This pressure on general insurers’ profitability is driven mainly by rising costs and low returns on investment, rather than premium levels or business volume – both of which are set to rise. Meanwhile, life insurers are less optimistic about revenues, with expected income from fees and premiums anticipated to fall over the coming quarter.
The survey says that competition within the industry is one of the more significant limiting factors affecting growth – particularly within general insurance – with an increasing threat from start-up InsurTech companies who are setting a new benchmark for communicating and analysing customer needs.
Insurers are responding by continuing to invest heavily in technology to tackle rising costs and inefficiencies. However, they are equally keen to use new technology to drive growth through new products and reaching new customers. This reflects survey concerns around competition, systems capacity and limited demand. General insurers are expecting their growth to come substantially from gaining new business in the UK over the next 12 months, in contrast with life insurers who are looking to expand their international client base.
Regulatory spending has been tracking down across the insurance industry over the last couple of surveys but continues to be a key driver of capital expenditure – for general insurers in particular - despite the long awaited implementation of Solvency II in January.
Employment is still a hot topic, with life assurers expecting an increase in numbers employed over the next quarter. General insurers also expect to hire more staff, but with more of a focus on training existing employees.
Competition in the insurance broking industry continues to be intense and is highlighted as the number one threat to growth for brokers in the coming 12 months.
Jonathan Howe, UK insurance leader at PwC, commented: “As customers demand more from financial services products, the boundaries between the companies providing them are becoming increasingly blurred. This is especially the case in the life industry post Pension Freedom reform.”
“As a result, insurers are trying their very hardest to become more customer-focused and are looking for different skill sets in existing and potential employees to help them succeed.”
“Customer acquisition, technology and data skills will continue to be in high demand, while recent regulatory announcements - such as the FCA review in to life assurers’ treatment of long-standing customers - will also ensure compliance skills remain at the top of insurers’ recruitment wish lists.”
“A continued focus on efficiency and the need to dramatically improve the customer experience in insurance is pressing.
Competition within the industry continues to be seen as a limiting factor to growth and there is an ever increasing threat from start-up InsurTech companies breathing down the neck of incumbents, and who are setting the benchmark for communicating and analysing customer needs."
“These start-ups are currently small scale compared to the industry but they have the potential to have a major impact”
Jim Bichard, insurance partner at PwC, commented on the insurance brokering industry: “Brokers continue to invest heavily in technology and process efficiency in order to ensure they remain competitive and profitable at a time when premium levels are under considerable pressure. We are also seeing significant focus in the industry on data and analytics alongside marketing with a view to developing greater insight around clients and to access new customers.”
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