CEOs look on the bright side
The insurance industry may be one of the most disrupted in the world, but CEOs are not letting the pressure get to them.
PwC’s latest CEO Survey seeks the views of 100 insurance chiefs, and their outlook is increasingly positive.
More than 90% of respondents are confident about their organisation’s revenue prospects over the next three years, and half believe global economic growth will improve over the next year, compared with just 19% last year.
CEOs are also taking confidence from the fact the anticipated impact from insurtech competitors has yet to materialise, at least to the extent previously feared.
In fact, technology is opening new opportunities, such as rising demand for cyber insurance.
Of course, CEOs are well aware there are major challenges to overcome.
According to the survey, the three biggest worries are over-regulation (with 95% of respondents extremely or somewhat concerned), cyber threats (93%) and speed of technological change (85%).
Populism concerns 85%, with geopolitical uncertainty a worry for 83%.
More than 80% are concerned about a shortage of digital skills within the industry and their workforce, while 78% see changes in consumer behaviour as a threat to growth.
Some 66% report increasing pressure to deliver business results under shorter timelines.
PwC’s Global Insurance Leader Stephen O’Hearn says the lack of impact from insurtechs is a key reason for insurer optimism.
“Indeed, partnership with new entrants rather than rivalry is the order of the day.”
Nearly half (49%) of insurance CEOs are planning a new strategic alliance or joint venture to drive profitability and growth over the next year.
And insurtechs are responsive to offers of partnership or even acquisition.
However, Mr O’Hearn warns against complacency.
“Having perhaps overestimated the impact of outside threats and short-term disruption in the past, could insurers now be underestimating the urgent need to become digitally enabled, customer-focused organisations with flexible business and operating models?”
He says there are many obstacles facing insurers.
“They must learn to compete and achieve savings on a scale they have never attempted. Yet reducing costs alone won’t be enough to stay competitive.
“At the same time, they must develop a seamless end-to-end digital business model, which runs from advice and origination all the way to claims, and combines the best of humans and machines in a ‘bionic’ organisation.
“Related benefits include more personalised and effective life and non-life coverage, and a shift to delivering outcomes (for example, wellness or mobility) and using data to head off an emergency, not just providing compensation after an emergency has occurred.”
Technology alone won’t enable insurers to capitalise on unfolding opportunities – a cultural change is also required.
“Investments will go to waste unless there’s a genuine readiness to embrace change and bring innovation into the heart of the business,” PwC says. “In our experience innovation is all too often consigned to the fringes or operates in siloes within different divisions.
“It’s also proving difficult to get many of the pilots or proofs of concept out of the lab and into production.”
Swift and nimble decision-making is required from insurance companies more used to making big decisions in their own time.
“By the time traditional decision-making and implementation cycles have run their course, the market will have moved on,” PwC says.
“Innovation requires lots of little decisions and a willingness to learn from them. It also demands an entrepreneurial readiness to experiment and even fail, but fail fast and move on.”
Insurance CEOs may have reasons to be cheerful, but the pressure for urgent and fundamental change is mounting.
PwC says in this environment fortune will favour the bold – and persistent.
“Acting half-heartedly risks allowing other, more proactive companies to harness opportunities and lead the industry.”