Two-thirds of business leaders from across all industries taking part in the survey see more threats to growth than three years ago. Almost the same percentage (63%) of insurance CEOs feel the same.
The market volatility that has dented global economic confidence in the short-term is compounded by growing instability and uncertainty. As the survey highlights, the threats businesses face are becoming more complex, crossing the borders of geopolitics, regulation, cyber security, societal development, people, and reputation. Geopolitical uncertainty has jumped from fourth in CEO concerns last year to second this year (cited by 74% of business leaders from across all industries), topped only by over-regulation.
As an insurer, you’re very much at the frontline of this more unstable world. This uncertainty is making it harder to manage exposures, but it also opens up opportunities as businesses look to you to provide the risk analysis, advice, and coverage they need to navigate this difficult landscape. Accordingly, 64% of insurance CEOs are making significant changes to the way they define and manage risks in response to changing stakeholder expectations.
Technology is the trend that insurance CEOs see as most likely to transform customer and wider stakeholder expectations over the next five years.
Telematic sensors, data analytics, and other sources of digital insight and connectivity are paving the way for continuous customer engagement and real-time risk evaluation and pricing. In turn, the new generation of analytics not only can enable your business to anticipate what will happen (predictive analytics), but also shape outcomes (prescriptive analytics) such as reduced road accident rates, protection against equipment breakdowns, or improved health and well-being.
Yet, technology is also creating new benchmarks for customer experience, response, and cost and making it easier for customers to judge and compare your business against competitors and other industries. Nearly 70% of insurance CEOs see the speed of technological change as a threat to growth and more than 60% are concerned about shifts in consumer spending and behaviour.
In turn, technology is lowering barriers to market entry. Your fiercest competitor could be a FinTech company as easily as a traditional peer. It could also be a brand new operating or business model. Sixty five per cent of insurance CEOs see new market entrants as a threat to growth, considerably more than banking and capital markets organisations (56%) and asset managers (52%).
The insurers that are out in front are thinking about how to lead innovation rather than simply following the disruptors. They’re capitalising on the latest digital developments to carve out new revenue streams, speed up their response to customer demands and operate at much lower cost. Some are looking at how to reinvent themselves altogether – for example, from protecting against risk to managing and monetising information.
Ninety four per cent of insurance CEOs see over-regulation as a threat to growth, more than any other sector in the survey. The same proportion say that governments and regulators have a high impact on their strategy, again more than any other sector and only 2% less than clients.
With Solvency II having gone live at the beginning of the year, the influence within European markets is clear. Many other markets also face significant changes, not only in prudential but also conduct and data protection regulation. Key development include the UK’s Retail Distribution Review (RDR) and US Department of Labor Fiduciary Standard, which have significant implications for how insurance is sold and the fees customers pay.
Regulation will continue to be costly, complex, and constantly changing. Rather than simply reacting to each new regulatory development, it’s important to take a proactive approach to anticipating and analysing regulatory trends and building it into your strategic planning in the same way you would take account of customer sentiment and expectation.
Seventy per cent of insurance CEOs see the limited availability of key skills as a threat to growth, though less than a quarter of insurance CEOs are changing the way they manage talent to ensure they have the skills and adaptability they need. Given the scale of the skills shortages, the industry response seems muted.
In an integrated global economy, it’s important to bring together people with diverse skillsets. This includes people with digital and insurance capabilities, as well as people with experience working in government and within client businesses.
It’s important to ensure that your organisation’s values and objectives match the expectations of the younger generations that are entering the workforce. Nearly 60% (59%) of insurance CEOs say top talent prefer to work for organisations with social values which are aligned to their own, making this much more important than competitive compensation (36%).
The brightest and best candidates will actively seek out organisations with social values that mirror their own, as well as viable, rewarding career paths. It’s therefore important to communicate both your purpose and the value this creates for society, and the real and interesting opportunities that you can offer employees.
Peter D. Hancock, President and Chief Executive Officer, AIG, US