Insurance CEOs are acutely aware of the disruption and change facing their industry. Keeping pace isn’t just a matter of adopting new technology. It’s also about being innovative and developing the customer intimacy needed to meet fast-shifting market expectations, while sustaining an unrelenting focus on reducing costs.
Insurance CEOs’ concerns over regulation, the pace of technological change, shifting customer behaviour, and competition from new market entrants have continued to rise from their already high levels. In fact, no other industry group of CEOs is as ‘extremely concerned’ about the threats to growth in these four areas.
Incremental innovation and marginal cost savings won’t be enough to sustain profitability and growth in this disrupted marketplace. The good news is that many insurers are embracing innovation. Two-thirds of insurance CEOs see creativity and innovation as very important to their organisations, ahead of other financial services sectors. They’re also ahead of the curve in exploring the possibilities of artificial intelligence and humans and machines working together.
Eighty six per cent of insurance CEOs believe technology will completely reshape competition in the industry or have a significant impact over the next five years. The gathering transformation is already evident in areas ranging from robo-advice to pay-as-you-go and sensor-based coverage.
Cutting edge customer interaction and data analytics have enabled InsurTech businesses to set the pace in the marketplace. However, rather than being just a threat, collaboration with InsurTech businesses can help more established insurers to make the leap from incremental to breakthrough innovation. This includes improving insurers’ ability to analyse the huge amounts of data at their disposal, which can lead to better customer understanding, higher win-rates, and more informed underwriting. Partnership with InsurTech can help insurers improve processes, increase efficiencies, and reduce costs.
While digitisation and data proliferation are now central elements of the insurance business, they bring increased cyber risk. Over eight out of ten insurance CEOs (81%) are ‘somewhat’ or ‘extremely concerned’ about the impact on their growth prospects, on a par with banking and capital markets (82%).
Given the volume of medical, financial and other sensitive policyholder information insurers hold, breaches could lead to a loss of trust that would be extremely difficult to restore. Over seven out of ten insurance CEOs (72%) believe that it’s harder to sustain trust in this digitised world, though they also see the management of data as a competitive differentiator.
A massive 95% of insurance CEOs are at least ‘somewhat concerned’ about the potential impact of over-regulation on their growth prospects, and 67% are ‘extremely concerned’.
The need to implement so many regulatory reforms across so many areas has inevitably tied up management’s time and made reporting more cumbersome. Compliance demands and costs also continue to rise, straining operational infrastructure and holding back returns. However, these are the unavoidable realities of today’s marketplace. Insurers that are able to build the changes into business as usual can gain a critical edge. And, pressure on returns means the ‘second line’ now has to pay its way as part of an approach that shifts the focus beyond compliance to sharpening competitive advantage.