These are the main insurance industry findings from PwC’s 20th Global CEO Survey of 1,379 CEOs, including responses from 95 insurance CEOs in 39 countries.
Despite soft premium rates globally, low interest rates and subdued economic growth in many developed markets, insurance CEOs around the world are optimistic about their own companies’ growth prospects. Over a third (35%) are very confident they can achieve revenue growth over the next year, down slightly from 44% two years ago, with more than 80% are at least somewhat confident.
Despite the much publicised challenges in the Irish market, most notably in relation to profitability and rising claims costs, from our experience with insurance clients in Ireland, the trends highlighted in this report are very similar here. We see many insurers also optimistic about growth opportunities, despite the challenging market conditions. While business growth is the greatest priority, the sector is suffering from slim margins and regulation around the cost of claims is a key challenge. Concerns around key talent and international competitiveness are also priorities for the industry to enable further development of Ireland as an international centre of excellence for insurance. While Brexit looms large and will present opportunities for the sector, it is incumbent on us all to communicate that Ireland has the regulatory and infrastructural capacity for new insurers to locate here.
Robo-advice and pay-as-you-go
However, insurance CEOs are also acutely aware of the disruption and change facing their industry, the transformational impact of which is now evident in areas ranging from robo-advice to pay-as-you-go and sensor-based coverage. Concerns over regulation, competition from new market entrants, the pace of technological change and especially shifting customer behaviour have continued to rise from their already high levels in previous years.
Insurance CEOs’ concerns over potential barriers to market entry and development are also growing. Well over half (60%) believe that it’s becoming harder to compete in an open global marketplace because of moves toward more protectionist national policies. A further 74% of insurance CEOs – more than those in any other industry PwC surveyed – see lack of trust in business as a threat to growth.
The good news is that many insurers including in Ireland are taking action and seem to be ready to face up to their challenges. This is evident in the fact that 67% of industry leaders see creativity and innovation as very important to their organisations, more than any other financial services (FS) sector. Insurance CEOs are also ahead of their FS counterparts in exploring the benefits of humans and machines working together (61%) and considering the impact of artificial intelligence (AI) on future skills needs (49%).
Customer intelligence most valuable asset
The cost and disruption of regulation continue to be industry leaders’ paramount concern, but the sharp rise of concerns about shifting customer behaviour is particularly striking. 45% of insurance CEOs stated they were extremely concerned about changing customer behaviours, up from 24% last year. To keep pace, insurance CEOs recognise that customer intelligence, along with the quality of the client insights and interactions that underpin it, is their most valuable asset and surest foundation for profitability and growth.