Over 70 percent of insurance chief executive officers (CEOs) are making important changes to the way they use technology to assess and meet customer expectations, according to a new survey by PwC.
PwC’s 19th Annual Global Survey was carried out with 1,400 CEOs, including responses from 101 CEOs in the insurance sector in 43 countries. It found that 79 percent cite data and analytics and 76 percent cite relationship management systems as providing the greatest potential contribution to improving engagement with customers.
The data also found that threats businesses are facing are becoming more complex, crossing the borders of geopolitics, regulation, cyber security, societal development, people and reputation, according to PwC.
Accordingly, 64 percent of insurance CEOs are making significant changes to the way they define and manage risks in response to changing stakeholder expectations.
Seventy nine percent of insurance CEOs see cyber threats as a barrier to growth, more than their counterparts in banking and capital markets.
PwC also said that cyber risk could expose insurers to significant losses, both through specific cyber coverage and their technology, errors and omissions, and other existing business lines. It said a UK Government report estimates that the insurance industry’s global cyber-risk exposure is already in the order of £100 billion.
PwC said a new generation of analytics is enabling insurers to anticipate what will happen (predictive analytics) and also to shape outcomes such as reduced accident rates or improved health and well-being (prescriptive analytics). This more proactive and preventative approach marks a change in purpose for insurers, which will deliver considerable social as well as financial value.
However, technology is also creating new benchmarks for customer experience, response and cost and making it easier for customers to judge and compare insurers against their competitors, it said. For insurance firms, the ability to meet these challenges is often hampered by slow and unwieldy legacy systems and traditional ways of working.
70 percent of insurance CEOs see the speed of technological change as a threat to growth and more than 60 percent are concerned about shifts in consumer spending and behaviour.
PwC’s survey also shows economic headwinds are strengthening once again. Compared to 40 percent in 2015, only 28 percent of insurance CEOs now believe the global economy will improve over the coming year, reflecting a dip in optimism. Interestingly, whilst 38 percent of insurance CEOs are very confident about their ability to increase revenues, this is down from 44 percent in 2015.
Accordingly, 70 percent of insurers are planning to implement a cost cutting initiative over the next 12 months and technology is the trend insurance CEOs see as most likely to transform customer expectations over the next five years.
Arthur Wightman, PwC Bermuda territory and insurance leader, said: “Reinsurers and insurers are very much on the frontline of a more unstable world. This uncertainty makes it more challenging to manage exposures, but it also opens up opportunities as businesses look to the industry to provide the risk analysis, advice and protective coverage they need to navigate through this difficult landscape.
“To capitalise on these opportunities, reinsurers and insurers need to embrace new ways of working, novel ways of interacting with customers, and alternatives to traditional products and services.”
Wightman also said that helping businesses to protect against cyber attacks offers huge potential growth for insurers.
“We estimate that annual premiums could reach $7.5 billion by the end of the decade,” he added.
Stephen O’Hearn, global insurance leader at PwC, commented: “Findings from our survey underline the fact that those insurers out in front are embracing technological disruption as a growth opportunity rather than a threat. They are harnessing the creativity of their people to tap into new value chains and transform operational speed and cost.
“They are also seeking out new sources of data and making the most of client touch points to enhance customer experience, outcomes and whole new possibilities in what the business can deliver.”
PwC, North America, Bermuda