Insurance CEOs see growth and jobs rise but fear tech changes, says PwC survey

5 February 2014

Almost half of chief executive officers (CEOs) at insurance firms (45%) expect the global economy to improve over the next 12 months with 92% of the 74 company heads from 34 countries questioned in the ‘PwC Global CEO Survey’ sure they’ll see growth in the next three years at the worst. The insurance sector optimism is reflected in the fact that 59% plan to take on more staff over the coming year, but three-fifths of global insurer CEOs (60%)   worry that the speed of technological change is a threat.

The seventeenth annual PwC Global CEO Survey’ of the insurance sector revealed that 86% of the 74 insurance CEOs questioned believe technological advances will transform their businesses over the next five years, with 60% however viewing it as a threat to their growth prospects. 

In terms of technology, less than 40% of insurers have taken concrete steps to upgrade talent, technology, distribution, data analytics and innovation capacity at their firms, which perhaps explains why CEOs are worried about the threat of disintermediation and lost growth.

News Analysis: Regs and Tech Are Major Disruptors
Traditionally, the insurance sector has lagged behind banking and other financial services sectors in its adoption of technology but this cannot be allowed to continue forever with legacy systems needing replacement, customer expectations on the rise, and aggregation websites in the general insurance segment, and other newcomers elsewhere, eating away at market share. CEOs are obviously aware of this, hence their fear of tech. There is also the requirement to improve weather-related risk modelling and data analytics in the disaster and reinsurance markets as global warming and other risks rise in the coming years [see the recent World Economic Forum (WEF) Global Risks 2014 report for more on this. The findings of the wider CBI/PwC Financial Services Survey from the turn of the year can be seen by clicking on the highlighted text]. 

Other less positive findings from the sector-specific insurance CEO survey include the fact that 80% of insurance CEOs believe too much regulation is a barrier to growth. With Solvency II, the reinvigorated conduct agenda and many more regulations imminent this is not such a surprising finding. Indeed, it will most likely contribute towards the expected job growth as more and more compliance officers are hired.   

Commenting on the survey, David Law, global insurance leader at PwC, said: “Our findings raise questions about whether insurers are doing enough to keep pace with the shake-up in the marketplace. Developments that would have taken years to affect the market in the past can now do so in a matter of months. Insurers that are slow to respond could quickly lose business to more agile and innovative and, potentially, new competitors.

“The successful insurers will be first movers; even fast followers could end up being marginalised,” he continues. “The leaders will have clear insights into how the marketplace is evolving, where they’re best able to compete, and be able to respond quickly to challenges and opportunities. They also will use the latest developments in technology to improve customer profiling, reduce costs, and improve the customer experience.” 

More positively global insurance CEOs are obviously moving from “survival mode” to “growth mode”, added Law, and while the global economy remains fragile the forecast for growth reflect rising optimism and job creation potential within the sector.   

 

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