Insurance revenues will increase over the next three years, according to 92 percent of insurers’ CEOs surveyed by PwC in its 17th annual “CEO Survey,” and half said they see new entrants as a threat to growth.
“The insurance business in general is a business that grows as the economy grows. At the end of the day, it’s only when our customers do well that we do well, because we are the business that makes transactions possible in the world of commerce,” said Dinos Iordanou, chairman, president and CEO, Arch Capital Group Limited.
The number of CEOs who said they expect the global economy to improve over the next year tripled to 45 percent, compared to 15 percent last year; 59 percent said they plan to increase staff over the coming year, according to the report.
“Although the global economy remains fragile, immediate pressures are beginning to ease, allowing CEOs to shift from survival mode to growth mode,” said David Law, global insurance leader at PwC said. “Insurers face the challenge of how to capitalize on the growth potential created by a wealthier and longer-living global population, while grappling with the accelerating and potentially disruptive impacts of new technology, regulation and fast changing customer expectations.”
The biggest opportunities for growth, 47 percent of the CEOs said, are to increase their share of current markets; 26 percent said product and service innovation was the biggest opportunity. However, too much regulation is a barrier to growth, according to 80 percent of those CEOs.
Technological advances will transform their businesses over the next five years, according to 86 percent, but more than 60 percent said the speed of technological change is a threat to their companies’ growth prospects.
Insurance CEOs said the three trends that could transform the industry over the next three years are technological advances (86 percent), such as the digital economy, social media, mobile and big data; 73 percent said demographic shifts, and 55 percent said shifts in global economic power, according to the report. Resource scarcity and climate change, 36 percent, and urbanization, 32 percent, rounded out the top five transformative trends identified by the CEOs.
Fewer than 40 percent said they had taken concrete steps to upgrade talent, technology, distribution, data analytics and innovation capacity. Thirty-one percent said they have completed, or are executing, change initiatives in data management and analytics.
Fewer than 40 percent said their sales, IT, HR, R&D and customer service are well prepared for the transformational developments ahead, and half said they see new market entrants as a threat to growth, far more than in any other financial services sector, according to the report.
“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,” Law said. “The successful insurers will be first movers; even fast followers could end up being marginalized. 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.”
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