The insurance sector is currently witnessing transformational changes that will not only affect operations, but also impact regulation and consumer choice.
The change would disrupt growth trends of individual companies and those that fail to rise to the challenge will be over-taken by their peers in a competition, which analysts say would be very fierce.
PwC at one of its Global CEO Survey series had stated that insurers will face as much change in the next few years than they’ve seen in the past 50, but concerns are that many companies have been slow to respond to the transformational changes in the market, surrendering the advantage the more proactive competitors.
The report also notes that insurers face the challenge of how to capitalise on the growth potential created by a wealthier and longer living global population, while grappling with the accelerating and potentially disruptive impacts of technology, new regulation and fast changing customer expectations.
Sector leaders however recognise the rapid changes in their marketplace, and so see technological advances as the trend most likely to transform their businesses over the next five years, followed by demographic changes, and then shifts in global economic power.
What once seemed to be far in the future is becoming reality in today’s insurance marketplace? The digital experience is increasingly defining service standards and new analytical techniques are offering the opportunity to more effectively price coverage and control risks.
According to the analysts, the insurers who take advantage of these developments will have clear insights into how the marketplace is changing where they’re best able to compete and be agile and decisive enough to respond quickly to important challenges and opportunities. They also will use the latest developments in technology to enhance customer profiling, reduce costs, and improve customer experience.
The urgency of responding to these challenges is heightened by the extent to which the markets are witnessing aggressive competition from other financial services sectors and a new breed of nimble, tech-enabled entrants. In fact, half of the insurance CEOs see new market entrants as a potential business threat, far more than in any other financial services sector.
Technology
86% of insurance CEOs believe technological advances will transform their businesses in the next 3 to 5 years – more than any other factor. As the impact of technology continues to gather pace, sensor, big data and other new analytical techniques could prove to be a critical differentiator by transforming insurers’ ability to understand and respond to customers’ needs.
Management
31% of the Company CEO’s have completed or are executing change initiatives in the key area of data management and analytics. But new capabilities aren’t coming quickly enough as most CEOs are making plans for change, but most have yet to put them into action. Less than 40% of industry leaders believe that their sales, IT, HR, R & D and customer service are well prepared for the transformational developments ahead. Fewer than 40% have initiated plans to capitalise on these trends in the key areas of distribution, data analytics and innovation capacity.
Regulations
86% of insurance CEOs see over-regulation as an organizational threat. This is a higher percentage than in any other sector, and is far ahead of other perceived threats.
