The insurance industry is rife with opportunity and growing threats, reveals Insurance Ireland

11 September, 2018

  • 77% of survey respondents say there are more opportunities now than compared to three years ago; 66% said there are more threats

  • Technology is moving up the value chain and is increasingly used in risk analysis, innovation capacity and decision making

  • 71% believe the majority of Irish businesses will have cyber insurance in five years’ time

  • Insurers want policy focus on competitiveness and addressing the cost of claims

The 2018 Insurance Ireland-PwC CEO Pulse survey 'Addressing the challenges for future success’ has revealed the opinions of Ireland's insurance CEOs operating in domestic and international markets.

Pictured are (l-r): Anthony Brennan, President, Insurance Ireland & CEO, Zurich Insurance; Paraic Joyce, Insurance Partner, PwC; Darren O'Neill, Data Analytics Partner, PwC; Kevin Thompson, CEO, Insurance Ireland and Jim Power, Independent Economist.

According to the survey, Insurance CEOs remain confident about their company’s growth prospects. Opportunities are anticipated to arise from digital technologies as returns from these investments accelerate in areas such as risk analysis, innovation capacity and decision making. On the other hand, impending threats such as changes in industry regulation, the impact of Brexit and emerging technologies/InsurTech are set to become increasingly disruptive in the coming years.

Growth firmly on the agenda
83% of Irish insurance CEOs are confident about future business growth, slightly down from last year (90%). This confidence is reflected in projected headcount expansion in the year ahead (61%) with nearly one in five (15%) planning to grow the workforce by more than 10%, although it should be noted that there may be variations across the industry in terms of company size and sector. Globally, 90% of insurance leaders are confident about future growth prospects in the year ahead with 45% expecting to hire more people.

Over three-quarters (77%) are of the view that there are more opportunities now compared to three years ago, largely driven by the potential for expansion into new markets (34%). Product innovation and diversification are also seen as key opportunities for nearly one in five (17%). 

Kevin Thompson, CEO, Insurance Ireland, said: "The survey confirms that the Irish insurance industry is confident about future growth but is keenly aware of the challenges facing the industry. The message from CEOs on this is very clear, in an uncertain climate we need to control the issues we can. Chief among these issues are the need for a policy focus on competitiveness and addressing the cost of claims in general insurance.

“Insurance CEOs are investing in people and are realising greater returns from digital technologies and embedding them in their decision making processes.  While there is a high degree of confidence, two-thirds said that there are also more threats than there were three years ago as significant disruption is expected from changes in industry regulation, consumer expectations and emerging technologies."

"Insurers understand that clearing the barriers to growth and accelerating transformation is a daunting task. Yet the pressure for fundamental change is mounting.  We see many Irish based insurers putting innovation front and centre, taking full advantage of emerging technologies. Those who do will be the winners in an era of constant changing customer demand for even more dynamic digital products."

Widespread disruption on the cards 
Two-thirds (66%) of Irish insurance leaders believe that there are more threats to business growth compared to three years ago.  Aside from Brexit, the survey highlights a noticeable sharpening of CEOs' views with regard to the extent of disruption in the industry in the years ahead in areas such as industry regulation (86%, up from 71% last year) and emerging technologies/InsurTech (74%, up from 63% last year). Many expect continued disruption from changes in customer behaviours (54%), the new General Data Protection Regulation (55%) and changes in the international tax environment (46%).

Other significant concerns are low interest rates/poor investment performance, change management, the availability of key talent, cyber threats and accommodation/infrastructure constraints.   

Global insurance CEOs are less concerned than their Irish counterparts about disruption from regulatory changes (77%) but are more concerned about emerging technologies (82%) and customer behaviours (82%).  

Return on Investment from innovative technologies improving, but more to do 
Despite being disruptive, insurance leaders see the innovative potential from digital technologies. There has been a step-up in Return on Investment (ROI) from digital technologies compared to last year in areas such as operational efficiency (91%, up from 80% last year); innovation capacity (83%, up from 63% last year) and strategic decision making (72%, up from 60% last year). At 34%, data analytics is seen as the emerging technology providing the single greatest opportunity, followed by InsurTech (20%) and artificial intelligence (14%).  

At the same time, the research reveals that there is more work to do to fully leverage these new technologies. Two-thirds (66%) stated that the Irish insurance industry has not responded sufficiently to changing consumer purchasing habits and means of engagement such as across digital platforms and mobile. Half (49%) have no plans as yet in terms of leveraging the opportunities from humans and machines working together. Very few (3%) expect self-driving cars to be widely adopted by 2023 with 29% expecting them to be widely adopted within 10 years and 60% believing it will take in excess of 10 years.   

Darren O'Neill, Data Analytics Partner, PwC Ireland, said: "The survey highlights the importance of data analytics in presenting real opportunities.  Embedding these technologies demands a clear strategy. Substantial opportunities are on the horizon as a new generation of predictive analytics and artificial intelligence transforms insurers' ability to detect, anticipate and avert risk. Notable possibilities include RegTech, which cannot only strip out costs, but also strengthen risk management and improve the reliability of compliance."

“Rather than operating in isolation, humans and machines should actively collaborate. With these foundations in place, insurers can take the next big leap and become truly competitive customer centric organisations."

Brexit a key challenge but also heralds certain opportunities
Four out of five (80%) insurance leaders believe that Brexit will disrupt their businesses over the next five years. At the same time, nearly one in five (17%) Irish insurance CEOs surveyed with UK operations confirmed that their organisation is considering relocating some or all of its business to Ireland post-Brexit. Luxembourg is seen as having the most competitive international regulatory regime relative to Ireland, according to 69% of respondents. 

Over a quarter (26%) reported that infrastructure/accommodation pressures is the single biggest challenge in attracting UK companies to Ireland post-Brexit, up from 13% last year. 

Competitiveness and cost of claims are key Government priorities
Cost and competitiveness are clearly on the minds of Irish insurance leaders. The single key priority for Government, according to the survey, is to ensure that Ireland remains competitive, including wages and business rates (29%). Almost a quarter (23%) called for Government to address the cost of claims in general insurance and one in five (20%) said the priority should be to maintain the competitiveness of Ireland's corporate tax regime.   

Paraic Joyce, Insurance Partner, PwC Ireland, concluded: "Chipping away at costs is not enough to remain competitive. It will be critical that insurance companies take full advantage of emerging technologies and advanced automation. Being at the forefront of what customers want, offering products and services that competitors cannot, will be critical.

"Whatever the outcome of Brexit, it will be important that Ireland continues to develop as a centre of excellence for global insurance companies.  With a highly talented English-speaking workforce, a friendly business environment and access to an EU market of over 440 million consumers post-Brexit, Ireland needs to continue to work hard to maintain and improve its national competitiveness to ensure we can continue to secure insurance foreign direct investment."


About the survey: The survey was carried out amongst Ireland's insurance CEOs during the Summer 2018 having 35 participants representing international as well as local insurance companies and all classes of insurance. 

Contact us

Johanna Dehaene

Corporate Communications, PwC Ireland (Republic of)

Tel: +353 1 792 6547

Paraic Joyce

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6394

Follow PwC Ireland