Insurers remain resilient as they focus on key priorities, with 71% confident on growth prospects. 70% of Ireland’s insurance leaders are experiencing skills shortages but only 45% have clearly defined upskilling strategies in place. Remote working is here to stay with a large majority (89%) of respondents stating that at least 30% of their staff will work remotely in the future. Almost two-thirds (65%) say that the insurance industry has not sufficiently responded to changing consumer habits and modern means of engagement. Four out of ten (41%) are of the view that automation will result in a net decrease in their organisation’s workforce in the next five years. There is more work to do on climate change with few (28%) confirming that they have a plan to manage climate change risks in their insurance portfolios.
These are some of the key findings from the 2020 PwC/Insurance Ireland CEO Survey, titled 'Resilience and reinvention will help insurers manage the uncertainties’.
Seven out of ten (71%) Irish insurance leaders are confident about growth prospects for their organisations in the year ahead, down from 83% two years ago. Nearly two-thirds (62%) expect revenue growth in the year ahead, with a quarter stating this will be in excess of 10%. At the same time, over one fifth (22%) expect revenues to decline in the year ahead.
Speaking about the survey results, John O’Leary, PwC Ireland’s Insurance Leader, said: “Survey respondents’ confidence about the future underlines many insurers’ belief in their resilience and ability to deal with the disruption notwithstanding the health, economic and political uncertainties. However, there are many challenges including concern over the cost of claims, which has spiked to 35% from 16% last year, and the low/negative interest rate environment. These, coupled with the implications of COVID-19 for the broader economy, have dented some insurance leaders’ confidence.”
Regulation continues to be insurers’ greatest concern but less so than last year (2020: 67%; 2019: 88%). Other key risks cited include negative interest rates and the reduction in premium volumes (60%) and cost containment (46%). Brexit uncertainties also remain on the agenda (44%), although less so than last year (66%), possibly reflecting that many insurers have already put in place Brexit-readiness plans. While the industry, as a whole, remains well-capitalised, the crisis has also put greater focus on capital efficiency with 28% being worried about capital constraints.
The survey reports three key strategic priorities for the year ahead which are directly related to insurers tackling the current health and economic crises - leadership and talent development (63%), initiatives to realise cost efficiencies (61%) and digital transformation (57%).
The single greatest priority for the Government, according to the survey, is ensuring Ireland remains competitive (71%, up from 31% last year). Maintaining the competitiveness of Ireland’s corporate tax regime (43%) and reducing the personal tax burden (24%) are also high on the list. Other Government priorities should be infrastructure improvements (40%) and addressing the cost of claims (40%). Only 14% called for a Government stimulus package to be a priority.
Moyagh Murdock, CEO, Insurance Ireland, said: “The defining characteristic of leading insurers is their ability to respond to unfolding uncertainties and opportunities. Despite the uncertainties of a pandemic, we see leading insurers forging a culture of innovation, agile operating platforms and collaborative working that will enable them to spot opportunities and quickly capitalise on them. Remaining competitive as a business and as a nation is clearly important as we rebuild our economy post the pandemic. The need to address the cost of claims in general insurance continues to be a key priority.”
Seven out of ten (70%) respondents confirmed that their organisations are currently experiencing skills challenges, mostly around actuarial, digital/technology, risk and underwriting capabilities. Just 45% of respondents have clear upskilling strategies in place to meet these capability gaps. Top challenges with these efforts are measuring the value of upskilling programmes (52%) and retaining employees who have been upskilled (52%).
The survey confirms that remote working is here to stay for the industry, with nine out of ten (89%) respondents stating that at least 30% of their staff will work remotely in the future. Of this, over a quarter (28%) said that up to 100% of their workforce will work remotely. Almost all respondents (97%) stated that most of their people have been working remotely since the pandemic hit compared to 6% prior to the pandemic.
The survey reports that productivity has been the same (72%) or better (14%) since their people have transitioned to working from home during COVID-19.
While the pivot to these new ways of working appears to have been effective, supporting employee resilience and wellbeing (77%) was cited as the greatest challenge facing insurance employers as a result of remote working. Only 34% said that technology and connectivity were issues.
Similar to previous years, the majority of Irish insurance leaders are of the view that the insurance industry has not sufficiently responded to changing consumer habits and means of engagement, such as digital and mobile platforms (2020: 65%; 2019: 53%). Also, over a third (36%) stated that they had no plans yet to develop opportunities for humans and machines to work together (i.e. chatbots, robotic process automation, etc). At the same time, there is an increase in respondents' concerns relating to the speed of technological change (26%, up from 16% last year).
The survey further reveals that four out of ten (41%) Irish insurance leaders are of the view that automation will result in a net decrease in their organisation’s workforce in the next five years – but one in two believe that there will be no net change.
Cyber and data security is a high priority for four out of ten (39%) respondents. Nearly three-quarters (71%) believe that the majority of businesses will have cyber insurance in five years time.
Data Analytics (52%) was voted as the technology with the single greatest opportunity. Other technologies seen as opportunities, but to a much lesser extent, are: Artificial Intelligence (20%), Robotics (14%) and the Internet of Things (12%).
Darren O’Neill, PwC Ireland Data Analytics Partner, said: “The survey suggests that Irish insurers have more to do to fully embed some key technologies, including artificial intelligence, into their business models. Using automation for the delivery of key repetitive processes can reduce the cost to serve and increase efficiency. Insurance business models also need to continue to evolve around the concept of intelligent interaction, where smart devices are embedding insurers in people’s cars (telematics), homes (smart metering) and lifestyles (wearables), enabling policyholders to benefit from real-time equipment/health monitoring and maintenance. The ultimate result will be better outcomes for policyholders and lower, more proactively managed risks and claims for insurers.”
The survey reports that less than half (42%) of Irish insurance leaders see the transition to a low carbon economy as a net opportunity. Only a quarter (24%) said that they will prioritise sustainability practices on their strategic agenda in the year ahead.
The majority (72%) did not have a plan in place to manage climate change risks in relation to their insurance portfolios. Just over one in five (22%) confirmed that their organisation has issued a product specifically targeting the ESG aware consumer.
At the same time, two-thirds (69%) of respondents confirmed that they have environmental, sustainability and governance (ESG) policies in place, largely driven by corporate values (77%).
According to the survey, the vast majority (83%) of Irish insurance firms have a strategy in place to promote diversity and inclusion.
Moyagh Murdock concluded: “Throughout the pandemic insurers have demonstrated resilience and agility in managing the disruption to their businesses and continuing to look after their customers. Going forward, insurers will be working together to better integrate environmental, sustainability and governance considerations into their insurance product portfolios. Taking climate change as an example, ultimately consumers should benefit from green initiatives whether in home building, sustainable transport, driver behaviour or other areas. Insurers want to be part of the solution and are increasingly open to new ideas and approaches in this space.”
The survey was undertaken in August/September 2020 having 79 participants amongst Ireland’s leading insurers representing international as well as local insurance companies and all classes of insurance. The sample included 61% headquartered outside of Ireland and 39% headquartered in Ireland.
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