PwC-Insurance Ireland Leaders' Survey 2020

10 November, 2020

Four key statistics

  • 62%

    expect revenue growth in the year ahead while tackling talent, costs and digital transformation

  • 70%

    are experiencing skills shortages but only 45% have upskilling strategies in place

  • 65%

    say the industry has not responded sufficiently to changing consumer habits

  • 72%

    did not have a plan in place to manage climate change risks in relation to their portfolios

Resilience and reinvention will help insurers manage uncertainties

We are delighted to present the PwC Ireland-Insurance Ireland Leaders Survey for 2020. Including the views and priorities of 79 Irish insurance leaders, the report benchmarks key trends, challenges and opportunities in the industry as it faces unprecedented disruption. In particular, we look at the impact of technology, talent and remote working, as well as the influence of climate change.

Four key findings from the survey

Despite COVID-19, insurers remain resilient and confident about the future. They are tackling their challenges head-on with talent development, cost containment and digital transformation being key strategic priorities.

Skills shortages are prevalent in the industry but only 45% of respondents have clearly defined upskilling strategies in place. There is more work to do to make upskilling a success.

Insurance has not sufficiently responded to changing consumer habits and modern means of engagement. Customers continue to become more discerning. The quality of the services offered and the way providers use technology to enhance them is critical.

Irish insurers intend to address climate change, but action is lacking. Few confirmed that their organisation has issued a product specifically targeting the environmentally and socially aware consumer.

The defining characteristic of leading insurers is their ability to respond to unfolding uncertainties and opportunities. Despite the uncertainties of the pandemic, leading insurers are forging a culture of innovation. They are creating agile operating platforms and collaborative working environments to enable them to identify opportunities and quickly capitalise on them. These opportunities might be recruiting key talent, embedding the latest technologies to drive operational efficiencies or develop new products and services. They are also looking at new markets and forging new business models. Resilience and reinvention will help insurers manage the uncertainties.

As we move forward beyond COVID-19 and Brexit, leading insurers are increasingly open to new ideas to drive competitive advantage. They need to build on the foundations of ongoing business transformation, and having a blank canvas for invention and innovation will be critical.

A young woman admiring a brightly lit 3D grid on a transparent monitor.

Economic and business challenges

Insurers remain resilient as they tackle the challenges head-on with talent development, costs and digital transformation being strategic priorities.

According to the survey, 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%. This underlines many insurers' belief in their resilience and ability to deal with the disruption notwithstanding the health, economic and political uncertainties. A hardening market across some non-life classes is also undoubtedly contributing to this confidence. At the same time, over one-fifth (22%) expect revenues to decline in the year ahead. Concern over the cost of claims has spiked to 35% from 16% last year and the consequent impact on profits this may have. This, coupled with concerns about the implications of COVID-19 for the broader economy, has dented some insurance leaders' confidence.

There is plenty keeping Irish insurance leaders awake at night. While regulation is less of a concern than a year ago, the survey reveals that it continues to be insurers' greatest concern (67%). This may reflect increased engagement from regulators as a result of the crisis and an increased focus on treating customers fairly. Low or negative interest rates and the reduction in premium volumes due to the economic downturn are a challenge for six out of ten insurance leaders.

Costs are the third greatest concern with nearly half (46%) of insurers agreeing that cost containment is a challenge. While the industry as a whole remains well-capitalised, it is not surprising that the crisis has put greater focus on capital efficiency with 28% of leaders citing capital constraints as a key challenge.

And while nobody knows yet if a trade deal of any kind between the EU and the UK will materialise before the end of the year, 44% of responding Irish insurers remain concerned about Brexit uncertainties, down from 66% last year. This is likely reflective of the fact that many Irish-based insurers have already put in place Brexit mitigation plans and are already prepared to trade with the UK in a post-Brexit world. Indeed, many have seen an upside for their operations in Ireland as a result.

Insurers are also considerably more concerned than last year about the change in consumer behaviours—28%, up from 16% last year—as they are about technological advances.

Top three economic and policy challenges or risks facing insurance businesses

  2019 2020
Regulation 88% 67%
Low or negative interest rates or investment performance 59% 60%
Reduction in premium volumes due to economic downturn - 60%
Uncertainties from Brexit 66% 44%
Geopolitical uncertainties or trade conflicts 25% 24%
International tax reform or increasing tax burdens 9% 22%
Increasing environmental regulation - 14%
Diversity and inclusion - 10%

Top three business challenges or risks facing insurance businesses

  2019 2020
Cost containment - 46%
Cost of insurance claims particularly COVID-19 claims 16% 35%
Continued shift in consumer behaviours 16% 28%
Capital constraints - 28%
Speed of technological change 16% 26%
Health and well-being of our employees 9% 25%
Availability of key talent 63% 24%
Climate change and environmental risks 22% 19%
Leveraging digital including big data or data analytics 25% 18%
Deploying a safe environment for employees - 18%
Cyberthreats 28% 15%
Lack of trust in business 9% 14%
Readiness to respond to a crisis 6% 4%

Key priorities for insurance leaders

With remote working and online trading becoming much more prevalent, the three, key strategic priorities for the year ahead are directly related to insurers tackling the current health and economic crises: talent, costs and digital. The key focus on the strategic agenda in the year ahead will be leadership and talent development (63%), initiatives to realise cost efficiencies (61%) and digital transformation (57%).

Immediate growth focused strategies such as expanding into new markets (38%) and organic growth programmes (31%) will be less of a focus.

Competitiveness should be the key focus for the Government, according to Irish insurers.  Given that many of Ireland's insurance firms are trading internationally, it is not surprising that 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%) should also be top of mind. Other Government priorities, according to survey respondents, should be infrastructure improvements (40%) and addressing the cost of claims (40%). Only 14% called for a Government stimulus package to be a priority.

People

Leadership and talent development (63%) will be the single key strategic priority for Irish insurers in the year ahead, according to the survey. Seven out of ten respondents confirmed that their organisations are currently experiencing skills challenges. Of this, a quarter (24%) are struggling to bridge these skills gaps. The critical areas where skills are lacking are centred around actuarial, digital or technology, risk and underwriting capabilities.

Just 45% of respondents have defined upskilling strategies in place to meet these capability gaps. And those who are engaged in upskilling efforts are facing challenges including measuring the business outcome of upskilling programmes (52%), retaining employees who have been upskilled (48%, and a lack of appropriate resources (48%). Nearly a third (30%) are experiencing difficulty with employees effectively learning and embedding new skills.

Respondents' difficulties with their upskilling efforts are significant when coupled with the fact that a quarter of respondents (24%) are concerned about the availability of key talent in the market, albeit it should be noted that these worries were much more acute this time last year (63%).

The survey also points to permanent changes in how the insurance industry may work going forward. Remote working appears to be here to stay, as nine out of ten (89%) respondents said 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.

According to the survey, productivity has been the same (72%) or better (14%) since their people have transitioned to working from home during COVID-19. Just 14% said that productivity was negatively impacted.

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 arrangements. This was followed by effectively engaging employees (72%) and innovating and collaborating in virtual teams (62%). Only 34% said that technology and connectivity were issues.

Which of the following statements best describes where your organisation is currently positioned in terms of skills and talent?

  • We are not experiencing any material skills gaps at present: 28%
  • We have some skills and talent gaps in specific areas and have an upskilling or talent strategy to address these gaps: 45%
  • We have some skills and talent gaps in specific areas and are struggling to bridge these gaps: 23%
  • Skills and capability gaps are significantly impacting our business and we have an upskilling or talent strategy that we are effectively implementing to address these gaps: 1%
  • Skills and capability gaps are significantly impacting our business and we are struggling to bridge these gaps: 1%
  • We don't know what our future skills requirements are or where any gaps exist: 1%

Technology and digital

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 (65% versus 53% last year). COVID-19, which closed traditional 'brick and mortar' options for many customers for months, converted even the most technologically resistant individuals to digital channels. It is unlikely that adopted behaviours will revert after the crisis, and digitally enabled solutions will become an increasing differentiator. In a world working and interacting nearly 100% remotely, institutions that made investments in their technology infrastructure and developed digital channels before COVID-19 have fared better in the crisis than those that hadn't. This may have contributed to the increase in respondents' concerns relating to the speed of technological change (26%, up from 16% last year). Leading insurers will further digitise their customer interaction models, strengthen digital sales and servicing. This will put further pressure on legacy infrastructure and the need to accelerate the shift to cloud-based, modern architectures.

Cyber and data security are a high priority for insurers as four out of ten (39%) respondents said that they will prioritise these areas in the year ahead. The rise in frequency of cybercrime has also offered new opportunities for insurers with nearly three-quarters of respondents (71%) believing that the majority of businesses will have cyber insurance in five years time (2019: 69%).

The survey also 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. However, one in two are of the view that there will be no net increase or decrease. Digital ways of working have never been more sharply in focus or demand or both. Using automation for the delivery of processes (repetitive or key) can reduce the cost to serve and increase efficiency. It is also important in the context of liberating the workforce for value adding activities and providing a more productive and satisfying workforce experience, particularly at times of difficulty and uncertainty. The majority of respondents (64%) said that plans are either being developed or at an advanced stage in terms of opportunities for humans and machines to work together (i.e. chatbots, robotic process automation, etc), over a third (36%) had no plans yet, down from 49% two years ago.

Has the insurance industry responded sufficiently in your view to changing consumer purchasing habits and means of engagement, such as across digital and mobile platforms?

  2018 2018 2020
Yes 14% 22% 14%
No 66% 53% 65%
Not sure 20% 25% 21%

Unsurprisingly, data analytics (52%) was voted as the technology with the single greatest opportunity. The selection and pricing of risk remains the core activity for any insurer and access and availability of high quality data is central to this objective. Overcoming challenges in the data management lifecycle is top of the agenda for many insurers. In addition, many insurers lack the data analytics tools and capabilities to transform real-time consumer data into valuable insights that drive their propositions. More advanced organisations are looking at their data as a strategic asset and moving from being a closed company, (i.e. only using internal data and information for decisions and processes) to an open company (accessing publicly available data to compliment internal data and improve the speed and accuracy of decision-making).

Other technologies were also seen to offer opportunities including artificial intelligence (20%), robotics (14%) and the internet of things (IoT) (12%), but to a lesser extent than data analytics.

Adoption of new and emerging technologies will continue to impact insurance products and services. 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 or health monitoring and maintenance. All of this will mean greater levels of personalisation – products and services more tailored to individual needs. It will also help drive greater efficiencies into the business model (through automation, improved decisioning, more accurate targeting). The ultimate result is better outcomes for policyholders and lower, more proactively managed risks and claims for insurers. The survey suggests that Irish insurers have more to do to fully embed some of these emerging technologies into their business models.

Climate change and diversity

Climate change is widely recognised as being one of the greatest challenges of our generation. The survey highlights the clear intention by Irish insurers to address climate change, but there lacks action.

Just one in five (19%) respondents acknowledge climate change and environmental risks to be a concern (2019: 22%). Only a quarter (24%) said that they will prioritise sustainability practices on their strategic agenda in the year ahead. According to the survey, four out of ten (42%) Irish insurance leaders see the transition to a low-carbon economy as a net opportunity. But over half (53%) see it as neither an opportunity nor a threat.

The majority (72%) did not have a plan in place to manage climate change risks in relation to their insurance portfolios – albeit of this half did say they are either working on a plan or they intended to work on a plan. Just over one in five (22%) confirmed that their organisation has issued a product specifically targeting the ESG-aware consumer.

Does your company have a plan in place to manage climate change risks in relation to your insurance portfolio?

  • No, but we are currently working on a plan for this: 25%
  • No, and I do not intend to plan for this: 22%
  • No, but I intend to plan for this: 25%
  • Yes: 28%

At the same time, most (69%) Irish insurers confirmed that they have environmental, sustainability and governance (ESG) policies in place. This development has been largely driven by corporate values (77%), although regulatory changes (50%) and investor expectations (41%) also featured prominently.

The Governor of the Central Bank recently urged insurance companies to have a 'degree of ambition' in their plans to improve diversity and inclusion at senior levels. It appears that more action is needed in this area. According to the survey, however, the vast majority (83%) of Irish insurance leaders confirmed that their organisation has a strategy in place to promote diversity and inclusion.

Four key actions for insurance leaders

We believe that there are four key actions for Irish insurers to manage the current uncertainties and get ahead:

1. Actively review cost effectiveness, productivity and operational excellence

No one knows how the pandemic will evolve. But organisational resilience and agility will be key to getting ahead in the face of today's uncertainties. As well as eliminating unnecessary effort and driving down costs, organisations need to align their operating models, workforce, digital skills, culture and ways of working in the most agile, productive and customer-attuned ways possible.

2. Prioritise people, upskilling and execution capability

With all of the current uncertainties, ensuring you have the right people with the right skills is critical. Prioritise staff safety and keep their mental health top of mind. The survey suggests that more investment in upskilling is needed, and leadership and execution capability are seen as competitive advantages. Insurers will need to combine a strong ability to execute strategy with relentless leadership focus, appropriate decision-making and meaningful investments in resources and capabilities.

3. Drive digital transformation and innovate at scale

Leading institutions need to further digitise their customer interaction models, strengthen digital sales and services and materially cut back on support functions and physical infrastructure. This, in turn, will put increasing pressure on legacy infrastructure and the need to accelerate the shift to cloud-based, modern architectures. The post–COVID-19 world creates even more prospects for digitally skilled workers, and greater demand for training. Insurers are increasingly comfortable with experimentation and developing partnerships with technology-centric firms to innovate their businesses. But success requires scale. This is a matter not just of resources or market reach but also of creating the agile operating platforms and ability to work with multiple partners that will enable quick turnaround from pilot to market.

4. Invest in climate change

Climate change will not go away. How it changes your business will be driven by the consumer, and if the right investments are made will produce bottom line results. Review your products from an environmentally and socially-aware customer's perspective. Ensure that you have a clear plan in place to manage climate risks in relation to your insurance portfolios.

We are here to help you

We are the leading advisor to the insurance industry in Ireland. We have the specialised skills and unrivalled experience to help your insurance business cut through the challenges, adding real value to your business. Contact us today.

Contact us

John O'Leary

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 8659

Paraic Joyce

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6394

Darren O'Neill

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 7521

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