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PwC-Insurance Ireland Leaders' Survey 2021

A resilient insurance industry planning for the new norm

We are delighted to present the PwC-Insurance Ireland Leaders' Survey 2021 highlighting the views and priorities of Irish insurance leaders across all major classes of insurance. With 94 responding Irish insurance leaders, the report benchmarks key trends, challenges and opportunities in the industry as the economy cautiously reopens following more than a year of the greatest disruption in our generation. In particular, we look at people and adjusting to the new ways of working, technology or digital and climate change.

There are four key findings from the survey:

  • Confidence rebounds, there are significant plans to invest post pandemic
  • Headcount is on the increase, as significant changes to workforce strategies are expected
  • Customers want more from insurance companies and intermediaries and the industry needs to do more to respond to seize the opportunities from technology
  • There are climate change goals, but more action is needed

Against a background of robust economic growth projections, recovering consumer sentiment and successful vaccine roll-out, our economy is cautiously reopening. The survey highlights an insurance industry that is rebounding with certainty and resilience, but not without its challenges. Poor investment performance due to low or negative interest rates and regulatory challenges continue to be key macro risks. Other key business challenges include the availability of key talent and skills, digital transformation and adjusting to the new ways of working. Cyberthreats are on the rise. The industry is planning to tackle many of these issues head on with significant investment step-ups. As the industry adjusts to the new ways of working, significant changes to workforce strategies are on the agenda. Hybrid working, diversity and inclusion, talent and leadership and productivity through automation are all priorities for greater investment.

Greater leveraging of technologies is an area of real opportunity for the insurance industry. For example, greater use of data analytics to add value and using robotics or robo advice and chatbots to deliver tailored, on-demand insurance and address changing consumer habits. The survey suggests that the industry can do much more in this area.

The transition towards a more sustainable economy and society is identified as a top priority to address the challenges facing current and future generations. For example, climate change provides insurance companies, as significant institutional investors, with the opportunity and responsibility to engage. In addition, the insurance industry can play a role in sustainability beyond climate change.The impact of COVID-19 amplified negative developments e.g., with regards to social inequalities, and more holistic and consistent strategies on Environmental, Social and Governance (ESG) are indispensable. While sustainability is already high on the strategic agenda, more concrete action is needed to translate this into product development, investment strategy or opportunities and to fully leverage the socio-economic role of the industry.

The attractiveness of Ireland as a place to do business remains central for the industry and should be the number one government priority. Supporting the international sector, its European and global competitiveness and continuing to address domestic challenges, i.e the cost of claims, are top government priorities. Competitiveness is a key driver for supporting the growth of the international sector. A consistent and predictable regulatory regime in line with best EU practice is also essential.

The competitiveness of the Irish corporate tax regime continues to be considered one of the top economic challenges for the insurance industry in the 2021 survey, with 36 % identifying it as a key government priority (down from 41% last year).

The industry, having adapted well to COVID-19, is confident about the future. Challenges are being addressed and that will bring opportunities for those who can adapt and lead on innovative technologies and address the challenges of climate change.

— John O'Leary Insurance Partner, PwC Ireland and Moyagh Murdock CEO, Insurance Ireland

Economic outlook

  • 85% of Irish insurers are confident about business growth, up from 71% last year
  • 55% will invest significantly in digital transformation

Confidence rebounds but not without its challenges, significant plans to invest

Following the significant disruption which the COVID-19 crisis has brought to our economy and society, confidence in a positive future in which the industry can play its part bounced back. 85% of Irish insurers are confident about business growth for the year ahead, up from 71% this time last year. Over a quarter (29%) are 'very confident' compared to 14% last year.

Confidence not without its challenges

Poor investment returns due to low or negative interest rates is the top economic challenge facing the industry (65%). Concerns about over-regulation remain (59%) high and may have been fueled by regulatory focus in certain areas e.g., the payment of dividends and business interruption insurance. The aftermath of the crisis is still being felt in certain areas with 39% still concerned about reducing premium volumes caused by the economic hit, albeit this is down substantially from last year (60%).

Concerns over the availability and retention of key talent has hit record levels for nearly half (45%) of Irish insurers, up from 24% last year. Other key business challenges include digital transformation (45%) and adjusting to the new working environment (43%). Not surprisingly concern about cyberthreats has spiked, up from 15% last year to 45% and is an area of great focus as insurers prioritise cybersecurity.

The area of cost containment is seen as less of a concern (19%), having dropped from 43% last year.

Chart 1: Confidence about business growth in the year ahead for your insurance business

Challenges

Table 1: Economic and policy challenges facing insurance businesses

  2020 2021
Low or negative interest rates or investment performance 60% 65%
Cost of regulation or over-regulation - 59%
Reduction in premium volumes due to economic downturn 60% 39%
Re-emergence of inflation in the economy - 22%
International tax reform - 20%
Geopolitical uncertainties or trade conflicts 24% 17%
Lack of diversity and inclusion in the workplace 10% 10%
Increasing tax burdens to finance deficits 22% 7%

Table 2: Business challenges facing insurance businesses

  2020 2021
Retention or availability of key talent 24% 25%
Digital transformation - 45%
Adjusting to the new work environment - 43%
Cyberthreats 15% 41%
Continued shift in consumer behaviours 28% 23%
Climate change and environmental risks 19% 23%
Capital constraints or capital efficiency 28% 20%
Cost containment or management 46% 19%
Cost of insurance claims particularly COVID-19 claims 35% 16%
Health and well-being of our employees 25% 13%
Cost of reinsurance protection - 12%

Investment step-up

The survey reveals that insurance leaders are planning to tackle the key challenges head on. Significant step up in priority areas is expected as they continue to build resilient and sustainable businesses for the future. Digital transformation (55%) will see by far the greatest increase in investment. Cybersecurity and sustainability will also see significant investment step-ups. Lower levels of investment are planned in areas such as realising cost efficiencies and talent development.

Table 3: How do you plan to change your long-term investments in the following areas over the next three years (significant investment >10%)

  2021
Digital transformation 55%
Cybersecurity and data privacy 32%
Sustainability and ESG initiatives 30%
Initiatives to realise cost-efficiencies 17%
Leadership and talent development 16%
Organic growth programmes 13%
Capital investments 11%
Advertising and brand building 5%

Competitiveness the single key priority for Government

Ensuring Ireland remains competitive should be the top priority for the Irish Government (51%), according to Ireland's insurers. Other key priority areas are supporting the international sector (41%) and maintaining the competitiveness of Ireland's corporate tax regime (36%), likely reflecting the increasing international pressure on the 12.5% corporate tax rate. Around a third are calling for the government to continue addressing the cost of claims (34%) and improve Ireland's national and cybersecurity infrastructure (30%).

Table 4: Key government priorities for the insurance sector at this time

  2020 2021
Ensure Ireland remains competitive, including wages and rates 71% 51%
Support growth of international sector - 41%
Maintain competitiveness of Irish corporate tax regime 43% 36%
Addressing the cost of claims 40% 34%
Improve national infrastructure including housing, roads or broadband 40% 30%
National cybersecurity infrastructure - 30%
Ensuring competitive insurance is available to Irish businesses 24% 29%
Ensure key skills available 26% 23%
No cliff edge on government COVID-19 support - 14%
Reducing personal tax burden 24% 12%

People

Headcount on the increase, as significant changes to workforce strategies expected

  • 54% plan to increase headcount
  • 69% said that a large majority of their workforce plans to continue working remotely at least 2-3 days per week post COVID-19

Reflecting high levels of business confidence, over half (54%) of Irish insurance leaders plan on increasing headcount in the year ahead of which one in ten are set to increase this greatly.

At the same time, concern about the availability and retention of key talent has reached record levels (45%) and many companies are reacting to this – 40% say they are changing their workforce strategy for investing in talent and leadership development.

With 43% saying that adjusting to the new ways of working is a challenge, the survey highlights the impact of the pandemic on the workplace. Once COVID-19 has passed, 69% of survey participants reveal that a large majority of their workforce plans to continue working remotely.

The survey reveals a huge amount of change in workforce strategies coming down the track. Hybrid working (62%) will see the greatest investment and consequent change for the Irish insurance industry. This is followed by changing strategies for diversity and inclusion (46%), talent and leadership development (40%) and productivity through automation (34%).

Insurance leaders are concerned about skills' shortages particularly in the following key capability areas: digital or technology, actuarial, risk and compliance, underwriting and product development.

Table 5: What aspects of your workforce strategy are you changing or investing in?

  2021
Hybrid working 62%
Diversity and inclusion 46%
Talent and leadership development 40%
Productivity through automation and technology 34%
Workforce engagement and communications 31%
Health and well-being of the workforce 31%
Reward and recognition 17%
Organisational purpose and values 14%
Workforce culture and behaviours 14%
Upskilling or reskilling 5%
Use of workforce data analytics 5%

Technology or digital

More to do to seize opportunities from technology

  • 69% of Insurance Leaders are of the view that the Irish insurance industry has not responded sufficiently to changing consumer purchasing habits
  • 59% rank data analytics as the technology providing the greatest opportunities for the sector, well ahead of other technologies

69% of respondents are of the view that the Irish insurance industry has not responded sufficiently to changing consumer purchasing habits and means of engagement, such as across digital and mobile platforms – and has deteriorated from 53% in 2019. The identification of digital transformation as a key priority and target for investment shows that the industry is ready to step up and address the challenges. The technology that is seen as having the greatest opportunity by far is data analytics (59%). Few see opportunities from artificial intelligence (15%), the internet of things (12%) or robotics (11%). Only 3% see value from Blockchain.

At the same time, the majority (62%) confirmed that their organisation is in the process of developing opportunities from humans and machines working together (i.e., chatbots, robotic process automation etc), up from 52% in 2018.

Six out of ten (59%) respondents confirmed that over half of their organisation's entire IT estate will be in the cloud in three years time.

54% are of the view that the majority of businesses will have cyber insurance in five years time, surprisingly down from 71% last year. Over a quarter (26%) said it is too early to tell. But there is real concern about cyberthreats (41%), up from 15% last year. Prevention is better than cure and the survey reveals that 32% of Ireland's insurance leaders plan to invest significantly in cybersecurity over the next three years.

Chart 2: 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?

Chart 3: What is your organisation's state of development in terms of opportunities from humans and machines working together (i.e., chatbots, robotic process automation, etc)

ESG and climate change: From plan to action

  • 77% said that sustainability is high or moderately high on the strategic planning list, with 30% planning to invest significantly
  • 82% of insurers confirmed that their organisation has, at least to some extent, explicitly integrated climate change into their risk management and governance processes

Over three quarters (77%) of Irish insurance leaders revealed that sustainability is either high or moderately high on the list when it comes to their organisation's business and strategic planning.

Over eight out of 10 (82%) confirmed that their organisation has, at least to some extent, explicitly integrated climate change into their risk management and governance processes.

The major challenge and opportunity ahead seems to be the transition from plan to action. 30% stated that their organisation is planning to invest significantly in sustainability and ESG initiatives over the next three years.

21% have issued a product specifically targeting the ESG aware consumer and a further 36% are currently in the process of issuing one. 36% have a concrete plan in place to manage climate risks in relation to their insurance portfolios and investment strategy and a further 31% are working on such a plan.

Interestingly, responding to climate change is increasingly seen as a positive for business with 60% of insurance leaders viewing the transition to a low carbon economy as a net opportunity, up from 41% in 2019.

Chart 4: Does your company have a plan in place to manage climate change risks in relation to your insurance portfolio and investment strategy?

Chart 5: To what extent do you see the transitions to a low-carbon economy as a net opportunity or a net threat to your business?

Key actions

We believe that there are four key actions for Irish insurers to seize the opportunities as the economy reopens:

i. Step-up investment in digital transformation to achieve efficiencies

As the pandemic abates investment in growth and transformation has now moved centre stage for insurance leaders. Digital transformation tops the list of investment priorities with over half of insurance leaders saying they will invest significantly to realise the opportunities offered by data analytics and automation and to respond to changing consumer habits and how they engage with their customers. Digital transformation is not just about embedding digital right across the organisation, it is also a cultural and mindset shift. Involve all of your people in the change right across the organisation including enhancing skill sets.

ii. Invest in new workforce strategies for a changed workplace

Insurance leaders plan on increasing headcount in an environment where competition for key talent has never been greater and, for years, many of them have been trying to reinvent the way they attract, motivate and retain employees to stay relevant to the modern workforce. The pandemic provides an opportunity to change the odds. It is forcing companies to rethink the purpose of office work while also opening up opportunities to reskill teams, redefine the nature of jobs and recalibrate incentive plans. It is good to see many insurance leaders grasping the nettle by reshaping many aspects of their workforce strategies for this new environment (including protocols for hybrid working, leadership development and diversity and inclusion).

iii. Seize the opportunities that technology and automation bring

The survey suggests that there is more to do to respond to changing consumer purchasing habits. Technology is central to this. Fully embedding technologies will be key to automation, personalisation, cost-efficiencies and customer satisfaction.

iv. Action greater investment in sustainability

The survey highlights that more investment in climate change is needed. Multiple regulatory changes are coming down the tracks which insurance companies will need to grapple with and respond to. Organisations should set and execute their ambitions. Review your products from the perspective of an ESG-aware customer. Ensure that you have a clear plan in place to manage climate risks in relation to your insurance portfolios and to fully integrate ESG into governance and risk management structures. Educate your board and employees about the changes you are making. Organisations need to manage their reputational risk as it's not only about regulations but also about navigating a combination of political, activist, consumer, investor and societal forces. If the right investments are made, climate action will produce bottom-line results.

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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