PwC-Insurance Ireland Leaders' Survey 2022

Resilience amid uncertainties

The PwC-Insurance Ireland Insurance Leaders Survey 2022 highlights the views and priorities of Irish insurance leaders across all major classes of insurance. With 37 responding Irish insurance leaders, the report benchmarks key trends, challenges and opportunities in the industry. The survey reveals that Irish insurers are confident about growth prospects in the year ahead despite significant economic and business challenges. The volatility surrounding the macroeconomic climate makes it even more important for insurers to conduct robust scenario modelling as they refresh their strategies. The emphasis now needs to be on remaining competitive as an industry in the face of global headwinds by continuing to invest in priority areas, such as digital transformation and people.

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

Economic outlook

  • 83% confident about business growth, up from 75% pre-pandemic
  • 61% concerned about rising costs, up from 19% last year

Aside from lingering concerns such as supply chain issues, skills shortages and persistent cyberattacks, the war in Ukraine has brought a whole new set of uncertainties. Energy security, inflationary and cost pressures and interest rate hikes are now dominating with recession concerns in some jurisdictions. According to the survey findings, insurers are facing increasing claims costs, salary and other business cost inflation.

Confidence despite uncertainties

A large majority of Irish insurance leaders are confident about future business growth despite the economic challenges. 83% are confident about business growth for their organisation in the year ahead, compared to 85% last year and 75% prior to the pandemic in 2019.

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Business challenges shift drastically—cost pressures the single biggest concern

Increasing cost pressures (61%) is by far the single key business challenge for Irish insurance leaders. This follows the retention of key talent (47%) and the cost of insurance claims (36%). Over one third (34%) are concerned about the threat of a recession. Digital transformation challenges have also fallen to tenth position from joint second position last year.

The top challenge in 2019, prior to the pandemic, was the retention or availability of key talent—still a major concern at second place this year.

Despite persistent cyberattacks on businesses in Ireland and around the world, concerns about cybersecurity have fallen.

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Sustainability and ESG to see significant investment increases

Sustainability and environmental, social and governance (ESG) initiatives will be targeted for the greatest step up in investment over the next three years with over four out of ten Irish insurance leaders confirming a significant increase in investment in this area. Other areas for significant investment increases are digital transformation, cybersecurity and data privacy and leadership and talent development.

Despite cost pressures being the greatest concern, only 13% expect to implement initiatives to realise cost efficiencies.

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Competitiveness, skills and cost of claims top Government priorities

Similar to last year, the top priority for Government by a significant margin is ensuring that Ireland remains competitive (86%), having shot up from 51% last year. It is clear that the erosion of competitiveness caused by persistently high inflation is a concern for practically all insurance leaders. Other key areas insurance leaders would like Government to focus on include skills availability, addressing the cost of claims and supporting growth in the international sector.

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People and workplace

  • 76% expect over 80% of their workforce to continue working remotely at least two days or more a week
  • 90% are experiencing skills deficits in technology or digital, up from 59% last year

Addressing workforce challenges has also topped the management agenda. Those challenges include managing productivity, ensuring employee wellness and engagement and hiring the right specialists in a competitive market. Workforce issues will remain a priority as the industry adopts new ways of working and builds new capabilities in areas like digital, ESG and cybersecurity.

Ambitious plans to increase headcount

Six out of ten insurance leaders plan to increase headcount in the year ahead, having slightly more ambitious plans than last year and the year before (54%).

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Hybrid working here to stay

Indicating perhaps that the new ways of working in a post-pandemic world are becoming the norm, there is a significant uplift in expectations in the proportion of the workforce who will continue to work remotely at least two days or more a week. For example, 76% of Irish insurance leaders expect over 80% of their workforce to continue working remotely on this basis compared to 41% last year.

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Significant changes in workforce strategies ahead

The survey reveals that Irish insurance companies are responding to the new ways of working by planning significant changes in their workforce strategies. Eight out of ten are planning to invest in their hybrid or flexible working models, up from 62% last year. Over half plan to invest in the health and well-being of their workforce (57%) and diversity and inclusion (54%), up from 31% and 46% respectively last year.

Given the acute challenges with available talent, it is surprising that few see the need to invest in upskilling or reskilling (6%), productivity using automation and technology (15%) and reward and recognition (18%). However, an area that insurers do want to evolve is their organisational culture with 39% of respondents revealing an intent to invest in this strategic area.

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Skills deficit challenges becoming more acute

The survey shows that skills deficit challenges have increased in all key specialist areas compared to last year. Almost all (90%) of insurance leaders said that they are struggling with digital or technology skills, up from 59% last year. In addition, 67% are struggling with actuarial skills, up from 40% last year and 45% are struggling with compliance skills, up from 33% last year. Finding creative solutions through flexibility, mobility and upskilling are some of the options that insurers will need to explore.

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Technology or digital

  • 69% agree that automation and AI are fundamentally changing the way insurers interact with consumers
  • 27% already offer consumers personalised solutions and a further 41% have plans for action in this area

As digital innovation and adoption continue to fundamentally reshape the risk landscape, they also create new opportunities for those insurers that can innovate at pace. Continued rapid advancements in digital and analytics capabilities, from inside and outside the industry, have put many players under pressure. The survey points to a steady increase in digital efforts and adoption. However, insurers still lack speed and agility due to inherent complexities such as legacy systems and traditionally siloed operations. A fresh approach to digital is needed to drive a competitive advantage that can be sustained.

Steady progress in digital transformation agenda, but still room for improvement

The survey suggests that the digital agenda is being embraced with steady progress in certain areas. 70% of respondents agreed that insurers are fully embracing the digital future by leveraging the power of digital technology, data and responsible AI for product offerings, pricing and customer engagement. A similar proportion (69%) agreed that automation and AI are fundamentally changing the way insurers interact with consumers. 68% anticipated that more than half of their IT estate will be in the cloud in three years time, up from 59% last year. In addition, nearly half (46%) expect to see the majority of their revenues to have migrated from traditional platforms to digital platforms offering insurance-as-a-service by 2030.

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However, less than one third (32%) still have no plans to leverage opportunities from humans and machines working together i.e. chatbots, robotic process automation etc. But this has improved from 48% in 2018 with steady progress over the last four years.

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Less than one third (27%) are offering consumers personalised solutions presented in a context of their day-to-day lives—be it while buying a car, planning for retirement or starting a business. A further 41% are thinking about it and have plans.

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Polarised views on cyber insurance

Over a fifth (22%) of survey participants are of the view that it's either too early to tell if businesses will have cyber insurance in two years' time. A further 24% say the increasing risk may make cyber insurance unsustainable in terms of cost. In comparison, 41% expect most businesses to have cyber insurance in two years' time.

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Environmental, social and governance

  • 92% either have a plan, or aim to have a plan, to manage climate risks in relation to their insurance portfolio and investment strategy
  • 32% have issued a product that specifically targets the ESG-aware consumer

Around the world, expectations are mounting for the industry to play a greater role in environmental, social and governance (ESG) issues, as both investors in and underwriters of other companies. The growing threat of climate change poses systemic physical and transition risks, with direct implications for the insurance industry. To protect against and prevent these risks, insurers will need to develop a deeper understanding of them in their portfolios, rebuild their risk models and pricing assumptions, create new climate-related products and services, and work with organisations to help them mitigate ESG risks. According to one global insurance executive, "Weather risks are constantly changing and evolving, and we need to understand these changes so that we can price for the exposure. Working with industry and government will help drive better standards and make infrastructure more resilient".

Some good progress on climate change commitments, but more action needed

92% either have a plan or aim to have a plan to manage climate risks in relation to their insurance portfolio and investment strategy. Six out of ten Irish insurance leaders confirmed that they have made a carbon-neutral or net zero commitment, which is well ahead of that confirmed by Irish CEOs in PwC's 2022 CEO Survey (33%) launched in March. All insurance leaders surveyed stated that they had either fully or partially integrated climate risk into their risk management and governance processes, up from 82% last year.

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One third (32%) confirmed that their company had issued a product that specifically targets the ESG-aware consumer or marketed products as ethical or sustainable, up from 21% last year. A further 27% are in the process of designing such products.

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Four actions business can take now

1. Protect your business from financial and non-financial risks

After the pandemic, the expectation was that the global economy would revert to an era of relative calm and steady growth. Instead, challenges abound as persistently high inflation, increasing interest rates, energy insecurity and a very uncertain geopolitical landscape cloud the business horizon and give rise to a new set of financial risks. Insurers are well-placed to manage these financial risks but as insurance companies grow, non-financial risks are becoming increasingly important. Topping the list for the insurance sector are relentless technological changes that are significantly affecting operating and business models, growing customer expectations, highly capitalised new market entrants and talent shortages. The next crisis is just around the corner, so insurers should start responding to non-financial risks with the same rigour currently reserved for actuarial risks. That means finding more opportunities to involve the risk management function earlier in strategic decision-making, establishing a clearly defined company-wide risk culture and making more aggressive investments in technology.

2. Win the race for talent

Insurers will need to reimagine their future work and workforce as wider society navigates changing employee priorities and technology advancements. High demand and short supply of qualified actuaries, underwriters and agents combined with disruptions driven by digital adoption make the talent crisis even more pronounced for insurers. Finding creative solutions through flexibility including hybrid working, mobility and upskilling are some of the options that insurers need to explore. Insurers also need to manage their organisational culture. With social, environmental and customer-centric goals at their core, insurers can unlock growth, productivity and employee engagement by aligning culture to the purpose of the organisation.

3. Continue to fully embed digital technologies

Insurers must fully embrace the digital future by leveraging the power of digital technologies, data and responsible AI for product offerings, pricing and customer engagement. A significant portion of the current digital effort is focused on driving operational efficiency as opposed to creating new value for customers. Insurers need to pivot by leveraging digital investments for differentiating products and building partnerships and customer engagement models.

4. Embed ESG in your organisation's core

As stakeholders demand more action, authenticity and accountability from financial institutions, insurers are making good progress—but still have a way to go to fully establish their ESG credentials and make them a part of their purpose. To embed ESG deeply into the culture and values of the organisation and communicate that priority successfully to customers, insurers must demonstrate how ESG has a tangible impact for clients and helps accelerate positive outcomes for wider society. One way of doing this is to adjust your strategy to embed ESG in your core capabilities (e.g. your investment process, product innovation, operations and workforce management).

We are here to help

If you would like to discuss any aspect of this report in more detail, please contact the team below.

Contact us

John O'Leary

Partner, PwC Ireland (Republic of)

Paraic Joyce

Partner, PwC Ireland (Republic of)

Darren O'Neill

Partner, PwC Ireland (Republic of)

Ronan Mulligan

Partner, PwC Ireland (Republic of)

Tel: +353 86 411 6027

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