Insurance industry chief executive officers are bullish on their companies’ growth potential in the coming year despite some recent challenges, a new report shows. PwC’s 20th “Key Findings in the Insurance Industry” (PDF) survey found that more than 35% of CEOs are very confident they can achieve revenue growth in the next year, while more than 80% are at least somewhat confident. They’re keeping a wary eye toward expected disruptions in the marketplace as a result of new technology such as sensor-based coverage and regulations. In fact, 83% of respondents said they are at least somewhat concerned about the threat to growth from the speed of technological change, and 95% said they are at least somewhat concerned about over-regulation.
Insurance technology (InsurTech) firms have set the pace in the marketplace, the report states, and the amount of annual investments in InsurTech startups has grown fivefold in the three years up to 2016, with cumulative funding since 2010 reaching $3.4 billion. Still, more established companies could use these newcomers to “enable them to make the leap from incremental to breakthrough innovation.”
“Our research shows that differences in management and culture are among the biggest impediments to closer ties between established insurers and InsurTech startups, but it is eminently possible for them to forge closer relationships,” the report states. “Rather than seeing the contrasting cultures as unbridgeable, there are opportunities to complement the long-term mindset of incumbent players with the creativity and agility of their InsurTech peers to create market shaping alliances.”
Indeed, insurers are ready to make technological leaps. Sixty-seven percent of industry leaders see creativity and innovation as very important to their organizations, and strengthening digital and technological capabilities tops respondents’ top five list of the most important areas to strengthen, according to the survey. For instance, 61% of CEOs are looking at the benefits of human/machine interactions, and almost half are looking at artificial intelligence.
A major concern associated with digitization, however, is security. Eighty-one percent of insurance CEOs are somewhat or extremely concerned about the effect of cyberrisk on their growth prospects, according to the survey. “Given the volume of medical, financial and other sensitive policyholder information insurers hold, breaches could lead to a loss of trust that would be extremely difficult to restore,” the report states.
In the end, the elements of success remain unchanged: reducing costs while strengthening productivity and boosting growth potential. To those goals, insurers are looking at automating routine tasks, which can lower costs and free up employees to work with customers on higher-value growth areas such as cyberrisk insurance, the report states. Technologies that companies are paying attention to include machine learning, advanced analytics, sensors, AI and robotics.
One more factor to insurers’ growth is workforce. Many are looking at how humans and machines can work together. For example, almost half of respondents said they are considering the impact of AI on future skills needs, and 72% said they have added digital training to their learning programs.