By Alex Bertolotti, UK Leader of Insurance at PwC UK
Firms told us that they are cautiously confident about their prospects in 2021, and this is especially so with general insurers. Having fallen in Q1 and Q2, general insurers’ optimism about business prospects has seen the biggest rise of any financial services segment, according to our survey. I hope that this stark turnaround in sentiment can pave the way for an acceleration in customer-led transformation, despite the bumps in the road ahead. Possible challenges come from the Financial Conduct Authority's test case on business interruption claims and its plan to bring insurance renewal prices into line with new customer offers. The potential for a less than smooth economic recovery may also prove to test the sector.
Meanwhile, insurance brokers are also now reporting rising confidence and profit expectations, and although life insurers are less positive, they too report that volumes are only 2% down on normal, while anticipating significant increases in business over the next three months.
In terms of how the industry anticipates their business transforming, life insurers see regulation as by far the biggest disruptor, with an additional strong focus on cost reduction. This is ahead of product development and responding to changing customer demands. Insurance brokers see both changes in regulation and customer preferences as highly disruptive. Across the board insurers place a prominent focus on diversity and inclusion as areas in which they hope to drive change. They also plan to continue prioritising technology to both enhance customer experience and maximise efficiency.
With a potential vaccine in sight, we could see a recovery in the new year, however, it is likely that this uptick will be slow. Firms need to ensure that they have sufficiently battened down the hatches and are ready for what could be another challenging year. So, what should they be thinking about?
Customer-led transformation
We know that insurers are facing disruption on multiple fronts, so it's imperative that firms look at how they can manage and maximise shifts in customer preferences and behaviour. The acceleration in digital technologies could also play a key role in helping firms weather the upcoming storms. In fact, to get ahead, firms should consider these drivers and feature them strongly in any strategic response to disruption.
Cloud adoption would help insurers gain the flexibility they need to meet changing customer demands. While advances in artificial intelligence (AI) and data analytics could also help insurers improve customer understanding and interaction. Our results show us that brokers seem to lead the way in terms of recognising the potential role digital technologies can play. However, most life and general insurers see the main benefit as just managing financial risk. By not making the most of digital advances, firms risk falling behind to agile, tech-enabled entrants.
People driving change
Skills are as important as technology in driving transformation, so upskilling and reskilling should be included in any planning for 2021 and beyond. One of the key ways that insurers could approach this issue is by strengthening diversity and inclusion within the business. This will lead to fresh perspectives and a breadth of experience needed to steer through disruption and change.
Our survey results provide valuable insights into insurers’ progress on transformation and how they’re looking to steer through these challenging times. While efficiency and risk management are clearly critical, transformation strategies must keep pace with changing customer expectations. That these shifts have been accelerated by the impact of COVID-19 cannot be understated and so it is crucial that firms make the most of available data today, as it can hold the key to understanding what customers really want.
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