Insurance companies leverage opportunities offered by disruption

02 November 2017 Consultancy.uk

Insurance companies are increasingly faced with internal and external disruptions, largely due to new technologies and business models arising. A new report explores how some of the world’s biggest insurance firms are rising to the challenge – many, it appears, see technology as an opportunity.

From changing business models and cyber risk to change management, insurers need to look beyond Brexit to the wider challenges facing the industry, as traditional strategies are coming under increasing threat. The current geopolitical environment, coupled with a relatively dynamic business environment – with disruption and technological advance on the horizon – are contributing to widespread uncertainty for CEOs across various landscapes, including insurers.

However, disruption is also presenting the insurance industry with major opportunities according to 'Preparing to disrupt and grow', a KPMG survey involving 100 insurance industry CEOs across ten global markets, 14 of whom were located in the UK. The CEOs were from relatively large companies, with 42% from companies generating more than $10 billion in revenues, and almost 50% had been in the job for more than five years.Confidence in overall growth

One of the consequences of the variety of regional and international development is a reduction in confidence in the overall global economy’s growth prospects in the near-term as well as their 3-year outlooks. One-year outlook on growth has fallen from 71% to 66%, while the longer-term outlook has plummeted from 85% to 59%.

Insurance industry growth predictions are also down, again, particularly in the case of thee-year rates (92% to 61% predicting growth), while the one-year outlook fell by 12% to 70% on last year. Companies are relatively confident about their growth prospect in the short-term, at 85% of respondents, although the enthusiasm for the future noted last year has fallen significantly to 79% from 92% predicting growth in the coming three years.

View on disruptionThe majority of insurers are relatively well informed on the matter of disruption in the sector, as well as wider market changes affecting the industry, including changes in business model as new technologies cut into risks, changing consumer preferences, and new digital solutions. In terms of the expected impact of technology, 46% say that it is likely that it will see disruption within the sector within the coming three years, while 36% disagree (27% strongly).

Disruption

In terms of disruption in the technology space, a large number of organisations see technology as more of an opportunity than as a threat, with 30% citing that they strongly agree and 31% that they agree. Around 20% of organisation surveyed disagreed with the sentiment. A large number of organisations also say that they are actively disrupting the sector in which they operate, with 43% saying that they strongly agree and 37% that they agree.

Top of mind riskThe respondents were also asked to identify the biggest risks for 2017. Emerging technologies came out ahead at 36% of companies surveyed, up slightly on last year when it stood at 29%. The shift in risks is partly a reflection of the disruptive and other changes sweeping the market. As such, operational risk was noted as considerably more concerning this year, as cited by 33% of respondents compared to 19% last year. Cyber security has decreased slightly in perceived risk, falling from 42% to 26%, while talent is up from 13% to 27% of respondents.

Will Pritchett, Head of Technology, Insurance, KPMG UK, added, “The pace of digitisation and the changing landscape of disruptive technologies is opening up ever greater possibilities for insurers and their customers. Customer centricity is now almost mandatory but the industry is still some way off delivering that completely, grappling with the legacy and security of their businesses whilst also trying to unlock the richness of data they hold and can source. The focus and ambition of organisations is undeniable, and notable progress has been made, but taking the pragmatic steps to truly re-engineer their business for the customer is proving harder.”

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