When insurance firms launched social media initiatives, the results were rewarding.
By Robert Dixon
How are insurance companies preparing to survive—and maybe thrive—in this era of “stable instability?” In its 16th annual survey of global insurance executives, accounting and consulting firm PwC (formerly PriceWaterhouseCoopers) examined what companies are doing to deal with today’s chaotic business landscape.
The industry overview, “Dealing with Disruption: Adapting to Survive and Thrive,” found insurance CEOs are focusing on “a few carefully selected initiatives to stimulate organic growth; exploring new ways to attract and keep customers; and balancing efficiency with agility. And to succeed in these three goals, CEOs are recognizing the role that trust plays, and that they’ll have to work hard to repair the bridges between business and society.”
"The industry is facing significant challenges and opportunities: trajectories of growth in different parts of the world are diverging; customers are demanding more transparent and accessible products; technology is revolutionizing risk analysis and customer profiling; and the speed of change is putting existing business models at risk,” David Law, global leader of PwC’s insurance practice, writes in the report’s introduction. “There is also a heightened threat of new entrants picking off profitable business. The insurers that come out on top will focus keenly on the customer and have a superior capacity for innovation and reinvention. They’ll be able to anticipate change and how it affects them, as well as be nimble enough to quickly capitalize on emerging opportunities."
Key findings from the survey include:
- Insurers are upbeat about their companies’ future, PwC found. Nearly 90 percent of those surveyed were “at least reasonably confident” about revenue growth over the next 12 months and next three years. That figure contrasts markedly with CEOs’ views about the economy; only 15 percent expect growth and a quarter foresee declines ahead, PwC reported. Even that is upbeat; a year ago, almost half of insurance executives expected the economy to decline.
- Some 86 percent of industry leaders said they plan to increase investment in technology over the next 12 months, more than any other commercial sector PwC examined.
- Another 58 percent are concerned about the shift in consumer spending on insurance products. In the report, PwC said its findings raise questions about whether insurers are moving quickly enough to keep up with market shifts.
- The insurance industry needs to rebuild consumer trust. About 55 percent of insurance executives expressed concern over this issue, slightly more than any other financial services industry sector, the consulting firm reported.
- Global executives see the most likely growth markets as Asia and Latin America; they are least likely to focus on growth from Western Europe and the Middle East, PwC reported. Major disasters and a lack of information have cooled interest in some emerging markets, the survey found.
- The focus over the next 12 months is on the customer. Growing the customer base (71 percent), enhancing customer service (59 percent) and improving operational effectiveness (52 percent) are the three top areas targeted for investment by insurance executives over the next year.
- The availability of people with key skills (64 percent), changing consumer behaviors (58 percent) and increasing tax burdens (57 percent) are seen as the main barriers to growth in the industry.
Technology, the internet, social media and an uncertain economy are driving rapid changes both in customer expectations and the ability of the insurance industry to meet consumers’ needs, PwC reported. “We will see financial service providers use ‘big data’ analytics to design products that adapt to the changing needs of the household as they move through different life stages,” says Dr. Anand Rao, principal overseeing innovation in analytics for the insurance practice at PwC US. “Advice will be tailored based on age, making it simpler for consumers and advisors, while automation and analytics reduce the complexity of insurance products.”
In its report, PwC points out that the same new technologies and market data that present opportunities for growth to the current industry may also make it easier for new competitors to enter the market.
“The speed at which insurers are able to anticipate and adapt to change, rather than simply reacting to events, will be a key differentiator in the transformation ahead,” the report says. “To stay in the game, they will need to think and act at the same rate as technology and customer expectations evolve.”
PwC surveyed 1,330 insurance executives, obtained results from 92 of them and interviewed 39 face-to-face for the study. The complete report is available at www.pwc.com/ceosurvey.
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