Insurance Trends 2019 - PwC
Insurancetrends 2019Digital transformation shiftsfrom threat to opportunityPart of PwC’s 22nd Annual Global CEO Survey trends seriesceosurvey.pwc
2 Insurance trends 2019Part of PwC’s 22nd CEO Survey trend seriesFrom threat toopportunityUntil recently, insurance was one of the global economy’s mostdisrupted sectors. The pace of technological change and shiftsin consumer behaviour had led to a new wave of competitionthat many insurance companies found threatening. Yet, as shownby responses from 140 insurance industry leaders taking part inPwC’s 22nd Annual Global CEO Survey, that initial trepidationover digital transformation is turning into optimism.
3 Insurance trends 2019Part of PwC’s 22nd CEO Survey trend seriesA clear sign of this shift in sentiment is the easing ofconcerns in the survey results, specifically about the speedof technological change and other disruptive developments(see Exhibit 1). Moreover, when asked about implementingtheir own artificial intelligence (AI) initiatives, whichcompanies are using to create more seamless interactionswith customers, more than 80% of insurance CEOs said thatAI was already a part of their business model or would bewithin the next three years.Although the current wave of new technology investmentfocussed first on improving customer experience andreducing costs, it is now shifting to new business models.The increasing use of sensors, AI and machine learning incombination has affected the practices of loss anticipationand compensation, moving them towards more proactiverisk detection, intervention and prevention. The possibilitiesalready can be seen in health monitoring and alerts fromwearable devices, which are now being built into healthcoverage. Further examples include the use of Internetof Things (IoT) technology to reduce property claims andcontrol crop damage risk, deploying integrated real-timedata from ground sensors, aerial surveillance and satelliteimagery. The win-win is better outcomes for policyholdersand lower risks and claims for insurers.EXHIBIT 1QUESTIONConcerns over disruption easeHow concerned are you about thefollowing potential business threats toyour organisation’s growth prospects?Insurance participants stating ‘extremely concerned’:51%Speed oftechnological change31%31%Changing consumerbehaviour21%22%New market entrants10%0102018Source: PwC’s 22nd Annual Global CEO SurveyBase: Insurance CEOs (140)20201930405060
4 Insurance trends 2019Part of PwC’s 22nd CEO Survey trend seriesAlthough insurance always hasbenefitted society by helpingpeople provide for retirementand ill health and recover fromcatastrophe, preventing loss andincentivising healthy lifestylesfurther increases its social value.Meanwhile, the intelligent interaction at theheart of new risk models is taking customerexperience and engagement to a new level.For example, smart devices are embeddinginsurers in people’s homes, enablingpolicyholders to benefit from real-timeequipment monitoring and maintenance.This connectivity is strengtheningpolicyholder trust, which is central to theinsurance promise. Although insurancealways has benefitted society by helpingpeople provide for retirement and ill healthand recover from catastrophe, preventingloss and incentivising healthy lifestylesfurther increases its social value. In all thesedegrees, the nature of the relationshipbetween insurer and insured — even whatwe mean by ‘insurance’ — is changing, in away that will be felt this year.
5 Insurance trends 2019Part of PwC’s 22nd CEO Survey trend series72%Insurance CEOs relying on organicgrowth to drive revenue70%Insurance CEOs relying on operationalefficiency to drive growthMarking out the front-runnersAs the CEO Survey findings highlight, someinsurers are embracing the future andcapitalising on opportunities much fasterthan others.Until a few years ago, innovation was oftenstuck in labs and incubators and onlyslowly reached customers. Today, frontrunners have shifted innovation into theheart of their businesses. A telling instanceis the extent to which increasingly digitallyaware compliance teams now collaboratein the development of new products, ratherthan simply vetting them at the end of theprocess. This shift in organisation andmind-set enables the companies to bringnew products and services to market morequickly while at the same time challengingconventional ideas about insurancebusiness models. The pace of change isalso visible in the emergence of simplerproducts, which are available in modularunits that are easy to understand anddistribute digitally.In turn, innovative companies are lookingbeyond the industry’s traditional confinesto participate in business ecosystemsthat cut across health, wealth, agriculture,financial management and beyond. Thestarting point is getting a holistic view ofwhat customers want and need — solutionsthat encompass health, retirement provisionand inheritance planning, for example —and then determining what capabilitiesare available in-house and with whom topartner to deliver the rest.Many of the insurers out in front are locatedin Asia, where the young demographic ismost open to digital transactions, especiallymobile. The pace of development inmuch of Asia is also less encumberedby regulatory brakes on innovation oroutdated legacy systems. Other notabledevelopments in that region include easyand intuitive forms of distribution, facilitatedby online retail giants.When asked about their plans for drivinggrowth over the next 12 months, CEOstended to say they would rely on organicgrowth (72%) and operational efficiency(70%), and it’s clear that both of thesepriorities should go hand in hand. Thistranslates into a renewed emphasis onefficiency and cost reduction, freeing upresources with which to develop futuretalent, organisational capabilities andcustomer offerings. There is also growinginterest in InsurTech capabilities, often inpartnership but sometimes brought inhouse, as a source of talent and innovation.
6 Insurance trends 2019Part of PwC’s 22nd CEO Survey trend seriesStrategymade realHow are new insurancemodels changing therelationship withconsumers, and whatwill it take to succeed?While customer-centricity has long been a prominentbuzzword in the insurance industry, most insurers havestruggled to truly understand what it means and howto deliver it.That’s changing.Consumers want choice, flexibility, simplicity andpersonalisation in what they purchase, the channelsthey use, and how they interact with carriers. Boththe amount and precision of customer intelligenceare growing to make this possible. For the first timein history, insurers, aided by InsurTech enterprisesand advances in digital technology, are innovatingwith customer needs and experience at the centre.Historically, the relationship with consumers has beenbuilt around renewal and claims payment. Today,digitally enabled consumers are open to a much moreinteractive relationship with carriers, which have theopportunity to offer services on an as-needed basis.For example, you can insure your car only when youdrive, your golf clubs when you hit the links, and yourcamera when you go on vacation. Then, you cantoggle off coverage via your mobile phone whenyou’re back home. That’s the kind of flexibilitycustomers want. InsurTechs such as Trōv, Cuvvaand Slice are making this on-demand, usage-basedpersonalised insurance a reality.Another distinct development is how insurers arepartnering with technology companies and platformproviders to create new value propositions forcustomers. ZhongAn’s recently announced partnershipwith Grab is a great example of insurers and technologycompanies joining forces to offer customised insuranceproducts to millions of consumers in Southeast Asia.
7 Insurance trends 2019Part of PwC’s 22nd CEO Survey trend seriesMaking headwayHowever, challenges remain. Many insurers are still tryingto break out of their legacy shells. The tangle of legacy andcomplexity doesn’t centre only on technology, but also ondecision-making and working practices. Front-runners aredecentralising decision-making from corporate centres tobusiness units closer to customers. But that cultural shifttakes time.And, although technology often dominates the transformationagenda, success ultimately hinges on people. Developingnew business models and competing in chosen ecosystemsdemand deep competency in data, analytics and AI. Yet,as more operations become automated, innately humancapabilities that can’t be replicated by machines — includingcreativity, empathy and leadership — are becoming an evengreater differentiator. It’s therefore troubling that more than80% of insurance CEOs are extremely (36%) or somewhat(45%) concerned about the impact of skills shortages ontheir growth prospects. Exhibit 2 highlights the impact ofthese skills gaps on the cost of hiring talent and the ability toinnovate and sustain quality standards and/or the customerexperience.Moreover, although insurers always have built their successon data, digital transformation and associated changes incustomer expectations have heightened data’s value. Morethan 90% of insurance CEOs highlight the importance ofdata in understanding customer preferences (97%) and theEXHIBIT 2QUESTIONSkills shortages hold backinnovation and growthWhat impact is ‘availability of keyskills’ having on your organisation’sgrowth prospects?64%50%48%38%26%6%We are not able toinnovativeeffectivelyOur people costsare rising morethan expectedOur quality standardsand/or customerexperience areimpactedAsked of those who selected ‘extremely concerned’ for ‘availability of key skills’.Source: PwC’s 22nd Annual Global CEO SurveyBase: Insurance CEOs (140)We are missing ourgrowth targetsWe are unable topursue a marketopportunityWe cancelled ordelayed a keystrategicinitiative8%There is no impacton my organisation’sgrowth andprofitability
8 Insurance trends 2019Part of PwC’s 22nd CEO Survey trend seriesdecisions they make about managingenterprise risk (93%). Yet, only 10% ofthose who believe that data on customers’preferences and needs is critical orimportant say the data they receive iscomprehensive. And only 39% believethat the data about the risks to which thebusiness is exposed is comprehensive.CEOs also complained about the ongoingfailure of data sharing within organisations,which reflects the still siloed nature ofmarketing, underwriting and claims.Forging aheadIf you are an insurance executive, how canyour business accelerate transformationand reap the rewards? In our view, there arefive essential priorities for you to consider.They aren’t mutually exclusive — indeed,recognising and addressing theinterdependencies between them is acrucial part of making them work:1. Reimagine your businessDigital transformation is opening upopportunities to develop deeper customerrelationships and insights. But it’s not adifferentiator in itself.The key to standing out is determiningwhat your business does better than anyother. In the short term, this might becost/pricing competitiveness or claimssettlement speed. But it’s also importantto look at openings for innovation in riskprevention and customer experienceto transition to the future state in acommercially attractive way.You then can identify and focus resourceson the specific capabilities that can fulfilyour customer promise. If you want tolead through innovation, for example, thenit should sit in the centre of the business,not in an isolated lab or incubator.2. Choose the ecosystemyou want to serveAs opportunities open up beyondinsurance and your business becomesboth an orchestrator and a direct providerof products and services, it’s important tojudge what commercial ecosystem bestplays to your strengths and relationships.For example, could equipment insuranceextend into a maintenance service? As apension provider, could you extend yourofferings into care services, inheritance
9 Insurance trends 2019Part of PwC’s 22nd CEO Survey trend seriesplanning or development of purpose-builtretirement accommodation? Whatever youchoose, you’ll need to determine how toengage with your target ecosystem, withwhom you might need to partner (i.e.,who’s the best match in terms of openplatform functionality, data sharing andunderstanding of business costs) and howto cement customer and partner loyalty.3. Simplify legacy systems todrive efficiency and create capacityfor growthThe demands of transformation have tobalance with the need to sustain existingbusiness models and ‘keep the lightson’ using ageing legacy systems. Butyou can’t continue to rely on slow andunwieldy capabilities when cheaper andmore efficient AI, blockchain, cloud/SaaS, robotic process automation (RPA)and intelligent process automation (IPA)solutions are available — which, in additionto enhancing risk selection, can helpreduce costs.It’s therefore important to simplify,selectively decommission and and shiftlegacy capabilities to new capabilities.Although modernising different componentsand integrating them into existing platformscan seem like the most pragmatic option,this can be difficult. The alternative iscreating fully modernised capabilities in onego and, once they’re trialled and refined,moving over customers from existingplatforms.4. Focus on talent developmentIf talent drives transformation, how canyou foster a culture that inspires your bestand brightest, and build, buy or borrow anynecessary skills that are missing?Although much focus is on which jobsRPA and AI will replace, it’s more likelythat elements of jobs will be automatedand augmented. It’s therefore important tolook at how tasks will change (e.g., claimshandling and settlement), how your staffcan make the most of the freed-up capacityand how your company can harnesstechnology to support this.As you look to foster organisational buyin, agility and customer focus, PwC’sown experience highlights how up-skillingexisting staff can be highly effective and
10 Insurance trends 2019Part of PwC’s 22nd CEO Survey trend seriesmotivational. We assessed our 250,000partners and staff, found opportunitiesto enhance our collective digital skillsand knowledge, and have seen bothenthusiastic uptake for up-skilling andsubsequent, noticeable improvements inour people’s digital competence. Moreover,and just as important for insurers, is havinga culture, purpose and environment thatinspires and retains people from outside(e.g., as part of InsurTech partnerships oracquisitions).5. Accelerate executionAs the velocity and complexity ofchange increases, execution and changemanagement need to become corecompetencies. It’s important to revisit howchange is designed, plans are created andbudgets are made and implemented, andmove away from old-style implementationmarathons in favour of a series of agilesprints. As data becomes increasinglycritical, it’s more important than everto break down any operational andtechnological siloes that hold up datasharing and inhibit execution.The insurance industry is used to bigdecisions, big system implementations andbig product launches. But today’s marketrequires trying and learning from lots of littledecisions. Inculcating that culture into yourorganisation is challenging but essential indriving innovation and change.Insurance is emerging as an innovator.There’s currently a unique opportunity forcompanies to be distinctive, as trepidationabout disruption turns to optimism.The industry is ripe for change and thecompanies out in front are in a position totake advantage of an increasingly open andconnected landscape.The winners are differentiating themselvesby envisioning customer needs beyondtraditional insurance and have adopted aproactive approach to talent developmentand strategic collaboration. They’re alsodistinguished by a readiness to embracetechnology in order to create innovativebusiness models, a recognition of data astheir organisation’s most critical asset, andan agile approach to execution and changemanagement.
11 Insurance trends 2019Part of PwC’s 22nd CEO Survey trend seriesAuthors andcontactsGermanyStephen O’HearnGlobal Insurance LeaderPartner, PwC Germany ijit MukhopadhyayFS Consulting, Digital and CustomerExperience TransformationPartner, PwC Japan nited StatesMarie CarrPrincipal, PwC US 1-312-298-6823marie.carr@pwc.comEric TrowbridgeDirector, Financial Services MarketingPwC US 1-202-248-4470eric.trowbridge@pwc.comLara De VidoSenior Manager, GlobalFinancial Services MarketingPwC US 1-646-322-9378lara.de.vido@pwc.com
About PwC’s22nd Annual GlobalCEO SurveyPwC conducted 3,200 interviews with CEOs over 90 territories. Therewere 140 respondents from the insurance sector, and 32% of theinsurance CEOs reported an annual revenue greater than US 1bn.Notes: Not all figures add up to 100%, as a result of rounding percentagesand exclusion of ‘neither/nor’ and ‘don’t know’ responses. We also conducted face-to-face, in-depth interviews with CEOs andthought leaders from five continents over the second half of 2018. Theinterviews can be found at ceosurvey.pwc. Our global report (which includes responses from 1,378 CEOs) isweighted by national GDP to ensure that CEOs’ views are fairlyrepresented across all major regions. The research was undertaken by PwC Research, our global centreof excellence for primary research and evidence-based consultingservices: www.pwc.co.uk/pwcresearchYou can find other CEO Survey reports here:ceosurvey.pwcAt PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 158 countries with more than 236,000 people who are committed to deliveringquality in assurance, advisory and tax services.Find out more and tell us what matters to you by visiting us at www.pwc.com.This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information containedin this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the informationcontained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone elseacting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. 2019 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity.Please see www.pwc.com/structure for further details.
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