What are the top risks facing the insurance industry?
Toronto, ON (Sept. 14, 2017) – PwC and the Centre for the Study of Financial Innovation (CSFI) have joined forces to gather responses from senior insurers and close observers of the financial scene to learn what they see as the biggest threat.
The 2017 Insurance Banana Skins Survey includes insights from more than 800 insurers, regulators and close observers of the industry across 52 countries. This year’s survey included 38 Canadian responses:
- Life insurers: 4
- Non-life insurers: 19
- Composite: 4
- Reinsurers: 3
- Observers: 6
The Canadian survey results indicate that insurers in Canada are starting to realize the challenges of using technology to transform their businesses from slow, reactive and product centric to agile, predictive and customer-focused. The pace of change has escalated drastically. Insurers are concerned about their preparedness and ability to keep pace while managing new risks and attracting the right talent to drive the business forward.
When we look back at the highlights from the 2015 Banana Skins Survey, we can see how quickly the industry is changing. Regulation, which ranked number one in 2015, fell to number six this year. This was unexpected given the recent release of the IFRS 17 accounting standard and the sizable impact it will have on the industry. Rapid advances in technology are challenging the industry’s traditional structures and business models, and the top risk concerns of insurers in Canada have shifted to reflect these challenges.
Even more telling is the confidence level Canadian insurers have in dealing with the new risks they’re facing. New technology, increased competition, evolving business models, cyber risk (both as a crime risk and an underwriting risk) and the challenges of managing business transformation in a digital age are forcing insurers to re-evaluate their business strategies and quickly adapt to stay relevant. As a result, organizations feel less prepared to handle risks than they did in 2015—and this indicates that there’s a lot of work that still needs to be done to face the challenges ahead.
Compared to global counterparts, who remain highly concerned about economic instability and low interest rates that continue to depress investment returns, Canadian insurers are more worried about structural and organizational risks. The good news is that these risks are easier to convert to opportunities with the right investments.
Today the ability to respond to structural and organizational risks is hampered by ineffective change management and gaps in talent. Additionally, unwieldy legacy systems that are costly to fix and impossible to scale are inhibiting successful execution of strategies. While the industry may view investing largely in technology as an enabler, its untamed deployment may expose you to unprecedented risks, including capital losses and cyber attacks.
In summary, the inter-relatedness of the top risks that Canadian insurers are facing warrants a fresh review and refinement of your strategy and execution plans that will convert these risks into opportunities.
For the full Canadian report, click here.
For the global report, click here.
The Centre for the Study of Financial Innovation is a non-profit think-tank, established in 1993 to look at future developments in the international financial field – particularly from the point of view of practitioners. Its goals include identifying new areas of business, flagging areas of danger and provoking a debate about key financial issues. The Centre has no ideological brief, beyond a belief in open markets. For more information, visit www.csfi.org.
PwC is a network of firms in 157 countries with more than 223,000 people who are committed to delivering quality in assurance, tax and advisory services. Find out more by visiting us at www.pwc.com/ca.
“PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. Please visit www.pwc.com/structure for further details.
© 2017 PwC. All rights reserved.
SOURCE: PwCBanana Skins, CSFI, PwC, top risks