MAINTAINING OPTIMISM WHILE GRAPPLING WITH TRANSFORMATIONAL CHANGES - 21ST CEO SURVEY - PWC
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
21st CEO Survey
Maintaining optimism
while grappling with
transformational
changes
Key findings from the Insurance industry
ceosurvey.pwc
2 | PwC’s 21st CEO Survey: Insurance
Contents
5 7 9 11 13 15 17 X
Grounds for Seize the Buy, borrow, Harnessing Revolutionising Mainstreaming The bionic 20 Conclusion
optimism opportunity or build automation compliance innovation organisation
capabilities 21 21st CEO
Survey
Methodology
22 PwC industry
contacts
3 | PwC’s 21st CEO Survey: Insurance
Exhibit 1
Insurance CEOs report existing in one of the most
Introduction disrupted sectors
Q How disruptive do you think the following trends will be for your business over the next five years?
i Chart shows percentage of Insurance CEOs stating ‘very disruptive’
36%
37%
According to PwC’s 21st CEO Survey, insurance CEOs
continue to report that theirs is one of the most 22% 23%
disrupted industries (see exhibit 1). However, their 33%
30% Increase in number of significant
outlook is increasingly positive. Half of insurance CEOs 28% 24% 26% direct and indirect competitors
say that they believe global economic growth will (traditional and new)
39%
improve over the next 12 months, up from only 19% in 33% 27% 13%
Changes in distribution channels
29%
2017. And more than 90% report that they are confident Changing customer behaviour
22%
about their own organisations’ revenue prospects over
43%
the next three years (43% are very confident and 49% 48% 40% 37% 55%
Changes in core technologies of production
or service (e.g. AI, robotics, blockchain)
are somewhat confident).
28% 30% 29%
20% Changes in industry regulation
9%
Entertainment and media Communications Insurance Banking and Technology
capital markets
Source: PwC’s 21st CEO Survey, Insurance
4 | PwC’s 21st CEO Survey: Insurance Among the many reasons for the positive Despite their CEOs’ optimism, insurers do We believe the insurers that are successfully outlook is that the anticipated disruption face some obstacles. They must become tackling these challenges are defined by both from incoming competitors (e.g. InsurTech leaner to compete and achieve savings their technological capabilities and their and digital platform players) hasn’t on a scale they have never attempted. Yet readiness to continuously bring innovation materialised to the extent that was feared. reducing costs alone won’t be enough to into the mainstream of the business. Indeed, partnership with new entrants stay competitive. At the same time they Rather than operating in isolation, humans rather than rivalry is the order of the day. must develop a seamless end-to-end digital and machines are beginning to actively Moreover, new risk mitigation opportunities business model, which runs from advice collaborate, and the pace must continue. – sensors and cyber assessments, for instance and origination all the way to claims, and With these foundations in place, they are – are opening up. But, having perhaps combines the best of humans and machines taking the next big leap by becoming bionic. overestimated the impact of outside threats in a ‘bionic’ organization. And, more Related benefits include more personalised and short-term disruption in the past, could insurance CEOs do recognize the enormity and effective life and non-life coverage, and Stephen O’Hearn insurers now be underestimating the urgent of this challenge than they did a year ago – a shift to delivering outcomes (e.g. wellness PwC’s Global Insurance Leader need to become digitally-enabled, customer- more than half (51%) report being extremely or mobility) and using data to head off an focused organizations with flexible business concerned about the pace of technological emergency, not just providing compensation and operating models? change. after an emergency has occurred.
5 | PwC’s 21st CEO Survey: Insurance
Grounds for optimism
Insurance CEOs report feeling positive about the
global economy and their own organisations’
prospects.
6 | PwC’s 21st CEO Survey: Insurance
Half of insurance CEOs believe In our work, we find that grounds for As industry boundaries blur, competition
that global economic growth will optimism exist in the increasing digitisation for this new business will come from multiple
improve over the next 12 months, of the global economy and resulting shift sectors. Insurance firms will need to have a
in customer preferences. Digitisation opens clear and differentiated value proposition,
up from only 19% in 2017.
up a range of new opportunities, such as defining what’s genuinely innovative and
the demand for cyber insurance. In fact, 40 new, the benefits for customers, and what
percent of CEOs from across all industries they can offer that competitors can’t.
are now extremely concerned about cyber
threats, compared to 24% in 2017. In turn,
there are openings for insurers to become
orchestrators of services such as mobility or
Internet of Things-enabled smart homes. For
example, a homeowner policy could bundle
(likely lower-priced) coverage with certain
smart features, such as sensors that can warn
of impending equipment failure before a loss
actually occurs.
7 | PwC’s 21st CEO Survey: Insurance
Seize the opportunity
CEOs cite barriers such as the speed of technological
change and over-regulation, but there are solutions.
8 | PwC’s 21st CEO Survey: Insurance
While opportunities do exist, the barriers to Exhibit 2
capitalising on them haven’t gone away (see
exhibit 2). Actual growth has generally failed What’s keeping insurance CEOs up at night?
to live up to expectations in recent years. Why
Q How concerned are you about the following threats to your organisation’s growth prospects?
is there such a disconnect and how can it be
overcome? The answer in large part is scale: i Chart shows percentage of Insurance CEOs stating ‘extremely’ or ‘somewhat concerned’
very few companies have all – or in some
cases, even some – of the resources they need 95%
93%
to become truly cutting-edge businesses.
85% 85%
83%
For example, few insurers have the necessary
technological capabilities to compete. In fact,
85% of insurance CEOs report they’re at least
somewhat concerned about the speed of
technological change. The challenges include
a continued reliance on slow and unwieldy
systems and the difficulties of moving old
– sometimes very old – books of business
over to new platforms. It’s important to look
for opportunities to simplify, selectively
decommission, and shift legacy systems over
to the cloud/SaaS, with the aim of managing Over-regulation Cyber threats Speed of technological Populism Geopolitical uncertainty
change
core processes in an integrated end-to-end
Source: PwC’s 21st CEO Survey, Insurance
manner.
9 | PwC’s 21st CEO Survey: Insurance
Buy, borrow, or build capabilities
Almost half of insurance CEOs say they are planning
alliances.
10 | PwC’s 21st CEO Survey: Insurance
As insurers look at how to accelerate InsurTech businesses are likely to be receptive
technological innovation, it’s also important to offers of partnership and even acquisition.
that they think about where they need to While they may have the innovative
partner and what companies they want to technology to respond to changing customer
acquire. Nearly half (49%) of insurance CEOs demands, establishing viable platforms for
are planning a new strategic alliance or joint asset management, retirement, and group
venture to drive profitability and growth over policies is expensive, as is entering many
the next 12 months, reflecting the increasing market niches such as digital small medium
importance of partnership ecosystems. enterprise (SME) insurance. We’re seeing
more tie-ups with larger players as a result.11 | PwC’s 21st CEO Survey: Insurance
Harnessing automation
CEOs must identify opportunities to advance tech.12 | PwC’s 21st CEO Survey: Insurance
Just chipping away at costs won’t be enough Industry front-runners recognise that this Human and machine collaboration:
to remain competitive. Insurance CEOs is a transformation in how people work Thinking about their people strategy
need a clear innovation strategy, one that and interact with digital capabilities, rather for the digital age, more than half of
is predicated on integrated, end-to-end than simply a technology implementation
insurance CEOs are clear about how
business and operating models that enable challenge. Key considerations through the
companies to take full advantage of advanced transformation include redefining job profiles
robotics and artificial intelligence can
automation. and freeing up people’s time to focus on more improve the customer experience.
value-adding activities.
A starting point – and a key to becoming
‘bionic’ – is the relatively mature and easy-
to-implement robotic process automation
(RPA). Once that is in place, insurers
can then identify opportunities to apply
more advanced automation and artificial
intelligence (AI).13 | PwC’s 21st CEO Survey: Insurance
Revolutionising
compliance
With over-regulation as
the No. 1 worry, RegTech is
a way forward.14 | PwC’s 21st CEO Survey: Insurance
Over-regulation is still insurance CEOs’ Even bigger opportunities are on the horizon
biggest worry (62% are extremely concerned as a new generation of predictive analytics
and 33% somewhat concerned) and no other and AI transforms insurers’ ability to detect,
sector comes close. And with IFRS 17, the anticipate, and avert regulatory risks. The
new set of accounting rules for insurance possibilities include scanning for early
contracts, looming, these challenges aren’t warning signs of financial crime or mis-
going away. selling and identifying the scenarios that
could give rise to regulatory missteps.
At the same time, pressure on returns and
the need to free up funds for investment Tie-ups between insurers, brokers, and
mean there can no longer be a blank cheque major technology companies are providing
for compliance costs. RegTech can not only further impetus to the development and
strip out costs in labour-intensive areas such implementation of RegTech. As with all
as ‘know your customer’, but also strengthen technology, making the most of the potential
risk management and improve compliance. calls for a shift in talent priorities, mindset,
and ways of working within risk and
compliance functions.15 | PwC’s 21st CEO Survey: Insurance
Mainstreaming innovation
Putting innovation at the heart of an organization
requires cultural, operational change.16 | PwC’s 21st CEO Survey: Insurance
Technology alone won’t enable insurers The cultural leap includes the swift and
to capitalise on unfolding opportunities. nimble decision making needed to respond
Investments will go to waste unless there’s quickly to changing market demands. The
a genuine readiness to embrace change insurance industry is accustomed to big
and bring innovation into the heart of the decisions, big system implementations,
business. In our experience innovation is all and big product launches. Yet by the
too often consigned to the fringes or operates time traditional decision making and
in siloes within different divisions. It’s also implementation cycles have run their
proving difficult to get many of the pilots course, the market will have moved on.
and proofs of concept out of the lab and into Innovation requires lots of little decisions
production. The key to overcoming such and a willingness to learn from them. It also
hurdles is as much cultural as operational. demands an entrepreneurial readiness to
experiment and even fail, but fail fast and
move on.17 | PwC’s 21st CEO Survey: Insurance
The bionic organisation
Humans and machines working together.18 | PwC’s 21st CEO Survey: Insurance
Capitalising on opportunities also demands about shortages of digital skills within the within siloed pockets (e.g. actuaries and
a deeper understanding of the customer, industry (81%) and within their workforce marketing). They now need to come together
which isn’t easy at a time when their (86%). While this is a challenge for all sectors within a more collaborative organisational
expectations are shifting so fast. In fact, – around three-quarters of participants in the design.
more insurance CEOs (78%) see changes in CEO Survey are concerned – insurance CEOs
consumer behaviour as a threat to growth report having the biggest anxieties in this About half of the insurance CEOs reported
than those in almost any other industry (only area of all sector CEOs. making strong efforts to attract and retain
entertainment and media is higher at 80%). these ‘renaissance people’ in areas such as
And it isn’t just digital skills that are modernising the working environment and
Developing the necessary capabilities in demand, but also the creativity and shifting employer brand perception (see
requires close collaboration of humans and emotional intelligence needed to innovate exhibit 3). But there are also opportunities
machines – machines augment rather than and reconnect with customers. Eighty- to take this further. There is room to expand
supplant human capabilities, and vice versa. six percent of insurance CEOs say that already-existing programs, in addition to
Investment, innovation models, and choice they believe their organizations need to other, obvious steps such as improving
of partners such as InsurTech firms, can flow strengthen employees’ soft skills alongside compensation and other perks.
from this. digital skills.
This, in turn, requires digital talent, which Bringing these capabilities together within a
insurance CEOs say is difficult to attract. bionic organisation demands a combination
In fact, only 19% of insurance CEOs say it’s of emotional and technological capabilities.
easy to do so. More than 80% are concerned Very often these capabilities have existed19 | PwC’s 21st CEO Survey: Insurance
Exhibit 3
How insurance CEOs aim to build tech talent
Q To what extent is your organisation using the following strategies to attract or develop digital skills?
i Chart shows percentage of Insurance CEOs reporting ‘to a large extent’
53%
49%
45% 45%
38%
36%
29%
23% 23%
18%
Modernising Implementing Implementing Partnering with Outsourcing to Changing brand Changing employee Improving Working with Relocating your
the working new flexible ways continuous learning external providers external providers perception through dress codes compensation and educational operations closer
environment (e.g. of working (e.g. and development marketing and benefit packages institutions to available talent
rolling out digital mobile and remote programmes advertising pools
tools, creating working)
collaborative
physical
environments)
Source: PwC’s 21st CEO Survey, Insurance20 | PwC’s 21st CEO Survey: Insurance
Conclusion
Fortune favours the bold – How far are insurers prepared to go in Sixty-six percent of insurance CEOs
and persistent. this transformation of talent, culture, report increasing pressure on their
and decision making? What level of organisation to deliver business results
Clearing away the barriers to growth and experimentation are company stakeholders
under shorter timelines.
accelerating transformation is a daunting prepared to accept?
task. Yet the pressure for urgent and
Fortune will favour the bold – and persistent
fundamental change is mounting. And at the
– at this time of disruption. By contrast,
same time, two- thirds of insurance CEOs say
reluctance to tackle deep-seated inefficiencies
they feel increasing pressure to deliver results
or put innovation at the heart of an
on shorter timeframes.
organization can only prolong the disconnect
While strategies will vary according to between aspiration and bottom line reality.
individual companies’ characteristics and Acting half-heartedly risks allowing other,
circumstances, structural and cultural change more-proactive companies to harness
will almost certainly be necessary. However, opportunities and lead the industry.
no company has the scale to address all of the
issues and develop the necessary competitive
capabilities on its own. Partnerships are
therefore crucial.21 | PwC’s 21st CEO Survey: Insurance
21st CEO Survey Methodology
PwC conducted 1,293 interviews with CEOs • 40% of companies had revenues of We also conducted face-to-face, in-depth
in 85 countries. Our sample is weighted by $1 billion or more. interviews with CEOs and thought leaders
national GDP to ensure that CEOs’ views are • 35% of companies had revenues between from five continents over the fourth quarter
fairly represented across all major countries. $100 million and $1 billion. of 2017. Their interviews are quoted in this
The interviews were also spread across a report, and more extensive extracts can be
range of industries. Further details by region • 20% of companies had revenues of up to found on our website at ceosurvey.pwc.com,
and industry are available by request. Eleven $100 million. where you can also explore responses by
percent of the interviews were conducted by • 56% of companies were privately owned. sector and location.
telephone, 77% online, and 12% by post or
face-to-face. All quantitative interviews were Notes The research was undertaken by
conducted on a confidential basis. PwC Research, our global centre of excellence
• Not all figures add up to 100%, as a result
for primary research and evidence-based
of rounding percentages and exclusion of
The lower threshold for all companies consulting services
‘neither/nor’ and ‘don’t know’ responses.
included in the top 10 countries (by GDP) www.pwc.co.uk/pwcresearch.
was 500 employees or revenues of more than • The base for figures is 1,293 (all
US$50 million. The threshold for companies respondents) unless otherwise stated.
included in the next 20 countries was more
than 100 employees or revenues of more than
$10 million.22 | PwC’s 21st CEO Survey: Insurance
PwC industry contacts
Stephen O’Hearn Jamie Yoder
Global Insurance Leader US Insurance Market Leader
PwC Germany PwC US
+49 89 38 00 69 688 +1 312 298 3462
stephen.ohearn@pwc.com jamie.yoder@pwc.com
Gero Matouschek Eric Trowbridge
Insurance Advisory Partner US Insurance Marketing Leader
PwC Germany PwC US
+49 151 6732 6502 +1 202 248 4470
gero.matouschek@pwc.com eric.trowbridge@pwc.comceosurvey.pwc At 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 delivering quality 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 contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained 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 else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2018 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.
You can also read
