How the Insurance Industry is Changing
"Insurers who anticipate and plan for change can create their own future" (PWC, 2012). Change favours the opportunistic and the proactive, who can utilise the opportunities that change provides to stay on top. As insurers and insurance brokers grapple with capturing new business, picking the right investments and adhering with regulations, it is essential to understand how external environmental pressures will shape business decisions they need to make. Social The key trend here is that the power balance is shifting towards customers as competitiveness increases and social trends take hold. Customer expectations are changing with stronger demands around speed of service, simplicity and business transparency. One possible shift is that "more and more insurance will be bought by customers as opposed to being sold by agents" (PWC, 2012). The Takeaway: A greater focus on information availability, simplicity and customer centricity will be required. Technology It is undeniable that technology has and will continue to reshape the way things are done. In relation to the insurance industry, advances in software & hardware capabilities will pave the way for more accurate data analysis. This in turn, will enable insurers and insurance brokers to "transform big data into actionable insights" (PWC, 2012) improving their business' efficiency. Technology will also reshape customer expectations of how they can interact with their insurers and other businesses. The Takeaway: Keep up to date with technological advancements that your customers are using in their lives and assess how you may be able to incorporate these changes into your business. Economic Emerging markets are driving the growth across the global economy. Specifically, the E6 countries (China, India, Brazil, Russia, Indonesia and Mexico) are estimated to contribute nearly half (47%) of global GDP growth between 2006 and 2020. These emerging economies will also attract investment to drive the growth in infrastructure, job creation and evolution of new businesses. In turn, providing new opportunities for insurers and insurance brokers, to service the growing economies. The Takeaway: Insurers and Insurance Brokers will have to re-evaluate their strategic objectives towards emerging & developing economies to capitalise on future business opportunities. Environmental The environment is changing. "The severity and frequency of catastrophic events, both natural and man-made, have been increasing over the past 20 years" (PWC, 2012). New risks are developing and the impact from the environmental changes may be more significant than previously thought. Due to this, having a robust insurance industry becomes even more crucial to promote confidence to both businesses and individuals. Furthermore, Insurers and Insurance brokers will need to become more adept and sophisticated in their ability to price risk. The Takeaway: Insurers will require better risk management capabilities and modeling to ensure risk is calculated and priced accurately. Political The political landscape is shifting faster than ever. As the political landscape shifts, it is anticipated that the regulatory environment will continue to tighten. This is occurring due to greater standardisation and globalisation of the insurance market. In particular, the fallout from Brexit continues to unfold creating greater uncertainty. The Takeaway: Reflect on your political landscape and conceive how political changes may impact your business. The world is changing. So how will you stay on top of the changes and compete in the new world? Read more from PWC's Insurance 2020 Report.
Advisr does not provide advice and does not hold a financial service license (AFSL). All information above has been provided by Andy Jamieson.