ADDRESSING THE CHALLENGES FOR FUTURE SUCCESS - PWC CEO PULSE SURVEY: ADDRESSING THE ...
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www.pwc.ie
www.insuranceireland.eu
Addressing
the challenges
for future success
1
Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies challenges priorities
Executive Summary – Growing opportunities, growing threats
We are pleased to present the 2018 Insurance Ireland – PwC Brexit: Nearly one fifth (17%) of survey
respondents with UK operations have
CEO Pulse Survey highlighting the views of Irish insurance reported that their company is considering
CEOs on the trends influencing the industry and the outlook relocating some or all of its operations to
and opportunities for growth. Ireland post-Brexit. Luxembourg is the most
competitive international regulatory regime
The survey, which was conducted in industry regulation, Brexit and emerging relative to Ireland. Paraic Joyce, Kevin Thompson,
Summer 2018, captures the views of Irish technologies. Other concerns include Insurance Partner, PwC CEO, Insurance Ireland
insurance CEOs across all classes of changes in customer behaviours, changes in Government priorities: The three
Government priorities which the CEOs The international environment remains
insurance and benchmarked the trends the international tax environment, poor
consider the most important are ensuring uncertain with the risks of Brexit and other
against the 2016 and 2017 surveys to give investment performance, talent and cyber
competitiveness on issues like wages and geopolitical risks impacting on sentiment and
an insight into changing industry views. threats.
rates, addressing the cost of claims and outlook.
Innovation and Tech: Despite the potentially maintaining the competitiveness of the Irish
Key takeaways from the survey disruptive effects of emerging technologies corporate tax regime.
Insurance CEOs are keenly aware of
include: and other trends, there are opportunities with
disruption and change facing their industry
The survey highlights that the Irish industry is and the transformational impact of
Confidence: Although down from 90% last 71% of Irish insurance CEOs believing that
confident about future growth, is investing in technology which is now evident across all
year, a significant majority (83%) of Irish the majority of businesses will have cyber
people and is getting greater returns from areas of the industry. Insurers are responding
insurance CEOs are confident about insurance in five years time. Two-thirds
investment in digital technologies. However, through utilising technologies such as data
business growth in the year ahead. This (66%) of respondents also said that the
some challenges are becoming more acute. analytics and artificial intelligence to inform
compares with 90% globally. Almost two insurance industry has more to do to
For example, while 77% of the respondents risk analysis, improve operations and
thirds (61%) plan to expand their workforce respond to changing purchasing habits and
said that there are more growth opportunities enhance client solutions.
in the year ahead and of these respondents, means of engagement such as across digital
platforms. It is noticeable that digital than there were three years ago, 66%
15% expect to expand their workforce by in More generally, the competitiveness
technology is playing a greater role in confirmed that there are also more threats.
excess of 10%. Although it should be noted challenges facing all businesses, and Ireland
that there may be variations across the decision making within companies and is no as a location, feature strongly in the survey
The opportunities for growth mainly relate to
industry. longer just an operational tool. However, the reflecting the competitive international
expanding into new markets and product
majority believe that it will be ten years or environment for insurance investments and
diversification and innovation. However, this
Challenges: There has been a noticeable more before self-drive driving cars are widely the need for Government policy to maintain
is tempered by business challenges relating
sharpening of CEOs’ views on the disruptive adopted. its focus on competitiveness.
to low interest rates, the availability of key
potential of issues such as changes in
talent and changing customer behaviours.
Fit for growth 2
Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies challenges priorities
1. Confidence
Ireland continues to be one of the highest performing Chart 1: Confidence about business growth in
the year ahead for your insurance business
Chart 2: Plans for workforce expansion in the
year ahead
economies in the EU. And despite continued disruption in the
industry, Irish insurers remain overwhelmingly positive in 170= 17% Growth up to 5%
200= 20%
Very confident 230= 23% 300= 30%
their outlook. Globally, 90% of insurance leaders are 240= 24% 260= 26%
Growth between 5-10%
confident about their own organisation’s revenue growth 660= 66% 200= 20%
Confident 670= 67%
and 45% plan to hire more people. 530= 53% Growth between 10-20%
90= 9%
100= 10%
Over eight out of ten (83%) Irish insurance This optimism is grounded on opportunities 170= 17% 60= 6%
Not confident 100= 10% More than 20%
30= 3%
CEOs are confident about business growth from emerging technologies and the ability of
230= 23%
in the year ahead, albeit slightly down from digital technologies to make a real difference
No plans to grow the workforce
330= 33%
prior year levels (90%). This confidence is to operational efficiencies, innovation 50= 2018 IRE 50= 2017 IRE 50= 2016 IRE 340= 34%
reflected in workforce expansion plans capacity, customer sales and the bottom Downsizing the workforce
60= 6%
(61%), including four out of ten (41%) line. Insurance leaders see real opportunities 30= 3%
projecting headcount expansion of over 5%. from data analytics, artificial intelligence and 50= 2018 IRE 50= 2017 IRE
It should be noted that this outlook may not robotics. They recognise that seizing the
be uniform across the industry and there are growth opportunities from these new trends
variations in company headcount in different will transform business models.
sectors. The slight dampening in mood in
Ireland compared to last year is likely to
reflect external challenges and international
uncertainties such as Brexit and other
geopolitical trends, the changing
international tax environment and looming
trade tariffs, all of which may impact Ireland’s 83% confident about
future economic growth. future business growth
61% plan to hire more people
Fit for growth 3
Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies challenges priorities
More opportunities, but also include more personalised products. For Chart 3: Single greatest growth opportunity Chart 4: In your view, will the majority of
for your insurance business in the next three businesses have cyber insurance in 5 years
more threats many, this will be a fundamental shift in
years time?
business models, using data to head-off an
71+3+620A
Three-quarters (77%) of insurance CEO emergency, not just providing compensation
340= 34% Too early to tell
respondents are of the view that there are after the accident has occurred. Examples Expanding into new markets 170= 17% 20%
more growth opportunities now than there are providing sensors when a car exceeds 60= 6%
were three years ago, up from 42% last year. certain speed limits or health insurers
Increased share in existing
260= 26% Don’t
At the same time, two-thirds (66%) also providing fitness devices or internet of 230= 23% know
markets
believe that there are more threats, up from things-enabled smart homes. If done right, 470= 47% 6%
2018
25% last year. customers will be more satisfied, the bottom 170= 17%
Further product innovation and No
line will be healthier and investors will be diversification
1700= 17% 3%
Expansion into new markets is seen as the 180= 18%
happier.
single greatest growth opportunity for Irish
Emerging technologies/
140= 14% Yes
insurance leaders and has tipped the One in sixteen Irish insurance leaders -
InsurTech 71%
balance from expansion into existing confirmed that a merger or acquisition will be -
markets. Two years ago, for example, nearly their single greatest opportunity for growth 60= 6%
170= 17%
71% expect majority
half of Irish based insurance CEOs were of over the next three years. With their Mergers and acquisitions
the view that expansion into existing markets innovative technologies to respond to 180= 18%
was the single greatest growth opportunity. 30= 3%
changing customer demands, InsurTech
Brexit 30= 3%
of businesses to have
businesses, for example, are likely to be
Emerging technologies/InsurTech will be the
receptive to offers of partnership and even
- cyber insurance in 5
single key growth driver for over one in ten
acquisition. We are seeing more tie-ups with 50= 2018 IRE 50= 2017 IRE 50= 2016 IRE years time
(14%) survey respondents.
larger players as a result.
Nearly one in five (17%) see product
77% see more
innovation and diversification as their single
most important driver of growth. For
example, as more businesses move to digital
channels, demand for cyber insurance will
opportunities
rise. The survey confirms that nearly three-
quarters (71%) expect the majority of
66% see
businesses operating in Ireland will have more threats
cyber insurance in the next five years. We
also see openings for insurers to become the
‘orchestrator’ of services, moving away from
traditional products where benefits will
Fit for growth 4
Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies
Technologies challenges priorities
2. Emerging technologies
Similar to last year, the research reveals that data analytics Chart 6: Extent to which digital technologies
are creating high value to your business in the
Chart 7: When do you expect self-driving cars
being widely adopted in Ireland?
is, by far, the emerging technology providing the single following areas (% who said ‘quite high value/
greatest opportunity (34%). A further one in five (20%) said very high value’)
Within 5 years
30= 3%
-
that InsurTech provides the greatest opportunity. Other Operational
910= 91% 290= 29%
emerging technologies providing opportunities are artificial efficiency
800= 80% Within 10 years
270= 27%
580= 58%
intelligence, robotics, the internet of things and blockchain. 830= 83% In more than 10 years
600= 60%
700= 70%
Innovation capacity 630= 63%
At the same time, over nine out of ten do not 610= 61% Do not expect to see 80= 8%
34% see data see self drive cars being widely accepted in
Ireland within the next five years. Risk-taking decisions
720= 72%
600= 60%
them widely adopted 30= 3%
50= 2018 IRE 50= 2017 IRE
analytics as the emerging 290= 29%
Chart 5: Which of the following emerging
technology providing the technologies do you see as having the single Direct customer 660= 66%
460= 46%
82%
sales and service
greatest opportunity greatest opportunity?
34+20+149A
experience 490= 49%
Blockchain
660= 66%
On average
The research confirms that digital
The internet
of things*
9% Data
analytics
Regulatory
compliance
300= 30% said digital technologies
technologies are creating much more value 9% 34% 390= 39% are creating high
for businesses compared to previous years. 520= 52%
Brand and reputation 330= 33% value in areas such as
On average, a quarter more insurance Robotics/
leaders feel that digital technologies are automation
2018 480= 48% operational efficiency,
14%
creating high value for their business in areas 50= 2018 IRE 50= 2017 IRE 50= 2016 IRE innovation capacity and
such as operational efficiencies, innovation risk-taking, up from
capacity, risk taking, customer sales and Artificial
reputation compared to two years ago. intelligence InsurTech 49% two years ago
14% 20%
*personal health devices, home technologies, connected
devices etc)
Fit for growth 5Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies challenges priorities
More to do on customer Chart 8: Has the insurance industry Mainstreaming innovation
responded sufficiently to changing consumer
engagement and automation purchasing habits and means of engagement, Over eight out of ten (83%) survey
such as across digital and mobile platforms?
respondents are of the view that digital
66% said the
14+66+20A
technologies are driving high value in
Yes
Not sure innovation capacity. But technology alone
14%
insurance industry is not 20% won’t enable insurers to capitalise on
sufficiently responding unfolding innovation opportunities.
Investments will go to waste unless there is a
to changing customer genuine readiness to embrace change and
2018
habits bring innovation into the heart of business.
The PwC experience is that innovation is all
Two-thirds (66%) of survey respondents are too often consigned to the fringes or
of the view that the insurance industry has operates in silos within different divisions.
not sufficiently responded to changing No The key to overcoming such hurdles is as
66% much cultural as operational. The cultural
consumer purchasing habits and means of
engagement, such as across digital and leap includes the swift and nimble decision
mobile platforms. Half (49%) stated that they Chart 9: What is your organisation’s state of making needed to respond quickly to
had no plans yet in terms of developing development in terms of opportunities from changing market demands. The insurance
humans and machines working together (ie industry is accustomed to big decisions, big
opportunities from humans and machines
chatbots, robotic process automation, etc.) system implementations, and big product
working together.
launches. Yet by the time traditional decision
49+46+5A
Development at an
advanced stage
making and implementation cycles have run
5% their course, the market will have moved on.
Innovation requires lots of little decisions and
No plans yet a willingness to learn from them. Keeping
49%
pace demands a readiness to bring
innovation front and centre into the
2018
mainstream of the organisation. It also
requires a willingness to experiment and
Plans are being even fail, but fail fast and move on.
developed
46%
Fit for growth 6Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies challenges
Challenges priorities
3. Disruption/challenges
The survey reveals the extent of the anticipated disruption in Over half (55%) see the GDPR, which came
into effect in May 2018, as a major
the Irish insurance industry over the next five years. disruption, though not to the same extent as
Disruption has also accelerated. Regulatory changes and the last year. While insurers have embedded
impact of Brexit are seen as the greatest disruptors and GDPR into their businesses, security over
data remains an area of key focus in order to
significantly more so than last year. build trust with customers.
transformation. Substantial opportunities are
74% said emerging
In an era where the internet is redefining
on the horizon as a new generation of
customer expectations, over half (54%) of
predictive analytics and artificial intelligence
Irish insurance CEOs reported that changing
technologies will disrupt transforms insurers’ ability to detect,
customer behaviours will continue to disrupt
their businesses, up from anticipate and avert risk. Notable possibilities
their businesses over the next five years.
include RegTech (regulatory technology
63% last year created to address regulatory challenges
Insurers shouldn’t underestimate the need
for longer term transformational change into
through innovative technology), which
digitally-enabled, customer-focused
While also bringing opportunities (page 5), cannot only strip out costs in labour-
organisations with flexible business and
three-quarters (74%) of insurance leaders intensive areas such as ‘know your
operating models. Successful insurers take
are of the view that emerging technologies/ customers’ requirements', but also
both their technological capabilities and their
InsurTech will also disrupt their businesses strengthen risk management and improve
readiness to innovate into the mainstream of
over the next five years, up from 63% last the reliability of compliance.
their businesses. Rather than operating in
year. Technological advances are changing
isolation, humans and machines should
business models and is challenging an
industry that is not accustomed to rapid Pace of disruption has actively collaborate. With these foundations
in place, insurers can take the next big leap
transformation. Embedding these accelerated and enhance their positions as competitive
technologies demands a clear strategy
customer centric organisations.
including a roadmap for decommissioning
legacy systems (including shifting to the The changing international tax environment
cloud), accelerating automation and laying and distribution channels will also continue
the platform for the next wave of to be key disruptors in the years ahead.
Fit for growth 7Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies challenges priorities
Chart 10: Extent of disruption of the following Challenges innovation and who see the benefits of (RPA), and once in place they can apply
trends for your insurance business over the humans and machines working together, more advanced automation and artificial
next five years (% who said very disruptive/ Nearly one in five (17%) respondents said communicating with artificial intelligence and intelligence. Industry front runners recognise
somewhat disruptive)
that geopolitical uncertainty is the greatest robotics. But it isn’t just digital skills that are that this is a transformation in how people
economic and policy risk they expect to in demand, the need for creativity and work and interact with digital capabilities,
Changes in industry 860= 86% face. emotional intelligence are just as important rather than simply a technological
regulation 710= 71% to innovate and re-connect with customers. implementation challenge. Key
910= 91%
26% said that low
These soft skills are needed alongside the considerations through the transformation
Impact of Brexit 800= 80% technical digital skills in a modern insurance include redefining job profiles and freeing up
630= 63% world. Taking full advantage of automation people’s time to focus on more value-adding
- interest rates/poor will be important, identifying opportunities to activities.
Emerging
technologies/
740= 74%
630= 63%
investment performance implement robotic process automation
InsurTech - is the single key challenge
GDPR 550= 55% for business growth Chart 11: Single key business challenge/risk facing insurance businesses (% who said it is the
700= 70% single key challenge)
-
Changes in customer 540= 54% Other top challenges for business growth Embedding
New market entrants
570= 57% include low interest rates/poor investment Solvency II
26+26+1714632A
behaviours/needs
3% 2%
660= 66% performance, change management and the
continuing shift in consumer behaviours. Leveraging ‘Big
Changes in the 460= 46% Data/data analytics’
international tax 460= 46% Low interest rates/
6% poor investment
environment 420= 42%
Concerns over cyber threats also Cyber threats
performance
Changes in 450= 45% continue to loom. 26%
6%
distribution channels 670= 67%
480= 48% Thinking about a people strategy for a digital
50= 2018 IRE 50= 2017 IRE 50= 2016 IRE age, talent also remains a threat to business Continued shift in
consumer behaviours 2018
growth with nearly one in five (17%) saying
14%
this is the single key challenge. Attracting
and retaining people with the right skills,
remains extremely competitive and, as other
Change
PwC research confirms, is a challenge for
Availability management
many industries. Key to business of key talent 26%
transformation will be the success of 17%
attracting digital talent, who can drive
Fit for growth 8Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies challenges priorities
4. Brexit
Nearly a fifth (17%) of participants surveyed with UK Chart 12: If your organisation has UK operations, is your company considering relocating some
or all of its operations to Ireland?
operations reported that their company is considering
14+43+340A 13+47+1327A
14%
relocating some or all of its operations to Ireland or this is 13%
27%
under consideration, down from 26% last year. 40%
While it does present opportunities in certain
80% said Brexit is a areas, namely financial services, Brexit, in
any of its possible shapes, will not be good
2018 2017
key business disruptor, for our economy. A no-deal scenario at the
up from 63% last year end of March 2019 would have potentially 13%
disasterous consequences for Ireland. 43% 47%
3%
According to the research, over half (57%) While we are hopeful that a Withdrawal
Yes No
said that the regulatory environment is the Agreement can be agreed with a transition Under consideration Don’t know/not applicable
single biggest challenge in attracting UK period kicking in, nevertheless, there is great
companies here post-Brexit, but is down uncertainty and we advise businesses to
from 70% last year. A quarter (26%) said that plan for all scenarios including the worst Chart 13: What is the single biggest challenge for Ireland in attracting UK companies here
infrastructure and accommodation deficits case scenario. Businesses need to review post-Brexit?
57+26+116A 70+13+107A
are constraints, up from 13% last year. their business models, examine their supply
6% 7%
Personal taxation and the availability of key chains, diversify their products and markets,
11% 10%
talent were also identified as challenges. consider the impact on their people, review
contracts and all of this takes time. You can
see PwC's no risk actions at www.pwc.ie
13%
2018 2017
26%
57%
70%
Regulatory environment Infrastructure/accommodation constraints
Personal taxation Availability of key talent
Fit for growth 9Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies challenges priorities
5. Regulation
As identified on page 8, changes in regulation are expected to Chart 14: As an international insurance centre, how is the Irish regulatory regime viewed
be one of the greatest business disruptors for the Irish compared to other EU territories?
77+6+17A 73+0+27A 50+13+37A
insurance industry over the next five years. 17%
27% 37%
77% said that Ireland’s regulatory regime is more 6%
demanding compared to other EU territories 2018 2017 2016
Over three-quarters (77%) of survey RegTech a way forward
respondents are of the view that the Irish 50%
regulatory regime is more demanding as an With IFRS 17 looming and the new set of 77% 73%
13%
international insurance centre compared to accounting rules for insurance contracts, it is
More demanding Less demanding The same
other EU territories and is slightly up from not surprising that the regulatory challenges
73% last year. According to the survey, are not going away. At the same time,
Chart 15: Specific regulations which will present the single biggest challenge
26+20+16159842A
Luxembourg (69%) is by far the most pressure on returns and the need to free up
competitive international regulatory regime funds for investment mean there can no BEPS (Base Erosion PRIIPS AML (Anti money
4% laundering)
relative to Ireland. longer be a blank cheque for compliance Profit Sharing)
8% 1%
costs. RegTech can not only strip out costs IFRS 17
The regulations that will pose the greatest in labour intensive areas such as ‘know your 26%
Conduct risk
challenges, according to the survey, are: customer’, but also strengthen risk
9%
IFRS 17, GDPR and Solvency II. management and improve compliance. And
even bigger opportunities are on the horizon
The majority (74%) are of the view that the as a new generation of predictive analytics 2018
capital requirements of Solvency II are and artificial intelligence transforms insurers’
appropriate with the greatest benefits being ability to detect, anticipate and avert Insurance
a greater focus on risk and governance, regulatory risks. The possibilities include Distribution
better use of capital and improved data Directive
scanning for early warning signs of financial 15%
quality. General Data
crime or mis-selling and identifying the Protection Regulation
scenarios that could give rise to regulatory 20%
Solvency II
missteps. 16%
Fit for growth 10Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies challenges priorities
6. Government priorities
Ensuring Ireland remains competitive, including tax, wages Chart 16: What is the single key Government priority for the insurance sector?
and business rates, is the single key priority for Government,
according to Irish insurance leaders. Other key priorities are Improvements
to infrastructure
29+23+209865A
addressing the cost of claims, the availability of key skills, Readily available
accommodation
(telecoms, technology,
energy/roads)
reducing the personal tax burden and improving 6% 5%
accommodation and infrastructure capacity. Ensure Ireland remains
competitive, including
Reducing the
personal tax burden wages and rates
But just chipping away at costs will not be 29%
8%
enough to remain competitive. As we have
seen, it will be critical that insurance
Ensure key skills
companies take full advantage of emerging are available 2018
technologies and advanced automation 9%
while being at the forefront of what the
customer wants, offering products and
services that their competitors cannot.
Maintain
29% said that
competitiveness
of Irish corporate Addressing the
tax regime cost of claims
23%
ensuring Ireland remains 20%
competitive is the single
key Government priority
Fit for growth 11Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies challenges priorities
Concluding insight Survey
Fortune favours the bold - and persistent methodology
Clearing away the barriers to growth and How far are insurers prepared to go in this and contacts
accelerating transformation is a daunting transformation of talent, technology, culture
task. Yet the pressure for urgent and and decision making? What level of The survey was carried out amongst Irish
fundamental change is mounting. Two-thirds experimentation are company stakeholders based insurance CEOs across all classes of
of Irish insurance CEOs surveyed see more prepared to accept? insurance (many who represent international
threats to growth in their organisation than insurance companies) during Summer 2018
there were three years ago. Fortune will favour the bold – and persistent having 35 respondents.
– at this time of disruption. By contrast,
While strategies will vary according to reluctance to tackle deep-seated
individual companies’ characterstics and inefficiencies or put innovation at the heart of
circumstances, structural and cultural an organisaiton can only prolong the
change will almost certainly be necessary. disconnect between aspiration and bottom
However, no company has the scale to line reality. Acting half-heartedly risks
address all the issues and develop the allowing other, more proactive companies to
necessary competitive capabilities on its harness opportunities and lead the industry.
own. Partnerships are therefore crucial.
Fit for growth 12Executive Summary 1. Confidence 2. Emerging 3. Disruption/ 4. Brexit 5. Regulation 6. Government Contacts
technologies challenges priorities
Key Contacts
If you would like to discuss any aspects of this report in more detail, please contact:
Paraic Joyce Kevin Thompson
Insurance Partner, PwC Ireland CEO, Insurance Ireland
+353 1 792 6394 +353 1 676 1820
padraic.joyce@pwc.com kevin.thompson@insuranceireland.eu
Laura Farrell
Ronan Mulligan Chief Membership Engagement Officer, Insurance
Insurance Partner, PwC Ireland Ireland
+353 1 792 7505 +353 1 676 1820
ronan.mulligan@pwc.com laura.farrell@insuranceireland.eu
Darren O’Neill John Byrne
Data Analytics Partner – Insurance, PwC Ireland Head of Communications, Insurance Ireland
+353 1 792 752 +353 1 644 7781
darren.oneill@pwc.com john.byrne@insuranceireland.ie
Fit for growth 13www.pwc.ie This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. © 2018 PricewaterhouseCoopers. 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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