Forging ahead amid uncertainty

Insurance is one of the most disrupted industries. However, CEOs’ outlook for the future is increasingly positive.

According to the findings of PwC’s 21st annual Global CEO survey, CEOs are confident about their own organisations’ revenue prospects over the next three years.

The top themes emerging

Overall, the insurance industry faces significant challenges, but positive developments are also creating new opportunities for growth in the sector, says Victor Muguto, Long Term Insurance Leader for PwC Africa.

According to the survey findings on Africa’s insurance industry the top themes emerging are:

1. Technology and data are disrupting the industry but are also being used also to accelerate growth;
2. Regulatory and accounting changes continue to place pressure on the industry, as well as costs and disruption;
3. Changing demographics and rapid urbanisation are creating a new ‘scramble’ for Africa’s customers and a convergence of services around the customer as banks, insurers, mobile phone operators and retailers all fight for customer attention and share of wallet; and
4. The workforce of the future. Rather than operating in isolation, humans and machines are beginning to actively collaborate. In order to ensure a thriving industry in the future, insurers will need to invest in their changing workplace and developing new talent capabilities. 

Other developments

According to PWC, the insurance industry in 2020 will be a vastly different space than it is today.

“The ever-evolving regulatory landscape will pose more challenges for insurers and reinsurers; and also impact profitability. The increase in inflationary pressures may precipitate an exponential rise in inflation and there is likely to be a negative impact on demand. There is likely to be an increase in policy terminations and increased regulatory reforms will subdue growth, particularly in more mature markets,” says Seelan Naidoo, Head of Property and Engineering at Allianz. 

“The true impact of climate change is likely to be more pronounced by 2020, rapidly increasing claims cost to insurers. Digital acceleration will be more advanced within the industry and more changes are expected on risk insured and new products brought to the market,” continues Naidoo. 

“Insurers will be investing more into analytics - this will largely eradicate back end non-value transactions within organisations and, lead to reduced workforce. Blockchain technology will become more pronounced within the industry resulting in increased efficiency and reliability. IOT (Internet of things) and automation will become integral within businesses and will result in a reduction in costs. Insurers will need to be fully prepared to deal with data privacy and protection, including the adequacy of infrastructure to deal with these requirements,” says Naidoo. 

Keep up with the disruption

“With all the changes that the insurance industry is undergoing, including the increased regulation and technological advances, companies are faced with a number of challenges. Changes to operations, systems, and processes are required to keep up with the disruption in the market. Focusing on the top emerging trends and adopting appropriate strategies is imperative,” says Muguto.

“Anticipated disruption from incoming competitors (e.g. Insurtech and digital platform players) has not materialised to the extent that was feared, previously. Indeed, partnership with new entrants rather than rivalry is the order of the day. However, having perhaps overestimated the impact of outside threats and short-term disruption in the past, insurers will need to focus on becoming more digitally enabled, customer focused organisations with flexible business and operating models,” continues Muguto. 

Editor’s Thoughts:
As Muguto mentioned, with all the changes that the insurance industry is undergoing, including the increased regulation and technological advances, changes to operations, systems, and processes are required to keep up with the disruption in the market. Do you believe these changes are better considered now than reacted to later? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.