As per the latest CBI/PwC Financial Services Survey, insurers remain cautiously optimistic about their business prospects as they face pressure on prices, margins and operational efficiencies.
The survey noted that a major chunk of insurance demand is non-discretionary in sectors such as home and vehicle cover, which makes the industry less vulnerable to economic shocks than other FS segments.
Also, as wage costs rise, they need to maintain growth and keep pace with new regulatory and reporting demands, including IFRS 17 and the environmental, social and governance (ESG)-focused Workforce on Climate-Related Disclosure (TCFD). needed.
The survey showed that, for insurance companies, regulation changes are one of the two most disruptive trends facing their business in the coming year. The second is the increasing focus on ESG.
There is uncertainty over how long insurers can remain untouched by the worst effects of the recession, PwC reported: “Pension sales and valuations could be vulnerable to a correction in the financial market. In turn, the cost of claims often increases during recessions. In our surveys, insurers uncover risks to customers, including the impact of bankruptcy.
These short- and long-term pressures have highlighted the need to build agile, customer-intuitive and cost-efficient digital capabilities.
Finally, PwC’s survey revealed a significant gap between insurers who are already taking advantage of the digital transformation and others who are still finding it difficult to move forward.
Alex Bertolotti, insurance leader at PwC UK, commented: “Insurers face increasing pressure on prices, margins and operational efficiencies. At the same time, they need to maintain growth, drive change and regulate regulation from ESG to IFRS 17. and need to keep pace with rapid changes in stakeholder expectations.
“All this necessitates significant investment at a time when finances are constrained. This is why it is so important to look at a cost baseline-by-line to characterize the ‘good cost’ necessary to meet strategic goals, while eliminating lingering ‘bad costs’ in areas such as process inefficiencies and claims leakage. is important.”
