The industry is facing a “perfect storm” of soft rates, low investment yields and new regulation, as well as feeling the impact of new technology, shifting customer expectations and the threat of losing margins to "nimble" insurtech entrants, according to a new report from PwC.
The annual PwC report, released at the Monte Carlo Reinsurance Rendez-Vous, challenged the insurance and reinsurance industry to take brave steps in their cost reduction strategies.
It found that 70 percent of insurance business leaders plan to implement a cost reduction initiative over the coming year. However, PwC argued that squeezing a few percentage point savings is no longer enough in such a competitive and disrupted marketplace.
According to PwC, investment in technologies that sharpen the precision of risk selection and pricing but also improve the overall operations efficiency and effectiveness, will be “crucial” for companies looking to differentiate themselves.
The report said: “Those who take up the challenge will see significant cost savings and a game-changing boost in customer relationships.”
Stephen O’Hearn, global insurance leader at PwC, commented: “Many insurance executives have had bruising prior experiences with cost initiatives failing to deliver long-term gains or culture change within the organisation. But the time to confront the challenge is now."
He added: “Real business transformation is necessary. Outsourcing and shared services are certain to yield some benefits but automation may be the most sustainable long-term solution.”
