According to a recent survey of 500 global insurance executives conducted by Towers Watson recently, most believe they are ill-prepared to face emerging trends of attracting talent, using advanced technology and consumer empowerment through social media.
The Towers Watson survey was conducted in cooperation with International Insurance Society and released at the 49th Annual Seminar of the IIS in Seoul earlier this week.
Survey respondents were asked to identify “megatrends” of greatest concern to the executives and how they were preparing to deal with them over the next two and five years.
The top three megatrends on the nearer-term time horizon—and the ones insurers said they were equipped to deal with—were:
- Capital management changes resulting from sustained low interest rates and a volatile investment environment, identified by 66 percent
- Regulatory and legislative constraints, selected by 61 percent
- The volatile economic environment, selected by half the respondents.
Sixty-seven percent of those surveyed reported being well prepared to deal with capital management issues, while 63 percent said they had a good grip on regulatory issues.
In addition, more than half (68 percent) are confident in their ability to withstand the volatile economic environment.
Over the longer term—five-year time horizon—the economy and regulation overtake capital management in importance, and issues like demographic aging trends and the increasing role of predictive modeling register higher levels of concern, according to comparative percentage shown in the “Megatrends” survey report.
More striking, however, is the level of preparedness indicated for emerging trends, Towers Watson notes, revealing, for example, that only about one-third of respondents feel as least as prepared as their competitors to deal with the increased role of advanced technology, such as predictive modeling and big data—and one-quarter said they’re not at all prepared.
More than one-third said they’re not prepared for rise of social media.
The survey also raised questions about the industry’s future needs of top quality talent, Mark Saunders, regional managing director, Asia Pacific insurance sector, and risk consulting and software practice leader for Towers Watson, noted in a video released in conjunction with the report. Saunders said that nearly two-thirds said they are not prepared or only partially prepared to meet the increasing demands of talent attraction, engagement and retention.
“Insurers need to remember that talent needs may change significantly in coming years as we deal with the challenges and potential of big data, not to mention social media and other emerging trends,” Saunders observed.
He noted that consumer goods sellers “employ behavioral anthropologists and psychologists to help them better understand and predict behavior of potential and existing customers. Insurers will increasingly need such skills too to thrive,” he suggested.
Saunders noted that the survey revealed variations between property/casualty and life insurers in terms of their concerns past the top three. While life insurers are more worried about demographic change, P/C carrier executives see predictive modeling, advanced technology, extreme weather events and climate change as emerging worrisome megatrends.
Dr. Louis Ng, from the Department of Statistics and Actuarial Science at the University of Hong Kong noted during the video presentation of the survey findings that the results also reveal variations among regions. Ng reported that:
- Europeans are less likely to worry about talent shortages and big data, and more likely to worry about the volatile economic environment and changing regulations.
- Asia-Pacific respondents are far more focused on changing regulations and talent issues while paying less attention to capital management issues and big data
- Americans are much more likely to worry about capital management and big data, and less about social media and emerging markets.
Saunders said, “The findings also raise a bigger question: Are insurers failing to look at emerging issues because they are overly focused on what we might call ‘evergreen or conventional wisdom’ topics related to capital management and public policy?”
While not suggesting that insurers ignore these issues, which he in fact described as “the very heart of our business,” Saunders said “there is danger if we fail to give to proper attention to emerging threats” pointing to the possibility of disruptive competitors.
The Towers Watson 2013 Insurance Megatrends Survey was conducted March-April 2013.
It is reported in full at www.towerswatson.com in an Insight paper, video and infographic.
IIS On-Site Survey
Separately, IIS conducted its own survey of the Seoul seminar participants on major issues facing the delegates, sponsored by the ACORD group.
Over 400 delegates from 36 countries at the IIS Seoul Annual Seminar responded to a series of questions about key issues facing the industry.
The top issues identified were:
- Competitive price/adequate profitability, 31 percent
- Asset/liability management, 18 percent
- Multiple/inconsistent regulatory standards, 14 percent
Like the Towers Watson survey, IIS seminar participants said the greatest threats included regulatory challenges (30 percent) and capital constraints (20 percent).
IIS said in a media statement that the Towers Watson and IIS seminar results track closely in that both highlight concerns for changing regulatory requirements and capital management/asset-liability management issues.
The IIS Survey also further identified more segmented concerns. The most significant concerns of that list for non-life insurers was risk management/ERM (27 percent), regulation and reporting requirements (17 percent) and catastrophe loss trends (17 percent).
This represented an evolution from the 2012 IIS Annual Seminar survey in Rio that identified key non-life issues as inadequate premium (31 percent) and risk management/ERM (23 percent).
Discussing regulatory issues in more detail, the IIS statement about the two surveys noted that the content of IIS Annual seminar sessions underscored the variations in regulatory concerns vary by region—with Europe in the midst of defining what Solvency II will be, the United States going in a different direction and Asia pursuing a range of alternatives for solvency requirements.
The low interest rate environment, and regulatory concerns about assuring adequate capital to maintain solvency, make capital management and asset-liability management a key concern. Slow global economic recovery and uncertainty cloud judgments about how to respond to these key issues with company policies, the sessions revealed.
Primary regulatory concerns indicated by additional survey questions were multiple and inconsistent standards among national regulators (27 percent), understanding and anticipating regulations (18 percent) and public, regulatory and rating agency reactions (18 percent).
Regulatory efforts to improve cooperation and consistency of standards will require more years to remove these concerns, IIS said in a statement.
An additional IIS survey question about whether market conditions and profitability prospects were most likely to improve had respondents split, with 31 percent seeing improvement, 35 percent indicating worsening prospects, and 34 percent saying profits would stay the same in future years.
Another question on whether skeptics were overreacting to environmental concerns resulted in 65 percent either strongly disagreeing (36 percent) or somewhat disagreeing (29 percent).
The IIS survey was sponsored by ACORD, the global data standards organization for the insurance industry, and presented by ACORD President and CEO Gregory A. Maciag.
Further coverage of these topics within the seminar presentations is available at www.iisonline.org, along with an extensive archive file of prior seminar presentations.
Sources: Towers Watson Megatrends report, International Insurance Society