EY underscores top trends and how to manage them
TORONTO, April 11, 2016 /CNW/ - Canada's property and casualty (P&C) insurers are dealing with a host of challenges in 2016 so far – from low interest rates to the weak dollar to increasing competition. According to EY's 2016 P&C Insurance Outlook, they'll have to excel at managing 7 forces impacting the insurance industry if they want to thrive in this environment.
"P&C insurers have a lot on their plate this year," says Janice Deganis, EY's Canadian Insurance Leader. "Taking measured steps to refine their current strategy isn't sufficient. As multiple factors are dramatically and quickly changing the industry, companies will need to focus on efficiency, investing in digital and improving the customer experience."
Deganis notes: "One of the ways P&C insurance companies can stay competitive is by focusing on becoming a digital leader internally as well as externally. Attracting the right talent to help undertake the transformation required to achieve growth in such unpredictable times is also critical."
EY has identified 7 external forces that will shape the P&C insurance industry in 2016. Insurers can address all of these forces with EY's roadmap (below), which involves a dramatic transformation from the outside in.
Impact of external forces on the Canadian P&C market in 2016:
(0 = Very low impact, 10 = Very high impact)
1. Technology (10) - Digital technologies, such as social media, telematics and analytics, are redefining the insurance market. The impact will affect most business areas, from marketing and distribution to customer service and pricing models.
2. Competitive landscape (9) - Competition will heat up as established insurers act fast to capitalize on game-changing market shifts. Challenges will also come from non-traditional sources, such as FinTechs, offering innovative digital solutions.
3. Customer expectations (8) - Services in other digitally enabled industries are causing consumers to demand more personalized experiences from insurers. With the greater opportunity for comparison shopping on the web, the impact will likely be significant.
4. Economic and financial conditions (6) - Uncertain financial and economic conditions are expected to continue through 2016. Slow economic growth, decline in the Canadian dollar and a weakness in the oil and gas industry are major downside risks for insurers.
5. Regulation (6) - In 2016, insurers will need to stay on top of changing regulations, implementing risk management processes and increased control functions. In particular, changes to capital factors will have implications for companies investing in technology, equities and foreign investments.
6. Cyber risks (5) - Digital transformation will expose insurers to higher risks from fraud, data theft and political activism. With greater access to sensitive data, privacy breaches will become a bigger worry, as will reputational risks from the use of social media.
7. Catastrophes (4) - The numerous natural and man-made disasters of previous years have been less prevalent in the last year. Despite this fact, globally, climate change and natural disasters are a constant challenge for P&C insurers.
Roadmap for transformation: priorities for 2016
In 2016, leading P&C insurers will focus on the following pathway to change:
- Transform operations to drive efficiency, reduce costs, accelerate growth and improve the customer experience
- Shift from a product to a customer experience orientation
- Position your organization for digital leadership
- Develop and attract the right talent to drive change
- Prepare for the next wave of M&A activity
- Create a culture of continuous innovation
- Drive performance through analytics
- Make risk management a key priority
"It's a complex and volatile environment right now for P&C insurers, and they can't afford to rest on their laurels," says Deganis. "First and foremost, insurance companies need to rediscover who their customers are and what they're looking for. That will inform much of the transformation needed to succeed in the next few years."
Read the full 2016 P&C Insurance Outlook or the 2016 Life Insurance Outlook.
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