Technology-driven client solutions top list of opportunities; regulatory risks loom large and pressure of disruption mounts
TORONTO, Dec. 6, 2018 /CNW/ - Increasingly competitive markets are driving Canadian insurers to invest in new technologies to better meet customer expectations and find their niche in an increasingly crowded market. This is among the many findings in KPMG's 2018 Canadian insurance industry opportunities and risks report.
"For many of our major clients and this year's respondents, it's all about knowing the customer," says Chris Cornell, Partner and National Sector Leader, Insurance, KPMG in Canada. "Organizations want – and need – to deal with their customers in the way the customer wants to want to be dealt with, whether that's through digital experience, directly with the company or through their broker."
Now in its sixth year, the cross-sectional survey asks more than 40 Canadian insurers, both large and small, to weigh in on the opportunities and risks they see for their organizations and the industry as a whole.
Top opportunities
Organization |
Industry |
||
— |
Enhanced operations processes and |
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Data analytics to enhance product design, |
— |
Data analytics to enhance product |
— |
Changing customer needs and |
— |
Offering better customer experience |
— |
Enhanced operational processes and |
All roads lead to the customer
The desire to stand out is strong – especially in an industry with new online entrants, niche competitors and direct-to-consumer alternatives. To make an impression, Canadian insurers are leveraging their strengths, size and the latest technology to hone in on what their customers truly want, and continue delivering on their evolving expectations. As demographics shift and customer preferences move toward on-demand platforms, point-and-click services and simplified service delivery, the need to pursue direct-to-consumer strategies is more apparent than ever.
"For many, what's standing in the way of creating a direct-to-consumer channel is legacy and past success. A lot of insurers have roots in broker-based models, and they can't simply be tossed out because the industry is in transition," notes Cornell. "Therefore, the balancing act they need to perform is managing their current broker-based business model, while also building out a direct to consumer channel that will be distinguishable in the market and can survive that transition phase."
Intense competition and an increasing demand for digital services is informing new strategies and forcing Canadian insurers to think and do differently. Indeed, they are starting to integrate technology across the value chain and use it as a bridge to new and innovative business models. Some insurers are also starting to take things further with InsurTech to generate savings, operate efficiently and become more data-driven and client-centric. However, insurers also recognize these opportunities come with sizable costs and strategic risks.
Top risks
Organization |
Industry |
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Failure to adapt to changing customer |
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Regulatory and compliance burden |
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Regulatory and compliance burden |
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Natural catastrophes |
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Failure to adopt new technologies |
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Low interest rates and equity market |
Bracing for IFRS 17
Few disruptions loom heavier over the insurance industry than the arrival of IFRS 17. The new accounting requirements, in addition to changes already introduced under IFRS 9, will stretch current processes and have a direct impact on all players, including multi-national insurers who have a footprint in the Canadian market.
"IFRS 17 is a massive challenge and Canada is one of the few jurisdictions in which all insurers, large and small, must comply," explains Dana Chaput, Partner, Audit and Insurance Accounting Change Leader, KPMG in Canada. "Ambitious insurers are using this change as a catalyst for process improvements within Finance or Actuarial, increased automation, and to develop future leaders."
The accounting changes introduced by IFRS 17 will also have knock-on implications with respect to regulation, capital and taxes. "Regulatory and tax authorities are trying their best to signpost where they're going to head," adds Chaput, "but they've yet to come out with updated requirements. This creates a 'chicken and egg' scenario where insurers are moving forward on IFRS 17 implementation, but questions about capital and tax implications remain outstanding."
IFRS is not the only regulatory consideration. The FASB's Targeted Improvements to US GAAP Long-Duration Contract Accounting will result in significant changes to how insurers required to report under US GAAP measure the liability for certain insurance contracts and amortize deferred acquisition costs. New expectations around Know Your Customer and Know Your Product, revised Life Insurance Capital Adequacy Test calculations are also expected to put pressure on insurers as they try to keep pace with compliance on a number of fronts.
Access a full copy of the 2018 Canadian insurance industry opportunities and risks report at https://home.kpmg.com/ca/en/home/insights/2018/12/kpmgs-canadian-insurance-opportunities-risks-report.html.
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About the 2018 Canadian insurance industry opportunities and risks report
Each year, KPMG in Canada gathers input from insurance professionals across the country to capture their top opportunities, concerns and contribute valuable insights into an industry that is changing rapidly. This year's report builds upon the top trends identified in previous studies, and takes a closer look at how regulation, technology and an increase in competition are combining to bridge the gaps between insurers and their customers.
About KPMG
KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG member firms around the world have 200,000 professionals, in 154 countries.
The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.
SOURCE KPMG LLP
For further information: Kevin Dove, Director, Corporate Communications, KPMG in Canada, 416.777.8026, kdove@kpmg.ca
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