Many insurance companies feel inadequately prepared to face certain megatrends that will impact the industry in the coming years, including the rise of social media and "big data," according to a new insurance survey by Towers Watson, a global professional services company.
Respondents around the world who participated in the Insurance Megatrends Survey said that trends related to capital management, regulatory constraints and economic volatility are of greatest concern for the next several years, and a majority of respondents feel their companies are well prepared to address these challenges. However, respondents said they are less equipped to manage some important emerging trends — notably the impact of social media (29%), the role of advanced technology such as "big data" (32%), and workforce challenges around talent attraction and retention (33%).
"A focus on capital management and regulations is familiar territory for insurance companies and therefore the least surprising finding in our survey," said Tricia Guinn, managing director, Risk and Financial Services, Towers Watson. "On the other hand, the rather low priority given to new and emerging trends raises the question of whether insurers are devoting enough attention to issues that may have a huge impact on the industry down the road."
As an example, Guinn noted the increasingly rapid adoption of new technologies by consumers of all ages. "Not only is a whole new generation coming along that will make its insurance-related buying decisions differently thanks to the Internet and social media, the current insurance-buying consumer is embracing these technologies, too. While insurers have an important role to play helping current and future generations achieve financial security, they need to quickly accelerate their strategies regarding emerging technologies or risk losing out to competitors both within and outside the insurance industry."
The 2013 Insurance Megatrends survey, conducted in cooperation with the International Insurance Society, looked at the trends of most concern to insurers in each geographic region and how well prepared they are to address the impact of these trends. The survey asked respondents to rank trends by impact over the next two years and then over the next five years. In the longer time frame, insurers become increasingly more concerned about emerging trends; however, the regulatory environment (47%) and economic volatility (44%) again ranked as two leading concerns five years out. More than 500 insurance experts participated in the global survey.
"I would be surprised if low interest rates and economic uncertainty will still be considered top impact issues in 10 years' time. That would mean the status quo has succeeded over creativity, fresh perspective and potential game changers," said Mark Saunders, Risk Consulting practice leader, Towers Watson, Asia Pacific. "And I do think the industry is ripe for a disruptive game changer — one that will dramatically improve the industry's image and reputation by promoting the 'good' and empowering better connection with, and appreciation by, society and communities. We need to create a positive buzz that goes viral — via a revolutionary change in the way things are done, through affirmative actions and execution."
Survey findings also varied among regions. European respondents are more likely over the next five years to consider regulations their greatest concern while ranking talent statistically lower than the other regions.
Asia Pacific respondents are almost equally concerned about regulatory trends while giving comparatively higher rankings to the need for talent and social media's impact. North Americans are slightly less concerned about regulations than their counterparts, with higher priorities given to big data and extreme weather events.
"Big data is another area where an insurance company can differentiate itself," said Steve Shurety, head of the Insurance Management Consultancy at Towers Watson. "There's great potential for looking differently at the data we already have, identifying new sources of data and seeing how we can use either to improve the bottom line or to give us a pricing, product or service advantage with the customer base. With so much focus on capital management and public policy, are insurers paying too little attention to the competitive advantage — or disadvantage — that will flow from new megatrends such as big data?"