Deloitte outlook: global insurers poised to accelerate growth in 2022
Published: 16 February 2022
- IFRS 17 go-live date less than a year away: preparations complete for 37% of global insurers
- APAC insurers expect 16.6% rise in technology budgets, higher than the global average of 13.7%
- Capabilities in cloud engineering, data science and analytics, AI and machine learning, software development, and cybersecurity in high demand
Despite lingering concerns about the potential impact of COVID-19 variants on business recovery and return-to-workplace strategies, insurers across the world remain fairly bullish on their growth prospects for 2022; about one-third expect revenues to be "significantly better" this year, according to Deloitte's 2022 insurance outlook from the Deloitte Center for Financial Services, which canvassed more than 400 senior insurance executives from North America, Europe, and Asia Pacific.
"However, global insurers also face emerging risks and new compliance demands. For example, two-thirds of respondents expect to increase cybersecurity spending to counter a growing number of cyberattacks, mainly driven by a surge in ransomware events and more vulnerable remote infrastructure. ESG is clearly another high priority at most insurance companies, with about 9 out of every 10 survey respondents saying their companies will invest more in this area. However, insurance companies in China are just starting to formulate their responses to and disclosures on climate risks, compared with their international peers," says Barry Man, Deloitte China Insurance leader.
"At the same time, International Financial Reporting Standard 17 (IFRS 17) has brought actuarial and finance together in an unprecedented way. Finance technology and data architecture have had major impact. While a lot of new data has been created to feed a brand new set of disclosures, the pandemic has prompted an acceleration of transformation plans," says Simon Dai, Deloitte China Actuarial leader.
According to Deloitte’s survey, preparations for IFRS 17 are already complete for 37% of insurance companies – North American respondents (58%) are ahead of their peers in APAC (41%) and Europe (23%). About one-third, however, said their companies are only somewhat far along or just getting started with preparation for the transition.
"Insurers today have become increasingly dependent on emerging technologies and data sources to drive efficiency, enhance cybersecurity, and expand organization-wide capabilities. It is critical that they align pandemic-driven adaptations with long term technology strategies to capture the synergistic value of emerging tools," Dai adds.
For instance, almost 70% of respondents to the Deloitte survey plan to increase spending on data-related technologies, including privacy (70%), collection (69%), and analytics (67%). Insurers should take a multidimensional approach with alternative data by leveraging enhanced analytical capabilities to derive real-time insights for faster, more accurate decision-making, and automating routine risk selection, pricing, and fraud detection, which will result in improved loss and expense ratios.
Furthermore, most respondents cited plans to invest more in enabling technologies and evolving talent models to build on the digital and virtual platforms that sustained their operations and maintained their engagement with customers during the worst of the pandemic. Insurers quickly shored up their digital capabilities to enable virtual consumer engagement after COVID-19 made face-to-face contact problematic even for those who still preferred to buy and be serviced that way.
"As the environment begins to stabilize, carriers should consider how to build on these adaptations and better integrate them with legacy approaches to product development, marketing, and distribution," says Joanna Wong, Hong Kong Insurance leader, Deloitte China. "A shift to 'right-channeling' – thinking strategically about which insurance interactions require digital versus human intervention to create the ideal experience for each consumer – should guide insurer distribution and service strategies. We also suggest insurance companies consider forming alliances or partnerships with entities that can provide seamless interaction and data sources to create more comprehensive, consumer-centric experiences."
Overall, Deloitte believes reignited competition in the global insurance outlook also creates new opportunities for “Insurers of the Future” to differentiate:
- Stand out from the crowd: with competition high following a pandemic pause, providers should avoid differentiating solely on price by elevating their value propositions with new capabilities and enhanced customer experience.
- Consider modernizing and/or upgrading core legacy operations platforms to facilitate seamless execution of routine administration and servicing activities such as case installation, billing, claims, and absence management.
- Product and service redesign: enable speedier, more agile customization of products with enhanced automation, rationalization, and harmonization of product portfolios and services to improve profitability.
For more findings from Deloitte's 2022 insurance outlook, please click here to visit.