March 21, 2017 by Tessie Sanci
Technology will continue to dominate the six major external forces impacting the Property and Casualty (P&C) insurance industry this year, according to Ernst & Young’s (EY) 2017 Canadian Property and Casualty Insurance Outlook.
“We’ve been talking about that [technological] movement for a number of years…and the capacity to be able to interact more with customers in that way, but now we’ve actually seen that come to fruition,” says Janice Deganis, insurance leader at EY Canada, referring to the launch of Canada’s first home & auto digital quote-to-bind insurance provider, Sonnet, which is owned by Economical Insurance.
In addition to technology, a talent shortage and evolving customer demands are cited among the six factors “forcing Canada’s P&C insurers to embrace innovation more urgently than ever,” as it “grapples with considerable disruption in 2017,” the report reveals. Adapting to these forces will be key…
Insurers must consider the importance of improving the technology in their own back office in addition to ensuring they have a digital offering available for clients.
“You have to find ways to be able to get efficiencies from your technology in order to pay for the additional spend that you need in order to connect to the customer,” says Deganis.
Some of those efficiencies may be produced by an investment in robotic process automation, the report suggests. This technology is helpful in completing repetitive tasks such as inputting information into systems, which could reduce costs.
Multiple economic factors are likely to affect insurers’ own pocketbooks and those of their clients.
The combined impact of low insurance premiums and low interest rates are putting pressure on the ability of insurers to cover their operation costs through premiums and investment returns. Ongoing volatility in the energy industry and its negative impact on the Canadian economy may also result in an increase in claims from customers, which tends to be the case when the economy is not flourishing, according to Deganis.
In addition, the unknown implications of the economic policies of U.S. president Donald Trump’s new administration remain a concern, according to the report.
Insurers should add the term “customer-centricity” to their vocabulary.
“Offering multiple ways in order to be able to transact with the insurance company is important,” says Deganis. That seamless, customer-centric experience is also produced when customers’ data is shared across systems. This allows brokers or other employees to understand the customer’s needs, without that customer having to remind the insurer of what services they require.
The devastation in 2016 caused by the Fort McMurray wildfire made it inevitable that natural and human-made catastrophes (CATs) would be a key area of focus in 2017. However, the current concentration on CATs did not stem from the occurrence of a one-time event. Instead, CATs are considered “the new normal” and will require innovative, yet prudent strategies in order to cope, according to the report.
“It’s the magnitude of the size and the frequency of some of these catastrophes that will bring concern [regarding whether] we have enough capital in the Canadian and reinsurance market in order to cover those,” she explains.
The threat of cyber invasion poses a business opportunity and a warning for P&C insurers.
A growing number of insurers are exploring the development of cybersecurity policies but this process is in early stages, according to Deganis.
Insurers are also vulnerable and must protect themselves against such threats through the hiring of cybersecurity experts, the delivery of cyber risk training to staff and having the chief risk officer work more closely with the information technology team, the report states.
Insurers should take stock of the skills they will require from their employees in the near future. A large percentage of the workforce will retire in the near future and the emphasis on digital tools is requiring new types of expertise.
It will take time to replace retiring employees that possess certain skills, such as particular types of underwriting, says Deganis.
As insurers look to replace more traditional insurance skill sets, they should also consider how to appeal to potential employees who are adept in working with digital tools and could contribute to developing products and services for a younger generation.
Copyright © 2017 Transcontinental Media G.P. This article first appeared in the March 2017 edition of Canadian Insurance Top Broker magazine
This story was originally published by Canadian Insurance Top Broker.