A “potent combination” of technological change, talent pressure, customer expectations and cyber risks is forcing Canada’s property and casualty (P&C) insurers to embrace innovation more urgently than ever in 2017, according to a new report from EY.
EY’s 2017 P&C Insurance Outlook, released on Tuesday, identified six forces shaping the P&C insurance industry in the year ahead, and evaluated the impact of these external forces on the Canadian P&C market in 2017 based on very low impact (0) to very high impact (10). The factors shaping the industry include technology (9), economic and political uncertainty (9), customer expectations (8), catastrophes (7), cyber risks (7) and talent (6).
“Amidst fast-changing technology, evolving customer demands, and an uncertain economic and political environment, Canada’s P&C industry is grappling with considerable disruption in 2017,” said Janice Deganis, EY’s Canadian insurance leader, in a statement. “The issue of talent is new in our ranking this year. The pressure is on to find new people with the right digital skills.”
Looking at each of the factors individually:
Technology – The constant evolution of digital technologies and new developments in robotics, process automation and insurtechs are among emerging pressures on insurers often saddled with outdated systems, the statement said. Technological advances enable proactive insurers to improve efficiencies and gain critical ground in the quest for customer and market leadership;
Economic and political uncertainty – Low insurance rates and stagnant Canadian growth, along with continued volatility in the energy industry will put continued pressure on insurers, EY suggested. At the same time, the economic policies of the new administration in the United States may affect the broader economy with as yet unknown implications;
Customer expectations – The self-service, on-demand economy is forcing insurers to take a critical look at their role in customer centricity. Those insurers who focus on simpler products and a holistic approach may be better positioned to meet their customers’ expectations, the report said;
Catastrophes – Natural and human-made catastrophes are a growing threat for P&C insurers, who are already dealing with low investment yields, soft pricing and catastrophic loss claims. As natural disaster losses become “the new normal,” the industry’s ability to withstand and recover will require innovative, yet prudent strategies to cope;
Cyber risks – With digital attacks on the rise, cyber risk insurance will see significant growth as a commercial line of business in 2017. To maintain their leadership role, insurers themselves will be under pressures to adopt robust cybersecurity systems in their own organizations, EY said; and
Talent – With many insurance professionals retiring in the coming years, insurers will need to attract Millennials to fill the gaps. Insurers will need to attract data scientists, cyber risk specialists, digital marketers and other skilled professionals to secure their future.
To thrive in 2017, EY suggested that insurers will want to focus on the following pathways to change: remain “laser-focused” on customers and adapt go-to-market strategies to meet their ever-changing needs; focus on customer-driven innovation and accelerate the development of new products and business models that unlock market potential; adopt technology to improve performance “at every mark,” from embracing the robotics that can automate insurance processes, to deploying advanced analytics to unlock new efficiencies and solutions; put the perils of catastrophes and cyber risks high on the corporate agenda; and rethink strategies to attract, develop and retain talent with the skills to propel growth in a fast-evolving environment.
“In 2017, Canada’s P&C insurers will need to flex a different set of organizational muscles to unlock the competitive advantages of digital and product innovation and deliver on customer expectations,” Deganis said in the statement. “These challenges also represent opportunity to build business and change the future of the entire sector for the better.”