Tech change, cyber risk overtake regulation as top risks for insurers
LONDON: The global insurance industry’s ability to confront structural and technological changes is now the greatest risk it faces, according to a new survey of insurers and close observers of the sector.
The CSFI’s latest Insurance Banana Skins 2017 survey, conducted with support from PwC, surveyed 836 insurance practitioners and industry observers in 52 countries, to find out where they saw the greatest risks over the next two to three years.
Change management is at the head of a cluster of operating risks which have jumped to the top of the rankings.
The report raises concerns about the industry’s ability to address the formidable agenda of digitisation, new competition, consolidation and cost reduction it faces, especially because of rapidly emerging technologies which could transform insurance markets, such as driverless cars, the ‘internet of things’ and artificial intelligence.
Cyber risk follows close behind, with anxiety rising about attacks on insurers themselves as well as the costs of underwriting cyber-crime. Other major concerns include the adequacy of insurer’s internal technology systems and new competition, particularly from the ‘InsurTech’ sector.
The next cluster of high-ranking risks, interest rates, investment performance and macro-economic risk, shows that concern about economic instability remains high.
Although respondents acknowledged signs of growth, confidence in the recovery is not strong for reasons as widely dispersed as the slowdown in China, the risk of Trump-era protectionism, and populism in Europe. The risk of political interference was seen to have risen sharply.
However, Britain’s exit from the EU was seen to be a minimal source of risk for insurers, particularly those without operations in the UK.
Regulatory risk, which has topped the last three editions of this survey, has fallen out of the top five this year. This is largely because recent regulatory changes are settling in to business as usual, though the cost and complication of regulation continue to be a concern.
The report shows that the industry’s ability to attract and retain human talent is a fast-rising concern, particularly to handle the digital challenge. Conversely, an area of declining risk is the governance and management of insurance companies. — Bernama