After a notable dip in the first half of the year, general insurance companies are increasingly confident and optimistic about profit expectations, although regulatory interventions continue to be a headwind for the sector, according to the latest CBI / PwC Financial Services Survey 2020.
Across the survey, general insurers’ optimism about business prospects witnessed the largest rise of any financial services segment, which is promising after the challenges of the first two quarters of the year.
While this “stark turnaround” in sentiment might result in an acceleration in the customer-led transformation, the survey notes continued challenges from regulatory interventions to the uncertain trajectory of economic recovery.
According to CBI and PwC, optimism within the insurance industry is on the up in spite of challenges resulting from the FCA’s business interruption test case and also the authority’s intention to bring renewal prices in line with new customer offers.
“The results provide valuable insights into insurers’ progress on transformation and how they’re looking to steer through these challenging times. While efficiency and risk management are clearly critical, transformation strategies must keep pace with changing customer expectations,” said Alex Bertolotti, UK Leader of Insurance at PwC UK.
While the impact of the COVID-19 pandemic has hit profitability on both the liability and asset side of the balance sheet, insurers are expecting an uptick in demand for solutions amid elevated risk awareness.
According to the survey, brokers are now reporting growing confidence and profit expectations, and while life players are less upbeat about the situation, they too report that premium volumes are only down 2% on normal. Additionally, life insurers are expecting significant increases in business for the remainder of 2020.
The survey reveals that life insurers view regulation as by far the greatest disruptor, with an additional strong focus on cost reduction, followed by product development and responding to changing customer needs. For insurance brokerages, says the survey, both changes in regulation and customer preference are seen as highly disruptive.
“That these shifts have been accelerated by the impact of COVID-19 cannot be understated and firms that make the most of available data hold the key to understanding what customers really want,” continued Bertolotti. “We’re seeing changes in customer preferences and behaviour so it makes sense to see these drivers feature strongly in how insurers plan to respond in the future. What’s crucial is to turn this appetite for change into progress on the ground.”
While insurers will be hoping for greater demand and profits for the remainder of the year and beyond, the survey also revealed that carriers are very focused on diversity and inclusion and hope to drive change in these areas. Additionally, the use of new technologies to enhance customer experience and to maximise efficiency is also a prominent focus.
