Global Insurers Expect Modest Growth Amid Swift Pace of Regulatory Change
January 28 2015 - 9:05AM
Business Wire
Insurers concerned they are not evolving quickly enough to be
relevant to future generations
Insurers across the world say regulatory changes and sustained
low interest rates will continue to be their primary environmental
challenges over the next one to three years, according to a new
insurance industry outlook survey conducted by global professional
services company Towers Watson (NYSE, NASDAQ: TW). While these
near-term environmental challenges stand as insurers’ top concern
(62%), they also express worries about more fundamental issues such
as whether their business models will hold up to new and emerging
risks (27%).
North American insurers exhibited more concern over interest
rate risks (85%) than their European (68%) and Asia Pacific (61%)
counterparts, while anxieties over regulatory changes resonated
higher with European (82%) and Asia Pacific (80%) insurers than
with their North American (65%) peers. Life and property &
casualty (P&C) insurers had similar takes on the main
environmental challenges, with the exception of climate change,
which no life insurer ranked as a risk.
“With Solvency II implementation a year away, it’s not terribly
surprising that regulation ranks top of mind for global insurers,”
said Graham Fulcher, Towers Watson’s EMEA P&C practice lead.
“However, disproportionate short-term focus on regulation is a
long-term cause for concern at a time when insurers have many
emerging challenges to think about, such as the opportunities of
big data and social media, and the poor underwriting environment.
That is part of the danger with an excessive focus on regulation:
It distracts insurers from spending adequate time on things that
ultimately matter more.”
Most insurers project business conditions to remain flat (60%)
or possibly even enter a period of negative growth (17%) over the
next three years. Asia Pacific insurers are the most bullish on
growth prospects (52%), significantly more so than North American
(20%) and European (18%) insurers. Life insurers (27%) showed more
optimism than P&C executives (18%) concerning growth. Nearly
two-thirds (63%) envision the most likely prospects for growth
coming principally through organic means.
“The general projection for global insurers over the next few
years is for nominal growth, and that’s likely why multinationals
have targeted Latin America and Asia for future expansion. But that
is not a development that will come easily. European and North
American companies entering these markets must contend with
significant differences in business practices, language and
culture,” said Serhat Guven, Towers Watson’s North America P&C
practice lead.
Survey respondents said technology (88%) and talent-related
issues (78%) are their top resource challenges. “In Asia, some
companies are establishing internal innovation centers to become
market disruptors before they get disrupted, and more insurers
might want to consider this approach,” said Michael Freeman, Towers
Watson’s Risk Consulting and Software lead, Asia Pacific.
“Talent-wise, success and failure often depend on your workforce.
Insurers that have the right mix of talented people are more likely
to succeed.”
Insurers also reflected on the primary opportunities and threats
to their business. Beyond regulations (57%), other emerging
opportunities or threats included changing distribution channels
(47%), the pace of innovation (39%), big data (30%) and social
media (9%). “There are numerous emerging opportunities that
insurers can capitalize on to grow their business,” said Guven.
“However, in many cases, companies react with incremental changes
rather than taking more radical steps. Many insurers in our survey
are now questioning whether this approach will enable them to keep
pace with the market.”
About the Survey
Towers Watson conducted its global survey of insurance companies
with a total of 365 executives, representing all regions of the
world, and a fairly even split between life and P&C.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global
professional services company that helps organizations improve
performance through effective people, risk and financial
management. With 15,000 associates around the world, the company
offers consulting, technology and solutions in the areas of
benefits, talent management, rewards, and risk and capital
management. Learn more at towerswatson.com.
Towers WatsonJosh Wozman, +1
703-258-7670josh.wozman@towerswatson.com
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