Pressure is on to improve bottom line after catastrophic 2013
1 April 2, 2014 at 2:26 pm by Doug McPhieEach year, EY publishes our Canadian property and casualty insurance outlook, where we take the pulse of the industry and note what challenges – and opportunities – are in store for the year ahead.
It’s fair to say the industry is undergoing transformation like never before. Companies are finally starting to take a good hard look at how to effectively harness digital technology. They’re shifting greater attention to the customer. And in the midst of all this, 2013 ended up being a record claim year.
All things considered, there’s no shortage of challenges for Canada’s P&C insurers. But, as we know, where there’s a challenge, there’s often opportunity.
Take technology, for example. We all know insurers have been late adopters when it comes to digital. They’re aware of the benefits, but have taken time to understand how to use it effectively. The reality, however, is that technology can help insurers to better understand risks like flooding, while investments in state-of-the-art integrated platforms can enhance product pricing and improve the customer experience.
With increasingly severe weather, improving underwriting capabilities should be a priority. To do that, savvy insurers are tapping into the power of technology and analytics to help create better predictive models. Meanwhile, tapping into that power for things like vehicle telematics, for example, has the potential to completely change the industry.
But in all of this, it’s about so much more than simply capturing the right data. Insurers need strategies for deriving meaningful insights from the information they have, and insurers continue to lag behind other sectors in their implementation of a digital strategy.
In this new and dynamic environment, all companies need to work hard to sustain their competitive edge in the marketplace. But by taking advantage of the right opportunities, insurers can set themselves up for positive results going forward.
In our 2014 outlook, we note that to successfully position for growth, insurers need to understand and focus on the following:
- Product development and innovation, with an eye on expenses
- Digital technology and analytics
- Unpredictable weather and catastrophes
- Regulatory and accounting changes
To read more about these issues in the full report, visit www.ey.com/ca/propertyinsurance
It’s an exciting time for the P&C insurance industry. No doubt, there’s more to come. I look forward to weighing in on various industry issues on this blog – and hearing your thoughts, too.
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It is a sad reality that the majority of the industry lacks vision (spending more time on developing vision & mission statements than truly understanding how to deliver what they have put into print). Investing in technology is often seen as a cost, without recognizing the potential benefits, resulting in CEOs shortchanging the investment in technology while pressuring Executives to deliver stellar results – not recognizing that a KIA will never deliver the Ferrari performance they hope to achieve. The reality is that the industry is filled with leaders who are entrepreneur wannabees, who look at companies such as Microsoft or Google, and want their results without taking educated risks. If the industry wants to achieve the results they expect, they need to double down with the best IT minds, and stop trying to obtain stellar results from “affordable” IT talent that the Microsoft and Googles of the world pass over. The talk of the need for technology in the insurance industry is as old as Bill Gates. The industry needs leaders who can lead, and not those who are unwilling to make the investment and assume the risk that will deliver the results that the shareholders dream about. We need to break the cycle of Insurance = Late or Inadequate Adopters (because of an unwillingness to take risk). Funny that insurers, who should understand risk better than anyone, fail to understand the best way to manage risk themselves.