About 10 months into the global COVID-19 pandemic, insurance leaders are less confident about growing their business and are increasingly concerned about the cratering economy, an insurance industry observer told a recent virtual conference.
Even so, they’re showing more confidence about finding talent and have accelerated their digital plans, said Laura Hay, global head of insurance at KPMG International.
Before the pandemic, 95% of insurer CEOs in a 2019 KPMG survey reported feeling confident about the three-year growth prospects of their own companies. Then COVID-19, declared a global pandemic in March by the World Health Organization, took a pin to that balloon.
“Fast forward about 18 months later, [during] the COVID times over the summer [of 2020], and CEOs have downshifted their confidence to 71%,” Hay said during the KPMG Annual Insurance Conference, recently held virtually. Taken in isolation, that’s not a terrible number, but “it’s actually one of the largest shifts we’ve seen since we’ve been doing our CEO outlook surveys in terms of confidence,” she added.
Asked about the impact of COVID on the economy, insurance executives were bleak. “It was even a larger shift when it came to the economy,” Hay said of the 2020 survey result, which reporting that 65% of insurer leaders felt confident about the economy last year. In 2020, that number dropped to less than a third (32%).
But while insurers are losing confidence in growth opportunities and the economy, they did see some opportunities as a result of COVID-19. For example, the pandemic has forced them to accelerate the creation and implementation of seamless digital experiences for customers, Hay said.
Furthermore, more than half (57%) of insurance CEOs said they’ll be downsizing their office space, a nod to the ability to have staff work remotely. On that same note, nearly four in five (79%) of them said the ability to have staff work remotely means they can widen their potential talent pool, she reported.
”All of these are incredibly large shifts from even just six months prior,” Hay said.
In an interview with Canadian Underwriter last week, TD Insurance president and CEO Ray Chun expressed how his company will embrace those kinds of changes. COVID-19’s push to have people work from home has expanded the talent pool beyond where TD offices are located.
“It’s opened up our talent pool, nationally,” Chun said. “Right now, we actually will look to hire across the country, and that’s significant.”
KPMG also reported that COVID-19 has changed what insurance company CEOs perceive as their greatest threats. At the beginning of the year, they ranked cyber security risk (16%), environment and climate change risk, a return to territorialism and regulatory risk (15% each) as their top risks. Hay noted how closely they all were ranked.
Today, supply chain risk tops the chart, by a wide margin.
Twenty-five per cent of insurance executives polled believe supply chain is their company’s greatest threat. Talent risk followed at 18%. What’s noteworthy about that result, Hay said, is that only 2% of CEOs ranked supply chain as their top risk last year, while talent risk sat at just 1%.
Environmental (11%) and return to territorialism (11%) managed to stay in the Top 4 of the 2020 list, while cyber (4%) and regulatory (7%) fell father down.
“Given the rise in cybersecurity events and increased phishing and ransomware attacks, I was surprised that [cyber] dropped down,” Hay said.
But Hay said the elevated concern about supply chain risk makes sense. “If you reflect on supply chain risk, we think that has a lot to do with customer expectations, and the ability for insurers to deliver — to meet those customer expectations — and the need to really look at the business models to be able to respond to those customer needs and expectations.”
Feature image by iStock.com/sefa ozel