Competitive Landscape a Worry for Kiwi Insurers – PwC Report
Competitive landscape a worry for Kiwi insurers – PwC Report
PwC’s Reinventing insurance, one step at a time Report, ranks competition as the third greatest risk in NZ (up from number five in 2015) while change management and technology are listed as the biggest risks for insurers.
While change management and technology are the top risks globally as well, competition ranks unusually high in NZ.
“It’s no surprise that local insurers are feeling the effects of an increasingly competitive market. InsurTech start-ups are bringing in new technologies to the market and they aren’t held back by legacy systems or outdated business models,” says Karl Deutschle, PwC Partner and Insurance Sector Leader.
“Insurers are well aware that they need to build solutions and products that are focused on the customer. However, their biggest challenge is to convert that awareness into reality. The smaller disruptors are able to focus on a specific customer solution and deliver this quickly and seamlessly. The bigger incumbents still need to master this speed to market.”
Another stand out in this year’s report is the increasing concern over regulatory risk. This is no surprise since the high-risk initiatives affecting the industry include the implementation of IFRS 17 - Insurance Contracts, the review of the Financial Advisers Act, and the proposed changes to the EQC Act.
On top of these, we have increases to EQC and Fire Service levies (and changes to the way emergency services are funded), a Privacy Act review in development and a review of the Insurance (Prudential Supervision) Act 2010.
“The insurance sector has been in a state of disruption since the Christchurch earthquakes in 2010 and many of the changes mentioned above have been as a result of an increase in natural catastrophes in NZ. However, thanks to our stable political system, the risk of political interference is perceived as being quite low (ranked 16 but up by three places since 2015). The same can’t be said for Australia though, where political interference in the sector has jumped nine places and is now the second-highest risk overall,” says Mr Deutschle.
Clearly, change management is driving most markets but we also asked respondents how prepared they think the industry is to manage these risks.
“The results showed that NZ ranks in the bottom quartile of all countries surveyed in terms of preparedness. However, we share that space with Canada, the US and South Africa.
“We’re below the global average and behind many of our Asia-Pac neighbours but this might be that Kiwi respondents were just more realistic about the challenges ahead than their global counterparts,” concludes Mr Deutschle.