Insurance industry grappling with heightened risks – PwC
Insurance industry grappling with heightened risks – PwC | Insurance Business Australia
Insurance News
Insurance industry grappling with heightened risks – PwC
Survey reveals key concerns
Insurance News
By
Roxanne Libatique
PwC Australia (PwC) has published the findings of its Insurance Banana Skins survey, which delves into the array of challenges currently besieging the insurance industry.
The research, conducted from May through August 2023, involved participants from the global insurance scene, including a host of names from Australia.
Key insights from the Banana Skins survey
The results from this year’s Banana Skins Index, showed an increased level of unease among professionals in Australia’s insurance industry. This anxiety exceeded both the international norm and the levels recorded in Australia during the 2021 survey.
The Australian insurance market is grappling with several critical challenges, it said. These include considerable financial losses attributed to extended coverage claims and natural disasters, exacerbated by soaring claims inflation, and an uptick in climate-related incidents.
Such challenges have particularly strained the non-life insurance segment, fuelling concerns over the sustainability of insurance premiums in line with rising inflationary pressures. The industry is under increased scrutiny to accelerate the processing of policy claims amid policyholder vulnerability and economic distress.
Main concerns of Australian insurers
Australian insurers are striving to maintain a delicate balance between ensuring growth and profitability, complying with more stringent regulatory and reporting frameworks, mitigating emerging threats like climate change and cyber security breaches, and innovating customer engagement strategies.
The survey identified cyber security threats, regulatory compliance issues, and climate change as the three principal areas of concern. These issues highlight the reliance on technology, the complexity of adhering to new legislative frameworks, and the unpredictability and financial impact of natural disasters.
Additionally, the research emphasised the overlap between climate change risks, the scrutiny of regulatory bodies on greenwashing practices, and maintaining a robust reputation.
How can insurers address these concerns?
insurers are focused on enhancing their resilience and refining their risk management practices.
Commenting on the findings, PwC insurance leader Antonie Jagga (pictured left) noted the Australian insurers’ difficulty in pursuing growth and profitability while meeting the increasing needs and expectations of customers.
“Insurers in Australia are facing a raft of competing priorities, such as increased regulatory requirements and climate-related disasters as well as concerns over the rising price of insurance products,” he said. “In a tight market, where cost-of-living pressures are making customers reassess all expenses, failure to adequately prepare for potential risks is not an option. Australian insurers must take action now to ensure they’re prepared for any number of risks which may arise. This includes modernising their operations, reinforcing their cyber defences, attracting and retaining specialise talent, and adopting an approach to regulatory requirements that goes beyond minimum compliance.”
PwC financial services industry leader Barry Trubridge (pictured right) added: “It is interesting to note that concerns over reputation are particularly acute for Australian insurers. We believe this is because it’s linked with concerns over climate-related challenges, such as natural disasters, which create a need for insurers to provide rapid support. Insurers will make or break their reputation during these rapid response events, when customers’ expectations and emotions are high and operations are stretched.”
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