Insurance outlook amid compound volatility and emerging tech
Last year proved to be a pivotal one for the insurance industry, marked by numerous challenges such as an unpredictable economy, major geopolitical events, extreme weather, a constantly evolving regulatory environment and new technological advancements. Against this backdrop, the 2023 KPMG Global CEO Outlook Survey looks ahead and offers valuable insights into insurance executives’ aspirations for the sector and their growth plans.
Insurance executives maintain a positive outlook on growth opportunities despite compound volatility caused by disruptive events such as the pandemic, inflation, war, natural disasters, and a series of powerful structural changes. About three-fourths of insurance CEOs express confidence in the expansion prospects of their company and industry over the next three years, and 55% are inclined to pursue acquisitions that will significantly impact their organization.
The promising economic outlook for growth is driving CEOs’ pursuit of digital transformation. Most of the executives surveyed (60%) anticipate increasing capital investment to acquire new technology. Companies must adapt to and embrace emerging technology to meet policyholders’ needs and maintain a competitive edge. Investing in technology yields substantial benefits for insurance organizations, including the ability to modernize their operations, streamline processes and offer online portals, mobile apps and other digital tools that can simplify policy management and claims filing for their customers. These investments can attract tech-savvy customers and employees.
Generative AI is a top investment priority for 72% of insurance leaders who recognize its potential to increase profitability (21%) and enhance fraud detection and cyberattack response (20%). Despite the excitement surrounding the integration of new technology, 64% of executives view the current lack of regulations as a substantial barrier. Recently, the Biden administration issued an executive order to monitor and regulate the risks associated with artificial intelligence. Understanding the regulatory landscape of generative AI and other emerging technologies will be one of the factors crucial for insurance organizations to deploy them ethically within their products and services.
Most insurance leaders (58%) anticipate a three- to five-year timeframe for a return on investments in generative AI, cognizant that it may take time to reap the benefits. One of the potential benefits of generative AI is enhanced detection of cyberattacks, but 85% of leaders are concerned that it could also provide adversaries with new attack strategies, making it a double-edged sword. Therefore, organizations must strengthen their infrastructure and legacy systems to prepare for potential attacks.
New technology also has the potential to address the current talent gap within the industry. For instance, the emergence of insurtech companies and the use of generative AI and other leading technologies present an opportunity to attract tech-savvy professionals skilled in artificial intelligence, data analytics, cybersecurity, and machine learning. Additionally, businesses can invest in their existing employees and promote upskilling opportunities for new tech skills, thereby enhancing efficiency and profitability. Investing in technology will enable insurance companies to remain competitive and attract new talent interested in working in a tech-driven industry.
The ability to attract and retain talent also may depend on whether the workforce will be in office, hybrid or remote. More than half (53%) of insurance leaders envision an in-office work environment in the next three years, while 41% envision a hybrid work setting and 5% expect fully remote work. Furthermore, 98% of leaders are likely to reward employees who make an effort to come into the office with favorable assignments, raises and promotions.
While compound volatility has created a challenging environment, insurance CEOs remain optimistic and committed to investing in digital innovation to enhance their business and position their companies for transformation and growth in the years ahead.
