Insurers worry about change: Report

New Zealand insurers rank around the bottom quartile of the world when it comes to preparedness for the changes transforming the industry, PwC’s latest report shows.

Friday, August 4th 2017, 6:00AM

It has released its latest research on the sector, looking at what the industry sees as its key risks.

New Zealand insurers listed change management, technology and competition as their primary concerns.

“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 InsurTech start-ups are bringing in new technologies to the market and they aren’t held back by legacy systems or outdated business models,” said Karl Deutschle, PwC partner and insurance sector leader in New Zealand.

“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.”

Deutschle said roboadvice was part of that element of change. He said insurers were worried that if they came to roboadvice too late they could fall behind.

Insurers were also concerned by regulatory risk as they dealt with the Financial Advisers Act review and Reserve Bank rule changes among other upheavals.

"The insurance sector has been in a state of disruption since the Christchurch earthquakes in 2010 and many of the changes have been as a result of an increase in natural catastrophes in New Zealand. 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),” Deutschle said.

He said the research showed that insurers in New Zealand ranked behind Australia, Japan and China in terms of preparedness for change.

"We also share the space with much of the English-speaking world. Canada, the United States and South Africa all had similar levels of preparedness to New Zealand, while our local insurers felt more prepared than their counterparts in the United Kingdom and Hong Kong.

"Although New Zealand insurers may feel less prepared to navigate the risks ahead than the global average, that could well be a sign that they’re more realistic about the transformation challenge ahead of them than their more colleagues overseas. However, one thing is very clear: change management is absolutely crucial in a fast-moving, digital world underpinned by fast-moving changes in customer expectations and regulation."

He said he had been surprised by the strength of feeling in the responses from the more than 20 New Zealand industry respondents included.

They had ranked technology and change well ahead of risk such as the economy or challenges hiring staff.

Tags: Financial Advisers Act PwC regulation Reserve Bank roboadvice