Mumbai, 15 July 2015 - A new survey charting the top risks in the global insurance sector shows that insurers in India perceive managing change in the industry as the top risk to their business. Also rating significantly higher than the global average were the risks around governance, such as the quality of risk management.
On the other hand, regulation came in bottom of the risk rankings in India, with more stringent capital requirements generally seen as strengthening the industry. The economic environment was also a lower order concern, with positivity about India’s growth and inflation under control.
This is quite in contrast to the overall global findings where regulatory concerns emerged as the overall top risk for participants in the survey for the third successive time, underlining the deep impact regulatory change is having (Comparison chart of India and global rankings on page 2).
The CSFI’s latest ‘Insurance Banana Skins 2015’ survey, conducted in association with PwC, polled over 800 insurance practitioners and industry observers in 54 countries (including India), to find out where they saw the greatest risks over the next 2-3 years.
Sharing his thoughts on India findings, Anuraag Sunder, Director, PwC India said, “Respondents from India perceive regulation as the least important risk and this could only be a reflection of the new reality where post the FDI changes, industry has accepted the new set of regulations as 'new normal'. They are now more focused on 'Change management', which is ranked as the top business risk. Fast paced changes on the ever-evolving customer side and increasing demand of digital interface is also a reflection of 'change management' that insurers would need to walk through.
Cluttered at the top are financial risks (exposure through long term liabilities and investment performance) and human capital risks (quality of management and human talent), signifying lack of confidence on the talent pool”, Sunder added.
As India’s customers continue to adopt technology in a big way, adapting to their ever-evolving expectations, especially from a technology standpoint was high on the priority list of the respondents. On the non-life side the absence of any common data platform to make informed decisions was an area of concern.
Technology was widely seen as the driving force behind new markets, changing customer demand, and facilitating competition from non-traditional entrants. While the need for insurers to respond to change is nothing new, many respondents saw the current challenges demanding special urgency.
The concern raised is that the traditional insurance industry will be slow to grasp the opportunity and will end up facing a threat. Developments such as digitisation, the internet and social media are already profoundly influencing price and demand for insurance products, and the means customers use to interact with their insurance providers.
In the overall rankings, India scored above average on the Banana Skins Index (India at 3.31 and global at 3.21), implying a higher level of risk anxiety. It scored above average on the Preparedness Index, implying a higher level of risk preparedness (India at 3.27 and global at 3.20).
The Banana Skins Index measures the average score given by each country to the 25 risks listed in the questionnaire. The higher the score, the greater is the implied “anxiety level”. The Preparedness Index measures the average response given to the question: “How well prepared do you think the insurance industry is to handle the risks you identified?” where 1=Poorly and 5=Well. The higher the score, the greater is the implied level of preparedness.
5. The survey is the latest in the CSFI’s long-running Banana Skins series on financial risk. Previous Insurance Banana Skins surveys were in 2007, 2009 2011 and 2013. It can be downloaded from PwC’s website: www.pwc.com/fs or the CSFI website: www.csfi.org
6. The CSFI (Centre for the Study of Financial Innovation) is a non-profit think-tank, founded in 1993, which looks at challenges and opportunities for the financial sector. It has an affiliate organisation in New York, the New York CSFI.
7. PwC is a network of firms in 157 countries with more than 195,000 people who are committed to delivering quality in assurance, tax and advisory services. More information is available at the firm's website, www.pwc.com
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