The Biggest Threats To Insurance Businesses
According to professional services firm PricewaterhouseCoopers (PWC), the three biggest concerns for insurers worldwide are crime, regulation and technology.
These conclusions come from PWC’s biennial insurance banana skins report published alongside the Centre for the Study of Financial Innovation (CSFI) which convey the most urgent risks facing the insurance sector. This year’s analysis was based on 607 responses from 47 territories, including 91 UK respondents.
Specifically cybercrime, was raised by respondents for the first time and concluded to be the greatest threat to face the global insurance industry over the next two to three upcoming years.
Although there is a strong concern from the global insurance sector about the vulnerability of legacy systems, the report highlighted an overwhelming belief that insurers are underestimating the potential costs of cyber crime when writing polices. Further issues present themselves as ambiguous policy wordings which could be prone to reputational damage if insurers or their clients have differing expectations of what policies cover.
In October 2021 alone, there were 94 publicly disclosed cyber security incidents discovered which accounted for 51,248,331 breached records!
The report identified the rise of regulatory risk as the second largest concern for global insurance professionals, driven by the implementation of measures such as Solvency II and IFRS 17.
The most visible factor found by the report were concerns over the volumes of new rules being implemented that are naturally accompanied by costs and compliance burdens which respondents believed hinder innovation and competition.
Lastly, the third greatest threat to the global insurance industry was identified as the need for business and technology modernisation. It seems multiple respondents shared the view that many sector players are disadvantaged with old business models and poorly equipped IT infrastructures that cannot handle the fast pace of changing demands of the industry.
Opposingly insurtechs were generally seen by respondents as quick to react to digital demands. The underlying issue with this is the concern that insurtechs are moving too fast, without proper safeguarding in place. Some respondents also argue insurtechs are unfairly less regulated than traditional insurers which puts them at an advantage compared to incumbents and potentially creating increased risky behaviour.
4. A REG Tech Helping Hand
With these threats facing the insurance industry throughout the next two to three years, an intelligent on demand technology which has the ability to control the legal, regulatory and commercial risks facing insurance businesses seems like a dream doesn’t it?
The Office for National Statistics (ONS) Crime Survey for England and Wales showed that there were an estimated 4.6 million fraud offences in the year ending March 2021, a 24% increase compared with 2020 figures.
Evidence from the Cyber Security breaches Survey (2021) suggests that the risk level is potentially higher than ever under COVID-19, and that businesses are finding it harder to administer cyber security measures during the pandemic. For example, fewer businesses are now deploying security monitoring tools (35%, vs. 40% last year) or undertaking any form of user monitoring (32% vs. 38%).
REG provides governance tools for risk management and due diligence checks of all your counterparties, cost effectively achieving protection from the risks presented by your counterparty relationships. If you would like to talk to us about how we can help you please contact us.