The annual Global Priorities survey by the International Insurance Society found that industry executives are feeling more prepared than in the previous two years on a whole range of issues: cybersecurity, climate change, inflation, competition for talent, data security and expense management.
In addition, major concerns from prior years — how to cope with the pandemic and how to adapt to a hybrid workplace — have greatly diminished.
The major uncertainty among executives is geopolitics. What will happen in Ukraine? Will China invade Taiwan? Will the trend toward what the report called "backsliding democracies" continue?
While I'm delighted by the upbeat responses to the survey, I'd add one uncertainty to the list, echoing what an executive said in a webinar that the IIS held to analyze the report. Worried about misplaced complacency, he said: "I'm surprised anyone can feel comfortable about the level of cybersecurity protection that insurers have in place."
To tick through the main numbers in the IIS summary:
- Cybersecurity: "In 2021, 83% of executives who were prioritizing cyber security said they felt their company was prepared to do so. By 2023, that number increased to 94%."
- Climate change: "In 2021, 62% said their company was prepared to address the effects of climate change, and, by 2023, 78% said the same."
- Inflation: "89% prepared in 2021, to 93% in 2023."
- Competition for talent: "59% to 79%." (One executive said in response to the survey: “We are faced with numerous retiring subject matter experts without having new talent coming in behind them to continue moving the business forward from here. Huge legacy knowledge bases will be disrupted, shrunk, or lost altogether.”)
- Data security: "87% to 97%."
- Expense management: "94% to 97%."
- Hybrid workforce: "46% of executives were prioritizing a hybrid workforce in 2022, but that number dropped to 14% this year."
- COVID: "In 2021, the pandemic response was the top economic priority, with 63% of executives saying that the pandemic recovery was one of their top-three economic issues. In 2023, however, the pandemic is a top-three economic priority for only 11% of executives."
To put the report in perspective, IIS President Josh Landau conducted a webinar with two longtime stalwarts of the IIS: Andreas Berger, CEO, Swiss Re Corporate Solutions, and John Spence, retired regional head, M&A and strategy, Generali Asia. This is where Spence said he couldn't understand anyone feeling comfortable about the current level of cybersecurity.
"I was surprised by the answers around cybersecurity and the sort of view that insurance executives felt they could cope with cybersecurity," he added. "I don't know where that strength of position comes from. Cybersecurity really has to be at the top of the agenda.... And I'd encourage significant caution and investment to deal with that issue."
Berger added his own note of caution about inflation. "Inflation should remain a top concern for executives this year and beyond," he said. "Global inflation rates are easing more slowly than desired... [and] executives in service industries like ourselves in insurance, where labor is the key input, will have to really watch [wage] inflation [to see if it] is set to stay structurally higher over the longer period."
Concerning geopolitical uncertainties, he said he sees them leading to three profound changes that will play out over many years in how the world economy operates — and, thus, in where the opportunities for insurers will lie:
"Number one, it's a reorientation of global supply chains to insulate economies against future trade disruptions. That's what we see. Number two, added impetus to the green transition, given worries of energy security that Russia's invasion of Ukraine has sparked, and number three, potential risk of global food security."
Spence emphasized the need to focus on acquiring AI talent. "Insurers need to be thinking very carefully about the people they have on their teams that are equipped to understand the transformation or issues associated with AI, ... [who are developing the use cases] that are improving customer service, that are personalizing products, that are optimizing the pricing and detecting fraud and reducing costs.... It's a significant challenge, and insurers who in many ways have been very slow to adopt new technologies will need to move rapidly in this new area or be left behind,"
That's a lot for you to sort through, I know, and I encourage you to dig into the report and watch the webinar. But here's my summary:
Insurers have been working hard for years to tackle a whole array of problems and can feel good about being better prepared but still need to stay on alert, especially about cybersecurity and inflation, in addition to the scary possibilities of today's geopolitics.
Cheers,
Paul