eSignature Legitimacy for the Insurance Industry in the European Union

How to eSign a document: e-signature legitimacy for Insurance Industry in European Union

Hello everyone, many commentators believe that the insurance sector is at a point of inflection. Some of the macroeconomic challenges we’ve faced over the last 12 months allied to areas such as demographic shifts, climate change, disruptive technology and changes in customer behaviour are perhaps radically reshaping the business environment and requiring perhaps more radical responses from insurers if they are to survive and thrive in this environment. Now, we cover a number of these topics in our Global Insurance Outlook for FY24, and I’m delighted to be joined here today by Isabelle Santenac, who’s our Global Insurance Sector Leader. Good morning, Isabelle. Good morning, Peter. So maybe we start with the overall macroeconomic picture and how insurers are facing into some of the headwinds that we see in the market today? Yes, and it’s fair to say that leaders have to navigate through very uncertain times right now and so many challenges. So, if I start with the political ones, there are political tensions in part of the world. We see the war continuing in Ukraine, it has been for 18 months now. Inflation continues to be high and certainly higher than what central banks expect, so interest rates also are quite high. So, when you see all of that I think it’s very important for the leaders to be able to have robust scenarios and stress testing, but also to be able to decide where they want to invest, where they need to disinvest, to be more prepared for the future and ensure they are agile and resilient. Then it’s fair to say that over the last two years the industry has been quite resilient and has been quite successful from a financial perspective when you see the pricing increase, which helps, of course, growing the top line but also how they manage costs. And the positive impact of the interest rates on the life business, I think overall it has been quite a good year. So, I think there is a lot of optimism also and we see a lot of companies and leaders who want to continue to grow and to acquire, which is always a positive sign. And maybe to finish on this, I think there are opportunities for the industry when you have to navigate through uncertainties, through many risks, and you mentioned some of them in the introduction, you need more protection. So that’s why the industry is here for, to protect the society. So, a lot of opportunities also from a business perspective. And I mentioned at the start the impact of disruptive technology and perhaps GenAI has become the core celeb in the industry. Gartner, I think have it at the peak of the hype curve on inflated expectations, which means that they see it having a huge impact over the next 12 to 18 months. Now, some of the insurers I talk to they see both the transformative opportunities but equally some of the risks. How do you see the insurance sector sort of navigating the opportunity and the threat of GenAI? Yes, certainly, Peter, there are a lot of opportunities for the insurance industry to use AI and we see a lot of pilots already in progress, also some already deployed. So, whether in underwriting, on claims processing, on compliance, on some support functions areas, on marketing, client interaction. So, you see a lot of areas where AI can really help the industry. But as you mentioned, there are also risks that the industry needs to be aware of. Of course, how do you use AI from an ethical perspective, are you sure that that doesn’t create bias in your decision-making process. Are you sure you still have humans in the middle of the use of AI, because I think it’s a fundamental principle to have still human controlling a little bit what the AI is doing. And that’s a concern of the regulators, and so we see new regulation coming in Europe, in particular, but the US will follow. And so, you need to be able to navigate through also this new landscape, which means that you need to have a very robust risk assessment framework on how you want to use AI, what you allow your people to do with AI, what you don’t allow. And that is really a fundamental aspect of what you should do before you accelerate on AI. But definitely we see the pace of the use of AI accelerating significantly for the industry in particular. And I guess GenAI links to the focus of the previous Outlook was very much on purpose and saying the insurers need to focus on purpose. Now, I guess some people would argue that some of the challenges we’ve seen in the markets, macroeconomic challenges, some of the war in Ukraine, the sad events in the Middle East, have sort of taken the focus away of the insurance sector from purpose. We now talk about societal value in the Outlook, what’s your sense in terms of where insurers are on that critical area? So, protection gap is still a big topic for the industry. We see that for many reasons, again, increasing severity and frequency of climate change risk, new emerging risks like cyber. Also, the fact that some protection schemes which were working quite well in the past are not working well now and even less well in the future, like pensions or life protections, because governments don’t have enough money to cover that. So, all of that is really increasing the protection gap. So, the ESG topic, environmental, societal, governance issue, is a key topic for regulators and for the society as a whole. So, we see more transparency needed there. We have a new standdown now in Europe on corporate sustainability reporting disclosure, which embraces ESG concepts. And so, for the industry, it’s an opportunity to be more transparent on what they do and to be fair, the environmental topic becomes a little bit political in some parts of the world. So, there is a good opportunity to talk also about what the industry is doing on the S, and so what do they do to help society. Whether to help people to live better, so encourage health, or mental health, which is a big topic right now. But also, how do they help insuring underserved people, make the product more affordable. So, all of that are critical elements for the society and we believe there is a big opportunity for the industry, again to do more, but they do already quite a lot, so to communicate more on what they are doing on that. Yes, and I think the protection gap particularly is an important issue, so I think your point around being able to be more inclusive around protection and how we can deliver that to consumers is important. If we stick on the consumer angle, we know from a lot of our discussions with insurers that they’re increasingly focussed on customer experience. And we know that people like you and I don’t look at insurers as, we don’t compare insurers to each other, we compare them with Apple or Amazon or Facebook, in terms of the customer experience. How do you see the insurance sector focussing now on customer and starting to try and deliver that seamless, frictionless experience? Yes, well Peter, I think I have not seen any strategy reports of any insurer not saying that they want to be more customer centric, so this is a real objective and a real priority. And that’s a right priority because, as you say it, now the customers are used to have very different client experience. You mentioned some of the gaffers but there are many aspects, people want to buy more easily products, they want to have the product they want when they need it, they want to be, of course, more digital in the acquisition process. So, the insurance industry has to react to that, and I think pandemic was a good accelerator for that, and to be fair, the industry managed that quite well. But now being customer-centric means that you need to better know what your customer wants and what your customer needs. So, client segmentation is a very important element and a foundation to be more customer centric. And then you need to think differently than just thinking about products. So, what you, Peter, need in your life from an insurance protection perspective is a little bit different than selling you one product one after the other. So that’s why we see also the importance of being part of ecosystems, so can new products be part of a broader offering to better serve the customer? And we see the growing space, I would say, of ecosystems. We see also now embedded insurance because people want to buy something and then attached to that what they need to manage the product they buy, and protection of this product is an important element. So, the industry has to react, start to react on that. But I think we believe, and we say that in the report, that there is more to do, which also creates some challenges for your IT infrastructure, for your data, do you have the right data, how do you access the data, how do you share data with potential partners, etc. So, I think, again, good, right direction, lots has been done, but still a lot to do. No, I’d agree, and it’s been interesting the regulator in the UK has obviously focussed on consumer duty recently. And it’s interesting in the guidance that they’ve sent out, probably for the first time that they’ve said to insurers we want to see how you deal with key segments of your customer base, so not just generically your customers but show us how you’re differing and you’re providing service to each of your segments. So, for the first time they’re having to look at that as a differentiating factor. Yes, which can create also problems also from a pricing perspective, etc. Indeed. Because the more you segment the less you pool the risks. So that’s also an element to take into consideration. Absolutely. So, I guess finally, the outlook this year highlights the importance of transparency and trust within the sector particularly in line with some of the themes that we’ve talked about before. Why do you think this is such an issue now for insurance companies? Well, first let’s say that the trust is a foundation of the insurance industry, so it’s very important that your brand is trusted by your clients but also by the society as a whole. And it’s fair to say, Peter, that over the past few years, and in particular during pandemic times, the trust of the industry has been damaged a little bit because people realised that what they thought were protected were not. And when you suffer, and you need protection you want your insurance provider to stand by you and that has not been always the case. I think we can also mention the fact that the industry is walking away of some risks, like climate change risk in California, Florida, etc. Yes. Which doesn’t help to build trust. So, what that means for customers, customers want to have value for what they pay and ensure the insurer will support them when they need. Regulators also want to see trust for the insurance industry and have faith partners for the insurers. We talked about client-centricity, and to develop your client base, to be able to provide more services to your clients, requires that the client trusts you. And when you see the embedded insurance concept, I think there is a risk that because clients trust more of the brands they will buy insurance protections through the acquisition of other products, not through the insurance industry. So, I think there is a threat here if the industry doesn’t react well, but also, again, opportunity because again when you think about the insurance industry you think about trust, by definition. So, I think the industry is well-positioned to restore trust and what we discussed also before on societal impact plays in their favour on this topic. Yes, agree. So, we’ve covered a whole range of topics and areas and some very important subjects. And I know they’re covered in far more detail in our Outlook. So, Isabelle, thank you very much for your time today. Thank you, Peter.