The following is an opinion piece written by Martha Phillips, MIRM, head of IT risk and assurance at Aviva. The views expressed within the article are not necessarily those of Corporate Risk and Insurance.
The main risks currently facing the insurance industry can be grouped into three main areas – strategic change, financial uncertainty, and data security and management.
The insurance industry, like all sectors, is facing a potentially turbulent macro-economic environment in 2019. Uncertainty surrounds the post-Brexit economy, including interest rate and currency fluctuation, which may impact revenue and profitability. The macro-environment may also restrict or provide opportunities for M&A activity, deal volumes, and management of capital intensive portfolios. Political and environmental risks (weather, civil unrest, unstable governments) may increase further and have the potential to erode profits and predictability of operations.
In addition, insurers are increasingly facing new and emerging competition, in the form of new market entrants and start-ups, including ‘fintech’ and ‘insurtech’. Insurers have historically been slow to invest in their digital propositions – and the infrastructure to support them.
Today, consumers expect financial products to be increasingly simple, flexible, and accessible, serviced seamlessly across digital and offline channels. Indeed there are also huge opportunities to serve consumers, if established insurers can adapt their strategy and operating model - and attract innovative talent - in the face of new competition. Critical to achieving an agile and innovative digital ‘insurtech’ or ‘fintech’ business is striking the right balance in culture – being able to manage within risk tolerance, while not stifling innovative thinking and swift delivery.
At the heart of the insurance industry is data. Data security and management will feature on an insurer’s list of top risks as long as the threat environment and regulation continues to rapidly evolve. The financial services sector as a whole must continually invest in maintaining secure and resilient operations, complemented by a security-aware culture. Media headlines show that data security and resilience is increasingly becoming an issue of public trust. Interest in how consumer data is being used is also likely to continue post-GDPR.
