Canadian insurers see a number of new risks for the industry, according to Toronto-based PriceWaterhouseCoopers’ (PwC) biennial Insurance Banana Skins survey, including regulation and social media.
The survey ranked regulation as the number one concern facing the insurance industry in Canada, up from ninth place in 2011. Industry members are becoming increasingly concerned about the regulatory burden, says Allan Buitendag, national consulting insurance leader, PwC, in Toronto, because regulation is broadening out from reporting to other aspects of management, such as governance. As such, insurers will have to put in more controls in place or perhaps use new technology to meet the new requirements.
“All of those things drive costs,” says Buitendag, “which is tough for the industry when they are facing lowered profitability, challenges around investment returns and a host of other challenges within the marketplace.”
The macro-economic environment is the second highest concern for Canadian insurers, according to PwC. In 2011, the macro-economic environment was listed as number 13 on the list. While many parts of the world are starting to see economic improvement after the financial crisis, says Buitendag, ongoing uncertainty around economies or general instability in places like Europe or the Middle East continue to worry insurers.
New to the survey’s list this year was social media. Respondents ranked social media 13th out of 27 industry concerns. Social media is a struggle for the industry at the moment, according to Buitendag, because many companies have barely figured out how to handle the Internet.
“Now it’s almost like, “well, forget about the fact that our website isn’t that effective,” he says, “we now need to think about how we’re going to deal with Twitter and Facebook.”
However, Buitendag believes that social media will become less of a concern in future as companies put together policies and form structures for employees to use social media effectively.
Other concerns on the minds of Canadian insurers include long tail liabilities, ranked at number three, guaranteed products, listed in fourth place and investment performance at number five.
A full list of the to 27 concerns for Canadian insurers and their global peers can be found on the PwC website.
The survey consists of responses from insurers, regulators and close observers of the insurance industry.