The need for Canadian insurers to pursue direct-to-consumer strategies is more apparent than ever as demographics shift and customer preferences move toward on-demand platforms, point-and-click services and simplified service delivery, KPMG said in releasing a new report on the industry.
“For many, what’s standing in the way of creating a direct-to-consumer channel is legacy and past success,” said Chris Cornell, partner and national sector leader, insurance, for KPMG in Canada.
“A lot of insurers have roots in broker-based models, and they can’t simply be tossed out because the industry is in transition.
“Therefore, the balancing act they need to perform is managing their current broker-based business model, while also building out a direct to consumer channel that will be distinguishable in the market and can survive that transition phase.”
He was commenting on the professional services firm’s sixth annual Canadian insurance industry opportunities and risks report, which is based on interviews with more than 40 Canadian insurers, both large and small, to weigh in on the opportunities and risks they see for their organizations and the industry as a whole. It was released this month at KPMG’s annual insurance conference in Toronto.
The report says intense competition and an increasing demand for digital services is informing new strategies and forcing Canadian insurers to think and do differently.
“Indeed, they are starting to integrate technology across the value chain and use it as a bridge to new and innovative business models,” KPMG said.
“Some insurers are also starting to take things further with insurtech to generate savings, operate efficiently and become more data-driven and client-centric,” KPMG said.
“However, insurers also recognize these opportunities come with sizable costs and strategic risks.”
The report says few disruptions loom heavier over the insurance industry than the arrival of the new accounting requirements known as IFRS-17. KPMG said the new standards, along with changes introduced earlier under IFRS-9, will stretch current processes and have a direct impact on all players, including multi-national insurers who have a footprint in the Canadian market.
“IFRS-17 is a massive challenge and Canada is one of the few jurisdictions in which all insurers, large and small, must comply,” said Dana Chaput, partner, audit and insurance accounting change leader for KPMG in Canada. “Ambitious insurers are using this change as a catalyst for process improvements within finance or actuarial, increased automation and to develop future leaders.”
The accounting changes introduced by IFRS- 17 will also have knock-on implications with respect to regulation, capital and taxes, Ms. Chaput said.
“Regulatory and tax authorities are trying their best to signpost where they’re going to head but they’ve yet to come out with updated requirements.”
She said this creates a ‘chicken-and-egg’ scenario where insurers are moving forward on IFRS-17 implementation but questions about capital and tax implications remain.
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