KPMG’s new head talks global insurance reporting frameworks, insurance M&A, and why insurers need to be more customer-centric
Now that the European Parliament, Council and Commission have agreed on the contents of Omnibus II, do you think insurers have enough time to prepare for Solvency II?
While the 2016 start date sounds a long way off, the reality is that a lot still needs to be done by insurers. The announcement that it is to finally go ahead was welcomed and helped focus everyone’s attention, but there are still quite a few things that need to be clarified. Despite that, the timeline is doable. A lot of larger insurers will be required to deliver a dry run at the end of 2014 and in Q3 2015 so for them the timescales are even more compressed.
What are your thoughts on the revised proposals on insurance accounting published by the International Accounting Standards Board (IASB)? Do you think a common global insurance reporting framework will ever be realised?
The latest proposal was a significant improvement on the one issued in 2010 and it is clear that the IASB has been listening hard to the industry, particularly about volatility issues. We are very close to reaching a workable standard. Having said that, the period for comments to be submitted has just closed, so we may see some sort of compromise in the final proposal.
In terms of convergence, the likelihood of one common global standard is now pretty remote. While there is a lot more alignment between the FASB and IASB, there are still some significant differences. Having said that, with the exception of the US, most of the world uses IFRS so that is probably about as close as we will ever get to a common standard.
Besides the above, what do you think is the biggest issue facing insurers globally at the moment?
Every conversation I am having with clients is about achieving sustainable and profitable growth at a time when they are operating in a very low interest rate environment. We have seen little to no growth in the insurance markets in the developed world so we are now engaging with our clients about what they are doing about growth and how they are placing the customer at the heart of their strategy.
We recently polled several of our clients and we received some quite stark results. For example, less than a quarter thinks that their products are developed and marketed with enough transparency to make them understandable to their clients. So it is clear that to grow, insurers need to put more focus on making their strategies customer-centric. Developing a strategy around the emerging opportunities will be key to unlocking success.
What will drive growth for insurers in 2014?
We have seen that those companies that have done well in recent years have been those that are really focused on what they are trying to achieve in terms of the market you want to operate in and what products you want to offer. The time of being all things to all men has well and truly gone. Agility, in my opinion, is a cornerstone of where growth will come from. Insurers can no longer afford to be set in their ways. The players that are going to succeed will be the ones that are trusted by their customers and the regulator. By being clear on what you are doing and how you will do it you will see better results.
What should insurers be paying attention to over the next 12 months?
As people look to get back to growth, we will see a pickup in M&A activity. Also one thing I expect to see more of next year will be insurers looking at the content of their portfolios, such as books of business or profitability. Finally, I expect to see more use of data and analytics. Every insurer believes it has a unique proposition around the data it owns, but they are all frantically trying to use this data and enhance it to derive competitive advantage.
As the new global head of insurance, what is your focus for your new role?
This role is about building on our already strong reputation in the market. We are known for having a very strong competence but also pragmatic approach in the market. One area of real focus for us is in our strategic capabilities. We need to offer services that the c-suite is really interested in. I want to position ourselves as thinking about the future of industry. This is vital for our growth and the industry’s development.