PwC: 64% of Insurance CEOs see increasing tax burden as a threat to their growth prospects

Published at 00:01 AM on 06 July 2015

Tax teams are set to play a more prominent role in policy and strategic decisions, as insurers attempt to find growth whilst adapting to a raft of new tax compliance demands from governments and the wider public.

  • 64% of insurance CEOs see the increasing tax burden as a threat to their growth prospects, compared to 57% two years ago
  • More than 70% of tax directors accept that public and political pressures have affected their tax function
  • Just one third of tax directors have formulated a plan to adapt their resources to address the future shape of tax functions
  • Around 80% of tax directors acknowledge that their information systems require enhancement 

The heightened reputational and non-compliance risks associated with how companies manage their tax affairs means that boards are taking a much closer and more active interest in tax policies and how the tax landscape is set to evolve. Executives increasingly expect tax teams to keep them up-to-date with tax policy developments, strategic options and potential risks.

Colin Graham, Global Insurance Tax Leader at PwC, commented:

“Tax has always been one of an insurer’s most significant expenses, and a key challenge for insurers now is to continue to find growth whilst responding in a clear and thoughtful way to a much wider base of stakeholders than before, including not only tax authorities and governments, but also regulators, investors, non-governmental organisations (NGOs), the media and the general public.”

The impact that numerous regulatory developments are having on insurers’ operations is becoming increasingly evident. PwC’s new report highlights that tax functions within insurance companies may find it difficult to cope with the challenges of adapting and having the agility required to deal with the constant change in the tax environment in addition to complimenting the way insurance is changing towards real-time pricing and customer-focused solutions. A growing efficiency gap is emerging between tax processes and other financial systems within insurance companies.

While insurers generally recognise the need for change in their tax functions, most are still at the early stages of transition. PwC’s survey shows that few tax teams appear to have evaluated the likely future alternative scenarios, let alone made plans or put them into implementation. By 2020, PwC believes that the organisation of a typical tax team and how it delivers its services will be very different from today.

Colin Graham, Global Insurance Tax Leader at PwC concludes:

“The certainties and demands that have shaped tax management over the past 30 years are being swept aside. What tax teams are required to do, how they do it, who does it and where they do it will all change as a result. As companies focus on maximising return on equity and managing capital under new solvency regimes, the value that can be created by tax professionals is becoming increasingly recognised and highly prized. Insurers need to ensure their tax functions are reviewed and automated in order to allow tax teams to become closer to transactional activity and strategic conversations”

PwC’s report outlines five priorities for tax teams to equip themselves for the future:

  • Develop and implement a modernised tax control framework, which incorporates the key components of governance, risk identification, monitoring, enforcement and communication;
  • Major automation of data extraction and review processes are needed to ensure compliance and release tax professionals’ time to manage risk and advise the business. Standardised data and greater automation are critical in managing tax more efficiently; 
  • As demands on tax teams evolve, some tax operations are embedded in the business and others become increasingly automated, the skills, capabilities and approach of tax teams will need to adjust. Tax teams will spend less time on data cleaning and routine reporting and more on advising on future developments in the tax policy landscape; 
  • Tax has traditionally provided analysis and policy, which the business has then implemented. As the focus of tax moves to sales and the end-consumer, tax specialists will need to be much closer to transactional activity; 
  • The focus of tax optimisation will shift from reducing to paying an appropriate amount of tax and ensuring that current tax policies stand up to current and future scrutiny

Ends                                                                                    

Notes to editors

1)       Colin Graham is available for interviews. Please contact Ellie Raven on +44 (0) 207 804 3663 or [email protected]

2)      80 Insurance CEOs in 37 countries were interviewed for PwC’s 18th Annual Global CEO Survey, ‘A marketplace without boundaries? Responding to disruption’. (www.pwc.com/ceosurvey)

3)      PwC also surveyed 20 tax leaders globally, 10 of whom are based in the United Kingdom.

4)      PwC’s report, ‘Insurance 2020: Equipping your business for the global tax revolution’, is the latest in a series of viewpoints exploring mega trends that are reshaping the commercial and operating environment for insurers worldwide. The transformational developments stretch from hyper-connectivity to more customer expectations, the shifts in public attitudes to increasing cost and complexity of regulation. The central message from Insurance 2020 is that whatever organisations are doing in the short-term – be it dealing with market instability or just going about day-to-day business – they need to be looking at how to keep pace with the sweeping Social, Technological, Economic, Environmental and Political  (STEEP) developments that are transforming the world.

Ellie Raven, PwC media relations, Financial Services

Tel: +44 (0) 207 804 3663

Email: [email protected]


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