Insurance companies will focus on expanding this year, with a particular emphasis on recruiting people with digital, systems and software development skills, according to PricewaterhouseCoopers (PWC).

The global professional services business predicts skills shortages in this area.

In a new report, PWC Insurance Leader Jonathan Howe says insurers’ commitment to change is demonstrated by their continued investment in people and technology.

“As the focus on modernisation hots up, it is not surprising insurers are concerned about the availability of staff with digital skills,” he said.

“They should further explore the opportunity to tap in to the exciting and diverse skill sets found in start-up companies – partnering as an alternative to recruiting.”

He says there has been a large increase in the value of claims in the past year, and he expects this trend to continue. “The rise… will cause significant concern for those in the general insurance market and is a contributing factor for the ongoing focus on cutting costs throughout the business to maintain profitability.”

PWC says total operating costs for insurers have increased, and will continue to do so.

It says general insurers’ top three reasons to invest in the year ahead are improving efficiency, providing new products and reaching new customers.

The report notes a significant rise in the perceived threat from other financial services sectors, plus new market entrants.

Insurers consider the political and regulatory environment the biggest barrier to innovation in the UK, while the flourishing fintech community, access to talent and capital, and strong customer demand for new products are seen as positives.