By this time you're probably packing up your laptop and getting ready to head out the door for some holiday festivities (try not to work too much over the break!).
But since everyone is compiling their lists of top stories and predictions, it's as good a time as any for us to weigh in.
From my POV, for what it's worth, here are some of the top 2011 stories that impacted insurance—and that may carry over into 2012:
- The year of the cat. From the Japanese earthquake and tsunami right up to the Midwest blizzards of a few days ago, 2011’s unprecedented weather events made it clear that when it comes to natural disasters, you can run but you can’t hide. According to A.M. Best, catastrophes cost the U.S. P-C industry about $38.6 billion in losses during the first 9 months of 2011, up 140 percent from the same period in 2010. Which leads to:
- The hardening market. Most industry analysts are predicting that the sheer volume and cost of 2011’s cats will finally reverse the seemingly endless soft market. Although not everyone agrees that hardening is inevitable, it’s probably a safe bet that at the very least we’ll see some tightening of pricing and availability in property coverages.
- The impact of world events. Egypt, Libya and the ongoing European economic crisis: If there was any doubt that we’re living in a global economy, the domestic impact of these big events is proof. And with Kim Jong-Il checking out, we may be back on high alert for the sort of nuclear threats that have been superseded by economic disasters in recent years.
- Weinergate. Although you may have already forgotten the silly scandal involving Anthony Weiner and a cell phone, the potential liability of social networking, cyber hacking and online risk will only grow, especially as more users transition to mobile functions.
What issues are ongoing and growing in 2012?
- More cats. NOAA is predicting a rough winter for the continental U.S., and that's just through February. Then there's tornado season, hurricane season, and non-specific random disaster season, where stuff like earthquakes hit the East Coast. Is climate change real, or are we just going through some cyclical bad-weather period? The point might well be moot since the losses just keep coming.
- More supply chain disruptions. The combination of cats, floundering economies and political unrest began to take a serious toll on global supply chains last year. Just yesterday, an explosion at a Chinese plant supplying parts to Apple is threatening to disrupt iPad 2 production (oh, and it killed some people, too). Scenarios like this are sure to become more common in an increasingly connected—and unstable—global economy.
- A growing emphasis on ERM. The Jerry Sandusky scandal underlined the vulnerability of organizations of all sizes and types when it comes to the bad behavior of one rotten apple. The once-sacrosanct area of college sports is increasingly coming under scrutiny in light of scandals involving Syracuse University and Ohio State. More than ever, it will be important for organizations of all sizes and types to have a clear understanding of potential risk and building solid risk management systems into the very core of their operations.
- More specialty business. With so many things (cats, politics, the economy, the soft market) out of their control, it only makes sense for independent agents to invest in niche businesses they understand and enjoy. However, you can't just throw a dart at the board and hope it hits the most popular offering. Specialization requires developing a whole new skill set, and it can open the door to increased E&O liability if you're just talking and not walking the walk. But even with these caveats--and even if the soft market wanes in 2012--I doubt we’ll see a reversal of this trend.
- Political focus on insurance issues. In 2011, our elected officials proved themselves to be utterly shameless when it came to making their opponents look bad--no matter how badly that polarization and gridlock affected their constituents. Now that the presidential election year is here, they'll probably be ramping it up even more. Although for the most part insurance has managed to fly under the radar (at least we're not working in the banking industry), don’t be surprised if more insurance issues crop up. NFIP and crop insurance reform will probably get more attention, as well as fine-tuning of the function of the Federal Insurance Office.
What trends do you think will most impact your business in 2012?