Rapid technology changes, demanding customers, tightregulations, catastrophes, capital buildup, low interest rates,slow economic growth—not exactly the horsemen of the Apocalypse,but these factors will determine the fate of insurance in the NewYear, says Ernst & Young.

"These forces have not had as great an impact in 2013," says EYin a report covering its U.S. P&C industry outlook."Nevertheless, these issues remain volatile and their impact shouldnot be underestimated in 2014." 

Stronger internal operating fundamentals, including pricing andunderwriting discipline, will protect the industry from beingrocked by external pressures. Here are six tips for insurers todefend against the shifting tides of risk:

Double down on broad-based, transformative technologywith high ROI impact

A recent EY survey showed that more than half of insurers intendto integrate digital strategies into their corporate structure, andmore than three-quarters will do this within the next threeyears. 

In a low interest rate environment, insurers must invest inoperating technology to drive down frictional costs and staycurrent. Interactive and flexible mobile design opens up directclaims channels and agent-powered distribution, says EY, andcustomers and agents are demanding it. Although companies are awareof the need to evolve digitally, though, 40% of insurers say theyneed senior management support to make the change. 

Adopt a range of enterprise data excellence

Strong data monitoring is a must for insurers seeking to stayahead of market forces and federal oversight, says EY, and thosewho follow the following tips will "outperform competitors in 2014and beyond": 

• Establish enterprise-wide common standards andpolicies for capturing, storing and reporting data. 
• Utilize analytics with applications that monitorsystems with minimal intervention and create reports for fasterresponse to emerging claims issues. 
• Optimize risk and capital analysis across acompany's value chain, including distribution, underwriting,business processes, claims and investmentapplications. 
• Organize data ownership and controls under a chiefdata officer. 
• Enhance data security to protect from cyber attackswithin and without the country. 

Innovate product development processes anddelivery

The risks of tomorrow are driven by customer expectations,disruptive technology and legal frameworks. The risks EY expectsinsurers to quickly design, develop and market new productstargeted for the following exposures: 

• Cyber insurance.
• Catastrophe insurance, especially surroundingfloods and terrorism coverage. 
• Workers' compensation in the new healthcaremarket.
• Nanotechnology.
• Sensor technology in telematics, consumer andindustrial products.

Exploit segment differences for targeted growthstrategies

Companies exploiting global, geographic, product and demographicopportunities in the following sectors will achieve the best growthand bottom-line performance in coming years, says EY:

• Specialty market pricing has firmed and transformedwith new entrants and products. Success requires pricingdiscipline, experience and analytical capabilities. 
• In workers' compensation, lost-time loss frequencyis trending down, medical costs are contained and premium growth isaccelerating. However, trends vary significantlystate-by-state. 
• Regional differences mean uneven economicperformance throughout the country. Population and employmentdrivers, industry-specific economic trend, and politicalenvironments also produce varying risks andopportunities. 
• Alternative capital structures are reshaping theprimary and reinsurance markets. 
• Merger and acquisition activity offers theopportunity to immediately increase market share in existingbusiness segments and scale new markets. 

Get in front of emerging investmentchallenges

Investment income performance fell by 14% from 2008 to 2012,says EY, with record-low yields expected in 2013 and continuinginto 2014. Even an upswing in yields that emerged in May 2013 willcontend against maturing investments from the past turning up withlow rates. Insurers are exploring new sources of capital fromequities, commodities and hedge funds. On top of that, leadershipchanges at the Federal Reserve, tapering economic policy and aslowly recovering global economy is fueling uncertainty ininvestment markets. Insurer board of directors, executives and riskcommittees should practice financial stress tests, scenarioplanning and economic global modeling for whatever the increasinglyinterdependent world ushers into 2014. 

Prepare for escalating governance andaccountability

Insurers have always faced a complex regulatory environment,says EY, but insurers must be careful not to get tangled up incertain regulatory trends in 2014. These include solvency-focusedregulations such as ORSA affecting internal risk managementpractices, keeping financial resources in line with FederalInsurance Office (FIO) rules, and cross-border supervision andregulation of multinational corporations.