It may be tempting for an insurer to hold the fort in thesedifficult times and wait for a boost in the economy or a decisiveturn in the market to bolster their top and bottom lines. Butproactive carriers can facilitate growth under any conditions bybroadening their strategic outlook and capitalizing on fundamentalchanges emerging in distribution, technology, and regulation.

A rising tide lifts everyone’s boats. Books of business expandduring economic booms, thanks to widespread exposure growth.Premium volume is boosted by hardening insurance markets, often following major disastersthat temporarily drain industry capacity.

Yet under these scenarios, insurers are the passivebeneficiaries—or victims—of forces entirely outside of theircontrol. They are forced into reactive and often defensivepositions. But it doesn’t have to be that way.

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To break out of this boom-or-bust mentality, and to put insurersback in control of their own destiny, there are a number ofstrategic options and potentially game-changing support toolsavailable to improve their chances not just to survive, but toprosper in the decade ahead—which will likely be one of the mostchallenging in the industry’s history.

What exactly are carriers and their distributors up against?What new hurdles will they face in the race against theircompetition? What marketing initiatives, operational enhancements,distribution solutions, and tech upgrades might they consider toreengineer and reposition their organizations so they have a betterchance of succeeding over the long haul, regardless of the state ofthe economy or insurance market?

While compiling Deloitte’s recently released “Insurance Industry Outlook: High HurdlesLoom in 2011 & Beyond,” it became clear that leading-edgecarriers can turn potential threats into revenue opportunities in avariety of ways.

Deloitte identified six systemic challenges that could eitherundermine or accelerate carrier growth, depending on how insurancecompanies choose to respond.

● Insurers can’t wait for the economy torebound. It could take years for a full economic recoveryto be achieved, making organic growth and profitabilityproblematic, particularly for carriers that try to maintain thestatus quo rather than experiment and innovate.

Indeed, insurers don’t necessarily need a broad recovery toboost sales and profits, as there are opportunities to grow even ina weak economy.

While many sectors are still in the doldrums, some areas—including healthcare, technology, and environmental sustainability—are seeing morerapid expansion, presenting greater opportunities for carrierswilling and able to move into additional niche markets.

There are also regions and specific states that were not hit ashard as others by the recession, and are likely to recover faster.Indeed, while the latest census indicates that some areas of thecountry lost population (and insurable exposures along with them),other regions are gaining on both counts.

Last but not least, if a carrier is struggling to groworganically, a merger or acquisition could present an opportunityto enter new markets or customer segments, as well as achieveeconomies of scale and make strategic use of excess capital.

● Virtual consumers have arrived. Clients and prospects are increasingly living theirlives and doing business online, and will expect their insurers tofollow suit. Proactive carriers are more routinely communicatingand providing client services in the virtual world, includingsocial media outlets.

Personal lines carriers have led the field with web-based salesand service. Many allow consumers to get price quotes viaaggregation sites, and offer claims-filing options via mobileapplications. Some are selling small-commercial policies directlyvia the web, with more likely to follow suit as such products areincreasingly commoditized.

Meanwhile, social media offers insurers the chance to bolsterawareness of the industry’s role, value and solutions. Carriers canuse virtual platforms to spread the word about the exposures facedby consumers, as well as the products they offer to make peoplemore financially secure.

Insurers are still struggling to come to grips with how tointegrate their traditional and online operations, in terms ofmarketing, distribution and service. There is much upside potentialfor those that can pioneer useful interfaces with prospects andcustomers over the web.

● Carriers reassess distributionoptions. Agents and brokers will remain a primary salesoutlet in personal and commercial lines, but a growing number ofcarriers are at least considering alternative channels. To remainrelevant, both insurers and producers need to distinguish theirvalue propositions—for one another as well as for buyers.

As mentioned earlier, more carriers are considering going directto consumers either via the web, aggregator sites or affinitygroups. Some are bypassing agents entirely, while others areemploying or at least considering multiple distribution platformsthat include an agent component.

However, even those carriers committed to traditional agencydistribution are reviewing the profitability and growth potentialof their current (including their top) producers. Proactivecarriers are using advanced analytics to identify and invest moreresources with those agencies positioned to grow not just in themarket overall, but with their company.

● Insurers should treat data as astrategic asset. Data is the lifeblood of insurance, yetmany carriers are seeking a transfusion of additional informationto better control their costs, meet new oversight demands frominternal and external stakeholders, and establish more effectiveenterpriserisk management systems.

While more insurers are starting to recognize that data is astrategic asset that can give them a competitive edge, thereappears to be much room for improvement in how information ishandled. Indeed, Deloitte’s 2010 “Global Risk Management” survey ofchief risk officers at global financial services firms found thatonly small percentages of respondents characterize theirorganization’s risk data strategy and infrastructure as “extremelyeffective.”

Whether it comes to data controls or checks (8 percent), datamanagement and maintenance (7 percent), data standards (6 percent),data governance (5 percent), data process architecture and workflowlogic (5 percent), or data sourcing strategy (3 percent), very fewrespondents see their company’s systems as “extremely effective.”Indeed, in each category, less than one-third of respondents evenrated their carrier’s performance as “very effective.”

Thus, proactive insurers are putting more transparent,accountable and productive data management systems in place, whilesome are appointing chief analytics officers to monetize theinformation generated.

● Tech to the rescue! Beyonddata management, technology is destined to play a far moreprominent role within the insurance industry. The effectiveimplementation of new and emerging tech tools could even make the differencebetween success and failure for many insurers.

Using the web and its various permutations to attract and retainbusiness is just one major tech-driven initiative.

Predictive modeling and advanced analytics are also critical toimprove decision-making and cut costs, whether in underwriting,claims, product development, marketing or distribution.

Cloud computing is another potential game-changer, loweringoperational barriers and entry costs considerably for new insurers,while offering more established carriers currently bogged down bylegacy systems the opportunity to add functionality withoutreplacing existing infrastructure or expanding in-house ITdepartments.

Meanwhile, auto insurers are already capitalizing on driver monitoring systems to make pricing more precise, using atechnology that could have applications for industrial risks, aswell.

Looking ahead, the likely rise in telemedicine for standardhealth care could have benefits for workers’ compensation and autoinsurers. Similar remote assessment and monitoring technology couldalso be applied by underwriters and adjusters.

● Rules of the roaduncertain. With regulatory reform a work in progress, bothin the U.S. and globally, carriers face an extended period in whichthey won’t know what compliance demands and costs they’ll face.

The Dodd-Frank Wall Street Reform and Consumer Protection Actmay have major implications for those carriers deemed systemicallyrisky. Those with thrifts will have to cope with a change inregulators. The new Federal Insurance Office will be poking itsnose into how insurers do business in underserved areas, as well asthe efficacy of state regulation. The new system for overseeingexcess and surplus lines under one national standard is still beingassembled.

In the meantime, the U.S. is not operating in a vacuum. Workcontinues on Solvency II in the European Union, which will impactU.S. insurers with European subsidiaries as well as those withEuropean parents, and is likely to influence regulatory standardsfor all U.S. carriers at some point. In addition, the InternationalAccounting Standards Board is fine-tuning its InternationalFinancial Reporting Standards for insurers.

Health care reform will also impact property-casualty insurers,as workers’ comp and auto carriers may see higher costs and longerwaits for service for their medical liability claimants.

In addition, commercial insurance agencies that depend on grouphealth for a large portion of their commissions are seeing thatvital revenue stream restricted by medical loss ratio limits, adevelopment that could drive some into a sale or merger, or promptdemands for higher payments on P & C sales.

Carriers need to be proactive, staying on top of developmentsand working through various worst-case scenarios to determine howthey might be affected and respond as regulatory reforms playout.

In conclusion, by placing these six fundamental developmentsprominently on their agendas and tackling them creatively,innovative insurers can position themselves not just to endure inthe short term, but to succeed over the long haul.

Those insurers that consistently strive to stay ahead of thecurve, regularly reassess the status quo, prepare to experiment,achieve total command over their data, and are open to investmentsin new systems, technologies and people are more likely to overcomethe challenges they face, whatever they may be.