PwC US released a report that identifies key areas ofopportunity and challenges for insurers in 2013. PwC's annualreport—Top Issues: The Insurance Industry in 2013—points to severalissues that are having a profound impact on the industry includingcustomer experience, big data and analytics, operations, andemerging changes in automobile insurance.

Companies in the vanguard are focusing on new ways to improvedata collection and analysis, as well as claims, billing and otheroperational areas. These efforts are part of an industry-wideeffort to more effectively engage with customers, exploitinformation and analytics, and manage risk.

“All of these initiatives have a common goal of increasingefficiency and growing the business,” says Jamie Yoder, U.S.Insurance Advisory Practice co-leader, PwC. “These developmentswill touch every part of an insurer's business—from risk managementto product development to customer service.”

In the year ahead, insurers are expected to encounter challengesand opportunities in the following areas:

Customer Experience

The growth of e-commerce and mobile technology over the past twodecades has led consumers to expect convenience, simplicity andtransparency. Moreover, changing demographics in the U.S. andglobally have created new market segments with new needs. For themost part, customers feel that carriers are falling short ofmeeting customer expectations and in turn missing out on a vitalcompetitive differentiator. Competitive carriers will continue toinvest in understanding consumer and policyholder expectations.

“It is important for insurers to tap into technologicaladvancements to stay current but also have an open line ofinteraction with clients,” says Yoder. “Revisiting customerexperience programs, changing traditional distribution platforms,designing products that balance consumer and producer needs anddifferentiating value proposition through new models of advice willhelp open the door to new opportunity, business and profit.”

Information Advantage & Big DataAnalytics

Analytics was once a back-room operation driven primarily byactuaries and statisticians, but it is now a cross-functional groupwith executive level visibility. Insurers who leverage analyticsshould find it easier to identify and make key business decisionsas well as quickly mobilize teams to better connect to thecustomer—all qualities that can set an organization up for successand growth.

“In 2013, we will likely see insurers increasingly bring inexternal sources of information and combine it with internal datato deliver business intelligence to the field,” said Anand Rao,principal in PwC's U.S. Insurance Advisory Practice. “Leadinginsurers are exploiting advanced big data analytic techniques to gobeyond predictive modeling in an effort to simulate futurescenarios and visualize the impact of their decisions onoperations.”

Operations

Billing and payments can help insurers achieve far more thanjust the collections of premiums. The operational and accountingfunction of a company can create a better knowledge of customersand stronger relationships with them. By combining acustomer-centric view of the billing process and applying the mosteffective technologies and tools available, insurance carriers aresignificantly streamlining their billing processes, reducing costs,reducing errors, and enhancing customer satisfaction andloyalty.

Like other parts of insurers' businesses, claims functions areinvesting billions of dollars, often with outside vendors, in newtechnologies and processes that improve the claims process and helpmanage the torrent of data that has become available. In order tomanage costs and increase claimant satisfaction, carriers arerefining how they manage vendor relationships by embracing newtechnologies, such as smart phone applications and sensors,promising more actionable insights into customer behavior andexpectations.

Emerging Changes in Auto Insurance

All of the above are coalescing and could have the most visibleimpact on auto insurers. Recent auto technology advancements havehelped insurers better manage risk, but the rise of affinitygroups, changing ownership patterns and autonomous vehiclesnecessitates the development of innovative new products andapproaches to distribution. Carriers that can think creativelyabout new markets and the changes in automotive technology will bethe ones that are most likely to successfully navigate the path tothe future.

“As the results of PwC's16^th Annual CEO Survey further validate, 2013 is ayear of moving forward for insurers,” says Yoder. “They are takingthe customer experience and advanced analytics pilot programs outof the testing stage and into the action stage. This action willlikely be a defining moment for the industry.”

PwC's Top InsuranceIndustry Issues report also addresses the state ofenterprise risk management among U.S. insurers, as well as thedeals environment, accounting for insurance contracts,principles-based reserving (PBR) and tax compliance.