The insurance industry cannot maintain the status quo for market growth. As 2017 kicks off, consider the biggest drivers of change:

Customer expectations: Clients expect convenience and transparency and have greater ability to find it than ever before.
Pace of innovation: Customers have a need for new insurance solutions, but incumbents are struggling to provide appropriate products and services.
Start-ups: New players that innovate quickly are filling the gaps.

This year, monitor the following insurance industry issues, which will create an environment that is positioned for growth:

1. The rise of insurance tech

There are several business challenges that established insurers are facing as they try to meet new customer needs while improving core insurance functions. A specific focus on insurance technology, or “InsurTech,” has emerged to help insurers solve these challenges.

Explore ways to leverage and incorporate technology into your growth strategy to discover emerging coverage needs and risks that require new insurance products and services.

2. Artificial intelligence

The initial impact of artificial intelligence (AI) primarily relates to improving efficiencies and automating existing customer-facing, underwriting and claims processes. Over time, its impact will be more profound; it will identify, assess and underwrite emerging risks and identify new revenue sources.

Organizations should consider taking specific steps to incorporate AI techniques within a broader data science group, such as building a pilot of your AI process using existing vendor tools or open-source tools.

3. Cyber insurance

Cyber is a potentially huge but still largely untapped opportunity for insurers and reinsurers. It's estimated that annual gross written premiums will increase from around $2.5 billion today to $7.5 billion by the end of the decade. However, many insurers don't want to cover it at all, others have set limits below the levels their clients seek, and some have imposed restrictive exclusions.

Insurers and brokers could put cyber insurance on a more sustainable footing by sharing data more effectively.

4. Aging workforce

The insurance industry is facing a looming crisis with a rapidly aging workforce. According to the U.S. Bureau of Labor Statistics, the number of insurance professionals aged 55 years and older has increased 74% in the last 10 years; by 2018, a quarter of insurance industry employees will be within five to 10 years of retirement.

Companies that effectively recruit, train and develop dedicated future staff and leaders will differentiate themselves and set themselves up for success into the future.

5. Industry M&A activity

Inbound foreign investment — especially from Japan and China — is expected to continue fueling U.S. merger and acquisition (M&A) activity. Private equity will remain an important player in the deals market, not least because it has expanded its targets beyond brokers to the industry as a whole. The need to eliminate costs in order to grow the bottom line will remain a primary economic driver of consolidation.

6. Model risk management

One of the fastest growing concerns on insurers' enterprise risk agenda is model risk management, which has become a major focus of regulators and the subject of intense activity and debate.

Models are among insurers' greatest assets. Putting models and the data that feeds them at the center of value creation can provide new perspectives that better address customer expectations.

7. Insurance taxation

Several proposed legislative changes could significantly impact the insurance industry as the U.S. leadership endures change. Election-year politics are dominating legislative action this year as both parties lay down policy agendas for 2017 and beyond.

All companies — regardless of scale — need to ensure that their capital and operating spend aligns with their strategy and capabilities and the ways they choose to differentiate themselves in the market. Keeping a close eye on these evolving industry issues will be to your organization's competitive edge. In this transformative time, the ones that can't or won't do these things will fall increasingly behind the market leaders.

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Top 7 P&C Concerns for 2017

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