For Rebecca Amoroso, national insurance industry group leader for Deloitte, her "Global Insurance Industry Outlook" comes down to three issues: the growth imperative, leveraging analytical tools, and managing the complexities of compliance. In her report, subtitled "Issues on the Horizon 2007," she writes: "To succeed in the coming years, companies will need to shorten the time it takes to turn strategy into action and implement their programs with high levels of precision and efficiency."
Amoroso views the emphasis on growth in the industry as organic. "A lot of companies are looking within their organization to determine how they can gain a competitive edge in the marketplace," she says.
One area worthy of attention involves innovations in customer service. Amoroso contends carriers recognize their customers are not just policyholders but also producers–agents and brokers–who sell those policies to the general public. "Carriers must understand what the needs are of the distribution force," she says. "I think a lot of it has to do with being an organization that's easy for agents to work with." This means carriers having the right tools and technology in place to allow agents to better serve and satisfy the policyholder and to write the most business as quickly as possible.
Carriers also need to comprehend the agents' perspective and what's important to them. "I think that's what a lot of insurance companies are trying to grapple with," she notes. "What is going to get agents' attention and bring business toward a certain insurance company as opposed to agents going to another entity?" To get the business, Amoroso advises carriers to search for ways, including technology, to facilitate the relationship process with agents.
The big buzz in the insurance industry, according to Amoroso, currently focuses on analytical tools for predictive modeling. She finds their use prevalent in underwriting, particularly in the small commercial and personal lines arenas. These tools "also are starting to take hold in other areas, such as claims management," she says. Predictive modeling serves an important role in working to detect the $80 billion in insurance fraud that takes place annually, Amoroso points out, adding companies also are starting to talk about modeling in marketing to strengthen the distribution channel.
Predictive modeling began for many insurers as credit scoring for personal lines, but it's evolved to something much greater, explains Amoroso. "Companies are looking at what data sources are out there and the technology concerning credit, behavioral issues, lifestyle patterns–traditional and nontraditional ways of looking at their business," she says. Carriers are eyeing their internal data, as well, to use the data in different parts of the organization. "Companies may have had a lot of information in the past," she continues. "But with technology the way it is today and more of a buzz around modeling in general, [the use of data] has been emerging."
In the area of compliance, Amoroso comments the implementation of the NAIC's model audit rule, which is expected to take effect in 2010, will have an impact for nonpublic insurance companies. Sometimes described as Sarbanes-Oxley for mutual carriers, the new rule has forced nonpublic companies to look at what SOX is all about so carriers can adopt some of the best practices before the NAIC rule becomes official. "They are starting down this path before the model rule takes effect," she says.
Amoroso doesn't believe the discussion over federal regulation of the industry is dying down. "My personal opinion is I don't think [federal oversight] will happen any time soon, but I do know some companies are very much in favor of having an optional federal charter," she remarks. "Some companies are opposed, and many of the states are opposed, but I do think everyone would agree our current system is inefficient. It remains to be seen how quickly and in what form a federal charter will take place. I think [the issue] is top of mind and will be discussed for some time."
The states and the NAIC are trying to improve efficiencies in the regulatory process with changes such as the model audit rule and having some models in place. "Will they be successful at it?" she asks. "That's the unknown question here."
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