Insurers Grapple With Changing World

Insurers need to grapple with a changing global environment and both the challenges and opportunities they present in a growing global economy, an executive from Willis told insurance executives recently.

Tom Ealy, executive vice president of Willis North America, made his remarks at the A.M. Best Company's 15th Annual Review and Preview Conference in Naples, Fla.

Mr. Ealy, who leads the firm's commercial and consumer segments for both the U.S. and Canada, identified eight key mega-trends that, he said, should be at the top of the insurance industry's agenda.

Willis said Mr. Ealy told the executives that:

o Maintaining a sustainable competitive advantage can only be won, in part, through technology which enables employees to work smarter and clients to receive services with built-in reliability, speed, simplicity and transparency.

o The nature of risk is changing and becoming more global. Powerful economic, technological, societal and ideological forces are making the world smaller and more risky.

o The high quality versus best cost tradeoff has been shattered. Clients demand both today. At the same time, price is only an issue in the absence of value. Clients increasingly demand contract certainty and that insurance providers' intellectual capital be put compellingly on display.

o Both manufacturers and distributors of insurance products are clamoring to get as close as possible to policyholders of all shapes and sizes. Innovative aggregator, collaborative network and managing general agency models are being built to tap into new sources of distribution.

o There is a convergence of capital and insurance markets. Fueled by a combination of the availability of large pools of capital and more sophisticated risk modeling tools, structured financial solutions such as insurance-linked securities are becoming more prevalent.

o Regulation has never been stronger or more complicated, with a two-tier system for agents and brokers. The UK Financial Services Authority's national and principles-based approach to regulation can serve as a model for the United States.

o For brokers there is an imperative to attract and retain professional talent. Today's workforce demands that agents, brokers and insurers do a much better job of attracting new talent to the industry and provide vibrant careers with an emphasis on continuous learning.

o Mr. Ealy quoted Joe Plumeri, Willis Group chairman and CEO, who has promoted raising insurers' self-esteem and who called insurance “the DNA of capitalism.”

Mr. Ealy remarked that homes and offices are not built, manufacturing is not performed, and services cannot be delivered without insurance. Insurance remains vital to the global economy, “and navigating these mega-trends will increasingly define our success in helping to propel it,” he said.