Trends in regulation, risk, revenue and retirement will shape the insurance industry in 2009, according to a new analysis by a research consulting firm.
Needham, Mass.-based TowerGroup said these factors during the ongoing economic turmoil will force carriers to adopt new skills and business discipline in order to survive.
Risk and regulation, said TowerGroup, will be at the forefront as insurers pump money and resources into initiatives designed to optimize risk management and meet new regulatory mandates.
Increased costs and decreased revenues, the firm said, will lead to further industry consolidation and redistribution of assets.
It predicted that as a large number of experienced insurance workers reach retirement, the strain on insurers will increase as decades of knowledge walk out the door.
However, in regard to the life and annuity insurance business, the retirement demographic of consumers presents a great opportunity to offer new products and services, TowerGroup noted.
“The convergence of several negative economic influences has resulted in unprecedented financial pressure on insurance carriers,” said Karen Pauli, a research director in the TowerGroup Insurance practice.
“Although these challenges are clearly daunting, it is critical that carriers maintain a long-term vision despite the short-term economic imperatives. Carriers that focus both financial and human resources at the enterprise level, incorporating both operational efficiency and risk management, will come out of the current crisis ahead of the pack,” advised Ms. Pauli.
Highlights of the new research include:
o TowerGroup's finding that data management and predictive analytics are no longer merely “nice-to-have” technology initiatives. It said carriers that fail to recognize this fact will see significant deterioration in their results as well as plummeting loss of competitive position.
o Advice that insurance carriers must implement effective risk governance initiatives that span both the organization and its distribution partner network, where integrating information is imperative.
o A drop in investors' and policyholders' confidence resulting from the current economic crisis will lead to increased instability in the industry and heightened merger and acquisition activity in 2009.
o Cost containment will be a top priority for insurers in 2009, but customer-facing initiatives to improve customer service and the ease of doing business will continue to enjoy funding and support.
Rachel Alt-Simmons, a TowerGroup insurance practice research director, advised that “insurers must continue to focus on customer-facing initiatives even in the face of cost-containment pressure, given that these initiatives will be key to rebuilding confidence among policyholders and shareholders.”
“Customer-focused insurers that concentrate on solutions rather than products will emerge as the top competitors in the market,” she said.
The TowerGroup Research Note is titled “2009 Top 10 Business Drivers, Strategic Responses, and IT Initiatives in Insurance.”
The report can be purchased online at: http://store.towergroup.com/index.asp?PageAction=VIEWPROD&ProdID=525.
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