Tough Times Pose Threats, Opportunities, Says LOMA CEO

NU Online News Service, MAY 18, 3:12 p.m. EDT

ORLANDO, FLA.--The struggling economy will spur mergers and crimp insurers' profits in the short term, but down the road it offers them opportunities to achieve efficiencies and greater growth, the head of the Life Office Management Association said.

"The world has changed pretty dramatically since we met at this time last year," noted Robert Kerzner, president and chief executive officer of both LOMA and the Life Insurance Marketing and Research Association during his speech here at the ACORD LOMA Insurance Systems Forum.

"The final quarter of 2008 is something none of us would want to live through again," he added.

He remarked that life insurance sales fell 14 percent in last year's fourth quarter, which is the worst figure reported since 1951, while the property-casualty industry's net income "fell by a whopping 96.2 percent" in 2008.

Thanks to the "financial meltdown" which continues to cripple the economy, "a transformation is underway in this business, and when the dust settles this industry is going to look extremely different," he said.

For one, he predicted, "there are probably going to be fewer companies, as there no doubt will be consolidation down the line."

However, he added, because of the credit market crunch, the toxic assets on the books of many carriers, the fact that some insurers are taking Troubled Asset Relief Program funds from Washington, and "the game of chicken going on" in terms of who might want to acquire which company and at what price, "the consolidation is not going to happen as quickly as some might expect."

He predicted that "we'll see the first big deal in the next three-to-six months, and then see consolidation activity accelerate after that."

In addition, he said health care reform will present opportunities for life and health carriers, as federal efforts include a "major information technology component--the computerization of medical records," an effort bolstered by the Obama administration's commitment of $17 billion from the economic stimulus package.

"Once we overcome the major concerns about privacy, this system will improve our ability to serve consumers," he said.

Pointing out that "the current underwriting process can be frustratingly long in terms of getting necessary medical information," he asked the audience to "imagine how much faster, more efficient and more accurate we'll be able to work if we can get that data at the touch of a button."

He added that payment of both health and medical disability claims would also be greatly facilitated by having medical records available electronically.

"As we return to 'normal,' whatever that turns out to be," he concluded, "IT will be the enabler of greater efficiency and productivity," whether that involves underwriting, research, sales, claims or continuing education.