Global insurance markets outlook for 2012

Canada property-casualty insurance outlook

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Reaching tomorrow's customers requires a fresh look at the changing face and voice of the market, and the timely development of new products, distribution channels and service offerings that address these altered needs.

 

Optimism in a changed environment

The outlook for the property/casualty (P&C) insurance industry in Canada is mixed, given the persistence of challenging economic and market conditions. Concerns include volatile capital markets, the low-interest rate environment and its impact on industry book yield and expanding regulations governing insurer risk and capital management practices.

Optimism is emerging; however, improvements in industry profitability may appear in the next two to three years. For instance, industry consolidation is expected to increase in 2012, as insurers awash in excess capital and capacity look to buy other insurers to achieve strategic growth plans.

This, in turn, should keep the market value of insurers at current market prices or possibly even higher. Additionally, actions are being taken in some provinces to reduce the cost of P&C insurance. Ontario's Ministry of Finance, for example, announced in 2011 the establishment of a task force to determine the scope and nature of automobile insurance fraud and provide recommendations regarding ways to reduce it.

Given the current loss picture, Ontario regulators also approved a 1.4% automobile insurance rate increase in the fourth quarter of 2011. Nevertheless, in the current, protracted climate of global economic uncertainty, insurers cannot rely solely on well-developed and executed strategies to attain profitability.

To achieve meaningful results, insurers will need to pursue innovation, leverage their superior information resources and manage their processes more closely to achieve a sustainable advantage. In this regard, greater use of advanced analytics and other technologies across the value chain presents opportunities to reach more customers more conveniently with lower-priced products they need and value.

Five emerging trends that may warrant management's attention in 2012 include:
1 Manage the company in the current low-interest rate environment
2 Make better use of technology to increase business intelligence and improve efficiencies
3 Transform core insurance systems
4 Strengthen risk management infrastructure to respond to regulatory challenges
5 Adapt to the evolving risk profiles and needs of the customer



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