Global insurance outlooks 2013
US property-casualty insurers must approach market challenges holistically, understanding their interplay and effects on underwriting, operations and investment.
Management priorities in 2013 should include the following:
- Taking a long-term view on business investing
- Preparing for regulatory changes
- Using "big data" effectively
- Identifying and executing growth opportunities
Investing for the long term
Given the lack of attractive options to increase investment yield, the best opportunity for many carriers to increase profitability might be investments in infrastructure, systems and intellectual capital.
Claims and billing services are ripe for attention, as consumers increasingly want secure, real-time solutions delivered through multiple online channels. New market entrants have an advantage here, as they are not burdened with legacy infrastructures.
Meanwhile, the debate about outsourcing continues. Some question whether the cost savings have come at the expense of customer service and data integration. We expect new quality measurements to guide the next generation of outsourcing decisions.
Although varied regulatory initiatives place different emphasis on capital requirements, reporting standards and risk measures, the common theme is a sharper focus on clearly articulating an insurer’s risk profile. Large insurers are more likely to possess the sufficient wherewithal to meet these stepped-up requirements, while small and mid-sized insurers could be more adversely affected.
Regardless of size, insurers must increase their data management, reporting and analytical resources to address the requirements. It is also crucial for organizations to integrate risk data across disciplines.
Using “big data”
US property-casualty insurers have access to vast amounts of data from transactions, claim histories, social media connections, Internet searches and new sources such as vehicle telematics. Firms that capture, analyze and integrate this data effectively have a significant competitive advantage.
The era of “big data” will leverage extremely large, complex and often real-time data sets. Vehicle telematics provides a hint at what this new era offers.
“Big data” brings challenges as well. New roles, such as data scientists and chief data officers, will become more prominent, while privacy-related issues must remain a priority.
Although the US market is vast, many insurers see drawbacks to being concentrated in a single country. Acquisitions enable insurers to diversify and expand territory, products and distribution sources.
International expansion can reduce domestic insurers’ dependence on the US economy. In fact, several US insurers have already directly acquired or engaged in joint ventures with foreign companies, especially in the Lloyd’s market.
Insurers can also benefit by turning to emerging markets in Asia-Pacific and Latin America, where penetration rates are lower. We also see strong growth opportunities in cyber-liability, nanotechnology and energy.