NEW YORK, Dec. 2, 2015 /PRNewswire/ -- The next year
likely will be one of continued disruptive change in the US
property/casualty insurance market, and insurers will need to focus
on innovation in all areas of the business to remain successful,
according to the 2016 EY US property/casualty insurance
outlook.
"Economic growth remains slow, regulatory pressures such as the
Department of Labor fiduciary rule and systemically important
financial institutions rules continue to intensify, competitive
pressures from new entrants from other sectors and markets around
the world abound, and technology has created refined distribution
channels and risk-pricing approaches," said Dave Hollander, Principal, Ernst & Young
LLP, and EY Global Insurance Advisory leader. "A customer and
digitally centric business model is essential to reduce costs and
offer lifetime value for end customers and channel partners
alike."
EY believes US property/casualty insurance companies should
focus on the following eight areas in 2016 to remain industry
leaders.
- Position organizations for digital leadership. As
digital service models become more common in retail and other
industries, the property/casualty industry will need to further
align with customers' expectations. New technologies, such as
mobility, social media, telematics and the Internet of Things, will
continue to disrupt all parts of the industry, from client
acquisition to claims to servicing. Insurers will need to lay the
groundwork for digital transformation, build a back office to
support digital platforms, and start new initiatives such as
next-generation portals, customer experience and data access.
- Prepare for the next wave of M&A activity. The
M&A surge from 2015 is expected to continue in 2016 as
acquirers, particularly Asian buyers, seek access to US markets to
build scale. Insurers will need to establish a well-defined process
for post-merger integration to remove cost redundancies and
inefficiencies. Those that refrain from M&A activity will need
to focus on recruiting human capital and accessing distribution
that provides high-retention, profitable business to compete
against larger, better-capitalized companies.
- Create a culture of continuous innovation. Insurers will
need to shed their conservative orientation and cultivate a culture
of innovation to remain relevant in changing times. They should
explore new technologies and models used by startups and make
innovation a top strategic priority, changing metrics, celebrating
controlled failure and rewarding collaboration in ways that do not
exist today.
- Shift from a product to a service orientation. Insurers
will want to enhance their service capabilities while developing
products that can serve new customer needs and behaviors. Insurers
should also take a more value-added, advisory approach, carefully
analyzing their customers' risks and developing risk-mitigation
strategies and insurance coverage tailored to their needs,
typically in more of lifetime value or even pay-as-you
live-and-change model.
- Build a next-generation distribution platform. Consumers
want the same flexibility to learn, compare, purchase and report a
claim as they have become accustomed to in other industries.
Insurers will need to streamline costly and duplicative
infrastructure, consider acquiring captive distribution to add
customers and boost business, and rethink compensation plans for
distributors, including changing level-commission compensation
standards in favor of greater upfront cash payments that reward
access to new profitable customers.
- Improve performance through analytics. Harnessing large
volumes of data from real-time sources can help insurers develop
new products and refine pricing strategies. Insurers should apply
proven analytics to the homeowners market to understand and price
risks and use analytics to manage commercial market risks. Data
scientists and actuarial skills are indeed complimentary when
targeted at strategic business issues.
- Develop the right talent to lead change. Insurers need
to be proactive in recruiting and retaining innovators and leaders,
while providing existing teams with new skills required to succeed.
In addition, insurers will need to develop expertise in health,
wealth and risk advisory skills so they can bundle products and
provide services to meet their customers' changing risk needs and
expectations.
- Make risk management a C-suite priority. With a more
complex and volatile landscape for insurance firms, risk managers
are being held accountable for improved financial performance and
value creation. Insurers will need to stay current on changing
regulatory frameworks, communicate the issues that will affect the
industry and respond to changes as they emerge. They also will need
to watch for emerging risks, such as cyber-attacks, and prepare for
natural or man-made catastrophe losses. Even with another benign
natural catastrophe year, cyber is emerging as both an opportunity
and a very real threat to profitability and predictability.
Read the complete 2016 EY US property/casualty insurance outlook
at www.ey.com/insurance.
Notes to Editors
About EY
EY is a global leader in assurance, tax, transaction and
advisory services. The insights and quality services we deliver
help build trust and confidence in the capital markets and in
economies the world over. We develop outstanding leaders who team
to deliver on our promises to all of our stakeholders. In so doing,
we play a critical role in building a better working world for our
people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or
more, of the member firms of Ernst & Young Global Limited, each
of which is a separate legal entity. Ernst & Young Global
Limited, a UK company limited by guarantee, does not provide
services to clients. For more information about our organization,
please visit ey.com.
This news release has been issued by Ernst & Young LLP, an
EY member firm serving clients in the US.
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SOURCE EY