Top Insurance Industry Issues in 2012

March 2012
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Top Insurance Industry Issues in 2012

At a glance

Top Insurance Industry Issues in 2012 addresses key issues for insurance companies including SSAP 101, regulatory compliance, Dodd-Frank, international expansion, risk and capital management, the low interest rate environment, policy administration, the impact of FATCA, and more.

Top Insurance Industry Issues in 2012 describes in detail the challenges insurers are facing and the strategies they can use to cope with change, manage risk, enhance their operations, and grow.
  • In 2011, life insurers started to feel meaningful effects from the low interest rate environment, including declining sales, revenue, profitability, and company valuations. If interest rates continue to stay low - and it appears likely that they will for at least another two years - then life insurers’ financial pain will be broader and deeper.
  • Two key themes have dominated regulatory discussions in the past year: Supervisory focus on risk and capital management, and concerted efforts to move towards a consistent approach to cross-territory supervision of insurance groups. These initiatives underscore the importance of embedding strong risk management principles throughout an enterprise and moving beyond just "tick the box" compliance.
  • In a volatile market, analysts' lack of confidence in prevailing disclosure standards can only heighten investor uncertainty. This makes it even more important for insurers to provide stakeholders clear and informative financial information.
  • Expansion remains a challenge for many insurers. The M&A environment has been muted in recent years, and growth beyond stagnant developed markets into more dynamic emerging ones presents both opportunity and risk. A key consideration for all companies is that one size does not fit all when determining M&A strategy and/or how to expand into new geographic markets.
  • Technology, including mobile devices and sensors, offers insurers great promise for developing a competitive edge, but only if they can effectively analyze the huge amount of data that is now available. If they can meet this challenge, then they will be able to reduce costs, improve efficiencies, and enhance their ongoing attempts to move from product-focused to customer oriented operating models.
  • Current claims, policy administration and billings systems replacements have reached their practical limits, and modern and flexible platforms have become "table stakes" for any successful carrier. Quite simply, the cost of establishing a common view through superior IT execution and pricing segmentation could prove to be the cost of staying in business.
  • Regulatory compliance continues to be a major concern for insurers, and the industry is anticipating potential impacts of Dodd-Frank legislation, including on the systemically important financial institution (SIFI) designation and the Federal Insurance Office's (FIO) pending report to Congress on the state of US insurance regulation. Moreover, the issue of unclaimed property has become a concern for insurers as public officials are now focusing much more on the issue than they did in the past.
  • There have been major tax compliance developments in the past several months that strongly affect insurers, notably SSAP 101 and FATCA. The latter has the potential to have an especially big impact on compliance functions both in the US and globally.

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