In their 2014 property/casualty outlook report, the Deloitte Center for Financial Services thinks that Property & Casualty (P&C) Insurers should take a look at changing how they do business and how to utilize better technology if they have any plans of long-term growth.According to Deloitte’s report, it is also believed that they will have regulatory uncertainty to deal with.
As time progresses in the coming year, the report says that insurance companies will start using technology such as apps on smart phones and aggregated data bureaus while the smaller insurance companies will use telematics.
Gary Shaw, the national sector leader of Deloitte’s insurance group and the vice chairman of Deloitte LLP, said, “Rather than wait for a rising economic tide to provide a lift, insurers should consider transforming the ways they do business to compete more effectively. Regardless of the emerging favorable market conditions, insurers face a full host of challenges. We anticipate a growing number of organizations will re-evaluate their business models to more effectively compete in today’s marketplace.”
As 2014 begins, a lot of P&C insurers can “breathe a sigh of relief” as they look back on 2013. The economy continued to slowly grow and the number of losses over the year were not as bad as in previous years. In the report it also says, “Yet insurers face significant challenges to adapt to evolving consumer demands, incorporate new data sources and cope with an uncertain regulatory environment.”
Deloitte says that the 3 biggest trends insurers need to think about using are:
1. Technology
In 2014, the report says that making upgrades to technology will be a priority. Before today, many businesses just made adjustments that would be short-term but now “should be considering how a bolder investment in more transformational upgrades might better position their companies to remain competitive not just in 2014, but for the remainder of the decade.”
To be specific, implementing digital strategies that will better engage more policyholders and make the customer’s experience better has become a necessity in a society filled with smart phone users. In the report, it states that the playing field for smaller insurance companies will be leveled with the use of apps on smart phones and aggregated data bureaus while the larger companies will need to raise their game and differentiate themselves from other insurers. In addition, the process of making a sale may be enhanced by a company’s ability to use mobile technology to better educate consumers about their product(s). At the same time, many insurance companies may improve upon their ‘straight-through underwriting’ and their ability to price a quote/policy to allow them to offer insurance coverage directly to consumers or make sure their market share is protected against those that do.
In regards to this, Shaw said, “There are usually tactical steps insurers could take to make a short-term course correction, and tweaks can often be implemented to adjust systems and processes. But to capitalize on emerging opportunities instead of being undermined by the disruptive changes likely to alter the competitive landscape, top insurance executives should be more predisposed towards bigger-picture innovations.”
2. Regulatory uncertainty
This uncertainty may continue throughout all of 2014. Some important decisions that still need to be made are looming over people’s heads and the Federal Insurance Office (FIO) put out a report a short time ago about ways to modernize how the insurance industry is overseen. Howard Mills, the chief advisor of Deloitte’s insurance group, sees the report by the FIO as possibly challenging some aspects of state regulation, but “it is not likely an immediate threat to state supremacy overall.”
Mills also said, “Most of FIO’s recommendations require Congressional action, which is not expected anytime soon, or are a call to the states to make changes, which FIO cannot now compel. The bottom line is that there is likely to be little immediate impact but rather continued uncertainty over a slowly evolving regulatory landscape shaped by how the states and federal government interact.”
3. Core transformations
Deloitte anticipates that, instead of making slight modifications to their internal processes to give them a temporary increase in productivity, many insurance companies will make larger changes to improve upon their current operating models as well as make modifications to their data on pricing, customers and underwriting to try to achieve a long-term advantage over their competitors.
Insurance is something that people and businesses wish they didn’t need, although it can come in handy when the need arises. But, if insurance companies can bring about changes that will bring them into the modern world with things like downloadable apps for their smart phones, acquiring and dealing with insurance might become easier. Hopefully, the changes will also bring with them a higher level of competition between insurance companies to help lower premiums for current and future policyholders
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