Ernst & Young offers its advice to insurers that want to succeed in the year ahead.
Execute flexible approaches to manage uncertain conditions. To implement fluid strategies in an environment of multiple uncertainties, an insurer’s operational capabilities, infrastructure and corporate culture must support flexible, rapid and well-governed decision-making, thereby assuring agile performance with accountability. Diligent monitoring of changes in loss exposures and loss development drivers will guide flexible adjustments to risk management and risk pricing.
Anticipate, understand and address the impact of prospective regulations. Insurers must assess the impact of new regulations and accounting changes prior to implementation. They should consider enhancing the sophistication, articulation and deployment of their risk management standards and related systems, as compared to their current regulatory and reporting environments. E&Y states that those insurers who fail to understand the full impact of regulations and new accounting standards may lose competitive advantage.
Comprehend and act upon changing insurance buying behaviors. Gaining a clear understanding of the customer will improve the chances of marketing success, notes E&Y. The buying behaviors and risk profiles of tomorrow’s customers will likely bear little resemblance to those today. Identifying, assessing and capitalizing on the characteristics of tomorrow’s customers underscores the need to tailor products, services and distribution channels to their specialized needs, notes the report.
Increase investments in core systems to bolster growth and profitability. Insurers face mounting pressures to modernize core insurance systems such as claims, policy administration, underwriting and billing. Competitors have set the stage for this need for improvement, along with heightened customer expectations and, above all, increasing costs to maintain and upgrade systems. “Faced with limited investment alternatives yielding an attractive return, insurers are investing in themselves to position their operations for growth and improved profitability,” notes the firm.
Apply business analytics to address difficult top-line growth conditions. E&Y states that an uncertain economic environment will force insurers to apply business analytics across the value chain can glean deeper information on customer markets, underwriting segment profitability and claims management. Insights gained from analytics can then guide both strategy development and improved decision making, notes the firm.