2013 Outlook on Insurance Interview with Rebecca C. Amoroso

With continued economic uncertainty, new regulations and evolving consumer expectations to contend with, it seems the only constant is indeed change for the insurance industry. Rebecca C. Amoroso, vice chairman and U.S. Insurance leader, Deloitte LLP, provides her perspective on how insurers can proactively take on the year ahead.  

What are some of the major issues facing the insurance sector in 2013?

Both life and annuity (L&A) and property-casualty (P&C) insurers face a series of interdependent challenges in the coming year.

Some of these issues are financial, relating to how insurers can keep boosting their top and bottom lines — whether that means considering alternative investment options in response to low interest rates, or taking advantage of merger or acquisition opportunities to access new markets and achieve economies of scale.

Some are related to marketing, in terms of how carriers might more effectively reach and serve clients, such as capitalizing on the fastest-growing segments in a slowly recovering economy, or making innovation part of their DNA when it comes to product development.

A number involve management conundrums, including how to better leverage technology, or turn enterprise risk management from a compliance requirement into a game-changing differentiator.

Meanwhile, regulatory issues inevitably come to the forefront, challenging carriers to adapt to the changing rules of the game, both here in the United States as well as globally.

And yet the 2013 insurance outlook is a bit of a tale of two industries. The state and direction of the economy is a major factor for insurers of all stripes. But exposure growth is gaining momentum in the P&C sector, with private employment slowly but steadily increasing, auto sales on the rise, the housing market poised for a rebound and much needed pricing increases being achieved. Indeed, the P&C outlook is relatively bullish.

This same economy, however, presents more challenges for life and annuity writers, given stubbornly high unemployment, persistently low interest rates and the competition for a limited pool of discretionary income among cautious prospects.

But while it’s relatively easy to identify the challenges facing insurance companies, it’s a lot harder to determine how an individual player should respond. Each course of action has its own risks and rewards, but perhaps the one certainty is that doing nothing to change how an insurer operates is usually not a viable option over the long term.

What are some steps insurance companies can take to manage through the current climate of economic uncertainty?

Regardless of the state of the economy, carriers can expand their business and improve their profitability by staying focused not just on the immediate obstacles they may come across in terms of the business or regulatory climate, but also by continually reinventing themselves so they are positioned to thrive over the long haul.

Many insurers have already made such a proactive approach part of their standard operating procedure. They continually reexamine how they do business, realizing that achieving innovation across the enterprise is part of an ongoing journey — not a final destination.

They regularly reassess their product development and target marketing strategies. They also periodically reevaluate their distribution options, both to fine-tune the productivity of their existing sales force, as well as explore the possibility of adding new channels to reach prospects with different needs and preferences.

The same message applies internally as well. Leading insurers realize that despite the increasing importance of technology, insurance is still a people business and should continuously adapt to the needs of an increasingly diverse and ever-evolving workforce.

Where do insurers go from here to achieve growth?

While they may come in different forms, there are opportunities to achieve growth in both the L&A and P&C industries. For P&C this could come in the form of mergers and acquisitions, expansion into new markets as well as the addition of alternative distribution channels. Additionally, in an increasingly commoditized market, P&C Insurers looking to pursue organic growth should start thinking more broadly about how to remain relevant to consumers — with the true winners recognizing the coming tidal wave of changing customer expectations and needs.

For L&A carriers health care reform and the retirement income market may provide opportunities. With millions of consumers prompted to buy health insurance or pay a penalty next year under a new federal mandate, there might be an opportunity to cross-sell life insurance and annuity products via the same channels. Life insurers can take advantage of the new opportunities by focusing their core marketing and underwriting strengths on these growth segments. Another option for L&A players is to explore partnering with health insurers to offer their life, disability and accident products.

Interestingly, only about one-third of those responding to a recent Deloitte survey seek professional advice when planning their retirement, which is a prime reason why 60 percent do not have a formal plan to save and provide income for their post-working lives. Therefore L&A carriers should rethink their approach to gain more trust and generate growth in the retirement savings market.

Indeed, to achieve sustained growth in 2013 and beyond, insurers will need to keep reinventing themselves.