Industry Looking At Likely Megatrends
June 28, 2013 by Cyril Tuohy
Tighter regulation and tougher capital requirements, economic volatility and longevity risk due to big demographic changes are the trends insurance executives say are most likely to affect their companies in the next five years, according to a new survey.
A total of 47 percent of respondents said that new laws and capital management would have the most impact on their companies, according to the survey published by Towers Watson.
Another 44 percent said economic volatility and shareholder pressure would have the most impact, the survey found. In addition, 40 percent said longevity risk due to demographic changes would have the most impact.
While the findings are not entirely new, the fact that the industry has “been there, done that” is no longer the issue, according to Patricia Guinn, managing director of Towers Watson’s Risk and Financial Services segment and author of the 2013 Insurance Megatrends Survey.
“Perhaps most significantly, the industry has to consider whether ‘been there, done that’ is adequate preparation for megatrends that, quite literally, are unlike any we’ve seen before,” Guinn wrote in the report’s conclusion.
Results indicate few insurance executives feel adequately prepared. Only 11 percent of respondents said they were “poised to leverage” into a competitive advantage trends in shifting demographics and longevity risk, for instance.
In addition, only 10 percent said they were prepared to take advantage of new regulatory, legislative and capital constraints. A total of 16 percent said they were prepared to capitalize on the bigger role of advanced technology and big data.
The findings raise questions about whether insurers are paying too little attention “to the competitive advantage – or disadvantage – that will flow from new megatrends,” Guinn noted.
“Life insurers, for example, often possess only a fraction of the consumer data that are routinely held by banks, not to mention Facebook and other new media platforms,” Guinn wrote.
Data-rich companies know more than life insurers do about a consumer’s lifestyle and buying habits, simply on the basis of those companies’ ability to mine that data and anticipate future needs. Life insurers, by contrast, have limited points of contact: the purchase of policy, collection of premium and payout.
The survey of 553 insurance executives and managers was conducted online from March 19 to April 19 with an equal representation of executives working at life and property-casualty carriers.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at Cyril.Tuohy@innfeedback.com.
