If 2011 was the year of retrenchment, then 2012 is the year of the customer, finds PwC's "Top Issues: The Insurance Industry in 2012." Leading insurers are keenly focusing on improving the customer experience to differentiate themselves from competitors and expand their global market share.
The report also covers other key areas of focus, including international regulatory developments in risk and capital management.
Technology: Innovation is happening in all aspects of information, from capturing and interpreting to integrating and sharing. Innovation is enabling insurers to make better and smarter use of greater amounts of data, called "big data." While personal lines carriers are further along in their use of technology, today all insurance sectors have an opportunity to use big data and smart analytics, many for increasingly large and complex risks.
In these instances, big data will be used not only to automate, but also to enhance underwriting processes, reduce cycle time, facilitate better pricing, improve loss control and better inform decision making related to customer acquisition and retention.
"One of the largest challenges insurers will face in 2012 and beyond is capturing and interpreting data from a growing number of structured and unstructured sources, including but not limited to social media, policyholder behaviour and telematics," says Jamie Yoder, PwC's US insurance advisory practice co-leader. "Insurers that apply advanced analytical techniques to harness the power of big data will be better able to understand their customers, tailor products to meet their needs, and enhance the overall customer experience."
Emerging Markets: Insurers are increasing their focus on emerging markets as an important part of their growth strategies. Growing populations and expanding middle classes have increased the demand for insurance in these markets. Insurers that are already in emerging markets are examining their footprints to ensure they are getting optimum growth and value from their investment.
According to Marie Carr, PwC US insurance advisory principal, "The rise of emerging markets is forcing insurers to re-think their current business models and go-to market strategies in these regions and countries. What works in one place may not work in another, and successful insurers are developing innovative products that meet specific customer needs in specific geographic markets."
Regulatory Issues: Insurers are making internal investments to meet regulatory demands and better manage risk. Many insurers expect to change the way they manage risk over the next year, as well as modify their capital structures.
More specifically, in preparation for the US ORSA requirement, insurers are developing a more formal assessment of their ERM framework and risk management practices. Those with robust frameworks may find complying with the requirements less burdensome than those with less developed frameworks and infrastructures. As standards across the industry develop, even more advanced organisations may need to make further investments to maintain a market-leading position, as well as fulfill increasing regulatory scrutiny of risk management.
Joe Calandro, PwC US insurance advisory managing director said, "In preparing for NAIC ORSA and Europe's Solvency II regulation, insurers are starting to integrate strategic and risk management analyses for planning and decision-making purposes. This benefits customers and other stakeholders because it could help insurance companies manage their capital more efficiently, especially with respect to potential unexpected changes in the marketplace."
Download the report at http://pwc.to/TopInsIssues
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