U.S. property/casualty insurers should expect disruptive changes in a number of areas in 2016,
including technology, pricing, customer demand, and “heightened regulatory creep,” consultant
Ernst & Young said in a new report.
“Insurers that stay ahead of these shifts should reap substantial benefits, while laggards risk
falling behind or even out of the race,” according to the EY industry outlook.
EY said insurers should plan for the looming transformational changes.
“Refining legacy products and approaches is not enough,” the report concludes. “What is
required is a fresh outside-in approach that starts with the customer and carriers through to digital
trends and market shifts, both inside and outside the industry.”
EY ranks the major outside elements that it sees affecting the market in 2016, with 10
representing the highest impact, and 0, the least:
• Technology. EY rates this one a 10 in terms of impact over the coming months. That’s because
digital technology, including social media, telematics, and analytics are likely game changes, with
expectations it will affect business areas including marketing and distribution, to customer service
and pricing models.
• Pricing. This trend gets a 9 ranking. As EY explains, insurers will need to rethink pricing
models in an age of pay-as-you-go market appeal and greater use of customer-focused analytics.
• Customer expectations. This earns an 8 ranking in terms of impact, due to technological
changes in other industries that rely on web-based customer service. EY said that this will be big,
in large part due to customers comparison shopping on the web as they seek more personalized
experiences from insurers.
Economy and interest rates. With a 6 ranking, the expectation is for a more moderate impact
versus the previous three factors, but it is still a big deal. EY noted that there is a prediction of
modest economic growth in the months ahead, a trend that could be adversely affected by global
volatility and the resulting uncertainty. As well, low U.S. interest rates are still a factor, pressuring
• Regulations. With a 5 ranking, the impact of government regulations is likely to have a solid
impact. EY said that “heightened regulatory creep” is generating a bigger concern. EY warns that
insurers will need to assess how changing regulations might impact them, and plan for a greater
impact in 2017 after the U.S. elections.
• One final element: catastrophes. EY gave this one a 2 ranking, noting that moderate
catastrophe activity continues to keep downward pressure on pricing. One variable: a very large and
unexpected event, or a series of events, could change the market.
“After years of relative calm, a big loss event could be more likely,” EY wrote.