Property/casualty insurers may face challenging market in 2015

- Slower premium growth and increasing competition create an uncertain operating environment

- Regulatory demands may increase human resource and financial capital costs

- Technology investments can help improve top-line growth

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Dec 10, 2014, 10:00 ET

NEW YORK, Dec. 10, 2014 /PRNewswire/ -- U.S. property/casualty insurers must proactively address competitive pressures, increased risk and regulatory burdens to continue growth in a market that shows signs of both opportunity and challenge, according to the 2015 EY US property/casualty insurance outlook.

"Companies that can successfully plan and operate in a fast-changing environment will differentiate themselves from those that respond reactively," said David Hollander, Principal, Ernst & Young LLP, and EY Global Insurance Advisory leader. "Investing in technology solutions and focusing on new markets, products and approaches to existing customers will help insurers manage these external challenges."

EY believes U.S. property/casualty insurance companies should focus on the following six key areas in 2015 to remain industry leaders:

Respond to increasing competition with strategic cost management and focused pricing. Insurers are entering an uncertain operating environment marked by slower premium growth and increasing competition. Companies must focus on cost, efficiency and more refined segmentation and pricing strategies to maintain good profit margin. For the past three years, insurers have been able to maintain stable expense ratios due in large part to premium growth. However, if rates ease in 2015, premium growth may not be able to keep up with expense growth.
Engineer an enterprise data excellence strategy. Property/casualty insurers in 2015 must embrace an enterprise data excellence strategy that addresses all aspects of their operating model. Data collection and analysis are necessary decision-making tools, particularly as more insurers compete based on their level of data superiority or develop new business models utilizing these technological capabilities.
Improve customer connectivity by expanding distribution and customer service. Reaching the customer in a variety of formats is becoming a competitive necessity, given the expansion of choices available to consumers from other industries today. Adding channels and offering alternative communication modes improves client access, enhancing competition for the most profitable customers.
Retool operations for new and evolving risks. As insurers pursue top-line revenue growth in new products, the effective identification, analysis and mitigation of new and emerging risks is increasingly important. Throughout the global economy, new business models are replacing traditional services, while altering customary risk patterns. New risks such as the "Internet of things," or the networked connectivity of products, and cyber-crime offer growth opportunities for insurers.
Proactively address multiple regulatory requirements and potential tax considerations. The growing volume and complexity of insurance rules and various regulatory agencies compel insurers to invest in more flexible technology, data analytics and skilled management. While more stringent regulations may impede growth, increase expenses and divert valuable human resources, the impact will be less for insurers that select appropriate technology and data solutions to address their broader risk management and reporting demands.
Address investment performance and capital management. Given an abundance of capital, most insurers are re-evaluating their investment allocations to enhance performance and improve diversification. Global political and economic volatility and uncertainty are expected to continue to influence the capital markets in 2015, requiring insurers to take a more proactive approach toward overseeing their investment and capital management strategies.

The complete 2015 EY US property/casualty insurance outlook may be found at ey.com/insurance.

Notes to Editors

About EY's Global Insurance Center

Insurers must increasingly address more complex and converging regulatory issues that challenge their risk management approaches, operations and financial reporting practices. EY's Global Insurance Center brings together a worldwide team of professionals to help you succeed — a team with deep technical experience providing assurance, tax, transaction and advisory services. The center works to anticipate market trends, identify the implications and develop points of view on relevant sector issues. Ultimately, it enables us to help you meet your goals and compete more effectively.

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

This news release has been issued by Ernst & Young LLP, an EY member firm serving clients in the US.

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SOURCE EY