Number of Factors to Test Industry in 2009

The financial and housing crises, along with a prolonged soft market for insurance products, are converging to create a highly challenging environment for the U.S. insurance industry in 2009.

These factors will force insurance carriers to adopt new skills and business discipline in order to survive the economic turmoil, according to new research from TowerGroup that identifies key insurance trends for the coming year.

TowerGroup expects “four R’s” – risk, revenue, regulation, and retirement – to shape the insurance industry in 2009. Risk and regulation will be at the forefront as insurance carriers pump money and resources into initiatives designed to optimize risk management and meet new regulatory mandates. Increased costs and decreased revenues will lead to further industry consolidation and redistribution of assets. As a large number of experienced insurance workers reach retirement, the strain on insurers will increase as decades of knowledge walk out the door. However, in regard to the life and annuity insurance business, the retirement demographic of consumers presents a great opportunity to offer new products and services.

Highlights of the new research include:

• TowerGroup believes that data management and predictive analytics are no longer merely “nice-to-have” technology initiatives. Carriers that fail to recognize this fact will see significant deterioration in their results as well as plummeting loss of competitive position.
• Insurance carriers must implement effective risk governance initiatives that span both the organization and its distribution partner network, where integrating information is imperative.
• A drop in investors' and policyholders' confidence resulting from the current economic crisis will lead to increased instability in the industry and heightened merger and acquisition activity in 2009.
• Cost containment will be a top priority for insurers in 2009, but customer-facing initiatives to improve customer service and the ease of doing business will continue to enjoy funding and support.

The research report may be purchased online at the TowerGroup Store via credit card by using this link: http://store.towergroup.com/index.asp?PageAction=VIEWPROD&ProdID=525