Insurers waiting for an economic rebound to buoy their growth prospects may be deluding themselves, a new report from New York-based Deloitte contends.

The report, “Insurance Industry Outlook: High Hurdles Loom in 2011 & Beyond,” says that no matter how well-managed or financially sound a given insurer might be, none are immune to the effects of a sluggish economy. “Business closures, millions of layoffs, the credit crunch, shrinking disposable income, the decline in new business launches and mounting home foreclosures over the past two years have made top- and bottom-line gains difficult for insurers to achieve,” the report states. “For the property/casualty sector, billions of dollars in insurable risks evaporated during the economic downturn that began in fall 2008, and the slow recovery continues to dampen pricing and premium volume growth today.”

Since it could take years for a full economic recovery to be achieved, the malaise is an even graver threat for life and annuity carriers, as a suppressed demand for their products is coupled with the threat of a prolonged period of low interest rates. “For some carriers, the longer interest rates remain at historic lows, the deeper the hole they may find themselves in when it comes to making good on return rates set in older policies,” the report states.

Yet, the economy is but one of a handful of fundamental factors impacting top- and bottom-line growth. One primary challenge is meeting the evolving needs of more price- and service-conscious consumers. “More buyers are routinely accessing the web on the go via their mobile devices, including when shopping for goods and services. It might not be long before individual consumers routinely check their insurance options in this fashion as well.”

Accordingly, insurers will have to figure out how to integrate their traditional operations and their agent network with the virtual world, the report states.

 nother source of external pressure on the industry will come from regulators. The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated creation of the Federal Insurance Office (FIO) to gather information and provide analysis for the executive branch and Congress, and to act as a unified voice in global insurance negotiations. “While Dodd-Frank did not grant much overt regulatory authority on paper to the new agency, it could very well end up having a significant effect on insurer operations and costs,” the report states. “For example, FIO has the authority to demand data from the industry to produce a series of studies mandated under the law.”

With all of these factors making organic growth and profitability problematic, carriers that merely circle the wagons and try to ride the storm rather than invest in technologies that help them address these challenges will be at a disadvantage, the report concludes. “Technology appears destined to play a far more prominent role within the insurance industry, beyond data management. Indeed, the effective implementation of a number of technology tools and strategies might be the differentiator many carriers need to stay ahead of their competitors.”

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Corrected March 7, 2011 at 11:51AM: yes