Insurers likely face a future that includes more regulations, more demanding consumers, more challenging investment markets, more catastrophe losses and much more data to be consumed, managed and analyzed, according to “Top Five Disrupters in the Next Five Years for Insurers,” a report from Novarica.

The top five potential disrupters to the P&C industry in the next five years, according to survey results, are: shifting market needs (42 percent), regulations (16 percent), big data and analytics (14 percent), catastrophes (11 percent) and the financial environment (9 percent), 9 percent of respondents choose “other.”

Life/annuity insurers largely had the same concerns: regulations (47 percent), financial environment (20 percent), shifting market needs (13 percent), big data and analytics (13 percent); 7 percent of respondents choose “other.”

Noting that insurers need a long-term vision that accounts for tomorrow’s issues, Novarica asked more than 80 insurer CIOs consider the biggest potential disrupters, as listed above, and asked what they are doing now to prepare.

Regulatory: Most concerns were focused on changes potentially resulting from the Affordable Care Act and the Consumer Financial Protection Bureau, followed by concerns over increasingly assertive state regulators, which could consider insurers as a potential revenue source in a stagnant economy. In response, many insurers are planning to increase the agility of their systems environment so products and practices can be aligned with any new requirements imposed by regulators.

Shifting market: Concerns include the potential growth of usage-based insurance, channel proliferation, and a lack of tolerance for complexity by consumers in either communications or product. Insurers are planning to respond with simplified products and underwriting processes; insurers also expect more direct-to-consumer sales. In response, many insurers are investing in channels and data/analytics capabilities, and rethinking processes from a customer experience point-of-view.

Big data and analytics: Most insurers’ IT infrastructures were not designed to deal with massive amounts of structured and unstructured data. Many insurers are planning to use big data to process information better to gain competitive advantage, rather than attempting to collect better data. Only a few insurers currently have active projects, though many are in the evaluation and planning phase.

Financial environment: Persistently low interest rates have dampened investment returns and tax code issues could potentially disrupt the value of tax-advantaged life/annuities products. In response, insurers are investing systems agility and refocusing on underwriting profitability through better analytics.

Catastrophe losses: Increased catastrophe losses and climate change are prompting a reevaluation of current models and investment to improve their understanding of exposures.

To address these potential challenges, Novarica said, insurer IT leaders are investing in data and analytics capabilities to better understand and pricing risk, and building agility into their systems and organizations. The 82 participants in the survey included 7 large and 8 midsize life/annuity insurers, as well as 13 large and 44 midsize P&C insurers. Novarica describes large insurers as those with more than $1 billion in annual premium.

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