New York — The leading overall issue facing the global insurance industry is competitive pricing and adequate profitability, according to a survey of the participants at the annual seminar of the
For the last several years, IIS has surveyed its annual seminar participants to determine key concerns of participating insurance executives, this year coming 39% from Asia Pacific, 26% from United States/Canada, 22% from Europe, 8% from Latin America, 3% from the Middle East, and 1% from Africa and others. Respondents were mostly from broadly based companies with 42% from companies in "most lines," along with 26% life specialists and 20% non-life specialists.
The survey was conducted by
When asked, "What is the top issue facing the insurance industry?" 44% of respondents selected "competitive price/adequate profitability," as they had in 2006 (43%), with "new market opportunities" the top vote getter in 2007 coming in third at 16%. "Organic growth" came in second at 18%. In 2005 the top issue was the role of regulation, and in 2004 it was "taking advantage of new market opportunities."
"The industry returned to performance concerns this year," says Patrick Kenny, IIS president and CEO. "But, growth, organic and in new markets, continues to be of keen interest."
As in 2006 and 2007, the leading threat to the industry was unmeasurable risks at 33% (41% in 2007, 53% in 2006). Competition from outside the industry was second at 22%. Inadequate human capital was third at 16% (second in 2007 at 27%, and in 2006 at 23%). In 2005, the focus was even more on human capital issues (46%).
The issue of greatest concern to non-life companies was profitability (38%), followed by growth and new market opportunities (29%) and risk management/enterprise risk management (21%). 2007 results ranked risk management/enterprise risk management first at 33%, followed by profitability (25%) and meeting customer demand/products/distribution (21%). Concerns are now more focused on performance with growth and risk management close behind.
For life insurers, the leading concern also was profitability (33%) as it was in 2006, followed by distribution efficiency (22%) which was first in 2007, and then investments to meet benefit demands (19%) also third in 2007. The search for efficient distribution methods continues to focus much of the life companies' attention, but this year only after profitability.
Among growth concerns, new market opportunities came first (29%), then organic growth (25%), as both did in 2007, with competitive products/pricing coming in third (17%). Development of emerging foreign markets, particularly in Asia, Eastern Europe and Latin America, along with new product and customer market segments in developed insurance markets continue to draw attention, with the rapid growth in India and China of particular interest.
Of financial issues, competitive price/adequate profitability led the way with 26%, followed by managing risk/enterprise risk management (ERM) at 21%, reversing the 2007 order, with asset/liability management also at 21% and capital management/allocation at 20%. Solvency II and related solvency and accounting reforms are stimulating reconsideration of performance measures and requirements for achieving profitability in this new world through competition and pricing.
Operational issues were led by productivity/efficiency/expense controls (36%), distribution effectiveness (17%) and organizational talent/retention and training (16%). Recent focus on talent has given way to effective use of talent in efficient organizations.
For risk management, the key concerns were applying risk analysis in business decisions (34%), understanding/anticipating risks (26%) and building a strong risk culture (22%). As ERM programs mature, the focus is moving to turning compliance efforts to concerns for competitive advantage.
Source: International Insurance Society Inc.
