Pricing and regulatory pressures have been the most significant growth barriers for insurers, according to the "2012 KPMG Insurance Industry Outlook Survey," which saw 47 percent of U.S.-based insurance executives citing each of those challenges.
The past few years have been tough on the industry, said Laura J. Hay, national sector leader, insurance, at KPMG in New York. "There's no doubt that the message of risk and performance management needs to be stronger going forward and, in our view, the companies that get that equation right will be the leaders in the future in the next generation."
As for the survey, she said, "the big headline for us was just how much money is being put into operational efficiencies and maximizing value. We saw a big spike at 64 percent of the respondents planning to increase IT spending," which was up from 49 percent in 2011.
The IT plans include upgrading IT infrastructure (57 percent), customer growth or service (37 percent) and data warehouses (30 percent), according to the survey, which polled 102 insurance executives from large, U.S.-based companies.
Mark Breading, a partner at Strategy Meets Action, an insurance-focused strategic advisory firm with headquarters in Boston, said his firm's research also finds increased IT spending -- with about two-thirds of insurers increasing their IT budgets.
In particular, he said, insurers are increasingly using data and analytics to help identify key initiatives around distribution, product development and pricing, claims handling, customer service, etc.
"What we see happening now is, rather than data and analytics being risk-centric, now they are really spreading across the business," Breading said. "Every part of the business is seeing they need more insights, they need more information about what is happening in the business and, by the way, they need it more real-time."
The average insurer spends about 9 percent of its IT budget on data and analytics, according to a recent report authored by Breading, "Data and Analytics in Insurance: The Dawn of a New Era," which queried 165 insurance company professionals. The study also revealed that a significant amount of money is spent directly by business units on data and analytics in addition to the IT budget spending.
In addition to IT concerns, the KPMG survey found that one in five executives said they were navigating significant changes in the regulatory environment -- up 12 percent from the previous year.
In the past, Hay said, insurers mostly focused on state regulations, but recently, the potential impact of federal regulations is "taking center stage with many companies." Insurers are also looking at the impact of forthcoming global regulations.
--By Anne Freedman
September 15, 2012
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