2015 Property and Casualty Insurance Industry Outlook
Focusing on the big picture
In many ways, property and casualty insurers are better positioned for sustained growth than in quite some time. As the US economic recovery gains momentum, there will be a surge of insurable exposures in both personal and commercial lines. Yet plenty of challenges remain to keep industry executives on their toes. This year’s Outlook discusses bigger picture issues likely to have a significant effect on consumer behavior and insurer operations in 2015 and beyond.
2015 and beyond
Rather than focus on the short-term ups and downs of their own particular markets and the economy as a whole, property and casualty (P&C) insurers need to deal with more systemic challenges to lead the industry. In this outlook, we highlight four pillars for long-term success that should rank high on insurer strategic agendas.
See below for a brief overview of these pillars and an infographic outlining key priorities for insurers. For the full view into our outlook for 2015, download the report.
This Outlook is part of Deloitte’s Financial Services Industry Outlooks series, which provides insights and trends for insurance, banking, investment management, and commercial real estate.
Four priorities for property and casualty carriers
Achieving information fluency
Many insurers are not positioned to capitalize on the vast amount of data they already have, let alone from new sources such as auto telematics and the Internet of Things. Carriers may want to consider:
- Breaking free of outdated, siloed data systems
- Establishing a more flexible data management infrastructure and governance architecture
- Upgrading their cyber security systems to take into account all the new ways data is collected, handled, and stored
Overcoming regulatory challenges
Insurers can rely on regulatory uncertainty as an ongoing way of life rather than a passing conundrum as multiple overseers—state, federal, and international—sort out new standards and rules. P&C insurers will want to look out for:
- The first Own Risk and Solvency Assessment filing
- The potential for new group capital requirements
- The FIO’s examination of the availability and pricing of auto insurance in poorer areas
Upgrading capital management
P&C insurers will need better frameworks and models to meet the increasing demands of stakeholders for more robust stress testing and scenario planning, as well as to support growth needs. Carriers may want to think about:
- How to maintain ROE at a time when alternative investors are pouring funds into the business and helping establish record levels of capacity
- Reviewing the return potential and pricing of products in light of persistently low interest rates
- Establishing a more robust internal risk-adjusted capital framework that incorporates a multitude of approaches
Getting ahead of climate change
US insurers have generally been slow to follow the lead of their European counterparts in addressing how to mitigate factors likely to spur climate change and trigger more frequent and severe weather-related events. Carriers are primed to become more engaged on this issue for three reasons:
- Intensifying regulatory and rating agency scrutiny into how insurers are accounting for climate change issues
- It is better to prepare for the potential impact of climate change in case scientific warnings turn out to be well-founded
- There is growth potential for insurers that capitalize on a growing market for sustainability-related products and services