Insurance Outlook: Recession forces many changes in insurance industry

The recession will have significant impact on the insurance industry around the globe over the next several years, resulting in mergers and acquisitions, restructuring, changing compensation and more, according to a recent report by the international financial services firm New York-based PricewaterhouseCoopers International Ltd.

“The financial crisis has already proved to be a watershed for the insurance industry in many parts of the world,” the report states. “What customers, investors, governments and regulators expect from insurers is changing rapidly and pervasively and the developments we see today are only the beginning. The environment will continue to evolve at a rapid pace over the next two to three years, ruling out and return to the relative stability and certainty that preceded the crisis.”

• Restructuring – As firms pull out of geographies and business lines that are not profitable, some carriers will be able to capture market share or expand lines of coverage.
• Purchase patterns – As customers become more comfortable buying products and services online, companies that are not reaching customers through social media and the Internet will become increasingly marginalized.
• Mergers and acquisitions – The fragmented global insurance industry is poised for resurgence in mergers and acquisitions activity, especially with the recent stabilization of the financial markets and rise in overall buyouts.
• Regulation – Oversight on the insurance industry is likely to rise because of federal bailout packages made to several large national insurers.
• Compensation – Some insurers will be forced to change their compensation policies because of increased oversight of financial services providers.
• Location – The likely increase in oversight and taxation of insurers will help influence decisions on where corporate headquarters are and where some providers choose to do business.