2012 Insurance Outlook Survey

Insurance Industry OutlookSurvey:
Executives Focus on Efficiency, IT, and Talent amid Slow Growth and Regulatory Challenges
kpmg.com
KPMGs Industry Outlook Survey

KPMG LLP (KPMG), the audit, tax, and advisory firm, surveyed C-suite and other top-level executives in the insurance industry during the second quarter of 2012. Participants were asked about business conditions in their sector, the most significant revenue growth opportunities, and any barriers to growth that may exist. They were also asked a variety of questions about the economy, including factors they perceive might impede or support their sectors recovery, and to assess the impact advancing technologies may have on their business model. These responses were compared to the findings of a similar survey conducted among industry executives in the second quarter of 2011.
2012 KPMG LLP , a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 26321NSS
Foreword 2 Key Findings Moving Forward in a Slow Market In Pursuit of Growth and Opportunity Capital Spending and Investing Risk and Regulatory Challenges Data Analytics and Digital Marketing Channels Hope for Recovery Remains on the Horizon 4 6 9 10 12 15 17
Revenue 17 Headcount 18 Conclusion 20 KPMG: A Leader in Serving the Insurance Industry 21
Contents
2 | 2012 Insurance Industry Outlook Survey
Foreword
2012 Insurance Industry Outlook Survey | 3
As the insurance industry continues to regain its footing while confronting new and pending capital, regulatory, and compliance requirements, KPMG has again reached out to dozens of senior insurance executives in the United States to gather information about current industry conditions and perspectives on future challenges. What follows on these pages is a report that creates a picture of an evolving industry one that is challenging its business model, seeking new ideas for growth, and one that is wrestling with how to leverage tradition and new approaches. Our intention in publishing this survey report is to both share information from industry insiders and to spark conversation and debate about the key issues that are shaping the contours of the industry landscape. On behalf of KPMG, I would like to thank those who participated in this survey. I hope the findings are useful to you in addressing market challenges and opportunities. I also welcome the chance to discuss this study and its implications for your business in the year ahead.
Laura J. Hay National Sector Leader, Insurance KPMG LLP
Key Findings
Against a backdrop of complex and still-unclear regulatory demands that have emerged from the crisis in the financial service industry, insurance executives who participated in the 2012 KPMG Insurance Industry Outlook Survey say operational process improvements and technology enhancements aimed at strengthening consumer connectivity and productivity are at the top of their agenda going forward.
The executives find themselves operating in an environment of not only slow growth and pricing pressure, but also one where low interest rates are forcing a reexamination of the traditional business model and directly affecting their bottom line. This report is drawn from the responses of 102 insurance executives from large, U.S.-based companies. The majority of respondents (41percent) represent companies with annual revenue between $1 billion and $10 billion, while 31percent are from companies with annual revenue between $100million and $1 billion, and 27percent with revenue of more than $10 billion. Fifty-fourpercent of these companies are publicly held and 46percent are privately held. Following is a summary of a number of the key findings on this years survey: Pricing and regulatory and legislative pressures were rated equally (47percent) as the most significant growth barriers for insurers in the immediate future. When asked about top initiatives, 21percent of executives cited the improvement of operational processes and related
technology, and 20percent said navigating significant changes in the regulatory environment. In particular, this marks a jump in management focus on regulation, up from 12percent last year. In their efforts to increase operational efficiencies and maximize value, 64percent of respondents plan to increase spending on IT, up from 49percent in 2011. In particular, most respondents foresee their IT investment dollars going toward improving IT infrastructure, followed by customer growth or service initiatives, and data warehouses. M&A activity in the insurance industry is expected to continue over the next year. More than half (59percent) of sector executives believe their company will be involved in a merger or acquisition, either as buyer or seller, over the next two years. Of that group, the majority (48percent) expect to be the buyers, which was 6percentage points fewer than the results reported in the 2011 industry survey. With insurers challenged to do more with fewer resources, having the right talent is more important than ever. As a result, many executives plan to increase their focus on key talent management areas, including performance management (40percent), succession planning (39percent), and development and training (35percent). In a related finding, 16percent of respondents said the lack of qualified work force was a barrier to growth triple the level from 2011(5percent). When asked about their expectations for the U.S. economy a year from now, 61percent of sector executives expect mostly modest improvements while 32percent believe it will essentially remain the same. However, 70percent believe a substantial economic recovery will not occur until 20142015 or later.
Moving Forward in a Slow Market
Challenging market conditions are encouraging insurers to place a greater emphasis on creating value within their organizations. With continued slow growth and pricing pressures in play, executives in this years survey are looking to increase efficiencies and invest in technology to improve operations and navigate the changing regulatory landscape. This includes upgrading IT infrastructure and realizing the value of data analytics in strategic decision making. Talent management will also play a key role as firms are charged to do more with fewer resources. Overall, firms are relying on their core strengths, and divesting assets and pursuing merger and acquisition strategies, to help fuel growth over the next year. Meanwhile, they have tempered expectations for the year ahead, expecting modest revenue gains and little-to-no change in hiring.
Initiatives garnering attention

When asked about the top initiatives on the minds of management over the next two years, 21percent of executives cite the need to significantly improve operational processes and related technology, followed by 20percent that list navigating significant changes in the regulatory environment. Top management initiatives over the next two years
30
Operating costs over the next year

Facing many market challenges, 65percent of executives foresee continued increases in operating costs over the next year. While market uncertainty remains, the potential for inflation can be viewed as a contributing factor to these anticipated changes in operating costs, as well as underwriting performance, excess capacity, and unusually high catastropherelated losses.
70 60
21%
20
20% 15% 13% 11%
50 40 30
9% 4% 4%
65%
10
20
3%
10 0
Key
0
Key Significant improvement of operation processes and related technology Navigating significant changes in the regulatory environment Significant investment in organic growth Merger/acquisition Significant changes in business model Significant cost reduction initiatives Significant changes to financial processes and related technology Strategic divestiture of current assets Improve enterprise risk management programs/processes
16%
19%
Increase
No change
Decrease
Increasing the focus on talent

With insurers challenged to do more with fewer resources, having the right talent is more important than ever. For many companies, it may be the prime differentiator in achieving success and gaining competitive advantage in the future. As a result, many executives plan to increase their focus on key talent management areas including performance management (40percent), succession planning (39percent), and development and training (35percent). Key areas of focus regarding talent management in thenext two years
50 40 30 20
14% 11% 40% 39% 35% 32% 25% 25% 22%
10 0
Key Performance management Development/training Rewards/compensation Engagement/communication Global talent management/ workforce planning Multiple responses allowed Multiple responses allowed Succession planning Retention Acquisition/recruiting Diversity
In Pursuit of Growth and Opportunity

The pursuit of growth is an ongoing challenge for insurers faced with evolving regulation and continued market uncertainty. Not surprisingly, a majority of survey respondents widely view pricing pressures (47percent) and regulatory and legislative pressures (47percent) as the most significant growth barriers facing their industry over the next year. Barriers to growth
50 40 30 20 10 0
Key Pricing pressures Risk management issues Lack of qualified workforce responses allowed Multiple responses Regulatory and legislative pressures Lack of customer demand Increased taxation 20% 20% 16% 11% 47% 47%
M&A drivers
Much of this activity will be largely driven by the ability to gain access to new markets, according to 56percent of respondents. Other top drivers cited by executives include regulatory changes (40percent) and product synergies (31percent). Important drivers of alliances, mergers, and acquisitions in 2013
60 50 40 30 20 10 0
Key Access to new markets Product synergies Improved use of capital Regulatory changes/pressures Access to new technology and products Access to new resources 40% 31% 56%
28%
25% 18% 11%
Strategic divestiture of current assets Multiple responses responses allowed
Driving revenue
According to 37percent of the executives surveyed, organic growth is still considered a primary driver of revenue growth, down slightly from 42percent in 2011. Respondents also see the introduction of new products (32percent), price increases (31percent), and business acquisitions as possessing significant potential to drive revenue. Biggest drivers of revenue growth: next 1 3 years 2012
40
37% 32% 31% 27% 24% 23% 23% 20% 14%
Growth through M&A

With M&A activity still a viable strategic factor in their continued efforts to drive growth, 59percent of insurance executives anticipate that their company will be in a merger or acquisition either as a buyer or seller over the next two years. Likelihood of M&A activity
40
30
32%
30
22%
26%
20
20
10
10
2%
9%
9%
0
Key
1 Organic growth
0
Key Very likely as a buyer Very likely as a seller No plans for M&A activity Somewhat likely as a buyer Somewhat likely as a seller Unsure/dont know
Introduction of new products Acquisition/joint venture Increased cross-line sales Expansion to new geographic markets
Price increases New distribution channels New opportunities resulting from regulatory changes Stricter underwriting guidelines responses allowed Multiple responses
Increased market share in current geographic area
Capital Spending and Investing

Most executives (70percent) indicate they have significant cash on the balance sheet and are readying to start spending. In fact, 36percent of that population acknowledges that investment already is significantly underway. Of those with cash on their balance sheets, technology, strategic acquisitions, and customer-centric initiatives are top priorities. Priority investments among those with significant cash available
40
36%
Ready to spend
Sixty-fourpercent of executives predict their companys capital spending will increase over the next year, up from 47percent in 2011. Technology is expected to get the lions share of spending, followed by other key areas such as new products and services, business acquisitions, and the regulatory/control environment. Areas for increased spending over the next year
70 60 50 40
41% 32% 25% 23% 22% 20% 13% 64%
30
27%
30
20
17%
20 10
10
6%
7%
7%
4%
6%
0
Key Information technology Acquisition of a business New products or services
1%
0
Key Technology Marketing/customer programs Increased dividends Strategic acquisitions Stock repurchase Resources
Regulation/control environment Business model transformation Employee compensation and training Expanding facilities
Advertising and marketing Geographic expansion Research and development Green/sustainability initiatives responses allowed allowed Multiple responses
In their quest to create value, insurers realize the critical role information technology will play in their success. When asked to define the highest priorities when spending IT investment dollars, 57percent of respondents cite improving IT infrastructure at the top of the list. Other high IT-related priorities include achieving customer growth or service and investing in data warehouses. Areas for technology investment 2012
60 50 40 30 20
12% 12% 37% 30% 21% 21% 21% 57%
10 0
Key IT infrastructure Data warehouses E-commerce Forecasting capabilities Accounting systems responses allowed Multiple responses Customer growth or service Administrative systems Risk modeling and analysis Cloud computing
9%
Risk and Regulatory Challenges

Evolving regulation and changing marketplace dynamics have emphasized the need for companies to implement a strong internal risk framework. Asked to identify any existing challenges preventing the adoption of a formal risk policy, 34percent of survey respondents cited culture and behavior as a key challenge, while 27percent believe that process integration and operational efficiency pose significant obstacles. Challenges preventing the adoption of a formal risk policy
40
34%
Asked to name the primary focus of their companys enterprise risk management program over the next year 21percent of insurance executives said it would be to support business decisions. Key focus of enterprise risk management program
30
21%
20
19%
18% 16% 14% 12%
10
27% 25% 19% 12% 19%
30
20
0
Key Supporting business decisions Assessment of risk exposures Improve risk management processes Improve the risk management structure Technology Risk culture and training
10
0
Key Culture and behavior Clearly defined roles and responsibilities Shared resources across the organization Multiple Multiple responses responsesallowed allowed Process integration/efficiency of operations Governance framework Dont know
Despite obvious challenges, 64percent of respondents believe their company is at least somewhat prepared to seize opportunities as a result of public policy and regulatory reform. Meanwhile, 25percent report being very prepared. Ability to seize opportunities from regulatory change
70 60 50 40 30 20 10 0
Key Somewhat prepared Not prepared Very prepared Dont know 8% 3% 25% 64%
Fifty-fivepercent of executives say increased federal oversight, if implemented, will be the regulatory change with the greatest impact on their businesses. Regulatory changes impacting business the most
60 50 40
33% 32% 55%
30 20 10 0
Key Increased federal oversight Consumer protections Accounting valuation and disclosure Group and cross-border supervision Multiple responses allowed
2
20%
19%
18%
7%
Convergence of insurance contract 2 standards Shifting capital requirements Solvency modernization initiatives
This survey was performed before June 2012, when certain statements were made by FASB relative to the insurance contracts standard.
Tax regulation
According to the executives surveyed, evolving tax regulation is expected to impact their business strategy, with 29percent believing it will result in less capital investment. Potential impact of tax regulation
40
35%
30
29%
20
18% 15% 13% 11%
10
0
Key Less capital investment Increased overseas expansion Increased domestic expansion Multiple responses responses allowed Increased M&A activity Changing business structure/impact to hiring Don't know
Data Analytics and Digital Marketing Channels

Data analytic capabilities are becoming more important in helping to support strategic decision making throughout the insurance industry. In fact, 32percent of executives believe their companies either have competent data analytic capabilities or are en route to achieving higher skills in this area. Data analytics maturity of your company
40
32%
However, challenges exist for companies trying to enhance their data analytic capabilities. Thirty-sevenpercent of executives say that cleansing and maintaining data integrity is the biggest obstacle toward implementation, while 28percent cite the complexity of analytic design. Challenges to implementing sophisticated data analytics
40
37%
30
28%
27%
25%
25% 19% 18%
20
26% 21% 19%
30
16% 13% 11%
10
20
10
2%
Key Cleansing and maintaining data integrity Complexity of analytic design to achieve end result Platform or technology needed to support analytics Integrating analytic results with changes to performance drivers Lack of skills or vision needed to reach analytic capability required Legal jurisdiction concerns over data use Multiple responses allowed Cost of implementation and ongoing support Senior management and business unit support Volume of data needed to support analytics Lack of available data to support analytics
0
Key Average utilization of analytics, Rapidly moving toward high average analytical literacy analytical literacy High data analytics literacy Dont know Some data analytics capabilities, but low analytical literacy in the workforce
Exploring digital marketing channels

Insurance executives plan to use digital, social, and mobile technologies in a variety of ways over the next 12 months. In fact, 45percent have plans to deploy customer-facing mobile applications, while 41percent will use social media for external brand promotion, and 39percent expect to use it for recruiting purposes over the next year. Digital marketing strategies planned for year ahead
50
45% 41%
40 30 20 10 0
Key
39% 36% 30% 26% 24% 21% 20% 19% 18%
16%
14% 9% 8% 8%
16%
Customer-facing mobile applications Social media for external brand promotion Social media for recruiting Social media for customer insight Mobile-specific customer-facing Web sites Social media for two-way customer engagement Social media for enterprise collaboration/knowledge sharing Creation and distribution of digital media marketing messages using 3video Enterprise mobile applications Creation and distribution of digital media internal messages using video Location-based marketing using mobile technology Mobile-specific enterprise Web sites (i.e., mobile intranets) Social media for customer crowd sourcing
4 Mobile-commerce technologies
Social media for enterprise crowd sourcing Social media for enterprise risk management Don't know Multiple responses allowed
3 4
Including company-specific external video channels Including NFC-enabled payments and mobile wallets
Hope for Recovery Remains on the Horizon

The U.S. economic recovery continues to be just beyond reach, according to the insurance executives who participated in this years survey. Seventypercent have pushed back their expectations for a complete U.S. economic recovery until 2014 or later.
100 1% 29% 38% 4%
Revenue
Similar to last years findings, survey respondents reported an increase in revenue. 53 percent say revenues were up this year, as compared to 50 percent in 2011.
100 11% 80 36% 60 36% 15%
80
40 60 27% 53% 20 50%
40 58% 20 43% 0 Key Better now 0 Key 2015 or later 2013 2011 2012 (Q2) 2014 2012 2011 (Q2) 2012 (Q2) Same now 2011 (Q2) Worse now
Looking forward, executives continue to view external factors as a much greater concern than internal factors. A large majority (70percent) admit to being more concerned about the economy, competition, and the impact of regulatory changes over their ability to compete or whether they have the right strategic direction internally (30percent). Nevertheless, more than half (61percent) say they believe the economy will experience mostly modest improvements over the next year, while 32percent predict it will stay the same.
100 7% 32% 6%
Asked to describe their revenue expectations a year from now, two-thirds (66percent) of executives predict that revenues will increase, while 27percent believe revenues will remain the same. Again, this mirrors the expectations of the prior year, when 70percent and 26percent, respectively, shared these views.
100 7% 27% 4% 26%
80
60
40 66% 20
70%
80
37%
0 Key 2012 (Q2) 2011 (Q2)
60
Increase in revenues About the same Decrease in revenues

40 61% 20 57%
0 Key Better next year 2012 (Q2) About the same 2011 (Q2) Worse next year
Headcount
Hiring results remained relatively flat over last year. While 35percent of respondents say they added personnel, the same amount (35percent) acknowledge a decrease in headcount. Headcount: Current compared to last year
100 35%
Moving forward, 45percent of executives say they expect to increase headcount over the next year. Headcount: Expected year ahead
100
3% 21%
80
80
60 30% 40
60
31%
40
35%
20
20 0
Key Increase Decrease
45%
0
Key Increase Decrease
2012 (Q2)
About the same
2012 (Q2)
About the same Unsure/dont know
Moreover, nearly one-quarter (23percent) predict their U.S. headcount will not return to prerecession levels until 2015 or later, and even more (27percent) believe that they will never return to those levels. Headcount: Return to prerecession levels
40
30
23% 24%
27%
20
15%
10
0%
7% 4%
0
Key Already at pre-recession level First half of 2013 End of 2014 Never Second half of 2012 End of 2013 End of 2015 or later
Conclusion
Mounting regulatory and legislative pressures combined with pricing volatility continue to create significant challenges and serve as sizable growth barriers for the insurance sector. As a result, insurance executives expect to focus much of their time and energy during the next two years on strategies that will improve their organizations operational processes, help navigate through regulatory changes, and enhance technological capabilities. To support their efforts, executives plan to invest more on technology to improve their IT infrastructure, enhance client products and services, and invest in data warehouses. Meanwhile, insurance executives anticipate modest revenue gains over the next year but remain guarded longer term, not seeing a complete economic recovery until 2014 or beyond.
The insurance sector continues to face a demanding market environment that requires companies to adjust and actively manage change that may impact sales and performance. Having the right professional services firmone with the industry depth, knowledge and insight to help clients address their most pressing issues and achieve their goalsis critical. KPMGs Insurance practice includes professionals with the knowledge, experience, and skills to help our clients address their most pressing challenges, sort through todays complex business problems, and achieve their goals. Working with our international network of member firms, we serve clients worldwide, developing insights into major business trends and helping to enhance future plans. Our long-term experience in insurance enables us to offer the company-specific guidance needed to help our clients become or remain market leaders.
KPMG: A Leader in Serving the Insurance Industry

Key Contacts For more information about this publication or about KPMGs Insurance practice, please contact the following: Laura J. Hay National Sector Leader, Insurance T: 212-872-3383 E: ljhay@kpmg.com Tom Daugherty National Insurance Client Leader, Audit T: 614-249-2336 E: tdaugherty@kpmg.com Ellen Hancock National Insurance Audit Leader T: 860-297-5581 E: ehancock@kpmg.com Craig Pichette National Insurance Tax Leader T: 312-665-5267 E: cpichette@kpmg.com Sue Townsen National Advisory Leader, Insurance T: 212-872-2178 E: stownsen@kpmg.com David White National Actuarial Leader T: 404-222-3006 E: dlwhite@kpmg.com Matt McCorry National Leader, Insurance Risk & Performance T: 212-954-3945 E: memccorry@kpmg.com Lourdes Munier National Marketing Director, Insurance T: 201-505-3732 E: lmunier@kpmg.com kpmg.com
KPMG LLP , the audit, tax, and advisory firm, is the U.S. member of KPMG International Cooperative (KPMG International), a Swiss entity. KPMG Internationals member firms have 145,000 professionals, including more than 8,000 partners, in 152 countries. 2012 KPMG LLP , a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 26321NSS

2012 Insurance Outlook Survey

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

2012 Insurance Outlook Survey

Hochgeladen von

Copyright:

Verfügbare Formate

Insurance Industry OutlookSurvey:

KPMGs Industry Outlook Survey

Revenue 17 Headcount 18 Conclusion 20 KPMG: A Leader in Serving the Insurance Industry 21

2 | 2012 Insurance Industry Outlook Survey

2012 Insurance Industry Outlook Survey | 3

Laura J. Hay National Sector Leader, Insurance KPMG LLP

4 | 2012 Insurance Industry Outlook Survey

2012 Insurance Industry Outlook Survey | 5

6 | 2012 Insurance Industry Outlook Survey

Moving Forward in a Slow Market

2012 Insurance Industry Outlook Survey | 7

Initiatives garnering attention

Operating costs over the next year

20% 15% 13% 11%

8 | 2012 Insurance Industry Outlook Survey

Increasing the focus on talent

2012 Insurance Industry Outlook Survey | 9

In Pursuit of Growth and Opportunity

25% 18% 11%

Strategic divestiture of current assets Multiple responses responses allowed

Growth through M&A

Increased market share in current geographic area

10 | 2012 Insurance Industry Outlook Survey

Capital Spending and Investing

2012 Insurance Industry Outlook Survey | 11

12 | 2012 Insurance Industry Outlook Survey

Risk and Regulatory Challenges

18% 16% 14% 12%

2012 Insurance Industry Outlook Survey | 13

14 | 2012 Insurance Industry Outlook Survey

18% 15% 13% 11%

2012 Insurance Industry Outlook Survey | 15

Data Analytics and Digital Marketing Channels

25% 19% 18%

16% 13% 11%

16 | 2012 Insurance Industry Outlook Survey

Exploring digital marketing channels

39% 36% 30% 26% 24% 21% 20% 19% 18%

2012 Insurance Industry Outlook Survey | 17

Hope for Recovery Remains on the Horizon

40 60 27% 53% 20 50%

0 Key 2012 (Q2) 2011 (Q2)

Increase in revenues About the same Decrease in revenues

18 | 2012 Insurance Industry Outlook Survey

2012 Insurance Industry Outlook Survey | 19

20 | 2012 Insurance Industry Outlook Survey

2012 Insurance Industry Outlook Survey | 21

KPMG: A Leader in Serving the Insurance Industry

Das könnte Ihnen auch gefallen