Canadian life insurers are in a better position than their U.S. counterparts, says Ernst & Young’s new outlook study.
But companies still need to adjust their product shelves and business strategies to overcome challenges like lower margins and changing demographics.
The study outlines five key things they must consider throughout 2013. These are:
1. New strategies for sustainable advantage
2. How to manage persistent slow growth and a low interest rate
3. How to address consumer demographic and distribution changes
4. Upcoming regulatory and accounting changes
5. How to turn technology into a competitive advantage
“Larger insurers continue to enjoy robust assets and market share, but have difficulty growing organically,” adds McPhie. “They’re looking…outside their core business or growing through foreign acquisitions.”
Smaller insurers are focusing on niche market opportunities. McPhie says the best strategy for these companies is to pursue joint ventures that allow them to offer more complete insurance solutions.
The report notes small biz owners will find new regulatory changes particularly challenging, so they have to understand the impacts they’ll have on their existing processes, controls, resources and IT as early as possible.
Regulators are currently demanding the highest level of transparency, as well as improved solvency, capital calculation, adequacy and risk control, says McPhie.
He adds, “On top of that, [there’s] emerging accounting standards.” The potential profitability of companies depends on proper integration of these changes.
What’s more, he says Canadian insurers can boost their operational excellence overall by examining U.S. companies.
“U.S. insurers were forced by the economic crisis to take significant steps toward operational excellence,” says McPhie. “In Canada, companies need fundamental process changes [regarding] investments in technology, predictive modeling and consumer analytics. To achieve similar efficiency, compete more effectively and increase margins.”