on March 19, 2012 by admin in Insurance Industry, Comments (0)

Insurance industry ahead-2012 pushes to contain growing risk, operational cost

Insurance industry in Nigeria and globally would be contending with critical issues that mostly border on risk management and operational cost in the current year to achieve growth and make good returns to shareholders.

At the Chartered Insurance Institute 2012 Business Outlook for the insurance industry held in Lagos, stakeholders identified the need for operators to dissect the 2012 budget, understand government’s policy direction, and make strategic plans to take advantage of emerging opportunities in the economy.

PricewaterhouseCoopers, in its report for 2012 insurance year, describes in detail the challenges insurers are facing and the strategies they can use to cope with change, manage risk, enhance their operations, and grow.

In 2011, life insurers started to feel meaningful effects from the low interest rate environment, including declining sales, revenue, profitability, and company valuations. If interest rates continue to stay low – and it appears likely that they will for at least another two years – then life insurers’ financial pain will be broader and deeper. Two key themes have dominated regulatory discussions in the past year: Supervisory focus on risk and capital management, and concerted efforts to move towards a consistent approach to cross-territory supervision of insurance groups. These initiatives underscore the importance of embedding strong risk management principles throughout an enterprise and moving beyond just “tick the box” compliance.

In a volatile market, analysts’ lack of confidence in prevailing disclosure standards can only heighten investor uncertainty. This makes it even more important for insurers to provide stakeholders clear and informative financial information.

Expansion remains a challenge for many insurers. The MA environment has been muted in recent years, and growth beyond stagnant developed markets into more dynamic emerging ones presents both opportunity and risk. A key consideration for all companies is that one size does not fit all when determining MA strategy and/or how to expand into new geographic markets. Technology, including mobile devices and sensors, offers insurers great promise for developing a competitive edge, but only if they can effectively analyze the huge amount of data that is now available.If they can meet this challenge, then they will be able to reduce costs, improve efficiencies, and enhance their ongoing attempts to move from product-focused to customer-oriented operating models.

Current claims, policy administration and billings systems replacements have reached their practical limits, and modern and flexible platforms have become “table stakes” for any successful carrier. Quite simply, the cost of establishing a common view through superior IT execution and pricing segmentation could prove to be the cost of staying in business.Regulatory compliance continues to be a major concern for insurers, and the industry is anticipating potential impacts of the different legislation, including on the systemically important financial institution designation.

Article source: http://www.businessdayonline.com/NG/index.php/banking-a-finance/34578-insurance-industry-ahead-2012-pushes-to-contain-growing-risk-operational-cost

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