Economy Is Causing Insurance Executives To Lose Hope In the Future

Tuesday’s Post 12/1/11 –  Economic drawbacks and a deteriorating regulatory environment has many U.S. auto insurance executives believing that new business conditions not getting better.   They remain cautious about their company’s performance and the industry’s ability to produce an underwriting profit. During a recent Auto Insurance Industry Conference, 36% of the 350 interviewed executives believed that the insurance business has worsened in comparison to earlier years. This is a big difference from last year, where fifty-one percent claimed that businesses have been enhanced from 2009 to 2010. The most doesn’t expect a brighter future—twenty-eight percent even believes that the there will be another crisis before the economy recovers. Due to economic drawbacks, only a 3rd of Property & Casualty insurance executives are anticipating that their company would perform above expectations in 2012. This is 10 percent less compared with surveys held last year. A fourth of surveyed executives are anticipating their businesses to perform below expectations—19 percent more than last year. Executives announced to KPMG that, in the next three years, ameliorating underwriting profit would prove difficult. As a matter of fact, almost four out of ten executives (39%) anticipates the chance of increased underwriting profit as “weak,” this has increased by 33% from last year. Only two percent of the executives are expecting a strong profitability, two percent less than last year.  The KPMG survey has discovered that insurance company executives fear that the industry over a period of three to five years would be most challenged in risks associated with adequately pricing insurance products and risk associated with regulatory reform. 

Executives still believe—amidst economic, regulatory concerns, and declining optimism—that the top focus, from a management perspective, would stay to be organic growth for the next two years. Additionally, executives claim that organic growth, acquisitions/joint ventures, and the introduction of new products would be the main drivers of revenue. Next year, executives would place most of their investments in information technology, new products or services, and strategic acquisitions.  Laura Hay, the national leader of KPMG’s U.S. insurance practice concludes, “What we’ll see are firms improving operational efficiencies through technology, focusing on their core strengths, divesting of certain assets or markets that don’t fit those strengths and more aggressive M&A strategies.”


Michael E. Dortch
President &  Managing Agent
Corporate Home Office
618 South Broad Street
Lansdale, Pennsylvania  19446
(800) 807-0762  ext. 602