The insurance industry may not see a return to relative stability and certainty for a few years as it reacts to the effects of regulatory reform, increased government intervention and potential tax law changes in the aftermath of the financial crisis, according to a new report.
Different Landscape
Within five years, the industry landscape could look markedly different, and Americans may find their insurance policies underwritten by a handful of large, well-capitalized firms that can demonstrate financial strength and economies of scale, said PricewaterhouseCoopers LLP in its “Emerging from the Storm: The Day After Tomorrow for Insurance” report.
The report outlines developments expected to reshape the industry over the next five years.
Congressional Acts
The most significant for U.S. insurers will likely be regulatory changes resulting from legislation to reform health insurance and increase federal oversight of insurance and financial industries.
Creation of a Federal Insurance Office could provide federal policymakers with the information and resources to better respond to crises, mitigate systemic risks and help ensure a well-functioning financial system, but it could also lead to dual state and U.S. regulation.
“Insurers are in the business of managing risk and measuring probability. They don’t like uncertainty, yet they are facing two massive reform initiatives, the outcomes of which are unknown but could alter their destiny,” said Bill Chrnelich, partner, PricewaterhouseCoopers’ insurance sector. “Some insurers are taking a cautious, wait and see approach, while others see this period as a once-in-a-generation opportunity to shape their future.”
Anticipate Reforms
According to PricewaterhouseCoopers, the insurers most likely to succeed once regulatory changes are enacted are those that anticipate the most likely possibilities for reform.
“There is only one certainty for the insurance industry: change is coming and, as a result, the competitive landscape will be very different in five years from what exists today,” added Chrnelich.
New Environment
“This will jeopardize some insurers’ business, but it should also enable those who are better prepared to excel in a new environment. Success will likely depend on close monitoring of developments and the ability to quickly capitalize on opportunities as reforms and changes within the industry become clearer,” Chrnelich said.
Topics Legislation Market Property Casualty
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