Leveraging new technologies and rethinking traditional methods of managing and conducting business will become essential for insurance companies looking to grow in a poor economy and a challenging market, according to a new report.

The report by Deloitte, a consulting, audit, financial advisory, risk management and tax services conglomerate, is titled “Global Insurance Industry Outlook–Mid-Year Update 2008.”

It noted that although the industry has seen “strong business conditions” over the last few years, the economy, the soft market and global competition will challenge results in the near future. Additionally, the report found that insurance is a mature industry, and so driving profitable top-line growth is difficult.

But the report added, “At the same time, advancing technology is making it possible to develop deeper insights into consumers, products, product packages and distribution partners, and is also helping create new channels for reaching customers.”

To take advantage of the opportunities, though, insurers will need to make fundamental changes in the way they utilize technology, recruit employees and seek growth, according to the report.

Companies looking to grow will likely look for strategic partnerships across financial services sectors, the report said. “M&A [mergers and acquisitions] will assume greater prominence–success will depend on being able to base deals on long-terms strategic goals and having the key capabilities needed to execute mergers quickly and effectively,” stated the report.

Sending company functions to offshore locations will also become increasingly important to help companies reduce costs, and also to help fill talent gaps, according to the report.

Companies also need to become more flexible to attract a new generation of talent. The report said insurers could allow employees to create their own career paths, for example.

The report noted that forward-looking companies will look to integrate advanced analytics as well. Insurers have taken advantage of advanced analytics in the area of underwriting, said the report, but now “ongoing advances are making analytics applicable to more parts of the business, such as claims administration, distribution management and pricing…”

Insurers should also refocus on their distribution networks. A statement accompanying the report said insurers should view distribution “as a profit, not cost, center that drives differentiation and growth [and] can help insurers achieve success through better alignment with agents and a multichanneled approach toward marketing.”

Deloitte suggested insurers can look to the retirement market for a “unique opportunity,” since the industry can offer “guaranteed” products as opposed to competitors such as mutual fund companies.

Rebecca C. Amoroso, Deloitte's U.S. insurance leader, said, “The insurance industry faces a tremendous challenge as it pursues future growth. While profitable growth is the key to success in a mature industry like insurance, it can be prohibitively difficult to achieve through conventional strategies simply because the industry is mature.”

Ms. Amoroso called it “vital that insurance executives take a fresh look at the industry and seek fundamental change at all levels of the organization–from its people strategy to its client and product strategy to its processes and infrastructure.”

Information concerning the report is online at www.deloitte.com/us/insurance.