The current global financial crisis continues to impact insurers. With the economy at low ebb, industry professionals do not foresee noticeable improvements in business performance in the imminent future. They have, however, cultivated a positive outlook for next year, according to Celent, a Boston-based financial research and consulting firm.
Celent recently surveyed insurers and vendors to gather perspectives about the ramifications of the credit crunch, releasing its findings in the report, "Handling the Crisis: Update on Q1 Insurance Industry Expectations and Strategies."
According to the firm, insurers are "pessimistic about the outlook for the broader economy, but remain bullish on their own companies' strategies." Sixty percent of the insurer survey respondents expect their companies to be doing considerably better or somewhat better 12 months from now. In addition, respondents as a group are confident that they are employing the appropriate proactive approaches to succeed in both the short and long terms.
Some insurers report modifications to their business and/or IT strategies. The survey also looked into the available levers for any business. For more than two-thirds of those surveyed, freezes on discretionary spending and nonessential travel had already been implemented or were being implemented. Staff reductions, salary freezes, or revisions of budgets were options that had been implemented for just under half of insurers.
"Stripping out costs by being smarter positions the insurer for improved profitability when the cycle turns," added Craig Weber, senior vice president of Celent's Insurance Group and coauthor of the report.
Celent assumes that, without further shocks to the global economy, insurers are likely to hold steady on these decisions. It appears that many insurers have laid the foundation for getting through the next year. Therefore, the firm is cautiously optimistic that the industry's forward progress in terms of service and technology improvements will be minimally impacted by market conditions.
This report is the first in a series that will chart insurers' responses to the crisis. A table of contents for the 22-page report is available here.
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