E&Y notes that if the U.S. fails to achieve equivalency with Solvency II, new capital requirements may be triggered for companies doing business in the Eurozone.

Additionally, the report says final standards for insurance reporting revisions from the Financial Accounting Standards Board and International Accounting Standards Board are expected this year.

“At a minimum,” E&Y says, “these changes will necessitate significant systems’ updates. Given substantial increases in reported earnings volatility, insurers’ integrated risk and capital management strategies also may need revision.”

Changing consumer behaviors will also challenge insurers. E&Y says baby boomers will be driving with greater frequency than today’s seniors as they are forced to work longer, young insureds will require additional forms of communication, and the country’s changing ethnic mix will require new marketing strategies to reach consumers.

To face these challenges, E&Y says insurers must:

• Increase investments in core systems to bolster growth and profitability. “Pressures are mounting to transform core insurance systems such as claims, policy administration, underwriting and billing,” says the report. “The push for improvement comes from competitors, heightened customer expectations and, above all, increasing costs to maintain and upgrade systems.”
• Anticipate, understand and address the impact of prospective regulations. Insurers must assess a regulation’s impact before implementation and be prepared when the changes occur, says the report.
• Comprehend and act upon changing insurance-buying behaviors. The report says insurers should consider a multi-channel strategy, both online and offline, that provides clear product information to new buyers and a simplified renewal process for returning customers.
• Execute flexible approaches to manage uncertain economic conditions. “Diligent monitoring of changes in loss exposures and loss-development drivers will guide flexible adjustments to risk management and risk pricing,” the report says.