For a complete copy of the study, click here.

Click on the following slides to see the survey's key findings.

Adapting to Regulatory Pressures

New and pending regulations in recent years have affected how insurance executives are using their resources to adapt. According to the survey, regulatory pressure has the greatest impact on how insurers approach their business.

The top legislative issue cited as being a force of change was the Affordable Health Care Act (51 percent), followed by increased federal oversight (44 percent).

These regulatory pressures can influence barriers that can hinder an agency's growth. Respondents cited regulation and legislative pressure as having the potential to be the biggest limitation impacting growth at 60 percent, up from 47 percent in 2012. The biggest increase from the 2012 to 2013 survey in this category was taxation, having more than tripled from 11 percent to 34 percent in the last year.

Insurers have also found the need to evaluate their business models in the last year, with 58 percent citing political and regulatory uncertainty as being the biggest threat to their business.

Policy changes not only threaten businesses, but executives said they may not be ready to productively manage the impact of public policy changes in terms of regulation. Although 36 percent said they are very prepared to handle the possible impacts—compared with 25 percent in 2012—60 percent say they're only somewhat prepared.

Overall, agency executives surveyed believe that navigating and adapting to changes in the regulation environment will be the largest consumer of time, energy and resources.

Data and Analytics Come to the Forefront

The ability to use data and analytics as a strategic management tool has become integral to insurance business success.

According to the survey, the level of attention given to data and analytics is on the rise, with 26 percent claiming to have achieved higher data and analytic literacy, up 5 percent from 2012.

Most organizations use data and analytics to drive actionable insights in the areas of risk management and in acquiring customers.

Although insurers are trying to find better ways to use data and analytics, the process can be challenging. Executives cite cost and ongoing support as the greatest difficulty (47 percent), followed by platform and technology needed to support analysis (31 percent), cleansing and maintaining data integrity (29 percent) and complex analysis of design to achieve a result (28 percent).

Less Likelihood of M&A

With an improving economy, insurance executives are less inclined to pursue growth by merger or acquisition; 39 percent of respondents expect their company to be a buyer in an M&A, compared with 48 percent in 2012. And 41 percent have no plans for M&A activity.

Of those looking to pursue an M&A, 41 percent are driven by the desire to access emerging markets. Brazil was the top choice among executives (at 15 percent) in predicting which new market their company would make a capital investment greater than $5 million within the next year.

In terms of economic outlook, 63 percent of respondents believe that economic conditions will be better next year.

However, executives have mixed opinions regarding staffing levels for next year. The percentage of increased hires in the insurance sector fell from 35 percent in 2012 to 32 percent. And although 46 percent of respondents believe there will be an increase in staffing levels in the coming year, 29 percent predict a decrease and 25 percent predict no change.

Technology Becomes Major Investment

New apps, cloud adaptation, information technology systems and customer expectations have caused technological investments to be a primary focus and source of funding for agencies.

Information technology, new products and geographic expansion are the top factors in the evolving business model for agencies, with technology remaining the highest priority investment. Forty-three percent of the companies surveyed said they are working to improve their IT infrastructure, and that it is the top technological investment of their agency.

Agencies also face long-term challenges with updating their aging middleware and legacy systems. Fifty-five percent of agencies with these systems currently in place said their agency would undergo extensive IT improvement to modernize existing systems.

Cloud adoption has been at the forefront of technological improvements for the majority of insurance agencies. According to the survey, nearly 72 percent of executives said that they have adopted or plan to adopt cloud technology in their agency, 38 percent have already adopted the cloud and 34 percent are in the planning process.

Increases in Operating Costs, Revenue

Upgrading agency technology systems and continuing to adapt to the shifting markets does not come without a cost: 61 percent of the executives surveyed expect an increase in operations costs next year, driven by compliance and reporting activities related to new regulatory demands.

Improvements in operations are generally focused on underwriting, pricing and distribution channels, as well as cost reduction in terms of process and organization.

The focus of operations advancement, however, is still customer-based. Agencies listed new customer acquisition as their main priority (51 percent) followed by customer retention (41 percent).

Although operations costs are rising, respondents expected revenues to continue increasing: 73 percent reported an increase in company revenues compared to that of 2012 and most believe that revenues will continue to increase, with 81 percent maintaining a positive outlook for 2014.

Agents are preparing their businesses for growth, with the driving forces of revenue in coming years expected to stem from new products, organic growth and new opportunities in the regulatory environment.

However, low interest rates put pressure on companies, and this could severely impact companies if interest rates remain low for an extended period. Twenty-eight percent of respondents said this will have a negative impact on earnings, 13 percent believe the interest rates will have no long-term effect, 13 percent believe it will specifically influence M&A activity and 13 percent are not sure of the implications of these rates.

Regulatory Factors Driving Force

In general, regulatory factors have become the specific cause of challenges and transformation in nearly every category surveyed by KMPG.

With evolving rules in recent years, the current economic state and progressing technological advancements, the industry remains in a state of flux, forcing agencies to adapt to serve the shifting market dynamics and demographics.

For some agencies, this situation presents a challenge. However, the way a company approaches the evolving environment can dictate an agency's degree of success. Organizations that are looking to the future for their solutions and are able to keep up with the new market will be the agencies that emerge ahead of the rest.