The insurance industry has also experienced a significant decline in its net investment income, which dropped from $31.6 billion in early 2015 to $26.5 billion in the first half of 2016. The outlook for 2017 is not expected to be any better.

The change in leadership in the White House, Senate and House is also expected to lead to regulatory changes at the state, federal and international levels. Some of the issues which could be affected include the National Flood Insurance Program, cybersecurity regulations and even the use of autonomous vehicles.

Auto insurers are expected to raise premiums for personal and commercial auto policyholders as the frequency and severity of claims and repair costs continue to increase. With gasoline prices expected to remain lower, the increase in the number of miles driven will continue to rise. While new auto technology and telematics are expected to eventually reduce the number and size of claims, when that will actually occur is uncertain.

Technology and cyber challenges

As technology continues to change customer expectations, Ernst & Young says that insurers will increase their efforts in 2017 to become more innovative. A number of companies are partnering with InsurTech startups and others to blend these new technologies with their existing operations to provide the service and access customers demand for today.

New products and coverage options, as well as the ability to provide on-demand coverage will disrupt the traditional insurance landscape. Ernst & Young cites the example of insurance technology start-up Trov, which will be rolling out on-demand insurance in 2017, allowing policyholders to activate and turn off coverage for their personal belongings as needed via their cellphones.

The report says that other technologies such as artificial intelligence, telematics, the Internet of Things and blockchain will also have key roles in insurance, forcing insurers to rethink what they offer and how it is provided to policyholders.

These changes could also affect mergers and acquisitions in the market. "Weak organic growth, profitability pressures and favorable market multiples will make conditions ripe for consolidation in 2017," said Thomas Holzheu, the Americas chief economist for Swiss Re Sigma.

Cybersecurity will also continue to be an issue in 2017, especially because attacks are expected to increase. According to Ernst & Young, the property and casualty cyber sector is worth well over $3.25 billion and has more than 60 carriers offering coverage products. The greatest growth opportunities may be in the small-business sector, where a significant number of companies have been affected, but still do not have insurance or substantial cybersecurity plans in place.

Related: President-elect Trump likely to back broad insurance goals

The changing workforce will also mean new approaches to handling an ever-increasing workload while managing customer expectations. (Photo: iStock)

The talent gap will widen

Filling the vacant seats left by retiring professionals is taking on a new urgency for insurers, which are accelerating their efforts to hire millennials and others to handle the gap left by more than 70,000 retirees in 2017.

Technology will be able to offset some of the loss, but many insurers will need to create innovations to attract new workers and meet their customers' needs. "Insurers now have the opportunity to introduce new technology, such as robotics, and more effective workforce management activities," said David Hollander, Americas insurance leader for Ernst & Young.

According to the survey, the challenges facing insurers can be successfully addressed in four ways by:

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   1. Focusing on new products and business models while still addressing customers' needs and expectations.
   2. Using technology to help automate key processes, systematically applying advanced analytics enterprise-wide, and investing in key technologies to position companies for the future.
   3. Anticipating the growing cyber risk from hackers and taking steps to identify and mitigate their activities.
   4. Rethinking how companies attract and retain their workforce, including a clear understanding of how millennials view insurance and the opportunities it provides.

With customer demands continuing to increase, collaboration and innovation will be critical components to insurers' success. And an industry not traditionally known for its use of technology and change may find both of these items on its list of New Year's resolutions in 2017.