2019 Insurance Outlook: Growing economy bolsters insurers, but longer-term trends may require transformation


2019 Insurance Outlook: Growing economy bolsters insurers, but longer-term trends may require transformation

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HARARE, Sustained economic growth, rising interest rates, and higher investment income are among the positive factors that appear to be bolstering insurer results in 2018, setting the stage for enhanced top- and bottom-line growth in 2019.

Looking ahead to 2019

While improving economic conditions this year may have brightened the short-term outlook for insurers in 2019, for many insurers, a rising tide won’t necessarily lift all boats equally. There are still plenty of challenges to overcome in the year ahead, as well as opportunities to improve a carrier’s competitive position and bottom line

The underlying message is that while the industry may have to cope with a plethora of internal and external pressures, their impact remains very much in each insurer’s own hands. Perhaps the biggest determining factor will be how committed and prepared each insurer is to adapt quickly to a rapidly changing economy and society

Recession could put a damper on insurer growth by 2020

While 2018 and 2019 are shaping up to be banner years for insurers, some concerns are being raised about an economic slowdown, if not a full-fledged recession, as early as 2020. Many are worried about the potential for ongoing disputes between the United States and China as well as other nations over tariffs and trade rules. Meanwhile, some expect the economic stimulus from federal tax cuts and additional government spending to peter out by 2020, while rising interest rates could perhaps discourage consumer borrowing, housing construction, and business expansion. In fact, Vanguard recently warned that the chances for a recession by late 2020 are between 30 and 40 percent. One warning sign cited by economists was a flattening yield curve between short- and long-term interest rates—a development that has historically indicated a recession ahead.

Why should cloud be high on insurer agendas in 2019?

For many insurers, the cloud-computing debate is over.18 With 7 in 10 carriers using cloud in their business today, it is already an integral part of their technology environment and business platform strategies.

The traditional drivers of cloud computing—cost savings and pay-as-you-consume contracts—will likely continue to push usage. Yet the next round of adoption will likely be driven by other key benefits that cloud offers—namely speed, flexibility, and scalability.

Insurance CIOs, who are under pressure to deliver digital capabilities, are looking at developing applications on the cloud as a faster alternative to on-premises deployments.20 Beyond that, evolving technologies such as advanced analytics, telematics monitoring via the Internet of Things (IoT), and cognitive applications generally demand newer technology capabilities that are both quickly scalable and flexible, given the amount of data being generated and the processing power needed to leverage it.

Cloud providers seem to be actively evolving their capabilities to offer advanced solutions in partnership with system integrators to create industry-specific solutions.21 Carriers have an opportunity to be part of this ecosystem of partners to gain a competitive edge by drawing timely insights from data in a cost-effective manner.