Insurance Industry Undergoes Regulatory Changes-Competition Heats Up, 11-9-2007
Insurance and risk management make up an immense global industry. Recent regulatory changes have heightened competition within this industry — an area in which competition has always been fierce. Massive mergers and acquisitions have resulted, creating financial services mega-firms. Many of these offer a complete range of financial services and products to their customers, from checking accounts to investment products to life insurance. The biggest changes in the insurance industry are detailed in a recent report from Plunkett Research, Ltd. Some of the trends affecting this market include:
1) Aging Populations Create Challenges and Opportunities for the Insurance Industry. The aging of populations in the U.S., Japan and many European nations will create both challenges and opportunities for insurance companies. For example, as large segments of the population age and retire, they will rely more and more on asset management and retirement products for income, rather than their previous salaries.
2) Insurance Industry Reform May Be on the Horizon. Insurance policies written in the U.S. are regulated on a state level by state insurance commissioners. However, in April 2006, New Hampshire Senator John Sununu and South Dakota Senator Tim Johnson cosponsored a bill to authorize the formulation of a federal insurance regulator within the Treasury Department for life and for property and casualty policies.
3) Employers Push Health Care Costs onto Employees. As employers face continued growth in health care costs, they are, in most cases, shifting more of the burden onto employees. In 2005, employees contributed about 17% of the cost for individual health care coverage and 26% to 28% of the cost for family coverage.
4) Malpractice Suits Are Blamed for Rising Health Care Costs/Tort Reform Is Capping Awards for Damages. Health care costs have become a hot political topic, and many have pointed at malpractice lawsuits as a primary cause of rising costs. For years, punitive lawsuits for pain and suffering have levied huge settlements from doctors, hospitals and their insurers. Many states are tackling malpractice awards through referenda and legislation that limit total damage awards.
To find out more about these exciting trends and others, check out Plunkett’s Insurance Industry Almanac 2008, or go to www.plunkettresearch.com and sign up for a subscription to Plunkett’s completely up-to-date online database!
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