NU Online News Service, Nov. 19, 2003, 10:45 EST – A new survey by the global insurance services practice of Deloitte & Touche L.L.P. in New York finds that 79% of insurance executives believe the insurance industry depends too much on healthy investment returns to turn a strong profit.
At the same time, 86% say the best way for insurers to improve profitability is to improve their core operations. Improved underwriting, more reliable information on risks, enhanced claims management and tighter controls are once again industry priorities, Deloitte says.
“This survey confirms that core insurance operations have now returned to center stage in the pursuit of profitability,” said Owen Ryan, global managing partner of Deloitte’s insurance practice. “With many companies deprived of the investment income they once used to subsidize their core business, industry executives now recognize that some of their practices need to change.”
Ryan expects this focus on operations will continue even after investment returns recover.
Insurance executives participating in the survey do not believe they can look purely to higher premiums to boost business. Only 11% say premiums are the most effective way to boost profitability. At the same time, 33% say losses on assets are the single most important cause of rising premiums.
Deloitte says 76% of life industry respondents and 68% of property-casualty respondents say better cost control is an effective way to improve profitability. And 57% say that lower investment returns aren’t as big a problem as spiraling costs.