In surveying 95 U.S.-based senior insurance executives,
"M&A activity is expected to ramp up in the next year as insurers leverage their strong capital positions to seek profitable growth, enter new markets and rationalize non-core operations," said
When asked to identify the primary drivers of M&A activity in the insurance industry in 2014, executives most frequently cited "access to new markets and geographic areas" (45 percent); "regulatory changes and pressures" (45 percent, up from 36 percent in 2013); "access to new technology and products" (37 percent, up from 29 percent in 2013); and "improved use of capital" (24 percent). Fourteen percent of respondents also indicated that the "strategic divestiture of current assets" is one of the initiatives expected to consume management's time, energy and resources the most, up from three percent last year.
"The global regulatory landscape continues to emerge as a key deal catalyst as insurers consider the continued implementation of risk based capital and capital management initiatives," said
A Growing Investment Agenda
More than half of respondents (52 percent) believe that "customer demand and changes in customer focus, buying patterns and preferences" will be the primary driver of transformation for their business, followed by "coping with changes in technology" (45 percent) and "domestic competition" (42 percent).
When asked to identify the highest-priority investment area for their company over the next year, respondents most frequently cited "strategic acquisitions" (34 percent, up from 22 percent in 2013), followed by "customer programs" (25 percent, up from 23 percent in 2013), and "information technology" (24 percent). Over the next two years, insurers are primarily looking to boost their technology investments for "customer growth and customer service" (27 percent), "data and predictive analytics" (26 percent) and "risk modeling and analysis" (24 percent).
However, cost continues to be the primary challenge to implementing and supporting more sophisticated data and analytics, as indicated by 37 percent of respondents.