From catastrophe risk to consumer-directed healthcare to an optional federal charter, the insurance industry faces a number of critical issues in 2008. Executives from the industry associations that represent each insurance sector -- property and casualty, life, health, and reinsurance -- speculate
on the most urgent issues facing their lines of business in 2008 and provide insight into how technology can help meet those challenges.
Editor's note: This contributed commentary is part of a larger compilation on the financial outlook of the insurance industry. For links to the other guest commentaries, scroll to the bottom of the page.
The most critical issue facing P&C insurers in 2008 is developing a solution to stabilize property insurance markets in catastrophe-prone regions of the U.S. Everyone wants to reduce the financial devastation resulting from natural disasters by making homes stronger and people safer, limiting development in the highest-risk areas and stabilizing markets by combining private market competition with appropriate governmental participation.
The industry has proven that it can respond to large catastrophes. But private markets may not have the financial capacity to fund "mega catastrophes" or pay claims from a series of very large events in a single year. In these instances, a public/private financial partnership would offer solvency protection to states in order to stabilize markets. However, any federal program must be structured so that it does not mask the true cost of insuring against catastrophes, encourage reckless development in high-risk areas or hinder the flow of new private capital to the market.
Technology will play an increasingly important role in the debate over how such a public/private partnership should be structured. Advances in risk modeling will play a crucial role in helping insurers and the government evaluate exposure to catastrophic risk, take the appropriate steps to prevent losses and determine the financial resources needed to protect the economy from the next natural disaster.
Life Insurance Industry Needs Optional Federal Charter
-- By Kim Dorgan, EVP, American Council of Life Insurers
Health Insurance Industry Seeks Broader Coverage
-- By Karen Ignagni, President & CEO, America's Health Insurance Plans
Reinsurers Address Natural Catastrope Risk
-- By Frank Nutter, President, Reinsurance Association of America