Insurance executives less optimistic of profitability: KPMG

Insurance executives are becoming less and less optimistic of the industry’s ability to be profitable in the face of increased competition, according to a new survey by KPMG LLP. The survey, conducted at KMPG’s annual insurance conference in New York, found no respondents rated the industry’s chances of increasing margins in the next one to three years as “strong” this is down from 22% in 2002 and 11% in 2003. In the p&c sector, the outlook for premium growth is viewed as positive by just 43% of respondents, with 23% saying premiums will likley decrease and 34% predicting premiums will flatten. This compares with 2003, when 65% of respondents expected premiums to increase.However, respondents did remain confident of their own company’s ability to perform, with 48% saying they expect to perform above expectation in the year ahead, and just 8% expecting to fall well short of expectations. Key to growth, respondents note, will be underwriting (26%) and customer focus (25%). Last year, distribution (30%) followed underwriting (32%) as the key to growth.Of note, respondents expect their heftiest competition other then that with their fellow insurers to come from international financial services companies (24%) banks were perceived as the biggest threat by just 10%. And the biggest legislative challenge, not surprisingly, will be complying with Sarbanes-Oxley, although this was cited by 83% of respondents in 2004, compared to 58% in 2003.