Marsh sees profitability for insurers in 2017

Insurance brokerage Marsh & McLennan Companies cited in a 2017 trends report that certain economic conditions and stiffer competition will drive insurance firms to explore other income avenues to bolster margins.

Among others, the firm noted that the persistent low interest environment, a warming economy and tighter job market could point to potentially higher interest rates in the coming year and offset possible increases in casualty rates.

“Despite the challenges, the industry has remained profitable… still insurers’ margins are under pressure and shrinking due to competition, new market entrants and downward rate pressures,” Marsh said in its report.

Firms are also expected to offer flexible terms on coverage, collateral, and service delivery to retain business in an increasingly competitive environment.

Limited investment income opportunities have also driven insurers to focus on underwriting profitability over the past few years over premium growth.

“Many have described how their new ‘quest for profitability’ would lead to less rate volatility in the future as their upfront decisions lead to more consistent and overall better results,” the trend report emphasized.

Over the long term, Marsh noted that rising medical costs, organized and aggressive legal complaints, and larger damages are expected to affect more product lines.

“For the foreseeable future, however, new carrier entrants and expanding insurer appetites will bring the industry’s focus back to growth,” Marsh stressed in the report.