BLOGS
BEST
A new survey reveals that insurers
intend to ramp up IT spending in 2012,
and customer relationship management
(CRM) and cloud top the list.
The survey, conducted by indepen-
dent technology consultancy Ovum, says
that while IT budgets are still constrained
this year, almost half of the CIOs surveyed
expected to ramp up spending in 2012.
“While the CIOs we surveyed had
mixed feelings about their IT budgets in
2011, confidence for 2012 is much higher,”
said Barry Rabkin, Ovum insurance tech-
nology principal analyst. “Forty-seven
percent expect their IT budgets to in-
crease, and some by significant amounts.”
CRM systems are a top priority, Rabkin
said, with two-thirds of respondents
indicating it as the area most likely to
benefit from increased investment. “This
commitment to increasing spend on
CRM systems shows that the insurance
industry is coming to grips with the need
to understand customers better.”
Another area of new investment is
cloud computing, with almost half of
respondents saying their company has
experimented with private cloud comput-
ing since 2010, or plan to begin to do so
in 2011.
from:
Terry Golesworthy,
June 16, 2011
topic: Why Carriers
Care About
Consumers’ Favorite
Ice Cream Flavors
FINANCIAL MANAGEMENT
Low Interest Rates Put Life Insurers at Risk
A protracted drop in interest rates
leads to significantly lower investment
income and higher reserve requirements,
weakening insurers’ profitability, capital
adequacy and financial flexibility, says
Moody’s.
Moody’s Investors Service published a
stress scenario analysis that demonstrates
the effects of a protracted period of low
interest rates on U.S. life insurers. Ac-
cording to the report, this situation could
subject U.S. life insurers to substantial
losses and resultant rating downgrades.
The rating agency’s baseline economic
scenario for the United States calls for a
sluggish recovery, however, under which
slowly increasing interest rates would
gradually relieve the spread compression
and earnings pressure insurers are cur-
rently experiencing.
Moody’s latest report offers a review
of U.S. life insurers’ 2008-2010 regulatory
cash flow testing filings. “As expected, our
analysis showed that insurers fared badly
under declining interest rate scenarios,”
said VP Neil Strauss in a statement. “Low
interest rates over five or more years
would lead not only to significantly lower
investment income, but also to higher
reserve requirements, weakening firms’
profitability, capital adequacy and finan-
cial flexibility.”
“With the vast majority of total in-
dustry general account reserves related
to annuities and other interest-sensi-
tive products, U.S. life insurers have a
considerable amount of interest rate risk,”
Strauss says. “And a significant portion
of their earnings derive from interest
spread.” But because the crediting rates
paid to policyholders cannot be lowered
below guaranteed minimums, the profits
companies earn from interest spread
are compressed when interest rates are
low. Moreover, at some point investment
yields may fall below crediting rates,
producing negative interest spread, which
hurts earnings significantly.
...Postings about annuities
or life insurance—while
interesting to (some) readers
here—look less compelling on
News Feeds where baby
announcements, holiday
pictures and Lady Gaga
information are posted. Even
then, if a fan reads a post, is he
or she likely to engage by
posting “Nice annuities” or
“Wow, life insurance kicks”?
So what is an insurer to do?
One thing is to play the game.
Progressive was one of seven
insurers in July to ask, “What’s
your favorite ice cream flavor?”
Mayhem from Allstate posted,
“I’m the crying baby who really
doesn’t see what your
schedule has to do with my
issues.” Even relatively
conservative USAA posted,
“’Me no dum-dum. You dum-
dum. You bring me gum-gum?’
Name that flick and then share
another line from the movie.”
These simple postings get
responses, sometimes in the
thousands, and that dialogue
opens the door for more
business-related posts to
appear.
It is, however, a game, and to
many carriers, insurance is not
a game. It is hard for carriers to
be trivial, funny and personal.
They relate to traditional,
conservative and careful. This
illustrates why social media is a
challenge…
Join the conversation:
http://www.insurancenet-
working.com/blogs/
ec v rs tio :
ttp/w .inu n e
g om b gs/
