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A recent report released by PricewaterhouseCoopers LLP lists several major trends or moves that are necessary within the insurance industry for it to deal with the present era of reform.

Major Trends in Health Insurance
The PricewaterhouseCoopers report suggests that successful insurers will be the ones who are successful in carefully factoring in the following considerations into their business decisions:

* Consolidation of the Insurance Industry
At the present time, the insurance market in the United States is highly fragmented. Therefore, there is a strong basic rationale for consolidating and for restructuring. This might mean that there will be an increase in mergers and acquisitions, and in particular the larger and better-capitalized firms buy up the smaller firms. It is expected that consolidation will help to make available the kind of capital stability and the additional economies of scale that will act as an important factor when it comes to attracting customers and will aid companies in the demonstration of their financial strength, which will be apparent to not only ratings agencies but also to the third-party distributors who tend to have control of the customer making them a major determinant of an insurers’ fortunes.

* An eye opening for retail investors
The confidence of investors, who had become familiar with high yields on their investments but who lacked a clear understanding of related risks, appears to have been replaced with shock, disappointment and prudence. The pursuit of innovation in methods for advancing sales has now been replaced by focusing on stability, risk management and a demand for less complex and more straightforward and clearly understood policies and investment products rather than such products as index-linked investments. An example of this is the present growth in demand for whole life insurance. What appears to be however, a strong desire for guarantees, could create problems for insurance companies wanting to scale back such products as they endeavor to limit their risk. There is a potential for higher risk and guarantees costs, and also the need for higher commission payments to distributors. This in turn could change the economics of products as insurers find themselves needing to better understand the costs of components, and of pricing and profit profiles.

* Increased uncertainty with regard to taxes
With the current increases in debt and fiscal deficit, governments are seeking ways for them to increase their tax revenues. This means that they will be closely looking at insurance companies, and the insurance industry, as a major source for potential tax receipt, an industry that has grown in recent years. What this means is that insurance companies can now expect a heightened scrutinizing of their tax planning techniques, and in addition, there will be more rigorous requirements for openness and the exchange of information with regard to clients.

* Major restructuring
Because of the current financial crisis, many insurers have found it necessary to raise their prices, hold up on the pursuit of new business or they have had to withdraw from high risk and formally attractive peripheral markets. What will happen is as some insurers step back from some of their geographic markets and reduce some of their business product activity, there could be a substantial increase in market share for some of those companies that remain, meaning that some of the major companies will fall back while others rise up. Those company that have the best comprehension of their risks will be the most likely to be in a stronger position to take advantage of the potential openings that their less-informed and less-assured competitors may let get by them.