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Operating margins, technology to drive insurer trends in 2016

Operating margins, technology to drive insurer trends in 2016

Insurers will see margin pressure in 2016, and technology will continue to take center stage, according to a report released Monday by S&P Capital IQ.

With the exception of life insurers, which saw margins expand 138 basis points to 9.68%, year-to-date operating margins for most insurers contracted through Sept. 30, said the New York-based division of McGraw Hill Financial Inc., citing data from SNL Financial L.C. Hardest hit were multiline insurers, where operating margins were down 196 basis points to 10.46%.

This could force insurers to pare business, said the report, “Marketscope Advisor Trends & Ideas: Insurance Predictions for 2016.”

“Many insurers may be forced to conclude that a broad-based product and segment strategy is no longer a viable business model. Many will trim product offerings, selling or running off noncore and underperforming lines of business,” S&P Capital IQ said in its report.

Technology will continue to have a substantial impact on the industry.

While “The insurance industry remains heavily dependent on third-party intermediaries — agents and brokers — to market and distribute their products,” S&P Capital IQ notes in its report that “a growing number of consumers prefer to research products and make purchases online,” meaning that the “degree to which an insurer is able to meet these shifts in purchasing trends will be a key competitive factor.”

Technology will also affect competition, S&P Capital IQ said.

“Tech innovations like Policy Genius and Google Compare, shopping sites which allow consumers to compare policies, are two examples. While these sites may help insurers increase their online presence, they also serve to further commoditize insurance products,” the report said.

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