Yesterday the accounting and consulting firm of PricewaterhouseCoopers issued "Emerging from the Storm: The Day After Tomorrow for Insurance," a report which warns insurers to be on their guard against government, their fellow insurers, and especially their own tendency to avoid change. The consulting firm says change is coming and the insurers must adapt or die.
As a consultant, Pricewaterhouse has a vested interest in scaring the insurance crowd, since it's in the business of "creating business strategies that anticipate the most likely possibilities."
But some warnings should be heeded. Industry consolidation is well underway, particularly among the highly competitive insurance brokers like Aon, Marsh & McLennan, and Willis Group. Even staid MetLife is making noise about acquisitions. And no one doubts that health insurers are in for a turbulent period as Congress debates reform - and the public option.
Pricewaterhouse may be ahead of the curve in predicting that cash-starved states, and even the federal government, could see the stock and bond hoards of insurers as a useful source of tax dollars. "Insurers can expect renewed scrutiny of their tax planning techniques," the consulting firm predicts. Insurers' accounting is obtuse, to say the least, as evidenced by regulators' decision to add $11 billion to life insurers' capital with the stroke of a pen.
Insurers will argue, as they always do, that any taxation that decreases their capital will make it harder to pay policyholders. But insurers are their own worst enemy, implies Pricewaterhouse, because they can't come to any consensus on a "relevant, intelligible and comparable basis of accounting."
So it goes without saying that the accounting firm of Pricewaterhouse is there to help.