The reverberations from last year’s seismic legislative tilts will be keenly felt by insurers in the coming year. A new report by Boston-based Aite Group finds reaction to health care reform and financial services reform among five trends that will shape each sector respectively.
Indeed, three of the five trends Aite sees on the health side (growing interest in health care exchanges, reforming health care payments, increasing adoption of electronic medical records) are all substantially influenced by the Patient Protection and Affordable Care Act.
Officials at Aite say with Republican efforts to repeal the law more likely to only produce a few alterations, health insurers need to prepare for a new landscape.
"Although parts of health care reform are expected to change drastically, the idea around using health care insurance ‘exchanges’ to create a competitive marketplace are, enabling the masses to buy health insurance, is here to stay," the report, authored by Research Director Clark Troy and Senior Analyst Kunal Pandya, states.
For life insurers, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, will have immediate impacts. The law sets a $5 million exemption for estate and gift taxes and establishes a top federal tax rate of 35% percent for the next two years. The upshot for life insurers is that estate taxes will be less of a strategic driver for life insurance sales in the near future.
The report says the industry will have to adjust accordingly. "Life insurance producers will need to act as financial advisers and planners and focus on using the gifting provisions on the new tax law to facilitate wealth transfer. They will need to attend to the retirement needs of baby boomers and help them define strategies to protect wealth and provide for income needs, most likely using annuities," the report explains.
In addition to regulatory challenges, life and health insurers must also deal with aging technology stacks. "Both verticals must overcome strong legacy platform overhangs; through concerted, coordinated, and informed effort, participants will help ring in positive changes for 2011," the report states.
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