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What to Expect from the Insurance Industry in 2018

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Mar. 20 2018, Updated 4:25 p.m. ET

Emerging markets

Emerging markets such as China provide a great growth opportunity for property and casualty insurers. A rise in property and casualty premiums is expected in these markets, and the majority of the rise is expected to come by way of increased auto insurance rates.

However, increased prices may not be able to generate substantial profits due to the risk elements auto carriers could face. The major risk element carriers could face is the cost of repairing vehicles with sensors installed in them, as this cost is very high. 

The recent hurricanes have damaged a significant number of vehicles, which could result in increased costs for auto companies.

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How could rate hikes benefit insurance companies?

In 2018, the Federal Reserve is expected to make four rate increases. These hikes could be beneficial for insurance companies because their life insurance and annuities businesses could experience positive effects.

Insurance companies are expected to digitalize their processes in order to gain customer attention. Many insurance companies are planning to acquire new technologies in order to simplify their operations.

American International Group (AIG) has an ROIC (return on invested capital) of 0.62% on a trailing-12-month basis. Its competitors (XLF) CNO Financial Group (CNO), Arch Capital Group (ACGL), and Travelers Companies (TRV) have ROICs of 0.98%, 4.6%, and 5.7%, respectively, on a trailing-12-month basis.

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