The insurance industry is facing one of its most challenging times because of lower investment returns arising from the poor economic climate. This, combined with changing consumer behaviour - focusing on more flexible and low-margin long-term savings products, is placing significant strain on many organisations.

The industry is likely to see further significant consolidation, with a large proportion of insurance policies being provided by a small number of players. This will further force the hand of the smaller insurers to focus on niche solutions, delivered through a small number of channels. Increasing pressure will also come from the banking sector, which is increasing its position as provider of personal insurance products.

Further impacts on the insurance industry arise from the regulatory drivers surrounding the conduct of insurance business and demands for tighter financial and operational controls.