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Insurance giant Aviva plc announced recently that it will open a new division devoted to global asset management. Read the 2008 industry forecast from Ernst & Young, and you might expect similar moves from other insurance companies.

The report noted that the retirement of the Baby Boomer generation has already begun and said, “As they shift their defined contribution plans, they will seek predictable low-cost income-producing financial products.”

It went on to predict: “There will be competitive rewards for insurance companies who can bridge the accumulation-to-payout phase, combining the two into one offering and presenting greater value to plan participants.”

That’s the big-picture challenge for insurers, but industry forecasters see plenty of short-term problems, too.

Ernst & Young suggested that the competitive advantage from now on will lie with insurers that have “the people, systems and processes” to handle riskier and more complex types of investments.

The report passed along a prediction that industry outsourcing contracts will double by 2010 to more than $6 billion, and warned: “Risks from service interruption, customer data, information security and privacy exposures – and the reputational risks they pose – could far outweigh any benefits from cost reduction.”

A 2008 forecast from Deloitte & Touche predicted that both property and casualty and life insurance companies will be forced to decide “if much-needed growth can be achieved organically or if it will require acquisitions.”

The age-old structure for selling insurance products might need to be rethought, according to the Deloitte report. “Companies are dealing with a new generation of consumers that is used to shopping online.”

To top it all off, Deloitte points out that the industry is “heading toward a talent crisis as an increasing number of agents, underwriters and claim adjusters near retirement.”

If you faced a list of challenges like that, what would you do? Buy more insurance?