In an industry that’s so often immersed in day-to-day priorities – getting through overflowing submission inboxes, writing that big piece of business, getting to the next phase of a technology integration – chances to take stock of the larger insurance landscape can be few and far between. With the year winding down, we at Insurance Quantified, together with our advisors, are taking this opportunity to share our insights on some of the most important trends shaping the industry today – and how they will affect insurance businesses in the future.
Kicking off: an introduction from our CEO, Brian Modesitt.
At Insurance Quantified, we’ve assembled a blend of insurance, innovation and technical talent so we can serve our clients on a mission of underwriting transformation. Below are a collection of observations from our strategic advisors and employees as we close out 2023. Wishing everyone a happy and healthy holiday season. – Brian Modesitt, CEO
What is the state of the commercial P&C industry going into year-end? What have been the biggest wins and losses from the year?
“While it is hard to categorize the wider marketplace, for Property & Casualty, I think the state is fairly healthy. With some outliers, rates have adjusted to reflect risk. There has been a lot of effort toward becoming more efficient to drive down expenses while delivering more to distribution partners.” – Ed Sweeney, Advisor
“The industry is in a state of continual change. Attracting and retaining the necessary talent, societal and environmental pressures on loss frequency and severity, and uncertainty due to geopolitical conflicts are all important factors. Developing adequate pricing without certainty around your cost of goods sold has never been more challenging. That being said, there’s also reason for optimism, with the industry’s strong capital base and explosion in innovation.” – Dave Michelson, Advisor
“The talent landscape continues to trend toward digitalization, automation and data analytics, leading to an increased demand for professionals with expertise in technology, data science and risk management.” – Jody Tracey, Chief People Officer
What is ahead for the commercial P&C industry in 2024? What external factors (inflation, interest rates, war, etc.) are most likely to impact businesses and how?
“We’re likely to see a continued hard market, possibly escalating in cat property as climate change/weather patterns continue to confuse models. Meaningful tort reform seems unlikely. Litigation funding is a growing asset class (attracting capital to fund larger lawsuits). If interest rates remain higher for longer, we may see an impact/increase in target combined ratios in long-tail lines, specifically workers compensation, with possible downward pressure on pricing. Geopolitical risks remain, but absent a major meltdown in the Middle East, the impact will mostly be restricted to specialty lines such as marine, political risk and oil & gas.” – Jeremy Johnson, Advisor
“I think the industry will continue to evolve based on the economic factors impacting it. More businesses will move into the E&S market in an effort to get insured the coverages they desire. There will be a continued focus on innovation as everyone tries to do more with a close eye on expenses. With interest rate increases starting to slow, the impact of inflation will soften. It feels like there is increasing geopolitical risk that we all will need to actively manage and monitor closely.” – Ed Sweeney, Advisor
“2024 is likely to be a mixed bag of results. Societal inflation will continue to apply pressure on personal auto and commercial auto results. Property insurers will continue to navigate around worsening catastrophic weather probabilities and spotty supporting reinsurance capacity. Cybersecurity will be a continuing and growing threat. The higher cost of debt will put pressure on underwriting decision-making. Overall, maintaining an enterprise risk management discipline in this dynamic environment will be even more critical.” – Dave Michelson, Advisor
“There’s tension between the trends that the commercial P&C industry is facing and its ability to respond to them. Technological innovation and climate change are rapidly becoming more important to risk evaluation, necessitating more complex processes, but introducing new workflows into standard operating procedures is often met with resistance and fear.” – Jeff Tyler, Chief Technology Officer
“Setting up Millennial and Gen Z employees for success will become increasingly important in the coming years. These digital-native generations expect their companies to arm them with the modern tools and steadfast support they need for success, yet in the face of a difficult competitive environment, a significant number of insurers have reduced their investment in technology, training and the like. As industry veterans begin to retire, it is crucial for insurers to invest in technology and training to help newer generations to not only respond but to help shape the changing business landscape. For many, this will require a wholesale shift in mindset, with catering to these preferences becoming a must, not a nice-to-have.” – Shireen Braun, Chief Client Officer
How has the underwriting function been impacted by trends in 2023?
“Hard market factors equate to submission growth, which will lead to ongoing challenges in submission prioritization, risk selection (cat aggregate management) and pricing adequacy. There will be a growing appreciation for and review of technology solutions to lighten and prioritize underwriters’ workloads. We’ll see particular ongoing growth in MGA and ‘MGA-in-a-box’ providers for underwriters to try their hand at entrepreneurship.” – Jeremy Johnson, Advisor
“To be best set up for underwriting success, insurers should have processes and tooling in place so that underwriters can focus on the highest-value tasks, relationship development and risk analysis. This means they need to do away with as many administrative, routine and automatable tasks as possible, helping underwriters make the greatest impact on top-line growth and bottom-line profitability.” – Chad Roth, VP of Sales and Account Management
“Underwriting has always been a deeply analytical and specialized process, but also a feel-based one – underwriters know the products they are writing inside-out and can often estimate an indicative rating or benchmark premium in their heads. To keep up with the complexity of today’s insurance landscape, which is growing exponentially, underwriters need processes that bring together the art and the science more seamlessly. This can help with everything from risk evaluation to building new relationships.” – Jeff Tyler, Chief Technology Officer
“Underwriting teams are expected to do more, but that is the same every year. They are looking to use more technology to amplify their impact throughout the underwriting lifecycle to help them scale where they can – but ultimately this is a relationship game in most areas.” – Ed Sweeney, Advisor
“There has been a big push toward workflow efficiency and automation, AI and data analytics. Interestingly, not all insurance companies are at the same place on this journey. Some have just started, while for others, it has been a focus area for years. For the companies with sizable IT functions and budgets, the degree of success ranges from wildly successful to lagging deliverables with frustration and seeking third-party solutions. For the companies with a small IT staff and available dollars to invest, their progress has been slower and they are now faced with how to wisely invest internally or select an outside provider from an ever-growing number of third-party solutions.” – Dave Michelson, Advisor
What can commercial insurers do to set underwriting talent up for success in 2024?
“Inspiring underwriters to adopt technological change or process improvement can be difficult. Presenting these shifts as a natural evolution – one that will help them better accomplish tasks and goals they value – is key. Underwriters have the opportunity to revolutionize the process of how they interact with their broker partners and clients, assess risk and review claim data and loss trends. By leveraging technology, they can identify market shifts early on and become market leaders in how they understand and underwrite in response to them. Ultimately, this creates a great foundation for employees to get involved with the process, voice their preferences and not only become champions of the new way forward but also get ahead of the trends that drive them ahead of their competition.” – Shireen Braun, Chief Client Officer
“I think commercial insurers can best set up underwriting talent by listening to the underwriters and their needs. They should also think more about career pathing and creating an environment that elevates talent, helping employees who are rising through the ranks develop skills that align with future technological innovation and the goals of the business.” – Chad Roth, VP of Sales and Account Management
“I believe it is now very important for underwriting talent to have a basic grounding in data sciences. Among the key reasons are: the need to correctly interpret results from AI systems and understand both the limits and the incredible opportunities presented by new technology. In addition, I believe cross-functional teams that embed dedicated IT and data science resources with underwriters will outperform siloed teams.” – Suman Palit, Head of Solution Architecture
“Modern underwriting should be a collaborative effort between humans and machines. With the right combination of AI automation and smart human-in-the-loop processes, underwriters can dramatically reduce their manual and operational workload, leading to increased efficiency and accuracy in risk assessment. Aligning technology with human expertise can streamline the underwriting process, enabling more nuanced and informed decision-making, resulting in better outcomes for both insurers and customers.” – Naim Falandino, SVP of Product
We hope these insights from our employees and advisors have helped set the scene for an exciting, innovative and productive year ahead. From all of us at Insurance Quantified, we wish you a safe and successful 2024!