P&C insurance: More adaptable than we give it credit

Stagnant, slow to adapt, anti-innovation—these are some of the terms often used by industry insiders and outsiders to describe the P&C insurance space (the world of auto, home and business insurance).

It is a convenient punchline, but a little overused and exaggerated in my view. It's true, many insurers have more to do in order to capitalize on the latest consumer trends and adopt the newest technologies. Many non-insurance companies have a lot to do as well. The situation is not as dire as I hear from other commentators and there are several examples to demonstrate how responsive the industry has been to recent changes in the modern economy and technology landscape. I would like to point out a few:

Response to ride sharing has been swift: Many auto insurers have been actively following the progress of Uber and its competitors and have been relatively quick to create solutions for their ride-sharing drivers/customers. Remember, this is a new type of risk—there is still not much data to entirely understand the loss experience. However, it seems that every month there is either a new insurer offering a novel coverage solution or an existing player is expanding into new state.
Drones to the rescue: Several insurers have announced plans to test this technology for use in the claims process, as there is potential to make it more efficient and safer, notably in situations where a catastrophe or extreme weather has occurred. This is cutting edge technology that the private sector has only recently been able to leverage.
Google Glass may have found its place: Speaking of the claims process, while this technology seems to have fallen out of favor among consumers, some insurers are exploring its use among claims adjusters. Insurance professionals can more effectively record and transmit accident information, creating a more seamless experience.

(Image: Shutterstock.com)

Fostering innovation: Several insurers are attempting to harness cutting edge technology through investing or partnering with startup technology companies. Instead of trying to build an internal organization, some have created venture funds or forged alliances with those outside the industry to capitalize on emerging trends.
Driving behavior-based pricing: Telematics and/or usage based insurance (UBI) has been with us for some time now (relatively speaking) and there has been a great deal of discussion in the industry on this topic. But I still find this to be a remarkable innovation, as applied to both personal vehicles and commercial fleets. It will continue to revolutionize the insurance rating process but also offers opportunities in other facets of the insurance value chain as well as integration with non-insurance entities.
Creative marketing: Remarkably, the most interesting and memorable advertising campaigns are often produced by auto and home insurers (GEICO, Progressive, Allstate, Esurance, State Farm, Nationwide). The ability to capture mind-share among consumers and businesses is not an easy task. However, many insurers have demonstrated an ability to bring insurance to the forefront of consumerism. Aside from TV, we are also seeing more digital creativity online and through social media platforms. Insurance is not something we easily gravitate towards so marketing creativity and distinction is important.

The reality is that the insurance industry is a different animal from many of its brethren in the economy. The state-based regulation framework can create limitations (an understatement to some); insurance is an intangible product that requires a good deal of consumer education; and the cost of the product is difficult to calculate precisely as expected losses are actuarial estimations. Even in light of this, the industry has demonstrated an aptitude to adapt and work to be forward thinking.

(Image: Shutterstock.com)

So what lies beyond the horizon? There are several catalysts that will likely move the "insurance needle" further. One area revolves around cyber/data breach risk. This threat is not going anywhere, and in fact, is growing day by day as we become more digitally connected and feel more comfortable sharing information in the cloud or online. As cars, homes and businesses become more computerized and host larger amounts of first and third party data, consumers and businesses will be exposed to more risk in all facets of their digital lives. The insurance industry is already making strides to address this, but I believe the best is yet to come in terms of creative and value-added solutions.

Secondly, I believe that we will see more P&C insurance offerings integrated or bundled with non-insurance offerings. As more non-insurance entities gain larger quantities of data on individuals and businesses, they can serve as conduits to underwriting new or existing risks for insurers.

Opportunity for unique insurance solutions

Finally, there's an opportunity for insurers and agents to work more closely with consumers and businesses on developing unique/specialized insurance solutions. Customers are becoming more willing to contribute data to third party entities—this provides a gateway to build a closer relationship with clients adding more value and increasing retention in a very competitive market.

We have all heard the refrain before—"the world is changing rapidly." Insurance professionals are working hard to adapt and perhaps it's time to acknowledge these laudable efforts. It may be time to let up a little on the punchline that the insurance industry is "painfully slow moving" in light of some exciting developments by many companies and what is on the horizon.

What do you think?

Please feel free to reach out to me at [email protected] or comment below.

Neil K. Rekhi is the founder of Premium Intel, which provides market intelligence and insights focused on the Property and Casualty (P&C) marketplace to support strategic analysis and decision making.

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