How to protect P&C profits under pressure
The current financial climate is forcing MGUs, MGAs and insurance carriers to compete on price. Here are three ways to do that.
Inflation is driving costs even higher and faster in most markets, undermining underwriting profitability throughout the modern insurance landscape. Managing general underwriters (MGUs), managing general agents (MGAs), insurance carriers, reinsurers are all feeling the pressure as customers look for savings.
Motivated by price, as many as one in ten of U.S. consumers are now shopping around for new insurance providers, according to the consultancy firm Bain. The same is true for small and large businesses.
This has created a challenging environment where actors are forced to compete on price. Faced with this new reality, what actions can be taken to keep bottom lines as healthy as possible? Here are three options.
Option No. 1: Power up underwriters with technology and AI.
Lean into the ongoing digitization of insurance. There is more data and analytics available than ever to help empower underwriters, both in-house and MGUs. They no longer need to rely on outdated methods and mountains of inadequate risk data. AI and new solutions such as data risk exchanges are enabling greater accuracy and speed in pricing risk. As a result, they can service more requests and underwrite more business while limiting loss ratios and creating better pricing.
Option No. 2: Rack up customer retention.
Competitive pricing isn’t everything. There are other ways to win. Improving customer retention is another way to help boost overall profitability. There are a couple of different ways to achieve this. First and foremost is a superior customer experience, and this is true for all actors in the P&C value chain. The key here is to identify the critical points in time in the customer’s journey when they will have an eye on other alternatives. For example, for carriers this is when they file claims and are up for renewal. With this in mind, they will need to focus on speed and ease such as automatic renewals. Investing in real-time monitoring that allows for accurate updates and allows updated renewal quotes to go out immediately makes sense and reduces friction in the process. Everyone in the P&C ecosystem should be looking for strategic initiatives that save resources, time and give customers a better overall experience.
Option No. 3: Identify and develop winning partnerships.
Last but not least, to facilitate profits actors should also identify and develop partnerships with other members of the value chain as well as third-party vendors who can offer a competitive advantage. By sharpening operational capabilities, some savings can be achieved. This should be a focus. However, even more effort should go into finding partners that can help you differentiate yourself and grow your business. Ask yourself: Who can help you sharpen customer customization and conversion? Implement process automation? Develop updated predictive models? Cut KYC and AML times?
Aim to be bold and creative in thinking about the problems your customers are facing. In 2023, the success of your P&C business will be closely tied to how well you manage to find ways to address these, while reducing costs and pursuing initiatives that will increase your competitive advantage. Improved profits are within reach even during these uncertain times but it calls for adjusting business models and daily operations. Those who think and act strategically and make bold moves will be well positioned to face current challenges and accelerate future
Kathy Hickey (Kathy.Hickey@accelins.com) is the chief product officer at Accelerant, a data-driven insurance platform that intelligently matches specialty risks with risk capital to the benefit of the entire value chain. She has spent her career working in the technology field for Qlik, CA Technologies (now Broadcom), and other software companies.
These opinions are the author’s own.
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