Agency Data & the State of Insurance Distribution

According to a recent report by Deloitte on the state of the insurance industry, hopes for accelerated growth and improved bottom-line profitability were tempered throughout 2017 as a result of both natural (Hurricanes Harvey, Irma and Maria; wildfires) and man made events. However, insurers and reinsurers are optimistic for 2018 due to:

  • Abundant capacity
  • Alternative capital
  • Corporate tax reform
  • Increased economic growth
  • Interest rates increasing, and
  • The entry/re-entry of some markets in the space that will result in the property/casualty marketplace remaining competitive.

Furthermore, insurance rates have experienced increasing renewal premiums year over year across most major commercial lines in second-quarter 2018, with Commercial Auto seeing the greatest positive increase in premium renewal, according to IVANS.

It’s important to note, however, that these increases don’t reflect a firm market; it is still a buyer’s market with insurers, MGAs, MGUs, wholesalers, and program managers having to compete beyond price. This means developing innovative products for agents and brokers to market and sell – products that will enhance clients’ success, improve the customer experience, and provide better coverage, structures, and services for specific industries and segments.

Developing new products means leveraging technology advances. According to a recent survey of insurers from Willis Towers Watson, respondents expect usage-based insurance (UBI) to grow beyond auto and anticipate using telematics and technologies associated with the Internet of Things (IoT) to personalize risk assessment for homeowners (0% today versus 65% in two years) and commercial property (0% today versus 38% in two years). The five-year outlook for telematics’ impact on insurers’ business will be on pricing (90%) and underwriting (80%), notes the survey.


Additionally, personal lines insurers say the top-growing new data sources they plan to use two years from now include:

  1. UBI (70%)
  2. Unstructured internal claims information (61%)
  3. Smart home/smart building data, unstructured internal underwriting information and social media (52%)

The Deloitte report underscores the use of Internet of Things (IoT) connectivity to potentially reshape the way homeowners insurers assess, price, and limit risks. Eighty million smart home devices were delivered globally in 2016, and expectations of a compound annual growth rate of 60% could result in over 600 million such devices in use by 2021. Carriers may receive fewer and less-severe claims and be able to gather data for more personalized and profitable pricing with the deployment of safety-connected technology. Commercial insurers are also looking to tap unstructured internal claims information (92%) and other unstructured customer information (54%) to improve the customer experience and design new products.

There’s an underlying pulse right now in the P&C market place that cards are stacked against the Program Administrators, MGA’s, MGU’s and even the smaller to mid-size wholesaler operations.  The landscape is experiencing of punishing measures from the retail brokerage community who are choosing to scale down their specialty market relationships and aligning with large wholesale brands who they can squeeze for additional commission. Another notable challenge is that insurers are playing both sides, wholesale and retail, but this isn’t anything new as AIG started this in the 1980s. It an interesting time as we see the carrier pricing and coverage competing for the retailers to stay on the retail side and bypassing the specialty wholesale distribution. However, the MGAs, Program Administrators and Wholesalers who stick to their specialty knitting will ultimately prevail if they’re truly specialists and agency client-dedicated.

To read the full story on the state of data and insurance distribution, please feel free to download our free white paper from Neilson Marketing Services.

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