5 Top Challenges Carriers Face in a Rapidly Changing Industry

Excerpt from full article originally published on Insurance Thought Leadership

Insurance carriers have been hit hard not only by the declines in the financial market, but from converging industry dynamics that in combination magnify their impact. Executives now find themselves at a crossroads: identify the relevant issues and adapt, or continue using outdated approaches which are quickly becoming relics of a bygone era.

Are we in a hard market?

According to MarketScout, the average property/casualty rate increased by 5% from 2011 to 2012, with this same upward trend continuing into 2013. And yet, just last week the Council of Insurance Agents & Brokers (CIAB) reported that rate increases in the second quarter did not keep pace with the previous two quarters. The reality is that, while carriers are seeing much lower returns on investment income, there is an increase in total surplus dollars relative to total premium. This dynamic makes sustaining a hard market difficult and therefore pricing competition for the best risks continues to be fierce.

Tackling Economic Stagnancy

A sluggish economic recovery affects insurance premiums. For commercial lines carriers, the slow growth in payroll means that overall exposure is not increasing at the same rate as medical inflation. Various estimates put medical inflation in the 4% range for 2012 and payroll growth under 2%.

Regulation Woes

According to the 2013 KPMG survey, 60% of executives stated that regulatory and legislative pressures served as the most significant inhibitor of growth in the coming year, a 13% increase from the 2012 survey, and 19% from 2011’s.

Data Access & Literacy

According to a KPMG study, only 55% of execs claimed that their company demonstrated advanced data and analytics literacy. If the other 45% want to stay competitive, they need to make analytics a top priority moving forward.

Big data is now a board level conversation, and carriers are being asked: “What is your big data strategy?” When that question arises in your meeting, will you have a good answer?

Talent Crisis The industry is estimated to have 400,000 positions to fill by 2020, and 20 percent of underwriters will retire in the next few years. The up-and-coming generation of workers expect to use sophisticated tools and advanced technologies in the workplace.

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