The speed, the climb, the drop and the turns…rollercoasters are an exhilarating thrill! But if the rollercoaster is commercial auto, some insurers may be happy to get off the ride.
It’s no secret the commercial auto industry is feeling pain. Much of it can be attributed to a soft market, high claim payouts, and inadequate ISO rates. A recent Carrier Management article re-emphasized this notion citing advanced technologies, distracted driving and poorly trained drivers resulting in unfavorable claims results. Furthermore, despite rate increases, 2016 was the worst year for underwriting performance since 2001 with combined ratios growing 1.6% to 110.4% from the previous year.
While the uncertainty of the situation may seem nauseating, about 20% of commercial auto carriers are running a profit. What do they know that others don’t and what are they doing differently? More importantly, will it remain at 20%? Or, 18 months from now will we see the number of profitable insurers grow?
Several indicators exist on how this will play out, take personal auto for example. In the past six years, profitable personal auto insurers can attribute their success to the adoption of data and analytics. To beat adverse selection, they have effectively leveraged data to select, price business and manage claims. This example has also played out effectively in work comp, with the top carriers vying for market share over the last 5 years.
Independent rating agencies like AM Best and Fitch agree. With negative outlooks projected for all commercial lines, insurers that fail to adopt the advanced analytics and enhanced data to make competitive decisions will be unable to compete. It boils down to those that have incorporated analytics, and those who have not.
It’s up to insurers to decide when to face uncertainty head-on and make investments in the future. After all, a ride on a Merry-Go-Round is much less stressful than on a rollercoaster.
Learn how one commercial auto insurer fought adverse selection and improved their loss ratio by 29 points in our latest case study.
ABOUT THE AUTHOR:
Kirstin Marr, CMO of Valen Analytics, has a passion for building companies that invent leading-edge technologies to improve customers’ lives and solve the inefficiencies that exist in traditional marketplaces. As the chief brand advocate for Valen Analytics, she helps pave the way for Valen’s clients to lead the innovation initiatives required to compete in today’s marketplace. Before Valen, she ran business-to-business marketing for internet technology pioneer and market leader, ServiceMagic.com (now HomeAdvisor).
Kirstin has a long-standing commitment to philanthropy and community leadership. Most recently, Kirstin is leading the Insurance Careers Movement coalition, a grassroots initiative of more than 850 insurance organizations raising awareness of what insurance has to offer young professionals. She has been involved in several non-profits focused on Science, Technology, Engineering and Mathematics (STEM) education, among other non-profit causes.