Innovation Amidst Industry Challenges It Possible?

Lastly, catastrophic climate and weather events, such as hurricanes, are expected to increase in frequency and severity, as are smaller-scale events, such as hail storms, tornadoes and wildfires.

Industry Opportunities

With only a few carriers commanding most of the personallines insurance market and hundreds of other insurers making up the rest, competition is fierce. But there are still opportunities to win market share and improve profitability.

Many carriers renew policies year after year without reviewing the risk properly. Failure to adequately price risk leads to missed opportunities. Instead, use targeted underwriting to review your existing book of business to see if and how it has shifted. Re-underwriting is a non-rate change activity that can improve your bottom line without waiting for rate to earn through.

For example, if customers renovate their homes, they may be under-insured depending on the extent of the changes. For auto policies, several factors cut into profitability, including garage rate evasion, vehicle eligibility and recent violation history. All of these risks would likely impact customers’ premiums, but insurers need the correct data to help identify these risks and price policies properly.

Another tactic is to leverage solutions to provide expense savings or improve pricing. For example, inflation impacts direct mail with postage costs rising and supply chain issues delaying the delivery of envelopes. Instead, increasing digital marketing can allow you to reach more people at a lower cost.

Additionally, some personal-lines insurers offer personal cyber insurance to cover broader cyber risks beyond basic identity theft as an add-on to homeowners, renters or condo policies. However, as of now, only a few companies offer this type of coverage, which provides an opportunity for others to follow suit.

Digitalization

The pandemic accelerated the adoption of digital capabilities to replace outdated technology, improve

By Michelle Jackson

efficiencies and reduce expenses. Luckily, consumers gravitate toward digital experiences and are more comfortable communicating with insurers through digital interactions.

While digitalization offers opportunities for carriers, it also brings challenges - namely, digital fraud. From 2019 through 2021, digital fraud in the insurance industry spiked 54.3%, and from the second quarter of 2021 to the second quarter of 2022, it went up 159% - more than any other sector surveyed, according to TransUnion data.

The insurance industry is a significant target of digital fraud because of the large amount of sensitive consumer data insurance carriers possess. And, because some insurance data systems haven’t been updated recently, they may be more attractive for fraudsters to steal data and use it in other types of fraud. Much recent fraud involves data theft to be used in other industries. Cybercriminals aren’t necessarily filing fake insurance claims; they’re using stolen data to submit fraudulent claims for unemployment benefits or tax returns.

The cost of fraud impacts the loss ratio and increases operational expenses, impacting profitability and increasing consumer premiums. To combat this, a more integrated approach layering different fraud detection capabilities can help build consumer trust and profitable growth will help insurers.

What’s Next?

As insurers deal with the ongoing challenges and trends impacting personal-lines insurance policies, the opportunities to increase profitability require out-of-the-box thinking and innovative solutions.

Insurance carriers need to continue doing business as usual, but when there’s extreme pressure from these converging challenges, it’s worth considering a different, more innovative and data-driven approach during difficult economic times. The business can grow - but with datadriven solutions and technologies.

Michelle Jackson is Senior Director, Insurance Strategy for TransUnion and leads the personal lines insurance market strategy team.