INSURANCE NEWS FLASH April 01, 2014
Table of Contents Sales & Marketing ................................................................................................................. 3 Finance ............................................................................................................................... 10 Technology .......................................................................................................................... 13 Strategy .............................................................................................................................. 18
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Sales & Marketing Travel insurance sales spike as the MH370 mystery continues March 26, 2014 | Live Insurance News http://www.liveinsurancenews.com/travel-insurance-sales-spike-mh370-mysterycontinues/8533272/ In light of the heart wrenching disappearance of the Malaysia Airlines flight MH370 and the 239 people who made up its passengers and crew, travel insurance has become a product that fliers are packing with them much more frequently, as people feel rattled about the situation in the South East Asian region. This has occurred at the same time that some travelers have simply cancelled their plans, outright. Many people are feeling quite rattled – understandably so – about the circumstances surrounding the missing plane and would rather not find themselves in the air until that mystery has been solved. However, for those who can’t avoid heading away from home and into the region, or for those that have not been entirely frightened off of the chance to head away for business or pleasure, travel insurance is increasingly becoming the option to provide them with a bit of extra peace of mind. This has been the case in many countries, but travel insurance sales are especially rising in India. The coverage is mandatory for travelers headed from India to the United States, the United Kingdom, Canada, and Australia, but this additional medical coverage has traditionally been skipped over by the majority of people headed through the South East Asian or the Gulf regions. According to S. Bhattacharya from National Insurance Co., “In the last few days, we have witnessed a sharp rise in purchase of travel insurance by fliers to South East Asia. The mystery surrounding the disappearance of flight MH370 that was flying from Kuala Lumpur to Beijing appears to have triggered the panic purchase.” Many insurers and insurance agents are hoping that this trend for coverage among travelers will continue. The reason is that this added protection is very affordable and is extremely useful against unexpected mishaps and illnesses that could be financially devastating to someone who must seek care in a country that is not their own. Moreover, travel insurance also provides added coverage against other unfortunate occurrences such as lost baggage, inordinate flight delays, accidents, and even a hijacked plane.
Top and Bottom Insurers for Customer Experience March 25, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/25/top-and-bottom-insurers-for-customerexperience?ref=rss USAA and State Farm ranked the highest out of 15 insurers on the 2014 Temkin Experience Ratings, an annual ranking of companies based on a study of 10,000 U.S. consumers.
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Customers surveyed were asked to evaluate their experiences with a company across three dimensions: functional (“Can you do what you want to do?”), accessible (“How easy is it to work with the company?”), and emotional (“How do you feel about the interactions?”). A score of 70% or above is considered “good.” USAA ranked 29th out of 268 companies from 19 different industries on the list. The insurer earned a 78% rating based on customers’ ratings. This is the fourth year in a row that USAA has been the top-rated insurer on the list. State Farm earned a 74% rating and ranks 59th overall. This is the insurer’s third straight year coming in second place among insurance companies on the list. At the bottom of the list is 21st Century, which came in 232nd place with a rating of 55%. This is the fourth year in a row that 21st century has placed last among insurance companies on the Temkins list. Right above it is American Family, which has declined from its position as the second highestrated insurer in 2011. American Family ranked 226th with a rating of 56%. The insurers whose rankings most improved from 2013 to 2014 were The Hartford (+7 points), Liberty Mutual (+7), 21st Century (+6), and AAA (+5). Nationwide (-5 points), American Family (-2), and Farmers (-1) were the only insurers whose ratings declined from last year. Overall, the insurance industry averaged a 68% rating and tied for sixth place out of the 19 industries. Insurance’s average increased 2.9% from last year’s.
How Might Small-Business Agents Rise to the Challenge of Direct Online Sellers? March 25, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/25/how-might-small-business-agents-rise-to-thechalle?ref=rss As a growing number of insurance carriers attempt to sell small-business coverage direct to consumers, agents will need to be more than mere policy peddlers and price shoppers to remain relevant for their customers. That’s the message I delivered to the “2014 Organic Growth Exchange,” a conference for independent agents held earlier this month in Arizona. I realized early on that I was preaching to the choir with this assembly, made up largely of members of the Beyond Insurance Global Network, described on its website as an “exclusive peer-to-peer group of best-in-class independent agencies and brokers that serve their clients as diagnostic, consultative Trusted Risk Advisors.” The group was launched by Scott Addis, president of The Addis Group in King of Prussia, Pa., who invited me to deliver the keynote address at his event. I met Scott in 2003, when, as Editor in Chief of National Underwriter, I profiled him and outlined his agency’s loss-control emphasis. In that story, I highlighted the fact that NU had chosen The Addis Group as the year’s “Commercial Insurance Agency of the Year” even though Scott insisted his firm did not sell insurance for a living. Instead, he positioned Addis as the risk manager for its clients.
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After the profile appeared, Scott started getting calls from agents all over the country, seeking more details and advice about his consultative-brokerage approach. He went on to build a solid agency consulting business based on that philosophy, culminating with the launch of his Beyond Insurance network and the creation of his “Certified Risk Architect” certification program. Ultimately, the majority of commercial-lines agents are likely going to have to offer risk management as a core service if they expect to ward off the threat of disintermediation. Indeed, small-business clients are starting to resemble personal lines consumers more and more, a price-driven market with policies increasingly commoditized. As that trend plays out, agents who have little else to offer except quote and coverage comparisons will find themselves being marginalized and often elbowed out of the transaction. This isn’t some far-off concern. There is a market segment already keenly interested in buying their small-business insurance direct from carriers, without an agent or broker to help them or advise them. A survey by Deloitte of 751 small-business insurance buyers last year found that 16% were “very likely” to buy direct if given the opportunity, while 35% were at least “somewhat likely” to do so. Together, that means half of the market may be at risk for agents. However, this certainly doesn’t mean all small-commercial agents are doomed. Deloitte’s research found that many independent agents still have a strong foundation on which to fortify their relationships with small-business clients. For one, trust in agents among the respondent pool was quite high, in the neighborhood of 80 percent for a number of service categories, such as guiding clients through the claims management process and serving as their advocate with a carrier if a claims dispute arises. Nearly three-quarters surveyed also said they trusted their agent to serve as their loss control advisor and offer tips on how to mitigate their exposures. The trust issue is very significant, because among the 48% of respondents who said they were “not very likely” to buy small-business coverage without an agent, two-thirds said it was because they “don’t trust an insurance company to deal with me fairly,” which was far and away the biggest reason cited. Satisfaction levels among the survey respondents were also pretty positive, with 31% “very satisfied” with their agents, and another 52% at least “satisfied.” Given such high ratings, it’s no wonder that more than half hadn’t changed their agent in over a decade, including 28% who had never done so. Still, even agents with strong client relationships cannot afford to take their small-business customers for granted. Insurance consumers remain very price-sensitive, and the small-business market is no exception. Indeed, Deloitte’s survey found that nearly half said a price hike by their current insurer or a lower price offered by a competing carrier would be “very influential” in deciding whether to move their account. Meanwhile, 40% of respondents who had changed agents said they did so because they didn’t get the best price available from their prior producer. Combine that with the 84 percent who said they expected to get a price discount if they abandoned their agent and bought small-business coverage direct from an insurer, and you can see the makings of a market disruption. So, what should agents do to differentiate their value proposition and maintain their place in the distribution chain?
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Don’t panic. At first blush, those who seem most inclined to buy direct are smaller accounts that may be difficult for independent agents to serve profitably. They are also very price-driven, which is not the niche targeted by consultative brokers emphasizing the value of long-term savings generated via loss control and risk management advice.
Perhaps a segment of this market is simply destined to transition to the direct sales channel. But if that is the segment your agency happens to serve, you may have to go after bigger clients with more complex needs, or find another line of work. •
If you can’t beat ‘em, join ‘em. Carriers selling direct to consumers may try to avoid channel conflict with their existing distribution force by referring clients to agents for service and crossselling—although likely at a lower commission rate, since the acquisition costs are being absorbed by the carrier. In that case, a direct sale could be a win-win-win for the insurer, the agent, and the buyer.
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Added-value is the key. No matter how an agency conducts its business, remember that every client is in play—if not vulnerable to being solicited by direct writers, then certainly by other independent agencies. What will your agency do to stand out and make its services unique and essential to clients? If direct-to-consumer insurers offer a sizable discount for discarding the intermediary, that means agents are going to have to earn that extra premium to remain in the distribution chain.
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Holistic service is crucial. To convince policyholders that an agent is worthy of retention, they are likely going to have to be more than just a sales intermediary. Deloitte’s survey found that only four in 10 small-business respondents characterized their agents as taking a consultative approach—that is, offering advice on risk identification, loss control, and claims management. More agencies will need to go this route to preserve their clientele, especially as direct selling expands.
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Consider a new compensation model. Truly consultative agents and brokers may want to wean themselves off pure sales commissions and consider charging a fee for their value-added services. In this way, their expense can be more transparent and their value more easily compared against the savings they generate as risk managers, measured in terms of lower loss costs and smaller insurance premiums.
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Try cross-selling. Agents that have multiple policies with clients are usually at far less risk of losing accounts than those who fill only a single coverage or service need. Beyond property and casualty insurance, more small-business agents might expand their offerings to include life and health insurance, disability coverage, and retirement planning, as well as loss control and safety services.
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Fight fire with fire! What’s your digital strategy for sales and service? Independent agencies should build their own robust tech capabilities, delivering information and services via multiple platforms, including mobile devices and social media. Meanwhile, nothing is stopping an agency from starting up their own aggregator website to sell coverage online for multiple carriers.
Most importantly, know your customer inside and out, target your services (as well as the medium through which they’re delivered) to meet your clients’ specific needs, and be able to document the added value your agency provides. The f
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Workplace Safety Risks Primary Concern for Small Business March 24, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/24/workplace-safety-risks-primary-concern-forsmall-b?ref=rss For small business owners, keeping employees safe at work is a major concern, according to a survey by EMPLOYERS, a specialty provider of workers’ compensation insurance and services. The survey revealed that workplace safety risks were cited as the greatest worry for business owners, with 35% of survey respondents citing it as their primary concern. Other top concerns are professional liability risks (26%) and cyber security risks (25%). “Small business owners realize they have to protect their most valuable assets—their employees,” said EMPLOYERS Chief Operating Officer Stephen V. Festa. “Employee injuries can carry a significant cost, not only in terms of medical and workers’ compensation expenses, but also in terms of lost productivity and potentially lower workplace morale.” Workplace safety is also an issue that survey correspondents plan on spending the most time addressing in the coming year, according to survey results. “We wanted to see how prepared small business owners believe they are for the types of injuries that are most common in the workplace, or if they were placing too much emphasis on events that are unlikely to occur,” Festa said. “We were relieved to find that the most common type of injuries— slips, trips and falls—was cited most often. However, we were surprised that almost four out of five small business owners did not claim to be most prepared for them.” Slips, trips and falls, according to the U.S. Bureau of Labor and Statistics, account for nearly a quarter of all nonfatal workplace injuries and 15% of all fatal workplace injuries that occur in the private sector. 21% of small business employers feel as though they are prepared to handle slip, trip and fall accidents. Other common injuries that small business owners are prepared to handle include motor vehicle accidents (12%) and employees coming into contact with harmful objects and equipment (12%). Small businesses are least prepared to address acts of violence (29%), and fires or explosions (17%). Survey results were based on interviews of a representative sample of 502 small businesses with 100 employees or fewer. Find more details on EMPLOYERS’ website.
Allianz Starts Payment on Malaysian Airliner Claims March 19, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/19/allianz-starts-payment-on-malaysian-airlinerclaim?ref=rss FRANKFURT (Reuters) - Allianz has started to make payment on claims linked to the disappearance of a Malaysian airliner earlier this month, the German insurer said Tuesday.
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Allianz confirmed last week it is the lead insurer covering the Malaysia Airlines jet that disappeared over the Pacific Ocean on March 8, while Willis has emerged as broker. Flight MH370, a Boeing 777-200ER, vanished from civilian air traffic control screens off Malaysia's east coast less than an hour after take-off. An international land and sea search for the jetliner and the 239 people aboard is now covering an area the size of Australia but police and intelligence agencies have yet to establish a clear motive to explain its disappearance. "Allianz Global Corporate & Specialty and other co-reinsurers of the Malaysia Airlines aviation hull and liability policy have made initial payments," the insurer said in a statement. "This is in agreement with the insurance broker, Willis, and is in line with normal market practice and our contractual obligations where an aircraft is reported as missing." German business daily Handelsblatt earlier reported payment in the case would amount to around 100 million euros ($139.13 million) for the aircraft and the people aboard. It is unclear how much of the claim will be passed on to other insurers in the consortium. Allianz declined to comment on the financial details.
Auto insurance gap for ridesharing closed by Uber March 18, 2014 | Live Insurance News http://www.liveinsurancenews.com/auto-insurance-gap-ridesharing-closed-uber/8532938/ The popular Uber ridesharing program has now broadened the auto insurance coverage that it is offering its drivers, in order to help to ease the concerns of American lawmakers and regulators, and to help to ensure that these services will be used on a broader scale. This type of ridesharing program allows the use a smartphone app to find a ride. The drivers in these ridesharing programs aren’t usually professionals, but are typically regular licensed drivers in their own cars, as opposed to taxicabs or commercial vehicles. Until now, the auto insurance coverage provided through the companies would become active only once the driver has accepted the drive request and is either on his or her way to pick up the passenger, or when the passenger is actually being transported somewhere. This created an auto insurance gap for those drivers while they were between ridesharing rides. This ridesharing insurance gap was starting to become problematic in certain specific situations when an accident would occur, as insurers were refusing to pay and drivers were finding themselves either going to court or having to pay for damages out of pocket – or both.
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The new policy at Uber has now been designed to help to make its drivers feel more confident and to boost the comfort level of lawmakers and regulators with this idea of public transportation. The reason that the opinion of regulators and lawmakers are especially important at the moment is that the actual rules and laws to be applied to ridesharing companies are being developed right now. This, according to Travis Kalanick, the chief exec at Uber. Kalanick explained it as follows: “That allows them to be thoughtful as they work through the legislative options.” A couple of Uber’s main competitors, Lyft and Sidecar, have also announced that they are preparing to offer the same additional auto insurance protection to its drivers so that they will not face the ridesharing coverage gap and will have protection when they are between passengers. This issue has been growing since an accident occurred on New Year’s Eve that drew a spotlight on the coverage problem.
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Finance Insurance industry sees a decline in insured losses in 2013 March 31, 2014 | Live Insurance News http://www.liveinsurancenews.com/insurance-industry-sees-decline-insured-losses2013/8533302/ Swiss Re, a leading reinsurance firm, has announced that the global insurance industry has seen losses from natural disasters and man-made catastrophes fall by 44% in 2013. A calm hurricane season help insurers avoid significant losses, but powerful storms in Europe had a significant impact on the insurance industry. Despite this impact, however, insured losses industry-wide were less than what had been seen in 2012. As such, the insurance industry is expected to be in a strong position to handle the impact of any significant disaster in the future. $45 billion in insured losses recorded industry-wide in 2013, down from $81 billion in 2012 According to Swiss Re, insured losses in the industry fell from $81 billion in 2012 to $45 billion in 2013. Insurance companies covered less than a third of the $140 billion in economic losses that were reported throughout 2013. Notably, flood damage accounted for $4.1 billion in insured losses in Europe alone, with the majority of these losses coming in May and June. Strong storms in Canada, Germany, and France are also cited as events that lead to major insured losses. Countries still exposed to economic damage Swiss Re suggests that insurance is an adequate measure of the resilience that countries have against natural disasters. While some countries have become quite effective in managing the damage caused by natural disaster, their resilience against economic loss has been lackluster. Swiss Re suggests that the collective public sector is facing significant financial strain due to the impact of natural disasters like Hurricane Sandy. US is home to most insured losses in 2013 While 2013 was modest in terms of disasters when compared to the previous year, some disasters managed to have a major impact on the insurance industry as a whole. Swiss Re notes that the U.S. boasts of the most insured losses in 2013, largely due to outbreaks or tornados that caused significant damage in some parts of the country. The polar vortex phenomenon has also been linked to insured losses in the U.S.
Lloyd’s Posts Biggest Profit in Four Years as Disaster Claims Fall March 26, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/26/lloyds-posts-biggest-profit-in-four-years-asdisas?ref=rss (Bloomberg) -- Lloyd’s of London, the world’s oldest insurance market, reported its biggest annual profit in four years as natural catastrophe claims declined.
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Pretax profit increased to 3.2 billion ($5.3 billion) in 2013 from 2.8 billion pounds the previous year, the London-based market said in a statement today. Lloyd’s paid out 86.8 pence in claims and operating expenses for every pound it took in in premiums, compared with 91.1 pence in 2012. Earnings for Lloyd’s of London insurers have been boosted by a decline in costs linked to U.S. hurricanes. Claims against insurers and reinsurers from natural catastrophes dropped 52% last year to about $31 billion, according to Munich Re, the world’s biggest reinsurer. “The hurricane season was benign and catastrophe claims were benign in 2013,” Inga Beale, who in January became the market’s first female chief executive officer, said in an interview. “This is the highest profit since 2009.” Today’s results were also boosted by a release of 1.6 billion pounds of reserves previously set aside for claims. That compares to 1.4 billion pounds in 2012. Investment income declined 36% to 839 million pounds.
S&P's Removes Generali from Negative Creditwatch, Affirms A- Rating March 25, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/25/sps-removes-generali-from-negativecreditwatch-aff?ref=rss MILAN (Reuters) - International rating agency Standard & Poor's has removed Generali from its Credit Watch list after ascertaining that Italy's biggest insurer would not exhaust its regulatory capital even if its home country were to default on its debt. In a statement, the rating agency said it affirmed Generali's rating at A-, two notches above Italy's sovereign rating, with a negative outlook. Back in November, Generali had reacted angrily at Standard & Poor's decision to threaten a downgrade by putting it on Credit Watch, wa move hich Generali's CEO Mario Greco had called "a gross mistake."
Munich Re Sees Profit Dropping to 3 Billion Euros This Year March 20, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/20/munich-re-sees-profit-dropping-to-3-billioneuros?ref=rss Munich Re, the world’s biggest reinsurer, said profit this year is expected to decline 9.1% as prices charged by the industry are in decline. The estimate for net income this year of 3 billion euros ($4.2 billion) compares to profit before minorities of 3.3 billion euros in 2013, the Munich-based reinsurer said in a statement today. Munich Re also said it plans to buy back shares worth 1 billion euros before its 2015 shareholder meeting.
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Reinsurers, which help primary insurers shoulder risks, are increasing payouts to investors as strong balance sheets and lower-than-average losses from natural disasters led to an abundance of capital available for coverage. The strong supply of capital brought rates for property-catastrophe policies down 11% in January, while prices also fell for most other types of coverage, according to Guy Carpenter, the reinsurance broker of Marsh & McLennan Cos. In January, when Munich Re renewed “slightly more than half” of its non-life reinsurance contracts, it saw prices falling by about 1.5%, the company said last month. Munich Re, led by Chief Executive Officer Nikolaus von Bomhard, said last month it plans to boost its dividend for 2013 to 7.25 euros a share from 7 euros after fourth-quarter profit beat estimates on lower catastrophe-related costs. It announced plans last year to buy back 1 billion euros of stock by a shareholders’ meeting scheduled for April 30. Hannover Re, the world’s third-biggest reinsurer, dropped the most in eight months in Frankfurt trading on March 11 after fourth-quarter operating profit missed analysts’ estimates. Swiss Re Ltd., the world’s second-biggest reinsurer, raised its proposed dividend payout to shareholders for 2013 after posting fourth-quarter profit that exceeded analysts’ estimates. Munich Re said yesterday that Doris Hoepke and Pina Albo will become members of its management board this year. The only woman on the board before them was Edith Lukas, who was a member from 1976 until 1993.
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Technology Striking a Nerve in the Insurance Industry: Google and Insurance March 19, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/19/striking-a-nerve-in-the-insurance-industrygoogle?ref=rss Editor's note: Denise Garth is a partner and chief digital officer at Strategy Meets Action. This blog post originally appeared on SMA's website. To say we struck a nerve in the industry with the Google and Insurance: Far Reaching Implications research is an understatement! It was picked up by all the major industry media – in some cases multiple times. It has set a record for downloaded and purchased SMA research, generating a torrent of follow-up calls and discussions. It has been shared and used by executive teams for discussion and strategic planning. The companion blog for the research had nearly 10,000 views – and continues to be posted, tweeted and retweeted a month and half after it was published! So why has there been such a strong interest and reaction in the industry? Well, one reason might be that there is a fascination and admiration for the competitive drive in Google’s transformation from a search engine to an innovator of new technologies and solutions like Android, Google cars, Google glasses, wearable devices, and others. And then there is the fact that they are securing a strong, growing (and enviable) customer loyalty. Don’t overlook their challenge to other innovators like Apple, Amazon and Microsoft – it’s impossible to ignore, just like their impressive growth and financial results! But the appeal that underpins all of this is Google’s unwavering vision of making information universally accessible and useful. And having a huge imagination that is spearheading innovation in multi-dimensional ways doesn’t hurt either! As Google drives innovation, offering an integrated and seamless customer experience and making available the use of their ground-breaking technologies to people in their everyday lives, the levels of customer intimacy and loyalty continue to increase. And in the opposite direction, the vast amount of data becoming available via some of these technologies concerning individuals and their cars, homes, and bodies is breath-taking. And it will be transformative! Google continues to ambitiously expand its capabilities in and beyond the digital and mobile realms, creating an environment that presents... This is why the implications for insurance are so great. Google is bringing an outside-in, customerdriven approach to innovation that is causing insurers to rethink, reimagine, and reinvent their visions of a technology enabled future. Google is organizing data, technology, and location around people, creating a new level of customer empowerment and centricity unheralded in any industry, let alone insurance. Not only is this powerful, it is fundamentally changing the business of insurance! Innovation is no longer just a nice-to-have initiative. It has become a must-have, strategic, core mandate that will define a new era of winners (and losers). Why? Because the increasingly rapid pace of change is challenging decades of business traditions and assumptions and demanding a response.
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This is unprecedented in the history of the insurance industry. And all the while, the changes just keep coming: new technologies, the mash-up of technologies, and new uses for these technologies. These changes are highly disruptive but they are also transformational. One industry innovation leader that we recently spoke to about innovation noted that: “There is an outrageous level of individualism – from devices, data, and components that will break the traditional infrastructure, culture and systems of traditional insurers.” Companies like Google, Apple, Uber, Zipcar, and others, as well as next-gen and emerging technologies are intensifying this level of individualism. Many insurers, large and small, are struggling to get their heads around a comprehensive view or a full understanding of the impact that these influencers will have on the disruption and transformation of the insurance industry. That is why the Google and Insurance research report has provoked such a response in the industry – because it provides insights and a glimpse of the challenges and opportunities for the industry. It also points to why, as an industry, we need to rethink how we respond to and embrace innovation as the core of a new culture and keystone of a new future. Other industries, from retail to books, music, and movies, have experienced the same thing the insurance industry is now encountering: the very foundations of their businesses are being challenged, requiring novel thinking, experimentation, innovation, and adoption of the new and emerging technologies. As one industry leader and CIO recently commented, “Insurers must build knowledge, a network, and an ecosystem of outside-in relationships to reimagine and contribute to their company’s future.” This persistent and continual disruption will necessitate a new way of embracing change and innovation. It will require a culture and model built around ongoing collaboration and ideation that extends outside the traditional insurance organization. This is why an innovation mandate is critical. The innovation mandate must track and assess trends and influencers both inside and outside the industry, prepare plans and scenarios, experiment, and collaborate in order to gain competitive advantage. Unfortunately, the day-to-day operational demands, time constraints, and shortage of expertise or resources for evaluating the many implications for insurance will find most insurers unprepared or unequipped to respond to this level of disruption. More troubling is the way that many insurers are continuing to operate with the long-standing approach of wait-and-see or being a fast follower. With the accelerating release of next-gen technologies, eager competitors, new influencers, and increasing customer demands, failing to adopt a culture of innovation and collaboration could create a potentially unsurmountable risk to survival of the business. For insurers, the coming years promise unparalleled opportunity to increase their value to their customers. Those that are best able to capitalize on the key technology influencers will reap the most in rewards. In contrast, those that do not prepare for the future will find themselves falling behind, losing both competitive position and financial stability. To capture the full potential, insurers must determine to create and participate in an ecosystem of outside experts and resources; inspire their leadership; and enable their journey of change, transformation, and innovation. Why will this be so important? Because the ecosystem network will integrate new ideas and thinking from outside the organization, and provide that outside-in perspective needed to break legacy assumptions. The innovation journey toward rethinking, reimaging, and reinventing the business of insurance has started. And Strategy Meets Action has joined the journey. Have you?
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Predictive Modeling Usage Up for P&C; Strategies Remain Incomplete March 20, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/20/predictive-modeling-usage-up-for-pcstrategies-rem?ref=rss Predictive modeling is on the rise for property & casualty insurers in virtually every line of business over the last year, according to Towers Watson’s fifth annual Predictive Modeling survey, but most insurers do not have a comprehensive, company-wide approach for using predictive modeling for all core functions. Results show that there is a lack of data-driven analytics uniformity in most enterprises while overall usage fluctuates significantly depending on the company size or by the line of business. Carriers have a willingness “to embrace predictive modeling programs, but in many instances, the actual investment in, or execution to establish these frameworks, has been incomplete or targeted to specific business lines or operational needs,” said Brian Stoll, director, P&C practice, Towers Watson. According to Stoll, there are several possible reasons why. The financial crisis could be causing insurers to put investments on hold and instead are focusing on expenses, or Stoll suggests that there could be a narrow vision of predictive modeling’s applications and potential. “Perhaps data, people or cultural challenges are a factor, or some are only applying data-driven analytics when an area is underperforming. Whatever the reasons, a compelling case can be made that well-executed predictive modeling provides better pricing guidance to underwriters,” Stoll said.
Opportunity for Automated Underwriting Grows: SMA March 25, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/25/opportunity-for-automated-underwritinggrows-sma?ref=rss Underwriting automation will ease competitive and pricing pressures for all sizes of insurers, according to Strategy Meets Action (SMA), and the opportunity for automated underwriting grows as insurers realize their dissatisfaction with their policy administration systems. Twenty-seven percent of commercial insurer respondents to SMA’s “State of Commercial Markets Underwriting Automation” survey said they were not satisfied with their policy administration systems—the highest rate of dissatisfaction among all technology investments. SMA theorizes that this is because policy administration systems no longer satisfy the need for commercial lines underwriting in the areas of risk evaluation, analysis and decision-making. On average, 37% of the underwriting process is managed through the respondents’ policy administration system. “The market is clear about the requirements for the automation of underwriting for both simple and complex risks,” said Deb Smallwood, SMA founder and the report’s author. “The biggest challenge
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for insurers will be to determine how to meet the underwriting automation requirements in ways that go beyond the traditional approaches.” When asked which operational drivers need the most improvement, there is a gap between what business and IT professionals view as problems in automated underwriting. Both identify efficiency or productivity, but business professionals indicate that efficiency improvement will come about through better data-driven decisions, while IT prioritizes speed as the solution. Investment priorities in underwriting automation continue to rise. For both simple and complex risks, underwriting systems, desktop solutions and workstations comprise the top investment area for commercial lines underwriting in the next 18 months. Other top areas for investment include rating, business intelligence and the use of data. For both simple and complex risks, more than two-thirds of insurers are planning to spend more than 10% of all technology investments on underwriting in the next 18 months. “The projections for technology spending on underwriting automation are healthy,” the report states. “There is a better understanding of what is needed that coincides with a greater appreciation of what is possible.”
Insurance technology is taking a step toward becoming more personable March 26, 2014 | Live Insurance News http://www.liveinsurancenews.com/insurance-technology-taking-step-toward-becomingpersonable/8533258/ Insurance companies are beginning to look to technology in order to help them connect with consumers. While many insurers have turned to social media in order to increase their engagement, having a presence on sites like Twitter and Facebook is no longer considered adequate. As such, many companies have begun to develop and release their own mobile applications in order to appeal more effectively to consumers that are becoming heavily reliant on smartphones and tablets. Apps may be able to help insurers connect with consumers more effectively Many of the applications coming from insurance companies have to do with providing consumers with quotes on policies. These applications are also being used to begin the claims process, highlighting convenience and automation. Applications that allow people to pay their insurance premiums from their mobile devices are becoming more popular as well. Some insurers are releasing applications that are designed to present a certain image in an effort to connect with consumers more effectively. Novelty applications help create something that consumers can connect with Progressive has the Flo-isms application, which provides users with sayings from the insurance company‘s popular “Flo” mascot. GEICO has a similar application that acts as a mobile game, tasking users with directing vehicles safely to a destination. These applications do little in the way of insurance services, but they have managed to make insurance companies seem more human rather than large, faceless corporations that are concerned with nothing more than profit. Insurers continue to overcome negative stigmas associated with the insurance business as a whole
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The insurance industry has long struggled to overcome the stigmas associated with business. Insurers are quite often criticized as being profit-hungry organizations that have little care for consumers in general. While insurance is certainly a business, insurers are working to dispel the stigma that has come to define the industry by showing consumers that they can be more personable. Given that most of the applications that insurers offer are free, a stronger focus on mobile technology may be able to help insurance companies accomplish this goal.
Tech Creeps Up List of Insurers' Biggest Risks March 27, 2014 | Insurance and Technology http://www.insurancetech.com/regulation/tech-creeps-up-list-of-insurers-biggest/240166840 Most insurers believe that their technology infrastructure is too sprawling and outdated in order to effectively manage risk, according to recent Wolters Kluwer research for its Regulatory and Risk Management Indicator report. Thirty-seven percent of the 300 insurance organizations polled by the company said that their top obstacle to managing risk at the enterprise level was "Too many technology systems that are not integrated." That was by far the leader, eclipsing "Regulatory pressure" by 17%. A further 14% also cited "The lack of quality data, management, and analysis." In addition, while the top risk reported overall was regulatory risk -- more than half of insurers selected it as one of their top risks -- IT risk was second, with a third of them doing so. In addition, Wolters Kluwer noted, the biggest insurers were more concerned with IT risks. "The challenges insurers face with technology is that most do not account for the unique complexities of managing regulatory risk for carriers," Steve Taylor, senior market manager of enterprise risk and compliance for Wolters Kluwer, told Insurance & Technology in an e-mail. "Since most solutions are created with an approach to meet as many needs as possible out of the box, they are often lacking when faced with the demanding and increasingly complex landscape of regulations for financial services companies. As the survey indicates, this is particularly evident when carriers attempt to retrieve data from disconnected systems in use in various parts of the business." Insurers must put a governing structure in place so that they can use their data effectively to manage risk across the enterprise, Taylor adds. Currently, technology is too siloed, since it has often been deployed for specific purposes within the business rather than an overall enterprise view. "The technology should function from a solid understanding of both carrier workflow and regulatory demands with an integration that allows carriers to effectively assess and manage risk with a central governing platform," Taylor says. "We believe what insurers need now, especially with ORSA looming, is technology that will provide a complete view of risk: A solution built on a foundation of regulatory and process expertise that provides needed transparency from regulatory requirement through to proof of compliance."
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Strategy Insurance industry steps into the Canada Pension Plan March 25, 2014 | Live Insurance News http://www.liveinsurancenews.com/insurance-industry-steps-canada-pension-plan/8533218/ The recent news has now been announced, stating that the Canada Pension Plan Investment Board has agreed to make a $1.8 billion acquisition of Wilton Re Holdings Ltd. in order to take the largest pension fund manager in the nation into the life insurance industry. This reinsurer is being purchased by investors and represents the first foray of Canada Pension into this sector. Among the investors taking part in this acquisition in the insurance industry are Vestar Capital Partners Inc., Stone Point Capital, and Kelso & Co. It represents the first time that Canada Pension has made a direct investment into this sector. However, it saw Wilton Re as “an ideal platform” for providing the Canada Pension Plan Investment Board (CPPIB) with the capability to “deploy significant follow-on capital at scale in the U.S. life insurance sector.” This, according to Andre Bourbonnais, the CPPIB senior vice president of private investments. Investments in the reinsurance and insurance industry are appealing for pension funds for several reasons. Primary among those reasons is that this sector looks to grow cash over the long term in order to match its liabilities. Over the last few years, Wilton Re, a company based in Bermuda, has been able to hone in on opportunities by absorbing business from primary carriers that are looking to be able to mitigate risks or simplify their operations. Earlier in 2014, Wilton Re entered into a number of deals for assuming liabilities, such as from CAN Financial Corp (the Loews Corp controlled insurer), and from CNO Financial Group Inc. The reinsurer is run by Chris Stroup, a former executive from Swiss Re Ltd. In 2004, the company received the backing it required from investors that include Vestar, and insurance broker Marsh & McLennan Cos. From 2005 and through the years that followed, Wilton Re has made at least $1.7 billion in investments in the insurance industry in the form of acquisitions and risk transfer deals, according to the official acquisition statement that was recently released to announce the deal.
Insurance marketing spending war is easing March 25, 2014 | Live Insurance News http://www.liveinsurancenews.com/insurance-marketing-spending-war-easing/8533286/ There has been an insurance marketing war going on between Allstate and Geico in terms of spending on ads, but now after two years of increases that have been in the double digits, it is now being reported that the later of those insurers had boosted its ad spend by only 5 percent in 2013, to reach $1.75 billion.
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At the same time, Allstate Corp. is also slowing its rate of spending on the ads that it is producing. This, according to SNL Kagan, a research firm. According to the data that was released in recent news, last year, Allstate’s spending rose by 7 percent, bringing it to $887.3 million. This was notably lower than the increases in 2012, which were of 11.3 percent. This seems to be the insurance marketing trend, at the moment, particularly when it comes to the auto coverage sector. State Farm Mutual Automobile, which has traditionally been a big spender when it comes to advertising, showed that its spend rose by only 3.2 percent over the last year. In the two years previous, it had been posting large increases. The insurance marketing data used for this report was gathered from the American statutory annual P&C statement filings. The slowing in the growth of spending for insurance advertising isn’t necessarily good news for large media companies. Television networks are especially dependent on this industry for building their ad revenues. For most of the last ten years, the P&C insurance market has been taking part in an all out advertising war that has helped to bring the industry into the top 10 ad spenders in the United States. This, according to Kantar Media figures. Geico has been a leader in ad spending. This is among Warren Buffett’s Berkshire Hathaway insurance companies. Equally, though, SNL Kagan’s report pointed out that while it has been spending heavily for its marketing campaigns, it has also used this to its full potential, spiking its portion of the market share. As the insurance marketing spending rose, so did the creativity in the ads, replacing what was once a drab category with one that is much more dramatic and makes a notably larger splash.
North American Insurance Execs Say M&A Ready to Pick Up over Next Few Years March 25, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/25/north-american-insurance-execs-say-maready-to-pic?ref=rss After dropping to “unnaturally low” levels during the 2008 financial crisis, mergers and acquisitions activity appears set to increase in volume over the next one-to-three years, a recent survey suggests. Towers Watson says 86% of North American insurance executives “expect to see an increase in the volume of insurance M&As over the next one-to-three years, compared to the previous three years….” The firm adds 78% of the executives say they are actively considering acquisitions. Specifically: •
64% say they are seeking an opportunistic purchase, or “one where the right deal comes along,” Towers Watson says.
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55% say they are interested in bolt-on acquisitions within an existing geography and segment.
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47% say they would focus on expansions into new markets.
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47% say they would pursue acquisitions to improve access to new customer segments, distribution capabilities, product expertise or other technical or operational capabilities.
Regarding the most significant factors that could fuel further North American M&A activity: •
58% say strategic intention to expand into new geographies/sectors.
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57% say difficulties achieving organic growth given the challenging economic times.
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54% say general economies of scale.
Major impediments to increased activity, according to the survey respondents, include priceexpectation gaps between buyers and sellers (55%) and limited availability of viable opportunities (52%). Related Insurer Share Price Gets Bump After Acquisition, but M&A Is a Long-Term Game When a global, publicly traded insurer makes an acquisition, its share price generally outperforms the insurance-industry average in the short... “Each insurer has its own philosophy about acquisitions, but there are a few parameters all acquirers should observe,” Jack Gibson, Towers Watson’s global lead for insurance M&A, says in a statement. “Foremost, insurers need a clear M&A strategy developed in advance that aligns with their broader corporate strategy. Those that do are most likely to find a strategic fit that makes sense from both a near- and longer-term perspective. Beyond financial considerations, it is vital for insurers to carefully consider integration and cultural issues in advance, not after the deal is announced, as some deals that are strategically and financially attractive may not be good organizational fits. It is also important that insurers continually evaluate assumptions during the due diligence period to confirm the transaction still makes as much sense at the time the offer is made as it did earlier in the process.” The survey involved 60 North American insurance executives across the life and property and casualty sectors who participated in an online survey from Jan. 8 through Jan. 27.
Insurance Carriers Find Efficiencies in Partnering March 20, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/20/insurance-carriers-find-efficiencies-inpartnering?ref=rss With the unrelenting competitive pressure of today’s insurance marketplace, even the largest multiline carriers no longer go it alone. At Columbus, Ohio-based Nationwide, strategic alliances— formalized partnerships with other insurers, with complementary service providers, with affinity groups, and with critical vendors—are now critically important components of the mutual insurer’s product, marketing and customer retention strategies.
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“Partnering is definitely becoming commonplace, and not just at Nationwide,” said Vicente Rivera, associate vice president of strategic alliance management, Nationwide Direct and Affinity Solutions. “Auto insurers such as Geico and Progressive collaborate with other property and homeowners insurance providers to round out their products. They even extend multiproduct discounts to their customers.” The need to differentiate and offer more to the customer is the driving force behind today’s wave of insurance partnering, said Rivera, whom I met last week in Scottsdale, Ariz., at the annual conference of the Association of Strategic Alliance Professionals. “The marketplace is very competitive and we have to partner to provide customers with all the products they need,” Rivera explained. It’s also becoming crucial for customer acquisition in a very noisy marketplace. “You see all the money insurers invest in mass marketing. You need partnering to break through the clutter and reach the ultimate customer. That’s true for uniline insurers and for multiline insurers like Nationwide too.” Insurers are following the example of the high-tech and biopharmaceutical industries—which for decades have utilized sophisticated partnering capabilities to develop new products and to deliver more complete solutions to their customers. Within the past few years, many insurers like Nationwide have developed and institutionalized the practice of alliance management as a functional department within their organizations. A formalized alliance management function improves a company’s ability to find the right partners and to manage these strategic relationships effectively, efficiently, and sustainably. “We’re a customer-centric brand and seek that in our partners,” Rivera said. “We want to make sure our corporate philosophy matches, that there’s a cultural fit. We are very particular. Our values have to align. In our case, we have a strategic alliance management function to manage the most strategic relationships—and even with more tactical partnerships, we hold our partners accountable to our approach.” Alliance management focuses heavily on maintaining alignment between and among partners, which is a very complex challenge when two or more organizations are coming together for a common purpose. “Alignment is very important and we are very disciplined when looking at partners. We want to make sure not only that they are long-term relationships, and that they bring value to our customers, but also that they are able to bring value to their constituents as well. We are very relationship based.” Given the complexity of partnering relationships—and the fact that partnerships create many forms of reciprocal value for the partners and the customer, including but not limited to financial value— alliance managers across every industry are challenged to identify, measure, and communicate the value created by their strategic alliances. “With most of our partnerships, we measure the ROI [return on investment], but as important as that is, we want to make sure our partner is getting benefits too,” Rivera said. This is especially true for affinity partnerships. “When we partner with membership organizations to serve their member bases, we measure not just the number of policies in force, but also what products their members are buying, and we use a variety of quantitative and qualitative measures to show that we are providing the right products.” For many if not most sizeable organizations, in insurance and in other industries, the mindset of reciprocity that is essential for successful alliances can come in direct conflict with the culture and values of a competitive corporate culture.
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“We always have to get alignment so that we have the support needed to drive success, so that involves collaborative meetings, engaging leadership in steering committees, and always making sure people understand the value. That helps bring folks along,” Rivera said. Strategic alliances require a strong, structured management framework anchored by memoranda of understanding that lead to contracts that help govern the relationship. Also key, Rivera said, is establishing a single point of contact at each partner who is responsible for managing the relationship. He insists on the single contact point, even when Nationwide’s partner does not have a formal alliance management function. “This is about the relationship. It helps keep us focused on the overall partnership so that we don’t lose sight of that relationship as we conduct the day-to-day tasks at hand,” he said. The alliance manager then is responsible for managing internal as well as external relationships that are critical to the success of the alliance—so alliance managers spend a lot of time in communication. “This way leaders in each company know the goals, what is happening, and there’s a clear path for dispute resolution.” Going forward, partnering is going to even be more important, according to Rivera. “Partnering is one very effective tool to break through marketplace clutter, and to help our agents become the agents of tomorrow. With the customer at the center, our agents’ role is paramount in building and maintaining the customer relationship. Any partner or association we work with must bring value to our distribution chain, and to the customer,” he said.
Florida may soon be home to a private flood insurance market March 20, 2014 | Live Insurance News http://www.liveinsurancenews.com/florida-may-soon-home-private-flood-insurancemarket/8533127/ Homeowners in Florida are facing rising flood insurance rates that could threaten their financial stability, but state lawmakers may be able to provide some relief through new legislation. The legislation would create a competitive, private insurance market throughout the state. This would take flood insurance out of the jurisdiction of the federal government, allowing private insurers in Florida to provide this coverage to homeowners. State lawmakers believe that this will be beneficial to consumers as the National Flood Insurance Program may no longer be able to provide the coverage that homeowners need. NFIP continues to struggle with massive debt The federal insurance program has struggled to sustain itself beneath massive debt for several years now. Reforms have done little to alleviate the program’s financial problems, but they have make flood protection significantly more expensive for homeowners in many parts of the country. In Florida, some homeowners have seen their insurance rates increase by 400% or more due to reforms targeting the federal insurance program.
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Private market may help keep insurance costs down Opening up the Florida market to private insurers may be an effective way to keep flood insurance costs down, but whether insurers would be inclined to participate in this private market is suspect. Insurers have been somewhat reluctant to participate in the flood protection sector because of the financial risks it represents. Flood damage can be very costly and difficult to repair. States like Florida are notoriously prone to flood disasters, which could make insurers much less likely to participate in the market. Homeowners show support for legislation Exactly how lawmakers intend to encourage insurers to participate in the flood market is not clear. Legislators believe that mitigating the risks that insurance companies would be exposing themselves to would provide adequate incentive for these companies to participate in the private market. Exactly what these incentives would be is unclear at this time, but homeowners have shown support for private flood insurance as a way to mitigate the rising rates of the federal program.
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