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Perspective

The Era of Uncertainty Explored at PCI 2016 [Video]

November 20, 2016| Von Liz Kramer | P/C General Industry | English

Region: North America

The only real certainty for property-casualty insurance carriers in the U.S. today seems to be uncertainty. That was reflected in the theme of last month’s annual meeting of the Property Casualty Insurers of America Association (PCI) in Dallas.

Over 1,100 insurers, reinsurers and brokers gathered to hear a great line-up of speakers discuss the numerous political and economic uncertainties facing our industry.

PCI’s 1,000+ member companies write $202 billion in annual premium, or 35% of the nation's property casualty insurance coverage.

This year’s conference theme, The Era of Uncertainty, was well chosen; the industry is pricing business and assuming risk in an environment with so many new variables that the ultimate outcome is far from clear.

That much is evident from the conversations we had with clients at the conference. Our customers continue to seek help on known products that are facing unknown risks or new exposures. Yet the question remains, how to deal with a future that’s bringing new unknown disruptors into play?

The Commercial Auto segment, for example, is in its fourth year of adverse development, and yet this is a shorter tail casualty line with plenty of data points. Economic, legal and demographic shifts as well as competitive market dynamics continue to make this line a challenge for many carriers.

Carriers are further facing uncertainty around the new risks they’re underwriting now, as they simply don’t know what the future holds. The continued development of autonomous vehicles, the sharing economy, the Internet of Things and other emerging technological advancements are just a few examples.

Another trend we continue to see is around companies trying to diversify - expanding into new territories, new classes and new products. Not surprisingly, many of our clients want to explore alternative paths to growth. In personal lines, for example, carriers are faced with extreme weather events and significant innovation having an impact on Personal Auto. Carriers are looking at commercial lines as a way to diversify and develop new opportunities. That’s great, but it also comes with its own set of challenges. Current market conditions for existing participants continue to show competitive rates, even as losses come in and prior reserve redundancies no longer provide the cushions that they did in the past.

Fortunately, the industry has faced unknowns and new exposures in the past, met those challenges and done well. Our clients also recognize that as a direct reinsurer, Gen Re is a perfect sounding board to deal with such challenges. Gen Re's assumption of risk helps provide carriers with underwriting and claims perspective so they are able to stay on top of gross product issues.

How? We spend a lot of time looking at rate trends and identifying drivers of loss. We examine all the possible implications of new and emerging risks on pricing and coverage. We work with clients to stay on top of legal and economic trends and determine where to make future investments to ensure we continue to add value.

In an interview for A.M. BestTV in Dallas, John Weber asked me to comment on the industry outlook for 2017; I told him that from an industry perspective, technology is going to be a huge driver of change.

Technology will be a major differentiator in the context of distribution. Speed and simplicity are themes we continue to hear. But how does the industry do this without losing its ability to underwrite risk?

Technology also has an impact on the underwriting functions, such as rate analysis, exposure modeling and loss control. The industry has a lot of data; the challenge is mining through the quality of the data, analyzing the output and understanding which parts are most relevant. Technology should be balanced with talent so we can leverage it to support us and help us make better decisions.

Just as important, carriers also need to monitor how their customers are using technology at work and at home, because digitalization creates strong potential for new product development. Looking at the pace of development, the era of uncertainty has only just begun.

 

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