Insurance Industry Roundtable
At the 2019 SAWCA All-Committee Conference, a panel of representatives from the insurance industry discussed a variety of issues. The speakers were:
- Steve Nowak – Trean Corp
- Mark Walls – Safety National
- Jeff Eggleston – AKERA
- Jeremy Terry – KEMI
- Melissa Blatt – Encova
- Billy Roberts – AMFed
- Barbara Cullum – Eastern Alliance
- Andrew Pauley – NAMIC
Regulatory Challenges
Comments:
Regulators try to push a “one size fits all” approach even when it doesn’t make sense. A carrier based in Minneapolis was requested by a southern state to provide a “hurricane recovery” plan. Another regulator requested that they provide the sexual preferences of all their board members, which is a question they are prohibited by law from asking.
Our greatest challenge is the data and data mapping to satisfy EDI reporting requirements. There are significant penalties with any errors and the requirements are different for every state.
Regulations are created to fix an issue because one company made a mistake and it creates a burden on the entire industry rather than just focusing on where the problem was.
Workers’ compensation is probably the most highly regulated line of business with all elements of the claims handling process being regulated. In spite of all this regulation, no one considers workers’ compensation to be either efficient or result in high customer satisfaction. It may be time to take a look at the regulations to make sure they still fit their purpose and are focused on improving the efficiency and effectiveness of the system.
We have dozens of full-time staff focused on reviewing and reporting data to the jurisdictions. This is very costly for us.
The insurance industry spends millions every year issuing checks for $5 or less that were flagged as an underpayment by EDI. It costs the carrier more than $5 to issue those checks and it costs the medical providers more than $5 to process those checks. No one wants these checks. It may be time to question why this is done.
There is a particular state where I feel they do everything they can to make our lives more difficult. Everything we send them seems to get pushed back and they are very adversarial. That experience is very unproductive.
It is so important for regulators and payers to work together to enhance the system for the benefit of injured workers. Some of the regulations have no impact on the benefit delivery model and just add costs to the system.
We work with a lot of coal companies and we are seeing both the state and federal government requiring them to increase their collateral for self-insurance. This increased costs could end up pushing some of these companies out of business.
With the economy being near full employment we are seeing claim frequency increasing. This couples with claim severity that has been trending upward for years to create a situation where we are concerned about rate adequacy. We are concerned from a rate standpoint that the rating agencies will respond to the evolving marketplace in a timely manner.
InsurTech
Comments:
InsurTech companies are constantly saying they want to “disrupt” the insurance industry. But the insurance industry does not want to be disrupted. It is a highly regulated marketplace built on predictability and stability. Carriers are looking for things that can provide impactful, incremental change that are also cost effective. Right now there is more sizzle than steak with regard to InsurTech.
We do not believe that brokers and claims handlers will be displaced by InsurTech or artificial intelligence. There will always be a need for the human element in our business.
I have been to the InsurTech Connect conference in Las Vegas the last two years. I noticed a significant turnover in the companies exhibiting at these events. These startups go all in to try and get noticed at a conference and when they do not get quick adoption they are out of business. Too many of these technology companies do not understand the insurance business.
I could see smaller businesses going with an online insurance buying model bypassing using an agent, as their risks are fairly easy to define. But this approach will not work for larger companies.
We are currently replacing our claims and underwriting system which is very expensive and a very complex task.
Our experience is that many of the claims predictive analytics models provide no value. A good claims adjuster will come to the same conclusions as the models without spending the additional money for the analytics. Ultimately what makes the biggest impact on claims is well-trained adjusters, not analytics.
The insurance industry has always innovated and always will. Consumers are demanding faster service and turnaround on things. But there are a number of regulatory hurdles that must be overcome in this industry. Too many InsurTech companies do not understand the regulatory environment.
AM Best is adding an innovation component to their scoring of carriers. This does not necessarily mean adoption of InsurTech but carriers are expected to show they are looking to innovate in ways to improve efficiency an customer satisfaction.
TRIA Renewal
Comments:
The insurance industry is very focused on trying to get TRIA renewed before it expires at the end of the year. TRIA provides a critical backstop to the insurance industry which enables the industry to underwrite high risk and concentration targets knowing their exposures are capped.
Many do not realize how much market upheaval there was when TRIA was previously allowed to lapse. It became very difficult for employers with employees concentrated in certain areas to secure coverage. This included the financial services industry in Manhattan and defense contractors, but it also impacted colleges and governmental entities.
There is a bipartisan bill coming out of the House of Representatives that will reauthorize TRIA for 7 years. It remains to be seen what the Senate will do with this even though there is bipartisan support. There is concern about the perceived inability of Congress to move any legislation forward right now.
This is not just a large carrier issue. Smaller carriers also failed the AM Best “TRIA stress test” because they had too much concentration of risk in their book of business.
Market Consolidation
Comments:
We are seeing a lot of consolidation on the broker side and it changes the way business gets done not necessarily for the better. When smaller agencies are purchased by larger corporations we lose the relationships we have and often those larger brokers are unwilling to do business with smaller carriers.
Over the last ten years there has been lots of consolidation on the TPA side. Because of this there is an increasing gap between the largest TPAs and the rest of the marketplace.
The reinsurance side of insurance is also evolving. Essentially all insurance pricing starts with what the reinsurance industry is willing to do. A few years ago there was a significant infusion of alternative capital into the reinsurance marketplace because they saw it as a place they could receive a consistent return on investment. However, as the reinsurance marketplace is getting hit with losses from multiple lines of coverage the alternative capital is starting to lose interest. This could lead to higher reinsurance rates, which ultimately means higher pricing on the front end.