View from the Top

At the 2016 Advisen Casualty Insights Conference, a panel of top insurance company executives talked about several issues in the casualty insurance marketplace. The panel included:

• Joe Peiser – Executive Vice President, Head of Casualty Brokering – Willis Towers Watson (moderator)
• Alexander Baugh – President, Liability and Financial Lines – AIG
• David Bresnahan – Executive Vice President – Berkshire Hathaway Specialty Insurance
• Duane Hercules – President – Safety National
• Chris Maleno – Senior Vice President – Chubb Group
• Timothy Turner – Chairman and CEO – RT Specialty

Question: Millenials are now the largest segment of the U.S. workforce, yet only 4% of Millennials indicate they find the insurance industry is desirable as a career choice. How do we change this?

Answers:

• The insurance industry offers a wide variety of career choices that should be appealing to Millennials over time. We need to do a better job educating people on the career opportunities and work to change perceptions.
• The insurance industry needs to do a better job recruiting on college campuses and offering internships to show college students the opportunities in insurance.

Question: Will we continue to see increased M&A activity in the insurance marketplace?

Answers:

• The U.S. economy is slowly growing and that is attracting increased interest from foreign companies in investing in U.S. carriers.
• As long as our industry is profitable, there will be interest in M&A activity to increase market share and diversify risk portfolios.
• We are going to continue to see carriers try to focus more on profitable lines and move away from lines that are less profitable.

Question: Have science and analytics trumped underwriting judgement?

Answers:

• The use of new tools is essential to growing as an industry. But these new tools will not replace the human element. They compliment what the underwriter can do but cannot fully replace it.
• Insurance is a consultative relationship business, not a purely transactional business. Those relationships are an important element in the business that cannot be replaced by analytics alone.
• Insurance buyers rate interaction as the most important factor in their relationship with an insurance carrier. Price is important, but the human element is still very strong.

Question: Could specialization change the marketplace? Will anyone be underserved due to specialization?

Answers:

• Specialists have the ability to outperform a multi-line carrier in their area of specialty.
• Even with specialization, carriers will look for markets with potential for growth. If a market segment is being underserved the carriers will respond.
• Specialist are needed because certain lines of business require a highly specialized skill set for both underwriting and claims handling.

Question: We are seeing deterioration on the profitability of certain lines, especially commercial auto. Is this due to poor underwriting or something else?

Answers:

• The profitability of many lines of business have improved in the last few years. One exception is commercial auto. Clearly rates in this area have been inadequate in recent years.
• A lack of experienced drivers is having an impact on the commercial insurance marketplace. This is not just in commercial trucking but also things like delivery drivers.
• Technology can make an impact, but this will take time.
• Some feel that the commercial insurance marketplace is very profitable right not, but low interest rates are a continued concerns. The industry is not losing money but profit levels are not where they should be.

Question: Is the current brokerage system inefficient?

Answers:

• There is a move to driving out inefficiencies in our industry. This is something risk management buyers are very sensitive to. If someone is not adding value they will find themselves cut out of the process.
• Brokers are doing more today with less head count. They are operating more efficiently than ever before.
• It is possible that, in the future, we will see more risk managers look to buy insurance coverage direct online. This create risks for the employers but it would save money in premiums.

Question: Is there a way for carriers, brokers and employers can work together better to resolve disputes and avoid litigation?

Answers:

• The U.S. tort system drives much of this. Regulatory requirements force carriers to make coverage decisions within a certain period of time or they lose those potential defenses. This forces carriers to respond with reservation of rights letters rather than working with the insured to resolve coverage concerns.
• Everyone looks bad when the claims system doesn’t perform well. There are things we can do better.

Question: What should we be doing to increase innovation in the casualty industry?

Answers:

• As an industry, we are always trying to innovate. There is not one way of doing business that works for everyone. We need to be open to new ideas.
• While there are times when face-to-face interaction is needed, we see more employees working in remote locations and collaborating with co-workers online.  This is a significant change from year past. Also, more are realizing that not all key people need to reside in the home office. You can attract and keep better talent by being flexible in terms of working location.