Has US insurance truly entered a long-awaited hard market?
Are carriers now in a position to be more selective about the risks they underwrite, so that they can increase premiums, grow their business and turn a greater profit?
In a nutshell, "Yes," found FirstBest Systems, provider of insurance software solutions for global insurance carriers, which announced the findings from an industry survey of insurance carriers primarily focused on commercial lines.
Insurance industry research in recent months is split. In September 2012, MarketScout reported that commercial lines rates were up 5% and personal rates increased 3%. Yet, a panel of insurance executives stated at the October 2012 Council of Insurance Agents and Brokers (CIAB) Insurance Leadership Forum in Colorado that the industry is not experiencing a hard market just yet. The group said that, while P&C rates are higher on average and there have been fewer catastrophes, there are areas where rates are increasing dramatically and others where rate increases are negligible.
To reveal the market reality, FirstBest surveyed insurers over the last few months to learn how they felt about the business climate. FirstBest received 72 survey responses from professionals with IT and business management responsibilities. 85% of the group indicated that they work with commercial lines of insurance, with remaining respondents serving personal lines.
In the survey, when asked "At what stage do you find the market?" 71% of respondents felt the market was beginning to harden. 18% felt the market was already hard and only 11% felt the market was still soft.
Then FirstBest asked "As your company positions for the hard market, which goals top the list below?"
Respondents were asked to select up to three responses. The goals most indicated among the six options were:
-To ensure high renewal rate of quality business (64%)
-To provide faster service and decision making (40%)
-To obtain as many qualified submissions as possible (33%).
When asked "How strategic is underwriting in achieving growth and profitability in a hard market?," 92% of carriers chose "very important," with the remaining 8% selecting "somewhat important."
When asked "As you optimize for the hard market, what is the greatest challenge for underwriters?," 33% of carriers indicated they are most challenged to "analyze risk in less time to get quotes out quickly." 24% indicated "access to data and analytics in order to make smarter decisions" and 18% indicated "adjust risk appetite on the fly." The remaining responses each garnered about 8%.
"While we did not include agent and broker responses in the survey findings, given the response rate was statistically smaller, the sentiment this group provided was in line with their counterparts at commercial-lines carriers–that they were experiencing a hardening market even before Hurricane Sandy," stated Joseph Pilkerton, co-founder and COO, FirstBest Systems.
"The carriers we're working and speaking with understand that a hard market offers greater opportunities to select new business amid higher volumes of submissions and to carefully scrutinize their renewals. The FirstBest Front Office Suite helps carriers to capitalize on these opportunities with an underwriting desktop that pulls together all information required to make decisions in less time, and by enabling rigorous underwriting guidelines that can be rapidly adjusted as market conditions change," he added.
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