Getting savvy with digital platforms as commercial insurance prices increase
By Richard Hartley, CEO, Cytora
As we closed out 2020, global commercial insurers saw yet another round of price increases. Prices jumped by 22% in Q4 of 2020, according to Marsh’s Global Insurance Market Index, which you can download here.
According to the report, this is the largest increase since the index was initially launched in 2012. This follows year-on-year average increases of 20% in Q3 and 19% in Q2.
Following the launch of the Marsh Index, Willis Towers Watson published its own data, showing that US commercial insurance prices grew by a substantial 10% over the fourth quarter of 2020. Data for nearly all commercial lines in the US showed significant price increases in Q4.
Both of these reports indicate substantial price rises in commercial insurance. But they also reveal more fundamental issues being faced by the market today.
Growing profitably without compromising loss ratio
As pressure from an increasingly competitive and hard market mounts, there’s still an opportunity for insurers to generate a significant volume of new business that is sustainably profitable in the long term, outside of rate fluctuation.
However, to make the most of today’s market and grow profitably over a long time horizon without compromising loss ratio, insurers need to assess all new business submissions against their in-force portfolio, and select submissions that enhance – rather than degrade – the portfolio.
Currently, this remains a highly manual process, where equal time is allocated to risks that have significantly different levels of profitability. This puts strain on the expense ratio and adds operational costs, which continue to increase.
The insurers that can identify profitable risks quickly without absorbing decision-making capacity will be able to offer competitive rates and better broker responsiveness, translating into superior conversion. These insurers will be best positioned to achieve top decile underwriting returns that transcend the oscillations of the cycle.
Leveraging digital platforms
Today, smart insurers can use platforms to digitise submissions and renewals as they flow through the business. These digital platforms connect underwriters to profitable opportunities which match their expertise instantly – all fully aligned with underwriting strategy.
The digital processing of risk will soon become a vital part of every commercial insurer’s business. Those who move fast will capitalise on this immediately viable opportunity.