Personal Lines Trends: Successfully Navigating Natural, Technological and Social Changes

Carriers can mitigate the impact of exogenous shifts on the market by considering the utility of digital technology, analytics, product and distribution capabilities for maintaining their competitive edge.

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Homeowners and personal auto insurers operate in highly competitive, increasingly segmented markets. The market leaders, such as Progressive and Chubb, are experiencing strong growth, while many regional carriers are struggling to keep their personal lines book of business profitable.

Many carriers are beginning to consider the long-term impact of demographic shifts, urbanization, and climate change. Proper prioritization of technology investments can help create an advantage in sales, risk management, customer experience, and cost containment in both the near and long term.

Carriers can help future proof their business strategies by considering these specific technology capabilities, mitigating the impact of exogenous shifts:

Distribution and Product Strategy

Carriers can diminish the effects of increased competition by segmenting their distribution strategy. Some carriers may elect to partner with other carriers, associations, or industry partners to access new pools of potential clients. For instance, some smaller insurers may focus their strategy solely on product manufacturing, choosing to sell their products through a national carrier.

Other carriers may begin to specialize in particular risks. For instance, a homeowners carrier could specialize in manufactured homes. Partnering with manufactured homes’ dealerships can give a carrier an opportunity to sell policies at the point of purchase. Similarly, auto carriers can create distribution strategies for coverages like toys (e.g., snowmobiles, jet skis, and RVs), aligning themselves with social media influencers that are trusted in these communities.

Digital and Analytic Capabilities

Digital and analytic capabilities can help carriers create differentiating customer experiences and improve their risk management. Personal lines should strive to benchmark their analytic capabilities against online retailers like Amazon.

Both auto and homeowners carriers are looking for opportunities to offer more digital self-service capabilities to their agents and policyholders. Many digital investments are looking to provide customers with more transparency through both the application process and claims lifecycle. For example, auto carriers can offer integrated scheduling services for rental cars and towing companies. Homeowners carriers can likewise connect policyholders with a marketplace of approved local vendors.

Analytics can be a multi-purpose investment that can be applied across the enterprise. Some carriers look to purchase analytic solutions, while other carriers elect to develop these capabilities in-house. Both auto and homeowners carriers are likely to augment their consumption of third-party data to strengthen marketing campaigns, increase underwriting discipline, and improve fraud detection.

Underwriting discipline will become increasingly important as speed-to-market increases and new risks emerge. Carriers will release new products to market without fully understanding a potential product’s loss history.

Macro Trends

Carriers should consider the impact of exogenous shifts in the long term. These shifts can be both organic and technological. Organic influences include the nation’s demographic transition, higher levels of urbanization, and increased storm severity caused by climate change. Climate change is already beginning to influence the suite of products offered by the insurers. For instance, the excess flood insurance is growing in popularity.

Technological shifts may include the widespread acceptance of autonomous vehicles and 5G. Smart cars will likely reduce the frequency of claims; however, the severity (measured in dollars) could increase because of the technology embedded in the vehicle. Other emerging technologies can help enhance existing technology programs. For instance, 5G would augment carrier’s capacity for IoT programs by reducing latency and expanding bandwidth.

Successful companies will think longer term to develop strategies to address these predictable market changes. Novarica’s recent brief, Personal Lines: Near-Term and Long-Term Technology Trends provides more information on approaches carriers can employ to learn to keep pace with both short- and long-term trends that will impact the marketplace.

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Chuck Ruzicka // Chuck Ruzicka is a Research Council Fellow at Novarica. He has expertise in insurance IT leadership and business transformation as well as technology strategy for personal, commercial, workers’ comp, life, and specialty lines. Prior to joining Novarica, Ruzicka served in senior technology management roles including VP at Progressive Insurance, where he was responsible for financial system architecture, billing, divisional policy, and financial systems; both CIO of Agency Markets and VP of Infrastructure Software and Security at Liberty Mutual; and CIO at several regional insurance companies. Most recently, Ruzicka was an independent consultant, using his experience to complete roadmaps for application portfolio upgrades and information management strategies as well as to lead core system software selection projects. He also has board member experience for mutual property/casualty, specialty lines, and software development companies. Chuck has an MBA in Finance from the Ohio State University. He can be reached directly at    

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