The P&C Insurance Industry has exited 2022 with some turbulent challenges but many opportunities to refine and grow the industry.
Underwriting performance is among the highest focuses throughout the industry in 2023 with the goal to better assess risk and monitor efficiency. This year continues a hard market for P&C insurance with some softening of commercial lines.
WaterStreet Company is here to help inform insurers of trends to expect in 2023. We are a provider of P&C Policy Administration Software, supporting insurers through policy and claims administration, document management, third-party connections and more.
The State of the P&C Insurance Industry
In the first half of 2022, the United States P&C Insurance Industry recorded a net profit of $34 billion, a -14% decline from 2021.
Hurricanes and natural disasters, such as Hurricane Ian’s impact on Florida, helped push the S&P Global Ratings to change the grading of the P&C industry to “negative” this past October.
Inflation has affected the insurance industry as both home and auto prices have increased over the course of 2022, leading into high insuring rates for 2023 with some predictions of leveling around mid-year.
Greater attention has turned towards underwriting, marked by 2022’s largest mid-year underwriting loss since 2012, with a loss of -$4.2 billion.
Many insurers are turning towards usage-based insurance as the sensors for sharing data in vehicles and homes gain adoption and more policyholders aim to decrease their costs per usage. The global market size for UBI is projected to reach $66.8 billion by 2026.
Bottom Line:
- Net profit for the P&C Insurance Industry has declined again from the previous year with a close focus on underwriting losses.
- Hurricanes and natural disasters have proven critical to end of year financial performance.
- Inflation has impacted insuring rates, and is estimated to level around mid-2023.
2023 Industry Trends
Many insurers are employing a combination of risk assessment efforts by firming rates and fine tuning the underwriting process.
Underwriting efficiency calls for careful watch over a number of unique Key Performance Indicators, including the average number of days a quoted policy spends in underwriting or strike rate to help measure the quality of lead generation before it reaches underwriting.
Insurers have the opportunity to arm underwriters with a suite of tools for better assessing the risk of a property. These tools include methods of monitoring the age and status of homes, such as the age of home roofs, and integrating with geolocation applications to move away from risk assessment by ZIP codes and towards geological data.
Claims administration also stands to improve for many insurers across the country. Treating claims with a triage approach allows the business to prioritize claims by cost rather than urgency set by the First Notice of Loss. When businesses shift into claims triage, critical claims can be settled before further costs accumulate and fraudulent claims can be identified before processed. Not only does this method of claims administration save the business costs associated with critical and fraudulent claims, it also leads to improved customer satisfaction, addressing policyholders with the most urgent needs first.
There is also a renewed interest in Loss Triangle Analysis. While Loss Triangles are conducted periodically for financial reporting purposes, many businesses miss opportunities in disorganized data. When the company has central, unified data management practices, many more insightful trends are made possible to help guide the company towards efficiency.
Industry Niche Trends
Many insurers and investors have turned a strategic eye towards embedded insurance. When today’s insurance customers shop for coverage, they tend to start their insurance buying journey right where they left off while financing their property – with the loan lender. Whether the customer purchased a car, a home or other property, lenders are in an excellent position to recommend insurance products.
Managing General Agents (MGAs) are stepping in to help fill claims administration and underwriting needs for lenders. This has led MGAs to seek insurance software that can match complex business requirements.
Small to mid-sized insurers are facing greater difficulties heading into 2023. Many feel priced out by competitive incumbent carriers and high claims payouts due to underestimated risks.
The accelerated need for insurance analytics has also placed small insurers at a disadvantage who may not have the talent or historical data needed to highlight key performance and play to the company’s strengths.
WaterStreet Company in 2023
WaterStreet insurance solutions are flexible and backed by decades of experience in P&C insurance.
We understand the importance for carriers and MGAs to adapt to market changes. Ask us about our additional services for accounting, policy, distribution and customer service support.
Reach out to WaterStreet Company today to request a consultation and demo.
