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The spectrum of change we describe in Insurance 2030 affects all carriers, regardless of their specific lines of business. Likewise, we think most readers will recognize the buyer personae we’ve developed, even if their customers are not exact matches.
Of course, there are some issues that are very specific to industry subsectors. This first in a series analyzes the implications of particular relevance to commercial property and casualty insurers and their stakeholders.
- Agents and brokers: Account- instead of line-based solutions would help us provide customers more customized, holistic solutions, as well as better manage our books of business.
- Small and mid-size commercial customers: We’d love it if we could actually understand what our policies say so we know what’s covered and when. That’d also help us know if we have any coverage gaps.
- Securities holders, regulators and employees: We need you to maintain profitable returns across credit and underwriting cycles. How can you do this in an increasingly volatile and costly claims environment?
- Complex, rigid, product-centric risk transfer solutions
- Emerging risk coverage gaps
- Disconnected functional silos
Solutions
- Creating flexible, customer-centric risk transfer solutions
- Closing coverage gaps
- Connecting functional silos
Creating flexible, customer-centric risk transfer solutions
There’s a general lack of plain-English product descriptions, not least because there’s a lack of standard coverages. This is especially true with small and medium-size businesses, which (unlike many larger companies) rarely employ dedicated risk managers responsible for understanding protection needs and related policy terms and conditions.
Although many carriers offer bundles to better serve customer protection needs, we suggest moving away from current product-centric models and instead designing more holistic, account-level coverages. Instead of requiring customers to seek out and interpret offerings, basic risk assessment can take place via easy-to-understand, chatbot-assisted online questionnaires that AI capabilities validate. This will facilitate the writing of policies that cover key risks, thereby reducing coverage gaps, at risk-based prices.
Better yet, simplifying products and adopting an account-level approach helps more than just customers. For carriers, the operational benefits of policy simplification include code and rate refreshes that facilitate:
- Rationalized, higher quality data and therefore more insightful and timely reporting. This is crucial for small commercial portfolio management because low- to no-touch underwriting needs timely and effective analysis and oversight.
- More accurate underwriting appetites that provide agents a clearer picture of what they should offer customers.
- New perspectives on both commercial and specialty risks. This includes capacity support of simplified products as well as potential contributions to and input on the drafting of simplified policy language. Significantly, this should carry over to simplified small commercial treaties.
- More efficient and economical risk transfer across lines of coverage, leading to better bottom lines, fewer regulatory concerns and more positive employee and customer experiences.
Closing coverage gaps
As we’ve already noted, an account-based approach can help carriers, brokers and their customers identify gaps in traditional coverage. Covering volatile risks like cyber, supply chain and business interruption is more complicated. As is the case with standard products, carriers need a deep understanding of risk drivers to underwrite at the appropriate terms and conditions and economically manage risk transfer across an account. However, developing this understanding requires meaningful and timely data from a variety of emerging sources, including sensors and other IoT applications that in many cases have yet to materialize.
In an attempt to fill in the blanks, insurers are continuously parsing data to improve assessment of their risk portfolios. However, some risks, such as cyber and climate, are increasing in scope and cost regardless. This taxes carriers’ ability to adequately cover them. As a result, managing such risks requires a societal response across stakeholder classes — policyholders, brokers, carriers, non-insurance entities, capital markets and the government. Global industry, NGO and public sector initiatives are already in place to address some of these concerns but prescriptive actions have been limited as of yet. We expect more concerted stakeholder efforts in the coming years, which may result in (re)insurance products becoming just a part of overall risk transfer solutions.
Connecting functional silos
Underpinning more effective risk transfer and client-centric approaches are integrated internal functions with timely, efficient and rationalized data collection, processing and application. Done properly, operational model redesign simplifies functions and processes, thereby reducing cost and enhancing organizational flexibility. The key to success is creating an end-to-end feedback loop, potentially facilitated by AI, that stitches together disparate data sources. Being able to quickly integrate data from functional domains (e.g., distribution, claims, billing) and actuarial information is invaluable in identifying and appropriately pricing the customer risks you should underwrite, often for multiple (and at times many) policy terms.
Contributors
PwC's Francois Ramette (Principal), Joseph Calandro (Managing Director), and Jonathan Blough (Director) contributed to the Insurance 2030: Commercial P&C considerations report.
Industry perspective
PwC's Marie Carr and Joseph Calandro talk with Kimberly Holmes, Chief Actuary of Liberty Mutual Global Risk Solutions about innovation, risk, and analytics used to improve distribution management.
Joseph Calandro
Managing Director, PwC Insurance Consulting
Marie Carr
Principal, PwC Insurance Consulting
Kimberly Holmes
Chief Actuary, Liberty Mutual Global Risk Solutions
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