Risk & Insurance: 2020 Trends Set to Shape 2021
As we wind down the year, we thought we’d look back at trends that affected our industry and the lessons gleaned. Here are six topics that are top of mind for the team at Archipelago as we head into 2021.
By this time last year, companies were already embracing Zoom calls, Slack messages & Google docs; post-COVID, the embrace will only grow stronger. And yet, this is just the early throes of an unevenly distributed future. If the tide emerged through broad generalized platforms, it’s already bringing in a new crop of industry-specific, domain-tuned collaboration tools that tackle everything from structural design to safety inspections. How will this change the way you work?
— Tim Anglade, VP Product
Incorporating Resilience into Community Programs is More Important Now Than Ever
Community Resilience is a measure of a community's sustained ability to utilize available resources to respond to, withstand, and recover from adverse situations. However, due to the increase in natural disasters over the last ten years, there has been an overwhelming focus on mitigating loss from these physical hazards only. This focus on disaster resilience is not lost in wake of the Covid-19 pandemic. We have learned that community resilience, the full community, is more important than ever. The principles that experts have promoted for disaster resilience have immediate applicability to support the recovery from this pandemic.
Past disaster community resilience focus has often been on the adaptation process, focusing on infrastructure recovery, government and non-government entity communication, social capital, and economic development. These ideas supported the development of post-COVID public health policies, risk communication, and the need for a rapidly changing built environment. The pandemic provides us a catalyst to create truly resilient communities for all residents and all types of shocks and stressors.
— Erin Ashley, Director of Risk Engineering
With the pandemic front of mind, it would be easy to overlook another key 2020 development that will shake up the commercial insurance landscape for many years to come. Aon’s combination with Willis will create the world’s largest broker, and clear daylight in terms of scale between the top two, Aon and Marsh, and the rest. The implications of this for clients will unfold in due course but could swing either way in terms of being beneficial vs. detrimental. On the one hand, there are clear benefits to scale, and bigger could mean better: global reach, insight from data, market power to drive positive change; on the other, less choice and competition may breed inertia and stagnate innovation. Other brokers will steadily rise to the challenge, but the fate of the industry and its required modernization through digital transformation may ultimately come down to how Aon and Marsh choose to embrace their leadership positions.
— Anthony Siggers, Co-Founder & CPO
The Challenge to be Different
Many insurance companies operating in the United States are often, from an outsider's perspective, indistinguishable by service and financial rating. Up until recently, insurance companies have been competing aggressively on price to increase or maintain market share. Unfortunately, throughout the last 2 to 3 years, insurers have suffered considerably from accumulations of attritional losses. Add in a prolonged period of high expense ratios, and insurance companies are dealing with depleting profits and a reduced ability to underwrite new business.
The insurance market is hardening with rate increases up to 50% year over year occurring. Brokers are shopping around for their clients in search of a reasonable deal. Underwriters, as a consequence, are seeing record numbers of new submissions, which in turn is posing new challenges for insurance companies. Business leaders want to avoid the mistakes of recent years and build sustainable, diverse, and profitable books of business that can ride out price cycles and poor-performing loss years. Underwriters are under unrelenting pressure to achieve such goals.
There are growing signals indicating that insurers are creating sources of competitive advantage for their underwriters through the requirement of deeper client insights and the ability to process business holistically and efficiently. Common themes include data that goes beyond the status quo, providing insights around catastrophe risk, non-catastrophe risk, and risk engineering; prioritizing submissions rich in content and high in structure ahead of those poor in data quality and structure; programmatic ingestion of submissions to support quick and accurate triage and prioritization against appetites; and new approaches to risk engineering assessments that do not necessitate the need for on-site visits.
— Dominic Sindall, Solutions
The Demand for Establishing Virtual Relationships is Here to Stay
The inability to meet in person has changed the dynamics of business communication and insurance market interactions, not only with the traditional “renewal roadshow” and business travel but also with weekly in-person engagements and local events. As we have been forced to quickly adapt to a new norm of Zoom rooms and Webex-style formats, the industry as a whole has eliminated travel time and expenses and had to make deals without face-to-face interaction. Now, we rely on existing relationships, virtually established interaction, and insured submission data. Virtual roadshows have provided a substitute to present an insured’s risk management story and showcase a portfolio beyond the initial submission data with remote relationships.
As much as in-person interactions will still yield unique credibility and higher fidelity collaboration, the frequency of in-person meetings and travel won't likely bounce back in upcoming years. The good news—to date, over the last year, it has not seemed to negatively impact renewal results. Rather it has forced a focus on trust, technicality, and a knack for virtual relationship building. As business cases are established (or I’ll bullishly say proven), traditional work travelers may see themselves having more personal flights than business flights. Workspace dynamics of the office will continue to change (you won’t see your co-workers or clients at the same cadence), and face-to-face meetings will be less frequent and considered a luxury.
— Jordan McCarthy, Account Executive, Client Development
Data Quality will Impact Your Renewal
Today's hardening commercial property insurance market continues to impact buyers, brokers, and insurers. As noted in Advisen’s 2020 Property Insights Conference, more than any time in the last decade, insurers are placing a premium on data quality in the form of secondary modifiers, TIV accuracy, and SOV completeness, as well as rewarding differentiated stewardship such as robust inspection programs and investments in mitigation. In essence, risk managers are being challenged to go from buying insurance to finding the right combination of risk retention, alternative risk mechanisms, traditional insurance, and compromise to balance the convergence of budget constraints, higher rates, and constrained capacity.
As this trend continues, 2021 will be a year that rewards those who ensure accurate and clean SOVs.
— Fred Kipperman, Managing Director