Usually financial results are black and white, positive or negative, good or bad. However, the analyses of the P & C underwriting results from 2015 are coming in and looking decidedly gray – neither good nor bad.
According to an article in Insurance Journal, “...net written premium grew by 3.4 percent in 2015 versus a 4.2 percent hike in the previous year.” Further, “...the combined ratio grew to 97.8 from 97 in 2014. In 2013, the figure was at 96.2. As the ISO/PCI report points out, this is the first time the combined ratio was under 100 three years in a row since 1971-1973.”
On the one hand net premium grew, and the combined ratio was still in the black. Not only that, it’s the first time in over 40 years that there have been three consecutive years of positive combined ratios. Great! Right?
Well, not really. The rate of growth slowed and the ratios did rise, and these trends have P & C executives worried. In fact, as Beth Fitzgerald, president of ISO solutions, explains in the article, “The slowdown of written premium growth for the entire industry could indicate an even more challenging environment for insurers in the near future.” And AM Best has rated commercial P & C negatively since the start of the year.
What to do about this? Ms. Fitzgerald prescribed the solution in the Insurance Journal article: “Only those insurers best equipped for underwriting will likely see success in the future.”
That makes sense.
To reinforce the importance of good underwriting in the future, Tony Cid, at Intellect SEEC, has published a white paper called “Analytics and Big Data: Changing the Role of the Underwriter” through Property Casualty 360. In it he elaborates on what “best equipped for underwriting” might mean. He outlines the four key roles of Underwriters of the future:
- The new business generator
- The innovator
- The customer advocate
- The data expert
These four roles offer insight into how underwriting will become more influential on the overall results for P & C insurers. Well equipped and innovative underwriters are not just going to make the existing business more profitable, but they are going to actually grow the business by finding new risks to underwrite and new premium to collect by solving real problems for their customers, leveraging data and information in new ways.
Better underwriting is the path out of the gray for P & C, and the future is now.