Claims Center of Profitable Returns in the Future

Claims is at the center of the revolution to maintain a sustainable organization, according to Mark Cloutier, chief executive officer of the Brit Group and keynote speaker at the recent International Association of Claim Professionals annual conference held in Sonoma, California.

A loose monetary policy globally coupled with major debt has the potential to stifle growth, he said, noting that the federal reserve hasn’t been very accurate with its growth estimate thus far.

“[The] Fed’s inability to establish a firm expectation of growth in the economy,” said Cloutier.

A further challenge to businesses around the world is the declining price of commodities.

Current price earnings suggest a greater concentration of wealth going to the wealthy, causing inequality which is driving continued volatility in insurance industry earning capacity, he explained. Cloutier added that as debt continues to be used for unproductive purposes, larger governments will likely raise taxes.

Worldwide property/casualty rates are expected to decline by about one percent in 2017, he said. As a result, growth will come from global expansion as mergers and acquisitions and disaster-related runoff is expected.

The takeway from his presentation is that the property/casualty industry can expect low to no growth as future consumption is denied and wealth inequality takes hold. Low yields on investment income could mean cash flow may be inhibited for use where needed, he said. The property/casualty industry can expect to see rates decline and falling yields as expense ratios increase. The industry will also likely see increasing regulation, the result of insurers being coupled with the banking industry.

Intermediaries like Airbnb and Uber are encouraging disruption and the industry should take note, Cloutier said. The industry needs to respond by redesigning its model to make the insurance process more efficient and share the savings with consumers.

He said the industry needs to be better about responding to customers and at using data and it should focus on offering better priced products and innovation by introducing new products in response to demand.

Insurers using predictive analytics will see benefits such as better risk selection, better claims outcome and increased customer retention, he said. In addition, Cloutier said insurers need to be better at communicating with regulators.

Because claims is “data rich”, Cloutier said the department can create new demand for underinsured areas, recognizing missed coverage opportunities to offset slow growth and excess supply. The department is also positioned to identify new risks that need protection resulting in new products. Cloutier suggested the industry needs to reevaluate how it delivers and serves the mature products that already exist.

“Claims is the center of change that drives business forward,” Cloutier said.