Study Finds Property Casualty Insurers Pressured to Innovate

Property/casualty insurers are facing an erosion of barriers to entry in their markets, as risk data becomes more widely available, and as new capital sources disrupt traditional insurers, according to a new study by Conning.

“The value proposition of the insurance industry rests on the two foundations of managing information about risk and providing a large pool of capital to absorb risk—both of these are under attack,” said Jerry Theodorou, vice president, Insurance Research at Conning. “First, quantitative and qualitative technology advances that make data increasingly available enable new market entrants or customers themselves to absorb risk that insurers would otherwise handle. Second, new, much larger and more efficient capital providers entering the industry are siphoning off premium that ordinarily would flow to insurers. If insurers do not respond effectively to the data and capital challenges, the property/casualty industry may diminish in size and do so at an accelerating rate.”

The Conning study, “Innovation in Property-Casualty Insurance: Responding to a Changing Value Proposition,” explores the relevance and value proposition of the property/casualty insurance industry in the face of today’s unprecedented challenges. It also presents responses from many leading insurers, as well as scenarios for potential future outcomes and solutions.

“Insurers recognize that the entry of new capital, more widespread availability of data, and the proliferation of new risks pose threats to the traditional insurance value proposition,” said Steve Webersen, head of Insurance Research at Conning. “As these challenges have evolved, leading property/casualty insurers and reinsurers have been responding with structured programs to innovate in product development, emerging risk coverages, and in the use of richer data and analytics. As the industry responds to meet these unprecedented challenges from commoditization and disruptors, it will need to continually assess the value of its responses and reinvest in refining its business model.”

Source: Conning