Having experienced the largest decline in profitability in 2011, the U.S. non-life insurance market was most improved compared to other national markets in 2012, according to the “World Insurance Report 2014,” from Capgemini, a business and technology consulting firm.
Many non-life national insurance markets saw increased profit margins in 2012, helped by stronger ratios for claims and investments, Capgemini said, and continuing investment in operations and channels led to stable and improving operational and acquisition ratios.
As indicated by the underwriting ratio, overall efficiency improved in 2012, as non-life insurers benefited from a lower number of major natural disasters, as well as better management of operating and acquisition expenses. Further, primarily a result of lower CAT losses, insured claims fell to $77 billion in 2012, a significant decline from $126 billion the year prior, when Superstorm Sandy hit the east coast of the United States and an earthquake and tsunami hit Japan, Capgemini said.
Claims ratios across the globe are recovering, Capgemini said, following the high payouts that hurt many markets in 2011. In the United States, from 2011 to ’12, the percent change for the claims ratio improved to 69.6 percent, a -4.6 point decline.
“From an operational perspective, however, the industry performed poorly,” Capgemini said. “Already high, the U.S. operating expense ratio deteriorated an additional 1.9 points, making it the worst-performing operating ratio of all the countries examined.” At 1.9, the operational ratio showed a “medium deterioration,” Capgemini said; the acquisition ratio was -1.0, a “low change;” and the underwriting ratio was -3.7, a “medium improvement,” Capgemini said.
While continued heavy investment in core systems transformation, predictive modeling and claims processing likely have increased operating costs in the short run, they could help insurers increase operational efficiencies in the long run, Capgemini said.
Acquisition ratios improved for the third year in a row in the United States, Capgemini said, as insurers increasing conducted sales via the Internet and mobile channels. By 2015, digital channel sales are projected to grow by 11 percent to $14 billion, Capgemini said, which is 6 percent of the total category of insurance sales.
In most countries, acquisition ratios are improving modestly or staying the same, Capgemini said, as the use of direct sales and service channels begins to become more mainstream.
The United States, France and Germany were most improved in terms of acquisition ratios, and moving customers to direct channels, including mobile and the internet, is helping to contain acquisition costs, Capgemini said, by reduce the costs of supporting sales forces, while also permitting anytime, anywhere self-service options.
