Policy admin systems, business intelligence/modeling tools, CRM/distribution, connectivity and claims are the most important areas for specialty insurers to focus their tech investments, if they haven’t already, according to “Business and Technology Trends: Specialty Lines Insurers,” a new survey and study from Novarica.
The study suggests specialty carriers are holding the line with no real improvement in the market at this point; therefore, their primary concerns are growth, expense reduction across the enterprise and operational effectiveness.
The report identifies 48 insurers active in the specialty insurance space, two with more than $5 billion it total premiums (Lexington Insurance Company and Zurich), 17 with more than $1 billion in total premiums, and 29 with premiums ranging from $100 million and $1 billion.
Novarica indicates the top priorities for specialty insurers are business intelligence (reporting and repository), rating engines and core policy admin systems. While the report outlines the focus of specialty lines’ carriers within each area of the enterprise, the acquisition and storage of detailed structured- and unstructured-risk data across core systems is repeatedly emphasized for its ability to enable better underwriting and pricing.
According to the research, using excess & surplus (E&S) as a proxy, a few specialty lines carriers are reporting a pullback from the more challenging lines. Chiefly, carriers are exiting from exposed property catastrophe, given the after effects of Hurricane Sandy and other catastrophes in 2012.
Loss experience and pricing is highly dependent on regional focus and the specific line of business. According to the report the private and nonprofit D&O market is wrestling with underpricing, while cyber-liability insurance has being seeing continuing double-digit growth. There is also the tension between the need to tighten coverage and raise rates and the desire to maintain market share.
As the book continues to shift to higher hazard business, specialty carriers have to become even more focused on proper pricing and delivering true underwriting expertise for unique accounts. While rate increases are common and submission volume is on the rise, it remains to be seen how much of this will translate to increased premium.
Novarica also points out that carriers also are seeing more negotiation at renewal time, with some insureds more willing to consider self-insurance or co-insurance.
