Pictured left to right: Kathleen Bromage, Brad Auerbach, Avril Castagnetta, Bill Keogh, Scott Steele
By Brent Carris, Research Analyst, Insurance Information Institute
The 2020 Joint Industry Forum began its afternoon sessions with an informative discussion on how businesses can best adapt to the tech driven customer experience. Moderated by Kathleen Bromage, Chief Marketing and Communication Officer at The Hartford, panelists resoundingly agreed that the shift in customer interaction must be a company-wide initiative, not just the job of the Chief Marketing Officer (CMO).
Bromage started the conversation by addressing how focus is shifting more to the services that surround the product, adding how the role of the CMO is facing fundamental change. Panelist, Scott Steele, CMO of Church Mutual noted there is an, “overwhelming amount of information in the technology explosion, ” and CMO’s can make stronger more unified opportunities for marketing to grow.
“Start with consumer expectations and how they are changing,” said Bill Keogh, Insurtech and Fintech Advisory at Ingenium. Every role needs to understand insurance marketing, Keogh added, from the senior level to hiring the right team. Furthering this sentiment, Avril Castagnetta, Americas Insurance Marketing Transformation Leader at EY, addressed the importance of agents and brokers being better at social selling and “someone who engenders trust online”, adding that some customers are even obtaining life insurance policies through WhatsApp.
Personalization and a “0 friction future” are important for the industry to think about, per Brad Auerbach, Head of Industry, Insurance at Facebook. “Look at solutions that are already out there and how you can personalize it for your company,” said Steele. “The more you know about the consumer the more you can bring them the most relevant services, product or communication” added Auerbach, noting the importance of a focus on loyalty and retention.
Wrapping up the conversation, panelists stressed the importance of the CEO pushing and empowering teams to test and learn. “Products are changing and you want marketing to be the front of that,” concluded Keogh.
Between panel discussions and conversations with thought leaders and decision makers from across the insurance industry, I learned a lot and accumulated insights and leads that will feed this blog for some time to come.
At a high level, an informal poll during one session – “JIF 2020 Crystal Ball—What Does the Future Hold?” – asked attendees several questions to get a sense of where they see the greatest opportunities and threats for the coming year. Asked where they thought innovation would have the greatest impact in 2020, 36 percent said claims, followed by 26 percent who said they believe product marketing would be most affected.
I suppose this isn’t very surprising, as claims and product marketing both touch customers very directly. Marketing makes the promises and, when it works well, claims keeps them. These should be high-priority areas for companies that expect to remain in business and competitive.
When asked what they expected to affect their companies’ bottom lines the most, 47 percent of participants said natural disasters and 30 percent said litigation costs (highlighting the increased attention being paid to social inflation).
I was a bit surprised to see cyber didn’t rank higher – especially given the fact that it recently came out at the top of concerns cited in the 2020 Allianz Risk Barometer. Autonomous vehicles – for all the media attention they receive – was the top choice of no one in the room.
When asked which of the following natural perils – tornadoes, hail, hurricanes, wildfires, and floods – keeps participants up at night, someone piped up to ask, “Why don’t you have an ‘all of the above’ choice?”
Forced to choose, the group’s top nightmares were: floods, wildfires, and hurricanes, in that order.
Asked about global events and trends they expect to have an impact on insurers worldwide, “Protectionism and trade disputes” was the top answer by far, at 58 percent – far above the next-highest: 28 percent for Brexit.
When asked about their expectations (not necessarily their preferences) for the 2020 election results, more participants (54 percent) said they expect a continuation of the status quo, with a Republican White House and Senate and Democratic House of Representatives. Twenty-nine percent said they expect the Democrats to take the White House and the Senate and House to remain essentially unchanged.
I found these results a bit surprising, given the mid-term turnout that led the House to flip from a Republican to a Democrat majority. The dynamics don’t seem to have changed much since the mid-terms. If the Presidency doesn’t change parties, one might reasonably expect a change of balance in the Senate. If a Democrat wins the Oval Office, I would expect the dynamics that get him or her there would also result in the Senate changing hands.
While interesting, this is not at all a scientific study. What are your thoughts and expectations on these or other topics affecting insurance in 2020?
Each year Triple-I hosts a conference called the Property/Casualty Joint Industry Forum. This event, which took place on January 16 this year, assembles key figures from the business, policymaking, and media spheres to explore topics of vital interest to the property/casualty insurance industry.
During his opening remarks, Triple-I CEO Sean Kevelighan laid out many of the key issues the industry is facing: extreme weather events (wildfires can now be as costly as hurricanes), flat interest rates, populism and political risk around the world, building the workforce of the future, and the race to better engage with customers. Making disaster resilience a win/win proposition for both insurers and their customers is another vital issue.
He then sat down with CBS News’ senior foreign affairs correspondent and Face the Nation host Margaret Brennan. They discussed current events, including the impeachment of President Trump and the recently signed trade deal with China. Ms. Brennan advised news consumers to make sure that they have a trusted source: “if they are a pain to each side,” then you know they get it right.
Sean Kevelighan and Margaret Brennan
Over the next week or so, we’ll be blogging about the fascinating conversations that took place during the conference. Upcoming posts will cover:
Extreme Weather
The Future of Insurance Marketing
JIF 2020 Crystal Ball—What Does the Future Hold for the Insurance Industry?
A 21st Century Workforce That Reflects the Communities We Serve
A Conversation with Economist Dr. Glenn Hubbard on Business and the Economy
For a full agenda click here. Check out this video for an overview of the conference. Interested in attending next year’s conference? Contact us at jif@iii.org.
I’m looking forward to attending my first Insurance Information Institute Joint Industry Forum next week. The agenda for the January 16 event at the Marriott Marquis Hotel in New York City is packed with impressive speakers from across the insurance industry, as well as influencers from media, academia, and the world of politics and policy:
Triple-I CEO Sean Kevelighan will interview award-winning broadcast journalist and CBS Face the Nation host Margaret Brennan about current issues and the 2020 elections;
Former U.S. Council of Economic Advisers Chairman Glenn Hubbard will discuss events and trends shaping the insurance business environment with Wall Street Journal chief economics correspondent Jon Hilsenrath; and
Phil Klotzbach, research scientist in the Department of Atmospheric Science at Colorado State University and Triple-I non-resident scholar will lead a panel on extreme weather that includes the Weather Channel’s Dr. Rick Knabb.
Other panels include:
The Future of Insurance Marketing;
A 21st Century Workforce That Reflects Communities We Serve; and
An interactive discussion:JIF 2020 Crystal Ball—What Does the Future Hold?
The full-day event will wrap up with a cocktail reception with Dr. Hubbard. The entire event will be a fun, informative opportunity to learn and network with peers, subject-matter experts, and industry influencers.
I hope to see you there; if you haven’t signed up, please note: Registration closes at 5:00 p.m. (ET) Friday, January 10, 2020.
It’s getting harder for California homeowners in fire-prone areas to buy and keep insurance.
Homeowners insurance non-renewals were on many listeners’ minds during last week’s Insurance Information Institute (I.I.I.) radio satellite media tour (SMT) on the aftermath of the 2017-18 California wildfires.
With 20 media outlets throughout the state participating, I.I.I. CEO Sean Kevelighan, Head of Media and Public Affairs Michael Barry, and Director of Strategic Communications Janet Ruiz were on hand to answer questions from journalists.
As the frequency and cost of California wildfires increase, it’s getting harder for homeowners in fire-prone areas to buy and keep insurance. In August 2019, the California Department of Insurance released data showing insurers are non-renewing an increasing number of residents in areas with high wildfire risk.
The guidance the I.I.I. provided to Californians faced with this dilemma included:
If your insurer says they won’t renew your policy, ask them to reconsider. Your situation may involve factors they don’t know about.
Try another insurer. The insurance market is competitive, and insurers don’t profit from not writing business. Risk appetites and underwriting vary.
When all else fails, California’s Fair Access to Insurance Requirements (FAIR) plan is available as an insurer of last resort, after “a diligent effort to obtain coverage in the voluntary market has been made.”
The I.I.I.’s speakers also emphasized during the SMT that property owners can make their homes more resilient to wildfires by mitigating their own risks; how California’s insurers disbursed nearly $25 billion to their customers to help them recover financially from the 2017-18 wildfires; and how state regulators are working with insurers to price accurately the risks of covering homes in wildfire-prone communities.
Within hours of I.I.I.’s SMT, California Insurance Commissioner Ricardo Lara announced mandatory protections from insurance non-renewals extending into new areas of Northern and Southern California. The one-year moratorium covers residential policies in ZIP codes adjacent to recent wildfire disasters. The law cited by Commissioner Lara (Senate Bill 824) protects homeowners adjacent to a declared wildfire emergency who didn’t suffer a total loss — recognizing the disruption non-renewals cause in communities after wildfire disasters.
Below is a list of the participating radio stations and podcasters who taped the I.I.I. conversations for either broadcast or streaming in January 2020:
KCAA 1050-AM/KRLA 870-AM/KSPA 1510-AM Los Angeles/KDIA 1640-AM/KFAX 1100-AM Radio San Francisco-Oakland-San Jose “Bill Martinez Live”
Business Radio X-IND Podcast National, “The Mark Bishop Podcast”
KOCI 101.5-FM Los Angeles/Liberty Express Radio Network-AM/FM Radio Syndicated “School for Startups”
KSZL 1230-AM Radio Los Angeles “America Tonight with Kate Delaney”
KMET 1490-AM Los Angeles – KEST 1450-AM Radio San Francisco-Oakland-San Jose, “Talk! With Audrey”
Transformation Talk Radio-Online Podcast National, “The Dr. Pat Show”
KVTA 1590-AM Radio Los Angeles, “The Kim Pagano Show”
KSTE 650-AM Radio Sacramento-Stockton-Modesto, “The Chad Benson Show”
In a hard market, demand for coverage is strong, supply weak. Insurers impose strict underwriting standards, and buyers pay higher premiums.
For those still tiptoeing around whether the property insurance market is yet officially “hard,” two speakers at Advisen’s Property Insights Conference last week unabashedly used the “H-word,” and none of the 300-plus insurance and risk-management professionals attending seemed to disagree.
Gary Marchitello, head of property broking for Willis Towers Watson, was first to say it in an on-stage conversation with Michael Andler, executive vice president/U.S. property practice leader at Lockton Cos.
Andler concurred: “If it walks like a hard market and talks like a hard market, it’s a hard market.”
Some presenters during the daylong event quibbled over when pricing went from merely “hardening” to “hard”. Some said the hard market is eight quarters old, while others said it began as recently as the second quarter of 2019 – but no one piped up to deny it’s here.
Hard, soft, and why it matters
In a hard market, demand for coverage is strong, supply weak. Insurers impose strict underwriting standards and issue fewer policies. Consequently, buyers pay higher premiums. During soft markets, customers can negotiate lower prices as insurers compete for business. When the market hardens again, prices rise as insurers adjust rates at renewal.
Marchitello, with four decades’ experience, said this hard market is different: “With prices rising, you’d expect new entrants to the market. That is absolutely not happening.”
“It’s going to get worse before it gets better,” he added. “Two years of combined ratios above 100 have forced underwriters to drive profitability” rather than pursue market share, as many did during the soft market.
We brought it on ourselves
In a room packed with insurers, brokers, and buyers, one might expect some finger pointing for the dramatic price increases. I heard little to none.
“We as underwriters allowed it to happen,” said Erik Nikodem, senior vice president at Everest Insurance.
“We lost the script during the soft market,” said Michal Nardiello, senior vice president at CNA. “We pushed deals that weren’t sustainable in the long haul.”
And it wasn’t only underwriters accepting responsibility.
“I never turned down a lower rate” when the market was soft, said Lori Seidenberg, global director of real assets insurance for BlackRock. Not that she should have – but professional risk managers know a soft market isn’t going to last forever and need to plan accordingly.
Despite this admirable accountability, it’s important to remember larger forces have been at work. As CNA’s Nardiello put it: “There’s been a massive shift of wealth and people into areas prone to fire, tornados, hail, and flood” – perils that are themselves changing in frequency and intensity.
Also a factor is “social inflation” – rising litigation costs that drive up insurers’ claim payouts, loss ratios, and, ultimately, policyholder premiums. It’s been estimated that social inflation “could ultimately blow a $200 billion hole in global reserves.”
What’s next?
Carriers, customers, and brokers all acknowledged the need to do things differently. While much was said about using technology, data, and analytics to improve underwriting and reduce expenses, the dominant theme was communication. All parties recognized they must communicate early and often.
As Duncan Ellis, head of retail property, North America for AIG, put it: “Bad news doesn’t get better with time.”
“It’s important for brokers to get a handle on the data,” said Theresa Purcell, director of risk management for real estate giant Kushner. She also recommended that brokers “get creative. Suggest different structures. Educate us about other services” that might better suit individual customer needs.
Stephanie Hyde, executive director at P-E Risk, an insurance and risk management consultancy, echoed Purcell, adding that brokers need to “educate yourselves about all lines of coverage your clients need so you can understand what they’re going through.”
Maria Grace, vice president and chief underwriting officer for property and inland marine at Everest, urged brokers to “put us [underwriters] in front of your clients” to help them understand why prices are increasing and, where possible, offer more appropriate solutions.
