Consistent Challenges Impacting Insurance Policyholders
In a world of constant change, it’s helpful when you can find some consistency — especially when you have clients who may be impacted!
Recently, I had the chance to attend two different insurance carrier conferences. At these meetings, the carriers provided their agency partners with updates on financial performance, strategic initiatives, challenges, opportunities, and forecasts for the future.
The two insurance carriers are quite different. One is a regional mutual carrier with a defined market segment. The other is a national carrier writing for a broad range of business sizes and industry types.
Despite their unique position in the insurance marketplace, the challenges facing both carriers are consistent. Here’s what I found.
Technology and Cybersecurity
Over a million cyber, ransomware, and fraudulent attacks are happening every day. Not only are the insurance carriers concerned about policyholder security protocols and performance, but they’re also focused on their own defenses.
Insurance claims continue, rates are going up, and coverage is going down.
We’re all in this together, and we all need to be vigilant to watch for any phishing or phony schemes.
Increased cost of parts, increased cost of labor, and delays due to supply chain disruption are all causing increased claims payments.
The war between Ukraine and Russia is also impacting inflation, as the lack of oil puts added pressure on inputs. This inflation is requiring the increased insurance-to-value limits and driving cost of risk (rate) and putting pressure on loss ratios. In order for carriers to adequately price and reserve for the expected claim payout, they need to increase rates.
To see these dynamics in action, let’s look at an example (one that hit close to home). Recently, my friends were rear ended. Fortunately, no one was hurt. The car needed a new bumper, repairs to the trunk lid, a few dents popped out, and touchup paint. Likely a few thousand dollars, and the car would be in the shop for a couple days, right? Wrong! Mechanic’s labor charges, plus the cost of the parts and materials provided, put the estimate at three times the amount initially expected. The body shop is backlogged, and parts must be ordered, which means the earliest appointment for the repairs is two weeks out. My friends’ auto policy provides a benefit for a rental car. Instead of a rental car for a few days, the insurance carrier is now paying for 3 weeks of rental car expense on top of the cost to repairs. This is all assuming the necessary parts for repairs are available and arrive on time. The overall cost of the claim went from a few thousand dollars to five figures.
Talent Acquisition and Retention
Navigating labor issues in the current economic environment is driving the importance for efficiencies and incorporation of insurtech solutions. Insurers, like all of us, are looking for great talent. People who love what they do, who they do it with, and providing great value and service to you, our clients.
Insurance Rate Increases Impact Everyone
Big or small, local or national, the challenges listed above will impact all policyholders, likely in the form of rate increases.
At Holmes Murphy, our purpose is to care about your potential. That means educating and preparing you for what lies ahead — even if the news isn’t great. Armed with information, you can make informed decisions on your insurance and risk management program.
While the only constant is change, education is power, and we’re here to help you with it all. Feel free to reach out to us with any questions!
Published on: 05.16.22