The P&C Insurance Industry has entered 2024 with signs of positive change. Many insurers across the industry have taken strides to improve underwriting practices for better risk assessment.
While underwriting has taken a greater focus, this has left areas of the country uninsurable or with intense rate hikes. This year continues a hard market for P&C insurance, affecting personal lines to a great degree.
WaterStreet Company is here to help inform insurers of trends to expect in 2024. We are a provider of P&C Policy Administration Software, supporting insurers through policy and claims administration, document management, third-party connections and more.
The State of the P&C Insurance Industry
In the first half of 2023, the United States P&C Insurance Industry experienced the largest mid-year underwriting loss, leading to a -70% net income decline by $22.2 billion.
At the close of 2023, S&P Global estimates the P&C insurance market reached a break-even point due to a multitude of factors. Carriers across the country have employed corrective actions to improve premium growth.
Early predictions in 2023 estimated a softening of market conditions for commercial lines. Commercial lines across all account sizes by mid-year 2023 experienced an 8.9% premium increase. S&P Global found the profitability gap between personal and commercial lines has reached a significant high as commercial lines have become much more profitable over the course of 2023.
Inflation greatly pushed costs behind claims losses in 2023, resulting from the increased cost for construction materials and auto parts for personal lines. Hurricanes and natural disasters were attributed to causing $32 billion in insured losses by mid-year of 2023.
By November of 2023, the core inflation index reached its lowest level in two years, driven by lower energy and gas prices. Housing costs and consumer goods continued to climb, deeply affecting American households and bringing the total inflation rate to 6% annually.
The real estate market continued with similar year-over-year trends in 2023. Premiums for homeowners grew over 13% in Q3 of 2023 while home buyers experienced low inventory. December 2023 experienced 1.03 million fewer active home listings compared to December 2019.
Many insurers are turning towards usage-based insurance as the sensors for sharing data in vehicles and homes gain adoption and more policyholders aim to decrease their costs per usage. The global market size for UBI is projected to reach $66.8 billion by 2026.
Bottom Line:
- Net profit for the P&C Insurance Industry has closely broken even in 2023 with significant underwriting losses in the first half of the year.
- Profitability in commercial lines greatly outweighed profitability in personal lines.
- Inflation has impacted claims costs and continues to affect many areas of the economy with improvements to energy sectors.
2024 P&C Industry Trends
Marketing Strategies
Direct to Consumer marketing offers insurers a competitive advantage while managing marketing channels. This method of marketing allows insurers to increase and decrease ad spend depending on market conditions, saving costs and amplifying returns with agility throughout the year.
Many insurers and investors have turned a strategic eye towards embedded insurance. When today’s insurance customers shop for coverage, they tend to start their insurance buying journey right where they left off while financing their property – with the loan lender. Whether the customer purchased a car, a home or other property, lenders are in an excellent position to recommend insurance products.
Real Estate
The current 30-year fixed mortgage interest rate as of March 2024 stands around 7%, leaving new homeowners with hefty monthly payments.
This March 2024, a landmark ruling has upended commission structures for realtors, going into action this July 2024. Home sellers will no longer be responsible for covering commissions towards the buyer’s agents. This is likely to add greater up-front costs to new home buyers, but will likely also bring down the total costs of buying a home.
Loss Triangle Analysis
There is renewed interest in Loss Triangle Analysis. While Loss Triangles are conducted periodically for financial reporting purposes, many businesses miss opportunities in disorganized data. When the company has central, unified data management practices, many more insightful trends are made possible to help guide the company towards efficiency.
Underwriting Practices
Underwriting efficiency calls for careful watch. Many insurers have improved technology in risk assessment to improve the quality of their data and ease of use for reporting.
Insurers have the opportunity to arm underwriters with a suite of tools for better assessing the risk of a property. These tools include methods of monitoring the age and status of homes, such as the age of home roofs, and integrating with geolocation applications to move away from risk assessment by ZIP codes and towards geological data.
These metrics include the average number of days a quoted policy spends in underwriting, or strike rate, to help measure the quality of lead generation before it reaches underwriting.
Industry Niche Trends
Managing General Agents (MGAs) are stepping in to help fill claims administration and underwriting needs for lenders. This has led MGAs to seek insurance software that can match complex business requirements.
Small to mid-sized insurers are facing greater difficulties. Many feel priced out by competitive incumbent carriers and high claims payouts due to underestimated risks.
The accelerated need for insurance analytics has also placed small insurers at a disadvantage who may not have the talent or historical data needed to highlight key performance and play to the company’s strengths.
WaterStreet Company in 2024
WaterStreet insurance solutions are flexible and backed by decades of experience in P&C insurance.
We understand the importance for carriers and MGAs to adapt to market changes. Ask us about our additional services for accounting, policy, distribution and customer service support.
Reach out to WaterStreet Company today to request a consultation and demo.
