I recently published our latest Business and Technology Trends report, which looks at the top priorities for personal lines insurers based on our own expertise and conversations with members of our Novarica Insurance Technology Research Council. I also offer data about the marketplace and discuss 30 examples of recent technology investments by personal lines insurers. As the market continues to be soft and very competitive conditions increase profitability pressures, personal lines insurers are focusing on growth strategies, expense reduction, and improving underwriting results.
Overall, the personal lines market is characterized by high transaction volumes; intense price competition; high levels of advertising spending, particularly on the part of direct response companies; and slow growth.
Widespread use of segmentation has restrained the cyclical nature of personal lines pricing, with auto pricing remaining fairly stable even as homeowner rates increase. Furthermore, the weak economy, while beginning to recover, has left a legacy of declining premium and fewer exposures as fewer vehicles were purchased and limits were reduced to control costs. Stagnant investment income on top of that has resulted in rising combined ratios and significantly increased competition as carriers vie to take a larger piece of the pie from other carriers.
Against this landscape, personal lines carriers are focusing on managing and improving customer retention, improving – or just maintaining – their market position, and reducing their expenses to continue to respond to pressure on the combined ratio. In particular, carriers’ top initiatives include business intelligence, policy administration systems replacement, claims systems replacement, and portal functionality for both agents and insured.