Key trends facing insurers writing property insurance

In his keynote address at Grinnell Mutual’s 2019 Mutual Summit, Brian Sullivan brought a “big-prairie-sky” perspective. His keynote presentation at Mutual Summit highlighted the trends, changes, and challenges facing mutual insurance companies.

Sullivan is editor and publisher of Auto Insurance Report and Property Insurance Report. He is a journalist and analyst, covering financial services and the insurance industry for more than 35 years.

Competing in a (slowly) changing industry

“Change in insurance is like a steamroller — it moves slowly, but decisively,” Sullivan said. “Get your feet moving now, so you don’t get flattened.”

Companies can no longer create cost-effective, from-scratch solutions for their operations, according to Sullivan. Instead, getting the competitive edge means using strong third-party solutions for data, infrastructure, Internet, capital management, and reinsurance.

“Every change in insurance benefits small insurance companies more than the larger ones,” said Sullivan. “You don’t need to scale, you need smarts.”

And you need to keep three big things in mind.

Increasing accuracy in pricing

“Smarts” may be one thing missing from the equation, according to Sullivan.

The modern mutual insurance company may not be able to set prices on its own because it doesn’t have enough data or talent. Collaborating with peers and third-party partners, such as Grinnell Mutual, can help fill in the data and human resource gaps. And it makes sense because, as Sullivan said, “Today we all drink from the same data fountain.”

Sullivan believes that by-peril rating is a must because it allows carriers the flexibility to rate policies accurately. An analysis by Verisk found that carriers that implemented by-peril rating plans on their homeowners insurance policies reported loss ratios 7.4 percentage points lower than carriers that did not use by-peril rating (69.2 versus 76.6) and had an average combined ratio of 96.1 (versus a 104.9 combined ratio for other carriers).

Choosing the right infrastructure

Finding a third-party system for policy administration and claims is key to the future success of a mutual insurance company — maybe even more important (and costly) than the building you work in.

“Purchasing a system could be the biggest decision of your career, because of what flows through it,” said Sullivan. “Approach it with care and get it right.”

Rethinking innovation

Fostering innovative thinking can start from the bottom up, with mentorship programs leading the way. Here’s how it works:

Designate a younger staff person or people to do the legwork of innovation, probably someone that you’re targeting for future leadership.
Assign a mentor to your innovation leader or team, who should report directly to senior leadership so ideas can get vetted and implemented without working through a chain of command.
Allow your innovator(s) to allocate time for this as an ongoing project.
If the ideas are big enough, projects can be referred to a cross-functional team within your company, or you can work together to find an appropriate third-party partner.

Who is your customer?

Working with agents

“There will always be a need for an agent who can provide help,” said Sullivan, who predicts that more people will buy direct, thanks to the Internet. That’s why it’s imperative for agents to transition from service providers to service advisers — their knowledge and insight is the true value they offer.

To demonstrate this value, agents need to act on their data instead of reacting to inbound calls. Meanwhile, carriers can help agents be successful by helping them provide purposeful, prepared customer service.

Working with policyholders

Policyholder demographics are changing in America. Millennials — those born between 1981 and 1996 — have supplanted Baby Boomers as the largest age cohort. In addition, more women are making financial decisions in households and immigration is at a high.

As the makeup of policyholders change, so do their preferences in interactions. Companies need to experiment with transactional experiences — paying bills, adjusting coverages, and filing claims — through smartphone applications and websites.

Believe in the digital reality

Online, insurance companies of all sizes are shoulder-to-shoulder and small insurers are gaining a competitive advantage.

“On sites like compare.com, you can get consideration from a buyer without a $400 million advertising budget,” said Sullivan. Online comparison-shopping sites allow carriers to price and quote business with a highly segmented, granular approach.

Prepare now for tomorrow

The future is in collaboration. An insurer’s competitive edge is in the use of third-party data, tools, and services. Sullivan recommends talking to vendors and suppliers to find out what you can do to be a better user of their service.

And consider talking to your policyholders and agents to find out how you can better serve them. Their feedback will give you the insights to improve your products and services. The success of your mutual insurance company could depend on it.

“You have time to change, but you’ll need every minute. You have to respect the past of your company — and the future,” said Sullivan. “Take it seriously.”

Read about Grinnell Re services