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“Property and Casualty insurance carriers collectively have now been profitable for thirteen consecutive years” according to industry analyst Chris Burand. According to Burand this is unprecedented and has taken place in “the softest and most stable market, over a ten-year span, in history.”
This is a truly remarkable development. It has many obvious implications for agents.
According to Burand in a time like this the natural behavior of insurance companies is to “focus much harder on expenses”. This makes sense when you think about it. As I have written before the capabilities to collect and analyze data have been growing exponentially. Carriers have the resources to deepen their investments in these areas with the tremendous profits they are making. Burand believes, and I agree, that they will invest even more in loss modeling and automated underwriting systems.
A little over a decade ago the use of credit scoring became the norm for loss prediction in personal lines. Then increases in computing power allowed credit scoring and loss trends to be compared for better rate prediction. Now, the exponential increase in computing power, the increased sophistication of algorithms, the plummeting cost of computing and the historical cash position of carriers gives insurance companies to become much more sophisticated. And they are.
Of course as companies are able to do a better job of loss prediction their reliance on agent’s front line underwriting will decline.
According to Burand “the historic focus companies have placed on agencies to upfront underwrite will be minimized. Many agencies entire business model is based on their upfront underwriting ability…so their survivability is questionable.”
What insurance companies need agents for is organic growth. This has always been true. It will be true in the future. In fact, it is likely, based on Burand’s assessment to be the most valuable thing agents do. This in an environment in which agents have, and will have unprecedented competition from non traditional sellers of insurance (i.e. Google, Walmart, Overstocks, Esurance….).
The first implication is obvious! If you are not a growth-oriented business your future is extremely limited! Unfortunately for most independent agents they are not growth oriented. Are you?