Natural catastrophes headlined the world of personal-lines insurance in 2011. To gain some perspective on what to expect in 2012, NU asked an array of leading executives about their current concerns—and what trends and new developments will shape the personal-lines business this year.
LEONARD C. BREVIK
Executive Vice President and CEO
National Association of Professional Insurance Agents
The biggest concern is navigating a tricky economy. Right now, we seem to be stuck somewhere in the middle, not knowing which way things will go. In our industry, we see some signs of a slight firming in prices, but we’ve been seeing that for over a year now. In the broader economy, Wall Street has been doing great lately, but on Main Street things could be better.
A big issue for PIA will be public policy regarding natural catastrophes. We are fully supportive of legislation that would enhance mitigation—but not of legislation to replace private insurance with government programs. PIA members believe that natural-catastrophe risk should be placed in the insurance market, not on taxpayers.
Hopefully, we will not have to lobby for another short-term extension for the National Flood Insurance Program in 2012. We hope that Congress will finally pass the Flood Insurance Reform Act of 2012, with its five-year reauthorization, well in advance of the expiration of the program’s authorization on May 31, 2012.
It is likely that as a result of the 2012 elections there will be a Republican-controlled Congress. We are preparing for that change by seriously looking at some of the tax inequities independent agents face as small businesses.
More generally, we would certainly expect that a Republican-controlled Congress would be more responsive to the needs of small businesses and independent agents. But we will need to remain vigilant on certain issues. For example, PIA strongly opposes federal regulation of insurance, but support for it crosses the ideological divide.
Senior Vice President
Chartis Private Client Group
Although there have been incremental improvements, we are still in the midst of a down economy. For those with substantial wealth, liability exposures are heightened as a result. For example, the minor fender-bender of five years ago is now more likely to escalate into a full-blown lawsuit, and there are more underinsured drivers on the road as well.
Sarcastic comments posted on Facebook or other social-media outlets could become fodder for a slander claim. There’s also a heightened risk of domestic [household] employees becoming more litigious.
Our personal Excess Liability policy was created to address these precise exposures with much higher limits than what is typically available in the direct-to-consumer marketplace.
In addition, we will continue to help high-net-worth homeowners obtain the robust catastrophe coverage required to adequately protect their residences.
Consumer awareness continues to be a challenge for those of us who offer more specialized products and services to a niche group. The majority of high-net-worth individuals and families still purchase insurance without the guidance of an independent agent. They’re inadvertently limiting their access to customized protection, higher coverage limits and high-touch claim service.
President and CEO
Independent Insurance Agents & Brokers of America
Many of the challenges the independent-agency system faces in 2012 are centered in Washington, D.C., including continuing battles regarding the National Flood Insurance Program; health care; financial-services oversight and regulatory reform; crop insurance; and tax reform. In 2012, the Big “I” will continue to advocate on behalf of its small-business owners on these issues.
The Big “I” is very excited to announce the launching of the consumer-agent portal (CAP) in the Summer of 2012, which will result in fundamental changes in the way independent agents serve and interact with consumers and will help drive business to independent agencies on the electronic highway.
Chubb Personal Insurance
We have the opportunity to emphasize the “personal” in personal insurance. One way we do that is to highlight the many services—beyond claims-paying—that make Chubb a valuable partner in asset protection. Home appraisals, wildfire-defense services, advice on how to protect your jewelry and art collections, and referrals to quality service providers are just some of what we provide to our personal-lines customers.
Private Wealth Vice President
For personal insurance, no significant rate increases are planned in 2012 at Fireman’s Fund.
We anticipate continued new-business growth in the high-net-worth arena. The biggest challenge we face is educating wealthy individuals with significant net worth and assets on the difference in coverage they receive from a general product and [one tailored for them]. Many wealthy people are not appropriately insured, as they are covered by a general insurance product through a captive agent with insufficient limits and limited coverage provisions.
A good example of a coverage gap is having sufficient loss-of-use coverage for the time it takes to rebuild a multimillion-dollar mansion. This process typically takes multiple years, but most general-market policies only provide one year of loss-of-use coverage and cap the amount available.
Consumer Markets The Hartford
The Hartford believes it is critical to stay at the leading edge of pricing sophistication. Through telematics we have access to detailed information to help price the risk. Our telematics offering, called TrueLane, will be piloted in 2012.
In an era in which digital technology is growing exponentially and direct-to-consumer sales are thriving, some people are surprised to learn that many consumers still prefer to buy their home and auto coverage through a local agent. One group that should be of particular interest to agents is the 78-million-strong baby boomer [generation], which represents the largest and fastest-growing age group in history. They control 60 percent of market premium, making them a very desirable segment.
According to our research, the majority of AARP members prefer the advice and counsel of a local agent when making decisions about their insurance. Capitalizing on this receptivity affords agents—and those companies that partner with them—opportunities for significant growth and business development.
Field Management Travelers Insurance
With the shifting market conditions, now is the time for agents to focus on the customer experience to drive retention.
The annual client-review process is one way agents can help clients understand the coverages, discounts and options that can maximize their insurance protection. Travelers supports agents in this process with our Guide to Better Coverage, an online educational tool that identifies how life changes impact coverage needs.
We also believe that technology can become an integrated part of agents’ value proposition to their customers by helping agents meet them where they learn, shop and seek service.
Senior Vice President,
State and Policy Affairs National Association of Mutual Insurance Companies
We had hundreds of new legislators elected in 2010, and we’re still in the process of educating them on our issues and our industry. This is a great opportunity as we have legislators in many states who will be more receptive to our issues, but it is a challenge.
NAMIC’s primary objective on the state level in 2012 is to continue to pursue reform of state regulation, primarily rate regulation. In 2011, we saw four states enact some kind of rate reform (Tennessee, Connecticut, Florida and Texas), and we will work to build on that momentum.
Distribution Farmers Insurance
We will continue in 2012 to grow our business faster by better managing our three distribution channels around exclusive agents (Farmers), independent agents (Foremost) and our direct auto channel (21st Century).
We have increased our advertising and brand investment and are focused on the fact that we recruit and train the best agents.
In addition, we are expanding our reach by optimizing our multichannel business model and consistently meeting our customers’ needs. We want to provide customers with their preferred way of shopping, purchasing, servicing and communicating.
Fifty-four percent of [insurance-shopping] customers went online to get a quote in 2010. The majority of online shoppers went directly to [a carrier’s] Web site. However, 78 percent of those customers are still purchasing offline, because they need to talk with someone who can guide them.
So our Web presence needs to be solidified and enhanced as we think of new ways to involve our agents into this equation in a value-added way.
Personal Lines Hanover Insurance Group
The recent weather-and-catastrophe activity, along with changes to catastrophe models, will change the view of the cost of providing property insurance in many areas. Carriers will need to be diligent about assessing their need for price—and weigh that against the impact the current economic environment will have on customers’ willingness to pay higher prices. Such price increases could lead to more shopping activity.
There is an incredible opportunity for independent agents to sell value and distinguish themselves by selling a total account and added coverage such as guaranteed-replacement cost, rental-car upgrade, water back-up protection and ID theft. While many believe that consumers want to “save” money by reducing their premiums, all signs point to increased consumer demand for insurance products that are tailored for their individual needs.
Additionally, disruption in certain marketplaces also will create opportunities for carriers that are not as geographically concentrated in those markets to grow profitably by selling value at a competitive price.
Personal Lines | Grange Insurance
Weather remains the biggest challenge to our personal-lines business. As with many regional carriers operating in the South and Midwest, record-breaking weather losses over the past three to five years have challenged combined operating ratios (Grange’s was 100 at the end of 2011).
Opportunities lie in growing our multiline business with auto and shifting the mix of our homeowners’ business. Our preferred- and middle-market auto products have been very competitive, so the key going forward is to continue to provide our agents with the tools and marketing support to help them sell auto and gain market share.
In homeowners’ business, weather continues to pressure our—and our competitors’—ability to turn an underwriting profit. We’ll continue to manage severe weather’s effect on our homeowners’ book by offering more coverage and deductible options.
We’ll also focus on increasing our renters’ business, which is less susceptible to weather volatility and, due to economic and demographic trends, a real growth opportunity.