It's been nearly 3 years since I last wrote about the E&S industry forPropertyCasualty360.com.

Back then, I tried to make an analogy between thechanging dynamics in the E&S market and the gaming industry bypointing to thriving casinos in Las Vegas, which evolved beyondrelying on gaming to cater to the modifying tastes of theircustomer base. I suggested that the 'rules' of the insuranceindustry house seem to be changing, and our ability to adapt willbe key to our ability to thrive.

Alternately, I considered the risk profile a failedcasino in Atlantic City. Financial backers had the luxury ofknowing the risk inside thehouse, at the tables, was a lock. They knew that math wouldguarantee they'd win, if they got gamersto play.

E&S markets, however, are exposedto both externalfactors and the risk inside thehouse. Carriers should be so lucky as to have the certainty that acasino has: guaranteed underwriting profit, if only enough bets aremade.

That article published in the days leading up to NAPSLO 2014, when some risk factors of notewere injections of hedge funds' capital to off-shore propertymarkets, an escalation in size, scale, and speed of class actionsuits ready to sue public officers of companies whose stocks haddipped, emerging concern on concussion litigation, as well asactivist re-definitions of "occurrence."

Fast forward three years

Today, NAPSLO is WSIA, and we have a new host of riskfactors that we now call "disrupters" like Uber, a growing globalcyber threat, a national opioid crisis, automated driving, sharedeconomy insurance companies and technology platforms withpredictive analytics and big data. 

The insurance industry is on this great precipice for atechnological revolution. Like Las Vegas, the insurance industry isclearly evolving and innovating to meet customer needs while alsoaddressing the new risk factors.

Related: WSIA 'Chalkboard': A new beginning[infographic] 

But are we placing enough focus on the deals at the tables?

The customer experience is changing, too. But how are the oldinsurance models holding up?

While our industry remains dynamic and is ever-changing,insurance principles remain the same. Getting back to basics, therules of engagement are constant. Any policy that we write couldalways result in a loss. We have to think of the impact that a losscould make on our book of business. What is the likelihood thatthis could happen and what would the ultimate result be from thatloss? Are we assessing the risk the right way? Is our policy goingto make us profitable — after all of our possible costsincurred may hit?

Related: 'Specialty Treatment': The state of the E&Smarket

And if we don't meet all of our principles of underwriting,should we walk away?

Adaptation is the key to survival

The insurance industry must adapt while remaining true to thebasics. We have to continue to evolve, utilizing all of ourexisting tools, and leverage new tools now available to us.

However, we also must heed Albert Einstein's famous advice:"Information is not knowledge." In other words, aswe strive to adapt and use data analytics and sophisticated modellingtools, it's worth remembering that simply having more data doesnot mean better outcomes.

Whether a deal happens through apps or on a bar napkin, a poorlyconceived deal will not have the best result.

There is no doubt that the data and delivery in our industrywill advance. The tools of the trade are definitely improving.Whether or not we are able to transform better data and predictive analytics inthe hands of underwriters who are paid to make up/downdecisions every day on policies that could be adversely affected byfactors they don't even know about yet remains to be seen.

At the end of the day, even great data and tools can beover-ridden by bad decisions made by the people in this business.Perhaps with better tools, this result will be better measured, andthe consequences more immediate.

Three years from now, I'm certain we will be walking into WSIAwith a completely different set of risk factors. The insuranceindustry will have evolved even further in its use of technologyand data. The underlying principles, however, will be the same.Those who focus on relationships, underwriting expertise anddiscipline, and client service will still have chips on thetable.

Derek R. Broaddus, CPCU, ASLI, is senior vice president andExcess Casualty Division manager at Allied World. Theopinions expressed here are his own. He can be reached by sendingemail to [email protected].

Related:

Stronger together: The journey to creating WSIA

WSIA's U40: A new beginning for young E&Sprofessionals