The economic conditions of the last few years have affected the personal lines of the insurance industry more than any other line as carriers worked in a competitive market that saw fewer policies being purchased because of varying issues such as unemployment, layoffs, and the mortgage crisis.
"With a continuing soft market and very competitive conditions creating profitability pressures, personal lines carriers are focusing on growth strategies, expense reduction, and improving underwriting results," says Karlyn Carnahan, principal in the insurance practice of Novarica.
Carnahan is the author of a Novarica research report released in March titled "Business and Technology Trends: Personal Lines."
"Prices continue to decline and loss costs continue to rise," says Carnahan of the difficulties carriers face. "[Insurers] are not getting the same kind of return on combined ratios. It's an ugly story for the insurance industry."
Carnahan's research uncovered several concerns among personal lines carriers such as how can carriers grow and how can they reduce expenses to keep up with the competition.
"Some insurers aren't even trying to grow," she says. "They are just trying to stay even, which itself is a challenge. At the same time, consumer expectations are rising, the expectation of technology is rising, and a lot of technology advances are taking place. Carriers are trying to figure out what steps to take to plan for the future."
Carnahan listed four technology priorities for personal lines insurers:
• Connectivity
• Policy
• Business intelligence
• Claims
Carnahan believes extending functionality to agents continues to rise in importance despite the increasing number of personal lines carriers who are looking to do business directly with consumers.
"It's less about differentiation and more just the price to pay to be in the game," says Carnahan. "Both agents and carriers prefer to receive and provide information electronically. Real-time upload, download, and data translation deliver tangible benefits."
Carnahan recommends upgrading policy administration systems to gain both operational efficiencies and flexibility.
"Look for highly configurable solutions with product configurators, simple rules and tools for launching new rating algorithms, and to give business users the ability to make their own modifications," she says.
As for BI, Carnahan explains that carriers need to start with a data-quality initiative.
"For small carriers, look at working with an organization that can provide pooled data and insights," says Carnahan. "Use models to improve underwriting insights."
Streamlining claims management speeds up the service function and provides consistent best practices to all claimants.
"Insurers that have implemented modern claims systems report tangible speed-to-market benefits," says Carnahan. "These carriers are gaining a competitive advantage by improved efficiencies in claims handling and better outcome management."
Carnahan believes personal lines carriers use more CRM technology than other insurance lines to better manage marketing campaigns and call-center prospecting. Sales teams benefit through automated approval processes for quoting, tracking sales opportunities, and monitoring sales goals.
She lists the top CRM concerns for personal lines insurers as:
• Integrating the call center with the Web quote system for a seamless experience
• Expanding information made available to CSRs in order to reduce handoffs and to support the CSRs in resolving problems
• Implementing Voice-over-IP to enable remote work.
One reason direct writers have achieved such a large portion of the market is the amount of money they are able to spend on marketing. Carnahan estimated that Geico is spending $900 million in marketing this year.
"That's larger than the entire revenue base for many insurance carriers competing with them," she says. "It's a challenging marketing situation for personal lines carriers. A larger percentage of consumers are researching their quotes on line and many are purchasing their insurance online. If a personal-lines carrier doesn't have a Web-based capability they are missing out on a large portion of the marketplace. This is challenging for carriers that work with independent agents."
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