Trio of CEOs tackles 3 key topics at I.I.I.'s Joint Industry Forum

EMC's Kelley, who (perhaps rightfully) took every opportunity to extol the virtues of mutual companies during the panel, noted that the 9% turnover rate at his company was lower than the 12% rate seen industrywide.

Watson himself admitted that there was a time in his youth when he once shared the same "insurance is boring" perspective, back when his father wanted him to enter the industry. It was only after he decided to give it a try between college and law school that he realized a career in insurance offered far more than he'd ever imagined.

Watson added that the P&C industry needs to recruit more from other industries — he pointed to the increased hiring of software engineers and more technology-oriented professionals in recent years — and the trio identified underwriters and claims adjusters as two of the biggest talent sets that will need replenishing as more experienced minds retire. "It's hard to train and keep good people," added Watson.

"We're hiring at AIG," Duperreault quipped, to great laughter from attendees. 

Technology: challenge, or opportunity?

When asked about emerging technology, Kelley — whose subtle, dry wit provided a breath of fresh air and personality throughout the panel — is ever mindful that as new tech is implemented, that independent agents aren't marginalized and that they're empowered to do a better job for clients.

Referring to those insurtech start-ups who would seek to disintermediate the men and women who serve as the P&C industry's backbone, Duperreault said, "I wish those guys luck. Don't underestimate the independent agent."

In Watson's view, many insurtech start-ups are more interested in "helping with different parts of the value chain," rather than being major disruptors looking to supplant major P&C players. He noted that some of the most notable technological improvements to existing processes include increased automation — which, in turn, provides faster response time and more satisfying user experiences in binding policies and claims service — and better underwriting, as well as decreasing the cost of data processing. 

Duperreault added that due to the pace of change in emerging and evolving technologies, it's sometimes "hard to bet on which [solution] is going to be a winner." 

Watson said he views emerging technology as "more opportunity than challenge," alluding to the industry's continued progress in what he called "the Fourth Industrial Revolution." He drew comparisons between the proliferation of insurtech start-ups with the boom and bust of the dotcom era, wondering aloud, "How do we not make the same mistakes again?"

Regulatory environment in 2018

The discussion turned to regulatory concerns and M&A/consolidation, and how the former might affect a P&C market in which it's already difficult to get rate in many lines. Watson noted that "one of the greatest barriers to entry for companies wanting to compete with us is regulation."

When discussing how mergers & acquisitions might play into the plans for P&C insurers this year, the panelists were more concerned about the "why" than the "when." "M&A transactions are all different, companies have different wants," said Watson. "Some people are buying because they want to get into a market; for some sellers, their boards have decided their business model isn't working and they sell. Mergers of equals are less frequent now."

"If you're going to have a merger, there needs to be a level of understanding by both parties, or it's not going to work," added Kelley.

"The Street likes growth," Duperreault shrugged, adding that for some companies, when things aren't going well for them they need to come up with a story for their shareholders — which can lead to an unwise acquisition or merger that could come back to haunt them down the road. "You have to ask, why is [the deal] happening? Are the two companies together better than they were apart?"

In terms of how mutual insurers will stay competitive, Kelley said their challenge is to continually evolve and remain solvent without access to equity capital. Additionally, all three CEOs seemed to come to a consensus that the P&C industry shouldn't be calling those funds "alternative capital" any longer.

"That's not going away," said Watson. "It's here to stay. We as an industry need to figure out how we can use that capital more."

Editor's Note: This story first appeared in a brand-new e-newsletter that's currently in beta testing, that features content exclusively for P&C industry executives. Those who would like to receive it can send an e-mail to smoynihan@alm.com with "Beta Test" in the subject line.