Long-term investments in technology are finally paying off for carriers, according to findings from a decade-long ACORD study released today.
ACORD conducts their U.S. Property & Casualty Value Creation Study every 10 years, analyzing the 100 largest U.S. P&C carriers with total premiums between $600 million and $60 billion, representing 90% of the P&C insurance market.
The ACORD study provides insight into what drives value creation and places carriers into one of three categories: sustainable value creators, hollow value creators, and value destroyers.
ACORD president and CEO Bill Pieroni says the purpose of the study is to create strategic and tactical insight into what approaches make carriers successful, and what others can do to improve their value proposition.
Specifically, Pieroni says the study was designed to answer three key questions:
- Which metrics should be used to measure value creation across P&C carriers?
- Which strategies and tactics lead to sustained value creation?
- What key capability and execution imperatives drive sustained value creation over time?
Pieroni says this year's study marked a major departure from previous editions, as the gap between value-creating carriers (84%) and value-destroyers (16%) grew dramatically.
To explain this transition, Pieroni primarily points to technology.
"Several factors contributed to this shift, including an increased focus on underwriting profit, digitization, and the constantly changing macroeconomic conditions," Pieroni said.
"Increased alignment between strategic intent and capabilities is the key differentiating factor separating sustainable value creators from destroyers. We are finally seeing the true impact of decades of technology investment on results."
Key takeaways
Among the notable highlights, ACORD's P&C value creation study found that of those carriers who created value ("sustainable value creators"), 58% sustained it over time, and did so primarily through investment income and underwriting activities.
The study also noted that "hollow value creators" would have fallen into the value destruction category if it were not for their investment income.
Publicly traded, value-creating P&C carriers were also found to return twice the average of the S&P 500 over the study period.
Pieroni explains that this year's study found that, in contrast to past years, high-performing carriers were successful in all four areas of strategic focus, as opposed to a select few: customer intimacy, product leadership, innovation, and operational excellence.
Pieroni sat down with PC360 to explain this and more, reflecting on the results of the decade-long study, their implications on the P&C market, and how technology is the leading factor driving value creation among successful carriers.
Watch the video interview here or at the top of this page.
Methodology
Based on the annual statutory filings of the top 100 U.S. property-casualty insurers, this study employs a sophisticated and proprietary methodology to determine the amount of value generated by each carrier, while identifying the source of value generated through both underwriting and investment activities. Crucial factors like business and channel strategy, premium-and-product mix, digital maturity, and operating expenses are also examined.
ACORD members can download a copy of the whitepaper by visiting www.acord.org or contacting memberservices@acord.org.
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