Rising property & casualty insurance premiums are causing many consumers and carriers to feel pessimistic about the future. According to Policygenius research, average national home insurance premiums are approximately 35% higher now than they were just two years ago, driven largely by increased exposure in states that are vulnerable to hazards like hurricanes, tornados and wildfires.
In high-exposure states like Florida, there’s a genuine homeowners insurance crisis. Over the past three years, more than 30 insurers have either become insolvent, reduced their exposure or left the state altogether, leaving thousands of homeowners searching for alternatives.
But while the challenges are real, there’s also reason for optimism in the P&C insurance space. Shake-ups in established markets can translate into opportunities for new beginnings. Here are five trends coming together to support fresh starts in the P&C sector and that will provide reason for optimism in the months to come.
1. More data and increasingly sophisticated analytics drive new opportunities: The concept behind #DataForGood — that democratizing information can improve lives — is coming to fruition as data lakes, cooperatives and clearinghouses enable wider access to ethically-acquired, anonymized data from a near-endless array of public and private sources. Tools like generative AI and cloud applications make it easier for insurers to harness this real-time data to solve problems. These new capabilities can help insurers automate and enhance processes, from underwriting to policyholder communications.
2. Marketplace gaps attract enthusiastic new entrants: When large carriers pull out of vulnerable states, it doesn’t just disrupt the marketplace; it creates a vacuum that new entrants are eager to fill. Not all will be successful, but data-driven insurers who fully understand the risks and specialize in various locations’ unique attributes have the opportunity to price policies appropriately and generate new business. Also keep in mind that small, agile, up-and-coming brands are determined to bring their products to market and are committed to delivering on their brand promise.
3. Better communication capabilities build resilient policyholder relationships: With more data and new AI-driven options in automated communications, carriers can have two-way dialogues with policyholders, making sure they understand their benefits, highlight their value and better manage expectations. Insurers can proactively reach out with useful tips to help policyholders protect their homes and assets. But first, they need to request consent for communication at every customer interaction point and make the conversation seamless across all platforms, i.e., email, phone, text, voice-first devices, etc.
4. Insurers partner with policyholders to explore options and control costs: Thanks in part to the better communication capabilities noted above, carriers and policyholders have more opportunities to work together to protect assets and improve affordability. With the right vendor partners, carriers can automate communications and manage consent to ensure they are respecting policyholder preferences and complying with regulations. But greater cooperation depends on encouraging policyholders to opt-in for communication on their preferred channels. Carriers can make it worthwhile with alerts about potential hazards, tips for loss prevention, help with shopping for the right level of coverage and other exchanges where policyholders receive information they value.
5. Making hard choices leads to more sustainable models: Getting policy pricing right will require difficult decisions. Not every property can be insured cost-effectively, and self-insurance might be the best fit in some situations. But more realistic, location-specific underwriting can result in more sustainable models. Carriers can also explore offering customization options so policyholders can choose coverage that meets their priorities and budgets. Home insurers can adopt models that offer levels of coverage similar to what auto insurers offer, which range from the minimum required coverage to comprehensive policies. Another reason for optimism? So far, the U.S. economy has dodged a widely predicted recession, and capital is flowing more freely as a result. More access to funding can help data-focused startups get off the ground and assist established carriers with digital transformation projects that allow them to harness information and technology to serve customers more efficiently.
There’s no question that the past few years have been challenging for the P&C insurance industry, and the coming years are likely to require more creativity to solve problems exacerbated by climate change. But the industry may not have to go it alone; in some cases, governments are exploring ways to step up.
For example, Florida legislators are currently studying a proposal for state-run Citizens Property Insurance to handle hurricane claims and leave coverage for other hazards to private insurers, an arrangement loosely modeled on the National Flood Insurance Program. In the years to come, it’s likely that other regions may consider unconventional approaches to address risk exposure.
Lessons learned over the past several years have been hard won, and individual policyholders as well as people in public and private organizations will have to adjust for the years ahead, using data more effectively to manage risks. Fortunately, creativity is something Americans excel at, which is another reason for optimism in the property & casualty space in 2024.
Tara Kelly is the founder, president & CEO of SPLICE Software, a customer engagement company that specializes in using big data, small data and artificial intelligence to create messages that drive customer engagement and the desired call to action.
Opinions expressed here are the author’s own.
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Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.