Tough Times Call for New Priorities for P&C Personal Lines Carriers
It has been quite a year for property & casualty personal lines carriers in the U.S., and the implications are showing in their strategic priorities for 2024. Last year, ReSource Pro’s Strategic Initiatives research revealed the key business drivers for technology investments: customer expectations and growth. A year later, the focus for 2024 is business optimization and pricing precision. There was also a sizeable increase year-over-year in the number of respondents who reported being in the survival stage of their transformation, rising from 5% to 25%.
Challenges for P&C Carriers in 2023
These shifts warrant some context. Personal auto carriers are still facing inflation that is driving up the cost of vehicle repairs, settlements for total loss and theft claims, and medical care for injuries. Dangerous driving remains on the rise, as evidenced by a growing number of collision fatalities, with a 3X+ higher death rate than several other countries. It has been a costly year for homeowners carriers, too. We saw 25 catastrophic weather events in 2023, each resulting in $1 billion or more in damage, compared to 18 in 2022. This is a record since tracking began in 1980. Lumber and other building materials cost more, and a construction labor shortage also increased the cost of home repairs.
The first half of 2023 concluded with the largest mid-year underwriting loss in more than 10 years. Homeowners’ claims costs were more than 30% higher year-over-year, and auto claims costs were up almost 13%. Some carriers pulled back from writing business in catastrophe-prone states. Filings were made for rate increases throughout the year. By August, the year-to-date average auto premium was up more than 10%, and homeowners had increased almost 9%. In November, the Insurance Information Institute and Milliman’s 2023 combined net ratio forecast for the P&C industry rose to 103.8, compared to their August estimate of 102.2.
A New Focus on Internal, Achievable Outcomes
This context explains why personal lines carriers are now heavily focused on process optimization and lessening their focus on bolder strategies, from new products and expanded distribution partners to innovation. Prior years had customer and agent expectations as leading drivers for tech investment. For 2024, there has been a significant shift to internally facing needs.
Personal lines P&C leaders are also focused on pricing precision for 2024; this driver did not appear in last year’s research. The leading transformation goal for underwriting corresponds with the leading overall driver for technology investment, which is to reduce manual hand-offs and rekeying. Carriers should think about this more broadly than process automation by looking for tools that could also improve pricing precision. AI-powered submission solutions can automate the processing of ACORD forms and other new business application documents. This can be taken further to validate or augment key risk characteristics, from geocode and COPE to fraud indicators, score new business applications, apply straight-through processing rules, and even identify those most likely to bind to prioritize underwriting assignments.
The Path to Effective Claims Automation
For claims transformation, enhancing digital FNOL/FROI capabilities is by far at the top of the list for 2024. Yet, digitizing claim intake started more than twenty years ago. And carriers who didn’t have a solution in 2020 raced to get something in place when the lockdown began. Perhaps FNOL/FROI is at the top of the list because the existing solution is only digital on the front end, with expensive and time-consuming people handling it behind the scenes. But just in case, carriers need to avoid the habit of repeatedly starting claim transformation at the literal first step of the claim journey. Instead, by evaluating the full claims journey, they will discover the highest-value problems to solve. This will pave the path to automate downstream business processes to reduce costs and improve customer experience. Examples include digital payments or automating claim triage and assignment.
How will 2024 play out for property & casualty personal lines carriers? There are too many factors beyond the industry’s control to be sure, Mother Nature being at the top of the list. However, our research confirms that industry leaders are making significant shifts in their priorities to weather next year’s storms. You can learn more by reading our new research report, “2024 Strategic Initiatives: Plans and Progress in P&C Personal Lines.”
ReSource Pro brings integrated operational solutions to insurance organizations to improve growth, profitability and insurance outcomes. Headquartered in New York, ReSource Pro’s global service centers address client operational needs around the clock. Recognized as an industry thought leader and listed as one of Inc. 5000 Fastest Growing Private Companies annually since 2009, the company is renowned for its focus on innovation, service excellence and trusted partnerships, and its unique productivity platform for insurance operations. More than 5,000 ReSource Pro employees provide dedicated support to hundreds of insurance organizations, consistently achieving a +97% client retention rate over a decade. For more information, visit www.resourcepro.com.
