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Judy Greenwald

Insurance buyers should make greater use of analytics: Willis report

July 15, 2014 - 1:02pm

Insurance Business Analytics


While benefitting from overcapacity, corporate insurance buyers are lagging behind insurers in making greater use of analytics, says Willis Group Holdings P.L.C. in a report on international market trends in construction, property and casualty insurance pricing, issued Tuesday.

The 2013/2014 year-end renewal season for construction, property and casualty insurance was marked by overcapacity and rate reductions of 5% to 25% on natural catastrophe excess-of-loss treaty reinsurance, says Willis in the report, “Construction, Property and Casualty: International Market Trends.”

Similar reductions marked the first quarter of 2014 as well, says Willis in the report.

“Our interpretation is that soft market conditions are likely to continue without necessarily threatening the profitability and solvency of carriers, provided that they actively manage their portfolios,” says the report.

The report warns, however that while corporate buyers are making greater use of analytics, as are insurers, “we think they are trailing behind carriers who continue to make profitable decisions based on a deeper understanding of risk pricing.”

“However, carriers' hunger for premium income may be starting to entice them to relax their discipline in relation to the provision of quality underwriting information, upon which modeling is reliant,” says the report.

“Such relaxation of underwriting discipline would not only mean that corporate buyers are less able to drive preferential pricing through better data, but would also raise the prospects of claims settlement difficulties down the line, as insurers avail themselves of the defense of nondisclosure to dispute claims at a time of reduced profitability and reserves,” says the report.

The report says also that “Corporate buyers can achieve substantially better than average pricing through the provision of good underwriting data, the use of analytics to drive pricing and through strong relationships with carriers.”

Discussing construction in particular, the report says as the volume of construction projects has reduced in many parts of the world, competition between insurers for premium volume and market share has intensified, while capacity is at an all-time high.

The report also includes sections on the general property, mining property, renewable energy, and power property and casualty markets.

Copies of the report are available here.

 



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