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Increased connectivity and greater use of technology will be the legacy of the pandemic, according to the CEOs of some of the world’s largest insurers.
The CEO participants in S&P Global Ratings Inc. 37th Annual Insurance Conference, being held online, also said commercial insurance price increases still have some way to go to compensate for an extended period of soft pricing.
“Think about things like leveraging virtual technologies across the entire employee base, the digital knowledge-sharing platforms that we have all become accustomed to using,” said Dino Robusto, chairman and CEO of CNA Financial Corp.
“All of this has been accelerated. Virtual claims adjustment and risk control inspections — many of these things are going to remain as permanent tools.”
“We did not as an industry do a lot of WebExes or use connectivity this way,” relying mainly on face-to-face meetings, said Peter Zaffino, president and CEO of American International Group Inc. “We learned to move the business forward in a manner that was very productive,” accelerating digital transformation.
John Neal, CEO of Lloyd's of London, said, “If we did not have the digital capability we do have to communicate, trade and operate, we would have failed” during the pandemic.
The CEOs said commercial insurance pricing increases are likely to continue, making up for years of soft pricing.
“We’re coming out of the softest pricing cycle we’ve ever seen,” Mr. Neal said. “Before we saw prices start to move about three years ago, we almost had a decade of challenging prices.” Operating in a near 0% interest rate environment, insurers “have to be able to price products to make a return on the underwriting side of the equation.”
“A lot of lines of business are experiencing rate because they need it,” Mr. Zaffino said.
Mr. Robusto said that prior to the hardening of the market, there were more than 20 quarters in which pricing increases were lower than loss cost trends, and that only in the last 18 to 24 months have there been any “meaningful” price increases —in the low double-digit percentages — for middle-market accounts. “So, really what you have here is a lot of ground still to be made up.”
Mr. Zaffino said the 19.9% initial public offering of AIG’s life and retirement business was a result of a review that showed synergies were not as strong as once thought, and that investors preferred the pure play of a life and retirement business or that of a property/casualty business to investing in a composite of both.