Posted by Guest Blogger, Ian Turvill. (And uncharacteristically, short.)
US property and casualty insurers can expect another year of overall industry underwriting profit in 2006, matching the results of 2004, according to a recent report from Conning Research and Consulting. However, Stephan Christiansen, director of research at Conning Research and Consulting, states that: "Profitability continues through 2006, but slowing premium growth, rising loss costs and accumulating surplus will take their tool and the industry will again show combined ratios above 100% [i.e., unprofitable] in 2007 and 2008."
The study highlights three specific - though I think related - reasons for this change "surplus accumulation, strong loss reserves, and strong cash flow". In other words, insurers are profitable, and so they will be tempted to lower their rates to capture greater share. And they will suffer as a result! This sounds like a job for EDM.
When insurers use EDM to shift from a manual to an automated underwriting environment, they can enforce consistent application of underwriting rules, and they can prevent underwriters writing business at lower rates simply to capture share.
But, if they do this, won't they lose out at the hands of more aggressive competitors? Not necessarily. If they combine this with custom analytics that allow a much more precise measurement of risk, and so attract the business they want, and turn away the business they don't.