Disruption, regulation and technology are key market challenges

The US P/C market faces a number of key challenges it must face head-on as it goes into 2017, according to John Barbagallo, the incoming chair of the Property Casualty Insurance Association of America (PCIAA).

“We’ve entered a time of uncertainty,” he told PCI Today. “But within that uncertainty there are threats and also opportunities.

“We’ve always been a regulated industry. Typically insurance in the US has always been regulated at the state level, and it still is today.

“That could be fairly complex, because you’re dealing with 51 different jurisdictions, but it was a safe system that served consumers very well by focusing on company solvency and market conduct.

“Increasingly we’re getting regulation on multiple fronts. There are still the states, but we’re seeing more of what I call federal intrusion.”

According to Barbagallo this intrusion is taking place through the insurance industry and through the Federal Insurance Office, which came out of the Dodd-Frank Act, and through other federal agencies getting into the insurance business, such as the Department of Housing and Urban Development.

In addition, at the international level Barbagallo pointed to the move towards global convergence that started with other financial services such as banking but which is now increasingly drawing insurance into.

“Our concerns are that there’s not a lot of visibility into the negotiations that are occurring between US federal representatives and foreign representatives, and we really are concerned about a Europe-centric, bank-centric, one-size-fits-all approach to regulating things like capital standards that don’t really fit our model very well,” he said.

Barbagallo added that he had been involved in PCI issues for nine years and that over that time the market had seen a shift from 90 percent involvement in state issues to almost as much time spent on federal issues and international challenges.

On a more positive note he pointed out that technology was increasingly accelerating, leading to an increased level of connectivity across people, social platforms and machines. As a result this is creating a huge amount of data.

“Those who are able to manage it well will be able to develop insights and create new products that better serve consumers than the products we have today. The problem is that regulators lag in terms of innovation.

“It’s a little bit of the nature of the beast: regulators need to exercise control, and with the pace of change it’s really hard for our industry to innovate and bring new products to the market when new regulations are holding us back,” Barbagallo said.

“We have to do a better job as an industry of restating and reiterating the value proposition, how this technology and data-driven change can be openly good for consumers; it lowers costs, it makes things more efficient, it improves the customer experience. We have to get the regulators to understand that and work with us on the advancement of new products.”