Product experimentation will shape industry

So-called disruptor technology companies will shape the direction of the insurance industry going forward, but not all will succeed, James Auden, managing director and head of property and casualty (P&C) insurance in North America at Fitch Ratings, told PCI Today.

“There’s a lot of change going on in terms of technology and data and how to harness that to manage the business better,” said Auden. “Companies are investing in varying degrees in technology in a bid to keep pace.”

Additionally, Auden believes, there will be developments on the customer experience side of the business.

“Customers want more of a web-based experience and in the next 15 to 20 years, things will be very different,” he said.

On the market outlook, the rating agency projected that the industry’s combined ratio would increase this year. For the last three consecutive years, its combined ratio has remained under 100 percent.

Auden added: “At mid-year the ratio was right around 100 percent. The third quarter should be better as the catastrophes have not flowed through but we will see more cats in the fourth quarter.

“In our outlook report, which will be released in late November/early December, I suspect we’ll forecast a slight underwriting loss for 2017 for the whole market.”

This year there has been pretty steady premium growth of around 3 percent so far, versus around 4 percent in the last two years, he said.

Auden also explained that catastrophe losses for the past three years have been lower than the historical averages, but this year has been more of a normal year for catastrophe losses.

He said that third quarter earnings would demonstrate the impact Hurricane Matthew has had on the US market.

“For Florida, the concern was that the specialty underwriters and homeowners’ insurers were untested. I believe they are still untested. For many of them, they will have their retention and they may have tapped into their first layer of reinsurance, but it’s not the big event,” Auden added.