Insurance Technology Featured Article

Novarica Report Claims that Personal Lines Carriers Invest as Market Softens

November 14, 2012

Karlyn Carnahan, a principal with Novarica and author of a recent report, stated that in initiatives that promote growth strategies, expense reduction, and improvements in underwriting results, they see personal lines carriers looking to invest, as the market continues to be soft.

“Business intelligence, policy, agent portals and connectivity, and claims are definitely key technology areas for these carriers to help confront stresses on profitability,” she added.

Particularly on the part of direct response companies, Novarica characterizes the market with high transaction volumes, intense price competition, high levels of advertising spending, and lastly, slow growth. Moreover, the report also provides recommendations on how carriers should begin projects in these areas.

For example, those looking to invest in business intelligence, before overlaying business intelligence tools such as a predictive analytics module or an organization that can provide pooled data and insights; they should first begin with data-quality initiatives.

To gain operational efficiencies and flexibility in its ability to add data, Novarica also suggests carriers upgrade their policy administration systems, which will eventually improve risk selection and risk pricing, and reduce operating expenses.

According to the report, as agents and carriers increasingly prefer to receive and provide information electronically, extending functionality to agents continues to be important as it helps to process it with as little human touch as possible.

The report cites widespread use of segmentation as restraining the cyclical nature of personal lines pricing, with auto pricing remaining fairly stable even as homeowner rates increase.

For private passenger auto of 100.3 percent for 2012, and 105.0 percent for homeowners, A.M. Best and the Insurance Information Institute forecast a combined ratio with considerable regional variation for homeowners dependent on local CAT activity.

To continue to respond to pressure on the combined ratio, Novarica concludes that, personal lines carriers are focusing on managing and improving customer retention, improving or just maintaining their market position, and reducing their expenses.

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Edited by Brooke Neuman

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