What to Expect in 2016: Insurance and Property Risk Management Trends

Last year, amidst a soft insurance market and a mild Atlantic hurricane season, topics ranging from wildfires and drones to mega-mergers (e.g. ACE / Chubb) grabbed the insurance headlines. We can expect similar risk management trends to carry us through 2016 as the buyer’s market continues and we wonder, where’s the floor?

Here’s a look at a few of the risk management trends we expect to see this year.

  1. More data leads to better rates
    Accurate, detailed underwriting data can improve renewal outcomes and ensure you are insured-to-value. Tracking everything from construction classes and fire protection to secondary modifiers dealing with windstorm, seismic activity, etc. can give you a more complete picture of your risk profile. This is not only beneficial for catastrophe modeling programs (e.g. RMS, AIR) but can help you make informed decisions about the level of risk you’re willing to accept.
  1. Better prediction to more accurately assess near- and long-term risks
    With every storm, groups like the National Weather Service (NWS) are able to improve their forecasting models. According to a 2015 NPR feature story, in the years since Hurricane Katrina, new technology has improved the accuracy of hurricane tracking by 40% allowing the NWS to issue forecasts earlier and for more targeted areas. In addition, updates to catastrophe modeling software programs and a trend towards taking a blended approach to modeling can help risk managers get a more accurate assessment of their risk.
  1. A soft market with another year of declining rates
    According to MunichRE, the world’s largest reinsurer, in 2015 insurers paid out just $27 billion in natural disaster claims. That’s $4 billion less than 2014 ($31 billion) and significantly less than the 10 year average of $56 billion. In general, as a result of these rather benign losses, experts predict another year of declining rates with lower premiums, broader coverage, and increased capacity. However, for properties located “tornado alley” the Wells Fargo 2016 Insurance Market Outlook suggests pricing will not follow the market downward.
  1. High levels of competition drive customer service
    As a result of the soft market, the insurance industry is experiencing high levels of competition. Insurers who differentiate themselves with better customer service and an improved customer experience have an opportunity to stand out. Experts suggest capitalizing on the evolving expectations of today’s consumer by integrating technology and providing customers and pool members with anytime access to their property and claims data. As another differentiator, consider increasing your offering of consultative services to add value and strengthen your relationship with customers.
  1. Cyber security and drones continue to be an increasing threat and concern
    The market’s understanding of these two hot topics from 2015 will continue to evolve in 2016. The FAA estimates that by 2020, 30,000 drones will be doing business in our skies. While these unmanned aircrafts present an inherent risk to both property and individuals, a lack of historical data makes them difficult to insure. In addition, an increasing number of cyber-attacks (e.g. hacking, data theft) has driven an increased interest in cyber security particularly in the healthcare, retail, and financial sectors.

We’re curious what you think. Are you seeing these or other risk management trends in your day-to-day? What trends do you see on the horizon? Does the market have a floor? What type of event could cause the pendulum to swing back? Email us at info@assetworks.com to comment on this blog post.

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2020-02-03T15:06:58-05:00Tags: |

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