Corporate Insight recently attended the highly anticipated Property Insurance Report (PIR) National Conference in Dana Point, California. Over two days of presentations and panels from a range of industry experts, attendees received a comprehensive overview of the property insurance landscape as it stands today, and predictions for its future. The conference ended with the 20 Trends presentation by PIR National Conference co-hosts Brian and Patrick Sullivan, who walked listeners through a rapid-fire series of anticipated trends for 2022. Below are a few highlights:
The Insurtech revolution will not be televised
For anyone keeping track of major shifts in the insurance industry, it has been impossible to avoid conversations about the growth of insurtech companies, which were a focus at 2021’s AIR and SIR national conferences. The launch of new technology-focused companies such as Lemonade, many of which are included in our P&C Insurance Monitor coverage group, has raised questions about whether traditional insurers would become outdated. However many of the ‘insurtech 1.0’ companies are maturing, with big players like Kin and Hippo going public, allowing us to see the reality of these predictions.
The Sullivans differentiated between insurance startups with a focus on modern technology and data-science-based tools, and those that seek to take over market shares as insurance companies. The former have seen considerable breakthroughs in their development of resources such as virtual claims processes, AI-based products, and smart home technology (subscription required), while the latter have been forced to contend with the reality of insufficient skills and venture capital funding within an incredibly complex industry. This would seem to be evidenced by industry developments such as Metromile’s acquisition by Lemonade to mitigate the former’s financial difficulties, as well as newer reports on funding such as the latest Quarterly InsurTech Briefing from Willis Towers Watson, which recorded zero funding for 95% of insurtech companies.
“At the end of the day, all these companies have a nicer website and a cool user experience, but they operate like any other traditional insurance company” – Patrick Sullivan
Moreover, the Sullivans point out that the actual offerings that companies like Kin and Hippo bring to the table are not notably more advanced than those of ‘traditional’ insurers beyond boasting better designed websites and mobile apps. Despite framing insurtech growth in terms of innovation and disruption, most startups handle the day-to-day tasks of underwriting and claims handling in the same way as incumbents, but without the legacy customers, data insights and capital ‘traditional’ insurers have access to. As a result, the speakers predicted that the next decade will not see an insurtech become a market leader, although some will remain or become profitable.
Housing and property insurance in the post-COVID 19 landscape
The presenters emphasized that the effects of the ongoing pandemic for property insurers will be profound and lasting. Specifically, the ability to work remotely from home has led to a “permanent decoupling” of employment and geography—employees are afforded much greater flexibility in where they choose to buy and rent property, as working remotely does not tie them to a particular location. Dense core counties of U.S metro areas saw a net decrease in flow into the city as people are no longer limited to living within a certain radius to maintain a manageable commute. Renting an apartment in a high-density urban area has also become a less attractive prospect as the virus continues to make city life challenging. However, the Sullivans point out that while the trend of millennials renting rather than buying is likely to slow, it will remain an important part of the contemporary housing landscape. Many suburban areas are making an effort to provide rentals and multi-family housing oriented around a walkable core, and home ownership remains economically unfeasible for many in the face of pandemic-related inflation and financial precarity.
“Insurance executives who have been wringing their hands about millennials staying in cities and renting […] now have a reprieve from what looked like a shift that could undermine the foundation of homeowners multiperil insurance” – Patrick Sullivan
On a more positive note, insurers specifically may have avoided some of the dourer pandemic predictions. The Sullivans observed that insurers anticipated more frequent home claims; policyholders spending more time at home means “more toilets being flushed, more kitchens being used and more strain on electrical systems,” thus increasing the likelihood of a breakdown or damage that would lead to a claim. However, the Sullivans point out that theoretically since properties are less frequently left vacant, policyholders are more likely to notice and address a problem before it develops into a major loss event. This seems to be supported by insurance claims executives, whom the Sullivans say are reporting that increased usage is producing more frequent loss events, but that these events do not subsequently manifest as claims. The December 6th PIR Newsletter quotes an extensive examination of claims data conducted by Xactware, which found no measurable shift in property damage claims trends.
“Everyone talked about how working from home would lead to more claims – but we haven’t seen it yet” – Brian Sullivan
The personal side of working from home
The aforementioned “decoupling” of work and geography has had a surprising positive effect, namely that it has allowed insurance companies the ability to better build a diverse workforce. With an effective remote working structure, employees can be recruited from across the country and beyond. Insurers are no longer limited to their immediate local population, something which is particularly helpful for companies based out of areas that are rural or have limited diversity. A workforce with geographic, racial, ethnic, and cultural diversity affords many advantages within the industry.
However, lest we get too enthusiastic about the potential benefits of a remote workforce, Brian and Patrick also stressed that to date the success of this shift can largely be attributed to preexisting relationships between colleagues. What propelled the initial change was prior knowledge of coworkers and company culture that was transferable even to a context where employees work in physical isolation. The Sullivans stress that this model is a temporary one—as new employees are onboarded, the foundation that prior relationships provided becomes increasingly unsound. Moreover, for entry-level employees, the lack of access to a physical workspace will prove a significant challenge to professional maturation, which relies in part on professional interaction. The speakers emphasized that moving forward companies should seek to be incredibly thoughtful with how growth and mentorship can continue in a remote or hybrid environment.
“Technology alone is not sufficient to sustain remote work […] the connective tissue of personal relationships is starting to weaken” – Risk Information
Tech to look out for: PIR National Conference highlights virtual tools and better core integration
While the effects of the COVID-19 pandemic on the property insurance space have been a mixed bag, they have afforded companies the opportunity to effectively test and develop their virtual tools, some of which Corporate Insight detailed in our Unique and Innovative Features report. With most policyholders already equipped with the heretofore untapped power of smartphones and smart technology, it seems a natural time to observe how tools and resources that use cameras, data and LIDAR hold up. The Sullivans had a largely positive perspective on how this ‘stress test” was handled—when forced to shoulder the work of claims adjusters and underwriters who were suddenly unable to interact with policyholders, many were implemented to great success.
The PIR National Conference featured several speakers who presented on recent technological advances an breakthroughs, including representatives from core systems providers Guidewire and Duck Creek, who supported Brian and Patrick‘s predictions that better core integration will be at the forefront of technological development in the insurance space. Existing administration systems already in use by major carriers can be updated by integrating new tools and data sources to streamline policy and claims activity.
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