Dr. Robert P. Hartwig, CPCU, President of the Insurance Information Institute (I.I.I.), provided some insights into the economy and the insurance industry at the recent NAPSLO annual meeting. See his slides here, and a National Underwriter summary here. Some interesting observations:
- We are facing a recession and a soft market at the same time, which is not typical and has dramatically reduced demand.
- The economic challenges have changed insurance customer behavior including increased efforts to reduce insurance costs, like shopping, and causing higher claims frequency in lines such as workers comp.
- Business starts normally rise at the end of a recession and drive job creation, but the seizure in the credit markets has prevented an increase in new businesses so far. An upturn in business starts is necessary to drive job creation and commercial insurance growth.
- The impact of the recession is not consistent across the US, with parts of the country doing much better and recovering much faster than others.
- Demand for insurance is down, capacity is strong, and underwriters’ perception of risk is unchanged. This means that, barring an unforeseen external shock, a market turn is not imminent.
- Insurers will likely report flat top line results and improving bottom line results for the 3rd quarter, not deteriorating results as some expect.
- Inflation is a risk a few years in the future (not short term), and will impact insurance costs from rising severity, reserve and rate inadequacy, and the penetration of retention and reinsurance attachment points.
- We can expect deterioration in the tort system over the next few years, possibly resulting in a tort crisis.
In addition, Dr. Hartwig discussed future opportunities and challenges for our industry, including specific sectors of growth and tort challenges. Mr. Hartwig identified 11 industries for the next 10 years:
Export Oriented Industries
Brought to you by Tennant Risk Services.
Specialty Insurance Expertise: Tennant Risk Services
Content © Worldwide Facilities, LLC, 2005 - 2019 | All Rights Reserved.