By: Michael Miller, State Director, Smart Choice®
Is it possible that the hard personal lines market we’ve experienced over the last two years is finally starting to break in our favor? Technological innovations are helping us turn the corner, but we’re not out of the woods yet.
Hopeful Signs in Personal Lines
Let’s start with some good news. A forecasting report from the Insurance Information Institute (Triple-I) found that personal lines underwriting losses and profitability are finally starting to move in the right direction.
According to the report, the net combined ratio for personal auto coverage improved this year and could achieve profitability next year. Homeowner’s insurance losses will persist through 2025, but forecasters predict profitability in that market by 2026. Meanwhile, net premium growth for all personal lines is gaining momentum and is expected to outperform commercial lines growth by 8 percentage points in 2024.
This is certainly good news for the personal lines market and the independent agents who write personal lines. Improved profitability and fewer losses may give carriers the confidence to write new business and reconsider their moratoriums on new appointments.
This means you may be able to offer more options to your customers and a better customer experience overall.
Some Challenges Will Persist
While good news is on the horizon, after two years, the hardest market in a generation has left its mark. Big claim payouts, more accidents, increased repair costs, more frequent severe weather events, and higher labor costs have all contributed to large losses and lack of profitability for carriers. Extreme weather alone has cost the insurance industry $165 billion in the last two years.
The hard market has left carriers to choose to absorb higher reinsurance costs or raise premiums (or both). Neither is great news for agencies and their customers, who will bear the brunt of the hard market in higher insurance bills.
Innovate or Perish
What’s become clear over the last two years is that the traditional model is no longer profitable. Products, channels, and means of customer retention have all changed due to rising costs and volatile markets. Meanwhile, consumer demand for digital services continues to grow. Carriers have a choice: innovate or perish.
The hard market has forced carriers to embrace technologies that help them improve their products, open up new channels, and meet customer demand for digital products, such as telematics and apps that help them manage their policies online. Data integration tools and AI provide carriers with insights that have helped them optimize their products and services.
One example is telematics in the personal auto market.
Telematics is technology that tracks a customer’s speed, braking, and acceleration habits as well as miles driven and number of trips. If customers practice safe habits, they could be eligible for discounts on their auto insurance. Some carriers offer discounts just for signing up for their telematics program. Most personal auto carriers offer some form of telematics to their customers, and some carriers even require telematics devices for new business.
Telematics is just one example of how carriers are using technology to lower operating costs and rates for customers. Carriers are also embracing tools that help them understand trends in their underwriting and claims processes that will help them continue to improve their net combined ratios and avoid writing business that may result in costly claims.
Another promising innovation is the use of data to build highly customized coverage products. Carriers can craft on-demand insurance coverage for small events, such as borrowing a friend’s car. Or, a carrier may allow an agent to handpick the coverages their customers require rather than offer a one-size-fits-all personal auto or homeowner’s policy.
While the hard market may be with us through the end of the year, the industry is innovating to become more agile and offer better products to customers.
As independent agents, we can seek out the carriers who are embracing technology to improve their products and offer more competitive policies. Speak with your State Director to learn about the personal lines carriers that may be available to you through Smart Choice®.