7 Market Changes Insurers Should Exploit
Auto premium is the biggest premium generator for auto insurers. Increasing safety features, such as lane sensors, distance sensors, etc., and the impending driverless car will drive down premiums, so auto insurers need to identify how to respond. One possibility is adding manufacturer product liability.
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There is a lot of catastrophe activity right now and higher concentrations of people in urban areas. Consumers are living longer independently in partial-care living, multi-generational housing and other care facilities. This will create opportunities, as there are more unique properties to insure than ever. The challenge is finding a way to price this risk.
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Lower interest rates are affecting defined benefit health and retirement plans as employers are struggling to afford them. These are evolutionary changes in the health care industry that are going to create opportunities for health and life insurers through the innovative structure of health plans for health insurance exchanges and annuities.
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Technology adoption velocity is increasing. New technology emerges rapidly, consumers are shopping more online, and the majority of the global population has smartphones, all of which contribute to big data. And, there are privacy concerns around the notion of big data. This is going to increase opportunities for more targeted pricing, more targeted product placement and around privacy, especially for E&O insurers.
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There’s a lot of insurance around usage-based, and more consumers conscious about how much they’re paying for insurance versus how much they need. If insurers can figure out how to use existing data and new data coming in, they can target and write more customizable coverage.
Accessing an increasing direct market is also an opportunity; using big data to target people will help companies better identify and segment these customers. Historically, insurance coverage is siloed— life, home, auto, etc., but there’s opportunity to move to more lifestyle products, including coverage such as parent care and private medical supplement.
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Many coastal states have schemes to address hurricane coverage. However, through these, the event comes and then the states force companies and policyholders to pay back that loss. States are taking on this coverage that future generations end up paying. And, since we see a lot of capacity sitting in the reinsurance industry, having the states and government take on this risk “doesn’t make a lot of sense, other than politics.”
Also, the government is the biggest writer of earthquake reinsurers; 80 percent of homeowners policies in California are ending up at Fannie and Freddie, which are taxpayer funded. And, flood insurance is underfunded, so insurers have an opportunity there. In the past five years, there’s been progress made in terms of building flood models; the private market could pick up a lot of this.
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Workers expect to retire later, and life expectancy continues to improve, but life quality may not. People are also getting sick at younger ages, so there are opportunities for health insurers in this area, such as coverage for children of these people, wellness programs, medical tourism and targeted accountable care programs.
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