We have long known it is not the strongest of the species that survives, but the one that is the most adaptable to change — and this also applies within the insurance industry.
There's continuous pressure on insurers and MGAs to keep ahead of the competition by winning new profitable business and increasing retention at renewal, while driving down costs and providing great customer service. As all of this must be achieved amidst the quicksand of changing market conditions, insurers need the granularity to be able to respond dynamically.
How can insurers ensure they are constantly evolving in this environment? The key lies in utilising all the information available to them in real-time, and then self-serving changes to their rates, prices and other business rules based on what is happening at that moment.
By making the most of their customer insight and enriching this with data from the ever-growing number of third party sources, insurers can understand more about the risks they are insuring and customer behaviour across all channels. This enables them to provide the most accurate, tailored price for each individual, rather than relying on an aggregate risk profile or demographic.
Moreover, insurers need the ability to do this in real-time. Having immediate visibility of their book of business means insurers can react instantly to increases or decreases in their competitive position and can assess the impact of testing new rates.
Being able to self-service the required changes immediately puts control firmly in the hands of the underwriters. Self-service increases speed, drives up efficiency and acts as a catalyst to promote innovation and win profitable new business, as insurers have the agility to respond to market developments as they occur.
All insurers need to have these competencies in place to thrive in the new world. Those who distribute via brokers need the same capabilities as direct insurers to be able to compete with them.
Perhaps it is hardly surprising then that six out of the top ten insurers who distribute to SSP brokers have all deployed an insurer-hosted pricing (IHP) solution. As a result, they can rate risk and price more accurately and maintain their market position.
So where does this leave the smaller insurers and MGAs which operate in the personal lines intermediated space? The market has changed quite rapidly, so we are now seeing the medium-sized insurers looking to adopt IHP. In two to three years' time, IHP will be a hygiene factor.
Without the agility IHP provides, intermediated insurers will start to write the wrong type of business at the wrong price, and by doing so, won't be here in three years' time. Quite simply, by then all insurers and MGAs will either have an IHP solution or will have pulled out of the market altogether.
Staying still is no longer an option, so the time for insurers to take control of their destiny is now.