”I feel the earth move under my feet,” sang Carole King in 1971. She went on to say in her hit song “I feel the sky tumbling down…”
That may be how many insurance company executives feel as the ground in a 100 year-old industry shifts beneath their feet. This week’s Insurance Journal, reported financial results for U.S. property and casualty insurers for 2015 with two negative headlines. The first said premium growth is slowing and the second stated the industry combined ratio worsened to 97.8 in an environment in which investment earnings are very hard to come by.
While the current bad news is concerning if you’re an insurance company executive, the following statement ought to scare the hell out of you:
The insurers “best equipped for underwriting” are those with the financial capability and foresight to make the massive investments in technology necessary to be competitive. There aren’t very many of those.
Companies like The Travelers and Liberty Mutual are among those making huge investments in technology and they will likely be winners. The future, especially in personal lines, is already here. Recently, a large national carrier threw in the towel on this part of the business, because they can’t compete now and know they can’t catch up. There will be a lot more of that coming.
This trend has enormous implications for agents because being aligned with the right companies has never been more important. And, what do those companies want from their distribution partners? Size and organic growth. The Insurance Journal article points out the P&C industry’s growth rate was only 3.4% last year. Pretty anemic if you’re a carrier who wants to grow by 7%- 8% or more.
So agents, like members of Strategic Insurance Agency Alliance (of which my company OAA is a Master Agency) who are growing 15% or more on a premium base of $6 billion, are in increasing demand. They have huge, repeatable growth on a large base of premium. Agents, aligned with an organization like SIAA already have the winning carriers. This just perpetuates the cycle which is going to create massive wins for some carriers and agents, and an existential threat for everyone else.
Today is the time to align with high growth, technology-driven insurance companies and a large high-growth distribution organization like SIAA/OAA.