How to Win in Specialty Markets
Author:Town Hall On Demand
The market for Specialty Insurance offers insurers opportunities to capture higher profits and faster growth by writing non-traditional coverages in less regulated lines of business and segments. This CSC Town Hall focuses on the trends in specialty insurance and offers strategies to help your company win in this dynamic market.
- Alex Unterkoefler, Partner at Weisermazars LLP
- Michael Cook, Partner and Industry Strategist, General Insurance and Reinsurance, CSC
- Stuart Pembery, Specialty and Reinsurance Consultant, CSC
- Hugh Roberts, Senior Industry Analyst and Strategy Consultant, CSC
- Jeff Caruso, Senior Managing Editor, CSC
How to Win in Specialty Markets
The market for specialty insurance offers carriers an opportunity to capture higher profits and faster growth by writing non-traditional coverage in less regulated lines of business. This CSC Town Hall examines trends in specialty insurance and strategies to help companies profit in this dynamic market.
Compared to familiar insurance products like a homeowners or auto policy, specialty markets refer to non-standard industry products for unique situations, from coverage on a soccer player's legs to large construction projects. Lloyd’s of London is well known for its specialty insurance. Now the market is one of the fastest growing.
Hugh Roberts, a senior industry analyst and strategy consultant at CSC, says growth in specialty markets is being driven by a large amount of insurance capacity looking for larger returns. "Traditional insurance lines are being commoditized and can no longer produce above-average returns. Specialty insurance offers that opportunity," Roberts says.
Winning in specialty markets means standing apart, a difficult challenge when you offer a bespoke product for each customer. Stuart Pembery, a specialty and reinsurance consultant at CSC, says differentiation relies on a company's expertise in areas such as actuarial support that provides an accurate basis for pricing, efficient workflow management and robust governance. "As volumes start to grow, you need to know in near real time that your managing general agents (MGAs) are staying within their limits and writing the sorts of coverage you expect," Pembery says. "This is a key risk. If you delegate your underwriting, you need a process to monitor it."
Michael Cook, a partner and industry strategist at CSC, says big data is a technology that promises to shake up many aspects of the insurance market. Specialized products will be no exception. "When you look at the specialty market, the one thing it has always needed has been data," Cook says. The influx of capital and new market entrants will exert more pressure on companies to differentiate their product set and pricing. Cook says Big Data will help them achieve that.
"The spectrum of risks covered in this market are huge and have traditionally been handled with limited data. Using big data to understand the risk, monitor it, monitor loss and risk prevention -- all of these areas are going to be completely changed," Cook says.
Distribution channels offer another avenue to stand apart. Alex Unterkoefler, partner at WeiserMazars LLP, says new channels will open up, depending on the lines they choose to add. "The MGA market is a way to tap into underwriting expertise, and possibly actuarial expertise, for a specialty market, but they do entail a risk," he says. "The carrier needs to have a robust control environment to manage and understand the risks that are being placed. They need to understand the costs involved. From a finance and claims perspective, they need to make sure that an outsource provider is integrated with their other operations."
While MGAs allow a company to move in and out of specialty lines quickly, Unterkoefler says agents may make sense for specialty lines when a company wants more control. That channel will require a longer-term commitment and more infrastructure. Going direct is another option, he says, using digital marketing and industry partnerships to reach large markets with products like travel insurance.
Specialty markets are exciting and innovative - which means success requires a company to take quick advantage of emerging opportunities. However, legacy systems and regulatory requirements have made rapid product development difficult. Straight-through processing offers a faster path to market, but Roberts says it's not easy to achieve in companies with massive, complex systems. "What a company may need is an outside policy admin platform with a web-enabled portal that allows them to get up and running quickly."
Otherwise, Roberts says, the specialty market may just move too fast for them to be competitive. "These are new ideas and they replicate quickly. If you're not faster than your competitor, by the time you've got all your forms, rates and products designed, one of your competitors will already be there."
Other topics discussed during this Town Hall include:
• What makes the specialty market so diverse and dynamic
• The impact of evolving regulation in different regions
• How the flow of capital influences the market
• How straight through processing (STP) will affect specialty markets
• Potential challenges to specialty market growth
• Future opportunities in specialty markets