REVIEW: LIABILITY RATES SEE SOFT DECLINE IN FIRST QUARTER (2014)

Professional liability rates saw a soft decline- about 24 percent, during the first quarter of 2014, driven primarily by rising competition in the insurance industry.

Marsh L.L.C.’s report, “Benchmarking Trends: U.S. Umbrella and Excess Liability Rates Soften,” notes that about half of the firm’s insurer clients reported rate increases- an insubstantial change from the previous year. However, 24 percent of firms reported a rate decrease, compared to a mere 16 percent in the third quarter of 2012.

“Underwriters have been concerned about costly losses for companies in these sectors as result of explosions, pollution, and class action product litigation,” noted the report, a trend that has been having a major impact on liability rates in affected industries.

The primary driver of this soft decline has been increased competition within the professional liability market. According to Business Insurance, a large number of new insurers have entered the market in the last three years, presenting new competition and changing the major focus across the industry from rate increases to client retention.

“Insureds that can present more information to underwriters to demonstrate and explain real reductions in exposures typically will be better positioned to secure rate decreases at renewal,” the report recommended to policyholders.

As trends like these spread across insurance sectors, providers have to optimize their data management and business analytics solutions to adapt quickly. Increases in competition require firms to gain an edge and focus on high-quality data insights, delivered by predictive analytics and the latest business intelligence solution trends. Taking such an approach will enable considerable growth and flexibility to adapt to future market demands as well.

As insurers invest in high-quality predictive analytics software, however, they should expect the competition to also do the same, continuing the growth trend. This means focusing on the areas of operation that will drive the greatest growth and improve customer service the quickest. Underwriting and claims management improvements will minimize risk of fraud and other losses in particular, which can drive the best changes across the board.

Focus on efficiency, not growth

It may seem counter-intuitive, but for insurers to optimize their growth, they need to not focus on it. Too much focus on growth will limit other areas of operations that can help support those efforts. Instead, providers should center their efforts on being more efficient. Predictive modeling can optimize underwriting and claims management software to assess data faster and provide fraud detection earlier, helping these professionals work more efficiently and deliver results. This will, in turn, drive growth on its own, helping insurers leverage the new technology and big data trends to optimize workflow and deliver higher-quality service to their clients.

Ultimately, insurance providers will need to round out their investments and focus, but in order to gain an initial edge and maintain profits as the industry changes and rates decline, optimizing their business intelligence platform can provide key support for immediate and future changes.