Wednesday, October 21, 2015

SIAA Celebrates 20 Years of Helping Independent Agencies Grow Nation’s Largest Alliance

For Immediate Release Media Contact: Gary Kimball Kimball Communications 610‐559‐7585

 SIAA Celebrates 20 Years of Helping Independent Agencies Grow Nation’s largest alliance has written nearly $6 billion in premium and signed more than 5,500 member agencies

Oct. 21, 2015 – Hampton, N.H. – SIAA (Strategic Insurance Agency Alliance) today celebrates its 20th anniversary, having grown to be the nation’s largest agency alliance. With 48 master agencies, SIAA has signed more than 5,500 member agencies and generated nearly $6 billion in revenue since it was formed in 1995.

 SIAA celebrates the milestone with a champagne gala in Boston this evening, with more than 425 attendees expected, including CEOs and senior officers of SIAA’s strategic (carrier) partners, principals and staff of SIAA’s master agencies, publishers and editors of insurance industry media and other business associates and friends.

 “When we began to build a national network of agencies two decades ago, we focused on a mission to support the growth and continuing success of the independent agency distribution system,” said SIAA CEO Jim Masiello. “Today we celebrate the success of our integrated model with multi‐level partnering, which continues to be a proven solution to help agencies grow both premium and profitability.”

 The idea for SIAA grew out of the success of the Satellite Agency Network (SAN), a “master agency” comprised of independent agencies, which Masiello formed in New Hampshire in 1983 to overcome the biggest challenges facing independent agencies – growth and access to markets. Today, SIAA estimates that 13 percent of all independent agencies in the United States are or have been signed members of SIAA master agencies.

 SIAA has continued to add value to members through professional development and education, access to program and specialty markets, lead generation and more:
 • SIAA Business Insurance Advantage is a program that gives member agencies the ability to start or grow a profitable book of small commercial lines business.
• SIAA Agency Foundation is a program designed to assist new member start‐up agencies write quality business sooner than might otherwise be possible.
• SIAA Training & Learning Center had more than 1,000 member agencies register in 2014 with a dramatic increase in the use of content, such as a series of proprietary ACORD form lessons, Business Owner Policy training and CE credits.
• SIAA MarketFinder is used by member agencies to place difficult‐to‐write excess and surplus lines and specialty market business.
• Insurancedeals4u (ID4U) is a consumer‐facing web portal SIAA rolled out in 2004 to provide consumer access to all SIAA member agencies. It had more than 25,000 site visits providing 4,500 consumer leads to member agencies in 2014.

About SIAA SIAA is a national insurance agency alliance dedicated to the creation, retention, growth and continued success of the independent insurance agency distribution system. SIAA has signed more than 5,500 member agencies through 48 master agencies across the country since its inception in 1995. Of that member number, SIAA and its Master Agencies have created 3,100 new start‐up agencies coming predominantly from former captive agents. An estimated 13 percent of all independent agencies in the U.S. are or have been signed members of SIAA. SIAA brings profitable premium growth and quality relationship integration between its member agencies and strategic partner companies, and provides a wide range of resources to help agencies increase sales, retention, revenue and value. For more information on SIAA visit

Monday, August 31, 2015

How to Know What Insurance Customers Want

Great article on important things our Tague Alliance member clients and prospects want from us....

How to Know What Insurance Customers Want

By Andrew G. Simpson | August 25, 2015
What do today’s customers want from insurance providers?
They want understanding, interaction, even a relationship. But they vary in when and how they wish to learn, interact and build a relationship.
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Insurance providers have to understand not only when but also how to best help customers with their needs, Lynn Kesterson-Townes, worldwide commerce marketing leader for IBM,told the Insurance Marketing and Communications Association (IMCA) Annual Conference in Nashville.
Firms that figure out how to serve millennials will be able to capture other customers more easily and keep them, the e-commerce expert said.
According to Kesterson-Townes and research she shared from IBM, the insurance marketing and communication strategies of the past no longer work because insurance customers have changed.
“Obviously, they’re the same people, but the way they want to interact with their insurers is very different these days,” she said.
One way customers have changed is that they are less loyal than customers used to be.
In the past two years, 37 percent of customers of insurers contracted with IBM report that they switched their insurers. This churn rate is rising, it’s up 13 percent over the last few years.
“That’s because we believe that in today’s customer‑activated environment, marketing and communications strategies that used to work are no longer working to sustain retention or to significantly grow the business,” she said.
What Customers Want: IBM’s Kesterson-Townes at IMCA
Powered by
Bob and Ann
Kesterson-Townes shared two examples. One was a man, Bob, who had a car windshield claim. He also had a $50 discount coupon that would have helped pay his deductible.
“Except for reasons that no one can understand, the insurer didn’t let the auto glass place accept the coupon. No one’s actually to this day figured out why not. Bob’s still baffled why his insurer wouldn’t let his coupon be used. The auto glass place didn’t understand it. Bob had to pay the full deductible. Guess what else? The auto glass place didn’t lose a customer, but Bob switched insurers,” she said.
The other story was about Ann, whose husband just died in a fatal car accident. She received a condolence letter from her insurance carrier. Unfortunately, in the same envelope Ann also received a letter from the same insurance company informing her that her coverage was being cancelled.
“Unbelievable, right? Unbelievable. How did the marketing and communications department get to this point? Sorry your husband died and oh yeah, we’re canceling your policy! Did they not want to use another stamp? You wonder what was going through the heads of people, right?” said Kesterson-Townes.
According to the IBM consultant, these insurers were not thinking about their insureds at these critical times of interaction.
“That’s what customers are looking for today. They’re looking for an understanding of their personal situation when they’re having an event, when they’ve actually had a change in their own situation, and they’re looking for people to help them cope with it. They’re looking for that from their retailers, from their airlines, and from their insurers,” she said.
Interaction Points
She said today’s customers also expect all of the people they have relationships with to be able to respond in the same way. “Therefore, marketing and communications functions in insurers need to be more nimble, more innovative, and better able to engage with their customers and help their entire ecosystem along as well,” she said.
“They don’t want channels. They want interaction points, and we’ve changed that language on purpose because channels infer a one‑way communication. From me to you, from the insurer… ‘Let me push this product to you.'”
As examples of interaction points Kesterson-Townes cited emails from brokers, face-to-face-meetings, talking to a customer service representative over the phone, and click-throughs on a website, even a comparison website.
“As digitally enabling technologies empower and connect customers more easily with businesses and with each other, a one‑size‑fits‑all marketing and communications strategy no longer works. In fact it’s competitively disadvantageous because what we used to have is an organization‑centered economy and now we have an individual‑centered economy,” the IBM executive told the communications professionals.
Today’s customers are using a variety of web‑based interactions to talk to insurers, she said. In the beginning information and quoting stages, they are using a variety of interaction points and they don’t necessarily purchase where they’re searching, IBM’s research shows. In fact, it shows an 18 percent shift away from personal interaction and toward digital interaction at the beginning.
Personal Touch
But that doesn’t mean personal interaction is dead.
“[A]t the point of purchase, we are still seeing a lot of interaction, whether it’s on the phone or in person with a broker. What does this mean for insurers? Customers are obtaining their information and they’re quoting digitally. Then they’re purchasing a lot of times physically, we would call it,” she said.
She said this means that insurers need to be proficient at omni-channel marketing, at merging the digital and the physical experience so that for the customer it feels like the relationship is “building all along instead of restarting with every new interaction point.”
Due to the ubiquitous connectivity, insurance customers are looking for these “customer‑centric” interactions.
To meet this expectation, insurers need data. “You need to know where your customer is in the decision process. You need to know what’s going on in their lives to be causing this decision to be made,” she said.
Lead with Millennials
She stressed the value in being a leader rather than follower in understanding customers. The best place to lead is with millennials, the most empowered generation, people who are under the age of 30.
“You need to embrace your digital millennials because you can learn a lot from them. Once you get successful working with them you can use those lessons in other areas,” she advised.
She said two‑thirds of millennials are demanding customer digital and physical experiences that are harmonized.
“They want increased transparency. They want to really interact and have a relationship with you. They want an understanding of their personal needs. They want fast responses. They still want advice. But if their needs are not met, they’re even more likely to switch insurers than the rest of us. But they’re looking for value. Notice, I said ‘value’ not price,” Kesterson-Townes told the audience.
“We believe that if you can market and communicate to millennials effectively, you will actually be able to capture all of your customer segments,” she said.
That’s because, like millennials, all insurance customers today want four things.
“They want advice, simplicity, convenience, and value from their insurers, which brings us to trust. After all, insurance essentially started as a social network among like-minded people to share risk. How come most customers don’t trust their insurers?”
She said IBM surveys show that more than half (56 percent) of customers do not trust their insurer and that people with low trust in their insurers are almost 20 percent more likely to switch their providers. “That’s why this is important to you,” Kesterson-Townes told the IMCA audience.
According to IBM, it’s not useful to simply look at demographics or ages to segment today’s customers. Demographics actually offer limited insight into predicting the interaction point preferences, she said.
“How do you know if this customer would prefer to talk to an agent online, would prefer to see an agent in person, or would prefer to interact via email? Will demographics give you that answer? We would say, ‘No. In fact, they don’t.'”
Sometimes, demographics even appear counter-intuitive. For example, the youngest age bracket, those under 24 years of age, are not the most likely to purchase insurance via the Internet, she said. Nor is it the next oldest age group, those 24 to 34. It’s actually people 34 to 44 that are most likely to purchase insurance over the Internet.
“That’s a little counter-intuitive to some people. Some people would think the younger, the more likely.”
If not demographics, then what should insurance marketers rely on to understand customers? IBM thinks psychographics, or segmentation based on customer attitudes, is the answer.
“It’s based on behaviors. It’s based on their needs,” she said. “That is much more indicative of how someone wants tot be interacted with, not just how old they happen to be. ”
She said IBM has found that psychographic segmentation is four times more likely to point to the right interaction point than pure demographic segmentation analysis.
IBM identifies six customer segments, to which it assigns names including Loyal Quality Seeker and the Price-Oriented Minimalist.
Kesterson-Townes profiled three examples of growing customer segments.
Demanding Support Seeker
Susan, 33, is unmarried, an energy consultant, and moving from Seattle to Boston. So she needs car insurance, and also needs insurance for her new house in Boston. And she wants life insurance because she’s going to be adopting a child in Boston.
From a psychographic standpoint, Susan is a “Demanding Support Seeker” in IBM’s segmentation, or as Kesterson-Townes described her, “she’s high maintenance.”
“She acts like a traditional insurance customer. She needs a lot of hand‑holding. She really looks to insurers for advice. She trusts them, but she’s also every bit a person of this age, so she’s a modern empowered consumer,” she said.
This customer is very connected and social media savvy but prefers that all of her interactions be personal, from information gathering all the way through purchase and servicing after purchase.
“Demanding Support Seekers, or these high maintenance ones, have the lowest technology affinity in interaction. They want advice. They want full coverage. They want a one‑stop shop. They want someone on the other end of the phone,” Kesterson-Townes said.
Support Seeking Skeptics
John and Ann Cooke of Los Angeles epitomize the second segment Kesterson-Townes described. John is a 28‑year‑old manager at a large retail store. Ann is a 25‑year‑old nurse at a local hospital. This couple is extremely active on several social media sites, especially Facebook (which Kesterson-Townes says is actually for older people these days).
John and Ann are discussing buying a new car. They’ve done a lot of research on their own. Now they’ve turned to Facebook to seek advice from their friends and family on their experience with three models they are considering.
John and Ann are “Support Seeking Skeptics,” in IBM’s psychographic parlance. Support Seeking Skeptics have a medium technology affinity, but when it comes to social media, they’re “off the charts.”
They don’t feel well‑informed about insurance. They are young and haven’t had a whole lot of experience with it. They don’t trust insurers. They’re looking for advice about insurance at the same time they’re looking for advice about which car to buy.
How they prefer to interact with insurers depends on where they are in the process, according to Kesterson-Townes. For example, when searching for insurance, they want to hear from their peers about their experiences. They don’t want to interact with insurers. But when it comes to purchasing, they will flip to a personal interaction such as telephone or face‑to‑face.
“If you’re trying to sell this kind of group car insurance, for example, make sure you’re Facebook friends with John and Ann’s friends and network in,” the IBM expert advised.
Informed Optimizer
The third fast-growing segment is represented by Dan, a 27 year- old single and very successful video game designer who’s purchasing his first rental property. Dan is an “Informed Optimizer” in IBM-speak. “These guys optimize everything. They want to have the right insurance from the right insurer at the right time,” Kesterson-Townes said.
These customers have a very high technology affinity, they’re highly self‑sufficient, they’re informed, and they’re willing to experiment.
“They seek an optimal priced‑value ratio. Price is important, but they will shop around for exactly what they want,” she said.
They prefer to interact digitally throughout the process if possible, even through purchase and servicing. “They’re comfortable in that world, but because they want the tailored product they demand, they’ll get on the phone if they have to, to get exactly what they need,” she added.
As he researches landlord policies, Dan would be really impressed if an insurer reached out to him while he’s online with an appropriate product offer. If a company actually includes an app that Dan can use to communicate with the insurer throughout the relationship, Dan would be thrilled.
Merging Digital and Physical
While these three segments differ in their needs and preferences, they are all engaging in omni‑channel behaviors. Kesterson-Townes said IBM research shows that 80 percent of insurance customers are already using two or more interaction points for information gathering and quoting process. Twenty percent are already using four interaction points or more. Consumers say they expect to be using four interaction points or more in the near future as they look at insurance.
“Again, now’s a good time to start thinking about merging those digital and physical spaces,” said Kesterson-Townes.
She stressed that personal interaction will remain important. In fact, the highest sales conversion rate is in transactions through personal contact, with about 80 percent, versus 30 to 40 percent conversion on websites.
Seamless Experience
Customers want a seamless experience, involving  every contact that they have with the insurer, so they don’t have to start over providing their information at every interaction. That turns them off, the IBM executive told IMCA.
“Therefore, when they do talk to, let’s say, your call center rep, marketing is no longer about the call center rep getting out the right script and starting to pitch whatever product is the product of the day,” she said. “It really is about understanding what that customer’s talking to you about and being able to take them to the next level. ”
Marketing is about personalizing the experience for thousands, or even millions, of customers.
“Whether you’re responding to a customer in real time or anticipating a need that they didn’t even know they had, today’s insurance marketing and communications functions must exceed expectations to give their companies a competitive edge. It’s not just about speed. It’s about the experience. Every interaction is a moment of truth and moments matter. It’s about delivering relevant experiences at the right time and the right place,” she said.

Wednesday, August 12, 2015

Tague Alliance - Insurance Agents Valued By Small Business Owners According To New PIA Study But They Want Insurance Agents With Good Web Capabilities

Commercial lines customers – particularly small business owners – still prefer working with independent insurance agents in the Internet age, new industry research has found.
At the same time, agents can’t rest on their laurels and must show their value online as well as person-to-person, according to the results. In other words, the person-to-person interaction still matters, but agents must also embrace doing business through the Internet to keep pace with their customers.
“Our results affirm that while small business owners continue to greatly value the professional advice and personal service of an independent agent, there is an expectation that their agent will be more capable of online interaction concerning their accounts and that the agency will have a fully credible online presence,” PIA National Executive Vice President and CEO Mike Becker said in prepared remarks.
The findings come from a survey conducted by the agency-company council of the National Association of Professional Insurance Agents (PIA) and other groups, as part of the PIA Partnership. Data comes, in part from a random national sampling of 1,000 small business owners whose companies employ 50 or fewer people.
Becker said the results are both an “affirmation” that insurance agents still matter and “wake-up call” for them to boost their efficiency through use of the Internet and other high-tech tools.
The PIA Partnership encompasses insurance companies that work with PIA’s national division to pursue research and develop tools that help independent agents do their job better. P/C members of the group include Progressive Insurance, State Auto Group, The Hanover Insurance Group, The Hartford and The Motorists Insurance Group.
Research findings determined that agents offered great value to small business clients, who sought relationships with those who understood their business, offered quick service responses, personal attention, and could reassure them that they were making the right insurance decisions.
Other results indicated that even when small business clients started their insurance process online, they wanted to interact with an agent to make sure of their decisions but also ask questions.
PIA Partnership Chairman John Petrucci said the results show that agents – even though their personal interaction is valued, should make use of the Internet part of their daily jobs.
“The Internet is here to stay,” Petrucci said in prepared remarks. “It is not the opponent of agents. But while it can be a source for competition, it can also provide an opportunity for agents when they use it to their own advantage … but the one thing that is not an option for independent agents is inaction.”
Source: National Association of Professional Insurance Agents

Tuesday, July 28, 2015

Emerging Threats to our Vehicles & Potential Safety

Fiat Chrysler Cyber Risk Recall of 1.4M Vehicles Seen as Industry First

July 26, 2015 by Jeff Plungis and Mark Clothier

Fiat Chrysler Automobiles NV is recalling about 1.4 million cars and trucks equipped with radios that are vulnerable to hacking, the first formal safety campaign in response to a cybersecurity threat.

The move marks a milestone for the industry, which last year set a record with 64 million autos called back for fixes in the U.S. The National Highway Traffic Safety Administration, under fire from Congress for not catching defects more quickly, has been considering punitive action against Fiat Chrysler for failing to protect vehicle owners.

Unauthorized remote access to certain vehicle systems was blocked with a network-level improvement on July 23, the company said in a statement. In addition, affected customers will receive a USB device to upgrade vehicles’ software with internal safety features.

Fiat Chrysler was already distributing software to insulate some connected vehicles from illegal remote manipulation after Wired magazine published a story about software programmers who were able to take over a Jeep Cherokee being driven on a Missouri highway.

The company, led by Chief Executive Officer Sergio Marchionne, reiterated that it’s not aware of any real-world unauthorized remote hack into any of its vehicles. It stressed that no defect was found and said it’s conducting the campaign out of “an abundance of caution.”

NHTSA said it encouraged the action to protect consumers against a vulnerability that could affect a driver’s control.

Expanded Action

“Launching a recall is the right step to protect Fiat Chrysler’s customers, and it sets an important precedent for how NHTSA and the industry will respond to cybersecurity vulnerabilities,” NHTSA Administrator Mark Rosekind said in a statement Friday.

The recall covers about a million more cars and trucks than those initially identified as needing a software patch. The action includes 2015 versions of Ram pickups, Jeep Cherokee and Grand Cherokee SUVs, Dodge Challenger sports coupes and Viper supercars.

“That’s not a small number to go after,” Mark Boyadjis, an analyst with IHS Automotive, said in a telephone interview. “This is a pretty quick response and much of it could be P.R. driven. But I think it will keep consumers comfortable and prevent current ones and future ones from straying away from the brand.”

This isn’t the first time automobiles have been shown to be vulnerable to hacking. What elevates this instance is that researchers were able to find and disable vehicles from miles away over the cellular network that connects to the vehicles’ entertainment and navigation systems.

That capability makes the possibility of remote hacking of cars a reality. Earlier hacks have mostly been achieved by jacking the researchers’ laptops into diagnostic ports inside the cars.

Fiat Chrysler’s UConnect infotainment system uses Sprint Corp.’s wireless network.

“This is not a Sprint issue but we have been working with Chrysler to help them further secure their vehicles,” said Stephanie Vinge Walsh, a Sprint spokeswoman.

NHTSA said it would open an investigation of the remedy “to ensure that the scope of the recall is correct and that the remedy will be effective,” agency spokesman Gordon Trowbridge said in an e-mailed statement. The agency said its electronics and cybersecurity experts will continue to monitor hacking threats and take action when necessary.

Consumer Confidence

There’s a possibility the recall could affect consumer confidence in Fiat Chrysler, even though the company isn’t the only one with cybersecurity challenges, said Thilo Koslowski, vice president and automotive practice leader at technology consultant Gartner Inc.

“It validates that cyber-hacking with cars is a serious issue that the auto industry must pay attention to,” he said. “The auto industry needs to develop new technology to combat these technological problems.”

General Motors Co. has a team working on cybersecurity and has hired Harris Corp.’s Exelis and other firms to develop anti- hacking systems, said Mark Reuss, the Detroit automaker’s executive vice president for global product development. GM seeks to block hackers’ access to its autos, he said, and if they do get in, it tries to prevent them from gaining control.

“It’s probably one of the most important things we spend time on,” Reuss said. “Anyone who wants to do something like that will probably get on, so you have to look at what happens when they do.”

Proposed Legislation

GM has also worked with the U.S. military and with Boeing Co. on its anti-hacking systems, he said.

Senators Edward Markey of Massachusetts and Richard Blumenthal of Connecticut, both Democrats, introduced legislation on July 21 that would direct NHTSA and the Federal Trade Commission to establish rules to secure cars and protect consumer privacy.

The senators’ bill would also establish a rating system to inform owners about how secure their vehicles are beyond any minimum federal requirements. The lawmakers released a report in 2014 on gaps in car-security systems, concluding that only two of 16 automakers had the ability to detect and respond to a hacking attack.

Markey questioned why it took nine months after learning about the security gap for Fiat Chrysler to order a recall.

‘No Assurances’

“There are no assurances that these vehicles are the only ones that are this unprotected from cyberattack,” he said Friday in an e-mail. “A safe and fully equipped vehicle should be one that is equipped to protect drivers from hackers and thieves.”

Although general cyber threats have been acknowledged previously by the industry, the specific ability to take control of critical vehicle functions in the affected Fiat Chrysler vehicles only became clear with the Wired magazine report, said Fiat Chrysler spokesman Eric Mayne.

“Prior to this month, the precise means of the demonstrated manipulation was not known,” Mayne said.

Representatives Fred Upton and Frank Pallone, leaders of the House Energy and Commerce Committee, sent letters to 17 manufacturers and NHTSA in May to gather information about how the industry is addressing cybersecurity.

“As the underlying technologies seemingly evolve by the day, so too must our manufacturers and regulators keep pace to protect drivers from these growing threats,” the Michigan Republican and New Jersey Democrat said in a statement Friday. 

(By Bloomberg Reporters Mark Clothier and Jeff Plungis; with assistance from Patrick Ralph in New York, David Welch in Southfield, Michigan, and Jordan Robertson in Washington.)

Copyright 2015 Bloomberg.

Hackers Remotely Kill a Jeep on the Highway—With Me in It

I was driving 70 mph on the edge of downtown St. Louis when the exploit began to take hold.
Though I hadn’t touched the dashboard, the vents in the Jeep Cherokee started blasting cold air at the maximum setting, chilling the sweat on my back through the in-seat climate control system. Next the radio switched to the local hip hop station and began blaring Skee-lo at full volume. I spun the control knob left and hit the power button, to no avail. Then the windshield wipers turned on, and wiper fluid blurred the glass.

As I tried to cope with all this, a picture of the two hackers performing these stunts appeared on the car’s digital display: Charlie Miller and Chris Valasek, wearing their trademark track suits. A nice touch, I thought.

The Jeep’s strange behavior wasn’t entirely unexpected. I’d come to St. Louis to be Miller and Valasek’s digital crash-test dummy, a willing subject on whom they could test the car-hacking research they’d been doing over the past year. The result of their work was a hacking technique—what the security industry calls a zero-day exploit—that can target Jeep Cherokees and give the attacker wireless control, via the Internet, to any of thousands of vehicles. Their code is an automaker’s nightmare: software that lets hackers send commands through the Jeep’s entertainment system to its dashboard functions, steering, brakes, and transmission, all from a laptop that may be across the country.

To better simulate the experience of driving a vehicle while it’s being hijacked by an invisible, virtual force, Miller and Valasek refused to tell me ahead of time what kinds of attacks they planned to launch from Miller’s laptop in his house 10 miles west. Instead, they merely assured me that they wouldn’t do anything life-threatening. Then they told me to drive the Jeep onto the highway. “Remember, Andy,” Miller had said through my iPhone’s speaker just before I pulled onto the Interstate 64 on-ramp, “no matter what happens, don’t panic.”1
As the two hackers remotely toyed with the air-conditioning, radio, and windshield wipers, I mentally congratulated myself on my courage under pressure. That’s when they cut the transmission.

Immediately my accelerator stopped working. As I frantically pressed the pedal and watched the RPMs climb, the Jeep lost half its speed, then slowed to a crawl. This occurred just as I reached a long overpass, with no shoulder to offer an escape. The experiment had ceased to be fun.
At that point, the interstate began to slope upward, so the Jeep lost more momentum and barely crept forward. Cars lined up behind my bumper before passing me, honking. I could see an 18-wheeler approaching in my rearview mirror. I hoped its driver saw me, too, and could tell I was paralyzed on the highway.

“You’re doomed!” Valasek shouted, but I couldn’t make out his heckling over the blast of the radio, now pumping Kanye West. The semi loomed in the mirror, bearing down on my immobilized Jeep.

I followed Miller’s advice: I didn’t panic. I did, however, drop any semblance of bravery, grab my iPhone with a clammy fist, and beg the hackers to make it stop.

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Wednesday, May 27, 2015

ISO Releases 2014 P&C Insurance Industry Results

Tague Alliance members enjoyed a great 2014 and that was correlated with a solid industry result last year as well.  Below is the text of an article released by ISO on the industry results.

Net income for U.S. property/casualty insurers totaled $55.5 billion after taxes last year, coming as little surprise to experts who had forecast a $50-billion-plus result early this year.
In early January, Robert Hartwig, president of the Insurance Information Institute, gave one of the earliest forecasts of full-year industry income, predicting a figure just over $50 billion, along with a policyholders surplus level of $675 billion and a return on equity of 7.7 percent.
See related article, “Profit Estimated at Over $50B for 2014
The official results published on Tuesday by ISO, a Verisk Analytics business, and the Property Casualty Insurers Association of America, showed Hartwig’s surplus forecast was right on the mark. But with net income coming in $5 billion more than expected, industry ROE was actually 8.4 percent.
While the 8.4 percent return may have seemed disappointing when compared to the double-digit return of 10.2 percent for 2013, overall net profit came in at the second highest level since the financial crisis—surpassed only by the $63.8 billion profit number for 2013—Hartwig and Steven Weisbart, I.I.I.’s chief economist noted in a commentary about the ISO/PCI results.
In both years, insurers faced low levels of catastrophes but the catastrophe loss tally for 2013 was just a little bit better (lower) than 2014. Direct insured losses from catastrophes for both 2013 and 2014 fell far below 2011 and 2012 levels—among the costliest on record for catastrophe losses, Hartwig and Weisbart said, noting that in 2013, direct insured losses from catastrophes plummeted $22.1 billion to $12.9 billion.
According to the ISO/PCI report, direct insured property losses from catastrophes hitting the U.S. grew $2.6 billion to $15.5 billion in 2014 but this was still $7.2 billion lower than the 10-year average of $22.7 billion.
“Wildfires, winter storms, hail storms, and tornadoes all took their toll, but there was no single event that did enormous damage” in 2014, Hartwig and Weisbart they wrote in their commentary.
“The industry’s performance in 2014 could be considered a return to long-term trends, neither as strongly profitable as in 2013 nor as catastrophe-impacted as in 2011 and 2012,” they concluded.
In addition to modestly higher catastrophe losses, a lower level of investment income played a role in the driving the profit level for 2014 below 2013’s overall result. Investment income—primarily interest payments from bonds and dividends from stock holdings— dropped 2.5 percent to $46.2 billion.
Losses and Premiums Growing—But Not at the Same Rate
On the underwriting side, another highlight from the ISO/PCI year-end figures was the level of net written premiums, which jumped 4.1 and 4.4 percent in 2014 and 2013. Notably, however, the 2014 premium climb did not outpace the increase in total incurred losses, 6.2 percent, and the combined ratio inched up 0.8 points to 97.0 partly as a result of the difference.
Commenting on the 3-point underwriting profit for 2014, Beth Fitzgerald, president of ISO Insurance Programs and Analytic Services, said: “Right now, good underwriting results are a must for insurers. But with much of the improvement in underwriting results for the last two years attributable to moderate catastrophe losses and dependent on continued reserve releases, one has to wonder just how sustainable the net gains on underwriting will be.”
On a net basis (including deductions for reinsurance), catastrophe losses and loss adjustment expenses totaled $16.8 billion in 2014, up 20 percent over the $14.0 billion total recorded for 2013. Non-catastrophe losses totaled $317.9 billion in 2014, up 5.6 percent over 2013.
Lower levels of reserve takedowns during 2014 for losses incurred in prior years explained part of the increase in the industry’s incurred loss total for calendar year 2014. Overall, takedowns amounted to $11.2 billion in 2014, compared to $15.6 billion in 2013. The I.I.I. and ISO/PCI analyses both note, however, that much of the difference between the 2013 and 2014 levels of reserve takedowns (releases) is attributable to mortgage and financial guaranty lines of business. Excluding the guaranty businesses, reserve releases for other lines totaled $10.9 billion in 2014, compared to 12.0 billion in 2013.
Examining the top line, the economists at I.I.I. see continued exposure growth in the year ahead, noting that exposure changes and rate changes are the two determinants of net premium growth.
“Workers compensation is likely to remain among the fastest growing major P/C lines of insurance in 2014 if economic growth and hiring continue as projected,” Hartwig and Weisbart wrote in their analysis.
“With premiums for auto, home and major commercial lines all trending positively, overall industry growth could keep pace with overall economic growth in 2015, as was the case in the prior two years,” they said, noting that new vehicle sales are now back to pre-recession levels, and that residential construction recorded the best yearly numbers since 1999 last year.
“With the pace of real GDP growth expected to quicken in 2015 to nearly 3 percent, personal and commercial lines exposures—and the premiums they generate—should continue to expand modestly,” they said.
Fourth-Quarter Results: Combined Ratio at Record Low
Looking back at 2014, Robert Gordon, PCI’s senior vice president for policy development and research, noted the contribution of good fourth-quarter numbers from underwriting activities. “Property/casualty insurers had another moderately good year in 2014, with fourth-quarter results particularly strong,” he said, referring to net written premium growth of 4.8 percent and a combined ratio that was more than five points better than breakeven.
At 94.9, the combined ratio was the lowest recorded in nearly three decades, according to the PCI/ISO report. The fourth-quarter combined ratio has averaged 106.5 since 1986, the report said.
Net premium growth outpaced the increase in net losses, which was only 2.7 percent in the quarter.
Still, net income fell to $17.8 billion in fourth-quarter 2014, down nearly 14 percent from $20.7 billion in fourth-quarter 2013.
Significant declines in net investment income–a 9.2 percent drop to 11.9 billion–and a $4.1 billion decline in net realized investment gains—drove overall net income lower in spite of better underwriting results.

Sources: ISO, PCI, III