Navigating Tough Markets: Advanced Risk Selection in P&C Insurance with Pinpoint Predictive
No one in the insurance is unaware to the headlines about major insurance carriers reducing their presence in certain markets and either leaving markets entirely or making the tough decision to cease renewing lines of business in certain states. The headlines continue to publish discouraging news of simply how challenging things have become for insurance carriers.
In California alone, 90% of companies either are not offering property insurance or have heavy restrictions, while 70% are not currently offering new plans. This trend raises important questions about how insurers can navigate profitability challenges without limiting customer options. The term double inflation is being heard, where not only is inflation causing continuing uncertainty, the industry’s pains have been exacerbated by social inflation.
Rising costs, unprecedented claims payouts, and consumer expectations are posing challenges for insurers. Many are struggling to navigate the combined pressures of macroeconomic issues alongside escalating frequency and severity losses in personal lines.
The situation demands P&C insurers adapt, focusing on profitability while delivering the relevant experiences consumers deserve and require, yet, many carriers are unaware there is a solution that is immediately available to them so they can avoid making these difficult decisions to leave markets, as well as having an alternative solution to resort to out-pricing their best consumers in order to balance profitability against loss.
Historically, one lever carriers have attempted to utilize in addressing profitability is filing for rate increases. However, there comes a point when requested rate increases are limited or denied by regulators, forcing carriers to make the difficult decision to stop offering policies. This leaves consumers with fewer choices, driving premiums up for those that remain – a death spiral by adverse selection.
Next Era Risk Identifier
A better approach is to leverage risk intelligence at an individual level, powered by behavioral deep learning offered by Pinpoint Predictive. Our type of predictive intelligence helps carriers prepare more effectively and avoid future profitability issues or adverse selection as more people shop for insurance. By incorporating individual-level risk selection insurers can identify consumers with the highest risk propensity before they even become policyholders.
In the latest report, AM Best projects a combined ratio of 100.7 for all P&C underwriting lines in 2024. With advanced intelligence available earlier in the buying process, insurers can guide consumers down different underwriting and pricing paths, evaluate critical financial implications and avoid the potential damage caused by the lack of early intelligence.
Enhancing Fairness Through Advanced Risk Selection
Fairness in insurance goes beyond industry standards to include a deeper understanding of the individual. Even if a customer is unbanked or has no credit history, carriers can still leverage behavioral data. Insuring people more appropriately, rather than exiting a market to alleviate profitability and rating constraints, is fairer and better serves all stakeholders, including customers..
A Better Approach for P&C Insurers
Utilizing Pinpoint’s individualized predictive intelligence allows carriers to more precisely identify and quantify risks, placing policyholders into the appropriate tiers without the need for continuous premium increases or drastic market exits.
Furthermore, entering a market can also benefit from this cutting-edge individual-level intelligence. For example, a carrier entering a market like California, can use this approach to make informed decisions, identify customers who match their risk profile and gather better intelligence on potential agency partners for both the short and long term.
Conclusion
Insurers have a responsibility to serve all stakeholders, even in volatile times. Every single player in the insurance industry has a duty to keep its company sustainable, uphold promises to consumers, and deliver returns for investors or owners, and insurers can do this more efficiently, regardless of market conditions, by using Pinpoint predictions.
The challenges of achieving sustainable profitability amidst rising costs of claims, litigation, and social inflation require adapting to new or growing risks, and carriers can accomplish this by leveraging the power of behavioral predictions offered by Pinpoint. By not doing so, and failing to utilize Pinpoint or any of the available new technologies and intelligence on offer in the market, insurers will miss the opportunity to build stronger companies and fulfill their obligations to all stakeholders.
The key is more effective risk selection and assessment. Planning well and ensuring robust financial management are essential attributes for any company. The insurance industry, at its core, protects people and their dreams, providing peace of mind. By improving our practices and solidifying the industry, insurers will leave a legacy everyone will be truly proud to leave.
To learn more about Pinpoint Predictive and how we’re changing the game for P&C insurers now and into the future, contact us or book a discovery call with the team. We’re here to help.
Read this article originally published on Insurance Thought Leadership and authored by Pinpoint Predictive CEO, Scott Ham.
