In N.H.’s positive climate, insurers free to focus on competition and technology
News Currents
Insurers find the political and regulatory environment in New Hampshire favorable.
“[I]t’s clear that in New Hampshire, we have a different marketplace than the other New England states. It’s a very positive environment here,” explains Michael Christiansen, president of the New England division for Hanover Insurance.
That positive environment frees up New Hampshire insurers to worry about core challenges including competition and technology.
According to Christiansen, his company’s overall challenge in the Granite State is to confront competition “while at the same time growing profitably in a marketplace that is somewhat stable as far as agencies and accounts.”
Christiansen was one of several executives sharing his thoughts during a recent panel for the Independent Insurance Agents and Brokers of New Hampshire.
Reinsurance costs
The competitive landscape is being shaped by rising reinsurance costs. This a matter of concern to Tom Tierney, president and chief executive officer of Vermont Mutual, and all executives.
“This past year, 2005, there were three major cats: Katrina, Rita and Wilma. It cost the industry somewhere in the neighborhood, depending on who you believe, of $60 to 80 billion. That now is starting to flow back into the system…,” Tierney noted.
As a result of those catastrophes, insurers are having to accept major price increases in reinsurance renewals from a marketplace that offers them little choice. “[I]n the reinsurance market, there’s probably $170 billion and of that $170 billion, 60 percent of that is controlled by 10 companies. So we’re not talking a large competitive scale here. And the field is narrowing,” noted Tierney.
Concord Group, a personal lines insurer, also finds itself under pressure from reinsurers. “The reinsurance is more expensive, and where you write the business, depending on where it is, it gets even more expensive,” noted Linda Day, Concord Group president.
Reinsurance concerns aside, these CEOs contend their ability to compete is linked to technology.
For Concord’s Day, whose company is installing a new state-of-the-art system, technology presents a challenge on several fronts.
Day pointed to statistics indicating that while about 7 percent of consumers were going online in 2004 to get quotes, last year in 2005 that number grew to 27 percent.
These consumers are interested in more than just quotes, however. “The big numbers came in going to company sites, to service their accounts, to pay their bills, to maybe add a car, take a car off, that kind of things. So that is really important,” Day pointed out.
Technology is also behind the competitive pressure Concord Group is facing. “{W}e’re all feeling a tremendous amount of competition, particularly from the direct writers. They have very sophisticated predictive modeling tools that they use. They have advertising budgets that are probably twice as much as our surplus at Concord Group. So it’s a big challenge, trying to go up against those folks,” Day said.
As part of its response, her company has hired a consulting actuary to revamp its auto book. “I don’t mind the competition. It makes us all better. But we’re certainly feeling it there,” she acknowledged.
Vermont Mutual’s Tierney thinks technology has improved insurer decision-making. He gets a daily update on losses for the month and the year. “[T]hree or four years ago, that was impossible. Through automation we get information quicker, we’re able to make decisions quicker, and we’re able to react to the market quicker,” he said.
The current challenge is making the company’s technology work for agents. “Agencies often take the path of least resistance. In our situation, we need to make it easy for you to do that. And at the same time, we need to make sure that the underwriting principles that we have within the company, are adhered to,” Tierney said.
Hanover’s Christiansen believes technology will drive the competition that New Hampshire agents will soon face as insurers introduce more sophisticated products. The competition will not be limited to local companies. “For example, with the multi-variant auto products, I think you’ll see the regional companies currently in the state adopt those products to some extent. You will also see the national companies that have not been in this marketplace before come in here with their multi-variants, which enable them to act like a regional because of the sophistication of the system,” Christiansen added.
He predicts this will benefit agents as more companies make personal lines appointments in the state.
Also, the competition will not be limited to personal lines. “I think you’ll see a greater movement towards segmentation of small commercial versus first-tier middle-market business. This arms race that’s going on right now with automation is not just happening in personal lines. It’s also happening in commercial lines,” Christiansen told the agents.