Homeowners reverted to its historical trend with combined ratios in excess of 100 percent due to another round of catastrophe events affecting the United States. With the increase in personal auto competition, personal lines-dominant insurers face increased speculation on how to develop long-term prospective profits. The study found that personal lines writers experienced a reversal in 2018 from the previous four years as auto bounced back into profitable territory. Diversification of risk and reinsurance utilization remained important considerations, based on the past five years of results, according to Thomas Hettinger, Managing Director, Strategic Advisory, Guy Carpenter.
This is one of the key insights identified in Guy Carpenter’s Risk Benchmark 2019 report.
With the initiation of a flip in profitability between homeowners and personal auto, an argument can be made for building out a diversified portfolio. More carriers are looking to balance their portfolios with a small commercial book that is also under competitive pressure. Demands around predictive modeling solutions will grow as the top personal lines carriers push on their in-house analytics. Progressive, GEICO and USAA, for example, substantially lower expense ratios through their direct operations. In fact, other major carriers continue to build out direct solutions to help offset this challenge.
The study recognized that capital consumption continued to be front of mind, as personal lines writers search for consistent profit while managing volatility due to price competition and catastrophe losses from recent hurricanes and wildfire events.
Overall, the industry’s need to address challenges in the face of competition and growth will continue. Insurers will be tested in picking their opportunities with care to maximize their potential for success. Benchmarking and use of predictive analytic models will be foundational to advancement.
With our Risk Benchmark initiative, analytics tools and solutions, and market-leading insights, Guy Carpenter helps insurers navigate their day-to-day business challenges and capture profitable growth opportunities amidst this increasingly complex risk environment.