Things Insurers have to be Thankful For
There may not be a table big enough, but if the 2.5 million people in the insurance industry got together this thanksgiving then they would have plenty to be thankful for. Annuity sales, for a variety of reasons, are currently soaring. The industry, which just recently weathered a recession and a very active span for catastrophes, is nonetheless looking exceptionally robust as it breaks all-time policyholder’s surplus records. Most exciting of all, insurers looking to innovate and cut costs can look to a landscape of technology options that have stabilized and matured significantly in recent years.
Plump, Juicy, Annuity Sales
Sales of annuities, particularly fixed annuities, have been red hot. Fixed annuities sales are up almost 40% over the first two quarters of 2013 according to Insurance Newsnet. Typically annuity sales in the first quarter dip significantly compared with the fourth quarter, but this year the energy carried over into 2014, with only a slight dip of around 4%. The baby boomer demographic wave has contributed to this tremendous increase, as well as the increase in annuities slant towards fixed products. NEOS attributes better sales to better products, which are being designed and supported by better technology. “The products coming out these days are better targeted to the market, and some of them, especially in indexed annuities, would not have been as easy to implement in years past,” says Dan Kohler, senior consultant at NEOS.
Fresh, Homemade, Policyholder’s Surplus
Policyholder’s surplus, often seen as an indicator of the robustness of the P&C industry, hit record highs. A recent A.M. Best report indicates that policyholder’s surplus increased by $20 billion in the first half of 2014, pushing the overall number to $683.1 billion. This means, among other things, that insurers can feel comparatively quite well assured of their ability to meet future losses. NEOS senior consultant Dan Kohler argues that, “The fact that rising profits and increasing values of investment portfolios have managed to push this number to its record high despite considerable catastrophe losses is a heartening sign of resiliency.”
An Abundance of Stabilized and Matured Technology Investment Opportunities
Technology is providing insurers with some appetizing options for lowering costs, improving pricing, engaging with customers, deploying innovation, and improving distribution effectiveness. According to a report by Insurance & Technology, three quarters of insurers used predictive analytics in their pricing, and all insurers with over $1 billion in personal insurance employed it. Telematics are becoming more useful to insurers and palatable to consumers. NEOS managing consultant Steve Leigh asserts that, “Automated underwriting processes among life insurers have begun to come into their own, with successful implementations cutting costs and improving results.” Meanwhile, according to Leigh, increased investments into core system replacements, emerging technologies such as social media, mobile, gamification, digitalization, and others will yield increased business value over the next several years.
Overall, insurers are in a relatively good place, and they have promising opportunities to look into in to help them try to keep it that way. What will these promising trends bring for the industry through the end of 2014 and in to 2015?