A Global Conversation
Home Matters

“We've also seen new areas being covered [regarding alternative capital], the latest example being California wildfires. Tokio Millennium Re has fronted a cat bond for a company covering California wildfires. We've also seen other perils being covered like workers' compensation catastrophe business or, even beyond that, parametric coverages, which do address protection gaps in developing countries like the Philippines.”

Stephan Ruoff
CEO
Tokio Millennium Re

“Personal lines insurers have really been pressured recently to improve the homeowners line because of a deterioration in underwriting for personal auto. They've made significant investments in technology. They've really been focused on improving their underwriting and pricing tool set.

These advancements in predictive analytics have allowed for more accurate and more sophisticated risk classification, segmentation, and pricing.

By-peril pricing has become more prevalent in recent years. This has allowed for insurers that have adopted by-peril pricing to improve their loss ratios and increase market share. They've also been able to improve rate adequacy. By-peril pricing has allowed companies to more effectively and efficiently purchase reinsurance.

Although implementation costs can be prohibitive for predictive analytics, third-party data has also allowed more companies to adopt this technology. As companies become more analytically driven, they can become more specific in their pricing. It's our view that companies that are late to embrace these changes will either be adversely selected against or risk losing market share.”

Bobby Skrabal
Industry Analyst
A.M. Best

“For homeowners carriers, accuracy in pricing is a little bit more difficult because homeowners characteristics are less homogeneous in nature. Specifically naming some examples would be amount of insurance, protection class, age of dwelling as well as square footage just to name a few.

As a result, homeowners carriers have in recent years started to invest more in utilization of data analytics to improve pricing integrity. Greater access to data sources and more widely accepted or adopted by-peril pricing earlier and credit scoring all have in many ways leveraged the playing field within the homeowners marketplace.

Companies also have started to leverage technology in other facets of insurance operations such as claims, data as well as distribution. Technology has helped homeowners insurers to improve the customer experience through artificial intelligence as well as mobile app technologies.

As well, through these mobile apps, homes are now being equipped. Essentially, you have smartphones, smart TVs. You now have smart homes. These homes are equipped with smoke detectors and carbon monoxide detectors as well as security systems, water leak detectors, thermostat controls, and all sorts of technology that you can manage through basically a few taps of your cell phone.

These consumer-friendly services are intended to improve the customer experience. As I have mentioned previously as well, they were designed to essentially help insurance carriers more accurately understand the insurance risk as well as better price their products.

Ultimately, the consumers still have yet to embrace big data analytics within the insurance company environment because of the fact that there have been some concerns from a privacy perspective as well as overall cybersecurity risk.”

Maurice Thomas
Senior Financial Analyst
A.M. Best

“Generally speaking, a property/casualty policy doesn't have a risk associated with suicides or homicides. They're tragedies for the people involved and for society, but they don't trigger a homeowners policy or commercial liability policy. The claims that would, would be just accidental, but that is a very, very small percentage. You take that with the fact that it's not an underwriting risk that they particularly need to be concerned about.”

Peter Kochenburger
Professor of Law
University of Connecticut

“There is lots of publicity around hurricanes, lots of publicity around wildfires, but nonweather water is driving the loss ratio in the first lines property business. It's just washing machine hoses breaking, bathroom lines breaking, that sort of thing, where they could go at any time, and unfortunately, they tend to go a lot when no one's at home. We've seen a lot of claims in the last couple of years where people had been gone for days, a secondary home, a washing machine hose breaks, and it just runs for weeks until the customer gets there. It doesn't take long for a little bit of water to do a ton of damage on a house, and nobody wants to go through a water loss.”

Bill Gatewood
Group Practice Leader for Personal Lines
Burns &Wilcox