Casualty insurance exists in tow forms: commercial lines and personal lines (Bonner n.p.). Commercial lines are designed for businesses, while the personal lines deal with individual’s risks, such as auto and homeowners insurance. Commercial insurance is vital since it plays a significant role in the world’s economy. It protects the economy from failure because it assumes risks inherent in the production of goods and services. It is absence would result in a complete collapse of the economy.
The current market conditions for the property and casualty insurance is affected by high inflation rates in America. Besides, the industry is receiving inadequate support from the economic engines because of its sputtering condition (Ralphs n.p.). Technological advancements and rapid growths in insurer technology are changing buyers and customers’ expectations. The emergence of telematics, the internet, artificial intelligence, driverless cars, and block chains are also changing the current risks in the insurance industry. With these changes in future companies will be required to use advanced technology to satisfy customer’s need in the insurance industry.
The year 2017 has begun with a new era of political administration under the newly elected President of the United States America, Donald Trump. There is a high expectation for changes in economic growth and taxation policies. Therefore, the insurance companies’ management should rethink their businesses goals and come up with the new ways of operating strategies that will enable their existence even if tough times strike the industry. Before, developing survival approaches, the firms should ask and answer questions such as:
- What changes will the insurance industry encounter as a result of the change in political direction?
- In future which is the most important business segment?
- How can they streamline costs and attract new businesses using robotics, data analytics, and other emerging technologies?
- How do they remain relevant in the fast-changing marketplaces? How do they build innovative and customer-driven organizations?
- What can they do to ensure the right talents are available and in the right places?
With the changes in technology, policies, and regulations in 2017, the demand for new products (for example, cyber risk insurance) will be on the rise (Hoffman n.p.). The desire and drive to invest in innovative ways of enhancing growth face the challenge of complying with the current regulations in place. In the commercial sector, companies on a macroeconomic level are giving priority to expenses reduction and enhancement of efficiency. These strategies are crucial in increasing profits and decreasing insurance rate, which is vital in protecting the businesses from falling collapsing.
The cyber insurance market has a wider coverage now, with over 60 carriers offering cyber insurance and a gross written premium of $3.25 billion (Insurance Journal n.p.). With the increase in understanding and knowledge in cyber risks both by buyers and insurers, the limits of cyber insurance are on the rise. The government should not leave the issue of cyber security fully on insurance companies, just like with the flood insurance they should provide a solution. To protect against cyber security risks insurance companies are creating robust security systems, these systems help protect them as well as buyers against cyber attacks. Insurers are as well hiring an expert of cyber risks and also partnering with other companies to have proper systems to manage the increasing threats.
Businesses that operates in Florida are likely to face a limited market. The buyers of casualty insurance should expect to face soft market conditions this year. The Casualty Practice competition among cyber liability in 2017 is anticipated to be favorable for buyers because the rates and interest rates are low (Hofmann n.p.). The 2016 market trend shows the possibilities that some market conditions are at their last stages. Moreover, the claims are on the rise in 2017 with accumulated losses, for example, losses incurred when hurricanes hit Florida. The insurance market is changing in 2017 taking into account the activities and prices. Some rates have deteriorated while others are expected to slow going down.
The large insurer companies need to employ effective strategic and structural methods to cope with the challenge of slow growth. Some of them are buying similar businesses to make them much stronger and manage the market changes. Insurers are entering the year with a steady and robust base. However, the increased entry by these firms contributes to softening of the commercial line businesses as well as threatens their ability to make profits. Insurance companies are increasing their abilities to compete with new and existing companies for a share of the market within the economy with a very slow growth rate. Besides, economic challenges are spurring experimentation of new products and services, companies have found a new market opportunity and are developing products to fit these emerging markets for example business coverage while still expanding on the sales of cyber insurance and cyber services for risk management (Ralphs n.p.).
Insurers are as well facing the challenge of bolstering market share, innovation and the levels of profits. For example, auto safety technology could reduce the frequency of loss occurrences that would to a cut in the premiums contributed towards that risk, since business will see no need of paying for that policy. Besides, another challenge is the effects of data has on pricing and underwriting, and the existing balance between internet risks and benefits of cyber risks with relation to the connected devices (Ralphs n.p.).
Moreover, the marketplace will always favor buyers of insurance products, especially ones who already have risks management and risk transfers strategies (Hofmann). The high market capacity will enable insurance companies to absorb any catastrophic risk and losses that arose in 2016 in Florida, for example, those of Hurricane Mathew and Atlantic Hurricanes Significant insurance and reinsurance consolidations are expected in 2017, resulting from the decreasing property/casualty rates and profits on underwriting (Claire n.p.). The property will continue going down.
Commercial auto still poses problems to the insurance companies, its capacity is small and very scarce, but it’s experiencing a steady growth. Auto growth is expected to shoot to 10% in 2017 from 3% in 2006 (Insurance). Companies are making little or no profits on commercial automobiles, it is anticipated that the commercial insurance rates will decrease owing to the current adequate results and consistency in the market shares excluding auto companies whose prices are expected to go down as has been the case (Hoffman n.p.).
There will also be a challenge of widened talent that will result from the retiring groups, in 2017 (Insurance Journals n.p.). The projection estimate that 70,000 professionals will retire. Therefore, insurers need to be innovative to attract new talents, to meet the needs of their clients. Moreover, insurers need to introduce new products and come up with new business models. They should also automate most of their processes by using current technology as well as predict the possible cyber risks posed by hackers. Still, they should try to mitigate their activities and rethink of better ways to attract a competent workforce.
In conclusion, it is clear that insurance companies should pay key attention to new technology. Today, several technological advancements are taking place, and therefore insurance companies need to incorporate latest technologies in their working systems to remain competitive. Also, cyber risk should be a top agenda for the insurance companies. The cyber threats are on the rise and buyers are considering expanding their business coverage to include cyber risks management. Therefore, insurance firms should make sure they too understand and have packages covering cyber risks. Furthermore, they should be well prepared to face the changes under the new administration led by President Donald Trump. They should be alert on tax policy reform and other commercial related transformation insurance sector. Through effective policy strategies, insurance companies would be able to reduce the impact of changes in new business climate under the new regime.