Property Casualty Insurers Facing Pressured to Innovate

Property/casualty insurers are facing an erosion of barriers to entry in their markets, as risk data becomes more widely available, and as new capital sources disrupt traditional insurers, according to a new study by Conning. “The value proposition of the insurance industry rests on the two foundations of managing information about risk and providing a large pool of capital to absorb risk—both of these are under attack,” said Jerry Theodorou, vice president, Insurance Research at Conning. “First, quantitative and qualitative technology advances that make data increasingly available enable new market entrants or customers themselves to absorb risk that insurers would otherwise handle. Second, new, much larger and more efficient capital providers entering the industry are siphoning off premium that ordinarily would flow to insurers. If insurers do not respond effectively to the data and capital challenges, the property/casualty industry may diminish in size and do so at an accelerating rate.”