A look ahead at P&C insurance distribution trends

A significant number of commercial P&C insurers, irrespective of their size, are actively investigating and implementing new distribution channels – whether delegated, multi-national and open market as examples. Across the industry, compelling incentives are prompting many organizations to broaden their distribution strategies beyond traditional methods.

Brokers continue to be the primary channel for commercial insurance.

In fact, advancements in analytics and artificial intelligence are driving the transformation of P&C insurance distribution, enabling brokers to both maintain their importance and prosper.

Enhanced transparency regarding risk costs and more advanced internal risk management capabilities are compelling carriers to provide more refined and tailored offerings. In addition, larger brokers, who already command a considerable share of the industry’s total value, are achieving greater scale and developing sophisticated capabilities.

Moreover, the rise of new and intensifying risks—such as cyber threats, increasing natural disasters linked to climate change, supply chain challenges, social inflation and a turbulent geo-political environment—are reshaping the P&C market and heightening the importance of the broker/carrier relationship.

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The carrier-broker relationship

It’s no understatement that the carrier/broker relationship has been one of the most lasting and sustainable in the P&C market.

For P&C carriers, cultivating a solid, transparent relationship with brokers has proved to be critical – especially over the past few years as an increase in M&A in the broker community has increased. This consolidation has put increasing
pressure on P&C insurers to provide superior service to their broker partners.

So how can carriers forge even stronger bonds?

Investing in technology and other value-adds

One key approach for carriers to fulfill their commitments and strengthen their partnerships with brokers is by developing and utilizing technology. While various technological tools can differentiate carriers, these technologies must enhance the relationship between carriers and brokers. Moreover, maintaining effective two-way communication is vital in case any changes arise.

P&C carriers currently find themselves in a challenging position: despite having access to a wealth of data, they often struggle to obtain relevant information at critical stages of the insurance process. The rich availability of detailed data offers a chance to improve risk assessment; however, conventional data and analytics methods are becoming less effective in the face of rapid advancements in technology and data accessibility.

In this scenario, the leading insurers are excelling in three fundamental areas, which, in turn, are building stronger bonds with their broker partners:

• Data strategy: A strong data strategy that emphasizes acquisition, processing and integration is essential. By incorporating a variety of data sources, insurers can better prepare for changing market conditions and foster a more collaborative relationship with their broker partners.

• Advanced analytics: Adopting a comprehensive data strategy that employs advanced analytics and integrates insights into operational workflows is crucial for P&C carriers and their brokers to succeed in the bumpy market landscape.

• Next-generation analytics: The implementation of next-generation analytics is vital for effective risk evaluation and pricing. Utilizing AI and machine learning to ingest data as it becomes available will be critical for effectively managing and pricing more complex risks within the P&C landscape.

The more up-to-date data and improved tools that carriers can offer, the more swiftly the industry can address submissions, target new and lucrative business segments and provide detailed risk information, among other advantages. This, importantly, helps to strengthen connections among insured parties, carriers and brokers.

However, without a solid foundation of relationships, new technologies will have limited impact. Any technological investments made by carriers are intended to enhance relationships rather than replace them. A significant aspect of building these relationships involves discussing a carrier’s risk strategy, which informs brokers on when to present specific coverage options.

Future distribution trends

Several trends are reshaping traditional dynamics for U.S. commercial lines insurers. End customers — the insured companies — are retaining more risk and, consequently, seeking new forms of risk management support beyond mere insurance coverage.

To retain their significant role in a changing market, insurers must deliver new capabilities and insights, ensuring that the value they provide is clear and demonstrable. Prompt action regarding operating models, value propositions and capabilities will be crucial in determining which carriers thrive in this new environment.

Technological advancements may increase exposure in certain areas (such as cyber risks) and pose unforeseen challenges that will require innovative insurance solutions. Because of these developments, brokers will continue to play a vital role in the future of insurance distribution.