The insurance cycle may have fundamentally changed, an expert has said.
Nigel Thomas, division chief executive -
Austbrokers Networks,
AUB Group, said that he believes there has been a change in insurance pricing cycles.
“What we have seen is the lows have extended and the highs have shrunk,” Thomas told
Insurance Business. “In the past, the highs have been quite aggressive - what we are now seeing I think is a change in terms of the cycle.”
While adages may vary, the days of the traditional cycle do appear to be over as the market continues to harden in certain sectors. The fragmentation of hardening, however, is a newer trend, one that Thomas believes is down to the data available to insurers and underwriters.
“The more you can be specific in the way you assess ongoing risk, hopefully it will reduce that cyclical approach,” Thomas continued. “Underwriters are able to drill right down in the data that exists today and how you can analyse that data. It is that access to knowledge and data that has allowed the insurance market to be more bespoke in the way it delivers increases or changes in a risk profile.”
Thomas stressed however, that pricing will still have cycles due to the influence outside capital has on aspects of the market. While the industry is able to control its pricing based on underwriting practices and guidelines, when capital is in surplus it will lead to lower pricing.
As prices rise in more specific areas, Thomas said that it is important for brokers to discuss changes with clients early to help them prepare their business and mitigate against any risks to help lower premiums.
“If you leave it to the last minute, first and foremost the insurer has already gone through that loss experience and it is too late to introduce those changes in the risk profile from the risk management perspective,” Thomas continued. “If you haven’t gone early in those discussions with the client, you are getting increasing rates, plus you have to find money to invest in risk management.”
Related stories:
AUB Group announces latest acquisition
AUB Group names new COO
