In an interview with AM Best, Mike Miller, CEO of Pivix, highlighted the growing scrutiny of general liability insurance and the potential for rate increases.
Miller (pictured) pointed to various pressures, including rising reinsurance costs and prior accident year development, which are putting strain on pricing structures across the industry.
“Reinsurance costs have gone up, we all know that,” Miller said. “As reinsurance costs go up, obviously it puts pressure on your pricing structure. But there are other things that I understand companies are experiencing, which is prior accident year development. Once that happens, that puts pressure on your current accident year picks, you kind of get a double whammy from that.”
If interest rates begin to fall, investment income could also decrease, affecting returns on capital.
Miller added that inflation, which has stabilized somewhat in the United States, still saw high rates in recent years. Social inflation, though not widespread, continues to affect certain sectors. He suggested that these factors are likely to draw more attention to general liability (GL) insurance at the corporate level.
“Specifically, you get into things that we would all know about like daycare centers and, places where sexual molestation or harassment or things of that sort tend to get to headlines so those may be more stressed than maybe a GL policy on a local business, a construction working job site or something,” he said.
Miller expects GL rates to rise, stating that rate reductions should be avoided, even if underwriters believe they can price more competitively.
When asked about the impact on the excess and surplus (E&S) market, Miller expressed confidence in its ability to adapt quickly to changing conditions. E&S carriers, he said, can respond immediately to market needs as they are not required to file rates or forms.
“We're in a great position to respond and that's what E&S is all about. It's responding to needs in the market,” he said. “If these pressures start hitting the standard lines companies, they're going to start pushing some of that business back into the E&S market. Which has been going on for a period of time here. We should see more business coming into the E&S marketplace.”
Miller emphasized that the E&S market has the tools to handle the increased business and noted that the key challenge will be how effectively insurers utilize data to make informed decisions. He underscored the long-term nature of insurance, where the outcome of policies may not be known for years.
Miller, a former president of Scottsdale E&S, discussed his decision to launch an MGA. He said that entering the market as an MGA allows for quicker deployment of underwriting expertise without the need to raise significant capital to build a carrier.
“We can make this move into the marketplace much quicker than going out and trying to find a significant amount of cash to build a carrier company. We do the same thing. We have the underwriting expertise, we have the knowledge, we have the experience, we have a tech platform that we've already built that's proprietary to us,” he said.
The move to operate as an MGA, Miller explained, involves partnering with a carrier’s paper, allowing the team to bring their underwriting expertise and market knowledge to bear without the overhead of creating a new insurance company.
Miller also spoke about how MGAs can differentiate themselves to carrier partners, emphasizing the importance of experience and knowledge in managing profit for the carrier.
“I have a good CFO (and) chief actuary that is really steeped in the E&S marketplace so he's going to be able to help us help the carrier define what is it that we need to do to adjust whatever is happening in the marketplace because things are dynamic, they change all the time,” he said.
Miller added that MGAs offer carriers a quick entry into new markets without the upfront costs of building a platform or hiring additional personnel. This ability to provide carriers with a fast, efficient way to access new markets is a key advantage for MGAs.
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