Carrier pullbacks, a cost-of-living squeeze, extreme weather, and a persistent hard market added up to a challenging year for personal lines in 2023. But at least one leader sees light at the end of the tunnel.
Bryan Davis (pictured), EVP and head of VIU by Hub, Hub International’s digital broker platform for personal lines, shared why he’s bullish on the sector in an interview with Insurance Business.
“We do see signs that the market is starting to open,” he said. “Third-quarter earnings were strong for the industry, and that’s a very good leading indicator of what’s to follow. If some carriers start taking rate, then others are eventually going to start taking rate as well.”
However, while supply is gradually returning from admitted carriers, prices are not likely to come back down, Davis cautioned. He expected carriers to continue disciplined underwriting practices.
“We see some carriers restricting the amount of coverage they offer on their standard homeowners’ policies,” Davis said.
“Say, instead of guaranteed replacement costs in your homeowners’ policy, you might have a policy that has actual cash value, and you have to buy back the guaranteed replacement cost. Carriers know that it's tougher to take risks, particularly in some markets that are stricter on the rate being taken.”
Where larger carriers will continue to tread a conservative and broad national footprint, new entrants and emerging players could step in to fill coverage gaps, according to Davis.
“Some of the newer, more agile MGAs are technology-driven and can offer better underwriting around specific risks,” he said.
“There is an opportunity for emerging carriers to be creative and take some risk where other carriers may not be in a strong position to, and for new entrants to run to where national carriers are running from.
“In addition, brokers who really invest in their specialty businesses and their MGAs can also take some smart risks. If you can bring technology-driven underwriting solutions, where a legacy carrier is still behind the curve, that's really an opportunity for this industry to evolve.”
Davis shared some trends on his radar for the new year. One of them is the growing market for personal cyber insurance.
“Cyber insurance is one of those products that are abstract to the generic consumer. The hardest part is convincing people to get protected for something that they don't think can happen to them until it happens,” said Davis.
As cyberattacks become more commonplace, individual consumers are more likely to seek protection. Driving awareness of personal cyber risks and mitigation, as well as creating ease in securing cyber coverage, is likely to be key to nurturing the market.
Bundling cyber coverage with traditionally bought insurance products could bring new revenue sources for carriers and brokers, according to Davis.
“Should cyber be included with your homeowners’ policy? The answer is yes,” he told Insurance Business. “That's where some of the innovation and creativity of the industry can really come out on the consumer side.”
Extreme weather, such as hurricanes, wildfires, hail, and severe convective storms, will also continue to pose tremendous challenges to the industry this year.
“When carriers can't price and predict weather events, the result is usually non-renewals, restricting the amount of coverage, and re-evaluating the cost of repair and replacement on homes,” said Davis.
In some states, such as California, where current pricing models do not account for the change in weather patterns, legislation has made it difficult for carriers to take rate these perils.
“When the market was fairly soft, consumers didn't have these pain points because supply was abundant. Carriers didn't have to worry about the weather patterns, and inflation wasn’t putting pressure on the local Department of Insurance to mitigate the rate actions. But all of those are hitting the carriers at once,” Davis said. “I think the need for brokers is more dominant than ever.”
VIU by Hub is part of Hub International’s push to broaden its digital capabilities in personal lines. Despite technology's more prominent role in the distribution of personal insurance, Davis believes the need for independent agents and brokers has only increased.
“The need for an independent agent wasn't as great in the last ten years. But now I think it's even greater,” he said.
“It’s even more beneficial if a modern, independent agent can interact with customers in the way they want, to give them choice and neutrality. You want somebody explaining stuff to you, but you don't want to have to come down to their office between the hours of nine and three.”
Do you agree with Davis’ outlook for personal lines insurance in 2024? Please share your views on what’s ahead for the market in the comments below.
