In the world of Excess and Surplus (E&S) insurance, carriers are well-versed in managing tricky risks, meeting unique client needs, and adapting to ever-changing market conditions.
Take the ongoing devastation caused by California wildfires, for example. The E&S market is poised to play an even bigger role as admitted carriers pull back or exit high fire-risk areas altogether. Last year, State Farm made headlines when it announced plans to drop approximately 72,000 homeowners’ insurance policies in California.
It was not alone - Tokio Marine America Insurance Co. and Trans Pacific Insurance Co., both subsidiaries of Japan’s Tokio Marine Holdings Inc., informed California regulators in April 2024 of their decision to stop offering homeowners’ policies in the state.
With increasingly unpredictable events like wildfires, earthquakes, and floods on the rise, E&S carriers are stepping up to fill the gaps left by traditional insurers. However, thriving in this challenging space requires more than just adaptability; it demands the right technology.
According to Katarina Pregelj (pictured), vice president of commercial strategy at Ivans, insurtech can be a game-changer for carriers in the E&S market. Digital platforms, automation, and data analytics are streamlining operations, enhancing decision-making, and enabling brokers to deliver superior service to clients facing complex, evolving risks.
“There's been a tremendous amount of growth in the E&S space over the last decade driven primarily by the emergence of complex, unique, or otherwise hard to place risks, and the need for specialty solutions to address those risks,” Pregelj shared.
She’s right. The E&S insurance market has experienced remarkable growth, achieving a 21% compound annual growth rate over the past five years and surpassing $104 billion in premiums in 2023. For carriers looking to capitalize on this momentum, insurtech solutions can elevate client relations and drive business success through a range of powerful benefits:
"On the sales and distribution side, leveraging technology offers significant advantages in enhancing customer knowledge and enabling personalized communication. This includes streamlining digital lead generation and creating marketing materials that resonate with target customers," confirmed Pregelj.
Hyper-personalization is especially important in the E&S market, where clients often demand highly flexible solutions, and higher coverage limits to address complex and unique risks. This shift is reflected in the increasing embrace of customizable, tech-driven solutions across the insurance industry. According to a survey by the SAS Institute, 89% of insurance decision-makers plan to invest in GenAI by 2025, with 92% of respondents already having dedicated budgets in place.
In addition to enabling carriers to deliver highly targeted and relevant services to clients, insurtech solutions offer valuable back-end tools that can transform operations and significantly enhance profitability for their broker partners.
"In many cases, especially with brokers, margins are very thin due to the nuances and fundamentals of the business," said Pregelj.
"If you're a brokerage working with a business process outsourcing (BPO) organization, you're paying significant fees. On top of that, you may be relying on a fractional finance or accounting firm to handle surplus line taxes and fees—all of which add up quickly," Pregelj added.
By streamlining operations and reducing unnecessary costs, insurtech tools enable both carriers and their broker partners to focus on growing their business rather than getting weighed down by operational challenges, which ultimately means more business placed with carriers.
"It’s not about replacing brokers or other key players in the value chain," Pregelj explained. "Instead, it’s about empowering them to work more efficiently and optimize margins.” This increased efficiency not only frees up valuable time but also drives profitability, helping carriers stay competitive and strengthen their bottom line.
While insurtech solutions offer numerous advantages, Pregelj cautioned against adopting every new tool that hits the market without scrutiny. She emphasized the need for businesses to critically evaluate emerging technologies, ensuring they are both effective and capable of delivering tangible value.
"I think many of the solutions available today are still unproven, though some will undoubtedly demonstrate their value over time - and I’m excited to see how that unfolds,” Pregelj said. “However, there’s still a lot of noise in the market. It’s crucial to cut through it by leveraging feedback from industry peers and colleagues to identify what truly delivers value.”