Pillars of Market Discipline
Summary
I'm often asked whether 1 think the industry has heeded the lessons we learned in the last cycle. Are we keeping our promise to maintain our discipline and not to deliver irrational terms and conditions? The answer is yes. I do believe that for the most part insurers are resisting the temptation to revert to the old habits. Based on what I am hearing from underwriters on the front lines, as well as from our sales force and our broker partners, we aren't seeing the wild fluctuations that we were seeing a few years ago. Many industry analysts have said that there is a distinct softening on the commercial side, particularly on property, which is putting pressure on pricing. In a well-functioning, competitive marketplace there will always be some fluctuation in prices. But underwriters know it is okay to walk away from business that doesn't fit an insurer's appetite, or if the terms and conditions aren't acceptable.
Discipline is at the heart of the insurance industry. But without discipline, the very stability of the industry could be questioned. Ensuring technical mastery in underwriting, actuarial and claims is fundamental to the business. It is their responsibility to ensure that they are charging customers the right price for their risk. Three key pillars of discipline -- underwriting, claims and actuarial -- are the cornerstones of success. Getting those core competencies right is what companies base their reputation on here in Canada and globally. Focusing on technical expertise in these three pillars allows insurers to understand how to win in the marketplace -- and develop the products and services that will work. As insurers and brokers compete for market share, it becomes increasingly important that they differentiate themselves and hone their competitive advantage.See the full content of this document
Extract
Pillars of Market Discipline
Discipline is at the heart of the insurance industry. A pretty simple statement, I realize. But without discipline - in a number of areas, not solely around price - the very stability of the industry could be questioned. When I step back and think about...
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