Prices are under pressure in many insurance markets.
Executive Summary
When actual prices line up with technical prices, insurers expect underwriting profits to emerge. But what if underwriters find ways to adjust technical prices downwards? Based on interviews with underwriters conducted for their research, Tony Buckle and John Carolin, co-founders UWX, suggest that truer leading indicators of performance come from listening to the open and honest assessments of underwriters and keeping track of actions of managers. Related Part 1 article: "Soft Commercial Market Ahead: Prepare for Underwriter 'Herd Behavior'"After an extended period where pricing levels have risen and held at profitable levels, the balance of power appears to be shifting to buyers. In segments such as management liability and cyber, this shift has been dramatic, with loss-free accounts attracting reductions of 50 percent or more year on year.
“When the herd moves, it moves,” as the former British Prime Minister Boris Johnson once ruefully said. Momentum shifts are tough to manage.
Momentum shifts, such as those seen in a softening market, are even tougher. They prompt fear and irrational actions as the following quote from our research illustrates.
“We knew terms and conditions were not good, but the competitors wrote it if we did not.”—Senior Underwriter, Global Insurer, EMEA.
To paraphrase Rudyard Kipling, how do you keep your head when all about you are losing theirs?
