Insurers and reinsurers that achieve spectacular returns on average equity have seven common characteristics, according to Aon, which analyzed the performance of 100 insurers and reinsurers to uncover those traits.

The studied insurers and reinsurers from across the globe participate in different segments of the P/C market, and size is not the primary determinant of success, Aon reported in an article titled “How Insurance Companies can Sustain Profitable Growth Through the Market Cycle,” published this week.

Among the traits shared by outperforming companies are well-defined risk appetites and innovative underwriting techniques. Underwriting innovation, reducing acquisition costs, includes approaches such as automated underwriting, the use of delegated authority to third parties like managing general agents and participation in broker facilities, Aon suggests.

In contrast, those in the bottom quartile of performers over the last five years are “suspicious of automated and algorithmic underwriting, broker facilities and follow-market plays.” They “believe strongly in the art of underwriting and their ability to pick and price the best risks in the open market.”

For another take, read these articles: “How to Outperform: Don’t Outsource Underwriting; Manage Cycles” ; “S&P GMI Performance Rankings: E&S Insurer Kinsale Takes Top Spot“

The Aon article also contrasts top performers from those typically in remediation mode noting that the best of the pack are agile, entering and expanding in new risk categories with speed. Contrasting this speed and agility, laggards are slow to respond to new opportunities, beset by “lingering caution from the past,” and unwilling to “play in areas where they perceive outcomes to be too unpredictable.”

These companies are also stuck in the past on data and analytics. Rather than employing advanced analytics capabilities and augmenting their own data with third-party sources, they rely heavily on internal expertise and data, building technology in-house and creating rigid and unresponsive processes.

Rounding out the seven-item list, Aon also compares stellar performers and stragglers in their ability to attract top talent, their distribution management capabilities and their willingness to flex between available sources of capital —reinsurance, debt and equity.

The article ends with three action steps recommended to put insurers and reinsurers in the best possible position to protect and maintain their results through the market cycle:

1. Define a clear strategic vision. “What do you want to be known for?”
2. Invest in data and analytics, bringing in talent from outside the industry if necessary.
3. Create an enterprise profitable growth capability.

Explaining the last step, Aon suggests bringing together cross-functional expertise and being “scientific about growth.”

“Examine all the inputs required for a robust decision-making framework to maximize returns on capital,” the article says.