“Michael Heffner had owned his detached house a short drive from the seafront in Virginia Beach, on the US east coast, for exactly one year when his home insurer abruptly cancelled coverage. “They just dropped me,” says Heffner, a US Navy officer. “There was no, ‘Hey, do you want to stay on with us if we charge more?’ Nothing.”  Scrambling to find a new insurer, he found his existing premium of about $1,200 a year impossible to replicate. Instead, he received quotes ranging from $2,000 to $3,200. ”

FT Feb 12th 2024

Heffner, and millions of other homeowners worldwide are on the front line of an insurance affordability crisis. Global warming is making extreme weather events such as storms, floods and wildfires more frequent and severe, and therefore increasingly difficult for the sector to cover. As firms exit some areas and demand higher premiums in others, affordable home insurance cover — for many an essential annual outlay, often a condition of their mortgage debt — is getting harder to secure.

It's not just the USA. Continental Europe, Australia, and even in the less extreme climate of the UK the Bank of England warned in its 2021 climate survey that, in a scenario of governments failing to act on climate and global warming reaching 3.3C above pre-industrial levels by 2050, about 7% of UK households currently covered would be forced to go without insurance due to unavailability or expense. 

Such a trend could test the sector’s limits, some say. If yearly losses stick above the $100bn level, and firms are forced into further price rises and pullbacks to protect their balance sheets, it could “harm the whole proposition of the insurance sector to society”, says one reinsurance chief executive. There will be growing “patches” where buying insurance is uneconomical, Swiss Re has predicted.

The pressure on insurers and governments to counter these trends and provide cover are immense. It gives increased importance for insurers to free themselves from the shackles of legacy technology that means insurers spend too much time on control and admin leaving too little time for planning the future and improving performance. 

I wrote an article that Genasys kindly published recently that explains a way to free insurers from these shackles.

Back to freeing resources to focus on performance and growth

To achieve that effectively insurers must free themselves from spending most of the time on control to spending more on performance improvement and growth through innovation. They cannot do that if different parts of the value chain are managed on disparate and unconnected systems.

A PAS is not a panacea. It will not have the automated underwriting capabilities of new SaaS software like Cytora and Hyperexponential. Nor the counter-fraud capabilities of FRISS or SHIFT. Or the digital payment capabilities of Stripe, Mastercard, and Imburse. Nor the repair network coordination power of Entegral. The list goes on and on and will change as the relevant capabilities of each part of the ecosystem waxes and wanes.

What a MACH platform will allow you to accomplish is to integrate these into a complete and effective technology ecosystem. Cost-effectively, promptly, and pro-actively to allow insurers to anticipate threats and opportunities.

I suggest that with such a PAS, insurers might not have faced the flood of complaints nor the adverse loss ratios so many have suffered this year.

This is an excerpt from an article I wrote for Genasys which is one of the new breed of MACH platforms for carriers, brokers, and MGAs. 

For a full, explanation of what a MACH platform is and why it will help insurers find the time and free resources to help tackle the issues above click HERE. 

Finally, I am grateful to Genasys for allowing me to reprint this content