Canadian p&c industry in a micro cycle environment

Canada’s property and casualty insurance industry seems now to be operating in a micro-cycle type of environment as opposed to hard or soft markets, Brigid Murphy, president and CEO of Travelers Canada, said Tuesday at a luncheon and panel discussion presented by the Property Casualty Underwriters Club.

“Is the cycle dead? I actually think it is,” Murphy told attendees. “I think we are in a sort of micro cycle type of environment that will be ongoing. Gone are the good old days when the market hardened and you got 10%, 15% rate increase on everything. That just is not going to happen anymore.”

Greg Belton, executive chairman of HKMB Hub International, had earlier noted the market experiences the gamut of soft pricing to hard pricing, depending on individual risks. “In the absence of any kind of market-moving catastrophes or capital market calamity, we see a relatively stable market, which at this time, I think, defies being characterized as either hard or soft market,” Belton said.

Despite some challenges – such as the Ontario auto “black hole” and the soft commercial market – p&c companies in Canada have “demonstrated an incredible degree of resilience and actually we’re doing really well,” Murphy said.

“Analytics and data are two words that all of us use very frequently in our business. And so we have gotten better at producing results actually with less premium, if you like,” Murphy told attendees.

Understanding analytics, data and technology is key moving forward, she suggested.

“There is building understanding that consumer interests are best served by competition and innovation,” Murphy said. Citing the speed at which technological advances are occurring, “ (Ontario) consumers will be prevented from taking advantage of those if we actually don’t have a more flexible kind of system that can bring those benefits to consumers,” she added.

“Technology is really an enabler and I think we shouldn’t be overwhelmed by it,” Murphy recommended. “But the reality is that there’s a degree of sophistication now, certainly if you’re in the commodity lines of business, that’s required and you actually have to have those capabilities to compete,” she said.

“There’s no question that efficient delivery – not just from a cost point of view, but also from a consumer expectation point of view – is becoming a critical aspect of our business,” Murphy said.

Citing a J.D. Power survey finding that industry got a poor grade from Millennials who had to wait a minute for call centre calls to be answered. With regard to customer service, “we absolutely have to pick our game up on some of this stuff, on that part of it. I think consumer self-service on some of this commodity business is where the market will go,” Murphy said.

If not, some disruptor or new player with a better mousetrap will potentially force existing players out of the game, she added.

“I think there are fundamental changes taking place in our business, and I see in the last five years more evidence of innovation and drive, companies trying to get ahead of change and to address change than probably we’ve seen in the previous 20,” Murphy (pictured below) told attendees.

“And I think that’s because there’s an understanding, a fairly broad understanding, that we have to change to survive and prosper,” she added.

“Analytics, data, the tools that we have to do our jobs are so much more sophisticated and that will only increase,” Murphy noted.

“The company that has the better mousetrap in commercial lines, for example, when it comes to analytics, is going to out-select the other guys. The pricing just becomes more and more refined. Understanding risk and opportunity is really a big part of our future success,” she added.

“We have to be responsive to the up-and-coming consumers that will be looking for us to provide them with the kind of experience that they’re looking for,” Murphy said, including convenience and speed.

From a broker’s perspective, Murphy advised that when a customer goes to look do research, “you want to be there somehow.”

Noting that growth is a challenge in the brokerage business, “it’s really part of your resilience going forward,” Murphy suggested. “If price isn’t the answer to growth, then differentiation is, and that’s probably where you’re going to see the market get a bit more complex, where there’s value-added services and differentiation on things other than price.”

There are plenty of other challenges, Murphy suggested. That said, “I do think the industry has evolved to the point where a lot of these challenges are being seen as opportunities as well,” she told attendees.

More coverage of the Property Casualty Underwriters Club luncheon

Competition spurring greater efficiency, disciplined underwriting

Reinsurers face “structural crisis”: Munich Re Canada’s Wassenberg