With so many unknowns, especially this year due to the pandemic, focusing on the basics will be more important than ever. Those basics include having underwriters who are accessible, flexible, service-oriented, solution-oriented, and empowered to make certain decisions. Underwriters also need to continue to exhibit appropriate empathy and flexibility. This is important in any given year, but especially this year with the continuing work from home/virtual nature of the business.
As for what the market will look like next year, there is inevitably a fair degree of uncertainty, but we can predict that what happens will be related to the economy in general. COVID-19 vaccinations will impact our market and economy to a degree, but we can’t predict to what extent as there are a number of variables. How long will it take to roll out vaccinations? What’s the impact on the global and Canadian economies that have been hit hard by the pandemic? Will we see a big uptick in the economy fairly quickly as things improve, or not? What longer term damage has been done to certain industries and which industries will emerge stronger?
The competitiveness of the market is going to be interesting to observe. We saw quite a firm hardening market situation in 2020 which is expected to continue, but for how long, obviously time will tell. There are a number of factors to consider. On the one hand, the current environment is one of reduced capacity and increasing rates which has resulted from historic profitability issues. However, as rates increase and market conditions improve for insurers, capital is typically attracted into the industry. This, of course, can lead to increasing competition and in turn pressure the longevity and the extent of rate increases and the hard market environment. There are however offsetting factors to this potential situation, with one notable example being the continued material losses related to social inflation. It will be interesting to see how all of this plays out.
If we’re able to move past this pandemic because of widespread vaccination, I think that would affect the hard market to a degree. Several lines of business were hardening before COVID-19, but the pandemic certainly accelerated it in some market segments. However, there is still a lot of uncertainty about the loss activity directly related to COVID-19. If the losses are material, that certainly could prolong the hardening in the market. If the losses are not as material as some are anticipating, that could potentially reduce the longevity of the hard market. It will be interesting to see.