E&S market’s greatest challenges (and most promising opportunities) ahead

WSIA board members see the coming year as one of challenges and opportunities. (Photo: Shutterstock)

Three WSIA board members weigh in on what they consider the most pressing issues for their business in the year to come.

Mark E. Maucere, Vice President, Commercial Lines Underwriting
Arlington/Roe & Co. Indianapolis, Ind.

Considering the dynamics of our marketplace, I believe our greatest challenge is to simply remain relevant in an evolving marketplace. With the continued softening of rate, the increased level of capital and much of that investment coming from outside our industry, our marketplace is changing and quickly. This new investment will drive an increasing amount of automation and innovation in ways we may not realize today.

As we continue to see new markets (domestic and abroad) enter, standard carriers investing and acquiring E&S carriers, wholesale MGA and broker acquisitions, retail consolidation and new innovative ways to deliver capital to the marketplace, we know everyone is shuffling for an edge. With this expansion comes the investment of technology, specifically automation. At what point will a sophisticated broker-less transaction occur? How will we stay relevant?

As challenges approach us, so do the opportunities. If staying relevant is a challenge, being relevant can be an opportunity, too. We can bring value if we create a paradigm shift in our thinking. Specialization and development of trusted relationships are two continual opportunities where we can be a trusted advisor. Technology is allowing consumers to become more sophisticated and demand tailored products. Online shopping is becoming the norm. The youth of our world has grown up with this demand at their fingertips, and it is a part of their DNA. They make informed decisions and drill down with technology to find those answers to their needs. Staying relevant demands that we are those advisors and in a connected way.

Specialization at the program level and expertise in specific classes of business verticals are some of the key ways to become a differentiator. As technology drives down to the niche levels so must our expertise. While I am all for faster, more specialized business models, I believe that being an advisor is the key to relationship building. It supersedes any specialization and technologic advances we can develop.

The opportunity is to find new ways to build relationships. Staying connected includes face-to-face contact and phone conversations, but what else? Can we create blogs, content-based apps, webinars, YouTube accounts, Snapchat, Twitter content, or Facebook pages? The opportunity lies in how we connect and create that relationship. Challenges do create opportunities, but without the relationship and connecting in diverse ways, automation will perpetuate our roles. Our opportunity continues to be the customer experience; an opportunity that includes specialization, automation and a focus on relationship building.

Related: ‘Specialty Treatment’: The state of the E&S market

Computer key customer needs

Meeting customer needs in a fast-changing environment is one of the WSIA’s biggest challenges. (Photo: Shutterstock)

Dave Obenauer, CEO
CRC Wholesale Group Parsippany, N.J.

I believe the single biggest challenge for the wholesale and specialty insurance industry is also our biggest collective opportunity: delivering to the needs of clients in a fast-changing environment. The expectations and needs of our clients have changed significantly over the last several years, and continue to do so.

While there is a lot of focus on the potential disruptions from insurtech, the reality is that more meaningful immediate changes are already happening every day in our industry. Look at the distribution side of our industry in particular. If you think about it, it was not long ago that the best wholesale brokers and underwriters were individuals with strong domain expertise, transactional capabilities and strong client and carrier relationships. Those same characteristics remain critical — but now these “best of the best” wholesale brokers and underwriters are found at firms that can provide a robust, nationwide platform with the resources to meet the needs of retail clients.

As retail firms themselves are forced to up their game to win and retain business, they are increasingly expecting their wholesale partners to not only excel in transacting business but also be able to offer the scale, breadth of specialties and ability to invest in pre-sale as well as post-sale support. Increasingly, a national footprint, capabilities in the three primary sectors of our business (brokerage, binding authority and MGA/program facilities) are not just nice to have — they are required. Additionally, pre-sale support such as loss modeling, coverage benchmarking, custom program development and the like are the real differentiators. Post-sale support including the quick and accurate delivery of insurance policies, premium finance options and claims advocacy are also critical in the eyes of a growing number of retail clients.

Insurtech is certainly another challenge and opportunity to remain focused on. The problem, though, is sifting the good ideas from the bad. The use of robotics, in particular, is a real opportunity to allow both intermediaries and carriers in our industry to increase efficiencies. The typical insurance transaction, whether for small accounts or large ones, involves far too many inefficient touch points (which also lead to client service issues as well as errors & omissions exposures). Just try documenting a workflow for a relatively straightforward monoline placement (all the steps entailed in submission development, carrier selection, clearance, quoting, binding, billing, surplus lines taxes, and premium finance — you get the idea).

Addressing these challenges and opportunities does not come cheaply. The best wholesale firms with the scale and the patient capital support to do so are investing heavily in these areas. The best wholesale firms also understand that the “attack at dawn” strategy that worked so well for decades in our industry, is no longer sufficient to remain relevant — nay, essential — to our clients.

Related: WSIA’s U40: A new beginning for young E&S professionals


Interlocking gears stagnation and growth

Premiums are facing stagnation and significant downward pressure. (Photo: Shutterstock)

Gary Tiepelman, Senior Vice President
Western World Insurance Group Scottsdale, Ariz.

In my opinion, the greatest challenge facing those of us in the insurance industry today, in total, not just the excess and surplus lines segment, is the prolonged soft market we are experiencing.

Capacity, that is, competition, in our market is readily available and because of this, insurance rates and premiums for Property and Casualty have been stagnant, at best (Casualty) and in many cases facing significant downward pressure (Property).

This competition puts tremendous pressure on pricing and, in turn, more importance is placed upon the risk-selection process. At the same time, this creates great opportunity as virtually everything is being shopped. Submission activity continues to be through the roof.

We view this as getting many “at-bats.” That is the beauty of our segment of the industry: It is in the soft portions of the insurance cycle that we truly get to shine. This is when our underwriting {risk selection) is sharpest, and we are at our creative best. This is when new products are developed, and when new approaches to the business are created.

This is our time.


Related: MGAs see continued growth, but no escape from soft market, Conning finds