Page 30 - The Insurance Times January 2022

increased adoption of usage-based insurance products meaning losses were generally below reinsurance retentions
tailored to individual needs. and primary markets were left to bear the brunt of claims.
Carriers also took a hit in profitability from wildfires,
Investment trends convective storms and attritional losses, with several
reporting combined ratios over 100%. The onset of 2021
An analysis of approximately 2,000 global insurtechs focusing saw single-digit rate increases, a significant drop from
on life, property and casualty (P&C), and health insurance preceding years when rates were increasing by 15% to 20%.
found that from 2010 to 2020, about one-third of them This meant high capacity and peaking rates, driving property
secured funding, and a handful established strategic markets to build larger budgets. With the industry already
partnerships with at least one incumbent. Insurtech funding
set up for plateaus, when Winter Storm Uri hit Texas in
peaked in 2020 with €6 billion in deals. In terms of product
February of 2021 and caused nearly $15 billion in impact, it
categories, 66 percent of insurtechs operate within P&C
took the market by storm. The impact was significant, giving
lines of business (led by auto insurance), while 18 percent markets low expectations for profitability before even
and 16 percent focus on health insurance and life insurance, considering the impact of a quake or the approaching storm
respectively.
and wildfire season among other seasonal events. The
market remains competitive as carriers remain selective in
Around 47 percent of insurtechs launched between 2000 and the risks that they write while trying to retain their current
2020 focused on personal lines, with the number that portfolio. However, they continue to push rates, which
operate in commercial lines increasing in recent years. The contribute to a choppy property market.
increased funding, coupled with the mounting focus on
commercial lines, may push insurtechs to explore new, 2: Lifestyle changes and emerging threats
exciting opportunities, especially in serving small and midsize
enterprises (SMEs). The SME segment's need for Over the past year, drastic lifestyle changes have had a direct
customization, experience, and lower complexity of products impact on the cyber security market - leading to an uptick
makes this space ripe for insurtech interest. in ransomware and targeted attacks. For example, the shift
to a remote workforce has significantly heightened the risk
of network security
threats for businesses.
Even the insurance space
has been significantly
affected by ransomware
attacks. For insurance
professionals, loss ratios
on cyberattacks are
running high due to an
increase in severity and
claims. The magnitude of
its impact on profitability
means insurers cannot
afford to ignore it. Not
only are carriers increasing
rates, but they also are
more careful about
Key Trends managing capacity by layering programs and increasing
Some of the key trends and factors that marked the retentions, while tightening up the underwriting guidelines
insurance industry over the past year or so are illustrated and shortening quote expiration dates on cyber insurance
here to assess what each means for insurance professionals proposals.
this year:
3: Excessive litigation
1: Unpredictable natural disasters The key change in the market is increased policyholder
Year 2020 was the most active hurricane season on record, retentions. Many large plans are having trouble finding

30 The Insurance Times, January 2022