Stick to your knitting. Sell on value, not on price. Return to the basics. Achieve growth through disciplined underwriting.
The above are just a few of the mantras, some might say clichés, being repeated throughout the property/casualty insurance industry these days as it, like other lines of business, struggles to maintain profitability while under pressure from recessionary and soft market forces.
In the current issue of Insurance Journal, two notable figures in the P/C industry — Dr. Robert P. Hartwig, president of the Insurance Information Institute, and Joe Plumeri, chairman and CEO of Willis Group Holdings — expound on those ideas, asserting that in many ways difficult business environments present opportunities to those who recognize and act on ways to operate their businesses more creatively and efficiently.
“Turmoil in the long run is in many ways better than the status quo, because turmoil breeds opportunity,” Plumeri says in the “Closing Quote” on page N32. He says that now is a great time to begin selling on value and not on price, adding that the current recession “will make organizations rethink the way they operate. As new business models emerge, new risk assessments will be needed. The insurance industry’s expertise can provide true enterprise risk management, which clients will increasingly demand.”
On the insurance company side, Hartwig explains that while insurers’ equity investments have taken a huge hit and that it will likely take years for their portfolios to recover, the situation presents the opportunity for insurers to “return to their roots as underwriters” and be ready to “operate in an environment where earnings account for a smaller fraction of profit.”
Not since the mid-1970s has the industry run at an operating profit, Hartwig says, but it can and should be done.
Plumeri maintains that the industry can achieve sustainable success if it takes the opportunity, pushes itself to improve and grow, and rises to the moment.
The advice that Hartwig, Plumeri and others are offering to insurers and brokers alike may sound a bit like cheerleading, but their proposals are laudable and correct. It will be interesting going forward to see if the industry follows its own advice and begins sticking to its knitting, selling on value, returning to basics and achieving growth through disciplined underwriting.
These ideas may be tired and clichéd but that doesn’t mean they are wrong.