Lessons learned from lower yields
Managers who do not exceed in decision -making -based decision -making may late on the platform
In the worst case, insurers can see an uncontrolled deterioration in performance. This happens as rates become inadequate to cover the expenses and the cost of capital. In addition, signatures can rush in the most efficient fields of a portfolio, which led stakeholders to lose confidence in the capacity of the management team to equal or stay in advance on the market. The equity prices decrease and capital is more difficult to attract – and the cost of capital increases.
Artists in lower quartile over five years in our analysis have lower growth records and equity yields below the cost of capital. Insurers of this quartile also share common features:
- Appetite risk: Reactive to market conditions; The decisions of the risk appetite and the portfolio are often taken as a result of the impact shocks in segments or commercial units; Constantly take parts of the portfolio, an output and an unquestioned entry and lack profitable growth opportunities throughout the market cycle.
- Speed and agility: Slow to respond to emerging trends and new opportunities; Personal to the prudence of the past makes them reluctant to play in areas where they perceive the results as too unpredictable; They lose the early advantage of moving in the establishment of market share or await too long to take advantage of favorable market conditions.
- Data and analyzes: Count too much about internal expertise and internal construction data and technology, which leads to island and incomplete information on the risks and heavy inherited systems that create rigid and insensitive processes
- Subscription: F by firmly believe in the art of subscription and their ability to choose and assess the best risks on the free market; Sanmented on automated and algorithmic subscription, broker installations and market follow -up parts.
- Talent: Struggle to attract the best talents and depend on longtime staff; Do not tend to bring as many people with history outside the insurance industry; have reward structures that create a silo mentality and risk aversion.
- Distribution: Allow line subscribers to control relations with brokers and independent customers in order to maintain objectivity and autonomy in the selection and pricing of risks; This can limit the exchange of information and let subscribers make decisions without taking into account the portfolio effects and with incomplete data; And this can bring unwanted uncertainty and surprises in the customer renewal process.
- Capital: Inconsistent reinsurance strategies and unstructured decision -making lead to an increase in capital costs. Poor data quality and lack of transparency with reinsurers can create a lack of confidence, a more opportunistic approach and a lower quality panel.
The leadership teams of insurers with historically lower performance face many challenges. They must drive hard for growth without risking debilitating results. Gathering reliable ideas to make the right decisions about where to invest with energy, resources and capital for the best yields is a good starting point.