The 2022 US Property and Casualty Value Creation Study also underscored the importance of digitization and core operations for US P&C insurers to achieve success.
The study measures and analyzes the value creation among the top 100 US P&C insurance carriers over a twenty-year period. It leverages in-depth financial analysis, data-driven research, and interviews with industry leaders to assess career performance and the strategies that support success.
ACORD analyzed these US P&C insurers and the value they created or destroyed through both underwriting and investing; the total value created by the top 100 during the study period was $182 billion.
ACORD explained that the carriers were divided into three categories based on their performance. Sustainable value creators exceed the benchmark of required returns through both underwriting and investment activities; Holo value creators received expected returns through their investments but failed to generate value through underwriting; and value destroyers failed to generate substantial value during the study period.
Each group was assessed to identify the strategies, tactics and capabilities that lead to higher performance.
ACORD President and CEO Bill Pieroni said: “We see a growing emphasis on modernization, with the critical role of digitization clearly understood across the industry.
“The Covid pandemic, and the need to mediate digitally, has resulted in even the most ardent digital skeptics acknowledging the importance of digital capabilities. However, it also means that the bar is constantly being raised for digitally mature carriers to stay ahead in performance metrics.
The updated study includes data and insights as of this year. Key insights include the advantages of scale, as ACORD noted that the largest carriers strive to generate more sustainable value in the US P&C market. This potentially results in being able to devote resources to the continued development and renewal of digital capabilities over the long term.
The research also noted the importance of talent. According to ACOR Sustainable Value Creators are clearly winning the “war for talent”, a critical issue facing our industry.
Insurers classified as Sustainable Value Creators had the highest levels of employee retention and satisfaction, on average, in the study. In addition, associates of Sustainable Value Creators had the highest levels of productivity and associated value creation.
Finally, the report highlighted the unsustainability of relying on investments. Lower investment returns over the past several months affected value generation across the industry as compared to the average over the twenty-year period studied.
In a reversal from previous years, Sustainable Value Creators generated more value through underwriting than investment. Many previous hollow value creators failed to generate enough value and have sunk into the category of value destroyers.
“These results highlight the risk of relying on investment returns to offset underwriting losses,” Pieroni continued. “In this year’s study, we looked at the vulnerability of hollow value creators to market volatility. This inevitable volatility of investment returns illustrates the danger of relying solely on investment-based value creation – it is not sustainable. It is necessary to generate value through underwriting as well.”
Source: Latest Finance
