Can Insurers Maintain Underwriting Discipline?

What a difference two years makes: After the 2012 Property/Casualty Joint Industry Forum, "underwriting discipline" was the watchword. But this year, insurance CEOs were singing a slightly different tune.

"I look at 2013 and I think it was a terrific year. P&C rates were up all over the world, investment performance was high, and CATs were low," said Marsh & McLennan CEO Daniel Glaser. "But while everyone talks about disciplined underwriting, people aren't able to sustain it."

Glaser was referring to a remark made by Barclays insurance analyst Jay Gelb in an earlier session. 2013 was "a great underwriting year" for the industry, Gelb said. Yet entering this year, there are "signs of less underwriting discipline out there."

Looking for an opinion from outside the room, I asked Duane Heady, COO of Imperial Management Corporation, if he agreed with the assessment of his peers.

"The temptation is there [to loosen standards] because we had a great underwriting year in 2013," Heady says. "It's like, one good year and we forget the past five. All these small details add up to the difference between companies that are profitable and not profitable."

But savvy insurers can see signs that the quiet year of 2013 isn't the norm, said General Re CEO Franklin Montross.

"When you're looking at this benign trend perspective, it can be very difficult for the industry to assess [peril]," he noted. "But we still saw very significant events around the world. The Boulder flooding was a thousand-year event. Hailstorms in Germany were concentrated, but similar. And there was Typhoon Haiyan, which was only a couple hundred miles away from being an even worse event than it was."

What do you think? Can insurers stick to what works and keep the good momentum in the industry going? Or will the white-hot competition in the space lead to compromises in order to spur growth?

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio