There is no better way to learn about the trends in an industry than from the executives who live it every day. Most of the senior industry leaders who participated in Nolan’s P&C Executive Survey told us they are cautiously optimistic about the near future. While they currently face a tumultuous business climate, the P&C industry tends to weather adverse economic times relatively well. The most successful companies are those who have harnessed the complex process of adaptation into a routine discipline that adjusts with the industry’s inherent business cycles.

Our survey focused on key issues involving underwriting, claims, technology, contact centers, social media and organizational maturity. As we look deeper into each of these areas, the survey results reveal these critical trends and challenges:

  • Economic growth is gradual with low interest rates putting focus on underwriting discipline, loss and expense management, retention and growth acceleration.
  • Competitive market conditions coupled with favorable pricing trends are emphasizing the question of how much rate is sustainable in the marketplace.
  • Managing balance sheet impact is becoming increasingly complex as leaders navigate the adverse effects of major catastrophes like “super-storm” Sandy.
  • Technology is advancing rapidly, and with it demand for capital investment.
  • Reduction in claims loss costs and LAE, as well as improvement in reserve management practices, are offsetting low investment returns.
  • The complexity of “big data” and predictive modeling.
  • Use of social media in claims, underwriting, marketing and servicing.
  • Expected M&A activity to grow premium volume.
  • Increasing industry regulatory oversight.
  • Pursuit of “best in peer” organizational maturity.


The top three underwriting objectives were identified as increased profitability, renewal retention and organic growth. Those in turn put a priority on key underwriting initiatives such as analytics programs and new policy management systems. Of the respondents, 45% indicate market conditions will improve in the coming year, 54% indicate market conditions will remain the same, and 81% indicate premium growth will be under 10%.

Given this information, combined with our experience in the industry, Nolan expects the following:

  • Even with the market continuing to harden, rate increases may not be sufficient to sustain acceptable margins. Claim inflation may outpace rate increases.
  • A slow decline in reserve releases compared to prior years will impact results if reserves become inadequate.
  • Low interest rates and minimal investment yields place more pressure on underwriting profit.
  • Service will be a source of differentiation and a foundation for growth in the coming years.



Priority claims initiatives include claims analytics programs, litigation management and SIU effectiveness. The top three claims objectives are reducing loss costs, reducing LAE costs and improving claim reserve practices.

The use of analytics continues in the area of fraud mitigation and is also expanding into numerous other areas which can have a significant impact on a carrier’s financial results. These include FNOL triage, early identification of severity losses and recovery opportunities, litigation risk identification and legal avoidance, and other areas. Analytics can improve claims decision making, adjuster performance, settlement outcomes and operational efficiency. Analytics provides greater insight into a claim’s context and enables a transition from a reactive to proactive approach. It also provides for early detection of adverse claims development with a forward-looking view of frequency, severity, claims duration and LAE.

Given the industry’s dwindling reserve redundancy due to releases over the last several years to improve results, it is not surprising to see improving claims reserve practices as an important claims objective going forward. As reserve redundancy is reduced, it will be critical for case reserves to be adequate to pay losses.

  • Respondents overwhelmingly agree reducing loss costs is their primary objective, followed by reducing LAE and improving claim reserve practices.
  • Respondents indicated that claims process and workflow improvements will have the most significant impact on claims results.
  • Companies intend to place more emphasis on the quality of their claims operation and implementation of new claims technology with improved claims workflow and process changes as well as implementation of updated technology:


Technology initiatives such as expanding the use of data warehouses and data marts with reporting tools, replacing legacy policy management and replacing claim management systems are indicated as three top initiatives by most survey respondents. The three biggest technology challenges include staying current with technology in a rapidly changing IT environment, capital and expense budgetary constraints and the capacity of internal IT resources.

  • The market may not harden to the extent expected, placing higher pressure on IT to enable improved underwriting profitability with enhanced underwriting-related technologies.
  • Legacy policy management systems replacement ranked the second most popular program, with 65% of respondents listing it as a top initiative.
  • Technology is paying material dividends by increasing risk management  effectiveness, reducing fraud, enhancing distribution effectiveness, improving the customer experience, and reducing infrastructure costs.
  • Companies must find their own unique ways to apply technology in order to achieve market and service differentiation.

The third-place ranking of “replacing legacy claims technology” may reflect how much has already been accomplished in recent years, however, those companies relying on older claims technology should make systems renewal a priority. Today’s claims technologies can have a significant and, for some, a surprising impact on a company’s results by enabling improved claims results.  Keeping those systems up to date should be a top priority, yet claims systems (and processes) are too often allowed to become outdated due in part to the perception that claims technologies haven’t changed much, or that the costs don’t justify the benefits.

Interestingly, 40% of the respondents indicated they have no plans to implement a mobile technology platform. Companies not investing in mobile solutions, and the required governance platforms, will find themselves at a competitive disadvantage as market acceptance, functionality and dependence continues to grow.

Contact Centers

The top two contact center-related responses raise a potential concern.  Only about half the respondents indicate that policy service-specific and claims-specific contact centers are in place and functioning effectively.  Many companies may therefore find themselves playing catch-up in terms of delivering competitive service.  The good news is that the next highest-ranking response indicates that contact center usage will expand during the next twelve months.

  • The opportunity and capability to deliver differentiated service is rooted in the contact center. This critically important capability requires a mix of market awareness, skills, culture, and technology.
  • Balancing contact complexity and contact type is becoming increasingly difficult. Companies must evaluate how to best provide a satisfying service experience, while optimizing staff utilization. Further complicating the issue is the evolving role of agents as companies search for ways to partner with the distribution channel in delivering differentiated service.
  • Customer tolerance for lower service standards is rapidly disappearing as expectations rise and performance is routinely compared to best-in-class providers from other industries.


Social Media

Most companies have embraced social media and are using it in marketing (53%), claims (20%), underwriting (14%), and customer service (13%). The benefits of social media vary in level of importance but monitoring reputation across the internet is the primary benefit indicated.

A number of companies have formally integrated social media searches into their underwriting and claims processes, taking advantage of publicly available data to add to the file as part of the risk assessment decision. Privacy concerns may drive a shift in the use of social media over time. The survey responses reflect that social media has been a powerful tool for claims in fighting fraud. Providing fraud indicators to trigger additional research has proven to be one of social media’s tangible values within the industry.

  • Social media is here to stay, and it is an important cultural shift that companies must learn to manage effectively.
  • Carriers will be held to a higher standard of accessibility and will need to listen and respond to customers and others under the new paradigms of social media.
  • It is critical for companies to recognize the significance that social media has for their brand and make the necessary investments to implement dedicated programs to manage their social media presence.


Organizational Maturity

52% of the respondents rate their company’s organizational maturity as “best in class” or “strength” in regard to their staff applying knowledge of vision, mission and value propositions in their work.

Organizational maturity measures the degree and efficiency of methods of alignment. It determines the readiness of an organization to act as a cohesive and focused unit. Staff alignment, organizational positioning and effective communications all ranked as organizational maturity strengths for respondents. These three factors measure an organization’s efficiency and agility in adapting to change, and are critical for leading-edge and fast-following companies engaged in navigating the current dynamic times to achieve “best in peer group” organizational maturity.

  • Companies looking to gain competitive advantage must allocate financial and human resources to replace aging legacy technologies, update skillsets, become adept with data and redesign outdated IT management practices. The market value of these actions is proven.
  • Claims, underwriting, actuarial and distribution are the hardest hit areas in terms of talent loss.



Through this survey industry executives have told us they recognize that navigating the tumultuous business climate they face now and in the near future will require strong leadership and strategic discipline – stronger than has been typical for some carriers in the past. Implementing new technology in their organizations is a top priority for all.

  • Operational effectiveness will be critical in order to control expenses in this highly competitive environment.
  • The emphasis on underwriting discipline and effective control of loss costs will continue to improve margins.
  • Higher-quality underwriting information, obtained through the use of analytic tools in creating highly-usable indicators, will improve risk selection and pricing.
  • Process improvement, supported by investment in emerging technologies, will yield improved efficiencies and necessary cost reductions.
  • Continuing to redefine company and distribution channel roles in the acquisition, retention, and claims processes will further eliminate redundant activities and their associated impacts.
  • Skilled and knowledgeable people are still the most important asset in an organization. Therefore, finding and retaining talent remains a critical priority.

As noted before, companies who have fine-tuned their ability to respond to industry cycles have been the most successful. The survey respondents are optimistic that they can maintain the underwriting discipline needed to compete in the marketplace with modest rate increases and organic premium growth, while achieving profitability.

I’d be happy to discuss more about our analysis and answer questions about the survey. Feel free to contact me at

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