How can underwriters navigate this difficult period?
one more time, insurance business P&C turned to Jeff Reck (pictured), CEO of InsureTech Accelerator, for his insight on the current state of insurance, and his company’s plan to support underwriters during this challenging time.
Can you tell us about yourself, your path in insurance – and the main responsibilities of your role at Accelerant?
I’ve been in insurance and reinsurance for decades and decades. That whole time has given me perspective on how painful and how costly the industry can be for its participants and its customers – in every dimension: monetary, emotional and service-wise. I think a great deal of that pain and expense comes from the old technology used to try to do business. The industry is trying to run everything from daily operations to back-end stuff with an old pile of old technology.
It felt like Monday through Thursday was spent trying to fight data gremlins and only one day – Friday – was available to try and serve your customers. It is really soul destroying. Thankfully, I realized that I and many other seasoned but forward-thinking insurance operators had a unique vantage point from which to actually do something about it. To improve the specialty insurance. This was the reason we formed Excelent in 2018 and remains our mission today.
As CEO of Xellerant, I am responsible for ensuring that we are working against our mission to build the risk exchange for the 21st century, so that the basics of insurance work better for everyone.
On one side of our platform are the specialty underwriters. We are redefining their experience, making their work easier, faster and more rewarding. These specialty underwriters are the unsung heroes of this industry. They are the ones who best understand the niche needs of policyholders, but all too often beset by challenges like unanticipated capacity and absence of data to guide decision making.
On the other side of the platform are the providers of capital, who are taking the insurance risk. We are improving their experiences by providing high-fidelity risk data on portfolios with full transparency across the value chain and by sharing risk appropriately with our venture capital partners.
At Excelent, we have a great team working to deliver on this ambitious vision. We have assembled a team of experts to ensure that the service we provide to specialized underwriters and venture capital providers is unmatched. And we continually add colleagues to the team; Recently we announced that Paul Little has joined our Board of Directors. Together we are rebuilding one of the world’s oldest – and still most essential – industries.
With a new year approaching, where would you say the US P&C market currently stands?
The two main drivers of change are natural disasters and inflation/interest rates.
The damage caused by natural calamities in recent years has been much higher than in previous years. This is driving risk capital more than ever to explore specialty insurance, especially low volatility products. We attribute a meaningful portion of the apparent increase in interest from venture capital to Xcelrant’s portfolio to this dynamic.
Inflation is driving up and rapidly driving up costs in most markets, reducing underwriting profitability across the entire insurance landscape. As premiums rise, we are all feeling the pressure as customers look for savings. This dynamic makes technology driven operational efficiency even more important.
This environment is going to favor the bold. You can’t stick your head in the sand and continue doing business as usual. The momentum has been building for nearly a decade – small, owner-operated firms linked to efficient technology that sends data across the value chain will beat out large, monolithic companies that can’t or won’t modernize.
Would you say that the segment has fully recovered after the pandemic years?
Many would argue that the inflationary environment we find ourselves in was the result of our responses to the pandemic. As such, the effects are still having a huge impact on the industry. Overall, industry is also finding it difficult to attract talented people.
You can imagine that the hard work in most jobs in industry is sitting on top of a legacy data stack. We even have a word for it – ‘swivel chair.’ The act of taking information from one system and turning around in your chair to type that same information into another system that already can’t talk.
One thing that is really clear is that the best companies with the most agile, data-driven strategies are outperforming the rest of the players in the industry during these times of social and financial volatility.
What are the biggest challenges currently faced by underwriting teams as they support complex/niche lines of business?
To answer this question, you have to take a step back and look at the type of organization underwriters work in. Some of them are in-house with big insurance companies. We’ve talked about the challenges these old-line legacy carriers face. Bad technology, inability to access data, bloated bureaucracy, service business drags that were written off decades ago. All combine to make the experience challenging for underwriters.
Not surprisingly, an increasing number of underwriters have set up their own shingle, underwriting business on behalf of insurance companies. It is this type of underwriting that serves Accelerant. And this segment is growing much faster than the industry as a whole, with more than $60B in premium flowing through these independent underwriters today.
These independent specialty underwriters are underwriters without an owned balance sheet. He has distribution relationships, excellent risk selection capabilities and experience. They don’t have reliable backing from insurance companies, the long-term, predictable ability or data and analytics that insurers provide to grow their portfolios profitably.
How does Accelerant expect to support these underwriting teams?
We support specific underwriters – we call them our members – with a support system that meets underwriters’ needs across multiple dimensions: insurance capability, data and analytics, growth capital and operational needs.
As a member of the Excelent platform, you get access to long-term, committed opportunities. You have access to our portfolio data and analytics that help our members grow their profits almost 3 times faster than the average.
Accelerant provides its members with advice and capital to grow their businesses through acquisitions or hiring teams. Finally, we work with our members to ensure that our interactions are as efficient as possible, keeping their costs low and profits high. While we provide many benefits to our members, make no mistake – each of our members is highly independent and this is the primary driver of their ability to achieve such great results.
Accelerator members have had great success in driving Accelerator’s growth so far. To support this growth, we raised over $200 million in capital at a $2.25 billion valuation. For Excelent, the question remains the same, how do we better support our underwriter members and venture capital partners today than we did yesterday? It’s an exciting idea starter that continues to drive us.
Source
