March 1, 2015

Sluggish investment returns pressure other performance benchmarks

dollar's flow in black holeSagging investment performance for property-casualty insurers has put the screws to other carrier operating segments to take up the slack. Underwriting and premium growth are natural go-to operations, but can they make up for what could be continuing anemia in the capital markets?

A panel of experts at the January 2015 Property/Casualty Insurance Joint Industry Forum took a look at the issue and identified several challenges for the year ahead.

The first is what is predicted to be a persistent low-income environment for investments. For example, though last year’s investment returns look fairly solid at about 8%, the same cannot be said for the future. As bonds hit maturity, that money has to be reinvested, but the fixed-income opportunities that are out there are not going to produce those decent gains. Rates are low and don’t show any sign of rising any time soon, and equities markets are volatile. Projected capital investment returns are not commensurate with the risk that’s being taken, V. J. Dowling of Dowling & Partners said on the forum panel.

If premiums fall along with that reduction in investment income, insurers will start feeling the pressure on their reserve status. Matthew Moser from A. M. Best identified the squeeze on reserves as a prime reason for the company’s negative outlook for commercial lines carriers. Personal lines, he said, are not experiencing quite the same downward pressure, though large personal lines insurers are experiencing their own challenges, according to another speaker, Brian Sullivan of the Auto Insurance Report and Property Insurance Report.

Midsize insurers that have figured out how to weave in third-party systems to increase their through-processing agility and boost their access to and application of big data are gaining on the industry behemoths, he says. Smart technology investments that focus on claims and policy management system upgrades, potentially through cloud technology rather than in-house infrastructure, could level the playing field a bit.

Industry disruptors are emerging, the panel agreed. That includes new sources of reinsurance financing and new carrier infrastructure models. Moreover, the lack of catastrophes over the past decade can’t be counted on, panel members said. The period of minimal catastrophe losses won’t last forever, Robert Hartwig, president of the Insurance Information Institute, reminded participants.

Millennials require a digital touch

Millenials need to connect digitallyIf you want to hire, sell to, or in any way reach individuals born between the years of 1980 and 1996, the Millennial generation, you need to develop your digital presence.

A website, though necessary, simply isn’t enough, and the website that you have may be of marginal value if it isn’t integrated to multiple platforms. A recent Applied Systems report on the Millennial generation provides some pointers on a digital direction your company can take.

According to Goldman Sachs data cited by Applied, 44% of Millennials communicate opinions about services, products and brands using text messaging, while instant messaging and social media are used by 38% each. Just 16% use blogging to communicate their consumer opinions.

Not only do they share their own opinions via these methods, they look to family and friends for theirs. They also want in-person interactions, either over the phone or face-to-face, when they get to a certain point in their insurance experience, Applied found. Their purchases of auto insurance were split between online (35%), in-person (37%) and over-the-phone (25%) methods. For homeowners insurance, Millennials said they like to communicate with an advisor via phone, online, in person and through mobile apps or texting—in that order of popularity.

Your company’s marketing and CSR strategies now have not only bountiful avenues of communication but also myriad platforms to integrate. At-a-touch, fast-loading links that work on laptops, tablets, smartphones and, someday soon, in-home smart appliances must also function on multiple brands in multiple formats. Call centers that waste consumers’ time are in competition with immediate-response live-chat advice, and hold-time Muzak might underperform against informational and educational snippets presented to clients as they wait on the phone, other industry experts note.

Applied found that Millennials have grown up with almost unlimited choices and expect a lot of options so they can choose what fits best at the moment. If your technology is limited, expect your response from this next (and largest) buyer and employee segment to also be shackled. On the other hand, those who capitalize on Millennials’ technological literacy can expect to gain on more parochial competitors.


Drone applications buzz feds

droneErie, USAA, State Farm – all names of insurers asking the federal government for permission to use unmanned aerial vehicles (UAVs), popularly known as “drones,” for commercial operations. The Federal Aviation Administration has banned most commercial drone use, but insurers are hoping to receive exemptions.

Insurers foresee an array of uses for drones, including claims assessments in areas of widespread damage or inaccessibility, surveys and inspections, risk assessments, underwriting and loss prevention.

Insurers have requested approval to use unmanned aircraft system (UAS) technology on their own property for research and development, but Erie, for example, also wants to use drones in commercial and residential policyholder operations, and USAA wants to operate the vehicles at disaster sites.

While the FAA had received 167 requests for exemption from drone prohibitions from various businesses, just 13 exemptions had been granted as of Dec. 10. None are insurers.

The FAA’s most recent comprehensive report, from September 2013, offers a broad view of where the agency plans to go in its regulation of UASs, but just this December the regulator indicated it is going to miss the September 2015 deadline for safely integrating drones into the national airspace plan – and delays could extend to 2017 or beyond. Several European countries, Australia, Canada and Japan allow limited use of drones, with some restricting the UASs to five pounds or lighter. But safety issues are different in the U.S., the FAA says, adding it receives about 25 reports a month from aircraft pilots and others of drones flying near planes and airports.

Allstate announced this month its participation in a consortium dedicated to studying and advocating for drone usage in the insurance and construction sectors. The group, called Property Drone Consortium and led by EagleView Technology Corp., is a newly formed collaboration of insurers, construction industry leaders and supporting enterprises, including the Insurance Institute for Business and Home Safety. It aims to develop hardware and software solutions within the first year, build relations with relevant industry and government groups, establish industry standards for data formats, and promote industry expertise on UASs.

Connecting with the Next Big Buyer: The Millennial

Millenials are constantly connectedIndividuals born between the years of 1980 and 1996, the Millennial generation, bring a unique set of values and expectations to the market that require an overhaul of your service standards.

The insurance industry is under pressure to remake itself in the face of the technological revolution, and today’s agents and brokers must somehow remain personally connected while maximizing remotely controlled relations. Millennials, or Generation Y, are a major source of prospective sales in both business and personal lines, and they are your future agency leaders. Applied Systems took a comprehensive look at what the next generation wants and expects and how your agency can meet those demands.

Constantly Connected

A defining characteristic of Millennials and those to follow is their digital savvy. Touchpad relationships and high-speed answers and actions are the norm, so waiting 24 hours for a response is worse than alien; it’s ludicrous. Working, communicating, purchasing, researching—all of these are subject to expectations of immediacy and accuracy, and coming up with a wrong answer or a slow response is a deal killer in most circumstances. They just don’t have time for you. But they do have time to squawk about your failure on social media.

They use social media, which by the way is more than just Facebook, to blurt out their instant opinions and experiences—both positive and negative—so first impressions matter. All this makes them a key factor in your marketing strategy.

They are largely happy to conduct business without meeting in person. The study found that, of Millennials who had car insurance, 60% used a remote purchasing method—35% bought online; 25% used the phone. Just 37% had a face-to-face purchase experience. If you don’t have a quality, aggressive online presence, you are missing out on a bulky consumer segment. Millennials also like to conduct account maintenance online, so having self-service software that gives clients instant access to insurance information and account actions at all hours of the day and night is crucial.

Interestingly, the concept of “trusted advisor” is still very important to Millennials, Applied found. That means an agency’s website and call center need to provide consumers confidence and congeniality. Has your webmaster even considered these two concepts? Your marketing strategy also needs to reflect those two principles—you’ve got to display competence as well as friendliness at every customer touch point.

Millennials turn heavily to friends and family for referrals and opinions, Applied Systems found, using text messaging and social media. Since this generation relies so heavily on friends and family, it might be time to up the status of your business referral plan in your marketing strategy—and measure the attempts and the results.

Your digital relationship with Millennials needs to be “consistent, convenient and personalized at every stage of their buying or service journey,” Applied says. It’s time to take a new look at marketing and service from the perspective of the next buying generation and see if your technology is keeping up with your current and prospective clients.

Productivity and profitability insights from “best practices” agencies

Best practices agencyWe’re always interested in how agencies are performing and operating—we have, after all, made it our business. So we are closely watching the periodic results released from the Independent Insurance Agents & Brokers of America (Big “I”) Best Practices Survey.

In this report, the Big “I” analyzes the performance of 217 of the top insurance agencies in the country. It provides a timely and useful benchmark for evaluating agency operations. In particular, the report gives us a few different ways to look at profitability. For the sake of discussion, we’ll focus on the bracket of surveyed agencies with revenues between $5 million and $10 million.

Even within this cream-of-the-crop group of agencies, there can be a 30 percent difference in measures of profitability. For example, let’s consider the spread per employee, which is the difference between revenue per employee and the compensation per employee. This is an excellent metric of productivity because it measures employee contribution to the business before overhead. At average agencies, the spread is $64,733. At agencies with +25 percent profit, the spread is $89,868. That’s a 32 percent difference.

Also interesting are the figures for the Rule of 20. Assigning points to agencies based on organic growth rate and EBITDA margin, this looks at growth and profitability in balance. A score near or above 20 means a company will have a good return for shareholders. Average agencies surveyed had a score of 20.3; agencies with +25 percent profit had a score of 27.7; agencies with +25 percent growth had a score of 29.5.

Though the Rule of 20 formula is weighted to prioritize organic growth, growing the EBITDA margin is a solid strategy for improving the score during a soft insurance market or economic downturn.

In both the case of spread per employee and the Rule of 20, improving employee productivity can improve how an agency measures up. If you improve the output per employee based on improving operations efficiency and effectiveness, it’s “cheap” money that doesn’t require a huge investment or downsizing.

This is only a sampling of the ample data provided (you’ll have to purchase the full report for that), but these numbers demonstrate an essential truth—that the most profitable agencies have the most productive employees.

But, of course, there are many ways to understand the data. Tell us what you took away from the report, especially as it pertains to profitability, employee productivity and IT—tweet us @ReSourcePro with your thoughts.

Categorizing emerging exposures helps reinsurers measure potential losses

Former Secretary of Defense Donald Rumsfeld famously stated:

Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known emerging risksknowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult one.

Broadly speaking, pretty much everyone in the insurance industry could say cyber risk, terrorism, bodily injury compensation and casualty catastrophes are the leading concerns of (re)insurers, but Guy Carpenter has gone a step beyond the generalizations and identified some helpful categories (re)insurers can use to catalog risks by exposure “known-ness” in its Emerging Risks Report September 2014. Doing so allows underwriting teams to break down analytic silos and identify emerging issues across industry segments. Emerging risks are placed into three categories: technical, crystalizing and aggravating.

Technical risks are genuinely new, arising from new technologies and processes—think genetically modified organisms, nanotechnology, E-cigarettes and driverless cars, Guy Carpenter says. Cyber technology is probably the most talked about exposure, but there are many others that (re)insurers need to incorporate into their underwriting evaluations. Being out ahead on your knowledge of technology developments can work like a movie trailer—it’ll give you enough familiarity with the R&D script to discern if you want to buy a ticket to the show.

Crystalizing risks are those that are known to exist but whose implications are becoming more understood or whose effects are increasingly becoming manifest. It’s helpful to think about this category more in terms of emerging loss trends, since the actual exposure is known but the costs associated with loss payouts are still developing. Bodily injury compensation reserves are highly sensitive to adequate understanding of this category.

Aggravating risks are those already identified or even well known whose incidence and effect are aggravated by fluid circumstances. Ebola is, for example, a known exposure, but until this summer it was somewhat of an isolated phenomenon. Now, airlines, hotels and numerous other organizations find themselves wondering about its potential for bodily injury and other liability claims. The report uses terrorism as a case in point, but the concepts discussed can be applied to other exposures.

The report also has a section on modeling, naturally! While analysts can identify and unveil the depth of complex exposures, modeling is key to quantifying loss potential. Great modeling allows reinsurers to maintain financial stability and develop effective risk management programs for clients. Loss reserving is treated in its own section as part of a holistic planning model for a range of emerging exposures.

Guy Carpenter emphasizes the “opportunities” created by emerging exposures. The entire exercise of redefining exposures based on their level of emergence can help drive new research, push underwriters to better evaluate aggregation of risks and encourage the development of new models to quantify potential losses and engender new risk management programs. Those who have plumbed the knowns and unknowns will be ready to adopt new, profitable risks that they might have rejected and avoid risk accounts that have unmanifested large-loss propensities.






Four ways to keep staff motivated during the busy renewals season

Many Insurance Organizations are entering a busy season in one or more departments, especially employee benefits. Peak seasons can be a challenging time to get the work done while keeping staff morale up. Read on for four tips on how to keep your workforce happy and driven during stressful time of year.

  1. Start a friendly competition to encourage your employees to work harder.You can experiment with different competitions – daily versus weekly, or individual versus teams. One company offers an additional Friday off over the three- to four-month period to be taken once the benefits season is over for the employee who is the quickest to complete benefits update forms. You can also offer a free lunch or dinner for the employee who wins each week. Or, reward them with a small gift such as two tickets to a movie, a gift certificate to a store, or even highly coveted tickets to a sports game.
  2. Make sure to acknowledge hard work. Send weekly email updates telling your employees that their hard work is paying off.
  3. Support your team. Before the busy season even hits, you may want to offer training on time management and prioritization. Also, make sure employees know they can approach you if they’re struggling with their workload.
  4. Consider using temporary staffing during the peak season to fill the requirements needed to continue functioning at full capacity. This will also serve to complement your full-time workers’ schedules, as temporary employees typically have more flexible hours. They can work late at night or even during the weekends to get the work done. Additionally, your full-timers will feel less stressed and appreciate your taking note of the amount of work that needs to be done while you continue to be responsive to your clients’ needs.

The need for top insurance talent grows as industry ages

new talentIn the last several years there has been a great deal of buzz in the insurance industry about the need for top talent as Baby Boomers enter into retirement. In fact, according to a 2013 survey conducted by Accenture, the number of employees age 55 and over is 30% higher in the Property & Casualty industry than in any other industry. Moreover, it’s estimated that insurers will need to fill as many as 400,000 positions by 2020. Additionally, some estimates have about 50% of insurance agents retiring over the next 10 years. According to a study conducted by the Independent Insurance Agents & Brokers of America (IIAA), the average age of principals with 20% or more ownership in their agencies is 54, and 72% of these principals are older than 60.

The industry is well aware of the talent gap and is looking to fill positions as they become available in addition to needing more staff to meet their revenue projections. In fact, a survey of carriers earlier this year indicated that more than half (62%) had planned to increase their staff in 2014.

But hiring strong talent is difficult in a competitive market. Insurers and agencies are struggling to find experienced individuals to fill important positions. Some of this, unfortunately, has to do with the insurance industry’s reputation among young recruits. They don’t see it as an exciting and rewarding career, although the reality is quite the contrary. Perhaps we haven’t done a good job of selling the industry as a career path for individuals – one that is made up of risk advisors who provide asset protection and have significant specific industry expertise, business acumen, risk assessment and other skillsets in order to write and service complex accounts. Moreover, it’s an industry that offers a career with flexibility, security and opportunity.

In an interview with Art Betancourt, Vice President and Senior Search Consultant for MarshBerry, in the industry publication, Insurance Unplugged, this very issue is underscored. Art is on the front line looking for producer talent for agencies and spoke about the need to enhance the insurance industry’s reputation and brand. “One of my biggest challenges in attracting talent is that insurance is a dirty word in the job market,” he noted. “[But] in fact, the insurance industry is the best-kept secret if you’re looking for a sales position. There are a number of differentiating benefits, including residual income, personal satisfaction in serving as a trusted advisor to clients, and the flexibility you gain as an entrepreneur building a business within a business.”

This sentiment is also echoed in an article in Property/Casualty 360 in which the author writes: “Few would say that the industry has positioned itself as an exciting or attractive place for recent college graduates to work. Although P&C companies suffered less through the economic crisis than their banking or capital markets counterparts, the industry does not exert much pull on Millennials or on their younger siblings and cousins…”

Several recommendations have been made to address the talent challenges in the P&C industry both in the Accenture report and in findings based on a survey by McKinsey. These recommendations include focusing on improving the industry’s reputation, increasing the awareness and understanding of career opportunities among high school and college students, and enhancing the training of young professionals. Accenture suggests that insurers begin influencing universities to add business analytics and insurance coursework to their programs. Some of this is already being done at risk management schools around the country with the support of insurers. For example, the School of Risk Management, Insurance & Actuarial Science at St. John’s University in downtown Manhattan, in 2012 adopted an “Introduction to Risk & Insurance” course as a mandatory part of its core curriculum for all business majors. This represents a significant change, according to school officials, to fuel the insurance industry’s talent pipeline. The school brings in featured speakers from the industry to discuss their roles at the insurance companies and the career opportunities available. In addition, some insurers are sponsoring university programs to help position themselves within MBA programs.

These recommendations need to continue to take place in order for young graduates to view the insurance industry as a viable career choice and for insurers, MGAs and agencies to bring in new blood as individuals look to retire. In addition to undertaking these measures and rebranding the insurance industry as a whole, those throughout the distribution system can focus more of their time and resources to find and cultivate the talent needed on the front line by shifting their back-office operations. This can be accomplished by outsourcing business processing tasks. By so doing, agency owners, MGAs and carriers can zero in on getting the right talent to help generate income by expanding their footprint geographically and in certain niche markets and developing new products while positively impacting growth, productivity and the bottom line.


Based in New York, ReSource Pro is the premier provider of business process outsourcing services for the insurance industry, working with retail agencies, Managing General Agents (MGAs), and regional carriers. Our processing centers in Qingdao and Jinan, China are wholly owned subsidiaries of the U.S. corporation.








Leveraging to Win

Leveraging to Win

Business process outsourcing has become increasingly more popular throughout the past decade. In fact, more than 250 leading insurance organizations now rely on BPO services to help the, achieve profitable growth. As the statistics show, BPO is more than just a growing trend – it’s a highly leveraged strategy for the modern insurance organization.

That’s because more than 70 percent of professionals in the insurance industry have seen their workload expand over the past three years. Due in part to a changing market, increased competition, growing carrier requirements and more, insurance organization employees are now facing heavier workloads than ever before.

[Download the Infographic]

Additionally, companies are often failing to manage this increasing workload. Less than 30 percent of professionals in the insurance industry, for example, saw a reduction in their workload after implementing a new technology that promised to provide increased productivity. Those who hesitantly committed to BPO – by only outsourcing certain low-level tasks, for example – saw similar lacking results. As a result of this, the vast majority of insurance organizations still spend between 20 and 30 percent of their revenue on contextual processing work, giving them no value-adding activity in return for that investment.

BPO services can help to reverse that trend. “Level 1“ outsourcing services – which focus on offering support for specific tasks – can offer up to 60 percent in savings per task. “Level 2“ outsourcing services, which handle complete functions and processes, can increase in-office productivity by up to 20 percent, and can improve margins by up to 40 percent. Finally, there’s “Level 3“outsourcing, which can offer operational transformation. Such an outsourcing service will identify and address wasteful activity, inefficient processes and underutilized staff across an entire office – potentially boosting productivity by more than 25 percent, and profit margins by more than 50 percent.

[Download the Infographic]

Excellence in Practice… Again!


We are thrilled to announce that ReSource Pro’s Learning and Development department in Qingdao, China has recently been recognized for their Insurance Level 1 Program. The program has been selected to receive an American Society for Training and Development Excellence in Practice citation in the Career Development Category for the 2013 award year.

As the ASTD states, “Awards are being presented for proven practices that meet a demonstrated need, have appropriate design values, are aligned with other performance improvement initiatives, and deliver sustained, clear, and measurable results for their organization. Citations are being presented for practices that exhibit strong design and evaluation strategies and with time are expected to show sustained and measurable impact.”



The American Society for Training and Development (ASTD) is the world’s largest association dedicated to professional training and development. ASTD members are found in 100 countries (