2016 PROPERTY AND CASUALTY TRENDS AND PRODUCT DRIVERS

Increasing Customer Demands Lead to Technology Changes

In order to truly succeed, insurers must embrace the digital revolution and all the advances that it offers.

The number of internet connected devices and sensors is projected to reach 50 billion by 2020. - Cisco

49 percent of insurers expect new data analytics sources and techniques to be a key competitive differentiator. - PwC

57 percent of insurers intend to develop a business case for transforming their organization’s structure to support digital strategies. - Ernst & Young

78 percent anticipate this development within the next three years. - Ernst & Young

Evolving customer needs and emerging digital advances have spurred the growing acceptance of technological trends and breakthroughs within property and casualty organizations. Today’s consumers expect a digital experience. They want to be able to interact with their insurance company digitally via both computers and mobile devices. The insurance industry must be willing to change in order to accommodate those demands.

Technology is now being integrated across all systems and has become a vital part of every insurance operation. The focus must shift toward providing an increasingly digital experience for consumers. Now is the time for forward-thinking property and casualty insurers to consider investing in mobile and interactive product technologies that will enable them to create and distribute multimedia content, as well as perform transactions across multiple digital platforms.

#1 INCREASING CUSTOMER DEMANDS LEAD TO TECHNOLOGY CHANGES

Concern with Cyber Attacks Fuel Specialty Products

Cyber risk is emerging as a hot-button trend within the property and casualty segment. Organizations must get on board in order to stay competitive in today’s rapidly evolving marketplace.

Specialty lines products are gaining ground within the property and casualty sector. Given the recent and highly publicized data breaches at both large and small companies, the interest in cyber risk coverage has skyrocketed.

Network products are increasing the risk of criminal intrusions and fueling the demand for cyber coverage. Today’s connected world calls on products to evolve to meet clients’ needs. Bundling insurance products, such

as warranty coverage and cyber insurance, could facilitate new cross-sell opportunities.

#2 CONCERN WITH CYBER ATTACKS FUEL SPECIALTY PRODUCTS

Cyber risk is a huge opportunity for the industry and the next big risk area

that must be embraced.

The total cost of a data breach has increased 23 percent in the past two years to $3.79 million. - Security Intelligence

2014 saw a 49 percent increase in data breaches compared to 2013. This trajectory is expected to continue into 2015 and 2016. - Gemalto

Currently at $2.4 billion, the cyber insurance market is expected to more than double to $5 billion by 2020. - Advisen

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Insurers Stand on the Front Lines of Climate Change

Climate change is not a new topic of conversation. The industry must focus on efforts to quantify and limit the impact of climate change in the coming years.

Since insurers often pay for damages from weather-related catastrophes, they are—by definition—standing on the frontlines. While property and casualty insurers have been at the forefront in terms of advocating for stronger building codes, updated flood making and increased hazard-sensitive zoning loss, they have often taken a passive approach to the larger issue.

Increased focus from regulators, rating agencies, lawmakers, media and the general public are causing organizations to become engaged on the issue. They are now looking to get a better understanding on the cause of these risks, to better predict their consequences and to determine what might be done to limit exposure and losses. Insurers should seize this opportunity for product innovation and build a brand that resonates with consumers and businesses focused on sustainability.

#3 INSURERS STAND ON THE FRONT LINES OF CLIMATE CHANGE

12 of the 16 most expensive CAT events in U.S. history have occurred over the past decade. What are insurers doing about climate change? - Insurance Information Institute

69% are engaging experts with climate-change knowledge 65% are taking steps to encourage

policy holders to reduce losses inflicted by climate change-influenced events

74% have a process for identifying climate change-related risks and assessing the degree to which it could affect its business, including financial implications

39% have a climate-change policy related to risk and investment management

- California Department of Insurance

Environmental Products Making Waves

With regulations and highly publicized catastrophes driving a focus on environmental and casualty coverage, property and casualty insurers have the opportunity to expand their specialty line products.

Environmental coverage is an emerging specialty lines product that is set to have a significant impact on the property and casualty sector. With the frequency of claims on the rise, insurers are taking notice. A number of highly publicized catastrophic claims have resulted in regulatory scrutiny on transportation/railroad, mining, energy and pipeline exposures. As a result, many underwriters are re-evaluating the exposures in these key areas. With potential price increases of 25 percent, environment and casualty coverage is making a mark within the property and casualty sector.

#4 ENVIRONMENTAL PRODUCTS MAKING WAVES

Since 2009, environmental claims have risen 20 to 30 percent each year. - PropertyCasualty360

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