Risk Versus Rate Disconnect

Profit margins for homeowner’s insurance have always been extremely tight for insurance carriers and things may get worse before they improve according to a recent Aon Benfield report. As covered in Live Insurance News, the report shows potential profit in the home insurance market is dropping and may be attributed to property insurers not pricing homeowner policies in accordance with risk. This may come as a surprise to many consumers who have seen rate increases in their homeowner’s insurance policies, but according to the Aon Benfield report, rate hikes may not be enough to put carriers in the black. The uncertain economic climate compounds these challenges across the board for consumers, carriers and the state insurance regulators who are opposing rate hikes.

Many of these problems stem from inaccuracies in risk assessments and valuation. Carriers that implement solutions to solve these problems while also improving customer service have much to gain. Improving the accuracy and processes for handling contents claims can go a long way toward alleviating some of these pressures for carriers. This requires new approaches and technologies across the entire process from the underwriting of policies to contents inventory, valuation, replacement and payment solutions. It all comes down to accurately assessing the value of contents across the board, which is a win-win. Policy holders get the peace of mind that they are adequately covered in the case of a loss and that the inventory and replacement process will be as transparent, smooth and as swift as possible. Carriers can clearly demonstrate with quantifiable data when the insured requires more coverage to encompass the full value of the contents within their homes, including specialty items such as collectibles, fine art and antiques. Carriers are also able to improve customer service in the form of swifter and more accurate claims settlements, which can lead to greater customer satisfaction and help build customer loyalty.

That’s why many leading carriers are focusing technology and process improvement investments on contents claims solutions. What are some other ways that carriers are working to solve the risk versus rate disconnect problem?

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