3 Things – Powering Growth, Insurance Adaptation & 2024 InsurTech Outlook

Hi Friends!  We are back after the Thanksgiving holiday, hoping everyone had downtime, rest and time with loved ones.  In the last few weeks of the year we are seeing the industry slow down and begin to look ahead.  This week’s stories included the passing of a legendary second-in-command Mr. Charlie Munger leaving a hole in insurance player Berkshire Hathaway’s leadership and raising succession as a topic.  He lived a wonderful long life and we celebrate the contributions he made along with BH in the insurance industry.  Meanwhile, the other stories included several moves by insurers to grow and expand with investments and acquisitions, adaptations from other insurers as they begin to eye the future and predictions along with the launch of the InsurTech coalition who has ideas of their own about where we are headed.  Let’s dive into the three things we learned.


Powering Growth Through Strategic Acquisitions and Investments

Companies are increasingly expanding their MGA and agency operations through strategic acquisitions and investments to take advantage of the power of distribution. This week featured several headlines to highlight this ongoing theme.  Patriot Growth Insurance Services LLC is a prime example of this trend. With a hefty addition of $500 million in debt, Patriot is aggressively pursuing its growth and acquisition strategy, signaling a robust appetite for expansion in the insurance brokerage landscape.

Meanwhile, Inszone Insurance Services, LLC is not far behind in this race. The company recently announced a significant strategic investment from Lightyear Capital LLC. This move is complemented by the continued partnership with BHMS Investments which is not only retaining a significant equity portion but also injecting additional capital. This growth trajectory is a testament to the increasing consolidation and expansion in the retail agency sector.

Across the northern border, Aviva plc is making moves to strengthen its position in the Canadian market. The acquisition of Canadian vehicle replacement insurance MGA Optiom O2 Holdings Inc. for £100 million is a strategic step towards capital-light growth. This acquisition not only boosts Aviva Canada’s specialty lines business but also enhances its distribution capabilities, demonstrating their interest in capitalizing on lucrative market segments.

In a similar vein, Distinguished Programs has announced a strategic partnership with Covington Specialty Insurance Company, a subsidiary of RSUI Group. This partnership is set to offer executive lines insurance products exclusively to the wholesale brokerage community.  Distinguished Programs is positioning itself as a key player in the management liability space.


Insurance Adaptation in Face of Market Dynamics

We can see a theme of strategic adaptation within the insurance sector where entities are adapting for the future as they look ahead to 2024.  These stories collectively highlight a pattern of strategic growth, leadership restructuring, international expansion, and significant acquisitions in the insurance industry.

QBE Insurance Group has shown resilience and growth in Q3 2023, with a 7% increase in gross written premium (GWP) compared to the previous year. This growth, consistent in both reported and constant currency terms, is notable given the backdrop of several natural catastrophes, including storms, floods, and wildfires in various regions.

The Hartford has announced significant leadership changes. Mostly focused on commercial lines but including a new leader for the personal lines segment. These changes likely reflect The Hartford’s strategy to strengthen its focus on commercial lines to drive future growth.

Elsewhere, Markel announced that Bob Cox, President and COO will leave the company at the end of 2023 after leading profitable growth strategies.  In an international expansion move, State National is entering the UK market in 2024, in partnership with its UK-based Markel affiliate. This venture is aimed at creating a leading program services division for UK MGAs, demonstrating a strategic approach to leverage existing relationships and expertise to tap into new markets.

Finally, KKR is set to acquire the remaining 37% stake in Global Atlantic for $2.7 billion, bringing its ownership to 100%.  This acquisition is a clear indication of KKR’s commitment to expanding its influence in the insurance sector by taking this profitable life operation fully into their portfolio.


2024 Outlook: Balancing Traditional Challenges with InsurTech Innovations

As we step into 2024, the insurance industry is poised at an exciting juncture, characterized by a blend of traditional challenges and groundbreaking innovations.  Forrester Research has laid out a roadmap that hints at both opportunities and hurdles including key predictions suggesting a mixed bag for the year ahead: A significant number of embedded distributors might find it challenging to convert consumer interest into tangible sales.  Technology spending in the insurance sector is expected to see a modest increase of 5%.  The anticipated revolution by generative AI might not meet high expectations. An increase in heat-related retail insurance products, addressing the rising risks associated with higher temperatures and aging populations.

In contrast to these cautious projections, a first-of-its-kind InsurTech Coalition has emerged, spearheaded by the likes of Root, Lemonade, and Branch. This coalition recommends the industry must leverage telematics and data science.  They are capitalizing on new customer-facing technologies and AI to revolutionize how customers interact with insurance services.  The coalition represents a commitment to responsible innovation and a dedication to enhancing customer experiences.

While Forrester’s predictions underline the industry’s measured pace in adapting to new challenges, the InsurTech Coalition stands as a testament to the sector’s potential for rapid transformation and customer-centric innovation.

As the insurance industry navigates these contrasting dynamics, the coming year promises to be a watershed moment. It will be a year where the industry’s resilience will be tested and its capacity for innovation will be showcased. The balance between traditional methodologies and the bold strides of InsurTech will likely set the tone for the future of insurance.

Join us as we continue to explore the headlines and news shaping the insurance sector, and stay tuned for more insights on the unfolding narrative of our industry!  Stay productive, stay safe and stay in touch!