Specialized Solutions for the Specialty Market

How has the specialty marketplace evolved in recent years?

Changes in emerging risks, including external threats, are increasing the pressure on carriers to offer tailored solutions that reflect expertise in specific niche markets. And given increasing uncertainty, including the continued impacts of the pandemic, inflation and market volatility, people are seeking peace of mind, and they are looking for carriers to offer multifaceted solutions that help protect their interests.

What types of industry dynamics, trends and exposures are affecting commercial clients today?

Social inflation, economic inflation and a potential recession are factors that are creating challenging dynamics. Inflation is at nearly the highest levels that we’ve seen in the last 40 years. Social inflation continues to push tort costs higher, and it’s contributing to claims severity. Litigation funding is another factor impacting severity. Climate change and catastrophe are also affecting commercial clients. There’s a rise in construction costs due in part to the cost of diesel fuel, which is up significantly from last year. The prices of lumber and wood are also up significantly higher than pre-COVID levels. In addition, supply chain disruptions are another issue impacting construction costs. As a result, staying on top of loss cost trends is increasingly a challenge for the industry. Services like loss control, which can help customers avoid and mitigate losses, are becoming increasingly more important, particularly given the potential impact of supply chain disruptions which can delay repairs and affect the ability to resume operations after a claim.

The construction industry presents a unique dimension of complexity, as it’s subject to myriad economic, social, technological and environmental risk factors. Tell us about some of the opportunities the 2021 Infrastructure Investment and Jobs Act presents to the industry.

The 2021 infrastructure bill creates tremendous opportunities for construction contractors. It focuses on rebuilding our nation’s infrastructure, including bridges, tunnels, airports, data expansion and the electrical grid, to name a few areas. And to serve these needs carriers can potentially bring a portfolio that includes primary and excess casualty, environmental, inland marine, surety, builders risk and some of the professional lines of coverage.

One major new issue for many contractors is the need to take on contractors pollution liability coverage, also known as CPL. Fortunately, the environmental insurance industry is known for the kinds of product innovation that can help contractors in this situation. Brokers are seeking new, efficient processes for helping contractors to obtain this kind of newly required coverage. Using online platforms can help smaller contractors with pollution policies and other casualty products. Agents can use these platforms to quote, bind and issue a policy within a matter of minutes. And policies secured through these online portals not only can be affordable, they can also provide coverage for smaller contractors that is just as robust as a policy that might be purchased for an international contractor who potentially has more complex exposures. Ideally, carriers can integrate this coverage with experienced and responsive claims capabilities, and can provide a service dimension, such as dedicated environmental engineers who can assist in the underwriting process.

This is a holistic approach with which we’ve already had a lot of experience. One recent example was a large airport project where we were able to work across product teams to provide the owners and contractors with casualty, contractors pollution, and site pollution solutions. This illustrates the kind of coordinated, holistic approach that contractors ought to expect moving forward.

An important aspect of being a specialty insurer is a creative approach to underwriting. Tell us about that.

To be a specialty insurer you have to have a highly knowledgeable, experienced team committed to understanding their customers’ unique businesses and industries, along with the nuances within different market segments. This expertise is critical when crafting tailored solutions to help insureds manage risks and exposures in a comprehensive and efficient manner. But ever-changing economic conditions and market dynamics mean that there is rarely a one-size-fits-all approach.

Insureds are increasingly looking for carriers to take a more comprehensive and specialized approach. This means creating a custom-tailored solution that addresses their specific risk management needs. And beyond coverage alone, customers are looking for carriers to deliver holistic insurance solutions. They’re looking for services and capabilities that can help them manage their exposures, including risk management, claims handling, technology and tools. That’s why Markel recently formed a complex construction team that brings together dedicated underwriters and other specialists in areas such as claims and loss control, who will provide coordinated service to major accounts in this industry. That’s one example of the kind of holistic approach we believe is beneficial in many cases.

How have digital advancements like application programming interfaces (APIs), data and other tools changed the game for the claims process in terms of customer experience?

In terms of customer experience, APIs enable insurance companies to provide 24/7 access to products and buying options. APIs help customers and partners to get real-time information at any time of the day, and receive a quote within minutes. They allow for agnostic distribution, and they allow us to customize the experience for the customer based on product offering and service. Not only does this give the customer greater control of their buying experience, it also reduces friction in the process by giving the customer the information required to make a buying decision faster. The customer and strategic partners ultimately benefit from easier access to products, and an improved and more efficient buying experience.

What are some other technological advancements on the horizon relative to the claims process?

Speed is vital to customers and automation can shorten the claim intake and payment processes. In addition to APIs, there are many other tools that can help the examiner more quickly analyze and assess the claim. Drones, satellite imagery and smartphone videos can all help assess damage from hurricanes, wildfires and other weather-related catastrophic events. But it’s also critical to remember that for technology to have a positive impact, it must be used to address customers’ actual needs, which can vary considerably. The kinds of claims that we deal with are often complex and specialized. In such cases, it’s essential to maintain human interaction as a component of the process.

For example, we are the property insurer for a U.S. military base, and the policy contains an extra expense component if houses on the base are rendered uninhabitable. When a devastating hurricane hit that base, hundreds of families were displaced because their homes were uninhabitable. We paid out living expenses to those displaced families even before they were in a position to file any claims for those expenses themselves. Our coordinator on site made the judgment that the families needed immediate access to food, shelter, and transportation. They were treated in a way that was timely, caring, and dignified. The human element can make all the difference in handling a claim effectively.

How do you work with brokers when it comes to integrated risk management?

We view brokers as our partners. Brokers offer tremendous value in risk management and of course in placement, they are a critical part of the process. Brokers are also an important part of helping insureds to evaluate, understand and craft solutions for their insurance and risk management needs. Our loss control teams work very closely with brokers to understand what services are best suited for the insureds that we work with, and use their specialized knowledge to help design specialized services.

Many of our brokers have developed specializations in various industries. We often partner with them to surround the needs of our mutual insureds and to offer industry-specific solutions whenever they are feasible. And partnering with brokers that have specializations in different industries can help us to better understand insureds’ unmet needs, and identify specific ways we can collaborate to better address exposures and to help craft the best solutions.

What is your outlook on the specialty market over the next few years?

Insureds will increasingly need creative solutions to respond to ever more complex needs. Given this climate, we feel the need for specialty insurers will only continue to rise. In addition to construction, several other industry segments are looking for tailored product and service solutions. One great example is the life sciences sector—another very complex and dynamic industry. And our relationships with our partners in this area, including brokers, shows an increasing need for customized product and service solutions.

It’s increasingly important that specialty carriers understand the complex needs of the industries they serve. Carriers need to understand those exposures, organize themselves to bring together the right expertise, deliver comprehensive quality solutions, and provide service in a user-friendly, efficient manner. At Markel, we are aiming to be the market leader in each of the industries we serve. And providing that kind of holistic, specialized capability is going to be essential in reaching that level of industry leadership.