After having attended several conferences and sat in on several industry forums since the start of 2024, I'm discouraged by the macro trend in the property insurance space. If I'm correct about what I'm observing, and I'd like to think that I am, carriers have convinced themselves that the path of least resistance to trimming loss ratios is reducing LAE (loss adjustment expenses) as opposed to attacking the problem through a more holistic approach that the crisis demands. Talk about treating the symptom and not the cause.. 

Taking a step back in setting the stage, we have emerged over the past couple of years from a decade plus of bullish financial markets which stimulated a splashing of cash in the insurance space. With the availability of "free money", our sector got sloppy. It passed through much of the overall capital injection to misguided Insurtech hoping to replace legacy systems and stimulate a more hands off approach to underwriting. It embraced a growth centric mentality as companies tend to do during good times. Meanwhile, the climate became more volatile resulting in an uptick in catastrophic claim frequency and severity, and social inflation went largely unchecked in the same catastrophe prone regions. So with interest rates likely to stay high, climate change continuing to apply existential pressure, investors behind social inflation continuing sharpen their knives, and carrier portfolios infested with under-insured, over-exposed properties, is a race to the underwriting and loss adjustment expense bottom the answer? As you might assume, my take is a resounding, NO. 

Beginning with the high-net-worth residential and large commercial property markets, we need more involvement by experts from the point of policy bind (or even earlier for that matter) than ever. It is paramount that carriers understand what they are writing and that we begin to break down the walls of negative carrier perception through policyholder interaction early and often. These steps, combined with a concerted effort to support risk hardening, will shave loss ratios far more effectively than what might be accomplished by outsourcing the majority of underwriting and claims handling to the cheapest available technology solution to reduce costs in the very short-term. I argue that these same short-term savings will lead to a tsunami of claims disputes in the medium-term. I implore our carrier partners to look beyond their immediate need to lower loss ratios in lieu of the big picture. 

So what does this all mean to Deft? As an organization deeply rooted in deploying cutting edge technology early and often, we certainly don't promote a stagnation of innovation. Hell, we're leaning into research and development more than ever in 2024. That said, we promote technology as an augmenter as opposed to a replacement. A combination of professional expertise and superior technology throughout the lifecycle of a policy is the solution to all points of carrier shortcomings which are within human control. A short-term reactive race to the bottom does not interest us. Even if it means a flattening of revenue growth in 2024 while carriers leverage far inferior toolkit options, Deft will stay the course by continuing to provide capacity for complexity with the long-term sustainability of the markets we operate within at the forefront of our vision.  

 -JK