Report: Property-Casualty Insurers Seek Risk-Adjusted Expense Efficiency

Expense management is one of the few areas within the control of insurers to improve performance; yet as they review expenses, insurers must consider associated risks, according to a new study by Conning Research & Consulting.

“Property-casualty insurers today face compressed underwriting and investment returns, and understandably look to expense control to improve performance,” said Clint Harris, analyst at Conning Research & Consulting. “Yet there are many levels of risk associated with seeking expense efficiency for the insurer, particularly in loss control and in meeting ever-changing customer expectations. In fact, our analysis indicates a significant relationship between higher expense ratios and lower loss ratios in superior performers.”

The Conning Research study, “Property-Casualty Expense Management: Trends and Guiding Principles for Holistic Benchmarking” examines expense trends over time, among defined peer groupings, and isolates drivers of superior performance.

“In the current underwriting and investment environment, it is critical for insurers to develop and work within a set of guiding principles,” said Stephan Christiansen, director of research at Conning. “In our view, to be successful in expense control, ongoing expense measurement against both competitors and customer value considerations are crucial, as both are a moving target. Underwriting and claims expenses must be managed with an eye to the impact on losses and loss ratios to ensure adequate loss controls.”

Source: Conning Research and Consulting