How can subscribers get through this difficult time?
One more time, insurance company turned to Jeff Rake (pictured), CEO of insurtech Accelerant, for his thoughts on the current state of P&C insurance and how his company plans to support policyholders during this difficult time.
Can you tell us about yourself, your journey into insurance and the main responsibilities of your role at Accelerant?
I’ve been in insurance and reinsurance for decades and decades. All this time has given me a sense of the pain and cost the industry has for its participants and customers – in all dimensions: monetary, emotional and service. I think a lot of that pain and expense comes from outdated technology being used to try to do the trick. The industry is trying to manage everything from day-to-day operations to core tasks with an old stack of legacy technologies.
It felt like Monday through Thursday I was trying to fight data gremlins and only one day – Friday – was available to try and serve your customers. It is truly soul destroying. Fortunately, I realized that I and a number of other experienced but forward-thinking insurance operators had a unique vantage point to actually do something about it. Improve specialized insurance. This is why we created Accelerant in 2018 and it remains our goal today.
As CEO of Accelerant, I’m responsible for making sure we deliver on our mission to create the risk exchange for the 21st century, so that the foundations of insurance work better for everyone.
On one side of our platform are the specialist underwriters. We redefine their experience, making their job easier, faster, more rewarding. These specialty underwriters are the unsung heroes of this industry. They are the ones who best understand the niche needs of policyholders, but have too often faced challenges such as unpredictable capacity and a lack of data to make decisions.
On the other side of the platform are the capital providers, those who take the insurance risk. We enhance their experiences by providing high-fidelity portfolio exposure data with full transparency across the value chain and sharing risk fairly with our venture capital partners.
At Accelerant, we have a great team to deliver on this ambitious vision. We have assembled a team of experts to ensure that the service we provide to specialist underwriters and venture capital providers is second to none. And we are continually adding colleagues to the team; more recently, we announced that Paul Little had joined our Board of Directors. Together, we are rebuilding one of the world’s oldest and most essential industries.
At the dawn of a new year, where do you think the American property and casualty insurance market is?
The two main drivers of change are natural disasters and inflation/interest rates.
Losses from natural disasters in recent years have been much higher than in the past. This is pushing venture capital to explore specialty insurance more than ever, especially low volatility products. We attribute a significant portion of the sharp rise in venture capital interest in Accelerant’s portfolio to this dynamic.
Inflation is driving up and accelerating costs in most markets, undermining the profitability of underwriting across the insurance landscape. As premiums increase proportionately, we’re all feeling the pressure as customers seek savings. This dynamic makes technology-driven operational efficiency even more important.
This environment will favor the bold. You can’t put your head in the sand and continue to do business as usual. Momentum has been building for nearly a decade – small, owner-managed businesses bound together by efficient technology sending data across the value chain will beat the pants of large, monolithic companies that cannot or won’t. not modernize.
Would you say the segment has fully recovered after years of the pandemic?
Many would argue that the inflationary environment we find ourselves in is the result of our reactions to the pandemic. In this way, the effects still have a lot of impact on the industry. The industry as a whole also feels the difficulty of attracting talented people.
You can imagine the drudgery in most industry jobs sitting, as it is, on top of a pile of legacy data. We even have a term for it – “Swivel Chair”. The act of taking information from one system and turning in your chair to input that same information into another system that cannot communicate with the first.
One thing that is really evident is that in this time of social and financial volatility, the top companies with the most agile, data-driven strategies are outpacing the rest of the industry players.
What are the biggest challenges currently faced by underwriting teams when supporting complex/niche lines of business?
To answer this question, you need to take a step back and look at what type of organization policyholders sit in. Some of them are internal to large insurance companies. We talked about the challenges faced by these older legacy carriers. Bad technology, inability to leverage data, bloated bureaucracies, the drag of service businesses written decades ago. All combine to make the experience difficult for underwriters.
It’s no surprise that an increasing number of underwriters have started their own shingle underwriting business on behalf of insurance companies. This is the type of underwriter that Accelerant serves. And this segment is growing much faster than the industry as a whole, with more than $60 billion in premiums now flowing through these independent underwriters.
These independent specialist underwriters are underwriters without their own balance sheet. They have distribution relationships, excellent risk selection skills and experience. What they don’t have is reliable support from the insurance companies when it comes to providing the insurer with long-term predictable capacity or data and analysis to develop its portfolios profitably.
How does Accelerant hope to support these underwriting teams?
We support specialist underwriters – we call them our members – with a support system that covers underwriters’ needs across a number of dimensions: insurance capacity, data and analytics, growth capital and operational needs.
As a member of the Accelerant platform, you benefit from long-term committed capacity. You get access to our portfolio data and analytics that help our members grow their profits about 3x faster than average.
Accelerant provides its members with guidance and capital to grow their business through acquisitions or hiring teams. Finally, we work with our members to ensure that our interactions are as efficient as possible, reducing their costs and increasing their profits. Although we offer our members many benefits, make no mistake about it; each of our members is fiercely independent and this is a key driver of their ability to perform so well.
Accelerant members have had great success to date, driving Accelerant’s growth. To support this growth, we have raised over $200 million in capital at a valuation of $2.25 billion. For Accelerant, the question remains the same, how can we better support our underwriting members and our venture capital partners today than yesterday? It is a fascinating subject of reflection that continues to animate us.