How can subscribers navigate this difficult period?
Once again, insurance business turned to Jeff Rake (pictured), CEO of insurtech Accelerant, for his insights into the current state of P&C and how his company plans to support underwriters during this difficult time.
Can you tell us about yourself, your path to insurance, and the primary responsibilities of your role at Accelerant?
I have been in insurance and reinsurance for decades and decades. All that time has given me insight into how painful and costly the industry can be for its participants and its customers, in all dimensions: monetary, emotional, and service. I think a lot of that pain and expense comes from outdated technology that’s used to try to do the business. The industry is trying to run everything from day-to-day operations to the back-end with an old stack of legacy technology.
It seemed like Monday through Thursday he was spent trying to fight the data gremlins and only one day, Friday, was he available to try to serve his customers. It really is destroying the soul. Fortunately, I realized that myself and other experienced but forward-thinking insurance carriers had a unique point of view to do something about it. To improve specialized insurance. This was the reason we formed Accelerant in 2018 and it remains our purpose today.
As Accelerant’s CEO, I’m responsible for making sure we deliver on our mission to create the 21st century risk marketplace so that the basics of insurance work better for everyone.
On one side of our platform are specialized subscribers. We’re redefining your experience, making your job easier, faster, and more rewarding. These specialized underwriters are the unsung heroes of this industry. They best understand the specific needs of policyholders, but too often they have been beset by challenges such as the unpredictability and lack of data to drive decisions.
On the other side of the platform are the providers of capital, those who assume the insurance risk. We are improving your 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 execute 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 continually add colleagues to the team; We most recently announced that Paul Little has joined our Board of Directors. Together we are rebuilding one of the oldest and still most essential industries in the world.
With a new year just around the corner, where would you say the US P&C market is currently?
The two main drivers of change are natural catastrophes and inflation/interest rates.
Losses from natural catastrophes in recent years have been much higher than in the past. This is prompting venture capital to explore specialty insurance, especially low-volatility products, to a greater extent than ever before. We attribute a significant portion of the sharp increase in VC interest in the Accelerant portfolio to this dynamic.
Inflation is driving up costs faster and faster in most markets, undermining underwriting profitability across the insurance landscape. As premiums grow proportionally, we’re all feeling the pressure as customers look for savings. This dynamic makes technology-driven operational efficiencies even more important.
This environment will favor the daring. You cannot hide your head in the sand and continue to do business as usual. Momentum has been building for nearly a decade: small, owner-operated companies, linked by efficient technology that sends data through the value chain, will beat out large, monolithic companies that cannot or will not modernize.
Would you say that the segment has fully recovered after years of pandemic?
Many would say that the inflationary environment we find ourselves in was the result of our reactions to the pandemic. In that way, the effects are still impacting the industry very much. The industry in general is also feeling the difficulty of attracting talented people.
You can imagine the heavy lifting in most jobs in industry sitting, as they are, on top of a stack 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 write that same information to another system that cannot communicate with the first.
One thing that is truly evident is that in this time of social and financial volatility, the best companies with the most agile and data-driven strategies are getting ahead of the rest of the industry players.
What are the biggest challenges currently facing underwriting teams as they support complex/niche lines of business?
To answer this question, you need to take a step back and look at what type of organization your subscribers are in. Some of them are interns with large insurance companies. We’ve talked about the challenges facing these old line legacy carriers. Poor technology, inability to harness data, bloated bureaucracies, the ballast of the service business written decades ago. They all combine to make the experience challenging for subscribers.
Not surprisingly, a growing number of insurers have established their own texas underwriting business on behalf of insurance companies. It is this type of subscriber that Accelerant serves. And this segment is growing much faster than the industry as a whole, with over $60 billion of premiums flowing through these independent underwriters today.
These independent specialty underwriters are underwriters without their own balance sheet. They have dealer relationships, excellent risk selection capabilities and experience. What they don’t have is the reliable support of insurance companies when it comes to the insurer providing long-term predictable capacity or data and analytics to profitably grow their portfolios.
How does Accelerant hope to support these underwriting teams?
We support specialty underwriters, we call them our members, with a support system that encompasses underwriter needs across a number of dimensions: insurance capacity, data and analytics, growth capital, and operational needs.
As a member of the Accelerant platform, you receive long-term committed capacity. You have access to our portfolio data and analytics that help our members grow their earnings approximately 3 times faster than average.
Accelerant provides its members with advice and capital to grow their business through acquisitions or team hire. Finally, we work with our members to ensure that our interactions are as efficient as possible, keeping your costs low and profits high. While we provide our members with many benefits, make no mistake: each of our members is fiercely independent and that is the primary driver of their ability to achieve such great results.
Accelerant members have had great success to date, fueling Accelerant’s growth. To support this growth, we raised more than $200 million of capital at a valuation of $2.25 billion. For Accelerant, the question remains the same: how do we support our underwriting members and VC partners better today than yesterday? It is an exciting thought starter that continues to drive us forward.
