Emerging Trends in the U.S. Property-Casualty Insurance Market AASCIF 2016 Annual Conference July 27th, 2016 Bruce Fisher, CPCU Western Region Sales The Institutes 484-831-9077 fisher@theinstitutes.org

Agenda Property-Casualty Insurance Industry Trends - U.S Economic State - Job Trends - Technical Insurance Topics Background on The Institutes Open Discussion Time

United States Economic Trend US Real GDP Growth Source: US Real GDP Growth Rate (2016). Multpl. Retrieved April 22, 2016, from http://www.multpl.com/us-real-gdp-growth-rate Overall, current economic and marketplace trends in the United States are continuing to grow. The GDP has been steadily increasing since 2008, with a 1.98 % increase between 2014 and 2015.

10 Year Job Trend 2004 – December 2015 Property-Casualty Insurance Job Trends 10 Year Job Trend 2004 – December 2015 Source: Bureau of Labor Statistics December 2015 As you can see from this chart depicting the job trends over the last ten years, starting back in 2004, the property-casualty and reinsurance job market has remained steady. Since 2013, you can see that numbers are starting to increase as well. For agencies and brokerages, you can also see that the number of jobs in this sector is greater and is following a stronger upward trend.  

Property-Casualty Insurance Job Trends Occupation Employment % of Total Agent & Broker 495,000 31% Claims Policy Clerks/Processing 201,430 12% CSRs, Raters, Service 185,030 11% Claims Adjustment/Investigation 165,360 10% Management/Operations 80,810 5% Information Technology 68,430 4% Underwriting 62,620 Analysts 39,330 2% Legal 29,350 Reinsurance 25,300 Internal Audit/Compliance 24,520 Statistical/Actuarial 18,870 1% Other 222,000 14% Total 1,618,100 Agencies and brokerages are also leading the industry’s job opportunities, making up 31% of industry’s employment, followed by: Claims Policy Clerks/Processing—12% CSR, Raters, Service—11% Claims Adjustment/Investigation—10% Yet despite the increase in employment rates and available job opportunities, there is still a need to recruit and retain more professionals to the industry. According to the Department of Labor, Bureau of Labor Statistics, in the United States, 2.3 million individuals work in the insurance industry today, and more than 1 million will retire in the next ten years. This is something our industry is aware of and actively working to address, as it affects the long-term success and viability of our industry. Source: Bureau of Labor Statistics May 2014: Bureau of Labor Statistics May 2014

Technology Advances and Trends Based on a 2016 survey of Institutes Community members: Top 3 Trends Affecting Our Industry: Cyber security Ride sharing Predictive analytics Is Technology a Net Positive or Net Negative? Another topic we’ve seen on the rise, is technology and how it is affecting risk and our industry at large. Even more specifically, we’ve seen a rise in the amount of data available. Early this year, we surveyed our Institutes Community members again on what trends are shaping the future of our industry and the top three trends they identified were tied to technology—they were: Cyber Security Ride Sharing Predictive Analytics This same survey also shows that 73% of participants felt that these types of technology issues and changes would have a positive impact on our industry overall.

Technology Advances and Trends Telematics Providing potential for usage-based auto insurers to transform an emerging market and offer more differentiating services   Drones Claims adjusters looking to use drone technology for inspecting claims Predictive Modeling The number of companies looking to broaden their use of predictive analytics is on the rise. Cyber Risk Cyber risk threats include theft or manipulation of sensitive or private information, computer fraud and viruses

Technology Trend: Data Analytics Insurance has always been a data- and technology-driven business. Data analytics has become a growing technology trend. Professionals need to know how to collect large sets of data and critically analyze their findings for: Easier collaboration within your organization Identification of ideal customer and product matches The purpose of monitoring risk in real time While insurance has long been a data-driven business, one of the major needs we’ve seen is the ability to sift through tremendous amounts of data and turn that data into information to predict future losses. This is a discipline that applies techniques from the fields of statistics, pattern recognition, and computer science to big data and we’ve seen many insurance companies, brokers, and third party suppliers begin to hire data scientists. The field is now commonly referred to as data analytics.   With the billions of devices connected through the Internet, we easily gather and collect even more data through telematics, data analytics, and other techniques. However, we must also be able to think critically while understanding the analytics and mechanics of data analysis. These skills allow for: Easier collaborating with claims and other parts of your organization Identifying the right customer for the right product at the right price at the lowest risk And monitoring risk in real time Overall, the benefits of data analytics can also lead to companies creating new products and services, enhancing existing ones, and sometimes even inventing entirely new business models.

Industry Pending Talent Gap The industry is facing an impending workforce shortage. Our industry is currently 2.5 million strong and growing steadily. The median age is about 10 years older than the general population, so a large number will retire in the not-so-distant future. The Bureau of Labor Statistics estimates that 730,000 positions will need to be filled between now and 2024. Our industry is competing for top millennial talent with better-known industries. Our industry is currently 2.5 million strong and growing steadily. Yet, since the median age for an individual working in the insurance industry is about 10 years older than the general population, a large number will retire in the not-so-distant future. The Bureau of Labor Statistics estimating that 730,000 positions will need to be filled between now and 2024. With numbers this high, even if we were to hire every graduate of risk management and insurance programs at colleges and universities around the United States, we still would not be able to fill the talent shortage. Add in the fact that our industry is competing for top talent with other industries that are better known among millennials--such as, banking and technology, and we are at a disadvantage, but one we can overcome with a unified, coordinated industry effort. You and I know these benefits about working in the insurance industry. But the research shows that millennials are not aware of them. Research has also shown that as an industry, we need to be united in our efforts to educate students and young professionals about the career opportunities that will allow them to have a positive impact on individuals, communities, and society as a whole.

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Millennial Research

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Multichannel marketing approach to reach: MyPath Marketing Multichannel marketing approach to reach: Millennials ages 18 to 27 Currently in college or entering their first job post-school (including straight-to-work high-school graduates) Launch awareness campaign to: Appeal to emotions that resonate with millennials Garner awareness of what the insurance industry offers

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Company Report – Results by Topic Company level results by topics

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