Welcome to iLeads Insurance Market Minute, where we bring you the latest, most relevant news regarding the insurance market. Last week you were reading Mandatory Vaccine Policies May Have Workers Comp Implications. This week we’re bringing you:
Insurance brokers sue over discrimination*
Three insurance brokers in Baltimore, MD have filed complaints with the state regulator over allegations that an insurance company is discriminating against the predominantly Black neighborhoods in the city.
All three brokerages – Baltimore Insurance Network, Ross Insurance Agency, and Welsch Insurance Group – have accused Erie Insurance of engaging in insurance “redlining” of Black customers. Each of the brokerage firms filed separate complaints with the Maryland Insurance Administration this week, Baltimore Sun reported.
The three brokerages contract or have contracted with Erie to serve as insurance agents in the city. Two of the three brokerages are also Black-owned businesses.
Redlining refers to the practice of denying services to residents of particular neighborhoods based on race or ethnicity. The complaints by the brokerages accuse Erie of refusing to underwriter policies based on a potential client’s race, ethnic origin, neighborhood and/or socioeconomic status.
Broker M&A activity increases modestly in 2020*
Mergers and acquisitions in the insurance brokerage sector increased modestly to 754 deals announced in 2020, compared with 744 in 2019, according to a report Wednesday from S&P Inc.
Meanwhile, M&A activity decreased in the underwriting sector to 151 transactions announced in 2020, down from 165 in 2019, S&P said.
Underwriting sector deal activity slowed in the last three months of 2020 to 40 deals compared with 46 in the third quarter of 2020 and 47 in the fourth quarter of 2019. Fourth-quarter M&A activity in the property and casualty sector increased to 22 deals from 19 in the fourth-quarter 2019.
In a separate report, analysts MarshBerry said there were 676 brokerage M&A transactions announced in the United States, up 4.3% increase over 2019’s of 648 announced transactions. MarshBerry noted that “the announced 676 transactions de facto occurred in only 10 months, as M&A activity was at a virtual stand-still for April and May.”
Private capital-backed buyers completed 462, or 68.3%, of all announced transactions, MarshBerry said. Independent firms accounted for 90 of the 676 deals, 13.3%. The composition of the seller’s line of business remained “consistent” in 2020 with 50.3% property/casualty focused, 32.5% multiline and 17.2% in the employee benefits/consulting space.
Insurers rethink client and broker strategies heading into 2021*
Over the course of 2020, the insurance industry and its various participants, from brokerages and agencies to insurtechs and carriers, have had to undergo a significant shift in how they do business, thanks to the coronavirus pandemic. Since the crisis is far from over, 2021 will likewise be colored by ongoing changes within insurance organizations as they continue to adapt to the new normal.
During a panel at the Future of Insurance USA event, leaders from the industry sounded off on how their companies have changed so far, as well as what strategies and processes are helping them keep pace with the many developments in the marketplace.
“We have this interesting hybrid approach to innovation. We use focus groups, and primary and secondary research like everyone else, but we have the advantage of having all of these financial representatives – our advisors – that are essentially running constant tests. They’re always trying to figure out what’s the best way to serve their clients, so we can tap into and leverage those on-the-ground insights,” said Christian W. Mitchell, EVP and chief customer officer at Northwestern Mutual.
He added that Northwestern also holds a unique position in the market as a mutual company, in light of which, he noted, “We are in the process of thinking about what are the metrics to capture whether a client is better off having worked for us, as opposed to working for anyone else, and embedding that in our corporate metrics, what we report to the board on, and where we hold ourselves accountable.”
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