Half of insurers rated by A.M. Best were assessed to have moderate innovation capability and less than 11% scored in the top two tiers of its new criteria, the Oldwick, New Jersey-based ratings agency said in a report Tuesday.
Insurers that fail to embrace innovation may be subject to rating pressure as they find it increasingly difficult to compete and potentially lose relevance in the market, Best warned in the report.
The initial findings based on preliminary testing of the innovation score follow Best’s adoption of a new criteria procedure Scoring and Assessing Innovation March 5.
As part of the new criteria, insurers are placed into an innovation assessment category of leader, prominent, significant, moderate or minimal, Best said in a statement.
Those insurers assessed as “moderate” are “not necessarily behind the curve, but have not yet fully committed to, or developed a track record on, innovation,” Best said.
Half of rated insurers were scored as moderate, versus 23% for significant, 9% for prominent and 1% for leader, according to Best’s preliminary findings.
The health, reinsurance, and auto lines stood out as the most innovative lines, with external pressures driving the need for transformation, Best said.
“Companies assessed as being more innovative differentiate themselves by credibly quantifying the results of their innovation efforts. Leaders further distinguish themselves by credibly quantifying the results of their innovation efforts,” Best said in the statement.
The least innovative insurers, or those assessed at minimal, frequently operate in heavily regulated lines of business or have fewer competitive pressures, leaving little incentive to innovate, as well as face resource constraints, Best said…Read more>>