Programs for all!

What is a "program", what are the trends, where are the opportunities?

What is a program? In commercial insurance, a 'program' typically refers to a specialized offering designed to address the unique needs of a specific industry, niche market, or group of businesses with similar risks. Programs don’t have to involve captives or alternative risk transfer mechanisms; they can also be established by traditional carriers within the standard distribution value chain (see below). Regardless of the structure, programs provide tailored coverage, underwriting guidelines, and risk management solutions for targeted segments such as construction companies, nonprofits, healthcare providers, or manufacturers.

Features of a program:

1. 👥 Targeted Audience: Focus on some businesses or risks within a specific industry or segment.

2. 🤲 Customized Coverage: Policies are tailored to address unique exposures and requirements of the target audience.

3. 👀Specialized Underwriting: Program administrators or carriers have expertise in assessing and pricing risks for the specific segment.

4. 🧱Risk Management Services: Additional resources such as safety training or loss prevention strategies may be included.

Key benefits of a commercial insurance program:

1. Meet Specific Needs: Tailor coverage to address the risks of a niche market.

2. Attract Specialized Business: Appeal to clients with unique exposures.

3. Increase Profitability: Programs often command higher premiums due to customization.

4. Leverage Expertise: Show industry knowledge, fostering trust and brand differentiation

📈As a result of these benefits and the “hard” insurance market, program business continues to grow. Program business premiums increased by 32.8%, reaching $53.8 billion in written premium by 2020. In contrast, direct premiums earned for commercial lines grew by only 9.33% during the same period. By 2022, the program business market was estimated at approximately $70+ billion, continuing its upward trajectory. If you attend Target Markets, you can get a feel for this first hand! We are seeing a shift in preference over off the shelf products for SMBs.

Why doesn’t everyone have a program today?

1. ⏲️Time. Historically, creating a program takes significant time.

2. ⚡Energy. If something is working, and everyone is making money, why do work?

3. 💲Cost. Certain carriers charge a flat fee to create a program - $50k+ in some instances.

So where is Authentic “innovating” in the program value chain?

⛓️ Today’s value chain:

1. Traditional Carrier Program: Broker works with a traditional carrier to create a package that is tailored towards the insured.

2. MGA Program: Broker works with a Managing General Agent (“MGA”) that specializes in underwriting the specific risk to create the product. Ultimately, this MGA works with risk bearing parties on the back end.

🔮 Where we are innovating in the program value chain:

1. 💻 External technology (UX): Authentic provides a platform for all parties across the program. Insureds can purchase and manage policy documents, brokers can consult and administer the program (although little is needed here), while Authentic handles the rest! We are saving brokers significant time and energy on quoting, binding and payments in the program space.

2. 🏃Internal program technology (speed): Authentic has the ability to build a small business program in a matter of hours. We can adjust underwriting questions, logic, and other key program components instantly. We’ve stood up customized programs overnight for our partners :)

3. 💸Economics: If the group is large enough, Authentic can create profit sharing programs or captive cells. Authentic has capital partners that will capitalize programs, so brokers or insured groups do not have to find millions of dollars in capital to stand up a captive program.

In conclusion: We believe the program space will be utilized for all types of risks, not just those that are hard to place. At Authentic, we are addressing the challenges of time, energy, and technology to ensure all insureds can benefit from a program. Brokers can leverage Authentic’s technology to win new program business or administrate existing books much more efficiently. With strong tailwinds driving the program space forward, we are confident in our ability to contribute to its momentum.