California’s insurance market is facing serious challenges due to natural disasters like wildfires and earthquakes. These events have made it tough for many insurance companies to operate profitably. Some insurers are leaving the state or making it hard for customers to get coverage.
However, United Fire Group (UFG) Insurance is taking a different approach. Instead of pulling back, UFG is focusing on diversifying its services and using technology to manage risks more effectively. Clan Salazar, UFG’s vice president of specialty, mentioned that California, along with Texas and Florida, is a key state for their business. These states bring in a lot of premium income but also present significant challenges.
UFG has chosen to spread its risk across different areas and types of insurance. This strategy helps them stay competitive in high-risk regions while maintaining financial stability. Salazar explained that UFG used to offer a lot of wildfire coverage, but as the market changed, they decided to reduce that exposure. This careful reassessment has likely helped them avoid greater losses as conditions worsened.
Technology plays a crucial role in UFG’s strategy. The company has adopted advanced catastrophe modeling to better understand and assess risks. Salazar noted that improved data collection and new modeling tools allow them to analyze their exposure more accurately. However, he emphasized that technology alone isn’t enough. UFG relies on the expertise of its experienced underwriters to make informed decisions.
As many seasoned underwriters approach retirement, UFG faces the challenge of passing on their knowledge to younger staff. Salazar highlighted the importance of mentorship and training to ensure that new underwriters are well-equipped to handle the complexities of the industry.
UFG is also focusing on educating brokers and clients, especially as more businesses transition from standard insurance markets to excess and surplus (E&S) insurance. This shift can be confusing for clients who are not familiar with the process, making brokers vital in helping them understand the changes.
Despite the competitive landscape, Salazar sees opportunities in the E&S market, which is attracting new capacity and talent. However, he warns that increased capacity could lead to challenges if companies take on more risk than they can handle.
For UFG, the key to success lies in adapting their strategy, investing in their people, and utilizing the right tools to stay flexible. In California’s unpredictable insurance environment, this combination may give them a significant edge.