Social Inflation Hits Insurers, Not Economies  June 8th 2023

Social Inflation Hits Insurers, Not Economies

Executive Summary

P/C insurance professionals may think tort reform is coming as "nuclear" verdicts grow to "thermonuclear" status. But analysts at Assured Research are doubtful. Here, Assured Research President William Wilt and Managing Director Alan Zimmermann look for signs of economic disruption in states tagged as having the worst legal environments—a likely precursor for action on tort reform. They find little evidence that social inflation disrupts local economies. Instead, it is insurers in these states that feel the impact, they reveal through an analysis of loss ratios in states with the best and worst legal environments.

A version of this article was originally published in the May Assured Briefing for subscribers to Assured Research reports. The article is being republished by Carrier Management with permission from the authors.

Is Embedded Insurance the Wrong Idea?

If we aren't careful, embedded insurance could wind up just being a way to pester customers to buy insurance they don't need.

While I've been a proponent of embedded insurance, as have many others, an article published recently should cause some pondering. The article argues that embedding insurance is really just a way to pester customers to buy coverage they don't need.

Paul Carroll, Editor-in-Chief, Insurance Thought Leadership

Policyholder claims Progressive undervalued totaled vehicles in class action

Progressive Casualty Insurance is facing a class action suit filed by a New York policyholder, who alleges the insurance company undervalues and underpays claims after a vehicle is deemed a total loss by using non-standard adjustment reports to determine the actual cash value (ACV).

The suit claims the reports, prepared by Mitchell International, use “projected sold adjustment,” which are deceptive and unexplained, contrary to appraisal standards and methodologies and “not based in fact, as they are contrary to the used-car industry’s market pricing and inventory management practices,” according to the court documents.

Prior to the rise in online car buying, a dealership’s advertised price had very little to do with enticing potential buyers as many would visit a lot based on the inventory available, not price, the suit alleges. Since buyers were more driven by stock than cost, dealerships would often price vehicles above market. This allowed sellers to realize higher profits from consumers with poor negotiating skills, while leaving room for downward negotiation when dealing with a savvier buyer.

However, since online buying allows for easy price comparisons, shoppers are now more likely to seek out vehicles “priced to market” rather than above. “As such, a negotiated discount off the cash price is highly atypical,” according to the suit, which pointed out that these discounts should not be included when determining ACV.

How digital mapping insurance underwriting efficient

Digital mapping is defined as the science of collecting location intelligence data to formulate a digital image with the primary function of producing maps with highly accurate renderings of any given area. Developed in 2003, digital mapping has catalyzed a watershed movement of development for insurers, and as it continues to evolve so do its applications in the industry.

Insurers call upon this visual tool to minimize risk exposure and optimize the underwriting process, but it also serves as a platform for new processes and technologies to be built to enhance their work—this became particularly relevant during Hurricane Ian as insurers turned to digital mapping to provide impacted customers with support and insights before Ian even made landfall. Closer to home, insurance companies employ the use of digital mapping on a daily basis to help property owners successfully protect their land and assets.  

Tony Agresta, Executive Vice President And General Manager, Nearmap

How weather prediction tech creates better risk management

Extreme weather exposures have shifted in recent years, causing natural disasters like flooding, hurricanes and wildfires in previously unaffected regions. These events can result in weeks or even months of repairing property damage and business interruption. In 2022, the U.S. experienced 18 weather and climate disasters, each costing over one billion dollars, tying it with 2017 and 2011 for the third-highest number of such disasters in a year.

Risk managers need improved climate models for better prediction and more accurate pricing of climate risk. Companies facing new climate risks require better models to determine exposure severity and frequency. Such information can guide decision-making on suitable mitigation tools and solutions for protection. Although many models offer satisfactory output, newer digital technologies can produce more precise outputs that predict and enable planning with higher resolution for extreme weather events.

Advanced technologies offer a forward-looking perspective akin to gazing through a windshield clouded because of a defect in the glass. With a cloudy view, risk managers defer to their rearview mirror and rely upon an analysis of the past to predict the future. However, as the climate and events become more unpredictable and costly, looking forward, no matter how foggy the view, for real-time model assessment and proactive measures may need to become the norm.

Jeff Sharer, Vice President Of Customer And Product Experience, LineSlip Solutions

METLIFE PET INSURANCE ANNOUNCES ENHANCED ALL-IN-ONE PET HEALTH & WELLNESS APP

The pet mobile app, created through innovation with Microsoft, offers pet parents a range of features to help manage their pets’ health and wellness needs in one place

To celebrate Pet Appreciation Week, and help pet parents better manage their loved one’s health and wellness, MetLife Pet Insurance announced today the availability of its newly enhanced MetLife Pet mobile app. From helping make confident decisions for pet care to receiving valuable personalized content, this enhanced app offers an ecosystem of information to navigate lifelong pet health and wellness, all in one easily accessible place.

MetLife’s enhanced pet health and wellness ecosystem is built on Microsoft Azure and provides pet parents with a range of new features to keep their pets healthy and happy,

On Point: bolt CEO Dwane on How Democratizing Distribution Benefits Insureds and Agents

Technology has made it easier for consumers to explore and purchase insurance on their own.

While some fear this ease of access could put agents out of work, Jim Dwane, CEO of insurtech bolt, a property/casualty insurance exchange, said putting the basics in the hands of insureds will make agents’ expertise more valuable and the process of selling more efficient.

On Point podcast host Peter van Aartrijk spoke with Dwane to learn more about the role insurtechs will play going forward.

While insurance has a reputation for being slow to embrace innovation and technology, Dwane said adaptation has accelerated that in recent years. His company, bolt (which stands for Business Owners Liability Team), matches insurance buyers and sellers.

“If you can get the consumer — be it a small business or a person — if you can get them to do 50 to 75% of the upfront work digitally, that reduces their cost basis,” Dwane said.

When insureds feel comfortable doing more of the initial legwork, it brings higher margins on that business, he said. This enables agents to focus more on the consultative selling process and less on that operational, administrative work.

“It’s really happening in a lot of different areas — claims, analytics, document management. But really where we focus, where bolt’s kind of space in the world is, is in distribution,” he said. “And the reality of it is, insurance distribution is democratizing.”

As technology democratizes distribution, agents will move beyond the role of administrators and more heavily into the position of risk advisors, he said. “So, I think it’s a win for the digitization, is a win for the consumer, but it’s also a significant win for the agent and broker, you know, whether that be an independent agent, a captive agent, or an agent in a contact center for a large carrier like a Progressive or a Farmer’s.”