The End of ESG  June 14th 2023

U.S. Insurers Hit Hardest by Inflation, Triple-I Global Analysis Finds

U.S. insurers have paid more than their counterparts worldwide to repair and rebuild damaged properties and vehicles due to inflation since 2018, according to an executive briefing conducted on behalf of the International Insurance Society (IIS).

“Cumulative increases in property replacement costs were higher than overall inflation in the U.S., Canada and Japan."

Inflation and Insurance Replacement Costs was developed by the Insurance Information Institute (Triple-I) and analyzes the relationship between overall inflation and insurance replacement costs for property and casualty (P&C) insurers in six of the world’s largest insurance markets between 2018 and 2022: Canada, the European Union (E.U.), Japan, Korea, the United Kingdom (U.K.), and the United States (U.S.). P&C insurers offer auto, home, and business coverage. Both the IIS and Triple-I are affiliates of The Institutes.

Within this five-year timeframe, the U.S. experienced the highest cumulative inflation rate (20.7 percent), followed by the E.U. (20.3 percent), the U.K. (17.7 percent), Canada (17 percent), Korea (11.9 percent), and Japan (3.3 percent), the analysis found. The U.S. also saw the highest cumulative inflation rate increase for insurance replacement costs (30.4 percent) between 2018 and 2022, Triple-I determined.

Bad Press, Claims Issues, Halt on New Business Giving Industry Another Black Eye?

It’s no secret that the U.S. property/casualty insurance industry does not always enjoy a sterling reputation among consumers. As one insurance professor recently put it, the industry’s rank in public opinion is somewhere between that of a personal injury lawyer and used-car salesmen.

But a barrage of developments and negative press reports in the last year, especially in Florida, Louisiana and California, may have exacerbated the ill feelings nationwide. The president of the American Property Casualty Insurance Association called this “a critical inflection point for the industry.”

The current climate has some stakeholders calling for changes. Ideas range from a national education and advertising campaign that could remind the public of the benefits that come with insurance policies, to requiring more responsiveness and transparency by carriers after disaster claims.

Some insurance agents have said the seemingly relentless publicity coming out of Florida, after 10 insurer insolvencies in the last 30 months, soaring premiums, stories of hurricane claims that have not been paid, national news reports of insurers altering adjusters’ damage estimates – along with the recent State Farm, Allstate and AIG pullback from new business in California and other states – has given the industry another black eye and has hit agencies hard.

Claims transformation: The inconvenient truth

Claims is the beating heart of insurance service providers. It is the moment when insurers convert a policy into the financial help needed following a calamity, and it’s the point at which the sector proves its worth and makes good on the customer’s trust.

With such high stakes, you’d think insurers would do everything in their power to ensure a smooth, frictionless and stress-free claims experience. Yet, according to PwC’s Insurance Brand Sentiment Index 2022, something is going terribly wrong.

The index, which tracks the key drivers of compliments and complaints via social media, found that insurers experience more negative conversations on Twitter than positive, resulting in a net sentiment of -19.2%.

When you zoom in on claims, the numbers become even starker. PwC’s data shows that net sentiment for this critical event is -86.8%, highlighting it as a significant pain point.

According to the report, “…the approval or rejection of claims is the largest topic across the industry with customers unhappy with the outcome of a claim. However, customers are also voicing dissatisfaction with more basic operations such as claims status or delayed responses to questions.”

Moreover, claims dissatisfaction is a key reason consumers switch insurance providers. Accenture reports that nearly one-third (30%) of dissatisfied claimants had switched carriers in the past two years, and another 47% were considering it.

That data is damning.

Accenture says, “Overall, the consumers who reported not being fully satisfied could represent up to $34 billion in premiums annually, or up to $170 billion over the next five years.”

What is interesting is that insurance industry data suggests the opposite. According to the Association of British Insurers, 79% of home insurance, 87% of travel, and 99% of motor claims are fulfilled. Similarly, the American Council of Life Insurers (ACLI) reports that in 2021, companies paid approximately $100 billion to beneficiaries and another $97.7 billion to annuity holders in the U.S.

That begs the question: Why do consumers feel aggrieved when so many claims end in positive outcomes?

The answer is found at the intersection of two key areas: The failure to provide basic operations and timely responses, and the false perception that insurers don’t pay out.

With claims taking months or more to process and customers not being kept informed of where they are in the process, they can only assume they’ve either been forgotten, or their claim has been rejected.

The Predict & Prevent™ Podcast Episode 2: How Sensors and Visual Technology Can Help Insurers Effect Badly Needed Change

Sensors and data-driven intelligence platforms are foundational technologies that can identify hidden dangers and help prevent losses, according to the guests of “Hidden Dangers Uncovered,” The Institutes second installment of its podcast Predict & Prevent™.

Host Pete Miller, CPCU, CEO and president, The Institutes, sits down with Bob Marshall, CEO and co-founder of Whisker Labs, and Dave Tobias, COO and Co-Founder of Betterview, to discuss their companies’ approaches to implementing and utilizing sensors and data to drive effective change for their customers.

In the episode’s first segment, Miller and Marshall uncover the story behind Ting, an innovative plug-in sensor deployed in hundreds of thousands of U.S. homes to detect electrical issues that could cause fires. As co-inventor of this device, Marshall shares the sensor’s story from invention to adoption, detailing its AI-driven capabilities, and how it’s been shown to prevent 75-80% of electrical fires.

“Predict and prevent is possible here,” Marshall said.

“Electrical fire hazards typically develop over weeks [or] months. It can even be years … and we detect it very early. We detect the arcing the problem connection, and then, you know, we’re able to develop a pattern. Our data science allows us to know that it’s an outlet versus the panel versus a heating pad versus a laptop power supply.

In the second segment of the episode, Miller and Tobias discuss Betterview’s data-driven approach to predicting and preventing risk. Betterview, a property intelligence platform used by underwriters for scoring various property risks, acts as a prime example of how technology companies and insurance can work together for the betterment of all parties involved.

“I think our product is helping insurance carriers underwrite risk better. And that can mean a lot of different things to a lot of different people,” Tobias said.

“You know, pricing and effectively servicing their customers, customer experience element of it and predicting and preventing loss, which is a core belief of our company that we can actually effect change with that predict and prevent versus just repair and replace.”

To listen to this and other episodes, visit predictandprevent.org, or look for Predict & Prevent on most podcasting platforms. New episodes come out every two weeks.

Why data can move insurance from protection to prevention

Insurers are poised to play a valuable new role as partners in accident prevention.

As the frequency, scale, and costs of disasters increase, connected technologies such as in-home smart devices and third-party data sources allow insurers to deliver real-time, personalized alerts and insights that help policyholders proactively protect their homes, vehicles, and other insured assets.

Many insurers already have fledgling IoT projects and growing stores of data from multiple sources that they can use to start delivering more meaningful connected insurance services. But adoption of existing connected products such as telematics-based car insurance remains low.

Successfully using these connected insurance building blocks for prevention requires strengthening customer trust that insurers will use those insights sensibly, leveraging data effectively, and imagining new ways to protect customers from the worst impacts of disasters. 

Lars Boeing, Vice President Insurance, Capgemini Invent

The Legacy of Wejo

The mantra of last week's Autotech Detroit event was: "Build, Buy, or Partner." In the case of erstwhile data broker Wejo the message was "partner" but the partnership failed in spectacular fashion. That was not before the organization left its mark.

General Motors clearly turned to Wejo to act as its data broker with a $35M investment and an infusion of its own vehicle data - valued at $70M. With this support and a subsequent SPAC Wejo soon had $330M to begin developing solutions and selling data.

The aftermath of Wejo's apparent downfall is an educational moment for the industry. What is clear is that Wejo had many customers for its data - which was dominated by GM's car data culled from 11M connected cars.

An impressive list of location services companies had turned to Wejo for location data for both its quality and quantity. The data was so good, in fact, that GM itself found that it was buying back its own data through third parties that had put the Wejo data to work.

These third parties had been pursuing GM data for years and the Wejo-GM deal had opened the floodgates to the kind of location data needed for navigation-centric applications from insurance to navigation to automated driving. The Wejo deal exposed the reality within GM, and indeed other car makers, of confused and conflicting priorities and strategies regarding vehicle data.

Roger C. Lanctot, Director, Automotive Connected Mobility, Global Automotive Practice, TechInsights