News
Record-Breaking Travel Volumes Expected July 4
AAA projects 50.7 million Americans will travel 50 miles or more from home this Independence Day weekend*, setting a new record for the holiday. Domestic travel over the long weekend will increase by 2.1 million people compared to 2022. This year’s projection surpasses the previous July 4th weekend record set in 2019 of 49 million travelers.
“We’ve never projected travel numbers this high for Independence Day weekend,” said Paula Twidale, Senior Vice President of AAA Travel. “What this tells us is that despite inventory being limited and some prices 50% higher, consumers are not cutting back on travel this summer. Many of them heeded our advice and booked early, another sign of strong travel demand.”
This July 4th weekend is expected to set a new record for the number of Americans traveling by car for the holiday. AAA expects 43.2 million people will drive to their destinations, an increase of 2.4% over 2022 and 4% higher than 2019. This summer, gas prices are well below what they were one year ago. The national average for a gallon of regular was $4.80 on July 4th, 2022. Gas prices have remained steady the past couple of months, with the national average hovering around $3.50 to $3.60 a gallon, thanks to the lower cost of oil.
Air travel is also expected to set a new record. AAA projects 4.17 million Americans will fly to their destinations Independence Day weekend, an increase of 11.2% over 2022 and 6.6% over 2019. The previous July 4th weekend air travel record of 3.91 million travelers was set in 2019. The share of air travelers in the overall holiday forecast this year is an impressive 8.2% – the highest percentage in nearly 20 years.
Other modes of transportation are also on the rise this year. AAA expects 3.36 million people will travel by bus, cruise, or train over the long weekend, an increase of 24% over last year. While more travelers are turning to these modes this year, the number is not expected to surpass 2019’s total of 3.54 million.
US P&C I Growth momentum I Swiss Re Institute
After 15 consecutive quarters of lagging premium growth in commercial lines, personal lines became the main driver again.
One half of the year gone, our full-year premium growth and profitability forecasts for US P&C remain unchanged. 1Q23 direct premiums written were 8.4% higher than in 1Q22, an acceleration driven by strong rate gains in personal lines and commercial property. However, loss costs grew even faster than premiums, up 20% on a direct basis due to persistent inflation and an unusually active first quarter for natural catastrophes. The resulting net combined ratio of nearly 103% was the worst first-quarter underwriting result in over a decade. Interest rates, on the other hand, provided an uplift: investment yields contributed 33% more to net income than they did a year ago.
- Natural catastrophe losses and persistent inflation weighed on underwriting results in 1Q23.
- Premium growth remains strong, while momentum has shifted to personal lines.
- In commercial lines, strong property growth is offset by weak or negative growth in liability lines.
- We maintain our ROE estimates at 8.0% in 2023 and 9.5% in 2024 on higher premium rates and investment yields, and as claims severity eases.
- We maintain our premium growth estimates at 7.5% in 2023 and 5.5% in 2024.
Profitability
Profitability: despite a difficult first quarter, we still expect improvement in US P&C industry ROE this year and next, on higher underwriting and investment income. We maintain our ROE forecast of 8.0% in 2023 and 9.5% in 2024, up from 2.5% in 2022. That said, the 1Q23 ROE outcome of 3.6% highlights the downside risks to our forecast.1A 20% jump in loss costs in the quarter outweighed strong premium growth, making for a net underwriting loss of USD 7.5 billion. Net investment income increased and contributed USD 16 billion (including USD 2 billion of realized capital gains) to earnings, and we expect other factors to support continuation of positive momentum: the peak impact of inflation on property and auto claims costs is likely past, rate increases are supporting premium growth and investment gains from higher interest rates are accruing. Downside risks to our forecast include a prospect of more severe than expected recession in the second half of this year, financial stresses causing credit downgrades and higher capital requirements, unexpected natural catastrophe activity and a slow return to target inflation.
Treasury’s Federal Insurance Office Releases Report Assessing Climate-Related Risk, Gaps in Insurance Supervision
Today, the U.S. Department of the Treasury’s Federal Insurance Office (FIO) released a report entitled, Insurance Supervision and Regulation of Climate-Related Risks. The report, which is in response to President Biden’s Executive Order on Climate-Related Financial Risk, assesses climate-related issues and gaps in the supervision and regulation of insurers.
While the business of insurance in the United States is primarily regulated by the states, Congress established FIO through the Dodd-Frank Act in 2010 to serve an important role at the federal level. FIO is the only federal entity with a mandate focused on monitoring all aspects of the nation-wide insurance industry.
The report, which is one of several steps FIO is taking to assess climate related risk to the insurance sector, finds that there are important existing efforts to incorporate climate-related risk into state insurance regulation and supervision. While commendable, those efforts are fragmented across states and limited in several critical ways. The report encourages state insurance regulators and the National Association of Insurance Commissioners (NAIC) to build on their progress.
“I’m encouraged to see the progress that the National Association of Insurance Commissioners and some state insurance regulators have made on incorporating climate-related risk into regulatory and supervisory practices,” said Secretary of the Treasury Janet L. Yellen. “This effort should be deepened and broadened so that it is both more fully integrated into oversight of insurers and adopted by more state insurance regulators. The Federal Insurance Office will continue to assess and support efforts by state insurance regulators and the National Association of Insurance Commissioners to address climate-related financial risks in the insurance industry.”
Additional key findings of the report include:
- Climate-related risks, including physical, transition, and litigation risks, present increasingly significant challenges for the insurance industry. The oversight of climate-related risks is therefore an increasingly critical topic for state insurance regulators.
- State insurance regulators and the NAIC are increasingly focused on incorporating climate-related risks into supervision and regulation, but in most cases their efforts remain at a preliminary stage. The current regulatory framework provides state insurance regulators with tools they can adapt to better consider climate-related risks. Some are beginning to do so, but more state insurance regulators should prioritize these efforts.
- The NAIC and state insurance regulators should also prioritize the creation and use of new and effective climate-related risk tools and processes, such as the development of scenario analysis and increasing their use of the NAIC’s Catastrophe (CAT) Modeling Center of Excellence.
- More work is needed by state and federal regulators and policymakers, as well as by the private sector and the climate science and research communities, to better understand the nature of climate-related risks for the insurance industry, their implications for insurance regulation and supervision, and for the stability of the financial system —including for housing markets and the banking sector.
The report makes 20 policy recommendations on improving supervision of climate-related risks. A summary of these recommendations can be found on pages 2-6, while more details on insurance supervision of climate-related risks and support for the recommendations are provided on pages 13-55.
Pullback by insurers opens door for parametric wildfire coverage
Parametric coverage for wildfire exposures is gaining traction amid a challenging environment for catastrophe-exposed property risks.
Improved data sources and satellite imagery are also among the reasons for the broader uptake because better data translates to improved coverage trigger designs and increased confidence among users, experts say.
“Wildfire is a clear use case for parametric because it is easy to measure,” said Laurent Sabatié, co-founder and executive director of London-based Skyline Partners Ltd., an insurtech managing general agent that specializes in parametric coverage.
With the traditional property insurance market hardening, capacity for wildfire risks declining and retentions rising, parametric coverage can help provide additional capacity.
“We definitely are receiving more inquiries about parametric wildfire coverage, mainly due to the capacity reduction in the indemnity market,” said Jacob Choi, New York-based global head of analytics within Marsh Specialty’s parametric solutions group.
Pickleball injuries could cost more than $350 million in the US
Pickleball, the fastest-growing sport in the US, could also be responsible for a multi-million dollar rise in healthcare spending this year, according to UBS analysts.
A UBS Group note to clients, published Monday (June 26), said a rise in spending on surgeries such as joint replacements in the US may link back to the pickleball court, as Bloomberg reported.
The analysts estimated that in 2023 anywhere from $250 million to $500 million in medical spending could be due to pickleball injuries.
9 Keys for Embedded Insurance
Insurance distribution is a $72 billion market in property and casualty and $47 billion in life insurance. Even as margins have been competed out of many industries, profits in insurance distribution have remained consistent or even grown. Hence, it’s no surprise that distributing insurance is seen as an attractive business for many companies outside insurance.
The vast majority of insurance worldwide is still distributed through traditional channels – captive agents, independent agents and banks – but many insurers are exploring omnichannel approaches based on meeting customers where they are rather than driving customers to agent channels.
Examples:
“[We intend to] accelerate our efforts to provide customers with personalized solutions in their channel of choice” – president of personal lines at Travelers source
“People buy houses on the internet, right? They buy cars on the internet. There’s really no reason why they shouldn’t buy homeowners insurance on the internet.” – CEO of Allstate source Enter embedded insurance...
A newfangled term describing an ancient concept
"Embedded insurance" is a new Silicon Valley-ism. Yet embedded insurance predates the insurance agent, who is a product of the 19th century Industrial Revolution. Embedded insurance even predates insurance itself. Before insurance existed, an arrangement called bottomry embedded insurance into a marine loan: If the ship was lost at sea, the shipowner did not have to repay the loan. Hence, the interest rate for sea loans was higher than the interest rate for non-sea loans -- often usurious. Abuse of the usury exception by non-mariners led Pope Gregory IX to ban bottomry in 1236. That's when the insurance industry began to form among merchants in the Hanseatic cities, in Lombardy (Italy) and in London -- on Lombard Street, natch. So, yes, embedded insurance predates insurance itself.
In its broadest form, embedded insurance means distribution via any channel other than captive or independent agents, direct response (call centers and websites), aggregators, price comparison websites and lead generation (e.g., affiliate links). That leaves a wide range of concepts that could be embedded insurance, depending on your definition:
- Affinity marketing – selling insurance via associations, groups, etc.
- Point-of-sale marketing – selling insurance in the flow of selling something else as an opt-in or opt-out
- Providing insurance as part of another product or service, or to people/businesses that purchase another product or service (either included in the product price or opt-in)
- Employer voluntary benefits programs
- B2B2C or distribution to consumers via other businesses
Embedded insurance has been all the rage since some direct-to-consumer start-ups encountered higher-than-expected customer acquisition costs a few years ago. Indeed, a proper embedded offering can be very beneficial for everyone involved, including the consumer. But, like everything in insurance, embedded is easier said than done.
Adrian Jones is a partner at Hudson Structured Capital Management
Recommended Events
Connected Claims USA 2023 in Austin, TX (September 26-27, 2023). Reuters Events Invites the Insurance Claims Community to the World's Largest Claims Event
Connected Claims USA 2023, Austin TX, September 26-27, 2023
The claims community is facing immense market pressures, grappling with the impacts of inflation, and navigating changes in the ecosystem.
Performance, efficiency, and reputation ratings are directly linked to how successful Carriers can be in handling claims and providing a seamless journey. This has a profound impact on an organization's profitability. To meet objectives for client retention, claims leaders must urgently prioritize providing exceptional service and improving CSAT scores.
To inform the strategy to tackle these challenges, claims leaders look to Reuters Events: Connected Claims USA 2023, the Insurance flagship conference hosted by Reuters Events, world-leading events organizer. Event website is here
For the first time this September 26-27, the event is headed to the Austin Convention Center, TX, bringing over 700 attendees and 75+ senior speakers from the claims leadership teams of major US carriers.
This in-person event will bring together the decision-makers of the insurance claims community to gain valuable peer-to-peer insight, and provide attendees with the tools and knowledge to take back to their organizations.
Here is a look at the lineup of claims leaders joining us this September in Austin:
- Jim DiVirgilio, Chief Regional Claim Officer Americas & Head of U.S. Claims, AXA XL
- Paul Measley, Chief Claims Officer, Plymouth Rock Assurance Corporation
- Laila Brabander, Head of North American Personal Lines Claims, Chubb
- Lance Ondrej, SEVP & Chief Operating Officer, Germania Insurance
- Mike Fiato, EVP & Chief Claims Officer, Liberty Mutual
- Dan Moore, SVP Claims Shared Services, CNA
- Sean Burgess, Chief Claims Officer, Lemonade
- Carey Bond, Head of Claims, Americas, Lloyd's
- Angela Delude, Head of Claims Strategy, MassMutual
- Adam Hoover, VP, Business Architecture and Innovation, The Hanover
- Niketa Patel, VP Claim Customer Strategy, Travelers
- Andrea Bessling, Insurance Claims Executive, Allstate
- Jon Thornton, VP Claims Strategy & Transformation, Westfield
- Charlie Wendland, VP & Head of Claims, Branch Insurance
- Cheri McCourt, VP Claims, Northwestern Mutual
And many more exceptional speakers
InsurTech/M&A/Finance💰/Collaboration
Hagerty raises $105m in capital from State Farm, Markel Group & Hagerty family
Specialty insurance provider Hagerty has raised $105 million in capital from strategic investors, including State Farm, Markel Group and the Hagerty family.
According to the firm, the capital raise is comprised of $80 million of convertible preferred equity, which closed on June 23 2023, as well as a $25 million commitment of long-term debt financing for Hagerty Reinsurance Limited.
These funds will support the company’s profitable growth initiatives focused on serving the car enthusiast community, which includes evolving the company’s risk appetite and core product to expand its offerings to current members and reach new members.
At the same time, the capital will also allow Hagerty to make technology investments that should play a key role in driving operating efficiencies while improving customer facing interactions.
State Farm’s Chairman, President and Chief Executive Officer Michael Tipsord, commented: “We are pleased to continue to grow our investment in Hagerty and help support their strategic business objectives as we prepare for the upcoming launch of our commercial relationship.”
HELIXintel Secures Series A to Expand in Building Management Industry
HELIXintel, a platform providing building management, predictive analytics, and equipment management, has concluded a series A funding round.
National Grid Partners, the corporate venture and innovation arm of National Grid, led the round. Earlier investors, including Munich Re Ventures, Stellifi, Motivate Ventures and others, all participated in the round.
HELIXintel offers a platform that sources and organizes property and asset data. It aims to enable businesses to make strategic and informed decisions, unlocking value within their properties and assets.
Insurtech Raincoat raises additional $6.5m in seed funding
Raincoat, a startup developing scalable climate insurance solutions, has announced the closing of an additional $6.5 million seed round.
According to the announcement, the latest round of capital will support the company’s expansion to new markets to provide FEMA-like services – much faster than existing emergency solutions – after particular disasters such as hurricanes and earthquakes in the Caribbean, Mexico, and the Gulf Coast, wildfires in the west, and threats such as flood, drought, and excessive rain in Colombia and Brazil.
Jonathan González, Raincoat CEO and co-founder, said: “We look forward to pushing the limits of what’s possible and bringing our technology to more communities thanks to this new round of capital.
“Insurance should be there to protect you – and the expectation of payment after a catastrophe should not create anxiety – but rather bring ease. We are innovating today for the current and future generations and look forward to working with more local and international players to make this happen.”
GeoX Partners with Insurity to Provide P&C Insurers with Enhanced Risk Assessment Using Machine Vision and Deep Learning Technology
Insurity, a leading provider of cloud-based software and analytics for insurance carriers, brokers, and MGAs, today announced that it has partnered with GeoX to provide P&C insurance organizations with geospatial property data and first floor elevation data to more accurately classify and assess risk. Insurity customers can leverage GeoX’s proprietary artificial intelligence and patented technology to automate the extraction of 3D objects from aerial imagery to create more precise risk models.
As advanced imagery-based data and analytics makes it more efficient to determine the condition and characteristics of a property attribute and accurately price the risk, it becomes imperative for insurance organizations to adopt this technology to maintain a competitive edge in the marketplace. Through the partnership with GeoX, Insurity customers can access data about residential or commercial property to easily validate property characteristics without needing to go into the field.
From there, insurers can use the deep learning technology to accurately predict the properties likely to be affected by natural disasters and take the necessary action to mitigate risk, including providing policyholders with actionable adjustments they can make to their property to decrease risk. For underwriters and agents, this means increased efficiency at point-of-sale and a streamlined renewals process, as insurers can increase prices where necessary to increase revenue, while dropping prices where they are able to do so, resulting in increased customer satisfaction.
During the limited-time promotion, Insurity and GeoX will offer a volume-based pricing model, eliminating the need for a minimum commitment or heavy contractual obligations, which historically prevented smaller and medium-sized carriers from leveraging geospatial data.
"GeoX is thrilled to announce our new partnership with Insurity, a collaboration that serves as a beacon of hope for carriers facing the challenges increasing losses posed by changing climate conditions,” said Yuval Mey Raz, Chief Business Development Officer at GeoX. “By joining forces with Insurity, a leading player in the insurance analytics field, we are confident that we can provide the necessary solutions to address these obstacles. Through our expertise in aerial imagery and AI models, combined with Insurity's network and sector understanding, we will empower insurance stakeholders to overcome the challenges they face."
“Through this partnership with GeoX, Insurity seeks to provide our customers with a powerful tool to navigate the complexities of a changing risk landscape,” said Kirstin Marr, Chief Analytics Officer at Insurity. “With our combined expertise and solutions, we will offer accurate and unique property data, enabling carriers to create more precise risk models, adjust pricing effectively, and streamline their underwriting process.”
Central Insurance Expands Relationship with Shift Technology
Shift Technology, a provider of AI-powered decision automation and optimization solutions for the global insurance industry, today announced Central Insurance has expanded its use of the company's technology to include Shift Subrogation Detection. As a result, Central Insurance can better identify those claims for which a third party may be wholly or partially responsible for paying. The decision follows the insurer's successful use of Shift Claims Fraud Detection to identify suspicious activity in the claims process over the past three years.
Central Insurance is recognized for delivering exceptional hospitality and fulfilling its promise to quickly pay policyholders for covered losses when they occur. The company's use of Shift's Claims Fraud Detection solution has proven effective in identifying legitimate versus suspicious claims and settling claims quickly and fairly. By introducing subrogation detection into the claims process, Central Insurance can more effectively spot hidden subrogation opportunities and develop optimal recovery strategies.
"When a policyholder files a claim, they want to be made whole for their loss," said Jeff Lieberman, Director of Anti-Fraud and Recovery at Central. "The intricacy of what goes on behind the scenes is not important to them, but it's very important to us. Anytime we're able to efficiently and accurately identify if all or part of a claim is the responsibility of a third party, we ensure our policyholders are paid quickly while creating opportunities to recover that loss for the business."
Shift Subrogation Detection helps insurers accurately identify subrogation opportunities at scale and recommend claims handler actions that improve recovery outcomes, thus reducing claims leakage while providing a top-tier customer experience. Shift uses artificial intelligence to analyze claims data to provide a holistic view of the claim, including what happened, who was involved, and could other parties be at fault. Alerts provided by the solution include clear guidance on the nature and specifics of the subrogation opportunity, allowing for optimized demands and recovery execution. The ability to eliminate manual review and identification of recovery opportunities empowers handlers to focus their time and effort on opportunities with the highest likelihood of recovery.
"Not all claims are the responsibility of the policyholder making the claim; however, it's not always easy to make that determination," explained Paul Edwards, Vice President of Claims at Central. "Doing so has long been a manual and time-consuming process. Central is turning to innovative solutions like Shift Subrogation Detection to better understand what's happening in the claims process and ensure the parties truly responsible for a loss are held accountable."
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