News
Bold Movers and Losers: Incumbents Need to Act While InsurTechs Stumble
Today’s market dynamics “have effectively turned the tables,” wrote Doug McElhaney and Jason Ralph in their article, “Opportunities for insurers in a rapidly shifting insurtech market.”
There are opportunities now to transform talent structures by attracting more digital and analytical talent that was initially drawn in the direction of InsurTechs. As those InsurTechs are forced to downsize and as their valuations sink, “acqui-hire” possibilities may also emerge, the article suggests, referring to the prospect of acquiring a company to recruit its staff.
In terms of tech, the article advises incumbents to “be aggressive in procurement.” Noting that InsurTechs have moved away from initial ambitions of being disruptive toward new goals of becoming cooperative partners with existing carriers—”63 percent of InsurTechs enable the value chain and cooperate” by McKinsey’s count—the headwinds facing InsurTechs now also work in favor of incumbents. Specifically, since InsurTechs are facing both a scarcity of capital and an urgency to deliver profitable results, “insurers could have their strongest negotiating position in years with many of their current digital and technology vendors,” the article says.
Usage-Based Insurance Market Report 2022: Sector to Reach $123.4 Billion by 2027 at a CAGR of 24.59%
The "Usage-Based Insurance Market: Global Industry Trends, Share, Size, Growth, Opportunity and Forecast 2022-2027" report has been added to ResearchAndMarkets.com's offering.
The global usage-based insurance market reached a value of US$ 33.0 Billion in 2021. Looking forward, the publisher expects the market to reach US$ 123.4 Billion by 2027, exhibiting a CAGR of 24.59% during 2021-2027.
Usage-based insurance (UBI), or telematics insurance, is a form of a specialized automobile insurance policy that calculates the premium based on the usage of the vehicle or the consumer driving behavior. It is commonly available in the form of pay-how-you-drive (PHYD) and pay-per-mile formats (PPM).
The premium is calculated according to the readings obtained from the telematics device installed in the vehicle to monitor the speed, time and distance covered and observe the driving pattern. In comparison to the conventional insurance policies, UBI is more personalized, aids in promoting good driving practices, minimizes the instances of road accidents and offers enhanced satisfaction to the policy holder.
Significant growth in the automotive industry across the globe is one of the key factors creating a positive outlook for the market. Moreover, the widespread adoption of remote diagnostics to monitor consumer driving behavior is providing a thrust to the market growth. Automobile manufacturers are embedding advanced telematics-based platforms in light-duty vehicles (LDV) to monitor driving habits and prevent any sudden failures or accidents on the road.
Why geospatial-based ratings should replace historical territory ratings
The P&C insurance industry’s combined ratio is forecast to worsen to 105.6% from 99.5%, according to the Insurance Information Institute. Over the past several years insurers have been teetering around the edges of profitability. The industry must find better ways to assess, underwrite and price risk — and more accurately select and price policies in line with the actual risk of a property.
Growing losses, in part, can be attributed to the frequency and severity of large natural disasters — and population shifts to more catastrophe-prone areas. However, decreased profits also stem from a lack of granular, accurate information about potential hazards and exposure to loss at each insured location.
Pricing by territory is insufficient
Underlying the problem — and the need for change — is the fact that typical territory-based definitions and ratemaking methods are insufficient and inefficient. Insurers have the difficult task of balancing the need to create territories large enough to be credible from a statistical perspective — yet small enough to represent homogeneous regions where exposure to loss is relatively uniform.
Tammy Nichols Schwartz, CPCU, senior director of data & analytics at Guidewire
Not Time to Celebrate but Commercial Insurance Rates Are Stabilizing
With last year’s 25% rate hikes for public directors and officers liability insurance dropping to 2.5%, and 150% hikes for cyber cover sinking to 25%, significant softening is forecast for some casualty lines in 2023.
Those reduced price hikes are the high-end rate changes included in the latest Insurance Marketplace Realities Report, published by global broker and advisory firm WTW in early December. On the low end, public D&O insurance buyers could see rates actually drop as much as 7.5%, and cyber insurance buyers might experience flat renewals, the report says.
Anti-insurance crime group petitions YouTube
The National Insurance Crime Bureau (NICB), together with the Coalition Against Insurance Fraud and the International Association of Special Investigation Units, has sent a joint letter to YouTube requesting the social media platform to take down all videos that provide “how to” tutorials on carjacking Kia and Hyundai automobiles.
The organizations moved in response to the sudden spike in auto theft cases involving automobiles manufactured by Kia and Hyundai. It was found that certain cars – such as the Kia Rio and the Hyundai Accent – lack computer chips for theft “immobilizer” systems, allowing thieves to easily start the car and drive them away. Some thieves have even made instructional videos on how to perform the theft procedure using just a screwdriver and a USB cable, which have been shared on platforms such as YouTube and TikTok.
"Everyday consumers are being victimized by criminals using social media platforms to learn their newest illegal tricks and techniques," said NICB CEO David Glawe. "Some platforms are not doing enough to protect innocent victims from unnecessary harm."
DXC Technology Named a Leader by Everest Group in Digital Claims for Property & Casualty Insurance
DXC Technology (NYSE: DXC), a leading Fortune 500 global technology services provider, has been named a Leader in Everest Group's Digital Claims in Property and Casualty (P&C) Insurance – Solutions PEAK Matrix® Assessment 2022.
The global report identifies DXC as a Leader amongst service providers specializing in digital claims in the property and casualty insurance space, including through its DXC Assure Claims software and surround solutions that provide additional claims capabilities such as data insights and legal matter management. Everest Group's assessment acknowledges DXC's strengths in providing support for all major product types resulting in a well-balanced and diversified revenue mix globally.
"We are proud of this global recognition that specifically cites our market leadership and technology advancements for DXC Assure Claims and is also reflective of our leadership position in the London market processing complex, specialty claims that are at the center of the catastrophe market," said Ray August, president, Insurance Software and BPS, DXC Technology.
The report also notes that DXC's customers appreciate DXC Assure Claims ease of use and navigation throughout the life cycle of a claim, its robust reporting features and litigation management capabilities. It further recognized DXC's expansion of key partnerships that provide electronic payments, self-service features, customer analytics and document management.
Strategies for managing complex claims
When it comes to complex claims, a variety of factors can contribute to their intricacy including: numerous stakeholders, the involvement of several insurers or reinsurers, the failure of multiple systems or a single factor that contributes to significant losses, the possibility of litigation and sometimes, the total cost of the loss. Determining liability and how coverage applies to a claim, can also be contributing factors.
Understanding some of the issues that affect or influence a complex claim can reduce mistakes and help insurers be more proactive. Thinking through various aspects of the claim can also improve the outcomes for everyone.
Claims Magazine asked several experts to share their insights on the different phases involved when handling complex claims.
Wendy Stein Fulton, partner, Mound Cotton Wollan & Greengrass LLP
Rob Blasio, managing director, Gallagher Bassett Specialty
Jim Kremer, managing director of insurance consulting for Ernst & Young LLP
Will ChatGPT, artificial intelligence replace financial professionals any time soon?
Will artificial intelligence replace financial advisors or insurance agents anytime soon? The consensus is that it won’t in the near future, but AI can provide some assistance and a little bit of fun in the meantime.
Events
Connected Claims USA 2023
The world's largest claims and tech event is heading to 'Silicon Hills' (AKA Austin, TX) this year. See y'all there. September 26-27.
InsurTech/M&A/Finance/Collaboration
Bling Capital-backed Coverdash unveils its embedded, digital insurance for small businesses
Coverdash, providing small businesses, e-commerce merchants and gig-economy workers with insurance, launched its product in all 50 states after closing over $2.5 million in seed capital.
The round was led by Bling Capital, with participation from investors, including ((AXIS Digital Ventures, Tokio Marine Future Fund (in affiliation with World Innovation Lab), Expansion VC and Cameron Ventures. A group of strategic angel investors also participated, including Greg Hendrick, CEO of Vantage Risk; Garrett Koehn, president of CRC Insurance; and Steve Shenfeld, president of MidOcean Partners**.
The New York City-based insurtech was started by Ralph Betesh, David Vainer and Avery Rubin in 2022 to help smaller businesses source coverage in seconds and to provide an embedded technology so that partners working with businesses, like online marketplaces and service providers, can plug in Coverdash’s end-to-end insurance experience with a single line of code. The company secured 35 of these partners pre-launch, Betesh told TechCrunch.
Why We're Not Sleeping on Insurtech This Year
Believe it or not, it’s a really exciting time in the world of insurance. As in many sectors, COVID-19 accelerated the sector’s digital transformation as many insurers stepped up to the plate and faced the unprecedented challenges the pandemic posed.
Insurance is BIG business, with nearly $7 trillion in gross written premiums in 2022. But what gets VCs like me even more excited: $1 trillion more of premiums should have been purchased, but weren’t. So, over the next decade, we expect consumers and companies to spend at least $80 trillion globally on insurance. That’s 40 Apple’s, the highest valued public company in the world.
Nationwide, Securian, Cincinnati Financial, Institutes, Riskstream, blockchain,
The Institutes, a non-profit risk management and insurance educational group, through its RiskStream Collaborative blockchain consortium for developing insurance applications, has recognized The Cincinnati Insurance Companies, Nationwide and Securian Financial for their support of a project for educational verification of product sales. For their efforts, RiskStream honored the firms with its Collaborative 2022 Collaborator Award.
The solution developed by the Institutes' RiskStream Collaborative and these firms helps verify what the educational requirements are for insurers selling life and annuities products. Together, their solution includes a new industry-wide workflow for educational courses using NFTs. RiskStream implemented the solution with Kaleido, a development partner, and on its Canopy platform for core systems of record.
Securian was a founding member of RiskStream in 2018. "We joined the collaborative to learn more about Distributed Ledger Technology (e.g., blockchain), and to work with other carriers to solve shared common problems in the insurance industry," Brian Oberman, director of engineering for Securian's NextGen Lab, said in a written response to questions from Digital Insurance. "The benefits to date are: (1) a better understanding of Distributed Ledger Technology; (2) a better understanding of the challenges we all face; (3) practical learnings on how to implement this technology."
As venture capital markets cool, startups consider debt and loans as alternative financing options
Minh Le has been busy.
As a market manager for Silicon Valley Bank’s Washington and Western Canada region, he helps entrepreneurs access various lines of credit. And last year, as venture capitalists slowed their spending in response to the cooling economy, he had a rush of new clients.
“We’re seeing as much velocity as I’ve seen in the last decade,” said Le.
As traditional venture capital becomes increasingly harder to raise, many startup advisors are telling founders to seek out alternative financing tools like venture debt or revolver loans as a way to secure cash and avoid taking on equity.
Speaking at a Perkins Coie event in Seattle in October, Bonfire Ventures Principal Tyler Churchill said his firm is advising almost all of its portfolio companies to consider what a venture debt facility would look like.
Startup advisors point to multiple benefits of debt: extending cash runways without dilution, maintaining ownership control, and avoiding a potential down-round, when companies raise cash at a lower valuation than previous rounds.