The underlying economic growth of U.S. auto, home, and business insurers is likely to increase faster than the rest of the U.S. economy in 2023 --- Insurance Information Institute  January 30th 2023

Triple-I: 2023 Insurer Economic Performance Tied to Broader Trends

The underlying economic growth of U.S. auto, home, and business insurers is likely to increase faster than the rest of the U.S. economy in 2023, according to the Insurance Information Institute’s (Triple-I) just-released Insurance Economic Outlook.

“The timeline of any recovery in insurance underlying growth will be dictated by Federal Reserve monetary policy and any shift away from tightening rates,” said Dr. Michel Léonard, Chief Economist and Data Scientist, Triple-I. “As certainty over the timing of this change firms up, the cost of mortgages and other consumer loans will decrease, fueling underlying growth, especially for homeowners and personal auto.”

“Even though we expect economic fundamentals to improve throughout 2023, line-specific underwriting considerations will continue to depress performance,” noted Léonard. “For example, we expect personal auto underwriting trends, including adverse frequency and severity, to continue into 2023.” Insurers underwrite specific risks, in various business lines, to charge the policyholder an appropriate premium for assuming the risk.

Insurer economic growth had generally been tracking below the nation’s overall Gross Domestic Product (GDP) since the start of the pandemic in 2020. Triple-I, however, expects insurer underlying growth in 2023 to catch up on overall GDP, ending the year at around 3 to 3.5 percent, whereas the broader U.S. economy is forecast to grow at a rate of 3.2 percent this year, up from 2.6 percent in 2022.

Property/casualty (P/C) insurer replacement costs are projected to increase between 4.5 percent and 6.5 percent year-over-year in 2023. P/C insurers are generally defined as those offering auto, home, and business insurance coverage. “This is an improvement from 2022’s 8.1 percent and 2021’s 11.8 percent year-over-year increases,” Léonard said, noting that various P/C replacement costs increased upwards of 25 percent since 2020. “We are cautious about forecasting any reductions in inflation and replacement costs in 2023 because of ongoing heightened geopolitical risks and their impact on global supply chains and commodity prices,” he said.

Should replacement cost increases subside this year, it will benefit homeowners and personal auto insurers the most, followed by commercial property and commercial auto insurers. Used autos, new vehicles and construction materials experienced the steepest rise in prices in recent years amongst a basket of key goods replaced or repaired by P/C insurers.

Intelligent platform options take communication to a new level

The insurer’s handling of a claim can often turn into the moment of truth for the policyholder — prompting the policyholder to stay with the insurer or seek out competing offerings. The absence of a quality claims experience is the surest way to drive the policyholder to a competitor.

A low-friction engagement between the policyholder and the insurer that is underpinned by timely, transparent, and clear communications can facilitate future renewals. In providing this level of service, insurers can ensure insureds receive the personalization that will make them loyal customers for years to come.

Countering disjointed communications with personalized experiences

Time becomes a precious commodity following a loss occurrence. The policyholder, insurer’s first notice of loss reps, agents, adjusters, and repair firms/shops must communicate and exchange accurate, clear information and data. In this stressful environment, communication between the various stakeholders is a challenge by any measure.

Tesla Competing With ‘GEICOs of the World’ to Lower Insurance Prices

While executives of Tesla said the car maker’s insurance business isn’t yet big enough to warrant separate financial disclosure of its results, Chief Executive Officer Elon Musk reiterated a benefit for Tesla owners: cheaper premiums.

Speaking on an earnings conference call Wednesday, Musk said that “just by Tesla operating insurance for our cars at a competitive rate, that makes the other car insurance companies offer better rates for Teslas.” In other words, Tesla being in the insurance business “has a bigger effect than you think” because it lowers the cost of insurance even for Tesla drivers who don’t buy insurance coverage from Tesla. That’s because “now the GEICOs of the world have to compete with Tesla and cannot charge outrageous insurance for Teslas,” Musk asserted. It has an amplified effect, [which is] very important,” he said.

Suzanne Sclafane

Talking claims with AmFam, Plymouth Rock and Pie.

Digital Insurance spoke with three claims leaders about their plans to meet a challenging 2023 head-on.

Supply chain snags, staffing shortages, inflation and catastrophes – oh my! P&C insurers are looking at a challenging 2023. Rounding out our claims outlook for the year, we went right to the source: Claims leaders at three insurers, who shared how they're meeting these discrete challenges head on.

ISG to Publish Report on Insurance Platform Solutions

Upcoming ISG Provider Lens™ report will evaluate providers of modern platforms helping insurers boost efficiency and compete in a changing industry.

Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, has launched a research study examining providers of insurance platform solutions that enable insurance companies to develop and deliver relevant, personalized products in an intensely competitive industry.

The study results will be published in a comprehensive ISG Provider Lens™ report, called Insurance Platform Solutions, scheduled to be released in June. The report will cover companies offering modern platforms to both life and retirement and property and casualty insurance providers.

Enterprise buyers will be able to use information from the report to evaluate their current vendor relationships, potential new engagements and available offerings, while ISG advisors use the information to recommend providers to the firm’s buy-side clients.

Insurance companies urged to step up AI governance amid increasing regulation

Artificial intelligence (AI) has helped streamline and transform the insurance process, from underwriting to claims. But as these tools become increasingly embedded in carriers’ lines of business, so too does the need for governance to ensure the technologies are used in safe and compliant ways.

Insurance companies should also be increasingly engaged in the governance of AI systems in the face of growing regulatory pressure. Every organization should have an AI governance platform to avoid the risk of violating privacy and data protection laws, being accused of discrimination or bias, or engaging in unfair practices.

“As soon as a similar regulation or legislation is passed, organizations are placed in a precarious position because [lack of governance] can lead to fines, loss of market share, and bad press. Every business who uses AI needs to have this on their radar,” said Marcus Daley (pictured), technical co-founder of NeuralMetrics