News
Best’s Market Segment Report: AM Best Revises Outlook on US Homeowners Insurance Segment to Negative
Given three consecutive years of net underwriting losses in the U.S. homeowners insurance segment owing to elevated natural catastrophes that have continued in the first half of 2023, combined with other ongoing market challenges, AM Best has revised its outlook on the segment to negative from stable.
According to the new Best’s Market Segment Report, “Market Segment Outlook: US Homeowners,” insurers have already been contending with headwinds such as above-average catastrophe activity, inflationary pressures and elevated reinsurance costs. Now segment carriers are being further challenged by more-frequent secondary weather perils and higher retentions and co-participation given reinsurance pricing trends.
Rising loss costs, inflation and supply chain disruptions are pressuring earnings, making it difficult to maintain rate adequacy. Consequently, some market leaders have curtailed new business in catastrophe-exposed areas.
“Going forward, homeowners carriers will find it difficult to absorb these underwriting pressures while strengthening their balance sheets. A return to underwriting profitability over the near term appears highly unlikely,” said Maurice Thomas, senior financial analyst, AM Best.
Home Insurer Exodus from Several States Creates Challenges and Opportunities, J.D. Power Finds
Erie Insurance Ranks Highest in Both Homeowners and Renters Insurance Segments
Homeowners and renters across the country have been receiving letters from their insurance providers letting them know they are being dropped as a combination of catastrophic events, rising costs and regulatory pressures have strained property and casualty (P&C) insurance business models.
According to the J.D. Power 2023 U.S. Home Insurance Study, released today, the phenomenon represents opportunity for the carriers that remain, but comes with a need to understand the potential effect these actions have on customer perceptions.
“We’ve all seen the headlines about insurers leaving states like California and Florida where catastrophic weather claims have been at an all-time high, but this pattern is playing out nationwide, affecting thousands of homeowners in every state,” said Breanne Armstrong, director of insurance intelligence at J.D. Power.
“Insurers are reworking their actuarial maps, confronting state regulations that cap rate increases and struggling with profitability. For customers, this combination of steadily rising rates and sudden abandonment can create irreparable damage to brand loyalty and perceptions of trust. However, it also creates an opportunity for carriers that can come in and absorb these customer
California’s Home Insurance Deal Deadline Passes
A rumored legislative deal aimed at keeping home insurance companies from bailing on California is dead now that the deadline for a bill has passed. But a consumer group that has been attacking what it called a back-room insurance bailout plan warned Tuesday that those secret talks with the state’s Insurance Commissioner haven’t ended.
‘These negotiations were marked by secrecy and public interest advocates were barred from the room,’ Carmen Balber, executive director of Consumer Watchdog, said in a statement Tuesday. ‘Working in the dark from the insurance industry’s playbook to impose Florida-style deregulation in California isn’t how we’re going to solve this crisis and keep homeowners insured.’
A top insurance industry representative Tuesday denied companies were behind any secret dealings and blamed California’s collapsing insurance market on regulations more burdensome and bureaucratic than in other states.
‘If you believe that narrative, you are being fooled, the insurance industry did not draft an end of session legislative proposal,’ said Rex Frazier, president of the Personal Insurance Federation of California. He added that insurers would be stupid to pull back business in the state if they were making massive profits.
Top 10 largest insurance industry payouts of all time
What are the single events that caused the most damage, destruction and insured loss? We count down the Top 10 largest insurance payouts of all time
Despite their reputation for being reluctant to pay up, insurers have, over the years, forked out billions of dollars for some well-known events – particularly natural catastrophes and economic disasters. With this in mind, we have collated the Top 10 insurance payouts of all time and ranked them by estimates of insured losses. We are stick to single events here, so the 2007-08 financial crisis itself does not qualify.
Carmakers Seek to Boost Customer Experience With Insurance
Toyota’s Rob Spencer explains how telematics provide opportunities for OEMs to give consumers more personalized benefits
Fueled by technology and changing consumer behaviors, the automotive industry continues to evolve rapidly. From connected vehicles to subscription services, many automakers are expanding the products they offer and developing new revenue streams. Among those, some original equipment manufacturers (OEMs) are offering auto insurance as a way to extend their relationships with vehicle owners and improve the overall customer experience.
With growing bodies of data and enhanced technology, automakers can offer consumers a convenient way to purchase auto insurance while they are buying, financing, or even servicing a vehicle, says Rob Spencer, president and COO of Toyota Insurance and vice president with Toyota Motor Credit Corp. As an example, Toyota enables customers to secure and customize the company’s branded insurance through a partner insurance carrier or to access insurance through a broad panel of insurers.
“Our efforts are focused on improving the owner’s experience by improving the insurance experience,” Spencer explains. “Insurance is such a big part of car ownership that it plays a large role in customer satisfaction.”
As auto industry profit pools continue to shift toward services, captive finance companies have an opportunity to position themselves as essential profitability drivers, says Jeff Paul, managing director and leader of the U.S. Automotive Captive Finance Sector for Deloitte Services LP. “Insourcing insurance operations and innovating insurance products could play an important role in fueling growth,” he says.
On the Road Again: Rate Drops of People Working From Home
If you think U.S. roads have gotten busier on your morning commute, you`re not alone.
The rate of workers driving to their jobs creeped upwards nationwide last year, as did those who carpool to work by car, truck or van. The mean commuting time jumped by almost a minute in 2022 from the previous year, as more businesses ended full-time remote work, a sign that post-pandemic life edged closer in 2022 to what it was before COVID-19.
The rate of people working from home dropped from almost 18% in 2021 to 15.2% in 2022, according to new survey data on life in America released Thursday by the U. S. Census Bureau.
The survey covers commuting times, internet access, family life, income, education levels, disabilities, military service, and employment, among other topics.
Canopius expands into US excess casualty market
The goal is to 'make a significant impact', new head says
Global (re)insurer Canopius has entered the domestic US excess casualty market on Canopius US Insurance Company paper and has appointed Jude DiBattista US head of excess casualty.
“This initiative underscores Canopius' commitment to expanding its footprint in the US insurance sector and enhancing its casualty capabilities,” Canopius said in a press release shared with Insurance Business.
The insurer will focus on commercial risks, with a “specialized approach” in niche verticals including construction, commercial real-estate, hospitality, manufacturing, and technology.
"The E&S excess casualty market has become one of the fastest-growing markets in the insurance industry and this rapid growth has provided an opportunity for Canopius to enter the market and offer a specialized solution for our customers,” said Laurie Banez, Canopius head of casualty, U.S. & Bermuda.
NAIC tightens investment reporting rules for insurers
Insurers will face new costs to maintain characteristics data for the debt instruments they use, under new requirements issued by the National Association of Insurance Commissioners (NAIC), the organization of state insurance regulation bodies.
The new requirements, set to take effect January 1, 2025, are part of financial statement and investment schedules under statutory accounting principles (SSAPs), that insurers will have to file with state regulators, according to Sabrina Wilson, a regulatory policy expert and product manager at Clearwater Analytics, which consults with NAIC.
Insurers "will have to contact their brokers or front office teams to provide the data, store, organize and analyze it," Wilson wrote in a response to questions. "Insurers will also be required to maintain the supporting documents that back up their decisions on asset classifications and provide them to the regulators at request."
The NAIC updated its Investment Schedules so regulators can take a deeper look at insurers' investment portfolios. NAIC's bond definition guidance now requires insurers to categorize investments at a more granular level, and to move non-bond investments to a reporting schedule format used for fixed-income securities, equities, real estate and other investments.
Also under NAIC's new additions to investment reporting requirements, insurers will have to report paid-in-kind interest included in current principal amounts of investments. Acquisitions, disposals and holdings of asset-backed securities will need to be reported at lot level, not just position level, under capital gains or losses reporting.
NAIC is making these changes to standardize reporting under SSAPs, according to Wilson.
"For sure, back office teams will have to work closely with the front office teams to understand the characteristics of debt instruments for accounting and reporting purposes," she wrote.
Commentary/Opinion
Why home insurance, climate change will cost all Californians
Even as insurers flee California, lawmakers couldn't hammer out a deal to fix the collapsing market. Inaction will only make disasters more expensive. As another legislative session draws to a close in Sacramento, the problem lawmakers failed to fix is one of the most urgent facing Californians: the slow-moving collapse of the property insurance market as costs from climate disasters mount.
It “is not even a yellow flag issue. This is a waving red flag issue,” Gov. Gavin Newsom said Tuesday night when asked about the failure of the Legislature to act.
Blockchain Is Here. But Can Insurance Unlock Its ROI in Meaningful Ways?
As blockchain technology matures and more players in the insurance industry integrate it into their operations, many are wondering what kind of return companies are seeing on their blockchain investments.
‘That’s a very difficult question, because I actually don’t think the insurance industry broadly is using much blockchain,’ said Siddhartha Jha, founder, chairman and CEO of Arbol Inc., a global climate risk coverage platform and FinTech company. ‘They’re still at a very early POC stage in many cases.’
David Edwards, founder and CEO at ChainThat, a London-based insurance technology provider, has a similar take.
‘For individual insurers and participants, there’s no benefits, in terms of the ROI for blockchain,’ Edwards said. ‘It must be done as a group, as a kind of a consortium, to get it going. And the only way really to get that going is to get them all to work together. That’s the biggest challenge that we’re still seeing in the insurance industry.’
InsurTech/M&A/Finance/Collaboration
Hippo Investors Call for Strategic Review by Board, Other Actions
Members of the board of directors of insurtech Hippo were on the receiving end of an open letter from a “concerned shareholder group,” yesterday, urging board actions to preserve the value of a company that has faced financial difficulties recently.
Asserting that Hippo has reported “abysmal financial results and operated in an unsustainable manner” since becoming public in 2021, the shareholder group wrote, “The only viable path forward is for the board to immediately announce and run a strategic review process with the goal of preserving and maximizing value from the company’s capital, Spinnaker Insurance Company [a Hippo fronting operation] and NOLs [net operating losses].”
The letter signers, Bradley L. Radoff and Etude Capital LLC (Steven Stein), also called for enhanced financial disclosures “so that shareholders can hold the board and management accountable,” as well as an end to “meaningless non-GAAP guidance, like adjusted EBITDA.” The “adjusted EBITDA metric is regularly highlighted in Hippo’s earnings reports.
Members of the shareholder group, according to a media statement, hold roughly 2.5 percent of the outstanding common shares of Hippo Holdings Inc., ranking them among the company’s 10 largest shareholders,
People
American Family Bethany Jansen Women Insurance Leadership
Bethany Jansen, strategic technology program manager at American Family Insurance and one of Digital Insurance's Women in Insurance Leadership: Next honorees, has been helping her company adopt advanced artificial intelligence everywhere it makes sense.
Jansen's team developed a large language model that she brought to the sales insight and analytics team, a group of 36 analysts with different specialties, like profit and growth, agency reporting and Tableau dashboard tools.
"Within all of that, there's 413 tables in which any of this data can exist," Jansen said in an interview. "And when people leave their position, some of that institutional knowledge is lost. So utilizing the LLM to recall where that data is stored when they're viewing a certain report is helpful."
The analysts use a chat feature to look at a Tableau visualization and type in specific questions about the data and its provenance —– sometimes it comes from a mainframe or other company system, sometimes it's hosted on personal spreadsheets.
Jansen is well aware of the risks of generative AI. Such models can hallucinate —– literally make up information. It can be hard to make sure they are only using up-to-date information. They can pick up biases as they learn from past decisions.
"Generative AI is still fairly new, within the industry and within American Family Insurance," she said. "Right now, we're pretty careful and cognizant of implicit bias that can occur within AI models and how we can be more responsible with the data that we're utilizing to train the model."
John Hancock's Susan Roberts women insurance leadership 2023
Susan Roberts, head of U.S. strategy, transformation and continuous delivery at John Hancock Life Insurance, found that crowdsourcing innovative ways to work with technology could also be applicable to charity efforts outside the company.
Roberts, who joined John Hancock in 2018 and has over 25 years experience in the insurance and financial services industries, co-founded "100 Women Who Care - Boston," in which 100 women each contribute $100 every quarter, and choose a charity to receive a $10,000 grant.
"My career has been built around transformation and a spirit of trying things. Let's innovate, let's see what works and learn from there," she said. "It's very similar to how I work at John Hancock, which is bringing together the best and brightest, rallying them around a problem and then together we execute."
Roberts' role began with strategy and transformation, adding continuous delivery in 2020 when the pandemic led John Hancock to pursue that as a useful discipline to serve policyholders. Her work there began by thinking about the strategy for John Hancock's products in the market, and the experience for their policyholders. She said it was about "balancing not only the external, but also some of the internal [functions], like how we should be operating – really defining that strategy."
Before Roberts and John Hancock began emphasizing continuous delivery for products, the carrier launched about 10 new products per year. Now continuous delivery makes it possible to develop and launch about 20 new products per year, according to Roberts. John Hancock's continuous delivery is using AI to achieve the quicker claims processing and confirm accuracy of claims information.
"We're able to react much faster," she said. "We're really thinking about speed to market."
This is achieved by reorganizing the carrier's efforts to "reflect the customer journey," she added. John Hancock's customer engagement teams begin with "top of the funnel activities," then pass their work on those functions to claims operations teams. This ensures that new products have considered the customer experience holistically, according to Roberts.
"If I'm launching a new product, what's the servicing experience going to be like? What's the buying experience like for the advisor when they're working with the end consumer?" she said. "We talk about everything through the lens of the customer. And we deliver considering that experience. That really has transformed the way we work and helped us to really identify a lot of things that maybe in the past, we would have missed."