News
Commercial Auto Up Against Persistent Headwinds to Underwriting Profit
Underwriting losses in U.S. commercial auto have returned to pre-pandemic levels and rate increases have not been enough to keep up with severity trends.
“The liability component has been more problematic than the physical damage component, which is no surprise since adverse loss reserve development, driven by social inflation, tends to be a bigger issue for liability claims, which generally have a longer tail than property damage claims,” said Christopher Graham, senior industry analyst, Industry Research and Analytics, AM Best. “Even with that, though, the physical damage combined ratio is deteriorating.”
According to AM Best’s report on the segment, the combined ratio for physical damage has been below 100 since 2018 while the combined ratio for liability has consistently been above 100 – getting close to the break-even point in 2021. However, in 2022, the combined ratio for physical damage jumped 9 points from 2021 to 99.9.
More Independent Insurance Agents are Shopping Premiums, Even as Carrier Satisfaction Remains at an Unprecedented High, J.D. Power Finds
Rising Premiums Emerge as Great Disruptor, Despite Strong Carrier Relationships
While independent insurance agents continue to be satisfied with their carrier partners, the rising cost of premiums has made these relationships increasingly tenuous. According to the J.D. Power 2023 U.S. Independent Agent Satisfaction Study, released today, overall agent satisfaction with insurers of both personal lines and commercial lines has reached an all-time high, surpassing 2022’s record-setting score.
Year over year, personal lines satisfaction has achieved a significant 17-point increase (on a 1,000-point scale) and commercial lines a 6-point increase. Still, more agents have been shopping policies ahead of their clients’ renewals and are willing to move policies for a lower price to retain clients, even if an agent is content with the existing carrier.
The study was developed in conjunction with the Independent Insurance Agents & Brokers of America (IIABA). It evaluates the evolving role of independent agents in P&C insurance distribution, general business outlook, management strategy and overall satisfaction with personal lines and commercial lines insurers in the United States.
“Carriers are doing a great job of providing quality service to agents and it creates a huge competitive advantage,” said Stephen Crewdson, senior director of insurance business intelligence at J.D. Power. “Agents are more willing to place business with a carrier when they are more satisfied with their experience. However, the uptick in agents shopping their clients’ policies shows that rising premiums are the ultimate disruptor, threatening to upend even a strong existing relationship. That puts the onus on carriers to find ways to incentivize agents to stay by offering an experience that can justify these cost hikes.”
Progressive says it will not renew certain homeowners' policies in Florida
Progressive has announced that it will not be renewing certain homeowners’ insurance policies in Florida beginning May of next year.
A company spokesperson confirmed the move to local news channel WFLA and said Progressive has already initiated the necessary regulatory filings to enact the change.
The non-renewals will primarily impact DP3 policies that are typically for second homes, as well as other “direct and agency property policies.”
And while the spokesperson did not provide exact figures, the Insurance Information Institute (Triple-I) has projected that about 100,000 policyholders will be affected by the pullback.
Commentary/Opinion
2024 global insurance outlook | Deloitte Insights
Insurers evolving to address changing operating environment and precipitate even greater societal impact.
Key messages
- Escalating frequency and severity of global risks—from climate change to cybercrime—is intensifying focus on the insurance industry’s capacity and readiness to react as society’s “financial safety nets.”
- Most insurers are realizing that reacting to risks may not be good enough and are undertaking transformation efforts aimed at preventing losses from happening in the first place.
- This shift to a more customer-centric business model will likely require advanced technology adoption and modification of company culture to help minimize siloed interactions, enhance collaboration among employees, and increase accessibility of customer data—but skill sets may need to be augmented.
- Merger and acquisition (M&A) activity has been on a decline since Q2 2022 due mainly to macroeconomic factors. However, as increases in interest rates and inflation ease, pent-up activity may drive an upsurge in deals later in 2023 into 2024. Insurance technology companies (InsurTechs) remain front and center of acquisition activity as carriers increasingly look to these capabilities for point solutions across the value chain to power transformation efforts.
- A fundamental mission underlying much of this change is that the industry’s role is pivoting to that of a sustainability ambassador, influencing and propelling purpose-driven decisions and strategies of clients across industries to create a better workplace, marketplace, and society.
Data Sharing Helps Insurance Carriers Combat Social Inflation
One answer to the ‘social inflation’ problem is for carriers to pool their data to create insights about the early warning signals that precede litigation and, once a claim becomes attorney represented, those that help minimize costs and settlements.
Litigation drives “social inflation,” increased insurance awards, and settlements in casualty losses. Juries that are more plaintiff-friendly than in the past, expansion of coverages by judges, and litigation funded by investors have led to higher losses paid by insurers. “Nuclear verdicts,” those more than $1 million, are common and can stretch into the tens of millions of dollars today. Between 2012 and 2019, the average award rose by 50 percent to $1.7 million.
Insurance carriers need more tools to combat social inflation. I believe one answer to this problem lies in carriers pooling their data to create insights about the early warning signals that precede litigation and, once a claim becomes attorney represented, those that help minimize costs and settlements.
My company has built artificial intelligence (AI) tools that leverage cross-carrier pooled data for many years. Our clients who have contributed their anonymized data see the benefits every day. Building effective AI depends heavily on sample size. And our pooled data allows our models to be built on a broad cross section of carrier data. Small carriers benefit from the added number of data points; large carriers benefit from that and the addition of exposures for which they may not have much data. On average, the benefits are shown in lower litigation rates and smaller settlements and awards.
Heather H. Wilson, Chief Executive Officer of CLARA Analytics
Digitization, digitalization and digital transformation – what's the difference?
Digitization, digitalization and digital transformation.
While these three words may look and sound similar, each is vastly different in how it can impact an insurance business, according to Steven Salar (pictured), a former insurance agent who is now president of AI business Exidion.
Digitization has widespread appeal, for both more conservative businesses and those open to innovation. Salar described it as “encoding data and converting it into a digital format, similar to a PDF or mp3 file.”
Digitalization is using this data to improve workflows and process automation.
Research
Which states observe Columbus Day or Indigenous Peoples’ Day?
Depending on where in the United States you live and whom you work for, Columbus Day may be a day off with pay, another holiday entirely, or no different from any other Monday.
Columbus Day, the second Monday in October, is one of the most inconsistently celebrated U.S. holidays. It’s one of 11 official federal holidays, which means federal workers get a paid day off and there’s no mail delivery. Because federal offices will be closed, so will most banks and the bond markets that trade in U.S. government debt. The stock markets will remain open, however, as will most retailers and other businesses.
Beyond that, Columbus Day seems to be fading as a widely observed holiday, having come under fire in recent decades from Native American advocates and others, who’ve argued that Christopher Columbus isn’t an appropriate person to celebrate.
More recently, Native American groups and other critics have advocated for changing the holiday to something else, citing Columbus’ own mistreatment of natives and his legacy of European settlement. Several states (including Alaska, Iowa, Michigan and Oregon) and dozens of cities (including Seattle, San Antonio, Houston and Boston) have recognized Indigenous Peoples’ Day instead, though not always enshrined in law or as an official, permanent public holiday.
[Ed. note: Recommended] Europe and North America reached 30.4 million active insurance telematics policies in 2022
According to a new research report from the IoT analyst firm Berg Insight, the number of insurance telematics policies in force on the European market reached 13.6 million in Q4-2022.
Growing at a compound annual growth rate (CAGR) of 8.9 percent, this number is expected to reach 20.7 million by 2027. In North America, the number of insurance telematics policies in force is expected to grow at a CAGR of 11.7 percent from 16.8 million in Q4-2022 to reach 29.2 million in 2027.
“Smartphone-based insurance telematics solutions are becoming a more mature solution now and we can see many insurers that start to take advantage of the concept’s potential in claims handling and as a marketing tool for example”
Caspar Jansson, IoT Analyst at Berg Insight
InsurTech/M&A/Finance/Collaboration
Blue Marble partners with Nestlé to provide weather insurance to coffee farmers in Indonesia
Climate insurer Blue Marble and Nestlé have launched a pilot weather insurance programme in Indonesia designed to provide over 800 smallholder coffee farmers with financial protection against unpredictable weather rainfall and drought.
The weather insurance leverages satellite-based climate data to determine when coffee output has been adversely impacted by too much or insufficient rainfall in key phases of the crop cycle.
Payments by the parametric insurance scheme are issued automatically to registered coffee farmers who have been affected, according to the severity of the weather.
The more than 800 smallholder coffee farmers in Indonesia that stand to benefit from the pilot supply coffee to Nescafé, one of Nestlé’s brands.
Marcelo Burity, Global Head of Nestlé’s Green Coffee Development, commented, “This weather insurance helps to establish a support mechanism for smallholder coffee farmers in Indonesia. It allows them to access financial resources to re-establish their crops in the event of irregular weather conditions while building resilience in coffee farms.”
Leading Insurers Join Viewpoint's Inaugural Fund and Forward Network, a Newly Launched Industry Hub
Viewpoint Ventures, LLC today announced its debut with the close of its Viewpoint Fund I and the launch of its unique Viewpoint Forward Network.
“The Viewpoint Forward Network gives us up-to-the-minute intelligence from some of the best-performing organizations in the industry, which is critical to our thesis-driven approach. We believe it also adds tremendous value to our portfolio companies.”
The Viewpoint Forward Network is designed to be a centralized hub to share cutting-edge innovations, illuminate market conditions and sentiment, and cultivate productive business partnerships. At launch, it has attracted members from 70 leading insurance carriers, distribution organizations, and service providers. Several of the industry’s largest players are represented, including four of the top ten U.S. P&C carriers, five of the top ten largest global P&C brokerages, and five of the top ten annuity writers. The companies in the network manage approximately $2.9 trillion in assets.
“The insurance industry has innovated and adopted technology at a dizzying pace over the last decade,” said Drew Aldrich, Viewpoint’s Founder and Managing Partner. “And yet, industry players struggle through the noise to identify those very few impactful innovations, strategies, and startups that can meaningfully drive the future of their businesses. That’s where the Viewpoint Forward Network comes in. We designed it to be an impartial industry resource that intelligently connects the right players and highlights the vital trends and decisions facing firms.”
Insurtech Start-Up Breach Insurance Launches Crypto Shield Pro
Breach Insurance, a Boston-based global insurance underwriter that provides insurance technology and regulated insurance products for the cryptocurrency market, has announced the launch of Crypto Shield Pro - an innovative crypto custody insurance policy for institutional clients of crypto custody solutions.
Following the launch of the company's new Bermuda class IIGB carrier, the new institutional crypto insurance product protects policyholders from the theft, loss, and destruction of private keys and crypto assets held in custody that have traditionally been available only to large, established crypto institutions.
The company's capacity is backed by Accelerant, a data-driven risk exchange that empowers specialty underwriters and has earned a financial strength rating of "A-"(Excellent) from A.M. Best. Limits up to $10M per policy are available, with higher limits and custom coverage available with additional underwriting.
Along with Crypto Shield Pro, Breach is also making their free Active Wallet Monitoring service available to all. The service provides a complete picture of on-chain risks associated with wallets and allows anyone with a crypto wallet to gain free insights into wallet transactions across all major blockchains and cryptocurrencies, real-time identification of financial crime exposures, and flagging transactions linked to thieves, money laundering, terrorist financing, and sanctioned entities, which is critical to licensed and regulated entities.
Canada
How auto insurance will navigate a world with self-driving cars
Self-driving cars have been a part of visions of the future for decades, and what was once only imaginary has started to become reality.
Not only do self-driving cars exist, but five U.S. states (Arizona, California, Michigan, New Hampshire and Ohio) allow driverless cars to be tested on public roads without any person in the vehicle. Another 32 states allow testing with a safety driver present.
At some point, automated vehicles will likely be approved for sale and general use by consumers, with the anticipated societal benefit of a substantial reduction in the number of automobile accidents.
A recent study from the U.S. National Highway Traffic Safety Administration suggests 94% of automobile accidents are linked to driver error. Sharply reducing automobile accidents could save billions of dollars for insureds and insurers.
Tim Crljenica is a partner at Thomas Gold Pettingill in Toronto
EMEA
Major insurers eye Aviva takeover
Canadian insurance company could be in the frame.
Allianz and Intact are considering their options where it comes to an Aviva takeover, The Times has reported.
An American insurer is also in the frame, The Times reported, citing City sources.
At least one of Allianz and Intact is said to be mulling a £6 per share proposal for Aviva, according to the report.
Shares in UK-headquartered Aviva jumped on the news, rising upwards of 10% on Friday from the market’s open. However, this dampened somewhat as analysts queried the veracity of market chatter.