Commentary/Opinion
[Ed. Note: Recommended] The Changing World of Risk: Insurers and Brokers at the Center of Risk
A Majesco and Capgemini Joint Point of View Report
Risk. For insurers, it is at the heart of what they do – understanding, assessing, and managing it to provide, price, and underwrite the right products and value-added services to help customers manage in an increasingly uncertain world. But risk is changing, and challenging the predictability of its impact and frequency.
The rising number of extreme weather events and natural disasters has had a substantial effect on people and businesses – with over 18 catastrophic events in 2022 in the US alone. With rising property prices, materials, and repair costs, many insureds lack sufficient insurance coverage, resulting in a gap and increased financial risk. While environmental weather and natural disasters such as wildfires, hurricanes, or other catastrophic events, are top of mind, there is a growing set of new risks, including societal and technological.
Majesco and Capgemini recently brought together a roundtable of experienced P&C industry experts and participants to share their experiences and insights on these and other challenges. Their insights on what has worked for them – as well as what has not – offer valuable lessons for all P&C insurers dealing with the changing world of risk.
Read this report to better understand:
- How P&C insurers must rethink risk management strategies, from products and pricing to claims and prevention.
- The velocity and timing of new risks that are emerging within the insurance industry.
- Why a broader view of risks is needed for insurers, given the loss patterns that are occurring- - How change and risk is increasing customer expectations of insurers for new products and services.
- What technology platforms are crucial to manage increased risk, new products and risk prevention.
[Ed. note: Recommended] Vitality Members Are Craving To Share Data With Their Insurer
A behavioral change model successful in promoting healthier behaviors and successfully implemented in all the continents.
About 30 years ago, Adrian Gore and Barry Swartzberg harbored an intuition that introduced a different perspective on people's well-being. This approach, known as Vitality, has since matured into a methodology primed to serve as a fundamental competency for any insurer in the future. The insurance sector has wholeheartedly embraced the notion of incorporating preventive measures, as aptly expounded in The Geneva Association's publication titled "From Risk Transfer to Risk Prevention". The imperative to cultivate less risky behaviors among policyholders in personal lines and among frontline employees in commercial domains stands as the indispensable path towards realizing this aspiration.
The conventional medical standpoint primarily centers upon employing medical interventions once a disease has manifested. In essence, this approach entails prolonging life by extending the period spent in somewhat suboptimal health, albeit with variations contingent upon the nature of the disease. Conversely, Vitality's behavioral paradigm concentrates on promoting healthier lifestyle choices capable of elongating the duration of the policyholder's time spent in a state of optimal well-being, thus further extending their lifespan.
Matteo Carbone Co-Founder, Board member, Insurtech Thought Leader, Keynote speaker and writer on insurance innovation
News
Israel’s Insurance Industry Races to Mobilize Assistance in Wake of Hamas Attacks; Insurtech Businesses Rally
Israel’s insurance industry is rallying together to assist resident populations and people returning to their country, as well as supporting their staff and operations, following the devastating attacks by Hamas on Saturday, say industry leaders.
The recent attacks on Israeli civilians by Hamas, leaving at least 900 people dead, and a staggering 2,500 wounded or kidnapped, has sent shockwaves across the globe. According to business leaders on the ground in Tel Aviv and elsewhere, the insurance industry is in a race to support stricken Israelis in their time of need.
Today is the first day after the attacks, that companies have properly reopened, and insurance leaders are now addressing the urgent demand for assistance in several areas. No official figures currently exist in terms of damage assessment. According to the Global Trade Research Initiative, Indian exporters could face higher risk premiums and shipping costs, eroding their profit, but trade volumes will not get impacted unless the war escalates.
CNN said that global oil prices climbed 4% on Monday over fears that the unprecedented weekend attack could escalate into a regional conflict embroiling oil-producing nations. The latest reports suggest military operations have brought the situation under control, as Israel said on Tuesday it has re-established control over the Gaza border and was planting mines where Hamas militants had toppled the barrier during their bloody weekend assault, after another night of relentless Israeli air raids on the enclave.
Speaking to Insurtech Insights from Tel Aviv, Kobi Bendelak, CEO of Insurtech Israel, explained the on-the-ground situation, saying there were both short and long-term considerations for the insurance industry, but that companies had reacted with impressive swiftness to cope with the attack’s aftermath.
He said: “We have some urgent things to take care of and some long-term issues. The short term goal is to assist Israelis that are abroad – to extend travel insurance, to engage with the problems of flight cancellations and medical services around the world. Based on the situation, many Israelis have decided to come back home sooner than they expected. So, insurance companies have opened emergency help desks and are extending automatically, those policies that are required in these times”
Digitalization drives innovation and new risks in insurance industry: Swiss Re
The insurance industry is undergoing a digital revolution, opening doors to innovation while simultaneously introducing new risks, according to the latest sigma study, “The economics of digitalization in insurance,” by Swiss Re Institute.
Digitalization has allowed insurers to monitor, mitigate, and price risks more efficiently, leading to tailored insurance solutions that bridge protection gaps.
Insurers aim to achieve a 3–8 percentage point improvement in loss ratios and 10–20% cost savings across the value chain through digital transformation.
As businesses increasingly rely on digital infrastructure, the flip side reveals growing risks, including business interruption and cyber threats.
Swiss Re’s new Digital Insurance Index assesses 29 countries’ progress in digitalizing their insurance markets, with South Korea, Sweden, Finland, and the US leading the way.
California’s Next Steps: Picking the Right Cat Models and Staffing Up
Executive Summary
Getting it done. Now that the California Department of Insurance has announced a Sustainable Insurance Strategy to repair an ailing insurance market, exactly how CDI will undertake the task of reviewing forward-looking catastrophe models, from which outputs will be allowed to be consider in ratemaking, and deciding which models are appropriate, are among the formidable tasks to be tackled before the end of next year.
Does the California Department of Insurance have to hire a new contingent of specialists to understand private models, if those are allowed in the rate filing process? Or a boatload of actuaries?
Unstable Homeowners: Property Casualty Insurance Coverages
The U.S. homeowners insurance segment has been hit with three consecutive years of net underwriting losses as a result of above-average numbers of natural catastrophes, inflationary pressures and elevated reinsurance costs. These market headwinds have led AM Best to revise its outlook on the segment to negative from stable.
Segment carriers are being challenged “by more frequent secondary weather perils and higher retentions and co-participation, given reinsurance pricing trends,” according to the report titled “Market Segment Outlook: US Homeowners.”
“Rising loss costs, inflation and supply chain disruptions are pressuring earnings, making it difficult to maintain rate adequacy,” which has led several market leaders to curtail new business in catastrophe-exposed states, the report said.
“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, in a statement accompanying the report.
Andrea Wells, Vice President, Content, Wells Media Group
How many insurers made it to the billionaires list?
More than 30 newcomers also welcomed following robust results in 2022
Updated rankings from Insuramore revealed the “insurer billionaires” of 2022, highlighting the companies and groups that exceeded $1 billion in gross direct premiums across life/annuity, health, and property-casualty business combined.
In total, 638 insurer groups worldwide reached this milestone in 2022, showcasing the extensive reach and financial strength of these entities. When breaking down the numbers by segment, there were 304 insurance billionaires for life/annuity business, 220 for health insurance, and 275 for P&C insurance.
Specifically, within the P&C insurance segment, the numbers were further divided: 158 insurer groups surpassed $1 billion in gross direct premiums for commercial P&C lines, 153 for private P&C lines, 119 for motor insurance, and 48 for home insurance. Insuramore also noted that these numbers add up to more than 638 due to some groups achieving this threshold in multiple segments. Additionally, considering reinsurance, the count of insurer billionaires in 2022 increases to 658.
Newcomers to the billionaire club
Across the sector, 32 groups joined the ranks of insurer billionaires during 2022, having crossed the $1 billion threshold in gross direct activity, notable growth compared to 2021.
Kenneth Araullo, news writer for Insurance Business**.
E&S market is projected to see another year of underwriting profitability
The U.S. excess and surplus market is anticipated to see its second consecutive year of direct underwriting profits, according to Fitch Ratings, which reported nearly all lines are seeing double-digit premium growth due to higher prices.
“This comes at a time where the inflationary environment continues to make it difficult to properly insure to value in property lines as well as project ultimate losses in longer-tailed casualty lines,” Fitch Senior Director Douglas Pawlowski said in a release.
In addition to favorable pricing trends, the E&S market is seeing more demand as admitted carriers adjust their risk appetites for certain lines and regions.
Fitch Ratings noted this is clearly demonstrated in the home insurance markets of catastrophe-prone states such as California and Florida. The E&S sector will continue to play an important role in delivering capacity to these markets as admitted carriers grapple with growing loss expectations and regulators continue putting downward pressure on rates.
E&S premiums reached $91 billion in 2022, a year in which the sector accounted for more than 8% of the total U.S. P&C industry’s premiums. During the year, the E&S market’s direct combined ratio was around 96%, which was better than the overall P&C market, according to Fitch Ratings.
InsurTech/M&A/Finance💰/Collaboration
Truist in Talks to Sell Insurance Business for $10 Billion
Truist Financial is in talks to sell its insurance brokerage unit to private equity firm Stone Point for about $10 billion, news website Semafor reported on Monday, citing people familiar with the matter.
The potential deal would be the latest example of lingering effects following the banking crisis earlier this year, which continues to redraw the industry landscape even months after the last bank failure.
A sweeping overhaul of capital rules proposed by U.S. regulators in the aftermath of the crisis is prompting banks to prioritize their core businesses, spurring a retreat from secondary ventures.
Truist’s shares climbed 7.3% to $29.42 on Oct. 10, set for their biggest intraday percentage gain since early May if current levels hold.
Stone Point bought a 20% stake in the unit, known as Truist Insurance Holdings, in April in a deal that valued the business at $14.75 billion.
Insurtech Porch invests US$57 million in HOA
Insurtech Porch Group has invested US$57 million into its insurance carrier, Homeowners of America Insurance (HOA).
As part of the mandate, Porch will gain acquisition rights of HOA’s rights to potential Vesttoo claims. It also exchanged a US$49 million surplus note from HOA.
In addition, the group was appointed to the statutory committee of unsecured creditors in the Chapter 11 bankruptcy of Vesttoo and intends to pursue recovery of funds.
HOA is under supervision by the Texas Department of Insurance (TDI) following the release of HOA’s statutory accounts for the quarter ending 30 June this year.
Subsequently, rating agency Demotech withdrew its financial stability rating. Porch is working with the TDI to restore the company’s surplus to an appropriate level.
HOA will continue to use Porch’s captive reinsurer to further support financial strength.
Commenting on the mandate, Matt Ehrlichman, CEO of Porch, says: “This transaction is a credit to the team who worked with TDI and others to find a structure which supports HOA and is a good outcome for Porch and our stakeholders.”
Meet the insurtech: insured.io
Insured.io, a provider of cloud-based, customer engagement solutions, is built on the basis that effective, meaningful, technology-based communication and engagement is the key to carriers' success.
The insurtech, which started in 2011 as TundraLogic, rebranded to Insured.io in 2019. It was co-founded by industry veterans Steve Johnson, head of product, and Michael Kassing, chief visionary officer.
Insured.io's Customer Engagement Platform aims to provide seamless integration with various core administration systems and offers a suite of features, including an Interactive Voice Response (IVR) telecommunications platform and an insured portal.
"Our Customer Engagement Platform is designed for midsize insurers to be able to compete with large insurers, as well as small up-and-coming insurtechs, by providing a high-quality customer experience on a budget," said Johnson. "It's a full-featured solution for customer engagement, with an insured portal, IVR, mobile web, outbound notifications for retention, and then full analytics that can be used with any policy management system and any payment processor, in a non-disruptive fashion, that gives a midsize insurer the ability to launch a full-featured insurance experience quickly and easily."
The IVR platform presents a versatile toolkit aimed at elevating customer retention and engagement, including round-the-clock IVR payment and policy information, without the need for an insurance agent, automated call and text policy notifications and the Text-2-pay feature, which enables insureds to make quick payments via text messages
Shift Technology and TransUnion Cement Data Sharing Relationship
Shift Technology, a provider of AI-powered decision automation and optimization solutions for the global insurance industry, today announced the company has finalized a relationship agreement with TransUnion (NYSE: TRU), a global information and insights company. As a result, insurers using TransUnion TruLookup attributes and data to support their risk management initiatives can now also have that data used to inform Shift Claims Fraud Detection models via a direct feed.
According to the Coalition Against Insurance Fraud, in the United States alone some element of fraud is present in approximately 10 percent of all P&C insurance claims. This represents nearly $310 billion in losses per year. Artificial intelligence (AI) has proven effective in helping insurers find hidden fraud in the claims process by uncovering a greater number of suspicious claims, indicating the factors that prompted the claim to be flagged, and highlighting the most efficient means of investigation. However, it is well known that AI requires significant amounts of data to be at its most effective. Shift uses both an insurer's internal claims data as well as data from third-party sources to inform its fraud detection models. For carriers who subscribe to TransUnion's TruLookup data, Shift is now able to access that data directly without requiring additional integration work.
"Our relationship with Shift will enable our mutual customers to have access to a more effective and efficient claims fraud identification and investigation practice," said Ernesto Castelnuovo, SVP and Head of TransUnion's Specialized Risk Solutions. "In turn, they can deliver great experiences for consumers in moments that matter."