Commentary/Opinion
Auto Values Are Out-of-Date
Changes in buyers' behavior mean an insurer using MSRP to set an insurance value is underpricing the vehicle from the start.
Across the last five years, about 40 million used car transactions happened each year (source: Bureau of Transportation Statistics). For most make, model and year combinations, a reasonable and current estimate of the insurance value of a vehicle in operation could be produced from a vehicle identification number (VIN).
This is not your claim adjusters’ Total Loss Value worksheet. That would have mileage, condition, vehicle history, prior accidents and repairs, and like-for-like comparable vehicles in a local geography.
If you watch "Antiques Road Show" or even "Pawn Stars," you get the idea that everything has a value, that these can fluctuate and that the insurance value to replace something at market is a fungible concept, especially for things mass-produced – like a vehicle.
Before the government-imposed truth in labeling window sticker for vehicles emerged in the late 1950s, there was no ingredient label for what features were on a vehicle nor what a suggested retail price might be. As automotive retail strategies evolve, some manufacturers create many customer options while others produce more of a what-you-see-is-what-you-get menu.
Marty Ellingsworth, president, Salt Creek Analytics
News
Insurance premium rates continue to flatten amid 24 straight quarters of hikes
The latest Global Insurance Market Index, issued by global broker Marsh, indicates a consistent 3% uptick in global commercial insurance prices during the third quarter of 2023, mirroring the pricing trend observed in the preceding quarter. This also marks the 24th consecutive quarter displaying an increase in pricing.
Pricing trends remained relatively uniform across most regions in Q3. Comparable to Q2, these trends predominantly stemmed from persistent rate reductions in financial and professional lines, alongside a slight drop in prices within the cyber insurance market. However, these were countered by notable escalations in property insurance, especially evident in the US, where property prices soared by an average of 14%.
In the US, overall pricing elevation maintained a steady 4% increase on average, consistent with the two preceding quarters. Meanwhile, Latin America and the Caribbean witnessed a 10% surge in pricing (up from 8% in Q2), Europe experienced a 4% hike (a slight drop from 5% in Q2), Pacific encountered a 1% rise (a decrease from 2%), and Asia maintained steady pricing levels (remaining identical to Q2).
By contrast, the UK saw a composite pricing decrease of 1% (contrary to the 1% increase in Q2). The Global Insurance Market Index, for the first time, segregated results for Canada, where Q3 prices recorded a 1% decline, and for India, Middle East & Africa, which observed a 3% upsurge.
Research
Breakthrough in Crash Detection
At Sfara, we not only want to develop the best safety and crash detection technologies, we want to educate the industry on the human and financial costs that occur in automotive crashes below 25mph, where there has been a persistent myth that nothing of significance happens there.
However, the facts reveal a picture that shatters conventional thinking.
If you haven’t already done so, read our press release and watch its 90 second companion video. Or, follow us to stay connected and informed of the facts. LINKS HERE
In reference to this post’s image: The State of Florida maintains some of the most detailed crash information available. In the plot image from that dataset [FARS database, NHTSA], each dot represents a fatal crash under 25mph (over the course of a five-year period). Two-thirds of these occurred under 15mph.
All-Speed Crash Detection matters. Know the facts.
From PAYD to MHYD: How Telematics is Reshaping the World of Auto Insurance
The "Insurance Telematics in Europe and North America - 7th Edition" report has been added to ResearchAndMarkets.com's offering. This comprehensive study offers detailed insights into the evolving world of insurance telematics, revealing compelling growth figures and forecast trends until 2027.
Insurance telematics, commonly known as usage-based insurance (UBI), is transforming the automotive insurance landscape. Telematics, a blend of "telecommunications" and "informatics", involves collecting vehicle-related data via telecommunication networks. This breakthrough allows insurers to formulate pricing strategies based on real-time driving behavior, manage claims more efficiently, and uniquely position their offerings to consumers. Popularized models include Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD), and Manage-How-You-Drive (MHYD).
Market Potential:
The addressable market is enormous. In 2019, 317 million vehicles were in circulation in the EU22+3, with North America boasting approximately 293 million vehicles. Given that basic automotive insurance is compulsory in most developed regions, the potential for insurance telematics is vast. In 2019 alone, motor gross written premiums in EU22+3 were over €142.3 billion, with North America recording US$253.2 billion.
Growth Trends:
Europe and North America are currently the epicenters of the insurance telematics revolution. By the end of 2020, Europe had approximately 13.1 million insurance telematics policies. Forecasted figures suggest a rise to 35.1 million policies by 2025, growing at a CAGR of 21.7%. North America is projected to escalate from 16.7 million policies in 2020 to 49.0 million by 2025, marking a CAGR of 24.0%.
Latest data indicates 13.6 million active policies in Europe by the close of 2022, with a projection of 20.7 million by 2027.
North America is poised to grow from 16.8 million in 2022 to 29.2 million policies by 2027.
InsurTech/M&A/Finance💰/Collaboration
Top 10 insurtech fundraises to date
We round up the 10 largest insurtech funding rounds in the history of the industry, with one company raking in over US$1.4bn in total!
Raising money is an extremely important part of business – and whether you choose to get it from venture capitalists or bootstrap your company’s growth, it’s becoming an increasingly scarce commodity in today’s fundraising environment. This Top 10 looks at the largest raises in the history of insurtech.
We’ve focused only on named venture funding rounds from Series A through to Series J, and only counted those from pure-play insurtechs. So, let’s take a look at the 10 biggest fundraises in the history of the insurtech sector.
Alex Clere, Editor of FinTech and InsurTech Digital magazines
Q3 InsurTech investment surpasses USD1 billion on P&C surge
Driven by a 25.5% quarter-on-quarter surge in P&C InsurTech investment, new funding for the global InsurTech sector edged past a billion dollars to USD1.1 billion during the third quarter of 2023, up 19.8%, according to the latest Global InsurTech Report from Gallagher Re, the global reinsurance broker.
The rise occurred even as average deal size fell 16.4% quarter on quarter to a six-year low of USD10.3M, and Life & Health InsurTech investment slipped a further 4.5% quarter-on-quarter to USD166.6M.
In line with funding, quarterly InsurTech deal count increased from 97 in Q2 to 119 in Q3, the most since Q3 2022 (140). P&C InsurTech saw 90 deals, and Life & Health InsurTech, 29. Additionally, United States-based InsurTechs saw 55.4% of global InsurTech deal share in Q3 2023 -- the highest level since Q1 2020.
Early-stage InsurTech funding increased 24.7% quarter on quarter to USD269.45M, as the number of early-stage deals rose from 51 in Q2 to 71 in Q3. Meanwhile, average mid-stage Series B and C funding for the year to date fell to its lowest total since 2014, at USD24M. During the third quarter, companies in this category raised USD323.36M – or 29.5% of total InsurTech funding – across 18 deals in Q3.
At the larger end of the spectrum, two Q3 investments count as mega-rounds. Both the Boston-based homeowners insurance platform Openly and the San Francisco cyber platform Resilience raised USD100M in Series D rounds.
Over the quarter, (re)insurers made 34 InsurTech investments, the majority of which – for the fifth consecutive quarter – were in the early-stage category (61.8%). Q3 saw 10 seed/angel-stage investments and 11 Series A investments by trade players. MassMutual Ventures led the activity with seven investments. Three or more investments each were made by Avanta Ventures (part of CSAA), MS&AD Ventures and Munich Re Ventures
Largest Decline Ever in Agency M&A Through First Three Quarters: OPTIS
Investment banking and financial firm OPTIS Partners said the count of agency mergers and acquisitions through the first three quarters of 2023 saw the largest declined ever recorded.
There were 534 announced M&A deals of U.S. and Canada property/casualty insurance agencies through Sept. 30 – down 27% from 720 in 2022, according to the firm’s M&A database. There were 168 transactions in the third quarter, 34% lower than the same period in 2022.
Steve Germundson, partner of OPTIS Partners, said the slowdown was due to “rising costs of capital, the increase in leverage, and a smaller supply of business owners.”
Broadstreet Partners and Hub International led all buyers with 43 and 37 transactions year-to-date, respectively. Other top buyers were Inszone Insurance Services and Leavitt Group at 27 deals apiece, World Insurance Associates at 24, and Arthur J. Gallagher at 25. No other buyer reported more than 25 transactions in 2023.
Chart from Optis Partners
Vesttoo seeking ‘quick, private’ asset sale
Troubled insurtech Vesttoo is pivoting to an asset sale to “monetize valuable technology,” according to court documents.
A new filing in the Chapter 11 bankruptcy case indicates the Israeli startup’s push to create a reorganization and trade forward plan has been pulled back and that it is now seeking a “quiet, private sale.”
Explaining the move, Vesttoo’s interim CEO Ami Barlev said creditors calling for liquidation aren’t seeing the value in the firm’s artificial intelligence and machine learning technology. Vesttoo has asked for time to deliver on a “value-maximizing” transaction.
Innovation
[Ed. Note: Outstanding!] Adrian Jones Keynote at ITC 2023; The State of InsurTech
"My keynote at InsureTech Connect - the state of people, capital, and tech in insurance. And the 7 ingredients that have made every $5b+ startup in insurance since 2008 - and yes there are several of them today"
Presentation deck embedded in LinkedIn post.
Adrian Jones, Hudson Structured Capital Management
Collision Engineering Program touted as ‘breath of fresh air,’ tech shortage solution for industry
Collision industry professionals agreed during a Collision Industry Conference (CIC) session focused on the Collision Engineering Program (CEP) that the apprenticeship model is the answer to complaints about a lack of technicians.
“The collision engineering program was developed to build a new generation of highly motivated, passionate, skilled collision repair technologists for the industry,” said Mary Mahoney, Enterprise Holdings replacement and leisure division vice president.
“It’s a unique two-year apprenticeship model and what it includes is eight weeks in the classroom and eight weeks in the collision repair shop in a rotation for two years ending in an associate’s degree.
“The associate’s degree and the apprenticeship program are backed by the Department of Labor and Education. They also have the opportunity to gain additional certifications during their training. When they’re finished, they already have a job before they’ve even graduated. Our approach is to address this shortage from a regional or a local level versus a national level and we do that starting with our colleges that we serve and we bring in the industry.”
Nevada forum discusses key factors contributing to higher auto insurance costs
Auto insurers are likely to remain challenged through 2025 because of “significant U.S. inflation” that has tripled the cost of repair parts in recent years, a public forum heard Wednesday.
The forum, hosted by the Nevada Division of Insurance (DOI), featured a panel of industry experts gathered to discuss the factors driving up costs throughout the state, and the importance of ensuring repair facilities are properly compensated for the heightened expense of fixing modern vehicles.
Panelists included;
Dale Porfilio, the Insurance Information Institute’s chief insurance officer
Michael DeLong, research and advocacy associate with the Consumer Federation of America.
Robert Passmore, department vice president of personal lines at the American Property Casualty Insurance Association.
Aaron Schulenburg, executive director for the Society of Collision Repair Specialists, said "“there is only one right way to repair a vehicle – especially a vehicle with a modern, sophisticated suite of safety technology. Repairers have an obligation to the consumer to utilize OEM procedures, and information. If a vehicle is equipped with ADAS and safety technology, as they virtually all are today, those procedures play even greater roles.”
Canada
Why AI is keeping P&C regulators up at night
Increasingly concerned about biased uses of artificial intelligence, industry regulators are questioning insurers’ ability to explain why they’ve used certain data in their models or how the AI came to its conclusions, experts told the Insurance Bureau of Canada’s Regulatory Affairs Symposium last week.
P&C techies beware: although, artificial intelligence (AI) can streamline administrative work, improve risk modelling and bolster cyber security, AI outputs are only as good as their data inputs, Annie Veillet, partner, cloud and data practice at PwC Canada, said during a panel on AI Technology and Governance.
When data input into an AI is biased or inaccurate, it can produce skewed results. Plus, AI can generate made-up results from its data. AI ‘hallucination’ occurs when the machine produces an imagined answer based on incomplete data or patterns it wrongly perceived.
“It [can] inspire itself from its large set of data and answer the prompt that a human is asking,” said Veillet.