News
Moody’s downgrades Nationwide P&C financial strength
Moody’s has downgraded the Nationwide Mutual Insurance Company (NMIC) and its property & casualty affiliates, Nationwide P&C, insurance financial strength rating to A2 from A1, and downgraded NMIC’s surplus notes rating to Baa1 (hyb) from A3 (hyb).
Nationwide LogoThe rating agency has also affirmed the insurance financial strength ratings of Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company at A1 and the senior unsecured debt rating of Nationwide Financial Services (NFS) at Baa1.
The rating outlook for Nationwide P&C and NFS is stable, Moody’s added.
According to the announcement, Nationwide P&C’s rating downgrade reflects its weak profitability over the past several years. This was mainly due to standard personal and standard commercial lines experiencing high loss cost inflation along with sizable catastrophe losses, Moody’s noted.
“In response to this issue, Nationwide P&C is raising rates, tightening underwriting standards, and investing in automation and digitization to become more efficient,” analysts explained.
Adding: “ Over time, the group is shifting some of its underwriting focus from standard P&C lines toward excess and surplus and other specialty lines, while also shifting some of its distribution from independent agents toward wholesale and brokerage channels. It could take a couple years for Nationwide P&C to work through this transition and achieve its target underwriting results.
Lawmakers eye more money for ‘Safe Florida Home’ program
As lawmakers approved covering the costs of thousands of backlogged applications, several Florida House members said more money needs to be approved next year for a program to help residents make home improvements to reduce insurance premiums.
The House voted 110-0 to approve a bill (HB 1C) that includes covering more than 17,000 already-submitted applications to the My Safe Florida Home program. The bill also includes providing additional assistance to victims of Hurricane Idalia and has a total price tag of $416 million.
Rep. Lindsay Cross, D-St. Petersburg, called it “prudent” to examine how to expand the My Safe Florida Home program. Tuesday’s vote came on the second day of a special legislative session, with the Senate expected to take up the bill Wednesday.
“In my district and across the state, Floridians are experiencing flooding during hurricanes, during 100-year storm events and even during sunny-day high-tides,” Cross said. “Expanding this program to allow Floridians to mitigate potential flood damage ensures that people can stay in their homes and are not priced out of their neighborhoods and communities. There are simple and affordable measures like dry-proofing your home or installing sewer backfire pipes that can help so that when floodwaters come in, sewage doesn’t come along with it.”
Commentary/Opinion
State Farm, Progressive, Geico, Allstate UBI telematics 2023
Customers are increasingly dissatisfied with the cost of their auto insurance, which is likely leading insurance carriers to focus more on usage-based insurance (UBI) options.
Participation rates in UBI programs have more than doubled since 2016, from 8% to 17%, according to the J.D. Power 2023 U.S. Auto Insurance Study. New customers have a UBI participation rate of 26%. Customers do have concerns about UBI. Only 38% of customers responded that the data collected is "always accurate."
TransUnion released its 'Insurance Personal Lines Trends and Perspective' Q2 2023 report, which highlights how more consumers are actually opting-out of telematics programs. The number of consumers who accepted a telematics offer was 53% or 12 percentage points lower than a year ago, at 65%.
Kelly Hernandez, associate vice president, personal lines telematics at Nationwide, said in an emailed statement: "The future holds considerable progression for telematics as insurers will look to place more emphasis based on how safely someone drives. Nationwide is thinking beyond the discount-only pricing programs that customers have come to demand, to positively impacting policyholders driving behaviors and re-shaping how we think about auto insurance."
The interest in telematics behavior insights will likely continue over the next few years as nearly one in two top ten tier carriers use an exchange-based product, according to the LexisNexis Risk Solutions 2023 U.S Auto Insurance Trends Report.
Adam Pichon, senior vice president of auto insurance and claims, LexisNexis Risk Solutions, said in a statement: "A more competitive advantage can start with better claims handling workflows, better outcomes can be initiated by distracted driving awareness and mitigation, and carriers can begin planning for when the market softens – all with greater clarity helped gained through data insights. Renewals, chargeable violations and improved segmentation are all examples of ways to help improve results using data."
ChatGPT's Impact and Future in Insurance: Insights from Experts
A recent roundtable discussion featuring *Future Processing’s Insurance Practice Lead, Piotr Piekos and Frederik Bisbjerg, Senior Insurance Advisor, explored the opportunities and challenges that insurers will face when adopting ChatGPT.
Whilst the use of the natural language processing tool is still in its infancy, we sat down with Piotr and Frederik following the roundtable to discuss their predictions on how it will continue to revolutionise the insurance industry in the future.
How has ChatGPT impacted the insurance sector to date?
Piotr: As a data-driven industry, insurance has unsurprisingly been disrupted by the wider adoption of ChatGPT. Driven by AI technology, it enables businesses to have human-like conversations with customers via a chatbot.
For insurance companies, ChatGPT can be leveraged to respond to customer queries, process claims and underwrite policies. It can also analyse data and identify patterns that can help insurers make better decisions when it comes to risk and pricing.
Frederik: Many insurance businesses are beginning to use ChatGPT to streamline claims processing, improve customer satisfaction and reduce the number of fraudulent claims. Taking it one step further, AI can be used to innovate the insurance industry, with insurers using these data insights to create new products and services that meet the needs of the changing market.
What are some of the benefits for insurers using ChatGPT?
Frederik: Not only can ChatGPT be used to create chatbots to answer customer questions, but it also plays a fundamental role in automating the underwriting process. Insurance businesses can bolster their customer experience using ChatGPT to personalise products or services as chatbots can tailor insurance recommendations to individual customer needs.
Research
Pay, perks & perspectives: The 2023 Claims Salary Survey
Take a deeper look at the results of the 2023 Claims Salary Survey
Artificial intelligence (AI) and other technological advancements have automated portions of the claims process – helping customers file, track and complete claims efficiently – but the human component of claims is still very much alive. The role of the claims professional extends beyond the limitations of digital interactions, and they are often some of the first people with the opportunity to support and assist someone after a loss.
To get a closer glance at how the role of claims adjusters has shifted, how those in claims are being compensated and what the future of the profession looks like, ALM Intelligence, a division of Claims’ parent company, ALM Global, LLC, conducted the 2023 Claims Salary Survey. This annual survey asks for feedback on the profession from those who know it best – captive and independent adjusters.
The types of companies where claims professionals are working has shifted a bit from last year’s survey, with 70.9% of respondents reporting they are employed by an insurance company, and 29.1% working for/as an independent adjuster. This shows a drop from the 37.7% who were employed by an independent adjuster in 2022, and an increase in those employed by insurance companies (up from 62.3% in 2022).
A look at the pros
When it comes to the age of the respondents, the largest group by far were between 50 and 59 years old (38.8%), followed by 40 to 49-year-olds (19.9%) and 30 to 39-year-olds (9.9%). About a third (33.9%) said they function as adjusters, while 17.6% are managers and 10.9% are vice presidents or senior vice presidents. Smaller percentages of respondents said they serve in other positions, including specialist (6.7%), director/senior director (6.1%), analyst (2.4%), CEO/president (2.4%) and appraiser (1.8%).
Just over 38% of independent adjusters said there are more than 100 full-time employees at their company, and 25% reported being their company’s only full-time employee. One-quarter of these respondents said their company’s annual sales are over $50 million, while 19.4% said their company brings in $100,001 to $250,000, and 11.1% said their annual sales are between $250,001 and $500,000.
InsurTech/M&A/Finance/Collaboration
Insurance group makes unimpressive trading debut
Shares sold at price below marketed range
Two of what could be the year’s last sizeable initial public offerings made unimpressive debuts Friday, with one closing at its offer price, and the other ending its first day of trading a tad under.
Hamilton Insurance Group Ltd.’s shares were unchanged at the end of Friday trading, after the company raised US$225 million on Thursday from shares sold at US$15 each, below their marketed range.
The specialty insurer and existing shareholders sold 15 million shares after marketing them for US$16 to US$18, according to a statement. The IPO gave Hamilton a market value of about US$1.6 billion.
Awards
CIECA Announces 2023 Award Winners
CIECA (Collision Industry Electronic Commerce Association) announced its 2023 award recipients during the Collision Industry Red Carpet Awards ceremony on October 31 during the SEMA Show in Las Vegas, NV. Congratulations to all of those who were recognized!
[Ed. note: special shout out to our longtime friends and colleagues who truly deserve this recognition]
Company of the Year: OEC
“In addition to active representation on the Board of Trustees, company members greatly assisted with planning the CONNEX Conference,” noted CIECA Chair Greg Best, senior business analyst at California Casualty who recognized Board of Trustees member Ken Eagleson, OEC’s vice president of business development, for his dedication to the organization.
Chairperson's Award: Bill Brower
Over the last year, Best said that Bill Brower, vice president of industry relations at Solera, has taken an active role on the CIECA Board of Trustees and regularly contributes to board discussions to help move the organization forward. In addition to moderating a digital panel discussion during the CIECA CONNEX Conference this year, he helped confirm a variety of knowledgeable speakers for the event.
2024 PREDICTIONS
What Lies Ahead for the P&C Industry
[Editor's Comments] Predictions for the upcoming year typically begin to appear at this time of year. Considering the P&C profitability crisis in 2023 it is no surprise that many pundits are already looking ahead to 2024 and beyond. How do we collectively climb out of this hole featuring unprecedented cost increases, budget breaking premiums and global uncertainty all in the mix? We will continue to publish forecasts from industry thought leaders for what lies ahead in 2024.
Cyber, Geopolitics, Supply Chain Issues Are Risks to Watch in 2024
Two reports released recently highlight the risks to watch for businesses in the coming year.
The Hartford Risk Monitor, spotlighting top risks for mid to large businesses through a survey of agents and brokers, found the top concerns centered on artificial intelligence (AI), cyber, weather, gaps in insurance coverage and geopolitics.
Drilling down further, supply chain disruptions and increasing operational costs related to geopolitics redistribution, increasing severity and frequency of cyber-attacks, awareness of emerging risks, new products and exposure related to AI, keeping up with new technology, gaps in insurance related to extreme weather and growing awareness of multinational exposure were noted as top risks to monitor by The Hartford.
Aon’s 2023 Global Risk Management Survey of 3000 respondents in 61 countries, found similar concerns; however, AI and climate did not rank as high.
With respect to supply chain risk concerns, according to Aon’s survey, less than 40 percent of organizations have conducted supplier resiliency assessments and less than 20 percent have diversified their supplier base to mitigate supply chain or distribution failure risk.
One surprising finding in Aon’s survey, attracting and retaining talent made the top ten list of greatest concerns.
Economic slowdown, regulatory conditions, cyber risk and business interruption were also top risk concerns, the Aon survey found.
P&C Insurance in 2024: A Chat with the Experts on What to Expect
A new year means an opportunity to reflect – and time to anticipate what may be coming ahead. With 2024 right around the corner, I reached out to experts from our Insurance Intelligence practice to get their take on what we should expect to see across the insurance customer lifecycle in the new year.
UBI Disruption
Stephen Crewdson, Senior Director of Insurance Intelligence, shared a trend he's keeping an eye on when it comes to insurance shopping in 2024.
Our 2023 U.S. Insurance Shopping Study shows that consumers are increasingly interested in Usage Based Insurance (UBI) as premiums are increasing across the board. UBI is disrupting the decision to bundle auto and homeowners insurance as many consumers are finding their best deal is to have a UBI-based auto policy and a homeowner’s policy with a different, lower-priced carrier. We expect UBI to play an even larger role in insurance shopping in 2024 as premiums continue to increase and consumers explore more ways to save."
Adding & Communicating) Value
Breanne Armstrong, Director of Insurance Intelligence, provided her take on policy servicing trends we expect to see continue into 2024.
In the face of heightened emphasis on rate adequacy, insurance carriers are left with no other option but to increase premiums. The escalating importance of conveying the overall value proposition for auto and home insurance policies becomes crucial, especially with anticipated continued higher shopping levels in 2024. For customers who want to stick with their current carrier or who don’t find a better option, the focus shifts to reducing the costs of their policies. If the carrier hasn’t already conducted proactive outreach offering a policy review, customers will be reaching out to their agents or insurer seeking ways to mitigate their higher premiums. This presents an opportunity for carriers to highlight the existing and potential value of the policy and the advantages of being their customer.
Strategic partnerships between insurers and other companies are one way we have seen carriers bring additional value to their offerings and we expect to see more of this moving forward. For example, starting in 2022 Amica began partnering with Rocket Mortgage to provide Amica customers savings on a home loan or refinance, and State Farm has invested in ADT offering their homeowners insurance customers free smart home security systems, sensors and installation as well as a reduced rate on monitoring if the customer is willing to share their data with State Farm."
Digital Claims Transition Continues
Mark Garrett, Director of Insurance Intelligence, wrapped up our conversation with his expectations for claims in the new year.
Rising claims costs continue to put pressure on claims organizations to find efficiencies, and digital solutions are a key opportunity where insurers will be focused. In total losses, for example, industry leaders are using tech to determine totals notably quicker and seeing positive results in both cycle time reductions and improved customer experiences.
We’ve also seen increased usage of digital channels for claim reporting and communication and expect growth to continue. Texting is now the #2 digital method of progress updates behind email, surpassing website/app usage, and will continue to grow as more insurers roll out these alternatives to customers. However, insurers will be challenged with engaging customers with their preferred interaction channel, which is key to overall satisfaction, as not everyone wants to engage with digital channels in the same way. Continuing to have claim staff be available, responsive and express empathy will be challenging as high caseloads and longer-tailed claims continue in the future."
Insurance industry leaders anticipate challenges and opportunities in 2024
In a recent survey conducted by global advisory and solutions company WTW at its inaugural European Insurance Leaders’ Forum in Brussels, industry leaders identified key trends that are expected to shape the insurance landscape in 2024.
Respondents highlighted high inflation and interest rates as the most significant barriers to securing future revenue growth in 2024, with 25% considering it a major concern.
Attracting and retaining talent emerged as a close second, with 24% of insurance leaders recognising it as a critical factor influencing their organisations’ growth.
The survey also emphasised the increasing impact of digital transformation, with 20% of respondents citing it as a key trend affecting the industry’s ability to secure future revenue growth.
Despite a turbulent geopolitical landscape, only 15% of insurers viewed it as a significant threat to revenue growth in the coming year. Regulation, while always a consideration, ranked lower on the list of short-term risks, with only 13% identifying it as a major barrier.
Two-Thirds of North America Could Face Power Shortages this Winter
More than half of the U.S. and parts of Canada, home to around 180 million people, could fall short of electricity during extreme cold again this winter due to lacking natural gas infrastructure, the North American Electric Reliability Corp (NERC) said on Wednesday.
In its 2023-24 winter outlook, the regulatory authority warned that prolonged, wide-area cold snaps threaten the reliability of bulk power generation and availability of fuel supplies for natural gas-fired generation.
“Recent extreme cold weather events have shown that energy delivery disruptions can have devastating consequences for electric and gas consumers in impacted areas,” NERC said.
It put the U.S. Midwest, Northeast, Mid-Atlantic, and South, along with some Canadian provinces, at the highest risk for electricity supply shortages this winter.
Grid operators like Midcontinent ISO, PJM Interconnection, SERC Reliability Corp and Texas’ ERCOT are vulnerable to generators going offline under extreme cold conditions, NERC said, adding that cold weather could also choke off gas pipelines in New England that has limited gas infrastructure.