InsurTech/M&A/Finance💰/Collaboration
Insurtech/Insurance Index — Q3 2023
After a Q2 rebound, insurtech carriers reversed sharply over Q3, hit by rising loss ratios and the resulting deceleration in growth.
The Equal Ventures Insurance Index is a quarterly summary of insurance equity performance and trends. We’re back to reflect on the insurance/insurtech ecosystem in Q3, which turned out to be a fairly meaningful quarter in terms of both price action and industry news.
Q3 Headline Summary
- In Q2, we noted that insurtech carriers rebounded and outperformed; this trend reversed sharply over Q3, as the insurtech carriers in our index were hit by rising loss ratios and the resulting deceleration in growth.
- Digital brokers once again underperformed their legacy peers, most likely dragged lower as the broader market traded sideways, signaling risk-off for most of small-cap tech.
- YTD, insurtechs and digital challengers have outpaced their legacy comparables, but the spread in YTD performance narrowed significantly in Q3 (so much for a quick path to valuation recovery…).
- Legacy brokers and P&C insurers were, on average, flat over the quarter, mirroring the broader market (and also masking larger continuing trends that we discuss in greater detail below).
Rick Zullo, co-founder and general partner at Equal Ventures and Adam Chadroff, investor at Equal Ventures
Guidewire Partners With Swiss Re to Reduce Operational Friction Across Insurance Parties
Guidewire (NYSE: GWRE) announced its partnership with Swiss Re Reinsurance Solutions to help build a more interconnected insurance industry through the use of technology.
Based on a shared commitment to insurance innovation and excellence, the collaboration will help grow the insurance industry by reducing points of operational friction between risks, insureds, insurers, reinsurers, and intermediaries.
“In service of this, we look forward to collaborating with Swiss Re, a leading reinsurer and respected expert in risk transfer. Linking our platforms and their expertise will help insurers build systems of insight that streamline risk transfer processes and reduce industry protection gaps.”
The partnership will provide Guidewire and Swiss Re customers with a suite of analytics products, integrations, and data transfer mechanisms, starting with the deployment of Swiss Re Reinsurance Solutions’ proprietary data models and risk insights into the Guidewire cloud platform. Guidewire's Analytics Manager will facilitate the integrations to embed relevant insights into core insurance operations.
As insurers strive to price and select risks in an increasingly complex world, they are deploying advanced analytics into claims and underwriting workflow at a rapidly increasing pace. The industry’s adoption of generative AI will further accelerate this trend. Seamless interoperability of systems between primary carriers and reinsurers is necessary for sharing data, propagating insight, and facilitating risk transfer. The Guidewire and Swiss Re collaboration will reduce the friction that insurance counterparties face by streamlining data access and predictive model deployment.
News
SCOR posts 90.2% P&C combined ratio as nat cat losses exceed budget in Q3 - Reinsurance News
French reinsurer SCOR has reported Group net income of €147 million for the third quarter of 2023 and an improved P&C combined ratio of 90.2%, despite natural catastrophe losses coming in above budget and large man-made claims.
In its results, SCOR states that while the attritional loss ratio is satisfactory for the quarter, the level of man-made claims is too high, and therefore SCOR continues efforts to improve the core performance of its P&C book.
All in all, SCOR has reported a Q3 2023 cat ratio of 13.3%, including 4 points related to claims on the Hawaii wildfires.
For 9M 2023, the P&C combined ratio hit 88%, and SCOR expects it to come down to around 87% for full-year 2023.
P&C new business CSM amounted to €169 million in Q3 2023, reflecting year-on-year growth of 6.4%. P&C new business CSM for the nine month period rose 6.6% year-on-year to more than €1 billion.
Allianz Q3 operating profit down 14.6% driven by impact of nat cats - Reinsurance News
Allianz has reported that its operating profit dropped 14.6% to €3.5 billion in Q3, driven by the Property-Casualty business segment affected by a 7.3 percentage point impact by natural catastrophes on the combined ratio, the highest in a decade.
The firm’s net income in Q3 was €2.1 billion, down by 29.3%, though total business volume increased 4.5% to €36.5 billion.
In the Property-Casualty insurance segment in Q3, total business volume increased by 6.1% to €17.2 billion.
However, operating profit in the segment softened 25% to €1.4 billion, due to a lower operating insurance service result driven by an “exceptionally high level of natural catastrophes, that was partly offset by a higher operating investment result.”
Research
Latest US climate assessment shows the extreme toll taken by climate change
The damage isn’t spread out evenly.
The most comprehensive national assessment of climate change yet shows how dramatically climate costs are rising in the US, especially for the most vulnerable Americans.
Climate disasters are costing the US billions of dollars a year, and the damage isn’t spread out evenly, according to a new national climate assessment.
The assessment, produced about every four years, lays out the toll climate change is taking across every region in the United States. This is the fifth one — but for the first time, this year’s report includes chapters dedicated to economic impact and social inequities. As floods, fires, heatwaves, and other calamities tied to climate change intensify, households pay the price with higher costs and worsening environmental injustices.
Justine Calma is a science reporter covering the environment, climate, and energy with a decade of experience. She is also the host of the Hell or High Water podcast.
Commentary/Opinion
CRASH DETECTION: REAL TRANSFORMATION FOR AUTO CLAIMS – NO, REALLY
The distinction between basic Crash Detection and all-speed, false positive free Crash Detection is critical for effective deployment in an auto insurance claims application.
No carrier would want to waste valuable resources and risk annoying their policyholders by contacting them unnecessarily when no accident has occurred. On the other hand, all carriers would find it valuable to be alerted to real crashes in real time. In addition, documented crash details would have great value in the future.
Recently Sfara, a global telematics technology provider who launched the first mobile phone based crash detection in 2014, introduced the World’s First All-Speed Crash Detection, Including ZeroMotion.
These capabilities solve both of the above technical issues. Low speed accident detection for claims is more valuable than many may think. Sfara research reveals that 70% of crashes occur under 25 mph as do 48% of crashes involving injuries. And 11% of fatalities occur when a vehicle is not moving at all. Further, this solution captures the additional 70% of auto crashes that other solutions miss by solely detecting high speed accidents.
In addition to the valuable capabilities outlined above, Sfara has formed strategic partnerships with Mercedes Benz, Bosch, CCC Intelligent Solutions, the industry’s leading auto insurance physical damage information provider, and Solera eDriving, a global digital driver risk management provider for fleets. These relationships enable insurance companies and fleets who are already integrated with these companies’ solutions to operationalize Sfara’s Crash Detection results quickly and easily through the simple addition of the Sfara SDK to their flagship smartphone apps. Several Top 10 carriers have already begun. Thus, real Crash Detection becomes available to all policyholders, not just the minority who are enrolled in telematics programs.
Furthermore, incorporating a single source solution will accelerate market deployments. According to Sfara’s website they are a comprehensive service provider, incorporating All Speed Crash Detection, emergency services, Claims acceleration and UBI data through a single platform.
Stephen Applebaum and Alan Demers
GEICO, Liberty Mutual, Farmers Insurance layoffs – what are companies thinking?
The wave of layoffs and restructuring among large insurers such as GEICO, Liberty Mutual, and Farmers Insurance has driven concern about the state of the industry.
At least one corporate restructuring expert sees this trend continuing for several years as carriers undergo “a period of correction.”
“We’re in a very transitionary period, both in our economy and in the risk factors that have been playing out for a long time,” said Scott Stuart, CEO of the Turnaround Management Association (TMA), a global organization dedicated to corporate renewal and turnaround management.
What claims inflation means for insurer reserves
Earlier this year, the Bank of England warned that claims inflation will affect all general insurance firms, and urged the U.K. insurance sector to ensure they have sufficient reserves.
In a letter to the chief actuaries of general insurance companies, the Bank said: “There is a risk that persistently elevated claims inflation might result in a material deterioration of solvency coverage for some firms unless they take appropriate mitigating actions.”
There’s no doubt that claims inflation due to rising wages, medical and supply costs has hit everyone in the insurance industry and that we are also seeing a rise in the number of claims. Claims inflation is affecting all classes. From a property damage perspective, it’s cheaper if you can source materials and labor locally but if parts have to be shipped or flown in, the cost of a business interruption claim can go up by an unknown amount.
Claims inflation isn’t going away any time soon. We can expect a continued trend of upward values and numbers of claims in most classes if the social and economic climate does not improve. When people are struggling financially, they are more likely to claim for damage to their property rather than pay to get it fixed themselves.
Having said that, there’s a real danger of claims inflation being hyped in the media and scaring finance professionals into pressing for higher and higher reserves.
Tim Deardon is SVP and group head of claims at International General
Awards
MIT Professor’s IoT Sensors Make Roads Safer
Back in 2005, before smartphones were generally available, MIT Professor Hari Balakrishnan was so fed up with commuting delays in Boston that he built a mobile system to monitor road conditions.
He and his research team at MIT’s Computer Science and Artificial Intelligence Laboratory developed CarTel, short for car telematics. Using signal processing and machine learning, their sensing device for vehicles was able to infer the presence of potholes and other impediments from changes in traffic flow, which it measured with GPS and an accelerometer. Their research won several awards, and the system was covered by The Boston Globe.
In 2010 Balakrishnan and two cofounders commercialized CarTel by launching Cambridge Mobile Telematics. Today the Massachusetts company is the largest telematics service provider in the world. Insurance companies, car manufacturers, rideshare services, and public agencies use CMT data to assess driver behavior, encourage safer driving, dispatch roadside assistance, and more.
Balakrishnan, an IEEE Fellow, is this year’s Marconi Prize winner for his “fundamental discoveries in mobile sensing, networking, and distributed systems.” The award, given by the Marconi Society, is considered to be the top honor in communications.
“On paper this award honors me, but it really is a recognition of my 30-plus Ph.D. students, postdocs, collaborators, and the team at CMT who have worked incredibly hard in creative ways to take research ideas and have them really impact the world,” he says. “It honors the field of mobile sensing and networked systems.”
Canada
Canadians Aren't Ready For Electric Vehicles
Canadians need more education around EV ownership, insurance and infrastructure requirements: BrokerLink survey
- Only a quarter (24 per cent) of Canadians are currently familiar with EV auto insurance policies
- Availability of charging infrastructure (89%) and range anxiety (84%) are two of the top factors when it comes to switching from a gas car to an EV
- Eight in ten (82 per cent) Canadians believe the type of car they drive affects their insurance premiums more than whether it’s electric or gas-powered (56 per cent)
As the country gears up for the rise of electric vehicles (EV), many drivers have questions about how prepared Canada is to embrace this transformative technology. As it stands, Canadians seem to need more information about crucial aspects of EV ownership, such as infrastructure requirements and insurance implications, according to a 2023 Ipsos Canada survey commissioned by BrokerLink, a subsidiary of Intact Financial Corporation, and one of Canada’s largest property and casualty insurance brokerages.
The survey revealed that seven in ten (71 per cent) Canadians who own gas-powered vehicles are reluctant to give them up. Yet, six in ten (59 per cent) Canadians, who don’t currently have an EV, are excited to drive one in the future. Meanwhile, the same proportion (59 per cent) of Canadians say they will consider an EV for their next vehicle purchase and nearly two-thirds (64 per cent) of Canadians say they want to drive an EV for environmental reasons, including to reduce their carbon emissions.
2024 PREDICTIONS
Travelers analyst ‘bullish’ on economic outlook
The United States is unlikely to go into a recession in the next 18 months, despite various headwinds impacting the global economy and the construction sector, an economist and analyst at Travelers Cos. Inc. said Monday.
Stronger-than-expected GDP growth of almost 5% in the third quarter is “a good and unexpected outcome,” said Joan K. Woodward, executive vice president of public policy for Travelers and president of the Travelers Institute.
“We’re pretty bullish at Travelers in our economic modeling and the outlook right now. We don’t see a recession next year. That could change,” Ms. Woodward said.
Ms. Woodward was speaking during the opening session of the 43rd IRMI Construction Risk Conference in Orlando.
2024 Insurance industry employment outlook
The insurance industry is in for a drastic change by 2028, with 50% of the workforce projected to enter retirement.
That means millennials, Gen Z and those looking to change careers have a unique opportunity to join the insurance industry in 2024. Some of these jobs are more challenging to fill than others, but the outlook for insurance-industry employment looks good as 2023 winds down.
Available insurance jobs
“Talent, especially in skilled ‘judgment’ underwriting that’s not as reliant on automated underwriting tools, will be in high demand as more business moves to the excess/surplus lines sector,” says Nancy Germond, executive director of Risk Management and Education at the Big I®. “The need for skilled adjusters, especially on the property side, has probably never been greater.”
Findings in the 2019 Labor Market Study by The Jacobson Group and Aon plc indicate a strong rise in insurance jobs, with most insurers planning to hire additional staff. The study projects a high need for underwriting and technology jobs, including in claims management. Vince Spaniolo, managing partner at New York Life, says the most in-demand jobs in his market (Michigan) are insurance agents, financial advisors and administrative staff.
Other potential insurance job openings in 2024 include insurance claims investigators, loss control consultants, brokers, agents, actuaries, customer service representatives, adjusters, regulators, processing clerks, claims examiners and junior and senior underwriters. Risk management and insurance also involve careers in data science, business operations, marketing and sales.
This array of available jobs provides job hunters of all experience levels and educational backgrounds a chance to break into insurance.