Continued Deterioration in Personal Auto and Homeowners’ lines; AM Best Stays Negative  December 5th 2023

AM Best stays Negative on U.S. personal lines insurance segment

AM Best has announced it is maintaining its Negative outlook on the U.S. personal lines insurance segment for 2024, due to the continued deterioration in results for the personal auto and homeowners’ lines of business and rising loss costs.

The rating agency observed the challenges that personal lines writers have in maintaining rate adequacy, as well as elevated reinsurance costs amid heightened catastrophe loss volatility and increased secondary peril activity.

“Factors offsetting the negative pressures include solid levels of risk-adjusted capitalization for insurers within the segment with sufficient liquidity,” AM Best said.

The firm also noted improving investment yields and an overall push for rate adequacy with some easing of regulatory hurdles have also contributed positively.

Despite this, Richard Attanasio, senior director, AM Best, said, “The capital cushion has eroded for some insurers. Given the persistently high loss costs, as well as increased levels of net retention for homeowners carriers, a return to underwriting profitability for the segment over the near term appears highly unlikely.”

US crop insurance provides billions in profit for insurers -gov't agency

Roughly one-third of U.S. government spending to insure the nation's crops since 2011 has gone to insurance companies that derive more than $1 billion in profit from the program each year, according to a government watchdog's report released on Monday.

The federal crop insurance program, administered by the U.S. Department of Agriculture, is meant to protect farmers from financial losses after natural disasters or other events that result in crop losses or price declines.

The USDA worked with 13 privately held insurance companies to provide 1.2 million crop insurance policies at a cost of $17.3 billion in 2022, said the report from the Government Accountability Office (GAO).

From 2011 through 2022, the federal government paid about $36.6 billion to the insurance companies, about a third of the program's total cost of $107.7 billion, the GAO said.

During that time, the companies' underwriting gains, or profits, averaged $1.4 billion annually and their rate of return was nearly 17%, compared with a market rate of around 10%. USDA's target rate of return negotiated with insurers is 14.5%.

"This GAO report shows that a shocking proportion of the subsidies intended to support the cost of writing crop insurance policies for all farmers are being eaten up by companies and agents," said U.S. Senator Cory Booker, a Democrat, who requested the GAO report.

Former Root Marketing Exec Pleads Guilty to Taking Over $10 Million From the Insurer

Brinson Caleb “BC” Silver, former chief marketing officer for InsurTech Root, has pleaded guilty to stealing more than $10 million from his former employer and violating court orders.

According to the U.S. Attorney’s Office for the Southern District of Ohio, Silver, 43, of Culver City, Calif., pleaded guilty to one count each of wire fraud and contempt of court and has agreed to pay more than $10.2 million in restitution. A prison sentence of 24-51 months has been recommended.

Silver has been in jail in Butler County, Ohio, since June, according to the jail’s website. A federal judge had ordered Silver detained for criminal contempt on June 20.

Columbus, Ohio-based Root Inc., parent company of Root Insurance, filed a lawsuit in February in U.S. District Court for the Southern District of Ohio against Silver, accusing him of pocketing millions of dollars meant for advertising campaigns through a series of transfers from vendors to companies owned by him or his family. The U.S. Attorney’s Office said Silver spent the money on a $1.4 million yacht, a Mercedes-Benz G550 worth nearly $165,000, an amphibious airplane, expensive watches and other items.

“Silver failed to appear in court for a hearing related to his civil suit and instead spent lavishly while traveling the globe,” said the attorney’s office.

Root last month filed an application for entry of default since Silver failed to answer or plead to an amended lawsuit. Court records show Silver has largely been uncooperative during the legal process — denying the delivery of summonses, failing to provide information to a court-appointed custodian of his property and assets, and violating a court order limiting his spending to $5,000 on day-to-day personal living expenses

The attorney’s office said Silver spent “$20,000 on plastic surgery, more than $25,000 at Indonesian businesses (including $8,000 at a luxury resort in Bali) and in withdrawals made in Indonesia, and more than $88,000 through PayPal to individuals,” said the attorney’s office. He also withheld information about a multimillion-dollar property in California and at one point “made two phone calls to an “international relocation” company and asked for citizenship within a country that would not extradite him to the United States, and a foreign bank account that the United States could not freeze.”

Silver was Root’s CMO for just one year — Nov. 8, 2021 to Nov. 9, 2022 — before he was let go as part of company-wide layoffs. Root said in court filings that its finance department last year had noticed some “unplanned spending from the marketing department” and started to investigate.