Commentary/Opinion
[Ed. Note: Recommended] J,D. Power Insurance Intelligence | P&C Insights
2023 Insurance Annual Report
We're pleased to invite you to download our inaugural Annual Report which highlights a key actionable insight from each of our 2023 insurance and cross-industry benchmark studies.
Munich Re says hard market to earn through in 2024, with higher premiums / profit
Reinsurance firms are expecting the hard market environment to earn through in 2024 in much higher profits, with Munich Re the latest to forecast a significant increase for 2024.
Munich Re said today it will target €5 billion of group net profit in 2024, which is significantly up from the initial target for €4 billion of 2023.
Munich Re had updated its 2023 profit target to €4.5 billion in November, given the way reinsurance business had been earning through.
For next year, the earn through is expected to continue and drive group insurance revenue to €59 billion for the company.
The reinsurance arm is expected to deliver insurance revenue to €39 billion and a net profit of €4.2 billion in 2024.
“In an ongoing favourable market environment, Munich Re will continue to leverage its strong position to spur profitable growth,” the reinsurance giant said.
Adding that, “In property-casualty reinsurance, the combined ratio is likely to improve to 82%, reflecting operating improvements from the earn-through of the 2023 renewals and from the expected outcome of the 2024 renewals.”
Interestingly, Munich Re also noted that it doesn’t feel the need to increase its reserves, saying, “On the basis of Munich Re’s very strong reserving position, it is not planned to build up reserve prudency any further by offsetting part of the discounting impact, as was the case in 2023.”
"Difficult to claim" we are in a true hard market for commercial lines P&C: Bank of America
According to Bank of America Securities analysts, it is already difficult to claim that the industry is in a true hard market for commercial lines for property & casualty (P&C), and they believe that this will become “increasingly clear” through 2024.
Analysts also noted that they think margins will expand in reinsurance as the hard market continues, however volumes could wind up disappointing.
Moreover, across P&C, appetite is said to be “slowly moving” from reinsurers to personal lines where price/earnings momentum is more favourable into 2024.
Analysts stated that this makes sense due to 2023 being a year of crowded defensive concentration, and they now see plenty of room to now look towards more diversified/life names.
However, after a year of recovery in 2023, analysts said that they expect another strong year for European P&C insurers, with combined ratios (CORs) expected to improve further, driven by meaningful improvement in reinsurance margins, as well as further improvement in primary margins, mainly driven by personal lines.
“The outlook for pricing is neutral to positive, with the hard markets set to continue in personal lines and reinsurance. However, we see mixed trends emerging in commercial, with softening of liability offset by hardening in property and specialty,” analysts said.
The outlook for 2024 is looks to be stronger, with further hardening of personal lines pricing and continuation of hard market trends in reinsurance, expected to be seen.
From Litigation to Capital, Florida Insurance Market Improving, Panelists Say
The Florida property and casualty insurance market is not out of the woods but it is showing signs of progress, from litigation trends to capital investments in the state, according to almost two dozen people who spoke at the Florida Chamber of Commerce 2023 Insurance Summit.
“The fact that more carriers are not afraid to try cases is something that’s very different than where we were just 10-15 years ago,” said Aram Megerian, an insurance defense attorney with the Cole, Scott & Kissane law firm.
Until the 2022 legislative reforms limited one-way attorney fees, ended assignments of benefits and made bad-faith claims a little more difficult to prove, some insurers found it more cost-effective to settle claims disputes or avoid going to a trial, even when the payout was more than carriers’ adjusters had determined.
“It didn’t make financial sense to try cases,” Megerian said at the Summit in Orlando on Thusday. “It’s not perfect, but now, we’re seeing that jurors are responding and are not trying to punish insurance companies.”
News
Congress members say NHTSA’s take on data access ‘double standard’
Three U.S. Congress members have asked the National Highway Traffic Safety Administration (NHTSA) for a briefing regarding the effect compliance with a controversial “right to repair” Massachusetts state law will have on marketplace competition and consumers.
U.S. Reps Jake Auchincloss (D, MA-04), Marie Gluesenkamp Perez (D, WA-03), and Jared Golden (D, ME-2) made their request in a Dec. 11 letter to Secretary of Transportation Pete Buttigieg and NHTSA Deputy Administrator Sophie Shulman.
The crux of the U.S. right to repair argument is that vehicle, farming machinery, and electronic device OEMs don’t provide the same repair information and tool access to owners and independent repairers as they do to dealers. However, several repair trade organizations have said that’s not the case and is the opposite, including the Alliance for Automotive Innovation (Auto Innovators).
The legislation in question is the Massachusetts Data Access Law, which was passed by a voter referendum in 2020.
R2R has been a hot-button issue in Golden’s state of Maine as well, where a nearly identical law was passed on voter referendum in November. The campaign was operated by the Maine Right to Repair Committee and led by lobbyist Tommy Hickey who also spearheaded the Massachusetts R2R referendum initiative. The Maine campaign was largely funded by out-of-state entities.
Golden, Auchincloss, and Gluesenkamp Perez wrote that, while they appreciate NHTSA’s efforts to address the ongoing right to repair debate, they’re concerned about the “double standard” the Data Access Law will create.
They wrote in response to the suggestion from NHTSA and Massachusetts Attorney General Andrea Campbell that OEMs could allow Bluetooth access to vehicle telematics data within the state. They said the local wireless access could satisfy state and federal laws as well as privacy concerns.
Webinars/Podcasts/Interviews
Futurism in Insurance with Mark Breading, Senior Partner in Consulting at ReSource Pro
In the latest episode of Risk Management: Brick by Brick, Jason Reichl takes a trip to InsureTech Connect 2023 to chat with some of the best in the Risk Management world. This time, he chats with Mark Breading, Senior Partner in Consulting at ReSource Pro, an insurance-focused business solutions company that integrates people, processes, technology, and data analytics.
Jason and Mark discuss futurism and, more specifically, how AI is going to impact the future of the insurance world; the dual nature of big data and how we can handle it; and where the insurance industry is headed within the next decade.
To find out how TrustLayer manages risk so that people can build the physical world around us, head to TrustLayer.io.
The AI Impact on Insurance
AI is everywhere, and the insurance industry is no different.
Mark is a futurist, and so he’s always thinking about the future of AI and how it will impact the industry: “Well, first of all, I’m a futurist. I’ve always been a futurist. I always think about where the world is going, and where’s it heading for the insurance industry, but then trying to bring it back to today. Today, a lot of the conversations we’re having, you won’t be surprised, are around AI. But the discussions are really more about how do we govern AI?”
InsurTech/M&A/Finance💰/Collaboration
Meet the investors insuring insurtech's future
Insurtech is showing signs of life.
The vertical witnessed a 53% increase in deal value in Q3 compared to the previous quarter, hitting $1.7 billion raised across 115 deals, according to PitchBook's Q3 2023 Insurtech Report. It's a turning point for the vertical, which has been on a downward trajectory since 2021. The rise has been driven partially by more private equity investors getting involved: PE firms invested $6.8 billion into the vertical through the first three quarters of the year, surpassing 2022's total of $4.2 billion.
These are the 10 most active VC investors in insurtech since 2018, according to PitchBook data.
Innovation
Insurtech: The Green Insurer, A Car Insurance Provider, Introduces Product That Incentivizes Clients Driving Responsibly
The Green Insurer, a car insurance provider committed to reducing drivers’ impact on the environment, launched a new car insurance product “that rewards customers for driving responsibly.”
The Green Insurer calculates “a driver’s carbon footprint by analysing driving data and fusing it with information about their vehicle.”
Cambridge Mobile Telematics (CMT) powers “the service with driving data captured from smartphone sensors, which is transformed into driving and sustainability insights with artificial intelligence.”
Drivers can understand the environmental impact of “every trip they take.”
Paul Baxter, CEO of The Green Insurer, said:
“At The Green Insurer, we believe in harnessing the power of analytics to inspire sustainable driving habits and incentivise individuals to make a positive impact on our planet. Our partnership with CMT is a testament to our commitment to use the most accurate and reliable data provider in order to provide true driver feedback and make a real difference.”
UK drivers want more sustainable insurance options — “a recent CMT report on sustainable insurance found that 84% of UK drivers are concerned about climate breakdown. As a result, 76% of UK drivers say they would download their insurer’s app to reduce their carbon emissions and fuel consumption. CMT’s data shows that drivers participating in sustainable auto insurance programs are three times more engaged and save over £400 per year in fuel costs.”
The Green Insurer addresses “this growing market need across the UK.”
David Morse, Chief Customer Officer for CMT, said:
“Connected insurance provides drivers with an incredible amount of value, with a breadth of options they care about. From reducing carbon emissions to saving money on fuel, to getting life-saving help after a car crash, to discounts on insurance, there’s something for everyone. Safe driving is sustainable driving. We’re looking forward to working with The Green Insurer to improve road safety in the UK while empowering drivers to reduce carbon emissions.” The Green Insurer has undergone rigorous scrutiny to “ensure that every aspect of its offering is sustainable and contributes to carbon footprint reduction, like mandating the use of recycled parts for repairs.”
The program is underwritten by “a consortium of leading insurers who have significant experience in connected insurance and share a commitment to making car insurance more sustainable.”
The Green Insurer is designed for drivers of “all ages who want to reduce their carbon footprint.”
2024 PREDICTIONS
Insurers Eye Efficiencies and Technology as Ways to Offset Rising Premiums in 2024
For the insurance industry, 2023 was the year of disruption.
Surging rates made stakeholders re-think everything, from underwriting to carrier selection to the channels through which customers can access their policies. And with 2024 bearing down on carriers and policyholders alike, there’s bound to be much more in the way of sharp turns and quick pivots.
According to data collected by J.D. Power, 2024 will present plenty of new challenges and shifting trends in the insurance industry. From an evolution in the way customers shop for their policies to the way insurers service those policies, we have gleaned some key insights into what may be on the horizon for the year ahead.
Unbundling for Savings
“Bundle and save” has been a point of emphasis for carriers for years. But with premiums increasing across the board, customers are starting to uncover that decoupling their carriers may boost their savings.
According to J.D. Power research, customers are increasingly interested in usage-based insurance (UBI). That interest is disrupting the decision to bundle auto and homeowners insurance, with many customers finding their best deal is to have a UBI-based auto policy and a homeowners policy with a different, lower-priced carrier. In 2023, 66% of customers with less than one year with their home insurers bundled their home and auto insurance. That’s down from 76% a year ago.
Customers with more than a year with their home insurer showed more willingness to bundle, with 77% bundling home and auto, up slightly from 76%. But with no signs of premiums slowing down, we expect UBI to play an even larger role in insurance shopping in 2024, as customers become more agnostic about their carrier willing to unbundle and price shop their coverage.
Find out More
This Insurance Intelligence Report is based on responses from the J.D. Power 2023 U.S. Insurance Shopping Study, J.D. Power 2023 U.S. Home Insurance Study, J.D. Power 2023 U.S. Auto Insurance Study, and J.D. Power 2023 U.S. Auto Claims Satisfaction Study. It was authored by Stephen Crewdson, senior director; Mark Garrett, director; and Breanne Armstrong, director of insurance intelligence at J.D. Power. Please contact us at the numbers below to connect with the team or to learn more about the underlying research.
[Ed. Note: Highly Recommended] Best's Review | AM Best's Monthly Magazine
Insurers Scan the Horizon: Industry leaders and experts examine the topics likely to shape the year ahead.
In This Issue
Insurers Look Ahead to 2024 and Key Issues: Catastrophes, Inflation, Layoffs, AI and More
Geotab 2024 Trend Predictions for Connected Vehicles
AI and Data - The Titans of Connected Vehicle Insights for cost and performance
Geotab Inc. ("Geotab"), the global leader in connected transportation solutions, today released its 2024 predictions.
In an increasingly cost driven and challenging economy, Geotab's top predictions address how organizations are looking for ways to lower cost, improve performance and adapt to changing demands.
Top predictions include:
Geotab's AVP of Product Management, Sabina Martin, shares the company's industry 2024 predictions. In an increasingly cost-driven and challenging economy, Geotab’s top predictions address how organizations are looking for ways to lower costs, improve performance, and adapt to changing demands.
- A New Era of AI Predictability:
- The Cost Tightrope
- Sustainability - Small Steps for Big Change
- Wild West of Standards Gets Tamed
"Looking ahead into 2024, we foresee data and AI predictability as critical to staying ahead of the curve. ," said Sabina Martin, AVP of Product Management.
"AI driven insights powered by strong foundational data will help guide organizations through economic challenges, propel sustainability initiatives and ensure adaptability in an ever-changing world."
Outlook 2024: For independent insurance agents, it’s not business as usual
Let’s get the bad news out of the way first. If you’re an independent agent who’s expecting 2024 to deliver a magic cure for the hard market, you’re likely to be disappointed.
Now, the good news. There are amazing opportunities ahead for many agencies despite the current market conditions. The trick is knowing where to find them.
New year, same ol’ market
Independent agents’ biggest lesson in 2023 was that this is not “just an ordinary hard market.” And the outlook for 2024 bears this out. Market availability is expected to remain challenging. Additionally, rate adequacy will likely remain elusive, especially in personal lines, which have maintained a negative outlook from AM Best.
While inflation has lessened in recent months, existing inflation has already put considerable pressure on agencies and their carrier partners. It has also impacted every part of the supply chain, leading to higher claims costs.
Agency principals may be tempted to believe that the best path around such macro- and microeconomic challenges is to find more profitable carrier partners. However, the effects of the hard market cross our entire industry. As such, bringing in another carrier who is in the same situation as your current partners won’t be a panacea.
Instead, consider educating your clients on the current market realities. Clients are already familiar with the impact of rising prices on their business and personal lives. So, they’ll appreciate your honesty, even though they’ll be unhappy about policy increases.
James Keane is the vice president of national sales for SIAA, The Agent Alliance