News
![State Farm's homeowners loss ratio hits record high](https://dxj7eshgz03ln.cloudfront.net/production/link/image/915371/original_ratio_extra_large_d85a582c-3064-4dc1-bff9-994fc67ddd7f.png)
State Farm's homeowners loss ratio hits record high
Severe storms named as primary culprit
State Farm is poised to see its highest homeowners direct incurred loss ratio in over 20 years, according to new analysis by S&P Global.
For the first nine months of 2023, the insurance giant’s homeowners loss ratio stood at 84%. This is a significant increase from the 60.2% ratio reported in 2022. Should the trend persist for the rest of the year, it will be the fourth time since 1996 that State Farm’s direct incurred loss ratio for homeowners insurance has exceeded 80%.
Previous peaks occurred in 2001, 2008, and 2017, with these years seeing ratios of 87.5%, 81.2%, and 80.9%, respectively.
According to S&P Global, the main driver of this surge in State Farm’s homeowners loss ratio is the impact of severe storms. The US was hit by a multitude of weather events this year, including hail storms in the South, severe wind events in the Midwest and Southeast, and Hurricane Idalia. The third quarter alone witnessed eight one-billion-dollar weather events across the country, with Hawaii facing almost $6 billion in losses due to a devastating firestorm on the island of Maui.
Commentary/Opinion
![Incorporating Parametric Insurance Into Your Business](https://dxj7eshgz03ln.cloudfront.net/production/link/image/915571/original_ratio_extra_large_65179506-a90a-4f90-ac88-35c451322035.jpg)
Incorporating Parametric Insurance Into Your Business
By understanding parametric insurance you can be better prepared to integrate it into your company's risk management plan.The frequency and severity of weather catastrophes are on the rise. From devastating hurricanes to prolonged droughts, I see these events exposing a glaring global coverage gap in insurance.
Aon estimated economic losses due to natural disasters/weather catastrophes to be $313 billion globally last year. According to them, only 42% of those damages were covered by insurance programs. The overwhelming majority of insured losses were recorded in the U.S., with many communities worldwide having few realistic options to build financial climate resilience.
The evolving landscape of climate-related risks presents unique challenges for businesses worldwide. In this context, as someone who works in the industry, I've seen how parametric insurance can act as a strategic tool in managing weather-related risks.
However, effectively incorporating parametric insurance into a business's risk management strategy requires understanding its nuances, potential hurdles and industry-specific applications.
How Parametric Insurance Works
I believe that parametric insurance offers a fresh perspective on weather-related risk management by attempting to address the limitations of traditional indemnity-based insurance. Unlike the traditional insurance model, where claims are often subjected to lengthy assessments and negotiations, parametric insurance streamlines the claims process by linking payouts directly to objective triggers. These triggers, such as wind speeds or rainfall levels, are predefined and easily verifiable, eliminating the need for lengthy claims investigations.
Osho Jha, Arbol's Co-Founder and Chief Data Scientist, leads data-driven parametric products. Co-Founder at dClimate
![How Moen seeks to plug the leaks costing insurers](https://dxj7eshgz03ln.cloudfront.net/production/link/image/915562/original_ratio_extra_large_cf2bbe7d-a97b-4e11-99ee-e5a63bcbcd97.png)
How Moen seeks to plug the leaks costing insurers
Desmond Devoy, of Insurance Business Canada, sat down with Jeff Barnes, vice president, business development, to discuss the Moen Smart Water Network, Flo Smart Water Monitor and Shutoff, ESG, the impact of water leaks on the insurance market, and tips for stopping leaks before they become a problem.
Since there have been pipes to carry water, there have been leaks.
And ever since insurance policies began to cover water damage, pipes and policies have been in each other’s lives.
But in a conversation with Jeff Barnes (pictured), vice president, business development, Moen Smart Water, we discover more about Moen’s smart water security products and how the company seeks to save insurance companies money, save water, and prevent damage to policyholders’ homes.
Q – What role do smart water products, particularly the smart water security products, play in your ESG (Environmental, Social and Corporate Governance) story?
A – Within the broad umbrella of “ESG”, we focus on activities that are most meaningful to our business, and where we can have a real impact, and our Moen Smart Water Network – an integrated system of products working to monitor and enhance users’ experiences with water in the home while facilitating water conservation – is one of those areas.
Leaks may be relatively small, but they add up to a lot of wasted water. Even one slow leak can amount to over 11,000 litres of water wasted in a year. A burst pipe when no one is home can easily waste over 37,000 litres of water in just a few hours.
The Biggest Opportunity for Innovation
In this Future of Risk Forecast, Nick Lamparelli says firms have mostly digitized -- but still can't find the information they need when they need it.
Insurance Thought Leadership:
What technology now in the market do you believe will have the biggest transformative impact on insurance and risk management in the next five years?
Nick Lamparelli:
I believe IoT and sensor technology is getting traction, and insurance has finally noticed. Sensors can do much around notifying when events are occurring or about to occur. These technologies will have the capability to reduce both frequency and severity of claims (significantly). These technologies make the insurer highly relevant day to day to the policyholder. Because of this, insurers can get more innovative around coverage design and user experience. Insurers that invest in embedding IoT stand to be seen through a different lens every time a notification on someone's smart phone tells them that "no water was detected" so they can truly feel at ease and get the sense that their insurance premium is actually doing something for them.
Insurance Thought Leadership:
What do you see as the biggest obstacles to insurance innovation, and how would you recommend overcoming them?
Nick Lamparelli:
The biggest obstacle is inertia. And inertia is a byproduct of culture. Many insurance organizations do not have the corporate governance that forces them to enact change (see the mutuals and farm bureaus). For many of these firms, only the cold hard reality of financial existentialism will force someone, anyone to make the changes that need to be implemented.
Insurance Thought Leadership:
What is an area that you believe remains untapped/unfulfilled/overlooked for the promise of innovation in insurance?
Nick Lamparelli:
Knowledge management. We spend way too much time looking for things: searching for files, attachments, emails, etc. Insurers have done a decent job digitizing, but it hasn't helped them because now they have a mountain of data and no ability to mine it. Knowledge management, including using AI technologies to make sense of that data, will be crucial and unveil a ton of insights into a company's own data sets.
Insurance Thought Leadership:
How do you believe AI will transform insurance and risk management?
Nick Lamparelli:
Aside from where it is used now (to detect fraud, mostly), I think AI in knowledge management will be the first big value-producing outcome of generative AI. (See my prior answer.)
InsurTech/M&A/Finance💰/Collaboration
![Aon set to acquire middle-market P&C broker NFP](https://dxj7eshgz03ln.cloudfront.net/production/link/image/915372/original_ratio_extra_large_ed7ba8a7-0490-4d0e-a4a7-a0cdbe7c0ce6.png)
Aon set to acquire middle-market P&C broker NFP
Aon, the global re/insurance broker, has signed a definitive agreement to acquire NFP, a middle-market property and casualty broker, benefits consultant, wealth manager and retirement plan advisor, from funds affiliated with NFP’s main capital sponsor – Madison Dearborn Partners (MDP), and funds affiliated with HPS Investment Partners.
Under the terms of the transaction, Aon will acquire NFP for a total consideration estimated to be $13.4 billion at the time of close, which will be funded by $7 billion of cash and $6.4 billion of Aon stock.
Moreover, the acquisition of NFP will play a key role in expanding Aon’s presence within the large and fast-growing middle-market segment, with capabilities across risk, benefits, wealth and retirement plan advisory.
The firm’s Aon United strategy, Aon Business Services operating platform and investments in advanced analytics has driven a long-term track record of results and once completed, this acquisition will enable the combined firms to efficiently deliver content and capabilities to the middle-market segment.
![Bain Capital Insurance Invests $200 Million Into GuideOne Insurance Company to Launch Innovative New Platform Dedicated to Mutuals](https://dxj7eshgz03ln.cloudfront.net/production/link/image/915566/original_ratio_extra_large_9c8a6bde-292a-44b0-afac-b464e72bd18a.jpg)
Bain Capital Insurance Invests $200 Million Into GuideOne Insurance Company to Launch Innovative New Platform Dedicated to Mutuals
The Mutual Group, an innovative new insurance platform serving the mutual industry, today announced its plans to launch with support from Bain Capital Insurance, the dedicated insurance investing unit of Bain Capital. The Mutual Group is being created through Bain Capital Insurance’s acquisition of the operational platform of GuideOne Insurance Company (“GuideOne”), a leading niche-market mutual insurance carrier founded in 1947. GuideOne will serve as the inaugural member of The Mutual Group.
“Our goal in supporting mutuals is to preserve their independence and benefits of mutuality while providing a modern, scalable operating platform that supports long-term success.”
Chuck Chamness, former CEO of the National Association of Mutual Insurance Companies (NAMIC), is the newly appointed Chairman of the new member-centric mutual platform. Tim Fleming, Senior Vice President of Core Commercial Lines at GuideOn, will lead The Mutual Group as Chief Executive Officer. As part of the transaction, Bernie Hengesbaugh, Chief Executive Officer of GuideOne, will become Chairman, and Ken Cadematori, Chief Financial Officer of GuideOne, will succeed him as President and Chief Executive Officer.
“I am thrilled to be part of the creation of such an innovative new solution provider to the mutual insurance industry, which I am so proud to have spent nearly all of my career serving,” said Chamness.
The Mutual Group will launch with approximately $800 million in annual premium serviced across 50,000 commercial policyholders by its over 400 employees, and is based in West Des Moines, Iowa.
Just for Fun
![Home Alone: Would Homeowners Insurance Cover Kevin’s Damage?](https://dxj7eshgz03ln.cloudfront.net/production/link/image/915578/original_ratio_extra_large_c3cdc141-aa32-4aae-822f-eac2697013b9.jpg)
Home Alone: Would Homeowners Insurance Cover Kevin’s Damage?
Forget the emotional toll of leaving a child at home while jetting off to Paris—what would the repair bill be for the McCallister family after the credits roll for “Home Alone"?
“Home Alone," the endearing—and violent—1990 holiday comedy, follows Kevin McCallister (Macaulay Culkin) after his parents accidentally leave him home alone. Kevin must defend his home from persistent burglars Harry (Joe Pesci) and Marv (Daniel Stern), aka the Wet Bandits.
From ice traps on exterior steps to an iron to the face, Kevin's traps were creative, destructive … and may not have been covered by his parents' insurance policy.
Insurify asked licensed insurance agent Anuj Desai to review the claims the McCallisters would have filed after Kevin's battle with the Wet Bandits. Additionally, Tim Rhatigan, founder and principal of Chicago-based Rhatigan Law Offices personal injury firm, weighed in on potential lawsuits prompted by Kevin's attacks on the helpless bandits. Estimates for damages were provided by TheQuikFix*.
Here's what it would have cost the McCallisters to leave Kevin home alone for Christmas:
Claims
![The Benefits of Knowing More Sooner: How Insurers Are Streamlining Decisioning with Earlier AI-Powered Data](https://dxj7eshgz03ln.cloudfront.net/production/link/image/915576/original_ratio_extra_large_f1e285f8-e237-4c14-a33a-972b899b8e23.png)
The Benefits of Knowing More Sooner: How Insurers Are Streamlining Decisioning with Earlier AI-Powered Data
Successful claims management hinges on understanding and analyzing the fundamental facts of an accident, as quickly as possible. Empowering carriers to "know more sooner" can help them make well-informed claims decisions that optimize business outcomes and enhance the overall experience.
Game-changing photo AI solutions now exist to help carriers gain deeper accident insights from the outset of a claim, paving the way for accelerated settlements, smoother injury claim resolution, and more accurate outcomes.
THE IMPORTANCE OF EARLY DATA ANALYSIS
In the world of insurance, timing is everything and earlier data is key to better informing decisions that set the claim on the path of the best next step within an insurer's unique claims process. This proactive approach can optimize and accelerate downstream processing across various claim types.
When it comes to auto property damage claims, for example, access to earlier data can help claims handlers with faster decisioning and even help automate low-touch next steps and escalate more complex cases. For casualty claims, access to earlier data can help inform adjusters on next steps.
According to CCC’s Crash Course 2023, injured parties involved in third party casualty claims from 2019-2022 spent roughly 190 days between their first date of medical service and their last. These lengthy cycles times are a pain point, because the longer a claim stays open, the higher the average settlement amount becomes.
AI in Insurance
With AI at the Forefront, CNA Takes an Innovative Approach To Insurtech
Many people recognize that the pandemic catalyzed the evolution of technology, igniting growth in sectors such as e-commerce and healthtech. But did you know that the insurance industry was also deeply impacted?
According to a recent survey of insurance CEOs conducted by KPMG International, 85 percent of participants believe the pandemic accelerated the digitization of their operations and the creation of next-generation operating models, while 78 percent said it fueled the development of a seamless digital customer experience.
Commercial property and casualty insurance company CNA has both witnessed and guided this ongoing digital transformation. While the company has always been dedicated to developing innovative solutions for use across the industry, it has spent the past couple of years ramping up its efforts to deliver high-quality products to market quickly while embracing the latest advancements in technology.
So what are the key elements driving these efforts? If you guessed AI, you would be right. AI forms the backbone of many of the company’s newest solutions — but that’s not the only force fueling the organization’s tech endeavors.
According to VP of Business Relationship Management and Innovation Colleen Thomas, the company’s tech organization decided to shift to the use of a scaled agile framework, evolving the way in which it delivers tech changes.
Having worked at CNA for the past 18 years, Thomas can attest to the company’s continuous focus on driving progress through the adoption of new processes and tools. These initiatives directly impact her day-to-day work, as she plays a pivotal role in aligning technology with the needs of specific business areas.
![Evolving Insurance From Transactional To Transforming Consumers' Lives](https://dxj7eshgz03ln.cloudfront.net/production/link/image/915563/original_ratio_extra_large_cbcaf62d-4a48-4f87-a169-7bea1247f34c.jpg)
Evolving Insurance From Transactional To Transforming Consumers' Lives
The fear and apprehension about AI in the insurance industry is on par with the excitement for its potential.Coming off the heels of two of the biggest insurance technology conferences in the industry (InsureTech Connect and Guidewire Connections), the excitement about AI was palpable. While 2023 was a year of great excitement about the new AI frontier, what was clear at these major events was that the fear and apprehension about AI is on par with the excitement for its potential.
Trying to find a comparative technology in the last couple of decades with equal levels of excitement and fear recalls the arrival of online banking and cloud computing. Everyone now accepts these two technologies as a staple of society. Early on, however, concerns like security, data privacy and identity theft dampened their momentum and required technology companies to constantly innovate and educate customers to spark adoption.
We're now at this moment in the insurance industry where we—as tech vendors—need to stand up to this challenge and not only innovate but proactively determine ways to alleviate the concerns of insurers.
We're at a major shift in how the business of insurance needs to function. The transition of going from a lens of only looking at individual traditional transactions to holistic, intelligent, proactive and ultra-personalized customer experiences requires a similar level of effort to online banking and cloud computing to alleviate the concerns of insurance professionals.
Robert Clark is the founder and CEO of Cloverleaf Analytics
![Ethical AI in Insurance Consortium Welcomes Five New Members to Further Advance Responsible AI in Different Sectors of the Insurance Industry](https://dxj7eshgz03ln.cloudfront.net/production/link/image/915573/original_ratio_extra_large_0430902b-8eb8-43e3-bc22-0b8304e8af62.jpg)
Ethical AI in Insurance Consortium Welcomes Five New Members to Further Advance Responsible AI in Different Sectors of the Insurance Industry
The Ethical AI in Insurance Consortium (EAIC), which aims to foster responsible and transparent adoption of artificial intelligence (AI) for decision management in the insurance sector, is announcing new members MS Transverse Insurance Group, the Pennsylvania Compensation Rating Bureau (PCRB), Geospatial expert from Verisk Analytics – Todd Barr, Connected Car and Next Generation Auto Insurance expert from Telenav and Novo Insurance - Kumar Maddali, and Ogon Consulting. Additionally, the EAIC has just completed its survey of insurance and reinsurance executives determining attitudes, readiness, and use of AI that it announced during InsureTechConnect, and will be sharing the results in Q1 2024.
"We are pleased to join the Ethical AI in Insurance Consortium, a collective force shaping the future of responsible AI adoption in our industry," said John Williams, Senior Vice President and Head of Operations at MS Transverse Insurance Group. "Our company believes that fostering transparency, ethical guidelines, and collaboration is critical in ensuring the responsible integration of AI. By uniting with other industry leaders in the EAIC, we will drive a vision of using AI to enhance operational efficiency and effectiveness while upholding the highest standards of integrity, fairness, and accountability."
Bill Taylor, President and CEO of PCRB said, "As a data collection organization for the workers' compensation industry, we are always interested in how technology is evolving. With the emergence of AI, we all have different levels of interest and concerns. The Consortium's mission is focused on the ethical use of AI tools and components, which is a philosophy that aligns closely with our mission of more than 100 years to be a trusted, essential, and objective industry resource."
Editor's Note
![Happy Holidays](https://dxj7eshgz03ln.cloudfront.net/production/textual/image/915559/original_ratio_extra_large_ed72fe1e-bc5e-4c59-a188-9f3425bd0a51.jpeg)
Happy Holidays
Happy Holidays to all 'Connected' readers and our valued clients. We look forward to bringing you relevant P&C Insurance ecosystem content and serving you in 2024. In the meantime, 'Connected' will resume daily news coverage on January 2, 2024.
We wish you a safe and joyful Holiday Season!
2024 PREDICTIONS
![Top 10 economic predictions for 2024 | S&P Global](https://dxj7eshgz03ln.cloudfront.net/production/link/image/915577/original_ratio_extra_large_f2c08b4b-fda9-4a2a-9cc6-bcb7f7ea4352.jpg)
Top 10 economic predictions for 2024 | S&P Global
Top 10 economic predictions for 2024
- Inflation will moderate further.
- Growth in North America and Western Europe will fall short of its potential.
- Mainland China's economy will recover slowly.
- Policy rates will be cut in advanced economies from mid-year.
- Emerging markets will get an earlier start on easing cycles
- The US dollar will depreciate.
- Financial headwinds to growth will persist.
- Declines in residential house prices in Western Europe have further to go.
- A busy electoral calendar will create policy uncertainty.
- The energy transition will support growth in the US and Canada.
Ken Wattret, Vice-President, Global Economics, S&P Global Market Intelligence
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.