News
Car insurance costs are rising faster than overall inflation—here's a closer look
The cost of car insurance shot up 19% in just one year, the latest Bureau of Labor Statistics data shows, significantly more than the overall inflation rate of 3%.
The vast increase outpaced every other spending category tracked by the BLS in November. It is strikingly out of place alongside otherwise cooling inflation. What's more, the cost of new cars grew just 1.3% since last year after a period of record highs, and the cost of used cars and trucks actually fell.
So why the increase in car insurance costs? CheapInsurance.com identified reasons insurance costs are spiking, and compared historical inflation to the rising cost of car insurance using BLS data.
While the past year's insurance premium spikes have been particularly jarring, car insurance costs have increased faster than overall inflation for most of the past decade. That's largely due to faster cost increases in vehicle repairs, medical care, and (to some extent) legal costs, which all directly affect insurance agencies' expenses.
Ownership and use of cars are also on the rise, meaning more congested roads and, in turn, more accidents. To top it off, distractions while driving have surged in the age of technology, again causing costly crashes that insurance providers must cover.
US catastrophe exposed insurance rates rise up to 50% in 2023
Across the United States, last year, most of the fastest rising insurance rates for residential and commercial property have again been seen in the areas with the most significant exposure to catastrophe risks, according to MarketScout.
Reporting on insurance rates over the fourth-quarter of 2023, MarketScout’s data shows an overall rise continuing, but Richard Kerr, CEO of Novatae Risk Group which owns MarketScout, continues to highlight that catastrophe exposed property has been rising fastest, in terms of the cost to insure property.
Composite personal lines insurance rates were up by 4.61% across the full-year, bu the largest rate increases continue to be for catastrophe exposed homes.
“We continue to see the largest composite rate increases in homes over $1,000,000 in coverage A value, most likely because this includes all of the large homes in catastrophe exposed locations,” explained Richard Kerr, CEO. Who added that, While the composite rate for large homes was 5.9% for 2023, some homeowners in tough areas or with prior losses are experiencing rate increases as high as 50%.”
The insurance industry continues to catch-up, in terms of charging what it and its models feel are risk commensurate rates for property in catastrophe exposed locations, it seems.
Commentary/Opinion
Telematics is an Insurance Capability. So…Now What?
For many years, I’ve been a big pulpit-pounder for categorizing telematics as a capability, not just a technology project or innovation move. As my years of experience in the telematics space kept flying by, I learned valuable lessons from having this perspective. Incorporating telematics into an insurance carrier’s operation is a daunting challenge but recognizing that a new capability is being introduced can prepare the organization and its leadership to be better positioned for what’s to come
If you look at the insurance players who have been leading telematics programs in the space, you will find
Pete Frey, AVP Enterprise Telematics, Great American Insurance Group
What you need to know about UBI and connect-car technology
Unlock the future of auto insurance insights by Marc Gordan on Usage-Based Insurance (UBI) and connected car tech. Explore benefits and barriers in this expert commentary.
Wider adoption of usage-based insurance technology could provide drivers and insurance companies with enormous benefits. However, many car owners are wary of installing hardware devices and downloading apps. Here's how we can alleviate consumers' concerns about onboard tech.
Today, the world of telematics and usage-based insurance is no longer a novel idea. When first introduced into the industry more than two decades ago, the value offering was simple: have your driving behaviors (then tracked by combined GPS and cellular technologies) help dictate your insurance premium and subsequently earn discounts for sharing the information and for adopting or applying safer practices behind the wheel.
Over time, more data points around speeding, braking, distance traveled, time of day, etc., were introduced alongside more standardized rating factors around age, gender, type of car and residence.
Many of those foundational elements are still present and are guiding factors in today’s usage-based insurance (UBI) landscape.
Marc Gordan is head of global telematics strategy and development for LexisNexis Risk Solutions.
[Ed. Note: Highly Recommended] Telematics is an Insurance Capability. So…Now What?
For many years, I’ve been a big pulpit-pounder for categorizing telematics as a capability, not just a technology project or innovation move. As my years of experience in the telematics space kept flying by, I learned valuable lessons from having this perspective. Incorporating telematics into an insurance carrier’s operation is a daunting challenge but recognizing that a new capability is being introduced can prepare the organization and its leadership to be better positioned for what’s to come
If you look at the insurance players who have been leading telematics programs in the space, you will find telematics leaders and insurance executives who understand this concept. They understand that telematics is a practice in change management. Yes, there is enabling technology, but there are also business processes, customer experience considerations, and organizational change impacts involved as well. The good thing is that in recent years, the case has been made and insurance veterans are coming to the realization that telematics is an insurance capability. So now that we have established that, there is still a big lingering question…what is the best way to operationalize it as a capability?
There are various playbooks that can be used for establishing a telematics capability depending on the type of carrier, the size of the organization, commercial lines insurance versus personal lines, and so on. However, at the highest level, implementing a telematics capability should be approached using a product mindset. I am not necessarily labeling telematics as a “product,” per se. I am saying that to be successful, looking through a product lens can help an insurance carrier address the most critical aspects of a telematics implementation. To start, there are three main product areas that need to be considered: the market landscape, the insurance value, and the data itself.
Pete Frey - AVP Enterprise Telematics, Great American Insurance Group
InsurTech/M&A/Finance/Collaboration
Insurtech startup DigitalOwl raises $12 million from insurance giant RGA
The Israeli startup's platform provides automated reading, summarization, and analysis of medical records for insurance companies and lawyers, providing real-time, highly accurate assistance in their underwriting, claims settlement, and fraud prevention processes
DigitalOwl, an insurance technology company that utilizes advanced AI to interpret and transform medical records into a comprehensive and interactive digital underwriting abstract, announced on Tuesday a $12 million investment from insurance giant Reinsurance Group of America (RGA). In addition, the companies agreed to a strategic partnership to integrate DigitalOwl's technology into RGA's systems. This capital raise brings DigitalOwl's total funding to over $38 million since its inception.
Janover launches insurtech start-up
Janover Inc., an AI-enabled platform for commercial real estate transactions, has launched a new insurtech as a wholly owned subsidiary – Janover Insurance Group.
According to the announcement, this new venture is set to seamlessly integrate with Janover’s generative AI applications and directly plug into its marketing funnel.
In a statement, the company explained that Janover Insurance Group “aims to transform the landscape of commercial property insurance through the application of generative AI and its unique access to data on the commercial property market.”
The subsidiary will initially focus on multifamily and commercial property insurance, but there are plans for it to expand its services to include Small and Medium Business (SMB) clients as it expands further.
In addition, Janover confirmed that it has engaged Tyler Schapiro, CEO of Flagler Insurance, as a strategic advisor for its commercial insurance arm.
Innovation
Insurance outlook amid compound volatility and emerging tech
Insurance CEOs remain optimistic and committed to investing in emerging tech. Last year proved to be a pivotal one for the insurance industry, marked by numerous challenges such as an unpredictable economy, major geopolitical events, extreme weather, a constantly evolving regulatory environment and new technological advancements. Against this backdrop, the 2023 KPMG Global CEO Outlook Survey looks ahead and offers valuable insights into insurance executives' aspirations for the sector and their growth plans.
Insurance executives maintain a positive outlook on growth opportunities despite compound volatility caused by disruptive events such as the pandemic, inflation, war, natural disasters, and a series of powerful structural changes. About three-fourths of insurance CEOs express confidence in the expansion prospects of their company and industry over the next three years, and 55% are inclined to pursue acquisitions that will significantly impact their organization.
The promising economic outlook for growth is driving CEOs' pursuit of digital transformation. Most of the executives surveyed (60%) anticipate increasing capital investment to acquire new technology. Companies must adapt to and embrace emerging technology to meet policyholders' needs and maintain a competitive edge. Investing in technology yields substantial benefits for insurance organizations, including the ability to modernize their operations, streamline processes and offer online portals, mobile apps and other digital tools that can simplify policy management and claims filing for their customers. These investments can attract tech-savvy customers and employees.
Marsh unveils AI-powered facility for cell captives
Marsh LLC on Monday launched ReadyCell, a facility powered by artificial intelligence, to help organizations set up a cell captive within Mangrove Insurance Solutions PCC, the brokerage’s District of Columbia-domiciled protected cell company.
ReadyCell allows organizations of all sizes to form a cell captive within minutes and to insure a single line of coverage or a layer within a larger insurance program, Marsh said.
Any line of coverage and any amount of limit can be written by the cell captive. Businesses can also keep the cell captive on standby to assume risk when needed for up to 18 months, Marsh said.
“> This is part of our overall strategy to drive innovation and lead the digital evolution of the captive insurance sector,” said Ellen Charnley, president of Marsh Captive Solutions.
AI in Insurance
Are AI and data analytics hurting claims outcomes?
As artificial intelligence (AI) and data analytics gets more refined and adopted across multiple industries, this is proving to be problematic for insurance, with these technologies being adopted by plaintiffs.
“I see that the plaintiffs are even more sophisticated, figuring out how to how to use data, use AI, to solicit better outcomes for their customers,” said Tanner Hackett (pictured), CEO of Counterpart.
“I think that’s some of the reason that we’re seeing social inflation – insurance carriers are the ones that are paying for these claims, it’s not a fair fight.”
The CEO also pointed out that there is still a lag in using technology to streamline and strengthen claims departments.
“I’ve yet to see the investment that distribution has put into building API’s and front-end interfaces to make the UX experience better for customers,” he said.
“You’re putting out a product thinking that you know what’s going to happen on the back end with claims frequency and severity, and I would argue that it’s fairly unpredictable right now.”
Insurance’s AI Revolution Has Already Begun
AI is already more ingrained in the insurance industry’s day-to-day than most people realize, and early adopters of the technology are already starting to reap the benefits—but much more is to come.
Despite artificial intelligence (AI) being one of the hottest trends of 2023, we’re still in the early stages of the technology. 2024 is poised to be an even more impactful year on the AI front, a time when we’ll move from the “what if” conversations of AI and machine learning (ML) to the practical uses for such groundbreaking innovations.
In the insurance industry, AI represents incredible potential to accelerate the speed at which carriers innovate. It can transform customers’ interactions with their carriers, improving each touchpoint by arming employees with relevant and up-to-date information and speeding up onboarding, claims, and more. AI can also directly impact the bottom line for insurers, helping to ensure policies are within the desired parameters for financial performance.
Conversations about AI tend to be forward-looking in nature, but the technology is already putting in the work behind the scenes to improve customer service and financial performance at insurance carriers. Let’s look at a handful of ways that AI is being used today, and see a bit more that explains why McKinsey expects AI technologies to add up to $1.1 trillion in value annually across the insurance industry worldwide.
Jag Lamba, CEO & Founder of Certa
Announcements
ZURICH INNOVATION CHALLENGE JUST ANNOUNCED
IN SUPPORT OF THIS IMPORTANT AND VALUABLE PROGRAM AND THE INSURTECH COMMUNITY, WE ARE OFFERING MENTORING AND ADVICE TO POTENTIAL APPLICANTS BASED IN NORTH AMERICA.
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Zurich Innovation Championship back with fifth edition
Program the biggest open innovation contest for startups in the industry
Described as the biggest open innovation contest for startups in the industry, the Zurich Innovation Championship has attracted over 8,000 submissions since its launch in 2018. More than 50 startup collaborations are ongoing as a result of the global program.
“Building on the success of the first four editions, which have led to over 50 ongoing collaborations, our program continues to evolve and grow its impact,” group chief strategy officer Paolo Mantero said in a release. “This makes me even more excited for this year’s edition and the initiatives we will see come out of it as a result.”
The categories for 2024 are commercial insurance, digital simplification, life & health, and retail property & casualty. A total of 10 winners will be selected.
Startups and scaleups from all stages of maturity can apply until February 14, with the global round winners to be announced in May and the Innovation Demo Day happening in September.
“Each of the startups selected for the acceleration phase will go through a 12-week program to mature the initiative by validating the desirability, feasibility, and viability of the hypothesis created for the global finals,” Zurich noted.
“This will happen in close collaboration with the Zurich business unit that has chosen the startup. Unlike a traditional accelerator, this phase will focus also on accelerating the adoption within Zurich Business worldwide.”
Ericson Chan, group chief information and digital officer at Zurich, believes they are “redefining insurance at the dawn of hyper-innovation” by joining forces with top innovators and startups.
The Zurich Innovation Championship offers a one-of-its-kind opportunity to match startups with the biggest and boldest ideas with industry experts and Zurich leaders across the globe. It's not about where innovation happens, but rather about teaming up the right idea with the right local businesses to achieve scalable impact.
Joel Agard, Head of Innovation, Zurich