Commentary/Opinion
Why is the specialty market expected to grow nearly $50 billion?
Specialty insurance is expected to boom over the next couple of years, likely driven by three key factors.
By 2027, the specialty insurance market will be valued at $130.1 billion, up from $81.5 billion in 2022, Deloitte forecast in its Global Insurance Outlook.
This is mostly predicated on three main factors:
- The precision of risk assessment at a more micro level.
- Insurtech innovation
- Rising frequency of catastrophes
“I think over time, and particularly with insurers, they're just more precise at identifying things that are high, medium and low risk, versus what was happening 20 years ago,” said Eric Joost, COO at CAC Speciality, who joined Insurance Business to share his insight on specialty growth.
“In years past, we had more ‘naive capacity’ that might come into some of these markets, where these players were anchoring the prices or keeping prices lower, which is a good thing for clients, but over time that does create some challenges in the stability of the marketplace number and also for reinsurance availability.”
This has been bolstered by technological developments buoyed by insurtechs, especially within the cyber market.
News
Red Sea Turmoil Sends Economic Shockwaves Across the Globe
Two months of missile, drone and hijacking attacks against civilian ships in the Red Sea have caused the biggest diversion of international trade in decades, pushing up costs for shippers as far away as Asia and North America. The disruption is spreading, fueling fears of broader economic fallout.
Repeated rounds of retaliatory strikes by the US and its allies, as well as a multinational naval operation to patrol the waters, haven’t stopped the assaults by the Houthi militants that followed the start of the Israel-Hamas war. With sailors demanding double pay and insurance rates skyrocketing, shipping lines are steering clear of a waterway that normally carries 12% of the world’s seaborne trade.
More than 500 container ships that would have sailed through the Red Sea to and from the Suez Canal, carrying everything from clothing and toys to auto parts, are now adding two weeks to their routes to travel around the Cape of Good Hope at the southern tip of Africa, according to Flexport. That’s about a quarter of all the container-shipping capacity in the world, according to the digital logistics platform.
Enda Curran, Jana Randow and Alex Longley for Bloomberg
NFIP Reauthorized Until March 8
Last week, Congress passed a short-term continuing resolution (CR) to fund federal government agencies. The resolution has been referred to as a “laddered" approach, a two-step continuing resolution (CR) that funds some federal agencies through March 1 and some through March 8.
A short-term reauthorization of the National Flood Insurance Program (NFIP) through March 8 was included in the CR, which makes this the third short-term reauthorization of the NFIP in the last four months. The NFIP was due to expire on Feb. 2.
Earlier today, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “Reauthorization of the National Flood Insurance Program: Local Perspectives on Challenges and Solutions".
The hearing examined the overall level and availability of flood insurance in the United States, as well as the steps that can be taken to encourage greater deployment of flood insurance coverage. Specifically, the hearing discussed NFIP's primary sources of funding; NFIP's purchase of reinsurance; Risk Rating 2.0; flood mitigation, mapping, and management.
The No. 1 priority of the Big “I" is to make sure the NFIP is reauthorized and does not lapse. Beyond that, the Big “I" supports policies to increase take-up rates, whether through the NFIP or the private market. In particular, the Big “I" urges Congress to consider modest policy changes that could help grow the private market and protect consumers, such as clarifying requirements related to continuous coverage and midterm cancellations.
AI in Insurance
AI cracks code for insurance applications
Generative
The shift from traditional artificial intelligence, which has been in existence for 80 years and helped users in decision-making, to generative AI, which became widely available in 2022, allows companies to use technology for creative tasks and problem-solving, said Sebastian Antony, London-based head of global account strategy and financial services industry in UKI for cap market, health and commercial insurance, legal accounts at Google.
He was speaking Thursday as the opening keynote at the World Captive Forum in Orlando, which is sponsored by Business Insurance.
Artificial intelligence has long been able to tap huge amounts of data and computer processing power has increased exponentially for years, but generative AI’s ability to process human language has transformed the technology’s use, Mr. Antony said.
“Artificial intelligence today has cracked the human code of communication,” he said.
For example, you can instantly translate 220 languages using generative AI on your phone, Mr. Antony said.
For the insurance industry, generative AI can transform numerous tasks, according to Mr. Antony, including:
Public website navigation, to search for underwriting information.
Check submissions against an insurer’s underwriting appetite for the risk.
Check claims against policy wordings.
Automate information retrieval for recurring business processes.
Interpret regulations and identify potential violations.
Automation of customer service tasks.
Generate statutory filings.
Creative assistance, such as bespoke images.
Accelerated research.
Developing code to make computer engineering more efficient.
AI can also be used to speed up claims processing, Mr. Antony said.
Generative AI’s impact on the insurance industry and consumer – Lloyd’s
The increase and rapid adoption of technology has turned the market’s “eyes towards AI”, specifically generative AI (GAI), according to Iryna Chekanava, senior manager at Lloyd’s Lab.
Iryna explained to Insurance Times that “a common theme in AI discussions is to say technology is not new to the insurance industry”.
However, she noted that “AI been extensively adopted in predictive models and by emerging classes of business”.
According to FintechOS’ study, entitled Generative Artificial Intelligence: The Technology Polarising the Financial Services Industry, which was published on 22 November 2023, 44% of UK insurance institutions are already using GAI today, with 48% investing in GAI research and another 39% in its implementation.
For example, in March 2023, Zurich said that it was experimenting with ChatGPT as it explored how it could use the technology for tasks such as extracting data for claims and modelling.
More recently, on 9 October 2023, Sedgwick said it had been using artificial intelligence (AI) to enhance the claims experience for customers.
Warning
However, Catherine Carey, head of marketing at Consumer Intelligence, warned that it was “important” for the industry to consider the “impact on its customers” and how it would provide, and benefit from the implementation of AI.
Claims
Vehicles with the highest collision insurance losses
Collision coverage losses vary greatly depending on the size and type of vehicles involved as well as the circumstances of the collision. An analysis by the IIHS delved into claims data for 2019-2021 model year cars, trucks and SUVs to see which passenger vehicles have the highest (and lowest) collision losses across all classes.
The IIHS report explains that the two main factors they used to determine collision losses were claims frequency and claim severity (the cost of the claim). The average claim frequency across all classes of vehicle is 5.9 claims per 100 insured vehicle years. When it comes to relative collision claim severity, the average was $7,579 per claim.
The data showed that overall collision losses tend to increase with vehicle size, with all sizes of four-door cars, sports cars, luxury cars and luxury SUVs showing above-average losses.
The vehicles with the lowest collision losses included:
Toyota Tundra double cab LWB (52% below average)
Jeep Wrangler 2-door 4WD (47% below average)
Subaru Crosstrek 4WD (46% below average)
GMC Sierra 2500 4WD (45% below average)
GMC Canyon extended cab 4WD (45% below average)
In the slideshow above, we’ll look at the 2019-2021 model year vehicles across all classes that IIHS determined had the highest collision loss
Brittney Meredith-Miller is assistant editor of PropertyCasualty360.com
Recommended Events
2024 Insurance-Canada.ca Technology Forum (ICTF2024), “Becoming My Customer” – Tuesday, February 27, 2024, at the St. James Cathedral Centre, Toronto.
Welcome - Generative AI: A Tool for ... Everything? – Martina Conlon, Head of Insurance Insights, Datos Insights
Presenters, Panelists and Moderators- Learn about the presenters, panelists, moderators and hosts on the Faculty page
The Future of Insurance USA 2024 | May 15-16 2024 | Marriott Marquis Chicago, USA
The insurance leaders of tomorrow will not settle for the status quo of today.
In a rapidly changing world, it’s either disrupt, or be disrupted. The convergence of global unrest, rising NatCat losses and evolving customer needs are threatening profitability across the board. But with pressure, comes progress.
Set your future roadmap at Reuters Events: The Future of Insurance USA 2024 (May 15-16, Chicago), this year merging with Insurance AI & Innovative Tech USA to tackle both the strategic and practical elements of overcoming business critical challenges
People
People Moves: Coalition Nabs AIG’s Jones as Head of Global Claims
Robert Jones has joined Coalition as the head of global claims. He will step into the role Feb. 5.
Jones previously spent 32 years at AIG where he most recently served as the executive vice president of financial lines, specialty claims. At AIG, Jones was responsible for claims within the cyber, technology, media, fidelity and kidnap & ransom lines of business.
Coalition said Jones will lead the development of its global claims offering, in partnership with senior leaders across our Insurance organization. He will be responsible for continuing to develop and grow our cyber claims team to fit with our underwriting strategy, and collaborate with Coalition security and technology teams to assist policyholders with proactive services and incident response. Furthermore, Jones will be tasked with managing Coalition’s vendor network of external service providers, and help the internal underwriting teams develop risk-selection strategy.
2024 PREDICTIONS
Will 2024 be Better? Reflection on 2023 Venture Capital in InsurTech
Many founders have asked us in 2023, did investor pacing slow down? So, we tapped our network to get you access to the live data. And, we will use that data and our discussions with VCs in InsurTech to help you understand why and where we are going in 2024.
As 2023 came to a close, it was safe to say that the InsurTech investment landscape underwent a significant transformation this year, reflective of broader shifts within the tech and insurance industries. Amidst a backdrop of global economic recalibration, venture capital infusion into InsurTech startups witnessed a discernible contraction, marking a departure from the previously bullish years. This year’s investment climate, while cautious, has not dampened the innovative spirit that drives the sector forward, and strong startups continued to receive support while strengthening strategies to optimize costs.
We are also excited about positive trends in 2024. We are looking forward to the next generation of Insurance products in niche and specialty markets like those who have gone through our MGA Lab. Parametric solutions like Sola and Otonomi can simplify cover; cat-exposed solutions like Greenshield Risk and SPIN can support policyholders in states where larger insurers have left the market; and new category solutions like Batteryze and 5×5 can expand or enable commercial markets to function. This trend for new products will coincide with deeper integration with big data, AI, and predictive analytics to improve risk selection and workflow automation.
With all of the opportunity ahead of us, we see Venture Capitalists pivoting in 2024 to make new investments once their current portfolio is protected.
Anthony O'Donnell, Executive Editor, Insurance Innovation Reporter
In 2024, Change Becomes Non-Negotiable
Here are nine predictions for 2024, based on the certainty that few of yesterday’s approaches will be successful in tomorrow’s world.
We cannot imagine a riskier undertaking than predicting the future given the totally unforeseeable events of recent years, as well as the current state of the insurance industry and the world in general. On the other hand, there are some basic principles that help guide us through our annual predictions. In addition, we have hedged by widening our timeframe to not just 2024 but also to the near future.
Aland Demers and Stephen Applebaum as published in Insurance Thought Leadership
Insurance Trends and 2024 Outlook Report | TransUnion
Exclusive research from TransUnion
In 2024, commercial, personal and life insurance carriers can expect challenges and opportunities. Make sure you’re prepared for what’s to come by downloading TransUnion’s Insurance Trends and 2024 Outlook Report.
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Get the perspective you need to capture your share of business
Our in-depth and timely analyses will help you:
- Overcome profitability obstacles personal insurance carriers are facing
- Attract young buyers — and keep them loyal to your life insurance solutions
- Streamline the commercial insurance underwriting process
- And more