Commentary/Opinion
'Chilling effect' – How carrier pullouts affected auto and home insurance shopping behavior
New data has revealed how capacity constraints, made worse by carrier pullouts in auto and home insurance markets in several states, impacted consumer shopping trends last year.
JD Power’s quarterly shopping list report for US property and casualty (P&C) insurance showed that the shopping rate for consumers in Texas, Florida and California dropped in Q4 2023. These states experienced significant rate increases in auto and home insurance over the past year.
The trend likely indicates that shoppers in those markets likely found it too difficult or risky to switch auto and/or home insurance providers.
Stephen Crewdson (pictured), senior director in the global insurance intelligence group at JD Power, detailed the “chilling effect” that shrinking capacity and increasing rates had on insurance shopping behavior.
“In California and Florida, the shop rate for both bundled auto and home insurance came down a fairly significant amount,” said Crewdson.
“The shop rate of people shopping for both auto and home California was flat throughout the year, and in Q4, it tumbled, and we think it’s because home insurers were pulling out of the market.
“So, consumers were hearing from friends and family that it's hard to find homeowners’ insurance right now, and they may say, ‘I'm going to stick with the insurer I have right now because I'm afraid if I go out there and try to switch, I can't switch anyway.’”
Special Report: The Future of AI in Insurance
With the global Insurance AI market predicted to be worth $79.86 billion by 2032 (Precedence Research), it's crucial to stay on top of investment trends, adoption case studies, and success stories.
To help with this challenge, Reuters Events surveyed 700+ carriers to discover their experiences on the integration of AI in insurance, producing a 10-minute read summarizing the key stats in an easy-to-digest format.
Download the report here: The Future of AI in Insurance
This comprehensive infographic provides you with the insights you need to make informed investment decisions, including:
- What percentage of insurers are currently investing in AI/are planning to in the next few years?
- What are the prominent drivers and blockers for AI investment?
- What areas are AI being applied to, and to what effect?
- Has AI proved a worthwhile investment for companies so far?
What to Learn From Amazon's Failure
The closing of Amazon's Insurance Store shows the need to be organized around the customer -- and to figure out ecosystems.
From its inception in 1995 to today, Amazon has been a pioneer.
At this stage, it'd be easy for the tech giant to simply sit back and treat most of its business portfolio as cash cows, there to be milked until they run dry. However, 29 years later, Amazon continues to deliver lean startup models, learning fast, adapting and moving forward.
Before I dive into the recent Insurance Store experiment and its implications for the insurance industry, it's important to note that Amazon is an ecosystem driver. That last word is particularly important.
Broadly, there are two ecosystem models. On the one hand, you have drivers, like Amazon, who strive to own the ecosystem in which the market exists. They are the apex predator, holding the most customer knowledge while consistently increasing their ability to act on it.
Being a driver is an incredibly powerful market model when you can make it work, and it's unsurprising that some of the biggest brands in the world are also ecosystem drivers: Apple, Google and Netflix, to name a few.
On the other hand, there are modular producers, which specialize in operating in everyone else's ecosystems. They not only hold acute knowledge of the customer, they specialize in acting on it wherever they are. Think PayPal for payments or Intel in manufacturing.
Rory Yates is the SVP of corporate strategy at EIS, a global core technology platform provider for the insurance sector.
Research
The rise of data science in insurance: Can good governance catch up?
Pardeep Bassi and Kartina Tahir Thomson look at the risks associated with data science and what firms should be considering as part of their work on technology, data and models.
The rate at which data science techniques are developing and being adopted is increasing faster than insurers are able to develop their own understanding of the risk governance and ethics required.
To make matters more challenging, within most insurers there are two distinct groups operating on the front line of data science, often in conflict rather than in harmony: data science teams practising using cutting-edge techniques without the necessary understanding of their organisation’s risk frameworks, and insurance leaders who have limited experience with the latest advanced analytics. As a consequence, this internal disconnect leaves insurers and individuals that work for them exposed to risk.
Finding the right balance between governance and control, whilst still advancing the adoption of data science and the value that it creates, has become the magic middle ground upon which insurers have set their sights
News
Insurers start seeing profit, continue rate hikes
Progressive netted $1.9 billion in Q4 2023, a 141% increase from the $826.4 million the company netted in Q4 2022, according to the company’s December earnings release.
The company’s net income for 2023 is $3.9 billion, more than a 400% increase from 2022. The company recorded $721.4 million of net income earned in 2022. The 2023 annual amount is unaudited.
Progressive scheduled its Q4 earnings call for Feb. 14.
Last year, the company announced a plan for “aggressive” rate increases, increasing by 4% companywide during the first quarter. It raised rates by 13% in 2022.
Progressive and other insurers have seen their stock values rise as the companies report profits in the past month.
The Travelers Companies saw its stock jump more than 4% to an all-time high earlier this month, according to a Wall Street Journal (WSJ) article.
“The jump came after the company reported a record profit for its fourth quarter, boosted by double-digit rate increases in its businesses and personal insurance units,” the Wall Street Journal said.
Allstate, which hasn’t reported its Q4 financials yet, also is seeing a stock jump, up 50% since its lows last summer, the WSJ says.
Last month, Allstate received double-digit rate increases in New York, New Jersey, and California after CEO and President Tom Wilson threatened to leave the states if the increases weren’t approved.
Commercial Lines Continue to Perform Better Than Personal, Though Overall Underwriting Loss Persists, New Triple-I/Milliman Report Shows
The 2023 net combined ratio for the property/casualty industry is forecast to be 103.9, with commercial lines at 97.7, outperforming personal lines at 109.9. Record levels of severe convective storm losses are the single biggest driver of the overall adverse results. Hard markets continue with 2023 net written premium growth forecast at 9.0%, according to the latest underwriting projections by actuaries at the Insurance Information Institute (Triple-I) and Milliman
“Year-over-year P&C underlying growth grew 1.3% in 2023 & is forecasted by Triple-I to grow 2.6% in 2024." - @iiiorg Chief Economist Dr. Michel Léonard
Michel Léonard, Ph.D., CBE, Chief Economist and Data Scientist at Triple-I, discussed key macroeconomic trends impacting the property/casualty industry’s results including inflation, interest rates and overall economic underlying growth.
“Real gross domestic product (R-GDP) in the third quarter of 2023 accelerated to 4.9%, but economists still expect year-over-year growth of 2.1%,” said Léonard, noting that for GDP, “revised Q3 numbers did not disappoint but all eyes remain on Q4.” He said that the consumer price index (CPI) continues to slow down to 3.1% as of November, but CPI, less food and energy, is still up 4.0% year over year.
“Year-over-year P&C underlying growth grew 1.3% in 2023 and is forecasted by Triple-I to grow 2.6% in 2024,” said Léonard. “This is below U.S. GDP growth in 2023 and slightly above U.S. GDP growth in 2024. Year-over-year P&C replacement costs increased by 1.1% in 2023 and are forecasted to increase by 2.0% in 2024.”
Record number of ransomware attacks in 2023
There was a record number of ransomware attacks in 2023 with a total of 4,496 total leak site victims, compared with 2,670 in 2022 and 3,048 in 2021, according to a report Tuesday from Corvus Insurance Holdings Inc.
Incidents were down sequentially, in the fourth quarter by 7% from third-quarter 2023, with 1,278 victims observed on ransomware leak sites. Fourth-quarter incidents were, however, up 69% year over year, according to the report.
In 2022, ransomware attacks increased during each of the first three quarters and then declined slightly in the fourth quarter, the report said.
The increase in attacks parallels a jump in the amount of threat actors observed. The number of active ransomware groups increased by 34% between first-quarter and fourth-quarter 2023.
Despite the increases in incidents, the report emphasized law enforcement’s efforts to curb the most active ransomware groups, such as the Qakbot malware network, which included “a number of prominent ransomware gangs.”
Corvus Insurance, a wholly owned subsidiary of The Travelers Cos. Inc., was founded in 2017 and is headquartered in Boston.
InsurTech/M&A/Finance💰/Collaboration
Pie Insurance Builds Internal Claims Function With Support From Origami Risk’s Multi-Tenant SaaS P&C Insurance Core Solution - FinTech Futures: Fintech news
Origami Risk the industry-leading risk, safety and insurance Software as a Service (SaaS) technology firm today announced Pie Insurance (“Pie”), an insurtech specializing in commercial insurance for small businesses, has helped bring the company’s workers’ comp insurance claims function in-house through the implementation of Origami’s multi-tenant core solution.
In the past year, Pie has heavily invested in claims including expanding the team to more than 50 claims professionals. Through the company’s focus on claims and strategic implementation with Origami, Pie is making the claims experience simple and streamlined for both small business customers and the partner agents who serve them.
“Our implementation of Origami for claims administration is another milestone in Pie’s overall investment and commitment to building a world-class claims organization from the ground up,” said Carla Woodard, vice president of claims at Pie. “Small businesses depend on Pie to protect their livelihoods and their employees in the face of a workplace accident. Our goal is to ensure that they can navigate the claims process with ease, so they can focus on getting back to work and continue to grow their businesses. We’re confident the Origami platform will allow us to offer an exceptional claims lifecycle experience to our customers and their injured workers, while also providing a versatile and scalable solution.”
Pathpoint, AgentSync Unite for Superior Client Experience
Pathpoint and AgentSync have partnered to deliver a better agent and client experience by accelerating Pathpoint's average time-to-bind with automated policy infrastructure.
Pathpoint, the modern wholesaler where insurance agents can get bindable small commercial E&S quotes in just a few minutes, has searched for a solution to the factors that slow the quote-to-bind process for consumers and agents alike. They found it in AgentSync, a company focused on building modern insurance infrastructure that connects carriers, agencies, and agents.
By using AgentSync's Autopilot and Manage solutions, Pathpoint is leveraging data from industry sources of truth to validate agent licensing and streamline compliance and operations. By integrating accurate data throughout the policy lifecycle, Pathpoint has eliminated the friction of manually verifying that an agent is compliant before approving business.
"As AgentSync expands and captures an increasing share of data on agents and agencies in the U.S., it continues to deliver increasing value to Pathpoint as a reliable source of business data to accelerate processes across all of our core insurance activities – from sales to underwriting to compliance," said Hamza Amjad, Head of Revenue Operations at Pathpoint.
AI in Insurance
Insurity launches AI-powered solution to revolutionise decision-making for P&C insurance carriers - FinTech Global
Utilizing Insurity’s analytics solutions grants carriers an enhanced level of reliable insights into their portfolios, facilitating heightened segmentation and improved loss ratios.
The flagship offering of the solution, known as Insurity Predict, harnesses the power of AI to elevate predictive analytics and modelling capabilities, delivering a substantial enhancement in loss ratios and instilling credibility in strategic decisions.
This solution goes beyond merely boosting the accuracy of risk assessment; it also streamlines the underwriting process. Insurity’s analytics models employ advanced AI and machine learning techniques, enabling automation and furnishing superior decision support.
The move has come in response to today’s complex P&C insurance market, which is facing insurance organisations with a myriad of challenges which require accurate and timely decision-making.
Conventional approaches employed by insurers frequently suffer delays, resulting in considerable financial losses and operational hurdles. Insurity’s analytics solutions, driven by AI-powered insights, provide sophisticated, real-time, and reliable insights. This empowers insurers to acquire a more profound understanding of their portfolio, facilitating proactive business management
AI startups move faster with "AI Insurance", first-of-its-kind coverage for new AI risks
Vouch, a leader in business insurance for technology companies, today announces AI Insurance, a novel insurance product that helps AI startups survive lawsuits and innovate faster.
AI Insurance offers coverage for financial losses from AI products or services including top-of-mind risks like large language model (LLM) hallucinations, algorithmic bias, regulatory investigations, and claims of IP infringement in systems that utilize AI algorithms.
AI Insurance offers coverage for risks like LLM hallucinations, algorithmic bias, regulatory issues, and IP claims.
As the AI sector navigates class-action lawsuits, regulatory uncertainty, and heightened scrutiny of risks, AI Insurance is an unprecedented safety net for AI startups. It can pay for defense costs and damages, irrespective of fault, with Vouch expertly handling the claim so startups can conserve capital and maintain momentum.
Sophie McNaught, Director of AI at Vouch, remarked, "When you're a typical SaaS company, missing a quarter of progress to a lawsuit is a setback. For AI companies, it's existential. Vouch's AI Insurance is a critical financial backstop that helps AI startups innovate boldly and survive challenges."
Vouch's AI Insurance includes affirmative coverage for:
AI Errors & Omissions: Covers error and omission claims caused by AI products or services.
Bias and Discrimination: Addresses claims related to algorithmic bias or discrimination.
IP Claims: Safeguards against allegations of IP law violations.
Regulatory Investigations: Provides defense cost coverage for AI-specific regulations.
Report: Top AI Trends for Insurers in 2024 Include Claims, Other Insurance Processes
Insurers are prepared for artificial intelligence to move beyond task automation and machine learning to advanced uses in 2024, a new report examining the industry and how it’s using AI shows.
The report from Xceedance, a provider of operations support, technology, and data services for insurance organizations, is based on discussions with carriers and managing general agents. It identifies the challenges and opportunities for insurers of all sizes.
“There will be a significant shift in how insurers approach generative AI in 2024,” Arun Balakrishnan, CEO of Xceedance, stated. “They’ll be looking to advance the ways they apply it across claims, underwriting, and other insurance processes.
The Xceedance report focused on ways insurers can address four key AI challenges in 2024:
There must be significant focus on generative AI testing. Many insurers have been getting great results from machine learning, automating tasks in claims and underwriting. The challenge is to become comfortable with computers making choices, from level and type of coverage to claims recommendations. To achieve that level of trust, they’re going to have to try and test, again and again.
Insurance workflows must be reinvented. Underwriting questions, the set of questions insurers ask a client before providing a quote or policy, haven’t been changed significantly in decades. Successful insurers will combine technology, data, and AI and revise insurance processes from the ground up.
