News
Insurance concerns grow regarding atmospheric rivers
Climatologists say atmospheric rivers are becoming longer, wider and wetter. Increased flooding is the result.
In 2019, meteorologists nationwide began rating atmospheric rivers (AR), or storms that have the potential for millions of dollars in losses and severe flooding.
But what exactly is an atmospheric river?
This weather phenomenon that’s currently battering Southern California with repeated thunderstorms and flooding is a long, narrow “river” of condensed water vapor in the atmosphere that moves with the weather.
A strong river can carry between 7.5 and 25 times the flow of water that passes through the mouth of the Mississippi River. These rivers in the sky can be 300 miles wide, a mile deep and more than 1,000 miles long. Most are small, but they can be massive and fast moving, and when storms like that make landfall, they often release rain or snow, sometimes in large amounts over short periods of time.
One atmospheric river can carry 10.5 trillion gallons of water a day. They account for 50% of the annual precipitation in California, and are responsible for 65% of the western USA’s extreme rain and snow events. The storms develop in the tropics, which is why another moniker for this weather phenomenon is the Pineapple Express. They are a default feature of the entire global water cycle, and are present somewhere on the planet at any given time.
There are predictions that climate change will cause atmospheric rivers to become 25% longer and 25% wider and carry more water. This may lead to more flooding.
Christine G. Barlow, CPCU
What’s happening to global commercial insurance rates?
Marsh has released the latest edition of its Global Insurance Market Index, the broking giant’s proprietary measure of global commercial insurance rate change at renewal.
According to Marsh, global commercial insurance rates increased by 2% in the fourth quarter of 2023. In Q3, the change was a 3% increase.
“Rates continued to be relatively consistent across almost all regions in Q4,” Marsh noted. “As with Q3 and Q2, this was largely driven by a continuation of the trend for pricing decreases in financial and professional lines and a small decrease for rates in the cyber insurance market.
“Moderating rate increases for property risks also contributed to the quarter’s results, with increased competition offsetting the impact of strong demand and ongoing losses.
“On average, rates in Q4 were flat in the UK, Canada, Asia, and Pacific. Rates increased in the US by 3%; in Europe by 4%; in India, Middle East & Africa by 4%; and in Latin America and the Caribbean by 8%.”
On average, global property insurance rates rose by 6% in the fourth quarter; casualty insurance rates were up 3%; rates in financial and professional lines saw a 6% decline; and cyber insurance rates fell by 3%.
What's ahead for commercial insurance in 2024?
The commercial insurance market began to harden around 2019, after years of gradual shifts that lead to higher premiums and reduced capacity. The overall hard market is expected to remain for the better part of 2024.
Prior to the current conditions, the commercial insurance sector long enjoyed smooth sailing, with stable premiums and expanded coverage that continued for decades, according to the 2024 Commercial Insurance Outlook from Hylant. With the exception of a period after the September 11, 2001 terrorist attack on the World Trade Center — during which the market hardened for a short time — the last sustained hard market occurred in the 1980s.
Those in the commercial insurance space have now been up against a hard market for the last half-decade, which led many insurers to change course; whether that meant fewer renewals, increased premiums or terminating certain coverage products altogether.
But some insurance-industry watchers are optimistic.
“There are opportunities in the current market to continue to grow and prosper,” David Zona, senior vice president of commercial insurance, LexisNexis Risk Solutions, told PropertyCasualty360. “Economic conditions and business formation remain strong, and the agents and brokers who can serve both existing clients and effectively underwrite and assist those that are forming new businesses are poised for success.”
AM Best currently predicts a stable outlook for U.S. commercial lines in the year ahead.
American Family Insurance DreamBank unveils free video series for aspiring entrepreneurs featuring Kathy Ireland
American Family Insurance DreamBank announces a new collaboration with renowned supermodel turned entrepreneur Kathy Ireland, an innovative video series empowering aspiring and new entrepreneurs. The partnership exemplifies American Family Insurance's commitment to inspiring, building, and protecting dreams across America.
The five-part video series titled "Brand Building for Small Businesses," features five episodes, each 10-12 minutes long. The content guides entrepreneurs through key aspects of establishing a strong brand, including defining a company's mission and vision, connecting with a target audience, developing a strong identity, building awareness, and exploring innovation.
Ireland, an American Family Insurance ambassador since 2011 and its longest serving ambassador, is committed to the company's mission to inspire, protect and restore dreams. Beyond being a role model for women, she is heavily involved in her community, advocating for many causes, including women's and children's health, education, human rights and freedom.
Commentary/Opinion
In many ways, 2023 presented favorable market conditions for strong organic growth for the US P&S insurance industry...
Core factors included inflation, a more resilient than expected economy, a micro-cycle in property pricing, and property revaluations. This year, those growth positives are showing signs of fading.
Editor-at-large Adam McNestrie recently discussed the possibility of the super cycle momentum dissipating for P&C brokers in 2024, which could put an end to a remarkable run since H2 2020.
For carriers, growth is one of many metrics to assess performance and one that needs to be kept in balance with risk exposure.
Nonetheless, the trajectory of top line growth in relation to this year’s macro-economics and rate environment is worth watching. Especially so because there is likely to be more battle for growth among commercial lines carriers given these moving pieces.
Looking for early indications, the Insurance Insider US has compiled top-line growth of select commercial lines carriers that reported Q4 2023 results so far to see where they landed year-end compared to earlier quarters.
The compilation was mostly based on gross premiums written, the only exceptions being The Hartford (which does not disclose GPW) and The Hanover, for which we used net written premiums.
Telematics data and personalized commercial coverage
Commercial auto insurers must move from "should we" to "how do we" use telematics effectively.Constant connectivity has become synonymous with progress in our society, and the surge in connected vehicles on our roads is not just a trend; it's a paradigm shift that automotive insurers cannot afford to ignore.
Today's vehicles generate information directly linked to assessing risk. From GPS tracking to real-time diagnostics, telematics data offers a contemporaneous snapshot of driving behavior, vehicle location and health. This information is invaluable for insurers looking to accurately assess risk and tailor policies accordingly.
The question is not whether insurers should delve into telematics but rather how they can leverage this wealth of data effectively.
The data mother lode Telematics data can be likened to gold waiting to be unearthed. The ability to mine this data effectively is crucial for insurers looking to stay competitive in a rapidly evolving market. Analyzing driving patterns, frequency of use and even the condition of the policyholder's vehicles can provide insurers with a granular understanding of the risk within their portfolio. This, in turn, allows for more accurate pricing and the creation of personalized insurance products.
Car insurance rates have soared 43% since 2022 and are expected to climb more. Here's how to lower your premiums.
More drivers are forgoing auto insurance altogether as insurance rates increase.
Anyone already feeling burned by sharp increases in their auto insurance rates over the last year should buckle up - it's only getting more expensive.
Car insurance premiums in the U.S. will continue to climb this year after rising more than 43% since January 2022, new research from Bankrate shows.
"While we hope to see rates stabilize soon, that likely won't happen until at least 2025," Bankrate analyst Shannon Martin said in a statement .
The national average cost for full coverage car insurance was $2,543 per year as of January, up 26% from $2,014 in January 2023 and $1,771 in January 2022, according to Bankrate.
'I can barely afford it with a decent income'
Perspectives: An industry in crisis — challenges and opportunities
The insurance industry is old. There’s no real disagreement about that, regardless of the context. The history of the industry goes back hundreds of years, and its influence and role in transforming society in that time has been immense.
The workforce powering this global industry is also old. More exits from the industry due to retirement than new entrants coming in is commonplace, and the usual recruiting trail used to bring in college graduates and other early career individuals is failing to bridge the gap.
Data suggests that job availability and hiring in the insurance sector remains robust. There are still a lot of jobs in the industry, though, that are unfilled, particularly in claims.
What does all this mean? Well, we have a new generation of professionals in insurance, and while this is good for the industry, the industry needs a lot more of them. It also dovetails with an equally impactful and worrisome issue: a knowledge shortfall with those coming into the industry, particularly involving regulatory, ethical and compliance requirements.
In an industry that is heavily regulated, bound by legal precedents and inflexible policy conditions employees that don’t know how to navigate the conditions and requirements of policies will make mistakes. Whether those mistakes are in binding policies, reviewing applications, sharing data or handling claims they will inevitably end up costing companies. And that cost is calculated in reputation, fines, expenses and unscheduled payments.
Dwight Geddes is the founder of Metro Claims & Risk Management and Geddes Management Group
AI in Insurance
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:
NY's proposed AI rules seen as just the start for insurance carriers - Insurance News
In a likely harbinger of what’s to come from U.S. regulators, the New York Department of Financial Services recently issued proposed rules on how insurance carriers should use artificial intelligence and alternative data in underwriting and pricing.
The NYDFS circular letter said it expects carriers will establish governance protocols for AI systems and so-called external consumer data and information sources (“ECDIS”) and employ fairness testing of predictive models and variables before they are put into use. Currently, insurers aren’t required to abide by testing obligations when using AI in underwriting and pricing.
The proposed rules, released late last month, would apply to all lines of insurance: property & casualty, medical, life, auto, home, etc.
“The department expects that insurers use of emerging technologies such as artificial intelligence will be conducted in a manner that complies with all applicable federal and state laws, rules, and regulations,” the letter said.
The department conceded that the emerging technologies could both benefit insurers and consumers by simplifying and expediting procedures, and possibly result in more accurate underwriting and pricing. However, the letter also said the adoption of such technology may reflect systemic biases and its use could reinforce and exacerbate inequality.
Survey Shows that More than 90% of Insurers Plan to Increase AI Investment - Top 4 Trends for Insurers in 2024
To glean insights, Gradient AI conducted a survey among 100+ customers across diverse insurance companies, revealing four noteworthy AI trends influencing the future landscape of the insurance sector.
Trend #1- AI Adoption Accelerates
The survey shows that insurers are embracing AI as a strategic priority, with 90% of respondents planning to increase their AI investments. The majority of them (75%) are focusing on AI applications for underwriting and claims management, where AI can help optimize policy pricing, reduce quote turnaround times, triage claims, and reduce the duration and cost of claims.
In addition, about 25% of respondents are exploring the potential of Generative AI, which can create new and original content or data based on patterns and information it has learned from previous examples. This will allow insurers to automate tasks such as summarizing medical notes, generating routine correspondence, and processing simple applications and claims.
Gradient AI’s take: The survey confirms that AI is becoming an essential tool for insurers to enhance their effectiveness and efficiency. AI algorithms can provide accurate and consistent insights, enabling insurers to make better and faster decisions and reduce risks. However, AI is not a replacement for human expertise. Instead, it serves as a virtual digital assistant that can give insurers more confidence in making decisions. By combining AI and human judgment, insurers can achieve a more balanced and nuanced approach to decision making and risk assessment, increasing their confidence and trust in the outcomes.
InsurTech/M&A/Finance💰/Collaboration
Top insurtech funding rounds, January 2024
There were about 30 funding events in the insurtech sector between January 1 and January 31, 2024, according to a review by Digital Insurance.
What follows is a selection of these, focusing on those in the insurtech and property & casualty sectors that are part of the venture-capital financing model. (Other funding events, such as private-equity infusions, are included in the overall count.)
A portion of the data was sourced from Crunchbase. Other information, including quotes from investing VCs, comes from company announcements. These updates will continue monthly.
Digital Insurance
Innovation
Munich Re forms global parametric NatCat solutions team
European reinsurer Munich Re has announced the formation of a global parametric team focusing on natural catastrophe risk transfer solutions, bringing together experienced colleagues from around the world.
The market for parametric solutions is highly dynamic and still gaining pace. It complements traditional insurance by providing post-catastrophe liquidity and coverage for otherwise uninsurable risks.
Parametric claims are peril-based and recoveries are determined quickly, which makes this solution an efficient tool for covering business interruption and loss of income.
This in turn helps to improve resilience of public bodies, corporations and financial institutions, both in low-income and highly developed countries, Munich Re explains.
For more than 20 years Munich Re has offered a wide range of insurance-linked securitizations (ILS), weather-related and parametric natural catastrophe (NatCat) solutions.
The market for parametric solutions “is very close to its core: Significant risk-taking capacity and risk modelling capabilities, a deep knowledge of the risks and an unparalleled data base as well as a global presence,” the reinsurer states.
Adding: “This will be enhanced by the use of AI, IoT and remote sensing technologies to develop customised risk transfer solutions.”
