Commentary/Opinion
Challenges in electric vehicle repairs and insurance
Welcome back to the latest episode of The Future of Automotive on CBT News, where we put recent automotive and mobility news into the context of the broader themes impacting the industry.
Steve Greenfield from Automotive Ventures discusses the increasing cost of vehicle insurance. video
Last year, we witnessed all 10 of the top auto insurers in the U.S. raise rates by double digits.
U.S. auto insurers had a tough time adjusting in 2023 as rate increases failed to keep up with jumps in claim frequency and severity. A report from S&P Global observed that increases in severe auto crashes have resulted in a rise in litigated claims, and severe weather and a surge in vehicle thefts resulted in higher losses in comprehensive coverage.
And it’s worth calling out EVs, when it comes to their cost to repair.
News
Allstate to pursue further auto insurance rate increases
Move aimed at improving margins and keeping pace with increases in loss costs
The Allstate Corporation is looking to pursue further rate increases in its auto insurance business.
In December 2023, Allstate implemented auto insurance rate increases of 30% in California; 14.6%, New York; and 20%, New Jersey. Building on this, the insurance giant plans to roll out additional hikes.
During Allstate’s earnings call, chief executive Tom Wilson said: “Since 2022, the Allstate brand implemented rate increases of 33.3%, which included 16.4% in 2023 and 6.9% in the fourth quarter, driven by the recent approvals in California, New York, and New Jersey.
“National General implemented rate increases of 10% in 2022 and an additional 12.8% in 2023. Looking forward, we will pursue rate increases in 10 states to improve margins and in other states to keep pace with increases in loss costs.”
Wilson also noted: “Expense reductions were initiated in 2019 as part of the transformative growth plan to become a low-cost provider of protections; being early in this effort helped offset the rapid inflation in loss costs.”
NAIC Announces 2024 Strategic Priorities
Today, the National Association of Insurance Commissioners (NAIC) announced its 2024 strategic priorities. NAIC Members annually finalize the priorities and discuss potential workplans after assigning committee responsibilities.
"Built on the foundation of coordination, cooperation, and collaboration, the state-based insurance regulatory system is well equipped to keep taking on the shared challenges and responsibilities of a world more interconnected than ever before. The NAIC's regulatory priorities for 2024 reflect our commitment to pursuing innovative and effective solutions to the most pressing issues affecting consumers, the insurance sector, and markets," said NAIC President and Connecticut Insurance Commissioner Andrew N. Mais.
NAIC 2024 Priorities (in alphabetical order), full article
Florida Insurance Companies Plan Over 50 Percent Rate Rises
Two private home insurance companies operating in Florida are proposing to raise their rates by over 50 percent, a move that could bring even higher premiums for homeowners in the state, who are already paying for the most expensive coverage in the entire country.
The two insurers are Castle Key—a subsidiary of Allstate—and Amica Mutual Insurance, which are trying to increase their rates by 53 percent or 54 percent, as reported by local broadcaster Bay News 9. Newsweek contacted Amica's and Allstate's media teams for comment by email on Tuesday morning, outside normal business hours.
In a statement to Newsweek, Allstate said: "The cost of providing reliable protection for Florida homeowners has risen dramatically, and we're taking actions to ensure we can protect customers over the long haul. We're committed to the state of Florida and confident recent insurance reforms will address longstanding challenges in the state."
If approved by regulators, the hikes could be disastrous for Floridians, who are paying $4,218 a year on average in home insurance costs, according to Insurance.com. The national average is $2,777. Others, including CNN and Fox 13, have reported Florida's home premiums to be even higher, for an average of $6,000 a year.
InsurTech/M&A/Finance💰/Collaboration
The Future Of Insurance: Fintech 50 2024
From two startups protecting against hackers to a small business insurer using AI to process applications quickly, six insurtech businesses made our Fintech 50.Fintech startups have taken longer than many expected to crack the insurance business. Some of the companies that have exited the private market, like auto insurer Root and home insurer Hippo, continue to see deeply depressed stock prices years after going public.
But six insurtech startups still made standout progress over the past year and earned spots on our Fintech 50 list for 2024, with each using technology differently to try to make insurance cheaper, more effective and more accessible.
Cyber insurance, where companies offer coverage against incidents like ransomware attacks and phishing emails, is the fastest growing category of insurance, and two startups made our list again this year: Coalition and At-Bay. The two six-year-old San Francisco companies, both founded by former government intelligence analysts, have used tech to better assess the risks that small and mid-sized businesses will suffer from costly hacks–and to alert their customers to potential threats. Coalition grew gross written premium revenue to more than $630 million in 2023, up 15% from the year prior, while At-Bay grew to $301 million, up 20%. (Read more about Coalition and At-Bay here.)[https://www.forbes.com/sites/jeffkauflin/2024/02/13/the-future-of-insurance-fintech-50-2024/?sh=465f6ec5c291]
Insurtech Startup Cake Secures $1.3M in Pre-seed Funding
Cake, a transactional marketplace designed for independent insurance agents, has announced the completion of a $1.3M pre-seed funding round led by venture capital company Markd. Additional sponsors included 2ndF, Iridium Bloom LLC, 101 Weston Labs, IIANC, and other industry-specific strategic partners. The close of this round marks a step towards its vision of reshaping Insurance M&A, democratizing it, and widening its reach to agents across various levels.
Launched in 2021, Cake's platform connects independent agents aiming to sell whole businesses or partial accounts with those keen to expand their operations.
Co-Founder and CEO, Adam Bowe, emphasizes the importance of this tool, given the aging demographic among the industry's principal agents and the sizable amount of sub-$1.25M ARR agency books managed by older producers. He insists on facilitating easy access to liquidity from these assets to spur growth for all independent insurance agents.
"As we witness a shift away from private equity dominance, our platform makes it progressively simpler for agents to adapt to the changing insurance landscape. We offer a unique opportunity for agents to buy and sell their books of business, or even fractional sales with slices of their books, with each other." says Adam Bowe, Co-founder, and CEO
Selective Insurance Now Offers the Phyn Smart Water and Leak Detection Solution to Eligible Homeowner Customers
Selective Insurance, a leading business, home, and auto insurer, today announced that it is working with Phyn, the leader in intelligent water solutions, to offer Phyn Plus, its award-winning smart water monitoring device to eligible homeowners policyholders.
Phyn's innovative technology monitors a property's plumbing system to detect and mitigate leaks before they can cause extensive damage to homes and possessions.
Water damage is one of the most common home hazards, and each non-weather-related home claim generates an average of $13,000 in repair costs, per Selective's analysis of its 2022 claims data. Professionally installed on a home's main water line, Phyn Plus is designed to protect and monitor a property's entire plumbing system 24/7 to automatically detect all types of leaks, from pinhole and drip leaks to frozen pipe bursts. Phyn alerts homeowners in real-time when a leak is detected, helping to reduce the risk of costly water damage. If there is a catastrophic leak, Phyn can remotely and automatically shut off the property's main water supply. The Phyn mobile app also gives homeowners detailed insights into water use to help them conserve water and save money.
"Phyn Plus is the newest risk reduction solution we're offering our policyholders," said Allen Anderson, Senior Vice President of Personal Lines, Selective Insurance. "This value-creating technology helps reduce the risk of water-related property damage and limits the likelihood of inconvenience, disruption, and calamity to our eligible policyholders."
Ryze Claim Solutions Partners with Bain Capital Insurance to Support Continued Organic Growth and Launch Strategic Acquisition Initiative
Investment to drive organic and inorganic growth into new service offerings, geographies, and customer segments.
Ryze Claim Solutions ("Ryze" or the "Company"), a full-service claims management business, today announced it has entered a definitive agreement to be recapitalized by Bain Capital Insurance ("Bain Capital"), the dedicated insurance investing unit of Bain Capital.
Following the transaction, Ryze will be majority-owned by Bain Capital Insurance with members of the management team and select individuals, including VJ Dowling, Dave Delaney, and Stuart Myers, retaining a meaningful ownership stake in the business. Ryze will continue to operate under its current management team led by Executive Chairman, Tony Grippa, and President, Scott St. John. Financial terms of the private transaction were not disclosed.
Ryze is a provider of full-service residential and commercial claims management solutions to the insurance carrier, hybrid or fronting carrier, and managing general agent (MGA) markets. Since its inception in 2014, Ryze has expanded its core residential property loss adjusting services to include desk, end-to-end third-party administration (TPA), alternative dispute resolution, lender placed, and virtual solutions, and has diversified its customer base to include the residential property, commercial property, and casualty end-markets. Included under the Ryze umbrella is Certus, which provides TPA claim services to specialty and casualty insurance companies and the MGA market. A fully scalable platform, Ryze is supported by a technology-enabled proprietary system that includes tools that manage a claim’s life cycle from receipt to close.
Bain Capital Insurance was advised by Kirkland & Ellis and Waller Helms. Ryze was advised by McDermott, Will & Emery, and Dowling Hales.
AI in Insurance
Generative AI and the transformation of insurance knowledge work
Time will tell if this often-repeated phrase comes to pass, but it speaks to a larger truth: the nature of technology is disruption. Technology changes the work we do, how we perform it, and the lifestyle we enjoy as a result. Historically, waves of technological disruption (agricultural, industrial, digital) have favored and enabled intellectual and creative pursuits over physical labor.
In each wave, workers have had to adapt both their skills and mindsets to remain competitive in the marketplace. While some may fail to make the switch required of the times in which they live, the vast majority adapt. Through these prior waves of disruption, technology has played an assistive role to humans, with humans seeking to maximize the use of technology for current tasks, thereby freeing up time for higher-value work.
How will AI impact the bottom line?
As Artificial Intelligence (AI) continues to dominate the reinsurance space, employers are scrambling to understand how technological advancements will impact their bottom line.
According to research from Precedence, the global AI insurance market was estimated to be worth $4.59 billion in 2022 – and expecting to grow to $79.86 billion in 2032. From customer-facing chatbots to risk analysis platforms, the impact of these new technologies is only growing with time. But AI isn’t just changing client expectations of insurers, it’s also revolutionizing major internal practices.
“I see [AI and technology] affecting us in two main ways,” said Katie Rudd (pictured), senior vice president and head of UK analytics at Acrisure Re. “The first one is going to be driven by our clients and how our clients are innovating in terms of new products, investing in technology and adopting third party models. We’re seeing a big drive towards [clients] making more of an investment in capturing and leveraging the data that they already have. So, bringing together underwriting systems and claim systems – getting those infrastructures in place.”
Claims
3 leading causes of claims leakage in casualty insurance
Each year, claims leakage costs insurance carriers as much as $30 billion, according to EPAM Systems, Inc., which noted leakage can account for 5%-10% of all claims paid.
The International Risk Management Institute, Inc. explains claims leakage as the difference between what a claim should cost and what the carrier actually paid to settle the claim. Inefficient claims processes, errant payments, poor decision-making and fraud can all lead to claims leakage.
By investing in technology, carriers can reduce claims leakage and fraud by as much as $117 billion, according to a 2022 report by Everest Group Inc. Everest’s projections include P&C and life and annuity sectors.
According to CCC Intelligent Solutions Inc., overpayments can be avoided in casualty claims. To this end, the above slideshow reviews three causes of leakage in casualty claims as well as three ways to reduce these unnecessary costs.
2024 PREDICTIONS
Disinflation, deglobalisation and decarbonization – key themes for 2024
"I think there's a lot of opportunities we can provide here"
‘Risks on the rise as headwinds blow stronger’ – three specialists from the global reinsurance giant Swiss Re came together to provide contextualization of the Swiss Re Institute’s report into the Global Economic & Insurance Outlook of 2024/2025.
Swiss Re’s group chief economist, Jerome Haegeli noted that the reinsurer is expecting the global economy to cool down quite noticeably with major economies diverging as the US continues to grow, while Europe is stagnating and China is grappling with structural domestic growth challenges.
“On the insurance front, we do expect that the firm markets and the drivers which have been supporting insurance market prices, and also insurance market premiums, will remain intact,” he said. “In other words, the macros regime shifts that we have been seeing over the last few years, especially with the higher rates, they are here to stay.”