Global Insurance Market Moderates Amidst Affordability Crisis  February 15th 2024

The uninsurable world: what climate change is costing homeowners and insurers, Mike Daly

“Michael Heffner had owned his detached house a short drive from the seafront in Virginia Beach, on the US east coast, for exactly one year when his home insurer abruptly cancelled coverage. “They just dropped me,” says Heffner, a US Navy officer.

“There was no, ‘Hey, do you want to stay on with us if we charge more?’ Nothing.” Scrambling to find a new insurer, he found his existing premium of about $1,200 a year impossible to replicate. Instead, he received quotes ranging from $2,000 to $3,200. ”

Heffner, and millions of other homeowners worldwide are on the front line of an insurance affordability crisis. Global warming is making extreme weather events such as storms, floods and wildfires more frequent and severe, and therefore increasingly difficult for the sector to cover. As firms exit some areas and demand higher premiums in others, affordable home insurance cover — for many an essential annual outlay, often a condition of their mortgage debt — is getting harder to secure.

It's not just the USA. Continental Europe, Australia, and even in the less extreme climate of the UK the Bank of England warned in its 2021 climate survey that, in a scenario of governments failing to act on climate and global warming reaching 3.3C above pre-industrial levels by 2050, about 7% of UK households currently covered would be forced to go without insurance due to unavailability or expense.

Such a trend could test the sector’s limits, some say. If yearly losses stick above the $100bn level, and firms are forced into further price rises and pullbacks to protect their balance sheets, it could “harm the whole proposition of the insurance sector to society”, says one reinsurance chief executive. There will be growing “patches” where buying insurance is uneconomical, Swiss Re has predicted.

Mike Daly

The world of insurance in 2024: Stiffening competition, AI & generation gaps

A lot of industry professionals ask, “What’s changing in the insurance world?” The better question might be, “What’s not?”

These last few years have been a wild ride for insurers, with disruption coming from almost every angle, from a global pandemic to a global recession. In 2024, expect to see even more disruption, but what kind and how will the industry remain competitive?

Insurers should be prioritizing how they move faster. The sector has a great history. Unfortunately, a mindset has emerged. Given that it is a regulated sector and we have a set of individuals who spend their whole lives thinking about risk, it’s very easy for them to say, “Well, we’ll do that later. We’ll do that next.” But what that tends to lead to is underestimating the risk of not moving faster.

For carriers to succeed in this environment, the most important thing for them to do is to find ways to get started sooner. And particularly, as you’d imagine given the many discontinuities we’ve seen in recent years — pandemics, climate change, etc., being able to do so based on data. And more than simply having the ability to analyze that data, how is it that you use the outputs of that data to operationalize innovations in your business?

In 2024, here are several trends I see coming to fruition:

Stiffening competition

We’ve seen a significant price-hardening cycle over the past couple of years. That may not end instantaneously, but I think we’ve seen the end of the cycle’s first phase. From here, we’re likely to see a transition as affordability of the premiums is biting into insurance carriers’ abilities to continue to grow their business, despite much better performance in terms of profitability and combined ratios.

Aaron Wright is director of strategy at Earnix

Amazon Insurance Store: Coming to a state near you?

Amazon may have shuttered its UK insurance store, but there is no guarantee that the big tech giant has said “goodbye” to insurance forever – and here’s why agents may not want to rest on their laurels just yet.

The Amazon Insurance Store sputtered to a close in January, just 15 months after opening its virtual doors. However, Amazon will have gleaned information from the short-run enterprise that it could put to better use in the US or elsewhere.

The UK is a solid sandbox to pilot an online insurance project with strong regulation and insurance permeation. Its personal lines consumers and insurers are digital-first, but while this may seem like a net benefit for any incoming online insurance business there is a caveat that may be at the heart of Amazon’s failure there.

UK personal lines insurance is dominated by price comparison websites (PCWs), which each serve up offerings from more than 100 insurers.

Stop the man or woman on an American street and ask them which insurers they know, and (assuming they don’t express their anger over skyrocketing homeowners’ insurance costs) they might reply Allstate, GEICO, State Farm, or Progressive

Jen Frost