News
Legal System Abuse Adding to Increasing Auto Insurance Costs, Creating A New Asset Class of Investors Betting on Litigation
The Insurance Information Institute (Triple-I), the trusted source for data driven insights on risk and insurance, today released its latest issues brief highlighting how excessive litigation is compounding a years-long problem of rising auto insurance costs. As dangerous roads and driving conditions as well as economic costs have been on the rise for several years, the challenges presented by overzealous billboard attorneys are exasperating the situation, as insurers last year on average paid out more than $1.10 for every $1 in premium they collected, according to the brief.
Legal System Abuse – State of the Risk examines the tactics used to initiate more lawsuits, to drive up a defendant’s litigation expenses and settlement payouts, and to secure outsized monetary awards after jury verdicts. Plaintiff attorneys often use aggressive marketing and advertising techniques to attract potential plaintiffs, the issues brief notes. These practices are prevalent nationwide as plaintiff’s attorneys hint at the promise of a financial windfall for their clients through multiple channels – highway billboards, television advertisements, and social media.
“There are real costs behind what we all know and see plaguing our roads with promises of settlement dollars, as billboard attorneys are racking up fees, and consumers are found to be getting less and less. The price of insurance is the effect, not the cause of risk, and there must be more work done to curb legal system abuse, as auto insurers – both personal and commercial – are seeing significant increases in claims costs when attorneys enter into the picture,” stated Sean Kevelighan, CEO, Triple-I. “What’s more, there are multimillions of dark money investor dollars entering into the fray to try and get their share. Some of these investors are sovereign funds, which may very well pose increased national security risks.”
Bill against auto insurance 'bias' gets major backing
Illinois House Bill 4611 – which seeks to prohibit auto insurers from unfairly discriminating based on age, race, color, national or ethnic origin, immigration or citizenship status, sex, sexual orientation, disability, gender identity, or gender expression – has secured the backing of Illinois Secretary of State Alexi Giannoulias.
The Illinois Secretary of State expressed his support during a committee hearing on Monday, saying an insured’s driving record should be the basis of auto insurance rates and not the abovementioned factors.
“The purpose of auto insurance is to protect motorists while they drive; therefore, an individual’s driving record should serve as the primary factor that’s analyzed when setting rates,” Giannoulias said.
“Illinois insurers on average currently charge consumers with a safe driving record and poor credit hundreds of dollars more than someone with a DWI (driving while intoxicated) conviction and excellent credit.
“This emphasis on socio-economic factors is transparently unfair and discriminatory, leading to less availability, less affordability, and less attainability, especially those from disadvantaged neighborhoods and communities of color.”
Commentary/Opinion
Insurers and collision industry need to work together to protect data, article says
Ed. Note: Thanks to Teresa Moss and Repairer Driven News for spotlighting this important issue which has major implications for all of us in the auto physical damage claims and collision repair ecosystem.
The collision repair industry and auto insurance carriers need to take further steps to protect consumer data as technology and privacy crimes advance, according to an article recently published by Insurance Thought Leadership written by Stephen Applebaum, Insurance Solutions Group managing partner, and Alan Demers, InsurTech Consulting president.
“Our focus in this piece is fairly narrow — namely the unauthorized use of personal information in the auto insurance claim reporting, damage evaluation, and collision repair process,” the article says. “While this is just a subset of the broader data privacy issue, the implications are quite serious and affect millions of consumers, insurers, and their supply chain partner and present exposure to hundreds of supply chain participants.”
Teresa Moss, Repairer Driven News
Grappling with generational gaps & hitting back at nuclear verdicts
Here is some of what you may have missed during Day One of the Complex Claims & Litigation Forum in Las Vegas.
It was only fitting that the 2024 Complex Claims & Litigation Forum kicked off on Mon., Feb. 26 in Las Vegas with a robust discussion of many of the challenging issues facing today’s insurers and litigators.
Carey Bonds, head of U.S. claims for Lloyd’s, addressed some of those issues during a keynote speech that launched the conference at the Green Valley Ranch Resort.
Insurance customer needs adapt from one generation to the next, as does the market itself, said Carey Bond, head of U.S. Claims for Lloyd’s, during the opening keynote at the 2024 Complex Claims & Litigation Forum in Las Vegas.
A retired U.S. Army lieutenant colonel who has more than two decades of experience in claims management, Bonds encouraged attendees to work on closing gaps that are prevalent in the industry and to do so by challenging conventional norms.
The four specific gaps that Bonds said risk evaluators and defense counsel must bridge are the increasing reliance on cyber technology and the burgeoning field of artificial intelligence, regulatory compliance, climate change and the change in customer needs.
Buffett Says Berkshire ‘Built to Last’
Warren Buffett on Saturday moved to reassure investors that his conglomerate Berkshire Hathaway would serve them well over the long term, even as he mourned the recent passing of his longtime second-in-command Charlie Munger.
In his widely-read annual letter to Berkshire shareholders Buffett said his more than $900 billion conglomerate has become a fortress that could withstand even an unprecedented financial disaster.
“Berkshire is built to last,” Buffett wrote.
Still, Buffett tempered expectations for Berkshire’s stock price, saying his Omaha, Nebraska-based company “should do a bit better” than the average American corporation, but that its huge size left “no possibility of eye-popping performance.”
“There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others,” Buffett wrote.
Insurance is easy
Why investors may be heading towards a financial catastrophe
As the best hedge fund strategy of 2023 becomes a magnet for mainstream investors, the risk models it relies on are getting a lot tougher to crack.
The strategy in question is tied to insurance-linked securities, which are dominated by catastrophe bonds (often dubbed cat bonds). In 2023, no other asset class produced a better-performing bet for hedge funds, with firms including Fermat Capital Management and *Tenax Capital booking their biggest-ever returns.
Cat bonds have been around for more than 25 years and are used by the insurance industry to shield itself from losses too big to cover. That risk is instead transferred to investors who lose money if a pre-defined catastrophe hits, and rake in potentially huge returns if it doesn’t.
But calculating catastrophic risk is much more complex than it used to be. That’s because there’s a growing concentration of property in areas that are prone to increasingly frequent storms, fires, and floods. Taken individually, each event is less intense than a major earthquake or hurricane. In aggregate, however, such losses can be a lot bigger, and that has major implications for the growing numbers of investors now adding exposure to cat bonds.
Traditionally, cat bonds have been used to shield insurers from the kinds of losses associated with once-in-a-generation natural disasters. But last year, those primary perils, as they’re known, accounted for only 14% of global losses, according to broker Aon Plc. Meanwhile, a category known as secondary perils “outpaced their cumulative costs in the 21st century by a large margin.”
by Gautam Naik and Sheryl Tian Tong Lee
Florida: Reforms encourage carriers, drive property insurance market improvement
The legislative reforms aimed at improving the property insurance market in Florida are increasingly seen as having a positive effect, with carriers increasing their appetite for writing in the state and analysts suggesting the benefits of the reforms could be significant over time.
As we reported earlier this year, data released on homeowners’ property insurance lawsuits had already showed a decline in litigation.
The CEO of insurer Universal had said last year that he felt the situation was improving thanks to the reforms, which he reiterated again in the firm’s latest earnings call saying that property insurance claims trends are definitely looking better in Florida.
At the same time, while the Florida property insurance market is seen as improving and recent legislative reforms are expected to ultimately drive more capital to support reinsurance for the Florida marketplace, some in the insurance-linked securities (ILS) industry have rightly highlighted that there is still likely to be a premium charged for capacity deployed to the state.
That’s a given, until we really see the full effects of the already enacted legislative reforms, as well as any additional property insurance or reinsurance measures taken in the still ongoing Florida session this year.
But, the underlying sentiment seems to be that Florida’s marketplace for insurance is getting healthier all the time and this is now even encouraging some carriers to write more business there again.
Steve Evans owns and operates Artemis
Research
Aon, Jacobson Group insurers prioritize tech staff
Insurers plan to increase or maintain staff this year, according to the Semi-Annual U.S. Insurance Labor Market Study, conducted by The Jacobson Group and Aon.
Technology, underwriting and claims roles are top priorities. Only 10% of companies said they plan to reduce headcounts but many suggested they are cautious about hiring, according to the study results. Automation was the most common reason companies plan to reduce staff over the next year.
Gregory P. Jacobson, co-chief executive officer of The Jacobson Group, said in a statement: "The industry's unemployment rate is stable and just 10% of companies plan to reduce their headcounts this year. However, insurers appear to be operating with a bit more caution in terms of hiring."
Companies listed business volume increase as the primary reason for increasing staff, followed by expansion of business and new markets. Large and small-sized companies are likely to hire technology staff, while medium-sized companies are looking to fill actuarial and underwriting roles.
Recruitment will continue to be a challenge for the industry. Actuarial, executive and analytics positions are the most difficult to fill, according to the study.
Jeff Rieder, partner at Aon and head of STG Performance Benchmarking, said in a statement: "Companies appear to be in more of a holding pattern around staffing plans for the first half of 2024, as they evaluate growth plans and anticipate greater efficiency gains from technology improvements."
Also, 82% of companies are now expecting most employees in the office at least one day a week, which is up from 76% last year. Only 6% of companies are requiring employees to be in-person every day.
Kaitlyn Mattson Managing Editor, Digital Insurance
AI in Insurance
Millennials More Likely to Embrace AI in P&C Insurance than Other Generations, According to Insurity’s 2024 AI in Insurance Report
The Insurity 2024 AI in Insurance Report sheds light on the evolving landscape of artificial intelligence (AI) adoption in the Property & Casualty (P&C) insurance industry with critical implications for insurers.
This report reveals that millennials, born between 1980 and 1994, emerge as the most enthusiastic proponents of AI in P&C insurance, with 33% responding that they would recommend their carrier to adopt AI. Millennials view AI as a transformative tool in the industry and recognize its potential to streamline processes and enhance customer experiences. Their endorsement stems from the practical benefits AI offers, including time-saving efficiencies and ease of use in their day-to-day lives. As millennials juggle demanding careers and growing families, AI provides a lifeline by automating routine tasks and providing instant support. Insurers adopting AI technologies into their operations will not face as much apprehension with this group.
InsurTech/M&A/Finance💰/Collaboration
Workplace Safety Innovator Intenseye Raises US$64 Million in Series B Funding
The investment was spearheaded by Lightspeed Venture Partners and saw participation from Insight Partners, Point Nine, and Air Street Capital.
Established in 2018 and headquartered in New York,Intenseye specializes in leveraging existing camera infrastructure within facilities to proactively identify safety hazards that could potentially result in injuries and illnesses. With its cutting-edge technology, Intenseye’s solutions have been deployed across “thousands of sites” spanning over 25 countries, safeguarding the well-being of more than 100,000 workers.
The startup has forged strategic partnerships within the insurance industry, notably collaborating with AXA XL in 2021 to extend its services to insurance clients. Additionally, Intenseye counts Sumitomo, The Hartford, and USI among its esteemed partners, further solidifying its position as a trusted provider of workplace safety solutions.
Sercan Esen, Intenseye CEO, said: “The scope, scale, and costs of workplace incidents are escalating rapidly, underscoring the critical need for AI-driven solutions that help pinpoint and mitigate hazards while aligning to the highest standards of accuracy, privacy, and enterprise readiness. Intenseye isn’t just a ‘nice to have’— we’re proud to be at the forefront of a long-overdue transformation that is empowering EHS leaders to more effectively and efficiently protect their frontline teams.”
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People
National Insurance Crime Bureau Names Edward Tobin as Vice President, Strategy, Policy, and Government Affairs
The National Insurance Crime Bureau (NICB), the insurance industry's association dedicated to predicting, preventing, and prosecuting insurance crime, announces Edward Tobin as the organization's new Vice President, Strategy, Policy, and Government Affairs, effective Tuesday, Feb. 27.
"With more than 30 years of experience as an attorney and public policy strategist, Edward has a deep understanding of how to navigate the challenges and opportunities that exist for an organization like NICB, which sits at the intersection of the insurance industry and law enforcement," said Rich DiZinno, NICB's Senior Vice President and General Counsel. "His strong relationships and experience serving in both the public and private sectors will help NICB to achieve its mission."
Mr. Tobin was a partner at WilmerHale, an international law firm in Washington, DC, and Boston, MA, where he served as vice chair of the public policy and strategy practice. Mr. Tobin was the Deputy General Counsel and Senior Director for Government and Community Affairs at Microsoft, where he helped navigate Microsoft and its senior leaders, including then-CEO Bill Gates, through ongoing federal and state antitrust prosecutions and associated congressional oversight. He also held the senior role leading government affairs and community relations at US West in Denver, CO.