Does the P&C Insurance Cycle No Longer Exist?  February 29th 2024

Does the P&C Insurance Cycle No Longer Exist?

The hard market/soft market cycle has reigned for decades, but COVID shocks and a host of new technologies may be ending it.

Today’s world is confusing, replete with mixed and conflicting signals. Reports of low unemployment and high inflation have muddied forecasting for a recovery or a looming recession and leaves us unsure of what to expect: traditional economic cycles or permanent change. Either way, such signals foster uncertainty and test our objectivity on a daily and even hourly basis.

The P&C insurance market is displaying its own mixed signals, making it difficult for insurance business leaders to plan and adjust, not to mention the tremendous disruption to agents and customers. Large and persistent rate increases contrast with the most recent improvements in combined ratios and net income. Tighter underwriting actions and lack of insurance availability is creating challenges in navigating the complex landscape by all stakeholders.

The Insurance Clock

Back to the question: cycle or permanent change? Despite P&C’s desired state of steady, profitable growth, the reality is a constant tension and cycle of writing new business followed by turning the dials for profitability. In just the last 25 years, major shockwaves from 9/11 terror attacks, wars and the housing and financial market collapse have tested industry cycles, yet the clock still ticks ahead, perhaps with more elongated recoveries after these shockwaves. Read On

Alan Demers and Stephen Applebaum as published in Insurance Thought Leadership

"Worst insurance crisis in history"

Louisiana’s newly appointed insurance commissioner has voiced serious concern over the state’s persistent challenge in offering affordable insurance coverage, highlighting the need for legislative measures to attract more insurance providers to the region.

Appointed earlier this year, ex-insurance executive Tim Temple shared his insights with a state legislative committee on Tuesday, emphasizing the gravity of the insurance predicament facing Louisiana.

“Louisiana is experiencing the worst insurance crisis in its history,” Temple remarked. He further elaborated on the financial strain it places on residents, noting, “The average citizen in Louisiana spends more of their paycheck buying insurance than other states, so that’s the crisis that we’re facing.”

The situation worsened following the hurricanes of 2020 and 2021, leading to the financial collapse of several insurers and the exit of others from the state’s market. Access Home Insurance, Americas Insurance, FedNat Insurance, Gulfstream Property and Casualty, Lighthouse Excalibur, Southern Fidelity, State National Fire Insurance and Weston Property & Casualty and many others have recently closed their doors in Louisiana

Privacy and tracking claims are likely to reach a tipping point

Privacy will be a continued and exacerbated theme for 2024, particularly in the US, where more privacy and tracking claims are anticipated.

This is less of a global issue for now, but we continue to track developments in other jurisdictions where class action mechanisms are in place; for example, we have seen an increase in data privacy class actions in Australia.  Fortunately, most other global markets are still protected from mass litigation and class action litigation thanks to “loser pays” rules and a general reluctance of the courts to open the floodgates to mass litigation.

In addition to the aforementioned suits arising out of generative AI, we anticipate that facial recognition tools will also be in the hot seat in US courts. This will likely include more claims under the Illinois Biometric Information Privacy Act (BIPA) related to facial scanning, as well as an increase in geolocation claims due to vehicle tracking. 

With large-scale privacy-focused class actions, plaintiffs will look to find a hook with old statutes that provide for statutory damages, like federal and state wiretapping laws and the Video Privacy Protection Act (VPPA). As the year progresses with more decisions from the courts being made, hopefully some potential class actions will be curtailed.

CLM's CEO on whether the insurance industry has diversified its leadership

Back when Ronna Ruppelt (pictured), the CEO of Claims and Litigation Management Alliance (CLM), first entered the insurance industry in the 1980s, she experienced a disheartening dearth of female representation in C-suite level positions.

However, as time has progressed and workplace inequities have come under laser focus, Ruppelt has noticed some positive trends in many companies’ employment rosters.

“The industry has made tremendous strides, and frankly, how can it not when 66% of your entering workforce is women. It’s going to happen, and we want to help support that,” she said.

“It’s a whole different world than when I first started my career.”

Why Insurance Carriers Should Make the Choice to Offer Choice

Insurers should be focused on conveniently offering customers a variety of insurance options that go beyond their core business solutions in order to more broadly meet the expectations of today’s consumers.

In the midst of one of the toughest operating environments in recent years, it’s clear: in order to attract and retain the right insurance customers, the U.S. property/casualty insurance industry needs to go beyond traditional business practices and do things differently. We must reimagine how we create and deliver value to customers, who are demanding that insurance be much simpler and more relevant, personalized, and accessible.

According to a recent report from the Insurance Information Institute and Milliman, the 2023 net combined ratio for the P&C industry is forecast to be 103.9, with personal lines at 109.9. There’s no doubt that P&C insurers are still feeling the effects of a hard market, but that of course doesn’t mean it will last forever. Afterall, every industry experiences market cycles, and insurance is no different.

It’s only a matter of time before we move onto the next phase of the cycle and begin to see insurance rates stabilize—and eventually fall—and carriers’ risk appetites expand. And when we do, there’s no doubt that the competition for select customers will be intense.

Bill Suneson is the CEO and co-founder of Bindable