News
Feds v States – the battle for insurance control
Wildfires, hurricanes and other severe weather have roiled insurance coverage in several states and caused the federal government to take a closer look at the industry. Increased interest from Washington might create tension over jurisdiction but is not likely to dilute state authority over insurance.
California, Florida, Louisiana and Texas – which recently recorded its worst wildfire -- have borne the brunt of natural disasters over the last few years. Members of Congress representing those areas have become active with insurance legislation.
For instance, last week, the House Financial Services Committee approved a bill written by Rep. Maxine Waters, D-Calif. and ranking member of the panel, that would direct the Government Accountability Office to conduct a study of wildfire risk and its impact on homeowner and commercial property policies.
Another bill that the committee was poised to vote on but ultimately postponed due to time constraints would place constraints on the Federal Office of Insurance’s ability to collect data from insurers.
Legislation introduced recently by Rep. Adam Schiff, D-Calif., would establish a federal catastrophe reinsurance program within in the Treasury Department and strengthen the ability of FIO and the Office of Financial Research to monitor the insurance market. The bill appears to be stalled amid insurance industry opposition.
P&C insurance to hit trillion-dollar high in next decade
A recent study forecasts a substantial growth in the global property and casualty insurance market, projecting an increase from $700 billion in 2023 to $1036.17 billion by 2033.
The North American region is expected to lead the market throughout this period, attributed to its vast insurance industry.
Factors such as high income levels and a societal emphasis on financial security are contributing to the growing demand for insurance products in North America. Innovations in product offerings and advanced risk modeling practices further position the region for expansion.
In 2023, homeowners’ insurance emerged as the predominant segment within the market, capturing a market share of 37% and generating revenue of $259 billion. The market is segmented by product type, including homeowners’ insurance, condo insurance, car insurance, landlord insurance, renters’ insurance, and others, with homeowners’ insurance leading the sector.
Similarly, the agency distribution channel outperformed other segments in 2023, securing the largest market share of 46% and amassing revenue of $322 billion. The distribution channels are categorized into direct, agency, banks, and others, with agencies taking the forefront in market dominance.
Auto application fraud up 18%: New approaches to help mitigate risk
Artificial intelligence powers search-and-match algorithms that improve hit rates and predictive analytics help identify insurance fraud.
Personal auto insurance application fraud has increased 18 percent since 2019.
Artificial intelligence (AI) is powering advances in search-and-match algorithms that improve hit rates, reduce false positives, and help identify attempted evasion.
Insurers can leverage 65+ fraud-detection triggers in real-time via a “stoplight” approach that directs quote workflow to help automate and fast-track low-risk quotes, investigate those with potential for soft fraud, and mitigate risks with hard-fraud signals:
In an unparalleled hard market, application fraud analytics offer a more precise path to sustainable, profitable growth without extreme non-rate actions that slow new business in underpriced markets.
How is fraud affecting the insurance industry? What types of fraud are most common? Can new technologies and tools help personal auto leaders detect application fraud and confront premium leakage at the point of quote?
Commentary/Opinion
Are We at the Start of a Boom in Productivity? | Insurance Thought Leadership
Startling improvement in Q3 and Q4 suggests reasons for optimism, perhaps for many years.
In late 2001, Scott McNealy, the CEO of Sun Microsystems at the time, laid out for me a sweeping vision of remote work. Office buildings would be reduced to meeting rooms surrounded by a large parking lot. Employees would only come to the parking lot two or three days a week and would arrive around 10--avoiding rush hour traffic. They would plug their "sports utility offices" into the company network, letting colleagues know they were nearby if anyone wanted to arrange a meeting inside or just come by and bang on their window for a chat. Everyone would leave by around 3pm--again avoiding rush hour--and go home... to continue working.
McNealy had outfitted every employee with a home computer because, he said, "I do not want somebody at 10 o'clock at night who can't sleep, who wants to work because there's nothing good on TV, to not have full capability to do everything he needs to do to get the job done."
I asked: "Will people have trouble splitting work from home life?"
"There is no distinction," he said.
Paul Carroll, editor-in-chief, Insurance Thought Leadershship
Root CEO eyes nationwide presence after best-ever quarter
S&P Global Market Intelligence spoke with Timm about the role of AI in the company's underwriting process, how it prices risk and how it will shape its future. Other topics included Root's struggles in the stock market, its strategy for sustaining growth in a volatile market and how it will execute on its expansion plans. The following interview was edited for brevity and clarity.
S&P Global Market Intelligence: Root recently reported its best-ever quarter and the market responded by driving your stock to its highest level in almost two years. What does that mean to you as the CEO of the company?
Timm: One thing I've learned is not to look to the market to tell me things. I don't like looking to them on the upside because that would mean I have to listen to them on the downside, too. I think we've been deeply misunderstood by the market for quite some time and we've tried to stay focused and disciplined on the fundamentals of our business, driving near best-in-class industry loss ratios, disciplined growth and expense management. We want to focus on our customers, and I believe that the market eventually figures it out.
What markets are you prioritizing for expansion, and how do you assess the potential risks and rewards in these new markets?
We have a state expansion plan in place that we'll be executing this year, and we're going to be entering those states judiciously. When we add a state, we go in, we pick up a few thousand policies and then we measure the loss ratio and make sure that our pricing is holding up. If it is, we'll go get a few more until we build that confidence in our ability to price the risk in these markets. And as we do that, then we unconstrain that market and will allow it to grow. We're in 34 markets today and we don't see a reason Root shouldn't be nationwide at some point here soon. We want to continue to pursue that, particularly now that we've got our loss ratio to be one of the best in the industry.
Research
Drivers spend 20% of income on car-related expenses, can’t afford repairs
On average, drivers spend 20% of their monthly income on car-related expenses, such as repairs, maintenance, insurance premiums and auto-loan payments, according to a MarketWatch Guides survey.
The survey also says nearly 2 in 5 drivers can’t afford necessary repairs and upgrades for their cars.
Drivers who said they couldn’t afford necessary car repairs and upgrades are most likely to drive Volvo (55%), Mercedes-Benz (50%), Ford (50%), Jeep (46%), and Chevrolet (43%).
Of drivers surveyed, the No. 1 solution they found to affording their vehicle was doing their own car maintenance.
“I try to do repairs myself, and I use cars until they start to give me problems. I also refinanced my car when there was about $2,000 left on the loan, which helped me in those last few months of payments,” one of the respondents said.
Eighteen percent of respondents said they reduced their car insurance coverage to afford car expenses.
According to Jerry’s State of the American Driver Report, also reported that nearly a quarter (22%) of drivers they surveyed were reducing coverage with 39% of Gen Z the
InsurTech/M&A/Finance💰/Collaboration
Truist's insurance exit a potential bellwether as capital requirements tighten
Truist Financial Corp.'s massive sale of its remaining insurance business stands out as a response to impending heightened capital requirements and a potential bellwether as surging insurance valuations continue to entice US banks to cash out.
The banking giant agreed to sell the remaining 80% stake in its insurance business, Truist Insurance Holdings LLC, to an investor group led by Stone Point Capital LLC and Clayton Dubilier & Rice LLC in an all-cash transaction Feb. 20. The $7.6 billion deal value makes it by far the largest deal of its kind announced since at least 2017, beating only Truist's own partial 2023 sale of 20% of Truist Insurance Holdings to the same investor group in a deal valued at $1.95 billion.
The sale will boost Truist's common equity Tier 1 (CET1) ratio by 230 basis points under current capital rules and 255 basis points under Basel III proposed rules. Part of regulators' reactions to the collapses of Silicon Valley Bank, Signature Bank and First Republic Bank — representing the third-, fourth- and second-largest bank failures in US history, respectively — was heightened capital requirements for banks with more than $100 billion in assets.
Selling the remaining 80% of its insurance ops, which valued the business at $15.5 billion, was likely motivated in part by large banks' recent emphasis on stockpiling cash in anticipation of the final Basel III rule, experts said.
"If you go back to last February, this sale was a good idea that was available because the price was high and it was a very attractive offer for 20% of the business that [Truist] had a hard time refusing," said Christopher Marinac, director of research at Janney Montgomery Scott. "The world changed less than a month after the fact because we had the bank failures, and it soon became clear that the [Federal Reserve System] was going to react."
InsurTech Coverdash Announces $13.5M Series A Funding
Coverdash, a small and midsize business focused InsurTech, announced in February $13.5 million in Series A funding.
This financing comes within one calendar year of Coverdash’s oversubscribed Seed round, bringing the company’s total funding to $16 million to date. The Series A round was led by Nyca Partners, joining existing investors, including Bling Capital, AXIS Digital Ventures, Tokio Marine Future Fund, Expansion VC, Cameron Ventures, and others. The latest financing will be used to further expand Coverdash’s embedded partner network, grow its internal team and broaden its insurance carrier panel, according to a company press release.
Founded in 2022, Coverdash offers a full suite of commercial insurance products for all startups and SMBs across the U.S. Coverdash’s embedded technology enables partners from any industry to offer insurance to existing customers with a single line of code. The technology packages the operational, compliance and financial elements to allow partners to deliver highly configurable insurance solutions within their own front-end environments.
“We’re not just making insurance accessible and straightforward for business owners nationwide, we’re acting as their virtual risk management arm,” said Ralph Betesh, co-founder and CEO of Coverdash, in the release. “Coverdash goes beyond coverage – we offer startups and SMBs the support they need, especially in today’s challenging landscape when navigating the complexities of insurance has never been more vital.”
Top insurtech funding rounds, February 2024
There were about 40 funding events in the insurtech sector between February 1 and February 29, 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. For our previous edition, which covered the month of January click here. These updates will continue monthly.
Inigo and Samsara collaborate to transform commercial fleet insurance solutions - FinTech Global
Inigo Limited, a leading insurance provider, has partnered with Samsara in a bid to revolutionise insurance solutions for commercial fleets in the United States.
By leveraging Samsara’s telematics data, Inigo intends to introduce an innovative, data-driven insurance product which will enhance capacity and improve risk analysis in the US automobile sector.
This initiative will particularly benefit large fleets by offering pricing models that take into account individual telematic outputs and incorporate safety metrics in risk analysis. By integrating telematics data with advanced modelling and risk management techniques, Inigo aims to enhance risk selection processes and provide tailored pricing solutions.
Marsh has partnered with Inigo to distribute its product throughout the US, with the placement of this new insurance solution to be facilitated by their International Placement Division in London. Launched earlier this year on January 1, 2024, it has garnered substantial interest from major players in the trucking industry.
Craig Knightley, Insurance Chief Underwriting Officer at Inigo, commented, “Our core belief is that data science can provide different perspectives on risk. When we met with Samsara and realised just how effective their product is, we knew that working together, we could find an innovative new product for the market. We believe analysis of different datasets has demonstrated that a robust deployment of Samsara’s telematics and safety solutions will lead to a much better understanding of fleet performance and management, making a material impact on loss frequency and serving to make the roads safer. We see a further opportunity to work with clients to help them understand and contain risk to unlock business potential.”
Awards
Eight distinguished honorees selected for their contribution to driving insurance innovation | InsurTech Hartford Announces 2024 Industry Influencer Award Honorees
InsurTech Hartford, a pioneering organization dedicated to the advancement of insurance innovation, today announced the honorees of this year's industry influencer awards. These awards celebrate individuals who are making waves in insurance innovation and having a positive impact on the industry.
The honorees are:
- Alan Demers, President, InsurTech Consulting
- Bobbie Shrivastav, Co-Founder and COO, Benekiva
- Marissa Buckley, Co-Founder, RevUp
- Margeaux Giles, CEO, Irys InsurTech
- Curtis Goldsborough, President, National Insurance Inspection Services
- Tony Canas, Co-Founder, Insurance Nerds
- Laura Dinan Haber, Innovation Brand Director, Nassau Financial Group
- Christopher Frankland, Founder, InsurTech360
This year's honorees have been selected for their groundbreaking contributions, which highlight the critical role of technology in shaping its future. Finalists were chosen by last year's honorees: Rob Galbraith, Bryan Falchuk, Adrian Jones, Lisa Wardlaw, Patrick Kelahan, Matteo Carbone, Ema Roloff, David Gritz, Gilad Shai, Abel Travis, and Denise Garth.
The "Making Waves" awards will be presented during the InsurTech Hartford Symposium, an event that is the cornerstone for collaboration, learning, and networking among the brightest minds in the industry. Held April 17th and 18th, the symposium is expected to attract hundreds of professionals from across the world, including representatives from over 100 different carriers and 50 startups.
Insurance Humour (Appears Rarely)
Heinz Introduces World's First Ketchup Insurance Policy
Ketchup has been around for hundreds of years, and in that time, it’s become one of the world’s favorite condiments. The taste is unparalleled, but one thing we may never master is the art of not splattering it all over the place when using it.
The mishaps that a bottle of ketchup can cause don’t seem to make anyone love it any less, and that’s the spirit behind Heinz‘s new campaign, created by agency FP7 McCann. Introducing the world’s first ketchup-specific insurance policy, Heinz is looking to provide a little compensation for those who have suffered the most for their love of ketchup.
Inspired by the overwhelming number of social media posts that revolve around ketchup-related disasters, Heinz Arabia compiled a list of 57 common ketchup mishaps. These include everything from ordinary clothing stains to accidental splatters across carpets, ceilings and sofas. If you’ve documented your own ketchup chaos, you may be entitled to compensation.