Research
Why are auto insurance premiums so high? Blame inflation and a few other factors
Wednesday's inflation report showed consumer price growth continues to drift higher.
The Bureau of Labor Statistics reported price growth accelerated to 3.5% in March, from 3.2% in February.
Few categories had as big a jump year on year than auto insurance, which soared 22% from March 2023, the most significant year-on-year jump in that category since 1976.
And over the last few years, average auto insurance rates have surged 43%.
As of April, the national average cost of car insurance is $2,314 per year for full coverage and $644 per year for the bare minimum, according to Bankrate.
That works out to about $193 a month for full coverage and $54 for minimum coverage.
A host of factors determine how much insurance companies charge drivers, but the cost of nearly all of them seem to be increasing.
One major factor is simply the rising cost of modern vehicles themselves. Today, a new vehicle costs about $10,000 more than it did before the pandemic. Blame supply-chain issues that drove up the cost of vehicle parts, increased labor costs and customer demand, which has naturally pushed prices upward.
The increasing sophistication of the technology in today’s vehicles also contributes to rising costs, said Robert Passmore, department vice president of personal lines at American Property Casualty Insurance Association. Cameras and sensors, which are used for various driver-assistance technologies, like emergency braking, automated parking and blind-spot monitoring, require parts that are more expensive to replace. They're also subject to higher labor costs, Passmore said.
Triple-I: Insurance Economic Drivers Outperforming Overall US GDP, and Likely to Gain Further Momentum on Federal Reserve Cuts
The economic drivers of the U.S. property/casualty (P/C) insurance industry are now growing faster than the nation’s Gross Domestic Product (GDP) and are expected to gain further momentum in the event of Federal Reserve monetary rate cuts, according to the Insurance Information Institute’s (Triple-I) latest Insurance Economics Outlook.
"We’ve been forecasting that P/C underwriting growth would catch up on overall GDP and it has,” said Michel Léonard, Ph.D., CBE, chief economist and data scientist, Triple-I, in the organization’s April 2024 Outlook. @iiiorg
“Triple-I forecasts P&C underlying growth to increase to 3.4% in 2024, 1.2% above the Fed’s GDP forecast of 2.2%. It will likely take at least another year for this economic rising tide to lift the P/C industry’s overall growth and performance.”
“Triple-I expects P&C underlying growth to continue outperforming overall GDP growth into 2025 and 2026,” Léonard said. Using the Fed’s GDP forecast as a basis for comparison, underlying insurance growth is expected to outperform overall U.S. growth by an average of 2.0% over the next three years, the report explains.
“Different economic stress scenarios may reduce or widen the spread between P&C underlying growth and overall GDP growth, or even reverse the overall trend of P&C underlying growth outperforming overall GDP growth,” said Léonard. “The top two risks to underlying insurance growth and overall GDP growth is the Fed slowing or reversing course on monetary easing and renewed geopolitical risk including global supply chain disruptions
Climate/Resilience/Sustainability
Insurance "triple whammy" a major threat to people and the planet
A recent investigation conducted by ShareAction, a charity focused on responsible investment, has scrutinized the practices of the world’s 65 largest insurance companies, revealing significant shortcomings in the industry’s efforts to address a “triple whammy” – global warming, environmental degradation, and human rights protections.
Titled “Insuring Disaster 2024”, the report dissects the insurance sector’s role in underwriting and investing in ventures that exacerbate climate change, harm ecosystems, and neglect human rights. Notably, the study uncovered that only two insurers have pledged to avoid underwriting four of the globe’s most contentious fossil fuel initiatives.
In addition, a majority – two-thirds of the insurers – have no policies against underwriting companies involved in producing controversial weaponry, including chemical and cluster munitions. Furthermore, 30% of the evaluated insurers scored zero in developing policies aimed at safeguarding natural environments and biodiversity.
Despite the insurance industry annually disbursing over $100 billion for claims related to climate change impacts like flooding, storms, and fires over the past four years, investments and underwriting practices contributing to such disasters persist.
News
Following earlier cuts, San Antonio-based USAA axes 220 more jobs
Last summer, the financial services firm reported its first annual loss in a century.
San Antonio-based financial services firm USAA is laying off another 220 employees, marking its sixth round of pink slips over the past two years, the Express-News reports.
SAN ANTONIO NEWS Following earlier cuts, San Antonio-based USAA axes 220 more jobs Last summer, the financial services firm reported its first annual loss in a century.
USAA employs 19,000 people in San Antonio, where it operates a sprawling corporate campus. San Antonio-based financial services firm USAA is laying off another 220 employees, marking its sixth round of pink slips over the past two years, the Express-News reports.
Company officials declined to say which departments were affected and how many of the cuts occurred at its Alamo City operations, which employ 19,000 people, according to the daily. USAA has 37,000 workers nationwide.
By: Sanford Nowlin
MassMutual and Genomics Extend Genetic Testing to More Policyholders
The expanded program offers eligible MassMutual policyowners aged 35-70 access to polygenic risk testing via a saliva test that identifies hidden risk for eight common conditions.
MassMutual (Springfield, Mass.) and Genomics plc (Oxford, U.K.), have expanded a program that offers a genetic risk assessment service to MassMutual policyholders, providing insight into their personalized risk for eight major diseases. The expansion of the companies’ partnership follows a successful research collaboration in which more than 70 percent of policyholders who elected to use the risk assessment service reported intent to take preventative actions based on their risk scores, including plans to see their doctor or seek further screening, according to a joint statement from the companies.
Genomics’ at-home test studies millions of small variations in DNA, generating polygenic risk scores, that can inform the likelihood of certain conditions. The predictive power of this new type of genetic risk testing has the ability to improve individuals’ health outcomes by increasing patient engagement and activation and helping doctors make more informed decisions and recommendations for their patients, according to the joint statement.
During the initial Genomics and MassMutual research collaboration, 1 in 5 policyowners learned that they are at a higher risk for preventable diseases. The expanded program offers eligible MassMutual policyowners aged 35-70 access to polygenic risk testing via a saliva test that identifies hidden risk for eight common conditions: atrial fibrillation, breast, or prostate cancer (depending on biological sex), cardiovascular disease, high blood pressure, high low-density lipoprotein cholesterol, low bone density and type 2 diabetes. In addition to learning about their risk for each of the conditions, policyholders also receive actionable, tailored health advice and a report they can review with their doctor to reduce the chances of developing the condition.
Anthony R. O’Donnell, Executive Editor, Insurance Innovation Reporter
Commentary/Opinion
Three Reasons to Automate Your Inbound Subrogation Process
In 2023, Arbitration Forums reported that a staggering 1.1 million inbound subrogation files went to arbitration, which is 47% of the total 2.4 million demands filed within E-Subro Hub®. With an estimated average of 80 minutes spent per file, this amounts to a colossal 1.46 million hours of staff time spent on these demands, which has only continued to increase each year.
Handling inbound subrogation demands can be a daunting, time-consuming task. Demand packages, which can range anywhere from 25 to 200 pages in length, require meticulous manual review and validation, making them prone to inconsistencies. The results? Overpayments and the looming threat of arbitration.
The subrogation landscape needs a change, and CCC is here to help.
In our latest webinar, guest speaker Rick Trevino, Assistant Vice President at Loya Insurance Group, explained that the "inbound subrogation process has been manual and has not changed very much in [my] 26 years of tenure." Trevino discussed the importance of technology and how CCC® Inbound Subrogation leverages automation to improve efficiency with inbound subrogation processes.
Is the mass market failing wealthy insureds?
When you’re dealing with the glamorous and wealthy, personal service matters. That’s the mantra of boutique insurance business Personal Risk Management Solutions (PRMS), and it appears to be working.
The high-net-worth (HNW) and ultra-high net worth (UHNW) specialist insurance broker has a 99% win rate when it comes to new business, according to PRMS chief operating officer and partner Dale Krupowicz (pictured).
The female-founded and managed business has also achieved or outpaced its 25% growth target every year since launch in 2007. It has pulled this off entirely organically, and the hard market has led to boom rather than bust for the business.
It boasts Forbes list honorees, major art collectors, entrepreneurs and large business owners among its roster. PRMS is active across 50 states and further manages international exposures.
“We have clients that run the gamut,” Krupowicz told IBA.
“It’s a completely different world” – the hard market impact
Keeping on top of clients’ needs has proved vital in today’s shifting marketplace. Insurance carriers have tightened their appetite, and some have pulled out of areas entirely as they look to cut down their exposure amid inflationary and severe weather pressures. Clients with properties in California, Florida, New York City, the Hamptons, Colorado, Louisiana and Texas have felt the strain.
“We have to advise our clients a little differently than we have in the past,” Krupowicz said.
For some, this has meant a mindset shift of looking at insurance as a vehicle for payouts in catastrophic situations rather than smaller claims. That could mean looking at higher deductibles, sub-limits, or, for UHNW clients, even self-insuring. The non-admitted market has played an increasing role.
“Five years ago, if a client came to me, and they wanted to insure a luxury condo, a ski house, a beach house, I’d have insurance companies knocking down my door trying to write the business,” Krupowicz said. “That same client today, if I get an offer it could be 50% to 100% more than what they would have paid back in 2019, it’s a completely different world.”
Announcements
CCC making data sharing more flexible across products
CCC Intelligent Solutions has shared that its new streamlined workflow will work for everyone involved in a claim or repair and stand as a “technology-backed vision to power the next evolution of the industry.”
Called “Intelligent Experiences,” CCC said in a news release that the different perspectives of consumers and businesses will now be synthesized through its core cloud platform CCC IX Cloud “to help deliver the optimal outcome for everyone participating in a given interaction by orchestrating data, AI, and ecosystems at scale.”
CCC told Repairer Driven News the capabilities of CCC IX Cloud will be expanded to make data sharing more flexible across the company’s products for those who use them. Repairers will continue interacting with CCC One and have access to the same data as they do already, CCC said.
“We hear from customers that they want to connect to ecosystem trading partners in new and more intelligent ways,” CCC said. “For years we’ve provided data point-to-point. The intelligent mesh architecture will allow data to move more efficiently across our network.
“For example, a repair facility may receive a digital payment from an insurer once a claim has been auto-approved. Another example: a consumer could share photos taken at the scene of the accident which flow through to the insurer, shop, and even other ecosystem providers, such as parts suppliers.”
Claims
LexisNexis Risk Solutions Enhances Claims Datafill with New Insights to Expedite U.S. Auto Insurance Claims Processing
LexisNexis® Claims Datafill now offers the capability to proactively inform insurance carriers about the availability of a police report or violation data to help expedite insurance claims and improve the experience for consumers experiencing a loss event. Gathering information is one of the most time-consuming and costly steps in the claims process. According to 2023 LexisNexis Risk Solutions claims satisfaction research, 33% of consumers cited the length of time to settle claims as a primary reason for switching carriers.
Increased claims severities, which are well above historical averages, have continued to challenge the U.S. auto insurance market, registering six consecutive quarters of at least 5% growti. Fueled by labor and part shortages, the cost to repair – or replace – vehicles is increasing. More than a quarter of collision events from 2022 (27%) were total losses, which has added more expense pressure on American consumers as auto insurance rates are up almost 21% for the 12 months ended in February.
Part of the LexisNexis® Claims Compass platform, Claims Datafill is designed to help claims organizations validate data and information on people, policies and vehicles. It helps enable U.S. auto insurers to accelerate claim closings with more complete information and shave meaningful time off the claims process. New event monitoring features will help adjusters make more informed liability, subrogation and triage decisions with actionable insights delivered throughout the lifecycle of the claim.
"Event monitoring is a significant leap forward in our mission to empower insurers with a holistic picture of a claim event and save insurance adjusters from hunting for information and avoiding unnecessary exchanges with claimants," said Tanner Sheehan, vice president and general manager, claims, LexisNexis Risk Solutions. "Consumers want a quick, precise and easy claims experience, or they may consider shopping for a new insurance carrier. Claims Datafill can help improve customer experiences by limiting questions to consumers and expediting the steps of the claims process."
Data Privacy
DataTouch Launches Data Pump Manager for Auto Body Shops
The Data Pump Manager is designed to share only the correct estimate and needed repair information to conduct business with each service provider.
DataTouch LLC has announced the commercial release of the Data Pump Manager, a new technology that provides control over software data pumps that have been installed on shop computer systems. The Data Pump Manager is designed to share only the correct estimate and needed repair information to conduct business with each service provider.
Pete Tagliapietra, managing director of DataTouch, said the company continues to design data security software that allows shops to have complete control over estimates, personally identifiable information (PII) and repair information.
People
Lloyd’s announces US CEO; Watkins to leave
Lloyd’s of London Thursday said Dawn Miller has been appointed chief commercial officer of Lloyd’s and CEO of Lloyd’s Americas, effective Sept. 1, as Hank Watkins, regional director and president of Lloyd’s Americas, prepares to step down after 15 years at Lloyd’s.
In her expanded role as chief commercial officer, Ms. Miller will continue to lead the commercial directorate, retaining accountability for Lloyd’s Global Network. She also will remain a member of Lloyd’s Executive Committee, the statement said.
As CEO of Lloyd’s Americas, Ms. Miller will be responsible for relationships and growth in the region and building greater alignment with Bermuda.
Based in New York, Ms. Miller joined Lloyd’s in 2022 and was a commercial director prior to the announcement.
Also effective Sept. 1, Marc Lipman has been named president of Lloyd’s Americas, based in Canada, succeeding Mr. Watkins, regional director and president of Lloyd’s Americas, who will be leaving Lloyd’s at the end of this year.
Mr. Lipman joined Lloyd’s in June 2020 and had been president at Lloyd’s Canada Inc.
John Neal, Lloyd’s CEO, said in the statement that “the Americas represents over 60% of our market’s total premium” and that Lloyd’s is seeking “to increase our presence.”
Previsico Hires Aleksander Surowiak from Tractable AI to Supercharge Growth
Surowiak will define and execute an updated sales strategy and implement structures, systems, and processes to enable Previsico to achieve an ambitious growth plan.
Previsico, a London-based InsurTech providing real-time, street-level surface water flood forecasts to mitigate flood impacts globally, has appointed Aleksander Surowiak as Head of Sales to drive growth and nurture pivotal partnerships within the insurance sector. Surowiak brings extensive startup scaling experience, having spearheaded sales in Northern and Central Europe at Tractable AI, playing an important role in the company’s rise from a fledging startup to the U.K.’s 100th unicorn.
Surowiak will be charged with scaling the go-to-market function while nurturing key partner relationships, according to a Previsico statement. He will define and execute an updated sales strategy and implement structures, systems, and processes to enable Previsico to achieve an ambitious growth plan.
“Previsico is already delivering the world’s leading real-time surface water flood forecast technology to help mitigate the impact of floods in the U.K., U.S., and beyond,” comments Jonathan Jackson, CEO, Previsico. “As we continue to expand, Aleks’ experience and expertise in working with major clients and stakeholders will be hugely beneficial to us. We are delighted to welcome him to our winning team.”