News
Moody's: Home insurer premiums up, profits down
Insurers have responded to tough economic conditions by raising rates, tightening terms and shedding underperforming business.
Despite the fact that homeowners' insurance rates in the U.S. increased an average of 23% in 2023, according to Bankrate, the credit rating firm Moody's is reporting that carrier profit margins are down, prompting many insurers to launch profit-boosting strategies in the face of increased costs.
"Profitability in the U.S. homeowners' insurance sector has been weak in recent years as a result of exposure growth in catastrophe-prone areas, persistently high weather-related losses and rising costs to rebuild and repair homes," Moody's says in a new report on the start of the sector.
"Homeowners insurers have responded with sharp increases in premiums and tighter policy terms, and some have exited high-risk regions."
Among the report's key takeaways:
Over the past decade, the average combined ratio for the U.S. homeowners line was 101.3%, indicating insurers paid out more in claims than they received in premiums.
Insurers have responded by raising rates, tightening terms and shedding underperforming business. Nearly all states have seen double-digit rate increases in homeowners insurance over the past five years.
Carriers are reducing exposure to high-risk areas.
Insurers of last resort (aka residual markets) now represent roughly 3% of premiums covering homes in high-risk areas that are not covered by the private market, as private carriers pull back from high-risk areas.
Policy responses to physical climate risk shape the insurance market. Greater use of physical adaptation and risk mitigation will help insurers, governments, businesses and consumers manage physical climate risk. The (re)insurance industry could contribute by developing more sophisticated data and modeling and innovative products.
Mercury Insurance and Tokio Marine America Partner to Help Thousands of Californians Facing Non-renewals
Mercury Insurance (NYSE: MCY) is spearheading a plan to maintain insurance availability and provide coverage for thousands of California consumers. Tokio Marine America (TMA) and Mercury have closely cooperated to develop a plan to transition customers of TMA and its subsidiary, Trans Pacific Insurance Company (TPIC), to Mercury with assistance from a group of California independent insurance agents, and leadership from the California Department of Insurance.
"Innovative solutions surface during challenging times," said Gabriel Tirador, Chief Executive Officer and Director of Mercury. "A diverse group of entities worked together on this project with the common goal of providing coverage for California insurance consumers."
Tokio Marine America offers personal lines insurance only in California, representing a small percentage of the California personal lines market. Given the small segment of personal lines business and cost of updating its information technology systems, the company announced in April 2023 that it cannot sustainably support personal lines coverages and would be exiting the personal lines market. The Department of Insurance reviewed the proposal to transition customers to Mercury after Tokio Marine announced its withdrawal from personal lines.
TMA's and TPIC's exit has no impact on any other Tokio Marine Group company, and the company will continue writing commercial coverage for California businesses.
"We are pleased to have reached an agreement with Mercury Insurance Group to support our personal lines agents and customers during this transition period," said Daisuke Ugaeri, Chief Executive Officer at Tokio Marine America. "Tokio Marine America remains committed to commercial lines in California — and across the country — and supporting our agents and customers with exceptional service through this transition."
CNA Financial Corporation improves net income in Q1
CNA Financial Corporation is “off to an excellent start” this year, according to chair and chief executive Dino E. Robusto (pictured).
CNA’s P&C operations generated $2.39 billion in net written premiums in Q1. Of this total, $792 million came from specialty, $1.34 billion from commercial, and $260 million from international.
Commenting on the numbers, Robusto stated: “We are off to an excellent start with a record first quarter core income of $355 million, which benefited from 16% growth in net investment income and continued strong top and bottom line P&C performance.
“The all-in combined ratio was 94.6% and included 3.8 points of catastrophe loss, which is in line with our five-year first quarter average, and the P&C underlying combined ratio of 91.0% represents the 13th consecutive quarter below 92%.
“Gross written premiums ex. captives grew by 8% in the quarter with strong growth in commercial of 17% as the property market remains very favorable given the correction over the last couple of years, and casualty rate increases continue to accelerate.
Commentary/Opinion
Kevin Rampe Charts the Future of Chubb’s Claims Management
Kevin Rampe from Chubb shares insights on the future of claims management, focusing on the synergy between skilled professionals and advanced digital tools, the role of empathy in claims service, and the impact of data analytics on decision-making processes.
Risk & Insurance recently had a conversation with Kevin Rampe, the head of North America claims at Chubb, about the future of claims management, the role of empathy in the claims experience, and the impact of climate change on claims management at this year’s RISKWORLD conference.
What follows is a transcript of that conversation, edited for length and clarity.
Risk & Insurance: What is your vision for the future of claims management at Chubb, and how do you see that evolving over the next decade?
Kevin Rampe: At Chubb, claims management has always been centered around our people. We have an incredibly talented team with over a century of reputation for delivering outstanding claims service. Moving forward, maintaining this level of service will depend on our people’s ability to uphold technical excellence while effectively utilizing the tools we provide them.
These tools, whether digital or data-driven, will be crucial in enhancing the level of service our team can offer. By leveraging these resources, we can expedite the claims process, providing answers and payments more quickly to our clients.
AI in Insurance
Navigating The Fine Line: AI In Insurance And The Human Touch
In a world hyper-focused on efficiency and speed, the Ethical AI in Insurance Consortium's recent survey dropped a startling statistic: 80% of mid-size to large property and casualty (P&C) insurers are poised to deploy AI in decision-making within a year. This number isn't just a trend—it's a tidal wave reshaping the insurance landscape with profound implications. But how far should automation go? This isn't a question of whether AI should be utilized, but how to calibrate its role to best complement human expertise, ensuring fairness for all involved.
Recent tech controversies and consumer rights debates have surged in the news, including more states incorporating AI regulations. So, there's an evident need for industry leaders to embrace automation without losing sight of the personal touch—the soul of our industry—that forms the cornerstone of customer trust and satisfaction. Insurers must remember this while racing to innovate.
Building upon the foundational understanding that AI is transforming insurance, it's crucial to delve into how AI specifically alters the decision-making landscape in two of the industry's critical functions: claims processing and underwriting. AI's influence in these domains is profound, leveraging large datasets to predict outcomes and automate decisions with speed and precision that were once unimaginable.
Particularly in claims management, AI can sift through claims faster, identify fraudulent activity with more accuracy and enhance customer experience by expediting claims resolutions. In underwriting, algorithms analyze myriads of variables to assess risk, determine premiums and identify new product opportunities with customization not previously feasible.
Broker Insights launches AI-enabled tool for insurers to help win new business - Reinsurance News
Data analytics and market insight platform, Broker Insights, has launched Propensity Lens, which aims to improve efficiency for insurers by helping them to predict the possibility of winning business.
Propensity Lens is an addition to Broker Insights’ platform Vision Decision Intelligence, which includes data from over one-third of the UK commercial insurance market to connect brokers and insurers by overlaying partner insurers’ risk appetite with the broker’s customer data.
The AI-enabled tool also continually updates to reflect evolving market trends, ensuring accuracy and relevance. The model has undergone rigorous testing to ensure reliability and efficacy, reaffirming its status as an indispensable tool for insurers seeking to thrive in today’s dynamic commercial insurance landscape.
. Fraser Edmond, Chief Executive Officer, Broker Insights, commented, “We are thrilled to introduce the insurer Propensity Lens for new business. This product is the first of many envisioned AI-enabled products for our broker and insurer partners. With typical insurer no-quote rates of up to 80% and low conversion rates, there is a huge amount of wasted efforts on both sides.
Verifying AI content is integral to protecting insurers against liabilities
Artificial intelligence (AI), specifically generative AI models, in the corporate sector and insurance industry, is experiencing a dynamic evolution, both individually and collectively, to promote new opportunities for growth and differentiation in a competitive marketplace. The integration of AI has become a central force for promoting efficiency and accuracy across industries. Through the utilization of AI technologies, companies can optimize overall performance in various areas including customer service, sales, fraud detection, risk assessment and claims processing.
The increased utilization of AI will improve efficiencies in routine tasks, but it does not eliminate the need for human oversight. Human oversight is required to ensure ethical, legal and operational integrity within insurance operations. Human judgment is critical to ensure the integrity, fairness, and reliability of insurance operations in an AI-driven environment. By fostering collaboration between humans and AI systems, insurers can harness the strengths of both to achieve optimal outcomes while upholding ethical and regulatory standards.
AI algorithms are not infallible; they may exhibit biases or errors, particularly when trained on biased data or subjected to unforeseen circumstances such as system interactions, whereby the AI may encounter new patterns or types of data that were not present in its training datasets. Human oversight is required to identify and correct biases, ensuring that AI-driven decisions are fair, transparent, and accurate. Human experts can review AI-generated outputs, validate decision-making processes, and intervene when necessary to rectify inaccuracies or prevent harmful outcomes.
Sarah La Pearl & Evan Trevino
InsurTech/M&A/Finance💰/Collaboration
London-based InsurTech Eleos raises $4m to propel US expansion plans - FinTech Global
London-based InsurTech firm Eleos has successfully raised $4m in a seed funding round, as it eyes an expansion into the US market.
The seed funding round garnered support from Fuel Ventures and Indico Capital but also saw continued backing from previous investors, including Founders Factory, Insurtech NY, Magic Fund, and Indico Capital Partners, according to InsurTech Insights.
This tranche comes hot on the heels of Eleos’s pre-seed round completion merely six months ago, reflecting investor confidence in the company’s vision and potential.
Established in 2022, the firm has swiftly positioned itself as the UK’s sole provider of fully digital life insurance and income protection products.
With ambitions to surpass £1m in revenue by the end of 2024, Eleos addresses crucial gaps in the insurance sector, particularly in effectively communicating the importance of financial protections and delivering fully digital solutions.
Mark Pearson, founder of Fuel Ventures, remarked, “We’ve been looking for a way into the insurtech sector for a long time but to do that we need a team with specialist experience, an understanding of the challenges and access to a substantial market. With Eleos we’ve found all three and we believe their products encapsulate our thinking about the insurance space – giving people easy access on familiar platforms. We’re working together to make our shared vision of the future a reality and that’s why we’ve doubled down on our support for their growth and expansion.”
Innovation
FloodFlash US unveils new program
FloodFlash US has unveiled its Dealer Open Lot program, targeting car dealerships struggling to obtain flood coverage. The initiative comes as the US braces for a hurricane season predicted to be one of the most severe in years, placing additional risks on auto dealers whose inventories often reside on flood-prone lands.
Vehicle dealerships are particularly vulnerable, as automobiles can begin to float in as little as 12 inches of water, and deeper floods can cause substantial damage, leading to significant financial losses.
Recognizing the unique challenges faced by these businesses, FloodFlash’s new program offers a specialized parametric flood insurance that activates coverage through a sensor-based system, aimed at mitigating risks for dealers located in high-risk zones or those who have experienced previous flooding incidents.
“Certain sectors are underserved by existing flood carriers time and again,” said Rich Coyle (pictured), US commercial director at FloodFlash. “One of the greatest examples of this is auto dealerships. Many insurers baulk at the potential loss of car or motor-home stock that even low-level flooding can cause.
“Our new program is designed to support dealerships that have previously struggled to secure limits that would truly protect their businesses from flooding. It also rewards those businesses that are taking steps to mitigate their flood losses by aligning risk management practices with lower premiums.”
The Dealer Open Lot program is uniquely structured to address the direct needs of dealerships, covering potential losses from stock damage to business interruptions and relocation costs due to flooding.
Events
USA'S LEADING INSURTECH CONFERENCE Javits Center | New York | 5-6 June 2024
The insurance industry, no stranger to gauging risk, is facing its most profound disruptions in decades. Artificial intelligence, machine learning, Internet of Things, blockchain, data analytics and other emerging technologies are rising to prominence. Are you ready to transform your business?
Special Discount to 'Connected' followers: Use discount code INSURTECHCON25and receive 25% off your conference pass Register here
Fraud
Leader of ransomware gang LockBit named and charged by US
For years now, the leader of the ransomware gang LockBit, known as LockBitSupp, has been a provocative if mysterious presence on dark web forums.
He has goaded law enforcement authorities and aggressively recruited hackers from rival gangs. But his identity remained a mystery.
On Tuesday, however, US authorities revealed what they said was the identity of LockBit’s leader while indicting him for hacking-related crimes that carry a maximum penalty of 185 years in prison.
His name is Dmitry Yuryevich Khoroshev, a 31-year-old Russian national, described as the “creator, administrator and developer” behind the LockBit ransomware gang from its inception in 2019 to the present, according to US officials.
LockBit is accused of attacking at least 2,500 victims, which included at least 1,800 located in the US, according to the indictment. Khoroshev and affiliate hackers associated with his gang successfully extorted approximately $500 million in ransom payments from their victims, the indictment alleges, adding that Khoroshev himself pocketed at least $100 million.
Khoroshev remains at large, and the State Department offered a $10 million reward for information leading to his arrest or conviction. His smiling photo is now posted on a LockBit dark web page that was previously commandeered by law enforcement.
“The LockBit ransomware group represented one of the most prolific ransomware variants across the globe, causing billions of dollars in losses and wreaking havoc on critical infrastructure, including schools and hospitals,” FBI Director Christopher Wray said in a statement. “The charges announced today reflect the FBI’s unyielding commitment to disrupting ransomware organizations and holding the perpetrators accountable.”
Fraudsters using AI to manipulate images for false claims
AI-related insurance fraud with "shallowfakes" is up by 300%, according to Allianz UK.
"There is some fantastic technology out there, which is making our lives so much better in many ways," said Matt Crabtree, head of financial crime intelligence and investigation strategy at Allianz. "However, the sad reality is that fraudsters are using this same technology for their own illegal purposes and to target innocent members of the public to make a profit, with total disregard for the impact to the victim."
Insurance fraud costs the property and casualty insurance industry about $45 billion annually, according to the White Collar Crime Research Task Force at Colorado State University Global. These losses include homeowners, auto and commercial insurance, and American families foot some of the bill, paying up to $700 more per year to cover fraudulent claims and inaccurate applications. Now, fraudsters are using AI to manipulate images for fake claims. AI-related insurance fraud is up by 300% in all areas of insurance, according to an investigation by Allianz UK.
"Just as we use technology to help us detect fraud, dishonest people are increasingly using technology to try to get us to pay out for something that may not even have happened," said Scott Clayton, head of claims fraud at Zurich UK. "We, as insurers, have to keep up with technology and be alive to some of the new and emerging ways that people will try to make a fraudulent claims [sic]."
"Shallowfakes" Photo editing apps with generative AI features have made it easy to doctor images and videos, creating what experts call "shallowfakes" or "cheapfakes." These manipulated photos may appear legitimate at first glance and show how desperate scammers adapt their methods using new technology.
One fraudster in the UK filed a claim for an accident that never happened, using an image of a cracked bumper on his work van and a fake repair bill totaling more than $1,900, or €1,000. His insurer, Liverpool Victoria (owned by Allianz), had concerns about the case and sent the images to its fraud team for investigation. They found an identical image on the man's social media account, without vehicle damage.
An investigator at Aviva foiled another fraud attempt involving a $21,000 watch (£20,000) by discovering an identical photo online that showed the exact time down to the second. Aviva found a reported 9,250 fraud cases in 2022, helping the insurance giant avoid more than $129 million (£120 million) in false claims.