Commentary/Opinion
Could climate lawsuits become the next tobacco litigation?
As this type of litigation continues to evolve, insurance companies are keeping close tabs on the situation.
Does a spike in climate change-related litigation mean it is on-track to impact oil and gas companies the way earlier lawsuits had on the tobacco, asbestos and opioid industries? A recent report from Standard & Poor's Global Ratings (S&P) delved into that question.
Litigation over climate change has quadrupled over the past decade, rising to about 2,410 cases by 2023 versus 581 by 2013.
This could have a major financial impact on major corporations, but its influence is difficult to measure so far, according to S&P.
The good news for defendants is the volume of lawsuits over climate change has fallen off slightly after a worldwide peak in 2021, according to S&P's report, "Climate Litigation: Assessing Potential Impacts Remains Complex."
But plaintiffs are pursuing a broader range of targets, and the legal basis for those suits is widening, the report said.
One sector—the oil and gas industry—appears ready to bear the brunt of costs from these lawsuits, but publicly available data on costs incurred in such litigation is sparse.
"We believe that, generally, oil and gas companies subject to climate-related lawsuits are able to absorb the financial consequences of a ruling against them without a material negative impact on their credit profiles. However, if many companies in the sector were hit with financial litigation-related penalties, the implications could be more material for the sector overall," the S&P report said.
Trends Last year, litigants filed 200 climate change suits globally, down from 254 in 2022 and 263 in 2021.
Warren Buffett warns of AI risks: A "genie that scares the hell out of me"
Investing legend Warren Buffett on Saturday delivered a stark warning about artificial intelligence, likening the technology's rise to the development of nuclear weapons in World War II.
Why it matters: While it's not the first time Buffett has weighed in on AI risks, it comes at a time when AI is already creating vast amounts of paper wealth and stoking expectations about how the technology will upend everyday life.
Driving the news: Buffett made his remarks at Berkshire Hathaway's first annual meeting without Charlie Munger, the second-in-command who died in November at the age of 99.
Although Berkshire isn't directly invested in AI stocks, technology giant Apple remains its largest holding, even as the holding company significantly pared its massive stake in Q1.
What he's saying: During a question-and-answer session in Omaha, Buffett downplayed his expertise in AI, but "that doesn't mean I deny its existence or anything of the sort."
He harked back to his remarks at last year's meeting when he "said we let a genie out of the bottle when we developed nuclear weapons and that genie has now been doing some terrible things lately, and the power of that genie scares the hell out of me."
"Other than that I don't know any way to get the genie back into the bottle. AI is somewhat similar, it's part [of the] way out of the bottle and its enormously important, and it's going to be done by somebody so we may wish we'd never seen that genie or it may do wonderful things."
He specifically cited the rise of deepfake technology, where he described seeing one using his likeness, "and it was delivering a message that in no way came from me. So when you think of the potential for scamming people … scamming has always been part of the American scene but … it's going to be the growth industry of all time."
Verifying AI content is integral to protecting insurers against liabilities
The increased utilization of AI will improve efficiencies in routine tasks, but it does not eliminate the need for human oversight.
A robot hand and human hand touch fingers. Photo: ImageFlow/Adobe Stock 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 is an associate at Segal McCambridge in the firm's Chicago office. Evan Trevino is an associate at the firm who concentrates on first-party insurance defense litigation.
News
News + Notes: NAIC Issues National Call for Data, TPLF Sees Dip in 2023, New Ban on Asbestos Finalized and More : Risk & Insurance
The NAIC’s national call for policy and claim is intended to help regulators address a growing crisis in property insurance, but some states are opting out of full participation in an effort to attract new capacity.
NAIC’s Call for Data Meets Resistance
A comprehensive initiative by state regulators to investigate the high costs and accessibility of homeowners insurance faces hurdles, as key states consider opting out of the data request, according to the New York Times.
The National Association of Insurance Commissioners (NAIC), the body that represents state insurance regulators, announced in March that state agencies were seeking detailed data from insurers, including the types of coverage offered in different ZIP codes, recent claims payouts history, customer deductibles and opportunities for discounts through home improvements. The aim was to address the affordability and availability of homeowners insurance and the financial health of the insurance industry.
The data request — the largest and most comprehensive ever conducted at the national level — was set to reach over 400 insurance companies, providing insight into approximately 80% of all homeowners’ plans in the U.S., based on total insurance premiums. Some of the data was to be shared with the Treasury Department to help identify areas where homeowners face the highest risks and living costs.
However, each state regulator has the discretion to participate in the data call, and some states facing the highest risk of damage from severe storms and turbulent insurance markets — including Louisiana, Texas and Florida — have signaled they may share limited data or opt out entirely. This reluctance could create a significant gap in regulators’ picture of homeowners insurance markets nationwide and hinder their efforts to address the complex issues caused by inflation and severe weather due to climate change.
The reluctance of states like Texas and Florida to fully participate, and Louisiana’s complete opt-out, could leave out crucial data. Louisiana’s insurance regulator, for example, has decided not to compel companies operating in the state to share their data, focusing instead on regulatory and legislative efforts to attract insurers and stabilize the market.
Despite this, regulators maintain that the program represents a significant advancement in understanding homeowners insurance. The data collected could shed light on why major insurers have withdrawn from states like Florida and California, and why some homeowners, unable to afford rising insurance costs, have reduced their coverage.
Fannie Mae and Freddie Mac Postpone Updated Guidance for Property Insurance CoverageFannie Mae and Freddie Mac Postpone Updated Guidance for Property Insurance Coverage
Earlier this year, at the direction of the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac updated their selling and servicing guides to clarify various lender and servicer responsibilities related to monitoring and verifying property insurance coverage.
The updated guidance was set to take effect on June 1 and would have impacted a significant portion of the property insurance market by requiring mortgagors to acquire replacement cost value (RCV) coverage for their property.
Given that the National Association of Realtors estimates that Fannie and Freddie support approximately 70% of the mortgage market, this change would have a real-world impact on the many homeowners who are unable to satisfy the coverage requirements or who are forced to purchase a higher-cost insurance product to do so.
However, on Wednesday, at the request of the Big “I" and other stakeholders, Fannie and Freddie announced that the June 1 implementation of this updated guidance is being postponed indefinitely. The Big “I" was the only agent trade association to weigh in on this issue with the FHFA and government-sponsored enterprises (GSEs), communicating with each and submitting a joint letter with the National Association of Mutual Insurance Companies stating that the guidance would exacerbate existing challenges in the property insurance market.
The action taken by Fannie Mae and Freddie Mac to delay implementation of the guidance will allow stakeholders to come together and discuss the issue and the Big “I" appreciates the willingness shown by FHFA and Fannie and Freddie to reconsider the updated guidance.
The guidance would require homeowners to obtain complete RCV coverage for all aspects of their homes and explicitly states that actual cash value (ACV) coverage is unacceptable. Importantly, this mandate includes roofs, even though lenders and servicers in the vast majority of states have long accepted the use of ACV for roofs.
Fender benders mean serious high-tech repairs now
Auto body repair was a pretty straightforward business not that long ago. When metal got bent in a crash, someone needed to unbend it. It was a craft.
These days, it’s high-tech. Virtually every new vehicle sold in the last few years has sensors and cameras, including radar and sonar, throughout the body of the vehicle.
Those sensors dot the body of a car like little round buttons. Sometimes shiny black boxes are also embedded in the grille and what look like camera lenses are mounted behind the windshield up high near the rearview mirror.
These have made the repair process more complex because, unlike a smashed fender, a sensor or camera can’t just be bolted or welded back on. To work, they need to be carefully and precisely aligned. It’s changed the process of collision repair a lot.
“The change that we’ve seen in the last five years is greater than we’ve seen, probably, in the last five decades,” said Todd Dillender, chief operating officer of Caliber Collision, one of the biggest auto body repair companies in the United States with more than 1,700 locations across 41 states.
According to a study by the consumer automotive group AAA, fixing sensors and cameras now accounts for more than a third of the post-crash repair costs in a new vehicle.
It’s important to note that no one, including AAA, recommends not getting these features because of repair costs. Systems like automatic emergency braking, blind spot monitoring, and rear cross-traffic alerts can reduce your chances of getting in a crash in the first place. That’s one reason automatic emergency braking is now nearly universal on new cars and, in a few years, will be required in the United States.
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Claims
Hi Marley, Copart partner to enable insurer-consumer communication during total loss
Hi Marley and Copart now offer a product that the companies claim to be the “first-of-its-kind” to accelerate the total loss claims process for insurance carriers and policyholders.
Total Loss Assist integrates Copart’s Seller Portal with Hi Marley’s Insurance Cloud to create one conversation thread between the policyholder and other relevant parties and automate workflows to guide the policyholder through the total loss process and set expectations about the next steps, according to a news release.
It also sends real-time customized notifications from Copart to adjusters in Hi Marley about clear actions to take next as well as personalized and automated texts through Hi Marley to customers based on Copart alerts.
Hi Marley collaborated with several insurance carriers, including Plymouth Rock Assurance, to help design and develop Total Loss Assist.
Mike Greene, co-founder and CEO of Hi Marley, said insurance problems are complex and can’t be solved in a silo.
“We listen to carriers to understand their biggest pain points and partner with like-minded organizations, such as Copart, to design solutions,” he said. “These relationships within the insurance ecosystem are vital to innovation and accelerate our ability to solve problems for insurance carriers and their customers.”
Early adopters of Total Loss Assist resolved claims around two-and-a-half days faster, on average, with a 30% reduction in cycle time, according to the release. They also reported an increase in five-star survey results from policyholders who experienced the total loss claim process.
“Our early indicators point to higher customer survey scores and reduced cycle times,” said Paul Measley, Plymouth Rock Assurance chief claims officer, in the release. “We’re confident Total Loss Assist will bring an improved total loss process to our customers and employees.”
Hi Marley and Copart began its partnership in September 2023 to identify opportunities and use technological innovation to improve total loss claims handling, the release states.
Innovation
Synthetik successfully demonstrates its advanced flood analysis tool - Reinsurance News
Synthetik has announced the successful demonstration of Flowcore, its “Flood Data Collection and Analysis” platform designed for modelling flood scenarios and predicting resulting damages and financial/insurance losses.
Flowcore integrates Synthetik’s specialised GPU-accelerated flood simulation code and employs artificial intelligence (AI) to deliver rapid results. This capability enables the assessment of cumulative events or the analysis of high-volume probabilistic scenarios within seconds.
Flowcore’s reliability has been extensively validated using real-world events. For instance, it accurately recreated a flash flooding incident in Fort Lauderdale, FL, from April 2023 with exceptional precision, all achieved at unprecedented speeds.
Meeting the objectives set by the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP), Flowcore facilitates a better understanding of historical flood impacts, real-time analysis, and damage forecasting for future events nationwide.
Flowcore is already embraced by Synthetik’s partners in the insurance industry and signifies a significant advancement in the scalability of physics-based flood simulation.