News
US P&C 2023 underwriting improves, personal lines continue to drag: Triple-I/Milliman
The U.S. property & casualty (P&C) industry saw its second consecutive year of underwriting losses, with a net combined ratio of 101.6% for 2023. While there was improvement from 2022, personal lines still remained the major driver of unprofitability in 2023.
According to industry underwriting projections by actuaries at the Insurance Information Institute (Triple-I) and Milliman, a collaborating partner, premium growth is expected to further improve underwriting results throughout 2024, with the 2024 P&C industry net combined ratio currently forecast at 100.2%.
Dale Porfilio, FCAS, MAAA, chief insurance officer at Triple-I, commented: “The overall picture from prior quarters remains the same with commercial lines performing better than personal, but to a lesser extent,” he said. “The 2023 commercial lines net combined ratio was 96.2, 1.4 points worse than the 2022 result. While still unprofitable, personal lines improved 3.2 points relative to 2022.
“For 2023, the personal lines expense ratio improved by almost 2 points over 2022, most dramatically in personal auto. The net written premium growth rate for personal lines surpassed commercial lines by over seven points in 2023. Continued personal lines premium growth should lead to further convergence in underwriting performance in 2024.”
Jason B. Kurtz, FCAS, MAAA, a principal and consulting actuary at Milliman, explained that for commercial auto, the 2023 net combined ratio of 109.2 is 3.8 points higher than 2022, and 10.3 points higher than 2021.
Car insurance costs are surging — but it's not because of price gouging
Like many consumers, President Biden rants about shrinkflation, junk fees, and corporate price gouging.
But the most eye-popping inflation at the moment is coming from an industry that’s bearing large operating losses and has actually been undercharging consumers for the last few years.
According to Wednesday's CPI reading, the cost of car insurance is up 22.6% during the past year, the biggest jump by far across the 28 major spending categories Yahoo Finance has been tracking since 2021. During the last four years, car insurance has soared by 57% to an average annual premium of nearly $2,300, according to Bankrate.
Yet there’s no profit windfall like those energy companies enjoy when the price of gasoline skyrockets. Instead, US auto insurers have endured three consecutive years of underwriting losses, which means they paid out more in claims and expenses than they took in through the premiums we pay.
These losses totaled $33.2 billion in 2022, according to AM Best, a ratings agency focused on the insurance industry. The underwriting loss narrowed in 2023 to $16.9 billion, but S&P Global Ratings expects another year of red ink in 2024 before premiums once again exceed costs in 2025.
The insurance industry overall is still profitable. Auto insurance is only about one-third of all the insurance carriers provide in addition to home insurance and other types of coverage. The industry’s overall profit margin dipped from 10.9% in 2021 to 4.7% in 2022, according to S&P Capital IQ. It may have rebounded to 9.5% in 2023, but that's still below the 11.1% average for the S&P 500 as a whole.
So, as aggravating as soaring premiums are for drivers, insurers are largely blameless.
“They’re not price gouging,” Patricia Kwan of S&P Global Ratings told Yahoo Finance. “What caught the insurance industry by surprise is supply chain issues; there were a lot of shortages, the cost of repairs got more expensive, and labor costs also went up.”
Citizens gives approval to $5.5 billion reinsurance strategy
Plan includes several layers for losses across different segments
Citizens gives approval to $5.5 billion reinsurance strategy Reinsurance
Citizens Property Insurance Corporation has unveiled its $5.5 billion reinsurance strategy for 2024, designed to manage the increasing property exposure in Florida and adapt to evolving reinsurance market dynamics.
Florida’s property exposure is anticipated to climb to $3.6 trillion in 2024, marking a 9.3% increase from $3.3 trillion in 2023. The growth is attributed to factors such as population expansion, new construction, and rising property values.
As per a report, Citizens reported a 31% increase in gross exposure in 2023 and projects additional 7% growth for 2024.
The 2024 reinsurance plan for Florida’s state-backed insurer of last resort includes a $630 million “sliver layer” providing annual per occurrence coverage for personal, residential, and commercial residential losses. This coverage is designed to function in conjunction with the mandatory coverage offered by the Florida Hurricane Catastrophe Fund.
Positioned above the sliver layer and the Catastrophe Fund, Layer One is structured to deliver $4.9 billion in coverage for both personal and commercial residential losses. The layer’s strategy features a $500 million renewal risk transfer via Lightning Re, a multi-year note that provides aggregate coverage.
It also encompasses approximately $4.4 billion in occurrence and annual aggregate coverage sourced from both traditional and capital markets.
Commentary/Opinion
Coverage cuts, digital claims and other changes impacting the P&C market
The proliferation of risks impacting the property and casualty insurance market means that insurers have to be constantly aware of the latest developments that are reshaping their business.
On the West Coast, the California Department of Insurance (CDI) announced in March a sustainable insurance strategy proposal that would allow the use of catastrophe (Cat) modeling to improve the availability of coverage. The move, however, did not prevent State Farm from announcing on March 26 that it was cutting 72,000 policies in the state, citing wildfire risks.
"State Farm's latest action seems more related to their larger fiscal situation nationally than the pace of the administrative procedures around the Cat modeling and reinsurance pass through regulations," Amy Bach, executive director of United Policyholders (UP), recently shared via email with Digital Insurance.
Bach has long been skeptical about the merits of Cat modeling, writing in a July 2023 letter to CDI attorney Jon Phenix, "We firmly believe that allowing the unfettered use of Cat models for rate setting will create more problems than it will solve."
Instead, Bach proposed that the CDI should allow insurers to apply a trend factor to past catastrophe losses to recognize the increase in wildfires, or an industry-wide catastrophic loss experience model.
The increase in secondary perils like wildfires is one of the key insights in Marsh McLennan Agency's 2024 Commercial Property Insurance Trends, which highlights the significant factors influencing the commercial property industry and outlines strategies for navigating these challenges.
The report cites AM Best, which shares that secondary perils account for higher total losses than primary perils. Tornadoes, hailstorms, flooding and wildfires are among the secondary perils posing significant risks, with floods ranking as the highest loss leader in the United States.
The Marsh McLennan report highlights how accurate risk assessment is paramount in informing decisions regarding coverage modifications and loss prevention strategies. It also emphasizes data utilization in diversifying risk management portfolios.
Why all insurtechs should insource claims and customer care
All insurtechs have something in common: they promise to improve the customer experience over traditional players.
And yet I’m surprised to see that many of them have decided to focus more on the tech and building a great digital customer acquisition experience without investing in customer lifecycle management (aka customer care) – and even less in claims management.
In fact, too many of them have simply outsourced these processes – particularly putting claims management in the hands of traditional third-party administrators (TPAs) or even the insurer that is carrying the risk on its balance sheet.
So in the end, insurtechs say that they're improving the customer experience, but in practice they’re doing the opposite.
Insourcing vs. outsourcing insurance claims management
From a strategic perspective, I understand that the focus of any new player is on acquiring customers. After all, a company that doesn’t sell any insurance contracts doesn’t have any claims to manage, so it makes sense to focus on acquisition first.
At Qover, we decided to insource the full customer care experience from day one, and to sub-delegate claims management to TPAs or the insurer itself. We could outsource claims, while the risk carrier still allowed us to control the quality of the process and to step in when needed. Rather than pure outsourcing, it involved supervising and controlling the claims process.
Claims are the moment of truth in insurance. This is where you can really show customers that you’re delivering on your promise and building a better world (or not).
We received poor quality of data from TPAs or risk carriers.
Quentin Colmant, CEO and Co-founder at Qover
How Car Detection Sensors Revolutionize Modern Automotive Tech
Innovations in automotive technology have significantly enhanced vehicle safety and efficiency. Integrating innovative components has been central to these improvements, ensuring that driving is safer and more convenient than ever before. This integration also enables cars to adapt to the evolving demands of modern road conditions.
Among the most impactful innovations is the car detection sensor. These sensors are essential for ensuring various safety functions like collision avoidance, parking assistance, and adaptive cruise control operate effectively. Emphasizing the necessity of obtaining them from reputable sources underscores the importance of authenticity, optimal performance, and reliability, all crucial elements for upholding stringent safety norms in present-day vehicles.
Car detection sensors enhance vehicle safety by giving drivers vital proximity awareness. (Credit: Intelligent Living) Vehicle Safety Through Proximity Awareness
Car detection sensors enhance vehicle safety by giving drivers vital proximity awareness. It alerts drivers to obstacles in blind spots and during complex maneuvers like parking. The ability to detect nearby vehicles and objects reduces the risk of collisions and can save lives.
Integrating advanced car detection sensors into vehicles facilitates smoother traffic flow and more efficient parking space management, especially in congested urban environments. This technology not only heightens safety but also contributes to a more seamless and stress-free driving experience.
Improving Traffic Flow and Reducing Congestion read on
Research
U.S. product recalls reach highest quarterly total in past five years
Amidst stricter regulatory oversight and closer consumer scrutiny, U.S. product recalls increased eight percent quarter-over-quarter in Q1 2024. According to Sedgwick brand protection's latest U.S. Recall Index report, there were 909 recalls across five key industries in Q1, the highest single-quarter total in over five years. In contrast, the number of defective units fell 44.0% across all five industries, from 230.7 million in Q4 2023 to 129.6 million in Q1 2024.
Sedgwick's industry-leading Recall Index report offers in-depth analysis of the latest product recall data, safety regulations, and key challenges for the automotive, consumer product, food and drink, medical device, and pharmaceutical industries. Released quarterly, the report features unrivaled analysis and exclusive perspectives from Sedgwick's brand protection experts and network of strategic partners, the Index is a key resource in helping mitigate recall risk, litigation, and reputational damage caused by product crises and in-market events.
Product recall highlights from Q1 2024
Automotive recalls increased 9.2% quarter-over-quarter, with 262 events in Q1 2024. However, the number of units impacted fell 15.2%, from 14.7million in Q4 2023 to 12.5 million in Q1 2024. Electrical systems were the leading cause of recalls for the fifth consecutive quarter.
There were 92 consumer product recalls in Q1 2024, a 5.7% increase from the previous quarter. In contrast, the number of units impacted fell 71.8% from Q4 to 23.4 million, although the previous quarter marked a six-year high for units impacted.
InsurTech/M&A/Finance/Collaboration
Handdii Holdings Inc. Secures Strategic Investment by Johns Lyng Group to Meet Rising Demand for Managed Repair
Handdii Holdings Inc. (“handdii”), a pioneer in digital property claims, today announces strategic investment by Johns Lyng Group (“JLG”), a leading provider of integrated building services and restoration solutions. This investment comes as the demand for trusted, quality providers in insurance property repair is on the rise.
“We are delighted to enter into this strategic alliance with Johns Lyng Group. This investment not only aligns with our core competencies but also signifies our shared commitment to driving positive change and advancement in the property insurance claims sector.”
Amidst increasing pressure on insurance companies to manage growing claims costs while ensuring quality construction services for policyholders, the $100 billion U.S. industry is turning towards managed repair services at an accelerated rate. handdii, with its cutting-edge digital platform for policyholders, not only streamlines the claims process and controls costs for insurance firms but also offers peace of mind through its robust managed network of local contractors spanning 38 states.
Establishing itself in the U.S. in 2019 through the acquisition of Steamatic Inc. and significantly growing that presence with the 2021 acquisition of Reconstruction Experts, JLG has strategically expanded its operations, now boasting 33 business partners across 51 locations in 5 states, and a growing affiliate network nationwide.
This newfound partnership between handdii and JLG will effectively double the combined contractor field force, enhancing both parties' service capabilities. The investment will empower handdii to tap into JLG’s resources and support, enabling the expansion of operations and enriching service offerings in the competitive U.S. market. Simultaneously, Johns Lyng Group will leverage its expertise in restoration and construction services to drive growth and development in the region.
Christie Downs, CEO & Co-Founder of handdii said: "We are delighted to enter into this strategic alliance with Johns Lyng Group. This investment not only aligns with our core competencies but also signifies our shared commitment to driving positive change and advancement in the property insurance claims sector."
Cover Genius Closes $80M in Series E Funding as Investors See $700 Billion Opportunity in Embedded Protection
Cover Genius, the leading insurtech for embedded protection, today announced its $80 million Series E funding round. Despite the tech funding slowdown, the round was led by Spark Capital with support from existing investors, including Dawn Capital, King River Capital and G Squared.
This funding follows a remarkable year of sustained growth and expansion for Cover Genius and its award-winning global distribution platform, XCover. In 2023, the company achieved a remarkable 107% year-on-year growth and maintained an impressive 145% Net Revenue Retention by partnering with some of the world’s largest digital businesses to provide embedded protection to over 30 million customers worldwide.
“The display of trust from our investors highlights the resilience of our embedded business model and potential for growth, particularly as we strategically focus on key markets like travel, retail, ticketing, and logistics,” said Angus McDonald, CEO and co-founder of Cover Genius. “Our collaborations with well-known brands, including Uber, Ryanair, and eBay, demonstrate our unique ability to create customer-centric protection solutions backed by technology, policy innovation, and industry expertise.”
“Cover Genius’ technology platform, global presence and focus on digital claims initially caught our attention years ago,” said James Kuklinski, General Partner at Spark Capital. “By tackling common insurance obstacles such as limited market coverage, lengthy claims processes, and a lack of product diversity, the company has evolved into a category leader. We couldn’t be more excited to partner with the company as they continue driving more value to partners and a best-in-class consumer experience.”
The fresh capital will allow Cover Genius to expedite its growth plans and continue to invest in cutting-edge technology, including improved digital insurance distribution solutions, deploying Artificial Intelligence (AI) claims handling and expanding the protection solutions available on the platform. The improved tech capabilities and expansion of solutions will support new and existing partnerships, driving the creation of distinct solutions that offer innovative ways for digital companies to distribute protection products, such as Cancel For Any Reason (CFAR), Delay Valet (payment for travel inconveniences), Protection Pocket, and other types of protection.
MAPTYCS® Inc. partner with Munich Re for property and climate risk exposure.
MAPTYCS®, a leading property and climate risk exposure management firm, and Risk Management Partners (RMP) have partnered to provide businesses with access to Munich Re`s Location Risk Intelligence data via the MAPTYCS® platform, one of the most user friendly and highly performing solutions to manage property and climate risk exposures.
RMP is a unit of Munich Re, one of the world's leading providers of reinsurance, primary insurance and insurance-related risk solutions and a pioneer in the global assessment of natural hazards and climate-related risks. Risk Management Partners draws on this experience to develop advanced risk assessment capabilities.
MAPTYCS® is an intuitive and real-time geospatial risk exposure platform that is built to process large volumes of data and offers powerful risk analytics and visualization features. With the rise of natural disasters and the hardening of the property insurance market, risk professionals use MAPTYCS® to consolidate increasingly complex datasets and gain a granular understanding of their property and climate risk exposure.
Jacqueline Legrand, MAPTYCS® CEO said: "We partner with Munich Re's RMP, because it is in our strategy to offer our clients the greatest quality risk data across the world from renowned and well-established partners."
Innovation
Innovation and tech at State Farm revealed in patents for sale
State Farm launched a new website highlighting some patent inventions for sale and the tech spaces where they can be found.
More than an insurance company, State Farm is on the forefront of innovation and is showcasing some of its patented technology available for licensing, purchase or collaboration opportunities.
“As one of the most innovative companies in our industry, at State Farm we pride ourselves on creating the most advanced, leading-edge technologies to help keep our policyholders safe," said Haden Kirkpatrick, Vice President - Innovation & Venture Capital. "We’re excited to launch our patent website to extend our Intellectual Property assets and help offer these advanced technologies to firms which share our mission of helping more people in more ways. As we look to the future, we see the opportunity to predict and prevent losses, keeping our policyholders and fellow citizens safer and better protected than ever before.”
The patents in this portfolio fall under a variety of buckets including:
Artificial Intelligence Software
Autonomous & Electric Vehicles
Blockchain
Auto Telematics
Smart Home Technology and more
Interested parties can go to the website where there is a representative snapshot of some of the cutting-edge work being done at State Farm. If you want to learn more about our robust portfolio and are interested in purchasing, licensing or collaborating with us, email patents@statefarm.com and our patent team will respond to discuss your area of interest.
Events
InsurTech Summit 2024 June 4, 2024 | 2:00 – 7:30 PM (ET)
Special Discount for 'Connected' readers. Use Code; INSURTECH30 for 30% discount off registration, here
As a leader in insurance innovation, we extend this exclusive invitation to join us for InsurTech Summit 2024, a curated half-day program featuring top insurance-focused investors, start-up founders, key players from emerging companies and other industry stakeholders.
Experience engaging discussions and gain sharp insights into the commercial and legal issues currently impacting this rapidly evolving sector.