Research
LexisNexis® Insurance Demand Meter
On the LexisNexis® Insurance Demand Meter, quarterly year-over-year U.S. auto insurance consumer shopping activity clocked in at +2.9% even though volumes hurdled 2023’s strong first quarter.
While shopping growth was down slightly from last quarter’s +4.7%, the first quarter of the year still came in ‘Hot’. Quarterly year-over-year new policy growth was +8.7%, up from +7.0% last quarter. The increase pushed new policy demand into ‘Sizzling’ territory and solidified the 20th straight month — and seventh consecutive quarter — of positive new business growth.
Both shopping and new business activity were largely shaped by the ongoing premium increases being implemented by carriers juxtaposed with insurers’ efforts to control new business in unprofitable states and segments.
In the first quarter, older shoppers (66+) led all other cohorts in shopping growth, with higher premiums incentivizing those on fixed incomes to shop until they found a lower rate. This year’s tax season also delivered a boost, particularly on the shopping side. Despite purchase rates for this segment being slightly lower than in years past, we saw a record number of consumers enter the market.
Adam Pichon, SVP & GM, Auto Insurance and Claims Solutions
'Perfect storm’ of factors driving auto insurance rate hikes | Bryant News
According to the recent Consumer Price Index data released in March, auto insurance rates rose an eye-popping 21 percent year-over-year. We asked Bryant University Mathematics Professor Rick Gorvett, a Fellow of the Casualty Actuarial Society, about the steep increase and whether he sees any relief in the coming months.
What’s caused the recent spike in auto insurance rates?
The recent spike in personal auto insurance rates – by some measures, as much as 20% or more in some recent months, indicated by current versus costs 12 months prior – is a confluence of several factors. Almost a perfect storm, one might say.
The cyclical nature of the insurance business. During 2022 and into 2023, insurers had large underwriting losses. Over the last year, they have been trying to increase rates and rate adequacy to sustainable levels. This is a very common phenomenon in property-casualty insurance – a multi-year cycle from high rates accompanied by insurer profitability to lower rates and insurer losses, and back-and-forth again and again – and has existed as a industry reality for many decades. This cycle is partially driven by competition and the coming and going of alternative risk management mechanisms which compete with traditional insurance.
Supply chain issues. During and immediately after the pandemic, computer chips and other necessities for the manufacture and availability of modern automobiles saw supply shortages, leading in turn to supply shortages of cars. This caused price increases with respect to both new and used vehicles, and vehicle cost or value influences insurance premiums.
Increasing vehicle repair costs, due to more technically sophisticated electronic and computerized equipment in vehicle manufacturing, as well as certain modern manufacturing techniques that often require the replacement or repair of a large integrated part (as opposed to a smaller component in the past).
Social inflation. This is the general tendency of insurance losses to inflate at a higher rate than overall consumer inflation and includes social forces involving things like increased litigiousness and larger tort awards.
Driving behavior. Even before the pandemic, there was empirical evidence that overall driving behavior – perhaps most notably, distracted driving – was causing more frequent accidents and even fatalities.
Some folks are saying we have not seen a spike like this “since the 1970s.” Are there similarities/differences between now and then?
News
Progressive Insurance outlines April results
Progressive Insurance has released its earnings report for April 2024, during which the insurer’s combined ratio significantly improved compared to the previous year.
According to Progressive, its net premiums written for April 1-30 amounted to $6.18 billion. Net premiums earned, meanwhile, stood at $5.58 billion.
The insurer’s net income last month was $420.3 million. Its total pretax net realized gains (losses) on securities, on the other hand, reached $(266.1 million).
In April, Progressive’s combined ratio improved to 89%, from 97.9% a year ago.
The latest results from Progressive follow the company’s decision to embark on a substantial recruitment initiative this year. Last month, the insurer announced its plans to hire over 10,000 new colleagues.
At the time, Progressive highlighted the steady increase in its policies and revenue over the past decade.
“Our talented group of more than 60,000 employees across the country are at the forefront of what we do, and we’re committed to meeting the needs of our current employees as well as job seekers through a reimagined workforce,” Bill Clawson, Progressive’s chief human resources officer, noted in April.
Zurich Insurance: Q1 P&C Premiums, Insurance Revenue Up; On Track To Meet Or Exceed FY24 View
Zurich Insurance Group AG (ZURVY) reported Thursday that its first-quarter Property & Casualty or P&C Gross written premiums grew 5 percent to $12.62 billion from last year's $11.97 billion. The growth was 9 percent on a like-for-like basis.
P&C insurance revenue increased 9 percent to $10.25 billion from $9.41 billion a year ago. Insurance revenue grew 12 percent on a like-for-like basis.
Life Insurance revenue from short-term insurance contracts climbed 29 percent to $680 million.
Farmers Exchanges Gross written premiums grew 6 percent year-over-year to $7.08 billion.
Zurich Insurance said it delivered a strong performance in the first three months of 2024, continuing to profitably grow the top line and maintaining the positive momentum built last year.
The company said its previously announced share buyback will start as planned in the next few weeks.
Claudia Cordioli, Group Chief Financial Officer, said, "Ongoing growth in both our P&C and Life portfolios, combined with improved margins in Retail P&C, confirms the strength of our diversified business model. Farmers continues to show impressive results with Farmers Management Services reaching 6 percent growth in underlying fee income, well on track to meet or exceed the guidance of mid-single digit growth for the year."
Climate/Resilience/Sustainability
Swiss Re on the staying power of public-private partnerships
Going 'back to the future' to bridge nat-cat exposures
In the latest edition of Swiss Re’s flagship sigma report series, the global reinsurer offered an eye-opening insight into the lay of the natural catastrophe landscape. In 2023, natural catastrophes resulted in economic losses of US$280 billion – of which 40% (US$108 billion) were insured losses, well above the previous 10-year average of US$89 billion.
The report also revealed that, related to GDP, the insurance loss burden from catastrophes has more than doubled over the last 30 years. With such a stark challenge facing the reinsurance and insurance markets, the question on the minds of many is how to keep pace with insuring natural catastrophes as losses keep rising, and how to help society adapt to climate change.
A core component of the answer is to be found in the power of public-private partnerships, according to Ivo Menzinger (pictured), head of EMEA, public sector solutions at Swiss Re during a recent media briefing on the key findings of the report
Sustainable Switch Climate Focus| Reuters
The intense northern hemisphere summer heat that drove wildfires across the Mediterranean, buckled roads in Texas and strained power grids in China last year made it not just the warmest summer since official records began – but the warmest in some 2,000 years, new research suggests.
But before we dive in, please note that Sustainable Switch will be on a short break next week, and back in your inbox on May 28.
Now, back to the new work published in the journal Nature which suggests 2023 eclipsed temperatures over a far longer timeline than official records show – a finding established by looking at meteorological records dating to the mid-1800s and temperature data based on the analysis of tree rings across nine northern sites.
"When you look at the long sweep of history, you can see just how dramatic recent global warming is," said study co-author Jan Esper, a climate scientist at Johannes Gutenberg University in Germany.
Last year's summer season temperatures on lands between 30 and 90 degrees north latitude reached 2.07 degrees Celsius (3.73 degrees Fahrenheit) higher than pre-industrial averages, the study said.
Based on tree ring data, the summer months in 2023 were on average 2.2 C (4 F) warmer than the estimated average temperature across the years 1 to 1890.
This comes as the U.S. National Oceanic and Atmospheric Administration (NOAA) reported that some 60.5% of the world's reef area has been subjected to heat stress bad enough to trigger bleaching over the past year.
"I am very worried about the state of the world's coral reefs," NOAA's Coral Reef Watch coordinator Derek Manzello said in a monthly briefing. "We are seeing (ocean temperatures) play out right now that are very extreme in nature".
Sharon Kimathi, creator, curator and editor of the Reuters Sustainable Switch newsletter and the Sustainable Business vertical on Reuters.com
Advocates call on NAIC to release property data
Aside from some states refusing to participate in the **National Association of Insurance Commissioners (NAIC) call for property market data, issued March 8, another obstacle to managing risk to assure availability and affordability of insurance for homeowners has emerged.
NAIC stated it will not release the collected data publicly, but will share it with the Federal Insurance Office (FIO)*, a regulatory unit of the U.S. Treasury. A group of 20 advocacy organizations engaged in housing and consumer issues, along with 15 university professors and researchers engaged in climate change and housing issues, wrote to NAIC on May 7 urging full access to data.
Lilith Fellowes-Granda, associate director for financial regulation at the Center for American Progress. Keeping the collected data under wraps limits the risk analysis that other professionals can do and the ability to learn what communities more threatened by climate change are facing, stated Lilith Fellowes-Granda, associate director for financial regulation at the Center for American Progress.
"Policymakers, advocates and insurers themselves are making these decisions in real time, or trying to craft policies in real time to address the insurance affordability and availability crisis," she said. Not releasing data "just severely limits the brain trust that can tap into this information," she added.
FIO, which charged NAIC with conducting the call for data, has as part of its mandate a responsibility to ensure that underserved communities can access insurance.
Commentary/Opinion
New Consumer Alert Video Warns Insurance Commissioner's Deal Won't Get Homeowners Real Coverage
In a consumer alert video released today Consumer Watchdog warns that a low-benefit, high-cost, FAIR Plan-like policy is the best homeowners can hope to get from Insurance Commissioner Ricardo Lara's deal with the insurance industry.
Consumer Watchdog Executive Director Carmen Balber says in the video: "California Insurance Commissioner Ricardo Lara cut a deal with the insurance industry, one that he says will get them selling more home insurance in California. But internal documents Consumer Watchdog obtained under the Public Records Act show that the deal is a Bait and Switch on consumers that won't get a single new homeowner covered."
Insurance Commissioner Ricardo Lara announced a plan in September that would give insurance companies the deregulation they want in return for a "commitment" by insurance companies to start selling in risky parts of California again.
However, documents uncovered by Consumer Watchdog reveal that insurers would be allowed to meet their commitment by offering the same high cost, limited benefit coverage that homeowners are already guaranteed access to in the FAIR Plan today. The documents contain the text of the plan Lara negotiated in August that was the basis for his September agreement with the insurance industry.
Commissioner Lara testified before an Assembly Insurance Committee oversight hearing yesterday afternoon but did not disclose the type of policy insurance companies would be allowed to offer.
The consumer alert video asks, "Why is that bad?" The answer:
"FAIR Plan policies cover so little that homeowners have to buy a second insurance policy to fill in the gaps.
Carrier exits – is the worst over?
After months of seeing property and casualty insurers take drastic action to reduce their exposure to high-risk areas, are we reaching the end of the tunnel?
US insurers paid nearly $300 billion in disaster claims from 2021 to 20223, according to data by Aon. The losses have prompted a wave of pullouts from the likes of State Farm, Allstate, AIG, Chubb, and GEICO.
Some carriers stopped writing new homeowners insurance policies in states such as California, Florida, and Louisiana, where the risk of storms or wildfires is high, cancelled or declined to renew policies, or drastically scaled back on coverage.
But at least one insurance leader thinks the worst is over.
“It’s been over a year, and I don't think things have gotten better,” said Robb Lanham (pictured), chief of sales at HUB International.
“Some carriers waited for others to start pulling out before jumping in. Many have either pulled out of the market or taken drastic measures. I think a lot of that has already happened. I don't think it's getting any worse.”
InsurTech/M&A/Finance💰/Collaboration
AIG to sell 20% stake in Corebridge to Japan's Nippon Life for $3.8 bln
U.S. insurer American International Group (AIG.N), opens new tab said on Thursday it would sell a 20% stake in Corebridge Financial (CRBG.N), opens new tab to Japan's Nippon Life Insurance for $3.8 billion.
The deal is part of AIG's efforts to reduce its holdings in the life and retirement business, which it had listed as a separate company in 2022 following years of pressure from activist investors.
AIG will sell 120 million shares at an average price of $31.47 each. It did not specify what the proceeds from the sale would be used for, but has previously said they could be used for stock buybacks.
The insurer had a nearly 53% stake in Corebridge before the latest deal, according to regulatory filings, opens new tab. Peter Zaffino, CEO at AIG, has committed to sell the company's remaining ownership in Corebridge, but the firm agreed to maintain a 9.9% stake for two years after the deal closes. Corebridge shares surged 13% to a record high, while AIG's stock climbed 1.3%.
The sale would help Nippon Life boost its presence in the U.S. market. With 15 million clients, the company is one of the biggest life insurers in Japan, and also operates in Australia, India, Myanmar, China, Thailand and Indonesia.
J.P. Morgan Securities advised AIG on the deal, which is expected to close by the first quarter of 2025.
The Financial Technology Report Announces The Top 25 InsurTech Companies of 2024
[Editor's note: Congratulations to all Top 25 InsurTech Companies - Alan Demers and Stephen Applebaum]
The Financial Technology Report is pleased to announce The Top 25 InsurTech Companies of 2024. This year, the insurance industry anticipates a transformative shift driven by InsurTech, spotlighting automation, cloud computing, and AI as key focal points. There are an estimated 1,500 InsurTech startups currently operating around the world.
Among them, the following companies are spearheading a transformative era in the sector, catering to the evolving demands of both businesses and consumers for seamless, cost-effective insurance solutions. With a keen awareness of technological advancements, the companies on this list are dominant forces in a global market that's anticipated to hit $166 billion by 2030.
Root Insurance, one of the many impressive organizations on this list, has seen more than 12 million downloads of their app which allows drivers to get their insurance policy in less than one minute, manage the details, and file a claim. Companies like Lemonade provide insurance options across homeownership, pet care, and beyond — and are even finding ways to give back to the community by giving unused premiums to nonprofits selected by their users. And Bestow, on a mission to create financial stability for all, recently launched three top 30 carrier partnerships.
While selecting this year's honorees, we reviewed hundreds of candidates. An emphasis was placed on each company's profound impact on the insurance sector, the scale of businesses or consumers served, and the depth of their reach and influence within the industry. We invite you to join us in recognizing the achievements of The Top 25 InsurTech Companies of 2024.
This year's awardees include Asurion, Bestow, and Foxen, among other notable companies. To view the full list, visit