News
Commissioner Lara on what's challenging California's property insurance reform
California’s history includes numerous rapid remedies that haven’t endured, Insurance Commissioner Ricardo Lara stated while addressing legislators on the state’s property insurance market crisis.
“If we lose in court over process, not substance, that would be the ultimate failure,” Lara said to the state Assembly Insurance Committee, reiterating his commitment to implementing reforms by the end of the year.
He emphasized that swift action isn’t feasible due to concerns that “much-needed reform” could face legal challenges under transparency rules mandated by Proposition 103.
As per AM Best, the California Department of Insurance (CDI) plans to introduce changes in July. These changes will allow primary insurers to include reinsurance costs in rate filings if they agree to cover areas prone to wildfires and reduce enrollment in the FAIR Plan, Lara said.
John Norwood, representing the Independent Insurance Agents & Brokers of California, noted that the shift to private coverage depends on the CDI approving adequate rates for the FAIR Plan. He mentioned the “very price sensitive” nature of property insurance and highlighted a significant gap between a recently requested and approved rate hike for the FAIR Plan.
Commissioner Lara Gives State Farm Green Light to Reduce Wildfire Mitigation Discounts and Avoid Explanation of How Homeowners' Wildfire Risk is Determined, Says Consumer Watchdog
Insurance Commissioner Ricardo Lara approved State Farm's reduction of the discounts it offers homeowners for wildfire mitigation and freed the company from detailing to consumers in writing the wildfire risk factors that are used to rate or non-renew their property. The Commissioner denied Consumer Watchdog's petition challenging these failures in the company's filing implementing the "Safer from Wildfires" regulations.
Beginning on September 1st, State Farm will offer a total 6.3% discount to policyholders who meet all of the "Safer from Wildfires" individual home hardening and brush clearance standards, and also live in a Firewise USA or Fire Risk Reduction Community, resulting in an average policyholder savings of $113 a year. That discount is lower than the 7% discount State Farm currently offers to homeowners for doing less to protect their homes from wildfire. Seven of the ten individual "Safer from Wildfires" mitigation standards – for example the removal of combustible structures from within 30 feet of the property, or installing multi-pane windows that withstand heat – will only qualify homeowners for a 0.1% reduction in their premium. Consumer Watchdog's petition sought larger discounts, or a justification from State Farm for reducing them.
The company will also offer an additional 2-3.8% discount to homeowners who do more and seek certification from the Insurance Institute for Business and Home Safety ("IBHS"). However, consumers will have to pay a $125 inspection fee to find out if they qualify for those discounts. That means that in the first year, the fee will wipe out any savings from the IBHS discount. A homeowner at State Farm's average premium level who pays for and receives the highest IBHS certification would see their total mitigation discount reduced from $113 to $55.
"The Commissioner's failure to ensure that consumers are given the information necessary to understand their wildfire risk and sufficient incentives to mitigate their properties is disappointing," said Consumer Watchdog staff attorney Ryan Mellino. "Discounts this small don't incentivize mitigation and won't make our state safer from wildfires."
Research
Americans Expect to Spend a Record-Breaking $221 Billion on Summer Vacations This Year
Americans continue to signal that travel is splurge-worthy and are again setting new records for vacation spending in 2024. For a second consecutive year, Allianz Partners USA's annual Vacation Confidence Index found that Americans' total spend on summer vacations is expected to remain north of the $200 billion mark, this year exceeding $221.6 billion. According to the travel insurance and assistance provider, Americans have more than doubled their projected summer vacation spending since the inception of the pandemic. The 2024 figure represents an approximately 3.5% increase over last year, but a whopping 118% jump compared to 2019.
In 2024, the average American household is anticipated to spend $2,843 on their summer vacation, topping $2,000 for the fifth time since Allianz Partners began tracking vacation habits in 2009. Creeping up slightly over last year, the figure continues its steady climb from 2020's pandemic-related dip and shows a healthy 40% increase over 2019, which is fueled by more Americans planning to travel in 2024 (61%) versus 2019 (42%).
"This summer, we expect to again see a record-breaking number of Americans traveling for their summer vacations. Whether trips are planned for a neighboring state or an international bucket-list destination, an increase in traveler numbers can translate to an increase in unexpected and undesirable travel delays," said Daniel Durazo, director of external communications at Allianz Partners USA. "While travel costs remain inflated, our survey confirms Americans are not letting sticker shock hamper their vacation plans which makes investing in a travel insurance policy with travel delay coverage a smart move to protect their considerable trip investment."
Commentary/Opinion
Rising insurance premiums’ impact on US home prices: S&P - Reinsurance News
The increasing frequency of climate-related events in the US is driving up insurance premiums in certain areas, but it’s unclear how this affects home prices and affordability, prompting the need for further analysis, according to analysts at S&P Global Ratings.
S&P highlights significant differences in home insurance costs, partly based on the contribution of land to a property’s overall value.
In areas where land values exceed dwelling values, less coverage may be deemed necessary relative to the total property worth.
An analysis simulating sudden rises in typical insurance premiums suggests that homeowners with fixed-rate mortgages could effectively face an implied adjustable-rate feature, assuming limited flexibility in managing increased monthly expenses, says S&P analysts.
Additionally, considering the impact of future excess insurance premium payments on current home values, there’s potential for up to a 10% reduction in prices under certain conditions. This reduction is projected if premiums are expected to escalate by 20% annually over the next 20 years.
How to Provide Better Customer Service | Insurance Thought Leadership
The differentiator for independent insurance agents has always been the quality of the customer service they provide to their clients. Unfortunately, in today's challenging market, that focus on clients can fall to the wayside.
The standard of customer service varies from agency to agency and, in some cases, from agent to agent. Those making strides to improve their customers’ experiences are more successful than those who simply say: “This is how we’ve done it for 50 years; this is how my father did it,; and this is how we're going to continue do it.”
So what does superior customer service from insurance agents look like today? What trends have forced changes upon agents in terms of customer service, and what best practices can they follow to set up their agencies for success? full commentary
David L. Rice Jr., is president of Michigan Agency Partners, an SIAA Master Agency
Ralph Nader: Tapping Into The Vast Safety Potential Of ‘Loss Prevention’ By The Insurance Industry – OpEd [Eurasia Review]
A recent newspaper article reports that GEICO, one of the largest auto insurers in the U.S., has amassed a staggering $189 billion in cash, apart from the reserves required by law to insure the volume of potential claims by its policyholders. Angry consumers have cried out about auto insurance premiums going up as the prices of new and used cars have risen sharply. Yet the company still has not joined other insurance companies like State Farm, Nationwide and Allstate as a funder of the 35-year-old non-profit Advocates for Highway and Auto Safety.
It costs about $200,000 a year for each insurer to become a sponsor of this Washington-based coalition of consumer and insurance groups that press for safer cars, safer roadways and safer driving. With a tiny budget of $2.2 million a year, the dedicated staff at Advocates has put the "loss prevention" responsibility of the insurance industry into practice.
A new study estimated that Advocates, working at the federal, state and local levels, has been instrumental in passing 495 state safety laws. Advocates was also credited with saving $2 trillion in avoided medical costs, work loss and property damage, and saving 215,000 lives (plus many more injuries prevented). This dollar figure reflects reduced insurance claims and processing costs, largely by auto insurers.
Advocates' activity revolves around the largely neglected and ignored historical responsibility of the powerful insurance industry called "loss prevention." You, the people, are supposed to be protected with greater safety and health standards, safer products and safer workplaces from the vested profit interest that comes with fewer claims by injured or sickened policyholders.
Telematics, Driving & Insurance
How auto insurers are using tech and data to make the road safer
While elements of modern technology can impair drivers, such as cell phone distractions, auto insurers are finding new ways to use tech to make the road safer, including usage-based insurance programs, automatic braking technology and roadside assistance partnerships.
The cost to repair a vehicle jumped approximately 20% year-over-year according to the June 2023 consumer price index. The increased use of technology in vehicles, coupled with more severe crashes due to higher rates of speed, supply chain issues and fewer service technicians, have dramatically affected repair costs, with replacement parts for non-accident-related repairs also rising. With these costs also comes increased auto insurance premiums, leaving many policyholders interested in usage-based insurance to lower costs.
Usage-based insurance allows carriers to provide coverage based on several factors unique to a driver, including miles driven per week, where a car is driven, if the driver is speedy and more. These plans typically rely on technology in a vehicle or a mobile device to monitor the factors.
State Farm's Drive Safe & Save is an example of a usage-based program that personalizes coverage for policyholders based on driving habits. "Drive Safe & Save is our response to customer demand and enrollment is completely voluntary," Dave Phillips, senior public affairs specialist for State Farm's Eastern Market Area, recently told Digital Insurance's Patricia L. Harman. "It provides our customers the power to personalize their auto premium based on the number of miles driven and how safely they drive. It uses telematics technology to measure an individual's driving characteristics and the discount is based on how a customer drives. This may include things like annual mileage, fast acceleration, hard braking and cornering."
Phillips adds that the program is the company's largest discount opportunity for customers. "The average discount is between 10 and 15%, with even higher discounts possible depending on actual mileage driven and individual driving behaviors," he said. "The discount can be up to 30% or even higher for some customers, with the maximum available discount at 50%." In addition to the discounts, drivers who use the State Farm app will receive feedback to help them become even safer drivers.
InsurTech/M&A/Finance💰/Collaboration
InsurTech unicorn Wefox faces insolvency risk according to reports
Wefox, an InsurTech unicorn, has issued a stark warning to its investors regarding potential insolvency looming over the company.
With nearly 3 million customers and a valuation of $4.5bn (£3.6bn) less than two years ago, the European insurer finds itself grappling with a myriad of regulatory and financial challenges, according to a recent report from Sky News.
The source revealed that Wefox could face insolvency by the summer unless urgent measures are taken to address its mounting losses and operational hurdles. The company is said to be exploring options to sell off certain loss-making operations to mitigate the risk of collapse.
In the memo obtained by Sky News, Wefox’s executive chairman and chief executive Mark Hartigan painted a grim picture of the company’s financial outlook, outlining a scenario where its holding company “becomes insolvent in August, or potentially even earlier.” full article
Cyber insurtech BOXX partners with Zurich Insurance Group in Switzerland to introduce breakthrough personal cyber product
Award-winning global Insurtech BOXX Insurance Inc. that combines cyber insurance and security has announced the launch of a cutting-edge cyber risk solution in collaboration with Zurich Insurance Group in Switzerland, providing digital protection for individuals and families.
Designed for simplicity, the app's personalized experience puts users' digital safety front and centre, featuring an easy-to-use interface designed by Zurich Insurance in Switzerland and developed by BOXX in close collaboration with Zurich. The App is now available in Switzerland offering support in English, German, French and Italian.
"We created this to give individuals and families what they want – an app that delivers an essential bundle of tools at users fingertips including access to experts in the event of a cyber emergency," explained Vishal Kundi, CEO and Founder, BOXX Insurance. "Smartphones have become the fastest-selling gadgets in history.
They have penetrated every aspect of daily life. The average person picks their phone up to 100 times a day so if we want to make their world a digitally safer place, we have to ensure their phone and their usage is better secured," Kundi added.
Events
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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
People
Shattering insurtech's glass ceiling
For Margeaux Giles (pictured), her story isn’t just about breaking through the glass ceiling – it’s a masterclass in how to embrace womanhood in a male-dominated sector. As the CEO of Irys – and a speaker at IB’s upcoming Women in Insurance Summit – she said that from the very beginning of her career the male-female ratio was way off.
“Early in my career, it was apparent that there weren’t a lot of [women],” she told IB.
And if anyone should know the importance of championing fellow women – it’s Giles. A leader in the insurtech space, with awards including Insurtech Woman CEO of the Year, and Inspiring FinTech Female in 2023, Giles is also a regular forbes.com contributor and founding member of a half a dozen women in insurance groups
In combatting the lack of diversity, Giles’ challenge was two-fold: not only did she have to establish her authority in spaces traditionally dominated by men, but she also had to navigate the minefield of preconceptions about women in leadership roles. Her strategy? A blend of subtlety, ambiguity and a passion for female empowerment.
“Even if I was a man, as a risk advisor, and later a technology provider, I’m coming into someone else’s turf and telling them how to do the job better - which already puts you at odds. Going in as a woman, I think a lot of times it was a little disarming - but I had my tricks.”
One of these tricks involved signing her name M Giles – not Ms or Mrs – keeping her correspondence deliberately vague.
“Through our correspondence they would create whatever version of M.Giles they wanted in their head,” she said. “By the time we would meet or speak on the phone, I had already established myself and the relationship - which allowed me to bypass a lot of unconscious bias. Plus I secretly loved the shock in their voice when they figured out I was a woman.”
CLARA Analytics Expands Its Top-Talent Tech and Insurance Roster
Former CTO of the FBI and Leading Insurance Analytics Expert Join CLARA’s Expanding Team of AI Innovators
CLARA Analytics (“CLARA”), a leading provider of artificial intelligence (AI) technology for insurance claims optimization, today announced two new senior level hires, adding Wayne Chung as the company’s new Chief Technology Officer and insurance industry veteran Mark Tainton, who will serve as CLARA’s Chief Customer Officer.
Dr. Wayne Chung, as the former CTO of the Federal Bureau of Investigation, brings extensive experience in cybersecurity, AI, and systems engineering, making him an ideal steward for CLARA’s AI technology platform. Wayne has served as the CTO in several large organizations and currently contributes his skills to prestigious institutions such as Georgetown University Law Center and the U.S. Department of Justice.
Mark Tainton will serve in the newly created role of Chief Customer Officer, underscoring CLARA’s commitment to achieving outstanding results for its clients. With over three decades in the insurance industry, he has deep expertise in data science, AI, business intelligence, and risk management.
“Insurers are just beginning to understand how profoundly AI can impact their business,” said Heather H. Wilson, CEO of CLARA Analytics. “We’ve been relentless in pushing the envelope on innovation and customer value with a hyperfocus on privacy and security. Wayne Chung and Mark Tainton are the kind of high-caliber leaders who can help CLARA to build even stronger momentum in the year ahead, driving our commitment to game-changing ROI for our clients.”
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