Commentary/Opinion
The Problem(s) With Hail Claims, Part 1: A Cautionary Tale for Insureds and Insurers
The Problem(s) With Hail Claims, Part 1: A Cautionary Tale for Insureds and Insurers
Last year while I was out of town, a roofing company showed up at my home and told my wife there had been a hailstorm recently, so they were visiting impacted neighborhoods and providing free inspection services. She let them on the roof and, of course, they found extensive hail damage even though the storm they referred to did not deposit any hail in our immediate area that we were aware of.
So, to confirm their diagnosis, we contacted two roofing companies that we had used in the past at homes we’ve owned. Both of these companies had been in business locally for decades. Neither company found any hail damage to our roof. Neither of these companies follow storms looking for work, as both are usually backlogged with jobs. FULL ARTICLE
Bill Wilson
News
Record investment income for US P&C insurers in 2023: AM Best
In 2023, net investment income for the US property/casualty insurance sector reached a record $73.9 billion, boosted by higher interest rates, according to a new report by AM Best, a credit rating agency for the insurance industry.
The Best’s Special Report, “US P/C Insurers Achieve Record Investment Income in 2023,” reveals that net investment income rose by 1.4 percent over the previous year, reaching $73.9 billion. However, 2022’s figures were skewed by a $10.8 billion intercompany distribution from a large reinsurer.
Without this one-time event, net investment income growth in 2023 would have been nearly 20 percent. This increased investment income helped offset poor performance in sectors like auto insurance.
With rising weather and catastrophe-related losses, investment income is becoming crucial to counteract poor underwriting results.
“Aggregate net underwriting income has been volatile in the last 10 years—and often negative across the industry—and so investment income remains vital to earnings,” commented Helen Andersen, Industry Analyst, AM Best.
$168bn in fees & commissions earned from insurance broking activity in 2023
The value of the worldwide market for insurance broking in terms of fees and commissions earned was around $168 billion in 2023, considerably up from around $151 billion in 2022, according to Insuramore a provider of marketing services focusing on the insurance sector.
This increase is equivalent to a growth rate of around 11.3% without adjusting for inflation, but closer to 4.4% as an inflation-adjusted measure.
According to Insuramore, in 2023, this market is estimated to have broken down between around $76.6 billion due to commercial property & casualty (P&C) (non-life) retail broking, $16.5 billion to private P&C (non-life) retail broking, $54.5 billion to employee benefits plus life and health insurance retail broking, $7.4 billion to reinsurance broking, and $13 billion to wholesale broking.
Each of the segments registered a double-digit growth rate during the year apart from employee benefits plus life and health insurance retail broking, analysts noted.
Insuramore also added, without adjusting for inflation, the top 15 broking groups together achieved an even higher aggregate growth rate of 12.3% albeit this was driven in part by M&A activity.
Top cybersecurity concerns for insurers in 2024
Insurance carriers are battling old cyber threats at the same time that 'adversarial AI' deepens the risk, Datos Insights reports.
A persistent cybersecurity challenge for insurance companies is structural: Executives often lack clarity around who owns the cybersecurity function, according to Datos Insights.
A persistent cybersecurity challenge for insurance companies is structural: Executives often lack clarity around who owns the cybersecurity function, according to Datos Insights.
Many of today's insurance carriers are rushing headfirst toward process improvements using generative artificial intelligence (GenAI) without fully anticipating potential regulatory and cybersecurity vulnerabilities.
This was one of the observations to emerge from "Cyber at a Crossroads: Risk and Rewards for Insurers," a recent webinar hosted by the technology consultancy Datos Insights.
"There's so much hype" around artificial intelligence right now, said Cybersecurity Practice Director John Horn, "but we're really not seeing the efficacy yet… It's early days."
Among other issues, insurance and financial services organizations may be overly focused on the efficiencies afforded by artificial intelligence tools to recognize the threat of "adversarial AI," or AI tools that can be used against them, Horn said. "We expect underwriters to include an adversarial AI coverage, but most institutions wouldn't be able to detect an AI or GenAI attack if their lives depended upon it."
Why? Because it's nearly impossible to observe an AI cyberattack as it unfolds. As a result, information security officers and other C-Suite executives are reacting to the hype around AI but lack the operational experience or performance metrics necessary to create up-to-date cybersecurity guideposts.
Santander staff and customer data stolen in major cyber attack
Santander is the latest victim of a cyber attack – with hackers accessing data relating to all its staff and millions of overseas customers, the bank confirmed.
A hacking group was reportedly behind a similar data breach of Ticketmaster, which emerged earlier this week.
Certain information relating to all current and some former Santander staff – as well as customers in Spain, Chile and Uruguay – was accessed in the breach, the lender said.
“No transactional data, nor any credentials that would allow transactions to take place on accounts are contained in the database, including online banking details and passwords,” it said.
Santander employs about 200,000 people worldwide, including around 20,000 in the UK.
No customer data in the UK, or any other of its markets, were affected.
State Farm asks for stay in ACV case pending outcome of allegedly similar Progressive case
State Farm has requested an indefinite stay on discovery and proceedings in a lawsuit against it regarding allegations of undervalued total loss claims and reduced payments to claimants.
The request was made because of the pending appeal of a case against Progressive that would “review certifiability of auto total loss class actions alleging systematic underpayments of ‘actual cash value,’ just like this one,” State Farm’s motion states.
On behalf of a proposed nationwide class, the suit accuses Illinois-based State Farm of breach of contract, breach of covenant of good faith and fair dealing, unjust enrichment, and violations of Illinois’ Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2.
Plaintiffs allege State Farm paid out 4-11% less than what was owed by applying a discount, or “typical negotiation adjustment,” to the actual cash value (ACV) of aggregated used vehicle internet prices similar to the ones involved in claims.
State Farm’s stay request includes its motions for summary judgment on some of the plaintiff’s individual claims.
AI in Insurance
How Generative AI is transforming motor insurance claims - FinTech Global
Motor claims processing has become a crucial component of the insurance industry due to its high volume, significant impact on customer satisfaction, and financial implications. With the frequent occurrence of vehicle-related incidents, insurers must efficiently manage numerous claims to maintain operational effectiveness. The speed and accuracy of claims handling directly influence customer satisfaction and loyalty – and Generative AI may be the future, as Simplifai explains.
In the face of rising competition and heightened customer expectations, the insurance industry is undergoing a significant transformation.
Both insurance companies and consumers are experiencing a shift in perspective, driven by the need for efficiency, speed, and enhanced service delivery.
To thrive in this high-stakes environment, insurers are increasingly turning to AI and automation. This technological pivot is reshaping various aspects of the industry, with motor insurance claims processing standing out as a major beneficiary.
Motor insurance claims often constitute a substantial portion of an insurer’s payouts, making efficient claims management essential for minimising losses and optimising financial performance.
The introduction of autonomous and electric vehicles is further complicating the landscape, necessitating more sophisticated solutions for claims management. Automated claims processing powered by generative AI is emerging as a game-changer, offering a way to streamline operations, reduce fraud, and improve customer satisfaction.
With generative AI solutions like Claims Processing powered by InsuranceGPT, which have capabilities that extend beyond addressing current challenges, motor insurance is set for a more efficient, customer-centric, and predictive business environment.
Research
Decrease in Used Electric Vehicle Prices Coincides with an Increase in Total Loss Claims
Mitchell's latest trends report shows a jump in total loss frequency for both electric and newer internal combustion engine (ICE) automobiles.
Mitchell, an Enlyte company and leading technology and information provider for the Property & Casualty (P&C) claims and Collision Repair industries, today released its Q1 2024 trends report: Plugged-In: EV Collision Insights. This quarter's report provides an update on EV total loss frequency, which has risen since late last year as the price of used EVs has fallen. In the U.S. and Canada, EV total loss rates were 9.93% and 7.48% respectively—an increase of approximately 8% from Q4 2023 and 30% from Q3 2023 in both regions. Despite the dramatic rise, EV total loss frequency remains in line with 2021 and newer ICE alternatives, which ended the quarter with a rate of 9.51% in the U.S. and 7.44% in Canada.
"Slowing new sales, manufacturer price reductions and changing consumer sentiment are impacting the value of used EVs," explained Ryan Mandell, Mitchell's director of claims performance. "As a result, the total loss frequency for collision-damaged EVs is increasing. However, it is also increasing for new gasoline-powered vehicles, which are comparable to EVs in terms of their complexity and cost to repair."
InsurTech/M&A/Finance💰/Collaboration
Allianz Partners and Cosmo Connected announce partnership
Allianz Partners is collaborating with Cosmo Connected, a French startup that offers helmets with integrated automatic brake lights, turn signals, fall detection, and SMS alerts.
As part of the partnership, the companies are launching Cosmo Care, which includes the helmet and personal accident insurance provided by Allianz.
The new offering, which costs €9.99/month for 24 months, is currently available in France and will soon be rolled out to other European markets. The coverage is not limited to just one transportation method and it covers medical expenses and loss of income following an accident.
People
Tesla hires GEICO executive to help lower insurance costs
Tesla has hired a long-time GEICO executive to help lower the insurance costs for its electric vehicles.
Now, Electrek learned that Tesla recently hired Allen Laben, a 20-year veteran of insurance giant GEICO. Most recently, Laben was ‘Director of Claims Specialty Operations’ at GEICO, but he held several executive and managerial roles at the company over this career.
The insurance exec recently confirmed that he joined Tesla in the role of ‘Head of Insurance Partnerships’.
For years, Tesla has tried to deploy its own and partnered insurance products in order to address the generally high insurance costs that its owners have to pay.
The automaker has managed to reduce the cost of its vehicles over the last 5 years, but other costs related to owning its vehicles, like interest payments and insurance, have remained high.
Tesla believes that reducing those costs would help increase demand.
Webinars/Podcasts/Interviews
How One Insurtech Firm Formulated a Strategy for Climate Change
The Insurtech firm Hippo was facing two big challenges related to climate change: major loss ratios and rate hikes. The company used technologically empowered services to create its competitive edge, along with providing smart home packages, targeting risk-friendly customers, and using data-driven pricing. But now CEO and president Rick McCathron needed to determine how the firm’s underwriting model could account for the effects of high-intensity weather events.
Harvard Business School professor Lauren Cohen discusses how Hippo could adjust its strategy to survive a new era of unprecedented weather catastrophes in his case, “Hippo: Weathering the Storm of the Home Insurance Crisis.”
{Ed. note: Highly Recommended] Playback and Transcript Now Available for AM Best’s Webinar on Top 5 Auto Insurance Trends
Video playback and a transcript are now available for AM Best’s complimentary webinar, “Key Insights for the Road Ahead: Top 5 Auto Insurance Trends of 2023,” sponsored by LexisNexis Risk Solutions. Access them here.
As U.S. auto insurers steer into an increasingly bumpy future, a detailed exploration of five key auto insurance trends can help smooth the road ahead.
This webinar discusses how insurers addressed profitability challenges amidst continued rising costs, and how consumers responded to extreme market conditions. Don’t miss this view of current trends paired with forward-looking analysis and insights from a panel of industry experts.
Panelists include:
- Adam Pichon, SVP Global Insurance Analytics, LexisNexis Risk Solutions
- Tanner Sheehan, VP & GM, US Claims, LexisNexis Risk Solutions