News
U.S. Senate panel divided over climate as cause of rising insurance premiums
The U.S. Senate Budget Committee debated the cause of the insurance crisis plaguing homeowners around the country at a Wednesday hearing, with Democrats identifying climate change as the ultimate driving force of rising premiums and Republicans pointing to high government spending and inflation.
Homeowners insurance premiums have skyrocketed in recent years following billions in damages, which has led many insurance companies to drop coverage.
Budget Committee Chair Sheldon Whitehouse noted the example of Florida’s state-backed insurer Citizens in his opening statement.
As Florida faces an increased threat of hurricanes, heat waves and flooding, national insurers have dropped plans or raised prices in disaster-prone areas. Residents are left uninsured or priced out and instead turn to Citizens, an insurer of last resort backed by the state. Louisiana and California are facing similar problems.
Average homeowners insurance premiums in the Sunshine State total just over $4,000 a year, according to a March report from Florida Today. That’s well above the national average premium of about $2,700.
With so many residents using Citizens, the insurer’s payouts for damages could exceed its reserves, leading to even higher premiums for policyholders, Whitehouse said.
“Good luck with that,” Whitehouse, a Rhode Island Democrat, said. “Particularly if the surcharge goes to hundreds or even thousands of dollars.”
Commentary/Opinion
Moody's changes 2024 P/C outlook to stable
Moody's Ratings changed its outlook for the U.S. property/casualty personal insurance sector to stable from negative. This reflects continued improvement in underwriting results as insurers have significantly increased pricing in both personal auto and homeowners to address high auto repair and construction costs, high catastrophe and non-catastrophe weather losses and elevated reinsurance costs. Moody's expects that enhanced underwriting results coupled with higher net investment income will help personal lines insurers maintain or strengthen their capital levels,
Personal auto profitability will continue to improve; some insurers shift toward growth. U.S. personal auto insurers have responded to high loss cost trends by aggressively raising rates and taking other underwriting actions to improve profitability. According to Moody's yearly rate change and trend surveys for rated insurers, companies are seeking auto rate increases of about 11% in 2024, which is down from 14% for 2023 but still elevated compared to a pre-pandemic average around 4.5%. Moody's estimates that the industry's combined ratio for personal auto will fall below 100% in 2024 for the first time since 2020.
Several industry leaders will pursue growth in states where they have achieved rate adequacy.
Research
High housing costs erode confidence in U.S. economy
As American consumers continue to debate the health of the U.S. economy, a recent consumer survey from Nationwide finds an overwhelming majority of those polled (78%) still rate it as poor or fair, with that finding marking a 6% improvement since last year. Of these individuals, 80% cite inflation, 51% point to wages not keeping up with the high cost of living, and 50% cite high housing costs as the reasons for their less positive outlook, according to Nationwide's 2024 Economic Impact survey, released today.
The survey of 2,000 U.S. consumers aged 18 or older found people reporting that economic strains are severely impacting their personal finances, with the vast majority (64%) rating their personal financial situation as poor or fair, which increased slightly from 61% last year and could be in part due to housing expenses.
In an environment that is stretching the financial well-being of consumers across all income brackets, renters are disproportionately feeling the pressure. An overwhelming 77% of renters rate their personal finances as fair or poor, compared to 53% of homeowners. The burden of escalating housing costs has forced renters to make difficult decisions, including relocating or downsizing at twice the rate of homeowners (20% vs. 8%). Despite these challenges, renters are surprisingly more optimistic about the future. Two in five expect their personal financial situation to improve over the next six months, 12% higher than that of homeowners.
Taken together, these reports suggest an economic landscape that many Americans find stressful and uncertain, making it challenging to navigate and plan for long-term financial security.
According to Nationwide's survey, housing costs appear to be impacting consumers' financial wellbeing in myriad ways, including:
Claims/Payments
6 ways claims industry can mitigate social inflation | EY - US
Verdicts and settlement amounts are becoming more unpredictable and difficult to evaluate, requiring new approaches. In brief
Litigation trends and tactics, nuclear verdicts and societal views are impacting the insurance claims industry. Some aspects of social inflation are controllable for organizations. Social inflation – a topic that is on the minds of carrier leadership across North America – is often accompanied by a common fallacy that its impact– to a large extent – is uncontrollable.
Do you remember the high-profile case 30 years ago when a cup of hot coffee spilled on a customer’s lap upon leaving the drive-through of a fast-food chain, resulting in a $2.7 million settlement? It was one of the most infamous cases of social inflation against the perceived “big corporation” and is viewed by many as a springboard for social inflation trends.
In the last five years, the claims industry has experienced higher rates of litigation and litigated claim severity increases – outpacing the general rate of inflation and nonlitigated claim severity increases. Verdicts and settlement amounts are becoming more unpredictable and difficult to evaluate, further justifying the need for more focus on the claim litigation management function.
Achieving Effective Claims Payments
Digital solutions can make the high-stakes claims experience seamless, but industry data indicates a chasm between customer preferences and reality.
Insurance exists to mitigate the fallout from some of life’s most disruptive events. As such, claims are one of the most critical touchpoints for insurance companies. In moments of distress, it’s often easier for claimants to have a memorably negative experience with their insurance provider than a positive one, and waiting for a claims check in the mail or contending with complicated technology only exacerbates customer frustration.
Paper still reigns supreme
Most claims payments are still paid via check, even though this process is slower, less transparent, less secure and more expensive to manage than digital disbursement. Not to mention that this manual method ignores policyholder preferences.
Seventy-three percent of those surveyed in InvoiceCloud’s State of Online Payments report prefer to receive claims payments electronically. Not only does this streamline the payment experience, but electronic disbursement also reduces the time and cost associated with printing and mailing paper checks, alleviating employee workloads. Paper claims are slower and less transparent, putting urgently anticipated payments at the mercy of everything from postal service disruptions to lengthy wait times for manual lienholder endorsements. The rates of fraud when it comes to paper checks are also twice that of any other payment method, with JPMorgan Chase reporting that $1.3 billion was lost to check fraud in 2022.
Moving away from paper checks improves the claims experience for all involved. Yet, despite clear benefits to customers and insurers, most claims payments are still made via check.
Julie Schieni is VP, financial services, at InvoiceCloud
Let’s Win One for the Good Guys: A Familiar Claims Situation
Growing up we all watched television shows and movies pitting the good guy against the bad guy. Often the bad guy held some power over the good guy, either as the boss, the holder of all the money or the mortgagee. A level playing field did not exist. The good guy was at a major disadvantage.
Unfortunately, this same scenario sometimes exists in insurance claims. The carrier has power over the insured in the form of the checkbook coupled with being the sole power making coverage decisions (until courts, regulators or the press get involved).
Patrick Wraight, CIC, CRM, AU, is director of Insurance Journal's Academy of Insurance.
InsurTech/M&A/Finance/Collaboration
Climate Risk-Solving Insurance Provider Understory Secures $15 Million Series A Funding
Understory, the insurance platform protecting climate-vulnerable industries from severe weather risk, announced the close of a significantly oversubscribed Series A funding round, securing a substantial $15 million to drive its expansion into the renewable energy sector. This funding round, co-led by True Ventures and Prelude Ventures, underscores investors' strong belief in Understory's vision and expansion potential.
Following the highly successful launch of Understory's Dealers Open Lot insurance solution, which offers risk management for U.S. auto dealers and has provided protection for dealer inventories across nearly 1,000 locations from Hawaii to Delaware, the company is launching a product offering focused on the renewable energy sector. This product harnesses Understory's proprietary risk mitigation technology that has already reduced weather damage for its clients by over $65 million and effectively reduced overall claim trends by 60%. Understory's mutualized insurance approach, together with unparalleled risk selection and sharing of clients' best practices, has enabled sustainable and profitable portfolio growth.
Climate Risk-Solving Insurance Provider Understory Secures $15 Million Series A Funding
Puneet Agarwal, partner at True Ventures, commended the company's growth and trajectory: "The Understory team has brought a new, next-generation level of data intelligence to the insurance market. This new funding round is a significant milestone, positioning Understory to reshape the property insurance industry and renewable energy landscape. We're thrilled for the team as they continue to see so much promising traction."
New York-based InsurTech Authentic Insurance secures $11m in Series A funding - FinTech Global
Authentic Insurance, a New York-based InsurTech startup, has successfully raised $11m in a Series A funding round.
This investment round was led by First Mark Capital, with additional participation from Slow Ventures, Altai Ventures, MGV, Upper90, and Commerce Ventures, according to InsurTech Insights.
The fresh capital will be used by Authentic to expand its team and introduce new offerings to its product suite, such as workers’ compensation and health insurance products. This move aims to broaden the scope of coverage and benefits available to its clients.
Founded in 2022, Authentic Insurance enables SaaS platforms, associations, and other communities to establish their own captive insurance programs tailored for small business coverage. With a single line of code, partners can introduce their own insurance products. Authentic handles all aspects of underwriting, claims management, and oversees capital markets and reinsurance, earning a fee for these services.
The company primarily serves businesses generating less than $5m in annual revenue.
Innovation
Patent Issued for Determining acceptable driving behavior based on vehicle specific characteristics (USPTO 11981335): State Farm Mutual Automobile Insurance Company
The assignee for this patent, patent number 11981335, is State Farm Mutual Automobile Insurance Company (Bloomington, Illinois, United States).
Reporters obtained the following quote from the background information supplied by the inventors: “Current technologies make use of vehicle telematics data to assess driving behavior. For example, the telematics data may be collected and analyzed to determine the acceleration, braking and/or cornering habits of a driver of a vehicle, and the results of the analysis may be used to measure the performance of the driver over time.
The telematics data may be generated by sensors on the vehicle, or by a mobile device (e.g., smart phone) carried by the driver, for example. The measured performance may then be used for various purposes, such as modifying an insurance rating of the driver. More recently, it has been proposed that telematics data also be used in connection with car rental services, including peer-to-peer car rentals, to score potential renters (e.g., so that vehicle owners may avoid renting their vehicles to certain types of drivers).
“Typically, car rental services utilize terms of a rental agreement to constrain renter use of the rented vehicle. However, such terms are not able to constrain or limit many driving behaviors of a renter while the renter is operating a vehicle. This may occur because car rental services are not able to detect such driving behaviors, and as a result the car rental services cannot incorporate such driving behaviors into a rental agreement. Thus, car rental services may rely on the vehicle owner trusting the renter to not misuse the rented vehicle.
Meta Title: "Progressive Corp Patent: Predictive System for Insurance Premium Calculation
Progressive gets grant for predictive system for insurance premium calculation using usage based data
Progressive‘s patent involves a multivariate predictive system that processes usage-based data to underwrite insurance products. The system includes a database engine, digital filter, sampler, and multiplier to determine insurance premiums based on diverse sources of data. The patent also includes a claim for improving connectivity of home devices through data fusion and dynamic routing. GlobalData’s report on Progressive gives a 360-degree view of the company including its patenting strategy
Webinars/Podcasts/Interviews
June 27 CIECA Webinar: What You Need to Know About Unauthorized Use of Information & Data
{Ed. Note: Recommended] June 27 CIECA Webinar: What You Need to Know About Unauthorized Use of Information & Data - Description
Thursday, June 27 |11 am PT/1 pm CT/2 pm ET
"What the Collision Industry Needs to Know About the Unauthorized Use of Its Information & Data"
Featuring Pete Tagliapietra, Managing Director of DataTouch
During the one-hour live broadcast, Pete Tagliapietra, managing director of DataTouch, will discuss how the lack of data and information security is adversely affecting the collision industry.
All industry stakeholders, including CIECA members and non-members, are invited to attend the presentation.
Events
SCOUT INSURTECH: Jun 17, 2024, 12:30 PM - Lower.com Field, Columbus, OH
WHERE INNOVATORS CREATE NEW PARTNERSHIPS
An in-person gathering designed to cultivate new relationships between innovative insurtech companies and the broader insurance industry.
This environment will allow startups and high-growth companies to quickly connect with carriers, brokers and agents eager to hear new ideas and consider new partnerships.
Special Discount, 40% off for ‘Connected’ followers, use code: INSURTECHCONSULT