Climate/Change/Sustainability/ESG
Global heat record broken for 12th straight month in May
May was the 12th consecutive month to set a monthly global average temperature record, and exceed a key Paris Agreement temperature target.
Why it matters: The new data comes amid a slew of findings from climate monitoring groups released Wednesday, timed to coincide with a speech in New York by U.N. Secretary-General António Guterres.
This is not the longest period on record of warmest months (that stands at 15 months). However, it is the longest streak of months to reach or exceed the Paris Agreement's aspirational target of limiting global warming to as low as 1.5-degrees compared to preindustrial levels.
The big picture:
The news comes as parts of Asia, Mexico and Central America, and now the Southwestern U.S. have baked from withering heat waves, with all-time high temperature records set across the world.
North Atlantic Hurricane Outlook 2024
Summary
The 2024 North Atlantic hurricane season is expected to be very active according to seasonal outlook providers. Predictions sit above average for the period of elevated activity from 1995-2023, and well above average for the longer 1950-2023 period.
Factors in play include very warm sea-surface temperatures in the Atlantic Main Development Region, developing La Niña conditions and elevated activity in western Africa.
Hurricane landfalls vary substantially from year to year relative to activity in the Atlantic Basin including the Gulf of Mexico. This depends on daily weather patterns and related steering currents. Weather prediction for any event generally loses skill beyond a 7-10 day forecast lead making seasonal landfall predictions a challenge.
Interests in property (re)insurance should be prepared as always for impactful hurricane landfalls regardless of seasonal outlooks for the basin. For those seasons with ten or more hurricanes we have seen a wide range of insured losses, ranging from under USD 1 billion to over USD 100 billion
Research
Home Insurance Rates Surge 38% Nationwide Since 2019 — Arizona, Nebraska, Illinois See Biggest Increases
Rising home prices, inflation and the high cost of building materials contribute to skyrocketing insurance rates, with Americans paying 38% more to protect their homes than in 2019.
Arizona saw the biggest increase, with rates jumping 62%, according to a recent LendingTree's State of Home Insurance in 2024 report. Nebraska followed Arizona, which saw 59.9% higher insurance rates, and Illinois, with costs rising 56.9%.
The average cost of home insurance in the U.S. is $2,478 per year, but it's more than double that in Oklahoma, where the average price is $5,478 and Nebraska at $5,363.
The lowest average annual insurance costs are in Hawaii, at $549; New Hampshire, at $1,096; and California, at $1,121. These states have low insurance rates because of low approved rate changes this year. The rate was 4.2% in Hawaii, compared to 5.5% in New Hampshire and 8.8% in California.
In addition to increased home prices and building materials, climate contributes to the rate spike as insurers increase their premiums to combat rising claims. Wind and hail account for more than 40% of homeowners insurance claims, followed by 24.1% for fire and lighting claims and 23% for damage and freezing.
Fire and lighting had the largest average claim amount at $83,519. Liability claims came in second with an average loss of $25,323.
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"Insurance companies have to repair more homes, and it's more expensive to rebuild each one than it might have been just five years ago," Lending Tree home insurance expert and licensed insurance agent Rob Bhatt said. "When their costs of paying claims go up, they turn around and raise our rates. This is affecting prices for just about everyone, including people who haven't been directly impacted by a natural disaster, or at least not yet."
Commentary/Opinion
AI Large Language Models Not Leaving Chubb’s Greenberg ‘Breathless’
Revealing that Chubb has its own version of ChatGPT and an app store that delivers copilots to different functions of the company, CEO Evan Greenberg said he recognizes the power of AI—but he’s “not breathless about it.”
The chief executive addressed an audience of financial officers and analysts at the S&P Global Ratings Annual Insurance Conference Wednesday, responding to questions from S&P Managing Director Larry Wilkinson about topics ranging from AI to economic trends to China-U.S. relations to social inflation. FULL ARTICLE
CEOs need to be 'multiple crisis managers on an ongoing basis:' USAA's CEO
On this episode of Fortune’s Leadership Next podcast, co-hosts Alan Murray and Michal Lev-Ram talk to USAA President and CEO Wayne Peacock about the insurance company’s 102-year (and still going strong) focus on serving America’s military families. They also discuss the timing of Peacock taking over the top spot at the company, which took place just as the pandemic took hold, and why the company’s DEI efforts on the hiring front are essential when it comes to serving USAA members.
“The world requires broader thinking about how to make the best decisions, and I think our employee base needs to reflect that diversity, all manner of diversity in order to best prepare ourselves to serve today and tomorrow’s military,” says Peacock.
Listen to the episode or read the transcript below. HERE
AI in Insurance
Leveraging AI and geospatial imagery for insurance risk prediction
Artificial intelligence (AI) and geospatial imagery are revolutionising the insurance industry, enhancing everything from underwriting and risk assessment to claiming processes. By integrating AI with high-resolution geospatial data, insurers can gain unprecedented insights into the specific risks associated with a given location.
Location plays a critical role in insurance, influencing the likelihood of natural disasters, crime rates, and other factors that impact policy pricing and claims.
Leveraging AI allows insurers to analyse vast amounts of data quickly and accurately, identifying patterns and predicting risks with greater precision than ever before.
This innovative approach not only improves the accuracy of risk predictions but also streamlines the underwriting process, making it more efficient and effective.
As insurers continue to adopt AI and geospatial technology, they can offer more tailored policies, better manage risk, and enhance overall customer satisfaction.
A key component of this technological shift is geocoding, which involves converting addresses into geographic coordinates. This enables insurers to pinpoint the exact location of an insured property, facilitating more precise risk assessments.
Geocoding enhances the accuracy of data, allowing for more detailed analysis and better-informed underwriting decisions.
As part of the esteemed Professional InsurTech Certificate, Jon Lipinski – Co-Founder & President at Ecopia AI – explained how geocoding is becoming the new standard for insurers – and could in fact highlight thousands of under/overpriced properties.
AI may take time to reach fullest potential in insurance: Panel
Artificial intelligence could become a powerful tool for the insurance industry but may take some time to reach its fullest potential, according to a panel speaking Wednesday at the 40th Annual S&P Global Insurance Conference.
Doug McElhaney, Arlington, Virginia-based partner at McKinsey & Co., said AI offers the ability for vastly increased precision.
“What’s emerged is the ability for a variety of different analytical techniques and models to really get super precise about risk prediction, about understanding the nature and scale of risk and then how to navigate it.” Mr. McElhaney said. “I can get really precise about how I manage that risk, how I price it.”
One such example is using computer visioning technology to identify physical attributes of an insured property or structure with much greater precision, said Adrian Jones, New York-based chief of staff in international & global markets at Acrisure LLC.
“There’s tremendous opportunity in underwriting,” Mr. Jones said, adding he also sees promise for basic promise automation and the claims sector as well.
Frank Schmid, Stamford, Connecticut-based chief technology officer at General Reinsurance Corp., called AI a “general purpose technology,” similar in its impact to electricity or the steam engine
Fraud
Mercury Insurance Expert Offers Tips to Avoid Becoming a Victim of Insurance Fraud
While inflation continues to drive up home and auto insurance costs, fraud is a hidden culprit contributing to the hikes. Whether you're an actual victim of insurance fraud or simply an active policyholder, the reality is that insurance fraud impacts everyone. And as the frequency and complexity of fraudulent activities increase, so does the cost of insurance for all policyholders.
What exactly is insurance fraud? It's a deliberately deceptive act with the goal of receiving a wrongful payout from an insurance process. It can be committed by applicants, policyholders, third parties or even the insurance providers themselves — and it affects virtually every type of insurance including auto and homeowners.
"The total cost of insurance fraud for non-health insurance is estimated to be more than $40 billion per year. To put that into perspective, insurance fraud costs the average U.S. family between $400 and $700 per year in the form of increased premiums," said Steve Wang, Manager, Divisional Claims/Head of Special Investigations Unit at Mercury Insurance.
Insurance fraud is committed in various ways, but the main offenses include fraudulent claims, application fraud and premium fraud. Of these, fraudulent claims occur most frequently, which involve offenders filing false or exaggerated claims to receive benefits they are not entitled to. For example, a policyholder may intentionally cause property damage in order to file a claim.
Insurance fraud office complaints aired at Senator Menendez's bribery trial
New Jersey’s former attorney general Gurbir Grewal told a federal jury that Senator Robert Menendez twice reached out to him to complain about how the state’s insurance fraud office was unfairly treating Hispanic defendants.
Grewal, now the enforcement chief at the US Securities and Exchange Commission, said at the senator’s bribery trial that one of the encounters with Menendez led one of his top deputies in the Attorney General’s office to exclaim “that was gross.” Grewal said that Menendez first called him to raise concerns shortly after he became AG in early 2019.
Federal prosecutors in Manhattan say Menendez tried to pressure Grewal to “favorably resolve” two criminal matters at the behest of a businessman who allegedly bribed the Democratic senator with a $60,000 Mercedes-Benz convertible for his wife, Nadine.
“I believe he said to me he had concerns about how my office, the Office of Insurance Fraud Prosecutors, was treating Hispanic defendants versus non-Hispanic defendants in the trucking industry,” Grewal said. “I said ‘is this about a pending criminal matter?’ to which he responded ‘Yes,’” Grewal said.
The 70-year-old Menendez, who has said he’s innocent, didn’t seek the Democratic nomination for his seat this week, but filed to run as an independent instead. In addition to the Mercedes from Jose Uribe, the senator is accused of taking gold bars and cash from a group of Egyptian businessmen.
Podcast
What do video gaming addiction suits mean for insurers?
David Cummings of Reed Smith joins us to discuss how a recent influx of gaming addiction lawsuits may impact the insurance industry.
Many of us have indulged in the occasional video game as a way to decompress, to socialize with friends or just to test out our hand-eye coordination, but for a small percentage of people, these games become so much a part of their life that it can be classified as an addiction.
Those with video game addiction have severely reduced control over their gaming habits, to the point that it has negative consequences on their life, including at work, at school and within their personal relationships. Currently, some of the world's most popular video game publishers are battling lawsuits alleging the addictive nature of these games has caused people some kind of personal or financial injury.
As such, these publishers may soon be turning to their insurance companies, hoping these liabilities will be covered under their policies.
So, what do these lawsuits mean for the insurance industry?
For this episode of the Insurance Speak podcast, we were joined by David Cummings, partner in the Insurance Recovery Group at Reed Smith, to discuss just that.
Listen to our full conversation with Cummings above, or subscribe to the Insurance Speak podcast on Spotify, Apple Music or Libsyn.
People
CNA Financial Corporation names next CEO | Insurance Business America
CNA Financial Corporation executive vice president and global head of underwriting Doug Worman (pictured) will step into the roles of president and chief executive at the start of next year.
The appointment will see current chairman and CEO Dino E. Robusto transition to the executive chairman position. In his new capacity beginning 2025, Robusto will lead the CNA board of directors while acting as a strategic advisor to Worman, supporting the company’s objectives.
Expressing his confidence in Worman’s capabilities, Robusto stated: “Doug is an exceptional underwriting executive and has strengthened and solidified CNA’s underwriting culture and profitability.
“Along with the board, I am confident in Doug’s ability to lead CNA forward. He builds excellent organizational talent, skillfully cultivates broker relationships, and drives innovation to deliver industry-leading products and services for business customers.”
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