News
Personal auto insurance profitability on the right track – Triple-I
Don't pop the champagne corks just yet
Personal auto insurance underwriting profitability is showing signs of improvement after recent years of record losses, according to the Insurance Information Institute (Triple-I). However, these gains may take time to impact premium rates, the institute noted.
Triple-I reported that auto insurers’ 2023 net combined ratio of 104.9 is 7.3 points better than 2022. Additionally, 2023 net written premium growth of 14.3% is the highest in over 15 years and six points higher than the next-highest during that period, reflecting rate increases to offset inflationary loss costs, according to the “Triple-I Issues Brief, Trends and Insights: Personal Auto Insurance Rates.”
New auto sales in 2023 experienced their best performance in four years, aiding auto insurers' profitability. However, 2022 was marked by significant underwriting losses. The number of drivers and miles driven have returned to pre-pandemic levels, but risky driving behaviors that led to high losses have not improved, the Issues Brief noted.
Dale Porfilio, chief insurance officer at Triple-I and president of the Insurance Research Council (IRC), highlighted the results of the report and noted how telematics can improve driving behavior.
Nuclear Verdicts Surge With Median Award Near $24M in 2023 - Risk & Insurance : Risk & Insurance
Jury verdicts exceeding $10 million are on the rise, impacting businesses, industries, and society, according to Institute for Legal Reform analysis.
Nuclear verdicts in civil litigation cases are becoming increasingly frequent and severe, according to an analysis by the U.S. Chamber of Commerce Institute for Legal Reform (ILR).
These extreme jury awards of $10 million or more, dubbed “nuclear” for their devastating impacts on businesses, entire industries, and society at large, can have far-reaching consequences even when later reduced or thrown out by an appellate court, according to ILR’s report, which analyzes the cause of increasing nuclear verdicts and offers some suggestions for tort reforms that could blunt their growth.
Trends in Nuclear Verdicts
The frequency of nuclear verdicts rebounded to near pre-pandemic levels by the third quarter of 2021 after dropping during COVID-19 shutdowns, ILR found in its analysis of jury verdicts of $10 million or more between Jan. 1, 2013 and Dec. 31, 2022.
Over the past decade, both the median and mean nuclear verdicts have increased significantly, particularly in product liability cases. Over the 10-year study period — which includes the COVID-19 pandemic, when courthouses where largely shut down — the median nuclear verdict for all personal injury/wrongful death cases was $21.1 million and the mean was $88.9 million. FULL REPORT
How did MGAs fare in 2023?
The global revenue earned by managing general agencies, managing general underwriters, and coverholder groups reached approximately $23.9 billion in 2023, according to an updated ranking and analysis by marketing and consultancy firm Insuramore.
Between 70% and 75% of the revenue came from direct commercial property and casualty or non-life insurance, with the remainder from direct private P&C, life and health insurance, and reinsurance.
Last year’s market valuation marks an annual growth of over 20% compared to 2022, before accounting for inflation. The growth rate is nearly double that of the global insurance broking sector, which likely grew by over 11%. It also suggests that MGAs globally wrote premiums possibly exceeding $200 billion across all insurance classes in 2023.
In the past year, Brown & Brown retained its position as the leading group in this sector, with MGA revenues roughly double those of the second-ranked Amwins. The subsequent ranks were held by Ryan Specialty Group, TIH, and Gallagher.
Liberty Mutual facing bad faith UM/UIM class action lawsuit in Arizona
A bad faith class action lawsuit has been filed against Liberty Mutual and its subsidiaries in Arizona that alleges insurance companies have barred or not informed policyholders of their ability to use both uninsured and underinsured coverages.
In allegedly doing so, Liberty Mutual “breached its contractual and legal duties to its customers, including underpaying the benefits due,” the lawsuit states.
“Because UM/UIM coverage is personal coverage — despite being associated with a vehicle — it covers the person, not the vehicle. “When there are multiple vehicles, multiple UM/UIM coverages exist, and unless the insurer disclaims stacking, those coverage limits are added together to provide ‘stacked’ benefits for a single claim.
“Each separate coverage limit can be accessed to provide benefits for the same covered loss. When stacking coverages, the coverage limit is determined by adding together the UM/UIM benefits limits available under each vehicle’s UM/UIM coverage… In handling UM/UIM claims for its customers with multiple covered vehicles, defendants breached each of these duties as well as the insurance contracts themselves.”
As of Tuesday afternoon, none of the defendants had filed a response to the lawsuit.
Commentary/Opinion
Have We Turned the Corner on Distracted Driving? | Insurance Thought Leadership
For a book project in 2013, I looked up trends in traffic fatalities in the U.S. and was startled by the progress. In the quarter-century since 1988, fatalities had fallen steadily from more than 47,000 in a year to less than 33,000 even as the U.S. population increased by a third. Fatalities per 100 million vehicle miles traveled had fallen by more than half, from 2.32 to 1.1.
We were doing something right.
Then progress stalled... and then the trend reversed. By 2021, nearly 43,000 people died on U.S. roads, and the number was almost that high in 2022.
Why? Mostly because of distracted driving--all those smartphones we'd been buying since Apple introduced the iPhone in 2007 and were paying attention to rather than keeping our eyes and minds on the road.
So I was delighted to see the recent report from Cambridge Mobile Telematics, which said distracted driving had declined 4.5% in 2023. CMT calculated that the improvement "helped prevent over 55,000 crashes, 31,000 injuries, 250 fatalities and close to $2.2 billion in economic damages in the U.S. in 2023."
Calling a turn in a trend is always tricky, but I've followed a lot of trends for a lot of years, and I'm ready to call this one. I think distracted driving will only decline from here, for two reasons.
I'll explain. FULL COMMENTARY
Paul Carroll, Editor-in-Chief Insurance Thought Leadership
Research
2024 U.S. Auto Insurance Study | J.D. Power
With U.S. auto insurance rates up 11.2% on average during the past year—and insurers still losing an average of five cents on every dollar of premium they collect—sky-high premiums do not appear to be leveling off anytime soon. According to the J.D. Power 2024 U.S. Auto Insurance Study,SM released today, these rate increases do not necessarily erode customer satisfaction with auto insurers. When customers have a high level of trust in their insurer, customer satisfaction and brand advocacy increase considerably, even in the face of rate increases. However, slightly more than half (51%) of customers say they have little trust in their auto insurer.
“Auto insurers are in a tough position right now,” said Breanne Armstrong, director of global insurance intelligence at J.D. Power. “With repair costs still rising—and with more than 20% of vehicles involved in collisions now considered total write-offs—insurers are still losing money, despite passing along huge price increases to their customers. What’s interesting in J.D. Power data is that even though high premiums negatively affect customer satisfaction, those negative influences can be offset by high levels of trust that insurers will come through when they are needed.”
InsurTech/M&A/Finance💰/Collaboration
Mega-deal drought sends insurtech funding to 4-year low
Gallagher Re reports that global insurtech funding slipped 17.3% during Q1 2024.
"Since the InsurTech investment peak in 2021, we have continued to see a funding reset," Gallagher Re Global Head Dr. Andrew Johnston said in the firm's latest insurtech funding report.
First-quarter insurtech funding fell to its lowest point in four years after the industry failed to notch a deal exceeding $100 million for the first time since 2017, according to data compiled by Gallagher Re.
The report shows global insurtech funding slipped 17.3% during the period, falling from $1.103 billion the previous quarter to $912.3 million. Global insurtech funding has not dipped below the $1 billion marker for a quarter since 2020.
Despite continued interest and activity in the market, the average check size on each deal is decreasing, Gallagher Re Global Head Dr. Andrew Johnston said in the report. "Consequently, the average insurtech deal size fell sharply by 30.6% quarter on quarter," he added.
While the average deal dropped beneath $10 million, the number of first-quarter transactions jumped to 107 after posting just 100 deals for the previous period. Also during the first quarter, early-stage funding rose 26.5%, according to the Gallagher Re report.
"Since the InsurTech investment peak in 2021, we have continued to see a funding reset," Johnston said.
"With activity up but average deal size down, investors are becoming more democratic in their funding allocations and spreading capital more evenly among companies," he added. "This has resulted in a more sustainable InsurTech market."
Meanwhile, the first quarter saw Property & Casualty insurtech funding drop 22.5% on just six quarter deals. Life & Health insurtech funding also backpedaled quarter on quarter, falling 4.7% despite a deal increase by 54.2% over the same period.
Pyte Announces $5M in Funding for Private and Secure Data Utilization and Collaboration
The latest funding aims to accelerate the commercialization of Pyte’s secure computation platform for data utilization and collaboration.
Pyte, a secure computation platform for data-first global enterprises, has announced $5 million in additional capital, bringing its total funding to more than $12 million. The round was led by Myriad Venture Partners (Boston) with participation from Innovation Endeavors, Liberty Mutual Strategic Ventures and Pillar VC, among others.
Sadegh Riazi, Founder and CEO, Pyte.
“Insurance companies handle a great deal of sensitive information—such as digital identifiers, health records, tax records and credit history—and need to ensure data security without compromising data fidelity,” comments Sadegh Riazi, founder and CEO, Pyte. “That’s our goal with Pyte. Our technology helps organizations use data to support strategic and vital operations, like customer risk assessment, cross-selling and finding new product line opportunities, while also giving them confidence that information will remain private and secure.”
Events
InsurTech Hartford Innovation Challenge 2024
Wednesday, June 19, 2024 · 11:00 a.m. Eastern Time
About This Webinar
The InusrTech Hartford Innovation Challenge is a contest open to companies across the globe. The 2024 contest has 3 award categories:
Top Emerging Risk Solution
Best Health & Safety Solution
Best Emerging InsurTech
This is a virtual event and will include presentations form the finalists in each category and will announce the winners at the conclusion of the event. REGISTER HERE
AI in Insurance
Viewpoint: Why Insurers Should Have Confidence in Machine Learning Capability
Executive Summary: While insurance leaders plan to use machine learning capability in their pricing and underwriting processes, only a small proportion actually have embraced the technology. They need to take the next step because these are essential tools that will help them navigate changing regulations and be more responsive to consumer needs. Insurers must act now to be first movers, rather than reactive followers, writes Erez Barak, chief technology officer, Earnix.
Fraud
NICB and Agero Join Forces to Combat Insurance Fraud
Two leaders in their respective industries are joining forces to protect insurers and our communities from questionable third-party roadside and vehicle service providers to deter insurance fraud. The National Insurance Crime Bureau (NICB), the nation's premier not-for-profit organization dedicated to preventing and prosecuting insurance fraud and crime, and Agero, the leading white-label provider of digital driver assistance services and software for the majority of automotive insurance brands, are forming a strategic partnership to combat fraud before it happens.
"Through this strategic partnership, NICB and Agero will work together to detect fraudulent activities swiftly, prevent losses, and protect everyday Americans from vehicle service provider scams and crimes," said David J. Glawe, President and CEO of NICB.
The FBI reports that insurance fraud (non-health insurance) is estimated to be more than $40 billion per year, costing the average U.S. family between $400 and $700 annually in increased premiums. Additionally, auto insurance fraud is underreported, as 29 percent of those who say they were victims never reported their suspicions. These are the exact negative impacts that NICB and Agero are looking to address in their partnership.
"Agero's comprehensive approach to detecting malicious behavior and road safety enhancement is driven by our relentless pursuit to protect drivers and insurers through technological innovation and our commitment to excellence," said Jeffrey Blecher, Chief Operating Officer at Agero. "By harnessing the power of data intelligence, technology and five decades of experience, we continue to make significant strides in protecting insurers, drivers and the communities we serve from the adverse effects of fraudulent activities."
Podcast
Interview with President and COO of Toyota Insurance Robert Spencer | McKinsey
President and COO of Toyota Insurance Robert Spencer shares his views on how to enhance customer experience as the mobility ecosystem evolves.
New technologies and the data that comes with them are set to reshape the mobility ecosystem. In this episode of the McKinsey on Insurance podcast, Doug McElhaney, a partner in McKinsey’s Washington, DC, office, sat down at InsureTech Connect in Las Vegas with Robert Spencer, president and COO of Toyota Insurance. The two discuss the impending evolution of the mobility ecosystem and the opportunities it brings for OEMs and insurers to collaborate to provide the best possible experience to customers.
Doug McElhaney: How do you see the broader mobility ecosystem evolving in the next two to three years?
Robert Spencer: The first shift that we all probably know to be true is that there will be more electric vehicles, and with more electric vehicles will come more technology in those vehicles. The second is related to the use of data that’s coming from those vehicles—not just for insurance purposes but for everything. And consumers’ willingness to use their data for insurance has gone up. I think part of that is because there’s a better value proposition for what that data is being used for.