Q1 underwriting result strongest since 2007: Fitch  June 25th 2024

The Evolving Claims Professional | Insurance Thought Leadership

With short staffing and less experienced adjusters, organizations must equip claims professionals with better, data-driven tools.

One of the biggest issues affecting the P&C industry is the changing labor market. In the wake of the pandemic, hybrid and remote work has persisted. This “new normal” has created challenges for employers. The problem is compounded as older professionals retire, leaving claims organizations to bridge the knowledge gap as younger professionals enter the market.

A report by the National Association of Mutual Insurance Companies indicates 50% of the current insurance workforce will retire over the next 15 years. In addition, a 2022 survey found nearly a quarter of claims adjusters plan to retire by 2027. These stats portend a talent chasm.

For now, most claims operations have stabilized their staffs by backfilling the notable headcount deficits of the early 2020s. But the cumulative effect is a scarcity of deep claims technical expertise as compared with pre-pandemic levels.

Steve Laudermilch is executive vice president and general manager of Enlyte’s Casualty Solutions Group (CSG)

Are reports of Florida property insurance stabilization premature?

Hundreds of thousands of Floridians are still waiting to see their rates go down two years after tort reform.

On May 21, the Florida Office of Insurance Regulation (OIR) published its May 2024 Florida Property Insurance Market Update, claiming "overall market stabilization following the historic legislative reforms of 2022 and 2023."

Those 2022 and 2023 reforms include Florida Governor Ron DeSantis' signing of SB 2-A, which eliminated one-way attorneys' fees for disincentivizing "frivolous lawsuits" to reduce the burden of litigation and bring down costs for Florida homeowners.

Per the OIR, 10 Florida property insurers have filed for a 0% rate decrease to take effect in 2024, and at least eight more have filed for a rate decrease to take effect in 2024. The eight insurers that have reportedly filed for unspecified rate decreases are Safe Harbor Insurance Co., Spinnaker Insurance Co., Southern Oak Insurance Co., American National Property & Casualty Co., US Coastal Property & Casualty, Florida Peninsula Insurance Co., Stillwater Property and Casualty Insurance Co., and American Integrity Insurance Company of Florida.

The 10 insurers that reportedly filed for a 0% rate decrease are Florida Family Home Insurance Co., Florida Farm Bureau General Insurance Co., American Bankers Insurance Company of Florida, Edison Insurance Co., Castle Key Insurance Co., Heritage Property & Casualty Insurance Co., Castle Key Indemnity Co., American Integrity Insurance Company of Florida, American Security Insurance Co., and American Traditions Insurance Co.

Citizens Property Insurance Corp., Florida's largest property insurer, with 1,222,840 policies in force as of Q4 2023, has not been reported as filing for a 0% rate decrease or any other rate decrease. Policies written by Citizens account for 46.5% of all policies written by Florida's 25 largest property insurers. Policies in force for other Florida property insurers within Florida's top 25 amount to 716,740. Of the insurers that reportedly filed for a 0% rate decrease or a rate decrease, only seven fall within Florida's 40 largest insurers by policies in effect. Assuming that the filed rate decreases are approved, less than 1,000,000 of Florida's approximately 7,450,000 residential policies will be affected.

Homeowner Insurance Costs Will Come Down Just A Little

The long-term trend of homeowner insurance costs depends on the extent to which ongoing climate change is increasing actual losses. And that is uncertain, unfortunately. Homeowner’s insurance costs have risen markedly, with few choices in some markets. Climate change has been proclaimed as the cause, but misguided regulation is part of the problem along with uncertainty about what has really driven claims. Insurance costs will probably decline a small amount in the coming year, but the longer trend depends on uncertain factors.

Insurers must cover their costs to stay in business, as well as earn a return on their capital. Costs, in turn, are driven by the number of claims and the severity of claims. Losses that come from extreme weather, such as hurricanes or tornadoes, may be increasing due to climate change, but some of the recent changes may be temporary.

The cost of claims rises with inflation generally, the cost of building repairs in particular. The dollar cost of claims also depends on the legal system. State law and regulation may encourage more claims or fewer, with resulting high insurance costs or low. Laws that seek to help homeowners but which restrict insurers’ ability to cover their costs will lead companies to exit the business. The final result is insurance being unavailable. When this happens, political forces typically lead to more insurer-friendly regulation.

In recent years, insurance premiums have risen and availability has been strained in some locations. Extreme weather events have increased. The chart above shows the dollar amount (adjusted for inflation) of weather events with losses exceeding one billion dollars per event, based on data from NOAA.

The national sum of insurance claims or damage reflects not only severe weather but the locations in which structures are built. For decades Americans have been moving to more dangerous locations, at risk of hurricanes and tornadoes. Many northern states have cold winters but few extreme weather events that trigger unusual claims. As people move from the north to the south, total dollars of claims rises.

Bill Conerly, Senior Contributor, Forbes

Improving CX While Reducing Costs

Faced with rising automation and security risks, the insurance industry is in a constant push and pull between digital transformation and the customer experience. However, amid economic uncertainty, many carriers do not have the expendable capital to pour into the customer experience and instead have chosen to focus on their primary business functions to drive revenue. In fact, however, carriers can find ways to improve the customer experience while reducing operating costs, with a little strategic guidance.

Automating Processes for Efficiency

Automation presents a unique cost challenge. Initially, investing in AI, chatbots and other automation tools can strain budgets, especially for first-time adopters. However, the long-term benefits can significantly enhance efficiency and reduce operating costs.

Take auto claims processing. Insurance carriers can responsibly adopt technology in two key ways.

• They can invest in AI-powered software, albeit with upfront expenses covering software acquisition, employee training, and integration into existing workflows.

• Or companies can outsource operations to firms equipped with the necessary technology and expertise. This approach minimizes initial investment, offering a cost-effective means of tech adoption. Moreover, it streamlines implementation, freeing time to focus on core revenue-generating activities. Outsourcing also helps maintain low overhead costs.

Either way, machine learning algorithms can analyze vast amounts of data, accurately assessing the extent of damage and estimating repair costs with few to no errors. This drastically improves efficiency, paying for itself with the time saved and the avoidance of overpayments.

Ross Morera, senior director of customer experience at Solera

Climate change may cause more expensive insurance - expert

Climate change has caused the development of extreme weather conditions that have gravely affected the lives of people, and which may, in turn, cause insurance to become more expensive, according to a climate expert.

Ernst Rauch, a climate expert affiliated with reinsurance company Munich Re, talked about how, regardless of the damages incurred due to a weather event, there will always be someone who needs to pay for it, like insurers, the state, or the person who experienced the damage.

“If there is more damage, someone has to pay for it,” said Rauch in a Microsoft Start article.

Notably, insurance works in a way where many people will sign up to get coverage but only a few of them experience losses and receive compensation. Should there be a large number of people who are impacted by losses, insurers will need to pass on the risk and increase its premiums. With some extreme events being too expensive, insurers pass some of their risk to reinsurers.

In the article, Rauch pointed out that while insurers in California only covered between $1 billion and $3 billion in damages over the past decades, recent years saw annual insurance claims reach more than $10 billion.

“The amount of insured damage resulting from natural disasters now annually totals around $100 billion worldwide. Eighty- to 90% of these damages are weather-related,” said Rauch.