Research
US property-casualty insurers rocked by huge losses
Challenges in personal auto and homeowner segments take their toll – but there was a boost in the commercial sector
The US property/casualty (P/C) insurance sector experienced a second year of net underwriting losses exceeding $20 billion, driven by significant unprofitability in the private passenger auto and homeowners/farm owners segments, as detailed in a new AM Best report.
US personal lines segment’s underwriting loss in 2023
In 2023, the industry recorded a net underwriting loss of $21.6 billion, following a $25.8 billion loss in the prior year.
AM Best pointed to the personal lines segment as a major contributor, with a $32.8 billion underwriting loss.
Within this segment, the private passenger auto line reported an underwriting loss of nearly $17 billion, approximately half of the previous year’s loss. Conversely, the homeowners’/farm owners’ line saw net underwriting losses more than double to $16.0 billion.
Vast Majority of Drivers Would Share Data to Save Lives: Arity
New data from Arity analyzes U.S. transportation ecosystem challenges, revealing how drivers feel about risky driving behaviors and what driving behavior data tells us about how to fix them
An overwhelming 86% of U.S. drivers would be more willing to share driving behavior data if they knew it could help prevent the loss of life. That’s a key takeaway from a mobility data and analytics company, Arity.
Despite technological advancements in cars, the rise in traffic, distracted driving, and insurance premiums have made driving more time-consuming, costly, and dangerous, with traffic fatalities rising by 30% over the past decade.[1] The willingness of drivers to contribute their data underscores the growing recognition of data’s pivotal role in addressing road safety concerns nationwide.
“Today’s transportation ecosystem is broken and is costing people a lot of money and even lives. But it doesn’t have to be this way,” said Gary Hallgren, President of Arity. “With more driving data available than ever before, Arity is dedicated to identifying the factors contributing to road risk and enabling solutions that empower a smarter, safer, and more useful way to navigate the world. With this latest data report, we’re exploring ways to shape a better future of mobility, revealing how every stakeholder across transportation can contribute to safer roads.”
Commentary/Opinion
Beyond the Hype on Embedded Insurance | Insurance Thought Leadership
Proponents rave that embedded insurance benefits the insurer, third parties and customers, but we should temper the hype--without spoiling the enthusiasm.
The insurance industry is renowned for its ability to remain emotionally unaffected by hype and respond cautiously to it. With trading in risk as the core business, the insurance industry has evolved through several centuries, catering to the risk needs of the changing geopolitical, economic and technological landscapes. This inherent risk mindset has made the industry immune to being excited about any trigger or responding to it without a qualified assessment. However, a technology-driven startup boom in the last decade is changing the paradigm. These startups strive to gain attention by trumpeting their capabilities and offerings. For example, propositions such as on-demand, parametric and embedded insurance have been grabbing enormous column inches of insurance literature.
We are here to discuss embedded insurance. In the past, only large insurance companies and third-party brands had the privilege of partnering to sell embedded insurance policies. The simultaneous growth and adoption of several technologies has democratized the eligibility criteria and made it easier for anyone to partner, thus ushering in the new era of embedded insurance 2.0 (EI 2.0).
Now, we can seamlessly integrate granularized and tailor-made insurance coverage into the primary purchase process of a product or service, positioning it as an add-on component or an integrated feature, rather than treating it as a discretionary choice that follows a primary purchase. Embedding helps to prevent traditional decision fatigue and hesitation when purchasing insurance coverage.
Srivathsan Karanai Margan works as an insurance domain consultant at Tata Consultancy Services.
The Future Of Insurance: A Career That Matters
There is a common saying in the insurance industry that nobody decides to work in insurance, but rather, they end up in insurance due to random circumstances. As an industry, I think we need to work together to change the perception of insurance and encourage people to pursue this impactful career path.
Attracting younger individuals to the insurance industry is more critical today than ever, because the industry is predicted to lose approximately 400,000 workers by 2036 due to attrition. When individuals leave the insurance workforce for retirement or other reasons, the industry loses more than just personnel. What goes with these experts is institutional knowledge and experience.
The impact of the Great Resignation may have waned in the property insurance industry, but the competition for skilled employees remains a significant concern as property insurance companies have continued to struggle to fill the gaps and anticipate losses.
How to hire the next generation of P&C professionals
Ultimately, candidates are looking for stability and a company that can offer long-term growth.
The U.S. Bureau of Labor Statistics forecasts that over the next 15 years, 50% of the current insurance workforce will retire, leaving more than 400,000 open positions unfilled. With less than 25% of the industry currently under the age of 35, the talent shortage is imminent. Rather than looking at the negative effects this could have, the industry has the potential to transform, especially in the property & casualty sector.
How can employers fill these positions with the next generation of insurance professionals? Further, what does the next generation want from their employer?
Many enter the insurance industry because family or friends are successful in the industry. The value of companies networking and building relationships with younger professionals as they embark on their career path is increasingly important. Young professionals entering the workforce (or with under five years' experience) are looking for long-term growth opportunities and are hyper-focused on benefits as they move up within a company. Companies can attract new talent for the next generation by focusing on compensation, flexibility and technology.
Compensation
Most interesting in the current hiring landscape is candidates' expectations for compensation. More than ever, one of the first questions potential candidates ask is about 401K matches and parental leave or health insurance benefits. Ultimately, candidates are looking for stability and a company that can offer long-term growth.
A recent survey found 67% of Gen Z respondents ranked spending time with family and friends as a top life ambition, outweighing career goals. To attract the younger generation, a focus on 'lifestyle reimbursements' for extracurricular activities like gym memberships or streaming services is something to consider. Younger candidates are looking for work-life balance, and newer 'lifestyle' benefits make for an attractive option. Employers need to adjust compensation and benefits to attract the next generation of talent as work-life balance continues to be a non-negotiable.
AI in Insurance
Experts warn insurance industry to buckle up for AI regulation, litigation
With litigation related to the use of artificial intelligence expected to increase, industry experts are strongly recommending American insurance companies to prepare themselves before that reality takes hold.
“Given our litigious society, it’s just a fact of life that, as an insurance company, if you’re going to be using AI, you’re going to be, unfortunately, subjecting yourself to at least some amount of regulatory litigation and reputational risk,” Scott Kosnoff, partner, Faegre Drinker Biddle & Reath, LLP, said.
In Kosnoff’s opinion, it’s “probably unlikely” that insurance companies will be able to completely avoid this risk. However, he believes they can mitigate it while waiting on standardized AI regulations, which may be a long time coming.
He said by being mindful of regulatory expectations and trends; creating and managing a risk management framework; testing for algorithmic discrimination; and “having a story” that demonstrates commitment to ethical AI usage, insurers can place themselves in the best position to handle negative outcomes if, and when, they arise.
‘Blood in the water’
During a webinar hosted by the Washington Legal Foundation, Kosnoff noted that several high-profile cases related to AI usage in insurance have already been filed — and more are expected to come.
“All those courts are being vigorously defended, and we’re just going to have to wait and see how that plays out in the courts,” Kosnoff said. “But I think it’s fair to say that the plaintiff’s bar smells blood in the water, and they see the use of AI by insurers as sort of a fertile field.”
While he said a lot of the AI-related litigation arising focuses on inaccuracies, the general expectation is that much of it will focus on algorithmic discrimination in particular. This refers to instances where automated systems are believed to contribute to "unjustified different treatment or impacts" that disfavor people based on actual or perceived classifications such as gender, race, ethnicity, etc.
InsurTech/M&A/Finance💰/Collaboration
Israeli Insurtech Companies Conclude an Exceptionally Successful Quarter - Insurtech Israel News
Amid the challenges of the last quarter, Israeli insurtech startups have outdone themselves, showcasing their resilience and innovation. During the quarter, five exceptional startups collectively raised over $200 million in Series A and B funding rounds. This figure underscores the potential within the Israeli ecosystem in this field.
Amid the challenges of the last quarter, Israeli insurtech startups have outdone themselves, showcasing their resilience and innovation. During the quarter, five exceptional startups collectively raised over $200 million in Series A and B funding rounds. This figure underscores the potential within the Israeli ecosystem in this field.
The standout companies that secured significant funding are Healthee, DigitalOwl, Antidote Health, Honeycomb Insurance, and Novidea.
Each of these companies demonstrates innovation in digital health and health insurance, offering advanced technological solutions that are reshaping the insurtech landscape.
Kobi Bendelak, CEO of Insurtech Israel, stated that the tech ecosystem in Israel, particularly in the insurtech sector, continues to show substantial growth. Israel, known as the “Startup Nation,” is ranked high among the world’s leading countries in technology and innovation. Investor support, platforms that encourage entrepreneurship, and distinctive local talent form a solid foundation for the success of companies in this field.
Kobi Bendelak commented, “Despite the challenging period that began even before the war and intensified afterward, these funding rounds show incredible confidence in the Israeli insurtech ecosystem and its results, further strengthening the amazing work that has turned Tel Aviv into one of the global insurtech capitals.”
Bendelak noted that alongside the five mentioned companies, many other young startups also raised funds during the quarter. Although these fundraisings were not officially announced, they involved significant investments ranging from several hundred thousand dollars to a few million dollars. These fundings indicate ongoing awakening and development in Israel’s entrepreneurial ecosystem.
Insurance due diligence: A critical building block in M&A transactions
Mergers and acquisitions (M&A) involves multiple sophisticated entities, and can be challenging, intricate and risky. In the fast-paced and evolving world of M&A, due diligence plays a crucial role in facilitating a smooth transaction. Among the various types of due diligence, insurance due diligence has proved to be a critical step for parties involved in a transaction.
The M&A market has experienced volatility recently after years of steady growth and the record-breaking level of activity seen in 2021. Potential deal parties are expressing caution due to a variety of factors, such as high interest rates, valuation concerns and political uncertainty.[1] Global deal values halved in just two years to US$2.5tn in 2023 from their peak of more than US$5tn in 2021.
Despite this, the current environment also presents opportunities and signs of optimism, however, investors are likely to require greater levels of due diligence to gain the comfort they need to sign and successfully close deals.
Locally, stabilising macroeconomic factors are providing greater certainty to both potential buyers and corporate sellers considering strategic divestments. M&A activity in Australia has been boosted by international capital with investors from the US, Japan and Europe contributing to some of the largest transactions in Australia in 2023 and the first half of 2024.
For private capital, many funds have waited out this cycle, which has left record levels of capital available for deployment. Australia’s dealmakers are demanding greater certainty in order to transact, with high quality advice and thorough due diligence being essential elements to the successful execution of M&A deals
People
AAA Northern California, Nevada & Utah Announces Permanent CEO
AAA Northern California, Nevada & Utah (AAA NCNU), which has over six million members in Northern California, Arizona, Nevada, Utah, Montana, Wyoming, and Alaska, today announced that the board of directors has unanimously chosen Marshall L. Doney as the organization’s next President and CEO effective immediately.
“Marshall embodies unparalleled operational expertise, a visionary entrepreneurial spirit and a commitment to fostering innovative strategic partnerships that have benefited AAA throughout his career,” said Board Chair Wendy Paskin-Jordan. “His approach not only propels an organization forward, but also cultivates a culture of growth and development of those he works with which ensure a dynamic future built on collaboration and excellence that benefits our Members.”
“I am honored and grateful to the board for the opportunity to lead this innovative organization forward and to work with these dedicated and talented professionals,” said Doney. “This team is one that has tremendous potential and I have always admired their innovative and members-first approach. This is a terrific opportunity that any leader would welcome.”
Clay Creasey, the interim CEO, will assume the new role of Chief Mergers and Acquisitions Officer.
"I am extremely excited to work side by side with Clay on continuing AAA NCNU strategic initiatives and alliances that continue to grow our member value and support AAA NCNU's track record for innovation," Doney said.
“We are so grateful to Clay for his willingness to provide valuable stability, insightful ideas and continuity during this time,” said Paskin-Jordan. “He is an integral part of the leadership team and his contributions over his eight-year tenure here have helped strengthen the organization and our ability to serve our members. This new role continues to bring Clay's expertise to serve our members well.”
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4th of July
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