News
US P&C sector to return to profitability: Fitch Ratings
The US property and casualty (P&C) market is well on its way to returning to underwriting profitability along with a significant return on capital improvement for the full year, driven by lower winter storm losses and a recovery in personal auto results, according to Fitch Ratings.
However, the ratings company has warned that these results may not match first-quarter 2024 levels due to uncertainty regarding natural catastrophe exposures and loss reserve experience. The market still faces considerable challenges regarding the sustainability of commercial line pricing to meet ongoing loss-cost inflation and heightened litigation-related risk in several segments, Fitch explained .
The improvement in performance for 2024 will continue to be driven by personal lines results, with its recent substantial pricing actions and moderation of unusually high loss severity trends. Sharp price increases were seen, as reflected in direct written premiums (DWP) growth of 16% in personal auto and 13% in homeowners relative to Q1 2023.
Commercial lines DWP growth slowed to 4% for the quarter and workers’ compensation growth turned negative in the period. Additionally, segments with greater claims challenges, including commercial auto and other liability, reported higher year-over-year premium growth.
GEICO to pay millions in separate settlements
GEICO is to shell out around $8 million to settle with auto claims adjusters and policyholders in two separate cases.
In the case involving auto claims adjusters, the Berkshire Hathaway subsidiary was accused of wage and hour laws violations. Lodged by both former and current colleagues in Maryland and New York, the complaints had been refuted by GEICO, claiming that the supposed overtime hours weren’t logged on the adjusters’ time cards.
According to Bloomberg Law, the $6 million settlement was approved by Judge George L. Russell III earlier this week.
Meanwhile, in a separate development, policyholders of the insurance giant have sought preliminary approval for a $1.9 million settlement. The New Jersey case features allegations that GEICO failed to pay title or registration transfer fees upon the total loss of insured vehicles
Research
AI and Climate Change Lead Insurance Industry Priorities as Executives Eye Growth
The International Insurance Society (IIS) has published the results of its 2024 Global Priorities Survey. The survey, which is distributed to nearly 20,000 C-suite insurance executives around the world, provides a comprehensive overview of the industry's top priorities. These span Economic, Political and Legal, Social and Environmental, Operational, Technology and Innovation, and Business and Financial categories.
For the first time, AI has emerged as the top Technology and Innovation priority, with more than half of respondents emphasizing its importance, a significant increase from past years. Despite AI's potential to enhance operational efficiency, more than a third of executives report their companies are unprepared for its rapid advancement. Concerns include the industry's slow adaptation to technological changes and the need for extensive reskilling due to an aging workforce.
Climate change continues to dominate the Social and Environmental agenda, with 60% of industry executives prioritizing it in 2024. The increasing frequency and severity of natural disasters pose significant challenges, including difficulties in predicting future losses and rising costs that could destabilize carriers, governments, and consumers. These risks are exacerbated by the fact that a quarter of respondents feel their companies are not prepared to tackle this issue in 2024.
Inflation remains the most prioritized issue for the third consecutive year, even as recession fears have declined from their peak in 2022. Though its prioritization has decreased, cybersecurity remains a critical concern, with executives highlighting the need for robust protection against emerging AI-related cyber threats.
ISG to Evaluate Providers of Insurance Services
Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, has launched a research study examining service providers helping insurance companies improve operating efficiency, customer experience and product and service innovation.
The study results will be published in a comprehensive series of ISG Provider Lens™ reports, called Insurance Services, scheduled to be released in December.
Three geographically focused reports will cover industry-specialist providers offering business process outsourcing (BPO) services for life and retirement (L&R) and property and casualty (P&C) insurance, third-party administrator (TPA) services for L&R, and information technology outsourcing (ITO) services for the insurance industry in general.
Enterprise buyers will be able to use information from the reports to evaluate their current vendor relationships, potential new engagements and available offerings, while ISG advisors use the information to recommend providers to the firm’s buy-side clients.
Insurance companies are adopting technology rapidly to enhance operational resilience and delivery and are seeking providers to support their technology modernization efforts. Insurers are in various stages of digital transformation, including implementing low-code/no-code development for straight-through processing (STP), embedding intelligence in process automation, exploring enterprise-wide AI and ML applications and migrating from legacy to cloud solutions. They are even piloting generative AI (GenAI) in parts of their operations.
“Many providers are building long-term, mutually beneficial relationships with insurance firms, enabling them to move up the services value chain,” said Iain Fisher, director of ISG Provider Lens Research.
“Insurers understand these strategic partners can create immense value by applying next-generation technologies, innovative business processes and insurance domain capabilities to deliver greater efficiency, improved CX and enhanced innovation with relatively quick turnaround times.”
Commentary/Opinion
Insurers fret over militant attacks, AI hacks at Paris Olympics
Insurers are nervous that militant attacks or AI-generated fake images could derail the Paris Olympics, risking event cancellations and millions of dollars in claims. Insurers faced losses after the 2020 Tokyo Olympics were postponed for a year due to the COVID-19 pandemic.
Since then, wars in Ukraine and Gaza and a spate of elections this year, including in France, have driven up fears of politically-motivated violence at high-profile global events.
The Olympics take place in Paris from July 26-Aug 11 and the Paralympics from Aug 28-Sept 8.
German insurer Allianz (ALVG.DE), opens new tab is insurance partner for the Games. Other insurers, such as the Lloyd's of London (SOLYD.UL) market, are also providing cover.
"We are all aware of the geopolitical situation the world is in," said Eike Buergel, head of Allianz's Olympic and Paralympic programme.
"We are convinced that the IOC (International Olympic Committee), Paris 2024 and the national organising committees, together with the French authorities, are taking the right measures when it comes to challenges on the ground."
The possibility of Islamist attacks are the top security worry for the Games, the Paris chief of police said last month. "It's such a large event ... in a very large city, which in itself is quite difficult to police," said Andrew Duxbury, head of contingency at insurer Beazley (BEZG.L), opens new tab.
France has said it would move its opening ceremony from the River Seine if a specific security risk was confirmed.
Hard reinsurance market not going away
The reinsurance industry is currently experiencing a hard market, generating risk-adjusted returns not seen since 1993, according to a report by AM Best.
This cyclical shift, often triggered by significant underwriting losses and surplus erosion, has improved prospects for many reinsurers. Typically, a large-scale loss initiates the transition from soft to hard pricing cycles, attracting investors eager to benefit from hardening underwriting conditions and resulting in the formation of startup reinsurers.
According to insights from the credit agency, these new entities often merge or are acquired as the market eventually softens and supply-demand equilibrium is restored.
Historical events such as the great fire of Glarus (1861), Hurricanes Hugo (1989), Andrew (1992), and Ike (2008), as well as September 11 and the 2005 hurricane trio Katrina, Rita, and Wilma, have marked shifts in the reinsurance market. Traditionally, these events led to the formation of reinsurers that became market leaders.
However, the current hard market, which began around 2017, has not seen the same emergence of new reinsurers, AM Best noted.
AI in Insurance
Artificial Intelligence (AI) Meets Digital Duct Tape (RPA) | Insurance Innovation Reporter
Insurers are beginning to explore AI as a potential enhancement to existing RPA tools or possibly as a complete replacement.
Robotic process automation (RPA) has been used in the insurance industry since the 1990s and has incrementally improved over the years but still suffers from issues related to the underlying systems it must depend upon. Currently, the rigid and fragile nature of most RPA implementations leads to stalled processes and poor customer service. Moving from screen position field identification to tagging fields and incorporating API connections to RPA solutions where available has made the process better, but it still lacks the resilience and adaptability necessary to become the next digital duct tape.
Insurers have relied on RPA to bridge the gap between older insurance systems that contain a large amount of insurance capability but lack the process functionality to support a modern digital strategy with some success. Unfortunately, the requirements to meet the industry bar for good digital service strain the fragile RPA-to-older-system connection.
Insurers are beginning to explore AI as a potential enhancement to existing RPA tools or possibly as a complete replacement. There are some vendors working to use AI to deal with the need for greater resilience and adaptability in the RPA tooling but now, most insurance AI/RPA integrations are using AI capabilities as a step in a larger RPA managed process, generally around underwriting support and claims management.
Chuck Johnston is an insurance business technology strategist and founder of Johnston Digital Ventures
Is automated underwriting InsurTech’s silver bullet?
Often seen as an industry lambasted for a lack of change, the insurance sector has opened its eyes to a swathe of potential innovative technologies that could revolutionise the sector throughout 2024. At the height of this movement, the principle of automated underwriting emerged as the industry’s great fascination, with many touting it as a potential silver bullet.
FinTech Global‘s Harry Slade sat down with Earnix‘s Director of Strategy, Aaron Wright, to mull over the potential of automated underwriting – and decide whether it can truly be a catalyst for change in the space.
Leveraging advanced technologies such as artificial intelligence, machine learning, and big data analytics, automated underwriting streamlines the traditionally cumbersome and manual process of risk assessment.
Proponents argue that this significant enhancement to an insurers day-to-day can have seriously positive knock-on effects, leading to cost savings for insurers, but also delivering a faster and more seamless experience for customers, potentially reshaping the competitive dynamics of the insurance industry.
As the landscape of risk changes for insurers due to the ever-evolving economic turbulence faced internationally, Wright admitted it was time for underwriters to begin transforming their methods.
“Risk is evolving due to multiple factors including economic, catastrophic and climate events as well as technology (smart cars and home). Underwriters need to evolve the way they work to harness the increasingly sophisticated analytics that are available and avoid taking on higher risk due to lack of agility in underwriting and limited rule sophistication,” explained Wright.
InsurTech/M&A/Finance💰/Collaboration
Insurtech Is NOT Dead | Matteo Carbone
[Ed. Note: In his latest excellent article, Matteo Carbone explodes any anecdotal misconceptions about the wellbeing of the InsurTech movement and presents this in-depth, fact based view of its health, successes (and missteps).
The Insurtech movement is not dead; opposite, it is finally showing concrete impacts. However, what has worked aren't the shiny toys loved by futurologists and black swan hunters.
Instead, what has worked are awesome innovations done in the kitchen of the large carriers (borrowing the metaphor used by my friend Robert Pick at the WISA event last April). These usages of technologies and new data stay obscure and are even misunderstood by those who observe the sector without walking daily in these kitchens and understanding the language of their cuisine brigades.😉
Matteo Carbone, Co-Founder, Board member, Insurtech Thought Leader, Keynote speaker and writer on insurance innovation
AutoRek, J.P. Morgan Payments Partner on Insurance Receivables
InsurTech firm AutoRek has partnered with J.P. Morgan Payments to help insurance companies overcome data challenges with a more connected, streamlined infrastructure.
With these capabilities, insurance companies can unlock new market opportunities, the companies said in a press release.
“By working together, we will unlock many opportunities for insurance firms to streamline the premium receivables process,” Piers Williams, global insurance lead at AutoRek, said in the release. “This will help them to increase efficiency, accelerate cash flow, reduce write-offs and enhance controls.”
AutoRek offers a solution that helps insurance firms streamline their premium processing operations, bringing order and efficiency to financial data flows from banking sources, according to the release. The solution helps these firms enhance their cash allocation, matching and credit control.
J.P. Morgan Payments offers global capabilities in terms of treasury services, trade and working capital, and card and merchant services, the release said. The payments provider operates in more than 160 countries and in more than 120 currencies, processing nearly $10 trillion in payments each day.
The two companies will offer a combination of these complementary capabilities to insurance companies using their solutions, per the release.
Innovation
More Than a Billion Dollars . . . for Being "Early"
Imagine if insurers and repair facilities had a way to detect Total Loss as early as the first notice of loss (FNOL) using AI.
The auto repair industry is undergoing a significant transformation, thanks to the advent of AI-powered damage detection technology. This innovative approach is redefining how vehicle damage is assessed and when total loss claims are identified.
Let’s discuss how early detection of Total Loss Claims can save the industry over $1-billion yearly.
According to Statistics & Autosphere, 2-million insurance car collisions are claimed per year. Of these, 27 %, or 540,000, are Total Loss Claims per year based on repairerdrivennews.com. The problem with these claims is that by the time a claim is declared a total loss, many fees have been incurred and significant time (often months) has passed. These could have been saved if the right process and technology had been in place to enable Early Total Loss Detection at the FNOL. Let’s analyze the fees one by one…
Vehicles’ Towing fees
On average, towing a vehicle after an accident costs $200 per trip hansmaautomotive.com. For Total Loss (TL) Claims, that’s $400 in towing fees: one trip to the repair facility (bodyshop) for the manual inspection and declaration of the total loss, and another trip to the Recycling Centre for dismantling.
Events
ITC Vegas 2024 - The world’s largest gathering of insurance innovation
Insurtech Consulting and our ‘Connected’ newsletter are proud media partners of ITC Vegas 2024
Event Date: Tuesday, October 15 – Thursday, October 17, 2024
Event Location:
Mandalay Bay Convention Center 3950 Las Vegas Blvd S Las Vegas, NV 89119
ITC Vegas combines unbeatable networking with what’s new and next, ensuring your time will be spent meeting more people, sourcing more solutions, and creating valuable partnerships.
Discover solutions to your biggest challenges, gain access to unique and meaningful education, and meet the insurance industry’s best and brightest. Join the insurance event that doesn’t just bring the industry together – it moves the entire industry forward.
The future of insurance is here – at ITC Vegas. If you aren’t here, you are missing out on the conversations that are propelling the industry forward
People
Women Insurance Leadership Lifetime Achievement profiles | Digital Insurance
A new category was added this year to recognize women who have been trailblazers and forward-thinking visionaries in the industry for well over two decades. Two women were selected as the 2024 Women in Insurance Leadership Lifetime Achievement honorees.
Here are their profiles