Commentary/Opinion
The transition to electric vehicles (EVs) has brought high insurance costs, with new approaches needed to get losses under control...
EVs, historically a niche segment of the automotive industry, represent a growing share of vehicles on the roads. Cars are leading the way, both in retail sales and in commercial fleets, as well as buses, while the electric share of vans and trucks is rising steadily from a lower base.
This trend is set to accelerate. Production and demand for EVs are rising. Government policies that ban future sales of petrol and diesel cars (from 2035 in the EU and UK) are shaping manufacturers’ business plans. Developments in technology and economies of scale promise to bring down costs.
Insurers Can Parlay Technology into a Competitive Edge | Bain & Company
Data management and analytics have become essential for carriers looking to tap emerging opportunities.
At a Glance
Bain analysis shows that attaining technology leadership can lead to better performance on the dimensions of premium growth, expense ratio, and customer loyalty.
Yet only 5% to 10% of carriers consistently capture value from their data and technology investments. The big challenge is analyzing new forms of data and extracting useful insights.
Key investment priorities need to align with the carrier’s ambition to become best in customer experience, in product and price, in cost, or in distribution.
Purposeful investment creates a virtuous circle of increased value, market share growth, and the ability to invest further in tech innovations and new capabilities as they materialize.
Making deft use of data—from information collected by flood sensors at a manufacturing plant to a driver’s photographs of a crumpled car panel—has become a prime source of competitive advantage for insurance carriers. Zettabytes of data, much of it unstructured and behavioral, now flows from connected cars, houses, factories, and human bodies.
The challenge for insurers is not handling more data; rather, it’s figuring out how to tap and analyze new forms of data and having the right infrastructure and approach to extract useful insights. For example, customers can now submit auto accident photos to a claims unit for the first notice of loss. Those photos will inform better decisions only if the insurer has a robust artificial intelligence (AI) model to process and evaluate the images and integrates the information into the core claims-handling and customer-facing workflows. Expanding amounts and formats of data exacerbate the challenge. For instance, while many firms now handle image data, they are only starting to incorporate crash-detection signals from telematics into core claims-handling processes. FULL ANALYSIS
Insurance sector seeks new ways to attract staff
As insurance industry retirements accelerate, experts say companies are deploying old and new tactics to address the projected talent gap, although past failures have prompted some to rethink talent acquisition strategies.
Established programs, such as paid internships and job fair participation, have helped draw interest in insurance careers over the years, but employers recognize the need to widen the scope.
Newer initiatives, such as apprenticeships that guarantee employment upon completion and building on diversity programs, are showing some promise.
Jon Campisi
News
Guard exits California home insurance market
This move follows similar exits by other insurers. Guard Insurance is exiting the home insurance market in California.**
This move follows similar exits by other insurers facing wildfire risks and regulatory challenges. Tokio Marine America Insurance Co. and Trans Pacific Insurance Co. plan to withdraw entirely from California this month.
Additionally, four subsidiaries of Kemper haven’t renewed their home and auto policies starting this year due to a nationwide restructuring.
Other insurers have also taken similar steps. Hartford stopped issuing new home insurance policies in California and Florida.
U.S. Commercial P&C Insurance Rates Rise 4.3% in Q2
A slight overall rise in commercial property/casualty insurance rates reflects insurers' confidence in pricing strategies, according to MarketScout.
P&C insurance rate increases A composite of commercial property/casualty insurance rate hikes rose to 4.36% in the second quarter from 3.9% in the first quarter, according to Market Scout’s Market Barometer.
Richard Kerr, CEO of MarketScout’s parent, Novatae Risk Group, attributed the slight increase in the composite rate to insurers’ confidence in their pricing strategies.
“Insurers are comfortable with their pricing, and as a result, there was no significant movement in rates for any coverage or industry group,” Kerr said, adding that the onset of hurricane and wildfire season could potentially impact property rates in coming quarters.
The National Alliance for Insurance Education and Research conducted pricing surveys that corroborated MarketScout’s analysis of market conditions. These surveys, driven by new and renewal placements across the U.S., provided further insight into the rate changes.
In terms of coverage class, commercial property rates and commercial auto saw the most significant increases, up 7% and 8%, respectively in the second quarter. Workers’ compensation remained flat at 0%. Among casualty lines, cyber liability saw a 6.7% increase, while general liability, umbrella/excess and employment practices liability insurance (EPLI) all saw a 4.7% increase in 2Q.
Account size also played a role in premium increases, MarketScout found. Small accounts, those with premiums up to $25,000, saw a 5.7% increase in premiums in the second quarter. Medium accounts ($25,001 to $250,000) experienced a 5.3% increase, while large ($250,001 to $1 million) and jumbo (over $1 million) accounts both saw a 4.3% increase.
Case against State Farm junked as court issues major ruling
Consumers can complain about insurers’ violations of the insurance code but can’t take them to court over such breaches, an appeals court in Illinois has ruled.
Presiding appellate court judge Mark A. Pheanis of the Appellate Court of Illinois Second District declared: “An aggrieved party can submit a complaint to the department of insurance, and the department can investigate violations of its rules and regulations, hold hearings, and impose penalties on those it finds in violation.”
The judgment upholds a lower court’s decision that consumers cannot initiate private legal actions against insurance companies for violating claims handling regulations and other provisions of the state’s insurance code. As indicated, the appropriate recourse would be to file a complaint with the suitable authority.
The case stems from a car accident involving State Farm Mutual Automobile Insurance Co. policyholder Giampaolo Cherubin and Denise Hopman, who sustained injuries in the crash.
Hopman sued State Farm, alleging the insurer violated state insurance regulations requiring timely claim settlements and that payments or written denial explanations be provided within 30 days.
Climate/Resilience/Sustainability
Hurricane Beryl US insurance industry losses could be $750m to $1.2bn
Hurricane Beryl made landfall near Matagorda, Texas yesterday as a Category 1 storm and the fact certain meteorological conditions meant the storm did not intensify as much as it perhaps could have, means the insurance industry loss in the United States from Beryl will not be overly significant.
Hurricane Beryl was hindered by dry air entrainment and wind shear when over the very warm Gulf of Mexico waters, which has perhaps saved Texas from a more impactful disaster.
That said, the State has still felt widespread impacts from the hurricane, with reports of wind damage, more than 2 million losing power, as well as flooding.
Andre Siffert, Senior Meteorologist from reinsurance broker BMS Re, explained in an update that Beryl may have had greater than expected effects in the Houston metro region.
AI and climate change top priorities for insurance executives in 2024: IIS
Artificial Intelligence (AI) and climate change have emerged as the top priorities for insurance executives worldwide, according to a survey by the International Insurance Society (IIS).
The ILS 2024 Global Priorities Survey aimed to identify the most critical issues for industry leaders and gather insights to shape the agenda for stakeholders in the coming year.
The survey asked respondents to choose their top three concerns from six categories: Economic, Political and Legal, Social and Environmental, Operational, Technology and Innovation, and Business and Financial.
For the first time, AI emerged as the leading priority in Technology and Innovation, with over half of the respondents highlighting its importance. ILS attributes this rise to executives reporting that their companies are unprepared for AI’s rapid development. They cited slow adaptation to technological changes and the need for extensive reskilling due to an aging workforce as major concerns.
In the survey, one executive wrote: “Regardless of technology advancements… machine learning or AI integration, the industry continues to be slow to change and adapt internally.”
Climate change continues to dominate the Social and Environmental category for the fourth consecutive year, with 60% of executives prioritising it for 2024. The increasing frequency and severity of natural disasters pose significant challenges, such as difficulties in predicting future losses and rising costs that could destabilise insurers, governments, and consumers. A quarter of respondents admitted their companies are not ready to address this issue in 2024.
Here's Where Climate Change Is Driving Up Home Insurance Rates
Climate change is driving rates higher, but not always in areas with the greatest risk.
Enid, Okla., surrounded by farms about 90 minutes north of Oklahoma City, has an unwelcome distinction: Home insurance is more expensive, relative to home values, than almost anywhere else in the country.
Enid is hardly the American community that is most vulnerable to damaging weather. Yet as a share of home prices, insurance costs more in parts of Enid than in New Orleans, much of which is below sea level. More than in Paradise, Calif., which was destroyed by the Camp fire in 2018. More than in the Florida Keys, which are frequently wracked by hurricanes. Even more than in the Outer Banks of North Carolina, where houses have begun slipping into the rising sea.
Enid’s plight reveals an odd distortion in America’s system of pricing home insurance. As a warming planet delivers increasingly damaging weather, the cost of home insurance has jumped drastically. But companies are charging some people, especially in the middle of the country and parts of the southeast, far more than other homeowners with similar levels of risk, an examination by The New York Times has shown.
AI in Insurance
AI startup funding more than doubles in Q2, Crunchbase data shows
Investments in artificial intelligence (AI) startups surged to $24 billion from April to June, more than doubling from the previous quarter, according to data from Crunchbase, highlighting the growing appetite for the new technology.
Overall startup funding grew 16% sequentially to touch $79 billion in the last quarter, primarily driven by investments in AI, which became the largest sector for the first time, followed by healthcare and biotech.
WHY IT IS IMPORTANT
The runway success of OpenAI's ChatGPT has unleashed a race to adopt the latest AI technology in areas such as business productivity, healthcare, and manufacturing. Investors and Big Tech firms, however, say that meaningful gains from their massive investments in AI will only materialize over the next few years.
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