Commentary/Opinion
Loss cost inflation remains an unknown and is sustaining price discipline...
Loss cost inflation remains an unknown and is sustaining price discipline...The US casualty market is showing signs of strain as rising loss costs lead to rate rises and tighter availability, executives said during Q2 conference calls.
While the commercial insurance market in general has become more favorable to buyers, with property rates finally moderating, for example, US excess casualty showed a 10% rate rise in Q2, according to Marsh McLennan.
This compares to 9% in Q1 2024 and 7% in Q4 2023.
The uptick in casualty rates during the second quarter has also been apparent in carriers’ rate disclosures.
For RLI, casualty rates increased 9% in the most recent quarter vs. 7% in Q1. Selective’s general liability (GL) renewal pure price increased by 7.6%, compared to 6.5% in Q1 and 5.4% a year ago.
Greg Toczydlowski, Travelers’ president of business insurance, meanwhile told analysts that umbrella and auto saw double-digit rate increases, leading the way in terms of sequential rate movement in Q2 from the prior quarter.
We’re still in the early days of Q2 results reporting, but commentary from P&C executives so far points to the US casualty market maintaining discipline, with some forecasting casualty will keep broader commercial lines pricing strong as property rates decelerate.
“Casualty pricing will more than likely continue to move higher,” said Brown & Brown CEO J Powell Brown, adding that he is seeing “more discipline around pricing pressure on casualty” than any time in his career spanning three decades.
Expanding further, the executive said certain classes of business within casualty have struggled, but this is the “broadest impact of pricing discipline in casualty” he can recall.
“What I mean by that is not so much the upward pressure on rates. I'm more specifically thinking about the discipline of the industry to basically continue to hold the line because, usually, somebody is willing to flinch,” the CEO said.
RLI COO Jennifer Klobnak, on the other hand, was less bullish in predicting that casualty rate increases will accelerate in the second half of the year.
“I think there is some potential for it, but it's a fight every day to see what a given account is willing to do based on our competition – which, in some cases, makes no sense to us,” the executive said on the Q2 call.
“Hopefully, rates will continue to go up, but I'm not going to put that in writing at this point.”
Research
Digital Insurance launches its Advancements in Insurance Claims Technology research report
New research from Digital Insurance, Arizent's leading information resource serving senior executives in the insurance sector, analyzes how organizations are using technology to improve the claims process and where professionals still see room for improvement. Sponsored by Origami Risk, the Advancements in Insurance Claims Technology report reveals improving the claims process and enhancing customer experience are top digital transformation priorities for insurers, making them the primary levers driving adoption and implementation of digital tech.
A shift in customer expectations toward greater transparency throughout the claims process has been a key driver of change. The report indicates nearly half of all respondents (47%) say the biggest change in customer expectations over the past two to three years is an increased expectation for transparency.
"Claims and customer service are intertwined, since the customer's experience during the claims process is critical to how they view the value of their insurance. It could be the deciding factor in whether a customer stays loyal and recommends the company, or takes their business elsewhere."
"Claims and customer service are inherently intertwined, since the customer's experience during the claims process is critical to how they view the value of their insurance," says Janet King, VP of Research for Arizent. "It could be the deciding factor in whether a customer stays loyal and recommends the company to others, or takes their business elsewhere and publicly pans it."
One tactic where positive movement is happening involves empowering customers to play a more active role in the overall claims experience by taking pictures and uploading information digitally. More than half of respondents see this leading to reduced costs in the claims management process and more transparency for claimants.
However, less than one-third of all respondents say they are doing "very well" at keeping up with changing customer expectations around the claims process.
News
US homeowners insurance underwriting loss in 2023 was worst this century
When the rising cost of property and catastrophe reinsurance in the United States gets called out as affecting the affordability of insurance, commentators would do well to remember just how poorly US homeowners property insurance underwriters have performed.
Reinsurance pricing is often cited as having a negative effect on the affordability of homeowners insurance in the United States, in particular in catastrophe exposed states such as Florida and California.
But the way reinsurance pricing has been rising is not at all surprising, when you consider just how unprofitable the homeowners insurance business has become.
Rating agency AM Best highlighted this today, in reporting that last year the United States homeowner’s insurance segment experienced its worst underwriting results since at least 2000.
In fact, the segment suffered a $15.2 billion underwriting loss in 2023, which was more than double the losses seen in the previous year.
AM Best explained that the 2023 loss was also the worst experienced this century, with $14.8 billion in losses in 2011 the next highest figure.
The rating agency notes that continued shifts in population towards catastrophe prone regions of the US, is a key driver.
“The U.S. population overall grew 7.4% between 2010-2020 but rose 10.2% in the South and 9.2% in the West during the period,” David Blades, associate director, Industry Research and Analytics, AM Best explained. “Population trends show residents increasingly moving toward regions that are more prone to hurricanes, severe convective storms or even wildfires.”
Climate/Change/Sustainability/ESG
Best’s Market Segment Report: US Homeowners Insurance Segment Suffers Worst Underwriting Year of Century; Population Shifts to CAT-Prone Areas Adds to Volatility
With the U.S. homeowner’s insurance segment experiencing its worst underwriting results since at least 2000, a new AM Best report notes that a factor in the insured loss increase is population migration into areas where weather-related events are occurring more frequently.
The Best’s Market Segment Report, “Migration to CAT-Prone Areas Adds to US Homeowners Insurers’ Performance Volatility,” states that the segment suffered a $15.2 billion underwriting loss in 2023, more than double the losses seen in the previous year. The 2023 loss was also the worst this century, with $14.8 billion in losses in 2011 the next highest.
Urbanization and rising populations have become particularly problematic in regions susceptible to natural perils, the report states. According to the U.S. census, California, Florida, Georgia, North Carolina, Texas and Washington accounted for 53% of the country’s population growth between 2010 and 2020; all six states are prone to severe weather-related events.
“The U.S. population overall grew 7.4% between 2010-2020 but rose 10.2% in the South and 9.2% in the West during the period,” said David Blades, associate director, Industry Research and Analytics, AM Best. “Population trends show residents increasingly moving toward regions that are more prone to hurricanes, severe convective storms or even wildfires.”
Study Urges Rethinking of Disaster Management in Era of Compounding Events
A new report warns that compounding natural disasters introduce new, interconnected, and complex risk scenarios — and points to a need to reimagine efforts that support disaster preparedness, mitigation, and recovery “in an era of intensifying extreme weather-climate events and increased risk of compounding disasters.”
Published by the National Academies of Sciences, Engineering and Medicine, the 286-page document examines compounding disasters in Gulf Coast communities from 2020 to 2021. These included seven major hurricanes — some arriving in the same region within weeks of another — and a severe winter storm.
Allen Laman
Can Climate Tech Save Insurance? | Insurance Thought Leadership
The future of the insurance industry depends on how it responds to climate change.
Simply stated, extreme weather is disrupting property & casualty insurance profitability while destroying coverage affordability and restricting availability.
FORECAST: More Climate Change, Greater Focus and Action on Sustainability and Resilience
It is early innings for climate change and climate tech, especially in the property & casualty insurance industry, but the threats and the opportunities are already becoming clear to many.
As climate impacts continue to mount and sustainability disclosure requirements push insurers to focus more clearly on climate-related risks and opportunities, we expect to see more insurers explicitly integrate adaptation and resilience into their sustainability strategies.
Stephen Applebaum and Alan Demers, Insurance Thought Leadership
Summer heatwave leads to higher premiums, stricter underwriting
On Sun., July 21, 2024, the planet posted its hottest overall day on record, according to the European Union's Copernicus Climate Change Service. The daily global average temperature reached an all-time high of 17.15 degrees Celsius, surpassing the previous record of 17.09 degrees Celsius set the day before on July 20, 2024, the data showed.
Similar to FEMA's decisions regarding developments near floodplains, insurers are reevaluating risk models to account for the increased frequency and severity of events driven by extreme heat, Managing Director for VIU by HUB, Travis Hodges, told PropertyCasualty360 in an interview.
"We're seeing higher premiums and stricter underwriting standards as a result of these reassessments to cover the rising costs associated with weather-related damages and the heightened risk of property damage," he said. "States experiencing hotter temperatures and natural disasters like hurricanes and tornadoes are going to see a significant increase in home and property insurance premiums if they haven't already."
A PowerSetter survey of 2,000 Americans revealed 75% of households expected their utility bills to rise this summer, with 73% saying it will put a strain on their household finances. Meanwhile, 31% from the survey said they will cut their grocery budgets, 32% said they will spend less on entertainment, and one in five said they will cancel their summer vacation plans to pay bills.
Financial Results
WTW's net income climbs 48% in Q2 as revenue hits $2.3bn
Global advisory, broking and solutions firm WTW has revealed that net income for Q2 of 2024 was $142 million, an increase of 48% compared to Q2 of 2023.
WTW’s revenue in Q2 of 2024 was $2.27 billion, an increase of 5% compared to the same period in 2023. Of this total revenue figure, WTW’s Health, Wealth & Career segment made up $1.26 billion, while its Risk & Broking segment made up $979 million.
Meanwhile, the firm’s adjusted EBITDA in Q2 of 2024 was $466 million, or 20.6% of revenue, an increase of 13%, compared to Adjusted EBITDA of $411 million, or 19% of revenue, in the same quarter of 2023
WTW also disclosed that Adjusted Diluted Earnings per Share were $2.55 for Q2 of 2024, up 24% from Q2 of 2023. Meanwhile, the Operating Margin was 9.4% in Q2 of 2024, up 280 basis points from the same quarter of the prior year.
Carl Hess, WTW’s Chief Executive Officer, commented, “WTW delivered a strong second quarter, generating significant EPS growth and margin expansion through robust organic growth, operating efficiency and the continued execution of our Transformation program.
Cincinnati Financial Reports Second-Quarter 2024 Results
Cincinnati Financial Corporation (Nasdaq: CINF) today reported: Second-quarter 2024 net income of $312 million, or $1.98 per share, compared...
98.5% second-quarter 2024 property casualty combined ratio, increased from 97.6% for the second quarter of 2023.
14% growth in second-quarter net written premiums, including price increases, premium growth initiatives and a higher level of insured exposures.
$407 million second-quarter 2024 property casualty new business written premiums, up 34%. Agencies appointed since the beginning of 2023 contributed $33 million or 8% of total new business written premiums.
$24 million second-quarter 2024 life insurance subsidiary net income, up $3 million and including a 26% increase in non-GAAP operating income compared with the second quarter of 2023, and 2% growth in second-quarter 2024 term life insurance earned premiums.
Erie Indemnity Reports Second Quarter 2024 Results
Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter and six months ending June 30, 2024. Net income was $163.9 million, or $3.13 per diluted share, in the second quarter of 2024, compared to $117.9 million, or $2.25 per diluted share, in the second quarter of 2023. Net income was $288.5 million, or $5.52 per diluted share, in the first six months of 2024, compared to $204.1 million, or $3.90 per diluted share, in the first six months of 2023.
Operating income before taxes increased $56.1 million, or 41.8 percent, in the second quarter of 2024 compared to the second quarter of 2023.
Canada
Partners in AI: Tractable partners with Saputo Capital Collision to integrate artificial intelligence solutions for vehicle repair
Saputo Capitol Collision, the Canadian-based MSO with four locations across Ontario, has announced a partnership with Tractable to use its artificial intelligence (A.I.) solutions for vehicle repair.
Notably, Saputo is looking to use Tractable at its carrier-branded collision centre at the start of the vehicle intake process for repairable vehicles.
Joe Saputo, CEO of Saputo Capital Collision has just recently opened his CARSTAR-powered Oakville East/Mississauga South location, primarily aimed at repairing policyholder vehicles with no delay in approval from the carrier.
According to a recent press release, this joint venture between Saputo and Tractable is reportedly one of the first partnerships of its kind and is aimed at creating more efficient communication strategies between insureds.
The press release further noted that to also facilitate communication with customers, Saputo’s Collision Centre is sending a Tractable link to customers at initial contact before they even step foot inside of the shop. Saputo’s is then able to use Tractable A.I. to see what panels on the vehicle need to be replaced and begin the parts ordering process, instructing the customer to drop their car off only after critical repair parts have arrived. By bringing vehicles in only after the parts have arrived at the shop, Saputo is hoping to reduce effort on the customer and improve the key-to-key time, to ultimately return the car to the insured quicker and with higher quality.
“We couldn’t be more excited to bring Tractable into our workflow and improve the overall experience of the carrier policyholders,” said Saputo. “We are doing something in the industry that no one has ever done before and are on our way to creating what we hope will be the best customer experience possible.”
“The goal of the partnership is to be proactive, rather than reactive,” explained Natasha Woods, VP of Saputo Capital Collision Group. “Tractable will allow us to streamline the gap between the first notice of loss and the repair, improving KPIs such as touch time and cycle time.”
“Saputo Capital Collision already has an industry-leading reputation,” said Alex Dalyac, co-founder and CEO of Tractable. “We couldn’t be more excited to partner with them to deliver policyholders an extraordinary experience and continue to innovate in the industry.”
Events
Reuters Events: Connected Claims USA 2024 (Austin, November 12-13 | The World’s Largest Claims Event
Strategic AI | Customer Clarity | Scalable Efficiency
Whilst insurance moves towards profitability, claims teams scramble with policies written without the foresight of disruption’s impact on cost.
Boosting claims acumen is a must. The capabilities are available, but this means more moving parts than ever before – evolve now or you won’t survive the claims overhaul.
To achieve true claims transformation, from unparalleled efficiency to cost containment, you need to bring together specific AI and GenAI use cases, legal guidance, mature ecosystems, advanced risk prevention tech, enhanced customer capabilities and more.
Get your claims progression strategy at Reuters Events: Connected Claims USA 2024 (Austin, November 12-13) where the industry unites to propel the next era of efficient, sustainable claims, driven by empowered adjusters, focused on ultimate customer satisfaction.
Join 900+ senior insurance executives at #CCUSA to accelerate claims from a cost center to a competitive advantage driver.
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