Commentary/Opinion
Riding the Insurance Roller Coaster | Insurance Thought Leadership
For four years, the P&C market has been on a wild ride. And buckle up. A lot more ups and downs are coming.
Over the past four years, the P&C industry, among others, has fit the roller coaster analogy perfectly. In fact, think of the wildest ride you've ever been on.
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Alan Demers and Stephen Applebaum
From disasters to data: The evolution of catastrophe modeling post-pandemic
Catastrophe modeling has seen significant evolution over the past few decades. Daniel Zitelli (pictured), SVP and co-head of catastrophe modeling at Holborn, has witnessed these transformations firsthand. Speaking to IB, he said that, back in the early 2000s, catastrophe models were burgeoning in sophistication and adoption within the insurance marketplace.
“New model releases tended to be adopted very quickly, introducing fresh scientific methods that instilled confidence in model results,” he said.
At that time, out-of-the-box model results had a profound impact on risk pricing at both primary and reinsurance levels. The newfound ability to model granular losses by location or rating territories was groundbreaking and significantly influenced the market.
However, as technology progressed, so did the expectations and scrutiny surrounding these models.
“Models have become more commonplace today, and people now take a much more sophisticated view of the numbers generated,” Zitelli noted. No longer are out-of-the-box model numbers considered final answers; they serve as inputs for further study and analysis in risk evaluation. The integration of additional data sources, now more readily available and easily digestible, enables Holborn and the broader market to supplement model outputs with comprehensive context and a finer understanding of the actual risk.
Today’s users of these models blend outputs with historical weather patterns, claims data, and both government and private sector data, providing a multifaceted view of risk. Zitelli explained: “We combine model output with various data sources to understand the context of what those loss numbers mean.” This integration offers a more precise risk evaluation by aligning model outputs with real-world data.
How geocoding and property intelligence elevate risk modeling
The riskiest locations for insurers in U.S. are Florida, the Gulf Coast, the Eastern Seaboard and wildfire prone areas in the West, according to a recent study by the National Bureau of Economic Research (NBER).
Forecasters generally anticipate an uptick in wildfire-related losses due to climate change along with increased frequency of catastrophic weather events like hurricanes and floods. As a result, insurance carriers are scrambling to secure more accurate risk modeling.
PropertyCasualty360.com recently spoke to Berkley Charlton, chief product officer at Smarty, about technologies and strategies insurers can employ to create a more accurate risk profile for potential customers.
Prior to Smarty, Charlton was the managing director of product management at Pitney Bowes Software, where he led the global data and geocoding businesses to create a suite of location intelligence, geocoding and data products. Charlton also worked as vice president of strategy and business development at the Gadberry Group, where he managed product strategy for geocoding and data products.
Research
Mercury Insurance Names the Most Affordable New EVs to Insure
Due to the growing demand for electric vehicles, particularly in California, Mercury Insurance (NYSE: MCY) has compiled a list of the most affordable new EVs to insure, which will arm consumers with valuable knowledge when they go to shop for an EV.
Factors contributing to insurance costs include claims on similar vehicles, cost to repair and vehicle safety records. Mercury's research and development team examined 2024 model-year EVs that are available at dealerships today to compile this list.1
"One of the most important aspects when researching your ideal EV is to consider the total cost of ownership, in which insurance plays an important part," said Chong Gao, Director of Product Management R&D for Mercury Insurance. "We realize that for many customers this may be their first time considering an EV and it helps to have as much information as possible."
The top 10 list for new EVs, beginning with the most affordable make and model to insure is:
- Nissan Leaf
- Ford F-150 Lighting
- Kia Niro
- Hyundai IONIQ (all models)
- Volvo C40/XC40 Recharge
- Chevrolet Equinox EV
- Fiat 500e
- Subaru Solterra/Toyota BZ4X/Fisker Ocean Sport
- Volkswagen ID.4
- Genesis G80
News
Floridians without flood insurance still common across the state
FEMA stated there is a 30-day window to purchase and secure flood insurance, which means if you purchased the insurance on Thursday, Aug. 01, 2024, the policy would not kick in until early September, when Florida is at its highest risk for a landfalling hurricane.
- Flood insurance only required by federally backed mortgages and insured companies
- Since 1971, Florida has been hit by 19 hurricanes. Despite the state being the most hurricane-prone in the country, insurance companies state as many as 850,000 Floridians living in high-risk flood areas don’t carry flood insurance alongside their homeowners insurance policies.
What You Need To Know
- Florida has been hit by 19 hurricane since 1971
- Insurance companies say as many as 850,000 Floridians living in flood-prone areas don't carry flood insurance
- Most homeowners insurance policies don't cover flood damage from an exterior water source
Climate/Change/Sustainability/ESG
Extreme Weather Sends Insured Losses 70% Above Historical Norms
Natural catastrophes caused about $62 billion of insured losses in the first half of 2024 — roughly 70 percent above the 10-year average — as extreme wildfires, droughts and floods upend historical norms.
The data, which were compiled by Munich Re, show that “weather catastrophes in the U.S.” dominated losses in the period, Tobias Grimm, the reinsurer’s head of climate advisory, said in a phone interview. Other developments of note include “floods in regions where they are very rare, such as Dubai,” he said.
“It is clear that climate change plays a role in this development,” Grimm said.
Homes surrounded by floodwater after Hurricane Beryl made landfall in Sargent, Texas, on July 8.
In all, natural catastrophes caused $120 billion of losses in the first six months, with little to indicate that the rest of 2024 will offer much respite. That’s as meteorologists predict one of the most active hurricane seasons in recent years, while wildfires raging from California to Alberta have left large parts of North America in shock.
It’s the “longer-lasting heat waves that drive forest fires,” Grimm said.
Americans Worry Extreme Weather Could Hurt Retirement Savings But Few Are Prepared
One-in-four Americans said in recent survey that loss of insurance, risks of rising costs, or damages due to natural disasters were among the top risks for their retirement incomes.
More than half (56%) have anxiety about how extreme weather could affect their finances or health, but only 10% of those have discussed the concerns with a financial professional, according to the survey from Allianz Life.
Only slightly more than third (36%) of the respondents who have faced extreme weather events have taken into consideration the implications of extreme weather in their retirement planning.
Homeowner insurance premiums have increased as extreme weather events have occurred more frequently.
One-in-four Americans ranked risks of rising costs, loss of insurance, or damages due to extreme weather as one of the top three risks to their retirement income, but relatively few have a plan in place to face that challenge, a new study shows.
A survey from Allianz Life, an insurance and annuities provider, found that 56% of people said they had anxiety about rising costs, financial losses, or health effects from extreme weather events or natural disasters.1 However, only 10% of those respondents said they had discussed the concerns with a financial professional.
"Extreme weather has the potential to erode wealth just like other risks to a retirement strategy like inflation and increasing medical costs,” said Lorinda Niemeyer, head of sustainability, Allianz Life.
InsurTech/M&A/Finance💰/Collaboration
The key InsurTech trends to look out for in H2 - part one - FinTech Global
As we step into the second half of 2024, the InsurTech landscape is poised for significant advancement. Emerging technologies such as AI, machine learning, and large language models are set to revolutionise risk assessment, underwriting, and customer experiences. Meanwhile, there is a growing emphasis on ESG considerations bubbling up under the surface.
FinTech Global‘s Harry Slade sat down with a host of industry experts to talk all things InsurTech, and open up on what to expect from the industry as we head into H2 2024.
What role will AI play?
One of the most prominent talking points is the transformative role of AI and machine learning in reshaping the insurance sector. Formerly seen as a gimmick, or even just a buzzword, its role is now seen as an imperative for excellence in regard to risk selection and decision-making as Melanie Hayes, COO and co-founder of KYND explained.
“InsurTech companies have the opportunity to help drive innovation and operational excellence for the sector with the help of machine learning-powered technologies that enable consolidated insights from large volumes of varied data such as policy information, insurance claims data, historical exposure data and cyber accumulation risk among many others. These solutions, provided by progressive InsurTechs such as KYND, can process and structure data to offer insurers insights that lead to improved risk selection, profitable decision-making, enhanced portfolio resilience and reduced costs and loss ratios,” she stated. READ ON
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.
Register now and save, $200 off. Use promo code 200ITC1813
Code not valid on Independent Agent, Startup, Groups, or LATAM tickets. Discounts only apply to new registrations. REGISTER HERE
Announcements
Ahoy! Insurance Announces Yacht Underwriting Offering
Ahoy! Insurance, the tech-driven insurance provider built by boaters for boaters, today announced that it has significantly expanded its offering to boaters and agents, expanding its geographic coverage, insured value limits, and boat sizes. The new offering allows millions of larger boat owners to purchase Ahoy! Insurance's highly regarded, tech-driven, and user-friendly boating insurance for the first time.
The expansion of coverage comes at a critical time for owners of larger boats domiciled in the US, as they have faced dwindling options with traditional, large insurance carriers that struggle to accurately assess risk retreating from this marketplace. Ahoy! Insurance's offering fills the gap with speed criteria for qualifying boats and provides coverage limits of up to $2.5 million and a size of 95 feet. The new Yacht offering is available across all 50 states and US Territories.
Innovation
ZestyAI Launches Non-Weather Water Solution Amidst Rising Severity of Water Damage Claims
Today, ZestyAI, the leading provider of climate and property risk analytics solutions powered by artificial intelligence (AI), unveiled its newest solution to address one of the leading drivers of insurance losses - interior water. Z-WATER is an AI-powered model that predicts the frequency and severity of non-weather water and freeze claims for every property in the country.
Non-weather water claims are the third-leading cause of property insurance losses, costing insurers over $20B annually. Z-WATER is an AI-powered model that predicts the frequency and severity of non-weather water and freeze claims for every property in the country. (CNW Group/ZestyAI)
"The landscape of non-weather water claims is shifting, with a concerning trend towards increased claim severity," said Kumar Dhuvur, Co-Founder and Chief Product Officer of ZestyAI. "The rising cost of building materials and labor has inflated claim payouts. Additionally, the interconnected nature of our homes, with open floor plans, finished basements, and high-value electronics, means water damage can have a significantly higher price tag."
Non-weather water claims rank as the third-leading cause of insurance losses nationwide, underscoring the industry's critical need for a comprehensive predictive model. Until now, the industry has not had a property-specific model, leaving insurers grappling with the challenge of accurately assessing and mitigating the risk of non-weather water damage on a property-by-property basis.
Z-WATER goes beyond traditional models by incorporating the property-specific construction and architectural details that impact the total loss cost of non-weather water and freeze, along with the local infrastructure and water distribution network, for a holistic assessment of risk. ZestyAI's AI-powered model uses the interaction of these factors to deliver the best understanding of risk at the property level, helping the insurance industry.
CCC Wins 2024 AI Breakthrough Award for Top Computer Vision Solution - Autobody News
CCC Intelligent Solutions Inc. won the prestigious 2024 AI Breakthrough Award for Best Overall Computer Vision Solution, further solidifying its position as a leader in AI-powered technology for the auto insurance and repair industry.
The award, presented by Tech Breakthrough, recognizes the company's innovative approach to using artificial intelligence to tackle pressing industry challenges.
“This recognition reflects our ongoing commitment to advancing AI and driving innovation in the industry," said John Goodson, chief product and technology officer at CCC in a statement emailed to Autobody News. "It inspires us to continue to push boundaries, striving to meet and exceed the evolving needs of the auto insurance and repair sectors.”
The award comes at a crucial time when the auto insurance and collision repair industries are grappling with significant challenges, including workforce shortages, inflation, supply chain disruptions and the increasing complexity of modern vehicles. These factors have contributed to longer cycle times and higher costs for repairable, total loss, and casualty claims.
“The auto insurance and collision repair industries are facing challenges that include workforce shortages, inflation, supply chain issues, increasing vehicle complexity and rising consumer expectations,” said Steve Johansson, managing director at AI Breakthrough.
“CCC is tackling these challenges head-on. We’re proud to award them with Best Overall Computer Vision Solution.”
Since introducing its first AI solution for vehicle damage assessment in 2013, CCC has continued to expand its AI offerings. Today, the company leverages more than 300 AI models that integrate computer vision, natural language processing and deep learning. These models enhance customer interactions, streamline operations and digitize assessments across various facets of the insurance process, from estimating to subrogation
Podcast
From Dr Death to Insurance Thought Leadership | InsTech
This week Matthew Grant caught up with Paul Carroll. editor-in-chief, Insurance Thought Leadership to ask after 11 years of looking at insurance, how are insurers doing with technology?
Introduction
Joining Insurance Thought Leadership over 10 years ago, Paul Carroll’s motivation was his belief that of four areas yet to be disrupted by digital innovation, insurance was one of them.
I think there has been very steady and admirable progress. People realized that customers want speed and we can actually handle claims faster and more efficiently. It just has not been the Big Bang sort of approach that some people were thinking of when I got involved 10 – 11 years ago.
Paul Carroll, Editor-in-Chief of Insurance Thought Leadership