Research
2024 U.S. Small Commercial Insurance Study | J.D. Power
American Family Ranks Highest among Small Commercial Insurers
Even in an environment of rising rates in which 36% of small business owners have experienced premium increases during the past year, overall customer satisfaction, loyalty and brand advocacy stay strong when customers trust their commercial insurance providers.
According to the J.D. Power 2024 U.S. Small Commercial Insurance Study,SM released today, among small businesses with the highest levels of trust in their insurers 81% say they “definitely will” renew with their carrier and 79% say they “definitely will” recommend their carrier. Overall trust levels, however, vary widely by insurer.
“Trust is the single most important variable in the customer relationship with commercial insurance providers,” said Stephen Crewdson, senior director of global insurance intelligence at J.D. Power. “Across virtually every business metric that matters to insurers—customer loyalty, advocacy, premium retention, share of wallet—small business owners who trust their insurers represent significantly higher value. While some insurers are doing a great job cultivating that trust, others have a lot of work to do.”
73% of Insured Drivers Prefer to Pay Out-Of-Pocket Rather Than Filing Insurance Claim
While auto insurance is meant to be a financial safeguard for drivers, many are opting not to use it. In its latest analysis, LendingTree®, one of the nation's leading online marketplaces for loans, credit cards and insurance, found that 39% of insured drivers who've been in an auto accident or incident have bypassed their insurance for repairs. Additionally, 24% have filed a claim and later regretted doing so.
LendingTree conducted an online survey of 2,000 U.S. consumers ages 18 to 78 to get a clear picture of how drivers handle accidents and insurance.
Key Findings
Many prefer to pay out of pocket for auto damage. Among insured drivers in an accident or incident, 39% have bypassed their auto insurance for repairs. When asked why, 59% said the damage was minimal, 44% said their deductible was higher than the cost and 42% didn't want their insurance to increase.
Some keep these incidents to themselves. 57% of those who've paid out of pocket didn't disclose the incident to their insurer. A high deductible doesn't appear to be a barrier for many drivers since 76% had a deductible of less than $1,000 when they paid out of pocket, and 65% spent less than $1,000 on repairs.
Filing claims has led to regret for some drivers. Almost a quarter (24%) of insured drivers in an accident or incident have filed a claim and later regretted doing so. The top reasons for post-claim regret are significantly higher insurance rates (59%), a decreased vehicle value (36%) and an expensive deductible (33%). Among drivers who've filed a claim in the past five years, 26% said their annual insurance rate increased by at least 25%.
Overall, most drivers want to avoid insurance. Almost three-quarters (73%) of insured drivers in an incident would generally prefer to pay out of pocket for a small issue rather than go through insurance, and 49% have paid for repairs their insurance would have covered.
News
Inflation stress: Insurance premiums add to Americans’ economic angst - Insurance News
Insurance costs — for both car and homeowners coverage — are up significantly across the country adding to Americans' financial stresses since the pandemic and ensuing inflation wave.
New inflation numbers released Wednesday by the U.S. Bureau of Labor Statistics showed the price of car insurance is up 18.5% compared to a year ago and 75% since the COVID-19 pandemic in 2020. That compares to overall U.S. prices being up 23% since the pandemic, according to BLS.
Homeowners insurance premiums have also increased.
In 2019 (before the pandemic and its economic upheavals and resets), the average homeowners insurance premium in the U.S. was $1,272 — now it is $2,511, according to consulting firm CAPCO.com and Marketwatch.com
That's a 97% increase.
Homeowners insurance prices are even higher in some states. Some are eye popping.
The average homeowners insurance premium with $300,000 in dwelling coverages averages $5,531 annually in Florida — 144% higher than the national average for the same coverage ($2,270), according to financial firm Bankrate LLC.
In Nebraska, which has seen premiums rise amid increased claims from hail and wind storms as well as inflationary price pressures, the average premium is $5,655, according to Bankrate. That is 149% higher than the U.S. average.
Financial Results
CIAB observes softening commercial P&C market in Q2’24
In the second quarter of 2024, the commercial property and casualty (P&C) insurance market showed further signs of softening, according to The Council of Insurance Agents & Brokers’ (CIAB) latest quarterly survey.
Premiums across all account sizes increased by an average of 5.2% in Q2 2024, a noticeable drop from the 7.7% rise in the first quarter of 2024.
Medium-sized accounts experienced the most significant slowdown, with premium growth decreasing from 8.5% in Q1 to 5.1% in Q2.
The softening market is also evident in the lines of business. Premium increases were flat or down across all lines compared to the previous quarter. On average, commercial lines saw a 5.6% increase in premiums.
Notably, four lines recorded lower premiums this quarter: workers’ compensation, cyber, directors and officers (D&O), and employment practices liability.
Workers’ compensation premiums fell the most, with an average decrease of 2.2%, followed by a 1.7% drop in cyber premiums. This is a sharp contrast to two years ago, when cyber saw multiple quarters of over 20% increases.
While respondents did not specify the exact reasons for this decline, 46% noted increased capacity for cyber in Q2 2024. Generally, more capacity can lead to lower premiums, though this is not always the case.
AI in Insurance
Insurance has 5 problems - and AI isn't one
While billions trust their lives and livelihoods to insurers every day, the insurance sector itself is facing an existential crisis.
Record losses due to more frequent and severe natural disasters have skyrocketed premiums and deductibles. Carriers face significant backlash as policyholders scramble to find coverage in abandoned, high-risk markets. Meanwhile, analysts warn that the rate hikes and non-rate underwriting actions taken to navigate these market conditions will prove unsustainable in the long term.
With the appropriate ethical guardrails and human oversight, trustworthy AI is a solution.
In search of workarounds, some insurance leaders pinned hopes on the generative AI (GenAI) boom for quick fixes. However, allegations of faulty algorithms rendering unfair denials have fueled critics, who claim that AI has become just one more problem in an already fraught landscape.
The truth, per SAS' Stu Bradley, is more nuanced.
"While insurance leaders will certainly encounter obstacles as they advance their analytic maturity, AI itself isn't the problem," said Bradley, Senior Vice President of Risk, Fraud and Compliance Solutions. "Rather, organizations' understanding of their data and the potential unintended consequences of AI is the root of the issue. With the appropriate ethical guardrails and human oversight, trustworthy AI is a solution, delivering the insights and agility needed to redefine the industry."
At this potential turning point, experts from SAS have examined and offered insights on the top five insurance problems – and using AI isn't one of them. Confronting the insurance community's current technology challenges won't only bring AI closer to its full potential; it will also help future-proof the sector.
3 Lessons Learned From Leveraging Gen AI | Insurance Thought Leadership
Success with Gen AI comes from identifying the places in the customer journey where AI can supplement or enhance the experience.
Since the launch of OpenAI’s ChatGPT in November 2022, the concept of generative AI (Gen AI) has sparked a universal interest that spans beyond industries, geographical borders, and even generations.
Everyone–from CEOs to your grandma—has inquired about the transformative technology, and now companies are learning how to harness it. In the ever-evolving and competitive landscape of the insurance industry, companies need to stay ahead by anticipating, navigating, and addressing growing customer expectations and emerging challenges to mitigate the risk of becoming obsolete.
One of the challenges the insurance industry is facing is how to leverage emerging technologies to streamline processes and enhance customer experiences.
Carolyn Olsen is the senior director of data science at Clearcover.
InsurTech/M&A/Financeđź’°/Collaboration
YouSet secures $3.5m in seed funding to transform insurance shopping in Canada
YouSet, a Canadian startup aimed at simplifying the insurance procurement process, has successfully closed an oversubscribed seed funding round, amassing $3.5m.
Claims
The Hanover Enhances Workers' Compensation Claim Services with Expanded Work Safe Program
The Hanover Insurance Group, Inc. (NYSE: THG) today announced the expansion of Hanover Work Safe, a portfolio of value-added services designed to deliver a personalized approach to worker safety. As part of the company's distinctive workers' compensation offering, The Hanover offers claims specialists who proactively gain insights into factors that may impact the treatment of an injured worker beyond physical recovery and help structure a more holistic and individual claims response.
The enhanced workers' compensation claims program leverages data and predictive analytics to help better understand the person as a whole and how The Hanover can best support recovery. It considers not only the physical impacts of the biological injury that occurs on the job, but also looks closely at psychological, social and economic factors that potentially creates barriers to recovery and return to work including stress levels, health beliefs and literacy, family relationships, employer and employee relationships, and social support.
"The Hanover's enhanced claims approach, which includes administering surveys to both injured employees and employers at the time of injury, sets us apart from other providers as we are able to identify all factors that may impact a claim earlier in the process," said Carmen Sharp, senior vice president of claims at The Hanover. "By considering not only physical injuries but also psychological, social, and economic factors, we take a unique and individualized approach to workers' compensation claims. Our data-driven model helps us better understand the injured individual, ensuring we can effectively support their specific recovery needs."
Climate/Change/Sustainability/ESG
The Era of Runaway Heat Records Is Here
Las Vegas set a heat record of 117 degrees Fahrenheit (47.2C) in 1942, and for 82 years no weather system could budge it. Thermometers registered the same temperature four more times, all since 2005, without setting a new high. Then 2024 happened.
The heat record was broken — and not by just a little. On July 7, the temperature at Harry Reid Airport in Paradise, Nevada, jumped to 120F.
Eric Roston, Sustainability Editor, Bloomberg
For ClimateTech Innovation Showcase
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Kicking off Climate Week NYC with an exciting event featuring the latest climate technology solutions. Join the For ClimateTech team at Newlab for an immersive day of pitches, panels, and networking opportunities, bringing together over 100 innovators, investors, industry leaders, hardware experts, manufacturers, and more to showcase the latest advancements in climate technology.
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Commentary/Opinion
From Furry Insurtechs to Industry Allies | Insurance Thought Leadership
What have we learned in seven years?
One of my favorite quotes comes from Mark Twain, who once said, “When I was a boy of 14, my father was so ignorant I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much he had learned in seven years.”
I used the quote at my father's funeral in recognition of his patience during my troublesome teenage years. This came back to me when I reviewed the first half of 2024. One of the features of my year to date is how well I’ve been getting on with the insurance industry – better than at any other time this millennium, and I was wondering why.
For context, I should say that for the last 25 years of my career I have been involved in the digitalization of the insurance industry. Originally, I was a platform builder, and more recently a partner of InsTech – a “community for the curious,” which sits in the nexus between insurance and technology innovation. It champions solutions, whether from startups or big tech, that can make insurance better. So, I’ve always been on the outside selling in, relatively free to express my views, and I have done that with a degree of candor that has occasionally involved rocking the establishment boat -- usually by complaining about lack of technology investment, foresight, and leadership.
But I find myself doing that less and less. I don’t seem to be upsetting people so much, either – although there are exceptions! Am I softening at the end of my career? I wouldn’t be the only one to get more conservative and traditional as I aged. Or has the progress that the industry has made in recent years brought it closer to my more reformist agenda? I think it’s a bit of both, and here’s why:
Robin Merttens is the executive chairman of InsTech
Innovation
AM Best's 2025 Student Challenge Calls for Innovative Ideas to Solve Insurance Risks
AM Best’s 2025 Student Challenge, which gives undergraduate and graduate-level students the opportunity to develop and showcase innovative solutions for risk management and insurance, has begun accepting submissions from university students.
“At AM Best, we are proud to challenge the rising generation of insurance professionals to apply their own ingenuity and take a leadership role in the insurance industry of the future.”
The Student Challenge aims to empower students to generate innovative ideas in many areas of risk management and insurance, including artificial intelligence, technology, products, distribution methods, customer experience, marketing and social media, captive insurance and more.
Students can register online at www.ambest.com/studentchallenge and get started with question prompts found in AM Best’s Student Challenge Handbook.
The Student Challenge enables students to gain first-hand experience in insurance and risk management, said Lee McDonald, Senior Vice President, AM Best - Information Services.
“It serves as a catalyst for students to get in touch with risk management faculty at their schools, build teams with classmates and develop real-world ideas—while also getting feedback from AM Best experts based on an innovation rubric, gaining recognition for their efforts and expanding their resumes with an insurance-specific project.”
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