Climate/Change/Sustainability/ESG
Hurricane Debby privately insured loss estimate peaks near $1.4 billion in the U.S.
KCC flash estimate breaks down damage by wind, storm surge and inland flooding.
A three-headed monster of extreme weather, hyperinflation and social inflation is threatening the insurance industry
Privately insured loss from Hurricane Debby is estimated to reach nearly $1.4 billion in the U.S., according to data compiled by Karen Clark & Company (KCC).
KCC said wind accounted for roughly $845 million of the overall estimate, while storm surge and inland flooding made up $130 million and $440 million of the total, respectively.
The estimate includes the privately insured damage to residential, commercial, and industrial properties and automobiles, as well as business interruption. It does not include boats, offshore properties or NFIP losses.
Insurers barred from independent subrogation in $4 billion Maui wildfire settlement | Insurance Business America
A tentative $4.04 billion global settlement has been reached to resolve all lawsuits arising from claims related to the Maui wildfires, according to an order from Hawaii’s 2nd Circuit Court on Aug. 19.
However, insurers involved in the settlement will be prohibited from independently pursuing subrogation claims against the settling third parties, according to a report from AM Best.
Seven defendants, along with plaintiffs’ attorneys, announced the settlement, which aims to resolve approximately 450 lawsuits filed in state and federal courts following the Lahaina and Upcountry Maui wildfires.
The fires, which occurred in August 2023, devastated the town of Lahaina and were the most destructive in Hawaii's history, as noted by Gov. Josh Green's office.
Judge Peter T Cahill, in his order limiting subrogation rights, referenced the decision in the case “Yukumoto v. Tawarahara,” which established that insurers do not have an unrestricted right to subrogation but are instead limited to reimbursement rights defined by state law.
Research
The U.S. has a shingle problem, just in time for peak hurricane season
The roofing industry is phasing out one of the most popular shingle choices in the U.S. for decades, according to a recent study by itel.
Despite millions of American homes having three-tab asphalt shingles ahead of peak hurricane season, the data showed not only are fewer manufacturers making them, production is down 68% since 2019.
"Nearly four million insured homeowners in the U.S. submit a claim each year, with wind or hail damage, like from hurricanes, historically accounting for more than 40% of these claims," itel President Chris Touchton told PropertyCasualty360.com.
"As three-tab shingle production and available supply decreases, homes with three-tab shingle roofs face immediate challenges if damage occurs," he said. > > > >
"Decreasing availability of three-tab shingle supply might make it harder to facilitate a roof repair when damage is localized to several shingles or a single slope. This creates varying economic challenges not just for homeowners but also insurance carriers, who will ultimately fund replacements."
Rising production and installation costs, consumer preference of architectural shingles, durability and regulatory trends promoting better sustainability have led most manufacturers to wind down production of 3-tab shingles, according to itel.
More than half the homes with asphalt shingle roofs in hurricane states like Mississippi, Alabama, Georgia, Tennessee, North Carolina and South Carolina have three-tab asphalt shingles, with Florida at just 42% due to building codes and the popularity of tile roofs.
The Florida Division of Emergency Management says when hurricane wind gusts exceed 120mph (Category 3 storm and above), 30% to 50% of homes with shingle roofs experience enough damage to require re-roofing, regardless of roof age.
"Since three-tab shingles are less durable than other shingle roofs and were predominantly installed in the 1980s through the early 2000s, its risk for significant damage is considerably higher," Touchton said.
News
In-Force Flood Insurance Declines as More Move to Risky AreasIn-Force Flood Insurance Declines as More Move to Risky Areas
A week after Hurricane Debby drenched the East Coast, data from Neptune Flood shows that in-force flood insurance policies along the Eastern Seaboard are declining. Meanwhile, thousands more people are moving in rather than out of fire- and flood-prone areas, according to a new report from real estate company Redfin that used U.S. Census data.
Florida has seen the most significant population increase in high-risk counties. Despite this, the number of flood insurance policies in Florida remains low. Only 12% of the state's 8.97 million properties have flood insurance, with a modest 1.2% increase in coverage from June 2023 to June 2024, according to Neptune Flood. This brings the total number of policies to 1,089,386, up from 1,076,596 the previous year.
However, the situation is more concerning in other states along the East Coast. Georgia, for instance, saw a 3.7% decrease in flood insurance policies, with only 1.6% of its 4.2 million properties covered. South Carolina experienced a 3.1% decrease, leaving just 6.5% of its 2.1 million properties insured against floods. North Carolina also saw a decline, with a 2.5% drop in policies, covering only 2.6% of its 4.3 million properties.
Further north, states like Pennsylvania, New York, New Jersey and Connecticut have also seen reductions in flood insurance coverage. Pennsylvania saw a 3.9% decrease in policies, leaving only 0.7% of its 5.5 million properties insured. New York and New Jersey experienced declines of 1.3% and 2.2%, respectively, with coverage rates of 1.7% and 3.8%. Connecticut reported a 1.1% decrease, with only 1.6% of its properties covered.
“The number of flood insurance policies nationwide is declining for two primary reasons," explained Trevor Burgess, CEO of Neptune Flood. “First, the NFIP's new pricing structure eliminates subsidies for new policies and gradually phases them out for grandfathered renewal policies. Faced with annual price increases of up to 18%, many consumers are opting to drop non-mandatory coverage."
Commentary/Opinion
Why Accuracy Can’t Be Overlooked in Property Valuations
From a catastrophic natural disaster to a ransomware attack to an essential piece of equipment breaking down, business owners need to be sure they are purchasing adequate insurance to stay ahead of any risk exposures.
Accurate property valuations are an essential component of any property insurance program. Yet, companies often unknowingly underreport the value of their property assets, potentially leaving them underinsured.
Business owners must provide complete, in-depth information about their property to support accurate valuation. This includes the size, age and use of the property, as well as any specific or unique construction details.
In the past, annual valuations changed about 2%-3% each year. Recently, those changes have been as high as 5%-8%, according to The Hartford's data. Consequently, it's a best practice for property valuations to be revisited at least annually to ensure a business is insured for the full price of replacing an essential piece of equipment and alleviate the need to pay the difference out of pocket, which can be devastating for a business.
Reconstruction costs have been impacted by inflation, which makes it even more critical for companies to provide their insurer with the actual cost to replace property or equipment, not the book value. There is a big discrepancy between book value—which is what the company said it cost to acquire the equipment or property—rather than the full replacement value.
Ryan Carney is head of property and marine product at The Hartford. Caleb Woodby is chief property and marine underwriting officer at The Hartford
Financial Results
US P&C Q2'24 earnings recap: Personal auto drives the agenda | S&P Global Market Intelligence
Rate increases and easing loss-cost trends helped property and casualty insurers improve their bottom lines in the personal auto space.
Positive news on personal auto lines led the agenda during second-quarter earnings calls for property and casualty insurers, who talked more about growth as profitability issues faded.
Many insurers reported year-over-year increases in earnings and declines in combined ratios, as sell-side analysts predicted.
The Progressive Corp. was one example of this positivity as revenues for its personal lines, 93% of which are written for personal auto, increased 21% to $13.8 billion from $11.4 billion a year ago. Meanwhile net premiums written for Progressive's personal lines rose 26% year over year to $14.56 billion from $11.6 billion as its personal lines combined ratio fell to 88.6%.
Personal auto was also a bright spot for The Allstate Corp., as rate increases and moderating loss trends helped written premiums increase 12.3% year over year to $9.3 billion from $8.3 billion. The segment's underlying combined ratio improved 8.7 percentage points to 93.5% from 102.2% a year ago.
Nationwide shrinks losses
Nationwide has released the Q2 2024 financial results for its P&C insurance carriers.
Nationwide Mutual Insurance Company, which writes and assumes the majority of premiums written by Nationwide P&C companies, had a net underwriting loss of $187.5 million for the first six months of the year, a significant decrease compared to the $1.5 billion loss that was reported for the same period last year.
Direct written premiums for the period stood at $1.75 billion, an 11% decrease compared to the same period last year. The carrier, through reinsurance arrangements with group companies, assumed $8.9 billion of written premiums for the first six months of the year, a 9% decrease compared to the same period last year.
Based on our analysis, combined ratio for the first six months of the year was ~102%, a ~14-point improvement compared to the same period last year.
Last year, Nationwide implemented underwriting restrictions to mitigate risk and manage the personal and commercial lines portfolios in the current environment, and earlier this year, the company said it would drop coverage for ~100k pets across the country due to inflation, cost of veterinary care, and other factors.
While the company reported a year of record sales in 2023, driven primarily by the performance of its financial services business group, its P&C business achieved poor results over the last couple of years – in 2023 and 2022, Nationwide Mutual Insurance Company had an underwriting loss of $2.3 billion and $1.5 billion, respectively.
Swiss Re reports 17% rise in net profit, in line with expectations
Reinsurance company Swiss Re (SRENH.S), opens new tab said on Thursday that net profit rose 17% in the first six months of the year, roughly in line with expectations, and it maintained its full-year targets.
Earnings got a lift from low claims for natural catastrophe and investment income, Swiss Re said, while its digital white-label business that it is exiting continued to make a loss.
The net profit of $2.09 billion in the period compares with a profit $1.79 billion a year earlier. Analysts had expected a profit of $2.02 billion, according to a consensus forecast.
Swiss Re's new chief executive officer, Andreas Berger, said full year net profit should exceed $3.6 billion.
It said its prices rose 8% in its latest round of insurance renewals on July 1.
AI in Insurance
3 Lessons Learned From Leveraging Gen AI
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.
Through my role at Clearcover, I have discovered that success with Gen AI comes from identifying the places in the customer journey where AI can supplement or enhance the experience.
Though we’ve seen substantial operational efficiencies and high percentages of customer adoption, the journey to our recent launches taught us three important lessons that can help other product and innovation teams ensure that customers receive personalized, empathetic service via advanced Gen AI technology.
- AI can improve customer experiences: Gen AI products can allow for customers to receive around-the-clock support, addressing their queries well outside standard operating hours. One area we targeted at Clearcover was offering a 24/7 support system, developed in partnership with Ada, which ensures that our policyholders receive prompt assistance while having our human agents remain available for much more complex inquiries. Since the solution launched in April, more than 40% of our customer-facing chats no longer required human intervention. We estimate this could result in at least a 1% servicing cost ratio improvement at scale. READ ON
Carolyn Olsen is the senior director of data science at Clearcover
InsurTech/M&A/Finance💰/Collaboration
Clearcover Drives Claims Efficiency by Partnering with ServiceUp to Redefine Car Repair
Clearcover, a next-generation insurance company, announces a strategic partnership with ServiceUp, a leading technology company streamlining automotive repairs. The collaboration aims to redefine the car repair experience by combining Clearcover's seamless claims process with ServiceUp's exceptional "white glove" service and delivery.
Through its mobile platform, Clearcover policyholders can now schedule and receive repairs and maintenance services without ever leaving their homes via ServiceUp's comprehensive vehicle repair solution, which provides pick up and delivery at the policyholder's location.
"We are thrilled to join forces with ServiceUp to bring an unmatched level of convenience and quality service to our customers," said Clearcover Chief of Claims and Customer Service Aaron Wheaton. "This tech-forward approach aligns with our commitment to innovation and customer satisfaction. We are already seeing improvements in efficiency."
The benefits of the Clearcover partnership were recently highlighted in a Case Study published by ServiceUp. Results have shown repair process improvements for Clearcover, yielding impressive results, including reducing cycle times more than 30% and saving 20+ hours weekly per adjuster.
ServiceUp CEO Brett Carlson said, "We're thrilled to partner with Clearcover to bring the power of ServiceUp's repair platform to its customers. By combining both companies' innovative tech and a unified commitment to customer service, we're setting new standards in the automotive and insurance industries. This partnership underscores our joint dedication to providing seamless, efficient, and reliable solutions for all customers."
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