Research
Study: Car Insurance Prices Will Jump 22% This Year - Kelley Blue Book
Car insurance has become more expensive in 2024, and the increases may not be over. A new study projects that by the end of the year, the average policy will cost 22% more than it did a year ago.
The number comes from Insurify, an insurance comparison shopping service. Data scientists from Insurify “examined more than 97 million rates in its proprietary database, quoted via integrations with partnering insurance companies” in all 50 states and the District of Columbia.
Insurify says the average cost of comprehensive car insurance increased 24% last year and could nearly match that increase this year.
“The average annual cost of full coverage hit $2,329 in June 2024, a 15% increase from $2,018 at the end of 2023. Drivers could see a total increase of 22% in 2024, with average premiums of $2,469 by the end of the year,” Insurify says.
Prices Rise, But Insurers Aren’t Profiting
The price hikes come as insurance companies say they’re losing money.
“Insurer losses result from a combination of inflationary pressures — like the rising cost of vehicle repairs and the skyrocketing price of new cars — and unprecedented climate catastrophes that drive weather-related claims in states that haven’t historically seen as much of this type of damage,” the researchers write.
Growing demand for parametric insurance in 2024: AM Best
Record cat bond issuance and large spreads indicate a strong demand for reinsurance capacity, leading to continued interest in parametric-triggered reinsurance and insurance-linked securities (ILS) in the first half of 2024, according to AM Best’s latest report.
In the first half of 2024, six natural catastrophe bonds with parametric triggers were issued, accounting for about 7% of the total issuance volume, up from 6.2% in the same period of 2023.
Government entities are increasingly turning to the cat bond market for parametric reinsurance. Notably, the first parametric-triggered cyber catastrophe bond was issued in early 2024. Sponsored by Hannover Re, the Cumulus Re (Series 2024-1) bond covers cloud outages. This marks a shift in parametric risk transfer techniques from traditional weather and seismic events to other types of risks.
You can read more about this transaction, and all others, in the catastrophe bond and ILS Deal Directory of our sister publication, Artemis.
News
P&C reinsurance market is reaching a new level of equilibrium, says Swiss Re CFO
The primary insurance market now understands that price increases in property and casualty (P&C) reinsurance are needed going forwards, with the market now “reaching a new level of equilibrium”, according to Swiss Re’s Chief Financial Officer (CFO), John Dacey.
In a recent interview with CNBC International News following the release of a strong set of H1’24 results, CFO Dacey discussed the reinsurer’s experience at the July renewals and the P&C reinsurance market more broadly.
“We were very pleased with the July renewals, an 8% price increase and year to date 9%, so there’s been a little bit of modulation,” said Dacey.
Swiss Re’s P&C Re renewed contracts totalled $4.5 billion in treaty premium volume at the July renewals, representing a 7% volume increase compared to the business up for renewal.
Additionally, due to a careful approach to inflation and updated loss models, loss assumptions have risen by 10%.
“As we go forward, we expect that people will continue to see the need for the increase in the loading for cost inflation has lessened, but it’s not gone away,” said Dacey.
He explained that Swiss Re’s updated models, particularly for natural catastrophes, show increasing damage from convective storms and flooding. This necessitates higher prices for areas that were priced lower in 2020, 2021, and 2022.
How National Flood Insurance Program deadline may affect home buyers
Looming expiration for the largest U.S. flood insurance program may hold up some home sales this fall, just as the Federal Reserve is expected to cut interest rates.
The National Flood Insurance Program, a public insurance program sponsored by the federal government insures 4.7 million policyholders and protects more than $1.28 trillion in assets.
Congress has until Sept. 30 to reauthorize the NFIP.
“Without an extension, you’re not going to be able to get a mortgage in any area that requires flood insurance,” said Jaret Seiberg, a managing director and financial policy analyst at TD Cowen.
Consumers in the market for a home have been patiently waiting for the Federal Reserve to cut interest rates — a move it seems poised to make in September.
But without action from Congress, there could be another change at the end of that month that makes it temporarily trickier to buy or sell a home in some areas, or to refinance an existing mortgage.
That’s because the National Flood Insurance Program — the government-sponsored public insurance program that is the largest flood insurer in the U.S. — needs to be reauthorized by Sept. 30 to continue to issue new policies or increase coverage on existing policies.
If you are buying or selling a house, you want to avoid the end of September and the beginning of October.
Homeowners insurance policies typically don’t cover flood damage, meaning consumers who want to protect their home and its contents from that peril need a stand-alone flood policy. Mortgage lenders may require applicants to obtain such a policy before closing on a home, depending on the flood risk for the property.
“This is about the ability to get a mortgage in a flood zone after Sept. 30,” said Jaret Seiberg, a managing director and financial policy analyst at TD Cowen. “Without an [NFIP] extension, you’re not going to be able to get a mortgage in any area that requires flood insurance.”
Texas wildfires in 2024 are outpacing California's worst year, 1.2 million acres burned so far
On Tuesday, April 2, 2024, Texas's top emergency manager told a panel of lawmakers that the state should establish its own firefighting aircraft division after a series of wildfires, including the largest in state history, scorched the Panhandle region.
Texas wildfires have consumed over one million acres in 2024 and are on pace to rival California's most destructive wildfire year on record, according to a recent analysis by Fire Cash Buyer.
So far this year Texas has watched 1,202,617 of its acres burned by 7,530 wildfires, the data showed, with potential in August for unprecedented destruction surpassing California's record of 4,397,809 acres destroyed by wildfires in 2020. Compared to last year, Texas wildfire acreage has increased by 486%.
Meanwhile, California has seen 751,327 of its acres burned by 4,613 wildfires in 2024.
A business was destroyed by the Smokehouse Creek Fire, Feb. 29, 2024, in Stinnett, Texas.
Fire Cash Buyer said wildfire numbers in 2024 have remained stable, suggesting larger more intense blazes. At the same time, area burned by wildfires is expected to rise significantly in the near future, reaching 10 million acres in 2025 before stabilizing at around nine million acres in 2026.
State Farm Faces Setback as Class Action Lawsuit Progresses in Federal Court
State Farm Faces Setback as Class Action Lawsuit Progresses in Federal Court
In a significant legal development, U.S. District Judge Virginia Kendall has denied State Farm’s motion to dismiss a class action lawsuit, allowing the case to proceed in the U.S. District Court for the Northern District of Illinois. The lawsuit accuses the insurance giant of systematically undervaluing and underpaying policyholders for totaled vehicles, raising concerns among policyholders and industry analysts alike.
Challenges to State Farm’s Valuation Methods and Practices
The lawsuit, originally filed in March 2022, challenges State Farm’s vehicle valuation methods, specifically targeting the company’s “typical negotiation adjustments.” Plaintiffs allege that these practices resulted in deceptive undervaluation of vehicles, causing financial harm to policyholders who were not adequately compensated for their losses. They argue that if they had known about these adjustments, they might have chosen different insurance options or negotiated for lower premiums.
Example of Auto Claim Evaluation
When a policyholder files an auto claim after a vehicle is deemed a total loss, the process typically begins with a detailed assessment of the vehicle’s value. Here’s how an auto claim might be evaluated:
Financial Results
Cincinnati Financial Corporation Declares Regular Quarterly Cash Dividend
Cincinnati Financial Corporation (Nasdaq: CINF) announced that at today's regular meeting, the board of directors declared an 81-cents-per-share regular quarterly cash dividend. The dividend is payable October 15, 2024, to shareholders of record as of September 17, 2024.
Stephen M. Spray, president and chief executive officer, commented, "The payment of this dividend in October will complete 64 years of increasing annual cash dividends, an achievement that we believe only seven other public companies in the U.S. can claim. The confidence we have in our capital strength and in our ability to achieve industry-leading operating performance through our insurance business bolsters our belief that we'll continue to generate shareholder value through stock price appreciation and dividend payments far into the future."
InsurTech/M&A/Finance💰/Collaboration
[Ed. Note: Very informative] --- Insurtech profits? …(maybe) next year 😅
Even this year…full stack Insurtech players aim to show a profitable business (maybe) the next …let’s take a look at the H2 financials of the (not too) new kids in the block
Matteo Carbone. Founder and Director, IoT Insurance Observatory, Board member, Insurtech Thought Leader, Keynote speaker and writer on insurance innovation
The key InsurTech trends to look out for in H2 – part two - InsurTech Analyst
As H2 of 2024 is now fully upon us, the InsurTech sector is set to face new tests and set its sights on new opportunities. With regulatory tests on the horizon, and a notable shift towards digital solutions looking set to take the sector by storm, H2 looks set to be seismic for the space.
InsurTech Analyst‘s Harry Slade recently engaged with a range of industry experts to delve into the key InsurTech trends for the second half of the year. Here’s part two of that insightful conversation.
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.
Commentary/Opinion
When AI meets ROI: How data-driven drones and declines are shaking up property insurance
One of the most prominent trends within the investment property insurance market is the growing reliance on data analytics and advanced technology by insurance carriers – and it’s little surprise why.
According to research from APE Analytics, insurers actively using AI and machine learning have seen loss ratios improve by 5% through reduced claims and premiums rising by as much as 15% due to better risk evaluations.
“Insurance carriers are using third party data, including imagery from drones, to detect excess debris and roof concerns on properties,” said Michelle Afflalo (pictured), broker and agent at Ives Insurance Services. “One of our carriers has infrared technology that can detect moisture on a roof, so it can tell you if a roof has fungus growing on it, which could potentially lead to other issues.
“Basically, they’re using this technology to go and look at real estate before true underwriting begins. What used to happen is that we would write a policy, the carrier would do an inspection and the client would have a certain amount of time to address any issues, now it’s different; it’s all happening in pre underwriting.”
This technological integration into underwriting processes has led to a tighter approach from insurers, as they now have access to far more detailed risk assessments before even writing a policy.
Insurance Industry Insists It Has Right To Recoup Billions In Paid Wildfire Claims
The insurance industry continues to argue that a state judge got it wrong when he issued an order last week clearing the way for a $4.04 billion settlement of hundreds of lawsuits related to the August 2023 fires that killed 102 people and destroyed much of Lahaina.
At issue is whether insurers can file separate lawsuits to recoup billions of dollars in claims paid from the parties the insurers allege are responsible for the catastrophic fires. The alleged wrongdoers include Hawaiian Electric Industries, Kamehameha Schools and Hawaiian Telcom, which collectively the industry has accused of starting the fires or allowing them to spread.
Victims’ lawyers want the Hawaii Supreme Court to step in. They have asked Maui Judge Peter Cahill to let the high court determine the question central to his ruling, and want the insurance industry to join in on their request as a way to resolve the issue.
Maui Judge Peter Cahill last week issued an order saying insurers could not file subrogation suits related to the Maui wildfires. The outcome of the dispute – between the global insurance industry on one side and fire victims and some of Hawaii’s core institutions on the other – is likely to determine whether the pending settlement can be finalized. The alternative is likely to be a years-long legal quagmire.
Last week, in a major victory for proponents of the settlement, Cahill said the insurers couldn’t go after HECO, Kamehameha Schools and others to recoup claims paid. Now, having paid out $2.3 billion in claims to policyholders already, with an estimated $1 billion more yet to be paid, the insurance industry is carefully weighing its next move.
People
Chubb hires former KPMG ESG exec for resilience post
Chubb Ltd. announced Monday it has hired Amelie Fava-Verde, formerly with KPMG LLP, as senior vice president for its North America resilience services.
Ms. Fava-Verde previously was U.S. environmental, social and governance hub lead at KPMG will build and lead a team focused on developing and delivering resilience and recovery services for commercial, consumer and government clients transitioning to a low-carbon economy.