InsurTech/M&A/Financeđ°/Collaboration
Insurance brokerage Marsh McLennan strikes $7.75 bln deal for McGriff Insurance Services
Insurance brokerage Marsh McLennan (MMC.N), opens new tab said on Monday it has agreed to buy McGriff Insurance Services for $7.75 billion, as the industry gears up for higher spending on policies from businesses amid an improving economic outlook.
Wage growth and increasing expectations of a soft-landing have allowed companies across different sectors to revive spending on insurance policies despite higher prices, boosting commissions earned by brokerages tied to the premiums insurers charge.
Marsh McLennan said it expects the deal, struck through its Marsh McLennan Agency business, to enhance the unit's capabilities across commercial property and casualty, employee benefits, management liability and personal insurance lines.
"Strategically, the transaction makes sense to us as it will further expand its successful middle-market insurance business," Piper Sandler analyst Paul Newsome said. "This appears to be a business Marsh knows well."
Late last year, insurance broker Aon (AON.N), opens new tab had also agreed to buy privately held NFP in a deal valued at about $13.4 billion to tap the fast-growing middle-market segment.
Founded in 1886, McGriff is an affiliate of TIH Insurance Holdings and a provider of insurance broking and risk management services in the U.S. The company generated $1.3 billion in revenue for the trailing 12 months ended June 30, 2024. Its coverage also includes corporate bonding and surety services, cyber and title insurance, among others.
Honeycomb secured the biggest US InsurTech deal in H1 as deal activity in the country dropped by 43% - FinTech Global
US InsurTech deal activity for the first half of the year dropped by 43% YoY
The top 10 deals saw five states make the list as Wisconsin and Ohio secured one top deal each
Honeycomb secured the biggest InsurTech deal in the US during H1 2024 with a Series B funding round of $36m
In H1 2024, the US InsurTech sector saw a drop in both deal activity and funding. Only 53 deals were recorded during the first six months of 2024, marking a 43% decrease compared to the 93 completed in H1 last year. Funding also saw a steep decline, with InsurTech companies raising just $0.5bn during the first six months of 2024, a steep decline of 78% from the $2.3bn raised in H1 2023. If deal activity continues at the rate recorded in the first six months of the year, the projected total for 2024 would be 106 transactions, a 30% decrease from last yearâs total of 153.
The top 10 deals in H1 2024 within the U.S. InsurTech sector were spread across five states, with California and New York emerging as the dominant players. California secured three top deals, a decline from the five it had in H1 2023, while New York increased its share, rising from two top deals in H1 2023 to three in H1 2024. Illinois also saw a notable increase, securing two top deals compared to one in the previous year. Wisconsin and Ohio made their first appearance in the top 10 list, each securing one top deal, while Texas and Georgia, which each had one top deal in H1 2023, were absent from the H1 2024 list. This shift suggests a broadening distribution of significant InsurTech deals across more states, with new entrants like Wisconsin and Ohio signalling growing activity outside traditional hubs like California and New York.
Telematics, Driving & Insurance
Telematics and AI are the Real Future of Auto Insurance
A new technology gathers momentum, and a shadow of doubt quickly clouds over. Sound familiar? Some car owners reported a spike in auto insurance rates after installing mobile apps and dongles that track telematics data i.e., detailed driving behavior. A lawsuit was filed against General Motors, LexisNexis, and Verisk for selling the data to insurers. Soon, there are questions about where the industry is headed.
Auto Insurance Needs to Evolve
In this age of AI, it does not take an industry expert to envision connected cars, telematics apps, and usage-based auto insurance. But these technologies are new and yet to make real inroads. Most auto insurance policies are underwritten today based on more traditional risk criteria. These criteria could vary from state to state but largely cover areas such as: location, car make, insurance history, driving records, gender, age, marital status, home ownership, education, occupation, and credit history.
As you can tell, many of these factors have little to do with cars or driving. Yet, auto insurers continue to use them to make approve/decline decisions and set premiums.
Credit history deserves a deeper dive. A Bankrate.com report finds that, on average, drivers with poor credit pay 118% more for full coverage car insurance than those with excellent credit ($4,801 vs $2,200).
Compare that statistic with risky driving. Drivers with a DUI conviction pay an extra 70% on average, according to a Forbes Advisor study. Drivers with speeding tickets only pay an additional 22%, and those who cause an accident pay an extra 42%,
Niranjan Krishnan, Head of AI Solutions, FPT Software
Climate/Change/Sustainability/ESG
Heavy Weather â Impact of Storm Related Losses on Insurance and Banking
In August of 1992, I was work with Prudentialâs Property & Casualty insurance company. On one fateful morning, things changed forever. Hurricane Andrew came ashore as a Cat 5 storm, cutting a deeply destructive path across Southern Florida. We took $1.7 billion in pre tax losses. It was a stunning event which led to changes in the Florida market which ultimately made it too high a risk for us to sustain. PruPac was eventually sold to Liberty Mutual, who had a different tolerance for risk and a wildly different geographic distribution of business. Diversification matters, it turns out.
One of the projects we undertook in the aftermath of Andrew was a study of what would happen if a similar storm were to strike New Jerseyâs Raritan Bay. The result would have been potentially catastrophic. That study ultimately confirmed the wisdom of a divestiture, long before Super Storm Sandy sadly proved our analysis to be prophetic.
Recently, Hurricane Helene cut a destructive path from the Gulf of Mexico up through Georgia and the Southern Appalachian Mountain region. The destruction in places like Western North Carolina were like nothing seen in modern times. Risk profiles certainly appear to be changing.
Meanwhile, as Helene was swirling, North Carolina was experiencing an unnamed storm along the OBX. In the aftermath of that, a walk on the beach showed just how important the dunes and vegetation are for protection. The roots on some plants go down 5 feet or more.
Rob McIsaac is the President and CEO of RPM Ventures NC, LLC
Research
State Farm, Allstate, Geico top digital performers
State Farm, Allstate and Geico are top performers in digital experience, according to new research from Corporate Insight, which included surveys of 1,400 policyholders who are digitally active to try to understand insurance customers' preferences.
The 2024 P&C Insurance Experience Benchmark looks at 20 carriers across 170 attributes including categories like mobile, design & navigation, and support.
State Farm finished first with the top mobile app. Allstate had a strong performance in all categories and Geico took third with its self-service options, according to the press release.
Justin Suter, insurance research manager at Corporate Insight, said in the press release: "State Farm maintained its first-place ranking, but we saw firms make big jumps in this year's report by finding ways to provide value to policyholders outside of the traditional insurance model. Allstate's mobile app revamp, for example, added new features like a gas finder tool and a data breach checker that propelled it to second place."
The survey suggested that coverage details were the most common reason for a policyholder to engage with an insurer on a desktop, overtaking premium payment.
"Our survey found that while users are generally satisfied with their insurer's digital experience, few view their carrier's digital offerings as 'extremely modern," Suter said. "Some areas are stronger than others. Auto insurance mobile app users reported the highest satisfaction and were most likely to think of their insurer's app as 'extremely modern.' But desktop users in home and auto were slightly less satisfied and less likely to think of platforms as modern. The industry still has work to do if it wants to meet the digital expectations of today's users."
Kaitlyn Mattson, Managing Editor, Digital Insurance
News
45,000 Dockworkers to Strike, Threatening U.S. Supply Chain
Set to go into effect at midnight Oct. 1, the strike will stop operations at 36 ports on the East and Gulf Coasts.
The International Longshoremenâs Association (ILA) announced 45,000 of its members will commence a strike at midnight Oct. 1 across the East and Gulf Coasts, halting operations at 36 ports, which handle about half of the goods entering and exiting the U.S., posing a severe threat to the national supply chain.
This looming strike, the first since 1977, comes after prolonged negotiations failed to yield an agreement with the U.S. Maritime Alliance (USMX), the representative body for the ports. According to the ILA, the deadlock centers around what they describe as an "unacceptable wage package" and the controversial issue of automation which they demand be completely banned.
"The Ocean Carriers represented by USMX want to enjoy rich billion-dollar profits that they are making in 2024, while they offer ILA Longshore Workers an unacceptable wage package that we reject," the ILA said in a statement.
USMX did not respond to requests for comment from the Associated Press.
The implications of a prolonged strike could be dire. Industry experts predict significant disruptions that could extend into the peak holiday shopping season, affecting everything from consumer electronics to perishable goods.
In July, Greg Horn of PartsTrader warned the strike could be a potential threat to the continued improvement in parts delivery times to collision repair shops.
âTo give you an idea of what an East Coast and Gulf Coast strike would be like, seven of the top 10 [U.S.] ports would potentially be impacted by a strike,â Horn said. âIt will impact not only the aftermarket [parts] coming in from Taiwan through the Panama Canal for deliveries to the East Coast, but we also get a lot of vehicle components for European [automaker] vehicles that are being manufactured in Alabama, South Carolina, etc.â
US P&C insurance industry on track for profits in 2024, says Swiss Re
The US property and casualty (P&C) insurance industry is on pace for increased profits in 2024, supported by improved underwriting and investment results in the first half of the year, according to insights from Swiss Re.
The industryâs combined ratio for year-to-date 2024 stands at 98%, marking a seven-percentage-point (ppt) improvement from the same period in 2023. This improvement is largely driven by an 11 ppt reduction in the personal lines loss ratio, despite the pressure of severe convective storm activity on the homeowners' insurance sector.
Premium growth remained strong at around 10% for the first half of 2024, mainly driven by personal lines, as competition builds among carriers reaching rate adequacy. Investment income has provided a tailwind due to reinvestment yields outpacing portfolio yields.
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Industry return on equity (ROE) for the first half of 2024 hovered near 10%, and Swiss Re maintains its full-year forecasts for ROE at 9.5% in 2024 and 10.0% in 2025
The Category 4 event will highlight the impact of recent market hardening...
The Category 4 event will highlight the impact of recent market hardening..
Hurricane Helene looks set to be a broadly retained insured event and will serve as a reminder to reinsurers of the advantages of hard-won cat programme restructures.
Although there are already signs that reinsurers of North American cat risk are willing to concede to clients on price, there is no suggestion that reinsurers will entertain reductions in retention levels â and Helene is a clear display of the impact of mid-sized US wind events.
The Associated Press reported landslides and flooding forcing the closure of roads and isolating western North Carolina. Across the state more broadly, 400 roads remained closed by Sunday, according to the BBC.
Insured losses: Estimates begin
Over the weekend, AM Best produced an early insured-loss estimate for Helene of $5bn â although it is important to note that, at this stage, all estimates are subject to change.
Commentary/Opinion
Insurers embrace 'sexy' new trend: Why 'venture clienting' could overtake traditional investments
Sabine VanderLinden (pictured), co-founder and CEO of Alchemy Crew, understands better than most the evolving dynamic between technology ventures and large insurers â particularly where digital transformation is concerned.
Speaking to Insurance Business, she explains thereâs been a significant shift of late in how startups and corporations collaborate.
"Corporate venturing is a sphere in which a corporation sets up an environment where they can invest in startups," she says. This space, however, is undergoing disruption, especially in terms of investment, particularly in the fintech sector â with VanderLinden highlighting a drop in funding as a key concern for traditional corporate venturing models.
âThere used to be 140,000 fintech startups just last year. Today there are 153,000 startups in fintech â 25 to 30% of these startups have raised $824 billion. However, when you look at 2024 investment trends $36 billion has been invested in fintech startups â 50% of 2023 and 50% of 2022.
AI in Insurance
Insurance companies enhance tech spending to meet evolving customer needs
Insurance companies are significantly ramping up their technology-related spending, including on artificial intelligence (AI), as the industry seeks to move towards the modern Cloud architecture to enhance the online experience of customers, employees, and distributors.
According to rough industry estimates, information technology (IT)-related expenses now account for nearly 10 per cent of the companiesâ expenses. In the last five years, IT spending by insurers has seen robust growth, driven by digital transformation initiatives of companies to meet evolving consumer demands.
âTech spending as a proportion of expenses is 10 to 15 per cent currently. It was around 5 to 6 per cent five years ago,â said Krishnan Badrinath, Head for Technology & Innovation, Tata AIG General Insurance.
âCloud is one area where a good amount of spending is being done. In the last two years, I would say that AI has picked up well and a lot of companies, like us, are trying hands-on generative AI. We are all pumping funds into AI,â Badrinath added.
Industry insiders suggested that the integration of Internet of Things (IoT) technologies, particularly in telematics and health monitoring, has further increased tech spending of insurers to better assess risk and enhance service offerings.
Insurance CEOs Talk Gen AI, Growth, Workforce Strategies
A much higher percentage of insurance chief executives say that generative AI is a top investment priority for their firms than peers in other industries, according to a survey report published by professional services firm KPMG.
Roughly eight-in-10 insurance CEOsâ81 percentâare prioritizing generative AI investments, while just 64 of CEOs across all sectors globally are similarly inclined to put gen AI at the top of their investment lists, KPMG said.
According to KPMGâs 2024 CEO Outlook, when it comes to employment and growth strategies, responses from insurance industry leaders are more in line with those leaders in other sectors, with most respondents in insurance and other sectors saying they donât expect their workforces to grow very much over the next five years. In fact, some 60 percent of CEOs expect their organizationâs headcount will increase less than 5 percent over the next three years. For CEOs across all sectors and countries, the comparable figure was 58 percent.
Events
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Claims
Moment of Truth
HOW WELL AN INSURANCE CARRIER LOOKS AFTER ITS CUSTOMER â HANDLING THE CLAIMS PROCESS EXPEDITIOUSLY, ARRANGING FOR VEHICLE REPAIRS AND RENTAL CARS, AND MAKING THE CONSUMERS WHOLE AGAIN â IS PIVOTAL BOTH FOR THE CONSUMER AND FOR THE FINANCIAL HEALTH OF THE INSURANCE BUSINESS.
Insurance carriers typically have just two opportunities to interact with their customers: at policy renewal time and when the driver needs to make a claim. Handling the claim with the speed, accuracy and professionalism clients expect determines customer satisfaction and, ultimately, behavior at renewal time.
Research from LexisNexis Risk Solutions finds that policyholders who make an auto claim are 35 percent more likely to switch carriers than those who do not. In Exceeding Expectations or Falling Short? U.S. Auto Insurance Claims Trends, Insights and Impacts Revealed â researchers found that among customers who had made a claim in the past 12 months, 94 percent of respondents stated they were very (67 percent) or somewhat (27 percent) satisfied with the overall claims process. Nevertheless, one-third of them subsequently considered changing or actually changed carriers. The findings suggest that while overall carrier performance is good, there is no room for complacency: a substantial proportion of an insurance carrierâs business is at risk following an auto claim.
The findings come at a challenging time for auto insurers in the US. An industry that is historically cyclical is currently in âa really bad version of a down cycle,â beset by high costs, shortages of parts, replacement vehicles and labor, and costs related to litigation, according to Tanner Sheehan, vice president and general manager of U.S. claims at LexisNexis Risk Solutions