Research
Commercial Auto Insurance Declines in Underwriting Profitability; Increasing Economic and Social Inflation Continue to Influence Costs, Says Triple-I/CAS
The commercial auto insurance line has struggled to achieve underwriting profitability for years, even before the inflationary conditions that have been affecting property/casualty lines more recently. This trend has been accompanied by steady growth in net written premiums (NWP), according to the Insurance Information Institute (Triple-I), an affiliate of The Institutes.
“Increasing economic and social #inflation continues to profoundly influence escalating #insurance costs." - Dale Porfilio, Chief Insurance Officer, @iiiorg
In its latest Issues Brief, Commercial Auto: Trends and Insights, Triple-I noted that the declines in underwriting profitability, despite relatively steady growth in premiums written, have been driven by several causes including that vehicles – both commercial vehicles and personal vehicles they collide with – have become increasingly expensive to repair.
Litigation trends have also had an impact. Excessive injury and fatalities contribute to increased attorney involvement, which leads to higher claim-related expenses due to larger settlements and protracted litigation. Nationally, commercial auto defense and cost containment (DCC) expenses – a key measure of the impact of litigation on insurers – has nearly tripled over the past decade, the report stated.
A recent study Increasing Inflation on Auto Liability Insurance – Impact as of Year-End 2023, conducted by Triple-I and the Casualty Actuarial Society (CAS), found that between 2014 and 2023, increasing inflation drove auto liability losses and DCC up by a range of $118.9 billion to $137.2 billion, or 9.9% to 11.5% of the $1.2 trillion in net losses and DCC for the period
Broker M&A deals down 10% through Q3: Optis
There were 535 announced broker mergers and acquisitions through the first three quarters of 2024 among American and Canadian buyers, down 10% from 594 in the same period in 2023, according to a report released Wednesday by Otis Partners LLC.
Deal activity is also 11% below the previous five-year average, the report said.
There were 198 deals announced in the third quarter, up 14% from 173 in the second quarter and 21% from 164 in the first.
Private equity-backed/hybrid buyers accounted for 73% of all acquisitions for the quarter, while private parties accounted for 17% and publicly held brokers and all others accounted for just 10% of deals, according to report data.
Homeowners insurance requires urgent changes amid rising nat cat risks: Conning
According to a recent report by Conning, the escalating impact of natural catastrophes is threatening the homeowners insurance sector, indicating that the industry cannot sustain its current trajectory without significant changes.
While natural disasters have always posed risks to insurers, losses have surged dramatically in recent years. Between 1991 and 2016, natural catastrophe losses averaged 3.9% of the industry’s direct premiums; over the past seven years, this figure has more than doubled to 8.5%.
Alan Dobbins, a Director in the Insurance Research group at Conning and the report’s author, noted, “The increase in natural catastrophe losses is not solely due to primary perils such as hurricanes.”
News
Troubled taxi insurance assets targeted by $3 billion fund
Marblegate Asset Management is in discussions with state regulators about how it can potentially take over the assets of New York City’s insolvent taxi insurer, according to people with knowledge of the matter.
The $3 billion investment firm — the city’s biggest medallion owner and lender — hasn’t made a formal proposal, and is one of multiple parties that have reached out to New York’s Department of Financial Services about the situation at American Transit Insurance Co., according to the people.
The city’s biggest insurer for taxi and rideshare drivers has been insolvent for decades, and a state audit released last month found ATIC’s reserves to be “massively deficient” in its ability to cover claims. In the second quarter, the firm posted net losses of $700 million.
The size of the hole crosses a legal threshold that allows the DFS, which regulates insurers, to step in and place the company into receivership or liquidate it.
The DFS had ordered ATIC to find capital and explore a sale, warning that the consequences of its failure could be devastating and leave tens of thousands of drivers uninsured and without a source of income.
Commentary/Opinion
Turbocharging the Modern Insurance Agency | Insurance Thought Leadership
Next-generation distribution management can be key to fostering growth, delivering exceptional agent experiences, and advancing the agency into its next evolutionary stage.
As carriers seek better ways to support their agencies and nurture loyalty amid market changes, heightened customer expectations and a flood of AI-enabled possibilities, they can no longer rely on outdated approaches to manage distribution. Next-generation distribution management can play a pivotal role in fostering growth, delivering exceptional agent experiences, and perhaps most fundamentally, advancing the agency into its next evolutionary stage.
The needs of the modern insurance agency go beyond basic functions like managing producer relationships and tracking commissions. To thrive, agencies must be in the vanguard of agile, data-driven systems that can seamlessly support a fast-moving business environment.
Why Traditional Approaches Fall Short
Traditional approaches to agency management systems now often fall short. Legacy agency management systems lack the flexibility to keep up with shifting business requirements, regulatory changes, and the rapid pace of technological advancements.
Eric Bustos is general manager of Vymo, a global insurance IT platform provider
Financial Results
Aon's Reinsurance Solutions generates 7% organic revenue growth in Q3'24 - Reinsurance News
Global insurance and reinsurance broking group Aon has reported a 26% year-on-year rise in total revenue to $3.7 billion for the third quarter of 2024, with solid organic revenue growth across the business, including 7% to $503 million in its Reinsurance Solutions arm.
Aon noted that this increase in total revenue reflects organic revenue growth of 7% and acquired revenues from NFP, driven by net new business and ongoing strong retention.
Revenue growth occurred across all of Aon’s business segments in the quarter, including within Reinsurance Solutions, which climbed 8%, or 7% on an organic basis, as a result of solid growth in both treaty and facultative placements.
Gallagher reports Q3 revenue of $2.7B, up 13%
Arthur J. Gallagher & Co. reported $2.7 billion in total revenue during the third quarter, a 13% increase compared with the year-earlier period.
For combined brokerage and risk management segments, organic revenue increased 6% and net earnings grew 12%. For the first nine months of 2024, revenues have increased 16%, organic growth increased 8% and net earnings increased 19%, J. Patrick Gallagher Jr., Gallagher’s chairman, president and CEO, said during the results call.
On the pricing front, he said the brokerage was seeing renewal premium increases across most commercial lines with the exception of directors and officers liability insurance, which was down 5%, and cyber, which was flat. Commercial auto renewal premiums increased 7%, general liability was up 6%, property increased 4%, umbrella increased 10% and workers compensation was up 2%.
With regard to the reinsurance market, Mr. Gallagher said the July 1 renewal season saw modest property price declines concentrated at the top end of insurance towers, while casualty renewals saw terms and conditions tightened and some modest price increases concentrated in the U.S.
Recommended Events
2024 Global Insurance Forum - Presented by the IIS | Global Insurance Forum Nov. 17-19, 2024 Hyatt Regency Miami
Celebrate excellence and explore the impact of insurance innovation at the Hyatt Regency Miami on Nov. 17-19.
The Global Insurance Forum comprises a diverse audience of c-suite leaders dedicated to driving positive change and advancing the global good. Seize the opportunity to connect with your international colleagues and discuss the issues facing insurers and the world at large.
Data Privacy
Courts Side With Auto Suppliers in Clash With Carmakers Over Vehicle Data Access - WSJ
U.S. regulators and European courts are scrutinizing car company claims that to protect data from hackers they must limit access to the rest of the industry
A German court ruling recently sided with a German association of car parts suppliers against Mercedes-Benz.
Car companies can’t bury lucrative data under cybersecurity protections, away from suppliers and repair shops that need access to do business, according to recent court rulings in Europe.
In the U.S., regulators are scrutinizing data-access disputes. In March, the Federal Trade Commission and the Justice Department submitted a comment to the U.S. Copyright Office that referred to an FTC study that didn’t “find any evidence that providing independent repairers with access to diagnostics and firmware patches would introduce cybersecurity risks.”
That finding came in the FTC’s 2021 study of auto repair restrictions and the effects on consumer options.
Independent repair shops are often prevented from working on cars because they can’t access crucial information due to manufacturers’ systems to protect data, said Pierre Thibaudat, director general of the Automotive Data Publishers’ Association, a Brussels-based trade group that represents companies that provide automotive data from manufacturers for repairs and maintenance.
In some cases, repair shops are then forced to send clients to dealerships affiliated with specific manufacturers, losing revenue, he said. “From a commercial perspective, that’s absolutely insane,” he said.
Automakers have argued that giving broad access to car data creates security risks. A German court ruling this month sided with a German association of car parts suppliers against Mercedes-Benz, saying an international regulation on car cybersecurity doesn’t prevent manufacturers from opening access to suppliers.
Canada
AM Best's outlook on Canada's P&C segment remains stable despite C$3.1bn cat losses in 2023 - Reinsurance News
Global credit ratings agency AM Best is maintaining its stable outlook on Canada’s property & casualty (P&C) industry, amid significant challenges from catastrophic events in 2023 and this year.
The rating agency noted that the stable outlook was driven by a number of factors, including the sector’s solid risk-adjusted capitalisation levels, supported by very strong operating results, favorable combined ratios and growth in insurance service revenue, and improving investment return.
In spite of a manageable level of catastrophe activity seen during the first half of 2024, Canada’s property & casualty (P&C) insurers faced four major events in this year’s third quarter, which according to AM Best, should lead to another record year for losses.
Looking back at 2023, losses due to catastrophe events throughout the year are estimated to have reached CAD 3.1 billion, making it one of the five worst catastrophe years on record, trailing only inflation-adjusted catastrophe losses in 2013 and 2016.
2024 In Review
InsureTech Connect 2024 Perspectives: Tom Benton, Insurance Innovation Reporter
Tom shares his thoughts on ITC major themes of AI, Data and InsurTech Maturity.
As an “ITC OG” who has attended InsureTech Connect (ITC) many times since its inception in 2016, I’ve witnessed the conference’s remarkable growth and transformation. This year, as Contributing Editor for Insurance Innovation Reporter, I had the unique opportunity to ask questions rather than answer them, giving me a fresh perspective on the evolving landscape of insurance innovation.
ITC 2024, held in Las Vegas, attracted approximately 9,000 attendees according to the conference website. While ITC is unquestionably a large gathering, the atmosphere felt more intimate and focused this year. The redesigned expo hall, organized into industry-specific “neighborhoods,” was easier to navigate and provided a more personalized experience.
Insurers face AI Integration Challenges: Datos Insights’ Mitch Wein
A new C-suite role has emerged to help insurers face data-related challenges that must be solved on the way to production-ready AI.
The insurance industry continues to move from AI proofs-of-concept to full production models but it faces significant data management hurdles in reaching that goal. That was the thrust of a conversation between IIR and Mitch Wein, Executive Principal, Datos Insights (Boston) at the InsureTech Connect (ITC) Vegas 2024 event.
“People kind of kicked the data thing down the pike,” Wein began. “For the most part, carriers have a lot of legacy ecosystems out there for data”.
As insurers confront the limitations of their existing systems when implementing generative AI, Wein notes, “They realized that the data wasn’t fit for purpose for the models, so they were getting more hallucinations than they needed to.” To tackle this issue, insurers are adopting retrieval augmented generation to populate AI models’ context windows with relevant data, according to Wein. However, he noted, this has exposed inconsistencies in legacy systems and raised concerns about protecting sensitive information.
“The other challenge is the concern that if the data is exposed in the context window, that the rules about the data won’t be adhered to,” Wein explained, adding that this was particularly the case regarding personally identifiable information and other sensitive categories.