Embedded Insurance
RECOMMENDED: Monthly newsletter of Open and Embedded Insurance Observatory
[Ed.Note: Excellent newsletter focused on the emerging global Open and Embedded Insurance ecosystem.]
At the Open and Embedded Insurance Observatory, we conduct ongoing market research and intelligence on open and embedded Insurance. As a valuable member of our network we are delighted to share with you our monthly selection of key facts, insights, and news that we believe are meaningful and relevant. This newsletter covers all the insights and pertinent features from October 01- October 31, 2024.
We hope you find these resources beneficial for your business.
For any information or request, feel free to reach out to us at info@openinsuranceobs.com.
This newsletter is curated by Aashima Malik, Research Analyst at the Observatory. Yuri Poletto, Founder
Research
Mitchell: Growing Parity in Loss Outcomes Between BEVs and ICEs
Claims from collisions involving battery electric and internal combustion engines rose compared with last year while claims frequencies also rose, according to a new report that also shows a growing parity in loss outcomes of collisions involving battery electric vehicles (BEVs) and automobiles with an internal combustion engine (ICE).
Mitchell, an Enlyte company for the property/casualty claims and collision repair industries, released its Q3 2024 report on point of impact and the differences between BEVs and ICEs.
Claims Journal
Neptune Flood Releases Analysis of Hurricanes Helene and Milton
Neptune Flood has released an analysis of the aftermath of Hurricanes Helene and Milton, highlighting the challenges and systemic issues in the U.S. flood insurance market. This is the first issue created by the Neptune Flood Research Group, a newly formed team of analysts that will provide periodic commentary and insights on the flood insurance market. This issue covers:
Neptune Flood's Analysis on Hurricane Helene & Milton's Aftermath
Impact of Hurricanes Helene and Milton: Hurricanes Helene and Milton have caused significant damage, with Helene resulting in over 55,000 NFIP claims and projected losses between $6-7 billion, while Milton has resulted in over 18,000 claims with projected losses of $1.5-2.5 billion.
NFIP's Financial Strain: The NFIP is expected to face total losses between $8.2-10.5 billion for 2024, leading to a loss ratio above 200% before accounting for loss adjustment expense.
Private Market Losses: The private flood insurance market in Florida has also experienced considerable losses, with projections indicating total losses of over $500 million from Hurricanes Helene and Milton.
Shift Towards Private Insurance: The limitations of the NFIP have driven policyholders to seek more comprehensive private insurance options, which offer higher coverage limits and more flexibility.
Pinellas County Case Study: Pinellas County, Florida, has seen over 22,000 NFIP claims from Helene alone, with an additional 2,000 NFIP claims from Milton. The county saw over 40,000 buildings damaged in the storms, highlighting both the significant flood damage and extensive uninsured risk in the area.
Challenges with Risk Rating 2.0: Since the implementation of Risk Rating 2.0, the NFIP has seen a decline in its insured base, with many homeowners opting for private flood insurance due to rising premiums and coverage limitations.
Outdated Flood Maps: The reliance on outdated flood maps remains a significant challenge, with many homeowners unaware of their true flood risk.
Building Resilient Communities: Addressing the challenges of the flood insurance market requires collaboration among various stakeholders, increasing public awareness, and ensuring adequate insurance coverage.
Auto Insurance Shopping Increased 19% Year over Year in Q3 2024 | Morningstar
The third quarter of 2024 saw a big spike in shopping for both auto and property insurance, according to a report by TransUnion (NYSE: TRU). Auto insurance was up 19%, while property insurance shopping rose 16%, compared to the same time in 2023.
Auto insurance shopping increased across generations, though, not equally. Baby Boomers shopped the most by far, at 34%. Younger generations followed, with Gen Z (23%), Gen X (18%) and Millennials (8%) also looking for lower rates. Property insurance shopping was up among homeowners and renters alike.
These and other important findings are included in the 2025 Personal and Commercial Lines Annual Insurance Outlook, which provides insights and guidance to address anticipated trends in the new year.
“It’s important to note that consumers are also switching at significant rates,” said Patrick Foy, senior director of strategic planning for TransUnion’s Insurance business. “This should serve as a reminder to insurers that marketing and digital experiences matter for acquisition.”
The report found 38% of consumers who shopped for insurance in the past six months ended up switching carriers. It also notes that those who do not find better deals will often adjust their current policy by raising deductibles or opting into a telematics program to lower their premiums.
Insurers lean heavily on online marketing
Over the past two years, policy premiums have caught up with and recently exceed loss costs in the auto market. Predictably, insurers are also beginning to reinvest in marketing; however, not across all channels.
News
Sedgwick Announces Closing of $1B Investment from Altas Partners; Carlyle and Stone Point Investments
Sedgwick announced the closing of a minority investment led by Altas Partners, a North American private equity firm.
Current investors, including funds managed by global investment firm Carlyle and Stone Point Capital LLC, will remain as investors and continue to make new investments in the business, with Carlyle maintaining its control position in partnership with the investor group and the Sedgwick management team. Longtime investors CDPQ and Onex are continuing their support of Sedgwick as minority shareholders, according to the company.
Following the investment, Sedgwick’s total enterprise value is now roughly $13.2 billion, an increase from $6.7 billion when Carlyle made its initial investment in Sedgwick in 2018, according to the company.
Progressive to End Offering Dwelling Fire Insurance
Progressive said it will stop offering dwelling fire insurance, with nonrenewal notices going out as early as Nov. 19.
The Mayfield, Ohio-based insurer late last week said the decision to discontinue writing the coverage, often dubbed “landlord insurance,” for non-primary residences and rental properties was done to focus on owner-occupied homes and bundling home and auto insurance.
Stopping the line of business will create more capacity for these initiatives, Progressive said, adding that it “remains committed to the homeowners insurance market and will continue to offer homeowners, renters, condo, flood and umbrella policies.”
Zillow adds climate risk data and insurance advice to listings
Listings on the website and mobile app now show detailed climate risk information for five key categories — flood, wildfire, wind, heat and air quality — along with insurance recommendations and requirements.Environmental concerns are being placed at the forefront of home-buying decisions for many.
According to survey data from Zillow, more than 80% of prospective home buyers consider climate risks when shopping for a home.
“While all generations juggle trade-offs like budget, floor plans and commute times, younger home shoppers are more likely to face another consideration: They want to know if their home will be safe from rising waters, extreme temperatures and wildfires,” said Zillow senior population scientist Manny Garcia.
Because of that, Zillow added a new feature to its platform to ensure awareness of any threats to their property before purchasing. Listings on the website and mobile app now show detailed climate risk information for five key categories — flood, wildfire, wind, heat and air quality — along with insurance recommendations and requirements.
Legislator refiles bill to end grocery tax in Tennessee
“Healthy markets are ones where buyers and sellers have access to all relevant data for their decisions,” said Skylar Olsen, chief economist at Zillow. “This tool also helps agents inform their clients in discussing climate risk, insurance and long-term affordability.”
Best’s Market Segment Report: U.S. Commercial Auto Results in 2023 and the First Half of 2024 Continue to Deteriorate
-The U.S. commercial auto insurance segment incurred a net loss of $5 billion in 2023, with results in the first half of 2024 showing further deterioration from the prior year period, according to a new AM Best report.
“This is reflected in our negative outlook for the segment, which we issued in March 2024.”
Despite targeted underwriting initiatives, and pricing that has increased steadily during the past decade to address price adequacy issues, the commercial auto insurance segment continues to lag other property and casualty (P/C) lines in profitability. The new Best’s Special Report, titled, “Different Year, Same Story: Deteriorating Commercial Auto Results,” states that frequency and severity of accidents involving commercial automobiles are being negatively affected by distracted driving and the shortage of experienced commercial drivers. Social inflation also remains a key factor with respect to the line’s adverse loss reserve development.
U.S. commercial lines performance overall has been strong, particularly in 2022 and 2023, attributable to strong underwriting performance for lines such as workers’ compensation and surety, and solid performance of other P/C lines, in addition to renewed market underwriting discipline, according to the report. However, commercial auto has been the weakest P/C line for more than a decade, producing net underwriting losses every year from 2013 through 2023.
“The level of deterioration in 2022 and 2023 was notable, although it was due partly to the artificial improvement in results in the prior two years, owing to fewer private passenger and commercial vehicles on the road because of the COVID-19 pandemic,” said David Blades, associate director, AM Best. “This is reflected in our negative outlook for the segment, which we issued in March 2024.”
Climate/Resilience/Sustainability
What Trump 2.0 Means for Climate Initiatives | Insurance Thought Leadership
With a president-elect who talks about the "climate hoax," insurers can play a key role in ensuring that progress continues on resilience in the face of climate change.
While the insurance industry has, to its great credit, been leaning into initiatives to make people and their property more resilient in the face of climate change, last week's U.S. presidential election means the regulatory environment will be significantly different, come Jan. 20.
Donald Trump has long referred to the "climate hoax" and has called President Biden's big climate-related law the "Green New Scam." Trump will surely withdraw the U.S. from the Paris climate accord, as he did during his first term, and may even do so through an executive order on his first day in office. Backed by considerable oil and gas money, the president-elect has promised to "drill, baby, drill." So any regulatory support for reducing emissions and slowing climate change will be out the window.
But all is not lost for those of us who see climate change as one of the great challenges of our time. Trump won't necessarily block efforts to strengthen buildings and infrastructure in the face of intensifying storms — as long as the justification never mentions the word "climate." States and local governments will soldier on, in any case. Market forces will also keep driving progress, especially for electric vehicles, albeit more slowly, and for property resilience. And institutional inertia and legal challenges likely mean Trump won't be able to accomplish some of the more extreme measures being urged on him by conservative groups, even though Trump 2.0 is heading into office with much more experience and a more detailed plan than Trump 1.0 had eight years ago.
Paul Carroll, editor-in-chief, Insurance Thought Leadership
InsurTech/M&A/Finance💰/Collaboration
Sfara announces Instant Trip Start to accompany its All-Speed Crash Detection with ZeroMotion, their next step covering the most common crash scenarios that others miss.
[Ed. Note: This is a BIG deal. Not only is it an industry first that eliminates the need for hardware from crash detection but it allows carriers to capture and document the 20% of collisions that occur early in a trip and at zero to low speed.]
Sfara continues innovating against the market’s existing commodity crash detection solutions. Sfara has combined its previously announced ZeroMotionTM crash detection with their new Instant Trip Start feature, which includes attributing drivers to vehicles with no additional hardware.
With the release of SDK7, Sfara further widens its substantial lead against competitive crash detection solutions in covering the most common real-world crash scenarios that others miss. This coverage not only saves lives, but also improves enterprise economics, such as for First-Notice-of-Loss in the insurance industry.
Sfara already owns the industry’s only crash detection that offers detection and reporting at all speeds, plus when the vehicle is not moving. With that alone, Sfara’s technology covers the additional 70 percent of collisions that other solutions miss. By adding Instant Trip Start to ZeroMotion, Sfara can now provide crash detection the moment customers start their vehicles (with no installations, upgrades, dongles or tags).
Forge, GloveBox and Majesco Unite to Elevate Data and Document Access Across Agencies and MGAs
Majesco, a global leader of cloud intelligent insurance solutions for insurance business transformation, announced a groundbreaking three-way integration designed to transform document streaming between MGAs, agencies, and policyholders.
This partnership is set to drive new levels of efficiency, reducing service time and costs, while elevating the overall insurance experience for all stakeholders.
This partnership introduces key innovations in document streaming technology:
- Seamless Document Streaming: The integration automates the flow of policyholder data and documents, drastically reducing manual processing time and minimizing service-related efficiencies.
- Simplified Data Integration: Built on Majesco’s advanced system, this integration allows for a streamlined connection of data across all partners, ensuring smooth and efficient information exchange.
- Immediate Impact: Already successfully used by Acuity Insurance, this integration was implemented with Forge Insurance, where it will further improve service delivery, reducing time spent on non-revenue-generating tasks.
“This integration exemplifies our commitment to simplifying workflows, reducing costs, and elevating service experiences for agencies, MGAs, and policyholders,” says Ryan Mathisen, CEO of GloveBox. “By partnering with Majesco and Forge, we are creating an impactful solution that supports the dynamic needs of the insurance industry today.”
AI in Insurance
The $100 Billion Opportunity for Generative AI in P&C Claims Handling | Bain & Company
To improve productivity and the claims experience, insurers will need to scale up the most promising initiatives.
At a Glance
- With its heavy procedures and unstructured data, claims handling provides fertile ground for insurers piloting generative AI technology.
- We estimate that the technology could reduce loss-adjusting expenses by 20% to 25% and leakage by 30% to 50%, creating more than $100 billion in benefits for insurers and customers.
- But this can only happen if insurers scale up successful initiatives, which will require organizational change and new capabilities.
Claims is where the rubber meets the road for insurance companies. Negotiating a claim is a moment of truth for customers, with an outsize influence on whether they become promoters or detractors of the insurer. It is also the most costly insurer operation, thanks to the large pool of employees and the payouts involved. And given the high inflation, supply chain disruptions, and extreme weather events of recent years, costs have been climbing.
Bain & Co