Commentary/Opinion
Americans face an insurability crisis as climate change worsens disasters – a look at how insurance companies set rates and coverage
Home insurance rates are rising in the United States, not only in Florida, which saw tens of billions of dollars in losses from hurricanes Helene and Milton but across the country.
According to S&P Global Market Intelligence, homeowners insurance increased an average of 11.3% nationwide in 2023, with some states, including Texas, Arizona, and Utah, seeing nearly double that increase. Some analysts predict an average increase of about 6% in 2024.
These increases are driven by a potent mix of rising insurance payouts coupled with rising costs of construction as people build increasingly expensive homes and other assets in harm's way.
When home insurance averages $2,377 a year nationally and $11,000 per year in Florida, this is a blow to many people. Despite these rising rates, Jacques de Vaucleroy, chairman of the board of reinsurance giant Swiss Re, believes U.S. insurance is still priced too low to fully cover the risks.
It isn't just that premiums are changing. Insurers now often reduce coverage limits, cap payouts, increase deductibles and impose new conditions or even exclusions on some common perils, such as protection for wind, hail or water damage. Some require certain preventive measures or apply risk-based pricing – charging more for homes in flood plains, wildfire-prone zones, or coastal areas at risk of hurricanes.
But these changes are raising alarm bells. Some industry insiders worry that insurance may be losing its relevance and value – real or perceived – for policyholders as coverage shrinks, premiums rise and exclusions increase.
Are legacy systems weighing down the insurance industry?
Seventy four per cent of insurance companies rely on old tech
Are legacy systems weighing down the insurance industry?
Amid a hard market characterized by high demand for insurance, limited supply, and evolving risks, brokers, insurers, and underwriters are under significant pressure to respond quickly, price policies accurately, and deliver seamless service—all while grappling with increasing workloads and stretched resources. In this challenging environment, insurtech tools are emerging as essential solutions, enabling brokers and insurers to streamline operations, address talent shortages, and stay competitive in a rapidly changing landscape.
However, implementing new processes is often easier said than done. According to Prateek Sangal (pictured), senior vice president and head of digital at AmTrust, old habits are hard to retrain. “The biggest challenge is getting people to change the way they work, especially when it comes to something as ambiguous as technology.”
Legacy systems and capturing valuable data
Legacy systems remain a significant part of the insurance industry. In fact, a report from Clearwater Analytics reveals that as much as 74% of insurance companies still rely on old tech to complete core functions. To make matters worse, up to 70% of insurers’ annual IT budgets are spent on maintaining this outdated technology.
Managing Loss Control With Location Intelligence
By combining historical aerial imagery, property condition data, and AI, insurers can optimize underwriting, inspections, and fraud reduction.
Managing loss control has never been more critical for maintaining property risk. Insurers face rising claim frequency, escalating weather events, and the need for more effective loss control measures. Traditional methods, like in-person inspections, often fall short, leaving insurers vulnerable to unnecessary losses and inflated payouts.
The good news? More insurers are adopting technology to change these outcomes. Enter location intelligence.
By combining historical aerial imagery, property condition data, and AI, insurers gain the insights they need to optimize underwriting, inspections, and fraud reduction—and ultimately improve loss ratios.
David Tobias serves as the general manager of insurance at Nearmap. Previously, he co-founded Betterview, a property intelligence platform for P&C insurers that Nearmap acquired in 2023.
2025 PREDICTIONS
Global insurers set to navigate volatile market in 2025 – McKinsey
Economic shifts and innovation opportunities reshape strategies in P&C and life
The global insurance industry is navigating a volatile landscape marked by economic uncertainty, geopolitical tensions, and shifting trade patterns, according to McKinsey's Global Insurance Report 2025.
Despite these challenges, the report identifies opportunities for insurers to adapt and find profitable growth across personal lines P&C, commercial P&C, and life insurance sectors.
Personal lines property and casualty premiums grew by 9.5% in 2022–2023, reaching $1.1 trillion. This growth, which outpaced nominal global GDP by 0.5%, was primarily driven by rate increases in mature markets rather than expansion into new risks, McKinsey noted.
However, gross written premiums as a share of GDP remained below pre-pandemic levels, and the coverage gap between mature and emerging economies widened.
McKinsey highlighted that rising costs, including repair expenses and reinsurance premiums, have brought affordability into focus, particularly in the U.S. Insurers are encouraged to innovate and expand coverage in underinsured regions, especially in parts of Latin America and Asia, where economic conditions may support greater insurance uptake.
Climate change, geopolitical instability seen as top risks
Climate change, geopolitical instability and cybersecurity are the top risks worrying experts and the general public, according to AXA’s 2024 Future Risks Report.
The report is based on a survey of 3,000 experts from 50 countries and a representative sample of 20,000 individuals from 15 countries. Respondents were asked to rank their top 10 emerging risks based on their potential impact on society over the next five to 10 years.
The report also found both experts (92%) and the public (90%) believe crises have been increasing in recent years. Respondents — 93% of experts and 91% of the public — also believe these crises are having an increasingly significant impact on people’s lives.
“There’s an increasing feeling of global vulnerability when it comes to all of these risks becoming really, really tangible in our daily lives,” said Florian Richard, AXA XL’s chief risk officer for the Americas and head of underwriting risk, on a recent episode of the RIMS podcast.
This is the third year in a row where climate change, geopolitical instability and cybersecurity have ranked in the top three. Artificial intelligence ranked fourth for the second year in a row, highlighting its growing importance as both a key tool and a threat.
“It’s not surprising to see AI come at the very top of the rankings,” Richard said. “AI can be a risk in itself. You can think about how it can displace jobs. It can pose even an existential threat to mankind to some extent. But it also enhances existing risks. Think about privacy invasion, cybersecurity threats. All of these AI algorithms can facilitate those other kinds of risk.”
News
U.S. to add features such as blind-spot warnings and pedestrian detection to vehicle crash ratings
The U.S. government's automobile safety ratings will get a major update starting with the 2026 model year when regulators add new driver-assistance technologies and tests for protecting pedestrians.
The National Highway Traffic Safety Administration said Monday that it has finalized the changes, which were required by Congress under the 2021 bipartisan infrastructure law.
In addition to the five-star ratings for crash tests, the agency will add four new technologies including pedestrian automatic emergency braking, lane-keeping assist, blind-spot warning, and intervention if a driver tries to move toward a vehicle in a blind spot.
The new rule also strengthens test procedures and performance standards for technology that's already included in the ratings such as automatic emergency braking.
The agency said that the five-star crash test ratings, which most vehicles now get, would not change under the new system. But consumers would also see green check marks if vehicles they're shopping for have the safety features and can be assured that they meet standards set by the government, Buttigieg said.
InsurTech/M&A/Finance💰/Collaboration
Captive insurance industry news | Davies acquires Barker Claim Services
Davies has acquired Barker Claims Services, which provides professional claims handling and loss adjusting expertise across property, casualty and motor claims.
According to the firm, Barker Claim Services will build on Davies’ existing nationwide claims operations in North America, led by Don Lederer, claims solutions CEO, providing additional regional coverage to clients in Virginia, North Carolina, South Carolina and Northeast Tennessee.
Dan Saulter, group CEO at Davies, says: “I would like to extend a warm welcome to Brian and the rest of the team at Barker Claim Services. Brian and his team have an excellent reputation for maintaining strong relationships with its clients and delivering an exceptional level of service with local expertise.”
Brian Barker, president at Barker Claim Services, adds: “By investing heavily in technology and its people, Davies has been able to grow rapidly within the insurance market in North America over the last few years.
“Combining our regional expertise with Davies’ strong market presence and end-to-end insurance and risk management solutions will allow us to offer clients a bespoke service operation and strengthen our overall proposition.”
Captive insurance industry news | Marsh McLennan closes US$7.75bn deal on McGriff acquisition
Marsh McLennan has completed its acquisition of McGriff Insurance Services with a value of US$7.75 billion, funded through a combination of cash and debt financing proceeds.
Founded in 1886, McGriff provides commercial P&C insurance, surety, employee benefits, and personal lines insurance solutions to businesses and individuals across the US.
With the closure of the transaction, more than 3,500 McGriff employees will become part of Marsh McLennan Agency.
John Doyle, president and CEO of Marsh McLennan, comments: “We are thrilled to welcome the McGriff team to Marsh McLennan. Their deep specialty and industry capabilities will strengthen Marsh McLennan Agency’s value proposition and expand our reach in the growing middle market.”
Read Davis, CEO of McGriff, adds: “By joining Marsh McLennan Agency, our teammates gain access to expanded global resources and industry knowledge to build their career growth and bring innovative, actionable solutions to clients.”
Telematics, Driving & Insurance
Progressive Launches Auto Crash Detection Feature as Winter Safety Solution
[ED. NOTE: THIS IS A WATERSHED MOMENT IN AUTO INSURANCE. MUCH LIKE PROGRESSIVE'S INTRODUCTION OF SNAPSHOT SMARTPHONE BASED USAGE BASED INSURANCE IN 2008. NOW, REALTIME CRASH DETECTION, EMERGENCY RESPONSE AND ELECTRONIC FIRST NOTICE OF LOSS BECOMES A LONG AWAITED REALITY]
Progressive Insurance has launched Accident Response, a new safety feature available nationwide through its mobile app. The feature uses phone sensors to detect major accidents and automatically contacts the driver to offer assistance. If help is needed, users can request emergency services or tow trucks through the app or with a live agent. In cases of severe accidents without response, emergency services are automatically dispatched.
The feature's launch is timely as winter approaches, considering that 70% of US roads are in snow-prone areas, with over 116,800 people injured annually in crashes on snowy, slushy, or icy pavement. The service is free to use, though service costs depend on the customer's auto policy coverage. The feature is not available in California.
The launch of Progressive's Accident Response represents a strategic move in the competitive auto insurance landscape. This technology-driven feature addresses a important market need, particularly during winter months when accident risks increase significantly. The integration of crash detection and automated emergency response could potentially reduce claims processing time and lower operational costs through automation.
The service's automatic claim submission feature is particularly noteworthy as it streamlines the claims process, potentially improving customer satisfaction and retention rates. While there's no direct monetization of the feature itself, the long-term benefits include reduced claims severity through faster emergency response and improved risk management through data collection. This aligns with Progressive's historical focus on leveraging technology for competitive advantage in the insurance market.
Financial Results
State Farm reports Q3 results
[Ed.note: Ask yourself, how many companies can lose $14.1B, grow by some $7.5B while conveying a sense of success and stability? Meanwhile, #2 auto insurer, Progressive, adds 4.2 million policies in force (~3.3 million auto) and a 89% combined ratio in Q3 - game on]
State Farm released the Q3 2024 financial results for 12 of its P&C insurance carriers.
During the quarter, the group of companies reported a net underwriting loss of ~$4 billion, leading to an underwriting loss of ~$8.3 billion for the first nine months of the year. During the first nine months of 2023, State Farm reported a net underwriting loss of $12.5 billion.
State Farm’s auto carrier saw the biggest improvement, going from a loss of $8.2 billion in the first nine months of 2023 to a $3.3 billion loss for the same period this year. The auto carrier increased written premiums by ~$7.57 billion (18%) YoY to a total of $48.8 billion.
In 2023, State Farm had a combined underwriting loss of $14.1 billion across its P&C companies, but it ended the year with a net loss of $6.3 billion thanks to investment income and positive results from its life insurance business.
Awards
2024 Global Innovation Awards Winners Celebrate Breakthroughs in Genomics, Fire Prevention, and Climate Resilience | International Insurance Society
New York, New York – Nov. 18, 2024: The International Insurance Society (IIS), Insurance Thought Leadership (ITL), and Lloyd’s are proud to announce the winners of the 2024 Global Innovation Awards.
These awards recognize organizations for pioneering innovative solutions to critical challenges in insurance and risk management. Winners were honored at an awards ceremony on Nov. 18 at the Hyatt Regency Miami. The ceremony was a highlight of the Global Insurance Forum, held Nov. 17-19.