Commentary/Opinion
Bumps Ahead as Disruption Drives Changes in Auto Insurance
Executive Summary
Concerning trends in commercial auto make it urgent for insurers to embrace technology that will decrease accidents and make insurance pricing more commensurate with evolving risk, the head of Waymo's Risk and Insurance practice told Carrier Management.
Here, Tilia Gode and several other experts weigh in on the benefits and challenges ahead for auto insurers looking out at a landscape that includes, autonomous vehicles, OEMs distributing insurance and wider use of telematics data.
Martin Spit, principal EY-Parthenon, Ernst & Young LLP US and EY Americas Insurance Strategy and Transactions Leader, and Sulait Das, senior director, Americas
Increased demand for reinsurance, “particularly for property risks in areas with intensifying Nat Cat exposures.” - Monica Ningen
Reinsurance no longer just a ‘shock absorber’
This year’s conference circuit has spotlighted key trends shaking up the insurance industry. From the growing impact of data and AI to rising losses from extreme weather, carriers are increasingly focused on safeguarding their portfolios while staying ahead of rapid innovations.
The result, according to Monica Ningen, Swiss Re’s CEO of US P&C reinsurance, is an increased demand for reinsurance, “particularly for property risks in areas with intensifying Nat Cat (natural catastrophe) exposures.”
This demand is driven by higher property values, urbanization, inflation, and rising construction costs, especially in high-risk catastrophe areas, said Ningen. “Insurers are looking for reinsurance solutions that can help manage capital volatility and support growth, especially in sectors like renewable energy and construction,” she said.
The carrier landscape is evolving – and so is reinsurance
One of the key themes that has emerged from her engagements with clients in the US is the shift in the primary policy landscape. Beyond rate increases, there’s a focus on exposure management, policy limits, deductibles, and even implementing actual cash value on roofs.
At the same time, carriers are working closely with insureds to verify that homes remain insurable.
“Insurers are having productive discussions with agents and policyholders about roof age and insurability, which I believe will lead to a healthier market, particularly in the regional and mutual space,” said Ningen.
News
Commercial rate hikes largely hold steady in third quarter
Average commercial insurance annual renewal premiums increased 5.1% in the third quarter, a marginal deceleration from the 5.2% increase in the second quarter, according to the latest Council of Insurance Agents & Brokers pricing survey released Tuesday.
Umbrella liability was the only line to see higher increases in the quarter, rising to 8.6% from 7.2% in the prior quarter.
Commercial auto increased 8.5% in the third quarter, compared with 9% in the second; commercial property rose 7.9%, compared with 8.9%; general liability rates were up 4.8%, compared with 5.1%; and workers compensation rates declined 1.4%, compared with a 2.2% drop.
Among various specialty lines, directors and officers liability rates fell 1.9%, compared with a 1% decrease in the second quarter; cyber liability rates were down 1.5%, compared with 1.7% decline; employment practices liability rates rose 0.3%, compared with a 0.1% decrease; and medical malpractice rates rose 1.6%, compared with 1.5% increase.
By account size, medium-sized accounts saw 5.6% increases, compared with 5.1%; large accounts were up 5.3%, compared with 5.4%; and small accounts were up 4.4%, compared with 5%.
Climate/Resilience/Sustainability
IBHS releases updated resilient construction standards
The Insurance Institute for Business & Home Safety (IBHS) today released the 2025 FORTIFIED Home™, FORTIFIED Commercial™ and FORTIFIED Multifamily™ construction standards. All three standards are updated periodically to align with building codes and design standards. Since its inception in 2010, the FORTIFIED program has set the benchmark for beyond-code construction and re-roofing, designed to reduce storm damage by strengthening areas of homes, commercial buildings and multifamily properties typically vulnerable to high winds and heavy rain.
In the updated standards, the requirements for a FORTIFIED Roof™ designation in inland areas will be more consistent with requirements in hurricane-prone areas. All FORTIFIED roof decks will now have the tighter nailing pattern, and all roof-mounted vents will have to meet testing standards showing they prevent wind-driven rain from entering a building. These requirements, which have proven effective against hurricanes, will increase performance of residential and commercial structures as well as reduce the risk of damage from severe convective storms, including derechos, tornadoes and straight-line winds.
"When we looked at the recent severe weather events that impacted inland states, we realized much of the interior damage could be reduced by strengthening the roof system," said Fred Malik, managing director of FORTIFIED. "Our market research found materials and methods long used on the coast to prevent damage are now consistently available in inland markets, so it is the right time to make this shift."
S&P Global Market Intelligence Has Released a Report Exploring How Climate Change and Extreme weather are Reshaping the Insurance Industry
S&P Global Market Intelligence has released a report today showing how evolving natural catastrophe risks due to climate change are forcing insurers to reevaluate their relationships with each other and the world at large. The newly published Evolving Natural Catastrophe Risks report is part of S&P Global Market Intelligence's Big Picture 2025 Outlook Report Series.
In this new report, S&P Global Market Intelligence's climate, insurance and industry experts highlight how secondary perils like floods, fires and severe convective storms — as distinct from the insurance industry's peak perils of tropical cyclones and earthquakes — are now making up a larger portion of catastrophe losses in recent years. Insurers and reinsurers are used to picking up the tab for natural catastrophes, but the increasing frequency and severity of mid-sized events and hurricanes hitting previously unaffected areas has led to an overhaul of the industry's approach to those payouts.
"The insurance industry has often acted as an early warning system for individuals and industries looking to understand and mitigate future risk. With climate change expected to increase the severity and frequency of natural catastrophes, understanding this altered risk environment is paramount. Insurers have been beating the drum on a variety of climate change risks for many years so their current focus on extreme weather should be a cross-industry concern," said Raymond Barrett, lead author of the report at S&P Global Market Intelligence.
To request a copy of the Evolving Natural Catastrophe Risks report please contact
Research
Road Risk Alert: Distracted Driving is 18% Higher on Thanksgiving - Cambridge Mobile Telematics
Thanksgiving is one of the busiest travel times of the year, with millions of people driving to visit family and friends. It’s also one of the periods with the highest levels of distracted driving.
A new CMT analysis reveals a significant increase in distracted driving throughout Thanksgiving week. It peaks on Thanksgiving Day, with distraction hitting 18% higher rates than the typical Thursday in November. Speeding skyrockets 100%.
These elevated levels of distracted driving, even for one day, will cause hundreds of additional crashes and injuries.
But Thanksgiving isn’t the only day that sees elevated distraction levels — it increases throughout the week.
Higher levels of distraction start on Monday and Tuesday, with 1.5% and 2.9% increases. The Wednesday before Thanksgiving is a busy travel day and sees a 7% rise in distraction. Distraction peaks on Thanksgiving Day and remains high at 9% on Black Friday. By Saturday and Sunday, distraction levels gradually return to normal.
US Faces Growing Crisis Over High Traffic Deaths, NTSB Chair Says
The United States must address a growing public-health crisis over traffic deaths that remain significantly higher than pre-pandemic levels, the head of the National Transportation Safety Board said on Tuesday.
“Unlike most developed nations, U.S. roadways have grown more deadly over the last several decades,” NTSB Chair Jennifer Homendy said at a board meeting on its probe into a 2023 vehicle crash that killed six people. “By raw numbers, the U.S. has more motor-vehicle deaths than any other developed country. We also have the highest death rate.”
LexisNexis Insurance Demand Meter – Trends from Q3 2024
In Q3, quarterly year-over-year growth for U.S. auto insurance policy shopping and new policy volumes was full steam ahead. For the second consecutive quarter, both categories landed in “Nuclear” territory on the Demand Meter; however, Q3 market activity pushed the upper limits of this designation.
The quarterly year-over-year growth rate for auto policy shopping clocked in at 31.2%, up from the previous quarter’s 16.1% reading, and quarterly year-over-year new policy growth rose to 25.9%, up from Q2’s 19.5% number.
Shopping and new policy volumes became even more explosive in Q3 as some insurers continued to implement rate increases to attain profitability while others reignited marketing programs to attract consumers looking to mitigate the rate increases in their auto and home policies. This created a perfect storm of elevated activity.
Who’s Shopping?
- In the third quarter, shopping rates in the Direct distribution channel jumped a whopping 67%.
- Rate increases continued to force the 66+ age demographic into the market, and shopping among preferred and long-tenured customers also continued their upward trajectories; preferred shopping increased 35%, and high survivability customers topped out at 40%.
Telematics, Driving & Insurance
GM Collision Assistance App Contacts Driver at Accident Scene, Helps Them Choose Repair Shop
Crash detection data from GM's new app could also be used by insurance companies and auto body shops to speed up the repair process and capture business.
GM’s John Eck said the company’s new app can contact customers at the accident scene and help guide them through the process -- including potentially choosing a GM-certified body shop.
When the number of automakers offering collision shop certification programs began to grow more than a decade ago, shops foresaw automakers playing a much larger role in a driver’s decision where to have their vehicle repaired after a crash. After all, automakers had access to vehicle telematics data that could detect a collision and enable the automaker to contact the driver ahead of that customer even contacting their insurance company.
That’s been happening on a limited basis with some automakers, but it took a big step forward in recent weeks. A new General Motors mobile app can now contact drivers after an accident to assist them at the scene and help guide them to a GM-certified collision repair facility.
InsurTech/M&A/Finance💰/Collaboration
Top insurtech funding rounds, October 2024 | Digital Insurance
There were about 60 funding events in the insurtech sector in October, according to a review by Digital Insurance.
What follows is a selection of these, focusing on those in the insurtech and property & casualty sectors that are part of the venture-capital financing model. (Other funding events, such as private-equity infusions, are included in the overall count.)
Digital Insurance Staff
Federato announces $80 million raised to bring RiskOps to insurance
New capital will drive continued global expansion to bring more insurers into the AI era
Federato, the AI-native underwriting platform for insurance, announced today that it has raised a total of $80 million, including its latest Series C funding round. The $40 million round was led by global private markets investor StepStone Group (NASDAQ: STEP), with participation from existing investors, including Emergence Capital, Caffeinated Capital and Pear VC, who together represent over $200 billion in combined assets under management.
"We have been closely following Federato's rapid growth over the past five years as an LP in several organizations who have been investors in the company since inception. Founders Will and William's deep expertise in AI and their dedication to bringing a true vertical AI product to the insurance industry is impressive. Federato's fast-growing customer base is a testament to the impact they've already delivered," said John Avirett, Partner at StepStone Group. "We are excited to partner with Federato as they help insurers innovate on business models to better serve challenged markets."
People
NAIC Officers Elected for 2025
On November 19, 2024, Members of the National Association of Insurance Commissioners (NAIC) elected their 2025 officers at the conclusion of the NAIC Fall National Meeting in Denver, Colorado.
Here are the 2025 NAIC officers:
- President: North Dakota Insurance Commissioner Jon Godfread. Jon Godfread was first elected Commissioner of the North Dakota Insurance Department on November 8, 2016, and was re-elected for a third term on November 5, 2024.
- President-Elect: Virginia Insurance Commissioner Scott A. White. Scott A. White was appointed Commissioner of the Virginia Bureau of Insurance effective January 1, 2018.
- Vice President: Rhode Island Department of Business Regulation Director Elizabeth (Beth) Kelleher Dwyer. Beth Kelleher Dwyer was appointed Superintendent of Insurance on January 11, 2016, and named Director of the Rhode Island Department of Business Regulation in May 2023.
- Secretary-Treasurer: Utah Insurance Department Commissioner Jon Pike. Jon Pike was named Commissioner of the Utah Insurance Department effective January 5, 2021.
The newly elected officers will assume their duties on Jan. 1, 2025.
NAIC Members also elected 2025 zone officers during the Fall National Meeting. The NAIC is organized into four geographical zones, and within each zone, three officers are elected annually by the respective zone members.