Risk Prevention: Consumers are ready for a more rapid digital approach to the insurance industry  March 15th 2023

Bain: Consumer expectations shift to risk prevention

According to Bain & Company's recently published report, Customer Behavior and Loyalty in Insurance: Global Edition 2023, consumers are ready for a more rapid digital approach to the insurance industry. The desire for streamlined and easy-to-use digital channels for simple insurance transactions was especially amplified by the pandemic, and telematics adoption is increasing as we see a shift in focus from risk protection to risk prevention. 

The report notes that the insurance industry has seemingly struggled to improve digital interactions as consumer behaviors and desires change, and that many insurance organizations are slow to provide customers with adequate, speedy digital tools for self-service processes, such as in digital claims. Failure rates in digital transactions, which are a direct result of slow adoption to digital self-service tools, are up to 31% in auto insurance, according to the Bain report.

The Return of the Regulators

The sudden banking crisis will usher in an era of stiffer regulation and may even slow the Fed's attack on inflation while lowering investment returns.

That whoosh you felt coming out of Silicon Valley on Friday and then out of Washington, DC, on Monday was the wind shifting on regulation. And you can expect the wind to keep blowing in the direction of stricter regulation for quite some time, likely years.

The collapse of Silicon Valley Bank could also cause the Fed to slow its aggressive raising of interest rates, which would complicate life for insurers. Their investment portfolios have been benefiting from the higher rates, and they've seen the increases in costs, such as for replacement parts, moderate as the Fed attacked inflation. Any change in interest rate policy could slow or even reverse those recent gains. 

Paul Carroll, editor-in-chief, Insurance Thought Leadership

What is the FDIC and how does it work?

The FDIC was created 90 years ago to help the U.S. navigate a catastrophe that put thousands of banks out of business. Its mission is to keep panic and turbulence from collapsed institutions like Silicon Valley Bank, the second-largest bank failure in U.S. history, from spreading through the financial system.

Now the agency is once again working to convince citizens and businesses that their money is safe, hoping to avert bank runs that would deepen the current banking crisis.

The FDIC is relying on one of its main tools — deposit insurance — to help that cause, announcing that every account will be fully backstopped, even if deposits are above its current $250,000 limit.

The U.S. takes emergency measures to protect all deposits at Silicon Valley Bank The FDIC exists to help the banking system cope with exactly this type of crisis: When it was created in 1933, some 4,000 banks had closed in the first few months alone.

The Hanover Releases Inaugural Sustainability Report

The Hanover Insurance Group, Inc. (NYSE: THG) today announced the release of its inaugural sustainability report, which focuses on its environmental, social and governance ("ESG") approach and strategy. The report highlights the company's long-term commitment to advance sustainability initiatives, inclusion, diversity and equity ("IDE") efforts and reporting, strong corporate governance, and socially and environmentally conscious business practices.

"Since 1852, The Hanover has consistently delivered on its promises to protect our customers, reflecting the dependability and reliability of our organization over the course of its long history," said John C. Roche, president and chief executive officer at The Hanover. "With the publication of this inaugural report, we're excited to provide a deeper look into the continued progress we have made in our sustainability journey and how our ESG strategy is aligned with driving increased value creation for our stakeholders. We believe that an integrated approach to sustainability, combined with good corporate citizenship and strong financial and operational performance, is fundamental to ensuring our organization's resiliency and long-term success. We look forward to providing periodic updates on our progress through this report as we build on this positive momentum in future years."

US commercial prices up 4.8% through Q4: WTW

US commercial insurance prices rose again in the fourth quarter of 2022, according to WTW’s Commercial Lines Insurance Pricing Survey (CLIPS), with the aggregate commercial price change measured at 4.8%.

The survey compared prices charged on policies underwritten during the fourth quarter of 2022 with those charged for the same coverage during the same quarter in 2021.

According to the survey, the 4.8% increase was slightly down from the rate of 5.2% that was reported in Q3 22.

Collision repair trends and their impact on insurance

Over the last several years, the collision repair industry has faced numerous challenges, including:

• keeping employees safe during the pandemic while remaining open and operating as essential businesses;
• managing parts and material shortages from supply chain disruptions;
• navigating staffing challenges;
• meeting a growing demand for training and tooling to support the repair of an increasingly complex vehicle fleet;
• and addressing the increasing demand among customers for a digitized experience.

These challenges have impacted the auto insurance industry, as well. Nearly 90% of the overall collision repair industry revenue is from insurance-paid work — where the customer has made an insurance claim — while the remaining 10% is consumer paid out-of-pocket with no insurance claim.

As claim counts and resulting repair volumes continue to build towards pre-COVID levels, industry-wide capacity within the collision repair industry is being pushed to the brink. According to surveys conducted by CRASH Network, nearly all collision repair shops reported significant increases in their backlog of work, with 85% reporting they are scheduling new work two weeks or more into the future. Both the percentage of shops reporting they have at least some backlog and the average number of weeks of backlog continue to remain at their highest points in the past six years (Figure 1).

Confirmed: Global floods, droughts worsening with warming

The intensity of extreme drought and rainfall has “sharply” increased over the past 20 years, according to a study published Monday in the journal Nature Water. These aren’t merely tough weather events, they are leading to extremes such as crop failure, infrastructure damage, even humanitarian crises and conflict.

The big picture on water comes from data from a pair of satellites known as GRACE, or Gravity Recovery and Climate Experiment, that were used to measure changes in Earth’s water storage — the sum of all the water on and in the land, including groundwater, surface water, ice, and snow.

“It’s incredible that we can now monitor the pulse of continental water from outer space,” said Park Williams, a bioclimatologist at the University of California, Los Angeles who was not involved with the study.

“I have a feeling when future generations look back and try to determine when humanity really began understanding the planet as a whole, this will be one of the studies highlighted,” he said.

Flood premium relief sought in reintroduced bill

A reintroduced bill seeks to provide certain homeowners affected negatively by the recent repricing of one form of disaster insurance with temporary relief.

The bill, the Homeowner Flood Insurance Transparency and Protection Act, proposes temporarily giving consumers with higher rates the option to revert to the previous pricing model until the Federal Emergency Management Agency takes certain actions.

Specifically, FEMA would need to provide more transparency into the "2.0" pricing model implemented in 2021, including information about the calculations used, an online database listing premiums, the publication of a "comprehensive assessment" of the new rates' social and economic impacts, and a public notice and comment period. The new pricing did not lift rates for all borrowers but did for many.

Sens. Bill Cassidy, R-La., and Cindy Hyde-Smith, R-Mo., are the bill's sponsors.