Commentary/Opinion
Lara’s reforms OK, but miss real problem
California’s second-largest home insurer, Farmers Insurance, recently announced it will boost the number of home-insurance policies that it writes here this year by 2,500. In a normal insurance market, that shouldn’t even be news. In California it was a major story because it signals the first sign of relief during a crisis that has seen top insurers fleeing our wobbly market.
Farmers specifically cited an improved insurance marketplace for its decision. “This is a positive step forward for California homeowners, renters, and businesses who have faced significant challenges accessing coverage,” said Insurance Commissioner Ricardo Lara. “While more work needs to be done, this is a clear sign our reforms are working.”
“More work to be done” is an understatement. A week later, Safeco announced it will no longer write renters’ and condominium policies beginning next month. Other insurance companies remain leery of California’s market even after Lara’s new reforms.
Those new rules allow home-insurance companies to use catastrophe models for rate setting in exchange for expanding their coverage, especially in wildfire-prone areas. They also require insurers to consider homeowners’ fire-hardening measures when setting rates. Lara also has approved a series of rate hikes. These long-awaited changes are helpful, but don’t address the core problem: California’s system of insurance regulation.
Consider the absurdity of the situation. Insurance companies are in the business of writing insurance policies. Yet they don’t want to write them here. State officials blame climate change and inflation, but the real problem is rooted in Proposition 103 — the 1988 ballot measure that gave the insurance commissioner power to approve rate hikes and mandate price rollbacks.
These are price controls, which lead to shortages. If insurance companies cannot set rates to reflect their risk, they stop writing policies rather than face exposure. The results: fewer policies and over-reliance on the troubled state-created insurer of last resort (the FAIR Plan)
News
Moody's adjusts global P&C insurance outlook to stable -
Ratings agency Moody’s has changed its outlook for the global property and casualty (P&C) insurance sector to stable from negative for 2025.
The stable outlook is driven by factors such as improved personal lines pricing adequacy, commercial lines pricing remaining supportive of healthy results, and the fact investment income is expected to remain strong.
Analysts at Moody’s explained that this change reflects their view that increases in the price of personal lines P&C insurance, particularly in the United States (Aaa, negative), United Kingdom (Aa3, stable), and some continental European countries, will be sufficient to offset rising claims costs.
It should be noted that while prices for some sectors of commercial lines P&C insurance have peaked, Moody’s analysts believe they will remain high enough to support strong results in this sub sector for at least another year.
The firm explained that reinsurance prices are unlikely to fall significantly, and attachment points remain stable, insurers will remain exposed to high-frequency, lower-severity natural catastrophes, resulting in some earnings volatility, although “their capital is well protected.”
Research
Focus Advisors and Romans Group report continuing consolidator, MSO growth
Two advisory firms report that while the collision repair industry is normalizing to pre-COVID conditions, vehicle repairs continue to be more complex and expensive as MSOs and private equity firms continue to sweep the market.
Focus Advisors Founder and Managing Director David Roberts recently reported that work in process (WIP) has decreased and labor rate increases are normalizing.
Revenues are flat or down for many shops, most dramatically within single shops. As in previous years, more and more single shops are closing, this year by an estimated 800, according to an overview of Roberts’ findings this year. Consolidators and MSO businesses grow due to a focus by larger shops on advanced repair technologies and operational efficiencies, which most often come from scale, according to Roberts.
“Independent MSOs with four to six shops — and especially those with seven or more — are not just surviving; they’re thriving,” Roberts said. ----------------------------------------------------------------------------------------------------------------------------------------------Romans Group found similar trends in its research, detailed in its annual white paper on the U.S. and Canadian collision repair markets.
Throughout 2023, a more aggressive group of mid-size private-equity-funded consolidators accelerated their single and multiple-location acquisitions and geographic diversity, according to the report.
“Investor confidence in the collision repair industry has been boosted by what some see as the outsized industry financial performance,” a press release from Romans states. “The collision repair space continues to deliver its long-term proposition of proven economics and growth supported by insurance industry-driven demand dynamics that create cash flow stability and profitability for many of the best operators.
Collision Repair Industry Saw Revenue Decline, Surging Consolidation in 2024 -
The collision repair industry underwent significant shifts in 2024, marked by declining revenues, rising shop closures and rapid consolidation among operators. These trends were the focus of a presentation by David Roberts, founder and managing director of Focus Advisors Automotive M&A, at the MSO Symposium, held in November in Las Vegas.
Roberts said that while the industry is returning to pre-COVID conditions, challenges such as fewer repairable vehicles and increasing vehicle complexity persist.
“To succeed in an industry where complexity and access to repairable vehicles are ever more challenging, operators with scale will continue to grow and thrive,” Roberts emphasized.
DECLINE IN SINGLE SHOPS, GROWTH FOR LARGER OPERATORS
Independent single-shop closures reached nearly 800 in 2024, a reflection of declining revenues and intensified competition. Conversely, medium and large multi-shop operators (MSOs) continue to thrive, particularly those with seven or more locations.
Consolidators screenshot Collision repair shop holdings by consolidators, as of Nov. 1, 2024.
“Independent MSOs with four to six shops -- and especially those with seven or more -- are not just surviving; they’re thriving,” Roberts pointed out.
The consolidation trend is evident in the expansion of major consolidators like Caliber Collision and Classic Collision. Caliber leads the industry with more than 1,800 locations and an aggressive growth strategy that combines acquisitions and new developments. Meanwhile, Classic Collision and Joe Hudson’s Collision Center have each grown their shop counts by more than 22% in 2024, focusing heavily on acquisitions.
Collaboration Between Automotive, Software Industries Bridge ADAS Repair Gap
we have all witnessed, ADAS is transforming the automotive industry, with features like adaptive cruise control, lane-keeping assistance and collision avoidance becoming standard across many vehicle models.
These systems enhance vehicle safety and functionality, but their complexity presents new challenges for collision repair technicians. Many techs struggle with identifying hidden ADAS components, understanding intricate recalibration requirements and keeping up with frequent updates from OEMs.
THE GROWING COMPLEXITY OF ADAS TECHNOLOGY
ADAS features are evolving rapidly, driven by automakers’ commitments to safety mandates and consumer demand. Systems such as blind-spot monitoring, automatic emergency braking, and forward-collision warnings require precise calibration. Even minor collisions can disrupt these systems, requiring recalibration to restore them to OEM standards.
Technicians face several challenges in dealing with ADAS-equipped vehicles:
Hidden Systems: Identifying embedded ADAS components can be difficult, especially when they are not visibly apparent.
OEM Requirements: Each manufacturer’s recalibration process varies, requiring technicians to access specific tools, targets, and controlled environments.
Frequent Updates: ADAS technology evolves rapidly, leaving technicians with outdated knowledge if training resources are insufficient.
Data Privacy
Senators rip into automakers for selling customer data and blocking right to repair - The Verge
The auto industry’s commitment to right to repair is being tested.
‘It is clear that the motivation behind automotive companies’ avoidance of complying with right-to-repair laws is not due to a concern for consumer security or privacy, but instead a hypocritical, profit-driven reaction.’
A bipartisan group of senators is calling out the auto industry for its “hypocritical, profit-driven” opposition to national right-to-repair legislation, while also selling customer data to insurance companies and other third-party interests.
In a letter sent to the CEOs of the top automakers, the trio of legislators — Sens. Elizabeth Warren (D-MA), Jeff Merkley (D-OR), and Josh Hawley (R-MO) — urge them to better protect customer privacy, while also dropping their opposition to state and national right-to-repair efforts.
“Right-to-repair laws support consumer choice and prevent automakers from using restrictive repair laws to their financial advantage,” the senators write. “It is clear that the motivation behind automotive companies’ avoidance of complying with right-to-repair laws is not due to a concern for consumer security or privacy, but instead a hypocritical, profit-driven reaction.”
U.S. Senators Mike Lee and Jeff Merkley Introduce the Auto Data Privacy and Autonomy Act
Senators Mike Lee (R-UT) and Jeff Merkley (D-OR) have introduced the bipartisan Auto Data Privacy and Autonomy Act, legislation to restore vehicle owners’ control over their personal data in an era of rapidly advancing automotive technology.
With connected vehicles projected to make up 95% of all new vehicles on the road by 2030, this bill ensures Americans retain the right to privacy and autonomy over their vehicle data. Representative Eric Burlison (R-MO) leads the companion bill in the House.
“Ownership should mean control,” said Senator Lee. “Americans deserve to decide who has access to their personal data and how it is used—whether they are driving to work, harvesting crops, or operating machinery on a construction site. This bill empowers individuals to regain control of their vehicle data and restores transparency to a system that has left too many in the dark.”
2025 PREDICTIONS
2025 Underwriting Profit and ‘Shop-a-Palooza’ Predicted for Auto Insurance
2024 was another tough year for personal lines insurers and their customers.
In this space in late 2023, I wrote that seven of the 10 most read articles of 2023 were about the impacts of inflation and weather on auto and home loss costs, and personal lines insurers’ strategies to react to them.
Throughout 2024, articles about auto and homeowners insurance trends—or the results of personal lines insurers—still dominated the most-read articles list. Six out of the 10 most-viewed news articles published by Carrier Management this year are about those topics, including the top four.
- 1 State Farm Underwriting Loss Climbs to $14B (March)
- 2 GEICO’s ‘Eye-Popping’ 2023 Insurance Profits, Falling Employee Counts (February)
- 3 AM Best Downgrades State Farm General Ratings (March)
- 4 Why Homeowners Insurers Are Losing Money: Roofs Matter, Not Just Rates (October)
(Editor’s Note: The top 10 articles, based on reader views, make up the balance of the Dec. 31, 2024 Carrier Management Daily newsletter. The full list also appears at the bottom of this article, including articles about commercial liability insurance trends and technology.
Susanne Sclafane, Executive Editor, Wells Media Group
2025 Workers’ compensation trends to watch
The average age of U.S. workers is ticking higher, according to the Bureau of Labor Statistics (BLS).
Roughly one in four U.S. workers will be 55 or older by 2033, the BLS reported. Just over 15% of U.S. workers were 55 and older in 2003. During the next 20 years, the BLS predicts a 117% spike in both the 65 and older and 75 and older age groups.
“As the average age of workers increases, there is a higher incidence of chronic health conditions and comorbidities, along with an increased likelihood of workplace injuries and longer recovery times,” McGowan Program Administrators said in a December 2024 report. “Workers’ compensation programs must implement tailored safety programs and ergonomic solutions, focusing on preventive care and health maintenance. These measures are essential to support older workers in maintaining their health and productivity, ensuring a safer and more efficient workplace.”
At the same time, technology and the gig economy will continue shaping workers’ comp as innovations like AI and telemedicine impact the customer experience from underwriting and claims processes, to offering immediate access to medical professionals for injured workers.
Meanwhile, a 2024 survey of global executives showed 23% cited employee risk as their chief concern, higher than any other business risk. From the same survey, 42% of global executives believe they operate in a high risk environment compared to 31% in 2023.
Looking ahead to 2025, there is potential for an uptick in workers' compensation costs despite a softer market. Data compiled by Risk Strategies shows wage inflation, reduced rates and increased size of primary claims could lead to premium increases.
2025 Executive Outlook | Valerie Lavoie, Desjardins General Insurance Group
Communities across our country have felt the severe impacts of climate change, and the need for climate resilience and mitigation remains our industry’s top priority, as we continue to face catastrophic loss.
Too many Canadians have had to deal with the emotional and financial strain of losing a home, or the anxiety of evacuating from their community. This is why we are taking action to help prevent and prepare for future climate-related events.
Catastrophic weather events have presented us with one of the costliest years recorded and the financial impacts are felt through clients across the country. We want to see diverse voices contributing to effective policy and smart investment. The launch of Canada’s first National Adaptation Strategy was welcome news. And industry leaders have applauded the federal government’s commitment to a low-cost national flood insurance program. I look forward to seeing more operational funding.
Predictions, Wishes and the P&C Industry in 2025
Here we offer up our insights on the outlook for 2025
by: Stephen Applebaum and Alan Demers
Aside from predictions it is certain that the P&C industry faces some uncontested headwinds. Unprofitable commercial auto, a battered homeowner line, the mounting “brain drain” talent loss, lingering inflationary pressure, growing social inflation, a climate exposure wild card and more. Higher premiums are masking expense ratios at present and stability will once again reveal demand for efficiency gain through automation and insurtech innovation, stymied over the last 18 months.
Yet, we remain optimistic as underwriting profitability returns. COMPLETE ARTICLE
Stephen Applebaum and Alan Demers
Commercial insurance issues to watch in 2025
The commercial insurance market is predicted to reach $933.91 billion in 2024, according to the latest data from Market Research Future.
Market drivers include increasing regulatory compliance requirements, growing complexity of business operations and rising frequency and severity of natural catastrophes, the report showed, with machine learning and artificial intelligence now changing how risks are evaluated and underwritten, leading to correct prices and quicker claims settlement.
The use of innovations like telematics in commercial auto insurance is revolutionizing risk management while personalizing coverages for carriers and their customers. In 2024, 82% of commercial auto insurers used telematics in their organizations after just 65% utilized the technology in 2023. Also in 2024, 60% of commercial insurers formed dedicated, multi-disciplinary telematics teams, with Loss Control being the most represented area.
Meanwhile, an increase in claims is predicted for commercial lines in workers’ compensation as the average age of U.S. workers rise. Roughly one in four employees will be 55 or older by 2033, according to the Bureau of Labor and Statistics (BLS).
Over the next 20 years, the BLS predicts a 117% spike in both the 65 and older and 75 and older age groups.