Editor's Note
If you are like us, you woke up today and immediately searched for updates on the greater L.A. wildfires. As an insurance industry insiders we have been watching closely and have shared numerous industry articles and stories about the CA insurance market throughout last year up through today.
This is also an unfolding story that is difficult to watch but even harder to get away from as it matters to all Americans. It's very easy to feel helpless from afar wondering how, if anything, can be done to help. But you can make a difference.
As long-term supporters of the American Red Cross recognizing there are tremendous human needs from everyday events and even more each time there is a significant emergency like what is happening in Southern California today.
The American Red Cross mission: prevents and alleviates human suffering in the face of emergencies
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Los Angeles Wildfire Crisis
Economic loss from LA wildfires could reach $150 billion: Report
Total damage from the devastating wildfires scorching Southern California could amount to between $135 billion to $150 billion, according to AccuWeather, a private company specializing in weather data.
The wildfires were previously estimated to cost around $50 billion, $10 billion of which is expected to be insured, according to JPMorgan.
As homeowners try to recover from the fires, they could face challenges. Many homeowners in California have already experienced difficulty getting insurance, and some have had their insurance canceled.
Last summer in Pacific Palisades, 70% of State Farm customers, about 1,600 homeowners, lost coverage when the insurer dropped policies in and around the Santa Monica mountains.
The Insurance Crisis That Will Follow the California Fires | The New Yorker
For years, experts have warned that homeowner insurance in the state could easily collapse.
Last week, on the day before New Year’s Eve, California’s insurance commissioner, Ricardo Lara, announced what his office called “a landmark regulation” to improve access to coverage. The new rule, the commissioner declared, would address the problems that California homeowners were facing in the present and, at the same time, build “a resilient insurance market for the future.”
Then the Palisades Fire ignited, soon to be followed by the Eaton Fire, the Hurst Fire, the Lidia Fire, and the Sunset Fire. With damages from these still mostly uncontrolled blazes now estimated at up to a hundred and fifty billion dollars, the future of California’s insurance market is looking a lot more rocky than resilient.
As one L.A.-based insurance agent put it to the Wall Street Journal, “We are in uncharted territory.”
What is often referred to as California’s “insurance crisis” has been years in the making. The devastating Camp Fire, near Chico in 2018, caused an estimated sixteen and a half billion dollars’ worth of damage and led to a net loss for companies that had written fire policies in the state that year. In 2019, the number of homeowners’ policies in California that were not renewed jumped by more than thirty per cent.
Insurance commissioner issues moratorium on home policy cancellations in fire zones
California Insurance Commissioner Ricardo Lara has issued a moratorium that bars insurers from canceling or non-renewing home policies in the Pacific Palisades and the San Gabriel Valley's Eaton fire zones.
The moratorium, issued Thursday, protects homeowners living within the perimeter of the fire and in adjoining ZIP codes from losing their policies for one year, starting from when Gov. Gavin Newsom declared a state of emergency on Wednesday.
The moratoriums, provided for under state law, are typically issued after large fires and apply to all policyholders regardless of whether they have suffered a loss.
Triple-I Media Advisory: California Property Insurers Helping Customers Recover from Devastating L.A. Wildfires
California property insurers are acting as financial first responders to help their impacted customers recover from the wildfires devastating the metro Los Angeles area, according to the Insurance Information Institute (Triple-I).
California insurers are providing immediate relief to wildfire victims through additional living expenses (ALE) coverage for displaced policyholders.
This includes providing immediate relief through additional living expenses (ALE) coverage for displaced policyholders. Losses to property and vehicles will be covered up to the limits contained within an insurance policy.
Please note that California regulations require property insurers to immediately pay policyholders a minimum of one-third of the estimated value of their personal belongings and a minimum of four months’ worth of rent for the local area in which they live.
Triple-I offers the following insights on what’s typically covered
Los Angeles wildfires burn through the insurance industry
Southern California is battling multiple wildfires, particularly in the Pacific Palisades region of Los Angeles, fueled by dry conditions and powerful Santa Ana winds.
“It is safe to say that multiple thousands of structures will ultimately be impacted based on preliminary estimates of what has transpired thus far,” said Josh Darr, global head peril advisory for Guy Carpenter. “How many ultimately depends on containment of these fires which remains at zero percent late Wednesday afternoon under hostile firefighting conditions.”
Further highlighting the severity of the Palisades fires, CoreLogic’s senior hazard scientist Dr. Tom Jeffery pointed out that winds have reached exceptionally high speeds of 50 to 60 mph and beyond. “This not only drives the fires and embers but also inhibits flying the tanker aircraft and helicopters used to suppress the fires,” he shared.
Yet the worse may be to come as the area is likely to struggle to pick up the pieces in the face of limited insurance capacity.
Commentary/Opinion
Unavailable and unaffordable coverages – can insurers overcome them?
The increasing problem of unaffordable and unavailable insurance has severely impacted some insurance lines. According to global industry stakeholders, the result is rising numbers of under-insureds in advanced economies. This can leave brokers with the difficulty of balancing customers’ insurance needs against the reality that finding coverage may not be possible.
However, a report by the Geneva Association has indicated strategies insurers can adopt to make insurance offerings more inclusive and close protection gaps.
Inclusive Insurance in Advanced Economies, published in November, surveyed 28,000 households across seven advanced economies including the United States, the UK and Japan. The examination found significant protection gaps impacting key insurance lines including property, motor and health.
Insurance challenges in advanced economies
Kai-Uwe Schanz (pictured above), the author of the report, suggested that many advanced economies are experiencing similar insurance challenges.
“As in other parts of the world, in Australia, too, insurance premiums for properties in high-risk areas – like flood-prone regions or bushfire zones - have skyrocketed and hundreds of thousands of homes could become ‘uninsurable’ by the end of the decade,” said Schanz, director of social and financial inclusion.
Schanz said unavailability can be a significant issue when insurers lack the data to assess a risk profile or risk pools may be too small for effective mutualisation.
Will California homeowners relocate or rebuild? Both are costly
Tens of thousands of California residents will decide whether to permanently relocate or rebuild their homes after the most destructive fires in Los Angeles’ history.
Insurance companies may cover thousands of dollars in temporary housing and living expenses — unless homeowners are underinsured or not covered.
California’s insurance is in crisis. The solution will cost homeowners a ton
“The policy is generally going to cover the cost of additional living expenses while you are out of your home, to maintain what is kind of your usual standard of living,” said Karen Collins, the vice president of American Property Casualty Insurance Association’s property and environmental division.
For example, if someone’s insurance covers $100,000 for a property, the insurance company might cover another $20,000 — or 20% — in additional living expenses, Collins said.
Peter Vanek, president of PVRK, a Southern California-based real estate consulting company, said his home was destroyed by a battery fire in 2023. His insurance initially estimated $350,000 for the house. After Vanek provided evidence of what was lost, his insurance paid twice as much, including living expenses while he relocated, and the house was rebuilt.
To relocate or rebuild?
Insurance coverage plays an outsized role in the decision to move or invest resources into reconstruction. For some with insurance, it could boil down to having pictures of the property before the damages and updating insurers with home estimates.
“(Homeowners) might not have disposable income to cover the difference between whatever their insurance is going to cover and what their cost is to rebuild their home, replace all of their items,” Vanek said.
The current wildfires in Los Angeles County are the costliest and most destructive in its history. The insured losses could exceed $20 billion, according to a report by JPMorgan Chase.
InsurTech/M&A/Finance💰/Collaboration
Alacrity Solutions Agrees to Strategic Transaction for Long-Term Growth as a Leader in the Claims Management Industry
Company Partners with Leading Investment Firms to Support Continued Growth and Investment in Innovation
Operations Continue in Ordinary Course as Company Works to Close Transaction
Alacrity Solutions Group, LLC and its affiliates (“Alacrity Solutions” or the “Company”), a leader in insurance claims management services in North America, today announced that they have entered into a definitive agreement with its existing financial partners on a strategic transaction that will strengthen the Company’s capital structure and provide new financing (the “Transaction”).
“This strategic transaction will reinforce Alacrity Solutions’ financial foundation and accelerate its trajectory of growth and success”
The Transaction demonstrates the confidence of the Company’s financial partners in Alacrity Solutions’ management team, strategic vision, and mission to provide best-in-class services in the claims management industry.
“Today’s announcement marks a significant stride forward for Alacrity Solutions,” said Jim Pearl, Chief Executive Officer. “We are building a stronger financial foundation that positions Alacrity Solutions to continue serving as a leader in the claims management industry to our valued carrier customers well into the future. We move forward well-equipped to strategically invest in growth by driving technological innovation and expanding our platform through new strategic acquisitions and organic growth initiatives. We are encouraged by the support of our financial partners and look forward to continuing on this path of progress and growth.”
"This strategic transaction will reinforce Alacrity Solutions’ financial foundation and accelerate its trajectory of growth and success,” said David Barse and Mike Wartell, Independent Directors, Alacrity Solutions. “The Board of Directors has the utmost confidence in the Company’s ability to advance its industry leadership, and we look forward to continuing to work with Alacrity’s financial partners and management team to drive innovation and achieve sustained expansion in the years ahead.”
The Company anticipates closing the Transaction in the first quarter of 2025. As the Company works to finalize the Transaction, operations remain unaffected.
NYSIF Launches Insurance Innovation Program - FinTech Futures: Fintech news
The New York State Insurance Fund (NYSIF), the state’s largest non-profit workers’ compensation insurer, today launched the Insurance Innovation program. NYSIF is committed to staying at the forefront of the technological capabilities that enhance customer experience, improve operational efficiency, and support innovation within insurance product development.
NYSIF has prioritized the customer experience for injured workers, policyholders, and healthcare providers in all aspects of the workers’ compensation and disability benefit delivery. This includes the launch and expansion of the NYSIF Claim Mobile app, the small business support team, and the climate action premium credit program for hospitals. These innovations enable NYSIF to pay injured workers faster, prioritize safety services for business, and deliver a first-rate client service experience for policyholders.
NYSIF Executive Director and CEO Gaurav Vasisht said, “NYSIF is committed to leading the workers’ compensation and disability insurance industry through innovation and customer experience. The Innovation Program will continue to raise the bar as we evolve our delivery of insurance products and meaningful solutions for injured workers.”
To kick-off the Innovation Program, NYSIF has announced the release of a Request for Information (RFI), designed to reimagine insurance solutions. The final date for submission of responses is January 27, 2025, where organizations are invited to share insights, solutions, technologies, and strategies that align with NYSIF’s vision of leading continued innovation and excellence within the insurance industry. Innovators interested in joining the program must submit their applications via email to contracts@nysif.com.
AI in Insurance
An AI Inflection Point for Insurtech - William Blair
While the need for insurers to embrace advanced AI tools is arguably greater than it is in most industries, companies in the space have lagged in the use of those tools. But the technology needed to deliver cutting-edge solutions across the insurance ecosystem appears to have finally arrived.
Insurance has historically been reluctant when it comes to innovation, but the proliferation of more modern core policy admin systems means carriers and insurance software providers now have ready access to data needed to help train and refine LLM models. Old data siloes can now be torn down and analyses across carriers’ holistic—and massive—datasets are possible. These analyses have the potential to help power the next wave of insurance software platforms that through AI address—in a variety of ways—the greatest threats facing insurance carriers: increasing personnel expenses, an aging workforce, and mounting risk frequency, severity, and losses driven by catastrophic events.
Further, insurance carriers have finally begun to embrace cloud software deployments. These deployments—particularly multitenant public cloud deployments—are critical for hosting AI applications due to their scalability, flexibility, and a cost-effective pay-as-you-go model. Cloud systems also provide greater interoperability in support of more efficient underwriting and improved risk management. While still not as advanced in cloud adoption as most vertical software markets, insurance’s steady increase in cloud deployments makes it easier for software platforms to roll out AI solutions across the insurance industry.
Awards
CCC Intelligent Solutions Receives CIECA’s Electronic Commerce Company of the Year Award | CCC Intelligent Solutions
Award Recognizes CCC’s Leadership in Promoting CIECA Data Standards and Advancing Secure Exchange of Information Across Collision Repair Industry*
CCC Intelligent Solutions Inc. (CCC), a leading cloud platform powering the P&C insurance economy, announces today that it has been recognized as the Electronic Commerce Company of the Year by the Collision Industry Electronic Commerce Association (CIECA). This award highlights CCC’s leadership in promoting the adoption of CIECA data standards and its role in advancing the secure exchange of information across the collision repair ecosystem.
“CCC has been a longtime CIECA member and a strong supporter of standards in the industry,” said Paul Barry, CIECA’s executive director. “CCC’s commitment to CIECA and their help in attracting new members has been a critical part of CIECA’s success.”
As a founding member of CIECA, CCC has played a key role in advancing industry standards that enable secure, efficient data exchange and drive interoperability across the collision repair ecosystem. The company’s CCC Secure Share™ network is a leading example of how the CIECA Business Message Suite (BMS) standard can work to enable repairers to securely share data with third-party applications. The BMS standard protects sensitive data while giving repairers control over the information they share, improving communication between insurers, repairers and other industry stakeholders. Secure Share has more than 60 companies leveraging the network to securely exchange information with industry partners.
“At 3M, we focus on working seamlessly and securely with collision repairers," said Global Digital Solutions Leader Nic Echeverri at 3M. "CCC's use of the CIECA BMS standard allows repairers to share only the necessary information with third parties securely, giving them control and protecting sensitive data. This efficient and secure data exchange reduces manual data entry, promotes transparency, and helps us provide the right products and support, reinforcing our commitment to excellence in the collision repair industry.”