Today's Headline
Insurance leaders driven to close $1.8 trillion protection gap
Natural catastrophes caused $368 billion in losses last year — and 60% of those were uninsured.
Most uninsured properties are located in areas where insurance in unavailable or unaffordable. Among insurance executives, 78% believe the industry has an ethical obligation to close the $1.8 trillion global protection gap, according to a new survey from Economist Impact and SAS.
The protection gap — the difference between insured and uninsured losses worldwide — also represents a “significant” business opportunity according to 76% of those surveyed.
Climate change is driving an increase in catastrophic fires, flooding, storms and earthquakes, causing $368 billion in global economic losses last year. Of those losses, 60% were uninsured.
Most uninsured properties are either located in high-risk areas where insurance is unavailable or unaffordable. Trust is also at issue.
"Three-quarters [77%] of insurance leaders identify lack of trust in the industry as a significant barrier to closing the protection gap, and it's no wonder why," said Franklin Manchester, principal global insurance advisor at SAS, in a statement. "As carriers retreat from disaster-prone areas and data privacy violations are revealed, insurers must act decisively to regain consumer and regulator confidence.”
Financial Results
State Farm® Announces 2024 Financial Results
“After another year of catastrophe events, State Farm was there to help our customers recover from the unexpected and will continue to do so as we focus on our customers impacted by the devastating wildfires in California. As of February 26, we’ve received more than 11,750 total fire and auto claims related to the fires and have paid nearly $2.2 billion to our customers,” said Senior Vice President, Treasurer and Chief Financial Officer Mark Schwamberger. “Our customer-centered approach leads us to measure success in the number of promises kept. The financial strength of each affiliate is critical to our ability to keep those promises, and we will continue to take a state-specific approach in the way in which we operate.”
- The net worth for State Farm Mutual Automobile Insurance Company ended the year at $145.2 billion compared to $134.8 billion at year-end 2023.
- The State Farm P-C group of companies reported earned premium of $103.0 billion and a combined underwriting loss of $6.1 billion. This result compared to an underwriting loss of $14.1 billion on earned premium of $87.6 billion in 2023.
- The 2024 underwriting loss, combined with investment and other income of $6.0 billion, resulted in a P-C pre-tax operating loss of $111 million, which compares to the $8.5 billion loss reported in 2023.
- Total revenue, which includes premium revenue, earned investment income and realized capital gains (losses) was $123.0 billion for 2024 compared to $104.2 billion for 2023.
- State Farm reported a net income of $5.3 billion in 2024 compared to a net loss of $6.3 billion in 2023. The reported net income for 2024 includes the impact of $3.0 billion of realized capital gains, net of tax.FULL RELEASE
GM National Insurance Company shares 2024 results
GM National Insurance Company, the licensed carrier that’s part of General Motors, published its 2024 results, the first full year in business.
The company generated ~$20 million in written premiums across 12 states.
The carrier posted a net underwriting loss of $58 million, mainly attributed to underwriting expenses. Loss ratio (loss and loss adjustment expenses) was 177.5% for the year.
News
CEO of State Accident Insurance Fund Corporation has house riddled with gunfire
An Oregon insurance executive’s home was struck by gunfire last week in what authorities are investigating as a targeted attack. The shooter remains at large.
Police in Lake Oswego, a city near Portland, reported that multiple shots were fired at the residence of Chip Terhune, the president and CEO of State Accident Insurance Fund Corporation (SAIF), in the early morning hours of February 21. Security footage captured a suspect near the property, dressed in dark clothing and possibly wearing a hoodie or ski mask. Officials believe the shooter fled in a nearby vehicle.
Following the attack, Terhune revealed in an internal company-wide email that he had received a threatening message from someone claiming responsibility for the shooting. "We have received an email threat purporting to be the person(s) responsible. Although it does not target any specific employee, the email references knowledge of employee and relatives' names and addresses," he wrote. He advised SAIF employees to be cautious and remain aware of their surroundings.
Commentary/Opinion
P&C INSURANCE: MIND THE GAP(S)
The expression 'Mind the Gap' dates to the 1960s when it was first announced on the London Underground. The purpose was to warn passengers of the potentially dangerous gap between the train door and platform which are not perfectly aligned. It has since evolved to become a general warning about the danger of open space or gap between two points.
It applies especially well to the many risks and headwinds faced by the insurance industry today. And if unattended, may be irreversible or much harder to close.
The P&C industry is by design, resilient with layers of financial insulation. Reinsurance, surplus capital, low-risk and liquid investment portfolios are just some of these layers with individual state oversight to monitor financial stability. The insurance model has been tested over time during high inflationary periods and severe catastrophic events and alternating hard and soft market cycles. However, the last three years are arguably the most challenging from fluctuating inflation and worsening climate risks. Meanwhile, there are emerging and widening gaps that both threaten and are reshaping massive segments such as real estate and homeownership.
{CONTINUE](https://insurtechconsult.com/insights%2Fblog/f/pc-insurance-mind-the-gaps)
Alan Demers and Stephen Applebaum
Research
Drivers Still Wary of Self-Driving Cars, Supportive of ADAS Features - Autobody News
A new study by AAA shows drivers would rather see automakers improving ADAS than developing self-driving vehicles.
Despite increasing awareness of autonomous vehicle technology, most U.S. drivers remain hesitant to embrace self-driving cars, according to a new survey by AAA. The findings show that while trust in autonomous vehicles has increased marginally -- from 9% in 2023 to 13% in 2024 -- 60% of drivers still report being afraid to ride in one.
“Most drivers want automakers to focus on advanced safety technology,” said Greg Brannon, director of automotive engineering at AAA. “Though opinions on fully self-driving cars vary widely, it’s evident that today’s drivers value features that enhance their safety.”
The survey also shows a declining interest in self-driving vehicle development, with only 13% of respondents considering it a priority -- down from 18% in 2022. Instead, drivers overwhelmingly favor improvements to advanced driver assistance systems (ADAS). Seventy-eight percent of respondents cited safety system advancements as a top priority, a consistent trend in recent years.
Interest in ADAS features remains strong, with 64% of drivers wanting Automatic Emergency Braking (AEB) in their next vehicle, 62% interested in Reverse Automatic Emergency Braking, and 59% favoring Lane Keeping Assistance. AAA emphasized the performance and naming of these systems must clearly communicate their intended benefits to maintain consumer trust. MORE
Climate/Resilience/Sustainability
P&C insurers to navigate continued natural catastrophe pressures: Fitch
Fitch Ratings, a provider of credit ratings, research, and analytics, forecasts that the property and casualty (P&C) insurance industry will continue to face challenges from volatile natural catastrophe risks in 2025.
Fitch believes that the industry’s capital strength will enable re/insurers to absorb the impact of these losses, aided by prudent risk management and the effective use of catastrophe reinsurance.
The company, based in Chicago and New York, highlighted the continued exposure of the property and casualty sector to large-scale natural events during their recent North American Insurance Conference.
While the market has been tested by multiple significant events, it has not yet encountered a “mega catastrophe” in recent years. In particular, the lingering effects of wildfires are fresh in industry minds, but hurricanes remain the largest threat to financial stability.
For example, a direct hit by a major hurricane on Miami could result in losses exceeding $100 billion, while a large earthquake in California, particularly in Los Angeles or San Francisco, could lead to unpredictable outcomes and significant risk.
Legal System Abuse/Social Inflation
Report: Lawsuits cost Texans $38 billion a year - Insurance News
The financial impact of tort lawsuits on Texas households cost $38 billion in 2022, according to a new report by the U.S. Chamber of Commerce.
The report cites tort costs ranging from expenses associated with litigation, to compensation paid to claimants, and administrative costs to process claims as examples of costs impacting Texans and the state economy. They "affect everything from insurance premiums to the overall cost of living, making it crucial to understand their impact on Texas households," the report says.
The "tort system" refers to the civil legal system that provides a mechanism for individuals and businesses to obtain monetary damages, penalties or other civil remedies for harm they argue others caused them. Tort claims are primarily litigated in local, state and federal courts and through arbitration and mediation.
The system can provide a meaningful way to provide justice for those who suffer real harm but has been exploited, the chamber argues. Some attorneys file abusive lawsuits, use deceptive advertising or involve third-party funders who finance litigation but reduce the amount a plaintiff might otherwise receive, it says.
As a result, tort lawsuit costs have increased at a rate of 9.7% every year from 2016 to 2022, according to its analysis, with Texas representing "one of the leading states in year-over-year growth in tort costs."
"By implementing targeted reforms and promoting a more efficient legal process, Texas can work towards reducing these costs and ensuring a fairer, more sustainable legal environment for its residents," the chamber argues.
InsurTech/M&A/Finance💰/Collaboration
Insurtech Funding Declines In 2024, Yet Resilience, Rising Valuations Signal Long-Term Potential - Report
PitchBook’s latest research reveals a complex landscape for insurance technology (insurtech) venture funding in 2024, marked by a contraction.
PitchBook’s latest research reveals a complex landscape for insurance technology (insurtech) venture funding in 2024, marked by a contraction in total investment but persistent investor interest and soaring valuations.
In Q4 2024, PitchBook noted that deal value plummeted 42% quarter-over-quarter, dropping from $1.9 billion in Q3 to $1.1 billion, despite a modest 3.7% uptick in deal count from 109 to 113.
For the full year, the research report from PitchBook pointed out that insurtech venture capital (VC) funding totaled $5.1 billion across 446 deals—down from $5.8 billion over 530 deals in 2023.
According to the analysis from PitchBook, this pullback, evident since the sector’s 2021 peak, reflects a more cautious and selective investment climate amid macroeconomic challenges like rising interest rates and shifting underwriting cycles.
Yet, the data underscores insurtech’s resilience, with both incumbents and venture investors continuing to back innovations in distribution, policy administration, and claims processing.
PitchBook pointed out in its report that the decline in funding is viewed as a market reset rather than a collapse.
Alacrity Solutions Successfully Completes Strategic Transaction to Strengthen Financial Foundation for Continued Industry Leadership | Business Wire
Alacrity Solutions Group, LLC and its affiliates (collectively, “Alacrity”), a leader in insurance claims management services, today announced that they have completed a milestone transaction with their existing financial partners that significantly strengthens Alacrity’s capital structure to support continued growth.
“I am grateful for the committed support of our financial partners and look forward to our continued success as we work together to deliver best-in-class claims management services to our customers.”
As a result of the transaction, Alacrity has fortified its balance sheet by securing $175 million of new capital and eliminating approximately $1 billion of debt, ensuring its capital structure aligns with its long-term growth trajectory. With this investment, Alacrity will drive continued expansion into new coverage areas, accelerate the development of innovative technological solutions, and continue setting the standard in insurance claims management.
"This transaction recognizes Alacrity’s commitment to building on its track record of excellence while paving the way for long-term growth," said Jim Pearl, Chief Executive Officer. “I am grateful for the committed support of our financial partners and look forward to our continued success as we work together to deliver best-in-class claims management services to our customers.”
Through the transaction, Alacrity is now owned by a group of the Company’s existing financial partners, a consortium of leading investment firms that includes Antares Capital, Blue Owl Capital, and KKR.
Announcements
LexisNexis Flyreel for Claims Now Available to Help U.S. Home Insurance Carriers Optimize Claims Processes and Reduce Costs
LexisNexis® Risk Solutions, a leading data, analytics and technology provider, today announced the availability of LexisNexis® Flyreel® for Claims. Flyreel is an advanced property survey solution that delivers actionable data to insurance carriers through cutting-edge AI technology, enhancing risk assessment and operational efficiency. Tailored for the claims workflow, the consumer-driven survey tool enables homeowners to initiate the property claims inspection process more conveniently, while providing insurance carriers with actionable insights to streamline claims handling and improve accuracy.
Flyreel for Claims is specifically designed to address pressing challenges in the home insurance industry, including changing customer expectations, workforce shortages, growing claims volumes, rising loss costs and loss adjustment expenses (LAE), inflation pressures and declining customer satisfaction scores. By streamlining the first notice of loss (FNOL) process, Flyreel helps adjusters deliver a faster, easier and more reliable claims experience.
Key features of LexisNexis Flyreel for Claims include:
- Efficiency and cost savings: By reducing reliance on local onsite claims adjusters, Flyreel helps minimize operational costs while expediting claims processing, enabling carriers to handle claims volumes effectively and triage more complex claims for a better customer experience.
- Consumer-driven tool: Policyholders can independently capture detailed property insights through an intuitive, self-guided app using their smart phone or mobile device, to jumpstart the FNOL process with actionable data that adjusters can use immediately.
- AI-powered insights: Flyreel delivers virtual property claims inspections using high-resolution video, imagery and data analysis. Assigned claims adjusters gain detailed measurements, 360-degree panoramic views and preserved high-resolution details that streamline damage assessment and decision-making.
- Streamlined claims investigations: Flyreel automates and accelerates claims investigations to support faster, more precise decision-making across the claims lifecycle.
- Comprehensive and scalable solution: Flyreel integrates data from underwriting and claims records allowing carriers to tailor to the solution to meet their specific needs, ensuring scalability and adaptability.
- SDK-enabled: Insurers can seamlessly embed Flyreel for Claims into their own app and related workflow, streamlining the consumer experience.
"Flyreel for Claims represents the next evolution of AI-driven technology tailored to meet the unique needs of the insurance industry and the consumers they serve," said Frank Cesario, director of claims, LexisNexis Risk Solutions. "
Claims
Sedgwick launches Gen AI feature to expedite claims
Sedgwick, a leading global provider of claims management, loss adjusting, and technology-enabled business solutions launches an innovative solution, an AI-generated claims summary feature in viaOne. The viaOne portal is Sedgwick's digital hub that provides clients with real-time access to their data and visibility into every aspect of their claims.
This new feature allows examiners and claims professionals to quickly view a summary of the past 12 months of information for a particular claim at the click of a button. This solution transforms the claims process as it efficiently provides key insights, reserve suggestions, next best actions, interactive settlements, quality assurance, predictive modeling, carrier requirements, and more.
By leveraging Sedgwick's proprietary GenAI technology, new efficiencies are created for examiners when taking over claims or conducting claims reviews, streamlining the process and saving time. This recent advancement in Sedgwick's technology evolution journey further positions the company as the leading claims administrator in revolutionizing claims management.
"The creation of this claims summary feature is a testament to Sedgwick's commitment to simplifying claims and transforming the industry. We remain hyper focused on utilizing the latest technology innovations to introduce new enhancements into the claims processes," said Leah Cooper, Global Chief Digital Officer. "By integrating data science, GenAI, and Sedgwick's deep industry knowledge, we continue to develop solutions that elevate our client's experience and raise the bar for the claims industry as a whole."
This innovation builds upon the success of the company's Sidekick+ technology, an industry-first award-winning application launched in 2023 that integrates Microsoft/OpenAI's ChatGPT technology with Sedgwick's established claims management tools.