U.S. P/C Industry Underwriting Loss $20B+ Higher in 2022; Reserve Releases Fall  March 27th 2023

U.S. P/C Industry Underwriting Loss $20B+ Higher in 2022; Reserve Releases Fall

U.S. P/C Industry Underwriting Loss $20B+ Higher in 2022; Reserve Releases Fall

According to data compiled by AM Best, the U.S. property/casualty industry recorded a $26.5 billion net underwriting loss in 2022, $21.5 billion more than the $5 billion underwriting loss the rating agency tabulated for 2021.

The P/C results, which the rating agency characterizes as preliminary, were presented in a Best’s Special Report titled “First Look: 12-Month 2022 US Property/Casualty Financial Results.”

The combined ratio linked to the $26.5 billion figure, at 102.7, is actually better than an estimated 104.0 full-year 2022 that the rating agency had forecast a few weeks ago. The earlier estimate, set forth in AM Best’s P/C Review & Preview report, was derived from analytical estimates, judgment and projections based on results through third-quarter 2022. The figures published yesterday were instead derived from companies’ annual statutory statements received as of March 9, 2023, representing an estimated 96 percent of the total P/C industry’s net premiums written.

High Inflation Hiked P/C Claims Costs Up to 7.5% in 2022

High inflation alone led to an increase in property/casualty claims of 5-7.5%, across five key markets in 2022, according to Swiss Re research.

“In 2023, we expect that inflation should lead to an additional increase of 3.5-6.5%,” said Swiss Re Institute’s Economic Insights report, titled “Inflation may be easing, but claims severity pressures in P&C remain,” which analyzed inflation and pricing trends in Germany, France, the UK, Australia, and the U.S.

AARP Launches Free App to Encourage and Reward Safe-Driving Practices

AARP launched a free smartphone app that empowers drivers to stay safe behind the wheel by analyzing five key driving behaviors linked to increasing safety and preventing crashes. AARP SafeTrip™ measures driving quality based on acceleration, braking, cornering, speeding and phone usage, and rewards success in each area or encourages improvement if needed.

“Even the most experienced drivers can benefit from seeing how safe they are on the road and if they could use some improvement,” said Josh Dunning, Vice President and National Director of AARP Driver Safety. “AARP SafeTrip serves as another milestone in our commitment of more than four decades of helping keep drivers safe, confident and independent.”

Auto insurance market disrupted by alternative companies favored by drivers

Boutique auto insurance companies earned higher satisfaction scores than industry behemoths such as GEICO, Progressive, and Allstate in Consumer Reports’ (CR) latest member car insurance survey.

It’s the latest indication that consumers appear more inclined to choose smaller companies with more comprehensive coverage over larger insurers that might lack breadth of coverage, even if it costs more.

In ranking of 36 companies, USAA, NJM, Amica and Erie topped the list despite spending less on advertising and being less familiar than their competitors, CR said. All four of the insurers received favorable scores.

Closing flood protection gap requires new approaches: Zurich

Closing the flood protection gap in vulnerable countries will require “massive investments” and new approaches from policymakers and re/insurers, a new report by the Zurich Flood Resilience Alliance has concluded.

The report highlights the urgent need to mitigate the effects of climate change for those most at risk of devastating flooding, as well as implementing adaptation efforts to prevent and manage avoidable losses.

Additionally, comprehensive social protection programs need to be created or strengthened in at-risk areas, the Alliance said, with insurance schemes utilised in some cases.

The Alliance is a multi-sectoral partnership that aims to build community flood resilience in both developed and developing countries. All members of the Alliance, with the exception of Zurich Insurance Company, are funded by the Z Zurich Foundation.

State Farm reports $1 BILLION increase in hail claim costs

State Farm has reported that the company’s annual claims paid to help customers recover from hail damages increased more than $1 billion from 2021 to 2022.

According to the insurance giant’s official statement, the reasons for the sharp increase is two-fold, namely: an increase in hail claims and inflation.

The number of hail claims increased by nearly 45,000 from 2021. However, inflation and supply chain issues occurring across the country is also responsible for the overall increase. To put it in more relative terms, the average claim increased by nearly $2,000 last year. That is the largest year-over-year increase to date.

‘Worrying Sign’ as Homeowners Repair, Claim Times Increase but Digital Usage Declines‘Worrying Sign’ as Homeowners Repair, Claim Times Increase but Digital Usage Declines

A combination of severe events, increasing prices and supply chain-related issues conspired to make 2022 the worst financial year for homeowners insurance providers. This—coupled with the strain on digital tools designed primarily to help the industry respond more quickly and efficiently—has led to increased dissatisfaction among customers, according to a recent study by J.D. Power, the “2023 U.S. Property Claims Satisfaction StudySM."

“The p-c industry playbook for the past few years has been to invest heavily in digital solutions that streamline the claims process for customers, while reducing costs and improving efficiency for carriers," said Mark Garrett, director, insurance intelligence at J.D. Power. “However, the longer cycle times have made it increasingly difficult to keep customers informed via digital channels and limit their need to contact their insurer with questions."

Transformation Is Now an Imperative

The insurance industry is at a crossroads, and ecosystem enablement and new business models are no longer a choice but an imperative.

Insurance has been a pillar of society for centuries, providing individuals and businesses with the protection they need against life's uncertainties.

Whether it was the law in King Hammurabi’s code that said a debtor didn’t have to pay back debts if a personal life tragedy made it impossible, or an insurer in today’s world helping homeowners repair their roofs after a natural disaster, insurance has enabled society to take risks and make progress.

Right now, though, insurance is at a critical juncture.

Some risks are becoming too risky for insurers to cover, leaving individuals and insurers unsure what to do in the face of ever-worsening climate catastrophes and cybersecurity threats. Claims inflation means occurrences that remain covered in insurance policies are getting pricier for insurers to cover, and the whole industry is being pushed toward a tipping point, where they must embrace digital ecosystem enablement or become obsolete.