APCIA Says Property Insurance Market ‘Hardest in a Generation’  March 29th 2023

APCIA Says Property Insurance Market ‘Hardest in a Generation’

A combination of historic high inflation and a growing frequency of natural catastrophes is creating the hardest market in a generation for property insurance, the American Property and Casualty Insurance Association says in a new white paper.

“The growth of population, housing, and businesses in hazard-prone areas are exacerbating the effects of climate change, leading to more frequent and severe catastrophe losses,” stated Karen Collins, the APCIA’s vice president, property and environmental, in a press release. “The higher costs of capital and reduced reinsurance capacity are further exerting upward pressure on insurance rates and may result in stricter underwriting in catastrophe-exposed markets.”

APCIA noted that the US inflation rate hit a 41-year high of 8% in 2022, peaking at 9.2% last June. Insurance claims have risen even faster, contributing to underwriting losses that pushed the estimated combined loss ratio for property casualty up to 104% according to a preliminary estimate by A.M. Best, the report says. That was the first underwriting loss since 2017.

Both claims frequency and claims severity play a role in those losses. The report says 2022 was the eighth year in a row that the US suffered 10 or more catastrophes with losses exceeding $1 billion. Natural disaster losses from 2020 to 2022 exceeded $275 billion, the highest-ever three-year total for US insurers.

Insurers face inflation, rising auto repair costs, CCC

Complex car technologies holding off increases in total loss claims.

The average cost of vehicle repairs is increasing, but that doesn't necessarily mean that the likelihood of auto insurers declaring total losses after accidents is increasing, according to insurance industry observers and research.

This contrast between repair costs and total loss claims is happening now because of a complex balance of other economic factors in the auto market, says Jason Verlen, vice president of product marketing at CCC Intelligent Solutions Inc., a property and casualty insurance economy cloud platform, which recently published its annual Crash Course report on trends in auto insurance, claims, repairs and driving behaviors.

Vehicle technology and its influence on claims

Every aspect of the automotive aftermarket is being impacted by new technologies and safety systems within vehicles. Repairers need new skills and insurers need new products based on new parameters.

Here, ARC360 partners Entegral, Enterprise and Repairify share their thoughts on how the constant evolution of technology is impacting their sectors

5G drives connected car surge

Study predicts total number of car connections will soar from 279 million in 2022 to 829 million in 2030 as 5G connectivity adds more value because of additional applications it will enable, especially under the banner of C-V2X

The continued trend for embedded mobile network access to become standard on ever more cars will see in-car connectivity hit the accelerator over the next seven years to reach 828.7 million, triple the 2022 total of 279.3 million, according to a study from Rethink Research.

As a result, said the company’s latest Wireless Watch research report and forecast on the connected car market, revenues derived from car connectivity will increase even more sharply and quadruple to $244bn by 2030, as 5G access becomes increasingly prevalent to deliver added-value services such as ultra HD streaming and more advanced driver assistance system (ADAS) features.

GEICO Faces Class Action for Allegedly Underpaying Auto Claims

GEICO General Insurance Co. must face a class action suit alleging that it has been underpaying benefits to its insureds injured in automobile accidents.

U.S. District Court Judge Dora L. Irizarry in federal court in Eastern New York has certified the class alleging breach of contract against GEICO General for shortchanging claimants who earn more than $2,000 a month.

The lead plaintiff in the case, Mary Lanzillotta, who was injured in a car accident, claims she was entitled to $55,000 in insurance coverage but was provided only $51,445 in benefits by GEICO General.

The plaintiff contends that the insurer utilizes an improper formula for calculating basic economic loss and first-party benefits, resulting in “unlawful deductions and premature policy exhaustion.” The complaint maintains that the insurer has used the same improper formula for all policyholders in the class, who are identified in part as insureds numbering “hundreds if not thousands” who have filed similar claims since March 2013.

Enhancing Claims Via Digital Payouts

Customers need their insurer to provide stability, clear communication and financial support during a claim – and to do so in a timely manner. Unfortunately, claimants have had to wait days or weeks to receive funds from their insurance provider, and a check in the mail is often their only payment option. 

In today’s digital-first economy, insurers need to innovate their payout processes to offer their customers speed, convenience and flexibility. Imagine enabling payouts that provide customers with a personalized experience and doing so in near real time. With just a point and click following claim approval, customers can control when and how they are paid – reducing payout timelines to minutes or less while providing the payout options that cater to each policyholder’s preference for managing their money. 

By digitizing payouts, insurers can transform a critical customer interaction, turning a painstaking process into a truly positive experience.

Robert Clayton, vice president and head of digital payouts, Fiserv.

American Modern's timely digital transformation

When Andreas Kleiner was appointed chief executive and president of American Modern Insurance Group in 2016, he had his work cut out for him. He is responsible for the company’s strategic leadership, but thanks to decades of industry experience – including 14 years with American Modern’s parent company, Munich Re – Kleiner has been successful in his role.

Today, he is overseeing the completion of an eight-year transformation program to upgrade American Modern’s technological infrastructure, which was previously dependent on a legacy system.

Kleiner’s impact, both within and outside his company, has made him one of Insurance Business America’s Hot 100 for 2023, a list of the industry’s most innovative and ambitious leaders.

American Modern’s transformation was inspired by the need to change its “very disjointed IT landscape” similar to that of many US-based insurers, Kleiner told Insurance Business. “The idea was to get rid of seven legacy IT systems and put everything into one fully integrated, state-of-the-art IT platform.”

Insurers partnering with educational institutions to promote insurance talent development

Insurance organizations are exploring opportunities to develop talent and promote insurance education by entering partnerships with educational institutions and developing supplemental digital solutions to enhance insurance education courses. Here are a few highlights of recent collaboration announcements that emphasize digital solutions and talent development for the insurance industry.

The National Alliance for Insurance Education launched its first set of virtual reality experiences for its insurance and risk management courses. The addition was announced at the Culture and Values conference, which emphasizes the significance of innovation, and attendees were able to participate in a demonstration. The first phase of the interactive VR experiences is available for the The Certified Risk Manager (CRM) Principles of Risk Management course, which focuses on methods of analytical risk identification, financial statement analysis and enterprise risk management. The virtual reality experience acts as a supplemental lesson to the risk management course and consists of a number of virtual locations in which participants learn to identify and assess potential hazards and risk exposures according to each setting, which include a convenience store, pizza parlor and a barber shop.

VIU by HUB recently announced that it is providing a customized personal lines digital broker solution for Arizona State University alumni, and also plans to implement executive mentorship and talent development opportunities for current ASU students. VIU experts may lead in opportunities and speaking engagements such as speaking to a class or at a conference.

Mike Keegan, managing director of Strategic Partnerships for VIU, says "They have several incredible programs at ASU… [VIU by HUB is] making those kinds of opportunities available to work with ASU work, and not just with the Alumni Association, but with the various schools within ASU's footprint and help them in that regard."

Grace Crane is a reporter for Digital Insurance.`

$40 Billion in Insurance Fraud Leading Contributor to Increased Premiums

With the recent effects of historically high inflation, most drivers and homeowners expect higher insurance rates, but many are surprised by just how high those costs have been. Insurance fraud costs the industry $40 billion annually and contributes significantly to higher consumer premiums.

In a recent report, Clearsurance.com revealed some of the reasons behind these increasing car and home insurance rates, which include the following factors:

• Car accident history
• Claims history
• Higher repair costs
• Higher home and vehicle values
• Insurance fraud
• Traffic violation record

A nationally recognized insurance expert, Melanie Musson, reminds readers, "While policyholders can't control all factors related to increased insurance rates, there are steps they can take to keep their insurance premiums affordable."