Closing the personal P&C protection gap  April 5th 2023

Closing the personal P&C protection gap - McKinsey & Company

Despite a slowdown during the height of the pandemic, personal property and casualty (P&C) insurance has seen annual growth of 3 percent since 2019. Personal lines still represent more than half of global P&C gross written premiums (GWP), but a growing protection gap in both developed and developing countries indicates that insurers struggle to design products fit for the evolving and emerging risks that modern personal-lines consumers demand.

The protection gap has a number of direct and indirect causes. In developed economies, customers’ personal P&C insurance needs are changing significantly and rapidly—particularly when it comes to motor insurance, given that connected cars and the sharing economy are transforming pricing models and risk profiles. Extreme weather events are wreaking havoc, with increased flooding, tropical storms, wildfires, and droughts challenging traditional risk assessment and underwriting models in property insurance. Cybersecurity risk is on the rise, and many insurers are struggling to properly quantify risk exposure, adjust terms and conditions, and consequently win the conviction of reinsurance capacity. And e-commerce is becoming indispensable,1 bringing a heightened risk of online fraud and theft.

Could Insurance Become Irrelevant?

Worldwide GDP is growing faster than insurance premiums, suggesting insurers aren't keeping up with customer needs. Three areas stand out.

McKinsey has been raising the alarm for some time about how insurers are in danger of losing relevance. The key indicator that we should be concerned is that global GDP is growing faster than insurance premiums, suggesting that insurers aren't keeping up with clients' needs. 

Three areas stand out as ones where insurers seem to be backing away from the risks: natural catastrophes, climate risk and cyber. With natural catastrophes, damages are increasing so fast that they are outstripping coverage. With climate change, the issue is more that attempts to address it rely on new technology, so there is little or no historical data to use for pricing. With cyber, attacks are proliferating so rapidly and changing shape so quickly that many insurers are being cautious.

Now, nobody is saying that insurers should just step in front of these massive risks so they can stay relevant. That would be a good way to get walloped. But McKinsey argues that there are ways to increasingly lean into all of these risks, through a combination of mitigation and pricing, that will grow the industry while preserving its traditional, protective role in society.

Paul Carroll, Editor-in-Chief, Insurance Thought Leadership

U.S. Personal Auto Results Headed the Wrong Way. Is a U-Turn Possible?

Executive Summary

Given the persistence of high loss costs, a return to underwriting profitability for the auto segment in 2023 appears highly unlikely, writes AM Best Associate Director David Blades. In fact, for 2023, AM Best is currently forecasting a 106 combined ratio for the U.S. personal auto segment, he notes in the article that describes the headwinds carriers are facing. In spite of the challenges, inflationary trends eventually will plateau, and in the meantime, more sophisticated pricing algorithms, along with good risk selection and disciplined underwriting, should help carriers chip away at unfavorable results, he writes

‘Telematics Is a Tool’: Root CEO Details Changed Strategy for 2023; UBI Basics

As InsurTech Root focuses its attention on signing up partners for embedded insurance relationships, telematics is taking a back seat to other pricing factors.

But the company launched as a telematics-based auto insurer intent on giving the best drivers the best rates back in 2016 can still go head-to-head with incumbents like Progressive on segmenting risks, Root Chief Executive Officer Alex Timm suggested during a webcast virtual fireside chat at the Jefferies Insurtech Conference yesterday.

Fielding questions from Jefferies Analyst Yaron Kinar about what Root has learned from an existing embedded partnership with Carvana and about how Root’s telematics program stacks up against some enhancements Progressive is bringing to its existing telematics program, Timm also said his company can take on the best preferred drivers—and the worst nonstandard drivers—while still catering to the preferred end of the market.

Cambridge Mobile Telematics Announces Road Safety Board with Steve Kiefer as Chairperson

New board will enhance CMT's efforts to make roads and drivers safer worldwide

Cambridge Mobile Telematics (CMT), the world's largest telematics service provider, announced today the formation of a dedicated Road Safety Board, with Steve Kiefer, a renowned advocate for safer roads, appointed as its chairperson. Creating the Safety Board reinforces CMT's commitment to its mission of making roads and drivers safer across the globe.

“CMT’s technology and dedication to making roads and drivers safer is unparalleled in the industry. Together, we will work towards making a lasting, positive impact on the lives of drivers, passengers, and pedestrians across the globe.”

"CMT has been working with both the private and public sectors for years to impact road safety through financial incentives, behavior change, and legislation. We established our Road Safety Board to accelerate and expand our impact in the public sphere, putting our significant resources at the disposal of the people on the front lines fighting to make real change for road safety,” said CMT's CEO, William Powers. “Steve Kiefer has been at the forefront of making roads safer for years. His impressive work at the Kiefer Foundation launched in memory of his son, Mitchel Kiefer, combined with his extensive experience as an executive at General Motors, makes him the ideal person to lead this critical mission

Steve Kiefer brings 40 years of automotive industry experience to CMT's Road Safety Board, with leadership positions at General Motors, including President of General Motors International, VP of Global Purchasing and Supply Chain, and President of Delphi Powertrain. After the tragic loss of his son Mitchel Kiefer to a distracted driver in 2016, Steve established the Kiefer Foundation in his memory. Since then, he has been appointed to Michigan's Governor's Traffic Safety Advisory Commission and honored with the Distinguished Service Citation from the Automotive Hall of Fame for his tireless efforts in promoting road safety.

AM Best TV: Insurers Innovate to Varying Degrees

The COVID-19 pandemic highlighted both well-planned and disjointed innovation efforts for insurers, said Jason Hopper, associate director, AM Best, referencing a new Best’s Special Report.

Drones tapped to improve risk management

Drones have been deployed by insurers and risk managers for several years to better assess risks, respond to catastrophes and improve claims efficiency.

But as other technological tools have become more widely available, businesses and insurers are using the unmanned aircraft systems in more targeted ways to collect data and to mitigate risk, experts say.

Agriculture, construction, real estate and specialty lines are just some of the insurance industry sectors where drones are improving risk management practices, they said.

8 insurers make Forbes' 2023 America's Best Midsize Employers list

Forbes named eight property, casualty and life insurance companies as some of the best employers in its 2023 America's Best Midsize Employers list, which spans across nine industries. To determine the best of America's employers, Forbes and Statista, a market research company, surveyed around 45,000 American employees at organizations employing between 1,000 to 5,000 workers. Survey respondents ranked whether they would recommend their employer on a scale of zero to 10 and were also asked to name other employers that they would recommend to friends or family members.

Digital Insurance reached out to the eight recognized P&C and life insurers for their comments on being recognized as one of the U.S.'s top 100 best midsize insurance employers. Shelter Insurance, NJM Insurance Group and Amica provided direct responses, and Hanover Insurance Group and Selective Insurance offered statements from press releases. Responses from Aflac, Symetra and American Fidelity were not received in time for publication.

Ford’s $1 million scholarship program to help aspiring auto techs

Ford is donating $1 million toward scholarship programs to help meet the demand for auto technicians throughout the industry.

Its newly-announced scholarship program, which “aims to foster diversity and reduce barriers for students pursuing careers in automotive service and technology,” will be rolled out through dealerships in four cities: Atlanta, Chicago, Dallas, and Phoenix. This round of funding will focus on STEM (Science Technology Engineering and Mathematics) skills as the industry shifts away from internal combustion engine (ICE) vehicles and toward electric vehicles (EVs).

According to the automaker, the program supports:

“A focus on STEM-based curriculum in combination with hands-on learning;

“Reaching students early and reinforcing the opportunities available for upward professional and economic advancement; and “Collaboration with dealers through their involvement in participating schools, career fairs, shadowing days, mentoring, and internships.” “As we move toward an electrified future, these career opportunities are exciting and require skilled technicians who are proficient in STEM-related study,” said Elena Ford, Chief Customer Experience Officer. “Working together with the Ford Fund and our dealers to offer this scholarship program means we will welcome a new generation of diverse students to the industry, and hopefully into our Ford family, to help us better serve our customers.”