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Industry Financials, Insurers and the Economy

Economic & Actuarial Analyses Ensure Our
“Best Pick Is Our Last Pick”

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By Lewis Nibbelin, Guest Blogger for Triple-I

Insurance underwriting and pricing require a clear view of loss experience and reliable economic projections. Today’s dynamic environment – marked by historically high inflation, climate-related risks, and regulatory constraints that vary widely by state – complicate such projections while making them more important than ever.

“Actuarial ratemaking is prospective in nature, but you have to look at history to be able to do that,” explained Dale Porfilio, Triple-I’s Chief Insurance Officer and President of the Insurance Research Council (IRC), in an interview for the All Eyes on Economics podcast. “A core part of that actuarial ratemaking is to say, ‘How are losses different? How have they trended? How are they going to grow?’”

Current economic uncertainty – particularly via rising replacement costs and high general inflation – presents a myriad of evolving factors many actuaries may struggle to contextualize.

“It just takes a while to get through the timeline of claims occurring and losses getting paid,” Porfilio told host and Triple-I Chief Economist and Data Scientist Dr. Michel Léonard. “We can already be in a cycle of increasing or decreasing inflation, and you won’t see it in losses yet… You’re going to see it faster from economic indicators than you’re going to see it in insurance.”

For economists and actuaries alike, projections are data-driven inferences. Using multiple data sources and various forms of sophisticated analysis all strengthen the precision of those inferences.

For example, IRC – like Triple-I, an affiliate of The Institutes – is developing a database that aggregates detailed personal auto injury claims information from numerous insurers. It encompasses five and a half years’ worth of data on not only the total claim payout, but the specific injuries and care within each claim file.

A database of this magnitude has the potential to help insurance carriers improve the accuracy of pricing and underwriting. More important, this research will help policymakers and carriers identify opportunities to reduce claim costs, which can improve the affordability of personal auto insurance.

Ultimately, synthesizing diverse perspectives reduces the role of luck for insurers when setting rates. 

Triple-I works to provide a “combined wisdom,” Porfilio said, through the quarterly Insurance Economics and Underwriting Projections: A Forward View, a joint report with Milliman. The report presents an underwriting projection model which – by using P/C replacement cost indices and economic growth data as leading indicators – is both actuarially and economically sound.

Understanding economic trends is crucial, but understanding how risk influences these trends is equally important. Ongoing geopolitical risk, for instance, continues to strain global supply chains, and integrating this information into underwriting projections is one way to build resilience against disruptions.

“Learning to speak as an economist or an actuary is another language,” Porfilio said, and resources such as Triple-I’s Chart of the Week serve to simplify the sharing of economic research for insurers and consumers.

This wealth of available data analysis ensures that “our best pick is our last pick,” Porfilio said. “We’re always putting our best answer on the page to share the best insights that we can…and educate and inform as wide of an audience as possible.”

The full interview is available now on Spotify, Audible, and Apple.

Auto Insurance, Homeowners Insurance, Insurers and the Economy, Market Conditions, Workers Compensation

NCIGF Moves Ahead
to Support Insurers

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By Max Dorfman, Research Writer, Triple-I

For the last 35 years, the National Conference of Insurance Guaranty Funds (NCIGF) – an organization dedicated to serving 55 property/casualty state guaranty funds – has provided operational support; communications, education, and outreach; as well as public policy management for these organizations.

State guaranty funds make up a privately funded, nonprofit state-based national system that pays covered claims up to a state’s legally allowable limits, protecting policyholders if their insurer becomes insolvent. There are 55 such funds because some states have more than one.

“All states have a property/casualty guaranty association, and some have a workers compensation guaranty association,” NCIGF President and CEO Roger Schmelzer explained in a recent “Executive Exchange” with Triple-I CEO Sean Kevelighan.

“We’re not claims payers,” Schmelzer said, “We try to do things for our members that they wouldn’t be doing for themselves or that it’s better to be doing in one place.”

For nearly five decades, the guaranty fund system has paid out more than $35 billion to cover claims against about 600 insolvencies.

“Through the years, the system has successfully met every challenge that’s come its way, and has been instrumental in supporting the insurance promise,” Schmelzer said.

NCIGF recently announced its updated organizational strategy, which focuses on:

  • Pre-liquidation planning with regulators and receivers,
  • Understanding and preparing for the changing landscape in insolvencies, and
  • Seeking shared solutions to common problems among state associations.

“We want to understand better the trends and factors that could lead to insolvency,” Schmelzer said. “Then we want to do everything we can with our members, working through our educational arm, to make sure members are prepared for whatever those trends might bring.”

Insurers and the Economy

Economic Analysis Matters More Than Ever
in “Golden Age” of Data

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By Lewis Nibbelin, Guest Blogger for Triple-I

Though data collection and curation have always been critical to insurance underwriting, advancements in artificial intelligence and data analytics have revolutionized how data is aggregated and applied to risk assessment and pricing.

This, in turn, increases the importance of economic analysis in insurance. 

“We are able to understand correlation better and make better predictions to prevent risks that formerly we were just being reactive to,” explained Josh Landau, President of the International Insurance Society (IIS), in an interview for the All Eyes on Economics podcast.

While AI and sophisticated models can gather and organize larger, more complex data sets in more interesting ways far more quickly than ever before, they can’t make the sorts of assessments or draw the kinds of salient conclusions that economists and actuaries can. 

“Drawing a conclusion would be impossible for AI to do,” Landau told host and Triple-I Chief Economist and Data Scientist Dr. Michel Léonard. “Really understanding where these non-correlated issues are impacting each other and how they’re impacting decisions, that’s where I see the economist’s role.”

Similarly, while automation may expedite data processing, critical thinking and socioemotional skills have never been more crucial for underwriters. Adaptability to technological developments, as well as the ability to meaningfully interpret intricate datasets, are necessary within a constantly evolving insurance landscape.

For example, the use of telematics to track actual driving behavior has contributed to more accurate underwriting and pricing, supporting the emergence of usage-based auto insurance.  A 2022 survey by the Insurance Research Council found that 45 percent of drivers made significant safety-related changes in how they drove after participating in a telematics program. An additional 35 percent said they made small changes in their driving behavior.

Ethical concerns surrounding the use of AI further underscore the significance of critical interpretation by humans.

Due to its many extensive investments and ability to determine what projects to insure – or not to — the insurance industry has an “outsized influence,” Landau said.

“As a result of that awesome depth and breadth of resources,” he said, “it’s important for carriers “to understand how they navigate through this responsibility, how they interact – not only with each other, but also with industry leaders and government leaders.” 

The digitized space’s potential for inaccuracies, biases, and data breaches presents a dilemma for stakeholders at every level, so managing these risks must always take precedence. 

Human oversight, diversity in AI training datasets, transparency about use of AI, and responsiveness to stakeholder feedback are all ways for insurers to utilize automated technologies while upholding the industry’s commitment to equity and security.

IIS – like Triple-I, an affiliate of The Institutes – facilitates industry dialogue through targeted webinars and its annual Global Priorities Survey and corresponding Global Insurance Forum (GIF), the next of which is held this upcoming November in Miami, Fla., in coordination with Triple-I’s Joint Industry Forum (JIF). Registration for GIF is available here. You can register for JIF here.

The full interview is available now on Spotify, Audible, and Apple.

Homeowners Insurance, Insurers and the Economy, Legal Environment, Market Conditions

Triple-I Brief Discusses Homeowners Insurance Market Challenges

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By Max Dorfman, Research Writer, Triple-I

Homeowners insurance costs have continued to consistently rise in the wake of the pandemic, alongside several other challenges, according to a new Triple-I Issues Brief.

The COVID-19 pandemic and Russian invasion of Ukraine sparked inflation – particularly with regard to replacement costs due to material shortages. Replacement-cost inflation has been exacerbated by a tight labor market. Even before the pandemic, loss costs had been rising steadily for some time, leading to homeowners insurance premiums climbing consistently from 2001 to 2021, according to the Insurance Research Council (IRC).

These cost factors, combined with rising losses related to natural catastrophes, have contributed to insurance affordability and availability issues, which vary by state. Disaster-related losses have increased over the past 30 years, due mostly to increasing severity of hurricanes and convective storms.

The brief notes that these costs surpassed household income growth, leading to decreased insurance affordability for many U.S. consumers. As expected, disaster-prone states have the least affordable homeowners insurance. The IRC ranks Florida as the state with the least-affordable coverage in the country.

Additionally, legal system abuse, which includes false claims of damage to homes. This has been a common issue in disaster-prone areas, where claims of roof damage, in particular, have substantially increased insurance costs.

The brief states that consumers and policymakers should be cognizant of the dynamics underlying these price shifts and understand why insurers must be forward looking in their approach to pricing these policies.

Learn More

Florida Homeowners Premium Growth Slows as Reforms Take Hold, Inflation Cools

IRC: Homeowners Insurance Affordability Worsens Nationally, Varies Widely By State

Homeowners Insurance Costs Exceeded Inflation From 2000 to 2020

Facts + Statistics: Homeowners and Renters Insurance

Industry Financials, Insurers and the Economy, Market Conditions

P/C Underwriting Profitability Remains
at Least a Year Away

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By Max Dorfman, Research Writer, Triple-I

The property/casualty insurance industry is expected to achieve underwriting profitability in 2025, according to the latest research from the Triple-I and Milliman, a collaborating partner. The report, Insurance Economics and Underwriting Projections: A Forward View, which was presented at a members-only webinar on July 11, also projects a small underwriting loss in 2024.

Michel Léonard, Ph.D., CBE, chief economist and data scientist at Triple-I, discussed how P/C replacement costs continue to increase more slowly than overall inflation.

“For the last 12 months, economic drivers of insurance performance have been favorable to the industry, with P/C insurance’s underlying growth catching up to overall U.S. economic growth rates, and its replacement costs increasing at a sluggish pace compared to overall inflation,” Dr. Léonard said. “We expected this favorable window to last into 2025.”

That may not be the case anymore for two reasons, according to Léonard.

“First, U.S. economic growth slowed more than expected in Q1 2024, largely because of the Fed’s lack of clarity about the timing of interest rate cuts,” he said. “Second, global supply chains are again showing stress due to ongoing and increasing geopolitical risk, such as the tensions in and around the Suez Canal. These causes may be threatening to send inflation back toward pandemic-era levels. Geopolitical risk never left, and supply chains are on a lifeline.”

Dale Porfilio, FCAS, MAAA, Triple-I’s chief insurance officer, discussed the split between personal and commercial lines, noting that, “The ongoing performance gap between personal and commercial lines remains, but that gap is closing.”

 “This quarter, we are projecting commercial lines underwriting results to outperform personal lines premium growth by over five points in 2024,” Porfilio added. “The difference, in large part, illustrates how regulatory scrutiny on personal lines has curbed the ability for insurers to increase prices to reflect the significant amount of inflation that impacted replacement costs through and coming out of COVID.”

Jason B. Kurtz, FCAS, MAAA, a principal and consulting actuary at Milliman – a global consulting and actuarial firm – points out how commercial multi-peril is one line that continues to face long-term challenges.

“While the expected net combined ratio of 106.2 is one point better than 2023, matching the eight-year average, the line has not been profitable since 2015. And with a Q1 direct incurred loss ratio of 52 percent and premium growth rates continuing to slow, we see some improvement but continuing unprofitability through 2026,” Kurtz said.

In juxtaposition, Kurtz pointed out the continuing robust performance of workers’ compensation.

“The expected 90.3 net combined ratio is nearly a one-point improvement from prior estimates and would mark 10 consecutive years of profitability for workers’ comp,” he said. “We continue to forecast favorable underwriting results through 2026.”

“Medical costs are going up, but they have not experienced the same type of inflation as the broader economy,” added Donna Glenn, FCAS, MAAA, chief actuary at the National Council on Compensation Insurance (NCCI). NCCI produces the Medical Inflation Insights report, which provides detailed information specific to workers’ compensation on a quarterly basis. “Since 2015, both workers’ compensation severity and medical inflation, as measured by NCCI’s Workers’ Compensation Weighted Medical Price index, have grown at a similar rate, a quite moderate 2 percent per year.”

Other highlights of the report include:

  • Homeowners insurance underwriting losses expected to continue for 2024-2025, but the line is expected to become profitable in 2026, with continued double-digit net written premium growth for 2024-2025.
  • Personal auto net combined ratio improved slightly from prior estimates and is on track to achieve profitability in 2025.
  • Commercial lines 2024 net combined ratio remained unchanged despite shifts in commercial property (-1 point), workers’ compensation (-1 point), and general liability (+1 point).
  • Net written premium growth rate for personal lines is expected to continue to surpass commercial lines by over 8 percentage points in 2024.
Insurers and the Economy, Legal Environment, Market Conditions, Regulation

Economic Climate Makes Understanding Insurance Increasingly Important

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By Lewis Nibbelin, Guest Blogger for Triple-I

Insurance coverage has long been “a grudge purchase – a once-or-twice-a-year transaction that many consumers didn’t want to think about,” Triple-I CEO Sean Kevelighan said in a recent episode of the “All Eyes on Economics” podcast.

But in today’s dynamic economic environment – marked by inflation the likes of which most insurance purchasers have never experienced – it has become more important than ever for consumers and policymakers to understand how insurance is underwritten and priced.

One of Triple-I’s chief objectives is “helping people understand what insurance can do for you, but also what you can do to change the situation,” Kevelighan told podcast host and Triple-I Chief Economist and Data Scientist Michel Léonard. “The narrative seems, at least from my standpoint, to be less about, ‘Why is my insurance so high?’ It’s more about, ‘What can we do to get it lower?’”

Rising insurance premium rates are the effect of risk levels, loss costs, and economic considerations like inflation. Too often, though, they’re discussed as if they were the cause.

High property/casualty premium rates are the result of numerous coalescing factors: Increased litigation, inflation, antiquated state regulations, losses from natural catastrophes, and pervasive post-pandemic high-risk behaviors, to name a few.

Every dollar invested in disaster resilience could save 13 in property damage, remediation, and economic impact costs, according to a recent joint report from Allstate and the U.S. Chamber of Commerce. As areas vulnerable to climate disasters become increasingly populated, it’s important for policyholders to develop resilience measures against the wildfire, hurricane, severe convective storm, and flood risks their property faces.

Consumer education and community involvement in mitigation and resilience offer a path toward greater control over claims.

However, regulatory barriers to fair, accurate underwriting also contribute to higher insurance costs. Despite tort reforms, rampant litigation has kept upward pressure on rates in Florida and Louisiana. California’s outdated Proposition 103 – by barring insurers from using modeling to price risk prospectively and from taking reinsurance costs into account when setting rates – has   impeded insurers from using actuarially sound insurance pricing.

Confusion around industry practices and effective mitigation is understandable, and during periods of economic instability and unforeseen disasters, blaming the insurance industry may seem the most direct way to regain control.

But rising rates are “not just an insurance problem,” Kevelighan said. “It’s a risk problem, and we all play a role in addressing that risk.”

The full interview is available now on Spotify, Audible, and Apple.

Catastrophes, Coastal Property, Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods, Homeowners Insurance, Legal Environment, Regulation, Wildfire

Triple-I Experts Speak
on Climate Risk, Resilience

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Hurricane Beryl’s rapid escalation from a tropical storm to a Category 5 hurricane does not bode well for the 2024 Atlantic Hurricane season, which is already projected to be of above-average intensity, warns Triple-I non-resident scholar Dr. Philip Klotzbach.

“This early-season storm activity is breaking records that were set in 1933 and 2005, two of the busiest Atlantic hurricane seasons on record,” Dr. Klotzbach, a research scientist in the Department of Atmospheric Science at Colorado State University, recently told The New York Times.

The quick escalation was a result of above-average sea surface temperatures. A hurricane that intensifies faster can be more dangerous as it leaves less time for people in its path to prepare and evacuate. Last October, Hurricane Otis moved up by multiple categories in just one day before striking Acapulco, Mexico, as a Cat-5 that killed more than 50 people.

After weakening to a tropical storm, Beryl made landfall as a Cat-1 hurricane near Matagorda, Texas, around 4 a.m. on July 8, according to the National Hurricane Center, making it the first named storm in the 2024 season to make landfall in the United States.  Beryl unleashed flooding rains and winds that transformed roads into rivers and ripped through power lines and tossed trees onto homes, roads, and cars. Restoring power to millions of Texans could take days or even weeks, subjecting residents who will not have air conditioning to further risk as a sweltering heatwave settles over the state.

Extreme heat was just one climate-related topic addressed by Triple-I Chief Insurance Officer Dale Porfilio in an interview with CNBC’s “Last Call” on July 9. While most farmers are insured against crop damage due to heat conditions and homeowners insurance typically covers wildfire-related losses, Porfilio noted, a “more subtle impact is on roofs that we thought were built to a 20-year lifespan.”

When subjected to extreme heat, roofs can become more brittle and prone to damage from wind or hail.

“So, you have to think about the roof coverage on your home insurance policy,” Porfilio said.

He also pointed out that flood risk represents “one of the biggest insurance gaps in this country. Over 90 percent of homeowners do not have the coverage.”

Many people incorrectly believe homeowners insurance covers flood damage or that they don’t need the coverage if their mortgage lender does not require it.

In an interview on CNBC’s “Squawk Box,” Triple-I CEO Sean Kevelighan discussed the potential impact of the predicted “well above-average” 2024 season on the U.S. property/casualty market.

“This is what the insurance industry is prepared for,” Kevelighan said. “It keeps capital on hand after writing policies to make sure that those promises can be kept.” The P/C industry has $1.1. trillion in surplus as of March 31, 2024.

Kevelighan pointed out that the challenges to the industry go beyond climate-related trends, explaining how legal system abuse, regulatory environments, shifting populations, and inflation are impacting insurers’ loss costs.

In Florida, for example, “you’ve got over 70 percent of all homeowners insurance litigation residing in that state, whereas it represents less than 10 percent of the overall claims.”

He pointed out that Florida’s insurance market has improved – with homeowners insurance premium growth  flattening somewhat – as a result of tort reform legislation and added that Louisiana’s legislature addressed insurance reform during its most recent session.

“In California, insurers can’t catch up with inflationary costs because of regulatory constraints,” Kevelighan noted. “They are not able to model [climate risk] and are not able price reinsurance into their policies.”

California’s wildfire situation is complex, and the state’s Proposition 103 has hindered insurers’ ability to profitably write homeowners coverage in that disaster-prone state. In late September 2023, California Insurance Commissioner Ricardo Lara announced a package of executive actions aimed at addressing some of the challenges included in Proposition 103. Lara has given the department a deadline of December 2024 to have the new rules completed.

Learn More:

Florida Homeowners Premium Growth Slows as Reforms Take Hold, Inflation Cools

Lightning-Related Claims Up Sharply in 2023

Less Severe Wildfire Season Seen; But No Less Vigilance Is Required

Accurately Writing Flood Coverage Hinges on Diverse Data Sources

IRC: Homeowners Insurance Affordability Worsens Nationally, Varies Widely by State

Legal Reforms Boost Florida Insurance Market; Premium Relief Will Require More Time

2024 Wildfires Expected to Be Up From Last Year, But Still Below Average

CSU Researchers Project “Extremely Active” 2024 Hurricane Season

Triple-I Issues Brief: Hurricanes

Triple-I Issues Brief: Attacking Florida’s Property/Casualty Risk Crisis

Triple-I Issues Brief: California’s Risk Crisis

Triple-I Issues Brief: Legal System Abuse

Triple-I Issues Brief: Wildfires

Triple-I Issues Brief: Severe Convective Storms

Triple-I Issues Brief: Flood

Auto Insurance, Homeowners Insurance, Insurers and the Economy, Legal Environment, Market Conditions, Risk Management

Insurance Underwriting
and Economic Analysis: “Art and Science”

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By Lewis Nibbelin, Guest Blogger for Triple-I

Home and auto insurance premium rates have been a topic of considerable public discussion as rising replacement costs and other factors – from climate-related losses to fraud and legal system abuse – have driven rates up and, in some states, crimped availability and affordability of coverage.

It’s important for policyholders and policymakers to understand the role of economic conditions and trends in setting rates.  Jennifer Kyung, Property and Casualty Chief Underwriting Officer at USAA, opens a window into the complex world of underwriting and economics in a recent episode of Triple-I’s All Eyes on Economics podcast.

Kyung told podcast host and Triple-I Chief Economist and Data Scientist Dr. Michel Léonard that economic analysis “is critical to us in underwriting and as we manage our plan.” She described economics as “part of our muscle memory as underwriters” – adding that the economic uncertainty of recent years reinforces the need for underwriters to have “a very agile mindset.”

Underwriting and economics are “a little bit art and science,” representing a balancing act between sophisticated data analytics and creative problem-solving.

“When we think about sales and premiums for homeowners, we may look at things like mortgage rates or new home starts to indicate how the market is going,” Kyung said. “In auto, we might look at new vehicle sales or auto loan rates. These, in combination, help us look at macro-economic trends and the environment and how that might interplay with our volume projections. That helps us with financial planning, as well as operational planning.”

“It’s really critical to keep these on the forefront on an ongoing basis throughout the year,” she said, “so we can adjust as needed…. As our results come in, this gives context to the results.”

Through continual analyses of external market conditions and the internal quality and growth of your business, Kyung said, underwriters “can manage and mitigate some of the volatility and risk for our organizations.”

A tool she recommends for evaluating economic indicators is Triple-I’s replacement cost indices, which track the evolution of replacement costs throughout time across various lines of insurance and geographic regions. These indices enable insurers to synthesize raw economic data and insurance market trends, providing an auxiliary framework to bolster financial and operational planning.

Kyung said Triple-I offers additional insight into “local flavor,” or “understanding what the emerging issues are…related to the local environment,” through such tools as Issues Briefs and Insurance Economics Profilers. Recent supply-chain disruptions have accentuated the relationship between local and global economies, revealing the importance of employing local economic analytics to interpretations of broader insurance market patterns.

Such fusions can help facilitate efficient planning in the face of shifts in the insurance landscape.

The full interview is available now on Spotify, Audible, and Apple.

Catastrophes, Homeowners Insurance, Insurance Industry, Legal Environment, Market Conditions

Florida Homeowners Premium Growth Slows
as Reforms Take Hold, Inflation Cools

Historic Florida State Capitol Building Source: Getty Images

Homeowners insurance premium growth in Florida has slowed since the state implemented legal system abuse reforms in 2022, according to a Triple-I analysis.

As shown in the chart below, average annual premiums climbed sharply after 2020. This was due in part to inflation spurred by the COVID-19 pandemic and the war in Ukraine as well as longtime challenges in the state with claim fraud and legal system abuse.

Source: Triple-I analysis of NAIC and OIR data

According to the state’s Office of Insurance Regulation (OIR), Florida accounted for nearly 71% of the nation’s homeowners claim-related litigation, despite representing only 15% of homeowners claims in 2022, the year Category 4 Hurricane Ian struck the state. In that same year, and prior to Ian making landfall in the state as a first major hurricane since 2018’s Hurricane Michael, six insurers declared insolvency. Hurricane Ian became the second largest on record by insured losses, in large part because of the extraordinary litigation costs estimated to result in Florida in the aftermath.  

The Florida Legislature responded to the growing crisis by passing several pieces of insurance reform, primarily tackling problems with assignment of benefits (AOB), bad-faith claims, and excessive fees.  For example, the new laws eliminated one-way attorney fees in property insurance litigation, forbid using appraisal awards to file a bad-faith lawsuit, and prohibited third parties from taking AOBs for any property claims. The legislation also ensures transparency and efficiency in the claims process and encourages more efficient, less costly alternatives to litigation.  

A surge in litigation

Litigation spiked when backlogged courts reopened following the pandemic, then again when the reforms were passed in 2022 and 2023, as plaintiffs’ attorneys raced to file suits ahead of implementation of the legislation.

This increase in litigation, combined with persistently strong inflation, contributed to increased loss costs and premium increases. In 2022, average homeowners premium rates rose more than 17 percent, to $3,040. Premiums continued to rise in 2023, although at a decreasing rate, as inflation has moderated and legal reforms have kicked in.

There are early signs that the reforms are beginning to bear fruit. In 2023, Florida’s defense and cost-containment expense (DCCE) ratio – a key measure of the impact of litigation – fell to 3.1, from 8.4 in 2022, according to S&P Global. In dollar terms, 2023 saw $739 million in direct incurred legal defense expenses – a major decline from 2022’s $1.6 billion. For perspective, incurred defense costs in the two largest U.S. insurance markets in 2023 were $401.6 million in California, followed by $284.7 million in Texas. As the chart below shows, Florida’s DCCE ratio – even during its best years – regularly exceeds the nation’s.

As insurers have failed or left the state, Citizens Property Insurance Corp. – the state-run insurer of last resort and currently Florida’s largest residential insurance writer – has swelled with new business and lawsuits. Citizens’ depopulation efforts to move policyholders to private insurers contributed to policy counts falling to 1.23 million by the end of 2023.

It’s important to remember that all premium estimates are based on the best information available at the time and actual results may differ due to changes in market conditions. For example, earlier Triple-I projections that average annual homeowners premiums in Florida would exceed $4,300 in 2022 and $6,000 in 2023 assumed significant rate increases would be needed to restore profitability to the state’s homeowners market. These projections did not assume legislative reform or that Citizens would become the state’s largest homeowners insurance company, with many risks priced below the admitted and excess and surplus markets. Our projections also assumed inflation would continue to grow at rates similar to those prevailing at the time.

In light of the reforms and moderating inflation, we are now reporting lower average annual premiums of $3,040 (2022) and $3,340 (2023). The Florida OIR has reported average premium rate filings are running below 2.0 percent in 2024 year-to-date in the private market. Further, OIR indicated eight domestic carriers have filed for rate decreases and 10 have filed for no increase this year. Additionally, eight property insurers have been approved to enter the Florida market, with more expected this year.

Triple-I will continue to monitor and report on the evolving property insurance market in Florida.

Insurance Industry, Legal Environment

Operating from the shadows, TPLF can create problems for judges and courts.

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Hand with black sleeve holding a gavel, piles of documents

A recently published article, The Fifth Dimension: TPLF and Its Effect on the Judiciary, highlights the ways the rising specter of third-party litigation funding (TPLF) can create unnecessary challenges for the judiciary. 

Triple-I has published a great deal regarding the potential impact of TPLF on costs for insurers and policyholders. Bellino’s gaze focused on potential risks for the judiciary:

  • Increased judicial workload
  • More fraudulent claims
  • Longer litigation and slower settlements
  • Creation of potential appellate issues

And, like many insurance industry stakeholders, Lisa M. Bellino (VP Claims Judicial & Legislative Affairs for Zurich North America in Philadelphia) is fundamentally concerned about the lack of transparency surrounding TPLF’s involvement in a lawsuit.

TPLF is a growing and costly aspect of legal system abuse, a problem that Triple-I and other industry thought leaders define as policyholder or plaintiff attorney actions that unnecessarily increase the costs and time to settle insurance claims. Qualifying actions can arise, for example, when clients or attorneys draw out litigation in hopes of a larger settlement simply because TPLF investors take such a giant piece of the payout. As there is little transparency around the use of TPLF, insurers and the courts have virtually no leeway in mitigating any of this risk.

TPLF can lead to undue judicial burden and waste.

When judges are unaware of the funding arrangement, they would likely also be in the dark about potential conflicts of interest or improper claims and, therefore, be unable to mitigate these risks. However, Bellino argues that the de facto practice of secrecy can cause judicial waste even in the limited number of jurisdictions and courts that require disclosure. Judges may feel compelled to spend a significant amount of time ascertaining attorney compliance. As funding often involves parties not directly related to the case, the judiciary may need to hold additional hearings and reviews to uncover the real parties in interest. Bellino cites a case in which the real parties were not the named plaintiffs.

TPLF can be a driving factor behind lawsuit generation.

When law firms pursue class action litigation, they may engage “lead generators,” companies that help find plaintiffs for a specific tort. Advertising tactics can include traditional and social media. When prospective claimants respond to these ads, they are directed to a law firm or a call center that distributes the recruited claimants to law firms. This service comes at a steep price – in dollars and justice. As funding may often come from TPLF, Bellino describes how the profit model behind lead generation companies working with law firms can increase the risk of fraudulent claims.

The risk of bogus claims and claimants can surge with TPLF.

Funders of class action litigation have a financial incentive to drive up the number of plaintiffs. As neither the defense nor the judge is typically aware of the third party’s potential conflict of interests, judicial resources can be wasted, and justice can be delayed for legitimate claimants. Bellino cites, among other examples, a New York case to illustrate how litigation funders and attorneys may even collaborate in multi-million dollar fraud schemes.

TPLF funders may encourage drawn-out litigation and hinder settlements

Bellino cites a case highlighting how funders might control litigation and delay resolutions to maximize their returns. A publicly traded TPLF giant allegedly blocked a settlement agreement between a plaintiff and the defendants, resulting in prolonged litigation across multiple jurisdictions. The interference may have led to additional motions, hearings, and opinions, diverting judicial resources from resolving the dispute between the named parties. As a result, costs for the plaintiff, defendant, and the courts likely would’ve soared. 

Undisclosed TPLF involvement can spark appellate concerns.

Undisclosed funding agreements can also prevent parties from adequately preparing their cases and preserving appellate issues. For example, a TPLF investor may fund medical testing that leads to recruiting plaintiffs for a class action against a drug manufacturer.  If this fact wasn’t disclosed to the defendants or court, at the very least, the defendant wouldn’t have access to information needed for defense or subsequent appeals. Also, the judiciary wouldn’t be able to perform its duty to monitor red flags for potential bias or fraud. It is also possible that the interests of the plaintiff will be affected by other appellate concerns, too.

Increases in litigation and claim costs have threatened the affordability and availability of many areas of insurance coverage. TPLF involvement, like other channels for potential legal system abuse, is nearly impossible to forecast and mitigate. And despite its original intended purpose–to help plaintiffs seek justice– it can extract a disproportionate amount of value from settlements, weakening the primary purpose of a financial payout.

Overall, the shroud of secrecy around TPLF can undermine the legal system, posing threats to unbiased and fair legal outcomes. Bellino strongly advocates for mandatory disclosure of TPLF agreements at the beginning of litigation. A system-wide requirement for early transparency would allow courts and involved parties to address potential conflicts, biases, and fraud early in the process. In her words, “Disclosure may restore reality and close the door on the TPLF Twilight Zone.”

To learn more about how TPLF can impact costs for insurers and policyholders, take a look at our primer, What is third-party litigation funding and how does it affect insurance pricing and affordability? Our issue brief, Legal System Abuse: State of the Risk, can also provide more context on how TPLF fits into social inflation.  

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