Virtual Triple-I Forum Reviews 2020, Looks Ahead at Risks, Opportunities

Sean Kevelighan, Triple-I CEO

Insurance is a business that promotes and demands resilience, and 2020 was a year-long case study in our industry’s ability to respond rapidly to new challenges from a firm financial foundation. Triple-I’s virtual Joint Industry Forum (JIF) provided many examples from a range of industry and academic leaders, along with insightful discussions about what the industry faces in the near and longer terms.

At the 2020 JIF in New York City, it was clear from our various panels that the industry had a full plate of priorities for the year ahead. Then came COVID-19, and a whole new set of public health and economic concerns was added to the existing exposure mix. The virus brought a strong economy nearly to a halt; while officials assessed and responded to these threats, civil unrest on a scale not seen since the 1990s broke out on the streets of many cities; historic and near-historic weather and wildfire activity descended on communities whose resources were already strained by the pandemic.

And all of the above took place amid the uncertainty created by the most contentious, chaotic election year in modern U.S. history.

Through it all, as this year’s JIF speakers described, the property/casualty insurance industry managed to shine.

“Look at how our companies performed” in the real-time shift to fully remote work, noted Chuck Chamness, President and CEO of the National Association of Mutual Insurance Companies (NAMIC). “Then look at the dynamic changes in our businesses caused in large part by the pandemic, where we gave back $14 billion in premiums to policyholders and contributed a couple of hundred million dollars-plus in charitable contributions. We really did our job this year.”

David Sampson, American Property Casualty Insurance Association (APCIA) President and CEO, added that the “bulk of the industry came together to proactively work with agents and policymakers to create a solution that could work for all stakeholders to provide protection against widespread economic shutdown as a result of a viral outbreak.”

APCIA, NAMIC, and Independent Insurance Agents and Brokers of America proposed to Congress a Business Continuity Protection Plan (BCPP) that would allow businesses to buy revenue-replacement coverage for up to 80 percent of payroll and other expenses in the event of a pandemic through state-regulated insurance entities, with aid coming from the Federal Emergency Management Agency (FEMA), which would run the program.

Our industry also faced a literal existential threat in the form of efforts to require insurers to pay billions in business income (interruption) claims for which not one penny of premium had ever been paid. Thanks to industry leaders stepping up to educate policymakers and the media, much of this threat – though, by no means all of it – seems to have faded. Triple-I’s Future of American Insurance & Reinsurance (FAIR) campaign played a critical role in informing policy discussions on business interruption coverage, the uninsurability of pandemic risk, and the need for federal involvement to mitigate the financial impact of future pandemics.

Throughout this year’s virtual JIF, the emphasis on innovation is a consistent thread. Peter Miller, President and CEO of The Institutes, observed that the pandemic and its attendant operational and economic stresses forced the industry into innovation overdrive. He cited a member of The Institutes’ board saying 2020 “caused them to do 10 years of innovation in one,” adding that board members have told him work-from-home alone has saved their companies “one hundred-plus million dollars a year.”

Whether discussing the industry’s response to climate change and extreme weather or how to communicate the importance of risk-based pricing to policymakers, innovation is at the heart of solving every challenge (and seizing every opportunity) our industry faces. Peter emphasized the importance of using innovation strategically across the entire value chain – not just to solve specific problems as they emerge.

In addition to the panelists I mentioned above, the conversations featured a cross section of industry leaders, Triple-I subject-matter experts and non-resident scholars. If you weren’t able to attend, you can view and watch the panels here.

Californians Warned About Mudslide Riskas Winter Bears Downon Wildfire Areas

California Insurance Commissioner Ricardo Lara is alerting citizens to review their insurance policies in order to protect themselves and their assets in anticipation of winter weather bringing the possibility of  floods, mudslides, debris flows, and other disasters to recent wildfire burn areas throughout the state.

The commissioner issued a notice to insurers reminding them of their duty to cover damage from any future mudslide or similar disaster caused by recent wildfires that weakened hillsides. In particular, the United States Geological Survey (USGS) has projected increased likelihood of debris flow for fire-scarred areas of the state in the event of heavy rainfall.

Many Californians may not be aware that homeowners’ and commercial insurance policies typically exclude flood, mudslide, debris flow, and other similar disasters—unless they are directly or indirectly caused by a recent wildfire or another peril covered by the applicable insurance policy. For insurance purposes, it’s important to understand the difference between “mudslides” and “mudflow.” 

Mudslides occur when a mass of earth or rock moves downhill, propelled by gravity. They typically don’t contain enough liquid to seep into your home, and they aren’t eligible for flood insurance coverage.  In fact, mudslides are not covered by any policy. 

Mudflow is covered by flood insurance, which is available from FEMA’s National Flood Insurance Program (NFIP) and a growing number of private insurers. Like flood, mudflow is excluded from standard homeowners and business insurance policies—you must buy the coverage separately. 

The California Department of Insurance has posted a fact sheet for consumers to answer questions about what their policies cover.

What Is Social Inflation? What Can InsurersDo About It?

A recent study by the Geneva Association on the topic of “social inflation” addresses the challenges of defining and quantifying the phenomenon. More important, it takes on the question of what insurers and reinsurers can actually do about it.

“Social inflation is a term that is widely cited in insurance debates but it is often ill-defined or at best only loosely explained,” the report begins. Broadly speaking, it “refers to all ways in which insurers’ claims costs rise over and above general economic inflation.”

Actuaries typically label such growth in claims costs “superimposed inflation,” the study says, but their measures “may not adequately account for advances in medical technology, which create new therapies, change the costs of treatment, and increase the lifespan of seriously injured claimants,” as well as other considerations.

More narrowly, the report says, “social inflation refers to legislative and litigation developments which impact insurers’ legal liabilities and claims costs.”

The definitional difficulties are well illustrated in the rendering below, from the study.

Understanding what drives these costs – and whether they are temporary phenomena or a long-term trend – is essential to adequately pricing insurers’ exposures and enabling them to pay claims.

Major drivers, possible solutions

Rollbacks in tort reforms stemming from past insurance availability and affordable crises have been implicated by some for driving social inflation. The report finds that any such correlations are “weak at best.”

More significant, the study found, are shifting judge and jury attitudes in ways favorable to plaintiffs; growing anti-corporate bias; and aggressive tactics used by plaintiff attorneys, including third-party litigation funding.  

What can insurers do to battle social inflation? The report suggests four areas of focus:

  • Engage in the public-policy debate to promote legislative changes that further level the playing field between plaintiffs and defendants;
  • Get better at defending against aggressive and increasingly well-armed plaintiffs’ attorneys;
  • Upgrade underwriting to reduce opportunities for claims surprises. “Insurers need better early-warning systems,” the report says, drawing on information from across their organizations, their own and competitor liability cases, and data from social and digital media;
  • Develop products with an eye toward mitigating social inflation. Given the scale of potential liability exposures, the report says, “co-participation arrangements” to share risks among reinsurers could help maintain and even expand the boundaries of insurability. Parametric insurance also might have a role to play.

More on social inflation, from the Triple-I Blog






What property/casualty insurance industrycan expect fromBiden White House

On January 20, in a historic inauguration ceremony surrounded by U.S. soldiers guarding against domestic terrorism — before a field of 200,000 illuminated flags representing Americans who could not attend the ceremony because of the coronavirus pandemic — President Joe Biden and Vice President Kamala Harris were sworn into office.

Sean Kevelighan, CEO, Insurance Information Institute (Triple-I), today released the following statement:

“Every four years—for more than two centuries—the United States has celebrated its Constitution, and that historic document’s invocation of “We, the People,” through the orderly and peaceful transfer of power atop the government’s executive branch. With today’s inauguration of President Joseph Biden and Vice President Kamala Harris, that solemn tradition continues in our nation’s capital only two weeks after unprecedented lawlessness descended upon Washington, D.C.

The U.S. economy is facing extraordinary challenges due to the COVID-19 pandemic. Yet the U.S.’s insurance industry will continue to provide essential financial protections to individuals and businesses while at the same time employing millions of Americans and paying billions of dollars in taxes to support crucial government services. The industry-supported Insurance Information Institute congratulates the Biden-Harris administration as it takes office. We also stand ready to provide its policymakers with the Triple-I’s unique, data-driven insights on insurance to inform public policy.”

The Biden administration has listed COVID-19, economic recovery, racial equity, and climate change among its top priorities.

In coming months, the property/casualty insurance industry is likely to encounter a frenetic pace of legislative activity on many issues affecting its operations. Here are just a few:

Climate Change –  Senator Dianne Feinstein’s proposed Addressing Climate Financial Risk Act, intended to help federal regulators understand and mitigate risks from climate change within the financial system, would require a Federal Insurance Office (FIO) report on how to modernize and improve climate risk insurance regulation.

“The insurance industry is more directly affected by climate risk than other areas of the financial system,” said Feinstein’s press release. The report would be modeled on FIO’s 2013 report on modernizing state insurance regulation.

Rep. Carolyn Maloney introduced the Pandemic Risk Insurance Act, which is modeled after the Terrorism Risk Insurance Act enacted after 9/11. However, the bill has yet to gain widespread support. The insurance industry has advanced several pandemic risk mitigation proposals of its own.

Congress could deliberate reauthorizing the National Flood Insurance Program, which was last done with the Biggert-Waters Flood Insurance Reform Act of 2012.

Full federal marijuana legalization remains daunting, with a slim Democratic majority, according to Politico, but piecemeal legislation with wider bipartisan support, such as banking access for cannabis businesses and medical marijuana research, may have a better chance to advance. Conflicting state and federal laws have discouraged insurers from participating in the cannabis-related business market.

An expected increase in the corporate tax rate would mean higher tax liabilities for property/casualty insurers.

Risk-based insurance pricing is an issue that’s expected to heat up, and insurers will have to explain to a new set of legislators that the business of insurance hinges on predicting the level of risk a policyholder represents and charging a premium that corresponds with that level of risk.

On January 28, at Triple-I’s virtual Joint Industry Forum, CEOs from five major insurance industry trade associations will share their perspectives and public policy priorities for 2021. Click here to register for the complimentary event.

Study Supports Casefor Flood Mitigationas World Warms

Intensifying rainfall fueled by climate change over the past 30 years has caused nearly $75 billion in flood damage in the United States, according to a study by Stanford University researchers.

The findings, published in the journal Proceedings of the National Academy of Sciences, shed light on the growing costs of flooding and the heightened risk faced by homeowners, builders, banks and insurers as the planet warms. Losses resulting from worsening extreme rains comprised nearly one-third of the total financial cost from flooding in the U.S. between 1988 and 2017, according to the report, which analyzed climate and socioeconomic data to quantify the relationship between changing historical rainfall trends and historical flood costs.

About 90 percent of natural disasters in the United States involve flooding, and much has been written about the flood protection gap.

“On average nationwide, only 30 percent of homes in the highest risk areas have flood coverage,” according to the Risk Management and Decision Processes Center of the Wharton School at the University of Pennsylvania, a Triple-I Resilience Accelerator partner. “Less than 25 percent of the buildings flooded by Hurricanes Harvey, Sandy, and Irma had insurance. Indeed, repeatedly after floods there is evidence of the United States’ large and persistent flood insurance gap.”

To make matters worse, a recent analysis by the nonprofit First Street Foundation found the United States to be woefully underprepared for damaging floods. The foundation identifies “around 1.7 times the number of properties as having substantial risk,” compared with Federal Emergency Management Agency (FEMA) flood designation.

Flood coverage isn’t included in most homeowners insurance policies, so many may not know they don’t have it if their bank didn’t require them to buy it before providing a mortgage. Until recently, flood insurance was considered an untouchable risk for private insurers to write, so FEMA’s National Flood Insurance Program (NFIP) was the only game in town.

In recent years, however, Congress adopted new laws to support the emergence of a robust domestic private flood insurance market.  Last year, regulators provided rules that allowed private carriers to offer flood policies outside of NFIP and to qualify for the mortgage flood insurance requirement. Carriers and reinsurers are expanding their use of sophisticated models to underwrite flood risk, driving the growth of private sector flood insurance.

Triple-I has more information about flood insurance in our Spotlight on: Flood insurance article.

Auto insurance rates decline across the U.S.

Auto insurance rates declined in 2020 for the first time in a decade, according to a recent survey by The survey results anticipate a 1.7 percent decline nationally.

A major factor in the decline are the pandemic-related discounts granted by insurers in 2020. These discounts have been valued at $14 billion, according to Triple-I estimates. Triple-I Chief Actuary James Lynch reported that many auto insurers are building these discounts into rates for 2021 and that driving declined by as much as 50 percent during spring lockdowns.

The estimate of just how much rates are declining depends on the metrics you use. The Consumer Price Index (CPI) report for December 2020 indicates that auto insurance rates declined by 4.8 percent nationwide compared with the same month last year. By contrast, the CPI showed the cost of new vehicles rising by 2 percent in December and by 0.5 percent for the full year 2020.

A comprehensive July 2018 assessment of the Missouri auto insurance market by the state’s Department of Insurance discovered even larger declines. It found that, when adjusted for inflation, the typical Missouri driver has seen a 17 percent decrease in auto insurance premiums since 1998.

Triple-I’s 2021 Insurance Fact Book Chronicles a Historic 2020

The Insurance Information Institute (Triple-I), an affiliate of The Institutes, has released its 2021 Insurance Fact Book, an essential resource for anyone who needs up-to-date information on insurance.

This year The Insurance Fact Book has new content to address many of the past year’s events, in such areas as: insurer response to the pandemic; civil disturbances; and homeowners high-risk markets.

Highlighted in the “Emerging and Evolving Insurance Issues” section are five unique insurance risks that have been impacted by the COVID-19 pandemic: business income (interruption) insurance; workers compensation; extreme weather; social inflation; and cyber.

“2020 provided a good illustration not only ofhow the disruption continuum is evolving, but also how the insurance industry is able to adapt and lead,” said Sean Kevelighan, CEO, Triple-I. “While the year began fairly normally, we very quickly encountered a global pandemic that still rages; a 2020 Atlantic hurricane season for the record books; and Western wildfires that burned their way through homes and businesses. All the while claims for covered catastrophes were paid in new and innovative ways, and many customers experienced premium rebates and returns from auto insurers, given the lack of driving during economic lock-downs.”

The 2021 Insurance Fact Book is a digital publication available for purchase from the Triple-I online store. It is available free of charge to Triple-I members. The Insurance Fact Book, issued annually since the Triple-I’s inception in 1960, helps inform the decisions of policymakers and business leaders and is an essential resource for journalists, researchers, and academics, among others. 

The Fact Book includes thousands of facts, figures, statistical tables, and charts documenting primarily the property/casualty insurance industry in the U.S. and worldwide. The publication offers details on auto, homeowners, and business insurance markets, with data on direct premiums written and the factors impacting the cost of these coverages. Additionally, there is voluminous information on the life/annuity insurance and reinsurance industries.

What COVID-19 means for workers comp claims

So far, the impact of COVID-19 on workers compensation has not been as great as first feared. The National Council on Compensation Insurance (NCCI) reported that as of the second quarter 2020, out of every 100,000 active workers comp claims, COVID-19 medical claims accounted for only about 200, depending on the jurisdiction.

Still, the pandemic presents uncertainties and concerns for workers compensation, just as it does for many other sectors.

NCCI’s annual survey found that COVID-19 was the top concern of workers compensation executives going into 2021.  Executives worry about uncertainty surrounding the duration of the pandemic, the size and number of claims that could develop, recovery time for workers sickened by COVID-19 and whether there would be long-term needs or lasting adverse effects.

Executives also mentioned state compensability presumptions that have arisen during the pandemic. These presumption rules, passed by various states, say that COVID-19 infections in certain workers are presumed to be work-related and covered under workers compensation. This presumption places the burden on the employer and insurer to prove that the infection was not work-related making it easier for those workers to file successful claims.

The executives surveyed by the NCCI expressed concern about the variations developing across states and the complexity of legislation and regulations that adds to the challenge of the rapidly evolving environment. Several noted issues and questions related to reinsurance for presumptive claims. Others are anticipating that compensability presumptions for contagious diseases, such as those instituted for COVID-19, will be widely adopted and permanently enacted or even expanded, in some cases, to include other common diseases.

In many states, immigrants are eligible for workers compensation benefits regardless of their legal status. A recent blog post by a legal expert showed how a decision by the Supreme Court of Nevada reiterated that the state’s workers’ compensation statutes clearly and unambiguously protected every person in the service of an employer, whether lawfully or unlawfully employed. The high court affirmed the judgment of the state district court that denied judicial review to an appeals officer’s decision awarding permanent total disability benefits to an undocumented worker.

Expanded Triple-I Flood Risk Maps Provide Richer Perspective

The Triple-I Resilience Accelerator’s flood risk visualization tool is being enhanced with:

  • National Flood Insurance Program (NFIP) data on “take-up rates” by U.S. county from 2010 to 2021,
  • Differences between take-up rates inside and outside of flood zones, and in different proximities to flood zones.

These additions will expand the Accelerator’s visualization from covering only the current year to providing an historical perspective on how take-up rates have changed over time. 

Take-up rates and resilience

Insurance take-up rates represent the percentage of people eligible for a particular coverage who take advantage of it. In the case of flood insurance, they are calculated as the number of insurance policies in force in a certain geography over the total number of eligible properties for which insurance can be bought.

Understanding flood insurance take-up rates is essential to assessing and improving communities’ ability to rebound from damaging events. About 90 percent of natural disasters in the United States involve flooding, the NFIP says, and much has been written about the flood protection gap.

“On average nationwide, only 30 percent of homes in the highest risk areas have flood coverage,” according to the Risk Management and Decision Processes Center of the Wharton School at the University of Pennsylvania, a Triple-I Resilience Accelerator partner. “Less than 25 percent of the buildings flooded by Hurricanes Harvey, Sandy, and Irma had insurance. Indeed, repeatedly after floods there is evidence of the United States’ large and persistent flood insurance gap.”

But understanding that gap to a degree that will support meaningful action requires comprehensive, granular data only NFIP can provide. It also requires the data to be available in easy-to-use formats. This is where the Triple-I/NFIP collaboration comes into play.

Key considerations to keep in mind when looking at take-up rates are year-over-year changes; whether the rates are by city, county, or state; and whether they are for all homes or homes in flood zones alone. During the first quarter of 2021, Triple-I’s Resilience Accelerator’s flood map will be updated with four options for users to visualize:

  • Annual take-up rates from 2010 to 2018,
  • 2019 take-up rates based on 2018 renewals only,
  • County-wide and flood-zones-only take-up rates estimates for 2020, and
  • County-wide share of dwellings in close proximity to flood zones.

Historical perspective

In 2019, NFIP started publishing historical data on NFIP insurance coverage, policies, and claims. NFIP’s decision to publish this data was a transformative point for industry practitioners, academics and those involved with flood insurance analysis. The Triple-I’s visualizations use NFIP’s full- and part-year data from 2010 to 2019 and our own estimates, based on this data, for 2020.

Dr. Michel Léonard, CBE, Triple-I vice president and senior economist says: “We’ve worked closely with NFIP to ensure that our visualizations reflect the most current, accurate information available on flood insurance take-up rates. In addition, we wanted to add to the discussion surrounding NFIP take-up rates by providing less common yet insightful ways to understand and visualize take-up rates, such as take-up rates for properties in flood zones only or the share of a country’s property in different proximities to flood zones.”

Flood coverage, as opposed to water damage from mechanical breakdown inside a house, isn’t included in most homeowners insurance policies, so many homeowners may not realize they don’t have it if their bank didn’t require them to buy it before providing a mortgage. Until recently, flood insurance was considered an “untouchable” risk for private insurers to write, so the NFIP was the only game in town.

In recent years, however, Congress adopted new laws to support the emergence of a robust domestic private flood insurance market.  Last year, regulators provided rules that allowed private carriers to offer flood policies outside of NFIP and to qualify for the mortgage flood insurance requirement. Carriers and reinsurers are expanding their use of sophisticated models to underwrite flood risk, driving the growth of private sector flood insurance.

 “We want to acknowledge and stress how significant the NFIP Policy and Claims data is to increasing our understanding of flood risk,” Léonard said. “Good data takes a lot of work, and NFIP’s commitment to making this data available is a perfect example of public-private partnerships delivering concrete value.”  

One Year. Two Forums. We’re Virtual in January and In Person in June

2021 is already looking brighter. Triple-I is presenting not one, but two, Joint Industry Forums in 2021! We’re kicking off the year with our virtual forum—Virtually Together: Insuring Our Way Forward—on Jan. 28. Then we’re making plans to gather in June in Washington, DC.

Registration for our first virtual Joint Industry Forum is complimentary. Plus, attendees to the virtual Forum receive a discounted registration for the in-person event.

Our virtual Forum focuses on the industry’s shared work to insure and protect. We have three sessions on tap for the day featuring dynamic industry thought leaders.

Trade Winds Navigation: More Rough Waters or Smooth Sailing Ahead?

Climate Change Risk & Resilience: Facing the Facts

CEO Perspectives

Confirmed Speakers (with more to be announced soon!)

• Tim Adams, President and CEO, Institute of International Finance

• Charles Chamness, President and CEO, National Association of Mutual Insurance Companies

• Sean Kevelighan, CEO, Insurance Information Institute

• Peter Miller, President and CEO, The Institutes

• Frank Nutter, President, Reinsurance Association of America

•David Sampson, President and CEO, American Property Casualty Insurance Association

Register today