Monthly Archives: January 2023

Auto Insurance, Legal Environment

Florida Auto Legislation, on Heels of 2022 Reforms, Suggests State is Serious About Insurance Crisis Fix

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Florida legislation proposed last week would prevent the state’s motorists from assigning their legal rights in auto insurance claims to repair shops.  

Assignment of benefits (AOB) is a standard practice in the insurance world. In Florida, however, this efficient, customer-friendly way to settle claims has long served as a magnet for fraud. The state’s legal environment has encouraged vendors and their attorneys to solicit unwarranted AOBs from tens of thousands of Floridians, conduct unnecessary or unnecessarily expensive work, then file tens of thousands of lawsuits against insurers that deny or dispute the claims.

Legislation approved in the closing weeks of 2022 took several crucial steps toward resolving the state’s property/casualty insurance crisis, including elimination of the state’s AOB laws with respect to property claims. But it didn’t affect auto-related AOBs.

Intended to help consumers

Florida’s auto glass law – originally intended to encourage drivers to repair or replace damaged windshields by prohibiting insurers from charging deductibles for windshield damage – is being exploited by glass-repair shops all over Florida. Unscrupulous vendors hire workers to canvas neighborhoods, enticing vehicle owners to sign up for “free” windshield replacements. They get car owners to sign an AOB contract that assigns the owners’ legal rights to the repair shop.

The shop then can sue the consumer’s insurer if it doesn’t pay what the shop demands. The result is a lawsuit by the vendor in the consumer’s name.

Lawyers have a strong incentive to file suits, as the insurer is required to pay their fees if it loses in court.  This has resulted in a “sue-to-settle” system, in which lawyers file suits over very small disputes to force a settlement.

Hope for the future

“What began as a small regional issue a decade ago with a few lawyers and some auto repair shops has blown up to become a major problem throughout the state,” said Mark Friedlander, Triple-I’s director of corporate communications and a Florida resident. Between 2011 and 2021, the number of auto glass lawsuits in Florida rose more than 4,000 percent, from 591 to more than 28,000. A National Insurance Crime Bureau (NICB) analysis found that Florida had the highest number of questionable auto-glass claims among the 50 states in 2020.

WhileFlorida is a “no-fault” state – meaning both parties in an accident submit claims to their own insurer, regardless of fault – it ranks high for attorney involvement in accident claims, the Insurance Research Council (IRC) has found. Attorney involvement is associated with higher costs, and IRC also has found Florida to be among the least affordable auto insurance markets.

The new measure, filed for the 2023 legislative session that starts March 7, offers hope that Florida is finally serious about solving the decades-old mechanisms that have fed the state’s current insurance crisis. Taken together, the two pieces of legislation will help stabilize Florida’s insurance market, but it will take years for the impacts of fraud and legal system abuse to be wrung out of the system.

Learn More:

Fraud, Litigation Push Florida Insurance Market to Brink of Collapse

Florida’s AOB Crisis: A Social-Inflation Microcosm

Careers and Employment

Nurturing Tomorrow’s Risk & Insurance Leaders

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By Loretta L. Worters, Vice President, Media Relations, Triple-I

Forget the stereotype of the boring door-to-door life insurance salesperson – aka Ned Ryerson from the movie Groundhog Day.  Insurance is not just about sales – it is a purpose-driven industry with countless opportunities to make a positive impact on individuals, businesses, and communities.

The insurance industry employs more than 2.8 million people spanning an incredible range of skills and talents, from art historians to actuaries; data scientists to drone pilots; marketers to M&A specialists; and, of course, from underwriters to claims professionals.

February’s annual celebration of Insurance Careers Month offers a reminder of the industry’s opportunities.

First organized in 2016, Insurance Careers Month seeks to inspire young people to choose insurance as a career, share what makes the industry a great one to work in, and collaborate to recruit, nurture, and retain emerging leaders.

“Insurance is the backbone of the global economy, providing security, recovery, and sustainability,” said Triple-I CEO Sean Kevelighan. “Whether just starting out in the workforce or thinking about a career enhancement, there are a wealth of opportunities across a broad spectrum of pursuits.”  

To raise awareness about insurance as a career path, Triple-I continues to partner with the HBCU I.M.P.A.C.T Initiative, Inc.® (IMPACT), a campaign aimed at recruiting students at historically Black colleges and universities (HBCUs) to the insurance industry. 

Lack of exposure to the insurance industry and to professional networks are the top barriers for Black professionals, according to a study conducted by Marsh. That’s why the Black Insurance Industry Collective (BIIC), a nonprofit organization affiliated with The Institutes, is focused on accelerating the advancement of African-American insurance professionals. The goal of BIIC is to empower these professionals to expand their leadership development opportunities by emphasizing mentorship and sponsorship while collaborating with like-minded organizations.  

“We contributed to the formation of the BIIC as part of our overall Diversity, Equity, and Inclusion initiative,” said Peter L. Miller, CPCU, president and chief executive officer of The Institutes. “We look forward to working with the BIIC Leadership Council as they cultivate and preserve a culture of inclusion for all who work in and are served by the risk-management and insurance community.”

The Insurance Industry Charitable Foundation (IICF) has a Talent HubTM, an online resource center created to help job seekers learn about opportunities in the insurance industry and for the insurance carriers, reinsurers, brokers, and agents to reach a new and diverse talent pool. 

“As the Baby Boomers near retirement, the insurance industry will need to fill a generation’s worth of jobs,” said IICF CEO Bill Ross.  “The goal of the IICF Talent HubTM is to introduce a new audience of non-traditional job seekers to the industry and the rewarding jobs and careers that are available.”

Talent development and the future of work will also be two key topics at the IICF Inclusion in Insurance Global Conference, June 13-15, 2023, in New York City.

Other organizations – like RIMS, the Spencer Educational Foundation and Gamma Iota Sigma – promote and advance risk-management and insurance education at the undergraduate and graduate levels.

In conjunction with Insurance Careers Month, the American Property Casualty Insurance Association’s (APCIA) 5th annual Emerging Leaders Conference, to be held February 5-7 in Charleston, S.C., will give younger industry professionals access to executive thought leadership, networking opportunities across job functions, and an agenda focused on professional and personal development. 

“The insurance industry is facing the most competitive labor market in decades, making retaining and developing talent a top priority,” said Marguerite Tortorello, managing director, Insurance Careers Movement, an industry initiative designed to raise awareness of the diverse career options risk management and insurance offer. “The Insurance Careers Movement is designed to bring together and recognize exceptional rising stars in our industry; an industry we are most proud to be a part of.”

As the next generation of professionals embark on their careers, they will find it’s an exciting time to join the insurance industry – an industry that embraces people who can drive change, innovate, and solve problems.  They will find that with a career in insurance they can contribute meaningful work, making a difference in the world every single day. 

Auto Insurance, Highway Safety, Theft

Online Promotionof Car-Theft Techniques Adds to Upward Pressure on Insurance Premiums

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Three anti-crime organizations have asked YouTube to take down all videos that teach people how to steal Kia and Hyundai automobiles. The organizations – the National Insurance Crime Bureau (NICB), the Coalition Against Insurance Fraud, and the International Association of Special Investigation Units (IASIU) – made their request in response to a spike in thefts of these vehicles.

The Highway Loss Data Institute (HLDI) late last year reported that bargain-priced Kia and Hyundai vehicles were being targeted for theft at rates similar to muscle cars and SUVs, based on an analysis of 2021 insurance claims. The spike is due, in part, to the fact that the models being stolen don’t have electronic immoblizers that stop thieves from bypassing the ignition.

Some thieves have even made instructional videos – shared on platforms like YouTube and TikTok – on how to perform the theft procedure using just a screwdriver and a USB cable. Since these videos started appearing on social media, police departments across the U.S. have reported drastic increases in Kia and Hyundai thefts.

In Chicago, for example, where only 328 Kias were stolen in 2021, more than 3,500 were stolen last year, CBS Chicago reported.

“Everyday consumers are being victimized by criminals using social media platforms to learn their newest illegal tricks and techniques,” said David Glawe, president and CEO of the NICB. “Some platforms are not doing enough to protect innocent victims from unnecessary harm.”

Celeste Dodson, president of IASIU, added, “When a vehicle is stolen, it is often not the end of the crime but the beginning. Vehicle thefts are associated with a multitude of criminal activity, including insurance fraud. The cost of these crimes is then passed on to consumers through higher premiums.”

Private-passenger auto insurance premium rates are experiencing upward pressure due to a variety of factors, including:

  • Rising insurer losses due to increasing accident frequency and severity;
  • More fatalities and injuries on the road, leading to increased attorney involvement in claims;
  • Continuing supply-chain issues, leading to rising costs for cars, replacement parts, and labor; and
  • More costly auto repairs due to safer, more technologically sophisticated vehicles.

Thefts of vehicles or components like catalytic converters only increase that pressure to raise rates.

The only way to turn that pressure down is to reduce claims and losses by reducing accidents and thefts. Making it harder for people to learn how to break the law and cause damage by watching online videos would be a small but needed step in that direction.   

Cyber Risk

Despite Warnings,Weak Password Policies Still Invite Cybercrime

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By Max Dorfman, Research Writer, Triple-I

It’s Cyber Security 101: Multi-factor authentication and hard-to-crack passwords are table stakes for preventing incursions.

Nevertheless, “Password,” “12345”, and “Qwerty123” are among the most commonly found passwords leaked on the dark web by hackers, according to mobile security firm Lookout. And, despite the amount of attention the issue receives, the situation does not appear to be improving.

A survey by EY, a consulting firm based in the United Kingdom, found that only 48 percent of government and public sector respondents said they are “very confident in their ability to use strong passwords at work.” The problem is exemplified by a recent study by the U.S. Office of Inspector General – part of the Department of the Interior (DOI), the agency responsible for managing federal lands and natural resources.

Hacking DOI, it turns out, is relatively easy.

In fewer than two hours – and spending only $15,000 – the Inspector General’s Office was able to procure “clear-text” (non-encrypted) passwords for 16 percent of user accounts. In total, 18,174 of 85,944 – 21 percent of active user passwords – were hacked, including 288 accounts with elevated privileges and 362 accounts of senior U.S. government employees.

Much of this issue, according to the report, stems from a lack of multifactor authentication, as well as password complexity requirements that allowed unrelated staff to use the same weak passwords. The Inspector General’s Office found that:

  • DOI did not consistently implement multifactor authentication;
  • Password complexity requirements were outdated and ineffective; and
  • The department did not timely disable inactive accounts or enforce password age limits, which left more than 6,000 additional active accounts vulnerable to attack.

The most commonly reused password was used on 478 unique active accounts. Investigators found that five of the 10 most-reused passwords at DOI included a variation of “password” combined with “1234”.

Simple passwords make hacking easy

With the average person having over 100 different online accounts with passwords, reusing passwords is understandable – but simple passwords make it easy for hackers to access personal data and accounts.

“Compromised, weak and reused passwords still account for the majority of hacking-related data breaches and are one of the top risk issues for most enterprises” said Gaurav Banga, CEO and founder of cybersecurity firm Balbix. In 2020, Balbix found that 99 percent of enterprise users recycle passwords across work accounts or between work and personal accounts.

A growing peril

“The cost of ransomware attacks has increased as criminals have targeted larger companies, supply chains and critical infrastructure,” Allianz says in its Allianz’s 2023 Risk Barometer. “In April 2022, an attack impacted around 30 institutions of the government of Costa Rica, crippling the territory for two months.”

The global insurer goes on to say, “Double and triple extortion attacks are now the norm…. Sensitive data is increasingly stolen and used as a leverage for extortion demands to business partners, suppliers, or customers.”

Part of this growth is due to the rise of “ransomware as a service” – a subscription-based business model that enables affiliates to use existing ransomware tools to execute attacks. Based on the “software as a service” model, it helps bad actors attack their targets without having to know how to code or hire unscrupulous programmers.

Shifting targets

Michael Menapace, an insurance attorney with Wiggin and Dana LLP and a Triple-I Non-resident Scholar, told attendees at Triple-I’s 2022 Joint Industry Forum that “ransomware as a business model remains alive and well.”

What has changed in recent years, he said, is that “where bad actors would encrypt your systems and extract a ransom to give you back your data, now they will exfiltrate your data and threaten to go public with it.”

The types of targets also have changed, Menapace said, with an increased focus on “softer targets—in particular, municipalities” that often don’t have the personnel or finances to maintain the same cyber hygiene as large corporate entities.

Organizations and individuals must take the threat of cyberattacks seriously and do as much as possible to reduce their risk. Improved cyber hygiene policies and practices are a necessary first step.

Industry Financials, Insurance Industry, Insurers and the Economy

Monetary Policy Drives Economic Prospects; Geopolitics Limits Inflation Improvement

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Inflation, interest rates, and recession will dominate the U.S. economic narrative in the first quarter of 2023, shifting in the second and third to a focus on timing of recovery and a more neutral monetary policy and, in the fourth, whether and when the Fed will signal the start of a new easing cycle, according to Triple-I Chief Economist and Data Scientist Dr. Michel Léonard.

“We forecast the U.S. economy to grow 3.2 percent in 2023, up from 2.6 percent in 2022,” Léonard says. The U.S. Consumer Price Index (CPI) ended 2023 at 6.5 percent year over year, down from a high of 9.1 percent year over year in June. “Triple-I expects inflation to continue to decline throughout 2023, though not equally from one to the next quarter. The pace and extent of any inflation slowdown are predicated on improvements in global geopolitical risk.”

P&C underlying growth, which has been below overall GDP since the start of the pandemic, is likely to grow at a faster pace than the rest of the U.S. economy throughout the year.

“We remain cautious and forecast insurance underlying growth for 2023 to be around 3 percent, up from 2 percent in 2022,” Léonard says. “We forecast P&C replacement costs to increase by between 4.5 percent and 6.5 percent year-over-year in 2023. P&C replacement costs increased on average 25 percent since the beginning of the COVID-19 pandemic in 2020.”

Even though Triple-I expects economic fundamentals to improve throughout 2023, line-specific underwriting considerations will continue to depress performance, Léonard says.

Triple-I members can access the Triple-I’s Economic Dashboard, available at the organization’s members-only website. The Dashboard’s ongoing updates allow insurance industry professionals to follow key economic reports (e.g., federal governmental updates on interest rate, unemployment, and housing trends) in real time, adjust forecasts, and recalibrate strategy. Each quarter, the Triple-I’s Outlook provides a road map about which key economic reports will most impact insurance industry performance.

To learn about the benefits of Triple-I membership, click here.

Auto Insurance, Theft

Catalytic Converter Thefts Up, SpurringLawmakers to Act

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By Max Dorfman, Research Writer, Triple-I

Rising thefts of catalytic converters – driven, at least in part, by increased black-market prices for the motor vehicle pollution-control component – have prompted renewed state and federal focus on stopping these crimes.

Converter thefts rose in 2021, with 52,206 reported, up from 1,298 in 2018, according to claims data from the National Insurance Crime Bureau (NICB). Catalytic converters are part of a vehicle’s exhaust system, reducing toxic gas and pollutants and turning them into safe emissions. Though the part itself is valuable—sometimes rising above $1,000 each on the black-market—the precious metals inside can be more valuable than gold. They include palladium, platinum, and rhodium, the latter of which is valued at $20,000 per ounce.

The NICB has found a strong link between “times of crisis, limited resources, and disruption of the supply chain that drives these thefts.”

In late 2022, the U.S. Department of Justice, alongside federal, state, and local law enforcement partners, broke up a network of thieves, dealers, and processors involved in selling stolen catalytic converters to a metal refinery for tens of millions of dollars. The ring spanned nine states, from California to Virginia. The United States is now pursuing forfeiture of $545 million connected to the case.

“This national network of criminals hurt victims across the country,” said FBI Director Christopher Wray. “They made hundreds of millions of dollars in the process—on the backs of thousands of innocent car owners.”

Lawmakers take notice

In 2021, 26 states across the U.S. proposed bills to limit the theft of catalytic converters. Stringent laws in Arkansas, South Carolina, and Texas require scrap metal buyers to maintain records of catalytic converter purchases. In Minnesota, a Catalytic Converter Theft Prevention Program was created for investigation and prosecution of this crime.

More recently, U.S. Rep. Jim Baird of Indiana introduced a federal “Preventing Auto Recycling Theft Act,” which would help law enforcement address these thefts by marking each converter with a traceable identification number and establishing federal penalties.

“Whoever steals or knowingly and unlawfully takes, carries away, or conceals a catalytic converter from another person’s motor vehicle, or knowingly purchases such a catalytic converter, with the intent to distribute, sell, or dispose of such catalytic converter or any precious metal removed therefrom in interstate or foreign commerce shall be fined under this title or imprisoned not more than 5 years, or both,” the legislation says.

Companion legislation has been introduced in the Senate by Sen. Amy Klobuchar of Minnesota and Ron Wyden of Oregon.

Preventive measures can be taken

The NICB recommends several steps to protect yourself from catalytic converter thefts:

  • Install a catalytic converter anti-theft device.
  • Park fleet trucks in an enclosed area that is secured, well lighted, locked and alarmed. 
  • Park personal vehicles, if possible, in a garage. If not possible and the vehicle must be parked in a driveway, consider installing motion sensor security lights. Whether in the garage or outside in the driveway, set the alarm on your vehicle if equipped.
  • Attend a local NICB catalytic converter etching event. If none are currently scheduled in your area, contact a muffler shop that can etch your vehicle’s VIN on the converter, and spray it with a highly visible high-heat paint.

The NICB notes that these thefts can be covered by insurance under the optional comprehensive portion of your insurance policy, which provides coverage for damage to your vehicle not caused by a collision.