Yearly Archives: 2024

Insurance Industry

Insurers Tackle Food Insecurity in 30th Year
of Philanthropy

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

One in five U.S. children is unsure where they will get their next meal, according to the U.S. Department of Agriculture. In 2022, 33 percent of single-parent families experienced food insecurity, and the problem is especially acute for families of color and households headed by single mothers.

The Insurance Industry Charitable Foundation is observing Hunger Action Month – a nationwide effort held every September– by raising funds in its ongoing fight against childhood hunger throughout its 30th anniversary year in 2024.

On average, IICF provides up to five meals for every dollar contributed, working with 11 nonprofit partners that serve communities across the United States and United Kingdom.  Donors to the IICF 30th Anniversary Celebration are recognized on its website as IICF Children’s Champions for contributions of $1,000 or greater and all donors contributing $30 or more.

Donors giving $30 or more can enroll for a complimentary year of IICF Global Membership, which provides exclusive volunteer opportunities and a network of philanthropically minded insurance professionals, noted IICF CEO Bill Ross.

 “We convened an IICF 30th Anniversary Committee of 35 industry leaders in the new year to help lead and advance our 30th campaign to raise funds for hungry children,” Ross said. “Seven insurance companies are leading internal company campaigns in support of IICF’s 30th, raising and matching funds for hungry children: CNA, Burns & Wilcox, Falvey Insurance Group, Lockton, Markel, RT Specialty and The Hartford. We hope more companies and individuals will participate.”

The IICF has approximately 400 individual donors to date.  For every 100 new donors, at only $30 each, that’s thousands of meals they can deliver to children in need.

“As we look back at 30 years of the IICF, it is encouraging to know we have grown from an effort primarily serving California, with approximately 20 board members, to now expanding as a national and growing international industry foundation with more than 800 insurance professionals, providing personal leadership and volunteer support, serving on IICF’s international and local boards and committees,” said Ross. 

“Throughout our 30 years, IICF has maintained a focus on children at risk, education and food insecurity. Each of our divisions encompasses these focus areas, as well as additional areas of need specific to each region, including military veterans, the environment, and social mobility,” he said.

“It is always important to recognize where we started as a foundation, and our vision remains the same today. The IICF is here to represent the insurance industry in a united philanthropic effort by providing grants in local communities, industrywide volunteer service and ongoing opportunities for leadership in our communities and our industry.”

More Work Needs to be Done

Since 2020, IICF has raised $1.8 million and delivered three million meals through its Children’s Relief Fund, which was launched in response to the global pandemic. But more needs to be done.  For those that wish to donate, the IICF is grateful to these acts of kindness. 

Ross summed it up best: “When we unite to help others, great things happen for everyone – communities, our neighbors in need and our industry!”

Insurance News

Insurance Industry Poised for Significant Hiring Surge

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The insurance industry is poised for significant employment growth in the coming year, with over half of insurers planning to increase their workforce, despite ongoing challenges in recruitment and retention, according to a recent study by the Jacobson Group and Ward/STG Performance Benchmarking.

The Q1 2024 Insurance Labor Market Survey revealed that a slight majority of insurers (52%) is planning to increase staff in the next 12 months. This trend is particularly strong in the property/casualty (P/C) segment, where 53% of companies intend to expand their workforce, compared with 47% of life/health insurers.

Looking at specific lines of business, 66% of commercial lines P/C carriers are set to increase staff over the next 12 months, which is 32 and 16 points higher than personal lines and all lines carriers, respectively, the report stated. While 10% of insurers plan to decrease staff, 38% expect to maintain their current levels.

When it comes to company size, 53% of both medium (300 to 1,000 employees) and large insurers (over 1,000) plan to add staff, compared to 51% of small companies (under 300).

The primary reasons behind the planned hiring surge are expected business volume growth (34%) and expansion into new markets, the survey found. On the other hand, automation and reorganization were cited as the top reasons for reducing headcount in the insurance industry.

Revenue Growth Expectations and Drivers

Three-quarters, or 77%, of insurers expect revenue to rise in the next 12 months, the survey reported. Leading the pack in optimism are commercial lines P/C companies, with 84% anticipating increased revenue. This bullish outlook was shared by 78% of personal lines companies and 75% of all lines  companies, while 71% of life/health insurers also expect to see revenue growth.

The primary drivers behind these revenue expectations have shifted, the survey found. For the first time since 2012, change in market share (46%) has overtaken pricing factors (37%) as the main catalyst for projected revenue changes. However, this trend is not uniform across all segments. P/C companies, in particular, still cite pricing (43%) as their top revenue driver.

Recruitment and Retention Challenges

With 90% of insurers planning to increase or maintain staff and voluntary turnover slowing slightly, recruitment will remain challenging in 2024, according to the report. Companies will also focus on retaining top talent amid shifting complexities and expectations.

Technology, underwriting, and claims roles are expected to see the greatest growth during the next 12 months, the survey showed. Product management and sales/marketing are the top areas where companies are looking to add experienced staff, while operations and claims roles were identified as areas most likely to add entry-level positions.

Actuarial, executive, and analytics positions are the most difficult roles for insurers to fill in the current market, the survey reported.

The ability to hire talent has improved compared to a year ago, with 14% of insurance companies feeling it has become more difficult, down from 25% in the January 2023 survey. About half of employers (53%) said the ability to attract talent is about the same as a year ago, while 28% said it was moderately better and 4% said it was significantly better.

To obtain a copy of the Q1 2024 Insurance Labor Market Survey, visit Jacobsen’s website.

Auto Insurance, Highway Safety, Legal Environment

Despite Improvements, Louisiana Is Still
Least Affordable State for Auto Insurance

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Max Dorfman, Research Writer, Triple-I

Louisiana’s personal auto insurance affordability improved to 2.67 percent of median household income in 2022 – down from 2.93 percent in 2020 – but it retains the dubious distinction of being the least affordable state, Triple-I’s chief insurance officer told the Louisiana House Insurance Committee in recent testimony.

Dale Porfilio – who also is president of the Insurance Research Council (IRC) – said that by nearly every metric the state’s insurance cost drivers are well above the national average:

  • Accident frequency – Louisiana is 16 percent higher than the national average;
  • Repair cost severity – Louisiana is 9 percent higher;
  • Injury claim relative frequency – Two out of every four property damage claims (when cars hit cars) in Louisiana result in bodily injury claims (49 percent), twice the one out of every four (25 percent) across all states;
  • Medical utilization – Louisiana is 47 percent higher;
  • Attorney involvement – Louisiana is 24 percent higher;
  • Underinsured motorists – At-fault drivers in Louisiana have insufficient liability insurance limits in over 35 percent of multi-car accidents, over twice the 16 percent U.S. average; and
  • Claims litigation – Litigation over personal auto claims in Louisiana is more than twice the national average, surpassed only by Florida.

Porfilio noted that for auto insurance affordability to improve, overall expected losses will need to be reduced. Legislation to reduce one or more of these key cost drivers would be helpful, Porfilio said.

As Triple-I and IRC previously reported, the combination of high insurance expenditures and low median income make Louisiana a difficult state in which to lower costs. The frequency of hurricanes hitting the state increases homeowners insurance costs, and the high cost of reinsurance has contributed to the Louisiana’s insurance woes.

In fact, in 2020 and 2021, in the wake of Hurricane Laura and Hurricane Ida, insurers paid out more than $23 billion in insured losses from over 800,000 claims filed.

While Louisiana policymakers were confident a $45 million fund approved in February 2023 to encourage insurers to write property insurance business in the state would help stabilize the market, insurance commissioner Jim Donelon recognized that the approved grants are only the first step toward reducing homeowners’ insurance rates.

As Porfilio’s testimony demonstrated – and the market has dictated – more work is needed to lower costs for consumers and insurers in Louisiana.

Auto Insurance

Georgia Is Among the Least Affordable States for Auto Insurance

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By Max Dorfman, Research Writer, Triple-I

Georgia’s personal auto insurance affordability has significantly worsened over the past decade and a half, making it one of the least affordable states, according to a new report by the Insurance Research Council (IRC) – a division of The Institutes, like Triple-I.

The study, Personal Auto Insurance Affordability in Georgia, ranks the state 47th in terms of auto insurance affordability. Only four other states – Louisiana, Florida, Mississippi, and New York – are less affordable. In 2006, Georgia was the 27th most affordable state.

Personal auto insurance expenditures in Georgia accounted for two percent of the median household income in 2022 (the latest year for which expenditure data is available). This is compared with 1.5 percent nationally.

Key findings:

  • From the mid-2000s through 2014, Georgians spent about the same on auto insurance as other Americans. In the mid-2010s, however, auto insurance expenditures in Georgia began escalating. Between 2014 and 2022, auto insurance spending in Georgia grew 5.6 percent annualized, compared with 3.3 percent in the country overall and faster than in any other state. In 2022, Georgia’s average expenditure of $1,347 was 20 percent higher than the U.S. average.
  • Affordability issues in Georgia’s auto insurance market stem from multiple factors — many of which have been faced by the rest of the country — including economic inflation, rising replacement costs, risky driving behavior, and legal system abuse. However, several key cost drivers are higher in Georgia, including propensity to file injury claims, number of underinsured motorists, and claim litigation.
  • Auto insurance litigation is a growing concern in Georgia, especially as tort reform in neighboring states may be pushing law firms in those states to seek opportunities elsewhere. Georgia has experienced elevated attorney advertising rates, particularly in television advertising.

“Uninsured and underinsured motorists are both a symptom and a cause of affordability issues,” said Dale Porfilio, FCAS, MAAA, president of the IRC. “When affordability deteriorates, whether from increasing costs or slower income growth, increasing numbers of motorists may choose to lower the policy limits or to forgo the mandated insurance completely.”

Porfilio, who is also Chief Insurance Officer of Triple-I, noted that the resulting need for drivers to purchase uninsured motorist (UM) and underinsured motorist (UIM) protection further increases average insurance expenditures.

“Both the UM and UIM rates are higher than average in Georgia,” he said. “The UIM rate is especially high in the state: Georgia’s UIM rate has been increasing steadily and was the third-highest rate in the country in 2022.”

Auto Insurance, Insurance Industry

Report: No-Fault Reforms Improved Michigan’s Personal Auto Insurance Affordability

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By Max Dorfman, Research Writer, Triple-I

Michigan personal auto insurance affordability improved markedly after enacting substantial auto insurance reform in 2019, according to a new report by the Insurance Research Council (IRC) – like the Triple-I, a division of The Institutes

The study, Personal Auto Insurance Affordability in Michigan, found that personal auto insurance expenditures accounted for 1.9 percent of the median household income in Michigan in 2022 (the last year the data is available), a decline of half-a-percent from the pre-reform peak. Michigan’s expenditure share remains higher than the percentage in the overall U.S. and forty-four other states.

Other key findings from the report include:

  • Before the reforms, Michigan drivers were required to purchase unlimited personal injury protection (PIP) coverage; in comparison, the second highest mandated amount of PIP coverage was $50,000 in New York. The unlimited medical benefits and other features, such as attendant care benefits and no medical fee schedule, led to Michigan’s extremely high average auto injury claim severity, which has been the primary cost driver in the state.
  • In 2022, Michigan households spent $1,319 to insure each vehicle, nearly 20 percent above the national average. However, in the years since reform, expenditures have fallen in Michigan while increasing in almost every other state. From 2019 to 2022, the average expenditure for auto insurance in Michigan fell 12 percent compared with an increase of five percent in the U.S. overall.
  • Uninsured and underinsured motorists are both a symptom and cause of affordability issues. In 2019, Michigan had the highest rate of uninsured drivers in the country, with more than one in four motorists lacking the required liability coverage. The uninsured motorist rate in Michigan dropped by 5 percent between 2020 and 2022.

“Efforts to improve auto insurance affordability in Michigan must begin with the underlying cost drivers: injury claim severity and litigation,” said Dale Porfilio, FCAS, MAAA, president of the IRC. “The average amount paid per auto claim for auto injury insurance is dramatically higher in Michigan, more than double the U.S. average and one and a half times the second highest state.”

Porfilio, who is also Chief Insurance Officer of the Insurance Information Institute (Triple-I), noted that the 2022 affordability data does not fully reflect many recent countrywide challenges to affordability, such as economic inflation, higher replacement costs, legal system abuse, and deteriorating driving behavior. “However, the movement of several key indicators illustrate the positive effect of the Michigan policymakers’ efforts to improve affordability in their state.”

Insurance News, Legal Environment

Agents Play Critical Role in Navigating Impacts of Legal System Abuse on Customers

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Legal system abuse, including frivolous lawsuits and inflated claims, is driving insurance claims costs to record highs, particularly in liability lines, disrupting the industry and impacting policyholders, insurers and independent agents, according to Triple-I.

Defining and Understanding Legal System Abuse

Legal system abuse involves actions that unnecessarily increase the costs and time required to settle insurance claims. Examples include filing frivolous lawsuits, inflating claims, ubiquitous attorney advertising that glorifies lawsuits and promises big payouts, and third-party litigation funding (TPLF), Dale Porfilio, Triple-I’s chief insurance officer, wrote in an article published in Agent for the Future. In TPLF, hedge funds and other financiers invest in lawsuits in exchange for a percentage of any settlement or judgment, which can incentivize holding out for bigger payouts and drawing out litigation.

These abusive practices increase claims costs while being nearly impossible for insurers to forecast and mitigate. Legal system abuse often compounds with other elements like economic inflation to further shift loss ratios and disrupt cost forecasts, making claims management even more challenging, Porfilio said.

“It is one driver of the market that we see right now,” noted Luke Bills, president of independent agent distribution at Liberty Mutual and Safeco Insurance. “Carriers start to withdraw. That’s a huge impact for independent agencies. We’re starting to see this across all lines of business.”

The effects of excessive claims costs due to legal system abuse ripple through the entire insurance industry, impacting policyholders, insurers and agents alike, according to Porfilio.

As claims payouts and premiums rise, it becomes more difficult for agents to sell coverage. Insurers may also pull back on the types of risks they are willing to cover, diminishing coverage availability in the market. Understanding and deterring legal system abuse is crucial for maintaining a healthy, affordable insurance market for all.

Role of Agents in Deterring Abuse

As legal system abuse threatens insurance coverage availability and affordability, agents play a crucial role in mitigating its effects on customers. By being proactive in client conversations, staying engaged with their customer base, and offering guidance throughout the claims process, agents can help their clients navigate the challenges posed by legal system abuse and remain a trusted advisor in an increasingly complex insurance landscape, Porfilio emphasized.

According to Bills, agents should be the policyholder’s first call after an insurable event. “We are seeing a significant increase in attorney-represented claims coming in at first notice of loss,” he said, noting that this trend is becoming more common even in personal lines.

At the point of sale, agents can discuss best practices for managing risks as part of the conversation on coverage options. They can also guide clients through the claims process when an insurable event arises.

To help curtail legal system abuse, Porfilio suggested that agents may want to consider integrating the following guidelines into their operations:

Know your customers to understand their financial situation and coverage needs. Adequate coverage is an integral component of a strong financial management plan, and agents should be ready to point clients to pertinent resources.

Be proactive in conversations about rising rates and help clients explore affordable coverage options that work with their budget. Explain that insurance rates rise for everyone due to more frequent claims and higher claims costs.

Stay engaged with your client base to increase awareness of policy responsibilities and the pitfalls of legal system abuse. Use communication channels, such as e-newsletters, to share tips on avoiding scams and understanding agreements like assignments of benefits.

Reach out proactively when you realize a client may have experienced an insurable event. Offer to answer questions and guide them through the claims process, reminding them that attorney and third-party involvement can significantly reduce their portion of any payout.

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.

Insurance News

Commercial P/C Market Stabilizes Amid Lingering Challenges: Baldwin Group

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The commercial property/casualty (P/C) insurance market shows signs of stabilization in 2024, despite persistent challenges like frequent natural disasters and social inflation, according to a midyear market report from The Baldwin Group (TBG). While rate increases have slowed and capacity has improved in some areas, insurers remain cautious, focusing on policyholders’ ability to manage potential loss scenarios.

“Though certain lines, industries, and geographies remain challenging, overall market conditions are easing,” the report’s authors state. “While rate increases have decelerated and there is new capacity for certain lines, insurers are still taking a very stringent approach to underwriting by putting a magnifying glass on insureds’ ability to prevent, respond to, and rebound from potential loss scenarios.”

Key Market Drivers and Trends in Commercial P/C

Severe weather events continue to be a major focus for insurers in 2024, as they remain concerned about the impact of unmodeled secondary perils and interconnected weather events on their books of business, according to TBG. Experts are predicting an increase in named storms for the 2024 Atlantic hurricane season, further emphasizing the need for insurers to closely monitor and assess their exposure to these risks, TBG noted.

Litigation trends have also had a significant impact on the commercial P/C market. The effects of legal system abuse and social inflation have become more evident, with the U.S. P/C industry witnessing a downturn in favorable reserve developments in 2023, stemming primarily from adverse developments in general liability and auto liability sectors, the report stated.

“Losses for these two lines are only projected to continue to grow at a fast rate due to social inflation and nuclear verdicts,” TBG said.

Several states have begun to fight back against legal system abuse, nuclear verdicts, and third-party litigation funding (TPLF). However, other states have expanded liability in certain areas, such as wrongful death cases, creating a complex and varied regulatory landscape for insurers to navigate, according to the report.

The economy continues to pose challenges for businesses and insurers alike. Slowing economic growth, persistent inflation, and high interest rates have created a difficult environment by increasing the cost of capital, claims, and goods, TBG reported. As a result, insurers are hesitant to deploy capital and implement drastic rate reductions, instead taking a cautious approach to exposure growth.

Geopolitical dynamics also play a role in shaping the commercial P/C market. Political dynamics and the threat of civil instability at local, state, national, and global levels pose risks to economic growth and supply chain stability, adding another layer of complexity for insurers to consider, according to the report.

To address these challenges, insurers are increasingly turning to advanced technologies, such as artificial intelligence (AI) and machine learning solutions. These technologies are being leveraged to address underwriting talent gaps, improve risk modeling accuracy, enhance operational efficiency, and boost long-term profitability, TBG reported.

One notable development, according to the report, is the release and adoption of Moody’s RMS Version 23 software, which is expected to capture recent trend — both catastrophe losses and higher repair and replacement costs — that have driven up insurer claims costs and provide larger modeled probable maximum losses.

Reinsurance Market Developments

For commercial property reinsurance, April 1 renewals brought increased capacity appetite on excess layers, while lower or primary layers remained challenging.

June 1 renewals in Florida saw some price reductions as dedicated capacity flowed into the market. However, the prospect of a highly active 2024 hurricane season has left reinsurers reluctant to support lower layers on programs, leading to continued bifurcation in appetite and pricing, according to TBG. Despite these developments, reinsurance prices remain well above historical averages from a technical pricing perspective. The next phase of the market cycle will be clearly dictated by how the hurricane season unfolds, the report noted.

On the casualty side, reinsurers continue to express concerns about reserving adequacy due to the impacts of social inflation. The unpredictability of losses related to COVID-19 shutdowns has increased conservatism, especially for casualty and auto portfolios heavily exposed to social inflation, where the expected claimant is a member of the general public rather than a contracted third party, according to the report. Adverse development from claims in the previous soft market (2015 to 2019) have led to increased scrutiny by reinsurers, many of which continue to reiterate their concerns on reserving adequacy, TBG reported.

Commercial Lines Market Conditions and Rate Trends

At the start of 2024, the commercial P/C insurance market showed early signs of stabilization, with a more orderly January 1 reinsurance renewal season indicating improved capacity and potential rate deceleration. As the year has progressed, these early developments have reached fruition, TBG stated.

Though certain lines, industries, and geographies remain challenging, overall market conditions are easing. While rate increases have decelerated and there is new capacity for certain lines, insurers are still taking a very stringent approach to underwriting by putting a magnifying glass on insureds’ ability to prevent, respond to, and rebound from potential loss scenarios, according to the report.

TBG provided a line-by-line update of its earlier market predictions, including rate trends based on the Council of Insurance Agents & Brokers (CIAB) Q1 commercial property/casualty pricing survey:

In the property market, the average rate increase in Q1 was 10.1%, but the market has notably stabilized due to insurer profitability in 2023, favorable renewals, and greater competition. However, distressed risks may see much steeper increases, TBG said.

General liability continues to see a clear bifurcation driven by the type of organization and likely claims sources, with an average rate increase of 4.1% in the first quarter. Social inflation, third-party litigation funding (TPLF), and nuclear verdicts are leading to continued market hardening, according to the report.

Commercial auto remains challenged due to litigation trends and high repair costs, with an average rate increase of 9.8% in Q1. Driver shortages are a focal issue in lawsuits, and insurers are adopting stricter underwriting tied to fleet size. Buyers should expect continued rate increases in this line, TBG reported.

Workers’ compensation remains competitive with plenty of capacity and stable rates, seeing an average rate decrease of 1.8%. It is an area of potential cost savings for insureds, as insurers look to increase profitable business, TBG noted. But medical inflation, an aging workforce, and state regulations could adversely affect claims patterns, the report adds.

In the directors and officers (D&O) liability market, public D&O rates have flattened, with most companies seeing relatively flat renewals. The private D&O market is shaped by bifurcation between stable and challenged risks, with an average Q1 rate decrease of 0.8%.

Employment practices liability insurance (EPLI) is seeing an average rate increase of 0.8% in the first quarter, with capacity and rates remaining stable. However, employee-friendly laws and regulations in states like California, New York, Florida, and Illinois continue to be challenging jurisdictions for underwriters, TBG noted.

Cyber liability has continued its stabilization in 2024, with an average Q1 rate increase of just 0.4%. Flat renewals and eager insurers characterize the market, with security controls and policies being the biggest factors in underwriting.

“Developments with AI are still too nascent for them to be felt in the market, though this will likely change as AI tools become even more prevalent,” TBG reported.

Umbrella liability capacity is restrained, especially for higher limit placements, due to social inflation and nuclear verdicts. Monoline coverage is less competitive than supported umbrella coverage, and the average rate increase in the first quarter was 7.0%.

To view the full report, visit The Baldwin Group website.