Of the findings in Triple-I’s recent report on consumer perceptions of weather risk, the Weather Channel’s experts were most struck by the fact that 60 percent of homeowners said they’d taken no steps to prepare – so, they asked Triple-I Chief Insurance Officer Dale Porfilio for his perspective.
Ultimately, Porfilio said, it comes down to perceptions.
“Two thirds of the people surveyed said they don’t expect to be affected by weather risk in the next five years,” Porfilio told the Weather Channel. “If you don’t think you’re going to be impacted, why would you prepare with a home evacuation plan or a home inventory?”
Of course, anyone who is exposed to weather is exposed to weather-related risk, and it’s essential for homeowners to understand and address the most relevant risks in order to protect their investments and their families.
Porfilio also addressed a question regarding availability of flood insurance, explaining that coverage is generally available through the Federal Emergency Management Agency’s National Flood Insurance Program, as well as a growing number of private insurers, but “might be perceived as too expensive.”
It is possible, however, that some insurers might not be willing to offer coverage in areas that have been hit repeatedly by flood.
Awareness and preparation are key. The Triple-I survey, published in coordination with global reinsurer Munich Re, found that, among the 22 percent of respondents who reported understanding their level of flood risk, 78 percent said they had purchased flood insurance. The report, Homeowners Perception of Weather Risks, provides insights into trends, behavior and how experiencing a weather event impacts consumer perceptions of future events.
By Loretta L. Worters, Vice President, Media Relations, Triple-I
Fire historically has been the main risk associated with the peril of lightning strikes. But as urban density increases and society’s dependence on electrical and electronic devices rises, lightning damage can be far more significant than the average home or business owners realizes.
According to a Triple-I analysis of State Farm data compiled to coincide with Lightning Safety Awareness Week (June 18-24), $952 million in lightning-caused U.S. homeowners insurance claims were paid out in 2022 to more than 62,000 policyholders. There was good news in the data, including:
The total value of lightning-caused U.S. homeowners insurance claims fell more than 27 percent in 2022 ($952 million) from 2021 ($1.3 billion).
The number of lightning-caused U.S. homeowners insurance claims only slightly increased, by 2.2 percent between 2021 and 2022 from 60,851 to 62,189, with numbers from the top 10 claims states contributing to about half of the total.
The average cost per lightning-caused claim decreased 29 percent, from $21,578 in 2021 to $15,280 in 2022.
“Insurers are moving toward predicting and preventing losses by advocating for resilience in coordination with the real-time application of technology,” said Triple-I CEO Sean Kevelighan. “Lightning Safety Awareness Week highlights the dangers lightning poses to life and property and how insurers and policyholders are reducing these risks.”
Homes aren’t the only structures at risk from lighting damage. In a recent interview with Kevelighan, Tim Harger – executive director of the Lightning Protection Institute – said an East Coast furniture manufacturer was subjected to “just over a million dollars in damage” when it was struck.
“Yes, there was the typical fire that caused structural damage, but what was impacted on the ‘inside’ was even more costly,” he said. “They had damaged inventory, production downtime, and loss of revenue during the repairs.”
Investment in a lightning protection system could have saved this business owner – and his insurer – the million dollars lost and prevented the business interruption.
“When it comes to protecting homes, businesses or critical facilities in communities, we know that a properly installed lighting protection system is scientifically proven to mitigate the damage from a lightning strike,” Harger said.
While cities have lightning issues, so do parts of the country where lightning-ignited wildfires are significant. According to the Congressional Research Service, most wildfires are human-caused (89 percent of the average number of wildfires from 2018 to 2022). However, wildfires caused by lightning tend to be slightly larger and to burn more acreage (53 percent of the average acreage burned from 2018 to 2022) than human-caused fires.
Florida, Georgia, Texas and California Lead Lightning Losses
Not surprisingly, Florida – the state with the most thunderstorms — remained the top state for number of lightning claims in 2022, with 5,504, followed by Georgia, with 4,474. However, California had the highest average cost per claim, at $36,319, followed by Texas, with $25,286.
Damage caused by lightning, such as fire, is covered by standard homeowners insurance policies. Some homeowners policies provide coverage for power surges that are the direct result of a lightning strike.
Of all the challenges facing property casualty insurers today – from growing catastrophe losses to social inflation – Church Mutual president Alan Ogilvie sees the “war for talent” as one of the most pressing.
“For us, the old adage is very true. Our best assets walk in the door in the morning, at the end of the day they leave, and you just hope and pray they come back,” Ogilvie said in a recent Executive Exchange conversation with Triple-I CEO Sean Kevelighan.
Ogilvie called talent acquisition and retention “our number one challenge.”
“We like to think we bring something a little bit unique to our employees, and that’s a sense of mission,” he said.
He pointed to Church Mutual’s status as 126-year-old mutual company – the largest writer of insurance for religious institutions, which has expanded to include coverage for health, educational, and nonprofit organizations – and said, “It’s pretty easy to get up in the morning when you’re protecting organizations that you know are doing tremendous things in our communities.”
Ogilvie is committed to busting the myth that insurance is a boring business. Among the features of insurance he emphasizes to people early in their careers is the focus on technology and addressing the challenges of climate risk. Catastrophe management – viewed through the lens of artificial intelligence and predictive analytics – has become a cutting-edge discipline.
This, combined with the fact that many insurance professionals are expected to be retiring over the next decade, “creates an incredible amount of opportunity,” Ogilvie said.
The 2023 Atlantic hurricane season officially started June 1 and is forecast to be a busy one, which is why homeowners need to prepare. Yet many lack even the most basic preventative measures, unaware of the risks they face, according to a new survey by Triple-I, in coordination with Munich Re.
The new report, Homeowners Perception of Weather Risks,provides insights into trends, behavior and how experiencing a weather event impacts consumer perceptions of future events.
In the first half of 2023, Triple-I, in coordination with Munich Re, asked homeowners across the United States about their experiences with weather-related risks. Among the key findings:
Twenty-five percent of respondents don’t expect to be impacted by weather risks in the future.
Thirty-two percent report that they have been impacted by weather in the last five years.
Two primary ways to prepare for weather risk includes creating a home inventory and an evacuation plan in case of emergency. Yet only 47 percent of respondents have a home inventory and slightly more (52 percent) have an evacuation plan.
Thunderstorms are reported as the chief weather concern, at 54 percent nationally. This includes flooding and tornados and varies by geographic region. The Midwest leads the area of highest reported thunderstorm risk, at 75 percent, and the West region reports the lowest proportion of concern, at 33 percent.
The survey suggests awareness and education around flood risk are the greatest opportunity for getting homeowners to take the necessary steps to protect their property. For example, among the 22 percent of respondents who reported understanding their flood risk, 78 percent said they had purchased flood insurance.
Insurance agencies that adopt digital methods to interact with customers have seen their revenues grow faster than their less digitally sophisticated competitors, according to new research by Liberty Mutual and Safeco Insurance. However, the research also indicates that digital adoption by agencies has slowed in recent years.
The study, The State of Digital in Independent Insurance Agencies, found that “highly digital adopter” agencies — based on a 10-point scale related to the number and complexity of the tools the agency uses — experienced a 70 percent growth rate, as opposed to 17 percent for “high digital adopters”, and a mere 10 percent for “low” and “medium” digital adopters.
But while digital adoption has gained traction, it has declined as a priority in agencies’ plans. In the latter part of 2020, 58 percent of agencies said improving digital capabilities was part of their five-year growth plans, according to the Liberty Mutual/Safeco study. However, by late 2021, this had decreased to 47 percent, approximately the same as in 2017.
The digital tools that have seen a decrease in use range from social media to live online chats. Additionally, many agencies said they are not tracking which digital tools are driving growth.
The survey found that 60 percent of digitally focused agencies said they planned to invest in new digital capabilities within their five-year agency growth plans. Only 42 percent of slow and steady growth agencies said the same. Growth-focused agencies have used several tools to increase their reach and revenue. Self-service portals, video calls, live online chats, video quotes, and policy reviews have all driven significant improvement among these agencies.
These, however, are not the only tools being recommended and used. Artificial intelligence, machine learning, Internet of Things, and big data analytics are all being considered and used to increase engagement with customers and prospects.
Cybercrime may be a factor hampering growth in digital adoption. Indeed, global cybercrime costs are predicted to hit $10.5 trillion annually by 2025, according to Cybersecurity Ventures. Additionally, more than half of all consumers have experienced a cybercrime at some point, according to a 2021 survey by Norton.
Agents remain alert to cyber threats. The Liberty Mutual/Safeco study found that 57 percent of survey respondents anticipated that cyber liability would have a major impact on their agencies by 2025, an increase from 46 percent in 2017.
Uncertainty spawned by the debt ceiling debate will likely exacerbate the replacement cost inflation that has been putting upward pressure on property/casualty insurers’ loss ratios – and, ultimately, consumers’ premium rates, according to Triple-I’s chief economist.
“Whether or not we go to five, 10, 20 days – or if we don’t have a shutdown at all – this signals to the market a dysfunction in terms of government operations,” said Dr. Michel Léonard, Triple-I chief economist and data scientist in an interview with Triple-I CEO Sean Kevelighan. “That leads to higher interest rates…which fuels inflation and reduces growth.”
As material and labor costs rise, home and vehicle repairs become more expensive, pushing up insurers’ losses and putting upward pressure on premium rates. For a P/C industry already struggling with high replacement costs and trying to grow with the rest of the economy, Léonard said, “This [debt limit debate] adds to those challenges.”
Kevelighan – whose background includes having worked in the U.S. Treasury Department during the George W. Bush administration – called high replacement costs a “new normal.”
“You have to look at year-over-three-years replacement costs, and they’re high,” Kevelighan said. “Personal homeowners replacement costs are up 55 percent. We’ve got personal auto replacement costs up 45 percent. And if inflation goes to a negative, we’re in an even worse place.”
Léonard pointed out that the federal government has shut down 21 times since 1976, with the shutdowns lasting as long as 35 days or as little as a few hours. In the interview above, he explains how these have typically played out and what types of scenarios might lie ahead.
The first in-person international event in the conference series since the 2019 Women in Insurance Global Conference, it will bring together hundreds of insurance professionals, C-suite executives, and experts on leadership and diversity, equity, and inclusion (DEI), along with sustainability, wellness, and business leaders for sessions dedicated to advancing ideas into action and providing actionable take-aways and strategies.
What makes any conference strong is the quality of the content and its speakers. IICF’s planning committee, which changes from year to year, is made up of industry professionals who are closest to the issues of the day, representing all areas of the United States and the United Kingdom in the planning. It’s an industry working together that makes this conference particularly powerful.
This year’s conference will feature emerging topics in leadership, personal and professional growth, the business of insurance, and the future of work.
Leadership topics include:
Personal Finance, with Jean Chatzky — financial editor of the Today Show for 25 years and founder and CEO of HerMoney.com and the coaching programs FinanceFixx and InvestingFixx;
Building the Public Voice of Women, with Emily Donahoe, founder/principal, WOMENSPEAK Training; and
Navigating Intergenerational Differences, with Chris Desantis, author, speaker and podcast host of Cubicle Confidential.
“IICF is thrilled to welcome such an accomplished field of speakers for the eleventh year of what was formerly known as the IICF Women in Insurance Conference Series,” said Elizabeth Myatt, vice president, chief program officer, and executive director of the IICF Northeast Division. “This event serves as a powerful catalyst for our industry as we bring together insurance professionals of all ages and career stages to discuss, learn and propel critical strategies.”
Elizabeth Myatt, vice president, chief program officer, and executive director of IICF Northeast Division
Myatt, who has led the conference since its inception, noted that it’s her favorite part of the job. “It has been wonderful to see the evolution of the conference series,” she said. “It is not just gender-focused — it is all kinds of diversity, leadership, and innovation and it’s the business of the industry itself, which has made it so valuable and meaningful to attendees.”
Myatt recognizes the importance of advancing DEI, which must be embedded in everything in the business, and everyone needs to see the shared value. She said a Congressional report this year spelled out some of the ways where the insurance industry has made an impact.
“There has been progress in gender diversity and for African-Americans, though we have not made as much progress within the Hispanic community as we’d like,” she said. “Through our conferences and the IDEA Council’s development of the IICF Talent Hub – an online resource center for non-traditional job seekers to learn about insurance industry jobs and career opportunities – and the Mentoring Alliance, which will prepare, inspire, and empower diverse talent by pairing them with role models and allies from leading companies across the industry, we are starting to see results.”
The theme for the last four years of the global conference has been advancing ideas into action, Myatt said.
“We want to provide tools, as well as new thinking. We don’t want the ideas that are shared here to stay in the room,” she said. “We plan to arm our audience with ways to make change, whether it’s personal, professional, or cultural.”
By Loretta L. Worters, Vice President, Media Relations, Triple-I
In celebration of International Day for Women in Maritime – observed every May 18 – Triple-I interviews women who have made a difference in the maritime field. Last year, the Triple-I focused on Isabelle Therrien, SVP-Canada, Falvey Cargo Underwriting.
For as long as Anne Marie Elder could remember, she loved the sea. Being the niece of a Merchant Marine officer, she heard her uncle’s stories about the Merchant Marine’s role in World War II. She imagined what it felt like to stand on deck and watch the sun reflect on the water’s surface, breathe in the salty air, and listen to the ocean waves. When she was in sixth grade, her Aunt Margaret told her about the first class with women graduating from the US Merchant Marine Academy (USMMA or Kings Point) and encouraged her to consider USMMA as an option for college.
It was the only college Elder applied to. She entered in 1984, in a class of about 211 men and 28 women. When she graduated, there were only 16 women – a 43 percent dropout rate.
As part of her education, she was required to serve two six-month terms as a midshipman aboard commercial U.S. Merchant ships. A 20-year-old woman aboard a Merchant ship with 25 men was not always well received. Within the first few hours on board one ship, the ship’s captain bluntly informed her that women did not belong at sea and that he did not want her on his ship.
“I was given specific orders to leave the bridge any time the captain was there,” she recalls. “I also wasn’t allowed to eat in the mess hall at the same time he ate his meals. This went on the entire time I worked aboard that ship.”
“The captain’s reaction was so ludicrous and unprofessional,” she said, “I decided to take the high road and refused to let him rob me of a great learning and life experience.”
Elder noted that the first month aboard ship could be challenging. “Some men gave me a hard time, but once they realized I was there to work and learn, they became more like brothers, looking out for me, making sure I was safe and watched over on the ship and when at a port.” For the first six months, Elder was the only woman aboard the ship.
“I went there to get an education, and nothing would dissuade me,” she said. “I was very serious, on the straight and narrow.”
By the age of 21, she had seen more of the world than anyone she knew.
“They were some of the greatest times of my life,” she said.
And that ship’s captain? He gave her one of the best evaluations she got during her year at sea.
“He didn’t want me on his ship, but he clearly respected the job that I did.”
Swallowing the Anchor
Elder thought that she would spend a few years at sea, but there weren’t many sailing jobs at the time of her graduation. She thought about going to law school. But she had a wonderful mentor and teacher at Kings Point: Rich Roenbeck, who was also a former Kings Pointer who taught her about marine insurance.
“He was so good, such a great teacher, and it was pretty interesting, so I decided to swallow the anchor – give up the sea life – and try marine insurance,” she said.
Elder’s Aunt was again encouraging. “A teacher in NYC and also a nurse at the VA hospital, she was an inspiration to me,” Elder said. “She was the number one reason I went to Kings Point and got ahead. When I started work, she took me out and bought me an entire wardrobe, so I’d look and feel confident when going to my new job.”
Her first job was with Continental Insurance/MOAC, which hired six marine trainees in their New York office – five men and Elder — where she started writing hull and cargo insurance. She also became very involved with the American Institute of Marine Underwriters (AIMU).
Anne Marie Elder, Global Chief Underwriting Officer, Marine
“AIMU is a hugely important part of marine insurance,” she said. “They are a wonderful organization that has been around 125 years this year! They provide education in our industry and are involved with issues that are important to our industry.”
Elder lives by King Point’s motto she learned years ago – Acta Non Verba! – Deeds, Not Words! Today, as a result of her deeds, she is Global Chief Underwriting Officer, Marine at AXA XL, a division of AXA, where her job is to develop the strategy and manage the portfolio of the company’s $1.1 billion book of marine business, one of the largest marine insurers in the world.
One of her greatest concerns is the talent gap the industry faces. Not just in the United States, but the rest of the world as well.
“Companies need to be more creative about bringing people into this industry,” she said. “They need to think differently, to assess the skillset, not necessarily the knowledge of insurance, but the overall skillset. Companies should compensate them appropriately for those skills and develop them quickly as underwriters.”
What brings Elder the greatest joy is developing people.
“You must be the captain of your own ship,” she said. “You can take that ship anywhere you want, but you must have a plan and develop the skills you need to know where you’re going. If you’re not going in the direction of your dreams, you need to change the course of your ship.”
She noted that women can sometimes be less vocal about their aspirations.
“Women think that if they work hard, they will be given a fair salary and chances to advance, but that’s not necessarily the case. Women need to work hard and develop the skills for advancement, but they also need to make sure that their managers know their short- and long-term career aspirations,” she said.
“I spent three years in London in marine treaty reinsurance and would never have had that opportunity if I hadn’t spoken up. It put me on people’s radar,” she explained. “You must be positioned and ready for the opportunities. You have to network and vocalize what you want. It also takes a good sponsor which is different from a mentor. A mentor guides and helps you strategize, but a sponsor promotes you to other people to help you advance in your career. You need both. I had someone early on who was looking out for me. It was a man. There were few women leaders when I started,” she said. “There still aren’t a lot of women in senior positions in marine insurance, but men are doing a better job of recognizing women’s assets.”
Elder noted that women and men can have very different leadership styles.
“We don’t always think the same way or manage the same way,” she said. “Having that diversity of thought makes a stronger company. Studies have shown that more diverse companies have higher profits.”
“It’s a great time for women to be in this industry because of all the opportunities out there,” she said. “I tell women, ‘Take the helm and be that leader.’ I tell them, ‘Full speed ahead, ladies, full speed ahead!’ ”
The U.S. property/casualty insurance industry ended 2022 with a net combined ratio of 102.4 – representing an overall underwriting loss that would have been significantly worse if not for an underwriting profit in commercial lines that partially offset a loss in personal lines, according to the latest underwriting projections by actuaries at Triple-I and Milliman
Combined ratio is the difference between claims and expenses paid and premiums collected by insurers. A combined ratio below 100 represents an underwriting profit, and one above 100 represents a loss.
The report, Insurance Economics and Underwriting Projections: A Forward View, presented at a members-only event on May 15, showed the divergence in performance between product lines was stark, with personal lines logging a combined ratio of 109.9 vs. 94.8 for commercial lines, the largest difference in at least 15 years. Looking ahead, the 2023 net combined ratio is forecast to be 101.5.
Dr. Michel Léonard, chief economist and data scientist at Triple-I, discussed key macroeconomic trends impacting the property/casualty industry results, including inflation, rising interest rates and overall P&C underlying growth. He noted that P&C underlying growth continues to be constrained by monetary policy.
“U.S. growth dropped over the last six months as rising interest rates depressed new housing starts, corporate capital investments and spending on vehicles,” Léonard said.
Léonard added that this trend is likely to continue, with the P&C industry contracting by -1.5 percent year to date, compared with U.S. gross domestic product (GDP), which grew at 1.3 percent. GDP is forecast to grow slightly above Fed expectations between 2023 and 2025, but to remain below the Fed’s long term growth expectation for the foreseeable future.
Looking at personal auto, Triple-I Chief Insurance Officer Dale Porfilio, said the 2022 net combined ratio came in at 112.2 — 10.7 points worse than 2021 and 19.7 points worse than 2020.
“The industry has not had this poor of a full year underwriting performance for personal auto in decades,” Porfilio said, adding, “Unless replacement cost trends begin to decrease materially – which is not currently forecast — it will take the industry into at least 2025 to restore personal auto results to underwriting profitability.”
For homeowners, Porfilio commented that the 2022 net combined ratio came in at an unprofitable 104.6. Porfilio added, “Hurricane Ian, the second-costliest insured loss after Hurricane Katrina, was a significant driver of underwriting losses for the industry.”
On the commercial side, Jason B. Kurtz, a principal and consulting actuary at Milliman, said commercial property, general liability, and workers compensation were bright spots for the industry, each logging underwriting gains in 2022. On the other hand, commercial auto and the commercial multi-peril lines were sources of weakness in 2022, with each seeing combined ratios of about 105.
“Commercial auto performed surprisingly well in 2021, but this appears to have been short-lived, as underwriting losses driven in part by material prior-year adverse development returned in 2022,” Kurtz said. “We expect further rate increases will be needed to offset loss pressures affecting this line.”
Turning to cyber, Dave Moore, president of Moore Actuarial Consulting, said cyber insurance direct written premium grew 50 percent in 2022. He added, “The cumulative growth over the last seven years has been 620 percent.” The direct incurred loss & DCC ratios for the last eight years have averaged “49 percent with 2022 coming in slightly below average at 45 percent.”
Overall, the P&C industry underwriting projections are experiencing the benefits from improved efficiency to significantly reduce both operating and loss adjustment expense ratios, as evidenced by the industry expense ratios for 2022.
“Commercial lines achieved lower net combined ratios than personal lines in both 2021 and 2022, and we forecast that to continue through at least 2025,” Porfilio said.
By Dr. Michel Léonard, Chief Economist and Data Scientist,and Riley Conlon, Research Analyst, Triple-I
U.S. employment remains more resilient than expected given monetary tightening, adding 253,000 jobs in April, and pushing the unemployment down to 3.4 percent in April compared to 3.5 percent in March.
Jobs growth has been positive for the last 26 months, with the U.S. economy now having replaced most of the jobs lost at the beginning of the pandemic. Employment for the Insurance Carriers and Related Activities subsector specifically continues to outperform wider U.S. employment. The unemployment rate for the insurance industry was 1.6 percent in April, up from 1.5 percent in March.
Employment’s resilience and the historically low current unemployment rate are likely to add to pressure from inflation hawks on the Fed to not only continue increasing rates but to make each rate hike bigger. Based on Triple-I’s model, the spread between actual employment and the pre-COVID forward trend, which has been narrowing since the end of the pandemic, is likely to stabilize at its current level.
Aligned with this forecast and our conversations with policy makers, our view is that it is unlikely that the stronger-than-expected April jobs performance will lead the Fed to aggressively accelerate the pace of current monetary tightening; it may, however, expand the duration of the current tightening cycle.
U.S. employment has been steadily heading back to its pre-COVID growth trend. This shows great resilience, given monetary tightening. Expect the Fed to continue with “Slow and steady wins the race,” even though calls for “Monetary shock and awe” will likely grow stronger.
