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.

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.

Every $1 invested in disaster resilience and preparedness saves $13 in economic impact, property damage and cleanup costs, emphasizing the value of proactive measures in mitigating the financial toll of natural disasters on U.S. communities and businesses, according to a new report from Allstate, the U.S. Chamber of Commerce, and the U.S. Chamber of Commerce Foundation.

The research, based on an analysis of 25 disaster scenarios, shows the return on investment (ROI) in resiliency programs includes economic benefits like saving jobs, preserving workforces, and reducing losses to production and income.

The U.S. has faced a growing toll from costly disasters in recent decades. From 1980 to the present, the nation experienced 383 climate-related events that each caused more than $1 billion in damage (adjusted for inflation to 2023 dollars). Cumulatively, these events have resulted in a total cost exceeding $2.7 trillion. To put this figure into perspective, the U.S. gross domestic product (GDP) was $22.4 trillion in 2023, the report noted.

The scale and location of disasters significantly impact the overall costs incurred. Larger disasters that strike urban centers tend to have far greater financial consequences compared to smaller events or those affecting rural areas, the research shows. However, regardless of the size or setting, the mounting costs of disasters present policymakers and citizens with difficult decisions about how to allocate limited resources, according to the report.

Economic Benefits of Investing in Resilience and Preparedness

A widely accepted ratio of the ROI of resilience, based on National Institute of Building Sciences research, is that $1 invested in resilience and disaster preparedness reduces damage and cleanup costs by $6. But the economic benefits extend far beyond that: The same $1 investment also reduces a community’s economic costs by an additional $7, the research found.

The potential savings are substantial across a range of disaster scenarios.

For example, $10.8 billion of investments to prepare Miami for a Category 4 major hurricane would prevent the loss of about 184,000 jobs and save $26 billion in production and $17 billion in income. In San Diego, $833 million invested to mitigate against a major earthquake would save about 38,000 jobs, $5.8 billion in production, and $3.3 billion in income.

Even in smaller cities, the economic savings are substantial. Investing $83 million in resilience and preparedness for a destructive tornado hitting Nashville would save more than 5,300 jobs, $683 million in production, and $464 million in income. The same $83 million investment to prepare Santa Fe for a major wildfire would save 388 jobs and preserve $45 million in output and $20 million in income.

Resilience and Preparedness Investment Options

“Doing nothing to prepare your community, business, or home for natural hazards is—without understatement—a recipe for disaster,” the report’s authors stated.

The report captured various resilience and preparedness efforts, organized into the following categories:

• For Communities: Investing in Infrastructure
  Community-based disaster risk reduction focuses on preventive action before a disaster strikes, including measures such as poverty alleviation, asset redistribution plans, and providing basic services like education and health care. Early warning systems are also crucial for alerting community members of impending disasters. Additionally, adopting zoning, land-use practices, and building codes through mitigation planning can help prevent or reduce damage from hazards.

• For Businesses: Mitigating Risk and Fostering Resilience
  Businesses can invest in hazard mitigation measures, such as structural improvements, adjustments based on professional hazard audits, accessibility updates, and employee training for emergency response. Applying disaster risk reduction practices is also essential. Five essentials practices outlined by the United Nations Office of Disaster Risk Reduction are: promoting public-private partnerships, leveraging private sector expertise, fostering collaborative data exchange, supporting risk assessments, and strengthening laws and regulations. 

• For Families: Awareness, Planning, and Home Improvements
  Families play a crucial role in building resilience and preparedness. The first step is to understand the types of disasters that could occur in your area and learn how to stay safe. Creating a family disaster plan that includes meeting places in case family members are separated is also essential. Home improvements, such as elevating electrical appliances, using flood-resistant materials, and maintaining or upgrading roofs, can help protect your home and loved ones during a disaster.

To view the complete report, visit the Allstate website.

The global insurance industry is grappling with significant challenges in claims resolution, as supply chain disruptions, rising inflation, and geopolitical tensions hinder the ability to process claims efficiently, according to a recent survey by Gallagher Bassett.

To navigate these obstacles, insurers are increasingly embracing digital solutions such as AI chatbots, data analytics, and streamlined digital claims processing to optimize operations and enhance decision-making capabilities, the survey found.

As insurers adapt to the evolving landscape, the adoption of cutting-edge technologies is becoming a critical strategy for insurers seeking to remain competitive and provide superior customer experiences, Gallagher Bassett noted.

“One of the key opportunities for insurers lies in the advancements in data analytics and AI. These technologies can help improve underwriting precision, streamline operations, and provide personalized customer experiences. By embracing digital transformation, insurers can increase efficiency and cost savings, benefiting themselves and their policyholders,” Gordon Vater, managing direct of GB Technical for Gallagher Bassett, wrote in the report.

The global supply chain has faced significant challenges in recent years, including rising inflation, geopolitical tensions, and energy prices. These challenges have had a substantial impact on insurers’ ability to resolve claims promptly and efficiently, the survey found. Over half of all global insurers have reported a moderate (43%) to significant (19%) impact on their ability to manage end-to-end claims resolution processes due to supply chain disruptions.

In response to these challenges, insurers have implemented various strategies to mitigate delays in claims resolutions. A majority (54%) of insurers have focused on implementing digital claims processing, which streamlines the claims process and reduces a reliance on physical documentation. Additionally, 45% of insurers have adjusted their claims processing timelines to account for potential delays, while 36% have expanded their repair vendor networks to ensure timely access to necessary resources.

The adoption of technology solutions has become a priority for insurers worldwide, with 57% investing in digital tools to improve claims resolution times in the face of supply chain challenges. Insurers are also emphasizing cost-saving measures (53%), diversifying supplier bases (44%), and making changes in vendor management (30%) to navigate the current landscape effectively.

Leveraging Technology and AI for Claims Resolution

AI chatbots and generative AI are proving instrumental in optimizing operations across the insurance industry, with 67% of insurers utilizing these technologies for customer service and 45% for claims processing. Risk assessment (31%) and underwriting processes (25%) are also benefiting from AI integration, the survey showed.

The adoption of AI in claims resolution is well underway, with 44% of insurers currently in the process of integrating AI chatbots or generative AI, and 42% having already successfully incorporated these technologies. Only 10% of insurers said they would not adopt AI for claims resolution.

Nearly all insurers, 95%, said speed and operational efficiency are the expected benefits of AI adoption, followed by lower costs/headcount, 74%, better customer service, 68%, and enhanced claims outcomes, 49%, according to the survey.

Challenges and Best Practices for AI Integration

As insurers increasingly adopt AI technologies to streamline operations and improve claims processing, they face several challenges in implementation. According to the survey, 39% of insurers struggle with seamlessly integrating AI into their business operations, while 26% grapple with ensuring compliance. Data privacy and security concerns are also a significant hurdle for 20% of insurers.

However, despite the perceived benefits of AI, only 37% of insurers are incorporating new technologies for disaster assessment and claims resolution following severe weather events. Among those insurers, notable best practices include utilizing satellite imagery, 3D technology, and predictive modeling to analyze historical weather patterns and claims data, facilitating swift and comprehensive damage assessments, according to the report.

While AI-enabled decision-support tools offer valuable insights, combining them with human expertise yields the best claims outcomes. By integrating AI tools at specific points along the claims lifecycle and leveraging human intervention to uncover hidden patterns and contextual factors, insurers can enhance decision-making and achieve better results.

The gap between liability loss trends and median liability insurance limits is growing, continuing the trend of the last 10 years, according to research from Chubb.

The “16th annual Liability Limit Benchmark & Large Loss Profile” report from Chubb provides data to help businesses determine appropriate liability insurance limits in today’s risky environment, fueled in part by the rise of nuclear verdicts and increasing punitive damages.

“This information is critical for building adequate liability towers that can adequately protect clients and their businesses, especially in the face of economic and social inflation, litigation funding, and nuclear verdicts, all of which continue to drive elevated liability-related loss costs,” the report stated. “The number of nuclear jury verdicts – that is, verdicts for awards of more than $10 million – is rising rapidly as cases that had been pending due to the pandemic continued making their way back into court.”

In 2022, nuclear verdicts totaled more than $18.3 billion, a significant jump from $4.9 billion in 2020, the report noted, citing Verisk data.

The Chubb report analyzed 11 industry sectors to help companies benchmark their liability insurance limits against others in their field, and highlight loss trends and significant losses in each sector.

Median liability insurance limits purchased nearly a decade ago declined across nine out of the 11 sectors analyzed, Chubb found. For example, median limits purchased in 2023 were 44% lower than in 2014 for the construction sector; nearly 31% lower for health care companies; and 28% lower for consumer products companies. Only the utilities sector had more coverage last year than 2014 with a 9% increase in the median limits purchased.

Liability Trends Across Industry Sectors

Here’s a closer look at the median liability limits purchased and loss cost trends in 2023 for 11 key sectors.

Life Sciences: In the life sciences sector, median insurance limits reached $241 million in 2023, a slight increase from $237 million in 2022 and $236 million in 2021. However, loss costs for this sector have  consistently outpaced median limits, reaching $600 million in 2023.

Health Care: Health care companies saw median insurance limits of $168 million in 2023, a decrease from $180 million in 2022 and $170 million in 2021. Over the past decade, median limits purchased by healthcare companies have declined by 30%, while loss costs continue to rise, hitting $450 million in 2023.

Consumer Products: The consumer products sector experienced a drop in median limits purchased, with $263 million in 2023, down from $300 million, which remained unchanged from 2016 to 2022. Meanwhile loss costs exceeded $800 million in 2023.

Real Estate/Hospitality: Median insurance limits purchased in the real estate/hospitality sector were $298 million in 2023, a slight decrease from $300 million in 2022 but an increase from $265 million in 2021. Loss costs, however, reached $700 million in 2023.

Transportation/Road: In the transportation/road sector, median limits purchased were $170 million in 2023, down from $175 million in 2022 and $183 million in 2021. Loss costs surpassed $450 million in 2023.

Transportation/Rail: The transportation/rail sector saw median limits of $323 million in 2023, a decrease from $348 million in 2022 and on par with median limits in 2021. Loss costs for this sector, however, reached $1.5 billion in 2023.

Construction: Median insurance limits purchased in the construction sector remained at $250 million, unchanged from 2022 and down from $260 million in 2021. Loss costs were nearly $700 million in 2023.

Manufacturing: The manufacturing sector experienced a decline in median insurance limits, with $340 million in 2023, down from $350 million in 2022 and $355 million in 2021. Loss costs were nearly double, approaching $700 million in 2023.

Oil/Gas: Oil/gas companies saw median limits purchased of $498 million, an increase from $469 million in 2022 and $475 million in 2021. The loss costs for the sector exceeded $1.2 billion in 2023.

Utilities: In the utilities sector, median limits were $375 million, a decrease from $385 million in 2022 but a slight increase from $371 million in 2021. Loss costs exceeded $700 million.

Chemical: The chemical sector saw median insurance limits purchased of $350 million, unchanged from 2022 and down from $400 million in 2021. Loss costs topped $1 billion in 2023.

Rise in Nuclear Verdicts and Punitive Damages

In recent years, there has been a notable increase in liability loss trends as a result of juries awarding punitive damages, Chubb noted. This trend is driven by several factors, including increased social consciousness and desire to punish corporations for perceived negligent behavior. Additionally, ideological divides and desensitization to awards in the billions of dollars have contributed to this trend, the report stated.

As a result of these factors, the risk, prevalence and quantum of punitive damage awards continue to rise, Chubb said, citing a 2022 report on punitive damages liability. The objective measures that dictate the amount of compensatory damages awarded to a plaintiff, such as actual medical costs and lost wages, are non-existent in the assessment of punitive damages, leading to a greater potential for large awards, according to Chubb.

Many organizations and businesses are seeking to mitigate the risk of punitive damages through insurance coverage. However, in several states, including California, Colorado, New York, Rhode Island and Utah, purchasing insurance that protects against punitive damages is restricted, Chubb said, noting that these states also happen to be where the majority of U.S. economic activity occurs and where nearly all punitive damage awards are made.

Despite the restrictions on punitive damage insurance in certain states, there are insurance solutions available for organizations looking to mitigate this risk, the insurer said. One such solution is seeking out punitive damage wrap (puni-wrap) policies, which are separate, standalone policies procured and issued outside of the U.S.

Industry Expert Insights on Factors Contributing to Punitive Damages

Different market segments have their own unique exposures and risk factors that contribute to the risk of nuclear verdicts and punitive damages. Three Chubb experts weighed in on the factors impacting their industries.

In the construction industry, Lyndsey Christofer, Construction and Real Estate & Hospitality Practice Leader at Chubb, noted, “One of the factors driving nuclear verdicts in the construction industry is the sheer size of the projects. They just keep getting bigger….When jurors see the amount that goes into a project, that can color the amount that they believe a plaintiff is entitled to.”

Caroline Clouser, Healthcare Industry Practice Leader at Chubb, highlighted the increasing sophistication of plaintiffs in bringing complex medical cases. “Plaintiffs used to shy away from the complexities of medical malpractice cases, but over the past several years have become very practiced in bringing complex medical cases and explaining the care and treatment in such a way that inflames the jurors, opening a potential for very large awards.”

“In the life sciences industry, it is especially important that jurors receive the full, factual scientific picture when it comes to product liability cases,” said Lee Farrow, Life Sciences Industry Practice Leader at Chubb. “In many instances, it is difficult for judges to decide what should be admissible, and that could lead to the admissibility of junk science. In those cases, jurors could be taking a paid expert’s opinion as fact, leading to excessive jury verdicts.”

To view the full report, visit Chubb website.

A new Trusted Choice survey revealed that many consumers do not fully understand the details of their insurance coverage, despite 86% saying they have a strong grasp of their policies.

The survey, conducted in advance of National Insurance Awareness Day on June 28, exposes significant insurance knowledge gaps that can be addressed by consulting with independent insurance agents to ensure consumers have the right coverage and understand what is and is not included in their policies, Trusted Choice stated.

“Because insurance protects people’s most important assets, it’s crucial that policyholders understand their coverage. But unfortunately, our survey shows there is a considerable insurance knowledge gap among consumers,” said Charles Symington, president and CEO of the Independent Insurance Agents of America (Big “I”).

Key Findings from the Survey

The survey found that 56% of Americans are unaware that a standard homeowners policy does not cover flood damage. This lack of knowledge can lead to significant financial losses in the event of a flood, as homeowners may assume they are protected when they are not.

In addition, 70% of respondents do not know that materials or fixtures intended for installation during renovations are not covered by a standard homeowners policy. Also, 46% of respondents do not have or are unsure if they have a home inventory of major household items in case they need to file a claim, the survey found.

The survey also revealed misconceptions about vehicle coverage.

Over half, or 55%, of respondents do not realize that a standard auto policy does not cover business use of a vehicle. Additionally, 44% incorrectly believe that personal items stolen from their car are covered by their auto insurance, when in fact, it is typically a standard home or renters insurance policy that covers such theft, the survey noted.

In addition, 57% do not know that parking tickets generally do not impact auto insurance premiums.

The Role of Independent Agents

Independent agents serve as an unbiased resource to help consumers better understand their coverage needs and navigate policies, according to Trusted Choice.

Kevin Brandt, executive director of Trusted Choice, explained, “An independent agent is best equipped to walk consumers through the entire process–from shopping for coverage to purchasing a plan and filing a claim. With their unbiased guidance and personalized approach, they empower individuals to navigate policies with clarity and confidence, ensuring they truly understand their coverage and make informed decisions.”

Learn about Triple-I’s Independent Agent Pro™ subscription, exclusively for independent insurance agents.