Category Archives: Business Risk

Business Risk, Catastrophes, Disaster Resilience, Emerging Risks, Industry Awards & Events, Industry Financials, Insurers and the Economy, Market Conditions, Regulation, Risk Management, Technology

JIF 2025: Litigation Trends, Artificial Intelligence Take Center Stage

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By Lewis Nibbelin, Contributing Writer, Triple-I

Identifying key risk trends amid an increasingly complex risk landscape was a dominant theme throughout Triple-I’s 2025 Joint Industry Forum – particularly during the panel spotlighting some of the insurance industry’s C-suite leaders.

Moderated by CNBC correspondent Contessa Brewer, the panel consisted of:

  • J. Powell Brown, president and CEO of Brown & Brown Inc.;
  • John J. Marchioni, chairman, president, and CEO of Selective Insurance Group;
  • Susan Rivera, CEO of Tokio Marine HCC (TMHCC); and
  • Rohit Verma, president and CEO of Crawford & Co.

Their discussion provided insight into how insurers can transform these uncertainties into opportunities for business development and for cultivating deeper connections with consumers.

Recouping policyholder trust

Given the volatility of the current risk environment – exacerbated by various ongoing geopolitical conflicts and the rising frequency and severity of natural catastrophes – it is more imperative than ever to reaffirm the intrinsic human element of insurance, the panelists agreed.

“That’s one of the most underappreciated aspects of our industry,” Marchioni said. “We make communities safer and put people’s lives and businesses back together after an unexpected loss. Being the calming force when you have unsettling events like this happen around the world is a big part of what we do.”

Yet prevailing public perception continues to indicate otherwise, even as insurers report repeated losses or nominal profits compared to other industries.

“The insurance industry may be the only industry where record profits are a problem,” CNBC’s Brewer added, because consumers tend to “not care whether it’s coming from your investments, or whether it’s coming from your underwriting business or your reinsurance. They just hear that you’re making record profits.”

Brown noted that consumer mistrust derives, in part, from “a very active plaintiffs’ bar,” which the American Tort Reform Association estimates spent over $2.5 billion for nearly 27 million ads across the United States last year. He further discussed how, though the average homeowners’ insurance premium rate in Florida will increase this year, his home state has enjoyed far more stable rates after tort reforms eased litigation costs on insurers.

Previous research by the Insurance Research Council (IRC) – like Triple-I, an affiliate of the Institutes – showed that most consumers perceive the link between attorney advertising and higher insurance costs. Crawford’s Verma, however, emphasized that this awareness does not necessarily translate into consumers understanding their own agency.

“It’s easier for homeowners to understand how the weather impacts potential losses and the fact that weather patterns have changed,” Verma said. “But when it comes to [legal system abuse], I don’t think that connection is as well understood.”

Reflecting on a record high in nuclear verdicts last year, Rivera suggested insurers must reconfigure how they communicate legal system abuse to consumers.

“Where are those hospital professional liability verdicts going to go?” he said. “They’re going to go back into the cost of health care at the end of the day.”

Leading the AI charge

Maintaining consumer centricity while implementing or experimenting with technological innovations – especially generative AI – was a unifying objective for all the panelists.

“We look at AI as an enabler,” Brown said, “so we can put teammates in a position to spend more time with customers, which is the most important thing.”

For Tokio Marine’s Rivera, AI “ultimately helps all of our insureds” by boosting operational efficiency while reducing operational costs, as well as facilitating more proactive risk management than ever before. A growing percentage of insurance executives appear to agree, as generative AI models continue to expedite data processing across the insurance value chain, reshaping underwriting, pricing, claims, and customer service.

Such efficiency, paired with the potential for improved decision-making, is crucial “in our dramatically changing environment,” Marchioni stressed.

“We have thousands of claims every day,” he said. “Thinking about lawsuit abuse as a backdrop – a claims adjuster, every day, has to make decisions regarding, ‘Do I settle this claim based on injuries or venue? What’s the value of the injury and of the claim? Who’s the plaintiffs’ attorney?’ These tools give more refined information so your knowledge workers can make better, more timely decisions.”

Generative AI fails, however, when base datasets are insufficient, outdated, or inaccurate, Brown pointed out. Training AI models uncritically can lead to outputs containing false and/or nonsensical information, commonly known as “hallucinations”.

At their current capacity, at least, AI models cannot draw the kinds of salient conclusions that adjustors and underwriters can, meaning AI could “change the way we work, but it’s not going to replace the jobs,” Verma said.

Though they do not currently exist in the United States at the federal level, AI regulations have already been introduced in some states, following a comprehensive AI Act enacted last year in Europe. With more legislation on the horizon, insurers must help lead these conversations to ensure that AI regulations suit the complex needs of insurance, without hindering the industry’s commitments to equity and security.

A 2024 report by Triple-I and SAS, a global leader in data and AI, centers the insurance industry’s role in guiding conversations around ethical AI implementation on a global, multi-sector scale, given insurers’ unique expertise in analyzing and preserving data integrity.

Learn More:

Insurance Affordability, Availability Demand Collaboration, Innovation

Executive Exchange: Insuring AI-Related Risks

Tariff Uncertainty May Strain Insurance Markets, Challenge Affordability

Reining in Third-Party Litigation Funding Gains Traction Nationwide

Claims Volume Up 36% in 2024; Climate, Costs, Litigation Drive Trend

Personal Cyber Risk Is Up; Why Isn’t Adoption of Personal Cyber Coverage?

U.S. Cyber Claims Surge While Global Rates Decline: Chubb

FBI: Elder Fraud Up; Bolsters Case for Personal Cyber Insurance

Triple-I Issues Brief: Cyber Insurance (Members Only)

Triple-I Issues Brief: Legal System Abuse (Members Only)

Auto Insurance, Business Insurance, Business Risk, Homeowners Insurance, Insurers and the Economy, Market Conditions, Wildfire

P&C Insurance Achieves Best Results Since 2013; Wildfire Losses, Tariffs Threaten 2025 Prospects

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By William Nibbelin, Senior Research Actuary, Triple-I

The U.S. P&C insurance industry’s financial outcomes for 2024 revealed a net combined ratio (NCR) of 96.6, demonstrating a substantial 5.1-point enhancement compared to the prior year and representing the sector’s most favorable underwriting performance since 2013, as detailed in a recent report by Triple-I and Milliman.

However, this progress faces potential impediments. The economic repercussions from early 2025 California wildfire losses, in conjunction with the unfolding influence of tariff policies, introduce factors that could dampen the industry’s performance throughout 2025 and possibly counterbalance the recent positive trajectory.

Noteworthy 2024 performance indicators:

  • The disparity in profitability between personal and commercial lines diminished, with both segments achieving an NCR below 100 for the year.
  • Personal auto insurers reported a 2024 NCR of 95.3, marking a considerable 9.6-point year-over-year improvement. This advancement was largely attributable to robust net written premium (NWP) expansion, with growth rates of 14.4 percent in 2023 and 12.8 percent in 2024.
  • Homeowners’ insurance experienced an 11.2-point improvement from 2023, as reflected in a 2024 NCR of 99.7. This represents the first instance of an NCR below 100 since 2019. Furthermore, the NWP growth rate reached 13.6 percent, surpassing the 12.4 percent growth observed in 2023 and achieving the highest level in over 15 years.

Impending challenges and market pressures:

  • The general liability segment is encountering increased financial strain, as evidenced by the least favorable NCR since 2016 and the third worst since 2010.
  • Early forecasts for the first quarter of 2025 suggest that the P&C industry may face its most challenging first-quarter results in over 15 years due to the extensive losses from the January 2025 Los Angeles wildfires.
  • The imposition of tariffs, effective as of early May 2025, is beginning to exert pressure on fundamental growth metrics and is contributing to the escalation of replacement costs across various insurance lines, initially with personal auto, and subsequently affecting homeowners and renters, commercial auto, and commercial property.  

Economic dynamics and trends

Triple-I’s chief economist and data scientist, Michel Léonard, Ph.D., CBE, pointed out that P&C underlying economic growth in 2025 has doubled the growth of the U.S. GDP, with the former at 5 percent and the latter at 2.5 percent year-over-year.  

In addition, it is anticipated that P&C replacement costs will not increase as quickly as the U.S. Consumer Price Index (CPI), with projected rates of 1.0 percent, compared to 2.0 percent year over year.  

However, Léonard offered a cautionary perspective, stating, “While P&C economic drivers continue to outperform the broader U.S. economy—with stronger growth and lower replacement cost inflation—we now anticipate a shift in 2025 due to ongoing and expanded tariffs”.  

He further elaborated on the potential adverse effects of tariffs: “These headwinds are expected to slow the sector’s momentum, potentially leading to a contraction later in the year that could exceed the overall GDP slowdown. Additionally, replacement costs, initially projected to rise more slowly than CPI, may accelerate and begin to outpace it, adding further pressure. Even though rising costs may lead to additional premium increases, these will likely be insufficient to offset slowing consumer spending and corporate investment.”

He explained how the timing of tariff impacts is staggered due to inventory management behavior, with the full effect of current tariffs yet to be realized.

Underwriting context and projections

Dale Porfilio, Chief Insurance Officer at Triple-I, attributes the notable 2024 turnaround in personal lines to the hard market conditions that allowed for necessary premium adjustments, rather than a decrease in incurred losses, which remained nearly flat. However, some upward pressure on the combined ratio is expected for 2025, reflecting tariff impacts and increased acquisition expenses. A deeper look into personal auto trends reveals that physical damage loss ratios have been improving rapidly, while liability coverage improvements have plateaued, raising concerns about legal system abuse and liability coverage responsiveness.

Homeowners’ insurance improvements were also driven primarily by premium increases, though a 2.5 percent decrease in net incurred losses, mainly from catastrophes, contributed. However, the 2025 outlook for homeowners is heavily influenced by the Los Angeles wildfires, with projections indicating that Q1 2025 could be the worst first quarter for the P&C industry in over 15 years. Current estimates suggest that the 2025 wildfires may lead to the costliest wildfire losses in U.S. history.

Jason B. Kurtz, FCAS, MAAA, a principal and consulting actuary at Milliman, emphasized the persistent negative influence of adverse prior year development (PYD) on the profitability of commercial auto and general liability lines, noting that this trend has been observed for three consecutive years.  

In discussing general liability, Kurtz pointed out the substantial reserve strengthening undertaken during 2024.

“The 2024 net combined ratio of 110 included a staggering nine points of adverse prior year development, amounting to more than $9 billion of reserve strengthening, the highest seen in at least 15 years,” Kurtz said. “It is also concerning that the hard-market years 2020-2023, which saw significant rate increases, are also seeing reserve increases.”  

Conversely, workers compensation combined ratios continued to benefit from favorable PYD for the eighth consecutive year, indicating sustained underwriting profitability.  

Donna Glenn, FCAS, MAAA, chief actuary at the National Council on Compensation Insurance (NCCI), presented an overview of the year’s average loss cost level changes and provided insights into the long-term financial stability of the workers compensation system.  

“The workers compensation system continues an era of exceptional performance with strong results and a financially healthy line,” said Glenn. “And while there are early indications of potential headwinds on the horizon, the industry is positioned well to navigate these challenges.”  

*Note: Insurance Economics and Underwriting Projections: A Forward View is a quarterly report available exclusively to Triple-I members and Milliman customers.

Business Risk, Careers and Employment, Insurance Industry, Insurers and the Economy, Market Conditions, Risk Management, Specialty Coverage

Hartford’s Karla Scott on the Present & Future of Marine Insurance

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

When Karla Scott first entered the insurance industry, she didn’t set out with a grand plan to become a leader in marine underwriting.

“I fell into it,” she admits. Starting at a brokerage firm focused on logistics insurance, she quickly discovered a passion for global trade and cargo underwriting.

“It’s different every day,” says Scott, who is global logistics product leader and senior managing director, Ocean Marine, The Hartford. She joined the company after The Hartford acquired Navigators in 2019.

“The technical work keeps my skills sharp, while the camaraderie and shared purpose offer personal and professional fulfillment.”

– Karla Scott

Scott works with clients, agents, and brokers around the world to ensure that businesses have the protection they need through the product’s entire supply-chain life cycle. Her team insures raw materials and finished goods that are transported on containerships, planes, trains, and trucks.  From geopolitics to commodity shifts, it’s an ever-evolving, complex industry that demands constant awareness and adaptation.

Now, with 24 years in marine insurance, Scott reflects on a career shaped by resilience, strong mentorship, and a deep commitment to community. Her journey underscores both the opportunities and challenges faced by women in a traditionally male-dominated field.

“Disrupting trade with…China, Canada, or Mexico would affect cost and the availability of insurance coverage.”

– Karla Scott

A Sea Change for Women

“Fifteen years ago, I sat at a table with 35 industry leaders and was the only woman,” Scott says. “But progress is happening. While marine insurance remains a niche within the broader insurance world, more women are entering the field and rising into leadership roles.”

There continues to be a gender pay gap and lack of career advancement opportunities, but Scott says “part of the reason, frankly, is that women tend not to self-advocate. It’s critical in the marine insurance space to promote yourself, but women often feel uncomfortable doing that.  Self-advocacy is not boastfulness. No one is going to put you in the spotlight unless you step into it.  Those are the skills we need to teach women coming up in this business.”

Being a woman on the West Coast in an East Coast-dominated industry meant navigating additional hurdles.

“There’s a current you swim against,” she says.

Overcoming Barriers

Support from forward-thinking male mentors and advisors helped her stay the course.

“I am indebted to three mentors who presented different strengths,” Scott says. “I learned how to manage people, to motivate people, technical skills, how important your reputation is in this industry, and how to push hard and be aggressive in certain situations and not aggressive in other situations.”

She also candidly addresses the internal battles many women face — imposter syndrome.

“I’ve experienced it myself and have reached out to my mentors, who are great at listening to my frustrations,” she says. “Having a strong network can help you work through those issues. Now that I’m on the other side, I’m pushing my mentees through those obstacles, helping them find their voice and teaching them to self-advocate—skills critical to closing the gender pay gap.”

The Power of Community

Scott’s involvement with the American Institute of Marine Underwriters (AIMU) and the Board of Marine Underwriters in San Francisco has been instrumental in her career. She has served as president of the latter twice and speaks passionately about the importance of collaboration in the insurance industry.

“One of the most unique parts of marine insurance is that we work in partnership with competitors to solve industry problems,” she says. “The technical work keeps my skills sharp, while the camaraderie and shared purpose offer personal and professional fulfillment.”

Trade Tensions and Industry Impacts

As global trade faces increasing scrutiny and tariff battles, Scott is already seeing the effects.

“Clients are canceling freight contracts, and volumes are dropping,” she says. “The result means lower trade volume, higher valuation of goods, and potential inflationary cycles may hit consumers hard.”

She points out that the lack of federal stimulus (unlike during the pandemic) leaves little room for economic cushioning.

“It’s a ‘hold your breath’ kind of moment,” Scott says.

Cargo theft is another growing concern.

“It spikes when inflation rises,” Scott notes, pointing out how easy it has become to resell stolen goods on platforms like Amazon and eBay.

Talk of reshoring manufacturing often overlooks the complexity of global trade.

“You can’t flip a light switch and manufacture everything in the U.S.,” she explains. “Machinery to build those goods often comes from Germany or Japan.

“Disrupting trade with top partners like China, Canada, or Mexico would significantly affect both cost and the availability of insurance coverage,” Scott says. “If consumer confidence drops and trade volumes fall, insurance demand will, too.”

Scott also highlights a deeper economic risk: the potential erosion of the U.S. dollar’s dominance in global trade. “If that shifts, the American economy could face even greater challenges.”

Auto Insurance, Business Risk, Homeowners Insurance, Insurers and the Economy

How Tariffs Affect
P&C Insurance Prospects

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Tariffs and threats of tariffs have been roiling financial markets since January. Property and casualty insurers are no less concerned, as the cost of repairing and replacing damaged property is a driver of claim costs and, ultimately, policyholder premiums.

Triple-I Chief Economist and Data Scientist Dr. Michel Léonard recently sat down to explain the implications of tariffs and trade barriers for insurers and what economic considerations concern industry decisionmakers.

While property and casualty insurers write many kinds of coverage, the lines Léonard primarily discussed were homeowners and personal and commercial auto – “lines that have a physical emphasis on repair, rebuild, and replace.”

Lumber from Canada; cars, trucks, and parts from Canada and Mexico; and garments, furnishings, and technology from Asia all come into play when considering the prospective impacts of tariffs on replacement costs, Léonard said.

“When we’re focusing specifically on China,” he said, “we’re looking primarily at farm equipment and alternative-energy components.”

Uncertainty around tariffs – particularly in recent weeks, as tariffs on Mexico and Canada have been imposed and “paused” – makes analysis even more difficult.

“Much depends on how much clarity there is, how much communication from the policymakers, from the administration and from the legislature,” Léonard said. It’s also important to remember that impacts can last well beyond their implementation and withdrawal.

During the first Trump Administration, tariffs on soft commodities, beef, grain, and so forth had impacts for several years afterwards.

“Those tariffs were fairly short lived,” Léonard said, “but for two to three years afterward farmers were uncomfortable investing in equipment at the same pace, and that reduced farmowners’ insurance growth.”

Regardless of how the current discussions around tariffs play out, the Trump Administration has signaled a decided shift in policy toward greater protectionism. As a result, Léonard said, “We should expect a repositioning in our understanding of our replacement costs and underlying growth forecast for the next 12 months, at a minimum.”

He projects a period of “most likely 24 to 36 months” in which growth will be slower and inflation – including replacement costs for the P&C industry – will be higher.

Learn More:

Tariffs and Insurance – full video (Members Only)

Insurance Economic Outlook (Members Only)

Business Risk, Catastrophes, Cyber Risk, Disaster Resilience, Floods, Life Insurance

Executive Exchange: RiskScan Survey Taps Cross-Market Viewpoints

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For insurers, “customer” is one word that encompasses individual policyholders, business owners, risk managers, agents and brokers, and others, all with different (often divergent) priorities. For reinsurers – whose primary customers are insurers themselves – “understanding the customer” is particularly challenging.

This was part of the motivation behind RiskScan 2024 – a collaborative survey carried out by Munich Re US and Triple-I. The survey provides a cross-market overview of top risk concerns among individuals across five key market segments: P&C insurance carriers, P&C agents and brokers, middle-market business decision makers, small business owners, and consumers. It explores not only P&C risks, but also how economic, political, and legal pressures shape risk perceptions. 

“I get very excited when we have a chance to be in our customers’ shoes,” said Kerri Hamm, EVP and head of cyber underwriting, client solutions, and business development at Munich Re US, in a recent Executive Exhange interview with Triple-I CEO Sean Kevelighan. “To really understand how they feel about a broad range of issues from what are their most important risks to how they feel about the cost of insurance and the economic environment.”

 Hamm discussed how more than one-third of respondents ranked economic inflation, cyber risk, and climate change as top concerns, identifying them as “increasing or resulting in rises of the cost of insurance.”

“When we really understand what our customers want, we can design a better product and think about whether the coverages we’re providing are meaningful to them,” Hamm said. “That can help us match pricing better to their expectations.”

One result that Hamm found “surprising” was that “legal system abuse” didn’t appear to be as widely accepted by respondents – apart from the insurance professionals – as driving up insurance costs. Kevelighan cited other research – including by Triple-I’s sister organization, the Insurance Research Council – that has found consumers to be aware of the growing influence of “billboard attorneys”.

Unfortunately, he said, “They don’t seem to be making the connection with how that’s affecting them. What we’re trying to do at Triple-I is to help them make that connection.”

Kevelighan talked about Triple-I’s education campaign around “the billboard effect” in Georgia. That campaign includes an actual billboard (“Trying to fight fire with fire,” he said), as well as a microsite called Stop Legal System Abuse. The campaign focuses on Georgia because the state tops the most recent list of places that the American Tort Reform Foundation calls “judicial hellholes”. 

“We’re trying to help citizens in Georgia see that this is costing you,” Kevelighan said, adding that Triple-I has seen high engagement through the program with people in the state.

Learn More:

Triple-I “State of the Risk” Issues Brief: Legal System Abuse (Members only)

Triple-I Launches Campaign to Highlight Challenges to Insurance Affordability in Georgia

Louisiana Reforms: Progress, But More Is Needed to Stem Legal System Abuse

JIF 2024: What’s In a Name? When It Comes to Legal System Abuse, A Lot

Climate Resilience and Legal System Abuse Take Center Stage in Miami

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

Legal System Abuse/Social Inflation Adds Costs and Challenges for US Casualty Insurance: AM Best

Who’s Financing Legal System Abuse? Louisianans Need to Know

Business Risk, Insurance Industry, Market Conditions, Risk Management

Triple-I Brief: Commercial Property Insurance Shows Signs of Improvement, Stable Growth

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While rising premiums have been the primary driver for commercial property insurance growth for years, a 25-quarter rate increase streak broke in early 2024. Strong risk-adjusted capitalization and adequate liquidity may sustain the stable outlook, notwithstanding formidable risks, according to Triple-I’s latest insurance brief Commercial Property: Trends and Insights.

The brief focuses on several core trends shaping opportunities and threats to the commercial property insurance segment:

  • Mounting climate and natural catastrophe risks
  • Increasing capacity in the reinsurance market
  • Lurking undervaluation risk
  • Rise of AI and technology in risk mitigation

According to a recent McKinsey report, data involving global figures for 25 primary commercial lines carriers indicate a combined ratio of 91 percent for 2023, down from a high of 102 in 2020 but holding steady from the prior year. Commercial property comprised $254 billion (or 26 percent) of premiums across these carriers.

Before 2024, the overall U.S. P&C commercial market experienced hard market conditions going back to 2018, according to NAIC data and analysis. Double-digit rate increases were the norm, particularly for properties in high-risk regions or with poor loss histories. A Marsh McLennan report shows that in Q4 2023, rate increases averaged 11 percent for more considerable commercial property risks and even higher for accounts with loss history challenges or catastrophic exposure.  Carriers have delivered steady quarterly increases since 2017 “to offset pressures from catastrophes and economic and social inflation.” Capacity constraints, driven by increased reinsurance costs, compounded this hardening, creating challenges for insurers and policyholders.

However, commercial insurers benefited from underwriting margins that outperformed the long-term average despite slowing year-over-year growth in direct premiums written, according to the 2024 S&P Global Market Intelligence U.S. Property and Casualty Industry Performance Rankings report. The top 50 of the 100 evaluated carriers was dominated by commercial line providers, with insurers focusing primarily on commercial property lines capturing three of the top 10 spots. In comparison, only two personal lines carriers ranked in the top 50.

AM Best, which maintains that insured losses in recent years have been driven primarily by secondary perils such as severe convective storms, issued its “Market Segment Outlook: US Commercial Lines” report. The analysts predict a stable market segment outlook for the U.S. commercial lines insurance sector in 2025. The company expects the commercial lines segment “will remain profitable in the aggregate and will be resilient in the face of near- and longer-term challenges.” However, relatively high claims costs, the multi-year impact of social inflation, and geopolitical risks may pose threats. The latest AM Best report focused solely on the commercial property segment (dated March 2024) advises that the Excess and Surplus (E&S) market has absorbed some of the higher risks. Still, overall secondary perils continue to be a significant “offsetting factor” for commercial property.

The damage of weather events and natural catastrophes tend to make big headlines (and rightly so), but the overall risk for commercial property isn’t limited to the destruction wrought by each disaster. It also extends to the interactions between the event outcomes and human systems. Specifically, these events can strain regional economic systems, such as decreasing the availability of rebuilding materials and labor while simultaneously amplifying demand for these same inputs. In turn, property replacement costs can soar.

Reinsurance

In 2023, major changes in reinsurance policy structures and price increases compelled insurers to decrease limits and absorb higher retentions. The policy restructurings also meant primary insurers had to retain more losses from increased secondary perils, such as floods, wildfires, and severe convective storms, that they could not cede to the reinsurance market. The insurers’ retention of loss may have allowed the incubation of increased capacity in the reinsurance market, improving late in 2023 and into early 2024.

By mid-year 2024 renewals, reinsurance appetite had grown with easing in some loss-free areas and, as applicable, underwriting scrutiny held firm in others areas. Analysts observed “flat to down mid-to high-single digits” reinsurance risk-adjusted rates for global property catastrophes. A Marsh McLennan report noted modest growth in investment and capital due to increased market capacity and underwriting interest from carriers. Late 2024 catastrophic events and any similar activities in the coming year will likely remain a primary drivers for reinsurance costs, along with the increasing cost of capital, financial market volatility, and economic inflation.

To learn more about Triple-I’s take on these and other commercial property insurance trends, read the issue brief and follow our blog.

Business Risk, Cyber Risk, Floods, Insurance Industry

RiskScan 2024 reveals risk priorities across the insurance marketplace

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By Mary Sams, Senior Research Analyst

Cyber incidents, changes in climate, and business interruption are the chief risk concerns among key marketplace segments in the insurance industry, according to RiskScan 2024, a new survey from Munich Reinsurance America Inc. (“Munich Re US”) and the Insurance Information Institute (Triple-I) reveals.

RiskScan 2024 provides a cross-market overview of top risk concerns among individuals across five key market segments: P&C insurance carriers, P&C agents and brokers, middle-market business decision makers, small business owners, and consumers. The survey explores not only P&C risks, but also how economic, political, and legal pressures shape risk perceptions. 

Methodology

To produce a compelling snapshot of cross-market views, Munich Re US and Triple-I engaged independent market researcher RTi Research in the summer of 2024 to survey 1,300 US-based individuals.

Market surveys typically focus on a single audience, but RiskScan 2024 is a multi-segment survey offering a comprehensive view of risk perceptions and yielding comparative results between audiences. The key insights present a variety of commonalities and disparities across the five distinct target segments, covering the full range of insurance buyers and sellers across the United States.

This online survey was conducted across gender, age, geographic region, household income, business revenue, and company size. 

Two primary cohorts make up five segments of participants in the RiskScan research:

  1. consumers and small business owners (n=700) and
  1. Insurance industry participants, which included carriers, agents, and brokers as well as middle market businesses (n=600). 

Research participants were presented with various risks across five segments and then asked to select their top three risk concerns. 

Key Insights

More than one-third of respondents chose economic inflation, cyber incidents, and climate change as their top three concerns based on insurance risks and market dynamics. All three of these reflect post-pandemic news topics. Economic inflation has increased over the last several years.  Consumers and small business owners have experienced direct impacts with increased costs and industry participants have seen these impacts on increased replacement costs and P&C insurance premiums.

There are significant disparities in the ranking results between the two primary cohorts within the research. Insurance professionals tend to identify a variety of risks and have significant awareness of all risk categories, including emerging technologies. As expected, these audiences exhibit broader knowledge and awareness of risk transfer and mitigation of new and emerging risks. Consumers identified a smaller number of risks associated with more immediate and direct impacts on themselves. 

The structure of RiskScan 2024 research yields a more complete understanding of the “white space” that exists between risk perception and action. The gaps were identified along three key risk areas: 

  • Flood risk
  • cyber risks, and
  • legal system abuse

Flood risk was also indicated as one of the chief concerns for each audience. However, consumers lack awareness that flood events are typically excluded from homeowner’s policies. Industry professionals are more aware of flood coverage exclusions, the importance of purchasing flood coverage before a flood event, and the likelihood of these events occurring.

Cyber incidents are a primary concern in all five market segments. Most audiences in the research, both consumer and commercial, feel unprepared as this threat vector is constantly emerging, expanding, and changing. Many people are knowledgeable about cyber risks and are concerned about how to mitigate new cyber threats. Troubling stories have come to light as the frequency and severity of cyber threats grow.

“The knowledge gap about insurance risks demonstrates the continued need for education of consumers and businesses, especially about flood, cyber, and legal system abuse,” says Triple-I CEO Sean Kevelighan. “Increasing knowledge will be instrumental for the collective work needed to better manage and mitigate future risks.”

The report includes additional results for each of the five primary audiences: consumers (n=500), small business owners (n=200), insurance carriers (n=200), insurance agents and brokers (n=200), and middle market businesses (n=200).

Download the full RiskScan 2024 report to review the details. Triple-I aims to empower stakeholders by driving research and education on this and other key insurance topics. Follow our blog to keep abreast of these essential conversations.

Auto Insurance, Business Insurance, Business Risk, Highway Safety, Insurers and the Economy, Market Conditions

Improved Commercial Auto Underwriting Profitability Expected After Years of Struggle

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The commercial auto insurance line has struggled to achieve underwriting profitability for years, even before the inflationary conditions that have been affecting property/casualty lines more recently. This trend has been accompanied by steady growth in net written premiums (NWP).

This weakness in underwriting profitability has been driven by several causes, according to a new Triple-I Issues Brief. One is the fact that vehicles – both commercial vehicles and personal vehicles they collide with – have become increasingly expensive to repair, thanks to new materials and increased reliance on sensors and computer systems designed to make driving more comfortable and safer. This well-established trend has been exacerbated by supply-chain disruptions during COVID-19 and continuing inflation in the pandemic’s aftermath.

Distracted driving and litigation trends also have played a role.

However, Triple-I sees some light on the horizon for commercial auto in terms of the line’s net combined ratio – a standard measure of underwriting profitability calculated by dividing the sum of claim-related losses and expenses by earned premium. A ratio under 100 indicates a profit and one above 100 indicates a loss.

As the chart below shows, the estimated 2024 net combined ratio for commercial auto insurance has improved slightly since 2023, and further improvement is expected over the next two years.

These projected improvements are based on an expectation of continued premium growth – due more to aggressive premium rate increase than to increased exposure – as the rate of insured losses levels off.

Business Insurance, Business Risk, Insurers and the Economy, Market Conditions

Strike’s Duration Will Determine Impact on P/C Insurance Industry

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By Michel Léonard, Ph.D., CBE, Chief Economist and Data Scientist, Triple-I 

The International Longshoremen’s Association (ILA) went on strike on Tuesday, Oct 1. The strike is expected to affect more than 20 ports along the Eastern Seaboard and Gulf Coast, including the ports of New York and New Jersey, Baltimore and Houston.  

Focusing specifically on the strike’s impact on the property/casualty industry – and given the specific goods transiting through those ports – the impact will be most direct for homeowners, personal and commercial auto, and commercial property. More specifically, the strike may lead to increased replacement costs and delays in the supply and replacement of homeowners’ content, such as garments and furniture; of European-made vehicles and vehicle replacement parts; and of concrete, especially for commercial construction.  

However, the strike’s impact will be significantly mitigated by current inventories for each of the impacted insurable goods and the tightness of related just-in-time supply chains. At minimum, Triple-I estimates, the strike would have to last one to two weeks to trigger further sustained increases in P/C replacement costs or accelerate a current slowdown in P/C underlying growth.   

 Another way the insurance industry would be affected is from losses from coverage protecting against adverse business costs of events, such as strikes. These coverages include, but are not limited to, business interruption, political risk, credit, supply-chain insurance, and some marine and cargo. However, most such policies have waiting periods ranging from five to 10 days, and then deductibles, before payment is triggered. As a result, losses for those lines are likely to be limited if the strike lasts less than one to two weeks.  

 Using a one to two-week timeline is helpful: The last major longshoremen’s strike in the United States – at the port of Long Beach, Calif., in 2021 – lasted one week.   

Business Risk, Insurers and the Economy

Inflation is Top Challenge for Middle-Market Firms, Chubb Study Finds

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By Max Dorfman, Research Writer, Triple-I 

Inflation remains the greatest challenge for middle-market companies, according to recent research from Chubb. While the companies Chubb surveyed performed well last year, they are looking at 2024 with trepidation, with rising wages expected to continue fueling inflation. Inflation has also been affected by the Middle East conflicts, which have altered trade routes. 

As a result, nearly three-quarters of companies said they would consider increasing their insurance coverage in response to rising replacement costs of their assets due to inflation.  

“For companies that experienced operational disruptions, nearly a third acknowledged that they could have been covered if they had purchased available insurance,” the report says. “In addition to potentially being underinsured for inflated property and equipment values, companies often underestimate the time it will take to get back up and running after an insured loss, which points to the need for adequate business interruption coverage and more thorough and realistic business continuity plans.” 

Middle-market companies have struggled with inflation since the coronavirus pandemic, partially due to changing employee dynamics. Recession and talent shortage/employee retention were also considered major risks, with 10 percent of those surveyed ranking one of these as the top concern for their companies in the coming year. 

The study notes that:  

  • More than two-thirds of companies have raised worker pay in the past year, with an average increase of 5.5 percent.  
  • To retain talented employees, nearly half of companies have offered incentive compensation or retention bonuses and plan to continue that in the future. 
  • Fewer than half the respondents felt they have enough cyber insurance coverage. 

Nearly 40 percent of companies surveyed by Chubb expect to raise the prices of their products and services because of these factors.  

Other significant findings include respondents stating that small companies are less prepared for business disruptions than mid-size and large ones. This, the study says, opens an opportunity for risk-management strategies that could reduce the need for increased coverage.  

Learn More:

Triple-I “Trends and Insights” Issues Brief: How Inflation Affects P/C Insurance Premium Rates — And How It Doesn’t

Surge in U.S. Auto Insurer Claim Payouts Due to Economic and Social Inflation

Homeowners Claim Costs Rose Faster Than Inflation for Two Decades

Group Captives Offer Cost-Sensitive Companies Opportunities to Save in Face of Inflation