Almost a year ago, I felt impelled to bust the cliché that insurance is boring. In that blog post, I called out the idea that any industry that touches every imaginable peril individuals, families, businesses, and communities face could reasonably be considered dull.

Today – as I dig back into work after spending two days at the Society of Insurance Research (SIR) annual conference in Las Vegas – I feel similarly impelled to take on a different myth: That, because of its focus on statistical analysis and the dollars-and-cents aspects of risk, the insurance industry is out of touch with day-to-day human concerns.

I get it. I’m no one’s quant. Until becoming immersed in this big-numbers industry, I probably shared this perspective. I might even slip back into it from time to time, when the conversations become a bit too actuarial for my all-too-verbal nature.

In his opening remarks, Mike Meyers, SIR president and lead competitive analyst at USAA, used a phrase that the cynic in me thought a bit hokey. He referred to the conference – the first major in-person event for SIR since the pandemic – as a “family reunion.” As the event proceeded, though, it really did feel that way. This was my first in-person SIR event, but it quickly became clear that wasn’t the case for most of the attendees.  The warmth and familiarity among the 200-plus participants was palpable.

Now, this was a gathering of insurance industry researchers, so, of course, there was going to be a lot of “numbers talk” and discussion about “leveraging technology to improve loss experience,” and so forth. But the human dimension was never far from any of the panels or one-on-one conversations. Whether the topic was online life and health insurance shopping; the challenges of researching diversity, equity and inclusion (DEI) in insurance; or how COVID-19 has affected the risk profiles of small businesses, nothing was abstract or soulless about these conversations.

Two bits that particularly struck me:

• In a discussion of automobile safety data, a correlation was drawn between driving-safety and fuel-consumption stats. It was just one chart underscoring the fact that safer drivers use less fuel, which, in turn, has a positive impact on the environment. It’s not a big jump from there to the fact that automobile telematics technology – which helps insurers more accurately price coverage and creates financial incentives to drive more safely – also helps reduce emissions. Who doesn’t want to save money AND the planet?
• If you’ve ever had to replace an entire ceiling (I have!) because of a long, slow, undetected leak upstairs, the presentation on smart plumbing would have excited you as much as it did me. More inspiring, though, was the win-win strategy implemented by the insurer, which provides the easy-to-use technology to the policyholder for free and pays for a plumbing inspection if the diagnostic app flags a possible leak. Future big claim deterred for the insurer, massive headaches prevented for the homeowner!

I may not be an actuary or a data scientist or an economist – or possess any of the extraordinary quantitative skills insurance is known for – but I’m glad the industry marshals and rigorously applies these resources to such homey challenges, at scale.

By Rohit Verma, Chief Executive Officer, Crawford & Company

Hurricane Ian inflicted more damage in Florida and the Carolinas than last year’s Hurricane Ida did in Louisiana, in terms of the number of buildings, vehicles, and infrastructure affected. It is the main reason Ian’s insured losses are likely to exceed Ida’s $36 billion.

Ian’s flood-damage claims are expected to exceed claims for Ian-caused wind damage as a percentage of this $40 billion to $60 billion event, even though only about 18 percent of Florida homes carried flood insurance. Crawford & Company anticipates we will be handling a significant percentage of these flood claims. Dealing with both insured and uninsured losses is going to be especially challenging.

As routes are cleared to the communities of Fort Myers and Florida’s southwest coast, Crawford continues to evaluate the impact of the hurricane and to assist with the recovery. In our fastest ever ramp-up, thousands of Crawford’s adjusters are already deployed – our largest deployment in history at such an early stage – and we expect this number to increase in coming weeks.

This adjuster engagement is spread across our U.S. CAT team: managed repair network Contractor Connection, our loss-adjusting business; Crawford’s on-demand inspection service WeGoLook; and edjuster, the technology-driven field and desktop contents claims handling solutions provider Crawford acquired in August 2021.

Crawford Global Technical Services also is engaged with several clients who are still assessing the damage from Hurricane Ian, and we expect the volume of commercial claims to rise as they get reported.  Moreover, Crawford has fully operational support rooms in Gainesville, Tampa, Sunrise and Orlando, Florida.

Access remains challenging during the early stages of the response due to damaged infrastructure, but we have prioritized emergency mitigation services, board-up activities, and tree removal to help mitigate further damage and return homes and commercial buildings to a usable condition as quickly as possible.

As we get further into the restoration process, claims inflation and supply chain issues are likely to impact the industry’s response to Hurricane Ian. There will be intense demand for building materials.

Our immediate focus now is to help those who experienced devastating losses and restore lives, businesses, and communities affected by the hurricane.

By Max Dorfman, Research Writer, Triple-I

A recent AM Best report finds that traditional reinsurance capital will decrease by approximately $40 billion by the end of 2022, lowering the total to $435 billion. This 8.4 percent decline comes after substantial increases of 15.5 percent for 2019, 8.9 percent for 2020, and 10.7 percent in 2021. The figure incorporates the upturn of the underwriting market and the downturn of the capital and investment markets, with continued geopolitical unrest and the possible decline in global GDP also considered. 

“With interest rates on the rise and equity markets declining, we do anticipate a rather substantial mark-to-market loss in traditional reinsurance capital levels,” said Dan Hofmeister, Senior Financial Analyst at AM Best. Reinsurance capital, working in the opposite direction, has been boosted by underwriting results in spite of heightened catastrophe loss activity in the first half of the year, he said.

Additionally, the report includes a 10-year record of third-party reinsurance capital levels and a prediction that overall third-party capital will remain stable at approximately $95 billion for 2022 compared to $94 billion in 2021.

With traditional and third-party capital together, the report predicts a 6.7 percent decrease in reinsurance capital from both sources, which would constitute the first decline in a decade, as recorded by AM Best.

Florida is emblematic of these struggles

Declines in the U.S. equity market have created capital supply challenges for some insurance-linked securities funds. However, the AM Best report stated that the pullback of traditional reinsurance in catastrophe-exposed markets like Florida could create opportunities for Insurance-Linked Security (ILS) funds. The report states that ILS funds can take advantage of significant price increases and tighter terms and conditions, if traditional capacity is restricted.

Still, Florida continues to be a hotspot for property/casualty losses, with the Triple-I finding that the state’s insurance marketplace has been beset by severe levels of fraud and litigation, driving the homeowner’s insurance market’s crisis in the state. The analysis concluded that the annual cost of an average Florida homeowners insurance policy could increase to $4,231 in 2022.

Reinsurance capital then provides a significant proportion of these costs that are directed to attorney fees and adjusting firms. Additionally, fraud related to roof replacement claims and other construction related matters continue to increase the reinsurance bill in Florida.

“Floridians pay the highest homeowners insurance premiums in the nation for reasons having little to do with their exposure to hurricanes,” said Sean Kevelighan, CEO of Triple-I.

With the threat of decreased capital for reinsurers and the markets in places like Florida experiencing turmoil, reinsurers are actively reviewing their strategy.

By Max Dorfman, Research Writer

Insurance professionals’ suspicions about fraudulent claims have increased during the pandemic as fraudsters have become more creative, according to a recent survey.

The survey by FRISS, a provider of fraud and risk detection solutions for property/casualty insurers, found that its 420 respondents in 2022 believe 20 percent of claims filed might contain fraud. That’s up from 18 percent in 2020.

“Innovation and digitization are disrupting the insurance industry in good ways, setting a new norm that’s enabling the industry to be even more responsive to customers’ needs,” said Triple-I CEO Sean Kevelighan in an introduction to the report. “Unfortunately, the acceleration of digital processes that began well before the pandemic also provides opportunities for fraud.”

In 2022, the top challenge reported by respondents was “Keeping up with fraudsters’ modus operandi” – a change from both the 2020 and 2018 surveys, in which “Internal data quality” was deemed the biggest challenge.

Insurance fraud costs U.S. consumers at least $80 billion every year, according to the Coalition Against Insurance Fraud. The FBI says the cost of non-health insurance fraud hovers at about $40 billion a year.  As a result, the average U.S. family incurs between $400 and $700 per year in losses due to increased premiums.

Respondents to the survey say fraud detection software has proven to be generally effective. This includes improving loss ratio (59 percent), staying ahead of developing fraud schemes (53 percent), and increasing investigator efficiency (52 percent).