Category Archives: Insurance News

Cyber Risk, Insurance News

US Cyber Claims Surge While Global Rates Decline: Chubb

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Cyber Security Data Protection Business Technology Privacy concept.

Cyber insurance claims are showing alarming trends in both frequency and severity, with U.S. businesses experiencing particularly steep increases while markets outside the U.S. show declining rates, according to a report from Chubb.

The comprehensive claims analysis, based on Chubb’s cyber claims data through December 2024, reveals critical insights about ransomware incidents driving claim severity, privacy-related liability becoming increasingly complex, and widespread cyber events contributing to rising frequency—all factors that are fundamentally reshaping the cyber risk landscape for businesses of all sizes.

U.S. Market Trends

The cyber insurance landscape in the U.S. continues to evolve at a concerning pace, with both frequency and severity of claims showing upward trajectories over the past three years. While claim frequency remains below the peak levels observed in 2020-2021, severity has increased significantly from 2020 through 2024, with notable volatility in recent years, Chubb reported.

Particularly alarming is the sharp increase in claim severity for mid-sized companies with revenues of $100 million to $999 million, and large companies with revenues exceeding $1 billion. These organizations have experienced substantial losses that have made headlines across business media. Interestingly, many of these attacks weren’t the result of sophisticated malware evading robust cybersecurity systems, but rather social engineering attacks targeting IT help desks and involving SIM card swaps in mobile phones, according to the report.

Another troubling trend is the rise in widespread cyber events—incidents that simultaneously affect numerous companies. These events, which can stem from attacks, software malfunctions or human error, increased to 5.3% of total reported claims in 2024, up from 4.0% in 2023, contributing significantly to the overall frequency of cyber claims.

International Market Contrast

The cyber risk scenario outside the U.S. tells a markedly different story. International markets are experiencing declining trends in both the frequency and severity of cyber claims. For medium and large revenue accounts outside the U.S., severity has decreased over the past three years, while small revenue accounts have seen only modest increases in severity, Chubb reported.

This divergence can be attributed to several factors. International businesses have increased cyber risk awareness at executive and board levels, improved business continuity planning, developed more robust incident response protocols, and focused on compliance with new regulatory frameworks such as the EU’s Digital Operational Resilience Act.

Perhaps most striking is the difference in ransom payment behavior. The willingness to pay ransoms is substantially lower outside the U.S., with only 8% of companies paying ransoms in 2024 compared to 35% of U.S.-based companies. This trend has remained consistent over the past five years, Chubb reported.

Notable Claims Statistics

The financial impact of cyber incidents continues to grow, with ransomware remaining the primary driver of losses. In 2023 and 2024, ransomware-related losses accounted for nearly 72% of all cyber claim dollars, up from an average of 63% between 2020 and 2022. The frequency of subsequent third-party litigation from ransomware incidents has also increased dramatically, up approximately 75% in 2024 compared to the 2020-2021 average.

The July 2024 CrowdStrike incident provides a sobering example of how non-malicious events can cause widespread disruption, the report noted. When the cybersecurity company CrowdStrike sent a faulty software update to customers worldwide, it resulted in 8.5 million systems crashing and generated between $400 million and $1.5 billion in insured losses, the report stated.

This incident highlighted that system failures can be as devastating as malicious attacks, underscoring the importance of comprehensive incident response planning and resilience measures. Organizations with strong resilience capabilities in place were better positioned to weather this unexpected disruption, reinforcing the value of preparedness in today’s interconnected digital ecosystem, according to Chubb.

Evolution of Privacy-Related Claims

As digital footprints expand and consumer awareness grows, privacy-related claims have emerged as a significant concern for businesses across the U.S. Recent data reveals a troubling trend: the proportion of third-party claims related to privacy liability has doubled in 2023-24 compared to 2020-22. This surge reflects not only heightened consumer awareness but also the evolving regulatory environment that has created new avenues for litigation, the report explained.

Three key regulatory frameworks are primarily driving this increase in U.S. privacy claims, Chubb reported:

  • The Illinois Biometric Information Privacy Act (BIPA) has become particularly impactful, regulating how companies collect, use, and handle biometric identifiers and information.
  • The Video Privacy Protection Act (VPPA) has gained renewed relevance in the digital age. This law directly addresses how companies implement and use pixels—those tiny snippets of code embedded in websites that track user behavior.
  • State-level wiretapping laws have also contributed to the privacy claims landscape. The California Invasion of Privacy Act (CIPA), for instance, provides individuals with a private right of action against businesses for privacy violations, with potential statutory damages reaching $5,000 per violation—a figure that can quickly escalate to significant amounts in class action scenarios.

Beyond U.S. borders, international privacy regulations continue to reshape how global businesses approach data handling and privacy compliance. The European Union’s General Data Protection Regulation (GDPR) stands as the gold standard, comprehensively regulating the lawful collection, processing, use, retention and deletion of personally identifiable information.

View the full report here.

Catastrophes, Insurance News

Severe Convective Storm Risks Reshape U.S. Property Insurance Market

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Downtown Houston buildings with damaged windows from derecho

Severe convective storms (SCS) are emerging as a major driver of U.S. property insurance costs, with large hail events alone damaging nearly 600,000 homes in 2024, according to an analysis by CoreLogic.

SCS weather events, which include damaging hail, tornadoes, straight-line winds and derechos, are becoming a significant driver of insured natural disaster losses across the U.S. While hurricanes and wildfires often receive more attention, these intense storms are causing considerable damage, CoreLogic noted.

Scale of Current Damage

In 2024, damaging hail of two inches or greater affected 567,000 single- and multifamily homes across the contiguous U.S. The combined reconstruction cost value (RCV) of these properties is approximately $160 billion. Texas, Nebraska, Missouri, Oklahoma, and Kansas account for 72% of the homes at risk for damaging hail.

The pattern of these storms is shifting. While 2024 saw 133 days of damaging hail—above the 20-year average of 121 days—storm activity is evolving. Rather than extended periods of severe weather, there’s a trend toward more concentrated events, the report explained.

These localized storms can strain resources and claims processing systems, creating challenges for insurers and claims managers. On Sept. 24, a single event in Oklahoma City damaged 35,000 homes, making it the most impactful single hail event of 2024. A derecho that struck Downtown Houston last May caused more damage to “hurricane-proof” buildings than Hurricane Beryl in July, according to a recent study.

Property at Risk from SCS

Hailstorms pose a threat to 41 million homes at moderate or greater risk, representing a reconstruction cost value (RCV) of $13.4 trillion, according to CoreLogic’s risk score models. For tornadoes, 66 million homes are at risk, valued at $21 trillion RCV. Straight-line winds affect 53 million homes with an RCV of $18.6 trillion.

Texas, with 8.1 million homes at moderate or greater risk, has the highest concentration of risk across all storm categories, due to its size and geographic position, according to CoreLogic. The Central U.S. shows the highest overall concentration of SCS risk.

Chicago is the metropolitan area most at risk in all three SCS risk categories, with approximately 3 million homes at risk for each type of severe weather event, the report found. For tornado risk, Dallas and Miami follow Chicago as the most exposed urban centers.

Changing Environmental Conditions

Warmer sea surface temperatures and increased atmospheric moisture are altering storm patterns, according to CoreLogic. The traditional SCS season is expanding, with storms appearing earlier in spring and continuing later into fallTornado impacts are also shifting much further east than historical norms, impacting Midwest states such as Illinois, Indiana, Michigan and Ohio.

Analysts have examined three greenhouse gas emissions representative concentration pathways (RCPs): RCP 4.5, 7.0, and 8.5, projecting outcomes through 2030 and 2050, the report noted. These scenarios indicate a shifting geography of SCS risk, with the South and Midwest facing projected increases.

By 2050, the South and Midwest are expected to see increased SCS activity, including large hail, strong winds, and tornadoes, the analysis found. This shift correlates with elevated atmospheric instability, particularly in higher emissions scenarios.

For the insurance sector, these projections indicate a need for refined risk models and improved infrastructure in emerging high-risk areas. Geographic risk exposure management will become increasingly important as SCS events evolve, according to CoreLogic.

View the full SCS report here.

Insurance Industry, Insurance News, Market Conditions, Regulation, Specialty Coverage

South Carolina Analysis Shows Liquor Liability Insurance Market in Crisis

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South Carolina’s liquor liability insurance market is in crisis, with insurers losing an average of $1.77 for every $1.00 of premium earned since 2017, while claim frequencies significantly outpace neighboring states, according to a recent study by the state’s Department of Insurance.

The comprehensive analysis, initiated following a 2019 request by the South Carolina Senate Judiciary Committee, reveals a deeply troubled marketplace where insurers are losing money.

“The data seem to confirm the anecdotal assertions, made by both insurance companies and small businesses, of a very troubled and challenged marketplace,” the report stated.

Current Market Landscape

The liquor liability insurance market in South Carolina has maintained a relatively stable number of participants in recent years. Since 2019, the number of insurance groups operating in this sector has held steady at around 48 participants. This consistency in market players suggests a mature, albeit challenging, insurance environment.

Despite the overall stability in participant numbers, the market is characterized by the dominance of three major insurance groups.

Premium Trends

While the number of market participants has remained relatively constant, earned premiums have experienced remarkable growth over a five-year period. From 2017 to 2022, earned premiums in the South Carolina liquor liability insurance market more than doubled to $17.0 million from $7.6 million.

This dramatic surge in premiums can be attributed to various factors, but rising insurance rates play a crucial role, the report noted.

Profitability Crisis in South Carolina

Since 2017, liquor liability insurers have lost about $1.77 for every $1.00 of premium earned over the six years observed. In the best performing of those six years (2018), the industry lost roughly $0.91 per $1.00 of premiums earned, while losing about $2.60 per $1.00 of premiums earned in the worst performing year, 2022.

“Combined ratios for the industry make it clear that this sub-line of insurance is being written at massive underwriting losses,” the report’s authors stated.

Source: South Carolina Department of Insurance

The severity of South Carolina’s liquor liability insurance crisis becomes even more apparent when compared to their neighboring states, where these same insurers have realized a net profit over time, the report noted.

Over the same 2017-2022 period analyzed, for example, North Carolina’s estimated liquor liability combined ratio ranged between 45% and 76%. In 2022, when South Carolina’s estimated combined ratio hit 290%, North Carolina’s stood at 62%.

Claims Severity and Frequency

The liquor liability insurance market in South Carolina also has experienced significant fluctuations in claim severity over recent years. In 2022, the average incurred claim per $1 million of earned premium reached $281,071, a substantial increase from $121,761 the previous year. This figure, however, falls within a broader historical context of volatility. The state witnessed its highest average claim of $338,244 in 2017, followed by a dramatic drop to $121,761 in 2021.

Despite these fluctuations, recent data suggests that South Carolina’s claim severity is aligning more closely with neighboring states in recent years, according to the report.

While severity trends show signs of alignment with regional norms, claim frequency in South Carolina presents a more pressing challenge.

From 2019 to 2022, South Carolina’s claim frequency (number of incurred claims per $1 million of earned premium) has outpaced that observed in the other states considerably. The claims frequency rate was nine in 2022, 13 in 2021, 10 in 2020 and 12 in 2019. During that same period, none of its neighboring states — Florida, Georgia and North Carolina — reported a claims frequency rate higher than five.

View the full South Carolina report here.

Insurance News, Technology

Insurtech Funding Hits Seven-Year Low,
Despite AI Growth

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Global insurtech funding hit a seven-year low of $4.25 billion in 2024, marking a challenging year for the sector, though AI-focused companies showed resilience by securing $2.01 billion across 119 deals, according to Gallagher Re’s Global Insurtech Report. 

Total insurtech funding in 2024 — down 5.6 percent from $4.51 billion in 2023 — represents the lowest funding level since 2018, signaling a more cautious investment climate. Last year’s insurtech deal count saw a more pronounced decline, falling 18.5 percent to 344 deals from 422 in the previous year — a low not seen since 2019. Reflecting this trend, the number of venture investors in the space decreased to 466 from 574, indicating a more selective approach to insurtech investments. 

Segment Performance 

A closer look at the market segments reveals divergent trajectories, Gallagher Re found. Property/Casualty (P/C) insurtech funding experienced a significant downturn, decreasing 24.3 percent to $2.59 billion in 2024 from $3.42 billion a year earlier. In contrast, Life/Health insurtech funding bucked the overall trend, surging by 53.6 percent to reach $1.66 billion. 

Despite an overall funding contraction, several positive indicators emerged, suggesting underlying strength in the market, the report noted. 

Early-stage funding grew by 8.8 percent to $1.22 billion, highlighting continued investor confidence in nascent insurtech innovations. Moreover, the average deal size increased by 14.6 percent to $14.67 million, indicating that while fewer deals were made, those that did close were of higher value. 

Lastly, mega-round funding — deals of $100 million or more — remained relatively stable at $930.17 million, down only slightly from $969.00 million in 2023. 

Geographic Shifts and Market Leadership 

The United States continues to be the powerhouse of insurtech innovation, accounting for 50.58 percent of all insurtech deals worldwide in 2024. 

The United Kingdom saw a significant increase in its deal share, rising to 9.30 percent in 2024 from 7.35 percent in the previous year. This growth of nearly two percentage points represents the largest gain among all countries. Moreover, the U.K. has consistently maintained its status as the nation with the second-largest share of global insurtech deals since 2017. 

While established markets continue to lead, several emerging players are making their mark on the insurtech landscape. Canada and Germany both demonstrated growth, each experiencing a 1.78 percentage point increase to claim a 3.20 percent share of global deals. South Korea is another country to watch, with its deal share increasing by 1.21 percentage points to reach 1.45 percent. 

AI-centered Insurtech Performance 

Artificial Intelligence continues to make waves in the insurtech industry, accounting for a significant portion of deals and funding in 2024. AI-focused firms represented 34.6 percent of all insurtech deals throughout the year, raising $2.01 billion across 119 deals. The financial prowess of AI-centered insurtechs is further highlighted by their higher average deal sizes, which stood at $18.93 million compared to $12.21 million for their non-AI counterparts. 

The fourth quarter of 2024 saw a particularly strong performance for AI in the insurtech space. AI-centered companies accounted for 42.3 percent of all deals during this period, showcasing the growing confidence in AI-driven solutions. Moreover, these AI-enabled insurtechs managed to raise an additional $5 million on average compared to their non-AI counterparts, further cementing the technology’s value proposition in the industry. 

While the numbers paint a promising picture, Gallagher Re emphasized the need for practical applications of AI in insurance. 

“Much like insurtech more broadly, AI must be part of a use case that is commercially sound and supports a broader set of business objectives,” the report stated. “Using AI to assist underwriters to make better risk selection decisions is one such clear use case, for example. Using AI to send customers down company rabbit holes where call centers once existed is not.” 

Learn More: 

Human Needs Drive Insurance and Should Drive Tech Solutions 

Actuarial Studies Advance Discussion on Bias, Modeling, and A.I. 

Agents Skeptical of AI but Recognize Potential for Efficiency, Survey Finds 

Insurers Need to Lead on Ethical Use of AI 

 

 

 

Careers and Employment, Insurance Industry, Insurance News

Triple-I Chart of the Week, Representation of Black professionals in Insurance: Growing, But Slowly

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On February 10, Triple-I released its latest Chart of the Week (COTW), “Representation of Black professionals in Insurance: Growing, But Slowly.” Citing data from the Bureau of Labor Statistics, the chart reveals that in 2024, Black professionals comprised 14.7 percent of the insurance industry, just a 0.1 percent increase from 2023 but still considerably up from 9.9 percent a decade ago. Triple-I’s snapshot shows some occupation categories: underwriters comprised 14.6 percent, agents 13.5 percent, and claims and policy processing clerks 21.9 percent.

The most recent BLS data also shows Black representation among claims adjusters, appraisers, examiners, and investigators is at 20.9 percent. Last year’s version of the chart revealed (using data from 2020) that Black professionals accounted for only 1.8 percent of senior executives at the top ten US insurers. (In 2024, Black CEO representation across the Fortune 500 was only 1.6 percent, an all-time high.) Overall, insurers have welcomed Black professionals at proportions commensurate with their proportion of the overall US workforce but have not managed to make headway in the C-suite.

According to BLS data cited in an AM Best report, total employment in the industry had surpassed 3 million by August 2023. However, employers could face massive attrition as thousands of workers (along with their leadership skills and knowledge) retire from the workforce in the coming years.

Attracting and retaining top talent remains a key business strategy for organizations that want to keep delivering world-class results and growth. As the insurance industry collects revenues from virtually every household in America, a workforce that reflects this enormous marketplace can tap into a diversity of thought and experience to help address the industry’s challenges, including making products affordable and available to cover a broad range of risks.

A Boston Consulting Group study revealed that companies with above-average diversity in their leadership teams reported innovation revenue at rates 19 percentage points higher than those with below-average diversity in management. Again, the ability of the industry’s aging workforce to connect with younger generations will be pivotal. US millennials and Gen Zers command nearly $3 trillion in spending power each year.

Progress towards diverse talent recruitment and retention goals can hinge upon cultivating a workplace where all employees feel welcome, supported, fulfilled, and empowered to keep growing professionally. Nonetheless, a lack of diversity at the C-suite level can undermine efforts to incorporate driven and career-focused candidates, especially among millennials and GenZ professionals. Rising generations are wary of glass ceilings and may want proof that inclusion and equity come from the top.

Data indicates that companies tend to employ Black professionals more often in jobs that don’t typically lead to higher roles instead of taking deliberate and strategic efforts to increase Black representation in areas close to centers of profit and strategic decision-making. These employees are taken out of the line of sight for getting tapped and groomed for opportunities that can lead to the C-suite. Insurers keen on Black talent development can open opportunities for Black employees to learn about what’s above that mid-level management ceiling and make connections. Organizations such as Black Insurance Industry Collective (BIIC) offer this and other types of strategic assistance to the industry for advancing, retaining, and empowering Black talent at the executive level.

“The momentum is clear—BIIC is not just shaping the conversation but actively driving meaningful change within the insurance industry,” says Amy-Cole Smith, Executive Director for BIIC and Director of Diversity at The Institutes.

Since its inception three years ago, BIIC has endeavored to support Black leaders within the risk management and insurance industry in full partnership with some of the largest insurance organizations. To date, 22 organizations have joined forces with BIIC to advance this mission.

Cole-Smith says, “By fostering mentorship, leadership development, and strategic networking opportunities, BIIC is creating tangible pathways for Black professionals to ascend into executive roles, influence key industry decisions, and pave the way for future generations.”

In addition to engaging over 4,000 professionals through its bespoke content designed to raise awareness and foster discussion of key topics relevant to this mission, BIIC has also supported over 135 emerging, mid-level, and senior Black professional leaders through its Executive Leadership Program, a collaboration with Darden Executive Education and Lifelong Learning. 

“Through its commitment to equity, inclusion, and professional excellence, BIIC is not only elevating individual careers but also transforming the industry’s leadership landscape, ensuring that diverse perspectives and voices shape its future,” according to Cole-Smith.

Insurance News, Legal Environment

Florida’s Progress
in Legal Reform:
A Model for 2025

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Florida’s legal system reforms, aimed at curbing frivolous lawsuits and unfair liability divisions, are showing early signs of success, according to a recent study from the U.S. Chamber of Commerce Institute for Legal Reform.

The historic reform legislation passed in 2022 and 2023 has led to insurance carriers expanding their business in Florida, and homeowner insurance rates are either stabilizing or decreasing.

Key reforms passed by state lawmakers include:

  • Florida Senate Bill 2A (2022): Eliminated one-way attorney fees and assignment of benefits for property insurance claims.
  • Florida HB 1205 (2023): Prohibits misleading legal service ads and the misuse of consumer health information for legal services.
  • Florida Supreme Court (2024): Requires discovery to be proportional to case needs.
  • Florida HB 837 (2023):
    • Adopts modified comparative fault.
    • Limits plaintiff recovery over 50% fault.
    • Protects multi-family owners from third-party crime liability.
    • Restricts bad faith insurance claims.
    • Limits medical damages to actual payments with required disclosures.

Florida reforms in 2022 have also addressed the issue of fraudulent assignment of benefits (AOB) claims. A recent court ruling upheld Senate Bill 2A, confirming that a “direction to pay” (DTP) is not an AOB and third parties lack standing to sue insurers without a valid AOB.

Despite facing opposition from the well-funded billboard trial lobby, the reforms have led to a reduction in property insurance lawsuits and stabilized rates. However, the problem of opportunistic trial attorneys driving up frivolous lawsuits for profit persists, emphasizing the need for insurers and businesses to adapt their risk management strategies in 2025.

Looking ahead, Florida lawmakers in 2025 are expected to reintroduce a bill requiring more transparency for third-party litigation funding (TPLF) during the 2025 legislative session, according to the Florida Chamber of Commerce. This is seen as another crucial step in the reform of Florida’s legal system.

“Legislative reforms have vastly improved Florida’s property insurance market. Any efforts to roll back the reforms previously passed would have a negative impact on the market’s continued path toward stability,” said Mark Friedlander, Triple-I’s Florida-based director of corporate communications.

The reforms have led to a significant drop in property claims lawsuits, better loss ratios for insurers, a manageable hurricane season, billions in new capital, and a projected reduction in reinsurance prices for 2025 following flattened rates in 2024. These developments underscore the effectiveness of the reforms and the potential for further improvement in the insurance market.

For a deeper understanding of the implications of TPLF and the ongoing legislative efforts, we invite you to explore Triple-I’s comprehensive TPLF white paper and visit our legal system abuse knowledge hub. You can also check out our new StopLegalSystemAbuse.org microsite.

Insurance News

Changing Risks, Rising Costs Drive Insurance Transformation for 2025: Majesco

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The landscape of risk is undergoing a dramatic transformation, becoming increasingly complex, frequent, and unpredictable. This new reality demands a fundamental shift in how businesses and insurers approach risk assessment and management, according to a white paper by Majesco on trends shaping insurance in 2025.

Insurance operational costs are increasing, growth is limited, and profitability challenges are becoming more pronounced. These issues underscore the fact that current operational business models and technology frameworks are no longer sufficient to meet the demands of today’s dynamic world, the report contends.

For example, only around 5% of property/casualty and life, accident and health insurers are “leading the way in innovation,” according to an April 2023 report by AM Best, Majesco noted.

Without a new business model and technology foundation, insurers will struggle to find a profitable growth strategy, improve operationally, respond rapidly to market opportunities, innovate with new products and services, and satisfy customers, employees, or distribution partners, according to the report.

A new report from Majesco cites the following eight trends will shape the insurance industry in 2025:

Trend 1: New Era of Risk Demands New Technology

The increasing frequency and complexity of risk events is forcing insurers to completely rethink how they assess and manage risk. Over the past five years, the U.S. has experienced an average of 18 billion-dollar disasters annually, more than double the long-term average of 8.1 such events per year from 1980 to 2022, according to the report. This stark increase is attributed to a combination of factors, including increased exposure, vulnerability, and the impacts of climate-related perils.

Moreover, the nature of risk events is evolving, often presenting as combined risks that amplify their impact. Hurricane Helene serves as a prime example of this trend, Majesco noted. The storm not only caused extensive property damage but also led to significant business interruption and more than 100 fatalities.

Traditional predictive models are becoming obsolete as insurers must adopt innovative technologies and data analytics to better understand, prevent, and mitigate increasingly unpredictable risks.

Trend 2: Growing Protection Gap Consequences

The widening gap between insured and uninsured losses is creating a crisis of affordability and trust in the insurance industry, with rising costs forcing many customers to reduce coverage or go uninsured.

Recent catastrophic events have highlighted the severity of this issue. Hurricane Helene, estimated to be a $50 billion event, saw an estimated 95% of losses go uninsured, according to Majesco.

The impact of rising insurance costs is felt across generations. According to recent research, 76% of younger consumers (Millennials and Gen Z) have had to tighten their budgets due to increased insurance expenses. Even 61% of older generations (Gen X and Boomers) report similar financial pressures.

Trend 3: Rise of Climate Risk Technologies

Climate change is driving insurers to adopt sophisticated technologies like AI models, IoT sensors, and advanced analytics to better understand and respond to environmental risks. This technological evolution is also creating convergence between insurance and banking sectors as both industries grapple with measuring and managing climate-related financial risks.

Technology enables insurers to rethink loss control for property. “Today it is primarily used for high-value or high-risk properties, leaving a large portion of insurers’ portfolios untouched,” the report noted. “Instead, by leveraging technology with self-surveys and videos with advanced analytics to assess the risk, insurers can segment and assess their entire property portfolio cost-effectively.”

Trend 4: Modern Insurance Constrained by Out-of-Sync Business Model

Legacy insurance operating models are struggling to keep pace with modern risks, leading to decreased profitability and higher expense ratios, according to the report. The report emphasizes the need for insurers to leverage emerging technologies like Cloud, APIs, AI/ML, GenAI, and IoT to optimize operations and innovate.

This shift is not just about staying competitive, but also about improving efficiency, speed to market, and customer experience in a rapidly changing risk landscape.

Trend 5: Democratization and Demonetization of Data

The insurance industry is witnessing a significant trend toward democratization and demonetization of data, making it more accessible, understandable, and actionable through new technological approaches that eliminate traditional cost barriers and data silos.

This shift is expected to level the playing field between large and small insurers by reducing data and analytics costs, eliminating the cost multiplier effect from the use of data by multiple entities, and making advanced data and analytics available to any organization, regardless of size. The trend is being driven by factors such as intelligent core solutions, embedded analytics, and the adoption of AI and GenAI.

“Data has always been the lifeblood of the insurance industry but today it is a vital asset in our digital world and increasingly crucial across every part of the insurance value chain. But access to data continues to be challenging and expensive,” the report stated.

Trend 6: AI and GenAI Propels Real Business Optimization

The integration of AI and GenAI into insurance business processes is transforming the industry, driving improved productivity and accelerating employees’ performance. A report from The Boston Consulting Group (BCG) highlights that only 4% of companies have fully integrated AI across functions, yielding significant value, while an additional 22% have implemented AI strategies and are starting to see substantial gains.

Over the past three years, AI leaders achieved 1.5 times higher revenue growth, 1.6 times greater shareholder returns, and 1.4 times higher returns on invested capital while also excelling in non-financial areas like patents filed and employee satisfaction, the BCG report found.

This AI transformation is particularly crucial as the insurance industry faces a massive workforce transition with half of insurance professionals expected to retire by 2030, the report noted.

Trend 7: Market Shifts Fuel New Product Growth Opportunities

Customer needs and changing risk patterns are driving demand for new insurance products. The report highlights four key areas of growth in the insurance market: Protection as a Service, the rise of specialty insurance, the emergence of parametric products, and the growth of supplemental and worksite products.

“Today’s customers are increasingly disillusioned with the ‘traditional’ insurance approach, creating a loyalty fault line between customers’ needs and expectations with insurers’ ability to deliver. While risk and trust tend to be constants, customers increasingly have no guaranteed loyalty to old models, even from trusted brands,” the report’s authors said.

Trend 8: The Algorithmic Economy Powers Intelligent Core Solutions

The integration of advanced analytics and AI directly into core insurance processes is creating a new “algorithmic economy” that fundamentally changes how insurance operates. This embedded intelligence is enabling insurers to make better decisions, operate more efficiently, and respond more quickly to market changes and customer needs.

“Embedded intelligence is part of the new ‘algorithmic economy’ and is the innovation catalyst needed to help insurers stay ahead of market trends and technological shifts, giving them the confidence to navigate complexities with ease and significantly improve business operations,” the report stated.

Obtain the full Majesco report here.

Insurance News

Digital Claims Satisfaction Rises Among Insurance Customers

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Auto and home insurers’ investments in mobile app features and refinements have led to a significant rise in customer satisfaction scores, according to the J.D. Power 2024 U.S. Claims Digital Experience Study.

The study revealed that overall satisfaction with the auto and home insurance digital insurance claims process is 871 (on a 1,000-point scale), up 17 points from 2023. This increase is attributed to the introduction of new features such as automatic collision reporting capabilities, enhanced image upload, and body shop selection tools, according to J.D. Power.

“The digital channel has now surpassed traditional phone-based communication as the most satisfying way for insurance customers to submit a new claim,” stated Mark Garrett, director of global insurance intelligence at J.D. Power. He further emphasized that while the insurance industry has made significant strides in digital claims reporting, there is still room for improvement, particularly in helping policyholders navigate between digital and offline channels.

The study, now in its fifth year, evaluates digital experiences among property/casualty insurance customers throughout the claims process. It examines the functional aspects of desktop, mobile web, and mobile apps based on four factors: visual appeal; clarity of the information; navigation; and range of services.

Insurers made an average of 6.75 updates to their mobile apps in 2023, an increase from 5.72 in 2022, according to Michael Ellison, president of Corporate Insight Inc., which partnered with J.D. Power on the study.

“The industry is reaching an important tipping point in which digital channels—particularly mobile apps—are the primary conduit to insurance customer engagement,” Ellison stated.

While 84% of claimants said their insurer provides an easy digital communication process, just 39% said their insurer always responded in a timely fashion to emails and text messages.

Nearly 20% of customers said they used more than one channel when they had a question about their claim, which the study noted was a frustration point that reduced satisfaction by more than 100 points. Among those who used more than one channel for the same topic, email, apps and phone calls were the most frequently cited.

More information about the J.D. Power study can be found here.

Emerging Risks, Insurance Industry, Insurance News

Multi-Family Affordable Housing Market Challenged by Surges in Insurance Premiums

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urban apartment buildings

With ​​nearly half of all homes in the United States at risk of “severe or extreme” damage from events like flooding, high winds, and wildfire, the perfect storm of climate risk and legal system abuse creates obstacles for homeowners. It also threatens a more financially vulnerable segment of the housing market, as increased premiums and waning coverage for affordable housing providers can put millions of renters at risk of becoming rent-burdened (paying more than 30 percent of gross monthly income in gross monthly rent) or unhoused.

In June of this year, about two dozen real estate, housing, and nonprofit organizations — self-describing as a “broad coalition of housing providers and lenders” —  wrote a letter to Congress and the Biden administration urging them to address the issue of property insurance affordability. Although the coalition declared its intent to represent all stakeholders in the housing market, it called attention to special concerns of affordable housing providers and renters.

The letter referenced an October 2023 survey and report commissioned by the National Leased Housing Association (NLHA) and supported by other affordable housing organizations. The survey involved more than 400 housing providers that operate 2.7 million rental units — 1.7 million of which are federally subsidized. Findings mentioned in the letter and report about the affordable housing market include:

– Rate increases of 25 percent or more in the most recent renewal period for one in every three policies for affordable housing providers.

– Over 93 percent of housing providers said they plan to mitigate cost increases, with three most commonly cited tactics: increasing insurance deductibles (67 percent), decreasing operating expenses (64 percent), and increasing rent (58 percent).

– Respondents cited limited markets and capacity as the cause for most premium increases, followed by claims history/loss and renter population.

According to the U.S. Department of Housing and Urban Development (HUD) guidelines, affordable housing is generally defined as housing for which the occupant is paying no more than 30 percent of gross income for housing costs. These units are often regulated under various regional and nationwide programs, which typically offer some form of government subsidy to the property owners – usually either through tax credits, government-backed financing, or direct payments. Rising insurance premiums for affordable housing properties have come at a particularly challenging time for both renters and affordable housing property owners, a large share of which are non-profit organizations.

Census Data indicates that in total renters comprise around 36 percent, or about 44.2 million of the 122.8 million Census captured households. The number of rent-burdened households nationwide has hit an all-time high. The latest rental housing market figures, taken from a report issued by the Joint Center For Housing Studies Of Harvard University, counts 22.4 million rent burdened households in this category, amplifying the dire need for more affordable units. That report also reveals the proportion of “cost-burdened renters rose to 50 percent, up 3.2 percentage points from 2019.” 

Additionally, homelessness increased 12 percent in 2023. More than 650,000 people were unhoused at some point last year — the highest number recorded since data collection began in 2007. A Wall Street Journal analysis reveals the most recent counts for 2024 are already up 10 percent, putting the total number of unhoused persons on track to exceed last year’s amount.

Meanwhile, the affordable housing stock is aging and the cost of debt to acquire or build multifamily properties has risen, too. As interest rates have been high in recent years, developers must offer investors greater returns than treasury notes. The problem is complex, but the outcomes can be brutally straightforward.

Higher insurance premiums on rented properties increase costs, which, in turn, get passed on to renters. Market-rate landlords can usually raise rents to cover the increasing costs of capital and insurance premiums. However, affordable housing providers are locked into rents set by the government. These amounts are tied to regional incomes, which can be depressed by wage stagnation. Thus, renters who rely on affordable housing can experience the impact of rising premiums in the form of decreased services and lapsed maintenance (as housing providers dip into other parts of the operating budget to make up the shortfall) or a decrease in the number of units on the market as housing providers extract units or leave the market.

In July of this year, HUD convened a meeting with various stakeholders to discuss policies and opportunities to address this and related challenges while managing potential risks to the long-term viability of affordable housing. HUD has modified its insurance requirements for apartment buildings with government-backed mortgages, now allowing owners to set their deductible for wind and storm events as high as $475,000, up from $250,000. This tactic may reduce premiums but can also raise out-of-pocket costs after a storm or severe climate event. Another approach in progress is the revision of HUD’s methodology for calculating the Operating Cost Adjustment Factors (OCAF), parameters for annual percentile increases in rent, for eligible multifamily properties to better account for increasing insurance costs.

Triple-I is committed to advancing conversations with business leaders, government regulators, and other stakeholders to attack the risk crisis and chart a path forward. To join the discussion, register for JIF 2024. Follow our blog to learn more about trends in insurance affordability and availability across the property and casualty market.

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Digital Payment Growth Faces Rising Cybersecurity Threats: Chubb

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The global digital payments landscape, projected to hit $16.6 trillion by 2028, is grappling with a surge in security breaches and scams, with U.S. consumers reporting losses of $1.8 billion due to bank transfer and payment scams in 2023 alone, according to a new report from Chubb.

Despite widespread adoption, only one in three users fully trust digital payment technologies, underscoring the need for enhanced security measures and consumer education, the report found.

Concerns about security of digital payments creates an opportunity for insurers to provide personal cyber coverage that offers consumers greater peace of mind, the report noted.

“In this dynamic environment, insurance plays a pivotal role in fostering trust and enabling the continued growth of the digital payments ecosystem. By providing protection against financial losses resulting from cyber scams, technology malfunctions and data breaches, insurance empowers individuals and businesses to embrace digital payments with confidence,” said Sean Ringsted, chief digital business officer of Chubb.

The Growth and Risks of Digital Payments

The total transaction value of digital payments is projected to be $11.6 trillion in 2024, with continued growth expected at a 9.5% annual rate through 2028, according to Chubb. This underscores the magnitude of the shift toward digital payments globally.

In the U.S. alone, the number of noncash payments, excluding checks, has increased more than 500% between 2000 and 2021, according to the Federal Reserve System. Digital wallets are projected to account for more than $25 trillion in global transaction value, or 49% of all online and point-of-sale sales combined, by 2027.

As reliance on digital payment technologies grows, so does the prevalence of security breaches and scams, Chubb warned.

Data compromise incidents involving financial institutions increased by more than 330% from 2019 to 2023. In 2023, U.S. consumers reported losing $1.8 billion due to scams involving bank transfers and payments. The three largest banks that offer the Zelle payment network rejected scam disputes worth approximately $560 million from 2021 to 2023, according to a U.S. Senate Subcommittee analysis.

Businesses are also feeling the financial pain, with merchant losses due to online payment fraud predicted to surpass $362 billion globally between 2023 and 2028. Juniper Research anticipates $91 billion in losses in 2028 alone.

“From the U.S. perspective, the survey results suggest that some consumers have been lulled into a false sense of security around digital payments,” said Robert Poliseno, president of North America Digital Insurance at Chubb. “To protect all consumers, key ecosystem participants — including financial institutions, merchants and insurers — should educate users about potential risks, including the diverse range of cyber scams, and emphasize protective measures, such as adopting secure digital practices, raising awareness of common pitfalls and utilizing various forms of available risk transfer products-like insurance.”

The Trust Gap in Digital Payments

Despite widespread adoption, trust in digital payment technologies is relatively low, according to the survey. Nearly one-third of respondents globally lack confidence in digital payment providers’ security measures. Concerns about the adequacy of customer support (36%) and confidentiality (29%) are also among the main impediments to full trust, the survey found.

The possibility of being scammed is a leading barrier to fully trusting digital payments. Globally, 64% of respondents are very or quite concerned about cyber scams when using digital technology to transfer money, the survey found. In the U.S., 49% of respondents are very or quite concerned.

Most respondents concerned about cyber scams indicate that they have altered their behavior or reduced their usage of certain platforms: 61% globally, 60% in the U.S., 56% in Latin America and 65% in Asia.

The Role of Insurance in Promoting Trust and Adoption

A significant portion of digital payment users mistakenly believe they are protected against losses in various scenarios, such as technology malfunctions or data breaches. Younger respondents, frequent users, and those engaging in risky behaviors could be especially at risk of incorrectly assuming they have automatic protection.

However, the Chubb survey found that actual usage of insurance is relatively low — only 16% globally have personal cyber scam or fraud insurance, while 23% have payment protection insurance.

The presence of transaction insurance plays a critical role in increasing users’ trust in digital payment technologies, Chubb reported. Holding such insurance significantly boosts confidence for three-quarters of consumers.

Consumers are willing to pay for this peace of mind, Chubb found, with the highest proportion willing to spend 6% or more of the transaction amount on insurance.

View the full report here.