Category Archives: Insurance News

Digital Claims Satisfaction Rises Among Insurance Customers

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.

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

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.

Digital Payment Growth Faces Rising Cybersecurity Threats: Chubb

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.

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

Despite the rapid advancement of artificial intelligence (AI) in the insurance industry, only 6% of agency principals have implemented an AI solution, with many expressing concerns about its impact on their agency’s operations, according to the 2024 Agent-Customer Connection Study by Liberty Mutual and Safeco Insurance.

The study — which surveyed more than 1,000 independent agency leaders, agency staff members, and consumers — reveals a complex relationship between AI and the insurance sector, indicating a need for effective strategies to harness AI’s potential and address prevalent concerns about AI accuracy and data privacy.

Low current adoption but growing interest

So far, AI tools remain on the fringes in most independent agencies, according to the report. While only 6% of agency principals surveyed said they have already implemented an AI solution in their agency, more than one-in-three (36%) said they are likely to be using AI in their business in the next five years.

The research found that agent sentiment on AI is split. Sixty-four percent of agency principals said they are interested in how AI can improve their business, but only 17% of agents said they trust AI technology, and 27% view AI as a threat.

“I’m still learning a lot about the impact that AI will have,” said one of the agents surveyed, “but from what I’ve learned so far, it could revolutionize the way we service clients and bring many new efficiencies to our service platform.”

For many agents, a lack of understanding about AI is holding back adoption. Forty-five percent of the agents surveyed said they don’t know enough about AI to make business decisions about the technology.

Concerns about AI accuracy and data privacy are also prevalent. Nearly one in three agents say they are unlikely to implement AI into their business practices in the next five years, citing a lack of trust and concerns about data privacy as the top reasons.

Potential Benefits of AI for Insurance Agencies

AI technology has the potential to drive significant efficiency gains and time savings for insurance agencies, the Liberty Mutual/Safeco report’s authors stated. AI-powered chatbots alone could save businesses up to 30% in customer support costs. The report cited a recent survey by Section, which found that among professionals who are adept at working with AI, they reported saving up to 12 hours per week by leveraging the technology.

Half of agency principals said they believe AI can make their business more efficient, and 43% of agency principals surveyed said using AI will help their agency better serve customers and grow the business in the future.

The top five areas where agents envision AI providing a boost include:

  • Identifying cross-selling opportunities, cited by 58%
  • Assisting with marketing content creation, 53%.
  • Automating routine service tasks, 52%.
  • Creating personalized customer communications, 46%.
  • Automating administrative tasks, 44%.

The efficiency and service enhancements enabled by AI will be key to meeting the rising expectations of insurance customers in the digital age, according to the report. Seventy-seven percent of independent agency customers said it’s very valuable or critical for their agent to be highly responsive to requests, and 67% want their agent to proactively understand their needs. The ability to contact an agent 24/7, something AI can help facilitate, would make 39% of customers more likely to choose a particular agent over another.

View the complete Liberty Mutual/Safeco survey report here.

Insurance Industry Poised for Significant Hiring Surge

The insurance industry is poised for significant employment growth in the coming year, with over half of insurers planning to increase their workforce, despite ongoing challenges in recruitment and retention, according to a recent study by the Jacobson Group and Ward/STG Performance Benchmarking.

The Q1 2024 Insurance Labor Market Survey revealed that a slight majority of insurers (52%) is planning to increase staff in the next 12 months. This trend is particularly strong in the property/casualty (P/C) segment, where 53% of companies intend to expand their workforce, compared with 47% of life/health insurers.

Looking at specific lines of business, 66% of commercial lines P/C carriers are set to increase staff over the next 12 months, which is 32 and 16 points higher than personal lines and all lines carriers, respectively, the report stated. While 10% of insurers plan to decrease staff, 38% expect to maintain their current levels.

When it comes to company size, 53% of both medium (300 to 1,000 employees) and large insurers (over 1,000) plan to add staff, compared to 51% of small companies (under 300).

The primary reasons behind the planned hiring surge are expected business volume growth (34%) and expansion into new markets, the survey found. On the other hand, automation and reorganization were cited as the top reasons for reducing headcount in the insurance industry.

Revenue Growth Expectations and Drivers

Three-quarters, or 77%, of insurers expect revenue to rise in the next 12 months, the survey reported. Leading the pack in optimism are commercial lines P/C companies, with 84% anticipating increased revenue. This bullish outlook was shared by 78% of personal lines companies and 75% of all lines  companies, while 71% of life/health insurers also expect to see revenue growth.

The primary drivers behind these revenue expectations have shifted, the survey found. For the first time since 2012, change in market share (46%) has overtaken pricing factors (37%) as the main catalyst for projected revenue changes. However, this trend is not uniform across all segments. P/C companies, in particular, still cite pricing (43%) as their top revenue driver.

Recruitment and Retention Challenges

With 90% of insurers planning to increase or maintain staff and voluntary turnover slowing slightly, recruitment will remain challenging in 2024, according to the report. Companies will also focus on retaining top talent amid shifting complexities and expectations.

Technology, underwriting, and claims roles are expected to see the greatest growth during the next 12 months, the survey showed. Product management and sales/marketing are the top areas where companies are looking to add experienced staff, while operations and claims roles were identified as areas most likely to add entry-level positions.

Actuarial, executive, and analytics positions are the most difficult roles for insurers to fill in the current market, the survey reported.

The ability to hire talent has improved compared to a year ago, with 14% of insurance companies feeling it has become more difficult, down from 25% in the January 2023 survey. About half of employers (53%) said the ability to attract talent is about the same as a year ago, while 28% said it was moderately better and 4% said it was significantly better.

To obtain a copy of the Q1 2024 Insurance Labor Market Survey, visit Jacobsen’s website.

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

Legal system abuse, including frivolous lawsuits and inflated claims, is driving insurance claims costs to record highs, particularly in liability lines, disrupting the industry and impacting policyholders, insurers and independent agents, according to Triple-I.

Defining and Understanding Legal System Abuse

Legal system abuse involves actions that unnecessarily increase the costs and time required to settle insurance claims. Examples include filing frivolous lawsuits, inflating claims, ubiquitous attorney advertising that glorifies lawsuits and promises big payouts, and third-party litigation funding (TPLF), Dale Porfilio, Triple-I’s chief insurance officer, wrote in an article published in Agent for the Future. In TPLF, hedge funds and other financiers invest in lawsuits in exchange for a percentage of any settlement or judgment, which can incentivize holding out for bigger payouts and drawing out litigation.

These abusive practices increase claims costs while being nearly impossible for insurers to forecast and mitigate. Legal system abuse often compounds with other elements like economic inflation to further shift loss ratios and disrupt cost forecasts, making claims management even more challenging, Porfilio said.

“It is one driver of the market that we see right now,” noted Luke Bills, president of independent agent distribution at Liberty Mutual and Safeco Insurance. “Carriers start to withdraw. That’s a huge impact for independent agencies. We’re starting to see this across all lines of business.”

The effects of excessive claims costs due to legal system abuse ripple through the entire insurance industry, impacting policyholders, insurers and agents alike, according to Porfilio.

As claims payouts and premiums rise, it becomes more difficult for agents to sell coverage. Insurers may also pull back on the types of risks they are willing to cover, diminishing coverage availability in the market. Understanding and deterring legal system abuse is crucial for maintaining a healthy, affordable insurance market for all.

Role of Agents in Deterring Abuse

As legal system abuse threatens insurance coverage availability and affordability, agents play a crucial role in mitigating its effects on customers. By being proactive in client conversations, staying engaged with their customer base, and offering guidance throughout the claims process, agents can help their clients navigate the challenges posed by legal system abuse and remain a trusted advisor in an increasingly complex insurance landscape, Porfilio emphasized.

According to Bills, agents should be the policyholder’s first call after an insurable event. “We are seeing a significant increase in attorney-represented claims coming in at first notice of loss,” he said, noting that this trend is becoming more common even in personal lines.

At the point of sale, agents can discuss best practices for managing risks as part of the conversation on coverage options. They can also guide clients through the claims process when an insurable event arises.

To help curtail legal system abuse, Porfilio suggested that agents may want to consider integrating the following guidelines into their operations:

Know your customers to understand their financial situation and coverage needs. Adequate coverage is an integral component of a strong financial management plan, and agents should be ready to point clients to pertinent resources.

Be proactive in conversations about rising rates and help clients explore affordable coverage options that work with their budget. Explain that insurance rates rise for everyone due to more frequent claims and higher claims costs.

Stay engaged with your client base to increase awareness of policy responsibilities and the pitfalls of legal system abuse. Use communication channels, such as e-newsletters, to share tips on avoiding scams and understanding agreements like assignments of benefits.

Reach out proactively when you realize a client may have experienced an insurable event. Offer to answer questions and guide them through the claims process, reminding them that attorney and third-party involvement can significantly reduce their portion of any payout.

Commercial P/C Market Stabilizes Amid Lingering Challenges: Baldwin Group

The commercial property/casualty (P/C) insurance market shows signs of stabilization in 2024, despite persistent challenges like frequent natural disasters and social inflation, according to a midyear market report from The Baldwin Group (TBG). While rate increases have slowed and capacity has improved in some areas, insurers remain cautious, focusing on policyholders’ ability to manage potential loss scenarios.

“Though certain lines, industries, and geographies remain challenging, overall market conditions are easing,” the report’s authors state. “While rate increases have decelerated and there is new capacity for certain lines, insurers are still taking a very stringent approach to underwriting by putting a magnifying glass on insureds’ ability to prevent, respond to, and rebound from potential loss scenarios.”

Key Market Drivers and Trends in Commercial P/C

Severe weather events continue to be a major focus for insurers in 2024, as they remain concerned about the impact of unmodeled secondary perils and interconnected weather events on their books of business, according to TBG. Experts are predicting an increase in named storms for the 2024 Atlantic hurricane season, further emphasizing the need for insurers to closely monitor and assess their exposure to these risks, TBG noted.

Litigation trends have also had a significant impact on the commercial P/C market. The effects of legal system abuse and social inflation have become more evident, with the U.S. P/C industry witnessing a downturn in favorable reserve developments in 2023, stemming primarily from adverse developments in general liability and auto liability sectors, the report stated.

“Losses for these two lines are only projected to continue to grow at a fast rate due to social inflation and nuclear verdicts,” TBG said.

Several states have begun to fight back against legal system abuse, nuclear verdicts, and third-party litigation funding (TPLF). However, other states have expanded liability in certain areas, such as wrongful death cases, creating a complex and varied regulatory landscape for insurers to navigate, according to the report.

The economy continues to pose challenges for businesses and insurers alike. Slowing economic growth, persistent inflation, and high interest rates have created a difficult environment by increasing the cost of capital, claims, and goods, TBG reported. As a result, insurers are hesitant to deploy capital and implement drastic rate reductions, instead taking a cautious approach to exposure growth.

Geopolitical dynamics also play a role in shaping the commercial P/C market. Political dynamics and the threat of civil instability at local, state, national, and global levels pose risks to economic growth and supply chain stability, adding another layer of complexity for insurers to consider, according to the report.

To address these challenges, insurers are increasingly turning to advanced technologies, such as artificial intelligence (AI) and machine learning solutions. These technologies are being leveraged to address underwriting talent gaps, improve risk modeling accuracy, enhance operational efficiency, and boost long-term profitability, TBG reported.

One notable development, according to the report, is the release and adoption of Moody’s RMS Version 23 software, which is expected to capture recent trend — both catastrophe losses and higher repair and replacement costs — that have driven up insurer claims costs and provide larger modeled probable maximum losses.

Reinsurance Market Developments

For commercial property reinsurance, April 1 renewals brought increased capacity appetite on excess layers, while lower or primary layers remained challenging.

June 1 renewals in Florida saw some price reductions as dedicated capacity flowed into the market. However, the prospect of a highly active 2024 hurricane season has left reinsurers reluctant to support lower layers on programs, leading to continued bifurcation in appetite and pricing, according to TBG. Despite these developments, reinsurance prices remain well above historical averages from a technical pricing perspective. The next phase of the market cycle will be clearly dictated by how the hurricane season unfolds, the report noted.

On the casualty side, reinsurers continue to express concerns about reserving adequacy due to the impacts of social inflation. The unpredictability of losses related to COVID-19 shutdowns has increased conservatism, especially for casualty and auto portfolios heavily exposed to social inflation, where the expected claimant is a member of the general public rather than a contracted third party, according to the report. Adverse development from claims in the previous soft market (2015 to 2019) have led to increased scrutiny by reinsurers, many of which continue to reiterate their concerns on reserving adequacy, TBG reported.

Commercial Lines Market Conditions and Rate Trends

At the start of 2024, the commercial P/C insurance market showed early signs of stabilization, with a more orderly January 1 reinsurance renewal season indicating improved capacity and potential rate deceleration. As the year has progressed, these early developments have reached fruition, TBG stated.

Though certain lines, industries, and geographies remain challenging, overall market conditions are easing. While rate increases have decelerated and there is new capacity for certain lines, insurers are still taking a very stringent approach to underwriting by putting a magnifying glass on insureds’ ability to prevent, respond to, and rebound from potential loss scenarios, according to the report.

TBG provided a line-by-line update of its earlier market predictions, including rate trends based on the Council of Insurance Agents & Brokers (CIAB) Q1 commercial property/casualty pricing survey:

In the property market, the average rate increase in Q1 was 10.1%, but the market has notably stabilized due to insurer profitability in 2023, favorable renewals, and greater competition. However, distressed risks may see much steeper increases, TBG said.

General liability continues to see a clear bifurcation driven by the type of organization and likely claims sources, with an average rate increase of 4.1% in the first quarter. Social inflation, third-party litigation funding (TPLF), and nuclear verdicts are leading to continued market hardening, according to the report.

Commercial auto remains challenged due to litigation trends and high repair costs, with an average rate increase of 9.8% in Q1. Driver shortages are a focal issue in lawsuits, and insurers are adopting stricter underwriting tied to fleet size. Buyers should expect continued rate increases in this line, TBG reported.

Workers’ compensation remains competitive with plenty of capacity and stable rates, seeing an average rate decrease of 1.8%. It is an area of potential cost savings for insureds, as insurers look to increase profitable business, TBG noted. But medical inflation, an aging workforce, and state regulations could adversely affect claims patterns, the report adds.

In the directors and officers (D&O) liability market, public D&O rates have flattened, with most companies seeing relatively flat renewals. The private D&O market is shaped by bifurcation between stable and challenged risks, with an average Q1 rate decrease of 0.8%.

Employment practices liability insurance (EPLI) is seeing an average rate increase of 0.8% in the first quarter, with capacity and rates remaining stable. However, employee-friendly laws and regulations in states like California, New York, Florida, and Illinois continue to be challenging jurisdictions for underwriters, TBG noted.

Cyber liability has continued its stabilization in 2024, with an average Q1 rate increase of just 0.4%. Flat renewals and eager insurers characterize the market, with security controls and policies being the biggest factors in underwriting.

“Developments with AI are still too nascent for them to be felt in the market, though this will likely change as AI tools become even more prevalent,” TBG reported.

Umbrella liability capacity is restrained, especially for higher limit placements, due to social inflation and nuclear verdicts. Monoline coverage is less competitive than supported umbrella coverage, and the average rate increase in the first quarter was 7.0%.

To view the full report, visit The Baldwin Group website.

Reinsurance Buyers See More Balanced Market at July 1 Renewals: Gallagher Re

Reinsurers experienced near-record returns in 2023, and continued to post strong results in the first quarter of 2024, with up to a 12% improvement in combined loss ratios, according to Gallagher Re’s 1st View report.

The report attributes these positive outcomes to several factors, including relatively benign natural catastrophe activity, adjustments in the reinsurance market, improved conditions in primary markets, and higher reinvestment rates. Improved results have created a more favorable market for reinsurance buyers, with sufficient capital available to meet increased demand, Gallagher Re observed.

“This more comfortable market for buyers has been underpinned by an increasing supply of capital to meet increased demand as reinsurers balance sheets have expanded on the back of strong 2023 and Q1 2024 results,” commented Gallagher Re CEO Tom Wakefield.

Non-life insurance-linked securities (ILS) capital reached a record level of $107 billion at the end of 2023 and continued to grow in the first half of 2024, driven by successful catastrophe bonds and increased investor interest.

However, ILS capacity became less abundant by midyear, as the Atlantic hurricane season approached,  Gallagher Re noted.

“ILS capacity became scarce as ILS investors were ‘unnerved’ by forecasts of an active hurricane season,” the report stated.

Property outlook

The property reinsurance market has experienced increased competitiveness and capacity due to reinsurers’ strong performance in recent years, the report noted.

While reinsurers were not significantly impacted by natural catastrophe losses in Q1, there were an estimated $43 billion of economic losses and $20 billion insured losses in Q1 with both numbers being near the 10-year average.

The first quarter is not traditionally a major driver of the annual natural catastrophe loss burden, historically only representing 14% of the full-year total. Losses in Q1 have been dominated by severe convective storm losses (34% of insured losses) and other secondary perils of wildfire, drought and flood making up another 29%.

At July 1 renewals, risk-adjusted catastrophe pricing for Florida property was down 0% to 10% on average, and additional capacity demands of $3 billion to $5 billion in Florida were all met.

“Following three consecutive years of double-digit risk-adjusted rate increases, reinsurers were looking to hold the line from a procing perspective,” the reinsurance intermediary said of the Florida property catastrophe market.

The report also highlighted that buyers of property catastrophe insurance have been able to negotiate better terms and conditions on their reinsurance contracts due to the “risk on” approach taken by reinsurers. Risk-adjusted catastrophe placements in the U.S. generally were down 0% to 12% at July 1, Gallagher Re reported.

Non-catastrophe property pricing in the U.S. was down 0 to 10% for loss free accounts, but up 5% to 15% with losses.

Casualty outlook

“Casualty underwriters appear less confident than property underwriters outlined above, although this warrants its own caveat. The issues driving stakeholder concerns are regionally nuanced as the frequency and severity of casualty losses are driven by local societal, economic, judicial, legislative, and behavioral factors,” the report stated.

In the casualty insurance sector, concerns over rate adequacy in the U.S. have increased, following adverse development reported by liability insurers in the fourth quarter of 2023 and the first quarter of 2024. The lengthening and deteriorating tail of liability claims have exacerbated reinsurers’ concerns, as the market is already dealing with economic and non-economic loss inflation.

At July 1 renewals, risk adjusted excess of loss rates for U.S. general liability business were up 5% to 10% with no losses, and up 5% to 15% with emerging losses.

For U.S. health care liability, increased loss severity was seen across the health care sector. Excess of loss rates were up 0 to 5% for limited-exposed layers, and up 3% to 8% for catastrophe layers, without emerging losses. Rate increases were greater — up 5% to 20% — for layers with emerging losses.

Professional liability lines with no emerging losses saw excess of loss rates decline 0% to 5%, while accounts with losses experienced 0% to 10% increases.

Workers compensation has seen continued pressure for increases, even on loss-free layers, Gallagher Re noted. Excess of loss rates with no loss emergence were up 0 to 5% and with loss emergence, increased 5% to 10% at July 1.

The full report can be downloaded on the Gallagher Re website.

Investing in Resilience Provides Significant Economic Benefits: Allstate/U.S. Chamber

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

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

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

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

Economic Benefits of Investing in Resilience and Preparedness

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

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

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

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

Resilience and Preparedness Investment Options

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

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

  • For Communities: Investing in Infrastructure
    Community-based disaster risk reduction focuses on preventive action before a disaster strikes, including measures such as poverty alleviation, asset redistribution plans, and providing basic services like education and health care. Early warning systems are also crucial for alerting community members of impending disasters. Additionally, adopting zoning, land-use practices, and building codes through mitigation planning can help prevent or reduce damage from hazards.
  • For Businesses: Mitigating Risk and Fostering Resilience
    Businesses can invest in hazard mitigation measures, such as structural improvements, adjustments based on professional hazard audits, accessibility updates, and employee training for emergency response. Applying disaster risk reduction practices is also essential. Five essentials practices outlined by the United Nations Office of Disaster Risk Reduction are: promoting public-private partnerships, leveraging private sector expertise, fostering collaborative data exchange, supporting risk assessments, and strengthening laws and regulations. 
  • For Families: Awareness, Planning, and Home Improvements
    Families play a crucial role in building resilience and preparedness. The first step is to understand the types of disasters that could occur in your area and learn how to stay safe. Creating a family disaster plan that includes meeting places in case family members are separated is also essential. Home improvements, such as elevating electrical appliances, using flood-resistant materials, and maintaining or upgrading roofs, can help protect your home and loved ones during a disaster.

To view the complete report, visit the Allstate website.

Global Insurers Embracing AI for Claims Resolution, Customer Service

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

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

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

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

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

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

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

Leveraging Technology and AI for Claims Resolution

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

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

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

Challenges and Best Practices for AI Integration

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

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

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