Category Archives: Insurers and the Economy

Disaster Resilience, Insurance Industry, Insurers and the Economy, Legal Environment, Market Conditions, Risk Management

Climate Resilience and Legal System Abuse Take Center Stage In Miami

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Triple-I’s Joint Industry Forum this week in Miami brought together subject-matter experts from across insurance, academia, government, and the nonprofit space to discuss climate resilience, legal system abuse, and – most important – what is being done and must continue to be done to ensure insurance availability and affordability during this period of evolving perils and policy challenges.

The insight-rich and engaging panels and “Risk Takes” will be generating Triple-I blog content for weeks to come. The following is a brief wrap-up.

While our times are “riskier than ever,” Triple-I CEO Sean Kevelighan pointed out that the U.S. property/casualty insurance industry “is well poised to manage these risks.” At the same time, he and many participants noted that collaboration and coalition building are critical for long-term success.

With respect to climate resilience, such collaboration is already taking place. Veronika Torarp, a partner in PwC Strategy’s insurance practice and moderator of the Climate Resilience panel, discussed the multi-industry coalition PwC is developing with Triple-I and other partners. Marsh McLennan’s managing director for public sector Dan Kaniewski – who moderated the Success Stories panel – discussed a project funded last year by Fannie Mae and managed by the National Institute of Building Sciences (NIBS) that culminated in a roadmap to incentivize investment in urban flood resilience across “co-beneficiary” groups.. Triple-I played an integral role in the NIBS project, which is currently seeking communities and partners for implementation of the roadmap.

In the area of legal system abuse, there was much conversation around the benefits to Florida of recent reforms in terms of making the Sunshine State more attractive to insurers again by discouraging excessive and fraudulent litigation. Legal system abuse is a multi-headed monster that drives up costs for everyone – from home and car owners to businesses and taxpayers – and, although progress has been made to fight it in Florida and elsewhere, it is expanding as quickly as those states are able to advance in tamping it down. Triple-I’s Dale Porfilio moderated a lively panel on the topic that included Louisiana Insurance Commissioner Tim Temple; Farmers Insurance head of legislative affairs Jeff Sauls; Viji Rangaswami, senior vice president and chief public affairs officer for Liberty Mutual; and Jerry Theodorou, policy director for finance, insurance, and trade at the R Street Institute.

Peter Miller, president and CEO of The Institutes, moderated the Innovation panel, which included Denise Garth, chief strategy officer at Majesco; Paul O’Connor, vice president of operational excellence at ServiceMaster; Kenneth Tolson, global president for digital solutions at Crawford & Co.; and Reggie Townsend, vice president and head of the data ethics practice at SAS. These subject-matter experts discussed how generative AI and other technologies are transforming insurance strategy and operations and increasing opportunities to improve and advance this most human-centered industry.

All four panels – as well as the Risk Takes and the “Fireside Chat” featuring Kate Horowitz, executive vice president of The Institutes, and Casey Kempton, president of personal lines for Nationwide Insurance – will be reported on in greater detail in subsequent posts.

Auto Insurance, Industry Financials, Insurers and the Economy, Legal Environment, Market Conditions

Inflation Continues
to Drive Up Consumers’ Insurance Costs

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By William Nibbelin, Senior Research Actuary, Triple-I

Insurance is priced to reflect the underlying risk of every policy. When more claims are filed and the average amount paid of those claims increases, insurance becomes more expensive. A measure of underwriting profitability for insurance carriers is the combined ratio calculated as losses and expense divided by earned premium plus operating expenses divided by written premium. A combined ratio over 100 represents an underwriting loss. When expected losses increase, an insurance carrier must increase premiums by raising rates to maintain a combined ratio under 100.

Commercial auto insurance has recorded a net combined ratio over 100 nine times out of 10 between 2014 and 2023, and, according to the latest forecasting report by Triple-I and Milliman, continues to worsen in 2024. According to the Triple-I Issues Brief, personal auto insurance has had a net combined ratio over 100 for the past three years, with a 2023 net written premium (NWP) growth of 14.3 percent, which was the highest in over 15 years.

From 2014 through 2023 economic and social inflation added $118.9 billion to $137.2 billion in auto liability losses and defense and cost containment (DCC) expenses. This represents 9.9 percent to 11.5 percent of the $1.2 trillion in net losses and DCC for the period and an increase of 24 percent to 31 percent from the previous analysis on years 2013 through 2022.

A new study – “Increasing Inflation on Auto Liability Insurance – Impact as of Year-end 2023” – is the fourth installment of research on the impact of economic and social inflation on insurer costs and claim payouts. Compared to the prior study, Commercial Auto Liability loss and DCC is 20.7 percent to 27.0 percent ($43 billion to $56 billion) higher due to increasing inflation. Personal auto liability loss and DCC is 7.7 percent to 8.2 percent ($76 billion to $81 billion) higher from increasing inflation.

Key Takeaways

  • The compound annual impact of increasing inflation ranges from 2.2 percent to 2.9 percent for commercial auto liability, which is higher than the personal auto liability estimate of 0.7 percent. However, the impact of increasing inflation from a dollar perspective is much higher for personal auto liability compared to commercial auto liability. This is due, in part, to the underlying size of the line of business.
  • Frequency of auto liability claims per $100 million GDP for 2023 is unchanged for commercial auto liability and lower for personal auto liability compared to 2020, when frequency dropped at the onset of the COVID-19 pandemic for both lines.
  • Severity of auto liability claims continues to increase year over year and has increased more than 70 percent from 2014 to 2023 for both lines.

Researchers Jim Lynch, FCAS, MAAA, Dave Moore, FCAS, MAAA, LLC, Dale Porfilio, FCAS, MAAA, Triple-I’s chief insurance officer, and William Nibbelin, Triple-I’s senior research actuary used a similar methodology as prior studies. Loss development patterns were used to identify inflation for selected property/casualty lines in excess of inflation in the overall economy. The new study extends the model with annual statement data through year-end 2023.

Commercial Auto Liability

The prior study indicated claim severity (size of losses) had risen 72 percent overall from 2013 to 2022, with the median annual increase at 6.3 percent. The new study indicates an additional annual increase of 6.6 percent from 2022 to 2023. The report compares the compound annual growth rate of 6.6 percent from 2014 through 2023 to the compound annual increase in the consumer price index (CPI) of 2.8 percent during this same time. With a flat frequency trend combined with an increasing severity trend in recent years for commercial auto liability, this comparison calls out the higher inflation faced by insurers beyond just general inflation trends.

Personal Auto Liability

While replacement costs remain flat to negative providing relief to personal auto physical damage, personal auto liability represents approximately 60 percent of the overall personal auto line. Similar to commercial auto liability – but slightly lower – claim severity for personal auto liability has increased at a compound annual rate of 6.3 percent from 2014 through 2023. However, unlike commercial auto liability, the frequency for personal auto liability has declined slightly in 2022 and 2023, with 85 claims per $100 million GDP in 2023 compared to 90 in 2022 and 100 in 2021.

Limitation of industry data

The report relies on industry data as reported by insurers to the National Association of Insurance Carriers (NAIC) and made available through different reporting suppliers, such as S&P Global Market Intelligence. As such, different individual inflationary elements – whether economic, social, or otherwise – cannot be determined using the underlying actuarial methodologies.

However, like prior studies the bulk of increasing inflation before 2020 is attributed to social inflation, while social inflation and economic inflation dominate increasing inflation together beginning in 2020.

Triple-I continues to foster a research-based conversation around social inflation as part of legal system abuse. For an overview of the topic and other helpful resources about its potential impact on insurers, policyholders, and the economy, check out our knowledge hub.

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

Improved Commercial Auto Underwriting Profitability Expected After Years of Struggle

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

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

Distracted driving and litigation trends also have played a role.

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

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

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

Homeowners Insurance, Insurers and the Economy

Buying Your First Home? Know Your Insurance

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By Lewis Nibbelin, Contributing Writer, Triple-I

First-time buyers comprised only 32 percent of the housing market in 2023, according to an annual profile by the National Association of Realtors. Though higher compared to 2022, this number is a stark drop from the 38 percent annual average since 1981.

The ongoing risk crisis and housing shortage, paired with rising mortgage rates, compound the issues prospective property owners typically face when purchasing real estate. These factors are distinctly challenging for first-time homeowners, who are often less informed on the insurance coverage necessary for their property.

Sandra Rampersaud, President and CEO of Vespiary Realty and Aequitas Risk Solutions, helps bridge this informational gap. In a recent episode of the All Eyes on Economics podcast with Triple-I Chief Economist and Data Scientist Dr. Michel Léonard, CBE, Rampersaud discussed the services she provides her clients as both a realtor and insurance broker.

Though many first-time buyers, as she explained, “do not have any clue on what it takes to manage…and even upkeep a home,” Rampersaud prepares clients for homeownership by urging them to consider flood risk and other potential losses from the beginning of the process. Due to the increasing need for flood coverage, which is not offered via standard homeowners insurance policies, flood insurance is a common question during her consultations.

“If this home does need flood insurance,” she asked as an example, “can you [the client] financially afford that? Because this is going to be a long-term commitment for 30 years until you own the home.”

The condition of a property may further complicate the buying process. Recent record-breaking climate disasters have created an influx of extensively damaged houses on the current market, Rampersaud said. Thus, more prospective homeowners must acquire builder’s risk insurance to secure a mortgage for and fix their property. Builder’s risk insurance policies vary wildly depending on the type and extent of renovations, so an understanding of the amount of coverage needed is crucial.

“It’s not always easy,” Rampersaud continued, “because the markets right now on the insurance end have actually ceased or minimized certain geographical areas” due to hurricane and storm damage. Some clients can no longer afford a property after accounting for these insurance costs, so finding realtors and insurance brokers experienced in builder’s risk insurance is especially important given present market trends.

U.S. immigrants are often at a disadvantage when trying to navigate these hurdles to first-time homeownership. Rampersaud—herself an Asian-American immigrant—said many of her immigrant clients lack knowledge when it comes to purchasing real estate.

“A parent growing up may or may not have given us the tools we needed,” she explained, and “having that background myself, I’ve always tutored…my clients in saying, ‘Wait a minute, why don’t we think about utilizing these resources and the way you look at your money to get what you need, which is a home?’”

Credit is a common setback, as immigrants may struggle to develop a credit and savings history in the U.S. to obtain financial backing for a home.

Rampersaud also emphasized the significance of choosing a compatible realtor, particularly one who can empower clients with the specific resources they need to smoothen the homebuying process. She encouraged prospective buyers to meet with and interview multiple realtors to determine the best option for them, saying, “A rule of thumb I have is that if I do meet a prospective buyer, we will have a conversation and a consultation, because I really would like to know if we are a good match for each other.”

Overall, on homebuying, Rampersaud said, “It’s a mindset sometimes people need to be guided to.” Entrusting the aid of knowledgeable, insurance-educated guides is one of the greatest long-term mitigative actions buyers can take toward gaining control over today’s acute economic uncertainty.

Listen to Podcast: Spotify, Audible, Apple

Learn More:

Triple-I “Trends and Insights” Issues Brief: Homeowners Insurance Rates

IRC: Homeowners Insurance Affordability Worsens Nationally, Varies Widely by State

Homeowners Claims Costs Rose Faster Than Inflation for 2 Decades

Triple-I Homebuyers Insurance Handbook

Auto Insurance, Insurers and the Economy, Legal Environment

Louisiana Is Least Affordable State for Personal Auto Coverage Across the South and U.S.

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Despite strong income growth that has helped improve personal auto insurance affordability in Louisiana, the state remains the least affordable among its Southern neighbors and the rest of the United States, according to the Insurance Research Council (IRC).

In 2022, the average annual premium expenditure per vehicle for auto insurance in Louisiana was $1,588, which is nearly 40 percent above the national average and nearly double that of the lowest-cost Southern state of North Carolina ($840), the IRC report says. Louisiana’s spending accounted for 2.67 percent of the median household income in the state.  

Florida’s average annual premium expenditures, at $1,625, exceed Louisiana’s, but the state is slightly more affordable; Florida’s higher median income results in a lower expenditure share of income (2.49 percent).  The Sunshine State is not included in the IRC report because it is the only no-fault jurisdiction among the Southern states, a fact that skews some comparisons.

All the Southern states had median household income below the overall U.S. figure, contributing to affordability challenges in the region as a whole. This was especially true for Mississippi, where the median income was 35 percent below the U.S. median.

In addition to low average household incomes, Louisiana’s affordability issues stem from such cost drivers as a higher tendency to file injury claims when an accident occurs, a high rate of underinsured motorists, and a high rate of claim litigation. Previous IRC claim research has pointed to high rates of attorney involvement in auto injury claims in the state.

In addition, Louisiana received the second-lowest score in a 2019 survey of businesses regarding the fairness of states’ litigation landscapes conducted by the U.S. Chamber of Commerce. It also is a perennial member of the “Judicial Hellholes” list published by the American Tort Reform Association (ATRA).

IRC – like Triple-I – is an affiliate of The Institutes.

Learn More:

Despite Improvements, Louisiana Is Still Least Affordable State for Auto Insurance

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

Louisiana Still Least Affordable State for Personal Auto, Homeowners Insurance

Louisiana Litigation Funding Reform Vetoed; AOB Ban, Insurer Incentive Boost Make It Into Law

Louisiana’s Insurance Woes Worsen as Florida Works to Fix Its Problems

Louisiana Insurance Regulator Issues Cease & Desist Order to Texas Law Firm

It’s not too late to register for Triple-I’s Joint Industry Forum: Solutions for a New Age of Risk. Join us in Miami, Nov. 19 and 20.

Auto Insurance, Business Insurance, Homeowners Insurance, Industry Financials, Insurers and the Economy, Market Conditions

Personal Lines Underwriting Results Improve, Reducing Gap With Commercial Lines

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The U.S. property and casualty insurance industry experienced better-than-expected economic and underwriting results in the first half of 2024, according to the latest forecasting report by Triple-I and Milliman.  The report was released during a members-only webinar on Oct. 10.

The industry’s estimated net combined ratio of 99.4 represented a 2.3-points year-over-year improvement, with commercial lines continuing to outperform personal lines. Combined ratio is a standard measure of underwriting profitability, in which a result below 100 represents a profit and one above 100 represents a loss. 

Much of the overall underwriting gain was due to growth in personal lines net premiums written. Commercial lines underwriting profitability remained mostly flat.

“The ongoing performance gap between personal and commercial lines remains, but that gap is closing,” said Triple-I Chief Insurance Officer Dale Porfilio. “The significant rate increases necessary to offset inflationary pressures on losses are driving the improved results in personal auto and homeowners. With that said, the impact of natural catastrophes such as Hurricanes Helene and Milton threaten the improved homeowners results and are a significant source of uncertainty.”

During the webinar Q&A period, Porfilio provided insight on the potential impact of Hurricane Milton on the Triple-I 2024 net combined ratio forecast during the Q&A portion. One key figure regarding potential catastrophe losses is the impact on the 2024 net combined ratio forecast of adding one additional billion dollars of catastrophe losses. Each additional billion dollars of catastrophe losses is an impact of one tenth of a percent on the forecast.

Triple-I has loaded an estimate for catastrophe losses for the second half of 2024 based on historical experience, trends, economic projections, etc. prior to Milton, so there is no expectation of needing to add $30 billion to $40 billion – the recent estimate published by Gallagher Re.

If there was a need to add an additional $30 billion in catastrophe losses, that would be a +3.0-point impact on the forecast.

The net combined ratio for homeowners insurance of 104.9 was a six-point improvement over first-half 2023.  The line is expected to achieve underwriting profitability in 2026, with continued double-digit growth in net written premiums expected in 2025.   

Personal auto’s net combined ratio of 100 is 4.9 points better than 2023. The line’s 2024 net written premium growth rate of 14.5 percent is the highest in over 15 years. 

Jason B. Kurtz – a principal and consulting actuary at Milliman – elaborated on profitability concerns within commercial lines. Commercial lines 2024 net combined ratio remained relatively flat at 97.1 percent. Improvements in commercial property, commercial multi-peril, and workers compensation were offset by continued deterioration in commercial auto and general liability.

“Commercial auto expectations are worsening and continue to remain unprofitable through at least 2026,” he said. “General liability has worsened and is expected to be unprofitable through 2026.”

Michel Léonard, Triple-I’s chief economist and data scientist, said P&C replacement costs are expected to overtake overall inflation in 2025.

“P&C carriers benefited from a ‘grace period’ over a few quarters during which replacement costs were increasing at a slower pace than overall inflation,” Dr. Léonard said. “That won’t be the case in 2025.”  

It’s not too late to register for Triple-I’s Joint Industry Forum: Solutions for a New Age of Risk. Join us in Miami, Nov. 19 and 20.

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

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

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

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

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

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

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

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

Industry Financials, Insurers and the Economy

Economic & Actuarial Analyses Ensure Our
“Best Pick Is Our Last Pick”

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By Lewis Nibbelin, Guest Blogger for Triple-I

Insurance underwriting and pricing require a clear view of loss experience and reliable economic projections. Today’s dynamic environment – marked by historically high inflation, climate-related risks, and regulatory constraints that vary widely by state – complicate such projections while making them more important than ever.

“Actuarial ratemaking is prospective in nature, but you have to look at history to be able to do that,” explained Dale Porfilio, Triple-I’s Chief Insurance Officer and President of the Insurance Research Council (IRC), in an interview for the All Eyes on Economics podcast. “A core part of that actuarial ratemaking is to say, ‘How are losses different? How have they trended? How are they going to grow?’”

Current economic uncertainty – particularly via rising replacement costs and high general inflation – presents a myriad of evolving factors many actuaries may struggle to contextualize.

“It just takes a while to get through the timeline of claims occurring and losses getting paid,” Porfilio told host and Triple-I Chief Economist and Data Scientist Dr. Michel Léonard. “We can already be in a cycle of increasing or decreasing inflation, and you won’t see it in losses yet… You’re going to see it faster from economic indicators than you’re going to see it in insurance.”

For economists and actuaries alike, projections are data-driven inferences. Using multiple data sources and various forms of sophisticated analysis all strengthen the precision of those inferences.

For example, IRC – like Triple-I, an affiliate of The Institutes – is developing a database that aggregates detailed personal auto injury claims information from numerous insurers. It encompasses five and a half years’ worth of data on not only the total claim payout, but the specific injuries and care within each claim file.

A database of this magnitude has the potential to help insurance carriers improve the accuracy of pricing and underwriting. More important, this research will help policymakers and carriers identify opportunities to reduce claim costs, which can improve the affordability of personal auto insurance.

Ultimately, synthesizing diverse perspectives reduces the role of luck for insurers when setting rates. 

Triple-I works to provide a “combined wisdom,” Porfilio said, through the quarterly Insurance Economics and Underwriting Projections: A Forward View, a joint report with Milliman. The report presents an underwriting projection model which – by using P/C replacement cost indices and economic growth data as leading indicators – is both actuarially and economically sound.

Understanding economic trends is crucial, but understanding how risk influences these trends is equally important. Ongoing geopolitical risk, for instance, continues to strain global supply chains, and integrating this information into underwriting projections is one way to build resilience against disruptions.

“Learning to speak as an economist or an actuary is another language,” Porfilio said, and resources such as Triple-I’s Chart of the Week serve to simplify the sharing of economic research for insurers and consumers.

This wealth of available data analysis ensures that “our best pick is our last pick,” Porfilio said. “We’re always putting our best answer on the page to share the best insights that we can…and educate and inform as wide of an audience as possible.”

The full interview is available now on Spotify, Audible, and Apple.

Auto Insurance, Homeowners Insurance, Insurers and the Economy, Market Conditions, Workers Compensation

NCIGF Moves Ahead
to Support Insurers

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By Max Dorfman, Research Writer, Triple-I

For the last 35 years, the National Conference of Insurance Guaranty Funds (NCIGF) – an organization dedicated to serving 55 property/casualty state guaranty funds – has provided operational support; communications, education, and outreach; as well as public policy management for these organizations.

State guaranty funds make up a privately funded, nonprofit state-based national system that pays covered claims up to a state’s legally allowable limits, protecting policyholders if their insurer becomes insolvent. There are 55 such funds because some states have more than one.

“All states have a property/casualty guaranty association, and some have a workers compensation guaranty association,” NCIGF President and CEO Roger Schmelzer explained in a recent “Executive Exchange” with Triple-I CEO Sean Kevelighan.

“We’re not claims payers,” Schmelzer said, “We try to do things for our members that they wouldn’t be doing for themselves or that it’s better to be doing in one place.”

For nearly five decades, the guaranty fund system has paid out more than $35 billion to cover claims against about 600 insolvencies.

“Through the years, the system has successfully met every challenge that’s come its way, and has been instrumental in supporting the insurance promise,” Schmelzer said.

NCIGF recently announced its updated organizational strategy, which focuses on:

  • Pre-liquidation planning with regulators and receivers,
  • Understanding and preparing for the changing landscape in insolvencies, and
  • Seeking shared solutions to common problems among state associations.

“We want to understand better the trends and factors that could lead to insolvency,” Schmelzer said. “Then we want to do everything we can with our members, working through our educational arm, to make sure members are prepared for whatever those trends might bring.”

Insurers and the Economy

Economic Analysis Matters More Than Ever
in “Golden Age” of Data

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By Lewis Nibbelin, Guest Blogger for Triple-I

Though data collection and curation have always been critical to insurance underwriting, advancements in artificial intelligence and data analytics have revolutionized how data is aggregated and applied to risk assessment and pricing.

This, in turn, increases the importance of economic analysis in insurance. 

“We are able to understand correlation better and make better predictions to prevent risks that formerly we were just being reactive to,” explained Josh Landau, President of the International Insurance Society (IIS), in an interview for the All Eyes on Economics podcast.

While AI and sophisticated models can gather and organize larger, more complex data sets in more interesting ways far more quickly than ever before, they can’t make the sorts of assessments or draw the kinds of salient conclusions that economists and actuaries can. 

“Drawing a conclusion would be impossible for AI to do,” Landau told host and Triple-I Chief Economist and Data Scientist Dr. Michel Léonard. “Really understanding where these non-correlated issues are impacting each other and how they’re impacting decisions, that’s where I see the economist’s role.”

Similarly, while automation may expedite data processing, critical thinking and socioemotional skills have never been more crucial for underwriters. Adaptability to technological developments, as well as the ability to meaningfully interpret intricate datasets, are necessary within a constantly evolving insurance landscape.

For example, the use of telematics to track actual driving behavior has contributed to more accurate underwriting and pricing, supporting the emergence of usage-based auto insurance.  A 2022 survey by the Insurance Research Council found that 45 percent of drivers made significant safety-related changes in how they drove after participating in a telematics program. An additional 35 percent said they made small changes in their driving behavior.

Ethical concerns surrounding the use of AI further underscore the significance of critical interpretation by humans.

Due to its many extensive investments and ability to determine what projects to insure – or not to — the insurance industry has an “outsized influence,” Landau said.

“As a result of that awesome depth and breadth of resources,” he said, “it’s important for carriers “to understand how they navigate through this responsibility, how they interact – not only with each other, but also with industry leaders and government leaders.” 

The digitized space’s potential for inaccuracies, biases, and data breaches presents a dilemma for stakeholders at every level, so managing these risks must always take precedence. 

Human oversight, diversity in AI training datasets, transparency about use of AI, and responsiveness to stakeholder feedback are all ways for insurers to utilize automated technologies while upholding the industry’s commitment to equity and security.

IIS – like Triple-I, an affiliate of The Institutes – facilitates industry dialogue through targeted webinars and its annual Global Priorities Survey and corresponding Global Insurance Forum (GIF), the next of which is held this upcoming November in Miami, Fla., in coordination with Triple-I’s Joint Industry Forum (JIF). Registration for GIF is available here. You can register for JIF here.

The full interview is available now on Spotify, Audible, and Apple.