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Insurance Industry

IRC: Consumers Deem
Most Rating Factors Fair

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By Max Dorfman, Research Writer, Triple-I

Most consumers believe the majority of personal insurance rating factors that insurers use to underwrite and price homeowners and auto coverage are fair, according to a new survey by the Insurance Research Council (IRC) – like Triple-I, an affiliate of The Institutes.

But there was some variation regarding which variables they consider fair.

Overall, consumers were more favorable toward factors they perceived to be directly related to the risk of the insured property (condition of the home, cost of rebuilding, miles driven, vehicle information, etc.). They were less likely to rank fair on aspects connected to the insured’s personal profile.

The study, Public Perceptions Regarding the Fairness of Insurance Rating Factors, focused on homeowners and personal auto insurance. IRC found that all 19 homeowners insurance rating factors were assessed to be fair by most respondents, and the majority deemed 10 of the 14 personal auto factors.

Insurance companies use statistically predictive rating variables to assess risk and determine policy prices, helping to accurately align premiums with risk and offer coverage to higher-risk consumers. The variables consider several socioeconomic factors to determine these coverage costs, including gender, age, education, and credit-based insurance scores.

“Given how inflation and other factors have driven up the cost of auto and homeowners insurance in recent years, IRC was not surprised to learn that paying for these essential coverages has been a financial burden for a sizable number of Americans,” said IRC president and Triple-I chief insurance officer Dale Porfilio.  “Yet, at the same time, consumers expressed widespread support in our survey for the fairness of the rating factors used by insurance carriers to price their auto and homeowners policies.”

Among personal auto factors, those most likely to be deemed fair included:

  • Traffic conviction record;
  • Driver’s loss/claim history; and
  • Driving behavior data from telematics.

However, the personal auto factors that were least likely to be considered fair were:

  • Education level;
  • Marital status; and
  • Gender of the driver.

Concerning homeowners insurance, the most fair factors included:

  • The use of safety systems
  • Condition of home; and
  • The estimated cost of rebuilding.

Least agreeable factors for homeowners involved:

  • Credit history;
  • Condition of surrounding building; and
  • The data from a connected device.

Previous IRC research that focused on consumer attitudes about the use of credit history as an insurance rating factor found that skepticism about the link between credit and future insurance claims declines when the predictive power of credit-based insurance scores is explained to them.

Disaster Resilience

NAIC Seeks Granular Data From Insurers to Help Fill Local Protection Gaps

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Data is at the core of risk management, and the National Association of Insurance Commissioners (NAIC) is seeking to identify gaps in the data state regulators collect from insurers – particularly with respect to understanding insurance availability and affordability.

“The increasing frequency and severity of weather events, rising reinsurance costs, and inflationary pressures are making property insurance availability and affordability more challenging for a growing number of regions across the U.S.,” the NAIC said in a statement during its Summer National Meeting in August. “These dynamics can vary within a relatively small geographic area, so while a state’s property insurance market may be generally healthy overall, there can be localized protection gaps that challenge certain communities.”

The NAIC said states may lack the kind of data needed to gauge the availability and affordability of insurance for consumers. Under Alan McClain, Arkansas insurance commissioner and chair of the NAIC Property and Casualty Committee, insurance regulators of at least 30 states have started work to identify where data is lacking. The plan is to develop a data template to establish “a long-term, robust data collection strategy to help regulators more nimbly respond to inquiries related to their property markets versus a one-time data call.”

This approach contrasts with one proposed last year by the U.S. Treasury’s Federal Insurance Office (FIO). In its request for information (RFI), FIO proposed collecting data related to “insurers’ underwriting metrics and related insurance policy information.”  It said the data “is needed in order for FIO to identify and more accurately assess the financial impact of weather-related events on insurers’ exposures and underwriting over time. FIO’s analysis would assess insurance availability and its effects on policyholders, particularly in regions of the country with the potential for major disruptions of private insurance coverage due to climate-related disasters.”

Triple-I responded to the FIO RFI by saying, in part, that:

  • The proposed call was duplicative and would ultimately hurt the people FIO wants to help;
  • The ZIP Code-level data FIO said it was seeking could lead to misleading conclusions; and
  • FIO could secure the information it needs from existing, publicly available data without placing an additional reporting burden on insurers.

Triple-I provided an extensive but not exhaustive list of resources for FIO to consider.

“There is no dearth of information to help FIO and policymakers address the conditions contributing to climate risk and drive the behavioral changes needed in the near, intermediate, and long term,” Triple-I wrote, reminding FIO that catastrophe-modeling firms prepare their industry exposure databases from public sources, not insurer data calls. “What is needed is to build on existing efforts and draw on the voluminous data and analysis already extant to target problem areas that are well understood.”

NAIC’s response to the RFI emphasized the importance of collaboration to address concerns about insurance availability and affordability and expressed displeasure at what it characterized as FIO’s “unilateral process.”

“While we recognize the Treasury’s desire to better understand the impact of climate risk and weather-related exposures on the availability and affordability of the homeowners’ insurance market,” NAIC wrote, “we are disappointed and concerned that Treasury chose not to engage insurance regulators in a credible exercise to identify data elements gathered by either the industry or the regulatory community.”

In a June 2023 report, FIO references the RFI and describes the proposed data call, stating that the comment period closed in December 2022 and that FIO is “assessing next steps.” The June report recognizes and commends the industry’s and the NAIC’s efforts to date but goes on to say that these efforts “are fragmented across states and limited in several critical ways.”

FIO makes 20 recommendations, and the report provides context for each, highlighting efforts already under way and explaining how implementation of the FIO recommendations could improve management and supervision of climate-related risks. It also proposes areas of focus for future work by state insurance regulators and the NAIC.

Learn More:

Data Call Would Hinder Climate-Risk Efforts More Than It Would Help

Federal Insurance Office (FIO) request for information (RFI)

Triple-I response to FIO RFI

Corporate Social Responsibility, Disaster Resilience, ESG, Risk Management

How Liberty Mutual Foundation BringsRisk ManagementInto Communities

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By Max Dorfman, Research Writer, Triple-I

Nature-based solutions, green jobs, and resilient infrastructure are at the core of Liberty Mutual Foundation’s approach to helping marginalized communities that are most vulnerable to climate-related perils.

“We believe investing philanthropically in communities to help them mitigate and adapt to the impact of climate change is a natural extension that we do as a property-casualty insurer and an area where we can offer a lot of expertise,” Foundation President Melissa MacDonnell told Triple-I CEO Sean Kevelighan in a recent Triple-I Executive Exchange.

MacDonnell described the foundation’s three-pronged approach to community giving, which consists of:

  • Nature-based solutions, such as increasing access to locally grown food and green space to protect communities from sea-level rise or flooding;
  • Green jobs that provide training and skill development in the green economy for low-income and underrepresented youth and young adults; and
  • Resilient infrastructure for low-income neighborhoods and communities of color.

The foundation also supports existing partners in advancing their climate resiliency goals.

“Any organization in our philanthropic portfolio is eligible for these grants, so they can step back and consider how climate is impacting them,” MacDonnell said. “This includes homelessness shelters and job programs. This is our way of acknowledging that climate affects all of us.”

Kevelighan noted that this holistic approach is particularly important for residents of vulnerable communities.

“We’ve been talking at Triple-I about the role everyone plays in climate,” he said. “It’s encouraging that you’re bringing risk management into communities – particularly those that can’t provide themselves enough resources.”

Kevelighan and MacDonnell discussed how other insurers can become more involved in helping vulnerable communities.

“Insurers should carve out the time to listen to the communities” MacDonnell said. “Partnering with communities and public officials is also important. We are at an incredible moment in time where federal funding is available for climate projects” as a result of measures like the Community Disaster Resilience Zones Act of 2022, which aims to build disaster resilience by identifying disadvantaged communities that are most at risk to natural disasters and providing funding for projects that mitigate those risks.

Cyber Risk, Technology

Keep It Simple:Security System Complexity Correlates With Breach Costs

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By Max Dorfman, Research Writer, Triple-I

Artificial intelligence is helping to limit the costs associated with data breaches, a recent study by IBM and the Ponemon Institute found. While these costs continue to rise, they are increasing more slowly for some organizations – in particular, those using less-complex, more-automated security systems.

According to the study, the average cost of a data breach was $4.45 million in 2023, a 2.3 percent increase from the 2022 cost of $4.35 million. The 2023 figure represents a 15.3 percent increase from 2020, when the average breach was $3.86 million.

However, not all organizations surveyed by the study experienced the same kinds of breaches – or the same costs. Organizations with “low or no security system complexity” – systems in which it is easier to identify and manage threats – experienced far smaller losses than those with high system complexity. The average 2023 breach cost $3.84 million for the former and a staggering $5.28 million for the latter. For organizations with high system complexity, this is an increase of more than 31 percent from the year before, amounting to an average of $1.44 million.

As David W. Viel, founder and CEO of Cognoscenti Systems, put it: “The size and complexity of a system directly results in a greater number of defects and resulting vulnerabilities as these quantities grow. On the other hand, the number of defects and cybersecurity vulnerabilities shrinks as the system or component is made smaller and simpler. This strongly suggests that designs and implementations that are small and simple should be very much favored over large and complex if effective cybersecurity is to be obtained.”

The research also noted that organizations that involve law enforcement in ransomware attacks experienced lower costs. The 37 percent of survey respondents that did not contact law enforcement paid 9.6 percent more than those that did, with the breach lasting an average of 33 days longer than those that did contact law enforcement. These longer breaches tended to cost organizations far more, with breaches with identification and containment times under 200 days averaging $3.93 million, and those over 200 days costing $4.95 million.

AI and automation are proving key

Security AI and automation both showed to be significant factors in lowering costs and reducing time to identify and contain breaches, with organizations utilizing these tools reporting 108-day shorter times to contain the breach, and $1.76 million lower data breach costs relative to organizations that did not use these tools. Organizations with no use of security AI and automation experienced an average of $5.36 million in data breach costs, 18.6 percent more than the average 2023 cost of a data breach.

Now, most respondents are using some level of these tools, with a full 61 percent using AI and automation. However, only 28 percent of respondents extensively used these tools in their cybersecurity processes, and 33 percent had limited use. The study noted that this means almost 40 percent of respondents rely only on manual inputs in their security operations.

Cyber insurance demand is growing

A recent study by global insurance brokerage Gallagher showed that the vast majority of business owners in U.S. – 74 percent – expressed extreme or very high concern about the impact of cyberattacks on their businesses. Indeed, a study by MarketsandMarkets found that the cyber insurance market is projected to grow from $10.3 billion in 2023 to $17.6 billion by 2028, noting that the rise in threats like data breaches, ransomware, and phishing attacks is driving demand.

Organizations are now responding more thoroughly to these threats, with increased underwriting rigor helping clients progress in cyber maturity, according to Aon’s 2023 Cyber Resilience Report. Aon states that several cybersecurity factors, including data security, application security, remote work, access control, and endpoint and systems security – all of which experienced the greatest improvement among Aon’s clients – must be continually monitored and evaluated, particularly for evolving threats.

Insurers and their customers need to work together to more fully address the risks and damages associated with cyberattacks as these threats continue to grow and businesses rely ever more heavily on technology.

Insurance Industry

National Black Business Month – Dale Sharpe Jenkins, M.S., CIC, AINS, Owner, The Jenkins Agency Incorporated, Celebrates 25 Years in Business

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By Kris Maccini, Head of Digital Distribution, Triple-I

Dale Sharpe Jenkins, M.S., CIC, AINS, principal/owner, The Jenkins Agency Incorporated, is quick to point out that she didn’t choose a career in insurance – insurance chose her. A first-generation college graduate, Jenkins sought a profession that would provide her and her family with opportunities. She began her career in life insurance at a small company in Columbus, Ohio before moving on to Progressive Insurance and opening its first claims office in Phoenix, Arizona. 

“Insurance plays an important role in our lives. The insurance industry has allowed me to make a great living and help people with their needs at the same time.” 

Eventually, Jenkins moved into a senior construction underwriter position at St. Paul Insurance Companies (now Travelers) and made the shift from claims to underwriting. While it was a rewarding position, Jenkins started a family and wanted more flexibility in her career. In 1998, she leveraged her experience in construction to build The Jenkins Agency Incorporated, an independent agency based in Arlington, Texas, specializing in commercial underwriting for construction, religious organizations, and other non-profits. 

“We write property/casualty, life, health, and group benefits. Most of our customers are small Black-owned businesses, and we are minority certified. I’m proud of what our agency has been able to do for the Black business community. Their success is our success.” 

Diversity has been at the epicenter of Jenkins’ career. The Dallas Black Chamber has recognized the agency for its work in the Black community; the Dallas-Fort Worth (DFW) Airport named The Jenkins Agency Incorporated as its Diversity Champion of 2023 at the SOAR Awards this year; and Business Insurance Magazine has also acknowledged the agency for its diversity efforts.  

In 2008, Jenkins joined the National African American Insurance Association (NAAIA), where she was a member of the founding Board of Directors and served as president of the Dallas chapter for three years. Since 2011, the NAAIA DFW Scholarship Foundation has provided financial awards to high school and college students interested in careers in insurance, finance, and marketing. 

“I’m very focused on providing [insurance] industry awareness to young people starting out or trying to discover a career for themselves. I was on the receiving end early in my career, and it’s nice to give back now.” 

The Jenkins Agency Incorporated celebrates its 25th anniversary this year. Reflecting on the past two decades, Jenkins feels blessed to be in her current position. She founded her company on her own without a book of business and built it from the ground up, relying on referrals. Her husband, Jeff, joined the business in 2000. 

“In the early years, we were in survival mode. We realized if we could make it to five years, we could make it to 10. Hiring our first employees was a highlight, and most of them have been with us for over a decade.” 

Like every small business, The Jenkins Agency experienced challenges in its initial years. Jenkins remembers the difficult transition from working in a large company to running her own business and maintaining a work/life balance. 

“Whether working for yourself or others, flexibility is very important when you are working and raising a family. Having my own business granted me that flexibility. I was able to work around my daughters’ schedules and still manage responsibilities at the office. Having your own business doesn’t mean you work less; in my experience, you work more but with the advantage is being able to manage your day.” 

To this day, Jenkins cites her two daughters as inspiration, along with other up-and-coming professionals. Both of her daughters have successful careers–her youngest daughter as a risk manager for a municipality in Texas and her oldest daughter as a business owner in California and a college professor. Entrepreneurship runs in the family. Jenkins’ father was also a business owner.  

Jenkins, who teaches risk management at the University of Texas in Arlington, is also motivated by her students. “My inspiration comes from the younger generation and how they embrace diversity and balance work and home. I’m also impressed with their talent.” 

Regarding the ongoing efforts to push for diversity, equity, and inclusion in the industry, Jenkins is cheering on this generation and asks young Black professionals not to lose ground.  

“My generation had to maneuver in a different way. We tried to fit in in any way we could–from hair to speech. This generation has a voice, and they are not afraid to be heard. To them I say…Keep your skills sharp so there is no question whether you can do the job and be proud of who you are.” 

Looking to participate in discussions around addressing disparities and working towards a more inclusive and equitable insurance landscape? Sign up for Empowering the Community: The Importance of Insurance in the Black Community, hosted on September 12 by The Black Insurance Industry Collective (BIIC).

Dale Sharpe Jenkins, M.S., CIC, AINS is an academic member of the Insurance Information Institute through her affiliation with the University of Texas at Arlington. 

Workers Compensation

National Workers’ Comp Adjuster Day: Unsung Heroes Who Improve People’s Lives

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By Loretta Worters, Vice President, Media Relations, Triple-I

When Victoria Aumiller, AIC, WCP, claims specialist, Chesapeake Employers Insurance came to the organization 14 years ago, she didn’t realize how meaningful her job would be.  Like many of her peers, Aumiller appreciates being able to make a direct impact to assist workers and their families.

Victoria Aumiller, Chesapeake Employers Insurance       

“Being injured is painful for the worker and scary for the family,” she said, adding, “it’s very fulfilling to make the experience less frightening and to help the worker navigate the medical and claims process.”

National Workers’ Comp Adjuster Day, observed on August 17, commemorates the work of Aumiller and those who have made a significant impact on the quality of life of people with disabilities and their families.

“Their job is incredibly valuable,” said Sheila Fortson, WCP®, director – Corporate & ESG communications, National Council on Compensation Insurance (NCCI).  “It’s a day of celebration, not only for workers comp. adjusters, but also for those who appreciate and respect their profession.”                                                     

Tess Madison, claims specialist with The MEMIC Group, said it’s the variety of people that she gets to work with and interact with daily that she enjoys best about being a workers compensation adjuster. 

Tess Madison, The MEMIC Group

“We get to experience all spectrums of society and forge working relationships with injured workers, but also attorneys, medical providers, employers, and nurses. Working together for one common goal is a great aspect of the job.”

Workers compensation claims adjusters are licensed by the states in which they work. Their duties include analyzing often complex employee claims for compensation, reviewing documentation, and authorizing payments.  When workers are injured  at work or ill due to working conditions, they can apply for compensation for medical bills and lost time or the pay for missed work.  Adjusters provide a detailed analysis of each open claim, including information related to the medical, disability, legal and financial aspects, as well as an action plan for claim resolution. When a serious injury occurs, claims adjusters are dedicated to helping injured workers get the medical care needed for a successful recovery while managing costs – a stressful and challenging role.

“When you make contact with the injured worker, it’s helpful to listen to how they describe the event and their injuries,” said Aumiller.  “You can assess if there’s a layer of fear or trauma associated with their experience and how they are mentally handling the event,” she explained.  “I determine what their current medical needs are from their symptoms and then coordinate the right medical providers to address their needs. I explain the process fully, answer any of their questions and explain what they can expect.  The clarity of the process and answering those questions early on takes some of the fear out of the situation for them.”

After a work-related injury, an injured worker can feel a high level of stress, wondering how they are going to get the proper medical treatment and how they are going to support themselves and their families, noted Madison.

“Prompt response time and direction for medical care, along with communication throughout the process, can make a huge impact. Likewise, ongoing communication and updates with an employer make a difference, especially if they have limited staff and rely on a healthy workforce to keep their business running.”

Madison said being a workers comp adjuster is not only meaningful, but rewarding.

“A work-related injury is often an unexpected and difficult situation. Not a lot of people are well-versed in how the compensation system works and don’t know what to expect through the process,” she said. “Some people are living paycheck to paycheck. It is a great feeling to know that you are doing everything you can to facilitate recovery and return them to work, reassuring the injured worker throughout the process that we are here for them.”

Brooke Ray, a claims examiner with Encova Insurance, agreed.

Brooke Ray, Encova Insurance

“I communicate daily with claimants that are experiencing some of the most challenging days of their lives,” she said. “I’m fortunate I can play an active role in their recovery by facilitating timely medical treatment, offering support, and answering any questions that arise during their recovery. It’s very rewarding when a claimant acknowledges how much you care.”

“National Workers Comp Adjuster Day was created to mark the day for these unsung heroes who make important decisions that ultimately improve the quality of life of injured workers,” said Forston. “We observe this occasion to ensure they receive recognition for their commitment to the well-being of affected workers and their families. They are an amazing group of people.”

Learn More:

Economic Trends Bode Well for Workers Comp, But Emerging Issues Warrant Attention

Workers Comp: A Strong Line Rebounds From Pandemic Pressure

Workers Comp: Resilient and Relevant

Insurance Industry

Group Captive Unites Risk Managementand Sustainability

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By Mary Sams, Senior Research Analyst, Triple-I

Impact Re Ltd. – a member-owned captive fronted by Zurich North America – brings together companies from a variety of industries that share an interest in both risk management and sustainable business practices.

The captive is a partnership between Zurich North America and Innovative Captive Strategies (ICS). In addition to being one of the largest providers of commercial insurance products and services in the United States and Canada, Zurich North America is part of global insurer Zurich Insurance — a company widely recognized for its commitment to sustainability. 

Group captives enable companies with similar risk profiles to reduce their insurance costs by pooling risk and simplifying risk management. Typical structures include committees managing risk control, finance, and underwriting.  Impact Re adds a sustainability committee and will offer members greater control and management of auto, general liability, and workers compensation programs, as well as providing access to management services focused on sustainability from Zurich Resilience Solutions (ZRS).

ZRS will conduct a sustainability assessment of the member company’s carbon footprint and energy consumption. The assessment is not designed to exclude non-conforming companies from membership but to provide baseline data against which members can measure their progress toward their own sustainability goals. The objective is to quantify the business benefits of sustainability and communicate those benefits to stakeholders.

Impact Re is among the winners announced in the Business Insurance 2023 Innovation Awards.

Learn More:

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

Pandemic Fuels Growth in Captive Insurance

Triple-I Paper Takes a Detailed Look at Member-Owned Group Captives

Industry Financials, Insurers and the Economy

P/C Underwriting Losses Forecast to at Least 2025

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By Max Dorfman, Research Writer, Triple-I

Poor personal lines performance will keep the U.S. property/casualty insurance industry’s underwriting profitability constrained for at least the next two years, Triple-I’s chief insurance officer told attendees at a members only webinar today.

“We forecast net combined ratios to incrementally improve each year from 2023 to 2025,” said Dale Porfilio, FCAS, MAAA, “with the industry returning to a small underwriting profit in 2025.”

The industry’s combined ratio – a standard measure of underwriting profitability, in which a result below 100 represents a profit and one above 100 represents a loss – is expected to end 2023 at 102.2, almost matching the 2022 result of 102.4.

“Catastrophe losses in the first half of 2023 were the highest in over two decades, slightly higher than the record set in first half of 2021,” Porfilio said. Triple-I predicted net written premium growth for 2023 at 7.9 percent.

Michel Léonard, PhD, CBE, Triple-I’s chief economist and data scientist, discussed key macroeconomic trends impacting the P&C industry results including inflation, rising interest rates, and overall P&C underlying growth.

“U.S. CPI will likely stay in the mid-to-upper 3 percent range through the end of the year,” Léonard said, noting that underlying growth for private passenger auto has resumed its pre-pandemic trend. “Increases in replacement costs continue to decelerate and have now returned to pre-COVID trends as supply-chain backlogs and labor disruptions ended.”

Léonard added that U.S. GDP “will likely decrease on a quarterly basis in the second half of the year compared to the first half, but still avoiding a technical recession in 2023.” 

For homeowners, Porfilio noted that the 2023 net combined ratio forecast of 104.8 is nearly identical to 2022 actual. He said homeowners incurred the majority of the first half of 2023 elevated catastrophes.

“A cumulative replacement cost increase of 55 percent from 2019-2022 contributes to our forecast of underwriting losses through 2025,” Porfilio added. “Premium growth in 2023-2025 is forecast to be elevated primarily due to rate increases.”

On the commercial side, Jason B. Kurtz, FCAS, MAAA, a principal and consulting actuary at Milliman, said commercial lines experienced underwriting gains in 2022.

“Commercial auto, however, was one commercial line that did not perform well in 2022,” he said. “For commercial auto, 2022 saw a return to underwriting losses, as the industry logged a 105.4 net combined ratio, the highest since 2019.”

“Workers compensation is the brightest spot among all major P&C product lines, with strong underwriting profitability forecast to continue through 2025,” Kurtz added. “Premium growth is expected to be modest, however, with approximately 3 percent growth each year.”

Donna Glenn, FCAS, MAAA, chief actuary at the National Council on Compensation Insurance, highlighted key factors that influenced the 2022 workers compensation results.

“Overall frequency continues its long-term negative trend as workplaces continue to get safer,” Glenn said. “Medical severity has remained moderate despite rising inflation, and wages and employment are above pre-pandemic levels. While severity was notably higher in 2022, it’s been moderate over the last few years. Together, these system dynamics result in a healthy and strong workers compensation system.” 

Workers Compensation

Economic Trends Bode Well for Workers Comp, But Emerging Issues Warrant Attention

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Workers compensation insurance provides for the cost of medical care, rehabilitation, and wage replacement for injured workers and death benefits for the dependents of persons killed in work-related accidents. In recent years, it has been the most profitable property/casualty line of business, having experienced its sixth consecutive year of combined ratios under 90 and its ninth straight year of underwriting gains.

Combined ratio represents the difference between claims and expenses paid and premiums collected by insurers. A combined ratio below 100 represents an underwriting profit, and one above 100 represents a loss. 

While the broader industry has suffered due to replacement cost trends, the most recent Triple-I Issues Brief shows how workers compensation has benefited from a generally strong economy and, in particular, strong growth in payrolls. Private employment surpassed its pre-pandemic level early in 2022, according to the U.S. Department of Labor’s Bureau of Labor Statistics, and employment growth remains faster than pre-pandemic norms. The past two years have seen payroll growth at rates of approximately 10 percent.

“Even if the current tight labor market begins to relax,” the brief says, “the forces driving payroll growth – particularly an aging work force and reduced immigration – will likely keep upward pressure on payrolls.”

While current trends bode well for workers comp, the industry needs to recognize and be responsive to emerging issues that may affect the line going forward. The impact of the pandemic – suddenly prompting more generalized acceptance of remote work and introducing a new issue in the form of “long COVID” – is one example, but it is hardly the only one.

“In 2016, there were 14 mental-injury bills considered in state legislatures,” said Bill Donnell, president and CEO of the National Council on Compensation Insurance. “In 2023, year to date, there have been more than 75.”

These measures – aimed at addressing issues as diverse as post-traumatic care for firefighters and impacts of workplace violence on employees – illustrate how stakeholder expectations continuously shift.

Auto Insurance, Highway Safety

Despite Fewer Claims, Personal Auto Insurance Payouts Increase

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By Max Dorfman, Research Writer, Triple-I

The average claim payment per insured personal vehicle rose between 2002 and 2022, with higher payments by insurers more than offsetting declines in frequency, according to new research by the Insurance Research Council (IRC) – like Triple-I, an affiliate of The Institutes.

“During the first half of the study period, the combination of declining frequency and increasing severity left average insurer loss costs relatively unchanged,” said IRC president and Triple-I chief insurance officer Dale Porfilio. “However, as claim frequency leveled off and claim severity accelerated, the average payment per insured vehicle for most coverages began to climb steadily until the 2020 drop due to COVID-19. By 2022, however, average loss costs for nearly every coverage had surpassed the 2019 level.”

Frequency for both property damage liability and bodily injury liability claims fell more than 2 percent annualized over the period from 2002 to 2022, while the average payout per insured vehicle increased over 2 percent for both types of claims over the same period.

Claim frequency – which decreased sharply during the coronavirus pandemic – remained below pre-pandemic levels in 2022, while claim severity skyrocketed, with the average loss cost also increasing. Accelerating growth in claim loss costs is a key driver of rising insurance costs for consumers.

Costs also varied widely from state to state. The combined injury average loss cost in the highest state, Florida, was over five times the loss cost in the lowest state, North Dakota. Traffic conditions, medical prices, policy limits and other insurance regulations, litigiousness, fraud, and the design of the injury tort or no-fault environment all influence these costs.

Pandemic upended insured vehicle costs

During the height of COVID-19, insurers returned $14 billion of premiums to consumers through discounts, rebates, and dividends due to fewer drivers on the road. However, risky driving behaviors like speeding and distracted driving appeared to compound while the roads were quieter. Consequently, traffic fatalities increased in 2020, despite the large drop in miles driven, with the average auto claim severity rising.

In 2021 and 2022, vehicle traffic resumed and claim severity worsened as risky driving behaviors continued. As a result, traffic fatalities rose in 2021, hitting the highest levels in 15 years. This also marked the highest percentage increase since the current reporting system began in 1975.

Although some of these pressures may stabilize, the IRC report notes that the claim environment is likely to remain challenging as people continue to exhibit risky driving behavior. Additionally, longer-term pressures on injury claim severity from cost drivers, such as heavy medical utilization, cost-shifting, and claim abuse, continue to increase insured vehicle costs.

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