During the deep freeze across multiple states this week, some U.S. electric companies are being forced to pull the plug on consumers in the form of “rolling blackouts” to conserve energy, Insurance Information Institute’s (Triple-I) Scott Holeman reports in the video above.
Much of North America experiences periods of severely cold weather and is susceptible to snow and ice storms—extreme conditions that can inflict considerable damage on homes and create liability risks. Standard homeowners policies will cover most disasters that result from a freeze—but when the weather outside is frightful, it’s better to minimize the potential risks.
The Survival Guide lists a few steps that can be taken inside and outside a home to reduce risks of property damage, such as:
INSIDE THE HOUSE
Check the location for the main water shutoff in your home. And refresh your memory on—or learn—how the shutoff works to prevent your home’s pipes from bursting.
Open hot and cold faucets enough to let them drip slowly. In severely frigid temperatures, keeping water moving within the pipes will help prevent freezing.
Check to see that fireplaces, wood stoves, and electric heaters are working properly. Make sure no combustible items are near a home’s heat sources.This week’s widespread power outages have contributed to Kerosene Heater Safety becoming the second-most popular article at the Triple-I’s website.
OUTSIDE THE HOUSE
Watch for ice dams near gutter downspouts. Ice dams occur when water is unable to drain through the gutters and instead seeps into the house. Clear gutters of leaves and debris to allow runoff from melting snow and ice to flow freely at the base of the gutter, known as the downspout.
Keep your garage doors closed. This will prevent weather damage to whatever is stored in the garage. Plus, if your garage is attached to your house, the home entrance door from the garage is probably not as well-insulated as an exterior door so this will keep more heat in.
Double-check for dead, damaged, or dangerous tree branches and have them removed. Even if they looked sound earlier in the year, trees can be affected by ice, snow, or wind. When stressed, branches can fall and damage your house or car, or injure someone on or near your property.
The Triple-I has additional winter weather resources:
Many households and small businesses don’t have sufficient savings to repair and rebuild after a natural disaster. Insurance is a vital source of recovery funds, but many are uninsured or insufficiently insured. This insurance gap doesn’t just reduce their resilience; its impact can slow the recovery of entire communities.
Community-based catastrophe insurance (CBCI) – arranged by a local government, quasigovernmental body, or a community group to cover individual properties in the community – may help close the coverage gap. A recent Marsh & McLennan report looks at such arrangements and how they can promote community resilience.
In addition to improving financial recovery for communities, CBCI can provide more affordable disaster insurance coverage and could be linked directly to financing for community-level hazard mitigation. It offers multiple delivery models so officials and risk managers can explore and implement CBCI as part of an integrated risk management strategy.
Four broad institutional structures for CBCI illustrate the different roles and responsibilities of the community and other partners:
• A facilitator model
• A group policy model
• An aggregator model
• Purchase through a community captive.
In these frameworks, the community’s role and responsibility increase from lowest to highest. In the first, the community is more of a facilitator and a negotiator. In the second, it takes on a role in distribution, choosing insurance options and collecting premiums. In the third, the community plays a dual role: as the insured on a contract with a reinsurer and as the disburser of claims funds.
The fourth model harnesses an existing structure — an insurance captive — that enables the community to provide disaster policies.
“In all cases, the community could offer the coverage for a property owner to voluntarily decide to purchase, or there may be a few instances where a community would compel residents to purchase coverage,” the Marsh report says. “When coverage is voluntary, however, a community would likely need to offer purchase incentives to achieve goals of widespread take-up of the coverage.”
The report describes the four models in detail and provides a five-part roadmap for implementation.
A number of insurance companies are among Fortune magazine’s 2021 ranking of the world’s most admired companies.
Berkshire Hathaway, at Number 6, tops the property/casualty firms listed, followed by USAA, Allstate, Chubb, Swiss Re, Travelers, and Zurich, respectively.
MetLife tops the life insurance companies included, followed by New York Life Insurance, Massachusetts Mutual Life, Northwestern Mutual, and Prudential Financial.
The survey asked respondents to rank companies using criteria including: products, quality of management, financial soundness, ability to attract talent, and social responsibility.
The rankings came out just in time for Insurance Careers Month. To find out more about why working in insurance can be such an attractive career choice, check out the stories told by people working in a variety of fields who sat down for interviews for our Insurance Careers Corner series.
Triple-I’s “Insurance Careers Corner” series was created to highlight trailblazers in insurance and to spread awareness of the career opportunities within the industry.
February is Insurance Careers Month, and this month we interviewed Suzanne Meraz, an external affairs executive at CSAA Insurance Group. Suzanne discusses why she chose a career in insurance, the impacts of the pandemic, and the importance of racial equity in the industry.
Suzanne Meraz
Tell me about your current role at CSAA.
As external affairs executive for a AAA insurer, I’m fortunate to work with a talented team that manages PR, social media, thought leadership, executive visibility, reputation management, and relationships with industry associations (like Triple-I, The Institutes). Our team works to promote CSAA Insurance Group and its associated companies, such as Mobilitas, our commercial insurance company, and Avanta Ventures, our venture capital arm.
You’ve worked in PR and Corporate Communications for many years. What led you into insurance and to make a career in the industry?
I’ve been fortunate to have worked in PR my whole career, and in insurance for about 15 years. Hewitt Associates, a consulting firm later acquired by Aon, is where I started working with insurance. I was responsible for promoting the healthcare practice, helping companies with their healthcare benefit programs.
Working in insurance has provided me the opportunity to promote and learn about innovative products and services, such as green and entertainment insurance, as well as multiple lines, including P&C, healthcare and medical malpractice. I’ve truly enjoyed these experiences and working with many talented and smart people, but I am also proud to be part of this noble profession. As society’s financial first responders, we’re making and delivering on a promise to people to be there for people in their time of need. It feels good to be working in an industry that is doing something positive for the economy, for people, and for communities.
2020 was a rough year for the insurance industry. Can you talk about some of the challenges that you’ve faced?
2020 was challenging on many levels, but I’m very proud of what we’ve done at our company and overall as an industry. At CSAA, we quickly transitioned employees to work from home while continuing to serve our customers well. Our industry wasn’t known for having a work-from-home culture, and we all surprised ourselves in a good way.
The pandemic also spurred a lot of innovation which allowed us to think about ways to do things differently. For example, CSAA created efficiencies that allowed us to introduce a touchless claims system, which enabled customers to share pictures and videos of auto damage claims versus handling in person. We have received a lot of positive feedback for this enhancement, since it saves a lot of time and makes the entire process much more convenient for customers.
As an industry, insurance has assisted customers and communities throughout the pandemic with donations and community service. The industry also took a stand on racial equity issues. There is so much more to do, but it’s important that we start to use our voice as an industry to support important issues that we are facing. Our industry needs to become more diverse and better reflect the communities that we’re serving.
Let’s talk about Diversity & Inclusion. It is the topic that’s front of mind in the industry, particularly lack of representation for women and people of color. What challenges have you faced and overcome during your career? What is CSAA’s commitment to D&I?
As a mixed race female (half Japanese and half Polish), I feel that I bring a unique perspective to the table. While the communications field has strong female representation overall, that doesn’t mean that we can’t improve or don’t face other challenges. Women in leadership positions and people-of-color still remain very under-represented.
During my career, I have encountered sexism and discrimination. It’s a challenge many of us face, but I’ve been fortunate enough to not allow it to derail my goals and aspirations. To this day, I am often asked “What are you?” in terms of my ethnicity. In time, I’ve learned that it’s not my problem that people can’t put me in a box or easily categorize me.
The insurance industry has traditionally been tight-lipped on many social issues, but one of my proudest moments was when our CEO, Tom Troy, publicly supported Black Lives Matter. Coming from a mixed family, it meant so much for my company to take that stand on this important issue and to say those words. I’m grateful to be a part of a company that cares about our employees, customers and communities, and isn’t afraid to speak out on injustice.
You’ve just been honored as part of the 2021 APCIA Class of Emerging Leaders for your work in 2020 and helping to navigate CSAA with challenges through the pandemic as well as promoting diversity and equity. What are your goals for 2021 and beyond?
It was such an honor to be recognized along with my other CSAA colleagues who are so deserving: Briana Clifford, Beti Cung, Jachyn Davis, Christian Myers, and Maureen Parish. We need more events that bring the insurance industry together, whether it’s by function or discipline, to keep the industry engaged and share the stories of how we’re making a difference.
I’m proud of CSAA’s inclusion and belonging work. Over the past year, we’ve explored diversity training around unconscious bias and micro-aggressions. We also have a CEO that is truly supportive in addressing racial inequity and providing the space, budget, and support to launch programs that address these issues. Just acknowledging that these are serious and important issues is a big deal, yet we’re taking the necessary steps that will help us move forward and take real action. We’re on a journey with this, and we are not perfect, but we are committed to increasing the diversity of our workforce and advocating for representation at every level of our organization.
There’s so much work to be done in this area that it sometimes can feel overwhelming, but our team is committed to advocating for real change that can make a difference for our company and the communities we serve. For us, this is not a bandwagon moment and ‘Black Lives Matter’ wasn’t just for 2020. Inclusion and belonging is now and forever, and we will continue to move forward with action and purpose. We are working on a CSR report that will document transparency about where we are, what we are doing, where we have work to do and where we are headed. This is an exciting, important and pivotal time for the insurance industry and the world, and I am grateful for the role we can play in influencing a positive and long overdue outcome.
The insurance industry is uniquely positioned to provide leadership in the public policy dialogue over climate risks. Our contribution to this conversation is crucial because insurers recognize the growing intensity of threats to the properties insurers financially protect.
In 2020, the U.S. witnessed a record hurricane season with 30 named storms; 12 of them made landfall. We also observed the worst wildfire season on record with more than 10 million acres burned—roughly the size of Maryland.
The U.S.’s auto, home, and business insurers cumulatively saw their catastrophe-caused insured loss payouts more than double to $47.1 billion for the first nine-months of 2020 from $21.5 billion in the same nine-month period a year earlier, Verisk and the American Property Casualty Insurance Association (APCIA) found.
The federal government quantified this trend, too. According to the National Oceanic and Atmospheric Administration (NOAA), there were 22 weather and climate disasters in the U.S. in 2020. Damages from these disasters exceeded $1 billion each and totaled approximately $95 billion for all 22 events when including both insured and uninsured losses, NOAA estimated.
The demand for insurance industry involvement in addressing climate risks is urgent. With a new administration and Congressional majority, climate is a priority issue in Washington, D.C. Industry leaders would be wise to explore pro-actively climate risk solutions for business and society—and not wait for elected officials to prescribe a response.
I believe climate risk is a challenge that should be integrated into each insurer’s Enterprise Risk Management (ERM) framework. That means examining climate risk impacts on insurer investments, underwriting and operational priorities—and then managing all dimensions of those findings.
The Own Risk and Solvency Assessment (ORSA) framework is already in place. Adding additional resources to this process will provide further intelligence for how insurers ought to operate as we move forward. For example, at my company, we decided rather than wait for regulators to try to limit fossil fuel investments, we created a green energy portfolio. The idea was to create a position in non-carbon energy production—and be opportunistic as the economy transitions toward non-carbon alternatives.
We believe this transition can be done responsibly while still managing the primary mandate of securing financial strength for policyholders.
One of the biggest challenges we will likely face is rising consumer expectations. We also must remember the political arena often animates public expectations. As an industry, we have at times struggled to produce innovative products and services.
Whether its personal or commercial insurance, our consumers want offerings that are relevant for their individual needs, which today includes being more resilient to climate risk. Everyone in the financial sector faces these challenges but I am confident insurers have the insights and expertise to deliver the innovation required in our changing world.
Richard Creedon, Chairman of the Board and CEO of the member companies of the Utica National Insurance Group is also Chairman of the Insurance Information Institute’s Executive Leadership Committee
Social inflation – increasing insurance claims costs related to legislative and litigation trends – may be spreading beyond the United States, attendees were told at a webinar with the Greenberg School of Risk Management of St. John’s Tobin College of Business.
The webinar, held on February 10, was aimed to help lawyers and claims professionals understand the phenomenon, which is characterized by claims costs rising faster than general economic inflation can explain.
Annette Hofmann, Ph.D., professor of actuarial science at the Maurice R. Greenberg School of Risk Management, Insurance and Actuarial Science, pointed out that “though it is largely a U.S. issue, there are signs of social inflation in other countries with potential for further international contagion, albeit not to the same degree as in the U.S.”
She added that the impact of social inflation in the U.S. has been most evident in commercial auto liability insurance.
“Litigation finance, societal attitudes toward corporations and large jury payouts are all behind the phenomenon,” according to James Lynch, Chief Actuary of Triple-I and one of the presenters.
In his presentation, Lynch showed how incurred losses in commercial auto liability have been climbing steeply since 2010.
Lynch said Triple-I studied the link between social inflation and trends in actuarial data (rising loss development factors) by focusing on long-tailed liability lines including Commercial Auto, Medical Malpractice and Other Liability.
He said actuaries look at the pattern of reported losses – the sum of claims experts’ estimates of every known loss. Even if the ultimate amount of claims rises or falls from year to year, the pattern of emergence should stay the same. That hypothesis is at the core of standard actuarial practices.
In this case, it is increasing.
One interesting offshoot of this work is that actuaries can also predict how much in losses will be reported in any 12-month period. The chart on the right shows how actuaries analyzing countrywide data have not been able to do this in commercial auto. And this is not just happening in auto, medical malpractice occurrence, and other liability are seeing the same effect.
Lynch went on to discuss some of the potential reasons behind large jury payouts. One explanation is the darker view of life that people have. Confidence in government has plummeted, incomes and life expectancy have declined, and Google Trends indicates that searches for the word “dystopia” have increased by over 400 percent from 2005 to 2020.
In the meantime, Lynch and another presenter, Julie Campanini of Magna Legal Services, noted that huge amounts of money have been normalized by billion-dollar lottery jackpots, sky-high celebrity net-worth, and news reports of “nuclear” awards verdicts.
Other speakers included:
Jonathan E. Meer, partner at Wilson Elser, who spoke about the state of tort reform.
Jeff Cordray, a vice president and economist at Christensen Associates, who discussed the importance of determining economic damages, particularly when there is a potential for punitive damages in a case.
The Federal Emergency Management Agency (FEMA) recently unveiled its National Risk Index (NRI) for natural hazards. The online mapping application identifies communities most at risk for 18 types of events. It visualizes the risk metrics and includes data about expected annual losses, social vulnerabilities, and community resilience.
Zuzak explained that the NRI draws from a wide range of data and analytics resources and considers the probabilities or frequencies of 18 natural hazards and the population and property value exposed. Expected annual loss is calculated separately for each hazard, then summed to generate a composite score for all 18.
NRI enables FEMA to talk with communities about specific risks, identify high-impact mitigation opportunities, and learn how they can make the best use of their risk-management resources.
“NRI wasn’t built in a silo,” Zuzak said. “We brought in local and county and state governments, tribal and territorial governments to make sure we had the best available data. We also brought in academia, nonprofit organizations, and private industry to make sure we had everyone’s input.”
Part of an effort to reduce costs and eliminate inconsistent risk assessments for planning, the NRI uses a national baseline risk assessment to identify areas that offer high returns on risk-mitigation investment. The NRI can help communities:
Update emergency plans;
Improve hazard-mitigation plans;
Prioritize and allocate resources;
Identify need for more refined risk assessments;
Encourage community risk communication and engagement;
Educate homeowners and renters;
Support adoption of enhanced codes and standards;
Inform long-term community recovery.
“Nothing like this – a free, consistent, comprehensive nationwide risk assessment tool that addresses multiple hazards and includes social vulnerability and community resilience – existed before,” said Dr. Michel Léonard, CBE, vice president and senior economist for Triple-I. “This is an important addition to the toolkit of risk managers, insurers, policymakers, and others working to create a safer, more resilient world.”
Insurers saw more costly personal umbrella claims before the start of 2020, according to a Gen Re analysis, and the reinsurer expects such claims to continue as we emerge from the COVID-19 pandemic.
Personal umbrella insurance covers liability costs beyond the limits of the policyholders’ homeowners or auto policies.
Gen Re has uncovered some of the top drivers for the large claims, and they have to do with some of society’s harshest ills. Top reasons cited were increases in:
the annual poverty rate;
opioid prescription rates;
fatal accidents;
brain injuries;
attorney representation; and
injuries involving a fatality and multiple claimants.
Other notable predictors linked with higher claims severity include laws permitting recreational marijuana and a lack of motorcycle helmet laws.
Gen Re said poverty, opioid use, and marijuana laws were unexpected predictors of umbrella claim severity and that all of the analysis’ findings “will facilitate deeper client interaction on this line of business.”
“Social inflation” – a term used to describe growth in liability risks and costs related to litigation trends – has been a growing concern for insurers. The phenomenon has mostly affected the commercial auto and general liability lines, but the findings here – particularly the increase in attorney representation – suggest that it might be making inroads into personal lines.
By Loretta Worters, Vice President, Media Relations, Triple-I
During an exclusive Groundhog Day webinar presented to Triple-I members by Triple-I and Milliman, experts talked about what the insurance industry can expect in 2021.
Auto Insurance Report editor Brian Sullivan looked at both personal and commercial auto insurance. “For the first nine months, private passenger auto liability written premium was down less than two percent, but losses incurred were down more than 14 percent with loss ratios likely to be in the mid-50s.”
On the commercial side, Sullivan noted that commercial auto trends aren’t as powerful as those for personal lines. “Things have gotten better in terms of losses, but not that much better; certainly, nothing like personal auto,” Sullivan said.
Jeff Eddinger, senior division executive at the National Council for Compensation Insurance (NCCI), gave an early look at 2020 results for workers compensation insurance. “The pandemic has landed the U.S. economy into a recession. Significant job losses combined with changes in wage and rate levels have put downward pressure on premiums. NCCI estimates that private carrier net premium written will be down about 8 percent for 2020.”
Eddinger noted that as the virus began to spread in 2020, so did the concern that COVID claims could overwhelm the system. “Fortunately, that has turned out not to be the case. At the same time, there has been a drop in non-COVID claims, due in part to more remote work and less work-related driving. So far, incurred losses have decreased about 8 percent, in line with the drop in total premium. As a result, the estimated calendar year combined ratio for 2020 is almost unchanged from 2019 at 86. This would be the seventh straight year of underwriting profit for workers compensation.”
The industry is financially strong but continues to face uncertainty, Eddinger warned. “The vaccine rollout has begun, but new cases of the virus in the U.S. have soared to record levels. In addition to COVID claims, industry leaders are concerned about regulatory activity related to presumptions, the economic downturn and the long-term impact of working from home,” Eddinger said.
