Auto Insurers engage in aggressive customer courtship as shopping stagnates

Auto insurers are contending with record-low numbers of new shoppers, price competition and the ever looming Insurtech disruptors. These conditions have forced auto insurers into “aggressive customer courtship mode”, according to the J.D. Power 2018 U.S. Insurance Shopping Study.

To court customers insurers are investing forcefully in improving the shopping process and in national advertising to build their brands.

“We’re entering an era of consumer-centric insurance that will likely be marked by a surge in new digital offerings and serious efforts by insurers to improve the auto insurance shopping experience,” said Tom Super, Director of the Property and Casualty Insurance Practice at J.D. Power. “Auto insurers looking to differentiate and win new customers are making big bets with digital—such as in personalization—that meet customers’ growing expectations for improved interactions.”

Highlights from the study include:

  • Delivering an omnichannel experience is critical as 45 percent of auto insurance shoppers use multiple channels when purchasing a policy.
  • Brand reputation is the top driver of consideration, but a strong value proposition remains essential in driving quote and close rates.
  • Insurtech customer awareness still low: Just 6 percent of prospective customers indicate being aware of at least one of the following companies: Lemonade, Metromile, Trov and Sure. Less than half of shoppers who are aware of a given provider would consider doing business with them in the future.
  • Directs are winning purchase experience battle:Overall satisfaction among shoppers who purchased insurance from companies that primarily sell directly to the customer is 846 (on a 1,000-point scale). This compares with a score of 842 among shoppers who purchased insurance from companies that primarily sell through independent agents and 834 among those who bought from insurers who primarily sell through exclusive agents.

 

Cybersecurity insurance growth continues

Cyber insurance remained a fast-growing line in 2017, with package policy premium almost tripling, while standalone premium grew 7 percent*, NAIC data indicate.

Packaged cybersecurity policies as measured in quantified and estimated direct premiums written grew from $416.8 million in 2016 to $1.1 billion in 2017. The number of packaged claims made and occurrence policies in-force increased by 71 percent.

Standalone cybersecurity policies did not fare as well, with a 7 percent increase in direct premiums written from $920.7 million in 2016 to $985.6 million in 2017. The number of standalone occurrence policies in force fell by 12 percent, and the number of standalone cybersecurity claims-made policies fell by 33.3 percent. The loss ratio for 2017 standalone cybersecurity insurance was just 30 percent.

Over the past year, headline grabbing cyber incident such as the Equifax breach ensured that companies remained aware of the enormous potential losses cybersecurity threats pose to their businesses. Cyber incidents ranked second on Allianz’s 2018 list of top business risks (five years ago, it ranked 15th.).

A recent PwC report cautioned that given the increasingly frequent and severe nature of cyberattacks, it’s still unclear whether cyberrisks are adequately priced.

“The inevitable market-turning event will separate carriers that have sufficient risk management, underwriting processes and capital in place from ones that do not,” said the report.

Click to enlarge

*NAIC data sourced from S&P Market Intelligence on April 27, 2018.

 

From the I.I.I. Daily: Our most popular content, April 20-April 26

 

Here are the 5 most clicked on articles from the I.I.I. Daily newsletter.

 

  1. Most and Least Expensive ZIP codes for home insurance, The Street
  2. The Yellowstone supervolcano is a disaster waiting to happen, Washington Post
  3. States Where You Pay the Most and Least for Home Insurance, The Street
  4. Five New York Residents Charged in More Than $31.7M Fraud Scheme, Insurance Journal
  5. Three Insurance Tech Startups Announce Moves To Hartford, The Hartford Courant

 

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Reported Causes of Death and Public Perception

By Jennifer Ha, Head of Editorial and Publications, Insurance Information Institute

This capstone project, entitled, “Death: Reality vs. Reported,” prepared by four students for their Data Science in Practice course at the University of California, San Diego, bases its premise on an old study that compared the disparity of the number and causes of deaths reported by the Centers for Disease Control (CDC), and those reported in the media. In this case, the students have given the thesis an update: they have also included Google Trends Search Volume, but limited deaths reported by media to two sources: The Guardian, and The New York Times.

The students looked at the top 10 largest causes of mortality, as well as terrorism, overdoses, and homicides, three other causes of death they believed to receive a lot of media coverage. They did take some liberties (which they detail), but overall the findings were as follows:

“The most striking disparities here are that of kidney disease, heart disease, terrorism, and homicide. Kidney disease and heart disease are both about 10 times underrepresented in the news, while homicide is about 31 times overrepresented, and terrorism is a whopping 3,900 times overrepresented…This suggests that general public sentiment is not well-calibrated with the ways that people actually die. Heart disease and kidney disease appear largely underrepresented in the sphere of public attention, while terrorism and homicides capture a far larger share, relative to their share of deaths caused.”

Click on the gif below to see actual causes of death vs. what we worry about and what’s in the media:

Opioid abuse by auto insurance claimants — a serious problem

 

Auto insurance may become an inviting target for people seeking opioids, as Medicare is implementing  controversial restrictions on painkillers’ prescriptions.

Opioids were already the largest category of drugs paid for by auto insurers in 2017, according to a recent Auto Insurance Report article citing data from Optum, a pharmacy benefit management firm.  The narcotic represented 19 percent of medications paid for by auto insurance, down from nearly 24 percent in 2016. There were 7.5 opioid prescriptions per claim in 2017 up from 6.7 in 2016.

Tron Emptage, Optum’s chief clinical officer for the Workers Comp and Auto No-Fault division, notes that auto related prescriptions have been rising where workers comp related prescriptions have been falling. The auto related prescriptions also tend to be of a higher dosage than workers compensation.

It’s useful to compare the two types of claims, says Emptage, because injury types tend to be similar. But unlike workers compensation, which has many rules and fee schedules regulating prescription drug use, auto insurers have been on the receiving end of medical cost shifting as well as the abuse of the medical system to support lawsuits and general fraud, says the article. Challenging medical bills can be problematic when first-party claimants are involved, not to mention third-party claimants.

The article concludes that auto insurers in PIP states can establish pharmacy management programs to gain at least a small degree of control over what they pay for.

 

Fatal crashes increase 12 percent on National Weed Day

Marijuana retailers are expected to see a spike in sales on this 4/20 National Weed Day, but on a less high note, car crashes are also expected to increase today. A recent study published in JAMA Internal Medicine found that traffic fatalities were 12 percent more likely on April 20 after 4:20 pm, the time the  celebration traditionally begins, than on the same day one week before or one week after.

The marijuana related increase in accidents has not yet been perceived by most Americans.  A new survey by Property Casualty Insurers Association of America (PCI), found that over two thirds of Americans (68 percent) see no difference in road safety on April 20.

National Weed Day is particularly dangerous for young people according to the JAMA study. Fatal crashes were 38 percent more likely for drivers under the age of 21 years old. But the PCI survey found that over 50 percent of parents with teenagers at home said they have not spoken to their children about the dangers of driving high in the days leading up to April 20.

Americans rank marijuana use at near the bottom of potentially dangerous driving activity, the PCI poll found. However, 70 percent think the government should establish driving impairment standards for marijuana, and the same percentage support a field sobriety test for law enforcement to determine marijuana use.

The I.I.I.’s chief actuary, James Lynch gave a talk on public attitudes towards driving while high. The presentation can be found here.

 

From the I.I.I. Daily: Our most popular content, April 12 – April 19

Here are the 5 most clicked on articles from the I.I.I. Daily newsletter.

  1. These childhood hobbies may have helped Warren Buffett become a billionaire, CNBC
  2. Geico ordered to pay $23M to Southern California motorist, Seattle Times
  3. Blockchain Panel Part 1: How Blockchain Will Link a New Insurance Value Chain, A.M. Best Video
  4. Retirement Insurance Products Are Disappearing. And That’s Dangerous, The Wall Street Journal blog
  5. Legal Industry Targets Insurance Employers, Insurance Business Magazine

 

 

 

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The Week in a Minute, 4/19/18

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights. 

 

One passenger was killed, and seven others were injured, after a Southwest Airlines plane engine blew apart about 20 minutes after leaving New York City’s LaGuardia Airport on Tuesday, April 17.  U.S. commercial airlines had not had an accident which led to a passenger’s death since February 2009.

A winter-like April storm brought to Green Bay, Wisconsin its second-highest snow total ever.  Minnesota, Michigan, and Illinois were also hit by heavy snowfall over the past week.

The U.S.’s January 3-5 and March 1-3 snowstorms, as well as the nation’s tornadoes and hail storms of March 18-21, each generated $1 billion-plus in economic losses, according to the National Oceanic and Atmospheric Association (NOAA).

 

Small Florida insurers survive hurricanes and “Judicial Hellhole”

Florida’s small P/C insurers have withstood losses from Hurricane Irma and a legal environment that’s dubbed a “judicial hellhole” by the American Tort Reform Association, a recent article in S&P Global Market Intelligence reports.

The financial ratings firm Demotech affirmed the financial strength of over 50 companies in late March, a decision found “encouraging” by the CEO of the state-run Citizens Property Insurance Corp, Barry Gilway.

Gilway said that Demotech’s March actions is evidence of the resilience that smaller carriers showed during a year in which Hurricane Irma caused insured losses of about $8.61 billion, according to the latest Florida Office of Insurance Regulation tally.

Florida insurers face both weather-related risk and costs stemming from litigation on non-weather-related water-loss claims with an assignment of benefits (AOB) and other legal matters.  To combat the AOB problem, Citizens has drawn-up changes in policy language, increased efforts to fight fraud and grew its managed repair program. In January, Citizens said it expects AOB and litigation costs would account for about 23 percent of its 2018 operating expenses, up from 16 percent in 2017 – an increase of $17 million.

The frequency and severity of water-loss claims over the past 2.5 years shows “extremely negative trends,” and that deteriorating trends have begun to spread northward within the state, said Gilway.

Citizens is reopening approximately 37 percent of claims related to Hurricane Irma as part of its ongoing work to help its policyholders, who have been frustrated by a shortage of contractors, the Insurance Journal reported. A spokesperson for Citizens said that it’s common for claims to be reopened, and that the majority of those reopened are non-AOB Irma claims.

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