JIF Insights: Cowbell CEO On Simplifying Cyber
For Smaller Firms

At Triple-I’s Joint Industry Forum last week, I had the opportunity to meet with Jack Kudale, CEO and founder of Cowbell Cyber, and learn more about how the startup aims to simplify and demystify cyber insurance for small and medium enterprises.

Cowbell CEO Jack Kudale’s background includes 25 years in enterprise software and five in cyber security. He led three startups before founding Cowbell.

Cyber remains a tough sell among smaller companies. Many believe their risk profiles don’t warrant the cost of the coverage, and some complain the policies contain too many exclusions. A 2019 Advisen survey of brokers and underwriters – all involved in cyber insurance – found “not understanding exposures” (73 percent), “not understanding coverage” (63 percent), and “cost” (46 percent) to be the top three obstacles to writing and issuing cyber.

‘We eliminate the application’

Cowbell this morning announced the launch of Cowbell Prime 100 – the company’s A.I.-powered platform that promises to assess customers’ cyber exposures in real time and match them with the most relevant coverage for their business – all in about five minutes.

“Basically, we eliminate the application,” Kudale said. “The coverage is highly individualized for each specific business.“

And, if that isn’t enough, instead of an annual process of writing and renewal, Cowbell Prime 100 will continuously monitor customers’ exposures and recommend coverage changes in real time.

“For smaller companies, the concern is about speed and simplicity,” Kudale said. “Do I have to fill out long forms or answer intrusive questions? We remove all that friction and provide coverage tailored to their exposure.”

Larger companies, Kudale said, “are more interested in insights. Our continuous underwriting will help them better understand their cyber risks and how the recommended coverage addresses them.”

“The more customized the policy,” he continued, “the less concern there is about excessive exclusions.”

Cowbell Factors

The platform’s proprietary “Cowbell Factors” assess:

  • Projected loss costs based on hundreds of thousands of cyber cases,
  • Risk signals from internet-exposed infrastructure,
  • The customer’s cyber security practices,
  • “Dark web” intelligence,
  • Industry-specific business-interruption data, and
  • Regulatory compliance data.

Kudale’s background includes 25 years in enterprise software and five in cyber security. He led three startups before founding Cowbell with partners from the insurance and tech worlds.

Cowbell Prime 100 offers an A.M. Best ‘A’-rated admitted policy backed by Boost Insurance and prominent reinsurance partners, including Markel Global Reinsurance Company, Renaissance Re Holdings, and Nephila Capital. The company currently is appointing brokers and agents in California, Colorado, Arizona, Illinois, Oregon and Nevada.

JIF 2020 Crystal Ball

My first Triple-I Joint Industry Forum (JIF) did not disappoint.

Between panel discussions and conversations with thought leaders and decision makers from across the insurance industry,  I learned a lot and accumulated insights and leads that will feed this blog for some time to come.

At a high level, an informal poll during one session – “JIF 2020 Crystal Ball—What Does the Future Hold?” – asked attendees several questions to get a sense of where they see the greatest opportunities and threats for the coming year.  Asked where they thought innovation would have the greatest impact in 2020, 36 percent said claims, followed by 26 percent who said they believe product marketing would be most affected.

I suppose this isn’t very surprising, as claims and product marketing both touch customers very directly. Marketing makes the promises and, when it works well, claims keeps them.  These should be high-priority areas for companies that expect to remain in business and competitive.

When asked what they expected to affect their companies’ bottom lines the most, 47 percent of participants said natural disasters and 30 percent said litigation costs (highlighting the increased attention being paid to social inflation).

I was a bit surprised to see cyber didn’t rank higher – especially given the fact that it recently came out at the top of concerns cited in the 2020 Allianz Risk Barometer. Autonomous vehicles – for all the media attention they receive – was the top choice of no one in the room.

When asked which of the following natural perils – tornadoes, hail, hurricanes, wildfires, and floods – keeps participants up at night, someone piped up to ask, “Why don’t you have an ‘all of the above’ choice?”

Forced to choose, the group’s top nightmares were: floods, wildfires, and hurricanes, in that order.

Asked about global events and trends they expect to have an impact on insurers worldwide, “Protectionism and trade disputes” was the top answer by far, at 58 percent – far above the next-highest: 28 percent for Brexit.

When asked about their expectations (not necessarily their preferences) for the 2020 election results, more participants (54 percent) said they expect a continuation of the status quo, with a Republican White House and Senate and Democratic House of Representatives. Twenty-nine percent said they expect the Democrats to take the White House and the Senate and House to remain essentially unchanged.

I found these results a bit surprising, given the mid-term turnout that led the House to flip from a Republican to a Democrat majority. The dynamics don’t seem to have changed much since the mid-terms. If the Presidency doesn’t change parties, one might reasonably expect a change of balance in the Senate. If a Democrat wins the Oval Office, I would expect the dynamics that get him or her there would also result in the Senate changing hands.

While interesting, this is not at all a scientific study. What are your thoughts and expectations on these or other topics affecting insurance in 2020?

Joint Industry Forum 2020: A clear vision for the insurance industry

Each year Triple-I hosts a conference called the Property/Casualty Joint Industry Forum. This event, which took place on January 16 this year, assembles key figures from the business, policymaking, and media spheres to explore topics of vital interest to the property/casualty insurance industry.

During his opening remarks, Triple-I CEO Sean Kevelighan laid out many of the key issues the industry is facing: extreme weather events (wildfires can now be as costly as hurricanes), flat interest rates, populism and political risk around the world, building the workforce of the future, and the race to better engage with customers. Making disaster resilience a win/win proposition for both insurers and their customers is another vital issue.

He then sat down with CBS News’ senior foreign affairs correspondent and Face the Nation host Margaret Brennan. They discussed current events, including the impeachment of President Trump and the recently signed trade deal with China. Ms. Brennan advised news consumers to make sure that they have a trusted source: “if they are a pain to each side,” then you know they get it right.

Sean Kevelighan and Margaret Brennan

Over the next week or so, we’ll be blogging about the fascinating conversations that took place during the conference. Upcoming  posts will cover:

  • Extreme Weather
  • The Future of Insurance Marketing
  • JIF 2020 Crystal Ball—What Does the Future Hold for the Insurance Industry?
  • A 21st Century Workforce That Reflects the Communities We Serve
  • A Conversation with Economist Dr. Glenn Hubbard on Business and the Economy

For a full agenda click here. Check out this video for an overview of the conference. Interested in attending next year’s conference? Contact us at jif@iii.org.

Florida Dropped From 2020 “Judicial Hellholes” List

Each year the American Tort Reform Association (ATRA) publishes a list of “Judicial Hellholes”  — places where ATRA says laws and court procedures are applied in an “unfair and unbalanced” way in civil cases, usually to the disadvantage of defendants.

Since the issue of social inflation has been trending in recent months, it’s no surprise that the mention of ATRA’s report in our Daily newsletter garnered an unprecedented number of clicks.

Florida — a former number one Judicial Hellhole — doesn’t even make the cut this year.

“Florida took great strides toward improving its legal climate in 2019,” ATRA says “Although there is much work to be done, the election of Governor Ron DeSantis (R) has heralded a sea change in Florida’s legal landscape, beginning with the appointment of several new Florida Supreme Court justices. This new court is deferential to legislative efforts to stop lawsuit abuse and poised to correct the course set by the prior activist court.”

DeSantis in 2019 also signed into law a measure aimed at curbing assignment of benefits (AOB) litigation in the state. AOB is a standard insurance practice and an efficient, customer-friendly way to settle claims. As a convenience, a policyholder lets a third party – say, an auto glass repair company – directly bill the insurer. In Florida, however, legislative wrinkles have spawned a state of affairs in which legal fees can dwarf actual damages paid to the policyholder – sometimes tens of thousands of dollars for a single low-damage claim.

The measure DeSantis signed puts new requirements on contractors and lets insurers offer policies with limited AOB rights, or none at all. But it excludes auto glass repairs. The number of auto glass AOB lawsuits statewide in 2013 was over 3,800; by 2017, that number had grown to more than 20,000.

This year, the Philadelphia Court of Common Pleas took over the top spot for 2019. It is one of the preferred jurisdictions for asbestos litigation and home to an $8 billion product liability verdict. California, New York City, Louisiana, and St. Louis all rank in the top five.

Some of the trends noted in the ATRA report include:

  • the trial bar’s push to use public nuisance law to shift costs associated with public crises to businesses;
  • lead paint and climate change litigation;
  • the opioid and vaping crisis; and
  • new rights of action against employers.

Three Illinois counties – Cook, Madison, and St. Clair – made the list.  Antonio M. Romanucci, president of the Illinois Trial Lawyers Association, called the ATRA report misleading.  “The deceptively titled ‘Hellholes’ report is part of [ATRA’s] ongoing campaign to deny access to the court system that our tax dollars fund,” Romanucci told Illinois Radio Network. “ATRA’s annual publicity stunt demeans the U.S. Constitution and attacks citizens’ Seventh Amendment right to trial by jury.”

Romanucci said the number of civil lawsuits filed in Illinois has been declining since 2010 and was down 47 percent. And medical malpractice cases have dropped 32 percent since 2003.

Top 5 challenges for workers comp

The annual Focus on 5 survey by the National Council of Compensation Insurance (NCCI)  yielded the following issues that are keeping workers comp executives up at night:

  1. Will insurers be able to react quickly enough to preserve rate adequacy if loss costs start to rise after a sustained period of decline?
  2. How does an aging and changing workforce affect industry drivers like claims frequency and severity, along with wage and employment levels?
  3. What does the future hold for medical care costs, given variables like emerging healthcare technology and treatments, issues related to opioids and marijuana in the workplace, and mega-claims associated with seriously ill or injured workers?
  4. Will the gig economy ever grow to the extent that it affects workers comp premium levels? And will insurers develop innovative products to serve that market?
  5. How will rapidly changing workplace technology affect American jobs and the workers comp industry? Can regulation and legislation keep pace?

“It is critically important that we stay on top of the issues affecting our industry,” said Bill Donnell, NCCI president and CEO. “With a better understanding of the concerns of these leaders we can focus on key topics and provide insights that enable more informed decision making across the workers compensation system.”

 

From the Triple-I Daily: Our most popular content, January 4 to January 10

Here are the 5 most clicked on articles from this week’s I.I.I. Daily newsletter.

 

To subscribe to the Triple-I Daily email daily@iii.org.

I.I.I. Joint Industry Forum: Registration Deadline Fast Approaching

I’m looking forward to attending my first Insurance Information Institute Joint Industry Forum next week.  The agenda for the January 16 event at the Marriott Marquis Hotel in New York City is packed with impressive speakers from across the insurance industry, as well as influencers from media, academia, and the world of politics and policy:

  • Triple-I CEO Sean Kevelighan will interview award-winning broadcast journalist and CBS Face the Nation host Margaret Brennan about current issues and the 2020 elections;
  • Former U.S. Council of Economic Advisers Chairman Glenn Hubbard will discuss events and trends shaping the insurance business environment with Wall Street Journal chief economics correspondent Jon Hilsenrath; and
  • Phil Klotzbach, research scientist in the Department of Atmospheric Science at Colorado State University and Triple-I non-resident scholar will lead a panel on extreme weather that includes the Weather Channel’s Dr. Rick Knabb.

Other panels include:

  • The Future of Insurance Marketing;
  • A 21st Century Workforce That Reflects Communities We Serve; and
  • An interactive discussion: JIF 2020 Crystal Ball—What Does the Future Hold?

The full-day event will wrap up with a cocktail reception with Dr. Hubbard. The entire event will be a fun, informative opportunity to learn and network with peers, subject-matter experts, and industry influencers.

I hope to see you there; if you haven’t signed up, please note:  Registration closes at 5:00 p.m. (ET) Friday, January 10, 2020.

2020 Insurance Fact Book Includes New Section
On Emerging Risks

The Insurance Information Institute (Triple-I) 2020 Insurance Fact Book is now available.

The 234-page digital publication features facts, figures, statistical tables, and charts on U.S. and global insurance markets. It also includes detailed data on direct premiums written and factors affecting U.S. auto, homeowners, and business insurance costs.

Three unique insurance risks—cybersecurity, extreme weather, and social inflation—are highlighted in a new section called Emerging and Evolving Insurance Issues. Other new components include:

“As we welcome a new decade, the challenges before the insurance industry are vast,” said Triple-I CEO Sean Kevelighan. “The catastrophic shock and losses from the last few years, from California wildfires and the Atlantic hurricane season, are telling. What the last decade has foreshadowed could be, as some say, the new abnormal. Our new Insurance Fact Book reflects the new risks insurers face.”

The 2020 Insurance Fact Book is available for purchase from the Triple-I’s online store.  Copies may be obtained free of charge by Triple-I member companies and associate members via the Triple-I’s members-only website. Previous editions have been popular with policymakers, journalists, academics, business leaders, and others.

Auto Premiums Climbing;
Are They “Affordable”?

Car insurance premiums have risen steadily since 2009 at a faster pace than inflation, according to a recent paper in the Journal of Insurance Regulation.

Transportation is essential to opportunity in the United States. Cost of driving, therefore, isn’t a trivial issue.

When you hear a stat like that, what’s your instinctive response? To blame “greedy insurers” who are making money hand over fist and still aren’t satisfied? It might be, if you don’t follow insurance profitability trends. If you do, you know they’ve been losing money on auto insurance for years, despite increasing rates.

Rising rates have caused some to call for regulation to help make car insurance more affordable. Transportation is essential to opportunity in the United States, and most Americans rely on cars. Cost of driving, therefore, isn’t a trivial issue.

But the authors of the paper – Cost Trends and Affordability of Automobile Insurance in the U.S. –  found rate regulation could do more harm than good.

Frequency and severity

The year 2009 was the beginning of the end of the “Great Recession.” In a recovering economy, more people drive – to work, stores, restaurants, et cetera. More vehicles traveling more miles means more accidents and more insurance claims.

The insurance term for this is “frequency.” In addition to more cars on the road, the report finds, distracted driving due to use of digital devices may contribute to increased accident frequency.

In an improving economy, more cars are on the road. More vehicles mean more accidents and insurance claims. Distracted driving due to use of hand-held digital devices also may contribute to increased accident frequency.

Another key term is “severity” – the average cost of claims. Severity has been high for several reasons:

Safety and fuel efficiency are expensive. Cars are safer and cheaper to operate than ever before – thanks to sensors and computers and new materials, all of which are expensive to repair or replace after an accident. This affects loss costs, which are reflected in premiums.

Medical costs are on the rise – especially for hospitalization. The paper cites U.S. Bureau of Labor Statistics data showing that medical and auto insurance inflation growth track closely and hospital cost inflation by far outstrips both. Since many crash victims wind up in the hospital, it’s possible these costs aren’t fully reflected in insurance rates.  The paper also cites research indicating that hospitals may charge insurers more than other payers.

Litigation and generous juries. The report doesn’t go into detail about litigation, but the trend known as “social inflation” – marked by growing jury awards and “litigation funding,” in which investors pay plaintiffs to sue large companies in return for a share in the settlement – is well documented.

These factors drive up rates as insurers seek a return that justifies risk taking and operational spending. Nevertheless, the report finds no correlation between rising rates and insurer profitability.

Cracking the affordability nut

Literature on insurance affordability is diverse, with little consensus on the key term. The paper cites research that strongly suggests aggressive rate regulation actually reduces affordability.

“When rate regulation suppresses costs for the riskiest insureds,” the study states, “average premiums, losses, and injuries increase.”

So, what might improve auto insurance affordability?

Some contributors to rising rates – such as repair costs – “should partially self-correct over time,” the paper says. Others, like medical costs and “non-economic” damages (pain and suffering awards) could be addressed through changes in personal injury protection (PIP) laws, antifraud efforts, transparency in medical pricing, or civil justice reform. Stricter “distracted driving” laws and improved enforcement of existing ones could help reduce losses and premiums.

Insurers are investing in technology and improved analytics to streamline their workflows, improve service, and bolster their bottom lines. Some are even discussing getting out of auto entirely – which, should it become a trend, would not bode well for affordability or availability.

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