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.
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:
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.
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.
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).
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.
This week the Insurance Information Institute (I.I.I.) has published its 2018 Insurance Fact Book, the industry’s go-to resource for businesses, journalists, policymakers, researchers, and students. Providing comprehensive statistics indexed by state and insurance categories, the Insurance Fact Book allows its readers to understand the industry at a glance.
“The 2018 I.I.I. Insurance Fact Book was developed for use by anyone needing in-depth knowledge of the power that is the insurance industry,” says Sean Kevelighan, Chief Executive Officer of the Insurance Information Institute. “For nearly six decades, the Fact Book has been the essential reference resource on insurance. After record natural catastrophe losses in 2017, it’s more important than ever for audiences to have objective, fact-based content—and know that the insurance industry will emerge from these challenges stronger and better prepared to serve the public.”
The 2018 Insurance Information Institute Fact Book may be purchased by ordering copies via email at firstname.lastname@example.org or from the I.I.I.’s online store at www.iii.org/store. A PDF of the publication may also be downloaded online and is complimentary to I.I.I. member companies.
Competition for customers is fierce, so incumbent property/casualty (P/C) insurers must hustle to integrate digital technologies into their operations. Digitizing the claims experience holds great promise for the P/C industry both in terms of customer experience and cost savings.
McKinsey and Company has recently released a report about planning for a successful claims digitization process. The essential elements needed to digitize and transform claims include developing a new value proposition that sets a high-level aspiration (and getting managers to buy in) and pursuing an end-to-end digitization of the claims customer journey.
A truly innovative customer journey can be achieved by integrating with three other areas—AI and digital technologies, the digital integration of the claims ecosystem, and a new digital operating model.
The figure below shows what an aspirational future state of a customer journey would look like, and the digital assets needed to achieve that state.