The latest Insurance Information Institute (Triple-I) research indicates that between 2013 and 2022, economic and social inflation fueled a $96 to $105 billion increase in combined claim payouts for U.S. personal and commercial auto insurer liability.
The report “Impact of Increasing Inflation on Personal and Commercial Auto Liability Insurance” outlines Triple-I’s continued exploration of the impact of social inflation on insurer costs and claim payouts. The study proposes that increasing inflation drove loss and DCC (defense containment costs) higher in both insurance lines– by 6.5 percent ($61 billion) of total loss and DCC for personal auto and by 19 to 24 percent ($35 to $44 billion) for commercial auto.
Estimates place the average annual impact of increasing inflation at 0.6 percent for personal auto and 2.7 percent for commercial auto.
The accident rate (claim frequency) declined, and claim severity (size of losses) increased dramatically for personal and commercial lines.
Increasing inflation was mainly driven by social inflation factors before 2021, and since that year, it has continued as a product of economic and social inflation.
Researchers Jim Lynch, FCAS, MAAA, Triple-I’s former chief actuary, Dave Moore, FCAS, MAAA, president, Moore Actuarial Consulting, LLC, and Dale Porfilio, FCAS, MAAA, Triple-I’s chief insurance officer, approached the topic in a manner similar to their prior collaborations (in 2022 and early 2023). They used loss development patterns to identify inflation for selected property/casualty lines in excess of inflation in the overall economy. However, they extended their methodology in this project to use annual statement data through year-end 2022. Also, in this report, the authors use the term “inflation” for the first time to convey the operative mix of social and economic inflation on insurers’ costs.
Commercial Auto Liability
Data indicates that commercial auto liability faces its share of challenges, too, as losses have outpaced the growth rate of the overall economy. Claim severity (size of losses) has risen 72 percent overall since 2013, with the median annual increase at 6.3 percent. The report compares this change to the annual median increase of 2.1 percent in the Consumer Price Index, an observation offered as evidence that before 2020, social inflation may have been a primary factor in loss trends.
Researchers estimate that from 2013 to 2022, increasing inflation drove losses up by between $35 billion and $44 billion, or between 19 percent and 24 percent. The pandemic brought significant change to commercial auto liability, decreasing claim frequency while increasing claim severity more dramatically. Researchers contend the loss development factors for this line of business signal an ongoing problem of inflationary factors.
Personal Auto Liability
This line took in four times the net earned premiums in 2022 as commercial auto liability. However, multimillion-dollar personal auto settlements are rare; consequently, the cases have less impact on insured losses or development patterns. Premiums and insurer losses in this line fluctuated over the prior two decades but continue to increase, albeit more slowly than the overall economy. In recent years, however, losses have been growing faster than premiums. Since 2020, premiums fell 13 percent, while losses rose 15 percent. And, after 2019, severity increased dramatically, with the compound annual increase holding 3.0 percent from 2013 to 2019, then tripling to 9.2 percent compounded annually.
The double whammy of economic inflation and social inflation
The report describes the nuanced findings of personal and commercial auto liability –understandably different as these markets differ in many aspects, including size and risk factors. The analysis reveals some trends in common, however. Findings in commercial and personal auto liability indicate that the overall accident rate (claim frequency) declined during the early pandemic years, yet the severity (size of losses) increased more dramatically.
The earliest study in this series looked at insurance trends through the end of 2019, focusing on loss development factors (LDFs). Since economic inflation was stable, but LDFs were increasing steadily during that time, the researchers concluded that economic inflation was likely not the cause of rising costs. Then, beginning in 2021, a sizable uptick in the CPI-All Urban signaled a rise in overall economic inflation.
The resulting implications for underlying insurer costs can be observed in factors that impact claim payouts, such as replacement costs. The report states that since 2008, replacement costs for commercial and personal auto insurance have outpaced overall prices in the economy by 40 percent. Since 2019, these costs have risen almost three times faster than prices overall. Thus, for the years prior, researchers continue to attribute the bulk of losses for both lines primarily to social inflation but propose that social inflation and increasing overall economic inflation share the credit beginning in 2020.
Triple-I plans to continue to foster a research-based conversation around social inflation. For an overview of the topic and other helpful resources about its potential impact on insurers, policyholders, and the economy, check out our knowledge hub, Social inflation: hard to measure, important to understand.
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:
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:
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.
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.
“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.”
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.
“Embedded insurance” – often described as “B2B2C insurance” – has long been touted as a path toward innovation and growth in the traditional insurance market. However, it has been slow to mature.
The term refers to the integration of insurance products and services into retail transactions. The objective is to offer insurance solutions at the point of sale or as part of a package of products or services. This requires that the products and processes be simplified so that the consumer can make an informed purchase. Complex commercial insurance products are not likely to succeed using the embedded insurance model.
Six years ago, according to a report published by global investment management firm Conning, embedded insurance was frequently cited as a use case for distributed ledger technology or blockchain. Blockchain is a complex, ledger-centric technology that has a multitude of benefits, such as enhanced data security, immutability, and optimized data sharing.
More often than not, these benefits are overshadowed by cryptocurrency’s somewhat lackluster reputation. This complexity – and the more recent travails of crypto — may have contributed to the slow adoption of this technology for embedded insurance.
“We’re overwhelmed by the insurance industry’s curiosity in network-based technologies, such as blockchain,” says Brendan Picha, head of outreach for the RiskStream Collaborative. “We have several initiatives, some global in scope, that are reaching a welcomed point of maturity within the enterprise. This is happening at an interesting intersection with developments of other emerging technologies. The industry is now looking carefully at how these technologies could work together and RiskStream is well positioned to support and usher in this exploration.”
RiskStream – like Triple-I, an affiliate of The Institutes – is a member-led non-profit that aims to create an ecosystem using blockchain to streamline data flow and verification, reduce operating and vendor costs, drive efficiency, and enhance customer experience.
Many applications for embedded insurance have used open APIs and microprocesses to scale applications with retail partners. These technologies have helped support the growth of embedded insurance in travel insurance, personal auto, homeowners, and extended warranty products.
However, for most traditional insurance products, embedded insurance poses a challenge. These products are “sold, not bought,” and moving the purchase to a simplified platform and linking it to the retailer offers customers choices they may not be prone to make without a sales pitch.
Private equity investment companies have been attracted to companies seeking to expand into embedded insurance, attracting $3.5 billion since 2015, according to Conning. Gartner, a large research and consulting firm, has positioned embedded insurance at the heart of what it predicts will become the dominant insurance business model.
Growth in online sales since 2020 has increased the opportunities presented by embedded insurance as consumers have become more engaged in all types of online transactions. Financial services companies have grown and expanded tremendously during this time. Consumers have engaged in buying and selling automobiles online and have expanded the OEM relationship.
However, online sales of insurance have not seen similar growth. In 2017, Tesla launched a full-stack insurance business direct to consumers. While this technically is not embedded insurance, it illustrates the benefits of sharing telematics data from vehicles in underwriting the insurance program.
Expectations for embedded insurance are varied. Personal lines insurance with $400 billion in premium and small business with $100 billion in premium continue to be the greatest targets, according to Conning. Simplifying the insurance application, growing premium, lowering expense ratios, and narrowing protection gaps are all opportunities. The realization of these benefits and successes will depend on their being embraced by the carrier-retail partners.
The first in-person international event in the conference series since the 2019 Women in Insurance Global Conference, it will bring together hundreds of insurance professionals, C-suite executives, and experts on leadership and diversity, equity, and inclusion (DEI), along with sustainability, wellness, and business leaders for sessions dedicated to advancing ideas into action and providing actionable take-aways and strategies.
What makes any conference strong is the quality of the content and its speakers. IICF’s planning committee, which changes from year to year, is made up of industry professionals who are closest to the issues of the day, representing all areas of the United States and the United Kingdom in the planning. It’s an industry working together that makes this conference particularly powerful.
This year’s conference will feature emerging topics in leadership, personal and professional growth, the business of insurance, and the future of work.
Leadership topics include:
Personal Finance, with Jean Chatzky — financial editor of the Today Show for 25 years and founder and CEO of HerMoney.com and the coaching programs FinanceFixx and InvestingFixx;
Building the Public Voice of Women, with Emily Donahoe, founder/principal, WOMENSPEAK Training; and
Navigating Intergenerational Differences, with Chris Desantis, author, speaker and podcast host of Cubicle Confidential.
“IICF is thrilled to welcome such an accomplished field of speakers for the eleventh year of what was formerly known as the IICF Women in Insurance Conference Series,” said Elizabeth Myatt, vice president, chief program officer, and executive director of the IICF Northeast Division. “This event serves as a powerful catalyst for our industry as we bring together insurance professionals of all ages and career stages to discuss, learn and propel critical strategies.”
Myatt, who has led the conference since its inception, noted that it’s her favorite part of the job. “It has been wonderful to see the evolution of the conference series,” she said. “It is not just gender-focused — it is all kinds of diversity, leadership, and innovation and it’s the business of the industry itself, which has made it so valuable and meaningful to attendees.”
Myatt recognizes the importance of advancing DEI, which must be embedded in everything in the business, and everyone needs to see the shared value. She said a Congressional report this year spelled out some of the ways where the insurance industry has made an impact.
“There has been progress in gender diversity and for African-Americans, though we have not made as much progress within the Hispanic community as we’d like,” she said. “Through our conferences and the IDEA Council’s development of the IICF Talent Hub – an online resource center for non-traditional job seekers to learn about insurance industry jobs and career opportunities – and the Mentoring Alliance, which will prepare, inspire, and empower diverse talent by pairing them with role models and allies from leading companies across the industry, we are starting to see results.”
The theme for the last four years of the global conference has been advancing ideas into action, Myatt said.
“We want to provide tools, as well as new thinking. We don’t want the ideas that are shared here to stay in the room,” she said. “We plan to arm our audience with ways to make change, whether it’s personal, professional, or cultural.”
By Matthew Scarfone, Esq., Triple-I blog contributor, and shareholder at Colodny Fass
Florida presents property insurers with a unique set of factors that affect the availability and affordability of insurance coverage. The state boasts the third-largest population in America while simultaneously enduring a higher-than-average volume of natural disasters. It’s fair to say that operating a residential insurance company in the Sunshine State isn’t for the faint of heart.
What’s behind the mounting catastrophe in the Florida legal system?
But as damaging as the hurricanes can be, there is a man-made disaster that has contributed significantly to destabilizing the market to concerning levels: legal system abuse. In practice, some people are misusing tools of the justice system to manipulate outcomes and obtain windfalls. Insurance carriers have paid a heavy price in recent years due to the increased abuse of one-way attorney fees, bad faith claims, and other unsustainable litigation trends.
Exploitation of one-way attorney fees and bad faith law has been especially prevalent. Until recently, if a policyholder or third party sued an insurer and obtained any monetary award, they were entitled to recover all attorney fees incurred in the litigation. This practice may have incentivized people to dispute insurance claims, regardless of whether they were justified.
The problem was further exacerbated by the abuse of assignment of benefits (AOB) agreements, which created an opportunity for contractors to inflate costs. As a result, a modest homeowners insurance claim could lead to multiple lawsuits by different assignees, each asserting a separate claim for attorney fees. Manipulating this loophole encouraged excessive claims and unreasonable demands, forcing insurers to choose between paying the inflated bill or risking a lengthy trial where the attorney fees alone could exceed the claim amount. On top of that, courts have had broad discretion to apply fee multipliers and can award 1.5-3 times the reasonable attorney fee.
Cases involving allegations of bad faith further compound an insurer’s exposure because these cases can be costly to defend and involve intrusive discovery, amorphous damages, and unpredictable juries. Bad faith cases are not ripe (i.e., ready to potentially warrant judicial intervention) until there has been a final determination regarding coverage and the damage amount. Therefore, insurers regularly face the prospect of defending a bad faith case even after resolving the underlying dispute.
Florida’s courts did not help matters by ruling that appraisal awards—tools designed to help resolve disputes—could lay the procedural groundwork for bad faith actions. In other words, after resolving a claim through appraisal, insurers could still be left to defend a lawsuit for bad faith. Some attorneys used this caselaw as a playbook to fast-track claims into bad faith litigation by misusing the appraisal process.
The problem looks even worse when you quantify it. According to the Florida Office of Insurance Regulation (OIR), as of 2020, despite Florida only accounting for 9% of all homeowners insurance claims in the country, it accounted for 79% of all homeowner insurance litigation nationwide. Additionally, over the last decade, only 8% of the $51 billion paid out by insurers went to claimants, yet plaintiffs’ attorneys took home 71%. Meanwhile, eleven Florida property insurers fell into liquidation since 2017—five of those occurring last year alone.
Legislators recognized need for urgent action to help curb costs of insurance claims.
The Florida Legislature has responded to the growing crisis by passing multiple pieces of significant insurance reform, primarily tackling the problems with AOBs, bad faith claims, and excessive fees. For example, the new laws eliminate one-way attorney fees in property insurance litigation, forbids using appraisal awards to file a bad faith lawsuit, and prohibits vendors from taking AOBs under new policies. Despite criticism from the plaintiffs’ bar, these reforms are not all “one-sided.” Recently passed legislation also ensures transparency and efficiency in the claims process and encourages a more efficient and less costly alternative to litigation.
While it’s too soon to know exactly how recent reforms will improve the state’s insurance market, there is a sense of hope that these measures will decrease the volume of property insurance litigation and foster a more viable and stable residential insurance market that enables greater consumer access to affordable coverage.
It may take time for these reforms to have a measurable impact on Florida’s property insurance market. Still, insurers and policyholders alike should be optimistic that the market is headed in a more sustainable direction.
By Loretta L. Worters, Vice President, Media Relations, Triple-I
The gender pay gap is a sensitive topic we need to spotlight. We’ve seen it in every industry, from entertainment – when Patricia Arquette called for wage equality in her 2015 Oscars acceptance speech – to Wall Street, when CNBC reported in 2019 that Citibank admitted that its female employees earned 29% less than its male employees globally.
In the United States, the gender pay gap is 18%, which means that on average, in 2022, women made 82 cents for every dollar men earned in any industry, according to a recent Pew Research Center study —a rate that hasn’t significantly changed for two decades. Women of color continue to suffer the most severe gender wage gap in this country. Black women are paid 63 cents for every dollar white men are paid and must work an additional 214 days to catch up to what white men made in 2020 alone. Native women are paid about 60 cents and Hispanic women only 57 cents for every $1 earned by white men. In the insurance industry, women fared worse, earning just 62 cents on the dollar in 2020. As a result, women cannot build savings, withstand economic downturns, and achieve financial stability. This earnings gap widens during a woman’s career.
Older women bear the brunt of ageism
We’re all familiar with the phrases “past their prime,” “put them out to pasture,” and “not enough runway,” but often ageism is gender specific, targeting older women. Data from the Bureau of Labor Statistics shows that American men don’t typically start to make less money until they’re over 65. In contrast, women’s median pay decreases when they enter the 45–54-year age group.
Inequity can drive retirement insecurity
Lower lifetime earnings also reduce the amount of retirement capital women can accumulate from 401ks to defined benefit pension plans to social security. Women’s retirement contributions are, on average, 30% less than those made by men, according to a recent Goldman Sachs survey.
A 2020 report from the National Institute for Retirement Security (NIRS) finds that women can remain at a disadvantage with their retirement savings. Years spent out of the workforce for caregiving responsibilities—for children, spouses, and aging parents—significantly impact women’s total retirement savings and income. In fact, women are more likely to leave the workforce or take part-time jobs to shoulder those responsibilities – something we saw after the coronavirus struck.
Women tend to live longer than men, too, and thus often have a greater chance of exhausting their sources of income. According to the U.S. Centers for Disease Control, the average American man will live to age 76, while the average woman in America will live to be age 81.
Not only are women paid less, but men continue to dominate the top roles and highest-paying professions. Some folks say women need to be more confident and negotiate raises better. However, in 2019, The Wall Street Journal surveyed 2,000 graduates of an elite U.S. business school and found that 64% of the women versus 59% of the men asked for raises and promotions, but women were turned down twice as often.
Diversity brings value
With fewer women in top positions at insurance companies, insurers are missing out on critical sources of talent, according to McKinsey & Company. They referenced Harvard Business Review research which showed that diverse teams are more effective at solving difficult problems and reaching diverse markets and customer segments. Insurance companies need effective and diverse teams at all levels to grow and keep their competitive edge—meaning more women and women of color.
Transparency laws help close the gender pay gap
Wage transparency laws can close the gender pay gap, reduce discrimination, and promote fairer compensation practices. By requiring employers to disclose pay scales, job applicants can have a better sense of what to expect in terms of pay before they apply and negotiate salaries more effectively. This practice may also help women already in those jobs know what factors go into their pay and determine whether it is fair.
Theinsurance industry is making strides toward equity
Insurers are increasingly taking the initiative to transform their commitments into meaningful actions regarding pay equity based on gender, race, and overall diversity and inclusion. These organizations recognize that this is not only the right thing to do, of course. But they also realize that these practices are also good for business.
Triple-I believes that acknowledging and celebrating those organizations working to make a difference is important. Below is a highlight of what some of our member companies are accomplishing in the DEI and pay equity space. We encourage others who have a story to tell to let us know and we’ll include them in this celebration:
Allstate’s performance in workplace diversity meets or exceeds external benchmarks. As of Dec. 31, 2021, women made up approximately 57% of their workforce, and 42% of their employees were racially or ethnically diverse. Minimum compensation increased in 2022 to $17/hour and $20/hour, based on geographic differentials, the second increase in the last two years. Racial equity is a pillar of The Allstate Foundation, and it aims to close the racial opportunity gap for careers with thriving wages. As of January 2023, Allstate proactively added salary ranges to 100% of its job descriptions to be transparent and show its commitment to equitable pay practices.
American Family, recognizing the structural barriers in society that keep people from achieving their dreams, is doing its part to break down these barriers, committed to tackling systemic problems that impede equity and believes everyone deserves the freedom to dream fearlessly. For 2022, American Family received the Best of the Best Awards from the Professional Woman’s Magazine, among other awards. Their diversity and inclusion efforts are grounded in equity — believing fair treatment starts with giving people the proper systems, support, opportunities and access needed to achieve their professional success and advancement.
AmericanAg™ has undertaken several steps to increase both the diversity of their workforce and communication in their business communities, including the use online platforms, media outlets, and search firms to recruit top talent with diverse backgrounds, not tolerating gender gap compensation issues among employees. They have initiated all-employee discussion sessions concerning diversity, equity, and inclusion to bolster communication and education.
Argo Group is committed to cultivating an authentic, inclusive and respectful workplace where all employees feel comfortable bringing their whole selves to work with equal opportunities to be successful. They developed their first year report on the gender pay gap in 2020 among their team in the U.K., but the company has been tracking the pay gap and working on improvements since 2017.
CSAA Insurance Group, a AAA insurer, has been named to Seramount’s sixth annual Inclusion Index, which recognizes leaders in creating an inclusive workplace. Chubb engages in pay equity analysis to ensure equal pay between employees in similar roles. The objective of this practice is to determine whether pay differences are driven by fair and compensable factors, such as location or tenure, and not by unjustifiable factors, such as gender or race. It has been a success at the organization.
Farmers Insurance, ranked as a Best Employer for Women by Forbes, is partnering with Women Back to Work to support the career re-entry of women in tech. Women at Farmers Insurance have rated Team, Executive Team, and Leadership as the organization’s highest-scoring categories. Farmers Insurance ranks on Comparably in the top 5% of other companies with 10,000+ Employees for Gender Score.
Grange Insurance is a proud member of CEO Action for Diversity and Inclusion™, a national initiative of more than 2,000 CEOs and Presidents who are pledging to support a more inclusive workplace for employees, communities, and society. In 2022, Grange was selected as an honoree of Columbus Business First’s Diversity in Business Award in the Outstanding Diversity Organization category. As an example of its commitment to pay equity, Grange conducts an annual gender pay equity analysis.
At Hanover, measuring workforce demographics enables them to track where they stand and the work that needs to be done along their DEI (Diversity, Equity, and Inclusion) journey. This practice also helps them achieve a shared goal of attracting, retaining, and advancing a diverse workforce at all levels. For 2021, 59 % of the workforce was female.
Liberty Mutual was recognized by Forbes as one of America’s best employers for women every year since 2018. Liberty Mutual monitors their market competitiveness, constantly evaluating their pay practices to ensure relative parity among employees and across all business areas. They designed their compensation system to pay competitively for performance across all dimensions of diversity. Their multi-year DEI Plan includes goals to increase representation of women at all levels in the U.S. by 2025, as well as ensure progress over the long term. Delivering on these goals means that more than half of their U.S. workforce will be women.
Lloyd, in its 2021 Gender and Ethnicity Pay Gap Reports, noted its mean gender pay gap is 18.6%, an improvement of 1.8% from 2020. While there is still more to do, this shows a continually improving trend since the 27.7% pay gap in their first report in 2017. Lloyd’s is working to improve pay gaps by providing career development for women; hiring one in three ethnic minorities; and having an EDGE action plan, among other objectives.
MAPFRE continues reducing its gender pay gap. Its Compensation Policy lays out a compensation model that focuses on productivity and added value, contains no gender criteria, and is adapted to the competitive environment.
At MetLife, they are committed to pay equity and annually review their pay practices, including compensation and benefits programs, to ensure they incent the right behaviors and provide equal pay for equal work, regardless of gender or race. Their goal is to support, reward, and compensate the entire individual.
Munich Re sees diversity as the lively and active coexistence and working together of different mindsets, mentalities, experiences, and expertise. Their employees are their most valuable asset, and their diversity is the key to our success as a company. They are increasing the proportion of women in all management positions globally and Group-wide to 40 percent by the end of 2025.
Seramount placed Nationwide Insurance on its Top 75 Companies for Executive Women list, which recognizes corporations that have women in top executive positions and created a culture that identifies, promotes, and nurtures successful women.
In 2022 State Farm was ranked among the Top Companies for Executive Women by Seramount – and has been recognized every year since 2008. They have created the D&I Governance Council with its main objective to integrate diversity and inclusion into day-to-day business practices and how they lead their organization. They have also created learning opportunities such as Ally Skills Workshops for all employees and Inclusive Practices and Talent Decisions for recruiters and leaders. In addition, State Farm has cultivated transparency by sharing demographic data internally and externally.
Swiss Re noted that they have a regularly monitored gender-neutral approach to pay across all levels of the organization. They also conduct an annual statistical analysis of base salaries and total compensation across corporate bands, job families, employee ages, and experience levels to identify gender pay differentials for comparable roles across the organization. The regression-based analysis for 2022 found no statistically significant gender pay differentials across these categories.
USAA, a national insurance and financial services company focused on active military, veterans, and their families, announced its final commitment of $20 million to advance diversity, equity, and inclusion. As part of the company’s three-year, $50 million commitment made in late 2020, the latest grants to nearly 50 nonprofit organizations focus on amplifying the collaborative need to build diverse talent pipelines through education and employment programs.
Utica National boasts a workforce comprised of 60% women – a figure which mirrors the percentage across the entire insurance industry, based on a survey by the U.S. Bureau of Labor Statistics. Looking back at the company’s 107-year history, their very first employee was a woman, and now women make up the majority of their workforce that keeps the company moving and growing. For five consecutive years, Utica was named a Top Insurance Workplace by Insurance Business America magazine.
W.R. Berkley’s Code of Ethics and Business Conduct outlines how they address diversity and inclusion to provide equal opportunities for all Berkley employees. Many of their insurance businesses have diversity and inclusion committees that support these policies.
Westfield Group’sWomen’s Network works to educate, inspire and interact with women and their advocates by building a community focused on appreciating the strengths and contributions of women as leaders in the workplace. By providing advocacy and development that enables women to achieve their career goals, the network helps their organization achieve higher performance and profitability through diverse thought and voice.
Zurich Insurance is committed to gender equality in the workplace and has implemented measures globally to track progress. These initiatives include the Equal Pay for Equivalent Work analysis to make sure gender is not a factor when it comes to remuneration.
The Insurance Industry Charitable Foundation (IICF) developed Advancing Ideas into Action, based on their Inclusion in Insurance Regional Forums held in 2022, furthering conversations started by IICF in 2013 during their first Women in Insurance Global Conference (now the IICF Inclusion in Insurance Global Conference) about advancing ideas around diversity, equity, and inclusion (DEI) and innovation into action.
In its 2013 report, Increasing Gender Diversity in Insurance Leadership: Lessons from Women Who Reached the C-Suite, Spencer Stuart, an American global executive search and leadership consulting firm based in Chicago, Illinois, noted that “increasing diversity requires clear and consistent support from the CEO and senior management, and male leaders generally. Executive leadership sets the tone that diversity is a priority and sets expectations that succession plans and candidate slates will include women.”
Peter Miller, CPCU and president and CEO of The Institutes (of which Triple-I is affiliated), couldn’t agree more. “At the end of the day, all leaders must be deliberate and consistent in their efforts to attract and grow diverse talent,” Miller said, adding that “focusing on leadership-skills-based development is a critical factor in retaining and elevating diverse talent, which in turn helps drive pay equity.”
The Institutes has consistently been recognized as a Top Workplace over the last several years and earned national recognition as a 2023 Top Workplace. Additionally, The Institutes has been recognized for its work-life flexibility and compensation and benefits.
Social inflation contributed to a $30 billion increase in commercial auto liability claims between 2012 and 2021, according to updated research published by the Insurance Information Institute (Triple-I), in partnership with the Casualty Actuarial Society (CAS). Most of the increase for the total review period is attributable to the newly added years 2020 and 2021 to the data set.
Findings from the research paper, Social Inflation and Loss Development–An Update, suggest that while other factors may be in play, social inflation could be responsible for driving losses over the past 10 years up by as much as 18-20%. Results also indicate that social inflation, as a loss driver, may be outpacing inflation in the overall economy by 2 to 3% per year. The actuarial models in the paper assume that exposure in commercial auto liability grows in the long term at the same rate as the overall economy. The updated research supports the conversation that Triple-I and its industry partners have fostered over recent years to increase awareness about the phenomena and encourage solutions. Both social inflation Triple-I/CAS papers were authored by actuaries James Lynch and David Moore.
Tracing the wake of social inflation in commercial auto liability
Analysts in every industry may rely on economic indicators and established quantitative methodologies to adapt to cost increases caused by general inflation in the economy. According to the definition cited as the basis for the paper, the expansive scope of social inflation can pose a more complex challenge for insurers as it can include “all ways in which insurers’ claims costs rise over and above general economic inflation, including shifts in societal preferences over who is best placed to absorb risk.” The impact of some potential factors, such as increasing lawsuit verdicts and extended litigation, can be dynamic and hard to forecast, making effective risk mitigation tactics difficult.
Still, insurers must aim to offset increasing claim costs, and that effort can include finding a way to outline the footprint of social inflation. Thus, rather than attempting to deconstruct the components of social inflation, this update to the 2022 CAS-Triple I collaboration continues to zero in on tracking evidence of it, ascertaining the potential influence on losses over time, and potentially finding clues that may link back to the culprits. Accordingly, the research stays focused on the claim size and reviews the increase in loss development factors over time.
Research raises questions, highlights a new emerging reality
As with many industries, the COVID-19 pandemic challenges longstanding methodologies and conventional forecasting assumptions. Claim frequency, in relation to the overall economy, decreased sharply in 2020 and remained flat in 2021, even though driving appears to have returned to pre-pandemic levels. However, severity appears to have increased significantly.
Enter loss triangles – a conventional actuarial tool that can enable comparison of loss metrics across years and see how losses develop over time. As in last year’s paper, researchers used this tool to examine the loss development patterns of net paid loss and defense and containment costs (DCC). Analysis suggests that whereas the pandemic may have dramatically impeded the ability to file new litigation for a brief period, it may also have created more enduring repercussions by hampering the timely and, thus, more cost-effective settlement of outstanding claims.
Even as social inflation amplifies losses for commercial auto liability, existing methods to pinpoint where general inflation ends and social inflation begins may become less dependable. In addition to covering the pandemic shocks of the shutdown, the newly added data spanned into the economic recovery and was impacted by much of what came with it – demand booms, stressed supply and labor resources, and, of course, the eventual soaring of the Consumer Price Index (CPI) for all urban consumers. In 2021, the CPI increased by a formidable 4.7 percent, the fastest inflation growth rate this century. These and other changes in the economic environment may have dampened the effectiveness of the testing and modeling framework. In any case, calculations for loss emergence revealed that for the first time in a decade, actual emergence was less than expected emergence in 2020 and 2021, reversing observations made in the previous paper about the reliability of conventional actuarial estimates.
The importance of understanding social inflation
It’s important to remember that although insurers are often called upon to help businesses and communities bounce back from natural disasters or other unexpected events, social inflation is arguably a human-made crisis that already looms large in the marketplace. A 2020 study by the American Transportation Research Institute found that, from 2010 to 2018, the size of jury verdict awards grew 33 percent annually, as overall inflation grew by 1.7 percent each year within this same timeframe and healthcare costs increased by 2.9 percent.
As losses grow much faster than premiums, insurers can resort to any combination of methods to contain costs, including limiting the amount of coverage offered, increasing premiums, or discontinuing certain types of coverage. For policyholders that need to mitigate their commercial auto liability exposure, expensive coverage or lack of coverage can threaten the ability to stay competitive or even remain in operation, particularly for those in tight-margin industries.
Unprecedented times call for new ways of collecting and reviewing claims data. The paper relies on new ways of using old-school methods and discusses how the reliability for some metrics could be improved by utilizing other data sources. Apaper by the same researchers included similar observations for the medical malpractice liability sector. Key takeaways from the findings of these papers, along with an emerging body of research on social inflation, can be helpful in exploring actionable strategies, such as curbing lengthy litigation.
Inflation, interest rates, and recession will dominate the U.S. economic narrative in the first quarter of 2023, shifting in the second and third to a focus on timing of recovery and a more neutral monetary policy and, in the fourth, whether and when the Fed will signal the start of a new easing cycle, according to Triple-I Chief Economist and Data Scientist Dr. Michel Léonard.
“We forecast the U.S. economy to grow 3.2 percent in 2023, up from 2.6 percent in 2022,” Léonard says. The U.S. Consumer Price Index (CPI) ended 2023 at 6.5 percent year over year, down from a high of 9.1 percent year over year in June. “Triple-I expects inflation to continue to decline throughout 2023, though not equally from one to the next quarter. The pace and extent of any inflation slowdown are predicated on improvements in global geopolitical risk.”
P&C underlying growth, which has been below overall GDP since the start of the pandemic, is likely to grow at a faster pace than the rest of the U.S. economy throughout the year.
“We remain cautious and forecast insurance underlying growth for 2023 to be around 3 percent, up from 2 percent in 2022,” Léonard says. “We forecast P&C replacement costs to increase by between 4.5 percent and 6.5 percent year-over-year in 2023. P&C replacement costs increased on average 25 percent since the beginning of the COVID-19 pandemic in 2020.”
Even though Triple-I expects economic fundamentals to improve throughout 2023, line-specific underwriting considerations will continue to depress performance, Léonard says.
Triple-I members can access the Triple-I’s Economic Dashboard, available at the organization’s members-only website. The Dashboard’s ongoing updates allow insurance industry professionals to follow key economic reports (e.g., federal governmental updates on interest rate, unemployment, and housing trends) in real time, adjust forecasts, and recalibrate strategy. Each quarter, the Triple-I’s Outlook provides a road map about which key economic reports will most impact insurance industry performance.
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