Latest Studies

This Swiss Re Institute report concludes that the catastrophe loss experience of 2017 and 2018 is a wake-up call for the insurance industry, highlighting a trend of growing devastation wreaked by “secondary” perils. Secondary perils accounted for more than 60 percent of the $76 billion insured catastrophe losses for 2018. Independent secondary perils are more frequent than primary peril events like earthquakes and hurricanes, they include events such as river floods and winter storms. Another type of secondary peril is an event resulting from a primary peril such as a tsunami or fire that follows an earthquake or a hurricane induced storm surge. Independent secondary perils are often not modelled and get less monitoring from the industry. Losses from secondary perils are rising due to urbanization, rising concentration of assets in areas exposed to extreme weather conditions, and climate change.  For 2018 Swiss Re recorded total man-made and natural catastrophe economic losses of $165 billion, which resulted in insured losses of $85 billion, $76 billion of which were due to natural catastrophes and $9 billion to man-made loss events. In 2017 total economic losses from natural catastrophes and man-made disasters were $350 billion in 2017 with insurance covering $85 billion of the losses.  Full report

Aon's interactive maps and accompanying report analyze political risk, terrorism and political violence around the world. The report opens with a discussion of populism in Europe, which has become disruptive to the economic system. Political risks associated with the trade war between the U.S. and China, and political risks elsewhere that could affect the oil and gas industry are also examined. Terrorism has witnessed a shift in ideologies, with the new risk posed by returning Islamic State fighters matched in terms of cause and effect by the emerging threat of far-right extremism in North America and Europe. The maps were developed in partnership with Continuum Economics and the Risk Advisory Group. Full report

Increases in reconstruction costs in certain disaster-prone areas of the United States range from 5.6 percent to 7.6 percent from 2016 to 2018. In this report CoreLogic examines potential underinsurance issues in four regional scenarios with exposure to natural hazards: The Northeast Atlantic and Gulf Coast regions with hurricane-related storm surge risk; California with wildfire risk; and Oklahoma with tornado risk. California and Florida are estimated to have a 5.6 percent reconstruction cost increase in the time span covered, and Houston, Texas had a construction cost increase of 7.6 percent during that time. CoreLogic says these findings highlight the need for insurers to ensure customers have an adequate amount of coverage based on updated reconstruction cost values which also includes labor variation by market. The report also analyzes the impact of underinsurance on the lending industry through an increase in loan delinquencies following natural hazards. Full report

Automation is being more widely used by auto insurance companies to improve efficiency, lower costs and enhance their ability to compete by providing better customer service. The “2019 Future of Claims” study focused on the extent to which carriers would adopt additional automated claims-handling processes, and the progress being made toward the goal of a touchless claim. The study also looks at the automation continuum and explores consumer perspective to determine whether the steps being taken by carriers align with customer needs. The research shows that 95 percent of carriers are using or considering virtual claims processes as touchless claims become more popular. Of the carriers surveyed, 79 percent say they are considering moving toward touchless claims. Consumers with a claim history say that their satisfaction declines rapidly when they talk to more than one person, and 20 percent of consumers presently prefer self-service options for claims. Auto insurers using claims automation say that the approach reduces cycle times, improves employee productivity, lowers loss adjustment. The study includes multiple exhibits. Full report

This report suggests that insurers will find their next competitive advantages in capitalizing on personalized policies and services that reach customers during important life moments in real time. Artificial intelligence and other technologies will be a key component of insurers expanding their knowledge of and interactions with every customer. With the ability to target a customer’s specific needs, insurers can analyze that customer’s  “digital demographics“ — based on data provided from a wealth of connected and social devices — to provide hyper-personalized and on-demand services. Examples include telematics-based auto insurance that rewards safe driving, and parametric travel policies that instantly pay when a flight is delayed for more than two hours. The report examines several technology trends and presents survey results showing how insurance executives think these trends will impact their companies. Full report

The evolution of AI is expected to transform the insurance industry from its current detect and repair approach to a predict and prevent mode — a change that will affect every aspect of the industry. The article discusses four AI-related trends that are now shaping insurance: the explosion of data from connected devices, increased prevalence of physical robotics, open source and data ecosystems and advances in cognitive technologies. Insurers can prepare for these accelerating changes by getting smart on AI-related technologies and trends, developing and implementing coherent strategic plans, creating and executing a comprehensive data strategy and creating the right talent and technology infrastructure. Full report

This study by the Insurance Institute for Highway Safety (IIHS) found that a 5 mph increase in the maximum state speed limit was associated with an 8.5 percent increase in fatality rates on interstates/freeways and a 2.8 percent increase on other roads. In total during the 25-year study period, there were an estimated 36,760 more traffic fatalities than would have been expected if maximum speed limits had not increased—13,638 on interstates/freeways and 23,122 on other roads. The study concludes that officials managing the roadway system must carefully consider the potential lives lost before deciding to increase speed limits. Full report

An analysis by TrueMotion, a firm that collects and analyzes phone data for insurance companies, found Georgia drivers spent less them texting and using apps behind the wheel after the state’s distracted driving law went into effect in July 2018. The law prohibits motorists from handling phones or other electronic devices while driving. TrueMotion analyzed the behavior of more than 21,000 Georgia drivers for three months before and four months after the law took effect. It found that in the three months leading up to the law’s effective date, drivers were texting and using apps 19.5 percent of their time behind the wheel. Overall, distracted driving fell to 15.4 percent of total driving time, or a 21 percent decrease. The article includes links to details of the Georgia law and more details about TrueMotion's analysis. Full text

This National Council on Compensation Insurance (NCCI) report shows that claim frequency in workers compensation has been falling almost every year for more than two decades and by nearly one‐third just in the last 10 years. The declines have coincided with significant changes in the U.S. labor force. Most notably, the number of workers who are at least 55 years old has doubled since 2000. Women now make up 47 percent of the labor force, and the share of service sector employment is near record highs. NCCI investigated the relationship between changing workforce demographics and workers compensation frequency and found that in aggregate, frequency decline is mainly the result of lower incidence rates for all workers, not the result of changing workforce demographics. Frequency has dropped at an annualized rate of 1 percent - 4 percent for workers in each category by age, gender, or sector. Demographics affect frequency, but year‐to‐year demographic changes in the workforce are too small to explain overall decline. The aging workforce has had almost no net effect on frequency decline and the increased proportions of female and service sector workers push of frequency downward.  Full report

This white paper from the Insurance Industry Charitable Foundation (IICF) explores the issue of insurance industry talent acquisition from the perspective of the job seeker. The paper was developed by MarshBerry and based upon IICF discussions with industry millennial professionals at the November 2018 IICF Millennial Ideas Summit in New York. Full report

This analysis of 2018 global M&A (mergers and acquisitions) from Conning in the insurance distribution and services marketplace focuses solely on distribution and services. A separate Conning Strategic Study covers the global M&A activity among insurance underwriters. Globally in 2018 the number of distribution-related transactions set a record. Those totals eclipsed 2017 in terms of deal counts and were well above the five-year averages since 1996. Deal count has been climbing steadily over the past 20 years with remarkable consistency. Valuations have trended to and remained near historical highs and are expected to remain near these levels because demand remains robust and competition is strong for high-quality targets. Conning believes 2019 will continue to see an elevated level of transactions coming from the 10 most active consolidators, which have made 1,222 (known) acquisitions in the past five years (an average of 244 transactions per year). Capital resources directed at insurance distribution are particularly abundant in the private equity sector. The article details the numerous market drivers. The report is available for purchase from Conning by calling (888) 707-1177 or by visiting  www.conningresearch.com.

Michigan ranks as the third-least-affordable state in the country for auto insurance, according to this study from the Insurance Research Council (IRC). Michigan’s affordability index was 2.21 percent from 2013 through 2016, compared with 1.58 percent countrywide. The affordability index is the ratio of average expenditures on auto insurance to median household income, and only Louisiana and Florida experienced higher relative insurance costs than Michigan. Key drivers of the state’s high auto insurance costs include the high cost of personal injury protection (PIP) claims, the rapidly increasing frequency of bodily injury (BI) liability claims, and the increasing litigiousness of the system. The high cost of PIP claims can be traced to the state’s unlimited medical benefits for auto-related injuries, high utilization of expensive medical services (including CT scans, emergency room doctors, and diagnostic radiologists), and the absence of a medical fee schedule to help control the prices paid for medical services—in 2017, the average cost of a PIP claim in Michigan was more than six times the national average and was increasing nearly twice as fast. “The affordability of auto insurance continues to pose a major problem for Michigan households,” said Elizabeth Sprinkel, CPCU, senior vice president of the IRC. “PIP claim costs are continuing to increase at an alarming rate. An understanding of all the cost drivers in the state’s unique environment will be needed to address the affordability of auto insurance for Michigan’s consumers.” To obtain the full report contact David Corum, CPCU, 484-831-9046 Corum@TheInstitutes.org.