It may be a stretch to say the property and casualty insurance industry is in crisis, but there is burgeoning evidence and concerns that all is not right with the business and that it’s going to get worse before it gets better.
Consider a few facts:
- Underwriting losses fueled by rising claims costs and catastrophic events have resulted in an industry-wide combined ratio of 103%, an unsustainable level.
- Motor vehicle insurance premiums skyrocketed by 20.3% in December from a year earlier, the largest increase since the mid-1970s, government data show. The highest annual increase for auto insurance in nearly half a century made a notable upward contribution to the national inflation rate that may not be fading soon.
- Global insured losses from natural disasters hit a record $125 billion, and experts expect when all is counted, 2023 will set a new record for the number of billion-dollar events. Last year was also the deadliest since 2010, with more than 75,000 fatalities counted globally.
- With commercial rate hikes averaging 15% since 2019 and US personal lines rising 4.5% over that period, insurance is becoming increasingly unaffordable for many.
Rising auto repair and construction costs, inflation, supply chain disruptions, and, let’s face it, poor management, have ganged up on P&C insurers producing the most widespread losses in history.
"We are in a hard insurance market,” said Todd Greenbaum, president and CEO at Input1, an insurance company digital billing and payment service based in California. “This means that capacity is diminished, resulting in fewer options for coverage and higher prices. Insurance carriers have been required to increase prices to build greater reserves after the large losses in recent years."
With homes still in short supply and automobile supply chains still recovering, the cost of finished products and materials are higher than normal, said Greenbaum, who predicts at some point these factors will normalize and prices will ease.
"With that said, despite advances in IoT devices, drone coverage, and large datasets that improve risk modeling, the price for insuring homes and drivers is still too generalized,” he said. “Individual young drivers continue to be penalized with high rates even if they exhibit the same behaviors as more experienced drivers. Homes made of less flammable material or where other important mitigation steps are taken, are not being properly priced for those precautions."
Finally, he said, inflated claims remain a problem.
“Technology continues to play a critical role in risk evaluation and claims monitoring, but it hasn't yet led to a broad and meaningful benefit for policyholders,” said Greenbaum. “Hopefully, it soon will."
This article originally published on InsuranceNewsNet on January 18, 2024. Check out the full article on their page!
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