‘Growing appetite’ to tackle insurance fraud, but challenges are evolving
Why insurance organizations should “think global, not local” There is a growing appetite among insurers to tackle claims fraud more comprehensively. At the same time, fraudsters are ramping up their strategies and targeting markets beyond the US and UK, posing huge risks to insurers operating globally. That’s according to Steve Crystal (pictured), head of claims fraud and investigation services, international at Sedgwick, who spoke to insurance leaders and anti-fraud professionals at last week’s Insurance Innovators Fraud & Claims summit in London. “The rest of the world has noticeably been waking up to the risk posed by insurance fraud over the last five years,” Crystal said. “There is definitely a growing appetite to tackle insurance fraud, not just by those insurers that operate internationally, but also by those insurers who operate only in the local markets.” Claims fraud evolving as criminals find new targets According to the Coalition Against Insurance Fraud (CAIF), insurers make around $308 billion in fraud claims payments annually in the US alone, making the country one of the biggest markets for fraudsters. But Crystal noted that other fraud hotspots are emerging worldwide, such as South Africa and France. Additionally, organized crime groups are targeting product lines beyond auto insurance. The emergence of embedded insurance has also given fraudsters a new avenue to target insurers. Finally, Crystal named the rise of generative artificial intelligence (AI) as a potent threat. A notable case of claims fraud last year, for instance, stemmed from convincing fake boarding passes from a series of organized lost luggage claims between the US and the Dominican Republic costing around £1,500 ($1,900) each. AI tools have made fraud easier and more accessible than ever, necessitating collective action from the industry, Crystal warned. “I have seen some really good fake documents, photos and videos all around the world, incredible hologram foil strips on documents in real life,” said Crystal. “But there is an opportunity to fight back against these challenges through global education, cooperation and disruption.” “Think global, act local” – a strategy for tackling insurance fraud Addressing insurance industry stakeholders, Crystal shared his strategy for helping new markets tackle fraud as insurers seek to protect their reputations, retain genuine customers, and plug revenue leaks. “It’s advisable to be flexible [and] deliver a strategy that fits globally,” said Crystal. He recommended a process centered on detection (spotting potentially fraudulent insurance claims from portfolios) and containment (triaging and investigating suspicious claims). Insurance organizations must be accountable at all steps. Finally, Crystal stressed the importance of a “top-down culture” when it comes to eliminating claims fraud. “It’s got to be lived and breathed from the very top. Let’s do the right thing,” he said. “Do provide colleagues who are new to this area with in-country support when it’s relevant to do so, especially around coaching. “And in the market, build partnerships, make affiliations, and develop intelligence and explore technology.” Crystal underscored the importance of collaboration and information-sharing in the war against fraud, advocating for a united front against organized crime networks. He also highlighted the role of technology in enhancing fraud detection and prevention efforts, urging insurers to leverage innovative solutions to stay ahead of fraudsters. “There were different challenges [affecting anti-fraud efforts], including legislation, regulation, data protection, market approach, policy wordings, culture, and language,” Crystal said. “But my experience is that today, despite these challenges, there is a common denominator. Whatever your language, claims fraud is seen internationally as bad news, and I think that’s good news for our industry. What are your thoughts on the claims fraud landscape? Feel free to share your comments below.
Female leadership in insurance – practical next steps
In this series, I have been examining the state of female leadership in insurance from a qualitative and quantitative perspective. While the research paints a compelling picture of progress in some areas, female leaders within insurance have also highlighted the change that still needs to take place in the industry. In this final article in the series, we look to the future, and hear from female leaders about how to move the industry forward. What are insurance companies doing? Many of the women we interviewed agreed that insurance needs to focus on creating a level playing field for women to advance into leadership positions. From the conversation, it is clear that such initiatives are already underway in the industry. Nuria Fernández, General Manager at AXA Madrid International Hub, mentions “We have seen that most large insurance companies have already established a foundation with regards to equality and diversity, and put in place various initiatives to promote the advancement of women at various levels of the organization, especially in executive positions. We see more and more insurance industry leaders present at women’s forums and actively sharing their initiatives on social media, and it’s great to see it becoming increasingly relevant to employers and employees.” Marga Gabarró Olivet, CFO and COO at Zurich Spain also points out “(the) insurance industry has been advancing in gender equality and I think the basis for a playing field exists. However, speed of change to close the existing gaps needs to be accelerated. This needs external commitments, moving from awareness into action. In Spain, Zurich is one of the founders of REDEWI, which is a sectorial initiative comprising 70% of the insurance companies in the country together with part of the intermediaries and official organizations such as the insurance association Unespa and the Consorcio. REDEWI has set as an objective that 40% of the executive positions in 2023 should be occupied by women. This network has put into place different working groups among insurers to provide programs around training, development, work-life balance and visibility.” María José Álvarez. Innovation, Marketing and Development Director at Grupo Catalana Occidente adds, “we are firmly committed to effective equality of opportunity. As an insurance group, we believe that diversity, equality, and inclusion are not only fundamental rights, but are also competitive advantages for our businesses and a priority strategy in people management and the generation of an inclusive culture that promotes a balance between professional and personal life in all areas”. Allison Cone, Accenture Senior Manager, Marketing, Insurance South (NA), agrees: “I think while I’ve seen leadership make positive changes with new appointments, it not near the threshold we might hope at this point.” So it is clear that more can be done to accelerate change in insurance. How can insurance companies nurture female employees in the workforce and create a path to leadership? Fuelling the pipeline with female talent First, we need to start from a pipeline rich with female talent. Female leaders agree there are many reasons to promote a career in insurance amongst women. Marga Gabarró Olivet of Zurich emphasises the diverse career paths available in the industry at this moment in time for women at all levels of their careers, “The insurance sector is going through a great transformation journey, which offers hugely interesting opportunities to grow professionally and to work in a community of highly talented people with diverse personal and academic backgrounds.” Carrie Lonze, Managing Director in Accenture’s P&C Insurance Consulting Practice says, “Insurance is one of those industries that has an aspect of everything. If you want to do underwriting, risk, or actuary, there are many opportunities. If you’re a relationship person, there is another path within the industry you can choose. With customer expectations at heights we’ve never seen before, there is a place for people who want to exercise their creative brain and offer holistic, personalised protection.” “So many dynamics make the Insurance Industry a challenging, fun and exciting place to be – if you love analytical problem solving, you have countless options, or if you’re more of a relationship person there are key career opportunities as well – and what’s probably the most exciting part is solving for the evolving nature of risk; figuring out how to price & UW risks that didn’t even exist a year ago. With customer expectations and technology changes at heights we’ve never seen before, Insurance is a great place for people who want to exercise their creative brain and offer holistic, personalised protection,” she adds. Nuria Fernández, General Manager at AXA Madrid International Hub, agrees: “There is so much room for women advancement in insurance as there are so many different jobs where women can drive their potential. The industry is evolving and offers great opportunities for younger professionals and new fields such as data scientists, marketers, digital, etc., and there is even an opportunity for cross-functional growth. “ María José Álvarez of Grupo Catalana Occidente also highlights competitive salaries and flexibility as the two factors that make insurance an interesting industry for women to make a career in: “Working in the insurance industry is highly attractive for several reasons. In the Spanish case, insurance companies provide employment of the highest quality, reflected in contract stability, remuneration, conciliation measures, training plans, social benefits and the commitment to equality and diversity. Moreover, 84% of workers in the insurance industry have a flexible working day, and 97% of them have received a training plan during the year. These are data that demonstrate the commitment of the industry to the promotion of initiatives that result in the greater well-being and satisfaction of its workers.” Ultimately, women are needed at the workforce at all levels. Katrien Buys, Director of Strategy, Innovation & Sustainability at Grupo Ageas Portugal Lisboa explains why, “The insurance industry offers many rewarding career opportunities, for all interests and skill levels. Ultimately, an insurance company should reflect the customers it serves, and women are needed in the workforce.” Forging the path to leadership for women The next step is for companies to foster an environment of inclusive opportunities, where women are able to progress their careers at the
Business interruption risks continue in 2024
According to Allianz, businesses are most likely to develop alternative suppliers when working to de-risk supply chains. Business interruption (BI) ranks second in the Allianz Risk Barometer 2024, an annual survey that asks more than 3,000 risk management experts around the world to identify their top business challenges for the year ahead, behind the closely linked peril of cyber. It ranks among the top three risks for companies of all different sizes surveyed, and is the second biggest concern in the Americas, Europe, Asia Pacific, and Africa and Middle East regions. With almost all companies reliant on supply chains for critical products and services, it is little surprise that business interruption and supply chain disruption remain at the forefront of risk. It is the extent of the disruption that becomes the focus point. Some sectors of industry operate with supply chains that have extensive geographic footprints. The prominence of BI also reflects the volatile environment that companies currently operate in. Despite efforts to improve resilience, the need for efficiency means many companies still run with low levels of stock and just-in-time manufacturing, which results in little margin for errors or disruption. More resilient supply chains? COVID-19 and the resulting disruption to supply chains were a wake-up call for companies. Compared with pre-pandemic times, many companies are now much better prepared for business interruption or supply chain events. Before COVID-19, companies were generally reactive to events, but now they are much more aware of critical threats and the need to diversify and protect critical points. Awareness of business interruption and supply chain vulnerabilities makes a business better prepared and able to react in a smarter and more informed manner. According to the Allianz Risk Barometer results, businesses are most likely to develop alternative suppliers (60% of responses) when taking action to de-risk supply chains, followed by improving business continuity management (42%) and identifying and remediating supply chain bottlenecks (37%). However, smaller companies and those in specialist and high-value industries are more limited in what they can do to diversify their supply chains. Businesses may still have a number of options to mitigate their exposure. This may include changing the business model. If this is not viable, there may be options to reconfigure the supply chain — some sectors are heavily concentrated on a small number of suppliers. For others, the cost of increasing redundancy or relocating suppliers is just too great. Causes of most concern Cyber incidents and natural catastrophes are the top two causes of BI feared most by companies, followed by fire, and machinery/equipment breakdown or failure. However, almost any peril can cause disruption. BI is closely related to many of the other top global risks in this year’s Allianz Risk Barometer, such as climate change, political risks and violence, skills shortages, energy crisis and the impact of new technologies to name but a few. The global risk landscape is constantly changing, with climate change, digitalization, and geopolitics. Some risks lie dormant, but a significant enough change in geopolitics or events such as extreme weather patterns can very quickly change the predominant risks. The recent disruption in the Red Sea — a vital trade route between Europe and Asia – due to Houthi rebel attacks on vessels is the latest risk to hit supply chains. More than 400 container ships were diverted via the Cape of Good Hope around the southern tip of Africa between mid-December 2023 and the beginning of January 2024, prolonging journeys and causing delays to the delivery of products. That said, natural disasters and fire and explosion are notable for their potential to generate large BI losses and supply chain disruption. Severe flooding in Slovenia in August gave rise to one of the biggest supply chain events of 2023, causing production delays and parts shortages for European car manufacturers. Emerging supply chain risks Companies also named BI as their top business concern about climate change impacts in this year’s survey. However, BI related to climate change goes further than just physical damage from storms and floods. Extreme weather or climate events can have a widespread impact, causing economic hardship and political and social upheaval, as well as disrupting logistics and production. For example, a severe drought restricted transits through the Panama shipping canal in the last months of 2023, causing congestion and delays of up to two weeks. Climate change is also having an indirect effect, as decarbonization creates new supply chains. Emerging supply chains linked to the energy transition have already been identified as geographically concentrated as they depend on elements that can only be found in a select number of regions in the world. Countries are looking to secure critical supplies of technology and rare earth elements required to power transition technology like electric cars and enable renewable energy sources like solar panels. Geopolitical risks are of growing concern for businesses in emerging energy and technology supply chains, as well as high-value sectors like technology and artificial intelligence. Producers of rare earth elements are often found in the most underdeveloped and politically volatile areas. Mitigation — keep up to date In a fast-changing world, companies need to maintain regular audits of systems and to test their business continuity plans. There are always organizational changes in companies, and people move. There needs to be systems in place to manage change. If a company hasn’t implemented business continuity management (BCM), then they should carry out a business impact analysis and risk assessment. For those that have already embedded BCM into the business, it is vital they regularly check, update and test these plans, otherwise they won’t be able to react when the crisis starts. Based in the U.K., Marianna Grammatika is regional head of Allianz Risk Consulting for London and Nordics.
Will the P&C insurance market stabilize in 2024?
This year, homeowners in catastrophe-prone areas can expect rate increases of as much as 25%, Alera Group reports. Though unfavorable conditions for buyers in the P&C insurance market come to be expected, 2024 has shown signs of positive changes to come. New capacity is coming into the marketplace, and price increases will continue at a moderate rate. Reinsurers also have a fuller understanding of their willingness and commitment toward underwriting business. Some lines of business, however, are still challenging. Recent losses and unprofitable trends in personal insurance lines such as home and auto have significantly impacted pricing and availability in areas prone to catastrophes and in states where current regulations hinder proper rate adequacy. According to Alera Group’s 2024 Property and Casualty Market Outlook, homeowners in catastrophe-prone areas can expect rate increases of as much as 25%. To help insurance companies and professionals navigate the P&C market in 2024, Alera Group provided some key findings in its P&C Market Outlook, including current trends within the P&C insurance market and the drivers behind the current state of the industry. Rate increase, capacity improvement variations Alera Group’s recent P&C Market Outlook shows that prices will continue to go up in 2024, with most lines of business likely to experience a 1%-10% increase. Commercial auto and Commercial property, however, are going to witness more challenging increases, with a 10%-15% projected price increase, due to loss severity and frequency, higher repair costs and extreme weather events. It’s also worth noting that public and private directors and officers liability (D&O) and workers’ compensation will witness a 1%-10% price decrease as rates cover loss costs and markets are stabilized. Capacity is expected to improve in some lines, such as D&O, environmental liability, surety bonds and workers’ compensation. Other lines such as commercial auto, commercial property, environmental liability, medical malpractice and personal lines/private risk will witness capacity decrease in 2024. As a result, underwriters will continue to be selective and have more rigorous underwriting standards for commercial auto, medical malpractice and umbrella/excess liability. Factors influencing the P&C market in 2024 Among the most difficult challenges leaders face are understanding the current market and using that knowledge to prepare for what lies ahead. Insurance professionals need to comprehend and analyze the various factors influencing the current P&C market to better increase their level of control, fully explore options and find solutions that support their continued success. Professionals need to keep a close eye on the following factors… Inflation According to data released by the Labor Department in January, the overall cost of living in December increased by 3.4% from the previous year, which is slightly higher than the increase rate of 3.1% in November. The cost of auto insurance also went up by 1.5% in December compared to the previous month, with an overall increase of 20.3% from the previous year. Skyrocketing inflation has driven up costs on multiple fronts, including building materials, replacement parts, labor, medical expenses, attorney fees and settlement amounts. As a consequence, reinsurance costs rise during periods of high inflation, which leads to insurers introducing higher premiums for policyholders. Extreme weather events The National Centers for Environmental Information states that the United States has experienced 376 weather/climate disasters since 1980, and there were 28 confirmed disasters in 2023 alone. The total cost of these 376 events exceeds $2.655 trillion. These extreme weather events have significantly impacted the insurance industry and consumers. Several property insurers in the U.S., including Allstate, American Family, Erie Insurance Group and Berkshire Hathaway, have informed regulators that they have stopped providing coverage in certain regions, excluded protection from various weather events, and increased monthly premiums and deductibles as a result of the rising costs needed to cover these events effectively. With more expected extreme weather events fueled by climate change, there’s no doubt that property and businesses with historical losses or locations in catastrophe-prone regions should anticipate higher rate increases, capacity decreases and stricter underwriting scrutiny. Profitability needs Insurers have been able to strengthen their profitability due to rate increases, better underwriting practices and higher investment returns. Despite this, the P&C industry is still not earning enough to cover its cost of capital. Economists predict that, in most markets, the industry will not be able to generate sufficient returns to cover its cost of capital in 2024 or 2025 due to the rising expense of litigation and economic inflation, which leads to higher claims costs. Navigating the P&C Market in 2024 Conditions throughout 2024 will likely be similar to 2023, despite the increased stability and easing of rates and availability. As mentioned, the market will remain challenging for several lines of business. Companies and professionals need to take a proactive approach to assess risks and take control of their insurance. Insurance companies value businesses that understand risks and have effective strategies to minimize them. Managing risk well leads to more favorable pricing, terms and conditions. Given the current market conditions, it’s important for your broker to provide you with fully informed opinions and recommendations. Rather than solely relying on your broker, however, you need to take an active role in marketing your business to underwriters, in telling a convincing story that highlights the strengths of your organization, your plans for the future, the quality of your management team and your efforts to manage risks. Mark Englert is executive vice president and national property and casualty leader at Alera Group.
U.S. pharmacies crippled by cyberattack at UnitedHealth’s Change Healthcare
Pharmacies are still grappling with difficulties providing prescriptions Friday following a cyberattack against one of the nation’s largest health-care technology companies that began on Wednesday. Pharmacies nationwide reported delays in filling prescriptions following a Wednesday cyberattack against Change Healthcare, a technology company that handles orders and patient payments. “Change Healthcare is experiencing a network interruption related to a cybersecurity issue and our experts are working to address the matter,” the company said in a statement. “Once we became aware of the outside threat, in the interest of protecting our partners and patients, we took immediate action to disconnect our systems to prevent further impact. We will provide updates as more information becomes available.” Pharmacies across the country have issued notices that the cyberattack is disrupting their ability to process patients’ orders. Scheurer Family Pharmacy in Michigan notified customers in a Facebook post. “Due to a nationwide outage from the largest prescription processor in North America, we are currently unable to process prescriptions at any of our four locations of Scheurer Family Pharmacy,” the post said. “We are being told that this is temporary but have not been given a time for restored services.” The pharmacy clarified to concerned patients that it still was able to accept prescriptions but could not process them through the patients’ insurance. A later update stated that its systems were “back up and running.” Change Healthcare is one of the largest health-care technology companies in the United States. According to its website, the company handles 15 billion health-care transactions annually, and one-third of U.S. patient records are “touched by our clinical connectivity solutions.” In 2022, health insurance giant UnitedHealth Group completed its merger of U.S. health-care services companies Optum and Change Healthcare in a $7.8 billion deal. The transaction provided Optum broad access to patient records on tens of millions of Americans. Optum provides technology and data to insurance companies and health-care services and supplies technology services for more than 67,000 pharmacies and care to 129 million individual customers. Mickey Bresman, CEO of the security company Semperis, said the cyberattack was another reminder of the potential threats to the nation’s health-care infrastructure. “Now with reports surfacing that Change Healthcare has experienced an outage due to a likely ransomware attack and pharmacies across the country are experiencing delays in processing prescriptions, we’re reminded of the challenges health-care providers face daily to ensure business continuity and patient care,” he said. The American Hospital Association urged healthcare facilities Wednesday to disconnect from Optum and to check their systems for security vulnerabilities: “We recommend that all health care organizations that were disrupted or are potentially exposed by this incident consider disconnection from Optum until it is independently deemed safe to reconnect to Optum.”
Why commercial insureds should direct Master Service Agreements
Taking time to secure high-quality vendors via an insured-directed MSA fosters better disaster-recovery outcomes. Over the years, I have been surprised by how many companies will direct and negotiate vendor contracts but take a more passive role when it comes to disaster recovery services. Companies sign recovery-contractor agreements on either a per-job basis or with a Master Service Agreement (MSA). It makes little sense that a building owner would not direct these contracts themselves. There are many reasons for an insured to do this, which I will demonstrate below. Drafting your own agreement Contract language tends to benefit the originator in everything from payment terms and penalties to venue, applicable laws, qualifications, insurance types and insurance amounts. For this reasons, owners should be the ones directing MSAs. For any company currently in the habit of signing the contractor’s agreement, now is a good time to draft your own. Start with a thorough review of the contractor’s rate sheet and terms. Review before your next emergency need and not when you urgently require the services of these vendors. In plainer words, do it now. Get expert advice as you do this. Seek assistance from your adjuster, insurance broker and project management company who are all familiar with and/or have experience with these rate sheets and contracts. There may be some rates or terms that are not suitable. Language can be added to an MSA that supersedes contractor rate-sheet language with more acceptable terminology. If there are terms you don’t agree with and the vendor will not change, find another vendor. Any contractor who has trouble with an owner directed MSA, comparing rates and requiring more openness and transparency, should be questioned. Make your life easier as there are plenty of contractors willing to work with you. Managing terms, rates As you do this, ensure fairness to the contractor and do not ask for unreasonable terms. It is good to remember that disaster-recovery contractors are prepared, trained and staffed to provide you with services for a job that they can never fully anticipate. They should be ready to respond and perform. But they’re not banks. Keep that in mind as you draft an agreement. You want to do all you can to mitigate difficult invoice and payment negotiations that often take place at the end of a project by preparing before you need those services. It starts with a clean MSA. Here are some key items to examine when reviewing rate sheets: More things to review Any or all of the above-mentioned recovery professionals can help you with this. Long-term relationships with good vendors will be improved as more clarity is added to what is expected of them. This will also improve interactions with your adjuster team when it comes time to settle the claim. For the non-insurance projects employing the same contractors, this will help protect you and deliver more performance consistency. Good vendors will welcome your direction and should not have a problem with greater transparency in the process. Preparing for and taking the time to have quality vendors working under your terms will go a long way in achieving better outcomes in your disaster-recovery projects in terms of cost, time and peace-of-mind. Do it now.
Commercial insurance market update 2024
Explore an interactive regional-risk graphic or listen to a brief podcast as part of this deeper dive into market conditions. The commercial insurance market began to harden around 2019, after years of gradual shifts that lead to higher premiums and reduced capacity. The overall hard market is expected to remain for the better part of 2024. Prior to the current conditions, the commercial insurance sector long enjoyed smooth sailing, with stable premiums and expanded coverage that continued for decades, according to the 2024 Commercial Insurance Outlook from Hylant. With the exception of a period after the September 11, 2001 terrorist attack on the World Trade Center — during which the market hardened for a short time — the last sustained hard market occurred in the 1980s. Those in the commercial insurance space have now been up against a hard market for the last half-decade, which led many insurers to change course; whether that meant fewer renewals, increased premiums or terminating certain coverage products altogether. But some insurance-industry watchers are optimistic. “There are opportunities in the current market to continue to grow and prosper,” David Zona, senior vice president of commercial insurance, LexisNexis Risk Solutions, told PropertyCasualty360. “Economic conditions and business formation remain strong, and the agents and brokers who can serve both existing clients and effectively underwrite and assist those that are forming new businesses are poised for success.” AM Best currently predicts a stable outlook for U.S. commercial lines in the year ahead. In a recent update, which you can view in its entirety here, Alan Murray, associate director for AM Best, explained: “There are several key considerations underlying AM Best’s maintenance of a stable outlook for the U.S. P&C commercial lines segment. First and foremost, underwriting performance across commercial and specialty lines, both during and after the pandemic, and amidst the substantial economic and capital markets volatility of the past year has been persistently strong. Furthermore, admitted carriers in aggregate remain disciplined about risk selection, terms and conditions, and capacity deployment. As evidenced by the continuation of strong submission flow and growth in the non-admitted, or excess and surplus lines marketplace.” “And importantly, from the investment perspective,” Murray continued, “strictly higher fixed income reinvestment rates have begun to significantly bolster operating profitability in virtually all lines, especially long-tailed casualty lines of business.” When it comes to pricing and reserving, Murray explained that momentum remains positive, with the exception of workers’ compensation and certain management liability lines. What are commercial clients’ concerns? Many of the issues influencing the commercial insurance sector are also top concerns among the global business community at large. According to Allianz’s 2024 Risk Barometer, cyber incidents are the top business risk concern, followed by business interruption, natural catastrophes, macroeconomic developments, fire and explosion, climate change, political risks and violence, market developments and the shortage of a skilled workforce. The infographic below breaks down the top concerns for business owners worldwide, according to Allianz.
NY Dept. of Financial Services proposes AI guidance for insurers
In a proposed circular letter, the DFS recommended actions for insurers to prevent discrimination when using AI and ECDIS. The State of New York’s Superintendent of Financial Services, Adrienne A. Harris, issued a proposed circular letter for public comment on January 17 that aims to address and prevent discrimination when it comes to the use of AI and customer data by insurers. The letter — available in full on the Department of Financial Services’ website — acknowledges the benefits presented by utilizing consumer data and information services (ECDIS) and artificial intelligence to both insurers and customers by creating simplified, efficient processes. However, it also warns: “ At the same time, ECDIS may reflect systemic biases and its use can reinforce and exacerbate inequality. This raises significant concerns about the potential for unfair adverse effects or discriminatory decision-making. ECDIS may also have variable accuracy and reliability and may come from entities that are not subject to regulatory oversight and consumer protections.” The letter also states that the self-learning nature of AI systems “increases the risks of inaccurate, arbitrary, capricious, or unfairly discriminatory outcomes that may disproportionately affect vulnerable communities and individuals or otherwise undermine the insurance marketplace in New York.” The New York DFS laid out expectations within the letter for how insurers can develop and manage this technology in a way that mitigates any potential harm to consumers. According to the DFS guidance, insurers are expected to: “Technological advances that allow for greater efficiency in underwriting and pricing should never come at the expense of consumer protection,” Superintendent Harris said in a release. “DFS has a responsibility to ensure that the use of AI in insurance will be conducted in a way that does not replicate or expand existing systemic biases that have historically led to unlawful or unfair discrimination.”
Renting still less expensive than owning in nearly all of U.S.
Both rent and housing costs escalated in 2023, but rents are rising faster “Affordable housing” is becoming almost an oxymoron for many American households, whether they seek to rent or buy. The cost of renting or buying a three-bedroom home gobbles up more than one-third of wages in most county-level housing markets, and in some cases much more, ATTOM’s 2024 Rental Affordability Report reveals. In general, however, renting remains less expensive and consumes a smaller portion of average wages than owning in 274 (88%) of the 338 U.S. counties analyzed, the report found. Both rent and housing costs escalated in 2023, but rents are rising faster in most counties. “Continuously increasing home prices contribute to the escalation of rental costs, making both buying and renting properties a challenging endeavor across most of the United States,” said ATTOM CEO Rob Barber. In 58% of the counties analyzed, rents rose more than average local wages. Even so, renting remains the more affordable option. “Elevated home prices have become further and further out of reach for average workers, preventing those with marginal finances from obtaining mortgages and leaving them with few options other than renting,” the report stated. The rise in home prices was boosted by limited supply in 2023, even in the face of rising mortgage rates. “Changes in three-bedroom rents commonly have ranged from 3 percent decreases to 15 percent increases while changes in median sale prices for single-family homes last year typically ranged from 3 percent losses to 7 percent gains,” it noted. Even though rents rose in three-quarters of markets with populations of at least one million, their share of average local wages was still at least 10% lower than the cost of home ownership, including mortgages, property taxes and insurance. The biggest cost differentials were in Honolulu, where median three-bedroom rents swallowed 67% of average local wages but home ownership grabbed 134%. Other counties with populations exceeding one million and wide differentials between three-bedroom rents and home payments as shares of household wages were Kings County (Brooklyn – 72% vs. 136%), Alameda County (Oakland – 51% vs 108%), Santa Clara County (San Jose – 29% vs 83%), and Orange County outside Los Angeles (88% vs 136%). It was more economical to own than rent in only two counties – Riverside, CA (101% rent vs. 91% home payments) and Wayne, MI (22% vs 19%). There were only 64 markets nationwide where three-bedroom rents would snatch up less than one third of average local wages. Of these, 59 were in the Midwest and South. The most affordable, at around 22% of household wages, were Birmingham, Detroit, Lansing, Flint and Shreveport. At the other extreme, the least affordable three-bedroom units were also in the South as well as in California. Rents in Fort Myers, FL would consume 153% of wages. It was followed by Santa Barbara (131%), Monterey (107%) Vero Beach, FL (102%) and Riverside (101%). For homebuyers, the biggest bang for the earnings buck came from Wayne County/Detroit (19% of average wages), Montgomery (21%), St Louis (23%), Bibb County/Macon, GA (23%), and Caddo Parish/Shreveport (23%). Among counties with at least one million inhabitants the most affordable were Allegheny/Pittsburgh (27%), Cuyahoga/Cleveland (27%), St. Louis (30%) and Harris/Houston (35%). The most expensive counties to buy in were Marin outside San Francisco (164), Santa Cruz, CA (160%), Orange (136%), Kings/Brooklyn (136%) and Honolulu (134%). Fortunately for some buyers, average weekly wages rose faster than home prices in 58% of the 338 counties studied – reversing the trend noted in 2023. The chief beneficiaries were Los Angeles, Chicago, Houston, Phoenix and San Diego. In 42% of counties, however, the reverse was true: median home prices are rising faster than average weekly wages. Most affected are Orange County, Kings/Brooklyn, Miami-Dade, Broward, and Middlesex outside Boston.
International CAT event losses totaled $16.7 billion in 2023
According to CRESTA, the largest international loss event was a sequence of earthquakes that hit Turkey in February. In 2023, seven international catastrophe events each caused over $1 billion in losses, as reported by the CRESTA Industry Loss Index (CLIX). These events totaled $16.7 billion in damages, slightly below the 23-year average of $17.1 billion for similar events. The most significant of these was the Kahramanmaras Earthquake Sequence in Turkey, occurring in February 2023. It resulted in a record-breaking $5.8 billion loss for the Turkish insurance sector. Other notable disasters with over $1 billion in losses include: CLIX also mentioned that two additional events might be added to this list pending further investigation. These are severe storms in Germany in June and in Australia in December. Matthias Saenger, a manager at CRESTA CLIX, released a statement regarding these findings: “While from a global perspective, international Cat losses in 2023 were slightly below the long-term average, several countries experienced record-breaking events, namely Turkey, Italy, New Zealand and Mexico. This situation effectively illustrates the value proposition of global reinsurance: extraordinary or even record-breaking Cat losses on a national market level can represent quite “normal” loss levels in a globally diversified reinsurance portfolio. This scenario was the case in 2023 and explains why this year’s Cat losses were managed so robustly.”