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Looking forward to 2024


No one knows what GenAI will bring beyond the foreseeable future, who will adopt Tesla beyond the die-hard Elon Musk fans. ‘When you look at car buying in general, we’re trying to get to the next set of EV adopters,’ Tesla’s Chief Financial Officer Vaibhav Taneja said during an investor call in October. And what will people charge to fix cars?

A minute before we ring in the new year, here’s what to look forward to – tomorrow.

Florida Insurance Market: In development

On Mar 24, 2023, Florida’s Governor, Ron DeSantis, signed a legal reform bill, known as HB 837. This law, proposed by the Florida Legislature, aims to reduce unnecessary lawsuits and stop aggressive legal advertising by setting new limits on personal injury cases, insurance-related lawsuits, and the fees lawyers can charge. These changes become effective for legal cases filed after March 24, 2023. Just before this law was enacted, lawyers filed over 280,000 new cases, possibly in response to the upcoming changes. On the insurer’s recent earnings call, Heritage CEO Ernie Garateix confirmed that the carrier is “seeing slight decrease in litigation,” and that this data trend is what they like to see. As an aside, Heritage emphasized reducing exposure in Florida with personal lines policies-in-force intentionally declining.

This quarter, Slide Insurance, based in Tampa, acquired renewal rights for personal lines business in Florida from UPC Insurance. UPC canceled around 72,000 Florida personal lines policies in early February, and Slide plans to issue replacement policies. This is part of Slide’s effort to grow and stabilize the insurance market in Florida.

Orion180 Insurance was approved to operate in Florida, planning to launch a wind-only product for residential properties. This product is aimed at homes with a replacement cost above $700,000, covering Atlantic coastal properties and areas as far north as the Gulf of Mexico​​.

HCI Group’s subsidiary, TypTap Insurance Company, assumed approximately $30 million of in-force premium from Citizens Property Insurance Corporation. This included around 6,800 policies, effective from December 19, 2023, with plans for a second assumption of policies from Citizens in early 2024​​.

When it comes to new entrants, Orange Insurance Exchange was approved to operate in Florida, where it will offer homeowners’ and commercial residential policies. It plans to fully establish its reinsurance program by mid-2024​​.

Auto Insurance: Slowly back in business

As of Dec 8, 2023, the US experienced 25 significant weather and climate disasters, each incurring over $1 billion in damages. This marks an increase from the 18 such events recorded in 2022. The variety of these events included one drought, two floods, 19 severe storms, one tropical cyclone, one wildfire, and one winter storm. Tragically, these events resulted in 482 fatalities and had considerable economic impacts on the affected regions. When these natural disasters are combined with factors such as economic inflation, a rise in car thefts, the United Auto Workers strike in 2023, and the ongoing challenges in the auto insurance industry, the reasons behind the current downturn in auto insurance become increasingly evident.

Car insurers – who are concerned with profitability – limit ad spend and/or raise rates. According to the 2023 US Auto Insurance Study from JD Power, 31% of car insurance companies operating in the US enacted a rate increase this past year. Overall, the industry reported an average price increase of 15.5% while some states, like Florida, saw rates rise as much as 88% over the past year.

Setting aside policyholders, online marketplaces like EverQuote have also been facing challenges, though this may change soon. Joseph Sanborn, the CFO of EverQuote, recently noted that while financial struggles are prevalent among several insurance providers, there’s optimism for the future. He highlighted that the path and timing of recovery in the auto insurance sector for the upcoming year are not entirely predictable. However, Sanborn remains confident that the increase in auto insurance rates will lead to improved financial performance for carriers. This improvement is expected to incentivize these companies to actively pursue new customers. This shift could signal a positive change for online marketplaces that facilitate insurance policy comparisons and purchases.

“Turning to industry trends. There have been encouraging signs from some carriers that they are making meaningful progress in achieving their desired levels of profitability. As carriers return to acquiring new consumers, we believe that their appetite for growth will vary considerably by consumer profile and geography based on where they have achieved sufficient rate adequacy. As such, we believe that digital leaders like EverQuote will benefit given the better ability of our channel to more specifically target a desired consumer profile compared to most other forms of media,” said Sanborn on Nov 6.

E&S: Growth wave continues

In 2023, the excess and surplus (E&S) lines market saw significant growth, with notable developments from several companies.

Canopius entered the domestic US Excess Casualty market where it will concentrate on commercial risks, employing a specialized approach within niche verticals such as construction, commercial real estate, hospitality, manufacturing, and technology.

Cincinnati‘s Q2 and Selective‘s Q3 results pointed to a 25% premium growth in E&S. Meanwhile, The Hartford experienced a remarkable 34% growth in its E&S lines in Q3.

According to Coverager Data, new E&S entrants as of 2020 include Aurenity ($11M in funding), Capitola ($20.6M), Joyn ($17.7M), Ledgebrook ($8.8M), Richmond National ($100M), Shepherd ($6.2M), Starfish Specialty ($3M), Tango Specialty ($1.3M), and Vantage Risk Companies ($1B).

Most notably, the E&S market surpassed $100 billion in annual premiums this year. Ryan Specialty Group President Tim Turner shared – on Dec 6 – the following:

“Well, we believe that E&S business, most of it, is here to stay. And we’ve talked about these structural changes and secular changes in how nonadmitted P&C solutions are distributed in North America, and they continue to play out to this day. There’s — it starts with the companies. 10, 15, 20 years ago, there were a handful of wholesale-only distribution companies in North America. Today, there’s over 100. And that — those distribution lines that are dedicated to wholesale distribution in P&C are really the backbone of our ability to distribute more solutions and to solve more problems for our clients. But that’s part of the story.

The other part of it is the technical capabilities of the industry have changed dramatically. So there used to be 1 or 2 great medical malpractice brokers in a typical wholesale shop. Now there’s 100, right? The teams are bigger, they’re stronger in all these technical, high-hazard property and casualty segments. So unless you’re a big global broker, most of those retail brokers don’t have the resources to handle a lot of these highly technical, specialized segments of business. And so we’ve built our practice group model around those needs and solutions. And the carriers have responded to that.

So those distribution lines are very strong. They’re very broad and they’re very deep. And we believe that most of it is here to stay. Of course, knowing that rate adequacy when lines of business become more profitable, standard companies will take some of that business back. But that’s really a very small part of the story. Most of that business is very technical. They need our capacity. They need our skills and our horsepower behind these placements and we see a continued double-digit growth opportunity.”

Another anecdote belongs to Skyward Specialty – ‘a true E&S market in professional lines.’ The company recently acknowledged the growth potential of the medical stop-loss market. Its primary focus is on smaller employers, who are more actively engaged in managing medical costs. Here’s Andrew Robinson’s full statement – shared on Nov 7 – “To your question on medical stop-loss, look, we agree. I think that that is a big market that is growing in a sort of very attractive rate. And I think that it serves us very well. I’ll remind you that our principal focus is on smaller employers. Smaller employers tend to be far more focused on medical cost management. Sometimes we are catching these employers as they’re coming out of the guaranteed cost market into a self-insured market, which is a particular area that we are very good at capturing those opportunities and underwriting those risks when they do that. But I’ll just say to you that what we’re not doing is we’re not writing these very large groups. And so as a byproduct of that, all of our capabilities, our intellectual property, our focus as an organization is really towards that smaller employer market. And I think that our distributors would say that we’ve done things that are very distinctive relative to their ability to serve that market. And we certainly believe in terms of loss cost management, we have the ability to stay in front of things like medical cost inflation and so forth that make the sort of the results of that business particularly attractive for us.”

Generative AI: Practical with potential

Numerous insurance companies are actively exploring the potential of genAI across various aspects of the insurance value chain. Among them:

  1. AXA: Deployed AXA Secure GPT on Microsoft’s Azure OpenAI Service for tasks like text creation and translation.
  2. Helvetia: Conducting a live experiment with its chatbot Clara based on OpenAI’s ChatGPT for insurance-related queries.
  3. Loop: Its AI Assistant can answer questions from the Loop knowledge base and do so both conversationally and contextually.
  4. Marsh McLennan: Introduced LenAI, a genAI tool by the company’s Dublin Innovation Center and Oliver Wyman Digital, using Microsoft and OpenAI technologies, to enhance productivity and reduce time on tasks.
  5. Montoux: Incorporated genAI in its actuarial platform for easier model migration and development, enhancing actuaries’ access to model components and risk factors.
  6. Nationwide: Empowered its Pet HealthZone website with genAI for pet health information.

Guidewire CEO Mike Rosenbaum emphasized, on Dec 7, that while the potential is there, it’s still early to make definitive statements or predictions about the impact of genAI. “It’s certainly something that we’re looking at very carefully is like if you can see a path towards developer productivity improving with these tools. Can we also see a path towards migration velocity increasing? It’s definitely something that we’re looking at. And there’s a number of partners who have projects in place to sort of assess this and try to test it and try to validate that it’s going to work and accelerate. There’s definitely upside there. I think it’s probably a little bit too early for us to call and, sort of, put a number on that acceleration potential. But it’s definitely something we’re looking at and also partners are looking at around how — not just migrations, but also just implementation of functionality on the platform. That concept is not — has been brought up a number of times, and it’s something we’re looking at and have a lot of hope for, let’s say. So that potential is definitely there.” Similarly, Verisk CEO Lee Shavel shared, on Nov 1, that genAI remains a frequent topic with clients. “We believe gen AI can deliver efficiency within Verisk and in client-facing solutions, starting first in our underwriting and life businesses where we are actively exploring new product development as well as enhancements to existing solutions.”

Two weeks ago, I attended an insurance company’s holiday party, where the conversation turned to reflecting on the past year. It’s been a challenging year for the industry, marked by numerous layoffs, including significant customer losses at GEICO, the king of the hill. Separately, it has also been a disastrous year for Israel. Our best wishes for a safe and happy close to 2023 and a prosperous 2024.



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