Personal Amidst Is

1.Rising loss costs

Cost of labor, parts and materials contribute to the increase of loss costs. The impact of natural disasters and catastrophes results in more claims, too. Also, driving patterns have returned to pre-pandemic levels, leaving room for more accidents and claims. While safety devices like telematics may help prevent accidents, those features are yet to be widely adopted.

2.Economic and social inflation

Higher inflation has caused expenses, claims, demand for goods and supply-chain issues to rise, as well. As a result, premiums are going up and causing customers to leave their existing insurers to purchase new policies at lower rates. For insurers, this means that restoring profitability is harder because if they raise their premiums, they risk losing customers.

For example, TransUnion’s Q2 2022 Insurance Shopping survey showed customer retention challenges for insurers. Over the previous six months, 39% of insureds shopped for auto insurance, and 21% of those shoppers switched; 30% of insureds shopped for homeowners insurance, and 61% of those shoppers switched.

Additionally, state insurance regulators are reluctant to approve broad rate hikes as they try to tamp down inflation. Even if regulators allow it, insurers risk losing enough customers to offset their higher rates.

And, social inflation is impacting the industry. Social inflation refers to the impact of litigation costs on claim payouts and loss ratios. It threatens the affordability of coverage because it is difficult to predict.

3.Growing risks

With so many online insurance transactions, digital fraud (and cyber risk) is rising. Cyber security risks (data breaches, ransomware attacks) are becoming more common. The cost of cybercrime is expected to hit $10.5 trillion by 2025, according to a recent report.

Additionally, in a hardening market, many personal-lines carriers are spending less money on advertising and taking action to slow new business down so they have time to determine prices.