Insurance Market News

In the age of climate disaster and Artificial Intelligence in the workplace, what’s happening in the insurance market that ordinary people should consider news? Two significant changes are happening that we should discuss:

• The insurance industry underwrote high-risk properties, and they’re reacting to a dramatic increase in claims.
• Insurance companies embrace Artificial Intelligence significantly.

These two trends are significant enough to warrant our attention.

Insurance Industry is Reeling from Fire Claims

In addition to claims made by homeowners from the Caribbean Ocean, the summer’s wildfires on the West Coast have thrown a monkey wrench into the market, with more claims coming there. Will it take more than expedited rate increases for homeowners to confront the cost of living in disaster-riddled areas?

As policies underwritten by private sector insurance companies become scarcer and scarcer, consumers are turning to the government, for example, the State of Florida, for government-provided insurance for coverage. Whatever the result, that’s where insurance is at in the Autumn of 2023.

Insurance companies increase premium prices in this environment, citing the rising cost of repairing damaged properties. They are also bearing the cost of re-insuring the properties. Not every homeowner suffers a catastrophe, but every homeowner buys insurance. Is everybody paying a share of the cost of the damage?

The Insurance Market in Autumn, 2023

When the number of claims swamp insurers, they cannot pay them off, and with climate change wreaking so much havoc on personal property, it’s not difficult to understand how insurers struggle with so many losses. The government-industry partnership looks like the only way to meet the losses. However, the government must beware. They should check an insurer’s accurate financial picture to ensure the insurer can’t cover most losses. Government regulation is required. A federal law would discourage unfair business practices, for example.

Get Ready

How can you ensure your financial picture is best positioned for this calamity? These are questions to address to your financial advisor:

• Should you divest in any high-risk properties?
• Does your State offer property buyouts in areas deemed too risky to build?
• What are the hidden risks you are missing on your properties?

The insurance market at this time is volatile. As the insurance business becomes increasingly volatile, you should ask your financial advisor if you need to look at these factors:

• Is my property in a high-risk location, that is, does the location experience extreme weather, tornadoes or hurricanes?
• Have you looked at all price options for the coverage you want?
• If you’re paying a lot for coverage, what coverage do you have, and does your insurer have a good record of payouts?

Sometimes, big-name companies are big names because they pay a lot for image advertising and may neglect paying customers. Insurers have rules they use to deny claims. Become familiar with the rules pertinent to your policy.

Use of Artificial Intelligence in the Insurance Industry

The second issue in the insurance industry today is AI. Insurers plan on using AI for all aspects of the insurance industry, but most controversial, in monitoring the insured. According to the Industry, they can vet potential customers better, do more insightful risk assessments of properties, and cut through simple smoke screens like race and ethnicity to arrive at a fair price with AI. They can also detect fraud better with artificial Intelligence while weeding out potential wrong customers with better background checks.

AI also enhances the claims processing part of customer service and underwriting chores in the actual business. Will customers notice a difference from the use of AI? The claim numbers may go down. Unfortunately, Insurance companies raise premiums for questionable generalizations. Will AI enable that behavior?

Faulty Generalizations

By using criteria like the color of your skin, your cultural background, where to choose to worship, your gender, your income level, where you live, or your credit score, all of which have no bearing on your ability to operate a vehicle safely, insurers have raised rates. So, with AI, what should we expect?

You may have noticed that insurance companies ask customers permission to monitor every second of their driving. It’s such a big ask that Insurance Companies ask people to volunteer, like a Beta test. The AI to monitor behavior already exists, so it’s ready to go if that monitoring becomes the norm. Your insurance company can calculate your rates for your actions behind the wheel.

Does the industry intend to use AI to check out your driving perception? Will they turn to AI to find data addressing the quality of your hearing or eyesight? How about your reasoning skills? How logical or sensible is your thinking behind the wheel (watch your road rage!), your speed in learning new driving habits, and your ability to understand problems and how you solve them cognitively? Are any of these criteria going to lower your insurance premiums? If you believe that, then I have an air guitar I’ll sell you!

Write Your Congressperson

What can ordinary people do?

• Write to your representatives in government, especially at the State level, demanding lawmakers review the criteria insurance companies use now.
• Demand the State regulate the use of monitoring and raise questions about the invasion of privacy AI will enable.
• Insist that a government-mandated insurance requirement for driving includes a government-provided alternative, both viable and easily accessible, or consider making the government a single-payer insurer for all automobiles.

Government Provided Insurance

Artificial Intelligence may create situations where insurers won’t underwrite some drivers. While government-provided car insurance is available in many states, it’s not on the minds of consumers much. But you can find examples in Canada. The Canadian system in British Columbia provides mandatory auto insurance the government provides. After giving basic car insurance, private and government options are available for consumers who want more. So, it’s not like government-run auto insurance systems don’t exist.

In the US, mandatory insurance results in uninsured motorists. In the State of Michigan, for example, fully one-quarter of its drivers are without car insurance, another reason for government-run car insurance coverage. 

If you haven’t perceived it yet, AI will likely affect many freedoms you enjoy now behind the wheel.

AI Monitoring

America hooks up to more and more behavior apps like fitness monitors every day. Insurance companies want to tune in to every aspect of an individual’s life to offer a more tailored product and keep a close eye on everything they insure. Rather than perceiving chaos in the future, insurance companies make generalizations about behavior and raising or lowering premiums.

Unfortunately, generalizations are less than honest. Lawmakers must step up and set down by-lines to head off this trend. The restrictions on insurance companies need to reflect the distrust the conclusions insurers arrive at when determining premiums or whether to offer coverage at all. So, how do you keep your finances aligned with reality?

• Suggest lawmakers investigate insurance company behavior that leads to higher profit rather than improved coverage.
• Regulate the industry to keep insurers’ focus on serving their customers rather than raking in profits.

The industry must be able to ensure customers that their data is not being misused or sold to third parties who would use it to tailor products for the customer. Lawmakers must regulate the use of AI to ensure the processes aren’t abusing people.

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