The Risks of Hazard

Every year, AM Best publishes Understanding the Insurance Industry, and the 2015 edition came out a week or so ago. It’s subscription only, but here’s the link.

Inside is the Property/Casualty Market at a Glance, and it’s worth a glance because they call out so many topics we cover at Risks of Hazard. After the summary of what the segment is, and some cool "Top 10" lists (State Farm and Berkshire Hathaway dominate them), the editors state that “the property/casualty industry faces several issues.” That’s where it gets interesting.

First up is Personal Lines, and how “the segment and the industry as a whole continue to allocate significant resources toward improving technological systems.” Indeed, indeed, and indeed! AM Best goes on: “Companies continue to move away from legacy systems and invest in technology to improve and streamline all aspects of the insurance process.” The move towards these technologies is "being undertaken by companies of all sizes in an attempt to reduce long-term expenses and gain or maintain a competitive advantage.”

This week saw the House Financial Services housing subcommittee receiving comments on H.R. 2901, the bill introduced last June to recognize private flood insurance as adequate to satisfy FEMA’s mandatory purchase requirements. Or, to paraphrase: “Legalize Cherry Picking!”

AM Best reported on the hearing on January 15 (mind the subscription wall), and, to my delight, they use the term “cherry picking.” While it’s a perfect name for the act of underwriting the best properties in the compulsive purchase NFHA, I hadn’t seen it in reputable media until now (except for Insurance Thought Leadership, where Nick Lamparelli and I put it).

In August, we took a look at how this winter’s El Niño was shaping up. While most predictions pointed to an El Niño comparable with 1997 (the worst on record), some were predicting that a “Godzilla El Niño” was on its way. Now that we’re in the midst of it, let’s take a look at how El Niño has shaped up.

First off, Happy New Year to everyone with an interest in nat cat analytics for insurance.

To kick off 2016, The Risks of Hazard would like to address the biggest single problem faced by the insurance industry as a whole. Is it the coverage gap? Is it inaccurate data or analytics? Is it the need to transition to the cloud? Nope – those are minor by comparison.

According to the U.S. News Millennial Report 2014 (cheers to The Actuary for reporting it), 22% of the largest demographic likely to buy insurance in the coming decade claim to somewhat understand insurance. Yes – 78% of people in their 20s and early 30s don’t even somewhat understand insurance. Yikes.

With my last blog post of 2015, it’s time to honor the tradition of making predictions for the coming year. It is an especially fitting way for Risks of Hazard to end the year since we explore underwriting analytics that help underwriters understand the chances of something happening in the future.