The landscape of coastal insurance markets is facing increasing challenges, particularly in the property and casualty sector. Traditional insurers are struggling to remain profitable in these volatile markets causing many to scale back coverage or leave the market altogether. From the increasing frequency and intensity of storms to rising costs and rampant fraud, insurers and policyholders alike are feeling the pressure. Clamping down fraud is crucial in the bridge to finding long-term, sustainable solutions for the market.
Troubled insurance waters: Growing P&C claims and fraud complexity
The unique geographical position of southeastern states of the US makes them highly susceptible to hurricanes and tropical storms. Over the past few years, these storms have not only become more frequent, but also more costly. According to the National Center for Environmental Information, in 2023, there were eight storms costing over one billion dollars each, compared to four the year before. This year, the region has already witnessed six major storms. As the frequency and intensity of storms increases, so do the costs of insurance claims. Unfortunately, those costs are quickly outgrowing the premium rates. To alleviate financial burden, companies turn to raising premiums, but with rate increase restrictions in place, ratios simply aren’t favorable.
Read more: The insurer's guide to better identifying risk in CAT claims
In addition to the growing frequency and intensity of storms, a rise in the volume and complexity of insurance fraud is further contributing to capacity to manage claims losses. The influx of CAT claims makes it easy for people to stage accidents, make false claims of loss, or exaggerate damages. "Insurance fraud nationwide [totals] $300 billion a year, ... and in Florida, for example, it's between $40-$50 billion" says Stacey Giulianti, co-founder of Florida Peninsula Insurance Company. We’re seeing notable fraud across P&C lines. From roofing claims to water damage, property loss and theft to personal injury protection claims. Assignment of Benefits (AOB) abuse exasperates the issue, with contractors frequently engaging in legal action against insurers without the policyholder’s consent. With 15 percent of U.S. homeowners insurance claims, the state accounts for nearly 71 percent of the nation’s homeowners claim-related litigation. Not only does this result in added litigation expenses for the insurance companies, but it also significantly slows down the claims process, leaving genuine customers seething.
Impact to market viability: P&C insurers under pressure
Addressing these challenges is no simple task. Failure to address these issues could lead to severe consequences. Insurers may continue to leave the market, leaving residents with limited options, and premiums they simply cannot afford. If the conditions in the market continue to worsen, a lack of viable insurance options could drive residents out of the region, or result in increased criminal activity to help cover losses. Any solutions must be multifaceted and long-term.
Improved P&C claims risk management providing a ray of hope
Despite the daunting challenges, a strong risk assessment strategy can pay significant dividends. Traditional risk identification solutions that rely on historical data and predictive modeling do work, but modern challenges require modern solutions that keep up with the complexity of fraud tactics and techniques.
To see how advanced technology can streamline your risk assessment process, learn more about our insurance underwriting software.
Clearspeed’s unique, AI-enabled voice analytics technology uses simple voice-based questionnaires to provide fast, accurate and unbiased risk insights based on the individual and transaction you’re assessing. Fast and accurate risk results give adjusters the ability to act with confidence. Claims that show no risk can be fast tracked for settlement, leading to a more favorable perception of the insurer, higher customer retention, and trust. Where indicators of risk are present, claims can be routed for further investigation with risk detail, resulting in a more efficient claims investigations process.
See it in action: How Clearspeed works
Insurers implementing modern risk identification technologies, can reduce their fraud exposure, improve loss ratios, and introduce efficiencies into their claims handling processes, ultimately reducing operating expenses, perhaps reducing premium increase needs, and even extending writing viability in the market.
Learn more about how Clearspeed is helping insurers clamp down on claims risk.
