On this Memorial Day, let us unite as a nation to honor and remember those who gave everything for us. May we never forget their sacrifices and strive to uphold the values they fought to protect. ProgramBusiness.com will be closed on Monday, May 29, and will return on Tuesday. Have a safe and enjoyable weekend.

NOAA forecasters with the Climate Prediction Center, a division of the National Weather Service, predict near-normal hurricane activity in the Atlantic this year. NOAA’s outlook for the 2023 Atlantic hurricane season, which goes from June 1 to November 30, predicts a 40% chance of a near-normal season, a 30% chance of an above-normal season and a 30% chance of a below-normal season. NOAA is forecasting a range of 12 to 17 total named storms (winds of 39 mph or higher). Of those, 5 to 9 could become hurricanes (winds of 74 mph or higher), including 1 to 4 major hurricanes (category 3, 4 or 5; with winds of 111 mph or higher). NOAA has a 70% confidence in these ranges. “Thanks to the Commerce Department and NOAA’s critical investments this year in scientific and technological advancements in hurricane modeling, NOAA will be able to deliver even more accurate forecasts, helping ensure communities have the information they need to prepare for and respond to the destructive economic and ecological impacts of Atlantic hurricanes,” said Secretary of Commerce Gina M. Raimondo. The upcoming Atlantic hurricane season is expected to be less active than recent years, due to competing factors — some that suppress storm development and some that fuel it — driving this year's overall forecast for a near-normal season. After three hurricane seasons with La Nina present, NOAA scientists predict a high potential for El Nino to develop this summer, which can suppress Atlantic hurricane activity. El Nino’s potential influence on storm development could be offset by favorable conditions local to the tropical Atlantic Basin. Those conditions include the potential for an above-normal west African monsoon, which produces African easterly waves and seeds some of the stronger and longer-lived Atlantic storms, and warmer-than-normal sea surface temperatures in the tropical Atlantic Ocean and Caribbean Sea which creates more energy to fuel storm development. These factors are part of the longer term variability in Atlantic atmospheric and oceanic conditions that are conducive to hurricane development — known as the high-activity era for Atlantic hurricanes — which have been producing more active Atlantic hurricane seasons since 1995. “With a changing climate, the data and expertise NOAA provides to emergency managers and partners to support decision-making before, during and after a hurricane has never been more crucial,” said NOAA Administrator Rick Spinrad, Ph.D. “To that end, this year we are operationalizing a new hurricane forecast model and extending the tropical cyclone outlook graphic from five to seven days, which will provide emergency managers and communities with more time to prepare for storms.” This summer, NOAA will implement a series of upgrades and improvements. NOAA will expand the capacity of its operational supercomputing system by 20%. This increase in computing capability will enable NOAA to improve and run more complex forecast models, including significant model upgrades this hurricane season:

• In late June, the Hurricane Analysis and Forecast System (HAFS) will become operational. HAFS will run this season in tandem with the currently operational Hurricane Weather Research and Forecast Model System and Hurricanes in a Multi-scale Ocean-coupled Non-hydrostatic model, but eventually will become NOAA’s primary hurricane model. Retrospective analysis of tropical storms and hurricanes from the 2020-2022 seasons show that this model has a 10-15% improvement in track forecasts over existing operational models. This new model was jointly created by NOAA's Atlantic Oceanographic & Meteorological Laboratory Hurricane Modeling and Prediction Program and NOAA’s National Weather Service Environmental Modeling Center.
• The Probabilistic Storm Surge model upgrade on May 2, advances storm surge forecasting for the contiguous U.S. and new forecasts for surge, tide and waves for Puerto Rico and the U.S. Virgin Islands. Forecasters now have the ability to run the model for two storms simultaneously. This model provides forecasters with the likelihood, or probability, of various flooding scenarios including a near worst-case scenario to help communities prepare for all potential outcomes.

Additional upgrades or new tools for hurricane analysis and forecasting include:

• The National Hurricane Center’s Tropical Weather Outlook graphic, which shows tropical cyclone formation potential, has expanded the forecast range from five to seven days.
• Over the last 10 years, flooding from tropical storm rainfall was the single deadliest hazard. To give communities more time to prepare, the Weather Prediction Center is extending the Excessive Rainfall Outlook an additional two days, now providing forecasts up to five days in advance. The outlook shows general areas at risk for flash flooding due to excessive rainfall.
• The National Weather Service will unveil a new generation of forecast flood inundation mapping for portions of Texas and portions of the Mid-Atlantic and Northeast in September 2023. These forecast maps will extend to the rest of the U.S. by 2026. Forecast flood inundation maps will show the extent of flooding at the street level.
• NOAA will continue improving new and current observing systems critical in understanding and forecasting hurricanes. Two projects underway this season include:
• New small aircraft drone systems, the deployment of additional Saildrones and underwater gliders, and WindBorne global sounding balloons. These new technologies will advance our knowledge of hurricanes, fill critical data gaps and improve hurricane forecast accuracy.
• The modernization and upgrade of the Tropical Atmosphere Ocean buoy array. The upgrade will provide additional capabilities, updated instruments, more strategic placement of buoys and higher-frequency observations. Data from these buoys are used to forecast El Nino and La Nina, which can influence hurricane activity.

“As we saw with Hurricane Ian, it only takes one hurricane to cause widespread devastation and upend lives. So regardless of the number of storms predicted this season, it is critical that everyone understand their risk and heed the warnings of state and local officials. Whether you live on the coast or further inland, hurricanes can cause serious impacts to everybody in their path,” said FEMA Administrator Deanne Criswell. “Visit ready.gov or listo.gov for readiness resources, and get real time emergency alerts by downloading the FEMA App. Actions taken today can save your life when disaster strikes. The time to prepare is now.” NOAA’s outlook is for overall seasonal activity and is not a landfall forecast. In addition to the Atlantic seasonal outlook, NOAA also issues seasonal hurricane outlooks for the eastern Pacific and central Pacific hurricane basins. NOAA’s Climate Prediction Center will update the 2023 Atlantic seasonal outlook in early August, just prior to the historical peak of the season.  

Cyber insurance direct written premiums jumped 51% year-over-year in 2022 to $7.2 billion, but the hard market phase “has run its course” and rate growth will flatten out in the coming months, according to Fitch Ratings. “Two years of substantial price increases and shifts in market underwriting practices fostered better segment results, leading to heightened competition and shifting pricing trends,” said the ratings firm in its report, adding, “The cyber market’s hardening phase of the last two years, characterized by substantial changes in pricing and underwriting practices, appears to have run its course.” The cyber market also showed marked improvement in its results, with the loss ratio dropping to 43% in 2022 from 68% in 2021. Fitch likened the slowing price increases to similar trends in the directors & officers liability space with new capacity and competition but warned of the potential for a “negative shift in pricing trends.” “The current downward cycle is unlikely to shift, barring a new wave of cyber incidents with higher loss severity or a large cyber catastrophe event,” said Fitch in its report. However, while underwriting results have improved for cyber and there was a “modest tempering” in ransomware events last year, risk conditions should change rapidly. “The claims environment remains highly fluid, given the rapid pace of technological and economic change, such that recent relative claims stability may prove short lived,” said Fitch. Cyber insurance accounted for 1% of all property/casualty insurance premiums in 2022 but was the fastest growing sector last year. The percentage of standalone coverage in the market increased to 70% in 2022, accounting for $5.1 billion in premium and 343,000 policies, Fitch said. There are over 3.5 million package polices with cyber coverage in force, but they account for much less premium than standalone and have declined by 6% since 2020. The top 10 U.S. cyber writers insured 52% of the market at the end of 2022, with Fairfax Financial holding the largest standalone market share at 11.1%, followed by AXA XL at 10.4% and Arch Capital at 6.3%. Chubb wrote the largest percentage of package policies with a 28% share of all direct package premiums, followed by CNA Financial at 9% and Hartford Financial Services Group at 6%. Fitch also examined claims activity in 2022, which increased by 27% over the last two years. Approximately 5,400 standalone cyber claims were paid in 2022, twice the amount in 2019. “Despite concerns of higher claims costs from inflation and economic volatility, the average cost of a cyber claims payment was stable in the last two years,” Fitch commented, adding, “The potential for significant increases in loss severity derives from multiple fronts, including higher remediation and settlement costs, changes in the nature and value of ransomware events, higher regulatory fines and settlements as data privacy laws and regulations are implemented in more jurisdictions, and uncertainty regarding probability and insured losses from cyber catastrophes.”

Global insurer SCOR is withdrawing from the Net-Zero Insurance Alliance (NZIA), CEO Thierry Léger announced during the company’s most recent Annual General Meeting. Léger also announced SCOR’s new sustainability commitments which include a new policy on gas among others. This states that the reinsurer will no longer cover new gas field development projects. It also noted that exceptions may be made for insurance and facultative reinsurance for insureds with a verified strategy aligned with a credible Net Zero transition plan based on the Science-Based Targets (SBTi) initiative for the oil and gas exploration and production sector. SCOR’s new policy on Arctic oil and gas states that the reinsurer will exclude specific, stand alone direct insurance and facultative reinsurance coverage for oil and gas exploration, production and related dedicated infrastructure projects in the Arctic Monitoring and Assessment Program (AMAP) Region, with the exception of the Norwegian Arctic Region. The reinsurer’s new climate and energy transition measures also include a new policy on oil sands. This states that SCOR will no longer provide any new (or increase its commitments on existing) stand alone direct insurance and facultative reinsurance coverage, which includes both extraction and upgraders. Finally, its new policy on coal states that SCOR will exclude stand alone direct insurance and facultative reinsurance coverage for new dedicated thermal coal mining infrastructure such as ports, washing and handling facilities. The reinsurer also noted that it will not write any new business in respect of standalone thermal coal mines and standalone unabated coal-fired power plants. Organisations such as Reclaim Finance have said that they welcome these new climate commitments but believe that more can be done. In a recent statement the NGO also called on Léger, to further exclude new liquefied natural gas (LNG) terminals in order to align with the International Energy Agency’s (IEA) 1.5°C scenario projections and meet its climate commitments. Ariel Le Bourdonnec, Insurance Campaigner at Reclaim Finance, said: “Better late than never. SCOR is finally catching up with its competitors and adding to its exclusion of new oil fields the new gas fields. “But it’s disappointing that it hasn’t finished the job and still allows exceptions for companies in transition. The science is clear: a company that continues to develop new oil and gas fields cannot be considered “in transition”. But SCOR is setting an example for AXA, which has still to make a commitment on gas.” An open letter signed by 15 NGOs, including Reclaim Finance, was sent in May to Légercalling on him to stop covering new gas fields and liquefied natural gas (LNG) terminals. These new climate commitments, Reclaim finance has stated, respond to some of the demands made by its Insure our Future campaign, which calls on major insurers and reinsurers to act in the face of climate change. “However, one demand remains unanswered: the call to stop covering new LNG terminals. SCOR was recently identified by Reclaim Finance and the NGO Better Brazoria as one of the insurers behind the Freeport LNG climate bomb, the second largest liquefied natural gas (LNG) terminal in the US, located in the Gulf of Mexico,” the organisation added. Reclaim Finance asked SCOR about the need to stop covering new LNG terminals, to which SCOR’s management showed no intention of taking any action, according to the NGO. “SCOR still has no policy on new transport infrastructure which contributes to the development of new fields and locks in greenhouse gas emissions for years to come. SCOR can still provide the cover that allows projects like Freeport LNG to expand. Even if SCOR has withdrawn from the NZIA, we expect it to maintain the momentum it has built up to date and to announce as soon as possible that it will stop supporting new LNG terminals,” Ariel Le Bourdonnec added. The International Energy Agency (IEA) has projected that to limit global warming to 1.5°C requires a halt to the development of new oil and gas fields. It has also said that the war in Ukraine does not change this. The above are well known to SCOR, which has one of the most ambitious investment policies in the oil and gas sector among French investors but an insurance policy that lags far behind its peers, Reclaim Finance concluded.  

Most small cars don’t provide good protection for rear-seat passengers, the latest crash test ratings from the Insurance Institute for Highway Safety show. “These results highlight one of the key reasons that we updated our moderate overlap front crash test,” said IIHS President David Harkey. “In all the small cars we tested, the rear dummy ‘submarined’ under the seat belt, causing the lap belt to ride up onto the abdomen and increasing the risk of internal injuries.” None of the five small cars IIHS tested earns a good rating. The Honda Civic sedan and Toyota Corolla sedan are rated acceptable. The Kia Forte, Nissan Sentra and Subaru Crosstrek are rated poor. IIHS launched the updated moderate overlap front test last year after research showed that in newer vehicles the risk of a fatal injury is now higher for belted occupants in the rear than for those in front. This is not because the rear seat has become less safe. Rather, the front seat has become safer because of improved airbags and advanced seat belts that are rarely available in back. Even with these developments, the back seat remains the safest place for young children, who can be injured by an inflating front airbag. To encourage manufacturers to improve rear-seat protection, the updated test adds a dummy in the back seat behind the driver. The driver dummy is the size of an average adult man. The rear dummy represents a small woman or 12-year-old child. IIHS researchers also developed new metrics that focus on the injuries most frequently seen in back-seat passengers. For a vehicle to earn a good rating, there can’t be an excessive risk of injury to the head, neck, chest, abdomen or thigh, as recorded by the second-row dummy. The dummy should remain correctly positioned during the crash without sliding forward beneath the lap belt, and the head should remain a safe distance from the front seatback and the rest of the vehicle interior. A pressure sensor on the rear dummy’s torso is used to check whether the shoulder belt is too high, which can make the restraint system less effective. As in the original test, the structure of the occupant compartment must maintain adequate survival space for the driver, and measurements taken from the driver dummy shouldn’t show an excessive risk of injuries. All five small cars provided good protection in the front seat. However, measurements indicated a slightly higher risk of head or neck injuries to the driver in the Sentra. For the rear seating positions, it was a different story. In all five vehicles, the rear dummy submarined beneath the seat belt, causing the lap belt to slide from the hip bones onto the abdomen, where it can cause internal injuries. In the three poor-rated vehicles, measurements taken from the rear dummy also showed a moderate or high risk of head, neck or chest injuries. Apart from submarining by the rear dummy, the acceptable-rated Civic and Corolla mostly provided adequate protection in the back seat. In the Corolla, the rear dummy’s head also approached the front seatback, which increases the risk of head injuries.

   

The world’s biggest climate coalition for insurers is set to hold emergency talks after a wave of defections revealed the extent to which anti-ESG rhetoric in the US is unsettling members. Signatories of the Net Zero Insurance Alliance are due to meet Thursday to discuss next steps after some of the group’s biggest members including Munich Re walked out, according to people familiar with the process who asked not to be identified discussing private information. The development follows an escalation of Republican Party attacks on businesses and investors perceived to be embracing environmental, social and good governance goals. In a May 15 letter, attorneys general representing 23 US states said they were “concerned with the legality” of the NZIA, as they blamed the group for rising insurance and gas prices, and linked the alliance to “record-breaking” inflation. The letter is the latest example of the GOP turning to antitrust rules as a lever through which to vilify ESG. GOP senators announced plans last year to fight “ESG collusion,” while House Republicans ended 2022 by launching an investigation into whether climate alliances “are violating antitrust laws.” The goal is to single out those “advancing the ESG agenda,” they said. “Global companies find themselves between a rock and hard place,” said Karl Racine, a former attorney general of the District of Columbia, who’s now a partner at Hogan Lovells. While Europe has “embraced ESG and established regulatory and legal requirements to support it,” the situation in the US is shaped by partisan politics. “Global companies are, thus, confronted with challenging questions as to how to navigate these disparate waters,” he said. The United Nations Environment Programme, which convened the NZIA in 2021, said in a statement Wednesday that the decision by some signatories to walk away from the alliance was “in light of the recent discussions within the United States.” UNEP didn’t immediately respond to a request for comment on Thursday’s meeting. NZIA, which hasn’t had any US members since being convened, has seen four major insurers walk out since the end of March. Munich Re’s defection was followed by Zurich Insurance Group AG and Hannover Re. This week, Swiss Re joined the exodus. All four have said they remain committed to climate goals, but preferred to pursue these in isolation rather than as part of the NZIA. “The biggest success of the anti-ESG movement is getting companies to talk less about ESG,” said Joshua Lichtenstein, a partner at law firm Ropes & Gray LLP in New York. “They have slowed the trajectory of ESG communications here in the US. But clearly, the pro-ESG side is still winning by a pretty large margin.” The legal foundation of the GOP’s attacks on ESG remains unclear. Sonali Siriwardena, partner and global head of ESG at Simmons & Simmons in London, said that with the AGs requesting documentation on the types of communications between NZIA members, as well as the kinds of commitments made and the factors influencing efforts to cut emissions, it now “remains to be seen how robust these allegations will be and how NZIA members will respond.” Other NZIA members have signaled they remain committed to the group. The alliance “has played an important role developing the critical standards and frameworks for insurers to meet net zero,” a spokesperson for Aviva Plc said in an emailed comment. “In light of recent developments, we are working with the UN and other members to determine the best course of action going forward. We remain fully committed to pursuing our ambition of becoming a net zero company by 2040.” For firms that remain in the alliance, “they are going to have to evaluate whether their continued participation is actually going to harm them commercially in terms of contracts from red states,” Lichtenstein said. The NZIA, which at its peak represented roughly 15% of the insurance industry’s global premiums, is one of eight climate finance coalitions within the Glasgow Financial Alliance for Net Zero of which former Bank of England Governor Mark Carney was the principal architect. In an emailed statement, UNEP said that “regardless of the situation,” it “reaffirms its conviction ever since it initiated, convened, and launched the NZIA — that in order to successfully tackle the climate emergency, there is a fundamental and urgent need for collaboration, not just individual action.”    

U.S. workers' compensation insurers lowered rates in three dozen states during the first quarter, according to an S&P Global Market Intelligence analysis. The Hartford Financial Services Group Inc. led the field by securing approval for 79 rate cuts across nine states for an aggregate calculated premium change of $22.3 million. AmTrust Financial Services Inc. was second, receiving approvals for 39 rate reductions in the quarter for an aggregate calculated premium change of $20.3 million. The largest single rate decrease was a 5% rate cut by Missouri Employers Mutual Insurance Co. that will lower its premiums by $9.7 million. The rate reduction went into effect on Jan. 1 for both new and renewal businesses and is expected to affect about 13,500 policyholders. Georgia, South Carolina approve hundreds of cuts Regulators in Georgia were highly active as workers' comp insurers operating in the state obtained approvals for 206 rate decreases, for an aggregate calculated premium decrease of $116.1 million. South Carolina was also very active during the quarter, as its regulator signed off on 314 rate decreases for an aggregate calculated premium change of $60.1 million. Sirius increases rates There were fewer rate increases across the country than during the previous quarter, with the most significant rate hike in California. SiriusPoint Ltd. secured an 8.3% rate increase there for a calculated premium change of $6.6 million. The new rate went into effect on Feb. 24 for both new and renewal businesses.  

Climate-driven floods, hurricanes, wildfires and heat waves cause billions of dollars of damage every year in the United States. Federal scientists hope that better access to climate data will help one industry adapt: property insurers. Insurance companies are on the hook to pay for repairs after disasters, and even to rebuild entire homes and businesses that are destroyed. The growing cost to insurers was on full display last year, when Hurricane Ian caused more than $100 billion of damage in Florida, at least half of which was insured. As climate-driven extreme weather gets more common, insurance companies nationwide raise prices, or cancel policies altogether, leaving homeowners in the lurch. Florida, North Carolina, Louisiana, Colorado, Oregon and California have all seen insurers fold, cancel policies or leave the state after repeated floods, hurricanes and wildfires. "More and more Americans are frankly having mother nature barge through their front door," says Roy Wright, who leads the Insurance Institute for Business and Home Safety, an insurance industry-backed research group. "That change in climate comes at a price." Now, two federal science agencies are trying to help. The National Oceanic and Atmospheric Administration (NOAA) and the National Science Foundation (NSF) say they will create a research center that focuses on bringing climate change data to the insurance industry. Climate science can help companies see the future The goal is to help insurers understand how often and how severe floods, fires, heat waves and other climate-driven disasters will be in the future, so that companies can adjust their businesses to cope with that risk. It's not that insurance companies aren't already considering climate change. "Insurers are incredibly sophisticated around trying to understand physical climate risk," says Sarah Kapnick, NOAA's chief scientist. But, Kapnick says, the methods that insurers currently use to figure out how much to charge for a property insurance policy don't typically include detailed, long-term projections about how the climate will change in the future. Instead, companies rely on information about what has happened in the past: how frequently hurricanes have caused flooding, for example, or how hot the weather gets in August. The problem is that the future, and even the present, no longer look like the past. Large hurricanes that used to be infrequent are getting more common. The hottest days are often beyond what anyone has ever experienced. "What we knew about rain and wind and wildfire in 1990, and what we knew in 2010, is useful information, but it's insufficient to understand the risks that befall us come 2025, come 2030," Wright says. "NOAA, and the data they provide, is some of the most powerful data available anywhere in the world." Insurance companies are worried about climate change Kapnick says she has heard from insurance companies that are increasingly concerned that they don't have sufficient information to accurately assess what the future holds. "In the last few months they've really come to us saying, 'We need better information on understanding climate change and its effects on extreme [weather],'" Kapnick explains. The industry group the American Property Casualty Insurance Association says the new research center will be "extremely beneficial" to property insurers. "Climate change is a significant concern to the property casualty insurance industry as our nation faces the prospect of increased frequency and severity of major natural disasters including hurricanes, wildfires, and floods," Karen Collins, a vice president at the trade group, wrote in an email to NPR. "Insurers strongly support increased investments that help advance the latest science." The goal of the new research center will be to make detailed federal climate data available to insurance companies so they can use climate science to look into the future. In the coming months, the National Science Foundation will choose one or more universities to lead the center. Academic researchers, graduate students and federal scientists will work with insurers and reinsurers to make scientific information about climate change accessible to insurance companies, NOAA says. This type of collaboration between universities, government scientists and companies is not limited to climate science. The NSF oversees more than 70 such centers, including in agriculture, materials science and transportation.    

When Rod Buvens climbed to inspect the tile roof of the Estero home in 2019, he quickly found signs of damage. Hurricane Irma had churned through the area about 18 months earlier, but there were still broken tiles on the roof’s windward side — the side that bore the brunt of the storm’s force. When Buvens tested other tiles, trying to lift them with three fingers, many were loose. Hired by St. Petersburg-based United Property and Casualty to assess the homeowner’s claim, Buvens wrote an estimate for a full roof replacement, at $70,000. But that’s not what the homeowner received. After seeing Buvens’ estimate, United Property and Casualty, known as UPC, sent engineers to the home. The engineers found six broken tiles, but reported no damage. A final report — with Buvens’ name on it — said the claim wasn’t covered and the homeowner was owed $0. Buvens’ 2019 case is the earliest known accusation that an insurance company manipulated a homeowners’ assessment to reject or lowball a claim, a potential felony under state law. The case, which came out in a civil lawsuit, was reported in 2021 to the Department of Financial Services, the state agency that investigates insurance fraud. But state investigators quickly dismissed the complaint without interviewing Buvens. A spokesperson for the head of the agency, Florida Chief Financial Officer Jimmy Patronis, said it was closed “due to lack of participation by witnesses.” Yet that claim was refuted by Buvens in repeated follow-up emails to his office. Since then, at least seven other adjusters for insurance companies have come forward saying their reports were similarly manipulated to pay homeowners less than their claim estimates. Four have given sworn testimony in civil cases, which can be used in criminal court. Three others spoke during the Florida legislative session in December. Patronis’ office has reopened Buvens’ case as part of a larger investigation into claims against United Property and Casualty, now insolvent. The initial response from state regulators reflects how officials pursue complaints of fraud by policyholders and their advocates but not complaints against insurance companies, said Doug Quinn, executive director of the American Policyholder Association. It was Quinn’s association that referred the case to Patronis’ office. “There appears to be no motivation to go after insurance companies,” Quinn said. Adjuster sent to assess claim The owner of the Estero home said he was encouraged to file a claim by a contractor, SFR Services. The company had seen the damage, and it encouraged him to sign over his benefits in exchange for dealing with the homeowners’ insurance company, a subsidiary of United Property and Casualty. “The contractors pretty much handled everything,” the owner said recently. He asked that his name not be used because he feared appearing in a news story would make it harder for him to find homeowners insurance for his other properties. (Lawmakers last year banned homeowners from assigning their insurance benefits to a contractor, blaming such practices for driving up insurance prices.) When it received the claim, United Property and Casualty assigned an independent adjuster to assess the damage. Many insurers use contracted adjusters after storms. Licensed adjusters document the damage, determine whether it should be covered and estimate the repairs. That contractor employed Buvens, who had been a licensed field adjuster since 1992′s Hurricane Andrew. He also had a law degree from Louisiana State University. With his experience, he was one of only two field adjusters that United Property and Casualty used for assessing tile roofs in Collier and Lee counties, he later testified in a deposition. Tile roofs are often the most expensive type of roof. Buvens saw that wind had damaged the roof. The ceiling had water stains consistent with storm damage, he originally determined. He estimated repairing the garage and removing debris would cost another $1,376.30. But the estimate that the homeowner later received from United Property and Casualty concluded there was no wind damage, and they were owed nothing. Denial triggered lawsuit The homeowner’s contractor, SFR Services, sued United Property and Casualty on their behalf. In 2020, lawyers took Buvens’ sworn deposition for the case. When asked why he concluded that there was no storm damage to the home, Buvens said he was “told to put that in the report” by a desk adjuster working for United Property and Casualty and by the company that hired him. He said that they also told him to remove the $1,376.30 to repair the garage and remove debris. The company did not respond to requests for comment. He added that the claim director approached him about the deposition and told him to “play ball” or “I wouldn’t be working for (United Property and Casualty) anymore,” Buvens testified. I said, ‘I tell the truth, the whole truth. If you don’t like it, I’m sorry about that. You will have to do what you have to do.’” Orders to change estimates didn’t stop at that particular homeowner’s claim, Buvens said. United Property and Casualty was “constantly changing claim-handling practices,” he told lawyers, saying he knew of more than 1,000 instances “where they asked licensed field adjusters to go against their statutory duties to handle claims in good faith with the policyholder.” Buvens said such instances included the insurance company “ignoring damages” and “removing estimates that the field adjuster wrote.” United Property and Casualty offered to settle the case. The company paid $117,000, including $19,000 in SFR Services’ legal fees, according to SFR’s president, Ricky McGraw. The homeowner’s roof was replaced. Under Florida law, it’s a third-degree felony for someone to produce a loss estimate for an insurance claim if they know the estimate contains false, incomplete or misleading information. The penalty is up to five years in prison. If the fraudulent amount is more than $100,000, it could be a first-degree felony with up to 30 years in prison. Quinn, with the American Policyholder Association, was told about Buvens’ testimony from the lawyer handling the case, John Tolley. The association uses membership dues to report fraud by insurance companies and promote best practices among state regulators. Investigators with the association, including a former prosecutor, felt Buvens’ statement in the deposition was legitimate. In 2021, they alerted the FBI and Patronis’ office — which investigates insurance fraud. The allegations had a precedent: In 2016, New York’s attorney general secured guilty pleas against an engineering firm and a former executive on charges of falsifying engineers’ reports on flood claims after Hurricane Sandy. The association’s complaint went to a fraud investigator at Florida’s Department of Financial Services. The investigator asked Buvens to come to Fort Myers, where the department has a field office, he told the Times/Herald. Buvens was working in Texas at the time and asked to talk virtually. Buvens said he never heard anything more about it. The department closed the case “due to lack of participation by witnesses,” department spokesperson Devin Galetta told the Times/Herald in December. Buvens disputed that he wouldn’t cooperate. As evidence, he forwarded multiple emails sent to Patronis’ main address asking why he had received only “one, single initial communication” in response to his complaint. “Very plainly, the department has not followed up on the numerous UPC (United Property and Casualty) complaints that have been filed,” he wrote to Patronis. Eight adjusters have come forward Since then, at least seven other independent adjusters working for United Property and Casualty and other Florida-based insurers have alleged their reports were similarly manipulated to reject claims. In depositions, two adjusters said they were told only to go to the home to document the damage — someone above their head would fill out whether the claim was covered. In December, three other adjusters told a Florida House committee that insurance companies were routinely altering inspection reports. They followed up with records showing how one Venice homeowner’s 2022 claim was reduced from $37,258 to $2,524. After The Washington Post wrote about their allegations in March, state lawmakers changed the law to require insurers to document changes to an adjuster’s report and include the name of the person who ordered the changes. Quinn forwarded to Patronis’ office a complaint by another independent adjuster working for United Property and Casualty. That adjuster, Niles Wood, testified that the company had manipulated his claims. He shared a voicemail left on his phone from a United Property and Casualty employee telling him that they need one homeowner’s estimate “zeroed out.” “This is again UPC standard on these Hurricane Irma claims,” the employee says, according to the voicemail obtained by the Times/Herald. “The general loss statement needs to be changed to, ‘We cannot determine the damage or the date of loss of the damage.’” Text messages sent to a group of adjusters show a supervisor telling them that on Hurricane Irma claims, United Property and Casualty “no longer want you to turn in any estimate whatsoever for any damages.” “They are going to be doing denials on all of them,” the supervisor wrote. The messages were included in a federal racketeering lawsuit filed by SFR Services against United Property and Casualty and adjusting firms last year. Patronis’ office said they referred the cases to the state Office of Insurance Regulation, which can assess civil fines, not criminal charges. Office of Insurance Regulation spokesperson Samantha Bequer said they received the referral on Buvens’ case in January 2022. The office “reviewed the complaint in-depth,” but Bequer noted that United Property and Casualty’s financial condition was deteriorating as the investigation got off the ground. By October, company officials told regulators they were pulling out of the Florida market, Bequer said. The company is in state receivership, although its parent company still writes policies on commercial buildings. When asked about the adjusters’ cases in March, Patronis said his office was investigating. Buvens confirmed that an investigator has reopened his case. “If there’s criminal acts being found, we will prosecute to the fullest extent,” Patronis told the Times/Herald. But he cautioned that “there’s two sides to every story.” “Contractors can suck. Public adjusters can suck. Insurance companies can suck,” Patronis said. “But I can’t stress enough: It’s a disaster. There’s a reason why they call it ‘disasters.’ They’re not going to go smoothly.”  

Microsoft President Brad Smith backed calls for the U.S. government to create a new agency to license major artificial-intelligence systems, amid growing support for regulation of an industry that is moving aggressively to commercialize powerful new tools such as ChatGPT. “We are absolutely committed to ensuring that [AI] serves people well, that it brings real benefits, that it’s kept under human control,” Smith told The Wall Street Journal ahead of a Thursday speech in Washington, where he will make the case for regulation. “But I don’t think at the end of the day, we’re best served solely by a system that says, ‘Take the word of a large company.’ ” A new federal agency to oversee AI’s development is the “most sensible” course, Smith said in response to a question, echoing similar comments from Sam Altman, CEO of ChatGPT creator OpenAI, made to a congressional panel last week. Smith’s comments come as Washington considers how to respond to rapid consumer adoption of ChatGPT and other so-called generative AI systems, which have humanlike abilities to converse, create media, write computer code and more. Members of Congress are discussing bipartisan legislation to set safeguards on AI, and on Tuesday the Biden administration sought public input on a national AI strategy that could lead to new regulations. Policy makers have raised concerns about a range of potential downsides of the technology, such as the potential for AI systems to supercharge hacking capabilities or manipulate voters. One reason policy makers are so focused on the issue is that Microsoft has placed powerful AI tools in the hands of millions of its customers, benefiting its bottom line. Microsoft in January signed a $10 billion deal with OpenAI that would allow the tech giant to own 49% of OpenAI’s for-profit arm, the Journal has reported, citing investor documents. ChatGPT runs on Microsoft’s Azure cloud-computing platform, and Microsoft has incorporated ChatGPT and other so-called generative AI systems into an array of products including its Bing search engine, a move it hopes will peel away market share from Google. Microsoft and OpenAI’s rapid rollout led Google, a subsidiary of Alphabet, to launch a counteroffensive. It has made its own chatbot, called Bard, widely available to consumers and earlier this month announced plans to add AI systems to dozens of products. Meta Platforms, owner of Facebook and Instagram, is looking to cash in on its own chatbot program. Microsoft, Google and Meta all say they are rolling out the systems with safeguards, such as by limiting the questions chatbots will answer. Smith said Microsoft has been advocating for guardrails around AI for years, noting that it backed a Washington state law regulating the use of facial-recognition technology. “It would be a problem if we were advocating for regulation that only we could satisfy—that is not the case,” Smith said. “We are advocating for the kinds of laws and regulations that, I would argue, anyone who wants to be serious in the world of AI can and should meet.” The new regulatory regime should also place obligations on companies that provide apps based on powerful AI systems, Smith said in a blog post set to be published Thursday along with his speech in Washington to an audience of government officials and policy experts. For example, companies should have a responsibility to know who their customers are in case the technology is misused, and should be required to label or mark when a piece of digital content has been created by AI rather than a human being, the company said. Policy-making efforts in the U.S. are in early stages. Lawmakers on Capitol Hill are tied up in a high-stakes fight over the debt limit, with little time for legislation on other topics. The Biden administration can impose some checks on AI systems under existing law, but those are generally limited to after-the-fact law enforcement actions rather than pre-emptive safety rules. Smith said governments should give priority to safeguards around AI systems involved in “critical infrastructure,” such as a power grid or city traffic system. The administration should also issue an executive order declaring that any company selling AI tools to the government should have to implement the voluntary AI risk-management framework recently published by the National Institute of Standards and Technology, he said. In the absence of government action, Smith said Microsoft has talked with other industry players about a voluntary set of standards for AI systems, but those discussions remain informal. “There is an opportunity for the industry to share best practices, common principles, and also even adopt a set of standards,” Smith said, but he added that the best choice is for the government to take a leading role.    

WTW, a leading global advisory, broking and solutions company, today announced the introduction of a new financial product targeting clients intending to protect and leverage their intangible assets by considering transfer of the associated risks. To meet client demand, WTW is introducing Intangible Asset Protection (IAP), a first-of-its-kind product to fill a coverage gap in the market. An intangible asset is one that is not physical in nature but one that can hold significant value, and which can be created, transferred, bought or sold. Typical examples of intangible assets include intellectual property rights such as patents, trademarks, and copyrights, in addition to databases, contracts, and licensing agreements. Non-public, proprietary information such as formulas, processes, R&D testing data, designs, algorithms, and computer programming code are also typically defined as intangible assets that carry exposures where a company might want to consider protecting and transferring the associated risks, which is where WTW’s new IAP product would apply. This new IAP coverage closes a coverage gap in cyber, property, business interruption, and traditional intellectual property (IP) insurance. In listening to clients, WTW has created IAP to offer protection against IA-related exposures and their potential financial impacts. IAP is a tailored insurance offering that will initially cover non-public, proprietary, intangible assets from accidental or malicious insider actions resulting in disclosed, misappropriated, damaged, destroyed or lost IA. Kim Cauthorn, Global IP Leader, WTW, commented, “We listen closely to the needs of our clients; intangible assets comprise the majority of enterprise value for many entities today, but most of those assets are uninsured. Accordingly, that calls for a product that closes a key insurance coverage gap.” Beginning with coverage capped at $10 million in year one, it will expand through an iterative approach to cover additional intangible asset categories and exposures at higher limits. “IAP is the first holistic, modular vehicle for clients to tailor coverage to fit their IA risk profile, with the potential to grow and evolve with their business needs.” Aoife Woulfe, Head Intellectual Property, Tokio Marine Kiln (TMK), the carrier partnering on the solution, commented, “Tokio Marine Kiln has a longstanding reputation for intellectual property products that address changing clients’ needs, and we are proud to partner with WTW on this pioneering product. This product addresses critical coverage gaps in intangible risks and has the potential to become invaluable to clients by increasing the resilience of their businesses to unexpected events.” About WTW At WTW, we provide data-driven, insight-led solutions in the areas of people, risk, and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce, and maximize performance.

A generation of startups promised to transform the insurance industry with new types of data and algorithms to more accurately assess risk and price policies nearly a decade ago. So far, this has not occurred. Lemonade, Root Insurance, and Hippo, three high-profile insurtechs that have since gone public, have each lost tens of millions of dollars in their most recent quarters and seen their share prices plummet in recent years. At first, the insurance pricing process, which is heavily reliant on algorithms and mathematical modeling, appeared ripe for disruption due to advances in the sheer amount and variety of data digitally-native companies could suddenly collect on customers. However, the Silicon Valley axiom of "move fast and break things" hasn't been enough to transform an industry founded on centuries of observed human behavior, massive marketing budgets, and a keen understanding of the regulatory environment.Founded in 2015, Lemonade initially aimed to sell renters and homeowners insurance. It was worth $9.87 billion at its peak in 2021; it’s now worth $1.23 billion. Root Insurance, also founded in 2015, began with the idea of using telematics—or in-car data—to offer personalized auto insurance based on how people drive. In 2020, it was worth roughly $6.8 billion, and has since swooned to about $67 million. Property and casualty insurance startup Hippo went public at a $5 billion valuation in 2021. It is now worth around $425 million. So far, the insurtechs have been slow to gather and contextualize enough data to actually build better models. Regulations have restricted the use of some of their data and differentiated pricing. And it has been difficult to chip away market share from established industry giants. “For those who believed they could build a full-stack insurance company that would become a market-leading, at-scale carrier—I think that thesis has not materialized,” said Tanguy Catlin, a senior partner at McKinsey. All three upstarts say profitability is on the horizon, some blaming their recent poor showings on inflation and a pullback in tech investment over the last year. Their models are becoming increasingly accurate, they say, as they gather more data and learn how to contextualize it, and losses are trending downward. They also said they’ve had a meaningful impact on the customer experience of buying insurance, which can now be done online. But as far as transforming the risk analysis and pricing of insurance, that remains to be seen. “To date, we’ve not really seen disruption,” said Jefferies analyst Yaron Kinar. Data Problems “We did a fairly shoddy job of pricing and identifying risks. And we knew we would,” said Lemonade co-CEO and co-founder Daniel Schreiber of the early days of the company. The problem was that Lemonade, along with other insurtechs, started without access to the historical data sets that incumbents have been gathering, in some cases, over many decades. To build those more nuanced and complex sets of data takes time, Schreiber said. It isn’t just a matter of collecting enough data points, but also of identifying those that signify risk, which only happens once a claim is filed, he added. It’s a similar story at auto insurance startup Root, which built its business around the use of telematics. Through a smartphone app, Root could track the driving styles of users for two weeks, then offer them a personalized price based on how they drove. But Root didn’t know for sure whether certain driver behaviors actually correlated to higher risk until accidents occurred and the claims started coming in, said Chief Executive and Co-founder Alex Timm. Root grew fast, and in its early years had tens of thousands of claims coming in to work with. Once it was able to refine its model, the company went back and adjusted prices, Timm said. But that was a risky play, said Jefferies analyst Kinar. The type of clients who gravitated to insurtechs were younger and more price-sensitive—meaning they were more likely to leave the platform if they saw a meaningful rate increase. Root said 60% of its customer base is under 30. Chevy vs. Ferrari  Although startups had the digital-forward advantage of being able to collect tons more data points from smartphones, online interactions and other sources, regulations prevented them from actually using much of it for risk analysis and pricing. Lemonade says it collects hundreds of data points on people who visit its website to buy insurance. The company can see whether someone came to the website by searching for “cheap insurance” versus “good insurance,” as well as other information, Schreiber said. Lemonade can correlate some of these online behaviors to more risky individuals. That provides a fuller picture of a potential customer than having them simply answer 20 questions over the phone, the way they might in traditional insurance, he said. But regulation stops Lemonade from using information about observed behavior for pricing, Schreiber said. The company still uses it for targeted marketing, he added. Regulations vary state by state on what data can be used for pricing. The use of telematics to price auto insurance is permitted in some, but not others, said Timm. For that reason, Root cannot use telematics to price policies in California. At Hippo, the company can link to its customers’ smart home devices, but no data from those devices can be used to assess risk. The company can, however, use the fact that a given device is turned on to give the customer a discount. When insurtech was hot, startups were pitching all types of new data, including voice analysis or weather predictions five years into the future, as ways of transforming risk analysis, according to Michel Leonard, chief economist and data scientist at the Insurance Information Institute. But those lofty ideas were dashed on the realities of regulation, he said. “At first, it’s a great sell, great technology,” Leonard said. “But then when you come to underwriting, well, what’s the point? You can’t use it and you don’t have legacy data, so you’re really at a disadvantage.” Given those restrictions, the startups’ souped-up computing turned out to be superfluous, he said, like building a “Ferrari, when a Chevy is good.” ‘900-Pound Gorillas’ As they worked to provide more accurate pricing models, the startups found themselves in an intensely competitive industry. The cost of acquiring customers is enormously high in the insurance business, said McKinsey’s Catlin. In direct-to-consumer auto insurance, for instance, some market leaders spend billions a year on marketing, he said. “You’re coming up against two—900-pound gorillas is an understatement,” Jefferies’ Kinar said referring to Geico and Progressive. The incumbent advantage, he said, is both in their scads of marketing dollars as well as their deeper wells of data to figure out how to put those dollars to best use. “It’s certainly not for the faint of heart,” commented Timm. Catching Up Analysts agree that while insurtechs have yet to transform the industry, they have left their mark on the way providers interact with customers, with faster, digital channels. Entrenched companies are working to catch up. At Allstate, the amount of time it takes to buy a policy has dropped significantly, said Suren Gupta, president of enterprise solutions. A process that might have taken around 20 minutes can now be done, in some cases, in less than five, he said, adding that some of the changes he’s put into motion have been inspired by insurtechs. Indeed, the greatest value of insurtech startups might be as incubators for the industry, Catlin said. “You put money into insurtech to develop cool technologies, and then the traditional carriers find a way to access that technology, whether they buy the insurtech or they license the technology,” said Catlin. “That’s where I’ve seen most of the evolution.” Lemonade, Hippo and Root said their virtual origins still give them a head start over industry powerhouses working from legacy systems. Hippo also said its agility gives it the opportunity to adapt to market conditions better by filing rate changes faster and more frequently than its more established rivals. As far as promises around industry “disruption” go, Kinar said, “these days, that word doesn’t come up much at all anymore.”