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June 9, 2023

Property Insurers Curb New Policies in Cat-Prone Areas Nationally

Insurance companies are pulling back on homeowners’ policies in vulnerable areas nationally out of fear of floods, storms and fires made worse by climate change and soaring costs of rebuilding. AIG is planning curbs on home-insurance sales to affluent customers in some 200 ZIP Codes across the U.S. at high risk of floods or wildfires, people familiar with the matter said. The states affected include New York, Delaware, Florida, Colorado, Montana, Idaho and Wyoming, the people said. AIG has already restricted new business in California.

In a little-noticed pullback, Farmers Group earlier this year stopped offering new home-insurance policies in hurricane-prone Florida. A spokesman said that “with catastrophe costs at historically high levels and reconstruction costs continuing to climb,” the pause was designed to help Farmers more effectively manage its risk exposure.

State Farm and Allstate, meanwhile, are pulling back from California’s home-insurance market. The shift is making it hard for some home buyers to get insurance and is sparking fierce wrangling over what is most to blame: climate change, inflation or regulations.

Insurers in California say regulatory curbs on pricing mean they can’t recoup an inflation-driven surge in rebuilding costs, as well as rising losses from wildfires.

Payouts on claims to California homeowners more than doubled in 2019 through 2022, while premiums increased by only around a third, according to the American Property Casualty Insurance Association, an industry group.

Consumer advocates accuse the major insurance companies of using their market power to push back on policyholder protections. “They’re trying to bully their way out of oversight,” said Douglas Heller, director of insurance at the Consumer Federation of America. “They’re exploiting the moment to get something they’ve always wanted.”

State Farm and Allstate declined to comment on the suggestion that they are trying to pressure regulators.

The insurers’ moves leave homeowners with fewer choices or, in some cases, no choice at all, according to insurance brokers.

In California, State Farm and Allstate were “the only game in town” for multimillion-dollar homes in wildfire-exposed areas such as Lake Tahoe or Carmel, according to Jim Tolliver, a San Francisco-based broker with Woodruff Sawyer.

The decision by insurers to stop writing new home-insurance policies means properties including a Beverly Hills mansion that Tolliver is trying to find coverage for might not be insurable, he said. Allstate and State Farm are two of the five biggest insurers in the state. California has an insurer of last resort, the Fair Access to Insurance Requirements Plan, but that is expensive and offers bare-bones coverage of at most $3 million.

“California is a broken insurance system,” Tolliver said. “It’s a ticking time bomb.”

Ricardo Lara, the state’s insurance commissioner, disagrees, saying insurers in the past have paused and restarted writing policies. “We have been here before after wildfires and market changes,” he said. Lara, an elected official, added that the pullback won’t deter his staff from scrutinizing insurers’ pricing strategies “to prevent unjustifiably high rates.”

The question of what rates are justified is a thorny one.

California hasn’t been a consistently bad place for companies to sell home insurance in recent years. The average loss ratio, which measures claims in relation to premiums, on these policies was better in the state than in the U.S. as a whole in six of the 10 years through 2022, according to the ratings company AM Best.

But wildfires, increasing in severity and frequency owing to climate change, have taken a toll on insurers’ earnings. Since the start of 2017, seven of the eight wildfires with the highest insured losses have occurred in California, according to the insurance brokerage Aon.

Reinsurers, which companies including State Farm use to take on some of the risks of the policies they sell, have reacted to escalating losses on catastrophes by pushing up their prices. Rates for property-catastrophe reinsurance policies renewed on June 1 rose 33% on average, according to a recent report from the reinsurance broker Howden Tiger.

Adding to these pressures, the postpandemic rise in inflation and supply-chain glitches have pushed up rebuilding costs. Reconstruction costs, including the cost of labor and materials, have risen 25% in California since the start of 2020, according to the analytics company Verisk.

“With inflation so high, insurers don’t have much profit padding to carry them through a market where they’re taking short-term losses,” said Amy Bach, executive director at the consumer-advocacy group United Policyholders.

State Farm’s Californian property-insurance arm posted a $312 million underwriting loss for the first three months of this year, more than its $241 million loss for all of 2022, according to public records.

Lara, the California insurance commissioner, said insurers have failed to ask for the rate increases they need. A law passed by California voters in 1988, known as Proposition 103, requires insurers to get approval from the commissioner for rate increases. Requests for hikes of more than 6.9% can go to a public hearing, which typically means a decision takes 18 months or more, according to industry insiders.

Insurers typically asked for increases below 7%, sometimes more than once a year. State Farm and Allstate have now put in for much higher increases. State Farm requested a 28% raise in March, and Allstate last month put in for a 39.6% boost, state records show.

Allstate blamed California’s rate-approval system for its decision to pause new applications, saying it meant adjusting prices quickly to reflect the inflationary increases in rebuilding costs wasn’t an option. As a result, “The cost to insure new home customers in California is far higher than the price they would pay for policies,” the company said in a statement.

Insurers are pushing for changes to the state system to allow them to increase premiums more readily. They argue that climate change means that the current system of using historical claims data only, rather than also using models of potential wildfires, doesn’t accurately reflect the risks. The industry is also advocating for being allowed to reflect reinsurance costs in their requests for premium increases.

Even without the changes that the industry wants, rates are already going up a lot in the state, according to Bach of the consumer group United Policyholders. She said the commissioner’s message to insurers to ask for what they need will likely accelerate that trend. “Buckle your seat belts, California,” she said.

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June 9, 2023

Supreme Court Narrows the Reach of an Aggravated Identity Theft Law

The Supreme Court on Thursday narrowed the scope of a federal law that adds two years of prison to various felonies if identity theft is involved, unanimously ruling that the government had interpreted what can count too broadly.

The case centered on a Texas man, David Dubin, who was convicted of overbilling Medicaid for a psychological services firm. Because he submitted an inflated claim using a patient’s Medicaid number, prosecutors convinced a judge that the law on aggravated identity theft applied, and Mr. Dubin received a longer prison sentence.

But in a 21-page opinion joined by seven of her colleagues, Justice Sonia Sotomayor wrote that a defendant’s misuse of another person’s identity must be “at the crux of what makes the underlying offense criminal, rather than merely an ancillary feature of a billing method.” She rejected the government’s more sweeping interpretation that the law lacked any limit.

Under the government’s reading, she wrote, “as long as a billing or payment method employs another person’s name or other identifying information, that is enough. A lawyer who rounds up her hours from 2.9 to three and bills her client electronically has committed aggravated identity theft. The same is true of a waiter who serves flank steak but charges for filet mignon using an electronic payment method.”

“The text and context of the statute do not support such a boundless interpretation,” she added.

Congress enacted the law, the Identity Theft Penalty Enhancement Act, in 2004. It says that for a list of felonies, whoever “knowingly transfers, possesses or uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of two years.”

A House Judiciary Committee report at the time justified it by citing the frequency of identity theft when people opened credit card or utility accounts in someone else’s name and warned that such a tactic could help terrorists. Some Democrats opposed the bill because of the mandatory minimum sentence.

But the law has proved problematic for another reason: Congress left unclear what kinds of misuses of other people’s means of identification should trigger the law. While Mr. Dubin’s case does not fall squarely within an ordinary understanding of “identity theft,” both a district court and appeals court had ruled that it fit within the statute’s text.

Even with the new test established by the majority on Thursday, Justice Neil M. Gorsuch, in a concurring opinion, expressed worry that lower courts would still struggle to interpret the vague wording of the statute. He urged Congress to clarify the law, writing that it alone could fix the matter.

“Until it does, I fear the issues that have long plagued lower courts will persist,” he added. “And I will not be surprised if someday, maybe someday soon, they find their way back here.”
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June 9, 2023

Cyber Models Put 1:200-Year Loss Event at Up to $33.4B: Guy Carpenter

A 1 in 200-year cyber event could cost the global cyber insurance industry between $15.6 billion and $33.4 billion while a 1:50-year event could cause losses between $5.5 billion to $24.4 billion, according to a new analysis from reinsurance broker Guy Carpenter. A 1:200-year ransomware/malware event created the largest potential losses across models, per the report titled, Through the Looking Glass: Interrogating the Key Numbers Behind Today’s Cyber Market. Other scenarios included cloud disruption and data theft events. To develop the report, Guy Carpenter used data associated with 1.8 million cyber policies to model loss scenarios in three industry cyber models -- CyberCube, Guidewire-Cyence, and Moody’s RMS. The broker found wide variation among the models, especially on the 1:50-year events, with output from CyberCube trending higher, Moody’s RMS on the lower end, and Guidewire-Cyence in the middle for each scenario. Some of the variation could be explained by different parameters considered by models. For example, CyberCube’s model has a larger footprint of affected insureds for the ransomware scenario and includes financial fraud as a significant loss cost contributor to the data theft scenario. On the cloud outage scenario, all three vendors differed in their view of average severity per company. Guy Carpenter advised “focusing as much on the ‘why’ as the ‘how much’ of model divergence and noted that natural catastrophe models also show variations. However, the industry should be prepared to carefully evaluate model output. “There is no question that modeled losses from a significant cyber event would impact the market. However, given the industry’s resilience to significantly greater losses from other classes, in most cases these should not be insurmountable,” said Anthony Cordonnier, global co-head of cyber for Guy Carpenter. The broker added, “Cyber sits firmly within the range of a class with an extended tail and a high degree of uncertainty, but not in the realms of unfamiliarity for insurers, reinsurers and investors. While precedents and modeling evolve, the relative convergence or divergence between the models will be closely followed, which will bring comfort to sources of potential capacity for the future.” The insurance-linked securities (ILS) sector has gradually shown more interest in the cyber space, due partly to the improvement in modeling, Guy Carpenter noted. “The improvements to data quality and nimbleness of the cyber models are instrumental in continuing to attract capital to the cyber market,” said Erica Davis, global co-head of cyber for Guy Carpenter. “As the models continue to evolve, reinsurance buyers and sellers will be able to hone in on what truly differentiates each portfolio and more accurately identify, price and trade key catastrophe risk.” Guy Carpenter conducted a similar study in 2019 – the cyber market has changed significantly since then not only in terms of model maturity, but in premium, cyber threat landscape, and insurance take-up rate. By the latest measures, the U.S.-domiciled cyber market has reached $9 billion in premium, with the rest of the world contributing about $5 billion. While still dominated by the U.S. at 62.5% of the global market, UK and Europe have shown “accelerated growth,” according to the report. Large organizations account for 41.7% of global premium, while medium, small, and micro-sized companies account for over 58%. “It is apparent that the cyber market has become a much more significant constituent of the global insurance industry. At no time in the past has it had as much critical mass as it has now, and there are no signs of slowing down,” said Guy Carpenter.
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June 9, 2023

Lawyers Blame ChatGPT for Duping Them into Citing Bogus Case Law

Two apologetic lawyers responding to an angry judge in Manhattan federal court blamed ChatGPT Thursday for tricking them into including fictitious legal research in a court filing.

Attorneys Steven A. Schwartz and Peter LoDuca are facing possible punishment over a filing in a lawsuit against an airline that included references to past court cases that Schwartz thought were real, but were actually invented by the artificial intelligence-powered chatbot.

Schwartz explained that he used the groundbreaking program as he hunted for legal precedents supporting a client’s case against the Colombian airline Avianca for an injury incurred on a 2019 flight.

The chatbot, which has fascinated the world with its production of essay-like answers to prompts from users, suggested several cases involving aviation mishaps that Schwartz hadn’t been able to find through usual methods used at his law firm.

The problem was, several of those cases weren’t real or involved airlines that didn’t exist.

Schwartz told U.S. District Judge P. Kevin Castel he was “operating under a misconception ... that this website was obtaining these cases from some source I did not have access to.”

He said he “failed miserably” at doing follow-up research to ensure the citations were correct.

“I did not comprehend that ChatGPT could fabricate cases,” Schwartz said.

Its success, demonstrating how artificial intelligence could change the way humans work and learn, has generated fears from some. Hundreds of industry leaders signed a letter in May that warns “ mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war.”

Judge Castel seemed both baffled and disturbed at the unusual occurrence and disappointed the lawyers did not act quickly to correct the bogus legal citations when they were first alerted to the problem by Avianca’s lawyers and the court. Avianca pointed out the bogus case law in a March filing.

The judge confronted Schwartz with one legal case invented by the computer program. It was initially described as a wrongful death case brought by a woman against an airline only to morph into a legal claim about a man who missed a flight to New York and was forced to incur additional expenses.

“Can we agree that’s legal gibberish?” Castel asked.

Schwartz said he erroneously thought that the confusing presentation resulted from excerpts being drawn from different parts of the case.

When Castel finished his questioning, he asked Schwartz if he had anything else to say

“I would like to sincerely apologize,” Schwartz said.

He added that he had suffered personally and professionally as a result of the blunder and felt “embarrassed, humiliated and extremely remorseful.”

He said that he and the firm where he worked — Levidow, Levidow & Oberman — had put safeguards in place to ensure nothing similar happens again.

LoDuca, another lawyer who worked on the case, said he trusted Schwartz and didn’t adequately review what he had compiled.

After the judge read aloud portions of one cited case to show how easily it was to discern that it was “gibberish,” LoDuca said: “It never dawned on me that this was a bogus case.”

He said the outcome “pains me to no end.”

Ronald Minkoff, an attorney for the law firm, told the judge that the submission “resulted from carelessness, not bad faith” and should not result in sanctions.

He said lawyers have historically had a hard time with technology, particularly new technology, “and it’s not getting easier.”

“Mr. Schwartz, someone who barely does federal research, chose to use this new technology. He thought he was dealing with a standard search engine,” Minkoff said. “What he was doing was playing with live ammo.”

Daniel Shin, an adjunct professor and assistant director of research at the Center for Legal and Court Technology at William & Mary Law School, said he introduced the Avianca case during a conference last week that attracted dozens of participants in person and online from state and federal courts in the U.S., including Manhattan federal court.

He said the subject drew shock and befuddlement at the conference.

“We’re talking about the Southern District of New York, the federal district that handles big cases, 9/11 to all the big financial crimes,” Shin said. “This was the first documented instance of potential professional misconduct by an attorney using generative AI.”

He said the case demonstrated how the lawyers might not have understood how ChatGPT works because it tends to hallucinate, talking about fictional things in a manner that sounds realistic but is not.

“It highlights the dangers of using promising AI technologies without knowing the risks,” Shin said.

The judge said he’ll rule on sanctions at a later date.

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June 9, 2023

Lionel Richie Becomes an Acrisure Brand Ambassador

Acrisure announced today that legendary recording artist and entrepreneur Lionel Richie will be joining the company as an official Brand Ambassador. In this role, Richie will engage with broadcast and social media to raise awareness and generate excitement as Acrisure expands its direct-to-consumer offerings. He will also be a source of inspiration as he participates in other marketing efforts to highlight Acrisure's transformation into a broad Fintech services provider. Richie is a careful judge of character when it comes to whom he works with, and he decided to join the Acrisure team for two distinct reasons. First, he has seen and admired how the Company has prioritized innovation in every aspect of its business that has allowed Acrisure to grow beyond its insurance roots and establish itself as a global Fintech leader. Utilizing the best in human and artificial intelligence has enabled the Company to offer a full suite of financial services offerings to business and individual clients, including reinsurance, real estate, cyber security, and asset and wealth management, to name a few. Second, Acrisure's "limitless" culture syncs perfectly with Richie's personal ethos. Since its start, Acrisure pursued tremendous growth at a rapid pace; 75% of all M&A transactions come directly from existing Partner referrals, illustrating the personal and empathetic approach Acrisure brings to client relationships. Coupled with the Company's mantra of not staying complacent, this aligned with Richie's professional goals. "Acrisure could have coasted on its reputation as a massive player in the insurance industry, but it hasn't. Instead, it avoided the complacency that comes with success and has embraced innovation in so many ways. As a result, Acrisure has emerged as a true leader in the Fintech space," said Richie. "From what I've seen, its culture really values empathy - a sign that you can be focused on growth without forgetting where you started. At the end of the day, that's the type of company I want to work with." "It goes without saying but Lionel's stellar reputation will elevate and expand Acrisure's brand," said Greg Williams, Acrisure Co-Founder, Chairman and CEO. "His exceptional skill at connecting authentically with an audience will make him an invaluable resource for our organization. We're thrilled to partner with Lionel as we pursue our mission of limitless growth." Richie joining Acrisure is the latest accomplishment in a long list of recent marketing achievements. Last year, the Company received the naming rights from the Pittsburgh Steelers to establish Acrisure Stadium as the new home of the storied franchise. It also unveiled Acrisure Arena in Southern California - a world-class entertainment and sports venue and home to the AHL's Coachella Valley Firebirds. Acrisure also partnered with UBS Arena and the New York Islanders to name the state-of-the art venue's main entrance as "The Acrisure Great Hall" - along with many other local campaigns in Michigan, where the Company is headquartered. About Acrisure Acrisure is An Extraordinary Advantage℠ for millions of clients worldwide. The Company combines humans and high tech to deliver a broad array of products including Insurance, Reinsurance, Cyber Services, Mortgage Origination and more. In the last nine years, Acrisure has grown in revenue from $38 million to more than $4 billion and today employs over 15,000 colleagues in 21 countries. Acrisure expects to announce new developments in the near term. To follow news and updates in real time, visit or follow the Company on LinkedIn.    
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June 8, 2023

A Surprisingly High Number of Americans Think Insurance Fraud Is Not a Crime: Survey

A significant number of Americans aged 45 and younger show a high level of tolerance for insurance fraud – even feeling envious of those who commit it – according to a new survey of insurance consumers by Verisk and the Coalition Against Insurance Fraud. The study analyzes how American consumers view insurance fraud and insurance crime and delves into the psychology of insurance fraud to understand the motivations and justification for the crime derived from in-depth interviews with those convicted of insurance fraud. “This study should sound the alarm for insurers, consumer activists, regulators, and legislators on the state of fraud in America. While it’s marginally reassuring that 84% of Americans in the survey consider insurance fraud a crime, the 16% that do not consider it a crime potentially represent more than 53 million Americans,” said Matthew Smith, executive director of the Coalition Against Insurance Fraud. “There is a need for consumer education on the harm insurance fraud crimes have on our economy and on every American citizen and family.” The study found that 87-96% of older respondents consider insurance fraud a crime, while only 75% of those under age 45 consider it a crime, with the percentage skewing downward by age to only 64% for the youngest group. Other findings include:
  • More than 36% of all Americans believe it’s acceptable to submit an inflated auto damage claim
  • Over 30% of 25-34-year-olds “definitely would” submit a fraudulent property damage claim
  • 27% of those 18-24 would commit workers’ compensation fraud, compared to less than 10% of those 45 and older
  • Over a quarter of those 18-34 are “motivated” to commit insurance fraud compared to less than 7% of those over 45
“The results prove the continued need for insurers to be hypervigilant about the impact of fraud on their book of business,” said Maroun Mourad, president of Verisk Claims Solutions. “The fact that younger generations are more tolerant and motivated to commit claims fraud indicates that this problem is not going away and is likely to persist in the future. Carriers would be wise to set up a strong perimeter defense to ensure they are adequately and accurately detecting potential fraud throughout the policy life cycle.” The study, conducted by Dynata, collected more than 1,500 responses from a group of insurance-purchasing consumers matching the demographic standards identified in the 2020 U.S. Census. Learn more about the results of the study at a webinar on July 18. About Verisk Verisk provides data-driven analytic insights and solutions for the insurance industry. Through advanced data analytics, software, scientific research and deep industry knowledge, Verisk empowers customers to strengthen operating efficiency, improve underwriting and claims outcomes, combat fraud and make informed decisions about global issues, including climate change and extreme events, as well as political and ESG topics. About the Coalition Against Insurance Fraud Insurance fraud is the crime we all pay for, costing consumers more than $308.6B each year. Formed in 1993, the Coalition is the nation’s only alliance uniting all groups against insurance fraud. 280+ member organizations comprise the Coalition. Consumers, insurers, government agencies, legislators, prosecutors, and other committed partners come together under the Coalition banner. We fight all forms of insurance scams regardless of who commits the fraud. The power of our diversity and unity in protecting consumers earns the Coalition unparalleled credibility. The Coalition leads the fight against insurance fraud in our nation and with our global partners.

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June 8, 2023

Flood Insurance Costs Have Risen for More than Half of Policies: FEMA

Federal Emergency Management Agency (FEMA) recently released data that shows how flood insurance premiums changed following the implementation of Risk Rating 2.0, its latest methodology for calculating flood insurance costs for the National Flood Insurance Program (NFIP). As a result of these updates, many parts of the country could see their flood insurance costs go up. In fact, one South Florida zip code could see flood insurance premiums increase by 342%, according to an analysis by Miami Herald. But policyholders won’t see these increases all at once. Federal law caps flood insurance price hikes at 18% a year. This means some people will see their flood insurance go up each year until it meets the Risk Rating 2.0 standards. Following the release of Risk Rating 2.0, 66% of NFIP premiums have increased by at most $10, according to FEMA data. Meanwhile, 3.6% of policy premiums have gone up by more than $20. If you’re concerned about your overall housing costs, you can save by shopping around for home insurance policies. Visit Credible to compare options from different companies without affecting your credit score.

Where has flood insurance increased the most?

Across all states and territories, the average cost of flood insurance was $888 per policy prior to Risk Rating 2.0, according to FEMA data. With Risk Rating 2.0, the average cost of insurance is projected to be $1,808. Here are some of the states that could see the most expensive flood insurance costs on average, based on FEMA’s Risk Rating 2.0, which was implemented in October 2021 for new policies and in April 2022 for policies that were renewed.
  • Hawaii: $3,653
  • West Virginia: $3,074
  • Connecticut: $3,000
  • Maine: $2,700
  • New Hampshire: $2,545
  • Guam: $2,438
  • Vermont: $2,248
  • Florida: $2,213
  • Kentucky: $2,201
"The new methodology allows FEMA to equitably distribute premiums across all policyholders based on the value of their home and the unique flood risk of their property," FEMA said in a press release before the new rating was implemented. "Currently, many policyholders with lower-value homes are paying more than they should and policyholders with higher-value homes are paying less than they should." Risk Rating 2.0 steers away from old flood zone maps and focuses on various factors such as a property’s distance from the ocean and the costs to rebuild a home. "With Risk Rating 2.0, FEMA is updating a 50-year-old rating system to price each home individually – rather than by flood zone – and more accurately using modern insurance industry technologies, standards, and science," the National Association of Realtors (NAR) said in a post. "Under Risk Rating 2.0, some NFIP rates will increase while others will decrease, depending on each home's flood risk and replacement value," NAR continued. "Under the previous system, all rates would continue to climb 18% to 25% every year until reaching $63,000 for a $250,000 home under many policies."    
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June 8, 2023

Two Insurers Approved to Take Over 26,000 Policies from Florida State-run Insurer Citizens

It’s supposed to be the insurer of last resort, but they’ve picked up more than a million policies consisting of people who typically can’t get insurance elsewhere. Citizen’s insurance has swelled to 1.3 million customers and was never intended to hold that many policies. Slide Insurance has agreed to step in and take 25,000 of those policies. Loggerhead will take 1,000 policies. While it could end up costing policyholders more, even Governor Ron DeSantis has said it’s necessary. DeSantis said in March during a trip to Fort Myers that Citizens has not been solvent. “If you did have a major, major hurricane hit with a lot of Citizens property holders it would not have enough to pay out,” DeSantis stated. According to a consent order for SLIDE, Citizen plans to shed 26,000 policies in total. Insurance Agent Reid McDaniel with McDaniel Insurance Solutions of North Fort Myers pointed out that Citizens has depopulated in the past and predicts they will have to continue to decrease the number of policies they have.

State Law

A new state law signed by the governor would allow companies to charge up to 20% more than Citizens. “So maybe they might have a slight increase on their homeowners, but now they don’t have to carry flood insurance so it could really be a benefit to them,” McDaniel explained. Citizens is requiring all policyholders to eventually get flood insurance, something they may not need with a private insurer. “It could be a silver lining for those people,” McDaniel predicted. Florida’s Insurance Commissioner Michael Yaworsky called the move to depopulate a good sign “It’s a sign of a healthy market when there are private carriers that are available to depopulate citizens,” Yaworsky stated. Notices are expected to go out soon but no word on how much more it may cost policyholders. “You could have some sort of rate hike or you could have no rate hike. It will entirely depend on what the individual policy looks like,” Yaworsky said. Citizens policyholders should closely monitor their mailboxes for warnings of change.

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June 8, 2023

PGA and LIV Partnership Risks Antitrust Scrutiny

The PGA Tour and Saudi Arabia-backed challenger LIV Golf avoided calling their proposed partnership a merger. But their shock announcement is already raising serious concerns with US and European antitrust enforcers, according to people familiar with the matter. The tie-up, which was announced Tuesday, is being viewed by officials as a brazen play loaded with red flags, not the least of which is creating a giant monopoly in an industry that had only recently gained a competitor, said the people, who asked not be identified discussing non-public matters. After nearly a yearlong acrimonious legal battle, the rival golf leagues said they would join with the DP World Tour, the European golf circuit, and combine their golf-related business and rights into a new commercial entity. The agreement will resolve the ongoing antitrust litigation between PGA and LIV, though final terms of the deal, including the finances, are still in the works. The new for-profit entity involves three of the biggest golf tours in the world proposing to coordinate key aspects of their business on which they currently compete, the people said. Competition enforcers are likely to want to know how the proposed partnership will impact players, sponsorships and broadcast rights, they said. The US and UK — where DP World Tour is based — are certain to ask questions and the European Union’s competition authority may want information as well, they said. The US Justice Department, which has already been investigating PGA Tour over its dispute with LIV, will review the proposed deal, the people said, rather than the US Federal Trade Commission, which often handles sports leagues. The DOJ has interviewed several golfers who were suspended by the PGA for joining the rival tour as part of the existing investigation. The UK’s Competition and Market Authority has established itself as a global player in the competition world following the UK’s exit from the EU. The agency is already investigating sports broadcasters, including Comcast Corp.’s Sky Group Ltd., over the broadcasting of sports content in the UK. The European Commission, the EU’s competition body, previously brought a case against the International Skating Union over its eligibility rules for speed skaters. Europe’s highest court is also considering a case on whether soccer’s governing bodies, UEFA and FIFA, can restrict players from participating in rival leagues. A European Commission spokesperson said that if the deal has an EU component, it’s up to the companies to notify the deal. Representatives for the Justice Department, the FTC and the CMA declined to comment. Antitrust Lawyers No antitrust lawyers were involved in the PGA-LIV discussions, which focused on how to innovate the sport and bring the game to younger audiences, according to another person familiar with the talks. The leagues don’t expect the deal, described as a joint-venture, to require a traditional merger review, said that person, who spoke anonymously to describe confidential negotiations. The three tours have a written agreement, with some aspects still being determined, the person said. Those details are going to be key to the Justice Department’s review of the deal, antitrust experts said. PGA Tour Commissioner Jay Monahan dismissed questions about possible antitrust concerns with the partnership. “Every single player in men’s professional golf is going to have more opportunity and more growth,” he said in an interview with CNBC. “We are going to grow our industry. This is all positive.” Not everyone agrees. “The PGA-LIV merger is another in a long line of successful efforts by entrenched monopoly organizers of sporting competitions to maintain their dominance through predatory behavior directed toward rivals, followed by swallowing them up,” said Stephen Ross, a professor at Penn State Law. “Jay Monahan is no different than John D. Rockefeller, putting independent gas stations out of business and then folding them into Standard Oil.” Still, without knowing the details of the agreement, it’s hard to predict how the Justice Department will come down, said Ross, who is executive director at the Penn State Center for the Study of Sports in Society. For example, provisions that might prevent golfers from playing on a new tour might be cause for concern, he said. The agency’s antitrust lawyers might request changes or tinker with some of the specifics, said Jodi Balsam, a professor of sports law at Brooklyn Law School. But ultimately, she predicted, the partnership is likely to go ahead. “People don’t want to see this battle continue, including the regulators — they want to see golfers compete with each other without any barriers,” said Balsam, a former lawyer for the National Football League. Even if the PGA and LIV argue that the deal isn’t a merger, but a partnership, that may not matter to the Justice Department. It recently won a challenge against an alliance between American Airlines Group Inc. and JetBlue Airways Corp. by arguing it was a “de facto merger.” American plans to appeal the decision, which calls on it to unwind the partnership. The law firm Wachtell, Lipton, Rosen & Katz, whose Ed Herlihy serves as chairman of PGA Tour’s policy board, is advising the tour on the deal, but LIV wasn’t represented by outside counsel during the discussions. All three of the Wachtell lawyers on the team, including Herlihy, focus on mergers and acquisitions, not antitrust. Professional sports league mergers are rare. The last major one in the US occurred in 1979 when the National Hockey League voted to incorporate the World Hockey Association’s franchises. Hockey, like other team sports such as basketball, football and baseball, are organized as associations, or joint ventures, that set rules for territories, players and TV and radio contracts. Only Major League Baseball enjoys an exemption from US antitrust laws, which was granted by the Supreme Court more than a century ago. In comparison, in sports like golf and tennis, where individual players compete in tournaments, a single entity like the PGA often sets rules for participation. A recent spate of US antitrust cases in sports, however, have focused on how rivalry between single-player leagues impacts players. In the early 2010s, Ultimate Fighting Championship owner Zuffa LLC — now owned by media company Endeavor Group Holdings Inc. — bought its biggest mixed martial arts rival, Strikeforce. While the FTC didn’t challenge the deal, a group of fighters later filed suit, arguing the merger has allowed UFC to pay a fraction of what it would have in a more competitive market. The suit remains pending after a federal judge granted class-action status in 2020 to about 1,200 mixed martial artists. Another antitrust suit, brought by several Olympic gold-medal athletes against swimming’s governing body over rules that barred them from participating in a new swim league, was dismissed by a California federal court in January.
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June 8, 2023

AI Insurtech Concirrus Launches New Multi-line Submissions Solutions

AI insurtech Concirrus has announced its new submissions offering that provides a seamless end to end solution for customers at a competitive price. The new offering ensures customer privacy and has been described as the market’s first solution that can increase productivity by 400%. Using AI tools such as ChatGPT can come with inherent risks that must be carefully managed to harness their true benefits, Vinod Singh, Chief Technology Officer of Concirrus, said. He continues: “Articles continue to emerge highlighting concerns about data leakage and privacy issues with ChatGPT itself explicitly warning users about the risks of providing confidential data. “This is why our solution is far superior to what’s available on the market today as we have developed a privacy layer that enables us to leverage the capabilities of Large Language Models such as Google Bard or ChatGPT from Open AI. “This allows us to seamlessly convert submission emails and attachments into structured data that is then ingested by our data analytics platform, Quest. All the while ensuring the security of sensitive data and preventing any data leaks.” Concirrus’ submissions solution also goes beyond basic data extraction capabilities. Andrew Yeoman, Co-Founder and CEO of Concirrus, comments: “The sheer volume of email submissions insurers receive each year is staggering, with only a fraction of them receiving attention and a minuscule percentage resulting in quotes. “This leaves underwriters with limited capacity to assess risks effectively. While automation solutions have emerged, they require extensive training and labelling efforts, diminishing their benefits for insurers.” By streamlining the process through automation and addressing privacy issues, Concirrus has developed a simple workflow that integrates with a customer’s pricing engine, enabling faster decision-making, and empowering underwriters to focus on writing the submissions that matter most. “We’re entering a period where point solutions that require the customer to knit different systems together are becoming a complex and challenging technology burden. We’re offering a solution to the insurance market that allows data from all parts of the organisation to come together into one dynamic data analytics environment,” Yeoman concludes.
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June 8, 2023

ATS Underwriting Chooses Gradient AI to Expand Medical Stop Loss Insurance Business

Gradient AI, a leading enterprise software provider of artificial intelligence (AI) solutions in the insurance industry, today announced that ATS Underwriting, a privately held, full-service managing general underwriter (MGU) specializing in Medical Stop Loss insurance, has adopted Gradient AI’s SAIL™ Solution to enhance its underwriting processes within the small group transitional market. This market primarily consists of smaller companies undergoing a significant shift from fully insured to self-funded plans. ATS Underwriting specializes in delivering affordable medical stop loss insurance solutions. With a 30-year track record in underwriting and working with AM Best rated “A” (excellent) carriers, the company is dedicated to meeting the evolving needs of its clients. Recognizing the importance of expanding self-funded opportunities for its small business and carriers, ATS determined that AI technology would best support this strategic goal. After using a competitive AI solution, ATS switched to Gradient AI’s SAIL Solution due to its high-quality medical industry data lake, powered by AI predictive analytics. By harnessing the advanced features of SAIL, ATS’s team has gained valuable insights and increased confidence in its underwriting decision-making. As a result, the company can deliver greater service to its clients in a challenging yet growing market. “As a leader in the small group transitional market, partnering with Gradient AI is helping ATS leverage a massive opportunity in the stop loss space and establish a stronger presence in the market,” said Andrew Trupiano, president of ATS Underwriting. “Gradient AI has enabled ATS’s team to quote more groups even when the data is lacking. By leveraging AI-based underwriting together with traditional underwriting, we’re taking a hybrid approach to qualify groups, price risk more accurately, and better serve our clients.” Traditionally, underwriting for small groups requires the use of individual health questionnaires (IHQs), meaning employees must provide detailed information about themselves and their dependents. This process can be burdensome for employees, challenging for HR departments, and administratively complex for MGUs. Consequently, most smaller groups and MGUs forego IHQs, missing out on potential self-funded opportunities that may otherwise have been available to them. However, when using a medical underwriting AI tool like SAIL, IHQs are no longer needed to predict health plan risk. This removes a significant barrier for smaller groups that want to self-fund, granting them access to cost savings, flexibility, and benefits usually reserved for larger groups. Since 2007, ATS estimates that the number of companies with three to 500 employees buying self-funded medical coverage has grown by over 50%. As market pressure continues to push for the elimination of IHQs, predictive analytics enables insurers to secure quotes earlier and provides greater flexibility for stop loss carriers that cover companies of this size. Similarly, for carriers that cover larger companies, the use of predictive analytics also helps streamline underwriting and accelerate quote turnaround times. “Until now, lack of medical claims data represented a barrier to entry to the small business self-funded market for medical stop loss providers,” said Stan Smith, CEO and founder of Gradient AI. “However, innovative leaders like ATS have embraced AI-powered analytics and underwriting to better meet the needs of this large and growing segment. We are proud to provide ATS with advanced AI capabilities, to serve this important and growing market.” About Gradient AI Gradient AI is a leading provider of proven artificial intelligence (AI) solutions for the insurance industry. Its solutions improve loss ratios and profitability by predicting underwriting and claim risks with greater accuracy, as well as reducing quote turnaround times and claim expenses through intelligent automation. Unlike other solutions that use a limited claims and underwriting dataset, Gradient's software-as-a-service (SaaS) platform leverages a vast dataset comprising tens of millions of policies and claims. It also incorporates numerous other features including economic, health, geographic, and demographic information. Customers include some of the most recognized insurance carriers, MGAs, MGUs, TPAs, risk pools, PEOs, and large self-insured employers across all major lines of insurance. By using Gradient AI's solutions, insurers of all types achieve a better return on risk. To learn more about Gradient, please visit:
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June 7, 2023

Florida Joins Other States in Fight Over Flood Insurance Revamp

Florida has joined nine other states in a federal lawsuit challenging an overhaul of the National Flood Insurance Program, arguing the new system is flawed and will drive up premiums for many property owners. The lawsuit, led by Louisiana Attorney General Jeff Landry, was filed Thursday in the federal Eastern District of Louisiana against defendants including the Federal Emergency Management Agency. It came after the program changes, which were phased in starting in 2021, became fully effective April 1. The program plays a major role for Florida residents, many of whom are required to have flood insurance because of home mortgages. A document in the lawsuit said the program includes about 1.391 million Florida policies, with total coverage of nearly $367 billion. Louisiana, Florida, and the other states are challenging the new system, known as "Risk Rating 2.0: Equity in Action," that changed the methodology for determining flood-insurance prices. Among other things, the lawsuit alleges the system improperly considers "hypothetical" future risks and doesn't properly account for mitigation projects to protect properties from flood damage. "While the agency (Federal Emergency Management Agency) paints a picture of nuanced calculations using massive data repositories that reveal a property's individualized risks, the reality is much simpler: Flood insurance is going to be much more expensive for pretty much everybody," the lawsuit said. A section of the lawsuit that focused on Florida said "high insurance rates will cause people to leave the state of Florida because they can no longer afford to live in the state. In addition, it will depress property values, particularly in areas where flood insurance is required." But FEMA said on its website that the revamped system takes into account more variables that affect flooding and will result in rates "that are actuarially sound, equitable, easier to understand and better reflect a property's flood risk." Also, for example, it said the previous system did not account for the costs of rebuilding homes. "Policyholders with lower-valued homes may have been paying more than their share of the risk while policyholders with higher-valued homes may have been paying less than their share of the risk," the agency said. "Risk Rating 2.0 was not just a minor improvement, but a transformational leap forward for the NFIP (National Flood Insurance Program)." Attorney General Ashley Moody's office signed on to the lawsuit for Florida. Along with Louisiana, other plaintiffs are Idaho, Kentucky, Mississippi, Montana, North Dakota, South Dakota, Texas, Virginia, and numerous local governments in Louisiana. The 146-page lawsuit makes a series of allegations, including that federal officials violated a law known as the Administrative Procedure Act by making changes that were "arbitrary and capricious." As part of that argument, it pointed to the FEMA's consideration of climate change, which it said: "does not relate to the risk a property actually faces today." "Equity in Action uses catastrophe modeling, which takes into account future hypothetical events, including hypothetical events resulting from climate change," the lawsuit said. "The agency does not disclose what these hypothetical events are, nor does the agency explain how the hypothetical events change based on hypothetical future climate activity." The lawsuit, in part, seeks an injunction against the new system and a requirement that federal officials disclose the methodology and data that have been used.
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