2024 Insurance Market Update — Kenton Brine, NW Insurance Council (December 12, 2024)

Summary

Slides by Kenton Brine, President of NW Insurance Council, for the Senate Business, Financial Services, Gaming & Trade Committee, dated December 12, 2024. The slides describe NW Insurance Council as a non-profit, insurer-supported organization that informs media, consumers and public policymakers about home, auto and business insurance in Washington, Oregon and Idaho. They say auto insurance premium increases have averaged 26% in Washington in 2024 (citing Bankrate.com). They list 2023 alone as 28 events and $95 billion in losses from weather and climate disasters in the United States. The slides also state that by OIC rule, insurers now must provide additional information to policyholders who want to know why their premium increased at renewal.

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“2024 Insurance Market Update — Kenton Brine, NW Insurance Council (December 12, 2024).” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2024-12-12-a32281-d274341-nw-insurance-council-2024-insurance-market-u-b5480e6201/, SHA-256 c05927363ccae70f55939931714d178ce9d7709eb1bb56f3dd53f80a3c7aa896.

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2024 Insurance
Market Update
Senate Business, Financial Services,
Gaming & Trade Committee

Kenton Brine, President
NW Insurance Council
December 12, 2024
About NW Insurance Council and Insurance Trade Associations

 NWIC mission: We are a non-profit, insurer-supported organization that works to inform media, consumers &
public policymakers about home, auto & business insurance in Washington, Oregon & Idaho.

 We work with our in-state and national trade association partners, the Washington Insurers, APCIA and
NAMIC. Information in this presentation comes from those organizations as well as the Insurance
Information Institute and other sources. We also work with producer organizations IIABW and PIA.

 Insurance company members of the three P&C trades underwrite the majority of home, auto, liability and
business insurance policies in force in Washington state today.

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Insurance Basics – P&C insurance and the “Big Three.”

• P&C Insurance:

• The practice of predicting risk, pooling similar risks together, charging a premium that aligns with
similarly-situated risks in the pool. Relying on sufficient premium to pay current and future claims.
• Lines include homeowners, condo owners, renters, personal, professional and business liability,
personal and commercial auto, umbrella coverage and more.

• The “big three” elements of providing/servicing P&C insurance policies:
• Underwriting: Deciding who to write insurance for/what will be covered.
• Rating: What the policy will cost.
• Claims: taking care of the policyholder/rebuilding/replacing the covered loss.

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Property Insurance:
Challenges and
Changes
An overview of the Property Insurance Market in 2024
Challenges for property owners & drivers in WA:
Availability of coverage, affordability of premiums.
Issues affecting property insurance Issues affecting property and auto
availability: insurance affordability:
 Home/Auto: Higher cost to repair/replace structures
 Changes in underwriting standards and insurer and vehicles – materials, parts, labor. Increasing cost to
concerns about increasing risk exposure – driven by treat injuries to people.
claims payouts across the nation associated with
climate/weather events.  Auto: Increases in auto theft and catalytic converter
theft from 2020-2023. Complexity and cost to repair
 Dramatic increases in the cost to repair/replace today’s vehicles.
structures.
Impacts:
Impacts:
 Homeowner insurance premium increases have
 Non-renewal of property policies and difficulty averaged 22-36 percent in Washington over the past
finding property insurance for homes or businesses year. Average cost of HO coverage in WA 2024:
in some areas of the state. $1,434/yr ($871 below national average).
 Combining multiple policies from different insurers,  Auto insurance premium increases have averaged 26%
seeking coverage in the surplus lines market, or in WA in 2024 (Bankrate.com). Average cost for full
accessing the Washington FAIR Plan. auto coverage in WA is $1,724/yr ($734 below
national average).
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Property insurance premiums were stable for many
years, thanks to market growth and competition.
• From 2012-2021, premiums for Homeowners and Renters insurance mostly
kept pace with the US inflation rate.

6 12/11/2024 Source: Insurance Information Institute
“Big Picture” underwriting and the rising cost of
weather/climate disasters.
• Losses Due to Weather/Climate disasters in the United States:
Hurricanes, Tornados, Wildfires, Convective Storms (snow, rain, wind)

• 1980’s: 33 events (3.3 avg/yr), average losses: $22b/yr.
• 1990’s: 57 events, (5.7 avg/yr, average losses: $33b/yr
• 2000’s: 67 events (6.7/avg/yr), average losses: $61 b/yr
• 2010’s: 131 events (13.1 events avg/yr), average losses: $99b/yr
• Last five years (2018-23): Average 20 events per year, average losses: $123b/yr.
• 2023 alone: 28 events, $95 billion in losses.
• 2024: Hurricanes Helene and Milton: $44 billion in insured losses so far.
• WA Rates/Premiums are not impacted by losses in other states, but risk
tolerance may affect underwriting guidelines.

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Property Insurance Underwriting today:
“Parcel level” vs. “Big Picture.”
• “Parcel level” underwriting
• Information critical to sound insurance underwriting and financial stability.
• Companies compete in the market with unique and proprietary underwriting guidelines.
• History and risks of the insured structures – including structure and building material age.
• Likelihood of claims from policyholders (claims history).
• Repair/replacement costs in the area of the insured property.
• Crime statistics.
• Flood/fire history.
• Availability of materials and labor to make repairs.
• Flood/Hazard Maps and/or Risk Scores provided by vendors.
• Wildfire risk assessment includes building materials used, fuel load on and near the insured property,
access/egress, distance from and condition of fire services, defensible space/home hardening, etc.

• “Big Picture” – insurers responding to changes in risk:
• Robust competition vs. market consolidation.
• Nationwide increases in severity of claims and cost of repairs are impacting insurers’ underwriting approach.
• Access to and cost of Reinsurance (insurance for insurance companies).

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Challenges for insurance companies: inflation, claims
and repair costs, natural disasters, reinsurance.

Claims costs: rebuilding, disasters, Reinsurance: “Insurance for
labor, litigation/social inflation Insurance Companies”
• Costs for residential construction materials rose • Reinsurance is “insurance for insurers.” Once an
nearly 27 percent in 2021 – roofing materials alone insurer has paid out a certain amount to
rose 15 percent. Those costs continue to rise, but policyholders for a single catastrophic event, the
slower: 14 percent is the prediction for 2024. reinsurer steps in to cover the insurer’s claims
costs.
• “Social inflation” – costs related to lawsuits,
particularly “nuclear verdicts” over $10 million – • U.S. property catastrophe reinsurance rate
increased more than 27 percent in the last decade. increases ranged from 20 – 50 percent in 2023 –
the highest average increases in 17 years. But the
• Natural disasters – wildfires, hurricanes, reinsurance market is now stabilizing, with more
“convective storms” (warm, moist air rising from reinsurers entering/reentering markets, increasing
the earth creating wind, rain, tornadoes or hail): access to coverage and more competitive pricing.
18 natural disasters, $165 billion in losses.

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At the same time catastrophe losses are increasing,
so are rebuilding/replacement costs.

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Unsustainable: Insurers paid out $1.12 in property
claims for every $1 earned in premium in 2023.

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More home-building in disaster zones can impact
insurance underwriting/risk tolerance

1900-1959:
14% of new homes
built faced wildfire
threat.

2020-2022:
55% of new homes
built faced wildfire
threat.

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Auto insurance: Rising
costs for insurers and
consumers
Auto insurance market overview 2024
Auto insurance premiums have risen dramatically
since 2020. Here’s why.
• In 2023, auto insurers paid $1.06 in claims costs and expenses for every
$1 collected in premiums.
• Key factors driving loss costs and increased premiums from 2019-24:
• Vehicle repair costs increased 22%.
• Vehicle repair parts costs increased 24%.
• Used car values increased 29%.
• Vehicle thefts in WA increased 31% from 2021-22 – nearly 47,000 vehicles stolen – 3rd
highest rate per capita in the US.
• Driving behavior is worsening
• Drivers observed speeding increased 18% since 2020
• Distracted driving – 800k crashes in the US annually – 23% increase since 2020.
• WA: 810 traffic deaths in 2023 – highest number since 1990.

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The cost to treat injuries and repair vehicles has
increased dramatically over the past decade.

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In it together: Insurers, consumers and policymakers can
improve the property & auto insurance market
Property Insurance Auto Insurance
Building codes and zoning can consider impact of changing Competitive rates rely on rate accuracy, access to tools that
climate and increased wildfire & storm risks. help closely align rates to risk.

Home builders and homeowners can include IBHS Wildfire Efforts to re-emphasize safe driving habits, from driver
Prepared Home standards in new and existing structures to education to public awareness campaigns, to increased
improve resilience. visibility of enforcement could help reduce speed-and/or-
distraction related crashes.
Lenders, realtors, builders and insurers can team with wildfire
science experts and firefighting agencies to promote resilient Vehicle theft rates have begun to come down, and auto repair
communities. costs appear to be levelling off. Insurance rates tend to lag, but
follow, loss cost trends.
Legislators can work with insurers to promote a stable,
healthy, competitive insurance market that helps increase Premium Increase Transparency: By OIC rule (6/01/24), insurers
access to affordable home and renters’ insurance. now must provide additional information to policyholders who want
to know more about why their home or auto premium increased at
renewal. Work on that requirement will continue in 2024.

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