Addressing some symptoms of insurance issues, and not the underlying causes?

th (1)

There’s an odd contradiction in some of what the insurance industry does; the industry is built on predicting risk and strategizing risk sharing, yet in many ways it is victim of knowing its own concerns and reacting to and pricing the reaction, and not working to mitigating the effects of the outcomes.  And in at least one case looking to backfill its model to fit corporate strategy and perhaps not customer choice.

 Patrick Kelahan is a CX, engineering & insurance consultant, working with Insurers, Attorneys & Owners in his day job. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.


Backfilling or buyer’s remorse?

Allstate Insurance (US P&C carrier) recently announced its digital insurance brand, Esurance, will be discontinued as part of Allstate’s migration into being an omnichannel carrier where customers have options under one access point/model for agency based or digital insurance acquisition and service.

Looking back to 2011 with Esurance being a $1 billion acquisition by ALL wherein the company’s CEO announced, “Allstate is uniquely positioned to serve different customer segments with unique products and services,” said Thomas J. Wilson, Allstate’s president, chairman and chief executive officer. “This transaction provides immediate incremental growth in customer relationships and makes Allstate the only company serving all four major consumer segments based on their preferences for advice and choice.”

Appears that ALL figures customers in 2020 expect only one access point that will provide purchase options.   Here’s the thing- Allstate had internal rules that inhibited customers from switching agents and/or internal brands, not external barriers; this change will reportedly alleviate the ALL system problem, and empower agents to better serve customers (per leadership and aligned with a previously announced commission decrease) as ALL migrates into being an insurance technology company.  But what of the 1.5 million Esurance policyholders who consciously chose the Esurance model, and may balk at being tied in with the legacy brand?  And, will marketing costs truly be saved if digital customers still need targeted messages?  It’s certain that Allstate’s advertising partners will create a clever omnichannel ad campaign, but legacy brand is legacy brand, and buying culture is buying culture- can ALL be a cleverer digital carrier under the parent name than was Esurance?  Additionally, will rolling the Esurance policies into the parent change how staff handle claims?  Perhaps, but the effects of several years of underwriting losses for the Esurance PIF will not disappear simply because those claim customers are now called Allstate customers.  Would it have been a more direct action to fix the Esurance claim handling issues? And what does this move in combination with centralizing customer service away from agents suggest for the agency model?


Maybe a good idea earlier in the finance value chain?

Swiss Re announced this week the placement of US $225 million in parametrically triggered cat bonding for Bayview Asset Management’s MSR Opportunity Fund, covering mortgage default risk for Bayview’s loan portfolios in the states of California, Washington, Oregon, and South Carolina.  Bayview does manage ‘credit sensitive’ loan portfolios and derivative funds that include packaged mortgage portfolios, so a parametric product is an immediate hedge in the case of an event that meets the USGS survey index associated with the bond.  Seems a suitable move for the management company as it does not have direct ownership of properties but does have exposure to indirect loss if there are mortgage defaults for its funds mix of loans.  Makes one think- loan originators would be doing the market a service if along with property insurance requirements for loans in the respective states there would be either an EQ insurance requirement, or even a parametric option for mortgagors in the event of a trigger occurrence.  Hedging ‘up the food chain’ is good for the portfolio manager but does not help address the potential cause of default.  Swiss Re also has the unique opportunity to market the parametric default risk products to primary mortgagees.  It’s a changing risk mitigation world.

Problem hiding in plain sight

First California, now Australia in the news due to property owners encountering challenges with property underinsurance and unexpected increases in property repair costs.  These concerns are not new and become front burner issues each time a significant regional disaster occurs, always attracting the attention of those who sit at the head of the political insurance table, the insurance commissioners.  California’s commissioner enacted a moratorium on policy cancellations in brushfire areas (1 million property owners involved), and Australia’s Treasurer Josh Frydenberg recently asked Aus property insurance carriers for detailed information to help the government and population better understand where insurance recovery efforts stand.   Not Dutch boys with fingers in the dike, but certainly ex post actions for circumstances that pre-existed the respective regions’ disasters.

At least in California the primary drivers of the problem are property owner valuation knowledge (or lack of it), ineffective underwriting valuation tools, policy premium and market share competition driving carrier lack of enthusiasm for change, and unpredictability of post-disaster rebuilding costs. Also- misconception on the part of the public- few policies (close to zero) include wording of restoring to pre-loss condition, or replacement with like kind and quality.  The reality of the underinsurance problem is that there is now a de facto rise in insureds’ ‘deductibles’ after a disaster due to inadequate coverage limits. The ‘deductible’ effect is mitigated by insureds employing personal property settlement proceeds in the dwelling rebuild costs, but all in all it’s a relative fools’ game.  The worst effect is the extreme hardening of the property insurance market to the point where dwelling insurance becomes unavailable and/or unaffordable. The easy fix is better upfront estimation of rebuild costs, but even with that there is then a problem for carriers- the marginal premium increase suggested under current methods in moving from a $500K limit to a $750K limit is far less than a comparable change from $250K to $500K, so is there an overarching lack of motivation to raise coverage limits?  An unexpected related potential effect for carriers- earlier triggering of reinsurance treaties due to the weight of maximum losses and lessening of rei appetites for renewals under existing agreements.   Without question structural changes (no pun intended) are needed in property policy valuations and underwriting for areas where the frequency of regional disasters is high.

*Contrarian viewpoints of an industry observer, not to be confused with that of mainstream press, and presented in the light of knowing that there are many forward-thinking players in the industry who will work to lessening the effects noted above.

#innovatefromthecustomerbackwards  #newinsurancebalance

You get three free articles on Daily Fintech; after that you will need to become a member for just US $143 per year ($0.39 per day) and get all our fresh content and archives and participate in our forum.

The post Addressing some symptoms of insurance issues, and not the underlying causes? appeared first on Daily Fintech.

Can industry changes soften a hard property insurance market in California?


There are suggestions of hardening markets for US property insurance participants, and there is no better example of this than what is occurring in California.  Non-renewals in wildfire prone areas, premium increases, reductions in coverage and the seeming ultimate reaction- regulatory prohibition of policy non-renewals.

How did the state get to this point, and is there a lesson to be gained for any area that is exposed to regional maximum losses?  Is the hardening multi-trillion dollar California homeowners market a bellwether for others?


Patrick Kelahan is a CX, engineering & insurance consultant, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.


Hard Market — in the insurance industry, the upswing in a market cycle, when premiums increase and capacity for most types of insurance decreases. Can be caused by a number of factors, including falling investment returns for insurers, increases in frequency or severity of losses, and regulatory intervention deemed to be against the interests of insurers.[1]


An on point definition of a hard market for the California property insurance market prompted in great part by successive years of severe wildfires throughout the state, a circumstance that recently culminated in the state’s insurance commissioner to enact temporary regulations that prohibit non-renewal of homeowners’ policies for one million insured properties located within wildfire-prone areas. The commissioner’s action came as a result of insurance premiums in affected areas rising to seemingly unaffordable levels, in carriers refusing to underwrite properties, and in delayed recovery in wildfire areas due to limited availability of hazard insurance.


How did a bad fire situation get worse? Two years of homeowners’ lines’ loss ratios averaging in the 190 range, or $1.90 being paid out for every dollar of earned premium.  Who expects carriers to absorb that extent of loss without an according rise in premiums?  Let’s take a look at how the state got there (we’ll set aside the climate risk and fire damage negligence/liability discussion), and how things aren’t as simple as one might think.

Loss History

The state’s homeowners’ carriers were essentially the same in 2017-2018 as they were in the ten years preceding the heavy wildfire years.  Why does that matter?  Consider this chart of data for HO line earned premium, losses, and loss ratios for the ten years prior:[2]

CA Premiums Losses


$37.4 billion surplus of earned premiums over losses incurred during that ten-year span. That is not bad.


If one looks at the 2017 and 2018 results, the numbers flip:

Earned premiums–           $15.6 billion

Losses incurred–               $29 billion, or a $13.4 billion deficit. That gets companies’ attention.

A significant compounding concern for carriers for the 2017-18 period is that the losses were compressed into repetitive geographic areas, reflect concentration of maximum losses within same, and the factors behind the peril have not materially changed. So even though there was a $37 billion surplus noted for the ten years prior, carriers (being forward looking for revenues) reacted not only to raise premiums, but to restrict available coverage and restrict the scope of coverage, classic hard market characteristics.

Premiums and pricing

If the discussion continues to market factors regarding historic pricing, more evidence of the roots of a hard market come to the surface. Average homeowners’ policy premiums for the state relative to median property values are significantly skewed in comparison with other states with higher population and exposure to concentrated risk:[3]

States Premium

[3] data from

So the case builds for how a hard market builds- premium levels that seemingly fail to consider the potential effects of regional peril occurrences.  California having premium values one quarter of those in Florida?  There is also significant evidence that- on average- properties have been under-insured for value in that post-disaster rebuilding costs are exceeding coverage limits. The market (through pricing history) inadvertently set its own table for hardening.  And it’s not just carriers- homeowners and financing institutions are partners in the issue.


Homeowners do have options when persons have are unable to obtain voluntary insurance due to circumstances beyond their control- the state’s default insurer, the FAIR (Fair Access to Insurance Requirements) plan.  The state’s FAIR plan provides limited coverage for primary perils but its use requires property owners to have separate wrap around policies in order to have cover that reasonably matches the benefits of voluntary cover.  The FAIR plan is a syndicate pool supported by the state’s property insurance carriers, so think of it as analogous to auto/motor risk pool insurance.

Increasing the number of persons accessing the insurance of last resort is one thing, but considering a recent order by the state insurance commissioner to require FAIR to provide broadened coverage limits[4] (to $3 million) and broadened peril coverage (to mirror an ISO HO-3 policy form) seems (per FAIR leadership) to exceed the commissioner’s authority.  Right or wrong, the change in the FAIR plan does not alleviate the issues with concentration of risk, actuarially supported rates, or the fundamental fact that risk factors need to be mitigated.


What to do?

Property insurance is a keystone to any economy- borrowing, recovery, risk sharing, and risk management, etc. Absent a thriving insurance industry, a jurisdiction simply will flag in comparison with other areas. A hardening market is a wake-up call that the inherent cycle of insurance is at an attention point- carriers see challenges in the near future and are retracting access to insurance and placing a premium on price, even if company capital levels are currently higher than average.  Soft markets certainly reflect the reverse, but who complains when underwriting is easier and rate taking is de-emphasized? The surpluses in premiums gained during 2007-2016 are long forgotten.

Ideally the market would:

  • Set premiums at a level anticipating significant regional events
  • Price wildfire risk into all policies in the state (everyone gets affected when these events occur)
  • Leverage the available capital surplus and interest from reinsurers
  • Partner with private risk vehicles (ILS, Cat bonds) for broader backstopping of risk
  • Consider wildfire cover that is similar to earthquake or wind covers, with more substantial deductibles for that peril
  • Adopt complementary parametric plans that trigger when wildfires occur, providing immediate recovery funding to affected property owners rather than wait for government programs alone (that may take years to administer)
  • Refrain from using FAIR plan changes to circumvent needed changes in voluntary policies/underwriting/pricing
  • Tread very cautiously before having regulators take anecdotal actions ex post to occurrences
  • Implement immediate subsidies for areas that suffered direct and as yet unrecovered damage- not taking action affects all

With these efforts being in conjunction with all efforts being made to mitigate risk factors, encouraging behavior changes, and encouraging policies more in keeping with risk management- climate, economic, and functional.

Why this?

The state has other, potentially bigger concerns with risk- earthquakes.  Wildfire risk has had terrible effects, multi-billion dollar effects, most often in more remote or less densely populated areas than urban Los Angeles, San Francisco, and Oakland, heavily populated and developed high-risk earthquake areas.  EQ insurance penetration (approximately 11% of property owners) suggests uninsured losses will far eclipse wildfire losses if a significant quake occurs, and there is not enough resources (currently) for the state to back-fill an EQ disaster recovery.  The entire country will be affected.

And what of the balance of the world’s economies?  A recent Swiss Re Institute assessment of insurance protection globally denotes an estimated $222 billion natural disaster gap[5], a number that again would be overshadowed by temblor damage in developed regions.  What of the wildfires in Australia, where the affected areas are more than six times greater than the 2018 California wildfires affected?


Hardening of insurance markets- that’s a challenge for insurance customers, but for markets like California’s homeowners’ lines it’s a precursor for what may be coming elsewhere.


The post Can industry changes soften a hard property insurance market in California? appeared first on Daily Fintech.

The InsurTechs were nestled all snug in their beds, with visions of 2020 dancing in their heads


It’s the end of 2019, an auspicious year for insurance and InsurTech, and it’s the end of the year with expectations in the business world for business results and (hopeful) bonuses.  And of course there is the wondrous shadow of December holidays over all, with visions of sugarplums dancing in heads.

Not everyone celebrates a Christmas holiday, Chanukah, or Eid, but one cannot avoid the end of year holiday gifting and hopes.

In keeping with that spirit this final InsurTech column for 2019 wishes all well for the season and bright things for 2020.

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.


There are some friends and businesses for whom its hoped that Santa/Father Christmas/whoever finds holiday gifts.  All deserving, all have been good this year.

  • Parametric insurance– better understanding within the industry of its opportunities for cover and dramatic growth
  • John Bachmann, Social Survey– more vowels so his customer experience video series can carry on into 2020
  • Zurich Insurance- Mark Budd and Nicola Cannings– full subscription for its innovation contest
  • Erika Kriszan– recognition as the founder of the quietest best InsurTech conference- MOI Vienna
  • IRDAI– prudence in choosing the twenty participants in the Indian insurance sandbox
  • Coverager– all the respect they deserve for keeping the insurance industry informed

Holidays – any holiday – are such a great opportunity to focus on bringing the family together.  Lidia Bastianich

  • Paolo Sironi– a platform to expose his finance and economics ‘chops’ to a broader audience
  • The Daily Fintech– continued recognition as a best-in-class Fintech/InsurTech/blockchain/crypto resource, and being seen as the best value within the respective blogs’ world
  • Michael Porpora– a project for 2020 that outdoes his 2019 365 days of connections
  • Robin Kiera– a championship for the Hamburg football team
  • Nomaan Bashir– 2% insurance cover penetration within the Pakistani market
  • Lloyd’s of London– a balance beam to help the venerable institution integrate business and org change into its 300-year-old club
  • Insurance Nerds– continued traction advocating for insurance and continuity of the many of are privileged to work in insurance jobs

The holiday season is a perfect time to reflect on our blessings and seek out ways to make life better for those around us. Terri Marshall 

  • Benekiva– beneficiary first in every life insurance company’s stocking
  • Ukrainian InsurTechs– realization that there are great things happening in the industry there that have nothing to do with global politics
  • Intellect SEEC– more storage capacity to hold all those data
  • The California Dept of Insurance– an understanding that best intentions can produce unintended consequences
  • Lemonade Insurance– markers of many colors to try as an alternative to magenta
  • Rahul Mather– rest.
  • Road Warriors– time at home

Merry Merry and Happy New Year.

The post The InsurTechs were nestled all snug in their beds, with visions of 2020 dancing in their heads appeared first on Daily Fintech.

No Elephant is an island- resources maketh the beast


No one can know all in an industry, and surely that thought applies to insurance and InsurTech.  The Insurance Elephant knows the business is comprised of many parts that in aggregate lead to the insurance customer.  It’s the end of 2019 and as such seems an apt time to list and appreciate the many persons who are resources for me, and surely can be resources for all.  Please do review the list, gain an understanding of the unique contributions each in the list brings.


Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.


Here are my 2019 InsurTech/Industry respected resources, in no particular order, and certainly not an exclusive list:

  1. Kate Stilwell– CEO and founder, Jumpstart Insurance, earthquake parametric cover, advocate for disaster preparation and resilience.
  2. Kobi Bendelak, CEO- InsurTech Israel. Big brother to Israel’s many start-ups, advocate and investor.
  3. Hari Radhakrishnan- insurance broker, consultant and Socrates figure for the Indian insurance industry
  4. Robert Collins– Crossbordr brokers and consultant, Asia InsurTech guru, has forgotten more about insurance than most know. Poser of good points.
  5. Amber Woullet– insurance marketing whiz, hangs out with Penguins, rocks insurance videos.
  6. Mica Cooper– CEO and President, Aisus/InsureCrypt, insurance systems and cyber tilter.
  7. Lakshan De Silva– Partner and CTO at Intellect SEEC, knows the depth and breadth of the SEEC data lake. First to build a restaurant rating algorithm.
  8. Anand R- senior researcher at Lucep, facilitator of conversations and cheerleader for omnichannel customer experience methods.
  9. Hugues Bertin– CEO at Digital Insurance LatAm, knower of all happenings in the growing LatAm InsurTech world. Brings the global perspective to LAtAm.
  10. Grace Park and Cole Sirucek– co-founders, DocDoc Pte , patient intelligence company, advocates for patient knowledge, connecting optimum providers, and spreaders of the word regarding same.  Have innovated from their young daughter’s needs backwards.,
  11. Karl Heinz Passler– wearer of many InsurTech hats, speaks of InsurTech/incumbent collaboration. Also has day jobs as product manager and insurance startup mentor (he knows things).
  12. Nigel Walsh– co-host of the InsurTech Insider podcast (cohost Sarah Kocianski of 11:FS, ) and partner at Deloitte. Knows things. Travels widely but loves all things London.  Is wise to let Sarah lead the podcast convos.
  13. Denise Garth– SVP at Majesco, Strategic Marketer. Prepares articles of depth and breadth on the InsurTech industry, insurance, and what is coming next.
  14. Walid Al Saqqaf– founder at InsureBlocks, knows more than I ever will on practical insurance applications of Blockchain, video selfie guy, biggest smile in the InsurTech space.
  15. Matteo Carbone– founder, IoT Observatory, co-founder Archimede SPAC, 150 trips per year guy, advocate for insurance use of IoT. Challenger of the irrational exuberance of insurance startups.
  16. Hugh Terry– founder of the Digital Insurer, insurance blog that grew into the global virtual meet up that is Livefest. Finger on the pulse of Asia InsurTech
  17. Shefi and Avi Ben Hutta– Coverager,   keeper of the InsurTech companies’ data, hoster of industry get togethers, challengers of marketing pitches, cheerleaders, probers of BS, innovators in their own right.  Sibs, not married (don’t make that mistake!),
  18. Robin Kiera– founder, Digital Scouting, consultant, attention hacker, video blogger of the first degree. Able to interview a dozen influencers in one session.  Wearer of blue shirts.
  19. Lutz Kiesewetter– PR and vendor relations, Deutsche Familienvesicherung (DFV_AG), unabashed marketer of the firm’s path through InsurTech, IPO, and digital customer experience. Speaks of a model other firms should imitate.
  20. Nick Lamparelli– CUO of rethought Insurance, knows a thing or two on underwriting and reinsurance, listens to my babble on parametric, part of the foundation of the Insurance Nerds, podcaster extraordinaire.
  21. Juliette Murphy– CEO and co-founder, FloodMapp, advocate for resilience, flood awareness and tech, social do-gooder, engineer from Down Under who pivoted to being an engineer who is trying to build understanding of flood risks.
  22. Assaf Wand– CEO and co-founder, Hippo Insurance, building an insurance org (great staff) that is customer proactive, holistic approach to insurance service, also a lover of large gray animals.
  23. Rahul Mather– consulting analyst at Accenture, tireless info tracker, keeper of startup data, preparer of longitudinal reports, stats guy. Eager sharer of what he knows (which is a lot), eager listener to tenured industry folks.
  24. Daniel Schreiber– CEO and co-founder, Lemonade Insurance, thick-skinned point man for the firm, adherent to the principle of Ulysses contracts. Neophyte (not so much now) in the insurance world but unafraid to learn.  Discusser of AI innovation for customer benefit.  Defender of the Magenta.
  25. Christopher Frankland– InsurTech Partnerships at ReSource Pro, InsurTech everyman (who doesn’t know him?) Founder at InsurTech Heartland, industry expert at ‘getting it’.
  26. Frank Genheimer– consultant with New Insurance Business, actuary (what!?!?), owner of the best hair part in InsurTech, podcast host (field settings with Influencers- cool!)
  27. Ekrete Ola Gam -IKON– (this is his acronym- I don’t know his proper name ?? )- @olagamola in your Twitter feed, Nigerian economist/insurance guy, cheerleader for regular folks having insurance, for regulators and legislators to do their jobs, for the industry.
  28. Tony Canas– (can’t get that ~ to place over the ‘n’)- client advisor with the Jacobsen Group, Insurance Nerds Super Man, dynamo, all the alphabet items after his name. Supporter of all, never a discouraging word.
  29. Sridhar Subbaraman– Managing Director, Oasis Insurance Group, greenfield builder of an InsurTech Hub, United Arab Emirates, builder of insurance business model consensus.
  30. Pat West– Managing Partner, Hedge Quote, agency/agents’ thought leader, see-er of the need for a change in the insurance sales paradigm. Frank speaker, veteran of the big carrier sales machine.
  31. Adrian Jones– Deputy CEO, SCOR, really smart business strategist and understander of the arcane but interesting financial make-up of insurance companies.  And now a happy NYC dweller.

There are so many more who I respect and follow, learn from every day.  You know who you are.

The post No Elephant is an island- resources maketh the beast appeared first on Daily Fintech.

Is Lack of Trust a First Order Function in Narrowing the Insurance Protection Gap?

image The Geneva Association released an ambitious discussion of trust and its effect on insurance transactions, particularly in the perspective of well-known ‘protection gaps’ that are pervasive across many lines of insurance within mature economies.  Is, as Jad Ariss, Association Managing Director notes in the publication’s foreword, a “lack of trust fundamentally impeding insurance demand,” […]

The post Is Lack of Trust a First Order Function in Narrowing the Insurance Protection Gap? appeared first on Daily Fintech.

Innovate from the customer backwards- but caveat innovator!

image The insurance industry is in large part past the hysteria of disruption, innovation and entrants solving the issues of the insurance world, and is moving into the stage of implementation, collaboration and iteration. Startups that have gained traction are now broadening their markets, and in some cases, their offerings. And, the industry is recognizing […]

The post Innovate from the customer backwards- but caveat innovator! appeared first on Daily Fintech.

What is the future of insurance?

image Have we seen the future of insurance? No, unless you have conquered the whole space-time continuum thing, or yours is a parallax view of the insurance industry to come.  Is there good discussion and collaboration addressing what that future might be? Yes, if this week’s buffet of InsurTech news pieces is any indication, and […]

The post What is the future of insurance? appeared first on Daily Fintech.

Two insurance innovations roads to be taken- it’s not all tech

image The Innovation road diverged in an InsurTech wood, And while I wanted to travel both And be one searcher, long I stood And looked down one as far as I could To where it was lost in unknown techo growth;   Then took the other, as just as fair, And an improving process that […]

The post Two insurance innovations roads to be taken- it’s not all tech appeared first on Daily Fintech.

SME insurance- you can lead a horse to water, can you make it drink?

image If 40% of the U.S. and EU business owners do not have property and liability insurance, and 70+ % are underinsured, and the existing market is already more than US $60 billion in premiums, is there not an opportunity for growing the commercial line business, particularly for small and medium size enterprises (SMEs)? Of […]

The post SME insurance- you can lead a horse to water, can you make it drink? appeared first on Daily Fintech.

Wildfires and disasters- ecosystem opportunity to leverage InsurTech and innovation

Image Take a US $8 billion dollar insurance business that serves more than 7 million customers annually regarding residential real estate assets valued at more than US $5 trillion, that’s working in a regulated, politically hyped environment and one might see opportunity for innovation.  Throw in significant exposure to regional wildfires and urban area earthquakes, […]

The post Wildfires and disasters- ecosystem opportunity to leverage InsurTech and innovation appeared first on Daily Fintech.