How has COVID-19 financially affected the P&C industry?

The property and casualty (P&C) insurance industry published financials for the second quarter (Q2) of 2020, which show a decline in net premium mainly attributable to COVID-19, reversing the growth the industry has experienced in recent years. The premium decline was accompanied by a slightly more than offsetting decrease in incurred losses and other underwriting expenses, resulting in a P&C industry combined ratio in Q2 2020 of 99%, a one-point improvement over the prior year.

The industry annual net premium growth for the past five years has averaged 5%. This growth has been, at least temporarily, halted by the pandemic. The aggregate industry net earned premiums for Q2 2020 are $12 billion lower than those for Q1 2020. The net incurred losses, loss adjustment expenses, and other underwriting expenses also decreased between Q1 and Q2.

Milliman professionals discuss the Q2 2020 results more fully in this article.

Exploring solutions for student loan debt

The years following high school have always been a time of uncertainty for students choosing to pursue post-secondary education. The choices regarding college and choosing a major have big implications on a student’s career trajectory, not to mention financial situation, for years to come.

The growing uncertainty concerning the format of higher education due to COVID-19, the post-graduate job market, and the long-term impact of student debt leaves many individuals wondering if they will ever earn enough to free themselves from student loan debt.

This landscape presents significant opportunity for insurtechs and traditional insurance carriers to create sustainable solutions that capture a portion of the $1.54 trillion student loan market, while also providing students with post-graduation financial stability. Milliman’s Andrew Groth and Katherine Pipkorn explore some solutions to the student loan crisis in this article.

Auto coverage evolving as car manufacturers enter insurance marketplace

As traditional auto insurers compete against each other for customers, they’re now facing competition from new entrants in the auto insurance market. Some car manufacturers have begun offering insurance coverage that responds to the modern technology of today’s cars.

How can car manufacturers offer discounted premiums compared to large, sophisticated, and specialized insurance experts? Unlike the car industry, insurance rate calculations are a complex actuarial estimate of future costs, not an aggregation of known, fixed costs. The most consistently profitable insurance companies are the ones that excel at the advancement and refined use of technology and data analytics in underwriting, ratemaking, and claims handling.

Still, there are many ways car manufacturers may have an advantage over incumbent insurers. In this article, Milliman’s Elizabeth Bart examines the different elements that insurance premiums cover and how each could be reduced.

Navigating regulatory complications to determine black lung claims

Estimating future liabilities for even the most basic line of business involves in-depth analysis of data, expert knowledge of modeling, and professional application of assumptions. Black lung liabilities take reserving to an entirely different level.

Black lung compensation is rooted in a complex regulatory and legislative history.

The disease itself—pneumoconiosis—involves sophisticated and often conflicting medical and scientific evidence and opinions. Against a backdrop of social and political turbulence is a labyrinth of complex if not incomprehensible data. These unusual liabilities require actuarial and case reserving models that are truly unique, applying methodologies not used in any other line of business.

In this article, Milliman’s Christine Fleming and Travis Grulkowski discuss legislative and regulatory complications regarding black lung disease, including the highly complex, non-standard actuarial approaches for evaluating and estimating black lung liabilities.

Can innovation and governance coexist?

Big data, technology, and demographic changes have increased competitive pressures to the point where innovation has become essential for insurers. However, innovation is often at odds with many insurers’ governance structures. Governance seeks to define a framework under which business decisions are determined and executed.

In contrast, innovation by definition seeks new methods, ideas, and products. Viewed by many as a natural, or even acceptable, state of affairs, this tension can edge out a potentially profitable initiative, recasting it into a familiar mold with few growth possibilities.

In this article, Milliman’s Paul Fedchak and Stacy Koron discuss if the process really has to be that way.

Forming a captive may address the lack of pandemic risk solutions

The COVID-19 pandemic has challenged business interruption insurance and transformed how the industry looks at workers’ compensation coverage. Cyber liability has taken on new levels of exposure as people work from home, school is held online, and retail converts to no-touch operations.

Companies are realizing what their current insurance does and does not cover throughout these uncharted times. Many have recognized a gap in insurance coverage they should have filled. At present, mainstream insurance companies don’t provide coverage to meet the specific demands of pandemic risk. Even if these unique coverages do exist, some companies find certain types of losses could be handled internally within one’s own captive for less money than the commercial insurance market.

Companies may want to consider captive formation to address the combination of unavailable coverage and future uncertainty related to pandemic insurance. In this article, Milliman’s Rachel Seale and Billy Onion explore what companies need to think about before forming a captive and whether or not it makes sense financially.