As a part of the AAIS Pulse: Chicago presentation, Dr. Bob Hartwig, the director of the Risk and Uncertainty Management Center and clinical associate professor at University of South Carolina, sat down to shed light on the economy, inflation and government actions impacting the insurance industry at a time when losses from natural catastrophes are hurting underwriting results and the availability of reinsurance.
"The economy both in the US and internationally has certainly had significant impact, very real and immediate impact on the primary insurance industry - both on the property and on the casualty side." Hartwig explained. "But, the most obvious occurred on the property side, and also various types of automobile insurance."
Hartwig also identified that the prices of all basic goods continue to rise - anything to help build or repair a home or business, replacement parts for new and used vehicles, all cost more. To add, repairs for these items are taking longer everywhere. "The parts cost more, the labor costs more...but say the replacement vehicle that the insurer is paying for has to be paid for for 12 days instead of the normal 7...now that vehicle costs twice the amount it used to cost."
Hartwig also discussed that costs are rising rapidly today, and the rates in place today where built upon historical trends across the past 5-10 years or more, ending probably in 2021. So, they certainly don't reflect the inflationary pressures insurers are seeing today. "The task ahead is property and casualty insurers (including auto) need to restore some level of rate adequacy. "
To hear more about his insights regarding current economic conditions and how they affect the insurance market, please click the video above.