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Welcome to the Pride,

In the LION Specialty newsletter, we break down the 3-4 most important events in the financial institution insurance space every week. We scan 200+ news sources so you don’t have to.

Let’s jump into it:

1) Insurance Agencies Are Booming, But The Market Is Aging…

Every year, "Best Practices Study" by Big “I" and Reagan Consulting analyzes the performance of insurance agencies. The 2024 report just released (source).

Here are our 2 main findings from it:

1) Agencies are making more money than ever before. Insurance agencies grew by 10.6% per year on average. They’re seeing strong growth, while profitability remained historically high at 25.7%.

2) The industry is aging. The average age of insurance agency owners and workers rose to 54.4 years, up from 54.3. Not a remarkable increase, but there are fewer younger people in the industry.

Put another way -

Insurance agencies are booming, and boomer:ing.

So what?

Two things:

1) If there are fewer young people in the industry, it could be hard to find good brokers in the future.

This could lead to:

• Higher costs. Brokers might charge more for their services if there are fewer of them.
• Lower quality. It could be harder to find brokers who are experienced and knowledgeable.
• Less competition. There might be fewer brokers to choose from, giving you less bargaining power.

2) Insurance companies should put in the effort to understand insurance agents, too.

The deal flow insurance agencies provide is the lifeblood of insurance companies.

Because of the aging workforce, that's more important than ever. Insurance agents have long known their insurance company counterparts in and out. They know how financially and operationally sound the insurers are.

So, read the Best Practices Study.

Action steps:

• Work with brokers who are committed to attracting young talent. These brokers are more likely to be around for the long haul.
• Ask your broker about their financial health. A healthy broker is more likely to be able to handle your needs.
• Think about the future. Will your broker still be around in 10 years? If not, it might be time to switch.

We understand the importance of finding the right insurance partner. We're committed to attracting and developing young talent. We do this to ensure that we can continue to serve our clients for many years to come.

​Contact us to learn more about how we can help you manage risk and secure the best insurance coverage possible.

2) PFAS: Are These Chemicals Asbestos 2.0?

PFAS, a group of man-made chemicals found in many products, are gaining attention in the insurance industry (source). These chemicals can linger in the environment and cause health issues.

In case you haven't heard of them before, here's your 4-bullet summary:

1. PFAS are dangerous because they're notoriously persistent. The combination of dangerous side effects and the chemical being hard to break down makes them harmful.
2. PFAS are everywhere - They're in non-stick cookware, food packaging, firefighting foam, and more.
3. PFAS lawsuits are piling up - Thousands of lawsuits are pending, and some large settlements have already been reached.
4. Regulators are cracking down - Both federal and state governments are taking action to regulate PFAS.

Insurers are now facing a new wave of potential claims.

While some insurance executives aren't worried about PFAS being "the next asbestos," it's a trend worth watching. PFAS is a complex risk, with many layers of insurability.

It’s too early to say if it will be as big as asbestos, but it’s a risk we're monitoring closely.

So what?

This is a chance for you to get ahead of the market.

To do that, we recommend:

• Review your policies - Make sure you understand your coverage for PFAS-related claims. You may need to add specific exclusions or adjust limits accordingly.
• Talk to your underwriters - They may have new requirements or questions about your PFAS exposure.
• Educate your employees - Make sure they understand the risks of PFAS and how to avoid them.

Don't wait for the market to harden around this issue. We're still early and expect this to pick up momentum.

3) IAT Plunges Into AI-Assisted Claims Handling

In previous newsletters, we said that we're eager to see a big insurance company start using AI. After all, startups can lead innovation, but incumbents drive mass adoption.

Last week, IAT Insurance Group, a major US specialty insurer, announced it's using new AI to handle auto and general liability claims (source). They're using a product called Claims DocIntel Pro from CLARA Analytics.

This tool has 5 main features. It can:

1. Read legal and medical documents
2. Find important details that could lead to bigger claims
3. Create summaries of claims
4. Track medical treatments
5. Warn adjusters if a claim might get more complicated

This is one of the first examples of a large insurance company using AI to handle claims.

IAT chose to use this AI for auto and general liability claims because these types of claims are often the most complex and costly. They believe AI will help them find vital information faster, saving them time and money.

If it works well for IAT, we expect other insurers to follow.

So what?

Let's be honest -

The tenure of claims just takes too long. Passing a claim through all its stages takes YEARS. And a lot of that time goes to humans pushing papers back and forth.

AI has the potential to make claims processing much faster and more accurate. That's good for both insurers and policyholders.

But there are risks too.

Here at LION, we're watching closely to see how this technology impacts the industry.

We're asking questions like:

• Is the AI making the right decisions? Or are there errors that could lead to bigger problems down the road?
• (How) are humans still involved in the process? Or are they just rubber-stamping the AI's outputs?
• Is the AI being used to speed up work for claims adjusters? Or is it replacing them altogether?

Claims are the heart of insurance. They're the reason insurance exists in the first place. So let's make sure we use AI responsibly and ethically in this critical area.

4) Insurance Spending to Reach $10 Trillion By 2028

Global insurance spending is on track to hit a record high of nearly $10 trillion by 2028 (source). The insurance market has seen a 25% jump over the past four years, with total premiums reaching $9 trillion this year.

So what?

It's time for a victory lap. This is just another indicator of the success of our industry at large.

Sign Off

Don't hesitate to reach out if you have questions or want to explore how these changes might impact your insurance strategy.

Stay covered,

Natasha & Mark

Co-Founders and Managing Partners

LION Specialty

P.S. Did you find this newsletter valuable? Forward it to a colleague who might benefit. And if you have any topics you'd like us to cover in future editions, just hit reply and let us know!

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