In the latest episode of The Connected Podcast, our hosts dive into the historical significance of Memorial Day and recent transformative events in the insurance ecosystem. Originally known as Decoration Day, Memorial Day was established post-Civil War to honor Union soldiers and has evolved to commemorate all American military personnel lost in service. Observed on the last Monday in May since the enactment of the Uniform Monday Holiday Act in 1968, it marks the unofficial start of summer, celebrated by flying the flag at half-staff, and hosting parades and memorial services.
Turning to current events, this episode sheds light on the severe tornado outbreak from May 15-18, impacting states like Kentucky and Missouri. The devastation resulted in significant economic and insured losses, prompting discussions about the implications for underwriting in high-risk areas. Guy Carpenter highlights that this season’s tornado activity could exceed historical averages, affecting insurance strategies moving forward.
Additionally, the podcast addresses AM Best's concerns about NOAA's decision to discontinue updates to its billion-dollar weather disaster database post-2024. This database, which has been tracking significant weather events since 1980, is critical for insurers as they adapt to increasing secondary peril losses. The absence of updated data presents challenges in risk modeling, emphasizing the urgency for insurers to effectively navigate these pressures.
The discussion also covers key legislative developments, such as the U.S. House of Representatives’ narrow passage of the “One Big Beautiful Bill Act.” This influential tax reform bill seeks to make certain provisions of the 2017 Tax Cuts and Jobs Act permanent, notably increasing the deduction for pass-through entities to 23%. This is significant for independent insurance agencies which operate as pass-through entities.
On the consumer front, there is a marked increase in insurance shopping, with auto insurance reaching its highest level in nearly two decades. Economic uncertainty and substantial premium hikes, with auto rates up 42% and home insurance by 20% over the past two years, are driving consumers to find better rates.
In the face of economic challenges, the industry noted an underwriting profit in 2024, with a net combined ratio of 96.5%, thanks chiefly to improvements in personal lines like auto and home insurance. This turnaround has prompted insurers to raise premiums, prompting consumers to shop around more actively.
The episode also explores M&A survey insights, revealing that approximately one-third of companies change their insurance broker or carrier following mergers and acquisitions. This highlights the fluid nature of these transactions and the importance of aligning insurance arrangements with new company structures and risk profiles. As deal-making is projected to rise further in 2025, brokers and carriers need to adeptly handle these shifts, as highlighted by Joann Balous from Travelers.
In addition, the podcast features significant growth insights from GM National Insurance Company, which expanded its written premiums from $2.6 million in Q1 2024 to $9.5 million in Q1 2025 across 14 states. Despite this growth, the company faces increased net underwriting losses and challenges in managing high loss and expense ratios, indicating a need for strategic operational adjustments.
Exploring risk transfer, Willis Towers Watson notes a shift in the parametric insurance market, with stable or slightly decreasing rates due to increased market capacity. Parametric solutions now cover a broader range of risks, attracting middle-market and smaller insureds.
