Welcome to The Connected Podcast, your go-to source for the latest news and events shaping the insurance ecosystem. In this episode, we delve into the metaphorical concept of "Mind the Gap," a phrase commonly linked to the London Underground. However, here, we apply it to the insurance industry, which is grappling with unprecedented challenges. We'll explore the emerging disparities within the Property & Casualty (P&C) sector as it navigates volatility driven by inflation and climate risks in recent years. The episode highlights government's inadequate responses to extreme weather events, leaving insurers vulnerable and illustrating the necessity to identify and bridge these gaps for future stability.
We'll also address the significant issue of uninsured and underinsured motorists in the U.S., where over a third of drivers are affected in 2023 due to economic tensions. This represents another critical gap requiring urgent attention. Despite these challenges, there is room for optimism. According to A.M. Best & Co., there's been a substantial reduction in net underwriting losses for the P&C industry from 2023 to 2024, with further improvements anticipated. Financial gains from interest rate increases and positive rate trends in commercial lines offer relief, though severe weather events and active hurricane seasons continue to pose a threat.
Further into this episode, we spotlight significant industry developments. Peter Zaffino, CEO of American International Group, predicts a potential $200 billion in insured catastrophe losses by 2025, suggesting notable adjustments in reinsurance strategies. This shift could redefine the dynamics between primary insurers and their reinsurance partners. Meanwhile, the year 2024 concludes with a mixed outcome for the U.S. property and casualty insurance sector. Despite a net underwriting loss of $2.6 billion, there's been a compensatory rise in investment income thanks to increasing interest rates. The anticipation of net investment income reaching $100.8 billion by 2025 is a promising trend, particularly for commercial and personal lines.
The podcast also examines the rising claims frequency for battery electric vehicles (BEVs) in 2024, with a notable increase seen in the US and Canada. As BEVs and hybrids make up a growing share of new vehicle sales, insurers face the challenge of adapting to these automotive innovations and shifting consumer preferences.
Diving deeper, we explore evolving consumer attitudes towards artificial intelligence (AI) in the insurance industry, drawing insights from the Insurity's 2025 AI in Insurance Report. The report reveals a concerning decline in consumer trust in AI applications in property and casualty insurance, with only 20% of Americans viewing AI integration favorably—a decrease from 2024 figures. This brings to light the pressing need for insurers to enhance transparency and educate clients on the benefits of AI, emphasizing its value in areas such as real-time severe weather alerts.
The episode touches on legislative efforts with the proposed Litigation Transparency Act of 2025, aimed at upholding accountability standards in civil litigation funding by enforcing disclosure of payment recipients. This could significantly impact the insurance sector, ensuring greater transparency and integrity.
Lastly, we highlight Sedgwick's acquisition of the legal spend management division from Bottomline, aiming to revolutionize the management of legal expenses for property and casualty insurers. Sedgwick plans to leverage Bottomline's cloud-based technology to enhance its legal bill management services, providing insurers with tools for better litigation cost control and data-driven decision-making.
Join us as we navigate through these complex yet intriguing developments, emphasiz
