Challenges and Innovations in Insurance Underwriting Amid Economic Uncertainty

Insurance underwriting and pricing have become increasingly complex due to high inflation, climate-related risks, and varied state regulations. In an interview for the All Eyes on Economics podcast, Dale Porfilio, Chief Insurance Officer at Triple-I, emphasized the importance of historical loss data and economic projections in actuarial ratemaking. The current economic uncertainty, driven by rising replacement costs and inflation, presents challenges for actuaries in contextualizing data.

Porfilio explained that while actuarial ratemaking is prospective, it relies heavily on historical trends to predict future losses. Economic indicators often reveal trends faster than insurance data, making it essential for actuaries and economists to use multiple data sources for accurate projections. The Insurance Research Council (IRC) is developing a comprehensive database of personal auto injury claims to improve pricing accuracy and identify cost-reduction opportunities.

Triple-I collaborates with Milliman on the quarterly Insurance Economics and Underwriting Projections report, which uses economic growth data and replacement cost indices to create robust underwriting models. Understanding the interplay between economic trends and risk factors, such as geopolitical disruptions, is crucial for resilience in underwriting projections. Resources like Triple-I’s Chart of the Week aim to simplify economic research dissemination, ensuring informed decision-making within the insurance industry.