Contents

  1. Cover
  2. Editors Desk: Private Passenger Auto and Auto Insurer Rankings
  3. Contents: Auto Insurers and Parametric Insurance
  4. Bests Calendar and Executive Changes
  5. Executive Changes and Web Traffic
  6. Emerging Leaders Conference and Masthead Forestay
  7. At Large and Insurance Wellness Programs
  8. Risk Adviser and Business Judgment Rule
  9. Issues and Answers: Data and Asset Management
  10. Issues and Answers: Technology Revolution and Data Security
  11. Issues and Answers: Asset Allocation Strategy and 2024 Outlook
  12. What AM Best Says: Long-Term Care Claims Increase
  13. Life Insurance: Life Reinsurance Growth and Asia and Europe
  14. Auto Costs: Underwriting Losses and Private Passenger Insurers
  15. Auto Costs and Rate Adequacy
  16. Auto Electric Vehicles: Insurance and Battery
  17. Auto Electric Vehicles: Repair Cost and Claims Frequency
  18. Bests Rankings Auto: Top US Commercial and Top US Liability
  19. Bests Rankings Auto: Top US Private Passenger and Top US Total Auto
  20. Bests Rankings Auto: All Lines By State and Auto Liability By State
  21. Bests Rankings: Physical Damage and Private Passenger By State
  22. Bests Rankings: US Commercial By State and Private Passenger No Fault
  23. Bests Rankings: Commercial Auto No Fault and Commercial Auto Liability
  24. Parametric Insurance and Coral Reefs
  25. Parametric Insurance: Hawaii and Mexico
  26. Bests Rankings: L/H Asset Distribution and Private Flood and Cyber
  27. Bests Rankings Caribbean Insurers and What AM Best Says
  28. What AM Best Says and Underwriting Loss Control
  29. Underwriting Loss Control and Insurance Media
  30. Insurance Media and Insurance Guys Podcast
  31. State Rate Filings: North Carolina Auto Rates and Private Passenger
  32. Book Store and App Store
  33. Trending News and Trending Research
  34. AM Best Webinars and AM Best TV Audio
  35. Rating Actions and Americas Life/Health
  36. Rating Actions: Americas Life/Health and Americas Property/Casualty
  37. Rating Actions: Americas P/C and Europe Middle East and Africa
  38. Rating Actions: Holding Companies and Financial Strength Ratings
  39. Rating Actions and Corporate Changes
  40. Corporate Changes and Preferred Publisher Program
  41. Insurance Professional Resources and Industry Updates
  42. Last Word and Masthead Backstay
  43. Back Cover
 
20-21 20-21
AM Best: Long-Term Care Claims
Trending Up Since Pandemic
20
Rising claims costs and the inadequate pricing assumptions from the past
continue to have an impact, according to a newly published AM Best report.
by John Weber
T
he challenges facing the U.S. long-term care
insurance market show no signs of slowing, as a
segment outlook by AM Best remains negative.
According to the Sept. 8 Best’s Market Segment
Report,
Long-Term Care Claims Skyrocket in 2022
,
the combined impact from rising claims costs and
the inadequate pricing assumptions from the past
continue to complicate the playing field for writers
of this product.
Those older blocks of inadequate pricing
assumptions continue to lead to loss ratios exceeding
180, said AM Best Associate Director Michael
John Weber
is senior associate editor. He can be reached at
john.weber@ambest.com
.
BEST’S RE
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
Adams and Industry Research Analyst Kaitlin
Piasecki. Following is an edited transcript of an
interview with Adams and Piasecki.
Long-term writers did really well during the
pandemic, as claims were down by about
13%. What’s happened since that time?
Piasecki:
As you said, claims were down by
13% during COVID. However, at the end of
2022, they increased by 20%. Driving this was
really the shift from home care back to long-
term care facilities. Also adding to that was
inflation and the cost of medical supplies rising,
and then you also have the cost of higher wages
as well.
US Long-Term Care
mailto:john.weber@ambest.com
How are the legacy blocks of long-term
care business affecting the segment’s
financial performance?
Adams:
The older legacy blocks of business
have been a real drag on the segment’s financial
performance. Many carriers began exiting the LTC
business over a decade ago.
Its actual experience began to deviate from their
initial assumptions.
LTC requires numerous long-term assumptions.
This includes interest rates, expenses, policyholder
experience, just to name a few, and insurers are
really required to update these assumptions as a new
experience comes through. This did result in some
significant reserve charges at times.
We found policies that were sold in 2004 and
prior were written when interest rates were much
higher, and where LTC insurers had limited
historical experience to base their assumptions
on. In addition, they had much richer benefits,
such as unlimited benefit periods and compound
inflation riders.
As a result, our research shows that these
blocks incurred loss ratios that were significantly
higher than those policies that were issued in
2013 and after.
How have the companies writing this
business responded?
Adams:
Companies have taken a number of
steps to improve the profitability of their LTC
blocks. They stopped selling policies with these
unlimited benefit periods and these compound
inflation riders. They applied for significant rate
increases, sometimes as high as 60%, arguing
with regulators over a two- or three-year period
that they could go insolvent if they didn’t get
these rate increases.
They also offered to pay policyholders a lump
sum if they agreed to reduce the amount of benefits
in their policies. While this did come at a cost to
some insurers, it did reduce some of the uncertainty
for them on a go-forward basis, and some insurers
did have success with this.
Then, more recently, as insurers really began
to search for ways to improve the profitability
of their block of business, they began to focus
more on fraud, waste, and abuse, and preventive
care measures, such as doing safety audits of
policyholders’ homes.
“The older legacy blocks of
business have been a real drag
on the segment’s financial
performance. Many carriers
began exiting the LTC business
over a decade ago.”
Michael Adams
AM Best
Doing things like installing handrails in their
showers, making sure they have friends or family
members coming by every so often to check in on
them—these [moves] have begun to show some
initial success and they may delay the unnecessary
claims for months or potentially years, which could
benefit both the policyholder and the insurer.
What were the results that the AM
Best report mentions by the state of
Washington to provide residents with long-
term care coverage?
Piasecki:
Washington is the first state to actually
implement this mandatory payroll tax to its
residents. Although this is a mandatory tax, there
were a few exemptions.
One of the exemptions being that if somebody
could prove they had private long-term care
insurance, then they would be exempt, but they had
to have that private long-term care insurance prior
to Nov. 1, 2021, in order for them to be exempt. As
a result of that, we saw the number of lives being
insured with long-term care spike in 2021.
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
21
RGA President: Life Reinsurance
22
Growth Strengthens in Asia, Europe
The Hong Kong business is benefiting from the recovery of mainland China to
pre-COVID-19 levels. This is a “material” source of income for the Hong Kong
market, said Tony Cheng, president of Reinsurance Group of America Inc.
by David Pilla
R
einsurance Group of America Inc. is seeing
strong growth opportunities in Asia as the life
reinsurer also reported longevity business gains
in Europe, said its president.
The Asia market is growing on strong economic
recovery, driving demand for new products RGA
launched with its partners, President Tony Cheng
said in a conference call. The group sees momentum
in all its Asian markets with particular second-
quarter success in South Korea, he said.
RGA launched a new product in China in late
2022 and is getting a good reception in that market
David Pilla
is news editor. He can be reached at
david.pilla@ambest.com.
BEST’S REVIEW
•
OCTOBER 
as it works with market-leading insurers on other
product ideas, he said.
The Hong Kong business is benefiting from the
recovery of mainland China to pre-COVID-19
levels. Cheng said this is a “material” source of
income for the Hong Kong market.
Cheng noted that RGA completed a sizable
transaction with a new client in Japan, which follows
a number of coinsurance deals with international
companies that had operations there.
As Asian regulators apply tighter capital
standards, RGA is seeking to provide capital
solutions in the region, he said.
The longevity business in Europe is seeing good
growth as evidenced by a recent £5 billion ($6.39
Life Insurance
mailto:david.pilla@ambest.com
The U.S. pension risk transfer business
is gaining momentum, and RGA is
optimistic for “this sizable and growing
market.”
Tony Cheng
Reinsurance Group of America Inc.
billion) longevity swap transaction, Cheng said.
There is a strong deal pipeline in the region, he
added.
The U.K. BT Pension Scheme entered into a
longevity reinsurance arrangement on Aug. 1 with
RGA to protect BTPS from the cost of unexpected
increases in the life expectancy of its members.
The new longevity insurance and reinsurance
arrangement covers £5 billion of BTPS pensioner
liabilities and follows the £16 billion of liabilities
covered by a similar arrangement entered into by
BTPS in 2014, BTPS said in a separate statement.
Cheng said the U.S. pension risk transfer business
is gaining momentum, and RGA is optimistic for
“this sizable and growing market.”
At the end of May, Legal & General Retirement
America and RGA entered into a $309 million PRT
transaction with PPG, a Pittsburgh-based Fortune
500 global leader in manufacturing paints, coatings
and specialty materials.
The lift-out covers over 4,000 retirees and
beneficiaries with benefits under a defined benefit
pension plan sponsored by PPG, RGA said at the
time. LGRA is lead administrator and will be fully
responsible for the service and administration of all
participants transferred as part of the lift-out.
RGA said it has been a long-term reinsurance
partner of the Legal & General Group, and the
companies are expanding their decades-long
partnership to support the U.S. PRT market with
strategic solutions for plan sponsors seeking to
de-risk their pension plans.
In March, L&G posted higher 2022 profit on
growth in retirement solutions and a return to
profit in U.S. retail life insurance following adverse
mortality experience.
The retirement solutions segment of L&G—
LGRI—saw operating profit rise 9% on the scale of
backbook earnings, the performance of the global
annuity portfolio, robust pension risk transfer new
business volumes and routine assumption changes,
the group said at the time.
Second-quarter net income available to RGA
shareholders rose to $205 million from $105 million
a year ago. Net premiums rose to $3.34 billion from
$3.23 billion.
RGA had favorable mortality experience in
its U.S. individual life business and good results
in its U.S. individual and group health business,
Chief Executive Officer Anna Manning said in the
conference call.
The Asia traditional business saw favorable claims
experience and higher yields, Manning said.
The global financial solutions had a strong
quarter with contributions from spreads and
favorable longevity experience, she said.
The group’s transactions pipeline is healthy, with
opportunities across many geographies, she said.
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What’s Driving the Rise in Auto Costs
Repair costs and bad driving habits led to more than $30 billion in underwriting
losses for private passenger auto insurers in 2022, according to AM Best data.
by Anthony Bellano
24
A
flying rock. An errant icicle. While the typical
causes of a cracked car windshield haven’t
varied much in recent years, the financial
impact on automobile owners and insurers has
changed significantly as technology continues to
evolve.
“It used to be a windshield was a piece of glass,
a rubber gasket and some adhesive. They could
[fix] it almost anywhere,” said Robert Passmore,
department vice president, personal lines, for the
American Property Casualty Insurance Association.
“But now there are sensors and cameras and all
these things that are mounted in the glass that have
to be recalibrated. You have almost as much cost
associated with the recalibration and the remounting
of those things as with actually replacing glass. That
concept spreads everywhere.”
The growing cost and complexity of vehicle
repairs, as well as an increase in bad driving habits
and tighter limits on rates, are presenting problems
for a private passenger automobile insurance
industry that had a net underwriting loss of $33.16
billion in 2022, almost eight times higher than the
$4.19 billion seen in 2021, according to the AM
Best Special Report
2022 P/C Snapshot: Unprofitable
Anthony Bellano
is an associate editor. He can be reached at
anthony.bellano@ambest.com
.
BEST’S REVIEW
•
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Auto and Property Results Weaken P/C Underwriting
Performance
. In 2020, the industry reported an
underwriting net gain of $18.35 billion.
Other headwinds include higher used car prices,
supply chain and labor market challenges, and rising
medical costs, AM Best reported.
David Blades, associate director, industry research
and analytics at AM Best, said private passenger
auto is a line that has performed well historically,
but some newer equipment in newer automobiles,
including electric vehicles, has driven up the cost of
repairs and helped increase losses in 2022.
Average repair costs have been climbing steadily
for years. More parts, vehicle complexity, labor, and
diagnostic scans and calibrations have all played a
role, according to CCC Intelligent Solutions, an
automotive company that provides insight and
analysis of connected car data to inform consumers
about the automotive and insurance industries.
Part costs have increased across all major groups
from a combination of supply chain issues, tariffs,
greater use of new materials such as aluminum and
carbon fiber, and greater complexity from the use
of LED versus halogen in lamps, for example. The
average cost per part soared in 2021 and 2022, with
larger increases month over month and year over
year than seen in the past 20-plus years, according to
CCCIS.
Auto: Costs
mailto:anthony.bellano@ambest.com
“The average repair [time] has probably
gone up about a week in the last couple
of years, which is really significant. That
shows up in the cost of rentals that
insurers have to pay.”
Robert Passmore
American Property Casualty Insurance Association
Parts across all groups have increased by 20.2%
since 2019, according to the CCCIS analysts.
The cost of parts related to the windshield have
skyrocketed 56.4% in that time period, while
materials related to the grille and hood have jumped
36.2% and 35.0%, respectively.
Deteriorating Driving Behaviors
Some insurers and analysts believe the repairs
are linked to what appears to be an increase in bad
driving behaviors such as speeding and distracted
driving, as well as a decrease in seat belt use, that
began during the pandemic. “People thought, ‘Well
there’s not as many people on the road, so I can
text, use my phone, watch videos, do whatever,’”
Passmore said. “A lot of those habits haven’t reverted
back to where we were before. People still seem to be
doing those things.”
Blades agreed, saying the average speed of cars on
the road appears to be increasing. “The accidents
that have been happening have been more severe,
in part because of the speeding and the distracted
driving issues,” Blades said. “The accidents have
been more severe, and that hurts the physical
damage profitability numbers, and the auto liability
profitability numbers as well.”
In a recent report that provides telematics
applications to insurers, Cambridge Mobile
Telematics noted there has been a 23% surge in
distracted driving since 2020 and estimated that this
resulted in 420,000 additional crashes and 1,000
fatalities in 2022. The report,
The State of Distracted
Driving in 2023 & the Future of Road Safety
, also
found that those who interact with their phone
screens while driving are 240% more likely to crash
than drivers who do not interact with their screens.
There have been more fatalities as well. In 2021,
auto fatalities reached their highest level in 16
years, numbering 42,939, according to the AM
Best report, which cited figures from the National
Highway Traffic Safety Administration. It was
virtually the same in 2022, when 42,795 auto
fatalities were reported.
Additionally, 27% of crashes in 2022 were total
losses, which has added more expense pressure,
according to LexisNexis Risk Solutions, which
provides data and analytics for insurers.
Qualified labor is becoming more limited as
the complexity of repairs increases, Passmore said.
Auto repairs now require a different skill set that
makes them more expensive, he said. “Some of the
repairs have moved from more of not just taking
off and putting on fenders and doors and hoods
and things like that, but also all that stuff about the
recalibrating systems and all that. Some of the cost
moves to the mechanical side from the body side,
and that is usually paid at a higher rate,” he said.
Supply chain issues also greatly increased the
cycle time for repairs, resulting in additional loss
cost pressures, according to the Best’s Market
Segment Report
Market Segment Outlook: US
Personal Auto
.
“Our members are telling us there’s no rhyme
or reason to it. Sometimes it will be this part,
sometimes it will be that part,” Passmore said. “That
extends to repair times. The average repair [time]
has probably gone up about a week in the last couple
of years, which is really significant. That shows up in
the cost of rentals that insurers have to pay. Some of
those vehicles are taking so long to get those parts,
insurers have to make decisions about whether or
not to total the vehicle.”
According to the St. Louis Federal Reserve, the
total revenue for automotive repair and maintenance
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