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Ron Adiel, chief executive officer, Advisen
8 September 2019 Insurance

Large casualty losses become more frequent—and insurers must adjust, says Advisen chief

Large casualty losses are becoming more frequent and insurers must find better ways of pricing general and excess liability business if they are to avoid getting stung, Ron Adiel, chief executive officer of Advisen, told Monte Carlo Today.

“There has been a surge in big claims in the casualty area. This summer alone we have seen eight suits with verdicts or settlements over $100 million.

“While many of these enormous verdicts will be overturned or reduced, they are indicative of a broader set of issues,” Adiel said.

“Increased jury awards have been triggered by the views of Millennials on social responsibility coupled with the successful application of the ‘reptile theory’ by plaintiff attorneys (whereby plaintiff counsel use tactics to activate jurors’ survival instincts in hopes that they will make decisions based on instinct [ie, fear] rather than logic and reasoning).”

He said that other factors include increases in medical costs and the growth of litigation funding. At the same time, certain causes of loss are causing mass litigation including traumatic brain injuries, sexual abuse claims, and products (eg, glyphosate, opioids, talcum powder, and vaginal mesh implants) creating significant problems for companies and their insurers.

While insurers have enjoyed a favourable loss and allocated loss adjustment expense ratio for general and excess liability insurances, results have deteriorated recently especially since 2015.

As such, risk managers and brokers are increasingly reporting that they are experiencing premium increases at renewal, Adiel said.

He advocates insurers use larger datasets, such as those provided by Advisen, to price these products more effectively.

“Insurers are challenged to price their products accurately in this environment. While they may have experience from the policies they have written, the policies provide a view that is limited to their experience which is truncated by the limits of the policies they write.

“Having a broader set of large loss data describing diverse industries enables actuaries to see broader loss trends and price their products with greater confidence,” he explained.

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