Fires, explosions, aviation, and faulty workmanship top the list of insurance losses as measured by total value, according to a new Global Claims Review published by Allianz Global Corporate & Specialty (AGCS) which addresses more than 75 percent of the financial losses in over 200 countries from 2013 to 2018.
The report identifies five major causes of insurance loss in the United States in terms of the value and the frequency of claims, as listed below.
(by value of the claim)
- Fire and explosion 22%
- Storm damage 18%
- Aviation collision & crash 10%
- Faulty workmanship and maintenance 6%
- Defective products 5%
- Other 39%
(by the number of claims)
- Automobile crash and collision 12%
- Water damage 9%
- Faulty workmanship and maintenance 8%
- Damaged goods 7%
- Crime and disorder 7%
- Other 57%
In addition to looking at the top causes of loss in terms of both value and frequency, the Allianz report reveals a variety of trends affecting the insurance defense industry in the United States.
Business Sector Claims Trends
While it is useful to identify the top causes of insurance claims, it is equally important to acknowledge which industries experience higher values and frequency of claims.
Top Losses by Business Sector (by value of claims)
- Aviation (22%)
- Property (17%)
- Energy (17%)
- Marine (15%)
- Engineering (14%)
- Liability (5%)
- Financial Lines (4%)
- Mid-Corporate (4%)
- Entertainment (1%)
- Other (1%)
Top Losses by Business Sector (by number of claims)
- Marine (49%)
- Mid-corporate (19%)
- Aviation (10%)
- Liability (8%)
- Property (4%)
- Financial lines (3%)
- Engineering (3%)
- Entertainment (2%)
- Energy (<1%)
- Other (<1%)
Considering the frequency and value of claims within these industries collectively, the following industries pose the most significant liabilities.
Almost one-third (29 percent) of the value of marine claims result from ships sinking or collisions (16 percent) and fire or explosion (13 percent). Claims for damaged goods (including handling and storage) represent the leading category of marine claims by volume (at 22 percent), with other named factors like water damage, collisions, and machinery breakdown representing fewer than five percent per category. (The report does not categorize the majority (62 percent) of marine claims based on volume.)
Aviation repair costs are increasing along with the use of composite materials and more sophisticated engines that also carry a higher valuation. Policy deductible levels are relatively low, however, which results in more claims covered by insurance.
Property & Energy
Insurance claims in the property and energy sectors are extremely high value, considering the significantly low frequency and high percentage of value of claims. Even though only four percent of the number of claims originate from the property industry and a total of one percent from the energy sector, claims in each of these fields constitute 17 percent of the total value of all claims.
Liability and Property Claims Trends
The Allianz report identifies several trends affecting liability and property claims relevant to the United States. Some highlights and trends identified in the report are listed below.
- Almost half the value of all corporate liability loss claims (45 percent) result from defective products, which often includes allegations of faulty workmanship or maintenance.
- Large corporate liability claims involve litigation in about one-third of all claims, compared with property insurance where less than one percent of claims are litigated, on average.
- Higher settlements and awards in personal injury cases are evident in the past five years, including high levels of punitive damages in some cases. Bodily injury claims account for the largest share of liability claims, followed by product liability and medical malpractice claims. Rising claim values are increasingly evident in pharmaceutical and commercial motor claims.
- In the financial lines sector, professional indemnity losses due to alleged negligence or non-compliance with laws and regulations are factors in more than half (61 percent) of the value of claims.
- Employment practices liability (EPL) claims, including discrimination claims, are likely to increase in the future following the #metoo movement. In addition to corporate claims involving unfair work practices against women, organizations like churches and charities are also being targeted for sexual harassment and other workplace violations.
- Cyber security is a relatively small but growing concern as new technologies, such as driverless vehicles and the “Internet of Things” (IoT) emerge along with related liability claims. Some of these claims will evolve as product liability rather than personal injury claims. In regard to data theft and privacy concerns, U.S. courts to date have generally ruled that damages from data breaches are not covered under CGL policies.
- Advanced data analysis technologies, collectively referred to as “InsureTech,” are being tested and adopted by insurers to automate and accelerate the processing of claims where suitable. Drones, robotics, data analytics, and artificial intelligence are among the processes being used to speed claims resolution. AGCS reports that between 60-70 percent of its claims are under $11,300 in value, implying less complex losses that can be automated to free claims professionals for more complicated matters.
The findings detailed in the AGCS report are based on the analysis of 471,326 corporate insurance claims from 206 countries and territories for the period July 1, 2013 to July 1, 2018. Claims data includes 100% of the total loss, meaning the report includes both the AGCS covered portion plus the share covered by other insurance companies involved on the particular risk.
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This article is provided for educational purposes only. It is not to be interpreted as legal advice or an opinion in regard to any topic discussed. The article should not be used as a substitute for legal advice from a licensed attorney in your state. Every situation is different and circumstances vary widely depending on the governing state law, policy provisions, and related considerations.