Tech enabled claims instigation driving insurer claims frequency: 4WARN interview

Insurance companies have lost control of their claims frequency and the use of technology enabled claims instigation practices to drive more claims through litigation has become a significant social inflationary threat to the industry, with ramifications for the reinsurance and insurance-linked securities (ILS) market, speakers explained in our latest Artemis Live video interview.

One of the key drivers for this trend is not very well understood across the industry, the use of technology and advanced digital marketing techniques to instigate claims and drive them through law firms, resulting in higher claims and litigation as well.

This has become a significant issue for insurers that are facing the explosion in claims these practices are driving.

As their claims frequency has now run away from them, becoming less and less predictable in recent years, as this trend has exploded.

It’s also an issue of great relevance for the reinsurance and ILS capital providers that can be on the hook for higher losses as a result, with this trend likely to have driven some amplification of claims that flowed to these markets in recent years, especially after major catastrophe events.

We spoke with Joe Petrelli, well-known in the industry as the President and Co-Founder of rating agency Demotech and now also a co-founder of 4WARN Inc, and Todd Kozikowski, CEO, co-founder and shareholder of 4WARN, INC for this new video interview.

This is a little different to our typical videos, as we wanted to allow the speakers to get the data across to our readers, so there is a presentation involved as well.

Joe and Todd have been working closely together to deliver insights for the insurance and reinsurance industry that have previously been masked or hidden, but are extremely pertinent.

Specifically, they have undertaken significant work to mine and analyse data, to help insurers and reinsurers better understand some of the causes of the explosive claims litigation trends affecting the industry today, especially in the United States.

4WARN Inc. is a relatively new venture the pair have established to provide awareness of tech-enabled claim instigation, and to assist carriers and third parties in remediating claim instigation, as well as preparing themselves for this trend by developing strategies to defend against it.

They define tech-enabled claim instigation as the confluence of litigation funding, litigation marketing, litigation financing and search engine optimization to initiate insurance claims.

Our readers will be only too familiar with the claims inflation and loss amplification trends seen in catastrophe events over the last few years, particularly in Florida, but also in other regions.

This trend correlates with major catastrophe events, sees targeting of any weaknesses in policy forms, but is also a concern for casualty and other segments of the market as well where litigation may occur naturally but can now become significantly inflated.

The work 4WARN is doing sheds light on murky practices that are ramping up claims inflation today and causing issues to insurers and reinsurers (as well as ILS markets), inflating claims while also contributing to the challenges of insurability we see evidenced by some carriers exiting regions that are both catastrophe or climate affected, which are importantly some of the most affected by litigation too.

Watch the full video to learn more about the way digital techniques are weaponising insurance claims litigation, driving a significant elevation in claims frequency through to insurers, with ramifications for reinsurance and ILS market interests.

The full video interview is embedded below and can also be viewed in full, along with previous Artemis Live video interviews, over on our YouTube channel.

You can also listen to audio versions of our interviews by subscribing to the Artemis Live podcast here.

All of our Artemis Live video interviews have a focus on reinsurance, ILS and the efficiency of risk transfer and can be accessed directly from our YouTube Channel.

You can also listen in audio to these interviews by subscribing to the Artemis Live podcast here.

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