Triple-I CEO links catastrophe costs to legal system abuse
Speaking recently on CNBC, Sean Kevelighan talked about how inflation and litigation increase insurance premiums.
Insureds impacted by catastrophes such as Hurricane Beryl must contend with increased insurance and reconstruction costs due to both traditional and social inflation, Sean Kevelighan, Insurance Information Institute president and CEO, said during a recent interview on the CNBC show “Squawk Box.”
Related: Insurance rates soar on investment strategy and ‘legal system abuse’
Kevelighan appeared on the broadcast to talk with television personality Becky Quick about insurance and hurricane-season readiness in the face of what’s forecasted to be an above average Atlantic Hurricane season.
“This is what the insurance industry is prepared for,” Kevelighan said. “It keeps capital on hand after writing policies to make sure that those promises can be kept.”
The location, population density and local economics of a hurricane-impacted area all factor into catastrophe and rebuilding costs, he said. “Certainly, in a state like Florida, where you’re seeing extreme population growth, you could see a pretty significant economic impact” from natural catastrophes. Louisiana and Texas also are places where catastrophe frequency and insurance costs have experienced a steady rise, Kevelighan added.
The introduction of Florida into the interview opened the door for Kevelighan to discuss the impact of legal system abuse on insurance.
“Florida [originates] over 70% of all homeowners’ litigation … whereas it represents less than 10% of the overall claims,” said Kevelighan, who also drew attention to the state’s Assignment of Benefits program, which is meant to act as a consumer protection but can be exploited by contractors and attorneys.
“So we’ve got certain states where legal abuse has to be factored into the loss,” Kevelighan said. “That does increase the costs of overall claims.”
He added that inflationary trends that began during the COVID-19 pandemic continue to drive up replacement costs. “The industry is just catching up with that inflation,” he said.
Kevelighan closed out the interview by commending recent efforts at legal system abuse in Florida and Louisiana.
“Hopefully, we’ll begin to see things getting better,” he said in response to a question about insurers pulling out of states where they find the economics and regulatory environment too difficult in which to operate.
“Insurers want to be doing business in these states,” Kevelighan concluded. “These are growing economies, and that’s where insurance thrives. But when you’ve got constraints like regulatory challenges or legal system abuse, they do have to make some tough decisions.”
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