Risky Business

The insurance industry and its customers are confronting and adapting to a host of challenges today: increasing changes in the global climate, rapid technological developments, and economic pressures, to name a few.

As (re)insurance professionals, we focus on providing solutions to the challenges facing our clients. To do this, we must dig into risk concerns across the entire insurance value chain—from consumers to carriers. By understanding the risks that span multiple market segments, we can foster meaningful dialogue and develop innovative solutions that benefit society as a whole.

In collaboration with the Insurance Information Institute (Triple-I), Munich Re US developed RiskScan 2024 to provide insights on concerns related to specific property and casualty (P&C) risks as viewed by key market populations both inside and outside the insurance industry.

A total of 1,300 individuals representing consumers, small business owners, middle market decision-makers, agents and brokers, and insurance carriers were asked to rank their top concerns related to insurance risks, natural disasters, emerging technologies, P&C insurance costs, and market dynamics.

The survey results show that the P&C industry and the individuals and businesses it insures share worries about the health of the U.S. economy and getting back on their feet after a disaster, whether it’s a natural catastrophe or an intentional event such as a cyber attack.

Top Insurance Risks

Each segment of survey respondents was asked to rank its top three concerns from a list of eight insurance risks. The top concerns, based on selection by the highest percentage of respondents across all segments, were: cyber incidents (48%), changes in climate (48%), and business interruption (45%).

However, there was a clear difference in risk perception among the various groups. For example, 77% of consumers ranked tangible hazards like severe weather from climate change among their top three concerns, and 51% included risks that compromise their privacy, such as data breaches.

Meanwhile, insurance professionals maintained a more balanced mindset with 42% ranking cyber incidents and 39% ranking natural catastrophes in their top three concerns.

This segment considered all insurance risks to be relatively important, both immediate risks like changes in climate and emerging risks like artificial intelligence and per- and polyfluoroalkyl substances. Generally, most risks were selected by 35-45% of insurance professionals among their top three.

The survey results show that the P&C industry and the individuals and businesses it insures share worries about the health of the U.S. economy and getting back on their feet after a disaster, whether it’s a natural catastrophe or an intentional event such as a cyber attack.

Most Pressing Natural Disasters

When asked to identify the most pressing natural disasters out of a possible 11 options, all surveyed audiences were concerned about frequent, immediate non-peak perils such as thunderstorms, tornadoes, and floods. Of the non-peak perils, flood was ranked first or second natural threat of concern by nearly every segment, except consumers who ranked it fourth. Many consumers believe that if they are not in a flood zone, they are not at risk for flood and thus have often not purchased adequate coverage. Flooding from Hurricane Helene that devastated communities across western North Carolina in September demonstrated the dangers of that approach.

With 14.6 million properties in the United States at substantial risk of flood, according to climate risk modeling firm First Street, and pluvial flooding events occurring more often in areas that did not previously experience flooding, this is becoming one of the world’s most costly perils and represents a major insurance gap in the country.

This gap in consumer focus on flooding compared to insurance professionals and businesses suggests consumers might not know that traditional homeowners policies typically exclude flood coverage.

Closing the Gaps

Survey insights reveal that while the audience segments recognize the actual risks, there may be a gap in the understanding of the importance of adequate coverage and what drives P&C insurance costs.

While more than 50% of consumers and business professionals ranked cyber as their top insurance risk concern in RiskScan 2024, Munich Re’s 2024 global cyber survey found that 87% of managers surveyed state that their company is not adequately protected against cyber risks. Moreover, of respondents to Munich Re’s separate Global Cyber Risk and Insurance Survey 2024: Personal Lines, 42% have no intention of purchasing this insurance.

Meanwhile, 80% of consumers and 70% of small business owners surveyed for RiskScan 2024 did not realize that legal system abuse can drive up the cost of their P&C insurance.

By failing to reduce these gaps in knowledge, consumers and businesses may be susceptible to being uninsured or underinsured, while insurers face the risk of price inadequacy. Risk concerns like flood, cyber incidents, and legal system abuse present key opportunities for education and engagement.

Ensuring a Resilient Tomorrow

Surveys such as RiskScan 2024 enable industry professionals to assess the concerns of relevant stakeholders and determine product development needs to address key risks and emerging hazards.

With a focus on prediction, prevention, and protection, Munich Re US seeks creative ways to deliver future-focused solutions, empowering you to be braver and bolder today and ensure a resilient tomorrow.

RiskScan 2024 was commissioned by Munich Reinsurance America (Munich Re US) in partnership with the Insurance Information Institute (Triple-I). Research conducted independently by RTi Research.