December 7, 2025 • 43 mins
In this episode, we dive into the growing instability across today’s insurance markets and what it really means for your wallet, your home, and your health. The conversation begins with the looming health insurance crisis in the United States, where the possible expiration of Affordable Care Act subsidies threatens to send premiums skyrocketing for millions of people. We unpack how these subsidies work, why their potential removal could effectively double costs in some states, and how the bitter political fight in Congress is shaping the future of affordable coverage. From there, we zoom out to examine the fragile state of property and casualty insurance, especially in regions on the front lines of climate change. With wildfires, hurricanes, and other disasters becoming more frequent and severe, insurers are reassessing their risk, and consumers are feeling the consequences through higher premiums, reduced coverage options, and, in some cases, outright withdrawals from high-risk markets. We explore the regulatory pressure mounting on state insurance commissioners in places like California and Florida, as lawsuits, investigations, and public anger intensify. The episode also looks at the everyday decisions facing consumers around specific products such as travel insurance and long-term care coverage. We discuss whether travel policies are worth the price in an unpredictable world and why long-term care insurance is becoming increasingly difficult to afford, even as aging populations need it more than ever. Along the way, we highlight key industry developments, from investment shifts and merger activity to the rollout of new, high-cost drugs into commercial health plans across global markets. Throughout the episode, the common thread is a rising level of anxiety among policyholders. Whether it is a family trying to keep their health plan, a homeowner in a coastal state searching for affordable coverage, or a traveler wondering if they can risk going without protection, the sense of uncertainty is palpable. This episode connects the dots between policy, politics, corporate decisions, and the everyday lives of consumers, offering context, clarity, and critical questions about where the insurance world is headed next.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Insurance Weekly. We're here to navigate some of
the financial headlines that are really dominating the end of
this year. We're looking at risk regulation and what it
all means for well for your wallet. It's a critical time,
it really is across every major sector. You've got healthcare
decisions in Washington, climate lawsuits in the courts, and just
skyrocketing costs on the road. The whole insurance landscape is
(00:23):
facing these structural challenges, yeah, and challenges.
Speaker 2 (00:26):
Putting it mildly, it feels more like a systemic reckoning.
I mean, if you're trying to plan for twenty twenty
six right now, it is exceptionally difficult.
Speaker 1 (00:35):
Why is that? What are the big forces at play?
Speaker 2 (00:38):
It's this convergence of massive macro forces. You have this
chronic inflation that's driving up the cost of everything from
car parts to a hospital stay right. Then you layer
on climate instability, which is pushing all the catastrophic risk
models past their breaking point. And on top of that,
you have huge regulatory uncertainties swinging from state to state
all the way up to.
Speaker 1 (00:58):
Congress, and that squeeze it hits everyone.
Speaker 2 (01:01):
Everyone, from the global reinsure all the way down to
the average person just trying to pay their monthly bill.
Speaker 1 (01:06):
And when all those forces collide, the immediate and I
think painful outcome is this affordability crisis. It's hitting people
with incredible speed. It is.
Speaker 2 (01:17):
We have a few stories that really frame the sheer
desperation we're seeing.
Speaker 1 (01:22):
Let's start with those. The first one is in healthcare,
centered on the Affordable Care Act.
Speaker 2 (01:26):
Right there's this looming deadline, the potential expiration of enhanced
premium tax credits. It threatens to just dramatically increase healthcare costs.
We're talking about potentially doubling premiums for millions, doubling, doubling
in Ohio alone. The projections are that over half a
million people could face that kind of abrupt premium shock.
Speaker 1 (01:46):
That is an immediate political firestorm waiting to happen. But
at the same time, we're seeing a much slower collapse
in a key part of retirement planning.
Speaker 2 (01:54):
Yes, the long term care market or LTC carriers are
finally having to correct for decays of just massive fundamental mispricing.
Speaker 1 (02:03):
And the financial reality of that correction is brutal for policyholders.
Speaker 2 (02:07):
Brutal is the word in New York we've seen applications
for rate increases that are not just double digit, they're
pushing triple digits.
Speaker 1 (02:15):
What kind of numbers are we talking about.
Speaker 2 (02:16):
We're talking about increases like ninety five percent from Metamerica
and get this, ninety six point seven percent from First
Unham Life insurance company.
Speaker 1 (02:25):
Wow.
Speaker 2 (02:26):
So imagine you did the responsible thing twenty years ago.
You bought this policy for peace of mind, and now
you're being hit with a bill that's nearly double what
it was every year.
Speaker 1 (02:37):
And the third piece of this is what's happening on
the road with auto insurance.
Speaker 2 (02:41):
Right that cost desperation is showing up in really dangerous ways.
Auto insurance costs are just skyrocketing, way beyond general inflation,
and it's driving this desperate reaction from consumers.
Speaker 1 (02:53):
Oh were they doing?
Speaker 2 (02:54):
The data suggests that nearly thirty percent of drivers are
now being forced to cut their coverage so you know,
accepting much higher deductibles or and this is shocking, dropping
legally required auto coverage entirely.
Speaker 1 (03:06):
They're driving uninsured.
Speaker 2 (03:07):
They're driving uninsured because they simply cannot afford the monthly
premium anymore.
Speaker 1 (03:12):
And that to me seems like the clearest indicator of
how bad this has become. When people start gambling with
a legal requirement, it means they've just run out of
financial options.
Speaker 2 (03:22):
It's a sign of real economic distress.
Speaker 1 (03:25):
That really sets the stage for our conversation today. We're
going to unpack the details behind these crises, starting with
that political and financial cliff for the ACA. Okay, let's
focus in on the Affordable Care Act marketplace, because the
financial threat here is tied to a very specific political window.
It is we're talking about the pending expiration of those
(03:46):
enhanced ACA premium tax credits. For the people who rely
on them, what's the exact mechanism that causes their premiums
to explode if Congress doesn't act.
Speaker 2 (03:57):
The mechanism is, well, it's both simple and incredibly Right now,
these enhanced tax credits are significantly lowering the net monthly
premium for about twenty four million adults who buy their
insurance on the marketplace. Okay, if those enhancements expire, the
average annual premium for those people is projected to more
than double in twenty twenty six. More than double, that's
the average. It happens because the government subsidy, which right
(04:19):
now is shielding a lot of consumers from the true cost.
It either disappears entirely or it shrinks so drastically that
it's almost meaningless.
Speaker 1 (04:28):
The scale of that is it's hard to grasp until
you look at the human cost. There was a KFF
survey from just this past December that gives us a
window into what people are thinking. What choices are those
twenty four million Americans preparing to make?
Speaker 2 (04:45):
The survey data is it's stark, it's really stark evidence
of the crisis. When you present people with the idea
of doubled costs, they're forced into these unhealthy trade offs
such as well, one in three enrollies, that's thirty two
percent say they are very likely to show for a
cheaper plan. Now, on the surface, that sounds.
Speaker 1 (05:02):
Like a rational response, right, you shop around.
Speaker 2 (05:04):
But in the insurance world, as you know, cheaper plans
mean significantly higher deductibles and much higher out of pocket maximums.
Speaker 1 (05:10):
Which means they might buy the insurance to avoid a penalty,
but they can't actually afford to use the coverage for
anything that's not a total catastrophe exactly.
Speaker 2 (05:18):
They become functionally under insured. But here's the more disturbing finding. Okay,
one in four, that's twenty five percent say they would
be very likely to go uninsured entirely.
Speaker 1 (05:29):
A quarter of them would just drop coverage, drop it.
Speaker 2 (05:31):
We saw the stark anecdote from a sixty year old
woman in Missouri. She identified as a Republican, and she
said her cost was going from zero to over six hundred.
Speaker 1 (05:41):
Dollars a month, zero to six hundred.
Speaker 2 (05:43):
And she explained that her husband must keep the coverage
because he's at risk of going blind otherwise, but that
she is planning to drop herself from the policy.
Speaker 1 (05:51):
So the family is making a life and death decision
about who gets to have health care.
Speaker 2 (05:56):
A decision based entirely on an abrupt subsidy withdrawal.
Speaker 1 (05:59):
It's heart breaking, and I think we need to zoom
in on one group that faces the most dramatic cliff here,
people with incomes just above four hundred percent of the
federal poverty level. Why are they so vulnerable?
Speaker 2 (06:10):
Ah, this is where the math just gets brutal. The
enhanced credits got rid of what was called the subsidy cliff.
Explain it before, If your income went just one dollar
over four hundred percent of the poverty level. You lost
all of your subsidies. You were forced to pay the
full sticker.
Speaker 1 (06:25):
Price, which is astronomical.
Speaker 2 (06:27):
Right, So, the current enhance credits cap what those individuals
pay at no more than eight point five percent of
their income, a manageable number.
Speaker 1 (06:34):
But if the credits expire.
Speaker 2 (06:35):
That cap disappears. They go right back to paying the
full unsubsidized premium price for their plan. In many high
cost states, that could be thousands of dollars a month.
They go from a controlled eight point five percent maximum
to one hundred percent of the cost overnight.
Speaker 1 (06:52):
That creates an incredibly volatile situation politically, especially heading into
the twenty twenty six election cycle.
Speaker 2 (06:58):
Without a doubt, and the policy it's helf is popular.
The support is strong. Eighty four percent of marketplace enrollies
and that includes seventy percent Republicans want the extension. But
the blame game is very nuanced.
Speaker 1 (07:10):
So who do people blame if this happens?
Speaker 2 (07:12):
Well? The KFF survey asked that if an enrolli's annual
healthcare costs go up by one thousand dollars next year,
who's at fault? The blame is spread all over.
Speaker 1 (07:19):
The place, No single villain.
Speaker 2 (07:21):
Not at all. Thirty seven percent blame President Trump, thirty
three percent blame congressional Republicans, and twenty nine percent blame
congressional Democrats. No single party gets a pass in the
eyes of the consumer.
Speaker 1 (07:32):
Which is why it's such a powerful issue.
Speaker 2 (07:33):
Exactly, and it's mobilizing a slight majority. Fifty four percent
of registered voters said that a one thousand dollars hike
in their healthcare cost would have a major impact on
whether they vote in twenty twenty six and who they support.
This is not a niche issue, it's a mainstream economic
anxiety point.
Speaker 1 (07:49):
To make this abstract financial cliff just hyperreal, Let's go
back to that example of Washington state representative used it
illustrated a staggering one thousand percent premium jump.
Speaker 2 (08:00):
Yeah, that example was so powerful because it was so specific.
It was a married couple ages sixty and fifty five
earning eighty five thousand dollars a year in Clalm County, Washington.
Speaker 1 (08:08):
So a pretty typical near retirement middle.
Speaker 2 (08:09):
Class couple, the exact cohort that is extremely sensitive to
these changes. So under the current enhanced subsidies, their monthly
premium for the cheapest plan was one hundred and twenty
seven dollars in twenty twenty five.
Speaker 1 (08:20):
Okay, one hundred and twenty seven dollars a month manageable right.
Speaker 2 (08:23):
If the credits expire, that same premium jumps to one thousand,
four hundred and eighty five dollars per month in twenty
twenty six.
Speaker 1 (08:28):
That is, I'm doing the math here, that's over one
thousand percent increase three hundred and fifty eight dollars more
every single month.
Speaker 2 (08:35):
Correct their annual bill just for insurance, not counting deductibles
or copays, it explodes to nearly eighteen thousand dollars.
Speaker 1 (08:43):
What's the consequence of that? I mean, how does a
family even absorb that kind of hit.
Speaker 2 (08:47):
Well, it wasn't just about tightening the budget. It forced
a fundamental change in their retirement strategy. The representative noted
that a constituent facing this exact jump decided the only
immediate way out was for the wife who had already retired,
to take her social Security benefits early.
Speaker 1 (09:03):
Oh, that's a permanent decision.
Speaker 2 (09:05):
It's permanent. It means her monthly Social Security check is
lower for the rest of her life, and that money
which they had planned for you know, housing or maybe
long term care down the line now has to be
diverted immediately just to pay for basic health insurance premiums.
Speaker 1 (09:20):
It just shows how a political decision or an indecision
in DC can instantaneously dismantle a retirement plan that someone
has spent decades carefully building in an ins Okay, so
let's shift from that acute political fight over ACA subsidies
to what you called a chronic market failure in retirement planning,
long term care or LTC insurance. Right, the numbers are horrifying,
(09:44):
especially those triple digit rate hikes you mentioned in New York.
The New York Department of Financial Service is basically called
this a crisis caused by historical mispricing, and.
Speaker 2 (09:54):
Historical is the key word there. These policies were priced
decades ago, often in the nineties and early two thousands,
and they were based on actuarial models that just well,
they proved to be fundamentally flawed. How so in three
core ways, and you have to remember, the carriers have
a legal responsibility to stay solvent so they can pay
future claims. So when their underlying assumptions just completely collapse,
(10:16):
they are required by regulators to seek these massive rate corrections.
Speaker 1 (10:20):
Okay, let's break down those three flaws. Yeah, they tell
a story about miscalculating human behavior and just how long
we live. What was the first big actuarial mistake?
Speaker 2 (10:29):
The first one and probably the most significant, was underestimating
human longevity, but it was combined with a miscalculation of
rational policyholder behavior.
Speaker 1 (10:38):
What does that mean?
Speaker 2 (10:39):
Insurers assumed certain lapse rates, that's the percentage of people
who would just drop the policy over time because it
got too expensive or they didn't think they needed it anymore.
Speaker 1 (10:47):
Okay, so they built that into the price.
Speaker 2 (10:49):
They did, but the lapse rates turned out to be
much much lower than they expected. People held onto their
policies because they knew they were valuable, they knew they
were going to need that benefit.
Speaker 1 (11:01):
So the pool of policy holders didn't shrink as fast
as the model predicted.
Speaker 2 (11:05):
Exactly, So the policy holders acted rationally, and the industry's
pricing model basically punished that rationality.
Speaker 1 (11:12):
What was the second big mistake?
Speaker 2 (11:14):
Continued mortality improvements. Put simply, people are living longer, and importantly,
they are surviving longer into the age where they need
chronic long term care, and.
Speaker 1 (11:25):
That ties into the third flaw.
Speaker 2 (11:27):
I assume it translates directly in to the third flaw,
increasing claim durations. So when people finally do start drawing
benefits from their policy, they use them for a much
longer time than the actuaries projected twenty or thirty years ago.
Speaker 1 (11:41):
The carriers themselves are admitting this right.
Speaker 2 (11:43):
They are mutual of OMAHA. When they were justifying their
own twenty four point one percent increase essentially admitted it.
They stated that more policy holders are recognizing the benefit
of their long term care insurance policies, using benefits more
often and for a longer duration than anticipated.
Speaker 1 (11:59):
That's incredible. It's like the ultimate failing of the model.
The carrier is surprised that the policy they sold was
being used exactly as it was intended.
Speaker 2 (12:07):
And that use is driving up costs for everyone. The
foundational insight here isn't just that interest rates were low
on their invested premiums. It was that they completely underestimated
how long people would live and how effectively they would
use the very expensive benefit they'd been paying for.
Speaker 1 (12:24):
They modeled for people to drop the coverage or die
sooner than they.
Speaker 2 (12:27):
Did precisely, and this leaves millions of older Americans in
a really severe bind, especially because there's so much confusion
around what Medicare does and does not cover.
Speaker 1 (12:36):
Let's clarify that it's a crucial distinction for anyone planning
for retirement. What does Medicare cover and what does it
explicitly not cover.
Speaker 2 (12:44):
Medicare is your lifeline for acute medical needs, think hospital stays,
doctor visits, surgery, prescription drugs. That's your Parts A, B,
and D or a Part C advantage plan. Okay, but
and this is critical, Medicare will not pay for long
term care. It might cover a short stint of skilled
nursing or rehab after a hospital stay, but it will
(13:04):
not pay for routine, ongoing personal care.
Speaker 1 (13:07):
So assistance with daily living like bathing or dressing, or
extended stays in a nursing home for custodial care that's not.
Speaker 2 (13:16):
Covered, not at all. And that is the vast, often
six figure annual expense that has to be covered some
other way.
Speaker 1 (13:22):
So if Medicare is out, what are the main strategies.
It's private LTC insurance which we've just established as in crisis,
or what's the other.
Speaker 2 (13:28):
Action or medicaid? If an individual has exhausted their assets
and income down to the point where they qualify under
very stringent financial rules. Medicaid will step in as the
payer of last resort for long term care.
Speaker 1 (13:39):
Which means you have to be nearly impoverished to qualify correct.
Speaker 2 (13:43):
It's why financial advisors always urge people to consider private
LTC insurance in their fifties or sixties, before a health
condition makes it impossible to buy. But the caution remains.
Even if you have a policy, the carrier can and
will raise rates, and the policy itself might not cover
all of your expense.
Speaker 1 (14:00):
And this ripple effect of not having adequate insurance it
doesn't just stop with the policyholders' bank account. It strains
the entire medical system, especially in rural areas.
Speaker 2 (14:10):
The situation in Alabama really highlights the fragility of the
rural health system. If one hundred thousand residents lose their
insurance because of these affordability pressures, the Alabama Hospital Association
says the impact will be catastrophic. Why catastrophic They already
report six hundred and fifty million dollars a year in
unpaid care. That's essentially the cost of treating uninsured patients
(14:31):
who can't pay their bills. If you add tens of
thousands more uninsured people to that system, these already financially
strained hospitals, which are operating on tiny margins, they'll get
pushed right over the edge.
Speaker 1 (14:43):
And that threatens access to care for the entire community,
insured or not.
Speaker 2 (14:47):
Absolutely. We're also seeing this cost strain show up as
tension between hospitals and the big payers like Blue Cross
Blue Shield.
Speaker 1 (14:55):
The Minnesota case is a good example of that.
Speaker 2 (14:57):
A perfect example. It was this tense, high stakes standoff
between Aspirous Saint Luke's Facilities and Blue Cross and Blue
Shield of Minnesota. The hospital claimed they were being significantly
underpaid compared to their competitors in the DILUF.
Speaker 1 (15:12):
Market, so they wanted a rate increase.
Speaker 2 (15:14):
They were seeking what they called a fair market aligned reimbursement,
basically a rate that keeps up with their actual costs
for staffing, supplies, and everything else. If they had failed
to reach a deal, the hospital would have gone out
of network for thousands of BCBS.
Speaker 1 (15:29):
Members, forcing patients to either switch doctors or pay huge
out of network costs.
Speaker 2 (15:34):
Exactly, they did manage to secure a short term deal
through twenty twenty seven. But that underlying tension where providers
are constantly threatening to leave networks because they say they're
not being paid enough, is a chronic source of uncertainty
in our healthcare system.
Speaker 1 (15:49):
And when you combine all these systemic financial pressures with
the sheer complexity of government data systems, the outcome can
be just devastatingly personal.
Speaker 2 (15:59):
The trag case of Alan Mitchell and Maryland is a
story of just that, a devastating bureaucratic failure.
Speaker 1 (16:06):
What happened to him?
Speaker 2 (16:07):
Alan Mitchell was mistakenly declared dead by the government. The
root cause was a single Social Security number error on
another man's death certificate.
Speaker 1 (16:15):
A typo, just a typo. And what were the consequences?
Speaker 2 (16:18):
They were commediate and ruinous. Mitchell was battling kidney failure.
He desperately needed life saving dialysis. This death declaration caused
him to lose his pending application for Medicare Part B.
Speaker 1 (16:31):
So he lost his Medicare.
Speaker 2 (16:32):
And subsequently his wife's health insurance coverage was also canceload.
And even though they were repeatedly assured the error was fixed,
the systemic years just grind so slowly. His wife was
forced to spend thousands of dollars out of pocket for
his dialysis treatments while they were fighting to prove he
was in fact alive.
Speaker 1 (16:50):
It's an indictment of how fragile these data systems are
when one typo can lead to financial ruin and denial
of care. How common is this It's.
Speaker 2 (16:57):
More common than you'd hope. A report from the Social
Security Advisory Board estimated that between seven thousand and twelve
thousand people are affected by this kind of error every year.
Matt many yes and experts warn the problem is getting
worse now because federal employee terminations and budget cuts have
thinned the ranks of experienced staff who are needed to
manually investigate and fix these things. Once a typo gets
(17:21):
into a massive data system, undoing all the ripple effects
on your credit score, your pension, your insurance, it becomes
this exhausting, multi year fight. We heard of one man
who spent four years just trying to prove his own existence.
Speaker 1 (17:34):
It's a profound reminder that efficiency without human oversight in
these massive systems carries just immense unnecessary risk. Let's transition
now from the fragility of human data to the overwhelming
power of planetary data. Specifically, the systemic financial threat facing
property and casualty insurance that's being driven by climate change, and.
Speaker 2 (17:54):
That threat is absolutely no longer theoretical. It is the
primary driver of rising pin c rates. The industry itself
has confirmed this.
Speaker 1 (18:00):
What's the data on that.
Speaker 2 (18:02):
A study from the Treasury Department's Federal Insurance Office found
that average home insurance premiums nationwide went up nearly nine
percent faster than the rate of inflation between twenty eighteen
and twenty twenty two. This exponential risk, this supercharge extreme weather,
is translating directly into higher costs and in some places
no availability at all.
Speaker 1 (18:23):
And this climate driven affordability crisis has now found its
way directly into the courts with a really groundbreaking lawsuit
out of Washington State. It's a fascinating case and the
angle is new. It's not about environmental harm, It's about
insurance rates.
Speaker 2 (18:36):
That is the novel legal argument here. You have two
homeowners in Washington suing major fossil fuel companies Exonmobile, Chevron, Shell,
the American Petrolleum Institute, the whole list, claiming that there
are decades of deception and fraud about climate impacts directly
caused the homeowner's insurance crisis.
Speaker 1 (18:52):
So the claim is that these companies knew what would happen,
they misled the public, and their actions created the catastrophic
risk that now makes insurance unaffordable for people.
Speaker 2 (19:02):
That is the core claim. It's a direct line from
corporate deception to consumer economic damage, specifically their insurance costs.
Speaker 1 (19:11):
What's at stake here, especially given the immediate pushback.
Speaker 2 (19:14):
From the industry, well, the API, the American Petroleum Institute
immediately called the suit baseless. They're arguing that climate policy
belongs in Congress, not in what they call a patchwork
of courtrooms.
Speaker 1 (19:26):
But the legal stakes are huge.
Speaker 2 (19:28):
Immense because this case ties climate liability directly to consumer
pocketbook issues. And what's more, the US Supreme Court is
scheduled to address a related climate deception case on December twelfth.
If the justices take up that petition, it could set
a legal precedent that dramatically affects the two dozen or
more similar cases pending against the industry.
Speaker 1 (19:48):
A really crucial moment now shifting to the state level
efforts to manage these costs. We have these conflicting stories
about market stability. Let's start with Florida, which has been
the empicenter of this P and C market failure.
Speaker 2 (20:01):
It has, and the Florida Insurance Commissioner, Michael Yorski is
essentially claiming victory.
Speaker 1 (20:06):
What's he saying.
Speaker 2 (20:07):
He's using very strong language. He's saying that legislative market
reforms from twenty twenty two and twenty twenty three have
finally stabilized Florida's markeag and that consumers are finding relief.
Speaker 1 (20:19):
And those reforms were aimed at curbing lawsuits.
Speaker 2 (20:22):
Heck, exactly, they were specifically designed to stop aggressive litigation
tactics things like assignment of benefit abuses and one way
attorney fees which had just wildly inflated the cost of claims.
Speaker 1 (20:33):
So what's the evidence he's pointing to. Does he have
data to back that up?
Speaker 2 (20:36):
He does, He's citing clear data points. First, litigation is
demonstrably down to pre twenty nineteen levels. Second, and this
is critical, over one hundred carriers have filed for a
zero percent rate increase or in some cases even a decrease.
That sounds good, And there's a tangible example in the
auto sector. Progressive recently returned a massive one billion dollars
(20:57):
in auto rebates to its policyholders in Florida a billion. Yes,
and they attributed it to the fact that the rate
reductions they implemented actually exceeded their expectations of how beneficial
those reforms would be.
Speaker 1 (21:08):
That sounds undeniably successful. So why is there still so
much skepticism from consumer advocates.
Speaker 2 (21:13):
The skepticism really hinges on sustainability. The critics point out
that this stability might be temporary, and it's highly dependent
on one key factor, which is Florida got lucky. They
had a quiet year in twenty twenty five without any
catastrophic hurricane losses aw. So they argue that the structural
climate risk the reason Florida premiums rose nearly sixty percent
(21:35):
between twenty fifteen and twenty twenty three, the largest increase
of any state. That risk hasn't been solved. It's just
been masked by a favorable weather season.
Speaker 1 (21:45):
So one big storm could wipe out all these gains.
Speaker 2 (21:47):
One major hurricane could instantly wipe it all out, trigger
a new crisis in the reinsurance market, and force carriers
right back to the brink.
Speaker 1 (21:55):
Okay, so, speaking of stabilization, California has seen its own
market upheaval with league carriers pulling back, but now Farmers
Insurance is making a significant move to re engage.
Speaker 2 (22:05):
They are, but it's a clear trade off for consumers.
Speaker 1 (22:08):
What's the deal?
Speaker 2 (22:08):
So Farmer's Insurance is lifting its cap on new homeowners
policies in California. This is a huge signal of confidence
in the insurance Commissioner Ricardo Lara's new strategy.
Speaker 1 (22:18):
And Farmers had been restricting new business because of wildfire.
Speaker 2 (22:21):
Risk severely, but now they're removing that cap entirely. This
improves availability across the state, which is a massive win
for the housing market.
Speaker 1 (22:29):
But market availability, it seems, always comes with a price.
Speaker 2 (22:32):
Deck it does. At the exact same time Farmers is
re engaging, they are also requesting a statewide average rate
increase of six point nine to nine percent.
Speaker 1 (22:40):
So more availability, but higher prices.
Speaker 2 (22:43):
It confirms that even to get the market stable, premium
hikes are still a necessary part of keeping carriers financially healthy. Now,
Farmers did commit to expanding coverage in distressed locations, and
to make it a little more palatable, they're boosting their
discount for bundling home and auto up to twenty two percent.
Speaker 1 (23:00):
Mean you mentioned Commissioner Laura's strategy. His efforts to fix
the market have been sort of marred by a pretty
significant political controversy about his travel.
Speaker 2 (23:09):
That's right, while he was championing these reforms, and investigation
highlighted that Commissioner Laura had taken at least thirty two
luxury trips spanning one hundred and sixty three days to
places like Tokyo, Cape Town, and Dubai.
Speaker 1 (23:20):
And who was paying for this.
Speaker 2 (23:21):
The trips were reportedly funded by the National Association of
Insurance Commissioners or NAIC, which is an industry funded trade group.
The reports noted that while state employees traveling with him
were often in economy class, the industry funded group reportedly
covered first or business class.
Speaker 1 (23:39):
Seats for Lara, which doesn't look great.
Speaker 2 (23:42):
It draws immediate fire from consumer advocates. They argue that
the Commissioner is getting way too cozy with the very
industry he's supposed to be regulating, especially while the market
was in crisis. It raises serious questions about regulatory independence.
Speaker 1 (23:56):
Before we leave property insurance, let's use that UA SAA
sump pump case in Wisconsin as a lesson for policyholders
to get a claim denied.
Speaker 2 (24:05):
It's an incredibly instructive case. This homeowner in New Berlin
had a basement flood from a sump pump failure, a
specific thing he had coverage for. USAA initially denied his
ten thousand dollars claim without even sending an adjuster to
the house.
Speaker 1 (24:19):
They denied it just based on the paperwork, purely on
a paper review.
Speaker 2 (24:22):
So the homeowner, who felt devastated because he had lost
decades of collectibles, he did the smart thing. He hired
an insurance attorney.
Speaker 1 (24:29):
And what happened.
Speaker 2 (24:30):
The attorney sent one sharply worded letter to USIA and
the carrier reversed the denial and paid the full claim
within days.
Speaker 1 (24:37):
Oh and the attorney said, most people just accept the denial.
So what's the key takeaway for listeners here, especially about deadlines.
Speaker 2 (24:45):
The main takeaway is to trust your gut and get
legal advice if you feel you've been wronged, And the
attorney emphasized this critical deadline. In Wisconsin, policyholders typically have
only one year from the date of the incident to
file a lawsuit against their insurance company.
Speaker 1 (25:00):
One year. If you miss that window, you're out.
Speaker 2 (25:02):
Of luck, you lose all recourse. It underscores the need
to find a good agent who will really review your
coverage with you for specific risks like some pump failure
or valuables. We also saw FEMA step in to help
with this pressure, temporarily extending the grace period for national
flood insurance policies in places like Nebraska, giving people until
mid January to renew.
Speaker 1 (25:23):
Let's turn out to the auto insurance market, where these
affordability issues are leading to those desperate and frankly dangerous
consumer behaviors we talked about at.
Speaker 2 (25:31):
The top right that trend of nearly thirty percent of
drivers either reducing or dropping their legally required coverage.
Speaker 1 (25:38):
It's a market under massive financial pressure and it's leading
to a breakdown in regulatory compliance.
Speaker 2 (25:43):
Absolutely, high premiums are forcing drivers to raise their deductibles
to unaffordable levels or drop policies entirely. And this trend
has already caused a four percent drop in the number
of insured cars on the road year over year.
Speaker 1 (25:57):
Fewer insured cars means more risk for every responsible driver outsell.
Speaker 2 (26:01):
Yes, it does. And what's the impact on claim frequency?
Speaker 1 (26:05):
What is it?
Speaker 2 (26:05):
The number of claims being filed is down by eight
point five percent year over year. But this isn't because
of some miraculous drop in accidents.
Speaker 1 (26:12):
It's a behavioral response.
Speaker 2 (26:14):
It is drivers are choosing to pay for repairs out
of pocket, even for major damage, because they are terrified
that filing a claim will trigger a future premium increase
that they absolutely cannot afford.
Speaker 1 (26:24):
The system is essentially panalizing you for using the product
you paid for.
Speaker 2 (26:28):
It's forcing consumers to view their policy as catastrophe coverage,
only not as comprehensive protection. There was this poignant anecdote
that really captures the fear behind this.
Speaker 1 (26:40):
Tell me about it.
Speaker 2 (26:41):
It was a woman named Zoe who talked about going
uninsured for nearly four weeks because she had to choose
between paying her rent and food or paying her premium.
And she described driving in constant terror. She said, I
slow down at every single intersection, regardless of whether the
light was green or not. I'm careful at every time
I get worried.
Speaker 1 (27:01):
It just illustrates that for people who are financially strapped,
auto insurance is now this terrifying financial gamble, and.
Speaker 2 (27:07):
This consumer pain is being compounded by regulatory controversy. Let's
look at Michigan and its auto no fault reforms.
Speaker 1 (27:14):
Right, state officials claimed the twenty nineteen law lowered rates
and reduced the number of uninsured drivers.
Speaker 2 (27:19):
They did, but a recently commissioned report by the consulting
firm Milliman told a dramatically different story.
Speaker 1 (27:26):
This is a classic case of political cherry picking of data, doesn't.
Speaker 2 (27:29):
It a textbook case? The Michigan Department of Insurance and
Financial Services loudly claimed the twenty nineteen law lowered rates,
but the reality, according to Milliman's own data, is that
average rates for drivers in Michigan increased by nearly two
hundred dollars between twenty nineteen and twenty twenty four.
Speaker 1 (27:46):
So wait, if the rates went up, where did the
claim savings of three hundred and fifty seven dollars per
driver come from?
Speaker 2 (27:52):
They were isolating the savings from just one part of
the policy, the personal Injury protection or PIP portion. That
part did see a reduction, but those specific PIP savings
were completely wiped out by increases in the prices of
all the other mandatory parts of the coverage. So the
overall bill the consumer actually felt went up.
Speaker 1 (28:10):
And what about the claim that there were fewer uninsured
drivers also misleading.
Speaker 2 (28:15):
The report's own data showed that the actual number of
uninsured drivers in Michigan increased since the law was enacted.
The only silver lining was that the gap between Michigan's
uninsured rate and the national rate narrowed slightly.
Speaker 1 (28:27):
And beyond the money, these reforms caused real harm to
the most catastrophically injured drivers, didn't.
Speaker 2 (28:32):
They Yes, The reform imposed steep cuts to payments for
home care companies that treat these victims, many of whom
rely on these services for their basic daily existence. Milliman
found that nearly four thousand crash victims per year in
Michigan will exhaust the medical coverage provided by their insurance.
Speaker 1 (28:51):
Company, so they're left with nothing.
Speaker 2 (28:53):
The executive director of the Michigan Brain Injury Provider Council
noted that the report just fails to grasp the devastating
law long term impact on people who need continuous catastrophic
care for the rest of their lives.
Speaker 1 (29:05):
Okay, let's move now to some specialized business risks. We
have this fascinating, high profile case in cyber insurance involving
twenty three AM The company cyber insurers agreed to pay
sixteen point five million dollars to essentially buy back the
unused cyber coverage from the bankrupt company, which is now
called Chrome Holding.
Speaker 2 (29:24):
So wire insurers paying millions for coverage that the client
hasn't even fully used yet.
Speaker 1 (29:28):
Well, Chrome Holding, which is the reorganized twenty three a
me they filed for Chapter eleven. That sixteen point five
million dollar settlement is critical because it gives them the
cash to pay claims from the huge amount of cyber
litigation they're facing. This is from that big data breach
they have exactly.
Speaker 2 (29:43):
It includes a major consolidated class action from the October
twenty twenty three credential stuffing hack which affected over seven
million consumers, plus a separate pixel tracking lawsuit.
Speaker 1 (29:54):
And they started with twenty five million dollars in cyber coverage,
but almost eight point five million dollars of that had
art You've been paid out just in defense costs.
Speaker 2 (30:02):
And that brings up this crucial industry concept of a
wasting or eroding policy.
Speaker 1 (30:07):
Let's define that clearly. What is a wasting policy?
Speaker 2 (30:10):
This is standard language now in modern directors, officers and
cyberliability policies. A wasting policy means that the total coverage
limit in this case, the twenty five million dollars, is
immediately reduced dollar for dollar by every expense you incur
in defending the company.
Speaker 1 (30:25):
So all the lawyer's fees, expert witness costs, court fees,
all of that comes out of the main pot of money.
Speaker 2 (30:31):
Exactly. The defense costs literally eat away at the money
that's available to actually settle or pay out the claim damages.
So in this case, eight point five million dollars had
already been spent just on legal defense, reducing the available pot.
Speaker 1 (30:44):
So the pot was shrinking, the litigation was ongoing. Why
the urgency for the insurers to buy back the rest
of the coverage now instead of just letting it play out.
Speaker 2 (30:53):
It all comes down to mitigating what's called long tail
risk and achieving certainty. Explain that cyber litigation, actually class
actions after these massive data breaches can be incredibly complex.
They can drag on for five, seven, maybe ten years,
with continuous unknown defense costs piling up the.
Speaker 1 (31:11):
Whole time, so the insurer has no idea what their
final bill will be, none at all.
Speaker 2 (31:15):
By paying the sixteen point five million dollars now, the
insurers immediately get certainty, they know their total exposure, they
avoid potentially years of expensive coverage disputes, and they cap
their risk. This buyback strategy is usually reserved for really
complex longtail claims like environmental pollution or asbestos liability.
Speaker 1 (31:35):
So the fact that they're using it for cyber shows
how seriously the market now views that risk.
Speaker 2 (31:39):
It highlights just how persistent and unpredictable cyber risk has become.
Speaker 1 (31:43):
Speaking of strategic business coverage, captive insurance seems to be
moving beyond just the Fortune five hundred world. It is rapid.
So what exactly is a captive and why is the
mid market, especially retailers, adopting it so quickly.
Speaker 2 (31:56):
A captive is essentially an insurance company that's formed and
owned by a business like a retailer or a manufacturer,
specifically to ensure its own risks. It's a tool for
retaining risk and customizing your coverage.
Speaker 1 (32:09):
It's like being your own insurre.
Speaker 2 (32:10):
In a way. Yes, And the mid market, particularly retailers
with big vehicle fleets or multi state convenience store operations,
they're the fastest growing adopters because they're facing these specific,
escalating risks that are just hard to ensure on the
commercial market.
Speaker 1 (32:25):
Okay, let's break down the two big benefits, improved cash
flow and control. How does paying a premium to yourself
improve cash flow?
Speaker 2 (32:34):
Well, By paying premiums into your own captive, the business
gets to keep the underwriting profit and the surplus that
would normally go to a commercial.
Speaker 1 (32:41):
Carrier, and you can invest that surplus.
Speaker 2 (32:44):
You can invest it, generating more income for the business.
But more importantly, it lets the company smooth out those
volatile annual insurance costs. You can strategically use the captive
during hard market cycles when commercial rates are spiking. It
also lets them pre fund deductibles and even mana undated
capital expenses in a potentially tax advantaged way.
Speaker 1 (33:03):
Tell me more about those mandated expenses. What's an example
for a convenience store.
Speaker 2 (33:08):
For c stores, regulations often mandate really expensive infrastructure updates,
like modernizing their fuel tanks or installing secondary containment systems
that environmental regulations require.
Speaker 1 (33:20):
So big predictable costs.
Speaker 2 (33:21):
Right, a captive allows the business to systematically pre fund
those major capital upgrades. If you structure it correctly, you're
essentially saving for future compliance costs while keeping control over
the money until you actually need it.
Speaker 1 (33:34):
And in the control scene, what are the unique or
difficult risks a captive can cover that traditional insurance is
shying away from.
Speaker 2 (33:41):
This is where it gets really powerful. Captives give you
the flexibility to cover risks that have significant gaps in
the commercial market. Think about supply chain interruptions. A geopolitical
event causes a critical component to be delayed, and it
costs the retailer millions in lost sales. Commercial policies often
exclude or limit that. What else captives can cover emerging
(34:02):
environmental liabilities like pfas the forever chemicals, where the litigation
risk is just starting to unfold. And finally, for c stores,
the severity of claims from things like food recalls and
pathogen outbreaks is growing like crazy. According to experts. A
captive allows the business to fund those losses based on
its own actual safety record, rather than paying for the
(34:24):
risk of the entire industry.
Speaker 1 (34:25):
Let's turn our attention inward now to the insurance industry itself,
focusing on talent, compensation and regulation. This shift toward total
rewards and pay transparency is creating a major challenge at
the manager level.
Speaker 2 (34:38):
It's becoming a huge strategic priority because compensation is now
viewed so holistically. It's not just your base pay, it's
your benefits, your learning opportunities, your flexibility. It's a key
lever for attracting and retaining talent.
Speaker 1 (34:53):
But the transparency part only works if the managers are
trained to be what you call the frontline ambassadors.
Speaker 2 (34:59):
That's that's the core training gap. The critique here is
that managers often get to their position because they're technically excellent,
not because they have great communication or HR skills. They
often lack the vocabulary for these highly sensitive financial discussions, right.
Speaker 1 (35:14):
So they're the ones fielding the direct questions like why
is my salary five thousand dollars less than what I
saw in class.
Speaker 2 (35:20):
Door or why did my coworker get a larger raise?
And many leaders who came up through the technical ranks,
they become nervous when confronted with a compensation discussion. It's
especially true when they have to explain market data or
perceived inequities without just falling back on transactional arguments.
Speaker 1 (35:37):
So how are companies trying to fix this? We heard
about training on compa ratios. What are those and why
are they so critical for these conversations.
Speaker 2 (35:44):
Compa ratio or comparison ratio is a fundamental metric. It
compares an employee's current salary to the midpoint of the
established salary range for their specific job.
Speaker 1 (35:54):
Okay, so it's a way to standardize it.
Speaker 2 (35:56):
It is a comp ratio of one point zero means
the employees paid exactly the midpoint the market rate. If
the comp ratio is zero point eight, they're paid twenty
percent below the midpoint. Training managers on this gives them
an objective, data driven framework to explain why an employee
is paid where they are. It links it to their experience,
their performance, and the company's market strategy.
Speaker 1 (36:18):
And the goal is to shift the conversation away from
just an emotional.
Speaker 2 (36:21):
Negotiation exactly toward capability and future progression. And the data
really supports this effort. How So, the data shows that
employees are eight times more likely to consider a decision
fair even if they disagree with the amount, if they
understand the objective rationale behind it.
Speaker 1 (36:36):
So this manager training isn't optional anymore.
Speaker 2 (36:39):
Not at all, because the regulatory volatility is only increasing.
There are impending EU transparency directives that are going to
mandate disclosure of even broader paid data across international organizations
that will inevitably flood the market with comparative information, which
will just lead to more and more internal pulstions. HR
has to be partner with managers providing constant support, role
(37:02):
plays and even scenarioscripts.
Speaker 1 (37:04):
Shifting our global view, China is making a really significant
policy move to improve access to cutting edge, high cost medicine.
Speaker 2 (37:13):
This is a landmark step by their National Health Care
Security Administration. They've established what they're calling the Commercial Health
Insurance Innovative.
Speaker 1 (37:21):
Drug Catalog And how did that work?
Speaker 2 (37:23):
This system operates alongside their basic medical insurance and it's
specifically designed to support highly innovative drugs that have high
clinical value but would otherwise be financially out of reach
for most people.
Speaker 1 (37:34):
And one of the first therapies included is a CARRT
cell therapy zeverra cell for multiple myeloma. Why are carti
therapies so incredibly expensive?
Speaker 2 (37:42):
Car T therapy is a form of highly personalized medicine.
It involves extracting a patient's own T cells, genetically engineering
them in a lab to target their specific cancer cells,
multiplying them into the millions and then reinfusing them back
into the patient.
Speaker 1 (37:58):
The manufacturing and logistics fits that must be incredibly.
Speaker 2 (38:01):
Complex, incredibly and that's why the costs globally are often
in the hundreds of thousands of dollars per treatment. But
the trial results for zever sell really justify the attention.
Speaker 1 (38:10):
What did they find?
Speaker 2 (38:11):
They're impressive. Five year follow up results showed an overall
response rate of one hundred percent, with a seventy six
point nine percent patient's revival rate at sixty months after
the infusion.
Speaker 1 (38:22):
So by including this in their new catalog, China is
making a powerful statement.
Speaker 2 (38:26):
They are they're actively working to alleviate the massive financial
burden and enhance accessibility for patients who desperately need these
life saving personalized therapies, rather than letting the cost act
as an impenetrable barrier.
Speaker 1 (38:39):
Okay, let's wrap up our regulatory watch with some crucial
updates in federal crop insurance policies for the twenty twenty
six crop year.
Speaker 2 (38:45):
The USDA just unveiled what they're calling the Expanding Access
to Risk Protection Final Rule. It's really aimed at modernizing
and simplifying the whole federal crop insurance system for farmers
and ranchers.
Speaker 1 (38:58):
And the central theme is reducing regulatory hurdles.
Speaker 2 (39:01):
It is to make the system more flexible. And what
is a rapidly changing agricultural economy.
Speaker 1 (39:06):
What's the most significant practical change for farmers, especially regarding
prevented planting payments.
Speaker 2 (39:12):
It's the elimination of a really burdensome, long standing rule. Previously,
to qualify for certain prevented planting payments, the specific piece
of land had to have been previously insured.
Speaker 1 (39:23):
Which created a lot of extra complexity a.
Speaker 2 (39:25):
Ton of administrative burden. The new rule gets rid of
that requirement. Producers just have to show that the land
was planted or harvested in one of the past four years.
It simplifies compliance without inviting fraud.
Speaker 1 (39:37):
And are there other changes to streamline the reporting.
Speaker 2 (39:40):
Yes, The updates streamline reporting requirements, which is a major
time saver. For instance, farmers who switch insurance providers can
now submit their production reports directly to their new carrier
instead of navigating a bunch of bureaucratic steps. It also
expands coverage options for specialty crop producers like those growing
fresh mark get tomatoes and peppers. These are all steps
(40:02):
toward a more responsive system at the county level.
Speaker 1 (40:06):
We have covered a remarkable amount of ground today and
it's really revealed these intense pressure points across the entire
risk landscape. We started with that high stakes political and
financial fight over the future of ACA subsidies.
Speaker 2 (40:19):
Right, which is threatening to just dismantle retirement plans and
force families into these impossible health care choices.
Speaker 1 (40:25):
And we transition to that fundamental market failure in long
term care, showing how decades of well poor actuarial modeling
have left policy holders facing these brutal triple digit rate hikes.
Speaker 2 (40:36):
And we saw that this affordability crisis strains the whole
healthcare provider network, especially those fragile rural hospitals, and it
exposes the devastating human cost of simple systemic data errors
like the man who was mistakenly declared dead.
Speaker 1 (40:52):
Then we track the financial threat posed by climate change,
seeing how the industry's rising costs are now leading to
novel litigation against big.
Speaker 2 (40:59):
Oil, enforcing regulators in places like Florida and California to
make these really difficult trade offs between market availability and
necessary premium increases, and.
Speaker 1 (41:09):
We highlighted those desperate consumer behaviors in the auto market,
people paying out a pocket for repairs just to avoid
a future premium hike.
Speaker 2 (41:18):
We finished with the rising sophistication of specialized risk management,
the necessity for cyber insurers to buy back policies to
mitigate that long tail risk of complex litigation, and the
rapid adoption of captive insurance by mid market businesses who
are just seeking control over their own escalating liabilities.
Speaker 1 (41:35):
So what's the central challenge that all this data reveals.
Speaker 2 (41:38):
I think it's clear in so many areas, from longevity
risk to catastrophic climate events, the current insurance models are
struggling to reconcile these immense long term liabilities with predictable,
affordable pricing for the average consumer.
Speaker 1 (41:53):
And that structural gap between the escalating risk and an
affordable premium is being paid for by you. Then, And
that brings us to our final provocative thought.
Speaker 2 (42:02):
Today, as the industry, in a search for efficiency, increasingly
automates claims and decisions, we're seeing a dangerous and maybe
inevitable consequence emerge.
Speaker 1 (42:12):
Yeah, what's that.
Speaker 2 (42:13):
Well, we've established that forty one percent of doctors are
reporting increasing claim denial rates. We're now in an environment
where insurers are using algorithms to accelerate claim denial decisions.
Speaker 1 (42:23):
Which is essentially forcing patients to hire their own AI
powered bots just to fight back.
Speaker 2 (42:28):
It's creating an arms race of automation against the human
need for coverage.
Speaker 1 (42:32):
That's a chilling thought.
Speaker 2 (42:33):
And it leads to the final question for the industry,
which must be this, If your innovative tools are used
primarily to accelerate denials and minimize payouts, forcing patients to
hire their own technological proxies to prove their eligible, what
explicit mandatory steps must the insurance world take to ensure
that automation serves to improve efficiency without permanently eroding essential
(42:55):
human compassion, fairness, and necessary oversight in the claims process.
Speaker 1 (43:00):
Because that boundary between data efficiency and human.
Speaker 2 (43:03):
Justice, that is the ultimate test for the future of insurance.
Speaker 1 (43:07):
A challenging thought to leave you with. We hope this
looking to the numbers and crises facing the market, leads
you better informed and prepared.
Speaker 2 (43:14):
Thank you for joining us for this edition of Insurance Weekly.
Speaker 1 (43:16):
We'll catch you next time.
Welcome to Insurance Weekly. We're here to navigate some of
the financial headlines that are really dominating the end of
this year. We're looking at risk regulation and what it
all means for well for your wallet. It's a critical time,
it really is across every major sector. You've got healthcare
decisions in Washington, climate lawsuits in the courts, and just
skyrocketing costs on the road. The whole insurance landscape is
(00:23):
facing these structural challenges, yeah, and challenges.
Speaker 2 (00:26):
Putting it mildly, it feels more like a systemic reckoning.
I mean, if you're trying to plan for twenty twenty
six right now, it is exceptionally difficult.
Speaker 1 (00:35):
Why is that? What are the big forces at play?
Speaker 2 (00:38):
It's this convergence of massive macro forces. You have this
chronic inflation that's driving up the cost of everything from
car parts to a hospital stay right. Then you layer
on climate instability, which is pushing all the catastrophic risk
models past their breaking point. And on top of that,
you have huge regulatory uncertainties swinging from state to state
all the way up to.
Speaker 1 (00:58):
Congress, and that squeeze it hits everyone.
Speaker 2 (01:01):
Everyone, from the global reinsure all the way down to
the average person just trying to pay their monthly bill.
Speaker 1 (01:06):
And when all those forces collide, the immediate and I
think painful outcome is this affordability crisis. It's hitting people
with incredible speed. It is.
Speaker 2 (01:17):
We have a few stories that really frame the sheer
desperation we're seeing.
Speaker 1 (01:22):
Let's start with those. The first one is in healthcare,
centered on the Affordable Care Act.
Speaker 2 (01:26):
Right there's this looming deadline, the potential expiration of enhanced
premium tax credits. It threatens to just dramatically increase healthcare costs.
We're talking about potentially doubling premiums for millions, doubling, doubling
in Ohio alone. The projections are that over half a
million people could face that kind of abrupt premium shock.
Speaker 1 (01:46):
That is an immediate political firestorm waiting to happen. But
at the same time, we're seeing a much slower collapse
in a key part of retirement planning.
Speaker 2 (01:54):
Yes, the long term care market or LTC carriers are
finally having to correct for decays of just massive fundamental mispricing.
Speaker 1 (02:03):
And the financial reality of that correction is brutal for policyholders.
Speaker 2 (02:07):
Brutal is the word in New York we've seen applications
for rate increases that are not just double digit, they're
pushing triple digits.
Speaker 1 (02:15):
What kind of numbers are we talking about.
Speaker 2 (02:16):
We're talking about increases like ninety five percent from Metamerica
and get this, ninety six point seven percent from First
Unham Life insurance company.
Speaker 1 (02:25):
Wow.
Speaker 2 (02:26):
So imagine you did the responsible thing twenty years ago.
You bought this policy for peace of mind, and now
you're being hit with a bill that's nearly double what
it was every year.
Speaker 1 (02:37):
And the third piece of this is what's happening on
the road with auto insurance.
Speaker 2 (02:41):
Right that cost desperation is showing up in really dangerous ways.
Auto insurance costs are just skyrocketing, way beyond general inflation,
and it's driving this desperate reaction from consumers.
Speaker 1 (02:53):
Oh were they doing?
Speaker 2 (02:54):
The data suggests that nearly thirty percent of drivers are
now being forced to cut their coverage so you know,
accepting much higher deductibles or and this is shocking, dropping
legally required auto coverage entirely.
Speaker 1 (03:06):
They're driving uninsured.
Speaker 2 (03:07):
They're driving uninsured because they simply cannot afford the monthly
premium anymore.
Speaker 1 (03:12):
And that to me seems like the clearest indicator of
how bad this has become. When people start gambling with
a legal requirement, it means they've just run out of
financial options.
Speaker 2 (03:22):
It's a sign of real economic distress.
Speaker 1 (03:25):
That really sets the stage for our conversation today. We're
going to unpack the details behind these crises, starting with
that political and financial cliff for the ACA. Okay, let's
focus in on the Affordable Care Act marketplace, because the
financial threat here is tied to a very specific political window.
It is we're talking about the pending expiration of those
(03:46):
enhanced ACA premium tax credits. For the people who rely
on them, what's the exact mechanism that causes their premiums
to explode if Congress doesn't act.
Speaker 2 (03:57):
The mechanism is, well, it's both simple and incredibly Right now,
these enhanced tax credits are significantly lowering the net monthly
premium for about twenty four million adults who buy their
insurance on the marketplace. Okay, if those enhancements expire, the
average annual premium for those people is projected to more
than double in twenty twenty six. More than double, that's
the average. It happens because the government subsidy, which right
(04:19):
now is shielding a lot of consumers from the true cost.
It either disappears entirely or it shrinks so drastically that
it's almost meaningless.
Speaker 1 (04:28):
The scale of that is it's hard to grasp until
you look at the human cost. There was a KFF
survey from just this past December that gives us a
window into what people are thinking. What choices are those
twenty four million Americans preparing to make?
Speaker 2 (04:45):
The survey data is it's stark, it's really stark evidence
of the crisis. When you present people with the idea
of doubled costs, they're forced into these unhealthy trade offs
such as well, one in three enrollies, that's thirty two
percent say they are very likely to show for a
cheaper plan. Now, on the surface, that sounds.
Speaker 1 (05:02):
Like a rational response, right, you shop around.
Speaker 2 (05:04):
But in the insurance world, as you know, cheaper plans
mean significantly higher deductibles and much higher out of pocket maximums.
Speaker 1 (05:10):
Which means they might buy the insurance to avoid a penalty,
but they can't actually afford to use the coverage for
anything that's not a total catastrophe exactly.
Speaker 2 (05:18):
They become functionally under insured. But here's the more disturbing finding. Okay,
one in four, that's twenty five percent say they would
be very likely to go uninsured entirely.
Speaker 1 (05:29):
A quarter of them would just drop coverage, drop it.
Speaker 2 (05:31):
We saw the stark anecdote from a sixty year old
woman in Missouri. She identified as a Republican, and she
said her cost was going from zero to over six hundred.
Speaker 1 (05:41):
Dollars a month, zero to six hundred.
Speaker 2 (05:43):
And she explained that her husband must keep the coverage
because he's at risk of going blind otherwise, but that
she is planning to drop herself from the policy.
Speaker 1 (05:51):
So the family is making a life and death decision
about who gets to have health care.
Speaker 2 (05:56):
A decision based entirely on an abrupt subsidy withdrawal.
Speaker 1 (05:59):
It's heart breaking, and I think we need to zoom
in on one group that faces the most dramatic cliff here,
people with incomes just above four hundred percent of the
federal poverty level. Why are they so vulnerable?
Speaker 2 (06:10):
Ah, this is where the math just gets brutal. The
enhanced credits got rid of what was called the subsidy cliff.
Explain it before, If your income went just one dollar
over four hundred percent of the poverty level. You lost
all of your subsidies. You were forced to pay the
full sticker.
Speaker 1 (06:25):
Price, which is astronomical.
Speaker 2 (06:27):
Right, So, the current enhance credits cap what those individuals
pay at no more than eight point five percent of
their income, a manageable number.
Speaker 1 (06:34):
But if the credits expire.
Speaker 2 (06:35):
That cap disappears. They go right back to paying the
full unsubsidized premium price for their plan. In many high
cost states, that could be thousands of dollars a month.
They go from a controlled eight point five percent maximum
to one hundred percent of the cost overnight.
Speaker 1 (06:52):
That creates an incredibly volatile situation politically, especially heading into
the twenty twenty six election cycle.
Speaker 2 (06:58):
Without a doubt, and the policy it's helf is popular.
The support is strong. Eighty four percent of marketplace enrollies
and that includes seventy percent Republicans want the extension. But
the blame game is very nuanced.
Speaker 1 (07:10):
So who do people blame if this happens?
Speaker 2 (07:12):
Well? The KFF survey asked that if an enrolli's annual
healthcare costs go up by one thousand dollars next year,
who's at fault? The blame is spread all over.
Speaker 1 (07:19):
The place, No single villain.
Speaker 2 (07:21):
Not at all. Thirty seven percent blame President Trump, thirty
three percent blame congressional Republicans, and twenty nine percent blame
congressional Democrats. No single party gets a pass in the
eyes of the consumer.
Speaker 1 (07:32):
Which is why it's such a powerful issue.
Speaker 2 (07:33):
Exactly, and it's mobilizing a slight majority. Fifty four percent
of registered voters said that a one thousand dollars hike
in their healthcare cost would have a major impact on
whether they vote in twenty twenty six and who they support.
This is not a niche issue, it's a mainstream economic
anxiety point.
Speaker 1 (07:49):
To make this abstract financial cliff just hyperreal, Let's go
back to that example of Washington state representative used it
illustrated a staggering one thousand percent premium jump.
Speaker 2 (08:00):
Yeah, that example was so powerful because it was so specific.
It was a married couple ages sixty and fifty five
earning eighty five thousand dollars a year in Clalm County, Washington.
Speaker 1 (08:08):
So a pretty typical near retirement middle.
Speaker 2 (08:09):
Class couple, the exact cohort that is extremely sensitive to
these changes. So under the current enhanced subsidies, their monthly
premium for the cheapest plan was one hundred and twenty
seven dollars in twenty twenty five.
Speaker 1 (08:20):
Okay, one hundred and twenty seven dollars a month manageable right.
Speaker 2 (08:23):
If the credits expire, that same premium jumps to one thousand,
four hundred and eighty five dollars per month in twenty
twenty six.
Speaker 1 (08:28):
That is, I'm doing the math here, that's over one
thousand percent increase three hundred and fifty eight dollars more
every single month.
Speaker 2 (08:35):
Correct their annual bill just for insurance, not counting deductibles
or copays, it explodes to nearly eighteen thousand dollars.
Speaker 1 (08:43):
What's the consequence of that? I mean, how does a
family even absorb that kind of hit.
Speaker 2 (08:47):
Well, it wasn't just about tightening the budget. It forced
a fundamental change in their retirement strategy. The representative noted
that a constituent facing this exact jump decided the only
immediate way out was for the wife who had already retired,
to take her social Security benefits early.
Speaker 1 (09:03):
Oh, that's a permanent decision.
Speaker 2 (09:05):
It's permanent. It means her monthly Social Security check is
lower for the rest of her life, and that money
which they had planned for you know, housing or maybe
long term care down the line now has to be
diverted immediately just to pay for basic health insurance premiums.
Speaker 1 (09:20):
It just shows how a political decision or an indecision
in DC can instantaneously dismantle a retirement plan that someone
has spent decades carefully building in an ins Okay, so
let's shift from that acute political fight over ACA subsidies
to what you called a chronic market failure in retirement planning,
long term care or LTC insurance. Right, the numbers are horrifying,
(09:44):
especially those triple digit rate hikes you mentioned in New York.
The New York Department of Financial Service is basically called
this a crisis caused by historical mispricing, and.
Speaker 2 (09:54):
Historical is the key word there. These policies were priced
decades ago, often in the nineties and early two thousands,
and they were based on actuarial models that just well,
they proved to be fundamentally flawed. How so in three
core ways, and you have to remember, the carriers have
a legal responsibility to stay solvent so they can pay
future claims. So when their underlying assumptions just completely collapse,
(10:16):
they are required by regulators to seek these massive rate corrections.
Speaker 1 (10:20):
Okay, let's break down those three flaws. Yeah, they tell
a story about miscalculating human behavior and just how long
we live. What was the first big actuarial mistake?
Speaker 2 (10:29):
The first one and probably the most significant, was underestimating
human longevity, but it was combined with a miscalculation of
rational policyholder behavior.
Speaker 1 (10:38):
What does that mean?
Speaker 2 (10:39):
Insurers assumed certain lapse rates, that's the percentage of people
who would just drop the policy over time because it
got too expensive or they didn't think they needed it anymore.
Speaker 1 (10:47):
Okay, so they built that into the price.
Speaker 2 (10:49):
They did, but the lapse rates turned out to be
much much lower than they expected. People held onto their
policies because they knew they were valuable, they knew they
were going to need that benefit.
Speaker 1 (11:01):
So the pool of policy holders didn't shrink as fast
as the model predicted.
Speaker 2 (11:05):
Exactly, So the policy holders acted rationally, and the industry's
pricing model basically punished that rationality.
Speaker 1 (11:12):
What was the second big mistake?
Speaker 2 (11:14):
Continued mortality improvements. Put simply, people are living longer, and importantly,
they are surviving longer into the age where they need
chronic long term care, and.
Speaker 1 (11:25):
That ties into the third flaw.
Speaker 2 (11:27):
I assume it translates directly in to the third flaw,
increasing claim durations. So when people finally do start drawing
benefits from their policy, they use them for a much
longer time than the actuaries projected twenty or thirty years ago.
Speaker 1 (11:41):
The carriers themselves are admitting this right.
Speaker 2 (11:43):
They are mutual of OMAHA. When they were justifying their
own twenty four point one percent increase essentially admitted it.
They stated that more policy holders are recognizing the benefit
of their long term care insurance policies, using benefits more
often and for a longer duration than anticipated.
Speaker 1 (11:59):
That's incredible. It's like the ultimate failing of the model.
The carrier is surprised that the policy they sold was
being used exactly as it was intended.
Speaker 2 (12:07):
And that use is driving up costs for everyone. The
foundational insight here isn't just that interest rates were low
on their invested premiums. It was that they completely underestimated
how long people would live and how effectively they would
use the very expensive benefit they'd been paying for.
Speaker 1 (12:24):
They modeled for people to drop the coverage or die
sooner than they.
Speaker 2 (12:27):
Did precisely, and this leaves millions of older Americans in
a really severe bind, especially because there's so much confusion
around what Medicare does and does not cover.
Speaker 1 (12:36):
Let's clarify that it's a crucial distinction for anyone planning
for retirement. What does Medicare cover and what does it
explicitly not cover.
Speaker 2 (12:44):
Medicare is your lifeline for acute medical needs, think hospital stays,
doctor visits, surgery, prescription drugs. That's your Parts A, B,
and D or a Part C advantage plan. Okay, but
and this is critical, Medicare will not pay for long
term care. It might cover a short stint of skilled
nursing or rehab after a hospital stay, but it will
(13:04):
not pay for routine, ongoing personal care.
Speaker 1 (13:07):
So assistance with daily living like bathing or dressing, or
extended stays in a nursing home for custodial care that's not.
Speaker 2 (13:16):
Covered, not at all. And that is the vast, often
six figure annual expense that has to be covered some
other way.
Speaker 1 (13:22):
So if Medicare is out, what are the main strategies.
It's private LTC insurance which we've just established as in crisis,
or what's the other.
Speaker 2 (13:28):
Action or medicaid? If an individual has exhausted their assets
and income down to the point where they qualify under
very stringent financial rules. Medicaid will step in as the
payer of last resort for long term care.
Speaker 1 (13:39):
Which means you have to be nearly impoverished to qualify correct.
Speaker 2 (13:43):
It's why financial advisors always urge people to consider private
LTC insurance in their fifties or sixties, before a health
condition makes it impossible to buy. But the caution remains.
Even if you have a policy, the carrier can and
will raise rates, and the policy itself might not cover
all of your expense.
Speaker 1 (14:00):
And this ripple effect of not having adequate insurance it
doesn't just stop with the policyholders' bank account. It strains
the entire medical system, especially in rural areas.
Speaker 2 (14:10):
The situation in Alabama really highlights the fragility of the
rural health system. If one hundred thousand residents lose their
insurance because of these affordability pressures, the Alabama Hospital Association
says the impact will be catastrophic. Why catastrophic They already
report six hundred and fifty million dollars a year in
unpaid care. That's essentially the cost of treating uninsured patients
(14:31):
who can't pay their bills. If you add tens of
thousands more uninsured people to that system, these already financially
strained hospitals, which are operating on tiny margins, they'll get
pushed right over the edge.
Speaker 1 (14:43):
And that threatens access to care for the entire community,
insured or not.
Speaker 2 (14:47):
Absolutely. We're also seeing this cost strain show up as
tension between hospitals and the big payers like Blue Cross
Blue Shield.
Speaker 1 (14:55):
The Minnesota case is a good example of that.
Speaker 2 (14:57):
A perfect example. It was this tense, high stakes standoff
between Aspirous Saint Luke's Facilities and Blue Cross and Blue
Shield of Minnesota. The hospital claimed they were being significantly
underpaid compared to their competitors in the DILUF.
Speaker 1 (15:12):
Market, so they wanted a rate increase.
Speaker 2 (15:14):
They were seeking what they called a fair market aligned reimbursement,
basically a rate that keeps up with their actual costs
for staffing, supplies, and everything else. If they had failed
to reach a deal, the hospital would have gone out
of network for thousands of BCBS.
Speaker 1 (15:29):
Members, forcing patients to either switch doctors or pay huge
out of network costs.
Speaker 2 (15:34):
Exactly, they did manage to secure a short term deal
through twenty twenty seven. But that underlying tension where providers
are constantly threatening to leave networks because they say they're
not being paid enough, is a chronic source of uncertainty
in our healthcare system.
Speaker 1 (15:49):
And when you combine all these systemic financial pressures with
the sheer complexity of government data systems, the outcome can
be just devastatingly personal.
Speaker 2 (15:59):
The trag case of Alan Mitchell and Maryland is a
story of just that, a devastating bureaucratic failure.
Speaker 1 (16:06):
What happened to him?
Speaker 2 (16:07):
Alan Mitchell was mistakenly declared dead by the government. The
root cause was a single Social Security number error on
another man's death certificate.
Speaker 1 (16:15):
A typo, just a typo. And what were the consequences?
Speaker 2 (16:18):
They were commediate and ruinous. Mitchell was battling kidney failure.
He desperately needed life saving dialysis. This death declaration caused
him to lose his pending application for Medicare Part B.
Speaker 1 (16:31):
So he lost his Medicare.
Speaker 2 (16:32):
And subsequently his wife's health insurance coverage was also canceload.
And even though they were repeatedly assured the error was fixed,
the systemic years just grind so slowly. His wife was
forced to spend thousands of dollars out of pocket for
his dialysis treatments while they were fighting to prove he
was in fact alive.
Speaker 1 (16:50):
It's an indictment of how fragile these data systems are
when one typo can lead to financial ruin and denial
of care. How common is this It's.
Speaker 2 (16:57):
More common than you'd hope. A report from the Social
Security Advisory Board estimated that between seven thousand and twelve
thousand people are affected by this kind of error every year.
Matt many yes and experts warn the problem is getting
worse now because federal employee terminations and budget cuts have
thinned the ranks of experienced staff who are needed to
manually investigate and fix these things. Once a typo gets
(17:21):
into a massive data system, undoing all the ripple effects
on your credit score, your pension, your insurance, it becomes
this exhausting, multi year fight. We heard of one man
who spent four years just trying to prove his own existence.
Speaker 1 (17:34):
It's a profound reminder that efficiency without human oversight in
these massive systems carries just immense unnecessary risk. Let's transition
now from the fragility of human data to the overwhelming
power of planetary data. Specifically, the systemic financial threat facing
property and casualty insurance that's being driven by climate change, and.
Speaker 2 (17:54):
That threat is absolutely no longer theoretical. It is the
primary driver of rising pin c rates. The industry itself
has confirmed this.
Speaker 1 (18:00):
What's the data on that.
Speaker 2 (18:02):
A study from the Treasury Department's Federal Insurance Office found
that average home insurance premiums nationwide went up nearly nine
percent faster than the rate of inflation between twenty eighteen
and twenty twenty two. This exponential risk, this supercharge extreme weather,
is translating directly into higher costs and in some places
no availability at all.
Speaker 1 (18:23):
And this climate driven affordability crisis has now found its
way directly into the courts with a really groundbreaking lawsuit
out of Washington State. It's a fascinating case and the
angle is new. It's not about environmental harm, It's about
insurance rates.
Speaker 2 (18:36):
That is the novel legal argument here. You have two
homeowners in Washington suing major fossil fuel companies Exonmobile, Chevron, Shell,
the American Petrolleum Institute, the whole list, claiming that there
are decades of deception and fraud about climate impacts directly
caused the homeowner's insurance crisis.
Speaker 1 (18:52):
So the claim is that these companies knew what would happen,
they misled the public, and their actions created the catastrophic
risk that now makes insurance unaffordable for people.
Speaker 2 (19:02):
That is the core claim. It's a direct line from
corporate deception to consumer economic damage, specifically their insurance costs.
Speaker 1 (19:11):
What's at stake here, especially given the immediate pushback.
Speaker 2 (19:14):
From the industry, well, the API, the American Petroleum Institute
immediately called the suit baseless. They're arguing that climate policy
belongs in Congress, not in what they call a patchwork
of courtrooms.
Speaker 1 (19:26):
But the legal stakes are huge.
Speaker 2 (19:28):
Immense because this case ties climate liability directly to consumer
pocketbook issues. And what's more, the US Supreme Court is
scheduled to address a related climate deception case on December twelfth.
If the justices take up that petition, it could set
a legal precedent that dramatically affects the two dozen or
more similar cases pending against the industry.
Speaker 1 (19:48):
A really crucial moment now shifting to the state level
efforts to manage these costs. We have these conflicting stories
about market stability. Let's start with Florida, which has been
the empicenter of this P and C market failure.
Speaker 2 (20:01):
It has, and the Florida Insurance Commissioner, Michael Yorski is
essentially claiming victory.
Speaker 1 (20:06):
What's he saying.
Speaker 2 (20:07):
He's using very strong language. He's saying that legislative market
reforms from twenty twenty two and twenty twenty three have
finally stabilized Florida's markeag and that consumers are finding relief.
Speaker 1 (20:19):
And those reforms were aimed at curbing lawsuits.
Speaker 2 (20:22):
Heck, exactly, they were specifically designed to stop aggressive litigation
tactics things like assignment of benefit abuses and one way
attorney fees which had just wildly inflated the cost of claims.
Speaker 1 (20:33):
So what's the evidence he's pointing to. Does he have
data to back that up?
Speaker 2 (20:36):
He does, He's citing clear data points. First, litigation is
demonstrably down to pre twenty nineteen levels. Second, and this
is critical, over one hundred carriers have filed for a
zero percent rate increase or in some cases even a decrease.
That sounds good, And there's a tangible example in the
auto sector. Progressive recently returned a massive one billion dollars
(20:57):
in auto rebates to its policyholders in Florida a billion. Yes,
and they attributed it to the fact that the rate
reductions they implemented actually exceeded their expectations of how beneficial
those reforms would be.
Speaker 1 (21:08):
That sounds undeniably successful. So why is there still so
much skepticism from consumer advocates.
Speaker 2 (21:13):
The skepticism really hinges on sustainability. The critics point out
that this stability might be temporary, and it's highly dependent
on one key factor, which is Florida got lucky. They
had a quiet year in twenty twenty five without any
catastrophic hurricane losses aw. So they argue that the structural
climate risk the reason Florida premiums rose nearly sixty percent
(21:35):
between twenty fifteen and twenty twenty three, the largest increase
of any state. That risk hasn't been solved. It's just
been masked by a favorable weather season.
Speaker 1 (21:45):
So one big storm could wipe out all these gains.
Speaker 2 (21:47):
One major hurricane could instantly wipe it all out, trigger
a new crisis in the reinsurance market, and force carriers
right back to the brink.
Speaker 1 (21:55):
Okay, so, speaking of stabilization, California has seen its own
market upheaval with league carriers pulling back, but now Farmers
Insurance is making a significant move to re engage.
Speaker 2 (22:05):
They are, but it's a clear trade off for consumers.
Speaker 1 (22:08):
What's the deal?
Speaker 2 (22:08):
So Farmer's Insurance is lifting its cap on new homeowners
policies in California. This is a huge signal of confidence
in the insurance Commissioner Ricardo Lara's new strategy.
Speaker 1 (22:18):
And Farmers had been restricting new business because of wildfire.
Speaker 2 (22:21):
Risk severely, but now they're removing that cap entirely. This
improves availability across the state, which is a massive win
for the housing market.
Speaker 1 (22:29):
But market availability, it seems, always comes with a price.
Speaker 2 (22:32):
Deck it does. At the exact same time Farmers is
re engaging, they are also requesting a statewide average rate
increase of six point nine to nine percent.
Speaker 1 (22:40):
So more availability, but higher prices.
Speaker 2 (22:43):
It confirms that even to get the market stable, premium
hikes are still a necessary part of keeping carriers financially healthy. Now,
Farmers did commit to expanding coverage in distressed locations, and
to make it a little more palatable, they're boosting their
discount for bundling home and auto up to twenty two percent.
Speaker 1 (23:00):
Mean you mentioned Commissioner Laura's strategy. His efforts to fix
the market have been sort of marred by a pretty
significant political controversy about his travel.
Speaker 2 (23:09):
That's right, while he was championing these reforms, and investigation
highlighted that Commissioner Laura had taken at least thirty two
luxury trips spanning one hundred and sixty three days to
places like Tokyo, Cape Town, and Dubai.
Speaker 1 (23:20):
And who was paying for this.
Speaker 2 (23:21):
The trips were reportedly funded by the National Association of
Insurance Commissioners or NAIC, which is an industry funded trade group.
The reports noted that while state employees traveling with him
were often in economy class, the industry funded group reportedly
covered first or business class.
Speaker 1 (23:39):
Seats for Lara, which doesn't look great.
Speaker 2 (23:42):
It draws immediate fire from consumer advocates. They argue that
the Commissioner is getting way too cozy with the very
industry he's supposed to be regulating, especially while the market
was in crisis. It raises serious questions about regulatory independence.
Speaker 1 (23:56):
Before we leave property insurance, let's use that UA SAA
sump pump case in Wisconsin as a lesson for policyholders
to get a claim denied.
Speaker 2 (24:05):
It's an incredibly instructive case. This homeowner in New Berlin
had a basement flood from a sump pump failure, a
specific thing he had coverage for. USAA initially denied his
ten thousand dollars claim without even sending an adjuster to
the house.
Speaker 1 (24:19):
They denied it just based on the paperwork, purely on
a paper review.
Speaker 2 (24:22):
So the homeowner, who felt devastated because he had lost
decades of collectibles, he did the smart thing. He hired
an insurance attorney.
Speaker 1 (24:29):
And what happened.
Speaker 2 (24:30):
The attorney sent one sharply worded letter to USIA and
the carrier reversed the denial and paid the full claim
within days.
Speaker 1 (24:37):
Oh and the attorney said, most people just accept the denial.
So what's the key takeaway for listeners here, especially about deadlines.
Speaker 2 (24:45):
The main takeaway is to trust your gut and get
legal advice if you feel you've been wronged, And the
attorney emphasized this critical deadline. In Wisconsin, policyholders typically have
only one year from the date of the incident to
file a lawsuit against their insurance company.
Speaker 1 (25:00):
One year. If you miss that window, you're out.
Speaker 2 (25:02):
Of luck, you lose all recourse. It underscores the need
to find a good agent who will really review your
coverage with you for specific risks like some pump failure
or valuables. We also saw FEMA step in to help
with this pressure, temporarily extending the grace period for national
flood insurance policies in places like Nebraska, giving people until
mid January to renew.
Speaker 1 (25:23):
Let's turn out to the auto insurance market, where these
affordability issues are leading to those desperate and frankly dangerous
consumer behaviors we talked about at.
Speaker 2 (25:31):
The top right that trend of nearly thirty percent of
drivers either reducing or dropping their legally required coverage.
Speaker 1 (25:38):
It's a market under massive financial pressure and it's leading
to a breakdown in regulatory compliance.
Speaker 2 (25:43):
Absolutely, high premiums are forcing drivers to raise their deductibles
to unaffordable levels or drop policies entirely. And this trend
has already caused a four percent drop in the number
of insured cars on the road year over year.
Speaker 1 (25:57):
Fewer insured cars means more risk for every responsible driver outsell.
Speaker 2 (26:01):
Yes, it does. And what's the impact on claim frequency?
Speaker 1 (26:05):
What is it?
Speaker 2 (26:05):
The number of claims being filed is down by eight
point five percent year over year. But this isn't because
of some miraculous drop in accidents.
Speaker 1 (26:12):
It's a behavioral response.
Speaker 2 (26:14):
It is drivers are choosing to pay for repairs out
of pocket, even for major damage, because they are terrified
that filing a claim will trigger a future premium increase
that they absolutely cannot afford.
Speaker 1 (26:24):
The system is essentially panalizing you for using the product
you paid for.
Speaker 2 (26:28):
It's forcing consumers to view their policy as catastrophe coverage,
only not as comprehensive protection. There was this poignant anecdote
that really captures the fear behind this.
Speaker 1 (26:40):
Tell me about it.
Speaker 2 (26:41):
It was a woman named Zoe who talked about going
uninsured for nearly four weeks because she had to choose
between paying her rent and food or paying her premium.
And she described driving in constant terror. She said, I
slow down at every single intersection, regardless of whether the
light was green or not. I'm careful at every time
I get worried.
Speaker 1 (27:01):
It just illustrates that for people who are financially strapped,
auto insurance is now this terrifying financial gamble, and.
Speaker 2 (27:07):
This consumer pain is being compounded by regulatory controversy. Let's
look at Michigan and its auto no fault reforms.
Speaker 1 (27:14):
Right, state officials claimed the twenty nineteen law lowered rates
and reduced the number of uninsured drivers.
Speaker 2 (27:19):
They did, but a recently commissioned report by the consulting
firm Milliman told a dramatically different story.
Speaker 1 (27:26):
This is a classic case of political cherry picking of data, doesn't.
Speaker 2 (27:29):
It a textbook case? The Michigan Department of Insurance and
Financial Services loudly claimed the twenty nineteen law lowered rates,
but the reality, according to Milliman's own data, is that
average rates for drivers in Michigan increased by nearly two
hundred dollars between twenty nineteen and twenty twenty four.
Speaker 1 (27:46):
So wait, if the rates went up, where did the
claim savings of three hundred and fifty seven dollars per
driver come from?
Speaker 2 (27:52):
They were isolating the savings from just one part of
the policy, the personal Injury protection or PIP portion. That
part did see a reduction, but those specific PIP savings
were completely wiped out by increases in the prices of
all the other mandatory parts of the coverage. So the
overall bill the consumer actually felt went up.
Speaker 1 (28:10):
And what about the claim that there were fewer uninsured
drivers also misleading.
Speaker 2 (28:15):
The report's own data showed that the actual number of
uninsured drivers in Michigan increased since the law was enacted.
The only silver lining was that the gap between Michigan's
uninsured rate and the national rate narrowed slightly.
Speaker 1 (28:27):
And beyond the money, these reforms caused real harm to
the most catastrophically injured drivers, didn't.
Speaker 2 (28:32):
They Yes, The reform imposed steep cuts to payments for
home care companies that treat these victims, many of whom
rely on these services for their basic daily existence. Milliman
found that nearly four thousand crash victims per year in
Michigan will exhaust the medical coverage provided by their insurance.
Speaker 1 (28:51):
Company, so they're left with nothing.
Speaker 2 (28:53):
The executive director of the Michigan Brain Injury Provider Council
noted that the report just fails to grasp the devastating
law long term impact on people who need continuous catastrophic
care for the rest of their lives.
Speaker 1 (29:05):
Okay, let's move now to some specialized business risks. We
have this fascinating, high profile case in cyber insurance involving
twenty three AM The company cyber insurers agreed to pay
sixteen point five million dollars to essentially buy back the
unused cyber coverage from the bankrupt company, which is now
called Chrome Holding.
Speaker 2 (29:24):
So wire insurers paying millions for coverage that the client
hasn't even fully used yet.
Speaker 1 (29:28):
Well, Chrome Holding, which is the reorganized twenty three a
me they filed for Chapter eleven. That sixteen point five
million dollar settlement is critical because it gives them the
cash to pay claims from the huge amount of cyber
litigation they're facing. This is from that big data breach
they have exactly.
Speaker 2 (29:43):
It includes a major consolidated class action from the October
twenty twenty three credential stuffing hack which affected over seven
million consumers, plus a separate pixel tracking lawsuit.
Speaker 1 (29:54):
And they started with twenty five million dollars in cyber coverage,
but almost eight point five million dollars of that had
art You've been paid out just in defense costs.
Speaker 2 (30:02):
And that brings up this crucial industry concept of a
wasting or eroding policy.
Speaker 1 (30:07):
Let's define that clearly. What is a wasting policy?
Speaker 2 (30:10):
This is standard language now in modern directors, officers and
cyberliability policies. A wasting policy means that the total coverage
limit in this case, the twenty five million dollars, is
immediately reduced dollar for dollar by every expense you incur
in defending the company.
Speaker 1 (30:25):
So all the lawyer's fees, expert witness costs, court fees,
all of that comes out of the main pot of money.
Speaker 2 (30:31):
Exactly. The defense costs literally eat away at the money
that's available to actually settle or pay out the claim damages.
So in this case, eight point five million dollars had
already been spent just on legal defense, reducing the available pot.
Speaker 1 (30:44):
So the pot was shrinking, the litigation was ongoing. Why
the urgency for the insurers to buy back the rest
of the coverage now instead of just letting it play out.
Speaker 2 (30:53):
It all comes down to mitigating what's called long tail
risk and achieving certainty. Explain that cyber litigation, actually class
actions after these massive data breaches can be incredibly complex.
They can drag on for five, seven, maybe ten years,
with continuous unknown defense costs piling up the.
Speaker 1 (31:11):
Whole time, so the insurer has no idea what their
final bill will be, none at all.
Speaker 2 (31:15):
By paying the sixteen point five million dollars now, the
insurers immediately get certainty, they know their total exposure, they
avoid potentially years of expensive coverage disputes, and they cap
their risk. This buyback strategy is usually reserved for really
complex longtail claims like environmental pollution or asbestos liability.
Speaker 1 (31:35):
So the fact that they're using it for cyber shows
how seriously the market now views that risk.
Speaker 2 (31:39):
It highlights just how persistent and unpredictable cyber risk has become.
Speaker 1 (31:43):
Speaking of strategic business coverage, captive insurance seems to be
moving beyond just the Fortune five hundred world. It is rapid.
So what exactly is a captive and why is the
mid market, especially retailers, adopting it so quickly.
Speaker 2 (31:56):
A captive is essentially an insurance company that's formed and
owned by a business like a retailer or a manufacturer,
specifically to ensure its own risks. It's a tool for
retaining risk and customizing your coverage.
Speaker 1 (32:09):
It's like being your own insurre.
Speaker 2 (32:10):
In a way. Yes, And the mid market, particularly retailers
with big vehicle fleets or multi state convenience store operations,
they're the fastest growing adopters because they're facing these specific,
escalating risks that are just hard to ensure on the
commercial market.
Speaker 1 (32:25):
Okay, let's break down the two big benefits, improved cash
flow and control. How does paying a premium to yourself
improve cash flow?
Speaker 2 (32:34):
Well, By paying premiums into your own captive, the business
gets to keep the underwriting profit and the surplus that
would normally go to a commercial.
Speaker 1 (32:41):
Carrier, and you can invest that surplus.
Speaker 2 (32:44):
You can invest it, generating more income for the business.
But more importantly, it lets the company smooth out those
volatile annual insurance costs. You can strategically use the captive
during hard market cycles when commercial rates are spiking. It
also lets them pre fund deductibles and even mana undated
capital expenses in a potentially tax advantaged way.
Speaker 1 (33:03):
Tell me more about those mandated expenses. What's an example
for a convenience store.
Speaker 2 (33:08):
For c stores, regulations often mandate really expensive infrastructure updates,
like modernizing their fuel tanks or installing secondary containment systems
that environmental regulations require.
Speaker 1 (33:20):
So big predictable costs.
Speaker 2 (33:21):
Right, a captive allows the business to systematically pre fund
those major capital upgrades. If you structure it correctly, you're
essentially saving for future compliance costs while keeping control over
the money until you actually need it.
Speaker 1 (33:34):
And in the control scene, what are the unique or
difficult risks a captive can cover that traditional insurance is
shying away from.
Speaker 2 (33:41):
This is where it gets really powerful. Captives give you
the flexibility to cover risks that have significant gaps in
the commercial market. Think about supply chain interruptions. A geopolitical
event causes a critical component to be delayed, and it
costs the retailer millions in lost sales. Commercial policies often
exclude or limit that. What else captives can cover emerging
(34:02):
environmental liabilities like pfas the forever chemicals, where the litigation
risk is just starting to unfold. And finally, for c stores,
the severity of claims from things like food recalls and
pathogen outbreaks is growing like crazy. According to experts. A
captive allows the business to fund those losses based on
its own actual safety record, rather than paying for the
(34:24):
risk of the entire industry.
Speaker 1 (34:25):
Let's turn our attention inward now to the insurance industry itself,
focusing on talent, compensation and regulation. This shift toward total
rewards and pay transparency is creating a major challenge at
the manager level.
Speaker 2 (34:38):
It's becoming a huge strategic priority because compensation is now
viewed so holistically. It's not just your base pay, it's
your benefits, your learning opportunities, your flexibility. It's a key
lever for attracting and retaining talent.
Speaker 1 (34:53):
But the transparency part only works if the managers are
trained to be what you call the frontline ambassadors.
Speaker 2 (34:59):
That's that's the core training gap. The critique here is
that managers often get to their position because they're technically excellent,
not because they have great communication or HR skills. They
often lack the vocabulary for these highly sensitive financial discussions, right.
Speaker 1 (35:14):
So they're the ones fielding the direct questions like why
is my salary five thousand dollars less than what I
saw in class.
Speaker 2 (35:20):
Door or why did my coworker get a larger raise?
And many leaders who came up through the technical ranks,
they become nervous when confronted with a compensation discussion. It's
especially true when they have to explain market data or
perceived inequities without just falling back on transactional arguments.
Speaker 1 (35:37):
So how are companies trying to fix this? We heard
about training on compa ratios. What are those and why
are they so critical for these conversations.
Speaker 2 (35:44):
Compa ratio or comparison ratio is a fundamental metric. It
compares an employee's current salary to the midpoint of the
established salary range for their specific job.
Speaker 1 (35:54):
Okay, so it's a way to standardize it.
Speaker 2 (35:56):
It is a comp ratio of one point zero means
the employees paid exactly the midpoint the market rate. If
the comp ratio is zero point eight, they're paid twenty
percent below the midpoint. Training managers on this gives them
an objective, data driven framework to explain why an employee
is paid where they are. It links it to their experience,
their performance, and the company's market strategy.
Speaker 1 (36:18):
And the goal is to shift the conversation away from
just an emotional.
Speaker 2 (36:21):
Negotiation exactly toward capability and future progression. And the data
really supports this effort. How So, the data shows that
employees are eight times more likely to consider a decision
fair even if they disagree with the amount, if they
understand the objective rationale behind it.
Speaker 1 (36:36):
So this manager training isn't optional anymore.
Speaker 2 (36:39):
Not at all, because the regulatory volatility is only increasing.
There are impending EU transparency directives that are going to
mandate disclosure of even broader paid data across international organizations
that will inevitably flood the market with comparative information, which
will just lead to more and more internal pulstions. HR
has to be partner with managers providing constant support, role
(37:02):
plays and even scenarioscripts.
Speaker 1 (37:04):
Shifting our global view, China is making a really significant
policy move to improve access to cutting edge, high cost medicine.
Speaker 2 (37:13):
This is a landmark step by their National Health Care
Security Administration. They've established what they're calling the Commercial Health
Insurance Innovative.
Speaker 1 (37:21):
Drug Catalog And how did that work?
Speaker 2 (37:23):
This system operates alongside their basic medical insurance and it's
specifically designed to support highly innovative drugs that have high
clinical value but would otherwise be financially out of reach
for most people.
Speaker 1 (37:34):
And one of the first therapies included is a CARRT
cell therapy zeverra cell for multiple myeloma. Why are carti
therapies so incredibly expensive?
Speaker 2 (37:42):
Car T therapy is a form of highly personalized medicine.
It involves extracting a patient's own T cells, genetically engineering
them in a lab to target their specific cancer cells,
multiplying them into the millions and then reinfusing them back
into the patient.
Speaker 1 (37:58):
The manufacturing and logistics fits that must be incredibly.
Speaker 2 (38:01):
Complex, incredibly and that's why the costs globally are often
in the hundreds of thousands of dollars per treatment. But
the trial results for zever sell really justify the attention.
Speaker 1 (38:10):
What did they find?
Speaker 2 (38:11):
They're impressive. Five year follow up results showed an overall
response rate of one hundred percent, with a seventy six
point nine percent patient's revival rate at sixty months after
the infusion.
Speaker 1 (38:22):
So by including this in their new catalog, China is
making a powerful statement.
Speaker 2 (38:26):
They are they're actively working to alleviate the massive financial
burden and enhance accessibility for patients who desperately need these
life saving personalized therapies, rather than letting the cost act
as an impenetrable barrier.
Speaker 1 (38:39):
Okay, let's wrap up our regulatory watch with some crucial
updates in federal crop insurance policies for the twenty twenty
six crop year.
Speaker 2 (38:45):
The USDA just unveiled what they're calling the Expanding Access
to Risk Protection Final Rule. It's really aimed at modernizing
and simplifying the whole federal crop insurance system for farmers
and ranchers.
Speaker 1 (38:58):
And the central theme is reducing regulatory hurdles.
Speaker 2 (39:01):
It is to make the system more flexible. And what
is a rapidly changing agricultural economy.
Speaker 1 (39:06):
What's the most significant practical change for farmers, especially regarding
prevented planting payments.
Speaker 2 (39:12):
It's the elimination of a really burdensome, long standing rule. Previously,
to qualify for certain prevented planting payments, the specific piece
of land had to have been previously insured.
Speaker 1 (39:23):
Which created a lot of extra complexity a.
Speaker 2 (39:25):
Ton of administrative burden. The new rule gets rid of
that requirement. Producers just have to show that the land
was planted or harvested in one of the past four years.
It simplifies compliance without inviting fraud.
Speaker 1 (39:37):
And are there other changes to streamline the reporting.
Speaker 2 (39:40):
Yes, The updates streamline reporting requirements, which is a major
time saver. For instance, farmers who switch insurance providers can
now submit their production reports directly to their new carrier
instead of navigating a bunch of bureaucratic steps. It also
expands coverage options for specialty crop producers like those growing
fresh mark get tomatoes and peppers. These are all steps
(40:02):
toward a more responsive system at the county level.
Speaker 1 (40:06):
We have covered a remarkable amount of ground today and
it's really revealed these intense pressure points across the entire
risk landscape. We started with that high stakes political and
financial fight over the future of ACA subsidies.
Speaker 2 (40:19):
Right, which is threatening to just dismantle retirement plans and
force families into these impossible health care choices.
Speaker 1 (40:25):
And we transition to that fundamental market failure in long
term care, showing how decades of well poor actuarial modeling
have left policy holders facing these brutal triple digit rate hikes.
Speaker 2 (40:36):
And we saw that this affordability crisis strains the whole
healthcare provider network, especially those fragile rural hospitals, and it
exposes the devastating human cost of simple systemic data errors
like the man who was mistakenly declared dead.
Speaker 1 (40:52):
Then we track the financial threat posed by climate change,
seeing how the industry's rising costs are now leading to
novel litigation against big.
Speaker 2 (40:59):
Oil, enforcing regulators in places like Florida and California to
make these really difficult trade offs between market availability and
necessary premium increases, and.
Speaker 1 (41:09):
We highlighted those desperate consumer behaviors in the auto market,
people paying out a pocket for repairs just to avoid
a future premium hike.
Speaker 2 (41:18):
We finished with the rising sophistication of specialized risk management,
the necessity for cyber insurers to buy back policies to
mitigate that long tail risk of complex litigation, and the
rapid adoption of captive insurance by mid market businesses who
are just seeking control over their own escalating liabilities.
Speaker 1 (41:35):
So what's the central challenge that all this data reveals.
Speaker 2 (41:38):
I think it's clear in so many areas, from longevity
risk to catastrophic climate events, the current insurance models are
struggling to reconcile these immense long term liabilities with predictable,
affordable pricing for the average consumer.
Speaker 1 (41:53):
And that structural gap between the escalating risk and an
affordable premium is being paid for by you. Then, And
that brings us to our final provocative thought.
Speaker 2 (42:02):
Today, as the industry, in a search for efficiency, increasingly
automates claims and decisions, we're seeing a dangerous and maybe
inevitable consequence emerge.
Speaker 1 (42:12):
Yeah, what's that.
Speaker 2 (42:13):
Well, we've established that forty one percent of doctors are
reporting increasing claim denial rates. We're now in an environment
where insurers are using algorithms to accelerate claim denial decisions.
Speaker 1 (42:23):
Which is essentially forcing patients to hire their own AI
powered bots just to fight back.
Speaker 2 (42:28):
It's creating an arms race of automation against the human
need for coverage.
Speaker 1 (42:32):
That's a chilling thought.
Speaker 2 (42:33):
And it leads to the final question for the industry,
which must be this, If your innovative tools are used
primarily to accelerate denials and minimize payouts, forcing patients to
hire their own technological proxies to prove their eligible, what
explicit mandatory steps must the insurance world take to ensure
that automation serves to improve efficiency without permanently eroding essential
(42:55):
human compassion, fairness, and necessary oversight in the claims process.
Speaker 1 (43:00):
Because that boundary between data efficiency and human.
Speaker 2 (43:03):
Justice, that is the ultimate test for the future of insurance.
Speaker 1 (43:07):
A challenging thought to leave you with. We hope this
looking to the numbers and crises facing the market, leads
you better informed and prepared.
Speaker 2 (43:14):
Thank you for joining us for this edition of Insurance Weekly.
Speaker 1 (43:16):
We'll catch you next time.
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