Cyber incidents, changes in climate, and business interruption are the chief risk concerns among key marketplace segments in the insurance industry, according to survey RiskScan 2024 from Munich Reinsurance America and the Insurance Information Institute (Triple-I) reveals. Beinsure analyzed the report and highlighted the key points.
The Report reveals the top risk concerns in five categories – insurance risks, market dynamics, natural disasters, emerging technologies, and property and casualty insurance costs – among individuals in five key market segments: P&C insurance carriers, P&C agents and brokers, middle-market business decision makers, small business owners, and consumers.
In the summer of 2024, a survey involving 1,300 participants from five distinct market segments – consumers, small business owners (SBOs), middle-market decision-makers (MM decision-makers), property and casualty (P&C) insurance agents/brokers, and P&C insurers – was conducted to identify top risk concerns within the insurance industry.
The survey focused on insurance-specific risks, particularly natural disasters, emerging technologies, P&C insurance costs, and overall market dynamics. The findings, detailed in the RiskScan report, offer insights into the varying risk perceptions across these groups and include perspectives from leading industry experts.
RiskScan: Cross-Market Insights on Top Risk Concerns
The top concerns across all groups reflect major events that have dominated US headlines. Respondents were asked to rank their top three concerns from a list of insurance risks and market dynamics. More than a third chose economic inflation, cyber incidents, and changes in climate as their top concerns (see Dynamics of the Cyber Insurance Market).
With post-pandemic inflation still affecting the purchasing power of both businesses and consumers, continuing domestic political uncertainty, and the growing threat of data breaches and international hacking schemes dominating the news, these top concerns are understandable
Dale Porfilio, Chief Insurance Officer at the Insurance Information Institute
“Most of us have seen a significant rise in our personal insurance costs, and businesses have experienced the same with their commercial insurance. We are certainly navigating turbulent times, and the survey results underscore that economics is the top concern for consumers – as well as for the other 4 surveyed audiences”, Dale Porfilio says.
Insurers prioritize both current and emerging risks
Insurance professionals prioritize both current and emerging risks, while consumers focus primarily on risks with immediate, tangible impacts. This contrast is evident in their rankings of top-three risks.
Consumers heavily emphasize tangible risks, such as climate change and cyber threats. In contrast, insurance professionals adopt a broader view, considering both immediate threats like climate change and longer-term emerging risks, including new technologies and per- and polyfluoroalkyl substances (PFAS).
As an insurance professional focused on providing solutions that clients will truly find meaningful, understanding risk concerns is invaluable. It enables us to design and price products that genuinely address what clients care about most
Kerri Hamm, EVP – Head of Cyber Underwriting, Client Solutions, and Business Development at Munich Re US
Middle-market (MM) decision-makers, often risk managers with above-average insurance knowledge, occupy a middle ground. Their perspective is less concentrated than consumers’ but not as expansive as insurance professionals’, reflecting a balance between immediate concerns and broader risk factors.
Knowledge gaps
There is a noticeable gap in understanding between concern and coverage. Consumers express less concern about floods compared to insurance professionals and businesses, who rank floods among the top two most critical natural disasters. This suggests that many consumers may not realize their flood risk, especially as traditional homeowners’ policies typically exclude this peril.
Small business owners (SBOs), while ranking floods as a significant concern, often misunderstand their coverage. Many are unaware that commercial property insurance usually excludes flood damage.
Additionally, some incorrectly assume their business qualifies for FEMA disaster grants. Even when disaster assistance loans are provided, businesses must repay them with interest, adding financial strain.
A similar disconnect exists regarding cyber risks. Despite widespread acknowledgment of cyber threats, a significant portion of risks remains uninsured in both commercial and personal sectors. Munich Re’s Global Cyber Survey reveals that 87% of managers feel their companies lack adequate cyber protection.
Furthermore, only 19% of respondents in the personal lines survey reported being offered cyber insurance, and 42% have no plans to purchase it. The individuals underestimate these threats, highlighting the need for improved education on cyber insurance.
The knowledge gap about insurance risks demonstrates the continued need for education of consumers and businesses, especially about flood, cyber, and legal system abuse. Increasing knowledge will be instrumental for the collective work needed to better manage and mitigate future risks
Sean Kevelighan, President and CEO at Insurance Information Institute
Rising property and casualty insurance costs also reflect gaps in understanding. While inflation was widely recognized as a factor, insurance professionals identified legal system abuse as another major driver — something consumers and businesses did not prioritize.
Public education and collaborative efforts with lawmakers to address legal system abuses could help restore fairness and reduce cost pressures.
Top insurance risks
Consumers, businesses, and the insurance industry all face significant cyber threats. From businesses who are at risk of customer data breaches to digitally connected homes, we are now in a world of ever-evolving cyber risks.
Cyber risks, changes in climate, and business interruption rank as top concerns in the marketplace
Fueled by consumer responses, changes in climate—evidenced by the increasing frequency and severity of extreme weather—ranked among the top three overall risks.
Although business interruption understandably wasn’t a top concern for consumers, businesses are subjected to loss events such as extreme weather caused by changes in climate, cyber attacks, and supply chain issues that could potentially disrupt their operations.
All businesses are challenged with building and maintaining resilience while diversifying their supply chains in a post-pandemic, rapidly changing world.
Insurers placed climate further down their list of concerns, instead setting their sights on emerging exposures like PFAS. These “forever chemicals” are found in drinking water, soil, and many other products. It is estimated that 97% of Americans have PFAS in their blood. While claims for PFAS are at an early stage, the potential for liability is massive.
Cyber incidents remain a leading risk
Cyber incidents remain a leading risk across market segments. In a recent survey, cyber incidents—encompassing cybercrime—drew significant attention from respondents. Insurers, small business owners, and consumers ranked it second, while P&C agents, brokers, and middle-market decision-makers identified it as their top concern (see Cyber Risk Insurance Market Trends).
Cybercrime imposes immense financial burdens on the US economy, with costs estimated at $320 bn. Addressing this challenge requires a robust and sustainable approach.
The insurance industry supports this effort with clearly defined coverages that complement cybersecurity measures, driving profitability and meeting market demands.
Cyber insurance plays a crucial role in supporting economic stability, business success, and digital transformation. It strengthens resilience across the value chain by providing pre- and post-incident products and services.
The global cyber insurance market has grown rapidly, reaching $13 bn in 2023, nearly double its $7 bn size in 2020. From 2023 to 2024, the global cyber insurance market grew from $16.7 bn to $21 bn and is projected to reach $120 bn by 2032, demonstrating a substantial 24.5% CAGR during the forecast period
The cyber insurance solutions help businesses minimize risks, respond swiftly to breaches, and recover from the financial and operational impacts of cybercrime.
The cyber landscape continues to evolve rapidly with emerging threats like ransomware, AI-driven attacks, and supply chain vulnerabilities. These threats can lead to severe consequences, including prolonged business interruptions, major data breaches, significant financial loss, and hefty regulatory fines.
Natural disasters risks
Insurance professionals, however, also expressed concern about less frequent but potentially more devastating perils, namely earthquakes.
It was a bit surprising that earthquake was the most pressing natural disaster for P&C carriers because it’s often excluded. A likely explanation could be tied to the potential higher degree of claim leakage in earthquake events
Mike Quigley, EVP – Head of Property Underwriting and Multiline Risk Quantification at Munich Re US
and relatively untested models
The potential financial impact of an earthquake can be severe. When an earthquake strikes, it can cause extensive damage to homes, businesses, and city infrastructure in a large metropolitan area. The economic impact resulting from a devastating earthquake can heighten the risk of insolvency for some carriers.
Most pressing natural disasters
Flood insurance solutions
Advancements in flood modeling and innovative insurance solutions are expanding access to affordable flood insurance protection. Many consumers and businesses remain unaware that flood coverage is not included in basic policies and must be added or endorsed separately.
Clear data and precise risk evaluation are crucial in helping consumers and businesses understand their flood risk. First Street reports that 14.6 mn properties in the US face substantial flood risk. Reducing coverage limits can make flood insurance more affordable.
Flood is typically a partial-loss peril. Total loss of a home is exceedingly rare, as flood damage often accounts for only a portion of a home’s value and may exclude contents
Tim Brockett, EVP and Head of Specialty Lines at Munich Re US
Sub-limited policies allow carriers to offer reduced coverage at a lower premium, aligning with the partial-loss nature of flood events.
Most impactful emerging technologies
Asked what emerging technologies they felt would have the greatest impact on the way they live and work, consumers were aligned in pointing to artificial intelligence (AI), smart devices, and the Internet of Things (IoT).
The US AI market stood at nearly $90bn in 2023, and is expected to grow well beyond $200bn by 2030, according to Statista
Insurance professionals also rated AI as a top emerging technology but spread their other top choices among emerging sources of connection and automation like decentralized technology, digital insurance, and autonomous vehicles
No longer just computers and smartphones, smart devices are being augmented with AI in our homes and businesses, increasing security and privacy concerns.
- For consumers, the use of smart and connected devices is increasing exponentially in their daily lives – from entertainment to security to household appliances, and beyond.
- For businessowners, connected equipment creates operational efficiencies and complexities.
- For insurers, IoTconnected smart devices like sensors and telematics offer opportunities to prevent loss, provide data insights, and better manage their portfolios.
Insurance market dynamics and P&C cost drivers
Economic inflation, market decline, and domestic political uncertainty emerged as top concerns across all audiences. Inflation, unsurprisingly, plays a significant role in driving P&C cost increases, alongside the rising impact of natural disasters.
Stakeholders remain focused on escalating costs, particularly in the property sector and other lines facing extreme pricing pressure. Inflation is a major contributor, but so are higher losses driven by more frequent and severe weather events linked to climate changes.
Insurance professionals also note that legal system abuse is a key driver of P&C insurance costs. Industry experts believe aggressive advertising by attorneys and third-party litigation financing have driven the increase in large jury awards, directly impacting insurance costs for all.
Top market dynamic concerns
Greatest impacts on the cost of P&C insurance
Survey Methodology
The RiskScan survey was commissioned by Munich Re US, in collaboration with Triple-I. Munich Re US and the Triple-I engaged independent market researcher RTi in the summer of 2024 to survey US-based individuals from five marketplace segments across the insurance value chain.
This online survey was conducted across gender, age, geographic region, household income, business revenue, and company size and segmented by homeowner status, business ownership, role within their organization, and affiliation with the P&C insurance industry. They were then asked about their top concerns related to insurance risks, natural disasters, emerging technologies, P&C insurance costs, and market dynamics.
FAQ
The RiskScan 2024 report highlights cyber incidents, changes in climate, and business interruption as the leading risk concerns. These concerns reflect the increasing impact of extreme weather, data breaches, and supply chain disruptions.
Consumers prioritize immediate risks like climate change and cyber threats, while insurance professionals focus on both current and emerging risks, including advanced technologies and PFAS exposures. Middle-market decision-makers strike a balance, addressing both short-term and long-term concerns.
Key gaps include flood and cyber insurance awareness. Many consumers underestimate their flood risk or assume standard policies cover it, while businesses often misunderstand FEMA disaster assistance terms. Cyber insurance is also underutilized, with many unaware of its availability or importance.
Inflation significantly drives rising P&C costs, alongside the growing severity of natural disasters. Legal system abuse, including aggressive advertising by attorneys and litigation financing, also increases insurance expenses.
Floods and earthquakes are primary concerns. Flooding is often underestimated by consumers, while earthquakes, though less frequent, pose a high financial risk to insurers due to potential large-scale damage and claim leakage.
Artificial intelligence (AI), smart devices, and the Internet of Things (IoT) are the top emerging technologies. These innovations enhance operational efficiencies, loss prevention, and data-driven insights while introducing new risks, such as privacy and security concerns.
The global cyber insurance market grew from $7 bn in 2020 to $13 bn in 2023 and is projected to reach $120 bn by 2032. This growth reflects increasing demand for solutions that mitigate risks like ransomware, AI-driven attacks, and supply chain vulnerabilities, which threaten financial stability and operational continuity.
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AUTHORS: Kerri Hamm, EVP – Head of Cyber Underwriting, Client Solutions, and Business Development at Munich Re US, Michael Quigley, EVP – Head of Property Underwriting and Multiline Risk Quantification for Munich Re US, Tim Brockett, EVP and Head of Specialty Lines at Munich Re US
