AI in Insurance
Popularization of AI Fosters Insurance Innovation
Traditional methods of filing claims have remained largely unchanged for decades, and this is no longer acceptable but they will be replaced by new, touchless options that use AI to minimize human interactions and cut down on the amount of time wasted.
Even before the popularization of technology like ChatGPT among consumers, there has been a rise in the demand for digital services across industries, including insurance. In fact, according to a recent study examining auto insurance specifically, the majority of consumers trust a fully AI-automated claims process and half wanted completely digital services. Taking it all a step further, another study found 41 percent of insurance customers are likely to switch insurance providers due to dissatisfaction with their carrier’s digital capabilities.
It’s clear there is a rising demand for digital services, and as technology advances, the insurance industry—which was once a laggard when it came to innovation—now must keep pace with the demand for more efficient and streamlined processes. Traditional methods of filing claims have remained largely unchanged for decades, and this is no longer acceptable. In its place will be an all new, touchless option that uses AI to minimize human interactions and cut down on the amount of time wasted.
Bill Brower, Vice President Industry Relations for Solera
Laggards no more: Insurers appear as early AI adopters
The insurance industry is viewed as slow to change, particularly when it comes to embracing new technologies, but companies across the insurance ecosystem have been diligently delegitimizing the characterization.
During the pandemic, the industry showed an ability to step on the gas when it comes to digital adoption and this hastened pace of technology implementation hasn’t waned. According to a survey of U.S. and U.K. insurance professionals by Sprout.ai, 59% of insurers with more than 100 employees are already using generative AI technologies, such as ChatGPT. Further, 27% of U.K. insurers are using generative AI in their processes, while 40% of U.S. insurers are doing the same, Sprout.ai reported.
The survey queried 126 U.S. and U.K. insurance professionals at companies with more than 100 employees during April 2023.
When it comes to use cases, marketing and claims are the two areas with the biggest opportunities to leverage AI, Sprout.ai reported, noting more than half of survey respondents highlight those two areas. Administration and underwriting functions were also key areas that could benefit from generative AI.
When it comes to claims management, one of the most important tasks is being able to identify and prioritize which claims in a collection need the most attention, Michael Combs, president and CEO for CorVel Corp., said, noting generative AI performs this task exceptionally well.
ZhongAn: Artificial intelligence an essential strategic asset for insurers
ZhongAn Insurance and ZhongAn Technology have released China’s first-ever white paper on generative artificial intelligence (AI) technology, which is predicted to emerge as an essential strategic asset for insurance companies in the future.
Zhongan InsuranceThe ‘AIGC/ChatGPT Insurance Industry Application White Paper’ provides an in-depth analysis of more than 30 specific areas where AIGC technology could be implemented in the insurance field, including product design, actuarial science, marketing, operations, and customer service.
Additionally, they have the potential to optimise daily operations and improve research and development efficiency for insurance companies. All these along with ZhongAn’s own exploration of the technology’s potential.
The document also highlighted obstacles faced by the industry in utilising AIGC generative artificial intelligence technology, such as copyright hurdles during marketing, difficulties in adapting insurance data for model training, and potential risks concerning the confidentiality of customer data.
ZhongAn added: “In the operational realm, compliance issues surrounding the proper use of core insurance data and the accuracy of output results may come to the forefront. In practical application, enterprises must take a comprehensive approach to consider data quality, semantic comprehension, security risks, and user demands to ensure the model’s precision and usability.
AI trust lower in high-tech countries
The correlation between a country's digital advancement and public trust in artificial intelligence (AI) revealed an interesting dynamic, according to the analysis conducted by Swiss Re Institute.
The study evaluated 120 countries and found that Germany, France, the UK, Canada, and the US ranked among the top 20 in AI preparedness. Surprisingly, trust in AI remained relatively low in these advanced digital economies, with only around a third of respondents in each country expressing understanding and trust in AI. In contrast, those in emerging digital growth markets such as India, Nigeria, Mexico, Indonesia, the Philippines, and Argentina demonstrated higher levels of trust in AI.
The analysis, featured in Swiss Re Institute's recent report titled Decoding Digital Trust: A consumer perspective, highlighted the multifaceted nature of digital trust. It encompassed various psychological factors, including cultural and generational attitudes, institutional trust, prevalence of online fraud, and the ease of understanding and utilizing technology like AI. The report also explored how technologies like sensors and AI-driven automated decision-making bridged the gap between the real and online worlds.
Can AI Help Reduce Underwriter Fatigue?
Carriers should begin incorporating AI into their existing systems, as AI tools have been shown to be highly effective at alleviating work pressures through automation.
The insurance industry relies on accurate underwriting to remain profitable, and underwriters have always relied on data to do their jobs. This has been true ever since the first insurance policy was written and with the rise of big data underwriters now have access to more data than ever before. However, to my mind at least, the end result of this data explosion has been something of a mixed bag.
On the one hand, underwriters now have more data for evaluating and pricing policies. On the other hand, increased data access also hasn’t necessarily changed the underlying issue that many underwriters are still saddled with legacy systems that make their roles labor-intensive and time-consuming. If anything, higher data volumes have actually increased the workload for underwriters and contributed to large-scale fatigue that is adversely affecting the survival of the industry.
Bob Gaydos, Founder and CEO, Pendella
Commentary/Opinion
June ITL Focus: IoT | Insurance Thought Leadership
To check in on the prospects for the Internet of Things, Editor-in-Chief Paul Carroll chatted with Dave Wechsler, the insurtech lead investor with the $2 billion venture fund operated by OMERS, the pension fund of Ontario. Dave, an old friend of ITL’s, has a long history with the IoT and telematics, including as the vice president for growth initiatives at Hippo and as the leader of IoT business initiatives at Comcast.
FROM THE EDITOR
Despite all the possibilities I've read about and considered for the Internet of Things, Dave Wechsler managed to raise a new one in the conversation we had for this month's ITL Focus interview. He suggested that water leaks, fires and other household hazards could be handled as a service that would insulate carriers from the complexity and from the claims, in return for a per-household annual fee.
Many of you have seen Dave in action as a speaker at conferences during his time as the leader of IoT business initiatives at Comcast or, more recently, as the vice president of growth initiatives at Hippo. He's now a principal with the venture fund at OMERS, the Ontario pension fund, and had some thoughts on how IoT could get to massive scale.
The IoT, under the name of telematics, is taking hold in transportation, mostly because phones are full of sensors that can be used to evaluate someone's driving and because just about everyone has one with them at all times. But homes have been a trickier proposition. The vast majority are many years or even decades old, so they have to be retrofitted with sensors that can detect water leaks, fires and other hazards. That can be expensive. It can also be unreliable: The sensors may be installed wrong if homeowners do the work themselves or may be placed in areas where they somehow don't quite get hit by, say, the leaking water. Insurers have been experimenting with subsidizing clients' use of after-market sensors, but the smattering of efforts with a potpourri of sensors hasn't yet coalesced around a clear winner that could achieve real scale.
Paul Carroll, Editor-in-Chief, Insurance Thought Leadership
Viewpoint: Why Embedded Insurance Is Bad for Consumers and Insurers
Executive Summary
Advocates of embedded insurance highlight how it’s good for the insurance company (they sell more policies), good for the distributor (they get fee income for the referrals), and good for investors (embedded insurance can be overpriced due to the inability to comparison shop). Rarely do they address whether it is good for the buyer, writes Ian Gutterman, founder and CEO of Informed Insurance. In fact, it’s not good for the consumer—and it’s not even good for the insurer in Gutterman’s view. This article was originally published on Gutterman’s website, “Ian’s blog: Nominal Returns” at https://www.iansbnr.com/ in two parts. Carrier Management** is republishing this combined version with his permission.
Ian Gutterman, founder and CEO of Informed Insurance
News
Calif. scared off its biggest insurer. More could follow.
For nearly 35 years, California has been famously protective of insurance policyholders through laws and policies aimed at limiting rate increases.
But the system is coming under scrutiny following the stunning announcement Friday by State Farm — the largest property insurer in California — that it is no longer writing new policies for homeowners or businesses in the state.
Experts say State Farm’s decision highlights a flaw in California policies that effectively blocks insurers from considering climate change in setting premiums and discourages them from seeking rate increases sufficient to cover the state’s growing wildfire risk. In addition, the policies have created insurance premiums that are far too low and are forcing insurers to pull back their coverage in California to remain profitable.
State Farm’s retreat could compel other California insurers to take similar action, said Michael Wara, director of the Climate and Energy Policy Program at Stanford University’s Woods Institute for the Environment.
“The other insurers learned on Friday, and now they are all meeting to decide, how do we respond? Do we follow the lead?” Wara said. “If experience is any guide, probably they will. It’s like they’ve been given permission. If it was some small insurer, maybe no one would care. But this is State Farm.
“For State Farm to take this action, it’s essentially saying we don’t want to grow in the California market, and we would prefer to shrink in the most valuable real estate market in the country,” Wara added. “This is a situation that threatens the broader economic picture of California.”
Many of the restrictions on insurers originated with Proposition 103, a ballot measure California voters approved in 1988 amid soaring automobile insurance rates.
For property insurers, Prop 103 has made it almost impossible to set premiums based on computer models that project future risks including climate impacts, said Mark Sektnan, vice president for state government relations at the American Property Casualty Insurance Association. That’s because Prop 103 requires modeling used by insurers to be made public, which modeling companies want to avoid, Sektnan said.
Instead, insurers are setting rates based on their losses over the preceding 20 years.
“It’s a little bit like driving your car using the rearview mirror when your windshield is right there in front of you,” Sektnan said.
When insurers analyze the past 20 years to set rates, they are not fully capturing recent increases in California’s wildfire risk as climate-driven hotter temperatures have made the state’s forests and grasslands drier and more combustible, experts say.
For example, in the 20 years from 2003 through 2022, wildfires burned an average of 1 million acres a year in California, according to an E&E News analysis of data from the state Department of Forestry and Fire Protection.
But in the six years from 2017 through 2022, California wildfires burned an average of 1.8 million acres a year and destroyed or damaged nearly 51,000 structures in total.
“The problem in California is that the risk is changing pretty quickly, especially if you think over two decades. Two decades is just not fit for the problem,” Wara said.
Nancy Watkins, a California-based principal at Milliman insurance consultants, said the retrospective method “is an extremely simple rate-making model that in practice has totally failed to anticipate the growing risk in California due to factors like housing growth in high-risk areas, vegetation build up, the effect of climate change on longer fire seasons, hotter temperatures, drier air. None of that is factored into a backward-looking formula,” Watkins added.
Michael Soller, a spokesperson for the California Department of Insurance, said State Farm’s announcement “can create uncertainty and anxiety” among people seeking homeowners’ insurance and noted that 115 other companies are writing property coverage in the state.
“Our immediate focus is on helping consumers navigate their options,” Soller said.
California Insurance Commissioner Ricardo Lara is forcing insurers to give discounts to policyholders who make properties more wildfire-resilient, which Soller said encourages insurance companies “to invest in wildfire mitigation measures.”
Unable to account fully for wildfire risk, insurers instead have canceled or declined to renew policies in wildfire-prone areas. In 2019, after two consecutive years of massive wildfires in California, the number of insurer cancellations or nonrenewals shot up to 235,000 from 165,000 in 2018, state figures show.
At the same time, the number of policies written by the California FAIR Plan, which insures property owners who cannot buy coverage from an insurance company, jumped from 140,000 in 2018 to 190,000 in 2019. The number hit 268,000 in 2021, the most recent year for which records are publicly available.
About 33 Million U.S. Homes at Risk of Hurricane-Force Winds
According to an analysis by CoreLogic, about 33 million U.S. homes with a combined reconstruction cost value of $11.6 trillion are at risk of hurricane-force winds.
CoreLogic released its 2023 Hurricane Risk Report to mark the start of the Atlantic Hurricane Season on June 1.
The global property information, analytics, and data-enabled solutions provider, said it identified more than 32 million single-family residences and 1 million multifamily residences are at moderate or more significant risk of sustaining damage from hurricane-force winds. Nearly 8 million homes, with a RCV of $2.6 trillion, have direct or indirect coastal exposure, making them susceptible to storm surge.
Five Sigma: Typical claims organizations widely planning to increase their use of automation and cloud-based systems
Five Sigma commissioned a survey of 100 senior claims and risk leaders at property and casualty (P&C) insurance companies in the U.S.
According to the company, the survey, which was carried out by independent research and survey company Global Surveyz, provides valuable insight into an insurance industry increasingly eager to adopt new technologies for managing claims – even as many of its claims organizations still rely on legacy technologies.
7 steps for improving claims payment accuracy
Assessing and determining the value of items involved can require the expertise of contents valuators and other experts.
The pandemic has led to a loss of legacy knowledge in the insurance industry, as many senior leaders with vast property claims experience have taken early retirement. This has created a skills shortage of experienced claims adjusters, who play a vital role in helping policyholders recover from losses. It is certainly a talent that doesn’t grow on trees.
As with all successful businesses, there is a core of knowledge worth learning, retaining and passing along. New adjusters entering the field can benefit from knowing more about the working process of contents inventory and valuation behind property claims.
Property claims adjusters help policyholders recover from losses due to accidents, wildfires, storms, or other events. They work with a range of vendors including inventory specialists and contents valuators to assess the damage and determine the amount of compensation owed, whether to deny the claim or conduct further investigation.
Here are seven tips for working with vendor partners and a review of some of the basics to follow for a claim:
- Review the policy.
- Understand the coverage.
- Understand who is covered.
- Understand the limits and sub-limit categories and deductibles.
- Decide to allow the insured to create their own contents list or
- Dispatch an experienced contents valuation company to the loss site to assist the insured with their contents inventory creation.
Jane Nelson, vice president of business development, Claimplus
InsurTech/M&A/Finance💰/Collaboration
Berlin-based insurtech a winner in Zurich innovation competition
Berlin-based company omni:us has emerged as a global winner in the 2023 Zurich Innovation Championship for its Digital Claims Adjuster platform.
The championship, part of Zurich Insurance Group's startup program, aims to identify the most innovative startups and collaborate with them on solutions for the insurance industry.
This year, a record-breaking 3,500 startups participated in the competition, and omni:us was selected as one of the 13 winners.
As a result, omni:us will join the other winners in a four-month accelerator program organized by Zurich. During this program, they will have the opportunity to test the viability of their initiatives and receive financial and non-financial support. The support includes coaching from Zurich executives, as well as advice from internal and external experts on various topics.
“We are honored that Zurich has recognized the immense benefits that our AI-powered end-to-end claim automation solution, the Digital Claims Adjuster, can provide to insurance companies and their customers,” said Thomas Hauschild (pictured above), CEO of omni:us. “Zurich also acknowledged the scalability of our technology, and we are excited to work closely with the Zurich team this year to showcase the value we can bring to their customers.”
The Digital Claims Adjuster platform integrates end-to-end claims automation into existing insurance systems. The platform not only reduces process costs by up to 35% but also significantly enhances customer satisfaction and operational efficiency, omni:us said.
Ericson Chan, Zurich group chief information and digital officer, emphasized the importance of collaborating with startups.
Berkley sells Breckenridge division to AssuredPartners unit | Business Insurance
W.R. Berkley Corp. unit Breckenridge IS Inc. said late Thursday it has sold its insurance services division to Accretive Insurance Solutions, a wholesale and program management unit of AssuredPartners Inc.
Waller Helms Advisors acted as financial advisor to Breckenridge IS, Inc. and W.R. Berkley Corporation in connection with this transaction
Recommended Events
Connected Claims USA 2023 - The World’s Largest Claims Event
Customer-first. Digitally focused. Collaborative. Forward-thinking
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