AI in Insurance
Verisk bolsters anti-fraud claims solution with AI powered image forensics
Global data analytics and technology provider Verisk is expanding its anti-fraud claims solution with artificial intelligence that will enable insurers to identify potential fraud in claims photos with “lightning speed and laser precision.”
“Drawing on millions of claims images in Verisk’s databases, including the loss history database ClaimSearch, the image forensics solution analyzes every image submitted as part of a claim to detect indicators of fraud,” explains Verisk.
According to the firm, the solution automatically flags photos that have been altered, manipulated or downloaded from the internet. Using ClaimSearch, Verisk’s solution also identifies images that have been submitted to other insurers.
The image forensics solution will be featured in a webinar on June 21.
Verisk notes that reusing or altering photos is just one example of the growing trend of insurance fraud, which costs the U.S. approximately $308.6 billion annually.
The firm cites one of its studies in which a sample group of 768,000 claim images found 1,967 duplicates, including one photo used in 44 different claims.
These duplicate claim images could be linked to 1,475 separate claims for which approximately $5.3 million in indemnity payments were made, says Verisk.
Shane Riedman, vice president and general manager of anti-fraud analytics for Verisk Claims Solutions, said, “The ubiquity of mobile devices, photo editing software and claims filing applications is making it easier than ever to submit fraudulent images of damages to insurers.
“The image analytics and alerts we’re adding to ClaimSearch gives insurers the ability to quickly, automatically identify and investigate suspect claims, while simultaneously accelerating meritorious claim resolution for the vast majority of policyholders.”
Verisk suggests that insurers who contribute claims data to ClaimSearch — currently more than 95% of the industry – can submit claims photos and access certain image forensics checks with their current ClaimSearch subscription. To date, 315 insurers have signed up to contribute images, and nearly half of the top 20 P&C carriers are accessing the solution today.
Colorado Division of Insurance scales back its proposed regulation of AI in the life insurance industry
The Colorado Division of Insurance recently released a revised draft regulation regarding governance and risk management framework requirements for life insurance companies operating in the state of Colorado that use external consumer data (including, algorithms and predictive models built on such data) in their rating practices.
The draft life insurance regulation is the first proposed regulation implementing Colorado Senate Bill 21-169, a leading-edge, first-of-its-kind statute addressing the consideration of big data and artificial intelligence (AI) in the insurance industry. SB 21-169 takes aim at potential discriminatory impacts resulting from the use of algorithms and predictive models employed in insurance rating, underwriting, claims handling, and other business practices.
The revised draft life insurance regulation significantly scales back from the prior draft release in February. Significantly, the revised draft no longer focuses on “disproportionately negative outcomes” which would have included results or effects that “have a detrimental impact on a group” of protected characteristics “even after accounting for factors that define similarly situated consumers.” Removing that term altogether, the revised draft shifts focus to requiring “risk-based” governance and management frameworks. This change is significant – not only aligning the revised draft with traditional insurance regulation, but representing a sensible, incremental step forward for such regulation.
However, while the revised draft is less burdensome than the first draft, it still places significant requirements on life insurers. Those include requirements that life insurers establish “risk-based” frameworks for the use of external consumer data and information sources (ECDIS) in any insurance practice (including claims, ratemaking, and pricing). Moreover, the regulation requires implementation of those frameworks with respect to any algorithms and predictive models using or relying on ECDIS.
The revised draft regulation also requires documentation be maintained by life insurers using ECDIS including descriptions and explanations of how ECDIS is being used and how life insurers are testing their use of ECDIS for unfair discrimination. This documentation must be available upon the regulator’s request. Additionally, each insurer must make reports to the Colorado Division of Insurance, including a narrative report summarizing the company’s progress toward complying with the regulation.
Written by: Bennett Borden, Sam, Tyner-Monroe, Christopher Cullen and William Reichart
Month-Old AI Startup Mistral Raises $113 Million
French startup Mistral AI has reportedly raised a record $113 million in seed funding.
The company, founded by artificial intelligence (AI) vets from Google and Meta, launched just weeks ago, the Financial Times reported Tuesday (June 13).
That report notes this was the largest-ever seed round recorded in Europe, underlining the way AI continues to attract investments even in the middle of a drop in dealmaking.
“There is a rising awareness of the fact that this technology is transformative and Europe needs to do something about it, both as a regulator, as a customer and an investor,” Arthur Mensch, Mistral’s chief executive and a former DeepMind researcher, told the FT.
The FT report notes that Mistral hasn't yet developed its first product, with staff just starting to work days ago. The company intends to launch a new large language model (LLM) early next year, similar to OpenAI’s ChatGPT.
In an interview with PYMNTS published Wednesday (June 14), Jason Verlen, senior vice president of product management at CCC Intelligent Solutions Inc., said the potential of LLM has only just begun to be tapped.
“A lot of what’s being done with large language models can actually go much further — not just improving performance, but unlocking new business use-cases [and even new businesses],” said Verlen. “The possibilities inherent in AI for driving new horizons of efficiency and productivity in the macro environment are almost unbelievable.”
Verlen, whose company provides a cloud platform for the insurance and automotive industries, is enthusiastic about the potential for AI.
News
IoT Market - Embedded car OEM telematics subscribers exceeded 200 million in 2022
According to a new research report from the IoT analyst firm Berg Insight, the number of telematics service subscribers using embedded systems will grow at a compound annual growth rate (CAGR) of 16.1 percent from 202.3 million subscribers at the end of 2022 to 426.4 million subscribers at the end of 2027.
Moreover, Berg Insight forecasts that shipments of embedded car OEM telematics systems worldwide will grow from 50.3 million units in 2022 to reach 77.3 million units in 2027, which represents an attach rate of 94 percent at the end of the forecast period.
Carmakers have also begun selling premium features and enhancing car performance via OTA updates. BMW for example offers a range of vehicle functions in the form of digital after-sales services in the ConnectedDrive store. Other carmakers offering similar services include Tesla, Mercedes-Benz, Audi and Porsche. The increasing adoption of the Android Automotive OS and Google Automotive Services (GAS) is moreover a trend in the automotive industry and will likely have an effect on the connected car value chain in the future. Traditional vehicle-based platforms have also faced intense competition from portable and nomadic devices and have had a severe disadvantage in the longer development cycles.
“Connected car services have evolved from being a differentiating factor to a commodity. To offer more attractive digital experiences, carmakers increasingly focus on incorporating third-party apps into infotainment systems, providing access to the same apps that drivers have in their smartphones”, said Martin Cederqvist, IoT Analyst at Berg Insight.
Consumer Watchdog Reports Allstate's $16M Homeowners Rate Hike Approved Despite Company Quietly Ending Sales of New Home Insurance in California
Insurance Commissioner Ricardo Lara yesterday approved a 4%, $16 million, rate hike on Allstate home insurance policyholders, despite the fact that the company misled regulators at the Department of Insurance about ceasing new homeowners insurance sales in California.
Allstate, the sixth largest home insurance company in California, had sought the rate increase premised on written assurances that it was continuing to sell homeowners policies to new customers. However, Allstate abruptly stopped selling new homeowners insurance policies in November of last year without complying with California law which required it to: (1) publicly file that proposed change with the California Department of Insurance in advance, (2) explain the impact on its rates and (3) await the Insurance Commissioner's approval.
The Commissioner's denial of Consumer Watchdog's petition for hearing on Allstate's proposed increase confirms that Allstate's decision to avoid new customers may have impacted its rates. Yet it still allows Allstate to avoid documenting the impact at this time, and does not require Allstate to await the Commissioner's approval in the future.
Consumer Watchdog first discovered Allstate's unilateral withdrawal last month; the group immediately notified the Department and called on the company to prove that it was still entitled to a rate increase in light of its withdrawal from new business. However, the Insurance Commissioner approved the 4% rate increase over Consumer Watchdog's objection. The Department of Insurance did not require Allstate to provide data that would show the rate impact of that decision, or commit to wait for the Commissioner's review and approval of its rate applications before implementing such changes to its underwriting rules in future.
Allstate is now seeking a new 39.6%, $194 million, homeowners insurance rate increase. Consumer Watchdog is reviewing that application closely.
State Farm also unilaterally withdrew from new sales of homeowners insurance California last month.
"Insurance companies cannot grant themselves back-door rate increases by unilaterally ending sales," said Harvey Rosenfield, the author of Proposition 103. > "Allstate's actions here were particularly egregious in misleading the agency and Consumer Watchdog. Commissioner Lara should not reward Allstate for secretly reducing access to insurance in California. By not requiring Allstate to show the impact of its withdrawal on rates, the Commissioner is approving a rate increase that has not been justified, a violation of California law."
Allstate has acknowledged the rate impact of changes in its sales practices in other states, but refuses to do so in California.
Insurers Fleeing California Market Want Rate-Hike Flexibility
As property insurers flee California, a state riven by billion-dollar wildfires, mudslides, and the ever-present threat of a catastrophic earthquake, state lawmakers on Wednesday will take up the complex but necessary issue of how to convince the carriers to stay.
The joint hearing of the California Assembly’s Insurance and Emergency Management committees will concentrate on insurance and catastrophe modeling.
The session comes as the state’s geographical, environmental, and political realities combine to create an inflection point compelling carriers, shareholders, regulators, and consumer groups to shore up California’s crumbling market. State Farm General Insurance Co. is the latest insurer to cut coverage in the nation’s disaster-prone most populous state, following Allstate Corp., American International Group Inc., and Chubb Ltd.
The insurance industry is pushing regulators to allow rate increases that they say would allow them to remain in the property insurance market.
“The pullout from new homeowners’ coverage for consumers living in California poses an existential dilemma for California insurance regulators, California homeowners, and the government of the State of California,” Boston College Law Professor Patricia McCoy said.
“Should the State attempt to coerce insurers to continue to provide new coverage? If the state is too heavy-handed, insurers could flee the California market altogether,” McCoy said in an email. “On the other hand, doing nothing could lead to more attrition in the form of pullouts like State Farm’s, causing the private market for homeowners’ insurance in California to eventually collapse.”
State Farm announced May 26 that it would stop writing new property policies in California, effective the next day. The Bloomington, Ill.-based company is the largest underwriter of property and casualty insurance in California, where last year it had more than 21% of the market and incurred $5.9 billion in losses, according to California Department of Insurance figures.
The insurance giant, one of the catalysts for today’s hearing, failed to respond to multiple email and phone requests for comment on whether it would participate, or defend its exit decision, at the hearing.
U.S. Insurers Update Platforms to Match New Competition
Many insurance carriers in the U.S. are updating their core technology platforms to fend off new competitors and overcome growing macroeconomic challenges, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.
The 2023 ISG Provider Lens™ Insurance Platform Solutions report for the U.S. finds that carriers of both life and retirement (L&R) and property and casualty (P&C) insurance have begun to recognize that legacy systems, often internally developed and decades old, are major impediments to innovation. In an environment of extreme weather and climate change, inflation and related economic disruptions, they are under growing pressure to become more agile.
“Insurers are no longer deciding whether to modernize. It’s only a question of when and how fast,” said Paul Schreiner, partner and Americas Insurance Industry lead, at ISG. “The sooner they move, the more they stand to gain.”
Adopting a modern core insurance system is critical to carriers’ commercial survival, the report says. Insurers need updated technology to make almost any change aimed at improving productivity and enabling growth, including expanding product lines, locking down cybersecurity, reducing workloads and preparing for disaster recovery. As long as outdated platforms remain, IT costs and performance issues will increase.
Many U.S. insurance carriers in both sectors are partnering with service providers to digitally reinvent themselves by layering new technologies on top of old systems via APIs, the report says. These solutions deliver some quick wins but only represent interim fixes while the companies craft new operating models.
Digital-native startups with superior data and analytics capabilities are offering new insurance products that in many cases provide better customer experiences, ISG says. Traditional insurers’ legacy operating models and technology stacks often are too rigid to ingest and use the data required for new product development and successful risk management.
“Modernization lets carriers tap into a wealth of consumer information to craft products and services for specific customers’ needs,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “The same data can help them identify both opportunities and risks, leading to better decision-making.”
The report also examines other trends in the U.S. insurance industry, including the need to shift from risk reduction to risk removal and to build more consumer trust.
For more insights into the challenges facing U.S. insurers, including skills shortages and ingrained resistance to change, and advice on how best to move forward, see the ISG Provider Lens™ Focal Points briefing here.
Lex Machina Releases 2023 Insurance Litigation Report
Lex Machina, a LexisNexis company, today releases its annual Insurance Litigation Report. The report examines trends in insurance litigation in federal district courts and appellate courts. Focusing on the three-year period from 2020 to 2022, it surveys emerging trends in case filings, venues, judges, law firms, parties, timing metrics, case resolutions, findings, and damages. The report often focuses on different sets of data, e.g., filtering cases in order to provide analytics on general insurance cases, business liability policy cases, business interruption cases, hurricane-related cases, homeowners policy cases, and federal appellate insurance cases.
"This report reveals an interesting trend in which insurance cases have increased over the last three years," said Ronald Porter, Lex Machina's insurance legal data expert and editor of the report. "In addition, our filters showed that this increase was driven by several key subsets of insurance cases such as business liability policy cases, hurricane-related cases, and homeowners policy cases. Our data and analytics supported the data-driven insights that recent natural and economic phenomena, such as hurricanes, wildfires, a pandemic, and rising building costs, likely bolstered recent insurance case filings."
Highlights from the report include:
- In 2022, 18,912 insurance cases were litigated in federal district courts, a 30% increase from the number of insurance cases the year before.
- In the three-year period from 2020 to 2022, the highest number of insurance cases was filed in the Western District of Louisiana, while Judge Cain from the same district was the most active judge for insurance cases.
- In the three-year period from 2020 to 2022, State Farm Fire and Casualty Company was one of the most active plaintiffs and also the most active defendant.
- MMA Law Firm was the most active counsel representing plaintiffs in insurance cases in the three-year period from 2020 to 2022, while Porteous, Hainkel & Johnson represented defendants in the highest number of insurance cases over the same period of time.
- For insurance cases that were appealed to a federal appellate court and terminated from 2020 to 2022 with a decision on the merits of the appeal, 23% were ultimately reversed.
- $530 million in total damages were awarded as Approved Class Action Settlements from 2020 to 2022.
Lex Machina's reports and software enable practitioners to devise data-driven litigation strategies. The metrics in this report can help readers decide who to pursue as clients, whether to file a particular motion, or when to settle (and for how much). This research supplements traditional legal research and anecdotal data for a competitive edge in court.
Commentary/Opinion
Why We Should Be Optimistic About the Future of AI
[Ed. Note: Recommended]
Does the hyper rapid rise of artificial intelligence (AI) signal the end of the world? Or the start of a new era?
Jason Verlen, senior vice president, product management, at CCC Intelligent Solutions Inc., a cloud platform for the insurance and automotive industries, tells PYMNTS that, in his view, it is unequivocally the latter — we are stepping into an era with tremendous potential.
“This really is an exciting time,” Verlen said, adding that the business landscape is starting to leave behind the “Wave One” of AI platforms pre-trained on public data and beginning to enter what he refers to as “Wave Two.”
“Wave Two is where organizations take control, using generative AI on their own in-house data to solve narrower problems with domain-specific, secure, and high-provenance data,” he explained.
InsurTech/M&A/Finance💰/Collaboration
Generali to acquire Liberty Seguros for $2.5bn - Reinsurance News
Liberty Mutual Insurance has agreed to sell its Madrid headquartered personal lines and small commercial insurance business, Liberty Seguros, S.A., to Generali Group for USD 2.5 billion (EUR 2.3 billion), subject to customary closing adjustments.
The deal includes Liberty Seguros operations in Ireland, Northern Ireland, Portugal, and Spain.
Lloyd’s and Dubai Partner to Launch Insurtech Accelerator
Lloyd’s, the marketplace for commercial, corporate and speciality risk solutions, has announced a partnership with Dubai’s Department of Economy and Tourism (DET) to facilitate growth opportunities for Dubai-based insurtech start-ups and entrepreneurs.
The memorandum of understanding (MOU) facilitates the development of a Dubai Insurtech Enablement Platform to help start-ups and entrepreneurs to create innovative tech-based insurance solutions and products covering various sectors, ranging from autonomous vehicles to the transition to net zero.
Arturo to Bring Catastrophe Response Capabilities to the US Market, Further Solidifying Complete Policy Lifecycle Solution
Solution streamlines safe and effective damage assessment post-disaster Arturo, the property intelligence company that delivers portfolio-wide underwriting, risk and claims insights, today announced a global expansion of its catastrophe response capabilities to the United States insurance market.
Over the past few years, Arturo has proven the value in bridging disparate data sets to derive impactful property insights, playing a crucial role in providing insurtech solutions in Australia, where climate change-induced extreme weather events have cost each Australian household $888 on average over the past ten years. In the 2021-2022 year, that cost rose to $1,532, and that figure is expected to jump to $2,500 by 2050 due to the increasing frequency and severity of extreme weather. By working strategically with companies in the region, such as ICEYE, Vexcel Imaging and the Early Warning Network (EWN), Arturo leveraged AI to build a solution to contend with these events before, during and after they occur.
Reask Raises $4.6M Seed Round for Extreme Weather Risk Modeling
The seed round, led by Mastry Ventures and Collaborative Fund, brings the extreme weather risk modeler’s total funding raised to $6.55 million.
Reask (New York/London), a risk data company applying artificial intelligence (AI) to interpret and forecast global extreme weather conditions, has announced that it has raised seed round of $4.6 million bringing its total funding to $6.55 million to date. The seed round was co-led by Mastry Ventures (New York) and Collaborative Fund (New York), with participation from Macdoch Ventures and existing pre-seed investor Tencent, alongside pre-seed investors SV Angeland Hawktail.
(Hurricane wind speed impacts, 2022 hurricane season in Florida. Image source: Reask.)
Reask (New York/London), a risk data company applying artificial intelligence (AI) to interpret and forecast global extreme weather conditions, has announced that it has raised seed round of $4.6 million bringing its total funding to $6.55 million to date. The seed round was co-led by Mastry Ventures (New York) and Collaborative Fund (New York), with participation from Macdoch Ventures and existing pre-seed investor Tencent, alongside pre-seed investors SV Angeland Hawktail.
Recommended Events
2023 OnRamp Insurance Conference | June 21-22, 2023 | Allianz Field | Minneapolis-St. Paul, MN
gener8tor's OnRamp Insurance Conference brings together the insurance industry's leading corporations, investors and startups. Join leaders in insurance, fintech, wealth management and asset management on June 21-22, 2023 in Minneapolis-St. Paul.
Building the Future of Insurance
Join leading corporations, investors and startups in insurance, fintech, wealth management and asset management at gener8tor’s 2023 OnRamp Insurance Conference.