Commentary/Opinion
[Ed. note: Highly Recommended] Using Technology for Accident Prevention and Claims Cost Reduction in Personal Auto
For personal auto insurers, the story of the last few years can be summed up in just a few words: rising claims costs
The confluence of riskier driving, costlier auto components, supply chain disruption, and inflationary pressures created a 2022 that was the worst in many carriers’ histories, with a number of auto insurers posting combined ratios above 100, including some high-profile industry leaders with ten- and eleven-figure losses.
Rising claims costs have knock-on effects across the insurance organization. For one thing, they make it difficult to rate policies (it’s tough to price when you can’t accurately project loss costs). Reinsurance costs are also going up, and on the regulatory side, many carriers can only raise premiums so much to offset this increase.
Claims losses are the largest single cost center within an insurer, so they’ve always been targets for cost savings, and insurers have a range of technological options for addressing rising claims costs. Broadly speaking, these include solutions that create savings through operational efficiency, cost leakage control, and accident reduction.
Harry Huberty, Head of CIO Research at Datos Insights (formerly Aite-Novarica Group)
Data for Insurance Discounts? Consumers Say No Thanks
Newswise — Insurance companies have encouraged consumers to reduce their premiums by using monitoring technology for 25 years now, but consumers have been slow to embrace the idea.
First introduced in 1998, the technologies monitor various aspects of the customers’ behavior so the insurer can better determine their level of risk. For instance, drivers install sensors in their cars to monitor their driving habits, or wear Fitbit-like devices to keep track of their physical activity. Insurance companies gather the data, analyze it, and using data analytics, offer premium discounts to safe drivers or people who keep themselves in better condition.
Editor’s note: According to J.D .Power, consumers’ lack of satisfaction with auto insurance rates may be leading them to accept UBI. Usage-Based Insurance Surges as Customers Dissatisfied With Auto Insurance
According to economic theory, people should be more than happy to sign up for these usage-based insurance (UBI) contracts. According to the theory, the devices combat moral hazard, which is the idea that insurance will encourage riskier behavior from a policyholder because they have insurance to bail them out if something goes wrong. They can also save the consumers money. But customers have proven resistant. Monitoring devices on automobiles, for instance, have only about 5% market penetration globally.
“These were supposed to be the wave of the future, but they haven’t caught on,” said Richard Peter, a professor of finance at the Tippie College of Business and insurance expert who wondered why so many customers pass up the chance to save money on auto insurance. In a newly published study, he presents a theoretical model that suggests the algorithm insurance companies use to determine the discounts is too confusing for most people to understand. Since they can’t figure out what happens in the algorithm’s “black box,” policyholders are worried they will be misclassified as a bad driver even when they don’t take unnecessary risks. That some companies often outsource these algorithms to third parties only confuses consumers more.
Peter’s study, “Mitigating moral hazard with usage-based insurance,” was co-authored by Julia Holzapfel and Andreas Richter of Ludwig Maximilian University of Munich. It will be published in a forthcoming issue of the Journal of Risk and Insurance, the flagship journal of the American Risk and Insurance Association.
University of Iowa Tippie College of Business as published by Newswise
Can aerial imagery meet climate change challenges?
As worsening weather events increasingly force residents to vacate their homes and seek safety elsewhere, 2022 brought a mass migration of over 3 million people. And with 67% of U.S. residents experiencing an increase in severe weather events, how can insurers prepare themselves to combat these events and keep customers safe before they even make landfall?
Aerial imagery technology isn't new to the insurance industry, but as it continues to evolve so do its applications and capabilities. And when combined with machine learning, the data extrapolated from aerial imagery acts as a powerful tool in an insurer's toolkit, enabling them to predict which areas will be most greatly impacted and the resources that should be deployed for damage mitigation and reparations.
Tony Agresta, Executive Vice President And General Manager, Nearmap
InsurTech/M&A/Finance💰/Collaboration
Zendrive Partners with Autio to Help its Users Save on Auto
Zendrive announced its partnership with Autio, a location-based audio entertainment app that delivers travelers compelling stories about the places they're driving through.
Zendrive is powering Autio Drive & Save, giving their users a chance to save on their auto insurance with safer driving behavior. That’s all while drivers hear short stories about surrounding history, culture, nature, and more narrated by professional narrators, including Kevin Costner, a Co-Founder of the company. Users can access the driving program using the Autio app.
When Autio’s users opt into Autio Drive & Save, Zendrive's proprietary Mobility Risk Intelligence (MRI) technology quickly and seamlessly analyzes users' driving behavior without requiring user intervention. During this trial period, users get direct feedback on how they’re driving (i.e., whether they're checking their phones or speeding frequently) to help them drive safer and boost their chances of earning a personalized, discounted auto insurance policy.
Upon completing the test drive, Autio customers that meet the qualification criteria immediately qualify for an exclusive discount from Zendrive’s top-tier auto insurers partners. They’ll also get access to a free 1-year subscription to Autio.
Fidelis to raise up to $241.5m from IPO, as shares price below marketed range
Reflecting challenging market conditions for any company attempting an initial public offering (IPO) of its shares at this time, global insurance and reinsurance player Fidelis Insurance Holdings Limited has priced its IPO well below the marketed guidance range, now looking set to raise up to $241.5 million.
In addition, the company has ended up selling more shares than it was aiming to, while shares offered by its existing investors are fewer than anticipated and overall the offering was for less shares than the initial announcement stated.
That could be viewed as a vote of confidence, as existing shareholders have chosen not to cash out, or a signal that the IPO price achieved was deemed lower than hoped for.
As we reported before, Fidelis announced its initial public offering (IPO) of 17 million of its common shares, as the firm looks to “take advantage of the ongoing rate hardening” in key markets.
The offering was expected to include 5,714,286 of common shares offered by the company and 11,285,714 of common shares to be sold by certain of its existing shareholders, while underwriters would also have a 30-day option to purchase a further 2,550,000 common shares from the selling shareholders.
The targeted IPO price was pitched as in a range from USD 16.00 to USD 19.00 per common share.
11 insurtech investors with the most investments in Q1
As of March 31, 2023, the top four insurtech investors in the ranking had 13 combined investments. Just under half of these were new investments in the first quarter of the year.
Scroll through to see which firms made the top 11 and how they fared in the first quarter of 2023.
Source: FT Partners Research as published in Digital Insurance
Insurtech funding falls to 2018 levels, but represents a $7 trillion market opportunity, MAPFRE
Together with Dealroom, Mundi Ventures, NN Group, and Generali, MAPFRE has published “The State of Global Insurtech” , the third edition of a report that analyzes the state of insurtech worldwide with the objective of providing transparency through qualitative data and insights on the sector’s current state.
Venture capital funding in technology startups applied to insurance (insurtech) has fallen to 2018 levels, closing the first half of 2023 with an investment of $2.4 billion. This figure represents a 45% drop from the same period in 2022 and a similar figure from 5 years ago ($1.8 billion).
Against the tougher economic backdrop, startups with a higher degree of maturity (Series C) record the highest drop (62% compared to their historical peak). In the case of startups in Series B rounds, the drop stands at 43%. Early-stage companies (seed or Series A) have been the most successful in mitigating the decline, stabilizing at around 29%.
These are some of the main findings from ‘The State of Global Insurtech’ report, prepared by Dealroom.co, Mundi Ventures, MAPFRE, NN Group, and Generali. This is the third edition of a report that analyzes the state of the insurtech industry, providing transparency through qualitative data and insights on trends and the current state of the sector.
A $7 trillion market opportunity
Despite representing a $7 trillion market opportunity, the insurance industry is not able to attract the same level of investment as other sectors, such as food and health. For example, mobility and financial services, even with less opportunity space, have received 5 and 10 times more funding, respectively.
Insurtech has also focused heavily on the casualty insurance market, which has attracted more than 60% of funding in recent years, mostly thanks to cyber insurance and commercial, home, and auto insurance. Life insurance has seen particularly low levels of investment compared to health and casualty insurance.
Joan Cuscó, Global Head of Transformation at MAPFRE, says that “despite the fact that investment has cooled down in the venture capital context in general, ‘good’ startups are still completing important funding rounds. It should also be noted that insurance companies still have plenty of leeway to adopt insurtech solutions that are ready to be deployed at scale. This creates a huge opportunity to get the most out of insurtech startups that offer claim automation solutions and underwriting and premium rating pricing. The industry’s transformation is unstoppable.”
AI in Insurance
INSHUR taps Google for cloud and generative AI
On-demand insurance platform, INSHUR, has announced it is working with SADA, a leading business and technology consultancy and award-winning Google Cloud partner, to bolster global growth.
According to the announcement, this joint effort will help enhance INSHUR’s Google Cloud strategy, enabling the business to bring new products to market more quickly, leverage artificial intelligence (AI) to automate key processes and support self-service options for customers, and support the company’s’ expansion following their most recent acquisition.
The insurance platform acquired American Business Insurance Services in April 2023, combined with a recent $26m fundraising round, the company is projected to accelerate its growth plans by 200% in the next calendar year.
“As INSHUR continues on its upward trajectory, driving increasingly rapid global growth and expansion, we need to work with businesses that can help us scale quickly and effectively while continuing to provide the best service to our customers,” said Chris Gray, Chief Technology Officer, INSHUR.
Adding: “As a market leader that is pioneering approaches to cloud technology and AI, Google Cloud is a great fit to help us stay ahead of the curve and keep delivering.”
Wisedocs disrupts the insurance sector with innovative AI Medical Summary Platform
The inception of this partnership was driven by the need to streamline the process of medical record reviews. By harnessing the power of generative AI, Wisedocs’ AI Medical Summary Platform offers a pathway towards a more efficient review and decision-making process regarding medical records.
The forte of Wisedocs lies in creating AI-driven software platforms specifically tailored for the insurance sector. Their innovative solutions assist insurance carriers, legal firms, and healthcare providers by providing an efficient system to sort, review, and summarise medical records. Serving a broad spectrum of sectors, including auto, liability, disability, workers’ compensation, and tort law, Wisedocs has significantly transformed the way these industries operate.
With the launch of the AI Medical Summary Platform, Wisedocs has plans to further revolutionise the landscape. The firm aims to introduce a series of innovative features in the upcoming months. These enhancements are designed to improve the claims review process, increase the comprehensibility of medical records, and further automate processes that are traditionally manual and labour-intensive.
Key features of this new platform include an interactive timeline view, summary templates, keyword and date filtering, and an interactive summary annotator. Moreover, firms will continue to enjoy the core benefits of Wisedocs’ services, such as deduplication, customised sort templates, and outputs in PDF and Word formats, along with advanced editing capabilities.
The platform has already been put to the test by both new and existing customers, receiving high praise and positive feedback. Jenna Earnshaw, Co-Founder and COO of Wisedocs, underlined the industry’s response, noting that their innovative technology has been dubbed a ‘game-changer’.
Adding to this, Wisedocs Founder and CEO, Connor Atchison, shared, “We knew from the beginning of Wisedocs that Generative AI capabilities, paired with our in-depth understanding and professional history in the market, would be our key competitive edge to driving a successful AI medical summary platform. With Wisedocs, accurate and succinct summaries can now be generated from thousands of pages of medical records, automating the complex insurance process and creating a better and faster experience for the experts and claimants involved. We’ve built a platform with deep clinical knowledge that allows for true context understanding.”
News
Insurers set both premium and loss ratio records, report says
Despite posting a historically poor loss ratio, private insurers wrote a record number of premiums during Q1, according to a newly-released S&P Global Market Intelligence report.
According to S&P’s analysis, premiums rose $7.4 billion during the timeframe to reach $76.3 billion, compared to the $68.83 billion of premiums written during Q1 2022.
It attributed the 10% premium increase to carriers producing “strong top-line growth” as they strove to recoup losses through rate increases.
The analysis showed that of the nation’s top 10 private auto insurers, only GEICO and Liberty Mutual incurred year-over-year premium declines.
Conversely, Progressive increased its premiums by 25% with $11.72 billion in direct premiums written, while State Farm saw a 22% boost after bringing in $13.62 billion.
Among the other insurers to observe a double-digit spike in premiums were Allstate, USAA, and American Family.
Insurers raising rates or exiting: Swiss Re
U.S. property/casualty insurers are responding to higher inflation and natural catastrophe losses with rate increases when possible and exits when not, Swiss Re Ltd. said Wednesday in a report.
Halts to new business and non-renewals in certain lines were among the steps taken by insurers as they retrenched from catastrophe-prone markets such as California, Florida and Louisiana, in the first half of this year, Swiss Re said.
Underwriting actions have extended to commercial property and personal auto lines even while the focus is on homeowners insurance, according to Swiss Re Institute’s June U.S. Property-Casualty Outlook.
Insurers cite the economic environment, natural catastrophes, inflation and reinsurance costs in some cases as factors that have prompted a surge in expenses resulting in underwriting losses, Swiss Re said
3 ways to prioritize gender diversity in insurance industry
In a recent McKinsey & Company study, the insurance industry was listed as one of the top gender-diverse industries, particularly at the entry-level, where women account for two-thirds of these positions.
However, gender diversity at the C-suite level is still lacking. This presents an opportunity for an industry-wide effort to cultivate, retain and advance women's careers in insurance so we can boost gender diversity in leadership positions. Why?
Aside from the many proven benefits to team morale and cohesion that accompany a properly representative executive panel, new studies indicate that companies with above-average diversity scores in leadership perform better and innovate faster.
Webinars/Podcasts/Interviews
The Predict & Prevent™ Podcast Episode 5: Harnessing Data to Better Predict and Prevent Losses : Risk & Insurance
Improving the ability to capture more precise risk data not only helps predict potential losses but also makes it possible to measure and incentivize risk prevention efforts.
The podcast team for Predict & Prevent™ dives deeper into this topic with its fifth episode “Predicting Wildfires, Worker Injury with Better Risk Data ” featuring insight from two Insurtech CEO guests.
Host Pete Miller, CPCU, and CEO of The Institutes sits down with Kevin Stein, CEO and cofounder at Delos Insurance, and Sean Petterson, CEO and founder of StrongArm Technologies, to learn how they are leveraging technology to gain new insights on changing wildfire patterns and unsafe work activities.
In the first segment, Miller and Stein explore why risk models aren’t keeping up with changes in wildfire risk, the power of AI to enable more precise forecasts, using data for risk mitigation recommendations and incentives, insurance challenges caused by deficient data, and why insurance must remain open to new approaches to emerging problems.
“Our analysis shows that there’s about 6 million homes across the entirety of the U.S. that are struggling to find coverage because of perceived wildfire exposure. Our modeling says that 3 million of the 6 million are miscategorized, are actually quite safe and deserve to have pretty reasonable policies,” Stein said.
“The other 3 million are definitely exposed to wildfire. However, with certain hardening changes to the home, the landscape, forest management … those homes can be insured profitably as well.”
In the episode’s second segment, Miller and Petterson discuss his personal motivation to make workers safer, how pivoted from full-body exoskeletons to wearables for actionable real-time data, improving ergonomic movement analysis, incorporating worker feedback, changing culture to embrace safety innovations, and using data to show the ROI of injury prevention.
“Our mission is to use data to create a better future for industrial workers. And we do that by deploying wearable devices that capture data in real time and deliver haptic feedback to eliminate the injury before it happens, and then take that data and insert it into every aspect of the value chain so that we can put safety in the center of all conversations at a business,” Petterson said.
To listen to this and other episodes, visit predictandprevent.org, or look for Predict & Prevent on most podcasting platforms. New episodes come out every two weeks
Have a Safe and Happy Fourth!
Independence Day 2023 | 4th of July History, Traditions, Recipes | The Old Farmer's Almanac
What's the best way to celebrate the Independence Day of the United States on the 4th of July. Learn about the history and traditions behind the Fourth of July.
Independence Day on the Fourth of July is an all-important American holiday. Take a moment to refresh your memory about the true history of this nation. How did the founders envision this holiday and what’s special about America’s celebration of freedom?