Commentary/Opinion
Transforming the insurance experience through AI
Artificial intelligence can help organize data, streamline processes and improve customer service.
Artificial intelligence (AI) is dominating headlines, inspiring utopian visions on one hand and existential fears on the other. Raucous ethics debates rage in the margins, while awe-inspiring discoveries are made constantly.
Whatever your position, one thing is clear: generative AI has changed the game — forever. Yet various industries are adopting AI at different speeds. Retail, for instance, has deployed AI to understand and use consumers’ preferences to recommend what they purchase, while insurance remains an industry ripe for innovation, essential for every business but is still mired in antiquated technology. However, I believe generative AI represents an inflection point that will transform every part of our business and industry.
Spike Lipkin is the CEO and co-founder of Newfront
News
World hits record land, sea temperatures as climate change fuels 2023 extremes
- Temperature records topple around the world
- Sea temperatures also hit record high
- Climate talks failing to respond to extreme weather emergencies
- U.S. climate envoy Kerry expected in Beijing in July
The target of keeping long-term global warming within 1.5 degrees Celsius (2.7 Fahrenheit) is moving out of reach, climate experts say, with nations failing to set more ambitious goals despite months of record-breaking heat on land and sea.
[Ed. note: Recommended] Infographic: The Future of Claims Survey Results
Gain valuable insights into the evolving landscape of claims handling. Ahead of Reuters Events: Connected Claims USA 2023 (Sept. 26-27, Austin TX), we have conducted a comprehensive survey involving more than 5,000 insurance professionals from across North America.
The survey is aimed to explore the innovative direction of claims handling, uncovering the opportunities, challenges, and priorities shaping the industry to help inform your strategic decision-making.
Can a Connected Risk Ecosystem Really Stop Claims Before They Happen? : Risk & Insurance
Experts discuss how technology can bolster connectivity between risk management stakeholders and reduce losses.
A multidisciplinary panel of experts tackled this issue and presented their diverse opinions.
Moderator Andrew Schwartz, insurance analyst at Celent, led the discussion between incumbent representative Paul Primavera, EVP at Lockton Companies; Insurtech leader Brent Williams, founder and CEO at Benekiva; and Insurtech consultant Alan Demers, founder and president at InsurTech Consulting.
Demers pointed out that losses are top of mind for any claims organization, especially this year, after a heavy first quarter of catastrophe and weather losses on top of existing challenges with repair costs and the ever-present inflationary pressures. With this challenging landscape for insurers, focusing on mitigating losses or preventing them in the first place is a sound strategy, especially as claims costs are rising.
Primavera explained his perspective: “Pre-loss mitigation is a joint collaboration between insurers and policyholders. There needs to be a greater balance in identifying key loss drivers. Loss avoidance programs will benefit policyholders as well as insurers.”
Mitigate Losses and Prevent Claims Before They Happen
If mitigating and preventing claims before they happen is a joint effort between insureds and insurers, as Primavera noted, there must be an education component for policyholders. Individuals and businesses can take steps to reduce their risk exposures — but only if they know what steps to take and understand the potential reward of taking pre-loss action.
Williams said, “From a prevention standpoint, it’s about wellness, how to educate people. Claims will never go away. It’s more about how we can mitigate and prevent, and when we do have claims, which ones can we pay and move on from without a human looking at them. It’s about automating the process as well as mitigation and prevention, because at the end of the day, claims aren’t going away.”
He added, “It’s not only education but it’s shifting the paradigm that preventing losses is better for policyholders and how it lowers premiums.”
Demers agreed, saying there is “room for promotion and education, along with tools and incentives to show policyholders these things will help.”
The Connected Ecosystem of the Future Starts Now
“Loss control has always been feasible for commercial accounts because of scale, training programs, loss avoidance methods, safety management and technology. Now, it is coming downstream to retail and personal space. Telematics for safe driving, crash detection and water leak sensors are all becoming affordable. Technology is better and faster, and data is more abundant,” Demers said. “Now we need adoption.”
Demers cautioned, “We have a framework to facilitate a connected ecosystem and a long way to go.”
Cyber Insurance Market Expected to Surpass US $79.75 Billion by 2030
The cyber insurance market expected to surpass US$79.75 billion by 2030, fueled by increasing cyber attacks and risk awareness
According to a recent research report by SkyQuest, the global Cyber Insurance market is projected to reach a staggering USD 79.75 billion by 2030, with a remarkable compound annual growth rate (CAGR) of 25.7% during the forecast period from 2023 to 2030.
Prominent players in the Cyber Insurance market include Chubb, AXA XL, American International Group (AIG), Beazley, AXIS Capital, CNA Financial, Lockton, Munich Re, Zurich Insurance, Travelers, Allianz, Lloyd’s of London, Hiscox, Liberty Mutual, Esurance, NFP, Hartford, Willis Towers Watson, and Aon.
The market’s growth is primarily attributed to the rising frequency and severity of cyber-attacks, growing awareness of cyber risks and data breaches, evolving regulatory landscape and compliance requirements, emergence of new cyber threats and attack vectors, and the demand for financial protection against cyber risks. Additionally, industry-specific regulations and compliance mandates are also contributing to the market’s expansion.
AI in Insurance
AI and Automation: Using AI to Improve the Insurance Experience for Good
See pages 82-89 of May 2023 InsurTech magazine.
Alex Clere, Editor-in-Chief
SecondSight and INSUREtrust Partner, Utilize AI to Transform Mid-Market Cyber Insurance
SecondSight has announced a partnership with INSUREtrust, a leading cyber insurance and risk management specialty broker, using its AI to power INSUREtrust’s Cyber Pre-Check product for digital risk management and cyber underwriting.
SecondSight’s AI allows mid-market companies to experience a frictionless cyber renewal process by automating the understanding of a company’s exposure and vulnerabilities and mapping it to multiple markets for submission - creating the opportunity for brokers serving these markets to scale as their business grows.
INSUREtrust’s Cyber Pre-Check Provides cyber insurance brokers and their clients a suite of unique online tools that help businesses with an unparalleled understanding of digital risk, simplifying the application and vulnerability scanning as well as IT and insurance budget processes for policyholders. Cyber Pre-Check leverages digital risk quantification tools and enables clients to deploy telematics to help them stay aware of constantly evolving risk conditions in real time.
“By leveraging SecondSight’s AI with INSUREtrust data and analytics, we’re able to increase our productivity in helping clients understand digital risk and exposure while enabling carriers to evaluate companies with newfound accuracy and confidence,” said Christiaan Durdaller, President & CEO of INSUREtrust. “Cyber Pre-Check optimizes customer satisfaction due to reduced friction across the cyber underwriting process - propelling pre-underwriting and simplifying renewals.”
InsurTech/M&A/Finance💰/Collaboration
Lemonade Turns to Synthetic Agents to Finance Growth
Lemonade Turns to Synthetic Agents to Finance Growth: Powered by General Catalyst, program seeks to close cash-flow gap, unlock cash-friendly scaling
Powered by General Catalyst, Lemonade’s Synthetic Agents program seeks to close the cash-flow gap and unlock cash-friendly scaling
Lemonade (NYSE: LMND), the digital insurance company powered by AI and social impact, announced it has partnered with General Catalyst (GC), a leading venture firm and an early investor in Lemonade, to create Synthetic Agents, a novel financial structure that unlocks growth without depleting cash.
Under the program, which will commence on July 1, 2023, General Catalyst (through its Customer Value platform) will finance up to 80% of all Lemonade’s CAC, and in return will receive a synthetic ‘commission’ of up to 16% of the stream of premiums they helped finance. Once GC has recovered their investment and capped return on any one cohort, the remaining ‘lifetime value’ of the customers from that cohort accrues to Lemonade, entirely and forever.
“We think the Synthetic Agents program is something of a game changer for Lemonade,” said Daniel Schreiber, Lemonade co-CEO and co-founder. “Thanks to Synthetic Agents, we believe we will be able to accelerate growth without drawing down our capital reserves or selling more equity. That means generating a significantly larger business, sooner, with more cash in the bank, and with a materially higher return on capital.”
Much more on this from Daniel Schreiber on Lemonade blog post here
Insurtech funding falls but $7trn market opportunity
Insurtech funding fell to $2.4bn for the first half of 2023, a decline of 45% from the same period in 2022, according to a new report from Dealroom.co, Mundi Ventures, MAPFRE, NN Group, and Generali. Funding in insurtech has fallen to 2018 levels ($1.8bn).
The report, The State of Global Insurtech, reveals that the decline can be found mainly in start-ups with a higher degree of maturity (62% drop with respect to the historical maximum), while the drop in early-stage start-ups stands at 29%. The funding seen in the latter and the increase in the valuation of the main private insurtechs show there is still room for growth in the market, the report notes.
The report states: “Despite representing a $7trn 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 five and ten times more funding respectively.”
Jeroen Meijers, head of NN Ventures, NN Group, said: “There was a bubble, driven by the low-interest rate environment and search for returns; funding was too easy. In some cases money was raised without a solid customer proposition and business case. Now there has been a reset, and the players who do not have a solid foundation are getting squeezed. In the end it is a good thing and we will end up with a more healthy market. The strong insurtechs can even benefit from this”.
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, the report says. The insurance industry continues to be underfunded, especially in areas such as life insurance.
The valuation of insurtech start-ups stands at $281bn, with private companies accounting for a larger percentage of the sector (85%). The US remains the leading region for insurtech investment in 2023, with $1.2bn to date in 2023, although Asia is experiencing the strongest growth (58% in H1 2023 compared to H1 2022).
Digital asset InsurTech leader OneDegree Group raises $55m in Series B
The FinTech firm has concluded its Series B round, amassing a substantial $55m in investments. This impressive financial injection came in light of the company’s strong revenue growth across all its business units, paired with their ground-breaking forays into digital asset insurance and AI-powered InsurTech solutions.
In essence, OneDegree Group has revolutionised the insurance industry through its cutting-edge technology, cybersecurity expertise, and comprehensive understanding of digital assets. Their direct-to-consumer offerings range from pet and home insurance to medical coverage, each product demonstrating the team’s commitment to customer-centric design. Moreover, their distinct digital asset insurance arm, OneInfinity, has made a significant impact since its launch in 2022, having successfully safeguarded numerous virtual asset exchanges, custodians, and asset managers.
The newly secured funds will serve to propel the company’s global expansion, as well as to diversify its product suite and deepen its market reach for direct-to-consumer insurance products. OneDegree Group will particularly focus on its digital assets insurance and InsurTech solutions.
Moreover, the firm has displayed a steady path to profitability, having achieved robust growth in recurring revenue, decreased customer acquisition costs, and a substantially improved loss ratio. This points to the likelihood of the company reaching profitability by the end of 2024.
OneDegree Group co-founder and CEO Alvin Kwock remarked, “We have successfully achieved product market fit, which is testament to the team’s relentless focus on delivering customer-centric products… It is a real seal of approval to receive such strong backing from the market during this challenging fundraising environment. We’re delighted to welcome new investors and strategic partners in this latest closing, alongside our three largest existing institutional investors who also participated.”
The group’s previous investment milestone was its $55m Series B funding round announced in June 2023, cementing its commitment to innovation and industry leadership.
People
LEADERSHIP SPOTLIGHT: Ericson Chan, Zurich’s Group Chief Information & Digital Officer, Talks Innovation, Trends & Talent
Insurtech Insights talks to top CIDO and financial technology leader Ericson Chan, who shares his unique perspective on the future of insurtech
There isn’t much Ericson Chan doesn’t know about the latest innovations available in the insurance industry. The former CEO of Ping An Technology helped to transform the Group’s business model and online ecosystems through digital services – including a range of fintech products and online platforms.
Between 1998 and 2016, he held several technology and operations leadership roles at Standard Chartered Bank in Hong Kong, Shanghai and Singapore, including chief information officer for North Asia, head of Corporate & Investment Banking Operations in China and global head of Consumer Banking Technology. He also spent six years immersed in HealthTech in the U.S.
Chan joined Zurich as the Group Chief Information and Digital Officer and became a member of the Executive Committee in October 2020. In May 2023, he picked the 13 winners of the most recent Zurich Innovation Championship, selected from over 3,500 applicants, in a move that will nurture both new talent and technologies in the insurance space. We caught up with him to find out more.
Canada
Consumers in Canada Sour on EVs as Consideration Significantly Lags U.S., J.D. Power Finds
Canada’s electric vehicle (EV) holdouts are digging in their heels, with a majority (66%) saying they are either “very unlikely” or “somewhat unlikely” to consider an EV for their next vehicle purchase.
That’s according to the second annual J.D. Power Canada Electric Vehicle Consideration (EVC) Study, released today, which finds that overall EV consideration in Canada has declined 13 percentage points to 34% from 47% in 2022, and significantly lags EV consideration rates in the U.S., where 61% of consumers say they are either “very likely” or “somewhat likely” to consider purchasing an EV this year.