Commentary/Opinion
Love Thy Frenemies: 3 Reasons an Interconnected Claims Network Benefits the Industry
Claims servicing and payment are the ultimate product the insurance industry offers while fulfilling its most fundamental mission to put people, communities and businesses back on their feet after a loss. The best way we can effectively and efficiently fulfill this mission, particularly in this challenging environment, is through better ecosystem connectivity.
Competition will always be part of, and beneficial to, the industry. But if we find common ground for connecting the ecosystem players to protect what matters most, all parties can benefit.
Maroun S. Mourad is President of Claims Solutions, VerisK
News
APCIA says auto insurance has an ‘uncertain road ahead’ as claims outpace premium increases
According to a new study by the American Property Casualty Insurance Association (APCIA), auto insurance claims inflation has continued to rise faster than the underlying consumer price index (CPI), and claims are far outpacing premium increases.
In its paper, called “Auto Insurance: The Uncertain Road Ahead,” APCIA writes that the combination of rapidly increasing overall economic inflation and claims inflation has driven up auto insurance losses and combined ratios.
“In addition to inflation trends, the private passenger auto insurance sector is also experiencing several other trends such as increased frequency and severity of claims cost, riskier driving behavior by the public, cost increases for medical and hospital services, and outsized growth in lawsuit verdicts and legal system abuses, that are negatively impacting and pressuring the industry with increased losses,” said Robert Passmore, APCIA personal lines department vice president and co-author of the paper.
2023 crime data: Car thefts skyrocket in cities across the U.S.
Car thefts in dozens of cities across the U.S. have skyrocketed so far this year, according to a new report on crime.
Why it matters:
Motor vehicle thefts are up by roughly 34% from the same period last year, underscoring how crime patterns have evolved as the country has emerged from the pandemic.
- The mid-year data, released Thursday by the Council on Criminal Justice, also shows how online fads can help fuel real-world crime trends.
- "It’s likely that much of the increase is the result of thefts of Kia and Hyundai models," the report said — though it noted that rates were already rising before those brands became popular targets.
- Kia and Hyundai thefts surged in cities nationwide this year after a popular TikTok challenge showed users how to steal the cars.
By the numbers: The number of car thefts in the first six months of the year was 104.3% higher than the same period in 2019, the CCJ study found.
- Of the 32 cities that provided crime data, seven of them saw rates shoot up by 100% or more compared to the same time last year.
- Rochester, New York, saw the largest increase of vehicle thefts, with a spike of 355%, while St. Paul, Minnesota, saw t
After Devastating 2022 Hurricane Season, AAA Not Renewing Some Insurance Policies in Florida
AAA won’t renew “a very small percentage” of homeowners and auto insurance policies in hurricane-wracked Florida, joining other insurers in limiting their exposure in the Sunshine State despite efforts by lawmakers to calm the volatile insurance market, the company said Tuesday.
AAA said in a statement that it wasn’t leaving Florida, but that last year’s devastating hurricane season had led to an “unprecedented” rise in reinsurance rates, making it more costly to operate.
Officials with the company refused to say how many policies in Florida wouldn’t be renewed but said that they were “higher exposure” package policies which bundle homeowners and auto policies and were underwritten by Auto Club Insurance Company of Florida. An AAA spokesman wouldn’t explain how the company defined “higher exposure,” when asked.
Triple-I Issues Brief: Hurricanes Are Getting Costlier and Wetter
U.S. population growth in hurricane-prone states, coupled with the increasingly heavy rainfall which accompany these storms, has generated costlier insurance claim payouts for wind and flood-caused property damage, according to the Insurance Information Institute (Triple-I).
“While wind speeds and storm surge in coastal areas grab headlines, inland flooding is on the rise,” stated the just-released Triple-I Issues Brief, Hurricanes: State of the Risk. “In August 2021, Hurricane Ida brought strong winds and heavy flooding to the Louisiana coast before delivering so much water to the Northeast that Philadelphia and New York City saw flooded subway stations days after the storm passed. Ida also caused a surprising death toll thousands of miles from where the storm first made landfall.” Last year’s Hurricane Ian caused catastrophic flooding in central Florida after making landfall in southwest Florida as a Category 4 major hurricane.
AI in Insurance
For Travelers, the AI opportunity is profound: CEO Alan Schnitzer - Reinsurance News
Alan Schnitzer, Chairman and Chief Executive Officer (CEO) of U.S. insurer Travelers, has said that the company intends to spend more than $1.5 billion on technology this year as it looks to take advantage of the “profound” opportunity from artificial intelligence (AI).
Speaking earlier today during the carrier’s Q2 2023 earnings call, Schnitzer offered his thoughts on the growing capabilities of AI and how Travelers is leveraging new and advanced technology to optimise productivity and efficiency.
“We subscribe to the view that over time the impact of AI across the economy is going to be profound. So is the opportunity for Travelers,” said Schnitzer.
He explained that within the firm’s “perform and transform mindset,” it has, for years, been focused on responsibly developing differentiating AI capabilities across three of the firm’s innovation priorities; legal expertise, providing great experiences for clients; and optimising productivity and efficiency.
While branches of AI such as ChatGPT has raised awareness of some of the potential benefits, it’s been around in some form for quite some time now, although is clearly becoming more capable.
At Travelers, explained Schnitzer, there’s a team dedicated to AI specifically, and combined with others in enabling disciplines, the insurer has a significant number of employees engaged to make sure it’s a leader when it comes to AI.
Of course, new technology comes at a price, and Schnitzer noted that Travelers has been steadily increasing its tech spend in recent years, while also improving the strategic mix of that spend.
“That includes a meaningful increase in investments to develop and acquire cutting edge AI capabilities built on modern cloud technology. Importantly, we’ve done all that while significantly improving our expense ratio, in no small part, thanks to the success of our technology investments,” said Schnitzer.
The CEO said that in 2023, the primary insurer will spend “more than a billion and a half dollars on technology.”
AI Is Helping Insurance Companies With Underwriting and Due Diligence
The insurance industry has had a rough few years. It has been slammed with claims from a series of major hurricanes (so much so that a growing number of insurers are withdrawing from the Florida market) and wildfires. Valuations of vehicles have soared. And the COVID-19 pandemic resulted in life insurance companies paying out over $90 billion in 2020 alone.
To help overcome those losses and better analyze risk, a growing number of insurers are thinking about turning to artificial intelligence as part of their underwriting process. And it could result in some substantial returns.
One report from Accenture estimates incorporating AI and automation into the underwriting process could result in savings of up to $160 billion over five years as non-core and administrative duties are removed from underwriters’ plates.
The list of possible advantages for insurers is vast. For instance, companies can dig deeper into applicants’ history, using AI to perhaps find a lawsuit or some other flag the underwriting might normally miss. It can also be used to detect fraud and simply reduce human error in the application process. And the explosion in data from connected devices, from our phone to home assistants to cars and fitness trackers, will give these systems a tremendous amount of data that let companies understand their clients significantly better (One World Economic Forum estimate predicts there will be over one trillion connected devices by 2025).
For consumers, AI can expedite the handling of claims and potentially lead to faster settlements.
“By collecting large amounts of historical data, Discriminative AI can be used to make plausibility assessments and ensure quality and uniformity in the adjusting process,” IBM wrote. “Complimentarily, Generative AI will be able to help the adjustor summarize the data and generate a preliminary report.”
The Democratization Of Insurance Data
Who benefits most from AI in insurance? Consumers? Insurance carriers or agencies? Or all of the above?
As I covered in my first article in the series, generative AI has promise, and it has potential downsides for insurers. There should not be unrealistic expectations about the technology that a bot can drive insurer growth and customer satisfaction through the roof without foundational operational and data elements in place within an insurer.
In my second article, I went deeper into the importance of getting insurance data ready for generative AI and why insurers can only realistically expect value from this new technology if they take this step seriously.
Once the buzz over generative AI subsides, companies in every industry will determine what the real value is for their business. Before the last big technology that transformed the global economy (i.e., the internet), the insurance industry was one of the most data-rich industries, albeit with paper processes.
Generative AI could be another "internet moment," with a completely new way of doing business and consumer expectations. Thanks to the increasing integration of sensors and smart technologies, insurers likely have access to one of the most valuable data sources about consumer and business life in one place.
Robert Clark, founder and CEO of Cloverleaf Analytics and a Forbes Councils Member
InsurTech/M&A/Finance💰/Collaboration
Rising interest rates impact insurance M&A activity
Insurance agency mergers and acquisitions during the first half of 2023 fell 24% from the same period in 2022, according to fresh reporting from OPTIS Partners.
“The drop-off in deal count continues as we move through 2023, which isn’t surprising anyone if for no other reason than the cost of capital has increased so much,” Steve Germundson, a partner at OPTIS Partners, an investment banking and financial consulting firm specializing in the insurance industry, said in a recent press release.
OPTIS Partners’ M&A database tracks deals in the U.S. and Canada. The report breaks down buyers into four groups: Private equity-backed/hybrid brokers, privately held brokers, publicly held brokers, and all others. The private equity-backed/hybrid group of buyers maintained their dominance in the buying spree with 69% of all transactions for the quarter, while transactions between private parties accounted for 22%. Publicly held brokers and all others accounted for just 9% of deals.
Here are some of other headlines from the firm’s Agent & Broker Merger & Acquisition Update for the first half of 2023:
- There were 359 announced insurance agency mergers and acquisitions in the first half of 2023, down 24% from 475 in the same period in 2022.
- It was the lowest first-half total since 2020 but nevertheless equal to the previous five-year average.
- There were 177 announced deals in Q2 2023. This is down from the 182 deals announced during Q1 2023.
Tractable to tap into generative AI, further tech investment | Insurance Business America
The business recently confirmed a $65 million raise
Artificial intelligence (AI) damage assessment insurtech Tractable will use its recent $65 million raise to further refine its tech and tap into generative AI, its CEO told Insurance Business.
“This funding will enable us to double down on our AI research and development capabilities for our customers to power the end-user’s journey,” Tractable CEO and founder Alex Dalyac said. “The investment also enables us to explore how our technology can leverage recent advancements in the areas of generative AI and large language models.”
The insurtech, which has worked among big names in the insurance business from Aviva to Sompo to Tokio Marine, announced its Series E funding investment on July 18.
Backed by lead investor SoftBank Vision Fund 2, the round brought the company’s total funding to $184.9 million to date.
Dalyac said he hopes the technology will become an integral part of the auto chain.
“In the future, we envision our AI being used across the entire car owner journey– whether someone is looking to buy a car, sell their car, get repairs, get a rental, etc – so drivers have one app that connects all of these traditionally complex processes and puts more control in their hands,” he said
Ravin AI has Developed an AI-based inspection system for Car rental companies
Ravin AI has developed a proprietary, patented AI-based inspection system for Car rental companies. the company said that the system helps allocate damage more accurately, increasing the car rental company’s ability to collect damage by almost 30% and keep vehicles running.
According to the company, In 2021, the global car rental market was valued at $103.14 billion, and is projected to reach $141.17 billion by 2028 – a CAGR of 4.6% from 2021 to 2028.
Ravin AI: “The car rental industry’s transformation is being propelled by increasing tourism, a rise in the global population’s disposable income, and technology-enablement. Among these technological advancements, Artificial Intelligence (AI) has emerged as a revolutionary tool, especially in detecting hidden car damages and fraud
Coterie Insurance partnership with ZestyAI
ZestyAI, an insurtech company providing AI-powered climate and property risk analytics, has announced an agreement with Coterie Insurance, a managing general agent focused on instant quotes and coverage for small businesses.
Coterie will be using ZestyAI's property risk analytics platform, Z-Property, to provide risk insights for business insurance underwriting across the U.S., according to a press release from ZestyAI.
"Coterie is committed to maintaining a low loss ratio and ZestyAI enables us to reduce time spent underwriting, auditing and pricing while lowering our expense ratio," said Paul Bessire, chief data officer at Coterie Insurance. "Their focus on AI and innovation without losing track of regulatory support, in addition to the breadth, power and speed of delivering detailed property data, make them a dream partner for us."
Recommended Events
Connected Claims USA 2023 | September 26–27, 2023 | Austin Convention Center
Just released! Full timed agenda and audience profile for Reuters Events: Connected Claims USA 2023
Plenary Sessions including:
The Potential for AI and Automation Powering the Future of Claims Management
- Sean Burgess, Chief Claims Officer, Lemonade
- Andy Cohen, President, Snapsheet
- Lisa Wardlaw, President, 360 Digital Immersion
Plus:
- Presentation: Remove Organizational Barriers and Embrace Tomorrow’s Culture (Carey Bond, Head of Claims, Americas, Lloyd’s)
- Panel: No Touch, Low Touch or High Touch – Do you Know What your Customer Wants? (Rachel Simon, SVP Executive & Professional Claims, Berkshire Hathaway Specialty Insurance; Andrew Leeds, VP Claims, Plymouth Rock Assurance Corporation; Kim Haugaard, SVP Policyholder Service, Texas Mutual)
- Presentation: Navigate the Evolving Environment in Personal Lines Claims (Laila Brabander, Head of North American Personal Lines Claims, Client & Producer Engagement Team, Chubb)
- Fireside Chat: Technology as an Enabler for Improved CAT Response (Sean Serafin, VP Property Claims Operations, USAA)
- Panel: Building A High Performing Claims Team (Paul Measley, Chief Claims Officer, Plymouth Rock Assurance Corporation; Jacqueline Tirpak, VP Corporate Claims Officer, Erie Insurance; Angela Delude, Head of Claims Strategy, MassMutual)
Plus many more timely and relevant panel presentations, fireside chats, offsite networking events, live music, workshops, demos and exhibits ---- all 100% insurance claims-centric.
See you at #CCUSA – the must-attend event for North America’s claims community. Make the most of the 2 days, 3 stages, workshops, networking and more – plan your time now and leave with new connections, knowledge and partnerships.