AI in Insurance
Insurance's 'first' chief AI officer on why AI is a sherpa
Plus, what the next few years will hold for AI.
With artificial intelligence becoming increasingly influential in the insurance industry, is it time for insurers to appoint executives to steer their long-term AI strategy?
Darien Acosta (pictured), Cover Whale’s chief AI officer, would say so.
“CTOs (chief technology officers) weren’t a thing thirty years ago, prior to the internet. But now every company needs a CTO” he told Insurance Business in an interview. “But now, every company needs a CTO.”
“First” chief AI officer in the insurance industry
Billed as the insurance industry’s first chief AI officer, Acosta has been charged with leading the AI transformation within Cover Whale, a commercial trucking insurance provider and fast-growing insurtech based in New York.
Take the holistic insurance model a step further: Data lakes integrated with artificial intelligence
In my previous blog, I covered how insurance analysis has moved on from traditional methods to holistic models. These models allow insurers to better assess risks and losses by being able to view their entire portfolio in a non-siloed way. This allows insurers to make better use of the data they hold and provide more proactive support to their customers.
Insurers cannot move to a proactive model without getting their own house in order to better leverage the data they hold. So, the question is how do insurers reach this point and what kind of customer will benefit from it once it is in place?
Insurers can go and jump in the lake if they don’t fix their data
Insurers have a number of technologies to choose from to automate their processes and ensure better collaboration with their customers. Artificial Intelligence (AI) is one such technology. Research from McKinsey found that AI implementations could increase productivity in insurance processes and reduce operational expenses by up to 40% by 2030. Therefore, by investing in technology such as advanced data analytics and AI, insurers can identify fraud more easily, reduce their costs, and automate claims processes to give time back to claims handlers to actually speak to their customers.
In order to leverage AI properly, insurers have to pay attention to the quality of the data that they are using. Data cleaning and readiness need to be priorities in order to avoid false positives or biases creeping in. The amount of up to date and relevant data that an insurer has at their disposal is also critical, particularly as it relates to informing the real-time decision making that AI promises to unlock.
Sheridon Glenn Global VP, Strategic Markets & Initiatives at Guidewire
News
Extreme heatwaves to continue through August, WMO adviser says
Heatwaves are expected to persist in a large part of the world throughout August, an adviser on extreme heat said on Friday, following on from record temperatures in recent weeks.
The World Meteorological Organization (WMO) said earlier this week it expected temperatures in North America, Asia, North Africa and the Mediterranean to be above 40 Celsius (104 Fahrenheit) "for a prolonged number of days this week as the heatwave intensifies".
What Is FedNow? Federal Reserve Payment System Has Launched
The nation’s central banking system — the Federal Reserve — has released the government’s first real-time payment service. It's called FedNow.
Through FedNow, money transfers and bill payments will be much faster, almost instantaneous. The service launched Thursday, July 20, with dozens of banks and financial institutions as partners. Many — if not all — financial institutions are expected to get on board with the new instant payment system in the coming months and years.
"The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient," said Fed Chair Jerome Powell in an announcement Thursday. "Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid."
Here’s what to know about the government’s foray into real-time payments.
3 ways to enhance insurance claim payouts for customers
In a digital-first economy, insurers have an opportunity to differentiate themselves by incorporating speed, convenience, and flexibility into customer interactions. One way to do so is by innovating how funds are paid out, using technology to turn a traditionally painstaking process into a simplified digital experience.
Imagine enabling a personalized payouts experience, and doing so in near real time. With just a point and a click following claim approval, claimants can control when and how they are paid – reducing payout timelines, and catering to each claimant's money management preferences.
To that end, here are three ways digitizing payouts will enhance the claims experience:
- Maximizing payout choice
- Getting claimants paid quicker
- Enhancing end-to-end experiences
Digital transformation is changing how the insurance industry operates and providing opportunities for differentiation among insurers. By digitizing payouts, insurers are streamlining operations while creating better experiences that delight customers.
Josephine Stone, Director, Digital Payouts, Fiserv
Best’s Special Report: Unprofitable Auto, Property Insurance Results Weaken Property/Casualty Industry’s 2022 Underwriting Performance
Significant deterioration in the U.S. personal lines segment’s underwriting results, particularly in the private passenger auto line of business, sent the property/casualty (P/C) industry’s net underwriting income to a $25.7 billion loss in 2022, according to a new AM Best report.
“The number of claims has increased for virtually all casualty lines involving claimant-attorney representation for several years, with juries typically awarding plaintiffs large settlements. As medical technology and treatments advance, medical costs are likely to continue escalating.”
The 2022 financial results on each individual line of P/C business, along with corresponding analysis, are detailed in a new Best’s Special Report, titled, “2022 P/C Snapshot: Unprofitable Auto and Property Results Weaken P/C Underwriting Performance,” and the data is derived from companies’ statutory statements that were received by May 31, 2023.
The report notes that underwriting loss in 2022 followed a $3.0 billion underwriting loss in 2021 and was driven by a $40.0 billion underwriting loss in the personal lines segment. Losses on the personal auto line of business represented more than 80% of the 2022 personal lines loss and was nearly eight times higher than in the previous year. The homeowners/farmowners line also incurred a net underwriting loss for a third straight year.
“P/C claims expenses were magnified by inflationary pressures on the costs of repairing property and automobiles, as well as by lingering supply chain issues,” said David Blades, associate director, Industry Research and Analytics. “These factors elevated claims expense figures and challenged insurance companies’ reserving practices, adversely affecting their operational performance.”
Auto Insurance Study Says Underwriting Losses Doubled Last Year
A new study Auto Insurance: The Uncertain Road Ahead released by the American Property Casualty Insurance Association (APCIA), examines how insurance claims inflation has continued to rise faster than the underlying consumer price index (CPI), far outpacing increases in auto insurance premiums. 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, department vice president for APCIA and co-author of the paper.
Progressive’s Q2 Worsens in Spite of Double-Digit Auto Premium Growth
Progressive’s combined ratio came in just above breakeven for the second quarter of 2023, in spite of personal lines earned premium growth of more than 22 percent.
The company second-quarter combined ratio of 100.4 is four points above the company’s target of 96—a goal that Progressive achieved for full-year 2022. It is also 4.8 points over last year’s second-quarter 95.6 figure.
Year-to-date, the combined ratio ended up at 99.7, compared to 95.0 for the first six months of 2022.
Allstate Announces Auto Rate Increases of Over 11% in 12 Markets
The Allstate Corporation (NYSE: ALL) yesterday announced that during the month of June, the Allstate brand implemented auto rate increases of 11.6% across 12 locations, resulting in total brand premium impact of 2.6%. In addition, Allstate reported National General brand auto rate increases of 8.8% across 14 locations for a brand impact of 1.8%
S&P Global Market Intelligence Inaugural U.S. Property and Casualty Rankings Dominated by Specialty Commercial Insurers
The U.S. Property and Casualty (P&C) Insurance Performance Rankings published by S&P Global Market Intelligence, an inaugural annual ranking of the 100-largest P&C carriers in the country, found that companies focused on covering risks that are difficult to place in the traditional market distanced themselves from peers in key metrics measuring earnings, underwriting profitability, balance sheet growth and other indicators of success.
The U.S. Property and Casualty Insurance Performance Rankings are based on statutory financial results collected and compiled by S&P Global Market Intelligence. They are determined using 13 financial metrics from 2022 statutory filings grouped into six buckets: rates of return, underwriting profitability, balance sheet expansion, investment performance, prior-accident-year reserve development and premium growth.
The categories are given distinct weightings to calculate performance scores for each of the 100-largest U.S. P&C entities based on 2022 net premiums written. Similar calculations are used to rank the largest entities determined by S&P Global Market Intelligence to have commercial and personal lines-focused operations. This breakout is intended to recognize standout performances by carriers operating in market segments where overall financial results faced significant macroeconomic headwinds.
Kinsale Insurance Co., the Richmond, VA-based primary operating subsidiary of Kinsale Capital Group Inc., ranked as the top performing U.S. property and casualty insurer. Kinsale Insurance writes a diversified mix of casualty, property and professional lines business focused on small- and mid-sized business customers. Four of the eight top performers, including Kinsale, specialize in excess-and-surplus lines (E&S) business: RLI Corp., W. R. Berkley Corp. and James River Group Ltd.
Interview: CSAA Talks Insurance Product Excellence in the Age of Customer-Centricity
Ryan Vigus, EVP, Personal Lines Product, CSAA, talks about the importance of customer experience to the modern insurance agent and consumer—and what it takes to provide it.
Success in personal lines property/casualty insurance means having the right products and the right price, and creating a compelling and convenient experience for both agents and consumers, according to Ryan Vigus, Executive Vice President, Personal Lines Product at CSAA (Walnut Creek, Calif.).
In IIR’s recent conversation with Vigus, he stressed the importance of modernizing core technology to provide a simplified foundation for easy integration of new capabilities. CSAA also completely redesigned how the business and technology teams work together, resulting in much faster and successful project outcomes. The insurer now provides accurate, bindable quote using 10 questions or fewer for both auto and home policies. It is also able to react on a daily basis to significant changes in the marketplace.
Recommended Events
Society of Insurance Research (SIR) 2023 | Annual Conference, |Cincinnati, OH
Theme: Research on the Riverfront
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Canada
Appraisal Assistant: Solera unveils ‘Intelligent Triage’ FNOL appraisal system
With the launch of Solera’s Intelligent Triage platform, estimating has never been so easy, and the company says it is prepared to revolutionize the first notice of loss (FNOL) process with this new browser-based software.
Solera says this new piece of software allows for fast and accurate damage appraisals that can assess whether a vehicle is repairable or a total loss right from FNOL.
Intelligent Triage is also easily configurable within any estimating platform, according to Solera, allowing for seamless integration with a shop’s processes. The platform’s extensive image database is backed up by an AI that allows the system to continuously learn and improve its performance, according to Solera’s press release.
“Policyholders can now submit photos of their damaged vehicles at the first contact with their insurer, and the system will utilize machine learning algorithms to predict damage severity and recommend the most suitable next steps,” read an excerpt from last Wednesday’s press release.
“Whether it’s booking a repairer, settling as a total loss, or requiring further inspection, Solera’s extensive database of historical claims provides confidence-rated decisions in a matter of seconds.”
Solera’s v-p of industry relations, Bill Brower said this new product from the company is built around getting shops on top of rising claims rates and increasingly costly and complex repairs.
“Our product is perfectly suited for the current situation where insurers are dealing with more total loss claims and increasingly intricate vehicle designs that result in costlier repairs,” said Brower.
“It’s important to note that the criteria for determining total loss also change frequently based on the value of used vehicles.”