AI in Insurance
NAIC Releases Highly Anticipated Draft Model Bulletin on Insurers’ AI Use
On July 17, 2023, the Innovation, Cybersecurity and Technology (H) Committee of the National Association of Insurance Commissioners (NAIC) released for comment a highly anticipated model bulletin (Model Bulletin) on regulatory expectations for the use of artificial intelligence systems (AI Systems) by insurers.
The Model Bulletin encourages insurers to implement and maintain a board-approved written AI Systems Program (AIS Program) that addresses governance, risk management controls, internal audit functions and third-party AI systems. The goal of the AIS Program is to mitigate the risks of harm to consumers thru decisions made or supported by AI Systems, including third-party AI systems, that are arbitrary or capricious, unfairly discriminatory, or otherwise violate unfair trade practice laws or other legal standards, or that include data vulnerabilities.
The Bulletin also advises insurers of the information and documentation that insurance regulators may request during exams and investigations of the insurer’s AI Systems, including third-party AI Systems.
*Eversheds Sutherland (US) LLP *
News
Barring Change, Allstate May Exit California Property Market Completely
The topic of a recent California insurance department workshop was the potential use of catastrophe modeling in ratemaking, but carrier representatives and consumers took the opportunity to air concerns about other problems in the state’s insurance market.
The state’s growing availability crisis is poised to get worse unless changes beyond the introduction of forward-looking catastrophe modeling to ratemaking take hold, carrier executives said.
“Change is critical to restoring the health to the California insurance marketplace and [to] avoiding increased non-renewals and further carrier withdrawals from the state,” said Parr Schoolman, chief risk officer of Allstate Property and Liability, during the four minutes of remarks he delivered during a four-hour public workshop that was broadcast via Zoom and Facebook on July 13. Among the changes Schoolman advocated were actions to speed up rate filing approvals and to allow insurers to include the costs of reinsurance in their rate indications.
“Allstate would prefer to material[ly] re-enter the property market by offering new policies to the vast majority of consumers. We’d expect we’d be able to target at least 90 percent of the available market in terms of availability, with the inclusion of wildfire catastrophe modeling and reinsurance costs being allowed in the setting of premiums.”
“Without pricing enhancements, Allstate will remain closed to new business and will evaluate additional non-renewals or the full withdrawal of property lines from the California market,” he stated, concluding his testimony.
Farmers Insurance retracts Georgia non-renewal notices
Farmers Insurance has rescinded several thousand non-renewal notices sent to Georgia homeowners.
The non-renewals were initially scheduled to go into effect in August, according to a statement from Georgia's Office of the Commissioner of Insurance and Safety Fire.
Weston Burleson, director of communications and legislative affairs for the commissioner's office, told Digital Insurance that "none of the non-renewals would have gone into effect until at least August 1, and they have all been rescinded."
"We have decided not to move forward with our plan to non-renew a limited number of homeowners policies with older roofs. We have begun to notify affected customers of this decision," said Luis Sahagun, director of external communications for Farmers.
Redfin Reports Migration Into America’s Most Flood-Prone Areas Has More Than Doubled Since the Start of the Pandemic
The most flood-prone U.S. counties saw 384,000 more people move in than out in 2021 and 2022—a 103% increase from the prior two years, when 189,000 more people moved in than out, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.
The same trend took hold in the places most vulnerable to wildfires and heat as the pandemic homebuying boom and a housing affordability crisis pushed Americans into disaster-prone areas.
The counties with the highest wildfire risk saw 446,000 more people move in than out over the past two years, a 51% increase from 2019 and 2020. And the counties with the highest heat risk saw 629,000 more people move in than out, a 17% uptick.
Commercial price hikes accelerate in Q2: Ivans
Commercial insurance rates accelerated in most lines in the second quarter as property renewals continued to see the biggest hikes, according to a report issued Tuesday by Ivans Insurance Services.
Average commercial property premium renewal rates increased 9.77%, up from 8.89% in the first quarter of 2023, the Tampa, Florida-based insurance exchange reported.
General liability was the only line that saw rates moderate, as premium renewal rates increased 5.21% in the second quarter, down slightly from 5.23% in the first quarter.
Other lines of business also saw average rate increases accelerate: commercial auto rates increased 6.5%, up from 5.85% in the first quarter; business owners policy rates increased 7.56%, from 7.12%; and umbrella liability rates increased 5.12%, from 5.08% in the prior quarter.
Workers compensation was the only line that saw a decrease, with rates falling 1.10%, but this was less than the 1.36% decrease recorded in the prior quarter.
InsurTech/M&A/Finance💰/Collaboration
Computer Vision Insurtech Pioneer CompScience Raises $10M Series A Led By Valor Equity Partners
CompScience Insurance Services, the leading AI-powered safety analytics platform, announced a $10M Series A round led by operational growth investment firm Valor Equity Partners, early backers of transformational companies such as Tesla, SpaceX, and Coalition. Four More Capital, an early-stage investing arm of Henry Crown and Company, also participated in the round.
CompScience is the first company to combine visual AI with insurance incentives to drive changes that protect Americans at work. Companies that buy CompScience insurance policies receive the technology at no additional cost.
According to the US Bureau of Labor Statistics, every year 2.6 million Americans are injured on the job, costing over $167B. CompScience’s global mission is to stop 100 million preventable accidents from occurring through better use of data. CompScience grew its insurance business over 10x and drove down its injury rates by 23% so far this year with partners such as Swiss Re, Nationwide, and 10 of the top 20 commercial insurance agencies in the United States.
Its flagship product, the Intelligent Safety Platform, analyzes workplace security video with AI and data science techniques. With this data, CompScience delivers risk mitigation services to measurably reduce hazard exposure as part of a workers’ compensation policy or a SaaS offering.
“CompScience is fundamentally transforming employee workplace safety and re-architecting the insurance of these risks. Early results demonstrate the Intelligent Safety Platform’s potential to reduce the frequency of injuries, which could have a major positive impact on society,” said Vivek Pattipati, Partner at Valor Equity Partners. “The company is highly focused on solving workplace safety from first principles and disrupting the workers’ compensation insurance market with a superior product at lower cost. CompScience is also entering the market at the right time. They represent a key piece in the puzzle of a major restructuring of American supply chains and the reshoring of manufacturing jobs.”
Concirrus Partners with Insurity to Develop and Deliver Predictive Data Models for Enhanced Cargo Risk Management and Pricing Insights
As a welcome relief to global economic pressures, this partnership enables insurers to leverage data to streamline operations, reduce losses, and maximize profits
Insurity, a leading provider of cloud-based software for insurance carriers, brokers, and MGAs, today announced a new partnership with Concirrus, the leading AI insurtech helping commercial insurers to accelerate digital strategies for marine insurers. Concirrus' big data and machine learning capabilities, integrated with Insurity's global marine cargo platform, enables marine insurers to differentiate themselves through more competitive pricing while optimizing the balance between profitability and customer satisfaction.
"We are thrilled to be partnering with Insurity to deliver advanced analytics and a contemporary operating platform," said Andrew Yeoman, Chief Executive Officer at Concirrus. "We operate in an environment where customers value integrated solutions that genuinely bring the best of all worlds. Insurity has the market-leading platform for declaration management and certificate issuance, and by bringing our capabilities together, Insurity customers benefit from a compelling analytics solution that 'unlocks' insights to drive efficiencies, reduce losses, and boost profits."
Commentary/Opinion
An overheating planet requires extreme climate solutions
First came the hottest June in recorded history. Now it's the hottest-ever July. This year is already highly likely to replace 2016 atop the heat ranking. Scientists suspect the last several years have been warmer than any point in more than 125,000 years.
This acceleration of heat is the result of burning enough fossil fuel to raise global average temperatures about 1.2C since the Industrial Revolution. And we're not yet halfway to Peak Heat.
According to the current projections from researchers at Climate Action Tracker, all the existing emissions-cutting policies by governments around the world would result in the global average temperature increasing about 2.7C by 2100. A separate team at the United Nations compiled an end-of-century estimate of 2.8C.
The problem is clear: Existing weather is visibly outrunning our combined efforts to stem global warming. Humans are losing the race against heat.
"Climate policy is not keeping pace with the acceleration of climate change," says Ann Mettler, vice president for Europe at Breakthrough Energy, a consortium of nonprofits and venture capital funds backed by Bill Gates that invests in green technologies. Shifting to clean energy, she says, "whatever that cost, would pale in comparison to what these extreme weather events cost."
Insurance commissioners have posted AI guidelines. Do they go far enough?
The National Association of Insurance Commissioners has put out a bulletin on insurance companies' use of artificial intelligence, and it's getting mostly good reviews.**
The document contains many common-sense recommendations. Insurance companies must abide by all existing laws when they use AI, including the Unfair Trade Practices Act, the Unfair Claims Settlement Practices Act and the Corporate Governance Annual Disclosure Act.
They must put in place controls, testing, validation and auditing.
[Ed. note] see NAIC Innovation Cybersecurity and Technology (H) Committee Bulletin here**
Penny Crosman, Executive Editor, Technology, American Banker, Arizent
Is Connected Commercial Auto Turning the Corner?
There has been a significant increase in the range and sophistication of connecting technologies, which provide real-time and retrospective data that can be analyzed and used to provide loss mitigation and loss avoidance.
Commercial auto insurance in the United States has, in the aggregate, not been a successful line of business for a number of years. However, within the overall negative picture, there have been individual insurers that found ways to make an underwriting profit. And there has been a significant increase in the range and sophistication of connecting technologies available to fleet owners and fleet insurers. These technologies provide real-time and retrospective data that can be analyzed and used to provide loss mitigation and loss avoidance.
Donald Light, Celent, Director, North America Property Casualty Practice
[Ed. Note: Recommended] Understanding The Subrogation Opportunity
Despite its potential for significant economic implications, insurers often deprioritize subrogation because “it’s complicated.” In many ways, they’re right. Subrogation is complex. It involves multiple stakeholders - including insurance companies, their insured(s), and third parties – and it requires a unique combination of experience, timing, and focus on specific elements within the claims process.
Tim Christ, Sr. Solutions Director, CCC Intelligent Solutions; Karlyn Carnahan, Head of Insurance, North America, Celent; Patty Bullis, AVP Claims, AAA, The Auto Club Group
Webinars/Podcasts/Interviews
How to Expedite Auto Total Loss Claims, sponsored by LexisNexis Risk Solutions - Tue, Aug 8, 2023 11:00 AM EDT
Rising total losses aren’t new to the insurance industry, but the increase in the amount of these claims is staggering. According to LexisNexis® Risk Solutions, auto total losses accounted for 27% of all collision claims in 2022, and record severity, inflation and supply-chain challenges are driving the climb.
When adjusters spend time chasing critical details for settlement, the process drags out, expenses rise and customer satisfaction hangs in the balance. How can carriers simplify this process?
Join us for the webcast “Expediting Auto Total Loss Claims,” sponsored by LexisNexis Risk Solutions, to find out how – and where – data can help carriers respond more quickly to total loss claims and accelerate their resolutions. By equipping adjusters with the right intelligence –and leveraging data strategies at the right times in the workflow- carriers gain the insights to keep claims moving and improve the customer experience when it matters most.
Recommended Events
Connected Claims USA 2023 | September 26–27 | Austin Convention Center | USA
Customer-first. Digitally focused. Collaborative. Forward-thinking
“At a time of rapidly changing and evolving external conditions, customer perceptions and technology, hearing perspectives from peers is invaluable”
— Mike Fiato, Executive Vice President & Chief Claims Officer, Liberty Mutual Insurance
REGISTER HERE