AI in Insurance
Generative AI - Mitigating Risk To Realize Success in Life Insurance | Celent
Abstract
When we think about things that exist today that could be brought together and generate new products and services, we start to see how AI could really alter the future. As an example, in the not-too-distant future, films could be made exclusively without human actors and look not animated, but as real as movies do today, hence the actors strike. Artificial intelligence is revolutionizing the way we live and work, and it will profoundly reshape our world by transforming jobs and fostering new industries. From this point forward, it will have a transformative, disruptive impact on insurance operations and technology.
The launch of Open AI’s ChatGPT opened the world’s eyes to the extensive possibilities of generative AI. Many insurers have already implemented some form of AI in their organizations. Those who did may have introduced AI policy and governance guidelines as well. However, the introduction of generative AI and other LLMs adds several new elements of risk to the AI mix that insurers need to assess policy for if they haven’t already.
Keith Raymond, Principal Analyst, Insurance, Celent
Unmasking the Future of AI in Insurance: In2Risk Explores Where Quantum Computing and Mind Reading Come In
Whenever there is a significant advance in artificial intelligence technology, it tends to make us consider new possibilities and opportunities.
But along with the growth and potential benefits AI brings to the insurance industry, the potential downside of the rapid development must be considered.
New technologies introduce new risks to be mitigated and managed. And while the insurance industry is poised to address these emerging risks and exposures, the fast pace of development often creates unexpected challenges.
There is no doubt that advances in AI, quantum computing, and mind reading will impact the risk and insurance industry, but the lasting effects of these new technologies remain unknown.
“We have become more aware of cyberattacks and, in cyber insurance, see their sometimes-devastating costs,” commented Monique Ferraro, cyber counsel at HSB.
“The future presents unparalleled challenges.”
Ferraro will share her thoughts this fall at In2Risk in Washington, D.C., along with an all-female panel of attorneys to share their diverse perspectives of these advanced technologies, using their own experiences of currently handling cybersecurity and privacy cases.
Risks and Rewards of Generative AI, Quantum Computing, and Mind Reading
We no longer ask the question of whether AI, automation and other technological advancements will impact the insurance industry. Now it’s a matter of scale and impact of the technologies — and how to mitigate the new risks associated with them.
The global economy is growing thanks to AI, with a recent report showing a projected 7%, or almost $7 trillion, increase in the global GDP in the next ten years based on new applications of generative AI tools in business. The same report also predicted a 1.5% lift in productivity growth over the ten-year period.
But as ChatGPT and other generative AI programs gain market share and media attention at a breakneck pace, questions arise around privacy, cybersecurity, bias, deceptive practices, consumer protection and other issues.
And right alongside the rise of ChaptGPT has sprung its counterpart, WormGPT, a dark web tool purporting to have no ethical boundaries.
WormGPT can be used by hackers to quickly and effortlessly draft social engineering emails that would challenge even the tech-savviest humans, as one example of its possible uses.
“It’s possible that we could see technology that translates our thoughts into readable text or allows our memories to be accessed by computers,” Ferraro said.
Many Americans believe AI will provide their in-home care as they age
Less than a year since the launch of the popular Artificial Intelligence (AI) chatbot ChatGPT, Americans are embracing AI-based care as they age. One third of Americans and over half (58%) of millennials believe AI and robotics will provide their future in-home long-term care.
According to the annual Nationwide Retirement Institute Long-Term Care survey, conducted in partnership with LIMRA in May 2023, this survey of 1,439 U.S. adults aged 24 or over found that younger generations were particularly apt to embrace the technology.
Among the key findings:
Daily functions: More than one in three (35%) Americans would accept help from a robot for activities such as toileting, dressing and transferring. This rises to 52% among millennials and declines with older generations (23% for boomers and 36% for Gen Xers).
Companionship: Nearly the same amount (32%) say they would talk to robots/AI if they are feeling lonely. This increases to about half (52%) of millennials.
Physical safety: Almost seven out of ten (68%) Americans would use AI to alert family/friends if they were to experience a fall or physical danger (63% boomers, 70% Gen X, 72% millennials).
Medical history: Nearly half (48%) of Americans say they would share their medical history with AI to help support their care needs. This figure increases to 65% for millennials.
Swiss Re streamlines insurers’ natural disaster response with AI
Natural disasters have been increasing in frequency, severity, and diversity in recent years, pressuring insurers to be more efficient and to anticipate event and claim fallout. The same goes for reinsurance firms, which provide insurance for insurers, reducing their likelihood of large payouts—a significant factor in the insurance industry’s response to natural disasters.
According to the US National Oceanic and Atmospheric Administration (NOAA), the US has experienced 360 weather and climate disasters since 1980 in which overall costs reached or exceeded $1 billion for each one, totaling more than $2.57 trillion. In 2023, through July 11, NOAA confirmed 12 such events, including floods and severe storms. To keep up with the unsettling pace, Swiss Re, one of the world’s largest reinsurers, now leverages predictive analytics, machine learning (ML), and artificial intelligence (AI) to help its clients anticipate disasters and mitigate costs.
“If you look at the severity of losses over the past 10 years, one of the trends is that losses in the last five years are almost twice as much as those in the first five,” says Anil Vasagiri, SVP and head of property solutions at Swiss Re. “That’s an unmistakable trend and one which insurers, and reinsurers like Swiss Re, are having to understand and prepare for in order to operate in this sort of environment.”
Along with the overall cost of claims stemming from natural catastrophes (NatCats), insurers face operational challenges from the sudden and voluminous influx of claims that result. Immediately after such disasters, affected areas are frequently difficult or impossible to access, delaying response time to claims.
In his role, Vasagiri is responsible for the data and software assets deployed to Swiss Re’s clients, as well as the company’s overall data strategy. Late last year, Vasagiri’s property solutions division released a significant new tool to help its clients. Dubbed Rapid Damage Assessment (RDA), the platform blends advances in computer vision with other modeling techniques to help insurance clients better understand, plan, and analyze their portfolios before disasters strike, monitor their portfolios as events unfold, and then leverage technology to find and mitigate claims in the wake of an event. This can help identify claims of which policyholders are unaware, says Vasagiri, perhaps because they have holiday homes that have been affected and they live elsewhere, or they were forced to evacuate and have been unable to return. So RDA helps its clients inform those policyholders about how they could file claims
News
Convective storms across Southern US states, an "evolving situation" for reinsurers: AM Best
The growing frequency and severity of convective storms across Southern US states has become an “evolving situation” for re/insurers, as these events are continently hindering insurers’ ability to achieve effective diversification of their portfolios.
In a new commentary from global ratings agency AM Best, the company highlights that re/insurers rely on geographic diversification in underwriting to maintain a stable, profitable portfolio.
But, this method has proven to be more challenging within recent years due to the growing number of convective storms, as well as the increased intensity of these storms, and the wider geographic areas where storms are occurring.
Recent convective storms – severe thunderstorms, hailstorms, tornadoes, derechos – that spread through Texas, Louisiana, Arkansas and Mississippi hit Gulf Coast and nearby states historically impacted by hurricanes, adding to the potential perils that can threaten the results of property writers in those states.
IIHS contends phones can be used to mitigate distracted driving
While cell phones are often associated with distracted driving, the Insurance Institute of Highway Safety (IIHS) reports they can also aid in mitigating driving distractions.
“Our phones also offer a great defense against distraction — a ‘do not disturb’ feature that can block incoming calls and notifications while the user is driving,” wrote IIHS Senior Research Scientist Ian Reagan. “Other apps have the potential to reduce other types of distracted driving, encourage safer speeds and provide basic crash avoidance capabilities for every vehicle in the U.S. fleet. What’s more, the biggest players in the smartphone industry are eager to be part of the solution.”
LOR sees first year-over-year decrease since 2020 following Q1 record high
Enterprise reports that length of rental (LOR) reached 17.4 days during Q2 which, for the first time since the onset of the COVID-19 pandemic, is a year-over-year (YoY) decrease; down from 17.7 days last year.
LOR for Q2 2021 was 13.2 days. The one-and-a-half day decrease from Q1 to Q2 of this year is largely due to an uptick in parts delivery times and improvement in shop prioritization of repairs that require readily-available parts rather than backlogged parts. The 18.7-day LOR from Q1 was a record high.
“States that saw increases in overall LOR in Enterprise’s data, such as Arkansas, Florida, Georgia, and Minnesota, also saw similar trends when comparing parts delivery days,” said PartsTrader Chief Innovation Officer Greg Horn.
“Parts delays are still a significant factor in repair time and length of rental, and shops are making a great effort to schedule repairs for drivable vehicles to maximize shop throughput.”
Commentary/Opinion
Viewpoint: What Can Insurers Do About Extensive Attorney Involvement and High Settlement Costs?
Attorney involvement is one of the most critical determinants of ultimate claim costs. Significant costs include time from correspondence iterations, depositions, defense attorney costs, etc. These are present in determining whether the plaintiff’s attorney can negotiate a higher-than-usual settlement. Before we talk AI, let’s dig in a bit on why claimants tend to hire attorneys in the first place.
An experienced personal injury attorney can help navigate the complexities of the legal system, negotiate with insurance companies, and build a strong case, which may lead to a higher settlement or award for the claimant. Here are some reasons why claimants with legal representation may receive higher claims benefits.
Tom Warden, research fellow, Clara Analytics
Awards
INSURTECH INNOVATION AWARDS 2023 | Americas | The Digital Insurer
Description
The World’s Digital Insurance Awards 2023 will showcase the most innovative InsurTechs in Asia Pacific, EMEA and the Americas, and give InsurTech entrepreneurs a platform to pitch how they are helping to accelerate the digital transformation of insurance - demonstrably addressing industry pain-points and / or creating value from new market opportunities. The regional winners will compete in the Global InsurTech Innovation Awards
InsurTech/M&A/Finance💰/Collaboration
Startup on a Mission to Bring the Insurance Industry into Digital Age
It’s no secret that consumer expectations are at an all-time high. People demand seamless access to products and services. They want the right product, at the right price, at the right time — insurance is no exception. But, while the insurance industry admittedly shifted online, it is still early in its journey to providing the convenience and expediency consumers have come to expect.
I sat down with Wayne Slavin, co-founder and CEO of Sure, a leader in digital insurance, to discuss how they are unlocking the potential of digital insurance for the world’s most recognized brands and insurance carriers.
Gary Drenik: You have an interesting story as to how you landed in insurance. Can you explain the ‘aha’ moment for starting Sure?
Wayne Slavin: In 2014, I was mid-flight from San Francisco to Las Vegas when we suddenly experienced some pretty serious turbulence. Rationally, I know that flying is extremely safe, and yet, I was still a little unnerved. As I was looking around at the other passengers, I could tell they were feeling it, too. I then started to consider that it should be easy for anyone to purchase insurance on the spot, whenever they need it – like purchasing life insurance before boarding a plane. It turns out the need for life insurance is far greater than I anticipated, as a recent Prosper Insights & Analytics survey found that only 25% of US adults currently invest in it.
Whether life insurance or some other episodic insurance, I knew I was onto something. So, we set out to build a proprietary app to enable people to purchase insurance quickly and easily. What we soon realized is that the technology we developed was so powerful that the opportunity for Sure was much bigger than selling insurance digitally on our own. Instead, we could use our technology to help brands and carriers unlock the potential of digital insurance for their customers. Now, Sure combines our insurance expertise with our insurance infrastructure technology to build and launch sophisticated embedded insurance programs for large carriers and brands, all while prioritizing the customer experience.
Top insurtech funding rounds, July 2023 | Digital Insurance
There were more than 40 funding events in the insurtech sector between July 1 and July 31, 2023, according to a review by Digital Insurance. What follows is a selection of these, focusing on those in the P&C and life insurance sectors that are part of the venture-capital financing model. (Other funding events, such as private-equity infusions, are included in the overall count.)
A portion of the data was sourced from Crunchbase. Other information, including quotes from investing VCs, comes from company announcements. For our previous edition, which covered the month of June, click here. These updates will continue monthly.
Canada
Auto Insurance In An Existential Crisis - Insurance-Canada.ca - Where Insurance & Technology Meet
After many long years of stability, the 125-year-old, $300 billion U.S. auto insurance industry is caught between runaway inflationary cost pressures on one side and consumer wallets, many of which are no longer able to afford the spiraling auto insurance premium increases, on the other.
Stephen Applebaum and Alan Demers as published in Insurance-Canada.ca