AI in Insurance
Are we still talking about AI as a tool of the future? Not exactly.
“Being supported by technology has always been crucial at Allianz,’’ says Barbara Karuth-Zelle referring to processes supported by AI and data analytics in the insurance branch. The use of AI is present throughout the organization and across the full insurance value chain. We use intelligent chatbots in our client interaction, e.g., to answer customer queries, and embed AI tools in the underwriting process to assess and price risks more accurately. We also use them to simplify and speed up back-office operations and claims management, where AI enables immediate routing to partner repair shops instead of customers having to invest so much time and energy getting an appointment at a shop. This, naturally, leads to improved customer satisfaction.”
In this article, we expand on what Barbara Karuth-Zelle and Lucie Bakker shared in their interview with Der Spiegel about possible applications of AI in insurance, with a focus on existing AI tools at Allianz and what they mean for an employee and / or customer.
News
Early Estimate of Tropical Storm Hilary’s Damage and Economic Loss: $9 Billion
AccuWeather’s preliminary estimate of the total damage and economic loss from Tropical Storm Hilary in the U.S. is $7 billion to $9 billion.
Hilary brought widespread flooding through Southern California, washing out roads and bridges, flooding cars and homes, and shutting down businesses.
California Gov. Gavin Newsom proclaimed a state of emergency on Saturday as Hilary approached. More than 1,000 flights were canceled on Sunday, tens of thousands of power customers in California were without power from the storm, Sunday.
The storm continued its way up through Nevada and the northern Rockies, bringing continued heavy rain and flooding to the region. Las Vegas declared a state of emergency Sunday.
Here’s what Maui wildfires mean for Allstate, other P&C insurers
Citi analyst Joshua Shanker said in a recent note that the fires are estimated to have caused some $1.3B in homeowners’ losses from more than 3K homes, citing data from catastrophe modeler CoreLogic. By comparison, 1992’s Hurricane Ikini drove about $3B in insured losses and last year’s Hurricane Ian drove about $50B-$65B in global insured losses.
Shanker listed Allstate (NYSE:ALL) (8%), American International Group (NYSE:AIG) (2.3%), Chubb (NYSE:CB) (2.3%), and The Hartford (NYSE:HIG) (0.9%) as some of the carriers with the largest Hawaii homeowners’ insurance market shares, as measured by direct written premiums.
P&C insurers exposed in Hawaii’s homeowners insurance market may find themselves paying premiums to reinsurers to help cover losses above certain marks, an ideal risk-management tool for insurers to protect themselves from large financial losses in the event of any natural disaster. Bear in mind the frequency of extreme weather events has been on the rise over the years, GlobalData said in a report dated Friday, meaning P&C insurers' have to pay higher reinsurance rates, an increase that ultimately gets passed on to homeowners.
For Allstate (ALL), in particular, Shanker estimated that the company will likely endure ~$125M in catastrophe losses from the Maui fires in Q3. The sell-side analyst assumed $1.0B in Q3 catastrophe losses, given the risk of hurricane season, and another $680M in Q4. Allstate (ALL) estimated its July catastrophe losses at $313M, mostly owing to wind and hail events across a wide geographic area.
Regarding auto insurance market shares in Hawaii, Berkshire Hathaway’s (NYSE:BRK.A) (NYSE:BRK.B) GEICO tops the list at 29.5%, and Allstate (ALL) and Progressive (NYSE:PGR) have 9.7% and 7.0% market shares, respectively.
Hawaii wildfire insured losses could top $4.5B: Moody’s | Business Insurance
Moody’s RMS on Tuesday said insured losses from the wildfires Aug. 8-10 in Hawaii could exceed $4.5 billion.
The loss estimate reflects property damage, contents and business interruption across residential, commercial, industrial, automobile and infrastructure assets, a Moody’s RMS statement said.
The Newark, California-based catastrophe modeler said total economic losses should be $4 billion to $6 billion, and that most of the economic damage is expected to be covered by insurance, in the range of approximately 75% or more, because wildfire is a covered peril under typical insurance policies and the island has high insurance penetration rates.
Loss estimates incorporate damage assessments from multiple sources including satellite and aerial imagery in the worst-affected areas, as well as damage maps from the Maui Emergency Management Agency published on Aug. 11, 2023.
Most of the losses are expected to be from the town of Lahaina, where fire burned more than 2,100 acres and destroyed almost 2,200 structures. Moody’s RMS estimates the burn footprints in Lahaina and Kula wildfires include insured property value of $2.5 to $4 billion.
Loss estimates have been increasing over the past week.
Bosses Dislike Work-From-Home But Suspect They’re Stuck With It
Business leaders think that the spread of remote work has had more negative effects than positive ones, but they also see the practice becoming ingrained, according to a new survey by the Federal Reserve Bank of New York.
Roughly two-thirds of respondents said remote work had a negative impact in four areas: workplace culture, cohesiveness and team environment, communication among employees, and training and mentorship. The upside for employers: more than half said that work-from-home makes it easier to recruit staff, and more than two-thirds said it helps to retain them.
2023 Cyber Report | Tokio Marine HCC
Over the past three years the cyber insurance market has experienced both unprecedented growth and substantial changes to its underwriting approach in an effort to respond to the changing cyber threat landscape. While some may have hoped that the drop in ransomware and decelerating rate increases were a sign of market stabilization in 2022, cyber-attacks are once again back in the headlines in a big way.
This year could set a new record for financially motivated cyber-attacks, with several widespread cyber events adding to mounting attritional cyber losses. The increase in cyber losses comes at a time when the cyber insurance market’s apparent return to profitability coincides with the emergence of softening market conditions. It could, once again, find itself at an inflection point if the current trends continue.
Cyber risk is unpredictable in nature and continues to deliver new challenges to insurers. In this report we will delve into the insurance cyber market’s performance throughout the past couple of years, offering an overview of noteworthy cyber loss trends, placing special emphasis on ransomware.
Munich Re ranked largest reinsurer for third year running by AM Best
After taking the top spot from Swiss Re in 2020, the latest data from ratings agency AM Best confirms that German reinsurer Munich Re remains the world’s largest reinsurance company when ranked by gross life and non-life premiums written in 2022.
With reinsurance gross premiums written (GPW) of roughly $51.3 billion and net premiums written (NPW) of $48.6 billion in 2022, Munich Re tops the list of the world’s 50 largest reinsurers.
In terms of non-life premiums only, the reinsurer is also the largest, with GPW of $36.8 billion and NPW of $35.3 billion in 2022.
Swiss Re once again takes the second spot, which the firm has held since being overtaken by Munich Re in 2020, with total reinsurance GPW of $39.8 billion and NPW of $37.3 billion in 2022.
Another of Europe’s big four, Hannover Re, remains in third place with 2022 reinsurance GPW of $35.5 billion and NPW of $29.7 billion, with year-on-year growth ensuring the top three has been the same for three consecutive years.
InsurTech/M&A/Finance💰/Collaboration
World Insurance raises $1 billion from Goldman Sachs
Funds managed by Goldman Sachs Asset Management will invest more than $1 billion in debt and equity in World Insurance Associates LLC, the acquisitive brokerage announced Monday.
The investment indicates an enterprise value of $3.4 billion for Iselin, New Jersey-based World Insurance, which has more than $500 million in total revenue, the brokerage said in a statement.
World Insurance, which grew its brokerage revenue more than 50% last year to $347.2 million, is the 28th-largest brokerage of U.S. business, according to Business Insurance’s most recent ranking. The brokerage also owns Novatae Risk Group, its wholesale unit, and benefits-related businesses.
Goldman Sachs will be a co-lead equity investor in World Insurance alongside Charlesbank Capital Partners, which invested in the company in 2020, the statement said.
The transaction, which includes subordinated debt financing, is expected to close in the fourth quarter.
The financing “will support continued acceleration of World’s acquisition strategy and organic expansion,” the statement said.
Founded in 2011, World Insurance has been an active buyer of smaller brokerages over the past several years. In the first half of 2023, it announced 17 acquisitions.
US Insurance Giant Marsh Set for $448 Million Honan Deal
Marsh has agreed to acquire Honan Insurance Group Pty Ltd. as the US insurance broker giant seeks to expand its presence in Australia and New Zealand.
The Marsh & McLennan Cos Inc. unit has signed a deal to buy out Melbourne-based Honan, including an 80% stake held by private equity firm TA Associates, according to a statement, which confirmed an earlier Bloomberg News report. The deal is expected to be completed later this year, subject to regulatory approval. Marsh did not disclose the terms of the deal.
“The addition of Honan’s highly complementary capabilities, particularly in corporate risk and strata insurance, will enable Marsh to deepen the specialist expertise we provide to clients across Australia and New Zealand,” Nick Harris, chief executive officer of Pacific at Marsh, said in the statement.
Bloomberg News first reported in June that TA Associates had been working with a financial adviser as it weighed a sale of the business amid interest from prospective buyers. Marsh emerged as the likeliest purchaser after beating out other rivals in the industry and buyout firms and was finalizing details of a transaction that could value Honan at about A$700 million ($449 million), Bloomberg News reported on Sunday.
People
Hippo Names Peter Piotrowski Chief Claims Officer
Hippo (NYSE: HIPO), the home insurance group focused on proactive home protection, today named Peter Piotrowski, Chief Claims Officer. Piotrowski will lead claims for Hippo Insurance Services after serving as Chief Claims Officer at Vault for the last six years, and in executive roles at The Hanover Insurance Group, AIG and Chubb.
“Hippo’s vision of preventing and minimizing losses resonated with me”
With more than 35 years of experience, Piotrowski will oversee Hippo’s claims services to provide its customers with a technology-enabled, industry-leading claims experience. He will serve as a key member of Hippo's executive team and report to Chief Underwriting Officer Chris Donahue.
"Peter has built his career on an award-winning, customer-centric approach," said Donahue. "He's led multiple teams recognized for delivering an exceptional customer experience, providing some of the highest levels of service in the industry, and making it easy for customers to resolve even the most complex claims."
QBE North American CEO Jones leaving company
Australian insurer QBE Insurance Group Ltd. said Tuesday that Todd Jones, CEO of its North American operations since 2019, is leaving the company.
Julie Wood, who joined QBE earlier this year as group head of distribution, has been appointed as interim CEO North America, QBE said.
Mr. Jones will leave QBE at the end of August and work with Ms. Wood to ensure a smooth transition, the insurer said.
Prior to joining QBE in January, Ms. Wood was South East partnership and zonal leader and a member of the U.S. executive committee at Marsh LLC.
QBE said it is conducting a search to fill the role of CEO North America on a permanent basis.
Canada
Covergence and the Insurance Ecosystem - Insurance-Canada.ca - Where Insurance & Technology Meet
"The disruptive and confusing shifts we are all experiencing are in large part a result of accelerating convergence, which is taking place across all industries, products, services and technologies. Its influence extends to the blurring of the previously clear separation of our work and personal lives, giving rise to the current focus on “work-life balance.”
Stephen Applebaum & Aland Demers