AI in Insurance
Taking Generative AI for a Spin
Tools like ChatGPT and Bard offer endless applications for auto insurers, but adoption of generative AI isn’t a linear path.
KEY TAKEAWAYS:
--Generative AI can improve auto insurers' claims processes, optimize customer interactions and recommend plan changes.
--Some companies are slow to adopt because of inaccuracies and bias issues, privacy challenges, intellectual property concerns and heightened regulatory scrutiny.
--Like any new technology, generative AI needs effective guardrails. Once the right procedures are in place, it can provide value across the customer lifecycle for auto insurance companies.
Henry Kowal is director, outbound product management, insurance solutions, at Arity
AI, AI and More AI
AI may be radically improving how we forecast major storms -- among a host of other recent, important developments in the field.
While Scott Van Pelt opens his version of "SportsCenter" on ESPN with "The Best Thing I Saw Today," I can't limit myself to just one thing here. I've seen a whole bunch of smart things over the past week that I'd like to share as a sort of grab bag.
Several relate to AI -- even though we all feel like we're inundated with news about the field. The one that could be most important for insurance concerns what may be a breakthrough in how we forecast major storms -- three models based on a new approach were extremely accurate in forecasting the path of Hurricane Lee in mid-September, beginning when the storm was thousands of miles from North America.
As the Washington Post reported, "The models are orders of magnitude faster and cheaper to operate than conventional, government-run weather models. While AI models don’t yet provide all the capabilities needed for operational forecasting, their emergence portends a potential sea change in how weather forecasts are made."
Let's have a look.
Paul Carroll, editor-in-chief, Insurance Thought Leadership
InsurTech/M&A/Finance💰/Collaboration
Profitability concerns drive September swoon for insurtechs
A sharp decline in stock values for insurtech companies in the third quarter is an indication of investors' waning confidence in a sector beset by underwriting and profitability issues.
Hippo Holdings Inc., Lemonade Inc. and Root Inc. all experienced a rough September, during which their stocks each fell at least 12%.
Those declines indicate how much institutional and retail investors have "soured" on the companies, said Kaenan Hertz, managing partner for Insurtech Advisors LLC. Investors have changed their attitudes since getting interested in the "insurtech boom" after some of the initial IPOs.
"The whole conversation in the marketplace is about profitability, it's about loss ratios, and it's about customer acquisition costs," Hertz said in an interview. "And for the most part, Hippo, Root and Lemonade were having significant problems."
Hippo's stock value had fallen 18.99% this month through Sept. 28, while Root was down 14.90% and Lemonade was off 12.72%.
The numbers are worse for the third quarter for two of the three, with Hippo down 50.83% and Lemonade 28.54% lower. Root is up 8.95% for the quarter through Sept. 28, but Hertz said that is just "the tail" of a boost from a reported buyout offer in June from Embedded Insurance Inc.
Hippo, Lemonade and Root did not respond to requests for comment.
Boost Insurance enters strategic partnership with Canopius US Insurance Holdings
Boost Insurance, a leading insurance infrastructure platform, has announced a strategic partnership with Canopius US Insurance Holdings, Inc., a subsidiary of the Canopius Group.
This partnership aims to provide long-term risk capacity for insurance programs powered by Boost’s digital MGA (Managing General Agent) platform.
Boost’s full-stack platform offers compliance, capital, and technology infrastructure to insurtechs, MGAs, and embedded insurance partners, reducing the time and capital required for building and scaling insurance programs.
Traditionally, creating and expanding an MGA or insurance program would take years and significant capital investment.
However, Boost’s partners can now access end-to-end infrastructure through a simple API integration, allowing them to scale their digital insurance programs more cost-effectively.
Reserv Raises $20M Series A Co-Led By Altai Ventures and Bain Capital Ventures (BCV) to Accelerate Already-Rapid Growth
Reserv, the leader in AI-driven insurance claims processing, announced today the close of its $20M Series A round of financing to expand its generative AI claims data analysis tools. This latest funding round was co-led by Altai Ventures and Bain Capital Ventures (BCV) with participation from 8VC, Outpost Ventures, Convex Group, AXIS Capital, Anthemis Ventures and Arch Capital Group.
With Reserv, customers are seeing a sustained reduction in cycle times for property claims and auto claims in the magnitude of 1.6x to 2.6x, and this funding will enable the company to extend these results to additional customers.
Reserv helps managing general agents (MGAs) and insurance carriers improve claims handling and increase data availability for greater efficiency and accuracy. The company has grown ARR over 50x in the past year, making critical claim information available in real-time through multiple large language model (LLM) generative AI tools feeding automated workflows. Reserv provides a data advantage for MGA and carrier partners with claim files leveraging AI-generated insights that alert claims leaders and underwriters of anomalies immediately as they are identified.
“Insurance carriers are realizing that a TPA using modern technology can deliver outsized benefits relative to TPA incumbents burdened by legacy home-grown software,” said CJ Przybyl, co-founder and CEO of Reserv.
“We are enabling the best talent in the industry to focus on the customer experience while leveraging AI to ensure a consistent and scalable organization.”
SoFi has a new partner for renters and home insurance
The credit reporting company replaces Lemonade, which was the provider of renters and home insurance since April 2019.
Experian isn’t a new partner for SoFi – the company also powers the bank’s auto insurance offering, which was originally provided by its subsidiary Gabi.
Based on traffic data, Lemonade received around 15k visits from SoFi between September 2022 and August 2023. For the same period, SoFi generated 190k visits for Gabi.
Glia and Insurity Partner to Enhance the Claims Management Process
Integrated digital communication and collaboration tools will improve the customer experience while enabling brokers and agents to conduct business more seamlessly.
Glia (New York), the customer interaction vendor that vaunts its combination of Digital Customer Service (DCS), phone, and automated self-service on a single platform, has partnered with Insurity (Hartford), a provider of cloud-based software for insurance carriers, brokers and MGAs.
Through the partnership, Insurity says it will offer Glia’s Customer Interaction Platform as part of its solution, improving the customer experience while enabling brokers and agents to conduct business more seamlessly.
“At Insurity, we believe the strategic use of modern technology can strengthen customer and agent relationships while saving effort and resources for all. The digital interaction with Glia supercharges this mission,” comments Sylvester Mathis, Chief Insurance Officer at Insurity. “By unifying Glia’s digital-first technology with our insurance platform and AI capabilities, we enhance business value by reducing customer and agent servicing costs. Through a combined offering, we are helping insurance carriers and MGAs grow and succeed.”
News
[Ed. note: Highly Recommended] Best's Review Examines Auto Insurance Sector
The October issue of Best’s Review focuses on U.S. private passenger auto insurers:
- “What’s Driving the Rise in Auto Costs” examines the trends that have led to large underwriting losses in 2022.
- “When It Comes to Insuring Electric Vehicles, It’s All About the Battery” looks at how the insurance industry is grappling with the cost difference in average repairs between electric-powered vehicles and those with combustion engines.
- AM Best: Auto Insurance Profitability Unlikely in Near Term as Rate, Inflationary Pressures Continue” features an excerpt of a Best’s Market Segment Report that explains how rate adequacy remains a challenge because of an increase in loss severity.
Best’s Market Segment Report: Pre-Pandemic Woes Return to US Commercial Auto Insurance Segment
Underwriting losses in the U.S. commercial auto insurance segment soared to $3.3 billion in 2022 following near-breakeven results in the previous year, according to a new AM Best report.
Commercial auto insurance has been one of the worst-performing lines of business in the property/casualty industry since 2012, generating a higher combined ratio each year than that of the broader property/casualty commercial lines industry, However, in 2021, the combined ratio improved to less than 100 for the first time in over 10 years, in part due to fewer autos on U.S. roadways owing to the COVID-19 pandemic.
The new Best’s Special Report, titled, “Pre-Pandemic Woes Return to Commercial Auto,” states that long-standing headwinds for commercial auto insurers, including social and economic inflation, remain prevalent and impactful.
AM Best Named ‘Rating Agency of the Year’ at Inside P&C Honors 2023
AM Best was named “Rating Agency of the Year” at the Inside P&C Honors event on Sept. 27, 2023, in New York City. Accepting the award was James Gillard, executive vice president and chief operating officer.
The Inside P&C award recognizes the quality of AM Best’s market intelligence; the ability to consistently provide fair and accurate rating opinions; and the rating agency’s innovations within the industry, among other factors. The event was held in conjunction with the Inside P&C New York conference.
Matthew C. Mosher, president and CEO of AM Best Rating Services said: “It is gratifying to be recognized as Rating Agency of the Year, particularly in a challenging period for the insurance industry. We view our purpose as strengthening the financial solvency, stability and sustainability of the insurance industry in support of economic growth and the well-being of all stakeholders, and so this award speaks volumes about the efforts of our hard-working analytical teams in the United States and around the world.”
More information about the awards event can be found at www.insidepandc.com/honors. Inside P&C reports on the U.S. property/casualty insurance industry and is part of the Insider Publishing Group.
Commentary/Opinion
Electric vehicle adoption in the US – what does it mean for insurers?
Trade body shares insights for insurers as more drivers turn to clean energy
Electric vehicle (EV) adoption is gaining momentum in the US, with EVs accounting for approximately 6.5% of new vehicle sales in the first half of 2023, according to a new report by the American Property Casualty Insurance Association (APCIA).
Further estimates highlighted by APCIA’s report note that EV sales may reach a cumulative total of over one million in 2023 for the first time, reflecting the findings of a recent Pew Research Center survey which indicated that four-in-ten Americans (38%) are likely to consider an electric vehicle for their next purchase.
As more drivers consider using EVs, plug-in hybrids (PHEVs), and other low- and zero-emission vehicles, APCIA drew attention to the shifting auto landscape facing insurers today.
“Many of the risks associated with EVs are similar to those for conventional vehicles [but] EVs present some unique risk factors that can drive insurance costs higher,” said Ethan Aumann, senior director, environmental issues, and resiliency for the trade association.
Insurance Underwriting Will Never Be the Same
AI and ML are transforming underwriting by automating tasks and allowing underwriters to focus on high-value analysis.
Underwriting is undergoing a major transformation thanks to new technologies like artificial intelligence (AI) and machine learning (ML). For decades, underwriters relied solely on historical data to assess risk and determine coverage. But in today's rapidly changing world, historical data is no longer enough.
To stay competitive, underwriters now need to leverage AI and ML to unlock deep insights from both structured and unstructured data. These technologies allow underwriters to identify risks earlier, price policies smarter, and operate more efficiently.
AI and ML are revolutionizing underwriting across three key areas: automating repetitive tasks, generating real-time insights, and evolving the underwriter's role. With intelligent automation, underwriters can reduce costs, improve customer satisfaction, and adapt to changes faster. The future underwriter will act as custodian, integrator, and collaborator to drive even greater value.
Murray Izenwasser, Senior Vice President, Digital Strategy, ITL Partner, OZ Digital Consulting