AI in Insurance
Frustrated with Your Insurance Company? AI Could Help
Artificial intelligence has taken over the news cycle, driving the line of tools revolutionizing enterprises across industries. In fact, 36 percent of those in business, legal, and professional services are already using AI regularly for work, personal reasons, or both, according to the most recent annual McKinsey Global Survey.
PROS AND CONS OF AI IN INSURANCE
Pros: Efficiency, accuracy, and tailored coverage are the leading improvements AI implementation can bring. Reduced processing times and faster responses will become the norm. And the data within large language models will allow risk assessments to be much sharper.
Cons: Privacy and bias are some of the main concerns. Evaluating the data of customers means significant privacy implications for those customers. And inaccurate or biased training data can lead to skewed outcomes. This is where it is important for human underwriters or brokers to double-check the work of AI.
How Will AI Modernize Risk Assessment?
The insurance industry’s current data orchestration methods are time-consuming and prone to errors. Insurance is an old industry; finding ways to safely employ AI can modernize the purchasing experience and fast-track the entirety of the submission, quote, bind and policy issuance process.
AI can help companies assess risk more efficiently and accurately, as well as potentially transform the insurance underwriting process from data mastery to fraudulent claims and enhanced risk profiling. It’s able to scrutinize a broader array of factors than humans, resulting in precise and personalized risk assessments.
Commentary/Opinion
The Future of Insurance: Look What Lies Ahead
Insurance is critical to modern life, providing financial security for individuals, families, businesses, and entire communities. But the insurance business is in a heightened state of transformation, driven by new and intensifying risks, innovative distribution and service models, wealth and income inequality, and a dynamic technology landscape that features AI technology poised to either wreak havoc or unleash new orders of capabilities. To help industry leaders navigate these tumultuous waters, we’ve analyzed past industry performance and top consumer, regulatory, competitive, and technological trends to outline what to expect in the next decade.
Insurance Has Held Strong Against Market Volatility — But There’s More Turbulence Ahead
Since 2015, the insurance industry has faced obstacles such as shifting competitors and consumer expectations, tech trials and tribulations, climate change, and social tensions. These factors have impacted the industry’s performance, resulting in varied premium growth, led by emerging markets. On average, however, over the last seven years, the combined, loss, and expenditure ratios have maintained a constant trend among the top 25 global insurers (based on market capitalization).
The combined ratio remains around 100%, putting pressure on margins and forcing price rises to offset increased underwriting losses. This highlights the industry’s commoditization — and the importance of diversified strategies to maintain a strong balance sheet. External factors such as geopolitical unpredictability, the challenging economy, and the reality of climate change will further pressure profitability, yet there are green shoots brought by technological advancement and the possibility of providing solutions to the “protection gap” market of $2.8 trillion.
This blog was written by Principal Analyst Indranil Bandyopadhyay; and Principal Analyst Ellen Carney, Forrester.
News
Middle East: Events in Gaza cast a shadow over Arab insurance markets
The insurance sector is anticipating an increase in the prices of political violence coverage in the region, including Egypt, in the wake of the Israel-Hamas conflict.
At present, insurance companies are awaiting the reactions of international reinsurance companies to the war in the Gaza Strip. There is a possibility that reinsurers could tighten the coverage when renewing annual agreements.
Mr Alaa El-Zoheiry, chairman of the Insurance Federation of Egypt, says that war risk may be excluded from marine insurance policies, according to a report by Amwal Alghad. He says that the outbreak of any war in the region will lead to the possibility of raising premiums for political violence insurance, whose coverage includes war, whether internal or external.
He says that due to the lack of capacity, there is a possibility that the market might see hikes in insurance prices and the tightening of some reinsurance conditions.
Buyers set for another tough renewal as rate pressures rise
Many insurance buyers will likely face demands for more premium hikes at upcoming renewals with insurers pushing for rate increases in a continuing tough market for several major lines of coverage.
Property rates, which saw double-digit average increases earlier this year, are likely to rise further as little new capacity has entered the market and insurers point to sustained higher catastrophe losses, though increases likely won’t match last year’s hikes.
Several liability lines, which saw less pronounced increases, are also likely to experience higher rates as insurers report worsening losses, brokers and insurers say.
Only in some specialty lines — such as directors and officers liability and cyber liability, which have seen an inflow of new capacity over the past two to three years — are rates likely to fall, they said during meetings at the Insurance Leadership Forum held in Colorado Springs last week.
The conference, organized annually by the Washington-based Council of Insurance Agents & Brokers, is a key market meeting and draws top executives from insurers, brokers, reinsurers and other industry companies.
The meeting came about three weeks after the Rendez-Vous de Septembre in Monte Carlo where reinsurers indicated they will seek to impose further rate hikes on ceding reinsurers.
Vehicle Thefts Continue to Increase to Near-Record Highs in 2023
The United States continues to be plagued by near-record levels of vehicle thefts, according to a new report released by the National Insurance Crime Bureau (NICB), the insurance industry's not-for-profit association dedicated to predicting, preventing, and prosecuting insurance crime. The report showed that nearly 500,000 vehicles were reported stolen nationwide in the first half of 2023, marking an increase of more than two percent compared to the first half of 2022. Illinois represented the largest increase in vehicle thefts of any state at 38 percent, followed by New York with a 20 percent increase and Ohio with a 15 percent increase over the first half of 2022. The report was released to coincide with National Crime Prevention Month, which shines a spotlight on crime prevention and personal safety every October.
"Vehicle thefts increased to near-record highs in the United States last year, and unfortunately, current trends indicate total thefts this year may surpass 2022," said NICB President and CEO David J. Glawe. "With little deterrent to stop these criminal actors, law enforcement agencies and communities will continue to suffer."
Analyzing data from the National Crime Information Center (NCIC), NICB's report showed that between January and July 2023, vehicle thefts totaled more than 80,000 thefts per month and peaked in May with 87,993 vehicles reported stolen to law enforcement.
Research
Geico ranks first for overall mobile experience: Keynova
Property and casualty insurers are continuing to improve digital assistants, according to a report from Keynova.
Keynova Group, a financial services intelligence firm specializing in benchmark insights, released its Q3 2023 Mobile Insurance Scorecard, which evaluates the mobile website and mobile app offerings from the 12 largest U.S. property and casualty firms.
Geico scored first overall for mobile experience, app and mobile web. State Farm scored second overall and in mobile app. Progressive and State Farm tied for second in mobile web. Progressive scored third overall. Farmers scored third in mobile app.
The report analyzes user capabilities and live customer experience to identify trends and observe digital capabilities. Scoring is based on an evaluation of approximately 250 objective criteria.
The report suggests there is an increased focus on streamlining digital quoting by the carriers but Nationwide recently suspended all online and mobile quoting.
Beth Robertson, managing director of Keynova, thinks Nationwide retrenching from digital quoting was notable but it likely won't last.
"I don't think it's a permanent back away, it's just unusual at the same time when you have firms, including Nationwide, making a lot of advances in digital tools. … I think they're just reassessing and coming out with some stronger capabilities," Robertson said.
Digital assistants are typically not using natural language processing but 83% of the firms offer them in the mobile browser and 58% provide one in the app.
Insurance alliance, SambaSafety release report on telematics use
Nearly three-quarters of commercial insurance companies offer or plan to offer a telematics-based product
The National Alliance for Insurance Education and Research and SambaSafety, a provider of cloud-based risk management solutions, have partnered to release a report that focuses on the growing role of telematics in the insurance sector.
“In this dynamic era, when data steers our choices, it’s crucial for the insurance industry to remain informed, proactive and tactical,” said Paul Martin, director of academic content for the National Alliance.
“The report not only captures the current industry sentiments, but also provides a roadmap for the future. It encapsulates the evolving storyline of insurance, fueled by data, insights, and modern technology.”
The report includes information on how carriers and brokers are utilizing telematics in both commercial and personal lines. Among the report’s key findings:
- 72% of commercial insurance companies already offer or plan to offer a telematics-based product
- One-third of commercial auto respondents plan to launch a usage-based insurance product within the next one to two years
- 15% of broker respondents said they offered telematics value-added services
- There are unique challenges for commercial carriers using telematics data, with the largest hurdles identified as varying data formats (53%), resource constraints (32%) and compliance/processing data (21%)
Push for insurance innovation highlighted amid new digital risks
In its latest sigma study, Swiss Re Institute finds that potential digitalization benefits across countries and throughout the insurance value chain are far from exhausted.
According to the reinsurer’s “The economics of digitalization in insurance” sigma report, digitalization is a source of new growth, new risks, and new efficiencies for the insurance industry. Digital value creation has led to an increase in firms' intangible assets, including digital data. At the same time, increased dependency on digital infrastructure makes such assets more vulnerable, e.g., to business interruption and cyberattacks.
In the report, Swiss Re Institute also introduced the Insurance Digitalization Index, which tracks the progress made in 29 sample countries with respect to the digitalization of their insurance markets. South Korea came out on top of the index, followed by Sweden, Finland, and the US.
While advanced markets with strong physical infrastructure and high internet access rates have made the most progress in digitalizing their economies, China, Slovenia, and India are catching up. China, for example, has moved up by ten places in just ten years. This is because emerging markets can jump straight into adopting newer digital technologies rather than transitioning from legacy systems.
InsurTech/M&A/Finance💰/Collaboration
Matic Raises $20M Series B Extension Up-Round With New Investors
Funding to fuel partnership momentum, expand carrier network, and enhance product portfolio for leading embedded insurtech
Matic, a leading embedded insurtech platform, announced it raised $20 million as an extension to its Series B. The round includes $17 million in Series B equity co-led by IA Capital Group and Cultivation Capital with participation from existing investors and the majority led by new investors, including Intuit Ventures, TruStage Ventures, and Assurity Ventures. Concurrently, Matic upsized its credit facility by $3 million, bringing new liquidity to $20 million.
The round is underscored by Matic doubling its valuation since their 2020 Series B raise and track record of averaging 100%+ revenue growth over the past five years. Additionally, Matic has improved its bottom line by 60%+ over the last year, driven by its highly profitable, recurring revenue model.
Matic’s mission is to simplify the world of insurance. The company is a digital insurance agency built for partners. Matic integrates directly into the home ownership experience to help consumers save time and money on insurance and help partners generate a new revenue stream for their business.
Betterview Partners with Near Space Labs for Expanded Imagery Coverage
Betterview (San Francisco), an InsurTech provider of actionable property intelligence to property/casualty insurers, has announced a partnership with Near Space Labs (Brooklyn, N.Y.), a provider of high-quality earth imagery. Integrating imagery from Near Space Labs into the Betterview Property Intelligence Platform enables insurers to enhance the recency, frequency, and geographical coverage of property intelligence in underserved areas, enriching an overall view of property risk, according to a Betterview statement.
The vendor statement notes that insurers need multiple sources of property imagery for different use cases, including aerial, satellite, and street-level photos. Multiple sources can also capture images that a single source may miss, particularly in rural areas. Recognizing this, Betterview says it continues to expand imagery capabilities and incorporate a range of collection methodologies. They found an ideal partner in Near Space Labs.
“We were very impressed with what Near Space Labs had to offer,” comments Armin Monajemi, VP, strategic partnerships, Betterview. “Their imagery, captured by a fleet of autonomous high-altitude robots, gives us an in-depth look at areas of the country that have historically been hard to access, ensuring our customers always have the imagery they need. The two companies really see eye-to-eye, partly because of our startup background, and also because we share a mission: to reveal a complete picture of property risk.”
Awards
Global Innovation Awards at the International Insurance Society Global Insurance Forum | Nov. 5-7 | Hilton Singapore Orchard.
The Global Innovation Awards presented by the International Insurance Society and Insurance Thought Leadership celebrate the transformative power of innovation within the insurance and risk management industry.
These prestigious awards recognize insurers and insurtechs who push boundaries, drive positive change, and contribute to a more sustainable society. Three winners representing three categories— Property & Casualty, Life, Health, and Retirement, and Predict & Prevent — will be honored at an awards dinner at the Global Insurance Forum on Nov. 6.
People
Solera’s Bill Brower Honored by 2023 PropertyCasualty360 Insurance Luminaries Awards
Solera Holdings, LLC, the global leader in vehicle lifecycle management, today announced Bill Brower, Vice President of Industry Relations at Solera has been named to PropertyCasualty360’s Insurance Luminaries Class of 2023 in the Claims Innovation category.
Brower is a widely recognized claims leader across the insurance property and casualty (P&C) claims and automotive Industry with more than 30 years’ experience leading claims teams with top companies including Nationwide Insurance, Liberty Mutual Insurance, LexisNexis Risk Solutions, and now, Solera. He is being celebrated for his role in continuous claims innovation as he pioneers the growth of artificial intelligence (AI) and other emerging technology to meet the evolving needs of the industry and Solera’s customers.
Brower has captained Solera’s technology-first, customer-obsessed mindset that helps drive adoption of critical technology to optimize processes, increase efficiencies, and cut down costs for both carriers and customers – a true benefit in today’s economic climate.
“I am deeply honored and humbled to stand among these outstanding leaders in claims automation,” expressed Brower. “AI holds the power to revolutionize the customer claims experience for the better and I am truly grateful for the opportunity to guide the industry towards the future of full automation to include Touchless Claims with Solera.”