Commentary/Opinion
To Get Ahead, Insurance Companies Need To Think Beyond Core System Upgrades
Picture this: A company has an outdated core system, so its executives decide to upgrade it. After months of contract negotiations, they strike a (costly) deal for an upgrade, and the implementation process begins.
Flash forward to three years later—the implementation phase is still not over. Meanwhile, that core system, the latest technology at the time of purchase, is now outdated. Better technologies exist. But because the company’s leaders have already poured millions into this project, they don’t have the IT budget to change course. So they carry on, falling increasingly behind their competitors by the day.
This might seem like a far-fetched example, but it’s one that frequently happens at insurance companies (it occurs in other industries as well, but for the purpose of this article, I’m going to focus on insurance companies). It’s the Red Queen Effect in action: Companies take drastic steps only to remain where they currently are. The Red Queen Effect is a term you might recognize from Lewis Carroll’s Through the Looking-Glass; the Red Queen tells Alice that “it takes all the running you can do, to keep in the same place.” Insurance companies must avoid the Red Queen Effect to remain innovative and competitive.
Why Insurance Companies Can Get Pulled Into The Red Queen Effect
The insurance industry has traditionally taken longer to get on board with new technology. As McKinsey noted in a 2017 report, insurance “has been relatively slow to feel the digital effect owing to regulation, large in-force books, and the fact that newcomers seldom have the capital needed” to take on risks. Yet, as the consulting firm stressed, the industry “is not impregnable,” and companies that “fail to adapt will weaken under the pressure exerted by those that use digital technology.”
Amrish Singh is the founder and CEO of Liberate
AI in Insurance
AI Startup Helps Insurers Spot Cognitive Decline in Older Drivers
Mind Foundry Ltd., an artificial intelligence startup vying to help insurers decide which drivers should be covered, has raised $22 million in funding, the latest sign of growing demand to deploy AI in critical sectors where there’s little room for error.
The startup’s AI tools are being used to detect cognitive decline in older drivers in Japan to aid Asian insurance giant, Aioi Nissay Dowa Insurance Co., in predicting and preventing accidents.
Aioi invested in the funding round along with Parkwalk Advisors and the University of Oxford, said Brian Mullins, Mind Foundry’s chief executive officer. The Series B round brings the startup’s total funding to $44 million.
Traditionally, insurers have relied heavily on details such as the type of car and the driver’s age to predict who is more likely to be involved in serious accidents — and to set insurance premiums. In recent years, some insurers have leaned on AI software both to expedite settling claims and to analyze driving data to come up with more precise risk assessments for customers. AI’s increasing influence on insurance coverage decisions may worry some, but Mullins said there’s an upside when it comes to seniors.
How Tight Should State AI Rules for Insurance Be?
Some players want new state insurance guidelines on artificial intelligence to fit like a billowy wool kaftan, and others want them to fit like a tight steel belt.
The wool versus steel fight is showing up in comments on a new model bulletin being drafted by the National Association of Insurance Commissioners’ Innovation Cybersecurity and Technology Committee.
The committee posted a second draft of the bulletin model last week on its section of the NAIC website. Comments on the new draft are due Nov. 6.
Scott Kosnoff, an insurance law specialist at Faegre Drinker, said in an email interview that the NAIC’s AI regulatory effort covers much of the same ground as Colorado’s new regulation banning uses of “external consumer data and information sources” that lead to race-based discrimination.
News
US property and casualty carriers' Q3 gains to rest on pricing push
A majority of the largest publicly traded US property and casualty insurers are set to report year-over-year gains in both earnings and revenues in the third quarter, as well as improvement in combined ratios compared to a year ago.
Of the 20 largest P&C and multiline insurers by total assets that trade on major US exchanges, 17 are expected by sell-side analysts to record higher earnings year over year, while 15 should see revenues rise compared to a year ago, according to an S&P Global Market Intelligence analysis.
Nine insurers are expected to record quarter-over-quarter declines in earnings per share, and the same number of companies are projected to see sequential drops in revenues.
CFRA Research analyst Cathy Seifert said in an email that interest in the P&C space will likely be focused on the degree to which commercial lines insurers are able to maintain pricing power, while the personal lines space will be looking at claim cost inflation, particularly in the auto sector.
"To the degree that personal and commercial auto claim trends ease, investors will likely reward publicly traded auto underwriters by bidding up their shares," Seifert told Market Intelligence.
GEICO lays off 6% of workforce, prioritizes return to office
Insurance giant GEICO will cut 2,000 staff and mandate in-office days
Auto insurance giant GEICO will lay off 2,000 staff, or 6% of its workforce, and had issued a return to office mandate, the insurance company’s CEO Todd Combs said in a letter to employees sent this morning.
Staff affected by layoffs will be contacted today, Combs outlined in a company-wide email that was shared with Insurance Business by GEICO.
“To better position ourselves for long-term profitability and growth, and after a thorough evaluation across all lines of business, we are reducing our workforce by roughly 2,000 associates, or 6% of our total workforce,” Combs wrote to staff. “This will allow us to become more dynamic, agile, and streamline our processes while still serving our customers.”
Those not affected by cuts have been told they will be expected to boost their in-office days, with full implementation of this policy expected to follow from January 1, 2024
Travelers profit falls 14% on elevated catastrophe losses
Travelers Cos. Inc. on Wednesday reported a 14% fall in quarterly profit, as severe wind and hailstorms in parts of the United States drove up catastrophe losses for the insurer.
Core income of the New York-based company, often seen as a bellwether for the insurance sector as it typically reports results before peers, fell to $454 million, or $1.95 per share, in the third quarter ended Sept. 30, from $526 million, or $2.20 per share, a year earlier.
Severe wind and hail storms in multiple states caused the insurer’s catastrophe losses net of reinsurance to jump to $850 million from $512 million a year earlier.
Reinsurance broker Gallagher Re pegged global insured losses from natural catastrophes in the first nine months of 2023 at $93 billion, with the United States accounting for 74% of the losses.
The United States accounted for 23 out of 29 natural disasters that caused a loss of $1 billion each in the period, the broker said.
“Core income of $454 million for the quarter benefited from very strong underlying underwriting returns and net investment income but was also impacted by elevated catastrophe losses,” Travelers CEO Alan Schnitzer said.
The company reported a combined ratio of 101%, compared with 98.2% a year earlier. A ratio below 100% means the insurer earned more in premiums than it paid out in claims.
InsurTech/M&A/Finance💰/Collaboration
Top 10 insurtech accelerator programmes 2023
We list our Top 10 accelerator programmes that are providing mentorship to, and investing in, early-stage insurtech startups and entrepreneurs
What use is an accelerator, anyway? Turns out, quite some use indeed. These often months-long programmes give early-stage startups valuable insights, knowhow, connections, mentorship and even funding. In a cut-throat environment, that level of support can be the difference between floundering and flourishing.
So, with that in mind, we have rounded up our Top 10 insurtech accelerators.
InsurTech Digital
Cover Whale Introduces Bob: An AI-Powered Chatbot Revolutionizing Commercial Trucking Insurance
Cover Whale Insurance Solutions, Inc., a leading commercial trucking insurance provider and fast-growing insurtech, today announced Bob, its cutting-edge AI chatbot. As an embodiment of expert knowledge and agility, Bob streamlines communication with agents and policyholders, crucially improving response times and supporting Cover Whale's rapid growth.
Bob, an acronym for "bundle of bots," represents a collective of unique AI models trained to leverage Cover Whale's extensive knowledge base. Bob is primed to handle a spectrum of queries originating from Cover Whale's expanding base of commercial trucking insurance constituents, including insurance agents and their independent-trucker and fleet-owner clients.
Distinguished by accuracy and dynamism, Bob swiftly handles inquiries including claims processing, quoting and binding status, loss runs, underwriting guidelines, and other inbound questions and the conversations that follow. Bob is built to outpace the industry-standard wait time with an impressive two-minute response threshold, all the while maintaining Cover Whale's brand voice. Bob is also enabled with optical character recognition (OCR) to read inbound communications with embedded images.
BTV reveals accelerator success as startup valuation closes on $1bn
The Iowa-based firm has become a driving force for emerging insurtech companies, consistently propelling them to new heights. At the top of this list of achievements is their remarkable success rate. 96% (46/48) of all startups that have participated in the BTV accelerator are still operating, or have been successfully acquired.
These eye-catching figures only serve to reaffirm the programme’s position as a catalyst for sustainable growth within the industry, with the collective valuation of these four cohorts now rapidly approaching the much-vaunted $1bn mark.
These startups have even managed to rake in over $250m in funding since their participation in the accelerator, which is only continuing the exponential growth that these startups have experienced since entering the accelerator. In fact, on average, startups that have gone through the BTV accelerator program have witnessed their valuations double since their enrolment.
Dan Keough, Holmes Murphy Chairman and CEO and BTV Co-CEO, said, “We are immensely proud of our startups’ achievements and of the continued growth of the InsurTech sector as a whole. These outstanding outcomes validate the effectiveness of our accelerator program and underscore the vital role that InsurTech startups play in driving innovation within the insurance industry, while also working to identify risks sooner and drive down costs faster for our clients.”
SkyWatch and Droneinsurance.com join forces to set the benchmark in digital Drone Insurance - Insurtech Israel News
SkyWatch, a leader in digital insurance for the aviation industry, is proud to announce the strategic acquisition of Droneinsurance.com‘s assets. This collaboration brings together two innovative platforms, to offer clients a seamless experience with more options. It marks a significant milestone in the drone insurance sector and underlines SkyWatch’s commitment to providing unmatched coverage and service to drone operators across North America.
Under the partnership, customers of Droneinsurance.com will now be seamlessly transitioned to the SkyWatch platform for their insurance needs. This move guarantees a smoother experience for Droneinsurance.com clients while opening up a new world of enhanced possibilities for coverage and support through SkyWatch’s comprehensive offerings.
SkyWatch’s array of insurance policies, including hourly, monthly, and annual options, cover a wide spectrum of drone operators — from small photography businesses to inspection services, drone deliveries, light shows, and beyond. With coverage available in all 50 U.S. states and Canada, SkyWatch has firmly established itself as a pioneer in the drone insurance landscape.
“Droneinsurance.com has been a driving force in the industry, and we have always respected them as one of the first players that genuinely cared about the market and customers, striving to bring meaningful innovation,” says Tomer Kashi, CEO of SkyWatch. “This acquisition represents not just a business decision, but a commitment to elevating the standards of drone insurance for all operators so they can focus on their mission with confidence.”
Recommended Events
AM Best to Participate in Artificial Intelligence-Focused Panel at ITC Vegas 2023
AM Best Rating Services Executive Vice President and Chief Strategy Officer Andrea Keenan will participate in an artificial intelligence (AI)-focused panel discussion at ITC Vegas 2023, the world’s largest gathering of insurance innovation, which will occur Oct. 31-Nov. 2, 2023 at Mandalay Bay in Las Vegas.
“Tomorrow's Underwriter - Building Trust in AI, Generative and Beyond”
The panel discussion is titled, “Tomorrow's Underwriter - Building Trust in AI, Generative and Beyond” and will be held at 11:10 a.m. in the Mandalay Bay Ballroom on Wednesday, Nov. 1.
The discussion will address four core paradigms of AI – prediction, segmentation, optimization and generation – and address how each can contribute to business results. In addition to Keenan, the panel will include Federato founder and CEO, Will Ross, and Chief Operating Officer Megan Bock Zarnoch; Nigel Walsh, managing director for insurance, Google Cloud; and Deborah Smallwood, CEO and founder of Strategy Meets Action.
Keenan directs AM Best Rating Services’ strategy globally, and is responsible for the commercial, public relations, business development, industry research and corporate events teams.
Canada
Ontario reveals plans for carjacking crackdown
Some insurance industry groups have called it a crisis
Ontario Provincial Police have joined with their Greater Toronto Area counterparts to create a provincial taskforce aimed at addressing a rise in carjackings.
The task force is set to be co-led by the OPP and Toronto police, who say the level of violence used in vehicle thefts represents a “new and evolving threat.”
In a joint statement, the forces say there have been more 300 carjackings in the GTA this year, with over 200 of those taking place in Toronto.
Vehicle theft more broadly has spiked in recent years, with some insurance industry groups calling it a crisis.
Accelerant expands presence to Canada through acquisition of Omega Insurance
Insurtech firm Accelerant is set to expand its presence into the Canadian market through the acquisition of Omega Insurance Holdings, Inc., from Till Capital Ltd.
Omega Insurance Holdings offers secure, innovative and customized solutions for re/insurers entering and exiting the Canadian insurance market.
Jeff Radke, CEO and co-founder of Accelerant, commented: “Accelerant’s entry into Canada is an exciting culmination of years of work to understand and meet the unique needs of Canadian managing general agents and program administrators.”
As of 2022, Canada is said to have over 80 managing general agents (MGAs).
At the same time, Accelerant now has regulatory approval to welcome Canadian MGAs as members, to whom the company provides all the services they require to succeed, which includes distribution management and operational, actuarial, regulatory, and capital support.