AI in Insurance
Meet Your New Employee: Advanced AI
Much of the discussion around how to manage the advanced forms of artificial intelligence—machine learning, generative AI, large language models—deals with them only as technologies. This is a mistake.
Executive Summary
“Like any employee, AI must be onboarded to learn ‘how we do things around here,’ ”SAS Institute’s Insurance Industry Advisor Mike Fitzgerald.
Here, he notes that advanced forms of AI have characteristics that set them apart from other technologies—including the fact that they can make recommendations and decisions on their own that may not reflect corporate values—suggesting that insurers need to address this by applying standard human resource processes to advanced AI to keep them in line.
There are characteristics of these tools which require insurers to apply some of their traditional human resources tools to ensure adequate governance and to maintain an acceptable risk exposure.
Michael (Fitz) Fitzgerald is Insurance Industry Advisor for SAS Institute, Inc., an analytics and software solutions provider
News
Consumer Federation of America Testifies on Rising Property Insurance Costs and The Impact on Consumers
Rising Costs Are the Result of Several Reinforcing Factors, Consumers Require Major Reforms
On September 7th, 2023, Consumer Federation of America’s Director of Insurance Douglas Heller testified before the Senate Committee on Banking, Housing, and Urban Affairs on rising property insurance costs and the impact on consumers. In the testimony, CFA noted that failures we see in property insurance markets today are a result of several reinforcing factors, especially insurance companies’ ignoring climate risk for decades.
CFA stated that rate hikes by insurers and announcements to limit sales or coverage in certain areas are wrecking havoc on consumers. Two of the biggest drivers of premium increases and regional availability crises are the interacting effects of climate change and the exploding cost of risk transfer in the unregulated, global reinsurance market. To address affordability and availability, insurance regulators must focus on providing and incentivizing more investments in risk reduction and loss mitigation. And to stabilize the insurance market, regulators must incorporate mechanisms that supplement the unregulated reinsurance market, such as a public mega-catastrophe reinsurance facility.
Finally, rising insurance costs do not stem from consumer protection laws that provide regulatory oversight or legal accountability for bad actors in the insurance industry. These claims–that consumer protection laws are the problem–are inaccurate and harmful.
Caught in financial storm, P&C insurers turn to reorg, layoffs
Some of the costliest periods of natural catastrophes, rising accident claims and persistent inflation, have conspired to inflict turmoil for P&C insurers, leading to huge underwriting losses, reorganizations, and layoffs.
Through the first half of 2023, total underwriting losses reached $22 billion, resulting in net income of just $2 billion despite higher investment earnings. GEICO, Liberty Mutual, State Farm, and Farmers, among others, all reported huge underwriting losses in 2022 with some continuing in the current year. They mostly blamed the same causes but are dealing somewhat differently with the tumult.
Munich Re reports better-than-expected Q3 net profit, raises 2023 guidance
German reinsurer Munich Re (MUVGn.DE) said on Monday that net profit in the third quarter was around 1.2 billion euros ($1.27 billion), better than expectations, and it raised its outlook for the full year.
In an unscheduled announcement of preliminary earnings, the company cited major losses in its property-casualty division that were slightly below expectations and strength in its life and health reinsurance business.
Analysts had expected net profit of 1.131 billion euros in the quarter, according to a consensus of 15 analysts compiled by Munich Re. That is up from net profit of 527 million euros a year earlier.
For 2023, Munich Re now expects net profit of 4.5 billion euros, higher than the 4 billion euros it had previously flagged.
Munich Re will announce final results on Nov. 8.
Chubb reports significant rise in net income as P&C underwriting profit swells in Q3
Property and casualty insurer Chubb has reported net income and core operating income for Q3 2023 of $2.04 billion each, up 157.8% and 55.4%, respectively, as its P&C arm delivered a combined ratio of 88.4% with underwriting income of $1.31 billion.
The P&C underwriting result improved significantly from the $710 million gain seen in Q3 2022, when Chubb reported a combined ratio of 93.1%.
In fact, the segment’s current accident year underwriting income excluding catastrophe losses was a record $1.78 billion, with a combined ratio of 84.3%.
Growth was also solid in P&C in Q3 2023, with net premiums written jumping more than 8% year-on-year to $11.7 billion.
Commentary/Opinion
The Insurance Industry's PR Crisis
Insurance insiders understand why premiums need to climb for autos and homes -- but consumers are angry.
The headline in Business Insider couldn't be starker: "Insurance Companies Have Discovered Devious New Ways to Rip You Off." And I think it should be a call to action.
People in the industry understand the need to sharply raise rates for auto and homeowners insurance. Replacement costs are way up, climbing far faster even than the lofty inflation rates of the past two years. The addition of sophisticated electronics in cars and the transition to electric vehicles increase repair costs, too. Frequency of claims is up, as well, and will likely keep increasing, especially for homeowners, as the warming climate causes more and bigger storms and wildfires.
As costs rise, premiums have to, too. Insurance is a business, not a hobby.
But consumers aren't in the industry and aren't exactly sympathetic to insurers' problems. They just see rates soaring, and they're angry. They will now generate as much pressure as they can on state regulators -- whom they elect, either directly or indirectly -- and we can expect to see a lot more headlines about "devious" insurers.
What to do?
Paul Carroll, editor-in-chief, Insurance Thought Leadership
InsurTech/M&A/Finance💰/Collaboration
Arthur J Gallagher to Acquire Cadence Insurance for $904M
Arthur J Gallagher to Acquire Cadence Insurance for $904M
Arthur J. Gallagher & Co. today said it has signed a definitive agreement with Cadence Bank to acquire Cadence Insurance, Inc. for $904 million cash.
Baton Rouge, Louisiana-headquartered Cadence Insurance, the second largest bank-affiliated insurance brokerage in the nation, offers a suite of commercial property/casualty, employee benefits, and personal lines products to clients from 34 offices in 9 different states across the Southeast, including Texas.
Insurtech startup QuoteWell comes out of stealth, raised over $15M in Series A funding led by NEA
QuoteWell, a tech-enabled commercial insurance wholesale brokerage that is at the forefront of innovating the distribution side of insurance, today announced the launch of its brokerage operations to serve independent retail agents. QuoteWell helps agents who are often overlooked and given poor customer service due to low premiums associated with their accounts and provides best-in-class in-house brokers to efficiently find and place the risk.
In the lead-up to today's public launch, QuoteWell, founded in 2021, has secured over $15 million in Series A funding led by New Enterprise Associates, Inc. (NEA). Goldcrest and Floating Point also participated in the round. The new capital will be used towards expanding the company's brokerage team and enhancing the infrastructure that underpins automation and operational efficiencies.
"We see a huge opportunity to better serve a segment of the insurance business that is often underserved by incumbents and developed what we call a hybrid insurtech that aims to provide the best service and results for our customers," said Joey Bouchard, CEO and Founder, QuoteWell. "As a part 'software startup focused on the insurance sector' and part 'wholesale broker,' we combine industry best practices with a forward-looking, innovative lens to deliver the most impact."
New ADEPT Driver Program Boosts Telematics Policyholder Retention
ADEPT Driver®, a research and product development company that provides driver safety training to the insurance industry, today announced the details of a new program designed to increase telematics policyholder retention and enhance crash avoidance skills.
Telematics Tutor™ will join the award-winning organization’s online offerings in November.
As telematics dropout rates soar, Telematics Tutor helps insurers reestablish trust with policyholders by demystifying usage-based insurance and teaching drivers how to improve their UBI scores. The science-based course effectively modifies driver behavior by targeting the underlying causes of auto crashes.
“We are excited about the potential of integrating neurocognitive assessment metrics with UBI and telematics metrics to improve underwriting pricing models and predictive analytics,” said Dr. Richard Harkness, CEO of ADEPT Driver.
High-risk drivers with low telematics driver risk scores can take Telematics Tutor and improve their scores by learning what factors contribute to risk score calculations and then changing their driving behaviors. In addition to premium discounts, higher customer satisfaction and safer driving, this can lead to increased adoption and lower dropout rates, as well as better retention of high-value, lower-risk customers.
“Effective driver behavior modification can reduce loss costs and increase profitability,” Harkness said. “The best way to reduce your loss costs is to not have the claim in the first place.”
CompScience Insurance launches safety platform
CompScience Insurance Services Inc., a San Francisco-based insurtech specializing in artificial intelligence technologies, announced Monday the launch of the CompScience Intelligent Safety Platform as a way for companies to mitigate potential workplace safety hazards.
The product is designed to help reduce injury risk in industries such as manufacturing, hospitality retail and logistics, and simultaneously help to keep down workers compensation premiums.
The new AI-powered platform generates a full suite of causal risk factors, including scoring safety at facilities, reporting potential injuries with video analytics, detecting real-time risk, and providing risk reduction recommendations.
CompScience says the goal of the platform is to end the cycle of reactive safety and help companies use real-time data to come up with more proactive solutions to mitigate the total cost of risk.
People
Crash Champions Announces Appointment of Automotive Insurance Industry Veteran Michael Sieger to its Board of Directors
Crash Champions, LLC ("Crash Champions" or the "Company"), one of the nation's largest and fastest-growing operators of high-quality automotive collision repair services, announced today the appointment of Michael Sieger to its Board of Directors.
Mr. Sieger joins Crash Champions following a three-decade career at The Progressive Corporation (NYSE: PGR, "Progressive"), where he most recently served as Claims President from 2015 until his retirement in January 2022. At Progressive, Mr. Sieger was responsible for overall claims strategy and led the organization through significant growth during his tenure.
"We are proud to welcome Mike to Crash Champions' Board of Directors," said Matt Ebert, Founder and CEO of Crash Champions. "Mike brings a wealth of knowledge on the automotive insurance industry, having helped lead Progressive during a period of strong growth, which should bring us valuable insights as we continue our strategic expansion across the U.S."
"Crash Champions has more than doubled its footprint since we partnered with the Company last year. As we seek to continue our growth trajectory, we are excited to welcome Mike to the Board and look forward to leveraging his seasoned industry perspectives," said José E. Feliciano, Chairman of Crash Champions' Board of Directors and Co-Founder and Managing Partner of Clearlake, and Colin Leonard, Partner and Managing Director at Clearlake
EMEA
Zurich slashes claim times to just 13 minutes after introducing WhatsApp and video customer journeys
Waiting times for Zurich customers have been slashed dramatically after the insurer introduced video and WhatsApp messaging for customers making a claim.
Claims times have been cut to an average of just 13 minutes for customers using a new WhatsApp messaging option, while Zurich has seen a five-fold rise in the number of customers using the insurer’s new video messaging service, Hello Zurich.
Hello Zurich allows claims handlers to video call with claimants, building trust from day one while allowing handlers to capture visual information about the claim, significantly reducing time and hassle for customers and eliminating the need for long email exchanges.
Zurich is also employing the service for customers identified as vulnerable, who may be more comfortable discussing their claim face-to-face rather than over email or the phone.
Meanwhile Zurich has also launched an end-to-end WhatsApp messaging journey for contents insurance claimants. This enables customers to share information instantly with images taken and stored on their mobile devices and the option to instantly copy documents via their camera apps.
As a result, average claim times have been reduced to just 13 minutes for customers making contents insurance claims. Zurich plans to expand the service into other lines in the future.