Commentary/Opinion
Survival of the Fastest–Strategy 1: Auto Quoting that Avoids the Hidden Costs of Lost Business
One-rate insurers can gain sizable and durable competitive advantages as the vanguard of a revolution in selling personal auto insurance.
In this, the first article of a four-part series, see how multiple auto rate calls damage the customer experience—and how insurers can evolve beyond obsolete quote flows.
Is your business suffering from a slow and outdated quoting process? How long does it take for your new customers to get a complete, accurate, fully bindable quote? How easy do you make it for them?
The insurance buying journey remains tedious and complex, requiring applicants to repeatedly input new information or validate data running in the background. Meanwhile, reports are ordered in sequential stages, contingent upon the outcomes of prior steps. This outdated process can result in up to a third of potential customers abandoning the sales funnel before even seeing a price. Of applicants that remain, as many as 30 percent may be uprated after the initial quote—a customer experience that erodes trust.
David Ayers leads technology initiatives and insurance use-case development for Verisk’s LightSpeed platform
Dramatic plan to expand flood areas could force millions to buy insurance
It’s a glaring weak spot in climate protection: Millions of U.S. residents don’t have flood insurance and face financial ruin if their home is inundated.
But the nation’s insurance gap would shrink under a dramatic proposal that could require millions of property owners to buy flood coverage for the first time, potentially costing them thousands of dollars a year.
The proposal by a federal advisory panel, Technical Mapping Advisory Council (TMAC) urges the government to expand the areas considered by regulators to be at high risk of flooding, according to a report by the panel that was provided to E&E News.
The consequences would be far-reaching and costly because property owners in those areas are required by law to have flood insurance if their property is secured by a federally backed mortgage.
Flood coverage is sold separately from homeowners insurance, and a small fraction of U.S. households have flood policies.
Expanding the flood insurance requirement to millions of additional properties could upend housing markets across the nation by increasing ownership costs. But it could also financially protect millions of people who currently don’t have coverage as they face rising flood risk. Uninsured homeowners can collect only a few thousand dollars in federal disaster aid after a major flood.
“This adjustment would be a significant shock,” said Jeremy Porter, head of climate implications research at the First Street Foundation, a New York nonprofit that assesses climate risk.
It’s unclear how many additional property owners would be required to have flood insurance under the proposal. Coverage costs about $1,000 a year, but prices are rising rapidly as climate change and increasing development intensify flood damage.
Currently about 8.5 million properties are located in areas considered by the federal government as having a high risk of flooding — a number that is widely believed by experts to be too low.
The First Street Foundation estimates that 19 million properties should be in at-risk areas.
“Half of all properties across the country with significant flood risk don’t know it because they are not currently mapped” into a federal flood risk area, Porter said.
The new proposal aims to address well-documented problems with federal flood maps that have contributed to a national shortfall in the use of flood insurance. The maps have been criticized for excluding large tracts of flood-prone area and for leading people who live outside of a designated at-risk area to believe — incorrectly — that they are safe.
The proposal “has a significant positive impact on ensuring that people are more financially protected,” said Chad Berginnis, executive director of the Association of State Floodplain Managers. “Insurance is always a front-line protection.”
News
New 'industry-first' sustainable tool launches for auto insurers
[Ed. Note:]
Call to action and global preview from down under where the impact of Climate Change is irrefutable and existential.
Big kudos to Solera, Inc. for enabling the auto insurance ecosystem to manage Sustainability. Now is the time for all of us to learn about Scope 1,2 and 3 emissions and the impact our industry can have, specifically on Scope 3. Carriers can commit to reducing their carbon footprint across the value chain by choosing suppliers that are performing better when it comes to reducing emissions, by encouraging other businesses to take corporate climate action and position their brand as a responsible and innovative market leader.
Solera, a global provider of vehicle lifecycle management and claims, has launched Sustainable Estimatics – which Solara claimed to be an industry-first carbon tracking tool.
The tool enables insurers to track and offset the carbon emissions linked to the end-to-end auto insurance claims process, focusing on scope 3 emissions, which are the most difficult to measure. It also enables insurers to compare the CO2 emissions associated with repairing car parts versus replacing them to help drivers make well-informed decisions.
“With one of the world's largest AI-powered claims databases, we're excited to introduce Sustainable Estimatics to the Australian market. This innovative tool is designed to address the urgent sustainability demands facing insurers, not merely as a compliance checkbox, but as a way to help them provide customers with more competitive, green premiums,” said Solera APAC managing director Chris Iacovou.
Insurers commit to sustainability
According to Solera, a whopping 99% of insurers recognize the significance of prioritising sustainability metrics, but face various challenges implementing these. It also found that almost a quarter of insurers (22%) struggled with limited access to vehicle claims emission data, while 27% faced data silo challenges. Similarly, 23% lacked the necessary analytics skills to make informed decisions regarding claims data and sustainability.
White House Holds Round Table Discussion on Right to Repair Efforts
State legislative leaders and industry representatives from around the U.S. convened at the White House on Oct. 24 to discuss how to ensure consumers retain the right to repair what they own, including their vehicles.
The discussion, hosted by the National Economic Council, focused on how original manufacturers’ increasing use of repair restrictions, like patent abuse, hurt small businesses and consumers alike.
“From smartphones to wheelchairs to cars to farm equipment, too often manufacturers make it difficult to access spare parts, manuals and tools necessary to make fixes,” said Lael Brainard, director of the NEC. “So it doesn’t only cost consumers money, but it also prevents independent repair shops from competing in this business and it creates unnecessary waste from reducing the lifespan of these devices.”
Representing automotive repairers in the discussion was Don Jones, senior vice president at Allstate and a member of the CAR Coalition. Jones talked about how bipartisan bills like Save Money on Auto Repair Transportation (SMART) and Right to Equitable and Professional Auto Industry Repair (REPAIR) acts would increase consumer choice and promote a healthy car repair market for vehicle owners.
“One way to increase consumer choice is to bolster aftermarket part manufacturing,” Jones said. “Unfortunately, the manufacturing of aftermarket parts has been severely limited due to OEM use of design patents on basic cosmetic car parts.
"The good news is, there is a solution,” Jones continued. “Simply, the bipartisan SMART Act will provide customers with increased options and choice---saving them money and potentially getting their vehicle repaired more quickly.”
Research
U.S. CEOs Head for the Exits Across Industries; No. of Insurer Exits Steady
Through the first nine months of this year, 1,425 CEOs have left their posts at U.S. companies across industries—marking the highest nine-month total in over a decade.
According to global outplacement and business and executive coaching firm Challenger, Gray & Christmas, Inc., the nine-month figure is 47 percent higher than the 969 CEO changes the firm counted for the during the same period in 2022—and surpasses any nine-month total on record since the firm began tracking in 2002.
According to the firm, in just the third quarter, 518 U.S. CEOs left their posts—also the most in a quarter on record. The third-quarter figure is up 166 percent from the 195 CEOs who left in the third quarter last year, and up 5.9 percent from second-quarter 2023.
“Companies are revving up for economic changes in the coming months,” said Andrew Challenger, senior vice president of Challenger, Gray & Christmas, in a media statement. “With the rise of labor costs and interest rates, companies are looking to new leaders.”
Digging into details by industry, the report shows that insurance industry CEOs bucked the overall trends with the number of departures tallied by Challenger, Gray & Christmas almost exactly the same as last year’s count—16 in 2023 vs. 17 in 2022. For other financial firms, in contrast, the exit numbers mirrored the overall trend with exits rising 36 percent in 2023 so far.
CEO Factories: Which Companies Manufacture the Most Future CEOs?
Are there some companies that breeding grounds for future chief executives? Are there any “CEO factories” in the insurance sector?
A new analysis from online small business lender OnDeck has found that five management consulting firms produce the most CEOs. And among those consulting firms, McKinsey & Company outranks the others, according to the OnDeck analysis, which found that 7.1 percent of McKinsey’s former employees have graduated into the role somewhere.
Only one property/casualty insurance company appears on any of the charts created by OnDeck: AIG.
But with just under 2 percent of AIG employees (1.79 percent) climbing the corporate ladder to a CEO role over the course of their careers, the commercial insurance giant’s ability to manufacture CEOs falls well short of the McKinsey, and even Lazard—the top-ranked financial firm.
AIG ranks 17th out of 20 finance companies analyzed by OnDeck.
Carriers prioritize customer experience in digital transformation
Improving customer experience has emerged as a pivotal focus for carriers and brokers in their digital transformation journey, according to data from Digital Insurance's State of Insurance Digital Transformation 2023 report.
Other primary tech-oriented goals for carriers and agents include driving underwriting efficiency and overcoming tech talent shortages.
Customer Experience
According to Digital Insurance research, 85% of carriers and brokers named customer experience as one of their top three goals for digital transformation, and 47% identified it as their first priority.
"Insurance companies say improving customer experiences is a top priority – making it simpler and taking out the hurdles," said Ellen Carney, principal analyst at Forrester.
"From a digitization and technology standpoint, that includes straight-through processing. If you have a parking lot accident, we wouldn't need to send out an adjuster and we could just pay the limits. Ask the customer how they want the payment, like Venmo or PayPal, and make it super simple."
Forrester's research echoes insurers' sentiments surrounding customer satisfaction, with 77% of insurers saying that improving the customer experience is their top priority overall. Straight-through processing enables automated underwriting processes or claims handling, with the goal of minimizing manual intervention and reducing processing time.
"The numbers that we've heard about straight-through processing are really ambitious, with 70% to 75% [of carriers saying they plan to use] straight-through processing in underwriting in the case of life insurance and claims in P&C," said Carney.
Improved Auto Insurance Results Coming—But Not Soon Enough: S&P GMI
Strong rate hikes fueling nearly a 16 percent in direct written premiums for U.S. private passenger auto insurers will bring the industry combined ratio down from a “worst-in-decades” result for 2022, according to an analysis by S&P Global Market Intelligence.
But the improvement from a 112.2 combined ratio won’t be as much as the industry had hoped, S&P GMI said in a media statement announcing its newly released “U.S. Auto Insurance Market Report, which added that improvements aren’t coming as rapidly as expected.
Although the report does not indicate the expected combined ratio improvements, S&P GMI told Carrier Management that project the firm’s analysts project that U.S. private auto combined ratio will come down to about 108.7 for 2023 and to 102.9 for 2024
The report does provide direct premium growth forecasts of 15.9 percent for full-year 2023, and 9.1 percent for 2024. The 15.9 percent projection exceeds an 11.4 percent growth figure achieved across the industry for the first-half of 2023, a prior projection from S&P GMI of 13.4 percent—and surpasses the previous 25-year high rate of 10.2 percent in 2003.
“The post-pandemic return to normalcy has played out differently than most market participants envisioned,” said Tim Zawacki, Principal Insurance Analyst, S&P Global Market Intelligence.
“Stubbornly elevated crash severity has defied the longer-term trend, reflecting secular changes in working patterns and other factors that have resulted in more wrecks occurring at higher rates of speed. Increases in severe crashes have precipitated a rise in litigated claims, which drive up costs. Severe weather and a surge in vehicle thefts have resulted in higher losses in the comprehensive coverage,” he said, summing up the environment that auto insurers are responding to with rate actions.
AI in Insurance
Xceedance Launches Center of Excellence for Generative AI, Empowering Insurance Transformation
Xceedance, a leading global provider of strategic operations support, technology, and data services for insurance organizations, announced the establishment of a Center of Excellence for Generative AI. This initiative will see significant investments in developing and introducing high-ROI generative AI use cases across the insurance value chain.
Arun Balakrishnan, CEO of Xceedance, emphasized the impact of this development, stating, “One of the most compelling advantages of Generative AI is its ability to expedite data processing, elevating insurance professionals from laborious, repetitive tasks to higher-value responsibilities. Xceedance is at the forefront of innovation, collaborating with several insurers and brokers worldwide to establish a sandbox environment for experimenting with Generative AI. This approach ensures motivated users gain exposure to Generative AI, enabling them to identify high-return use cases and fail fast, fostering technological exploration.”
Generative AI addresses the pressing need to assimilate data from diverse sources and extract insights into evolving risks. It equips insurers with a deeper understanding of underlying risks, allowing them to stay abreast of technological advancements in various industries, comprehend associated risks, strategically use data, and embrace intelligent technologies. In an industry where human expertise is crucial for customer engagement and Generative AI is a relatively new and untested technology, the sandbox approach provides the groundwork for successful integration.
How Nationwide is Embracing the Revolution of Generative AI
Dr. Emily Tincher had a problem.
Her team was looking for ways to transform thousands of pages of highly technical veterinarian medical knowledge into digestible information that could help the common pet owner take better care of their dogs and cats.
The challenge was with so much potential content—it seemed an insurmountable task to even get a start. Demanding project timelines were also adding pressure.
Enter generative artificial intelligence.
With a few creative prompts, Emily and her team were able to ask the Generative AI tool to create first-draft summaries for seventy-one different health conditions.
With a few more prompts, the tool quickly created additional drafts of both short-form and longer-form descriptions of the health conditions—all drafted in laymen’s terms.
With the boost from generative AI, Emily and a team of other veterinarian experts at Nationwide Pet were able to review and update the newly packaged information for accuracy and enhancement.
The resulting subject matter was transformed into the secret sauce fueling the one-of-a-kind Nationwide Pet HealthZone®, a groundbreaking platform that uses Nationwide Pet claims data from millions of pets to provide personalized information about specific health risks.
In an effort that saved more than three hundred hours, the use of generative AI drastically accelerated the creation of 35,000 words of medicalized content, saving time and money.
“Without the option to use generative AI, we would have had to either compromise the quality of the content we were aiming for, or dramatically extend a critical deadline. It was a fantastic way to augment our resources,” said Dr. Jules Benson, Nationwide Vice President, Pet Health and Chief Veterinary Officer.
It’s one of several ways Nationwide is on the forefront of leveraging generative artificial intelligence to speed up work and provide better customer experience for partners and members.
A leg up on the competition
“For the better part of a decade, we’ve been investing in our technological and data analytics infrastructure to leverage artificial intelligence and machine learning at scale to enable our business,” said Nationwide Chief Technology Officer Jim Fowler. “Our team has the advantage of that upfront investment allowing us to embrace the revolution that generative AI will bring to our industry.”
Joe Case, Public Relations Lead, Nationwide
InsurTech/M&A/Finance💰/Collaboration
Nationwide and Resideo Technologies Partner to Enhance Home Protection Through Smart Solutions
Nationwide has announced its partnership with Resideo Technologies - a global provider of Honeywell Home smart thermostats and First Alert solutions. Nationwide is one of the largest and strongest diversified insurance and financial services organisations in the US and provides a full range of insurance and financial services products.
Resideo is a leading global manufacturer and developer of technology-driven products and components that provide critical comfort, energy management, and safety and security solutions to over 150 million homes globally.
The collaboration will see the merger of Nationwide’s extensive coverage and industry expertise with Resideo’s comprehensive smart home solutions and its network of national installation relationships, enabling US homeowners to harness technology-enabled preventive capabilities, mitigating the risk of unexpected damage and the associated financial implications for their homes.
InsurTech Laka pedals ahead with $8m funding and strategic acquisition
Laka, an InsurTech aimed at bicycles, reportedly announced a successful funding round amounting to $8m. Leading the investment was the French mobility fund, Shift4Good.
Additional supporters of this round encompass Autotech Ventures, Porsche Ventures, Creandum, Ponooc, and Elkstone Partners, according to a report from Forbes. It’s worth noting that the funding round was composed of both debt and equity.
Laka distinguishes itself with a unique “collective-driven insurance model”. Instead of traditional upfront premiums, this approach calculates coverage costs based on the actual claims filed each month. These costs are then evenly spread amongst a collective of e-bike riders. Essentially, cyclists only pay for the coverage they truly require.
Adding to its expansion trajectory, Laka also acquired Cylantro, a reputable e-bike insurance broker situated in France.
Laka’s bespoke insurance model has found success not only with individual customers but also through B2B2C partnerships, collaborating with major retailers to access a broader cyclist audience. Their established collaboration with Decathlon, a leading global sports retailer, exemplifies their outreach strategy.
Laka chief executive Tobias Taupitz commented on their growth strategy, “Over time we learned that there’s additional appetite on the B2B2C side, working with big partners like Decathlon, one of the world’s leading sports retailers, and we have been live with them for about two years now in various countries.”
Recommended Events
Press/Media - ITC Vegas
Founded in 2016, InsureTech Connect (ITC) is the world’s largest gathering of insurance innovation, offering unparalleled access to the largest and most comprehensive gathering of over 10,000 tech entrepreneurs, investors, and insurance industry executives from across the globe. The 2023 event’s presenting sponsor is McKinsey & Company.
From its inception, ITC has focused on providing exceptional experiences and a steadfast platform for connections, sharing of ideas and solutions, and amplifying new technology, thought leaders, and disruptors. Over the last 6 years, ITC Vegas has been attended by over 30,000 people from 65+ countries and continues to expand worldwide.
Canada
Équité Association launches insurance crime detection platform
Équité Association has launched a national insurance crime detection platform that uses predictive analytics and machine learning to detect and thwart insurance fraud.
The platform, called EQ Insights, leverages a "consortium-based approach," said Équité. It comes as bad actors exploit newer technologies to commit insurance-related crimes, which cost Canadians an estimated $3 billion to $5 billion annually.
"By coming together to share intelligence and merging analytics with member investigations, we can start to move the industry to a 'predict and prevent' model and, ultimately, make a meaningful reduction of these crimes in Canada," said CEO and president Terri O'Brien.
Équité counts Canada's top P&C insurers among its members, including Desjardins, Northbridge, iA Financial, Intact, Beneva, and Co-operators.