Commentary/Opinion
Three trends influencing a shift in insurtech
CEO shares the reason technology priorities are shifting
The insurance industry has undergone a profound transformation thanks to technology. Innovative digital solutions continue to overhaul inefficiencies and outdated processes, but three trends will influence how the insurtech sector will evolve, one CEO told Insurance Business.
According to Jason Liu (pictured), CEO of Zywave, a brokerage software technology provider, mergers and acquisitions, generative AI, and private equity investment are shifting insurtechs’ focus from administrative work to revenue operations.
“Historically, the focus has been on the back office or operations side [of insurance companies], rather than on what matters, which is the customers,” Liu said. “I’ve seen a shift in the last five years where there’s been increasing awareness and attention on the front office.”
“If you look at the [technology] spend, it’s almost two-thirds on the front office versus the back office. It’s completely the reverse in insurance, where the spend has been primarily on the policy and claims system on the carrier side, and the AMS (agency management system) on the agency side,” Liu said.
News
Treasury’s Federal Insurance Office Advances First Insurer Data Call to Assess Climate-Related Financial Risk to Consumers
Today, the U.S. Department of the Treasury’s Federal Insurance Office (FIO) took a critical next step to proceed with its first-ever data collection from insurers to assess climate-related financial risk to consumers across the United States.
FIO’s data collection will obtain previously unavailable insurance data at a ZIP Code level on a consistent, granular, and comparable basis from the largest homeowners insurance providers that collectively underwrite around 70% of homeowners insurance premiums nationwide. These nationwide data are critical to understanding how climate-related financial risks impact individuals and families across state markets and the United States, particularly given recent insurer pullbacks and significant premium increases in several states. In 2022, insurance covered only 60 percent of $165 billion in total economic losses from climate-related disasters, affecting millions of Americans.
“Americans are facing growing challenges from extreme weather events caused by climate change,” said Secretary of the Treasury Janet L. Yellen. “The Treasury Department’s insurer data collection is the first of its kind and will provide critical information at a local level to assess the increasing impacts of climate change on household budgets. The resulting data and analyses will help policymakers inform potential approaches to improving insurance availability and affordability for consumers.”
FIO today is providing public notice on its intent to proceed with the data collection, while also submitting the data collection request to the Office of Management and Budget for approval and public comment.
Today’s action advances the proposal for data collection that FIO published in October 2022. FIO has carefully reviewed the comments received and engaged with numerous stakeholders, including the National Association of Insurance Commissioners (NAIC) and state insurance regulators. Based on these discussions, FIO has streamlined and refined its data collection request to facilitate a more effective implementation of the collection. The changes to the data collection proposal are intended to help establish a national baseline for analytics at a ZIP Code level, while also reducing burden on small insurers. FIO will continue its engagement with the NAIC, state insurance regulators, and other stakeholders on this initiative.
Swiss Re P&C exec Anil Vasigiri on climate risk technology
The increasing number of climate disasters causing property losses and the increased risk of climate disasters affecting property insurance create greater demand for tech solutions to evaluate climate risks and respond. Swiss Re, as a reinsurer for property and casualty insurance carriers that directly deal with climate losses, has CatNet, a proprietary location intelligence tool for assessing climate risks, and Rapid Damage Assessment (RDA), a tool that uses aerial imagery and artificial intelligence and machine learning to generate actionable information for insurers.
Digital Insurance spoke with Anil Vasigiri, head of property and deputy head of P&C solutions at Swiss Re, about the RDA, the challenges in modeling climate disaster risks and how technology addresses these issues.
Rapid Damage Assessment is a new solution that we launched last year, just a few months before Hurricane Ian and it already has established its value proposition in the industry. We see a lot of traction for the platform. The components of what RDA brings exist in the market today – aerial imagery exists, AI/ML techniques exist, loss estimation exists.
Inflation, High Interest Rates, and Catastrophes Contribute to 2023 Underwriting Loss for P&C Industry, New Triple-I/Milliman Report Shows
The P/C insurance industry's forecast for 2023 combined ratio is 103.8, in part due to severe convective storm losses being the highest in decades.
The 2023 net combined ratio for the property/casualty industry is forecast to be 103.8, in part due to severe convective storm losses being the highest in decades. Hard markets continue with 2023 net written premium growth forecast at 8.3%, according to the latest underwriting projections by actuaries at the Insurance Information Institute (Triple-I) and Milliman.
Between 2020 and 2023, P/C insurance replacement costs increased an average of 45%, whereas inflation for the overall U.S. economy increased 15% within that same period.
The quarterly report, Insurance Economics and Underwriting Objections: A Forward View, was presented on Nov. 2, at an exclusive members only virtual webinar.
Michel Léonard, Ph.D., CBE, Chief Economist and Data Scientist at Triple-I, discussed key macroeconomic trends impacting the property/casualty industry results including inflation, increasing interest rates and overall economic underlying growth.
“P/C growth has improved in 2023, growing 1.3% versus 2.1% for overall gross domestic product (GDP). While many hurdles could derail such improvements, P&C underlying economic growth is currently positioned to increase faster than overall GDP by 2.6% versus 1.7% in 2024 and by 4.5% versus 2.0% in 2025,” he explained.
Commissioner Arnold Testifies on Behalf of NAIC at U.S. House Financial Services Subcommittee Hearing
Today, Minnesota Department of Commerce Commissioner Grace Arnold, co-vice chair of the National Association of Insurance Commissioners' (NAIC) Property and Casualty Insurance (C) Committee and member of the NAIC's Climate and Resiliency (EX) Task Force, represented NAIC Members before the U.S. House of Representatives Financial Services Subcommittee on Housing and Insurance.
Testifying at a hearing on "The Factors Influencing the High Cost of Insurance for Consumers," Commissioner Arnold observed how state insurance regulators "have the capacity to respond swiftly and nimbly to market conditions" in each of their markets.
In her companion written testimony, Commissioner Arnold discussed NAIC Members' work on two of the biggest challenges facing the insurance marketplace: natural catastrophes and emerging technologies. Their efforts include growing consumer awareness, strengthening communities' readiness, increasing industry transparency and disclosures, and equipping state insurance regulators with more tools and data to proactively address the challenges posed by natural catastrophes.
"We are on the front lines assisting consumers with policy questions and talking to businesses about their concerns. We are committed to doing all that we can to support our citizens and communities and continuing to work with our federal, state, and local partners to help our country address the devastating personal and economic impacts of natural disasters. State regulation has a strong 150-year-plus track record of evolving to meet the challenges posed by dynamic markets, and we continue to believe that well-regulated markets make for well-protected policyholders," said Commissioner Arnold.
Reiterating one of the NAIC's key legislative priorities, Commissioner Arnold urged Congress to pass a long-term reauthorization of the National Flood Insurance Program (NFIP) before its Nov. 17, 2023, expiration, noting, "A long-term extension will help provide certainty for policyholders in their efforts to prepare for flood disasters." She also urged support for the bicameral, bipartisan Disaster Mitigation and Tax Parity Act of 2023 (S. 1953 / H.R. 4070), which would ensure state-based disaster mitigation grants receive the same federal tax exemptions as federal mitigation grants, helping provide greater incentives for homeowners to take action to protect their homes from natural disasters.
InsurTech/M&A/Finance💰/Collaboration
Has the insurance M&A bubble deflated?
A recent report from OPTIS Partners’ M&A database revealed a notable drop in announced insurance agency mergers and acquisitions during the first three quarters of 2023. The figures show a decline to 534 transactions, down from 729 in 2022, marking a significant decrease.
The report covers sales of US and Canadian agencies dealing with property and casualty (P&C) insurance, as well as those managing both P&C and employee benefits or solely employee benefits. The data from 2022 onwards also encompasses life/financial services, consulting, and other businesses associated with insurance distribution.
OPTIS partner Steve Germundson said that various factors contributed to the slowdown in deal activity. Rising capital costs, increased leverage, and a reduced number of business owners prepared to sell were primary reasons for the decline, Germundson said.
Crunching the figures – has M&A movement slowed down?
Notable shifts in buyers’ behavior were observed, where previous active participants like Acrisure and PCF Insurance notably reduced their deal activity by 81% compared to 2022. However, new leaders emerged, with Broadstreet Partners and Hub International leading the transactions, completing 43 and 37 deals, respectively.
Cowbell gets $25M more to keep growing like gangbusters
Cowbell, the four-year-old company formerly known as “Cowbell Cyber” that offers cyber threat monitoring and insurance that helps cover its customers’ costs in the event of a breach or ransomware payment, has enjoyed a blockbuster year, reporting 49% growth year-over-year so far — and it’s not slowing down anytime soon.
Today the Pleasanton, California-headquartered company announced it has raised another round of $25 million from Prosperity7 Ventures, the diversified growth fund of Aramco Ventures, itself a subsidiary of Saudi Arabian oil giant Aramco. That’s notable since Aramco itself has been the target and victim of major cyber attacks, including the largest in history.
AI in Insurance
ACORD Transcriber Announces Expanded AI-Enabled Features for Intelligent Document Processing
ACORD Solutions Group, leading provider of next-generation digital solutions for the global insurance industry, today announced the launch of extended capabilities in ACORD Transcriber, a widely used tool that enables digitalization and automation of data processing from insurance forms and other documents. These AI-based capabilities facilitate data extraction from both structured and unstructured document formats, including submissions, contracts, invoices, endorsements, loss runs, market reform contracts (MRCs), schedules of value (SOVs), declaration pages, and more.
The latest features of ACORD Transcriber's insurance-specific AI/ML engine include new and enhanced capabilities such as:
Comprehensive baseline AI models: Built into ACORD Transcriber are pre-trained AI models for a wide variety of insurance document types. Leveraging these in combination with client samples reduces onboarding time and allows users to quickly achieve high levels of data extraction accuracy.
Advanced Large Language Models (LLM) integration: Sophisticated, insurance-specific AI models and advanced Natural Language Processing (NLP) features allow users to extract data from any insurance documents, even the most complex and unstructured ones. ACORD Transcriber includes out-of-the-box support for integration to multiple external LLMs, such as clients' proprietary or third-party models.
Improved data security: ACORD Transcriber has the ability to run all data extraction and population use cases in memory, with the option to not persist any customer data.
"Insurance stakeholders have to process a flood of documents every day, in a daunting variety of formats, from standardized to completely unstructured – PDFs, spreadsheets, tables, even text buried in the body of an email or images of paper forms captured by a mobile phone," said Rakesh Tangri, SVP & Global Chief Solutions Architect, ACORD Solutions Group. "They need a truly intelligent tool to understand all possible formats, extract and populate data with confidence, and make that data consumable – ultimately allowing them to thrive in our industry's digital future."
November Best’s Review Shows How AI is Changing the Insurance Business
In November, Best’s Review shows how artificial intelligence is impacting the insurance market and how it’s also presenting new challenges. In “What the AI Revolution Means for Insurers, Insureds and the Insurance Workforce,” industry experts were interviewed in AM Best TV’s studio, at conferences and in the field throughout the year to discuss the technology, risk opportunities and potential regulatory issues. Best’s Review also looks at how new carriers have come to the Sunshine State in the wake of legislation aimed at driving down litigation and opening up the homeowners market.
Innovation
Tech quickening underwriting and pricing, product development
Las Vegas – Technology is helping speed up the processes of underwriting and pricing, and product development in the commercial insurance industry while also bringing in new talent, several sources said during a panel discussion Wednesday at the annual Insuretech Connect conference.
. “I think we’ve seen fantastic differences over the past 10, 20, 30 years,” said Duncan Anderson, Reigate, England-based global leader, insurance technology for Willis Towers Watson PLC. Advances in hardware include chip design optimized for a specific task, he noted.
Lindsey Joosten, Portsmouth, New Hampshire-based vice president and senior director of global underwriting technology for Liberty Mutual Insurance Co., said the abundance of data and application programming interfaces, or APIs, has made rating and pricing more efficient.
Property catastrophe modeling for a specific account, which could have previously taken up to 24 hours just a few years ago, can now be done in as little as 10 minutes, Mr. Joosten said.
“We can now, within minutes, rate and price quotations,” said Chetan Gautam, Malvern, Pennsylvania-based head of global pricing platforms and data for Chubb Ltd.
Taffy Jo Mayers, global commercial lines leader for WTW, noted that technology adoption by the insurance industry can also serve as a recruiting tool, bringing new talent into the industry.
She added that some newer products, such as usage-based insurance products, began life in the personal lines side of the business.
OEM insurance execs say their products save time, improve claims process for all involved
Insurance executives with General Motors, Rivian, and Toyota shared on Thursday that the goals they have in offering insurance to their customers are not only to protect their brand and keep customers happy but also to provide a better claims experience for all involved, including payment to repairers for the use of OEM parts and repair procedures.
Andrew Rose, OnStar Insurance president; Mike Slattery, Rivian head of insurance, and Robert Spencer, Toyota Insurance president and COO, shared how insurance through their OEMs works during one of three Society of Collision Repair Specialists (SCRS) OEM Collision Repair Technology Summit sessions.
They all agreed that they didn’t get into the insurance business to be in the insurance business but to keep customers happy with their brands.
SCRS Executive Director Aaron Schulenburg started off the session by saying that the challenges repair facilities run into is a difference in perception and expectation and what consumer experience should look like.
Awards
The Hartford, Progressive, Nationwide small business
Small commercial insurers are continuing to offer more digital self-service and policy management options for policyholders but the pace of transformation is slow, according to Keynova.
Keynova Group, a financial services intelligence firm specializing in benchmark insights, released its 2023 Small Commercial Insurance Scorecard, which evaluates the small commercial insurance digital capabilities of the 10 largest U.S. carriers including Allstate, Chubb, Geico, Hiscox, Liberty Mutual, Nationwide, Progressive, State Farm, The Hartford and Travelers. The Scorecard is based on an evaluation of 300 objective criteria and includes trends and insights that may influence digital strategies. The report analyzed the digital capabilities for small business customers including ease of use and customer support, as well as account management.
For the fifth year in a row, The Hartford ranked first in the small commercial insurance scorecard. Progressive ranked second. Nationwide ranked third.
The report found that all carriers have improved the process of digital Certificate of Insurance (COI) requests and half of firms support mobile customized COI requests. But there are opportunities to enhance additional digital capabilities that support small businesses.
"This was the 5-year anniversary of our Small Commercial Insurance Scorecard, launched in 2019, and I was interested to highlight substantive changes in carrier's digital capabilities for supporting small businesses," said Beth Robertson, managing director of Keynova Group, in an emailed statement. "I was surprised to see that many companies have not significantly advanced the breadth of the digital services they offer for small firms, although some carriers have continued to enhance their capabilities. The Hartford is most notable in its regular and across-the-board improvements to the digital tools it provides to small firms – for both prospects and existing policyholders."