AI in Insurance
Navigating the AI insurance landscape
Artificial intelligence (AI) has long been a steady force in insurance, utilized by many companies to streamline different aspects of their business.
But recent advancements in the technology, including the growing prominence of generative AI platforms like ChatGPT and Google’s Bard, have made room for further discussions about the opportunities and risks associated with its use.
In a recent roundtable discussion with Insurance Business Canada, senior representatives from Definity and Google offered their insights on the role of AI in the industry.
Neil Bunn, director of client engineering at Google’s strategic verticals in Canada, emphasized how AI has driven efficiencies across claims, compliance, fraud detection, underwriting, and customer experience.
At Definity, AI technology has been used to identify potential fraud or suspicious activity, as well as opportunities for consultative risk services and building inspections for commercial property customers.
The company has also leveraged machine learning (ML) for first notification of loss (FNOL) benefits, assigning specialized adjusters and providing personalized recommendations for repair shops and medical providers.
“Investing in innovative technologies like generative AI is one of many avenues Definity is pursuing to achieve its goal of becoming a top-five P&C insurer in Canada,” said Jeffrey Baer, VP, enterprise analytics and data office at Definity.
News
Road Risk Alert: Increase in Distracted Driving Raises Safety Concerns for Thanksgiving
Thanksgiving is a holiday when American families come together and celebrate with food, football, and pie. But it has a less savory effect on our roads.
According to a new CMT analysis, distracted driving skyrockets on Thanksgiving Day. On an average day two weeks before and after Thanksgiving, drivers spend an average of 2 minutes and 2 seconds on their phones while driving. On Thanksgiving Day, this time increases to 2 minutes and 13 seconds, a 9.2% increase.
The time drivers spend on their phones on Thanksgiving has increased consistently since 2020. In 2020, drivers spent 2 minutes and 4 seconds per driving hour on their phones. In 2021, distraction increased to 2 minutes and 18 seconds. 2022 continued this trend with drivers spending 2 minutes and 24 seconds on their phones per driving hour, a 20-second increase since 2020.
IRC: Natural Disasters, Rising Repair Costs Making U.S. Home Insurance Less Affordable
The growing frequency and severity of natural disasters, combined with rising home repair costs and other economic factors, have contributed to less affordable homeowners insurance, according to a newly-released Insurance Research Council (IRC) Research Brief.
“By examining what’s driving up the cost of #claims, #insurers & #policymakers can identify opportunities for improving both the affordability & availability of homeowners #insurance nationwide." - Dale Porfilio, president, Insurance Research Council
The IRC, an affiliate of The Institutes, measures affordability with the ratio of average homeowners insurance expenditures to median household income. In 2020, the most recent year for which data are available, this ratio was 1.93 percent. In other words, U.S. households spent an average of 1.93 percent of their income on homeowners insurance.
Homeowners insurance was most affordable in Utah, where households spent 0.92 percent of their annual income on homeowners insurance in 2020. Other states with low expenditure-to-income ratios in that year included Oregon, Wisconsin, Washington and New Hampshire. The least affordable states in 2020 included Louisiana (3.84 percent), Florida, Oklahoma, Mississippi, and Alabama, in that order.
Ultimately, homeowners affordability is determined by cost drivers, which can vary from state to state. These cost drviers include the number of claims paid, the average claim payment, weather and other natural hazard risks, and other perils which a home insurance policy covers, such as losses due to theft and vandalism. Additional cost pressures come from the amount insurers spend to process, investigate, and litigate claims, as well as the percent of homeowners claims with litigation.
First-Ever Flood Forecasting Maps Show Houses and Roads at Risk
The National Weather Service has launched the first flood forecasting system with precise, real-time data showing spots that are at imminent risk of inundation
CLIMATEWIRE | A new government forecasting system shows for the first time roads, streets and properties that are likely to be flooded by ongoing or upcoming rainstorms, providing unprecedented detail for preparations.
The National Weather Service venture offers the first real-time forecasting service that shows precise areas such as city blocks likely to experience at least an inch of flooding over the subsequent five days, shading the areas blue on an online map.
A leading NWS scientist called the forecasting system “a revolutionary advance” for providing detailed, street-level flood prediction in real time.
“We're not just trying to say that the flood is at 10 feet. We're trying to say your street can be flooded,” said Mark Glaudemans, the chief of NWS’s Water Resources Services Branch. “With this five-day forecast, local authorities, emergency managers and the public can now make preparations to be ready.”
Commentary/Opinion
What to Expect: ‘No Material or Sudden Changes’ in Commercial Insurance Pricing
Even though reinsurance executives are making noise about social inflation and liability rate inadequacy, WTW isn’t expecting any major changes in the pricing for commercial casualty or property insurance markets heading into 2024.
“The property market will try to lean into the hard market for as long as possible (which could be increasingly difficult if new money comes into the market on January 1). With a constricting capital base and current insurers remediating their liability portfolios, the casualty market might attempt to drive rate increases,” the global broker and advisory firm said in the latest edition of its semiannual “Insurance Marketplace Realities Report,” published in mid-November.
“Despite the shifting terrain, in the near term, we don’t expect material or sudden changes in the market—for better or worse,” the report said.
"Insurance is going through a huge transformation right now"
It was ex-CEO of Microsoft, Satya Nadella who contested that “every business will become a software business” and CEO of Charles Taylor InsureTech Arjun Ramdas (pictured) is seeing first-hand how this prediction is playing out across the insurance ecosystem.
In the three years since Ramdas joined the insurtech division from Microsoft - where he served as practice leader of its UK consulting services – he has seen it progress rapidly, growing its team, doubling its revenue and maximising its profits. Coming from a tech-focused background, he said, it’s been rewarding to join a company with such deep roots in the insurance sector which boasts such a wealth of insurance expertise.
How insurance is transforming
“Not being an insurance expert, it’s been fantastic knowing I can rely on the experts around me and I rely on them every day,” he said. “And it has been fun because insurance is going through a huge transformation right now with regards to how front-to-back digital transformation is driving change. But at the same time as an industry, insurance tends to be more risk-averse, and it has a slower pace of change compared to some of the other sectors I’ve worked with.”
Several factors are at play behind the scenes of this, among them the challenge inherent with insurance companies’ reliance on scaling up through acquisitive growth. There’s a lot of M&A in the insurance industry, he said, but it can come at the price of fragmenting a company’s operating model and the technology that enables that.
Announcements
Lloyd's of London strikes deal to remain in iconic HQ
Sky Newshas learnt that the world's most prominent insurance industry marketplace could announce as early as this month that it has reached agreement with Ping An to remain in its One Lime Street home until 2041.
Property industry sources said on Wednesday that Lloyd's and Ping An, the Chinese insurer, had agreed as part of the deal to remove a break clause in the lease in 2026.
The existing agreement, which was due to expire in 2031, will be replaced with a new one under which annual rent increases will range from 3% to 5%, the real estate sources added.
Ping An will also agree to invest £20m in upgrading the building's energy efficiency in an attempt to improve its carbon footprint, they said.
Lloyd's continued occupancy of the building had been thrown into doubt last year amid its management team's deliberations about the impact of post-pandemic working practices on the marketplace.
City workers attend a Remembrance Day ceremony at Lloyd's of London, in the City of London, to mark Armistice Day, the anniversary of the end of the First World War.
Lloyd's said last year it was thinking carefully about the future requirements for the spaces and services it needs Designed by the renowned architect Richard Rogers, Lloyd's HQ is one of the world's most recognisable commercial buildings.
The tower has been owned by Ping An since 2013, which bought it from Germany's Commerzbank for £260m.
InsurTech/M&A/Finance💰/Collaboration
InsurTech 2023: Top 10 M&A Deals
Below, we run through our Top 10 insurtech M&A deals of 2023, with our top acquisition coming in at a significant US$2.6bn… read on to find out more
While M&A in 2023, particularly in H2, has taken a downturn from the unprecedented highs seen in the insurtech industry post-pandemic (2021-2022), significant deals have still occurred this year.
Below, InsurTech Digital runs through our Top 10 M&A deals of 2023 (so far!)
Entrio Extends Recent Round to $11M to Ensure Responsible Tech Adoption in Financial Institutions - MarketWatch
Entrio, the way enterprises adopt technology responsibly, extends its recent funding round to $11M to expand its reach from banks to broader financial institutions, namely insurance.
Israeli startup Entrio, the responsible tech adoption platform, extends its recent funding round to $11M and welcomes new investors American Family Ventures, Fin Capital, and Selah Ventures with additional support from existing investor Alicorn.
The average tech stack in banks and financial institutions can exceed ten thousand solutions and is valued at hundreds of millions of dollars per organization. This makes tech visibility and management difficult, leading to an even greater rise in spend and technical debt. Entrio is leading the way for these organizations to better adopt technology by optimizing its use and eliminating unnecessary risks and expenses, usually in the tens of millions of dollars range.
Entrio's Live Solutions Catalog continuously maps all third-party solutions, including where they are used and how they are used. It categorizes their capabilities, compares them to other solutions in the market, and provides up-to-date market intelligence on vendors and solutions. Entrio enables technology leaders to evolve their tech stack with transparency, efficiency, and agility, ensuring sustainable growth for the enterprise.
US banks increasingly exit insurance, enticed by big paydays
Surging insurance valuations are enticing US banks to cash out and use the proceeds strategically.
For the first time in at least eight years, US banks are selling off their insurance units at a quicker pace than they are acquiring them. So far in 2023, the banking industry has announced seven insurance business sales, outpacing the number of acquisitions by two.
The uptick in exits comes at a time when the gap between the two industries' valuations has drastically widened, with insurance valuations surging and bank valuations hitting one of the lowest points since the Great Financial Crisis. Moreover, at a time when capital is king for the banking industry, banks are enticed by the large payday a sale brings and the strategic options for using that cash, such as restructuring their underwater securities books.
"At the end of the day, the reason that [banks] are showing their arms has a lot to do with capital and the fact that this saves them from having to capital raise," said Christopher Marinac, a director of research at Janney Montgomery Scott. "Part of the challenge is that banks don't want to recognize losses because that's a permanent change to book value versus being temporary. But if they have a gain to offset it, then it makes that decision more palatable."
Relativity6 Continues to Lead in Cutting Edge Innovation for P&C Insurance with Groundbreaking AI Product for Business Activity Detection
Relativity6 has released their latest innovative product designed to revolutionize the way underwriting teams operate and make critical risk decisions.
This state-of-the-art tool, named ActivitySights, offers unparalleled business activity detection. Providing insurance and financial institutions with the key data insights they need to stay ahead in the competitive product landscape.
With increased demand for instant decision-making, underwriters need tools that are not just accurate, but also fast and reliable. Addressing this need, Relativity6 provides real-time NAICS classification and risk detection in under 2 seconds, beating industry benchmarks by 5-10X.
"Today, underwriting organizations cannot afford to wait," said Alan Ringvald, CEO of Relativity6. "Every second counts when it comes to submitting, quoting and binding. Competitive organizations need fast decision-making and the ability to understand business activities in real-time. With our innovations, we're not just offering insights; we're guaranteeing speed, accuracy, and the competitive edge carriers need to survive in a hard market."
"Building on our success here in the U.S. we will be looking to expand into other international markets, where industry classification is an issue as well, first focusing on North America," said Josh Lurie, COO of Relativity6.
Awards
Mylo Named Best Insurtech Company in 2023 by Benzinga Global Fintech Awards
Mylo was selected as the winner based on the success and acclaim of its unique insurance intelligence platform that integrates into partner experiences to connect small business owners and individuals with competitive coverage from 100+ leading carriers. Mylo takes insurance guidance to the next level, delivering highly personalized coverage recommendations to businesses and individuals for each unique stage of their business and life.
"This recognition as Best Insurtech Company of 2023 among our industry peers is a great honor during an outstanding year for Mylo," said David Embry, Mylo CEO. "We're proud of the insurance solutions we've been providing for the past eight years and excited to reach even more partners, agents and customers with the guidance they need to make smart decisions and protect what matters."
In addition to its channel partner strategy, Mylo is also bringing its time-tested technology to agency partners through its new Amplifi℠ platform. This SaaS platform equips agents with the capability to deliver personalized solutions without the prohibitive costs, expand their reach and product range, and drive more conversions with a high volume of transactions.
This is the second consecutive win for Mylo in the Benzinga Global Fintech Awards, as Mylo was named the 2022 People's Choice Award winner, determined exclusively by public voting.