Commentary/Opinion
The next wave of Insurtech’s (Part II)
As discussed in Part I, I wrote about the industry’s progress over the past century and the key milestones that led to the rise of Insurtech. However, I also highlighted the fact that established players do not receive enough credit for their long-standing success in the industry and are unlikely to be replaced by any Insurtech anytime soon.
The rise of Insurtech can partially be attributed to traditional insurance companies’ lack of focus on customer experience. Historically, these companies have classified their clients as “policyholders” instead of “customers”, demonstrating a disregard for their needs and satisfaction. The first wave of Insurtech startups aimed to improve the customer experience by focusing on user-friendly interfaces, advanced data sources, and digital solutions. While these improvements were significant and a great start, there is still a lot of room for growth, particularly in the specialty insurance sector. Lessons derived from the first wave of Insurtech’s.
It’s important to note that the first wave of Insurtech did not completely revolutionize the insurance industry, but rather made incremental advancements towards better serving customers. However, Insurtech v1.0 companies successfully navigated the intricate task of convincing incumbents, service providers, consumers, regulators, and the broader financial markets that digitization of insurance is inevitable.
Their mission was to underscore the imperative inclusion of advanced technologies in the future of insurance while outlining a viable path for venture backable companies. Despite this, the performance of few Insurtech v1.0 ventures, assessed through exit metrics, might be perceived as underwhelming by the insurance or venture community
Amir Kabir, General Partner at AV8 Ventures
CNA CIO Jane Possell Counsels Community in the Cloud, Evolutionary Transformation
Delivering a customer keynote address at Guidewire Connections 2023, Possell discussed the importance of customer community for innovation in core capabilities and strategic differentiation.
The need for community among Guidewire (San Mateo, Calif.) customers and the importance of thinking in terms of incremental “evolution” rather than “big bang” approaches to transformation were among the themes explored by Jane Possell, EVP, Global Chief Information Officer, Analytics, Operations at CNA Insurance (Chicago) in her customer keynote on the first day of Guidewire Connections, the vendor’s annual user group meeting, held this year at the Gaylord Opryland on Monday, Nov. 13. Possell spoke about her Connections address with Insurance Innovation Reporter.
“Community” is the theme of this year’s Connections, and Possell addressed it as an urgent imperative at a time when Guidewire was gaining a broader footprint in the cloud. “It’s becoming increasingly important for their customers to connect and be able to align on the types of product innovation that Guidewire is going to continue to deliver in the cloud,” she said. “Because we’re all going to need a lot of fundamentally similar things, including the ability to have our own strategic differentiation.”
The industry’s progress in the cloud touched on a perennial question in the industry, Possell suggested, regarding the degree to which every insurance company was unique and the implications of that belief on technology development.
More Americans struggle to afford insurance rate as one major issue drives rate hikes: ‘If you’re not worried, you’re not paying attention’
More Americans struggle to afford insurance rate as one major issue drives rate hikes: ‘If you’re not worried, you’re not paying attention’.
Many Millennials and Gen Z’ers are already experts at budgeting for modern-day essentials not required for success in earlier generations.
With a major issue driving up insurance rates across multiple states, however, homeowners of those generations — along with many other Americans — are needing to adjust to yet another curveball of the times, with many struggling to protect their living spaces.
Susan Elizabeth Turek, author
The strategic edge of employee engagement in claims resolution
In the intricate tapestry of Human Capital Management, the nexus of leadership, culture and insurance, weaves a narrative that is often overlooked: the indispensable role of employee engagement in claims management.
It’s not just about paperwork and processes; it’s about fostering a collective sense of responsibility and ownership that transforms claims management into a collaborative journey rather than a mere transaction.
The unseen force in claims management
As insurance professionals navigating the labyrinth of risk, we understand that claims management is more than just a reactive process. It’s a dynamic interplay of human factors, corporate culture and leadership strategies.
Below, I explore the pivotal role of employee engagement in shaping the outcomes of claims, transcending the conventional boundaries of insurance procedures.
Section 1: Beyond policies and procedures — the human element
In the realm of claims management, the human element is often overshadowed by the bureaucratic procedures and policies. However, enlightened leaders recognize that the true catalyst for successful claims resolution lies in engaging employees at every step. An engaged workforce is not just a resource; it is a strategic advantage in the pursuit of seamless claims management.
Section 2: Cultivating ownership and responsibility
Employee engagement in claims management is not a passive agreement; it’s an active cultivation of ownership and responsibility. Leaders need to instill a sense of accountability that goes beyond individual roles. This involves fostering a culture where every team member feels a personal stake in the claims process. After all, a sense of ownership is the driving force behind proactive problem-solving and efficient claims resolution.
Section 3: The power of open communication
Effective communication is the cornerstone of successful claims management. In a landscape where misunderstandings can escalate into complications, creating channels for open communication is paramount. Encouraging employees to share their insights, concerns and suggestions not only streamlines the process but also unveils hidden nuances that can be instrumental in shaping favorable claims outcomes.
Clint Tripodi is senior vice president of and National Human Capital Management Practice at The Liberty Company Insurance Brokers
News
55.4 Million Expected Over Thanksgiving Holiday Travel Period
AAA projects 55.4 million travelers will head 50 miles or more from home over the Thanksgiving holiday travel
This year’s holiday forecast is a 2.3% increase over last year, third highest since 2000
AAA projects 55.4 million travelers will head 50 miles or more from home over the Thanksgiving holiday travel period*. This year’s Thanksgiving forecast is an increase of 2.3% over last year and marks the third-highest Thanksgiving forecast since AAA began tracking holiday travel in 2000. The top two years were 2005 and 2019, respectively.
“For many Americans, Thanksgiving and travel go hand in hand, and this holiday, we expect more people on the roads, skies, and seas compared to 2022,” said Paula Twidale, Senior Vice President of AAA Travel. “Travel demand has been strong all year, and AAA’s Thanksgiving forecast reflects that continued desire to get away and spend time with loved ones.”
S&P: Struggles in Personal Auto Insurance to Subside More Slowly Than Expected
S&P Global Market Intelligence projects that personal auto results will improve from 2022’s worst-in-decades combined ratio of 112.2%, though not as rapidly as the organization’s experts previously expected.
Continued pressure on claim severity across coverages has prolonged post-pandemic recovery for the personal auto business, and carriers will continue to implement large rate increases in the near term, S&P GMI shared in its latest U.S. Auto Insurance Market Report.
Tim Zawacki, principal insurance analyst at S&P Global Market Intelligence, said that the company’s “revised forecast for 2023 direct premiums written growth of 15.9% would easily surpass the previous 25-year-high rate of increase of 10.2% in 2003.”
“The post-pandemic return to normalcy has played out differently than most market participants envisioned,” he said.
“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.”
Zawacki said increases in severe auto 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 comprehensive coverage. The industry has responded aggressively to deteriorating results with multiple rounds of sizable rate increases, he noted, but carriers’ ability to realign rates to reflect higher loss costs varies widely by geography.
“We continue to expect that they will eventually succeed in that initiative albeit over a longer timeline and with greater increases in premium rates than we had previously envisioned,” he said.
The 4 Key Factors Contributing to Rising Insurance Rates
It’s no secret to buyers of almost any type of property/casualty insurance policy — home, auto, business — that rates are rising, regardless of whether claims have been submitted.
People may also have heard about major insurers who are pulling out of certain states and/or lines of business as their losses grow and their earnings shrink.
Why?
The reasons for rising insurance premiums are many and varied, but four key factors are contributing: economic inflation, social inflation, weather, and reinsurance costs.
Inflation peaked in June 2022 at over 9%, a 40-year high. It has since decelerated, but insurance rates can’t adjust in real time. Rate-change filings with state insurance departments are most often an annual process (auto rates are generally filed every six months). Rates for some types of business are typically filed only every three to five years.
Building material costs have increased 39% since the beginning of 2020, and between January 2020 and January 2023, the Consumer Price Index of auto parts outstripped that of auto insurance rates by 25%, leading to huge U.S. underwriting losses for personal auto insurance. All this means that claims to replace or repair buildings and autos are larger.
But there’s another type of inflation at work — “social inflation.” It’s a term used to explain the rise in claims’ costs that exceed those of economic inflation. Its main causes are increased litigation and escalating settlement costs (also known as “nuclear verdicts”), both based on a perception that the insurance industry has deep pockets.
Research
Shared Mobility's Global Impact On The Urban Landscape
Today, more than four billion people live in cities. By 2050, the United Nations (UN) estimates the number will grow to six billion, which amounts to adding eight cities the size of London every year. At that point, 70% of the world’s population will be urban dwellers. Cities will also account for 85% of the world’s economic output.
This expansion is putting urban transport systems worldwide under intense pressure to accommodate the rising demand. Despite global urbanization, only half of the world’s population currently has convenient access to public transport. Specifically, 75% of the population has access to public transport in Europe and the United States, while only 33% have access in sub-Saharan Africa. This limits access to jobs and education and reduces overall social inclusion — unless an individual can afford to travel by a privately owned car. That alternative puts another strain on cities: The explosion of urbanites also has led to an explosion of congestion, pollution, and greenhouse gas emissions.
Transport systems are intrinsically linked to the prosperity of cities. They affect quality of life, economic growth, social cohesion, and the environment. Transportation systems will also determine how far cities will be able to contribute to global targets set by the 2015 Paris Agreement to combat climate change and the UN’s Sustainable Development Goals (SDGs) for a more prosperous, equitable future.
Oliver Wyman
InsurTech/M&A/Finance💰/Collaboration
Duck Creek teaming with Microsoft to bring generative AI to P&C insurers
Duck Creek Technologies, a P&C solutions provider, has unveiled a breakthrough initiative in collaboration with Microsoft, which is set to empower insurers to reimagine their businesses by facilitating smoother implementation processes and faster speed to market through the aid of generative artificial intelligence (AI).
Duck Creek’s platform is built on Microsoft Azure, technology which is used for harnessing the power of Azure OpenAI Service.
This comes as large language models (LLMs) continue to change the landscape of technology.
According to Duck Creek, this represents a “significant leap forward” in the insurance sector, as it can change and influence different ways how insurers conduct their business and engage with customers.
By merging Duck Creek’s knowledge within insurance solutions with the cutting-edge capabilities of Microsoft, this collaboration between the two companies is seeking to create a more agile future for the entire insurance sector.
“Generative AI is a truly transformative technology, and our valued customers will benefit immensely from its powerful capabilities as we continue to drive the modernization of the insurance industry. Our objective is to empower insurers to innovate products faster and assist employees with AI tools,” said Mike Jackowski, Chief Executive Officer, Duck Creek Technologies.
Ahoy! Insurance & American Sailing Announce Strategic Partnership
Ahoy! Insurance today announced a new partnership with American Sailing (ASA).
The partnership significantly expands Ahoy’s reach in the US market, which has more than 12 million registered boaters. Members of the ASA, the nation’s largest sailing authority, will gain access to an offering made specifically for boaters by boaters. Customer service will be provided by the highly trained staff of the Hilb Group, a leading national broker.
Select Ahoy! Insurance benefits include the following:
_ A holistic offering at a more attractive price, exclusive to ASA members. - Frictionless onboarding that enables a 3-minute quote and 5-minute purchase. - Broad coverage options, with reduced deductibles for self-inspections. - Access to tailored features such as phone overboard coverage, on-water towing assistance, as well as an anti-boat theft technology, among others.
“ASA has been a vital institution in American sailing for over four decades and is known for its top-notch member offerings while the Hilb Group is known for its excellent service,” said Amit Nisenbaum, CEO of Ahoy! Insurance. “This partnership brings each of these two highly respected organizations together with us to enable American Sailing boaters to enjoy a tech-driven offering tailored to their needs and with great customer support. We’re excited for this partnership to join with ASA, and we know their members will love the Ahoy! experience.”
Canada
Competition Bureau opens investigation into Applied Systems
Insurance software business Applied Systems is facing a Canadian Competition Bureau investigation into alleged “anti-competitive” conduct.
The Federal Court of Canada granted an order on November 14, 2023, requiring Applied Systems Canada to produce records and written information for the Competition Bureau’s investigation.
The Competition Bureau will use information obtained during its Applied Systems investigation to “determine if the alleged conduct is harming competition in Canada’s insurance technology (insurtech) industry,” the department said in a new release.
The department is further set to investigate “whether Applied Systems is engaging in conduct contrary to the restrictive trade practices provisions of the Competition Act, including the abuse of dominance provision.”
How the M&A environment will affect carriers' business models
Carriers need to transform business models to help control claims and operating costs in today's M&A environment.
Canadian P&C insurance industry carriers and service providers will need to transform their business models to help control claims and operating costs in an M&A environment featuring competing demands for capital, speakers said Thursday at KPMG’s 2023 Insurance Conference in Toronto.
“Insurers in our mind have to adopt an 80/20 lens,” said Georges Pigeon, a deal advisory partner with KPMG in Canada. “They need to think through what is core versus non-core in their business.