AI in Insurance
Generative AI expected to impact many different insurance lines: Aon
The insurance market’s overall understanding of generative AI-related risk is still within it’s early stages, but this developing form of the technology is expected to impact many different lines within the sector, such as Technology Errors and Omissions / Cyber, Professional Liability, Media Liability, Employment Practices Liability, and more, reports Aon.
Generative AI is a type of artificial intelligence that contains the ability to create material such as images, music or text. This form of AI is already proving to be quite a disruptor across the industry, and its adoption is said to be growing at an “explosive rate.”
In its Global Insurance Market Insights report for the third quarter of 2023, broker Aon highlights how insurance policies can potentially address AI risk through affirmative coverage, specific exclusions, or by just “remaining silent”, which ultimately creates ambiguity.
According to Aon, insurers are defining their strategies around this rapidly changing risk landscape through a combination of different factors.
One of these involves insurers building out their underwriting requirements which are already very robust.
While underwriters are just beginning to ask questions, the process has the potential to become quite troublesome and prolonged with the many potential applications that could wind up being created and eventually deployed across the sector.
At the same time, insurers are also developing creative AI products and solutions that they are then adopting and embedding within their own platforms.
News
Thanksgiving 2023 - Tradition, Origins & Meaning
Thanksgiving Day is a national holiday in the United States, and Thanksgiving 2023 occurs on Thursday, November 23.
In 1621, the Plymouth colonists from England and the Native American Wampanoag people shared an autumn harvest feast that is acknowledged as one of the first Thanksgiving celebrations in the colonies.
For more than two centuries, days of thanksgiving were celebrated by individual colonies and states. It wasn’t until 1863, in the midst of the Civil War, that President Abraham Lincoln proclaimed a national Thanksgiving Day to be held each November. But the holiday is not without controversy. Many Americans—including people of Native American ancestry—believe Thanksgiving celebrations mask the true history of oppression and bloodshed that underlies the relationship between European settlers and Native Americans.
Tesla Launched its Own Car Insurance. These Drivers Say it’s a Lemon.
In February, Mark Bova purchased a used 2018 Tesla Model S. Before leaving the dealer, he bought insurance from Tesla, finding the initial $93 monthly premium “really reasonable.”
Sixteen days later, as he drove along the Capital Beltway to his Maryland home, he engaged Autopilot, Tesla’s automated driving system. The car started beeping and lurched left — striking a median and flipping. He escaped through a window as the car filled with smoke. An ambulance rushed him to the hospital with back injuries that later required surgery.
“I’m a former Green Beret,” Bova said, referring to the U.S. Army Special Forces. “That was probably the second-most traumatic thing I’ve gone through other than being in combat.”
His ordeal isn’t over.** Tesla Insurance, launched in 2019 by the electric-car company, has promised policyholders “vastly better” service than rivals, as **Tesla chief Elon Musk put it in April 2022. Musk also said he aimed to offer “same-day” collision repairs. But Bova says he has been battling the insurer ever since the crash.
Higher Repair Costs, Supply Line Delays Drive Business Interruption Claims
The aftershocks of the COVID-19 pandemic have hit businesses hard, with inflation, supply chain disruptions, and increasing downtime.
Just as we saw how ill-prepared our healthcare system was for the global outbreak, so was our economy, and our supply and distribution network.
In addition to rising operating costs, equipment failures are a bigger threat than ever as higher prices and longer wait times make it difficult to fix or replace things.
When equipment breaks down, companies are scrambling for spare parts and materials, paying more for repairs, and worrying about the possibility of a business interruption.
It is a challenging time for commercial organizations, and they are looking to insurers, not only to help cover their losses, but to get them back in operation as quickly as possible.
Equipment Costs Up 16%
According to the Bureau of Labor Statistics, the Consumer Price Index (CPI), which measures the costs of goods and services over time, rose 4.7% in 2021 and 8% in 2022.
Over the same period, HSB has seen the cost of the replacement equipment it insures go up an average of 16%. Manufacturing equipment had the highest percentage increase at 19%, followed by electrical equipment, air conditioning and refrigeration equipment, and boilers.
John Nosari, senior vice president of commercial equipment breakdown claims at HSB
Class action alleges USAA Insurance reduced, denied claims through automation
USAA Casualty Insurance Co. and USAA General Indemnity Co. were hit with a consumer class action Thursday alleging they arbitrarily and wrongfully denied personal injury protection and/or medical payment insurance benefits by delegating adjustment claims to third parties.
This complaint was first surfaced by Law.com Radar.
In the complaint filed Nov. 16 in the Washington Superior Court for Clark County, plaintiffs Caryn Jennings and Tricia Harder, on behalf of themselves and others similarly situated, accused USAA of violating the Washington Consumer Protection Act, as well as breach of contract, and breach of the covenant of good faith and fair dealing. The plaintiffs claim that USAA denied their insureds’ personal injury protection (PIP) and/or medical payment insurance benefits because the company allegedly delegates its insurance claim adjustment to a third party’s computer program that arbitrarily reduces or denies these claims.
The plaintiffs seek declaratory relief as to PIP coverage, and they also seek injunctive relief enjoining USAA from continuing to handle claims as such, the complaint said.
According to plaintiffs, represented by counsel at Tousley Brain Stephens and Franklin D. Azar & Associates, USAA should be conducting an investigation into each bill for medical expenses submitted by insureds. Instead, they employ a Medical Bill Audit (MBA) system designed to reduce the amount USAA pays for health care claims.
Commentary/Opinion
Attacking the Risk Crisis
Ahead of next week's Town Hall, I sat down with Triple-I CEO Sean Kevelighan to discuss how insurers can help tackle climate risks.
I'm headed to Washington, DC, next week for the Insurance Information Institute's Town Hall on "Attacking the Risk Crisis" and took the occasion to chat with Triple-I CEO Sean Kevelighan about the climate-related issues that will be the focus.
I hope to see many of you there. (You can register here. Use the code WELCOMEITL, and you'll receive a $200 discount off the non-member price.)
The event is a compressed, single-afternoon affair, designed to generate action items for the insurance industry while creating opportunities for networking and for attendees to conduct other business in DC while they're there. Representatives from various federal agencies, as well as from think tanks such as the Brookings Institution, will be there, because discussions will straddle the roles of the insurance industry and of public policy.
Paul Carroll, editor-in-chief, Insurance Thought Leadership
Managing social inflation and nuclear verdicts
From the impact of economic inflation to the volatility of social inflation, today’s claims landscape is trickier to manage than ever. As social inflation and nuclear verdicts, an exceptionally high jury award, continue to evolve, organisations must leverage every possible resource to manage the challenges that lie ahead.
The court of public opinion
Shifting public sentiment compounds the myriad of liability risk factors businesses face today, particularly when allegations lead to litigation. The trend of social inflation, whereby jury sentiment towards the plaintiff results in much higher-than-anticipated damages awards, means that litigation outcomes and costs are increasingly difficult to predict.
To hedge this kind of uncertainty, companies are turning to proven trial and appellate counsel as well as other specialists such jury consultants and witness preparation experts to help them prepare for trial and determine how their case might play out in front of plaintiff-leaning jurors. In addition, insureds need to ensure that they can rely on the quality of their insurer’s claims team and specialist risk management support, as experience and the quality of service and advice given is more important than ever if a claim is likely to go to trial.
Beth Diamond. Group Head of Claims, Beazley
Skills gap in insurance industry’s aging workforce is a growing concern
Fostering data skills can help companies prepare workers for the future
Key takeaways
- Insurers should be proactive to fill roles for claims adjusters, underwriters and actuaries.
- Succession planning will also be crucial in ensuring a smooth transition of leadership roles.
- Strategic workforce planning, upskilling employees and investing in technology are key
"Data analytics, cybersecurity and digital marketing are skills we expect to be in especially high demand as workforce pressure continues. But data-related skills, in particular, will be paramount for various business functions of insurers.
Marlene Dailey, RSM US financial services senior analyst
Research
AAA Study Finds Advanced Driver Assistance Systems Could Prevent 250,000 Deaths
Hundreds of thousands of lives could be saved and tens of millions of crashes prevented thanks to advanced driver assistance systems (ADAS) such as automatic emergency braking, adaptive cruise control and forward collision warning. That’s according to a recent study conducted by the American Automobile Association (AAA) Foundation for Traffic Safety and the University of North Carolina.
The potential benefits of these driver aids appear staggeringly effective based on projected figures alone. According to the report, current ADAS technologies could prevent approximately 14 million injuries and 37 million crashes over a 30 year span, stretching from 2021 to 2050.
In addition, the report estimates ADAS would prevent approximately 250,000 deaths over the next 30 years. In total, the AAA study states this represents 16% of injury crashes and 22% of all deaths that would occur on U.S. roads without these technologies during this same 30-year span.
“The findings from this latest study on the AAA Foundation’s work in emerging technologies suggest that ADAS has the potential to transform road safety,” said Dr. David Yang, president and executive director of the AAA Foundation. The specific automotive safety technologies that were taken into consideration include automatic emergency braking, forward collision warning, pedestrian detection, adaptive cruise control, lane departure warning and lane keeping assistance.
These are all active driver aids, meaning they take over some degree of steering or braking input when activated. As one of its baselines for prediction, the study also assumed the number of future crashes will be similar to crash levels from 2017 to 2019 and then factored annual increases due to increasing vehicle travel.
People
The Hanover Appoints Stephen P. Marohn President, Specialty Property and Casualty
The Hanover Insurance Group, Inc. (NYSE: THG) today announced it has appointed Stephen P. Marohn president of specialty property and casualty. In this role, Marohn will be responsible for leading the company's excess and surplus (E&S) business, specialty industrial business, Hanover Programs, specialty general liability and Hanover Specialty Insurance Brokers (HSIB).
With more than 30 years of wide-ranging industry experience and an accomplished background in commercial and specialty property and casualty insurance, Marohn most recently served as senior vice president of small business at CNA Insurance. Over the course of his 10 years with CNA, his responsibilities included oversight of the businesses and zone leadership for product lines such as primary and excess casualty, package, and property across segments, including small business, middle market, and national accounts. Prior to joining CNA in 2013, Marohn held a number of senior leadership roles throughout the 18 years he spent at AIG. He served as executive vice president at AIG's Japan Holdings KK operation leading the commercial portfolio for Japan and South Korea, held field leadership roles in California and Ohio, and led the National Accounts marketing segment for the Great Lakes Region.
"We are very pleased to welcome Steve to our company and to this important role within our specialty business," said Bryan J. Salvatore, executive vice president and president of specialty at The Hanover. "Steve's breadth of experience and approach to leadership will bring immediate value to our talented teams as well as the agents, wholesalers, and program administrators with whom we work. Under his leadership, we look forward to expanding these important businesses to meet the growing specialty needs of our key stakeholders and to driving even more sustainable profitable growth across our specialty segment."
2024 PREDICTIONS
Boost in property/casualty profitability forecast: Swiss Re
Profitability in the property/casualty sector is forecast to improve through 2025, driven by dual tailwinds of higher premiums and better investment returns, according to a report Tuesday from Swiss Re Ltd.
After a significant repricing of insurance risk in 2023, property/casualty global premium growth is estimated at 3.4% this year and then forecast to soften to 2.6% growth in 2024 and 2025, Swiss Re said.
Improvements in profitability are also being driven by higher investment returns, given the higher interest rate environment. Investment returns in the property/casualty have topped 3.3% in 2023 and are forecast to rise further to approximately 3.7% in 2024 and 3.9% in 2025, according to the report.
On the claims side, “the impact of economic inflation on claims is forecast to ease further over the course of 2024 and 2025,” as tighter underwriting improved terms and conditions for insurers are expected to further mitigate the effects of inflation on claims costs.
Total premium growth across all insurance sectors including life is forecast at 2.2% annually on average for the next two years, higher than the average of 1.6% over the past five years, 2018-2022, the report said.
Biz Leaders Say Economic Downturn Outranks Climate, Tech as Top Worry
Economic and societal threats—such as an economic downturn, inflation, and an erosion of social cohesion—rank among the biggest risks to doing business in G20 countries over the next two years, according to a global survey of business leaders.
The World Economic Forum’s 2023 Executive Opinion Survey, conducted between April and August 2023 in partnership with Marsh McLennan and Zurich North America, gathered views from more than 11,000 business executives around the world.
This year’s survey highlights how, even before the current conflict in the Middle East, increasingly intertwined economic and societal risks were perceived as the biggest concerns in G20 countries against a backdrop of escalating global political tensions and persistent inflationary environments in many major economies, a media statement about the report noted.