AI: at the Center of CLAIMS -- on the one year anniversary of ChatGPT  November 30th 2023

Claims or No Claims

“A Moment of Incredible Opportunities”

That title on top of a series of slides presented by a featured speaker at a recent Casualty Actuarial Society annual meeting drew my attention. Alex Salkever, a futurist, writer and technology leader, was delivering remarks on the topic of how AI tools will—and will not—alter human work.

Coincidentally, Salkever’s presentation was broadcast as I was doing a final read of a trio of articles by Deputy Editor Elizabeth Blosfield, for which she interviewed leaders of carrier claims organizations about their top-of-mind challenges—and opportunities—going into 2024. AI ranked first in both areas. Catastrophes that develop unpredictably followed close behind as a key challenge.

Salkever’s first “Moment of Incredible Opportunities” slide displayed a New York Times headline, “Can A.I. Detect Wildfires Faster Than Humans? California Is Trying to Find Out” (by Thomas Fuller((, Aug. 24, 2022). The second showed images taken from a dozen cameras situated in wildfire-prone areas of California. More than 1,000 cameras, Salkever explained, “have machine vision and very advanced detection capabilities on them, and they are scanning with software in the back end for very early signs of fire.”

A collaboration of the University of California San Diego’s public safety program (AlertCalifornia) and the California Department of Forestry and Fire Protection (Cal Fire), the AI detection system alerted firefighters about fire conditions before 911 calls 40 percent of the time, the New York Times article said. In fact, it correctly identified 77 fires in advance of 911 calls during the first two months of operation, according to a Time magazine article declaring this one of “The Best Inventions of 2023.”

In the insurance claims space, a lack of predictability frustrates claims executives as they try to mobilize adjusters to help disaster-stricken policyholders. “It’s not like next Tuesday you’re going to have this claim to handle. They happen when they happen…We need to be there for our customers,” Eric Sanders, chief claims and risk solutions officer for QBE North America, told Blosfield.

But what if they didn’t happen?

While neither Salkever nor the experts cited in other press reports suggest that AI or any other technology will eliminate wildfire insurance claims, Salkever reminded his audience that “the goal of Cal Fire is to stop 95 percent of fires before they hit 10 acres.”

In addition to our focus on claims topics, this edition of Carrier Management features the “how we’re doing it” stories of insurers already using another emerging technology—sensor technology, commonly referred to as the Internet of Things.

Returning as CM Guest Editor with a follow-up to a prior report—”Insurance Is Getting Connected: IoT Arrives in Insurance” (CM’s Q3 2021 edition)—IoT Insurance Observatory Director Matteo Carbone teamed up with representatives of State Farm, HSB, Nationwide, Tokio Marine, The Hartford and Allstate to detail the increased sensor-powered connections they’re making to the physical world to alert humans (or automated shutoff technology) to act in ways that will eliminate dangers and change risky behaviors—ultimately reducing insurance claims.

Three of the articles co-authored by Carbone refer to a simple plug-in sensor that also “employs machine learning to detect and mitigate electrical fire hazards, such as electrical arcing concealed behind walls,” preventing a high percentage of electrically generated fires. In one of them, Carbone and HSB’s Gordon Hui advance the idea that IoT can help improve overall carrier underwriting performance “by offsetting cat-related losses with proactive management of losses caused by non-cat perils, including non-weather water.”

In yet another article, Carbone and State Farm’s Haden Kirkpatrick note that “through loss mitigation smart home vendors, State Farm harbors the ambition of preventing 20 percent of losses related to fire, water and theft.” Going on to describe the creation of “home health scores” from data generated by IoT devices, they write, “With the right plan, this data could also be used to establish benefits like a reimagined claims management process,” reporting that State Farm obtained a patent for an IoT-driven claim process earlier this year.

In an article referring to car insurance applications, Carbone and Tokio Marine’s Robert Pick describe a telematics product “focused on improving driving behaviors consistent with the carrier’s goal to create accident-free cities in Japan.” Carbone and Allstate’s Susanna Su set the scene of a crash—and an ensuing push notification from a mobile app asking, “Do you need to call 911?”

“One side of property and casualty is insuring for damages. The other is lives. And getting people out in time,” Salkever said at one point during his talk at the CAS meeting. “Insurance is an incredible lever for changing society and changing the way the world works,” he also said.

“The greatest success stories of this [technology] are the fires you never hear about,” an AlertCalifornia investigator said in the New York Times article.

More Than an Observer: Carbone Still Igniting Industry’s IoT Passion

There’s an image accompanying the next article of this special report showing a closeup profile view of a visionary whose mind is connected to a network of things. (The State Farm Vision: Ecosystem Capabilities for the Insurer of the Future)

The illustration of this innovator peering into the future was conceptualized by Carrier Management’s art director, with the help of AI, to represent the words of the headline, “The State Farm Vision: Ecosystem Capabilities for the Insurer of the Future.”

And it’s a fair representation for an article written by IoT Insurance Observatory Founder Matteo Carbone and State Farm’s Vice President of Innovation Haden Kirkpatrick, in which the two authors advise industry peers to adopt platform-based strategies of intercompany partnerships to capitalize on the increasing availability of data from IoT devices and to create seamless customer experiences—basically to emulate the centuries-old carrier which has partnered with ADT and other home ecosystem players as it leans into the future.

But it’s a better representation of Kirkpatrick’s description of Carbone.

The State Farm Vision: Ecosystem Capabilities for the Insurer of the Future

A century-old insurer is evolving to help people manage the risks of everyday life, recover from the unexpected and realize their dreams in an increasingly hyperconnected world. The State Farm innovation journey extends beyond insurance products and into the ecosystems of connected things surrounding them.

Executive Summary

Back in 2015, in the first viral insurance innovation article he wrote (“Will Fintech newcomers disrupt health and home insurance?“), IoT Insurance Observatory Founder Matteo Carbone provoked the insurance sector, urging stakeholders to delineate their levels of ambition and their roles in the home and car ecosystems, and to identify ways of cooperating with other ecosystem players having like aims of creating services around an integrated set of customer needs.

At a recent conference, Haden Kirkpatrick, VP of Innovation at State Farm, described how the 101-year-old carrier has embraced a visionary outlook to sustain—and expand—its relevance to customers who, in Kirkpatrick’s words, “now expect their insurers to understand them as well as Google and to deliver products and services as efficiently and cost-effectively as Amazon, all in a curated Netflix-style queue.”

This article describes State Farm’s existing relationships with ADT and other home ecosystem players, and future ecosystem capabilities for the insurer of the future.

State Farm’s challenge lies in meeting customers where they are against evolving consumer expectations—expectations that have undergone profound transformations over the last two decades. Consumers expect an experience delivered in a fashion as seamless and elegant as an Apple product, that understands them as well as Google, and is delivered as efficiently and cost-effectively as Amazon, all in a curated Netflix-style queue.

Guest Editor’s Note: Kirkpatrick spoke about this at the Future of Insurance USA 2023 conference. His presentation conveyed a palpable sense of urgency regarding the imperative evolution of the industry to the hundreds of insurance executives in attendance.)

The insurer of the future should adopt a mindset, approach and positioning more akin to that of a big tech company than a traditional insurance provider. Consequently, even in the realm of insurance, technology will emerge as the predominant catalyst for the realization of insurers’ strategic objectives (as prophesied in co-author Carbone’s 2017 book, “All the Insurance Players Will Be Insurtech.”)

GUEST EDITORS Haden Kirkpatrick and Matteo Carbone

Allstate’s Telematics Strategy: Responding to Evolving Customer Needs

When consumers decide what to buy, they want companies to treat them as individuals: “Do you know my unique needs?” and “Will you be there for me when I need you?”

Executive Summary

"Do you need to call 911?" To give customers peace of mind, Allstate launched Crash Detection in 2020, free for customers enrolled in Drivewise telematics program, giving those customers quick access to emergency help through the Allstate mobile app.

That's just one example of how Allstate leverages the dynamic, expanding capability of telematics to deliver personalized value for customers, according to Allstate's Susanna Su and the IoT Insurance Observatory's Matteo Carbone.

Telematics helps Allstate customers get the best rates based on their driving, but price isn't all customers care about. An Observatory survey conducted with Swiss Re found that automatic emergency assistance and anti-theft support ranks close behind safe-driving rewards.

For insurers, the answer to these questions lies in offering increased value. Carriers need to deliver experiences that go beyond premiums and claims to exceed customer expectations and gain their trust.

Technological evolution further amplifies this interest, as customers’ protection needs become more complex. Insuring connected cars, electric and autonomous vehicles, and ridesharing prompts questions for carriers:

“How much is this protection designed on customers’ unique needs and risks?” “Will customers feel more control in the face of more choices?” “What more value can be delivered to gain higher engagement and trust from customers?”

Telematics makes it possible to understand customers’ individual needs and provide personalized solutions and value as those needs evolve

Nationwide Insurance: Using a Decade of Learnings to Create Next-Generation Telematics Solutions

Executive Summary

Only recently has the U.S. auto insurance sector acknowledged the pivotal status of telematics as a fundamental capability within the personal auto line.

Here, Nationwide AVP Kelly Hernandez and CM Guest Editor Matteo Carbone review Nationwide’s trailblazing efforts to offer UBI programs—and expand them beyond the discount-only pricing programs that once defined the space. Educating agents and impacting distracted driving behaviors along the way, the carrier is building off early learnings and successes to bring to market the next wave of telematics capabilities.

The landscape has undergone substantial transformation in the latter portion of the previous decade and in recent years. Insurers have maintained their perception of telematics as a product, referred to as usage-based insurance (UBI) auto policies, primarily tailored for new (self-selected) policyholders. Carriers have developed more robust capabilities in effectively managing telematics data, accumulating actuarial evidence to think differently about how to rate auto insurance more accurately. This transition enables insurers to think beyond providing a discount to the most favorable risk profiles.

Telematics pricing will see significant advancements in the future as carriers look to put more weight on rating customers based on how they drive and less on non-driving variables.

Insurers have gradually embraced a mobile-centric approach, complemented in some cases by a small in-car beacon partnered with a smartphone app. Driving behaviors are acquired through phone sensors, and the data is subsequently transmitted to the insurer. The number of UBI policies has grown more than threefold from 2016 based on the IoT Insurance Observatory research—reaching 17 percent penetration per J.D. Power’s recent survey—and this considerable expansion has been propelled by mobile-based approaches. Nowadays, the OBD dongles are mainly used for pay-per-use policies where the precise tracking of all the miles driven is a fundamental part.

The adoption of the mobile-centric approach has yielded cost reductions in data capture costs and has facilitated the widespread implementation of continuous engagement strategies by numerous carriers. This signifies a more mature way to apply IoT to the insurance business. The gradual accumulation of experience has enabled the industry to pivot its attention from the product (UBI policy) toward integrating the IoT paradigm across all fundamental insurance processes.