AI in Insurance
58% of life insurers use artificial intelligence or are interested: NAIC survey
Fifty-eight percent of life insurers are either using or have an interest in using artificial intelligence in their businesses, an NAIC working group found. That data was part of the third in a series of surveys state insurance regulators are conducting across the insurance world. The Big Data and Artificial Intelligence Working Group discussed the findings Friday during the National Association of Insurance Commissioners' fall meeting in Orlando.
The 58% figure is well below the use of AI, or desire to use the technology, expressed during earlier surveys by home (70%) and auto (88%) insurers. > "These surveys were conducted to accomplish three primary goals," said Kevin Gaffney, Vermont insurance commissioner. "To gain a better understanding of the insurance industry's use and governance of AI, to seek information that could aid in the development of guidance or potential regulatory framework to support the insurance industry's use of AI, and to inform regulators as to the current and plan business practices of companies."
The latest survey response was strong, Gaffney said, with 161 life insurers participating. The survey was limited to insurers who wrote at least $250 million in national life insurance premium in 2021, and covered at least 10,000 lives via term insurance the same year. Life insurers reported they are mainly using AI and machine learning for marketing and underwriting.
Consultants caution insurers about Gen AI inaccuracy risks
Before jumping into implementation of generative AI, insurers may want to consider some of its issues that the industry has already identified.
Insurers considering using Gen AI for claims, underwriting and other operational functions will need to watch out for "hallucinations," the phenomenon of Gen AI language models producing inaccurate or nonsense results.
Professionals and experts are concerned about issues with bias, privacy, security and "hallucination," the term being used to describe output from generative AI that is inaccurate or incoherent, because the large language model (LLM) technology has not correctly processed data and information received.
Hallucinations can produce incorrect results that materially affect insurance business operations such as underwriting and claims decisions, and can also lead to security issues and leaks of sensitive information, impacting customer service, as Adrian McKnight, chief digital officer of WNS, a business process management company, explained.
Michael Shashoua, Senior Editor, Digital Insurance
The Avatar effect – artificial intelligence and the insurance workforce
James Cameron’s blockbuster movie Avatar broke post-pandemic onset records when it was released last December, and the way the films’ protagonists, an alien species known as Na’vi, interact with the world around them could act as a blueprint for professionals looking to better understand the potential that generative AI might have to change how they work amid numerous talent and workforce challenges.
Generative artificial intelligence (generative AI) exploded into public consciousness in late 2022 with the emergence of popular online platform ChatGPT. A record-breaking 100 million people flocked to Microsoft-backed ChatGPT within its first two months, leaving rival Alphabet, parent company of Google, rushing to push out its Bard alternative.
In August 2023, Gartner placed the technology at its peak of inflated expectations on the hype cycle, with a senior VP analyst commenting that its popularity will have a “profound impact” on both business and society.
In the space of just one year, big businesses, from entertainment giant Disney to shopping titan Walmart to insurance colossus Chubb, have come out and said they are looking at how generative AI, or large language models (LLMs), could work within their industries. Seventy per cent (70%) of global CEOs cited AI as their top investment priority in KPMG’s 2023 CEO Outlook survey.
News
AM Best stays Negative on U.S. personal lines insurance segment
AM Best has announced it is maintaining its Negative outlook on the U.S. personal lines insurance segment for 2024, due to the continued deterioration in results for the personal auto and homeowners’ lines of business and rising loss costs.
The rating agency observed the challenges that personal lines writers have in maintaining rate adequacy, as well as elevated reinsurance costs amid heightened catastrophe loss volatility and increased secondary peril activity.
“Factors offsetting the negative pressures include solid levels of risk-adjusted capitalization for insurers within the segment with sufficient liquidity,” AM Best said.
The firm also noted improving investment yields and an overall push for rate adequacy with some easing of regulatory hurdles have also contributed positively.
Despite this, Richard Attanasio, senior director, AM Best, said, “The capital cushion has eroded for some insurers. Given the persistently high loss costs, as well as increased levels of net retention for homeowners carriers, a return to underwriting profitability for the segment over the near term appears highly unlikely.”
US crop insurance provides billions in profit for insurers -gov't agency
Roughly one-third of U.S. government spending to insure the nation's crops since 2011 has gone to insurance companies that derive more than $1 billion in profit from the program each year, according to a government watchdog's report released on Monday.
The federal crop insurance program, administered by the U.S. Department of Agriculture, is meant to protect farmers from financial losses after natural disasters or other events that result in crop losses or price declines.
The USDA worked with 13 privately held insurance companies to provide 1.2 million crop insurance policies at a cost of $17.3 billion in 2022, said the report from the Government Accountability Office (GAO).
From 2011 through 2022, the federal government paid about $36.6 billion to the insurance companies, about a third of the program's total cost of $107.7 billion, the GAO said.
During that time, the companies' underwriting gains, or profits, averaged $1.4 billion annually and their rate of return was nearly 17%, compared with a market rate of around 10%. USDA's target rate of return negotiated with insurers is 14.5%.
"This GAO report shows that a shocking proportion of the subsidies intended to support the cost of writing crop insurance policies for all farmers are being eaten up by companies and agents," said U.S. Senator Cory Booker, a Democrat, who requested the GAO report.
Former Root Marketing Exec Pleads Guilty to Taking Over $10 Million From the Insurer
Brinson Caleb “BC” Silver, former chief marketing officer for InsurTech Root, has pleaded guilty to stealing more than $10 million from his former employer and violating court orders.
According to the U.S. Attorney’s Office for the Southern District of Ohio, Silver, 43, of Culver City, Calif., pleaded guilty to one count each of wire fraud and contempt of court and has agreed to pay more than $10.2 million in restitution. A prison sentence of 24-51 months has been recommended.
Silver has been in jail in Butler County, Ohio, since June, according to the jail’s website. A federal judge had ordered Silver detained for criminal contempt on June 20.
Columbus, Ohio-based Root Inc., parent company of Root Insurance, filed a lawsuit in February in U.S. District Court for the Southern District of Ohio against Silver, accusing him of pocketing millions of dollars meant for advertising campaigns through a series of transfers from vendors to companies owned by him or his family. The U.S. Attorney’s Office said Silver spent the money on a $1.4 million yacht, a Mercedes-Benz G550 worth nearly $165,000, an amphibious airplane, expensive watches and other items.
“Silver failed to appear in court for a hearing related to his civil suit and instead spent lavishly while traveling the globe,” said the attorney’s office.
Root last month filed an application for entry of default since Silver failed to answer or plead to an amended lawsuit. Court records show Silver has largely been uncooperative during the legal process — denying the delivery of summonses, failing to provide information to a court-appointed custodian of his property and assets, and violating a court order limiting his spending to $5,000 on day-to-day personal living expenses
The attorney’s office said Silver spent “$20,000 on plastic surgery, more than $25,000 at Indonesian businesses (including $8,000 at a luxury resort in Bali) and in withdrawals made in Indonesia, and more than $88,000 through PayPal to individuals,” said the attorney’s office. He also withheld information about a multimillion-dollar property in California and at one point “made two phone calls to an “international relocation” company and asked for citizenship within a country that would not extradite him to the United States, and a foreign bank account that the United States could not freeze.”
Silver was Root’s CMO for just one year — Nov. 8, 2021 to Nov. 9, 2022 — before he was let go as part of company-wide layoffs. Root said in court filings that its finance department last year had noticed some “unplanned spending from the marketing department” and started to investigate.
Commentary/Opinion
Why Building Codes Are Key to Future Climate Resiliency
The process of upgrading building standards and model codes can take many years, a time frame that is at odds with the growing severe weather risks many Americans face.
Between January and August this year, the U.S. experienced a record-breaking 23 severe weather events, with losses exceeding $1 billion.
“The previous record of 22 events was set just three years ago,” says Mark Berven, president and COO of property and casualty at Nationwide. “And over the past several years, we’ve seen severe weather becoming an ‘everywhere issue,’ not just a coastal issue.”
This trend underscores the need for building codes to keep up with growing risks. Nationwide’s recent Agency Forward survey of commercial property stakeholders, which included commercial property owners, business owners, new construction builders, and insurance agents, found that:
More than eight out of 10 agree on the importance of improving building codes in their area.
A quarter of property stakeholders also believe building codes in their region are outdated.
As the urgency to update building codes becomes more apparent, insurance agents are uniquely positioned to advocate for change.
InsurTech/M&A/Finance💰/Collaboration
Genpact Working With AWS, Amazon Business to Reduce Insurance Claims Life Cycle
Amazon Web Services (AWS) and Amazon Business are tapping global professional services firm Genpact for its generative AI to enhance claims management.
Leveraging its claims management expertise as well as Amazon Bedrock generative AI capabilities and Amazon Business procurement API integrations, including pricing information, Genpact anticipates the claims submission timeline from weeks to days.
The initiative is focused on streamlining property loss replacement item identification and enabling more efficient and timely delivery of policyholder estimates.
Amazon Bedrock is a fully managed service that provides access to foundation models (FMs) from leading AI companies through an application programming interface (API) to build and scale generative AI applications.
“AI is fundamentally reshaping the landscape of the insurance industry,” said Sameer Dewan, global operating officer, Genpact. “Our Genpact AI-driven automated pricing workflow, powered by AWS, is transforming the research, significantly reducing the time adjusters spend investigating by as much as 75 percent. By automating routine tasks and enhancing decision making, our AI solution is empowering smarter pricing decisions, expediting claims settlements, and bringing about a profound transformation in the customer experience.”
In the future, Genpact plans to integrate additional AI services into the automated workflow to introduce enhanced features. These include real-time summaries of market values for claimed contents and optimal action recommendations for further processing.
Cytora Partners with ZestyAI to Boost Commercial Property Underwriting
Cytora has announced its partnership with ZestyAI to enhance commercial property underwriting through the seamless integration of climate models.
Cytora has announced its partnership with ZestyAI to enhance commercial property underwriting through the seamless integration of climate models.
As a leading digital risk processing platform, Cytora is thrilled to announce this collaboration with ZestyAI, a trailblazer in using artificial intelligence for property risk assessment. By incorporating ZestyAI’s capabilities into the Cytora platform, commercial insurance underwriters gain access to advanced analytics and risk scores, empowering them to evaluate and mitigate climate-related risks effectively.
According to reports, the partnership addresses the escalating concerns among commercial property insurers regarding increased losses from once-considered “secondary perils,” such as wildfires and severe storms, including hail.
ZestyAI, renowned for its proficiency in leveraging artificial intelligence to assess risk exposure at the property level, introduces comprehensive climate risk models. These models take into account all factors influencing a property’s value and its vulnerability to natural disasters, providing insurers with a powerful tool to navigate the evolving landscape of climate-related risks.
Mine raises $30 million
Israeli startup Mine has raised $30 million in Series B funding led by Battery Ventures, with participation from Saban Ventures, MassMutual Ventures, Headline Ventures, Nationwide, and others.
Founded in 2019, Mine describes itself as a smart data assistant that helps users discover and manage their data online. With Mine, users can find out which companies are holding their data, request data deletions, and more.
The startup also has an enterprise offering, MineOS, which provides companies with a solution to manage their data.
People
NAIC Officers Elected for 2024
Members of the National Association of Insurance Commissioners (NAIC) elected the 2024 officers at the conclusion of the NAIC Fall National Meeting in Orlando today.
Here are the 2024 NAIC officers:
- President: Connecticut Insurance Commissioner Andrew N. Mais. Andrew N. Mais was nominated Commissioner of the Connecticut Insurance Department effective March 4, 2019.
- President-Elect: North Dakota Insurance Commissioner Jon Godfread. Jon Godfread was first elected Commissioner of the North Dakota Insurance Department on November 8, 2016, and re-elected on November 3, 2020.
- Vice President: Virginia Insurance Commissioner Scott A. White. Scott A. White was appointed Commissioner of the Virginia Bureau of Insurance effective January 1, 2018.
- Secretary-Treasurer: Rhode Island Superintendent of Financial Services Elizabeth (Beth) Kelleher Dwyer. Beth Kelleher Dwyer was appointed Superintendent of Insurance on January 11, 2016, and effective May 2023, named Director of Rhode Island's Department of Business Regulation.
The newly elected officers will assume their duties on Jan. 1, 2024.
The NAIC members also elected 2024 zone officers during the Fall National Meeting. The NAIC is organized into four geographical zones, and within each zone, three officers are elected annually by the respective zone members.
Innovation
The State Farm Vision: Ecosystem Capabilities for the Insurer of the Future
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.
Haden Kirkpatrick is the Vice President of Innovation at State Farm, and
Matteo Carbone is Director of the IoT Insurance Observatory and chairman of Net Insurance’s innovation advisory board. Carbone was the Guest Editor of the Carrier Management Q32021 special report, ”Insurance Is Getting Connected,” and Q42023 special report, ”Making More Connections,” about IoT insurance applications. A frequent contributor, Carbone was also a guest editor for Carrier Management’s 2018 featured magazine section, “Startups Face Off Against Established Players” ; co-editor Adrian Jones)