AI in Insurance
NAIC Members Approve Model Bulletin on Use of AI by Insurers
The National Association of Insurance Commissioners (NAIC) Membership voted to adopt the Model Bulletin on the Use of Artificial Intelligence Systems by Insurers during the 2023 Fall National Meeting.
The bulletin reflects the work of the NAIC Innovation, Cybersecurity, and Technology (H) Committee, chaired by Maryland Insurance Commissioner Kathleen A. Birrane. Michael Conway, Commissioner of the Colorado Division of Insurance, and Doug Ommen, Commissioner of the Iowa Insurance Division, are co-vice chairs of the committee.
"This initiative represents a collaborative effort to set clear expectations for state Departments of Insurance regarding the utilization of AI by insurance companies, balancing the potential for innovation with the imperative to address unique risks," said Commissioner Birrane. "As the insurance sector navigates the complexities of AI, the NAIC's Model Bulletin on the Use of Artificial Intelligence Systems by Insurers provides a robust foundation to safeguard consumers, promote fairness, and uphold the highest standards of integrity within the industry."
The H Committee, comprised of representatives from 15 states, began drafting the bulletin in 2023 with the goal of establishing comprehensive regulatory standards to ensure the responsible deployment of AI in the insurance industry. The bulletin addresses critical issues related to the usage of AI, such as potential inaccuracies, unfair biases leading to discrimination, and data vulnerabilities.
While not a model law or regulation, the AI model bulletin serves as a guiding document, fostering uniformity among state insurance regulators regarding expectations for insurance carriers deploying AI. The bulletin comprises four key sections, each addressing crucial aspects of AI usage by insurers. It emphasizes the importance of responsible governance, risk management policies, and procedures to ensure fair and accurate outcomes for consumers.
Human Expertise: The Unseen Powerhouse Behind Data Analytics and AI in the Insurance Industry
Artificial Intelligence and Data Analytics: A Necessity for Human Expertise
In today’s digital age, artificial intelligence (AI) and data analytics are creating a seismic shift in various industries, and the insurance sector is no exception. While AI and data analytics offer immense potential for automation and efficiency, they are not standalone solutions. They heavily rely on human expertise for effective outcomes.
Insurance companies are increasingly integrating AI as part of an augmented intelligence approach in their operations. This approach combines the strengths of AI, such as its ability to process large volumes of data and perform complex calculations, with human expertise in decision-making, quality control, and continuous improvement of AI systems.
AI’s role in insurance is not merely about automating repetitive tasks. It’s about retaining and enhancing human expertise, freeing up specialists for complex tasks that require critical thinking, judgment, and creativity.
AI in Insurance: Enhancing Efficiency and Customer Satisfaction
The integration of AI in insurance processes is revolutionizing the way insurers operate, improving efficiency, and enhancing customer satisfaction.
AI is used for efficient claims processing, enabling insurance professionals to focus on more complex activities. This not only enhances productivity but also preserves knowledge within the company.
However, the integration of AI tools requires a fine balance. It’s crucial to identify areas where human judgment is indispensable and where AI can take over repetitive tasks.
Continuous feedback from insurance professionals is vital in refining AI performance, ensuring that the outcomes are of high quality and align with the company’s objectives and regulations.
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News
Commercial P&C pricing cycle close to peak, says JP Morgan
Analysts at JP Morgan have reported that the pricing cycle is “probably close to the peak” in commercial lines.
Underlining the backdrop for this statement, JP Morgan’s analysts highlighted that since 2018, prices in many lines of business on the wholesale side of the P&C re/insurance sector have seen “material price corrections as a reaction to poor industry profitability, elevated catastrophe losses and the rise of phenomena such as social inflation.”
Citing data from Marsh, JP Morgan’s analysts noted that global commercial lines prices have seen increases of ~60% in aggregate since 2018.
“As a result, the commercial P&C arms of AXA, Allianz and Zurich have benefitted from strong pricing trends over the past few years,” the analysts added.
However, in the last year, JP Morgan said it has seen prices continue to increase, but at lower levels in aggregate than in previous years.
“Price hardening is much less widespread and limited to areas such as property in which the reduction in reinsurance cover has seen catastrophe-exposed business see material price increases,” JP Morgan’s analysts observed.
Senator Ed Markey To Automakers: Don’t Sell Connected Car Data
Senator Ed Markey (D-MA) wants automakers to curb collecting and selling data from users of connected cars that could reveal sensitive information.
“As cars increasingly become high-tech computers on wheels, they produce vast amounts of data on drivers, passengers, pedestrians, and other motorists, creating the potential for severe privacy violations,” Markey writes in a letter sent to 14 car manufacturers.
“This data could reveal sensitive personal information, including location history and driving behavior, and can help data brokers develop detailed data profiles on users.”
Markey’s letter to the automakers follows a recent report from Mozilla that showed “unfettered data collection and privacy intrusions,” in the car industry, MediaPost reports. The Mozilla reports found that car companies collect more data than necessary and 84% of them can share personal data with outside companies.
Markey said connected car data can be used for targeted advertising, “such as displaying an intrusive ad on a vehicle dashboard.”
AAA: More than half of drivers surveyed engage in risky behavior
More than half of U.S. drivers engage in risky behaviors while behind the wheel, new research shows.
According to the AAA Foundation for Traffic Safety’s annual Traffic Safety Culture Index (TSCI) survey, just 41% of drivers were considered safe. The latest study, based on 2022 data, found that of the 2,499 drivers studied, more than 1 in 5 sped while others admitted to being distracted.
Some of those studied also engaged in aggressive or impaired driving, the study found.
“Despite acknowledging the dangers, some drivers continue to engage in potentially deadly behaviors, particularly speeding,” said David Yang, AAA Foundation’s president and executive director.
“Understanding the different types of risky driving behaviors and the characteristics of drivers who engage in them is crucial for developing targeted interventions to achieve safe mobility.”
Commentary/Opinion
Insurance industry needs to think more broadly about risk: Risk Strategies’ Mina
With the insurance market constantly changing and growing concerns around climate change, geopolitical issues and new technologies, the industry needs to think more about what could happen if there was no access to insurance, Risk Strategies’ John Mina highlighted in a recent interview with Reinsurance News.
“It is important to think about where the industry is going for the next five to ten years and beyond. But it is also highly relevant to advise clients on what could happen if you can’t have insurance. How do you protect yourself?” said the CEO.
He continued: “This goes beyond the role of insurance as a vehicle to transfer risk, I believe we have to think more broadly about risk in all its forms. How do we retain and manage it? How do we avoid it? And where the industry is going.
“The insurance industry is currently going through a hard market, which is expected to continue into 2024. In addition to this challenge, a number of insurers are retracting from different spaces, either from specific geographies or different classes of business, and have concerns around climate change.”
As insurers retract from those spaces, it leaves clients with fewer and fewer options, Mina noted. Additionally, this hard market is unlike any others, he highlighted.
As AI advances, so should our investment in human touch
The emergence of artificial intelligence (AI) in the insurance industry may have a transformative impact on agents and carriers. AI can enable us to spend less energy on time-consuming administrative tasks. It can synthesize large amounts of data, help us make decisions at rapid speed, and better assess risks.
When you boil it down, AI essentially gives us the gift of time. The question is: What do we do with this newfound energy? My suggestion: Invest in your agents which will make the customer experience more delightful.
The reality is, some customers are willing and eager to embrace AI, especially those of younger generations. But there will always be the need for human touch in insurance. In fact, almost half of customers prefer to interact with a human even after a policy is in place. It’s humans, after all, who build relationships, not AI. By devoting more time to our customers, we are better able to understand their unique needs and provide valuable advice and counsel.
AI technology in the insurance landscape
AI can serve as an ‘executive assistant’ by taking care of many administrative tasks. It’s capable of automating customer forms and policy renewals, extracting information from documents and maintaining detailed records. This can reduce wait times and get customers covered more quickly. For simpler transactions, AI can also provide customer support in an effective way that feels natural.
Bryan Davis is executive vice president and head of VIU by HUB
Keeping the customer journey and experience as a North Star
During a recent CIO Leadership Live session, Jonathon Valentine, CIO and co-founder of next-generation telematics insurtech company ThingCo, spoke with CIO’s Lee Rennick about leadership, innovation, and frictionless tech for the end user.
As a connected car data company focusing on the motor insurance sector, UK-based ThingCo is dedicated to developing next gen telematics built with the latest technology. But ensuring the best possible end user experience is the primary consideration to choose the right way forward.
“I think of myself as a techie, but I’m probably more of an insurance person who’s just good at tech rather than the other way round,” says Jonathon Valentine, the company’s CIO and co-founder. And it’s that combination of disciplines that’s enabled him to continuously build knowledge, especially as tech creation is gaining momentum.
“Gen AI and LLMs will probably transform us as a business and what we can do to data, so we’re absorbing data from third party sources,” he says. “We would never do that before, but we will if it’s going to help us become more intelligent in what we do because humans can only go so far, and models can only get you so far. But now these new models allow us to do a lot more. It’s very early days, though. We’re not experts. We’re pure admirers and users and we’re only just scratching the surface, but I’m excited to see what more is given to us.”
Research
Many Insurers Struggle to Deliver Seamless Digital Experience as Repair Cycle Times Rise, J.D. Power Finds
With customers saying their average auto repair cycle time has doubled in the past two years—now topping 23 days—and the average home repair cycle time increasing as well, insurers need to work harder than ever to manage customer expectations. According to the J.D. Power 2023 U.S. Claims Digital Experience Study,SM released today, digital communications channels have become the key to maintaining customer satisfaction throughout the claims process, but many insurers are still struggling to deliver a truly seamless digital experience. As a result, overall satisfaction is 854, down 3 points from 2022.
"Across all of our insurance claims experience studies, we find that the more insurers can do to manage expectations, keep customers updated and make it easy for them to manage the claims process without a lot of effort, the more satisfied customers become—even when repair cycle times are longer than ever," said Mark Garrett, director of global insurance intelligence at J.D. Power. "Customers have an expectation that using digital tools will create efficiencies in the process and keep them informed throughout their claim, but many insurers struggle to meet those expectations. Only 41% of customers ‘completely agree’ both expectations were met. Whether it is making the claim, submitting photos or communicating with claims staff, there are still bumps along the digital road. Notable, too, is that only 35% of customers said the estimation process was ‘very easy.’"
Fortunately, when these experiences go well satisfaction is very positively affected. Digital communications in the form of personalized text messages, status updates via mobile apps and guides to help reading estimates can dramatically improve that experience without significantly raising customer service costs for insurers. However, many customers still indicate they need to pick up the phone to track down a status update, often resulting in repeating information to a representative. This negatively affects the overall customer experience.
InsurTech/M&A/Finance💰/Collaboration
Nearmap Announces Agreement to Acquire Betterview, a Complementary Property Intelligence and Risk Management Platform
Nearmap, one of the world’s largest location intelligence and aerial imagery solutions providers, has signed an agreement to acquire Betterview, a leading property intelligence and risk management platform in the insurance industry.
Founded in Australia in 2007, Nearmap expanded operations into the U.S. in 2014 to help companies better visualize the truth on the ground to make more informed business decisions. Today’s announcement marks a significant milestone in the advancement of the Nearmap global growth strategy. This will reinforce the company’s position as a leading source of imagery intelligence, data and solutions, and expand and complement its expertise and capabilities for insurance customers and partners.
“The Nearmap acquisition of Betterview is transformative for the industry,” said Andy Watt, CEO of Nearmap. “Integrating the Betterview platform and AI solutions into the Nearmap technology stack will enable better visualization of the truth on the ground with a richer, more powerful set of AI capabilities that combine the best of both companies. This is a significant milestone in our ongoing efforts to innovate solutions for insurance carriers, and expand our presence within the property and casualty space.”
Betterview is an established and trusted source of property intelligence and risk management for the insurance industry, applying artificial intelligence and computer vision to help identify and mitigate property risk, improve and automate underwriting and inspection workflows, and provide a more productive, seamless customer experience.
“Combining the offerings of two best-in-class providers will deliver greater impact for insurers,” said Betterview Co-Founder and CEO David Lyman. “The acquisition of Betterview by Nearmap will increase access to premium imagery and cutting-edge, scalable property intelligence solutions for the insurance industry.”
“We are optimistic about the outcomes this acquisition will bring to our customers, the potential for developing even greater products together, and the impact it will have on the future of the insurance industry,” said Betterview Co-Founder and COO Dave Tobias.
Innovation
Volvo’s new EX90 model equipped with AI-based driver monitoring tech
Volvo will introduce and standardize driver monitoring software (DMS) in its new fully-electric EX90, according to a company providing technology for the model.
Smart Eye, which develops artificial intelligence (AI)-based driver monitoring technology, said last week that its DMS software is included in the model.
The new technology combines a dual driver understanding system (DUS) with capacitive sensing to ensure hands are on the steering wheel, Smart Eye said when announcing the collaboration.
Canada
Beyond the pandemic – what's going on in the insurance claims space?
Within the insurance claims landscape, 2023 has unfolded as a period of period of adaptation, marked by supply-chain challenges, natural catastrophes, and the ongoing repercussions of the COVID-19 pandemic.
During a recent roundtable discussion hosted by Insurance Business Canada, industry experts from CNA Canada, Desjardins General Insurance Group, and Royal Claims Services offered their insights on the trends developing in the insurance claims space.
Post-pandemic trends in insurance claims
Following the pandemic, digital transformation has continued to accelerate and open new avenues for the industry, according to Valérie Lavoie, president and COO of Desjardins General Insurance Group.
However, the shift to a post-pandemic world also introduced specific challenges, particularly in the realm of auto insurance.