AI in Insurance
Q&A: Nationwide CTO Jim Fowler talks generative AI
The world’s introduction to the power of generative artificial intelligence (AI) has introduced new risks and concerns to the public consciousness that were not on most people’s radars even a year ago. But it is creating tremendous new opportunities for businesses and the way we work. As this technology has rapidly evolved, generative AI seems to be at a critical turning point. While there is a pervasive openness to using the tool, that comes with a healthy skepticism as full trust remains elusive. Nationwide’s Chief Technology Officer Jim Fowler explains how AI is being implemented at Nationwide today and its potential outlook.
Q: What is happening with generative AI at Nationwide?
Fowler: AI is not a new term in our world. For the last decade, Nationwide has deployed predictive models of artificial intelligence to help our teams make life insurance underwriting decisions and process claims. What is different for us now is the emergence of generative AI and large language models.
We are witnessing the coming of age of large language models that can scan vast amounts of data and generate predictions. With ChatGPT4 technology, it can create content based on an extremely large knowledge base. The other piece is natural language processing, which is the ability to ask and answer questions in natural language using the large language model to generate content.
The thoughtful integration of generative AI will enable companies to build stronger relationships with customers through a more personal, reassuring, and effortless experience. That is where our focus is.
We have spent the past five years digitally enabling our products and services with modern integration platforms and intelligently automating processes. This work is pivotal and allows us to plug into the ecosystem of our intermediaries. Today, we are at the start of a new phase that I call augmented intelligence. This technology is going to empower a bionic enterprise that bring humans aided by machines to run the company and serve customers, agents and financial professionals in a vastly different way for the next 100 years.
Applying GenAI can improve loss ratios and interaction across the market: Planck's Tsur
As GenerativeAI (GenAI) continues to expand across the insurance and reinsurance sector, Elad Tsur, Co-Founder and CEO of Planck, explained during a recent interview with Reinsurance News how the technology can play a key advantage in helping to reduce loss ratios and bring more competitive rates to end customers.
In terms of loss ratio, Tsur explained that if organisations want to strive for optimization within their expense ratios, which is becoming very topical within the industry today given the current market environment, then it is essential that they do this while maintaining their loss ratios.
“When you automate and take an individual out of the loop and in some cases units, you need to ensure that you have something that can replace the person, because there was obviously a reason why they were part of it in the first place.
“You need to ensure that if you are replacing a person, you need to be able to mimic a person’s behaviours in some cases.
News
U.S. P/C Insurers Set for Modest Improvement in 2024
U.S. property/casualty (P/C) insurers will see some relief in the coming year following a rough 2023 as a personal auto line recovery contributes to statutory profit improvement, according to Fitch Ratings in its 2024 sector outlook report. Projections for the year include continued strong industry premium growth, with improvement moderated by a combined ratio that remains above 100% and a return on surplus of approximately 5% that is still below historical norms.
Fitch’s sector outlook for the U.S. P/C industry remains neutral. The outlook for the individual commercial and personal lines sectors are neutral as well. Meager financial results in 2023 reflect larger year over year underwriting losses and lower statutory earnings, driven by poorer personal auto and homeowners performance.
“Following two years of large underwriting losses, auto results will show more material improvement as rate increases take hold and claims severity trends moderate, though a return to segment underwriting profits is less likely,” said Managing Director Jim Auden. “Countering the auto rebound are continued challenges P/C insurers are facing in managing catastrophe exposures and loss-cost uncertainty in many segments amid higher inflation and growing claims litigation activity and costs.”
The commercial lines sector continues to generate underwriting profits. Sector underwriting gains may narrow in 2024, but pricing trends are anticipated to remain largely positive. Property and commercial auto lines remain as segments with greater performance uncertainty.
Best’s Market Segment Report: US Personal Auto Insurance Results Worsen as Claims Severity Rises
Following the worst year in the recent past for U.S. personal auto insurers, results continued to slide in the first half of 2023 as the segment posted a direct incurred loss ratio that was more than three percentage points above the one recorded in the same period of 2022, according to an AM Best report.
“Workplace patterns have changed post-pandemic with work-from-home arrangements, reducing the number of vehicles on the road. However, driver inattentiveness and riskier driving habits have become more problematic in the last few years, and as a result, auto severity has worsened”
The Best’s Market Segment Report, “US Personal Auto Results Worsen as Claims Severity Rises,” states that the 112.2 net combined ratio in 2022 for the personal auto line of business represented a deterioration of nearly 11 percentage points from 2021. The 2022 combined ratio also is approximately 10 percentage points worse than the 10-year average and median combined ratios for the line. Overall, the segment saw a $33.1 billion underwriting loss in 2022. Economic inflation, supply chain disruptions and technological advances in vehicles have led to increased claims costs. Coupled with increased accident frequency, loss costs have increased faster than rates, creating rate adequacy challenges for insurers.
“Workplace patterns have changed post-pandemic with work-from-home arrangements, reducing the number of vehicles on the road. However, driver inattentiveness and riskier driving habits have become more problematic in the last few years, and as a result, auto severity has worsened,” said Christopher Graham, senior industry analyst, Industry Research and Analytics, AM Best
Year in Review: Three Auto Industry Trends That Defined 2023 [Ed.note: key insights regarding auto collision repair and loss costs captured in the video link]
2023 saw a continuation of the multi-year state of industry challenges and changes for the collision repair and insurance markets – one that requires both shops and carriers to explore new ways of operating and delivering on customer expectations.
This year-end report will take a broader look at three key trends that defined the industry in 2023, from the alarming rise in vehicle thefts and vandalism to the intricate impact of labor strikes and the changing dynamics of total cost of repairs.
As CCC continues to monitor this data, it’s clear that the auto repair and insurance sectors are navigating a complex terrain marked by significant shifts in consumer behavior, supply chain resilience, and market demands.
U.S. commercial insurance prices rise 6.1% in Q3'23, double-digit surges in key sectors: WTW - Reinsurance News
Global insurance brokerageWTW revealed that U.S. commercial insurance prices have sustained a consistent upward trend throughout the third quarter of 2023.
According to the Commercial Lines Insurance Pricing Survey (CLIPS) conducted by WTW’s Insurance Consulting and Technology (ICT) business, commercial premiums demonstrated a steady increase of 6.1%.
The quarterly survey compared insurance prices for policies underwritten during the third quarter of 2023 with those from the same corresponding quarter in 2022, showing a year-over-year rise.
Carriers reported an aggregate commercial price change slightly above 6%.
Among the various coverage areas, Commercial Property experienced the most significant price increase, showcasing a notable double-digit surge.
While the rate was slightly lower than in the previous quarter, it reflected a substantial uptrend. Excess/Umbrella liability also saw a double-digit increase, surpassing the previous quarter’s rate, indicating a consistent upward trajectory for this coverage over multiple quarters.
Property insurance rate increases may be softening
There are signs that the extreme spikes in property insurance may be softening.
Woodruff Sawyer predicts that there will only be single-digit increases in property and casualty insurance rates in 2024, and Ivans reported that the pace of increases eased for property insurance in November, increasing 9.9%, down from the 10.4% increase in October.
Most (but not all) insurance products experienced rate increases in 2023, however some markets saw rates go up at a slower pace than they did the previous two years.
However, inflation, climate and catastrophic losses, and reinsurance costs could all disrupt the forecast, Woodruff Sawyer said.
“Contributing to the challenges in the property market is valuation,” according to the report. “Some insureds have not been proactively increasing replacement cost values, and when large industry losses occur, it has a negative impact on the entire industry.”
Sean Kent, senior vice president of Insurance at FirstService Financial, says most of the property and casualty insurance reports on pricing trends and the 2024 outlook indicate a softening in property insurance rates, which means a leveling off of rates or even a drop can be expected.
“After a few years of insurance carriers hedging their losses by padding their portfolios with increased rates and deductibles, there appears to be added flexibility on renewals and increased capacity to generate more competition for new business,” Kent says. “Plus, 2023 was a major reset year for reinsurance carriers that applied significant rate increases, presumably to avoid more of the same in 2024.”
EV owners face higher repair bills and longer wait times compared to gas cars
Welcome back to the latest episode of The Future of Automotive, with Steve Greenfield, Founder and CEO of Automotive Ventures, where we put recent automotive and mobility news into the context of the broader themes impacting the industry.
A Wall Street Journal article this week reported on why battery-powered vehicles face longer wait times and bigger repair bills than gasoline-engine vehicles, after a crash.
For electric vehicles (EVs), repairs following a collision can cost thousands of dollars more than their gas-powered counterparts, because the fixes tend to require more replacement parts, the vehicles are more complicated and fewer skilled technicians exist to do such repairs. While those issues may ease over time, first-time electric owners may be startled by the higher costs and longer wait times.
Last year, repairing an EV after a crash cost an average $6,587 compared with $4,215 for all vehicles, according to CCC Intelligent Solutions.
The increased costs following collisions contrast with the maintenance savings that dealers and automakers promote when trying to get buyers to switch to electric cars and trucks. In addition to not needing gas, EVs tend to require less maintenance. Not needing to do regular service items like oil changes, engine tune-ups or replacement of timing belts means that electric-vehicle owners spend half as much maintaining their vehicles as their gasoline-owning counterparts, according to Consumer Reports.
But, when EVs need repair, it can be costly. Rental-car company Hertz Global Holdings, which operates a large electric fleet mostly composed of Tesla vehicles, said its third-quarter profit was negatively impacted, in part because of the cost of repairing electric models.
Research
[Ed. Note: Highly Recommended} The Keys to Unlocking SIUs Future Success: Coalition Against Insurance Fraud sponsored by PwC
The Keys to Unlocking SIUs Future Success
PwC sponsored the Coalition Against Insurance Frauds' most Recent Study "The Keys to Unlocking SIUs Future Success." The study was presented at the Coalition's Annual Meeting December 8th in Washington DC.
Thank you to the Coalition’s Research Team and staff including outgoing Executive Director Matthew Smith for their work this year creating this Study. Also, many thanks to the insurers who participated by providing answers to the survey.
Please visit the Coalition’s site for more information: insurancefraud.org HERE
Wade Wickre, Director, Insurance Financial Crimes, PwC
Tesla Cybertruck's stiff structure, sharp design raise safety concerns -experts
The angular design of Tesla's (TSLA.O) Cybertruck has safety experts concerned the electric pickup truck's stiff stainless-steel exoskeleton could hurt pedestrians and cyclists and damage other vehicles on roads.
Reuters spoke to six safety professors and officials who viewed videos of crash tests conducted by Tesla on its first new vehicle in nearly four years and shown during a webcast delivery event last week.
Crash test videos that Tesla live-streamed at a Nov. 30 event were heavily discussed on social media. Experts who spoke to Reuters said they needed crash-test data to reach firm conclusions about the safety.
"The big problem there is if they really make the skin of the vehicle very stiff by using thick stainless steel, then when people hit their heads on it, it's going to cause more damage to them," said Adrian Lund, the former president of the Insurance Institute for Highway Safety (IIHS), whose vehicle crash tests are an industry standard.
Tesla touted the structures of the truck that absorb impact during the crash. Tesla CEO Elon Musk said in a social media post on Tuesday that he was "highly confident" Cybertruck will be safer than other trucks for occupants and pedestrians.
Data Taking Center Stage in North American Insurance Industry
Insurance carriers in North America are becoming even more data-driven in response to rising costs and other market challenges, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.
The 2023 ISG Provider Lens™ Insurance Services report for North America finds that traditional insurers are simultaneously wrestling with changing customer needs, growing cybersecurity threats, volatile economic conditions and rising risks from extreme weather and other factors. To become more customer-focused and develop successful products, they need to replace legacy technology and processes and break down silos across operations and IT, ISG says.
"Competing in insurance today requires insurers to become more agile in responding to customer needs while reducing the costs of operations," said Dennis Winkler, Americas Insurance Industry lead at ISG. "New technologies and automation are driving hyper-personalized customer experience improvements and operational efficiencies, and at the core of both of these is data."
Insurers are investing in digitalization projects to deliver more value to policyholders, create better policyholder experiences, and make every interaction from policy purchase through filing a claim match customers’ expectations, the report says. To do so, they must identify friction points, make business processes more responsive and utilize intelligent automation and technologies that can track changes in policyholder sentiment.
InsurTech/M&A/Finance💰/Collaboration
HSB: The Original InsurTech
HSB (formerly Hartford Steam Boiler) was founded in 1866 to address one of the 19th century’s most dangerous perils.
Steam, which powered the Industrial Revolution, enabled unprecedented levels of innovation and productivity, through factory machinery, locomotives and steamboats. But a key risk emerged: Steam boilers were exploding approximately one out of every four days, destroying businesses and causing fatalities across the country. In fact, the largest maritime disaster in U.S. history occurred in 1865 when the Sultana, a Mississippi River steamboat, took the lives of over 1800 people, including Union soldiers who were returning home from the Civil War.
The Hartford Polytechnic Club, a group of local business and civic leaders, explored what could be done about steam boiler explosions. Based on their discussions, members of the club founded Hartford Steam Boiler. Their idea: the establishment of better standards by understanding the underlying risk and associated technology, periodic inspection services, and a financial guarantee (i.e., insurance) to encourage inspections could dramatically reduce what many people thought were “acts of God.”
HSB’s IoT efforts are a continued evolution of the original model that combines technology with engineering and insurance. HSB CEO Greg Barats leads IoT for Munich Re, HSB’s parent company and one of the largest global reinsurers in the world. With a broad ecosystem, HSB builds its own hardware, software and data platform solutions; the company also partners with technology leaders and invests in relevant startups via its dedicated corporate Venture Capital fund.