AI in Insurance
How AI could change insurance
The numbers are staggering. ChatGPT amassed 100 million users in its first two months, only for that record to be smashed a few months later by rival Threads, with 100 million users in just five days.
It took TikTok roughly nine months to reach that number of users and Instagram two-and-a-half years, but the uptake of ChatGPT after it launched in November 2022 was unprecedented. The speed of its adoption prompted a wave of speculation in the media and business world about the disruptive potential of such technology.
With digitalization increasing rapidly in many areas of life, the amount of data that can be leveraged is proliferating. As a data-driven industry, insurance is not new to artificial intelligence (AI) or using data analytics across its value chain to improve products, interactions, prevention, claims and processes. According to several studies, the industry is among those with the highest value potential from AI.
Estimates point to the market potential of generative AI (GenAI) reaching $15 billion by 2025 and $32 billion by 2027 in the insurance and finance industries alone. McKinsey foresees AI technologies could add up to $1.1 trillion in potential annual value for the global insurance industry.
Michael Bruch Global Head of Risk Consulting Advisory Services at Allianz Commercial
News
US Property & Casualty outlook: strong momentum into 2024
The US P&C insurance industry enters 2024 with strong momentum. Profitability was below insurers' cost of capital last year, but strong premium increases, easing claims cost inflation and higher investment returns began to boost industry results by 2H23. We expect these trends to continue in 2024, supporting profitability improvement.
The loss ratio on personal lines was 21 percentage points higher than on commercial lines in 9M23, but we expect this gap to narrow in 2024. Personal lines premiums are growing faster and easing economic inflation primarily benefits personal lines claims costs, while social inflation mostly impacts commercial lines. We forecast industry return on equity (ROE) at 9.5% in 2024 and 10.0% in 2025, supported by premium growth of 7.0% and 4.5% respectively in these years.
SwissRe Institute
Commercial property insurance rate hikes come off highs
Commercial property insurance policyholders, who have seen continued premium hikes and cuts in coverage since 2018, will likely see more moderate rate increases in the first half of this year as capacity grows and some stability returns, brokers say.
Insurers will still push for higher rates, with catastrophe-exposed properties, loss-hit accounts and more challenged occupancies such as food, public entity and multi-family real estate, seeing increases in the low double digits and higher.
Best-in-class properties with minimal losses will benefit from a more competitive market with low-single-digit increases and even flat renewals possible for some buyers, they said.
The property insurance market is highly dependent on what the Jan. 1 treaty reinsurance renewals bring, said Martha Bane, Glendale, California-based managing director of the North America property practice at Arthur J. Gallagher & Co.
Car Insurance Premiums to Increase 12.6% in 2024 - Highest Rate increase in 6 years
American drivers should prepare themselves for another year of Auto Insurance sticker shock, with auto insurers expected to raise car insurance premiums by an average of 12.6% in 2024, after raising rates by 11.2% in 2023. This will be the highest rate increase since 2018, according to The State of Auto Insurance in 2024 report published by ValuePenguin.com, a LendingTree subsidiary. The average annual cost of auto insurance will reach $1,984 in 2024, and drivers across all 50 states will see premiums increase.
Insurtech Branch conducts another round of layoffs
After laying off 186 employees last June, insurance startup Branch has made another round of layoffs that impacted 85 employees, according to our sources. A Branch spokesperson refused to disclose the number of employees who were let go, adding that our figure overstates the impact. The spokesperson shared the following email statement with Coverager:
“Persistent inflation has posed a significant challenge for home and auto insurance companies such as ours and as stewards of our members’ capital, we need to meet the moment with a sound and responsible plan for our members, employees, and investors. That’s why today, we’ve made the incredibly difficult decision to reduce the size of our team.
This decision was made to ensure the strength of Branch’s business during these economically turbulent times, but makes parting with valued individuals no less difficult. We are working to ease the transition of affected employees in their next career step, including a severance package, two months of paid health insurance continuation through COBRA, career placement services with a dedicated coach, and an extended post-termination exercise period for vested options.
Commentary/Opinion
Balancing AI and the Future of Insurance | Insurance Thought Leadership
To be successful in our use of AI, we must remember one thing: A machine cannot replace the need for human touch in our industry.
Artificial intelligence (AI) isn’t new, but what it enables us to do is evolving rapidly. In the insurance industry, we’ve already seen AI transform risk assessment, data analytics and time-consuming administrative tasks. And it’s safe to assume that tomorrow’s technological advancements will have even more dramatic impacts on the way we do business. However, there is one thing we must keep in mind if we are to be successful in our use of AI: A machine cannot replace the need for human touch in our industry.
In a world where consumer behaviors and preferences are ever-changing; the human touch can be critical for successful transactions. The needs of our customers are dynamic, and a one-size-fits-all approach does not account for the complexities and constant shifts happening in their lives. We need people to serve as quality control for AI, to provide the underlying training it requires and to develop and deploy it in ways that create value for society while safeguarding against potential harm. While AI will enhance our ability to do our jobs, striking a balance between technology and a human touch will be key to ensuring it will improve the customer experience, as well.
Bryan Davis serves as executive vice president and head of VIU by HUB, a digital brokerage platform backed and developed by HUB International, the largest personal lines broker in the U.S.
Accenture's insurance head on the industry's seismic shifts
“I came into the insurance industry much like most people come into the insurance industry, which is probably by accident,” Kenneth Saldanha (pictured), told Insurance Business.
Now, as the global lead of Accenture’s insurance practice, he explains that it was his background in mathematics that inevitably led him into the field – helping him find his niche in his initial consulting assignments.
But Saldanha’s career trajectory in insurance is not just a story of personal growth – it’s also a testament to the allure and complexity of the industry – especially when it comes to the sector’s fascinating nature and the caliber of people it attracts.
“I think there’s a lot of very good people who work in insurance,” he said, highlighting the human aspect that often underpins career choices. “In insurance, when you meet a group of people you really like, it causes you to stay in the industry. And that’s certainly been the case for me.”
Research
[Ed. Note: Recommended] Enlyte's 2024 Trends Report Addresses Top Challenges in the P&C Industry
Industry leaders offer unique data and strategies to address trending issues including generative AI, provider shortages, drug costs and regulatory updates
As the P&C industry sets course for 2024, executives face continuing challenges in integrating generative AI, understanding data analytics maturity, staying current with prescription drug trends, and managing medical and auto claims costs amidst fears of inflation and legislative and regulatory changes.
To help insurance and automotive leaders improve their outcomes, Enlyte has issued its 2024 Enlytened Trends Report. The annual publication delivers valuable insights from renowned subject matter experts at Enlyte, the parent company of Mitchell, Genex and Coventry.
In an extensive report covering a wide array of today's most pressing issues, industry leaders present intelligence and predictions based on data-driven trends in collision and casualty markets.
"The rapid change and volatility we have been through in recent years has prepared us well for the transformational opportunities that lie ahead," said Alex Sun, CEO of Enlyte. "With a unique view of data and claims activity across auto collision, casualty and workers' comp, we feel our responsibility at Enlyte is to deliver industry leaders with insights offering a unique perspective."
Using today's data to forecast tomorrow's issues, Enlytened '24 authors deliver a thorough assessment of trends the industry is facing today along with strategies leaders can use when tackling difficult issues and meeting future goals. Enlytened's eight chapters address issues P&C and collision repair leaders care about most.
J.D. Power: The factors changing insurance
Although insurance has always evolved with society, the P&C insurance sector is now engaged in a notable business transition due largely to economic forces beyond insurers’ control.
That, at least, is the conclusion that J.D. Power’s Senior director of Insurance Business Intelligence Stephen Crewdson, CPCU, reached in the recent report titled The Five Forces Influencing P&C Insurance Shopping. “The pace of change in the P&C industry has been increasing for years,” Crewdson writes in the report’s introduction. He adds that insurance is no longer an industry of business traditionalists and is now responding so socio-political and economic forces with accelerated scale and speed.
The slideshow above illustrates the five forces changing the nature of business in P&C insurance, according to J.D. Power Insurance Intelligence
Claims
Claim Assist Solutions Brings Together Several Powerhouse Adjusting Firms
As the property and casualty insurance industry continues transforming its operations and technology, carriers increasingly seek ways to offset these investments with a more cost-effective claims-adjusting process without sacrificing quality, accuracy, or service.
In response, several well-known firms have joined forces under an overarching brand name, Claim Assist Solutions, including Allcat Claims Service, Colonial Claims, Lighthouse Claims Service, Parker Loss Consultants, Prestige Claims Service, and QA Claims. All are powered by Claim Assist Technologies, an end-to-end proprietary claim management software platform.
Claim Assist Solutions provides people, process, and technology to leading insurance carriers in the auto, property, flood, and complex and commercial claims industry through its more than 2,000 employees and independent adjuster network of 17,000 licensed contractors.
“While we’re introducing a new name, our focus within each company remains the same – be the provider of choice for all insurance adjusting needs with a complete set of tech-enabled insurance services that facilitate claims with total accuracy, speed, and quality, which in turn, provides valuable capacity back to the carrier,” said CEO, Sid Carr.
Companies within Claim Assist Solutions will continue to service clients separately; however, the companies will share best practices across human resources, finance, and administration while investing in technology to ensure the highest levels of client satisfaction.
The journey to this announcement began when Trive Capital, a Dallas-based private equity firm, and Valedor Partners, a Houston-based private investment firm, invested in Allcat Claims Service** in 2022. From that transaction, Claim Assist Solutions was able to pursue additional growth investments of claim service companies.
“Coming under a common name, while maintaining existing brand identities, conveys all the capabilities we can offer across our platform,” said president, Ramon Lopez. “Together, we service six out of the top 10 P&C insurance carriers. From flood to commercial to your everyday auto or home claim, we can do it all and look forward to helping more clients in the future.”
InsurTech/M&A/Finance💰/Collaboration
Five Sigma and Odie Pet Insurance Partner to Drive Innovation and Efficiency in Claims Management
Five Sigma, a pioneer in cloud-native claims management solutions, is excited to announce a strategic partnership with Odie Pet Insurance, a full-service pet health insurance company on a mission to democratize pet insurance and remove the financial burden for pet owners by providing greater coverage flexibility and affordable premiums. This collaboration marks a significant leap forward in reimagining pet insurance claims processes and enhancing operational excellence across the industry.
Five Sigma's innovative Claims Management System is tailored specifically for property & casualty insurance companies and uniquely aligns with Odie Pet Insurance's mission to redefine the pet insurance landscape. This partnership is built on the shared goal of leveraging technology to simplify and enhance claims operations while delivering unparalleled experiences to pet owners.
"We are thrilled to join forces with Odie Pet Insurance to bring a new era of efficiency and innovation to pet insurance claims management," stated Oded Barak, CEO and Co-founder of Five Sigma. "Our vertical SaaS claims solution combined with Odie's visionary approach will reshape how pet insurance claims are handled, offering streamlined processes, intelligent automation, and data-driven insights."
Sixfold Joins Guidewire Insurtech Vanguards Program | Sixfold
Sixfold, the Generative AI exclusively built for insurance underwriters, today announced that the company has joined Guidewire’s Insurtech Vanguards program, an initiative led by property and casualty (P&C) cloud platform provider, Guidewire (NYSE: GWRE)**, to help insurers learn about the newest insurtechs and how to best leverage them.
Jane Tran, Co-founder & COO at Sixfold, expressed, “Guidewire stands as the industry's foremost policy vault, embodying the definitive source of truth. Collaborating with Guidewire empowers us to advance our enterprise-grade generative AI solutions tailored specifically for underwriters.”
Insurtech Vanguards is a community of select startups and technology providers that are bringing novel solutions to the P&C industry. As part of the program, Guidewire provides strategic guidance to and advocates for the participating insurtechs, while connecting them with Guidewire’s P&C customers.
Sixfold seamlessly handles the ingestion, routing, classification, and summarization of submissions, and provides trustworthy, data-driven policy recommendations to underwriters in a user-friendly format.