AI in Insurance
2024 AI Trends Reshaping Insurance Operations
The industry’s strategic focus on AI adoption, coupled with nuanced considerations for data quality and talent retention, is poised to usher in a new era of innovation and operational excellence to the insurance sector in 2024.
2024 promises to be an exciting year for artificial intelligence (AI) within the insurance sector, offering new avenues for insurers to implement and capitalize on technological advancements. Last year saw a notable upswing in AI adoption within the insurance industry, and throughout 2023, a growing number of companies integrated AI into their daily operations to enhance efficiency.
Looking ahead, expect a continual focus on AI, with insurers dedicating time, money, and resources to develop and execute strategic initiatives involving AI. The shift in 2024 will include a proactive approach, as insurers leverage AI in building streamlined processes, reducing time constraints, and enhancing overall efficacy. The strategic use of AI is expected to address and overcome various common challenges faced by insurers.
Stan Smith, Founder and CEO founded Gradient AI
Insureds need to be aware of potential insurance gaps when using AI: Munich Re
Global reinsurance giant Munich Re has highlighted how AI exposures within traditional insurance policies possess the ability to become a significant unexpected risk to insurers’ portfolios.
This comes as the industry evaluates how to transfer capabilities in insuring traditional machine learning models to generative AI (GenAI) applications.
A recent whitepaper released by the reinsurer explains how AI risks are usually excluded in traditional insurance policies, meaning that the damage that AI models can cause could wind up being covered by traditional insurance policies.
Some examples that Munich Re highlights include, AI-based machinery injuring bystanders, which could be covered by existing general liability policies, as well as AI models that are hacked, which could be covered by existing cyber insurance policies.
An alarming example that the reinsurer also gives is that AI-based cleaning robots could potentially destroy a property, which could wind up being covered by existing property insurance policies.
In addition, AI models that make biased employment decisions could also be covered by existing EPLI policies, Munich Re stated.
News
MAPFRE Overcomes Challenges for Record 2023
In 2023, we hit records of premiums & this is already translating into profitability, with the adjusted ROE near 10% says Antonio Huertas MAPFRE CEO
Leading insurance firm MAPFRE has announced impressive 2023 results, including €32.23bn in revenues, €26.91bn in premiums and €692m in earnings. Coming towards a century of conducting business, Mapfre is the leading insurance company in Spain, the leading multinational insurance group in Latin America, in the top 10 insurance firms in Europe and the 17th largest reinsurer in the world.
“In 2023, we hit records in terms of premiums, and this strong growth is already translating into profitability, with the adjusted ROE close to 10%,” shares Antonio Huertas, Chairman and CEO of MAPFRE.
“MAPFRE is overcoming the challenges of the current context and continues advancing its business transformation. Furthermore, we reaffirm the commitment to our shareholders with a final dividend of 9 cents, proof of the strength of the Group’s results and financial position."
Mapfre was founded in 1933 in Spain, where it is still headquartered.
Commentary/Opinion
Challenges Facing Tesla Insurance
In the ever-evolving landscape of the automotive industry, Tesla has carved out a unique niche not only as an electric vehicle (EV) manufacturer but also as a disruptive force in areas such as autonomous driving and energy solutions. With their sights set on revolutionizing the insurance industry, Tesla Insurance aims to leverage their technological prowess to offer innovative and personalized coverage. However, despite the impressive technology at their disposal, the road ahead for Tesla Insurance is fraught with challenges.
Data Privacy Concerns
One of the cornerstones of Tesla's insurance strategy is the use of vast amounts of data collected from their vehicles. While this data can provide valuable insights for personalized risk assessment, it raises significant concerns about privacy. Customers may hesitate to share detailed driving habits and personal information, especially in an era where data breaches and privacy violations are at the forefront of public consciousness.
Neeraj Kaushik, product manager for the NGIN platform initiative at Infosys McCamish Systems
Navigating Innovation: The Intricacies of Insuring Emerging Exposures
Between emerging risks and written coverage is a lot of science and more than a little art. There are always new exposures that owners would like to insure. Most carriers say development is just as much a push from their underwriting and claims groups as a pull from brokers and insureds.
Innovation is more than just a what; it’s a how.
“New and improved” gets a bad rap, but incremental enhancements to existing policies are often the fastest and easiest ways to respond to evolving risks. And fast is important. “Speed to market” was a familiar phrase among development executives. Unspoken, but implied, was the importance of not letting great be the enemy of good.
Creating Coverage
The foundational pillars of developing new coverage, according to Michael Marks, VP of emerging markets and innovation at Nationwide, “are understanding the risks themselves, the partners and collaborators, and then the specific policy language itself. The risks and the coverage might seem obvious, but the collaboration is just as important.
“It is essential that their strategic objectives are aligned with ours,” he said.
It might seem axiomatic, but “we are trying to find what is insurable,” said Marks. “For example, we are very interested in parametric, especially for single perils. That can simplify the offering both for us and for the insured. They can buy just the protection that they need. We are always trying to break things apart and make them more accessible.”
Gregory DL Morris is an independent business journalist
It’s Time for the Commercial Property Insurance Industry to Adopt Tech Efficiencies
Buyers of commercial property insurance are facing many challenges. Rates are rising, capacity is becoming scarce (particularly in catastrophe exposed zones), and large programs, often involving dozens of insurers, are proving harder to syndicate. Today, brokers and their clients are looking for new solutions, many of which have been moving to the forefront over the last several years.
Brokers in particular are expanding their toolkits. In addition to traditional roles such as placing insurance, they are helping their clients to analyze and take control of their total cost of risk, to optimize their buying strategies and to proactively manage their risks. Whether through resiliency investments or the establishment of captives, property owners are leveraging risk retention and mitigation to complement, or even supersede, traditional insurance practices.
Additionally, new methods to structure, capitalize and transfer risk have emerged. Catastrophe bonds, initially designed to cover re/insurers, are increasingly being adopted by large corporations to directly hedge their risks to supplement and/or replace sources of traditional insurance coverage. Then there are parametric policies — a type of insurance contract insuring policyholders against the occurrence of a specific event. These are outgrowths of the industry finding ways to sustain itself through a difficult period, moving fast and making changes for a dynamic risk environment.
Alex Lyashok, CEO of Archipelago
Claims
These regulatory changes could impact future property claims
The start of 2024 brought a host of changes that could impact property claims, including updates to major codes and guidelines that affect residential and commercial policyholders dealing with new construction, renovations, and replacement HVAC equipment.
Adjusters should be aware of new sections in the 2024 International Building Code (IBC) as well as amendments to National Fire Protection Association 211 (NFPA 211). By being familiar with the changes, insurance professionals can better understand how property losses may be impacted and ensure they, or their assessment partners, are considering these codes when evaluating property claims.
Tornado loads added to 2024 International Building Code
The IBC underwent its usual three-year update with some revisions and additions to make it in line with construction best practices and new technology. The document defines minimum requirements for new and existing buildings as they relate to public health and safety. Though not required, individual states or jurisdictions often adopt IBC recommendations or approve further modifications, and adjusters should confirm their assessment partner is familiar with the specific codes of a particular area.
This year’s edition includes changes to roofing underlayment specifications, tornado load requirements, and snow load considerations.
Roof underlayment: Roofs typically need a layer of material between the roof decking and the roof covering — such as the material that goes under asphalt shingles — to avoid moisture intrusion and to aid in water-shedding. The 2024 IBC has a detailed section for roofing underlayment specifications, including which types are appropriate for certain roof coverings. The 2024 IBC also lists recommended application and fastening techniques based on certain criteria.
Kevin Huelsman is the technical education trainer for Alpine Intel
InsurTech/M&A/Finance💰/Collaboration
Capital One to acquire Discover Financial Services in $35.3 billion all-stock deal
KEY POINTS
- Capital One Financial is set to acquire Discover Financial Services in a $35.3 billion all-stock deal.
- The Wall Street Journal reported that Capital One, which already uses Visa and Mastercard networks, plans to keep the Discover brand.
- The merger of the two companies, which are among the largest credit card issuers in the U.S., would expand Capital One’s credit card offerings and its deposit base.
Under the agreement, Discover shareholders would receive 1.0192 Capital One shares for each Discover share or about a 26% premium from Discover’s Friday closing price of $110.49. The companies said they expect the deal to close in late 2024 or early 2025, after which Capital One shareholders would hold 60% and Discover shareholders would own 40% of the combined company.
Giant US insurance broker Truist in advanced sale talks
With over US$48 billion in premiums, Truist Insurance is the fifth largest broker in the US, seventh largest globally – and this week it looks like it may finalize a majority stake sale to Stone Point Capital and Clayton Dubilier & Rice.
The sale of the stake in Truist could be announced later this week, according to confidential Bloomberg sources. Last April, the company sold a 20% stake to a Stone Point-headed group.
Private equity group Stone Point paid $1.95 billion for the 20% stake, and it is believed that the current valuation is on the same terms as the initial investment, valuing the insurance giant at close to $15 billion – 33% of the total value of the PE firm’s assets under management.
Headed by chairman and chief executive John Howard, the giant broker completed a revamp of its wholesale business arm last month – splitting it into two divisions, wholesale and underwriting.
It is still uncertain whether the company’s premium finance business will be included – the original deal excluded that part of the business.
Truist Insurance Holdings employs around 9,000 employees, close to 17% of parent company Truist Financial Corp’s 53,000 workforce. The news of a potential sale follows last September’s announcement by the parent company’s CEO Bill Rogers that there would be “sizeable reductions in force” over the coming year.
Recommended Events
Discover the Future of Insurtech coming from Israel. Tickets, Tue, Mar 5, 2024 at 3:30 PM | Eventbrite
Discover the Future of Insurtech coming from Israel : Join Us in Columbus, Ohio on March 5
Embark on a journey into the cutting-edge world of insurtech as we welcome the top Israeli startups to Columbus. Hosted by One Columbus, JobsOhio, InsurTech Ohio, and Insurtech Israel, this exclusive social event promises an evening filled with innovation, networking, and insightful discussions.
Innovation
WindBorne’s new WeatherMesh brings AI forecasting to re/insurers
WindBorne Systems, an environmental and weather intelligence company, has recently unveiled its groundbreaking AI forecasting model, WeatherMesh. This innovation holds significant promise for the re/insurance industry, offering improved risk assessment and enhanced claims management capabilities.
WeatherMesh sets a new standard for accuracy in real-time, 24-hour global forecasts, surpassing Google DeepMind’s GraphCast by 11% in predicting a key metric: the 500-millibar geopotential height.
WeatherMesh also outperformed the gold-standard in traditional weather modelling held by the European Centre for Medium-Range Weather Forecast’s (ECMWF) medium-range model, by 6%-14% for five-day forecasts.
WindBorne’s breakthrough is attributed to its innovative machine learning architecture, modelling techniques, and comprehensive data sources. Generating forecasts with one-hour resolution, WeatherMesh is ideal for real-time applications, distinguishing it from other models that offer forecasts with six-hour resolution.
WeatherMesh predicts a range of meteorological parameters including temperature, pressure, wind speed and direction, dew point, cloud cover, incoming radiation, and precipitation
Webinars/Podcasts/Interviews
AM Best: US Economy's Soft Landing May Experience a Bumpy Road
The economy performed well in 2023, but there are signs of a potential slowdown ahead, said Ann Modica, director, AM Best, referencing a new Best's Special Report.
View the video version of this interview here