AI in Insurance
AI and the Future of P&C Insurance
In the face of escalating natural disasters, the insurance industry is at a crossroads. The choice? Stick with the status quo and struggle under the weight of outdated systems and processes or embrace AI and its myriad opportunities for transformation. For insurers who choose the latter, the future looks not just manageable but bright. AI offers a path forward where efficiency, accuracy, fraud prevention, and customer satisfaction are not just goals but realities, ensuring that the insurance industry can weather any storm.
Insurance companies are increasingly harnessing the power of cutting-edge technologies such as Artificial Intelligence (AI), Machine Learning (ML), and sophisticated data analytics. These tools are essential in reshaping strategies for risk assessment related to weather catastrophes, refining the claims management process, elevating fraud detection capabilities, and ensuring uninterrupted service to policyholders.
This technological evolution is making a significant mark, fundamentally altering the dynamics of the insurance sector and, most notably, the processing of claims. Jim Fowler, EVP and CTO at Nationwide explained,
“The changes I’ve seen in technology during my 30-plus-year career have been amazing, and the revolution Gen AI is driving today is the most significant I’ve experienced. Frankly, the world is going to be forever changed – and insurance is one of the industries likely facing the most disruption.”
Loveland Innovations Blog
Three Benefits and Three Challenges of Implementing AI in Claims Management
Insurance carriers and TPAs are increasingly looking to artificial intelligence to enhance their claims management efficiency and fraud-detection efforts.
AI has the power to collect, organize and analyze claims data in a fraction of the time it would take an adjuster. It can also spot red flags and identify patterns suggestive of fraud. These applications promise to hasten claim resolution, save costs and improve both client and adjuster satisfaction.
But as technology advances, there remains much work to be done in understanding and implementing AI and effectively reaping the benefits it has to offer.
Here’s how carriers and claims handlers are using AI in their claims management processes today — and the barriers they face going forward.
Current Uses of AI in Claims
1) Data Collection, Organization and Analysis
Claims submissions may include dozens if not hundreds of documents, including photos, medical reports, legal documents, police reports et cetera.
“Where AI can really be helpful is allowing claims teams [to] better digest, analyze and track information,” said Marc Rothchild, senior vice president and head of claims and Xceedance.
This is done mostly using optical character recognition, the most reliable technology used for processing structured documentation. By pulling out key information from lengthy documents, OCR helps adjusters triage claims and determine which may demand more of their attention and expertise. full article
News
Allstate, State Farm raising rates by double digits
ED. NOTE: In a related development, two Illinois bills seek to create the Motor Vehicle Insurance Fairness Act, which would create a review process for car insurance rate increases in the state. STORY HERE
Allstate and State Farm, both based in Illinois, are said to be raising their homeowners' insurance rates in the state by double digits.
Citing the insurance giants’ respective state filings, a Chicago Tribune report said Allstate’s 12.7% hike is being rolled out this week, while State Farm’s 12.3% increase will take effect on different dates – March 15 for new business; May 15, renewals.
In terms of dollar amounts, Allstate’s adjustment will mean an additional $237 per year on top of the average annual premium; for State Farm, around $138.
It was noted that, across the country, the cost of home insurance has gone up by 23% since January last year.
Allianz reports record operating profit of €14.7bn for FY23
Insurance giant Allianz has reported a record operating profit of €14.7 billion for the full year 2023, an increase of 6.7% from €13.8 billion in the previous year, driven primarily by the Life/Health (L&H) business segment.
Group-wide, total business volume grew 5.5% to €161.7 billion in 2023, which Allianz attributes to its Property and Casualty (P&C) business segment on the back of positive price and volume effects, supported by the performance of its L&H segment driven by growth in the US.
Core net income grew from €7 billion in 2022 to €9.1 billion in 2023, driven by an improved operating profit in the current period, as net income increased 33% year-on-year to €8.5 billion.
By segment, P&C delivered total business volume growth of 8.4% to €76.5 billion, as operating profit rose 1.2% to €6.9 billion for FY23, driven by a higher operating investment result, partly offset by lower other operating and insurance service results.
Commentary/Opinion
Unauthorized Use of Auto Claims Data
Privacy violations related to personal information have serious implications for consumers, insurers and their supply chain partners.
Data privacy is a sprawling, multi-faceted, complex and controversial issue that means different things to different audiences but has serious implications for businesses and consumers alike. And the issue is sure to continue to grow in importance given the explosive adoption of data-driven technology and digitization, which will drive ever greater levels of information capture and use. Meanwhile, concerns about how personal data is captured, managed and exploited are intensifying, with the emergence of more data breaches, hacking, identity theft and ransomware crimes.
Our focus in this piece is fairly narrow – namely the unauthorized use of personal information in the auto insurance claim reporting, damage evaluation and collision repair process. While this is just a subset of the broader data privacy issue, the implications are quite serious and affect millions of consumers, insurers and their supply chain partners and present exposure to hundreds of supply chain participants. These events occur more than 20 million times a year across a multibillion-dollar ecosystem.
Stephen Applebaum and Alan Demers, published in Insurance Thought Leadership
‘Blockbuster’ Hurricane Season Possible: AccuWeather
With more than three months to go before its official start, AccuWeather meteorologists warn that a “blockbuster” hurricane season is possible, paying particular attention to late season storms.
Two factors prompted the alarm—the return of La Niña and historically warm water across the Atlantic Ocean.
A current El Niño pattern is forecast to transition into a La Niña pattern during the second half of the hurricane season, AccuWeather Chief Meteorologist Jonathan Porter said, noting that La Niñas typically produce more Atlantic storms.
“La Niña was building fast during the 2005 season, and was firmly established amid the 2020 season,” AccuWeather said, noting hurricane seasons in those years tied for the most active in recorded history (31 tropical systems).
2024 “could be a back-loaded season,” AccuWeather stated, noting that La Niña might not officially develop until late summer or early autumn. That doesn’t mean homeowners can rest easy early on. Systems have developed before June 1 in seven of the past 10 years.
InsurTech/M&A/Finance💰/Collaboration
CLARA Analytics Secures Funding From Nationwide
CLARA Analytics and Nationwide are deepening their current partnership. CLARA has received an investment from Nationwide Ventures, the investment arm of the insurance and financial services company. Nationwide’s investment comes from its $350 million investment fund. CLARA has raised a total of $64 million, including its recently announced Series C.
“Since partnering together in 2022, Nationwide has seen the very substantial benefits that this technology can offer”
CLARA’s award-winning AI platform, CLARAty.ai, analyzes both structured and unstructured data, performing contextual analysis using natural language processing (NLP) and generating insights that help claims associates make sound data-driven decisions.
“The Nationwide investment is a huge vote of confidence from a leading voice in the industry,” said Heather H. Wilson, CEO of CLARA Analytics. “We have more than doubled our annual recurring revenue in the past year as carriers recognize the value of AI in claims management. We expect our rapid growth to accelerate even further as AI becomes a mainstay in modern claims management organizations.”
CLARA uses predictive AI, generative AI (GenAI), and large language models (LLMs) to extract detailed information from claims documents and deliver concise case summaries, predictive alerts, and actionable recommendations to claims associates. Together, the AI platform will inform key stakeholders across the organization, delivering highly relevant information to the exact people who need it.
“Since partnering together in 2022, Nationwide has seen the very substantial benefits that this technology can offer,” said George Williams, Chief Operating Officer of Commercial, E&S and Specialty at Nationwide. “We’re excited to expand this relationship and look forward to what’s to come between our two companies.”
Insurtech Root Inc. Results Improve but Remain at a Net Loss
Insurtech Root Inc. posted a net loss for the fourth quarter 2023 of $24 million and a net loss for the year of $147.4 million.
Results were improvements from net losses of about $58.3 million for fourth quarter 2022 and about $298 million for all of 2022.
The Columbus, Ohio-based company’s Q4 net combined ratio was about 112, an improvement from the near 180 combined ratio of Q4 2022. Root finished 2023 with a combined ratio of 133.2 versus 195 the year prior.
Co-founder and CEO Alex Timm said in a letter to shareholders that Root remains “in the early chapters of disrupting the auto insurance industry” but in 2023 “significantly bolstered [the company’s] pricing and underwriting technology while optimizing our expense structure, putting us in an increasingly strong position throughout 2023.”
“Importantly, we believe we have now achieved scale in the business,” he said while claiming that Root last year was one of the fastest growing auto insurers in the country.
Net premiums written for Q4 and full year were about $229 million and $573.2 million compared to $55.3 million and about $269 million, respectively, in 2022.
BriteCore Expands Its Solution Marketplace with Four New Vendor Solutions
New Vendor Additions Improve Operational Efficiency and Digital Agility of P&C Insurers
BriteCore, a next-generation provider of cloud-native core administration solutions for property and casualty (P&C) insurance carriers and MGAs, proudly announces the expansion of its Solution Marketplace with the addition of four new insurance vendor solutions. These new vendor integrations include Smarty, LexisNexis Auto Data Prefill, Verisk VINMaster, and Betterview.
The BriteCore Solution Marketplace is a significant development in the insurance industry, offering an unparalleled array of choices and flexibility for insurance carriers. With over 70 different vendors offering over 100 integrations, the marketplace enables clients to customize their BriteCore experience by choosing from a diverse range of vendors, each offering unique capabilities and services that integrate smoothly with the BriteCore platform. This marketplace is not just a collection of solutions; it's a carefully curated ecosystem that enhances the operational efficiency and digital agility of P&C insurers.
Trusted by over 90 insurers across North America, BriteCore’s policy administration solution enables mid-size carriers and fast-growing MGAs to efficiently manage their insurance operations and effectively compete with the largest providers.
Claims
Cat resilience with sats, planes and ground truth
“This came from a real life scenario,” said Ken Tolson.
Tolson is CEO of digital solutions for Crawford & Company, one of the world’s largest claims management providers. He was explaining how insurers and reinsurers typically use data from three different sources to accurately assess property damage after a natural disaster - and also to predict costs before an event happens.
“We were working with a reinsurer that has spent quite a bit of effort developing a solution to use satellite technology to provide an assessment to carriers to look at an event and try to assess reserving and get to a point of getting very accurate about what the impact will be,” said the 30-year industry veteran.
A trinity of data sources
The three sources are satellite data, aerial photography and evidence from on-the-ground inspection. Tolson said pooling this trio of inputs significantly improves the accuracy of property damage assessments after nat cats.
People
Arturo Taps Insurtech Titan Jeff Taylor as Chief Strategy Officer
Arturo, the property intelligence company that delivers portfolio-wide underwriting, risk, claims and catastrophe-driven event insights, announces the appointment of Jeffrey Taylor as Chief Strategy Officer.
This appointment comes as Arturo prepares to expand into adjacent markets and further deliver on its mission to provide actionable property intelligence and risk profiles that better protect our world.
Taylor has hit the ground running and has already made an impact on product development and partnerships, both with an eye for greater penetration and adoption in the insurance industry as well as expansion within the greater property ecosystem.
Taylor brings a great deal of experience to this role, having worked at Xactware from 1992 to 2007 which was subsequently acquired by Verisk, where he remained until 2023. In those years, he served in a variety of leadership roles as President of 3D Visual Intelligence, President of Geomni, Vice President of Geospatial Solutions, and Vice President for Xactimate.
“There are great headwinds plaguing the P&C insurance industry. Climate change has made it much harder to measure risk today, and legacy systems and outdated datasets are not helping. Today’s insurance customers want what anyone wants: clarity, a fair price, fast service, and to be made whole, but the aforementioned problems are holding the industry back from meeting those expectations,” said Taylor. “That’s why I’m excited about this opportunity. Arturo has a lot of potential with their strong foundation of accurate, fast property intelligence. And it’s not data in a vacuum; it has a proven record of helping carriers do everything from alleviating the burden on customers at quote to getting people help faster than ever before in the wake of some of the most catastrophic natural disasters.”
In addition to his years pioneering some of the keystone solutions of the insurance industry, especially as it relates to real property, his career includes several construction industry years with Home Depot managing large custom home projects and as a roofer. This hands-on and up-close experience with property degradation and repairs brings a unique lens to Arturo’s specialty in remote analysis of property conditions, especially after a natural disaster. Taylor’s appointment solidifies the strides Arturo has taken in expanding their offering to assist with claims and catastrophe response.
“In our industry, there isn't a more respected or experienced person than Jeff. Jeff has a tremendous track record and has led many transformational movements within insurtech. We are thrilled to have him join our team and help lead Arturo into the future,” said Marty Smuin, CEO at Arturo.
Jeff recently served on the board of Vexcel Imaging and is active in several charitable organizations, including the Primary Children’s Hospital in Utah.
Canada
Alberta wildfire season starts early as Canada's mild winter persists
The western Canadian province of Alberta on Tuesday declared an early start to wildfire season as a result of an unusually dry and mild winter, allowing the government to put more money and resources into tackling blazes.
Canada endured its worst wildfire season on record last year as 18.5 million hectares (45.7 million acres) burned, nearly seven times the 10-year average, according to the federal government.
Alberta is also suffering from drought, and there are 52 wildfires still burning in the province from last year as well as 17 new blazes so far in 2024.
Wildfire season in Alberta tends to peak in the spring and usually officially kicks off on March 1.
The province declared an early start this year to better direct resources to those fires already underway, the provincial government said in a news release.