AI in Insurance
Three Benefits and Three Challenges of Implementing AI in Claims Management
Many claim handlers are already using AI in their processes to some extent, but realizing its full potential could be hampered by a lack of tech talent and access to adequate data.
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.
Katie Dwyer is a freelance editor and writer based out of Philadelphia. She can be reached at riskletters@theinstitutes.org.
News
GEICO’s ‘Eye-Popping’ 2023 Insurance Profits, Falling Employee Counts
Even though Berkshire Hathaway’s latest annual report featured Warren Buffett’s forecast that the days of “eye-popping performance” for the giant conglomerate have past, readers focused on property/casualty insurance saw numbers that jumped off the pages.
Among them were:
A 2023 pretax underwriting profit of $3.6 billion, reversing a $1.9 billion underwriting loss reported for 2022 at Berkshire’s personal auto insurance operation, GEICO, and fueling a $5 billion pretax underwriting profit for all of Berkshire Hathaway’s insurance operations last year.
2023 underwriting profits for the remainder of primary operations coming in three-times higher than 2022 and more than double 2021, with written premiums growing 24.1 percent to $3.5 billion.
P/C reinsurance operations adding another $2.0 billion in pretax underwriting profit. The last time P/C reinsurance came in even close to that figure more than a decade ago in 2013, when P/C reinsurance underwriting profits reached $1.0 billion (according to records kept by Carrier Management)
GEICO’s $3.6 billion pretax underwriting profit translates to a 90.7 combined ratio, more than 14 points below the 104.8 recorded in 2022. The only better year of underwriting performance at GEICO in the last 10 was 2020, when COVID shutdowns kept drivers off the roads. In 2020, GEICO’s combined ratio landed at 90.2, fueling a $3.4 billion pretax underwriting profit.
InsurTech/M&A/Finance💰/Collaboration
Pricing Decision Intelligence Vendor hyperexponential Sets Sights on the U.S.
The firm’s recent funding round will help it to expand its presence in the U.S. and increase investment in new product capabilities beyond large commercial
Last month, pricing decision intelligence (PDI) solutions vendor hyperexponential (London) announced the completion of a $73 million Series B funding round led by Battery Ventures (Boston), with Marcus Ryu, who came aboard the VC as a partner in 2022, serving as sponsor of the round and joining as a board member, along with Andreesen Horowitz/a16z (Menlo Park, Calif.) General Partner Angela Strange.
The funding will help hyperexponential to expand its presence in the U.S. and to enable increased investment in new product capabilities to serve growing client demand in adjacent insurance markets, including the SME insurance sector.
Like companies before it, hyperexponential’s raison d’etre is to help insurance companies make better decisions about the risks they price, because those decisions ultimately have the greatest effect on their bottom line, according to CEO Amrit Santhirasenan. Unlike other pricing technology vendors, hyperexponential was created to take advantage of developments in technology occurring at a time when new degrees and types of risk were emerging globally.
Anthony O'Donnell, Executive Editor, Insurance Innovation Reporter
Concirrus reports 204.6% revenue growth amidst challenging insurtech climate -
AI insurtech Concirrus has revealed a 204.6% surge in revenue for the fiscal year ending in December 2023, marking a pivotal shift towards profitability
This comes amidst a tumultuous period for the global insurtech sector, which grappled with a sustained decline in funding, plunging below $1 billion for the first time in three years, leading to the downfall of numerous enterprises.
“Having bought out our venture investors in early 2023, financial stability became a priority, while at the same time creating the next generation of our technology. This has all been underpinned by the amazing support of our client base and some significant customer wins,” Andrew Yeoman, Founder and CEO of Concirrus said.
Insurtech Optalitix announces partnership with pricing platform Quantee
Optalitix, an InsurTech that provides software pricing products to leading UK insurers, has partnered with Quantee, an insurance pricing platform.
The two companies are working to create a solution that will enable insurers to quickly quote for business on aggregator sites, making it easier and more cost-effective to access customers.
Through this partnership Optalitix Quote, an underwriting workbench that allows underwriters to embed their pricing model to reduce system development time and boost speed to market, has been integrated with Quantee’s pricing engine.
How VOOM Insurance Is Driving Change in the Mobility Space
Tomer Kashi is an InsurTech founder, a former software engineer and project manager within the cybersecurity division of the Israeli Prime Minister’s Office, and a self-proclaimed “tech geek.”
He says the problem-solving skills he developed working with the Israeli government to create interdisciplinary technology projects have translated to insurance, an industry he says he “stumbled into.”
“I used to say that before pitching VCs (venture capitalists), I was pitching the Prime Minister of the country,” he says, referring to Israel where he is based. “After my tenure for the government, I decided to basically start from scratch and tackle big problems, and I stumbled upon insurance.”
Kashi and his colleague Ori Blumenthal co-founded VOOM Insurance, where Kashi serves as CEO and Blumenthal serves as chief technology officer. The InsurTech provides digital usage-based insurance for “everything you can ride, drive or fly,” according to its website. Its expertise lies in various mobility segments across all categories, from drones and light aircraft to motorcycles, e-bikes, rideshare, delivery, and modern fleets, and the company focuses on customers in underserved niches. It has offices in Tel Aviv, Israel, and Palo Alto, California, and is a licensed insurance broker in all 50 U.S. states and Canada.
“In our minds, especially in specialty segments, there is an opportunity to provide meaningful innovation where no one else does,” Kashi says.
Over the past three years, VOOM has focused on creating usage-based insurance products for different niches in the mobility world, such as commercial drones, motorcycles, ATVs, UTVs, and recently, gig economy workers and rideshare drivers. Kashi sees opportunity in these spaces, as a survey done by VOOM in 2021 found that 49 percent of respondents ride their motorcycle less than 1,000 miles per year and 70 percent of respondents ride less than 2,000 miles per year. The survey was distributed online and reached more than 400 motorcycle owners, with data weighted to ensure a fair representation of age and gender.
“No insurance company has ever created the pay-per-mile policy for this segment, and the reason is pretty clear,” Kashi says. “After all, it’s a niche market — maybe a niche market of several billions of dollars, but still much smaller than car insurance.”
Research
CoreLogic: 2-inch-Plus Hail Fell on 10M U.S. Homes in 2023
Last year saw 141 days with large hail (2 inch or greater)—the highest number of days in 20 years, according to a new report by CoreLogic.
The 2024 Severe Convective Storm Report details how severe thunderstorm risk is growing in the U.S. It also highlights the historic severe convective storm activity, also known as severe thunderstorm, seen in 2023.
In the aggregate, severe convective storms generated insured losses on par with a single major hurricane.
Claims
Keys to reducing losses for casualty claims
A new study from CCC Intelligent Solutions finds that carriers could save as much as 30% on payouts by improving the accuracy and management of their casualty claims.
Digital Insurance features CCC Intelligent Solutions' latest research on reducing casualty claims leakage by up to 30%, with insights on what carriers can do from Kevin Moynihan, VP of Product Management.
Commentary/Opinion
P&C claims and decarbonization goals | McKinsey
P&C claims can drive significant progress toward decarbonization goals—and better business outcomes.
Property and casualty (P&C) insurers have been facing mounting pressures on claims expenses and loss ratios due to market forces such as rising inflation, global supply chain issues, and an increase in catastrophic events. Against this backdrop, it’s critical for insurers to prioritize strategies that alleviate short-term pressures and prepare for the next normal in claims,1 all while the claims function broadens its scope beyond the traditional dimensions of efficiency, effectiveness, and customer satisfaction to include employee satisfaction and sustainability.
In this article, we focus on sustainability and outline how insurers can manage the environmental impact of claims to work toward their decarbonization targets. Insurers with strong environmental commitments have begun to examine their claims emissions and set decarbonization targets. The claims function hits a sweet spot. Our analysis shows that the function accounts for a large share—85 percent—of operational emissions2; it’s at least somewhat under insurers’ control; and it’s an opportunity to create positive outcomes for both the business and customers.
Vitaly Baranov is an associate partner in McKinsey’s London office, where Sid Kamath is a partner and Joseph Tsaparas is a consultant; Jonas Chinczewski is an associate partner in the Munich office, where Michael Müssig and Philipp Schaumburg are partners; Sylvain Johansson is a senior partner in the Geneva office; and Elixabete Larrea Tamayo is a senior partner in the Boston office. The authors wish to thank Antonio Grimaldi, Paulina Kamińska, George Russell, and Craig Stock for their contributions to this article.
Telematics, Driving & Insurance
How telematics is "reshaping" the insurance industry
Brown & Riding group head on how the tech can uplift the motor segment
In the realm of auto insurance, telematics has long been a driving force to minimize risks through the promotion of better driving habits. While it has proven itself for decades within the trucking industry, Brown & Riding principal, SVP, and transportation practice group leader Timothy M Pedersen, Jr (pictured above) says that it can offer so much more, especially in the realm of smaller-sized risks.
“Imagine a world where driving habits, not just location and claims history, determine your business’s insurance premiums,” Pedersen says. “The evolution of telematics in insurance is reshaping the industry, offering a glimpse into this future where data helps drive your rates.”
Telematics technology, which collects and stores data on driving habits through GPS, has evolved significantly since its early days. Pedersen recounts a notable milestone that came in 2004, which was when Qualcomm enhanced the accuracy of positioning by integrating GPS and cellular signals.
“Around this time telematics took off,” he said. “According to the GPS Alliance, the revenue generated from GPS sales jumped 55% between 2005 and 2010 while the price per device dropped 56% for commercial vehicles.”
The mid-2000s also served as ground zero for another notable technology.
“In that time, we also saw the invention of the modern-day smartphone,” Pedersen explained. “The first iPhone was released in 2007. With this evolution of both software and hardware, telematics can now be used by not only commercial-sized fleets but also smaller, mom-and-pop sized risks.”
American drivers are now even more distracted by their phones. Pedestrian deaths are soaring.
American drivers are now even more distracted by their phones. Pedestrian deaths are soaring. During the pandemic, distracted driving increased, and it hasn’t gone down since.
Until relatively recently, good data on the problem of distracted driving has been hard to find. The government estimates that 3,522 people died because of it in 2021, but experts say the official number probably majorly undercounts the number of deaths, in part because police are rarely able to definitively prove that a driver was distracted right before a crash.
In the last few years, though, the data on distracted driving has gotten better. Cambridge Mobile Telematics is a company that partners with major insurance companies to offer downloadable apps that drivers can use to save money on their rates. Via the apps,
Cambridge Mobile Telematics (CMT) uses mobile phone sensors to measure driving behavior, including whether a person is speeding, holding their phone, or interacting with an unlocked screen while driving (the company says it doesn’t collect information on what the drivers are doing on their phones). Its work gives the company insight into the driving behaviors of more than 10 million people.
CMT recently analyzed driver behavior during millions of car trips. What it found should be troubling to anyone who uses a road in the US: During the pandemic, American drivers got even more distracted by their phones while driving. The amount of distracted driving hasn’t receded, even as life has mostly stabilized.
The company found that both phone motion and screen interaction while driving went up roughly 20 percent between 2020-2022.
“By almost every metric CMT measures, distracted driving is more present than ever on US roadways. Drivers are spending more time using their phones while driving and doing it on more trips. Drivers interacted with their phones on nearly 58% of trips in 2022,” a recent report by the company concludes. More than a third of that phone motion distraction happens at over 50 mph.
Recommended Events
Reuters Events: The Future of Insurance USA 2024 | May 15-16 2024 | Marriott Marquis Chicago
Embrace AI. Propel Customer-Centricity. Outsmart Disruption.
In a rapidly changing world, it’s either disrupt, or be disrupted. The convergence of global unrest, rising NatCat losses and evolving customer needs are threatening profitability across the board. But with pressure, comes progress.
Set your future roadmap at Reuters Events: The Future of Insurance USA 2024 (May 15-16, Chicago), this year merging with Insurance AI & Innovative Tech USA to tackle both the strategic and practical elements of overcoming business critical challenges
Keynote Announcement: Insurance EVolved with Andrew Rose, President, General Motors Insurance