AI in Insurance
More advanced & specialised conversational AI to be developed in the near term: AM Best
Credit ratings agency AM Best has revealed that it expects to see more advanced and specialised conversational AI developed over the near term to handle more complex situations across the insurance industry.
As many are aware, insurers have been very active by adopting AI for customer service via conversational AI, which is based on natural language processing and allows both the customer and the insurer to interact through chatbots and voice assistants.
Moreover, Best also flags claims handling as a key area in which AI tools can play a major role in the industry, as the tools can assist claims adjusters with image recognition and extracting information from medical records.
AI technology possesses the abilities to analyze large amounts of historical data, which it can then use to make plausibility assessments, ensure quality and uniformity in the adjusting process, and ultimately help adjustors summarize data and generate a preliminary report.
A highly beneficial aspect of AI is that it can also be used to analyze large amounts of data to spot unusual patterns as an indication of fraud, which can be very useful for companies. The technology may also detect manipulated images or patterns of behavior, which could lead to further investigation.
How AI is transforming InsurTech
As AI continues its ascent as a transformative force in the business landscape, the InsurTech sector has found itself as the latest realm aiming to tap into its remarkable potential. FinTech Global recently spoke to a host of industry experts in a bid to unravel the profound impact that AI is poised to have on the space.
Over the past decade, advanced technologies such as Machine Learning (ML), and AI have been embraced by companies across the globe. Now, with efficiency seen as a vital component to success, those same technologies are perfectly placed to have a transformative impact.
Insurers are now looking to streamline day-to-day functions, ushering in automation and improved process efficiency.
Furthermore, these technologies empower insurers to harness treasure troves of customer data, enabling sophisticated analysis and informed decision-making. This, in turn, facilitates the provision of more tailored and profitable insurance offerings, amplifying customer satisfaction and business performance.
Max Stratmann, Chief Revenue Officer, Scanbot SDK, explained the transformative impact the technology is having on his firm. He said, “AI technology, especially machine learning, is a cornerstone of our InsurTech solutions. In particular, we use it to further refine our mobile document scanning and data extraction solutions. Some key areas of improvement are an enhanced user guidance and automated post-scan processing, such as cropping and perspective correction.”
These gains, while notable, are widely considered to be the tip of the iceberg. AI is an ever-growing industry – and the market has witnessed remarkable growth in recent years, securing a valuation of $136.55bn in 2022.
News
Tractable Alleges CCC Violates U.S. Antitrust Laws
[Ed. Note: Tractable ups the ante in a 5 year history of litigation with CCC Intelligent Solutions who originally sued it for fraud and theft of proprietary information in 2018.]
Tractable accused CCC of violating federal antitrust laws in a court filing today, alleging that CCC is using its 85% market share of the Estimatics market to limit customer choice and raise prices that ultimately impact the American consumer. Estimatics products can be used to identify automotive damage, diagnose necessary repairs, and estimate the costs of such repairs.
"Today, Tractable took legal action against CCC, challenging what Tractable believes is anticompetitive conduct that harms the auto collision ecosystem. Tractable took this legal action to enable choice and best-of-breed technologies in the ecosystem: for insurers, repairers, service providers, and everyday Americans, who pay for auto insurance as a life necessity," said Alex Dalyac, the founder and CEO of Tractable
US P&C insurers hit with rating downgrades
AM Best cites challenging period for personal lines
There were more rating downgrades than upgrades on property & casualty insurers in the US in 2023, according to credit rating agency AM Best.
In AM Best’s “US Property/Casualty Downgrades Outpace Upgrades in 2023” report, it was noted that there were 55 downgrades last year – a higher total compared to upgrades (35) in 2023, as well as to the number of downgrades (30) in 2022.
Broken down, the bulk of last year’s downgrades came from the personal lines segment.
“In 2023, 39 ratings in the personal lines segment were downgraded and nine were upgraded, compared with 18 downgrades and 10 upgrades the year before,” AM Best reported. “Downgrades were driven primarily by declines in capitalization and deteriorating operating performance.
“Upgrades were due primarily to insurers being added to a different rating unit or related to lift from a parent organization, while only about 40% of upgrades were related to improvements to specific building block assessments.
“Many downgrades were due to changes in multiple building blocks, all of which included balance sheet strength. Auto carriers accounted for 24 of the downgrades, underscoring the deterioration in personal property and auto results.”
AM Best industry analyst Helen Andersen commented that market trends are expected to continue negatively impacting personal lines insurers in the US.
Automakers Are Sharing Consumers’ Driving Behavior With Insurance Companies
LexisNexis, which generates consumer risk profiles for the insurers, knew about every trip G.M. drivers had taken in their cars, including when they sped, braked too hard or accelerated rapidly.
Kenn Dahl says he has always been a careful driver. The owner of a software company near Seattle, he drives a leased Chevrolet Bolt. He’s never been responsible for an accident.
So Mr. Dahl, 65, was surprised in 2022 when the cost of his car insurance jumped by 21 percent. Quotes from other insurance companies were also high. One insurance agent told him his LexisNexis report was a factor.
LexisNexis is a New York-based global data broker with a “Risk Solutions” division that caters to the auto insurance industry and has traditionally kept tabs on car accidents and tickets. Upon Mr. Dahl’s request, LexisNexis sent him a 258-page “consumer disclosure report,” which it must provide per the Fair Credit Reporting Act.
What it contained stunned him: more than 130 pages detailing each time he or his wife had driven the Bolt over the previous six months. It included the dates of 640 trips, their start and end times, the distance driven and an accounting of any speeding, hard braking or sharp accelerations. The only thing it didn’t have is where they had driven the car.
On a Thursday morning in June for example, the car had been driven 7.33 miles in 18 minutes; there had been two rapid accelerations and two incidents of hard braking.
Complete article here - may require subscription
Kashmir Hill has been writing about technology and privacy for more than a decade.
Statista: Insurance industry ranks 3rd in lobbying spending in 2023
The insurance industry remained a lobbying powerhouse in 2023, only trailing behind the pharmaceutical and electronics manufacturing industries, according to data released by Statista.
As an industry, insurance companies spent $157 million lobbying, pharmaceutical companies spent $378 million and electronic manufacturers spent $239 million.
The automotive industry ranked 18th, with $84 million spent on lobbying in 2023.
Within the insurance market, those focused on healthcare spent the most in 2023 with Blue Cross/Blue Shield, America’s Health Insurance Plans, Cigna Corp and AFLAC Inc. topping the list, according to opensecrets.org.
American Property Casualty Insurance Association ranked 5th with $6 million spent on lobbying in 2023. USAA followed with $4 million spent.
Research
Report: U.S. Consumers Continue to Shop and Switch Auto Insurance at Higher Rates, Dragging on Retention Rates
Continued rate increases, along with improved combined ratios, and now opens a window for insurers to capitalize on continued shopping as they seek a return to profitability in 2024.
That’s according to the LexisNexis Insurance Demand Meter, a “Hot” Q4 2023..
Other findings in the report include:
U.S. auto insurance shopping and new policies posted positive year-over-year growth and record volumes for the final quarter of the year, both registering as ‘Hot’ on the Insurance Demand Meter.
Year-over-year shopper growth showed the strongest Q4 growth since 2020.
Quarterly year-over-year growth for new policies outpaced shopper growth for the sixth consecutive quarter, meaning consumers continue to switch carriers at an increasing rate when they shop.
41% of insured households shopped their auto insurance at least once in 2023.
Retention levels have dropped a three percentage points since Q1 2022 as consumers hit the market
With 2024 already underway, insurers have an opportunity to seize market share, particularly evident in the direct channel where factors like marketing expenditure and rate adjustments are prompting increased shopping behavior.
Texas, one of the first states to increase rates and experience positive growth, saw negative shopping numbers in the final quarter of 2023, according to the report.
InsurTech/M&A/Finance💰/Collaboration
Vouch Raises $25 million on Strong 2023 Performance
Vouch, the leading provider of business insurance for high-growth companies, today announced the closure of a $25 million Series C-1 funding round, led by Ribbit Capital. The insider-led round was oversubscribed and follows a year of strong business performance, including 66% year-over-year revenue growth and favorable loss ratio outcomes. This growth trajectory is supported by an annual premium retention rate of over 120%, alongside improving margins across the business.
Sam Hodges, Co-founder and CEO of Vouch, remarked, "2023 was a landmark year for Vouch, driven by our team's dedication and our investors' belief in our mission. I'm proud that we're one of the few companies in our market that has achieved our goals despite industry headwinds, balancing pursuit of our big vision with strong business performance. And most importantly, we've been there when our clients need us most, successfully resolving hundreds of claims – many of which are complex and potentially company-limiting – totaling many millions of dollars. This additional equity funding enables us to expand our insurance product set and distribution channels and also to continue investing in our technology platform."
In 2023, Vouch also increased its reinsurance panel from four to seven partners and accelerated its pace of insurance innovation, including the launch of AI Insurance, a first-of-its-kind coverage that mitigates nascent AI risks including LLM hallucinations, regulatory mistakes and intellectual property issues. Vouch Horizon, the company's solution for scale-stage startups, continues to win marquee accounts.
Commentary/Opinion
Property the best priced business in the world. Conditions to endure: Chubb CEO Greenberg
Property underwriting is “the best-priced business in the world right now” and, as long as Chubb is getting paid adequately, its CEO Evan Greenberg said that the company is ready to take greater catastrophe concentration and volatility.
Writing in the Chubb annual letter to shareholders, Evan Greenberg explained that Chubb has become increasingly property and catastrophe exposure levered.
He highlighted that Chubb has no aversion to taking on more property catastrophe risk, as long as the pricing remains adequate to do so.
Greenberg also highlighted some of the market dynamics that have changed and helped to enhance his firm’s appetite for property catastrophe risk, with even alternative capital deserving of a rare mention.
He noted that Chubb, like other insurers, has “become more CAT-levered by writing more property insurance business” but urged his shareholders to focus on the calendar year combined ratio, which he called “the best measure for investors,” while also explaining that “Volatility of margin and income is a feature of a company in the risk business.”
The Plaintiff Bar Is Winning in AI
The plaintiff bar’s unprecedented investment in AI presents a real and present danger to the insurance litigation defense industry. It is a danger that is only now starting to show on the radar screens of chief claim and litigation officers. This article explores why it is such a threat and why the first response must be, at a minimum, awareness.
The P&C insurance industry runs the largest negotiation network in the world. Annually, 30,000-plus claims professionals assign out over a million litigated claims to 30,000-plus defense attorneys with one goal in mind – negotiating a good outcome. A full 98% of those cases will settle.
In negotiation, success boils down to two critical factors: (1) having better data than your opponent and (2) being able to use that data to negotiate more effectively. Data is critical to eliminating uncertainty, quantifying risk and predicting value. And those who have data to use in their negotiations do better than those that don’t. full article
Taylor Smith is the founder and president of Suite 200 Solutions
The Insurance Data Butterfly Effect
"Breaking news: This just in—another national insurer has been fined significantly after an independent industry audit of their AI models. The audit revealed that the third-party data the insurer purchased to build their world-renowned AI-powered insurance product was laden with tremendous levels of inaccuracy and bias impacting underwriting and claims."
This example situation is unfortunately a foregone conclusion as 2024 is projected to see major increases in AI technology adoption by insurers that have a long-held practice of buying subpar data to run their business. With consumers and insurers salivating about the potential for AI, what pitfalls should insurers watch out for to ensure they procure quality data?
Potential Issues With Insurers Purchasing Third-Party Data
Insurers purchase data to build their products from a variety of sources, including credit and motor vehicle reports, geospatial data, social media monitoring data, information from smart home/connected car/IoT devices and other sources that can lead to inaccurate and biased data.
This third-party data is merged with existing customer data from disjointed internal insurer systems to create a subpar foundation for the products and services that consumers of all socioeconomic backgrounds purchase.
Robert Clark is the founder and CEO of Cloverleaf Analytics
Hippo CEO says insurtech 'turned the corner' in Q4 2023
Home insurance provider Hippo reported a significant jump in its total generated premium (TGP) and revenue in the final quarter and full year of 2023, in what its chief executive has dubbed a turning point for the insurtech.
For the full year, Hippo posted a TGP of $1.1 billion, a 40% increase from the prior year. The firm also grew revenue significantly faster than TGP, increasing 75% from $120 million to $210 million.
The company’s net loss for the year was $273.1 million, compared to a loss of $333.4 million in 2022.
“I think when people look back on it, they’re going to say Q4 2023 was the quarter that Hippo turned the corner,” President and CEO Rick McCathron told Insurance Business.
“We now have strong confidence and guidance, and this creates opportunity with a lot of freedom and flexibility. Once we get adjusted EBITDA profitable, that absolutely changes the dynamics in a company.”
People
Copart Appoints Jeff Liaw as CEO and Director and Jay Adair as Executive Chairman
Copart, Inc. (NASDAQ: CPRT) today announced that its Board of Directors has appointed Jeff Liaw as the company’s sole Chief Executive Officer (CEO) and as a member of the Board of Directors. Mr. Liaw has been serving as Co-CEO since March 2022. In addition, Jay Adair, who served as the Company’s CEO from February 2010 to February 2022 and as Co-CEO along with Mr. Liaw since March 2022 will step down from that role. In addition, the Board of Directors has appointed Mr. Adair as Executive Chairman, and he will remain an active executive officer of the company in that capacity. The above changes are effective April 1, 2024.
Mr. Liaw joined Copart in 2016 as Chief Financial Officer (CFO) and was promoted to President in 2019. Mr. Liaw was named Copart’s CEO North America in February of 2021 and Co-CEO in March of 2022. Prior to joining Copart, Mr. Liaw served as the CFO of FleetPride, Inc. and as a principal of TPG Capital Management, L.P., a private equity firm. He earned a B.A. and B.B.A. from the University of Texas, and an M.B.A. from Harvard.
Commenting on Jeff’s appointment, Willis Johnson, who will remain Chairman of the Board of Directors, said: “Today’s appointment of Jeff as CEO recognizes his significant contributions to Copart over the last eight years and the board’s confidence in him to lead Copart into the future. Jay’s thoughtful succession planning has positioned Copart to seamlessly transition leadership responsibilities, while continuing our tireless pursuit of delivering outstanding outcomes to our customers.”
Mr. Adair added, “I congratulate Jeff on his continued success in leading Copart. Jeff thinks like a founder, and I have no doubt he will continue to grow Copart in the years ahead with a profound focus on our customers and employees.