AI in Insurance
3 Ways AI Could Transform Your Insurance Policy
While artificial intelligence raises privacy concerns, it may make insurance cheaper and easier to use for some people.
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Your insurance company may know more about you than you realize.
The technology that saturates today’s world — smart-home devices, drone images, fitness trackers, social media posts and telematics programs that monitor your driving habits — can help insurers piece together a detailed picture of your behavior.
Your permission isn’t always required. Many facts about your house, car and neighborhood are public records. Data brokers also gather and sell details about your activity, like which stores you visit, what you click online and the whereabouts of your mobile phone.
For a human, all that data is too much to process. But the ability of artificial intelligence to interpret data could upend the process of buying an insurance policy and filing a claim. As insurers face questions about fairness and privacy, some people may find it’s harder to get coverage. Others will benefit from cheaper rates, quicker applications and easier claims.
Faster insurance applications
Customers could see a shortened application process as insurance companies embrace AI. Insurers may drastically cut the number of questions they ask in a home insurance application, says Peter Flynn, head of personal lines for the Americas at insurance consulting firm Xceedance. “In the future, they might only ask five questions,” Flynn says. “But they might gather 5,000 additional data points, and they might interpret those 5,000 things in addition to the five answers they get from the applicant.”
Chicago-based Kin Insurance, for example, collects thousands of data points and “prefills” home insurance applications with property details like square footage, foundation type and number of bathrooms.
A similar shift is happening in life insurance underwriting, which traditionally requires a medical exam plus a health and lifestyle questionnaire. As AI models improve, more carriers offer accelerated underwriting — quickly issuing policies to low-risk customers based on digital medical records and other data, while flagging higher-risk applicants for conventional underwriting.
“You can put a little bit of information and they can return a rate that’s not based on somebody coming to your house and taking blood,” says David Embry, CEO of online insurance broker Mylo.
How Gen AI Changes Everything in 2024
In the rapidly evolving landscape of the insurance industry, the integration of cutting-edge technologies is reshaping the way companies operate and serve their clients. One such groundbreaking advancement that is set to revolutionize the insurance sector in 2024 is generative artificial intelligence. This sophisticated technology is poised to significantly improve various aspects of insurance, from underwriting processes to claims management.
Generative AI operates on the principle of generating new content, such as images, text or even entire datasets, based on patterns and information it has learned from vast amounts of existing data. This capability has the potential to redefine how insurers assess risks, personalize coverage and streamline operations for enhanced efficiency.
Precision Underwriting:
Generative AI enables insurers to conduct more precise underwriting by analyzing extensive datasets to identify nuanced patterns and correlations. This leads to a more accurate evaluation of risks, allowing insurers to tailor coverage to individual policyholders based on their unique circumstances, ultimately optimizing pricing strategies.
Enhanced Customer Experience:
The integration of generative AI enhances the overall customer experience by enabling insurers to provide personalized services. From crafting customized policies to offering targeted recommendations, this technology allows insurers to understand and meet the evolving needs of their clients, fostering stronger relationships.
Fraud Detection and Prevention:
The insurance industry has long grappled with fraudulent claims. Generative AI's ability to analyze vast datasets and identify anomalies facilitates robust fraud detection and prevention mechanisms. Insurers can identify suspicious patterns, flag potential fraud and mitigate risks before processing claims. see all 10 here
Abhishek Peter is an assistant manager at Fecund Software Services
AI Setting Insurance Premiums Could Be Great — Or a Disaster
Algorithms using millions of inputs to judge costs and claims are a dream scenario for companies. We need guardrails to protect against unintended consequences.
How would you feel about artificial intelligence setting your insurance premiums thereby determining the price you pay based on, potentially, millions of inputs collected from social media, your spending history and technology embedded in your home and car? Although such “black box” algorithms aren’t in use yet, the struggling insurance industry is giddy about their long-run potential. The enthusiasm needs to be matched by regulators taking much-needed steps to establish guardrails.
After a couple of rocky years, insurance companies are experimenting with AI to evaluate claims, screen policyholders and control day-to-day costs. Those efforts make sense and may ultimately smooth the industry’s boom-bust cycles, perhaps even lowering costs for policyholders. But regulators nationwide must follow the lead of Colorado and New York to ensure that profitability improvements don’t come at the expense of consumer equity and privacy.
First, there’s the issue of data-driven bias, a long-standing problem in insurance that predates the recent flurry of AI excitement. Several studies have shown that the use of credit scores in underwriting car insurance has tended to push premiums higher for people of color, even after holding driving history constant. Similar effects have been identified in the use of zip codes. Now, AI’s proliferation could bring a plethora of additional variables into the process, including social media posts, purchasing habits and higher-frequency location data. In a worst-case scenario, AI could mean data-driven bias on steroids.
By Jonathan Levin
Telematics, Driving & Insurance
Most-used apps while driving, hands-free legislation results revealed; IIHS calls for safe advertising
The Governors Highway Safety Association (GHSA) and Cambridge Mobile Telematics (CMT) released a report Thursday that offers recommendations to address a growing concern when it comes to road safety — distracted driving caused by smartphone use.
The Insurance Institute for Highway Safety (IIHS) looked at the issue from a different angle Wednesday in a piece written about the depiction of speeding in vehicle advertisements and how they effect driver’s actions on the road.
The report suggests states implement a multi-faceted approach that includes the adoption of strong and clear laws, which CMT says its research confirms has a positive impact on distraction rates.
As part of a recent Advanced Notice of Proposed Rulemaking for advanced impaired driving prevention technologies, the National Highway Traffic Safety Administration (NHTSA) estimates that distracted driving caused 12,405 fatalities in 2021 and a societal cost of $158 billion.
The report details how distracted driving has fallen in Ohio, Alabama, Michigan, and Missouri since hands-free laws were implemented. During the first three months following the enactment of these laws, distraction declined an average of 6.6%, according to the report.
Since enforcement of Ohio’s hands-free law began in October, CMT noted an 8.1% decrease in driver distraction. CMT estimates it has so far prevented 3,060 crashes, 1,700 injuries, and 14 fatalities.
News
A.M. Best downgrades State Farm General
Rating agency A.M. Best Co. said Thursday it has downgraded the financial strength rating of State Farm General Insurance Co., the homeowners unit of State Farm Group, to B (Fair) from A (Excellent).
Rating agency A.M. Best Co. said Thursday it has downgraded the financial strength rating of State Farm General Insurance Co., the homeowners unit of State Farm Group, to B (Fair) from A (Excellent).
Its long-term issuer credit rating was also downgraded to “bb+” (Fair) from “a” (Excellent), while the outlook of its financial strength rating has been revised to stable from negative, Best said.
The downgrades reflect continued deterioration in State Farm General’s policyholder surplus at Dec. 31, 2023, which resulted in a corresponding decline in overall risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR) and weakening balance sheet metrics.
“A contributing factor to this decline was sharp increases in claim severity affecting the company’s umbrella and commercial multi-peril lines of business,” Best said.
State Farm General last week said it would non-renew up to 72,000 commercial and personal lines policies in California and exit the commercial apartment insurance market in the state.
Insurance industry welcomes hundreds of millions of dollars for NFIP in new bill
Insurance industry trade groups have praised provisions in a government-funding bill signed into law over the weekend by President Biden that would fortify localities against natural disasters.
In a flurry of activity late last week and into Saturday to avoid a government shutdown, the House and Senate approved $1.2 trillion appropriations legislation that provides funding for the Departments of Defense, Treasury, Homeland Security, Treasury, State, Labor, Health and Human Services and other agencies and programs.
The 1,012-page measure rolled up six appropriations bills that completed funding to keep the government open through the end of its fiscal year on Sept. 30. Separate legislation approved earlier in the month included the other six spending bills.
The most recent legislation extends the National Flood Insurance Program through the end of the fiscal year and provides $25.3 billion for the Federal Emergency Management Agency, including $20.3 billion for disaster response and recovery.
The FEMA funding includes $175 million for flood mapping and mitigation; $281 million for flood hazard mapping and risk analysis; $319 million in emergency grants; and $231 million for flood insurance operations.
How the total solar eclipse could affect auto claims
With a total solar eclipse set to pass over parts of Canada in less than two weeks, researchers at Toronto’s Sunnybrook Research Institute are warning about a possible surge in traffic fatalities.
The rare celestial event will unfold over Canada, the United States and Mexico on the afternoon of Apr. 8 as the Moon aligns perfectly between the Earth and Sun. In Canada, the solar eclipse’s path of totality will pass through several cities and towns in Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland, plunging them into darkness for a few minutes, the Canadian Space Agency reports.
The eclipse will be within driving range for more than 200 million people in Canada and the U.S., says a press release from the Sunnybrook Research Institute, one of Canada’s Top 10 research hospitals.
Researchers have noted the last total solar eclipse in the U.S. in 2017 was associated with an increase in fatal crashes.
InsurTech/M&A/Finance💰/Collaboration
Accuserve Partners with Flexpoint Ford to Continue Expansion and Growth Strategy
Accuserve Solutions (“Accuserve” or the “Company”), an independent managed repair services platform, and Aquiline Capital Partners LP (“Aquiline”), a private investment specialist in financial services and related technologies, announced today that they have reached an agreement for a majority investment from Flexpoint Ford (“Flexpoint”), a private equity firm specializing in investments in the financial services and healthcare industries.
Flexpoint’s partnership is expected to accelerate Accuserve’s growth as it continues to develop value added property claims solutions for insurance carriers, homeowners, and contractors.
Accuserve is a fast-growing full-service managed repair and home services platform, connecting insurance carriers, homeowners, and contractors through a unified platform that simplifies the property restoration and claims process from incident through repair. The Company has invested significantly in technology to ensure improvement in the property claim workflow with the ultimate objective of removing pain points for all stakeholders.
Flexpoint’s investment, alongside the continued support from Aquiline, is expected to bring significant financial resources, industry expertise, and relationships to Accuserve to further drive continued growth and deliver industry-leading services to its customers. The partnership with Flexpoint will enable Accuserve to expand its contractor networks and service offerings in complementary markets, pursue strategic acquisitions, and enhance its sophisticated technology and data analytic tools.
Waller Helms Advisors acted as financial advisor to Accuserve Solutions and Aquiline Capital Partners in connection with this transaction.
Verisk Announces Integration with Seek Now
Platform integration designed to optimize processing time for claims resolutions
Verisk (Nasdaq: VRSK), a leading global data analytics and technology provider, has announced a strategic integration with Seek Now, a leading claims inspection service provider and business intelligence solution in the residential and commercial property insurance space. This integration expands Verisk’s open ecosystem, offering claims adjusters increased flexibility and streamlining the damage assessment process. Seek Now’s technology will be seamlessly integrated within Verisk’s suite of property estimating solutions, eliminating the need for manual information transfer.
As a result of this integration, shared customers of Verisk and Seek Now will experience a simplified and accelerated claims resolution process, improving their claims outcomes while enriching their policyholder’s overall experience. The integration will also streamline referrals, real-time routing, status and data collection process for property insurance claims leading to a meaningful reduction in cycle times.
“Verisk continues to expand our open ecosystem and to innovate to help our clients complete their important work with greater ease, efficiency and accuracy,” said Aaron Brunko, president of property estimating solutions, Verisk. “We’re pleased to add Seek Now to our collaborative ecosystem in an effort to accelerate claims efficiency and have a positive impact on the entire insurance value chain.”
“By integrating directly within Verisk’s Property Estimating Solutions, every adjuster within our extensive network of mutual insurance carrier customers gains swift access to ground truth data, often within just 24 hours,” said Russ Carroll, CEO of Seek Now. “Regardless of the claim type—whether it's wind/hail, interior, water damage, or any other—adjusters will now enjoy a seamless pathway to enhance their adjudication processes, thus ensuring superior service for home and business owners like never before.”
Oka Raises US$10 Million in Funding for Carbon Credit Insurance
Oka, a leading provider of carbon credit insurance, announced the successful completion of a $10 million funding round.
The investment comes from notable backers including Aquiline Capital Partners, firstminute capital, and other strategic partners.
The raised capital will bolster Oka’s risk-based capital requirements and support its operational expansion as it continues to underwrite through its innovative Lloyd’s syndicate-in-a-box, Oka Syndicate 1922. In addition to attracting investment, Oka has forged partnerships with three reinsurance providers and secured a capital commitment from a subsidiary of Greenlight Capital Re. This commitment will enable Greenlight Capital Re to act as a capacity provider for Oka’s initial three years of operation, further enhancing Oka’s capacity to underwrite carbon credit insurance effectively.
This funding round underscores investors’ confidence in Oka’s mission to provide comprehensive insurance solutions tailored to the evolving needs of carbon credit markets. With this infusion of capital, Oka is well-positioned to strengthen its presence in the insurance industry and drive sustainable growth in the carbon credit insurance sector.
Oka CEO Chris Slater commented on the raise, saying: “In a difficult market for venture funding and the VCM alike, we’re delighted by the vote of confidence in Oka. The capital committed by our brilliant investors and capital partners puts us one step closer to realizing our ambitious vision of insuring every carbon credit.”
Innovation
Smart home water monitoring devices prevent property damage
The average water leak goes undetected for more than 75 days, causing serious damage to homes and commercial buildings, and water damage claims account for $13 billion in annual losses for insurers, according to EMC Security.
Water damage or freezing pipes was the second leading cause of home insurance claims from 2016 to 2020, according to the Insurance Information Institute (Triple-I). Smart home water sensors are early detection systems that find leaks inside and outside the home before they get out of hand. Some insurers reward insureds who install and use water monitoring devices with discounts.
Partnerships
Mercury Insurance has partnered with Flume Water Monitor to reduce water leaks. Policyholders save 25% on the retail price of the smart home device and may be eligible for a discount if they live in a qualifying state. The discount applies for as long as the device is active on the property.
“Water leaks are the leading cause of non-weather-related homeowner losses,” said Adam Bakonis, Mercury Senior Product Manager to PR Newswire. “Saving our customers money while providing them multiple layers of protection means we are doing our job.”
Church Mutual Insurance has also partnered with a water-monitoring device company. Church Mutual policyholders can get a CM Sensor® at no cost, and the technology offers 24/7 detection of temperature changes and other water alerts. This lets homeowners and commercial property owners know when extreme temperatures in the home or building could cause pipes to burst or freeze.
Home Advisor reports 29.4% of 2023 home insurance claims were due to water damage and freezing. Moen, Flume, AlertAQ and other companies that make these water sensors could save insurers and policyholders from substantial losses
ZestyAI Unveils Roof Age Solution for Property Risk Assessment
Today, ZestyAI, the leading provider of climate and property risk analytics solutions powered by artificial intelligence (AI), unveiled its newest solution to address the leading driver of insurance losses - roof claims.
ZestyAI's Roof Age is a new solution that pinpoints the age of a roof using data from both building permits and historical imagery. This unique approach allows the company to determine the age of each roof with over 90 percent accuracy and nearly 100 percent coverage across the contiguous US.
ZestyAI’s Roof Age is a new solution that pinpoints the age of a roof using data from both building permits and historical imagery.
In a recent survey from ZestyAI, 62% of homeowners reported putting off home improvements or maintenance projects for financial reasons. It was found that only 35% of homeowners would be comfortable with a large home improvement cost, such as a roof replacement, right now, and when asked how they would handle a roof replacement, over 40% of homeowners said they would attempt to file an insurance claim. (CNW Group/ZestyAI)
Traditional methods of obtaining roof age information are deeply flawed and inaccuracies in assessing roof age contribute to the approximately $19 billion in roof-related claims per year. Most carriers depend on policyholder or agent-reported data, which is often inaccurate, leading to blind spots in assessing property risk. In a recent ZestyAI survey, 63 percent of homeowners reported not knowing the age of their roof if they were not in their homes the last time it was replaced.
Recognizing the critical need for a more reliable and comprehensive solution, ZestyAI has introduced Roof Age to precisely determine of the age of a roof with unparalleled accuracy. Insurance carriers will use ZestyAI Roof Age to prevent losses, improve premium capture, and optimize inspections.
"Roof claims stand as the primary driver of insurance losses, yet many carriers continue to rely on unproven policyholder-provided data for assessing roof age," said Kumar Dhuvur, Co-Founder and Chief Product Officer of ZestyAI. "ZestyAI Roof Age is the most accurate, comprehensive product on the market. Our unique approach leverages the power of artificial intelligence to analyze both building permits and historical aerial imagery, providing unmatched confidence for insurance carriers in their underwriting and rating decisions."