Research
Auto insurance in the emerging mobility era
Technology disruptions are reshaping mobility solutions. Will mobility insurance see a meteoric transformation?
Before the end of this decade, autonomous vehicles (AVs), electric vehicles (EVs), and shared forms of mobility are poised to transform the mobility landscape. How will the auto insurance landscape evolve to adapt to this wave of disruption?
About the research
This is a large question with many, many answers. At ITC Vegas 2023, McKinsey brought together a group of 20 leaders from auto insurance, automotive, and mobility to discuss the future of the industry (see sidebar, “About the research”). Despite the convergence of expertise, the diverse perspectives highlighted the complexity and dynamic nature of the characteristics expected to separate winners from “also-rans” in the coming years.
Is the emerging mobility paradigm real or a mirage?
Accelerating investment in emerging mobility technologies signals a transformation in the landscape within the next five to ten years. Market participants optimistic about the pace of innovation expect that by 2030, roughly half of new vehicles will be electric, nearly all new vehicles will be connected, and some (maybe one in six) will have Level 3+ autonomous-driving capabilities—such as self-driving without constant human supervision. On the same timeline, industry participants expect that approximately one-third of personal miles traveled will likely be attributed to micro- and shared-mobility solutions, such as bikes and ride-hailing services. These are not mere technological shifts in mobility; these are forces that fundamentally alter how we perceive and interact with personal mobility.
News
Florida insurance market continues to strengthen following impactful legislation: OIR - Reinsurance News
The Florida insurance market continues to strengthen, showing signs that recent legislation is having positive impacts on the property insurance market, according to the state’s Insurance Commissioner Michael Yaworsky.
Yaworsky’s comments stem from the Florida Office of Insurance Regulation’s (OIR) update on the state’s property and casualty insurance market.
As per the OIR, following the recent “historic legislative reforms” designed to promote market stability, eight property and casualty insurers were approved to enter Florida’s insurance market.
“Florida’s insurance market continues to strengthen, showing signs recent legislation is having positive impacts to the property insurance market,” Yaworsky said.
He continued, “OIR remains steadfast in our efforts to stabilize Florida’s insurance market by implementing legislative reforms and recruiting more insurers to the state. We look forward to continuing this work and promoting a competitive market for policyholders.”
Speaking on Citizens Property Insurance Corporation (Citizens), the OIR noted that in 2023, Florida’s state-backed insurer showed improvements in its financial strength over previous years.
“As the market continues to stabilize, OIR is seeing continued interest from authorized insurers in the Citizens Depopulation program. In 2024, OIR approved 13 companies to assume more than 354,000 policies from Citizens. In 2023, more than 275,000 policies were assumed from Citizens, reducing Citizen’s exposure by more than $113 billion,” OIR observed.
Climate/Resilience/Sustainability
With Increasingly Volatile Weather, Insurers Are Embracing New Tools to Manage Losses - Industry Blogs
I was talking with my colleague in California a few weeks back, and he was once again donning his rain suit and boots to prepare his home for an imminent deluge.
All around communities like his, residents were filling sandbags, stocking up on groceries, and preparing to stay off the roads as another atmospheric river quickly approached from the west. I’m sure that’s not what he expected when he moved from Tacoma, Washington, to “sunny” Southern California, but it’s becoming clear that volatile weather events are just the new normal—and not just for the folks out west.
Across the United States, communities are being impacted by increasingly frequent and severe weather events. The latest flooding across California is just one of many recent examples. In mid-February, a winter snowstorm in the northeast led to a sudden, massive snowfall that shuttered much of New York City. These storms are threatening the safety of residents, disrupting business operations, and increasing losses for insurers.
Tim Bower, Account Executive, ESRI
Commentary/Opinion
VC Insights: Putting the Focus on Insurers, Not Silicon Valley
When Eos Venture Partners invested in a cyber recovery firm, it had yet to generate significant profit.
Executive Summary
"How do we make the insurance industry better than we found it?"
That's the mission of Eos Venture Partners, according to Jonathan Kalman, a founding partner of the venture capital firm, who told Guest Editor Mike Fitzgerald about some of the portfolio companies that reflect the mission, and about a strategy of turning loss-making companies into profit-making ones by providing capital, relationships and know-how.
Kalman also shared views on the impacts of AI and advanced analytics on P/C insurance and how carriers can prepare their workforces for an AI future.
See related articles, "Critical Thinkers Needed for AI-Powered Insurers" and "All Aboard What's Next for Executives and Boards of AI-Powered Insurers"
Michael (Fitz) Fitzgerald, Insurance Industry Advisor for SAS Institute Inc., served as guest editor for this article and others featured in CM's Q1-2024 magazine, "Leading the AI-Powered Insurer."
Optimizing your Insurtech for Venture Investment | LinkedIn
The Insurtech category is starting to bounce back. Coming off investment lows of ’22 and ’23, there’s renewed interest from the VC community in Insurtechs and MGAs (managing general agents). But the bar has been raised considerably. As an investor, I’m often asked what it takes to get funding in today’s market.
This is the first installment of a 3-part series meant to provide some insight into what OMERS Ventures found attractive about each of our insurance investments: Clearcover, Foresight and Joyn Insurance. First up – Clearcover
Dave Wechsler, Fintech/Insurtech investor, OMERS Ventures
Telematics, Driving & Insurance
Aviva Launches Aviva MyDrive for Safer Driving and Potential Insurance Savings
Available to all users who purchase Aviva Online car insurance through price comparison sites, the feature monitors driving behaviors via smartphones. Metrics such as acceleration, braking, cornering, speed, and phone usage are evaluated to incentivize safer driving.
With an estimated 85% of users expected to receive insurance renewal discounts, Aviva MyDrive represents the insurer’s commitment to fostering road safety. Unlike its predecessor, QuoteMeHappy Connect, Aviva MyDrive is accessible to all drivers purchasing insurance through price comparison platforms.
Speaking about the new initiative during the pilot phase in 2023, Steve Treloar, Aviva’s retail director, said: “We’re really pleased with the test phase of ‘Aviva Drive’ and have been encouraged by the feedback we’ve received from motorists who used the app. “
He added: ”To help make it even better, we’ve made a number of changes including giving motorists hints and tips on how to improve their driving, and the ability to share scores and badges using social media networks.”
AI in Insurance
April ITL Focus: AI | Insurance Thought Leadership
We seem to be in a moment where we're taking a deep breath on generative AI and large language models like ChatGPT. The enthusiasm over the past year and a half has been extraordinary, and we can all see how AI will at least improve productivity and perhaps make more revolutionary changes in insurance. But we haven't seen any killer apps like the electronic spreadsheet that sold so many Apple II's in the late 1970s and 1980s and launched the personal computer revolution. And we're waiting.
We're not in what Gartner would call the Trough of Disillusionment on their Technology Hype Cycle. But we are in a Trough of Where Do We Go From Here?
When in doubt on breakthrough ideas, I often turn to my friend John Sviokla, whom I've had the pleasure of working with for more than a quarter-century. After years of teaching at Harvard Business School, John in the late 1990s became vice chairman of Diamond Management and Technology Consultants, where I was a partner. He stayed on after PwC bought Diamond in 2010 and was a leader in the strategy and innovation practice, before becoming the marketing lead in the U.S. A year ago, he and some colleagues formed GAI Insights to help companies think about the implications of generative AI and about how to begin implementing it, with insurance as a major focus. They have leaned in to their connections with Harvard, publishing two recent articles in Harvard Business Review; John and one of his colleagues have also become executive fellows at the business school.
At Diamond, we joked that we needed to assign a young associate to just follow John around with a grocery sack and collect all the ideas he spun off every day and didn't have the time to follow through on. So, while John and his colleagues are delving into many ideas and developing them deeply, I thought I'd get out a shopping bag and ask John to toss out some ideas about the future of generative AI.
Paul Carroll, editor- in -chief, Insurance Thought Leadership
Navigating risks in AI governance – what have we learned so far?
Efforts are being made in a current regulatory void, but just how effective are they?
As artificial intelligence (AI) continues to evolve and become increasingly integrated into various aspects of business and governance, the importance of robust AI governance for effective risk management has never been more pronounced. With AI's rapid advancement come new and complex risks, from ethical dilemmas and privacy concerns to potential financial losses and reputational damage.
AI governance serves as a critical framework, ensuring that AI technologies are developed, deployed, and utilised in a manner that not only fosters innovation but also mitigates these emerging risks, thereby safeguarding organisations and society at large from potential adverse outcomes.
Sonal Madhok, an analyst within the CRB Graduate Development Program at WTW, delineates this transformative era where the swift integration of AI in various sectors has catalysed a shift from mere planning to action in the realm of governance. This surge in AI applications highlights a profound need for a governance framework characterised by transparency, fairness, and safety, albeit in the absence of a universally adopted guideline.
Kenneth Araullo is a senior news writer for Insurance Business
What is synthetic data, and how are insurers using it?
Advances in generative AI have enhanced the accuracy of synthetic data, which makes it a valuable tool.
By 2027, as many as 40% of the AI algorithms used by insurers will integrate synthetic data in order to ensure fairness within their processes and comply with regulations, a recent report from IDC FutureScape predicted.
Synthetic data is created artificially through computer simulation or generated by algorithms as either an alternative or supplement to real-world data. This data allows AI models to mirror real-world scenarios while also protecting the privacy of customers.
According to TechTarget, to create synthetic data generative AI models “use a set of training data to learn the statistical patterns and relationships in the data and then use this knowledge to generate new synthetic data that’s similar to the original data.”
Currently, about 18% of enterprises integrate synthetic data, notably to help insurers comply with privacy regulations and facilitate secure data exchanges. IDC notes that advances in generative AI have enhanced the accuracy of synthetic data, which makes it a valuable tool.
“Across various sectors, AI is revolutionizing processes and driving transformative changes. In the insurance industry, AI adoption is reshaping operations, from enhancing risk assessment with synthetic data to optimizing sales through generative AI-based tools,” Surya Narayan Saha, Research Manager, Financial Insights, IDC Asia/Pacific, said in a release.
The Power of AI Upskilling in insurance: Skills we need to develop
There is a high demand for specialists and experts who can implement, integrate, maintain, govern and develop AI applications – and, importantly, create the foundation architecture for it to work. Data engineers, AI architects, data scientists, Machine Learning engineers are not just sought after in the insurance industry.
AI enhances capabilities of knowledge workers
At the same time, AI is changing the roles of technical experts, as we have observed at Swiss Re through our experimentation with code completion and pair programmer tools. These tools offer suggestions for code completion or alternatives and can even write code autonomously. However, the engineer remains in control, with the ability to accept or reject the suggestions. The results have been remarkable, as the tool has already demonstrated productivity increases of up to 20% among our colleagues using it. The time saved can be allocated to increased creativity and to do tasks that often fall to the bottom of the "to do" list, such as mentoring colleagues, learning and knowledge sharing.
Specialists are just the tip of the iceberg when it comes to people who need to have Gen AI skills. While AI can automate certain tasks, a significant portion of its value is derived from its integration into everyday tools, such as emails, document production and meeting admin. This helps us all increase productivity and enable us to focus on tasks we enjoy and create greater value add.complete report
People
Swiss Re CEO steps down, successor named
Swiss Re has announced a major leadership change with Andreas Berger (pictured) set to assume the role of group chief executive officer on July 1, 2024, succeeding company vet Christian Mumenthaler, who has decided to step down following an eight-year tenure.
Berger, who joined Swiss Re in March 2019, brings extensive experience from his previous roles at Boston Consulting Group, Gerling, and Allianz.
Innovation
Russell Innovation Center for Entrepreneurs and The Hanover Announce Exclusive Insurance-Based Programming
The Russell Innovation Center for Entrepreneurs (RICE) and The Hanover Insurance Group, Inc. (NYSE: THG) announced the introduction of insurance-based programming designed to foster economic mobility within the entrepreneurial community that is supported by RICE.
A $250,000 grant from The Hanover is designed to advance RICE's continued programming and support of Black business owners in Georgia and beyond. The Hanover also partnered with RICE to develop and implement a three-part educational series on key insurance considerations for businesses. Entrepreneurs will be able to access the series through Digital RICE, the Center's innovative online platform offering access to master classes from industry experts, personal development and leadership content, and a resource directory tailored to the needs of Black entrepreneurs. This series provides:
An overview of commercial insurance fundamentals
The basics of risk management
The value of working with an independent insurance agent when selecting insurance
"RICE has made a large impact on the Black business and entrepreneurial community, helping to advance the work and growth of many Black business owners," said Basil Morris, chief strategy officer at The Hanover and executive sponsor of the RICE partnership. "Partnering with the team at RICE to develop this new insurance-based programming helps strengthen the resiliency and sustainability of these businesses by providing an important foundational understanding of the complex risk management and insurance landscape."
"We are honored to collaborate with The Hanover in pioneering this program to equip Black entrepreneurs with the necessary tools and knowledge to navigate the complexities of risk management and insurance," said Jay Bailey, president, and CEO of RICE. "This type of uncommon access and opportunity is the foundation of knowledge and resources Black business owners need for sustainable growth and success."