Climate Change/Sustainability/ESG
Storms kill at least 21 in 4 states as spate of deadly weather continues
Powerful storms killed at least 21 people, injured hundreds and left a wide trail of destruction across Texas, Oklahoma, Arkansas and Kentucky, obliterating homes and destroying a truck stop where dozens sought shelter in a restroom during the latest deadly weather to strike the central U.S.
The storms inflicted their worst damage in a region spanning from north of Dallas to the northwest corner of Arkansas, and the system threatened to bring more violent weather to other parts of the Midwest. On Monday, forecasters said, the greatest risk would shift to the east, covering a broad swath of the country from Alabama to near New York City.
NOAA predicts above-normal 2024 Atlantic hurricane season
La Nina and warmer-than-average ocean temperatures are major drivers of tropical activity
NOAA National Weather Service forecasters at the Climate Prediction Center predict above-normal hurricane activity in the Atlantic basin this year. NOAA’s outlook for the 2024 Atlantic hurricane season, which spans from June 1 to November 30, predicts an 85% chance of an above-normal season, a 10% chance of a near-normal season and a 5% chance of a below-normal season.
NOAA is forecasting a range of 17 to 25 total named storms (winds of 39 mph or higher). Of those, 8 to 13 are forecast to become hurricanes (winds of 74 mph or higher), including 4 to 7 major hurricanes (category 3, 4 or 5; with winds of 111 mph or higher). Forecasters have a 70% confidence in these ranges.
The upcoming Atlantic hurricane season is expected to have above-normal activity due to a confluence of factors, including near-record warm ocean temperatures in the Atlantic Ocean, development of La Nina conditions in the Pacific, reduced Atlantic trade winds and less wind shear, all of which tend to favor tropical storm formation.
Insurers are working to shore up the $2B carbon offset market
Data fraud, questionable accounting practices and intensified catastrophes are just some of the issues that have battered the voluntary carbon market.
Those misfortunes have helped spur a new line of business: Insurance policies designed to de-risk credits that polluters buy to neutralize their climate impact. Whether insurance can help stabilize an industry under heavy scrutiny remains to be seen, though.
Carbon credits are a financial instrument to help channel capital into projects that cut greenhouse gas emissions. Project developers sell credits equal to one ton of carbon dioxide reduced or avoided to polluters who want to cancel out emissions. But some projects — particularly forest projects — have been shown to benefit the climate much less than promised, often because the forests were not at risk of being cut down in the first place.
In the latest sign of the fledgling insurance industry's growth, Park City, Utah-based insurer Oka teamed up with Cloverly, a carbon trading platform, to offer insured credits earlier this year. Cloverly's 300-strong corporate users can purchase a policy to go with carbon credits traded on its digital marketplace, not unlike how consumers can add an extended warranty while shopping for a new phone, according to the company.
If part of an insured forestry project burns down in a fire, for instance, Oka would pay the policyholder for the value of the lost carbon credits. Cloverly, headquartered in London and Atlanta, Georgia, has yet to invalidate credits since its inception in 2019, according to Chief Executive Officer Jason Rubottom. Still, Rubottom says he wasted no time contacting Oka after learning about the company.
Insurance is a "necessary solution to scaling this market with integrity," Rubottom says. "There is uncertainty and risk in any carbon credit. There is no way to avoid it. It is more about minimizing and mitigating [that risk]."
If part of an insured forestry project burns down in a fire, for instance, Oka would pay the policyholder for the value of the lost carbon credits.
News
U.S. Home Insurers Post Net Combined Ratio Over 110: S&P Global
The U.S. homeowners insurance segment posted its worst underwriting results in over a decade in 2023, according to an analysis by S&P Global Market Intelligence.
The net combined ratio for the homeowners business, excluding policyholders’ dividends, was 110.5 in 2023, the highest since 2011 (121.9).
S&P said inflationary pressures, the devastating wildfire in Hawaii and a record-breaking number of billion-dollar loss events from convective storms weighed on the industry’s results.
Appeals court revives $2.5M dispute between captive insurer, automation company
The 2nd U.S. Circuit Court of Appeals on Thursday overturned the dismissal of a dispute between a claims automation company and a captive insurer over coverage of a $2.5 million class action over the valuation of cars damaged in crashes.
The three-judge appeals court panel said in Ameriprise Captive Insurance Co. v. Audatex North America Inc. that the insurer sufficiently alleged that the underlying class-action suit was brought because of Audatex’s loss valuation software.
The appeals court did not determine whether the Westlake, Texas-based automation technology company, owned by Solera Holdings LLC, is responsible for covering the settlement of Zuern v. IDS Property Casualty Insurance Co.
Mackenzie Zuern sued Ameriprise subsidiary IDS in Washington state court in 2019 on behalf of a proposed class who claimed the loss of their vehicles was undervalued. Ameriprise settled the suit and sued Audatex in federal court in New York to recover defense costs and the settlement, court records show.
Audatex moved for dismissal, arguing the vendor agreement between the parties did not require it to defend or cover the class action. The trial court agreed with Audatex.
An Ameriprise representative said the company is “pleased with the court’s decision,” but declined further comment.
A representative for Audatex did not respond to a request for comment.
Research
Navigating Shifts in the Personal Lines Insurance Industry Series: Part Two – The Evolving Market Landscape
In the first part of our series on shifts in the personal lines of insurance industry, we discussed the insurance industry’s slow pace of change, especially when adapting to changing customer expectations. Evolving customer needs and advances in technology are significant drivers of industry shifts that often result in market disruptions, new products, or the creation of new business models.
In part two of our three-part series, we’ll take a deep dive into these factors, with a focus on the automotive segment and what organizations should consider to keep pace and stay competitive.
Evolving Market Landscape, New Products and Business Models
The adoption of vehicle sharing and the increase in autonomous vehicles are anticipated to lead to a decrease in the auto insurance market size. Additionally, the emergence of telematics and higher levels of autonomous driving will make insurance risk pricing more dependent on usage data. These trends have contributed to products like usage-based insurance and parametric insurance products. The value chain will also continue to evolve. We will see market power shifting to those who control data and customer relationships, such as original equipment manufacturers (OEMs) and dealer networks. New businesses will evolve that specialize in data provisioning, or processing.
Here are the key trends in the market, products and business models:
- Vehicle Sharing: Shared mobility and emerging preferences of Gen-Z to share rather than own vehicles are expected to compress the personal auto insurance market over time. This will result in increased competition, especially as insurers look to reduce the portfolio-wide average age of drivers by competing to acquire Gen-Z customers.
- Impact of Autonomous Vehicles: With advanced driven assistance systems (ADAS) and autonomous vehicles (AV), liability shifts to the OEM/software provider and this portion of coverage moves from personal lines to commercial lines insurance. Improved safety in vehicles will also result in lower losses and eventually reduced premiums. More importantly, a substantial portion of the risk pool will be influenced by OEM and third-party participation in distribution, products, pricing and claims processes.
- Expansion of Usage-Based Insurance (UBI): Usage-based auto policies become mainstream. It is expected to grow at a compounded annual growth rate (CAGR) of 25+ percent.[1] Growth in UBI comes as customers feel more comfortable sharing data in exchange for value. This will also give way to on-demand insurance for coverage durations of as little as an hour.
Claims/Payments
Lemonade Exec: AI Getting the Right Claims to the Right Adjuster
AI Jim, the chatbot that handles claims for InsurTech Lemonade, is renowned for its ability to handle claims in seconds.
Two seconds to be exact.
That was the time it took the chatbot to settle a bicycle theft claim in June last year, breaking AI Jim’s previous record of three seconds.
But when Chief Claims Officer Sean Burgess recently spoke to CM Deputy Editor Elizabeth Blosfield about the benefits that the use of AI brings to the property/casualty insurance claims process, Burgess highlighted AI benefits beyond speed.
“What [the AI] really does is it allows the right claim to get to the right adjuster,” Burgess said. While instant claims services from a chatbot is exciting to talk about, improved workflow management using AI is something that resonates with the veteran claims professional.
Burgess, who spent 28 years at USAA before signing on to lead the claims function at Lemonade, described how workflow management, fraud detection and efficiency benefits from AI are helping Lemonade to lower its loss and loss expense ratios and deliver good service to customers on their worst days—when they have claims—during the opening session of Carrier Management’s InsurTech Summit 2024 in mid-May.
Innovation
Three, two, one, blast-off! Are insurance firms ready for space?
"We are, yes"
Three, two, one, blast-off! Are insurance firms ready for space?
“We have a couple of submissions in from companies that are looking at asteroid mining,” said Joseph Ziolkowski. “It sounds crazy but there has been a massive amount of investment into companies that are building technology to mine asteroids.”
It did sound crazy, so *Insurance Business asked the Relm Insurance CEO if meant that his Bermuda-headquartered firm is currently providing insurance for space projects.
“We are, yes,” he said.
Ziolkowski said there are companies that have spent more than a decade working on space projects and have managed to raise hundreds of millions of dollars.
“What's really interesting is that as these companies raise more capital the need for insurance is only going to become more relevant,” he said. “That's where we come in.”
Realm also provides covers for the equipment on space stations.
“There is a company that is working on manufacturing technology or equipment that will function on a space station and for that particular company we are providing them with product liability insurance,” said Ziolkowski
Lloyd’s Lab Opens Applications for its 13th Cohort | Insurtech Insights
The Lloyd’s Lab encourages innovation in the insurance sector by supporting startups and scaleups in developing groundbreaking solutions. Over 10 weeks, participants have the opportunity to validate their ideas and bring new products to market with the support of Lloyd’s extensive network and resources.
The Lab provides a unique opportunity for innovators to test new concepts, ideas, and products with the guidance of experts from the world’s largest insurance and reinsurance market. Lloyd’s Lab is seeking fresh, disruptive ideas to enhance Lloyd’s market and better serve its customers.
Lloyd’s Lab facilitator, Rosie Denée said: “Participants will benefit from access to expert mentors, key advisors, potential trading partners, and investors. Additionally, participants can choose to work from Lloyd’s in London or wherever best suits their business needs.”
Application Themes for Cohort 13
New Products: Lloyd’s Lab is looking for innovative insurance products that address underinsurance or significantly improve existing coverages. Submissions may include technologies that help insurers quantify new types of risk, predict potential losses, bundle insurance with existing services, or develop parametric products and smart contract-based offerings.
Data, Models & Processes: Efficient underwriting at Lloyd’s relies on advanced tools and techniques for risk assessment, portfolio management, and claims handling. The Lab seeks submissions that introduce new data sources for accurate underwriting, predict future claims, aggregate data sets to uncover trends, automate payment processes, or improve documentation processing.
Building Resilience and Supporting Transition in the Middle East & Africa (MEA): As the MEA region faces challenges from climate change, energy transition, and natural catastrophes, the Lab is focused on solutions that enhance resilience and support sustainable development. Submissions should target commercial lines of business and may include innovative disaster response products, sustainable insurance solutions for the energy transition, and advanced catastrophe modeling tools.
AI in Insurance
Generative AI’s Game-Changing Impact on InsurTech
Over the past year, Generative AI has gained prominence in discussions around Artificial Intelligence due to the emergence of advanced large multimodal models such as OpenAI’s GPT-4, Google’s Gemini 1.5 Pro etc.
Across verticals, organizations have been actively exploring Generative AI applications for their business functions. The excitement around the technology, […]Over the past year, Generative AI has gained prominence in discussions around Artificial Intelligence due to the emergence of advanced large multimodal models such as OpenAI’s GPT-4, Google’s Gemini 1.5 Pro etc.
Across verticals, organizations have been actively exploring Generative AI applications for their business functions. The excitement around the technology, and its vast untapped potential, is reflected in a prediction by Bloomberg that the Generative AI will become a USD 1.3 trillion market by 2032. Insurance is one of the key sectors where Generative AI is expected to have a revolutionary impact – enhancing operational efficiency and service delivery, and elevating customer experience. From automating claims processing to predictive risk assessments, let us take a deeper look at some of the Generative AI use-cases that will redefine InsurTech in the years ahead.
Automated and Efficient Claims Settlement Lengthy and complex claims settlement processes have long been a pain-point for insurance customers. Generative AI addresses this by streamlining the claims process through seamless automation. AI analyzes images or other visual data to generate damage assessments. It can extract and analyze relevant information from documents such as invoices, medical records and insurance policies – enabling it to swiftly determine the validity of the claim, as well as the coverage, and expedite the settlement. This serves to improve process efficiency, reduce the administrative burden on staff, and significantly boost customer satisfaction.
Optimized Underwriting and Streamlining Risk Assessment Underwriting is another key area where this technology can create immense value for insurance firms. With their ability to analyze vast amounts of data, Generative AI models build comprehensive risk assessment frameworks that enable them to swiftly identify patterns and highlight potential risks. It automates evaluation of a policy applicant’s data, including medical and financial records submitted, in order to determine the appropriate coverage and premium.
Leveraging AI, underwriters are empowered to better assess risks and make more informed decisions. By reducing manual effort, minimizing the possibility of human error, and ensuring both accuracy and consistency in risk assessment, Generative AI is poised to play a pivotal role in optimizing underwriting processes.
Sachin Panicker, Chief AI Officer, Fulcrum Digital
Events
USA'S LEADING INSURTECH CONFERENCE Javits Center | New York | 5-6 June 2024
The insurance industry, no stranger to gauging risk, is facing its most profound disruptions in decades. Artificial intelligence, machine learning, Internet of Things, blockchain, data analytics and other emerging technologies are rising to prominence. Are you ready to transform your business?
Special Discount to 'Connected' followers: Use discount code INSURTECHCON30 and receive 30% off your conference pass Register here
SCOUT INSURTECH: Jun 17, 2024, 12:30 PM - Lower.com Field, Columbus, OH
WHERE INNOVATORS CREATE NEW PARTNERSHIPS
An in-person gathering designed to cultivate new relationships between innovative insurtech companies and the broader insurance industry.
This environment will allow startups and high-growth companies to quickly connect with carriers, brokers and agents eager to hear new ideas and consider new partnerships.
Special Discount, 40% off for ‘Connected’ followers, use code: INSURTECHCONSULT