AI in Insurance
Interview - Scaling AI in Insurance: A Conversation with Zurich's Christian Westermann
Christian Westermann is shaping the application of artificial intelligence (AI) in insurance—from improving decision-making to streamlining processes. As group head of AI at Zurich Insurance he oversees the growth and scalability of AI throughout the company’s insurance value chain globally, guided by a robust Responsible AI framework that is meant to safeguard the company from potential AI risks.
Tanja Brettel, an expert in our Financial Services practice, chatted with Westermann about how the technology is revolutionizing insurance, why a responsible approach to AI is paramount, and what role the EU AI Act plays in his organization’s AI journey.
Q: How do you envision generative AI transforming the insurance industry in the next three to five years?
Westermann: Generative AI will not change the industry’s innate role in providing coverage for losses. However, more than a transformation, I see a revolution in how it will enable us to provide better customer service and make tasks like underwriting or claims management more efficient.
The insurance industry is very language and picture driven, with a lot of unstructured data. For example, large claims historically required loss adjusters on the ground to write down what happened and take pictures. Extracting information from such reports was partially a manual process. With generative AI, you can now do that at scale, beyond country borders. For global companies like us, this is a huge benefit. This improves insights into losses and, ultimately, helps us better understand our customers. FULL INTERVIEW
Climate/Resilience/Sustainability
US homeowners' insurers hit record low
The US homeowners’ insurance market has encountered its worst underwriting results since at least 2000, with population shifts into regions increasingly prone to weather-related events playing a significant role, according to a recent AM Best report.
The “Migration to CAT-Prone Areas Adds to US Homeowners’ Insurers’ Performance Volatility” report highlights a staggering $15.2 billion underwriting loss for 2023. The loss more than doubles the previous year’s figure and marks the worst in over two decades, with 2011’s $14.8 billion loss being the next highest.
Urbanization and population growth in areas vulnerable to natural disasters are compounding the issue, the report indicates. US Census data shows that California, Florida, Georgia, North Carolina, Texas, and Washington collectively accounted for 53% of the nation’s population growth from 2010 to 2020, all states known for severe weather events.
Can Climate Tech Save Insurance? | Insurance Thought Leadership
The future of the insurance industry depends on how it responds to climate change.
Simply stated, extreme weather is disrupting property & casualty insurance profitability while destroying coverage affordability and restricting availability.
Ironically, these new threats may have surfaced at a perfect time to encourage the insurance industry to finally transform its legacy approaches to risk managements to position itself for the rapidly transforming new economy. At the heart of this makeover is a critical paradigm shift, albeit still early on, from "repair and replace" to a "predict and prevent" mindset applied across the enterprise: product design, underwriting, distribution, claims, service and marketing. Some refer to this capability as resiliency. Climate tech to the rescue.
Complete article as featured in insurance Thought Leadership
Stephen Applebaum and Alan Demers
H1 global insured nat cat losses 68% higher than ten-year average: Munich Re
A new report from Munich Re has revealed that global insured losses from natural disasters in H1 of 2024 stood at $62 billion, 68% higher than the ten-year average of $37 billion and slightly up on last year.
- Catastrophic flooding, extreme storms, and two earthquakes produce overall losses of roughly US$ 120bn
- Global insured losses, at US$ 62bn, significantly higher than the ten-year average of US$ 37bn
- Number of fatalities in connection with natural disasters down compared to past years
68% of overall losses and 76% of insured losses attributable to severe thunderstorms, flooding and forest fires
The reinsurer’s report additionally observed that global losses in H1 of 2024 were $120 billion, lower than in the previous year’s H1 total of $140 billion. However, it is worth noting that 2023 was affected by extremely high losses in connection with the severe earthquake in Turkey and Syria.
“In a longer-term comparison, overall losses in the first half of 2024 clearly exceeded the average values for both the past ten years and the previous 30 years,” Munich Re said.
According to the firm, the share of claims for non-peak perils, which include severe thunderstorms, flooding and forest fires, was again high, with 68% of total losses and 76% of insured losses driven by these natural disasters.
Meanwhile, in the US, severe thunderstorms reportedly drove the loss statistics for H1, with the National Oceanic and Atmospheric Administration (NOAA) reporting 1,250 tornadoes From January to June, much higher than the long-term average of 820.
InsurTech/M&A/Finance💰/Collaboration
Elephant Insurance Expands Offerings with Coastal Home Insurer Annex
New partnership with Annex allows Elephant to offer insurance for coastal homes in Texas and along the Eastern Seaboard.(
Elephant Insurance is excited to announce an expansion of its product offerings with a new partnership with Annex, a leading coastal home insurer. This partnership allows Elephant to offer insurance for coastal homes in Texas and along the Eastern Seaboard.
“Elephant focuses on the needs of our customers with a variety of bundling opportunities to match their unique situations,” said Alberto Schiavon, CEO at Elephant Insurance. “We are proud to add a product to provide important insurance protection to homeowners who may struggle to find this coverage with other insurers. We strive to put the customers’ needs at the center of everything we do, and Annex provides another way to do that.”
Gradient AI Secures $56 Million in Series C Funding to Expand AI-Powered Insurance Solutions
Led by Centana Growth Partners, Funding Will Enhance and Extend the Range of Product Solutions and Expand Customer Success and Sales Functions
Gradient AI, a leading enterprise software provider of artificial intelligence (AI) solutions in the insurance industry, today announced that it has raised $56.1 million in Series C funding.
“Gradient AI has an experienced executive team and products that produce demonstrable ROI for its customers which, together, have helped Gradient deliver strong financial results”
The round was led by Centana Growth Partners, with participation from existing investors MassMutual Ventures, Sandbox Insurtech Ventures and Forte Ventures. The funds will be used to support product development to continue driving innovation and efficiency in the insurance industry and to further bolster customer success and sales functions.
"While we are gratified to secure this significant investment from both Centana and our existing investors, this is just the first step," said Stan Smith, CEO of Gradient AI. "Now it’s up to us to use this funding wisely, enhancing our platform and delivering unparalleled value to our customers. Insurers are becoming increasingly sophisticated in their risk assessment and are focused on improving their operational efficiencies. We are helping them achieve these goals by automating processes, reducing costs, and significantly improving results.”
North American insurance underwriter M&A activity rebounds in Q2 | S&P Global Market Intelligence
North American insurance underwriter deal activity rose significantly during the second quarter of 2024, recovering from a first quarter marred by inflationary pressures and a difficult M&A environment.
Both the frequency and aggregate value of transactions involving insurance underwriters increased sequentially in the second quarter, bucking the trend in the broader M&A market in the US and Canada, which slowed due to relatively high interest rates and financing challenges.
The number of insurance underwriter transactions climbed by nearly 38% to 22, aligning with totals in 2023. Aggregate transaction value increased by about 829% to $4.80 billion quarter over quarter, a notable increase from the first quarter's recent low of approximately $520 million.
Commentary/Opinion
LESSONS LEARNED: FROM C-SUITE TO FRONT LINE - Stephen Applebaum
Since entering the business world in 1966 as an apprentice accounting student, I have worked in a wide variety of diverse roles and responsibilities across a number of different industries and segments, including financial, retail, manufacturing, distribution, entertainment and, for the last 40 years, information technology and the Property & Casualty insurance ecosystem.
My roles have been increasingly senior business development, leadership and executive positions with responsibilities for operations, product development, business development, revenue, leadership, partnerships, alliances and strategy.
Across my entire career I have had the pleasure and privilege of working closely with mostly good and decent people and I have made many lifelong friends. When I reflect back over my career, I realize that there are a number of things I learned which may be of interest and even value to those younger than me (which is now most of you).
I realize that the world has changed in many ways over time but I believe most of these lessons remain valid and universal. Here for what it’s worth are some of these lessons learned and insights offered.
Stephen Applebaum. Managing Partner. Insurance Solutions Group
InsurTech Insights: Q&A with Mark Breading - Insurtech Israel News
Mark Breading, Senior Partner at ReSource Pro, is a visionary in the insurance industry, renowned for his forward-thinking strategies and expertise in integrating technology with business innovation. With a distinguished career spanning roles at IBM and now leading ReSource Pro’s consulting and advisory services, Mark brings unparalleled insights into the digital transformation of P&C insurers. Recognized globally as a top influencer in InsurTech and a mentor in the industry, Mark continues to shape the future of insurance through his pioneering methodologies and strategic leadership. In a recent Q&A session with InsurTech Israel News magazine, he shared exclusive insights and perspectives for the readers.
In your view, what are the most significant trends shaping the future of InsurTech over the next decade?
Breading:
Demonstrating (financial) value – there will be a winnowing of winners and losers among Insurtechs with the winners being those that deliver quantifiable value to their re(insurer), MGA, or broker customers.
Addressing coverage gaps – embedded and parametric models will rely heavily on addressing risks that heretofore have not been covered by the industry. There will be other Insurtech entities that focus on specific lines and tailored coverages to expand the overall market.
New Insurtech MGAs – will continue to be launched to capitalize on the move towards more specialization. FULL INTERVIEW
A Lesson for Insurance From the Olympics | Insurance Thought Leadership
If, like me, you kept a weather eye on the Olympics while working Monday, you probably saw occasional images of an unlikely figure leaning back in a chair, looking like he was trying to take a nap amid the chaos around him. That was Stephen Nedoroscik, a member of the U.S. men's gymnastics team, who was readying himself for about 20 seconds of supremely important effort.
His four teammates were going to perform the first 17 routines that were part of the team competition. Then they were going to turn to Nedoroscik, the only American to ever win a world championship on the pommel horse, and ask him to bring them home on his specialty. At stake: the team's first Olympic medal in 16 years.
He delivered. Big time. His teammates knew it, too, long before they saw the score that put them well ahead of the fourth place team. They were jumping up and down even as he began his dismount, and they mobbed him as soon as they could get to him.
Social media mobbed him, too. My daughters tell me that for a while their various feeds were 80% about Nedoroscik.
Paul Carroll, editor-in-chief, Insurance Thought L
The Smart Workforce Pivot: Insurance’s Backdoor to Talent Acquisition
The dilemma in today’s labor market is real.
In 2023, the U.S. labor market had 9.5 million unfilled jobs. Yet there were just 6.5 million unemployed workers, according to the U.S. Chamber of Commerce. If every unemployed person found a position tomorrow, there would still be over two million open positions.
Finding talent today is a struggle at best. Finding talent within the insurance industry? As difficult as it comes.
Elevating the Customer Experience: Innovations in the Insurance Industry
In today’s rapidly evolving digital landscape, customer experience is paramount across all industries, including insurance. While traditionally viewed as a transactional service, insurance companies increasingly recognize the significance of fostering strong customer relationships. Insurance providers can meet and exceed customer expectations by prioritizing customer-centric approaches and leveraging innovative technologies, ultimately driving loyalty and retention.
By Jose Rivera, Director of Solution Consulting and Partnerships at Dyad