AI in Insurance
Report: AI boosts insurtech market, but deepfakes a risk
AI-focused insurance technology has bolstered the global insurtech market, but the risks of deepfakes in fraudulent claims and the exclusion of potential customers by AI models presents challenges.
Gallagher Re, the reinsurance broker, has released its Global InsurTech Report for Q2 of 2024, which outlines the impact AI driven technologies are having on insurance markets.
According to the report, global financing for insurtech firms rose 40% in the second quarter from the previous three months, with around 33% of total insurance tech funding in the second quarter going into AI-focused businesses. Over Q2 of 2024, funding in the insurtech space reached $1.27 billion (£992.8 million), the highest level since Q1 of 2023.
This surge in funding is closely linked to the boom in AI technology. Insurtech firms are utilising AI tools to more effectively process claims, evaluate risk, process contracts, and underwrite policies, as well as automate tasks and cut costs.
News
A Closer Look: Unveiling the Global Impact of CrowdStrike Event
CrowdStrike, a leading cybersecurity technology provider, offers a range of products and services, including endpoint detection and response (EDR). EDR monitors traffic passing through computer systems to protect against malicious files, viruses and malware. In its last earnings report, CrowdStrike reported a total of nearly 24,000 organization customers, including nearly 60% of the Fortune 500.
On July 19, at 04:09 am UTC, CrowdStrike released a "Rapid Response Content" update to its EDR tool dubbed “Falcon,” sitting on Microsoft Windows devices.
CrowdStrike uses Rapid Response updates to adapt to the changing threat landscape quickly. Unfortunately, this update contained a software coding flaw that caused Microsoft devices to crash, leading to the infamous "blue screen of death." CrowdStrike promptly reverted the update and introduced a fix, but the impact was significant.
The CrowdStrike event highlights the potential severity of digital supply chain interconnectedness, as it disrupted not only CrowdStrike's customers but also propagated through third-party networks, impacting the resilience of seemingly unrelated industries. However, in the immediate aftermath we observe that insurers are carefully considering the implications of this event and continuing to support their clients with unchanged coverage, thus demonstrating the resilience of the cyber insurance market.
Following this incident, Guy Carpenter has estimated the losses and evaluated the implications for underwriting considerations and catastrophe risk management.
Financial Results
GEICO ends Q2 with $1.78 billion profit
GEICO ended the second quarter of 2024 with a $1.78 billion underwriting profit, a significant increase compared to the same quarter last year.
For the first six month of 2024, GEICO reported $3.7 billion in pre-tax underwriting earnings, compared to $1.2 billion for the same period in 2023.
The underwriting profit reflected higher average premiums per auto policy, lower claims frequencies and improved operating efficiencies compared to 2023, partially offset by a rise in average claims severities and less favorable development of prior accident years’ claims estimates.
Premiums written increased $1 billion (10.7%) in the second quarter and $1.7 billion (8.9%) in the first six months of 2024 compared to 2023, reflecting an increase in average written premiums per auto policy of 11.3%, primarily attributable to rate increases, partially offset by a 4.3% decrease in policies-in-force over the past year. The rate of decline in policies-in-force slowed in the first half of 2024, driven by increased new business and higher retention rates.
GEICO’s loss ratio was 74.1% in the second quarter and 73.3% in the first six months of 2024, decreases of 10.2 percentage points and 10.4 percentage points, respectively, compared to 2023.
Progressive sees doubling of losses in property segment
Progressive Insurance (formally The Progressive Corporation) has released its shareholder report for the second quarter of 2024, revealing a more than doubling of losses for its property segment.
In the three months ended June 30, Progressive’s pretax profit from personal lines (personal auto and special lines) amounted to $1.57 billion, a surge from 2023’s $55.3 million. Its commercial lines business, meanwhile, contributed $303.8 million in pretax profit, improving from $87.2 million last year.
The property segment, however, suffered bigger losses compared to 2023. The business – which writes residential property insurance for homeowners, other property owners, and renters, and umbrella insurance – posted a $487.8 million pretax loss in the quarter, a worse showing than 2023’s $206.8 million pretax loss.
Progressive’s total underwriting operations improved from a pretax loss last year worth $64.3 million to $1.39 billion in pretax profit this time around.
InsurTech/M&A/Finance💰/Collaboration
The world's top 150 insurtech companies: 2024
The insurance industry is finding itself in the midst of major disruption, with a slew of companies — ranging from richly-valued firms to young startups — seeking to disrupt the market with innovative, tech-based solutions.
This wave of innovation is what is today referred to as insurtech, short for insurance technology. An offshoot from fintech, this nascent but fast-growing field aims to replace some of the manual processes traditionally attached to insurance that are seen as cumbersome — such as processing claims, comparing quotes and underwriting — with digital technology.
To assess the companies shaping the future of the insurance industry, CNBC, together with the market research firm Statista, has compiled The World’s Top Insurance Companies 2024 report. The report lists the top 150 insurtech companies globally, and includes firms from a variety of market categories, from digital insurers to claim and fraud management services. Each segment table is unranked, and the companies are listed in alphabetical order.
Global adoption of insurtech is growing. But the space hasn’t been without its challenges. In the first quarter of 2024, total venture capital investment in insurtech startups slumped 18% year-over-year to $900 million, marking the lowest level in nearly six years, according to CB Insights.
Broker M&A activity, size of deals decrease: Sica Fletcher
The number of mergers and acquisitions slid 6.9% through the first half of 2024, but the size of those deals fell much further compared with the first half of last year, according to a report Tuesday from Sica Fletcher LLC, an insurance M&A advisory firm.
The Sica Fletcher Agency & Broker Buyer Index tracks 22 of the most active acquirers in the insurance brokerage sector, the report said.
Deals in the index accounted for 70% of all deal activity in the agency and brokerage sector through June 2024, Sica Fletcher said.
Those firms tracked in the index acquired 242 agents and brokers through June 2024, down from 260 through June 2023. “Investors continue to be more selective when evaluating acquisition opportunities,” the report said.
Deal sizes slipped more precipitously, however, as buyers acquired $635 million of agency and broker revenue, approximately 45% less than what was acquired through June 2023, the report said.
The average revenue of acquired agencies through June 2024 was $2.63 million, 41% less than the $4.46 million through June 2023.
BroadStreet Partners Inc. was listed as the most active acquirer with 46 deals, compared with just 26 in the year-ago period. Hub International Ltd. was the second-most-active acquirer with 27 deals, off one from 28 a year ago; and Inszone Insurance Services Inc. was third at 24 deals compared with 18 a year ago, according to report data.
Flume Partners with Amica Insurance to Help Homeowners Prevent Costly Water Damage with Smart Leak Detection
Flume, a pioneer in residential leak detection technology, is excited to announce a new collaboration with Amica Insurance. By utilizing an advanced smart leak detection device, homeowners can significantly mitigate the risk of catastrophic water damage caused by leaks. The Flume Smart Water Monitor system provides a proactive, digitally driven approach to leak detection, reducing water damage claim cost by up to 80%. Increasing the adoption of this technology can help homeowners avoid the financial burden and disruption of preventable flooding.
"1.3 million U.S. homeowners experience water damage annually, leading to substantial financial and emotional stress," said Eric Adler, CEO of Flume. "To repair these homes, insurers spend $15B per year on water damage claims which represents 24% of total homeowner insurance claims. By promoting the use of smart leak detection, Flume aims to lower the frequency and severity of these claims. Additionally, this initiative will contribute to water conservation efforts in regions facing water scarcity, as leaks waste an estimated one trillion gallons of water each year."
"Flume has been a valued partner of Amica for three years, and we are thrilled to advance our water loss mitigation efforts together," said Laurie Tremblay, Senior Innovation Analyst at Amica. "Water leaks are a leading cause of preventable insurance claims. With Flume's cutting-edge technology, we can empower homeowners to gain better insight into their water usage and proactively prevent water damage."
Competitive Data Builds Competitive Moats for InsurTech Porch
The insurance industry, long perceived as a slow-moving behemoth, is experiencing a seismic shift thanks to the emergence of InsurTech companies.
These tech-driven firms are revolutionizing the way insurance is bought, sold and managed, bringing unprecedented levels of efficiency, customer satisfaction and innovation to the sector and signaling its digital transformation and positioning within the connected economy.
But smaller InsurTech startups are still subject to the same volatile macro events that their policyholders and peers must deal with.
And on Tuesday’s (Aug. 6) second quarter 2024 earnings call, the homeowners insurance and vertical software platform Porch stressed both its nimbleness and the unavoidable occurrence of catastrophic events.
“The team delivered a solid performance this quarter. Despite a May hurricane-like event in Houston with 100 miles per hour sustained winds that caused catastrophic weather claims worse than historic experiences and expectations, our results are still broadly in line with plan and showed solid year-over-year improvement. Our insurance profitability actions continued to result in attritional losses performing better than anticipated and substantial improvement in our gross combined ratio year-over-year,” Matt Ehrlichman, CEO, chairman and founder of Porch, said during the call.
The company reported total revenue of $110.8 million for the most recent quarter, an increase of 12% or $12.1 million compared to the prior year (second quarter 2023: $98.8 million), driven by the insurance segment, including a 28% increase in premium per policy and lower reinsurance ceding.
Dealer groups invest in AutoComplete’s AI tech platform for auto insurance
AutoComplete has completed a financing round to further its expansion and development of an artificial intelligence-based, according to The Presidio Group, which advised the company in the deal.
Presidio said the SAFE-structured capital raise, led by Bain Ventures and FM Capital, included seven new strategic dealership group investors — AutoNation, Butler Automotive Group, Flow Automotive, Ken Garff Automotive Group, Mills Automotive Group, OREMOR Automotive Group and Pohanka Automotive Group.
Presidio was also an investor in the round. The amount raised was not disclosed.
“The market potential for AutoComplete’s turnkey auto insurance platform is tremendous,” AutoComplete co-CEO Ahmed Khaishgi said, “and the backing from major dealership groups further validates our ability to grow and become an entrenched part of the automotive retailing ecosystem.”
Khaishgi, who previously launched insurance technology platform SquareTrade and oversaw its 2017 sale to Allstate, co-founded San Francisco-based AutoComplete in 2021.
AutoComplete is designed to let dealers streamline internal operations and monetize the vehicle insurance process within their dealerships, without disrupting a car sale. The platform shops for the most competitive insurance offers based on a customer’s specific requirements to speed up the shopping process and save money.
“AutoComplete helps dealers solve a pain point that often emerges late in the vehicle-buying process: Does the consumer have insurance lined up to cover his or her new purchase?” Presidio managing director Keith Style said.
“The technology can help dealerships build out a brand-new profit stream — the ‘I’ in F&I — with minimal effort. The dealers who signed on as investors in this financing round clearly saw the value of AutoComplete’s solution.”
People
CCC Names Justin McWhirter as Chief Information Officer | CCC Intelligent Solutions
Amazon Web Services Alum to Enhance Day-to-Day Operations, Accelerate Innovation and Drive AI Initiatives
CCC Intelligent Solutions Inc. (CCC), a leading cloud platform powering the P&C insurance economy, announces today the appointment of Justin McWhirter as chief information officer (CIO) following the retirement of CIO Bill Rocholl, who held the position since 2013. McWhirter will oversee the company’s IT operations, enhancing the day-to-day operations of existing applications, while also accelerating the pace of innovation and driving AI initiatives for CCC and its customers.
McWhirter joins CCC from Amazon Web Services (AWS) where he led a team of solution architects and collaborated with key stakeholders across the organization to create and scale programs at a global level. At AWS, McWhirter provided counsel on migrations, modernization, and strategic technical decisions, re-architected data processing platforms using cloud best practices, and worked closely with customers to implement innovative solutions. His leadership and strategic vision fostered continuous improvement and technological innovation, contributing to the advancement of cloud technology initiatives and customer acquisition.
“Justin’s proven ability to leverage technology for impactful results, along with his expertise in optimizing existing systems and his forward-thinking approach for scaling innovation, make him an exceptional addition to our leadership team,” said John Goodson, chief product and technology officer for CCC. “His expertise will be crucial as we continue to improve our day-to-day operations while helping customers reimagine what is possible. Justin’s leadership will play a key role in our mission to make ‘life just work’ better for our customers and the millions involved in auto claims and repairs each year.”
Canada
Revealed – insurers adding auto insurance surcharges
Canadian insurers are adding surcharges to auto insurance policies amid the country’s vehicle theft crisis.
In her Driving.ca column, Lorraine Sommerfeld listed CAA, Aviva, Pafco, Economical/Definity, and Chubb as carriers that have passed on the costs of auto theft to consumers.
Here’s how much insurers are adding to auto insurance policies on certain vehicles:
CAA – a surcharge of $1,500 unless car owners take recommended actions
Aviva – a $500 surcharge on high-target cars if a TAG or KYCS system (not subsidized) is not installed
Pafco – a $1,500 surcharge that can be removed by having a TAG system (subsidized)
Economical/Definity – a $500 surcharge if policyholders opt out; TAG system free or subsidized
Chubb – a $500 surcharge, with TAG systems either free or subsidized depending on the vehicle
Sommerfeld also noted that Intact has taken action beyond the common surcharge.
Podcast
One Inc CEO: Insurance Market Is Ripe for Embedded Payments
In the connected economy, there are simple business models (think subscriptions), complex business models (think platforms like Uber), and then there’s insurance.
The insurance sector is so large and complicated that it’s hard to get a read on how big it is. Some estimates put it at $12 trillion cutting across health ($1.3 trillion), property and casualty ($1.5 trillion) and auto ($652 billion). And that’s just three categories.
In terms of “pay and get paid,” take a simple auto accident. Funds flow as consumers pay premiums to insurance companies. Funds flow as insurance companies pay one another. Lien holders must be paid off in order to satisfy the terms of car loans. Adjusters, brokers and suppliers are all stakeholders, too. Things get even more complicated when there are multiple vehicles involved in a crash or multiple payment modalities in the mix.
“Insurance is one of the most complex markets on the planet,” One Inc CEO Ian Drysdale told PYMNTS, adding it is sorely in need of a digital overhaul — and there are still $500 million worth of paper checks flowing in the United States alone.
The goal is for providers such as One Inc to turn those paper payments into electronic ones, automatically reconciled in various back offices. In the meantime, the emergence of the company’s digital payments network, linking far-flung stakeholders, also improves the user experience, he said.