AI in Insurance
Gen AI shows potential for fighting insurance fraud
Generative AI has been used to fight back against cyber attacks against insurers, but it's also beginning to be used to catch and stop insurance fraud, industry professionals and experts say.
Catching fraud requires a workflow that includes machine learning, predictive modeling and rules engines, states Kimberly Harris-Ferrante, distinguished vice president analyst, Gartner. Gen AI is useful because, she says, "you're going to package multiple technologies to do the analysis, the workflow, the decision mean, the calculation of risk. And because these technologies are new, they're more simplistic in how they're being spun in the industry."
Insurers are becoming more concerned about Gen AI being applied to create fake images or content that can be used in claims, but their use of technology still has to catch up, according to Harris-Ferrante.
"A lot of insurance companies don't have modern fraud solutions. They're not running these state of the art AI-based fraud solutions," she said. "Mainstream insurance companies are still running some rules that a special investigation unit built, that could be running internally. We haven't seen any best in class yet."
Rather than using Gen AI to manipulate damage photos for claims, a bigger issue is its use for false identification of policyholders making claims. Synthetic IDs, which are fabricated identities that are not real people, are being used to make claims, as Karen Jennings, a special investigations unit manager at American Family Insurance, explains.
Commentary/Opinion
Insurance body calls nonprofit "a major impediment"
The American Property Casualty Insurance Association (APCIA) has released a strongly worded statement against Consumer Watchdog following a ‘disappointing’ development.
Having met the minimal threshold requirements, Consumer Watchdog was found eligible to seek compensation in California Department of Insurance proceedings as an intervenor for the next two years. The eligibility comes despite several concerns raised by the insurance industry and government officials alike.
Common questions include: “How does Consumer Watchdog represent consumers when they have no members in their organization? If Consumer Watchdog has no members, and no voters they are accountable to, then who watches the ‘Watchdog’? Does Consumer Watchdog’s intervention serve as a positive for consumers, or does it result in unnecessary delay?”
It was noted that the nonprofit submitted a response to public comments in July, initially failing to provide a description of the relevant work it conducted. An additional submission was made upon scrutiny, and Consumer Watchdog was also urged to provide more information upfront in subsequent requests.
In response to the matter of eligibility, APCIA assistant vice president for state government relations Laura Curtis had this to say: “We are disappointed that Consumer Watchdog, which admits having zero consumer members, will be allowed to continue its self-interested efforts that are contributing to California’s insurance crisis.
Analysts predict P&C industry could once again weather an economic recession
Amid market volatility and economic uncertainty following last week’s poorly received jobs report, Insurance Insider recently analyzed what could happen to the property and casualty insurance industry if a recession occurred.
The analysts surmise that the industry could “weather a recession” but only if loss costs and reserving pressures don’t worsen.
The article notes that, over time, the economy has become more dependent on services rather than historical trends of a smaller industry and capital base that were interlinked.
“This shift has played out differently in personal lines cycles versus commercial lines and reinsurance,” the article says. “Even within those segments, trends and results could be very different.”
Looking back to recessions in the early 1990s, early 2000s, the Great Recession, and the COVID-19 Recession, the overall P&C industry outperformed the S&P 500 three out of four times.
Lurah Lowery
Online Car Auctions | Repairable & Used Cars - Copart Blog
Auto Insurance Differences for Electric Vehicles
Major technological changes in one industry often cause ripples that bring big changes to the businesses that support that industry.
Electric vehicles (EVs) represent the leading edge in automotive technology, and auto insurance companies treat them differently from the traditional internal combustion engine (ICE) vehicles. These differences can affect auto repair shops, tow truck operators, salvage yards along with consumers. Let’s look at some of these changes.
More Likely to Be Declared a Total Loss
Since EVs require more time and expense to repair, insurance companies tend to declare them total losses more often. Damages that would be a simple claim on a traditional vehicle can send electric vehicles to salvage auctions, like Copart’s.
In addition, insurance adjusters are often less familiar with EVs than they are with traditional ICE automobiles. So, it can be more difficult to accurately estimate repair costs and vehicle values.
Accidents Can Be Much More Complicated
First of all, EVs accelerate with 100% torque at zero idle. This means rather than the gradual build in power most drivers are used to, EVs take off like a rocket. If the driver doesn’t know how to control that sudden burst of power, they might hit another vehicle or obstacle.
EVs also weigh more than traditional cars, sometimes up to twice as much. A heavier car with massive acceleration causes more damage when these accidents happen. What would be a fender bender between two traditional vehicles can be severe when an EV becomes involved.
Different Handling When Damaged
After an accident, EVs require special handling for transportation and storage. EVs should be towed on flatbed trucks and not free-wheeled or towed behind a tow truck. The moving tires on an EV can generate current, which can cause fires and even explosions in a damaged EV.
The lithium-ion batteries that power EVs can leak, burst into flames or even explode days after an accident. So, storage facilities need to monitor them for rising heat and possible chemical leaks. When fires occur, they require massive amounts of water and special techniques to extinguish. EVS often need to be quarantined from other vehicles for a few days after they arrive at a storage location.
Flood damage brings different risks at well. EVs flooded by fresh water can short out. After saltwater flooded Florida last year, we noticed some of the recovered EVs could combust up to 21 days after they were picked up due to ongoing corrosion and delayed chemical reactions.
News
Auto Insurance Rose 15% in First Half of 2024
Personal auto insurance rates rose 15% in the first half of 2024, according to data analysis from Insurify. The average annual premium now costs $2,329. By the end of the year, Insurify predicts that rates will have increased a total of 22%.
Maryland currently has the highest personal auto rates in the U.S., with an average of $3,400 annually. New Hampshire has the lowest, at $1,000 annually. However, California, Missouri and Minnesota are predicted to see auto insurance costs increase by more than 50% in 2024.
2024's rate increases continue the trend set in 2023, which saw premiums rise by 24% after insurers experienced record underwriting losses of $33.1 billion in 2022. While underwriting losses decreased to $17 billion in 2023, the hit was still enough to drive 2024's first-half increases.
One factor contributing to losses is vehicle maintenance repair costs—which have increased by nearly 38% over the past five years, according to data from the U.S. Bureau of Labor Statistics. While safety technologies can help drivers avoid crashes and the related premium increases, they're also expensive to repair. Advanced driver assistance systems (ADAS) can add up to 37.6% to the total repair cost after an accident, according to AAA data, and minor damages to front radar and distance sensors can add up to $1,540.
These costs are compounded by the increasing usage of expensive-to-repair electric vehicles, auto mechanic backlogs, and vehicles getting older as Americans hold onto their cars for longer. Average vehicle ages reached a record 12.6 years in 2024, according to S&P Global Mobility.
Increasingly severe and frequent weather events are also driving rate hikes. For instance, Minnesota experienced $1.8 billion in damages following a series of hail storms in August 2023, contributing to a 55% increase in rates. Hail-related auto claims represented 11.8% of all comprehensive claims in 2023, up from 9% in 2020, according to CCC Intelligent Solutions.
California Insurance Commissioner Lara Moves to Implement New Insurance Rate Review Process - CollisionWeek
Consumer group raises concern over new process.
California Insurance Commissioner Lara on August 8 issued a Bulletin implementing rate review reforms aimed at stabilizing the state’s insurance marketplace.
This accomplishes reforms that were included in budget trailer language that Governor Newsom introduced in May, and which were first proposed by Commissioner Lara last year as part of his Sustainable Insurance Strategy.
Commissioner Lara issued the Bulletin under his existing Proposition 103 authority to help the Department conduct a rigorous and transparent review of rate change applications within the current 60-day timeline prescribed under Prop. 103 more than 30 years ago. At the core of the Bulletin, the Department seeks to increase the transparency and speed of rate change application review and approval times in ways that are beneficial to consumers, the Department, and the insurance market. Also, as part of this reform, the Department will create a “data reconciliation tool” as a check that insurance companies must complete upon submitting their rate applications to the Department for review.
According to Lara, “Consumers benefit from a thorough and transparent rate review with more insurance products and greater availability of coverage. Today, I am strengthening my Department’s ability to enforce timelines set more than 30 years ago under Proposition 103. Reducing unnecessary delays is critical to getting our state’s insurance marketplace back on track.”
Governor Newsom said, “We’ve been working closely with the Insurance Commissioner and fully support these actions to modernize the rate application processes, consistent with the timelines outlined in Prop 103. It’s part of the state’s larger package of solutions to ensure Californians have adequate access to insurance and combat market exodus that hurts consumers. These are the actions necessary to address California’s insurance crisis.”
Consumer groups raised concerns about the rate change process detailed in the bulletin.
InsurTech/M&A/Finance💰/Collaboration
Mulberri expands COI platform to target P&C B2B partners
Mulberri is promoting its Certificate of Insurance (COI) Platform to P&C B2B partners, with a focus on reaching insurance carriers and brokers. The platform offers key features such as COI creation, administration, renewals, as well as reporting and compliance tools.
This is an extension of Mulberri’s original mission to enable HR, benefits, and payroll providers to offer a variety of insurance products to their SMB customers. The coverages offered include workers’ comp, cyber, and BOP.
Founded in 2021, the California startup raised $17.5 million but has seen its team shrink by 27% over the past year, leaving it with 11 employees, according to LinkedIn. In February, Co-founder and Chief Product Officer Imam Sheikh, along with Vice President of Engineering & AI Moiz Dohadwala, departed to build a network security company called ArmorxAI.
Investors include Altamont Capital Partners, Eos Venture Partners, Hanover Technology Investment Management, and MS&AD Ventures.
Deloitte Partners with Autonomy to Launch Autonomy Data Services (ADS), Driving Innovation in EV Subscription Market - ESG News
Listen to this story:
- Autonomy pivots to a SaaS business, launching Autonomy Data Services (ADS) with Deloitte.
- ADS secures $2.5M in new funding, completes a $32M debt-for-equity swap, and acquires key assets for a new business model.
- The vehicle subscription market is set to grow, with ADS leading the charge in innovative digital mobility solutions.
Autonomy, the leading EV subscription company, is transitioning from vehicle subscriptions to a SaaS model with the launch of Autonomy Data Services (ADS).
Partnering with Deloitte, ADS aims to expand its market reach, leveraging Deloitte’s vast network and expertise. “This partnership positions ADS at the forefront of the evolving vehicle subscription market, enabling the provision of innovative solutions without the burden of debt or residual risk,” said Scott Painter, founder of ADS.
ADS has secured $2.5 million in new funding and completed a $32 million debt-for-equity swap. This financial boost, combined with the acquisition of key assets from companies like Shift, Canvas, UberXChange Leasing, and Fair, forms a solid foundation for ADS’s new business approach. The acquired assets, valued between $10 to $12 million, include vital intellectual property such as brand names, domain IP, compliance frameworks, and technology codebases.
The vehicle subscription market is on the rise. By 2024, it’s expected to be valued at USD 4.52 billion, with a projected growth rate of 34.2% CAGR, reaching USD 35.49 billion by 2031. This shift reflects consumer preferences for flexible, all-inclusive plans over traditional ownership. A 2024 Deloitte study highlights that 45% of US consumers are reconsidering vehicle ownership, with 28% of younger adults preferring subscription services.
Claims
Debby’s Florida Claims Already Near 12,000 as Yaworsky Says Market is Strengthening
The number of Florida claims from Hurricane Debby, filed within five days of the storm, already is almost half of the the number of claims filed in Hurricane Idalia in a three-month period.
Debby claims by Friday had reached more than 11,900, the Florida Office of Insurance Regulation reported after compiling required data from property insurers. Idalia, which pummeled the same region of the state in 2022, produced 25,047 claims by Nov. 16, 10 weeks after landfall.
William Rabb is Southeast Editor for Insurance Journal. He is a long-time newspaper man in the Deep South; also covered workers' comp insurance issues for a trade publication for a few years.
Generali CEO: Catastrophes, Claims Inflation Dent Property/Casualty Result as Life Soars
Assicurazioni Generali S.p.A. saw strong first-half growth and profit in its life insurance and asset management businesses while the property/casualty segment was hit by claims and economic inflation, the group's chief executive officer said.
Generali is seeing rising claims inflation across all P/C markets as well as higher natural catastrophe losses, CEO Philippe Donnet said in a conference call.
The first-half result included positive contributions from recently acquired Liberty Seguros and Conning Holdings Ltd., Donnet said. These contributions strengthened Generali's efforts to boost its insurance operations and Europe and build a worldwide asset management effort, he said.
Current price: Second-quarter net result fell to €797 million ($870.2 million) from €1.04 billion a year ago.
Current price: For the first half, net result fell to €2.05 billion from €2.24 billion. Gross written premiums rose to €50.14 billion from €42.24 billion. The combined ratio worsened to 92.4 from 91.6.
The lower result was affected by capital gains and other one-off items including a London real estate disposal, Donnet said.
GWP rose 26.6% in the life segment and 10.5% in P/C.
In P/C, the operating result fell 6.7% on higher natural catastrophe losses and a lower benefit from discounting.
Generali has implemented pruning and claims management measures to improve the P/C segment, said Group General Manager Marco Sesana in the call. For this reason, the group recorded lower growth in the motor line in Italy and France, he said.
Legal System Abuse/Social Inflation
Is Social Inflation to Blame for High Insurance Rates? | Bankrate
Discover the causes and impact of social inflation on rising insurance rates, including attorney tactics and economic factors.The escalating rates of auto and home insurance have left some policyholders reeling and looking for answers. Like a relentless game of hot potato, insurance industry stakeholders have pointed their fingers in several directions, shifting blame to rising reinsurance costs, climate change and price gouging on vehicle repairs and home rebuilding costs. However, others claim social inflation is the culprit.
Confused yet? You’re not alone. If you’re unsure what social inflation is and why insurance companies are finding it increasingly challenging to balance profits and affordability, Bankrate insurance experts are here to explain.
What is social inflation?
Warren Buffett, former chairman and CEO of Berkshire Hathaway, is credited with coining the term social inflation in 1978. In a letter to Berkshire Hathaway stockholders, Buffett justified rate increases due to “a broadening definition by society and juries of what is covered by insurance policies.” Fundamentally, this definition still holds true.
Social inflation refers to the increasing costs of insurance claims expanding beyond the rate of general economic inflation. Director of the Insurance Journal’s Academy of Insurance Patrick Wraight states this phenomenon is “one of the reasons that liability claims continue to get larger and a reason why more people should consider raising their limits of insurance on their liability policies.”
Several economic mechanisms and societal factors are forcing more auto and home insurance claims — and larger jury awards if these claims end up in court. Increases in litigation contribute to higher insurance rates and can result in policyholders paying out of pocket for liability losses that exceed the limits of their policies.
OEMs & Auto Insurance
Electric vehicles: The rising risk for insurers
Electric vehicle sales in the U.S. saw an increase of 60% year over year from 1 million in 2022 to 1.6 million in 2023. By 2030, the National Renewable Energy Laboratory predicts there could be 30 million to 42 million EVs on U.S. roads.
But EVs cost more to insure – an average of $44 per month more than an internal combustion engine vehicle, according to the National Association of Insurance Commissioners.
What’s behind those higher car insurance rates was the topic of a recent webinar by the Society of Insurance Research.
One reason for the higher rates is the severity of EV auto claims, said Xiaohui Lu, vice president, global business development with LexisNexis. The severity of EV auto claims is 34% higher than that of ICE vehicle claims, he said. In addition, those who switch from the ICE vehicle to an EV have a 31% higher post-switch loss cost than those who switch from one ICE to another. Those who switch from an ICE to an EV have a higher collision risk, with a 14% greater severity and frequency of claims.
Driving an EV is different from driving an ICE, and that is one factor in higher auto insurance claims for EV drivers said Jonathan Atteberry, Lexis Nexis senior director, data science.
Electric vehicles are generally wider than ICEs, and have a higher torque/weight ratio. EVs also have an immediate and strong acceleration. All of this adds up to a higher collision loss cost.
“It takes time to adapt to the distinctive driving experience of EVs,” he said. “The vast majority of those who are buying EVs are buying their first EV – drivers have to get used to them and adapt to them.”