AI in Insurance
Only trusted tech partnerships can hasten insurance AI innovation
The insurance industry often faces criticism for its reluctance to adopt new technologies. But now, Generative AI (GenAI) offers an unprecedented opportunity to streamline and automate everything from underwriting to claims processing.
Despite this, a significant challenge remains: persuading insurers and agents to trust this potent new technology.
Insurtechs, positioned at the intersection of innovation and tradition, have a vital role in fostering a collaborative GenAI future, but it all must be anchored in trust and transparency.
Insurtechs must spearhead honest discussions about the risks of delaying GenAI adoption. While legacy systems are familiar and deeply ingrained, they are also costly to maintain and hinder innovation.
Picture a scenario where underwriters spend countless hours sifting through data mountains to assess risk, only to be overtaken by competitors utilizing AI-powered systems that produce nuanced risk profiles in mere moments. This is not a distant future but the current reality confronting the insurance industry.
The answer lies in the inherent limitations of the old guard. Maintaining these systems continually drains resources, and security vulnerabilities are increasingly problematic. Legacy systems are becoming harder and more expensive to secure. More recently, cloud- and digital-native AI solutions can provide a way forward, seamlessly integrating with existing infrastructures, thus overcoming legacy system limitations and heralding a new era of efficiency and security.
By vividly illustrating these risks and presenting a compelling vision of AI's benefits, insurtechs can motivate early adoption and prevent insurers from falling behind.
Leandro DalleMule is global head of Insurance and general manager at Planck
Commentary/Opinion
Hiscox group CEO on what pricing tells policymakers
Pricing is insurers’ way of trying to change behavior, according to Hiscox group chief executive Aki Hussain (pictured).
In an interview with the Financial Times, Hussain pointed out that insurance companies seek to get their message across, particularly to powers that be who can limit building risks, by way of pricing adjustments.
He told the publication: “If you’re going to build on flood plains, it might well be problematic to get flood insurance… The only way we can really signal that – we can lobby, we can have conversations – but the most stark signal is ultimately through pricing.”
The FT noted that in the US, where insurance affordability has been an issue, Hussain’s camp is a major natural disaster insurer and would like to see better risk management via policymaking.
“Ultimately what you are trying to do through pricing is signal a change in behavior,” the CEO said.
Hippo CEO "proud" of decision to pause writing homeowners' insurance
“We are very fortunate we took that disciplined approach.”
Hippo Insurance’s decision to temporarily stop writing new homeowners’ insurance business across the US nearly a year ago received “mixed reactions” from the industry, according to its chief executive.
But in hindsight, Rick McCathron (pictured) said he has no regrets about pushing pause.
“With the benefit of hindsight, we are very fortunate that we took that disciplined approach,” McCathron told Insurance Business. “Because if you compare what has happened to other companies in the second quarter [of 2024], we have shown that the disciplined approach made a considerable difference in our earnings.
“I’m proud that we had the fortitude to make that tough call, and I’m also excited that it was ultimately a blip in time to allow us to continue to grow the business profitably.”
Research
Triple-I Blog | Insurance Industry Poised for Significant Hiring Surge
The insurance industry is poised for significant employment growth in the coming year, with over half of insurers planning to increase their workforce, despite ongoing challenges in recruitment and retention, according to a recent study by the Jacobson Group and Ward/STG Performance Benchmarking.
The Q1 2024 Insurance Labor Market Survey revealed that a slight majority of insurers (52%) is planning to increase staff in the next 12 months. This trend is particularly strong in the property/casualty (P/C) segment, where 53% of companies intend to expand their workforce, compared with 47% of life/health insurers.
Looking at specific lines of business, 66% of commercial lines P/C carriers are set to increase staff over the next 12 months, which is 32 and 16 points higher than personal lines and all lines carriers, respectively, the report stated. While 10% of insurers plan to decrease staff, 38% expect to maintain their current levels.
When it comes to company size, 53% of both medium (300 to 1,000 employees) and large insurers (over 1,000) plan to add staff, compared to 51% of small companies (under 300).
Telematics, Driving & Insurance
A View Into the Future of Car Insurance: When Driver Scores Replace Credit Scores
Offering a view into the future of auto insurance, the leader of a mobility data and analytics firm said during a recent interview that he foresees a time when drivers will know their driving scores and proudly share them.
“I believe that in the future, people will be taking their great driving score and they’ll be shopping it around to insurance companies,” Gary Hallgren, president of Arity, told Carrier Management, drawing comparisons to the availability of credit scores.
Arity, a B2B company with a mission of making transportation safer, smarter and more economical, does not currently provide scores it develops based on the frequency of distracted driving, speeding, sudden breaking or time of travel directly to customers. Instead, it uses driving behavior data to power services promised by third-party apps like Life360, a family driving network, offering crash detection, and GasBuddy, offering personalized features to optimize fuel consumption and map out efficient driving routes based on past driving behavior. Arity also delivers driving data insights and actual driving scores, derived from a customer’s actual driving data, to insurance companies under certain conditions. FULL INTERVIEW
Financial Results
State Farm reports Q2 results
State Farm released the Q2 2024 financial results for 12 of its P&C insurance carriers. The company reported a net underwriting loss of ~$5.7 billion for the first six months.
During the quarter, the group of companies reported a net underwriting loss of $4.35 billion, leading to a ~$5.7 billion underwriting loss for the first six month of the year. During the first six month of 2023, State Farm reported a net underwriting loss of $7.2 billion.
State Farm’s auto carrier saw the biggest improvement, going from a $4.85 billion loss in the first six months of 2023 to a $3.26 billion loss for the same period this year. The auto carrier increased written premiums by ~$5.34 billion (20%) YoY to a total of $31.8 billion.
In 2023, State Farm had a combined underwriting loss of $14.1 billion across its P&C companies, but it ended the year with a net loss of $6.3 billion thanks to investment income and positive results from its life insurance business.
InsurTech/M&A/Finance💰/Collaboration
InsurTech platform QuickFacts secures $2 million to continue North American expansion efforts
Halifax-based QuickFacts has raised $2 million CAD in seed funding to launch its insurance brokerage workflow platform in Québec and the United States (US).
The all-equity funding round was led by Sandpiper Ventures with participation from St. John’s, Nfld.-based Killick Capital, New York City-based fund InsurTech NY, and numerous angel investors, including Sparkasa Capital managing director Paul Hill, former Aviva managing director Phil Gibson, and former Marsh Canada managing director Neil Mitchell.
Rhiannon Davies from Sandpiper and Hill will each receive a seat on QuickFacts’ board, with another seat being added in the coming months, co-founder and chief revenue officer Jeff Barsalou told BetaKit in an email statement.
Founded in 2020 by Jeff and his wife, president and CEO Christy Barsalou, QuickFacts’ platform aggregates insurance-carrier underwriting information for brokerages, compiling it into a single searchable database that compares carrier information.
The startup said it currently employs 19 people and will use the capital to hire four additional employees that will help it complete its Canadian expansion, break into the US market, facilitate the addition of new product lines, and “explore possibilities with its vendor and carrier partners.”
YouSet Secures $3.5 Million in Seed Funding to Transform Canadian Home and Auto Insurance
YouSet, a rapidly growing Canadian Insurtech startup, has raised $3.5 million in an oversubscribed seed funding round to further its mission of simplifying and saving money on insurance for Canadians.
The company, which allows users to compare rates from major insurers in under four minutes, is also launching a groundbreaking feature that lets customers bundle home and auto policies from different providers, unlocking up to an additional 15% in savings.
This latest round of funding follows YouSet’s successful $2.1 million pre-seed round in 2022. The investment comes from a mix of returning investors, including Don Fox (former Executive VP at Intact), Neil Mitchell (former Managing Director at Marsh), Joe Canavan (Principal of Canavan Capital), and Nicolas Bouchard (Founder of DuProprio), as well as new strategic angel investors like Jim Texier (former Head of Big Data at AXA), Phil Gibson (former Senior VP at Aviva), and Dan Robichaud (serial entrepreneur and investor).
Founded with the goal of saving Canadians time and money, YouSet’s platform offers a seamless user experience that has already attracted over 250,000 users. On average, users save nearly 30% on their insurance premiums by comparing rates through YouSet. The newly introduced bundling feature takes these savings even further, allowing users to mix and match home and auto insurance from different insurers for the first time, with the potential to unlock up to 15% more in discounts.
Climate/Resilience/Sustainability
Can Climate Tech Save Insurance?
The future of the insurance industry is dependent 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, this growing threat may have surfaced at the perfect time to encourage the insurance industry to finally transform its legacy approaches to risk management and to position itself for the new economy.
Stephen Applebaum & Alan Demers
FEMA has run out of money in the middle of hurricane season
The agency also provided $6 billion in assistance to Texas residents who suffered losses after Hurricane Beryl, the first hurricane of the 2024 Atlantic hurricane season.
The Federal Emergency Management Agency (FEMA) has run out of disaster relief funding for the second year in a row before the peak of the Atlantic hurricane season has even arrived.
The agency, which is funded by Congress, uses the disaster relief fund to aid state and local governments in preparing and recovering from natural disasters including earthquakes, tornadoes, wildfires and hurricanes.
The DRF also provides financial assistance for the Individuals and Households Program which helps eligible disaster survivors with funding for temporary housing and other disaster-related expenses.
The United States has already faced 19 climate disasters this year with losses exceeding $1 billion each, according to FEMA.
Destructive wildfires, which began in late June, ravaged the town of Ruidoso, New Mexico, forcing thousands of residents to evacuate and leaving at least two people dead. The cost of damages due to the South Fork Fire was estimated at $1.2 billion, according to FEMA.
FEMA approved more than $2.4 million in funding for New Mexico homeowners whose homes were devastated by the fires and subsequent flooding.
Data Privacy
General Motors, OnStar at head of line in data trafficking suit
General Motors LLC and OnStar LLC are up first in what is likely to become a series of lawsuits brought by the state of Texas against companies sharing data about consumers' driving habits with insurers.
The Consumer Protection Division of the Office of Attorney General on Tuesday filed a deceptive trade practices original petition in Montgomery County against GM and OnStar. It alleges false, deceptive and misleading business practices related to the collection and sale of more than 1.5 million drivers' data to insurance companies without the consumers' knowledge or consent.
Causes of action under the Texas Deceptive Trade Practices Act include misrepresentations concerning the collection, use of and sale of OnStar Smart Driver driving data.
The state's action follows a June 2024 announcement by Attorney General Ken Paxton of the opening of an investigation into several car manufacturers regarding allegations they improperly collected mass amounts of data about drivers directly from vehicles and sold the information to third parties.
People
USAA chief executive Wayne Peacock retiring
USAA (United Services Automobile Association) president and chief executive Wayne Peacock (pictured) is retiring in the first half of 2025 after 36 years with the company.
Peacock joined USAA in 1988 and has since played a pivotal role in various capacities, including overseeing strategy, marketing, member services, technology, shared services, and corporate real estate. Before his promotion to CEO in 2020, he was president of USAA’s property & casualty insurance group.
The chief executive led the company through the challenges of the global pandemic, quickly transitioning USAA’s 36,000 employees to remote work within a week. With Peacock at the helm, USAA also raised its minimum wage above industry standards and enhanced benefits.
“Wayne has always answered the call to serve, and the board is thankful for his leadership,” stated retired Navy Vice Adm. Jim Zortman, board chair at USAA. “He is thoughtful and strategic and has never wavered in doing what’s right for the association.