AI in Insurance
Could GenAI free insurance companies from pilot purgatory?
Generative AI (GenAI) has taken the business world by storm, promising to transform industries with its potential $4.4 trillion impact on the global economy, according to McKinsey.
In data-intensive sectors like insurance, the allure of GenAI is particularly strong. Yet, many insurers find themselves trapped in “pilot purgatory,” where AI initiatives linger in experimental phases without scaling up or delivering significant returns.
The insurance industry stands at a critical juncture. While some companies have begun deploying GenAI for tasks like claims processing and underwriting automation, they’re often missing the bigger picture. To truly harness the transformative power of AI, insurers need a comprehensive strategy, that goes beyond isolated applications.
Why is the insurance industry stuck? A significant hurdle is the industry’s tendency to focus too much on the technology itself rather than the business outcomes it can achieve. McKinsey’s Cameron Talischi points out that insurers often spend excessive time testing and benchmarking tools like large language models (LLMs), even though the choice of LLM usually has a marginal impact on performance.
In claims management, GenAI can swiftly and accurately analyse vast amounts of unstructured data like medical records and legal documents. This accelerates the process, reduces human error, and improves customer satisfaction. For underwriting, particularly in property and casualty insurance, GenAI can extract critical information from submissions, helping underwriters assess risk more effectively and make faster decisions.
P&C executives discuss AI use, regulation in insurance with Triple-I and SAS
A new whitepaper from the Insurance Information Institute (Triple-I) and SAS takes the stance that property and casualty insurers are uniquely positioned to provide guidance to regulators and advance the conversation for ethical uses of artificial intelligence for all businesses.
“Pioneering Ethical AI: The Crucial Role of Property and Casualty Insurers” states that, as a first step, insurers should be expected to lead by example by developing detailed plans to deliver ethical AI in their operations.
“This will position them as trusted experts to help lead the wider business and regulatory community in the implementation of ethical AI,” the paper states.
According to the report, AI regulation is currently “fractured” and geographically based, mostly varying by state, but also by country.
Research
U.S. P&C Insurers Post Significant Underwriting Gain in H1 2024 - Risk & Insurance : Risk & Insurance
Rebounding from a $24 billion loss, the U.S. property & casualty insurance industry posted a $3.8 billion net underwriting gain in H1 2024.
The U.S. Property and Casualty (P/C) insurance industry witnessed a turnaround in the first half of 2024, recording a net underwriting gain of $3.8 billion, a stark contrast to the $24 billion loss in the same period last year, according to a new report from AM Best.
The industry’s recovery was primarily driven by an 11.3% growth in net earned premiums, which offset a 2.5% increase in incurred losses and loss adjustment expenses (LAE) and a 24.9% rise in other underwriting expenses, according to the report, titled “First Look: Six-Month 2024 US Property/Casualty Financial Results.” The personal lines segment was chiefly responsible for this improvement in underwriting results.
The industry’s combined ratio also improved, standing at 97.7. Catastrophe losses, which had significantly impacted the previous year’s results due to severe convective storm losses, accounted for 7.4 points on the six-month 2024 combined ratio, down from an estimated 9.7 points in the prior year, Best reported.
Drivers quickly learn to skirt limits set by partial automation systems
Drivers are more likely to multitask when using partial automation, and some manage to do so even while playing by the rules of the systems’ attention requirements, new research from the Insurance Institute for Highway Safety shows.
“These results are a good reminder of the way people learn,” said IIHS President David Harkey. “If you train them to think that paying attention means nudging the steering wheel every few seconds, then that’s exactly what they’ll do.”
Drivers were much more likely to check their phones, eat a sandwich or do other visual-manual activities while using Volvo’s Pilot Assist partial automation system than when driving unassisted, a monthlong study of driver behavior that IIHS conducted with the Massachusetts Institute of Technology’s AgeLab showed. The tendency to multitask also increased over time for some drivers as they grew more comfortable with the technology, while others were more distracted while using the system from the start.
Meanwhile, many drivers using Tesla’s Autopilot system quickly mastered the timing interval of its attention reminder feature so that they could prevent warnings from escalating to more serious interventions, another IIHS-AgeLab study found. Some people used this skill to continue engaging in distracting behaviors, punctuated by quick moves to stop the alerts.
“In both these studies, drivers adapted their behavior to engage in distracting activities,” Harkey said. “This demonstrates why partial automation systems need more robust safeguards to prevent misuse.”
More Homeowners Shop for Coverage but Most Stay Put
Homeowners and renters have faced insurance rates above the overall rate of inflation in 2024, according to the "2024 U.S. Home Insurance Study" from J.D. Power. Yet, while these rate increases are straining customer satisfaction and resulting in a sharp increase in the percentage of customers shopping for new policies, many are deciding to stay with their current policy.
“The average shopping rate among home insurance customers has climbed to a record high of 6.8% through the second quarter of 2024, up from 5.9% two years ago," said Breanne Armstrong, director of insurance intelligence at J.D. Power.
Thirty-seven percent of home insurance customers who saw their rates increase were likely to shop for a new policy, according to the report. Further, among those customers who saw a rate increase, customer satisfaction dropped to 594 on a 1,000-point scale—92 points lower than among customers who did not receive an insurer-initiated rate increase.
But while a record 6.8% of all home insurance customers are actively shopping for new policies, only 2.2% of homeowners switched policies as a result, down from 2.5% two years ago, the report said.
“Many shoppers have ended up staying put because there are so few alternatives available, but carriers need to recognize that steady rate increases put policy retention at risk and has a negative effect on customer satisfaction," Armstrong said.
In addition, bundling home and auto products has declined significantly in 2024 compared with 2023, with customers looking to switch auto insurance without switching their home insurance. Specifically, 21% of customers say they “definitely will" also switch their home insurance if they switch their auto insurance, which is down from 24% a year ago.
News
California bars insurance cancellations for 750,000 fire victims
California ordered home insurers to maintain coverage during the next year for 750,000 customers in four counties ravaged by wildfires that are still burning east of Los Angeles.
The moratorium blocks insurers from canceling or not renewing policies in areas affected by the Line, Airport and Bridge fires, the California Department of Insurance said Thursday. The protection covers policyholders regardless of whether their homes burned down.
The freeze on cancellations takes effect retroactively from the day last week when Governor Gavin Newsom declared a state of emergency in the region. Insurance Commissioner Ricardo Lara can block companies from denying coverage because of a 2018 law designed to provide temporary disaster relief to wildfire victims. Almost one million policies have been placed under moratorium this year alone, according to the insurance department.
“Wildfire survivors should not have to worry about insurance while they are recovering,” Lara said in a statement.
The threat of wildfires has upended the insurance market in recent years, with companies such as State Farm, Allstate, and USAA cutting back on coverage. Premiums have spiked for many property owners while others have struggled to find coverage at all. That’s resulted in a rapid growth of the state’s last-resort insurer, the FAIR plan.
Commentary/Opinion
Is Florida’s Home Insurance Market on the Road to Recovery?
For the first time in seven years, the Florida home insurance market is turning a profit and new insurance carriers have entered the state. Many industry insiders say this indicates that the recent legislative changes are working and the insurance market is showing signs of stabilization. However, with over two months left of what was initially forecasted to be a record-breaking hurricane season, many homeowners are wondering if the Florida homeowners insurance market is strong enough to withstand another hit.
“Heavy loss activity in Florida during the 2024 Atlantic hurricane season could have a negative impact on the market’s recovery,” says Mark Friedlander, director of corporate communications at the Insurance Information Institute, “but insurers are well-positioned with adequate levels of capital and reinsurance to weather the storms.”
Not everyone agrees that the Florida property market is approaching solid ground yet or that market stabilization will trickle down real savings to policyholders. Even in a healthy insurance market, home insurance premiums usually increase slowly over time. With the current average cost of Florida home insurance at $5,531 per year for $300,000 in dwelling coverage, most homeowners are hoping to see rates decrease drastically.
Regarding the market’s current state, Rep. Spencer Roach of Florida says, “I would categorize it somewhere between cautious optimism and wishful thinking. Only time will tell.”
InsurTech/M&A/Finance💰/Collaboration
Mitchell partners with PAVE
Mitchell International, an Enlyte company, announced a partnership with PAVE to automate vehicle inspections and condition reporting.
By combining Mitchell’s cloud-based appraisal platform and open data system with PAVE’s AI and guided image capture technology, organizations in the US and Canada can create condition reports from uploaded photos.
These reports will identify the vehicle damage and include estimated costs for parts, labor, repair or replace operations, and regional taxes.
PAVE’s AI solution integrates with the Mitchell Intelligent Open Platform, allowing flexibility for users to combine Mitchell’s technology with their own AI or third-party AI tools. This collaboration aims to improve workflow efficiency and quality in industries such as fleet management.
In the past, it was announced that Mitchell is working with Tractable, which uses AI to review images of damaged vehicles and provide repair cost estimates.
Tractable, with ongoing lawsuits against Mitchell’s rival, CCC Intelligent Solutions, has seen its CEO, Alex Dalyac, leave the company in June, while the other co-founder, Adrien Cohen, stepped down in October 2022 and now serves in an advisory role.
We reached out to Mitchell for a comment regarding the status of its partnership with Tractable, and they responded:
“No, there is no impact. Through our open platform, organizations can access machine learning and computer vision models from industry-leading, third-party AI providers including Tractable, PAVE, Claim Genius and Inspektlabs. Mitchell also offers its own AI—known as Mitchell Intelligent Damage Analysis—allowing auto insurers and collision repair facilities to select their AI provider of choice.”
Cerity Partners Welcomes Touchdown Ventures
The addition of Touchdown Ventures will expand Cerity Partners' offering to corporations and businesses, and deepen the firm's VC capabilities and expertise.
Cerity Partners, a leading independent wealth management firm in the U.S., announced today that it is merging with Touchdown Ventures (Touchdown), a leading provider of advisory services for corporate venture programs. Following the closing, anticipated in the coming weeks, Touchdown will operate as Cerity Partners Ventures (CPV) and integrate into the firm alongside Cerity Partners' broader service offerings.
Partnering with Touchdown will facilitate the expansion of Cerity Partners' offerings to corporations and businesses to include Venture Capital-as-a-Service (VCaaS) which aims to unlock access to external innovation through tailored venture capital solutions. The merger will also broaden access to innovative startups, while enhancing Cerity Partners' offerings to its private clients and expanding its footprint in key growth-oriented markets, including Philadelphia, Chicago, Los Angeles, and San Francisco.
"Our partnership with Touchdown Ventures comes during a period of significant growth for Cerity Partners and will be instrumental in deepening our offering to corporate partners," said Kurt Miscinski, CEO of Cerity Partners. "Touchdown's best-in-industry VC professionals, coupled with our shared fiduciary commitment to deliver exceptional service in our clients' best interest, make them an ideal partner. We couldn't be more excited to welcome the Touchdown team."
David Horowitz, Touchdown's CEO, noted, "Our relationship with Cerity Partners amplifies our team's ability to provide the best possible venture capital services for corporations seeking access to external innovation. This merger reinforces the commitment of our team to continue our mission, and I speak for my co-founders in saying that we are excited to keep doing what we are doing together with our new colleagues at Cerity Partners."
Park Sutton, A Waller Helms Company, Advises $1.5 Billion VC Manager, Touchdown Ventures, on Partnership with Cerity
A Waller Helms Company (“Park Sutton”), is pleased to have represented Touchdown Ventures (“Touchdown,” “TDVC” or the “Firm”) on its partnership with Cerity Partners (“Cerity”), a leading independent wealth manager with over $100 billion in client assets, headquartered in New York, NY. The combination adds more than 50 colleagues to the Cerity Partners team and a unique area of expertise in alternative investment strategies focused on early-stage and growth-oriented private investments.
Legal System Abuse/Social Inflation
"It's an industry problem": Is social inflation reshaping the insurance landscape?
Examining the impact of AI and social trends on global insurers
Social inflation has been around since 2015, according to research from Swiss Re, with subsequent liability claims costs rising by 16% over the last five years – and by a staggering 57% over the past decade. As social inflation continues to plague firms, questions still remain around the best practices companies can take to tackle any forthcoming challenges.
Speaking to IB, Erich Bublitz (pictured), head of excess & surplus at AmTrust E&S Insurance Services, said that this phenomenon, driven by rising insurance claims costs due to societal trends and legal changes, is especially evident in longer-tail lines of business like general liability and auto liability.
“Social inflation really impacts any part of the insurance industry that has liability coverage,” Bublitz said. “The longer the tail, the more social inflation tends to impact it, because just like interest rates compound year over year, so longer tail business, you see more of an impact.”
‘No one company can solve the problem. It’s an industry problem’
Here, AmTrust E&S focuses on underwriting complex risks, making it particularly vulnerable to the effects of social inflation.
“By definition, you end up with slightly more complex risks, risks that have some unique aspect to them, and the result of that tends to be more complex claims, more severe claims,” Bublitz added. “No one company can solve the problem. It’s an industry problem. If only one carrier is adjusting rates appropriately, they kind of price themselves out of the market.”
People
Paul Gange Joins the Boyd Group as Chief Operating Officer for U.S. Collision
"We’re excited to share that Paul Gange recently joined the Boyd Group as Chief Operating Officer for U.S. Collision. In his new role, Paul will oversee the Gerber Collision & Glass and Mobile Auto Solutions businesses, managing more than 830 repair centers across the United States.
Paul’s extensive background includes nearly 30 years of industry experience. He recently served as Vice President/General Manager of E-Commerce at OEConnection. He also served as the North American President for Advantage Parts Solutions, and was the co-founder, President and CEO of the Fix Auto USA franchise system from 2009-2020, when he and his partners sold the business.
Gange began his career in the automotive collision repair and claims business in 1996 at Mitchell International, and also served in executive positions with Solera.
We look forward to the valuable contributions Paul will bring to our continued success.
Gerber Collision and Glass
Scott Kohl Named VP of Operations for ProColor Collision U.S. - CollisionWeek
ProColor Collision, the collision repair services franchise, announced the addition of Scott Kohl as vice president of Operations for its U.S. operations.
Reporting to Scott Bridges, senior vice president, Fix Network USA, ProColor Collision, Kohl oversees the ProColor Collision Operations teams focused on Implementation & Support and Sales & Performance.
Together, these teams provide ongoing guidance and support to ProColor Collision franchisees, including ongoing training, branding, and all operational excellence support to grow skills and create efficiencies to help drive each location’s growth and success.
“ProColor Collision is experiencing steady growth in the United States thanks to the ongoing commitment of our support team and the dedication and drive of our long-term and newest franchisees,” said Bridges.
“Scott brings to the team a unique combination of experience in all aspects of the collision repair industry and has a strong history of creating solid relationships between body shop networks and insurance companies.”
With over 25 years of experience in the finance-insurance-collision industry, Kohl brings a wealth of knowledge and expertise to ProColor Collision. His experience as a current ASE Master Collision/Refinish Technician with I-CAR certification and his successful insurance industry career of increasing responsibilities with Safeco, Liberty Mutual, and most recently, Kemper Auto, give him a comprehensive understanding of all aspects of a collision repair business.