AI in Insurance
AI, Underwriting and the Coming Talent Gap | Insurance Innovation Reporter
AI and GenAI, when deployed effectively, can mimic the minds of our industry’s best underwriters and help all underwriters make better decisions, write better policies and protect the bottom line.
I spend a lot of time thinking about insurance and the things that drive the industry. How can carriers deliver consistent profitability and growth? What are the technologies insurers are turning to in their efforts to gain operational efficiencies and reduce costs? Where do these technologies intersect with the policy and claims lifecycle?
Jérémy Jawish is CEO of Shift Technology
Commentary/Opinion
How insurance ecosystems drive successful transformations
Harnessing Innovation: A go-it-alone approach to insurance modernization often falls short.
Insurers are grappling with a challenging terrain marked by a constricted reinsurance market and record loss severity.
Consider that the U.S. P&C insurance sector incurred $65 billion in catastrophe losses in 2023, according to AM Best. Globally, insured losses reached $118 billion.
In response to these conditions, insurers in the U.S. have been pulling back from some markets, tightening terms and raising rates. Consequently, policyholders are paring back their coverage. This contributes to a widening insurance protection gap and highlights the need for insurers to design products that effectively address rising risks and evolving policyholder demands.
Insurers are increasingly applying technological innovation to adapt. Advances in generative and predictive AI, IoT devices, aerial and satellite imagery, and modern analytics enable insurers to leverage real-time data to enhance risk management and deliver tailored solutions to policyholders.
In response to these conditions, insurers in the U.S. have been pulling back from some markets, tightening terms and raising rates. Consequently, policyholders are paring back their coverage. This contributes to a widening insurance protection gap and highlights the need for insurers to design products that effectively address rising risks and evolving policyholder demands.
Insurers are increasingly applying technological innovation to adapt. Advances in generative and predictive AI, IoT devices, aerial and satellite imagery, and modern analytics enable insurers to leverage real-time data to enhance risk management and deliver tailored solutions to policyholders.
Guidewire Chief Evangelist Laura Drabik is a frequent commentator on issues of innovation and insurance ecosystems in the P&C industry. She also leads the Guidewire Insurtech Vanguard program, which helps insurers learn about new insurtechs and how to leverage their capabilities efficiently. Drabik is the author of the Drabik Digest blog and the host of the InsurTalk podcast.
Telematics, Driving & Insurance
How IoT data transformed insurance profitability | Insurance Business America
With the rapid adoption of the IoT also reshaping the insurance landscape and transforming traditional risk assessment processes, it’s an innovative, if not complex, time for firms right.
Looking back to where it began, Matteo Carbone (pictured), founder and director of the IoT Insurance Observatory, points to the roots of IoT-driven insurance innovations in auto telematics, with early experiments starting over 20 years ago.
“The initial focus was on using telematics to offer discounts to safe drivers,” he said, referencing how insurers pioneered the collection of driving behavior data to refine pricing models. Over time, this evolved into a more sophisticated approach, where carriers began applying surcharges to high-risk drivers, leading to “far more accurate risk assessments.”
Case in point is Progressive, a leader in telematics, which used this technology to consistently outperform the US market. Between 2014 and 2023, Progressive’s private passenger liability portfolio has consistently achieved a significantly better loss ratio than the rest of the market. In 2014, Progressive’s loss ratio was five percentage points better than the competitors. This competitive advantage has increased over the years, reaching about 15 percentage points in 2022-2023, highlighting how data-driven insights can significantly enhance profitability.
Matteo Carbone, (pictured), founder and director of the IoT Insurance Observatory
Can telematics drive fairness in auto insurance by reducing bias?
Algorithms play a crucial role in determining everything from social media feeds to insurance premiums. However, as powerful as they are, these algorithms can inadvertently perpetuate biases, especially in auto insurance pricing. Traditionally, insurers rely on demographic markers and even credit scores to assess risk - variables that can unfairly penalize certain individuals and lead to discriminatory pricing.
Telematics, a technology that collects real-time driving data, offers a solution to this problem. By focusing on individual driving behavior, telematics provides a more accurate and equitable measure of risk. Instead of relying on broad demographic categories, insurers can now tailor premiums based on how safely a person drives, reducing the reliance on biased proxies to move towards fairer pricing models. This shift not only helps combat bias but also aligns with growing consumer expectations for personalization and transparency in insurance.
The evolution of telematics
Telematics, however, hasn’t always been a perfect solution. According to Joel Pepera (pictured left), director of core telematics data science at Arity, the technology has followed a three-stage evolution to reach its current state:
InsurTech/M&A/Finance💰/Collaboration
One Inc & JP Morgan: Revolutionising Insurance Payments | FinTech Magazine
Discover how One Inc and JP Morgan Payments are teaming up to transform insurance financial operations, ensuring seamless, secure, and swift transactions
Payment platforms are the backbone of the insurance sector, playing a pivotal role in managing premiums, claims and commissions. The interaction between insurers, policyholders and service providers hinges on these financial operations being efficient and reliable.
The fragmentation of payment systems, coupled with the rising demand for hassle-free, quick and safe payment methods, and the need to adhere to the latest financial norms have underscored the urgency to streamline these platforms.
Stepping up to this challenge, One Inc and JP Morgan Payments are joining forces to pave the way for a more cohesive payment structure.
Data Privacy
Trends in Data Breach and Privacy Risk | Insurance Thought Leadership
A new report on the cyber risk outlook by Allianz Commercial reveals that cyber claims have continued their upward trend over the past year, driven in large part by a rise in data and privacy breach incidents. The frequency of large cyber claims (>€1 million) in the first six months of 2024 was up 14% while severity increased by 17%, according to the insurer’s claims analysis, following just a 1% increase in severity during 2023. Data and privacy breach-related elements are present in two-thirds of these large losses. Overall, the total number of cyber claims in 2024 is expected to stabilize, following a 30% increase in frequency during 2023, which resulted in 700-plus claims.
The growing significance of data breach losses among cyber insurance claims is driven by a number of notable trends. A rise in ransomware attacks, including data exfiltration, is a consequence of changing attacker tactics and the growing interdependencies between organizations sharing ever more personal records. At the same time, the evolving regulatory and legal environment has brought an uptick in so-called "non-attack" data privacy-related class action litigation, resulting from incidents such as wrongful collection and processing of personal data – the share of these claims has tripled in value in two years alone.
"Non-attack" claims increase as privacy litigation ramps up
The rise in "non-attack" data privacy claims is the consequence of developments in technology, the growing commercial value of personal data, and a developing regulatory and legal landscape. For example, unlike the EU’s General Data Protection Regulation (GDPR), privacy regulations in the U.S. are less prescriptive and open to interpretation, while plaintiff lawyers are hungry for potential sources of revenue. This is creating a gray area that is ripe for class action litigation, the report notes.MORE
Michael Daum is global head of cyber claims for Allianz Commercial
Webinars/Podcasts/Interviews
CCC to Host Webinar on Emerging Automotive Industry Trends | FenderBender and ABRN
The webinar will address rising repair costs, changing customer expectations, and the complexities of modern vehicles.
CCC’s Senior Industry Analysts Kyle Krumlauf and Erik Bahnsen, along with guest speaker Rohit Makhijani, Principal Analyst at Forrester, will host a webinar to explore emerging trends that could transform the way claims are handled and repairs are managed. The webinar will delve into insights from CCC’s latest Crash Course Q3 Report.
The discussion will focus on rising repair costs, shifting customer expectations, and the increasing complexities of modern vehicles. Key topics will include the impacts of persistent inflation, labor shortages, supply chain disruptions, and the evolving landscape of vehicle affordability.
Participants can expect to gain valuable insights on several critical areas:
- Navigating Inflation: Strategies for mitigating rising costs across parts, labor, and administrative expenses.
- Handling Vehicle Complexity: Insights on managing intricate repair processes, including supplement approval and repair cycle times.
- Dealing with Supply Chain Disruptions: Approaches to handle parts shortages and streamline processes in the face of unpredictability.
- Responding to Customer Behavior: How changes in driving patterns, ADAS technology, and customer expectations are shaping the future of claims and repair.
The webinar aims to provide a comprehensive overview of the data driving these conversations and offer practical solutions for industry professionals.
Insurance Digitalization
Insurance Digitalization: Transformation Pending
The P&C Insurance Industry has yet to materially make the shift from analog to digital despite being one of the largest information and data rich sectors in financial services
By: Stephen Applebaum and Alan Demers
To be clear, this is not meant to insult the insurance industry – there is already more than enough of that.
In fact, we love the insurance industry. It has provided us with lucrative employment over our careers, allowed us to grow and learn, enabled us to forge many valued relationships and above all, actively assist the industry to serve customers and communities in times of need and stress. Its products and services are critical in managing risk for everyone and it is a pillar of all economic systems.
What we do hope to accomplish with this article is to spotlight the insurance industry’s glaring digital gap, especially in contrast to other industries. Often closely compared to financial services, specifically banking, insurance seems far behind. We consider what it may take to focus on and accelerate the shift from its legacy, analog-intense infrastructure to the digital world in which other segments successfully operate. Not only would such a shift improve business and operational results and elevate worker skillsets but it will help make insurance more visible to consumers, most of whom now live in a digital, virtual world.
SPECIAL CAUSE
Dragonfly Holiday Campaign 2024
The Dragonfly Foundation Chicago is a 501(c)(3) nonprofit dedicated to supporting local pediatric cancer patients and their families by offering strength, courage, and joy during the most difficult of times.
We do this by fulfilling day-to-day essential needs (brought to our attention through front-line staff at all eight of our area partner hospitals), such as gas cards, grocery cards, household essentials, toys, and more.
We create community - by providing opportunities for our families to enjoy sporting events, holiday outings, and fun experiences, which provide a distraction from their daily treatments. Our many hospital programs help our partner clinical teams to provide stellar, developmentally appropriate care, such as our hair loss kits and treatment-related stuffed animals.
While our chapter only started in March of 2020, we have already assisted over 400 families throughout the Chicagoland area and raised almost $600,000 to support our families. The demand for our services is growing and we look forward to continuing to make an impact on those affected by pediatric cancer.
Your support means the world – thank you for making an impact in a way that means the most to you!
Corporate and personal support welcome and appreciated
To learn more, visit Dragonfly Chicago
2024 In Review
Adrian Jones: Leaving Las Vegas
Leaving Vegas at dawn after 62 meetings over 3 days at InsureTech Connect. Observations:
1) There's as much activity as ever as the sector matures - from both young startups and big incumbents
2) The provocateurs were nowhere to be found. Have we over learned the lessons? Are we missing the swashbucklers who proudly know nothing about insurance except that it can be done better?
3) AI everywhere. And yet the whole sector struggles with basic data quality. As a general rule: the less sexy, the more useful.
4) Eight years since InsurTech became a thing, new enterprise grade software solutions are going head to head with incumbents, providing far more choice than before and forcing incumbents to step up their game. This is what is personally most exciting in my current role.
5) InsurTech MGAs are hitting growth curves with solid underwriting performance. Right after the tourist investors departed and wrote off the sector.
Moment of Truth at ITC Vegas: CCC Intelligent Solutions
🔮 How can insurers and repairers work together to elevate customer satisfaction? This question took center stage at InsureTech Connect, where we hosted an insightful panel discussion on findings from our Moments of Truth report.
Thank you to Jody from Root Inc., Arlo from Driven Brands Inc., and Michelle from Preferred Mutual Insurance Company for joining us and sharing their thoughts.
🔑 Key takeaway? There’s opportunity for insurers and repairers to work better together to create seamless customer experience and better customer satisfaction scores for all.
Download the Moments of Truth report here:
Insurance sector takes to AI for wide range of tasks
Commercial insurers and others in the sector are deploying artificial intelligence to meet various challenges, from process automation to ingesting data for underwriting, according to a panel of industry experts who spoke Wednesday at the annual Insurtech Connect conference.
The progress they are making, however, must be tempered by keeping human beings in the loop for all operations and not ceding too much autonomy to the technology, they said.
Mojgan Lefebvre, Boston-based chief technology & operations officer for Travelers Cos. Inc., said the insurance sector has been using artificial intelligence “for years,” but that use has recently increased dramatically, including in underwriting.
“What’s happened over the past couple of years … the exponential nature of it is just incredible. We’ve been using it in predictive analytics, pricing and all of that, and now it has found its way into customer service and underwriting,” Ms. Lefebvre said.
AI can perform routine, repetitive tasks like document searches and image processing much faster than humans and is being used to help ingest information during the underwriting process. The focus is on “automating anything that’s routine so that we can let our underwriters focus on their expertise,” Ms. Lefebvre said.
“It means the world of possibilities for insurance changes. … It is an exciting time,” Gary Hoberman, New York-based CEO and founder of technology company Unqork Inc., said of the myriad possibilities for AI to improve efficiencies in insurance.