AI in Insurance
Eighty Percent of Organizations Don’t Have a Dedicated Plan to Address Generative AI Risks, According to New Riskonnect Research
Cybersecurity, AI, and geopolitical risk are top enterprise threats, yet data uncovers key gaps in companies’ risk management strategies
Cybersecurity is now organizations’ top risk driver, surpassing economic and talent risks which were the top drivers in 2023, according to Riskonnect’s 2024 New Generation of Risk Report. Yet most organizations (80%) don’t have a dedicated plan to address generative AI risks, including AI-driven fraud attacks, which go hand in hand with cybersecurity threats. The proprietary research was released today and is based on a global survey of more than 200 risk, compliance, and resilience professionals.
According to @Riskonnect's 2024 New Generation of Risk Report, #cybersecurity is now organizations' top risk driver, yet 80% of organizations don't have a dedicated plan to address #GenAI risks like AI-driven #fraud attacks.
Nearly three quarters of respondents (72%) said cybersecurity risks are having a significant or severe impact on their organization, which is a notable increase over last year’s 47%. Another quarter of respondents (24%) said AI-powered cybersecurity threats – such as ransomware, phishing, and deepfakes – will have the biggest impact on businesses over the next 12 months. Even still, 65% of companies don’t have a policy in place to govern the use of generative AI by partners and suppliers, despite the fact third parties are a common entry point for fraudsters.
“Cybersecurity has jumped to the forefront of concerns. Our research shows that organizations are acutely aware of the impact of these risks, but aren’t evolving their risk management strategies fast enough,” said Jim Wetekamp, CEO of Riskonnect. “Cybersecurity, AI, and third-party risks are increasingly intertwined as criminals become savvier in how they infiltrate organizations. Keeping up in this new generation of risk requires addressing the full and interconnected spectrum of threats.”
Generative AI in the insurance industry | IBM
Savvy insurers will seize the gen AI opportunities that intrigue their customers
For the insurance industry, is generative AI more of a risk or an opportunity? Insurance CEOs are equally divided: 49% said it’s more of a risk, 51% said it’s more of an opportunity. Industry executives anticipate using gen AI to fuel competitive advantage with improved sales, customer experiences, and organizational capabilities—but they are wary of the risks to cybersecurity and operations and the issues that can arise from inaccuracy and bias.*
Regardless of the insurer tendency for prudence and risk mitigation, the pressure is on to seize the opportunities. 77% of industry executives said they need to adopt gen AI quickly to keep up with rivals.
As insurance organizations walk a tightrope between rapidly building new gen AI capabilities and managing gen AI risk and compliance, they are pushing forward with adoption, based on new research from the IBM Institute for Business Value (IBM IBV). Investments in gen AI are expected to surge by over 300% from 2023 to 2025 as organizations move from pilots in one or two areas to implementations in more functions across the business.
InsurTech/M&A/Finance💰/Collaboration
Top 10: Insurance Products of 2024 | InsurTech Digital
From leak detection to on-demand coverage, these 10 innovative products are reshaping the insurance landscape for our digital age
Gone are the days of cumbersome processes and unmanageable policies. A new breed of insurers has entered the industry: insurtechs with customer-centric models that prioritise usability and transparency.
From AI-powered chatbots that provide instant, personalised service to blockchain-enabled smart contracts that automate claims processing, these innovations are transforming the very essence of insurance. In this countdown, we’ll explore the top 10 customer models that are setting new standards in the industry. These aren’t just small tweaks; they’re changing how insurance products are created, delivered, and used. Each model takes a different approach to solve long-standing industry problems, proving that when insurers truly focus on the customer, everyone benefits.SEE LIST
Financial Results
Root Inc (ROOT) Q3 2024 Earnings Call Highlights: Profitability Milestone and Strategic Growth ...
[Ed. Note: ROOT posts a first-ever profitable quarter since beginning operations in 2015. As one of the more studied insurance industry "disruptor" insurtechs, measurement of financial viability has been bantered and debated for almost a decade now. The crushing effect of the Covid-era followed by surging premium increases to boost profits are the latest chapters of this unfolding story]
Root Inc (ROOT) Q3 2024 Earnings Call Highlights: Profitability Milestone and Strategic Growth ...
Net Income: $23 million, a $69 million improvement year over year.
Operating Income: $34 million, a $68 million improvement year over year.
Adjusted EBITDA: $42 million, a $61 million improvement year over year.
Gross Loss Ratio: 57%, believed to be industry best.
Gross Combined Ratio: 89%, nearly a 30-point improvement year over year.
Gross Accident Period Loss Ratio: 58%, a four-point improvement year over year.
Operating Cash Flow: Nearly $50 million in the quarter.
Reinsurance Costs: Reduced difference between gross and net loss ratios to one point, a reduction of 10 points year over year.
Term Loan Refinancing: Reduced facility size from $300 million to $200 million, improved cost of capital by at least 300 basis points.
Allstate sees net income and revenue growth despite higher cat losses in Q3’24 - Reinsurance News
The Allstate Corporation has reported it was able to generate “excellent” returns in the third quarter of 2024 despite higher catastrophe losses, seeing its net income applicable to common shareholders improve to $1.2bn, compared to a net loss of $41mn loss seen in the same quarter last year.
Catastrophe losses for Q3 2024 were $1.7bn, 44.2% higher compared to the $1.1bn seen in Q3 2023. Underlying combined ratio (which excludes major claims) for the quarter was 83.2%, an improvement from the 91.9% seen in Q3 2023.
The recorded combined ratio in this year’s third quarter was 96.4%, a massive improvement from the 103.4% seen in the same period last year.
Total revenues of $16.6bn in this year’s third quarter were 14.7% above the prior year quarter driven by increased Property-Liability earned premiums, which were $13.7bn in the quarter.
Property-Liability underwriting results also saw improvement, to $495mn, compared to the $414mn loss seen in Q3 2023.
Earned premiums for Allstate Protection auto grew 11.1%, to $9.2bn, compared to the prior year quarter. The increase was driven by rate increases, partially offset by a decline in policies in force of 1.5%.
Chubb Reports Third Quarter Per Share Net Income and Core Operating Income
- Net income was $2.32 billion, up 13.8%, and core operating income was $2.33 billion, up 14.3%. For the nine months, net income and core operating income were a record $6.70 billion and $6.75 billion, up 16.9% and 13.8%, respectively. On a per share basis, year-to-date net income and core operating income of $16.38 and $16.50 were records and up 18.8% and 15.6%.
- Consolidated net premiums written were up 5.5%, or 6.6% in constant dollars. P&C net premiums written were up 5.4%, or 6.1% in constant dollars.
- P&C underwriting income was $1.46 billion, up 11.7%, with a combined ratio of 87.7%. P&C current accident year underwriting income excluding catastrophe losses was a record $1.98 billion, up 11.5%, with a combined ratio of 83.4%. For the nine months, P&C underwriting income was $4.28 billion, up 8.4%, and $5.41 billion, up 11.0%, on a current accident year excluding catastrophe losses basis, leading to a combined ratio of 83.4%.
- Pre-tax catastrophe losses were $765 million, including $250 million from Hurricane Helene, compared with $670 million last year.
Markel Group reports 2024 third quarter and nine-months results
Markel Group Inc. (NYSE: MKL) today reported its financial results for the third quarter of 2024. The Company also announced today it filed its Form 10-Q for the quarter ended September 30, 2024 with the Securities and Exchange Commission. Markel Group aspires to build one of the world's great companies and deploys three financial engines in pursuit of this goal: Insurance, Investments and Markel Ventures.
"We've consistently emphasized the value of our family of businesses that have found a home under the Markel Group umbrella. The results of 2024 so far underscore that benefit. Many of our businesses performed exceptionally, others made solid improvements where there was room for improvement, and a few faced slowdowns or challenges," said Tom Gayner, Chief Executive Officer. "Overall, we achieved strong results, and we're confident in our long-term ability for that to continue to be the case."
Operating revenue growth of 37% and 15% for the quarter and nine months ended September 30, 2024, respectively, as well as significant growth in operating income, was driven by our Investments engine.
Our Investments engine benefited from more favorable market value movements within our equity portfolio in 2024 compared to 2023. Generally accepted accounting principles (GAAP) require that we include unrealized gains and losses on equity securities in net income. This may lead to short-term volatility in revenues and operating income that temporarily obscures our underlying operating performance.
Net investment income within our Investments engine increased 22% and 29% for the quarter and nine months ended September 30, 2024, respectively, reflecting higher interest rates and increased investment holdings in 2024 compared to 2023.
Underwriting results for the quarter and nine months ended September 30, 2024 included $62 million of net losses and loss adjustment expenses attributed to Hurricane Helene, or three points and one point on the quarter-to-date and year-to-date consolidated combined ratio, respectively.
Legal System Abuse/Social Inflation
Social inflation to drive US casualty rates - Commercial Risk
Social inflation is expected to drive further rate increases for US-exposed casualty risks into 2025, as the trend for nuclear verdicts shows no sign of abating.
US nuclear litigation verdicts greater than $10m and thermonuclear verdicts of more than $100m increased by 27% in 2023, to reach a 15-year high of $14.4bn, according to Marathon Strategies. Nuclear verdicts have totalled $183bn since 2019, with an increase in both the size and number of such awards.
Most of these were product liability or personal injury cases. Recent years have seen large verdicts or settlements reached for motor accidents, as well as class actions from talc, heartburn treatments, opioids, weedkiller products and forever chemicals.
European companies are not immune to nuclear verdicts, with most multinationals operating in, or selling into, the US. And multiple factors are fuelling the increase in US nuclear verdicts, including mistrust of corporates, erosion of tort reform, changing jury demographics, litigation funders and more aggressive plaintiff attorney tactics. The latter sees plaintiff lawyers exploit human psychology to sway juries and drive up the value of awards.
Social inflation is now the main growth driver of US liability claims, according to Swiss Re. The rising number of large court verdicts has led to a 57% increase in US liability claims over the past decade. During the last five years, US commercial casualty insurance losses grew at an average annual rate of 11% to €143bn in 2023. This sum far surpasses the total insured losses from global natural catastrophes of $108bn in the same year.
The effects of social inflation can be seen in the loss trends and reserving actions for US casualty exposed business, according to Lisa Williams, global head of casualty at Zurich Insurance.
“What we have seen across the industry for international portfolios and in US domestic portfolios is a real deterioration between the accident years 2014 and 2019, which was higher than expected. Actual claims that were being settled and coming through at this time were incurring at a much higher magnitude than was expected at the time,” she said.
Triple-I Campaign Raises Awareness of Legal System Abuse Impacts in Georgia | III
To raise awareness of the impacts of legal system abuse on Georgia consumers, businesses and insurers, the Insurance Information Institute (Triple-I) has launched a multi-faceted campaign that includes an Interstate 20 billboard in Downtown Atlanta and digital billboards across the Metro Atlanta area on bus stops and other urban panels.
According to the American Tort Reform Association, Georgia is ranked as the worst “Judicial Hellhole” in the U.S. due to its excessive volume of lawsuits, outrageous damage awards and a hostile legal environment.
“Our work aims to educate Georgians on how these legal practices increase their auto and home insurance costs and negatively impact everyone,” said Triple-I CEO Sean Kevelighan.
He added, “Billboard attorneys in the state continue to exploit legal loopholes, which inflate costs for everyone—consumers, businesses and the local economy. In fact, this abuse costs each Georgian $1,372 per year and contributes to over 137,000 job losses annually. We are committed to shedding light on these practices and advocating for comprehensive legislative reforms that address legal system abuse.”
Further, Kevelighan and Atlanta independent insurance agent Robert Townley, president of Townley Kenton, addressed the broad impacts of legal system abuse during a brief video.
In addition to the Atlanta awareness campaign, Triple-I launched a dedicated consumer website, StopLegalSystemAbuse.org, and interviewed several consumers for their perspective on tactics used by billboard attorneys across the U.S. to encourage lawsuits.
Commentary/Opinion
Cover Genius CEO: Partnerships, agility define the future of insurtech
The American insurtech landscape has entered a “second wave” that’s all about collaboration and partnerships with traditional insurers and big-name corporations, according to Angus McDonald, Cover Genius CEO.
He spoke with InsuranceNewsNet on the eve of the company’s 10-year anniversary, reflecting on past developments and his projections for the future of insurtech.
While insurtechs were originally poised as “disruptors” to traditional insurance carriers, McDonald said the way forward calls for mutually beneficial partnerships.
“It is a development that we’ve seen partly because the first wave of a lot of insurtechs focused on underwriting problems. They probably saw insurers as competitors for the products that they were building, and I think that was kind of ‘insurtech 1.0,’” he said.
However, he noted that once those insurtechs went public, many failed to perform well, making them shift strategies.
“When you look at the new wave, they’re usually a lot more partnered and joined up with risk capital providers, either as an MGA structure or through really strong reinsurance agreements. So, we are seeing the second wave being much more collaborative and much more partner-focused with insurers,” he said.
Multi-pronged partnerships
McDonald believes a “real acceleration” in the adoption of embedded insurance platforms such as Cover Genius is one of the factors driving mutually beneficial partnerships between insurtechs and traditional insurers.
“What we’re seeing is a lot of combined partnerships with a third-party distribution platform, and these things are often not two-party partnerships. Often, they’re three or four-party partnerships, and all that takes a real skill set around how do you create win-win situations for all those parties. That’s something we’re really focused on,” he said.
Announcements
DataTouch “P-Pages AI” Refines the Collision Repair Planning Process for All Estimates Received from Insurance Company Appraisal Sources
An AI Technology Developed for Collision Repair Shops to Consistently and Accurately Identify All of the Required Repair Operations Needed to Complete the Repair Plan Correctly
DataTouch LLC announces the commercial release of “P-Pages AI,” an artificial intelligence (AI) technology offered to collision repair shops that efficiently converts estimates received in a PDF format from external appraisal sources into a sharable digital format based on CIECA Standards. It was designed to correctly interpret and apply the existing Collision Estimating Guide (CEG) Procedure Pages (P-Pages)* for each estimating system.
In just a few seconds, P-Pages AI generates an updated electronic estimate that identifies the “Not Included” operations and costs per the P-Pages that are frequently overlooked by the appraisal source. The P-Pages AI estimate also identifies the section within the CEG P-Pages that documents the operation required to complete the repair for each crash part.
“Collision industry professionals realize that the ‘Not Included’ operations identified within the CEG P-Page sections are not taken into consideration or automated by some of the estimating systems,” said Pete Tagliapietra, managing director of DataTouch. “It is very time-consuming for repair planners to manually analyze every estimate and incorporate these operations in order to build an accurate and complete repair plan.”
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Happy Halloween
Halloween: Origins, Meaning & Traditions | HISTORY
Halloween is a holiday celebrated each year on October 31, and Halloween 2024 will occur on Thursday, October 31.
The tradition originated with the ancient Celtic festival of Samhain, when people would light bonfires and wear costumes to ward off ghosts. In the 8th century, Pope Gregory III designated November 1 as a time to honor all saints. Soon, All Saints Day incorporated some of the traditions of Samhain. The evening before was known as All Hallows Eve, and later Halloween.
Over time, Halloween evolved into a day of activities like trick-or-treating, carving jack-o-lanterns, festive gatherings, donning costumes and eating treats.