AI in Insurance
Report: AI adoption expanding in insurance, but challenges remain
Why are insurers facing problems with new AI models?
Earnix has published its third annual 2024 Industry Trends Report, revealing evolving priorities and pressing challenges within the insurance industry. Based on responses from over 400 insurance executives, the report sheds light on the sector’s increasing reliance on AI, ongoing modernization struggles, and rising regulatory demands.
According to the report, AI deployment in insurance is set to expand significantly, with 70% of respondents planning to implement AI models that use real-time data predictions within the next two years. This projection marks a notable increase from the current adoption rate of under 30%, indicating that real-time predictive analytics are becoming central to business strategies in the sector.
The report also emphasised the growing compliance challenges facing insurers. More than half of the executives reported that their companies incurred fines or issued refunds due to operational errors in the last year, an outcome that may be contributing to a rise in compliance-focused activities. Over two-thirds (70%) of respondents indicated they expect to allocate more time to regulatory compliance in the coming year.
Aaron Wright, director of strategy at Earnix, emphasised the importance of adopting real-time AI models to “increase collaboration and innovation” in meeting regulatory standards.
Commentary/Opinion
Flood adaptation can cut damage costs by up to tenfold – Swiss Re
Economic losses from natural catastrophes are estimated at $280 billion for 2023, with floods accounting for $51.6 billion of the total, according to Swiss Re Institute.
As climate change continues to amplify extreme weather events and urban expansion raises asset values in high-risk areas, losses are expected to grow. While preventive measures like dykes, dams, and flood gates come at a cost, the financial benefits of such infrastructure can surpass reconstruction expenses by up to tenfold, a Swiss Re Institute study reports.
Veronica Scotti, chairperson of Public Sector Solutions at Swiss Re, noted that investments in climate adaptation, including flood preparedness, support economic stability, job creation, and public safety. However, a significant funding shortfall exists.
“It is therefore crucial to create the conditions for private capital to flow into climate adaptation projects and at the same time optimize the use of public funds,” Scotti said. “Quantifying the benefits of adaptation measures is a key step towards facilitating public-private investment and ultimately closing the huge financing gap.”
Swiss Re Institute conducted a study assessing the economic benefits and cost ratios of various flood adaptation measures, offering insights to guide investment decisions and identify the most effective flood prevention strategies to bolster economic resilience and community safety.
Benefit-to-cost ratios vary widely by region, according to Swiss Re’s research. Grey infrastructure, such as dykes and levees, is highly effective for mitigating coastal flood damage, providing benefits two to seven times their costs, and in some cases, up to ten times in flood-prone areas. When designed to optimal standards, these structures can cut flood damage by 60% to 90%, particularly in densely populated areas.
How AI is transforming the automotive industry
The automotive industry stands at a crossroads. After decades of market dominance, European and American carmakers now face intense competition from Chinese manufacturers, particularly in the electric vehicle (EV) segment.
To regain a competitive edge, automobile manufacturers are increasingly turning to technologies, with Artificial Intelligence (AI) being perhaps the most promising tool.
AI has the potential to drive significant improvements across both in-vehicle features and broader business operations. This includes everything from autonomous driving and advanced driver assistance systems (AD/ADAS) to connected vehicle systems; from manufacturing to supply chain management; from data management ecosystem to IT infrastructure maintenance.
A recent study by Deloitte underscores the transformative power of AI, noting that 79% of businesses expect generative AI alone to be a major disruptor within the next three years. In this article, we explore how AI is reshaping the future of the automotive industry.
Looking on the Brighter Side - by Glenn Mercer - Car Charts
Now for some better news, a spectacular chart on the long-term declining traffic fatality rate in the USA
I found this in Critical Issues in Transportation for 2024 and Beyond1, from the National Academies Press. The underlying source is the NHTSA.
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Now, I know in recent years there have reversals and counter-reversals in the long-term trend, as the pandemic cleared roads (and thus allowed higher and deadlier speeds), and as the recovery from the pandemic turned the trend back downwards. But for the purposes of this post I just wanted to show the very big picture.
Which is a picture of very bad news (a century of about 40,000 deaths per year?!?) and very good news (a death rate of only about 2 per hundred million miles of driving?!?). I’ll leave it to you to pick your optic, but IMHO it’s a mix of tragedy and victory. Millions of lives lost… but maybe billions of trips to the beach with the kids. Trade-offs, trade-offs.
Leaving that thorny dilemma aside, it’s interesting to see some changes across the century. In the 1920s the fatality rate was sky-high, for at least two reasons: cars had almost no safety equipment (believe it or not, even windshield wipers weren’t standard on US cars until about 1920), and most states didn’t even have driving tests until 1940 or so. Then we can see the drop during World War II, when car production was curtailed and gasoline rationed. The surge in the 1960s through 1980s I have not researched, but my suspicion is that in this period horsepower and speed were increasing faster than safety equipment could keep up (the first state to require the use of seatbelts was New York… and that was only in 1984!).
Glenn Mercer
Research
Insurance distribution tech market to grow to $50B by 2029
Key growth drivers include growing urban populations and a greater use of the internet to buy insurance products.
The insurance distribution technology market in the United States is projected to grow to more than $50 billion by 2029, according to a new report from ResearchAndMarkets.com.
The report projects a compound annual growth rate (CAGR) of 16.4% between 2024 and 2029. In 2023, the market was valued at just $20 billion.
By contrast, the overall U.S. insurance distribution market is projected to grow at a CAGR of just 8.24% between now and 2029.
The report finds there’s strong growth potential for insurance distribution technology as insurers try to meet demand from younger generations for innovative products and services.
Key growth drivers for insurance technology include growing urban populations, greater use of the internet to buy insurance products, increasing use of insurance apps and a drive to integrate artificial intelligence with insurance.
Trends in distribution technology will likely include:
- Increasing use of social media as a distribution channel
- Growing adoption of telematics
- Collaboration with Big Tech
- Emergence of subscription models
- Increasing use of block chain in insurance
- Rising popularity of gamification
- Growing use of virtual insurance advisors
Claims
Shops Can Grade Auto Insurers to Show Consumers How Their Carrier Stacks Up
Collision repairers are aware of the differences among auto insurers selling policies in their state. CRASH Network’s annual “Insurer Report Card” survey, which has just opened, aims to communicate those differences to consumers.
“Most consumers probably aren’t aware that they likely have dozens and dozens of companies from which they could buy their auto insurance policy,” said John Yoswick, editor of CRASH Network. “The ‘Insurer Report Card’ is a way collision repairers can share their unique perspective to help drivers better understand their choices and see that there can be clear differences among those insurance companies when they have a claim.”
More than 1,000 collision repair professionals each year grade the performance of the auto insurers in their state through the “Insurer Report Card.” Consumers can download the survey findings throughout the year. Insurers that consistently receive top grades from shops tout that in their marketing, and other organizations that offer independent information to consumers about financial decisions – such as the Wall Street Journal, Money, and USA Today – now incorporate the “Insurer Report Card” grades into their auto insurance rankings.
The survey asks collision repairers to grade each company – from “A+” to “F” – based on how well the insurers' claims practices help ensure quality repairs and customer service.
“Because each state has a different mix of insurers, the ‘Insurer Report Card’ allows repairers to grade insurers specific to their state,” Yoswick said. “That makes it far more extensive than similar surveys, which generally focus on only the 10 largest national insurers.”
To request a link to the survey, shops can visit www.crashnetwork.com.
Climate/Resilience/Sustainability
Catastrophe-bond funds suffered virtually no losses from Hurricane Milton
After two weeks of number-crunching, it now seems clear that investors in catastrophe bonds emerged from Hurricane Milton relatively unscathed.
In fact, holders of the bonds may be looking at returns of as much as 12%, according to Zurich-based asset manager and catastrophe-bond specialist Plenum Investments AG.
Before Milton struck just south of Tampa on Oct. 9 as a Category 3 hurricane, the market for catastrophe bonds had been bracing for losses as steep as 15%, dwarfing those triggered by Hurricane Ian two years earlier. In the event, losses from Milton will likely be closer to 1%, possibly even less.
"The underlying dynamic means that spreads stay at high levels," said Dirk Schmelzer, managing partner at Plenum, which oversees more than $1.2 billion in insurance-linked securities and insurance debt, including about $900 million of catastrophe bonds.
And with this year's hurricane season now unlikely to deliver more losses, the outlook is for "very attractive returns over the next 12 months," he said during a webinar on Thursday. November hurricanes tend to hit in the lower latitudes and the chances of a major storm making landfall in the US "is next to zero," Schmelzer said.
Catastrophe bonds, or cat bonds as they're often called, are issued by insurers and reinsurers in order to hand some of their risk over to the capital markets. Investors in the bonds make money if a predefined disaster doesn't occur, but can lose much of their capital if it does.
U.S. sees highest number of tornadoes in 13 years
*The United States has experienced a surge in tornadic activity this year, fueled by an active spring storm season and large hurricanes, AccuWeather reports.
Over 1,750 preliminary tornado reports — about 400 more than the historical average — have been filed across 45 states, making 2024 the most active year for tornadoes in 13 years. However, it seems unlikely that 2024 will catch up with the 2,250 preliminary tornado reports recorded in 2011.
In a release, AccuWeather Lead Long-Range Expert Paul Pastelok described 2024 as “exceptionally active.”
The states hit hardest were those within what is traditionally known as Tornado Alley, with Texas, Nebraska and Iowa showing the highest number of preliminary reports. Illinois and Florida round out the top five states for tornadoes this year with 125 and 103 preliminary reports, respectively. Notably, Florida, Oklahoma, Ohio and New York have all issued more tornado warnings this year than in any year since 2002.
The number and location of tornadoes this year was driven in part by several hurricanes that have spawned particularly violent twisters. AccuWeather reports that Hurricanes Beryl, Debby, Helene and Milton alone produced 178 tornadoes. Only two seasons since 1995 have produced more hurricane-spawned tornadoes.
InsurTech/M&A/Finance💰/Collaboration
Insurity Partners with ICEYE to Deliver Real-Time Catastrophe Insights to P&C Insurance Customers
Insurity, a leading provider of cloud-based software for insurance carriers, brokers, and MGAs, today announced its partnership with ICEYE, a world leader in persistent monitoring via synthetic aperture radar (SAR) satellite technology.
This collaboration brings ICEYE’s near real-time natural catastrophe insights directly into Insurity’s geospatial analytics platform, empowering insurers to respond more effectively to disaster events, serve policyholders faster, and mitigate avoidable losses.
With the frequency and severity of natural disasters rising each year, timely access to accurate data is critical for P&C insurers. Through ICEYE’s advanced monitoring capabilities and SAR satellite constellation, Insurity’s customers can now harness objective, actionable insights for any location on Earth, regardless of time of day or weather conditions. This integration allows insurers to streamline disaster response, allocate resources efficiently, and provide immediate support to policyholders impacted by catastrophes.
“Our partnership with ICEYE reinforces Insurity’s commitment to delivering the most advanced data and analytics solutions to our P&C insurance customers,” said Chris Lafond, Chief Executive Officer at Insurity. “By integrating ICEYE’s real-time catastrophe insights into our platform, we’re enabling insurers to make faster, data-driven decisions that benefit policyholders when they need it most. This collaboration brings a new level of precision and responsiveness to disaster response in the insurance industry.”
Predict & Prevent
LeakBot Rolled Out to 16 More States in US Market
Ondo Insurtech (LSE: ONDO), a leading company in claims prevention technology for home insurers, is pleased to confirm that Nationwide Mutual Insurance Company (“Nationwide”) will announce a major expansion of their partnership with Ondo, to roll-out LeakBot into 16 U.S. States.
Nationwide has led innovation in the U.S. with its Smart Home Program – a new innovative way for the Nationwide’s homeowners insurance customers to keep their homes safe with connected, smart devices that can notify customers of potential hazards in their homes.
Nationwide will today announce that they will offer free LeakBot devices and repair services to new and existing customers in a total of 16 U.S. states: Pennsylvania, Maryland, North Carolina, Virginia, Montana, Idaho, Kentucky, Indiana, Vermont, Oregon, West Virginia, Tennessee, Illinois, New Hampshire, and Washington, in addition to Ohio.
The commercial details are confidential but Ondo confirm that the structure of the deal includes advance prepayments ahead of order deployments meaning the working capital requirements of this expansion are fully funded.
Mark Teets, Director Personal Lines Product Development at Nationwide says: “Our strategy at Nationwide is to ‘Predict and Prevent’ and we have fully integrated LeakBot into our own platform to do this for water damage in our members homes. The results so far have been remarkable and this has led us to already expand the distribution of LeakBot to our customers in these 15 new states. Our ambition at Nationwide is for all of our customers to benefit from this type of Predict and Prevent technology as we believe that finding an issue and fixing it before it becomes a major problem is good for both the company and the customer.”
OEMs & Auto Insurance
Travelers appoints Volkswagen Insurance
Volkswagen Insurance Services has been appointed with Travelers as of Nov 11, 2024.
The company’s principal office is located at 1950 Opportunity Way, Suite 1500, Reston, VA 20190—the headquarters of Volkswagen Group of America.
The management team includes:
- Sawinder Singh: Senior Director, Head of Insurance and Protection Services – North American - - Region (NAR) at Volkswagen Financial Services Canada.
- Garett Miles: Senior Vice President, Chief Risk Officer, NAR at VW Credit, Inc.
- Heather Bernstein: Vice President of Finance at VW Credit, Inc
GEICO appoints Toyota Insurance Management Solutions
Toyota Insurance Management Solutions is appointed with GEICO County Mutual Insurance Company and GEICO Texas County Mutual Insurance Company. One entity focuses on commercial auto, while the other specializes in Texas business.
This news follows our coverage of TIMS and Lemonade.
Other noteworthy appointments include GEICO and Select Insurance Markets , an aggregator of personal and commercial lines products that is part of One80 Intermediaries.