AI in Insurance
New California law prohibits using AI as basis to deny insurance claims
Last year, about a quarter of all health insurance claims were denied in California — a reality mirrored nationwide that has stoked public anger toward health care companies, and led to accusations that such decisions lack human empathy.
But this month, a new state law is taking on the latest twist in the debate, ensuring that a human’s perspective cannot literally be removed from such decisions by prohibiting coverage denials be made on the sole basis of artificial intelligence algorithms.
Signed by Gov. Gavin Newsom last September, Senate Bill 1120 — known as the “Physicians Make Decisions Act” — comes as frustration with the health insurance system has intensified. Last month’s high-profile killing of UnitedHealthcare executive Brian Thompson in New York City ignited a wave of reactions that often reflected the public’s anger.
According to 2024 data from the California Nurses Association, approximately 26% of insurance claims are denied, one of many factors that inspired the law’s primary author, state Sen. Josh Becker, a Menlo Park Democrat.
“In 2021 alone, (nationwide) data showed that health insurance companies denied more than 49 million claims,” said Becker, citing data from the Kaiser Family Foundation. “Yet customers appealed less than 0.2% of them.”
In November 2023, a lawsuit against UnitedHealthcare spotlighted concerns about the misuse of AI in health insurance decision-making, accusing the company of using artificial intelligence to deny claims.
While SB 1120 does not entirely prohibit the use of AI technology, it mandates that human judgment remains central to coverage decisions. Under the new law, AI tools cannot be used to deny, delay or alter health care services deemed medically necessary by doctors.
“An algorithm cannot fully understand a patient’s unique medical history or needs, and its misuse can lead to devastating consequences,” Becker said. “This law ensures that human oversight remains at the heart of health care decisions, safeguarding Californians’ access to the quality care they deserve.”
Generative AI: a gamechanger with risks to navigate
From streamlining claims processing to enhancing fraud detection, AI is enabling insurers to operate more efficiently while delivering better service to customers.
In fact, a recent report from Accenture shows that 29% of working hours in the insurance industry can be automated by gen AI. However, this also raises critical questions about maintaining a personal connection with policyholders and, most importantly, using this technology responsibly.
“The average ransomware demand now stands at $1 million, with typical payouts ranging between $500,000 and $600,000,” shared Derek May (pictured), VP of technology and cyber at Hub International Insurance Brokers, highlighting the growing threat of cyberattacks. Adding to the concern, the cost of cybercrime recovery for Canadian businesses has skyrocketed, doubling from approximately $600 million in 2021 to $1.2 billion in 2023, underscoring the escalating financial impact.
Agentic AI: the next frontier of artificial intelligence?
Understanding this risk landscape is particularly important as the insurance market continues to buzz about agentic AI, which refers to systems designed to act independently, making decisions without the need for constant human oversight. While human involvement will always play a critical role, AI has the potential to revolutionize traditionally tedious and time-consuming tasks.
Speaking on the benefits of AI in insurance, Khalid Lahraoui, global and EMEA insurance lead at Accenture, shared: “Modern core systems that accommodate gen AI capabilities, automation and real-time data sharing, enable faster, more accurate claims and underwriting decisions, reduce operating costs and speed new products and services to market.
News
Property cat reinsurance rates-on-line down 8% at 1.1 2025: Howden
According to global insurance and reinsurance broking group Howden, risk-adjusted global property-catastrophe reinsurance rates-on-line decreased by 8% on average at the January 1st, 2025, reinsurance renewals, in comparison to +3% that was recorded last year.
In their January 1st 2025 reinsurance renewals report, Howden noted that demand at this years renewals was “strong once again, driven by higher exposures and asset values, and increased appetite across traditional and alternative markets drove an even bigger increase in supply.”
In spite of another year that saw elevated catastrophe loss activity, which was further aggravated by the late arrivals of Hurricanes Helene and Milton, favourable market conditions reportedly helped insurers to navigate the uncertainty around loss quantum to see property-catastrophe placements over the line, typically with sizeable rate decreases, Howden explained.
Predict & Prevent
The rising cost of home repairs: how Moen is mitigating risks with smart technology
The following article was written in association with Moen.
Over the past five years, the cost of rebuilding and repairing homes has surged dramatically, presenting challenges for both homeowners and insurers. Statistics Canada’s October Consumer Price Index (CPI) revealed a 66% increase in residential building construction costs since 2019 - far surpassing the national inflation rate of 19%. This sharp rise has driven home replacement costs up by 24%.
A key factor behind this increase? Canada’s growing vulnerability to weather disasters. The 2024 natural catastrophe season was one of the most destructive on record, with estimated damages exceeding $7 billion.
While these disasters cannot be fully prevented, there are proactive measures that can be taken to significantly reduce other more preventable claims, such as water damage from leaks. Jerry Fairborn (pictured), national sales manager, commercial, at Moen, recently spoke with Insurance Business about how the company’s innovative solutions are reducing costs and protecting Canadian homeowners from water-related risks.
Insurers can improve household insurance policies by providing smart home features
The growing adoption of smart home technology is enabling consumers to both spot damage early and reduce its impact by integrating these advanced features into their homes.
Insurers are increasingly recognising the value of smart home devices and are beginning to incorporate them into their policies. For example, US insurer Nationwide has launched an initiative…The growing adoption of smart home technology is enabling consumers to both spot damage early and reduce its impact by integrating these advanced features into their homes. Insurers are increasingly recognising the value of smart home devices and are beginning to incorporate them into their policies. For example, US insurer Nationwide has launched an initiative in collaboration with water solutions provider Phyn to offer discounted leak detection solutions to its policyholders. However, consumer uptake of smart devices such as water leak detection devices remains limited.
As per GlobalData’s 2024 Emerging Trends Insurance Consumer Survey, just 13.6% of respondents reported having a water leak detection device installed in their home, with an additional 12% expressing the intention to add one within the next two years. This low uptake is particularly alarming given the potential for significant damage caused by leaking or burst pipes.
Source: GlobalData’s 2024 Emerging Trends Insurance Consumer Survey.
Commentary/Opinion
Americans’ rage at insurers goes beyond health coverage – the author of ‘Delay, Deny, Defend’ points to 3 reforms that could help
My book "Delay, Deny, Defend: Why Insurance Companies Don't Pay Claims and What You Can Do About It" was thrust into the spotlight recently, after UnitedHealthcare CEO Brian Thompson was shot and killed in what authorities say was a targeted attack outside the company's annual investors conference. Investigators at the scene found bullet casings inscribed with the words "delay," "deny" and "depose."
The unsettling echo of the book's title struck me and many others.
That killing – and the torrent of online outrage that followed – put Americans' unhappiness with health insurers at the front of the national conversation. Many people responded not by mourning Thompson, but by blaming UnitedHealthcare and other insurers for failing to pay for essential medical treatments. Gleeful online trolls even celebrated the alleged killer as a heroic vigilante.
Speaking as an insurance scholar, I think few should be surprised by this ghoulish reaction. The killing revealed many Americans' resentment and even rage about insurance companies. And while the focus has been on health insurance, these frustrations extend across the broader insurance landscape. Homeowners insurance, for example, is becoming harder to get in many states even as coverage is shrinking, and auto insurance rates are skyrocketing. These trends are fueling widespread discontent with insurers of all kinds.
Jay Feinman
InsurTech/M&A/Finance💰/Collaboration
Roamly Expands Reinsurance Partnerships, Reinforcing Leadership in Innovative Digital Insurance Solutions
Roamly, the global leader in digital insurance technology and solutions proudly announces the expansion of its reinsurance partnerships to include SiriusPoint, Spinnaker, Apollo, ICW, Vantage and Ladder Re. This robust panel of esteemed reinsurance partners underscores the strength and reliability of the Roamly Enterprise Platform and its comprehensive in-house capabilities.
Roamly Enterprise Platform: A digital insurance platform with proprietary actuarial and underwriting modules that accelerate the development and deployment of innovative insurance products tailored to evolving market needs.
Actuarial and Underwriting Expertise: A skilled in-house team ensuring precise risk assessment and market-responsive pricing strategies.
Risk, Legal and Claims Management: A dynamic organization providing effective risk oversight and a seamless claims experience for customers.
"Expanding our reinsurance partnerships with improved economics is a testament to Roamly's operational resilience and the trust our partners place in our capabilities," said Aaron Ammar, Chief Insurance Officer at Roamly. "The support of ICW, SiriusPoint, Vantage, Ladder Re, Apollo, and Spinnaker enhances our ability to innovate and scale quickly, empowering Roamly to meet the unique needs of our customers with unmatched efficiency and reliability."
Jones Raises $15M Series B to Solve Insurance Verification with Vertical AI Agents for Real Estate and Construction
Jones, the vertical software company leading AI innovation in insurance verification, today announced the close of its $15M Series B funding round led by NewSpring Capital, a growth equity firm managing $3.5 billion in capital with over 250 platform investments, via its dedicated growth and expansion strategy, NewSpring Growth. The round also saw continued participation from major existing investors, including Hetz Ventures, Camber Creek, Khosla Ventures, JLL Spark, DivcoWest Ventures, Rudin Ventures, and Ground Up Ventures.
Founded by Omri Stern and Michael Rudman, Jones is an AI-driven vertical software company that helps real estate and construction clients to accelerate the collection of insurance certificates (COIs), endorsements, and policies, verify compliance with precision, and integrate bi-directionally with key ERP systems. The company has scaled to 25,039 real estate properties and construction projects across over 2.5 billion square feet in the United States.
The investment marks a pivotal moment for Jones as it doubles down on its mission to help clients make smart decisions about insurance risk so they can boost efficiency and mitigate insurance claims. Jones plans to release a suite of AI-powered Agents, smart assistants that automate routine tasks, reduce manual workloads, and offer autonomous decision-making. The AI Agents are fine-tuned by proprietary data including insurance logic, risk benchmarks, and millions of verified insurance documents. The company also plans to continue expanding software workflows and deepening ERP integrations.
Telematics, Driving & Insurance
USAA discontinues standalone "Pay as You Drive" program
Noblr , owned by USAA, is ending its standalone “Pay as You Drive” program as part of a broader strategic shift, according to state filings.
USAA bought Noblr in 2021 to tap into its usage-based insurance (UBI) expertise. Over time, Noblr grew from 8 states to 15, but USAA has now decided to bring all telematics-based insurance under its “Usage-Based Program.”
System incompatibilities between Noblr and USAA prevent seamless policy transitions, requiring customers to reapply for coverage.
Noblr will stop writing new policies in Colorado on January 19, 2025.
According to filings, “Though we are nonrenewing the policies, we intend to offer all eligible policyholders the opportunity to choose an active auto program within the USAA companies as a replacement that will include a telematics offering.”
2025 PREDICTIONS
2025 Automotive & Mobility Predictions - Automotive Ventures
Automotive Ventures VC firm is funding the next wave of innovation in transportation technology. We believe the way we invest today is how we move tomorrow.
Combination of healthy M&A and IPO markets leads to some interesting deals
It's a new year, and time for another batch of predictions. People love their predictions big and bold, so hopefully this year's group doesn't disappoint. Healthy M&A and IPO markets will lead to some interesting deals in 2025. I can't wait to grade ourselves at the end of the year to see how many of these actually happen
Amazon could buy Lyft in 2025
Here's a 2025 prediction that we missed: The Information published an article predicting that e-commerce giant Amazon could buy Lyft in 2025. The article cites Amazon might leverage Lyft’s 24 million active riders to commercialize its own line of Zoox autonomous vehicles. While the speculative move would be huge, the piece also highlights Lyft’s struggling stock performance in prior years. | The Information (paid) SOURCE
U.S. Insurance Deals Outlook: More, More, More
In mid-December, PwC tallied a surge in M&A deals in the U.S. insurance industry in the second half of 2024, and predicted an active year in 2025 with brokerage and MGA deals leading the way.
According to PwC’s U.S. Insurance Deals Outlook 2025, a new administration in Washington ushering in a “deals-friendly” environment and the need for private equity firms to realize value from existing assets are factors that will fuel activity in the coming year.
The report, published in mid-December, reveals that there were 307 announced U.S. insurance industry deals between May and mid-November 2024—more than double the number of deals announced from mid-November 2023 to April 2024.
Insurtech Outlook 2025: What’s ahead for carriers and MGAs?
Roughly $55 billion has been invested in insurtech thus far, according to a Gallagher Re report. While we can debate whether all of that investment has been well spent, it is irrefutable that insurtech has grown in adoption, stimulated fresh ideas and kickstarted new ways of working across the insurance industry.
With generative AI ushering in new possibilities for efficiency and personalization, carriers and MGAs must be ready to meet the moment. Although there certainly are no guarantees, these five insurtech trends are most likely to shape the market in 2025.
No. 1: The appetite for insurtech will continue to expand.
If you just read the headline on Gallagher Re’s Q1 2024 report, you might be inclined to think the insurtech market is in a slump. After all, total insurtech funding for the first quarter of 2024 slipped below $1 billion for the first time in four years.
A deeper dive, however, shows the opposite trend, revealing the number of insurtech deals actually increased by 7% from quarter to quarter. This finding indicates insurtech remains an extremely attractive market segment, and I expect that to continue through 2025.
However, what cannot be ignored is that insurtech valuations and average deal sizes have decreased in the past two years. These unique market conditions have created a “survival of the fittest” environment. Companies built on solid financial foundations that can also demonstrate real, practical impact on the bottom lines of their customers will continue to attract clients and if needed, investors. Those that raised money at historically very high valuations or needed to raise money in the last two years may struggle to validate their value and are more likely to fail faster. The refreshed insurtech community that is emerging, and in many cases thriving, will do so well beyond 2025.
Tim Hardcastle is the CEO of INSTANDA