News
USAA hit with $100M punitive bad faith judgment
On Friday, a Nevada jury leveled a $100 million punitive judgment against USAA in a bad faith suit from a customer who alleges the insurer failed to defend him and pay his claim after an auto accident. USAA will also be required to pay $14 million in compensatory damages as part of the judgment.
When opening statements were heard in the case at the end of January, the plaintiff was suing the insurer for $20 million.
In 2018, the plaintiff, Timothy Kuhn, was in stationary traffic when a Ford F-150 slammed into the back of his BMW sedan at around 45 miles per hour. Kuhn claimed he received a serious brain injury as a result of the collision.
While Kuhn’s neck and back injuries healed quickly, he reported ongoing issues from the head injury, including memory loss, lack of focus and headaches.
Initially, USAA agreed the accident was not Kuhn’s fault, but that changed when he brought a suit against the other driver. At this time, he claims USAA intervened and argued Kuhn was responsible for the crash.
The plaintiff’s attorneys submitted a claim to the truck driver’s insurance in June 2020, resulting in a $50,000 payment from that insurer. Plaintiff Attorney Kimball Jones told the jury that once USAA caught wind that Kuhn planned to sue the truck driver, the carrier decided to intervene and litigate against him.
Kuhn said that throughout the claims process, USAA stuck to a “lowball” offer of $10,000, before finally agreeing to pay the policy limit of $250,000 on the eve of the trial. The insurer also argued that Kuhn’s brain injury was not as severe as he claimed.
Florida Gov. announces reduction in auto insurance rates following tort reform
Florida Governer Ron Desantis announced last week that three major auto insurance companies are reducing rates in the state.
He said during a speech at Florida International University that GEICO (10.5% decrease), State Farm (6% decrease) and Progressive (8.1% decrease) are the first insurance companies to lower rates.
“We have others that are going to be doing other things very soon, so we anticipate to see decreases for USAA and maybe some other companies as well,” Desantis said.
Desantis, who also announced rate reductions for homeowners insurance, noted that auto insurance was the number one inflationary item nationwide in 2024.
Financial Results
Everest Group swings to quarterly loss on one-time charge
Reinsurer Everest Group Monday posted a fourth-quarter loss, hit by a one-time charge tied to loss reserves in its U.S. casualty lines business.
The company last week disclosed that its fourth-quarter and full-year 2024 earnings will include a one-time charge of $1.5 billion tied to prior year’s loss reserves and a further $229 million of current accident year strengthening.
Everest also expects its pretax net catastrophe loss from California wildfires to be in the range of $350 million to $450 million for the first quarter.
Research
Climate change could reduce real estate values by $1.47 trillion
The bulk of household wealth (67%) is tied to the primary residence. Climate change — and increasing insurance needs — could sink property values in certain areas of the United States by more than $1 trillion over the next 30 years, according to a new study from First Street.
The shift will re-shape U.S. population patterns, with some states coming out ahead and others losing big time. By 2055, First Street’s models predict that properties in “climate abandonment” areas stand to lose $1.47 trillion in value, while those in “climate resilient” neighborhoods could gain $244 billion.
Residential real estate in the United States is valued at $50 trillion currently, and nearly two-thirds of U.S. adults are homeowners. The bulk of household wealth (67%) is tied to the primary residence.
For the last several decades, migration patterns in the country have been driven largely by quality of life and affordability, with many flocking to the Sun Belt — the southern portion of the country. Texas, California and Florida have been the fastest growing states since 2000.
But in recent years, these states have also been some of the hardest hit by climate change, experiencing an increase in both severe weather and insurance costs. Since 2000, Texas has seen $434 billion in disaster costs, while California has seen $155 billion and Florida is at $401 billion.
The study found that, between 2013 and 2022, nationwide, insurance costs grew from about 8% of mortgage payments to 20% of mortgage payments, a 115% increase. And even as premiums have risen, insurers have struggled to stay profitable. In 2023, the combined ratio for home insurers was 110.5% — meaning companies paid out 10.5% more in losses and expenses than they brought in with premiums.
AI in Insurance
EXL’s Insurance LLM transforms claims and underwriting | CIO
As insurance companies embrace generative AI (genAI) to address longstanding operational inefficiencies, they’re discovering that general-purpose large language models (LLMs) often fall short in solving their unique challenges.
Claims adjudication, for example, is an intensive manual process that bogs down insurers. Medical professionals can spend long hours reading upwards of 1,000 pages of medical records and other documents for a single claim. Then they have to synthesize and interpret all this complex information to facilitate a determination.
Understandably, lapses in concentration are common, and they can compromise the quality of the settlement. In addition, the quality of this overall work can vary significantly based on an employee’s experience.
The sheer volume of data, and the amount of time it takes to absorb it all, makes for an inconsistent, error-prone process. And while generic LLMs are powerful, they lack the precision, domain expertise, and privacy assurances needed to tackle the problem completely.
Recognizing this gap, EXL launched its EXL Insurance LLM, whose industry-specific AI capabilities empower insurers to streamline claims adjudication, enhance underwriting processes, and more. Leveraging NVIDIA’s AI platform, the EXL Insurance LLM is a purpose-built solution to the industry’s unique problems around claims adjudication and underwriting. Because it’s trained on proprietary industry data, the model provides specific, accurate, and concise responses that enhance insurers’ efficiency and improve the customer experience.
1st ‘AI insurance broker’ targets coverage gaps, aiding agents | InsuranceNewsNet
A specialty wholesale insurance brokerage is on a mission to “digitize human knowledge” in a way that can help bridge service and coverage gaps through its industry-first “AI insurance broker.”
“The vast majority of technology innovation in the past in specialty insurance has been mostly on faster distribution. Never in our existence could we digitize human knowledge and use that in a scalable way across the organization. Well, with LLMs, we can, and that’s why we make so many investments in this space,” Sivan Iram, founder and CEO, Flow Specialty, told InsuranceNewsNet.
Flow started by taking a highly functional core AI model powered by GPT’s OpenAI 4.0 Omni. A team of experts then spent over two years teaching it the ins and outs of insurance to the point where it could pass standardized exams.
The final product is what Iram describes as “an army of the world’s best assistants,” and that knowledge base is constantly evolving.
“The secret sauce at Flow is that we have the best mix of industry experts, insurance experts as well as technology experts together building a brokerage that is built to deliver for small, medium businesses,” Iram said.
Poll suggests re/insurers to prioritise AI and machine learning in 2025
As the re/insurance market progresses into 2025, the industry is prioritising innovation to stay ahead, with a high percentage (55%) focusing on AI and machine, a recent Reinsurance News poll has revealed.
innovation-poll-imageThis emphasis on AI and machine learning reflects the growing recognition of its transformative potential in areas such as risk assessment, claims processing, and fraud detection to boost efficiency.
As AI and machine learning take the lead, big data analytics fell in second place with 31% of participants selecting it as their primary area of innovation.
The analysis of big data empowers re/insurers to extract meaningful patterns and trends from vast datasets, leading to more accurate risk assessments, improved pricing strategies, and enhanced customer experiences.
Customer experience (CX) technology is also on the radar, with 9% of re/insurers saying they are looking to prioritise solutions to enhance customer interactions and satisfaction.
Although cloud computing currently accounts for only 4% of prioritised innovation areas, its importance has the potential to grow as the industry embraces digital transformation.
Service Is King: GIC Underwriters Automates Broker Inquiries with Indemn AI
GIC Underwriters has enjoyed over 30 years of success through a relentless focus on service. That commitment led the Miami-based wholesale broker and MGA to become an early adopter of artificial intelligence, selecting Indemn AI’s (New York) conversational insurance platform to automate broker inquiries. Within 60 days of deployment, GIC—which offers commercial and persona lines products in Arizona, Florida, Georgia, and Texas—had automated 46 percent of routine broker inquiries using Indemn’s Gen-AI-powered Broker Portal Assistant.
“Service is king when it comes to helping consumers purchase insurance and for brokers to sell it,” explained Juan Carlos Diaz-Padron, Chief Underwriting Officer, GIC Underwriters. “In an increasingly digital world, GIC Underwriters recognizes that technology is not just a tool but a strategic differentiator. We believe that effective, easy-to-implement technology increases efficiency and reduces our expense ratio.”
Given GIC’s orientation to technology, the firm had no reservations about exploring the potential of AI, according to Diaz-Padron. “Using AI in customer service made a lot of sense for us,” he says. “The GPT models allow for friendly and dynamic conversations. We serve a large number of bilingual agents, often switching languages within a single conversation, so we were ecstatic to see the AI agent handle multiple languages seamlessly right out of the box.”
GIC had used a live chat system for over a decade and had even built its own in-house product that connected its CSRs to inquiring brokers. While the tool was popular with brokers, GIC concluded AI could help them respond to more inquiries by automatically answering frequently asked questions about risk appetite, quote generation, coverage details and other topics.
Commentary/Opinion
[Ed. Note: Informative sponsored article] The AI Advantage: Transforming Insurance Claims for the Future — ClaimDeck
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This paper outlines the strategic importance of adopting advanced litigation management technologies like ClaimDeck, and the necessity of preparing for a more extensive integration of generative AI in the insurance landscape.
Claims
P&C Insurance Claims: The Time Has Come | Insurance Thought Leadership
For too long, progress in the insurance claims process has been slow and incremental. The time is now ripe for reinvention.
For those of us who have worked in this industry for a decade and longer, when you honestly assess how claims handling has evolved, you would fairly conclude that while certain aspects have improved – some even impressively – the fundamental model, process, service and financial outcomes have essentially remained unchanged or marginally improved.
When comparing insurance claim modernization with other financial and consumer services, the shortcomings become even more obvious. Yet the environment in which claims occur and are resolved has changed significantly.
The reasons for this lack of breakthrough are many and complex, and playing catch up in real time has not been easy – but it is possible, and mandatory
Alan Demers and Stephen Applebaum as featured on Insurance Thought Leadership
InsurTech/M&A/Finance💰/Collaboration
RAVIN AI and Five Sigma Partner to Transform Auto Claims with AI-Powered Vehicle Assessments
**RAVIN AI, a leader in AI-powered vehicle inspections, has partnered with Five Sigma, an innovator in AI claims management technology, to reshape auto claims handling. Through this partnership, RAVIN’s DeepDetect™, an AI vehicle assessment, has been integrated with *Five Sigma’s** end-to-end Claims Management Platform (CMS) and Clive™, the insurance industry’s first AI Claims Adjuster, delivering next-level automation and efficiency to auto insurers.***
Now, when policyholders submit a claim, they are prompted to scan their vehicle, generating a virtual assessment that predicts repair costs or determines total loss. Clive then automates the workflow by updating all relevant fields in Five Sigma’s AI-Native CMS or any other claims management system the insurer is using. If there are pictures of the vehicle from the FNOL, this analysis is done even faster.
“Our partnership with Ravin AI is another step in our automation-first philosophy for claims management, integrating various AI tools and use cases with Clive, our AI Claims Adjuster. By integrating Ravin’s advanced technology with Five Sigma’s, we are empowering insurers to reduce cycle times, improve accuracy, and boost operational efficiency”. — Oded Barak, CEO and Co-Founder of Five Sigma
“This partnership with Five Sigma is a game-changer for the insurance industry. By combining our AI-driven vehicle assessments with Five Sigma’s claims platform and Clive, we’re helping insurers streamline the claims process, enhance customer satisfaction, and reduce costs—all while driving innovation in auto insurance.” — Eliron Ekstein, CEO of Ravin AI
Webinars/Podcasts/Interviews
Scout InsurTech Spotlight with Alan Demers: "We're really at a crisis point that seems ongoing, especially in homeowners."
Alan Demers is the President and Founder of InsurTech Consulting, helping clients innovate and modernize P&C insurance. Alan was interviewed by Chris Luiz, CEO and Co-Founder at Scout InsurTech.
Alan, you and I had a discussion, and you brought up some of the current issues you see in the insurance industry. Can you talk about those? And what got us here?
“It has been a wild ride, and it mostly centers around profitability—whether it’s the profitability of insurance companies or the costs borne by consumers and small businesses paying the premiums. We're really at a crisis point that seems ongoing, especially in homeowners.
A lot of attention goes to climate and weather exposure, which is valid, but other big cost factors are easy to overlook. Inflation, legal abuse or social inflation, and changes in technology—especially in automobile repairs—are all impacting auto insurance lines. Even before COVID, there was an insurance-to-value problem brewing, particularly in the property space. Then property rebuild values soared during COVID, and insurance companies had to adjust to these new realities.
For instance, the average home cost has sharply increased in recent years, which has significantly impacted premiums. With that and ongoing issues like distracted driving, the result is higher premiums, reduced coverage and a growing protection gap.