AI in Insurance
AI CAN FIX EVERYTHING IN INSURANCE
By Alan Demers and Stephen Applebaum
Every time I read an article or a marketing piece espousing the astounding power of AI as applied to insurance, I cannot help but think about Gus Portokalos!
If you recall, Gus was the bride’s father in the 2002 hit movie ‘My Big Fat Greek Wedding’ who famously suggests "Put some Windex on it!" as a solution to all manner of problems including cuts and scrapes. Gus proudly related every word, phrase and meaning back to his Greek ancestry as a solution or fix to each conversation. A lot of people are treating AI in the same fashion.
Even the typically thoughtful Bill Gates gushed AI is "the first technology that has no limit" and “could be as revolutionary as the internet or mobile phones.”
Claims
Insurance is just one of virtually every industry that stands to gain in efficiency and operational cost reduction among other benefits of AI. Claims is one of those areas eyed for more efficiency, greater accuracy, and better customer experience despite some of the negative implications of a machine denying claims, and associated efforts to ban such usage. Particularly sensitive and controversial use-cases are for direct customer interaction, even for loss intake, known as ‘FNOL’ (First Notice of Loss) which is highly manual and would have tremendous ROI.
FNOL
FNOL is where each claim begins in the cycle. In fact, timely reporting is a key condition of the insurance contract. The claim reporting process is part interview, part explanation in which customers are asked a series of questions in order to capture when, how and what happened to who(m). Once this information is gathered and keyed into the system an assignment(s) is made to one or more adjusters where the process unfolds.
Lemonade CEO reflects on State Farm's 2018 'attack ad'
The insurance industry is at a critical juncture in its accelerating use of artificial intelligence tools. According to Lemonade CEO Dan Schreiber, insurance companies must fully embrace AI or risk becoming obsolete.
During his keynote speech at Insurtech Insights Europe in London, Schreiber reflected on State Farm’s infamous 2018 advertisement that mocked AI-powered insurance bots, noting the campaign by the US insurance giant misunderstood the trajectory of the technology in the industry.
The ad, which features two NBA players, appeared to suggest that AI-powered insurance bots lack compassion compared to human State Farm agents. Schreiber said Lemonade saw it as an opportunity to highlight the stark technological contrast between itself and traditional insurers.
“We absolutely loved that ad,” Schreiber said. “We downloaded it and we started paying to have it promoted on Google.”
In Schreiber’s eyes, the ad made State Farm “look ridiculous” for mocking bots that were already outperforming human agents in terms of customer satisfaction. He said Lemonade’s AI-powered chatbots were already demonstrating greater empathy than human representatives at the time.
AI meets insurance: digitizing the face of compliance and risk mitigation
How can insurance professionals leverage AI for their advantage?
“A game changer for insurance companies.”
That is how Kathleen Birrane, US insurance regulatory practice leader at DLA Piper, described AI technology in an interview with Insurance Business.
Her comments come in the wake of growing AI adoption within the insurance sector. According to TechRadar, “a third of major insurers already have Gen AI use cases in production, while most are advancing their data capabilities.”
AI and insurance practice
Danny Tobey, global chair of DLA Piper Americas AI and Data Analytics Practice, argues that AI can help insurance companies comply with regulatory guidelines and minimise risk when writing policies.
He noted that “our goal with proactive compliance is to look at the much earlier set of communications and other unstructured data, where some of these bad ideas get started, and that allows us to find things much earlier and do corrective actions like education or improvements to policies...”
A report by KPMG highlights AI’s potential to mitigate risk: “With enough training data, these algorithms can better analyse risk and predict outcomes, adding accuracy to risk models and pricing structures. These solutions are often developed to solve a specific problem, but there is an opportunity to quickly adjust for wider use across the value chain.”
AI not only has the potential to help with regulatory compliance and risk mitigation but to also boost the economy and improve the insurance landscape as a whole.
'Connected' Headline of the Day
In industry first, US P&C insurers exceed $1 trillion in direct annual premiums
US-domiciled property and casualty insurers have surpassed $1 trillion in annual direct premiums written for the first time in the industry's history, according to an S&P Global Market Intelligence analysis of annual regulatory statements.
Aggregated direct premiums written for 2024 were $1.05 trillion, an increase of 8.0% from the prior year. Personal lines of business, which consists of homeowners, farmowners and private auto, hit $534.92 billion compared to $477.04 billion in 2023. Out of the three individual business lines, private auto recorded the largest year-over-year increase at 12.6%. Private auto direct premiums written totaled $358.77 billion in 2024.
Homeowners direct premiums written climbed 11.1% to to $169.55 billion in 2024, while farmowners premiums came to $6.60 billion.
Aggregated premiums for commercial business lines grew 4.0% to $502.35 billion in 2024. Commercial lines include of a variety of coverages such as liability or casualty, commercial auto and property, and even pet insurance. Pet insurance is now a reported stand-alone line of business in 2024; it was previously included within the inland marine business line.
News
1-in-7 U.S Homeowners Uninsured, Report Shows
Nearly one-in-seven U.S. homes are uninsured, and 11.3 million out of 82.9 million owner-occupied homes (13.6%) are uninsured, a new study shows
A study from LendingTree that used Federal Emergency Management Agency data and U.S. Census data to calculate uninsured rates. It also used FEMA data to examine uninsured rates in the 25 most at-risk counties, which it categorized uninsured homes as owner-occupied homes with annual home insurance costs of less than $100.
NatCat protection gap has grown 65% over the past five years: Zurich
Regressive actions are making the gap worse
The natural catastrophe protection gap is rapidly growing, reaching US$180 billion, with a 65% increase over five years, primarily driven by climate change, according to Zurich’s group chief strategy officer.
Paolo Mantero (pictured) delivered the sobering statistics at a keynote at Insurtech Insights Europe in London on Wednesday. He said climate change is creating more frequent and severe natural disasters, affecting both emerging and developed economies, with significant economic and social implications.
“Over the last five years, the market has been able to cover only 65% of the total risk exposure (to natural catastrophes,” Mantero said. “This is an astonishing growth rate, especially compared to the economy, which has only grown by 25% over the same period.”
Regressive actions worsening the nat-cat protection gap
While governments, companies, and individuals are taking action on the protection gap, risk management has been inconsistent, Mantero said. He cited high population growth rates in catastrophe-prone areas in the United States, such as Florida, where Hurricane Ian dealt significant inland flooding and damage to communities in 2022. Florida was the fastest-growing state in the US that year according to US census data, with a 1.9% growth rate between 2021 and 2022.
Insurify: Full-coverage insurance projected to increase by 8% in 2025, including 3% from tariffs
Tariffs on Canada and Mexico could increase car insurance rates 60% faster, a new report by Insurify says.
Full-coverage car insurance is projected to increase by 8% by the end of 2025, from $2,313 to $2,502 on average, the report found. It says without tariffs car insurance is projected to increase by 5% year-over-year.
New York could see the highest increase with the annual cost of car insurance increasing by $489 by the end of 2025, the report says. It says about $110 of the increase could be attributable to tariffs.
Insurify previously projected that insurance rates would stay the same or remain flat in five states: Vermont, New Hampshire, Hawaii, New Mexico, and Idaho. With tariffs, however, rates would increase in every state.
“It will take some time for that cost to work through the system,” Andrew Whitman, professor of finance at the University of Minnesota, told Insurify. “Insurance companies have to file for rate increases, and those rate increases have to be based on increased claim costs.”
Despite Insurers' Profitable 2024 Results, U.S. Commercial Insurance Market Faces Growing Uncertainty: Lockton Market Update
At the start of 2025, the U.S. property and casualty insurance market remains largely stable and predictable. However, growing economic uncertainty, social inflation, and other issues are raising questions about the outlook for the rest of the year, according to the latest edition of the Lockton Market Update.
The quarterly report published by Lockton, the world's largest privately held and independent insurance broker, offers timely and relevant insights for commercial insurance buyers. The March report covers U.S. economic conditions, major industry headwinds and tailwinds, and includes a Q&A with an experienced risk professional on the biggest challenges in today's insurance market.
"Major industry headwinds such as social inflation, natural catastrophes, climate change, trade wars, tariffs, and regulatory changes are adding to the market uncertainty," said Vince Gaffigan, EVP, Director of Risk Consulting for Lockton. "Now, more than ever, businesses should be reevaluating their insurance programs to safeguard their operations and protect their balance sheets."
Conditions remain buyer-friendly across most major lines, including property, workers' compensation, directors and officers liability (D&O), and cyber. A notable exception is third-party liability, which continues to be reshaped by social inflation, driving pricing up and capacity down.
"Businesses must adapt to numerous factors impacting the market, including new risks involving trends like AI, cybersecurity, social inflation, and geopolitical crises," said Greg Spore, Lockton's U.S. Financial Services Market Leader. "These conditions make the information and advice in our report even more crucial as business leaders navigate an evolving landscape."
Climate/Resilience/Sustainability
Climate Hazards Projected to Hit Companies Hard by 2050s - Risk & Insurance : Risk & Insurance
Global companies face $1.2 trillion in annual climate costs by 2050s, with heat and water stress leading impacts, an S&P analysis finds.
The world’s largest companies could face annual climate-related costs of $1.2 trillion by the 2050s, according to a new S&P Global analysis.
While dramatic events like wildfires capture public attention with their visceral imagery and immediate destruction, the report reveals that extreme heat, water stress and drought will actually drive the majority of future climate-related costs for businesses.
Current State and Projections
The financial toll of climate change is escalating at an alarming rate, S&P reported. Major global companies could face annual costs from climate hazards reaching $885 billion in the 2030s, rising to $1.2 trillion by the 2050s, and further increasing to $1.6 trillion by the 2090s. These figures represent the potential financial impact on companies in the S&P Global 1200 index, which encompasses approximately 70% of global market capitalization.
These projections are based on the SSP2-4.5 climate scenario, which assumes greenhouse gas emissions will stabilize at current levels until 2050 before declining through 2100. Even with this relatively moderate scenario, global average temperatures are expected to rise by 2.7°C by century’s end, with a “very likely” range between 2.1°C and 3.5°C. Importantly, these cost estimates do not account for inflation and are presented in nominal 2024 prices. READ ON
Announcements
Westfield Expands Flood Protection Options for Homeowners, Reinforces Commitment to Disaster Recovery with $750K Donation
Westfield, a global property and casualty insurance company, is addressing growing flood risks by expanding its protection options for U.S. homeowners by offering an inland flood coverage add-on designed to help reduce the insurance gap for those living outside historical high-risk flood zones.
According to most recent FEMA data, more than 40% of flood insurance claims come from outside high-risk flood areas.
Developed in collaboration with a global reinsurance company, this affordable coverage helps homeowners recover from flash floods, which are increasingly impacting areas previously considered low risk. According to the Federal Emergency Management Agency (FEMA), in 2023 more than 40% of flood insurance claims came from outside high-risk flood areas.
"With increasingly unpredictable weather patterns, flooding is no longer confined to FEMA-designated high-risk areas," said Steve Butler, AVP, personal lines product management and underwriting at Westfield. "This coverage can enable homeowners' peace of mind and financial stability in the face of evolving flood risks."
As part of its broader commitment to flood resilience, Westfield is donating $750,000 to the Center for Disaster Philanthropy (CDP) to support flood recovery and mitigation efforts. This latest gift brings Westfield's total contributions through CDP to more than $3.5 million since 2016, reinforcing the company's dedication to helping communities rebuild after disasters.
"It can take several months, even years, before families and entire communities are able to rebuild and recover after devastating floods," said Patricia McIlreavy, president and CEO of CDP. "We are grateful for Westfield's generosity and support of vital programs, such as rebuilding homes and providing mental health, legal, and disaster case management services, that will help flood survivors recover and thrive."
Financial Results
Allstate Reports $73M After-Tax Catastrophe Losses in February 2025
ALL reports $1.17 billion in catastrophe losses year to date through February. In the same month, policies in force rose slightly on a sequential basis, which is likely to sustain premium growth for the insurer.The Allstate Corporation AL recently released estimates of catastrophe losses for February 2025. It amounted to $92 million, or $73 million after-tax. Notably, when combined with January’s catastrophe losses, ALL’s year-to-date total for February reached $1.17 billion, or $922 million after-tax.
The incidence of such catastrophe losses dampens an insurer’s underwriting profits and subsequently, the combined ratio. Softer underwriting results may also exert strain on a company’s margins. Since property and casualty (P&C) insurers usually remain susceptible to such losses, the companies have to remain equipped with measures such as rate hikes and favorable reserve development to counter the headwinds arising from such losses.
However, frequent catastrophe losses serve as a means for insurers to accelerate the policy renewal rate to make uninterrupted claim payments. Rate hikes are expected to bring higher premiums, which usually account for a massive chunk of an insurer’s top line. Catastrophe losses were $5 billion for 2024, while P&C insurance premiums earned advanced 11.2% year over year.
Recommended Events
Insurtech Hartford Symposium - April 29th & 30th
April 29th & 30th
Connecticut Convention Center
The InsurTech Hartford Symposium is a highly immersive conference experience that brings together great minds and world-class leaders offering the perfect ecosystem to Learn, Connect, and Unwind.
The InsurTech Hartford Symposium is in its fifth year and back in Downtown Hartford. People in the region are getting excited to have the event return to their backyard, and people from out of state are happy for us to be closer to transportation hubs such as high-speed trains and BDL airport. REGISTER
Pre-Day Event ; EmpowerHER, April 28th & 29th Join us for the Inaugural Insurance Thought leadership Event This one-of-a-kind gathering designed to celebrate and empower women and allies in the InsurTech industry. Partnering with the InsurTech Hartford Symposium, we’re offering this exclusive pre-event to maximize your experience in Connecticut and provide you with opportunities to connect, learn, and grow.
This in-person event is dedicated to inspiration, connection, and celebration—a chance to engage with thought leaders, gain career-boosting insights, and foster meaningful relationships that will propel your career in insurance and technology. REGISTER
InsurTech Consulting, LLC and ‘Connected’ newsletter are proud supporters of InsurTech Hartford Symposium and EmpowerHER, available to assist with sponsorship opportunities. Please contact alan@insurtechconsult.com