AI in Insurance
Will A.I. Become the New McKinsey?
As it’s currently imagined, the technology promises to concentrate wealth and disempower workers. Is an alternative possible?
When we talk about artificial intelligence, we rely on metaphor, as we always do when dealing with something new and unfamiliar.
Metaphors are, by their nature, imperfect, but we still need to choose them carefully, because bad ones can lead us astray. For example, it’s become very common to compare powerful A.I.s to genies in fairy tales. The metaphor is meant to highlight the difficulty of making powerful entities obey your commands; the computer scientist Stuart Russell has cited the parable of King Midas, who demanded that everything he touched turn into gold, to illustrate the dangers of an A.I. doing what you tell it to do instead of what you want it to do.
There are multiple problems with this metaphor, but one of them is that it derives the wrong lessons from the tale to which it refers. The point of the Midas parable is that greed will destroy you, and that the pursuit of wealth will cost you everything that is truly important. If your reading of the parable is that, when you are granted a wish by the gods, you should phrase your wish very, very carefully, then you have missed the point.
Ted Chiang, award-winning author, The New Yorker
AI Pioneer Says its Threat to World May Be ‘More Urgent’ Than Climate Change
Artificial intelligence could pose a “more urgent” threat to humanity than climate change, AI pioneer Geoffrey Hinton told Reuters in an interview on Friday.
Geoffrey Hinton, widely known as one of the “godfathers of AI,” recently announced he had quit Alphabet after a decade at the firm, saying he wanted to speak out on the risks of the technology without it affecting his former employer.
Hinton’s work is considered essential to the development of contemporary AI systems. In 1986, he co-authored the seminal paper “Learning representations by back-propagating errors,” a milestone in the development of the neural networks undergirding AI technology. In 2018, he was awarded the Turing Award in recognition of his research breakthroughs.
News
Berkshire’s Jain on GEICO Profit: ‘Don’t Take It to the Bank’; Tech Needs Rebuild
Even though Berkshire Hathaway’s GEICO achieved a 93 first-quarter combined ratio, an enviable result measured against industry peers, the leader of Berkshire’s insurance operations said the figure is not a true indication of where the business is today.
Answering a question posed by a shareholder for the second year in a row at Saturday’s annual meeting about GEICO’s ability to catch up with competitors who had leapt out ahead of the personal auto insurer in leveraging telematics for pricing and risk selection, Ajit Jain, chair of Berkshire’s insurance operations, initially gave a positive assessment for GEICO on that score.
In fact, GEICO “has certainly taken the bull by the horns and has made rapid strides in terms of trying to bridge the gap” that existed previously, he said, noting that close to 90 percent of new business “has a telematics input” into the pricing decision.
Lemonade shareholders ask why insiders aren't buying in
Another quarter, another earnings call. Since going public on the NYSE, insurtech Lemonade has regularly selected top voted investor questions for its top team to answer during its quarterly financial calls. This time around there were shareholder question marks over just why Lemonade insiders are not buying into the brand – or at least putting their own money where their mouths are.
“How can we expect investors to support the current team if insiders aren't buying shares at today's low levels?”, asked an individual named only as Darren, whose question was read out first as voted for by investors.
The question came as Lemonade’s stock, at $12.40 at Wednesday’s close, has sat at far lower levels than its July 2020 post-IPO price of nearly $70. At launch, the insurtech was priced at $29 per share.
While the price has rallied slightly since the insurer’s financials – as of Friday, May 5, it opened at $14.51 – it remains a far cry from its February 2021 peak of close to $164, a height it reached in the weeks after Lemonade co-CEO and co-founder Daniel Schreiber sold 300,000 shares to bag a windfall of just under $49 million. Schreiber has banked $87.13 million total and fellow co-CEO and co-founder Wininger $62.14 million from share sales since the loss-making insurtech went public, according to Benzinga data.
Negotiating tactics help curb losses in subrogation
Simple but sometimes overlooked negotiating skills can help reduces losses for insurers and other payers that go to subrogation, a pair of subrogation experts said.
By adhering to strategies such as always making a settlement demand and building relationships with other claims professionals, insurers and third-party administrators can offset losses with contributions from other entities involved in workers compensation, auto and other liability claims, they said Wednesday during a session at the Risk & Insurance Management Society Inc.’s Riskworld conference in Atlanta.
Why P&C is starting to use geospatial-based hazard ratings
The P&C insurance industry's combined ratio rose from 99.5% in 2021 to an estimated 105.6% in 2022, according to the Insurance Information Institute. Many insurers have struggled to maintain profitability, and as such, they must seek improved methods to evaluate, underwrite, and price risk.
The increasing losses can be attributed, in part, to the frequency and intensity of significant natural disasters, as well as the population's migration to regions that are more prone to catastrophes. The decline is also due to the insufficient availability of precise and detailed information concerning potential risks and the exposure to loss at each insured location.
Pricing by territory is insufficient
Underlying the challenge – and the need for change – is the fact that typical territory definitions and ratemaking methods are insufficient and inefficient. Insurers have the arduous task of balancing the need to create territories large enough to be credible from a statistical perspective – yet small enough to represent homogeneous regions where exposure to loss is relatively uniform.
Tammy Nichols Schwartz, Senior Director Of Data And Analytics, Guidewire
It's Finally Here! - Toyota Auto Insurance Comes to California
Toyota Auto Insurance, the automaker's branded insurance product, is now available to customers residing in California. Introduced to select markets in 2021, Toyota Auto Insurance offers customers quality, customizable coverage at affordable rates. Expanding into the Golden State represents a major milestone for Toyota Auto Insurance. Not only is California the nation's most populous state, it's also home to the first Toyota manufacturing facility in North America, Toyota Auto Body California.
Toyota Auto Insurance offers consumers a quick, easy, and flexible policy purchase process via Toyota's state-of the-art mobile app, call center agents, participating Toyota dealerships, and the ToyotaAutoInsurance.com website. Toyota Auto Insurance, underwritten in California by 21st Century Casualty Company, is available for both Toyota and non-Toyota vehicles in a customer's household.
"This expansion represents a significant milestone in our rollout of Toyota Auto Insurance," said Rob Spencer, Toyota Insurance President. "Drivers in the Golden State are now able to benefit from the exceptional value and top tier service offered by Toyota Auto Insurance. We look forward to this opportunity to enhance our customers' Toyota ownership experience."
InsurTech/M&A/Finance💰/Collaboration
‘The world has found its groove again’: new era begins for insurtech
Observers of global funding trends in the insurtech sector are at risk of whiplash after recent highs and lows, as reported every three months in Gallagher Re’s Global InsurTech Report.
New funding rebounded 38% to $US1.39 billion ($2.06 billion) in January to March. It was a remarkably sharp turnaround from the fourth quarter, when funding dived 57% to its lowest since the first three months of 2020.
Last year, the buoyant sector was sent sharply back down to earth as investor confidence dried up, triggering widespread and significant cost cutting and revamped business strategies, and a “lot of companies that did not make it through”.
Gallagher Re’s latest report explains that while much was made of last year’s plunge in investment — “Are investors pulling back for good? Will company valuations ever return to their 2020/2021 levels?” – the true story is perhaps under-recognition of the “lumpiness” that mega funding (rounds of at least $US100 million) inflict on the numbers.
“Somewhat astonishingly, if we consider all deals from 2012 onwards, 51% of all capital invested into insurtech has come from mega-rounds … from only 4% of the total number of deals done,” Global Head of InsurTech Andrew Johnston says.
Honoring innovative insurance technology in 2023
As insurance businesses evolve, technology advances and policyholder needs change, property and casualty insurance professionals must make tough decisions about how to best use the digital tools available to them: Should we embrace automated underwriting? Can we trust AI models with claims and underwriting tasks? How can digital connectivity continue to enhance the industry?
PropertyCasualty360 recently queried a cross-section of insurance business leaders to find out what they believe insurance technology innovation looks like in 2023.
Mark Rieder, head of innovation at NFP said, “The fact that we are talking about technology developments in the same breath as insurance is significant in and of itself.” He expects AI-powered personalization to be an impactful insurtech trend in 2023 and beyond.
Joseph D’Souza, founder and CEO of ProNavigator, predicted that in 2023, insurance professionals will increasingly turn to technology and software to help reduce repetitive tasks and enhance productivity. “In a nutshell, [we will find] ways to do more with fewer people while still delivering the expertise, service and customer experience that our customers expect.”
Digital Transformation: Sutherland, Bold Penguin To Develop Solutions For Commercial Insurance
Sutherland, a digital transformation technology and services company, has entered a partnership with Bold Penguin, a digital platform with integrated solutions that simplify commercial insurance.
This partnership allows Sutherland and Bold Penguin “to drive digital transformation in customer acquisition, new business, and underwriting for the commercial insurance industry.”
Sutherland’s end-to-end AI-based underwriting ecosystem “will integrate with Bold Penguin’s state-of-the-art analytics solution for data enrichment and validation.”
The combined capabilities “deliver superior data quality and intelligence to underwriters increasing productivity, speed to market, and decision-making.”
The partnership will “develop modern solutions for customer acquisition, business development, and underwriting.”
CCC and Verisk Form Strategic Partnership to Bring Innovations to P&C Insurance Claims
Initial Collaboration will Work to Prevent Auto Insurance Fraud
CCC Intelligent Solutions Inc. (CCC) and Verisk Analytics, Inc. (Verisk) announced today a strategic partnership to leverage the two providers’ market-leading technologies to bring new innovations to P&C insurance claims. CCC is a leading cloud platform for the P&C insurance economy and Verisk is a leading global data analytics and technology provider.
The first project announced through the partnership is the planned integration of anti-fraud analytics from Verisk’s claims fraud detection solution with CCC’s claims platform. This integration will help P&C insurers fight the rising threat of fraud in auto physical damage (APD) claims. When fully integrated, insurers will be able to quickly and easily identify potential fraud in real-time within existing CCC-powered workflows.
“Working with Verisk we can leverage the strengths of both companies to create new opportunities for our shared customers,” said Marc Fredman, chief strategy officer at CCC. “Mitigating fraud is a priority for insurers. By bringing the right data elements to adjusters’ fingertips, we can help them reduce fraud risk.”
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