AI in Insurance
Lemonade Shows Why Artificial Intelligence in Insurance Is the Future
For the past two years, there was little evidence that Lemonade (LMND -2.80%) Chief Executive Officer Daniel Schreiber was correct in his belief that artificial intelligence (AI) would revolutionize the insurance industry. As a result, investors lost faith in Schreiber and his company, and the stock is down 92% from its Jan. 11, 2021, all-time high of $183.26.
However, investor confidence in the company has risen recently. First-quarter results revealed a positive trend in one crucial metric investors use to evaluate if Lemonade's AI-based insurance revolution can replace conventional insurance business models. As a result of signs of progress, the stock price has gained about 11% this year, more than the S&P 500.
So has Lemonade turned the corner in proving its AI-fueled business model can achieve better results than traditional insurance? If so, the company might prove to be the future of the insurance industry.
ZestyAI leaders highlight the benefits of AI within P&C underwriting
According to leaders from ZestyAI, an AI-enabled property and risk analytics platform, property and casualty (P&C) underwriting can be significantly improved using AI.
AI is now contending with a new set of challenges that has disrupted traditional risk approaches. Specifically, climate risk has reached new levels of urgency as ongoing floods, wildfires, and other catastrophes erode the insurability and widen protection gaps of the communities they strike, warned the execs.
When questioned on how AI can assist property insurers and what its limits are, Kumar Dhuvur, the co-founder and chief product officer of ZestyAI, commented, “To me, the carriers that adopt AI first will definitely see a massive benefit. As other carriers cede market share, the forward-thinkers will be able to protect that market share and garner a share of the profits by leveraging models that manage risk better. Obviously, AI is a key enabler. But at the end of the day, it’s all about a better risk-splitting model, and that’s why they’re able to capture that value.”
AI Can Be a ‘Virtual Assistant’ for Claims Adjusters
Claims adjusting resonated with Gia Sawko.
Throughout her 30-year insurance career, she’s viewed adjusters as people who make others whole again. While working as the managing director of global safety and claims for Whole Foods Market, she saw her work as the process of putting folks back together.
“And that really was a big focus for me my entire career,” Sawko shared. “That it wasn’t a claim. It was an actual person.”
Sawko is a former adjuster and currently the director of claims for Gradient AI. She recently spoke about the roles artificial intelligence can play in the claims process during Carrier Management’s InsurTech Summit.
She doesn’t envision AI eliminating adjusters. Instead, she sees the technology making them more efficient.
“So that’s where I think it’s a benefit to adjusters or to carriers,” Sawko said, “and where people will start to embrace it more. Because they’ll see it as this virtual assistant.”
News
Economic anxiety prompts insurance cutbacks among consumers
As uncertainty continues to swirl around the national economy, consumer confidence in their personal finances has extended its decline. According to a new Nationwide Agency Forward survey (PDF) , consumer sentiment on the economy and their personal finances has deteriorated since September 2022, with only 16% of consumers positively rating the overall U.S. economic condition, an 8% decrease from last year. Additionally, only 39% give a positive rating of their own personal finances, also 8% lower than last year.
Looking for ways to cut cost In efforts to save money and manage the impact of inflation, 57% of consumers admit using their savings in the past year for everyday expenses like gas, groceries and housing expenses. Others reported eating out less often (54%), driving less (37%), and delaying major purchases (32%) within the last twelve months.
Eliminating insurance for potential savings
Among the top financial concerns for consumers is the cost of insurance, with 17% rating it among their top financial worries. 51% of consumers said they are looking for ways to save money on their existing insurance policies.
26% are decreasing or plan to decrease coverage/limits on existing policies 23% have or are considering switching to a new insurance agent 20% have already removed a policy from their coverage or plan to in the next six months
“Insurance is a layer of security that policyholders can rely on, especially as consumer prices have risen in the face of inflation. It provides the peace of mind knowing that you’re covered if you encounter a significant claim while your personal budget is stretched thin,” says Beth Riczko, Nationwide’s President of P&C Personal Lines. “My advice, if you are looking at insurance as a way to save, talk to an agent. Make sure you understand the implications of policy changes and how that would impact your current finances.”
If your insurance organization isn't digitizing, you'll lose clients
The 2022 Agency Growth Study conducted by Liberty Mutual and SafeCo reported that digital-first customer engagement has become the standard across industries. Roughly three out of five customer interactions happened online in 2022, compared to less than half in 2019.
While these stats don’t signify an end to in-person encounters, they do illustrate the significant change in customer expectations that companies need to keep up with.
The insurance industry is no exception. Although digitization in the industry grew during the pandemic, the study referenced above suggests insurance-industry modernization has begun to slow down.
The study also found that agencies that had invested in digitization grew 70% faster than agencies that hadn’t, revealing the importance of implementing digital transformation to stay competitive. For agencies still wary of digital transformation costs and processes, the question is actually: Can you afford not to? Let’s explore.
Axa beats first-quarter expectations
Axa, Europe’s second-biggest insurance company, posted a better-than-expected key capital buffer measure in the first quarter, reassuring investors of its capacity to generate cash as it navigates a higher interest rate environment.
The group's solvency II ratio — a measure of its capital strength under EU risk measurement rules for insurers — stood at 217% at the end of March, up 2 percentage points from the end of 2022, driven by strong operating return.
“Solvency was strong at 217%, better than consensus estimate of 208%,” Morgan Stanley said in a note.
KBW and Jefferies noted that the company's new operating capital generation guidance for 2023, between 25 and 30 points for 2023, also beat market expectations.
The French insurer's first-quarter sales rose 2% from the same period a year earlier to €31.8 billion ($35.01 billion), as growth of its property/casualty policies offset a fall in revenue from savings products in France and Italy.
What does risk management innovation look like?
Across the insurance ecosystem, there has been a hastened adoption of digital tools and processes, spurred on by the pandemic and supported by technology breakthroughs such as artificial intelligence.
The push toward the bleeding edge, where a range of vendors clamor for attention to their latest technology, begs the question: What does true risk management innovation look like?
According to Michael Combs, CEO of claims solutions provider CorVel, true innovations are those that wipe the slate clean and allow risk managers to tackle issues in previously unthought-of ways.
“If we were starting from scratch, the question is what can we do today to most effectively manage risk?” Combs said at RIMS’ 2023 RiskWorld conference. “Too often we’re constrained by how things are today and we need to look past that. We need to envision a future where things are very different.”
Innovating risk solutions is in the insurance industry’s DNA, noted Tim Hardcastle, CEO of Instanda.
“MGAs the world over are thriving and raising the bar on innovation through specialization,” Hardcastle said. “In cyber, we’re moving to preventative models to reduce the risk of distributed denial of service attacks. And in the actuarial world, data science, data analytics and machine learning are reshaping how risk management is done. History will recall this period as risk management’s true age of innovation.”
Tech is no death of the insurance salesman
Duck Creek Technologies Inc., an insurance software company, commissioned a survey this year of over 2,000 insurance policyholders in 13 countries and found that 44% of them prefer human interaction — an increase of 9% from a 2022 survey.
Yet, 93% of consumers are confident they have the proper coverage, irrespective of which channel they used to purchase the insurance policy, according to results of the survey released Tuesday.
“As the insurance industry continues to evolve, it is crucial for providers to listen to the needs and preferences of their customers,” Jess Keeney, chief product and technology officer at Duck Creek, said in a statement.
InsurTech/M&A/Finance💰/Collaboration
Highstreet Insurance Partners Completes 150th Agency Acquisition and Remains One of the Top Buyers in 2023
Highstreet Insurance Partners ("HSIP") announced today that it has partnered with Pennsylvania-based Yorke Agency (Yorke) and Maine-based Curley & Associates (Curley) marking their nineth and tenth acquisitions in 2023. Highstreet is one of the fastest growing insurance agencies in North America and has now reached a milestone of 150 acquisitions since forming the company in mid-2018.
"We are delighted to welcome the Yorke and Curley teams, as well as their clients to Highstreet. As we continue our rapid growth, we do it with agency partners who share our values, have entrenched relationships with their clients and are committed to their community." said Scott Wick, Founder & CEO of Highstreet.
Insurtech Cowbell Reveals That 91% Of SMEs With Cyber Insurance Policy Say Service Provider Helped Them Avoid Potential Incidents
Cowbell, the provider of cyber insurance for small and medium-sized enterprises (SMEs), today released its Cyber Round-Up: Q2 2023 report.
The report explores insights from small and medium-sized enterprise (SME) leaders “across the U.S., revealing that many SME leaders with cyber insurance feel better prepared for cyberattacks than those without coverage.”
91% of respondents with cyber insurance say “that their insurance provider has helped them avoid potential incidents.”
Furthermore, 77% of SMEs “with a cybersecurity strategy own a cyber insurance policy and are nearly nine times more likely to feel highly prepared to respond to a cyber incident.”
This, along with other data points, “underscores the notion that cyber insurance is critical to a sound cyber risk management strategy.”
Guidewire Celebrates Powerful Momentum of its PartnerConnect Ecosystem
Guidewire (NYSE: GWRE) announced its Guidewire Marketplace is now home to over 200 partner apps, solidifying the PartnerConnect Solution ecosystem’s position as the largest in the P&C industry. With over 180 Solution partners, the Guidewire PartnerConnect ecosystem continues to expand the breadth of innovative solutions to benefit its global community of P&C insurers.
PartnerConnect includes four relationship tiers (or levels): Access, Select, Advantage, and Premier. The PartnerConnect tiers are designed to recognize individual partners based on their achievements and promotions, and are awarded as partners gain more market traction when their integrated solutions are adopted by Guidewire customers.
“Our PartnerConnect Solution partners have gone above and beyond through their business and integration development”
SageSure Secures $250 Million in Equity Financing from Amwins and Flexpoint Ford
SageSure, one of the largest independent managing general underwriters focused on providing catastrophe-exposed property insurance, today announced the close of a $250 million equity investment led by Amwins and Flexpoint Ford (“Flexpoint”), with participation from Ares Management Corporation.
“We’re grateful for their investment in our capital-efficient business model. Their support will strengthen our ability to protect more American Dreams in challenging markets.”
The transaction partially recapitalizes SageSure’s long-term minority stakeholders while bringing in experienced strategic and financial investors. In connection with the transaction, Amwins and Flexpoint will each appoint a representative to the SageSure Board of Managers.
The equity investment also positions SageSure to continue its growth as the organization surpasses $1 billion of inforce premium. By deploying capital efficiently throughout its ecosystem, SageSure’s strategy supports its carrier partners and producers by creating additional underwriting capacity in an otherwise challenging environment for catastrophe-exposed property risk.
“SageSure is excited to include Amwins and Flexpoint Ford among our sophisticated capital partners,” said Terrence McLean, CEO and co-founder of SageSure. “We’re grateful for their investment in our capital-efficient business model. Their support will strengthen our ability to protect more American Dreams in challenging markets.”
People
Most Influential Woman in Fintech [Ed.note:Recommended] -- Congratulations to each for helping bring technology to life
Influence in the fintech sector takes many forms. There are the entrepreneurs who work long hours to build businesses, create jobs and develop innovative products that help people. There are the venture capitalists who take a chance on these founders with fresh ideas and give them the funding to keep going. There are industry organizers who get everyone on the same page on important matters such as industry self-regulation. And there are consultants and lawyers who help the industry get past all the obstacles that arise.
American Banker's inaugural Most Influential Women in Fintech honors women in all these categories. Why just women? Because the numbers are still dismal for women in fintech. Female-founded startups raised 1.9% of all venture capital funds in 2022, a drop from 2021, according to Pitchbook. Industry observers estimate that female-led startups in the fintech sector received about half of that. By recognizing the outstanding female leaders, we aim to highlight the contributions they are making alongside their male colleagues and allies.
All the people on the list below are helping to bring new financial technology to life and move the industry forward in its efforts to help consumers, businesses and financial institutions innovate and bring about better financial products and experiences.
The Big ‘I’ Announces Leadership TransitionThe Big ‘I’ Announces Leadership Transition
This week, Charles Symington, executive vice president, took charge of all day-to-day operations of the Independent Insurance Agents and Brokers of America (the Big “I").
Bob Rusbuldt, current president & CEO, will concentrate on issues related to the leadership transition and is relinquishing all operational responsibilities to Symington, who will officially assume the position of Big “I" president & CEO on Sept. 1 as planned.
Symington is committed to maintaining the association's preeminent position as the nation's top advocacy group for independent insurance agents and brokers, and is focused on strengthening relationships with industry stakeholders, including company partners, state associations and the agent and broker community.
Enhancing these relationships across various initiatives and programs will further the association's ability to meet the needs of Big “I" members in the modern marketplace, especially in the areas of market access; technology; diversity equity and inclusion (DE&I); talent recruitment and government advocacy, according to Symington.
Symington has a long Big “I" history. After serving as an insurance counsel on Capitol Hill, he started with the association in 2004 and since then has overseen federal and state government affairs, political affairs, grassroots, industry relations, and communications and media affairs. He has also been regularly recognized by The Hill as one of the top lobbyists in Washington, D.C., and has been a key leader in many industry coalitions on Capitol Hill, advocating on a range of topics important to Big “I" members such as flood insurance, small business tax issues, regulatory reforms and more.