With car insurance rates rising sharply in the last few years, providers of all sizes will likely be looking for ways to build loyalty and improve customer experiences in 2024. 

But that’s a difficult trick to pull off with prices rising across the board. Customers will be looking for competitive prices and discounts, which aren’t easy to offer in our current landscape.

This somewhat concerning trend has also coincided with a more promising one: the rise of telematics devices, which offer a distinct opportunity for providers. However, these opportunities also have their skeptics, as some drivers cite privacy concerns as a reason they’re skeptical about giving telematics insurance a try.

Still, it seems like the tide is turning, and telematics has a chance to make a real difference in the marketplace. Below, we’ve outlined the biggest advantages — and how providers can best communicate those advantages to their customers.

See also: How Better Data Can Turn Auto Insurance Around

The state of telematics insurance

A recent survey found that more than three in 10 policyholders were hesitant to put a tracking device in their car, citing privacy concerns.

Simultaneously, though, a recent study from Mordor Intelligence predicts that the telematics industry will nearly double in market size by the end of the decade. 

As the technology and infrastructure around telematics improve, these devices will continually become a more beneficial option for both providers and their customers. However, it’s up to the providers to emphasize those benefits and quell any concerns. 

How telematics can help

It’s clear that car insurance customers, already weary from years of rate increases, will be looking for discounts in 2024.

As ValuePenguin’s annual State of Auto Insurance report shows, car insurance rates in the U.S. are expected to rise by nearly 13% this year. Drivers are currently paying $1,984 a year on average — or $165 a month — and those averages will grow by 2025, largely due to extreme weather damage and rising repair costs. 

According to a report from Analytics IQ, a majority of drivers considering dropping their provider cite high rates as the main reason. 

In this shifting landscape, price comparisons will likely influence consumer behavior more than ever, which is all the more reason that providers need to attract customers with potentially discount-offering policies like telematics insurance. 

While not every driver saves money with a telematics device, all drivers have the potential to do so. Plus, these devices can offer drivers the ability to track their own driving and make improvements — simultaneously building loyalty and lowering their accident risk. 

Highlighting the benefits 

The simplest way to quell any concern is, of course, to highlight the benefits over the costs. Telematics should be presented as an opportunity for customers — a chance to be rewarded for being a good, safe driver.

One of the biggest points of emphasis here is customer control. With telematics, drivers have an enormous say in how much they pay for insurance, which is not true with many other coverage types. 

It’s also worth leaning into the gamification of this benefit. Not only can drivers use telematics to lower their rates and improve their driving, but they can track that information in real time — often through something as simple as a mobile app. 

A 2023 report from J.D. Power found that digital service satisfaction is the lowest among insurance customers when they can’t find the information they need on an insurer’s app or website. Telematics offers an opportunity for providers to beef up their digital presence, as well as a plethora of easy-to-access information for customers.

Above all, providers should also let the savings do the talking. In addition to emphasizing that telematics lets drivers “control” their rates, it’s also worth detailing the high, high upside for the safest drivers. Including testimonials or examples of especially low customer rates on your website can demonstrate just how beneficial telematics insurance can be. 

Leading with transparency

That said, it’s a mistake to address the positives and pretend that the negatives don’t exist. With research showing that privacy is the biggest concern for drivers who are skeptical of telematics, it’s crucial that providers get ahead of these worries by addressing them head-on.

This can be as simple as disclosing exactly what your telematics devices are tracking and what customer data is being used for. 

It’s also essential to make sure that disclosure is easily available for customers — shown right below the long list of benefits — and that your employees are briefed on explaining these details in full. 

See also: Oops! The Futurologists Were Wrong

Accepting the skepticism

The reality is that some people will likely remain skeptical of telematics for a long time. That’s OK — there are more than 230 million licensed drivers in the U.S., and the majority will gladly accept the freedom and potential discounts over privacy concerns. 

But pushing too hard could turn some customers off completely. Ultimately, it’s better to lead with the benefits, address the skepticism and let the cards fall where they may. Telematics doesn’t seem to be going anywhere, and you don’t have to win everyone over in a day. 

KEY TAKEAWAY:

--The rapid surge in litigation exposure has rendered the term "nuclear verdicts" --typically those exceeding $1 million — obsolete, with "thermonuclear verdicts," exceeding $10 million, emerging as the new benchmark.

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Litigation stands as the foremost challenge within the P&C industry. From 2018 to 2023, litigation management costs for the combined P&C sector surged 19%. As detailed in AM Best Financial reports, this escalation is reflected in an approximate $24 billion loss adjustment expense (LAE). According to alternate assessments, the top 50 carriers in the U.S. individually allocated an average of $500 million toward litigation expenses. If we conservatively estimate that litigation expenses represent only a quarter of the total litigation spending, accounting for expense and indemnity, the industry is funneling approximately $100 billion annually through its litigation departments.

However, litigation experts contend that the true extent of litigation challenges has yet to fully manifest. A prominent trade organization has identified combatting legal system abuse as the primary focus for the P&C sector in 2024. In many markets, lawyers have emerged as the dominant advertisers, often yielding substantial rewards in nuclear verdicts, which have now escalated to thermonuclear proportions. The rapid surge in litigation exposure has rendered the term "nuclear verdicts" --typically those exceeding $1 million — obsolete, with "thermonuclear verdicts," exceeding $10 million, emerging as the new benchmark. The consequences of unfettered litigation are exemplified by events such as the world's largest personal injury firm filing an astonishing 25,000 lawsuits in a single week in 2023.

Big tech and Wall Street have taken notice. One software company raised $50 million to use AI to draft demand letters for plaintiffs’ attorneys, and business is so good that one $30 billion technology investment fund just purchased another litigation tech company. Wall Street is deploying hundreds of millions of dollars to remove any obstacles to plaintiff attorneys acquiring as many claimants as possible. 

If this continues through 2024, insurers could pump an additional $40 billion directly to their courtroom opponent – plaintiffs’ personal injury attorneys. 

What’s next? What’s at stake?

See also: Attorney Involvement Keeps Claims Soaring

Insurance Litigation Today: A System Poised for Disruption

Over the past decade, insurers have increasingly delegated litigation responsibilities, first to attorneys and subsequently to external bill reviewers. The introduction of bill reviewers has since shaped today's industry standard, emphasizing the measurement of adjusters and law firms based on expense rather than value.

While insurers and insurance defense attorneys have grappled with the challenges posed by bill reviews for years, viable alternatives have only recently emerged. At the heart of this issue lies the need for a universally accepted standard for assessing value, with insurers predominantly focusing on cost metrics. Initially, bill reviewers provided a valuable service by scrutinizing expenses, yet insurers have failed to progress to the critical stage of controlling actual outcomes, particularly settlements.

Meanwhile, plaintiffs’ attorneys measure their value by one thing and one thing only: their bank accounts. Plaintiffs’ attorneys are typically paid a percentage of the settlements they obtain.

After decades of rising litigation expenses and little innovation, insurers named this dynamic social inflation. Insurers were able to predict the decreasing performance well enough to stay profitable. So long as insurers could predict the decline in claims litigation and insurance defense quality, they could price it into the premium.

But this incentive structure is powerful enough to end an insurance market – even before the ensuing exponential impact of litigation finance and AI. Over time, plaintiffs’ attorneys push settlements higher and higher and higher. They take 40% of the settlement and reinvest those settlements into more advertising. 

Next, plaintiffs’ attorneys leverage the increased income to invest in staff to prolong litigation instead of settling. Armed with an increasing amount of money and people, insurers reinforce this behavior by paying more and more, especially on the courtroom steps. Left unchecked, insurance becomes unaffordable or unavailable, as evidenced by the Florida property market. By the time legislators try to fix everything, the markets could be gone forever. 

Within the four walls of a claims litigation department or law firm, you can see with your own eyes how litigation became such a drain on the industry. Defense attorneys are paid by the hour to send emails to adjusters, and adjusters have to copy and paste those emails into claims systems to satisfy regular quality audits. 

The average adjuster routinely prioritizes work by email. The insurance defense attorney is paid the same hourly rate, whether productive or passive. For defense attorneys who go rogue and try to win, the external bill reviewers delete significant portions of their income. 

As a result, the average insurance defense attorney and plaintiff attorney often do not even begin exchanging serious settlement offers until after a substantial expense is incurred. Insurers typically can use billing data to watch this happen but do not have any other data or tools to control it. Ultimately, some event forces the attorneys to prioritize the case, and they call each other and settle … finally.

Insurance Litigation Tomorrow: Starting With Simplification

In 2023, the national P&C industry was compelled to confront the unfolding situation in Florida, which served as a harbinger of broader challenges emerging nationwide. This prompted a decisive response, with insurers initially turning to AI and predictive analytics to address the burgeoning crisis. However, they swiftly realized that such technological solutions were not the immediate panacea.

The unique nature of litigation, wherein insurers navigate a complex network of numerous lawyers from diverse law firms, with plaintiffs' attorneys often holding sway as the ultimate decision-makers, posed a formidable obstacle to innovation. Any transformative efforts needed to be rooted within the existing system, focusing on optimization from within.

See also: Role of NLP in Claims Management

While the innovation opportunities are complex from a people standpoint, they tend to be simple from a process standpoint:

• Basic Data Standards: Insurers needed a standardized, best-practices data set. They needed to understand the elements of a case that generate case progress or help define case value. They also required a clear expectation of what data points make up a case, what data points require further evaluation and when that evaluation should be complete. Insurers needed to leverage these basic standards to start workflow simplification, automation (including integrations) and prioritization.
• Workflow Simplification: Insurers needed to review their data to see which activities drove reduced exposure and which added exposure. Insurers needed to stop the legal tasks that added expense but did not affect resolution.
• Workflow Automation: Adjusters and attorneys are initially trained to be helpful at strategic work but are often saddled with inefficient administrative work. Insurers needed to shift them to making decisions, not setting reminders and summarizing emails. They also needed to leverage litigation automation tools to help adjusters and attorneys automatically move cases along.
• Settlement Optimization: Insurers needed to identify which cases could be settled and ensure the best resources prioritized that essential activity. Insurers needed to deprioritize cases that were not ripe for settlement.
• Integrations: Claims litigation departments needed to learn how to automatically get information out of claims systems and to law firms, and vice versa. Claims litigation departments needed to work seamlessly with their attorneys rather than interacting with them only through invoice reductions.
• Management Engagement and Prioritization: Claims litigation departments needed to explain to management why litigation was so expensive and how investment in it could yield value. 
• Halt to Legal System Abuse: Insurers needed to make social inflation more than an idea. They were required to show regulators the litigation cost drivers and the impact on policyholders and commerce. 
• Rewards for the Winners: Insurers needed to see which adjusters and attorneys obtained the best results and which needed additional training. Insurers needed to show adjusters and attorneys they cared about this problem and prevent them from taking their talents to the plaintiffs’ side.

The Industry Tipping Point: Will P&C Stop Legal System Abuse Before It's Too Late?

Insurance typically undergoes incremental change, not rapid transformation. Yet insurers now find themselves directly confronting the plaintiffs' bar in courtrooms, bolstered by support from Big Tech and Wall Street.

This litigation tipping point isn't your typical insurance issue. While inertia might lead insurers to attempt to predict this crisis rather than prevent it, this level of change isn't easily foreseeable.

Fortunately, insurers confront this challenge in the age of cloud technology. Core systems providers have equipped them with the necessary tools to combat legal system abuse should they choose to do so.

In the rapidly evolving landscape of the insurance industry, the integration of cutting-edge technologies is reshaping the way companies operate and serve their clients. One such groundbreaking advancement that is set to revolutionize the insurance sector in 2024 is generative artificial intelligence. This sophisticated technology is poised to significantly improve various aspects of insurance, from underwriting processes to claims management.

Generative AI operates on the principle of generating new content, such as images, text or even entire datasets, based on patterns and information it has learned from vast amounts of existing data. This capability has the potential to redefine how insurers assess risks, personalize coverage and streamline operations for enhanced efficiency.

1. Precision Underwriting:

Generative AI enables insurers to conduct more precise underwriting by analyzing extensive datasets to identify nuanced patterns and correlations. This leads to a more accurate evaluation of risks, allowing insurers to tailor coverage to individual policyholders based on their unique circumstances, ultimately optimizing pricing strategies.

2. Enhanced Customer Experience:

The integration of generative AI enhances the overall customer experience by enabling insurers to provide personalized services. From crafting customized policies to offering targeted recommendations, this technology allows insurers to understand and meet the evolving needs of their clients, fostering stronger relationships.

See also: What Generative AI Offers the Insurance Industry

3. Fraud Detection and Prevention:

The insurance industry has long grappled with fraudulent claims. Generative AI's ability to analyze vast datasets and identify anomalies facilitates robust fraud detection and prevention mechanisms. Insurers can identify suspicious patterns, flag potential fraud and mitigate risks before processing claims.

4. Efficient Claims Processing:

Generative AI streamlines the claims processing workflow, reducing the time and resources required for manual assessment. By automating mundane tasks and leveraging predictive analytics, insurers can expedite the claims settlement process, leading to faster and more accurate payouts for policyholders.

5. Data Security and Privacy:

As insurers handle sensitive customer information, data security and privacy are paramount. Generative AI algorithms are designed with advanced security features, ensuring the protection of confidential data. This technology assists insurers in maintaining compliance with evolving data protection regulations and safeguarding the trust of their policyholders.

6. Predictive Analytics for Risk Management:

Generative AI's predictive analytics capabilities empower insurers to anticipate and mitigate potential risks more effectively. By analyzing historical data and identifying emerging trends, insurers can adjust their strategies, minimizing losses and optimizing risk management protocols.

7. Product Innovation:

Generative AI facilitates product innovation. Insurers can leverage this technology to develop new, tailored insurance products that align with changing consumer preferences and market demands. This adaptability ensures that insurance offerings remain relevant and competitive in a dynamic marketplace.

See also: 4 Key Questions to Ask About Generative AI

8. Regulatory Compliance:

Staying compliant with regulatory requirements is a critical aspect of the insurance industry. Generative AI assists insurers in navigating complex regulatory landscapes by automating compliance checks and ensuring adherence to evolving legal frameworks, reducing the risk of penalties and legal complications.

9. Cost Efficiency:

By automating routine tasks and optimizing processes, generative AI contributes to cost efficiency. Insurers can allocate resources more strategically, reducing operational expenses.

10. Industry-wide Collaboration:

The adoption of generative AI encourages collaboration within the insurance ecosystem. Insurers, insurtech startups and technology providers can work together to harness the full potential of this technology, fostering innovation and driving transformations across the industry.

Generative AI is poised to reshape the insurance industry in 2024, offering unparalleled opportunities for insurers to enhance efficiency, improve customer experiences and stay ahead in an ever-evolving landscape. Embracing this transformative technology will be crucial for insurers seeking to thrive in the dynamic and competitive insurance market of the future

The insurance industry, a cornerstone of financial stability, is confronted with an array of challenges in 2024 that demand innovative solutions and strategic adaptation. As insurers navigate this dynamic landscape, they encounter complexities ranging from technological disruptions to evolving consumer expectations. In this article, we delve into the 10 major challenges poised to shape the trajectory of insurers in 2024.

1. Technological Integration:

Embracing and integrating cutting-edge technologies, such as artificial intelligence and blockchain, remains a top challenge for insurers. Adapting legacy systems to meet the demands of a digital era requires significant investments and a robust change management strategy.

2. Cybersecurity Threats:

With the increasing digitization of operations, insurers face heightened cybersecurity risks. Protecting sensitive customer data from cyber threats and ensuring compliance with stringent data protection regulations are paramount challenges in safeguarding the industry's reputation and maintaining customer trust.

See also: Risks, Trends, Challenges for Cyber Insurance

3. Regulatory Compliance Complexity:

The regulatory landscape is ever-evolving, with changes in data protection laws, financial regulations and environmental standards. Navigating these complexities demands continuous vigilance, adaptation and investment in compliance management systems.

4. Climate Change Impact:

The escalating impact of climate change introduces a new dimension of risk for insurers. From more frequent and severe natural disasters to changing patterns in health and life expectancy, insurers must reassess and adapt their risk models to stay ahead of the curve.

5. Shifting Consumer Expectations:

Changing consumer expectations, influenced by advancements in technology and a demand for personalized experiences, pose a challenge for insurers to stay relevant. Meeting these evolving expectations requires the development of innovative, customer-centric products and services.

6. Talent Acquisition and Retention:

Attracting and retaining top talent remains a persistent challenge for insurers. As the industry undergoes digital transformation, there is a growing need for skilled professionals in data analytics, cybersecurity and emerging technologies, creating intense competition for qualified personnel.

7. Economic Uncertainty:

Global economic uncertainties, exacerbated by geopolitical tensions and unexpected events, pose challenges for insurers in predicting and managing financial risks. Navigating economic fluctuations while maintaining profitability requires agility and strategic risk management.

See also: 20 Issues to Watch in 2024

8. Pandemic Preparedness:

The continuing impact of the COVID-19 pandemic and the potential for future health crises underscore the need for insurers to enhance their pandemic preparedness. Developing resilient business continuity plans and adapting to remote work dynamics are critical aspects of this challenge.

9. Ethical Use of Data:

As insurers leverage vast amounts of data for decision-making, the ethical use of this information becomes a focal point. Balancing the benefits of data-driven insights with privacy concerns and ethical considerations poses a challenge in maintaining trust with policyholders and the broader public.

10. Competition from Insurtech:

The rise of insurtech disruptors presents a significant challenge for traditional insurers. These agile startups leverage technology to offer streamlined, customer-friendly experiences, forcing established insurers to innovate, adapt and explore strategic partnerships to remain competitive.

In conclusion, the insurance industry faces a complex and rapidly changing landscape in 2024. Successfully navigating these challenges requires a combination of strategic foresight, technological agility and a commitment to meet evolving customer needs. By addressing these challenges, insurers can position themselves for long-term success in an industry marked by resilience and adaptability

In the dynamic landscape of insurance, the claims process stands as a pivotal point where customer satisfaction is either strengthened or compromised. As technology continues to evolve, insurers are leveraging innovative solutions to reshape the claims experience. In this article, we explore 10 groundbreaking ways technology is revolutionizing the claims journey, ensuring efficiency, accuracy and enhanced customer satisfaction.

1. Automated Claims Processing:

One of the key advancements in reshaping the claims experience is the implementation of automated claims processing systems. Using artificial intelligence (AI) and machine learning, insurers can reduce processing times and minimize manual errors.

2. AI-Powered Fraud Detection:

Technological advancements enable the integration of AI algorithms for sophisticated fraud detection. By analyzing patterns and anomalies in claim data, insurers can identify potentially fraudulent activities, safeguarding against financial losses and maintaining the integrity of the claims process.

See also: 5 Ways Generative AI Will Transform Claims

3. Digital Documentation and Imaging:

The shift toward digital documentation and imaging has significantly enhanced the efficiency of claims processing. Mobile apps and digital platforms allow policyholders to submit photos and documents related to their claims, expediting the assessment process and providing a seamless user experience.

4. Blockchain for Transparency:

Blockchain technology is making waves by providing a secure and transparent platform for claims processing. With distributed ledger technology, insurers can create an immutable record of claims, reducing disputes and enhancing trust between insurers and policyholders.

5. Telematics for Accurate Assessments:

Incorporating telematics data from connected devices, such as IoT-enabled vehicles, enables insurers to obtain real-time information for more accurate claims assessments. This data-driven approach ensures precise evaluations, leading to fair and prompt settlements.

6. Chatbots for Instant Support:

The integration of chatbots in the claims process offers policyholders instant support and information. By leveraging natural language processing, chatbots can answer queries, guide users through the claims submission process and provide timely updates, enhancing overall customer satisfaction.

7. Predictive Analytics for Risk Assessment:

Technology enables insurers to employ predictive analytics models for more accurate risk assessments. By analyzing historical data and patterns, insurers can identify potential risks, allowing for informed decision-making and risk mitigation strategies.

See also: Making the Claims Process More Efficient

8. Mobile Claims Tracking Apps:

Mobile apps dedicated to claims tracking empower policyholders to monitor the status of their claims in real time. Providing transparency and accessibility, these apps enhance communication between insurers and customers, fostering a more collaborative and responsive claims experience.

9. Augmented Reality for Property Claims:

In property insurance, augmented reality (AR) is transforming the claims assessment process. Insurers can use AR to remotely assess damages, enabling quicker decision-making and reducing the need for on-site inspections, particularly in emergencies.

10. Personalized Communication Platforms:

Technology enables insurers to implement personalized communication platforms that cater to the individual needs of policyholders. Tailored updates, alerts and guidance throughout the claims process contribute to a more engaging and customer-centric experience.

Technology is undeniably reshaping the claims experience in the insurance industry. The integration of automated processes, AI-driven solutions, and digital platforms not only enhances efficiency but also places customer satisfaction at the forefront. As insurers continue to embrace these technological innovations, the future of claims processing promises a more streamlined, transparent and customer-friendly journey

Over the past year, generative AI (or GenAI) has hijacked the technology agenda in every industry—including P&C insurance. Given its ability to generate virtually any form of content based on the inputs it's trained on, a potentially endless number of GenAI use cases in P&C insurance span distribution, underwriting, claims and beyond.

The enthusiasm is palpable. Today, 59% of large insurers are actively experimenting with GenAI, with most running up to 15 different proofs of concept or early-stage prototypes. The payoff could be huge: According to McKinsey, generative AI could help unlock up to $1 trillion in annual value for the insurance industry worldwide. 

Yet as the transition from conceptual to operational accelerates in the months ahead, insurers will face formidable challenges. GenAI-enabled fraud, increased government scrutiny and any number of legal complications will threaten progress. Yet many carriers will discover the most significant hurdles will stem from the practical realities of supporting and leveraging generative AI to its fullest potential.  

For some, these obstacles could derail their efforts to harness GenAI to their competitive advantage. For others, the hype surrounding this technology will give way to a more pragmatic approach that enables them to make full use of what is arguably the most consequential technology of the next decade. 

P&C Joins the GenAI Revolution 

To understand the dynamics in play, let's start with the basics. generative AI is a subset of deep learning that leverages sophisticated algorithms to digest vast amounts of structured and unstructured data, learn patterns and generate original content—including text, audio, images, video and code. If early signs are any indication, generative AI has the potential to unleash a whole new level of human productivity. 

GenAI isn't new—its foundations and the large language models (LLMs) it uses trace back to at least the 1960s. The public release of OpenAI's ChatGPT in November 2022 catapulted generative AI into the popular imagination. By December 2023, a survey found that 76% of personal lines and 79% of commercial lines carriers were either studying or piloting GenAI applications in their operations. What they're learning is eye-opening. 

See also: 4 Key Questions to Ask About Generative AI

Generative AI Use Cases: Unlimited

According to Celent, 84% of senior insurance executives expect to gain a sustainable competitive edge from their investments in this technology. But that's predicated on identifying the most compelling use cases for GenAI, from transforming distribution and underwriting processes to revolutionizing claims handling and more. 

Coaching or "co-piloting" agents through the sales process for complex products like cyber or summarizing submission data to streamline underwriting workflows have emerged as some of the most promising applications. So has synthetic claims analysis to identify opportunities for new lines or potential enhancements to existing ones. But as many carriers are learning, identifying advantageous use cases is one thing. Implementing the requisite infrastructure and data ecosystems to support them is another. That's where the reality check comes in. 

The Critical Role of Cloud-based Infrastructure

Infrastructure considerations are paramount to leveraging generative AI's full potential. For one thing, diverse and continuously refreshed datasets are required to train GenAI for use cases throughout the insurance life cycle. As Forbes reports, a single model must often span multiple servers and accelerators to execute a trained language models that may have billions of parameters. 

This level of complexity requires an average 4X improvement in hardware computing performance and a 50X increase in processing workloads. Most organizations won't have the appetite for the investments and overhead needed to support that kind of performance on their own. Nor is it likely they'll be successful if they did. 

According to Deloitte, a modern, cloud-based infrastructure is required to support and scale the computational demands of GenAI applications. Insurers will need one that combines core, data and digital to integrate with and interpret data from an expanding ecosystem of data partners and make it actionable. 

Governance Takes Center Stage

As the industry navigates the complexities of GenAI adoption, governance will become the linchpin in ensuring effective and responsible deployment. Establishing frameworks for data privacy, security, transparency of training data and compliance with evolving regulatory mandates will be business-critical. 

In view of these needs, look for more insurers to establish centers of excellence (CoE) to oversee GenAI implementations. For each use case, the CoE must define factors such as: Who is the user? What is the user experience? What data and functionality are they permitted to access—and why? 

There's also another critical dimension. Making GenAI truly effective and empowering means giving the people using it—employees, customers, partners—an understanding of how it's being used and what data serves as its inputs. In coming months, look for regional insurers to learn that, like their major carrier brethren, they must tap multiple large language models simultaneously to corroborate output details and prevent AI "hallucinations" that can reinforce biases or lead to errors.  

See also: 5 Ways Generative AI Will Transform Claims

Human + GenAI: The Future of the P&C Workforce

GenAI's most promising P&C use cases should showcase another reality: This technology isn't about replacing human roles. It's about empowering them. Humans with domain expertise are needed to identify use cases and develop, test and deploy GenAI-enabled applications. A human-in-the-middle must also vet AI-produced output for factual errors and bias. 

According to McKinsey, leaders must take a broad view of GenAI's capabilities and deeply consider its implications for workforce needs. Training and upskilling will be required. So might new roles such as AI trainers, interpreters and ethicists. 

According to a recent study published by Harvard Business School, it's well worth the investment. Designed to measure the impact of AI on knowledge work, the study found that teams using AI completed 12% more tasks on average, completed them 25% faster and produced 40%-higher-quality results than those not using AI. Better still, workers with the lowest scores before the study saw the most significant jump (43%) in performance when they could use AI—suggesting the technology works as a skills leveler. 

The Road Ahead: Embracing a Pragmatic Approach

As the industry moves forward, a checklist approach can guide insurers in refining their strategies for generative AI: 

• Get Smart: Keep abreast of advances in generative AI, incorporating new insights and technologies into your strategic road map.
• Modernize Your Infrastructure: Implementing and scaling generative AI use cases isn't possible with legacy systems; if you haven't deployed a modern, cloud-based insurance platform, now is the time. 
• Start Experimenting: Identify significant use cases with a clear and low-stakes path to success. 
• Establish a Center of Excellence: Develop robust governance frameworks to ensure data privacy, security and regulatory compliance as new GenAI-enabled applications are introduced and scaled safely. 
• Invest in Skills Development: Define and deploy training initiatives to develop the expertise and capabilities needed to deploy, manage and refine GenAI applications.
• Prepare for the Unexpected: Anticipate and plan for potential obstacles, including ethical considerations, technological complexities, evolving data requirements and market dynamics. 

The transition from irrational exuberance to reality will not be easy for some carriers. But it will be necessary. With more than $1 trillion in annual value at stake, insurers that refine approaches, focus on governance and foster human-GenAI collaboration won't just safely navigate the near term—they'll shape the future of insurance. 

Just as homeowners insurance premiums in the U.S. seem to be catching up with soaring claims, early signs are emerging that the hurricane season in the Atlantic may range between awful and truly horrific.

The El Niño and La Niña weather patterns typically create countervailing effects on the severity of a hurricane season. El Niño raises temperatures across the U.S., meaning there's more energy in Atlantic waters that can turn into severe hurricanes, but the weather pattern also causes wind shear that can break up storms as they start to form. La Niña cools temperatures, but it also reduces the wind shear, letting more storms form.

This season is thus far looking like the worst of both worlds. 

We are currently in an El Niño pattern that has temperatures in the Atlantic at levels usually not seen until July, and they will only get worse. Last year, the heat from El Niño alone was enough to turn what was expected to be a below-average season into one that was about 20% worse than normal. 

And El Niño is expected to give way to La Niña by late summer or early fall, reducing wind shear and making it more likely that heat-driven winds can turn into major storms.

Weather predictions are always uncertain, especially this far ahead, and no one is even trying to guess how many hurricanes will make landfall or how destructive they'll be, but as a former ocean sailor, I suggest we get ready to batten down the hatches.

The Washington Post quoted one meteorologist as saying: “Basically, it is the perfect recipe for hurricanes to form and strengthen.”

Another told the Post: “There’s plenty of time ahead before we get to the meatiest part of the hurricane season. But a lot’s going to have to change … for forecasters to feel much more comfortable going into hurricane season.”

The dire forecast comes as the homeowners insurance industry was finally getting some good news. After posting underwriting losses for six of the past seven years, insurers in the U.S. homeowners market were expected to see profitability improve in 2024 because of rising rates and stricter underwriting, according to Fitch Ratings.

But how much can the home insurance sector's combined ratio come down 2023, when the Triple-I estimates it was 112.3, the worst since 2011?

A lot will depend on catastrophe losses, so all eyes will be on the Atlantic hurricane season.

Here's hoping something changes the current trajectory.

Cheers,

Paul

Inefficient data collection processes often impede the smooth handling of insurance claims, resulting in delays and inaccuracies that can frustrate both insurance companies and policyholders. The urgency to streamline these processes and enhance efficiency has never been more pressing. 

As an insurance adjuster, you understand the importance of accurate and timely information in assessing and resolving claims effectively. But traditional methods can no longer keep up with the demands of the modern insurance landscape. 

Your claims management can be significantly streamlined by leveraging advanced technology solutions, such as automated data capture tools and secure cloud-based platforms. 

But navigating the complexities of claims management requires a keen understanding of the challenges that often arise. Let's delve into the key hurdles faced within the industry.

Comprehensive Data Collection 

Before, during and after incidents, the inefficiencies in gathering detailed information hinder accuracy and speed. Without a complete picture of the situation, insurers may struggle to assess claims accurately, leading to delays and potential disputes. 

Documenting Work 

The importance of meticulously documenting workflows cannot be overstated. Incomplete or inadequate documentation of processes can create bottlenecks in the claims handling process, causing delays and increasing the likelihood of errors. Clear and detailed documentation is essential for ensuring transparency, accountability and efficient resolution of claims. 

See also: Role of NLP in Claims Management

Capturing Data With Speed and Efficiency 

An essential aspect of claims management is the ability to capture data swiftly and efficiently. However, traditional claims processes often fall short. Timely data capture is crucial for expediting the assessment, cleanup, repair and estimation of insurance claims, enabling insurers to provide timely assistance to policyholders in need. 

Data Security and Ownership 

Protecting policyholder data is paramount in claims management. Ensuring secure data handling practices not only preserves data integrity but also safeguards policyholder privacy. With data breaches on the rise, maintaining robust security measures is essential for upholding trust with policyholders and complying with data protection regulations. 

As an insurance adjuster, By staying informed and addressing key pain points, you can elevate your expertise and deliver optimal outcomes for both insurers and policyholders. 

Role of Technology in Claims Management 

In the fast-paced world of claims management, technology plays a pivotal role in revolutionizing processes and enhancing efficiency. Let's explore the key technologies. 

AI-Powered Claims Processing  

AI algorithms can quickly analyze claim documents, extract relevant information and even predict the likelihood of fraudulent claims. This not only speeds the claims settlement process but also reduces errors. 

Blockchain for Secure Data Management  

Blockchain technology creates an immutable ledger of all claim-related activities. By using blockchain, insurers can enhance data security, prevent fraud and enable seamless information sharing among stakeholders. 

3D Virtual Tours and Floor Plans  

Incorporating 3D virtual tours and floor plans can significantly improve the accuracy of property damage assessments. Adjusters can virtually inspect properties, assess damages more precisely and expedite the estimation process, leading to faster claims resolutions. 

Predictive Analytics for Claims Forecasting  

Predictive analytics tools analyze historical data to forecast claim trends, identify potential risks and estimate claim costs accurately. By using predictive analytics, insurers can manage claims, allocate resources effectively and make data-driven decisions to optimize claims outcomes. 

In the dynamic realm of claims management, embracing cutting-edge technologies is no longer a choice but a necessity. By harnessing the power of technology, you can navigate the complexities of claims handling, setting new benchmarks for industry excellence. 

See also: Making the Claims Process More Efficient

Addressing Key Challenges 

In claims management, leveraging technology to overcome key challenges is essential.  

Process Optimization Through Technology 

Automated workflows and real-time tracking enable you to handle claims swiftly and accurately. Data can be processed seamlessly, leading to quicker resolutions for policyholders. 

Enhancing Communication With Policyholders 

Technology enhances communication channels. Policyholders are kept informed throughout the claims process, through automated alerts, personalized updates and interactive platforms. 

Standardization of Claims Procedures 

Standardizing claims procedures is crucial to ensure consistency and reduce confusion. By using technology-driven platforms, insurers can create uniform processes that align with industry regulations and best practices. This standardization not only enhances operational efficiency but also instills confidence in policyholders by providing a clear framework for claim resolution.

By leveraging advanced tools and software, you can streamline processes, reduce manual tasks, and enhance accuracy in claim assessments. This boosts efficiency and improves the experience for adjusters and policyholders.

Embracing innovative solutions is no longer an option but a necessity to address challenges effectively and provide timely and accurate resolutions. 

KEY TAKEAWAYS:

--The demand for volcano catastrophe models has been tepid, meaning many insurers may not fully recognize the eruption-related risks to which they are exposed, which include direct physical damage as well as indirect effects such as supply chain disruption.

--The "what if" methodology of downward counterfactual analysis probes the outcomes of near-miss incidents, assuming they had escalated adversely. These insights can enhance preparedness and reduce the impact of similar future events.

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Volcanic eruptions are relatively uncommon when compared with the frequency of other geohazards, such as earthquakes. But volcanic unrest occurs much more often.

Volcanic unrest is signified by precursors such as seismicity, ground deformation, release of volcanic gases and increased heat flow. Unrest can last for months or even years. For example, in the 1930s, there were several years of unrest on the Caribbean island of Montserrat. There was no eruption following the unrest in the 1930s, nor in the 1960s, when there was further major unrest on the island. But both periods of unrest warned of the potential for an eruption, which eventually began on July 18, 1995, claiming 24 lives and destroying nearly two-thirds of the island.

Could Montserrat and the insurance industry have been better prepared? Reflecting on the unrest in the previous decades, could a deeper analysis of "what could have been" - employing downward counterfactual thinking -  have spurred more robust preparations?

See also: Parametric Insurance Can Tackle Climate Risks

Tepid demand for volcanic risk modeling

Costly disasters in the 1990s, such as Hurricane Andrew, highlighted the inadequacy of existing risk management practices and catalyzed the emergence of the catastrophe modeling industry. But while models for weather-related and seismic risks gained traction, volcanic risk models did not enjoy comparable adoption, even in the wake of the Montserrat eruption. 

The rarity of volcanic events and the absence of significant historical losses have led to a tepid demand for models in the insurance sector, especially when compared with more frequently occurring perils such as wildfires, floods and windstorms. The absence of volcanic catastrophe models means that many insurers may not fully recognize the eruption-related risks to which they are exposed, which include direct physical damage as well as indirect effects such as supply chain disruption.

See also: AI, Aerial Imagery Can Help Spot Flood Risks

Reimagining the past to prepare for the future

The "what if" methodology of downward counterfactual analysis probes the outcomes of near-miss incidents, assuming they had escalated adversely. The aim is to harness insights from these hypothetical worst-case situations to enhance preparedness and reduce the impact of similar future events. 

For a given period of volcanic unrest, it is possible to reimagine the past by considering a range of plausible eruptive scenarios and estimating their likelihood of being realized. Currently, there is unrest at the Campi Flegrei caldera near Naples in the form of ground deformation, continuing since 2004, and more recent seismic activity. 

An Mw4.2 earthquake occurred on Sept. 27, 2023, the largest in 40 years, which should prompt a re-analysis of past unrest to help prepare for possible future outcomes. Between 1982 and 1984, there was a volcanic crisis at Campi Flegrei, which caused building damage and triggered the evacuation of tens of thousands of people. 

A downward counterfactual analysis of this crisis could consider the building damage consequences of future seismicity clustered under different towns within the caldera. Unrest at Campi Flegrei, a densely populated area, poses a significant risk to life and infrastructure in the event of eruption, but impact on the insurance industry would likely be limited due to low insurance take-up in Italy. In contrast, the U.S., Japan and New Zealand are countries with areas of high insurance exposure that are subject to significant volcano risk. 

The eruption of Eyjafjallajökull, Iceland, in 2010, caused enormous disruption to air travel and temporary closure of European airspace. The International Air Transport Association stated that the total loss to the airline industry from the eruption was around $1.7 billion. 

When rare events such as this occur, thoughts turn to how such losses might have been mitigated. These are upward counterfactuals, but risk managers need also to be mindful of downward counterfactuals, such as the triggering of an eruption of Katla, the big sister volcano of Eyjafjallajökull. Cascading events, where one event triggers another, can be very difficult for risk modelers to anticipate but devastating if they do occur. Identifying such compound scenarios for historical events is an objective of downward counterfactual analysis.

Incorporating downward counterfactual analysis into risk management practices is not just an academic exercise but an essential strategy for ensuring financial robustness and strategic foresight. By reimagining worse outcomes than those historically observed, insurers can anticipate and prepare for events that, while rare, have the potential to cause catastrophic loss. 

Recognizing these near misses allows for more refined pricing, customized coverage options and adequate capitalization. As the world faces increasing uncertainty, integrating downward counterfactual analysis for volcanic risks ensures that the insurance sector remains prepared in its role as a safeguard against the unexpected.

As America watched the game a couple weeks ago, the servers in our clouds went into overdrive unleashing the power of artificial intelligence (AI) to optimize game outcomes and our viewing experience. Teams that adopt these advanced technologies are seeing a competitive advantage and increasing revenue.

There is much to learn about how AI was used while we were eating buffalo wings and chips during the big game. Here are four ways the NFL most likely used AI and how they relate to the insurance industry:

Player Performance Analysis: Teams are using AI to analyze each player’s performance and injury risk. Machine learning can go above and beyond simple averages and evaluate vast amounts of data from games, practices and training sessions to identify patterns and trends that might not be apparent to human analysts.

Using AI for the insurance industry’s core underwriting and claim processes gives our insurance managers — aka coaches — the tools to increase revenue and lower loss costs.

See also: Can AI Solve Underlying Data Problems?

Injury Prevention and Rehabilitation: AI is employed to monitor player health and detect early signs of potential injuries. Wearable devices equipped with AI algorithms track players’ movements, biometrics and physical condition to provide real-time insights. Additionally, AI-powered rehabilitation programs can personalize treatment plans for injured players, speeding their recovery.

How are we treating our injured workers? Are we sending them to the best providers to get the best treatment, like an NFL star? AI improves the health outcomes of claimants involved in a casualty claim. The carrier will save medical expenses, and the claimant will return to health faster. Our incentives are aligned!

Recruitment and Drafting: AI algorithms assist teams in scouting and recruiting players. These systems can analyze player statistics, game footage and other relevant data to identify prospects who fit the team’s needs and playing style.

How are we finding the best new insurance recruits? Insurance executives across the board are talking about the pending brain drain as the workforce ages. AI can assist and find the right talent, but more importantly, it can be trained with data from insurance systems to emulate our top performers and assist our teams with decision support.

Fan Engagement: AI-powered chatbots and virtual assistants provide fans with instant access to information, ticket purchases and interactive experiences. Social media monitoring tools use AI to analyze fan sentiment and engagement, helping teams tailor their marketing strategies accordingly.

Like the NFL, your marketing and customer service teams can use AI to improve customer sentiment. AI eliminates mundane tasks for agents, underwriters and adjusters to provide an empathetic experience for customers — aka fans. Showing empathy for front-line employees and improving their work experience produces improved renewals, captures market share and boosts employee retention.

See also: Why Brokers Should Embrace AI

In 2022, the revenue of all 32 NFL teams totaled $18.6 billion. This is a small fraction of the $1.48 trillion size of the U.S. insurance market.

Large insurance players have begun investing and are seeing massive returns with payoff periods of less than a year. Investment in these systems of intelligence is becoming paramount for any carrier looking to compete.

Every executive across the insurance industry needs an AI playbook, just like Patrick Mahomes and Brock Purdy!

As first seen in Insurance Innovation Reporter.