Coral reefs are under considerable threat from climate change, with a fourth global mass coral bleaching event confirmed this year - the second in the past decade. As climate change intensifies, parametric insurance could play a crucial role in protecting these vulnerable ecosystems from escalating stresses.

In April, the Coral Reef Watch at the U.S. National Oceanographic and Atmospheric Administration confirmed the world's fourth recorded global coral bleaching event — following those in 1998, 2010 and 2014-2017. The latest event, which began in early 2023, is expected to surpass previous occurrences in both extent and severity, with more than three-quarters of the world's reefs having already experienced heat stress intense enough to bleach corals.

See also: What if 'Parametric Insurance' Meant More?

Marine heat waves drive bleaching

The current bleaching has been driven by multiple, linked factors. Chief among these are the record sea-surface temperatures in 2023, identified by the World Meteorological Organization as the hottest year on record for both the atmosphere and oceans, with elevated temperatures continuing throughout 2024. Marine heat waves, which contribute significantly to coral bleaching, are occurring against a backdrop of longer-term increases in sea surface temperature.

Local threats such as overfishing, sedimentation and runoff further weaken coral reefs, making them more susceptible to acute shocks such as tropical cyclones. These combined stressors mean that coral bleaching events, especially when coupled with extreme weather, can push ecosystems beyond their capacity to recover. This has potentially drastic consequences for marine biodiversity, food security and livelihoods.

What happens when water temperatures increase?

Warm-water corals thrive in temperatures between 23 and 29 degrees Celsius. When temperatures exceed this range significantly or for extended periods, corals expel the algae that give them color, leaving behind a white, carbonate structure — a process known as bleaching. Reef recovery is not guaranteed and is less likely when combined with other stressors, and corals cannot migrate to cooler waters.

The Degree Heating Weeks index measures heat stress intensity and duration on corals by summing temperature anomalies over a 12-week period, giving a total in degree weeks. At 4 degrees Celsius weeks, significant coral bleaching is likely, and at 8 degrees Celsius weeks, severe bleaching and significant reef mortality are expected.

Understanding coral reef composition is also crucial for assessing bleaching vulnerability, as the type of coral species and water depth influence outcomes, and some corals show adaptive capacity.

Parametric insurance for coral reef protection

Parametric insurance is emerging as a promising tool to protect ecosystems. It offers rapid funding for protection and restoration efforts following damaging events, such as tropical cyclones, enabling conservationists to respond swiftly and effectively. Several coral reef parametric solutions have been implemented in the Caribbean and Pacific regions to address tropical cyclone impacts.

Exploratory efforts are also under way to assess the potential of parametric insurance to protect against or minimize coral bleaching. This could involve using the DHW index, with pre-agreed payouts being triggered when the index exceeds a certain threshold. Two critical elements determine the feasibility of such insurance:

Insurability

This considers whether insurance markets would offer affordable policies underpinned by the DHW index. The high rate of ocean warming and increasing frequency of bleaching events may make policies prohibitively expensive; however, in geographies where marine heat waves are less connected to chronic ocean warming or where bleaching impacts from a heat wave represent underwriting portfolio diversification, insurance pricing may be more affordable.

Other important considerations include the structure of the product, which determines payout frequency and amount, and the influence of cyclical climate phenomena such as the El Niño Southern Oscillation, whose impact varies globally.

In cases where affordable insurance pricing is challenging to secure, alternative risk financing mechanisms could be pursued — for example, the establishment of a grant-capitalized fund that can be drawn on to finance response actions. The release of money from this fund could be underpinned by risk analytics, with payout timing and amount based on a metric such as the DHW. The fund itself could potentially be insured if payouts exceed a given amount within a year.

See also: Can Insurers Take the Lead on Climate Resiliency?

Payout use cases

This considers whether and how the rapid injection of capital could mitigate or minimize bleaching impacts. Several ideas are under development — for example, compensating people to not fish, deploying coral shades, administering marine probiotics and pumping cooler deep water, and scaling up reef monitoring. While a silver bullet solution is unlikely, tailoring interventions to a discrete location may yield local benefits.

While parametric insurance for coral bleaching faces significant challenges, it is likely to play a growing role in protecting against acute hazards such as tropical cyclones. This is driven by changes to the frequency and severity of acute hazards, the improved recognition of the critical ecosystem services that coral reefs provide, and the growing treatment of coral reefs as natural infrastructure and natural capital, opening the potential for new funding and enhanced protection.

When considering the critical contribution of coral reefs to economies and livelihoods, alongside the multiple and intensifying stressors they face, risk reduction and risk transfer are likely to prove integral to ensuring the survival of these ecosystems.

Why it matters

Coral reefs provide between $375 billion and $2.7 trillion in ecosystem services annually, crucial for the safety, nutrition, economic security, health and wellbeing of millions of people. They protect an estimated 150,000 kilometers of shoreline in more than 100 countries and territories, reducing wave energy by 97% and mitigating flood risk and erosion in coastal areas.

Coral reefs are also vital to ocean ecosystems, supporting 25% of all marine life. About 96% of those who fish are artisanal, working individually or in small communities, and rely on healthy reefs for roughly half of all global seafood.

AI is transforming the work of professionals everywhere. Unfortunately, that includes cybercriminals. These threat actors can now harvest and analyze more data than ever, automate phishing attacks and mimic human voices with alarming accuracy, allowing them to penetrate the defenses of the most sophisticated organizations.

According to Microsoft's latest digital defense report, cybercriminals and nation-states launch more than 600 million attacks against the company's customers daily. That's nearly 7,000 per second. The advent of generative AI will likely increase the severity and frequency of those cyberattacks, which could drive claims and premiums.

However, AI also offers immense potential to benefit the cyber insurance market. It can counter costs associated with cyberattacks, both in the reactive phase of breaches and in proactive risk mitigation.

See also: The Potential of AI in Claims Fraud Detection

More cost certainty with AI-powered data mining

One of the most significant costs in assessing the potential damage and cause of cyberattacks is data mining — the process of analyzing logs, files and other digital information in search of clues about a breach. This work helps organizations and the industry better understand and manage cyber risks.

Before the widespread commercialization of generative AI, human analysts and lawyers predominantly conducted this work, sifting through millions of documents to determine if sensitive information was exposed or exfiltrated and what required reporting to authorities.

Today, generative AI and machine-learning tools offer ways to automate more of the data-mining process, delivering faster, more accurate results — and, crucially, with more cost certainty.

Consider a breach involving sensitive data points like tax identification numbers or Social Security numbers. Confirming whether those numbers were exposed at a global company would require months of work by human analysts. With the right search instructions and parameters, AI-powered tools can search for the numbers instantly.

Human oversight still needed

The results cannot be blindly trusted. As effective as the technology is, it's not a standalone solution. Human input and oversight remain crucial. Getting accurate results and avoiding false positives require cyber experts with extensive experience searching for sensitive data points and understanding the context in which they appear in documents. That experience allows them to provide the right prompts and test the results to ensure accuracy.

Without human expertise, data will continue to be vulnerable to attack. Additionally, the cost savings of an AI-powered data-mining operation could be lost if lawyers challenge the findings and must conduct their own investigation. The technology may stand alone one day, but it's not there yet.

Generative AI's next frontier: pre-breach maintenance

A data breach often surprises company executives. Many are unaware of the sensitive information exposed. Sometimes, they didn't appreciate the number of people not following company guidelines around data preservation. Other times, they were unaware employees were using private messaging apps to transmit files to personal devices. Occasionally, executives weren't informed that data relating to spun-off or sold entities remained undeleted. These realizations are spurring organizations and the cyber insurance industry to rethink ways to improve pre-breach data maintenance.

See also: The Evolving Landscape of Cybersecurity

Cyber health scans

Despite the billions of dollars that organizations spend yearly on building cyberinfrastructure, attacks persist. That's why there is unprecedented focus on the content of the data — rather than the walls around it. This new approach could significantly alter how cyber insurance companies assess risk.

AI development is helping to power the new approach. With large language model-based tools, organizations can receive a data scan that generates a heat map detailing sensitive data and potential risk levels in the event of a cyberattack. This allows companies to understand their vulnerable data before an attack.

A scan can give organizations an outline of the internal data stored in their systems. With that picture, they can improve data governance by making informed risk-mitigating decisions, such as removing or further securing sensitive digital information. By making that information more secure, organizations make ransomware attacks less inviting and reduce their costs and risks.

AI's positive influence is just beginning

AI's application to the cyber insurance market has only begun to show its impact. However, by leveraging AI for both pre- and post-breach processes, organizations and insurers can reduce breach-related costs while improving risk management.

Consumers are reaching a tipping point with insurers, driven by soaring insurance costs, inflation, and high interest rates. This new Majesco report explores how insurers must adapt to shifting consumer expectations, particularly among Millenials and Gen Z, who now dominate the market. With insights into generational behaviors, strategies for leveraging technology, and advice on addressing financial concerns, the report provides actionable guidance for insurers to build trust, close protection gaps, and stay relevant in a rapidly evolving landscape. Don’t miss these critical insights for transforming your approach.

Read Now

Sponsored by ITL Partner: Majesco

Obesity is a chronic condition that affects millions of Americans. It’s also a significant risk to cardiovascular diseases, a leading cause of mortality. Despite implementing state and local programs addressing the issue, the rates of obesity remain high. 

Why? One reason is the restricted access to treatments. To build a healthier America, the government must partner with organizations and insurers to increase the availability of obesity medications and take an aggressive approach to controlling this epidemic. 

Obesity Rates Are Rising

In 2023, the Centers for Disease Control and Prevention (CDC) estimated that more than one in three adults in 23 states lived with obesity. This is the first time since 2013 that the prevalence of obesity has reached 35%. At least one in five adults in every state lives with the condition. 

What does this data suggest? It calls for advancing treatment and prevention strategies, starting with addressing the stigma and bias associated with obesity.  

Obesity itself is a complex condition to manage, but it's also a precursor for numerous chronic ailments, like heart disease, stroke, Type 2 diabetes, cancers and respiratory illnesses. Comorbidities are prevalent, which results in even more expensive therapies. Robust prevention measures must be implemented to control the health issue.

See also: A Novel Approach to Curbing Healthcare Costs

Causes of Soaring Obesity Rates

What factors drive the obesity trend? Here are some of them. 

Poor Nutritional Decisions

A survey by the International Food Information Council (IFIC) found that although many Americans consider processed food unhealthy, 70% don't fully understand what processed food is. The survey also found that nutrition drives food purchasing decisions 20% less in low-income households than in high-income households.

The Western diet is another culprit. Despite knowing the benefits of good nutrition, many Americans consume pre-packaged foods because they're convenient. Fast food culture is firmly embedded in society, which increases obesity incidence.

Sedentary Lifestyles

More than one in five adults don't exercise. The rates of physical inactivity across U.S. territories range from 18% in Colorado to 49% in Puerto Rico.

Exercising could prevent one in 10 premature deaths. Despite physicians offering blanket advice to patients about getting more activity, many miss out on their fitness due to lack of time and limited access to safe areas. 

Increased Rates of Mental Health Conditions

Depression and obesity tend to coexist, although researchers don't fully understand the complex link between mental health and weight. Individuals diagnosed with obesity had a 55% higher risk of developing depression. Alternatively, those with depression had a 58% higher risk of being obese. 

Depression can prompt emotional eating behaviors, using food to cope with difficult emotions instead of satisfying hunger. Additionally, people who feel low and sad are less likely to adopt healthy lifestyles, like exercising. Poor mental health triggers negative habits, like stress eating, which elevates the risk of obesity.

One or a combination of these factors increases the risk of unhealthy weight gain. 

See also: Data Science Is Transforming Public Health

The Less Evident Causes

Some factors that contribute to obesity being an epidemic are less obvious.

Restricted Access to Insurance-Covered Drugs

Limited accessibility to medications that aid in weight loss prevents people from getting adequate treatment for obesity. Because most insurers don't cover many FDA-approved weight loss prescriptions, spending out-of-pocket discourages people from exploring pharmacological interventions to remedy their health problems. As a result, medications become available only to a few people who can afford them. 

Some insurers may cover obesity treatments but for a higher premium, leaving others with no choice but to opt for less effective, cheaper alternatives. Others may also include coverage in their policy but require prior authorization and need the patient to meet specific eligibility requirements. All these restrictive layers prevent the availability of obesity treatments. 

Counterproductive Diets

Popular culture promises quick-fix solutions to obesity, which can harm a person’s health. Fad diets lead to unsustainable consumption behaviors. Restrictive eating patterns are poor approaches to losing pounds because they contribute to increased body fat or eating disorders. Counterproductive diets may also lead to weight cycling, where body mass fluctuates between losing and regaining weight. These bouts of weight loss and increase are associated with diabetes and perpetuate obesity.

Employers Are Liable to Address Obesity Concerns

Under the Americans with Disabilities Act (ADA), a disability is a condition that limits a person’s ability to accomplish one or more significant activities. Obesity isn't considered a disability unless it coexists with a disabling disease, like diabetes. It’s an impairment and doesn't qualify a person for disability benefits.

However, this could change as more state and federal lawsuits challenge the coverage exclusions for obesity medications and treatments. 

Employers are responsible for accommodating the needs of their employees living with obesity. Otherwise, they could face legal issues. Some solutions are providing access to wellness programs, modifying their job responsibilities and offering flexible scheduling for their medical appointments. 

Employees can take legal action against the company if it fails to ensure their rights while on duty. For instance, denying a medical leave violates the Family and Medical Leave Act (FMLA). Employees discriminated against because of their weight may also file a legal action with the Equal Employment Opportunity Commission (EEOC).  

What About Insurance Providers?

Insurers may or may not cover weight loss, depending on the type of plan. According to a recent study, 18% of larger companies cover glucagon-like peptide-1 (GLP-1) antagonists for weight loss. These injectables help treat obesity. Smaller organizations may exclude GLP-1 drugs because of cost considerations and the lack of evidence of their efficacy. 

One reason insurers don't cover GLP-1 drugs is that using them to treat weight problems is considered off-label. Although they can reduce appetite and curb hunger, these IV drugs are FDA-approved only to treat Type 2 diabetes — not obesity. 

Fortunately, the FDA recently approved injectables such as Wegovy (semaglutide), Zepbound (tirzepatide) and Saxenda (liraglutide) for chronic weight management. Some insurers cover them if employees meet certain eligibility requirements, such as being diagnosed with high blood pressure, high cholesterol and other obesity-related medical problems. An elevated BMI that classifies a person as obese may not suffice to get drug coverage. 

If employees are denied services and treatments because of their obesity status, they may pursue legal action under the ADA. They may also file a breach of contract to court if their policy explicitly includes coverage for obesity drugs, but insurers reject the claims. 

If their physicians recommend a medically necessary procedure but the provider refuses to cover it, employees may file an internal and external appeal. 

Government Interventions to Decrease Obesity Rates

What does the government do to bring the numbers down? At the federal level, officials monitor obesity trends and related risk factors to understand the disease better. This approach opens up opportunities for novel interventions with a high chance of effectiveness. Additionally, programs like Federally Qualified Health Centers and WIC offer services to support children and families at high risk of obesity.

Meanwhile, state and local agencies prioritize two methods for addressing the issue. One is to promote good nutrition, exercise and breastfeeding in early care and education. Breastfeeding reduces the risk of obesity by 36%-52% during childhood and early adolescence. A second is to cement policies and activities that expand awareness of Family Healthy Weight Programs, which encompass safe and effective treatments for childhood obesity. 

Medications Approved for Treating Obesity

The FDA has approved six drugs to remedy overweight and obesity. They are: 

• Xenica and Alli (orlistat)
• Qsymia (phentermine-topiramate)
• Contrave (naltrexone-bupropion) 
• Saxenda (liraglutide)
• Wegovy (semaglutide)
• Zepbound (tirzepatide)

These medications are typically prescribed in full doses for 12 weeks. If the patient doesn't lose at least 5% of their initial weight, the doctor may change the medications or suggest lifestyle modifications. 

See also: How AI Can Lead to Personalized Medicine

The Pipeline for Future Obesity Treatments

The next generation of obesity remedies combines conventional weight loss drugs with entero-pancreatic hormone-based therapies, which are medications that target the hormones produced in the gut. This new formula aims to regulate metabolism, appetite and blood sugar levels to control weight. 

In addition, new drugs like retatrutide, cagrisema, mazdutide and survodutide are in phase 3 trials as potential treatments for complicating metabolic dysfunctions. Scientists are also developing oral forms of GLP-1 as a substitute for injectables currently used to treat Type 2 diabetes. 

These numerous therapy options with different mechanisms of action will empower healthcare providers to individualize treatment based on the patient's preference, comorbidities and response to medications. Tailored interventions have a higher probability of success than a universal approach. Let's hope these new drugs can finally curb the number of obesity cases.

Reducing Obesity Must Be a Priority

Obesity is linked with several chronic illnesses, like diabetes and heart disease, that can be fatal. Lowering the cases should be a priority. Advancements in pharmacotherapy will expand access to treatments. Timely FDA approval of these novel drugs will allow people to access the prescriptions sooner and address their health problems.

Business rules are the backbone of decision-making in the insurance industry, guiding everything from claims processing to policy pricing and compliance. However, updating and managing these rules is often cumbersome and time-consuming, leaving many insurers struggling to keep up with market demands and regulatory changes.

This is where business rules engines (BREs) come into play. These systems streamline the management and execution of business rules, enabling insurance companies to adapt swiftly and efficiently. By introducing automation and flexibility into their core operations, insurers can respond to market shifts, regulatory changes, and customer needs with unprecedented speed and accuracy.

Let’s dive deeper into what a business rules engine is, how it works, and why it's becoming an indispensable tool for insurance companies. 

See also: Automated Underwriting: A New Era of Work

Traditional Approach to Business Rules Updates

The traditional approach to managing business rules relies on embedding the logic directly within the application code. This means that even the simplest change requires the IT department to locate the relevant section of code to implement updates. This method comes with significant risks:

• Dependency on IT – Every change requires IT intervention, slowing the process and leading to potential bottlenecks.
• Lack of Centralization – Business rules are scattered across the codebase, making it difficult to maintain a single source of truth.
• High Risk of Errors – The absence of a centralized rule repository means different versions of the same rule can exist, raising the likelihood of mistakes.
• Time-Consuming Updates – Implementing changes is a lengthy process, which hampers a company’s ability to respond quickly to market.

The Benefits of a Business Rules Engines

A BRE can be thought of as a product configurator, allowing non-technical users to manage and modify business logic without needing to know how to code. This makes it especially valuable for insurance companies, where business rules must be updated regularly due to changes in regulatory policies, market conditions, or customer needs. By using a BRE, insurers can respond quickly and efficiently to these changes without depending on IT.

There are many different BREs on the market, including our Higson solution, which provides an intuitive, modern studio interface and reflects the client's business structure, giving nontechnical users easy access to the rules they need to manage.

Using a business rules engine drastically reduces the time to market. Instead of waiting weeks or even months for IT to locate, update, and test rules embedded in application code, business users can make necessary adjustments directly in the BRE.

Use Cases for Insurance 

Tariff Adjustments

Traditionally, updating insurance tariffs involves multiple teams and IT intervention and can take weeks. With a BRE, business users can update premiums in hours. 

Underwriting Automation

A BRE can partially automate underwriting decisions for standard policies, leaving underwriters to focus on more complex cases. For instance, rules engines can automatically approve life insurance applications that meet predefined risk criteria, while flagging higher-risk cases for manual review. 

Product Offer Adjustments

For one of the major insurance companies in Poland, managing the introduction and adjustment of complex insurance products across various channels was a challenge. The process involved manual updates to product configurations and pricing models and regulatory compliance checks, making it slow and prone to errors.

By leveraging a BRE, the insurer was able to automate and centralize product offer management. The BRE enabled business users to quickly configure new insurance products, adjust existing offers, and ensure regulatory compliance without IT intervention.

See also: Business Models, Product, Value-Added Services

Conclusion

BREs provide a highly efficient solution for insurance companies, offering a way to significantly reduce the time required to introduce products. They empower business users by allowing them to manage and adjust business logic. Moreover, the flexibility of a modern BRE means it can seamlessly integrate with existing systems. 

BREs shift the approach managers and analysts take when dealing with complex business logic. Instead of relying on rigid, generalized rules, BREs allow companies to experiment with different scenarios and implement changes in real time without high costs or  dependencies on IT teams. Developing new tariffs or product updates need no longer be a lengthy, IT-heavy process. With a rules engine, you can quickly adjust and test market behavior, pulling back changes that don’t work and moving forward with those that do.

Paul Carroll

I’ve long been a big believer in the power of design. My history with writing about technological innovation goes back far enough that I interviewed some of the original designers of the Macintosh computer, then watched as its ease and elegance let it outclass the computers built based on the standard set by the then-all-powerful IBM. Over the years, people have been learning that design considerations are powerful far beyond branding and individual products, which is why I wanted to talk to you about the design work you’re doing with insurance agencies.

Josh Levine

In insurance, people tend to think about design in terms of the user experience with consumer-facing apps and websites. Very rarely do people think of the agent experience or the broker experience or the employee experience. Most internal systems are overlooked, or at least are not top of mind. So agents wind up working with various carriers and being stuck learning and navigating these cumbersome systems.

We've been around for quite a while, and a lot of the original work, particularly 10 or 12 years ago, was with carriers. The work was mostly related to direct-to-consumer, claims tools, and all that. But over the last five or six years we’ve seen that start to shift. Now, about half of our work is focused on what I call the agent experience or the broker experience. 

And that’s a big shift. It shows that the industry is starting to recognize something pretty important: When agents and brokers and other internal users have good tools, it doesn’t just make their lives easier. It makes them more efficient, keeps them loyal, and ultimately leads to better outcomes for the end customer.

The question is: How do you leverage design to make it easier for them to do business, plain and simple? How does one use design like Apple did, to make these systems kind of filter into their lives and feel natural? How do you design the stuff that people do on a daily basis?

This new emphasis on design for internal tools is refreshing. It’s a healthy shift because, while every agent and broker is familiar with well-designed consumer products—like their Apple Watch—they’re not necessarily clamoring for better interfaces at work. They’re not out there demanding, "We need better design!" But it’s encouraging to see more agencies and brokerages recognizing the value of better-designed tools and starting to focus on this need.

Carriers are finally starting to see that design and user experience are ways for them to differentiate themselves with agents and brokers, to be the carrier of choice. 

Paul Carroll

I published an article not long ago about the talent gap that has so many people worried, with so many senior people retiring and with seemingly too little enthusiasm among younger people about taking their spots. The article said the best way to find new talent is to stop scaring it off through the sort of profusion of complex systems you’re talking about. 

Josh Levine

We do a lot of research. We spend a lot of time researching and observing agents at work, watching the challenges they go through to get a policy issued or to process a claim. It almost feels like the complexity is intentional. Obviously, it’s not. It's no one's fault. It's the nature of a non-design-driven industry. You end up with these clunky, disconnected systems that don’t talk to each other—basically, the opposite of the seamless experience we’ve come to expect from well-designed products. It’s what happens when systems get built in silos over the years.

And you can’t expect the younger generation to use these old tools. They simply won't. Modern design is table stakes. Tools don't need to be game-breaking, but they need to make people’s jobs easier. The intersection of design and the business of insurance, how things get sold and how things get serviced, is so, so critical for recruiting and retaining younger talent.

Paul Carroll

Beyond the haphazard nature of the development of the systems agents and brokers use, are there other impediments to a design focus? 

Josh Levine

The big, obvious misconception is that these tools are only about data entry—like all agents and brokers need to do is plug in information as fast as possible. But the reality is, these tools need to support more consultative work. You’re dealing with agents and brokers with a huge range of experience: Some have been in the industry for decades, while others are just starting out. Then you have assistants, junior agents, specialists—each with their own role and level of expertise. Good design needs to accommodate all of them, making it easy for anyone to find what they need, work efficiently, and provide value to their clients. It’s not just about speed; it’s about designing tools that adapt to different workflows, experience levels, and needs.

That's where digital can play an incredible role. Some of this is just common sense, like giving a broker or an agent immediate feedback rather than asking them to answer 75 underwriting questions only to then say, “Oh, nope, not eligible.” 

So the big question is, how do you create a real dialog with agents and brokers? How can you use digital and design to give them insights? And for those newer to the industry, how do we layer in coaching and training to help them understand the nuances of the products they’re working with? The goal is to guide agents and brokers at every stage, whether they're seasoned pros or just starting out, making sure they’re equipped not just to enter data but to provide value to their clients in ways that feel natural and informed.

There are a lot of best practices for how to go about this. And there is a lot you can do to facilitate more collaboration—not just in the sense of multiple people working on the same job, but in creating tools that let agents ask questions and get feedback within their organization. You want to create the sort of environment you have when you’re sitting with someone and having a dialog, and you're saying, “No, no, stop right there. We can't write this. This won't be a good fit,” or, “Talk to Johnny over there.” Digital tools can mimic this experience by building in components that let people interact, ask questions, and share insights naturally. It’s about designing systems that encourage the same kind of helpful, real-time exchanges agents would have in person.

But the core systems out there are missing that layer of user experience, of agent experience, of customer experience. Humanizing the agent/broker experience is such a huge opportunity to move the industry forward. We obviously talk a lot about customer experience. But the customer experience and employee experience are connected. You can’t have a great customer experience without a great employee experience, right?

The CSRs [customer service representatives] need to know the right things to say and have the right tools. The agents need the right tools. They need to have the right education, they need to be equipped, or you're not going to be able to deliver on this great customer experience everyone's talking about.

Paul Carroll

You remind me of my early days on the copy desk at the Wall Street Journal. I was all of 22 years old, but I was surrounded by institutional knowledge. “Hey, George, how do we handle this?” “Hey, Joe….”

Josh Levine

You have to engage with the realities of the day-to-day work of agents and brokers. If they prefer using email or other digital apps and tools, you have to factor that into the digital experience you are designing, or they won't adopt it. 

At the end of the day, they have to be able to do business and sell. They’ll either use your tool as intended, or they’ll find workarounds to bypass it. Getting the design right is challenging, but it’s essential if you want them to fully engage with the tools you provide. 

Our first client was MetLife, and they actually flew us out to Japan to meet with folks who were just so passionate about helping the next generation of agents. These senior people had been agents at one time, but that was 10 or 15, or even 20 or 30 years ago. Being such an expert in this very complex, nuanced industry is an amazing thing, but the knowledge can also be a curse. The senior people make assumptions about the tools the younger people need and the features they’ll want, and how they use them. And the reality is that it's just a different world.

Our goal is to dismantle these assumptions by considering the “why” before the “what.” Through direct research with agents, we can avoid spending two years investing in a platform only to discover that agents won’t use it.

Paul Carroll

This is great, Josh. Thanks so much.

Embedded Insurance: A Major Disruptor

About Josh Levine

Josh Levine is the founder and CEO of Cake & Arrow, an experience design and product innovation company that works exclusively with insurance companies to create digital products and services that transform how insurance is bought, sold, and serviced. With a career spanning over 25 years, Josh is a seasoned practitioner of human-centered design, digital product strategy, and design thinking. Since founding Cake & Arrow in 2002, Josh has led innovation and design initiatives for more than 40 of the most prominent carriers, distributors, and insurtechs—including MetLife, Travelers, Aflac, Chubb, Amwins, American Family, and Unqork. A designer by trade, Josh inspires insurance companies to embrace design-driven mindsets and build meaningful relationships with the customers and employees they serve. He’s motivated to help traditional organizations unleash the humanity in their business and explore new ways of solving old problems.

When I write the Great American Novel about today's political dysfunction, I'm going to call it "They." Because some mysterious, evil "they" sure are causing lots of problems — pick just about any complaint about anything you don't like in the U.S. these days, and "they" are causing the problem. "They" will make a great villain for my book. 

When I write the sequel, about the insurance industry, I'll call it "The Algorithm." Because, to look at how consumer advocates are using the term to villainize any decision they don't like, we may have another "they" on our hands.

In the meantime, I suggest that, even amid all the excitement about generative AI, we talk far less about the great algorithms we're creating and put a human face on everything we do. 

The thought about how algorithms are being used to demonize insurers crystallized for me when I saw this headline on a recent press release: 

"Insurance Commissioner Finalizes Plan Allowing Secret Algorithms to Raise Home Insurance Rates; Lies About Making Insurers Sell More Coverage in Return, Says Consumer Watchdog."

Now, I'm not sure that the California insurance commissioner isn't using some spin when he describes how insurers will have to commit to offering coverage for a certain number of vulnerable homes, in return for the right to use predictive modeling and not just historical data in their underwriting.

But the notion of 'secret algorithms" is a straight-up scare tactic. We're basically supposed to imagine that the Terminator has traveled back through time and just landed among us. 

The use of predictive models is thoroughly standard these days, across industries, but I suspect that consumer advocates, lawyers, and anyone else with a beef with an insurance company will lean into the specter of evil algorithms for some time. 

AI advocates talk a lot these days about going even beyond generative AI to what's known as artificial general intelligence, or AGI — AI that isn't just relegated to a specific task but has truly human intelligence. The advocates talk glowingly about the prospect, but some experts think humanity could be innovating its way out of existence — and we all remember how HAL turned out in "2001: A Space Odyssey."

Insurers are doing all the responsible things, thinking about biases that can creep into AI and providing as much insight as possible into how machine learning makes decisions, so they don't just come from a black box. 

Still, I'd suggest not talking about algorithms, AI, or machine learning except in a situation where there is a clear benefit to the consumer. 

"We're using AI so we can automatically approve your policy submission." 

"We're paying your claim super-fast because of our algorithms." 

"We're using machine learning so our chatbots are so smart they can answer all your questions at any hour of the day or night." 

But I'd make clear that any decision to turn down a policy submission or claim or to raise a rate was made by a human, based on all sorts of traditional, explainable criteria. And I'd make sure customers know that any confusion with a chatbot means a query is immediately kicked to a living, breathing person. 

Because if we were to link adverse outcomes to algorithms, "they" could have a field day. 

Cheers,

Paul

P.S. My favorite Dad joke goes like this:

Q. How do we know that Al Gore invented the internet?

A. Because it relies on Al-Gore-ithms.

Ba-dum-bum.

Casey Beckman is Vice President, Global Compliance and Fraud, for RGA. She is a highly skilled financial services compliance professional with over 20 years of experience in building and transforming compliance and risk programs for global companies. Casey joined RGA in 2016 and leads the vision, strategy, and execution of the compliance operating model for RGA’s global operations. Before joining RGA, Casey held various compliance roles for Aegon/Transamerica, a leading provider of life insurance, retirement, and investment solutions. Casey earned a bachelor’s degree in business administration and management from Mount Mercy University, and an MBA from the University of Phoenix.

Paul Carroll

Casey, thank you for joining me today. Would you share a bit about your role at RGA and your overall industry experience?

Casey Beckman

I’ve been with RGA for eight years, and I’m currently RGA’s global chief compliance officer. I have been in the compliance field within the insurance industry for over 20 years. Prior to RGA, I worked at Aegon/Transamerica for 17 years and held various compliance roles both on the insurance side as well as the asset management side. I have experience in leading all aspects of a global compliance program, including artificial intelligence governance, financial crimes monitoring, economic sanctions compliance, code of conduct policy compliance, regulatory change management, compliance assurance testing, and directing investigations.

Paul Carroll

Based on your experience, what do you see as a major risk trend for the insurance industry?

Casey Beckman

The use of artificial intelligence comes to mind. This emerging risk has been impossible to ignore as we continue to use AI in both our personal and work lives. Along with this use comes an increase in compliance and ethical concerns such as data protection, AI transparency, and explainability, and mitigating biases that AI could create. It's important to remember that AI was built by humans and is susceptible to flaws and errors. 

RGA currently has an AI governance strategy project underway to ensure we have appropriate controls and governance over the use of AI to mitigate risks posed by AI. The project team includes various business leaders, data scientists, experts in AI technology, risk management, compliance, and legal. I can’t stress enough how important it is that organizations acknowledge that AI risk is owned by everyone, and everyone has an obligation to use AI responsibly. 

Paul Carroll 

What role can AI, data analytics, and emerging technologies play in mitigating compliance risks related to fraud, cybersecurity, and other areas?

Casey Beckman

I think AI will significantly impact how compliance teams monitor risks. 

AI has the ability to analyze a large amount of data and can quickly identify patterns and anomalies that can help with suspicious activity detection, whether it be financial transaction patterns or monitoring for cyber threats.

AI can also help with:

• Sanctions screening that could help reduce and clear false positives.
• Knowing your customer, to help determine if there are high-risk clients that would require additional due diligence or monitoring. 
• Overall compliance program health, such as metrics and reporting on key performance indicators (KPIs).
• Streamlining compliance processes, such as policy creation and maintenance, policy monitoring and adherence, and control development and assurance.
• Assisting with investigations, including performing data analytics.
• Gathering information, including from unstructured sources such as notes on paper or in PDFs and from audio and video, whose review has historically been extremely time-consuming. 
• Crafting reports, at least by providing a rough draft that provides a substantial starting point for the compliance officer.

Paul Carroll

How is the evolving AI regulatory landscape across global markets affecting risk management practices and compliance requirements?

Casey Beckman

We are beginning to see more momentum from regulators in this space, however, there are still many regulators that have yet to propose or enact regulations. Risk and compliance professionals need to ensure that any AI governance framework being developed is agile enough that as new regulations come out, the governance framework can adapt quickly to new requirements. 

Paul Carroll

What skills and mindsets will risk and compliance professionals need to develop to stay ahead of rapidly evolving AI risk facing the insurance industry?

Casey Beckman

Knowledge is power! There are obvious things like attending conferences, obtaining AI governance certifications, and building your network, which can help you stay ahead, but it’s also important to not lose sight of the fact AI governance is a team effort. It’s important to stay connected to your business leaders, research and development teams, data scientists, IT teams, etc. to align with your organization’s AI strategy to ensure the governance continues to mitigate the risks as AI evolves. Just like being agile with the regulations, the governance also must be agile and align with your organization’s AI strategy goals.

As social inflation continues to exert pressure on the insurance industry, this is not only a financial issue, but one with far-reaching impacts on insurers, beneficiaries, and society at large. 

Rising litigation costs, evolving societal expectations, and increasingly complex claims are not isolated challenges — they are part of a larger wave of change. To meet these challenges, insurers must explore changes across the board, from modernization efforts  to reforms within the legal system itself, to cultural shifts that prioritize efficiency and empathy. 

Social inflation refers to the upward trend in insurance claim costs driven by a combination of legal and societal factors, distinct from traditional economic inflation. Unlike economic inflation, which reflects changes in the cost of goods and services, social inflation stems from a broader set of influences, including increased litigation frequency, escalating jury awards, evolving societal expectations of corporate responsibility, and changes in legal practices. 

This phenomenon has become particularly pronounced in sectors such as life and liability insurance, where claim valuations have seen a significant rise. Legal frameworks that permit extended litigation and large punitive damage awards are key reasons. 

Additionally, the growing influence of litigation funding and the public’s increased scrutiny of corporate practices have intensified the financial pressures faced by insurers. 

The rise in costs associated with social inflation is not merely a result of higher claim values but reflects a fundamental shift in how claims are processed and contested. 

See also: Social Inflation and Reserve Development

According to a recent report from the Swiss Re Institute, the surge in large court verdicts has driven a 57% increase in liability claims in the U.S. over the past decade, with social inflation peaking at 7% annually in 2023. Jurors and courts are increasingly awarding higher compensation as a reflection of societal demands for fairness, justice, and accountability in corporate behavior. This shift has led to more frequent and higher cost claims, particularly in cases where punitive damages are involved. According to Swiss Re, legal expenses in the U.S. are rising at a rate that surpasses economic inflation, signaling an urgent need for the insurance industry to adapt. 

Addressing social inflation requires a multidimensional strategy that goes beyond cost control and delves into structural reform. This includes revisiting legal frameworks that contribute to protracted litigation and higher settlement costs. The existing system often delays claim resolutions, leading to elevated legal expenses that ultimately increase premiums for policyholders.

Implementing legal reforms, such as caps on damages or streamlined litigation processes, could help mitigate the financial pressures on insurers and improve the overall efficiency and fairness of the claims process. 

In addition to necessary legal reforms, a fundamental shift in corporate culture is imperative. Insurers must adopt a framework of enhanced transparency and prioritize the customer. This entails not only optimizing the claims process but also improving communication channels and transparency with policyholders and beneficiaries. 

Gianfranco Lot, Swiss Re’s chief underwriting officer, P&C Re, highlighted the severity of the issue, noting that U.S. liability lines exposed to bodily injury claims have incurred cumulative underwriting losses of $43 billion over the past five years. This has led to a significant decline in available capacity for global businesses, with rate increases failing to keep pace with escalating loss trends. 

See also: Social Inflation: Decades of Insurance Litigation Abuse

The integration of automation and data analytics can significantly enhance both efficiency and transparency. These technologies allow carriers to better leverage data, improving the prediction of claim trends, risk assessments, and process optimizations. As a result, claims can be handled more quickly, with fewer errors, and beneficiaries can receive real-time updates. 

Given the escalating underwriting losses and increasing litigation costs faced by insurers, technology must be leveraged as a crucial component of a broader strategy to address these challenges. While technology alone cannot resolve systemic issues, its role in reducing operational costs and enhancing data accuracy is vital. 

As social inflation intensifies, the industry is faced with implementing a multifaceted strategy encompassing both internal and systemic reforms. Legal changes, corporate transparency, and technological advancements must collectively contribute to a more  equitable and efficient claims process. Insurers adept at integrating these elements will be better positioned to manage the complexities of rising claim costs while upholding their obligations to beneficiaries. 

To learn more, you can download this white paper from Benekiva.

Managing loss control has never been more critical for maintaining property risk. Insurers face rising claim frequency, escalating weather events, and the need for more effective loss control measures. Traditional methods, like in-person inspections, often fall short, leaving insurers vulnerable to unnecessary losses and inflated payouts.

The good news? More insurers are adopting technology to change these outcomes. Enter location intelligence. 

By combining historical aerial imagery, property condition data, and AI, insurers gain the insights they need to optimize underwriting, inspections, and fraud reduction—and ultimately improve loss ratios.

A Common Challenge: Roof Condition Visibility

Inaccurate or outdated property condition data can cripple insurers' ability to accurately assess and price risk and manage claims. Consider Frederick Mutual Insurance Co. (FMIC). Initially, FMIC struggled with roof claims due to a lack of clear visibility into property conditions across its portfolio. Without property intelligence based on current imagery or reliable property data, the company relied heavily on inspection teams to verify roof conditions—an approach that was time-consuming, costly, and resource-intensive while not providing visibility on roof condition.

This challenge isn’t unique to FMIC; roof claims continue to be a pain point for the industry. Without a source of truth to determine if a roof was previously damaged—especially after severe weather events—insurers can’t effectively identify fraudulent claims, leaving them exposed. Location intelligence directly tackles this by delivering clearer, data-backed insights into risk.

Seeing Risk Clearly

The combination of new and historical aerial imagery, AI, and property condition data offers a comprehensive understanding of a given property—long before a physical inspection. With these tools, insurers can detect aging roofs, faulty designs, and materials exposed to weather risks, all before these conditions lead to expensive losses and claims. AI-derived detections from imagery and risk scores allow for more detailed damage assessments, enabling insurers to pinpoint hazardous or high-priority areas. This targeted approach not only enhances underwriting accuracy but also strengthens loss control efforts.

Location intelligence also sharpens claims accuracy. By comparing claimed damage against historical imagery and property data, insurers can swiftly identify discrepancies and potential fraud. Inspection processes are streamlined, helping insurers allocate resources to properties that need immediate attention.

FMIC, a Nearmap customer, found success leveraging this approach. The company improved its direct loss ratio by 57% and maintained a 36% average loss and loss adjustment expense ratio over five years. The insights not only helped FMIC reduce losses but also boosted operational efficiency, allowing for straight-through processing of low-risk properties and reallocating resources to complex cases. In essence, FMIC was empowered to write business with greater confidence. 

See also: Crucial Role of Geocoding in Insurance

The Future of Location Intelligence in Insurance

Location intelligence, powered by AI and advanced analytics, will become even more essential for insurers aiming to manage losses and verify claims. It’s also paving the way for improved risk management and better relationships between insurers and insureds. Here’s why:

1. Risk Mitigation
   Traditional risk assessment methods fall short, especially amid rising construction costs and increasing weather severity. Location intelligence allows insurers to overcome these limitations by identifying properties at higher risk for damage from hailstorms, hurricanes, tornadoes, and floods. Insurers can:
   • Offer more competitive coverage options in high-risk areas by accurately assessing and pricing risks.
   • Implement risk mitigation strategies, such as encouraging property improvements that increase resilience, protect assets, and reduce potential losses, all while making insureds partners in risk management.
2. Building Trust and Resilience With Policyholders
   No one wants to deal with a major property loss, so when a crisis hits, a fast claims response can strengthen trust between insurers and policyholders. Location intelligence enables this by:
   • Capturing imagery 24-48 hours after a severe weather event and leveraging AI to classify the damage, which accelerates claims verification and can reduce the need for physical inspections.
   • Allowing for quick communication about property damage and streamlined claims payout processes. These are practical, vital ways to help people who may be displaced and need rapid access to resources. 

See also: 'Data as a Product' Strategy

Adopting location intelligence can help insurers make more informed decisions, better manage risks, and deliver a more responsive, customer-focused experience. As the industry grapples with evolving risks, accurate AI, aerial imagery, and property condition data will remain central to building a more resilient future for insurers and their customers.