The plaintiff bar’s unprecedented investment in AI presents a real and present danger to the insurance litigation defense industry. It is a danger that is only now starting to show on the radar screens of chief claim and litigation officers. This article explores why it is such a threat and why the first response must be, at a minimum, awareness.

The P&C insurance industry runs the largest negotiation network in the world. Annually, 30,000-plus claims professionals assign out over a million litigated claims to 30,000-plus defense attorneys with one goal in mind – negotiating a good outcome. A full 98% of those cases will settle.  

In negotiation, success boils down to two critical factors: (1) having better data than your opponent and (2) being able to use that data to negotiate more effectively. Data is critical to eliminating uncertainty, quantifying risk and predicting value. And those who have data to use in their negotiations do better than those that don’t. 

Let’s start with a real-world example of how the plaintiff bar is leveraging technology to do this. EvenUp Law is a company that has raised $65 million and has a valuation of more than $325 million. They are helping personal injury attorneys leapfrog P&C in two areas:

1. GenAI demand packages. They use AI to craft demand packages for personal injury attorneys, including facts, damages, liability estimates and detailed special damage analyses. They use AI to tell stories to maximize general damages. The plaintiff bar has always “sold” their demands better than we “sell” our offers, and now they are doing that on steroids.  EvenUp asserts that they drive up the value of claims by 30%.
    
2. Tech-enabled data sharing. EvenUp has started a contributory database for the plaintiff bar. The plaintiff bar has always been better at sharing data than the defense.  We have been talking about a contributory litigation database for 20 years but have yet to actually do it.

That’s just the start. AI is being used by the plaintiff bar to pick the best cases and pick the best venues, right down to quantifying the impact of facing off against specific insurance companies. Investors see the opportunity in this, and money follows opportunity. A January 2024 Bloomberg Law article highlighted how AI will enable litigation funders to invest with greater precision and effectiveness, especially in smaller cases – a segment litigation funders have typically avoided. Insurance companies will see more cases funded by third parties, not fewer. 

See also: AI and the Future of Independent Agents

Social inflation, nuclear verdicts and legal system abuse have been three tenets of our industry conversation for years now. If you believe those trends present existential risk to our industry now, just wait until AI takes hold. The plaintiff bar is poised to adopt AI much faster than the defense given their advantages in a few key areas:

1. Data accessibility. Plaintiff firms value their data and store it one accessible spot. On the defense side, it tends to sit in highly disparate data sets. There is a disconnect, a gap, and inconsistency between data at the defense firm and data in the claims department. Critical components of the data remain unstructured and unusable. Names of attorneys and law firms are spelled differently, and key data is not reliably recorded in the claim system, which frequently fails to capture offers and demands and sometimes even settlement amounts.
    
2. Economic incentives. Plaintiff attorney economics strongly encourage AI adoption. Their very compensation is driven by maximizing outcomes while minimizing expenditures through less work. The benefit that AI offers is completely synergistic with their desire for efficiencies. Generative AI is not a threat to them, it is a massive opportunity!
    
3. Minimal IT barriers. If a partner at a personal injury firm wants to use AI, then that means it is going to happen. They don’t face extensive IT and compliance approvals, politics or backlogs. If something improves performance, they can just do it.
    
4. Sharing mentality. The plaintiff bar loves to share. They hold an abundance mentality and don’t let competitive concerns get in the way. Chief claim and litigation officers want to share, but they have to convince layers of legal and IT teams that data sharing is good and necessary, which has proven an insurmountable hurdle for the last 20 years. Personal injury law firms don’t have that hurdle.

At its core, AI is about either creating data where there is none or creating insights into data in ways just not humanly possible. Or both. But the real power of these insights is in how they can be used to negotiate better outcomes. And while the plaintiff bar charges ahead, claim professionals and defense attorneys are left to negotiate as all humans do in the absence of data --  they engage in reactionary bargaining and anecdotal predictions and rely on their maturity, seasoning and experience to guide them.

There is nothing wrong with that – negotiation is half-art, half-science. But we’re not going to win by ignoring the science part, and we operate in an industry where both claim department and defense firms are finding it difficult to find and keep experienced people. The plaintiff bar is rapidly becoming systematic in their approach, and we badly need to catch up.

See also: Balancing AI and the Future of Insurance

How will we respond to this threat? What might that response look like? Let’s explore three use-case scenarios for AI in the defense industry. Each is designed to support better negotiations and to put tools and actionable data in the hands of the claim professionals and defense attorneys who desperately need those things. 

1. Better analyze risk. AI can help us quantify the economic risk of facing a specific plaintiff attorney or being in a specific venue. It can identify which attorneys take cases to trial and which do not. It can identify the verdicts they have obtained. I am a better negotiation decision-maker and strategist when I know this. 
    
2. “Sell” our offers. Second, in the same way EvenUp Law prepares demand packages for personal injury attorneys, AI can assemble facts and negotiation points for claims professionals and defense attorneys. Defense teams benefit from “selling” their offer amounts with evidence and with conviction, just like plaintiff attorneys “sell” their demand packages. I am a better negotiator when I do this.
    
3. Negotiate with strength. The winner of the negotiation is usually the one who has attained a superior position of information. Predicting your opposing party’s walk-away number is the key piece of information to attaining an optimal resolution. Your opposing party will happily take $1 more than their walk-away number, or $250,000 more. Imagine the use of AI in a tool that helps claim professionals and defense attorneys zero in on that walk-away number, establish bargaining zones and predict the impact of anticipated legal activities (costs) against that bargaining zone. Keeping the business economics of every litigated claim squarely top-page and top-of-mind makes me a better negotiator. Additionally, AI will be better than we are at predicting and quantifying nuclear verdict risk. Ultimately, it will help in guiding and advising defense teams on offer cadence, anchoring effects, legal spend efficiency and overall negotiation strategy. 

For most commercial carriers, the negotiated amounts written on the settlement checks represent the largest expense for the company. Contrast that with the fact that less than 10% of defense attorneys who perform the actual settlement negotiations report any formal training in negotiation science.  Then factor in the plaintiff bar blazing past the defense in their use of AI tech – heavily focused on gaining negotiation advantages. 

When it comes to litigated claims, the P&C Industry has focused nearly all technology on managing legal expenses, which only make up about 20% of total loss cost. It is time for P&C to get just as serious about indemnity as the personal injury attorneys who make their living from it, which means it is time to get serious about AI tech and data. 

And it needs to happen fast – we have never been faced with technology that is moving as fast as it is today.

As cyberattacks become more frequent, sophisticated and damaging, fueled by AI-powered tools, a surge in insurance claims related to these incidents is anticipated. This surge is expected to trigger a collective response within the insurance industry, prompting a reassessment of policies. Much like regions grappling with the aftermath of hurricanes, where damage insurance policies became unsustainable, the escalating cost of cyber claims will force insurance companies to reevaluate their offerings.

See also: Risks, Trends, Challenges for Cyber Insurance

Stricter Requirements for Leadership

In response to the rising tide of cyber claims, insurance providers are expected to impose new restrictions. A notable development will be the enforcement of stricter requirements for board members and executives. Leadership will be mandated to possess a comprehensive understanding of cybersecurity, reflecting the growing recognition that effective cyber risk management begins at the top.

Leadership teams will need to demonstrate expertise in areas such as security and ransomware. This shift aims to ensure that organizations are not merely reactive in the face of cyber threats but are actively engaged in preventative cybersecurity measures. Consequently, there will be a push for the establishment of robust processes and technology frameworks that facilitate effective incident response.

2024 will also usher in an era where organizations go beyond merely requesting recovery in the aftermath of a cyber incident. Instead, there will be a paradigm shift toward well-prepared checklists and measures in anticipation of potential cybersecurity attacks, incorporating a "shift left" approach to bolstering defenses and minimizing vulnerabilities from the outset.

As the industry navigates these changes, organizations must stay abreast of evolving cyber threats and assess their cyber insurance needs meticulously. The collaboration among insurers and businesses in implementing effective cybersecurity measures is set to become a cornerstone in mitigating the financial impact of cyber incidents.

Mandating Comprehensive Security Frameworks

This year, insurers will push for stricter policy conditions that mandate comprehensive security frameworks, including:

• Regular security audits and penetration testing: Identifying vulnerabilities before they're exploited is key. Expect mandatory audits and penetration tests to become the norm, ensuring systems are constantly under scrutiny. Moreover, there may be requirements that anyone performing pentests or incident response are those that are trusted in the industry and have a demonstrable track record. This could include references to ensure these frameworks are executed by security practitioners with keen insight and experience.
• Robust incident response plans: The days of scrambling after a breach are over. Insurance companies will demand well-rehearsed incident response plans, with clear roles and responsibilities for each team member. As with pentesting, insurers may require incident response teams with trusted industry expertise and a proven track record, ensuring effective handling of cyber threats.
• Investment in cybersecurity technology: Implementing advanced security tools like intrusion detection systems and endpoint protection will become a non-negotiable requirement for securing coverage. Insurers may also require evidence of continuous monitoring and updating of these technologies to stay ahead of evolving threats.

The shift toward preparedness is not just about cost reduction for insurers; it's about protecting businesses and their customers from the devastating consequences of cyberattacks. By prioritizing prevention and resilience, the insurance industry can play a crucial role in building a more secure digital landscape.

See also: Cyber Trends, Risks and Opportunities in 2024

A New Era of Partnership Among Businesses and Insurers

In the evolving landscape of the cyber insurance industry, success may hinge on insurers taking a proactive approach. With the understanding that frequent large payouts can diminish profits, insurers may opt to deploy their own subject matter experts (SMEs) to guide new clients toward sustainable success.

While we can rely on existing knowledge frameworks like the MITRE ATT&CK, the real danger lies in what we are unaware of. Instances such as nation-state actors infiltrating systems for years underscore the critical need for heightened vigilance. As we move into 2024, collaboration, information sharing, and diligent attention to blind spots will be paramount.

The insurance industry is poised for transformation as cyber threats surge, necessitating stricter policy measures and a deeper integration of cybersecurity expertise. This paradigm shift signifies a move beyond premium adjustments toward a resilient partnership among organizations and insurers, reinforcing our collective ability to combat cyber risks.

Drone usage in insurance will increase this decade as it enters the mainstream. Experts say the commercial drone market will grow annually by 14% until 2030. Here are five ways drones will affect insurance companies and their imaging practices. 

Changing Risk Assessment

Risk assessment will be among the biggest changes with drone-based imaging and photogrammetry. When assessing risk, insurers look for various hazards and signs of damage to determine what a client’s rate should be. Drones change this practice by increasing accuracy, considering their ability to capture images and detect details humans cannot see. 

For instance, insurance companies may cover tall, hard-to-reach buildings that are challenging for employees to inspect. Drones aid human workers by taking detailed pictures of these structures and increasing accuracy when giving estimates. Complex buildings cost time and money for insurers to evaluate, so crewless aircraft have become essential in risk assessment.

Decreasing Fraud

Fraud is a consistent problem for insurers, with fraudsters taking advantage in numerous corners of the insurance industry. The FBI says non-health insurance fraud costs over $40 billion annually, causing increased premiums for American families. Drone technology can reduce fraud with its highly detailed imaging and photogrammetry systems and increase accuracy for insurers. 

Some insurers instruct their customers to take photographs of the accident to determine the claim’s validity. While many users submit good pictures, insurance companies can dispatch drones to the site of the incident and collect images there. That puts more control into their hands when mitigating fraud. 

Insurers can reduce the risk of fraud through drones because some customers may try to trick the system. Users may misrepresent the severity of their claim to receive a higher reimbursement than appropriate. Using drones lets insurance companies inspect a car or property before the incident and compare it with its appearance afterward. Thus, it’s harder for customers to mislead their insurers.

See also: How Technology Is Changing Fraud Detection

Improving Safety

Another important pillar of drone-based imaging and photogrammetry is the safety improvements for insurers and their customers. Crewless aircraft can increase safety by eliminating the need for employees to trek dangerous terrain to survey accident sites. Problems may arise when an insurer surveys storm damage, collapsed buildings and other hazardous structures, and drones protect employees from these liabilities. 

Drones also help insurers and their employees by their ability to create detailed 3D models. The insurance company can apprise professionals of the landscape before arriving in dangerous terrain. Thus, the risk of harm decreases for workers heading to accident scenes because they know what to expect. Improving safety cuts costs and aids profitability for insurers.

Enhancing Efficiency

Drones are growing in demand across industries because of their various services. Efficiency is among the chief reasons insurance companies use them, considering their ability to capture topographical data and assess dangerous areas. Drones also speed up response and help insurers get the most accurate information on any site. 

For instance, drones significantly help insurers after natural disasters strike. Roads may be too dangerous to drive, so insurers can dispatch drones. Rapid arrival means insurance companies can process claims more quickly and help those with damaged property. These benefits also reduce strain on adjusters, who can do their job more efficiently thanks to this advanced technology.

One example in the industry comes from Allstate. The company made drone usage more widespread in the late 2010s, and now it needs only 4.5 days to produce repair estimates for its customers. 

Drones are still advantageous even when storms or accidents haven’t occurred. Dispatching this technology optimizes insurance company operations by reaching rural areas or hard-to-access sites like wind farms. Minimizing the need for manual inspections makes processes more efficient and can lead to cost savings for insurers.  

Reducing Costs

Saving money is another premier feature of drone technology. Using crewless aircraft means humans have less responsibility for insurance, thus reducing the risk of on-the-job injuries and the associated costs. The cost-saving benefits are a significant reason why experts say commercial drone use will outpace consumer use by 2024.

Drones also reduce operational costs by eliminating the need to send somebody to a remote area or use specialized equipment to access a dangerous site. However, this feature awaits permission because the Federal Aviation Administration (FAA) requires a human operator to have a line of sight with their drone. 

While operational costs are critical, insurers also benefit from reducing organizational losses. For instance, insurers using drone technology have more accurate pricing and a lowered risk of underpricing their customers when assessing rates.

See also: Cyber Trends, Risks and Opportunities in 2024

Are There Legal Concerns for Drone-Based Imaging? 

While they have demonstrated their impact on claims, drones bring challenges for insurance companies they must address to ensure the staying power of this technology. What legal and ethical concerns come with drone-based imaging? Here are a few issues to watch for. 

Flying Restrictions

A primary concern for insurance companies is the flying restrictions on drones in the U.S. The FAA permits flying over most areas in the country, but insurers must avoid sending their drones over restricted areas. 

Illegal drone-flying sites include national parks and military bases, but insurers must also avoid dispatching their devices within five miles of airports. Special permission from air traffic control is necessary to access these areas, which can involve more red tape than required to maintain efficiency.

The insurance industry must also consider what countries ban drones or have heavy restrictions. For instance, Egypt requires drone users to receive permission from its Ministry of Defense before flying within the country. In India, only its citizens have permission to operate these advanced devices.

Limiting the use of drones means insurance companies in these countries cannot take advantage of their benefits and must find other ways to optimize their operations. 

Cybersecurity

Cybersecurity is another significant issue for insurance companies and their drone usage. Drones rely on Wi-Fi and radio signals for their operations, thus opening the possibility of hacking and hijacking. Bad actors could take control of a drone’s radio signal, alter its direction or steal confidential information stored inside the machine. They could also intentionally crash the drone and cause significant losses for the insurer. 

Cybersecurity liabilities are critical for insurance companies because of the sensitive data stored inside the drones. Stolen information could harm the insurer’s reputation and make it liable for data breaches and financial losses. 

Privacy Concerns

Deploying drones also brings privacy concerns for insurance companies with their imaging and photogrammetry abilities. For instance, drones could cause legal trouble if they intrude on private property without permission. 

While there hasn’t been much litigation, court cases have already started to shape common law throughout the states. For instance, the Michigan Supreme Court will decide a case determining whether Long Lake Township could legally use a drone to inspect somebody’s private property.  

Other privacy concerns arise if drones collect biometric data, license plate numbers and additional sensitive information while inspecting accident sites. Drones can fly at lower levels than the average crewed machine, making privacy issues more pronounced.

Damage and Injury Risks

Residents may sue insurance companies for damages if they think the business has violated their privacy rights. However, the insurers could be at greater risk if the drones cause injuries or property damage during their inspections. The low-flying capabilities of drones increase the risk of colliding with humans. 

While consumer machines tend to be lightweight, commercial drones are heavier and can cause more bodily harm if something malfunctions. The drones could lose power or succumb to a sudden change in weather conditions, causing the machine to fall to the ground and injure bystanders.   

Leveraging Drone Technology for Insurance

The insurance industry has recently taken advantage of drone technology as companies look to optimize their operations. Drones provide opportunities to save money, decrease fraud and improve risk management. However, there are also legal and ethical concerns to watch as more guidance and common law emerge. Regardless, drone technology is here to stay for insurers.

We are currently seeing advances in AI and automation coming at a pace that is hard to keep up with. Underwriters are starting to recognize that they will need to adapt and in many cases acquire new skills so they can thrive in this era of AI.

Just how will we see the traditional skills of an underwriter changing?

A role that will evolve, not be replaced

The first thing to make very clear is that no machine is ever going to replace the human underwriter. It is a role that relies heavily on skills that robots simply cannot replicate, evaluating complex risks, refining portfolio strategy, using creativity and deepening crucial relationships with brokers. But AI allows for automating many tasks that have to date been performed manually and been time-consuming, such as data entry and re-keying.

Those repetitive, more menial tasks, such as sieving through data, reviewing data fields, trying to identify missing data fields, entering data fields to different systems, can take up one-third of the average underwriter's working day. Streamlining this process vastly increases efficiency and enables skilled risk professionals to concentrate on higher-value work.

See also: Insurance Underwriting Will Never Be the Same

Data-savvy underwriters

At a basic level, many underwriters will soon find that their job becomes less admin-focused and less monotonous. This will create the opportunity -- and the need, to keep up with the competition -- to develop a host of new skills. These include skills related to interpreting data, making consistently high-quality decisions and thinking of creative solutions.

To make effective use of data -- to understand it, apply it and make decisions from it -- you need to have, at the very least, a basic data education. Put simply, the next generation of underwriters will be much more data-savvy, applying the insights created by data analysis in a creative and thoughtful way. 

Agility and creativity

The old, monolithic tech stacks are giving way to combinations of modular solutions that fulfil specific purposes. These platforms can quickly evolve to fit different needs. Consequently, underwriters will have to be more flexible in the way they work, able to upskill and adapt to different tech solutions.

We are going to see faster feedback loops between changing levels of risk and market conditions and portfolio appetite, which will mean that underwriters need to be adept at identifying emerging risks and opportunities in real time and making continuous refinements to portfolio strategy. Underwriters are going to be met with ever more complex and varied scenarios, with climate change, for example, having a huge impact on the insurance industry.

As volatility increases, the agility to identify changes in risk and operationalize refinements to portfolio strategy will become increasingly important. Underwriters will need to leverage the technology around them and come up with unique solutions to understand, manage and transfer risk. There is no textbook to tackle the challenges we are going to face over the next few decades -= the most creative underwriters will be the ones writing it.

See also: Why Underwriters Don't Underwrite Much

Multi-functional teams

Generative AI may well lead to new roles within the insurance sector, such as "risk flow engineers" and "risk flow experts” -- people who know exactly how to extract the most useful outputs for decision-making and continuously optimize risk flows. There will be digital trading managers skilled in monitoring the health and performance of digital trading -- providing critical human oversight. There will be underwriters who will use the time that has been freed up to further develop their broker relationship skills and develop a broader portfolio view.  

Greater digitization and AI will also create more unity among underwriting, data strategy and technology teams. Siloed departments will become increasingly untenable. The best organizations will have multi-functional teams enabled by digital risk flows where information flows throughout the organization. Every team member will need the technical tools and expertise to work together.

The underwriting landscape is changing dramatically as a result of machine learning algorithms, data analytics and other AI technologies. While learning more about AI and technology will be critical for success, it is not as simple as saying there is a checklist of skills you really need to learn. Just as important will be having a curious mind and the will to constantly update your expertise and learn things.

As this transformation progresses, we can expect to see a new breed of underwriter that has developed skills around data analysis, digital literacy and critical thinking, but who is also creative, flexible and adaptable in the way they approach their role.

In the insurance industry, premium payments are the most frequent interaction that carriers have with their policyholders, and claims payments are the most sensitive. Carriers that are focused on enhancing the customer experience need to prioritize these important interactions.

In today’s digital environment, highly streamlined weekly—or even daily—electronic transactions are normalized thanks to digital giants like Amazon, Alphabet and Apple. In the insurance industry, by contrast, InvoiceCloud’s annual State of Online Payments report reveals that 60% of respondents who were surveyed regularly encounter issues when receiving bills or making payments. For insurers, this statistic could mean disaster. Aware of the stakes (namely, losing policyholders), insurance executives are becoming increasingly vigilant about digital transformation, especially for the payment experience.

With so much attention focused on meeting customer expectations, why do these transactions so often go awry? And what can insurance companies do to enhance the policyholder experience at these critical moments? 

See also: Revolutionizing Digital Payments

Streamline consumer transactions

Customers today, across all verticals, expect simple, secure and convenient digital interactions – and their intolerance for unintuitive online experiences could mean higher abandonment rates and more. 

According to the State of Online Payments report, 23% of respondents cite forgetting their username and password as the top issue they face when attempting to pay a bill online. This creates customer dissatisfaction, late payments and low digital adoption. Offering self-service capabilities like password reset or the ability to easily change banking information and payment methods is critical for overcoming this roadblock. Easy enrollment in AutoPay can also eliminate this issue entirely, allowing policyholders to “set it and forget it” for monthly premiums.

Additionally, offering a simple guest checkout option enables policyholders to forego registering for an account or remembering login information. Guest checkout allows insureds to make payments without logging in, allowing insurance companies to remove friction from the process, promote a positive customer experience and increase timely payments.

Making it easier for policyholders to adopt self-service options streamlines the payment experience, reduces costs and bolsters customer satisfaction. Research from McKinsey found that 62% of policyholders prefer digital self-service options, and yet the State of Online Payments report found that self-service adoption has become relatively stagnant, experiencing YoY growth in the low single digits. One possible explanation for the discrepancy is that finding and enrolling in self-service routes is prohibitively complicated for consumers. By making self-service options easy to find and opt into, insurers can drive higher adoption and better accommodate customer preferences.

Facilitate communication with mobile bill payers

Mobile devices are now the most common channel for making digital bill payments, with 65% of respondents to the State of Online Payments survey reporting they have used their phone to pay a bill within the past 12 months—more than any other method. Yet respondents crave more robust, interactive communications through their mobile interactions.

Interactive reminders and payment confirmations are a critical part of facilitating timely payments and meeting customer preferences. However, 17% of survey respondents reported not receiving useful reminders, and 11% did not get confirmation of payment. Lack of basic communication undermines policyholder trust and increases confusion and frustration when premiums are due, which results in late payments and customer dissatisfaction.

Respondents also reported that when they did receive reminders, they were at times unclear or lacking necessary context such as the amount due or due dates. Offering simple, interactive communication with clear, accurate information optimizes mobile usage and allows policyholders to engage the way they prefer. 

See also: Enhancing Claims Via Digital Payouts

Cater to all policyholder preferences

While the vast majority of respondents to the State of Online Payments survey indicated that they prefer digital engagement both in paying premiums and receiving claims payments, there are still other payment options preferred. As such, carriers should understand their customer demographics and offer options that appeal to various preferences. In addition, policyholders often use multiple methods for payment and disbursement (i.e., paying one month by automated phone system and the next on mobile). Therefore, offering a true omni-channel experience with real-time, integrated payments methods is key to meeting customer expectations. 

When it comes to receiving claim payments, data from the State of Online Payments report reveals that among respondents who typically pay bills online, the vast majority (73%) prefer a direct deposit into their bank account. Furthermore, 14% of respondents would prefer to receive payments as a paper check, 8% prefer a payment through PayPal or Venmo and 5% prefer to receive a pre-paid card. Clearly, offering digital disbursement options is non-negotiable for carriers. However, it’s important to note that some respondents (i.e., older policyholders) are more likely to prefer analog payment methods. Offering multiple, integrated options allows carriers to respond to the diverse preferences of their customers. 

It doesn’t matter how many new tools or payment options an insurer offers its policyholders – if the solution is not simple, convenient and personalized, policyholders will not use the system. Low digital adoption means that policyholders, agents and carriers won't realize the downstream benefits of an enhanced customer experience, like expense reduction and streamlined processes.

In insurance, the experience of making premium payments and receiving claims is the customer experience. Understanding and addressing your policyholder preferences and providing convenient digital options is critical in driving customer satisfaction, policy retention and profitability. Embracing digital transformation at these critical touchpoints is the best way for carriers to compete effectively in this tech-forward environment.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or positions of Legal & General America or of its parent company, Legal & General Group.

As Yogi Berra (and others) have said, “Making predictions is hard, especially about the future.” But as a leadership team we at Legal & General America (LGA) make predictions. Specifically, we carefully track external trends and distill them into a set of predictions, which then inform our recommendations.

For 2024, here are my personal top five predictions, and five recommendations for the U.S. life insurance market. 

See also: Insurance in 2030: What Does the Future Hold?

Predictions

1. 2024 will be the year that the wellbeing of the 65-plus population becomes a mainstream topic of conversation for their children 

A spike in long-term care needs, driven by pandemic deferred medical check-ups, will help adult children realize their parents have gotten older and may be ill-prepared to handle all of the financial, administrative and emotional needs.

2. GLP1 – analogs will be partially subsidized by a life insurer 

In 2024, a reinsurer or actuarial consulting firm will publish a plausible protective value paper that shows the benefits at point of underwriting for long-term use of diabetes medication for weight loss. Expect a carrier with a large block of high net worth whole life to roll out a discount on prescriptions to follow.

3. The first life insurance policy will be underwritten by a large language model (OpenAI’s ChatGPT, and Google’s PaLM) - leading to a consulting arms race

We will see the public announcement of a generative AI “co-pilot” analyzing the risk of life insurance applicants in conjunction with a human underwriter. That will trigger a tidal wave of FOMO, pushing board rooms around the U.S. to hire consulting firms and system integrators to rush out conversational AI projects in claims, customer service and new business.

4. US cash-value products will continue to shrink

Indexed universal life (IUL) insurance products, which until last year rode a wave of premium financing, will continue to face major headwinds in 2024. Combine that with annuity 1035 focused distributors, and these products could be a tough sell in this economy for nervous customers – who may be consciously conserving cashflow, e.g. increasingly switching from annual modes to monthly. 

5. Digitized underwriting will accelerate – helping make term life insurance more profitable 

LGA and a few other companies have rolled out digital underwriting processes that drastically simplify the case management burdens for distributors – essentially making it zero touch, almost 50% of the time. Fast-moving distributors will move to consolidate their term life insurance business with companies that make it increasingly profitable for them to help their advisers and customers get affordable protection.

See also: Glimmers of Good News on Climate (Finally)

Recommendations

1. Travel to see that prospect, client, partner 

The rich information exchange, high fidelity and focused attention of face-to-face business meetings trump all the advantages of Teams, Zoom, etc. .

2. Exploit generative AI through feature-rich software

While deploying a LLM is likely too large a lift for non-software engineers, everyone can easily dip their toes in the generative AI waters by using a tool like Notion or Adobe Firefly. 

3. Develop a customer engagement strategy 

Marketing content will become so affordable, and ubiquitous, that what really matters will be customer activation, and engagement with your content, driving tangible actions from your efforts.

4. Encourage your clients to come up with a plan for their parents (and in-laws)

From what to do with the dining room table, to how to fund long-term care, embrace that awkward talk with your siblings, spouse and parents about their wishes.

5. Promote the value of professional advice 

Given a flood of AI-generated op-eds and social media echo chambers, search engine research now has marginal value. Help your clients see the importance of consulting with an independent life insurance broker, estate attorney or registered investment adviser to get personalized expert counsel.

Now that I’m finished predicting the industry’s biggest impacts for the year, I’m off to play the Powerball.

 

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In the auto insurance industry, automation is no longer a distant dream. Automation is already integrated into the way insurance companies assess risks, process claims, and engage with customers. In fact, 87% of insurance providers invest over $5 million into automation and AI technology annually.

Beyond the adoption of new technologies, this evolution represents a complete overhaul of the insurance process. With automation, insurers are not only streamlining operations, they’re setting new benchmarks for efficiency, accuracy and personalized service. 

With such a substantial investment in automation and AI, the question arises: How are these technologies transforming the landscape of auto insurance? In the following sections, we’ll explore the innovations taking hold in this evolving industry.

Current Use of Automation

Automation in auto insurance has moved from a futuristic vision to a practical, everyday tool, reshaping how companies assess risks, process claims and interact with customers. The current use of automation is not just about adopting new technologies; it's about reimagining and streamlining every facet of the insurance process.

From underwriting to customer service to claims processing, automation is setting a new standard for efficiency, accuracy and personalized service, reflecting a major shift in how insurers operate and engage with their policyholders.

Below, we discuss each of these innovations in more depth, highlighting how automation is being leveraged to enhance the insurance experience.

See also: Does Generative AI Kill Process Outsourcing?

Automation in Claims Processing

The shift toward automating claims processing marks a significant leap forward in operational efficiency. AI-driven systems are now adept at evaluating claims' validity, automating damage assessment through digital images and videos and swiftly initiating payouts. This speeds up the process from claim submission to resolution and drastically reduces human error and intervention.

A notable example includes CCC Intelligent Solutions, a software-as-a-service (SaaS) platform for the property and casualty insurance industry. The company increased its use of advanced AI for auto claims processing by 60% year over year in 2023. This advancement allows quicker damage evaluation through photos, determining the repair cost and whether a car is a total loss or repairable, significantly reducing the time to resolve claims.​

Automation in Underwriting

In underwriting, the use of AI and machine learning to analyze extensive datasets – ranging from driving records to real-time telematics data – has revolutionized risk assessment. This deep analysis allows for a more accurate prediction of risk levels, facilitating the creation of nuanced and personalized policy pricing.

Liberty Mutual has collaborated with Jupiter, an insurtech that offers weather and climate analytics, to enhance its risk management capabilities for commercial insurance clients. By integrating Jupiter's sophisticated climate data and predictive analytics into its risk assessment processes, Liberty Mutual can now offer a more nuanced and dynamic approach to evaluating risk.

This collaboration enables the insurer to precisely analyze potential weather-related risks to businesses, from flood and storm damage to other climate change impacts. As a result, Liberty Mutual is better equipped to tailor insurance solutions, offering more accurate and personalized pricing.

Automation in Customer Service

The deployment of AI-powered chatbots and virtual assistants for customer service has introduced a new dimension of customer interaction. These tools offer 24/7 support, efficiently handle inquiries, provide policy recommendations and even facilitate the initiation of claims. The result is a seamless and highly responsive customer service experience that meets the modern consumer's expectations for immediacy and convenience.

For instance, Lemonade has significantly improved operational efficiency and customer engagement by leveraging AI chatbots and machine learning models. Their AI chatbot, Jim, stands out for its impressive track record, autonomously managing interactions and processing claims at a speed that traditional methods can't match.

In fact, Jim has made headlines by setting a world record for settling a legitimate insurance claim in an astonishing two seconds, showcasing its extraordinary efficiency and the sophisticated algorithms that underpin its decision-making capabilities.

This innovation showcases how automation is refining the claims process and elevating customer service standards, establishing a new industry benchmark to address the dynamic needs of policyholders.

See also: AI's Role in Commercial Underwriting

Benefits and Challenges of Automation in Auto Insurance

The adoption of automation in the auto insurance industry brings a host of benefits, streamlining operations, enhancing customer experiences and refining risk assessment processes.

Yet the sector faces several challenges. These require careful navigation to ensure that the potential of automation is fully realized without compromising the integrity or inclusiveness of insurance services. 

Benefits of Automation in Auto Insurance

• Enhanced Efficiency and Productivity: Automation significantly reduces the time required for underwriting and claims processing. By leveraging AI and machine learning, insurers can analyze vast datasets quickly, identify patterns and make informed decisions with greater speed. This reduction in manual tasks frees staff to focus on more complex, value-adding activities.
• Improved Customer Experience: Digital platforms and AI-driven chatbots offer policyholders 24/7 access to services, from obtaining quotes to filing claims. This immediacy and convenience boost customer satisfaction, as policyholders no longer need to navigate time-consuming call centers or paperwork.
• Advanced Risk Assessment: Automation enables the use of telematics and real-time data analytics for personalized risk assessment. By monitoring driving behavior directly, insurers can tailor premiums more accurately to the individual's risk profile.
• Fraud Detection and Prevention: Sophisticated algorithms can analyze claims and identify patterns indicative of fraud, saving time and money by ensuring fair premiums. 

Challenges of Automation in Auto Insurance

• Data Privacy and Security: The collection and analysis of vast amounts of personal data raise significant privacy concerns. Insurers must navigate stringent data protection regulations and ensure robust cybersecurity measures to protect sensitive information from breaches.
• Regulatory Compliance: The fast pace of technological advancement in automation and AI can outstrip existing regulatory frameworks. Insurers must continually monitor and adapt to new regulations designed to ensure the ethical use of AI and consumer protections.
• Customer Trust and Transparency: While automation offers efficiency, the impersonal nature of AI interactions can affect customer trust. Insurers need to find the right balance between automated services and human interaction, ensuring transparency in how AI decisions are made, particularly in claims denials and premium adjustments.
• Technological Integration and Upkeep: Integrating new technologies with existing systems can be complex and costly. Additionally, continuous investment is needed to update and maintain these systems, ensuring they remain secure against cyber threats and effective against evolving fraud tactics.
• Workforce Transformation: As automation changes the nature of work in the insurance industry, there is a pressing need for reskilling and upskilling employees. Insurers must invest in training programs to equip their workforce with the necessary skills to operate new technologies and focus on more strategic, analytical tasks.

Emerging Technologies

Emerging technologies are revolutionizing the auto insurance sector, offering unprecedented opportunities for innovation and efficiency. At the forefront, AI and machine learning (ML) are leading this transformation, each bringing distinct advantages:

AI in Auto Insurance

The advent of AI in auto insurance marks a pivotal shift toward more personalized, efficient and secure services for policyholders, underscoring the role of AI in finance in transforming the industry's approach to risk assessment, customer service and claims processing. By integrating AI technologies–ranging from predictive analytics for risk assessment to machine vision for damage analysis–insurers are not only streamlining operational processes but are also significantly enhancing the benefits delivered to policyholders.

In fraud detection, Verisk leverages AI to refine fraud detection strategies. By analyzing both structured and unstructured data, including images and text, Verisk's AI tools can detect suspicious patterns and behaviors that signal fraudulent claims. This not only significantly improves the efficiency and accuracy of fraud analytics but also protects policyholders from the indirect costs of fraud, such as higher premiums.

Moving from fraud detection to the speed and transparency of claims processing, the application of machine vision technology by Ant Financial's "Ding Sun Bao" represents a leap toward enhancing policyholder satisfaction.

Using machine vision technology, this application compares images of vehicle damage against a comprehensive database of damage levels and associated repair costs. It automates the assessment and reporting process.

Ant Financial's AI has showcased remarkable efficiency in claims processing, outperforming human adjusters by processing claims in just six seconds compared with the human average of nearly seven minutes. 

Similarly, Tractable's AI software automates the claims process through machine vision. By assessing damage through images and benchmarking them against a vast database, it provides immediate repair cost estimates. This not only streamlines the claims process but also offers a clear, immediate understanding of potential costs to insurers and policyholders alike, contributing to a smoother, more efficient claims experience.

Finally, Progressive's AI chatbot "Flo" exemplifies another dimension of AI's impact–enhancing customer service. Flo leverages natural language processing to provide instant responses to policy-related queries and claims support. This direct, immediate communication channel reflects the broader benefits AI brings to policyholders: enhanced accessibility, personalized interaction and swift service delivery.

See also: How Automation Can Address Today’s Growing Underwriting Challenge

Machine Learning

In addition to AI's transformative impact, ML technologies further refine the insurance landscape, particularly in the realm of personalized pricing models. ML's ability to leverage telematics data allows for a more detailed analysis of individual driving behaviors, ensuring that premiums more accurately reflect a driver's risk profile.

This analysis allows for the creation of Usage-Based Insurance (UBI) models, such as Pay-As-You-Drive (PAYD) and Pay-How-You-Drive (PHYD). These models are pivotal in ensuring that premiums accurately mirror the policyholder's risk profile, directly linking insurance costs to safer driving practices. The benefit here is twofold: Policyholders can potentially see lower premiums through safer driving, and insurers can foster a safer driving culture.

Ant Financial's "Auto Insurance Points" system analyzes traditional and non-traditional data points–ranging from driving behaviors to spending habits–to assign a risk score to policyholders.

This risk score is used for personalized pricing, allowing insurers to offer rates that align closely with the individual's actual risk level. This method ensures fairness in pricing and empowers policyholders to directly influence their insurance costs through their driving behaviors.

For policyholders, the ability to compare car insurance quotes becomes even more valuable in this context. With insurers increasingly adopting AI and ML technologies, policyholders can more effectively assess which policies offer the best value based on their personal driving habits and risk profiles. This comparison not only aids in finding competitive pricing but also in identifying insurance offerings that reward safer driving practices.

Future Potential of Automation in Insurance

The future of automation in auto insurance is being significantly shaped by the advent of generative AI (GenAI), which enables end-to-end claims process automation. By leveraging GenAI tools, insurance companies can automate the evaluation of claims based on uploaded images of vehicle damage, streamlining the settlement process.

Simplifai has launched a generative AI tool, InsuranceGPT, which is the first large language model (LLM) specifically trained on insurance-related information, including policies, claims and customer service interactions. InsuranceGPT aims to improve the way insurance companies interact with their customers, ensuring that responses are not only quick but also accurate and highly relevant to the customers' needs.

InsuranceGPT's deep understanding of insurance terminologies and policies enables it to handle complex inquiries with ease, offering personalized advice and streamlining the claims process by identifying discrepancies in claims submissions and initiating procedures autonomously, significantly improving response times and operational efficiency.

Verisk also recently introduced an innovative, generative AI tool to expedite insurance claim processing within its Discovery Navigator platform. This tool automates the summarization of medical records for property and casualty claims, significantly reducing the time needed for claims handlers to review records. It promises up to 90% faster processing than manual methods, with up to 95% accuracy, enhancing efficiency.

CorVel has also launched a generative AI initiative through its Care MC claims platform, aiming to redefine claims and case management. This system automates tasks, such as summarizing medical documents and extracting key information, streamlining the claims process and allowing adjusters to focus more on direct interactions with claimants. This innovation marks a significant step toward more efficient and accurate claims management.

Final Thoughts

As we stand on the brink of a new era in AI in insurance, one question remains: How will these technologies continue to shape our experiences and expectations?

With examples like Verisk's quick claim review tool and Simplifai's engaging chatbot, the future is promising yet filled with challenges. One thing is for certain–future changes must balance technological benefits and security to ensure success in this evolving landscape.

In late 2001, Scott McNealy, the CEO of Sun Microsystems at the time, laid out for me a sweeping vision of remote work. Office buildings would be reduced to meeting rooms surrounded by a large parking lot. Employees would only come to the parking lot two or three days a week and would arrive around 10--avoiding rush hour traffic. They would plug their "sports utility offices" into the company network, letting colleagues know they were nearby if anyone wanted to arrange a meeting inside or just come by and bang on their window for a chat. Everyone would leave by around 3pm--again avoiding rush hour--and go home... to continue working.

McNealy had outfitted every employee with a home computer because, he said, "I do not want somebody at 10 o'clock at night who can't sleep, who wants to work because there's nothing good on TV, to not have full capability to do everything he needs to do to get the job done."

I asked: "Will people have trouble splitting work from home life?"

"There is no distinction," he said.

In my experience, McNealy was prescient about a lot of things. For instance, Sun adopted the slogan "the network is the computer" 40 years ago, long before most of us had even heard of the internet, and McNealy began describing cars as "computers on wheels" almost that long ago, well before most of us were aware of the processors being built into cars. I think he may have been right, if a bit early, about the productivity possible through remote work, too.

Certainly, something is driving the major, recent gains in productivity--up 4.9% on an annualized basis in the third quarter and a further 3.2% annualized in the fourth quarter, after a 1.9% decline during the COVID chaos of 2021 and a 1.2% rebound in 2022.

Productivity numbers are tricky, and it takes years to truly discern a trend -- the surge in the '90s from digitization, including the internet, wasn't fully recognized until 1999 -- but if my instincts are right, and we're at the start of a similar boom, then insurers face a huge opportunity and a challenge.

The opportunity is that all the efforts now underway to improve efficiency can become far more ambitious. The challenge is that they will have to become far more ambitious, because some, even many, of your competitors will seize the opportunity even if you don't. 

I realize I'm somewhat biased here, because I've been Team Remote Work for more than 25 years, since I left the Wall Street Journal and became a partner at Diamond Management & Technology Consultants. Yes, given the consulting firm culture of when-in-doubt-get-on-a-plane, I commuted from the Bay Area to headquarters in Chicago two or three times a month, but when I was home, I was home.

If my two daughters, then quite young, wanted to jump in the pool, I could just about always find time to go have my best moments of the day (and maybe theirs). When I needed to get serious, I could just shut the door to my office and get to it. The result was a happy employee and some of my best work -- the magazine my team and I produced for Diamond was once a finalist for the National Magazine Award for General Excellence, the industry's highest honor. 

Yes, many jobs require more interaction with multiple people in real time than the editing of a bi-monthly magazine does and don't lend themselves so easily to remote work. I sometimes think of the experience of my younger brother, who, like me, started on the copy desk at the Wall Street Journal but who didn't go remote over four decades -- and really couldn't have, even though the act of editing only requires a person and a computer. Instead, he commuted two hours to New York City from a northern suburb of Philadelphia and two hours home every day because, especially as he took on more senior editing responsibilities, he had to be in the mix as stories changed and as copy did or didn't arrive on deadline.

There are, of course, also many jobs that simply can't be remote -- in construction, hospitality, healthcare and more. 

But I think most insurance jobs have more in common with my experience editing a bi-monthly magazine than they do with putting out a daily newspaper or with the jobs that have to be in person. Someone underwriting, handling a claim or working with people to sell or service a policy certainly has reasons to interact with others but is doing the productive part of the work on their own.  

The jury is still out on whether innovation can happen as easily when people work remotely and whether any sense of isolation is harmful, but a lot of benefits are clear-cut. Employees are happier and thus less likely to leave. You've just given them what amounts to a raise by cutting their commute expenses and have given then back maybe an hour of each day they don't have to come in. You've made it easier for them to juggle any responsibilities with children or with aging parents and to work around any family illnesses. 

You also reduce your need for office space and for relocation expenses. (The WSJ paid to relocate me five times in my 17 years there.)

This article in the New York Times explores in detail the potential for productivity gains from remote or hybrid work. It also introduces the prospect that AI, especially recent developments in generative AI, are already feeding into productivity improvements.

Personally, I think that may be optimistic. It took close to 20 years from the time personal computers appeared in the late 1970s and early 1980s until major productivity gains from digitization registered. And, while I think there is much more low-hanging fruit to be harvested with AI than there was with massive IT projects in the '80s and '90s, I still think we're in the beginning stages of the Gen AI revolution. 

But it will happen. And I haven't ever heard anyone say insurance is an efficient industry. We've made great progress in the past decade and will continue to do so, but there is an awful lot of white space still there for innovators.

We now seem to have two waves to ride: first, the switch to remote work, then the long, deep benefits from the adoption of generative AI. 

As I often say, I take to heart the Silicon Valley mantra that you should never confuse a clear view with a short distance, and I may be violating that adage here. But even if you add a few years to my guesses, we're still in for profound change, and I think we can all aim higher.

Cheers,

Paul

P.S. My best work-from-home moments came when my younger daughter got home from pre-school. I'd hear the front door slam, then the sound of her backpack landing on the hardwood in the foyer, followed by her little tennis shoes slapping against the floor as she raced toward my office. I'd turn my chair to face the door, so she could launch herself into my chest and land in my lap. She'd give me the biggest hug, and we'd chat about her day. Occasionally, she'd fall asleep in my arms. I'd never dream of putting her down, so I'd take phone calls with her on my chest and even type emails or edit articles around her little body. 

I doubt anyone has ever had a better experience working in an office or come away more energized.  

KEY TAKEAWAY:

--By understanding who Gen Zalpha is, tapping into their spending power, rethinking advertising strategies and building authentic connections on social media, insurance brands can position themselves to thrive in the evolving consumer landscape.

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In the dynamic landscape of digital marketing for insurance, understanding and connecting with emerging consumer generations is key to staying ahead. 

As we venture into the era of Gen Zalpha, a fusion of Gen Z and Alpha, the insurance industry and marketers are presented with a unique set of challenges and opportunities. With their innate digital savviness and significant spending power, Gen Zalpha is reshaping the consumer landscape. 

To effectively engage with Gen Zalpha, it's crucial to understand who they are and what defines their digital behavior. Gen Zalpha represents those born from 2001 onward, combining the characteristics of both Gen Z and Alpha. They are growing up with smartphones and social media as integral parts of their lives.

The most recent social medium to rise to prominence is TikTok, with 1.1 billion active users across 160 countries. TikTok has overtaken Twitter, Reddit, Pinterest and Snapchat very quickly. It is also thought to have taken a big portion of YouTube’s user base, a figure that is yet to be determined. The potential for reaching new customers and advertising has led to the expansion of the insurance industry onto these platforms. Many insurance businesses are creating accounts on these platforms to expand their territory, build trust and attract users. 

Gen Zalpha has never known a world without the internet. They are fluent in digital communication, and social media platforms are their primary means of connection, information and entertainment. Which makes them so powerful for insurance brands to target.

Unlocking Gen Zalpha's potential requires a strategic shift in marketing approaches, embracing the digital behaviors and preferences of this unique demographic. Here are some actionable tips for the insurance industry to captivate and engage with a Gen Zalpha audience: 

See also: Revolutionizing Life Insurance Uptake in Younger Markets

Unleashing the Spending Power of Gen Zalpha

Gen Zalpha wields substantial spending power and can influence household purchases. To tap into this demographic, marketers need to employ strategies that resonate with their unique preferences and behaviors. One way of doing this is through influencer marketing.

Gen Zalpha is highly influenced by social media personalities and content creators. Collaborate with influencers who align with your brand values to authentically reach and engage this audience. A good example of this is Tom, life insurance for dads, who are targeting new dads and a younger demographic through social media and harnessing celebrity influencers to endorse and promote their product.

Rethinking Advertising Strategies for Gen Zalpha

Gen Zalpha is reshaping the advertising landscape. Marketers need to adapt their strategies to meet the expectations of this audience.

• Mobile-First Approach: Gen Zalpha's digital world revolves around mobile devices. Ensure that your advertising strategies prioritize mobile platforms, with responsive and visually appealing content.
• Data-Driven Personalization: Leverage data analytics to understand the preferences and behaviors of Gen Zalpha. Personalize your campaigns to deliver content that resonates on an individual level, increasing the likelihood of engagement. Regular interaction with your audience on social media through relevant content can provide a wealth of insight into their preferences and thoughts. This deep understanding of your customers' needs and expectations enables you to devise better marketing strategies and tailor your offerings accordingly.
• Sustainability and Social Responsibility: Gen Zalpha values brands that prioritize sustainability and social responsibility. Incorporate these values into your advertising messages to create a positive brand image and foster loyalty.

See also: What to Understand About Gen Z

Building Authentic Connections Through Social Media

To truly unlock the potential of Gen Zalpha, insurance brands must focus on building authentic connections on social media platforms. Here are some actionable tips:

• Educational Content: One of the best ways to use social media for the insurance industry is to create educational content that explains various insurance policies and their benefits. These videos should be short and engaging, with a clear focus on helping viewers understand complex insurance concepts.
• Show Personality: One thing you can do to spice up your content and make yourself stand out even more is to let your own personality shine in your videos. Show yourself as upbeat, humorous or fun, so viewers can relate to your brand. This is especially important when tackling a topic like insurance. 
• User-Generated Content (UGC): Encourage your audience to create and share content related to your brand. UGC not only provides authentic testimonials but also enhances brand visibility among Gen Zalpha's peer networks.
• Community Engagement: Foster a sense of community around your brand. Engage with your audience through comments, messages and polls. Actively participating in the online conversation helps build trust and loyalty.
• Trend Participation: Stay current with social media trends and challenges. Participating in popular trends demonstrates that your brand is culturally aware and aligns with the interests of Gen Zalpha.

By understanding who Gen Zalpha is, tapping into their spending power, rethinking advertising strategies and building authentic connections on social media, insurance brands can position themselves to thrive in the evolving consumer landscape. As marketers, it's crucial to stay agile, adaptable and attuned to the pulse of Gen Zalpha to effectively capture their attention and loyalty.