Category Archives: Technology

North American Insurers Lead In Tech Spending

North American insurers lead the way in IT spending globally and will invest $73 billion in tech areas such as data analytics, cloud, and insurtech in 2017.

Digital Insurance reports that global IT spending by insurers is slated to reach $185 billion by the end of this year, according to the Celent “IT Spending in Insurance 2017” report.

After North America, insurer technology spending by region is as follows: Europe ($69 billion); Asia ($33 billion); Latin America ($5 billion); then a group of territories comprising Africa, the Middle East and Eastern Europe (around $5 billion collectively).

Three overarching trends – digitalization, data analytics, and legacy and ecosystem transformation – still dominate investment, Celent said.

“In a few markets globally, we have seen a slight reduction in IT spending this year. Generally, the more mature markets remain under pressure to demonstrate value through efficiency,” said senior vice president Jamie Macgregor.

Selfies And Life Insurance

Today’s selfie may already be posted on Instagram, but consider this: one day it could be part of your application for life insurance.

NerdWallet reports that several life insurers are testing technology that uses facial analytics and other data to estimate life expectancy.

The tech company in focus, Lapetus Solutions, says its product Chronos, would enable a customer to buy life insurance online in as little as 10 minutes without taking a life insurance medical exam.

NerdWallet explains that state regulatory approval would be required for an insurer to be able to use Chronos in the underwriting process. Once approved, here’s how it would work:

“You’d upload a selfie to the insurer online and answer health and other questions. The facial analytics technology would scan hundreds of points on your face and extract certain information, including your body mass index, physiological age (in layman’s terms, how old you look) and whether you’re aging faster or slower than your actual age.”

The facial analytics angle is just one example of how life insurers are exploring the use of data, statistical models, artificial intelligence and other innovative techniques in their business.

Time and testing will tell which new approaches prove effective, says Robert Kerzner, president and CEO of LIMRA: “This one may or may not meet the vetting process to make carriers comfortable.”

What do you think?

Check out I.I.I. facts and statistics on life insurance.

Insurers Invest In Artificial Intelligence

About two-thirds of insurers use artificial intelligence-based (AI) “virtual assistants” to handle some customer calls and use of the technology is expected to increase, according to a just-published Accenture survey.

Today’s I.I.I. Daily, via Bloomberg, reports that 85 percent of the executives surveyed by Accenture indicated that they would invest “significantly” in the technology over the next three years.

Insurance companies will spend on average $90 million on artificial-intelligence technologies by 2020, according to research from Tata Consultancy Services.

The Bloomberg article “Insurance Customers Need to Get Used To Talking To Machines” is timely.

A new global study by software company Pegasystems Inc reveals that while consumers are optimistic about the benefits of AI, they are also confused about what AI really does and have misplaced fears that inhibit them from fully embracing AI devices and services.

In the survey of 6,000 customers in six countries, Pegasystems found that only one in three (36 percent) of consumers are comfortable with businesses using AI to engage with them—even if this typically results in a better customer experience.

Digital Insurance reports: “The irony in many cases is that consumers may be surprised to learn they are already exposed to much more AI than they realize.”

Only 34 percent of respondents thought they had directly experienced AI. But when asked about the technologies in their lives, the survey found that 84 percent actually use at least one AI-powered service or device such as virtual home assistants, intelligent chatbots, or predictive product suggestions.

“When asked separately to identify AI-powered devices, only 41 percent knew Amazon’s Alexa and Google Home run on AI.”

Core Systems Transformation And The Future Of Insurance

Core Systems Transformation is the next evolutionary step toward sustainable excellence and future success for insurance businesses. The key to this shift is how the insurance industry adapts new technologies into its practices–and how insurers embrace its essential values at all levels of their corporate culture.

In a new thought leadership piece, I.I.I. CEO Sean Kevelighan offers a few insights that we hope will initiate a broader discussion on the subject.

“Many liken the adoption of automated and/or augmented intelligence to a “4th industrial revolution.” Uniform standards—Stevenson’s railroad gauges and Whitney’s use of interchangeable parts—helped to power the first industrial revolution. To bring about the next revolution, insurance must further develop and implement its own sets of industry standards to facilitate change and growth in all areas and at all organizational levels: from IT to underwriting to product to distribution and customer service.

Much in the same way leaders in the Fintech sector have leveraged new technologies (e.g., blockchain) with outstanding results, insurance needs to acquire the tools, practices and perspectives (expressed by one global business processor, Xchanging, as conforming around “standards in data, processes, hubs, service providers and technologies”) to maximize and streamline products and, indeed, every link in the insurance value-chain.”

From Making the Pieces Fit Together:  Pathways to Digital Insurance Business and Culture Transformation

Impact Of Collision/Crash Top Cause of Liability Loss In U.S.

Despite advances in safety, the impact of collision/crash, particularly motor-related, is the main driver of liability loss activity in the United States.

The impact of collision/crash accounted for close to half (42 percent) of the value of business liability claims in the U.S., according to the latest global claims review by Allianz Global Corporate & Specialty (AGCS).

New technology will drive a big shift in liability claims, AGCS warns. For example, the rise of autonomous driving presents new loss scenarios for insurers:

“A decline in car ownership in favor of motor fleets, car-sharing and driverless taxis could see insurers move away from providing millions of single annual motor insurance policies to drivers, instead providing large policies purchased by manufacturers, fleet owners and operators.”

The shift to product liability will require insurers to develop technical expertise and not rely on historic data and driver profiling for pricing. Allianz has already started building teams of engineers with experience in automotive and driverless technology.

(Read this Insuring California blog post for more insight on how driverless cars will change auto insurance.)

The growing “sharing economy” also raises new liability questions:

”A road traffic accident featuring an autonomous car share vehicle could involve the vehicle manufacturer, software provider and the fleet operator, as well as third parties involved in the accident. This would make liability harder to apportion and claims more complex to settle.”

AGCS Global Claims Review analyzes over 100,000 corporate liability insurance claims from more than 100 countries, with a total value of €8.85bn (US$9.3bn), paid by AGCS, and other insurers, between 2011 and 2016.

Over 80 percent of losses arise from these 10 causes:

See Insurance Information Institute (I.I.I.) information on litigiousness here.

Insurers Innovating To Prevent Driver Distraction

The distracted driving epidemic, and its impact on highway accidents and the cost of auto insurance, continues to be all over the news.

A 2016 underwriting loss of $7 billion for State Farm’s auto insurance business, announced earlier this week, prompted the latest wave of headlines (see Bloomberg report).

Smartphones and gadgets and screens installed in new cars are two major sources of distraction, the Wall Street Journal recently reported.

While technology is part of the problem, it is also part of the solution (see earlier T+C post). A number of insurers are already partnering with technology companies to offer solutions to prevent distracted driving.

Digital Insurance features some of the latest technologies introduced by insurers here. The list includes a distracted driving simulator brought into schools as part of Arbella Insurance’s Distractology program, as well as apps that integrate with usage-based insurance programs to curb distracted driving (see here and here).

An Insurance Information Institute (I.I.I.) white paper on how more auto accidents and larger claims are driving costs higher is available here.

I.I.I. advice on how to keep your auto insurance affordable here.

Satellite, Mobile Technologies Underpin Insurance Payout To Herders In Kenya

A $2 million insurance payout to thousands of livestock owners in Kenya hit by drought is a good example of insurance and technology coming together to deliver financial protection where it is needed most.

The Kenya Livestock Insurance Program (KLIP), a public-private partnership developed by the government of Kenya and reinsured by Swiss Re, just announced the payout which averages around $170 per household and will be made by the end of February.

KLIP uses satellite technology to measure vegetation available to livestock. Payment is triggered for feed, veterinary medicines and water trucks when the satellite data shows drought is so bad that animal lives are at risk.

In this case, the $2 million payout will help save 70,000 tropical livestock – primarily cows, goats and camels – that in turn sustain approximately 100,000 people across six counties.

Even better, a consortium of insurers led by APA Insurance will pay funds directly into the livestock owners’ bank accounts or via mobile phone accounts.

Here’s the infographic:

The 2016/2017 drought in Kenya was one of the worst in 16 years. Between 2008 and 2011, livestock losses in Kenya accounted for 70 percent of the $12.1 billion in damages caused by drought.

More on this story from Thomson Reuters Foundation.

Insurance Information Institute facts and statistics on droughts and heatwaves are available here.

From 1 To 100: Re(insurer) Tech Investments Soar

Who says insurers and reinsurers aren’t tech savvy? CB Insights reports that (re)insurers made 100 strategic investments in private tech companies in 2016, up from a single investment just four years prior.

Wow, that’s an increase of 9,900 percent.

Cybersecurity, digital insurance distribution, IoT and property management software are some of the tech areas where insurers and reinsurers are investing, according to CB Insights data.

Screen Shot 2017-02-12 at 9.56.44 AM

U.S.-based tech startups attracted 65 percent of (re)insurer investment between 2015 and 2016, while France, China, the United Kingdom and Germany also saw deals.

Munich Re and HSB, XL Catlin’s XL Innovate, Liberty Mutual, Mass Mutual and Assurant are just some of the reinsurance and insurance companies investing in tech startups either directly or via their corporate venture arms.

This is just one of the ways that insurers are leveraging technology, and more specifically data and analytics, into their business.

At the recent Insurance Information Institute Joint Industry Forum, property/casualty insurance leaders identified technology as one of the most important issues for the industry in 2017.

This post by the I.I.I. Insuring California blog talks about how Silicon Valley’s Plug and Play is connecting insurers with the startup ecosystem.

From Many Models, One Decision

Insurance Information Institute chief actuary James Lynch previews one of the most important conferences in the catastrophe modeling world.

I will be attending Cat Risk Management 2017 in Orlando next week, and the reason is as close as the weather forecast I’m looking at early Wednesday.

By now, the weather models have more or less converged: my own sliver of New Jersey is forecast to get about 6 inches of snow. The key word in that last sentence is models.

The many organizations that forecast the weather – the Weather Channel, Accuweather, Weather Underground, the National Weather Service – even the hearty jokester on your local station – use multiple models to predict sun, rain or snow.

The similarity to actuarial work is striking. Like an actuary, the weatherman hasn’t built the models but has to understand the strengths and weaknesses of each. And she has to make a single, certain prediction, yet couch that certainty within a pocket of doubt. The National Weather Service predicts 6.7 inches for my hometown: as much as 7 but as little as 3 (Editor’s Note: total snowfall 6.3 inches by Thursday evening).

Actuaries do that with your insurance policy – many uncertainties but one price. Of the many risks with which they must contend is how their portfolio of policies will perform under a catastrophe. Years ago this risk was estimated crudely – the old Casualty Actuarial Society exams included a section on the ISO Excess Wind calculation. Now catastrophe models do the job. And insurers need a lot of catastrophe models, which is what will be taking me to Orlando.

Next week’s conference is a cornucopia of cat models – hurricane models and wildfire models, earthquake and flood models. There is even discussion of how to coordinate the many models insurers must juggle. The conference, presented by the Reinsurance Association of America, is sold out; about 500 will attend.

I will be live-tweeting and will post a report. I.I.I. wants to draw attention to the importance of resilience – helping people understand that the best way to rebound from cataclysm is to prepare for it. Explaining how insurers do their part – in this case using models so that a policy’s price reflects its risk – helps everyone understand how much risk they must prepare for.

And I suppose, yes, will be good to visit balmy Florida after digging out from a half-foot of snow.

I.I.I.’s Facts and Statistics on global catastrophes gives a good idea of the scope of disasters that insurers protect against.

Ransomware: Is Cyber Insurance On Your Radar?

Hotel guests locked out of their rooms at a four-star hotel in the Austrian Alps? Washington DC’s CCTV system disrupted days before Donald Trump’s inauguration? Libraries in St Louis brought to a standstill? Eight years of digital evidence lost by a Texas police department?

Ransomware is not just grabbing headlines, it’s now the favorite method of cyberattack used against businesses, particularly in North America and Europe, according to this Malwarebytes report.

In the fourth quarter of 2016 alone, Malawarebytes catalogued nearly 400 variants of ransomware, and 81 percent of ransomware detected in corporate environments occurred in North America.

Lloyd’s insurer Beazley saw ransomware attacks quadruple in 2016 and projects them to double again in 2017.

“Evolving ransomware variants enable hackers to methodically investigate a company’s system, selectively lock the most critical files, and demand higher ransoms to get the most valuable files unencrypted.”

In its white paper Cyberrisk: Threat and Opportunity, the Insurance Information Institute reports that insurers are issuing an increasing number of cyber insurance policies and coverage for cyber extortion, including payment of a ransom following a ransomware attack, is available.

According to the FBI, ransomware attacks are on the up, particularly targeting organizations because the payoffs are higher.