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Featured General Insurance Security

Now more than ever, insurance companies have become prime targets for cyber threats. Insurers handle vast amounts of sensitive data, making them attractive to cybercriminals.

Also, the increased attack surfaces from reliance on technology for efficient and seamless operations make insurers and others in their ecosystem—such as intermediaries, vendors, and policyholders—easier targets.

For insurers, having strong cybersecurity isn’t just about following the rules—it’s essential for protecting their business.

This article looks at specific cybersecurity strategies to help insurance companies protect their assets, reputation, and customer trust.

The impact of cyber risks

Cyber risks pose significant financial challenges to insurance companies, often resulting in a surge of claims related to breaches, ransomware attacks, and other cyber-related damages. This can substantially increase the financial burden on insurers due to higher claims payouts.

Additionally, insurers that cover ransomware payments may face huge financial demands. Even if they don’t cover such payments, they still incur high costs from legal battles and recovery efforts.

Cyber attacks can also disrupt operational activities, leading to lost revenue and increased costs associated with remediation and recovery.

The dynamic nature of cyber threats complicates underwriting risks for insurers. As mentioned earlier, insurers become prime targets for cyber attacks because they hold sensitive customer data. Data breaches can expose this confidential information, leading to regulatory fines and a significant loss of customer trust.

Breaches can severely impact an insurer’s reputation, making it difficult to attract and retain customers.

Cybersecurity solutions for insurers

 1. Advanced threat detection & response

Insurance companies must stay ahead of sophisticated cyber threats by employing advanced threat detection and response systems. These systems utilize artificial intelligence and machine learning to identify and mitigate potential threats in real time.

CrowdStrike 

CrowdStrike’s Falcon platform is renowned for its next-generation endpoint protection, offering real-time threat detection and response capabilities. By leveraging AI-driven analytics, CrowdStrike helps insurance companies detect threats swiftly and minimize potential damage.

 2. Data encryption & protection

Ensuring that sensitive customer data is encrypted both at rest and in transit is crucial for preventing unauthorized access and breaches. Encryption transforms data into a secure format that can only be deciphered by authorized parties.

Symantec (now part of Broadcom Inc.)

Symantec’s Data Loss Prevention (DLP) solutions provide robust encryption and data protection tools. These solutions help insurance companies safeguard sensitive information, ensuring compliance with regulatory standards and protecting against data breaches.

 3. Identity & access management (IAM)

Identity and Access Management solutions control who has access to what information within an organization. By implementing strong IAM protocols, insurance companies can ensure that only authorized personnel have access to sensitive data and systems.

Okta 

Okta’s Identity Cloud offers comprehensive IAM solutions, including single sign-on (SSO), multi-factor authentication (MFA), and lifecycle management. Okta enables insurance companies to manage user identities securely and streamline access to critical applications.

 4. Security information & event management (SIEM)

SIEM systems aggregate and analyze activity from various sources across the IT infrastructure, providing a centralized view of security events. This enables insurance companies to detect and respond to incidents more effectively.

Splunk

Splunk’s SIEM platform offers real-time monitoring, advanced analytics, and automated response capabilities. By integrating data from multiple sources, Splunk helps insurance companies gain comprehensive visibility into their security posture and respond to incidents swiftly.

 5. Cloud security

As insurance companies migrate to cloud environments, ensuring the security of cloud-based applications and data is paramount. Cloud security solutions protect against threats specific to cloud infrastructure and services.

Palo Alto Networks

Palo Alto Networks’ Prisma Cloud provides comprehensive cloud security, covering infrastructure, applications, data, and access. It helps insurance companies secure their cloud environments, ensuring compliance and protecting against cyber threats.

Bottom line

For insurance companies, investing in robust cybersecurity solutions is not just about protecting data but also about maintaining customer trust and ensuring regulatory compliance. By partnering with industry-leading cybersecurity firms like CrowdStrike, Symantec, and many others, insurance companies can fortify their defenses against an ever-evolving cyber threat landscape.

Implementing these solutions helps safeguard sensitive information, ensuring the continuity and integrity of business operations in the digital age.

May 31, 2024
Featured General Insurance Security

The Insurtech industry is revolutionizing insurance with technology, offering faster, smarter services that benefit everyone. Thanks to Insurtech companies, customers today enjoy instant claims processing, laser-fast customer service, and personalized policies. Insurers get real-time data insights that further fuel innovation. But with these advancements come new risks.

Insurtech companies are a prime target for cybercriminals. Why? Because they house vast amounts of sensitive personal and financial data. Protecting this information isn’t just a technical necessity—it’s essential for maintaining trust and integrity, both for customers and clients, but also for the industry. With this in mind, let’s explore cybersecurity risks and solutions for the Insurtech industry in 2024 and beyond.

Cybersecurity risks

Data breaches

In a data breach, unauthorized individuals (hackers) gain access to sensitive, confidential information. Data breaches are rife. For example, insurance broker Keenan & Associates suffered a major data breach in 2023, impacting 1.5M individuals. And back in January this year, life and health insurance giant Washington National Insurance Company fell victim to a SIM-swapping attack that saw over 20,000 people affected. More generally, annual data breaches in the US have increased more than threefold since 2012, while the average cost to US businesses has surged by 60%.

When it comes to data breaches, not all targets are equal, although all industries are impacted. For example, the industry that suffers the most data breaches is IT, software, and tech services. This may surprise some people because you’d expect companies in the tech sector to employ stringent cybersecurity measures. The truth is, that many companies are committed to cybersecurity, but tech companies, including Insurtech companies, are such a lucrative target that robust and quality cybersecurity measures are paramount.

It’s important to note that the term data breach specifically refers to the exposure or theft of data itself, but there are many methods through which data can be stolen, and each presents unique risks. Let’s look at some of the methods that result in a data breach.

Ransomware attacks

Ransomware attacks, where malicious software encrypts a company’s data and demands payment for its release, are one of the primary causes of data breaches. Ransomware attacks can bring a company’s operations to a standstill, leading to financial losses and data theft. For Insurtech companies, the consequences are severe: lost revenue, compromised sensitive information, and damaged client trust. Shockingly, 20% of the costs from ransomware attacks stem from the blow to a company’s reputation.

The most common entry point for ransomware attacks is phishing, which brings us to our next risk.

Phishing and insider threats

Phishing involves deceptive emails or messages that trick employees into revealing sensitive information or clicking on malicious links. For example, an employee might receive an email claiming to be from the CEO, urging them to act quickly on a fake invoice. These messages often create a sense of urgency, prompting hasty actions. Insider threats, whether intentional or accidental, pose additional risks. Employees with access to sensitive data can inadvertently or deliberately cause breaches.

Third-party vulnerabilities

Insurtech companies often rely on third-party vendors, which can introduce significant security risks. Vendors may have access to sensitive data and systems, creating potential entry points for cybercriminals. Many companies also use open-source code, which, while beneficial, can contain vulnerabilities. If hackers find these vulnerabilities, they can potentially access countless different software systems.

Threats in a tech-fueled world

One of the more pressing concerns today is how increasingly powerful software and systems are shaping the cybercrime industry. Cybercriminals are now using AI to craft scarily convincing phishing emails, making it harder to rely on traditional red flags like spelling and grammar errors.

Similarly, the rise of cybercrime-as-a-service has changed the landscape. Cybercriminals now offer ransomware software to aspiring hackers who may not be tech-savvy, for a monthly fee. This lowers the bar for entry, allowing more people to engage in cybercrime. The combination of AI-enhanced phishing and accessible cybercrime tools means companies must be more vigilant than ever in their cybersecurity efforts.

Solutions – combating cybersecurity risks in Insurtech

So, we’ve covered the risks, but how do Insurtech companies go about combating them? Let’s look.

  • Advanced encryption: Implement robust encryption methods for protecting sensitive data both at rest and in transit. Use strong encryption standards like AES-256 to ensure that intercepted data remains unreadable without the correct decryption keys.
  • Multi-Factor Authentication (MFA): Implement MFA to add an extra layer of security by requiring multiple forms of verification before accessing sensitive systems. This reduces the risk of unauthorized access, even if passwords are compromised.
  • Regular security audits and penetration testing: Conduct regular security audits and penetration testing to identify and address vulnerabilities proactively. Comprehensive assessments help find and fix security gaps, keeping the company ahead of potential threats.
  • Employee training and awareness: Regular training sessions for employees help them recognize phishing attempts and other cyber threats. Emphasize the importance of following security protocols and reporting suspicious activities to create a well-informed and vigilant workforce.
  • Incident response planning: Develop and maintain a robust incident response plan outlining steps to take immediately after a breach is detected, including containment, eradication, and recovery processes. Regularly update and test the plan to ensure the team is prepared for an effective response.
  • Stringent access control: Employ the principle of least privilege, where users only have access to the systems necessary to perform their jobs. This massively limits what data can leak during a phishing attack.
  • Cybersecurity insurance: Invest in cybersecurity insurance to mitigate the financial impact of a cyber-attack. This insurance covers costs associated with data breaches, ransomware attacks, and other incidents, providing access to specialized response teams and resources for quicker recovery.

Wrapping up

In today’s hostile cyber environment, Insurtech companies are prime targets for attacks. Robust cybersecurity isn’t optional—it’s a must. By taking deliberate measures like advanced encryption, multi-factor authentication, and regular security audits, companies can protect their systems and keep sensitive data safe from malicious actors.

 

May 29, 2024
Business Featured General Insurance

The workforce isn’t what it was a few years ago. The adoption of remote work arrangements and the creation of innovative technology to optimize procedures have resulted in increased prospects and efficaciousness in recent times.

This is particularly true in the insurance sector, where technology has improved client experiences by streamlining the processing of claims and making it more individualized. Although some contend that technology—more especially, artificial intelligence—is displacing workers, technology helps those in the IT industry find new career paths and lessens burnout.

Early career programs for young professionals are highly valued in the insurance business, and the sector has shown a readiness to accept talent that has chosen an atypical career path. Young workers just entering the profession may find that their life experience, license, and proactive approach assists them in landing internships, independent contractor positions, and apprenticeships.

Employers are aggressively seeking professionals and recent industry newcomers with pre-existing technological skills due to the growing need for digital talent in the insurance sector.

Although there is a steep learning curve, the program offers young professionals a highly sought-after skill set and proof of their technical proficiency that can be utilized by any business. Digital natives acquire proficiency in these intricate systems fast, and their exposure to them refines their critical thinking abilities. It also enables people to be vital contributors to the suggestions for enhancements and innovations to these systems.

Any area may eventually experience burnout but call center workers in the insurance industry are particularly susceptible to it. When consumers deal with issues like illness, accidents, damage to their homes, and even the loss of a loved one, these staff members serve as their primary point of contact.

AI implementation in this segment of the insurance business is a potential remedy for call center employee turnover and fatigue. Employees at contact centers can focus on providing better customer service by using AI to help reduce some of the more laborious aspects of their employment.

Employing AI throughout a call center might also make burnout more apparent to managers, as underperforming staff members may generally go unnoticed. Machine learning algorithms can notify management when an employee is having difficulties and recommend a suitable resolution. In the contact center example, it may be as easy as proposing that the worker take a wellness break or take the remainder of the day off, or it could be more complex like advising that the worker get trained for a particular action that is causing them problems. Everyone may benefit from the inclusion of AI in the workforce.

Short-term benefits include an enhanced workday for agents, more task comfort, and a positive employer impression. From a management perspective, this technology can not only provide enhanced insight into worker well-being but also streamline the process of tracking it, potentially minimizing employee attrition before it becomes noticeable to people. Over time, operational procedures across the employee lifecycle can be strengthened with the use of data collected from burnout reduction initiatives.

May 28, 2024
Automation Featured General Insurance Security

Policyholders increasingly prefer digital interactions over physical ones. However, verification challenges will often lead to high onboarding dropout rates.

Companies must adopt AI-driven verification technologies and advanced digital processes to deliver seamless experiences that foster customer trust and confidence.

Today, digital identity verification solutions are revolutionizing how insurers meet customer expectations and combat fraud.

AI-driven verification solutions

Enhancing identity verification processes is crucial for managing customer identities securely and efficiently in an era of rampant fraud.

This entails adopting AI verification technologies and advanced digital processes like digital onboarding, biometric signatures, and biometrics to deliver faster, smoother experiences, thereby building customer trust and confidence.

These solutions, powered by advanced technologies like biometrics, artificial intelligence (AI), machine learning, and blockchain, are revolutionizing how insurers verify policyholder identities, streamline underwriting processes, and combat fraud.

Let’s delve into the significance of digital identity verification solutions in insurance and how they are reshaping the industry landscape.

 1. Streamlining customer onboarding & verification processes

According to a report by Statista, 44% of Americans aged 18 to 29 who have some form of insurance purchased their policies online.

Traditionally, the insurance application process involved cumbersome paperwork, manual document verification, and lengthy approval times.

However, with digital identity verification solutions, insurers can streamline customer onboarding and verification processes, thereby enabling faster policy issuance and enhancing the overall customer experience.

Through secure online platforms and mobile applications, policyholders can now verify their identity digitally using biometric authentication like Face ID and fingerprint scanning. This not only eliminates the need for paper-based documentation but also ensures greater security and trust in the insurance transaction.

 2. Enhancing risk assessment & underwriting accuracy

Digital identity verification solutions play a crucial role in enhancing risk assessment and underwriting accuracy for insurers.

By leveraging AI algorithms and machine learning models, insurers can analyze vast amounts of data collected from policyholders, including biometric information, behavioral patterns, and transaction history.

This data-driven approach allows insurers to gain deeper insights into customer profiles, assess risk more accurately, and tailor insurance products to individual needs.

 3. Improving compliance with regulatory requirements

Digital identity verification solutions help insurers adhere to regulatory requirements like General Data Protection Regulation (GDPR), anti-money laundering (AML) and Know Your Customer (KYC) guidelines by ensuring the secure collection, storage, and transmission of sensitive customer information.

Through encrypted communication channels and blockchain technology, insurers can safeguard customer data from unauthorized access and cyber threats, thereby maintaining regulatory compliance and protecting customer privacy.

 4. Combatting fraud & enhancing security

Digital identity verification solutions offer a hypoactive approach to combating fraud by detecting suspicious activities and verifying the authenticity of customer identities in real-time.

By employing advanced biometric authentication methods and behavioral analysis techniques, insurers can detect fraudulent claims, identity theft, and unauthorized transactions with greater accuracy and efficiency.

This not only helps insurers minimize financial losses but also protects honest policyholders from the adverse effects of fraudulent activities, thereby preserving trust and integrity in the insurance ecosystem.

Successful implementations in the U.S.

Lemonade

Lemonade uses advanced digital identity verification to streamline the customer onboarding process. Their AI-driven platform verifies user identities quickly and securely, reducing the risk of fraud and enhancing the customer experience.

Root Insurance

Root Insurance leverages digital identity verification to ensure accurate and secure policy issuance. By integrating identity verification technology, Root can offer a seamless and efficient onboarding process for new customers.

NEXT Insurance

NEXT Insurance utilizes AI-driven digital identity verification to ensure the secure and efficient onboarding of new customers. This technology helps NEXT Insurance verify identities in real-time, reducing the risk of fraud and providing a seamless user experience for small business owners seeking insurance coverage.

To conclude

Digital identity verification solutions are transforming the insurance industry by driving efficiency, enhancing security, and improving the overall customer experience. By embracing these innovative technologies, insurers can streamline operations, mitigate risks, and stay ahead in an increasingly competitive market.

As digitalization continues to reshape the insurance landscape, the adoption of digital identity verification solutions will play a pivotal role in shaping the future of insurance and ensuring its sustainability in the digital era.

May 22, 2024
Featured General Insurance

The home insurance sector is frequently perceived as a “follower” of innovation in comparison to other insurance verticals, such as auto. Specifically, touchless claims—a procedure in which the adjuster and customer do not interact face-to-face—have skyrocketed in the number of vehicle claims but are still mostly considered as aspirational goals for house insurance in general.

Since the COVID-19 epidemic four years ago, there has been a significant and rapid increase in homeowner claim technology, virtual inspection choices, and the desk adjuster model. This has resulted in an urgent demand for innovation. Property claims were being handled and resolved without an adjuster or other contractor present for inspection or evaluation on-site often in the history of our sector.

While the pandemic was mostly responsible for the positive digital revolution, not all the results were ideal. Adjusters were occasionally left to oversee a disorganized system of vendors, procedures, and tools despite the industry’s adoption of new tools and technology.

Recently, more difficulties have surfaced on top of previous difficulties. It’s commonly known that the pandemic caused inflation, and the sector was negatively impacted by labor shortages and supply chain problems.

Data indicates that the homeowners’ insurance industry has seen rising claim severity for seven years running, even in the absence of the pandemic. According to CoreLogic statistics, recent hail damage shattered previous records at every National Weather Service office. Lastly, JD Power reports that in just two years, repair cycle durations have increased by 33%, or around six days.

In the face of these challenges, adjusters are expected to perform greater duties and process claims at a historical rate.

Collaboration is essential in identifying the optimal blend of claim touchpoints to enhance efficiency and accuracy, benefiting homeowners, adjusters, and insurers alike. The realm of homeowners’ insurance stands at a pivotal juncture, with the industry prioritizing swift and fair settlements.

Because each home is unique, many claims pertaining to residential property will never be “touchless.” Evaluating the damage and repairability of a home can be a complicated process. However, there are several chances to “touch less,” which leads to a seamless homeowner experience, an optimized adjuster workflow, and an effective carrier claims management program.

Insurance companies that successfully handle low touch claims usually have the following characteristics, albeit the exact number of touchpoints will depend on the specifics and requirements of each claim.

Streamlining decision-making through ‘touchless’ processes

Homes aren’t standardized, as was previously mentioned, but that doesn’t mean decision-making can’t be. Large volumes of data are managed or at the disposal of homeowners’ insurance firms, ranging from policyholder and claim history to material availability and cost.

The advancement and settlement of claims can be standardized with the use of such data. For example, centralized or third-party analysis can reliably respond to questions about repairability, pricing, material availability, and timing following the first collection of measurements and photos of damage. All of that can happen without the requirement for a follow-up visit or other additional touchpoints. More significantly, though, is that it enables carriers to handle claims more uniformly, regardless of their location or level of severity.

Embracing embedded intelligence through ‘touchless’ processes

It goes without saying, but it must be acknowledged that modern technology can also work in our favor. It could be revolutionary to combine massive data sets with digital technologies that expedite our ability to make informed judgments.

There is much talk about artificial intelligence (AI) and machine learning, and these technologies are becoming more and more important in automating claims. There are also interesting new ways that the industry is utilizing “big data.” Although most property disputes will probably never be managed entirely by this technology, it will speed up procedures without compromising accuracy.

Though technology is undoubtedly important, as everyone reading this tale knows, it can also be harmful. A disorganized and confused process will result from adjusters and homeowners investing in an excessive number of different tools and resources. If intelligence justifies the trouble and any negative effects on adjuster workflows, then investing in strong data and decision-making assistance is worthwhile.

Our sector must embrace consolidation and integration as it works to create a culture and practices that support “touchless” claims. Rather than adding steps to an already complicated process, we should seek ways to integrate data and intelligence into current workflows.

Internal alignment

Without the cooperation of every employee, no organization will be able to implement the change. Although difficult, change management is essential, particularly when one approach has long been “the way”. However, you can use your statistics as a very effective instrument to gain support.

Utilize the data to demonstrate how a better strategy will make day-to-day operations easier and more productive. For example, illustrate how the number of adjuster touchpoints and average claim cycle times are related.

Although the settlement amounts for cars and homes will never be the same, there are some similarities that can assist homeowners’ insurance enter a new, more precise, and more efficient era of claims processing. Although it’s unlikely that a totally touchless ecosystem will ever be achieved, developing a less touch process can be a catalyst for industry stabilization and the creation of a bright future.

May 20, 2024
Automation Featured General Insurance

Today, technology has become a cornerstone for driving efficiency, fostering innovation, and enhancing profitability.

From the early adoption of digital platforms for policy management to the integration of data analytics for risk assessment, insurers have continuously embraced technological advancements to stay competitive in a rapidly changing market.

Artificial Intelligence (AI) is at the forefront of this technological revolution, offering opportunities for insurers to improve decision-making, enhancing customer experiences, and reap many benefits. However, alongside the promises of AI lie significant challenges that insurers must overcome to unlock its full potential.

This article attempts to uncover why AI adoption has been low, provide remedies for those challenges, while also examining successful problem-solvers.

Challenge 1: Data quality and quantity

Inaccurate or insufficient data can lead to biased predictions and erroneous decisions, posing risks to insurers and customers alike.

For instance, AI systems, particularly Generative AI, may produce inaccuracies known as “hallucinations,” where false information is generated. These inaccuracies undermine the reliability of AI models.

Problem-solver

DataRobot offers AI-driven solutions for data preparation, enabling insurance companies to clean, structure, and enrich their data efficiently. Their platform empowers insurers to leverage advanced analytics and machine learning to improve data quality and make more accurate predictions.

Challenge 2: Data privacy and security

For data to yield reliable insights, as explained in the previous paragraphs, a substantial amount must be collected. However, this often blurs the lines regarding the kinds of data that can be collected.

Data privacy regulations such as GDPR and HIPAA typically restrict insurers and other entities from overstepping these boundaries, with strict enforcement backed by heavy legal penalties.

Moreover, robust, and advanced security measures must be implemented to thwart data breaches, albeit at an additional cost.

Problem-solver

Acquired by Informatica in mid-2023, Privitar offers privacy engineering solutions for organizations, including insurance companies. Their platform facilitates the anonymization and de-identification of sensitive data, ensuring compliance with data protection regulations while enabling meaningful analysis and insights.

Challenge 3: Interpretability and explainability

Often, AI algorithms operate as “black boxes,” lacking transparency and making it challenging for insurance professionals to comprehend AI-driven decisions.

“Black boxes” in AI refer to artificial intelligence systems whose inputs and operations are not visible to the user, or another interested party. Essentially, a black box represents an opaque system. Black box AI models reach conclusions or decisions without offering explanations on how they were derived.

This lack of interpretability can foster skepticism and distrust among stakeholders, impeding the adoption of AI technologies.

Insurers must prioritize the development of AI models that offer clear explanations for their decisions, allowing stakeholders to trust and validate AI-driven outcomes.

Problem-solver

DigitalOwl’s AI solutions prioritize transparency and explainability, providing clear reasoning for every decision and enabling insurance professionals to comprehend the underlying factors driving AI-driven outcomes.

By incorporating features that allow stakeholders to trace the decision-making process of AI models, insurers can cultivate trust and confidence in AI-driven processes. For instance, all DigitalOwl’s data points are clickable, directing users directly to the source document from which the data point was extracted.

Challenge 4: Regulatory compliance

According to a recent YouGov poll, health insurance ranks sixth among the industries most Americans believe should be regulated. , health insurance ranks sixth among the industries most Americans believe should be regulated.

Navigating the heavily regulated insurance industry while implementing AI solutions necessitates adherence to guidelines on underwriting, claims handling, and customer communication.

Non-compliance with regulatory standards can lead to fines, legal liabilities, and, worst of all, damage to the company’s reputation.

Insurers must stay updated on regulatory requirements and ensure that their AI systems comply with industry regulations.

Problem-solver

Compliance.ai offers regulatory compliance solutions powered by AI and machine learning. Their platform helps insurance companies stay up to date with regulatory changes and requirements by monitoring and analyzing regulatory content from various sources.

This enables insurers to ensure compliance with industry regulations and reduce the risk of non-compliance penalties.

Conclusion

While challenges like data quality, privacy, and regulatory compliance persist in implementing AI in insurance, proactive solutions like those offered by DigitalOwl, DataRobot, and many others around the globe pave the way for enhanced efficiency, transparency, and trust in AI-driven processes.

By addressing these challenges head-on and leveraging advanced technologies, insurers can unlock the full potential of AI to drive innovation and profitability in the insurance industry.

May 15, 2024
Featured General Insurance

An enormous transition from the last 35 years of worldwide mass production of products and services back to fragmented, protectionist production networks and supply chains is a challenge that the property and casualty (P&C) insurance sector has never faced before.

It’s true that carriers know how to endure bad times. Upon a calamity, the insurance sector steps in to restore what has been destroyed. Utilizing dispersed worldwide production systems has allowed them to accomplish this at a high rate of speed, volume, and (relatively) cheap cost.

But there is a limit to this period of consistent, inexpensive abundance.

Currently, interruptions in the supply chain are having a profound effect on everyone, including insurance. In January and February of last year, for instance, trade volumes in the Panama Canal decreased by 32%, while trade volumes in the Suez Canal decreased by 50% over the same period. Insurance is impacted by these and similar situations.

Imagine that a community is attacked by a powerful storm. That occurs frequently. 88.5% of American counties saw the declaration of a natural disaster between January 2013 and January 2023. In those situations, the demand for various personal property goods, auto components, and building supplies and tools quickly spikes. When such materials are in short supply, what happens? All in all, insurers still have contractual obligations to fulfill, and as a result, expenses rise, losses mount, and claimants endure protracted delays. Everyone is at a disadvantage.

The two main factors influencing supply chain changes are nationalism and demographics.

China is facing a dropping birth rate that could influence its labor force, and the country’s population fell by 2 million in 2023 alone. As major hubs for global industry, South Korea, Japan, and Germany all have fast aging labor forces; as a result, their working populations will decline, and their output will decline as well. Other nations are following suit. For instance, the U.S. population will peak in 2080 and then begin to fall, despite significant positive immigration flows.

On the other hand, a new era of geopolitical instability has been brought about by the rise of nationalism, current conflicts like the wars in the Middle East and Ukraine, anti-globalization sentiments in the United States, and “de-risking” in Europe. A fragmented world of protectionism and conflict threats is replacing the formerly uncontested supremacy of a global commercial network. In addition to reverting to historical norms, this also represents a radical reconstruction of contemporary supply chains that have enabled the widespread, reasonably priced replacement of insured items during the past few decades. Both the industry and its clients will be impacted.

These difficulties are made worse by the disparity between the overall demand and supply for insurance. The need for coverage is rising in tandem with the frequency of losses. The inability of certain authorities to permit appropriate pricing in conjunction with these losses limits insurers’ ability to take on comparable risks. Disruptions in the supply chain and rising claims settlement expenses intensify this disparity, forcing insurers out of the market while the need for insurance rises.

Strategies for insurance companies to adapt

Though difficult to implement, the answers are easy to explain. Carrier commitments to manage this changing environment include:

  1. Quick, smart adjustments to underwriting and pricing
  2. Effective yet affordable risk-reduction techniques
  3. Agreed upon supplier chain terms

With enough focus, the following can be accomplished.

  • Accelerated underwriting speed

Climate change, supply chain problems, and legislative barriers can quickly render certain geographic areas or risk categories uninsurable. In certain situations, insurers need to be able to respond with eligibility steps accurately and promptly.

  • Price reflecting speed

2020’s experience has shown us that we must react to risk and pricing fluctuations far more quickly. However, we need to use the data available with greater sophistication. Insurance prices are skyrocketing, and those who cannot quickly incorporate new, highly predictive characteristics into their ratings may face adverse selection. Years used to be the measure of speed; today, it’s months, and for top insurers, it’s weeks.

  • Balance of managing risk

Options for reducing risk are always growing. In a post-globalized environment when replacement costs are higher and replacement timelines are longer, risk mitigation as opposed to loss replacement is looking more and more appealing from an economic standpoint.

  • Oversee supply chain contracts

Manage the claims ecosystem proactively to guarantee preparedness in high-risk locations and for high-demand commodities. This might involve creative approaches to inventory management, such as storing essential parts to prevent shortages, or hedging techniques with vendors of products for regions.

The globe is shifting because of deglobalization. It won’t be simple for insurers (or other businesses) to adjust to this shift, even with their tools. All-out effort, strategic planning, and a proactive, open-minded mindset will be needed.

May 13, 2024
Featured General Insurance

The earliest form of insurance involved people pooling their resources into a common fund to compensate those facing specific losses like funeral expenses, which were relatively easy to prove.

Over time, insurance evolved to cover more complex risks involving numerous people, activities, and properties. This transition led to the need for an independent party to conduct risk assessment and investigate claims, resulting in the creation of contractual policies governing the process.

With technology advancing rapidly, peer-to-peer (P2P) insurance has become a reality in today’s world.

How does peer-to-peer (P2P) insurance look today?

In P2P insurance, policyholders contribute premiums to a shared pool, which is used to pay out claims when a member experiences a covered loss. Any surplus funds may be returned to members or donated to a chosen charity.

Advanced technologies like Artificial Intelligence and Blockchain enable the implementation of P2P insurance among a diverse group of individuals with varying needs and risk tolerances, while minimizing reliance on a central governing party.

Notable examples

Lemonade

Often hailed as the world’s first P2P insurance company, Lemonade utilizes a full-stack carrier approach, combining technology with a peer-to-peer business model to streamline insurance processes and deliver value to customers.

Through its platform, Lemonade has revolutionized the insurance experience, offering transparent pricing, quick claims processing, and a commitment to social impact by donating excess premiums to charitable causes.

To date, Lemonade is the only company that still implements P2P insurance. Others have tried implementing it once but with limited success, leading to their downfall (or lack of implementation thereof).

These include:

Friendsurance (2010)

Friendsurance, a groundbreaking German startup, disrupted the insurance landscape with its social network-based model. Users banded together with friends or family, sharing coverage and incentivizing risk prevention.

The online platform provided a range of policies, from electronics and bikes to household and liability, while offering users rewards for damage reports and claims.

Xiang Hu Bao

Introduced by Alipay in 2018, Xiang Hu Bao represents a milestone in online mutual aid platforms in China, boasting over 100 million participants. Its mission is to foster inclusive health protection, particularly for lower-income and rural individuals.

Members contributed approximately $4.25 annually which was deducted from their Alipay accounts. Coverage extended up to $40,000 for specific illnesses, with claims processed via blockchain technology.

The platform levied up to 8% commission from the claims pool, and complex cases were adjudicated by a jury comprising of platform members.

Teambrella (2015)

Teambrella, a Bitcoin-based peer-to-peer (P2P) insurance platform, seeked to revolutionize the insurance industry by eliminating the need for traditional insurers.

Founded by Russian entrepreneurs Alex Paperno, Eugene Porubaev, and Vlad Kravchuk, Teambrella allowed users to provide coverage to each other without intermediaries.

Users formed teams and contributed funds to a shared Bitcoin wallet, providing coverage for various risks. Claims were processed through a voting system, which incentivized honesty and transparency.

Final thoughts

The evolution of insurance from its earliest forms of communal pooling to the modern era of peer-to-peer (P2P) insurance showcases how technology and innovation can work together to create a disruption in the insurance space.

However, despite the promises of P2P insurance, several challenges persist. One major challenge is the risk of moral hazard, where insured parties may alter their behavior to take advantage of the shared risk pool.

Add to that, the decentralized nature of P2P insurance platforms introduces vulnerabilities to fraudulent activities like false claims or identity theft.

Lastly, regulatory compliance and legal complexities pose ongoing challenges for P2P insurers operating in various jurisdictions, as many countries still lack formal legislation to govern them.

Addressing these challenges requires continuous innovation, robust risk management practices, and effective regulatory oversight, the lack of which has seen many insurtechs like Friendsurance, Teambrella, and many others that made headlines in the 2010s failing to materialize results.

May 10, 2024
Automation Featured General Insurance

It’s a Saturday afternoon as you enter a house. Before you, a toaster spits sparks, an aquarium teeters on the brink of bursting, and the bathroom floor is flooded with water. But none of this is happening. Armed with your smartphone and Allianz’s augmented reality app “Haunted House,” you’re experiencing everyday scenarios transformed into vivid lessons on potential home hazards. This isn’t just a quirky display of futuristic technology; it’s a strategic initiative by this UK-based insurer to boost homeowner awareness and preparedness for the unexpected.

Similarly, Australian-based NRMA Insurance leverages virtual reality to deliver stark lessons in road safety. Their VR car crash simulation places participants inside a real car, enhanced with a hydraulic system that moves in sync with the harrowing scenes played out through their VR headsets. This visceral experience aims to instill a deeper understanding of crash dynamics and the importance of cautious driving.

Of course, these are rather dramatic examples of how insurers can leverage AR and VR to engage with their customers—how many people want to willingly experience a car crash, simulated or not? Still, many other use cases exist for these technologies in the insurance industry, from risk assessment and damage estimation to training adjusters and enhancing customer service interactions.

What exactly are AR and VR?

Both Augmented Reality (AR) and Virtual Reality (VR) are immersive technologies that enhance and alter our perception of the world. AR layers digital information onto the real world. Heard of Pokémon Go? That’s AR. In contrast, VR creates a fully immersive experience, typically through headsets, transporting users to entirely virtual environments, commonly used in gaming. Increasingly, businesses across various sectors are adopting these technologies to train employees, improve customer experience, and streamline operations. And the insurance sector is no exception here.

AR and VR use cases in the insurance sector

AR-powered visual claims

A recent report predicts that by 2025, over 80% of auto claims and 50% of non-injury claims will be processed virtually. A big part of this shift is AR-powered visual claims. In the past, adjusters would often have to assess damage in person or rely on less-than-ideal images from customers. But today, policyholders can initiate live video sessions, using their smartphones to show adjusters the damage in real time.

Adjusters use AR technology to overlay measurements directly onto the video feed, precisely gauging the extent of damage without physical presence. They can also pinpoint the damage location using geolocation, pause the feed to examine details more thoroughly, and instantly share claim forms and documents for electronic signatures. This method not only reduces the need for onsite visits but also accelerates the entire claims process.

AR for field risk assessments

Zurich Insurance has changed the way its risk engineers and field inspectors conduct on-site evaluations through AR glasses. These professionals often work in challenging environments where they need to climb ladders or navigate tight spaces, making it cumbersome to handle traditional handheld devices for accessing vital data like checklists or site plans. By using AR glasses, Zurich’s engineers and inspectors can view multiple screens of information directly in their line of sight. This hands-free technology allows them to consult in real-time with remote experts using “see-what-I-see” communication capabilities, enhancing decision-making and efficiency directly from the field.

AR and VR for training

VR and AR are making training more interactive and human centered. With VR, new adjusters can step into realistic simulations, practicing on virtual properties to hone their skills safely and confidently. For example, an auto insurance adjuster might use VR to step into a virtual accident scene. They could examine a digitally reconstructed car crash, assess the extent of damage from multiple angles, and practice writing accurate estimates based on their observations. Similarly, a property insurance adjuster might engage in a VR simulation of a flooded home. They would navigate through the house to identify water damage, measure the level of moisture in walls using virtual tools, and simulate interactions with homeowners.

And then there’s AR, which brings training into the real world, allowing trainees to see data and damage assessments superimposed right before their eyes on actual sites. A good example of this is an AR training program by Farmers Insurance. Before the AR/VR program, new hires would walk through a two-story house in L.A. that had significant damages. The problem was that the house was set up in the same way every time, meaning the new employees weren’t getting enough exposure to different scenarios. But with the new AR/VR headsets, they could walk through six different floor plans, seeing a whopping 500 different damage scenarios.

Customer service

Here, AR and VR are mostly used to boost personalized experiences and foster a deeper connection with customers. It should come as no surprise that the insurance industry in general has a reputation for being a little dry or dull. This is mostly out of necessity – insurers must convey information accurately, and they’re typically dealing with sensitive topics.

However, that doesn’t mean there isn’t a place for more immersive technologies that can lighten things up a little. Potential use cases here include AR or VR customer service agents who can answer basic customer questions, troubleshoot issues, or even schedule appointments with human representatives. This can provide 24/7 support and reduce wait times for customers. Another good example is personalized advice on how to make homes safer using an AR app that offers recommendations as you move through your home.

Lastly, insurers could use AR and VR to make choosing or deciphering insurance policies less confusing and stressful. For example, an AR app could scan physical policy documents and then overlay interactive explanations on top of complex terms and clauses, making them easier to understand in the context of the policy.

Final thoughts

Augmented Reality (AR) and Virtual Reality (VR) are redefining engagement across the insurance sector. From immersive training simulations that prepare adjusters for real-world scenarios to interactive apps that educate homeowners about potential risks, these technologies are enhancing both customer service and operational efficiency. As the industry embraces these tools, AR and VR are not just transforming interactions but are also improving the accuracy and empathy of services provided, ensuring a more informed and responsive insurance landscape.

May 8, 2024
Featured General Insurance

Which technologies are North American life insurers investing in and finding appealing?

Top corporate priorities in 2024 will include innovation, digital acceleration, and cybersecurity. These will also influence how life insurers will approach their fintech investments. Technology leaders at life and annuity companies, both individually and collectively, are closely assessing how their business and investment objectives mesh with their IT requirements, as reported in the Celent research Dimensions: Life Insurance IT Pressures & Priorities 2024: North American Edition. The following highlights findings from a survey conducted among chief information officers of life insurance companies.

Finding equilibrium in investment priorities

Growth is still impacting IT spending overall, and insurers are optimistic about the industry’s state. This trend shows that the industry is embracing tech investments as a catalyst for success, demonstrating that it has not just recovered from the economic hardships faced in the years following the pandemic. Insurance companies are concentrating on cost containment and reduction at the same time, which means that there is more control over expenditure than there was during the previous three years.

The goal of insurers is to achieve a balance between innovation (pursuing new technologies) and legacy (maintaining basic systems). A little under half of IT spending is allocated to the upkeep and improvement of current systems, both new and old. Additionally, insurers are putting their recent investments into practice.

It is evident that the insurance business is pursuing a dual-purpose investment strategy to uphold established institutions and take advantage of the disruptive opportunities presented by new technologies. The distribution of an IT budget across the primary activities—greenfield projects, innovation, and transformation, deploying new and upgraded systems, and maintenance and upkeep of existing ones—depends on the company’s size (small, midsize, or large).

Projected expenditure analysis

North American life insurers’ IT spending has returned to pre-pandemic levels, indicating a reduction in IT budgets and an emphasis on cost management in comparison to the preceding three years. Chief information officers are closely reviewing IT spending and how it fits with priorities and economic conditions after years of digital investments.

While 2023 IT budgets were lower than 2022 budgets, most insurers anticipate raising their 2024 budgets; nonetheless, one-third of insurers plan to either cut or freeze their budget. The average predicted increase for insurers of all sizes is expected to be 8.9% this year, with an average budget of 4.6% of premiums expected by 2024.

Many budgetary resources are going toward improving and implementing recent purchases. Most CIOs’ expenditures are devoted to sustaining their present systems.

Some notable points are as follows:

  • Insurance companies prioritize investing in technologies that enhance the customer experience and increase agent productivity. Policies and distribution partners’ policyholder portals, distribution management, and illustration/quoting systems are among the front-end components for which significant expenditures are anticipated.
  • The most notable improvements are being made to the back-office functions of underwriting. While not at the same levels as the previous two years, policy administration and servicing (PAS) systems remain a major area of investment. New digital capabilities for billing are replacing repetitive payment mechanisms.
  • The primary motivation behind investments in data and analytics is the necessity to preserve and improve current systems, with the most notable improvements being in the areas of data management, MLOps, and open data integration.
  • Because so many CIOs find the cloud’s value propositions—security, scalability, and accessibility—to be enticing, cloud deployments are expected to increase across all systems. Small insurers are less likely than their bigger counterparts to be expanding their use of the cloud, with a third of major carriers significantly increasing their use of the cloud for fundamental backend systems and more than four out of five midsize insurers using it for data and analytics.

Cybersecurity is one notable area where spending has surged. Cybersecurity has risen from fourth place to the top this year, with spending being driven mostly by this priority. Today, over 90% of insurers rank cybersecurity as a major or high concern, mostly because of the increasing risks posed by ransomware and computer breaches. The amount of the budget allocated to cybersecurity in 2023 (6.9%) does not commensurate with the importance of tackling cyber hazards, notwithstanding the claimed priority. According to Celent’s projection, the amount spent on cybersecurity would rise by 8.6% in 2024 as insurers search for the right instruments to combat emerging risks. To completely stop the ever-evolving cyber threats, nothing has been successful. There will be a need for additional investment.

Welcoming the era of artificial intelligence

Large language models (LLMs) and generative artificial intelligence (GenAI), though they have been a hot topic for the past year, are not yet being actively employed by life insurers in North America, but many of them plan to use them and are developing use cases for them. While just 5% of respondents claimed that GenAI/LLM technologies are now being produced, 75% stated that they had budgeted for GenAI/LLM projects that are either planned for 2024 or are already in the research stage. This suggests that these technologies are being actively pursued.

In life insurance, the areas where GenAI and LLMs are regarded to be most valuable are customer experience (CX), onboarding, marketing, code development, servicing and operations, underwriting, and rating. Two AI application cases that are now being used in many different industries are automated data science pipelines and speech-to-text processing. Relatively speaking, based on reports, the AI use case that the property and casualty insurance side of the business is now adopting the most is geographical analysis or picture recognition. This demonstrates how AI technologies and use cases that are most suited for their specific needs are being adopted by the insurance sector.

The ease of access to the data, the quality of the data, the data/information repositories, and the auditability of the data are all factors that insurers must carefully consider as they prepare to adopt GenAI use cases. Ensuring the data is viable for GenAI activities and addressing any shortcomings requires well-thought-out plans for data infrastructure and governance.

Addressing present and future demands

To meet their immediate and long-term requirements, insurers must carefully consider their investments in technology, whether it be new or old. Successful implementations will require a strategic evaluation of fast shifting factors, ranging from the possibility of AI-driven solutions to the impact of cyber threats.

 

May 6, 2024
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