Insurance

Both the number and intensity of claims increased in the previous year. Going into the new year, auto insurance companies, collision repair shops, and automakers faced a perfect storm of uncertainty due to these trends, an already overworked parts supply chain, and the unprecedented autoworkers’ strike. What impact will 2023’s occurrences have on 2024’s collision claims? These are the seven tendencies that OEMs, insurers, and repairers need to be aware of.

1. There are more and more claims filed. As of early 2022, there has been a 1% increase in collision claims. Car owners are still getting into accidents even though there are more Advanced Driver Assistance Systems (ADAS)-equipped cars on the road. An over dependence on ADAS technology and distracted driving are the causes of several of these collisions.

2. There is an increase in the average cost of repairable claims. Repairing a car properly and safely can be expensive depending on several factors. early 2023 saw an increase of around 8% over the first half of 2022 in the average cost of a repairable claim in the United States, which topped $4,700. Annualized growth typically ranges from 3% to 5%, therefore that is a significant increase. For the foreseeable future, anticipate annual growth of 8% to 10%.

3. More cars that are involved in collisions are probably going to be fixed rather than written off completely. We predicted at the beginning of the year that the value of secondhand cars would decline. Prices are still high in part because of the United Auto Workers strike and its aftereffects on inventory. Furthermore, the average price of a new car in the United States is expensive at almost $47,000. Because of these increased costs, auto insurers now have a higher threshold for total losses, which indicates that more collision-damaged cars are probably going to be fixed today rather than being declared total losses.

4. The slowly declining repairability will continue. The materials that car manufacturers choose to use are one factor in this. While aluminum body panels can be repaired, it is more likely that the crash energy from the collision caused a pattern of damage that makes a repair unsafe due to the panel’s material qualities. Of the items on estimate, 17.5% were repaired at the beginning of 2022. It reached 17.1% in 2023. The capacity to fix parts is also being hampered by ADAS, which is now a requirement for all new cars. Consider the existence of a millimeter-wave radar sensor concealed behind a bumper cover, for example. There might be less possibilities for the expert to fix it if the bumper is damaged. Many manufacturers demand the sensor be replaced to ensure it keeps working correctly.

5. Parts now make up a larger portion of the estimate overall. About 1% more pieces are on collision estimations now than there were a year ago. A rise in the typical number of parts utilized in each repair is partly to blame for this. In the past, adding one extra part per estimate required four to five years. Now, it requires roughly a year. The fact that a replacement item now costs about $275—an additional $75 over 2020—makes that noteworthy. Although it has decreased from its peak in 2022, inflation is still partially responsible for these growing expenses, especially for aftermarket parts. Single-digit price hikes for OEM and aftermarket parts are probably in store for this year. Nevertheless, a lot will rely on how the autoworkers’ strike plays out in the end.

6. From early 2024, anticipate a modest increase in the portion of parts budgets allocated to aftermarket components. The freight problems that occurred at the beginning of the pandemic are thankfully behind us. Parts inventories were affected by the disruptions in addition to other aspects. Inventory levels for aftermarket providers are stabilizing, despite the future of consumer transit being uncertain and depending on how companies handle efforts related to returning to the office in the long run. A quarter of a percentage point more was spent on aftermarket components in the first half of 2023 than there was in the same period in 2022, with 21.5% of parts dollars going toward them. Until early 2024, the slight growth should persist.

7. By the end of 2024, 40% of calibrations may occur. 17% of repairable autos in the US have regular calibrations. That percentage is expected to rise dramatically in 2024, maybe reaching 40% by year’s end and possibly 60% by year’s end. The typical model year of vehicles that can be repaired is one factor contributing to this. In 2022, it was 2015 for the first half. Imagine that it was 2016 in 2023. It will be genuinely revolutionary when we reach the point where 2018 becomes the average model year. Every single car made in 2018 and beyond has at least one ADAS technology, which makes recalibration after repairs more necessary.

Repair frequency and costs will rise as more OEMs want calibrations for a greater range of accident scenarios. As of right now, the average additional cost for all calibrations included in an estimate is $500. While this raises the cost of repairs, collision facilities that want to keep cycle time under control and bring the work in-house may find new revenue streams as a result.

Navigating the path forward

These trends make it evident that our sector will need to be flexible by 2024. For instance, insurers need to be ready from an underwriting standpoint given the anticipated increase in calibration frequency. Collision shops, on the other hand, run the danger of losing their profit margin to a sublease unless they make the necessary investments in the tools and training to do the work internally. Carriers might also be obliged to modify their rates to strike a balance between costs and profits, given the high average cost of repairs. Furthermore, vehicle body shops ought to consider utilizing technology to accelerate crucial stages in the restoration procedure, which can enhance productivity, decrease cycle times, and regulate costs.

The internet has changed how we live, work, and connect with others. Now, with the proliferation of connected devices, we are entering a new era—the Internet of Things (IoT).

The Internet of Things encompasses a vast array of interconnected devices imbued with sensors and sophisticated software, empowering them to seamlessly gather, analyze, and exchange data.

This intricate web of connectivity enables devices to communicate with each other creating a dynamic ecosystem where information flows freely among various endpoints.

IoT in insurance

The integration of the Internet of Things in the insurance sector brings forth a plethora of advantages. From efficient customer service to simplified claims processing, IoT not only prevents risks and losses but also significantly reduces operational costs.

By utilizing data from internet-connected devices, IoT-connected insurance refines the understanding of risks. For instance, in auto insurance, risk assessment is usually done using historical data and actuarial statistics to establish a customer’s risk profile, ultimately determining the premium.

Now, with IoT devices like vehicle sensors and smartphone apps, real-time data can be collected, recorded, and processed leading to more accurate premiums.

IoT applications in insurance

  • Telematics in auto insurance

Telematics, a prime example of IoT implementation in auto insurance, utilizes sensors installed in vehicles to collect real-time data on driving behavior. This data enables insurers to personalize premiums based on individual driving habits, promoting safer driving practices and reducing the risk of accidents.

Using Snapshot, a telematics program by Progressive, the insurer gathers real-time data to understand the driving habits of its policyholders. Premium discounts are given to drivers who drive safely.

  • Smart home devices in property insurance

In property insurance, smart home devices such as security cameras, motion sensors, and leak detectors have revolutionized risk mitigation. By continuously monitoring homes for potential hazards, these devices help prevent damages, minimize losses, and enable insurers to offer tailored coverage to homeowners.

Since 2015, American Family has partnered with Ring Video Doorbell to offer homeowner’s insurance. If you install the latter’s doorbell equipped with a Wi-Fi-enabled camera as part of your homeowner’s coverage, the company will reimburse your deductibles in case of burglary.

  • Wearables in health insurance

Health insurance has embraced wearables like fitness trackers and smartwatches to promote wellness and reduce healthcare costs. These devices monitor users’ vital signs, activity levels, and overall health, allowing insurers to incentivize healthy behaviors and provide personalized coverage plans.

As an example, John Hancock Life Insurance Co. includes a Wellness Incentive Benefit Endorsement. With it, policyholders can benefit from premium savings, Amazon gift cards, travel discounts, and more by engaging in health and wellness activities like regular exercise while using an approved fitness-tracking device.

  • Drones in crop insurance

Drones equipped with high-resolution cameras and sensors conduct aerial surveys of agricultural fields, capturing detailed imagery of crop health, moisture levels, and pest infestations. Insurers analyze this data for accurate risk assessment, identifying potential hazards like drought or flooding.

Today, drones and specialized software like Pix4Dfields are used to assess crop damage in agricultural policies backed by the Risk Management Agency under the U.S. Department of Agriculture.

In addition, loss adjusters can swiftly assess affected assets and survey hard-to-reach places using drones, reducing claims costs by up to 30 percent, as reported by Forbes. As a result, claims are expedited and costs are reduced, leading to increased customer satisfaction and profits, respectively.

In conclusion

Despite the remarkable advancements, the integration of IoT in insurance comes with its own set of challenges. From data privacy and security concerns to the need for standardization and interoperability, insurers must navigate this complex maze of unfamiliarity to achieve gains brought by the Internet of Things.

In today’s digital age, social media platforms have become invaluable tools for businesses to connect with their audience, foster brand loyalty, and ultimately drive growth. For insurance companies, leveraging social media effectively can be a game-changer in building brand presence and engaging with customers.

1. Know your audience

Understanding your target demographic is crucial for any marketing strategy, and social media is no exception. Insurance companies should research their audience demographics, preferences, and pain points to tailor their content and messaging accordingly. Whether it’s millennials seeking health insurance or homeowners looking for comprehensive coverage, knowing your audience allows you to create content that resonates with them.

2. Consistent branding

Maintaining a consistent brand identity across all social media platforms is essential for building brand recognition and trust. Use consistent colors, logos, and messaging to reinforce your brand’s identity. This consistency helps customers recognize your brand amidst the clutter of social media and fosters a sense of reliability and professionalism.

3. Engaging content creation

Insurance may not be the most inherently exciting topic, but that doesn’t mean your social media content has to be dull. Get creative with your content by sharing informative articles, engaging infographics, client testimonials, or even behind-the-scenes glimpses of your company culture. Interactive content such as polls, quizzes, or live Q&A sessions can also encourage active participation from your audience.

4. Utilize visuals

Visual content tends to perform better on social media platforms than text-only posts. Incorporate eye-catching visuals such as images, videos, and animations to grab users’ attention as they scroll through their feeds. Whether it’s showcasing the benefits of a particular insurance plan or explaining complex concepts in a visually appealing way, compelling visuals can significantly enhance your social media presence.

5. Provide value

Rather than bombarding your audience with promotional content, focus on providing value through educational and informative posts. Share tips for saving money on insurance premiums, advice on risk management, or updates on industry trends and regulations. By positioning your brand as a trusted source of valuable information, you can establish credibility and foster long-term relationships with your audience.

Conclusion

Building a brand presence and engaging with customers on social media requires a thoughtful and strategic approach. By understanding your audience, maintaining consistent branding, creating engaging content, providing value, actively engaging with your audience, and leveraging influencers and partnerships, insurance companies can effectively navigate the social sphere and cultivate meaningful relationships with their customers.

Robotic Process Automation (RPA) has emerged as a game-changing technology across various industries, including insurance. RPA is the use of low-code software bots to automate repetitive and rule-based tasks within business processes.

These bots are adept at mimicking human actions and seamlessly interact with different systems and applications to execute tasks like data entry and validation.

Studies indicate that financial services have experienced a potential ROI increase of up to 200% during the initial year following RPA implementation. In the insurance sector, RPA has garnered significant attention and adoption due to its capacity to streamline operations, enhance efficiency and drive cost reductions.

Insurers handle large volumes of customer data for a number of business processes ranging from underwriting, claims processing, sales and distribution, policy administration and even regulatory compliance.

By automating laborious and error-prone tasks, RPA empowers insurance companies to redirect their focus towards value-driven activities instead like decision-making and personalized customer service.

How insurers benefit from RPA

Policy administration

The manual underwriting process in insurance, historically time-consuming and labor-intensive, has been transformed by Robotic Process Automation (RPA).

RPA paired with OCR (Optical Character Recognition) will enable insurers to automatically digitize customer data from registration forms and other printouts. Afterwards, integration with Advanced Analytics and Machine Learning models will bring out useful data insights.

Automating administrative activities like rating and quoting with RPA saves time and resources, enhancing workflow efficiency in the insurance industry. Real-life case studies —covered in the next section—demonstrate significant reductions in time and effort, enabling quicker and more effective processing of applications.

Furthermore, RPA assists in policy renewals by automating communication, updates and premium collection, while also managing policy cancellations efficiently.

Customer service

Insurance companies are leveraging Robotic Process Automation (RPA) to transform customer service operations. By integrating conversational AI and RPA technologies, insurers expedite issue resolution and empower support teams with AI-driven assistants.

These assistants efficiently process unstructured data, generate customer profiles, and provide timely solutions, enhancing overall customer service effectiveness and satisfaction.

As customer expectations evolve towards personalized service, RPA tools play a crucial role in automating standardized and time-consuming tasks. This allows employees to focus on providing personalized interactions for complex grievances.

Case studies

PZU

As one of Europe’s leading insurers, PZU Group harnessed UiPath’s RPA technology to improve customer service. By deploying RPA in its five critical applications, PZU realized a 50% boost in insurance consultants’ productivity. This efficiency enhancement significantly reduced call durations with customers while ensuring 100% accuracy in data entry.

Zurich Insurance Group

Zurich Insurance Group optimized its policy handling processes with Capgemini’s automation solution powered by BluePrism software. Integrating RPA robots early in policy management streamlined tasks like data entry, invoice generation and policy document drafting. This resulted in improved policy quality and a notable reduction in support desk inquiries.

Nsure.com

Nsure.com, an online insurance shopping platform, implemented RPA to automate customer communications. This initiative has transformed their sales and distribution, allowing half of their customers to complete transactions without agent interaction.

ADNIC

Abu Dhabi-based insurance provider, ADNIC, achieved a 30% reduction in work time by implementing RPA bots for quote generation and policy registration. This efficiency gain enabled employees to transition into decision-making roles, enhancing overall operational effectiveness.

Bottom line

Many employers overlook the inefficiency of manual tasks. McKinsey reports that workers spend 1.8 hours daily on non-impactful activities like data gathering and aggregation alone. By automating repetitive tasks and streamlining processes, insurance providers can realize significant cost savings and operational efficiencies.

Reach out to LenderDock today to learn more about how our solutions empower your business and drive success in an ever-competitive market landscape.

In today’s data-driven world, businesses across various sectors are harnessing the power of data analysis to make informed decisions, drive efficiencies, and unlock new opportunities. Among these industries, the insurance sector stands out as a prime example of how data analysis is reshaping operations, mitigating risks, and enhancing customer experiences.

1. Understanding the data landscape

The insurance industry is inherently data-rich, with vast amounts of information collected through policy applications, claims processing, underwriting, and customer interactions. This wealth of data encompasses demographic details, risk factors, claim histories, and more. Analyzing this data provides insurers with invaluable insights into market trends, customer behaviors, and emerging risks.

2. Predictive modeling for risk assessment

One of the key applications of data analysis in the insurance sector is predictive modeling. By leveraging historical data and advanced analytical techniques such as machine learning, insurers can assess risk more accurately. Predictive models help identify patterns and predict the likelihood of future events, enabling insurers to price policies effectively and optimize underwriting decisions.

3. Fraud detection and prevention

Fraudulent claims pose a significant challenge for insurers, leading to financial losses and reputational damage. Data analysis plays a crucial role in detecting and preventing insurance fraud. By analyzing various data points such as claim histories, transaction patterns, and behavioral anomalies, insurers can flag suspicious activities and investigate them further, ultimately reducing fraudulent losses.

4. Personalized pricing and customer insights

Data analysis empowers insurers to move away from traditional one-size-fits-all pricing models towards more personalized approaches. By analyzing customer data, including demographics, lifestyle choices, and previous interactions, insurers can tailor pricing and coverage options to individual needs. Additionally, data analysis provides valuable insights into customer preferences, enabling insurers to enhance their products and services accordingly.

Conclusion

In conclusion, data analysis is revolutionizing the insurance industry, driving innovation, and transforming traditional business practices. By harnessing the power of data, insurers can better understand their customers, manage risks effectively, and improve operational efficiency. As the industry continues to evolve, data analysis will remain a cornerstone of success, enabling insurers to thrive in an increasingly competitive landscape.

In the realm of insurance, the concept of Uberrimae Fidae, or Utmost Good Faith, serves as the bedrock of trust and transparency between insurers and policyholders. This principle mandates complete honesty, full disclosure of pertinent information, and unwavering transparency throughout the insurance process.

Essentially, it establishes a framework for mutually beneficial relationships and fair dealings.

However, with the proliferation of customer data, rising incentives for fraud, and increasing market competition, insurers face the challenge of maintaining customer trust while remaining competitive.

This is where blockchain comes into play.

What is blockchain?

Blockchain is a decentralized ledger technology that facilitates secure and transparent recording of transactions across a network of nodes. Each transaction, encapsulated within a “block” is cryptographically linked to its predecessor, forming an immutable chain resistant to retroactive alteration.

This architecture ensures the integrity and transparency of data stored on the blockchain.

While the term has often been associated with cryptocurrencies, this represents only the tip of the iceberg in terms of its potential.

Blockchain in insurance

The integration of blockchain technology into the insurance sector holds immense promise for revolutionizing traditional processes and enhancing operational efficiency. By harnessing blockchain, insurers can streamline various facets of their operations, from policy issuance and claims processing to risk assessment and fraud detection.

The distributed ledger nature of blockchain allows insurers to store immutable and traceable records of customer data, accessible in real-time by various stakeholders.

Additionally, smart contracts enable automation of insurance processes like claim payout, triggering payments automatically when predefined conditions are met. For example, if premiums have been duly paid, and the specified peril conditions have been met, the claim will be paid out automatically.

Applications of blockchain

  • Smart contracts

Smart contracts, imbued with self-executing capabilities and predefined conditions, automate various insurance processes. This includes policy issuance, claims settlement, and premium payments, based on predetermined criteria.

Smart contracts can be implemented on the blockchain and thus allow for a self-serving mechanism requiring little to no supervision.

  • On-demand insurance

Leveraging blockchain, on-demand insurance models offer flexible coverage options that policyholders can activate or deactivate as needed, catering to evolving customer needs and providing personalized insurance solutions.

Take for instance motor coverage that is activated only when the insured alone actively drives his vehicle. Telematic data can be fed in real time into the blockchain allowing for dynamic adjustments to premiums based on usage.

  • Re-insurance

Blockchain facilitates transparent and efficient reinsurance processes by enabling real-time data sharing among insurers and reinsurers. This enhances risk assessment, claims handling, and settlement procedures, resulting in cost savings and operational efficiencies.

  • Health insurance

Blockchain enhances data sharing and management in health insurance by securely storing and accessing medical records. Real-time access to patient records by both healthcare providers and insurers speeds up claims processing and prevents fraud by ensuring data integrity.

  • Legal compliance

Blockchain aids insurers in meeting legal and regulatory obligations by securely storing and sharing customer data for KYC (Know Your Customer) and AML (Anti-Money Laundering) compliance. Moreover, it automates the generation and submission of insurance reports to regulators, ensuring timely reporting.

Final thoughts

The essence of the insurance business lies in trust between key stakeholders. Blockchain enhances this trust by securely storing data, automating processes and reducing risks (fraud).

Ready to streamline your insurance processes and focus exclusively on serving your policyholders? Discover how LenderDock’s innovative Verification-as-a-Service platform can revolutionize your operations and drive cost savings. Embrace the future of insurance today with LenderDock.

The customer’s main objective when buying insurance is to get the finest coverage possible to safeguard their possessions. There is no such thing as “full coverage,” though, for someone’s car, house, or any other covered item—as any insurance expert will tell you. As a result, an insured person may file a claim and then be surprised to learn that it was rejected. Here are a few scenarios under which a claim may be rejected.

1. There is insufficient information in the claim

2. No coverage exists for the service

Prior to doing any work or repairs, it is usually a good idea to wait for your insurance company’s approval, as some of these activities could not be covered by your policy.

3. The late filing of the claim

Most plans include tight deadlines for when an insured must submit a claim. One may be automatically denied if it is filed after the deadline.

4. There is a duplicate claim

Erroneously filing a claim more than once may result in its denial. Although it’s usually simple to correct, it’s advisable to avoid this scenario as it may cause claim reimbursements to be delayed.

5. Previous damage is not protected

Not just health insurance is affected by pre-existing conditions. An insured party’s claim may be rejected if it contains property damage that was there before the claim incident.

6. Absence of prior consent

Verify that the insurance company does not require preapproval for any treatments rendered; if it does, you run the risk of having your claim rejected.

7. The insurance has expired

Non-payment-related coverage gaps are frequent yet preventable.

There are actions an insured can take if their claim is rejected. It is advised in certain situations that the insured:

• Fixes any mistakes and files the claim again.

• If the denial’s reasoning is unclear, get in touch with their insurance company and request a thorough justification.

• If they don’t agree with the denial, they might think about submitting an appeal. The insured should make sure to acquire any paperwork or further proof of their claim before filing an appeal.

• Seek expert assistance from a legal or claims specialist if they require more assistance. The insured can seek assistance from their state’s insurance commissioner if everything else fails.

AM Best doesn’t think that Artificial Intelligence (AI) is the main reason why so many people have lost their jobs in the insurance business recently.

The credit rating agency recently said in a report that “it is too soon to cite AI as the leading cause of the job losses, at least at this nascent stage.” He said that the layoffs are more likely to be in “the cyclical, rather than the structural, category.”

The rating agency said that structural unemployment is when jobs are lost because of changes in the system, the use of technology, or a mismatch between what the business needs and what the workers can do. Employment changes caused by the business cycle are called cyclical unemployment. AM Best said, “This seems to be the case in the insurance industry.”

Recently, Liberty Mutual, American Family, and GEICO all said they were cutting staff. This new information comes after those companies. According to AM Best, the most recent layoffs have an impact on personal lines insurance the most. This will have the most impact on personal lines insurance because loss ratios and underwriting margins are being pushed down by rising climate risk, loss cost inflation, and reinsurance capacity and price.

The commentary stated that the recent layoffs by insurers alone do not indicate any pressure on ratings

AM Best did say that advances in artificial intelligence will slowly change the job outlook in the insurance business. AM Best stated that many insurance companies are testing generative AI because they think it could help them with customer service. They also said that the level of industry disruption will depend on how fast AI develops in the coming years.

AM Best also mentioned that it’s still not clear what effect generative AI will have on jobs, but it will probably change the way society works as current workers learn how to use the power of this new technology.

The Bureau of Labor Statistics says that insurance companies and other related businesses have slowed down their hiring to about 1,100 jobs in October. This was less than the number of new hires in September (3,900) and July (8,300), according to the BLS.

There have also been layoffs at insurance technology companies. Earlier this year, Hippo, Branch Insurance, Corvus Insurance, and Pie Insurance all said they were letting people go. Thimble, NEXT, Lemonade, and Root were some of the insurtechs that cut staff last year.

Without having to incur the usual costs of expansion, MGAs can provide insurers with an affordable way to enter new or niche markets.

What is a managing general agent? This piece will focus on giving a clear definition of managing general agents (MGAs) instead of going into detail about their uses, history, and growth.

The following list of factors determines whether a person or thing is an MGA:

1. Anyone or any group that manages all or part of an insurance company’s business, such as the restricted administration of an insurance company’s division, department, or underwriting office; and

2. Acts as an agent for that insurer by doing the three things below, either by themselves or with other companies; this is true no matter what the agent’s title is (e.g., “agent,” “MGA,” etc.) or whether the MGA is authorized by the insurer to do these things.

A. Writes gross direct premiums equal to or greater than 5% of the insurer’s policyholder surplus (as shown in the insurer’s most recent annual statement for any given quarter or year); or

B. Underwrites gross direct premiums equal to or greater than 5% of the insurer’s policyholder surplus (as shown in the insurer’s most recent annual statement) in any given quarter or year; or

C. Either

i. Changes or pays out claims worth more than $10,000 each; or

ii. Negotiates coverage on behalf of the insurer.

In general, look at MDL 225, which is the NAIC Managing General Agents Act.

In short, an MGA is a person who oversees how an insurer does business, writes some of the insurer’s business, settles or adjusts some of the insurer’s claims, and either works with the insurer to arrange reinsurance or brings in new business. Things aren’t always so simple, though.

Unique aspects of each state

All 50 states, the District of Columbia, and the Virgin Islands may have different rules and thresholds than the Model Act. This is because the above summary is based on the Managing General Agents Act (the Model Act) of the National Association of Insurance Commissioners (NAIC, id., § 2(D)).

Based on California law’s description of MGA, for example, it looks like a person or business can be considered an MGA just by negotiating reinsurance (Cal. Insurance Code §769.81(c)). On the other hand, Texas law has a very different—possibly more literal—definition of an MGA. It only looks at whether the person or organization can accept or process policies made and sold by other agents and whether they have control over an insurer’s local agency and field operations (see §19.1202(3) of the 28th Texas Administrative Code). Surprisingly, though, the New York rule sticks much more closely to the Model Act’s description of MGA, with no clear differences – check out N.Y. Comp. Codes R. & Regs. tit. 11, §33.2 – it lowers the amount of money that can be paid out for adjusting and changing claims from $25,000 to $10,000, which is what the Model Act said.

Exceptions. Obviously, the Model Act lets some people and groups off the hook from being seen as MGAs when they might otherwise be qualified for exemptions. To give you a quick rundown of these exceptions:

1. An employee of the insurance company,

2. A U.S. branch manager stationed in the U.S. of an overseas insurance company,

3. An associated underwriting manager who oversees all or part of the insurance company’s contractual activities and whose pay is not based on the number of written premiums; or

4. An attorney-in-fact for a reciprocal insurer or interinsurance exchange subscriber acting under power of attorney.

Because of the large amount of underwriting and production that would usually be too much for one person, many MGAs are businesses rather than people. Because of this, some states, like New York, have done away with the first clause and replaced it with the third one. As for the holding company act protection, it applies to all affiliates, no matter what services they provide to the insurance company (N.Y. Comp. Codes R. & Regs. tit. 11, §33.4(a)). This move gives captive agencies and the insurers that work with them a little more room to breathe. These companies do cost-effective underwriting and claims management in-house. It was likely partly caused by the huge rise in the number of hostage agencies that have been set up and used over the years.

License terms and responsibilities

What does it mean if you’ve proven that you meet the legal standards to be an MGA in at least one state? MGAs need to keep their licenses up to date in the state where the risk is located or where the insurance is based (NAIC Managing General Agents Act, MDL 225, §3).

Granting licenses

The rules for getting a license may also be different in each state. Most of the time, the MGA will need to keep another license in addition to its production license. It might even be necessary to have extra IDs for everyone who works for the MGA. Some states, like New York, don’t have a specific type of license. For example, an MGA’s producer license gives it a license. This means that the insurer is mostly responsible for any extra registration requirements, like making sure that the right MGA-specific appointments are set up and forms are filled out and sent in (see the OGC Opinion from December 18, 2002, and the Department of Financial Services’ Managing General Agent Appointment and Termination).

Responsibility

Becoming an MGA can mean taking on a lot of duties, such as more attention from regulators, binding contracts, and reporting obligations. These may be more important than any new license standards that might or might not need to be met.

As per the Model Act, “the MGA’s actions are taken to be those of the insurer for whom it is acting… an MGA may be examined as if it were the insurer,” (see NAIC Managing General Agents Act, MDL 225, §6. To be clear, that quote is all of Section 6 of the Model Act). It basically tells MGAs that officials will take their duties very seriously. As many who have helped producers through regulatory examinations at the insurer level can tell, these exams are not right for the average producer.

Also, the Model Act has a lot of complicated rules that must be written in every contract that controls the MGA’s services, even though it is the insurer, not the MGA, that is mostly responsible for reporting.

Key points

There are without a question many good reasons to become an MGA. For starters, MGAs can be a good option for insurers that want to get into a new or niche market because they don’t have to pay the normal fees. This means that any MGA that has the tools to let the insurer enter the market in question (for example, having previously approved goods) is in a very good position to make a lot of money.

Because of this, an agent who only brings in business would never want to be seen as an MGA unless they really do the things that a state’s MGA guidelines say they should do. This is why many people are told to get rid of the words “managing general agent” or “MGA” from their insurance policies. That word doesn’t seem to change the fact that someone or something is an MGA, so why even bring up the idea that you might be providing services that are only available to MGAs?

This increases danger and scrutiny from regulators for no reason, even if it’s small. For example, if a regulator looks at an agreement with the wrong title while looking at an insurer, the regulator may investigate the producer’s responsibilities and license status. Also, using the terms incorrectly could lead to confusion about the services covered by the insurance contract when there shouldn’t be any confusion at all.

You should think about this: “Do I underwrite insurance, adjust or pay claims, negotiate reinsurance, or even just manage elements of an unaffiliated insurer’s business?” If the answer is “yes,” you should look over the laws about handling general agents in each state where you have a producer license.

Data is nothing new to the insurance sector. Underwriters and actuaries have been assessing risk and setting prices by analyzing large volumes of data for decades. But as the insurance market develops, artificial intelligence (AI) will play a bigger role in assisting insurers in remaining competitive and meeting changing client demands. Even more opportunities have arisen due to the generative AI models’ recent surge in popularity, such as OpenAI’s ChatGPT. In the following is a high-level summary of the typical insurtech effect areas, highlighting three particular businesses whose products make extensive use of AI.

Emergence of insurtech in the spotlight

Innovations in insurance firms and products that are based on technology have increased rapidly during the last five years. All these developments are referred to as insurtech. By utilizing technological breakthroughs, especially artificial intelligence (AI), insurtech is revolutionizing the traditional insurance industry. They employ AI to improve client satisfaction, optimize workflows, and deliver more individualized services. The following functional domains have been the focus of several of these technologies:

• Enhanced underwriting procedures

• Streamlined claims processing

• Increased policy flexibility and customization

• Preventing fraud

• Enhanced risk management

The insurance sector is adjusting to the world’s constant digitization. This tendency will only continue as more businesses invest in it, as we’ll cover in the sections that follow. It’s fascinating to keep an eye out for developments there.

Kin

Chicago-based Kin is a cutting-edge home insurance provider. The company was established in 2016 with the goal of giving consumers purchasing house insurance a more customized experience. Their platform offers well-informed advice on what insurance coverage is best for each property. Kin analyzes a comprehensive data set comprising over 5,000 factors about each customer and their home before making recommendations. A human underwriter could never match the speed and precision of the quotes generated by Kin’s platform. All of this is made feasible by Kin’s usage of artificial intelligence.

Standard home insurance policies frequently have the flaw of being inflexible, meaning they don’t alter when the cost of materials and houses does. A scenario where the coverage is insufficient to cover the cost of replacement can easily result in underinsurance. This issue is resolved by Kin’s platform, which uses market data and periodic reevaluations of underwritten policies to identify potential issues.

Kin can run a lot leaner as a business, with considerably lower expenses, because it can use its software to optimize many elements of the firm. As a result, Kin can pass along the cost savings to its clients, increasing their competition in the industry.

Clearcover

An auto insurance provider called Clearcover takes great satisfaction in using cutting-edge technology to give its clients the finest possible service. Their exclusive ClearAI AI-based tool forms the basis of their technology. Throughout the company, Clearcover makes extensive use of this tool. In terms of quotation, Clearcover’s platform assists clients in obtaining the appropriate coverage according to their particular needs, much as Kin’s. The capacity of Clearcover to handle claims, however, is where the more amazing functionality resides.

The sophisticated image processing feature of ClearAI enables it to instantly assess if an incident is covered by analyzing photos of a damaged car. The customer might receive an automatic payout from the platform once ClearAI verifies their eligibility. Clearcover may now pay a valid claim in as little as seven minutes after it has been fully processed thanks to these features. However, processing a claim with an insurance company usually takes days.

As an insurance firm, Clearcover gains a great deal from company representatives who are successful in selling their policies. Considering this, they have expanded ClearAI to incorporate lead qualification tools. With so many leads to review, there is a lot of noise. These tools assist agents in sorting through it. They can immediately obtain better-quality leads and have a greater likelihood of client retention.

DAIS

In the InsurTech space, DAIS Technology is finally making waves with UnderwriteGPT, a new product built on generative AI and large language models. No insurance is sold by DAIS. The business created a set of resources that insurance firms can utilize. Their product offers may be enhanced, goods can be introduced to the market faster, and customers will receive an overall better experience thanks to this suite.

Kin and Clearcover notwithstanding, DAIS intends to promote UnderwriteGPT as a mechanism to expedite the underwriting procedure and enhance risk evaluation, culminating in superior policyholder coverage and price. DAIS and The Paladin Group, a top digital brokerage with a focus on transportation and cutting-edge risk management solutions, collaborated to create UnderwriteGPT. Because UnderwriteGPT is still in the early stages of becoming ready for the market, the company has only provided limited information on what it does explicitly.

UnderwriteGPT has been in confidential development for approximately a year, and its public unveiling marks a significant milestone. The solution is expected to revolutionize the way brokerages and insurance companies approach policy underwriting.

Insurtech’s evolution: Navigating tomorrow’s landscape

The insurance industry has seen tremendous transformation in recent years due to the introduction of contemporary technology. Businesses like DAIS Technology, Kin, and Clearcover have been setting the standard for using AI to transform the sector. With technology developing at a never-before-seen rate, the opportunities for creativity are endless. Leaders in the sector aren’t scared to think outside the box, from wearable technology that analyzes health data and modifies premiums accordingly to AI-powered customer support. There are a lot more insurtech innovations to come that will benefit both insurance firms and policyholders.