I thought I would share our team’s personal out-takes from Insuretech Connect (ITC) in Las Vegas last week. There were six key conversations relevant to the Australian Insurance market:
1. Generative AI
The topic that dominated the conference was generative AI. No surprise there. AI is no stranger to the insurance industry with algorithmic and predictive AI already heavily embedded for insurance practices.
However, generative AI is the new frontier and we witnessed many scenarios, from contact centres (voice), claims assessment, triage and scenario planning, to name a few. It is still early days, but with profitability, affordability, regulatory, customer and operational issues, generative AI solutions are being developed to streamline, reduce friction costs, leakage and proactively improve the customer experience.
The general consensus is that this will have a transformational impact on the industry in a very short time frame, perhaps even the next 12/24 months. Compared to sensors, blockchain, and the other previous tech waves, this is the real thing. It is hard to think of any part of the value chain that AI will not impact and there was a presentation or panel covering every aspect of the insurance value chain.
There were several conversations about ‘AI guidance’ versus ‘full automation’, with AI not necessarily making unilateral decisions independent of the human intervention, but advising on the decision, whether underwriting, customer service, claims, marketing or customer journey management. Financial Principle Group said that the AI guidance tool from EvolutionIQ had been transformational in managing their complex claims more efficiently and effectively.
Joe Biden's Presidential Executive Order on AI, a week before the conference, is a clear signal that regulation is coming, not a surprise given the concerns at the conference with such things data privacy and generative AI’s ability to ‘hallucinate’. Many insurers at the conference are using AI to fact check AI, crunching different data sets, from different sources, to see if the conclusions are the same and therefore verified and valid. The general view was to build proprietary generative AI, rather than rely on open AI platforms, given the hallucination factor and security risks.
2. Affordability
Like Australia, auto premiums have increased significantly in the US. Last year saw the biggest increase in 46 years of 20%. With Australian personal lines premium increasing by 30%, many were surprised to hear Motor insurance was still profitable In Australia in FY23. Not so in the US!
This slide below, from a presentation by Adrian Jones, shows this increase in US auto premiums and the profitability gap between personal and commercial lines. Adrian is Head of Ventures, BMNT, Co-founder & CEO Pivot Labs, and Chair UK Defence Investor Network.
In some parts of the US homeowners cannot get insurance due to fire and flood risk. There was a call for more government assistance, as we have seen recently in Australia.
I believe there is a great opportunity to share information between the two markets on catastrophic eventsm and I enjoyed being on the ITC panel discussion on this topic. It was entitled "Preparing for Catastrophic Risks. Insights from recent events and emerging threats."
From right to left
-Stuart Blake, MD and Co-founder, The Bridge International
-Ruth Foxe Blader, Partner, Anthemis
David Derigiotis, Chief Insurance Officer, Embroker
-Trevor Shanklin, Head of Insurance Flexport
-Emilio Figueroa, CEO and Founder, Indemnity Lab
3. Shared value and shared data models
There appears to be a much higher uptake of the shared value model of insurance in the US, giving consumers, who opt into telematics based products (and other SV programmes), a chance to trigger discounts and rewards based on good driving behaviour.
The Global Head of Digital at Tokyo Marine annouced that they had now captured dash-cam kilometres equivalent to the distance between Earth and Neptune (which is 34 billion kms.) With AI, they can now generate insights from this vast information source, assessing driver behaviour at a much richer level, as the video footage provides more context than non-video data from other telematics devices such as the smart phone.
Tokio Marine has several incubators in different locations helping it to select best in class Insurtech to support its world-wide business. Their approach to their global tech stack strategy was impressive.
Perhaps our insurance affordability issue in Australia will now encourage more consumers to share their behavioural data to bring down their premiums?
Finally the winner of the ICTs Forward50 Insuretech start-up was CEO JohnButler and CompScience, an organisation determined to help reduce workplace risk and workers comp claims. For example they use CCTV footage data to assess risk and claims in the workplace. He was inspired to launch this start up after his father-in-law had an accident at work.
Video is now the big data opportunity for Insurers to leverage and feed AI for its insights.
4. Cyber Security and climate risk
In a recent survey of 500 brokers, the biggest concern for US consumers is cyber security, ahead of climate impact and natural perils.
Cyber insurers, like Cowbell, have recognised the potential of the SME market, which is more vulnerable than enterprise companies, as they do not have the resources and expertise to protect themselves at the same level as larger organisations. Cyber risk seems an unlimited market opportunity for insurers.
Although Cowbell can quote cyber risk on an external scan, they are also working hard to encourage organisations to give them access beyond the firewall. This helps identify opportunities for companies to protect themselves further and potentially reduce premiums. A tough sell for Cowbell, but another example of a shared value and education model.
Interesting their SVP of underwriting, Caroline Thompson, was comfortable offering cover for AI risk, which can only make the Cyber risk market opportunity even greater.
In the climate risk area, impressive Insurtech’s like Geosite and Raincoat are using satellite and other weather data sets to build complex models to predict future climate change risk. AI is now making the analysis of this data possible, and affordable.
5. Embedded insurance and seeking simplicity
There was also a view from the CEO of Hippo that in five years’ time people will buy insurance in a different way, largely though embedded insurance bundled into other products and services, that have higher customer engagement. Hippo now sell house insurance through home construction companies, offered at the moment in time when insurance is required to secure the customers loan for the build. Their vision, when they launched six years ago, was to completely modernise Home insurance, but they have pivoted to a new mission of simplification; making the purchase of property insurance easy and frictionless. T
Another impressive embedded play was Credit Karma who have added insurance to their credit score mobile app, which has over 3 million users. They have educated consumers on how they can improve their credit scores, and are now educating these subscribers on how to improve their driving, to reduce their Motor Insurance premiums. The insurance ecosystem just gets bigger and bigger.
6. Data and tech partnering
The shift from in-house to a ‘partner not build’ approach in tech continues. ‘Plug and Plug’ now aggregate Insuretech offerings and have created a marketplace for insurers, offering advisory service to find the best tech stack fit for clients. A strong proposition given the challenges of navigating this increasingly saturated Insurtech world, despite the great help from ITC.
Plug and Play’s massive booth in the expo hall was made up of their marketplace Insurtech brands. A clever activation.
Summary
Despite the concerns over AI, cyber and climate, risk and affordability, there was an optimistic vibe at the conference; excitement about the innovation ahead and the increasing market opportunity for those insurers prepared to leverage data at scale and new technology.
I am one of those optimists.
David McDonald, my fellow Co-founder and MD with Sara Elmstrom, Partner at The Bridge International and CEO of Contact Centre solutions
For more information or a detailed briefing on ITC please reach out to @Lewis Pullen. Partner and CMO. at lewis.pullen@thebridgeinternational.com.au
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