Insurance news

In a recent report, Verisk highlighted the impact of the UK government’s decision to ease entry rules for construction workers from overseas. While this move is expected to expand the pool of skilled workers available for property repairs, potentially addressing delays in property claims cycle times and improving work-in-progress (WIP), it will take some time for its effects to be felt across industries.

The report also outlined the warning issued by the Migration Advisory Committee, emphasising the shortages in occupations like bricklayers, roofers, carpenters, and plasterers since the UK’s exit from the EU. The Home Office has recently added these professions to its shortage occupation list, aiming to streamline entry for workers in these fields.

Verisk property head Ben Blain said that relaxing the rules for skilled workers to work in the UK should be welcome news as labour shortage has impacted the delays in completing repair work for policyholders.

Besides labour shortages, the report also underscores other factors contributing to increased repair costs and prolonged repair durations.

“Increases in the cost of materials, oil, gas, and plant have made repairs to commercial and domestic properties significantly more expensive for insurers and contractors alike. The shortage of building materials caused by the war in Ukraine also contributed to the challenges faced by insurers and contractors,” Blain said.

Inflation levelling off

Verisk analyses and shares insights regarding macroeconomic, regulatory, and political impacts. Blain said that trends in claims activity alongside the insights should help insurers, contractors, and other groups involved in property repair to make informed decisions in uncertain conditions.

“The data we share with our customers provides a platform for fair and transparent discussions between insurers and contractors. By offering an impartial service for setting repair rates, it strengthens their relationships and streamlines the process. This ultimately makes for swifter decision making to get repairs underway which is a clear benefit for policyholder,” he said.

The report also had some good news for carriers as it revealed that the peak of inflation that is elevating prices is seemingly leveling off.

“The last 18 months have seen significant increases in the cost of materials,” Blain said. “One example is the cost of bricks and concrete blocks which have risen by 24%. But the positive news is that the worst of the inflation pressures appears to be behind us, but that does not mean we can expect prices to come down markedly in the near to medium term. For example, bricks were 50p each and they are now over £1.00, and we are unlikely to see a return to pre-high inflation price levels.”

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In a landmark ruling, Judge Arthur Engoron has found that former President Donald Trump and his organization had misled financial institutions, including insurance companies, by greatly inflating asset values. This manipulation of asset worth, as discovered in a lawsuit initiated by New York’s attorney general, could have manipulated his insurance premiums.

“In defendants’ world… a disclaimer by one party casting responsibility on another party exonerates the other party’s lies,” opined Engoron in a detailed 35-page decision, highlighting the stark disconnect between the claims made and reality. As Engoron established, this misrepresentation not only violated the law but possibly impacted the insurance calculations.

Notably, Trump’s counterargument hinged on a disclaimer present in the financial statements he provided banks and insurers. He argued that this disclaimer absolved him from the reliability of the information within. Judge Engoron gave this argument short shrift, noting that such blanket disclaimers shouldn’t be allowed to shield inaccurate statements, especially when they have real-world ramifications, such as in the insurance industry.

Attorney General Letitia James pinpointed several instances where Trump’s claims of asset values appeared dubious. For instance, the former president’s valuation of his Manhattan Trump Tower apartment was nearly triple its presumed actual worth. Similarly, his Mar-a-Lago property was valued at an astronomical figure, largely based on a hypothetical residential development use, which is restricted by deed terms.

Trump faces an uphill legal battle. While criminal charges were not pursued in this particular case, the ruling poses significant implications for Trump’s future business ventures in New York.

Trump’s impending non-jury trial in early October will further determine the ramifications of these findings. Attorney General James seeks a staggering $250 million in penalties, based on the benefits procured from the alleged deceit.

Aviva Plc is purchasing American International Group Inc.’s UK protection business for £460 million in a deal that would expand the UK insurer’s presence in the local market, Bloomberg has reported.

Aviva will use internal resources to acquire AIG Life Ltd. from Corebridge Financial Inc., an AIG subsidiary, according to a statement on Monday. The transaction is expected to close in the first half of 2024.

The purchase “continues our progress in repositioning the group towards capital-light growth,” said Aviva group CEO Amanda Blanc.

Aviva has been scaling back its overseas presence as part of a strategic overhaul. It has sold off assets in markets including Italy and Singapore.

The acquisition of the AIG unit will help it reach more customers, such as small and medium enterprises and high net worth propositions, according to Aviva’s statement.

The transaction consideration represents 0.9 times AIG Life UK’s Solvency II own funds, after adjusting for expected capital synergies. 

American International Group (AIG) has announced that it will be appointing Edward L. Dandridge as its new executive vice president and chief marketing & communications officer, effective October 16.

In his new role, Dandridge will lead the global teams responsible for shaping AIG’s corporate reputation, overseeing brand, marketing, external and internal communications. He will work in close collaboration with AIG’s investor relations, government relations, and corporate social responsibility teams. His focus will be on supporting AIG’s global businesses to enhance the company’s brand presence in the marketplace and strategically position it for sustained growth and profitability.

Drawing from his previous tenure at AIG, where he served in the same capacity for the insurer’s general insurance division, Dandridge was hailed as a vital part of the leadership team that orchestrated a transformative turnaround of this business. Dandridge is also an alumnus of Tufts University, holding a Bachelor of Arts with honours, and holds a Juris Doctor from the University of Pennsylvania Law School.

With over three decades of leadership experience, Dandridge holds several key positions, such as being a member of the President’s Advisory Committee of the Federal Reserve Bank of Philadelphia and the chair of the Susan G. Komen National Board of Directors. His prior leadership roles encompassed prominent organisations, including SVP, chief communication officer of Boeing, chief marketing & communication officer of Marsh & McLennan, and president & CEO of the National Association of Investment Companies.

Reporting to Peter Zaffino, chairman & CEO, Dandridge will also have a seat on AIG’s executive leadership team.

“In recent years, we have made significant progress in positioning AIG for long-term profitable growth. I am pleased to welcome Ed back to AIG and look forward to working with him at this important time as we enter the next phase of our journey of being a top performing global insurer. Ed has a proven track record of partnering with the business to best position us to add meaningful value to our customers and distribution partners, along with other stakeholders,” Zaffino said.

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The advent of generative artificial intelligence (AI) has not only transformed the insurance industry’s view on artificial intelligence and machine learning (ML), but it’s also become a driving force for insurtechs to speed up their innovation and develop increasingly adaptive and AI-driven systems.

“The generative AI buzz has caused a quantum leap in the belief in what an AI-powered system could and should do for someone running a business,” said Yaron Lavie (pictured), vice president of products at Earnix, a global software provider for the insurance and banking industries.

“I think that’s been the driving force. Until last year, the idea of having a semi-automated system that would tell me what I should do … was perceived as almost blasphemy. Now, everyone understands that this is possible. Not only is it possible, but if I don’t do it, I may be left behind.”

The importance of agile product innovation

For technology providers like Earnix, this shift has meant becoming more agile and more attuned to the pain points of insurance companies rapidly integrating AI and ML into their processes.

“It comes down to the concept of agile product innovation, where you come up with something when it’s very early, you get it out in the market, you get feedback, and then you iterate and make improvements,” Lavie said.

Earnix unveiled a new module, called Model Accelerator, at its 2023 Excelerate summit in London this week. Model Accelerator is a web-based module that aims to streamline and accelerate the process of building and incorporating advanced models in pricing, underwriting, and real-time rating.

Speaking to Insurance Business on the sidelines of Excelerate, Lavie said the module builds on Earnix’s existing capabilities – Price-It and Underwrite-It – to help insurance companies fast-track model production.

“I think the most exciting thing is seeing customers that have this great model but can’t figure out how to take that and put it into production,” said Lavie.

“We provide them with access to Model Accelerator, and they can take those models that up until now have been gathering dust, incorporate them, and use them to run their business.”

AI and machine learning adoption challenges

A 2023 survey commissioned by Earnix, polling 400 insurance executives worldwide, found that 100% of leaders plan to use machine learning models for pricing and underwriting. Still, only 20% said they were able to do so.

The adoption challenges around AI and machine learning were among the motivating factors for Earnix to develop Model Accelerator, according to Lavie.

“One of the key gaps that we identified is that our customers are coming up with more sophisticated and innovative machine learning techniques, and they want to bring that into the software in a way that provides them the governance, performance, and stability that they expect from a system like Earnix,” he said. “So, we needed to constantly expand on that [capability] to more machine learning modeling types.

“The second is around data. Over time, [customers] have become more sophisticated in processing, consuming, and analysing data. We needed to make sure that within Model Accelerator, we provide those abilities to help them smartly process data.”

Generative AI in Earnix’s systems?

As for whether Earnix would integrate large language models such as ChatGPT into its systems, Lavie revealed that the insurtech is experimenting with use cases.

“The jury’s still out because a lot of generative AI is about text, images, things that we don’t process right now,” the VP said. “We’re still experimenting with that.”

Beyond Model Accelerator, Earnix is looking to real-time business monitoring in its long-term AI vision. For Lavie, that means AI is serving as a CEO’s co-pilot in intelligent, data-based decision-making.

“It automatically maps out what you could do, as well as pinpoints what you should do, and that completely transforms how you would operate as a business,” he said.

“Instead of being reflective and doing things after the fact, it puts you in real-time, where you’re constantly making the right decisions based on what you know. Instead of manually testing out different ideas, you’d have all those ideas automatically generated and pre-vetted to you by the AI.”

Real-time business monitoring is Earnix’s north star, Lavie said, but he admits the technology may be more than a decade out for the insurance technology industry.

“It’s probably a vision that we need to gradually build over a number of years,” he added. “It’s a great, great vision. I think someone’s going to get to it. It’s a question of understanding and identifying some innovative early adopters and pinpointing the right roadmap to getting there.”

What are your thoughts on Earnix’s Model Accelerator and generative AI’s impact on insurtech innovation? Sound off in the comments.

A new report has noted an escalation in both cyber claims frequency and severity for businesses across all revenue brackets in the first half of the year, with companies whose earnings exceed US$100 million witnessing the most substantial rise (20%) in claims and encountering greater losses due to attacks — a 72% spike in claims severity from the latter half of 2022.

In its 2023 Cyber Claims Report: Mid-year Update, active insurance provider Coalition presented an analysis of cyber trends in the first half of 2023. Faced with a surge in cyber assaults, Coalition’s claims data exhibited a 12% upsurge in cyber claims during the first six months of the year, primarily propelled by notable spikes in ransomware and funds transfer fraud (FTF).

Additionally, Coalition’s report highlighted a surge in ransomware claims frequency in 1H 2023, up by 27% compared to 2H 2022. The severity of claims also hit a record high, witnessing a 61% increase from the previous half and a staggering 117% surge over the past year. Furthermore, cybercriminals amplified their ransom demands, with the average ransom standing at US$1.62 million — a 47% escalation over the previous six months and a 74% upswing over the last year.

Through the company’s active cyber insurance, Coalition also touted achieving the recovery of US$23 million in stolen funds — all of which was returned directly to policyholders. Notably, Coalition’s total FTF recovery amount was nearly three times greater than that of 2H 2022, averaging US$612,000 per FTF claim and covering 79% of all FTF losses in recoverable instances.

Other key findings for the cyber market

Additional pivotal findings from the report included a 15% rise in FTF claims frequency in 1H 2023, accompanied by a 39% escalation in FTF severity, resulting in an average loss exceeding US$297,000. Moreover, during this period, Coalition successfully negotiated ransomware payments down to an average of 44% of the initial amount demanded.

The report also highlighted businesses utilising Google Workspace for email as these firms demonstrated a higher level of security compared to those employing Microsoft Office 365 (M365) and on-premises Microsoft Exchange. M365 users were over twice as likely to experience a claim in contrast to Google Workspace users, while on-premises Microsoft Exchange users were nearly three times more likely to face a claim than businesses using Google Workspace.

Overall, companies leveraging Google Workspace experienced a 25% reduction in risk for FTF or BEC claims and a 10% reduction in risk for ransomware claims.

“The cyber threat landscape has become more volatile, and, as a result, we’ve seen claims become more severe and more common than ever. To help prevent these costly and disruptive incidents, organisations need to take an active role in improving their security defences and make risk management a top priority,” Coalition incident response head Chris Hendricks said.

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As an experienced snowshoer, the daunting sight of steep slopes is a familiar one to Verisk CEO and president Lee Shavel (pictured). When you set out on a snowshoeing trek, and you’ve climbed the slopes and you’re looking down, he said, you do wonder, ‘how am I ever going to get down there?’ The answer is simple but effective – it’s all about taking things one step at a time and not getting caught up in the destination.

It’s only when you look back that you realise how far you’ve come, he said, and it’s the same when he examines the progress made on Verisk’s stated mission to become “a better strategic partner for the global insurance industry”. Shavel was appointed CEO in May 2022, taking up the additional mantle of president in December and he highlighted how much he has enjoyed getting to know the business, its leaders and the initiatives it’s pursuing to support this mission.

“When I joined,” he said, “one of my hypotheses – and the one I think I was probably the most concerned about – was that we had been a very good product organisation but in the service of better partnering with the industry, we have room to grow in becoming a better client organisation and engaging at a senior client level to understand their needs and the needs of the wider industry. That required us, as an organisation, to elevate that dialogue and I knew I needed to lead – reaching out and initiating those new conversations.”

Understanding what insurance companies want from their partners

Utilising multiple channels, including CEO and CIO roundtables and individual client meetings, Verisk was clear from the outset about the opportunity for its strategic clients to provide open and candid feedback. What was a pleasant surprise, he said, was how clearly clients outlined their desire to have a strategic dialogue with Verisk and to utilise the company’s resources to support their growing data, analytical and technological requirements.

Insurance clients are looking for strategic partners that have the scale and expertise to tie these requirements together and integrate them into their processes and procedures, he said. And they’re also keen to understand how their peers in the market are leading or leveraging technological and data transformation – and what they can learn from that. This is allowing Verisk to take on more of a “counsellor” role at a strategic level which, in turn, is opening up new ideas around how the firm can better serve the industry.

“In one of the conversations we had, there was some frustration around legacy issues which it was important for us to hear and understand,” he said. “But during the second conversation, the client requested that we talk them through what we’re doing for them, but also what we’re doing for others that might be of value to them.

“That was an incredibly impactful conversation for us because rather than us pushing ideas from the bottom up, this was a top-down mandate which I think enabled us to better serve the client. And we’re going to have a six-month follow-up on that to make sure we’re continuing to deliver on the expectations we’ve set and to ensure regular dialogue with our clients at the strategic and enterprise-wide level.”

The challenges and opportunities facing the market

From those conversations, Verisk has gained a horizon view of the challenges and opportunities facing its strategic partners at this time and Shavel noted that there’s no shortage of either.

The number one concern is shared by many, he said, and centres around how inflation is impacting the insurance industry.

When discussing inflation, he said, it’s easy to zero in on the first-order inflationary impacts but what’s becoming clearer is how inflation is impacting supply chains in terms of disruptions and scarcity. This, in turn, is introducing levels of delay in repairing entities which entails greater costs. The impact of these knock-on costs and disruptions needs to be understood at a local and granular level because supply chain concerns are on clients’ minds, certainly from an existing exposure loss and claims standpoint but also, on the underwriting side, around how this can be factored into pricing.

There’s also a strong regulatory challenge around this, he said, particularly in the US where different states have differing regimes and approaches to pricing. California, for instance, by statute, doesn’t allow insurers to base pricing on any forward-looking estimates, which creates significant challenges in a market where costs are changing so rapidly. So, helping clients navigate that regulatory landscape in order to make the right underwriting and pricing decisions within their local markets is high on Verisk’s agenda.

“The third challenge is that all our clients struggle to some degree with the data and technological environment that continues to change rapidly as we deploy a much more cloud-intensive data infrastructure, with growing numbers of datasets and analytical approaches,” he said. “In almost all of our conversations, the impact of generative AI is a very active topic, as is how we can work with the industry to safely explore the application of that technology to different dimensions of their businesses.”

The changing face of data and technology

Interestingly, he said, this third shared challenge around technology and data is also where the real wealth of opportunities open to the market can be found.

Shavel noted that there has been a “generational shift” in the technology leadership in insurance companies. Even just 10 years ago, there was some concern and suspicion of the security risks associated with moving to a more cloud-orientated environment. But now there is a broader industry-level acceptance that, while cloud-based structures must maintain the highest possible security profiles, they are very beneficial from an economic, analytical and operational standpoint.

“Cloud-based structures [present] an opportunity for the industry to better price and manage their business by utilising broader, more current and more dynamically managed datasets,” he said. “I think it has also opened up new forms of insurance, the most immediate example being usage-based insurance, particularly on the motor side, where, as we have collected more data around driving behaviour, underwriters are becoming more comfortable in developing pricing structures for usage-based policies.”

For Shavel and his team, helping clients traverse the challenges and take advantage of the opportunities facing the insurance industry at this time is what makes Verisk’s position in the market so exciting. Going back to the snowshoeing analogy, he noted that he does look back on what the business has achieved and think, “wow, did we actually do all that?”

“We’ve come a long distance,” he said. “But I don’t think you get there by giant leaps but rather consistent progress against your goals. We’ve done a good job of outlining our team goals, and then everyone individually expresses their work towards achieving them.

“I think we’ve gone a long way in reorientating our purpose and getting the pieces in place. What I’m hopeful of now is that we’ll be able to continue to build on the great work that we’ve done with clients and and accelerate how we help them seize the opportunities we’re seeing in the market.”

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Markerstudy sees the challenges in the UK personal lines market as a runway for further growth, following a deal to acquire Atlanta Group, the personal lines brokerage of Ardonagh Group.

Leaders said the new player created by the merger could surpass £3 billion in gross written premium (GWP) very quickly.

 “We would like to be a one-stop shop for insurance,” said Kevin Spencer (pictured), CEO of Markerstudy Group.

Spencer also said the merged business would be able pursue more opportunities for growth, both organically and through M&A.

“If something comes along, and it’s opportunistic, we can consider it, and that’s the beauty of the combination,” he said at a recent press briefing. “We can operate really dynamically when something comes up.”

Ian Donaldson, CEO of Ardonagh Retail, said: “That’s always been a passion of mine… to give that diversity of product and diversity of distribution, so you never relied on one or the other. This [deal] expands that, absolutely.”

Tackling the personal lines market

Asked where they could see opportunities for organic growth, Donaldson named standard home and motor insurance as major areas.

“Given what’s going on at the moment, it’d be crazy not to be pushing hard in motor,” the chief executive said.

While customers are shopping around for better rates, he said, Atlanta can strengthen its pricing sophistication and distribution channels to widen its footprint.

“We are, within Atlanta, quite restricted on some of our footprint,” Donaldson said. “This deal gives us the opportunity to take that even further.”

Customers also ultimately benefit with a broader suite of products available in the market, the CEO set out. Significant brands in Atlanta’s book include Swinton, Autonet, and Carole Nash.

“Considering the cost-of-living crisis, what can we offer that’s different? How can we be a bit more competitive? How can be a bit more sophisticated in the pricing? How can consumers get great brands and great products, but slightly more competitive prices? That would be the challenge we put to ourselves,” Donaldson said.

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Intact Financial Corp (Intact), a Canadian multinational property and casualty insurance company and the parent company of RSA, has started the sale of RSA’s personal insurance business, according to reports.

A Bloomberg report revealed that Intact has been working with JPMorgan Chase & Co to gauge buyer interest in the personal insurance business, which is valued at approximately £500 million and covers everything from home to pet protection. The business also sells insurance policies directly to clients and includes partnerships with other financial institutions.

Strategic review

Toronto-based Intact and Danish insurance group Tryg A/S acquired RSA in 2021, providing Intact with control of the business’s Canadian and UK and international operations. Meanwhile, Tryg took the business’s Swedish and Norwegian arms. In March, Intact announced that RSA’s personal lines business will exit the competitive market for motor insurance.

Through RSA, Intact has been expanding into commercial insurance in the UK. This month, it announced the acquisition of the brokered commercial platform from Direct Line Insurance Group Plc in a deal that could rise to £550 million. Intact said it will continue to pursue a strategic review of its personal lines business in the UK.

“The strategic review of these options is underway and is expected to be completed in Q4 this year,” a spokesperson for Intact told Bloomberg.