AI ON A BIG SCALE WILL GIVE INSURERS A HUGE COMPETITIVE EDGE

Insurers that roll out AI solutions across their businesses will gain a substantial advantage over their competitors.Most big insurers have begun experimenting with artificial intelligence (AI) applications. Some have even begun implementing AI solutions. Few, however, have rolled out AI applications at scale across their organizations.

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One of Northern Ireland's leading insurance brokers, our focus is on business in NI and we believe strongly that with the experience our team has acquired in the global insurance broking environment combined with our local business knowledge we have a unique blend of qualities to offer clients.

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Insurance Technology

Digital Transformation in Insurance Industry

Article | July 14, 2022

Insurers of the future will play more of a risk avoidance role and less of a risk mitigation one. The seemingly effective yet simple ideas of Netflix, Uber, Ola, Amazon, and many other ideas have forever transformed their industry segments. Digital transformation in the insurance industry is embraced in various ways to address the complex challenges posed by consumers, regulatory, and digital landscapes. To keep up with insureds' demands, insurers have had to digitize various aspects of their operations. Any company that wants to stay competitive in today's market must meet customers where and when they need it. Insurance's digital transformation, powered by artificial intelligence, machine learning, predictive analytics, mobile services, live chat, and other technologies, enables insurers to do just that and will continue to change the industry for years. Insurance Companies to Look at Value Chain through a Digital Lens: Gain First-Mover Advantage: Product introduction to gain a potentially sustainable competitive advantage. To achieve the first-mover advantage, the insurer should have two crucial capabilities: the ability to pinpoint unmet customer needs to guide product development and quickly adapt existing products to market forces. Reduce IT costs to fund innovation: When insurance companies refactor monolithic applications into modular micro services, application maintenance costs are reduced. Grow revenue by differentiating the customer journey: Electronic document capture and processing, robotic process automation (RPA), and robo-advisors improve serviceability and help businesses gain a competitive advantage. Despite market participants' claims that the insurance industry was not an early adopter of digital transformation, new players, business models, and demanding customers are forcing the industry to embrace digital technologies. As a result, the global insurance market is expected to grow by 45% between 2022 and 2025. Modern digital engineering does not occur in a vacuum; new products must be compatible with existing technologies and processes. Ascertain that the development team understands legacy insurance applications and the data required to integrate them with new, digitally engineered products.

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Insurance Technology

Builders Risk Insurance Vs. Liability Coverage: How Each Benefit Works

Article | July 20, 2022

For construction contractors, there is nothing more important than safeguarding your works in progress. After all, if something were to damage the property and interrupt your progress, then you might face a huge financial setback. At this point, it’s critical that you have builder’s risk insurance ready and waiting. Your policy will be there to assist you following property damage at construction sites. However, your builder’s risk policy will not offer the same coverage to injuries or property damage that you cause to other parties. In this case, separate liability insurance benefits will provide the necessary benefits. Though separate from your builder’s risk policy, liability coverage is equally important. Let’s take a closer look at how these benefits work.

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Claims

The Age of Sustainable Fixed-Income Investing Has Arrived

Article | July 15, 2022

Environmental, social, and governance (ESG) considerations have increasingly entered the mainstream of investment discussions, both through routine incorporation into traditional investment processes and through distinct sustainable or impact investing styles. Recent and current global conditions, such as extreme weather events, the inequitable effects of the COVID-19 pandemic, rising distrust of government institutions, and geopolitical challenges to a rules-based world order, have accelerated this trend, emphasizing the direct relevance of ESG and sustainability to understanding long-term market risks and opportunities. Until recently, equity investors were more concerned with ESG and sustainability than their fixed-income counterparts. That is, however, beginning to change, and at a rapid pace. ESG and sustainability have gained significant traction among bond investors, particularly since the implementation of COVID-19, and are now widely regarded as essential components of fixed income investing. For example, global sustainable debt issuance reached a new high of over US$1.6 trillion in 2021 and is expected to rise further in the coming years. Notably, we believe that ESG integration and sustainable fixed-income investing require a very deliberate, thoughtful approach — one that varies significantly from one fixed-income sector to the next. ESG and sustainability: At a high level, researchers believe that increased awareness of ESG and sustainability benefits global markets in two ways: 1. ESG integration allows market participants to think more holistically about the types of financially material risks and opportunities — such as physical, reputational, and (geo)political — that should ideally be reflected in asset valuations and taken into account during the routine portfolio construction and management process. 2. Furthermore, the conversation about sustainable investing is encouraging more market participants to look beyond narrow, issuer-specific investment thesis to consider how market participants' behaviors affect the broader systems and structures (e.g., climate stability, institutional strength) whose long-term viability is critical for the long-term health of economies and markets. We, like many others, believe that a stable global climate, clean air and water for all, adherence to the rule of law, strong institutions with broad public legitimacy, and broad-based access to economic opportunity are valuable public goods from which market participants would benefit collectively over time. As a result, a central goal of sustainable investing is to assist markets in evolving toward rewarding participants for exercising responsible stewardship of these public goods, which are critical to pursuing favorable long-term outcomes for the real people who are the ultimate beneficiaries of markets. This framing of sustainability highlights why fixed income is so important in moving global markets and economies in a more sustainable direction.

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Claims

Are motor claims in Europe about to rebound?

Article | September 14, 2021

The COVID-19 pandemic has caused unprecedented disruption to the insurance industry overall, dramatically curtailing business activity, upending the everyday lives of employees and customers, and more. However, companies that derive a substantial portion of their business from motor insurance have enjoyed stronger bottom-line results during the pandemic than in previous years. That’s because when sudden lockdowns kept drivers at home and off the road (see exhibit), claims plunged by 60 to 80 percent almost immediately. As restrictions began to lift, claim volumes subsequently bounced back, although they remain 20 to 30 percent lower than they were before the pandemic. The corresponding drop in payouts for claims was only partially offset by the refunds on premiums that insurers paid to customers to compensate them for traveling fewer miles. Are motor claims in Europe about to rebound? As of mid-2021, motor claims volume remains suppressed—at least for the time being. For insurers, this offers a short-term window to pursue or accelerate strategic initiatives aimed at establishing claims excellence, a key driver of profitability. These initiatives include transforming claims processes to improve customer experience, building digital capabilities, leveraging advanced analytics to improve decision-making, and reducing long-standing sources of leakage. Acting now will help insurers be prepared when vaccination rates across Europe accelerate, economies reopen, and both mobility and motor claims rebound. Even as the pandemic recedes and business returns, insurers are likely to confront three persistent challenges that can be addressed—at least in part—by transforming claims management to improve profitability. Top-line pressure will continue. Pandemic-related top-line pressure will likely continue for the foreseeable future. If history serves as a guide, commercial lines, which suffered from a temporary halt in business activity in the tourism, aviation, entertainment, and local business sectors, may be slow to recover. During the 2008 financial crisis, for instance, commercial lines took significantly longer to recover than personal lines. As for personal lines today, declines in everyday commuting have altered customers’ perceptions of the value of insurance: if they drive less, they expect to pay less. As noted above, some insurers have proactively offered their customers premium paybacks for reduced car usage—a change that could endure. Digital is here to stay. Because of the pandemic, people shifted many everyday activities to remote channels and adopted new digital tools. For example, across Europe, 60 to 70 percent of consumers moved some of their shopping online, and most intend to perpetuate the new habit after the pandemic ends. This shift in customer behavior extended to engagement with insurers. In the United Kingdom, claims notifications filed via digital channels doubled during the pandemic, and insurers received 30 percent more digital inquiries than in the past. However, customers’ growing expectations for an end-to-end digital experience—with 24/7 service, instant feedback, and a user-friendly interface—still place most insurers in the position of playing catch-up. The large majority of customers still prefer to place a call rather than use digital self-service; in Europe, for example, more than 50 percent of claims are initiated when a customer contacts an agent. This preference could indicate that insurers have yet to fully digitize the claims handling process. Inflation will affect claims costs. Insurers anticipate increased pressure on claims costs from multiple sources. First, car repair shops have suffered the knock-on effects of the COVID-19-induced drop in claims volume. Many received government help, but they also responded by increasing labor rates and margins on spare parts. The claims inflation rate currently sits at 4 to 5 percent. Ongoing cost pressure means repair shops are unlikely to reinstate their pre-COVID-19 price levels without some restructuring in the sector. In one scenario, insurers could step into the role of ecosystem orchestrators, significantly consolidating repair volumes and offering strong incentives—including extending insurance services to include maintenance and offering negotiated prices for parts and labor—to repair shops to participate. Meanwhile, insurers can analyze increased volumes of claims data to continually assess the performance of repair shops and then use those insights to guide customers to the best deals. Even before the pandemic, insurers had made strides in improving the bottom line by increasing productivity and optimizing technical excellence, particularly via pricing. Now is the time to tackle claims. Claims organizations can use this period of lower claims volume to plan their strategic investments in advanced analytics transformation, to devise new digital talent strategies, and to improve their understanding of customer needs and expectations. A complete suite of analytics and updated process automation—prerequisites for accurate, end-to-end automation—constitute the backbone of the new claims and customer experience model. The tools are evolving, driving automated decision-making along the entire claims handling process: routing, triaging, liability negotiation, cost estimating, deciding to repair or write off damaged vehicles, cash settlements, and fraud detection. All these areas will increasingly use digital and analytics as opposed to manual labor, changing the entire claims operating model. Responding to customer demands for a seamless claims experience is a top priority. The pandemic has proved that customers are eager for and accepting of new digital experiences. They expect full transparency throughout the claims journey; minimal effort on their part (for example, very little engagement back and forth with the agent to get the claim resolved and receive payment); faster resolution of claims, perhaps including automated payments; and the ability to move seamlessly between the digital and physical worlds. Furthermore, insurers can work to reduce leakage and improve the bottom line. Leakage takes many forms, including replacing rather than repairing a vehicle, offering a luxury replacement vehicle rather than a car that matches the customer’s vehicle class, and incurring costs for in-person loss assessments even in obvious cases for which pictures would suffice. Tackling leakage will entail enabling efficient detection of anomalies, selecting claims for detailed review, and empowering the claims organizations to efficiently close claims that cast no doubt. Accomplishing these critical objectives will entail a shift from a scattered and often siloed approach using unintegrated digital and analytics tools to end-to-end digital- and analytics-enabled claims processes. On the front end, insurers will need to establish tools on par with the top digital services their customers use every day (for example, ride-hailing apps, social media, and digital banks). On the back end, claims organization will need to invest in a suite of analytics engines to support automated decision-making to cut costs. The opportunity starts with claims prevention—using telematics and the Internet of Things to issue safety warnings and damage prevention tips—and continues throughout the claims processing journey, from providing customers with an easy digital first notice of loss interface and improving claims cost accuracy, to digital selection of a repair shop and automated payment processing and invoice checks. This relative lull in activity also gives insurers a good time to provide teams handling claims with the training they need to learn new processes and operate new digital tools. Claims are already rebounding, so the clock is ticking for insurers. Building end-to-end digital and analytics solutions requires significant investment and will take substantial time. For claims organizations, it is critical to act now or risk missing the opportunity to emerge from the pandemic stronger than competitors.

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Spotlight

ABL Group

One of Northern Ireland's leading insurance brokers, our focus is on business in NI and we believe strongly that with the experience our team has acquired in the global insurance broking environment combined with our local business knowledge we have a unique blend of qualities to offer clients.

Related News

Valued Policy Law and Total Loss

inredisputesblog | May 21, 2019

Typically, a fire insurance policy pays a policyholder for the actual cash value or the replacement value of the property destroyed. But in 20 states, if there is a total loss, the amount the insurer must pay is equal to the value of the property at the time the insurance policy was issued. What happens if the policy covers a multi-building complex and one of the buildings is destroyed? The Eighth Circuit Court of Appeals recently addressed this issue. In Norwood-Redfield Apartments Limited Partnership v. American Family Mutual Ins. Co., No. 18-2618 (8th Cir. May 16, 2019)(Unpublished), the appeals court affirmed a judgment in favour of the insurance company denying the policyholder’s claim to recover the full value listed on the policy of an entire complex of buildings when only one of the buildings was destroyed. The policyholder sued its insurance carrier after a fire destroyed one of the buildings out of 32 in the complex. The insurance carrier paid nearly $3 million for the loss, but the policyholder wanted the policy limits of over $31 million.

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Valued Policy Law and Total Loss

inredisputesblog | May 21, 2019

Typically, a fire insurance policy pays a policyholder for the actual cash value or the replacement value of the property destroyed. But in 20 states, if there is a total loss, the amount the insurer must pay is equal to the value of the property at the time the insurance policy was issued. What happens if the policy covers a multi-building complex and one of the buildings is destroyed? The Eighth Circuit Court of Appeals recently addressed this issue. In Norwood-Redfield Apartments Limited Partnership v. American Family Mutual Ins. Co., No. 18-2618 (8th Cir. May 16, 2019)(Unpublished), the appeals court affirmed a judgment in favour of the insurance company denying the policyholder’s claim to recover the full value listed on the policy of an entire complex of buildings when only one of the buildings was destroyed. The policyholder sued its insurance carrier after a fire destroyed one of the buildings out of 32 in the complex. The insurance carrier paid nearly $3 million for the loss, but the policyholder wanted the policy limits of over $31 million.

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