Insurance is a topic of perennial interest, but it is not often discussed for furthering cutting-edge technologies like generative AI and machine learning. However, Insurtech, with its ability to redefine business models and leverage cutting-edge technologies, has left an indelible mark on the insurance industry landscape.

Whether it’s a homeowner navigating insurance policies or an industry professional charting the course for future business growth, Insurtech’s broad reach has enabled companies to take on new types of risks to reshape risk management strategies in the face of evolving climate risk and changing regulations.

In this episode of Core Conversations, host Maiclaire Bolton Smith sits down with InsTech CEO Matthew Grant. The two unpack just how far the industry has come and how far things still need to go as bleeding-edge technologies come to the forefront of the international conversation and stand to bridge the gap between this traditional industry and the evolution of consumer expectations.

In This Episode:

3:13 – How insurance won out over technological innovations, leaving homeowners to purchase policies in a traditional manner.

4:22 – So why did technology revolutionize the way insurers underwrite policies?

7:22 – As data leads to increased visibility for risk, how does that affect insurers ability to offer coverage?

8:40 – How tech tools put the power in the hands of a policyholder to speed up the claims process.

10:17 – Where does AI have the most potential to expedite the claims process?

12:52 – Erika Stanley goes over the numbers in the housing market with The Sip.

13:55 – Will generative AI and algorithmic underwriting define the future of insurance decisions?

16:05 – Why has reinsurance been so quick to adopt new technology?

18:43 – Erika Stanley talks about what is happening in the world of natural disasters.

20:21 – Is the Insurtech revolution over, or is it only beginning?

Links:

• RAA Conference: Cat Risk Management 2024
• InsTech Podcast
• Hazard HQ Command Central
• Read CoreLogic Intelligence

Up Next: How Will Property Data Help Manage the California Insurance Crisis?

Find full episodes with all our guests in our podcast archive here: https://clgx.co/3HFslXD

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Copyright 2024 CoreLogic

Matthew Grant:

Yeah, the tool is a bit too enthusiastic and it's starting to reject claims or reject people wanting to buy insurance, because it's picking up some signals that are just not correct.

There's so much protection, as there should be of course, for people buying insurance, so in a sense it's slowed down the adoption of the use of generative AI by insurance companies.

Maiclaire Bolton Smith:

Welcome back to Core Conversations: A CoreLogic Podcast where we tour the property market to investigate how economics, climate change, governmental policies, and technology affect everyday life. I am your host, Maiclaire Bolton Smith, and I'm just as curious as you are about everything that happens in our industry.

InsurTech, which took its inspiration from the more widely known FinTech industry, has been trying to transform the insurance industry since it came onto the scene by altering business models and disrupting an industry that has historically been seen as a slow adopter of technology. But has it succeeded?

So to talk about this industry, whether it's revolutionizing insurance and what we can look forward to in the future, we've invited Matthew Grant, the CEO of InsTech to talk to us today. Matthew, welcome to Core Conversations.

MG:

Maiclaire, I'm delighted to be here today. It's always a pleasure to be on the other side of the microphone, and as I'm sure we'll talk about, I've got a very special place in my heart for CoreLogic.

MBS:

Well, that is so great, and I love having another podcaster on the podcast today, so that's really exciting.

Erika Stanley:

Before we jump into talking about whether InsurTech is revolutionizing the insurance industry and what these technologies mean for the future of the property market, I wanted to remind our listeners that we want to help you keep pace with the property market.

To make it easy, we curate the latest insight and analysis for you on our social media where you can find us using the handle @CoreLogic on Facebook and LinkedIn or @CoreLogicInc on X, formerly known as Twitter and Instagram. But now let's get back to Maiclaire and Matthew.

MBS:

I mean, you and I have known each other for a number of years, and in a former life were actually colleagues, so yeah, it's really great to talk to you about this today. So, I guess let's just start with the basics. Most people probably have heard of InsurTech, but can we just talk a little bit about what exactly is it? Let's just define what we mean when we say "InsurTech."

MG:

Yeah, it's a really good question, and the difficulty is, of course, lots of people have got a slightly different interpretation of it. I'd say for the purposes of what we're going to talk about today and probably how most people think about it, companies that have come out in the last 10, 15 years using data analytics, new technology, either as risk carriers or risk intermediaries quite often technology labeled MGAs, or companies that are building technology for improving those analytics.

I do use it slightly carefully these days though, because I feel there's a lot of really powerful analytics and data that has come out from companies that have been around much longer than that time period, and there's quite a lot of interesting things happening from companies that are outside of the traditional insurance industry.

So yeah, definitely look forward talking a little bit more about it, but I think for the purposes of today, it's probably those companies that have been around the last 10, 15 years.

MBS:

Sure. Yeah, and that's really what I want to dive into. So I guess thinking of an insurance policyholder myself — and I recently bought a new home and we've had to get a new insurance policy — For somebody like me who is a homeowner who has an insurance policy, how has InsurTech changed the way someone would purchase their insurance today?

MG:

Can I be a bit provocative? And I say that-

MBS:

Yes.

MG:

... maybe not at all. I was listening to someone else's podcast. It doesn't really matter who he was, but he was a very interesting podcast. He was outside of insurance. Normally he helps people find good ways to travel or get good deals, and he was talking about buying insurance and what brought it home to me is you could have listened to that podcast five years ago, 10 years ago, probably wouldn't have changed.

He actually specifically named one company that didn't offer digital quotes, because they'd been sued by a client who'd gone for an online quote. He talked about filling in-

MBS:

Oh, interesting.

MG:

... yeah, another company where he had to fill in about a hundred lines of data — I think it was electronically. So, I think sadly I'd say there are lots of good examples. I don't want to be too cynical, but not as much as people might've hoped 10 years ago, but there are definitely some differences coming through.

MBS:

What about the other side then? So maybe not for the homeowner purchasing insurance, but what about for the actual insurer. What about from their perspective, how has InsurTech kind of revolutionized the way they do things?

MG:

Yeah, so I'd say we're seeing quite a lot of changes there. I mean, it just came back to your question about somebody buying personalized insurance. I mean, the goal has been as consumers to not have to put in all of that information, put in two or three bits of data, maybe do it through your mobile device. That's starting to happen.

I mean, over in the U.K. we've been slightly further ahead of that then in the U.S., and now we're starting to see that move into small commercial. So traditionally a commercial insurance buyer small company would've had to go to a broker, longer process.

Now they're having the ability to buy that insurance much more efficiently. And in the background, there are organizations and probably yourselves that are providing the data, that's giving a much more precise view of the risk and therefore a better price from an underwriting perspective and premium to that buyer of the insurance.

MBS:

Sure, yeah. So okay, we've kind of broadly said insurance, but the insurance industry is huge and it goes everywhere from underwriting through to claims. So, let's take a step back and look at the two different sides of insurance, both underwriting and claims, and talk a little bit about how each of those is being influenced by InsurTech.

So maybe let's just start with underwriting a policy, starting with where you're trying to acquire a new policy. It's being underwritten. How is InsurTech transforming or disrupting the way it's being done? Insurance has existed for hundreds of years.

MG:

So disruption, I sort of use this phrase now that in the, well, we're going to step back. I mean a lot of the companies that started off 10, 15 years ago came out wanted to disrupt insurance. That was their kind of mantra. They raised funds on it.

I said in the war between the insurers and the disruptors, the insurers have won that one. So, we're not seeing much disruption. It's very different buying a policy once a year than it is using your banking app where you might want to do transactions three or four times a day, so disruption less so.

But what has changed is, back to this point, that the insurer now has got access to a lot more high-resolution data. So if you are in, if you're in California and you're in a wildfire zone, there should be more accuracy around what is the risk you are building. If you're in a flood zone, and obviously the U.S. you've got more options now for buying flood insurance, there should be more accuracy around the flood risk. If you own your house, your insurer should know more about your property, they should know more about the rebuild cost.

So the data is much richer and that should benefit both the buyer of insurance and the underwriter in being able to underwrite more precisely. And of course in the U.S., you've got a rated market or you've got a regulated market for rates. Less flexibility around pricing, but that people have to make choices about what they underwrite on who they insure.

MBS:

So maybe just even really it's open, potentially opened the market for them to underwrite properties that they maybe wouldn't have in the past because they now have more data. Although on the opposite side of that, may make them be pulling back more too because they do actually see what the potential risk could be, which we've seen from several insurers here in California.

MG:

Although both actually, so to your point about the way between the U.S. and the market, and you've got your admitted carriers and the U.S. non-admitted, so you might get a standard admitted carrier that most people would recognize as a household name. If you're in a high risk area, that business will be written outside of the U.S. quite typically often find its way to London.

So to your point about, there's actually, there are more choices now because certain companies will take on risks, others wouldn't. So I'd say from a policyholder's point of view, yes, they do actually get more choice. They might have to accept some limitations on the policy. They might have to make some changes to their property to make it more resistant or resilient to loss. But ultimately, it should be for the best for the homeowner.

ES:

MBS:

Now what if we take the opposite side of that and from a claims' perspective — so pipe breaks, hurricane happens, somebody has damage to their home, they need to file a claim. How has Insurtech, maybe even more from the homeowner side of things, they may see more of an impact from the claim side. Can we talk about how that's a little bit different?

MG:

Yeah, it is quite varied. I mean, the areas that have been the most interesting to look at are around a couple of different uses of imagery to assess the loss. So on the one hand you've got aerial imagery, so it could be companies that are flying aircraft or using satellites or even weather balloons to look at what happens after a hurricane and actually start to identify where properties have been damaged that can help triage and allow insurers to settle claims more quickly if there's clearly been a loss or get loss adjusters at.

There's also quite interesting tools being used where people are able to use their own mobile phones or iPhones or Android devices point it at some damage, and that can help the loss adjuster assess the damage in some cases that they're just literally using it as another pair of eyes. They haven't got to go out on site in some cases more sophisticated and it can actually take measurements and even sort of work out the loss.

So that speeds up the claim, it reduces costs for everybody. The experience, again, everyone benefits from that, with that new technology coming in.

MBS:

Yeah, I mean that's one side of things to think of. People taking mobile phone pictures and helping to expedite the claims' resolution, my brain instantly went to. How does AI come into play with all of these things? Are we seeing AI being a big part of helping with claims resolutions? I mean, I know on the underwriting side too, that's kind of a big thing of having better understanding of what the attributes of the property may be.

MG:

It's interesting you mentioned AI. I mean, if we're talking 12 months ago, we'd have been thinking about AI, artificial intelligence in the old world. Now we tend to go straight to generative AI and chat GPT. And I'd say again, what's changed? A lot of companies used to claim to be using AI and just mean they're running large Excel spreadsheets.

I mean, definitely when there's large volumes of data and particularly large volumes of lost data, you're running machine learning and artificial intelligence to help understand the trends, the themes, does start to become really useful for more accurate assessment of how do you correlate the visual damage with the financial loss.

So that's happening. And then you get into chat GPT and generative AI. Then you get into a whole different level of how you use those tools, which we can talk about. That's starting to get into a different area there about efficiency of looking at documentation and claims information.

MBS:

Yeah, and it's really interesting too, because as you said, a year ago we would've thought of just general AI. And now, I mean the world has just been transformed by chat GPT over the last 12 months. So it's interesting to see how that is a disruptor for many industries and how it is playing into our industry as well.

MG:

Yeah, and that's a good plug for a podcast we did with Key Insurance. I was really intrigued to see that Marsh McLennan have managed to achieve eight hours of time savings for their companies. Of course, that includes the brokers. And I'm just wondering if there's a correlation between the number of people we've seen having lunch and spending more time out and about in London now that they've managed to save time.

So transformation in some way, maybe not quite the way they'd expected. And then the other area we should talk about is algorithmic underwriting, which is actually the next natural progression from that.

MBS:

Let's talk a little bit more about that. What exactly is that algorithmic underwriting?

MG:

So algorithmic underwriting essentially took its inspiration from the financial markets and investment markets where companies are using analytics, sophisticated analytics, to make decisions. Probably the one that is most well known. And as you move to algorithmic underwriting, you take underwriter out of it altogether and you essentially have the machine doing the underwriting.

MBS:

Interesting, interesting. So that is revolutionary and that is a big disruption to the industry that has existed for so long, potentially.

ES:

Before Matthew and Maiclaire continue the conversation about InsurTech, it's that time again, grab a cup of coffee or your favorite beverage. We're going to do the numbers in the housing market. Here's what you need to know. U.S. single-family rental prices were up by 2.5% year over year in October, marking the 18th straight month of annual deceleration.

San Diego, St. Louis, Boston, and New York led the way for year-over-year rental price increases. San Diego saw a 5.2% increase. St. Louis a 5% increase, and Boston and New York both experienced a 4.7% increase. On the other side. Austin, Texas and Miami posted annual losses of 2.1% and 1%, respectively. Rent growth in Phoenix was flat. And that's The Sip See you next time.

MBS:

On this topic of generative AI. This is a big one because at our INTRCONNECT conference that we've just hosted, we have this panel that talked about AI and insurance, specifically generative AI, and we talked a little bit about responsible use of AI in insurance. So can you talk a little bit about this as well, Matthew?

MG:

Yeah, it's a huge topic. We actually run a newsletter on what insurers are doing in generative AI. And what we're seeing is that there's a lot of caution around allowing employees to use generative AI tools because of the issue is in terms of how you deal with your customers.

And one of the big risks where people are trying to use generative AI, for example, to identify fraud, is there have been cases where, yeah, the tool is a bit too enthusiastic, and it's starting to reject claims or reject people wanting to buy insurance because it's picking up some signals that are just not correct. And there's so much protection, as there should be of course, for people buying insurance.

So in a sense, it's slowed down the adoption of the use of generative AI by insurance companies. Where we're seeing more use of it is people doing internal reviews of, for example, looking at claims documentation to see what's covered. But yeah, insurance companies are moving very carefully, even to the extent that quite a few of them now are banning the use of generative AI at work for their employees. Just it's a blanket ban. They're so worried about this.

MBS:

Interesting.

MG:

Sort of getting out of control.

MBS:

Yeah, and I can see how it very easily could.

ES:

Before we continue this episode, we wanted to take a break and let you know about an upcoming event that will blow your socks off. Come to Orlando from February 26-29 for the RAA Cat Risk Management Conference hosted by the Reinsurance Association of America.

While you're there, you can find CoreLogic and meet some of our previous podcast guests while you dive into the world of catastrophe risk management. Attendees will have first access to CoreLogic's annual Severe Convective Storm Report and can also snag some limited-edition severe convective storm socks. Register at the link in the show notes and see you there.

MBS:

Okay. So far we've really focused on primary insurance. What about the reinsurance market? How is that being impacted by InsurTech?

MG:

Yeah, the really exciting thing about reinsurance, certainly in my career has been the speed with which reinsurance companies and specialty insurance companies can adopt new technology.

And so it's still a regulated industry clearly, but they're not dealing directly in many cases with the ultimate personal lines individual. And so, a little bit of what we were talking about on the algorithmic underwriting, they've got, and they historically have been the ones that have used data very effectively to manage portfolios, make decisions about going into new lines of business.

The power of reinsurance is you can enable new types of risks. Cyber is one we've seen most recently. We all know about the massive insurance gap. I think going back to generative AI, one of the things we haven't yet seen is the insurance to ensure for problems that come through misuse of generative AI. Copyright is one big issue about people getting sued for copyright issues.

MBS:

For sure.

MG:

And then I think that liability risk, and of course again, back to our experience of catastrophes, we don't know what's ahead of us next year, but we do know that as major catastrophes evolve, reinsurance has stepped in as it did with terrorism, to be able to provide insurance protection for that so that insurance companies can continue to support their clients with insurance.

MBS:

Yeah, and we do know, especially with the climate change and with a lot of our catastrophes getting stronger and more impactful and having greater losses, and really just the changing in losses too.

I mean, one thing we've talked about in this podcast is how catastrophe trends have changed and how we used to plan for earthquake and hurricane and now there's severe convective storm and hail and wildfire, really taking over. So kind of understanding all of that as well too as we pulled all things together from an reinsurance perspective.

MG:

Yeah, definitely. I mean, wildfire five years ago, we wouldn't, 10 years ago maybe, we wouldn't have thought about it as a parallel tour., As you say, it's now really-

MBS:

Absolutely

MG:

If not dominating, it's of very significant.

MBS:

Yeah. Okay. I think to kind of wrap up today, we've definitely seen big transformation because of InsurTech. Do we think the InsurTech revolution is over or is it just beginning, especially with generative AI really taking over?

If we had this conversation five years ago, we kind of talked about where we thought we would be today and where we are. Where do you think we're going to be in even 1, 5, 10 years from now?

ES:

Before we end this episode on InsurTech, let's take a break and talk about what's happening in the world of natural disasters. CoreLogic's Hazard, HQ Command Central reports on natural catastrophes and extreme weather events across the world. A link to their coverage is in the show notes.

In December, tornadoes and severe thunderstorms hit Tennessee and Kentucky in the U.S. CoreLogic estimated that 10,345 single- and multifamily homes in the areas affected by the storms have at least a 30% chance of tornadic damage. This late-season tornado is partially due to the current phase of the El Niño Southern Oscillation or ENSO. El Niño phases coincide with the southeastern shift in the jet stream as well as increased precipitation in the Southeast.

Then on New Year's Day, Japan's Noto Peninsula was rocked by a magnitude 7.5 earthquake that caused widespread damage. The earthquake occurred at a shallow depth of 6.2 miles or 10 kilometers beneath the Earth's surface at 9:10 p.m. local time.

The U.S geological survey reported level nine ground shaking on the Modified Mercalli Intensity Scale, and the mayor of Suzu, a nearby town, said that over 90% of the 5,000 homes in the city may have been damaged or destroyed. CoreLogic estimates that insured losses in Japan could be between $1 and $5 billion dollars.

MG:

If I can just reframe the question a little bit so we don't get caught up on, Insurtech is only companies that came around in the last 10 to 15 years. I would say without doubt, the leaders of insurance companies recognize the importance of technology and moving to full digital, but they don't know how to do it and they know they need to do it.

So that's a difference from 10 years ago. There are lots of, I think what's really exciting is there's companies coming in from outside of insurance that have already got access to data. There may be companies managing properties coming in from Marine, looking at every asset that's out there that currently needs to be insured. And so you are harnessing that experience, those customers into the insurance space.

So where the big opportunities are is that seamless insurance. So with your individual, people frankly don't really care too much about insurance. They just want to get covered for when they have a loss without having to worry about did they buy the right insurance or will their insurance be there on the day.

I believe there will be insurance organizations coming through that will win because they will look after their customers and they'll filter out the ones that are trying to be fraudulent. But they will have a very satisfactory experience of when they have a loss, they get the loss paid for and claims get settled quickly and they'll continue staying as a customer of that insurance company.

MBS:

Yeah, ultimately that's what people want, is they want to make sure that their insurance company has their back when the unexpected happens.

MG:

Exactly.

MBS:

Yeah. Okay. Matthew, this has been so great. Thanks so much for joining me today on Core Conversations: A CoreLogic Podcast. It was so great to chat with you.

MG:

No, thank you, Maiclaire. It's been a pleasure to be here.

MBS:

All right, and thank you so much for listening. I hope you've enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcasts to be notified when new episodes are released.

And thanks to the team for helping bring this podcast to life. Producer, Jessi Devenyns; editor and sound engineer, Romie Aromin; our facts guru, Erika Stanley; and social media duo, Sarah Buck and Makaila Brooks. Tune in next time for another Core Conversation.

ES:

You still there? Well, thanks for sticking around. Matthew Grant is the CEO at InsTech and the host of the Weekly InsTech podcast. He has 25 years of experience in catastrophe modeling, first with EQE, and then 20 years with RMS, where his mission to promote the use of data and analytics in making insurance decisions was ignited.

You can follow his podcast at instech.co/podcast or find a link in the show notes.

InsTech is a company born in London and focused on identifying and promoting the use of the best technology, data, and analytics within insurance and risk management around the world.