AI, Customer-Centricity & More: Top Takeaways from The Future of Insurance USA 2024

Change is accelerating all around. In turn, insurance companies are reinventing their businesses to keep pace with shifts in climate, technology, geopolitical volatility, and customer and workforce expectations. Facing a growing number of what appear to be financially unsupportable risks, according to the latest Global Insurance Outlook from Deloitte, insurers must evaluate policies, strengthen their resilience, and build new strategic roadmaps.

The challenges are all too well illustrated by the latest U.S. industry figures, as reported by Deloitte, where non-life insurers saw net underwriting losses of “$26.9 billion in 2022, six times higher than the previous year”. Though growth of earned premiums was 8.3%, the 14.1% rise in incurred losses and loss adjustment expenses outpaced this by a “significant margin”.??

Facing what Deloitte describes as “the hardest market in a generation”, insurers across every line are finding that generative AI (GenAI) and other tools are providing significant opportunities to enhance performance with productivity and efficiency gains. With this, however, comes serious societal concerns, not least, warns the International Monetary Fund (IMF), job losses at all levels and widening gaps in inequality. Security is also front of mind and the industry is proceeding cautiously with most organizations experimenting internally as they await regulatory guidance. At a federal level this has been slow but some states have begun to share their expectations – New York, California and Colorado among them.

Meanwhile, despite the wide-ranging possibilities - from enhanced operations to deeper risk insights, more flexible product development and better customer interactions – harnessing AI’s full potential remains a work in progress. A survey conducted in 2023 by customer focused software company Salesforce finds a quarter of insurers are not using AI at all and those that are find it “moderately challenging”. ?

At Reuters Events: The Future of Insurance USA 2024 (May 15-16, Chicago) all this and more was discussed by high-level executives from leading players, insurtechs, regulators and technologists, which are compiled in this report, alongside additional insights from Salesforce and Gerent. Among them: Hiscox, Delta Dental, MetLife, Prudential, Legal & General America, Clearcover, Hippo, the New York Department of Financial Services and more.

Click here to access the full report.

1: Purpose, people and opportunity

In 2024, profitability is top of mind for U.S. insurance carriers and they are reimagining their purpose as they search for gaps in the market. “We’re moving from a dental insurance company to a healthcare company focused on oral health,” said keynoter Sarah Chavarria, CEO & President of Delta Dental of California and Affiliates, who joined the business in 2017 with a vigorous agenda to transform, strategy, structure, and culture. Her vision to make insurance part of the solution to America’s flailing healthcare system, where 68.5 million adults don’t have dental coverage, according to the CareQuest Institute for Oral Health.?

The disparities are large in the Commonwealth Fund’s 2024 State of Health Disparities report which finds that “profound racial and ethnic inequities in healthcare exist across and within states”. ?Chavarria is focusing her energy is on underserved and underrepresented demographics, starting with the elderly and women, but her vision “is to make sure all Americans have access to care”. Part of her drive comes from listening to employees, 70% of whom “have strong expectations to do meaningful work that even results in social impact”.?

70% of employees “have strong expectations to do meaningful work that even results in social impact”

Sarah Chavarria, CEO & President of Delta Dental of California and Affiliates

In the sensitive claims process, Cathy Lanning, Managing Director & Practice Lead at Salesforce, sees a real opportunity for insurers to harness automation and advanced AI “to put new productivity tools in the hands of their people so they can accelerate human capital”. Not only could this free talent up to do the “meaningful” work they desire, it could also help to address the talent shortage – a common challenge for 79% of insurers responding to a Salesforce survey.

Jeff Ruetty, Strategic Advisor, Gerent, a Salesforce integrator, says this is particularly true for many mid-market and specialty carriers which “don't have the resources of, say, a top 10 insurance carrier, but are very entrepreneurial, and their customers have the same expectations”.

However, while the scale of technological possibility is clear, Randy Termeer, President, Property & Casualty at USAA, a financial services company serving the U.S. military, veterans, and families, believes “human judgement is sustainable, it is intrinsic to our proficiency…it is what the technical winners of insurance are relying on now.”?

Another lesson from Termeer is that managers want “to be the ones that drive change” with their teams. When managers become champions of transformation it has, he says “a ripple effect through the organization”. However, it’s vital to be clear on metrics and how they are measured, and to make people accountable.

?“Human judgement is sustainable, it is intrinsic to our proficiency…it is what the technical winners of insurance are relying on now”

Randy Termeer, President, Property & Casualty at USAA

For more takeaways and insights from North America's leading gathering of insurance executives, download the full report here.

Beyond the hype of advancing AI?

In the next three years, finds AON’s latest Global Risk Management Survey, AI is expected become a top three risk, and is likely to be the “next big issue impacting earnings volatility”. There is also, however, significant low-hanging opportunity – and insurers are not just talking about it. They are testing use cases, both customer facing and internal, starting with efficiency and productivity gains that can be realized in the short-term with minimal risk. But all have an eye on the long-term potential too. Pawan Verma, Global Chief Information Officer, MetLife believes that when automation, classic AI, and NLP (natural language processing) machine learning combines with GenAI, then the industry will be onto “really creating something remarkable”.

Niki Kouri-Maglaras, VP & Chief Digital Officer, International Businesses at Prudential Financial, sees innovation happening fastest in Asia. “They're much more open to taking risk”, she says, which may “also be because regulation is less mature”. ?In an August 2023 strategic update, Prudential pointed to a “major health insurance opportunity in Asia”. One of three groupwide enablers would include an open-architecture technology platform “to which we can apply generative AI and data analytics to create actions and insights”.

In the highly regulated U.S. market, however, congress has “failed to pass any legislation to either narrowly target specific AI risks or broadly ensure the responsible development and deployment of AI systems”, says non-profit research outfit Brookings. However some states are setting the pace, with California taking bold steps by introducing 30 new measures aimed at protecting consumers and jobs. Eleven states have also signed the model bulletin of the National Association of Insurance Commissioners (NAIC), which sets out the key principles for use of AI.

At the New York Department of Financial Services, which oversees insurers, banks, credit unions and more, Superintendent Adrienne Harris sees the challenge for regulators clearly. “Insurance is a business of discrimination in the truest sense of the word,” she says, and so irrespective of any technology “what we want to prevent is improper discrimination”. To get this right, her focus is on “three-Ps”– policy, process, and people.

“Insurance is a business of discrimination in the truest sense of the word…what we want to prevent is improper discrimination”

Adrienne Harris, Superintendent, New York Department of Financial Services

The New York Department of Financial Services has recently issued proposed guidance for AI and insurance but so far that is focused exclusively on pricing and underwriting. Early recommendations for insurers include to:

• Do outcome testing to understand how the algorithm works. Engineers across lines need to be accountable.
• Pay attention to third-parties. It’s not enough to outsource AI to a third party and say, “well, it's the third party's algorithm”. Vendor management is essential.

There is still some fine-tuning to do to define what the regulatory rules actually mean for insurers. However, Harris believes it possible to “protect consumers and markets while building a robust market for insurers to do business”. Stakeholder engagement is key but she advises carriers to engage early and often about their business plans.

Want to read on? For more takeaways and insights from North America's leading gathering of insurance executives, download the full report here.