DRC will be back at attending this year’s DIGIN conference to take advantage of roundtables, networking opportunities and interactive discussions with insurance industry leaders from around the country. With scores of panels, all with their own unique and engaging topics, here are three subjects where we are “Digging in”!!
Using AI to Underwrite Risk Surrounding Climate Change
As weather patterns change, becoming more extreme and unpredictable as the effects of climate change become more and more pronounced, insurers find themselves in a dangerous predicament when it comes to estimating future claims. Previously insurers have been able to rely on historic climate data to make relevant, accurate predictions, climate change has thrown a wrench into the equation by defying historical trends, and doing so in a catastrophic way. This unpredictability has led some insurers to pull out of markets, concerned that their traditional models will cause them to lose money in an ever-evolving climate landscape. As a result, many policyholders are struggling or even unable to obtain coverage. In California, where wildfires have destroyed entire towns, state data shows that non-renewals of homeowner’s insurance policies rose by 31% from 2019 to 2020, and withdrawals are expected to continue. Insurance companies are trying to mitigate problems like this in a number of different ways, some by leaning into the ever-growing technological capabilities of artificial intelligence and machine learning. While this area of technology is still in a state of rapid development, there are a few trends that could aid the insurance industry moving into the future. One is the explosion of the Internet of Things (IoT) – smart devices embedded with software, sensors and other capabilities that are able to collect information from consumers. Current examples include things like smartphones and watches, fitness trackers and home technologies like Amazon’s Alexa. Some insurance companies are already using IoT products to track weather patterns, with those products extracting data more accurately than radar.
The Impact of Usage-Based Insurance from a Tech & Public Policy Perspective
Insurers have long relied on statistical trends, but with new leaps in data mining and monitoring systems, usage-based insurance has grown more and more popular. Usage-based insurance, which tracks a given policyholder’s activity and behaviors, itself isn’t new, as it has been used with travel insurance and other products before. The development of in-vehicle telecommunication devices – also known as telematics – to track these behaviors in drivers has led to an uptick in the use of usage-based insurance with auto insurance. While telematics gives insurance companies unprecedented access to a wide range of information about the drivers they insure, including braking patterns, acceleration rates and airbag deployment, its use also raises questions about drivers’ privacy. For example, if a motorist frequently travels to liquor stores identified by GPS will this be used in underwriting their auto insurance or shared in a database accessible by health/life insurers? Or if a motorist enjoys the rush of quickly accelerating but never exceeds the speed limit, will he/she/they still be punished by their insurance provider for the lead foot? While many consumers are happy to give up aspects of their privacy for the sake of convenience – in this case, for a lower premium – can policyholders really be sure how their telematics data will ultimately be used? This evolving dynamic at the intersection of tech advances and public policy concerns will stay on our radar for new developments, so stay tuned for future updates.
Applications of Blockchain in the Insurance Industry
Although cryptocurrencies might claim the lion’s share of the spotlight, Blockchain technology also has new emerging use cases for the insurance industry. Many experts predict that its use will become more widespread, carrying with it the potential to transform efficiency in multiple areas of the industry. But what is a blockchain, and how can it be used within the context of insurance? A blockchain is essentially a digital, decentralized list of records (“blocks”) that exists across a network of computers. Every “block” contains a timestamp, transaction data, as well as a record of the block that came before it. This part is key – because every block is connected to the one that came before it, any change to one block would change the data of all subsequent blocks. Any attempt to change the data would be obvious, as the new digital fingerprint would fail to match the older ones. This feature makes the blockchain highly resistant to data modification and highly transparent – a feature of obvious importance to insurers.
An increasing number of insurance companies are taking advantage of big data to gain insights into their customers and to drive logical product development. However, as the use of big data grows, so do concerns about security. On the client side, many customers worry about their privacy and want to know that their personal data will be protected. On the business side, agents may be frustrated by the amount of time it takes to collect, verify and re-verify data when onboarding new clients, which traditionally requires a wait for verification by third parties. The blockchain can help mitigate concerns from both of these areas due to the extra security it provides. On the blockchain, customers can be confident their personal and private information will stay in the right hands and insurance providers can create verified data profiles for customers that can be sent to other parties without needing the extra step of additional verification.
These are just three of the topics DRC is looking forward to learning more about at DIGIN this year. As we continue to refine and advance our full cloud-based SaaS platform for commercial, personal and specialty lines we will be staying abreast of these developments to help our customers bring new, innovative coverage options to market with speed and confidence.