Next-generation risks are outpacing current business practices in the U.S. property and casualty (P&C) insurance industry, according to Nearmap’s Next-Gen Risk Readiness Index on the P&C insurance, titled, “Weathering the Storm Ahead: Leveraging Location Intelligence to Transform U.S. P&C Underwriting and Claims”.
The report, states Nearmap, “identifies emerging risks and offers a path forward for P&C insurers. It explores how advanced location intelligence technologies—including artificial intelligence (AI)-powered insights from aerial imagery*--can optimize the entire policy lifecycle, allowing insurers to rise to the challenge of emerging risks while protecting and growing their businesses.”
Insurance Carrier Risks
Next-generation risks, according to the report and survey, include “severe weather and natural catastrophes, inaccurate property assessments, and rising fraud,” which “intersect with industry-wide challenges including the adoption of advanced technologies, managing unprecedented volumes of data, and replacing legacy IT infrastructure.”
Survey respondents, who included 174 senior workers in insurance carrier companies who work within the P&C risk function, agree that the industry has “blind spots” centered on cybersecurity (34%); privacy concerns (29%); impact of climate and severe weather (28%); predicting emerging risks (28%); insurance fraud (26%); and assessing property risks with technology (25%).
The impact of climate change is the leading concern for U.S. P&C insurers, states the report, as 69% of professionals report that severe weather is disrupting their businesses and the industry. Dave Tobias, general manager of insurance, Nearmap, states, “every state is now a CAT state. Every carrier is now a CAT carrier. As I look forward, our industry must move quicker to adopt technology—not only to price risk more effectively, but to provide data and tools that help insureds become active partners in risk management.”
Aerial Imagery
“To mitigate severe weather, property risk, fraudulent claims, and emerging risks, many P&C insurers rely on varying imagery sources,” according to the report. Sixty percent of respondents agree that AI insights derived from imagery would allow them to insure once-uninsurable properties,” states the report. Furthermore, “66% of respondents agree that new technologies lower average insurance costs by shifting higher premiums to high-risk consumers,” and “67% of respondents agree that technologies like AI-derived insights could significantly reduce the volume of fraudulent claims.”
“[Ninety percent] of respondents use plane-based aerial imagery. Another 90% use drone-based aerial imagery.” However, the vehicle used to capture imagery matters, the report emphasizes. Drone imagery raises privacy concerns for three in five (59%) P&C professionals, while plane-based aerial imagery offers “the right level of resolution while protecting individual customer privacy. It also enables the delivery of new services, driven by personalization. However, only a fraction of P&C insurers use it for both claims and underwriting,” which is a “major missed opportunity that forward-thinking P&C insurers can leverage to maximize competitive advantage: becoming proactive expert risk managers and continuously improving their combined ratio and risk profile across their entire book of business.”
According to the report, “adoption of plane-based aerial imagery seems to be driven by its impact on underwriting, as more respondents single out improving decision-making and underwriting rather than validating claims as their highest-level goals. However, similar numbers of employers are using the technology for underwriting and for claims. Eliminating high-risk properties from underwriting can significantly improve expense ratios and reduce losses.” Those who use aerial imagery for both claims and underwriting say it provides a host of business and operational benefits, including simplifying policy decisions, improving risk preparation and response, and saving time and money.
Furthermore, “AI-derived insights from imagery helps P&C insurers address current business needs, such as making go-/no-go underwriting decisions, providing personalized policies and pricing, streamlining claims, and mitigating fraud,” the report states. “It also addresses future requirements, such as predicting and preventing emerging risks, entering and exiting markets, and making informed decisions about properties in climate-impacted areas.”
Driving ROI with AI-Derived Insights
“P&C insurance companies can use AI-derived insights from aerial imagery to support business transformation, from serving clients in new ways to maintaining a presence in challenging markets and optimizing key processes,” states the report. This technology can drive return on investment (ROI) for P&C insurance companies, according to the report, by enabling balanced personalization; offering policies others won’t; correctly pricing risk into policies; streamlining claims management; and combating fraud.
Adoption of AI Technology: What P&C Insurers Seek
Although three in five insurers say AI is the future of P&C, only one in six have adopted the latest AI technology, according to the report. However, “respondents’ readiness to adopt AI-driven technology to elevate risk management differs based on their position in the buying cycle and firm size,” according to the report. For instance, all respondents indicated that they need a “positive impact on their bottom line (34%), seamless integration with other business systems (33%), and proof that it can deliver on customer and business risk mitigation (34%).”
Those actively considering AI technology see top risk factors driving change in the industry as cybersecurity (41%) and data privacy (32%). Those who have basic AI knowledge seek to improve efficiency (47%) and integrate seamlessly with existing processes (44%) and boost profit (41%). Lastly, those who have advanced knowledge seek proof that the technology will improve risk mitigation (31%), boost profit (30%), and position the company as tech-forward (28%).
Among existing users, 47% said they would accelerate adoption if it made them profitable.