A Look Back at 2022: Permacrisis, AI, and Insurtech 2.0

According to the editors of the Collins English Dictionary, “permacrisis” was 2022’s word of the year. This portmanteau of “permanent” and “crisis” unfortunately captures how difficult the last 12 months have been for many around the world. From the largest land war in Europe since World War II, to a 40-year record inflation and high commodity prices, to the fastest pace of interest rate increases in decades in the US and Europe, the world has experienced geopolitical and economic shocks of a level unseen in decades. 2022 has been little respite after nearly 3 years of the Covid epidemic.

The insurance industry has not been immune to these simultaneous dislocations. Premium rate increases have slowed down and long-term trends such as social inflation and the impact of climate change on CAT activity have been exacerbated with a second consecutive year of losses due to natural catastrophes exceeding $100B and a devastating winter storm in North America this past week. The end of “free money” has also delivered a reckoning to many unprofitable venture-fueled neo-insurers with lax underwriting standards that have seen their, once soaring, valuations collapse as the market rewards present cash flows.

Despite the gloomy headlines, 2022 has also been a year of progress for the industry. Rising interest rates have strengthened the finances and valuations of many carriers with a nearly 10% YTD increase in the iShares US Insurance ETF in contrast to a nearly 20% decline in the S&P 500. Furthermore, the slowdown of the first wave of insurtech players has been overshadowed by explosive advances in artificial intelligence (AI), with seemingly weekly breakthroughs such as Stable Diffusion for image generation and Chat GPT for human-level text creation. These technological breakthroughs represent a uniquely powerful opportunity for insurers everywhere and are key to unlocking the potential of the next wave of insurtech – one with underwriters at its center.

At Kalepa, we have been advocates of the power of combining human and artificial intelligence since day 1. It is the reason we called our product Copilot. One of the key trends of 2022 has been the emergence of other AI-powered underwriting workbenches across industries, taking advantage of the rapid advances in Machine Learning and especially Natural Language Processing. There are now Copilots for software developers, copywriters, and lawyers. Just as its younger siblings enable professionals in other disciplines, Kalepa’s Copilot enables insurance underwriters to efficiently assess risks and to make informed decisions about how to price and underwrite policies. By leveraging the power of AI, insurers can stay ahead of volatility, emerging risks and trends, and ultimately bind risks with confidence in any environment.

But the use of AI in underwriting is about more than just speed and accuracy. It's also about seamless collaboration between human and artificial intelligence. The most successful insurance carriers will be those that are able to leverage the unique strengths of both humans and machines, working together to deliver the best possible underwriting results, efficiently and at scale.

With this in mind, in 2022 we stayed busy ensuring that Copilot continues to meet the challenge of delivering more efficient, profitable, and delightful underwriting:

• We launched a completely revamped experience for Copilot’s Hub module: the entry point for every Copilot user. We have made it easier than ever to find the right risk and jump right in. We want to ensure that Copilot helps every underwriter have access to the right info in the right place at the right time.
• We introduced support for commercial fleets. Underwriting automotive fleets profitably is challenging and time-consuming. Supporting commercial fleets has been a priority for Kalepa’s clients and for commercial insurers more broadly. We are thus proud that Copilot now delivers a comprehensive and intuitive offering to fleet underwriters.
• We were recognized as a top global insurtech company for 2022 by FinTech Global. We are honored by this recognition and proud to share that insurers who have implemented Copilot typically experience throughput increases of 40% and combined ratio improvements of over 1000 bps, 5 to 10x the impact of almost every other initiative.

While 2022 has been a difficult and highly disruptive year, it's also been a year of opportunity and growth for the insurance industry. By embracing the power of AI, insurers can optimize their underwriting processes, stay ahead of emerging risks, and ultimately deliver better products and services to their policyholders. This is the true spirit of insurtech: a focus on sound and efficient underwriting. At Kalepa, we're proud to be at the forefront of this revolution and look forward to continuing to help our carrier partners navigate the challenges ahead.

As always, we thank our customers and partners for their trust, feedback, and support.

Wish you a Happy and Prosperous New Year!

Paul Monasterio

CEO and Co-Founder, Kalepa