Verisk’s Shavel: AI making it easier to calculate casualty exposures

With deteriorating conditions in the casualty market dominating discussions at this year’s Rendez-Vous, Verisk CEO Lee Shavel has flagged AI as a powerful tool for (re)insurers to better calculate their exposures.

"The deterioration of the casualty space has come up in nearly every conversation I've had with our clients," said Shavel.

"Generative AI is a development in that direction, and we're excited about its potential – especially in processing large, non-standardised and unstructured data," he added.

Speaking to The Insurer TV, Shavel explained that Verisk has developed an AI tool to help casualty analysts quickly extract valuable information from medical records, enabling them to better understand exposures.

"In the US, we’ve introduced a tool that allows casualty analysts to receive summaries of vast amounts of medical reports, saving them time from having to sift through hundreds of pages, while providing reliable summaries," said Shavel.

He added that Verisk plans to introduce the concept to the UK soon.

Another major casualty-related issue Verisk is focused on is social inflation, which has arguably been the most significant contributor to the sector's recent struggles.

“Social inflation is another risk that is difficult to model, but we're trying to understand it, particularly related to casualty risk,” he explained.

Due to the pressure social inflation is putting on the industry, Verisk has co-authored a study with RAND to examine its impact across various lines of business.

"Verisk recently collaborated with RAND on a study evaluating data from our claims organisations and jury awards. This helps quantify the severity of social inflation in certain areas," said Shavel.

He believes this data will eventually enable insurers to model social inflation more effectively, helping them price their exposures more accurately.

“I think the next step is incorporating that into the modelling for the pricing of casualty risk and other general liability exposures that the industry is dealing with,” added Shavel.

SRCC modelling in focus as losses mount

Shavel also highlighted the growing industry focus on modelling exposures from strikes, riots and civil commotion (SRCC).

"Interestingly, SRCC now exceeds terrorism as a loss driver in terms of aggregate industry losses," Shavel noted.

SRCC events are becoming comparable to natural disasters in some regions, yet their modelling remains underdeveloped. In response, Verisk has released an SRCC index to help the industry better understand the associated risks.

“We have been dedicating resources to modelling SRCC, our Maplecroft subsidiary has developed an SRCC index that allows insurers to evaluate and compare that risk on a geospatial basis within countries.

“SRCC has been an area that we think the insurance industry has recognised they have direct exposure to as well as indirect exposure from a severity standpoint, and we're working with them to model it and incorporate it into their pricing more effectively,” said Shavel.

Watch the full interview with Verisk’s Lee Shavel to hear more about: