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Insurers Beware – Be Blasé About Big Data at Your Peril

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Insurers Beware – Be Blasé About Big Data at Your Peril

By Tony Tarquini, European Insurance Director, Pegasystems

When the new FCA chairman Charles Randell voiced his opinion about big data and artificial intelligence (AI) in July this year, it certainly upset the apple cart for a number of individuals across the insurance sector.

Mr Randell highlighted his concerns and proposed future regulations for insurers and other financial services firms using the aforementioned technologies.

As digital transformation takes hold of every industry, the exploration of big data and AI and its integration into insurance services and products has also increased. Consequently, players in the sector should be prepared to reconsider the AI basics and clarify the ground rules to ensure their customers are not left exposed to the mismanagement of personal data or a security breach. It is important that insurance companies take this challenge seriously so they themselves can avoid another scandal such as that experienced with Cambridge Analytica.

Tony Tarquini

Tony Tarquini

There is widespread agreement that since the advent of AI and big data, the insurance landscape has seen a degree of change. By having the ability to turn data into insights, brokers can now grow profits considerably. Right now, the latest technologies are permitting insurers to delve into their past and ongoing data records, as well as analyse sources in the public domain, for example social media platforms, so they can build up a more complete picture of their customers’ profiles and offer the most appropriate products and services to them.

Headlines splashed across newspapers and magazines citing the dangers of AI and machine learning in the financial sector should be taken with a pinch of salt. In fact, businesses should educate their audiences about how important and beneficial it is for financial services companies to use data in a positive way, for example using telematics to reduce insurance premiums. Yet, implementing AI is not straightforward. Throughout its incorporation into systems there are a few critial factors that necessitate vigilant consideration to guarantee and smooth processes. Infrastructure and relevant skill sets are crucial success factors for AI deployment, as AI requires unique skills and computing environments. But, first and foremost, data quality should be the highest priority because the more accurate the data, the better AI is able to perform. Although small data sets can be a good starting point and are capable of delivering quite astounding results, in general, the greater the data set the better the algorithms function.

The most important feature for insurers implementing AI is that they must be able to employ a particular type of the technology, called transparent AI. This type of AI is compulsory for being able to clarify its outputs and results, as well as how it calculated these. Bearing in mind that financial services is a highly regulated market, insurance brokers have to have the ability to substantiate and describe how they have produced a particular outcome. When making predictions or decisions, employees must be able to explain their reasoning, to guarantee they are correct and comply to regulatory requirements. Regrettably, there are some companies that are ignoring the warning signs and have started to rely on the opposite type of AI, namely opaque AI, which makes being held to account an almost unfeasible task.

Nevertheless, the future of the sector undeniably lies in the use of big data, as long as it is used ethically, and its results can be used to improve relationships with customers. There are some companies who have accepted responsibility and adopted transparent AI with open arms. Yet, Unavoidably, there are others who scrimp on costs and cut corners, or just don’t have the relevant knowledge or skills for using this technology. We’ve seen the disastrous results of when AI hasn’t gone to plan which should serve as a warning to insurers to spur them to act.

The Microsoft Tay chatbot that rapidly turned into a racist, incorrect orders on Amazon Alexa, sex-crazed neo-Nazi, and Google Home devices developing abusive behaviour, all demonstrate the possible dangers of opaque closed loop AI technology gone wrong and bring to attention the question of ethics of its use. The insurance industry shouldn’t kid themselves that they will avoid succumbing to a similar fate. Therefore, regulators need to outline the ethical and moral guidelines they would require from AI roll-out in insurance, for example, refusal of health or motor insurance policies. From both an ethical and regulatory viewpoint, it is crucial that employees understand what AI is and how it operates within the context of the insurance industry, to avoid any regulatory mishaps.

Finally, greater insight and control of the decision-making processes can be achieved through the use of AI technologies, but it is imperative that any AI that is utilised can be thoroughly adapted and inspected. This will help mitigate against the possible issue of AI going awol and guarantee that brokers can improve their risk algorithms which, in turn, will result in cheaper and more tailored products for their clients.

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Exclusive: Portugal sees green hydrogen output by end-2022, $12 billion in investment lined up

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Exclusive: Portugal sees green hydrogen output by end-2022, $12 billion in investment lined up 1

By Sergio Goncalves

LISBON (Reuters) – Portugal will start producing green hydrogen by the end of 2022 and already has private investment worth around 10 billion euros ($12 billion) lined up for eight projects that are expected to move forward, Environment Minister Joao Matos Fernandes said.

He told Reuters in a telephone interview there were also several “pre-contracts for the purchase and assembly of electrolysers” to produce the zero-carbon fuel made by electrolysis out of water using renewable wind and solar energy.

Such hydrogen is more expensive to extract than the heavily polluting conventional method of using heat and chemical reactions to release hydrogen from coal or natural gas, known as brown and grey hydrogen respectively.

Hydrogen is now mostly used in the oil refining industry and to produce ammonia fertilisers, but sectors such as steelmaking, transportation and chemicals are beginning to develop large-scale hydrogen applications to gradually replace fossil fuels as countries try to reduce pollution.

The European Commission has mapped out a plan to scale up green hydrogen projects across polluting sectors to meet a net zero emissions goal by 2050 and become a leader in a market analysts expect to be worth $1.2 trillion by that date.

“By the end of 2022, there will certainly be green hydrogen production in Portugal,” Matos Fernandes said. “Green hydrogen will, over time, allow Portugal to completely change its paradigm and become an energy exporting country.”

He said seven groups had submitted applications under Europe’s IPCEI scheme for common-interest projects to make part of a planned export-oriented “hydrogen cluster” near the port of Sines, from where hydrogen could be shipped to Rotterdam. Total investment there is estimated at some 7 billion euros.

A consortium including Portugal’s main utility EDP, oil company Galp, world’s largest wind turbine maker Vestas, among others, is behind one of the projects.

In Estarreja in north Portugal, local firm Bondalti Chemicals aims to invest 2.4 billion euros in a hydrogen plant.

Altogether, these envisage an installed capacity of over 1,000 megawatts (MW).

Matos Fernandes said Portugal was also negotiating with Spain the construction of a pipeline for renewable gases, including hydrogen, from Sines to France, crossing Spain.

LITHIUM PLANS

Spain and Portugal also want to develop an ambitious cross-border lithium project taking advantage of the geographical proximity of their lithium deposits and aiming to cover the entire value chain from mining to refining, cell and battery manufacturing to battery recycling, he said.

Portugal is already a large producer of low-grade lithium mainly for the ceramics industry, but is preparing to make higher-grade metal used in electric car batteries.

A much-awaited licensing tender for lithium-bearing areas that has been delayed by the COVID-19 pandemic should take place by the year-end, Matos Fernandes said.

He promised the tender would address environmental concerns by local communities and there would be no lithium mining “at any cost”.

The minister also said Portugal would use its six-month presidency of the Council of the European Union to finalise a landmark law that would make the bloc’s climate targets irreversible and speed up emissions cuts this decade, expecting it to be approved in the first half of 2021.

(Reporting by Sergio Goncalves; Editing by Andrei Khalip and David Evans)

 

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Under fire in EU, AstraZeneca CEO says ‘hopefully’ will meet vaccine supply goals

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Under fire in EU, AstraZeneca CEO says 'hopefully' will meet vaccine supply goals 2

BRUSSELS (Reuters) – AstraZeneca boss Pascal Soriot said on Thursday he hoped to meet the European Union’s expectations on the number of COVID-19 vaccines the company can deliver to the bloc in the second quarter, after big cuts in the first three months of the year.

The Anglo-Swedish drugmaker has been under fire in the EU for its delayed supplies of shots to the 27-nation bloc, which ordered 300 million doses by the end of June.

“We are working 24/7 to improve delivery and hopefully catch up to the expectations for Q2,” Soriot told EU lawmakers in a public hearing.

Under its contract with the EU, the company has committed to delivering 180 million doses in the second quarter.

Soriot did not mention the 180 million target, but said he was confident the company will be able to increase production in the second quarter using factories outside the EU that had no production problems, including in the United States.

He confirmed the company was trying to get 40 million doses of the COVID-19 vaccine to the EU by the end of March, which is less than half the amount it promised for the quarter in its contract.

The EU, which has fallen far behind the United States and former member Britain in vaccinating its public, has repeatedly urged the firm to deliver more.

Lower-than-expected yields – the amount of vaccine that can be produced from base ingredients – at its factories hurt output in the first three months.

Asked about supplies to Britain, which relies on the same factories used by the EU, Soriot said the former EU member with a population of around 66 million was smaller, and noted that most doses produced in the EU were used to serve the EU which has a population of about 450 million.

Executives from rival drugmakers that have developed or are testing COVID-19 vaccines, including Moderna Inc and CureVac NV were also part of the panel.

But most questions were directed at Soriot amid anger that the company has failed to deliver promised vaccine quantities to the bloc on schedule.

Moderna Chief Executive Officer Stephane Bancel said the company has experienced fluctuations as the U.S. biotech group ramps up output of its COVID-19 vaccine.

He said usually a company would stockpile product ahead of a launch, but it is shipping every dose it makes, leaving it without any spare inventory.

His comments came a day after the company increased its output target for this year and 2022 as it invests in additional manufacturing capacity.

(Reporting by Josephine Mason in London and Francesco Guarascio in Brussels; Editing by Susan Fenton, Bill Berkrot and Keith Weir)

 

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Shift to sun, ski and suburbs gives Airbnb advantage over hotels

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Shift to sun, ski and suburbs gives Airbnb advantage over hotels 3

By Ankit Ajmera

(Reuters) – Airbnb’s quarterly results are likely to show the pandemic may have helped the home rental company lure leisure travelers away from big hotels during the global travel collapse of 2020.

Weary of being locked up in their homes for months, travelers hit the road and booked homes and cottages on Airbnb, while avoiding flights and downtown hotels, analysts said.

Airbnb accounted for 18% of the total U.S. lodging revenue in 2020, up from 11.5% in 2019, data from hotel analytics provider STR and vacation rental data company AirDNA showed.

It outperformed the hotel industry and online travel agents such as Expedia and Booking.com thanks to its greater offer of ‘sun, ski, and suburban’ rental homes, Cowen & Co analysts said.

Shift to sun, ski and suburbs gives Airbnb advantage over hotels 4

(Graphic: Airbnb grabs bigger share of U.S. lodging market in pandemic: https://graphics.reuters.com/AIRBNB-RESULTS/yxmpjxqdopr/chart.png)

For an interactive graphic, click here: https://tmsnrt.rs/3pPbQwH

THE CONTEXT

In 2019, about 90% of Airbnb’s bookings came from leisure travels compared with about 20%-30% for large hotels chains, including Marriott and Hilton, that rely on business travel to grow their profits.

“Unfortunately, the hotel operators do not have as much supply in locations where people are willing to travel,” said Jamie Lane, vice president of research at AirDNA.

Lane said with mass vaccinations later in the year, the share of alternative accommodations including Airbnb will drop before continuing to grow at 2%-3% per year once normal travel patterns return.

Shift to sun, ski and suburbs gives Airbnb advantage over hotels 5

(Graphic: Airbnb U.S. sales against top hotels: https://graphics.reuters.com/AIRBNB-RESULTS/gjnpwzkdbvw/chart.png)

For an interactive graphic, click here: https://tmsnrt.rs/3dPKvsd

THE FUNDAMENTALS

* The San Francisco-based company is expected to report gross bookings of $23.10 billion in 2020, down from about $38 billion a year earlier, according to the mean estimate of 12 analysts according to Refinitiv; gross bookings are seen rising by 50% in 2021.

* Analysts’ mean estimate for Airbnb’s full-year net loss is $3.52 billion, bigger than a loss of $674.3 million a year earlier. Full-year revenue is expected to drop 32% to $3.27 billion.

WALL STREET SENTIMENT

* Of 34 brokerages, 20 rate Airbnb’s stock “hold”, 12 “buy” or higher and two “sell” or lower

* Wall Street’s median 12-month price target for Airbnb is $156​, about 22% below its last closing price of $200.20.

* The company’s stock has nearly tripled since listing in December

Shift to sun, ski and suburbs gives Airbnb advantage over hotels 6

(Graphic: Airbnb’s stock has nearly tripled since debut: https://graphics.reuters.com/AIRBNB-RESULTS/jznpnoqrlvl/chart.png)

For an interactive graphic, click here: https://tmsnrt.rs/3dG2lOd

(Reporting by Ankit Ajmera in Bengaluru; Editing by Sweta Singh and Saumyadeb Chakrabarty)

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