How a ChatGPT-backed insurance app sent US broker stocks tumbling

Investor nerves had already been heightened last week following the release of new automation tools from AI startup Anthropic, which are aimed at streamlining tasks across legal, data and financial research.

• US insurance and tech stocks dropped after Insurify launched a ChatGPT-based app.
• S&P 500 Software index fell 13%, losing nearly $1 trillion in value
• Insurify's AI app lets users compare and buy auto insurance policies directly.

Did our AI summary help?

US insurance and technology stocks came under sharp pressure this week after an artificial intelligence-powered insurance comparison app triggered fresh fears about disruption across the sector.

The S&P 500 Software and Services index has fallen about 13% since late January, wiping out nearly $1 trillion in market value over the past week. The iShares Tech-Software ETF is down almost 20% so far this year, reflecting broader jitters around AI-led automation, according to a Reuters report.

The sell-off intensified after online insurance platform Insurify launched a ChatGPT-based app that allows users to compare auto insurance rates using inputs such as vehicle details, credit history and driving records. Shares of major US insurance brokers Willis Towers Watson, Aon and Arthur J. Gallagher slumped between 9% and 12% on Monday before recovering part of the losses in early Tuesday trade.

The S&P 500 Insurance index closed down 3.9% on Monday, its steepest single-day fall since October. Willis Towers Watson was the worst hit, ending the session 12% lower in its worst trading day since November 2008. Arthur J. Gallagher fell 9.9%, while Aon declined 9.3%.

“The insurance broker stocks are getting hammered,” Bloomberg Intelligence insurance analyst Matthew Palazola said, noting that “there could be concerns about the new Insurify tool and Anthropic’s new AI tools.”

He added that the applications “may be a threat to some consulting businesses of insurance brokers though we view them as force multiplier rather than an existential threat.”

AI-related anxiety also spilled over into European insurers, with analysts linking the declines to rapid developments in insurance-focused applications within ChatGPT and other AI platforms.

Insurify said its app, which launched on February 3, is designed to simplify the traditionally complex process of buying insurance. The tool combines Insurify’s proprietary database of more than 196 million auto insurance quotes with over 70,000 verified customer reviews to generate personalised recommendations.

“Shopping for car insurance has traditionally been time-consuming, confusing, and frustrating for many drivers,” Insurify founder and CEO Snejina Zacharia said. “With our new ChatGPT app, we’re redefining the insurance shopping experience by making it feel as simple as having a conversation.”

Within ChatGPT, users can access the Insurify app to view tailored rate estimates based on factors such as location, age, vehicle, credit profile and coverage needs. The app allows side-by-side comparisons of insurers, highlighting trade-offs across price, customer service, coverage options and discounts.

The app also acts as a gateway to complete the purchase journey, allowing users to continue on Insurify’s platform and buy policies directly through the company, which is licensed in all 50 US states and Washington, D.C.

With ChatGPT now serving more than 800 million weekly users, Zacharia said the launch reflects changing consumer behaviour.

“People are increasingly turning to AI to help them make everyday decisions,” she said. “We see this as a natural next step in our mission to make insurance shopping easier, more transparent, and more personalized.”

Investor nerves had already been heightened last week following the release of new automation tools from AI startup Anthropic, which are aimed at streamlining tasks across legal, data and financial research. The Insurify launch has added to concerns that AI applications could rapidly upend established business models, triggering sharp reactions across global markets.