Why insurance needs dynamic, flexible AI

Will Ross
on
February 11, 2021

Christine Price sits in her well-kempt home office unsure of what just happened.  As neat and orderly as the books on the shelf behind her may appear, the three monitors in front of her reveal the chaos.  Her call has just run over twenty minutes, but she still can’t answer a simple question, do we like the risk or not?

A new manager and rising star, Christine’s just been lambasted for drawing a hard line with a broker her VP has known for 30 years.  But the evidence is clear – the account is part of a dangerous cat accumulation, and performance is questionable.  With her team well ahead on retention, Christine knows her underwriter made the right call to let this one go.  What’s keeping her VP from seeing the same?  

These situations are all too common in a competitive commercial insurance market.  Whether it’s balancing the trade-off between rate and retention, keeping an eye on accumulation/aggregation, or optimizing the right mix of new business, any underwriter you take the time to listen to will tell you they’re ill-equipped to keep track of all the moving pieces. Ask three individuals about the same risk and its fit for the portfolio, and you’ll get three different answers. Don’t believe me?  Try.  

Insurance, like so many other industries, has fallen victim to the great hypocrisy that transformation somehow means eking out a little more cost from the same linear processes.  It makes sense.  Insurance companies are making money, and change is painful.  

But while everyone else is squeezing nickels, a new class of carriers – and I don’t mean Lemonade or Hippo – are starting to inspire change. They’re seeing tools like AI and Machine Learning not as a way to put information through a stagnant process faster but to make risk selection dynamic, real-time, and collaborative. They’re realizing that their underwriters don’t need to be guided down a wire; they need to be informed about what others are seeing in the marketplace and empowered to identify great risks for their companies.  

Don’t get me wrong, doing this in a legacy IT environment is hard.  But if every underwriter you have is pushing for 10% rate and the market’s only taking 5%, wouldn’t you want to know?  Wouldn’t you want to be able to change and adapt -- to find that pocket where you can take 15% and get that information seamlessly into the hands of your underwriters?

At Federato, we believe that enabling underwriting teams to see and communicate these hidden patterns is the true power of AI.  By shifting environments from static/linear to dynamic/flexible, and trusting in technology as a mechanism for control in a complex, relationship-driven business, we’re seeing carriers prove they can do better.

Enabling underwriting teams to see and communicate hidden patterns is the true power of AI

Every insurance executive has to ask themselves, do they want to create an environment that brings the best out of the smart people they work so hard to hire? Or will they miss the new wave that’s already happening?