Equal Parts Talent & Technology

Given your extensive experience in the industry, how has the insurtech landscape evolved over the past eight-plus years? Insurtechs went from “disrupt the industry” to “collaborate with the industry”; do you see another similar paradigm shift on the horizon?

The term insurtech really entered the industry’s lexicon in 2016, which happened to correspond with the first year of the InsureTech Connect conference. And certainly, at the time, the paradigms around insurtech were all focused heavily on disruption related to a few different areas—how the experience and expense structure related to acquiring and serving customers was going to change dramatically and the potential to meaningfully enhance the precision of pricing. And while there are examples, such as in cyber, few insurtechs have genuinely delivered on the promises of a better expense structure and pricing precision.

In general, insurtechs and their venture backers (and carriers and distribution partners they serve) better understand how difficult it is to bend the cost curve and to more precisely price risk. Since around the end of 2021, insurtechs more often describe their models as partners and enablers as opposed to disruptors. Nearly all Insurtech MGAs are executing using underwriters to make a significant portion of the risk selection and pricing decisions. And they now embrace the importance of carriers’ role as risk capital providers and brokers’ role in distributing products. I believe the industry is entering a phase where the value of insurtechs to serve new markets, deliver new products, and improve risk selection and pricing will amplify because of the change in orientation from disrupter to enabler.

What lessons did the industry learn in terms of making effective use of technology? What do you think the industry’s main priorities should be when it comes to evaluating and integrating a particular technological solution into their workflow—and should those priorities evolve from where they are now?

Being a commercial specialty carrier, I tend to focus my thinking on that part of the market. The big lesson learned over the last few years is simply that it is often difficult to extract the value of big data and new technology to improve risk selection and pricing and adjudicate claims.

It’s certainly incredibly difficult to have machines replicate the efficacy of the average underwriter and claims professional let alone the best in those fields.

I most definitely believe that, in the complex commercial and specialty market, we have learned a lot in terms of using new data focused on risks and claims and how predictive analytics, including AI, enhances the performance of underwriters and claims professionals. Because of the way big data can be used and distilled, clearer indications can be identified, so we have clear potential dimensions of risk that would otherwise be highly difficult to recognize. The trick is to figure out the signals in the data and serve up the most important insights to underwriters and claims professional so better decisions can be made.

Those who have been investing and learning in practical ways are benefiting. At Skyward Specialty, nearly every one of our underwriting divisions is working with new forms of risk data and advanced technology to improve the fidelity of our risk selection and pricing and to achieve optimal claims outcomes.

Perhaps the biggest issue the industry faces today is the current talent shortage, with few young people interested in entering insurance. Could leaning into tech be a selling point for the digital native generations like Millennials or Gen Z?

This is a very fitting question actually because it so happens that I have two Gen Z kids, a 28-year-old and a 25-year-old, both of whom started on the carrier side and have since left the industry. One went back to school for an advanced degree in data science and now leads a large data team for a media company, and the other is working for a well-known strategy consulting firm. While most certainly the generations of younger developing professionals, who are more digitally native, want to work in that sort of tech-forward environment, I believe they are looking to be part of a culture that is forward thinking, open to new ideas and less burdened by tradition.

Unfortunately, attracting young talent needs to overcome the general narrative that has existed for years in the U.S. that insurance is a “tired” and “boring” industry. And while there are many insurance companies with cultures that are very attractive to Gen Z and the next generations, there is still a lot we can and should be doing to start and build their careers. Until companies industrywide create cultures that are enterprising in nature, listen to what young talent might see or need, and unburden the legacy of traditional thinking, we will find it somewhat difficult to attract the best talent as compared to tech, consulting, or other parts of the financial services market.

Besides that, what do you think the industry should be doing to address the talent shortage?

There are many things that must be done to attract younger talent as I just noted, but I highlight two specific actions. As we are not a particularly diverse industry, and not representative of the broader population here in the U.S., we should at least seek to widen and increase the diversity. This in particular would enrich our industry and drive more innovation and access to talent.

Second is that we have quite an aging workforce that holds so much of our industry’s technical knowledge. We are simultaneously going through a technological transformation through which this knowledge will need to be codified, not simply “transferred.” If that codification is done well, the role of the next generation should focus on the analysis and decision making not the information consolidation that makes up so much of our activity as an industry today. This creates an interesting proposition and exciting opportunity as we look forward through the next five- or even 10-year horizon.

Insurance has historically been a relationship business. Should companies keep their focus on individuals with traditional “people skills” or expand to others with experience in using tech to aggregate data and derive crucial insights from it? Is previous experience in the industry still important, or do you think bringing in employees from outside the industry should be a priority?

From my perspective the answer to that question is yes to both, not either/or. In our world of complex specialty-focused commercial risks, the ability for the broker to know that the underwriter is going to be responsive and can capably construct a solution is crucial. Nothing replaces personal relationships and credibility developed over time.

That said, I believe, and this is how Skyward Specialty is being built, technology, in particular predictive analytics, helps our underwriters distill and better assess and price to risk in a high-fidelity way. The enables our underwriters to be responsive to opportunities and solve problems for our brokers.

How can tech enable better and more informed risk selection? Will this influence how companies choose which markets and businesses to serve?

I believe advanced tech and new risk data open up possibilities. A great example is in our specialty transportation, which serves a subsegment of truckers, which we all know is typically a very challenging part of the market.

In 2021, we launched SkyDrive, which is a data platform we require insureds to use that captures powerful information about the power units (i.e., trucks) and driver performance and quality, along with live capture of behavioral information from a wide range of telematics providers. We look at core indicators of risk behaviors, like hard breaking or rapid lane changes or route selections, that drivers may choose and bring those together to better understand risk.

This unquestionably allows us to look at risk on a spectrum. Today, we are principally focused on risk selection; however, over time, it should allow us to price those risks on the entire spectrum.

In line with that, tech can lead to much more robust risk control programs. Could developing these open a path to serving markets or business that would normally not be served?

For sure. In the example of SkyDrive I just provided, we use the same information used by underwriting and serve it up to our insureds’ risk managers so over the life of the policy they can continually monitor the risk features of their trucks and behaviors of their drivers.

Another great recent example is a partnership we have with Understory Weather. We used their technology to create solutions to serve the automobile dealers marketplace with a first-of-its-kind captive property solution.

Understory provides far more granular, on-the-ground weather information and far more predictive information which allows auto dealers to much more proactively manage their inventory in the case of local convective storms, for example, and also better adjudicate and manage losses when they occur. The on-the-ground, real- time information they have allows for precise determination of loss.

In a case such as this, which is notoriously difficult, we have created a tech-enabled product that changes the risk through better risk management information. I believe this sort of approach can be applied to so many markets, and it is a big focus for us as a company.

We’ve seen some tech-enabled carriers move towards direct distribution of their products. What kind of impact could this have on intermediaries?

In our part of the market, I haven’t really seen any success in this regard. I think that it is a far more narrow, difficult proposition to do in any material way in the specialty, higher-acuity commercial markets.

What do you see in the future for tech-enabled carriers and brokers?

The companies likely to win will be the ones who embrace talent and technology in equal parts, whether it be broking, underwriting or claims.

Great carriers and brokers will be using information to create solutions that are better than what’s available today and are delivered with a better experience, more efficiently, at a lower cost and a more precise price, and with a margin that is attractive for all participants who are able to operate successfully in this capacity.