WOW !!! Hank should be proud. Underwriting is the fundamental base of insurance. That being said, my experience with “underwriters” is mixed. Once had an underwriter tell me that Hardie Siding was not fireproof. Think about that. And, one underwriter told me that a concrete pump truck / boom was a crane. The issue there was coverage under a GL policy for mobile equipment. And he had “Senior” in front of his title. I remember the days when it took years to attain the title of underwriter.
I am not sure he gets the idea that the techs can program the same “examine the application” process of human underwriters into a computer except with thousands more data-points to feed in; but the computer doesn’t have a ‘gut’ and that is the big difference. And you are correct on the lacking expertise of today’s so-called underwriters, title means nothing. A two minute conversation with them will usually tell you they either do or do-not know what they are talking about. There was no learning curve with the newbies, they just jumped into a title.
Ok… I don’t think that anyone has said that InsurTech’s are changing the concept or science of taking risk. The InsurTech movement is about turning the distribution of insurance on its head. Using third party data sources to streamline underwriting. Allowing consumers to quote & compare realtime on their own time. Providing embedded insurance offerings within a large e-commerce entities booking path, checkout or sign up. Allowing major brands to distribute insurance offerings to their trusted considerable network of consumers. Creating new, agile entities that are providing capacity and taking on risk. Would you say that fundamentally transportation is the same since 1850? The fundamental base is to move from one place to another but we are not still using a horse and carriage to get there. Same thing for Insurance. Chubb is going direct to consumer or via partnerships utilizing Chubb Studio and Chubb Blink. They are in fact pushing the envelope on change and continue to invest into these InsurTech entities. When the autonomous vehicle is finally here the fundamental / science of a large portion of risk will shift from the individual to the corporation that is providing the vehicle. Thus the impact on the distribution once again. Yes Insurance is about taking on / shielding oneself from risk. Where that risk lies and how it is transferred is changing forever.
When I review the financials of some of these start ups, I wonder if they can survive, but investment dollars keep pouring in despite very high combined ratios. I guess it comes down to whether the web quoting and booking can replace agents and whether the current large companies in the market can apply the same or better technology to gain market share through the web. The large existing companies have the scale to minimize the impact of the cost of automation. They also have to balance how their current agency base will react if they move toward direct marketing.
“Underwriting” no longer involves concepts such as risk selection, charging for risk and exposures, or partnering with insureds to mitigate risk. It’s about picking your preferred agent/broker and rewarding them for volume. It’s about finding enough credits to be the cheapest option. It’s about minimizing the negative risk drivers in your file and maximizing the insignificant. It’s about cross-selling, “prospecting,” and papering over mistakes.
Algorithms don’t care (unless they’re programmed to) about the producer, who the insured or agent might now, how much supporting business or premium is added. They don’t care about renewal rate goals, new business production goals. If a credit is earned, it is applied — debits too. Sure, the algorithm doesn’t have a “gut;” do you really trust your fellow citizens’ “gut” these days? If not your fellow citizens, why would your underwriter be any smarter or different.
I believe that InsureTech is having their 1990’s moment; are they going to be the next Pets.com or the next Amazon.com? MySpace or Facebook? AOL or TimeWarner???
There are plenty of InsureTech startups, many with abysmal financials. And that’s why Barnes & Noble and Borders dismissed Amazon. It just takes one… There’s no denying that a Chubb, Travelers, Hartford, etc., balance sheet is an impressively “protective mote,” but their institutional memory, their silos, their reliance on ancient technology and traditional distribution models will make them the next “buggy whip manufacturers” if they don’t shape up and ship out.
Technology upgrade in this industry was needed and still is needed. That doesn’t mean we need robots or AI to take the jobs of underwriters or brokers. It means technology can help underwriters and brokers do their jobs better and more efficiently for their clients/prospects. Some of these start up tech companies think they can change the entire industry, but what they don’t realize from a micro-perspective is insurance is a necessary evil that is dictated by state laws that all vary and are constantly evolving. Attorneys and law-makers are the driving force, not technology. If you’re a tech start up and you want to help this industry? Figure out how to mitigate claims and adjust claims bc the new tech companies I’ve seen in action are absolutely miserable at both of these essential aspects of the industry.
WOW !!! Hank should be proud. Underwriting is the fundamental base of insurance. That being said, my experience with “underwriters” is mixed. Once had an underwriter tell me that Hardie Siding was not fireproof. Think about that. And, one underwriter told me that a concrete pump truck / boom was a crane. The issue there was coverage under a GL policy for mobile equipment. And he had “Senior” in front of his title. I remember the days when it took years to attain the title of underwriter.
I am not sure he gets the idea that the techs can program the same “examine the application” process of human underwriters into a computer except with thousands more data-points to feed in; but the computer doesn’t have a ‘gut’ and that is the big difference. And you are correct on the lacking expertise of today’s so-called underwriters, title means nothing. A two minute conversation with them will usually tell you they either do or do-not know what they are talking about. There was no learning curve with the newbies, they just jumped into a title.
I finally agree with something that Evan says!
Hank is 100% correct.
Evan not Hank.
Are we still waiting for Lemonade to fold???
What else would you expect him to say?
Ok… I don’t think that anyone has said that InsurTech’s are changing the concept or science of taking risk. The InsurTech movement is about turning the distribution of insurance on its head. Using third party data sources to streamline underwriting. Allowing consumers to quote & compare realtime on their own time. Providing embedded insurance offerings within a large e-commerce entities booking path, checkout or sign up. Allowing major brands to distribute insurance offerings to their trusted considerable network of consumers. Creating new, agile entities that are providing capacity and taking on risk. Would you say that fundamentally transportation is the same since 1850? The fundamental base is to move from one place to another but we are not still using a horse and carriage to get there. Same thing for Insurance. Chubb is going direct to consumer or via partnerships utilizing Chubb Studio and Chubb Blink. They are in fact pushing the envelope on change and continue to invest into these InsurTech entities. When the autonomous vehicle is finally here the fundamental / science of a large portion of risk will shift from the individual to the corporation that is providing the vehicle. Thus the impact on the distribution once again. Yes Insurance is about taking on / shielding oneself from risk. Where that risk lies and how it is transferred is changing forever.
When I review the financials of some of these start ups, I wonder if they can survive, but investment dollars keep pouring in despite very high combined ratios. I guess it comes down to whether the web quoting and booking can replace agents and whether the current large companies in the market can apply the same or better technology to gain market share through the web. The large existing companies have the scale to minimize the impact of the cost of automation. They also have to balance how their current agency base will react if they move toward direct marketing.
“Underwriting” no longer involves concepts such as risk selection, charging for risk and exposures, or partnering with insureds to mitigate risk. It’s about picking your preferred agent/broker and rewarding them for volume. It’s about finding enough credits to be the cheapest option. It’s about minimizing the negative risk drivers in your file and maximizing the insignificant. It’s about cross-selling, “prospecting,” and papering over mistakes.
Algorithms don’t care (unless they’re programmed to) about the producer, who the insured or agent might now, how much supporting business or premium is added. They don’t care about renewal rate goals, new business production goals. If a credit is earned, it is applied — debits too. Sure, the algorithm doesn’t have a “gut;” do you really trust your fellow citizens’ “gut” these days? If not your fellow citizens, why would your underwriter be any smarter or different.
I believe that InsureTech is having their 1990’s moment; are they going to be the next Pets.com or the next Amazon.com? MySpace or Facebook? AOL or TimeWarner???
There are plenty of InsureTech startups, many with abysmal financials. And that’s why Barnes & Noble and Borders dismissed Amazon. It just takes one… There’s no denying that a Chubb, Travelers, Hartford, etc., balance sheet is an impressively “protective mote,” but their institutional memory, their silos, their reliance on ancient technology and traditional distribution models will make them the next “buggy whip manufacturers” if they don’t shape up and ship out.
Technology upgrade in this industry was needed and still is needed. That doesn’t mean we need robots or AI to take the jobs of underwriters or brokers. It means technology can help underwriters and brokers do their jobs better and more efficiently for their clients/prospects. Some of these start up tech companies think they can change the entire industry, but what they don’t realize from a micro-perspective is insurance is a necessary evil that is dictated by state laws that all vary and are constantly evolving. Attorneys and law-makers are the driving force, not technology. If you’re a tech start up and you want to help this industry? Figure out how to mitigate claims and adjust claims bc the new tech companies I’ve seen in action are absolutely miserable at both of these essential aspects of the industry.