InsurTech is grabbing the attention of carriers and agencies alike, but the level of change it promises also causes anxiety.
At the 2019 InsureTech Connect Conference in Las Vegas on Sept. 25, experts attempted to calm concerns about adapting new technology, speaking during a panel discussion focused on “Making InsurTech Practical.”
During the discussion, Sean Conrad, vice president of pricing at Hannover Re, and Jim Lucas, senior vice president and chief actuary at life insurer AAA Life, reassured a packed audience that InsurTech can be applied successfully in multiple ways. Below, Carrier Management Editor Mark Hollmer outlines edited highlights of their discussion, as moderated by Eric Carlson, principal and life actuary at Milliman IntelliScript.
Carlson: What drives Your InsurTech decisions?
Conrad: Better risk selection is one of the primary drivers. We wanted to be able to go into deals and know when to walk away. [It was] also important to provide deals to clients.
Lucas: InsurTech produced better mortality results.
Carlson: How do you validate measuring if InsurTech works or is better [than the status quo]?
Lucas: The first thing is we need the InsurTech to [involve] a specific use case. Then we look for some type of external validation—for a reinsurance partner, for example. Then you seek a retro study or live pilot. If you can do a retro study, you can do enough to validate results.
Conrad: A retro study [looking at past practices] or pilot–something to validate the hypothesis for the business case.
Carlson: How did InsurTech impact your employees and other parties?
Lucas: For our employees, there was a particular fear in the underwriting space about what that would mean for their jobs. Once we got through the change management curve, they really started embracing it [with a refrain of] “my job is changing, but it doesn’t mean my job is going away.”
Conrad: You do get a lot of skepticism early on. Education and communication are really important. [Another] aspect—automation is going to really make their jobs more interesting [as technology replicates the more routine aspects of their work routines].
Carlson: InsurTech and the use of predictive models to select risks—this is a big paradigm shift from historic underwriting. How did you integrate the benefits from each approach, and how did you manage expectations externally and internally?
Conrad: Predictive models are really complementary to subject matter experts [in underwriting]. Sometimes it is top down with subject experts, hypotheses and thoughts, and sometimes you can dig into data to see how that plays out.
Lucas: Subject matters experts are able to take low-frequency/high-severity incidents [that predictive models can’t handle] and provide models [in a complementary way].
Conrad: It is the ability to communicate results—that’s where people who understand the models and also have business understanding can contribute to distribution and management…It shouldn’t be surprising that in some cases [underwriting] decisions will change [with the injection of InsurTech].
Carlson: Real-time pricing, is that possible?
Lucas: It can be done, [but it is five years away].
Conrad: It will be really tough. The ability to stratify and be more granular—that will be the trend. But I don’t think you’ll get to individualized pricing.
Carlson: Future [tech] plans?
Conrad: We’re looking at new data options to source and stratify risk.