There is a lot of talk about the insurance industry being slower to adopt new technologies such as artificial intelligence, but Counterpart CEO Tanner Hackett and Socotra CEO Dan Woods both agreed on the latest episode of The Insuring Cyber Podcast that the industry’s conservative nature can serve as a benefit.
“I do appreciate the conservative nature of insurance,” Hackett said, speaking with The Insuring Cyber Podcast from the 2023 PLUS Cyber Symposium held this year in New York City. “You know, this is why the industry is still around. It’s because they’ve done things well for a very long time.”
Woods, who spoke with The Insuring Cyber Podcast from Socotra’s Connected PlatForum event held in New York City ahead of InsurTech NY’s 2023 Spring Conference, agreed.
“It’s a conservative industry and necessarily so,” he said. “This is the industry that has to work when everything else falls apart and the tornado comes and the earthquake happens and things like that. And you don’t want them taking enormous risks. They have to work when everything else doesn’t.”
With this in mind, Hackett, whose company Counterpart focuses on helping small businesses manage risk by pairing insurance experts with AI-driven underwriting and claims technology, said thoughtfulness is an important part of implementing an AI strategy.
“You need to be thoughtful about, ‘Can we actually rate, quote, bind this business without a human touch?'” he said. “And the answer is, oftentimes, ‘No.'”
“Rather than to be this black box that nobody looks at, how do you make the underwriter smarter in their decision-making so they don’t have to think about every corner of the insurance policy but focus on those unique exposures that require human intuition?”
Indeed, he said leaning too hard into AI can mean insurers are forgetting about what makes the insurance industry thrive: its human touch.
“There’s a very personal touch, and there’s a lot of complexity to what we do,” he said.
Hackett explained that there’s a balance to be struck between introducing new efficiencies with AI while saving these complex issues for skilled underwriters.
“If you’re writing a $2,000, $3,000, $4,000 policy, you can’t be dedicating the human resources to look at every application answer,” he said. “How can you take technology to make that person more efficient? And then conversely, a model can’t understand all the complexities between a manufacturer in Ohio or a restaurant in Los Angeles. They are very different businesses. So that takes the training of the human to teach the model how to think about this exposure and how to get smarter the next time.”
Despite treading carefully, shying away from implementing AI altogether is not the answer either, Woods cautioned insurers.
“One of the trends that’s happening is certain technologies and certain techniques have now become so proven in other industries that it’s now being shown that the risky thing is not to change,” he said.
As a cloud native core platform for technology-driven insurers, Woods said Socotra is seeking to work with insurers in helping them harness the power of AI while navigating some of the challenges. Some of the biggest opportunities he sees for AI in insurance are within customer service and fraud detection.
“At the end of the day, insurance is a pure data industry. They don’t make or ship anything. All they do is collect, organize, store and analyze data. That’s the first thing to realize,” he said. “And if the entirety of what the business operates on are data, then that’s an extraordinary opportunity for AI definitionally because it views data, learns, manipulates data and so forth. So, there are probably more aspects that AI can improve than ones it can’t.”
While change can be scary, Hackett encouraged insurers to look at AI technology as a tool to help their business move forward.
“AI—there’s so many connotations that come with this term. It can be perceived as something scary,” he said. “We see it as a tool, an asset.”