Insurance Innovation is alive and well

Last week, I was lucky enough to attend the Society of Insurance Research ’s annual conference where Dhakshina Moorthy K. and I presented N2G Worldwide Insurance Services, LLC 's Underwriting Transformation story, explaining what it took to re-imagine and implement their new underwriting processing environment.? One of the keys to their success was to approach transformation in small bite size projects that enabled N2G to transform not in a big bang fashion, but in incremental, easy to absorb projects that over time resulting in huge change.??More importantly, this approach helped users adapt to change and accept it, helping to drive success.

It may surprise some people to hear this, but innovation is alive and well in insurance. Much of the content of the conference was on the directions that both insurers and tech companies are investing in to push innovation in the industry.? It showcased that insurers are always looking to improve their products, their response to the public, and are looking to understand how changes in the world will impact the industry and how the industry can benefit from such changes.? As you would naturally expect today, Artificial Intelligence was a major focus of much of the research, both in how insurers can leverage AI to improve operations and what impact AI will have on insurance processing, products and offerings.??

The insurance industry as a whole has a bad reputation for being slow to change and not being as innovative as other industries.? That honestly is not the case and this conference really is a proof point.???

What most people don’t know is that insurers have often been on the forefront of tech development.? Insurers, in particular life insurers, were core to the development of the mainframe and modern computing as we know it.? Insurers had invested heavily in tabulators in the early 1900’s, tabulators being the precursor to the computer. Prudential Life had an early partnership with Remington Rand to develop the UNIVAC, where?Prudential provided much of the requirements that went into the development of the first UNIVAC mainframes. Of course, Prudential didn’t take delivery due to contractual disputes (some things never really change in tech, do they?).? Met Life was the first insurer to take delivery of a UNIVAC.? It was the second UNIVAC purchased by a corporate client in the spring of 1954.? Franklin Life also took delivery of a UNIVAC shortly thereafter.? Northwestern Mutual Life is credited with receiving the first IBM 705 on December 26, 1957 - the first company to buy a mainframe outright instead of leasing it.? Insurers were in the first wave of non-government organizations to invest in this new technology that eventually went on to form the environment that we live in today.??

It’s not all about large budget busting innovations though.? Insurers have always been looking for ways to improve operations with simple but extremely clever improvements.? While in Boston, Moorthy had a chance to visit The Insurance Library.? Many of the exhibits at the library showcase how innovative insurers can be to solve the problems in day to day processing.? How many people reading this are old enough to remember rating wheels??

The rating wheel dramatically improved the ability of raters, and everyone else in the industry really, to quickly come up with quotes and pricing on risks.? If you’re in Boston, are interested about our industry and have the time, visit the Insurance Library, it’s the largest insurance library open to the public.??

A personal favorite insurance innovation is the #firemark.? Firemarks were placed on buildings to identify the building as having insurance, essentially an "insurance card" denoting proof of insurance. Fire departments responding to a blaze would use the firemark to identify who insured the building and recover their costs for services rendered.? Firemarks were introduced into the US by Benjamin Franklin in 1752, based upon the practice he observed in England. Many can be seen today on older buildings in Philadelphia if you look closely enough. ?

From a technology perspective, when we find a technology that works, the generally accepted view is that we stick with it, maybe too long.? Part of that issue is that the industry is risk averse, and change brings risk.? But, the industry has always been moving forward to make processing and operations better.?

The next wave of insurance innovation will certainly include Artificial Intelligence. A note of caution though, we have to avoid "magical thinking" when it comes to AI - or any technology really.? Yes, AI will have a tremendous impact on the industry and how insurers operate on a day to day basis. This will be especially true with how insurers interact with parties in the value chain.? However, AI is not a silver bullet.? It's not a magic solution that will solve all of our problems. We’ve all seen tech silver bullets come and go, eventually each technology finds their appropriate place in our toolkit. AI will do the same. Yes, it will have an outsize impact on how insurance operations and coverages develop but it is still a single tool, and an immature tool at that, within a broader landscape of tools and technologies. All companies, both within the insurance industry and outside of the industry, will need to find how to apply AI appropriately and effectively to meet their needs and clients needs.

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