Digitalisation, AI and talent strategies go under the microscope

The debate over the potential of digitalisation and AI continued among panellists at an October roundtable hosted by The Insurer and Verisk, as participants called for clarity and even a closer look outside the industry.

Attendees discussed how the sector is trying to balance the potential cost savings and efficiencies that digitalisation and AI can generate against the increased risks this could create.

This prompted a debate on whether digitalisation has become a “dirty word” because of the scale of transition that may be required, which could be off-putting to certain firms.

“I think it depends on the size and scale of the transformation required,” said Harry Moore, head of operational strategy and transformation at Mosaic Insurance.

“I have worked with organisations previously where the size of the transformation required was quite significant, and I think that's when it becomes overwhelming and daunting to prioritise those and tackle those [systems and business processes] in the right order.

“But for the newer companies around the table, Mosaic being one of them, I think it's a little bit easier, because AI and automation was already a thing when we started, so it's already integrated with how we do things today. So the [major] transformation is not required, or is much less severe.”

Stephen Farrell, group chief operating officer at Acrisure Re, discussed how the firm had transitioned from a “relatively small and niche company” and as a result now aims to be “more at the forefront of innovation and technology rather than simply following the pack”.

“For example, we are heavily involved in Lloyd’s Blueprint Two and are just about to go live with our first digital peer-to-peer link with a major reinsurer using Acord messaging.”

In addition, Richard Wayman, group chief information officer at Beat Capital Partners, noted digitalisation is a “necessity” for the firm.

AI potential

Participants warned that linking digitalisation directly with AI – which has touted applications including improved risk pricing and claims handling processes – may present difficulties.

“I think the issue is, particularly with the emergence in recent years of AI, the two things become synonymous,” said Wayman.

“I believe it then confuses the conversation around digitising your business and delivering transformation, which is completely different to the application of AI.”

Wayman added that the sector’s role is to “untangle the illusion around AI”.

“Everyone asks, ‘What are we doing about AI?’ I think we should still be asking, ‘Where are we on our digitalisation journey?’ There are multiple digitalisation projects still to be delivered and embedded into the market, which have nothing to do with AI.

“AI is just another tool at our disposal to assist with digitalisation and ultimately delivering operational efficiencies and data accuracy and value to our customers where there is a genuine application.”

Acrisure Re’s Farrell explained that in most board meetings he attends, non-executive directors ask him, “Where have you implemented AI?”

He continued: “To say nowhere to that question can make you feel like you're failing, but I don't want to be pushed into implementing technology that isn’t right for us at this time.

“So, there's the notion floating around that you’ve got to be doing something in the AI space and, as a consequence, I would guess that there are some ill-thought-out AI projects running in the market.

“I want to focus on prioritising our process efficiency requirements and evaluating the best solution whether it is AI driven or not rather than adopting AI for AI’s sake.”

Craig Knightley, chief underwriting officer of insurance at Inigo, explained that specific applications need to be put to clients to demonstrate the value of AI.

“Say you used AI to go back to a client and say, ‘We think the properties you've got that are most exposed to climate change are these ones,’” he said, adding such an approach is currently untapped among large corporate clients.

“I think you just change the conversation, and that's a much better value proposition to an end client than just saying here's a price via a broker.”

Richard Smith, chief product officer for EMEA at Verisk, noted that AI offerings, including large language models, can have more generic benefits such as summarising documents.

“That's fine, but that isn't anything to do with insurance. How do you do something that makes an underwriting decision more effective?

“That's hard to find because that relies on the business knowledge you have built up over time combining with the technology.”

Knightley also said a lack of clarity exists within the sector and urged the need to “think about the problem you’re trying to answer”.

“I don't think there’s enough clarity in what I've observed [in the industry]. It's just [people thinking] ‘AI is the answer, but I don't know what the question is.’”

Laurie Davison, group chief operating officer at Munich Re Specialty – Global Markets, compared the situation with AI to a target operating model in that “everyone has a different interpretation of what that means”.

“Similarly, with AI, some refer to it in the context of data scrubbing, others to helping with risk selection, and some to predictive analytics. We're trying to solve different problems but using the same term.

“There's a problem to solve, but also an opportunity to advance our industry with new tools. AI can address many challenges, from manual data scrubbing to predictive analytics for risk selection.

“For Munich Re, it's about leveraging AI to obtain better data which supports our decision making.”

Giovanni Garcia, senior vice president for business development at Verisk, cited the potential of AI, specifically machine learning for handling quotes, but noted it should enable underwriters to devote more time elsewhere.

“The grey area is where we would want the underwriters to actually spend some time, that's what we want people to do. We want more analysts to analyse, underwriters to underwrite.”

External innovation and talent

Amid such widespread change, participants discussed how the market must also look at external innovation as well as whether the level of talent needed for the future is available.

Inigo’s Knightley said he is most impressed by innovation from outside the insurance industry, citing the insurer’s partnership with US Internet of Things company Samsara as an example.

Under the terms of the deal, Inigo will use data from Samsara, which is collected using AI dash cams, to provide insurance to US auto fleets.

“What Samsara allows you to do is have a camera that not only looks out on the road, but also looks at the driver,” Knightley said.

“Half of all deaths on the roads in US are because of drinking, mobile phone usage or speeding – behavioural issues, things that people could adjust if they behave slightly differently.

“And so the cameras change people's behaviours. I'm more impressed by how technology is altering behaviours that way than what we are doing as insurers and so I think the bit for us as insurers is to say, ‘How do you partner with companies like that?’”

On the quest for talent, Chris Drew, Volante Global’s chief actuarial officer, said recruitment is complicated by the complexities of the insurance industry. He warned that newcomers joining from other parts of financial services might not be able to “hit the ground running”.

“There will of course be some parts that are the same (things like accounting, credit control etc) and so specific tasks and some processes may be transferrable from other industries but certainly more of the management and senior roles need that insurance experience.

“With that in mind, it means home-grown talent is far more important to the insurance industry than it perhaps is in other industries. As a complicated industry, newcomers can’t read it all in a book or learn it in six months.”

Because of these issues, he said “the talent pool for insurance is smaller than it is for other industries”.

“[That] doesn’t mean the talent isn’t there, it definitely is, but it needs to be given the broad experience (and time in the industry) to develop the deep understanding that is required to piece everything together.

“Without the whole industry providing experience and training that talent properly to have a deep understanding of how the industry works, the talent pool isn’t as big is it could be, and everyone chases the same limited pool of people.”