With insurers today grappling with customer experience, need for digitization and automation, and other challenges, the time is now to reimagine how to address them to stay ahead. That's what Alex Martin (CEO of Clearspeed), Kim Garland (former President of State Auto), and Mitchell Kemper (Head of Partnership Enablement at Solaria Labs within Liberty Mutual), discussed at Insurtech Insights NYC this past June, centering on the value of building trust as a competitive advantage.
Building trust as a competitive advantage
Martin draws on his deep military background to underscore the crucial role of trust in high-stakes environments. His motivation stems from a tragic incident in Iraq when a lapse in vetting led to the loss of a special forces soldier and close friend. At the time, there was no reliable data available to assess the trustworthiness of someone who turned out to be an Al-Qaeda operative. This lack of data highlighted a pressing need for a faster, better way to assess risk in extreme scenarios - even life or death circumstances. This inspired the start of Clearspeed, a new mode of technology ready to help build trust in extreme scenarios.
From a leadership perspective, innovation is about empowering decision-makers to have data points that didn’t previously exist. Martin is committed to pushing the boundaries of technology to enhance risk assessment and improve decision-making processes. This motivation for innovation goes beyond personal achievement as he aims to “leave this industry better than when we entered it years ago” to shape a more informed future.
Learn more about our story here
Kim Garland's view on fraudulent losses
Garland opened the discussion by highlighting that the insurance industry has always had fraudulent losses, but now the scale and complexity of illegitimate losses are much higher. He attributes this increase to social inflation, where claims costs rise at a rate that surpasses economic inflation, worsening the challenge of managing illegitimate losses. This shift has led to higher costs for consumers and “at some point, the entire system breaks. You lose affordability, you lose availability, within the market,” Garland says.
Garland emphasizes the need for insurers to continually refine their risk models. An insurer has to put a price on risk and the equation for figuring out that amount changes. As a company, they have to ask themselves what the probability is that the insured will inflate their claim, and if it’s high, what the severity of the inflation could be. The goal is to accurately price risk while mitigating the impact of potential fraud.
Mitchell Kemper on digital transformation
Kemper continues the thread by saying that the insurance industry has always had a list of problems, and now there's a dual impact from digital transformation. When looking at these historical issues that now have a different face, Kemper suggests, “‘How can I keep these bad actors off of my books? I think you can do that through this interesting inflection point… there's …an evolution of technologies that require you to either have to match up almost every data point that's being entered through other data sources or figure out ways early on to identify if this person should be trusted or not.” While advancements have created positive impacts for the sector like making submitting claims and getting quotes easier, they have also provided new opportunities for bad actors to exploit the ecosystem. They can submit false information or documentation around a claim which results in carriers paying more to identify if that data is reliable.
Another priority for Kemper is small commercial businesses and any new businesses entering insurers' portfolios—specifically, the importance for insurers to understand what each company does. Newer companies often lack comprehensive data, making it difficult for insurance companies to accurately assess their risk, determine pricing, and apply underwriting principles. In turn, insurers may face challenges in managing the risks associated with unknown or potentially fraudulent companies, or those that adjust their business models to capitalize on growth opportunities.
Team culture and leadership
In thinking about how people confront these challenges, Kemper thinks about his team and leadership culture. Creating a company culture of innovation and learning within organizations will better position them to adapt and thrive. He notes that “Leaders in organizations who encourage curiosity, learning, and diversity of thought will find themselves with opportunities to try unique processes or create unique experiences that will give them a leg up,” versus companies that are less willing to try new things. Successful leaders are those who view failures as opportunities and communicate these insights effectively to drive future success.
Garland reflects on the evolution of insurance practices over the last couple of decades. Innovations like automated underwriting models, telematics, and credit scores went through a cultural cycle where they initially faced skepticism but eventually gained acceptance. As new cycles occur, companies should prepare for the “first wave of everybody criticizing you, and too many companies as soon as they get criticized bail out.” Companies must have the stamina to go through these cycles and be motivated to be first movers within the industry.
Balancing current success with future planning
Kemper adds that executing on these newer opportunities and building trust with colleagues is important. He highlights that it's crucial not only to pursue projects, but also to learn from the ones that don’t succeed. Effective communication regarding what was learned from unsuccessful methods, along with how these insights will inform future projects is key. Additionally, understanding stakeholders’ needs upstream and identifying potential barriers early on leads to more effective solutions.
To conclude, Garland stresses that companies should balance their focus between current success and future planning. He says, “We're playing the game that we have to win today and we're playing the game that we have to win two to three years from now.” Garland notes that some organizations fall short by concentrating solely on present achievements or fixating on long-term projections. Ensuring company successes falls on all leaders to guide teams to address both immediate and future goals.
As the insurance sector continues to evolve and grow, the insights from these three leaders demonstrate a required combination of trust, leadership, and risk management to enable success. Embracing innovation while maintaining focus on informed decision-making is key to navigating challenges and moving forward.
Watch the full session here
