October 10, 2025 | 15:25
Insurance at a crossroads | Bryan Falchuk
Bryan: Thank you for having me on.
Dani: Thank you for being here. And I know you have a lot to say on all of this, so let's get right into it. First question for you, you know, insurance is a for-profit industry. So where do you see money being left on the table and what can we do to address this?
Bryan: So I think when people hear a phrase like, "Leaving money on the table," they think about sales or like, "Could I have upsold or increased the coverage or sold another policy” or whatever, and I get that, but that's not really the path to profitability and insurance. So if we think about money on the table from a profit standpoint, it's really about indemnity, how we look at the exposure, how we price it, and then how we respond to it when it plays out, right? And so that to me is, I mean, that's the nuts and bolts of insurance. So it's not about marketing to drive more sales. It's about having the right sales in the door and then being a lot more exact, if you will, and caring about the accuracy that we bring to the actual analysis of the risk. And I've seen lots of good moves on that part. And I think we've made a lot of progress, it was just in a session talking about segmenting even deeper and refreshing the segmentation regularly. And so saying like, this is our appetite and just sort of leaving it at that. And that was a question from the audience, was actually like, why would you keep re-segmenting? And I was like, why would you not? Maybe the world changes, your product changes, the way claims play out changes, so you need to stay on top of it. But we've also not done well. So I've been in plenty of conversations where, you know, I sat in a pitch from an insurtech who had this great solution that would allow the carrier to have a more a predicted loss ratio when they were looking at a risk, five points more accurate, and I watched the chief actuary just sort of look at it and say, oh, that's not that much. And I used to be chief claims officer, and like, I hate the story, but I love this story because it's such a, I think anyone in the industry can identify with it as like, if I get a call from our CEO, there's like, hey, can you take five points out of our loss ratio, other than not paying valid claims, which is not a viable path. I have no clue how to do that. So when we have something that can get us to not leave money on the table, why would we just sort of write that five points to pretty much any carrier is material?
Dani: Why are we like this?
Bryan: So there's a whole, there's a whole lot behind it. I mean, ultimately, I think it is a kind of psychology and culture. We are risk averse people as a whole and for outsiders that might seem weird because we go around buying risks so like don't we love risks but we really don't we buy risk and then like we box it in and we put conditions and stipulations on it and we put limitations on it and everything and so we're uncomfortable with the unknown and doing something new is unknown you know I was when I was running claims, I sat in a panel with some other chief claims officers and someone was talking about moving to predictive analytics. This is like earlier days when AI hadn't been talked about yet, right? It was all predictive analytics. To try to predict the claim outcome, this isn't like litigated matters. And this chief claims officer got really uncomfortable and he's like, well, we don't know if the prediction would be right using this new tool. and our claims take three to five years to play out. So we could be sleeping on a time bomb, basically. Now, if you look at their combined ratio, it's over a hundred. So this is a carrier who is losing money in their current operations. And their head of claims is holding back on trying something different because it might be a bad answer. Now, I get like that may not have been the right answer, but what you're doing right now is a bad answer. Like we already know that, but his attitude was well that's comfortable and familiar and I can get my hands around it and explain it even though it's losing us money. It sounds absurd but this is actually really common human behavior across the board so yeah we don't like risk we don't like change naturally as a species and insurance species even more so. It's tough for us.
Dani: I remember in our earlier conversation I did have something that a former CEO used to say, "Change is hard, but the relevance is worse." And that's the thing, I think we're hitting this tipping point. Things do have to change, there's no choice in the matter. And maybe we can talk about the consumer trust side again a little bit. It does feel like it's taken a hit. What can be done to rebuild it?
Bryan: Yeah, well, I don't think we've really done anything to gild it in the first place and that's the reality is we're there for people who didn't talk at the moment and by enlarge insurers are actually looking for coverage trying to take care of people despite the public sentiment against us. But we've never really done a good job in genuinely helping the public understand insurance, which is complicated and hard to understand and so we've fallen into the easy path which is either fear. So like sell them the fear, which by the way, if they don't trust you to follow through on making them whole again, you've just sort of set them up to feel even worse or the easiest path is save money, right? Like insurance doesn't matter, just pay less for it. That's a really bad way to frame your product. Like, hey, this doesn't matter, the cheaper you can get it, the better. and that's kind of been the winning strategy. Unfortunately if you ask people to quote or to like you know bring up a specific marketing slogan or campaign from an insurer it's never the fear -based or the like we're there for you in the top moments ones those are feel very generic it's the catchy ones around how much money you see right that doesn't generate trust too. There's a there's a like a mirror image to that on the carrier side as well as, you know, we bemoaned this sort of adversarial nature of the interaction with the claimant or in insured who thinks we're there to screw them over to put it bluntly, right, like, and when you're trying to help someone, and you're being treated like you're not trying to help them, it's even more offensive. It's one thing to not thank someone when they're standing up for you. It's another to be mad at them in the process. And, you know, like, I would hear my claims team take these first calls with claimants, with insurers who were so suspicious. It was adversarial and the person on my team is like, "I woke up this morning to help people and I'm being punched in the face for it." That's a terrible morale, employee retention kind of situation. So that's not good and doesn't lead to good outcomes. But we're also adversarial towards them at times and fraud is a great example, when you talk about trust, you look at the historic approach to fraud, and it was like, there are people perpetrating fraud, we need to catch them, you need to stay vigilant, we don't catch enough of it, which sure breeds you to be suspicious of what you're looking at, understandably. However, if you're focused on just catching fraud, the solutions you put in place will probably flag more things then are actually fraud, probably still going to miss some stuff, but we focus so much on the false negatives like, oh no, we missed something, right? Like it said it was clean, but it wasn't. And so we go overboard in trying to watch out for fraud. That's fine, except that there is a cost to thinking something's fraudulent when it isn't. So, you know, I've talked to enough people who think like, oh, it's fine. And we figured it out after 30 days, we realized it was clean and we let the claim go along. Okay, but what was the average handle, the average life cycle of that claim versus one that you didn't have any suspicion of? Like for like, you know, control for circumstances and whatnot, what you find is even when you determine relatively quickly that it was clean, it still takes longer, it still does slow things down, you're more careful, you're more cautious, rightly so. However, longer total handle, the total lifecycle of the claim or total handle time, which generally aligns with higher claim costs, higher loss -adjusting expense, higher indemnity, more likelihood that an attorney's brought in, a plaintiff's bar has come in, and a public adjuster comes in. Someone who might agitate and drive the cost up when, if you had rightly identified them as not fraud up front, you would have saved all that. So I'm more interested in the false negatives, actually, than the false positive, the false, I'm getting confused my false, the false positives than the false negatives, because it's those good customers in a legitimate bind that we are trying to be helpful to, that at least for a period of time, yeah, we've been treated the wrong way. Newer solutions are better at Getting rid of that and I you know in my book series I talk about a fraud solution and I was expecting it to be about we caught all this extra fraud and it paid for itself and The person that curious I do that the project was like that's fine But actually like we didn't think we had that much of a fraud problem And we're pretty good at catching it and we are still that way. We're a little bit better, but It's all the stuff that we thought was fraud that isn't that we were wasting our time with.
Dani: yes we can settle faster customer is you know settled more quickly think about what that does for you
Bryan: You're wasting your resources you're wasting your customer's time you're wasting customer goodwill you're wasting the chance that they were new or if they're not a customer what you know they could be a business or a personalized insurance of yours as well you're missing all of that and so I was really surprised that that business case ended up focusing on the upside of the not fraud. Just shutting things down before they've even risen to the level of someone looking at them and it's like no one talks about this in fraud and actually having that trust of the insurer of the claimant is just as valuable if not more.
Dani: That's the thing and I think leading with trust or looking at a trust first lens does change the region of the conversation that way so you're not like trying to find the fraud but you are clearing the people you know who are genuine claimants and getting you through the process.
Bryan: Yeah, but there's you know Just throwing like there's a hold up to this so I know there'd be people that say yeah, but these people are but we don't know like all totally I'm not we're not talking about just blindly trust everyone and get taken advantage right, we're talking about tools now, there are approaches now that can do a dramatically better job. And it's not just because they're flagging twice as many things or three times as many things. They're flagging the right things and they're doing it in a much more directive and specific way. So you can go in and figure out if it is real or not. And you do that before you've paid, which is it's really hard to claw back fraud once dollars have gone out the door. So it's not about just letting everything go. It's not being smarter. again to that like the chief actuary who let the five points go is like we have better answers we should be using
Dani: It should be. I wanted to come back to that actually as i remember in our earlier chat too these just the idea of just yeah no it's just five points
Bryan: oh such a dangerous word
Dani: And the idea that you know we talked about how there's that accepted lore you know at ten percent of flames of fraudulent like that's just how we do business that's how we operate But I remember you could say what what if that could be fine.
Bryan: Yeah, that's great
Dani: So we can say well, it's just a 5% difference, but how many billions of dollars?
Bryan: Oh, we've priced it in it's fine Okay, well, what if you what if you didn't have to price it in or you could cut it to 5% Imagine your price competitiveness in that and no one would be able to catch you on the so like We taught we bemoan, you know the commoditization and it's about cheap and or fear And then we have things we can do to actually create material advantage But we get into make -up. It's like, oh, but that's that API calls five cents more than what we're paying right now. That's okay, but value is not paying five cents less. What is what money on the table back to your original question is What's the net value of it? So I'm as guilty of being cheap as a lot of people are. I had a conversation with my financial planner the other day because I got a big tax bill from, you know, capital gains, which is a good problem to have because my father would rather pay no taxes, meaning he lost money. I'm like, well, I get it, like, you don't want to lose. But when I raise this to the financial planner, he's like, alright, so we need to reduce your taxes. I'm like, it's not about just blindly no taxes, or all the gain. It's about both sides being informed by each other, so that I'm making a total value decision. It might be better off paying some taxes if the net result is better I just want to make sure the math Recognizes there's two sides of the equation and not just one and it's it's taking a true value based decision And not looking at a price tag and saying no to it just because there is a price
Dani: Yes, and I think you know that reminds me of another point which is not just looking at the price tag and deciding but also within organizations if they're making decisions somewhat in a silo, there's that, oh, well, which cost center does this go with?
Bryan: Oh, yeah.
Dani: And then you just don't do anything.
Bryan: Yeah. I mean, if seeing that, IoT is a great example. Like in personal lines, in commercial lines, it's easier to find places to stick to this sort of risk management or loss prevention activities, like installing IoT, like water leakage sensors, for example. Because you often will have a risk management budget in a larger at least commercialized policy, but in homeowners you don't. So if you're going to give away like, you know, leak detection sensors and water shut off devices, who pays for that? If you're not going to charge the customer, someone's got to pay for that. The agent's not going to pay for it. Is it a marketing spend? Like I see some curious you think of it that way, but the benefit doesn't fall through the marketing. So why should marketing pay for it? Is it a claims spend? Well, sort of the opposite of a claim. So why should claims spend on it even though it's like well fewer claims isn't that a benefit to claims I've seen carriers who have done pilots actually have like clear multiple X ROI but we don't know what cost center to put it in so we're not going to do it or maybe we're not going to do it this year and it's like but you have the money it's just in the wrong cost center can you not
Dani: we see the value so what are we…
Bryan: And this is where I think we get trapped in local optimization quite often because we do things in silos or it's a specific issue or specific line of business and we might miss the chance to make a global optimization or reach a global maximum because of that. And that's, I mean, frankly, that's a CEO and CFO and maybe COO's job is to have that cost organization per view. We shouldn't be scared to do it when we find those moments even if it doesn't fit into the nice, tidy budget that we put together. I'm not saying spend irrationally and outside of the dollars that you have, but when you know something is a net positive, why would you like difficult accounting that you could solve with some more effort? Why should that be the reason you don't do?
Bryan: You've heard what he said, folks. Last question, Bryan, as we wrap up, what's one thing you would share with folks listening today, like that and think they should be paying more attention to, they shouldn't be doing it right now. -
Dani: So the hashtag answer is AI, but that's not actually the answer. People actually are really annoyed with me for this because I don't say a technology or solution or whatever. I think it's actually much more fundamental than that and it's around culture, it's just hubris. Like when your ego and sense of your perfection or having the right answer keeps you from going down the right path. And we've talked about lots of examples of that. They're like, oh, that's not that much. We already do this really well. Oh, we already baked the fraud into our pricing. So it's not a big deal. If you think you have all the answers, the end is coming. You like your point on your relevance, right? Like, I think a very dangerous thing is having a lot of money in the bank, because it tends to breed complacency and a sense that you've got it right. Being rich or having a large surplus or excessive reserves are not signs of success. That might be past success or maybe market conditions or luck or a number of things. Even if it is that you made all the right decisions and are the perfect manager. Does that mean that you're done making perfect decisions forever? Like having that openness to being wrong? I said on another podcast, like, you know, I say a lot of things about where the industry is going. I'm happy for people to disagree with me. And I don't mind being wrong. And the hosts laughed at me like that's not true. Everyone hates being wrong. So, no, I don't actually care. It's like, what I'd like to be right, sure, unless it's something really scary I'm talking about. But it's the fact that I would rather see what I think is true and have people disagree with me and engage in it and move the thinking of the industry forward than for me to be right. And people, it's done. I don't need to win the points of being right. What I need and the reason why I put this stuff out is the engagement from the industry. And you don't get that when people just assume that they're perfect to begin with, whether they explicitly say it that way or not.
Dani: Excellent. Inertia ends here folks, you heard it here. Bryan, thank you.
Bryan: Thank you for having me.