AI Wisdom Ep. 13: Business Continuity – Riding the Wave of Disruption with Paul Carroll

Digital Transformation - July 21 2020

On this episode of the “AI Wisdom – Talking Innovation in Insurance” podcast, host Ron Glozman speaks with Paul Carroll, Editor-in-Chief, Insurance Thought Leadership, a digital publishing platform that is a catalyst for change in insurance and risk management, and Partner at Devil’s Advocate Group, about how information technology can drive corporate strategy. They discuss how AI and other emerging technologies can influence business continuity and resiliency plans for insurance companies as they evolve to adapt to the new normal. Click the link to listen or read the full transcript below.

Full Transcript

Ron Glozman: Hello, and welcome to “AI Wisdom – Talking Innovation in Insurance.” On this podcast, we talk to business and insurtech leaders about how artificial intelligence is transforming the way we buy and sell insurance. I'm your host Ron Glozman, Founder and CEO of Chisel AI, and a strong believer in the power of AI to help people work smart and enrich their lives. So, let's get into it.

We’re living in a very volatile time. Business operations can change dramatically in a matter of days. Proven business continuity plans minimize the risk and allow insurers to deliver positive business outcomes to employees, customers, partners, and stakeholders. Being able to deploy a proven plan quickly and efficiently is key to limiting the impact of potential business outages, losses, etc.

With new threats on the horizon like cyber-attacks, climate change, and of course, global pandemics, which we’re all living in right now, there are combining existing threats and it’s critical that insurance companies develop strategies that embrace emerging technologies to automate and streamline manual processes so they can quickly adapt to distributed workforces, protect their business assets, and continue to deliver an optimal customer experience. Today, I’m very pleased to have Paul Carroll, Editor-in-Chief of Insurance Thought Leadership and Partner at Devil’s Advocate Group joining me today as we discuss the implications of business continuity and the future of insurance. Welcome, Paul. Before we jump into our discussion, can you please introduce yourself and tell us a little bit more about Insurance Thought Leadership and Devil’s Advocate Group?

Paul: Sure. I’m delighted to be here. Thanks for having me on. Insurance Thought Leadership is really a community based on a publishing platform devoted to the best ideas by the best thinkers on how to innovate in risk management and insurance. We’ve been around for about seven years, have 1,500 people who write for us at least occasionally, have about 4,500 articles life on the site. We were bought by The Institutes toward the end of last year as part of their focus on educating people on insurance.

They’re the folks who do the CPCU, ARM sorts of designations and provide most of the continuing education for people in the insurance industry in the U.S. They’ve been buying some conferences and some publishing operations as a way of trying to then integrate them and serve the industry better with cutting edge ideas. I do a newsletter called “Six Things” that comes out every Tuesday, that’s probably the most popular thing that I do. But at the end, I’ll explain how you can also find some of the other things we do.

With the Devil’s Advocate Group, that really springs out of my history as a journalist covering technology and then innovation. A fellow I’ve worked with for a long time and I wrote a book called Billion Dollar Lessons that came out in 2008. It was basically the flip side of Jim Collins. So, while he would look at success stories, do a bunch of research and say here’s how to be like those guys, we had 20 researchers spend 2 years looking at 2,500 failures and said, here are the patterns, here’s how not to be like those guys.

It turned out the biggest insight from the book was that most organizations knew they were doing something severely wrong, but the information didn’t bubble up to the folks who were actually making the decision, so they went ahead and did something really stupid anyway. As a result, we’ve developed the same, we call the Devil’s Advocate Process where we come in basically interview people in an organization to find those hidden thoughts and present them to the CEO so that they can avoid being examples in our next book. So that went a little long but anyway, that’s sort of who I am and how I wound up here today.

Ron: You know, why don’t we just jump right into it? Because there’s been a lot of talk these days about business continuity and business resiliency in the wake of coronavirus or COVID-19. So what are some measures that you’ve seen and maybe you haven’t seen but you think insurance companies should take and can take to ensure that they have the right technologies and corporate infrastructures in place and processes to support them so that they continue to do these best business practices, remotely, now and in the future?

Paul: Sure. One of the nice things, if that’s not too strong a term about where we’re going through now is that the need for change is now obvious, right? People could deny that for a long time. It’s actually the same sort of thing we went through before we published Billion Dollar Lessons in 2008. The world had been on a pretty good run for a while, and it wasn’t clear that folks were going to take it seriously when we talked about failure. But actually, with the first talk I did on Billion Dollar Lessons which came out in the fall of 2008, smack in the middle of the great recession between the time I got into the shower and the time I got out of the shower, the Dow had fallen 750 points. So, there was no longer a need to sell people on the idea that change needed to happen.

I agree very much that resilience is a huge issue, I think people get it. In my experience, people are too timid. So, they temporize and don’t necessarily take out that clean sheet of paper and totally reinvent the business.

I would say that what people ought to be doing now is imagining what life is like after the pandemic, assume that a lot of habits are going to change for suppliers, partners, and in particular customers. They’re going to be way more comfortable with digital interactions than they were back in the days before we were all wearing masks and staying six feet apart from each other.

So take out a clean sheet of paper and design the perfect form of your business let’s say two years from now so that you have something that you can be shooting for and designing for rather than just taking the little bitty steps here and there and kind of feeling your way toward that future.

Ron: That’s powerful. So how do you, because, we have gone through this internally and maybe in a different sense, but we have the same thing from a product perspective, which is, you always know the end goal and our approach internally has always been to take incremental steps because I think, people are afraid of change. That’s just a fact and large change especially. But the difference is when you do something incrementally and it’s small, it seems easier. It doesn’t seem like this big scary thing and a huge seven-month project or a one-year project and, you know, just to follow along with their example of a two-year project. Let’s just play that out. You are a company, you’ve drawn a clean piece of paper, you’ve drawn out a plan saying this is the type of business I want to look like in two years. What are the next steps to take?

Paul: You mentioned 1986 before, my background is I spent a long time at the Wall Street Journal as a reporter and editor. I got started covering technology in 1986 in New York. And feel like I’ve basically been watching this same movie ever since because the company I covered starting in ‘86 was IBM, which at that point was just incomprehensively powerful by any standard. The rule of thumb was that IBM accounted for half the revenue of the computer industry, two-thirds of the profits, and three-quarters of the market value. I mean, just imagine that in today’s world and you’d have Apple and Google and Microsoft and everybody else pretty much rolled into one and that’d be IBM. And yet IBM was too slow, and it nearly failed. I mean, there were talks of possible bankruptcy by the time I stopped covering the company in 1993.

So that’s sort of my background for saying that you can get into all kinds of trouble no matter who you are if you just take incremental steps. But at the same time, I think that even once you define what that future is going to be, let’s say two years out, you have to get there in incremental steps, right? Even if at the moment you have this situation where everybody understands that the world is going to be very different then you still have to sort of manage people toward the change. So, I would say that you take out this clean sheet of paper, you set up this bold vision, you make clear that you’re serious.

I’m thinking of a story that came up when I helped some folks at McKinsey, the three probably most senior strategists at the firm do a book that came out a couple of years ago. And they had an example of an insurance company that decided the future was paperless and within 10 years they were not going to be using any paper. Well, then the McKinsey guys pulled out the budget and said, yeah, but you’re budgeting for a 6% increase in paper this next year.

If you set a goal saying you’re going to be paperless then start being paperless. If you’re going to have a different workforce then start changing the mix of people that you have on board.

If the products are going to be different, if you’re going to go more toward a services mentality rather than a product mentality, then start doing things today that will really get you there rather than just sort of talking about where you want to be in a couple of years. Does that make sense?

Ron: I love it. That makes perfect sense, it’s very tangible. We all know that the industry is in a state of flux because a lot of companies are examining different business cases, for AI and other technologies. And there’s sometimes an overwhelming sense of technologies out there and you’ve probably seen every shape and size of technology throughout the years. And one of the things that we’ve seen is they’re trying to figure out how to partner with insurtechs, working with IBM or Microsoft, or even like a Salesforce or Guidewire or modern versions of those companies, it’s very different than working with even us a 40-person team, right? In your opinion, what is the adoption of AI and emerging technologies role in accelerating and supporting these business plans when it comes to natural disasters, climate change, cyber-attacks, and pandemics? And how should these companies be thinking about working with these smaller players compared to the traditional IBM, Microsoft and so forth?

Paul: So, I have a long history as you suggest with technology and with AI. I mean, when I got started in 1986, there were a lot of people who were coming to me talking about natural language processing capabilities and so forth. And I just didn’t see that the computing capability was there yet. And obviously, things are a lot different 30 something years ago than they are today, so I think the capability is now there. But over the years, I’ve sort of developed a sense that AI is really almost what we can’t do yet.

You know, if you had told me in 1986 that I’d be talking to my phone, asking it for directions, I would have said you were nuts.

People talked about AI, but it was just so far beyond the pale that it was almost magic. And it’s gotta be tough for folks like you who are in the business of AI because anything that can be done is sort of dismissed as, “oh yeah, sure, of course, we can talk to our phone”. We can scan documents and find all kinds of things way faster than a paralegal would have been able to or whatever before. So, AI is always kind of a moving target.

But at the same time, I think if you start thinking of very specific things that you want to be able to do then AI in a focused way can be very powerful. These days you’re going to be spending a lot more time dealing with people not face to face if you’re an insurance company, insurance agents, whatever. And as a result, you can use technologies like chatbots to augment what you’re doing. You can use AI to sense the tone of somebody’s voice on the phone to figure out whether they’re starting to get angry and somebody needs to get involved in a way that they might not otherwise.

You can use AI to take a look at images which previously people would have had to look at and start extracting information about claims or about potential risks because of flooding or whatever. I think that I’ve thought it for quite a while that the insurance industry has way too many expenses embedded in it.

You know, we’ve sort of always done things a certain way, and we think that’s the only way they can be done. But from the customer standpoint, an awful lot of that premium dollar is still being eaten up by overhead.

And if you want to figure out why people aren’t buying say as much life insurance as they might otherwise, well, overhead is a lot of it. You know, if you’re getting 50 cents back on your dollar, that’s one thing. If you’re getting 75 cents, 80 cents back on your dollar or whatever, that’s an entirely different proposition that you have for people.

So I think that there are ways through robotic process automation or all kinds of other things to have the computer serve up information to people in ways that greatly reduce expenses so that people aren’t having to spend so much time chasing around trying to gather all the information for underwriting or processing a claim or whatever.

So, I guess I’m not making sort of a grand statement about AI, but I think there are so many targets in the industry that AI could address, and in particular take costs out but surely do many other things as well.

Ron: Do you think that the rate of adoption should be accelerating?

Paul: Oh, very much so. And then in terms of sort of how you do it, I think this idea of a focused approach is the right way to do it. If you just sort of say, all right, I’m going to adopt AI, well, all right. What’s the next step? But if you say I’ve got this problem because expenses are too high here or my call center isn’t working very efficiently there or whatever, then you can actually define a problem and come up with a tangible benefit. But, yeah, I think that what I said that digital, in general, is going to be a much bigger piece of the insurance industry a year or two out whenever we really recover from the pandemic, I think AI has a big role on that.

Ron: I wholeheartedly agree. So, we’re going to take a quick 20-second break to tell you where you can find out more information and insights about insurance innovation. We’ll be right back.

[If you liked this episode of AI Wisdom, subscribe to our blog, Writing the Future: AI in Commercial Insurance at www.chisel.ai/blog for feature articles, interviews, opinions, and more.]

We’re back with our featured guest, Paul Carroll. Let’s jump right into the next question. I don’t think it’s a question in anybody’s mind that technology disruption continues to be a dominant theme for the industry this year and for the foreseeable future, at least. What are your recommendations to insurance companies who are struggling with change? And more specifically, sometimes we talk about analysis paralysis. What is your view on that?

Paul: Analysis paralysis is a real problem. As part of the book, Billion Dollar Lessons that we published, we found that if companies try to take too broad an approach to innovation they often fail. You know, I’ve seen people try to do innovation courses or whatever. And in my experience and I’ve focused on this a lot, innovation doesn’t really bubble up from the bottom. Innovation happens from the top down. So if you’re the CEO, you’re part of the C-suite, you need to have a way to just search for ideas because there are good ideas in the organization, but then you have to filter them because you only have so many hours in your week and decide that there are certain projects that conceivably will have a big impact on the business.

What you do, as the CEO is you set up a little portfolio of these things. One is too few because you’re basically betting the business on that one, two is probably still too few, but you probably can’t handle more than five, so you’re probably talking three, four or five of these initiatives. You don’t want to spend a lot of money on them, you want to be able to cycle through them pretty quickly because most of them aren’t going to work. You basically manage this process so that you’re always looking for potentially important ideas that can change the business. And once you have a successor to in that sort of environment then that starts to filter down and that’s the way you really create an innovation culture at a business.

Ron: Let’s cover all of that – basically, let’s go a little bit deeper. So yes, you do want to run one or two experiments, I agree with you. But at the same time, if you’re looking at, you know, one or two experiments and it’s likely more than one or two with a vendor, there’s a cost to them. I find it a little bit unreasonable that these big insurance companies ask for free POCs. I understand the ask. Don’t get me wrong. I mean, from our perspective, at least at Chisel we never ask to make a profit. To me, a proof of concept is something that we just want to break even on, that’s it.

We want to recover our costs because I want to form a long-term relationship with you. Yes, there are other costs that you invest in a partnership – those dinners and those flights, but it’s also respect, $20,000, $50,000 pilot for free is hard, but at the same time, to your point as the CEO of a carrier, you want to run two, three, four experiments to know which one works. How do you balance that?

Paul: That’s interesting. I should have been clearer about the perspective I was using. When I was talking about what the CEO would do, I was really talking about internal resources and conceivably drawing on some external resources like your company but wasn’t really talking about the interface between the incumbent and the insurtech. I think that incumbents are making a massive mistake by not understanding who you are and how to deal with you. They just don’t understand what a 40-person company looks and feels like.

You know, back in the day IBM decided it was going to help little companies. It was going to invest in them and then it was going to come in and learn about these technologies and help these companies sell. And IBM smothered probably a good 20 companies because, you know, you have a 40-person business, you have some promising technology and suddenly IBM is sending you 50 salespeople every week to train. Well, you’ve got a business to run and, yeah, you want the IBM salesforce to know what you’re doing but you’re really not a salesforce training business.

So I think it is incumbent, if you will, on the incumbents to understand that a 40-person company is very different and you can’t spend six months doing a proof of concept and then having it go through a review process and then another one, and then another one, and then another one and then, at the end of the year you get a yes or no.

There has to be a way to be fair to the smaller companies and to just greatly speed up the cycle because I would bet that you would be able to handle more in the way of these sorts of demands from the incumbents if you would at least get an answer quickly rather than just being dragged along for quite a while.

Ron: What do you see as like tangible approaches? And thank you for the clarification. So you mentioned the internal resources, bubbling up ideas, running internal projects, seeing which ones work, what do you see as some other approaches that companies can take today to mobilize innovation within their organization?

Paul: Burn the fax machines. I think probably the biggest theme I’m hearing is just make everything digital. Forget these paper forms, talk about technology history and so forth. I have now been at this long enough that I can look back mostly with pride on some things I’ve written about technology. So, I wrote about 3D printing in the Wall Street Journal for instance, in 1989.

I think it was in about 1991 or 1992 that I wrote something saying that paper forms should be obsolete because you can now have people fill things in online. And of course, in the process, you reduce errors and you reduce the reprocessing time and so forth. We can maybe get into more specifics, but I think just commit to being completely digital.

Your customers don’t really want to see you or come into your office now anyway. Figure out a way to take the face to face interaction out of your business and you’ll be way ahead of the game for a good while to come.

Ron: Burn the fax machines, I hope everybody got that.

Paul: They’re still out there.

Ron: I know that it’s out there. But from our part at Chisel, we’re not supporting fax.

Paul: There you go. Now there is this concept called the long tail where there will be people who will still want to use paper for a while. I haven’t looked in a while, but a few years ago, I found that there was something like three or four million people who were still using dial-up in the U.S. via EarthLink. So, you know, they don’t entirely go away but that’s not your future, so stop paying so much attention to it.

Ron: All right. So, you know, there’s a lot of debate today about AI and the future of work and a lot of fear about AI replacing human workers. We’d love to hear your views on that.

Paul: I don’t see that happening. I think that there are so many things that are going to wind up being created and they’re actually more interesting jobs. I don’t think anybody really has much fun being in a call center but if that kind of work is handled more by chatbots and so forth, then you can have people sort of supervising the chatbots and just intervening on the interesting complicated problems rather than having to tell somebody when their policy payment, their premium payment is next due, that kind of thing.

There’s a concept that I like called the Centaur. Mythologically, that’s half man, half horse but I think you’re going to find lots of jobs becoming Centaurs, sort of half-person, half machine. I think that you’ll have most of the boring tasks get automated but there’ll still be plenty of work that is of interest for people like you and me to do. So, I see that as a legitimate concern, but I don’t think it’s going to be a big problem.

Ron: Centaurs are probably one of my favorite creatures. All right. So, one of the fun things that we like to do is we like to wrap up on the same question for everybody. I’ll preface it by saying my favorite answers to this question are always not business-related. The question is very open-ended. What is one piece of wisdom that you’d like to share with our listeners?

Paul: I saw that in the notes you very kindly sent ahead of time, I was thinking more of a business answer. My business answer would be to think about devil’s advocates because there are lots of things that you sort of think you know that you don’t really know. And if you give somebody license to poke holes in your argument, say “Don’t tell me if this idea is good, just tell me because, you know, I assume it’s goodjust tell me all the things that can possibly go wrong,” I think that’s going to open your eyes.

In terms of I’ll tell you the best thing I ever did with my kids and I don’t know how practical this will be for anybody else, but this one little decision I made wound up having a profound effect. It was basically just finding something to do with, in this case, my younger daughter, that was unobtrusive but gave me a lot of time with her while she was a teenager.

She was one of the top distance runners in the country as a high school student, so she would have to go on these long runs. In the place in Northern California where I live it can be quite hot in the afternoons. So, I just told her that anytime she wanted to go for a run, no matter when, no matter what I was doing, I was willing to be her Sherpa. I would get on my bicycle because I couldn’t possibly keep up with her on foot and carry water for her.

She would go, you know, sometimes for 10, 12 miles or whatever, which would give me a lot of time. She also was as you might imagine, panting so she wasn’t inclined to talk a whole lot. So, I basically would get an hour sometimes just to sort of talk to her. And I love history, I know a lot about different parts of history and often times she would start a run saying, "Hey, okay. So, tell me about X." And I would just tell her everything I knew about X for the next hour. So, she wound up with a history degree from Yale, she’s now in law school and she not only learned a lot of history but developed a love for it. What we did formed the basis for a really good relationship that’s continuing now that she’s 23, almost 24. So long answer but a friend of mine way back when sort of planted that idea in my head because he was talking about parallel time that he wanted to be able to have with his son when the son became a teenager to sort of do something together where you didn’t absolutely have to be talking to each other all the time but could form a basis for a good, strong relationship.

Ron: As we wrap up, where can people reach out if they want to learn more about you and what you do?

Paul: Sure. The best place to go is insurancethoughtleadership.com. That’s a mouthful, but that’s where all the good stuff is. I would encourage you when you go there to sign up for this free "Six Things" newsletter that comes out every Tuesday. You can also go on Twitter to #ITLupdates or can find us on LinkedIn. I also post articles there, there’s a reasonable amount of interaction, both on Twitter and in LinkedIn. I’d encourage you to come find us there.

Ron: Thank you so much for taking the time, Paul. As always, you can find us at www.chisel.ai, on LinkedIn, make sure you like and subscribe and we’ll have another episode for you shortly. Thanks again, Paul.  

Paul: Thank you.

Ron: That’s a wrap for this episode of “AI Wisdom” hosted by Chisel AI and me, Ron Glozman. Thanks for listening.

If you like our podcast and want to hear more, check us out at www.chisel.ai or tune in and subscribe wherever you get your podcasts: SoundCloudSpotifyiTunesGoogle Podcast, or Stitcher

Join us next time for more expert insights and straight talk on how AI and insurtech innovations are transforming the insurance value chain. See you on the next episode!

Browse different topics

Recent Posts