Craig Bedell Talks Digital Transformation in Commercial Insurance

Digital Transformation - June 17 2020

Craig Bedell is Sole Proprietor at Bedell Consulting, and a prolific speaker, mentor, writer, and teacher focused on the intersection of insurance, business and technology. Craig Bedell has over 30 years of P&C insurance business experience, mostly on the underwriting, sales, marketing and field management side. Eight of those years were spent as a commercial lines broker and risk manager. Prior to founding his own insurance solutions consultancy, Craig served as a Global Insurance Industry Executive at IBM. We connected with Craig to ask a few questions about digital transformation in P&C insurance, Insurtech partnerships, and how COVID-19 and other key trends are impacting commercial insurance today.

Craig, your focus is on optimizing people, processes and technology in insurance and risk management. If you had to give the industry a report card, how well do insurers manage and price risk today? 

Overall the insurance industry does an excellent job pricing risk. It has to in order to survive.  That’s not to say that there aren’t challenges especially with coverages for new and emerging risks as well as the occasional dramatic shift in historically predictable risks.

Currently some of the newer risks in the commercial and specialty space include cyber security, identity risk, and areas of liability associated with AI and bias. Obviously COVID-19 has opened up a can of worms relative to business interruption and workers’ compensation covers and thus pricing. 

In personal lines, shifts in driving habits and opportunities to move towards usage-based pricing models offer examples of changes to historical approaches. 

In commercial lines it will be interesting to see just how dramatically COVID-19 and extended work-from-home practices affect workers’ comp and liability coverages. Obviously, business interruption and supply chain exposures will drive insurance opportunities.

From the perspective of risk management: the insurance industry has generally been rather passive. Certainly, carriers and reinsurers are strong risk advisers but, except for a few companies that do have strong engineering risk management services, the industry hasn’t served as an active risk manager of sorts. 

Certainly, terms and conditions along with limits and deductibles have influenced some behaviors thus affecting some managing of risk. But, by and large, carriers haven’t been strong risk management partners other than through direct risk transfer via the policies they have written.

If you look behind the curtain at the commercial insurance back office, there is still an incredible amount of paper pushing and time-sucking manual work. As the industry has had to move to working remotely due to COVID-19, paper-based processes are proving difficult to adapt to virtualization. Why does digital transformation still seem so far off, and do you think the current coronavirus crisis will accelerate digitization initiatives?

When we can look back on the COVID-19 pandemic, one of the “silver linings” we will note is that it served as a catalyst for the accelerated adoption of technologies that have been available yet under-utilized by the insurance industry and have been lying in wait for better use. 

When things are going “just fine,” it is rare that we want to change things. When we are busy with our daily routines, we rarely spend time “thinking outside the box,” let alone acting on those thoughts.

COVID-19 demanded that companies deal with their employees as “customers of their services” including business systems for underwriting, pricing, policy administration, claims, billing, accounting, commissions, and many more. Then there were demands for remote (external) communications, collaboration, task management and human resources. This was all on top of the customer support functions including policy, claims, billing and general call center capabilities.

The point is, the business of insurance had to adopt these capabilities as best it could. Holes, weaknesses, and shortcomings became apparent to every level of the organization including senior management. Insurance companies will have the opportunity to collect their insights, develop comprehensive strategies, and flush out priorities with firsthand experience.

The outcome of COVID-19 will likely be a much clearer picture of what needs addressed; what worked and what didn’t.

We recently curated a crowdsourced eBook Underwriting Priorities: The Digital Evolution of Commercial Insurance Underwriting. What’s your take on which technologies and digital transformation initiatives commercial lines carriers and brokers should focus on to make their underwriting processes more efficient, profitable, and responsive to customers?

The key for any insurer to acquiring and retaining profitable commercial lines business is being able to:

  • Clearly communicate to the market (insureds and producers) its appetite and offerings
  • Efficiently and accurately assess the risk details of a client
  • Respond quickly with an attractive program and price

Success is then dependent upon efficient insurance services including adjustments, modifications to covers; effective communications and advice; accurate accounting/billing, audits and reports; and quality claims and loss adjustment services. For producers, there’s compensation management, training and sales support.

Technologies that support customer interactions; process efficiencies, risk assessment, and performance management will continue to be key. I see great, focused use of artificial intelligence to aide in the “collection and digestion” of risk profile data – specific to the client’s business, as well as the general SIC code being hugely valuable. Robotic business processing, rules engines, and decision management technologies will help root out process inefficiencies.  Both AI and process automation will free up underwriters to apply their expertise to differentiate their offerings.

Financial performance software, predictive analytics, and business intelligence will continue to help insurers steer their portfolio strategies – risk, investment, claims and compensation.

Another technology that will likely change the game in unexpected ways may be blockchain. As commercial blockchains get formed to manage industry supply chain, food safety, finance, and so many other functions, there will be a place for risk management and specifically insurance to have a place in the network. This could change the model by which insurance is sold and written. Additionally, insurance-specific blockchains offer the potential to bring “back office” efficiencies between carriers as well as with the reinsurance market.

Most important, any technology that helps improve flexibility will be of value. Insurance will always be a key risk management technique. What’s changing are the diversity and complexity of risks, as well as the ability to assess and thus manage risk. Insurers that can effectively respond to these opportunities will prevail.

Established insurance carriers and brokers have increasingly partnered with small, nimble Insurtech startups to achieve their digital transformation goals. What impact do you think the pandemic and its aftermath will have on Insurtech? What areas of innovation will continue to be priorities, and which projects stand the best chance of supporting a broker or carrier’s rapid recovery after COVID-19?

Personally, I have never liked or really used the term Insurtech. I think it’s been an overused catch-all term. I do, however, see this as a logical phase of technology evolution. In its early stages, computers ran on code written by highly talented programmers who wrote an entirely different “machine language.” Through this language, they were able to coerce a machine to compute at a much higher and accurate rate than could humans – so long as the program they wrote was accurate. But the computer was relatively inflexible, so business processes, forms and even communications had to change in order to accommodate the linear processes introduced by these computerized systems.

As an early adopter of technology, the insurance industry benefited from the early returns on its investments. However, the convoluted business processes and forms-based communications that served these early technologies did not change as the technical capabilities evolved. What was then an advantage has grown into an “albatross around the neck” for most insurance companies.

More recently modern technology has become “smarter,” allowing business people to connect services/functional capabilities together (using English or their native language) in order to complete tasks.

Enter a period of time where technically savvy insurance business people could afford to “set up shop” to create service offerings using off-the-shelf core technical capabilities and, voila, we had the beginning of what some called “Instech.”

I believe we are past that point and are entering into the period where the surviving firms will be referred to as business solutions partners. These will be companies that offer services that address specific industry functionality to which carriers can subscribe.

Even before COVID-19, and the economic impacts it brought with it, we were observing the signs of some “wilting of the Instech rose.” Those firms that are able to scale and live up to the definition of a business solutions partner will continue to flourish. I don’t see insurance companies investing in miracles.  

Based on your experience, what are the secrets to a successful insurer-insurtech partnership? 

Any business partner has to be delivering a product or service that meets a need for its client that the client otherwise couldn’t easily fulfill for itself. To be a partner, a business solution provider is by definition interested in and committed to the success of its partner (client).  This is more than a customer relationship to whom the provider has sold something, but instead has a committed stake in the mutual success of the partnership.

By its very nature, a business solution partner will be working to nurture a long-term mutually rewarding relationship. In the modern world of insurance, this will mean understanding the business challenge/opportunity, applying imagination, change management and improvement, along with the technical capabilities to enhance the service.

As a highly regulated business, insurers must always comply with regulatory requirements. Business partners will understand these parameters.

Take out your crystal ball: What do you think the insurance industry will look like in 10 years?

I forecast that risk management overall will mature dramatically over the next 10 years, particularly in commercial lines.

Personal lines will likely remain relatively unchanged. We’ll see the biggest changes in the distribution of coverages. Automobiles will still need to be insured in order to be licensed. My guess is that cars will come with insurance provided through a network of MGA’s or MGU’s.  Homeowners insurance will likely be bought directly but, for the more affluent, agents and brokers will continue to be important risk advisors. I hope that the industry adopts blockchain or some other form of secure data protocol so that each individual and every dwelling carries with them a risk score to bring efficiency and accuracy to the underwriting/pricing process.

In commercial, I believe insurers and brokers will be providing extended risk management insight and advice to the middle market and will be dealing with much more sophisticated corporate risk managers on larger accounts.

I believe that risk emanates in great part from the unknown. As assets of all types – including workers – become more instrumented and predictive maintenance and risk management can be practiced, then entire classes of risks will be managed through techniques other than insurance. Successful insurers and brokers will develop fee-based risk management services and will partner with commercial accounts to help them use insights to better manage their risks. Mother Nature and Planet Earth will continue to offer a host of natural cause risks for which insurance is the logical approach.

The industry will become much more active in partnering with regulators, especially in the United States, to transform the regulations to allow more flexibility in the types of allowable coverages and currency of rates. Here, again, blockchain may be a transformative capability.


Craig Bedell

Craig Bedell, ARM is an insurance expert with deep insights into the optimization of people, process and technology. Craig was formerly Global Insurance Industry Executive within IBM’s Insurance Industry Executive Leadership Team where he was responsible for IBM’s global strategy in Business Solutions with special focus on Customer, Product, Claims, Distribution and Financial Performance. His efforts have been focused heavily on the application cognitive computing in transforming the insurance industry

He joined IBM in 2008 and brought with him over 30 years of experience in the insurance business.  At IBM Craig led the Business Analytics Software Group for Insurance before he moving to the Global Leadership Team. He also led the Global Business Insurance Practices globally for Cognos and Pitney Bowes MapInfo before joining IBM.

Craig’s experience also includes over 30 years as an underwriter, branch manager, broker and home office executive. He has an additional 12+ years in the technology industry leading worldwide insurance solutions for business analytics, decision management, business redesign and innovation.

Craig currently provides consulting, enablement, and mentoring services. He is a published author, writer, public speaker, mentor, and consultant.

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