Book Talk: Q&A with Paul Tetrault, Author of Insurance 101 for Innovators

Insurance Industry News & Views - January 21 2021

Paul Tetrault is Executive Director of The Insurance Library in Boston, and author of Insurance 101 for Innovators, a primer on fundamental concepts in the field of insurance and risk management, published by Insurance Nerds. Proceeds from the book’s sales go to support The Insurance Library, a 501(c)(3) nonprofit that serves the insurance community by providing research, education and opportunities for engagement. We connected with Paul to talk about why he wrote the book, who it is for, and how Insurtech innovators often go down the wrong path when developing solutions for the insurance industry.

Paul, congratulations on the publication of Insurance 101 for Innovators. When we last spoke back in November 2019, you argued that, “there seems to be a foundational misconception that the insurance industry was created over a century ago and has been static ever since, and now it has to deal with this new thing known as innovation.” Was setting the record straight about how insurance and innovation have always gone hand-in-hand an impetus for writing the book?

Thanks for the opportunity to discuss the book and innovation in insurance. The perception I referred to may be a bit less pervasive as time goes by, but it persists. It’s not hard to find offhand references along the lines of “the insurance industry has been slow to accept change,” or “not known for innovation, the insurance industry…” While there are issues regarding legacy systems and instances of sticking to doing things as they have always been done, it is nevertheless true that insurance – an innovation itself – has always been an area where innovation flourishes.

At the same time, I don’t think anyone would disagree that the pace of innovation – in insurance as in other areas – has increased dramatically in recent years, and the growth of the insurtech movement is significant. The motivation for this book was a recognition that there are a lot of new entrants seeking to innovate for and/or disrupt insurance, or aspects of insurance, and for many of them, and the employees they hire as they grow, there is a tremendous learning curve.

Insurance is different from other businesses in many ways. Pricing, distribution and regulation are a few examples of aspects of insurance that are very different from other areas of business. And like some other industries, there is jargon and usage of terms that can throw off one who is not initiated. So, the book is meant to bridge the gap for innovators who may want to interact with the industry but don’t have a background in insurance. It gives them the broad overview, core concepts and terminology to allow them to talk with insurance industry incumbents and regulators.insurance101-3D-cover-final (1)

The idea for the book actually started as the idea for a class on insurance for innovators, which The Insurance Library offers in a 1.5-hour online format. I was attending an insurtech-related event last year and met a couple of founders who were running a startup focused on developing AI applications for insurance. When I described The Insurance Library as a provider of education including insurance designation and licensing courses, they asked if we offered something on insurance fundamentals as they thought it would be of value to their new hires. And while we have always offered introductory courses, they have been developed for people working in the insurance industry and often meant to serve as a foundation for further insurance education. The difference with Insurance 101 for Innovators is that the content is presented specifically with the information needs of innovators in mind.

Your book aims to explain the key concepts and terminology of insurance in a concise and easy-to-understand way using industry anecdotes and analogies. Who is the primary audience you had in mind when writing the book?

The intended audience is anyone who knows little to nothing about insurance but wants to know more, and quickly. It is specifically targeted at those who seek to innovate in the insurance space but do not have an insurance background. It gives a broad overview of key concepts and terminology so that, having read it, one can have a conversation with folks in insurance and not stumble over misalignments. Significantly, it isn’t bogged down with nonessential information. For instance, innovators don’t need to know everything in a licensing course, or a professional designation curriculum, but they need to know enough essentials to be able to converse without stumbling over terms or misconceptions.

It should also provide insights that could help innovators avoid going down the wrong path with some of their ideas. Finally, it is a resource that innovators as they grow can provide to their employees such as technical personnel without insurance backgrounds to give them helpful context about the industry and ecosystem they are working for or in.

In the early days of Insurtech, some would-be technology providers stressed disruption over cooperation with industry incumbents, which we haven’t really seen come to pass, at least not yet. Do you think this disconnect was a result of some insurtechs not really understanding the industry they had set out to disrupt?

For sure. It’s easy to look at a large industry with incumbents having 100-plus years of experience and assume that it is ripe for disruption. But it is a case of not knowing what you don’t know. Insurance is a hyper-competitive business in general and it is filled with really smart people, many of whom are always looking for better ways of doing what they do.

There is a (pink) elephant in the room that provides a great case study for making assumptions and assertions that had to be greatly modified when they clashed with reality.

There’s a lot of discussion today about the Amazon effect on customers’ expectations when they go to buy insurance. In your book, you make the argument that insurance is different. How so, and where do innovators tend to go down the wrong path when it comes to ‘modernizing’ an industry that has a reputation for being outdated in how it operates?

As I mentioned at the outset, insurance is different from other business segments in a lot of significant ways. Pricing, distribution and regulation are matters that stand out, but there are others such as resolution of troubled companies and a completely different system for accounting. Innovators can go down the wrong path if they fail to appreciate these differences and most importantly why they exist. Innovators are understandably fond of challenging the notion of doing something “because we’ve always done it this way,” but if there is a legitimate, well-grounded reason for doing something a certain way, that has to be recognized.

At the same time, everything can always be improved upon, and when it comes to user experience, there are a lot of gains being made both by incumbents and newcomers.

Do you see insurtechs taking a more mature approach to working with incumbents today versus, say, 3-5 years ago? Are insurers and insurtechs now speaking the same language, or do we still have a way to go?

Yes, I think the bold and sweeping notions of disrupting an entire industry, along the lines of how TNC/ride-sharing companies disrupted the taxi business, have been muted for the most part. Meanwhile, a lot of innovators have recognized they can make a play for building a better mousetrap that affects a segment of the multilayered system that results in the sale and servicing of insurance products. The hubris has been replaced by a more thoughtful approach.

From the industry side, the level of concern about being disrupted has subsided. Incumbents have become more comfortable with understanding the level of activity that is going on with start-ups and figured out a way to assess what might work for them and what might not. And beyond that, some significant incumbents are deeply involved in the innovation movement.

Paul-TetraultPaul Tetrault, JD, CPCU, ARM, AIM, is executive director of The Insurance Library, a non-profit that enriches the insurance and risk management community by preserving its history and offering services in the arears of research, education and engagement. Paul previously served as state and policy affairs counsel for the National Association of Mutual Insurance Companies, responsible for public policy development, legislative and regulatory issue management, and legal analysis in support of NAMIC’s government affairs activities. Active in the CPCU Society, Tetrault is chair of the Society’s Regulatory and Legislative Interest Group and a member of the Society’s Publications Committee, as well as a member of the board of the Boston Chapter. He is a recognized thought leader on public policy issues involving the property and casualty insurance industry and is a frequent contributor to insurance trade and professional publications such as National Underwriter/PC 360 and INSIGHTS: A Professional Journal by the CPCU Society. Prior to joining NAMIC in 2005, Tetrault practiced law focusing on litigation defense and insurance coverage issues. He previously served for many years as editor of The Standard, New England’s Insurance Weekly. A graduate of Villanova University and Suffolk University Law School, Tetrault is a member of the bars of Massachusetts and the United States Supreme Court.

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