AI Wisdom Ep. 35: The Future of Commercial Lines Underwriting

Insurance Industry News & Views - May 26 2021

GlobalData forecasts that AI platform sales in the insurance sector will reach $US3.4 billion ($4.39 billion) in 2024 from $US1.2 billion ($1.55 billion) in 2019 – a compound annual growth rate of 23%.

Analyst Sophia Patel says AI demand in insurance is no longer limited to basic conversational platforms for customer queries. “Applications for AI in insurance now span the sector’s value chain – from product development and risk profiling to claims handling,” she said. “As more legacy insurers inevitably move to the cloud, AI platforms, which are more compatible with these operating systems, are certain to see greater traction.”

Forward-thinking insurers are making innovative, bold moves to harness the power of intelligent automation, emerging technologies, and data to digitize their underwriting operations to serve customers and brokers better.

As the nature of risks change over the next three, five and ten years; as autonomous vehicles become more mainstream; as the business workers’ profile changes and workers’ comp needs evolve; and the insurance industry workforce transitions and new digital natives dominate, insurers need to embrace technologies to meet changing customer needs, maintain healthy portfolios and deliver exceptional customer experiences.

On this episode of the “AI Wisdom – Talking Innovation in Insurance” podcast, host Ron Glozman, CEO, Chisel AI speaks with Tony Fenton, Vice President of Commercial Lines Underwriting and Product, Nationwide about his digital transformation predictions for commercial lines underwriting in 2021 and beyond.

With an extensive track record in commercial lines, Tony shares his insights on the top four criteria that insurers should be considering when it comes to digital transformation and measuring the success of transformation.

  1. Understanding agent and customer engagement
  2. Customer Retention
  3. Rate or Cost of Goods Sold
  4. Product Performance (Loss and Expenses)

And outlines how one of biggest changes impacting underwriting today is understanding the interaction experience between underwriting and agents, as well as customers in terms of products.

As customer and agent interaction models continue to evolve, the digitization of underwriting methodologies is morphing to close the gap. Using technology and advanced analytics to leverage data to effectively assess risks and underwrite accurately with speed and pace is essential. Tony explains how advanced analytics play a significant role in the insurance industry and how modeling techniques continue to get more sophisticated in incorporating data.

AI, IoT, RPA, are all really unique and play a role within our industry and what I see is not siloed technology, but really full-stack technology says Tony Fenton, Vice President of Commercial Lines Underwriting and Product, Nationwide. “I think each of these technologies play together to create that right experience for agents, customers, or outcomes. It's less about the siloed approach to the technology, but how do they actually complement each other in terms of creating the right outcome.”

Listen to the full episode to hear Tony’s take on the importance of culture, setting your North Star to align with operational strategies and why being a student of the industry is so vital. Click play to listen to the full episode (listen time 33 minutes) or read the full transcript below.

Full Transcript

Ron: Hello, and welcome to "AI Wisdom Talking Innovation In Insurance." 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.

I'm very pleased to have Tony Fenton, Vice President of Commercial Lines Underwriting and Product, Nationwide, join me today as we discuss the future of commercial lines underwriting. Welcome, Tony. Thank you so much for joining us.

Tony: Thanks, Ron. Appreciate it.

Ron: Would love for you to do a quick introduction.

Tony: Yes, absolutely. So, Tony Fenton, Vice President of Underwriting and Product at Nationwide. I've been in the industry 23 years, all commercial lines. The topic today is befitting. There's been a lot of change as of recent. But looking back on my career, number of years in the field, operations, and also some time in staff, with my role that I have today, I have the best of both worlds. The underwriting product organization, in terms of truly building out our products, but also thinking about the strategy. How do we live into the future? How do we meet the needs of customers and agents leveraging technology? Going back 23 years ago, to where we're at today, the world continues to change and that's what makes me excited about what we do. Very excited for the conversation and appreciate it.

Ron: That's awesome, and I'm glad that you're going to have such a great insight across those 23 years, because the very, very first thing I want to talk about is that changing world. So, right now, we're still in the midst of a pandemic, there's been quite a bit of civil unrest, especially in the United States and there have been other market factors such as the Suez Canal blockage, and so many other things going on globally that the market has just been hardening, and there's been quite a bit of disruption. So, I'd love for you to share which commercial lines you're seeing as the most affected, and what are the factors that you feel are having the biggest impact right now?

Tony: Great question. Again, playing off of the conversation that we had earlier, interesting times. I think, you look at the lines of business, and there's a few that are pressured, and for different reasons, but I'll run through insights that I have in the market. I think about commercial auto. Commercial auto's been pressured for roughly a decade and I think a lot of carriers continue to struggle with auto performance. There's a lot of different moving parts there. You have distracted driving, you have social inflation in terms of the results and loss pressures, but it's also keeping up with the technology, and understanding driving behavior and leaning into truly matching up rate and exposure. So that's an interesting line that I think continues to...a pressure point in the industry.

I think about property as well. From a property perspective, going back the last few years, an enormous amount of CAT activity. So again, unprecedented. You think about even Q1 this year, the ice storm in Texas. I mean, you traditionally think about wind and hail and tornadoes and natural disasters, but that probably wasn't top of mind, or radar for the industry. So, I think it's matching up the CAT activity against, what is the CAT strategy, as well as property performance in the portfolio. Maybe the last area I'd highlight is cyber, and just with the amount of activity in the cyberspace, cybercriminals are continuing to get more sophisticated. That's an area that is evolving. I think over the last decade we've seen that cover continue to move and morph, but again, very active. You think about cyber breaches and just the ability to respond and also some of the ransomware coverage, as well as the extortion that's happening. So those are probably three pressure points in the industry. I think from my perspective, those are really dynamic.

Ron: I think those are probably going to be some of the ones that people are most impacted by. I mean, most people own property, and that ice, hail, snowstorm, whatever the right word for it is, that happened in Texas, is certainly unprecedented. It's interesting because a survey that was conducted by Strategy Meets Action (SMA) and Boundless Consulting said that 80% of industry experts expect underwriting to be significantly different in the next five years, and 94% expect it to be significantly different by the end of the next decade. What are some of the changes that you expect to see are going to have an impact in commercial lines underwriting?

Tony: I think expectations continue to change. So maybe not just commercial underwriting, but I really center up on customer and agent expectations, whether it's the interaction model, whether it's products, and I like to liken it to Amazon. Think about this last year from a pandemic perspective, having the ability to click "Buy" and get an item in a couple days, I think that user experience is unique and different. I think the insurance transaction hasn't morphed a lot over the last couple decades. I think the expectation of agents and customers continue to change and if companies don't clearly understand what are the needs of our distribution partners and customers and meet them where they're at with the evolving expectations, I do think that there will be gaps.

One of the biggest changes from an underwriting perspective is understanding that interaction experience with both underwriting and agents, as well as ultimate customers in terms of products.

Tony Fenton Quote #1 Lighter Grey

So, that's one point. I think, number two would be the ability to leverage data, data as an advantage. Going back, my 23 years, when I was an underwriter, I think every carrier had a whole set of questions that they would ask in terms of eligibility, trying to better understand risk and exposure. As of recent years, finding different ways to get to the answers through data. So, as an underwriter, you still probably need the insights to effectively underwrite, but how do you actually compress the number of questions that's using unstructured third-party data? And that's really using technology and advanced analytics to our advantage. So, I think that's an evolutionary move in the industry. I don't think anyone's fully arrived, but condensing the number of questions, getting the right answers to those questions, accurately, with speed and pace, is another area.

And lastly, I think the modeling. I think advanced analytics continues to play a significant role in our industry and I think the modeling techniques continue to get more sophisticated in incorporating that data. So those are probably three areas that I think commercial underwriting will continue to evolve. It's meeting the expectations for distribution partners and customers, whether it's product or experience, it's the data aspect, but also, how you actually wield that data through modeling and analytics. So, definitely interesting times.

Ron: I love that. I think obviously, data is key, and near and dear to our heart here. I also want to talk a little bit about people, because if we look at underwriting organizations today and the hypothetical underwriting organization of the future, are you seeing new roles in these organizations? And if so, what can insurers do to either hire, upskill, and reskill their people today to help them advance in the future?

Tony: I think talent is a key focus and not just talent, but also development. I think the underwriter of the future will have different skill sets than maybe the traditional underwriter that I was maybe 20 years ago. Back to the data and analytics, being fluent in digital enablement and technology, being able to understand the power of advanced analytics to understand the portfolio, but even more so, being able to wield a decision on a portfolio basis. So, not only the individual risks, but understanding the portfolio. That's really important in small commercial. When we're talking about underwriting, and I think you have small commercial, and you have middle market, two different go-to-market strategies, but in small commercial, being able to really truly understand your portfolio from a risk perspective, but also using the analytics and data to best shape the outcomes over a period of time.

So, some of the things at Nationwide, we've invested over $160 million in terms of upskilling and reskilling our talent, and we call that “Future of Work”. Our underwriters, as well as all the professionals within the organization, have an opportunity to take very targeted training courses, and really customize their learning experience over the course of each year. So, it could be digital technology, it could be advanced analytics, it could be a number of different areas that really focus on microlearning around a specific area of interest. But I think that's going to be critical, because it gets back to upskilling, as well as augmenting the traditional underwriting approach with these new concepts and staying abreast of our environment and industry.

Ron: I love that, and I think that's so powerful, because staying ahead...if you're not doing something to keep up with the pace in some sense you're falling behind, right? Because time only moves in one direction. It moves forward. And so, if you are using the same skill sets, the same tools, the people are using the same technologies, you're going to be left behind. So, staying up to date is going to be extremely important. One of the things though is, there's a lot of things coming out these days. I mean, there's obviously artificial intelligence, but there's Internet of Things, like, IoT devices, there's RPA, there's all these talks about straight-through processing and automation. How do you see those things intersecting with the underwriting ecosystem and the insurance distribution channels? Are there going to be changes? Are things going to remain the same? And if so what parts of them are going to remain the same, and what parts will be different?

Tony: I think with technology, there's a lot of advancement. You mentioned AI, IoT, RPA, all really unique and play a role within our industry. What I see is not siloed technology, but really full-stack technology and when I say that I think each of these technologies play together to create that right experience for agents, customers, or outcomes. So, I think it's less about the siloed approach to the technology, but how do they actually complement each other in terms of creating the right outcome.

One of the areas that I am passionate about is APIs relative to product enablement. Thinking about having a modern policy admin system, being able to build your APIs, and make your products more portable. I think there's a lot of different platforms that continue to pop up and persist within the industry. Having the ability to have an API and participate with speed, ease, and efficiency is critically important. But then within that platform, you probably have, you have different third-party data that's integrated, and that third-party data is sometimes curated through artificial intelligence. So, said another way, you have artificial intelligence, you have the actual API technology, in terms of building out a product and porting it. But last but not least, you might actually use RPA, in terms of some of the back-end experiences.

I think from my perspective, it's not really about the singular technology, it's about how do those technologies interact to create the right experience.

And at times, you digitize what you can to create the right experience, but at the same token, there might be process improvements relative to how you think about your organization. So, it's not always technology, because in the past, I think you can take an experience and you can digitize it, but maybe the experience, to begin with, was maybe not optimal. So, I think it's making sure you have the right experience, and then working your way through what needs to be digitized, what needs to be ...leveraging a difference technology to get the right result. I see this as being more of a complementary technology play, versus maybe silos that I've seen in the past.

Ron: Silos, I think, are not to anybody's advantage. Silos are typically...there are times when silos make sense, especially around data privacy and data security. Data siloing is a good concept because it reduces the opportunities for somebody to access the data. But when it comes to, like, operating information, obviously, we want to have that information to be accessible to everybody and not siloed, because I've seen this in the past with the very large organizations, the right hand doesn't know what the left hand is doing and any types of efficiencies we can introduce into the process to minimize that, I think will definitely be of benefit to all players in the space.

I do want to circle back on this talk of living through unprecedented times that we touched on in the beginning of the conversation. You know, right now we're dealing with remote work. At least for now, most offices appear to still remain closed for the foreseeable future. The need for business continuity and resiliency is heightened as part of that and cyberattacks are on the rise. We've seen just in the past couple of months, several very, very large cyberattacks come into the market and really impact some large players. We won't name any names today, but what are you seeing that insurance companies can do to catch up to these mounting changes to be faster, better in digital, while also being secure?

Tony: I think one of the key words you mentioned there is moving environment. So, the environment's always been continuing to shift and change, but I think it gets back to understanding the agent and customer experience. As an insurance company, understanding the consumers of your products. So, first and foremost in this changing environment, really pegging, what does a distribution partner need to be effective in selling and representing products? Are they positioned appropriately in terms of product capability, as well as the ability to be sold in market? I think that's critically important.

Then secondly, what is the user experience? How do you really truly engage with a customer, end customer, as well as an agency? I think about first notice of loss more for a customer. Going back a number of years ago, you'd be faxing something in or calling it in. With the advent of technology, with smartphone utilization, there's an expectation that you have the opportunity to report and engage in a digital fashion. So again, back to the discussion around expectations, making sure that you truly know and can react to the evolving base of both customer and agent. And I think, how does one do that? I think it's investing time in this space, and not just assuming, but listening, doing listening sessions with your agents, as well as customers, to better understand not only what are the needs today, but what are the needs of the future and I do think that that's a very much dedicated discipline that requires focus.

Quite frankly, each customer set could be a little bit different. You think about small commercial customers. it's all about speed, ease, efficiency, coverage, and packaging for a small business. In middle market, it's really about expertise and consultation. So, not only do you have the insurance product itself, you have what is the consultation experience you get through loss control services? What experience can you provide in terms of augmenting their business or helping them manage risk? So, I think it's really truly understanding, again, what are the evolving issues for them as an industry, but what is the interaction model that would be most beneficial?

Ron: Those are some great words of wisdom. 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 for feature articles, interviews, opinions, and more.]

We're back with our featured guest, Tony Fenton. Let's jump right into the next question. I've read several articles emphasizing the importance of culture. I recently had the opportunity to speak with Megan Bock Zarnoch, who's the CEO and founder of Boundless Consulting, about the intersection of culture and underwriting. I'd love to get your thoughts on the importance of culture in driving underwriting innovation and digital transformation.

Tony: First and foremost, culture is critically important, because it is the connection to your strategy and the DNA of the team. Culture is what folks do when someone's not around, and truly creating that operational principle for the team to really strive towards the results, as well as have that North Star in terms of what you stand for as an organization. I do think that without the right cultural pillars, you probably don't have the North Star in terms of what you're aiming to accomplish.

I think back to the question on culture, if you don't have a strong culture, you don't have the pillars, you probably don't have the North Star in terms of what are you strategically trying to accomplish and connecting each of the individuals into that strategy.

One thing I've found over the years is all professionals want to see themselves in the strategic picture. Having the right cultural DNA against your operational strategy is the glue that really keeps the company moving forward. So again, common language, connection to the strategy, and an ability to really have a North Star in terms of what you stand for as an organization. So, I can't stress enough, I definitely agree that it is critically important, and for each associate to understand the culture and connect it to the strategy. And then, ultimately, day in and day out, how they live into both of those.

Ron: I feel like you could talk about culture for a long time, and people would love to just listen, because culture is something that's very near and dear for us as well. I think without culture, like, an organization is comprised of people at the end of the day. Obviously, there's software and business processes, and checks and balances, and a lot of really good stuff. But at the end of the day, it just comes down to people, and culture, and a mission, and being driven. So, when we think about large-scale digital transformation, it doesn't happen overnight. I think leadership has a part of that ensuring that insurers keep on driving and continuing to have drive towards progress and empowering their change agents within the organization. So, I'd love to get your thoughts on how can these executives in these large organizations, like Nationwide, for example, how can they drive progress, secure buy-in, and empower the people within to drive change?

Tony: Ron, that's a great question. A lot to unpack in that question, but I think about large-scale digital transformation as an investment and a journey. When you say large-scale digital transformation, that generally doesn't happen in 30-day, or even 90-day increments. So, one of the things that I think each company should do is think about the, I call it the three horizons, the now, the next, and the future. Digital transformation is one of those next and future moments for a company. So, understanding where you're at in terms of your digital transformation, but also then planning for the future. So, again, it's really important to have a solid digital foundation and to really go through a transformational effort, you have to really think in those horizons, where you have interactions, whether its customers, agents, in that digital transformation space. I call that working on the now, creating the right agency and customer experience.

But, in terms of large-scale transformation, it's got to be something that is painting that picture into the next and into the future, where you get buy-in. I think back to your question regarding how do you get buy-in, its painting, what does the future of our industry look like? And what is the upsides and downsides of having the digital transformation in place? And I think again, it's not a moment in time, it's got to be a dedicated strategy in which you get the buy-in, and the operational excellence around the execution of that, because anytime you undertake a multi-year digital transformation, you're going to have moments where you look up and you say, "Gosh, is this the right strategy, is this the right investment?"

But being able to tether back to the why, and tether back to what this gains, both you and also your agents and customers, is critically important. I think it's really about understanding the longer lens of the investment, but also tethering back to that “why”.

Nationwide has been working on a multi-year digital transformation within our policy center system through Guidewire. And again, what that's done for us is allowed us to have one singular digital platform for our policy admin. And again, this seems like an easy statement, but having that opportunity to build off of one platform that's modern gives us that opportunity to be advantaged, with speed of delivery of products, the ability to build off APIs that I mentioned earlier. But that's a labor of love. That's a multi-year investment, multi-year journey, but back to why you might do it, it gives you the chassis in which you can accelerate and sprint into the future.

Ron: There are so many great things there, and I think I'm going to have to borrow the now, the next, and the future, because I've never heard it put so eloquently. When you said that, I just had a giant smile on my face because it perfectly reflects how I think about future planning when I'm thinking about my business. Hopefully, that resonated for people as well. I'd love to talk a little bit about change because change is daunting. You know, not everybody is accepting of change. Many people dread it. Humans are great at change, but at the same time, we're very averse to it. We like to know what's happening, we're creatures of habit. And so, what advice do you have for insurers who are embracing emerging technologies, and putting in new practices in place, and gearing up to change their underwriting behavior while struggling with this change management?

Tony: I think change always comes back to the “why”. And when I say why is, why might we have to make a change, the ability for each individual to understand the why. And I think, again, every individual has a lens into their role, and their perspective, and their experiences. So, clearly rooting in the “why” the change.

I think, secondly, enabling the change, and when you say enable the change, I think it's back to the cultural component. How does this fit into the cultural North Star that we've built, but also back to the strategy.

We were talking a little bit about future of work, and the investment that Nationwide has made in future of work, it was clearly articulating that the industry is changing, the speed and velocity of data analytics, artificial intelligence, new technology, the whole world in which we operate is changing.

Painting that picture for associates was critically important. I think, then enabling back to here are courses in which you can supplement, augment, and build your professional acumen. Then finding ways to then recognize, support, and also tie back to the strategy. So, I think it's really about painting that picture of the “why”, but then also enabling, and connecting it to the strategy. It seems really simple, but in the same token, if you skip over the “why”, and you skip over the enablement piece of change, you'll have folks that are looking around wondering, why might we actually be doing this?

Ron: That's right. Why are we actually should be doing this is always a question? How do you think about success? Because whenever we embark on a change process, I think one of the goals that we have is to improve our business for the better. At least I would hope so. Otherwise, there's really no point in going about change. So, how do you measure success? What are the top five criteria that insurers should be thinking about when it comes to transformation, and measuring the success of that transformation?

Tony: Great question, Ron. If you're only going to let me have five, I've got to ponder, and I don't know if this is in rank order. First and foremost, understanding agent and customer engagement. If you're an insurance company and you're serving the end customer, what is the engagement? Are you meeting their expectations with your products and services? So, I think it's about understanding the customer, whether it's the end customer, whether it's the independent agent for Nationwide, for our P&C products. So that would be number one, understanding the engagement and are we meeting expectations?

I think, number two, are we keeping the customers we have? Simple metric, retention. So, are we able to meet the needs of our existing customers? Again, as you go through digital transformation, you're going to be moving, maybe, customers in and out of products, and throughout that process, are you keeping the customers, and then are you able to really build up that trust, where retention is key.

I think next is growth. Are you able to accumulate and grow customers? You have the right products; you have the right experience. Are you able to create new customers for your organization? And again, that's a great measure, because are your products attractive? Are you really, truly creating value? And are you differentiated in market?

Next up, I would say rate. In terms of true underwriting and product performance, I'm going back to a traditional metric of rate. Are you keeping up with rate in market? So, said another way, understand what is your cost of goods sold for the product. Why that's really important is, for any carrier, staying on top of that is commensurate with creating stability. What you wouldn't want to do is not understand that, and then all of a sudden have a rate increase that goes up 20%, where you shock a customer. So, I think it's really understanding your cost of goods sold. And at times, there might be opportunities to decrease rates. It goes both ways.

I think rate is a key performance indicator of understanding your cost of goods sold, creating stability, and pricing the product most appropriately.

Tony Fenton Quote #2 Lighter Grey

And the last part is the performance of your products and that's the loss performance, as well as the expense component. But the bigger part of that, that I think a lot of the industry doesn't always talk about is what's the end-to-end value chain view of your product. And so, said another way, that entire lifecycle. What does acquisition look like, in terms of point of sale. What is onboarding, and what is the during policy term look like. And then in the event of a claim, what is that experience, your interaction model. And then understand the insights, as well as the end-to-end view of that customer lifecycle, is critically important. And that plays into loss performance, but it also plays into what I mentioned earlier on the agent and customer engagement. Really not thinking about just one moment in time, but what is that entire lifecycle for the customer? And then what are the insights you can glean to either make your product stronger, create a better experience, and truly live into the expectations of both the agent and customer?

Ron: Those are some five amazing tips, and I wish we had time for you to share more, but as we wrap up, I would love for you to give one piece of wisdom, a 60-second clip that you'd like to share with your peers.

Tony: One tip is, I'd say be curious. You know, our industry continues to change. Over my 23 years, I've really come to appreciate change is constant, and be curious, but also be a student of the industry. So, when you're being curious, understand what are the moving parts of our industry? What are the dynamics in terms of expectations? We've talked a lot about today, agents and customers. But then I think it's also knowing your customers, back to voice of customer, voice of agent, or voice of distribution partner.

I would sum it up be a student of the industry and be curious because there's nothing more constant in our industry than change.

Ron: I love that. Be curious. That is powerful words. So, Tony, where can people connect with you and Nationwide if they want to learn more?

Tony: I can be found on LinkedIn. Feel free to send me a LinkedIn invite, and love to connect. Or if you want more information on Nationwide Insurance, go out to our website at

Ron: Awesome. Thank you so much for taking the time today. And as always, if you guys want to learn more about insurance, innovation, and everything that's going on, please check out, and you can connect with me on Twitter or LinkedIn, at Ron Glozman. Thanks again, Tony.

Tony: Thanks, Ron.

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

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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!

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