Are AI and data analytics hurting claims outcomes?

The insurance industry needs to catch up, insurtech CEO warns

Are AI and data analytics hurting claims outcomes?


By David Saric

As artificial intelligence (AI) and data analytics gets more refined and adopted across multiple industries, this is proving to be problematic for insurance, with these technologies being adopted by plaintiffs.

“I see that the plaintiffs are even more sophisticated, figuring out how to how to use data, use AI, to solicit better outcomes for their customers,” said Tanner Hackett (pictured), CEO of Counterpart.

“I think that’s some of the reason that we’re seeing social inflation – insurance carriers are the ones that are paying for these claims, it’s not a fair fight.”

The CEO also pointed out that there is still a lag in using technology to streamline and strengthen claims departments.

“I’ve yet to see the investment that distribution has put into building API’s and front-end interfaces to make the UX experience better for customers,” he said.

“You’re putting out a product thinking that you know what’s going to happen on the back end with claims frequency and severity, and I would argue that it’s fairly unpredictable right now.”

Carriers continue to face a volatile market

While Hackett has witnessed some concerted effort from carriers to create more sophisticated claims processes, it is still lagging behind where the plaintiffs are at and too intertwined with other departments.

“I think there’s a lot of overlap between claims and underwriting to be effective in this volatile market,” he said.

“We’re entering a year of high volatility with the global conflicts, current macroeconomic trends and with an election cycle coming up. The only way to combat this is to be able to iterate quicker, and the only way to iterate quicker is to get a better data signal earlier.”

In an interview with Insurance Business, Hackett spoke about why brokers are an important piece of the insurance puzzle to create a more trusting experience for customers and why carriers may be looking to do more tech partnerships/acquisitions as MGAs become more advanced.

“There just isn’t that trust between the carrier and the small business” – Counterpart CEO

Before starting Counterpart, Hackett said he had owned several small businesses.

The CEO noted that insurance companies can be a valuable ally for businessowners because of their ability to deal with adverse outcomes.

“This can be very complicated stuff, and some of these risks can be existential to a smaller enterprise,” he said.

However, there is a large disconnect between insureds and their insurers, and Hackett said: “There just isn’t that trust between carrier and the small business.”

“I don’t blame them. It’s never been [there], it’s never felt like a partnership before.”

This is where agents and brokers, especially those with sophisticated tools at their disposal, can help bolster confidence in insurance products and the industry.

“If they can find a way to tap into the resources from carriers or MGAs such as HR tools, harassment and discrimination training, or give them more transparency into claims trends, we can use this as a conduit to espouse our message that we’re in it together, our incentives are completely aligned,” Hackett said.

For Hackett, this must start at an internal level, as insurers need to find a way to create more transparency internally, with the advanced tools, insights and data they at their disposal, to forge more productive relationships with brokers and clients externally.

“I see this partnership between an insurance carriers, brokers and small business clients is one that requires continued investment, and I think there’s going to be mounting pressure to do so,” Hackett said.

“They’re seeing MGAs be quite successful at their own game” – Counterpart CEO

Having attended the InsureTech Connect (ITC) conference in Las Vegas, NV, for multiple years, Hackett has witnessed attendance grow with each successive edition, from both small and big players in the industry.

“It was a is big year for a lot of the smaller niche providers, everything from data, to underwriting automation, to claims to risk mitigation. There was every flavor of tool that you can imagine, and it was very well trafficked by a lot of big carriers,” he observed.

The CEO believes that this openness to learn and adopt new ways of working is showing how the tide is turning in insurance, where the old adage “if it isn't broke, don’t fix it” is becoming slowly irrelevant in the industry.

“They’re really starting to wrap our heads around what’s going on in this world, because they are seeing MGAs be quite successful at their own game,” Hackett said.

“These MGAs are able to do so by using home-rolled datasets, underwriting infrastructure, claims management, risk mitigation, which is quite beneficial.”

Hackett believes that this has resulted in more carriers wanting to acquire or partner with smaller insurtechs in order to gain a competitive edge in the market without having to build a whole new set of processes themselves.

“That’s not their core competency,” he said.

With Corvus being acquired by Travelers and Thimble by Arch Insurance recently, carriers are recognizing that it is going to take a while to organically build the technological capabilities of these smaller companies.

“Instead, they can do it for pennies on the dollar, relatively speaking, and get those capabilities today, to leverage their brand and start to compete,” Hackett said. “I think we can expect to see more of this kind of activity in 2024 and onwards.”

What’s your view on AI’s impact on the claims space and Counterpart CEO Tanner Hackett’s perspective on more Insurtech acquisitions? Leave a comment below.

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