The insurance industry has gone through a rapid period of digitalization, and specialized providers are coming into their own to make a tangible difference for the companies they work with. In this special edition of Insurance Business TV, we talk to Xceedance's president for the Americas, Travis Macmillan, to explain how insurance companies can not only adapt to the new tech-led environment but help shape it.
[Shaping the Future of Insurance: The Power of Focused Expertise Paul Lucas [00:00:07] Hello everyone and welcome to the latest edition of Insurance Business TV where we'll be delving into the digitalization of the insurance industry. Are you a technophile or a technophobe? If you're the former, then there's going to be plenty for you to add it to your playbook today as we delve into the concept of vertical integration. And if you're the latter, well, don't worry, because we're going to be explaining that idea and delving into some of the changes digitalization is bringing and how you can get started, I say we actually are going to be turning tweet genuine industry experts to wear both hats and explain how these ideas can benefit your business. That man is Travis MacMillan, President of the Americas at Xceedance. Travis, welcome to Insurance Business TV. Travis MacMillan [00:00:56] Thank you, Paul. It's great to be here today. Paul Lucas [00:00:59] So Travis, the insurance industry has, of course, gone through a rapid period of digitalization. Now, can you elaborate for us on some of the changes and the impact they've had? Travis MacMillan [00:01:10] Absolutely, Paul, so you know, if I think back, you know, first, I've been in the industry about 30 32 years, the first 25 years, the industry, you know, change was like very gradual. You know, starting with the advent of things like the fax machine, the Internet, email, online rating, you know, for personal lines and small commercial, that said, if I if I look at the last five years in the industry, there's been more digital transformation than over the past 25 combined. You know, and there's several real notable changes, I think that have impacted the industry in a very positive way. So let me talk about, you know, some of those key transformations, you know, first is digital customer experience, right, insurers have invested heavily in improving their digital interfaces and online presence. Customers can now you know, purchase policy, file claims, manage their accounts, all through a very user friendly website, mobile applications, and a lot of that's been driven through, you know, low code, no code type solutions, where, you know, insurers can can leverage, you know, really their legacy technology, and create new sexier front ends, you know, to change that whole customer experience. You know, another big areas, data analytics and AI. And, you know, you think about insurers, you know, they've harnessed the power of data analytics and artificial intelligence, you know, the AI aspect of that, to better assess risk, underwriting policy, detect fraud, fraudulent activity on claims, leverage, mature, you know, machine learning modules, to analyze the vast amount of data to really create more accurate predictions and streamline decision making through, you know, the whole process around underwriting. You know, the next area, I would say, is, is really in telematics and the internet of things, you know, the use of telematic devices, and IOT, you know, it's really become prevalent in the insurance industry, particularly in insurance, auto, the auto line of business, I think those technologies and tracking driver behaviors, enabling insurers to offer really uses base insurance policies, potentially reducing, you know, premium in creating kind of a better risk selection based on driver history has really kind of changed, you know, that area. Personalization, and what I mean by that is really, insurers are leveraging customer data to tailor policies really, and pricing specific to individual needs and behaviors. And this personalization really can lead to more competitive premiums for the insured, which in turn means a better customer risk retention for the insurance carrier. You know, automation and chatbot. Chatbot was a buzzword, you know, going back a couple of years ago, it's still pretty prevalent, and I think insurers are really figuring out, you know, better ways to to leverage chatbot and automated systems are really increasing, you know, kind of the customer support ecosystem for, you know, policyholders in for the claims process. So, rather than having, let's say a human answer that phone 24/7 People can go online and they can interact with a bot to really get at what they need to file a claim. To get policy questions answered on a 24 by seven, you know basis, which is really kind of changing the whole spectrum of that whole customer interaction, and experience. And in turn for a carrier, what that means is, while they're meeting customer needs, they're also reducing their operating costs substantially, which then allows them to deploy new products into the marketplace better. And for a lesser a lesser rate, we're seeing, you know, really kind of a whole wave of insurer tech startups that have really emerged with a focus on innovating technologies, that's really kind of disrupted the traditional insurance model. And these startups offer, you know, new insurance products and services, often with a strong emphasis around digitalization, that are really, you know, started to revolutional, revolutionary, you know, the, the whole area of insurance. I think the second part of your question is, you know, what are some of the impacts of these changes? And I think it really there, I'd break it into kind of four key areas. One is improved efficiency, right. So digitalization has really streamlined, many insurance processes, reducing paperwork, reducing manual tasks, which leads to cost savings, and faster service and delivery. And really kind of meeting the whole demographic change of the insurance buyer. Right? If you go back to baby boomers and people prior to that, their expectation was they wanted interaction with an agent or broker, they wanted to deal with paper that was, you know, that was their expectation. But really, Millennials, Gen Z, Gen I's, the next generation, what whoever they're going to be, you know, they want it now they want instant touch, they want it through a mobile phone. And, and realistically, the insurance industry has to adapt to those changes to meet really those customer needs. And enhanced risk assessment is another big area, I think of where these changes are impacting so through the advanced analytics and AI is really improved the insurers ability to assess risks accurately, leading to more competitive price. But more importantly, better risk selection, right? So their portfolio, and really, where they see loss trends occurring and things like that become more predictable. So it allows them to really, I think, react to the market in a much better way. If you think about Insurer Techs and how they've come to the market, it's really increased competition, right from a traditional insurer, which I think drives better outcomes, it drives better outcomes for insurers, it drives better outcomes for insurance companies, because it's really kind of pushing, pushing the envelope across, you know, things collectively. And ultimately, I think, the last bucket that I think is critical is really around better customer experience, because customers have now more control and transparency over, you know, the whole insurance process. And that results in in better overall satisfaction for them. Paul Lucas [00:08:30] When you talk to us, as well about that, so it's that emergence of these specialized providers. So just give us a little bit of insight as well in terms of what they bring to the table compared to those traditional some would say horizontal providers. Travis MacMillan [00:08:46] Yeah, so it's interesting. So I think that you know, is we think about providers that help support the insurance industry, right in the specialization, I think there's there's main differences between a specialized provider and a traditional horizontal provider, really, it gets at the depth of acumen that they have an insurance, right, so what we've seen is that specialized providers have a wealth of insurance knowledge, they have deep insurance acumen, they speak the insurance language, they understand the challenges and the advancement of technology and how to apply that to everything that an insurer or traditional insurer really needs to be able to evolve into that new space, right the space that like the insurer techs are playing and things like that. And it really better positions them for longer term success, right? Because of that specialization. If I think about providers that go across multiple verticals, they're not just focused on insurance, they're focused on things like manufacturing, retail, etc. And while they may have deep technical background across, you know, all of the shiny objects like AI like chat GPT Things like that, right, where they know how to apply them. But more in a general standpoint, the issue really becomes there is that they lack the deep knowledge to be able to understand the process that an insurer goes through, and how to take it from A to Z, which is really, you know, the transformation that that that's truly needed. Paul Lucas [00:10:21] I mean, that that sounds great in theory, but you know, I'm gonna put you on the spot. Travis, can you give us any, any real world examples where a vertical focused approach has actually made a tangible difference? Travis MacMillan [00:10:34] Sure, I think I can find a couple of examples of how digitalization combined with vertical focus providers has provided the right approach to drive what I'll call more efficient operation operations, personal customer experience and the ability to tap into niche markets, really that I think tailor or you know, through tailored like insurance solutions, right. So first, let me describe for you, you know, kind of a company who focuses in on homeowners and renters insurance, as a startup organization, and really looking at becoming what I'll call a digital insurance company, focused on those two areas and lines of business. So in this case, the company used an AI driven chatbots and AI automated underwriting process to provide quick and hassle free policy issuance and claims processing. So if I bifurcate, those two, you have first the front end part, right? How do I track the right client through this digital process? And then where the rubber meets the road is at the time of a claim, right? And then how do I then digitize that whole claims back end process from FLL? Through the through it, right? By leveraging really, artificial intelligence and technology, right, the company was was able to operate through an ease of use, which means as a consumer, I have less information I need to provide them. Because through a couple of different, let's say, pieces of information, I can then go out into the marketplace and leverage AI to pull in third party information that exists about me as a potential policyholder, and bring that into the equation of the underwriting process. Right. And then, through that process, really harnessed AI, to be able to then offer me the right coverages at the right price, to drive that process. Right. So it creates this ease of use, that's, you know, almost unheard of, and what does that really do for for the insurer? Well, it allows them to operate at a whole different operating cost model, right, because there's less human intervention, there's less back and forth. And their risk selection should be better than average, right? Then, then, when it comes time to let's say, I have a claim. So then again, it's all done through a digital process. So I go online, and, you know, I'm interacting, again, with a chatbot, an AI enabled chatbot, and I'm putting in information about my claim, they already know everything about me. And then they can literally take me through a digital process 24 hours a day, 365 days a year, and even take it a step further, where they can utilize a virtual desk, adjust process, where they don't need to send boots on the ground, you know, an independent adjuster out there that has a knock on my door come in and evaluate, you know, the claim, they can actually do it through a virtual way. And the customer, you know, experience that I would then get from that would allow them to adjudicate the claim settle the claim almost instantly, within 24 hours, which is unheard of right. And then they can send me a digital, you know, payment on the claim or dispatch a, you know, a repair company that then comes out and actually fixes and makes me whole again. So that's all real that's there. What does that mean? It means that, you know, I've created a whole different process to go from A to Z, right? I've had a whole different experience. And then when I have a claim, my entire claims experience is completely different, which actually gets at a lower allocated loss adjustment expense for the company, which means that I can provide products to the marketplace at a lower costs, but still maintain the right profit levels that I need and that you know, my owners would expect me to deliver as an insurer. I'll actually probably share a you know, another example that's, that's a little bit different. So if we think about the auto industry Right, you know, and an auto insurance writer, we have another use case where it's a unique approach using telematics and telematic data on smartphones, to assess driver behavior, right. And, and so when you think about, let's say, a digital intervention of an insurance company that's transitioning from traditional to non traditional, right? And using, let's say, smartphone sensors to monitor driver behavior, it allows you to then offer a use based pricing model, right. So if I know exactly how an insured is driving, at any point in time, I know how hard they're braking, I know how quick they're turning, I know whether or not they're actually exceeding the speed limit, what times they actually do that, I can then literally offer them a pricing model that says, I can anticipate all the things in how you're driving overlay to that, let's say traffic patterns, things like that. Right? So then it will allow me to really attract safer drivers, offering them the right premium or lower premiums, because their exposures are less. And I can rely on that data and the technology to drive more accurate pricing compared to the way in which I operate it as it let's say a traditional insurer, ultimately driving better loss ratios, and better outcomes, you know, for for the insurance company and ultimately, even for the policyholder themselves. Paul Lucas [00:16:41] And so maybe when you talk about ideas like that, they still sound sort of futuristic, but they're very much the here and now. But if we if we do Travis MacMillan [00:16:50] Absolutely here now, right? I mean, it's amazing. Paul Lucas [00:16:54] Yeah, but if we do look towards the future, just tell me how you think the role of these vertical focused consulting companies will evolve in the insurance sector? And indeed, how can they help insurers to not just adapt to but I suppose, shape the future landscape of the industry as well? Travis MacMillan [00:17:11] Yeah, Paul, great question. I think, you know, insurance companies, managing general agencies, and managing general underwriters, right? I kind of bunched them all together, because they're very similar, they all take risk. And, you know, expose either a frontline carriers capital or capital themselves, you know, who embrace, you know, vertical focused consulting companies will have an advantage to create the right level of dis of disruption, and apply it to, you know, really traditional insurance models, by leveraging all of the new areas and future advancements of technology to really deliver better value that will meet the unique needs of their target customers. And it goes back to kind of my earlier comment, the demographics of the buyer are changing. And for companies that aren't embracing that change, that's going to be problematic, right. So I believe that it's really the role of, of the vertical focused consultancy, to understand all of the technologies that are out there. And the accelerators that are being developed, and to then take their deep domain in the insurance space, because remember, these people like Xceedance, as an example, right, focus only on insurance, and by only focusing on insurance. And being agnostic to technology allows you then to really think about what's the art of the possible and applying those technologies to really leapfrog them, you know, ahead of the time and create that right? disruption. Right. So, you know, as a further example, you know, if we take the Gen z's, and millennials, their expectations are vastly different than the baby boomers. And companies truly need to understand that as their portfolios of clients are changing. And they need to work with vertical focus companies to help them drive that change to meet the customer's expectation, because otherwise, they're going to get to a point in time where they're going to become irrelevant. And then that becomes a problem. Right. And I think all of this will set the foundation for the future landscape of change within the insurance industry. Paul Lucas [00:19:37] Yeah, and I was gonna say as well, I mean, you know, I mentioned at the top about the idea of potentially some technophobes who might be watching this as well. But for an insurance professional or industry observer, just somebody who wants to know more about vertical integration, just give them an idea on how they can get started. Travis MacMillan [00:19:57] Yeah, so it's a it's a great question. I'm gonna answer it in two ways, I'm going to answer it in a fundamental way, which is, you know, how would you engage a consultancy? In order to have that conversation? What are some of the things you should look at? And then I'm going to go completely rogue, and I'm going to tell you something that I did just to demonstrate the power of the technology that's coming to head. Right. So first is I think they should look at companies, you know, that truly focus on the vertical. And the reason for that is that most will have deep knowledge, or at least knowledge of the insurance sector. And that's important, right? That has to be kind of like table stakes. A lot of these companies will also be harnessing technology and array intervention, but you want one that's going to be actually agnostic to technology. The reason I say that is because then they're going to keep technology in the forefront, and always look at what's the most cutting edge and how to apply that then to process right through the lens of technology to enable process so that people can be doing more that's core to their job, or their role, or their roles will then expanded to other things. But that but that's critical. Right? I think it's also important for them to question the the consultancy and ask, really, really, what I would call three important questions. First is, do you only focus on insurance? If the answer to that is no, they need to probe deeper? What else do they focus on? Right? First is? And then the second question is, well, you know, what's the depth of your team in insurance? Right? How much acumen Do you truly bring to the table? Is it just, you know, the consultative people that are out there talking about, you know, insurance in general? Or do they do their teams actually, you know, bring to the table, deep acumen across all areas? So whether you're talking about claims, finance and accounting, underwriting policy, servicing operations, customer satisfaction, whatever it is, do they truly embrace and have a deep understanding of every aspect of what an insurance company does today? Because that's critical. And then the third is, you know, what types of technology and invention have they been involved with? And, more importantly, what's the benefits that their current customers have achieved? From what they've instituted? Did it meet their challenges? Did it? You know, did it align with their strategic direction of where they wanted to head? And was it able to be delivered, etc. You know, those are those are just really to kind of name a few. But I think what's what's critical is that they don't fall into the trap of companies that are not being innovative, that aren't doing, you know, that really kind of do everything through the window of just people and process. They say they're, they're innovating technology, but they can't actually demonstrate in real time real life examples of how they've done that. I think that would be that would be problematic. Now, just to show you how innovative we are, and how innovative we can be Paul, what I did is actually I took a step further. And I went and asked that question to chat GPT, because I wanted to see what it would say. Right? So what I said was, you know, how would I learn more about an insurance vertical integration? And what it said to me was this, learning more about insurance, vertical integration involves gaining a comprehensive understanding of how insurance companies operate within their specific vertical markets and the strategies they employ to streamline their operations where technology can change their current process, then it listed out about 14 questions, right, to focus in on everything from self learning, to networking, to understanding the vast technologies. And I think all of that really relates back to, you know, the question that was at hand, you know, how can I as an insurance professional, right, understand and empower a conversation with the right consultancy, to really take me to the next level to create that disruption. And so it's interesting how technology today has evolved so much where I can ask it a question, and it can give me almost an answer in which as a human, I would think about, it's pretty powerful stuff. And for companies that aren't embracing it, they're going to become stagnant really quickly, I think, because while we've seen huge change in the last five years, I think the change we're going to see in the next two to three is really going to revolutionize the way that the insurance industry as a whole interacts with its customers with each other. And it's things that you know, we can't even contemplate today. Paul Lucas [00:25:10] Yeah, I imagine that you've probably scared it a few people and excited a few more Travis. But that was a great record for us. Thank you very much for your for your time today. Travis MacMillan [00:25:20] Super Thank you, Paul. And I'll just throw out your you know, to the watchers. Look, if anybody has questions or if you want to engage in a conversation about it, I'd be happy to do that. You know, they can reach me at [email protected] or find me on LinkedIn. Always happy to help people in the industry. Paul Lucas [00:25:41] Yeah, fantastic. Well, it's Travis managed to keep a technologically malnourished mind like my own on track. But for more industry knowledge from the very best, stay tuned right here, at Insurance Business TV.]