Everyone is talking about AI, automation, and how fast insurance needs to move. Those are important conversations to have. In my role, none of that matters if the fundamentals are not in place.

That was one of the central themes in Send’s recent INFUSE webinar, “Getting the Foundations Right: Building an Underwriting Engine for 2026,” that I participated in recently. The discussion brought together perspectives across technology, consulting, and underwriting, from me, Matt Carter from Altus Consulting and Daryn Upil of The Hartford. What stood out most was how often we came back to the same point: If you want underwriting to be faster, smarter, and more scalable, you must get the foundation right first.

That foundation is not just about technology. It is about underwriting discipline, clarity of decision-making, trustworthy data, and making sure the organization is focused on the things that create value.

The market is changing, and underwriting must respond

Underwriting has always evolved alongside the market, but the pace of change now feels different. In the U.S., we are dealing with increasingly complex catastrophe exposures and continuing legal system abuse. Across markets, customer expectations are rising, data is expanding, and the pressure to make better decisions faster continues to grow. That creates real opportunity, but it also creates risk.

It is easy to get caught up in the promise of new tools. Every insurer is hearing about what AI can do, what automation can unlock, and how quickly operations can be transformed. But underwriting is not improved by technology alone. It improves when technology strengthens sound decision-making.

That, to me, is the key distinction. We should absolutely be looking at how to use AI, data, and automation to build an underwriting engine. But the engine only works when it is built on a solid underwriting foundation.

Technology can accelerate decisions, but it cannot replace underwriting fundamentals

Great underwriting starts with the fundamentals. Do you have clear underwriting rules? Do you understand your appetite? Do your people know what good business looks like? Can you make consistent decisions and explain why they were made?

If those things are not in place, adding more technology does not solve the problem. It just speeds up the wrong process.

That is why the conversation around modernization should begin with the underlying operating model and not just the tools. We need to ask if our processes are designed the right way, is the data useful, and are the outputs we are generating trusted by the people making decisions every day.

There is a lot of noise and urgency in the market right now. Leadership teams are asked every day how they are using AI and how quickly they can implement it. We need to remember that underwriting is a balance of art and science; you can change backwards and forwards, but the art will never go away. We need to stay focused on what matters most to the business and build from there.

Legacy systems are not just a technology problem

Legacy systems remain a challenge for many carriers both operationally and from a people perspective.

A lot of insurance organizations, especially long-established carriers, have systems that have been around for decades. In many cases, those systems have done exactly what they were designed to do. But the industry is now asking more from them…more data, insight, integration, and flexibility in how we deliver underwriting. This is where the strain starts to show.

We also can't ignore the talent piece. When new people enter the industry, they are used to modern technology in almost every part of their lives. If they join a company and immediately work on outdated systems that feel disconnected from how they expect technology to function, it creates friction from day one. Modernization is not just about efficiency. It is also about creating an environment where talented people can do their best work.

Data should support decisions, not create distractions

Data came up repeatedly during the webinar, and better data is one of the biggest unlocks for underwriting.

The goal is not to collect as much data as possible. The goal is to have the right data to support better decisions.

As underwriters, we have more technical information at our fingertips than ever before. We can find out what a building is made of, when it was built, if it is in a hail zone, or sits in a higher crime area. Those, and other risk indicators that may apply, are incredibly valuable. They help us work faster and with greater precision.

We can get all the technical data and risk about a property and still not know enough about the person or business behind it. You may not know how seriously that business owner takes safety. You may not know the quality of their management practices. You may not know how they operate day to day. Those things still matter. They are often what separates an acceptable risk from a great one.

That is why I don't believe technology will replace underwriters. I see it changing where they spend their time. The more we can automate routine tasks and surface technical data quickly, the more valuable underwriters become in the areas where judgment, conversation, and commercial understanding matter most.

The future of underwriting is still human

There is understandable concern in the market about what AI means for the underwriting profession. My view is that the role is not disappearing; it is evolving.

The science side of underwriting is going to become stronger, faster, and more accessible. We will have better tools, broader data sources, and more intelligent workflows helping us evaluate risk.

But underwriting is still a business of judgment. It still requires negotiation, relationship management, pattern recognition, and the ability to see beyond what is immediately visible in the data.

The human element is not going away because as the technical aspects of underwriting become more automated, the softer skills are going to be even more important. Underwriters will need to ask better questions, challenge assumptions, interpret signals, and make thoughtful decisions in situations where there is no perfect answer. That is not something you can simply hand over to a model.

Leadership has to create focus

One of the questions raised during the webinar was how leaders make time to understand the real problem when there is so much pressure to move quickly. I think the answer comes back to focus.

Every leadership team today has more opportunities than they can pursue at one time, so they need to prioritize and decide what matters most to give comfort and confidence to their teams.

The differentiator could be service for some, underwriting expertise, product design, or distribution for others. Technology should help strengthen those advantages and not distract from them.

Leadership should always encourage innovation, but remember they need to be aligned around the right kind of innovation.

Foundations create flexibility

My main takeaway from this webinar is that building an underwriting engine for 2026 and beyond starts with getting the foundations right. If not, technology will just add complexity. This is an exciting time to be in the industry, and we all need to stay focused, prioritize, and bring people along on the journey.

Paul Carroll

GenAI is reshaping insurance. Let’s start there—what’s changing in workers’ compensation?

Tirath Desai

It’s becoming a central conversation. Carriers are asking a fundamental question: what’s next? Many are coming out of a soft market and rethinking growth. Workers’ compensation insurers across the globe continue to navigate common issues related to the changing nature of work, rising medical costs, changing workforce, increasing litigation and regulatory changes.

That’s especially true for state-affiliated funds transitioning into mutual models. Historically, they’ve been focused—single state, single line. Now growth is harder to find. That creates pressure. 

Besides competition, there is a need for expanded capabilities. Differentiation in a crowded market. So, the questions shift. How do we grow? Where do we collaborate? What makes us stand out? AI is at the center of that discussion. Not the only answer—but a critical one.

Paul Carroll

Workers’ comp has long relied on predict-and-prevent strategies. Now we’re seeing new pressures—medical costs, social inflation. What’s changing?

Tirath Desai

Pressure is built on multiple fronts. Costs are rising. Risk is harder to manage, and expectations are shifting. Many carriers have operated within defined regulatory frameworks for years. Now they’re expanding—into larger risks, more complex products, newer distribution models. They’re asking practical questions. Can we improve fraud detection? Strengthen medical management? Deliver a better experience? Reach new channels? 

At the same time, many are holding significant capital while their core book contracts. That tension—capital available; growth constrained—is driving urgency.

Paul Carroll

GenAI clearly improves efficiency. But where does it create real advantage beyond cost?

Tirath Desai

It starts with better decisions. Stronger underwriting. Earlier fraud detection. Faster, more consistent claims handling. Take claims processing. Today, it’s still heavily manual. Notes, documentation, back-and-forth across multiple parties. It slows everything down. AI changes that. It can extract and synthesize information in real time. Build a clearer view of a claimant’s history. Support faster, more informed decisions. 

Payments are another example. Complex. Fragmented. Often difficult to track. With the proper technology, you can streamline that process end-to-end. Fewer delays. More visibility. So yes—efficiency improves. But the bigger shift is quality. Better outcomes. Better experiences.

Paul Carroll

You’ve spoken about a more worker-centric model. What makes that a shift?

Tirath Desai

Today’s experience isn’t built around the worker. Start by reporting an injury claim. Awareness isn’t always there. The process can feel unclear, slow, and disconnected. Now imagine something different. A digital entry point where a worker can report an incident, check eligibility, upload information, claim status and payment—in one centralized location. That data flows directly into core systems. It’s confirmed, summarized, and ready to act on. Compare that to today. Phone calls. Manual entry. Multiple handoffs. Delays at every step. 

We can help remove a lot of that friction. And we can go further. Real-time guidance. Instant answers to simple questions. Support without always needing human intervention. That’s a meaningful shift—for both the worker and the carrier.

Paul Carroll

What happens when you improve responsiveness for injured workers?

Tirath Desai

You can reduce friction. And that matters. Delays and poor communication often cause dissatisfaction. Dissatisfaction can lead to disputes. And disputes can escalate to litigation. More responsive, more transparent interactions help change that dynamic. Now, AI isn’t a holistic solution. It still requires oversight. Judgment. Human involvement is where it matters. But it can remove many of the pain points in the process.

Faster responses. Clearer communication. More consistent experiences. That’s where the real value shows up.

Paul Carroll

Can AI help prevent accidents?

Tirath Desai

There’s potential—but it’s nuanced. Workplace monitoring isn’t new. What’s changing is how data is captured and used. Some approaches rely on wearable devices. Adoption can be a challenge. Over time, employees may resist if it feels intrusive. Other approaches are less invasive. For example, using existing visual data—images or video—to help identify risks. Detect unsafe conditions. Trigger alerts before an incident occurs. That’s promising. But the results are still evolving. 

Many organizations are still working to define the return on investment. So, the opportunity is real. But it requires balance—between insight and trust.

Paul Carroll

Does GenAI accelerate collaborations and ecosystems?

Tirath Desai

Absolutely. No carrier can—or should—build everything alone. The pace of change is too fast. We’re seeing more ecosystem-driven models. Carriers combining internal capabilities with external innovation. Selecting targeted solutions where they can add greater value.

For example, some organizations are building their own AI capabilities. But in areas like litigation support or document processing, they may choose to integrate external solutions instead. It’s about focus. Invest where it differentiates you. Collaborate where it accelerates you. That’s how you can scale effectively.

Paul Carroll

What’s your advice for carriers getting started with AI?

Tirath Desai

Start broader. Not smaller. Many organizations began with isolated use cases. That made sense early on. Now it’s time to step back. Ask a bigger question: How does AI fit across the value chain and a holistic lifecycle—underwriting, claims, billing? Then build from there. 

Three priorities stand out. First, governance. Clear frameworks. Responsible use. Defined accountability. Second, technology. Flexible platforms that can evolve. Integrate new tools. Adapt quickly. Third, data. This is often the hardest part. Many organizations still lack a unified view of their data. Without that, progress slows.

There’s a real opportunity here. But you don’t need to do everything at once. The focus should be clear. Build a road map. Move with intent. Position your organization for what’s next.

Paul Carroll

Thanks.

About Tirath Desai

Tirath Desai is a seasoned leader in the insurance technology space, with deep expertise in insurance core platforms, digital solutions, and large-scale transformation programs. As PwC’s Insurance Core Transformation and Digital Leader, he partners with carriers to modernize policy, billing, and claims operations, enhance agent distribution, and implement innovative cloud and AI-driven solutions.  With over two decades of consulting experience, Tirath has led numerous large-scale transformations, particularly within workers’ compensation and commercial lines. His work emphasizes strong IT service management practices to drive service reliability, governance, and continual improvement across the enterprise. His track record includes delivering end-to-end transformation strategies that generate measurable business value, accelerate speed-to-market, and improve operational efficiency and customer experience. Tirath is particularly focused on integrating artificial intelligence into operational frameworks—leveraging predictive analytics, intelligent automation, and machine learning to optimize claims management, enhance decision-making, and proactively manage risk in workers’ compensation. By combining structured service management methodologies with AI innovation, he helps insurers build resilient, scalable, and future-ready operating models.

Nearly 80% of improper Medicaid payments are tied to insufficient documentation rather than confirmed fraud or abuse. This distinction is critical. It suggests that many of the system's most costly inefficiencies are not rooted in claims processing or fraud detection but in how eligibility data is captured and verified at the very beginning. At the same time, hospitals, in 2025, accounted for approximately $43 billion in care that was delivered but not reimbursed. This reflects a system under strain, where denials, delays, and repeated documentation requests have become routine. Taken together, these trends point to a simple but often overlooked reality: Insurance performance is largely determined upstream, at intake, long before a claim is submitted.

The Overlooked Shift from Claims Optimization to Data Integrity

For decades, insurers have invested heavily in optimizing claims workflows and strengthening fraud detection. These efforts have produced results, particularly in identifying anomalies and recovering funds. However, they largely operate after the fact, once data has already entered the system.

Eligibility intake has not kept pace. In many cases, it is still treated as a compliance checkpoint designed to collect information, rather than a dynamic decision layer responsible for validating it. This distinction matters. When data entered at enrollment is incomplete or inconsistent, those issues do not stay contained. They move through the system, showing up later as claim denials, payment delays, and administrative rework. What begins as a small gap at intake often turns into a larger operational issue downstream.

The scale of the system amplifies this effect. Medicaid alone covers roughly one in five Americans, yet nearly 8% of the U.S. population remains uninsured. Within that group are individuals who are likely eligible but not successfully enrolled, creating both access gaps and financial inefficiencies across the system.

The Strategic Opportunity at the Point of Entry

The growing gap between where insurers invest and where errors originate creates a clear strategic opportunity. Improving data quality at intake offers a more direct path to reducing downstream inefficiencies than continuing to focus solely on post-claim optimization.

Unlike claims processing, which reacts to errors, eligibility intake has the potential to prevent them. By strengthening how data is collected and verified at the outset, payers can improve accuracy, reduce rework, and enhance overall system performance.

Several approaches are gaining traction across industries that face similar verification challenges:

• Verified data inputs: Leveraging trusted, third-party data sources to prefill and validate information reduces reliance on self-reported inputs and improves consistency across records.
• Upfront data support: Providing complete and accurate information at the time of submission helps reduce gaps that would otherwise delay processing or trigger follow-up requests
• Automation of routine checks: Reducing manual review for standard cases allows staff to focus on exceptions, improving both efficiency and accuracy.
• Structured data standards: Ensuring that information is captured in consistent, auditable formats improves traceability and reduces disputes over missing or insufficient documentation.
• Continuous data reconciliation: Periodically validating and updating eligibility data across systems helps maintain accuracy over time and reduces discrepancies that can surface during claims processing or audits.

These strategies reflect a broader shift toward treating intake as infrastructure rather than administration. The goal is not simply to collect data, but to ensure that it is accurate, complete, and usable across the system from the start.

From Reactive Correction to Preventive Design

The current model of insurance operations remains largely reactive. Errors are identified after claims are submitted, and significant resources are allocated to correcting them. This approach is both costly and inefficient.

Manual verification processes contribute to this challenge. They are time-intensive, prone to human error, and difficult to scale. They also introduce variability, as outcomes may differ depending on who reviews the information and how it is interpreted. These inconsistencies increase the likelihood of both payment errors and audit discrepancies.

In contrast, preventive models focus on reducing the likelihood of error at the point where data enters the system. By improving verification at intake, insurers can reduce the volume of issues that require downstream correction.

This shift has implications beyond cost. More accurate intake processes improve the experience for both members and providers. Coverage can be confirmed earlier. Onboarding becomes smoother. Access to care becomes more predictable.

For insurers, it creates a more stable operating environment. Fewer surprises. Fewer exceptions. More consistency across the lifecycle of a claim.

The Future of Insurance Performance Starts at Intake

As healthcare systems continue to evolve, the importance of data integrity will only increase. Coverage models are becoming more complex, regulatory requirements are expanding, and expectations for efficiency and transparency are rising.

In this environment, the performance of insurance systems will depend less on how effectively they process claims and more on how accurately they establish eligibility from the outset. Intake is no longer a peripheral function. It is a foundational layer that influences every downstream outcome.

Reframing eligibility intake as a core performance lever requires a shift in mindset. It means recognizing that the quality of data at entry determines the efficiency of everything that follows. It also means investing in processes and systems that prioritize accuracy, consistency, and verification from the start.

For states and healthcare providers, the opportunity is clear. By fixing the front door, they can reduce administrative burden, improve payment accuracy, and strengthen the overall performance of the system.

Why do drivers in Louisiana pay an average of $4,180 annually for full-coverage car insurance while Vermont drivers only pay $1,504? The answer is simple: territorial ratemaking.

Traditionally, auto insurers have used a policyholder's geographic location as a core input in determining premiums. Variables like historical claims losses, traffic density, and weather patterns are used to estimate the risk profile of a given territory, which in turn, determines pricing.

However, driving patterns now shift faster and vary more locally than the traditional signals used in pricing decisions. Many of the data sources used for territorial ratemaking update too slowly to spot emerging risk shifts and enable timely corrective rate action. At the same time, auto insurers often miss meaningful variations in driving behavior at the ZIP code level due to limited claims information.

In other words, the importance of territory hasn't changed, but the nature of the risk it's meant to represent has.

To more confidently model risk and set accurate rates, auto insurers need a current, granular view of how people in specific ZIP codes actually drive today — not how they drove months or years ago.

Why traditional data alone can't fully reflect today's driving risk

Auto insurers rely heavily on historical claims and loss data to assess territorial risk, but this data is inherently backward-looking and often takes months or years to reflect changes in driving behavior.

This lag is problematic due to the fluid nature of driving patterns. For example, Arity research found that after rising 30% from 2019 to 2023, overall rates of distracted driving declined in 2024 and early 2025.

Driving behavior also varies significantly among ZIP codes within the same state, or even the same county. Consider a residential neighborhood versus a busy commercial area. While the residential area may have steady, low-volume traffic, the commercial area may be a hot spot for stop-and-go driving.

When analyzed at the ZIP code level, claims data alone is often too sparse to produce statistically credible insights. As a result, auto insurers may not detect localized differences and group drivers from the same territory into a single risk profile, potentially overcharging safer customers.

The issue isn't territorial ratemaking itself, but rather the limitations of the data used to inform it. With greater access to driving behavior signals, auto insurers can capture dimensions of risk that many traditional ratemaking factors weren't designed to observe at a territorial level.

How mobility data can transform territorial ratemaking

As driving behavior continues to shift across geographies, auto insurers can't rely on static historical data alone — and fortunately, they don't have to.

With mobility data, insurers can use driving behavior signals like braking, speeding, phone distraction, and time-of-day exposure mapped to specific ZIP codes to enhance territorial pricing strategies.

For actuarial and pricing leaders, this shift does more than introduce a new rating factor. It helps close the visibility gap between how risk is priced and how people are actually driving today.

1. Strengthen data credibility in low-volume areas
   
   Because claims are relatively infrequent events, data at the ZIP code level is often too sparse to be statistically credible. Likewise, commonly used third-party proxies, like surveys or census data, are updated infrequently and may not reflect the most current driving conditions.
   
   These blind spots affect model accuracy, along with file and use confidence, competitive pricing decisions, and how defensible a carrier's territorial assumptions are to regulators.
   
   In contrast, mobility data enables auto insurers to identify local changes in risk before they aggregate to state-level loss trends. This can help supplement sparse loss experience, especially for regional carriers with more limited data.
   
   By incorporating a regularly refreshed dataset that captures current driving patterns mapped to ZIP codes, auto insurers can identify misalignment with historical territorial assumptions and build a more accurate view of risk.
    
2. Increase pricing precision at the local level
   
   Driving behavior is becoming increasingly variable across ZIP codes within the same state or rating territory. Consider developments like return-to-office mandates that affect roadway usage and reshape how, when, and where people drive.
   
   When auto insurers rely exclusively on inputs like third-party data and claims and loss ratios, pricing decisions may not accurately reflect current risk trends. In contrast, mobility data offers context on how driving behavior is evolving, providing an additional layer that helps validate whether similarly priced territories actually share similar risk profiles.
   
   With ZIP codes serving as a practical and familiar linking key, auto insurers can integrate these insights into existing models and workflows, making it easier to adjust segmentation as needed.
    
3. Identify emerging risks to improve rate responsiveness
   
   The use of historical claims data to assess risk introduces a time lag, since changes in driving behavior often take a year or more to appear in loss experience. This delay limits auto insurers' ability to respond in step with evolving driving behavior, leaving them to react after the fact.
   
   Mobility data supports more proactive decision-making by capturing risk shifts as they develop. Because driving behavior is continuously observed and regularly refreshed, it can serve as an early indicator of emerging risk, supporting timely rate decisions without forcing insurers to react to short-term noise.
   
   Additionally, teams can spot emerging risk shifts by tracking year-over-year changes in driving behavior. Those insights can then be built into actuarial narratives, giving pricing decisions and regulatory filings more current, data-backed support.

The future of territorial pricing

Territorial ratemaking has always depended on the quality of the data behind it. But as variability across ZIP codes increases, carriers that rely solely on historical signals risk falling behind trends that competitors can already see.

The gap between auto insurers' geographic risk assessments and actual driver behavior will only widen unless pricing and actuarial teams adapt their approach.

Going forward, auto insurers that embrace mobility data to supplement traditional rating factors can strengthen their territorial models, make more confident pricing decisions, and better identify emerging pockets of risk before shifts appear in claims or loss ratios.

Picture the call.

A state insurance commissioner's office. Your legal team. A customer's attorney. An AI-generated claim denial that affected someone's home, their health, and their livelihood. The question on the table is not whether your model was accurate. The question is who in your organization reviewed that specific decision, what they actually checked, and where the documentation is.

You look around the room.

The data science team points to the risk function. The risk function points at the business unit. The business unit points at the model. The model has no name. The model cannot be deposed. The model's directors and officers (D&O) liability policy does not exist.

Yours does.

The question moving through every insurance boardroom right now is not whether your AI works. It is whether you can prove a human being — a named, accountable, documentable human being — was genuinely in the loop when it didn't.

I have spent two decades working inside financial services organizations across North America, Asia Pacific, and EMEA — in insurance, banking, and enterprise technology. I have been in the rooms where this question lands. The silence it produces is not incompetence. It is the sound of an industry that built extraordinary AI capability and forgot to build the accountability architecture around it.

That silence is becoming expensive.

Your Accuracy Dashboard Is Not a Defense

Here is what your AI governance documentation almost certainly shows: model performance metrics. Accuracy rates. Loss ratios. Straight-through processing volumes. Fraud detection rates. These numbers are real, and the investment behind them is genuine.

Here is what your AI governance documentation almost certainly does not show: the name of the human who reviewed the decision that is now in dispute. What they were trained to look for. How long they spent on it. Whether they had the authority — and the actual expectation — to override the model's recommendation.

Those are two entirely different documents. Most insurers have the first. Almost none have the second.

Under the EU AI Act, OSFI B-15, and SR 11-7, the second document is what matters. Regulators are not asking whether your model performs well in aggregate. They are asking whether a specific decision — the one in front of them — had meaningful human oversight. Meaningful. Not ceremonial. Not a click-through.

Accuracy metrics tell you how often the AI is right. They tell you nothing about whether the human in the loop actually understood what they were approving.

Most insurers have the checkbox. Very few have a defensible record. That gap — between the checkbox and the defensible record — is where the liability lives.

What Happened in the Netherlands Will Happen Here

In 2020, the Dutch government's benefits AI flagged 26,000 families as suspected fraud. Most were innocent. The algorithm ran for years. The humans trusted it. No one built a mechanism for those humans to meaningfully question what the system was telling them.

By the time the full picture emerged, families had lost homes. Children had been taken into care. Careers had been destroyed. The prime minister resigned. The government fell.

Not because the AI was malicious, but because no one could name the human responsible for any specific decision. The accountability architecture was missing. And when it was missing at scale — across 26,000 families — there was no one to hold accountable except the institution itself.

That story is not a European warning. It is a preview.

The same structural failure exists in US healthcare AI, in automated claims systems, in credit decision making, and in hiring algorithms. The technology performs as designed. The human layer — the named, documented, trained, empowered human layer — is absent or ceremonial. When something goes wrong at scale, the institution absorbs the liability because no individual can be identified as responsible.

Unfair AI doesn't just break trust between a customer and a machine. It collapses trust across your entire organization — retroactively. And the collapse travels up the chain until it finds someone with a name.

That name will be on your org chart. It may be yours.

Run This Test Before You Read the Next Section

Pull three recent AI-denied claims from your system. Any three.

For each one, answer these questions: Who is the named human reviewer in the audit trail? What specific aspects of the AI recommendation did they evaluate? Is there documentation showing they genuinely interrogated the output — not just approved it?

If you can produce complete, defensible answers for all three in under 10 minutes, your AI governance is in reasonable shape.

If you cannot — if the trail goes cold at "the system flagged it" or "the team reviewed it" — you have just identified your exposure. That is not a criticism. It is a diagnostic. It is also, increasingly, what plaintiff attorneys run on insurers before they file. What D&O underwriters are beginning to check at renewal. What state insurance commissioners are starting to request in market conduct examinations.

The gap you just found is the gap this article is about.

Three Ways to Close the Gap — Before Someone Closes It for You

Name the human — in the system, in the record, in the audit trail. Every high-stakes AI decision — claim denial, underwriting declination, fraud escalation, pricing exception — needs a named individual reviewer, not a team, not a role, not a function. A person. Because when the commissioner's office calls, they will ask for that person. If you cannot produce a name, you cannot produce a defense.

Build the authority to say no — and document when it is used. The difference between meaningful oversight and rubber-stamping is whether your reviewers have explicit authority to override the AI, training to know when they should, and time to exercise that judgment. If your straight-through processing rates are above 95%, ask yourself honestly: is that efficiency, or is it the absence of human judgment? Regulators are beginning to ask the same question.

Audit fairness separately from accuracy. Your model validation process measures performance. It does not measure whether the outcomes your AI produces are perceived as fair by the people affected. Consistency of treatment across demographics. Accessibility of recourse. Clarity of explanation. These are legitimacy measures and they require a different audit. The insurers who build this capability now will be positioned as leaders. The ones who wait will be building it during an investigation.

The Verdict Is Already Being Written

The insurance industry did not get here through negligence. It got here through speed. AI capability moved faster than governance frameworks. Deployment timelines outran accountability infrastructure. The checkbox appeared because it was faster than the defensible record. None of that was malicious.

But 2025 is not 2019. The EU AI Act is not a distant concern — it is setting the global documentation standard, and US regulators are actively incorporating its logic. D&O underwriters are beginning to ask about AI governance at renewal. state insurance commissioners are starting to include AI decision audit trails in market conduct examinations. Class action attorneys are looking for patterns in AI-driven denials.

The verdict on your AI governance is being written right now — by regulators, by courts, by customers who received a decision they couldn't understand or challenge. It is being written in the audit trails you do or do not have. In the names, you can or cannot produce. In the documentation that proves a human being was genuinely, meaningfully in the loop.

The algorithm will not appear in that verdict. It cannot be deposed. It cannot be held accountable. It does not have a name.

You do.

"The algorithm decided" is not a name. It's a future deposition headline.

Given my education, experience and, I'll admit, personality, mistakes in writing jump up and bite me on the nose. Once, as I flipped through a book, I stopped because something felt vaguely wrong. I read the page I had just glanced at and found a typo about two-thirds of the way down.

Given how much copy I see every day, I see a lot of mistakes, and I think some patterns are worth pointing out. Today I'll focus on the repetition that creeps into our phrasing (no, you shouldn't say people "mutually agree"; by definition, any agreement has to be mutual) and undercuts the crisp confidence we want to project.

These aren't the kinds of mistakes that spellcheck or even Grammarly, in most cases, will flag for you, but they're like termites in a wooden structure. They weaken our writing, while insurance needs to be projecting competence and strength.

Let's have a look.

To me, phrases such as "mutually agree" are like a record with a scratch in it. The phrases quickly repeat themselves, and they hit me with the same sort of screech that a record player can. I realize my reaction is unusually harsh — an occupational hazard and perhaps a personality defect — but such phrases are still worth purging. When you say people mutually agreed to do something, you sound defensive — "Honest, when I say we agreed, I meant it. Really." In fact, in a lot of cases, "mutual agreement" is a euphemism. A coach "mutually agreed" with a team that it was time to part? Yeah, he was fired. Just say "agreed" and get on with it. Your readers will sense your confidence, even if they don't react as viscerally to language as I do. 

If you look a bit, I think you'll mutually agree that there are lot of such screechy phrases. Here are just some that have crossed my desk since I started keeping a list a couple of weeks ago:

• Two people share a common trait. If you share a trait with someone, you have that trait in common, by definition.
• Some number of different people. Why different? You can't have more than one of the same person. But I see "different people," "different businesses," "different" this, "different" that.
• Closely scrutinize. To scrutinize is to look closely at something. You can't look closely closely.
• Major crisis, major catastrophe, major disaster. Can there be a crisis/catastrophe/disaster that isn't major?
• Advance warning. Warning after the fact isn't actually warning.
• Pre-planned. Planning after the fact isn't actually planning.
• Proactive risk management. Reactive risk management isn't actually risk management, at least not for whatever loss you just suffered.
• Someone successfully accomplished something. If you accomplished something, you succeeded. There are many variants of this issue. A New York Times column yesterday, for instance, redundantly said that something "successfully came to fruition" — a new one for me. "Successfully" gets sprinkled into articles and bios like fairy dust. Some aren't inherently repetitive. For instance, bios often say that someone "successfully launched" a product or business. It's certainly possible to launch a product or business that flops, but you wouldn't be telling us about a flop. "Success" is overrated. The word feels needy.
• Speaking of being used like fairy dust, I'll re-up my disdain for new, which I've expressed in earlier rants on language. I appreciate the temptation. We're trying to stir up excitement and move the industry forward, but not everything is new and shouldn't be labeled as such. I'd say the most common (mis)usage I see is "created a new" something (as though you can create an old something). The phrases that most set my teeth on edge are "new record" (as though you could set an old record) and "new innovations" (the root of "innovation" is "-nov-," which means new). Talking about new innovations makes us sound like an old late-night commercial — This product "is new, new, all new. And wait... there's more!"
• Proven track record. The whole point of a track record is that it's proven. It's written down. It's verifiable. You don't need to trust what the tout is telling you about a horse. You can see the track record for yourself.
• Most-well-known. This isn't a redundancy, but it's bizarre, and I'm seeing it a lot, so I'm tossing it in here. The progression goes "good," "better," "best." It doesn't go "good," "better," "most well." So why would the progression about how famous something or someone is go "known," "better-known," "most-well-known"? It doesn't. Yes, "well-known" is a legitimate phrase, but "most well" isn't a thing, so "most-well-known" surely isn't. I think people chicken out because "best" seems like an endorsement. They don't want to use "best" in connection with, say, a notorious criminal, but the only superlative available to you is "best-known." "Most well" simply doesn't exist in the English language, not even if you're describing how done you want your steak to be.

You get the idea. You probably even already go through the sort of self-editing I'm suggesting. You were probably harangued in elementary school to avoid the passive voice and may have been counseled to delete "very" every time you used it. I'm merely suggesting adding something to your to-don't list. 

Your writing will come across as more confident if you eliminate the weak redundancies I've listed — and the million others you'll spot once you start looking.

Fixing these redundancy issues may feel like a small thing, and even a grump like me will acknowledge that the changes will fly under the radar for most people, but I'm reminded of a saying that was my mantra when I used to take long bicycle trips and was packing: "If you take care of the ounces, the pounds will take care of themselves." Customers are demanding that insurance become more understandable, even friendlier. No more of the "whereofs" and "wherefores" in arcane documents that only a lawyer could love. So I don't think it's possible to pay too much attention to the language we use. Every little thing we do becomes part of how customers perceive us.

You now have your advance warning. You can proceed with your proactive pre-planning.

Cheers,

Paul

P.S. Here are some of my favorite previous rants on language: "Can We Please Tone Down All the 'Inflection Point' Talk?"; "Let's Stop With the Gibberish"' "May I Rant for a Moment?"; and "Two Words We Must Stop Using." 

For some reason, most Americans seem to think that when the U.S.-Iran conflict comes to an end, oil prices and the broader economy will quickly bounce back to normal. Unfortunately, that is just not realistic, and the longer-term damage is already set in motion. Subject matter experts are predicting a 12- to 18-month correction period once the situation stabilizes. The backup of oil tankers in the Strait of Hormuz will take at least a year to clear.

A year‑long oil crisis would hit both automobile sales and auto insurance in ways that go far beyond just higher gas prices. The short version: vehicle demand would likely shift sharply toward fuel‑efficient and electric models, overall sales could soften, and auto insurance costs would almost certainly rise due to inflation, repair costs, and economic stress. Below is a structured breakdown grounded in recent reporting and economic analysis.

Impact on Automobile Sales

Demand will shift toward fuel‑efficient and electric vehicles. When fuel becomes expensive for a long period, consumers rethink what they drive. Economic theory treats vehicles and gasoline as complementary goods, meaning high fuel prices suppress demand for gas‑heavy vehicles. Buyers tend to move away from trucks and large SUVs and toward smaller, more efficient cars or EVs.

Overall auto sales could decline. A prolonged oil crisis raises household expenses across the board. With budgets squeezed, many consumers delay big purchases like cars. This effect is amplified if the crisis also disrupts supply chains or raises production costs—both of which are likely when oil prices stay high for months.

Higher vehicle prices due to supply chain strain. Geopolitical disruptions tied to oil crises often spill into shipping and parts availability. Recent reporting shows that conflicts affecting oil supply also cause shipping delays, higher transport costs, and production cuts by major automakers. Toyota, for example, has already reduced output in response to Middle East instability. Fewer cars produced means higher prices for both new and used vehicles, further dampening sales.

Impact on Auto Insurance

Rising premiums driven by inflation and repair costs. Auto insurers are already facing a "severity crisis": repair costs have surged due to inflation, supply chain issues, and the increasing complexity of modern vehicles. A prolonged oil crisis would worsen these pressures by raising transportation and parts costs. Insurers have been "racing to take rate," and pessimistic outlooks suggest continued premium increases.

Higher replacement costs due to vehicle shortages. If automakers produce fewer vehicles because of high energy costs or supply disruptions, replacement vehicles become more expensive. Insurers must pay more for totaled cars, which pushes premiums higher. This dynamic has already been observed during labor strikes and supply chain disruptions.

Changes in customer retention because of Increased financial stress. When households face sustained high fuel costs, they may struggle to keep up with insurance payments. Analysts warn that squeezed budgets can lead to policy lapses, reduced coverage levels, or shopping for cheaper (and sometimes inadequate) policies.

More accidents in stressed industries. In sectors tied to oil and gas, worker shortages and fatigue have historically increased accident rates, which in turn raise liability claims and insurance costs. While this is industry‑specific, it contributes to overall market pressure.

The Big Picture

If the oil crisis lasts a year or more, the most likely outcome is:

• Automobile sales soften overall, with a strong shift toward efficient and electric models.
• Large SUVs and trucks lose market share, unless essential for work.
• Vehicle prices rise due to supply chain strain and higher transport costs.
• Auto insurance premiums continue climbing, driven by inflation, repair costs, and higher replacement values.
• Consumers face financial strain, leading to more lapses, reduced coverage, and slower sales cycles.

Reality bites, but understanding these outcomes and challenges will enable all participants to plan and adjust accordingly.

Paul Carroll

Denise, we were talking the other day about the fundamental changes occurring in insurance, and you had quite a list. Could you start us off by walking us through some of those?

Denise Garth

The industry is changing a lot, and it's not just technology — it's everything. Risk is changing, customer demographics and expectations are changing, where people are living is changing. 

One of the biggest things we're seeing is the growing protection gap. The cost of insurance has increased significantly due to climate and weather events, rising claims costs, and the legal challenges the industry faces. It is unsustainable for customers, forcing them to make difficult decisions such as not buying insurance, switching for a lower cost, increasing deductibles, and more. It is a tipping point of change.   

We see a new era for insurance — one that's really built around intelligence to enable adaptability.

The way forward is going to require both an operating model and a technology foundation redesign and redefinition. We've been talking about transformation for the last 10 to 20 years, and in most cases, it was about ripping out the technology and putting in something new over the existing operating model. Now we must rethink the operating model: how we want and need to do business to remain relevant.

In today's world, products are evolving. You still need auto, but there are so many variations of it now — autonomous vehicles, people doing things with Uber and the gig economy. There's a whole different set of product types needed to support those, and that goes across all products, whether it's P&C or L&A&H. 

We have to do business in a way that fits this future, not the past.

Our operating models have been crafted over decades around a myriad of constraints, business assumptions, and challenges from the past. They've evolved by layering in technologies, manual work, point solutions — and we now face what I call a "spaghetti infrastructure" that has created a really inefficient, unprofitable, and employee-constrained operation. It's added a level of complexity on top of an already complex business. 

Instead of just replacing technology with the next modern core solution, we have to think about what it is we compete on. That's where technology really begins to come into play — not just cloud-native technology and robust core systems, but now AI, both in terms of technology infrastructure and business architecture that can redefine the operating model and business processes. 

In a webinar I just did, I shared that 82% indicate they want to do something with AI, but very few are actually doing it, or they're doing it in a piecemeal way. AI needs to be more than just an add-on technology. It has to be embedded into and redefine how we do business, so you can constantly optimize what you're doing. That redefines the overall business value of cloud and AI-native core that the market begins to see and realize in business outcomes.

I predicted that by 2030, we could see a 20-point reduction in expense ratios — and it's starting to happen as you see publicly traded insurers talk about what they're doing with AI. That is going to completely change the competitive landscape. 

Paul Carroll

For me, the big thing I see companies potentially missing — because I've seen them miss it in other waves of technology over the past several decades — is the need for the agility you mention.

Gen AI is going to allow the sort of breakthrough that Amazon produced in the first wave of the internet. It didn’t just do the old things better; Amazon reinvented retail. If insurers lock themselves into developing a better form of what they've done before, they're going to miss out on a lot of opportunities.

From a technology standpoint, how do you enable the agility that insurers need?

Manish Shah

Before diving into the solution, I want to make sure we also look at the broader, common theme underlying these problems. A lot of people blame the insurance industry for not having modern systems, for not knowing their customers, for not having the right products or pricing. But if you really dig deep, the biggest issue facing the insurance industry — the one causing all those other problems — is that it simply cannot keep up with how fast the world is changing. Insurance is out of phase.

Customer expectations are significantly different and changing almost daily. There’s a huge change in risks and in how those risk profiles are developing. And the technological advancements happening today are leaps and bounds faster than what insurance companies' general culture allows them to absorb.

They're not unaware of the problem. The issue is how fast they can adopt new technology, how fast they can change their culture and get to changes in products, better pricing, better distribution, and so forth.. 

Our view is that it's not just about using technology or solving a niche problem. It's about making your mission-critical systems nimbler and relying on a partner and ecosystem framework rather than a traditional command-and-control framework. 

Not every innovation has to be built in-house from the ground up. The real value companies can leverage is to test the technological innovations that companies like ours bring to them in a meaningful way — roll them out to customers, learn from them, test them, understand user behavior, and refine them.

That's why our approach is not simply about selling technology or a core system. It's about having intelligence built into every workflow, every process, every customer interaction — so you can get meaningful feedback from customers that allows you to evolve faster than the rest.

It's not a technology discussion — it's a speed discussion. How fast can I validate my ideas? That, clearly, is the biggest impediment in the industry.

Most people are still grossly underestimating what AI can and will do to every single business. Insurance is not an exception. Regulations will shield you only for so long, but when it comes to customer service, operational efficiency, improved profitability, faster turnaround, claims resolution, and better underwriting — AI, and more importantly, agentic AI, is going to play a huge role in every single one of those areas.

Whether people embrace it or resist it, in the next 18 to 24 months, a hybrid workforce — built with humans and AI agents working together — is going to be common. We're literally talking about leveraging artificial intelligence not as a tool but as an entity that works alongside humans. And that means the human workforce is going to have a very different role. They won't be writing the first draft — they'll be validating it. That is a huge cultural shift.

If organizations don't start engaging with this thought process early and experimenting with it now, they'll eventually be pressured to do it in a hurry. And if you try to implement this in a rush, even if you can get the technology in place, you cannot simultaneously implement the cultural shift that needs to accompany it. Doing it sooner is critically important.

Denise Garth

We talk about the "capacity gap." The capacity to have the right type of people running the business inside an insurance company is under significant strain — particularly given that a large percentage of the workforce is expected to retire by 2030. Estimates put those losses at 40% to 50%. You're going to lose your underwriters, your claims adjusters, your billing professionals — people who know your legacy systems, let alone people who understand your products and your business.

That's exactly where the hybrid workforce comes into play. Not only can it help you do more with the resources you have, but it can also educate and train new people in a consistent way — creating real value, consistency, and quality for those coming in and trying to learn this business. It gives them the confidence to do the work and learn along the way. That's a major factor in all of this that a lot of insurers haven't fully faced up to yet.

Paul Carroll

Peter Drucker used to say that culture eats strategy for breakfast. And when you look at AI — or just the new technology environment, in general — if you approach it as a destination, something you're going to do once, you're going to fail. 

It has to be a cultural shift, something you work on this week, next week, next month, and the month after that. 

Denise Garth

It really comes down to leadership, because you're going to have to redefine the organization and people's roles — jobs are going to look very different. 

Paul Carroll

How does software need to evolve to support a hybrid workforce of both humans and AI agents?

Manish Shah

Today’s software was designed to be used 100% by humans. And human users have a little bit different constraints than AI users. For example, humans can't process too much information at once. We need multipage forms in a user interface, relational databases, more structured data — things like that. AI agents don't have those same constraints. Software today must be designed for both people and AI agents to do the work they’re best suited for. 

Toward the latter part of the year, we plan to release a brand-new user interface, suited for each type of user. Providing seamless handoffs between them is also a key part of that design consideration. 

The current core system user design is simply not going to be adequate for where the world is moving. The industry has come a long way in the last 20 to 25 years in modernizing, but the fundamental pain points are still there — how long it takes to implement modern software, the cost, how long it takes to maintain it, the total cost of ownership. 

Just like Claude has created a significant dent — in a lot of people's minds and in the markets — with the idea that "I can build the software," we think the same kind of shift is possible for enterprise implementation. Sure, that came with a lot more enthusiasm than realism at first, but I think it will get there.

Why can't AI implement our software? Why does an implementation take three years? Our goal is to build a Claude-like AI capability that interacts directly with business users and translates that into system configurations — allowing our customers to actually move forward.

Paul Carroll

Thanks, Denise and Manish. 

About Denise Garth

Chief Strategy Officer at Majesco, Denise Garth drives thought leadership and innovation strategy for insurers worldwide. She’s a global voice on digital transformation, customer experience, and the future of intelligent insurance ecosystems, shaping how carriers modernize and reimagine their business models.

About Manish Shah

President and Chief Product Officer at Majesco, Manish leads global product innovation across intelligent core systems, AI-powered platforms, and digital ecosystems. A visionary technologist, he’s known for helping insurers accelerate modernization while staying true to human-centric design and trust.

For decades, insurance has relied on a model that assumes time is on its side. Risk could be assessed, priced, and adjusted in cycles. Products evolved gradually, and systems were built for control rather than speed. That model is now under pressure in ways it was never designed to handle.

The issue is not that insurers lack insight. Most organizations have more data than ever before, along with increasingly sophisticated models to interpret it. The problem is far more practical: they cannot act on that insight fast enough. Pricing updates remain tied to fixed cycles, model changes take time to deploy, and by the time adjustments are implemented, the underlying risk has already shifted.

Inside insurance organizations, this tension is well understood. There is no shortage of awareness or intent. The frustration comes from the gap between what teams know needs to happen and what they can execute. Pricing changes sit in queues, model updates wait for deployment windows, and while those changes move through the system, the underlying risk continues to move.

The gap between the speed of risk and the speed of response is no longer just inefficiency. It's showing up in loss ratios, missed growth opportunities, and an increasing inability to compete on speed.

A model that cannot keep up

Insurance was not designed for continuous change. Pricing is still adjusted at defined intervals, underwriting models are updated periodically, and product changes move through systems that assume a relatively stable environment.

Risk no longer behaves that way. Exposure can shift materially between pricing reviews. New data arrives continuously, often from sources that did not exist even a few years ago. By the time updates are implemented, the assumptions they were based on are frequently out of date.

Most insurers recognize this dynamic. The challenge is not diagnosing the problem, but overcoming the structural constraints that prevent them from responding in real time. Legacy systems, internal processes, and the way decision-making is organized all introduce delay, even when the business is trying to move faster.

The result is a fundamental mismatch between how risk evolves and how insurance operates.

When technology slows you down

Much of the industry conversation around innovation focuses on adopting new technologies. But for many insurers, the more immediate issue is the technology already in place.

Core systems continue to underpin underwriting, pricing, and product configuration, yet were built for a different era. They prioritize stability and control, which made sense when change was incremental, but they are far less suited to an environment where conditions shift constantly.

This creates a form of operational inertia. Even relatively straightforward changes can trigger complex processes, requiring coordination across multiple teams and systems. As a result, external changes move faster than internal responses. Updates queue behind IT backlogs, implementation timelines stretch, and opportunities to respond to emerging risks are missed.

It's not a lack of capability that holds insurers back. It's the difficulty of translating that capability into action within the constraints of the existing operating model.

The AI gap is an execution gap

The same pattern is playing out with AI and advanced analytics. The potential is widely understood, and in many cases, already proven. More precise pricing, improved risk selection, and better customer engagement are all achievable outcomes.

What remains unresolved is how to operationalize those capabilities at scale.

In many organizations, AI is still being deployed as a series of point solutions rather than integrated into the core of decision-making. Data remains fragmented, insights are generated in isolation, and the process of moving from analysis to action is slower than it needs to be. This is not a failure of ambition but one of integration.

Without an operating model that can absorb and act on these capabilities continuously, AI risks adding another layer of complexity rather than delivering meaningful transformation. The gap between what is technically possible and what is practically achievable continues to grow.

Innovation that arrives too late

One of the clearest consequences of this dynamic is the speed of product innovation. Emerging risks require new forms of coverage, more flexible pricing, and the ability to adapt offerings as conditions change. Yet bringing new products to market remains a slow, resource-intensive process. By the time a product is launched, the risk it was designed to address may already have evolved.

In effect, insurers are often pricing yesterday's risk in today's market.

This lag has direct commercial implications. It limits the ability to seize new opportunities, exposes reliance on outdated assumptions, and makes it harder to compete in areas where speed and adaptability are becoming critical.

More than an efficiency problem

It's tempting to frame these challenges as operational inefficiencies. At its core, this is a question of missed opportunity. Every delay in responding to changing risk conditions shows up somewhere. In pricing that no longer reflects exposure. In products that reach the market too late. In capital deployed against assumptions that are already outdated.

Over time, this erodes both profitability and competitiveness. It also has wider implications for the role insurance plays in the economy. When insurers cannot respond quickly enough to evolving risk, it becomes harder to price and transfer that risk effectively, which in turn affects how capital is deployed.

A breaking point for the operating model

The insurance industry has adapted to change many times before, but the current moment is different in both speed and scale. What the industry is facing is not a series of isolated challenges, but a structural shift in how risk behaves. The operating model that has supported insurance for decades is reaching its limits.

Closing the gap between the speed of risk and the speed of response will require more than incremental improvement. It will require a fundamentally different approach, one that allows insurers to move from periodic decision-making to continuous, real-time action.

The industry is not short on data, insight, or ambition. What it lacks is the ability to translate those strengths into action at the pace the market now demands. That is why this moment feels different. This is not simply another innovation "phase," it's the point at which the traditional operating model breaks.

Small commercial construction has a coverage-gap problem, and the industry still tends to frame it too narrowly. This is not simply an education issue. It is a systems issue spanning intake, underwriting, product selection, agency guidance, renewal, and digital distribution.

Most businesses in the small-contractor world have at least one real coverage gap, and usually more than one. The same hot spots show up repeatedly. Subcontractors are a big one: no certificates on file, subcontractors carrying skinny limits, or general liability policies that quietly carve out subcontractor work or action-over claims. Tools, equipment, and materials are another weak link. Without good inland marine coverage, anything not bolted down or specifically listed, including tools in trucks, on jobs, or in storage, is basically uninsured. Completed operations are often thin, even though many claims show up months after the job is done. Many small contractors also remain bare on EPL, cyber, and professional liability, even when they are doing design-build or heavy advisory work.

That pattern persists because the market still treats small contractors like downsized versions of big construction firms, when they behave more like volatile micro-businesses. They pivot fast. A three-person general contractor may effectively be running a 40-person operation through subcontractors, while underwriting is still staring at W-2 payroll. The issue is not a lack of products. It's a lack of connectivity between what these businesses actually do and how the insurance workflow captures risk.

Where the mismatch shows up most often

General liability is still the big category that contractors misunderstand. Many assume it covers everything, including design mistakes, employee issues, and their own stuff. In reality, it usually does not include professional liability, EPL, or personal property, and it may limit or exclude some subcontractor work. Inland marine or tools coverage is often confused with GL or property, or skipped entirely, which means tools in trucks, on sites, or moving between jobs are underinsured or not insured at all.

Workers' compensation also gets dodgy when owners try to call everyone a 1099 to save premium, then find out the hard way they have misclassified people and have no real coverage for injured subcontractors. Builders' risk is often assumed to be baked into GL or the owner's policy, so ground-up jobs and major renovations go forward with no project-specific property coverage.

These gaps usually start at the front door and then get locked in at every step. Intake is rushed, so applications understate revenue, gloss over higher-hazard work, and skip key details like subcontractors, storage locations, or any design role. Underwriting on small accounts leans too heavily on class codes and checkboxes instead of actually looking at job mix and contracts. Agencies under pressure to be fast and cheap default to contract minimums, not coverage that matches how the contractor actually operates. Once the account is bound, renewals become copy-paste unless a new job contract or pricing issue forces changes.

But a small premium does not mean simple risk. If intake captures only a partial version of the business, every downstream step becomes a more efficient way of institutionalizing the wrong answer.

Where data and AI can genuinely help

The industry talks a great deal about data and AI closing protection gaps. In small commercial construction, those tools can absolutely help, as long as there is honesty about their limits.

They are strong at spotting mismatches. A business described as a handyman operation may suddenly show structural steel on its website, permits, or social footprint. Revenue, payroll, job types, and contract requirements may suggest limits that look very different from what was initially requested. AI and external data can also prompt for missing pieces that matter, including subcontracts, storage locations, equipment schedules, and certificates of insurance.

But those tools still fall short when the intake data is thin or wrong because that just becomes fancy math on bad inputs. They also struggle with nuance in construction contracts, indemnity wording, project delivery methods, and all the gray areas humans still argue about. When a contractor reinvents the business every six to 12 months without clear signals, the models lag reality.

AI is most valuable here as a signal-detection layer that surfaces where the representation of risk and the operating reality have drifted apart. That signal layer is powerful, but it still needs a human who understands construction and coverage to translate signals into real decisions at the account level.

Why digital-first works only part of the time

Embedded insurance and digital-first distribution can work for simple, low-hazard contractor risks. Solo trades with straightforward work, such as interior painting, basic handyman services, and simple flooring, are often a good fit for one-click experiences, especially for certificates of insurance and small endorsements.

But once the risk includes heavy use of subcontractors, multi-story or structural work, design-assist, unusual materials, or specialized sites such as data centers and hospitals, the account moves out of click-and-bind territory. A more consultative approach becomes necessary because someone has to ask harder questions about scope, contract language, and jobsite conditions.

The opportunity is not to choose between human expertise and digital efficiency. It's to build a true human-plus-machine model, with AI surfacing the right questions and construction-savvy agents and underwriters interpreting the messy reality on the ground.

What needs to change

To make small commercial construction more consistent and scalable for carriers, underwriting, data access, and product design have to be rethought together.

It starts with smarter intake: third-party data such as permits, licensing, online footprint, and certificate tracking, combined with a tight set of questions about subcontractors, heights, structural work, and design responsibility.

On the product side, the market needs to move away from one-size-fits-all BOPs and toward modular contractor stacks: general liability with completed operations, inland marine, builders' risk, professional liability, EPL, and cyber. The industry should also standardize how it handles subcontractor injury, action-over exposure, and unscheduled subcontractors instead of burying giant gaps in endorsements no one reads.

Renewal is another missed opportunity. Claims data and operational signals should trigger smarter follow-up questions. Did the insured add design services, go higher, start public work, or pick up data-center jobs? That is how a tiny general contractor winning a slice of a larger data-center build gets structured correctly instead of being shoved into a tiny-limit package or declined outright.

What a better ecosystem looks like

In a healthier ecosystem, small contractors would not be walking around with Swiss-cheese policies that only reveal the holes when a lawyer gets involved. Coverage would adapt as work changes, with limits and modules responding to live data instead of stale applications. Policies and quotes would spell out major exclusions, including subcontractors, height, professional services, and residential work, in plain language right up front.

Subcontractors would be run through shared platforms for vetting, certificates of insurance, and standard hold-harmless language, feeding cleaner data straight into underwriting. Intake, underwriting, and renewal would function as a continuous risk-monitoring process.

That is the real innovation challenge in small commercial construction. The market does not need a watered-down version of large-account insurance. It needs a more adaptive, reality-based version of small-account insurance built for businesses that change faster than the forms designed to cover them.