Tag Archives: Cheatham

‘Tear Down the Information Silos’

Instead of a short bio, let us know what are your top three books everyone working on digital transformation needs to read and top three tech gadgets one needs to have?

“Zero to One.” This is the best book on tech, and so many entrepreneurs don’t understand the key concept: Your tech better be 10X better if you want to win,

“Moneyball.” I love this book because it helped me see how someone can look at a problem totally different. In the case of “Moneyball,” Billy Beane started looking at baseball stats in a different way.

“The Dip.” This is Seth Godin’s best book, and it’s super short. 10X better technology takes time. You will hit a new dip every single day. Pushing through the dip is key; 99% of people don’t get through the dip in some form or fashion.

iPhone. I hate my phone and love my phone all at once. I saw some crazy stat that it’s still a better deal at $1,000 than most gadgets, based on the number of times you touch it in a day (versus everything else).

Garmin Fenix 5. I was really disappointed with my Fitbit. So I ponied up for a Fenix 5 watch, and I absolutely love it. I love how well it is constructed.

Calendly (or equivalent scheduling app). I would go insane without this app. Seriously.

You are not only the CEO of RiskGenius but also a renowned influencer in the insurance industry. First, tell us more about your company. How far are you with becoming the Google of insurance?

We are getting closer every single day. Users can now use our Google-like search to find and compare policy language instantly. Now we are moving to an analytics based approach — put another way, the computers are going to start showing insurance pros what is and is not important.

See also: Why AI Will Transform Insurance  

When you start a discussion – for example, on LinkedIn – a lot of experts from around the globe participate. What role does social media play in your work as CEO? What would you recommend to C-suites of incumbents who don’t have an interactive presence on the internet?

Social media is our secret sauce. I have more than 100,000 followers on LinkedIn, and most of them are in insurance. That is crazy. I use LinkedIn to share wins, struggles and ideas. Some day, I would love to go back and read through all my crazy LinkedIn posts.

Most corporate social media is so, so boring. I love the personal touch. And, I guess you have to be a bit controversial — although I don’t really think my posts to LinkedIn are that controversial. For example, I recently posted that you can’t fix your front end until you address your legacy software. I don’t see that as controversial; others did.

Life is too short to be boring.

How do you estimate the state of the industry inside and outside the U.S.?

Honestly, we are in the first inning of a nine-inning transformation. There are major insurance corporations that are just now scanning in paper documents. Most insurance professionals can’t really find the digital information they need. We have so far to go.

What do you think are the biggest chances for incumbents to use the digital transformation? What are the biggest hurdles in your opinion?

The biggest opportunity and the biggest hurdle is tearing down information silos. I can’t tell you how difficult it is to get our hands on  an insurance carrier’s forms sometimes. This occurs because (1) the information is not stored in a central location and (2) the information gatekeeper does not want to give up the information to a more efficient system.

Herbert Fromme, maybe Germany’s most famous journalist on insurance topics, said a few weeks ago that insurers can reduce the majority of tasks in the future and, for the rest, need employees with different skill sets. What do you think about this?

Absolutely, and this is no different than most other industries. I used to be a litigation attorney. I attained my billable hours primarily by reviewing large document sets on cases. Two years into my career, I started reading about outsourcing operations that would review litigation documents at a fraction of the cost. Two years after that, I started reading about technology-assisted review, which involved machines reviewing litigation documents.

The same thing is happening in insurance. Insurance companies have just gotten comfortable outsourcing many jobs to other countries where labor is cheap. And now you are starting to see machine learning solutions that can do the outsourcing work (ahem, www.riskgenius.com).

What are your top three do’s and don’t’s for a C-suite that understands the need to act soon?

Do’s:

  1. Spend most of your time on the problem.
  2. Make sure you have buy-in from all employees — not just executives.
  3. Avoid reading traditional tech press — do your own research.

See also: How Technology Breaks Down Silos  

What would you advise young people who are thinking of entering the insurance industry?

Go get a job in insurance and pay attention to all of the crazy, frustrating situations that you see. There will be a lot. It is the nature of the beast. Talk to your peers about the problems you are having. See which problems others focus on. Then figure out how to fix the problem you have selected.

Thank you for your time.

Dear Insurtech, It’s Not You, It’s Me

Dear Insurtech,

It was nice getting to know you in 2016. You served your purpose, but now it’s time for RiskGenius to move on. It’s time for me to move on.

There were a series of events that helped me realize that you, insurtech, and me, well, we can’t really be friends anymore.

I can’t be conference guy 

Recently, I was in San Francisco meeting with some insurance professionals who are plugged into the insurtech scene. One of them brought up a recent insurtech conference and commented, “You are everywhere, Chris!”

I shuddered. I have never wanted to be “conference guy,” but I got sucked into being just that this year, and there are way too many insurtech conferences.

Little comes out of insurtech events 

I often attended insurtech events this year and wondered at the end, “What will come out of that?” And very little developed. As the year progressed, it started to dawn on me what was going on. And then, finally, everything crystalized after one phone call on Dec. 13.

A wonderful insurance professional called to let me know he was leaving his firm at the end of the year because he was frustrated by the lack of engagement by his firm with insurtech companies.

See also: The Future of Insurance Is Insurtech   

It hit me: Insurance companies are simply trying to understand what the heck it is we insurtech companies are doing. Often, there are no real plans for insurance companies to actually engage with insurtech companies.

I need to focus on the doing, not the talking 

This year, we have found a tremendous partner in an insurance carrier that I hope to tell you about soon. There are also pockets of people focused on insurance technology innovation — but I need to find these people because they often aren’t at the conferences, or aren’t on Twitter or LinkedIn.

Some of the best events I attended were intimate gatherings. Insurance Thought Leadership invited me to a cyber insurance conference I loved. Marsh invited me to an executive retreat that was incredibly insightful. And an insurance carrier allowed us to participate in an innovation challenge with internal employees that changed the trajectory of our company. But none of these three events focused solely on “insurtech.”

RiskGenius is ready

As I look toward 2017, I am going to remove both myself and RiskGenius from the insurtech scene. Instead, we are going to be actively seeking out those partners that can use our software right now. It’s no longer about tinkering and building algorithms; RiskGenius is weaponized and ready to go.

Two areas have emerged where RiskGenius fits perfectly.

First, RiskGenius is primed for policy automation.

We can take an entire library of policies, show you similarities and differences and then serve up the correct policy based on what the user needs.

See also: 4 Marketing Lessons for Insurtechs  

Second, RiskGenius analytics has people really excited.

We are now able to take an insurance policy that a user provides us and compare it with all the policies we have previously collected and stored. Soon, I will write about how we have evaluated more than 400 cyber insurance policies.

This is awkward, insurtech. But we can’t be a “thing” anymore. I’m sorry — it’s not you, it’s me (and RiskGenius). We want more for our future.

Thanks for the memories,

Chris Cheatham

CEO, RiskGenius

Can Insurance Innovate?

It’s a simple question — can insurance innovate? Think about your answer; I will give you mine at the end of this post. 

Here’s a quick story from an insurance book that helps set the stage for how the industry got to where it is today:

There once was a membership association called the American Insurance Underwriters (AIU). The AIU acted as an agent for member insurance companies in international markets. Each member insurance company held a percentage of the AIU pool by which payments and liabilities were assigned.

In the 1960s, an AIU member bid on a contract to insure a large church in Boston. But the insurance company didn’t bid the insurance like everyone else. Instead, the insurer created a tailored contract with its own rate calculations, “rather than the standard forms and prices other (AIU) insurers had agreed to use.”

The incumbent insurer was not pleased:

“Executives at Continental Insurance, which held about 27% of the AIU pool, went ballistic…. [Continental Chairman Victor] Hurd objected that this radical maneuver of using competitive pricing and deductibles in fire insurance was somehow going to ruin the insurance industry.”

Executives at the heretic insurance company convened.  One “old-fashioned insurance man” (the book’s description, not mine) argued that the relationship with the AIU must remain intact as it was an important revenue source to the company. The executive urged the group to stick to the AIU practices.  

See also: Underwriters Need Some Power Tools

Another executive who participated in the custom underwriting urged another path:

“We should not be tethered to outmoded practices,” he said, “whether the custom of rate-setting associations, the terms of our policies or anything else.”

Who was that executive? Maurice Greenburg, who later became the CEO of AIG, one of the largest commercial insurance carriers in the world. But before AIG, Greenberg had to fight to change the way things were working at American Home, the heretic insurance company. Greenberg had to argue that remaining a part of an organization that sets international practices and shares profits and liabilities across insurers was not the best approach. Today, this seems obvious; at the time, some viewed this as blasphemy.

But Greenberg’s innovation didn’t stop there. According to Greenberg’s book, he used the AIU discussion to point out another outmoded practice relating to insurance agents:

“Insurance agents worked for themselves in the field writing policies, yet they possessed the authority to bind the insurance companies they represented…. American Home’s agents seemed to care more about commissions than quality. Greenberg envisioned moving American Home away from its reliance on agents in favor of setting its own underwriting standards and moving away from the personal lines that agents tended to underwrite in favor of commercial risks that tended to be identified by brokers.”

Of course, every insurance company operates this way today.

Reading The AIG Story has led me to a couple of ideas.

There is absolutely no doubt that insurance companies can and do innovate. Insurance companies create new insurance products every day. For example, AIG launched kidnapping insurance in the 1970s in response to the emerging threat to wealthy individuals. You can see this kind of innovation today in the insurance products that were created to cover the Uber gap.

But, as I take a step back and survey the insurance technology (insurtech) scene, I believe we are missing one important discussion: the connection between the technology and new insurance products. How will your mobile app help AIG identify a new product that should be underwritten? How will your health data help Zurich create variable rates for health insurance? How will your technology-enabled policy review software help an insurance company identify outlier language that may create additional liabilities? (I have an answer to this last question!)

See also: 6 Key Ways to Drive Innovation

The last mile is missing from insurtech discussions. The last mile is showing how your awesome new software can actually improve the underwriting or claims experience for insurance professionals. The last mile requires an inordinate level of expertise by the creators of the new technology. Most technologists won’t finish the last mile. Pitch decks and 10-minute question and answer periods won’t get you there.

So yes, insurance can innovate. The question is, can insurtech truly support this innovation?

How Algorithms Will Transform Insurance

I can’t stop thinking about algorithms. I am obsessed, and I want to tell you why.

Let’s be clear: I am not a data scientist. I am a guy who finds technology and applications of technology fascinating. I am not writing this for technology nerds. I am writing this for professionals who want a working knowledge of technology.

If you are reading this, then you understand computers. A computer is nothing more than rules programmed by a human. Those rules are then executed and create an output.

But algorithms are so much more; they are breathtaking. An algorithm is a computer writing its own rules and then creating output from those rules.

It’s easy to focus on the scary part of algorithms. In the Avengers movie, a super algorithm results in a machine – Ultron – bent on destroying the world. I will leave those scenarios to the Elon Musks of the world.

Algorithms can do so much good

Think about any repetitive task you do. An algorithm can be created to solve that task. Some algorithms are used for fun. For example, Facebook uses algorithms to suggest friends for you to connect with. Google Photos uses an algorithm to identify faces and group pictures of the same person together (which can lead to terrible results).

Algorithms are already being used in the insurance industry. Take a look at CoverHound or PolicyGenius; the algorithms behind these applications quote personal lines of insurance based on your needs.

How algorithms work (and why they are awesome)

Again, I am not a data scientist, but here is my simple explanation of how most if not all algorithms are created:

1. Create a seed set.

First, you identify a seed set, which is the core learning that is taught to the algorithm. Yes, that’s right, even a computer algorithm has to be taught something from a human! For example, with the Facebook algorithm, I’m almost certain that the algorithm was first fed a giant spreadsheet that contained information about individuals and how they were connected (you do know your data created Facebook, Google and every other big data company you can think of, right?).

2. Feed the seed set to the algorithm.

The algorithm then reads all of the information it is fed and starts making its own rules. For example, the Facebook algorithm may determine: “Oh, I see, Jimmy likes Teenage Mutant Ninja Turtles, and he is connected with Bobby from the same city, and Bobby also likes Teenage Mutant Ninja Turtles. I bet Jimmy also knows Steve from the same city who also has a love for Donatello. They should connect.”

3. A human reviews the results.

A human (see, you are still needed!) then reviews the output of the application of the algorithm rules. In the Facebook example, a human might determine if Jimmy and Steve should actually connect on Facebook. Maybe they are part of rival gangs, and the algorithm didn’t recognize this. The human would then add this data to the spreadsheet and feed it back to the algorithm.

4. The algorithm rules are improved based on new input.

The algorithm creates rules to account for the new information. “Don’t connect rival gang members even if they live in the same city and like the Teenage Mutant Ninja Turtles.”

5. Steps three and four continue indefinitely.

Now stop for a second and think about all the rules that are built up in your head about people you connect with. Maybe you prefer to hang out with people who brew beer or read Harry Potter. There are literally hundreds of millions of personal preferences that human beings use to associate with people.

What if you could store all of those preferences and use them to connect people?

That’s Facebook.

Algorithms are good for insurance workers

Now think about your work and all the stuff you know and all of the stuff your colleagues know. What if all of that information could be fed into an algorithm and used to create rules. You could then use those rules to more quickly do your work.

I can hear you thinking “But then I will be out of a job.” Therein lies the rub, one that has been discussed ad nauseum (more than 9 million results for a Google search on “technology will destroy jobs”). Fatalists argue that algorithms and the advanced software programs they create will destroy jobs. Famous technologist and investor Marc Andreessen expressed as much when he proclaimed in 2011 that “software is eating the world.”

But what happens if software starts doing repetitive tasks previously done by humans? I believe humans find new ways to be productive. And, I believe history supports my theory. But that’s a blog post for another day.

I will leave you with two questions.

What repetitive tasks do you despise?

Wouldn’t it be great if you could offload these tasks to a computer?

Digital Is Not Enough; Nor Is Paperless

The service of risk management within insurance companies needs to innovate. Today, a small fraction of commercial customers take advantage of risk management services provided by insurance agencies. And insurance companies are fine with this, as they have limited supply — or people — that can provide risk management services.

But what if the same high level of risk management services could be offered to all customers of an insurance company?

How would an insurance company go about offering widespread, and high-quality, risk management services?

The Solution to Better Risk Management Is Your People (Plus Technology)

Insurance agencies currently engaged in risk management services have a distinct advantage: the accumulated knowledge of its people that provide contract reviews for customers.

I had this epiphany as I was reading through a slidedeck titled “Innovation is almost impossible for older companies,” which states:

“People have acquired skills that, at moments, have given significant advantages to companies in order to prosper.”

Insurance agencies now must figure out how to harness the risk management skills of its people in new ways. The alternative is scary for my insurance professional friends, because someone else — someone with new technology and a new supply of risk management knowledge — will figure it out instead. Insurance companies could quickly be out-innovated, as occurred to the taxi industry.

For some time, the taxi industry had skills that allowed it to prosper. Taxi companies used technology and money to set up phone numbers that could be called to request a ride; these companies also stockpiled just enough cars and drivers to meet the minimum level of demand. But then Uber came along and created a better technology that connected riders to a different (and bigger) pool of drivers. The taxi industry got out-innovated.

Insurance agencies are composed of people who have acquired risk management skills. My friends in the industry can review contracts with the best of them. But each of them has a limited capacity to complete contract reviews based on hours in the day. So not all customers get risk management services (either because they don’t know about them or don’t want to pay for them).

A technology will come along that will expand the supply of risk management services. One insurance consultant thinks that technology will be a computer avatar that analyzes and predicts risks independently.

I think the idea of an independently functioning risk management avatar is misguided. I am reminded of a quote from Zero to One, written by the founder of Paypal, Peter Thiel:

“Better technology in law, medicine and education won’t replace professionals; it will allow them to do even more.”

Better Technology Will Allow Insurance Professionals to Do More

I continue to be drawn to the word “collaboration” as I envision the future of insurance technology. Recently, I spent time evaluating software solutions in the insurance industry. All of the solutions I reviewed are focused on step one, what I call “Make it Digital.” Only within the last five to 10 years have insurance carriers and agencies gone paperless, and the insurance software companies are filling this need.

Digital is not enough. Paperless is not enough. Insurance technology must connect people and the knowledge that they create. Don’t think about just connecting to your customers. Think about connecting your team.

Imagine if your entire risk management team could work as a living, breathing entity to assess and evaluate risk. When Agent Jim in Kansas City has a question about liquidated damages in Texas, he should be able to quickly identify work completed by Agent Bob in Dallas dealing with this exact issue. He can then evaluate the work and bring Bob in on any follow-up questions.

I have yet to find an insurance carrier or agency that has figured this out.

This is where the opportunity lies in insurance technology: collaboration.