5 Steps Insurance Must Take to Integrate Artificial Intelligence into Its Post-Pandemic Risk Strategy

By: Saravana Kumari Sundaram | March 2, 2021

Saravana Kumari Sundaram heads the Insurance Solutions at Virtusa. She has three decades of global experience spanning across Insurance, Securities and Capital Markets and Banking. She started as a technologist and broadened the horizons to large programs and account management followed by an in-depth focus into the insurance industry. She is an Associate from Insurance Institute of India (AIII) in both Life Insurance and General Insurance and a member of Life Office Management Association (LOMA), USA and Chartered Insurance Institute (CII), UK. She is passionate about applying technologies for business disruption. She is an experienced PMP professional and a Six Sigma green belt.

As with most industries, the insurance world was rocked by the arrival of COVID-19, which thrust most businesses into a precarious position — finding new ways to assess vulnerabilities and up the customer experience while operating in a remote world.

While COVID arrived like a chilling blast of arctic air, it didn’t freeze businesses and prevent them from taking action.

Quite the opposite; the pandemic invigorated the need to embrace new digital initiatives including artificial intelligence (AI).

According to a December 2020 study from TransUnion, “digitization accelerated in response to the COVID-19 pandemic as insurers looked to better serve customers and remain competitive in today’s evolving marketplace — digital adoption in the insurance industry grew 20% globally in the past year.”

Now, just weeks into 2021, this focus on innovations such as AI remains a top-tier priority and the key to success in the era of “new normal.”

Here’s why — insurers have always had access to mountains of data but are now being asked to process it at unprecedented speeds that most simply cannot meet.

Enter AI.

AI can take data from traditional and new resources such as Internet of Things (IoT) devices, social media pages and credit reports to provide insights on levels they’ve never seen before.

For example, we’ve seen an email triage system using natural language processing and AI/ML deliver 80% accuracy and an 89% confidence level while reducing turnaround times by 50%. In addition, the system played a pivotal role in fueling better customer experiences and freeing agents to focus on more pressing customer-facing needs.

It’s benefits like these that have given the industry hope, but they don’t shed light on where this AI journey begins. Here are steps that each company must consider as they kickoff their AI initiative.

1) AI Strategy and Roadmap

Gartner predicts that nearly 80% of AI and machine learning initiatives will not deliver business outcomes through 2022.

There are many reasons why this is the case.

One is that businesses fail in their due diligence, specifically when it comes to the following: discovering, analyzing and prioritizing the use cases that address their challenges and then determining, which can be addressed in both the short and long term.

We’re all eager to launch our AI initiative, but we cannot ignore these core steps.

2) Forge Your Data Strategy

Another reason AI investments often miss the mark is they lack an underlying data strategy. Some of the typical risks with AI implementations include:

Inadequate understanding of the organization’s data
Insufficient availability of the right data
Poor data quality
Lack of clear ownership

The right data strategy includes many elements such as:

Data Diversity: Bring in data from your systems of record as well as alternate and third-party data sources and both structured and unstructured data.
Data Glossary and Lineage: Create a glossary where technical and business metadata are captured and continuously updated as new sources are added. This ensures faster identification of the right datasets.
Data Quality: Data quality checks address completeness, uniqueness, timeliness, accuracy, consistency and validity of datasets before they are used for AI/ML use cases.
Responsive Data Architecture: Cloud-enabled architecture helps to scale and optimize compute capacity usage across on-premise, public cloud or hybrid workloads.
Data APIs: Exposing data via APIs simplifies and provides uniform access to data consumers, reduces redundancies, enables agility and self-service, measures consumption and monetizes curated data and insights.

3) Check Your Readiness

Next comes the assessment of current technologies, business and data landscape. This process will allow you to assess your AI maturity level.

Deploying AI requires a massive amount of readiness from a technology and data standpoint. Determine data, model training and deployment gaps before you begin and find ways for how these can be bridged.

4) Train Your Team

Not only do you need to check your readiness from a technology standpoint, you also must get your team up-to-speed on these new AI capabilities.

This means training employees, assessing their skill sets and “up skilling” as needed.

5) AI Governance

Those who are new to AI may be so focused on the benefits that they overlook governance and ethics. Make sure you have a plan in place that ensures the ethical use of data and keeps the team one step ahead of new regulations.

The insurance industry is ringing the AI bell, and the race is on. However, while the urge to finish first is enticing, taking the right steps is what will allow these businesses to do it right the first time and operate on a level demanded by this “new era.” &

Vermont’s Future Is Golden

Challenging market conditions are driving insureds to captives. Vermont offers a reliable domicile.

By: State of Vermont | November 21, 2024

Hard markets in commercial insurance lines have been a problem for years now. Many lines don’t show signs of softening, though some, like cyber, have ebbed over the past few years.

High claims volumes and costs have caused carriers to tighten terms and conditions, introduce new exclusions and increase premiums. A variety of different risks are included in this market tightening, and it’s affecting both public and private companies.

As Sandy Bigglestone, deputy commissioner for the State of Vermont’s captive insurance division, explained, schools, churches and other nonprofits are contending carriers are “excluding sexual abuse and molestation from coverage for a lot of these types of entities. These organizations understand the risk and the public needs to have confidence the organizations are addressing the risks, so they must have the coverage.”

Though many commercial lines are affected, property has perhaps been hit the hardest. Increased claims, inaccurate property valuations and other challenges have caused insurers to tighten their books in recent years. 2024’s spate of hurricanes will likely make matters worse.

“There continues to be challenges in the commercial market,” Bigglestone said. “Some companies are coming to us with risks that they say they’ve been self-insuring on their balance sheet, and why not transfer that to a captive to receive greater benefits?”

Consistency and Stability

Sandy Bigglestone, Deputy Commissioner for the State of Vermont’s Captive Insurance Division

With the commercial insurance market so unstable, companies are turning to captives to house their exposures. Vermont, a long-time domicile, is getting increased attention because of their strong reputation and their leadership as the top domicile worldwide.

“All stakeholders enjoy the stable political and regulatory environment Vermont has to offer to operate in,” Bigglestone said.

Of course, a lot of consideration goes into deciding whether or not a captive is the right choice for a particular company. Businesses need to assess their exposures and their books to make sure they can adequately operate a captive.

There are significant advantages, however. “For low frequency, high severity risks, captives can access the reinsurance markets directly, so it’s very attractive for businesses to put a captive in place,” Bigglestone said.

And carriers are more accepting of captives as part of a broader insurance program.

“Captives are changing the relationship businesses have with commercial carriers,” Bigglestone said. “Commercial carriers are wanting to see companies with skin in the game; therefore, the relationships have evolved to be less transactional and more strategic.”

Balancing Bureaucracy

With 76 global domiciles, companies have a lot of options when it comes to selecting a captive partner. “Captive insurance domiciles compete globally for the business,” Bigglestone said. “If you were to put all 7,000-plus captive insurance companies around the world, all in New York, it wouldn’t have the same economic impact as 700 captives in Vermont does. The captive insurance industry is very important to our state and we will continue to support it in any way we can.”

Businesses should look for domiciles that balance a need for quality regulations with a process that isn’t overly bureaucratic and is seamless for business owners to navigate.

“Companies are attracted to an environment with quality regulatory standards and a stable regulatory environment,” Bigglestone said. “Vermont sets the regulatory standard in terms of financial analysis and examinations.”

In addition to quality regulations, firms will want to seek out a domicile that is agile enough to license captive insurance companies that fit their unique needs. It is important that a domicile have firm but fair regulation and the experience to consider new ideas and implement them. Companies must consider a variety of factors when choosing a domicile and not everyone will be the right fit for every company.

“You have to consider the captive owner and the industry sector that that owner operates in, as well as the insurance risks that are going into the captive program,” Bigglestone said. “Captive laws and regulations have to have a reasonable degree of flexibility to accommodate all the varying needs of owners and then impose rules based on the merits of each captive program.”

She added that creativity is a critical part of the process: “The ability to vet concepts and ideas with trusted individuals is key to having quality standards,” Bigglestone said. “And it can make captives appealing to insureds who are tired of commercial carriers not meeting the needs of the business, and who desire more control over their insurance programs.”

“When you think about the commercial marketplace, commercial insurers are supposed to operate in each jurisdiction in a competitive manner. Commercial carriers often look the same. They sell auto coverage to anyone with a driver’s license. The rules and regulations imposed upon commercial insurance companies are designed to be more formulaic for that reason,” Bigglestone said.

“Uniform regulatory standards apply to commercial carriers for the protection of the policyholders. These are standards all insurance regulators focus on, and standards captive insurance regulators need to understand, but with a specialized focus.”

A Quality Domicile Built for the Future

A combination of experience, regulatory standards and talent make Vermont a top domicile for companies looking to form a captive. The longevity of licensing captive insurance companies for over forty years is a testament to the quality work they’ve provided in the past and will continue to provide for many years to come.

Vermont’s reputation has helped the state attract and retain top captive talent, ensuring the businesses it serves are in good hands. The state has 32 employees dedicated to captives, and their average employee retention is 15 years. The Vermont Captive Insurance Association, the largest captive insurance trade organization, also helps companies connect with professional services needed to make their captive successful.

“There’s a whole host of service providers with proven expertise right here in Vermont,” Bigglestone said.

Taken together, Vermont’s resources, expertise and talent make it a prime domicile. They’ve been on a growth trajectory over the last few years and that’s unlikely to change anytime soon. Companies can trust their captive will be in good hands when they choose Vermont.

“Vermont has always competed on quality,” Bigglestone said. “We do have a mission and that hasn’t changed in over 40 years. It’s to maintain a system, or domicile that attracts quality business to Vermont, to promote our reputation in the industry, and to uphold a regulatory framework to protect the solvency of the companies that choose to place their business here.”

To learn more, visit: www.vermontcaptive.com

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with State of Vermont. The editorial staff of Risk & Insurance had no role in its preparation.

The State of Vermont, known as the “Gold Standard” of captive domiciles, is the leading onshore captive insurance domicile, with over 1,200 licensed captive insurance companies, including 48 of the Fortune 100 and 18 of the companies that make up the Dow 30.