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Change is happening on all fronts in the risk and insurance world.
The explosion of data enables more proactive risk management and more granular underwriting, but has also created a bifurcation among brokers and carriers, separating those that have the scale and capabilities to harness that data from those that don’t.
The rise of artificial intelligence and machine learning are slowly modernizing and automating many manual processes within insurance. As with the influx of data, the organizations that can nimbly adapt to these technologies will be the ones to thrive.
“Technology and data produce many benefits, but implementing new technology requires a significant investment of resources. As a result, greater reliance on technology is shifting the competitive landscape,” said Morris Tooker, head of Middle & Large Commercial for The Hartford.
At the end of the day, the carriers that will come out on top are those that take advantage of these trends rather than resist them. In each case, insurers can identify a point of friction for clients and use it as an opportunity to provide better service.
Morris Tooker, Head of Middle & Large Commercial for The Hartford
In most categories of risk, a greater volume of data provides a window into the exposure that never existed before. Rather than waiting for trends to emerge in loss patterns, risk managers can spot common drivers earlier and take action.
Slips, trips and falls offer a perfect example.
“Data allows you to see the problem more clearly. If the majority of slips and falls are happening in a specific part of your building, having the ability to capture that data point right away and aggregate with other claims information provides the opportunity to see a pattern. Then you can evaluate and fix the root of the problem. Maybe you put down more non-slip coatings or another risk management technique,” said Tooker.
“Especially as the labor market tightens and there may be varied skill levels in the workforce, creating a safer work environment can go a long way in preventing future losses.”
Data also allows risk managers to prioritize those efforts that can produce the greatest benefit.
“Partnering the early identification of a claim trend with data about litigation rates, for example, results in more informed decisions being made by business leaders or risk managers,”said Tooker.
More data also allows greater sophistication in risk evaluation and selection for underwriters, and more cost-effective claim management. This has been particularly evident in the realm of workers’ comp, where predictive analytics gets extra eyes on potentially complex claims.
“Our claims organization has the ability to harness the power of data and advanced analytics that often lead to better outcomes for our insureds and return employees back to work sooner. We can look for patterns, raise red flags early in the claim process if needed and assign extra resources like nurse case managers to help mitigate certain risks,” Tooker said.
“In the case of opioid use in particular, these added resources can help avoid addiction and ensure a good outcome for the injured worker.”
In the volatile world of auto risk, fleet telematics likewise let risk managers and insurers look more closely at what might be driving losses, zeroing in on individual drivers exhibiting unsafe behaviors on the road. This helps insureds avoid claims and makes their fleet drivers safer.
“Telematics can help identify problematic driving behaviors,” Tooker said.
“Issues like taking sharp turns, braking too quickly or speeding can be proactively addressed and help lessen the likelihood of an accident.”
“Arising out of consolidation is access to more data, which means that you’re able to leverage that more for your customer,” Tooker said. “We see this as an avenue for specialization.”
Organizing claims data by industry — rather than by line — better aligns it with the client data that brokers bring to the table. This provides a fuller picture of a company’s operations and risk exposures, allowing insurers to both direct risk engineering resources more appropriately and better identify coverage gaps.
“Specialization means being focused on the complete insurance and risk management needs of a business. Our thinking has to shift away from a coverage focus to a risk focus and really creating a deep understanding of the clients’ operations and industry,” Tooker said.
Companies have come to expect specialization in claims and risk engineering services from their carrier partners. Risk managers increasingly want to know how they compare to their competitors in terms of claim frequency and severity, risk mitigation protocols, and their overall risk profile.
“There’s an expectation that you’ll bring a specialized expertise to their programs, and have the data insight to back that up,” Tooker said.
Just like data has been a catalyst for better risk management and a more specialized insurance approach, artificial intelligence, automation and the technologies collectively referred to as Insuretech have sparked a change in the delivery of customer service.
The Hartford has implemented automation and machine learning technologies to several key functions to do just that.
State license verification for agents is one example.
“We found that for our agents and producers, conducting that verification was a manual process. We automated the entire thing and now are running that step automatically in the background. That saves time and headaches for brokers and by extension, our clients,” Tooker said.
Eliminating policy errors is another application.
“We know that receiving policies that contain errors is a pain point for agents and brokers – and it’s an industry-wide issue. We built a model that uses predictive analytics to bring down errors in policy wording, and our quality has increased as a result,” Tooker said.
Artificial intelligence has also been applied to the processing of incoming submissions. Text processing technology can identify whether a request is from a small commercial or midsize company, for example, or whether the request is to add an insured or an endorsement. That request can then be automatically funneled to the right process internally.
Together, these types of enhancements ultimately allow insurance professionals to spend less time on administrative processes and more time where it matters most — applying their expertise to deliver greater, more specialized solutions for their policyholders.
“We find it’s about executing the little things well,” Tooker said.
“The conversation used to be about disruption. It was initially all about how Silicon Valley was going to come in and displace the long-standing, traditional insurers.
“Now, it’s much more about partnership — about finding the little things that make the insurance business difficult and smoothing out those pain points. “This makes life easier for insurers, but it ultimately translates into faster and more streamlined service for insureds,” he said. “That remains the primary goal amid ongoing change.”
To learn more, visit thehartford.com/specialization .
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with The Hartford. The editorial staff of Risk & Insurance had no role in its preparation.
In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.
He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.
Now he was ready to make his mark on the business world.
Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.
Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.
This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.
In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.
R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?
Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.
When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.
I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.
We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.
R&I: So Starr’s success has meant success for the Chinese insurance industry as well.
Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.
“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.
Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.
We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.
On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.
R&I: What’s your outlook on current trade relations between the U.S. and China?
Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.
President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.
R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.
Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.
They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.
R&I: What stands in the way of that happening?
Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.
For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.
The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”
So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.
R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.
Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.
R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?
Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.
It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.
R&I: Your op-ed was very enlightening on that topic.
Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.
R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?
Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.
R&I: And that’s because you are a private company?
Hank Greenberg: Yes. We attract a different type of person in a private company.
R&I: Do you think that enables you to react more quickly?
Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.
“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.
R&I: You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.
Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.
R&I: And that fateful decision the AIG board made really affected the course of the country.
Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.
From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.
R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.
In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.
Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.
Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.
R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?
Hank Greenberg: We did something last week.
On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.
Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.
R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.
Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.
R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now and where it’s going?
Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.
How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.
More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.
One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.
So, change is inevitable. You need people who can deal with change.
R&I: Is there anything else, Mr. Greenberg, you want to comment on?
Hank Greenberg: I think I’ve covered it. &
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