How Insurtech Is Becoming an Industry-Wide Solution to Some of the Toughest Risks

From construction to cargo to cyber, an array of Insurtech technology solutions is beginning to bring real improvement to risk management safety strategies.
By: | October 25, 2018 • 6 min read

Finding affordable — if any — general liability coverage as a construction firm operating in the State of New York has become increasingly difficult in recent years.


Labor Law section 240/241, better known as the “Scaffold Law,” enacted in the late 19th century, imposes strict liability upon contractors and property owners for “gravity-related” injuries, presuming them to be at fault even if the worker’s negligence contributed to the accident.

In recent years, courts have extended their interpretation of a gravity-related accident, resulting in large settlements. And added to that, injured workers can circumvent the workers’ compensation exclusive remedy doctrine.

The law has also increased moral hazard, raising the likelihood of more injuries and related litigation. That means the cost of insuring a construction project in New York is as much as 10 times higher than in other states, forcing many insurers to scale back their offerings or pull out altogether.

“The law in New York is very much in favor of the worker,” said Adam Schnell, executive vice president, Ethos Specialty Insurance Services, which provides general liability insurance for New York construction. “Essentially it is a workers’ compensation exposure; if you have an accident onsite, such as falling from a height or an object falling from a height injuring a worker, then it is the property owner and/or general contractor who will be held ‘strictly’ liable, often resulting in a multimillion-dollar claim.”

However, help is at hand with a host of new tech tools to help underwriters get a better understanding of worker safety risks and drive more favorable loss ratios.

Data Is King

Data is key when it comes to assessing the risk and providing the appropriate cover, according to Schnell. Thanks to advancements in technology there is now more access to information than before, he said.

“In particular, the NYC Department of Buildings has records on safety violations on worksites and related fines and closures,” he said. “In that respect, you can quickly see patterns emerge with companies that try and cut corners to finish the job quicker and at a lower cost and increased margin by flouting safety rules.

“Then there are public information and proprietary sources, which provide data on site inspections and court documents on legal action that has been taken against companies to help you measure the risk. That way you can quickly determine if it’s a risk that you want to insure.”

Schnell said, in theory, this data also helps construction firms with better safety records to get more competitive quotes. Without it, he added, insurers can be pricing themselves out or worse still, leaving themselves exposed to unforeseen claims running to millions of dollars.

“Drones can be used to monitor construction sites and to access difficult to reach areas or to evaluate roofs or other elevated structures without the need for physical access.”  — Ann Myhr, senior director of Knowledge Resources, The Institutes

Underwriters are also increasingly employing cutting-edge technology to identify and mitigate against the risk, said Martha Notaras, a partner at XL Innovate. At the forefront of this is the use of wearables, which track and provide data on a worker’s movements, including everything from wristbands to environmental sensors for temperature, pollution and even noise, she said.


“These devices can come in many forms; there are wristbands that warn workers if they are near a live electrical wire,” she said. “Then there is a company called GuardHat, which has a device that collects data on activities a worker is doing but, more importantly, ensures they’re wearing a hard hat.”

Other leading technologies, Notaras said, include sensors that monitor particulate levels on worksites and 360-degree cameras that can survey a project’s progress as well as worker safety. All of that information gathered is then stored in a database and can be analyzed by companies, she said.

“All of these technologies can help companies to see where their exposures are, keep track of and improve on them,” she said. “OSHA is particularly hot on how long it takes companies to rectify a situation once a problem has occurred, so they can help greatly in that respect.”

And companies are already seeing the results, according to Notaras. One worker wearing a Triax tracking device who had an accident was able to receive treatment 90 percent quicker than if he had not been wearing it, she said.

Making Our Roads Safer

Another area where Insurtech is making big strides is in commercial auto, where frequency of accidents has been on the rise year-on-year over the last decade according to the U.S. Transportation Department, as have the severity and size of payouts. As a result, rates have spiked, some as much as 30 percent, and some of the biggest players have pulled out.

But Notaras said that commercial fleet operators have been quick to adopt devices such as telematics in a bid to improve driver safety. By using the data captured by these devices, underwriters can then benchmark driver performance against the industry average and other drivers, and be able to better assess the risk, she said.

Ann Myhr, senior director of Knowledge Resources, The Institutes

Then there are semi-autonomous features such as forward collision warning, automatic emergency braking and lane departure warning, which can promote driver safety and reduce accidents, said Ann Myhr, senior director of Knowledge Resources for the Institutes. They are also being used in contractor’s equipment including backhoes, forklifts and cranes to improve safety, as are drones, she added.

“Drones/unmanned aircraft are increasingly being used by risk managers, underwriters and claims professionals,” she said. “Drones can be used to monitor construction sites and to access difficult-to-reach areas or to evaluate roofs or other elevated structures without the need for physical access.”

From Cargo Spoilage to Cyber Security

Phil Edmundson, founder and CEO of Corvus Insurance, said that among the latest Insurtech products offered by his company are those that use data captured by sensors monitoring the temperature of goods carried in cargo shipments to detect where spoilages occur. Another application is in cyber insurance where web traffic data is screened for IT security vulnerabilities, he said.

“This data has been around for a long time; we are simply accessing and using it to help improve loss control.


“With our cargo product from our data analysis, if a perspective policyholder is deemed a good risk, then we offer them a broader coverage.”

Other areas where Insurtech has helped improve underwriters’ understanding of risk is in homeowners’ insurance, where the Internet of Things has given greater insight into how people manage their homes, said Notaras.

This includes, for example, having alarm systems enabled so that they know every precaution was taken in the event of a break-in, she said.

“A number of vendors have brought these new technologies to the table, which are now being piloted by companies to help them measure their exposures and make safety improvements,” said Marsh’s U.S. construction leader, David Marino. “But they are also using this big data to help provide additional benefits including better productivity and billing and to address HR issues.” &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

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 an 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. &

The R&I Editorial Team can be reached at [email protected]