Tackling Underwriting Challenges: Ascot’s Jeff Canfield on Leveraging AI

Ascot's Jeff Canfield shares his take on the potential of AI in underwriting, Ascot's strategy for deal selection, and the company's unique approach to underwriting specialty risks.
By: | May 30, 2024
Topics: Q&As | RIMS | Risk Management

At RISKWORLD 2024, Risk & Insurance® caught up with Jeff Canfield, EVP, head of U.S. casualty at Ascot. What follows is a transcription of their discussion on the potential of AI in underwriting, Ascot’s strategy for deal selection, and their unique approach to underwriting specialty risks.

Risk & Insurance: What are your thoughts on the potential for AI to streamline the underwriting process?

Jeff Canfield: I believe AI has significant potential to enhance it. In the E&S casualty group we receive around 40,000 submissions annually. Our main challenge is to identify ways for our underwriters to focus on the deals that are most likely to bind.

By leveraging AI, we can streamline the initial screening and prioritization of submissions. This allows our underwriters to allocate their time and expertise more effectively, concentrating on the most promising opportunities.

We prioritize deals that we are confident in binding based on a combination of internal and external data points. By leveraging these data-driven insights, we can identify the most promising opportunities early on in the process.

Our team then focuses their efforts on these high-priority deals first. This targeted approach allows us to efficiently allocate our resources and maximize our chances of success.

R&I: How does Ascot leverage data and AI to prioritize deals for underwriters?

JC: We are implementing a two-step process to prioritize submissions for our underwriters.

In step one, we use internal data to surface certain deals that we believe are a good fit for our portfolio.

In step two, we utilize a variety of external data sources to validate and enhance our submission data. In the future, we plan to further harness AI to automatically pull in that third-party data in order to easily establish a complete view of each deal.

For example, if our internal data suggests a deal is a restaurant, but our AI-enabled technology scours the web and discovers that the establishment has a mechanical bull, we can quickly determine that it’s not a risk we want to underwrite.

This approach saves our underwriters valuable time by ensuring they focus on the most promising opportunities.

R&I: How effective has your approach in using AI been in reducing the number of submissions for your underwriters?

JC: It has been working really well, enabling us to increase the bind percentage of the submissions we receive and refine our appetite in the market.

Prioritization of submissions allows our team to focus on the most relevant and promising opportunities, enhancing both efficiency and effectiveness in our underwriting process.

R&I: Are there risks in using AI in underwriting?

JC: The primary risk is losing the human element, what we call the “underwriting gut.” There’s a fear that there might be an overreliance on third-party data.

At the end of the day, AI-enabled technologies are simply tools in the underwriter’s toolbox, useful for prioritizing their desk. However, it must be a human making the final decision. Outsourcing that decision-making to technology or AI would be a mistake in most segments of commercial insurance.

R&I: How can a specialty underwriter stay relevant in the face of global dislocation and rapid change?

JC: At Ascot, we place a strong emphasis on researching the economy of the future. As opportunities in new areas arise — such as smart manufacturing and autonomous vehicles — our underwriters are tasked with proactively exploring and understanding these emerging trends. As a result, we position ourselves to effectively underwrite risks associated with these evolving sectors. Staying ahead of the curve allows us to remain relevant and provide valuable coverage solutions to our clients in a dynamic global landscape.

R&I: What is Ascot’s approach to underwriting specialty risks?

JC: We want our underwriters to specialize and deeply understand the exposures they cover. We encourage them to conduct their own research into these risks.

By doing so, when those risks come in, we can be the first company that brokers think of because we truly understand the underlying technology. This specialized knowledge and proactive approach to risk evaluation sets us apart in the market.

R&I: What sets Ascot apart in the marketplace when it comes to understanding and insuring new technologies?

JC: Many standard line underwriters, and even some E&S underwriters, don’t fully grasp these emerging technologies. We take the time to thoroughly research and understand them.

By doing so, we ensure our continued relevance in the marketplace. The pace at which new technologies and segments of the economy are emerging is only accelerating. Staying ahead of these developments is crucial for our success.

At Ascot, we differentiate ourselves by being tech-centric, client-centric, and risk-centric in our approach to underwriting. These three elements are crucial to us.

We leverage technology to enhance our underwriting capabilities. Our focus remains on understanding and meeting the needs of our clients. Simultaneously, we maintain a keen eye on the risks we underwrite.

It’s the combination of these three factors that sets us apart as a specialty insurer.

R&I: How do you perceive the current state of capacity and pricing in the casualty insurance market, particularly in the excess casualty segment?

JC: In the excess casualty market, we are seeing a shift in capacity. $25 million blocks of capacity are becoming increasingly rare, with carriers more often offering smaller blocks in the range of $10-15 million.

This trend is creating opportunities for insurers to fill the gaps in coverage that have emerged due to the reduction in available capacity at higher layers.

We’re also seeing a shift towards lower limits becoming the norm in the casualty insurance market, with limits of $5 million, $10 million, and $15 million becoming increasingly common. This shift is making those layers more sustainable.

Regarding the rate environment, we’re managing to stay ahead of the trend in most casualty lines. We view the current loss trend as in the high single digits. If we can achieve rate increases at or above trend on the majority of our casualty lines, which we are currently accomplishing, we consider that a success.

There is some discussion about a potential re-hardening of the excess casualty market, particularly in light of nuclear verdicts and other factors. This could potentially lead to a rate environment in the low double digits, although it’s still too early to say for certain. However, early returns indicate that 2023 could be another challenging year for casualty. &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected].

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