the enormous potential of AI in insurance

Rick Kahlbaugh, Chief Executive Officer, Fortegra

In the lead up to Insurance Innovators USA, we’re catching up with our some of our key speakers to get their thoughts on hot topics and key industry trends. For the first interview of the series, Insurance Innovators spoke to Rick Kahlbaugh about the future of AI in insurance. Rick outlined some of the challenges around integrating new technologies and how Fortegra are adopting AI to boost operational productivity. It was a pleasure to chat to Rick and we can’t wait to hear more from him in Nashville.

Over the past few years, how have external pressures forced the insurance industry to change its mindset around the adoption of new tech?   

R.K. There’s no doubt technology is transforming the insurance industry. Over the next decade, advances in robotics, AI, and machine learning will create more streamlined operations, better underwriting models, and improved customer service. To remain competitive, Fortegra and other insurers will embrace the transformation to new technologies and adapt their operating models to meet consumer expectations and enhance their competitive position.    

In your opinion, are traditional carriers adopting new tech quickly enough? Or do they face being left behind by BigTech and insurtech?

R.K. The industry is catching up. From industry leaders I have spoken with, it seems we all appreciate that technology and innovation can enable better decision-making during the underwriting and claim management process. Applying various technologies to decision making will enhance the customer experience.

All that being said, you must be careful to ensure whatever it is you’re adapting solves the problem and improves the process. Technology for technology’s sake is less than optimal. Sometimes it doesn’t make sense to eliminate the human touch. In fact, we were curious about this question, so we ran the numbers and found that a majority of our customers preferred to file claims by phone. That isn’t something you’d expect these days, but it’s informative. Because the way we see it, we’re in business to solve our customers’ problems. And if you’re not solving your customers’ problems, they couldn’t care less about your technology.

At Fortegra, where has AI had the greatest impact to date on improving productivity?

R.K. Underwriting.

At Fortegra we collaborate with our agents and digital partners to identify opportunities of similarly situated or homogenous risks. Said another way, once the underwriting model and target risk is defined, we use AI to broaden our search for all similarly situated risks.

Once we identify a cohort group that meets our underwriting approach, we can provide the lists to our agents to help them expand their business and ours. If you have AI as a support feature, you can target specific businesses for marketing, improve the sale process and offer consumers options. AI is also helping us eliminate redundancy and has generally made life simpler, a little more precise. If we can become a more efficient, I believe customers will more readily gravitate to the Fortegra value proposition..

With regulatory oversight of AI use in insurance set to increase – how can carriers adopt appropriate governance and expertise?

R.K. The most important principle is to do no harm. AI and tech are tremendous tools, but they aren’t perfect.  The industry needs to be mindful of the unintended consequences to machine assisted underwriting. It can lead to entire classes of consumers having fewer rather than more options to manage risk. But to do that, you need to be humble enough to acknowledge the grey areas. I think the companies that harness the promise of AI and tech without abandoning common sense, and the responsibility to act in accordance with the letter and spirit of the regulations that govern the industry will avoid headline and regulatory risk.  

Looking ahead, where does AI have the greatest potential in the coming years? Is the industry just at the tip of the iceberg for implementing AI?

R.K. Insurance is a tough business in that we price our product before we know what it costs. If technology offers more insight into that cost. When we can predict it with a little more accuracy, the results will be quite positive for everyone – consumers, regulators, rating agencies, insurers, and investors. Our big push is for using AI across the business to touch all of our stakeholders. But we’re still in early stages and there’s a lot of opportunity for the industry in the coming years.