Are AI and data analytics hurting claims outcomes?

As artificial intelligence (AI) and data analytics are increasingly refined and adopted across many industries, this is proving problematic for insurance, with these technologies being adopted by plaintiffs.

“I’m seeing plaintiffs become even more sophisticated, knowing how to use data, use AI, to get better outcomes for their clients,” said Tanner Hackett (pictured), CEO of Counterpart.

“I think that’s part of the reason we’re seeing social inflation: it’s the insurance companies that are paying for these claims, it’s not a fair fight.”

The CEO also highlighted that there was still a lag in using technology to streamline and strengthen claims services.

“I have yet to see the investment that retail has made in creating APIs and front-end interfaces to improve the UX experience for customers,” he said.

“You launch a product thinking you know what’s ultimately going to happen in terms of frequency and severity of claims, and I would say that’s pretty unpredictable right now.”

Carriers continue to face a volatile market

Although Hackett has seen concerted efforts by carriers to create more sophisticated claims processes, it still lags behind the plaintiffs’ situation and is too closely tied to other departments.

“I think there is a lot of overlap between claims and underwriting to be effective in this volatile market,” he said.

“We are entering a year of high volatility due to global conflicts, current macroeconomic trends and an approaching election cycle. The only way to combat this problem is to be able to iterate faster, and the only way to iterate faster is to get a better data signal sooner.

In an interview with Insurance companyHackett explained why brokers are an important piece of the insurance puzzle in creating a more confident experience for customers and why carriers may look to enter into more technology partnerships/acquisitions as MGAs become more advanced.

“There’s just not that trust between the carrier and the small business” – Counterpart CEO

Before starting Counterpart, Hackett said he owned several small businesses.

The CEO emphasized that insurance companies can be a valuable ally for business owners because of their ability to deal with adverse consequences.

“It can be very complicated, and some of these risks can be existential for a small business,” he said.

However, there is a significant gap between policyholders and their insurers, and Hackett said, “There’s just not that trust between the carrier and the small business.” »

“I don’t blame them. It’s never been there, it’s never felt like a partnership before.

This is where agents and brokers, especially those with sophisticated tools, can help build trust in insurance products and the industry.

“If they can find a way to leverage insurer or MGA resources, like HR tools, harassment and discrimination training, or give them more transparency on claims trends, we can. “use it as a channel to get our message out that we are in this together, our incentives are completely aligned,” Hackett said.

For Hackett, this has to start internally, as insurers need to find a way to create more transparency internally, with the advanced tools, information and data they have, to forge more productive relationships with brokers and clients externally.

“I think this partnership between an insurance company, brokers and small business clients requires continued investment, and I think there will be increasing pressure to do that,” Hackett said.

“They see MGAs succeeding in their own game” – CEO of Counterpart

Having attended the InsureTech Connect Conference (ITC) in Las Vegas, NV, for several years, Hackett has seen attendance increase with each successive edition, from both small and large players in the industry.

“It’s been a banner year for many small, niche providers, across everything from data and underwriting automation to claims and risk mitigation. It had every kind of tool you can imagine, and it was very well publicized by many great people,” he observed.

The CEO believes this openness to learning and adopting new ways of working shows how the tide is turning in the insurance industry, where the old adage “if it’s broken, don’t fix it » is slowly losing relevance in the industry.

“They’re really starting to understand what’s going on in this world because they’re seeing MGAs succeed in their own game,” Hackett said.

“These MGAs are able to do that using our own data sets, our underwriting infrastructure, our management of things and risk mitigation, which is very beneficial.”

Hackett believes this has led to more insurers wanting to acquire or partner with smaller insurance companies in order to gain a competitive advantage in the market without having to create a whole new set of processes themselves.

“It’s not their core competency,” he said.

With Corvus being acquired by travelers and thimble by Arch Insurance Recently, carriers have recognized that it will take some time to organically grow the technological capabilities of these smaller companies.

“Instead, they can do it for pennies on the dollar, in relative terms, and get those capabilities today, to leverage their brand and start to compete,” Hackett said. “I think we can expect to see more of this type of activity in 2024 and beyond.”

What are your thoughts on the impact of AI on the claims space and Counterpart CEO Tanner Hackett’s views on further Insurtech acquisitions? Leave a comment below.