It is not enough for insurers just to be underwriters anymore. During a dialogue at the Global Insurance Forum 2021, Chubb chairman and CEO Evan Greenberg raised the issue of the volatility of risk and how insurance and its leaders need to change to keep up with risk exposures.
He highlighted how, when the world was brought to a standstill at the height of the pandemic, risk exposure did not stop, and that we now live in a world that is much faster moving and more complex.
It will not just be about underwriting
In terms of keeping up with how the world is changing, Mr Greenberg was not overly concerned with the insurance industry’s ability to evolve, but he also emphasised that new skillsets are required.
“It’s not enough to be underwriters anymore,” he said. “You need to have analytics. Engineering is becoming so important. Insurance companies that can say they are just great underwriting companies – well, you better be a great underwriting company and a great engineering company as we go forward.
“It’s not a burden. It’s exciting. It’s dynamic and it requires in the future a different kind of leadership. You have to be more broad-gauged. You have to be interested in understanding the world at large and not just [be] a technician that has embraced the skills and the knowledge of the industry narrowly, but to be able to have a vision that gives you more insight into risk so you can craft and evolve your enterprise.”
He added that as the industry changes, it will not always be the underwriter at the centre of insurance. There will be times where it will be the analyst or the engineer at the centre, with underwriters around them, when it comes to decision making, gaining insights and the delivery of products.
Machine learning will stay in a supportive role for now
Over the last couple of years there has been much fanfare surrounding the applications of AI and machine learning (ML) in underwriting. Mr Greenberg made sure to differentiate the two, pointing out that true independent AI has not yet been used.
And while ML and lesser forms of AI are deeply integrated into some parts of the insurance business to support decision making, it is companion to human judgement.
“It doesn’t replace that insight and that judgement. Maybe in more modest ways and things that are much more rote or rules-based by their nature. But ML is still crude, and it takes a lot of data to fuel the development of it and its insight,” he said.
Insurance is the business of discrimination
More recently, the use of AI and ML in underwriting has also raised concerns over biases appearing in insurance, given that those systems themselves have been shown to demonstrate bias. Mr Greenberg, however, distinguished unconscious and conscious bias and pointed out that the latter is a core part of insurance.
“Insurance is the business of discrimination … based on proclivity to loss. What has a greater proclivity? Who has a greater proclivity? Face it, that is what we do for a living. And being more insightful around that is all it’s about fundamentally, at its core,” he said.
At the same time, insurance is a regulated industry that serves a purpose in society. There is a debate on how far to go to discern proclivity to loss - and regulations do limit that ability, but insurers need to make such decisions consciously and objectively, he said. A