“From the past to the future” – CEO on the role of artificial intelligence in the changing risk management industry

There are few things more divisive in the world today than the debate over the continued spread of generative artificial intelligence (AI). Spurred on by the popularity of generative AI platforms such as ChatGPT and DALL-E, and its seemingly untenable position as a superior entity when it comes to activities such as art and – unfortunately for the writer – writing, the arguments for AI have been more explicit and nuanced as they have begun to seep into more of the main industries.

While those who are vocal in the news or on social media view it as something that will eventually replace the human workforce, some of those entrenched in the technology see it as something that will create better opportunities. In a conversation with Insurance Business’s Corporate Risk channel, Cytora CEO and co-founder Richard Hartley said that AI, just like any other technology, will team up with the human element to “break down barriers of entry for different jobs” in various sectors.

“I really see it as similar to me with a mobile phone; I’m more productive with it than without it. Human and AI will lead to higher productivity and higher opportunity for these people,” Hartley said. It provides some functionality, but for the most part, I think it will increase productivity and make people more effective and efficient.”

It used to be a smaller industry, Hartley said, citing the transportation industry as a close parallel, affordable only by the very wealthy.

“As this technology becomes more accessible, and prices come down, more and more people can drive, and it becomes available and available to a lot of people,” Hartley said. “My point about almost all technologies is that they create opportunity. Ultimately, whenever you apply a technology to a market, that market gets a lot bigger. You think about this in all sorts of ways.”

Working in the industry is a “pure discovery process”

Cytora, an insurance company that specializes in AI-based solutions for insurers like Allianz, Beazley, Markel, and others, has been around since 2015. Since its inception, the company has focused on using AI to aggregate large amounts of unstructured data into, in its words, Hartley, “Focusing on that data and connecting it and playing it in the decision-making process,” as well as the risk forecasting component.

However, growth is not without its pains, and transferring all of these lessons to the insurance industry has been the most challenging, Hartley said, calling it a “pure discovery process.”

“When you start anything, including a company, there are times when you don’t know most things. It’s a discovery process, right? We’ve never worked in the insurance industry before, so this was purely a discovery process.” “It took us many years to learn the difference between a superficial problem and an acute problem to solve this thing that really matters to people.”

He also outlined some of the difficulties in developing skills, and the time it took to successfully implement the company’s vision. Hartley described Cytora as a company focused on the commercial and specialty insurance markets, helping companies digitize their workflows and streamline the renewal process, while at the same time helping them write more risks without costs and have greater control over risk selection and risk decision-making. Even with advanced AI technologies at their fingertips, these aspects will not come together without the right people behind them.

“A big part of that was assembling a great team that could really complement each other, including people from industry who had a deep understanding of the field. I think we took some time to bring together people on the technology side with people from the actual market who understand,” Hartley said. Nuances of commercial insurance.

Customer value was also a particular concern, with Hartley calling their customer base “logical”.

“They will buy the product if it creates value; they won’t buy the product if it doesn’t create value. You really have to be clear about the value you’re providing. Also, keep changing the product, so you can really answer ‘yes’ to the question ‘Is your product of value’? “That was probably, I think, the biggest learning of the day,” he said.

“development”

For an industry more vulnerable than anywhere else, Hartley called the current iteration of AI in insurance an “evolution” rather than a “revolution.”

“I think recently, with the advent of generative AI, we’ve seen a real acceleration of capabilities in this space. It provides huge opportunity, and there are different areas of value. I think one is focused on productivity. I think AI can basically help insurers do more. “.

The technology’s value proposition, according to Hartley, lies in its ability to handle volume. An AI-driven industry will be able to write more risks, and this is an important aspect given the outlook for the insurance industry in the future.

“If you’ve read the recent reports from Swiss Re, they project that insurance premiums will probably double by 2040. And that’s really driven by climate change and an increased level of volatility, increased levels of risk. I think there’s a huge opportunity to use the increased ability of AI to increase the amount of risk that can be It should be written by insurers, and at the same time help them decide which risks are right for them based on their appetites, and make sure they’re making optimization decisions on those risks,” Hartley said.

Emphasizing once again that it takes two people to tango – or in this case an underwriting – Hartley said Cytora believes the equation will still need real people behind it, despite fans’ concerns.

“We look at this as a ‘person-machine’ equation where you desperately need underwriters. You need people with a lot of experience and many years of experience; it can really be enabled by AI. It would be interesting – looking at the book, for example , My sister is a writer. Technology can help her write better, write faster, change style, etc. Very similar to how it can be in insurance too, where it doesn’t replace a person, it helps them a lot and enables them to do more and do do a better job,” he said.

Regulations and competitions

While touting the technology as something that will advance risk management, Hartley also recognizes that continued unsupervised deployment will lead to future problems. In particular, he highlighted decision-making as something that must be looked at seriously if artificial intelligence continues to grow on a large scale.

“It takes a regulatory framework that governments have to put in place for AI to make sure it is used in the right areas, particularly in the context of decision-making… making sure that the decisions that AI makes are fair, and not biased. The role of governments is to provide this similar regulatory framework.” of how other industries are regulated.“I think that’s important,” he said.

In addition to regulations, he also said competition needs to be more pervasive in the space, saying it’s “dangerous” to the industry if only one company – or country – has AI capabilities.

“I think it’s great that there are so many companies that are developing this… you look at Google and OpenAI, that competition is very healthy. I also think it’s really important that different countries and different countries invest a lot in developing AI, so it’s very important to have a lot of money,” Hartley said. Geopolitically, there can be a degree of competition and parity around it.” “I think the combination of competition plus regulation should create the conditions for productive versus unproductive development in the future.”

From a retrospective to a prospective approach

As we move into a more digitized future, Hartley said there will be a huge shift in the insurance industry, particularly in the way the sector will view risk.

“The main shift, I think, is that risk is going to be understood in a more streamlined way. When you think about how to do risk today, it’s often driven by experience, where a risk expert comes into a company, and they’ll walk you through different frameworks and advise you on what the exposures and risks are. And as we move into the future, it will be more accessible to people, and on a more dynamic basis.

Citing wildfires and cyber hazards as examples, Hartley said the industry will begin to take a more “dynamic” approach to risk.

“I think the main shift will be moving from a rigid approach to a dynamic approach, moving from a regressive, backward-looking approach to a much more futuristic approach. I think that will be enabled by the availability of data, the availability of things like AI to process that data at scale.

With how quickly generative AI is growing, it’s not entirely outrageous to say that this future might be closer than we think — if it doesn’t already exist. Still, Hartley and Sitora are committed to their mission, one of “bigger and better risk and a global insurance industry,” and one where the company can help close the protection gap to take risk away from companies that don’t want it.

“I think we’re at a really important point in that, because of three things: We have the availability of data, in a way that’s increasing year on year. We also have processing power in the form of AI to find insights, where you can act on that data. Finally, in the context of climate change We have a moment of reckoning where we have to act now, so there’s a sense of urgency and need to really understand and reduce risk in a much more significant way than there was in the last century,” he said.

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