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Pandemic Spurring Automation in Small Commercial Insurance

In this episode of AMBest Audio, recorded with John Weber, Carpe Data CEO, Max Drucker discusses why he believes the COVID-19 pandemic will continue to hasten moves to automate systems and processes in insurance, particularly within the small commercial sector. 

Listen to the full episode here:


How is the COVID-19 pandemic affecting commercial insurers?

While the pandemic has had an impact on almost every aspect of insurance, small commercial in particular is facing a lot of uncertainty. While there’s been a decrease in claim volume across a broad spectrum of business types, many small commercial insurers don’t know which or how many of their policies will be renewed in the coming months.


What are some of the systems and operations that are being automated?

There’s been talk for years about moving small commercial to be more automated, following a similar approach to how auto insurance was able to achieve an almost entirely automated experience over time.  But the data, systems, and processes that support this are far behind in small commercial, and manual intervention is still commonplace in the sales process. This pandemic has created considerable motivation for carriers to invest in these resources (particularly in data) in order to critically analyze what is needed to achieve this sort of automated decisioning.


[Related: New Data Sources Key to Small Business Insurance in Shifting Landscape]


Are small insurers able to keep up in the race to automation?

For smaller insurers, this comes down to the resources that are available for them off the shelf. In the race to automation you need to improve critical items like central processes and systems, but much like our auto insurance analogy, the integration of new data is critical to gaining confidence in your decision making to a point where automation can take over. Segmentation is the name of the game here– how do you differentiate between two like businesses in order to select more effectively? Again it comes down to the new data available. Online data are a great source of information for things like reputation, business performance and presence, and classification, which further your understanding of a business’s risks compared to its peers. For small and large carriers alike, this information has never been as available as it is now.


Do you think this move to automation is permanent or will we go back to business as usual when the pandemic subsides?

I think that few people would believe that any automate-able tasks would be better served by going back to a less consistent, less efficient, less scalable manual process. What we’re going to see across small commercial at all stages of the policy lifecycle are massive improvements in automation, because the pandemic has become that driving motivation from which there is no going back.


What do you see as the future of automation in commercial insurance?

It all comes down to consistency; the ability to compare and contrast like businesses for appropriate pricing is crucial, and new and robust data are the foundation of those insights. Applying science to the historical “art” of underwriting gives you even more data points to measure and describe the businesses you’re selecting, allowing you to build automated processes with more confidence that yields predictable results. New information is critical to gaining confidence in your decisioning models, and the fluid nature of data in the digital world means that it never runs cold.

We’re also going to see a more proactive response to shifts in businesses (or even entire markets), especially as it pertains to underwriting. The idea of a one-time risk assessment at quoting is an antiquated one, and the pandemic has shown us that businesses adapt and change to suit their success.  I think we’re going to see more progress in proactive underwriting in 36 months than we’ve seen in the last 10 years, and that’s largely driven by the continuous data now available.


Get even more small commercial insights by listening to the original recording with AMBest Audio here!