The InsureTechGeek 6: Future of Insurance, Disruption of Insurance with Rob Galbraith from AF Group
On episode 6 of the InsureTech Geek Podcast, talking with the most Interesting Man in Insurance, Rob Galbraith, Director of Innovation at AF group.
The InsureTech Geek Podcast powered by JBKnowledge is all about technology that is transforming and disrupting the insurance world. We will be interviewing guests and doing deep dives with our own research and development team in technology that we see changing the industry. We are taking you on a journey through insurance tech, so enjoy the ride and geek out!
JAMES: All right. Welcome back for yet another episode of the InsureTech Geek Podcast. I am your InsureTech geek James Benham, live from our studio here in beautiful College Station TX, that’s right, its God’s country. We are talking about all thing’s insurance tech, with two people who live in Texas. Myself, and Mr. Rob Galbraith. Rob, how you doing today – not joining us from Texas?
ROB: Alright yeah. Good to be on James. Appreciate it. Super great to connect. Yeah, I am from San Antonio, but happened to be speaking to you today from AF Group headquarters in Lansing MI.
JAMES: Awesome. The other place that has the other part of my heart. Up there In Michigan. Now you grew up in Michigan, then you went to Michigan State but then you came down here to God’s country, and did what, 20 years here in Texas and you are still here?
ROB: Yeah-yeah. Absolutely. It is somewhat ironic James because this year 2019, was the year that I was going to spend more time in Texas than in Michigan. But I happen to have a job change, I worked for USA for almost four years in San Antonio and then started at AF Group in April, which is based in Lansing MI, so I’m up here around one week every month so Michigan is not going out without a fight, man.
JAMES: I tell you what, and it should not. And especially not in the summer you know? I just got back from my three months up there. I do June July and August in beautiful Southwest Michigan on the beaches there and I love Michigan, in the summer. And I always have to qualify that. The fall, the summer’s great, the falls are alright, those other two seasons are kind of tough though.
ROB: They are brutal yeah. As a kid growing up for, I distinctly remember being outside at recess when everybody is making igloos and started snowball fights and all of that. I was like, when is recess is over? This suck. I am going inside; it is damn cold out here.
JAMES: This is too much. I need a heater. And the crazy thing is, growing up in Michigan, so I married a girl from Michigan Italian that was going there in the summers, from what I hear, growing up in the 80s I’m going to school in the 80s, in Michigan, no air conditioning in most schools, so when it got hot, it got hot, and I’m told that it took a whole lot to cancel school, and a whole lot to not kick kids outside into recess.
ROB: Yeah absolutely true. Absolutely true. It is crazy. It snowed twice in the 20 years that I have lived in San Antonio. One of which you could make a decent–sized snowball out of it, and that is it, but yeah, we have had four or five snow days, because of ice and all of that was, yeah none of those would have been snow days.
JAMES: They are like, suck it up and get outside! We do not care. So, you went to high school in Michigan? You went to Michigan State. Now when you went to Michigan State, did you say, I dream of a career in insurance?
ROB: I did not, no. I know most people fall into insurance and have an interesting story. It may be a little bit more of a straight line for me than other people. So, I am an economics major. And it just so happens I was on the campus of Michigan State, and then I met a couple of folks from a longtime relations talk- a-lot web book or whatever, and they were asking if I knew a particular professor, and I was like yeah, I had him for Freshmen Econ, and I was a general business major. And I remember going to him, he was the first professor I ever saw outside office hours and I had a question whatever it was, and he started asking me about general business. And I was like, yeah, I want to know everything there is to know about business. And he is like, well that is not a major. He is like, you are going to go Finance or Accounting or Marketing. And I was like, I do not want to pick, I do not want to pay, he is like, if you do not want to pick, then pick Econ. I will do that, so that is how it becomes an economics major, and yeah, I did a little bit of banking, a little bit of finance, but most of my career has been as in insurance.
JAMES: Yeah, I mean it is interesting. There is not a lot of insurance programs in general in education. I mean, they exist but they are few and far between. And I do not know about Michigan State, but I know Texas A & M does not have it, and it has always baffled me, with how large the insurance industry is that there is no like formal degree program right? I mean you look at most professions with multi–trillion-dollar industry market gaps and you go, okay well there is a degree for that right? I mean you go to the other industry I work in, construction, there is a lot of degrees for construction and engineering and there are all kinds of degrees for finance and accounting and HR. There are degrees for just about every major profession. But almost none for this one.
ROB: Yeah I mean so, clearly there has been a growth in like the risk management and insurance programs across the country because people recognize the need, but yeah like, even if every single other guy got a job in insurance and never left, it wouldn’t come close to filling the talent gap right that we have so, yeah, it was kind of funny. They said that they were having like a career fair or I guess on a canvas at Michigan State. And they said, it was going to be about insurance and then whoever was commenting to them like, I thought you wanted kids to show up!
JAMES: Exactly. I mean if you look at the top ranking list of risk management degree programs, it’s a bunch of schools that, or you might have heard of one or two of them, but it’s very interesting how many very small schools are the ones that have the dedicated insurance program and the big powerhouses are still trying to come to grips with that and there should probably be a degree program we don’t know. But let us keep talking. So, you went to USA and you spent a long time in personal lines property, right?
ROB: Yeah, yeah, so I did a little bit of auto, started in auto pricing, after spending a little bit of time just coding, this or that, that was just kind of going ahead back then, but I wanted to get to the business side so I failed actuary, I couldn’t pass a single exam “-“
JAMES: Oh no! Oh no!
ROB: Yeah! So, I started in the pricing enterprise, but I had gotten my CBCU first, and the underwriting team at USA started an analytic shop in 2005. So the vice president that was in charge of that, he called me, he was like Rob, you don’t have to take these silly actuary exams and another year of this CBCU, come to the dark side, come to underwriting, help us build this analytics team and so that’s where I found home and that was my 15, my 20 years of underwriting.
JAMES: Oh wow. That is awesome. And now you have made a pretty big jump to work comp. And I have just spent the last decade and a half at work comp. I mean this, this is a swimming pool that is both very deep and very wide. How are you doing and are you coming up for air?
ROB: That’s a great version. Yeah, so very-very different, I am learning every day so for somebody that spent 20 years in the industry and wrote a book about insurance, coming to AF Group, learning the commercial side and learning work comp and a whole lot of other opportunities we are looking at. Things like wearables, that we would have never touched in the USA, yeah, then I was like, I do not know very much about insurance at all. So, it has been a steep learning curve, but good. It’s kind of reinvigorated me and made me realize what are multi–facet industry this is and if you ever get tired or bored at one thing, there are so many opportunities to switch it up like, you just can’t possibly know everything there is to know about insurance. Even if you have been in an industry for 40 or 50 years.
JAMES: Absolutely. I mean it is, it is amazing. At a decade and a half, I still feel like I’m in elementary school of my insurance education because I will hang out with some of my mentors in the insurance industry that are in their mid-60s, late 60s, who’s been in the industry for 30 or 40 years, easily two or three times as long as I have been in it, and I just learn a lot every time around them. So that’s why in insurance, I mean with all professions but especially in insurance because of how much on the job education there is, and how little college degree education there is, I mean off all the lines, even in a college degree program of risk management, they can’t possibly cover all the details about all the different lines of coverage and all the little new ones that are to managing risk. It helps to have some good mentors. I am hoping you have had some good mentors along the way in your career.
ROB: Absolutely, people I look up to, people I respect. And I feel like every leader I’ve had, good or bad, you know I’ve had both, I’ve taken something away in terms of like here’s something I want to do and I want to make it part of my leadership style, or here is something I don’t want to do. So yeah, it definitely by far and many more good leaders and good mentors and that for sure.
JAMES: That’s awesome. So, you are now leading innovation at AF Group. So, you are the director of innovation. What does that even mean at your company?
ROB: Yeah, so it is a great question. So we got a small but mighty team, we help foster innovations throughout the enterprise, and it isn’t an enterprise, it is a team sport, so we are not dissing ideas of people, everybody has ideas, so there is a few things that we focus on. We focus primarily on three things and then I will kind of mention where we will spear it, so we have a core market shaper culture here, has four pillars. One of the four pillars is fostering innovation, so that has set an expectation for every single employee. And so, we do a lot culturally. We have an InsureTech week, we have employee innovation weeks, we have something noted in the idea pipeline where we encourage employees to submit ideas. We also have a pipeline challenge every quarter on a business problem that an area has that we just want to get the collective brainpower of the enterprise, get focused on and we will give away prizes for the top ideas, etc. So first and foremost is promoting that culture of innovation, knowing that that is the way that we are going to compete in the future. We are over 110 years old, we used to be state fund of Michigan for decades. We are confident, we know it is required if you are a state–funded or government organization, and then we privatized, and we have expanded beyond the values in Michigan, and we have gone an acquired other brands.
So, we have several brands that all fall under the AF Group umbrella, and now we are starting to break out of work comp into other lines of business. We have a group called AF Specialty, and it does a lot of project agreements and captives and others we do company called Fundamental Underwriters that just rolled out commercial auto for the first-time last year for us in the trucking space and we are looking to add more products there so, it is kind of exciting times if you are here at AF Group. And so, in addition to fostering that culture of innovation, and kind of helping drive of our business results. We focus on technology enablement, so not tech for tech sake, but how can we leverage all this emerging tech that is coming out here in our business, either our existing lines or new lines or help on automation, reduce expenses, reduce losses, help with loss control folks, our, claims brokers, etc. And then there is business model innovation. So we are rolling out a new digital distribution platform for independent agents that we love, but we know that they may have been digitally market today, and so this is a way, particularly for the small market segment, for them to go online and possibly even get a bindable quote, to only start the process online. This is kind of an expectation that consumers have today. We know there are agents and others so something our agents have asked us for, and so we are going to be rolling that out in December this year. “-“
JAMES: Wait, just pause there, wait, just pause there. So, tell me what that experience is going to be like. Because work comp’s a B2B insurance product, right? And the ability to just go online and get price quotes and bind the policy without talking to a human and doing a directly digital is still in its infancy in the B2B comp workspace. So, walk me through what that is going to look like. All digital, you are going to push it through underwriting, buying the policy, you are going to inbound all the initial request data, push request for information back and forth through the portal. I mean is this going to be a fully digital experience and workflow?
ROB: It will be. Now there are going to be some referrals right, somewhere it’s more of an intake and then it kind of reverts over to the traditional agent channel, and there will be some back and forth, but for particular classes we are starting with quite a few that we think we can do straight–through processes in terms of underwriting, quoting, etc. and we are hoping to expand that over time yeah, so it will be a straight through. Now, it would be hosted, connecting with an agent’s website or an agency, and so that that agent would be servicing the policy just like they would have if they are acquired it through the traditional channel going through at the office, etc. But in the past like where an agent might put an ad in the phone book, or you know handing out business cards for a free lunch drawing or whatever, we know more and more agents out there are using Google AdWords, like Facebook, Instagram, others and so because they are able to target market in the digital channel, they are kind of attracting business that way.
Many businesses in the small and micro–segment, it is actually very costly for an agent to come in, to go through the entire process in their office, key in all that information, etc., quote it, get the commission, they are losing money on these policies. So, from a carrier perspective that can be very profitable. Roughly 62% of the market is a small business and everyone find small businesses a little differently, but from a carrier perspective, it is very profitable. But from an agent perspective, especially acquiring the business, it can be very expensive and not very profitable. And as agent perspective, you are looking to build a long-term relationship with that customer. Hopefully, build into other lines of business, etc. But that doesn’t always happen so we kind of are saying, hey our customers are already going on Google, searching Work Comp, they’ve been told need it, but there are not sure if they need it or not and they are not sure what the state requirements are, etc. So, they are doing their homework online. We are agents that or marketing their agencies online, why not help bridge the gap and allow folks to start the process at worst? And at best quote and buying coverage without it having to be physically touched by an agent.
JAMES: Yeah, but is the fact that they are going to have to self-service all of this, going to be reflected in the premium? Like if they are going in and doing all the work, is your goal to make brokers more profitable or drop premium for customers, or just streamline the customer interaction? Like, what is the end game?
ROB: Yeah, so I think it is providing the best service to these customers in a way that agents can profitably service them in terms of commissions, premiums, etc. All that is kind of staying the same today. Now we will see as business kind of gets writing through the channel how it performs what make sense, but it is just trying to make the acquisition easier for all parties. So, this is kind of what certain customer basis are looking to do. They are used to it and other fields, and other companies are out there that are doing it today so there are some startups that are out there that are advertising this. Other companies have gone digital as well, so we think that our capabilities are going to be a little bit more advanced than some of our competitors, but we are not the first ones out there in the market place today that are trying to brand digital experience to work from.
JAMES: No, you are not the first ones, but it is still at least from my exposure to it, it is still not the norm. It is still in the minority of direct digital experience. I mean even in my own experience, my own business, I am generally sent a PDF and asked to fill it out by a broker.
JAMES: It is pretty pathetic.
ROB: So, we do that right, too? What is your digital experience?
JAMES: Yeah, it is like a pathetic version of a digital. I am like, well you just did an analog to digital conversion. You did not create a digital experience. It is like, you used the paper equivalent on a computer rather than digitizing the experience. To me, one of the things that people like you have to drive into an organization is an understanding that taking a paper spreadsheet and turning it into an Excel spreadsheet or taking a paper form and turning it into a PDF is not creating a digital experience. You are just using a digital tool to use the same workflow as your paper, which and often cases is extremely inefficient. You are not digitizing a process.
ROB: Yeah, you are exactly right. So, we are getting input from our agents, we have stared a customer experience team. We have hired a customer experience manager from JD power which is one that does all this kind of surveys and the ratings and the scorings earlier this year and they are doing journey maps to just understand all the processes and the pain points for customers to help build customer experience. A lot of people do not think of customer experience and Work Comp necessarily together, but we are focused on that. From a variety of perspectives right, from the agents perspective and the policyholders perspective and the end–user workers perspective, and you mentioned earlier, pre–filling some of the information, so that absolutely part of the digital distribution that is going to have some pre–filled capabilities, and it is also going to have some education out there.
Some research so what it is, what are my state requirements, talking about different classes of business. We feel like it’s very important to educate the consumer that is out there and again, this is an opportunity for agents to be able to put some branding, to kind of talk about their agency out there in a way that if somebody is doing kind of the research online, they would find us. If they want to call and have a meeting at the agent‘s office or do business the traditional way they can, because they will get some of that information just from looking online, but if they want to start the process they will have that ability as well.
JAMES: Yeah, by the way, I cut you off before you got to tell me your last initiative that you are working on.
ROB: Yeah, so product innovation is the third one, so we talked about the tech enablement that kind of builds up everything else. We talked about the business model of innovation and of product innovation and as I mentioned, you know starting a brand-new company, we have put it on Guy Wire and are kind of going through digital transformation ourselves. So, bringing Guy Wire, we brought it into the claims organization first, working on the policy side, an agent portal as well so that is a long-term project. Just to upgrade over those old legacy mainframe systems. It is going to enable a lot of capabilities. It can be a painful transition, but it is necessary to bring our organization into the 21st century as with many other carriers. And so, what is cool about putting kind of new products in the marketplace, and again those can take a variety of different flavors, trying to be a nimble organization.
So, we have identified a lot of areas of opportunity through talking with agents, through feedback from our business development consultants and others, we are all kind of in this space and we hear different things and see our competitors reacting and so, agility, nimbleness, flexibility. This is all stuff that we talked about, day in and day out. It is easier said than done. And so that is what we want to get to. We want to be able to bring forward two to four new products to the market every year. Where we socialize all that inside our walls it sounds like a lot for somebody that is traditionally been a single product company, but that is history. But yet my boss Travis, is kind of known for being an innovator in the thought leader in this space. He will tell you in other organizations he has been in places where they brought 15 to 20 new products to the marketplace every year. So, it can be done.
ROB: And so, we are bringing that discipline to AF Group and that is something we are excited about.
JAMES: Well it is not just a discipline, it is a set of disciplines, it is also a mentality and a complete culture shift. Because the sheer inertia of doing nothing grips a lot of insurance carriers. Where you are like, oh no we have always done it this way or it is so hard to roll a new product line out, we can only do one a year, and then you almost have to have that someone who has seen it work before to say no-no, like legitimately, we can do this. We can do it. You know you have to set bold audacious goals, I mean, Abel Travis, so he is the Vice president of underwriting and product innovation, so he is looking across all products and all underwriting and then you focus on a whole bunch of different initiatives. I think one thing that would be interesting for our listeners is the differentiation between an innovation group and a technology group. Because there is a lot of technology used in innovation, but you have a CIO that is not in the invasion group.
ROB: We do. We partner very closely with our IT team and we had some robust conversations this year about exactly this point so a couple of points I will make. Number one, many IT organizations, there is a very stretch process in terms of governance, in terms of how did a project get approval, get funded, how does it get shepherded through IT? IT is a very limited resource; it is a critical resource and so you have got to manage it pretty tightly and so lots of organizations kind of have ways to manage their IT resources at a high level. That does not always lead to a lot of opportunities to support new technology, kick the tires, play worth different things right, kind of see what is out there. Or even bring your head up from your laptop to kind of see what some of the latest InsureTech are out there.
What are they offering? What is the compelling value prop, and also, they don’t always get the chance to interact with the business so there may be other requirements and talking about use cases for a particular application, in a particular area? But they do not necessarily have that broad line of sight to say, hey this technology is broadly applicable in many different areas of the business. And so that is where we come in as an innovation team. We used to be part of the IT organization, but there was a recognition that this goes beyond just kind of tinkering with kind of some new tech, and the Apple watch came out or Oculus rift goggles, and so it’s about kind of enabling the business and allowing them to do all the things that they want to do in terms of increasing revenue, lowering expenses, bringing down losses, etc. So, it needs to drive a business outcome and not just the tech for tech sake.
JAMES: Yeah, so you almost need a second career path in insurance organizations for insurance technologists to be different and parallel to information technologists. Because you have an innovation and insurance technology group that largely deals with technology and it is applications to current and new business lines. And then you have information technology, that has to make sure that infrastructure and of course in the modern insurance organization security, happens to be one of the top mandates of an IT organization, but you have to deal with security and infrastructure and rollout, connectivity, hardware, desktop support, application support, I mean there is so much. I mean in a modern info tech organization in insurance; they are paranoid that is going to get hacked every day.
There are trying to deal with massive-massive roll out budgets for claims and policy management systems and ERP systems. They are trying to keep those under control and on track. They are trying to develop all the custom applications, roll out new mobile, and they have all of these, it’s a big game of whack-a-mole sometimes because they have all these things that are trying to do on a rather, of course there is no budget that is unlimited, they have a limited budget, and then you have to have a dedicated set of people that are popping their head up above the forest and saying, what is the big shift? Like my gosh, there are a tech companies. They are turning themselves into carriers. How is that going to impact us? I mean that is to me, the ultimate disruption is not necessarily just the software vendors that are selling to the current insurance companies, it is the software and technology organizations that say, you-know-what, let us just carry the risk. Forget about selling to other people, let us just use our tech, carry the risk, and compete in the market. Because that is the Amazon to our business, right?
ROB: Absolutely. That non–traditional competitor we talk about that all the time also.
ROB: And people say it is not a matter of if, it is a matter of when.
JAMES: It is not a matter of when.
ROB: We’ve had a lot of interesting thoughts and debates on it so yeah.
JAMES: It is not a matter of when they are here. It is already here.
ROB: Right-right yeah.
JAMES: So, there are already tech companies out there that carry risk. They already exist. They are already competing in the property market. They are already competing in the auto market. They are already competing in the drone insurance market. I mean, I can run through a whole list of technology companies that have decided to carry risk and so it is not even, it is not even if, or even when. It is now. And so that is what is interesting for, and what is interesting for your company is your legacy as a state organization and then having it privatized. There is a lot of baggage there to overcome right?
ROB: Yeah, absolutely and I think we grew, we grew quickly but all these mergers and acquisitions take time to kind of process, they are not necessarily on the same systems to your point. The cultures are very different and so trying to find the right balance from an enterprise standpoint. That was something that I think was a big change for me, coming from the USAA, where they are technically different companies based on your eligibility, whether you are an officer, whether you are enlisted, whether you’re a child or a grandchild by their spouse and things like that, but they all work kind of are the same right. A lot of that complexity was kind of like if you are a USAA member, you are a USAA member, and you get great service, you get the same access to the same suite of products. Whereas at AF Group some of our brands are flagship, accident fund brand, we have got Comp West that handles California and several states out West.
A very similar risk appetite to accident fund. United Heartland that specializes in a lot of medical larger, place does an amazing job with loss control theory, very innovative organization. We have got our 30% underwriters that do a lot of kind of middle part of the country. Specialize in different types of this so, yeah, it is just interesting that each brand has its own unique identity, and different risk appetites. They are all writing competent kind of different space, different territory, but there is a lot of nuance through it and so I’m trying to understand when do we need to standardize things for an enterprise and kind of say this is the best practice that we would like everyone to adopt versus when do we kind of say, hey, you run your business, you’ve been running your business for a long time very successfully. We want to stay out of your way just what do you need from us to support you?
JAMES: Gotcha. Let us talk about big data and public data. Because of this plays a massive role in the current and future tech of insurance. Particularly in underwriting and then secondary on claims. The dream is to build a underwrite right risk, without having to ask a 20-page questionnaire. The dream is to be able to pull from both public and private, paid, and free data sources that allow you to create a picture of risk without having to ask 50,000,000 questions. Is that fair?
ROB: Yeah absolutely. A couple of initial thoughts on that. Number one, it is continuous underwriting too. So not just a point of sale, not just that renewal, but if something changes about the risk yesterday, I know about it today. That would be the ideal goal one. There is a lot of things in our world, we gather all this information. Do we even use it right? Is it meaningful anymore? Prove to me that it has value. So, the big irony for people that are not in the insurance industry, but I think everyone is surprised to find out that insurance companies that specialize in risk, tend to be very risk-averse right? Particularly underwriters because they do not want to give up that questions that they do not want.
JAMES: I mean wait-wait-wait. You mean people who deal in risk do not want to take risk?
ROB: They do not want to take risk because that is right, exactly right. Yeah so, it is a great irony.
JAMES: That’s because they know the downside budd!
ROB: Well that is true. So, and this is a story that I tell from my USAA days, so I know at least of an underwriting guy that will not write a vet clinic into a mobile home, and I was like how why do we have this rule in the books? We do not like vet clinics, so we do not do commercials. We do not write mobile homes like why this in is, it is like well there was this one claim years ago that we had to vet clinic at the mobile home, and we did not know we had it, so somebody said never again. We are never going to pay out a claim on a vet clinic in a mobile home. This needs to be a rule, right? Man law. And then they put it in, so you are right, once you see those downsides right, it is like oh my gosh you know? And it is always funny that to see the interplay between underwriting and claims like you were saying so like from a claims perspective you are like who put this on the books? This is a nightmare right. What are those guys in underwriting doing an in underwriting you are like why are you paying this claim, right? We do not have that in the contract, and you paid them more than the limit, right? What is going on?
JAMES: Yes, so, do you see wearables and satellite tracking photogrammetry Jobsite cameras completely changing the dynamic of work comp and the ability do not just underwrite before the policy is bound but real–time underwrite the risk?
ROB: Yeah, I do. That is the long-term vision for sure. And that goes back to when you were kind of asking about bringing the premiums down and what not right, I think that would be the ultimate hope is to say hey, we are helping you make your workplace safer, and that is being rewarded by reduced premiums right, and so yeah there is a lot of different ways to do it. We have a wearables pilot in AF Group with a company called Make-U-Save, so we had them installed here at AF Group headquarters over the summer and asked some of our folks in shipping and receiving and our security team and records teams to kind of wear them and report on its comfort. Is it interfering with your job, trying to collect some data? We just deployed it to our first policyholder, a manufacturing facility around Fort Wayne Indiana Vienna area last week. We are excited and kind of interested to hear how their experience goes with it and I can tell you that many of the policyholders that we spoke to are very interested in this technology. And the analogy that I use is that is not biometric, it is not capturing anything about the person, but it is capturing all the stuff around them.
So, you might work at a factory and temperature on the wall says its 72 degrees, but you in particular, maybe your job happens to be between two large pieces of machinery, and it is very hot, and your temperature is like 88 degrees. Maybe you need more breaks, maybe you need more hydration, etc. noise levels, things like that. It is capturing all these kinds of environmental variables and so, as a safety manager you can monitor all the employees real–time. If you can go on the floor, you can say that somebody needs a break, or maybe install something from the equipment standpoint to make their job a little bit easier, you can do ergo things and there is so much that you can do. Whereas typically in the past it was like if somebody would slip and fall, they do not necessarily want to go tell the safety manager. And the safety manager is not necessarily going to, they may have to record that for Urschel requirements or whatever but that is not necessarily what they tell their insurance carrier. Well, not all those kinds of near misses we know, so we could say hey, two people slipped in this area in the last month. Nobody reported the claim. Thankfully, nobody had a serious injury, but clearly, this is an area that has a high probability of a slip and fall. We need to do something to address that now. Not after somebody had a serious injury.
JAMES: Yeah, we did some great pilots with a couple of wearable solutions. And one in particular I was a big fan of, Spot-R by Triax, was by far, when we tested it in the field, it came out with the best results for slip, trip, fall detection, worker location detection, the availability for a two–way messenger too, so they can push a button and it’s like a, I have fallen and cannot get up button, so they even proved that they could evacuate a building in five minutes it is instead of eleven by using this.
ROB: That’s amazing. Wow, that is amazing. Yeah, I have tried others out, there is one called Kinetic and you kind of put it on your hip like an old school pager.
JAMES: Spot-R is a pager.
ROB: Yeah, if you bent with your back instead of bending your knees, as it gives you little jolts like a little electric collar right, whereas if you bend your knees or if you are lifting something overhead. If you lift overhead it’ s fine but if you are lifting and twisting your back to the side right, then it gives a little jolt.
ROB: So, there are all sorts of different, and so we think there is it is still in its infancy, there is going to be a lot more, the other thing that I want to mention, you touched on this. Cameras, right? Cameras are deployed throughout all sorts of different organizations. But those cameras are what I would say or dumb cameras today. So, I will give you my personal example. When I was at USAA, in a very infamous case, I was in our Phoenix office and happened to be running late to get a shuttle to go back to the airport to go back to Saint Antonio. So, I was running, thinking that it was going out of an open door, which in fact was I window, so I knocked myself out, had to do the hospital and I have a massive concussion. Thankfully right now to a more serious injury, so Liberty Mutual happened to be the work comp provider for USAA and they had to review. There was a video of this incident in the lobby so they reviewed it to see if there is anything from a safety perspective we could do. They actually put a cactus in front of the window no one can kind of jump over the cactus now. You know thank you, Rob, for the incident, please come back to visit.
JAMES: Oh my gosh.
ROB: So that camera is dumb. It captured that moment, but somebody had to go back and so okay, Rob it is head on Tuesday at 4:00 PM so let us go back to the videotape and look at that, now right? So, there are people working on this problem right now where it is actually putting AI behind those cameras so “-“
ROB: It knows what a normal passage in and out of the door looks like, it knows what is slip and fall look like, It knows what is smacking the window looks like and so it’s capturing all of those and recording those and can tell you hey, we didn’t have an incident where some guy ran through a window and knocked his head out but we saw 20 people that had a slip and fall and nobody reported anything but yeah, we are capturing it with the camera and AI and recording that so we can do something to make it safer. I had many people tell me that they accidentally walked into the window and it was not a big deal because they were just walking. Maybe they were looking at their phone or they were walking towards what they thought was the door, nobody was running in a full spin like I was, but had those incidents been recorded earlier people we’re bumping into the windows, maybe that cactus would have been there, maybe I wouldn’t have hit my head.
JAMES: I have had a concussion, twice. They are no fun, particularly from plate glass. I will tell you what. That is a that sucks! But the good news is, the good news is you were recovered, and they improved. We’ve seen some interesting technology out there like there was a software product called Reconstruct that will recreate every day the building and then will automatically look at worker gate and worker at movement patterns, just from the camera can tell you if they are lifting improperly if they are running, it does all that analysis. It is pretty fascinating tech so there is a good deal of tech out there doing this and I am fired up about it. They are using some pretty good deep learning and machine learning algorithms that, it’s a specific form of AI everybody keeps thinking we say AI that we are talking about generally AI like how or something else from 2001 : A Space Odyssey, and that’s just not here and it’s not going to be out here for 20 or 30 years but the specific forms of AI we have right now are still delivering some exciting results. And of course, I guess as director of innovation you have, you work for Abel, I’m sure you and Abel will see a whole lot of marketing fluff that when you peel the covers back, there’s my favorite, did you like Scooby-Doo as a kid? Did you watch it?
ROB: Yeah. Oh yeah.
JAMES: Okay I watched Scooby-Doo all the time. One of my favorite cartoons about AI, is one of the Scooby-Doo characters holding his hand on a person wearing a ghost, you remember how they always used to chase ghosts in Scooby-Doo?
JAMES: And, he’s holding his hand on a person wearing a ghost costume, and then he lifts and the costume says AI, and he lists it up, and the person‘s blank face says if then, underneath it, and for those, I’ve been writing code since 1991 so to me that is an hilarious joke because the reality is a lot of people that our marketing as having AI systems , just have conditional statements they programmed in. There is no actual machine learning going on. They are coding in every potential condition, and then, I even saw a chatbot at an insurance conference last year that was a quote unquote and it used air quotes around the words chatbot, because it was literally just a ANSI text interface to their software where you had to pick items from a menu, there was no free text discussion with the chatbot.
ROB: Oh wow.
JAMES: It was literally like, it was, and this is not my first time seeing this. I have seen several of this quote unquote chatbots that use a quote unquote AI, and all they did is they wound the clock back for 30 years to like 1986, and build a text terminal interface to a software program and then you would say pick option 1, or 3. Oh, man, I coded that in GW basic 1990 right, I mean like I, that’s how we build software back in the day was a text interface and select menu items, and so as a software developer it is insulting, but as someone who is leading innovation in the industry it’s got to be frustrating for you to see so much marketing BS take away from the real tech, there’s a lot of good vendors out there that are building some good tech. It is going to be a little frustrating to see some of that because I am sure you have pulled the covers back on many of these and did not like what you saw?
ROB: Yeah, you are right now it is so, so, some of it is quite hilarious but I have been through many bad pitches. So those are, there is some that are mechanically bad, but the ones that I think are tough is when it’s like man, they are saying all the right words, they are telling you all the right things like this is exactly what you are kind of looking for, assuming this thing works man, you are really excited, and then oftentimes it is not even getting to the proof of concept or pilot phase. You may be headed down that path but then when you kind of say well I will pass you the sample though and let us see what you come up with, they say like oh, well actually it does not do what I told you it would do, and it has a lot more limitations than I originally created. Those are the ones that are frustrating because it feels like a bait and switch where is right like, wait a minute now you told me it was what is going to do this and this and so you were kind of overselling its capabilities or overstating it.
JAMES: Oh yeah. Oh yeah.
ROB: Never cool so if you are an InsureTech vendor out there come on or whatever like “-“
JAMES: Yeah do not do it!
ROB: Tell me what is on your development road map. I mean if you can do it today you cannot do it today that is fine. If you, kind of have not thought about that and that is in the future release or that is good feedback or we will consider that or we can customize, that is fine. I am happy to have a dialogue on it, but do you right are right, but unfortunately, that takes away from the real deal, and then sometimes the real deal is not the sexiest presentation, right? Or new pitch and that it’s not the sexiest marketing or whatever and I have talked to some companies come of some startups that I believe in their business like believe in their CEO and their leadership team or whatever, but they are not necessarily getting the investment law or the hype or whatever and I’m always asking them about, why don’t you just throw out some AI words you know and kind of pitch it?
Yeah, it is tough because it is their work and they want to be true. This is our company; this is what we do, and I will oversell it or whatnot or overhyped it. I have talked to companies where like internally I was selling this at USAA. I kept talking about machine learning and deep learning, we need them, they are doing all of this, they are doing this deep learning stuff blah blah blah and they would kind of correct me like, well we are using deep learning but it is one of several techniques that we are using along with blah blah blah blah blah blah and I kept telling them like, nobody cares about that. They only care about deep learning, so it is not that you are not using deep learning, you are, but you are also just using half a dozen other things but like, let us just stick with deep learning.
ROB: As they socialize. It is good enough. That gets people’s attention and we go from there.
JAMES: That’s awesome. This is a great discussion. I have to ask about the future now. This is kind of our looking for a wrap up of this conversation. I have heard about what you are working on now, next five years, what do you see coming? Let us say, let us do a little futurism here, what do you see coming down the pipe?
ROB: I think there will be a lot of companies, I think the playing field just in general is going to be a lot clearer in five years. I could be wrong about this. I think as the technology matures, some of these startups mature, some will have successful partnerships with carriers, others I think may not, but they may become successful competitors with carriers. There is so much going on in distribution space in automation space and others so, I think that the winners and losers will shake out and it will become clear who the industry leaders are across the spectrum and all these kinds of emerging technologies. I think they are going to become a lot more mainstream and one of the things when I talked to audiences, if I talk to an InsureTech startup community, or somebody that works in innovation like it is truly appreciated acquired you know? If I talk about my book “The End of Insurance as We Know It” talk about some of the key points they lap it up.
When I talked to, what I considered my people like a traditional audience of casual extra society or the charted property casualty underwriters and other more traditional audiences, I know there is a lot of skepticism. There is usually like a couple of fans or die–hard people that are like pumping my hand like super hard after afterward. They are like I loved your talk, but I see those people’s faces like they are quite skeptical, and it is because their day-to-day has not changed. And so, to your point about the, oh yeah, we digitize, we put the form in PDF online, there is a lot of folks that it is like I will believe it when I see it. And I think five years from now it will affect many more people in the industry where they will see it and so I always tell people, agents and other like, if you are an agent, you are not going to be replaced. We have been talking about the demising insurance for 20, 30. But if you are not leveraging technology, you are going to be at risk.
So, and that is true at any job so, if you leverage technology, if you work with technology, if you are willing to adapt and change, you will be fine. We need a lot of those folks but if you are stuck to the status quo and the same way of doing whatever it is, claims, underwriting, pricing, you’re going to have a hard time far from 5 to 10 years from now, because these emerging technologies are only going to mature, they are only going to get more progressive, more pervasive throughout the industry. And it’s going to be the new normal and why I wrote the book because I was in meetings, and I kept leading meetings the last two–three years seeing this new tech they are like, oh my gosh, I just saw a glimpse of the future. That is what insurance is going look like 10 years from now. So, all the manual stuff, the paper-based stuff, whatever, those days are numbered. Now they may not come as fast as we want them to come in some areas, but 5 to 10 years I think it’s going to be a whole lot more streamlined process and quite frankly more focused on the customer, on claims, on the human side of the insurance that the empathetic side, the touchpoint side which I think is a good thing for all folks involved.
JAMES: I agree with you. I think that we are also going to see a dramatic shift in data gathering. You know when you combine satellite technology, drone tech, and public and private data source availability. I think that claims investigations are going to radically change. I think that underwriting is going to radically change. I think the client experience in getting policies, they will be able to buy policies by the minute, by the hour, by the day, by the week, by the year. They would be able to buy directly on the phone, charge it to Apple Pay. I think that is the consumerization of enterprise tech in a big way. I have already seen it starting to happen to some of the commercial products I have, Like my commercial drone insurance, I buy it by the hour by the location, through Veri-fly, and it is a radically different way then I buy the rest of my, like my cyber policy or my E&O or my general liability or, I have seen it happen. Slowly but surely.
ROB: Well I do not know about Very-fly, but I have talked to folks in Google . They are working with a drone insurer, in the UK called Flock, where they look at the model you have, they can look at historical information losses, etc. but they also look at what are the current weather conditions. What is the wind speed, is it raining, is it sunny, how many other drones are in the air, what else is in the air? Is it 20-mile p/h winds, what is the history of this operation?
ROB: They are taking into account a lot of real-time information to create that real-time pricing algorithm. It is not just based on what is experienced the last 3 to 5 years in drone losses and lets the project forward. Cyber kind of works the same way too right, in terms of it certainly should work this way where the cyber thread changes hourly, minutely, so you know what this cyber thread has been like the last three to five years may not be anything like the cyber threat is going to be from now to next Tuesday or whatever. So, if you see a spike in whatever suspicious activity, you are like, maybe your cyber cover should go up in price right, so I think you are right. Like more on–demand, and more in the moment more customization. And then the one thing that I believe in and you know I know this is a hot topic for debate, so I am I blockchain believer. There are so many parties to an insurance transaction. Not just the agent, not just the policyholder, not just a claimant, but so many medical providers, TPA’s, so what makes the Internet powerful, is that there is one of them.
There are not 30 internets, there are not 300 internets, there are not 3000 but there is 1 and we are all connected to it. And so, there are folks like the restream collaborative that the institutes put it on as sensibly trying to bring, carriers and other big parties together to do just that, whether that the broker‘s, shares, etc. And so, there are lots of different used cases for blockchain, but if they were there was essentially one watching that all this information was verified by your know, you kind of being, you want insurance. And I just said, James, pass me your blockchain. Okay, I got it. Here you go. Here is your quote because like to your point, all the information is already there. It is already there for you to check with anybody right?
ROB: The cost potential is massive. And I talk about this in my keynotes, right? So, think about credit cards for a minute. And if I have a loss, I can put it on a credit card right now. If it is not $100,000 right but that is a way, I could absorb smaller losses. And I do not have to pay insurance premiums, I only pay for the loss when I have it. Not that 90% of the time I do not have it. I have some flexibility in terms of paying it back. And you know even think about credit cards there is high regulatory right, compliance and you have to deal with, deal with large banks, and there are Visa and Mastercard, there is lots of fraud and the interchange fee is only 3%. Like so every time you swipe your card, it only costs 3% of the transaction price. So, insurance is closer to 30% in terms of an expense ratio. Now I do not think we will ever get down to 3%, but why is insurance 10 times higher? Well, it is because of all these validations and these checks and these claims and investigations and all this underwriting referral right. If I got rid of all that stuff, maybe I could get it down to high single digits right and that would cut just an enormous amount of cost out of the system. So, I think blockchain has a huge potential to be a big part of that problem.
JAMES: Yeah, my desire for blockchain is just to start with something simple. We have a product quote SmartCompliance, it is a certificate of insurance, issuance, and collection. Can we just get a policy blockchain please, so we do not have to use a cord policy forms like, please! Can we just have a policy blockchain that everybody has? I mean it is insanity how analog and archaic the process of documenting what coverage you have and then sending it to people is, and blockchain would definitively solve this problem. Like in my mind, and I know this is an opinion without a doubt it would, by the wayside note, I have the tangent for just a second, technically we only have one Internet. And March Putin said that he wants to isolate Russia and put it on its Internet.
ROB: Oh my gosh.
JAMES: And then he could technically say that tore and the dark web, and all kinds of fun things that go on with the internet.
ROB: Oh my gosh.
JAMES: But even the dark web operates over an Internet infrastructure but there are some very interesting political leaders talking about creating their Internet. Because that would be a travesty for the world if this if that happened. Blockchain, we have seen it solving all kinds of practical problems in the world. As an old coder, to me, it is just a giant encrypted linked list. One of the first things you had to learn in the early 90s in software development for data storage was this thing called the link list and that is essentially what blockchain is with public key encryption. I am oversimplifying it, but it is remarkably logical once you say oh yeah, well, why don’t we have that forever? And then you look at the number of industries that are starting to leverage it like the maritime and shipping industry right now.
ROB: Yeah. Absolutely
JAMES: I mean like Pravin material providence through blockchain is critical. It needs to happen now, and it needs to happen everywhere. And they are starting to use it pretty quickly. And it is encouraging to see adoption rates on blockchain and seeing people being willing to separate Bitcoin, which just operates on the blockchain, but it is irrelevant. I always ask for, set your feelings about digital currency versus Fiat currency aside for a second and look at the underlying technology and what it can do to radically change the insurance business.
ROB: Let me tell you a real quick story about blockchain if you do not mind James, so we had interned this summer, we had 2 interns Alex and Angela and they are both finishing their college freshman year. Both brilliant. So, Alex worked on exploring blockchain for us this summer, so I had to sit down with her at the end. This is my 19-year-old intern mind you okay. This is somebody that normally would be like, I take my coffee, two creams please right, and I am like, okay. Explain this blockchain thing to me one more time, right? And so, she is going through it, it was just blowing my mind. So, she was teaching me somebody that is 45, 20 years in the industry, right? I have been in the industry longer than she has been alive.
But she is educating me on blockchain and the applications and she was a member of the blockchain club at the University of Michigan and she got a leadership position at refreshment and she said yeah it was like a lot of turnover, a lot of people left the club and I ’m like, Ooh, you know, gossip right? Like what is going on with the chart & chain club? Is it in a bunch of anarchists or whatever? And she is like, no, she is like these are kids that are dropping out of school to go to work on Wall Street for a six–figure income. And I am like Alex, why are you here? We do not pay interns six figures, and she is like no-no-no, I believe in my degree and I want to finish it through and whatever, but to your point this is a real thing, right?
ROB: This is a real technology that is coming, it is coming fast and so many people are skepticism because of Bitcoin or whatever. I hear so much resistance and more so than anything else I mean. I used to tell people to look, all I can give you is an opinion at this point, but I am a believer. It is not there yet, it is not today technology as I believe AI is, but tomorrow. It has some growing pains, but I was like, do not fall asleep on it, yes, there has been a lot of hype and we are cutting into it that wall period, but I was like, definitely keep an eye on it. And you asked about the future. That is the one I think that will just kind of explode. There is this rule of tenant, tenant innovation, I don’t know if you ever heard of a James like, from the time of that something kind of first gets invented to the first time it kind of rolls out it often takes 10 years, and then for mass adoption, it takes another 10 years so we will hear this initial hype and they’ll be like, ah that went away, that was a number of things or whatever and then it comes back and because it was productized or refined or whatnot and then early adopters start getting in over the next 10 years it picks up. So mobile phones, a good example, kind of mobile phones and all of a sudden, the spark follows, and now, look at how ubiquitous they are.
JAMES: Yeah, I saw that a lot with a lot of business models and technologies that were rolled out during the dotcom boom in the late 90s and they’ve failed because frankly, hardware sucked at the time and Internet speed sucked, and then once Internet speeds got up and hardware started being much better and we had a bunch of better underlining software, people took the same models and just rehashed them and then they worked. And they were viable. And so sometimes you have to wait for either culture or industry to catch up to the idea, and I feel that is the case with augmented reality right now, HoloLens (II) is so much better than HoloLens (I). HoloLens (I) is amazing and you have all this innovation and shakeup in AR that is going to radically change everything about the way we live, and our houses are designed, and businesses are designed. It is just going to take a little while longer. Definitely took a decade or more to come up with those first good versions, it will easily take another decade to refine them enough that we get mass multibillion-person adoption in AR. So, I agree. Unfortunately, it is time to wrap this conversation up. I would like you to tell people how they can find out where can they get your book, so tell them that title of the book and where they can get your book.
ROB: Absolutely yeah. So it came out in February, it sold over 1500 copies, in over 10 countries, it’s just been amazing, it just got a ton of great reviews from folks, so it is called “The End of Insurance As We Know It” It is available exclusively on Amazon. It is sold in paperback version and Kindle version and you can find out more about it of course on Amazon and the book’s website endofinsurance.com I have got podcast recordings, video interviews, media articles, all sort of goodies out there that kind of help for folks that want to know more about the book.
JAMES: Awesome so endofinsurance.com go check that out today and the big thank you to you Rob, thanks for being on the show today, and thanks for what you are doing in the industry.
ROB: Appreciate the invite. So, I loved our conversation James and keep doing what you are doing man. Thanks for jumping into this podcast space. There is a lot of folks that have an interest in the space. They are dying for this information around the world, so I know you are going to be huge in no time.
JAMES: That’s awesome. Thanks a bunch, appreciate it.
Just for all of our listeners out there. This is the InsureTech Geek Podcast powered by JBKnowledge. That is “JBKnowledge.com”. It is all about technology that is transforming and disrupting the Insurance world. I have been your Host James Benham that’s “JamesBenham.com”. Thank you for joining us this week.