Dale Halon | August 2, 2019
"It's déjà vu all over again." While there's some question as to who first coined this expression, Yogi Berra is best remembered for being the one making this observation in 1961 about a baseball game. But we all have felt this from time to time.
While David Crosby's rendition of "Déjà Vu" was much more lyrical and melodic, 1 the thought process was far from new. This is especially true when we look at the insurance industry.
At the risk of dating myself (yet again), let me reminisce to my early days as an underwriter trainee. We calculated auto insurance premiums with a calculator. We used a Ronoco wheel to calculate earned and unearned premium for policy changes. We calculated payment plan amounts and hand wrote them on forms for the agent to give to the insured. We keypunched documents into a "computer." "Policy typists" hand-typed declarations pages. We pulled stacks of preprinted endorsements to mail out as a set of policy documents to insureds. And, we sent invoices for premiums via the US Postal Service.
In 1978, along came a "house built" insurance processing system, Short Term Rate and Write System (STRAWS). After entering rating codes and insured and exposure data, STRAWS would calculate the premiums on any transaction and produce policy documents. Nothing was available online, but it was a huge step forward.
As underwriters, we were concerned we would lose our value and be replaced by this technology. We thought management wouldn't stop there and come up with more automation. We were skeptical that the "system" could do as good a job as we could. We didn't want to change.
It was only a year later that we were converting STRAWS policies to a new mainframe policy processing system that did way more than STRAWS. It was time to sell my green eyeshade and desk calculator on eBay and adapt to a new reality of the work environment. Truth be told, I got promoted to a supervisory position, so it was now up to me to entice the dogs to eat the dog food. How could I respond to my teams' concerns about what their jobs would be like in the future? Of course, it was easy to see there was much more coming.
Fast-forward to the last 25 years. Insurance-based consumer credit scores started the new trend of injecting predictive modeling into the underwriting and pricing process. First, there was linear regression, then more advanced regression, clustering, factor analysis, neural networks, factor analysis, particle swarms, machine learning, and scads of cool software that continues to flow from inventive and forward-thinking mathematicians and data scientists. The new buzz is artificial intelligence (AI). No one even says "artificial intelligence" anymore. We're all supposed to know what AI is when the two syllables are spoken or written. There's at least one TV commercial that uses the acronym AI with the actual words never used in the message.
I was fortunate to attend the 2018 Chartered Property Casualty Underwriter (CPCU) Annual Meeting in San Diego last October. This is probably one of the best overall conferences for broad-based content for professional development available. A good chunk of the seminars featured technology as a topic. There was a star-studded panel discussion, "InsurTech Rising," as well as seminars on the Internet of Things, connected homes, data-driven approaches to rate local fire responses, and more.
And the trend continues with a new technology conference nearly every month. Insurance professionals now flock to these "tech" conferences to keep up with the latest and greatest innovations.
Like any other industry, we're blessed with more and more innovation. There are investment dollars flowing from venture capital firms and internal teams focused on "the next thing." We're able to know more about customers, prospective customers, risk evaluation, and the most opportune claim approaches. We answer our customer phone calls already knowing who they are and what product we should be offering as part of our conversation. We're doing way more with way fewer people AND doing a way better job at it.
NOTHING
EVERYTHING
Beyond our world of insurance, television, telephones, cinematography, navigation, cash management, communication, banking, advertising, shopping, aviation, travel, music production and replay, manufacturing (3D printing), medicine, and playing of games are just a few of the everyday activities that have gone through notable changes.
On the flip side, I recently sat for the Agent Licensing Exam for Ohio. The test material was the same stuff I learned and later taught in INS and CPCU classes in the 1980s and beyond. Yes, satellite, cyber, communicable disease, terrorism, domestic partners, autonomous vehicles (coming), and other types of endorsements/special coverage sections have been "grafted" to the old forms, but not much has changed here.
The bonus for me was the need to spend less than 20 hours preparing for the exam, which was enough to pass with a grade of 88 percent, where 70 percent was the requirement! Little had changed, including many internal limits on specific coverages. Thankfully, the old dog didn't need to learn any new tricks.
So, what does this all mean? It's a matter of perspective whether our industry is going through a revolution or just continued evolution. The bottom line for me is to watch with wonder but temper the excitement with a touch of reality. The valuable lessons from earlier days in our industry are still pertinent today. Our successors, while seemingly uninterested in the past, absolutely understand how to leverage assets to put Humpty Dumpty back together again should such unfortunate events occur to our customers. But our industry's need for insurance contract knowledge, exposure recognition, and human communication prowess cannot be overstated.
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Footnotes
If I had ever been here before I would pro'bly know just what to do
Hey, don't you?
If I had ever been here before on another time around the wheel
I would probably know just how to deal
With all of you.
And I feel like I've been here before
Feel like I've been here before
And you know it does make me wonder
What's going on under the ground.