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Watch Christopher M. Wells, Ph. D., Indico VP of Research and Development, and Michelle Gouveia, VP of Sandbox Insurtech Ventures, in episode 13 of Unstructured Unlocked. Listen in to learn how enterprise leaders discuss how fast AND accurate document intake enables them to make data-driven decisions, increase capacity, and drive top line revenue.
Christopher Wells: Computer. Hi, and welcome to another episode of Unstructured Unlocked. I’m your host, Chris Wells, VP of r and d at Indico Data, and I am very excited to introduce you to my guest, Michelle Gouveia of Sandbox Industries. Michelle.
Michelle Gouveia: Hey Chris, how are you?
CW: Oh, I’m really good. Better now that you’re here. How’s your day going?
MG: Good so far. No complaints. Starting to warm up over here in Connecticut. You’re in Boston, so you’re familiar.
CW: Yeah, I’m actually in Philly, so it’s either
MG: Oh, you’re in Philly. Yeah. Okay. Apologies for that,
CW: Just down the coast. No, it’s fine. I’m not sure whether Boston is an insult to Philadelphians or not and whether it goes the other way. But we’re not gonna cover that ground here on the podcast. Appreciate that. Yeah, absolutely. So tell us about yourself.
MG: Absolutely. So as you mentioned, I am an employee at Sandbox Industries. That’s a venture capital firm that is based out of Chicago. I joined that firm about four years ago in doing that brand new to to BC in that whole world. I spent eight years prior to that working in the insurance industry. So you’ve, you’ve talked to a lot of folks in the industry, and you probably know no one really goes into it purposefully. I kind of fell into it. I am born and raised in Hartford County, Connecticut, so insurance capital of the world. Very easy to just find yourself working at one of those big carriers, which is what happened straight Outta school. So I did four years at Travelers and then literally crossed the bridge across the street and did another four years at Hartford Steam Boiler, which is the city area of Munich. So, you know, big, big insurance nerd, I guess by, by default. So that’s a little bit about pro professional me leading up to, to sandbox personal me, like I said, born and raised in Connecticut, still living here. I’m a big, big soccer fan a new mom. And yeah, just enjoying what I get to do every single day at work. Obviously joining a podcast is part of that, so thanks for having me.
CW: Well, good. I hope it’s minimally painful. It’s funny, you know, I remember being a kid, ancient history at this point, but I grew up in the Rust Belt, and it was like, well, what are the possible jobs? You could be a, you could work on a firehouse, you could be a police officer, a lawyer, a doctor, and work in a factory. That was like, that was the list. And the, the space of careers now is so much bigger. And, you know, you mentioned falling into insurance. It seems like insurance is actually becoming sort of, I think it’s an up and coming career path, right?
MG: Yeah, there’s so when I got my mba, I, I did it at University of Hartford, <laugh>, again, state, local that they didn’t have it then, but, but I’m aware of now they have a specific track that’s focused on insurance. So it’s very much you know, as, as you mentioned, growing into a, a purposeful career path for folks. But yeah, as, as you said, what what I was familiar with was I have family members that worked at an insurance company or at a bank and then, you know, some, some manufacturing plants here in Connecticut as well. But tho, tho, tho that was my world right. And so you go to college and you’re like, well, I could major in math or English, but eventually I’ll, I’ll probably get back to one of those big corporations. So,
CW: Yeah. Yeah. Oh, that’s interesting. And insurance is like, something I’ve learned as I’ve worked with insurance companies in the last five or six years is it’s a broad umbrella. You can ensure just about anything.
MG: You can ensure just about anything. And then even within insurance, you can, there, there’s so many different roles, right? I think traditionally when people say, oh, I work in insurance, they think of, of you being as an insurance agent or insurance broker, not that you are an underwriter or you know, someone that works in, and maybe you think about the claims representatives cause that’s who, who you as a consumer touch on the insurance side. But yep. The actuaries, the compliance shops, there’s just, it’s such a diverse, you know, world in terms there, there’s any, any number of, of roles that you can do with an insurance that’s not purely just on the product selling side.
CW: Yeah, absolutely. But some of the most sophisticated organizations in the world, you know, you were talking about actuaries, they’re the actuaries are the original data scientists, right? And so there’s incredible amount of sophistication in insurance. I love it. Yeah. Good. So you kind of left insurance and went to venture capital. Why did you do that?
MG: <Laugh>? Well, sort of, and I’ll, and I’ll, I’ll explain this sort of, so sandbox as a firm has a strategy to launch investment funds in highly regulated industries. So where you have these large incumbents that are protected by things like the regulatory environment or their capital requirements but that are interested in partnering or are gatekeepers to innovation within those industries, right? So that they, they’re, they’re interested in bringing in new technologies and capabilities to help them gain market share or competitive advantage. And so within Sandbox, we have, we started off which is about 20 years ago in the BC space, started off in the healthcare sector following that launched a food and agriculture technology fund. And then in 2019 had the first closing of the Sandbox and SureTech Ventures fund, which is focused on the p and c or property and casualty in life insurance industry. So I got to know the, the, the, the team that was launching that at the firm around that time. And so because of the insurance expertise that I had from, from my roles was able to, to join got the opportunity to join. So I left the insurance like bubble in terms of working at an insurance company, but very much still part of, of the insurance industry and, and the, the landscape. Just doing some work with some really cool companies that are trying to, to change the industry. So
CW: That’s exciting. Yeah, I think a lot of people don’t realize, you know, what you’re talking about heavily regulated, and clearly healthcare is heavily regulated food and drugs. I think a lot of people don’t realize that there’s an extra layer of complication with insurance, which is every state regulates it. They’re okay, it’s not quite true, but roughly speaking, every state regulates it differently.
MG: Well, I think specific, I think it’s like 56 different jurisdictions even. Yeah. So outside of just the 50 states, right? Yeah. And, and they vary. It’s not just a check the box that they have their own, and, and it’s a similar process. They, they each have differing different processes, different relationships with each of the carriers different requirements that, that they have in place for how you price a product, how you sell a product what products are even available to be sold. So, so it is quite, quite a challenge to, to navigate for sure. Yeah. Very, very, very highly regulated industry, which I, to your point, people I think don’t, don’t always appreciate,
CW: Yeah. Highly and granularly regulated, but I mean, that must create a ton of opportunity for the companies that you’re talking to.
MG: It does. AB absolutely. And, and when, when we think about the insurance industry or the insurance value chain and kind of where we’re looking at companies it’s end-to-end. And there’s a number of opportunities within each of those, those links in the value chain, whether it’s new product development or how you distribute those new products just even in underwriting. So data and analytics, and how do you streamline that process? How do you improve back office operations and, you know, enhance the roles that people have so that they’re not doing the mundane data entry type work, but can really do the analytics and understand you know, some of the drivers of, of what they’re seeing. And then obviously, all, everything that you have on the claim side, whether that’s reduction in, in the severity of a claim, a reduction in the frequency at which a claim would be filed and then obviously the, the customer engagement and the, the relationship that you have with them there. And that, that’s just within the insurance industry. Then you, well, insurance entity, then you’ve got the brokers and the agents that are doing the distribution, those partnerships, and then on the backend, the reinsurance entities and, and their relationships into your connectivity. So it’s interesting. Yeah, there, there’s, there’s, there’s, it’s a, it’s a big space there. There’s quite a lot of opportunity there.
CW: Yeah. So you, you’re, I think what you’re saying is you see an opportunity across the entire ecosystem. It’s not just within the insurers themselves, but everything. That’s absolutely,
MG: Absolutely. Because, and it’s all connected. So Im improving something for, for one of those usually has, has an effect on improving the workflows or the interconnectivity between, between all of the entities.
CW: Okay. I have many questions. I’m gonna put a pin in that for now. I want I wanna spend a little bit of time and let you further credential yourself as a self-proclaimed insurance nerd. What, what did, what did you do specifically in the insurance space before you, you sort of made the jump.
MG: Yeah, so I, I think of my, my passes as two buckets, right? The travelers bucket and then the Hartstein boiler bucket just because it, they were two very different, different roles. So at Travelers, and ironically spent four years at both. So at Travelers it was in their agency management group. And so that’s a very, it was a very operational role. It was part of their compliance shop. So the, the job there was ensuring that all of the agents that were appointed or wanted to write traveler’s business were able to do so legally. So if they had their license, their insurance license in place, which to your point required them to be licensed in multiple states if they wanted to sell insurance in multiple states. And then as a result of that, what, what indemnity products could they sell?
And so validated that they had all of the right paperwork and documentation in place. And then as part of that, as, as well within that group, very often insurance agencies and, and brokerages are getting acquired and rolled up or merging with others. And so ensuring that internally within the travelers, that those records were all in sync so that the right agent was assigned to the right agency so that we could ensure that commissions were being paid correctly. And that you know, the, the, the relationship managers there had all, all the details on their, at their fingertips of, of, of who’s writing our business.
CW: Okay. So I’m much more familiar from my past life with the breakdown of, you know, sort of roles in banks. Would, would you consider, was this a back office role in an insurance company? Yeah.
MG: Yes. Okay. Absolutely. Absolutely. Yep. On the same page. And so, so that was what I did there. I spent my four years within that department and in a variety of roles, eventually growing into kind of the head of the knowledge management initiative there. So interesting procedures, understanding the work itself and then collaborating with, with the, the actual business units. So the personal lines teams or the commercial lines teams to, to just think about how to streamline some of the, the work requests that they were sending in their submissions. And improving the workflow there. And that really got me interested in, in stepping away from the day-to-day, like blocking and tackling of, of this is what we have to get done, and thinking about the strategy on how do we just improve this overall process. And so that was really the catalyst to, to me finding a role that was more tailored to strategy. So I took a strategic initiatives manager role at Hartford Steam Boiler after that. So li literally, they’re across the street from each other, so I, the same pathway to work and everything like that. That’s, so that’s how, how Lockton Hartford, Connecticut is. No, I mean, you throw a
CW: Rock, you hit an insurance company, and that’s
MG: How there, there you go. But be careful cuz they, a lot of ’em have glass <laugh> everywhere, so you wanna be careful. Of course. <Laugh>, I’m sure it’s well short. Yes. Very, very well short. So yeah, so at Hartford Steam Boiler I was, I took the strategic initiatives manager role within their business strategy and execution team. Okay. Which was a, honestly, and it was great for me, kind of a catchall for a lot of different things. So essentially I was, I was tasked with working on initiatives that were enterprise wide or executive led. Okay. And so one of the first ones that I worked on was launching a new product into the market. So I worked with the product team to help draft the policy document. I worked with the policy administration group to, to get those into, to the policy administration system and got got, you know, got to know how to draft requirements and represent the business on a lot of those business to IT conversations.
That was one I did help with their implementation of a new core system, which oh boy is, is a big, big task and never, ever goes according to plan. But was was a great learning experience as well. And then towards the, the second half of my time there really spent a lot of time focused on innovation initiatives within the company. So actually ran with, with a colleague of mine, a company wide Shark Tank event which actually led to someone’s idea being worked on for six to eight months and, and becoming realized worked on so worked on that. And then part of my role was, again, the kind of the executives sponsored work. Yep. I was not a part of that group there, but H S B partnered with Munich Re Ventures often.
And so any companies that they invested in that were strategic to, to Hartford Steve Boiler, or that Harper Sea Miller went out and found and, and wanted to, to partner with, whether it was the H S B has a, a reinsurance model as well. So they offer a lot of services to Okay. To their reinsurance partners. So sometimes it was companies that hsb wanted to work with internally. Sometimes it was partnering so that it could provide services or different capabilities to its reinsurance partners. I was the relationship manager for, for those InsureTechs coming in. So I would identi work with a business to identify, this is
CW: Starting to come together for me.
MG: Yes. To identify the need. Usually run, run some type of POC or pilot internally, capture those metrics, report out to the executive team on what we were seeing after a period of time, eventually help with the recommendation of either you know, up or out in terms of contract with them or, or, or build this into our process. And then as, as, as that decision was made, if the decision was to, to work with them, then work with the business to say, this is the solution we have, how do we operationalize it internally? How does it fall into the workflow? What are the new procedures and, and processes that we have to follow? And then you know, manage that for a a portion of time until it becomes just, just just part of the, of the day to day.
CW: Yeah. I wanna, I wanna pull that thread and then come back to that train of thought, cuz that sort of tells us how you got to sandbox a little bit. Sure. Foreshadowed it. But insurance companies are notoriously highly siloed organizations. So how did you break, how did you break those log jams to get, like, I mean, you’re talking about a new core system, right? That has to, that touches like everyone. How do you accomplish that in a siloed organization?
MG: So I think a big part of it is that again, as I mentioned, it was, and a course system always is going to be Right, some executive level Yeah. Strategic priority initiative. And so there’s, there’s just a general consensus of this has to get done. Okay. and so on, on the core system implementation, for example, I represented the business on that. Okay. So it was more of, here are our requirements okay, here, here’s the requirements list. What are the capabilities system, we can do this. We can’t do this. Okay, yeah. Now go back to the business. How does that impact what, what we wanna do? And, and in the instance of, of that particular project the goal was to launch the new product, have the new product, be the first one on that core system to just, to avoid a lot of the legacy, which would come later in integrating all of the, the legacy from other existing systems. So there was a little bit of a lift on that. But yeah, it’s, it’s, it’s getting together a lot of people, it’s a lot of it, it’s project management work a a lot of it, right? It’s, it’s identifying the, the, the key stakeholders who are the decision makers, and then just tracking very closely how things are progressing working with, with their teams as well. And just pushing through it. <Laugh>, honestly. Yeah. Okay. Yeah. Yeah. <Laugh>,
CW: Yeah. Just grate your teeth and get through. Okay. So at the end of your sort of insurance proper career, you spent a lot of time, you know, trying to stress test new technologies in the InsureTech space. What lessons did you take with you to Sandbox?
MG: Yeah, yeah. Actually that was a big part of of why I joined Sandbox was the lessons that I had learned okay. As, as part of those projects. And that was my, my ability to say in, in vetting or, or looking at a company, they, they are aware of the challenges. They, they know what it’ll, what it’ll take or how long it’ll take to, to sell into insurance company to implement their solution. What are, I could speak to, what are the challenges they will, they will hit up against internally, whether it’s procurement, whether it’s because they’re, they’re requiring a change in behavior, they’re gonna hit up against this, this type of, of challenge, or it’s a systems challenge. And you know, this was the, the start of a p i, connectivity being, being kind of table stakes, but, but how do you integrate?
How does the data get exchanged back and forth? So being able to, one, understand that those questions needed to be asked, and then two, asking while, while talking to a company, being able to, to weed out those that seem to understand the industry and the challenges that they face and, and, you know, added a little bit of credibility to, to their ability to sell into the insurance industry because it is a challenge. And yeah, part of that too is understanding who buys it, right? You, you may be working with, with a business unit who is very interested, but then if they hit up against an IT budget where that, that’s not priority. It, it’s just, it’s, it’s an uphill battle. And so just being able to speak to a lot of that, and then just for myself, I was, the, the switch that that clicked with Sandbox was, I was starting to wonder about, yeah, you know, I’m making these recommendations to senior management about, I think we should partner with this company, and then I hope the company’s here a year and a half from now when we’ve incorporated their entire solution Yeah.
Into our workflow. And if not, what are, what are the contingencies that we have in place? How reliant are we on, on what they’re providing us to get things done? So there’s a lot of those questions going on. It’s just, I just got very interested in, in what does it take for these companies to, to continue to, to exist. And so step in Sandbox and yeah, four years later here we are.
CW: Gosh, you have like insurance in your bones. Like the
MG: <Laugh> fell into it though. <Laugh>, yeah.
CW: So funny. Yeah, it’s very natural. Alright, so how, how do you advise startups So to like really understand insurance, like, what do you say, what should they do to really go out and understand here’s how things work at an insurance company? Because I, I’ve worked with and for a lot of different industries across my finance and now AI career and insurance is almost like tribal. Like, you gotta speak the lingo. You, you know, you have to, you have to have that right mindset. It’s just very, very different. So how do you advise companies just, you know, get smarter about these things?
MG: Yeah, I, you, you hit the nail ahead. You definitely need to understand or have empathy for the pain points and, and what they’re trying to solve. You know, understand the, the day, day-to-day that there’s a lot of acronyms, right? And, and it’s hard even within the industry to know all of them. Especially because as you mentioned sometimes or often in the insurance industry, the groups are siloed, but also the, you know, I worked at Travel for four years. Yeah. And this is probably, well, I’ll, I’ll admit it out there. Didn’t really know what reinsurance was until I joined Harvard Steam Boiler. My world just didn’t touch reinsurance. Right. That wasn’t my part of Yeah. Of my job at Travelers. And so there’s, there’s just so much that, that you learn as you go taking different roles, being ex exposed to different people within the industry.
And so what we try to bring to our companies is an understanding of what are, what are the, what’s, what are these people in, in the insurance companies trying to accomplish, right? When you’re talking to an IT person, what are their goals? If you’re talking to the chief underwriting officer that’s going to, that’s gonna differ, this is what they care about, right? Yeah. What is the chief claims officer care about? One of the things that’s really interesting though that we’re seeing is probably when, when InsureTech really took off as, as a sub-sector in, in broader FinTech and this is a, there’s been a lot of great work done. I think what we saw as a first tranche of, of InsureTech or startup activity was entrepreneurs that were on the receiving end of the insurance experience, right? You saw a lot of, a lot of claims type solutions.
You saw a lot of just I’m gonna change how you, how you buy insurance. Yeah. or cuz cuz it’s the, the consumer’s you know, perspective what we’re seeing now. And so to, to your question Chris, of there’s a little less explaining we have to do because we’re seeing a lot of industry veterans starting companies interest. They, they’ve interesting been in, in the companies. They, they understand the challenges and they, they’ve seen, or they have an idea that they think can improve what they have experienced. And so you’re seeing a lot of CEOs or, or co-founders or founders that are, you know, spent 15 years working in the insurance entity or in the financial services sector and that there’s, there’s a correlation to what they’re trying to solve for. So it’s a little bit of both, but I think generally entrepreneurs are getting, are getting better at understanding what, what is the, the goal that an insurance company has, what is the outcome that they’re seeking whether it be in the underwriting space how, how do they they select risks. How do they, how do they process their claims? How do they improve the customer experience? Yep. So it’s a lot of just helping them navigate who are you selling to? What are you really trying to help them accomplish? And then selling the, the company value proposition in that lens.
CW: Right. Okay. Gotcha. So the, the struggle previously had been helping these founders to figure out what’s painful so that you can do, sort of do the value engineering, right. To build up sales process. But now you’re saying that, you know, the company, the, as as insurance companies are going through this digital transformation phase. There are a lot of folks that are, you know, they actually have an understanding and they’re leaving the insurance companies to found the insurance tax. I think you’re saying that’s the trend that you’re seeing
MG: That Exactly. And, and on that, that first wave it’s, it’s even just understanding. You might understand the pain point, but you might not understand why it’s a pain point. And there’s, yeah, it’s, it’s not that insurance companies are resistant to, to change or slow to change because they’re stubborn. There, there, there are reasons, right? It’s the regulatory reasons. It’s, it’s how ingrained their systems are, or even how siloed they are in all the inter yeah. All the workarounds that they’ve built in order to, to do that. There’s, there’s a lot of data, lot of legacy information locked in there. And so it’s not, it’s never as simple as flipping a switch you know, to turn something off and turn something on. And I think over time we’ve seen just a, a recognition and appreciation of that, which translates to insurance companies being much more willing to partner because they feel that these companies understand their challenges and are willing to work with them as opposed to you know, disrupting them and trying to, to replace them.
CW: Great. I wanna, I wanna double click in really deeply on two things that sort of span all of the different flavors of insurance, which are underwriting and claims. So I wanna, I wanna do a deep dive there, but first, so I was, I was in financial services, you know, six, seven years ago, and we talked to a lot of insurance companies, particularly the life companies, cuz they, you know, I was in risk management and they do a lot of derivatives, right? Mm-Hmm. <affirmative> and all the way back then everyone was talking about digital transformation in insurance. And from what I could see, no one was doing it. And I don’t think that’s true today. So what, what happened in that intervening period that has, I mean, it’s really, there’s feels like the insurance industry is on fire in a good way right now. People are actually doing these things. So what changed?
MG: I think, so you ask a very interesting question. The way I think about it is digital transformation is not a one size fits all turn. Hmm. And so you’ve got companies at various stages of a transformation, right? I think originally what, what early days of, of digital transformation was everyone’s got these homegrown systems that are from the seventies and the eighties, and you’re doing data entry on green screens. And a digital transformation is just building a front end for that, right? Right. So that you have, you have an example that that’s an example of that. You’ve got a number of the, probably the tier one larger insurance carriers that have gone through the, the full digital transformation of, of ripping and replacing out their core system, right? Yeah. So they’ve got, they’ve got these new policy administration systems, new claim systems, new billing systems.
So, so that was the second wave of digital transformation is just lifting up the, the core, the core system underneath that, that makes the insurance carrier move day to day. And, and even on the broker and agency side, right? That, that’s also the same. You’ve got the homegrown systems that you then have one or two kind of industry standards that people are moving towards. And then you’ve got the digital transformation that comes after that. That comes, now we’ve got this, this, okay, this shiny new system in place. What are all the capabilities that we can do, whether it’s out of the box or what can we plug in now? Now the API connectivity is, is table stakes? Like what, what can we connect with to improve the improvements we’ve already made? And so there’s companies at various stages of their digital transformation.
And I think what we’re seeing is companies startups for, for example, that are willing also to meet these companies where they are. I think initially there was this push to this is our solution. We’re techno technologically savvy. We built this great thing. It’s so easy to work with us, you just have to have x. And a lot of times the insurance carriers would say, well, we don’t have x, you know, we’re, we’re still on on letter G, you know, or something like that. And so over time there, there’s been just a a, a more of a collaboration to say, this is where we are, okay, this is how I can, I can provide my service or my solution to you. And then over time, these companies are just continuing to improve where they are in their quote unquote digital transformation. It’s how I think about it. I I don’t think it’s, yeah, it’s a one size fits all you can. And, and it varies on the size of the carrier. There’s, there’s, it just means different things to different, to different groups, I think.
CW: Yeah. Size of the carrier, the actual business that Right. The types of risk that they have Exactly for Yeah. Yeah. Yeah. Exactly. Interesting. How, so same question, but on the VC side of things, like, you know, everyone talks about smart money. Has the InsureTech VC money gotten smarter alongside all of this?
MG: I like to think we’re always smart from, from the get
CW: Go. <Laugh> No, you Yeah. Sandbox for sure,
MG: Obviously. Yeah. I, I, I, I think so. I mean there, there’s so many different types of, of companies out there that, that you can invest in. And this goes back to my point earlier of, of the ecosystem is so large and you can, you can be a generalist that wants to play just a across the board. And even so finan, you know, a FinTech investor that has one or two investments in the intro tech space, just because there, there’s overlap there. Or you have some, some funds that are, are very specific. Some of them are mostly interested in investing in you know, specific business models or specific capabilities. So you know in the insurance space, managing general agent as a business model, right? Someone that, that holds the, the pen from the insurance carrier that can, can do some of the underwriting themselves you know, on behalf of the carrier.
That that’s a whole business model that you have MGAs for, for all lines of products that are either trying to, to distribute products differently or going after a very niche portion of the market changing up how the products are structured. You know, you may have, you may have some teams that are, are solely focused on even providing capacity to those MGAs or investing in them as a business model. And that’s, that’s solely where they’re focused. You have others that are really interested in the claims space or in the, the service and the tools that, that surround something, right? Like you could be an InsureTech investor that’s really focused on the cyber insurance market. And so cyber MGAs, cyber security solutions it can, it can be very, very focused or you can, you can take a step back and, and play in different areas. So I think the InsureTechs the definition of investing in InsureTech has, has grown. It’s not just someone that’s distributing products. It can be, it’s a whole, it’s a whole swath of, of companies that, that can fall under that InsureTech bucket, I think.
CW: Okay. That’s interesting. I promised I would double click on claims and underwriting. So now is the time <laugh> you talked a lot about pain points and InsureTechs getting smarter about those pain points, everyone’s gotta underwrite, right? That’s how you get the money in the door. Everyone’s got claims, unfortunately. What are ticket in which order order you want? But what are the pain points there and how are you seeing those being addressed by tech solutions?
MG: Yeah, so I’ll start with underwriting just, just from a workflow perspective. Yeah. for my brain. But I’ll take it from the lens of where, where we’re seeing a lot of entrepreneurial activity, cuz that for us is an indicator of, of what are the problems that the, the industry is trying to solve. And for, to actually both underwriting and claims, at least in, in my perspective, our perspective is data. Okay? And it’s, it’s not, it’s not just data existing, but it’s leveraging that data to make key business decisions. And then behind that having an underlying technology that helps achieve those, those desired outcomes. So there, there’s an exchange of data anytime that there’s a submission to an insurance carrier, right? Either, either if it’s,
CW: So someone says this, this is, I want this kind of insurance, here’s my risk profile as captured in various documents. That’s the kind of thing you’re talking about.
MG: Exactly. Right? And they can do that directly online if, if primarily if you’re in personal lines and you’re, you’re online on a website trying to, you know, to, to pull it, to put in for home or auto insurance you could do it through, through your agent or, or your insurance broker, right? But, but all it is, is, is a collection of data. What what we’ve seen arise in is partnerships with third party data vendors to oh, to streamline that process. So as opposed to you Chris having to put in every single thing about your property if now you probably, if you put in your address, it’s now asking you verifying questions, right? As opposed to saying how, you know, how do you heat your house? It’s, do you, you heat your house with oil? Is this correct or you heat your house with, with gas?
Is this correct? And so that they’re pulling that from third party data sources all to streamline and then also validate and authenticate the data that they’re getting as accurate to improve their underwriting and their risk selection. Interesting. So, so we’re seeing, we’re seeing a lot of, a lot of that. And what comes with that is the automation standpoint, right? Then that’s less, less having to, to double check that information when it comes in, whether it’s by email Yeah. Pdf, excel document and then having the technology underneath in some cases if it’s what we call low complexity high frequency type of, of underwriting. Okay. So pretty, pretty standard characteristics. Like, you know, you’re gonna write this, it’s pretty standard, here’s here’s your general pricing, being
CW: Able to pay some healthy 22 year old is gonna get a life policy cuz their parents said, you’re an adult now you should have a life policy.
MG: Right? That kinda thing. Yeah. And, and do they meet, do they meet these, these characteristics to say, yeah, yeah, this is this, we don’t need an underwriter to spend three hours betting the documentation that’s come in and, and writing it. It’s, we can, we can streamline that through and, and auto generate a, a policy. Yeah. for example, and that, and that occurs in across all lines of, of business? It could, yeah. Okay. especially the, the earliest, if you get into middle market insurance, which is more complex and has a lot of different lines, that’s, that’s a little bit different. But, but same same general theme of how do you aggregate the data to help you make faster, more effective, efficient decisions along that process.
CW: Yeah. And I think that that part makes sense. One thing I wasn’t anticipating that is the sort of like, where also are the decisions that we could just not make, right? Just have the machine, whatever that is, make that decision. That sounds like a regulatory nightmare and I wanna come back to that, but I also wanted to make the point that one of the great things about having humans do all of this is that humans are exceptionally good at exception handling. And so yes, as I’m filling out this, you know, how do you heat your home if someone types in, I burn plastic <laugh>, you know, in my fireplace, <laugh>, a human will know what to do with that, whereas a machine is gonna struggle. So how do, how do you keep the right amount of flexibility while not keeping so much flexibility that everything is a one-off and you waste a bunch of everyone’s time?
MG: Yeah. And so that’s the key question, right? It’s, it’s you, you can’t fully go, you can’t fully automate everything because you need, you need tho those eyes and that yeah. That assessment. But the goal is to get away from having everything be manual, right? Yeah. And, okay. And I think that the balance that, that we’re seeing now between what insurance carriers are willing to either outsource or, you know buy versus build in terms of, of partnering with, with companies and what the startups are looking to do is we’re not looking to, the startups are not looking to replace or the human, they’re looking to enhance the role that that human plays in the overall workflow. Interesting. And so you can, you can heighten the output and the work that someone does if they’re, if they’re analyzing the more complex stuff, instead of spending spending hours a day just pushing I’ll call it pushing paper, right?
How do you automate and improve the paper people and processes within an insurance company? And that’s really what I think we look for in companies and, and solutions. Yeah. And so I’ll go back to your regulatory nightmare side. Yeah, please. Yes, yes. It is a nightmare. And that’s part of why a lot, when, when introducing these technologies and these decision based solutions, you have to have that lens. You have to understand why an insurance company would not automate a specific portion as as simple quote unquote as it sounds. And a lot of those too that the system is, is written based on rules that, that are, that follow the regulatory requirements. So in terms of what, what variables can you use to price an insurance product, right? How do you make sure that there’s no biases in how you’re and how you’re doing risk selection?
Okay. Yeah. All of that comes from the models, the, the rules-based engines that are built into these systems that are driven by the regulatory requirements. And those are, those are going to differ by state, right? Like one state might say, you can’t, you can’t use this, this factor in your rating, but another one can, can allow it. And so that’s, that’s the complexity that that’s why it takes, you know, so long sometimes to, to implement or fully integrate. But, but those are just, that’s just the reality of of, of the business and, and the, the landscape,
CW: It’s got me wondering if these insurance regulations are, do you ever run into cases where the insurance regulations themselves need human judgment to be interpreted? Or is it usually stuff that you could just program into a system?
MG: That’s a great question. I am, I don’t know that the in-depth data, it depends. It probably varies by, by product line. Yeah. And, and state. I, I do know, I remember from my time at, at H S B that I remember the, the amount of back and forth that the teams had to do with the states to say, yeah, we were filing this product, right? And then the states would come back with exceptions or rules, or you have to handle it this way and then you respond with your rationale. So there, there’s a lot of a, of back and forth. Okay. So to, to answer your, your question there definitely there, there’s definitely a lot of human touch that goes into it in terms of how the system gets done. If, if it can’t be oiled down to just a, an a algorithm, it probably does always pop out for, for human touch.
And that was my point on, on the middle market side, usually have multiple lines of business being underwritten by, by multiple underwriters for a variety of insurance limits and things like that. So you’re, you, you do probably have to have multiple people touching that, validating that, and then it goes back to the insurance broker in most cases. And then they’re, I assessing that against other solutions too. So there is always gonna be a human component. I, I think, yeah. It’s just a matter of, of how do you automate as much of that as you can to, to enhance what, what the, what that human is able to, to produce
CW: A hundred percent. Alright, I wanna jump ahead to claims in a second. Yeah. But I also want, there were a couple things I wanted to highlight that AI and technology are making the human knowledge workers jobs better. That is such a consistent theme across this podcast. And I think people are still writing the AI is gonna take your jobs and like, you know, take over control of the human race thing. It’s just silly. Like those, those people don’t actually know anything about AI and what’s practical. So I’m glad you highlighted that. That’s great. Yeah. glad it
MG: Sounds like, I’m glad you highlighting that one <laugh>.
CW: Yeah. Good. It sounds like on the underwriting side that the, if I can boil it into a nutshell, the idea is get the right data in front of a person as fast as possible, and that might be zero data, right? In cases where you can just sort of, you know, quote to bind mm-hmm. <Affirmative>, nothing. Mm-Hmm. <affirmative> nothing in the way. Okay. So, and then the last thing I wanted to say is I don’t burn plastic in my fireplace. That was not a cry for help <laugh> doing, doing fine in case anyone else, right? <Laugh>. Okay. Speaking of speaking of fires, talk to me about claims. Where, where’s the pain? What are, what solutions are you seeing? Like, what’s going on there?
MG: So, so no surprise there, there’s a lot of activity happening in the claims space and you can, you can tackle you the, the general, you can tackle claims in a variety of ways, right? There’s, okay, to your point, there’s the AI and machine learning type solutions that can help, you know, aggregate data, help you identify trends and patterns in your claims that will ultimately help identify things sooner in a workflow, may also flow back and, and improve your underwriting decision making. If you’ve got a, if, if you’re sitting on all cuz the, the one thing in an insurance carrier is right, they, they own all of that claims data, and so they’re the ones that that can, can go through that and, and look to see patterns and trends. They’re sitting on a lot of it. There’s a lot of insights there that I think still need to be, need to be pulled out.
So, so that’s one area. There’s also just how do you improve the claims workflow from a customer engagement standpoint, right? So that comes down to portals and systems to file a claim, tracking the status of your claim the payouts of, of, of, of those claims, right? And the billing associated with, with that. That’s, that’s all kind of claims workflow solutions. There’s, you know, the elements of, of fraud detection from a claim stand, so from the lens of the carrier, okay is this a fraudulent claim? How, how do we validate that? How do we verify that, that this actually occurred? So lot, lots of different elements there. And then you’ve got just the, taking a step back, the, the general goal of reducing the frequency of claims events and reducing the severity of claims events. And so when you think about those two things, that opens up the world to be less about a, a solution that sits within the insurance carrier and can be risk mitigation solution.
So if you think about, you know, the wildfires and, and the US or even globally, right? What are some things that insurance carriers can offer their insurance to help make their homes or their properties safer? What are the tools that we can provide people? What are the resources that, that we can send out to let them know when there’s a storm coming? How quickly can, can we as an insurance carrier respond to a catastrophic event and reach out and, and, and have, you know, have that policy be activated? So it whole, whole world for claims and depending on on, on where, where you wanna find a solution there’s, there’s a number of pathways we’ve seen a lot of companies doing doing, and you, I mean, even things like telematics and yeah. You know, the, the pathway to autonomous vehicles and how does that impact how, how claims are and will that reduce the, the frequency of claims it, the theoretically it will, right? But then if there is a claim, who’s at fault? And so thinking about just the policies and who’s, who’s liable in those instances, that’s, it’s, it’s claims is a fascinating area of the insurance of the insurance space, especially when you think about all the, the ways that entrepreneurs are tackling it.
CW: It’s so funny. You don’t think of regulation as being a place that would attract entrepreneurs, but you know, it’s ripe, it’s absolutely ready for it. Yeah. that’s interesting. The you know, I I think you, you highlighted some themes that are common between underwriting and claims, right? Just the need for the, the right data to be in the right place. Someone has to make a decision, so get ’em to that point quicker. The sort of insurance plus stuff that you’re mentioning was not something that I have thought of. And now I’m wondering if like, my healthcare company should be buying HelloFresh and like sending me food every week as a part of my premium, right? Like, right. Yeah. <laugh>, you, you, you forget that these things, e e even they’re, they’re so deeply connected, like, especially in the healthcare space, like you are the risk. And so, yeah, of course the insurance company should be involved in the risk mitigation piece of it. So that’s, that’s fascinating. I hadn’t thought of that.
MG: And, and there’s, you know, there’s outside of, of that, going back to internally, right? There’s, there’s the, there’s the, so how do you identify the right risk mitigation tools, right? Data. Yeah. What data do you have to identify that this, this property is sitting in a location that would benefit from this written mis risk mitigation tool? And then how do you internalize that and say that, you know, this is, this is data that I can now use to identify risk accumulation in my model. So if there was a catastrophic event from an insurance carrier standpoint, how much, how, how at risk am I because, because 75% of all of my properties are in this area, which if it gets hit by a wildfire, catastrophic losses, right? So there’s, there’s just all of that to take into consideration. And there’s entrepreneurs hitting finding a solution in each of the, each of those stages which is, which is really fascinating.
CW: Interesting. Okay. This is all, this is blowing my mind wide open. There’s, there’s so much here. I want to ask, I wanna get into some, back into some nitty gritty. How are you seeing companies like the, on the insurance side, measuring the success of onboarding these new technologies, whether it’s for automation or it’s for analytics? Like what are, what are the trends there in terms of measuring success?
MG: Yeah, I think early days a a lot of it was based on what is the technology that okay, that I have, right? Like early days. So I have this, this new shiny technology that can do all of these things that this is who’s gonna change you know, our workflows. What we can do to what we’re seeing now is it’s less about the technology and more about the business outcome that that technology helps to drive that solution helps to drive. Okay. So how, you know, from an underwriting standpoint, how many more submissions can we process? Like, right? Like, how much more business can we get through? Got it. How many more claims can get reviewed? Or can cl how, how much faster do those claims get closed? Because we’ve, we’ve introduced this, this component into our workflow. So it’s, it’s really business outcomes. It’s that, that, that’s really the, the key. So when, when we talk to, to our companies, it’s, yes, you should highlight the technology and all the work and the capabilities that are there, but to sell an insurance carrier, insurance company on, on the solution, it’s what can you help them achieve?
CW: Yeah. What, what’s different about, in nutshell? Yeah. Yeah. What’s different about my business tomorrow when I turn on your solution and get everybody using it.
MG: Exactly. Because, and to be fair, like if you, if you, if you are a tech, if you implement a technology and, and it’s core to, to a workflow, it’s probably very sticky, right? It’s gonna be really hard to kind of rip and replace that out. But there is a little bit of, of a component of, of loyalty to this company has understands what, what my challenges were helped work with me, and I’ve seen actual validated results from this. And so why would I change if, if what I have is proven to be working? And so that, that’s, I think the, the key is it’s the technology is important, the capabilities are important, you should absolutely sell that. But it’s, it’s what what does the technology help achieve that make to, in, in my opinion, makes, makes the difference and, and what carriers are looking for in terms of the ROI when they, when they make an investment or a partner with, with a company. Yeah.
CW: Yep. All right. So all you InsureTech entrepreneurs out there, business impact, like yes. Focus there. Figure out what is the business and what is the impact. Good. All right. I drilled in real deep on underwriting and claims. Was there something i, something else I should have drilled in on? Cuz I, i, not an insurance nerd, I’m an aspiring insurance nerd, but I’m not there yet.
MG: You’re doing great. You’re doing great. Thanks. and I, I think, I think you hit on it. I think the, the, the underlying thing to, to all of that though is, is data. Yeah. And, and so appropriately it’s, it’s how does data impact underwriting and how does impact claims? But it, you know, it’s data in general in the insurance space is, is a fascinating area because there’s so much of it. Yeah. And, but so much of it that’s underutilized or not utilized. Like what are the insights that, a, as I mentioned, right, an insurance carrier has the most granular claims data, it owns that data. What insights can be pulled from that to help drive underwriting results to help identify when a claim comes in with certain characteristics, it should be elevated quickly because it, it could become catastrophic or costly or, or vice versa. Or it comes in and you can get through it quickly because it meets, it, it meets these three, these three standards. And so for us, we spend a lot of time, it’s it’s data vendors. So what, what new data is accessible that will help improve these workflows? What data already exists but is inaccessible internally? And so how do you access that and then make it usable so that it can help drive business decisions and business outcomes.
CW: Interesting. It raises the question in my mind, especially the data aspect of things like insurers notoriously, I mean, nobody likes to share their data, but are there opportunities in the industry for, you know, maybe data exchanges or, or some, you know, something along those lines that sort of could be a tide that raises all boats in the industry.
MG: So there is there ISO exists where there is some level of reporting that goes in and, and they’re kind of the standard. They help stand set pricing standards and, and policy language standards and things like that. But, but to your point, it’s, it’s, if, if a insurance carrier captures a hundred points of data, they’re probably reporting just a subset of that <laugh>, right? Right. yeah, exactly. But which is not, it’s not a knock on. That’s just the, that’s the, the requirements, right? They’re, they’re, they’re compliant with what they’re supposed to do, but there, there is a level of what competitive advantage can they achieve by having that, that data as well. But to be said, you know, there, yes. You know, the cyber, cyber insurance is all things considered a recently new product line. When it first got launched, there was a, a a lot of questions about what is the right in cyber insurance coverage? What, what are the things that matter? And those things change, right? There’s business interruption, there’s ransomware is what everyone sees in the headlines, right? Oh having data available to say, these are the instances where cyber insurance needs to be responsive, or these are the cyber incidents that are occurring, help with product innovation and making sure that the right things are being insured and available to, to the consumer. So, so yes, there, there is definitely value to, to sharing elements of, of data to improve the industry as a whole.
CW: Okay. Now I want you to pull out the crystal ball and this will be my, this will be the finale here. Where’s the insurance industry? And that’s, it’s an umbrella, right? So if you wanna focus on different parts, that’s fine as well, if you wanna make it tighter scope. But where’s the insurance industry headed in the next few years? We’re got this massive digital transformation and technologies are popping up overnight. Where are we going?
MG: Yeah, that, that is a massive question. Yeah, let’s see. So I, it’s
CW: Fine. You can take up to three minutes to answer it.
MG: Perfect. Yeah. No, no pressure. I think I, I recently heard from a conversation that I was having with with an entrepreneur that in the past, the insurance space has, has differentiates, insurance companies have differentiated themselves from a product standpoint by being more niche or more complex in, in their coverage, right? Yeah. That there’s a shift happening where the consumer is demanding simpler solutions and simpler offerings. So, you know, gone are the days, and, and I, I can attest to this because I helped, I helped write some gone are the days of very long, lengthy policy documents with long lists of exceptions where you have to, you, you need a law degree to try and figure out what’s covered and what’s not. Right? I think there’s a shift towards very plain vanilla, understandable. This is what your policy covers, this is what it doesn’t.
Yeah. so I think in general a move towards simpler, more consumable products for the consumer, and as a result of that simpler, more streamlined interactions to occur with that consumer. So whether it’s you, you know, you saw in personalized the trend of direct to consumer selling of insurance products, right? There’s, you know, there’s, there’s different schools of thought on whether the small commercial industry is going that way as well, you know, with a lot of entrepreneurial activity of buying your business insurance online. But also helping the tools and solutions that enable agents and brokers to better serve those customers. Okay. With, with more responsive, accurate products that cover what they actually need at their business. Yeah. and I think, you know we didn’t, we didn’t talk about it today, but, you know, indemnity products versus financial guarantee products or parametric insurance.
Right. Where again, simpler your policy is written to say, if X happens, then I will pay you y Yeah. Right. There’s no, there’s no claims workflow. You’re not waiting for for that to get adjudicated. It’s just, it’s instant. So, yeah. I think with, with all of the new technology capabilities and API connectivity and groups really coming together with the data ex with exchanges of data and capabilities that we will see a more streamlined, quick, responsive interaction with, with the end insured. That’s interesting. We’ll, we’ll, we’ll time test this in a few years and we’ll see. Hopefully I don’t end up with egg on my face on that, but I think I think from the consumer standpoint, we’re, we’re moving towards simpler, more digestible faster interactions within insurance
CW: And that that’s gotta be, you know, the simplicity’s gotta be better in some cases for the insurers too. Right. Because then you don’t end up with like, you know, the long-term care debacle or the variable annuity crazy index linked stuff that nobody knows how to act. The consumer and the insurance company both. Yeah. Everyone
MG: Have no idea what we do.
CW: Yeah, yeah. Yeah. That’s great. Okay, so simplicity and sort of tailor fit insurance just for me. I like the sound of both of those things. That’s great. Well, let’s wrap it there. This has been another episode of Unstructured Unlocked. I am your host, Chris Wells, and I have had the pleasure of speaking with Michelle Govea from Sandbox Industries. Michelle, thank you so much for enlightening us.
MG: Thanks for having me. It was great.
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