(Image credit: Adobe Stock.)
QBE North America recently announced its investment and multi-year commercial use agreement with HyperScience (New York), a machine learning, enterprise-grade artificial intelligence (AI) solution, which the insurer intends to use drive operational efficiency and unlock new data and insights for underwriting, pricing and claims. The acquisition was the third in a series flowing from a $50 million commitment QBE announced in 2017 to invest in early-stage businesses working on technically-challenging and industry-changing ideas. The company earlier announced its investments in RiskGenius (Overland Park, Kan.), a machine learning platform for analyzing policy wordings, in Oct. 2017, and Cytora, a London-based company that uses open source data to help commercial insurers lower loss ratios, grow premiums and improve expense ratios, in Dec. 2017. David McMillan, QBE’s Group COO has characterized the acquisitions as contributing to the company’s objective of delivering “Brilliant Basics” in underwriting, pricing and claims. Insurance Innovation Reporter talked with Ted Stuckey, SVP, Managing Director of QBE Ventures, and Head of QBE’s Global Innovation Lab, to talk about the acquisitions and how they fit into QBE’s broader strategy.
Insurance Innovation Reporter: Tell us a little about the role QBE Ventures is playing in bringing innovative technology into the company?
Ted Stuckey, QBE: We see our responsibility at QBE ventures as one piece of the broader strategy puzzle. There’s a lot of really exciting work going on. We’ve talked about our Brilliant Basics, emphasis on UW, pricing and claims. We have teams across the globe committed to doing really impressive stuff to help us accomplish our goals and get to point where we are satisfied as a company with our positioning. QBE Ventures is a piece of that story. Early stage companies as not just an opportunity to stay close to an energizing and exciting ecosystem but to harness those and deploy them within QBE to get immediate value.
IIR: The three companies QBE has recently invested in all have some kind of artificial intelligence in common; is that the theme of the investment program, or is that just coincidental to the broader objective of “Brilliant Basics”?
TS: Yes, it’s coincidental—these three companies are not a complete picture of our broader investment strategy. Of course, AI is an important area, but generally companies simply doing AI are not doing enough: the greatest value from AI comes when you apply it to specific verticals wherein the product has not just a bunch of subject matter expertise but specific data by which AI can add value in that vertical. HyperScience is hyper-vertical around back office document processing data entry. RiskGenius is an AI platform delivering a ton of value in product development and analytics. Cytora is an AI platform that is very much focused on underwriting, and to lesser extent the pricing side of commercial P&C. Yes, they’re all AI but not solely focused on that. In fact, it’s coincidental in that we had opportunity areas we wanted to tackle, and we knew that we could get lift in the back office world, accelerate work in underwriting and pricing and Cytora fit that bill.
If you look at QBE’s evolution as a company you’ll see the aggregation of many M&A transactions. We have a lot of different product that we need to get our arms around. In the U.S. we have about 140,000 unique policy forms—for an organization our size, that’s a lot. So RiskGenius allows us to better understand content and context in forms so that we can create better products faster, that we can compete better and have a better lens over the product Estate.
IIR: By saying “broader investment strategy,” you seem to affirm that more acquisitions are coming. What should we be looking at in the coming investments?
TS: We’re continuing to look for early-stage companies that can accelerate our strategy. These will sometimes be efficiency plays, sometimes reimagining our operations, and they will be companies that can make an impact on our business today—for example in the areas of claims, underwriting, pricing. You’ll see us expand beyond just this more internally focused investment and expand along our strategic plan in some of these coming investments. But we expect to be quite active in the market for the foreseeable future. The commitment to that has come all the way from the top. We’ve never been busier in QBE ventures.
IIR: So the investments will continue to support the Brilliant Basics objectives?
TS: Yes, in the near term, we will be scouting and sourcing organizations that can have a good impact on what we might call Brilliant Basics work streams. However, that’s not all we’re doing; we’re also looking to new business opportunities for QBE. Bigger bets.
Having a global VC arm is a good way to do that, and in executing our remit you could say we wear two hats. The first is very much about supporting the immediate needs of the organization, the immediate priorities as they relate to Brilliant Basics. If there’s a startup out there that can add value in pricing and underwriting work stream—as Cytora does—we are alert to such opportunities. We’re very tightly aligned to the business in that respect.
The second hat is how we build a portfolio that represents the future state of QBE, and how we look at products we’re not big in, or where our efforts are nascent, and how we accelerate our understanding through investment and partnership with early-stage companies.
We’re balancing both of those. You’ve seen a lot of “hat number one,” but I can tell you that just did several days with group executive committee and there’s very much a commitment to use this in a much more long-term, strategic fashion.
IIR: How are you working toward deriving value from the recent acquisitions? You’ve stressed QBE’s intention to derive value quickly.
TS: We have developed use cases across all three portfolio companies. We’re deploying HyperScience in Australia in claims workflow and seeing time and efficiency savings, particularly with ingesting forms in liability claims professionals, and allowing our frontline professionals to spend more time with the claimant. We’ve seen a great lift. That’s a small, very targeted use case that will be the catalyst for us to expand HyperScience beyond Australia and across the enterprise.
Cytora is in midst of deploying across various lines of business in Europe and Australia. The Cytora effect is quite transformational. The benefits include not only on selecting and writing better risks, but also prospecting differently and driving new net business we weren’t expecting. We expect it to have a real impact, resulting in better loss ratios. We’ll be driving this across the entire organization and start seeing impacts. We were an early adopter, and we have a vested interest in being successful.
RiskGenius’ first deployment is in specialty lines in North America. Specialty is probably the fastest growing part of QBE—we’re deploying an amazing number of new products every year. Because of that scale, ensuring that we’re using appropriate clauses, etc., has been an incredibly labor-intensive manual process. Now, we have a robust library of all products across specialty globally. RiskGenius is helping us to ensure that we have appropriate wordings in appropriate places, and we’re enabling our product professionals to spend time on value-added activities rather than lower-value administrative tasks.