Insurity CEO Talks Cloud, Data and Getting ROI from AI

Chris Lafond and Greg Penn, Insurity’s VP of Operations and Valen alumnus, talk with IIR about industry trends and the company’s deep roots in AI.

(Insurity headquarters in Hartford, Conn. Source: Insurity.)

Insurity (Hartford) has continued to vaunt its leadership as a provider of SaaS core software for the property/casualty industry. In this conversation Insurance Innovation Reporter and Chris Lafond, the Insurity CEO notes that the company now has over 400 customer in the cloud, and most of them in the public cloud. Greg Penn, Insurity’s VP of Operations, who joined the company as a result of Insurity’s 2017 acquisition of predictive analytics pioneer Valen (Denver), contributes insights into Insurity’s readiness to help clients navigate the challenges of AI.

Insurance Innovation Reporter: The first question I always like to ask a CEO is how’s business?

Chris Lafond, CEO, Insurity: Business has been good. At the beginning of 2023, there was a little bit of a slowdown. The P&C industry had a tough year of losses in 2022 and took a step back to think about their budgets—their cost.Ultimately that has led to a good place for Insurity. We have thought for a long time that the insurance industry is going to truly adopt the cloud and cloud-based software. We believe they’re going to focus on whether all the customizations and all of the jumping around they’ve done year after year after year added any real value. And all this renewed focus on cost fits with the fact that we have a product that we can implement quickly and more effectively than many of our competitors, and we think that has served us very well.

Chris Lafond, CEO, Insurity.

IIR: A recent press release describes Insurity as the leading provider of cloud software for P&C Insurance organizations. Obviously, cloud is a major trend in business generally and in core insurance software, so how do you justify that claim that Insurity is the leader in the sector?

CF: A couple of ways: today we have over 500 customers, making us easily one of the largest providers of software to the P&C industry. Of those over 500 customers across the solutions portfolio, over 400 are on the cloud and something over 350 are in the public cloud. We hear a lot of people talking about cloud, but we’ve been doing it super effectively, helping them reduce cost and getting them where they want to be. We’re reducing their teams’ focus on managing this stuff by running it for them.

IIR: That’s a big change from the insurance industry’s legendary reluctance to move to the cloud, which for many seemed like losing control in terms of managing both the technology and data security.

CF: Our customers have moved past that. It took a little bit of time for many insurers to accept the private cloud, but I think we’re beyond that stage too. They are now comfortable with the public cloud—and comfortable with the security, comfortable with what we have done to make sure that their data is safe, and that they don’t have to worry about it the up time. We’ve shown them that it works, and that they don’t have to worry about not having total control.

IIR: You’ve said in the past that Insurity made the decision not to pander to insurers’ reluctance but to be clear of your cloud direction as a company, and to even push them along in the same direction.

CF: We’ve been very aggressive. I think we’ve done what a lot of our competitors have declined to do, which has caused issues for their customers and the insurance industry generally. Severe over customization of solutions has endured longer than it should have, leaving it difficult for customers to upgrade, and making them afraid to move because they know their systems are fragile. We have pushed back dramatically on our customers, saying, “Look it’s time, and if you don’t do it, it’s going to cost you a lot more money to stay on an on-prem solution.” We’ve been able to push so aggressively because of high quality execution.

We recently took one of the largest P&C carriers globally, with a huge footprint, and moved it all to the public cloud. They were thrilled. They said, “We trust you guys, but we always thought this would be a little harder than you guys made it.” So, we have great references who have seen the experience we can give them, and I know a lot of our competitors are struggling to make that happen for their customers.

IIR: Let’s step back and talk about the changing business environment. What are some of the business and trends you see shaping the market in 2024?

CF: One thing we’ve seen changing is that the tendency of customers signing up for multi-million dollar implementations has really subsided. There are still some people doing that, thinking, “I’m not happy with this vendor and I’m going to jump to another one.” Then they’re not happy with that one and jump to a third one. I think I think the days where boards, CFOs and CEOs are allowing those kind of decisions are ending. Given the way that technology has evolved, the experience of seeing that kind of spending without getting real return has pushed people to think differently. In fact, we’ve had a number of customers who were leaning toward consolidating all their systems with one of our competitors and decided not to go that route: “We’re not going to do that—your stuff is working great for us, so we see no reason to take on that risk and expense.”

These bigger, longer-term strategies have not proven to work. The focus has shifted to asking what value are they getting, what are they really trying to accomplish with all this spending.

Another trend we’re seeing is that, even when customers are not moving, they’re revisiting the constant customization that they used to think they had to do. “Do I need to really spend two million dollars a year doing customization?” We’re now seeing greater willingness of customers to trust our advice as to what platforms to adopt and how to do it. They used to be more inclined to make demands, including insisting on heavy customization. Now they’re open to guidance.

IIR: It seems like a continuation of the process that started with the “build vs buy” question raised by the emergence of packaged software, touching on the core competencies of the parties: “Am I an insurance company or a software provider?”

CF: I completely agree with that. I’m never going to start my own insurance company, and they probably shouldn’t be software developers. There’s still some of that, of course, I still see a couple people saying, “We’re on path to build our own,” but I think that’s a path to getting fired.

IIR: What other trends do you see shaping 2024?

CF: Another trend we’ve seen is a focus on cost and return leading to interest in specific capabilities. Whether it’s an interest streamlining underwriting, adopting geospatial analytics, MGAs looking at core platforms, they were looking at those investments and asking, “How can I justify this thing back to my organization.”

IIR: So, it’s both a stricter focus on ROI and an interest in ancillary capabilities, apart from big-bang core system implementation?

CF: Absolutely, so we built our portfolio starting obviously with the core policy claims and Billings, but then added around things like predictive analytics. For us, the model is to continue to look for the opportunities to add value to customer, immediately improve their cost structure, their effective they are at running their business. How better I can be. If I put in premium loss control.

IIR: Speaking of analytics, what’s your view on the trajectory of AI in 2024?

CF: AI is obviously a major trend, but it should be understood as the continuation of a broader trend: how do we leverage all this data? Valen [an Insurity company] has been in the AI business for longer than anybody. The insurance companies are anxiously thinking about how AI can help them, but at the same time they’re very reluctant to allow anybody to use their data to create models and tools. The problem is that you can’t create AI in a vacuum; it has to be based on data. Insurers want the advantages of AI, but they’re saying, “We don’t want you using our data to build your engine.” Greg, maybe you could comment.

Greg Penn, VP, Operations, Insurity.

Greg Penn, VP, Operations, Insurity: Sure. The insurance industry has always been based on data—its roots are deep and long. With the rate of change in technology and what you can do with data, it is certainly top of mind. These days you can’t even open your email without seeing several solicitations asking you if you’re keeping up with GenAI and are you ready for this. The promise is very exciting. We’ve been in a hype cycle about GenAI since the advent of ChatGPT, but AI itself has been around a long time. To Chris’s point, owing to Insurity’s [2017] acquisition of Valen [founded in 2004], Insurity has essentially been in the AI business for over 18 years, thinking about the best way to really organize and leverage your data to get the return that AI promises.

Probably the biggest thing insurers are missing out on right now is their data strategy. They haven’t thought about that in the past the way they really need to. They’re getting hit with a lot of messaging on AI and we’re having conversations with them about the best way to they can organize your data to get the best return.

IIR: We’ve talked about the “buy vs build” question. Insurers began to trust their software providers to build core systems and enterprise technology, but they maintained significant IT organizations to build beyond the commodity technology to built capabilities that created a competitive advantage. AI seems like a technology area where insurers might want to build differentiating capabilities, but while they’re feeling pressure to move quickly on AI, they don’t seem to have the internal expertise. What kind of advice are you giving your clients?

GP: I would call out a couple of things: first, they have to trust their own data. They don’t know how to trust and enrich their own data for AI, let alone how to think about their data in a context of sharing. The AI market itself has addressed how to maintain control of your data, but insurers quickly come up against the question of whether they trust their data enough to do in what they need to get the answers and return that they expect.

It really starts with identifying what you need to come to grips with in terms of where you are in your data strategy—because they are sitting on a lot of data—and then how to best take it advantage of that. We have been first to the cloud with all of our data and analytic products. They’re all cloud-native products, and as a result of that can take advantage of modern technology. That is were we find a lot of our discussions with clients having confidence in our ability to help them, being cloud providers. We have adopted not only the SaaS capabilities that the cloud offers, but also the new and evolving data technologies that the cloud offers. For example, our partnership with Snowflake for our enterprise data platform. We’re incorporating that into all our solutions. And even as clients decide what solutions make sense for them, that enterprise platform is a part of each of those offerings. So ,we can start the conversation about how to trust your own data by leveraging these new capabilities.

That foundation quickly lets them move very quickly to taking advantage of AI—I can do GenAI, I can do predictive analytics—even if it’s my own data—but I have more visibility, more governance and more trust in my own data to enrich it for these valuable solutions.

CL: The thing that I get concerned about relates to a number of years ago where everybody wanted a data warehouse. They ran around like crazy people trying to build a data warehouse and said, “All I want is to have all my data in one place.”  That failed because people didn’t know what problem they were actually trying to solve. That’s the question they have to ask.

The risk I think insurers run as they enter this new world of AI is that they’re not thinking of data in terms of the problems they’re trying to solve. They need to ask that questions and think about what kind of data they need for those purposes because they probably don’t need every single data point in the company. They need to take a step back and prioritize. They need to feed the right data to train the AI engine rather than worrying about getting all their data in one place. And if they focus on that, they’ll be waiting a long time because we know those projects fail.

We’ve been in the cloud, we’ve been in the data world and we’ve been in AI for a long time. And so, we understand that we’ve been in the data World a long time. I think we’re better off than any of our competitors in terms of delivering that and helping people put all those things together. That’s very much the case with formulating a strategy for figuring out how you’re goig to use AI. We’re in it just a great position to help customers because we have very experienced people working in this area.

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Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at AnthODonnell@IIReporter.com or (503) 936-2803.

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