Counterpart CEO Hackett: Leveraging AI is critical to picking up “signals” in claims data

Counterpart CEO Tanner Hackett said his firm is focused on leveraging AI in both underwriting and claims handling, and that the management and professional liability MGA uses the technology to pick up “signals” in order to react to trends more quickly.

Hackett – who launched Counterpart in 2019 with Markel and Aspen backing – spoke to The Insurer TV on the sidelines of last month’s InsurTech NY Spring Conference, where he said that the use of third-party data in underwriting has “been solved for a large part”.

“A lot of companies have figured out how to incorporate third-party data… for an underwriter to apply to business,” which he acknowledged is “not easy” and said requires significant investment of time, money, and infrastructure, along with a long time to validate.

“But actually, the more interesting use-cases that I'm seeing are in claims and risk mitigation,” he argued.

Hackett said that similar principles can be applied to underwriting, which he said was “very complex”, but that the firm is beginning to “see the light of day” in its application.

“[Claims professionals] are able to interpret the data on a demand letter – synthesise this across their entire portfolio of risk – [to] get a better signal as to what the efficient settlement should be and develop a more thoughtful claim strategy around that, which is all to the benefit of that customer,” he commented.

Hackett acknowledged that adverse outcomes have the potential to be “existential” to insureds and said the insurance industry has a “responsibility” to settle claims as “quickly and efficiently as possible”.

He also commented that “every dollar” in excess of where a claim settles versus what it should be is affecting underwriters’ loss ratios.

“That's forcing us to increase our pricing,” he said, noting the importance of risk mitigation after policies are bound, and the obligation of a “smart underwriter” to take action to curb risk.

“There's a lot of data that you can collect over that 12-month term, and that data can be actioned upon,” Hackett said, highlighting specifically the EPLI risk factor of bringing politics into the workplace amid highly partisan-charged times.

“We want to support our businesses, especially in some of these hotly contested areas,” Hackett explained. He said Counterpart has explored providing insureds with policies, forms, and handbooks to guide them on how to handle such matters in the workplace.

Importance of staying in touch with insureds

Hackett said his company is committed to supporting insureds beyond a “very narrow focus” and offering a full-suite of products and services expected of an MGU.

Counterpart has spent significant time applying AI tools in its underwriting, and has so far “underwritten a lot of clean business”.

“We've done that for four years,” he commented, saying that successful underwriting requires being in closer touch with insureds.

“These are the folks that they check in with every quarter, every six months, even every year – them and the actuarial team – and say, 'How have I done?' That doesn't fly in their very dynamic environment anymore. You have to be on top of that,” Hackett explained.

“You have to extrapolate those signals as quickly as possible and recalibrate your underwriting processes, your strategy to reflect their learnings,” he argued.

“More that can be done” to mitigate insureds’ risk

Hackett said his company has “quite successfully” been underwriting with its two carrier partners for four years, and expanded its appetite from insureds with under 100 employees to those with up to 500 employees.

“We're covering nearly every industry, and recently expanded to include professional liability with our eyes towards how we can do more in that space,” he said, noting that Counterpart especially focuses on small business firms that have limited compliance functions.

Such companies, he said, likely don’t have risk mitigation teams, and their strategy for dealing with large and growing exposures is typically through risk transfer via insurance.

“I see this obligation of the insurance industry to try and keep pace with the exposures as they change. And I don't think we're doing the best job to be quite frank,” he said.

“I think there's a lot more that can be done. So, as I look at that in relation to where we are today, our ambitions are ultimately to be able to solve the biggest risks for small businesses,” he continued.

Hackett said it is imperative that insurers keep up with the evolution of exposure as the economy changes and the nature of professional liability continues to evolve.

“I see this overlay of being able to quote business really, really quickly for those small transactional accounts, through the adoption of APIs and seamless workflows, and building industry-specific verticals” in partnership with our distribution partners as risk evolves.

Industry shouldn’t be discouraged by insurtech failures

Commenting on current insurtech funding conditions, Hackett acknowledged “there’s carnage out there” and, as a venture entrepreneur he said that the insurtech industry is “incorrectly thinking” that every investment will be a success.

“That's playing out with the insurtech industry. I think we calibrated maybe incorrectly thinking everything is going to work. It just doesn't work,” he claimed.

Insurtechs, he said, are learning to “recalibrate” their value proposition and apply the lessons of technology more broadly.

“I'm talking to the upper levels of our carrier partners about how we can transfer the insights, and they can repurpose these [insights] for property, for GL” and other exposures, he said.

“These are truisms that data is going to be at the forefront of every decision that companies make,” he said, while acknowledging that the term “insurtech” can be “triggering for a lot of people”.

Hackett said there’s a blurred line between insurance firms applying data and technology companies applying their strengths to the insurance sector.

To that point, he said firms and investors shouldn’t be discouraged from “test[ing] the boundaries”, just because some insurtechs have failed.

Counterpart on strong financial footing

Hackett said that Counterpart specifically is “in a really good spot” with its carrier partners and with respect to capacity, after raising $56mn “from some of the most prominent investors in the world”, which include Valor Equity, which was among the earlier investors in Tesla and SpaceX.

“They bet on us along with Vy, Susa, Felicis Ventures – very reputable investors – they bet on us because they want to transform this industry,” he explained, saying that his firm has attracted industry experts who have built “really profitable” books of business in their previous stops.

“But they haven't been with a company that is willing to pursue the needs willing to challenge the assumptions that they've always known to be true,” he argued.

“They haven't been invited to ‘question’,” he continued, saying his company is working on fighting apathy and the school of thought centered on doing things the way they have always been done.

“That sums up the insurance industry. And that is something that we are, we're dedicated to changing,” Hackett said.

Watch the full interview with Counterpart founder and CEO Tanner Hackett to hear more on: