How insurers can plan for the looming recession

How insurers can plan for the looming recession

Q&A with Karim Hirji, CFO and Canada Managing Director at Intact Venture

Recently the InsurBreak Podcast featured Canada’s $20 billion dollar insurance company Intact. The insurance giant’s CFO and Managing Director for Intact Ventures Karim Hirji shared his views on the looming recession. The podcast, hosted by Ash Faraj, tackles the latest and greatest trends in insurance. Here we bring you the summary of the discussion with Karim.  

For background, Intact Insurance is Canada’s largest home, auto, and business insurance company, a $20 billion global company serving more than four million consumers or 20% of Canada’s P&C market. Intact has 14,000 employees supporting multiple insurance brands and distribution units. Over his 21-year career at Intact, Karim has held leadership roles in distribution, finance, corporate research, and development. He launched Intact Ventures in 2016, which invests in startups aiming to disrupt the property and casualty industry over the long term.  

We’ve extracted Karim’s most prescient insights below, across three topical business trends that matter to insurance business decision makers. 

  1. How AI brings value to Intact Insurance through machine learning to personalize pricing on an individual basis, modernize their pricing systems, and gain an edge in customer segmentation.
  2. How good analytical insights and AI can help make loss predictions that reduce cycle time, improve the customer experience, and save on costs.
  3. How AI improves the agent/customer interaction using intelligence to predict the best agent to manage specific customer needs.

Where have you seen success with AI as an insurance application?  

“The development and the value that we’ve seen with AI at Intact has been really robust, really interesting. It’s made us want to increase our investment even faster than what we’re currently doing.” 

“A lot of our early work on the AI side over the last five to six years was focused on pricing, modernizing our pricing systems, and really trying to gain an edge in terms of segmentation. The first big data problem that we actually embarked on was introducing telematics a handful of years ago as well. Today, many companies have telematics programs, but five or six years ago, we were one of the first to actually introduce that with a high penetration rate; over 50% of our customers were voluntarily opting in.”

How do you incorporate machine learning and AI when you’re taking a look at new data modes and trying to influence individual pricing for customers? 

“On the sales side, we’ve got relationships with one in four Canadians across the country. So how do you take the information that you have in terms of previous customer interactions, their propensity to buy or renew, their number of products, the policy profitability, and when that customer actually calls into our call center, to use that intelligence to be able to predict the best qualified agent to answer that call. And, you know, there are dozens and dozens of use cases like this. We’re just at the onset, I think, in terms of what’s going to be a very exciting generation of development, both in terms of pricing, customer experience, and cost efficiency—in terms of how AI can assist.” 

How can companies do well in this new climate of recession?

“The first important thing that we try to think about when we talk about the new economic climate is to determine if these recessionary and inflationary changes are structural or temporary? You want to make that important distinction so that as an insurer you don’t over or under react. I worry most about inflation: the impact from a cost of goods perspective and what’s happening from a geopolitical perspective with respect to oil prices, gas prices, etcetera. And how long will this actually last with respect to supply chain disruption?”

“So, the story for me, as I think about the planning we’ve done for 2023 and forward, is to double down on digital, double down on data and AI, continue focusing on ventures, and launch our third fund. On the venture piece, we’re digitally engaging three out of four of our customers. We want to make sure that we use data, and we use our risk insights and abilities to help improve the customer experience. We want to make sure that we’re helping our broker partners become more efficient and be able to communicate with their customers more directly.”

“So, for us, we continue looking at efficiencies internally and then redeploying that capital back into improving the customer experience, improving digital and data over time. At  Intact, I think you’re going to see innovation continue to increase at a pretty good clip over the next twelve to 18 months.” 

“We don’t wait for tough economic times to start managing expenses. We are actively managing expenses throughout the entire process to deliver a low expense ratio due to our scale advantages and then decide where to reinvest that in terms of digital data and the employee experience. So those are things, again, that are always top of mind, but in times like this, even more so.”  

How are you preparing your business for the long term—five or six years out?

“Thankfully, property and casualty insurance is generally recession proof. If we start there on the demand side, people always need to insure their homes, they always need to insure their cars, and they need to insure their businesses. So, for the most part, we’re a pretty safe investment from an investor perspective in times like this because our top line is pretty stable.”

“The risk is more on the insurance side. Can you price the risk, see the trend, and react accordingly? Still, our data driven methodology gives me a lot of comfort in terms of knowing that we have a good track record on that side. So, what I try to focus on in preparing our business is to make sure that we stay focused on data—and having the right control mechanisms in place to monitor the quality in underwriting, and to look at the emerging trends in claims.”

Where do you see technology investments headed? 

“For us, these are the four areas where we’re currently investing:

  • Mobility or getting physical customer goods from point A to point B. We look at the entire spectrum of autonomous vehicles and mobility companies out there. 
  • We’re investing in data and AI, obviously as a vertical, but quite honestly, over the last five or six years, data and AI underpin almost every investment that we make.
  • We’re investing in the sharing economy, but not just the sharing of goods. We’re also thinking about the sharing of balance sheets and the sharing of risk. So, what are the new models in terms of how risk is shared in the future and how might that impact property and casualty insurers in the future?  
  • And then the fourth area is distribution. We always believe that the entry point disruption in our industry will come through distribution. So, we’re always actively looking at the new ways companies are trying to better meet consumer needs and how that fits into our wheelhouse in terms of interacting with consumers and models that we need to build.”

How can insurers get access to consumers as they focus on distribution, whether that’s embedded, B2B, or other modes? 

“Mobility and pop tech are still very important and how people engage with their largest purchases and largest physical assets. Data and governance are other areas as well. How do people think about trust, data security, privacy and then Web 3.0 and decentralized finance is one that we always have internal debates on. I think, quite honestly, this will be an investable area for us when we launch the new fund. But it’s a trend that we’re definitely monitoring and perhaps we change our course on that in two or three years.”

AI is literally insuring insurers

For its part, Zelros is grateful to be ahead of the data curve in how it supports insurers globally. Karim identified key areas that AI will literally be depended upon to help insurers build and sustain growth in the “choppy waters” ahead. 

Zelros is proud to be the trusted partner to insurers worldwide,  in harnessing the advantages that only AI solutions afford. Zelros helps personalize the customer buying experience with insurance recommendations across all channels. This advantage not only boosts client acquisition, cross-sell and upsell–it reduces costs and increases revenue, using Responsible AI to build customer trust and loyalty. Our primary imperative is to protect global consumers everywhere.  

Tune in to other topically relevant and engaging podcasts from InsurBreak here. And reach out to Zelros for more information about how we help you meet your business goals using industry leading AI solutions