At Insurtech Insights, Sarah Jacobs, senior vice president, product and underwriting, Nationwide, raised the prospect of creating value in insurance that comes from more than just paying claims. After her remarks, Digital Insurance spoke with Jacobs about how insurers can achieve this goal.
This article is from a longer interview and edited for clarity.
What does it take for insurance to move from a "repair and replace" to "protect and prevent" mindset?
It gets back to the consumer dynamic. They expect real benefit out of something that they're putting in. That's their mindset. With repair and replace, the only benefit is if you have a claim, you're getting that money back out of the system.
At a macro level, our ability to predict events is challenged, because historical patterns aren't necessarily playing out in the same way. That creates uncertainty. Both at an individual level and at a macro level, we've got to find ways to get cost out of the equation. At the end of the day, we've got to take enough money to cover the losses, if we want to be there to protect customers, but it's not sustainable to just keep pushing in more and more costs, and then passing that on to customers, either through higher premiums or less coverage. We've got to figure out how to take these big costs – legal system abuse, fraud – take that out. All of that cost out, which helps improve the affordability of the product.
How do you implement "protect and prevent"?
We have a lot of vendors and partners. We've looked at so many different devices and models and concepts. What's going to resonate with the customer? What will be most impactful? It also has to be really simple for them to do. Don't ask them to do 10 steps to prevent something that's never going to happen. We can barely get them to plug in a device and download an app.
So we're really looking at it from that perspective of, is the customer going to see the value? Are they going to buy into it? Is it going to be easy for them to follow through on that? Does it create transparency and control? Control is another thing that customers are looking for. But they've got to understand whether it's telematics and how they're driving or their home and how they're maintaining it, how that directly impacts their rates. You have to find ways to really show that in their bill, in their premiums, in an ongoing positive engagement model.
How do claims and underwriting departments need to communicate?
When claims adjusters are adjusting a claim, they may see the claim is for the roof of the home, but they see that the deck is falling apart. It's creating a liability hazard. For decades, you have this manual, personal feedback loop. When a claims adjuster is adjusting and they find an issue, they report it back to underwriting. That's fine, at an individual case level, but what you really want to glean is those insights from claims at a macro level to understand what of this was preventable. That's where AI and data, gathering that claims data, analyzing that, can project into how we tackle that on the front end for underwriting.
Where should collaboration happen among carriers and within the industry?
We have the issue of getting customers to think about prevention. The costs that are getting pushed into the insurance system, they're macro level big issues – societal issues. Around legal system abuse, otherwise known as nuclear verdicts, we need to work with regulators, but carriers need to come together. After speaking, a carrier staff member stopped me to say, 'we need to think about how we use our collective data to bring to regulators to show them that this is a problem, and that it's hurting the customer.'
On building codes, we work with IBHS to show if you build a home this way, if you have defensible space around the home, you can actually prevent wildfire from reaching the home. It can sustain hurricane force winds. It's much, much more likely to sustain that, with a lot less damage. For an individual carrier, it's hard to make meaningful change at that broad level. That's where we need to collaborate, both within the company but also across carrier lines, to influence that on a broader scale.
