The importance of innovation
Innovation has always been a rallying cry for the re/insurance industry, as companies constantly try to stay ahead of the pack. As technology development seems be accelerating, re/insurance companies need to keep pace—and perhaps come up with new ways of thinking.
In September 2016 Hamilton Insurance Group, American International Group (AIG) and affiliates of Two Sigma Investments announced an agreement to form Attune, a technology-enabled platform to serve the $80 billion US small to medium-sized enterprise (SME) commercial insurance market.
Attune will use data science and advanced technology to meet the risk needs of small businesses. Partnering with retail and wholesale insurance brokers, agents and other intermediaries, it will provide small business owners with a broad, flexible range of products. The ultimate goal of Attune is to streamline risk submission and the insurance underwriting process for small businesses.
The announcement follows a memorandum of understanding the three companies signed in April to form this partnership.
“Attune will combine Hamilton’s small business knowledge and underwriting expertise with AIG’s scale, extensive data, and long-standing distribution network,” says Brian Duperreault, Hamilton’s chairman and chief executive officer.
“Technology and data science capabilities for Attune will be developed and managed by Two Sigma, a company that applies its technology platform and artificial intelligence capabilities to reveal unique data insights.”
According to Duperreault, Attune came about when Hamilton was working to develop a new approach to US small businesses, using data science and technology. He suggested to Peter Hancock, the CEO of AIG, that perhaps they could find an area where AIG and Hamilton could look to apply data science and technology together—and things started to happen.
“Innovation, no matter what the industry is, means that everyone is looking for the best use of information to provide a better service to the customer.”
“Peter wanted to know more about what we were doing in our US offices to start with, and when I explained our initiatives in the small business area he was very intrigued,” says Duperreault.
“He said let’s work on that together and I thought that it was a great idea. Linking it formally with Two Sigma to create a startup, entrepreneurial effort in small business was just tremendous.
“What AIG brings to the table is a wealth of experience, particularly in the specialty area. They’re a great carrier and they’ve basically covered every aspect of the insurance spectrum, with plenty of information and data experience. The limiting factor in doing things in the insurance business is legacy—it’s the limitation all carriers have. They have a hard time completely revamping, so they have to do it incrementally.
“This gave AIG the ability to do it from scratch in an entrepreneurial way, without legacy limitations, but still being able to have in the background all that experience and capability.
“For me it was about getting their capabilities and their data harnessed with what we were doing. Then when you throw in Two Sigma, one of the top technology companies in the world, you have a truly unique structure.”
According to Duperreault, the reason Attune will start off by looking at the US SME market is a simple one—it’s big, with $80 billion of premium. It’s also the most dynamic part of the US economy, as there’s a constant cycle of creation taking place, with new companies being formed all the time.
There’s another reason too. “It’s an area where incumbency doesn’t necessarily gain you very much, because of these new companies,” he says. “For us, we believe that data science and a better approach makes sense. There’s a greater spread there, large numbers of different types of companies—so it was a good place to start.”
The aspiration is to make Attune a leading player in the US SME market. He believes that there is going to be a lot of intellectual property development in this area of the market, with the three founders of Attune being able to bring their own contributions to it.
Duperreault is enthusiastic about the joint venture, but naturally has a few caveats. “Early on we’ll get a very good indication on whether the energy is there, and so far it’s been a tremendous experience for me.”
He adds that joint ventures are not easy to do, and three-way joint ventures are even more difficult, but stresses that everyone is attacking the enterprise with great spirit and recognises that such partnerships are the way to go in the future.
“Some companies can’t do it alone due to the sheer amount of business that needs to be done. I do not expect to see any issues arise that can’t be overcome,” he says. “You’ll always see some problems emerge, but so far we’ve already seen that we have a great chance of success.”
Duperreault believes there’s a big difference between being seen to be innovative and really being innovative. “You have to explore whether true innovation is taking place. It isn’t easy to do and I think a lot of companies try very hard but have limitations.
“Innovation has always been a major part of value creation in our business—you continually innovate and improve, to provide something that’s better than others have been providing. That’s where you have true differentiation, and a competitive edge. That hasn’t changed.
“What has changed is that we’re in a digital world now, so the innovation has to take that into account. Your product and your product delivery all have to be retooled to the new industrial logic that we have today, which is a digital structure in a digital world. Innovation, no matter what the industry is, means that everyone is looking for the best use of information to provide a better service to the customer.
“It isn’t just the product any more—it’s also the information around the product that is value-creating and we’re in exactly the same mode in the insurance industry. Doing information better, doing it in a way that allows us to perfect our product is where the real future lies,” he concludes.