Alan Schnitzer, Chairman and Chief Executive Officer (CEO) of U.S. insurer Travelers, has said that the company intends to spend more than $1.5 billion on technology this year as it looks to take advantage of the “profound” opportunity from artificial intelligence (AI).
Speaking earlier today during the carrier’s Q2 2023 earnings call, Schnitzer offered his thoughts on the growing capabilities of AI and how Travelers is leveraging new and advanced technology to optimise productivity and efficiency.
“We subscribe to the view that over time the impact of AI across the economy is going to be profound. So is the opportunity for Travelers,” said Schnitzer.
He explained that within the firm’s “perform and transform mindset,” it has, for years, been focused on responsibly developing differentiating AI capabilities across three of the firm’s innovation priorities; legal expertise, providing great experiences for clients; and optimising productivity and efficiency.
While branches of AI such as ChatGPT has raised awareness of some of the potential benefits, it’s been around in some form for quite some time now, although is clearly becoming more capable.
At Travelers, explained Schnitzer, there’s a team dedicated to AI specifically, and combined with others in enabling disciplines, the insurer has a significant number of employees engaged to make sure it’s a leader when it comes to AI.
Of course, new technology comes at a price, and Schnitzer noted that Travelers has been steadily increasing its tech spend in recent years, while also improving the strategic mix of that spend.
“That includes a meaningful increase in investments to develop and acquire cutting edge AI capabilities built on modern cloud technology. Importantly, we’ve done all that while significantly improving our expense ratio, in no small part, thanks to the success of our technology investments,” said Schnitzer.
The CEO said that in 2023, the primary insurer will spend “more than a billion and a half dollars on technology.”
When it comes to AI, Schnitzer underlined the importance of both the quantity and quality of data, explaining that Travelers has been investing in datasets, data quality, and data accessibility for more than a decade.
“Between submissions in our commercial businesses and quotes in PI, we intake millions of business opportunities each year. We also take in, adjust, and adjudicate millions of claims. We’re one of the largest risk control organisations in the industry. We provide risk mitigation to our commercial customers, completing more than 100,000 risk control consultations annually. We capture valuable data from virtually all of those interactions,” he said.
Add to this third party data, and years of “curated institutional knowledge” from policies, procedures, guidelines, forensic investigations, and similar, and Schnitzer is confident that the firm has an excellent foundation for the next, imminent iteration of generative AI.
“Given the competitive advantages that will come from deploying AI across the insurance value chain, and the expertise, resources and data required to get there, skill will increasingly be a differentiator in our industry. As will the ability to execute complex initiatives effectively and efficiently. Expertise, resources, data scale and execution excellence, all favour Travelers,” said Schnitzer.
As stressed by the Travelers CEO, the potential use cases for AI within the insurance and reinsurance industry are many and vary.
But for Travelers, Schnitzer explained that the approach is to “pursue very focused opportunities that are consistent with our innovation priorities and will create meaningful, sustainable competitive advantages. All with an eye towards leveraging strategic capabilities across our organisation.”
Currently, Travelers has numerous AI capabilities in production which impact various parts of the business, from efficiency to automation, to more advanced generative AI and large language models, which augment underwriting, claims handling, and also service delivery and beyond.
“We use intelligent process automation broadly throughout our business to handle hundreds of routine workflows. Automation and AI have been meaningful drivers of our expense ratio improvement over the past seven years or so,” he said.
“A key success driver in insurance is segmenting risk as finely as possible to achieve pricing that’s accurately calibrated to the risk. Deep learning models have significantly improved our ability to classify and segment risk in our flow businesses,” continued Schnitzer.
“So, in terms of AI, we’re investing with speed and strategic direction, consistent with our stated objective of delivering industry leading returns. I’ve only shared some of what’s in flight and the capabilities that we’ve developed are in various phases of adoption. The full impact of the capabilities we’re developing and others on our roadmap are still ahead of us,” he said.
