NEW YORK -- Big data and artificial intelligence should help insurers assess risk more efficiently, and that should help reduce costs and drive down premiums for clients, the new CEO of American International Group told The Nikkei recently.
Underwriters will need to adapt to the rise of insurance technology, or insurtech, said Brian Duperreault, who was appointed chief executive of the U.S. insurer in May. Edited excerpts from the interview follow.
Q: How are you incorporating insurtech into your business?
A: To me, the essence of insurtech is the use of data and analytical tools that, prior to this time, weren't available. So adapting to it, but not changing the essence of what we do. It just is making our jobs better, making us more professional and understanding. I personally don't believe that the buyers of insurance will go completely to a digital decision.
I think there is always going to be advice needed in making those decisions because it's complicated. The decision is not a simple one to do, and it's one you don't make all the time. But I think there is going to be an enormous return in making intelligent decisions about risk.
[Regarding Two Sigma, an investment firm whose decisions are guided by AI, and a joint venture partner with AIG] They make their decisions with algorithms. We do the same thing: We gather a lot of data and make a decision. So why shouldn't we be able to take that technology and capability and apply it to our business?
Q: Do you think that will lead to lower premiums?
A: [They] should come down. We have businesses where I don't even ask any questions. Because if you give me your name and address, I know all about you. I know enough to make a decision about the risk and at what price. And so this process of getting the information to the person who has to make the decision, that can change dramatically. If we can do that a lot simpler, then there are expense savings. And I believe we can. And we're working on ways to do that.
Q: How do you see insurance companies changing to fit the modern era?
A: I think the role of the underwriter will change to some degree. The underwriter is going to need different skill sets than they've had before. And those skill sets are all around being adept, facile, being agile with data, and analytics. And algorithmic processes. So they become part actuary, part data scientist, and also still that ultimate risk taker.
Q: How do you see the future of AIG?
A: AIG has everything it needs to be a great company again. We've gone through stages of difficult times to be honest. I think we can be better than we ever were, because we've learned a lot. You learn a lot in failure, maybe more than you do in success. So I think that how we got to where we are today, nobody would want to have gone down that road. But where we are today, I think we have everything we need to really become a great company.
The essence of our company, what we do, is to take risk. It's to satisfy the needs of our customers who want to take risk away. And so if you want to be the best partner to your client, then you take the risk that they really need to have removed, and you do that at a price that makes sense. The essence of greatness is: Are you the best at that? Are you the best risk taker there is, that you really understand this risk, that you have insight that no one has, including the insured themselves, about their own risk? If you have that, then you are a great company, in my business.
Q: Do you think that Google or Amazon.com will ever become competitors in the insurance world?
A: What I've found is we're never short of competitors in our business. There is always a competitor. They could be a competitor. If you want to compete in our business, you have to decide whether you want to commit the kind of capital you need to take risk. You can't compete in our business if you're not prepared to take risk and hold it for some period of time.
Q: How do you assess the Japanese market?
A: It's still, from a global insurance perspective, No. 2. In general insurance, nonlife insurance, it's the third largest in the world. So it's still a very, very large market, one that one should be part of.
Japan is an essential part of our organization and an essential part of who we are as a company. I have always loved the Japanese market. I've worked there. You can learn a lot about customer and customer satisfaction, customer segmentation, based on what happens in Japan.
For AIG, our Japanese business is -- it has all the elements of what we do around the world, all the elements. It is a mirror image of everything we do around the world, and so a great learning opportunity, a great experimental ... place for us to continue to innovate.
Q: In January, AIG will merge Japanese group members AIU Insurance Co. and Fuji Fire and Marine Insurance Co. to form a new company, AIG General Insurance. Can you tell us about that?
A: We've never really marketed ourselves as AIG in Japan. It's always been companies that are part of AIG; now it's AIG.
We're a very international company. That gives you a different perspective because it gives you a point of view that you wouldn't necessarily have if you were a Japan or Japanese-only company. So we've got all the capabilities one would need to deliver a product at a very efficient price, but a very good product with the right component parts.
Interviewed by Nikkei staff writers Mariko Hirano and Akira Yamashita