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Rick de Jager on the Price Writer Podcast Ep 17
11 Plays1 month ago
Navigating the Future of Insurance Pricing: An In-depth Conversation with Rick from Maven Blue Join us for this latest episode of Outstanding Claims. Jeremy talks with Rick de Jager a pivotal figure in the insurance industry and part of the team at Maven Blue, to discuss his unconventional journey into the realm of insurance. From banking to being bitten by the "insurance bug" during the credit crisis, Rick shares how his passion for quantitative sciences and risk management led him to the forefront of pricing and innovative solutions in the insurance sector. In this episode: Rick's Origin Story: Discover how Rick's early exposure to banking morphed into a deep-seated interest in insurance, guiding him through academic pursuits in insurance sciences and leading him to the heart of pricing. The Maven Blue Difference: Rick provides a comprehensive overview of Maven Blue, highlighting its unique approach to insurance pricing and tariff deployment. Learn how Maven Blue's open philosophy and advanced modeling platform empower insurers to streamline their processes and bring tariffs to market efficiently. Innovations in Insurance: Explore the groundbreaking features of Maven Blue's product, including their state-of-the-art machine learning algorithms designed for monitoring tariff performance and optimizing pricing strategies. The Future of Pricing: Rick discusses the pressing challenges facing the insurance industry, from inflation and affordability to customer behavior changes and the potential for multi-year policies. He also touches on the critical role of sustainability in pricing and the evolving landscape of insurance in response to technological advancements. The AI Dilemma: The conversation takes a deep dive into the complexities of integrating AI into insurance models, addressing both the opportunities and the inherent challenges of ensuring fairness and accuracy in automated decision-making.
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Transcript
Introduction of Rick and His Career Journey
00:00:01
Speaker
Hi Rick, welcome to the show. Hello Jeremy, thank you for having me. ah Thanks for being on today, it's great to see you. ah As ever, the first question is, how did you get where you are today?
00:00:13
Speaker
Yeah, it's a I came into the insurance world in a less direct way. I was introduced to the world of banking by my father and it became really my area of focus.
00:00:27
Speaker
So I started things out with an MBA. But then the credit crisis hit and I became really interested into the quantitative sciences, risk management. So I studied insurance sciences at the University of Amsterdam and and became bitten by the insurance bug.
Rick's Transition to the Netherlands and Maven Blue
00:00:46
Speaker
I had to calculate the impact of the quantitative impact study number five on a balance sheet. And that was just great fun.
00:00:58
Speaker
So I actually joined the city. and tried to get into it everything, but it became a very difficult environment and I just had such a passion for insurance. So I ended up ah deep diving into it from there.
00:01:14
Speaker
Yeah, I became really connected to the actuarial profession, working amongst particular software vendors, actuarial consultants, and just the actuarial sciences in general.
00:01:27
Speaker
So I navigated myself between Solstice 2 and IFRS 17. And it was just, intellectually speaking, a very stimulating environment. so I really enjoyed that.
00:01:39
Speaker
And at this juncture, I'm working for a great company trying to progress the actuarial sciences, pricing in particular, of course, and living in the Netherlands, which previously I've i've lived 20 years in the UK.
Maven Blue's Innovations and Market Impact
00:01:56
Speaker
a bit of a different direction but it's where for personal reasons it's the right place for me to be so yeah very curious where the next path will take me that's brilliant so what sir what made you move to the new company that you're with yeah maven blue is to me a really exciting company exciting because One of the big elephants in the room that few people actually discuss is how you get a tariff to market.
00:02:31
Speaker
Obviously for certain vendors, it is part of the mix, but it becomes part of their ecosystem and you need to commit to it. With MavenBlue, it's a very different approach. It's a very open philosophy.
00:02:46
Speaker
So the actual ah deployment of rates is completely Whatever modeling platform you use, you can take that to market in a very convenient and direct way into your policy admin system.
00:03:00
Speaker
So it's a different approach, a different mindset. And it's just a ah group of very passionate, very driven individuals, very intellectually curious about the actuarial sciences and pricing.
00:03:13
Speaker
So it's just a very stimulating environment to work in. Yes, it's it's it's good to know. I've seen the Maven Blue product. the rating engine myself and I do think it's a really good piece of software, a really great kit.
00:03:28
Speaker
you want to tell me about the things that are the benefits of it? Yeah, sure. No, absolutely. yes MavenBlue, of course, its founding sits in individuals that came from one of the leading policy admin providers in Europe.
00:03:49
Speaker
obviously Keylane with their product called Axon. It's widely popular in in the Netherlands, but also Belgium and parts in Scandinavia and other areas as well. So it's done really well.
00:04:01
Speaker
And those founders founded Maven Blue. So they've got a very rich understanding of the operational limitations or or issues that insurance companies face and the way in which you configure a price in your policy admin.
00:04:19
Speaker
can actually be quite complicated. So making that easier, that is the critical juncture. So there's a few there's a few components beyond that, which of course we're able to achieve.
00:04:33
Speaker
One of the things that that we're very excited about is the ability to monitor the performance of a tariff in the market. Let's say you ah create the necessary demand models and you have an expectation of how that model performs in the market.
00:04:51
Speaker
You can then compare it to what you're actually doing. And there is a machine learning algorithm that will actually try to optimize between the two. So if you're falling short of expectations, over concentrated in certain parts of your demographics or overall risk ah exposure,
00:05:07
Speaker
You can then tweak your pricing to ensure you're going to get to the right exposure level that and you want the terms of diversification, in terms of volume, et cetera. So it's, you're able to really quickly with, in relative terms, ah very little headaches, you're able to achieve quite sophisticated levels of pricing.
00:05:31
Speaker
And that's quite unusual because some of the providers out there, you're going to have quite lengthy processes to engineer things in such a way that that you're able to achieve these things. So yes, it's a unique approach, very different and happy to engage with anyone who wants to see it, try it, experience it.
00:05:54
Speaker
Absolutely. Yeah, that's brilliant. So I was very impressed with the MI tools just for a start, because it's great to have all that information in one place and the setup is is so easy.
00:06:06
Speaker
And also the option to be on rails with things. So you could take a small team and do quite sophisticated work very quickly without needing to build everything from from scratch like you have to with other tools so or indeed if you work open source.
Balancing Pricing and Customer Value in Insurance
00:06:25
Speaker
So Rick, what would you say is your mission for pricing? Yeah, it's it's a good question. I've worked in pricing for quite a while and you get different perspectives.
00:06:40
Speaker
You obviously have your your companies that are for profit, if you will. Sometimes talking to those that are mutuals and have more more of a communal focus where they're trying to enhance the community.
00:06:55
Speaker
yeah my My ultimate goal is, of course, to help the insurance companies balance the relationship between ah the prices that you charge and the relative amount of value that the customer is getting.
00:07:14
Speaker
If everything goes well, those two are in harmony and the customer gets the best possible service for the best possible price, while at the same time, the insurance company is financially healthy and productive.
00:07:30
Speaker
So yeah, that's my main vision, my main goal to achieve. And that's, of course means that things like ah customer discrimination, that those things are sort out proactively yeah and of course identified and addressed.
00:07:47
Speaker
Excellent. It's very good to know. Very good to know. And what would you say is your vision for pricing?
Future Challenges and Innovations in Insurance
00:07:55
Speaker
Yeah, this is an interesting question because I think the question becomes what are going to be the biggest hurdles for insurance companies facing some of the future challenges.
00:08:09
Speaker
And looking at how things are going right now, I'm really worried about inflation and the affordability of insurance. I think that's going to be a very serious point because I don't think we're done with inflation.
00:08:23
Speaker
I don't think inflation is going to go away. And and and there are possible supply side areas where inflation could suddenly sprout up again. And then we're right back at square one.
00:08:34
Speaker
um So affordability is, I think, a big question mark. And if you're quite innovative in your thinking, you don't necessarily need to reinvent the wheel to be giving customers a more affordable product. I give you an example. Everybody has really been obsessed with UBI, giving customers more of a as-you-use product, products but if you use it less effectively.
00:09:03
Speaker
um or you're less risk, then you get less of a premium. And insurance, they struggled with that. They really struggled because on the one side, the data, getting the data has been incredibly challenging. On the other side, you're going to hit very natural points of debate.
00:09:21
Speaker
If I have a good customer, I want to lower his fees because he's been so good to me and he's been low risk. But that also means that when you have a driver that's bad in his driving,
00:09:32
Speaker
that you need to penalize him. And it's difficult to make that argument to that person. And i just think that there are better ways that are maybe not as technical, but just require a new approach to thinking about how you develop a product. So if you look at a mobility insurance product where you just look at the overall travel profile of a customer,
00:10:00
Speaker
That person can travel by train, by bike, by car, by scooter. There are all sorts of possibilities. And on the day that I decide to travel by train versus a car, that I get something of maybe some money back or a benefit or or some extra cover.
00:10:18
Speaker
I have no idea, but there are ways in which you could see how that kind of behavior could reduce your overall risk exposure from an insurance perspective. And that could be shared. so I see that happening.
00:10:31
Speaker
The other thing that could happen is, and this is a crazy notion, but I think it has legs, is multi-year P&C policies.
00:10:42
Speaker
So having a car insurance policy, which is not just a single-year policy, it's such an assumption that that these policies are single-year. But I think if you have a multi-year policy, then the relationship with the customer changes.
00:11:00
Speaker
and potentially also your overall perspective of that risk because you get a far greater premium over the course and you get that assurance you you avoid the acquisition costs for customers so there are whole bunch of benefits to the insurance company that i think you can then also impart pass on to the customer as well so i see things like that happening The other concern I have looking to the future is customer behavior.
00:11:32
Speaker
We've seen quite dramatic changes in behavior. Things like COVID-19, they changed how we operate. For example, we had things like home insurance and leaks.
00:11:46
Speaker
If you look at water damage, that suddenly in home insurance decreased dramatically because everybody was working at home and they could turn off the water when they saw the leak. But if they were working from the office, then they they wouldn't see it and they were too late and then the damage happened.
00:12:03
Speaker
But then all the water damage exposure came at the businesses themselves. And these behaviors, they have a very profound effect on the overall claim rates.
00:12:15
Speaker
So I can see technologies. I can see um pandemic or other things, when these things, when new technologies, for example, hit and the behavior of customers changes, then I can see how that can affect the overall risk landscape. And that has pricing implications because when that behavior changes, you need to be able to price it accurately.
00:12:42
Speaker
And if you don't, someone's going to pay for it and Is that going to be the financial health of the company? Is it going to be the customer? Someone's going to be disadvantaged.
00:12:54
Speaker
Yeah. Having a responsive dynamic pricing process, I think is critical, critical to, to respond to those kinds of things. Yeah, definitely. The world is always in motion and there's only so much we can really get from our past data.
00:13:11
Speaker
There's always the need to be looking forward and knowing what's going on in the world and how it's changing. Yeah. Yeah. Yeah, absolutely. So yeah, for me, those would be the main points. Sustainability could not be could be another point.
00:13:24
Speaker
How do you bring sustainability aspects into pricing? And that's really tough. That's really tough because you're going to hit some very natural hurdles, i.e.
00:13:37
Speaker
a big battery is an additional risk. yeah A solar panel on your roof is an additional risk. But you do want to benefit those people. You do want to reward green behaviour.
00:13:50
Speaker
That's still a very active debate right now that I think in pricing will have implications. But where that's going to land is unclear, but it's a very active debate. Yeah, definitely.
00:14:02
Speaker
I like that idea of a ah longer than a year policy, particularly for younger drivers, actually. And perhaps if we could offer some more useful services, such as helping people to learn and develop better driving behaviours,
00:14:17
Speaker
So risk mitigation alongside the insurance and the same with home, in fact. Yeah, absolutely. And I can see how how interconnected home insurance, where you have security systems and all kinds of other physical things that you can do to improve your home security,
00:14:42
Speaker
If you apply those things, if you monitor those things, if you communicate with your insurer about those things, they they can have a profound effect on the overall risk of that setting.
00:14:54
Speaker
Yeah, I think there's a quick pro quo for both parties to then engage. And I see great benefits to to engagement between the trying of the insurer, the customer and companies that provide ah security services.
00:15:12
Speaker
Yes,
AI and Machine Learning in Insurance
00:15:13
Speaker
definitely. Yeah. And the leak detection as well and and the other useful items and devices that people can be doing and the behavioural changes as well. Yeah.
00:15:25
Speaker
No, agreed. Brilliant, Rick. OK. Is there anything else you'd like to add? No, I think at this juncture, I think I've um shared some of the thoughts that are on my mind.
00:15:38
Speaker
i'm i'm very intrigued how things are going to go with AI, I think that's going to be ah very challenging topic. It's challenging because we're not going to worry about people writing into their AI code explicitly that they want to do something negative, discriminate or whatever.
00:15:58
Speaker
With AI, we're always worried about what is going to happen implicitly to the model. We can't explicitly see, but do happen and are negative in their consequences.
00:16:10
Speaker
I think that's going to be an interesting field as well, that that you can build all these fancy, exciting AI models. But if you don't cover off the the impact of of an AI model, if you don't do the data science there, then that's going to be tricky for insurance companies to apply AI at all.
00:16:31
Speaker
Yeah, I think it's a common problem in me and other industries as well. But yes, definitely, it's difficult to see where we go at the moment. It's very promising technology, but the issues with it are apparent and they don't seem to be going away.
00:16:47
Speaker
no it's and it's not the first time AI has been around. um It's got more promise now, and I do agree with that, but Sometimes it it looks like things like machine learning have more promise at this juncture to really deliver on some of the expectations um than ai does because there are some critical areas where you just can't get over that hurdle. It just remains something that stares you in the face that you can't quite get around. So that's going to be interesting to see how that evolves.
00:17:20
Speaker
It's not andte well-defined issue at this point. Yeah, it's not very clear cut, is it? I'm finding quite interesting how it feels almost like it's pretty useful when it's a helper to a person, but it doesn't seem to work well when it's let loose without the person watching it. And it's really interesting from the point of view of it's an automation tool, but it's an automation tool that needs someone to babysit it.
00:17:50
Speaker
Yeah. And what's happening in the background? really difficult to see. Yes, you babysit it and you look at what it's doing, but can you really feel and see and the impact of what it's done?
00:18:04
Speaker
You look at the surface and you make a judgment, but it's very difficult to get around the fact that you don't really know what's going on beneath in detail. Yeah, it's interesting to me how it's meant to mimic the brain and actually in many ways has the same problems because We can ask ourselves, why did we make XYZ decision? and we can justify it and rationalize it afterwards.
00:18:30
Speaker
We don't really know that's why we did it And it feels like it's got the same issues. Yeah, yeah, it's funny, huh? seen Yeah, yeah. I think Elon Musk said that there is something, because because they use AI to advance the computational capacity of the the chips that they use to to run AI with.
00:18:52
Speaker
So incrementally, they're getting faster and cheaper at executing these AI models. And it's something like a growth rate of 10x per month. That's how fast they yeah the statement is of Elon Musk that by 2027, we're going to get an artificial general intelligence by 2027, think statement is.
00:19:20
Speaker
That to me was quite quite profound because it has quite significant implications. It does. And Elon Musk did promise driverless cars about 10 years ago now.
00:19:36
Speaker
So I'm a bit cynical on that. um'm I'm cynical on that as well. and the driverless cars, by the way, is really interesting because... of the Tesla insurance numbers that came out not too long ago, that was quite alarming.
00:19:51
Speaker
It is, yeah. I think on the one hand, they were aiming to lower insurance costs for their customers. So to some extent, they've done that.
00:20:02
Speaker
Whether they're intentionally subsidizing it or not, and I don't know. Yeah, they're in a very difficult spot because...
Autonomous Vehicles and Insurance Challenges
00:20:11
Speaker
It's very difficult to provide this sort of captive insurance capacity for Tesla cars without concentrating your risk.
00:20:20
Speaker
Part of these big insurance companies around the world doing the way they're doing is because they've got a very diversified portfolio of exposure and concentrating your portfolio on electric cars, yeah on a particular type of electric cars with an autopilot that you get a certain driving behavior, not just because of the autopilot, also because of the accelerator button being quite the people. Yeah. do and and And so you get this portfolio, which, you know, if I were working for them, i'd I'd like to diversify if I could, or I'd like to work with another insurer and, and try to get some diversification benefits and maybe lower my overall claims burden.
00:21:09
Speaker
So, yeah. it's they're in a difficult pickle I think trying to do what they're looking to do yeah definitely they're choosing to write only a specific the specific car their own cars which are new high performance uncertain high they're expensive vehicles they're lots of they're lots of what we would probably call red warning signs to writing writing a portfolio and then they're writing only those so it
00:21:40
Speaker
it is hard to see plus one of the things that gets forgotten is that when it comes to insurance it's not really about fixing desperate the teslas it's about fixing other people's cars and dealing with the bodily injury claims and that's a different skill set to the ones that they'll have yeah yeah absolutely It's interesting to see. I don't know. Do you know if anyone is still really seriously pursuing AVs? I know they might be saying publicly they're working on it. Maybe maybe Waymo is still in, but crews seem to be pulling back.
00:22:19
Speaker
Yeah, I don't know. I don't know. It's also you need to define an AV. It might become different than what we were initially promised.
00:22:33
Speaker
Yeah. I think we're going to get vehicles that have a degree of self-determination. Yeah. But at critical points will rely on the driver to input.
00:22:47
Speaker
There has been a very significant update to the Teslas. Obviously, there were all those accidents so many years ago. And then they did a big re recall, 2 million cars, not so long ago. And...
00:22:59
Speaker
I think that should signal that updates have been made and hopefully that all works better. i don't know, but yeah, I think we need to define what you expect from an AV.
00:23:11
Speaker
Yeah, that's fair. Is that a case of people with lowering their expectations though, moving away from we'll reach level five s soon to we're probably going to get comfortable at level two, level three?
00:23:25
Speaker
Yeah. If you look at, EU regulation, for example, there are regs to say that a driver will always need to keep their hand on the steering wheel. You're always going to have some sort of minimal input assumption from the powers that be now in in Europe.
00:23:44
Speaker
So I think that will have an impact on um on how these cars get developed. But yeah, I think we're going to become quite happy and satisfied with level two and three.
00:23:57
Speaker
Yeah. I'm not sure level five becomes insurable. The risk is, the question also is who pays. Because at a certain point, you're go to reach, and let let's say we reach your point where it's all hands off and I tell my phone where I want to go and the car takes me kind of thing. that's yeah If we get into an accident, who's liable?
00:24:18
Speaker
and And at some point, you're going to cross into a gray area where the producer of the vehicle becomes the carrier. Yeah. And that in insurance terms, I'm not sure those companies are capable of providing or is something that you can insure because the the downside, the risk becomes exponential because you could have some of those but i would call NACAD events, where a vehicle is hacked and some sort of malicious code is introduced. And I have no idea what's possible, but I can see how that could snowball and become quite toxic.
00:25:00
Speaker
Yeah, I can see issues there as well. I think ultimately the cost is going to be passed on to the end consumer in some way. We just don't know what the shape of that is going to be.
00:25:12
Speaker
But indeed, the aggregation of risk could be quite an extreme problem. Actually, if people do update, every car gets updated with new software at once and there's a problem with it and what what is going to happen?
00:25:27
Speaker
Could you imagine a world in which you buy a car and for the lifespan of that car, you have an implicit level of insurance covered? That would be quite crazy. ah Yeah, potentially. It will probably be that people will in some way pay for that, possibly through some subscriptions or something like that.
00:25:52
Speaker
We'll have to... It's like you're saying, the world changes too much for anyone to be sort of setting the their insurance level right at the start of the contract when they sell the car.
00:26:04
Speaker
So it's hard to see where it goes. But ultimately... I think they'll still be relying on an end consumer that covers the cost in some way and an insurance body that soaks up the risk in some way. And it's how you join those two together that I think is going to change.
00:26:23
Speaker
And it's it's also insurance companies have been so good at the balancing act between the different kinds of risk they're holding, generating free capital, overall spending.
00:26:35
Speaker
relative efficiency with which they deploy capital and ensure risk. And it's very difficult for these relative new kids on the block to completely take away that business model because it's so cemented in size and sophistication that it it's a slow burn to try and achieve that kind of, I think the insurance companies we know and love today that are significance, it's going to be very difficult to challenge those in a meaningful way because of their relative size and sophistication in how they run things.
Financial Influence of Insurance Companies
00:27:12
Speaker
Yeah, I agree with that. Yeah, definitely. Insurers have got a lot of money. Ultimately, they can do a lot with that capital when they need to.
00:27:25
Speaker
Yeah. Okay, Rick, it's been really great catching up this afternoon. Thanks a lot ever so much for being on the show. Thank you. thank you Thank you very much. Brilliant. You have a good rest of your day.
00:27:36
Speaker
You too. All the best. Cheers. Bye-bye.