The writing was on the Blackboard
Last week AIG announced the runoff of their Blackboard division and recognized a pre-tax loss of $210 million. Blackboard, which was acquired in 2017 from Hamilton, focused on the worthwhile and ambitious mission of reimagining mid-market commercial underwriting with software and data. This is undoubtedly a disappointing outcome for those involved and for many believers in the transformative power of technology in insurance, Kalepa included.
However, it doesn’t come as a surprise to many observers. Coming from an Air Force background, we are strong proponents of After Action Reports (AAR) which provide for reflection and critical learnings. From an external vantage point, here are our three key takeaways from Blackboard’s approach:
Play to your strengths: Managing a venerable and profitable insurance franchise is hard. It requires expertise and talented personnel in actuarial reserving, regulatory filings, distribution, underwriting, and claims management, to name a few. Building scalable, robust, and actionable data-powered products is also hard. It requires top-level engineers, data scientists, designers, fast-moving and iterative processes, usage of modern software-development techniques and tooling, as well as the ability to apply cutting-edge machine learning to specific business problems, rapidly and responsively. Attempting to develop a high-performance software platform within a large carrier requires mastery of very different skills and the ability to recruit and retain specialized talent. It is unlikely to succeed.
Understand incentives: The culture and mindset that are conducive to success at a large insurer do not often translate well when building a startup. Unsurprisingly, experienced and committed team members, with vast resources, will make different decisions and operate distinctly from the way they would at a scrappy startup. What successful early-stage companies often lack in resources, they make up for in resourcefulness, responsiveness, and speed. The prospect of rapid career growth and financial upside for team members, combined with the fulfillment of tackling an important and daunting industry pain point, is crucial to unleashing the boundless entrepreneurial drive that is required to address the biggest challenges in insurance.
Don’t count on internal data: The allure of tapping into AIG’s 100 years’ worth of insurance data and expertise is enchanting. In reality, taking advantage of internal data in a large and diverse organization is difficult. Data is often siloed in disparate systems and under the management of stakeholders with distinct priorities, as Blackboard unfortunately discovered. Well intentioned data scientists on staff, generally equipped with sub-optimal tools, can struggle to access and utilize internal data, sometimes even more than dedicated, external specialists would. As many insurers have learned, the ability to efficiently and effectively utilize external data can be a key unlock. Transforming such data into timely and relevant risk insights is necessary in order to successfully serve insureds and to drive profitable premium growth.
We have strong respect for many of the individual team members we have encountered and worked with at Blackboard and at AIG. We commend them on their accomplishments and on their intense effort to unlock value in our industry. Commercial underwriting is ripe for innovation and the combined power of skilled underwriters and cutting-edge technology will allow insurers to meet the evolving needs of businesses. We are thankful to our insurer and MGA clients, and to our partners, for the opportunity to continue to deliver on this mission every day.
