From Buzzword Bingo to Business Success: How Insurers Can Navigate the AI Hype
AI hype is at its highest point, but how can insurers separate the substance from the hype when it comes to new technologies? The answer is surprisingly simple.
Every year brings a new wave of hype and a new set of buzzwords that confuse the picture. And alongside those comes a flurry of keynote sessions, webinars, blog posts, venture capital investments - and confusion.
Honestly, it can leave all of us playing Buzzword Bingo.
Lately, the biggest hype wave in town has been Generative AI (Buzzword Bingo card includes GPT, Large Language Models, and GenAI). And certainly some of the implementations are astounding and impactful - we wrote about the risks and rewards of these technologies recently, including how we’re using them at Kalepa.
But at the same time, every technology cycle involves ‘overhype,’ and this time around, it’s extreme. New startups, new funding rounds, and oodles of buzzword-laden product announcements touting how a company is actually going to change the future of insurance this time.
It’s overwhelming. But it’s also nothing new. The Gartner Hype Cycle has been tracking hype waves of emerging technology for almost 30 years (full disclosure that we were also hyped up in a Gartner award). Time and time again, we see the same trend:
Why does that look so familiar?
Here’s the google search frequency for some of the biggest technology trends of the past several years:
And here’s the stock price for a few of the neoinsurance ‘disruptors’.
The problem isn’t that new technologies have no value – far from it. For every Pets.com there’s an Amazon; for every Lordstown Motors there’s a Tesla. The real problem is that every tool must be used in its proper place. The insurers that can figure out how to capture the value without getting caught in the hype are the ones who are poised for growth.
But that begs a question – in the face of complicated buzzwords and confusing technologies, how do you know when you’re looking at hype versus substance?
It’s all about simplicity.
Fighting the Hype with Simplicity
It’s funny, in most aspects of life, you know you’ve mastered a complex subject if you can explain it so simply that a five-year-old can understand. But in business, the opposite seems to be true – using big words and buzzwords actually makes you look more knowledgeable.
That’s a major reason that the business world is so susceptible to hype.
Let’s go back to the Gartner hype curve. Whenever you’re evaluating a technology, one way to think about “where are we on the hype curve?” is the simplicity/complexity associated.
The peak of the hype cycle arrives when there are a million ideas bouncing around about how to use the new technology (or even before that, when everyone proclaims that it’s going to change the world, but haven’t figured out how). The buzzwords are convoluted, and while there may be promises of simplicity for users, builders, or buyers, nothing is delivered.
In the trough of disillusionment, companies are trying to use the technology and finding themselves in messy situations with unexpected complexities.
However, for the technologies in the plateau of productivity, the exact opposite is true. The complexity is now hidden from view, operating in the background, while the new technology makes adoption easy for users, builders, and buyers. For these technologies, you can talk about the technology in simple language that truly delivers on your objectives, rather than the orchestrations under the hood.
For insurers, when you’re grappling with where you are on the hype curve, ask “Does this make things less complex for the lives of the people I care about?” And whether those people are your policyholders, your employees, or yourself, if the answer is no, then it’s just hype.
At this point, I think’s it’s worth clarifying a couple things:
- The best technology can be extremely complex. The important element is not the complexity of the product, but the simplicity and value of the solution. If all of the complexity is behind the scenes and the value is clear, that’s a real benefit.
- The technology has a better chance of being substance when it is core to the business (simple), and is more likely to be hype when it is non-core (convoluted). ‘Gamification’ worked at Duolingo because it helped people enjoy their learning experience and come back for more every day. In contrast, gamification at Zappos didn’t make shoe shopping any more enjoyable, so it was ultimately a flop.
Don’t believe us that simplicity is the key to cutting through hype? Let’s look at a famous example that illustrates the point.
A Simple Case Study in Simplicity
A classic tale of simplicity cutting through the hype comes from the world of arcade cabinets. Video games first came into existence throughout the 1960s, and hype was building on college campuses like Stanford where computer mainframes were available (basically “on-prem video games”).
Then in 1971, Ted Dabney and Nolan Bushnell (who later founded Chuck E. Cheese) brought video games to the masses with the creation of the first arcade game: Computer Space. However, Computer Space didn’t turn into the runaway success that its manufacturers had hoped for, selling less than 1500 units over its lifetime.
But Bushnell and Dabney weren’t done. A year later they founded the company Atari and launched the arcade game that would define the industry:
Within two years, Atari sold 8000 arcade cabinets, and Pong was eating up quarters like nothing seen before. Bushnell estimated that the average cabinet was host to over 150 games per day – an unfathomable amount for other coin-operated games like pinball.
Atari continued to simplify the pong experience even further in 1975 when they brought Pong to living rooms with Home Pong. That holiday season, they sold 150,000 units.
But why did Pong succeed where Computer Space failed?
The explanation offered by Bushnell himself was simplicity. Computer Space was notoriously unintuitive and even came with an instruction manual. Reflecting on this later, Bushnell said “Nobody wants to read an encyclopedia to play a game.” In contrast, Pong was incredibly simple to play – twist the knob one way to go up, twist it the other way to go down, don’t miss the ball. You only needed one hand!
That gameplay simplicity is only part of the story. Behind the scenes, both machines were complex to code and build. And they were worlds simpler to operate than the “on-prem” games that had come before. It was the simplicity of Pong in the arcade – and later pong in the home – that delivered on the early promise of video games.
One final, important note on this story - when we say that Pong delivered while Computer Space was hype, how did we determine that? It’s obvious, right? It all comes down to business metrics.
Keep the Metrics Simple - Focus on the business KPIs
It’s not a novel idea that “measuring things is a good way to decide if they’re working.” But new technologies and all their buzzwords can also confuse the conversation around KPIs. Oftentimes, these new technologies come with new metrics of their own.
Again, though, the key to differentiating hype from substance comes down to simplicity. In this case, it’s the same simple question effective leaders always ask: How does this technology improve the KPIs that are most important to my business?
If you’re an underwriting leader, those metrics include the combined ratio or quote and bind rates. If you’re an operator, you may be more concerned with audit results or the percentage of quoted/bound submissions that comply with guidelines. If you’re focused on underwriter personnel topics, you’re more interested in underwriter retention and efficiency metrics. Regardless, these are simple business KPIs that you already know.
But during the hype phase, the KPI topic is a confusing mess. Be particularly aware of these unfamiliar and unhelpful types of metrics:
- Vanity metrics – These figures may look good to outsiders or people not in-the-know, but they’re not actionable: they do not help you understand how your business is really performing and they do not guide your company strategy. Think about app companies who brag about how many downloads they have, without acknowledging that they don’t have many active users or aren’t making money.
- Technical metrics – These KPIs may tell you information about the performance of a technology, but if they don’t tie back to business outcomes, they’re mostly hype. You may hear terms like ‘precision’ and ‘recall’ used to describe the accuracy of AI models – these are important for understanding the technical quality, but on their own, they don’t answer the question of “is this hype, or is it helping my business?”
- “Anecdata” – Anecdotes are powerful ways to provide examples and illustrate how the technology works, but if they’re not coupled with business metrics, the overall impact may be more hype than substance. Every technology has a few anecdotes of how it was helpful in a specific scenario – that doesn’t mean it will move your business forward.
- No metrics – Most obviously, if there isn’t a way to measure the impact of a new technology, there probably isn’t one.
In the Pong story, we didn’t care about the screen refresh rates, the memory of the machine, a story of a couple meeting over a game of Pong, or proclamations about how video games would change the world. If you were an arcade owner in the early 70s, you wanted a Pong cabinet because a Pong cabinet would delight your customers and make you a lot of money. That’s how you knew that Pong was substance while Computer Space was hype – end of story.
There’s one more important point we need to make on cutting through the hype. So far, we’ve largely been talking about new technologies in a vacuum, but if we really want to separate the wheat from the chaff, we have to talk about implementation.
The Value of Turnkey Technology
Most technologies implementations fail. According to BCG, only 30% of IT transformations are actually successful.
This is a harsh reality for insurers. But the answer is not “never adopt new technology” – that’s a recipe for losing the technology arms race. Instead, carriers and MGAs should place a premium on turnkey solutions that are simple to implement.
“Turnkey” is a perfect word to describe these technologies. Think about what you need to know to operate a car versus what you need to know to build one. “If I turn the key, the car goes vroom. I press the right pedal to go, I press the left pedal to stop, and I turn the wheel to steer.” There’s no need to assemble the car yourself. No need to crank the engine by hand. You don’t even have to know what a catalytic converter is.
It's so simple that every five-year-old can understand it.
But many technologies that insurers are considering aren’t so simple. Software solutions often take 2, 6 or 12 months to configure and set up before they start (possibly) delivering on those business metrics. Policy admin systems can take much longer than that. Home-grown design and implementation phases often wind up buggy and years behind schedule, with maintenance being a long term drag on an entire IT team. And many of these systems only address a small part of the picture, which means complex integrations are required before you can start getting value.
Unfortunately, in the technology world, this mindset is most common in the enterprise realm - legacy systems that are challenging to implement, expensive to change, complex to maintain, and often low on value. Compare this to consumer technology where nearly everything is turnkey. Can you imagine waiting months (or years) to set up an Uber account or to download Instagram? No one would ever use it, and with good reason.
Among B2B software, turnkey technology is a game changer. You can see the value from day one, so you can decide for yourself whether it’s hype or substance. Integrations are a breeze or may not be needed at all, saving you from headaches and delays. On top of that, insurers can measure the impact to their business metrics from the start – it’s not some uncertain future state where the implementation may not even succeed.
The trouble is, while turnkey technology is simple to implement and integrate, it’s more complex to build. That’s a big reason it’s not so common. It’s a bit ironic – the less complex the implementation seems, the better the technology actually is. In that sense, simplicity is an underrated indicator of quality, and therefore a way to cut through the hype.
How Are We Handling the Hype at Kalepa
On one hand, it’s great that we work in an area that’s being extremely hyped up at the moment – AI software is the hottest trend in town. But on the flipside, it’s more important than ever that we remain focused on our mission: making every underwriter and underwriting organization as effective as they can be.
Our underwriting workbench – Copilot – helps commercial P&C underwriters make better underwriting decisions, faster and more confidently than ever. We’re trusted by insurers of all sizes, including top 10 carriers and leading MGAs.
From the beginning, we built Copilot to simplify the life of underwriters. It brings everything underwriters need to write a risk into one screen and strips out the noise. Copilot handles the complex pieces in the background, things like:
- Ingesting all of the submission documents (email, loss runs, application forms, etc.)
- Triaging and prioritizing submissions to deliver an optimal book
- Providing in-depth risk analysis to automatically identify all exposures and controls for each risk
- Surfacing third-party data from many sources (Copilot ingests billions of data point out of the box and can integrate into any internal or external data sources with ease)
- Streamlining broker communication, and
- Automated portfolio reporting, analysis, and optimization
That way, underwriters can focus on underwriting.
Copilot is also designed to be turnkey. It can receive a submission from an email inbox, a portal, or anything in between.Your underwriters can dive right in and start underwriting from day one.
Copilot works out-of-the-box, but it can also integrate with any submission management system, internal data sources, or third-party data sources. With Copilot’s simple APIs, insurers can connect in a flash.
At Kalepa, we’re all about delivering value to underwriters and insurers. We’ve helped carriers and MGAs of all sizes to hit (and exceed) their growth and profitability goals. One large carrier was able to improve their combined ratio by 10%.
For insurance professionals who want to understand these technologies at a more practical level, we’ve compiled the go to guide on the risks and rewards of these new AI technologies and easy-to-understand descriptions how Copilot’s features can transform your underwriting.
If you want to see Copilot’s AI in action so you can make sure we’re not just hype, feel free to set up time for a demo. We’ll even show you how Copilot works on your own submissions.
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