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InsurTech Ohio Interview with Chad Caldwell of Centric Consulting

Chad Caldwell is a Partner and the National Insurance Practice Lead at Centric Consulting a nationwide leader in business consulting, technology services and digital solutions. Chad has spent 20 years guiding insurance carriers through strategic and technical systems updates that have driven growth, retention and profitability. Chad was interviewed by Michael Fiedel, a Community Leader at InsurTech Ohio and Partner at PolicyFly, Inc.

Chad, have we just started to scratch the surface of the insurtech movement or are we in the thick of it?

“We’ve more than scratched the surface. Like any normal product lifecycle, when something new hits the marketplace, there’s typically a lot of hype around it. That was insurtech a few years ago — a lot more hype than results. But now it’s becoming another integrated component of insurance.

There are a couple of types of insurtechs that stand out. Some are attacking inefficiencies within a very focused portion of the policy lifecycle — like claims or some specific part of underwriting. Then you have major players like Bold Penguin or Root that are driving major changes for large segments of the value chain.”

You mentioned a couple of rising stars that are growing right here in Ohio, what stands out about their approach?

“I see a company like Bold Penguin changing the fabric of the small commercial insurance industry. What I think works so well for them is that they are enabling brokers and carriers to create a better customer experience for business owners. The key here is that they recognize the importance of the agent in this process, versus trying to displace them. Bold Penguin is also driving significant efficiency in the process business owners have to go through to purchase insurance. Efficiency is important in the small commercial space given the low premiums typically involved, but it is important to have that agent touch to be successful. Agents and carriers alike want technology to enable and automate in that low premium, high volume environment.

So it’s a fantastic example of where there’s a strategic goal to be low touch, high volume — and the technology, automation and enablement elements of Bold Penguin line up perfectly to deliver on that value.”

Overall what insurtech trends are you seeing or anticipating?

“As we look over the next three to five years, and these technology startups become more mature companies, some will turn into actual insurance companies. This evolution will lead to mounting pressure around loss experience. They won’t be able to survive with combined ratios of 120-plus year after year. Some insurtechs playing in the carrier space are at ratios far higher than that. At some point you need to have a return on investment. These aren’t nonprofit organizations. So the need for results is becoming critical because the investment mindset is changing rapidly.

McKinsey was talking about what insurtech investments look like in 2020. They pointed to an approximately 50% drop in terms of raw dollars, but a greater number of deals than the previous year. So that clearly demonstrates that the appetite is still there but turning more towards a smarter, smaller investment mentality. Accountability is key and the runway that some insurtechs were afforded is no longer acceptable. That’s driven by a greater expectation that it’s time for returns.

Another dynamic trend is being forced on the industry by the impact of COVID-19. A lot of surveys are saying that roughly one in four small businesses are going to be out of business, if they’re not already. So that means 25% of the commercial lines market, at least in terms of small business premiums, will evaporate. That’s going to put a lot of pressure on insurance carriers to compete for new premiums and create new business opportunities for insurtechs.”

Given all of the pressure the insurance industry faces, what technologies do you think are capable of delivering value and efficiency at such a critical time?

“There are quite a few exciting developments that are real and gaining momentum. In the workers compensation space, there’s extremely creative technology around virtual and augmented reality that is helping physical therapy and monitoring patient progress to make sure people are complying with doctor’s orders so that they can get back to work faster.

In IOT [Internet Of Things] there are a lot of examples of sensory data that provide whole new sources of information that carriers can analyze to determine risk levels and, more importantly, to prevent loss. This an entirely new area of loss prevention that didn’t exist before technology enabled it.

For carriers who are rich in data, machine learning allows them to run models proactively analyzing new opportunities within their book that were previously unforeseen. This level of intelligence can provide insight into new product and pricing opportunities for carriers, brokers, and insurtechs alike.”

The expertise that you and Centric bring to the table requires an incredible balance of core insurance industry knowledge, while juggling the time and effort to stay abreast in very technical trends that are changing constantly. As consultants, how does your team keep up in order to guide clients?

“The vital tool for our team is something we call the Insurance Value Chain. It’s a high-level capability model that’s based on the delivery of customer value and improving the customer experience. We break this model into sub-components, which then have metrics and KPIs [Key Performance Indicators] attached to them. This is an instrument we use to facilitate discussions on specific outcomes that have specific value associated with them. The Insurance Value Chain ensures we’re solving problems that matter and can be measured. It helps us focus on capability first, technology solution second.

In my experience, if you want to make a living as a management consultant and be a successful advisor to insurance companies, you need to know the insurance value chain, and the underlying processes and capabilities. Then you can marry that industry expertise with technology specialists who really understand the domain knowledge and have the subject matter expertise on core systems, machine learning, robotic process automation, advanced analytics, and so on.

This allows the execution of extremely technical projects in a way that is laser focused on a practical application that’s trying to solve a valuable problem. It’s absolutely thrilling when the game plan comes together, we’re measuring success against our original goals after launch, and the intended benefits are being realized.”

Allow me to close by putting you on the spot Chad. What’s your go-to advice for clients?

“I see people go down the road of a ‘build it and they will come mentality’ and every time we’ve seen that it’s been ultimately doomed to fail. You absolutely must have a business-driven outcome that technology can then enable. If you’re not focused on the business problem first, the conversation around technology is completely misplaced.”

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