The dawning of a new year is always a good time to take stock, reflect on what’s happened the year before, and to look forward to what might happen next.
I’m often asked by customers, industry observers, and the Earnix team what I think 2024 has in store for us. So let me dust off the crystal ball and make a few predictions.
As a younger man, prior to receiving my PhD from the University of Pennsylvania, I intended to return to Israel and teach economics at Bar-Ilan University. Instead, I spent a few years in the consulting world, at Anderson and Deloitte (Deloitte and Touche at the time). Detour Number One.
Then I met our founder, Sammy Krikler, who started Earnix to apply analytics for financial institutions to harness their customer data, make optimal business decisions, and improve their performance.
The rest, as they say, is history. Happily, that second detour led me to where I find myself today.
Historical Perspective – Where We Stand Today
Much has changed over that nearly 20-year period to arrive where Earnix is today, as the global leader in pricing and rating solutions for insurance and banking.
In the beginning, insurance carriers were focused on pricing through a cost-plus approach, hoping to compete by focusing on properly estimating actuarial costs and keeping operational costs in line, and then layering on a respectable and predictable margin.
One of our early insights was that this approach made sense to some degree, and was fertile ground for analytical rigor, but that insurers also needed to pay more attention to the top line, and make revenue generation a priority as well.
Which brings into play consumer behavior and competition, opening additional territory for analytics.
We began to look at consumer behavioral models – how will customers and prospects respond to changes in rates and offers? They really don’t understand risks, even the ones that they’re close to, and how they affect the policies insurers propose to write. And they certainly don’t care much about whether carriers meet their business objectives or not (unless they also happen to be shareholders).
Then we realized that pricing is much more like a “team sport,” in need of more collaboration.
Pricing involves actuarial, underwriting, product management, IT professionals, senior executives, sales and marketing, regulatory and compliance – pricing and rating cuts across all those stakeholder functions, all of which have their own objectives and KPIs. And all with established policies and procedures that need to be accommodated operationally to actually put pricing in front of customers and close business.
Now this was something we could really sink our teeth into. Huge numbers of variables, some of which may matter and some of which would turn out not to. An ever-increasing level of sophistication that requires balancing the needs of all those stakeholders. Plus, the effects of economic ups and downs, business cycles, and inflation.
Throw in the demands of pricing and rating in real time, to deploy seamlessly in the cloud, addressing regulatory requirements, the influence of Insurtechs, mergers that have created mega-carriers, an increasing focus on things like climate change, and that’s where we stand today.
Complex and exciting, to say the least.
“What's past is prologue."
-Shakespeare, The Tempest
Financial disclaimers always say “past performance is no guarantee of future results.” But as I scan the road behind for how we got here, and check the road ahead, here are some of my predictions for 2024 and beyond:
Technology Will Continue to Advance
This is an easy one. Innovation never sleeps. Artificial intelligence (AI) and machine learning (ML) are the cornerstones to modernizing insurance and banking, and are key to Earnix’s success to this point.
But we are only at the dawn of what these technologies can do. Generative AI and LLM based applications are prime examples. Not only will they continue to evolve, but I predict that tools to make them easier to apply, more accessible, and more transparent, will grow in importance.
The ability to further open up the analytical environment with Earnix Model AcceleratorTM and the Automatic Generalized Linear Model (AGLM) tool are cases in point. Insurers and banks will be able to utilize whatever models they can dream up within the Earnix environment, leading to new levels of innovation, accuracy, speed to market, and efficiency.
Insurance and Banking Will Remain Conservative
As stewards with significant fiduciary responsibilities, insurers and banks sometimes take their time making changes, even when those changes have demonstrable business upside. Earnix will need to continue to work hard to nurture their trust, and to show that what we do is solid analytically, delivers results, and can be implemented in a timely and predictable manner. And that they can beat their competition and thrive in a fast-moving world.
Legacy Systems Won’t Go Away Overnight
Partially as an outgrowth of that conservatism, legacy systems have become entrenched in banks and insurance companies. Some have very good reasons to exist and no compelling need to change in the short term – think billing, collections, accounting systems – and we need to peacefully coexist with them, even as we modernize pricing and rating, meet consumers whenever and wherever they want to do business, and personalize offers to a greater degree than ever.
Data Management Changes Its Focus
One of the things that slows many projects is that data is not available, or more often not available in a form that’s useful for analysis without significant massaging. In other cases, data privacy concerns rule out using certain data, for fear of exposing personally-identifiable information to misuse.
Data is too important and too valuable to not become better at managing and utilizing it.
I predict that the rapid rise of “synthetic data” and increasing use of external/third-party data will accelerate in 2024, and become insurers’ “superpower” as they redouble their personalization efforts in search of competitive advantage and differentiation, unlocking new revenue and profitability options.
Partnering Will Accelerate
With all the “moving parts” outlined above, insurers and bankers more than ever need to augment their internal resources with trusted third-party partners. I predict that Earnix will continue in 2024 to expand its growing partner community, so that our customers can move quickly and confidently into the future without concerns about system integration, change management, and implementation issues slowing them down.
Something Unpredictable Will Happen
No one can predict all future events, much less get everything right about their effects. Think COVID-19 and a worldwide pandemic. More, and more severe, climate disasters, and escalating replacement costs due to supply chain issues.
About the only protection against uncertainty (since there is no cure) is to continuously and intelligently monitor business performance and market conditions, to remain agile and able to react quickly to change. Agility is technological, organizational, and operational. Real-time analytics in pricing, rating, and underwriting will remain key to pivoting on a dime and to nurturing the ability to compete.
That’s one prediction I can confidently say will come true.