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Duperreault plans to use data analytics to transform underwriting at AIG

Posted On: May. 23, 2017 1:27 PM CST

As Brian Duperreault takes the helm at American International Group Inc., insurance industry analysts say they expect technology to be a key factor in the new chief executive’s strategy.

AIG announced last week that Mr. Duperreault, a longtime insurance executive, is returning to the company where he had worked in the 1970s and 1980s and leaving the top spot at Hamilton Insurance Group Ltd. His appointment was effective May 14.

The two companies will continue to be connected, however; AIG will buy Hamilton’s U.S. insurance platform for about $110 million and have a closer reinsurance relationship with Hamilton.

Hamilton has expanded significantly since its relaunch when Mr. Duperreault took over the leadership of the firm. It’s U.S. platform makes extensive use of technology in underwriting, including a business owners policy that relies on data rather than extensive underwriting questions to offer coverage quotes.

Hamilton also said it has signed a memorandum of understanding with AIG and Two Sigma Insurance Quantified, an affiliate of Two Sigma L.P., the hedge fund firm affiliated with Hamilton, where the three firms, who have an existing relationship, will work together more closely. Attune, an online insurance platform, will expand to target a market segment of companies with annual revenues up to $35 million, representing up to $150 billion in annual gross written premiums.

Hamilton USA will transfer its ownership in Attune to Hamilton Insurance Group and become a stand-alone unit of AIG that will be used to develop a technology platform applying data science and analytics to transform underwriting.

In a letter to the employees at Hamilton, Mr. Duperreault said he was leaving the company “because there are issues at AIG. And I think I can help fix them, in no small part by unlocking the potential represented by the Hamilton/Two Sigma/AIG partnership already in place at Attune.”

AIG urged to tap into data potential

Industry analysts said they expect technology to play a greater role in underwriting in the years to come.

Brett Horn, senior equity analyst at Morningstar Inc. in Chicago, said Mr. Duperreault has a firm appreciation of the value of data analytics and technology. 

“AIG, with its size and scale and global footprint, it’s a potential advantage that they should have presumably more complete data and analytics to underwrite better than smaller peers,” Mr. Horn said. “But the reality is the underwriting has been significantly worse than smaller peers, so there’s … an unexploited potential advantage that AIG has had that it’s focus on technology could bring to the fore.”

Greg Williams, senior director at A.M. Best Co. Inc. in Oldwick, New Jersey, said the use of technology in underwriting has increased over the last 10 years.

“We’ve definitely seen that in personal lines, starting with auto — even on property now — with a lot of more quoting and binding online,” Mr. Williams said. “In the commercial space it’s been significantly slower. We’ve seen more of it in the small commercial lines … but for the large part, we haven’t seen the adaptation of technology for pure underwriting on the commercial side that we’ve seen on the personal side.”

While Mr. Williams said he does expect to see fewer underwriters in the future, “I don’t think we’ll ever get to a place where there’s no underwriters.”

“I think on a large complex risk, you need that expertise,” Mr. Williams said, “and you’ll probably continue to need that expertise. So you’ll probably see a lot more underwriters in that realm, and I think role the underwriter might change.”

“The industry is going to change whether the old-line companies make the changes or whether new companies come and make the changes because there are lot of new startup companies that are changing the dynamic,” said Gloria Vogel, an adjunct professor at New York University.