Guiding Insurance Toward a Smarter, Safer Future: Interview with Peter Miller, The Institutes President & CEO

New technologies are transforming the risk management and insurance landscape at a rapid pace, and this ever-changing environment is pushing organizations to innovate alongside it. Peter L. Miller, CPCU, President and CEO of The Institutes recently sat down with John Weber from AM Best TV to discuss how AI, blockchain, and predictive technologies are reshaping risk management, enabling proactive loss prevention, and reinforcing the sector's ethical and educational foundation.

Check out a few highlights from this conversation below, and watch the full interview on AM Best’s website.

John Weber: How is insurance evolving in its use of advanced analytics to address systemic risk?

Peter Miller: It's changing a lot. We've talked for a long time about a concept we call the golden triangle, and that is really coming to fruition. The idea is that there's now more data, and you can have better access to it through cloud services. The source of data is increasingly Internet of Things (IoT) devices—sensors or other devices that feed a stream of data into cloud services—and then advanced analytics and AI that can analyze that data, make sense of it, and do things proactively.

There's a lot in the news about generative AI and different types of AI. That lives on data, and the ability to have more data and more computing power in these cloud services. The insurance sector is really starting to take advantage of that. What we're after is to be able to predict and prevent losses—because the best loss is the one that never occurs—so that we can provide better service to customers.

JW: With climate risk accelerating the frequency and severity of catastrophic events, where are the biggest opportunities for technology?

PM: I think it is in this predict and prevent capability—the ability to identify a risk and determine what we can do to avoid loss associated with that risk. There are all kinds of technology and startups that can gain insight and then take preventative action.

I've talked to several different startups. There's one called BurnBot that analyzes forests and other places where there's wildfire risk, and they'll do preventative targeted burns. It's a really cool idea because there are predictable patterns in how some of these fires spread. Another company called Faura is able to gain really detailed information through satellite images and provide a score for a particular property right down to the property level, along with mitigation recommendations.

We're now able to take much more detailed satellite images, combine them with data sources, and then get very specific on the risk for a particular property. There are also organizations that work with fire departments to identify risks in their area and help homeowners prevent or mitigate those risks.

It's really interesting because people are starting to focus on risk mitigation, which is extremely important as inflation causes replacement costs to go up, creating a protection gap. The future involves recognizing there's not enough premium to cover all potential losses, so we need to figure out how to mitigate losses before they happen. This creates a broader spectrum activity: risk management at the front end in the form of predict and prevent, and then indemnity to pay for losses when they occur. The combination of these two represents a real opportunity for insurance organizations.

JW: What is the RiskStream Collaborative and its purpose?

PM: The Institutes RiskStream Collaborative is an organization we started some time ago to work on blockchain technology. As part of that cloud leg in the golden triangle, you have to be able to store data, use it securely, and then do something with it. RiskStream allows for a very secure way for companies to exchange data and integrate it into blockchain technologies called smart contracts.

Smart contracts can get a stream of data, interpret it, and take an action automatically. The smart contract sitting on a blockchain allows for more efficient exchange of data, but also enables parametric insurance—where you cover a risk based on some parameter. When that parameter, such as temperature or wind speed, gets above a certain level, claims are automatically paid. That reduces claim processing time and gets money into the hands of the policyholder faster.

Blockchain is an enabler of all those things. It's very secure. There are advantages going forward, both in terms of its ability to securely share data and then to execute things like parametric insurance.

JW: Will blockchain technology become increasingly important in the insurance sector?

PM: Yes, and in the economy as a whole. You're seeing stablecoin that's built on a blockchain, which is a medium of exchange that you'll start to see for commerce internationally. This technology has advanced to a point where it can handle transactions at a higher rate. The quality and robustness of that technology has improved considerably, and it's much more secure.  

JW: Are you surprised by how rapidly AI has integrated into insurance after years of discussion?

PM: I think that's partially because the tools are advancing at a really rapid rate and their ease of use. I see three ways that companies are using it. The first is office automation: summarizing an email or claim file or sending out personalized emails to all customers. AI can certainly do that.

The second is integrating AI into existing workflows. This is what I see most people doing. Where they had a non-AI tool, they're seeing they can get good returns by changing out and using different tools.

The third bucket is actual transformation. AI is going to continue to be integrated and accelerate. The capabilities and economics are such that it's going to be a compelling message, particularly in lines of business that are more commodity-based. You can certainly reduce your costs significantly.

JW: After 33 years with The Institutes, what upcoming developments or initiatives are you most excited about?

PM: I'm very excited about the potential of generative AI. At The Institutes, we think it represents an opportunity for us to serve our customers. We teach ethics and hopefully can put an ethical mirror up to the RMI landscape saying, “These are great tools, but we're all here to help people, and we want to do that in an ethical way.”

I continue to be excited about the future of risk management and insurance because it makes people's lives better and safer. When we do that well, people can prosper and have better outcomes. Some of these new tools coming online could really help the RMI field achieve that objective. I get very excited about that.