Insuring the Innovators

The never-ending churn of technological advances presents opportunities and challenges for the insurance industry, says one innovator.

Technological developments such as autonomous vehicles and humanoid robots are making their way into the insurance marketplace, requiring insurers to adapt and rework their business practices, says Peter Mielert, head of Y-Risk Innovation Labs at The Hartford. “Understanding the physical and AI-related risks associated with these technologies, particularly in terms of decision-making and safety when working alongside them, is key to our business,” he adds.

Y-Risk, a managing general underwriter acquired in 2018 by The Hartford, provides tailored insurance solutions to technology-oriented companies. Y-Risk Innovation Labs was born of Y-Risk’s innovative underwriting culture, connected customer expertise, and experience writing emerging business models. Y-Risk Labs currently has a portfolio of pilot projects at various stages of development and execution, offering solutions to The Hartford’s Small Business, Middle and Large Business, and Global Specialty lines. It also serves emerging technology-oriented companies and business models with innovative, usage-based insurance. Its risk mitigation experiments focus specifically on technological improvements for property, liability, auto, and worker safety risks.

“Organic disruption” will develop as companies make technological advances and as Y-Risk customers take up those technologies. Changing business models also introduces new dynamics for insurers. Mielert says: “We must be prepared to address both types of risks.”

Mielert emphasizes the importance of practical underwriting and risk engineering in establishing the coverage process.

“We need to understand both hardware and software risks, and how autonomous vehicles and robots make decisions and the implications of those decisions,” he says. “Once we have underwritten a few of these risks and understand them more deeply through practical, hands-on experience, then we can begin to write coverage for them at scale. This may involve creating new and innovative insurance products in order to do so.”

The Innovation Process

Y-Risk Labs’ innovation process requires open communication and responsiveness to its customers’ demands. Three main components are involved in the process, Mielert says: collaboration, rigor, and structure.

The Hartford’s subject-matter experts, distribution partners, and outside experts are regularly brought together to collaborate on all stages of Y-Risk Labs’ process, from the creation and testing of new products to the evaluation of their role in creating customer value. “Innovation is a team sport, and it takes many roles and players to be successful,” Mielert says.

New ideas can only develop when new perspectives join the conversation. Y-Risk Labs seeks co-creation and the sharing of a wide range of viewpoints to spur conversation.

To achieve the other two components of rigor and structure, the innovation process must be “controlled, repeatable, and executed with rigor,” according to Mielert. Part of how Y-Risk Labs maintains that structure and rigor is through detailed business charters, defined pilot and experiment workstreams, and project managers to oversee it all. Additionally, determining the right metrics for success and socializing those in all stages of the process is fundamental to innovation success, he says.

Failure in the process occurs when what began as a positive insurance idea does not result in direct value to the customer. As Mielert puts it, “innovation only happens once customers see value in new products and capabilities.” In comparison, Mielert highlights his organization’s style of open communication, which involves both customer and broker input in the alignment of their business strategies to help Y-Risk Labs avoid pitfalls and chart the best path forward.

Culture of Innovation

Y-Risk Labs’ culture of innovation is also part of its success, and it is strengthened by ensuring practices consistently benefit the business. As Mielert explains, “our innovation culture celebrates success, expects and champions new ideas, learns from failure, and commits resources and attention to innovative activities.”

Y-Risk Labs is consistently monitoring the market for opportunities for innovation. This includes developing solutions to current business challenges along with maintaining awareness of emerging risks that offer the opportunity for business expansion; Y-Risk Labs also leverages new technologies and data sources to better understand customer needs and exposures.

“Innovation is a discipline, not just a mindset. While invention is the start of innovation, it is not the end. Creating customer value requires execution,” Mielert says. “New ideas come from considering new perspectives. Those new perspectives come from diverse teams sharing different ideas, spurring conversation, collaboration, and co-creation.”