Speaker 1:
From the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, welcome inside the Ice House. Our podcast from Intercontinental Exchange is your go-to for the latest on markets, leadership, vision, and business. For over 230 years, the NYSE has been the beating heart of global growth. Each week we bring you inspiring stories of innovators, job creators, and the movers and shakers of capitalism here at the NYSE and Ice's exchanges around the world. Now let's go inside the Ice House. Here's your host, Lance Glinn.
Lance Glinn:
Data is the engine driving today's insurance industry turning raw information into actionable insights. It allows insurers to see patterns, predict risks and price policies with unprecedented precision. Beyond numbers, data fuels smarter decisions, streamlines operations and transforms how the industry operates at every level. LexisNexis Risk Solutions Insurance is the go-to data and analytics partner for the insurance industry, powering smarter decisions at every step. Their insights help carriers assess risk, streamline claims, and improve customer experience with speed. Leading the business is our guest today, CEO, Bill Madison. With nearly four decades of experience, Bill has navigated through the industry's toughest challenges, always working for the betterment of insurers and policyholders. Bill, thanks so much for joining us inside the Ice House.
Bill Madison:
Thanks for having me.
Lance Glinn:
So I'd like to begin with something you said in LexisNexis Risk Solutions article titled, "Insurance Interest, Data Supercharges the Mastery of Risk." You noted that because everyone in the organization is also a consumer of insurance you all think about removing friction in the insurance process the same way that you'd want to experience it yourself. So how does just viewing the industry through that consumer lens influence the way you and your team design these solutions?
Bill Madison:
Well, it's a big part of our strategy, first of all. We talk a lot about the journey a consumer goes through when they're hitting a brand. And you think about in years past, the consumer had to provide a lot of information in order to get an insurance policy. So that was problem number one. And so you sit there and you really start to think about the promise that we bring to the industry. And a lot of it is more intelligence about the risk itself, but how can you use that philosophy of solving problems and falling in love with the problem and in this case, taking friction out of the process. And we do that through the better use of data and analytics.
Bill Madison:
So instead of collecting lot of information from the consumer, do you position it where the consumer is confirming information, big difference between the two. So as soon as that consumer hits the brand and you're asking on the insurance carriers asking the consumer for some basic information, name, address, date of birth, what can we provide back to the carrier that's important to the policy where the consumer is actually confirming the information. So that's really the beginning of the journey of taking friction out, making it easier for the consumer to do business with the insurance carrier.
Lance Glinn:
So you've been in this space for nearly 40 years, long enough obviously to witness some remarkable shifts, not just in technology but also in the way data drives decision making. So just looking back to when you first started, which based off what your team told me it was in your garage almost four decades ago, how would you describe really the evolution of the industry from then to now? And I know 40 years is a long time.
Bill Madison:
It's a long time.
Lance Glinn:
You can really sum it up these last couple four decades. You obviously have different technological advancements that are popping up, but how would you describe it?
Bill Madison:
And so a lot of it is the better understanding of data. There are a lot of data assets. It was just starting to formulate about 40 years ago, how do you actually get into an understanding where it's having a huge impact on your strategy as an insurance carrier, it was all new at the time. There was inspection services and basic information that you're capturing about the risk. But to automate that and to get a lot of that into a database format, a lot of it comes down to how does the insurance industry ingest that intelligence where they can make informed decisions associated with it? How do do you continue to layer intelligence as new solutions are coming into the market? So you get to a point that you have better and better understanding of the risk without losing what you learned yesterday. So it's constantly evolving, to your point. And obviously technology's played a huge role in that as well.
Lance Glinn:
Yeah, and we're going to talk about some of those technological advancements as we proceed on in our conversation. But data, you talked about its evolution. It was previously used, I think to really just simply support decision-making. But today, it's often the starting point in any industry, not just insurance, but it's often the starting point that really drives these decisions now. So we're going to dive deeper into how LexisNexis Risk Solutions Insurance uses data as we go. But first, what does this transformation mean? The transformation from it being used to support to now being a driver? What does it mean for how you lead this part of the business and how your team goes about helping these carriers?
Bill Madison:
Well, and a lot of it, I'm going to go back to the statement I just made a second ago, falling in love with the problem. So it's so easy as business today to create a solution and trying to find a problem that this solution is actually addressing. We start at the other end of really understanding the problem of our customers. So we have an account management model. So we don't provide our solutions or sell our solutions into the insurance industry where you have a hunter-farmer approach. By account management, we become an extension of that customer, of that insurance carrier. As a result of that, we start to understand the promise they're going through. And so we have that engagement, which allows us to sit back and say, "Okay, is this something common across the marketplace? And can this problem be solved through the better use of data analytics?"
Bill Madison:
And a lot of what we do, we don't return content by itself. We deliver decisions. So think about the difference between the two. And if you're delivering raw content, it's kind of easy to do that. You just kind of toss it over the wall and you say, "Okay, do with it what you want, embed into your process and you just let it go." We're so deeply embedded into the understanding of the problem itself. We try to make it easier for the systems of the insurance carriers to ingest it, make full use of it and how it's applied across their entire infrastructure in a way that they have a better understanding of the risk itself. So that's what we're extremely focused on.
Lance Glinn:
So to that point of risk, the very nature of it has shifted in today's interconnected, tech-driven world, right, threats, vulnerabilities, even the speed at which risks emerge. It obviously looks very different than they did maybe when you started nearly four decades ago. How have you seen just that overall risk landscape change and what does it mean for the type of solutions that you and your team are focused on delivering?
Bill Madison:
Well, it's not only the evolution of the risk itself, it's the demand for speed. So it's the demand of understanding the risk faster. So you've got two speed elements here, you've got the evolving risk, and then you've got the understanding needs to be as fast as possible. And when I say fast as possible, it's sub-second processing so they can really understand being the carriers of the risk itself and how do you apply it.
Bill Madison:
So there's two components there. On the evolving risk, I mean a great example is the pandemic. What happened on the evolving nature of the market itself, how things were shifting over that five-year period since the pandemic occurred, a lot of dynamics associated with it all involving the associated with the evolving risk from the standpoint then you have a lot of movement to the cloud that made organizations like LexisNexis more efficient. That got us into a position of providing the intelligence at a faster speed. So you've got those two components as well. So we've got to be in the know on both components and how do you apply them at a point where it's making a huge impact on the market.
Lance Glinn:
And I think LexisNexis Risk Solutions Insurance is really in a unique position where you play a pivotal role in how insurers operate. You're working with all top 25 US life and commercial auto insurers and impact more than 230 million purchase decisions each year. Just what are these in practice, what do these global partnerships look like and how do you collaborate with these carriers on a more basic level to help them tackle their biggest challenges that ultimately the policy holder at the end of the day is better off for it?
Bill Madison:
Yeah, well, ultimately, to your point, the consumer, keeping the consumer front and center in all those decisions. So I talked about the journey in our strategy, the journey of a consumer as they work with an insurance company. There are points along that journey where the insurance carriers need more intelligence about the risk to ultimately price it appropriately, to ultimately get it into the infrastructure. So when the event of a claim happens, how do you bring that intelligence forward?
Bill Madison:
How do you bring more information about the risk so the claim can be settled faster, where really the consumer satisfaction comes into play? Because if you look at the insurance industry and insurance carriers, when they start to lose risk, a lot of it starts at the point of need, point of claim where the claim is in handled properly at the right speed, where the consumer loses confidence with that carrier on the go forward. So we play a pivotal role in not only bringing the knowledge of at the risk forward, but also at a speed that's satisfactory to the carrier, into the consumer.
Lance Glinn:
So I spoke earlier said, we are going to talk about technological advancements not only for LexisNexis, but for the insurance industry and really all industries as a whole. And we're better to start than AI. It's something we talk about pretty much on every podcast we have because it's impacting every single industry that we have that we at least highlight here on the podcast, insurance, retail, whatever it may be. And I know at LexisNexis Risk Solutions Insurance, one example of AI or one example of a technological advancement that you're using is this fly reel technology. It puts property assessments directly into the hands of the policyholder. How does this shift giving customers more control, transform just the claims experience overall?
Bill Madison:
Well, so you've got it in that case with fly reels, both on the underwriting side and the claims side. So it's actually two points in the process. Probably the word to use there is education. Putting the consumer in a position to better understand how insurance works. I mean, you think about that statement, a lot of the challenges that consumers walk into is a lack of understanding of how insurance industry is really looking at them as a risk.
Lance Glinn:
You were looking at one right here.
Bill Madison:
Well, but it's true, right? Anytime you have a conversation, you say, "Man, my rates have gone up, right, over the last few years and I haven't had a claim and I've been with the insurance carrier for 20 years. So what's going on?" So these are conversations I have with random people as well as my friends and family members as well. And it's the whole ecosystem of insurance. And again, I reference back to the pandemic, what's happened since then. And it's not just about the risk, it's about the evolving risk within the market itself. Going forward, from a technology perspective, how does that come into play in helping to better understand the risk at a faster pace where you're actually getting to a position with Flyreel, educating the consumer at the same time?
Bill Madison:
So if you think about on the new business side, we've got the studies with consumers where they're very happy with the process that they now are capturing all the intelligence internally within the home and externally. So now they have a deeper appreciation as to what's important for the insurance carrier. We're guiding the consumer through that process. So that's a big play with putting the technology in the hands of the consumer. That's then with that intel is transformed or transferred to the insurance carrier that they can use it a price as a risk, then a point of claim on the smaller claims, say it's a kitchen fire where you're capturing that intelligence as well.
Bill Madison:
At that point, now, the insurance carrier has the ability to compare the two at point of new business underwriting at point of claim, bringing the two together so you have a complete picture of that risk and how to manage it on the go forward. So a lot of positives associated with that. So we're very pro transparency, being very transparent with the consumers, but what we have found with this tool and the Flyreel application itself, it becomes a very important asset that we have in truly, and again, repeating what I just said, but educating the consumers as well as helping the carriers understand the total risk itself.
Lance Glinn:
Absolutely. And I like how you brought up education because that's something I certainly could used when I first started going on my own insurances when I moved into my own apartment, when I got my own car, when I got off my parents' health insurance, that education certainly would've helped me years ago.
Bill Madison:
Well, it's frightening, isn't it when you're-
Lance Glinn:
It's 100% frightening. People look at it, I think as that first step into a real adulthood is when you have to start paying for your own insurances. And I know I certainly to a certain point looked at it that way, but that education point is really key because it's so important for consumers, especially people my age, right? I'm only 29. It's so important for people my age, the younger generation, to understand all these different nuances and all these different points of information that you're talking to.
Bill Madison:
Well, as you go out there, and especially if you had an insurance carrier's website, you have all the options associated with it, and you're sitting there and you're looking at the options, and as a consumer, you're going, "I have no idea what to pick. "
Lance Glinn:
100%. 100%.
Bill Madison:
And so now can we use AI? Can we use technology to actually help you understand what to buy, right? In combination with the data assets that we're providing back to the carrier, the two coming together has an incredible opportunity to take a lot of the fear factor away from consumers, especially in your situation. You're entering that market for the first time. You want to make sure that you have the right coverage.
Lance Glinn:
Absolutely.
Bill Madison:
And even with that Flyreel application, you're sitting there and what we see are consumers actually in a positive way over-reporting because they want to make sure they have the right coverage.
Lance Glinn:
Absolutely.
Bill Madison:
Which is great. [inaudible 00:16:23] with it. So we spent a lot of time and energy on that as well.
Lance Glinn:
Absolutely. So just looking at AI from a big picture perspective, I think insurance has always been about predicting and then managing risk, AI as a whole, uncovering patterns and insights and data. That's what a lot of it is used for. Just how is AI changing the way insurers understand price and even prevent risk compared to traditional approaches 10, 20, 30 years ago?
Bill Madison:
Yeah, I think we're at the early stages of that, right? It's going to continue to evolve. The one thing we all have to remember is the human element. You just can't let it run and go, right? You have to have human oversight associated with it. That's front and center. We're very focused on that as an organization. And the first thing, I should have mentioned this a second ago, but the first thing I think we need to do, what is AI?
Lance Glinn:
Sure.
Bill Madison:
Right.
Lance Glinn:
I mean, there are thousands of use cases out now with you can only imagine millions more to come that we don't even know about.
Bill Madison:
And we don't know about. But again, it's a true definition of it. The funny thing when we joke about it internally, you interview 15 people and say, "Please define this."
Lance Glinn:
You get 15 different answers.
Bill Madison:
No, you get 20 different opinions. And it's so funny to watch it from very basic if-then logic to something so sophisticated that people aren't even engaged with it yet. So everything else in between. So I think first of all, we need to really understand way AI is really going to do for the market. We've had versions of AI for decades out in the marketplace, modeling data assets, thinking differently on predicting the likelihood of a future claim. So if you think about out credit scores for the financial market, they're trying to predict an outcome over the next so many months. In their case, I think it's 12 months as well. We're doing the same thing, but related to insurance, the likelihood of having a claim over the next 12 months to understand you as a risk and the components of how you look today based on your prior experiences, the likelihood to have a future claim. So that's been fundamental to what we've been doing for years. Now, how do we advance it?
Bill Madison:
A lot of it's with process, internal process, bringing more intelligence out of a traditional paper report, for example, of a police report that's sitting out there that is text in nature, handwritten. How can you extract intelligence using AI out of that particular report that's used to settle a claim, have it so that is being reported back to the insurance carrier consistently in a data stream, digital stream that the insurance carrier can actually read it with the machine, but more importantly, the consistency associated with this. So you don't have 5 or 6 or 10 or 20 or 100 claim adjusters having their own individual interpretation of what the police report is saying. How do you bring the consistency that's the other side of AI that is going to play a huge role going into the future as well.
Lance Glinn:
So you mentioned we're still in the early part of it, specifically in the insurance industry. Is there a cautious optimism for what the future could bring because there are a lot, millions frankly, of use cases that we don't know about? Is there a excited optimism like, oh my God, what can AI uncover in the next 10, 15, 20 years, frankly, in the next 10, 15, 20 months? I think everybody is excited or cautious.
Bill Madison:
I think extremely excited associated with it. How do we become more efficient? I think the fear factor runs into the masses where they're going, "What, is it going to eliminate my job?" And I think with any new technology that fear is out there that hits any particular industry. But I think you're still going to have to have, again, as stated, massive human intervention associated with this.
Lance Glinn:
There's always going to be that interconnectedness between.
Bill Madison:
And how does it make us more efficient? So the humans that are in the throes of those transactions, how's it going to make them more efficient on the go forward?
Lance Glinn:
Bill, earlier we touched on LexisNexis Risk Solutions Insurance work on the impact of data and insurance. Another recent article looked at what the shift to electric vehicles means for auto insurance, comparing it to the transition from horse-drawn carriage to combustion engines that we know today. And of course, that transition happened a century ago, this new transition, how significant is it?
Bill Madison:
Well, it is pretty significant. So anytime there's a, in this case, new technology, because that's what we're talking about here, a new technology, the lack of performance data. Let me think about what I just said. The lack of performance data, understanding how that risk and how to manage it, how to price it. You almost have to launch and learn, gather intelligence over time, gather performance data associated with it, then continue to fine tune your pricing models on the go forward. That's part of the challenge in the early days.
Bill Madison:
I think the industry is getting much better at this right now, but some of the challenges that have occurred because of that new technology and the other side of it, that new technology is so different in terms of how you drive that vehicle versus what was in your garage yesterday. So we are doing a lot of research and studies on the profile of the garage, what's in the garage associated with it? Do you have an ice vehicle sitting within the garage itself in combination with the electric vehicle? Both of those drive differently. So I'm driving my ice vehicle, my normal gas powered vehicle during the week, weekends, I jump in the ice vehicle. Am I going to drive that vehicle the same way I drive the EV vehicle?
Bill Madison:
That same... Am I going to drive that vehicle the same way I have driven the ice vehicle all week? Probably not. The difference in when you accelerate and how you brake is massively different with EV opposed to the traditional ice vehicle. So what we're seeing is this training curve where it takes literally months, especially if you have the inconsistency of use within the household between those two products, does it have a bigger impact on having a claim over a shorter period of time? And we're seeing the performance of some of the garages with two separate technologies sitting within the garage being a little more risky that the insurance industry starting to take a close look at.
Lance Glinn:
So you have all these different variables.
Bill Madison:
Right.
Lance Glinn:
You mentioned even something as simple as someone like I would think, "Oh, it's a garage, I have two vehicles, one's an EV, one's a combustion engine. I wouldn't think twice about that." But obviously you guys are, how are you taking all this data that you now have then and transferring it over to these insurance carriers and helping them better understand it so that they can, again, work for the betterment of the policyholder?
Bill Madison:
Yeah, so great question. So another way I would state that same question, how do we make it real? So how do we present it back to the industry where they're looking at it in a way that's going to impact their strategy on the go-forward as well? It's a lot of testing, right? It's not looking at a few records and saying, "Okay, we've got it. This is how we're going to price this risk on the go-forward." Literally it's tens of thousands, in some cases, millions of records and examples of appending performance data to those files, analyzing those, providing the right distributions back to the insurance carrier, and then that organization working with their actuaries, working with their claims organization is complex.
Bill Madison:
So my answer to your question is, it depends, is the answer everybody hates, but applies a lot to the insurance industry because of all the variables involved? There are some consistency carrier to carrier, but there are a lot of variables that make it different in their approach to these things, how they launch and learn, or do they want everything perfect before they actually get into a process of really accepting, in this case, EVs within their portfolio. So that's what we have to take into consideration.
Lance Glinn:
So I want to pivot the conversation real quick. And as I was talking to your team leading up to this interview, we discussed a little bit about the topic of rising insurance costs and the real why behind it. And like I said before, I'm 29 years old, I have a newborn.
Bill Madison:
A few shocking statements.
Lance Glinn:
A few shocking statements. I have a newborn who I... Newborns cost money. And so I wanted to just ask you this question, and this is the only question we're going to talk on this subject, but I wanted to get it out there. I'm curious as again, someone who's newly over the last four or five years on, obviously my own health insurance, auto insurance, renters insurance, et cetera. The industry we talked about earlier is evolving. We know that. Talked about the technological advancements, talk about the new things that are popping up. But with this evolution also comes the increase in costs and insurance costs. It was the American Property Casualty Insurance Association highlighted in a recent article what you can do about the cost of insurance when everything is getting more expensive. It was sent to me, your team, it really popped into my eyes. I was like, "I got to ask Bill this question." What's really driving these ballooning costs? Where are these coming from and why am I paying more?
Bill Madison:
Yeah, so it's a complicated question.
Lance Glinn:
I'm sure. It's an easy question to ask. Well, why am I paying more? But I'm sure the answer, we can have a whole podcast, I'm sure on the answer.
Bill Madison:
Yeah, well, you could do one. Let me simplify it. All right, so it goes back to my reference on the pandemic. Okay, so you think about what was happening in March in 2020, the world is thinking differently about a lot of things. So you as a consumer, you were not driving your vehicle because we're going to stick on auto for a second.
Lance Glinn:
I was not driving my vehicle.
Bill Madison:
So it was March, you are driving, right? End of March, you're not driving, it's parked in your garage. Okay. So consumer groups were saying, "Okay, so why are we paying all these insurance premiums out there when we're not driving the vehicle?" And it's complicated. Really, the insurance companies still managing risks and so forth. They got costs. So they started to feel the pressure and in some cases they were giving rebates back to consumers. Some were giving the relief on the payment, other premiums coming up. But for the most part, the insurance carriers started to file lower rates with the departments of insurance across the US market. So when you're lower rates, it's all for the good of consumers associated with it. But the carriers were doing very well financially because no one's driving, not having claims. So you had that interesting dynamic over the course of 2020, '21 hits. And guess what? Consumers started driving again.
Lance Glinn:
Things opened back up.
Bill Madison:
But they opened back up in a big way. And the industry really couldn't anticipate how active consumers are going to be in driving again. So now that the claims started coming through, they go back to the departments of insurance to get the new rates file and the departments are going, "Oh, can't give you the 12% rate increase, but we'll give you 2 or 3% and you've got to go and take this over a period of time." Excuse me. So anyway, you have that dynamic. Then you had supply chain issues, you had labor issues. Remember the chip shortage you associated with it? Used car values were going through the roof. So all those things were hitting the industry at the same time, but they couldn't get the rate to really adjust to and think through all these changing dynamics.
Bill Madison:
So you had '21, '22, and '23 where the industry was literally losing billions and they were operating in the red for that period of time. And so race continued to go up in working with the departments and the industry had all the stats to say, "Here's why we're asking for the raise." So they did go up, but it was over a period of time to a point that we as consumers were all feeling the impact. So every time we opened the statement, that's what was happening. It wasn't until '24, last year that the industry for the most part got to a point of profitability again. Now it's working through all the dynamics and the individual strategies of the carriers.
Bill Madison:
Do they want to grow? Some carriers are still wrestling with getting the proper rate out there, but the larger carriers, for the most part, have figured it out and they're starting to get aggressive again and going after growing their market share, they're getting a little more relaxed associated with their pricing strategies. I think over the course of this year, we've seen 40% of the top 25 actually reduce rates in certain segments of their market. So you're starting to see that shift, but it was those dynamics over that four to five year period that the industry had to wrestle with.
Lance Glinn:
Well, I appreciate the simplification of what is a complex answer and answer that, as I said before, I'm sure we could do a whole podcast on frankly.
Bill Madison:
Yeah, there's a lot of complexity there.
Lance Glinn:
Because I'm sure, look, regardless of the age that one might be, this is something that we all deal with, whether they're 29, 39, 49, 59. So I appreciate, again, the simplification of this complex answer.
Bill Madison:
But it goes back to the education of the consumers.
Lance Glinn:
Absolutely.
Bill Madison:
How can we help them understand that bigger picture better?
Lance Glinn:
Absolutely. So I want to pull out the crystal ball for a moment. You look 5, 10 years ahead, 5, 10 years down the line, how do you see LexisNexis Risk Solutions Insurance just shaping the industry, and what role will the company play in just influencing the broader space?
Bill Madison:
Well, and I think it's the constant understanding of the risk, right? So if you look at how carriers became more competitive over time, it came through better segmentation is probably the easiest way to describe it. And by that, what I'm referencing is a number of years ago, the insurance carrier may have had somewhere between 5 and 10 pricing tiers. That same carrier today has 160 plus pricing tier association with it all, with the mindset of better segmentation of risk, that managing. With better segmentation, you can price differently. So you don't have a wide bucket of risk.
Bill Madison:
I can actually get into that one bucket and have better pricing scenarios associated with it. We play a critical role in that area and have played and will continue to play a critical role with that. So I think it's a combination of new data assets. I think it's a combination of presenting even more informed decisions than we have in recent years. But on the go-forward, remember I made the comment about the difference between delivering content and decisions. We focus on decisions. How can we bring more informed decisions back to our carriers that allows them to be more competitive in the marketplace and help them execute on their strategies? Very focused on that. So we'll remain in that category on the go-forward.
Lance Glinn:
So as we wrap up our conversation, Bill, we've discussed things from AI to real-time analytics, new and emerging risks. What excites you most about the company's future in the years ahead?
Bill Madison:
Well, it's just that, right? The impact that we're having on society. So part of it goes back to our customers, but if you look at how we're touching society today, it's amazing, right? 80% of the consumers in the US market are paying lower personalized insurance premiums because of what we do. And you look at the positive nature of data for good. How can we continue to advance that in a way that's not only helping the insurance industry, but helping just society? And I think we play a critical role in helping tell that story, but it's not just us. It needs to be a collected effort with educating the regulators so the regulators have a deeper appreciation, the insurance industry, so they can tell the story as well to their customers. And we'll continue to do that as well to stay on our toes. We're a very transparent organization. We want everybody to truly understand how data's being utilized, and so consumers do have that comfort feeling in terms of what we do and how the data is being used by the industry itself.
Lance Glinn:
Well, Bill, I appreciate the focus on education in our conversation. I appreciate the often complex answers or the simplification of complex answers I should say, and I thank you so much for joining us inside the Ice House.
Bill Madison:
Thanks for your time.
Speaker 1:
That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen and follow us on X at Ice House Podcast. From the New York Stock Exchange, we'll talk to you again next week inside the Ice House. Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither I nor its affiliates make any representations or warranties expressed or implied as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell a solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or parody.
