Insurance Is Relationship Business: Why AI Will Never Replace the Handshake That Binds a Tough Risk. My reflections on thirty years plus of insurance practice.
After three decades of writing surety bonds, placing hard risks, and watching markets harden, soften, and harden again, I have learned one truth that no “algorithm” has ever shaken. Insurance is a relationship business. Always has been and always will be. A recent piece in Insurance Business magazine, profiling ABEX’s Bill Finnell, said it more plainly than I have heard it said in years. When a tough risk lands on the desk, relationships are the only currency that actually spends. I am going to double down on that point, because the industry is dangerously close to forgetting it.
The Myth of the Frictionless Portal
We are living through the most aggressive wave of automation our industry has ever seen. Submission portals, AI-driven underwriting engines, instant quote APIs, chat-based service bots. The pitch is always the same: faster, cheaper, scalable, error-less, or some combination of these. On the easy stuff, the pitch is fairly valid. A clean BOP for a low-hazard accountant? Yeah, yeah, yeah ok. Push the button. Bind the risk. Move on, . . . but, . . . there’s more.
The easy stuff (“freely written” in our parlance) is not where insurers, MGAs, and producers earn a LOT of premium and commissions. I have said this ad nauseum but it’s worth hearing me say it again. If you want to make money in the insurance business, you have to go where the risk is. The easy stuff is where our products get commoditized. Margins on vanilla business have been compressing for years, and they will keep compressing as AI gets better at it. The work that actually pays, namely the contractor with a loss history issues, the manufacturer with a new exposure that no actuary has tabled, the surety account where the indemnitor’s balance sheet is more art than science, i.e., the “risky and difficult stuff”, has NEVER been transactable through a portal, and it never will be. THAT is the place where insurance is a relationship business in its purest form.
What Surety Teaches the Non-Surety Folk
I came up through surety, and surety has been screaming this lesson into the void for a hundred years. A surety bond is not insurance in the traditional sense. It is a tripartite credit instrument underwritten on character, capacity, and capital. Of those Three Cs, character is the one no machine has ever been able to read. When I have an actual conversation with a contractor or significant commercial surety program principal and decide whether to extend a $5, $10, or $20 million single project, I am not having my staff pull a credit score and then call it a day. I am reading the room. I am asking about the foreman who just retired. I am noticing whether the guy flinches when I bring up retainage or billings that don’t look right. I am calling three other underwriters who have written him before and asking, off the record, would you do it again?
I am going to state this clearly. Try teaching that to a large language model! You can’t, because the inputs are not in the training data. The “data” lives in thirty years of coffees, jobsite visits, internet and gumshoe OSINT due diligence and a kabillion phone calls. Insurance is a relationship business because the information that decides the hardest accounts has never been written down, never, ever, anywhere that a scraper can find it.
The Generational Risk That Most of us Have Been Screaming About
The Finnell piece touched a nerve that veterans have been quietly worrying about for years. A generation of brokers and underwriters is coming up keyboard-fluent and conversation-shy. They will push a submission through a portal at 3:00 a.m., finishing off a bottle of wine, but they will not pick up the phone to walk an underwriter through why the loss ratio is misleading. They are technically competent and relationally undernourished. Stuck in an iPad, or phone, or video games all of their youth, . . . I don’t know, and I don’t give a shit. What I DO give a shit about is that it is a deficit that no software upgrade is going to close.
Worse, it’s not all their fault. The tools reward the behavior. Every single one of us, surety company owners, carrier owners, and MGAs, we get bombarded every day with a new “this platform will do everything and you’ll write ten times as much premium” sales pitch. Every workflow we have built over the last fifteen years, and the new “AI-driven” solutions vendors have told them that speed and volume were the metrics that mattered. Well, the math of a hard market exposes the lie. When an underwriter is staring at 2,500 submissions and has time to quote forty, the broker who is known, known by voice, known by reputation, known by the quality of the last three deals they sent in, is the broker whose file goes to the top of the pile. The other 2,460 submissions get a polite decline or no response at all. Insurance is a relationship business, and the brokers who learn that early in their careers are the ones who will still be writing accounts in twenty years. The ones who don’t will be looking for work the next time capacity tightens.
AI Levels the Field. People Win the Game.
I am NOT anti-tech by any means. In fact, when I finish writing this I’m going to have AI spellcheck me and read its now familiar admonishment that foul language is not SEO. The fact is that AI WILL make our industry better at a thousand things, including triage, data extraction, fraud detection, first notice of loss handling, policy comparison, and regulatory compliance. I use these tools and I hope that you are too. They are extraordinary. But every honest claims executive and chief underwriting officer I have spoken to in the last few years says the same thing in slightly different words. AI gets you to a level playing field. It does not win the game.
What wins the game is the underwriter who calls the broker back and says, “I can’t do it the way you submitted it, but if you restructure the deductible and add this warranty, I can get it to the finishing line by Thursday.” What wins the game is the producer who travels to the client’s headquarters after a catastrophe and sits in the conference room until the claim nightmare is resolved. What wins the game is the MGA who picks up the phone on a Friday or Saturday afternoon when everyone else is saying, “No way! My weekends are sacred!” None of those moments can be automated, because none of them are about information. They are about trust, and trust is born within the friction that AI is busy trying to eliminate.
This is the paradox and the insurance industry needs to deal with, like RIGHT NOW. The more we automate the easy interactions, the more weight the hard interactions have to carry. Every touchpoint we delegate to a bot is a touchpoint that is no longer building the relational equity we will need the next time a client has a problem that we cannot solve with a f. dropdown menu. Efficiency without intimacy is a balance sheet that looks great, . . . until it doesn’t.
To the Insurers, MGAs, and Producers that I Love
From me to my carrier buddies, the MGAs, and the producers who will shape the next chapter of this business. By all means, invest in the technology. Build your portals. Load up your models with one hundred years of insurance u/w and loss data to train them. In other words, automate what should be automated but do NOT, under any circumstances, let your organization’s peeps forget that insurance is relationship business at its core. What am I saying here?
Carriers should resist the temptation to measure their underwriters purely on submission throughput. The underwriter who quotes 400 accounts a month and binds 30 looks great on a dashboard and is quietly destroying your distribution relationships. Reward the ones who answer the phone, who explain a decline, who teach a young broker how to package a tough risk.
MGAs should remember that their entire reason for existing is to be the human bridge between a specialized appetite and a market that doesn’t fully understand it. The day an MGA becomes indistinguishable from a portal is the day a portal replaces it. Differentiation lives in the conversation, not the rating engine. Be incredibly good at what you do and do it WITHIN the bounds of a relationship or you will be GONE!
Producers, especially the young ones, should hear this from someone who has been around long enough to mean it. Pick up the phone. Visit the underwriter. Go to the conference. Buy the espresso. The hours you spend building relationships in your twenties and thirties are the hours that compound for the rest of your career. There is no shortcut, and there will never be a shortcut, because insurance is a relationship business and the people who try to skip the relationship part always learn the same expensive lesson.
The Most Contrarian View Is the Oldest One
In a market that increasingly treats surety bonds (mainly commercial still) and simple coverages as commodities and the accompanying buying experience as a checkout flow, insisting that insurance is relationship business sounds like an uncool parent telling his or her kid that Beethoven really is good music. It is not “cool” and it is not “techie”. What it IS, is the most strategically important position an insurer, MGA, or producer can stake out right now, precisely when many in our industry are abandoning it in pursuit of scale. The firms that will own the next decade of specialty, surety, and hard-to-place business are the firms that pair the best technology in the industry WITH the deepest human relationships in the industry. Not one or the other. Both!
Thirty years in this, here is what I know from my side of the house. A surety bond gets written, the tough account gets placed, and the difficult claim gets resolved because somebody on one end of the transaction trusted somebody on the other end. That trust was not built by an algorithm. It was built through sincere conversations, over a meal, on a jobsite, on a phone call returned when it didn’t have to be (probably on one of those “sacred weekends”). Protect that, fund that, teach that to the next generation, demand that they practice that, . . . and the machines can have everything else.
~ C. Constantin Poindexter, MA, JD, CPCU, AFSB, ASLI, ARe, AINS, AIS, CPLP