The Art of Winning Commercial Insurance: Lessons from Moneyball

Insurance carriers are locked in a technology arms race. The dominant players are emerging, pricing risk more accurately and issuing policies faster than ever. Meanwhile, everyone else is wondering how they can keep up.

Instead, they should ask themselves how they can win.

The First Lesson of Moneyball

Insurance leaders can look to other arenas for inspiration. Take Michael Lewis’s Moneyball, which tells the story of Billy Beane’s success as GM of the Oakland A’s during the 2000s.

Years before Billy Beane became the A’s General Manager, baseball’s top insiders pronounced that the game was no longer a competition won by athletes: it was won with money. The richest teams could afford to pay the best players, and therefore won the most games. Despite their status as the poorest team in the league, Beane’s A’s finished the 2000s with the sixth best record in baseball while only spending a third as much as the richest teams.

How did Beane do it?

In one word: analytics. Beane quantified player performance with various objective statistical measurements and tied those measurements back to a single master metric: wins. When evaluating players, the A’s no longer saw a 6’5” outfielder with a great swing, they saw 3.5 expected wins above replacement for $2M/year. The team the Oakland A’s assembled resembled the Island of Misfit Toys — a pitcher who threw nearly underhanded, a first baseman who couldn’t field, and myriad drifters and aging players — and they won.

Usually, that’s where the story ends. At least, that’s where the book and the movie end. But the reality is that Beane ushered in an analytics age not only for the Oakland Athletics, but for athletics — period.

And now that everyone’s doing it, the A’s aren’t the best shop in town.

So which teams have a monopoly on the best analytics these days? Well, it turns out none of them do.

The Second Lesson of Moneyball

The best analytics now come from third-parties.

In baseball, the pinnacle of pitching analytics now comes from the Driveline training facilities in Kent, Washington. After reading Moneyball, college dropout and avid baseball fan Kyle Boddy became obsessive about pitching analytics and biomechanics. Over time he developed his coaching practice into the tech-powered training products, software platforms, and biomechanical analysis. Now, Driveline’s analytics are the secret sauce behind players like Shohei Ohtani of the Angels and Clayton Kershaw of the Dodgers — two of the best pitchers in the world.

The same phenomenon is taking over college football. Nowadays, CAI powers decisions at programs of all sizes, from playoff upstart Cincinnati to Big Ten stalwart Iowa, where Kirk Ferentz is the longest tenured coach in the NCAA.

In both cases, the same analytics technology enlisted at the highest level of sports is even being licensed for high schoolers. Anyone can partner with Driveline or CAI or any of the other analytics groups that are transforming athletics. The walled garden in sports is over, and the best insights now come from the best companies, not the best teams.

So what should insurers do?

The insurance industry has seen a similar revolution. The carriers that were early into technology investments reaped the rewards while others played catchup. At this point, the first lesson of Moneyball — focus on analytics — isn’t exactly a novel insight.

But now, insurers are in the second wave of a tech arms race.

While initial advances were made within the walls of trailblazing insurers, these days, the most advanced carriers are the ones that pair their own expertise with the brightest minds in technology. Insurtech innovators now provide the best AI, workflow, core systems, and data that money can buy.

Carriers now must differentiate themselves by being the best at identifying technology partners and successfully embedding them in their ecosystem, processes, and culture. From procurement to IT to the business team up to the C-suite, carriers should focus on finding the innovators who specialize in developing and implementing excellent technology.

And just like the current wave of sports analytics, carriers of all shapes and sizes can succeed in this new world.

How Kalepa can help

At Kalepa, we bring cutting edge technology to insurers of all sizes, from top-10 carriers to small regional players.

Our AI-powered Copilot software helps commercial P&C carriers bind with confidence. We analyze billions of data points to automatically triage risks against appetite, and we dramatically accelerate and improve risk selection so insurers can grow profitably. Copilot delivers these insights in a streamlined workbench optimized for underwriters, so they can quickly identify unexpected exposures and make better underwriting decisions, faster.

Want to learn more about how you can win the tech arms race? Schedule a demo today.