MGAs more open to adoping AI: Xceedance's Parcelli

Delegated underwriters are more likely to rely on artificial intelligence (AI) than primary carriers, according to a senior executive at insurance services provider Xceedance.

Speaking to Insurance Day, Michael Parcelli, senior vice-president and client partner at the firm, says the insurance sector as a whole has been relatively reluctant to adopt AI.

However, managing general agents (MGAs) and managing general underwriters (MGUs) are somewhat more open to the technology, given they have much smaller workforces and cannot simply hire more staff.

Michael Parcelli, Xceedance

Primary insurers are more likely to take a cautious stance. “Carriers might be less willing [to adopt AI] until they see all the consequences,” Parcelli says. He says there is “cautious optimism” among insurers, but also “nervous energy around what they can do and how it can go bad”.

However, labour force constraints may force all insurers to rely more heavily on AI.

Parcelli highlights US unemployment rates are already quite low (they were 4.1% in September, according to the US Bureau of Labor Statistics). “There’s not like 100 people outside your door waiting for jobs,” Parcelli says, adding recruitment is challenging.

“There have been studies proving if you give the same set of variables in a subjective decision to 10 different people, you’re going to get 10 different answers and that’s counterproductive to an insurance company”
_{Michael Parcelli
Xceedance}

The age profile of the insurance workforce – employees aged 50 and above outnumber those under the age of 30 – further constricts the available labour force.

Based in Bermuda and founded 2013, Xceedance provides various technological solutions for claims and underwriting management, data analytics and platforms for connecting primary and delegated insurers, and insurers with brokers and clients.

The Xceedance executive says his goal is to eliminate the need for humans to engage in data entry work and to develop AI as a mechanism for supporting human decision-making.

Parcelli believes AI will allow insurers to make claims and underwriting judgments more consistently. “There have been studies proving if you give the same set of variables in a subjective decision to 10 different people, you’re going to get 10 different answers and that’s counterproductive to an insurance company,” Parcelli says.

Although several US states are adopting new regulations on AI use in insurance, in large part to prevent them being used to discriminate against consumers, Parcelli believes these are more likely to weigh more heavily on life and health insurers.

As senior vice-president, Parcelli’s responsibilities include MGAs/MGUs and brokers. These make up about 20% of Xceedance’s business. Parcellis says these sectors are growing both as a share of Xceedance’s portfolio and the overall insurance sector.

Parcelli thinks the Covid pandemic may have spurred strong growth trends in the delegated underwriting sector, as wide-ranging disruption revealed gaps in specialised cover.

“All the coverages and issues that were revealed because of Covid became opportunities for companies,” especially delegated underwriting businesses like MGAs and MGUs, Parcelli says.