In our January article The Risk of Doing Nothing Haunts Insurance Industry, futurist David Smith warned that “It's incredibly dangerous in periods of high change to not have a vision. … Doing nothing is no longer safe—it's probably the riskiest thing you can do. If you're not changing business models fundamentally, then you're not changing. That's insurance.”

Smith's comments struck a chord with many readers—including Joe Beneducci, CEO of ProSight Specialty Insurance. “I was particularly moved to have this discussion” with PropertyCasualty360, said Beneducci, who “grew up in insurance, started as an underwriter, and worked at Chubb and Fireman's Fund,” where he served in various leadership roles including president and CEO.

“People talk about distribution, standard products, rates, the investment environment—our industry is dominated by these traditional topics—yet all around us the world is changing at light speed,” he explained. “It's amazing that we have such little change in our business—that there are so few examples of companies that take advantage of the change and do something about it.”

We talked to Beneducci about why insurance companies remain stuck in the middle of what he calls “The Great Divide”—and how he intends to avoid that fate for ProSight, the company he founded in 2009. Following are excerpts from our wide-ranging discussion on the future of the insurance industry.

PropertyCasualty360: Why does change pose such a challenge for so many insurance companies?

Joe Beneducci: Our industry, for so long, has been positioned for distribution. Customers obviously will always need insurance. Because of this, we've been complacent—the industry hasn't been forced to innovate because there's always been a demand for insurance.

Can you cite a time when our economy and society have gone through such massive change because of the progress of technology? Yet because our customer base didn't appear to be changing all that much, the insurance industry remained very static in its approach. There is a widespread attitude that the P&C insurance cycle is a mysterious force that comes and goes by a strange, unpredictable, indiscriminate forces with which we can do little to nothing to influence. We refer to this at ProSight as being in the middle of “The Great Divide.” We have an industry in large part that's camped out in the middle – in basecamp – because it appears to be the safest. Couple that with the restrictions insurance faces—very regulated industry, outdated technology in mature companies—and it's a monumental effort to move out of the middle.

The insurance industry was set up to try to grant as much access as possible. It becomes an enormous obstacle to delivering value; you can't be a real expert if you're distributing in a generalist format. That is what The Great Divide is all about.

David Smith says insurance is ripe to be digitized and can be delivered almost entirely over the internet—but you're talking about more than just technology disruption. How does this related to your concept of “The Great Divide”?

Consider our industry much like the music industry and others, in this one grouping in the center. As time has gone on, technology has created new efficiency in purchasing products and also increased the customer's understanding of the value of that purchase. So customers gravitate to one side or the other depending on what they want. One side is low-cost providers, who offer speed and efficiency in getting something done, and that's where their customers see value. The other side is the value side of the equation – offering high value in what you're delivering the customer. Because technology savvy customers, with increasing risk complexity, will pay only for value they know they will receive.

What won't be allowed going forward is staying in the middle. It's not safe in the middle.

Insurance is a bit more complicated than music. We have an enormous opportunity to differentiate value to customers who will be smarter and better informed than ever. Still, our industry isn't prepared, even though we are consumers just like our customers are, even though we operate our smart phones the same way. So many people in our industry still come to work thinking the industry will continue to work the way it always has worked, believing this is just a storm that will pass.

ProSight Specialty Insurance has taken the route of the high-value provider. Do you see other companies doing a good job moving to either the low cost or high value side?

First mover [advantage] on the low-cost provider side is done. In personal insurance lines, we are seeing the low-cost providers emerging—companies like Geico and eSurance that's now part of Allstate—but on the other side, there aren't many examples of those who have built a business on delivering inherent value to the customer.

I believed so much in this that I went out and founded a company, and now we're doing this on a global basis, that's our whole business proposition: to distinguish substantive value for our customers with our very exclusive and expert brokers and to offer a value proposition that is much more substantial and extremely deep compared to where the rest of the P&C industry operates.

So many insurance companies struggle to change while efficiently managing current operations—they are forced to work within the marketplace's predominant business models yet must somehow reinvent themselves while maintaining their current business. How does ProSight juggle this challenge?

We operate with all the same sorts of challenges, but there are a couple of differences. Because we built a company from the ground up, we weren't bound by legacy issues of outdated technology, excessive distribution, and so on. At the same time, we don't have a culture working against us. In building a new company, being a specialty insurer is our M.O. When new people come into our organization, we screen people based on their understanding of just what this specialist position means. ProSight products aren't for everyone, because we're not seeking customers on the low-cost-provider end of the spectrum. It's the same for our employees. We recruit unique people who aren't just talking about rates going up and down, but making a commitment to actually deliver that unique value—we call this the ProSight X-factor.

We do have to keep balanced. We talk about operating our business within regulatory requirements, for instance, but at the same time, we provide equal time talking about The Great Divide. As CEO, I put as much time and energy into how we develop our culture and recruit new people as I do focused on what we need to do to run a P&C company.

How about outside the walls of your company—how have you cultivated a customer base and a distribution channel that are aligned with your company's specialty strategy?

We only sell through brokers that sell business in the same way that we build innovative solutions that go beyond traditional insurance services to focus on unaddressed customer needs. There are only 42 brokers or Managing General Agents in the U.S. that have a ProSight appointment, and they must be able to provide our customers very unique value with deep products, deep expertise, extensive solutions. We go through regular reviews of the programs that we write with our brokers and spend a lot of time brainstorming concepts and solutions. We conduct focus groups with our customers, asking them “what keeps you up at night?” And in conjunction with distributors, we build new products and solutions that together we can bring to the end client that not only address their insurance and risk management needs, but can help them enhance their overall business.

We are laser focused on our specific client bases—in our niches and target spaces, our customers know who we are. We are connected with them online, managing the digital environment, making sure our message is clearly conveyed, working with brokers that only focus on specialty delivery. We don't write business with anyone else without that laser focus.

Special Reports /

ProSight Looks to Buck Insurance Industry Great Divide

Related Stories

Recommended For You