Novatae Risk Group’s Richard Kerr Suggests CEOs ‘Get All Over AI’

The hype surrounding GenAI’s promise is loud and infectious, but Richard Kerr believes CEOs should take a lesson from the dot-com era to keep their feet on the ground when it comes to the new technology. As the founder of one of the insurance industry’s first pure-play dot-coms, MarketScout, Kerr recalls the insanity at the turn of the century.

“We had 322 competitors right out of the gate,” he says. “The euphoria was underway, much like it is with AI today. But of the 322 companies that launched back then, there are now two left.”

MarketScout was one of the few success stories: in 2022, Kerr sold the company to Novatae Risk Group, where he now leads as CEO, and that early experience in taking a measured approach guides his AI strategy today. “These new innovations and technologies—they’ll never be a miraculous cure. They are incredible tools that support and promote innovation and enable us to move forward and create new products and new ideas,” he says. “But at the end of the day, we still have to sell something and make a profit.”

Use the Tech Wisely

As Kerr is quick to add, AI can help Novatae do that faster, better and cheaper in a highly competitive market. He points to AI’s capacity to process and analyze vast amounts of data, which makes it an indispensable tool for tasks like fraud detection, underwriting and predictive analytics. “Insurance is really just selling a piece of paper and a promise that we’ll cover you if disaster strikes,” Kerr says. “The difference today is that AI lets us do so much more with the data.”

For example, when insuring a building in a region prone to severe weather, AI allows Novatae to analyze data sets that predict the likelihood of events like hailstorms, which enables the company to price policies more accurately. “Ten years ago, we didn’t have that,” Kerr says.

Another example: in underwriting, AI-driven data analysis helps Kerr’s team assess risk in real-time. “A task that used to take an underwriter two days—analyzing property data to determine whether and how we should insure it—now takes 60 seconds,” Kerr says. By using AI models, Novatae can quickly process large datasets to calculate risk and determine insurance premiums, dramatically reducing the manual effort involved in underwriting and pricing.

Kerr’s approach isn’t limited to internal operations; it’s also transforming the customer experience. AI helps simplify complex insurance quotes by making policy comparisons easier to understand for both agents and consumers. “If you’re not an insurance expert, you get two quotes and you don’t know the difference between them,” Kerr says. Using AI, his customers can upload two policy quotes and quickly receive a clear comparison, in layman’s terms, of what’s covered and what isn’t in each. This streamlines the decision-making process for customers and ensures they’re well-informed—a win-win for both the consumer and the insurer.

It’s also allowing Novatae to spend marketing dollars more efficiently. “Marketing strategies that are driven by AI can laser focus your marketing efforts on providing information to those people who have an interest and who will respond,” says Kerr, adding that interactive marketing, a staple in the digital era, is now more effective than ever thanks to AI’s ability to process and predict consumer behavior. This allows Novatae to engage with potential clients more effectively, providing tailored solutions based on insights generated from vast data sets.

Develop In-House Expertise

Even while recognizing AI’s significant potential, many CEOs remain wary of its reliability, particularly in terms of data accuracy. While Kerr’s policy is not to share the different AI engine’s Novatae uses, he says Novatae’s approach includes cross-referencing data across multiple models to identify discrepancies. “We can literally pit different models against each other,” Kerr explains. “And just like with any information source you get from anywhere, you can’t just assume that every single thing that it delivers is going to be on point, right? But I’ll tell you what—it’s gonna have a bigger probability of being on point than the research analyst you hired and paid $150,000 to go do that research.”

What every company really needs now is “humans who are experts at handling this tool,” says Kerr, adding that the data is out there, but the sheer volume makes it akin to “drinking from a fire hose.” The biggest challenge is devoting the time necessary to figure out the best directions to take AI investment. “I wish I could find a team of five people who just spend all day, every day trying to figure out how to best use AI, because it’d probably be well worthwhile. It really takes time and everybody’s doing other things as well,” he says. “But frankly, that’s my job—to figure out where it’s worth spending time and money on.” At the moment, Novatae is developing an innovative new platform, expected to launch next year, that Kerr believes will be “a pretty significant change for how the consumer shops for insurance, all the way from home owners to business insurance.”

He acknowledges that experiments don’t always pan out, of course, which is always a risk in innovating. That’s why it’s also the CEO’s job to make the tough call to pull the plug when a particular direction isn’t working. “That’s more of an art than a science, and, frankly, what we’re being paid to do. The CEO needs to have that intuitive sense to know when to move on. It’s kind of like, the quarterback’s thrown five interception passes and it’s third quarter—it’s time for him to go. That’s hard because you’re speaking with your CIO and they’re like, ‘No, this is the way to go. We have to keep going.’ And sometimes the hard call is to just keep going, and sometimes it’s not,” says Kerr. “But that’s the experience, the knowledge, the reason you put someone in that chair as CEO is to be able to read and sense that. That’s how I know the job of a CEO will not be replaced by AI—because you can’t go into AI and say, ‘Hey, I’ve spent $10 million on this—should I give up?’ That’s not what a bot can do for you.

“And when it can?” he quips. “Then I guess I’m in trouble.”

For CEOs still at the starting gate, Kerr has these three recommendations:

• Don’t stay on the fence. “Take the time to study it,” he says. Experimenting with AI tools and understanding their capabilities will help CEOs decide which applications will best serve the bottom line. “Find some AI modules and just go in there and play with the technology.”

• Use multiple AI models: To maximize AI’s potential and its accuracy, businesses should cross-check data using multiple AI models. This approach helps identify inconsistencies and ensures the information is reliable before making key decisions. “We use them all and we’ve assimilated it where we can get the best that each one has to offer, because each is better at certain things.”

• Have a path towards monetization. “So we’re going to do all these really cool things, but once I do it, does it either save me x amount of dollars, which flow to the bottom line or does it generate additional income for me? That’s the most important part is—working through that.”