AI “Transformation”, Part 1
The view from the C-suite at the most dynamic moment our industry has ever lived through - told through the eyes of the people who have to make the call.
This is the first installment in a series on AI transformation. Over the next several posts I want to explore the organizational dynamics and the very practical dilemmas of this extraordinary moment - and to do it the way it actually unfolds inside a company: through the eyes of the people in the C-suite who have to decide what to do, and when.
Let’s start at the top of the house.
The View From the Boardroom
Picture a director on the board of a mid-size carrier. Thirty years in the industry, most of it in underwriting and finance, with a stint running a P&C book that taught her more about risk than any model ever could. She is sharp, she is skeptical by training, and she is not a technologist. For most of her career, that last fact was never a problem.
Then ChatGPT arrived, and since that moment AI’s importance to the strategic business agenda has built like a tsunami, in full view of everyone.
Her first instinct was the right one for a risk professional: skepticism. The early conversations centered on hallucinations, data privacy, security, and governance - exactly the concerns you would expect from people whose careers were built on prudence. Those concerns were, and are, legitimate. But if she is honest with herself, they also did some emotional work: they were a way to blunt what looked like a hype cycle, and to manage a quiet fear of the unknown.
What changed her posture was not a vendor pitch. It was velocity. The sheer momentum and rate of improvement of the models - and the tooling around them that makes them genuinely useful to “Normals” and not just engineers - created a different mindset almost overnight. The technology stopped being something she read about and became something she could pick up and try herself.
The outside signals reinforced it. Watching CNBC and reading the Wall Street Journal, she sees immense capital being poured into the sector - a signal that something is afoot. Early headlines of massive staff reductions piqued her interest further. Here, though, the old underwriter in her hesitates: many of those announcements are window dressing, manufacturing the “evidence” of success well ahead of the reality of AI’s actual role in the cost reduction. She has seen enough restructurings dressed up as strategy to know the difference.
And yet - and this is the part that matters - it doesn’t much matter whether the competitor’s number is real. The questions about governance and risk she started with were quickly amplified by a second, sharper set of questions about obsolescence and competition. Together they did something remarkable: they moved AI from the innovation update near the back of the deck to the very top of the board agenda.
Now flip the camera around. Because every one of those questions, however reasonable in the boardroom, lands on a single desk.
The Email
It begins, as these things do, with an email. “The board wants to know what we are doing about AI.” The next board meeting is three weeks away. The CTO has been assigned a 20-minute slot.
The timing could not be worse. She is chin-deep in the implementation of last year’s “transformation”1 priorities, under steady pressure to show tangible results. The resource allocation of her technology organization does not match this sudden change of agenda - the team and the org structure she carefully assembled to deliver a portfolio of third-party solutions is simply not built for what is now being asked of it.
It is part of the job to translate technical issues for non-technical people and to plan strategically for change. But she has also been watching the same tsunami, and is blessed - or cursed - with a deeper understanding of just how transformative this change will be. To borrow the metaphor without straining it: she is the one standing on the beach watching the water recede, while everyone else wanders out onto the wet sand to explore, delighted, not realizing what comes next.
This gap in understanding is normal, and in insurance it is almost structural. Boards are composed largely of finance, underwriting, and HR experts. If there is a former technology executive in the room, the odds are good that they learned their hard lessons - and won their victories - in a different era, when “transformation” meant a new policy administration system, and the cycle time was measured in years, not weeks.
The Blank PowerPoint
It’s 10pm, and the board materials are due in a week. This week was like every week: the calendar jammed back-to-back with status meetings, steering committees, risk meetings, compliance meetings, and one-on-ones2. The only time she gets to actually think is after the kids are asleep and email and Teams have finally gone quiet.
To make matters worse, the CFO has forwarded an investor deck. A competitor has announced that its AI initiatives have already delivered a 20% efficiency improvement, and that they are reducing headcount. He copies the CEO, who replies: “This is what we should be covering at the board.”
It is, of course, the very same kind of claim the board’s own director privately suspected was window dressing. But a number in a competitor’s deck does not have to be true to be dangerous. It only has to be believed.
Exhausted and distracted, staring at a blank PowerPoint, our CTO is facing a moment of truth, whether she realizes it or not. Like a choose-your-own-adventure book, the next few decisions may permanently alter the company’s path - and her own career.
The maddening part is that two opposite things are true at the same time.
On the one hand, it has never been more thrilling to be a technology leader in insurance. Despite the historical positioning of IT as a back-office service provider - much to the chagrin of insurance CTOs everywhere - this time the revolution is playing out in everyone’s pocket, in everyone’s own late-night experiments with ChatGPT. At long last, the rest of the business is waking up to the reality that technology is foundational to strategy and competition. Or at the very least, that IT is not just a cost center.
On the other hand, technology has never moved this fast, while the industry’s clock speed for absorbing it has remained stubbornly slow - throttled by bureaucracy, governance, resistance to change, and an intense focus on risk. The conversation seems to have changed overnight to “What have you done with AI?” - when the entire focus of the last planning cycle was finishing the core system implementation (currently a year late) and, of course, reducing cost in IT.
It’s 11pm. Her head is spinning and the PowerPoint3 is still blank. She closes the laptop and decides to sleep on it for one more night. She needs the rest, because internal audit has scheduled a 7:30am meeting to review their findings on folder permissions in SharePoint.
To Be Continued
In the next installment, I’ll follow our beleaguered CTO into the fork in the road - the genuinely different paths she can take from this critical juncture, and what each one costs her in the short run and the long run. It would be comforting to believe there is a single “right path forward.” Unfortunately, the velocity of the change, its implications for the business, and the insurance industry’s peculiar history with technology innovation together mean that the right path forward is anything but clear.
-Darryl
Coming Soon in “Hot Takes”
A few things I couldn’t resist needling in this post. Each is getting its own short, opinionated installment. If one of them made you nod (or wince), tell me which - I’ll move it up the queue.
“Transformation” has lost all meaning. Businesses are always evolving and transforming, it is not a project with an end date. “Transformation” programs are often not transformative and delegate the natural process of continuous change, either to an internal “transformation office” or, even worse, external consultants.
The compliance, risk, and audit tax. Each meeting is individually justifiable and collectively suffocating. We have professionalized the control function so thoroughly that the people we most need thinking about the future spend their days accounting for the past. A defense of compliance, paired with a suggested tweak, is coming.
The slide is not the strategy. Somewhere along the way we built an industry that judges the quality of the thinking by the quality and quantity of the PowerPoint deck, where “let me put something together” quietly eats many hours that should have gone to actual work. There are better ways to communicate.