Turning Risk Into Profit Through Strategic Loss Prevention

Pete Miller [00:32]: Welcome to the podcast. Today’s guest is Rose Hall, an innovation strategist and risk management expert.

Rose is founder and CEO of RH Business Ventures, an advisory firm that aims to help organizations drive business growth through risk management and innovation.

Rose previously held leadership roles at Turner Construction and AXA XL, where she developed award-winning models that merge insurance and technology to proactively reduce risk.

In this conversation, Rose makes the case for why the traditional indemnity model is straining under the weight of today’s risks – from climate to AI to geopolitical pressures – and what a more proactive predict-and-prevent approach looks like in practice.

She also breaks down why technology is a tool, and not the complete solution, what parametric insurance gets right about reducing friction, and why some of the smartest risk managers are now running toward risk rather than away from it.

Listen in for a frank, experience-backed conversation that reframes how insurers, brokers, and corporations can rethink their roles in managing the risks of tomorrow.

Pete Miller [01:50]: So Rose, you’ve kind of had a front row seat as insurance has kind of gone through the process of exploring a more proactive predict and prevent approach to risk management. So can you share your perspectives on what’s driving that shift and why isn’t the traditional indemnity model as we know it enough for kind of what we’re facing today in terms of risks?

Rose Hall [02:09]: Yeah, you bet, Pete. I think we can all agree that risks are bigger and more present than ever, from geopolitical concerns to climate to you know data center boom, AI. I mean, there’s just there’s no lack of risks in the space. And I think that when we think about the art of risk management being what do you retain? What do you transfer to an insurance company, and what do you contractually transfer to other parties in the stakeholder value chain? We have to get more creative about that art of what goes in each of those buckets. and the predict and prevent can span across all three of those things. So everyone in the value chain has an opportunity to predict and to predict and prevent and to lower that overall risk so that those buckets don’t overflow, if you if you will.

Pete Miller [02:58]: So when we think about the traditional annual renewal cycle, right, that we all know about and how does this mindset change the day to day relationship between sort of the players in the system, the insurer, broker and the corporate risk manager? And does that bring those partners into a greater alignment around loss prevention?

Rose Hall [03:17]: It can. And you know, if we think about the pool of risk we just talked about as a pie, right? Pieces of the pie. And this pie is bigger. It’s a bigger sized pie than it was a couple years ago or maybe a couple decades ago. but it’s still round and it still needs to be divvied up into those pieces of what do you transfer, what do you keep, and what do you manage. and then the stakeholders are largely the same too, right? So you’ve got the insurer, the broker, and the corporation that’s looking to protect their risks.

They can be in better alignment if we’re thinking about reducing the overall size of the pie. And predictive and prevent can help do that. But there’s a I’m going to introduce a little bit of a moral quagmire, if you will, with respect to the insurance space. Because the insurance space, risk is their business. We take on the risk. But as the risks get bigger and a little bit more unwieldy, we start to, as an insurance industry, we start to contract our appetite a little bit. New risks are scary. Appetite is what protects a company or an insurance company from overstepping what they’re able to cover. And so the fact that this risk pie has ballooned as fast as it has makes the insurance community a little bit more wary to just go ahead and accept all the risk. So now we have to take this pie and we have to think about who can, who can take a bigger share of it. Who can get creative about that bigger share?

And I think the risk managers, being more sophisticated now than maybe they were a few decades ago, are thinking, well, if I can take on more risk in a meaningful way and I can manage that risk through loss prevention, how much of what do I really have to give away to insurers? And it’s creating this concept of, well, maybe I should hold on to some of this and manage it really, really well instead of being afraid of risk all the time. Maybe I should run toward the risk if it’s something I really can manage. And that’s in my mind, I refer to that as innovating risk, innovating risk management, which is what I do, right? is thinking about risk in a different way. Let’s just don’t run from it. Let’s think about what pieces of it we’re actually really, really good at taking on and maybe take on more of that. And that’s why you’re seeing the rise of some of these captives now. Because corporations are saying, Whoa, whoa, whoa, wait, I can’t get rid of all this risk because the insurance community simply can’t take it all. I don’t want to hold it on my balance sheet. So maybe I put loss prevention measures in place to help lower that overall size of the risk. And then maybe I create my own way of managing that risk in an insurance capacity that’s managed solely by me. And and now now we have the rise of captives, right?

Pete Miller [05:54]: Yeah, so you said insurers kind of acting on their own are uniquely positioned to lead this innovation. So why insurers?

Rose Hall [06:00]: I think all the parties are going to need to innovate this, but yes, I do think the insurers are uniquely placed. And I think the brokers are uniquely placed, too. And the reason that I say both of those is because they see a cross-section of the corporate clients that each corporate client can’t see on its own. So, if you take a, you know, a soda company that rhymes with shmola-cola, they only see the way they do business. And an insurer that insures that type of company can see not only all the other soda makers in the world, but they can see all the consumer goods in the world, then they can see all the manufacturing in the world. They’re seeing a cross-section of how different corporations are handling that risk. So I think for that reason, insurers and brokers are uniquely placed, but insurers more specifically because they share the risk. The broker’s role is to demystify the industry and to help place the risk. But at the end of the day, the one who has the true skin in the game to the losses themselves are is the insured and the insurer.

Pete Miller [07:03]: So a broader view, right? They see more stuff.

Rose Hall [07:07]: Yeah. When I was at Axa XL, I had a as a risk engineer, my first role there, I had a book of construction clients. I had 20 different clients and I was friendly with all of their risk managers and their leaders who were in charge of managing risks for very, very large contractors. And they would say to me, “What are my peers doing? How are my peers managing this?” when I was doing risk management, or I’m sorry, when I was doing risk engineering, some of the emerging challenges were new technology, new processes, new materials. Wasn’t the data center boom quite yet, but that’s today, one of today’s challenges. These are things that each individual corporation is trying to figure out how to manage on their own. And who better to ask than your insurer? Hey, what are companies my size and shape doing to manage this emerging risk that no one’s ever seen before? And insurers are uniquely placed to be able to share that kind of information in a blinded way. And say, well, I can’t tell you what your competitors are doing, but I can say that a company your size with your challenges tends to do well with this technique or this technology or this method.

Pete Miller [08:13]: So, one of the things I understand, Rose, when you like one of your parts of your philosophy, a core pillar, is that technology is an enabler, not a complete solution. So, you’ve described how you learned this when Axa XL, as you mentioned, launched its construction ecosystem. So why didn’t a tech first approach work? And what did you do, what changes did you have to do to make that successful?

Rose Hall [08:35]: Yeah, so I work with technologies, I work with insurers, and I work with large corporations. And the one thing I will say is technologists are the innovators, they’re the forward thinkers, they’re the what can we do with all this data that we have? What are the what are the infinite possibilities out there? And when it comes to risk, it’s a little more of a less open mindset in terms of like what are my risks? How do I manage them? And how do I, you know, not show up on the front page of The New York Times? So you have these two seemingly diametrically opposed, let’s call them departments, if we’re talking about a single organization. You’ve got an innovation department and a risk department. And innovation’s like, hey, I want to go fast and break things. And risk is like, whoa, whoa, whoa, whoa, whoa, whoa, whoa, slow down. Let’s don’t be hasty. So I think that oftentimes the term innovation is erroneously conflated to mean tech. It’s not.

My definition of innovation is, and this may not be the right one, but it’s the one I choose, is doing something different than what you’ve done before, creating new value where it didn’t exist. Now that can be done through a new tech. That can be done through a process. And when we talk about risk, that can be done through a new insurance product. You can innovate how risk is managed by putting an insurance solution on the market that’s never been there before. That’s innovation. It may not have anything to do with technology. So you can use technology to innovate, but it’s not the only way to innovate. So we see this now. I think this is becoming really prevalent when people are talking about AI now. Because AI was first look at this cool shiny tool on the things we can do with it, and now people are starting to really dig into how is this affecting the human element and how does it bake into the way we do business, not just the way we, say, process zeros and ones, paperwork and digital, digital business, right? It’s the human element of it. So innovation is new value. However you get there. It can be technology, can be, you know, industry specific.

To your question about Axa XL, we as an insurance company endeavored to create an ecosystem. And as an insurance company, our biggest, one of our biggest assets is data, right? We have tons of, especially a legacy organization like Axa XL, we had tons of claims data. And we thought if we mixed all of our data with some of the data our clients have, we might get better insights, right? That’s kind of makes some sense. You mix two pools, two robust pools of data, and you get greater insights than you had before. The challenge is the data at the time, so let’s say 10 years ago, was not exactly clean from anybody’s perspective. And you didn’t know what you were going to get at the end of it. So clients were hesitant to share their data with their insurer, as one does. If we use a consumer example, if you know that little fob you can plug into your car that to take a page out of another insurer’s book of the safe drivers save 40% or whatever that is, right? Okay.

So you know you’re a good driver and you say, yeah, I’m going to plug that thing in and my insurance company can watch how I drive for a week and I’m going to get some discounts. Yay. What if your 16-year-old decides to take your car out? You’re going to leave that fob in there? Probably not. Yeah, probably not. I see you shaking your head. We’re on audio, but I see you shaking your head. Probably not. And it’s not because you think they’re a bad driver, it’s because you don’t know if they’re a good driver or not. You don’t know what happens when you’re not in the car.

So I think a lot of corporations when they look at, the insurer says, share all your data with us and we will better rate your insurance. We’ll know you better. We’ll have a better pulse on how your risk affects our, you know, the whole ecosystem. And the insured is like, ooh, I don’t know, because I’m not really sure what’s in my data. So do I really want the insurance company to be the first person that figures that out? So it was a little bit of trust, it was a little bit of comfort level with data, it was a little bit of comfort level with technology. keep in mind, you know, we did this ecosystem thing, we started it a little under 10 years ago. So I think the world is a lot more comfortable with data now. But what we learned was, bottom line, Pete, we learned that we had to earn the clients’ trust first. Then the question from them was hmm, well what kind of data do you want to see? When at first it was like, no way, I’m not sharing my data with you, forget it. Because they didn’t know what was in it. And it wasn’t that it was bad. They just didn’t know. And when we got to a place where we involved them in the process of, hey, we’re going to embark on this journey to use data and technology to better help better manage your risk and ours, come with us on this journey. Then we started to build some trust. And then when we said, hey, can we share data? The answer wasn’t no, no way. The answer was, well, what kind of data? What are we talking about here? And now you have a collaborative conversation going on. So that was the big pivot that we made when we started with a data play and then we moved to more of a trust-based, service-based collaboration on reducing risk.

Pete Miller [13:45]: That really resonates, Rose, because I have five kids who I taught to drive. And you can bet I was not using telematics. I hope my insurance company doesn’t hear that. But at any rate, no, that’s really insightful. So you know, I appreciate that perspective. And I think that’s very interesting what you were able to do there. You wrote in CLM magazine about actually how the technology itself has evolved, right? And to create better alignment, for example, drive you mentioned driving IoT adoption on construction sites. Co can you talk a little bit about how that technology did evolve?

Rose Hall [14:20]: You bet. So we’re going to go back 10 years ago again. And there was a lot of technology coming out into the construction space because cut construction was really devoid of any job site technology. Great project management software and scheduling, software and estimating software, but project management tech was pretty low. So, one of the first questions our clients were asking us all the time is, Well, what do we do about tech? I mean, we’ve got our inboxes are flooded with all these technologies that tell us they’re going to do everything on the job site for us. And these techs, these IoTs, largely, I would say, made the mistake of thinking that something that works in a static environment, like a manufacturing facility or an industrial environment, would play well in the construction space. And construction is such a unique culture. The most interesting wrinkle in that is that the job site changes every day. So the job changes every day, the humans on the job change every day, the materials on the job change every day, the plan changes every day. Like it’s not as though you go into the donut factory and you make the same donuts every single day. So these techs that came around made a couple of crucial assumption errors, I’m going to say, that they’ve since evolved to be able to understand the business better and have made better widgets. The first was a lot of them came in and said, You need to have this technology on every single one of your projects that’s going to protect this, that, and the other thing. Insert features here, you need us on every job. And that’s just not always true. So when you try to own the world and you make it a binary decision for a client, you either put us on every job or nothing, you’re going to get a no pretty fast.

The second is solving a real problem and not creating a liability. So some of these techs would come on and be like, I’m going to put a camera on your job site that will tell you, at the end of the day, will tell you every OSHA violation that you’ve that you’ve committed. And I was like, dear God, no, nobody’s going to put that on their job. Right? So what a technologist may think solves a problem, my gosh, I’m giving visibility to this project manager of all the stuff they can fix. Like, isn’t this great? And I’m like, no, you just created a record of liability. You created, you know, you created a mess. So not thinking through how a job site works and that it’s better to have a human walking around going, pointing at somebody and saying, get off that ladder. That’s more valuable to the human life and to the job than it is to record it and 12 hours later say, gee, maybe we should have asked him to get off the ladder. Right? Real-time correction is sometimes more valuable than capturing it and creating some data set about it. And then the third one I would say is the best techs integrate with the way they’re already doing business. So if they,  construction is such a complex industry and they’re worried about they got 99 problems every day, and your tech better not be one of them. So if the tech requires the PM to do something drastically different, add something to their day, log into another dashboard, they are less likely to use it. I’ve seen claims on jobs where the tech designed to protect that loss is sitting in a box on the PM’s desk. So you got a major water leak and you got your water leak technology sitting in a box. Hey, I didn’t have a chance to install that. Right? And then you come out three months later and they got another water leak, and the tech is still sitting on the PM’s desk.

So, while the insurance company thinks we’ve got water mitigation technology on that job because someone bought it, sent it, it was received, and the insurance company thinks, I got water mitigation on this job. You sure do. But it’s in a box on the PM’s desk and it’s not doing you any good, right? So implementation is only as good as you make it as frictionless as possible.

Pete Miller [18:17]: Boy, couldn’t agree more. I’ve seen so many projects where it’s like it didn’t fit the workflow, doesn’t get used. Yeah, a hundred percent. So what innovations are you seeing that are driving sort of maybe a more sustainable approach to loss prevention?

Rose Hall [18:32]: So, on the heels of what we just talked about, the invisible tech is the tech that’s going to stick. So make it work with the way they’re already doing business. and I and I’m assuming when you say sustainable, you mean like longevity, not environmentally sustainable. OK, yeah. So the value that you get out of it has to be greater than the burden it is to use it. Otherwise, it’s still going to sit on a box. so the loss prevention aspect of it, it’s you know, it’s just like I’m a I’m a big workout person and people say, yeah, I really want to start working out, but you know, I always get started and then I fall off and I go, Well, you have to do something that works for your current situation. If you’re not a 5 a.m. get up go to the gym person.

You can start that, but after the first week, you’re going to not do it anymore. innovation and loss prevention and changing anything about your routine and the way you do business has to fit into the way you currently do things. Otherwise, it will fall off. So the best the best innovations, the best loss prevention technology is the kind that that slips right into your everyday use and doesn’t cause any friction or, you know, any getting up at five o’clock in the morning.

Pete Miller [19:37]: I agree with you, though, Rose. I do get up at five o’clock in the morning because it fits. Yeah, yeah, yeah. No, I don’t you know.

Rose Hall [19:41]: God bless you, I can’t do it. I’m a 9 a.m. workout person. I got to have coffee, I got to have a little energy first, and then I want to go.

Pete Miller [19:48]: Yeah. Yeah, you get better workouts than I do, Rose. Because I’m at five anyway, you’re smarter than I am. Any we already knew that. But so talk a little bit more if you would. Just help me out with like traditional claim systems when we think of them. You know, handling claims handling often means friction. So adjustments and legal reviews and delayed payouts, but parametric insurance addresses that. But how does instant liquidity work as kind of an active loss mitigation tool.

Rose Hall [20:17]: Yeah, that’s a delicate balance, right? Because I think oftentimes in an indemnity policy, we sacrifice accuracy for speed and efficiency. And what parametric does is it pays on the event, not the loss. So if this happens, you get this. And sometimes you win and sometimes you lose, right? if you’re a homeowner and you have hail, let’s say hail, a parametric policy for hail, if your ZIP code gets hail everyone in the ZIP code gets a payout as an example. You may be the house that has no hail damage, in which case you’re a winner. Ding ding ding. You may be in the house that has way more hail damage than you got the payout for. And that basis risk is why I think the insurance industry tends to shy away from parametric, because they’re like, my gosh, we don’t ever want to pay if someone didn’t actually have a loss. But I think it washes out in the end. If you sacrifice all the friction and all the cost of fighting over did it happen or did it not happen, or did the loss happen or did the loss not happen and to what extent, if you just wipe all of that away and you just say, you get a car and you get a car and you get a car, remember that Oprah? In the end, if you’re underwriting it properly, it’ll wash out. It will protect enough and it will, you know, you’ll win some and you’ll lose some. And that risk is sometimes within or not within an insurer’s appetite, right? so they have to, you know, well, actually, my husband’s been in claims his whole life. And I look at him and I go, How do you deal with adversity every single day? Every day, all you’re dealing with is, yes, we did have a loss, no, we didn’t have a loss, no, this is not covered, this is covered. I mean, it’s just I think anything we can do to reduce that friction benefits everyone in the value chain.

Pete Miller [22:12]: We’ve talked a little bit about this, but maybe to expand on a little bit. So in you know, insurance and risk management are historically conservative fields, like related, you know, kind of to having repeat proven processes, which kind of isn’t really, you know, a great ground for making innovation. So how do you navigate sort of, you know, what actually is an emotional and in some cases organizational culture resistance to innovation when you look at it inside sort of, you know, long lived organizations.

Rose Hall [22:49]: I love this question so much, especially because recently insurers have been contracting as it relates to innovation. They’ve been leaning more into AI and technology, but innovation roles themselves have been disappearing in the last few years. And what I see when I’m approached about innovation any innovation roles that are out there is I see things like you need to have 20 years of AI experience. Nobody has 20 years of AI experience. You need to be able to code in Python. And I’m like, that’s not innovation, that’s just tech. So we’ve talked about the dichotomy between innovation and technology, but I think that as I’ve mentioned, I think the term innovation is frequently misunderstood, especially in legacy organizations. I think that you have to start by revamping a business model.

Innovating a business model, how you do business, and a technology can help support that, and AI can help support that. But if the insurance industry intends to be viable 10, 20, 30 years from now, with the way risks are rising and the way wealth is distributed, and with all the all the stuff we talked about today, they’re going to have to do business differently. And that’s AI is not going to fix that.

So whether you call it innovation or you call it strategy or you call it growth, whatever name you put on it, I’m always like, I don’t care what you call me, I just want to do great work. Whatever the new sexy term for it is, we’re going to have to innovate. You have to start by revamping the business model. We did not get to inventing the light bulb by iterating on the candle. You can’t just take these tiny steps on what you currently have and expect to have something new in the end. What you’re going to have is a duct-taped old thing, right? You’re going to have a bigger candle, a wider candle, a longer burning candle. These are all micro innovations, but they didn’t break the model. They didn’t disrupt the candle the way a lightbulb did. So organizations that there will be organizations. There’s a there’s a curve. And if you were, if we had video, you’d see my bell curve in my hands right now. But the curve is there’s, you know, the early adopters and the laggards on the tail ends and in the middle is everybody else trying to figure it out. And all of those spaces are OK. As a legacy organization, you need to identify: are you an early adopter where you want to think differently about how we protect risk? Or are we going to follow those who’ve figured out how to do it right? And none of those places are bad. They’re all good. We need all parts of that value chain to be able to be able to innovate. But you don’t, you’re not going to be a first mover if you continue to iterate on the old model instead of rethinking the model from the top.

Just to tie that light bulb analogy in one more thing. The problem to solve is we need light. So if you focus on the problem to solve, we need to manage risk. The problem to solve is we need light. You can do it via candle and you can make it bigger and taller and whatever, or you can do it via light bulb, or you can do it via gas lamp or you can do it via whatever. But if you focus on the ultimate problem, the problem is light. You heard the old adage, guy goes to the hardware store to buy a drill, he doesn’t really want a drill. What he wants is a hole.

Pete Miller [26:21]: I started in IT Rose and it’s a framing problem, right? It’s like frame the problem. And, like, in IT, your job is not to write code, your job is to provide solutions. Right? So, which is kind of part and parcel to the idea, and you’ve written this and I love this quote: standing still is the most dangerous move in risk management. And that risk is actually the hidden engine of profit. So what does that mean to strategically retain and manage the right risks rather than just avoiding or transferring them. And where does loss prevention fit into that?

Rose Hall [26:55]: Yeah, Pete, I’m going to answer that with an example because I’ve done a lot of pontificating and not a lot of concrete on this call. So I’m going to give it a concrete example. When I was a risk engineer, I sat with a contractor and we were assessing, you know, their business practices, which is what we underwrite when we underwrite subcontractor default insurance. We underwrite how that contractor makes decisions related to subbing 85% of their work to another contractor.

And they said, we take on troubled projects all the time. We take on the projects that are going so bad that the owner kicks the last contractor off and they’re looking to finish it. And it’s going to cost… it it’s got a schedule problems, it’s got delivery problems, it’s got sub problems, material problems, blah, blah, blah. We love those projects. And the underwriter has like, she’s got this look on her face like, my God, where is the door?

And when we left, I said, I really think they’re a great risk and she goes, What on earth would make you think that? They take on troubled projects and I go, Yeah, but they’re really, really good at it. That’s their sweet spot. So if I sat with a contractor who only took on beautiful projects and decided, you know what, we’re going to take on trouble projects, I’d be running out the door too. But these this contractor, their specialty was taking a troubled project and turning it around in an expert fashion, charging what they should charge for that, and delivering the project successfully to the owner. And so they were charging a premium to take on risk that no one else wanted, but that they were experts at. So the sweet spot is figuring out in this space of where does the risk go? What risk should we retain? You don’t always want to just get rid of risk. A, it’s expensive. B, the market isn’t always there for that. There’s some stuff the insurance company the insurance market just simply won’t write. So you think, what kind of risks are we as an organization really good at? And let’s double down on that. And then the stuff that we’re not so good at, let’s insure that stuff. So I think there’s a hidden engine of profit in really understanding your business and what you actually want to take risk on, and what you want to give away.

Pete Miller [29:00]: I agree. I mean, Rose, like there’s a big upside to risk, right? We talk a lot about the downside, I think, in our industry, but nothing ventured, nothing gained, right? I mean, that’s that’s basically it. And I mean I couldn’t agree with more with you. So Rose, I want you to get out your crystal ball. So look five, 10 years out. So what separates the sort of the winning carriers and enterprises, the one the ones who treat loss prevention as an opportunity from those that are kind of stuck in the status quo, manage risk down to zero stuff.

Rose Hall [29:33]: Well, I don’t know about crystal ball, but I’ll tell you what I would love to see. As we talked about earlier with this like, you know, moral quagmire third rail sort of conversation about, hey, if we reduce risks far enough, it will start to it may start to make the insurance industry less relevant, right? It’s like when your when your granddad stops taking their stops taking their blood pressure meds and you go, why’d you stop taking your meds? Well, I felt really good. So, you know, I felt like I didn’t need them. Right? So when you have less claims, when you reduce the risk so much, and you manage it so well, people start to go, well, do I really need insurance for this? It’s not really a risk anymore. So I think that just selling insurance as a carrier starts to become, as much as we don’t want it to be, starts to become transactional. And the more that the risk is reduced, the more people are like, huh, you know, I mean, it doesn’t really hail here anymore. So maybe I don’t need hail insurance. And there’s a risk of irrelevancy.

I think to stay relevant, the object of the exercise is to really understand the risks that are out there and understand what the role is. So being a, let’s call it I I’m going to use the word loosely, but consultant in this space, being an expert, being an expert in what risks are out there and what’s available and where to put your risks, I think that is what’s going to become most valuable to large corporations going forward, helping them figure out where to put their risk. And right now that sits a little bit with the broker, a little bit with the carrier, but they all have their own agendas because they all make money different ways. So aligning incentives and changing the business model a little bit so that truly managing the risk is in everybody’s best interest, truly reducing the risk or capitalizing on the risk is an incentive that aligns across all the stakeholders. Maybe it’s a little utopian of me, but I think that’s the future of risk management. I don’t think it’s individual companies like I’m the broker, I do this. I’m the carrier, I do this. I think it’s a collaborative effort that’s more holistic than… I mean it’s like in medicine, you have cardiologists that does this, you have a you have a pulmonologist that does this, a nephrologist that does this, and oftentimes there’s stuff missed in between, right?

I think if the insurance industry moves toward more toward a holistic view of helping a client manage their specific risks, then they can write insurance as a byproduct of that advice instead of the other way around.

Pete Miller [31:55]: Rose, thank you.