My family, and that of the company I lead, share our origins among German immigrants and entrepreneurs who came to America in the late nineteenth century determined both to make a contribution and to succeed. The failure of revolutions in the 1800s to establish democracy in Germany caused thousands to immigrate to the United States. By 1860, an estimated 1.3 million German-born immigrants lived in the United States.1 That year, a group of twenty-one German-American businessmen, led by civil rights lawyer Hugo Wesendonck, gathered at Delmonico’s restaurant in Lower Manhattan. Wesendonck had fled riots and revolution in Germany and immigrated to the United States in search of asylum. When he got here, however, he was met with prejudice so pervasive that he could find no one willing to sell him life insurance.
Together this group of immigrants created the Germania Life Insurance Company of America with start-up funds from fellow German refugees. The company, which later rebranded as Guardian, would help policyholders pool their money so that in the event of a catastrophe, they would have something to fall back on.
At the outset, Wesendonck recognized the responsibility the company bore to its community, declaring that it should “have principles as unmovable as a rock” and “avoid pitfalls that for a time might promise prosperity.” Though he lived in the time of the Gold Rush and the Wild West, Wesendonck stressed the importance of integrity, arguing that “nothing should be promised that could not be carried out.”2
My own ancestors might have made the same admonition. Five generations back, a distant uncle left Europe for America as a young man, finding his way to the new state of Nebraska. The Homestead Act of 1862 offered the chance for those willing to become small landowners. Against all odds he raised enough money to buy a team of oxen and a covered wagon from merchants in the East and struck out for the sparsely populated Great Plains in the West. Seeking cheap land that he could farm and ranch, he became one of the early settlers of what would become West Point or Bancroft. As the territory had not yet been surveyed, the precise location remains unknown. Eventually our family settled in Wisner, a community along the Elkhorn River that at its peak would reach about 1,300 residents.
The pioneering story of my company’s founders and that of my ancestors in Nebraska has been handed down from generation to generation, not unlike the story of insurance.
Winston Churchill once said that if he had his way, he’d write the word “insure” over every door of every cottage because “I am convinced that, for sacrifices that are conceivably small, families can be secured against catastrophes which otherwise would smash them forever.”
For as long as there has been trade and commerce, there has been insurance.
Insurance, in so many ways, is part of the DNA of business. Business owners and individuals alike cannot know with any certainty the risks of the future, but they can share risk by pooling resources. In the past, communities of merchants sending goods in one direction and bringing home goods on the return formed “tontines,” or groups of farmers and whalers, to pool their money as a means of insuring each other in case a ship were to sink on the treacherous journey to distant horizons. Similarly, in the future we will need to manage risk in an age of digital transformation, one in which intelligent technologies will both advance industry and disrupt the lives of many workers.
If past is the prologue, the insurance industry and businesses of every kind must be on guard.
Stated simply: insurance is the mechanism by which someone makes a promise to give you money when you need it the most. When we make a promise, we keep it. That’s the business insurers are in. It’s true for health insurance, life insurance, and property and casualty insurance. If there’s a problem in your life, if someone dies, if someone gets sick, if someone is disabled, if your house is flooded, there’s another entity out there that will give you the money you need to survive. You pay a reasonably small amount of money now, and if something goes wrong, insurance pays a larger amount of money.
Many don’t realize how integrated insurance is in our lives. Without it surgeons, pediatricians, drivers, pilots, innovators, chefs, and schools would be reluctant to operate. Those who buy life insurance depend on commitments made today being fulfilled thirty to forty years from now. We work for outcomes many of us will never see.
Every year the life insurance industry pays out in claims an amount that is equivalent to three-fourths of the dollars that social security pays out in benefits every year. An estimated 75 million American families rely on life insurance. In 2017 alone, life insurers paid a total of $189 billion in annuity benefits, life insurance benefits, disability income, and long-term care benefits. When you factor in every sector of insurance, it’s clearly essential to America’s safety net. Without insurance we’d see a return to Dickensian times—orphans and widows in the streets.
Guardian is a mutual insurance company, which means it’s owned by policyholders. Profits earned by a mutual insurance company are either retained within the company for necessary investments or rebated to policyholders in the form of dividend distributions or reduced future premiums. According to one source, “in contrast, a stock insurance company is owned by investors who have purchased company stock; profits generated by a stock insurance company are distributed to the investors, as well as held in reserve and returned to policyholders in dividends.”3 That’s why a mutual company can take a long-term view: because we have long-term promises to our policyholders.
Doing the right thing and holding ourselves to very high ethical standards is at the core of our business. When we review a claim, we ask ourselves, “If I were on the other side of this transaction, how would I like to be treated?” It is an application of the Golden Rule, or, more philosophically, it’s John Rawls’s notion of a veil of ignorance. Our former general counsel, Eric Dinallo, is also a professor at New York University and makes this Rawlsian argument: if we were all in the same original position behind a veil of ignorance, we would all be equal and we would make moral decisions.
Our business goal is to serve more people. After all, we were founded with a social mission, to help immigrants. We want to serve all people at a reasonable cost and give them assurances so they don’t have to think about the misfortunes of life or what will happen when they stop working. In our Life business, we protect people against living too long or dying too soon. In our Group and Worksite business, we insure accidents, disability, dental claims, and critical illness. In short, we help protect people against what they can’t plan for. Our customers, the policyholders, purchase insurance to protect the people and even the prospective charities they care for and love.
Listening to customer feedback is one of the ways we keep policyholders as the foundation of our business. During one of my senior leadership meetings, we invited several of our customers to participate in a panel to share their stories. We learned how we can help customers better understand which dentists are in their network and how we can better share data between different groups. Near the end of the panel, Yvette Walker of GG Brands, maker of Gorilla Glue, told us that her company’s core values included integrity and having respect for everyone the company touches. She said those values and those of Guardian overlap. Then she shared the emotional story of when she had that realization. She described it as her most difficult year.
She had just undergone surgery and filed a short-term disability claim, when she suddenly and unexpectedly lost her husband. She called Guardian sobbing. She now needed help with a life insurance claim. A customer service person could not find the claim in the system but asked if she could hold a minute and went back into the mailroom, where she found the newly arrived claim. “Your people gave me the service and respect I would expect.”
Looking back at my own life, it took disasters of both global and a very personal scale to drive home for me the true value of insurance. On September 11, 2001, like many others, we lost friends in the World Trade Center attacks. And then, in the aftermath, I learned that a very close family member was dying, someone with small children, one just a year old.
A late-night phone call from my mother alerted me to the urgency of the situation. I rushed to the airport, slowed by extra security in the wake of 9/11, and by the time I arrived, it was too late. The death was very difficult for our family, and their local community rallied like nothing I had ever seen. They brought stacks of bottled water because there had been a water main break. They brought meals, organized a beautiful funeral service, and continued to support the family for months.
I was forty-one, and my career was on the rise. But the observed presence of the mortality of those around me—not to mention my own—forced me to reexamine my life. Shaken by the confluence of events, I walked into my boss’ office at the time to let him know I needed to take time off. I explained the situation, and he very kindly offered for me to take the summer off, but in the end, I decided to leave entirely.
MY PURPOSE
The time away from work enabled me to reflect and gain perspective. I thought a lot about purpose, my own and that of business and society.
In time I returned to work, this time as a consultant. Years later The Wall Street Journal published a special report titled “Women in the Workplace.” I was interviewed and recounted the story. I told the reporter that my original career was insurance, and ultimately I decided that I really loved it. I find it to be very meaningful—it affects people’s lives in a major way. We’re here for people at their worst moments.
One of my clients was Guardian Life, a company I had watched from afar and that was about to undergo a transformation. The opportunity to gain perspective meant I could see great possibilities to help people. I had learned that our loved one had purchased a small life insurance policy when death seemed so far away, perhaps even unnecessary. But after the death, the family appreciated the foresight. That’s the value of insurance that I had not yet fully appreciated. Its purpose is to help people in need, and that became a purpose to which I would dedicate my career, though I had no idea then where that would lead.
Over the course of a few years, I gradually transitioned from consultant to leader of one of Guardian’s main businesses.
The Guardian board let me know that it was considering me to become CEO. That was not part of my plan. The daughter of Nebraska free spirits, I’d not come back to work to be CEO. Although Guardian was different than any company I’d worked for, I worried that it would be difficult to adhere to the values and purpose I had set during my time off.
Not long after, I was up on a stepladder in the kitchen when my husband came in to ask how my day went. “They asked me to be CEO,” I told him and continued searching for something inside a cupboard. A silence followed.
“Why not?” he responded, puzzled but also with a note of encouragement.
“It will change our lives,” I said.
“But you love those people,” he responded.
He was right. I stepped down from the ladder and we sat together that evening discussing the opportunity to lead.
A wise friend, Srikumar Rao, who taught a course at Columbia Business School, offered this counsel: “What if you could help to make Guardian the company you want to lead?” Srikumar proposed. “You could be the example of the CEO you would want to work for.”
The timing was both urgent and presented an amazing opportunity. It was 2011, and despite a slow recovery from the Great Recession a few years earlier, Standard & Poor’s had cut the U.S. debt outlook from stable to negative for the first time since the Pearl Harbor attack in 1941. Technology disruption was becoming apparent, even for financial services.4 The iPhone was all of four years old, and cloud computing was in its infancy. A data revolution was in the making, and old barriers to entry were falling away. In his letter to the World Economic Forum, Klaus Schwab wrote of a “post-globalization, post-privacy, post-digitalization world.” The public and private sectors would soon be transformed by a new Industrial Revolution, one led by data, artificial intelligence (AI), augmented reality, and robotics. Talk among leaders swirled around the need for a new social contract and responsible business.
The opportunity to lead on these values inspired me, but the notion of becoming the first woman to lead Guardian did not occur to me—and, frankly, still doesn’t. I know that women can lead organizations of all sizes. Yes, women are still underrepresented in insurance company leadership positions, according to the 2018 McKinsey and LeanIn.Org study on Women in the Workplace. Somehow, though, “most men, and a surprising number of women, don’t believe gender parity in leadership is an issue. Thirty-three percent of women and nearly 50 percent of men across industries believe that 1 in 10 women in a senior leadership team is pretty good representation.”5
In the fall of 2017, the recruiting firm Korn Ferry published a report stating that just 6 percent of the Fortune 1,000 company CEOs were women. I’ve always suspected women have to work harder than men, and that women are often equally talented even though they don’t believe they are. These are things that are obvious if you are a working woman, but Korn Ferry’s Women CEOs Speak quantified the story. The authors noted that very few of us set out to be CEO; we tend to start with degrees in science, technology, engineering, and medicine; there is no single path; and we are motivated by purpose and culture. Women CEOs seek out challenge. “These women didn’t just prefer difficult and unpredictable work assignments, they sought them out.”
That was true for me, and I was inspired by Rao’s encouragement “to lead as I would want to be led.”
I accepted the role as Guardian’s first female CEO.
One priority was to reorient our team to take advantage of the technological disruptions ahead. Insurance, like so many industries today, competes with your last digital experience. It requires simple registration, one portal. How do we help actuaries—the people at the core of our industry who calculate premiums, reserves, and dividends—to become data scientists as well? How do we support investment experts to also become users of machine learning? How do we re-engineer our back office and build new platforms and new systems to better serve all policyholders, including millennials, who are accustomed to research and one-click purchases from their phones? The millennial generation, born between 1979 and 1995, is the largest age cohort in U.S. history, according to Michael Luis.6 How can these systems help us create new products and services that leverage our more than a century and a half of experience? How can the Human Resources Department lead a cultural change so everyone can participate in a newly revitalized company, or transition with dignity to a new role or a new job?
Digital transformation begins with getting the right team on the field. It means encouraging the veterans to keep marching down the field, recruiting new talent to complement existing strengths, and offering highly relevant retraining and continuous education to remain on the cutting edge. On reflection, this virtuous cycle is what every business must do on its journey from analog to digital. And it’s what every economy must accomplish in order to transform and build its comparative advantage.
I’ve always been obsessed with recruiting the best talent. It comes from my early career years at McKinsey, where talent was the product we sold and individual impact was clear and significant. I’ve been known to recruit people over a period of years to join my team, even when a role wasn’t yet defined and the person was perfectly happy with her current position. If I thought she would fit well in my company culture, on top of making important professional contributions, she became a relationship to cultivate.
As I moved from consulting to working in corporations, my philosophy of finding the best talent came with me. People who catch my eye are intellectually curious, adapters, and collaborators who will put the enterprise above themselves and are driven by our business’ contribution to society. These traits are essential as automation and augmentation continue their rapid pace forward and the connection to humanity becomes more and more important.
Although the need for tech skills has been front and center in the discussion about the war for talent, it’s really about the people who will add the most value to your company’s growth initiatives. Certainly everyone needs to understand technology, but industry specialists don’t lose their value. And given the pace of change, in addition to technologists and experts, I think demand also will grow for people who are experts in human resources, change management, communications, and consumer experience to help leaders and organizations navigate.
At Guardian, job one became to modernize our legacy technology end to end. These systems had been built before America put a man on the moon. This meant switching from our own data centers to cloud computing, an absolutely essential move toward more intelligent systems that can present insights and predictions. It meant that our IT staff would change from “racking and stacking” to developing more elastic software capabilities in the cloud. It meant we needed more sophisticated networking skills—we had to build security into our applications. It meant managing products as much as managing people. Instead of leading large teams of people, you might become an individual contributor who worked across disciplines. Hundreds of employees signed up for new skills training.
To accomplish these hard technical skills, we also needed to preserve and build the softer human characteristics that computers and algorithms cannot replace: curiosity, enthusiasm, collaboration, and an eagerness to embrace change and be nimble. Our employees no longer were order takers but people who took ownership and accountability. Yes, there are a lot of great traditions, but hierarchy can get in the way. We needed people to advocate and push for change.
Finally, we needed to drive change management top down and bottom up to ensure that executives, midlevel managers, and employees at every level embraced digital transformation. This began with helping them see and understand the long-term vision. What was in it for them? Our answer? The world is changing. If you acknowledge that’s true, why not work toward a company that invites change rather than being left behind?
We had to change how we work; to move faster, become intensely customer focused, collaborate across lines of business. We looked for change agents—mavericks already leading projects and change who would help to bring the entire organization along.
In an episode of the Hidden Brain podcast, NPR’s Shankar Vedantam interviewed Harvard Business School professor and author Francesca Gino, who studies the psychology of organizations.7 Her book Rebel Talent is a manifesto for change management. Professor Gino argues that rebels are people who break rules that should be broken. They break rules that hold them and others back, and their way of rule breaking is constructive rather than destructive. It creates positive change.8
We work in a regulated industry, so rules are very important. Gino points out that it’s important for leadership to be clear about rules that should never be broken but also to give permission to identify rules that are outdated or nonsensical. Her research shows how great leaders enable everyone to show up with their individual identities, to make their own contributions but also recognize they are part of a team. Her rebel talent practices fearless curiosity, always asking “Why not?” Efficiency is important, but it can also shoot down curiosity. Her writing points out a tension between expertise and experimentation. Expertise is valuable, but so is keeping an open mind and considering new, innovative options.
MELDING ACTUARIAL SCIENCE WITH COMPUTER SCIENCE
Our investment in cultural and educational change has been significant, but the return on investment has been even more significant. Nowhere is that more poignant than among our actuaries, the professionals who calculate insurance and annuity premiums, reserves, and dividends. Manufacturers have engineers, hospitals have doctors, and law firms have attorneys. Those who surround and support them are essential, but they are at the core of the business. Insurance companies rely on actuaries.
They are often portrayed in popular culture as accountants in green eyeshades staring at numbers and equations beneath the light of a desk lamp. Ben Stiller, Jack Nicholson, and Edward Norton have played actuaries in Hollywood. Comedian Will Ferrell played an IRS auditor whose fianceé left him for an actuary—adding insult to injury. In Batman comics, a mathematical genius named the Actuary was drawn as a villain who applies his mathematical formulas to aid the Penguin.
Actuaries, in fact, are heroes who will only add superpowers with the addition of data science, machine learning, and AI. The future of actuarial science will become more precise over time and as we reason over more data. Assessing one person’s health, for example, is easier the more data you have and the more patterns you recognize. AI will improve our fraud detection and claims management processes. It will make more effective and efficient the 150,000 emails per year that we receive requesting rate quotes from agents and brokers. It will improve how we determine risk and evaluate pricing.
Guardian’s chief actuary, Michael Slipowitz, discovered his love of numbers and math while following his favorite sports teams, notably the New York Yankees. Every day he pored over the statistics on the sports page in the local newspaper. Noticing this inclination, his mother suggested he look at the actuarial profession as his baseball talents waned and he started to think about what he wanted to do when he grew up. He followed a well-worn trail to becoming an actuary, studying accounting, joining an insurance company, taking his exams, and being admitted to the Society of Actuaries. He rose through the ranks by solving increasingly complex problems and questions. What is the propensity of a group to buy one or more insurance products? What is the propensity of policyholders to retain their policies? What is the correlation between those who go to the dentist twice a year and their lifespan? Actuaries examine investments and risk. What if a pandemic struck and an unpredictable number of insurance claims were filed?
A 2017 study of health insurance and labor market statistics found that the risk of cardiovascular disease, a leading cause of death, is lowered by dog ownership. Dogs improve the quality of sleep and provide a purpose to get up in the morning and a reason to exercise.9
Actuaries have long answered these and even more complex questions with a high degree of confidence, but data science and its many branches will increasingly help us to answer them with greater precision. To do so, however, we need people with hybrid skills; for example, actuaries with insurance industry expertise who also know how to use programming languages such as Python to explore data for answers, or investment people who know about financial markets but can also take structured and unstructured data to identify trends and valuation patterns.
Actuaries have grown up around a wide range of insurance instruments, including social security, Medicare, and Medicaid. Continuous education and technology are intertwined with the profession. For actuaries, as for most professions, data science will advance the field. At Guardian we process tens of millions of claims. No one person can manage that, but data science and AI are showing promising results. In the past actuaries might analyze several variables in order to estimate a likely outcome. Today we see the potential to leverage an exponential amount of data and variables It’s a whole new layer of complexity. Clearly the skills of the actuary—like those we all possess—must evolve.
A parlor game in some circles is to question the future of the radiologist. What is to become of this profession if the machine can diagnose an x-ray faster and more accurately than a human radiologist? That’s a parlor game that is expanding to include more and more professions. Will actuaries become data scientists? Will data scientists be replaced by self-created algorithms and AI technologies?
In November 2019 the Brookings Institution published a study examining new AI-related patents and job descriptions to interpret which jobs and which cities will be most affected by digital disruption. The radiologist was among them, but so were carmakers and clothiers, purchasing agents and agricultural workers. The Axios headline proclaimed: AI is coming for white-collar and blue-collar workers.10
In my view, AI in all its forms—machine learning, deep neural networks, natural-language processing, visual recognition—will augment rather than replace our human skills and capacities. The new actuary needs to be steeped in large quantities of data, and opportunity lies in the fact that some of these new data sources could make accessing insurance easier. Insurance, like more and more businesses, is a data business at the core. We have to hire for and train people to manage asymmetric data better than others.
Tom Olds, with whom I worked at McKinsey and, later, at an insurance technology start-up, is a good example of the asymmetric skillset we need. Today he leads predictive analytics for Guardian, and his team includes both data scientists and a number of physicists, including an astrophysicist. Tom explains that actuarial science and computer science are similar—they both use continuously increasing data sets to ascertain “signal to noise”—that is, the ratio of signal, or insights and predictions, to noise, or unwanted background. Tom sees the merging of data, actuarial science, machine learning, and AI as a certainty that will lead to better insights, better health, and better insurance planning.
One of Tom’s physicist-turned-actuary is Yun Wang, who trained at Zhejiang University in China. Ryan, as he prefers to be called, went on to study at Washington University in St. Louis, where he worked on a National Institutes of Health (NIH) grant to develop sensors that can better target drugs. The project brought together students from medicine, chemistry, physics, and engineering. There he was introduced to pattern recognition using algorithms and early instances of machine learning. During lab time friends would talk about Wall Street and how actuarial science was being used to assess risk and opportunity. It captured his imagination, but he was turned off by what he saw as greed and instead decided to head for Hartford, Connecticut, a mecca for the insurance industry, to study actuarial science at the University of Connecticut. He immediately recognized the math—floating point mathematics, partial differential equations, and advanced statistics—as similar to physics.
Today Ryan is studying patterns with machine learning and AI to root out fraudulent claims, which cost the industry and consumers billions of dollars. He’s also using data to improve risk assessment for underwriting life insurance policies. Millennials are now the future policyholders, and they expect the process of buying life insurance to be quick and painless. AI is shortening the process from an average of thirty-two days to just eight. AI also will gradually reduce the need for medical tests such as blood and urine sampling.
It will become exceedingly difficult for firms to compete in the marketplace and for individuals seeking jobs to compete for work without some familiarity with these digital tools. Businesses, industries, and people will be disrupted. Andrew McAfee and Erik Brynjolfsson, authors of The Second Machine Age, are optimistic about the prospects of digital transformation, but they also warn that it will bring thorny challenges. “Technological progress is going to leave behind some people, perhaps even a lot of people, as it races ahead.”11
The routine things humans do, repeatable functions, will be more easily replaced than higher-level, skilled functions. But machines, equipped with deep neural networks, agents, and bots, also will become intelligent learners. As Brynjolfsson and McAfee conclude, there’s never been a better time to be a worker with special skills and the right education, or a worse time to be a worker with only so-called ordinary skills and abilities.
As insurance professionals, we must care about digital transformation—a lot. We need to become experts at understanding labor and education trends, at both the client level and the macroeconomic level. If we are slow to understand how people and their work are changing, we will be slow to understand health outcomes and morbidity.
Nobel Prize–winning economist Angus Deaton and Anne Case have pioneered the link between education and skill levels—which often dictate which jobs are possible—and morbidity. “We propose a preliminary but plausible story in which cumulative disadvantage from one birth cohort to the next—in the labor market, in marriage and child outcomes, and in health—is triggered by progressively worsening labor market opportunities.”12
A case in point is the growing gig industry, which by some estimates employs as many people as the government sector. Those finding gigs, or time-limited jobs, through ride-sharing services such as Uber and Lyft or freelancer.com, often are not eligible for insurance services. Steve King, a partner and co-founder of Emergent Research, estimates that there are 18 million full-time gig workers and another 22 million Americans who do gig work part-time.13
In their startling book on the future of jobs, Ghost Work, Mary L. Gray and Siddharth Suri write that this gig economy is quietly moving to what they call “ghost work” on platforms such as Amazon’s Mechanical Turk, or MTurk, where “requesters” can post a wide variety of online tasks and workers can perform those tasks—often for a few cents at a time.14 A typical task might be to label a series of photos or to test your ability to type a series of numbers or letters. The World Bank projects that earnings from these tasks will grow to $25 billion annually by 2020. How people define their jobs and work is clearly changing.
These are people and families, many still pursuing an education, who are struggling economically and need insurance to prevent future emergencies. One in three has an employer-sponsored retirement plan, one in four an employer-sponsored medical plan, and just one in five has dental, disability, or life insurance. Recognizing that there is a new customer to serve, Guardian launched a digital storefront to help protect part-time workers, freelancers, and retirees who do not have access to benefits at work. We also invested in more than a dozen companies to help generate insights into the gig worker.
One investment was in Jobble.com, an online service that can schedule your work day with part-time jobs and tasks, both skilled and unskilled. Education and training matter to the future employment of everyone, regardless of their background. The questions become, “What is the best way to prepare for the future, and how do we make it accessible to all? How do we avoid one monolithic education model in order to include broad perspectives?”
The chapters that follow will begin to explore answers to these questions, but I cannot begin that journey without telling you the story of someone else’s journey.
Tracy L. Rich, Guardian’s former general counsel and corporate secretary, was my closest adviser and mentor. He died unexpectedly one summer’s day in 2019. Yet even today he remains for me a beacon for these hard questions about the future of work, both for our industry and for society. Born in South Carolina in the early 1950s, he was raised in a house without running water. He rose from humble beginnings to complete his law degree at New York University and a master of law degree from Boston University.
I often would walk down the hall to seek his sage advice on complex matters, but I did so fully aware he would tell me a story rather than tell me the answer. He taught me, and many of us at the company, how to think. His anecdotes were often formed as riddles or parables, and by the end I was supposed to know the moral. This is not how an actuary would answer a question, but it is how actuaries and data scientists—anyone, really—will have to augment what the algorithms tell us.
“In order to achieve the best results, you have to focus on people as well as the law,” Tracy once told an interviewer.
His people-first, philosophical approach—his kindness and humility—are human skills AI cannot replace, nor should we want it to.