Artificial intelligence may soon reshape not only how insurers operate, but what they insure. For Andrew Kelly (pictured), executive vice president at AJ Wayne & Associates, the rise of AI exposures is beginning to resemble the early days of cyber insurance - a niche risk that could evolve into an entire specialty sector.
But while new technologies are transforming the market, Kelly believes the fundamentals of E&S insurance remain unchanged: disciplined underwriting, strong broker relationships and clear communication with underwriters. “I’ve been with my firm for 23 years, and the last truly hard market I saw was in 2003,” Kelly said. “Back then, a hard market was defined, at least in our industry, as a situation where you could not get a domestic quote at all. The only place you could get a quote was somewhere like Lloyd’s – the real Lloyd’s in London.”
Today, Kelly believes the phrase “hard market” is often applied too loosely. Slower response times or fewer competing quotes may frustrate brokers, but that does not necessarily mean capacity has disappeared. “Because quotes aren’t coming out of everyone’s ears, or it’s not easy to get quotes in five minutes, some people call that a hard market,” he said. “I don’t know if I agree with that.”
In a market where underwriters may review thousands of submissions, Kelly said the difference between securing a quote and being ignored often comes down to how risks are presented. “In a quasi hard market, it’s not uncommon for markets to get two or three thousand submissions,” he said. “If you have a relationship with the underwriter and they know you’re calling, that you’ve taken the time to write a good cover letter, that you’re being professional, you go from number 2,501 in line to number two.”
Yet basic communication, he said, is frequently overlooked. “I’ve heard from many carriers that you’d be surprised how often basic communication is neglected,” Kelly said. “They don’t get cover letters. They just get ‘please quote.’ Nobody picks up the phone anymore.” A short conversation can often be accomplished more than an extended email exchange.
“One three-minute or five-minute phone call is worth dozens of emails,” he said. “There is so much you can communicate in that call that you skip ahead of a long email chain.”
Submission quality is just as important. Missing information or unexplained claims can quickly derail an account, even when coverage might otherwise be available. “I recently saw a submission with two or three claims, and we took the time to walk them backwards into the insured’s claims prevention procedures,” Kelly said. “That was the difference between them getting prior acts with their quote and losing their retroactive date.”
The goal, he added, is to create value before focusing on the sale. “If you want to stand out, we focus on adding value to the transaction before we start thinking about how we’re going to sell it.”
Kelly also emphasizes transparency when discussing premiums with brokers and insureds. His team routinely analyzes rate movement year over year to explain what is actually driving renewal pricing. “The first thing we do is run the numbers on a year-over-year basis,” he said.
In professional liability coverage where receipts determine the rateable base, that analysis often reveals that underlying rates have declined even when total premium has increased. “It’s very common to see a situation where receipts have gone up substantially, maybe 30 or 40 percent, but the rate has actually come down,” Kelly said. Presenting that information clearly can change the tone of renewal discussions. “If you can show the agent and the client that the rate has gone down from $1.15 to $0.95 per $1,000 of receipts, but the rate able base has gone up 40%, you can communicate a sense of fairness.”
Coverage discussions follow a similar philosophy. Rather than overwhelming clients with lengthy policy comparisons, Kelly focuses on a handful of meaningful differences. “Our goal is to boil the coverage down to five to ten pertinent points that really matter for that insured,” he said. Those details might include how policies treat independent contractors or how technology exposures are addressed within professional liability coverage. Once those distinctions are clear, insureds can better weigh price against protection. “They might save $500,” Kelly said. “But is it really worth it?”
Technology is also reshaping how insurers understand and segment risk. Advanced data aggregation now allows carriers to identify loss trends within specific sectors rather than exiting industries entirely when results deteriorate.
“Rather than abandoning the space, you can focus it and find ways to mitigate the specific risks that are causing the losses,” Kelly said. That ability to analyze risk more precisely may also accelerate the development of new specialty products – particularly around artificial intelligence. “In the 1990s, cyber was a niche product that only a small fraction of buyers purchased,” Kelly said. “Today it’s a major standalone line.”
Artificial intelligence could follow a similar path. As businesses increasingly rely on automated systems and machine learning tools, insurers may eventually create dedicated coverage designed specifically for those exposures. “It would not surprise me if, over the next five to 10 years, we see an AI insurance sector develop in the same way cyber did,” Kelly said.
For now, many policies address artificial intelligence only indirectly, often through endorsements or silence within existing policy language. Over time, Kelly expects that to change. “There will be an entire sector that specifically understands AI-related risks,” he said. “You’ll have managing general agents, claims people and specific forms and endorsements designed to address AI exposure, technology exposure and automation exposure.”
For brokers operating in the E&S market, those developments signal a new phase of specialization – and opportunity. “We are uniquely positioned to move into the next decade optimistically,” Kelly said. “I couldn’t be more excited to see where we all end up.”
