Electronic Chat with Dr. Dan Shoham
Bill Sinn | May 02, 2019
Name: Dr. Dan Shoham
Title: Chief Science Officer
Number of years you’ve spent in the insurance business?
3+ years in insurance, 30+ in predictive analytics.
Provide a little background on yourself.
I was born in Israel and moved to the US at age 12. At age 14, I was such a bad student that I was almost kicked out of high school. Fortunately, a Temple University professor saw potential in me and gave me an opportunity to work in his lab over the summer. I felt like the University environment suited me better and soon I started taking courses and dropped out of high school to enter a full-time undergraduate program. Later, I gained a full fellowship and graduated with top honors. I then went to graduate school and earned a Ph.D. in Mathematics at age 21.
My next adventure was as a Staff Scientist at M.I.T. Lincoln Labs in the late 1980s and early 1990s. During my time there, I worked on a variety of far-ahead-of-its-time machine vision technology projects, including the identification of mobile ballistic missile launchers using air- and space-borne imaging radars in the waning days of the Cold War.
After my work at M.I.T Lincoln Labs, I took an opportunity in the private sector at HNC Software (which was acquired by FICO) developing fraud-reduction algorithms. At HNC Software, I started off as a Senior Scientist, before being promoted to Principal Scientist, and then to Product Line Director. During my tenure there, I was responsible for building predictive analytics products for the financial and payment industry, including the international version of Falcon, a Neural-Network based credit card fraud detection system. Not many people understood back then, in the mid-1990s, the power and potential of Neural Networks. In a matter of a few years, we opened markets in over 60 countries on four continents with a provable fraud-reduction value proposition.
As I was broadening my scope from just the scientific aspects to the full spectrum of connecting the mathematical sciences and the monetization possibilities, I needed to upgrade the business side of my skill set. I returned to school to obtain a joint MBA from Columbia Business School in New York and London Business School, focusing on global management. I also became a licensed California CPA. I obtained these certifications to provide unambiguous credentials to my current and future audiences that I can speak the language of business no less than that of science.
This new skill set was put to use immediately when I founded and became the CEO of Edgeware Analytics, an angel-backed startup providing small business creditworthiness scores. In a few short years, over two billion dollars worth of small business loans were scored and transacted across our online platform. We were able to prove that small business loans that used our scores were, on average, $3,000 more profitable than without our scores. Unfortunately, when the credit markets froze in 2008, lending came to an extended halt and Edgeware Analytics became unprofitable. We still managed to sell the company to a group of investors composed primarily of former clients. The resultant company, Boefly, is still active.
After selling Edgeware Analytics, I had a series of positions, averaging 3 years each, helping establish predictive analytics organizations in operating companies including ARS National, Hyundai Capital America, and Farmers Insurance.
You founded a startup many years ago and then changed to a leading insurance carrier. Now you’re back to an insurtech company. Why the changes?
I feel that the best capacity to contribute comes from having lived on both sides of the vendor-operator divide. To justify original AI work, the value creation has to exceed the risk-adjusted development cost. When I was at Farmers, the value creation was limited to our market share -- about 5% of the US. At Betterview, cutting-edge science has the potential to create value for an entire global market, so the economy of scale enables investments in much more exciting opportunities.
You spent over three years as lead data scientist at Farmers Insurance. What do think was your greatest contribution at that company?
Without a doubt, my greatest contribution was an auto subrogation model. This model was used to identify subrogation opportunities that claim representatives missed. The model used several new techniques that were never before used at Farmers. Most crucially, a natural language processing algorithm I developed that incorporated text sources (i.e.phone call transcripts, mail correspondence, police reports, etc.) into the overall score. The new model was put into production in a Champion-Challenger mode where a percentage of new claims were scored under the prior system and a percentage under the new score. No one, not myself, not the claim representatives, not even the subrogation people, knew which claims were processed under the old and which under the new system. This was truly a true double-blind environment. Afterward, the total recoveries from both groups were compared. In its first year, the new system generated provable, bottom line, contribution in the tens of millions of dollars compared to total development and deployment costs of well under one million dollars.
How would you describe Betterview? What makes the company unique?
Betterview brings advanced Image Analytics AI to the aerial imagery property evaluation space. In the last few years, after decades of exasperatingly slow progress, image analytics AI has taken off spectacularly, and in some situations, it now outperforms human image comprehension. There is a somewhat rapid dash in many areas to bring these new capabilities to market. Betterview brings the right combination of talents to this unique time point, with a well-rounded set of skills and technologies. My job is to power up the advanced AI component of the story.
What is your vision for your new role at Betterview? What do you hope to change or innovate?
I would like the Betterview property report to become the baseline standard for the property insurance industry, much like FICO is for consumer credit underwriting. I feel that this could be achieved by making the report very comprehensive, having powerful machine learning image analytics definitively identify important observables and risk factors, and a plethora of risk scores translating these observables into provable dollar-measured value propositions. Much as credit scoring has become the industry language for lending, I want Betterview visual scoring system to be the equivilant for our markets.
You’ve pioneered a number of analytic models over the years. What changes or challenges do you see with data over the next 5-10 years?
Ohhooo, predicting the future of predictive analytics? I think the biggest change coming is the transition into multi-domain-ness. It has been an unchallenged predictive analytics conventional wisdom that it is not enough to do good math. In order to build solid models that can also generate leverageable business value, a strong dose of domain knowledge is needed. For example, to build a credit score, you don’t just need a mathematician, you also need a lending domain expert. To build a roof-evaluation score, you also need a roof domain expert. However, as we transition into a future where many different domains are brought together, the challenges multiply. At Betterview we currently bring together insurance, aerial imagery, roofs, software, UI, and AI domain experts. As more domains are incorporated into the leading models of the coming years, at some point, the complexity of the domains would become overwhelming. No one will be able to be an expert in all the required domains, and teams with a wide spectrum of expertise that do not normally interact with each other will be unmanageable. The challenge will be to develop technologies that can bridge the gap and deliver predictions better than any human while requiring a limited amount of domain expertise.
What do you like most about working with data and analytics? What gets you truly excited about his area of the business?
I love seeing a direct line from predictive power to value creation. There is nothing more joyful than to respond to “it can’t be done” with “yes it can, and I’m going to do it.” With Image analytics AI regularly breaking new “can’t be done” frontiers and Betterview positioned in the right place with the right people, I hope and expect to be saying “yes, it can” very often!
What do you think is the biggest challenge for insurers in the realm of data today?
Where to begin? Perhaps with the risk of becoming outdated. Ironically, insurance, arguably, was the first industry to monetize a form of predictive analytics. Property and casualty insurers were in the business of predicting and statistically pricing losses since at least the 17th century. However, along with the glory of being the first to innovate, comes the misfortune of having the longest time to ossify. Insurance, today, is a very fine and well-established art form that combines law, accounting, and statistics. Transparency and explainability trump predictive performance. Whereas 21st century AI scientists pride themselves on building models so complex that even their own creators don’t really know how they work inside--a necessity for models that outperform humans--actuaries are careful to build models that meet legal, accounting, and regulatory tests. This difference in methods creates a disconnect. It will not be long before data scientists with black box AI systems will develop risk prediction models that outstrip anything legally complying actuaries can produce. Then what? Will the market allow such models, with huge value creation opportunities, to just sit idle on the sidelines? If new entrants challenge the established system by bringing such AI systems into play, how will traditional insurers respond?
What is your passion outside of Betterview?
Outdoors: Mountain hiking. My bragging list includes the Grand Canyon Rim-to-Rim, Mount Whitney in winter conditions, the Inca Trail, Pikes Peak, Half Dome, Telescope Peak, Badwaters-to-Dante’s Peak, and Cactus-to-Clouds at nighttime.
Indoors: Boardgaming. My bragging list includes being the world’s highest-rated Diplomacy player for 5 years (of about 3,000 rated players at the time), and 3 consecutive wins of the California Axis and Allies tournament.
Do you have any words of advice for today’s insurance IT/business leaders?
Provable dollar-measured value proposition!
- Spotlight on the 2019 IASA Conference
- ValueMomentum Selects Erie as Site of Regional Development Center
- Capgemini and Majesco Become Alliance Partners
- Electronic Chat with Dr. Dan Shoham
- Electronic Chat with Todd Greenbaum
- Martha Notaras: The “Outsider” with an Amazing Inside View
- ProSight Direct Offers “Effortless Insurance for Today’s Professional”
- Electronic Chat with Larissa Tosch
- Martha Notaras Will Join ITA LIVE 2019 as a Keynote Speaker
- Five Things to Consider When Evaluating Your Cyber Risk
- ITA Pro Magazine, January/February 2019
- Major Ransomware Attack Could Hit U.S. with $89B In Economic Damages
- ITA Announces 1st of Three Keynote Speakers at ITA LIVE 2019
- Electronic Chat with Jeroen Morrenhof
- Legacy Systems Are Dead. Really? Don't Count On It.
- Now Accepting Nominations for the 2019 ITA Bridge Awards
- It's time to register for ITA LIVE!
- Registration is Now Open for ITA LIVE 2019!
- What to Expect from a Digital Experience Platform Implementation
- ITA Pro Magazine September Edition is Now Available
- It's National IT Professionals Day
- Save the Date for ITA-LIVE 2019
- OneShield Software and UrbanStat Work Together to Improve Real-Time Analytics and Risk Decision-Making
- ITA LIVE 2019 - SAVE THE DATE!
- Insurance Technology Association Announces New Editor-in-Chief
- August 2018 Edition ITA Pro Magazine is Now Available
- Enterprise Architecture in an Agile World
- Top 10 Tips for Securing Your Mobile Devices and Sensitive Client Data
- Industry Insight: 4 Global Insurance Trends in Digital, Data, Content Services and Security
- Diving Deeper into Prioritizing Your Strategic Digital investments
- Why Content Rules
- How Mass Personalization Will Open the Small Business Benefits Market
- At Year End 2017, Will Your Organization Be Protected from Cyber Risks?
- Do Insurance Bots Dream of Mitigating Risk?
- Conditioned to Respond
- Managing & Mobilizing Insurance Data in a Connected World
- Race to the Finish Line
- New Tools, New Opportunities in Claims
- ITA LIVE: Reaching Insurance Industry Crossroads
- Advice to Insurance IT Leaders: Keep Your Eye on the Ball
- New Date, Venue for ITA LIVE 2017
- Guidewire Makes Major Push to Small and Midtier Market by Acquiring ISCS
- Insurance Disruption is Happening Right Now
- Insurity Adds Strategic Investment Partner, General Atlantic
- Beyond Transformation: The Convergence of Finance, Risk, and Actuarial Functions
- The Rapid Evolution of Consumer Protection Regulation
- Talent Hunt: Finding, Attracting, Retaining Top People
- Insurers Flexing Their Distribution Models
- Technology Driving Disruption in Insurance
- Fear of ‘Next Bubble’ Challenges Life, Annuity Carriers
- Technology Allows Commercial Lines Insurers to Stand Out
- Single Sign-on Viewed as Biggest Tech Challenge for Agencies
- ISCS Observes 20th Anniversary; Scurto Predicts Major Changes Ahead
- Policyholders and Their First Impressions
- Progressive Making Progress on the UBI Front
- High and Dry: Insurers Search for Disaster Recovery Plans
- Insurers Sign The (Un)Dotted Line
- Reflections of a Retired Insurance CIO
- Mobile Device Management Just One Answer to BYOD Issue
- Lessons from GEICO and Progressive on Winning the Critical Buying Stage
- You Are a Target for a Cyber Attack
- Web-based Systems are the Next Evolution in Claims Technology
- Gaining a “Wow” Experience from Web Users
- Time to Shift from Business/IT Alignment to Business/IT Alliance
- Healthcare Insurers Changing to Consumer Model
- Organization is the Key for Selecting Software Vendors
- Analysts Expound on the Needs of the Mid-tier Insurance Market
- Finding the Cure for Obamacare’s Website
- New Software Solutions Benefit Insurers on the Inside and Outside
- Products, Market Impede Investment in Systems for Life Insurers
- Combatting Cyber Threats: Predict, Prevent, Persist
- The Future of Telematics Heads Beyond Insurance
- The Shame in Cyber Security Lapses
- Building Policy Administration Systems for the Future
- Insurers Look Into The Eyes of Their Policyholders
- It’s a New Dawn for the ITA
INSURANCE IT NEWS
- Spotlight on the 2019 IASA Conference
- New Research Points to Economic Challenges Impacting the North American Towing Industry
- Klinger Elected AIMS Society President
- FHM Insurance Company Goes Live with Insurity’s Cloud-based ‘Workers’ CompXPress’ Policy Administration System
- Messagepoint Named a Customer Communications Management Leader in the Aspire Leaderboard for Second Year in a Row
- EIS DXP Hits Milestone with 1,100 Open APIs Now Available to Insurers
- Policy Administration Systems Replacement Still Top of Mind for Property/Casualty Insurers; Novarica Profiles Over 40 Vendors in 12th Annual Report
- MEMIC’s Financial Strength Affirms "A" (Excellent) Rating From A.M. Best
The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
ITA LIVE 2019
The tide is up! It's time to register for ITA LIVE 2019, our annual educational and networking conference! Our theme is "The InsurTech Revolution: Cutting Through the Hype." and we'll be bringing in a torrent of industry thought leaders, amazing insight and wonderful perspectives on the world of insurtech and its impact on the insurance landscape.
ITA LIVE 2019 will present real-life examples of true startup technologies that are helping insurers gain real advantage -- and a competitive edge -- in the marketplace. We’ll highlight the more successful InsurTech partnerships, while offering case studies that demonstrate exciting innovation and cutting-edge techniques impacting all aspects of the insurance ecosystem.
Ride the wave to LIVE 2019. Sign up today! We look forward to seeing you in May, 2019!
BLOGS AND COLUMNS
You have surely heard it said that small businesses are the growth engine for America. Today, the phrase has a special ring to it for benefits... READ MORE
With stagnant growth and lingering low interest rates, the life insurance industry faces a challenging future... READ MORE
Finding insurance carriers willing to write commercial lines risks has always been a challenge for producers... READ MORE
As Guidewire Software prepares for the start of Connections, its 11th annual user conference that begins on Nov. 2, Brian Desmond, chief marketing... READ MORE