Today, let us dive into a game-changing trend that's reshaping the landscape of the financial services industry: the rise of low-code and no-code applications.

Why all the fuss? Low-code and no-code applications are software development platforms that allow users to build applications with minimal to no coding required. No coding skills necessary! These platforms provide intuitive interfaces and pre-built templates that empower business users to configure and create custom applications tailored to their specific needs.

Why the sudden surge in popularity within the financial services sector? For starters, speed is of the essence in today’s finance world. With low-code and no-code platforms, companies can accelerate their digital transformation initiatives and roll out new applications in record time. This agility is crucial in an industry where staying ahead of the curve can mean the difference between success and stagnation. 

But it's not just about speed—it's also about efficiency and cost-effectiveness. Traditional software development can be time-consuming and expensive, requiring a team of skilled developers, and needs extensive testing. With low-code and no-code platforms, businesses can slash development costs and streamline processes, allowing them to allocate resources more strategically.

See also: No-Code or Low-Code?

Now, data security is of paramount importance in an industry as heavily regulated as finance. The good news is that many low-code and no-code platforms come with built-in security features and compliance measures, giving businesses peace of mind.

But perhaps the most compelling reason why low-code and no-code applications are gaining prominence in financial services is their democratizing effect. Traditionally, software development has been the domain of highly skilled engineers, leaving business users out of the loop. With low-code and no-code platforms, the power to innovate is in the hands of the people who know the business best—and not in the hands of the coders or developers.

Take the rise of robo-advisers in the wealth management industry. These automated investment platforms rely heavily on data analysis and algorithmic trading strategies to deliver personalized investment advice to clients. With low-code and no-code platforms, financial institutions can quickly develop and deploy their own robo-adviser solutions.

Low -code and no -code applications are also revolutionizing back-office operations. From streamlining loan origination processes to automating risk assessment tasks, these platforms are helping financial institutions improve operational efficiency and drive down costs.

See also: How Life Insurers Can Leverage Generative AI

Many low-code and no-code platforms come equipped with AI and machine learning capabilities, making it easier than ever for businesses to harness the power of these cutting-edge technologies.

Low-code and no -code applications are not without their limitations. Complex applications may still require custom development, and there's always the risk of vendor lock-in. 

That being said, the future looks bright for low-code and no-code applications in financial services. As businesses continue to prioritize agility, efficiency and innovation, these platforms will play an increasingly important role in driving digital transformation and shaping the future of finance.

Employee health benefits are in the midst of a transformation because traditional benefits methods fall short of meeting the diverse needs of today's workforce. 

One solution is Individual Coverage Health Reimbursement Arrangements (ICHRAs). While many benefits consultants still believe they are tailored for small employers, the reality is the opposite. Mid-market and large companies can reap significant benefits from embracing ICHRAs, leveraging them to meet business goals, care for a diverse workforce and attract top talent. 

Controlling Rising Health Plan Costs for Large Companies 

It's not news that health insurance costs have been rising steeply, burdening businesses of all sizes. While Mercer’s annual employee benefits survey found that average rates increased by 5.2% from 2022 to 2023, many companies are seeing rate increases of 20% or more. In fact, according to SureCo’s 2024 State of Employee Health Benefits, benefits consultants said over a third of their book of business needs an alternative solution to traditional, fully insured coverage options.

Our research, which was conducted by Censuswide, an independent market research firm, found that most companies (85%) have changed healthcare carriers or plan design at least once over the past five years—but the numbers differ dramatically by company size. For example, 55% of companies with 150 to 500 employees had changed plans two or more times in the past five years, which increased to 67% for companies with 1,001 to 2,000 employees and 77% for companies with 2,001 to 2,500 employees. The larger the company, the more often they bounce around between insurance carriers. This is usually due to cost concerns from unexpected rate increase.

Changing to an ICHRA model generates substantial savings for large employers, with some experiencing savings of more than 60%. On average, benefits consultants who have moved their clients to an ICHRA model saw 16% savings. 

The appeal of ICHRAs lies in their ability to provide employers with greater control over healthcare expenditures. By breaking away from traditional group plans (i.e., pulling the ripcord), companies can establish a fixed budget for health benefits, shielding them from unpredictable premium increases. 

See also: Insurers' Social Inflation Problem

Caring for a Diverse Workforce

Large companies often operate across multiple states and serve employees from various backgrounds and demographics. Catering to each individual's unique healthcare needs can be challenging. Traditional group plans, typically offering limited options, fail to adequately address employees' diverse healthcare preferences.

ICHRAs offer a versatile solution for these businesses. Unlike rigid group plans, ICHRAs empower employees to select individual coverage that best suits their specific needs and circumstances from all available options on the individual market. This flexibility is especially beneficial for companies with dispersed workforces spanning different regions and life stages.

The flexibility of ICHRAs also enables employers to tailor contributions to different employee classes, ensuring that benefits align with their workforce’s needs. When companies offer an ICHRA with SureCo, their employees select an average of 32 unique plans, with some teams enrolling in as many as 160. Whether it's offering specialized plans for remote workers, part-time employees or specific age groups, ICHRAs provide the flexibility needed to ensure comprehensive healthcare coverage for all.

See also: How to Tackle the Long-Term-Care Crisis

ICHRAs Help Large Businesses Attract and Retain Top Talent

Offering high-quality health benefits is essential for any business wanting to attract and retain top talent. Employees increasingly prioritize comprehensive healthcare coverage when evaluating job opportunities. They want more autonomy and options in the plan selection process, and they’re willing to change jobs to get it.

According to our survey, 80% of employees said they would prefer to select their own plan from all available options vs. the few options their company currently offers them. 74% said they feel confident in their ability to select their own plan. For large companies seeking to stand out as employers of choice, embracing innovative benefits solutions like ICHRAs can make a difference.

So while ICHRAs may have been associated with small employers in the past, the model’s benefits extend far beyond that demographic. By leveraging ICHRAs, large businesses can achieve cost savings, cater to the unique needs of their diverse labor force and enhance their ability to attract and retain top talent in a competitive market. As the paradigm of employee health benefits continues to evolve, embracing innovative solutions like ICHRAs will be crucial for companies that are looking to stay ahead of the curve and meet the evolving needs of their workforce.

Methodology:

Responses were collected from a nationally representative sample of 1,637 HR and finance professionals, employees and benefits consultants across all industries. All employees and employers were from U.S.-based companies with 150 to 2,500 employees. Responses were collected between Jan. 3 and Jan. 11, 2024. Censuswide abides by and employs members of the Market Research Society, which is based on the ESOMAR principles.

In 2024, every insurance agent recognizes the need for a strong digital marketing plan that includes social selling. It’s a proven strategy that amplifies your relationship building – beating old school tactics like cold calling by a large measure. In fact, a recent survey says organizations that lead in social selling drive 45% more sales opportunities than companies whose social selling index scores rank low.

What’s less known is how to achieve social selling success. First, it’s important to realize it takes time. Though it’s possible to establish social media connections quickly, it takes a while to gain the kind of engaged relationships via such platforms as LinkedIn and Facebook that translate into loyal customers and repeat sales. That proficiency comes from practicing a regular routine of using those platforms strategically. It takes patience to grow a strong social network, to build a positive brand and to gain a broad reputation as someone who is knowledgeable and reliable and demonstrates real empathy for your clients. The following guidelines can help you establish a solid social selling practice, one day and one customer at a time.

Model each day after the aviation approach: Brief, Execute, Debrief.

The first stop to building an effective social selling strategy is to establish a solid plan. Leaders can help by guiding individuals and teams to adopt the best practices used in the aviation industry: Just as no pilot would ever climb into a cockpit without a plan, no insurance salesperson should ever approach a social selling plan without defining its goals and how to achieve them. 

Once briefed, you have the clarity to execute your plan. At the end of each week, the team meets to debrief and evaluate the results. Discuss what worked and what could be handled differently. This debriefing step is particularly effective when leaders invite the team to speak freely, with no regard to rank, to get the most candid feedback on how to improve the approach. 

See also: How to Use Social Media Data in Underwriting

Adopt a 3-step daily routine. 

Like everything in the digital world, social media evolves quickly. It requires constant vigilance to stay ahead of the industry news, trends and your prospects’ activities. Set aside an hour each morning to focus on social selling, following the three-step approach outlined below. This consistency delivers better outcomes. It lets you dedicate time to strengthening your brand as an insurance expert by making sure your reactions to posts and subsequent comments are authentic, educational, compelling and memorable. Important tip: Always schedule this time before checking emails to ensure you’re in control of your day vs. allowing email to set your priorities. 

1. Refresh your knowledge. Start the day by getting up to speed with industry news. Check relevant news websites, blogs, Facebook, LinkedIn and any other social media platforms where customers may be posting. Note webinars or other training opportunities to ensure you’re staying abreast of key topics. 
2. Manage your LinkedIn engagement. Armed with the latest information gained from step one’s news review, you have better context to check your LinkedIn connections for important notifications. Respond with any relevant updates, share articles, provide thought leadership content and take steps to maintain your industry expertise.

This is also a good time to check your post analytics. What content is resonating with your audiences? How can you refine your strategy to strengthen responses? 

3. Connect with prospects and influencers by applying the Triple 10 Method.

By 10 a.m. every day, use social media to: 

• Follow 10 key prospects 
• React to 10 prospects’ posts 
• Comment on 10 posts by your prospects

Think of steps one and two as precursors to being highly effective in step three. Consider these tips to making that critical final step most productive:

Leverage your key target list: If you haven’t already, make a list of people you view as top sales prospects. Prioritize connecting with them via social media to establish strong relationships that will deliver the greatest value. 

Round out your connections: Augment your key target list with other critical connections that can help enrich your own brand. For example, include well-respected industry influencers and colleagues who are recognized leaders in the insurance industry. 

Make connections engaging and personal: Avoid “spamming” your prospects.  Social selling is all about sincere engagement. So make every post valuable to your audience by offering relevant insights and wise solutions to problems. Avoid overselling or self-serving efforts. Personalizing connections is another effective approach to finding common ground by identifying shared backgrounds or common interests. For example, recognize that you attended the same university or have a shared love for a sport or other personal interest. 

Become a comment guru: Comments on social media drive the strongest engagement. They also require careful thought to get right. Start by selecting posts that really move you, so your comments can be more authentic and engaging. 

See also: Strategic Guide to Unlocking 'Gen Zalpha'

How to polish your social selling prowess.

As with any new methodology, it takes practice to become a social selling pro. Once you have a routine established, consider these insights to perfect your approach: 

Refine your prospect list. Create an ideal customer profile (ICP) to help define your key target list. Remember: You don’t have to do business with everyone. Instead, form a network that aligns with your objectives and core values. That will lead to more successful sales – and to a more satisfying career. 

Apply the proper rules of engagement: Never ignore someone because they’re not ready to do business with you. Be positive, genuine, professional and personal. Educate vs. sell. Treat everyone like an individual and avoid making universal comments. Be timely with your posts and use powerful words. 

Ensure your content engages and educates. You’ve heard it before: Content is king. And nowhere is that truer than when you’re using it to establish strong relationships and reinforce your expertise. Short product or explainer videos gain high visibility. In fact, a recent LinkedIn article confirmed video is the content most likely to lead to a purchase. Other examples of effective content include educational formats such as frequently asked questions (FAQs), success stories or case studies; consider interactive tools such as polls, calculators or quizzes. 

Develop the relationship first. You’ll know you’re ready to move to “the ask” when exchanges with a prospect are natural, two-way conversations. When a prospect is responding regularly to your posts and aligning with your insights, it’s easy to take the relationship to the next level. 

Establish a robust training culture. Leaders should set the example by being the first to become social selling experts. Then take steps to encourage interest among the broader sales team. Create contests. Build expectations in individual performance goals. Most important: Encourage individuals to become responsible for boosting their own social selling skills and defining their own success.

Social selling is a quickly evolving strategy that every insurance salesperson must adopt to stay competitive. By following this method, insurance sales teams will be more accomplished at making social selling part of their regular routine. 

As of February 1, 2024, The Hartford Financial Services Group, a large business, home, and automotive insurance provider, no longer writes new policies for California homeowners. With this announcement, The Hartford joins several other large insurance players, including Allstate, State Farm, Farmers, Safeco, and USAA, who have all stopped writing policies for the California P&C market. Other large insurers remaining in California are raising the rates of their home and auto insurance premiums by as much as 20%.

How did we get here? Over the last five years, the Golden State has faced many catastrophic weather events, from wildfires and earthquakes to heat waves and flash floods. There was even a hurricane off the coast of San Diego in 2023, the first to land on the California coast in more than 100 years. These natural disasters leave significant property damage and a hefty price tag for P&C insurers. The National Oceanic and Atmospheric Administration (NOAA) estimated the cost of natural disasters in California reached $22.2 billion in 2022, the second-highest in the nation behind the state of Texas. 

The state government and insurance commissioner in California are late to the game, scrambling to respond to the loss of these large carriers. Still, they continue to work on a plan and possible legislative solutions that will stem the exodus. 

Meanwhile, insurance consumers in California have more than 100 insurance carriers they can work with across the state. These remaining mid-sized P&C insurance carriers are being inundated by requests for policy quotes from insurance consumers seeking coverage. They are struggling to keep up with demand. The California FAIR Plan, a state-run program offering homeowners basic fire insurance in areas where traditional carriers have either withdrawn or are not renewing policies, reports that they’re receiving 1,000 applications per day.

With the right technology investments, these carriers have a meaningful opportunity to step in and be heroes. Acquiring these customers will help them scale significantly and even create new risk products. However, to successfully acquire and onboard these new customers, they’ll need to be agile, responsive, and able to deliver a top-notch customer experience.

Mid-sized Carriers, Large-Carrier Customer Experience

Because smaller carriers typically don’t have shareholders to please, they can put policies in place with little overhead, such as pleasing Wall Street and investors, allowing them to take on additional risk that the larger carriers are no longer willing to do. They can also provide a more intimate, personalized customer experience that will go a long way with insureds who feel the larger carriers have left them high and dry. That is, as long as they can keep up with demand and scale without compromising that service. Part of that includes an easy, seamless digital experience for customers.

Here’s the reality, though. These insurance consumers who’ve been left without policies are used to a certain level of service from the large carriers. The ability of mid-sized carriers to provide multiple, tailored digital channels will be crucial in customer acquisition. These channels must be seamless and easy for customers who expect a large carrier experience. Examples include a self-service customer portal where they can quickly review their policy information from anywhere, anytime, or an IVR system that makes it easy for customers to call a toll-free number, press a couple of buttons, and get the policy information they need without waiting. 

At the same time, communications channels should natively work together to provide consistency in data, messaging, and behavior across each channel. 

In our recent study of the behavioral data of 250,000 property and casualty insureds over two years, we learned that a consistent omnichannel experience can boost insurance customer retention by 21%. Having a single channel, such as a customer portal, also saw a lift to retention of 12%.                               

For mid-sized carriers, utilizing multiple self-service channels can significantly increase customer retention. For example, an insurance portal reduces policy churn by 12% compared to those who do not engage with a portal. Those who use multiple channels, such as phone, email, and SMS, are 21% less likely to cancel their policies, and those who repeatedly use multiple channels show a 25% higher retention rate—customers who use advanced features like policy document retrieval and ID card access exhibit even higher retention rates. 

Beyond California

Mid-sized carriers across the U.S. should pay close attention to what’s happening in California as a blueprint. This is only one insurance market where large carriers are pulling up stakes and getting out. Remember, extreme weather events are driving this trend, and those are happening from coast to coast. For example, recent flash flood events in Kentucky, Pennsylvania, New York, and New England have caused significant property damage in areas that have never been flood zones before. Florida is also facing a growing P&C insurance crisis brought on by increasingly intense hurricane seasons and lax regulations that resulted in skyrocketing premiums. 

Mid-sized carriers can prepare for similar situations in the states where they operate. To attract more customers, meeting them where they are is important. Create meaningful interactions with policyholders through proactive communication that helps them solve problems quickly on the channel of their choice. Sending helpful text messages, such as reminders when a premium is due or updating a customer on a claim, builds trust and keeps customers returning. Dedicated customer service portals are now a must-have for carriers of all sizes, as policyholders want more flexibility to log in and quickly find the information they need. Portals can also help keep expenses low for carriers, as they won’t need to tie up agents answering basic questions that customers can find there. 

To win the hearts and minds of insurance customers who’ve been canceled by larger carriers, mid-sized insurance organizations will need to go the extra mile. Always think of ways to be more proactive. If you can skillfully demonstrate that you anticipate your customers’ needs and will be around for the long haul, you can build deeper customer loyalty. At the same time, mid-sized carriers need to invest in cost-effective, modern technologies that help them streamline efficiencies, automate repetitive tasks, and empower staff. The ball is in their court. 

Sponsored by: ITL Partner: insured.io

Paul Carroll

I've been hearing people talk about improving the customer experience for a decade now. How are we doing?

Denise Garth

It depends on how you define customer experience. I think the focus on customer experience started out being about how customers interact with us online. But I think the customer experience issue has expanded beyond that. It's now also about whether we are providing the right products and services to meet their unique needs. We’ve moved into a greater level of personalization, where we’re looking at risk more individually and at how customers live their lives. 

That shift moves us into how to create an experience more holistically. It's not just about how am I looking at my policy online or how am I paying my bill online or how do I check my claims. It’s more than that. 

I think affordability has become a big factor, with the increases in premiums, in particular for property and vehicle insurance. We now are actually seeing the protection gap growing. Customers want more than just, Oh, I can go pay my bill online.

Paul Carroll

Can you think of an area where things are going especially well?

Denise Garth

There are pockets of companies that got ahead of the curve, particularly during COVID, especially with payments. People were looking to make sure they could operate digitally.

In benefits, some insurers are making it easier to enroll and to offer more guidance attuned to what someone really needs—I know you’re married, you’re older, you don’t have children and so on. So the insurer can frame what they’re recommending. 

Paul Carroll

On the flip side, are there areas where you think not a lot of progress has been made?

Denise Garth

We still do a lot of underwriting at the aggregate level, not the individual level, particularly for property and auto. 

We also engage too often at the transaction level, not at a holistic level. You have a claims department… but just for this line of business, and each creates its own experience. Nothing really ties it all together holistically across functions or lines of business. 

Paul Carroll

Is the solution just management discipline, or are there particular technologies that can help as tools become available?

Denise Garth

I think it gets back into leadership and strategy. You can still be organized by lines of business, but someone has to be thinking holistically, from a customer perspective. Many companies tried with a chief customer officer or chief digital officer, but I'm not sure they always had the necessary authority. Those business units are run with their own P&L, and they set their own priorities. 

I think that's the same problem that has happened with data and analytics. Everybody's kind of gone off and done all their individual initiatives, and nobody has put together an overall strategy.

What has really worked well for companies is to have an overall strategy. This is what we're going to be as a business. This is going to be our data and analytics strategy. This is going to be our customer strategy. This is going to be our distribution strategy. 

With a strategy, you can start at any point across the business and the strategy will bring it all together. Without a strategy, you run the risk of siloed solutions, disparate experiences, inconsistent experiences – in essence a hodgepodge of solutions that don’t work together to execute the strategy.

Paul Carroll

I feel like, these days, I'm contractually obligated to ask you about generative AI. How does it play into this in the near term and then maybe in the long term?

Denise Garth

I think it's a big thing. As you know, we're already into a third release of our core solutions that uses Gen AI, where we have moved from providing guidance to taking actions. You can take a transaction that, once you go through all the screens to conduct it, would take seven to 10 minutes, and you can do that in 30 seconds. This is going to be an extremely powerful productivity tool and a way companies can bend the learning curve for employees, particularly as we have growing retirements and loss of institutional knowledge.

Using Gen AI externally, with customers and with agents, will take a bit longer. 

Paul Carroll

When you talk about dealing with external folks. I think of Alaska Air’s issue with a chatbot earlier this year. It promised a customer some great deal, and Alaska Air tried to disavow the promise, but a court said, Nope, you’re liable for what your chatbot said.

If you were to come up with an ideal scenario, maybe two, three or five years out, what could the customer experience look like?

Denise Garth

Within the next two years, we could see a very different kind of experience. 

Customers won’t have to navigate through phone trees—“Hit one for this, hit two for that.” AI will give customer service agents information much more quickly, so customers won’t just be sitting on the phone. Service agents won’t have to manually pull information together across multiple systems.  We will be able to pull all the information about customers across multiple systems, we’ll begin to personalize the experience based on all the information—I want to get a text for this but a phone call for that. 

A couple of weeks ago, my brother got a text from his insurance company saying they had started working on his claim. He didn’t know anything about a claim, but he learned that someone had hit his son’s car, and the insurance company was letting my brother know they were already on site. 

The car ended up being a total, and the insurance company got my nephew, who’s still in college, a rental until he could find a new car. The claim was a great experience for them because the insurance company engaged in a wholly different way and did it so promptly. The process didn’t just begin 24 hours after the accident; it began immediately.

Paul Carroll

I think that sort of experience has to become the norm.

Any final thoughts?

Denise Garth

I just think we have to think bigger on customer experience. We can't just think about an individual transaction or a specific function. 

And as we have newer buyers coming into the market, we have to realize that Gen Z’s and Gen Y’s have different expectations and are technology natives. They have different lifestyles than we have. So we have to adapt our processes, provide different products and personalize the way we engage with them. 

Paul Carroll

Thanks, Denise. You always have such an interesting perspective.

As soon as the NFL draft ended Saturday night, we all waited anxiously to see how the various pundits would grade our teams' selections. But if you step back even a little bit, you see how ridiculous those grades are — and that they are symptomatic of an issue that can skew the judgment of lots of executives, including in insurance. The issue is false precision.

It's certainly fair to judge the players and the teams drafting them. How big, fast, strong, etc. is a player? What does the tape show about how they fared against competition in college? How well do they fit a team's needs? And so on. But that sort of general analysis isn't enough for the analysts — or for us as fans. All the attributes of a player get boiled down to a grade. Some player is an A- pick, while another is a B or a C+. The same sorts of ultra-precise ratings are rendered for teams. 

Yet the data doesn't come close to supporting such precision. As the saying goes, those being drafted have to this point faced a lot of college players who are now headed off to become accountants, and not a one of the players has yet faced a pro team. Who knows how a quarterback will react when he realizes that TJ Watt is going to hit him all game? 

And there's so much uncertainty about how players will last physically playing a brutal game. My Steelers used a third-round pick on a linebacker who won awards last season as the best in college football and has all the physical attributes to be a great pro, but he has a history of injuries and is reportedly lacking an ACL in one knee after tearing it twice. The data tells me he warrants a grade somewhere between F and A+. Ask me in a year or five, and I'll have a better idea.

The way the data is turned into grades raises questions, too, about how precise the analysis actually is. Just about anybody can hang out a shingle as a draft analyst, and even the well-funded operation at ESPN doesn't have the resources that are trained on the pool of talent by teams that are each spending a quarter of a billion dollars on player salaries each year. 

Besides, think about who's doing the grading vs. who's doing the drafting. Any of the pundits doing the grading would kill to be one of the general managers making the actual selections. The reason they're on TV and not in the draft room? It's because their opinions aren't as respected by those who control those $250 million annual payrolls.

If those of us watching the draft just take the grading for its entertainment value, then we have the right perspective. We can still get excited as fans (and trust me, my Steelers had a GREAT draft... I think) while understanding that all those mock drafts and lists that rank players out through the end of the sixth round are really only accurate for the first five or six picks, are a rough guide for the rest of the first round and then amount to just about nothing for the remaining 200-some players chosen. 

But the human tendency is to grasp on to the grade and forget how poor the data is that underlies it. And that sort of tendency can be dangerous in business.

Let's look at a few examples of false precision in insurance.

Here are the sorts of studies I see quoted all the time in articles that are sent to me for publication:

• "The global cyber insurance market is projected to be worth $90.6 billion (about $280 per person in the U.S.) by 2033, at a growth rate of 22.3% CAGR from 2023." 
• "Insurance fraud totals $308.6 billion in the U.S. each year."
• "The global blockchain in insurance market is expected to reach $32.9 billion by 2031, growing at a CAGR of 52.4% from 2022 to 2031." 
• "The global AI in insurance market is poised for substantial growth, with its value projected to increase from $5 billion in 2023 to approximately $91 billion by 2033. This remarkable expansion, [translates] to a compound annual growth rate (CAGR) of 32.7% over the forecast period."

My first problem with these sorts of claims is that the terminology is so vague. At least with the projection on cyber, we can be pretty sure the measuring stick for the size of the market is premiums. And we all have a pretty good handle on what fraud looks like. But what is the "blockchain in insurance market"? Is that strictly revenue generated by those selling blockchain services? Does it include the value of, say, claims that are coordinated on a blockchain? Likewise, what does the "AI in insurance market" entail? Revenue generated from AI services? Savings from AI? Or what?

My bigger problem is the false precision. The global cyber insurance market is going to grow 22.3% a year? You're sure about that? Not 22% a year? Not 20% to 25%? Not "really fast, with our current best estimate being 20% to 25% a year"?

Blockchain in insurance will grow 52.4% a year? That ".4" kills me, just like the pluses and minuses do on the made-up letter grades for those selected in the NFL draft. So do the ".7" in the 32.7% CAGR projected for AI and the  ".6" in the $308.6 billion that the U.S. supposedly loses to insurance fraud every year. 

Some of the false precision feels accidental. Give someone a calculator, and they're tempted to report a precise percentage as though it's meaningful to three digits, forgetting that the inputs are really just an educated guess. Give someone a spreadsheet that automatically adds up columns, and they're tempted to report that the guesses on fraud total precisely $308.6 billion.

Some of the false precision feels deliberate, though. The people producing these studies want you to think they can be far more precise than they can, and $308.6 billion sounds a lot more definitive than, say, $250 billion to $350 billion, which is probably a more accurate expression of the conclusion even if you accept the analysts' methodology and definitions. 

As with the draft grades, these studies are fine if you treat them as merely general guideposts. As John Maynard Keynes said, "It is better to be roughly right than precisely wrong." 

But executives sometimes get trapped by precise forecasts. 

In the mid-1980s, AT&T famously asked McKinsey to forecast how many cellphones would be in use in the U.S. in 2000 and was told the number would be only 900,000. On that basis, AT&T dropped out of the market for years and ceded territory to others. The actual number in use by 2000 was about a factor of 1,000 more than McKinsey estimated. 

Similarly, IBM's market researchers decided back in 1980 that the entire demand over the lifetime of the PC it was to introduce in 1981 would be 200,000 units. As a result, IBM rushed a product to market even though that meant relying on Intel for the processor and Microsoft for the operating system. In the 1990s, more than 200,000 units of IBM-compatible computers were selling EVERY DAY, and Intel and Microsoft got rich while IBM languished because it had underestimated the power of the PC.

Both the AT&T and IBM blunders are complicated. The companies didn't just fall for some random forecast. They had internal issues that inclined them to think in terms of landlines, not cellphones, and mainframes and minicomputers (so-called Big Iron), not PCs. But they still illustrate the need to be on guard about the kind of false precision that the NFL draft demonstrated in spades and that shows up in projections about insurance lines and technologies all the time.

Go, Steelers!

Paul  

Many marketers in the insurance industry are feeling the pressure of operating in a highly competitive business environment where huge marketing and branding budgets are essential. While the industry is focused on building brand dominance through broadcast, online and print media marketing, savvy insurance marketers can wow customers and prospects with near-real-time, precisely targeted, relevant messaging thanks to an abundance of trigger and life event data.

While the availability of trigger data is immense, actually leveraging it internally, or with a partner, to obtain the greatest value can be a challenge for even the most experienced marketer. How one navigates this virtual sea of information can be the difference between success and failure.

Let’s take a look at some of the best practices that can help insurance companies build and deploy smarter, more effective trigger-marketing campaigns. 

Close the back door

In a hyper-competitive market like the insurance industry, retaining existing customers is job number one! While many consumers don’t realize they can terminate policies without waiting for a renewal date, insurance marketers know they need to be watching diligently to identify customers who may be looking to exit, regardless of where they may be in a defined coverage period.

Many companies, across all industries, use first-party data, like website traffic, demographic and CRM data, to stay on top of customers who may be shopping for new products/providers. 

Savvier marketers will take that first-party data and pair it with third-party life event triggers, as life events are often a strong motivator for consumers to upgrade existing policies or seek new insurance providers altogether. For example, consumers may increase the value of life insurance after having a baby or getting married, add a vehicle to a policy after relocating or buying or selling a home or combine policies of two individuals into one after getting married. The combination of first-party data and life event triggers offers valuable insights into customers' activities and allows identification of risks associated with these events at critical inflection points so marketers can reengage customers with a series of timely and pertinent marketing messages geared toward retaining business.

See also: The Promise of Continuous Underwriting

Triage the triggers

No two triggers are quite the same, so neither should your marketing outreach strategies. First and foremost, it is important to understand which triggers are the most immediately actionable for certain products and which triggers may have a longer marketing curve. For instance, an expectant parent trigger might be a more long-term nurturing opportunity to sell a life policy for the child or to take out a larger policy for one or both soon-to-be parents. Meanwhile, someone planning to move will have a much more urgent need that demands a much more aggressive approach. That is a bottom-of-the-funnel, top-of-the-priority-list situation. Treat the most pressing triggers immediately.

Prioritize your channels

Much like assessing the value and urgency of triggers, it’s important to do the same across multiple channels. For instance, consumers conducting early-stage product shopping may be best nurtured via programmatic display and paid social, while those indicating greater intent could be effectively reached by direct mail with the support of email and other digital media. Of course, these aren’t hard and fast rules, but assessing the mix is vital to delivering an effective, efficient omnichannel strategy.

Leverage “FOMO” in your messaging

The fear of missing out, or “FOMO,” as it applies to trigger marketing, can instill in customers a sense that perhaps they may not have made the best choice or that there is a better option. A misstep in insurance can translate into tangible – and costly – consequences for consumers, so the motivation is there to find the right partner. Marketers can develop creative ad messaging that encourages customers to question their current insurance policies and wonder ... Are they getting the best rate? Do they have the right amount of coverage? Have they engaged with a company that will support them when disaster strikes?

One word of caution as it relates to messaging around life event triggers; make your messaging targeted but not intrusive. Getting too specific can make consumers feel “Big Brother” is looking over their shoulder. Aim for relevance; We’re here for you through life’s stages. Avoid creepiness; Congratulations on your pregnancy!

Drive alignment

A strong brand is built through years of messaging. The insurance industry has some of the strongest and best-known brands and messaging in advertising and the best trigger marketing touchpoints consistently ladder up to a provider’s core principles and mission. It’s vital for insurance marketers to make sure campaign messaging lives up to a company’s bold brand identity and hits the mark with consumers’ current needs.

Team alignment matters, too. The speed and responsiveness of trigger campaigns require marketing, outside vendors and sales teammates to work in parallel to build a process that keeps communications on brand and compliant, delivering effective marketing outreach at the earliest possible opportunity to reach consumers first!

See also: 2-Speed Strategy: Optimize and Innovate

Monitor your metrics

Not only does trigger marketing provide valuable insights into consumer behaviors and trends, it’s far more quantifiable and provides faster reads than most other campaign types, making it a darling of CMOs and CFOs. The ability to drill down into conversions and revenue metrics based on consumer triggers in near real time allows marketers to make quick adjustments and finetune strategies on the fly, which enhances the likelihood of a strong ROI.

For more information, download a free copy of The Insurance Marketer’s Guide to Life Event Marketing.

Insurance companies often struggle against the perception of being conservative institutions that are slow to change. Nothing could be further from the truth. 

Since the 1960s, the insurance industry has embraced so many new technologies, from punch cards and mainframes to tablets and mobile phones. Technology is the backbone of the modern insurance industry.  

Here’s an example of the industry’s technology commitment. In 2002, the life-annuity sector spent $1.4 billion on IT, and the P&C sector spent just under $3 billion. In 2022, those expenses were $5.7 billion for life and $9.3 billion for P&C. In our view, this investment is about industry transformation  and platform modernization, not just administering business growth. 

In 2024, insurers are embracing AI (artificial intelligence) to manage data, uncover opportunities and improve productivity.  

AI Deployed Across the Value Chain 

At Conning, understanding what’s driving insurer profitability is a crucial part of helping our clients develop effective investment strategies. Given 2023’s media storm around generative AI, we wanted to understand the state of AI within the industry. In addition to engaging in numerous conversations with insurers, AI experts, and technology firms, we conducted a survey in the fall of 2023 that looked at AI deployment across the insurance value chain. 

This is the second year of our annual survey on AI and technology adoption in the insurance industry. We surveyed senior insurance chief technology officers, chief operational officers and chief innovation officers, along with a select few senior insurance technology vendor executives.  

Three Parts of the Value Chain 

Our survey focused on three broad areas of the value chain in which AI is already showing some promise. 

Sales and Underwriting: By analyzing vast amounts of data, including customer information and external factors, AI is helping insurers make better-informed decisions when assessing underwriting risks, speeding up the underwriting process and reducing the likelihood of human error. 

Operations (Claims Processing and Fraud Detection): AI-powered systems are improving claims processing by automating mundane tasks and streamlining the workflow, analyzing claim documents, assessing damage and even calculating payouts, all with minimal human intervention. AI is playing a crucial role in fraud detection by flagging suspicious claims and patterns that may indicate fraud. 

Risk Control and Pricing: AI tools are improving insurers' ability to assess risks accurately and set prices accordingly. By analyzing historical data and real-time information, AI algorithms can predict trends and potential losses more effectively, enabling insurers to offer more competitive rates while maintaining profitability. 

See also: AI: Beyond Cost-Cutting, to Top-Line Growth

More Than Just LLMs 

Since 2023, AI, or more specifically generative AI, has been a significant focus of insurance management teams, but AI encompasses a variety of technologies. Understanding the differences is crucial to thinking through where and when their impact is likely to be felt. Our latest survey looked at three specific types of AI. 

Large language models (LLMs) are advanced AI systems designed to understand and generate human language. LLMs are the foundational technology supporting generative AI. 

Machine Learning/Predictive Analytics (ML/PA) are quantitative, statistical models using algorithms to make predictions or decisions learning from inputted data, are updated in real time and can improve performance from feedback from objective functions. 

Natural Language Processing (NLP) extracts meaning from speech or text. This enables insurers to efficiently process unstructured data from agent and customer phone calls to reports. 

Older AI Technologies More Widely Adopted 

In this survey, we asked how AI is reshaping the insurance industry and the opportunities and challenges that come with this technological transformation. At a high level, we found that, while there were varying degrees of adoption for all three technologies across the value chain, ML/PA and NLP had higher rates of adoption and deployment. Survey results suggest, however, that LLMs show great potential. 

This year’s survey results show 77% of the respondents indicated that they are in some stage of adopting AI, a 16-percentage-point increase from our 2023 survey. 

The survey found that 67% reported they were already piloting LLMs, which was the largest technology in the piloting stage. Given the relatively recent awareness of generative AI, this high percentage of piloting the underlying technology is a strong indicator of future adoption.  

Across the overall value chain, ML/PA was either in the early stages of adoption or had been fully adopted by 44% of responding firms. Sales and underwriting reported the highest adoption among components, at 54% of respondents. 

Our report, “Transformative AI Technology: Insights from Conning’s Executive Survey” provides a deeper analysis of the three technologies’ use within each part of the value chain. 

See also: Can AI Solve Underlying Data Problems?

Outlook and Challenges 

The surveys and discussions we’ve had strongly indicate that AI is helping insurers manage complexity and data diversity. We see its deployment increasing, and management teams will be spending time figuring out the best AI solutions for their company. 

However, regulations will significantly influence the speed of adoption. Already state regulators are restricting the types of data insurers can use in their AI systems. Additional regulations are being proposed and enacted at the national and international levels. Beyond regulations, insurers need to be mindful of potential litigation surrounding the use of generative AI. 

While regulation and litigation may slow AI’s continued adoption within the insurance industry, they are unlikely to stop it. If history has proven anything, when it comes to new technology, insurance is an industry where embracing new technology never stops. In 2024, nothing suggests to us that will change.

Adam Rimmer first saw the potential of parametric insurance while working at RMS, the world’s largest catastrophe modeling firm, since acquired by Moody’s. While there, he and his FloodFlash co-founder Ian Bartholomew structured and modeled triggers on over $2 billion of parametric insurance products and catastrophe bonds to protect governments and large corporations in the U.S. and around the world. They are now using those same principles at FloodFlash, a sensor-based, parametric flood product.

Insurance Thought Leadership: 

What gaps do you see in the traditional insurance market that FloodFlash is trying to fill?

Adam Rimmer: 

The great irony in property insurance is that those who most need coverage are the ones who can't buy it. If you operate in a high-risk area like the coastline, or if you are a class of business that is difficult for traditional underwriters to tackle, such as auto dealerships or specialist manufacturing facilities, the rates can be incredibly high. So you opt to self-insure. The same is true of some coverage types within flood: Business interruption loss is notoriously difficult to price, for example, so businesses in higher-risk areas frequently end up with no coverage at all.

That leads to a big coverage gap. Less than 20% of the $70 billion of loss that is caused by catastrophic floods annually is insured. And that gap is disproportionately among those at high risk.

I consider the flood insurance gap in the U.S. to have two sides: One is a demand-driven gap, caused by homeowners and businesses deciding that it’s not worth purchasing because they consider themselves at lower risk. Companies like Neptune Flood are doing an amazing job at addressing this gap, creating flood insurance that is so efficient and so easy that more people take it up.

The other side is a supply-driven gap: This is among homeowners and businesses that know themselves to be at high risk and want to buy protection. But no supplier is willing to sell it to them at a reasonable rate. Those customers will use the National Flood Insurance Program (NFIP) to cover the first $250,000 (homeowners) or $500,000 (businesses). For bigger losses, they are forced to self-insure.

FloodFlash is focused on that second, supply-driven gap. Its customers are too risky/uncertain for the private flood market and too large for the NFIP alone. 

The reason this apparent alchemy is possible — to insure the highest-risk customers and for it to still be profitable — lies not only in FloodFlash’s underwriting algorithms but also in a fundamental property of parametric insurance: Exposing the underwriter to only one variable (the parameter that’s being measured) removes sufficient uncertainty that the underwriter can actuarially justify charging more affordable rates for the first time. Parametric insurance creates a new market.

I don't see any way other than a paradigm shift in approach, like parametric coverage, for the insurance industry to materially close that gap.

Insurance Thought Leadership: 

What are the biggest challenges in convincing customers, regulators and insurers about the benefits of parametric insurance?

Adam Rimmer: 

The challenge is different for each of those groups. Insurers and reinsurers have been fantastic at grasping the science behind the underwriting and the analysis that means this type of coverage allows them to profitably access risk that they had previously been unable to touch. FloodFlash policies are placed at Lloyd’s of London with Munich Re, the largest reinsurer in the world, and Hiscox, the leading writer of U.S. flood risk in that market. We collaborate closely to ensure that FloodFlash is providing value for customers while simultaneously being a profit center for those underwriters. They believe in the opportunity here. Indeed, Munich Re’s VC arm has now taken on an equity stake in FloodFlash.

Regulators want to protect consumers, and FloodFlash's approach of using site-specific IoT sensors as the triggering mechanism has been important. The difference between a good parametric policy and a bad one is “basis risk,” i.e., How much does your payout under the parametric policy correlate with the loss you experience? The parameter that correlates most tightly with majority of property and property-adjacent flood losses is flood depth at the client site (as opposed to, say, a satellite image, a rainfall index or a nearby river/coastal gauge). FloodFlash originally launched in the U.K., and the team spent time with the Financial Conduct Authority (FCA) through their regulatory sandbox program to make sure the FCA were comfortable that the tight coupling between financial losses and readings from the FloodFlash sensor meant there were likely to be good outcomes for consumers.

For customers — and often their agents — the biggest challenge is perhaps making people comfortable that this new technology and new type of insurance can save their livelihood. That's tougher in insurance than other industries because buyers index on trust and familiarity in insurance. We have overcome that through our growing library of success stories and testimonials and through FloodFlash’s association with those big and trusted names like Munich Re and Lloyd's.

Insurance Thought Leadership: 

Is parametric a complement or alternative to traditional insurance coverage?

Adam Rimmer: 

Both. It can be a different answer for each client because the biggest factor is what other coverage options are available to them. In the U.K., 75% of customers use FloodFlash as their entire flood program, and the others use FloodFlash to expand their existing coverage -- most often as deductible infill.

In the U.S., the majority of customers use a FloodFlash policy as excess coverage above an NFIP policy. Our team works with agents to structure policies so the parametric trigger points correspond with the exhaustion of the NFIP limits. I also frequently see FloodFlash being used as standalone business interruption coverage. Standalone BI is almost impossible to buy in the traditional flood market if you're in a high-risk zone, but it's simple for FloodFlash, hence our recent launch of the specific Flood BI product. It can be viewed as a complement to their underlying property coverage, or equally as  an alternative to traditional BI.

Insurance Thought Leadership: 

How is climate change affecting the flood insurance landscape?

Adam Rimmer: 

Every year, not just climate change but also population growth and urbanization are increasing flood risk in the U.S. As it gets worse, the traditional market retreats, which is creating more of a gap. Almost every dollar of risk that FloodFlash protects is not risk that was previously covered by a traditional provider. It was previously part of the gap, and FloodFlash solved that problem.

FloodFlash first paid parametric claims when Storm Ciara hit the U.K. in 2020. It was an emotional moment. Our customers were business owners who previously were uninsured and didn't want to be. After the event, FloodFlash experienced incredible gratitude from customers whose businesses would otherwise have not survived.

Insurance Thought Leadership: 

What are some other trends you’ve observed in the global insurance market related to flood losses and parametric cover?

Adam Rimmer: 

In 2023, the U.S. experienced 26 flood and storm events that each caused over $1 billion in damage. That's the most ever in a single year, even after adjusting for inflation. The increased prevalence of storms and severe losses in a time of wider economic turmoil has led to a very hard insurance market, which in turn is putting parametric coverage on the table for an increasingly wide area of the market. That's a trend that's been particularly strong: customers considering parametric flood options for the first time.

People have been pointing out to me the parallels between parametric nat cat and where cyber insurance was maybe eight to 10 years ago. In both cases, you have this large and growing insurance gap that exists because the risk is very difficult to price. Product and technology developments mean the risk can now be insured for the first time. However, it's not something that happens overnight: Customers and their agents have to be educated not just on the solution but sometimes even on the problem, too. Today, of course, cyber cover is mainstream.

Insurance Thought Leadership: 

What has been different about the U.S. market compared with the U.K. one? Any surprises?

Adam Rimmer: 

Many differences, many of which I learned the hard way. I've found that wholesale brokers are an incredibly important part of the ecosystem in the U.S. They aren't anywhere near as prevalent in the U.K. And given that wholesalers disproportionately see hard-to-place risks, i.e., the customers where FloodFlash is most competitive, wholesalers have become very important to us. 

Timing of insurance purchasing, particularly for hurricane-exposed commercial property, is much more seasonal in the U.S. than in the U.K. In general, there is a much more sophisticated flood insurance market in the U.S.: in the U.K., flood is a default inclusion in both homeowners and commercial policies, so the market for standalone policies only exists when the main carrier is actively excluding flood coverage.

The most surprising element is the difference in policy size. I always expected U.S. policies to be bigger — median revenue, a reasonable predictor of insurance spending, is 2x in the U.S. what it is in the U.K. — but our average policy size is around 20 times bigger in the U.S. than the U.K. And that's just one of the reasons why I'm so excited about what FloodFlash is doing in the U.S. It’s going to be big.