Let's start with the bad news and a little background. For better or worse, Oprah has been American’s biggest weight loss influencer since the liquid diet fad in the late 1980s. 

And now she’s all in for Ozempic, and presumably other GLP-1 drugs. Of course, her regimen also includes significant exercise and, we would guess, the means and opportunity to eat healthy. Unfortunately, those nuances will likely be lost on your clients’ employees jumping on the GLP-1 bandwagon in hopes of a magic cure. 

Magic bullet or not, never before in the history of healthcare has anything – any drug, procedure, test, anything – combined this much effectiveness, popularity…and cost. Indeed, this single class of drugs – in what is forecast to be a "bumper year" for them – will likely add 10 basis points to the overall U.S. inflation rate in 2024. (You heard it here first, folks.)

Tip 1: Run the Numbers

Your clients covering these drugs for weight loss will experience the largest-ever cost increase attributable to a single covered benefit, so large that it will squeeze their overall profit margin.  Don’t believe that? 

Ask us for our Weight Loss Drug Economics Calculator (WLDEC), enter your own assumptions and see for yourselves.

WLDEC models every significant input – from obesity rate to uptake to cheating (see Tip 3 below), to our default estimates of the benefits – to estimate your cost increase, with and without using Quizzify.

WLDEC is available gratis to most advisers by writing to Al@Quizzify.com. Or, you can visit https://wldec.quizzify.com/, where you can enter your own assumptions, your own data and your own credit card.

See also: How Wearables Can Improve Worker Safety

Tip 2: Cover Zepbound, not Wegovy

Most of your clients have never even heard of Zepbound (“Sounds like an off-brand bus line,” someone said). Yet it is both more effective and currently much less expensive than Wegovy. 

Of course, you’ve heard of Mounjaro. You may not be aware that the exact same dosage of the exact same drug, Zepbound, is also called Mounjaro.

As of this writing, Wegovy is $16,200/year before rebates vs. Zepbound @ $12,720/year.

Tip 3: Don’t Rely on PBM Preauthorization to Limit Use

Preauthorization only works if the diagnosis, test, image, etc. supporting it is objective and somewhat definitive. In my particular case, to get authorized for continued physical therapy (PT), I needed an actual MRI. (Probably cost more than the 12 additional PT sessions, but that’s a tale for another time.)

For weight-loss drug preauthorization, all you need is a body mass index (BMI) of 30. Unlike blood tests or scans, this hurdle can be easily gamed. 

How do we know this? To begin with, the average American adult BMI is 30. (The median is lower.) A few hearty meals prior to a weigh-in can clear that hurdle for a big chunk of the population.

But will people gain this weight? Yes. Those old outcomes-based wellness programs were a hotbed of cheating, as employees would gain weight in order to lose it again. (People also cheat in "steps" programs.) And that was for maybe $1,000 tops. This is for a drug worth more than ten times that amount.

Cheating has an outsized effect on cost. Each point of cheating moves a full percentage point in your gross healthcare spending increase. (WLDEC will show you that.)

See also: How To Self-Fund Employee Healthcare Effectively

Tip 4: Ignore all the vendors who want to sell “coaching” or “behavior change” or “support” for people on these drugs

When you “run your numbers” on WLDEC and include coaching, you’ll find that hand-holding simply doesn’t pay for itself. It costs a lot and doesn’t meaningfully reduce use of other drugs or adverse medical events. All it does is keep people on the drugs longer before they drop out.

Further, coaches aren’t trained to know, for example, the safest way to treat common complications like constipation or heartburn, or what is by far the most likely and most hazardous nutrient deficiency or why those authoritative-looking Nutrition Facts labels are mostly misleading for people trying to improve their eating habits.

Tip 5: Teach client employees the downsides of these drugs before authorizing them

The optimal strategy would cover the drugs only for folks who are committed to using them as intended, with the greatest chances of keeping the weight off afterward – and educate them to help them realize those chances. 

Of course, you can’t do that. What you can do instead is teach clients’ employees the downsides of these drugs, so only those who are serious and committed will want to continue. Your wellness or diabetes vendor should have a set of Q&A designed to do exactly that and track the results. (Publicly, we call our 22-question quiz Before Your Journey, though we privately call it Curb Their Enthusiasm.)   

Many employees either won’t complete the quiz or else decide these drugs aren’t for them once they do. So you avoid a lot of eventual dropouts without spending for many months first, and without denying anybody anything. We call it “self-preauthorization.”

If you try to do your own self-preauthorizations or have your third-party administrator (TPA) do them, the PBMs will push back, because they make a lot of money on the rebates and want to maximize usage. But stand your ground! You work for your clients, not the PBMs.

Summary

What you just read is the most elegant and cost-effective way to direct your weight-loss drug spending to those who would benefit most.

You can start by asking AL@Quizzify.com for the weight-loss drug calculator. And if you ask nicely, we might even provide the answers to those questions in Tip #4. Or you could ask the coaches themselves. [SPOILER ALERT: As suggested above, they won’t know.]

Out Front Ideas with Kimberly and Mark kicks off yearly with our popular 20 Issues to Watch webinar. While there are certainly more than 20 issues to discuss, we focused on the high-impact matters relating to risk management and employee benefits that need more attention. These are essential issues for every risk manager, HR manager and insurance professional to monitor in 2024.

1. Election watch

This year’s federal election could significantly affect policies for businesses and individuals. One such policy is the Department of Labor’s new guidelines around independent contractor classification, which will take effect on March 11. Based on California’s AB 5, these guidelines will significantly reduce the number of workers classified as independent contractors. 

With insurance regulated at the state level, gubernatorial elections tend to bear more significance for the industry. Governors have significant influence over state policy, often including appointing insurance regulators. In 2024, there are 11 gubernatorial elections, in Delaware, Indiana, Missouri, Montana, New Hampshire, North Carolina, North Dakota, Utah, Vermont, Washington and West Virginia. Some of the more notable state reforms expected this year include:

• Georgia – With the state ranked by the American Tort Reform Association (ATRA) as the top “Judicial Hellhole,” tort reform legislation is expected to be introduced.
• Florida – Comprehensive tort reforms were passed last year, but will they survive court challenges and lead to cost savings for consumers and businesses, as expected?
• Louisiana – With some of the highest rates in the country, the state’s insurance commissioner is focused on homeowners and personal auto insurance reforms.

See also: Biggest Business Trends for 2024

2. Economic outlook

According to J.P. Morgan, economic growth is likely to decelerate in 2024 as the effects of monetary policy take a broader toll and post-pandemic tailwinds fade. Inflation, high interest rates and rising consumer debt are contributing to the forecast. Inflation is expected to remain above the federal long-term target of 2%. Mortgage rates are expected to drop under 6.5% by year’s end. For those currently with 3% to 4% interest rates, doubling that with a new property is less than appealing. 

The commercial property market continues to have challenges, with office occupancy well below pre-pandemic levels. When leases expire, many companies are downsizing their office footprint, leading to rising commercial vacancy levels. The Financial Times reported last week that $117 billion of commercial mortgages related to offices must either be repaid or refinanced by the end of 2024. 

According to KPMG, the mergers and acquisitions (M&A) volume in 2024 will be in the technology, health IT and physician practice sectors. S&P Global suggests creative deal structures and a relentless focus on value creation in private equity portfolios are critical in the year ahead. 

3. Geopolitical risks

Active wars in the Middle East and Ukraine and a threat of conflict between the U.S. and China over Taiwan have created a higher geopolitical risk, potentially affecting companies in various ways. Terrorists have been attacking ships in the Red Sea, leading to the Suez Canal, which is responsible for 12% of global trade. These attacks could lead to cargo loss, endanger crews and cause supply chain delays. 

Organizations with overseas employees should know where they are and how to evacuate them in the event of unrest. A complicating factor in dealing with these risks is that many insurance and reinsurance contracts have war risk exclusion clauses, which can exclude coverage for bodily injury or property damage deemed to have come from a war risk, in addition to business interruption and cyber incidents. Risk managers should work closely with their brokers to understand potential exposures.

4. Employee benefits

Employers have continued to expand benefit programs to align with the expectations and needs of their workforce, and 2024 is no different. Some of the expanded specialty health solutions include: 

• Family planning benefits – Fertility and in vitro fertilization (IVF), pregnancy loss, and maternity management
• Gender-affirming care – Transgender-inclusive benefits 
• Age-inclusive benefits – Menopausal care, providing access to virtual specialists and wellness coaches
• Financial wellness – Employee discount programs, money management tools, investment education and financial planning
• No copay healthcare plans – Surest, a new market entrant, offers full price transparency for each service and provider. Insureds can compare treatment options with prices across a network of doctors, hospitals and clinics before visits.

Additionally, benefit managers are grappling with weight loss drugs. Glucagon-like peptide 1 (GLP-1) coverage is expected to double and is projected to be a $22 billion market by 2030. Pharmaceutical costs are expected to worsen with a rise in specialty medications and their associated cost and coverage. 

See also: The ABCs of Agency Planning for 2024

5. Frequency rates

Data from the National Council on Compensation Insurance (NCCI) show that workers’ compensation accident frequency rates have trended downward in the last 20 years, resulting in rate reductions for many businesses. However, this trend may be changing. November and December 2022 data from the Bureau of Labor Statistics (BLS) noted that private industry employers saw a 4.5% increase in workplace injuries and a 5.7% increase in fatal injuries. The overall workplace injury rate was mostly unchanged from 2021, but when work-related illnesses were factored in, the rate increased. Additionally, the rate of fatal work injuries increased compared with 2021. Some of this can be attributed to new employees, who carry an increased accident frequency rate. For risk managers, safety training and pre-employment physicals should be a continued priority.

6. Climate change

2023 was the hottest year in recorded history. Across the U.S., cities smashed records for consecutive days with record temperatures, forcing risk managers to reevaluate heat safety for their workforce. Cal/OSHA passed new heat-related prevention guidelines, and federal OSHA is also working on new rules. Risk managers should consider indoor air quality assessments, additional water or rest stations, ventilation and cooling centers.

Additionally, the Panama Canal, which handles approximately 5% of seaborne trade, has been operating at reduced capacity for several months. A 30% decrease in rainfall has reduced water flow into the canal, which is necessary to use it. This leads to shipping delays and significantly higher shipping prices for companies. 

7. Medical inflation 

Medical inflation in workers’ compensation has recently been lower than overall economic inflation. However, most workers’ compensation medical costs are controlled by fee schedules lacking automatic adjustment provisions, so it can take longer for any increased cost to be reflected during inflationary periods. With rising labor and material costs, providers are pushing for fee schedule revisions. For example, Illinois has an automatic inflation adjustment built into its medical fee schedule, so as of Jan.1, 2024, most workers’ compensation medical service costs increased by 8.3%. Services not covered by fee schedules, such as attendant care, long-term care, transportation and durable medical equipment (DME), are already seeing significant inflation.

8. Redefined property insurance

Insurance Business America recently said the North American property insurance market will start to see more stability and capacity in 2024, and, barring catastrophes, insureds should expect to receive relief after years of pricing increases. Although the market is improving, risk managers are increasingly seeking property resilience assessments. When considering physical climate risks, an assessment may cover wind, precipitation, drought, wildfire, earthquakes, sea-level rise, extreme temperatures and more. Understanding the risks leads to a mitigation plan and allows a risk manager and their business stakeholders to determine the most meaningful measures.

While carriers may perform similar assessments related to the accuracy of valuations and as an added benefit to their insured, some risk managers and insurance buyers select independent partners to perform this work to obtain an unbiased review. In addition to property insurance, climate risk assessments and mitigation and adaptation recommendations may be helpful for a company’s environmental, social and governance (ESG) initiatives. 

Insurtech has become crucial to the property insurance industry, assisting with underwriting, risk mitigation and claims management. Real-time and historical weather data coupled with a suite of tech tools, AI, and machine learning are providing meaningful insights, which assist in streamlining the claims process, restoring property and allowing early detection and communication.

9. Liability verdicts

For several years, the number of commercial liability verdicts above $10 million has been increasing. Juries are increasingly hostile toward large organizations and public entities and desensitized to large dollar awards. This phenomenon is often called social inflation or nuclear verdicts, but in reality it is legal system abuse. According to the U.S. Chamber Institute for Legal Reform, the average household pays more than $3,600 in higher costs annually for goods and services because of unnecessary and abusive litigation. 

In addition, third-party litigation funding allows uninvolved investors to cover litigation costs on behalf of the plaintiff in exchange for a portion of the verdict. This encourages plaintiffs and attorneys to take cases to trial rather than settle because of the limited financial downside. 

The solution to the challenges of legal system abuse is tort reforms. However, these have been slow to materialize. In the meantime, businesses can expect their insurance and claims costs to rise as the jury awards continue to increase.

See also: In 2024, Change Becomes Non-Negotiable

10. Leave and accommodation landscape

The leave of absence space continues to evolve, resulting in employers implementing new company and state programs. Paid family and medical leave is expanding at the state level. Leave programs may include pregnancy loss, bereavement beyond immediate family and organ donation. Leave laws are complex for multi-state employers and require significant administration, coordination and communication to implement and manage them.

Legislation regarding transparency in drug pricing is beginning to mount challenges to the Employee Retirement Income Security Act of 1974 (ERISA) and the preemption of state pharmacy benefit manager (PBM) laws. Court rulings could have a significant impact on ERISA protections, which will affect short-term disability (STD) and long-term disability (LTD) plans. If the preemption clause is invalidated, group benefit plans could be at risk for lawsuits at the state level. 

The Mental Health Parity and Addiction Equity Act (MHPAEA) faces proposed regulation changes and enhanced enforcement, which could significantly affect employers. The changes would limit employer health and disability plans from providing less favorable mental health and substance abuse benefit plans to employees. For example, this change could potentially affect the 24-month limitation of mental health benefits under most LTD benefit plans, leading to a significant cost increase.

The Equal Employment Opportunity Commission (EEOC) has yet to issue the final rules for the Pregnant Workers Fairness Act (PWFA). This new law requires covered employers to provide “reasonable accommodations” for pregnancy, childbirth or related medical conditions. The EEOC noted in its strategic release plan that PWFA enforcement is a top priority, and cases are already being introduced against employers. 

11. Liability insurance tower challenges

Another factor increasing costs for businesses, public entities and insurance carriers is the challenge of managing liability insurance towers. Coverage layers above primary may have different terms, conditions and exclusions. 

Bad faith exposure is also creating a challenge. Insurance carriers could face a bad faith claim with higher excess/umbrella layers arguing the case should have been resolved within the primary layer. This leaves carriers stuck between their policyholders, who want to take a case to trial, and the excess/umbrella, who threaten bad faith litigation if there is an adverse jury verdict. Brokers and policyholders do not always contemplate bad faith exposure, so they may not understand a carrier’s reluctance to take cases to trial. While the policyholder may only have exposures up to their policy attachment point, bad faith litigation can create exposures well beyond the policy limit for a carrier.

12. Adverse reserve development

There are concerns that the insurance industry may find itself needing to increase tail claim reserves in multiple lines because of a variety of factors, including: 

1. Increasing commercial general liability and auto jury awards
2. Remaining backlog of pending cases in the courts due to COVID
3. Jury awards granted now that are related to seven- to 10-year-old incidents
4. Inflation rates that are much higher than anticipated on claims prior to 2019
5. Extensive losses due to climate change and rates that, while increasing, cannot keep up
6. Adverse development on workers’ compensation tail claims due to increased attendant care costs and longer life expectancies for severely injured workers

Risk managers and brokers should pay attention to the carrier earnings calls. If there are comments around the need to strengthen reserves in lines of coverage, this may signal that rates could increase or that the carrier might withhold certain lines of coverage.

13. Sustainability and regulations

For the last few years, ESG has become increasingly important for businesses, with tighter regulations from specific states, the Securities and Exchange Commission, the federal government and the European Union. These far-reaching regulations cover everything from climate emissions to workforce and board demographics and even investments. The regulations mean employers must track all their relevant data, in addition to data from their suppliers and business partners. Publicly traded companies have faced shareholder lawsuits pertaining to some of these issues. 

Conflicting rules from state insurance regulators are adding to the confusion for carriers. One state will attempt to restrict carriers from insuring or investing in fossil fuel companies, while others will penalize insurers that refuse to insure these companies. Last year, several states threatened antitrust lawsuits against carriers because of these issues. 

14. Human capital 

The December 2023 U.S. jobs report indicates more job openings than job seekers. Talent attraction is evolving in how to source candidates into the insurance industry, with efforts to recruit veterans, stay-at-home parents returning to the workforce, people with disabilities and high school graduates. There are growing conversations around skills-based hiring within insurance and, more broadly, across businesses globally. Organizations are also increasingly using artificial intelligence tools to assess competencies and potential among the candidate pool.

Recent labor strikes brought the issue of a four-day workweek to the forefront. Some companies are starting with one day off every other week or a half-day on Fridays. Additionally, many employers are planning a significant average salary increase in 2024 due to inflation and a tight labor market. In December 2023, a Willis Towers Watson survey found that U.S. employers are planning for an average salary increase of 4% in 2024 compared wth 4.4% in 2023 and 3.1% in 2021 and earlier years. 

See also: Top Employee Incentive Trends for 2024

15. Evolving presumptions

Presumption laws regarding first responders have been the most common form of workers’ compensation legislation for years and have expanded to include cancers. These presumptions switch the burden of proof so conditions are “presumed” to be work-related unless the employer can prove otherwise. In recent years, post-traumatic stress disorder (PTSD) has emerged as a presumption and now includes dispatchers and other occupations. The presumptions create situations where different workers exposed to the same situation have different claim outcomes. For example, a police officer responding to a workplace shooting could file for a PTSD claim, but those onsite employees where the shooting occurred may not. This year, Connecticut made all employee PTSD claims compensable. Washington also passed a PTSD presumption that applies to nurses, including the private sector. With a legislative blueprint in place, will other states expand presumptions?

16. Cyber preparedness

Cyber attacks have increased exponentially in volume, velocity and effectiveness. The National Cybersecurity Strategy is exploring whether a government backstop is needed for the cyber marketplace. This would resemble the Terrorism Risk Insurance Act (TRIA) and the terrorism risk marketplace. The concerns are that policy limits and exclusions in the cyber marketplace would leave cloud-based companies with inadequate protections in the case of a sustained outage. Also in question is the market’s ability to adequately cover the business interruption costs associated with a widespread attack on the infrastructure, such as the electrical grid. 

17. Workplace violence

Workplace violence continues to be a trend year over year. It is a leading cause of injury for healthcare and K-12 education employees. Retailers have also seen an increase, with employees walking off the job due to safety concerns and businesses closing locations due to risks. Law enforcement officers have also been heavily affected. Data from the National Police Association shows 378 officers were shot in 2023, a 60% increase compared with 2018. Employers are increasingly focused on safety in the workplace, including psychological safety, which can hurt employee morale and worker retention.

18. Employee well-being

Mental health and well-being have become an increasingly important area of focus for employers, which are offering benefit models that include virtual and in-person mental healthcare and apps for meditation, mindfulness, deep breathing, stress reduction and coping strategies. Employee resource groups are working to destigmatize mental health discussions. At every opportunity, environments should be created where employees feel safe to seek help.

Corporate and team culture matters, and companies have evaluated mission, purpose and core values to support a positive workplace. Pulse surveys often address well-being, providing meaningful insights across the business.

Mental health and well-being literacy is an opportunity for employers to grow their offerings as a resource for employees to learn about why mental health matters, personally and professionally, about signs and symptoms and about self-care and treatment options, along with easy access to the benefits available.

See also: Investment Outlook for 2024

19. Exclusive remedy

Lawsuits involving exclusive remedy have typically been dismissed on summary judgment because the burden to overcome it is difficult. Throughout the pandemic, there were several challenges to exclusive remedy, with most claiming that an employee brought COVID-19 home to their family. For the most part, these cases were dismissed. Recently, two high-profile cases were allowed to proceed on merits to let a jury decide if the burden to overcome exclusive remedy was met. Both of these cases involve workplace shootings in Virginia, with employees claiming their employer was aware of the risks and did not take appropriate action to protect them. If these plaintiffs prevail, similar suits will likely be introduced in other jurisdictions.

20. Implementing AI

When thinking about implementing AI, companies should contemplate their risk tolerance. Are you a first-to-market company? Are your internal stakeholder’s innovation drivers? Do you have clarity on use case scenarios, costs to implement and maintain and return on investment, and do you have leaders willing to support the short- and long-term investment? 

Generative AI, conversational AI, machine learning and the suite of tech tools supporting AI have significant potential to change the way underwriting is performed, claims are lodged and processed, customer service interactions are performed and claims are resolved from start to finish. 

AI already supports expedited claims processing for low-dollar, high-frequency claims in the liability, auto and property industries. With AI supporting the review and summarization of medical documents, the process for an adjuster is simplified. Will there ever be low-touch processing of medical-only claims in workers’ compensation? If so, it may develop with early adopter customers and innovative claims payers. AI could help the industry focus on what matters, improve human interaction and provide the claims expertise necessary to get the best outcome. 

Incumbent insurers must adapt their operating models, products and core processes to a new reality. All executives need an understanding of technological impacts and should ensure that their organizations are poised to unlock the potential. 

The traditional insurance business model has demonstrated remarkable resilience, but insurers must strive to exceed the evolving expectations of customers.

They want simplicity, like one-click shopping. They demand 24-hour accessibility and swift delivery. They expect unambiguous yet pertinent information about product features -- pricing being a pivotal consideration. Moreover, their needs extend beyond mere convenience. They need innovative, tailored services fit for the digital age.

Top Tech Trends Transforming the Insurance Sector

1. Robotic process automation (RPA) for back-office operations

RPA enhances both customer experience and operational efficiency, bridging the gap between legacy insurance systems. RPA platforms execute actions at the precise mouse and keyboard levels. Further integration with lower-level systems occurs through application programming interfaces (APIs). When constructing workflows with RPA for end-to-end automation, insurers can use API connectors.

RPA solutions are ideal for a distributed workforce, offering the ability to:

• Transfer data from one application to another by copying and pasting.
• Open emails, gather the data and transfer it into a core system.
• Create month-end profitability reports by calculating data.
• Integrate with components such as workflow automation and rules engines, to entirely automate processes.
• Enhance bot capabilities using add-ons of artificial intelligence (AI).

2. Transforming claims and underwriting with AI

Typically, underwriting involves routine administrative tasks such as data entry, email correspondence management and document editing. These time-intensive procedures have conditioned clients to anticipate slow turnarounds and minimal communication – fostering an increased desire for transparency.

AI's capacity to automate routine underwriting tasks has enabled underwriters to allocate more time to high-priority assignments. They can tailor policies for unique scenarios and foster robust customer relationships.

The lack of a central clearinghouse in the industry—a body scrutinizing loss runs, or claims losses often analyzed by insurers to gauge future risk—poses a significant challenge. Insurers that generate quotes have to sift through numerous PDFs and extract loss and claim amounts before inputting this data into another system for quote generation. 

AI simplifies this cumbersome process by enabling insurers to automatically extract these fields from underwriting applications and process most of the application information that comes their way. 

See also: 5 AI Trends You Can't Ignore in 2024

3. Predictive insurance analytics

Among the AI applications available for solving business problems in the insurance industry, predictive analytics stands out as supremely versatile. Predictive analytics provide a dual-purpose solution – enhancing customer experience and mitigating the temporal and financial burdens of claims handling while eliminating fraud. 

Insurance companies amalgamate external data, such as credit history, medical records and driving records, with their proprietary data stores to garner a more profound understanding of claimants and injured parties. Insurers employ predictive analytics and other AI technologies to enhance risk model accuracy through the automated adjustment of data models, which conserves significant time and effort for actuaries. 

4. Omnichannel customer experience

Insurance interactions have long relied on face-to-face or phone call interactions. However, in light of technological advancement and shifting customer expectations, insurance companies have acknowledged the imperative to evolve their digital service delivery, and omnichannel e-commerce has emerged as a potent force.

Omnichannel insurance hinges on delivering a satisfying experience across numerous touchpoints, whether it's an online policy purchase initiation, support solicitation via a mobile app or an in-person visit to seek assistance at a physical office. This approach guarantees that all customer information—preferences and historical data included—is immediately accessible by the insurance provider.

Imagine stepping into an insurance office and conversing with an agent attuned to your needs. Subsequently, you stumble on a bespoke policy recommendation in your email. Seamlessly—wherever you may be—the threads of your insurance experience remain connected.

5. Internet of Things (IoT) and telematics

In the coming years, the Internet of Things (IoT) promises to revolutionize our world. As of 2010, global ownership for networked devices stood at 12.5 billion; the number is expected to exceed 50 billion by 2025. 

Customers can transfer massive data volumes to their insurance providers or third parties—this happens either for real-time analysis or automation of reactions/services—already reshaping traditional business and operating models across multiple sectors.

Insurers predominantly employ IoT capabilities to enhance customer interactions and expedite underwriting, as well as claims processing. However, these is a surge in novel, attractive IoT-based services and business models. Digital networking via the IoT might develop into a strategic component specifically tailored for insurers.

See also: Cybersecurity Turns Attention to IoT

6. Low- and no-code development

Simply put, low/no-code software represents any software that sidesteps the need for intricate coding. Both developers and non-developers can create applications using a simple drag-and-drop interface. 

KPMG discovered that 7% of insurance companies lack the IT capacity to incorporate digital solutions into their businesses. Additionally, 39% of companies grapple with implementing digital solutions. 

Using low/no-code development, insurance companies have the ability to:

• Significantly reduce the sunk costs of their IT investments.
• Adapt rapidly to the dynamic environment and embrace change with agility.
• Aim to eradicate the detrimental impacts of skills differentials within their employee pool to enhance operational efficiency.

7. API-based insurance

Insurers' digital experience only satisfies 15% of their customers. To remain competitive, insurance companies must accelerate their digital transformation and adopt new technologies like APIs. A lack of digital capabilities might prompt over 40% of consumers to consider changing their insurance provider.

Why does the insurance industry, despite operating across a broad spectrum of businesses and potentially reaping numerous advantages from APIs, still need to integrate them at this stage?

The likely answer resides deep within the persistent stagnation at insurance organizations. It is only now, perhaps out of sheer necessity, that integration and APIs are capturing the attention of insurance C-suites.

8. Chatbots

Providers of insurance business process outsourcing (BPO) services have been popular for customer service. However, with the advent of chatbot, things changed. This virtual assistant fosters communication between a company and its customers.

An agent initiates the creation of workflows for rule-based insurance chatbots. These bots can commence conversations, provide support and handle requests by pre-established rules. Particularly when addressing standard user questions, the bot adheres to a path charted out by its creator. 

While rule-based chatbots can resolve simple issues, they do not provide you with all the opportunities that AI chatbots can offer after training. 

See also: The Rise of AI: a Double-Edged Sword

9. Self-service insurance portals

Sometimes, engaging with an insurance agent about a policy, acquiring crucial documents or updating account information can prove hectic, so providers enable customers to manage their policies online. 

The provision yields manifold advantages for both customers and insurers.

10. Embedded insurance

Because acquiring one-off insurance policies can be cumbersome, embedding non-insurance products with a policy presents an excellent solution.  

Embedded insurance is an innovative approach that facilitates insurers' entry into untapped markets and expands their reach. Established businesses can leverage the trend to penetrate developing markets more effectively.

Navigating the Future: Adapting to Next-Gen Technologies

Embracing agile and open digital systems on the cloud and providing a seamless customer-centric experience is what it means to be a next-generation digital insurer, but insurers must adapt their core insurance systems to fit into this new landscape. 

KEY TAKEAWAY:

--Insurers can get ahead by embracing technology like digital identity verification that achieves a balance between rigorous fraud prevention and providing a great customer experience. Every insurance company should acknowledge that digital identity making its way into onboarding flows is not an if – it’s a when.

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As Canada's insurance landscape evolves, one issue that continues to loom large is a rising rate of fraud.

The pandemic drove an uptick in fraud across many industries, as digital-first transactions became the norm. But while other sectors have made strides in mitigating fraud since, the insurance industry has struggled to get a handle on the issue.

While the rate of digital fraud across all industries decreased nearly 19% year over year from Q2 2021 to Q2 2022 in the U.S., the insurance industry saw a 22% increase during the same period. While multiple dynamics play into these trends, a key reason lies in the existing customer experience standards in the sector.

Unlike industries such as gaming and finance, where a certain level of friction while onboarding is acceptable to prevent fraud, insurance providers face a unique challenge. The competitive nature of the insurance market revolves around speed –specifically, the need to quote and enroll customers quickly.

With "time to quote" a key metric for winning customers, insurers are reluctant to create extra steps that add friction, and fraud protection, in front of prospects. Ultimately, this is costing insurers.

One way insurers can get ahead of these challenges is by embracing technology like digital identity verification that achieves a balance between rigorous fraud prevention and providing a great customer experience. Thankfully, digital identity technology advances every year and can be leveraged to support both. 

See also: How Technology Is Changing Fraud Detection

The true cost of fraud for policyholders

Health-insurance costs in the U.S. are climbing at the steepest rate in years, with some projecting the biggest increase in more than a decade. Costs for employer coverage alone are expected to jump by 6.5% in 2024, year over year.

Without technology in place to detect and prevent fraud, these costs are being passed on to policyholders through increased premiums. Over time, this undercurrent of rising costs will create challenges.

And it will certainly change the way companies compete. In today’s market, insurers that provide a good and fast quoting experience win. With little identity verification management in place, companies are optimizing for a two-minute verification process. This lean process often results in fraudulent claims being filed, or inaccurate information being updated for better rates. 

As cost and fraud trends spike, tomorrow’s competitive advantage will go beyond the traditional speed to quote. Insurers will also need to assure customers of robust measures to reduce fraud, protect identities online and ultimately keep rising premiums at bay.

See also: Using AI to Prevent Insurance Fraud

The power of digital identity 

Insurers can address these challenges through digital identity verification, which uses digital credentials to analyze and verify personal data, while keeping the ownership in the hands of the user. By incorporating digital ID verification into the policy application process, insurers can maintain a streamlined onboarding flow while customers can feel more confident that their information will be kept safe. 

Every insurance company should acknowledge that digital identity making its way into onboarding flows is not an if – it’s a when. At the federal level, the Digital ID & Authentication Council of Canada (DIACC) is advocating for a secure, interoperable digital identity for Canadians. On a provincial level, policy makers are working to support the adoption of digital credentials across levels of government and industry.

With technology intended to roll out across Canada, there will be a first-mover advantage for organizations that lean into digital ID technology. Making it a priority to lead with a streamlined customer experience, reduce fraud risks and ultimately cut operating costs will create a competitive advantage. 

For insurers new to digital ID technology, a great place to start leaning in is by taking a look at open standards-based technology. As digital identity is still in its early days in Canada, you’ll want to explore products that are built with the capability to facilitate credentials that allow the technology to work across various networks. By building with open standards, you’ll decrease the likelihood of larger expenditures later, thanks to standards set by DIACC’s Pan-Canadian Trust Framework. 

The rise of fraud in the insurance sector is calling for a paradigm shift. The power behind digital identity technology is no longer just nice to have – it offers a lifeline for an industry at a crossroads. 

The future of insurance affordability hinges on its ability to adapt, innovate and harness the capabilities of digital identity technology to create a more secure and supported industry.

The insurance industry is stressed by factors driving global volatility and disruption, like climate change, cybersecurity threats, war and a growing talent crisis. Seven in 10 insurance organizations worldwide say they feel pessimistic about market prospects or unprepared for disruptions on the horizon, a 2023 IDC survey found. A staggering 86% of the C-suite feel the same. 

But I don’t share their downcast mood. 

At the risk of sounding Pollyannaish, I see the industry’s future as bright—if only insurers move quickly to seize AI’s wide-ranging value. By spurring automation and next-gen data analytics capabilities, AI can drive productivity gains and product innovations and improve the employee experience. 

Once all this enterprise value comes into focus—and for many insurers, it already has—the industry’s pessimism will dissipate. Frayed nerves will calm as new tools and technologies integrating AI boost agility and evolve workforces. Leaders’ confidence in their industry’s rock-solid value and growth prospects will grow because of–not despite–an increasingly risk-laden world.

Here are three of the biggest ways AI-driven change will help build the insurance industry’s future.

See also: 5 Ways Generative AI Will Transform Claims

Powerful Risk Management Predictions

AI can bolster insurers’ core competency: managing and pricing risk. Consider climate change—as historic weather patterns change and extreme events become more frequent, AI models can help predict emerging trends. These models live and breathe data. Give them reams of climate data detailing geography, temperature and other weather variables—not to mention piles of claims data drawn from millions of policies— and AI tools can offer location-specific predictive analyses. 

Simply put, AI enables superior risk management, and that can help organizations get ahead of big changes reshaping property and casualty insurance underwriting, for example. While still not a crystal ball, AI can provide firms with a better understanding of the most powerful force shaping the planet’s future: climate change.

AI can also level up the power of HR platforms to help leaders improve workforce predictions. Organizations can train customized large language models on datasets detailing employee skill self-assessments, the skills required for specific roles, teams and functions and turnover and vacancies. HR leaders can then track workforce skill trends, flags deficits, prioritizes needs and predicts skills gaps. Assisted by AI, leaders can stop guessing about their future hiring needs.

Recommendations From Policies to Organizational Management

AI’s capabilities will help insurers do more than just predict and track risks. As AI models become more sophisticated, they can provide suggestions built from predictions and analyses to support insurers and customers. For example, AI can offer product and policy recommendations geared to climate-change scenarios for specific geographic regions, like surfacing a three-month flood insurance policy proposal ahead of hurricane season. 

Within organizations, AI can help leaders determine recruiting priorities and develop upskilling strategies mapped to strategic goals. AI can even recommend knowledge-capture ideas based on recent turnover and retirement-based attrition trends.  

Of course, AI suggestions must be reviewed, validated and possibly tweaked. Humans must remain in the driver’s seat. The point is that, with guardrails in place, AI can help insurers actively manage customer, market and workforce risks instead of simply reacting to circumstances. 

Or think of it this way: AI will help fuel an organization’s innovation engine, allowing insurers to strengthen their role as value creators and customer advisers. 

See also: 5 AI Trends You Can't Ignore in 2024

Improved Employee Experience 

Cultivating a culture of innovation is a workforce imperative, as well. With many insurance veterans on the cusp of retirement—by 2030, the industry is expected to face the largest shortage of workers of any industry—insurers need to reel in new talent ASAP. 

But here’s the deal—younger generations don’t want to work with cumbersome, outdated technology. Fortunately, insurers get it: IDC reports that technology is the top priority for insurance organizations worldwide, with profitability and customer satisfaction closely following. 

To attract next-gen talent, the industry must improve the employee experience. AI can play a valuable role here in two ways. First, streamlining IT processes via automation can free employees to spend more time on strategic–and satisfying–work. Second, AI can directly support and improve the employee experience via faster analytics capabilities that shorten time to insights and accelerate decision-making. 

That dual value proposition is what's driving IT investments in the insurance industry: Nearly eight in 10 insurance leaders surveyed by IDC say they want more streamlined IT processes to simplify uncovering business insights for nimbler decision making, and 34% of IT initiatives are intended to create a more intuitive user experience across functional areas to make employees happier and agile. 

AI will play a key role on both sides, helping to power innovation and workforce retention and recruiting. That’s reason enough to be optimistic about the industry’s future.

The rapid pace of technology changes happening this decade is a sign of how things are going to be. Unexpected events are going to occur more often, newer factors such as climate change, and advancements in AI, are going to disrupt normalcy and unpredictability is going to occupy more room. Hence insurers are increasingly adopting the role of– as this Deloitte article says–“society’s safety net.”

To take on this responsibility; to help predict rather than react; to stay transparent; to increase customer-centricity; and still remain profitable, is a tall order.   As insurers focus on their transformation objectives in 2024, two important things stand out:

1. Unifying journeys within the organization to ensure greatest collaboration and remove silos
2. Leveraging the right technology to accelerate this unification and see tangible outcomes.

Insurers are successfully transforming various business functions collaborating with technology partners. But the prospecting journey is least talked about - at least not as much as lead management and customer focus. How can insurers streamline the prospecting journey in the next few years, thereby aligning with a more holistic adoption of technology across their sales lifecycles and resulting in better performance?

Existing Prospecting challenges

• Too many leads of poor quality: With intense competition and outreach via several communication channels, there are a lot of enquiries, interest, but not many of these are high-quality leads.
• Evolving customer behavior- As customer needs rapidly evolve, it becomes a sustained priority to keep tabs on their preferred modes of engagement, their product interests and so on.
• Prospect nurturing - Managing the high volume of prospects and enquiries, and then identifying those that may have potential and nurturing them becomes a challenge for distributors, especially if they are not using the right tools.

The ideal tech blueprint for prospecting for this year

Does your sales technology cover the seller journey, end-to-end? Evaluate tools that can not only help your sellers automate their activities and provide insights, but also tighten and effectivize the prospecting journey, setting the right context for lead allocation and management. The two components of prospecting that can be streamlined with tech are prospect sourcing and prospect nurturing.

Prospect Sourcing

• Use AI-based chatbots on the website, social media to engage visitors and help in better prospecting
• Implement systems that can import leads coming in from various channels: email, Whatsapp, Linkedin, or an event list on excel into one central repository
• Your prospecting tool should also be able to auto schedule outreach with tailored content, links and other material based on prospect’s interest

Prospect Nurturing

• Use tech to nurture the leads that are in the central repository through sales playbooks that can determine the next best action for every lead in the system
• It can be a great push if these leads can be auto-allocated to distributors/agents depending on various parameters that are defined in the system (geography, product interested in, and so on)
• Leveraging tech such as Machine Learning, if the tech is able to guide the agent with recommended next steps, or further nudge the distributor to pass on the lead to the right agent - it can help catalyze the lead journey at the prospecting stage
• Finally, with the right kind of analytics, insurers/distributors can measure outreach effectiveness in real time to increase the probability of conversion in the next steps.

Tech-enabled prospecting creates a more efficient and targeted approach to customer acquisition. Tools with AI and ML capabilities, and data analytics will play an important role in separating the wheat from the chaff and identify potential customers far more accurately. A tighter prospecting journey automatically results in a smoother lead journey for the seller and better customer engagement for the insurance carrier.

Sponsored by ITL Partner: Vymo

 

Deb Smallwood is widely recognized as an industry thought leader who is known for her expertise in helping companies rethink the traditional business of insurance and position for success in the changing insurance world. For over 30 years, she has helped customers understand how to leverage technologies, shift strategies and make informed strategic investment decisions. She has worked with hundreds of insurers and vendors, enabling them to advance strategies enabled by technologies.  Prior to launching Strategy Meets Action, Smallwood held a variety of leadership roles developing strategic road maps and executing and deploying transformational projects. Her roles included VP of the insurance practice at CEB TowerGroup, chief transformation officer at Insurance Company of the West, partner at KPMG’s information risk management practice, and head of commercial lines application development and maintenance at Liberty Mutual.

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Paul Carroll

Perhaps you could start us off by describing your personal story arc, to set us up for a discussion of where the industry can go from here in terms of attracting, nurturing and promoting diverse talent.

Deb Smallwood

For the past 45 years in the industry, I held a variety of leadership positions; CIO, chief transformation officer, partner at KPMG and my last roles as the CEO and founder of Strategy Meets Action, always in ground-breaking roles as a woman executive at the intersection of business and technology transformation. Today, I have launched a book project and platform to empower women to unlock their infinite potential. My initial focus is partnering and collaborating with the women leaders and companies in insurance.

So my focus on where and how the industry can propel forward is a continuation of the past 45 years’ evolution, but at an accelerated pace.

I can still picture that first day at an insurance company in 1978, I was 23 years old. As I walked into the office, all I saw were rows of desks with women, while the offices were filled with men. I had never seen anything like that. There were no women in C-Suite roles and a few women leaders in the operations, back office and HR. 

If you fast forward to today, women have made visible and significant progress. Across our industry, women have elevated to every single C-suite, leadership and executive role within an insurance company: CEO, CFO, COO, CIO, heads of underwriting, claims and legal and in the new roles of data, innovation, strategy, customer experience and digital transformation. Women have proven they are both strategic and operational, with the ability to execute and deliver.

The glass ceiling has been broken in our industry. This is inviting women to join insurance. But the numbers of women in these positions are relatively small. Over 60% of the professionals in insurance are women. But only 18% of C-suite roles in the industry are filled by women, and only 3% by women of color.  So we hire plenty of women, but they are either leaving or not advancing in their careers.

One may suggest that the culture and the rules of engagement are traditional and have not evolved in line or at pace with changes in society that could support greater diversity in the C-suite.

Insurance industry is financially strong and continues to grow and expand. There is a healthy ecosystem. So there isn’t a compelling economic or financial reason to change culture, or even to innovate. But I think insurance companies will have to change, given the world we live in today.  Many external factors and mega trends are forcing diversity, equity and inclusion [DEI] and innovation.

I also believe AI will take the industry by storm and require radical innovation that we haven’t seen since the shift away from paper at the turn of the century and the shift to predictive model pricing once Progressive showed the way.  I believe AI will be a new gateway to attract and retain talent, especially women.

Paul Carroll

People were telling me all the way back in the 1980s that AI was going to change everything, and I knew it wouldn’t, and it didn't. Lately, I've become much more optimistic. I’m curious to hear more about how you think AI is going to be the next paradigm shift.

Deb Smallwood

AI capabilities has been evolving and expanding for some time and used across insurance in pockets, but as you state – with slow adoption and not transformative. What has taken the world and insurance by storm is generative AI. This AI offers maybe the first time since the telephone that everyone can play with a breakthrough technology. People are playing with it, using it, and it is elevating people’s thinking and generating new capabilities. It’s open source. It’s free. Everyone can explore it and experience it.   

Many insurers are buckling down, just like they did with new opportunities with social media, mobile technology and even the cloud. They are saying, let’s take this slowly so we can understand the risk and understand the potential impact to us, our policyholders and our ecosystem. Many are creating labs with a small, controlled group to test different use cases. Many are focused on the risks, not the opportunity to innovate and transform all dimensions of the business of insurance. I would suggest we need both lenses.

But the power of this AI technology is astounding. Let’s take a call center use case. Reps need to use and access multiple systems, from call center tech, to policy admin systems and multiple billing systems just to handle a query. They also need to access in real time scripts, procedures and rules. For the past 20 years, we've been unsuccessfully trying to resolve this complexity by integrating and moving data and so forth.

What AI and the suite of technologies can offer is a new, intelligent layer that can not only script talk tracks in real time based on the conversation but can document the conversation in real time and retrieve and interpret structured and unstructured data, images and videos from the various systems, as needed. Generative AI is going to go into those masses of data stores and pull out what the call center rep needs at that moment. Sure, this will require a different type of integration but, to me, is a quantum leap with intelligence augmenting and assisting the rep to new levels of customer experience and operational excellence.

Paul Carroll

Oh, agreed.

Deb Smallwood

Yeah, seeing and hearing what AI could do in call centers made me go, “Oh, wow!”

Paul Carroll

So how does AI disrupt things enough that it feeds into this diversity issue and creates an opportunity?

Deb Smallwood

I am very excited about the suite of AI technologies, as it creates new roles and new jobs. We can see this is already happening. What we have to do is inspire all, especially women, to stand up and raise their hands for these new types of projects. This is a new pathway to leadership and technical positions.

As I talk, interview and collaborate with women leaders for my book project, the conversations have renewed focus on how we can elevate the number of women in leadership positions. Current practices on hiring, promoting, merit increases and new opportunities are still out of balance and not working effectively in our industry. There is no transparency and accountability for really making a difference through DEI programs. Women deciding not to pursue C-suite positions or leaving insurance because of the all-male leadership layer is real. This should not be a surprise to anyone. 

So this tells me that the culture is still rooted in generational traditions. Board of director levels are at 80% male, and 70% of board positions are filled through networking, which perpetuates the lack of DEI at the most senior level of companies.

Insurance companies all have DEI programs, and I would challenge that it is a check-the-box activity.  There is little movement and few positive outcomes from these programs. The needle is not moving at the pace we need it to. I believe if there is a cultural change for true diversity, inclusion and equity, it needs to start at the board and C-suite levels, with compensation tied to DEI outcomes.

This is where my book comes in. As I open up the conversations with women executives, I am learning more about the true state of the industry as it relates to women in leadership beyond the numbers.  From the years when I was pushing up and through the glass ceiling, things are different. As one female CEO told me, the baby boomer generation did not have a choice to leave companies, for a variety of reasons. Today, as this executive was moving up the career ladder, she always felt empowered to make a choice to leave if she felt the company wasn’t the right fit culturally for her or wasn’t providing the right opportunities. With the younger generations moving between companies every three to five years, hybrid work environments and the expanding insurance ecosystem, there are many options. Right?

Insurance companies really have to embrace this diversity and inclusive cultural change, and I believe linking it to AI is an option. I just read that IBM is going to train 2 million people from diverse backgrounds over the next two years on AI. They're going to train 2 million people! Is insurance doing mass training? Is the insurance industry going into local communities and schools or going after women's groups and teaching them about insurance and AI?  

Paul Carroll

You spark a thought about AI and diversity. People will do these AI models and realize, oh, we trained them all using the perspective of white men. That doesn't work so well. When IBM had this great line about how they were sending Watson to medical school, after beating the greatest Jeopardy! champions, it turned out IBM was sending it to medical school on the Upper East Side of Manhattan, through a deal with Sloan Kettering. But people who are very well off don't have the same health issues or resources as others not so well off. You can't exactly take a model based on rich New Yorkers and use it in India or some other developing economy.

But if you have a successful industry like insurance, how do you say, you have to change a lot of things about how you're recruiting and promoting?

Deb Smallwood

Great question. Change is hard when you’re successful. But I think insurance companies will have to change, given the world we live in today. Executives need to acknowledge the current recruiting and promoting practices are not yielding the results expected from society’s expectations for diversity, equity and inclusion. As I talk to women leaders in insurance, and hear stories and experiences, there are words not being spoken and actions not being taken. Therefore, there is a reality that many executives are not even aware of. They don’t believe there are pockets of discrimination within their companies.

Paul Carroll

I'm sure they don't.

I went through some family records recently because my 93-year-old mother died in June, and I was reminded that my father's mother was the executive assistant to the CEO of Quaker Oats back in the early 1920s. That was basically the highest role a woman could have in a corporation in those days. When she married my grandfather, she had to quit because the thinking was that a married woman didn’t need to have a job and should make way for a single woman. That seems crazy.

Deb Smallwood

This is an amazing family story. That was so true. I remind myself that women have only been allowed to vote for a little over 100 years, right?  So yes, progress is being made from when I started in 1978, but not fast enough for today’s world.

Paul Carroll

Projecting out a bit, where do you see hope?

Deb Smallwood

My hope is more women will continue to fill board level/C-Suite roles and stay in our industry.  However, change will be required to keep the pipeline of young talent from shrinking. I don’t know if our industry will change fast enough. Fingers crossed. And as I partner and collaborate with the women in insurance and beyond with my book and platform, I hope I can continue to be a positive influence for women leadership and diversity in insurance.

Paul Carroll

Thanks, Deb. This was a great conversation.

KEY TAKEAWAY:

--Insurance products that are embedded through design facilitate adaptive systems by being a part of the network as opposed to a bolt-on feature. For instance, smart hot water systems that include tailored insurance protection may also include “over the air” software adjustments, informed by data shared across all other units, and thereby mitigate risk directly or by triggering on-site maintenance requests.

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P&C insurance is an extension of our desire to overcome nature. Our experience is defined by randomness and chance, and P&C insurance helps to mitigate the effects of (select) adverse random events. It facilitates a return to a pre-loss state or supports resilience understood as a “return to the same.” In this article, we argue that there are other forms of insurance fulfilment that may support adaptation rather than resilience alone – and that these are made possible by what we call Embedded Insurance at the Point of Design. 

Most of us are familiar by now with the concept of embedded insurance. Often, this is framed as a traditional insurance product that is offered when an insurable product is sold. Embedded Insurance at the Point of Design is different and is based on the premise that we can better tailor insurance products by co-designing them with assets and offering them as a bundled package with a single value proposition rather than offering a standardized “bolt on” coverage. The benefit of including insurance product development within the asset design process is that it allows for the development of a single value proposition and increases transparency and affinity between the insurer, designer and manufacturer. It may also create opportunity for new insurance product features focused on adaptation and risk mitigation. 

Consumers have a need for insurance to protect against unexpected and strongly negative events and are prepared to pay a premium now to avoid possible (and perceived greater) pain of loss later. Traditional P&C insurance products respond to this need by pricing risk and replacing the asset or settling to its fair value as determined at the time of loss. P&C Insurance products place the consumer back where they were pre-loss but do little to position the consumer to mitigate future losses. That is, these products focus on resilience, which we define here as a "return to the same."

See also: Time to Raise Your Embedded Insurance Game

When we think about resilience as a "return to the same," we might think of an analogy such as stretching a rubber band and releasing it. When we do this, the rubber band returns to its pre-stretched state. This synthetic resilience is a positive feature if we wish to re-use it as it was, and the same may be true for many insured assets. In other cases, there is value, both for the consumer and for the insurer, to repair or replace assets with updated features that improve their longevity or mitigate the risk of future loss or damage. When we think in these terms, we consider a shift from resilience to adaptation. Muscle damage and repair provides an analogy.

The process of human muscle strengthening involves a cycle of damage, inflammation, repair and adaptation. After a workout, our nervous system responds through inflammation and the activation of satellite cells around the muscles that fuse with the damaged tissue and support the repair process. As we continue with intervals of exercise and rest, a process of muscle strengthening occurs (called hypertrophy) alongside iterative improvements in the nervous system's ability to co-ordinate and synchronize muscle fibers in aid of repair. This is a learning system that adapts to events and becomes more proficient over time. Our muscles become stronger as a result.

Insurance products embedded in the asset design process may serve a similar function to the body's nervous system in this example if they are complemented by connected product systems.

In this diagram, we highlight both the proposition to explore insurance embedded at the point of design (X-axis) and complementary connected product systems (Y-axis). The two concepts together make possible assets with built-in and tailored protection plus a means of updating the asset (either through software update or re-release and replacement through an insurance claim process) to adapt to environmental conditions and risks.

The key to thinking differently about the role that P&C insurance can play is the concept of connected and articulated systems that incorporate feedback loops. These systems may make meaningful adaptation possible. Assets that are connected and provide data to the manufacturer and insurer allow for a deeper understanding of the conditions in which the asset exists and how it is used and create a basis for understanding how the asset may be improved to be more effective in these environments.

When we say these systems ought to be "articulated," we mean that the connectivity ought to also extend to other assets of the same class such that data may be shared not only with manufacturer and insurer but also with other products at the same time. Articulated and connected systems make possible meaningful feedback loops. Tesla's "over the air" updates are one example of a system like this that can facilitate product adaptation and evolution. If not live, updates may be delivered release by release.

See also: Is Embedded Insurance the Wrong Idea?

Insurance products that are embedded through design facilitate adaptive systems by being a part of the network as opposed to a bolt-on feature. The participation of insurers in product and system design allows for risk management-specific updates to inform either real-time or per-release modifications. The participation of manufacturers allows for transparency around timing of updates, of new releases and importantly of changes to cost that will inform insurance premiums. The relationship between parties highlights the strategic nature of designing connected and articulated systems.

An example of how an adaptive system supported by Embedded Insurance at the Point of Design may be realized is connected vehicles. Vehicles that are co-designed between auto manufacturers and insurers may offer tailored insurance solutions specific to the car and its target market. They may allow for data-sharing and a learning system across the network of vehicles. Feedback from the system may inform design enhancements to mitigate risk for subsequent models, and the replacement cost (or repair upgrade) may be factored into existing premium renewals in the case that the vehicle is damaged or destroyed and is repaired or replaced with an upgrade. 

An alternative example for property could include the manufacture and maintenance of residential hot water systems. Hot water system bursts represent a relatively infrequent but high-cost insurance claim category. Smart hot water systems that include tailored insurance protection may also include “over the air” software adjustments, informed by data shared across all other units, and thereby mitigate risk directly or by triggering on-site maintenance requests. The insurance premium may be priced to allow for replacement with updated models should the existing unit burst.  

Embedded Insurance at the Point of Design makes possible innovative forms of insurance by, firstly, allowing insurers to establish clear and close alignment with asset designers and manufacturers and, secondly, by supporting the development of connected and articulated product systems that may help to mitigate risk.

Whereas traditionally conceived insurance models seek to overcome nature, a truly embedded insurance model coupled with a connected system design may help consumers to better adapt and evolve in response to adverse events.

The insurance industry prides itself on the data it has. Carriers, historically, have had access to a wealth of data — and data sources — everything from disaster models to historic perils, real-time weather feeds, and current policy information to publicly available government data such as criminal records, bankruptcies, and foreclosures. But having access to data does not mean you have access to valuable insights. For data to be useful, you must first ensure the data you have is the data you want — clean, accurate, and reliable. Then, turn this data into information and that information into action. Good data leads to better decisions. And bad data? According to a recent MIT Sloan study, it costs carriers 20% of their revenue.

The Hidden Costs of Bad Data

The costs of bad data add up quickly. In fact, poor data quality can cost as much as 15-25% of total revenue, according to a study conducted by MIT Sloan. Poor data quality increases costs associated with the re-execution of a process due to data errors, correction efforts, and accruing out of lost or missed revenues. Conversely, according to the Sirius Group, quality data can lead to a 70% increase in revenue. With the right tools, carriers can turn the mountain of data they possess into a goldmine of opportunity.

But first, what do we mean by data quality?

According to IBM, data quality is the measure of how well a dataset meets the criteria for accuracy, completeness, validity, and consistency — crucial to data governance within an organization.

Good data helps organizations make better decisions. If data issues such as duplicate data, missing values, and outliers aren’t properly addressed, carriers increase their risk leading to less-than-optimal outcomes.

Is the Data You Have the Data You Want?

In the insurance industry, data accuracy is everything. The efficiency of the claims process is contingent upon the adjuster’s ability to verify a claim, which is based on having accurate data. The foundation of claims automation is also accurate data, both structured data from the system and unstructured data from the filing, to determine the appropriate course of action for each claim. The automation system continually reassesses its previous decisions as new information is added. Attempting this process with inconsistent or “dirty” data can lead to erroneous decisions and a poor customer experience.

Carriers wrestle with poor data quality because of the vast amounts of unstructured data that are stored in disparate systems. Many of these are legacy systems, while others are desktop-based actuarial applications. The problem is compounded by newer applications that have been added to the legacy systems, creating multi-layered, redundant IT architectures.

The Pitfalls of Bad Data

• Insurance underwriters depend on accurate data for risk assessment, which can influence premiums, policy terms, and profitability.
• Poor data quality increases costs associated with the re-execution of a process due to data errors, correction efforts, and lost or missed revenues. In a recent conversation on the “Slaying Your Data Dragons” webinar, OZ Senior Vice President Data Analytics & AI, Sal Cardozo, discussed the issues around data management.  
• Inaccurate, inconsistent data leads to less-than-optimal decisions. For instance, when underwriting and pricing property insurance, carriers often rely on the insured or their agent to provide the Construction, Occupancy, Protection, and Exposure (COPE) details about the property. These details enable the carrier to evaluate the potential loss associated with the property and price it accordingly. However, the insured may not always provide accurate information, leading to policy underpricing and increased losses.
• Lack of trust in data prevents insurance leaders from making the right decisions — sometimes leading to regulatory non-compliance.
• Carriers must comply with strict regulations around data accuracy, completeness, and appropriateness; failure to do so may result in huge fines and penalties.
• Many carriers grapple with inaccurate underwriting data, necessitating requests for additional information from agents and customers, leading to longer underwriting turnaround times and lost business.

How to Avoid the Big Bad Data Trap

1. Automate Repetitive Tasks

Data collection and processing is a repetitive, tedious task prone to human error. These errors could range from incorrectly understood instructions, typos, mismatched names and emails, duplicate records, or simply overlooking certain entries. These errors and an overwhelming amount of incorrect and incomplete data can accumulate and become significant inconsistencies over time. Through intelligent automation, carriers can reduce errors, cut costs, and provide a better customer experience while freeing up employee time for higher-value work.

Watch this joint NAMIC webinar to learn more about creating the right automation strategy and roadmap for your business.

2. Standardize Processes

In lieu of standardized protocols for data collection, different teams might adopt different methodologies for the same data. This inconsistency can cause discrepancies when data is combined or compared.

3. Integrate Your Data and Systems

Insurance carriers operate in different regions around the world. With a large global footprint, local and overseas business units tend to have various systems to manage policy and claims data, financial information, and marketing and sales data. However, if this data is not integrated into a common platform and view, it could hamper decision making over time.

Here’s how a global P&C carrier consolidated its data sources with intelligent automation and reaped the benefits of a standardized platform. Read the full story.

4. Modernize Legacy Systems

Legacy systems are not equipped to handle newer data types and large volumes or share data across departments, leading to delays and lost opportunities. Compare the standard insurance approval process to a digital model, which allows customers to lodge a claim from anywhere, upload photographs or details of the damage from their smartphone, and where automated underwriting processes can approve the claim almost immediately. The latter is faster, more efficient, and provides a seamless experience for the policyholder. Besides, older systems might lack the safeguards or validation checks in more modern solutions.

5. Perform Data Quality Checks:

Carriers must perform periodic reviews and cleaning of databases to maintain data quality. If these checks are not carried out regularly, inaccuracies can persist and compound, leading to a deterioration in data quality.

Bad data in all its forms costs the insurance industry more than you realize, from the more obvious financial and productivity effects to impacts on customer experience. While investing in comprehensive data integration may seem costly, what carriers truly cannot afford is bad data. 

To learn more about how you can achieve business success by leveraging the right data, get in touch with us. Read our e-book — Under the Hood: Unlocking the Hidden Value in Insurance Data, for all the ways you can reach your digital transformation goals with stronger data.

Murray Izenwasser, Senior Vice President, Digital Strategy

At OZ, Murray plays a pivotal role in understanding our clients’ businesses and then determining the best strategies and customer experiences to drive their business forward using real-world digital, marketing, and technology tools. Prior to OZ, Murray held senior positions at some of the world’s largest digital agencies, including Razorfish and Sapient, and co-founded and ran a successful digital engagement and technology agency for 7 years.

 

 

Sponsored by ITL Partner: OZ Digital Consulting

View original article on invoicecloud.com.

It’s become increasingly difficult to ignore: the insurance industry is facing a major talent shortage that is only just beginning. A confluence of factors has ushered us into this gap in the insurance workforce, including the Great Resignation — a trend in which nearly 57 million Americans quit their jobs in search of more fulfilling work and a better work-life balance – and minimal interest reported among younger generations in more traditional industries, like insurance (a recent PwC report found that 21% of millennials would rather not work in the financial services sector).

Not to mention what’s on the horizon: a wave of mass retirement is threatening to crash on the industry within the next few years, in which the U.S. Bureau of Labor Statistics projects nearly 400,000 employees will retire from the insurance and insurtech spaces.

Altogether, it seems likely that today’s insurance talent shortage isn’t going away any time soon. If anything, carriers may be feeling increased pressure from reduced staffing in the coming years, in a few critical ways.

Let’s explore how this workforce gap has and will continue to impact the day-to-day operations of insurance organizations and, critically, what can be done to bridge the gap.

1. Increased workloads disrupting internal processes

The most obvious impact of a reduced staff is increased workloads for the remaining team. With fewer folks to share the load, the slack is distributed among an insurer’s pared-down staff, and existing internal processes are likely to be disrupted.

Increased workloads are especially tedious and time-consuming if manual work is involved. Sending out bills and processing premium payments, for instance, can take hours out of a work week and cannot be ignored without risking revenue streams. However, spending excessive time on billing and payment-related tasks – despite the organizational importance of these processes – can distract staff from other critical aspects of their roles.

2. Retention risks from poor policyholder experience

One particularly detrimental example is the impact an overwhelmed staff can have on policyholder retention. Fewer hands on deck could mean fewer customer service representatives to field policyholder questions, concerns, and complaints, resulting in a poor customer experience. Plus, increased workloads (especially those that involve manual work) could mean an increase in errors, which tends to breed policyholder dissatisfaction. This is especially true when finances are involved.

Manually processing payments, for instance, can cause delays resulting in late payments, duplicate bills, and costly cancellations for non-payment. These inefficiencies create a rise in policyholder frustration and confusion, which could lead to their seeking new insurers. Finances are critical to policyholders, and any issues with payment processing can lead to a loss of trust in the insurer. Policyholders are not likely to remain with an insurer that mishandles their finances, whether it’s not processing premiums on time or delaying claims payments.

3. Difficulties hiring and retaining talent

We know finding talent has become a major challenge in the insurance space, but the workforce gap also takes a significant mental and physical toll on an organization’s remaining staff. Team members are stretching themselves thin to cover the cracks, fielding frustrated customer calls, and burning themselves out as a result.

Burnout is a state of physical, emotional, and mental exhaustion caused by prolonged stress and frustration in the workplace, and is often the result of excessive job demands, such as long work hours, intense pressure to meet deadlines, and inadequate support from colleagues or supervisors. The last thing insurance organizations need is to lose additional talent to burnout, but without a strategy to alleviate mounting, manual workloads, there’s not much insurers can do to escape this vicious cycle.

Addressing the Insurance Talent Shortage

During a time when policyholder expectations are at an all-time high and staffing is at an all-time low, carriers must do more with less while continuing to provide excellent service – otherwise, retention is at risk.

And it’s not just short-staffed insurers that are struggling: even carriers with full teams can become overwhelmed by the number of daily manual tasks. More manual work often means more room for error. It also means less time to dedicate to high-priority projects and cultivating relationships with policyholders.

To do all this, insurance companies must optimize their valuable human resources by automating manual tasks and processes, especially those processes where policyholder satisfaction is most at risk. Learn more by downloading InvoiceCloud’s ebook, The Digital Bridge: Closing the Insurance Talent Gap by Digitizing Billing and Payments.

Sponsored by ITL Partner: InvoiceCloud