One year ago, ChatGPT was officially introduced and sent the business world, pundits and laypersons alike into a frenzy.

So many aspects of work, life and business are projected to be at risk or, at a minimum, redefined. Conversations are nonstop about the incredible potential vs. man’s possible existential demise, as AI is now considered much closer to parity with human thinking than previously thought possible. What happens once AI catches up to and then surpasses human thinking is hard to fully imagine.

At a high level, AI encompasses; machine learning (ML), deep learning, generative AI, large language models (LLM) and the current favorite: generative pre-trained transformer (GPT). For purposes of this article, we will not attempt to explain these further.

AI in Insurance

Insurance is no exception, as technology providers are sprouting up, or, rather more commonly, solution providers are highlighting their existing AI capabilities. The AI vendor community to the P&C industry is rapidly expanding and may generally be grouped by use case; hyper-automation, insights, image and language.  

Some have been at the AI game for longer and may even fortuitously have “AI” in their brand identity. Others have been quick to point out that their work has been surrounded by AI for years, touting both expertise and subject knowledge. Even insurers themselves are experimenting, setting up AI safe zones, establishing so-called red and blue ocean strategies or simply creating AI best practices as a foundational starting point. It is doubtful that any insurance carrier boards of directors or C-suites have not set some AI work in motion. Insurance regulators are attempting to get ahead of things with proposed AI ethical standards but in reality, are in catch-up mode.

Famously, “technology in search of a problem” rarely is a successful approach, and, so far, generative AI for insurance feels more like a technology seeking problems to solve.

There are few AI experts with extensive knowledge and lots of business people with just basic AI knowledge, so components like machine learning, computer vision, large language models, and generative AI can easily get mashed up together. Fortunately, the experts are openly explaining the differences and providing the details on how this all works, and the webinars and conference events are helping the cause. In the meantime, such AI expertise shortages only complicate insurers’ vision for clear use cases, business purposes and ultimately ROI.

While insurance automation is not new, the prospects of applying AI to partially or completely replace humans quickly gained attention. More recently, these views have been tempered with the idea that AI will be better applied as a “co-pilot” for most insurance functions within underwriting, pricing, claims, sales and possibly others. The industry is in the crawl stage of crawl, walk run.

See also: 5 Ways Generative AI Will Transform Claims

AI for Claims

Conventional wisdom is that AI lacks human emotion and empathy. Claims might demand the most human emotion in insurance, so the AI use-cases talked about today tend to call for AI tools aiding claim adjusters rather than doing the whole job. However, all the discussion is still early and focused on the short term. ROI still dominates decision making and, given the highly competitive P&C insurance market, fraught with financial pressures, the balance between deployment of tools and automation of jobs will be put to new and more rigorous tests.  

Underwriting and claims emerge as the top use areas, which makes sense. Large amounts of data are used to assess and price risk, and, similarly, claims is all about gathering information and making decisions. Both functions are people-based and are already pursuing automation agendas like low-touch and straight-through-processing.

Within the claim space, much of the generative AI talk is heavily weighted to reviewing and summarizing records, such as medical billing or a demand package. The overarching wisdom is that claim handling is record- and paper-intensive. A common misperception is that all claims are alike. Claims insiders say, "A claim is a claim,” but that is misleading when applied broadly. High-frequency/low-severity claims differ greatly from the most complex claims that happen infrequently. Some 70% of auto claims, for example, have minor to modest damage and no or only minor injuries, with few documents to summarize.

Where Can/Should AI Be Applied Today?

The good news is that AI in claims is already successfully being embraced. Computer vision for total loss prediction and photo estimating is far-reaching. AI fraud models are helping carriers scan for anomalies for investigation. However, even within the best AI claims examples, there is a long way to go to reaching meaningful ROI. Trepidation around fairness, legal and regulatory pressures and data security when training models are valid concerns. Even so, there is room for more creative use-case thinking, and the following is a small sample of possibilities. 

This is a sort of AI use-case wish list, free from prioritization and not exhaustive but widely appealing because these are among the most repetitive and demanding claim functions:

• Claim intake for assignment accuracy, reducing or eliminating reassignments
• Claim triage
• Fraud detection, especially organized fraud
• Categorization and severity
• Coverage guidance
• Comparative negligence determination - which party(s) are at fault and to what degree?
• Correspondence generation
• Injury and damage evaluation 
• Settlement recommendations
• Notes analysis and summarization
• Case reserve and formula reserve setting or reserve portfolio management
• Regulatory compliance in real time
• Regulatory reporting: Summarize, validate, review and report
• Pending claim management, prediction and prioritization
• Business interruption claim analysis
• Quality assurance review/auditing
• File summarization for management review, file and settlement authority
• Productivity management measurement

See also: Insurers Boosting Their Use of AI

There certainly are risks to balance when it comes to the degree of co-piloting or replacing people. While there is excitement for automated and AI powered claim customer services, there is a natural dependence on chatbot acceptance to overcome, not to mention room for the connected claim ecosystem to become truly connected and coordinated to realize gains.

Moving ahead, carriers will need to apply additional filters when advancing use cases. Generally speaking, insurtech, including AI, falls into efficiency gain/expense reduction emphasis by automating process and reducing full-time employees (FTE). The elephant in the room today is insurer profitability from soaring indemnity costs in which there can be far greater influence from loss ratio improvement compared with loss adjustment expenses (LAE). Yet the P&C industry has overemphasized LAE reduction because of the simplicity in measuring operating costs.

Insurers will continue to buy vs. build AI through integration partners as a way forward. Solution providers will need to move closer to unravel high-value use cases. The open challenge to insurers and AI solution providers is coming together to develop meaningful business cases, including loss avoidance, mitigation and payout accuracy beyond efficiency gain.

According to a recent Slack survey, a staggering 43% of desk workers report feeling burned out. This problem is especially pronounced in the insurance industry, where the burnout rate stands at 39%, surpassing the national average of 35% and making it one of the top five sectors reporting the highest levels of burnout in 2022. 

While the effects of burnout are felt by every member of an insurance organization, insurance agents are particularly vulnerable. The role of an agent involves selling policies and catering to the needs of existing policyholders, requiring them to interact with many individuals and organizations on a daily basis. If an agent becomes overwhelmed, their ability to fulfill these critical responsibilities may be compromised, leading to negative consequences for both policyholders and insurance carriers, including reduced customer retention rates, decreased revenue streams, and lower satisfaction scores, among other adverse outcomes. 

Today’s insurance talent gap may be pouring gas on the already-blazing burnout fire, but there are ways organizations can bridge the workforce gap and better enable their agents to enjoy their work and be more productive. 

Read More Here

 

Sponsored by ITL Partner: InvoiceCloud

While the decade is all about tech transforming insurance, the year 2023 has definitely been all about Generative AI. As agencies connect individuals and businesses to the right insurance products - they will need all the help they can to provide superior experience to customers, forge stronger relationships with clients and increase sales. And the right toolkit is crucial to making this happen.

Here are four areas agencies should consider ‘technovating’ to boost their business in the coming years.

1. Empowering Your Agent: Is your agent toolkit really helping them sell? The topmost priority for any seller tool is a mobile-first design. An agent is out building relationships, so storing all meeting information and returning to feed this into a CRM is a killjoy. It stymies productivity and lowers the enthusiasm of agents who enjoy the process of selling more than anything else. Think of tools that provide your agents a seamless mobile experience, with a single interface for all their needs - tracking client locations ahead of a meeting, searching for the right collateral to share at the next meeting, catching up with the manager for a quick chat before a meeting, capturing meeting notes, setting up reminders for follow-up. All done easily, quickly, and effortlessly on the mobile, via a single screen. 

Your agent will be ecstatic! 

2. Nailing the Renewals Business: Now we all know that revenue from renewals are much higher than that from new business. So ensure that the tech you are using actually helps you strengthen your renewal process by,
   1. Auto-calendaring and tracking renewal dates of all products across your database
   2. Recommending the right time to follow-up on renewals based on previous history
   3. Nudging and reminding agents to engage with customers optimally

Simple fixes like this can ensure ~3x increase in revenues.

3. Focusing on Learning and Development: With the global insurance industry trying to navigate competition, regulatory challenges and the need to innovate, it is important to weave in a culture of continuous learning within the organization to help agents and relationship managers stay ahead of their game. 

Is there a way to integrate learning into the same tool that your agents are using? Leveraging AI and ML can actually help build a strong database of winning agent behaviors and best practices which is a dynamic way of coaching agents while they are on the go. Nuggets of insightful advice and mentoring from tenured agents, managers, star performers can harbor a thriving learning culture across the agency. 

4. Optimizing your Lead Management: A good way to rein in business is to ensure airtight lead management. Typically 5% of your leads convert. What are you doing about the remaining 95%? This is typically lost out due to various reasons. But here are the reasons you can actually fix:
   1. Leads that are not activated at the right time
   2. Leads that slip due to poor nurturing
   3. Leads that go sideways due to wrong allocation

AI and ML based technology are built to address these challenges. From pairing the right lead to the right agent based on several parameters, to nudging the agent to call them within the recommended time period, to following a strong lead nurture process backed by data insights, organizations have reported a 25% increase in conversions.

As we step into 2024 and chart our business goals, investing in the right tech can help in two ways: streamline and organize your internal processes and journeys, engage your agents with intuitive, easy-to-use technology,  and provide a roadmap to better revenues. 

 

Sponsored by ITL Partner: Vymo

The insurance industry is no stranger to data. Insurers need all the customer data they can get — structured data on a policy form, past behavior of policy renewals or terminations, and publicly available government data such as criminal records, bankruptcies, and foreclosures.

While insurers have access to mountains of data — everything from disaster models to historic perils, real-time weather feeds, and current policy information — they don’t have an effective way to integrate all these disparate data sources into one comprehensive view. Until we get there, we won’t have the deep insights we need to prevent risk or develop new products.

The faster we move as an industry to digitize that data, automate underwriting, and integrate third-party data, the more quickly we can create new underwriting and portfolio risk management techniques.

However, the silver lining is that some insurers are already integrating big data and analytics into their operations, from creating early-warning systems to gathering insights that prevent incidents to simplifying and accelerating claims processing.

Here’s how you can reduce friction throughout the customer journey — from requests for coverage to claims — while mitigating risk and cutting costs.

Risk-Based Pricing Innovation and Transformation

Even without face-to-face customer interactions, you can build accurate customer profiles by aggregating data from various sources — and scoring this based on demographics, social media, and public-facing data — to create more personalized products and risk-based pricing.

We’re seeing this play out in the auto insurance industry, which traditionally is highly competitive and price sensitive. Customers are known to switch insurers on price, which impacts growth and profitability.

However, with the help of customer data — structured and unstructured (reviews and ratings, blogs, social media, and auto forums) — you can better understand the customer, make correlations, categorize the risk status of different models, and set premiums accordingly.

Armed with these insights, you can:

• Accurately assess each unit’s risk within an insured pool by micro-segmenting risk pools.
• Price dynamically based on changing risk profiles — all enabled by granular behavioral data and advanced modeling.
• Offer competitive and differential pricing while improving premiums and demanding higher premiums for riskier products.

For example, in Spain, Zurich Insurance launched Klinc, the innovative, on-demand insurance solution that lets users of web and mobile applications buy cover whenever (and wherever) they need it.

In the future, we’ll see more cross-industry platforms and seamless insurance portability that integrate risks and exposures and covers for an insured under a universal insurance policy.

Point-Based Risk Scoring

The greatest challenge for commercial insurers is collecting data — policy in-force and industry-wide peril data — from disparate sources. Risk analysts constantly need context to make critical business decisions.

Enter location intelligence.

Location intelligence is the lens through which analysts, underwriters, and actuaries can view complex data, uncover opportunities, and identify hidden risks. Because of the spatial connection between policies and perils, location intelligence helps analysts extract and share actionable insights throughout their organizations.

By leveraging location, carriers can integrate data from policy databases, spreadsheets, and third-party vendors to get a better view of their portfolios.

This geographic view of the data provides:

• An intuitive platform for identifying clusters of policies in effect
• Concentrations of insured value
• Metrics on previous claims

With deeper contextual insights into potential perils, analysts can determine the exposure of an individual policy to perils on a hyperlocal level.

Location intelligence has transformed actuarial science paving the way for point-based risk scoring, the underwriting method that examines a policy’s relative exposure to the perils that may occur.

Point-based risk scoring is a drastic shift from the traditional method, where rates are determined based on whether a policy existed within a risk zone.

There have been instances where flooding and fires have occurred outside traditional risk zones, such as Hurricane Harvey and the Fort McMurray wildfire. But it’s still a more effective risk-scoring method that accounts for perils that could occur but have yet to happen.

Take, for example, a car owner who lives on a corner lot flanked by a busy road on one side and a quiet street on the other. The risk associated with this location would come down to which direction the driveway faces and insurers would then adjust for it.

Trusted data with location context allows insurers to price accordingly, mitigate risk exposure, and improve reinsurance rates.

Intelligent Risk Assessment

Commercial risk assessment is data intensive. A fixed data set is traditionally used to perform a risk assessment, which can be limiting. But when you integrate real-time data from external sources — more granular and up-to-date than you would typically find — you get the complete picture including:

• The likelihood of everyday perils at the property location
• The existence of high-risk items nearby
• The density of existing policies near the property

It helps you better assess the property submission before the policy is accepted.

Individual risk assessment results in special pricing of the premium cover required to cover the risks inherent to the particular property.

For insurers, it means identifying areas of reduced exposure, better risk management, and lower costs. For policyholders, it means better prices, as insurers will have a way to identify regions where they can offer more attractive terms and reward good customers with greater pricing accuracy.

By integrating critical risk-assessment data with historical results, you can quickly identify anomalies in likelihood and impact ratings and assess the geography and product or business lines driving such changes.

To learn more about how you can achieve success by leveraging data analytics and AI, 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

FROM THE EDITOR  It's a wonderful thing when incentives line up, and they are in the world of workers' comp. Workers, employers and insurers all have reasons to make the workplace safer, preventing injuries to employees while generating savings for employers and their insurers. That's why, at a time when rates are rising, often rapidly, in so many insurance lines, premiums for workers' comp have been trending downward for years. There is room for much more progress, too, as various technologies kick in.  For instance, cameras can spot dangers, such as water spills, in a factory and alert someone to mop it up before anyone trips and falls and gets injured. Cameras can also spot near-misses, tipping off a manager that a process is dangerous so they can warn employees and change how things are done, before someone gets, say, a hand caught in a machine. Workers can wear devices that monitor their movements and make sure they aren't creating stresses that could injure them. There are even exoskeletons that can assist workers, for instance in lifting heavy boxes.  In this month's interview, Paul Zamora, senior vice president for workers' compensation at ICW Group, runs through a whole variety of opportunities that lie ahead for carriers, employers and workers. I hope you'll give it a read. I think workers' comp can lead the way as insurance moves beyond its traditional repair-and-replace approach to a Predict & Prevent business model that draws on the industry's vast data and extraordinary expertise to prevent problems from happening in the first place. Cheers, Paul  In this month's FOCUS on Workers' Comp, Paul Zamora, senior vice president at ICW Group, delves into the evolving landscape of workers' comp insurance. Zamora discusses safety innovation and technology's role in claims reduction. He also touches on rate trends and customer strategies, providing insights into the evolving insurance scene. Read the Full Interview "The number one thing is making sure we're helping our customers have positive long-term results. So how do we make sure of that? How do we make sure they're safer and they’re paying the lowest amount of premium possible because they have safe operations. That they're not losing employees because they're injured?" — Paul Zamora Read the Full Interview READ MORE 'Scalable Compassion' in Workers’ Comp As much as claims representatives want to help individuals, there has been no feasible way to provide compassion at scale. Read More Rethinking Provider Networks in Work Comp Companies with custom physician provider networks experience 50% shorter treatment duration, 60% lower average medical expense and 35% shorter claim duration. Read More Absence Management: Work Comp's Future? As workers' comp claims dwindle, providers should offer "absence management" -- handling loss of work time for any reason, not just injury. Read More Why to Self-Fund Workers' Comp While companies assume more risk, they get significantly more control over coverage, claims management and associated costs. Read More Identifying Fraud in Workers’ Comp One of the best tools for fraud prevention is to let employees know that false claims will not be tolerated and that penalties are stiff. Read More Real or Fake? Finding Workers’ Comp Fraud If an employer suspects an employee has attempted to create a fraudulent claim, there are several steps to follow up on right away. Read More FEATURED THOUGHT LEADERS Thomas Ash Rhonda Moran Peter Rousmaniere Nick Ververis Stacey Gunn

Paul Zamora joined ICW Group in 2006 to assume the business leadership role of ICW Group’s workers’ compensation product line. Under his leadership, the company’s work comp business has far exceeded industry and competitive benchmarks for growth, profitability and efficiency. Prior to joining ICW Group, Paul served as an assistant vice president at Zenith Insurance, one of the top workers’ compensation carriers in the U.S., where he played a key underwriting role.

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Paul Carroll

I find it really interesting that, while insurers in so many lines are having to raise rates like crazy, workers’ comp rates keep going down. That seems to mean that carriers, employees and employers are collaborating to reduce workplace injuries. At ITL, what we call “Predict & Prevent” has become a major emphasis for where we think the industry should go, and workers’ comp seems to be a great example of the potential to prevent problems rather than simply helping people recover once something goes wrong.

Maybe you could start us off by talking about how workers’ comp has made such great progress and how it can continue to reduce injuries.

Paul Zamora

I have a couple of thoughts as to why the industry has done so well.

A few states have been working to reform their workers’ compensation systems. California is an example, having passed a reform bill back in 2012. Prior to 2012, that state was having horrific results. Carriers were dramatically increasing rates, and a bunch of large businesses began to realize that they don't have to have their warehouses in California. They could move them across the border to Arizona or Nevada and save a ton of money. So there was a huge push for reform, and there were enough savings in the system to let carriers reduce rates but still obtain profitability without having a real negative effect on benefits for injured workers. That was a huge win.

Other bills throughout the various states where ICW Group does business haven't quite achieved that result but still have made progress.

The other thing I think we have going for us is the huge financial incentive for policyholders to improve safety and reduce premiums. There's a lot of synergy with us, our agents and our policyholders to try to improve safety.

At ICW Group, we have what we call the Power of Three. We're monitoring how we're helping customers have lower frequency of claims, controlling those costs when they do have claims, so we have the best outcome possible, ultimately having a positive impact on their Experience Modification factor [which compares a company’s actual losses with those that are expected for a company in their industry and plays a major role in determining workers’ comp premiums].

And we're pleased. We’re lowering ex mods for our customers and seeing fewer claims, so companies can pay less premium.

We are working on using technology to track the near misses. Most of the time, when we get a really serious claim, such as when somebody puts a hand in a machine and maybe loses their hand or arm, well, there were a lot of situations where that almost happened but, luckily, the person was able to move their hand or arm out of the way. Tracking those near misses will help us make safety improvements so we protect the worker and greatly reduce those severe claims.

One thing we're doing right now is a pilot with a wearable. It tracks unsafe behaviors that could lead to a repetitive motion claim, or maybe someone is bending the wrong way.

We think there's even better safety technology coming. We are experimenting with smart cameras that can track both unsafe behavior and unsafe conditions. For example, it could see water on the floor and quickly buzz somebody at the employer's facility to go clean it up, and not wait for somebody to actually slip on it and get injured.

The challenge right now is that some of the technology is expensive. The smart cameras are quite expensive. So, it isn’t easy to deploy them to a lot of policyholders. But we believe, no different than a laptop or a cell phone, eventually that technology will become less expensive.

What we're trying to do right now is run pilots to see if the technology works. Does it really drive different behaviors? Does it really help us find and fix the problem before an injury can occur?

We're bullish that the safety technology will be much more affordable, so we can deploy it to more policyholders, and we are also bullish that it will change behavior and mitigate claims.

Paul Carroll

That all sounds super smart. What are some other big trends you see in workers’ comp leading into 2024?

Paul Zamora

I believe we're going to continue to see rates decrease. January is the time when most states update their pure premium rates, and just about every state other than Hawaii is recommending decreases. Most are double-digit decreases.

Some of the bigger states, such as California, may have hit bottom in terms of rates. We're starting to see accident year combined ratios climb. Carriers have a massive reserve redundancy from prior years, and they'll use those reserve redundancies to make their calendar year numbers look good. But you eventually will run out of that reserve redundancy, and you will have to start charging the proper rate. We're already seeing some of that in California. We're seeing some of that in other states, as well, such as in New Jersey. But we're also seeing a lot of competition in some of our bigger states, such as Illinois and Florida, where rates have not yet hit rock bottom.

The final thing I'd say is you're going to see the smart carriers go down the path of digitization. Carriers need to understand that, today, we're competing with traditional insurance carriers but that in the future our competition might look different. Amazon could decide they want to get further into the insurance space for one reason or another. And your buyers will be expecting the Amazon-type experience, where they go online and it's really easy to do what they want to do. Carriers need to pay attention.

Paul Carroll

Amazon is already dabbling. They've started to offer some insurance to small businesses, and it will be interesting to see how that evolves.

I think it's an important point you're getting into about long-term customer relationships. Beyond what you've already said, what is ICW Group doing, and what do you think others need to do, to foster those really long-term, profitable, mutually beneficial relationships?

Paul Zamora

The number one thing is making sure we're helping our customers have positive long-term results. So how do we make sure of that? How do we make sure they're safer and they’re paying the lowest amount of premium possible because they have safe operations. That they're not losing employees because they're injured? If we're not able to deliver on our Power of Three value proposition, customers are going to find another home.

Providing other value-added services is important, as well. We have a product called HR OnDemand, which was a huge benefit during COVID. There were a lot of HR questions around being in compliance with all of the new COVID regulations, and HR OnDemand allowed customers to talk to an HR expert and get free advice. We also have something called Safety OnDemand. We provide risk management services in-house, meaning we can go out and sit down with you and work with you. There are folks who want that advice at 2:00 am, so a self-help capability through online tools is critical.

Nurse triage is popular now, too. Maybe I don't know if I need to send an employee to the doctor or if they only need first aid. With nurse triage, I can call and speak with a registered nurse who can provide me guidance.

The final one is telemedicine, where you can see a doctor in your own workplace and not have to get in a car and drive to the clinic and maybe sit in the waiting room before you're seen.

Beyond the value-added services, you have to focus on the customer experience. And, as I said, we’re not going to just compete with the traditional insurance carriers in the future. We will probably be competing with companies like Amazon or Google.

Paul Carroll

Beyond what you just talked about, are there other ways for carriers to support their independent agent networks?

Paul Zamora

For us, it's extremely important to make sure we listen to our agents and figure out what they need. We are not a direct writer. We have zero direct business, and we don't have any plans to be a direct writer. So 100% of our business is from the independent agent force. Without them, we don't exist. So we try to make our interactions with them as efficient as possible for both of us.

This means focusing on how they submit accounts to us, how we go through the whole quoting process, the binding process, the mid-term servicing of the account and more. How do we make sure they don't have to add staff to try to be more effective in working with us? We've implemented some programs based on feedback from them, such as LeadGen OnDemand, which is a tool that allows them to market themselves to potential insureds in a very efficient manner. We pay for the platform, the mailers and the marketing collateral to help them grow their business. And that has paid huge dividends for us.

We introduced an Agent Portal so they can be more efficient in managing their business and keeping track of what's going on with their customers 24/7. Finally, we make sure we provide a quality product that they're proud to sell. They do not want to get that call at 11:00 pm asking, why'd you put me with that insurance company?

We take a franchise approach, which I think is important for carriers to do. I mean, you can appoint every agent that's got a license to do business, but then your agent community has nothing to differentiate themselves. If you take a franchise approach, you're giving your agents something valuable to have in their toolkit.

Paul Carroll

Are you expecting any particular changes in regulation?

Paul Zamora

We kind of wish the states would all be more similar and less nuanced on certain things. When they all have their little nuances, it creates a lot of extra work for everybody. Most of what we write, and I'm sure this is true for most carriers, is for risk that has multi-state exposure. It's a challenge, from a technology standpoint, to make sure your systems recognize all the nuances in, for example, California, Nevada and Arizona. And we need to make sure customers understand them, as well. If the customer is predominantly in one state, they think the insurance rules of that state apply to their business in all states, and that’s not true.

But we understand that change isn’t coming any time soon, if ever. So we just have to stay on top of the issues.

Paul Carroll

I wonder about some macro trends. It seems like the return-to-the-office movement has stabilized, but there could still be some adjustment, and some offices will be redesigned or repurposed, which could change the dynamics for workers’ comp. I also wonder what will happen with all this “onshoring” of manufacturing that seems to be in the works. Are there any other trends we should be tracking?

Paul Zamora

Onshoring would mean more jobs and more workers here to insure. At the same time, companies are automating a lot more. I saw a company the other day that has self-driving trucks on a dedicated route. No human being needs to be in the cab. If that level of automation spreads, there's no employee, there's no payroll and there's no workers’ comp premium associated with that job. We have started to see restaurants where wait staff kind of goes away. There's an iPad on your table for you to place your order, and then there's just a person who brings you out the food.

We probably won't see fully automated factories in my lifetime, but we’re paying attention to the trends.

Paul Carroll

Thanks, Paul. This has been a great conversation.

In a world driven by technological advancements and a changing workforce, the insurance industry faces the critical challenge of attracting and retaining the next generation of underwriters. The answer is a strategy that blends technology, talent development and alignment with the values of the younger generation.

Embracing Technology

The younger generation expects technology to be integrated into the workforce. Technology is not a nice-to-have for insurance carriers; it's table stakes. From implementing advanced underwriting software to incorporating AI-driven risk assessment tools, companies can create a competitive advantage by showcasing a commitment to a tech-centric future, which gives them a leg up on recruiting and retaining talent.

See also: How to Address the Talent Shortage in Insurance

Automation for Efficiency

Automating routine tasks lets underwriters focus on more meaningful work, flexing their underwriting muscles and contributing more effectively. This approach not only increases job satisfaction but also plays a crucial role in preventing turnover.

Automation, far from replacing crucial skills, serves as a complement to the human underwriter. Nobody wants to get into an industry if they feel like tech can do their job tomorrow, so it's important to communicate a commitment to the long-term viability of human underwriters, while simultaneously leveraging technology for increased efficiency.

Upskilling and Continuous Learning

As Gen Z prioritizes jobs that facilitate skill expansion and continuous learning through technology, it's important to provide avenues for upskilling. Investing in training on, for instance, how to use AI to reduce manual steps not only aligns with the preferences of the younger workforce but also benefits the company by ensuring a highly engaged and adaptable talent pool.

See also: What to Understand About Gen Z

The Untold Stories of Stability

Insurers must bridge the narrative gap to attract young recruits. Insurance is not just a job; it's a resilient sector that withstands economic fluctuations, continually evolves and offers a stable career path even in uncertain times.

In today's digitally driven landscape, insurance companies must implement efficient processes to enhance the claims process, both internally with insurance professionals and externally with policyholders. Technology serves as the catalyst for transforming traditional practices, elevating efficiency and enhancing overall policyholder experiences. The integration of technology not only addresses longstanding inefficiencies but also opens doors to opportunities, positioning the industry at the forefront of innovation.  

See also: Enhancing Claims Via Digital Payouts

Navigating the Challenges of Technology Adoption in Insurance 

While there are many benefits to technology adoption, it is important to consider the challenges faced by professionals and policyholders. Key challenges include: 

1. Reliance on Archaic Systems: Traditional claims processes often hinge on outdated systems, impeding the seamless integration of modern technologies and slowing the industry's overall progress toward digital transformation. 
2. Resistance to Technological Adoption: Insurance professionals resistant to embracing new technologies contribute to an industry that remains stagnant. 
3. Devaluation of Policyholder Relationships: Antiquated processes in the claims system can lead to the devaluation of policyholder relationships. Delays in claims processing due to outdated methods erode the trust that policyholders place in their insurance providers. 
4. Indemnity Leakage and Escalating Expenses: Delays in traditional claims processes contribute to indemnity leakage, where insurers may incur higher costs due to prolonged processing times. 
5. Impact on Policyholder Acquisition and Renewals: Poor claims experiences have a direct correlation to policyholder acquisition and renewals. Dissatisfied policyholders are more likely to explore alternative insurance options.
6. Failure to Adapt to Policyholder Communication Preferences: Traditional systems often fail to adapt to the preferred communication methods of policyholders. When a policyholder, accustomed to electronic communication, needs to file a claim, the lack of adaptation to their communication preference can lead to friction and dissatisfaction. 

Efficiency drives the success and sustainability of insurance operations, making it crucial to overcome the challenges listed above.  

See also: 5 Ways Generative AI Will Transform Claims

Embracing Digital Transformation and Insurtech Solutions in the Claims Process 

Digital transformation in the claims process and throughout the insurance industry involves a strategic and comprehensive approach to technology implementation.

With an average claims frequency of 8%, policyholders don't understand the claims process. Insurance professionals must ensure that the claims process is efficiently communicated and that transparency is present in every stage of the process, from first notice of loss through to claims completion. Claims professionals also must be educated on new technologies that are implemented throughout the process, especially if it affects their daily operations. 

There are many ways that companies in the insurance industry can take steps toward digital transformation, including: 

• Understanding Your Workflow: Analyze and understand each part of your existing workflow, extending from the sales cycle through to claims completion.
• Identifying Roadblocks: Recognize speed bumps and roadblocks in internal processes that impede efficiency, providing a road map for process improvements and digitization.
• Taking a Holistic Approach: Seek comprehensive process improvements rather than quick fixes. 
• Allocating Resources: Recognize the importance of allocating the necessary resources, both financially and in manpower, to drive the adoption of new technologies.
• Remaining Dedicated: Acknowledge that any transition relies on dedicating time, energy and resources. 

Insurtech solutions offer accelerated processing times, improved accuracy, enhanced policyholder experiences and adaptability to industry trends.

This strategic shift not only optimizes internal workflows but also creates enriching experiences for today's policyholders. Automation facilitates complex coverage decisions while efficiently communicating with policyholders. Real-time updates accessible through a customer portal empower policyholders, offering transparency to keep them informed throughout the process. 

Companies in the insurance industry can revolutionize their operations and remain competitive in an ever-evolving landscape, delivering unparalleled efficiency and value to internal processes and the overall policyholder experience. 

KEY TAKEAWAYS:

--Rather than implement new projects in isolation, insurers should envision and build an overarching strategic plan for digital transformation across the enterprise.

--Digital transformation requires that legacy systems be retired and policies consolidated onto modern solutions. 

--Companies must take a holistic view of the entire insurance value chain, prioritizing data as a central component of transformation efforts and investing in its management, quality and effective use. 

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Most life insurers are mid-journey when it comes to total organizational digital transformation. While initiatives have been underway for the better part of the past decade, completed project segments are rife with misalignment, unmet expectations and dissatisfaction with the outcome. Insurers are finding that realizing the maximum value from these initiatives is harder than it seems.

In many cases, these projects were touted as low-hanging fruit, designed to be implemented quickly and to deliver value in the short term. Unfortunately, this approach often falls short because the initiatives were not conceived and planned with an enterprise view in mind.

To realize the planned-for value of all digital transformation projects, insurers need to adopt three bedrock principles.

See also: Revolutionizing Life Insurance Uptake in Younger Markets

Principle #1: Begin taking a holistic approach to digital transformation

Projects that have been executed in silos and are not inclusive of the entire organization tend to run into more challenges in quality assurance cycles, resulting in delays, overruns and fewer results. Thus, they don’t produce the expected value. 

Rather than implement new projects in isolation, insurers should envision and build an overarching strategic plan for digital transformation across the enterprise. The plan would include solutions for major pain points from all stakeholders. It would consider core systems, digital sales, service solutions and adviser and distributor solutions. 

It’s critical for executives to engage all stakeholders and ensure everybody communicates their unique needs and understands how they contribute to the plan’s success. One sometimes unintended, but positive, outcome of this exercise is a strong sense of the organizational benefit and cross-over benefits that each phase of the transformation brings to the company. 

The key to organizational buy-in? Starting with a well-conceived and well-communicated plan. Within that overall plan, the enterprise can prioritize coming projects and allocate resources accordingly with energized teams ready to lay the foundation for success.

Principle #2: Reduce reliance on and complexity of legacy systems

Over time, most insurers build increasingly complex policy administration environments. These legacy ecosystems — the result of new product initiatives or M&A activity — create a disconnected landscape of data islands unable to communicate with each other.

With these isolated pockets of data, it’s difficult to provide customers with the same type of smooth digital experiences they enjoy in most other industries. Yet many insurers kick the modernization can down the road year after year, or paper over the cracks with patches and upgrades. 

Every year modernization is delayed, the gap grows bigger between the fully digital and mainly manual. It also becomes harder to get the most from any new digital initiative when it’s delivered into an IT environment where connections are difficult, interactions don’t happen in real time and most data is inaccessible.

Digital transformation requires that legacy systems be retired and policies consolidated onto modern solutions. 

Principle #3: Focus on data as the foundation for digital transformation by addressing data quality and efficacy challenges

Rather than focusing on isolated digital initiatives, insurers must take a holistic view of the entire insurance value chain. As part of this panoramic view, it’s important to prioritize data as a central component of your transformation efforts and invest in its management, quality and effective use. 

Historically, the insurance industry has treated data as a byproduct rather than a strategic asset. For the sake of efficiency in applications, insurance made many decisions that were “data minimalistic.” If you enter only what you need, you can move the application or process along quicker. But this mindset creates challenges when attempting to make better risk decisions. 

For example, many organizations are having to rework their data strategies when implementing artificial intelligence (AI) and machine learning (ML) initiatives because the outputs from those applications are only as good as the data being fed into them. 

Insurance companies must find ways to bridge the gap between their siloed legacy systems and the broader digital ecosystem, ensuring seamless integration and alignment of data assets.

When an organization implements foundational data principles like adopting robust data management practices, retiring old core systems, connecting systems with application programming interfaces (APIs) and using new, event-driven interaction techniques, they are poised to leverage new digital solutions. These solutions are much better-positioned to provide maximum value and are implemented leveraging new tech and old data that is effective and operationally meaningful. 

Creating this level of comprehensive data framework benefits all digital transformation initiatives. It increases the value generated by each one by producing actionable insights, optimizing processes, enhancing customer experiences and accelerating the development of innovative products and services. 

See also: Genomics Revolution in Life Insurance

Wrap up

When digital transformation projects are approached as isolated events, they are far less effective than when they are conceived and executed as part of an overarching transformation plan. Maximizing the value of each initiative requires a strategic approach that recognizes the importance of building a foundation for all future development and growth by modernizing core systems and focusing on data. 

Successful organizations understand that digital transformation isn’t just about implementing technology, but gaining organizational buy-in, emphasizing the importance of reducing complexity and reaping the benefits of quality data to better align with transformative efforts. These companies are on a holistic digital journey that empowers them to make informed decisions, drive innovation and deliver superior customer experiences.

Inadequate data continues to plague the insurance industry, as exemplified by Hurricane Ian victims in Florida still battling underpayments more than a year later. With claimants left with no option but to sue, the Insurance Information Institute estimated that insurance companies are facing $10 billion to $20 billion in litigation costs.

This situation underscores the critical need for fresh underwriting data in the digital age. Reliance on legacy valuations and records has left insurers struggling to accurately assess claims and risks, while eroding customer trust. The exponential growth of digital data provides immense potential here, if harnessed correctly. Combining external data streams with internal analytics creates a comprehensive 360-degree view of properties that legacy methods cannot match. The streams also provide the opportunity to adopt innovations that enhance inspections, streamline processes and improve customer experiences.

Indeed, forward-thinking insurers are already embracing external data and applying emerging technologies like AI and digital twins to extract richer data insights and enable faster, more efficient services.

While tier one insurers might be able to address all these challenges within their own resources and capabilities, that leaves a swath of the industry looking for answers. These insurers must tap innovative technologies like AI while leveraging new data sources outside their walls. The solution lies in embracing external data partnerships.

The potential of the data explosion in insurance

Data is ubiquitous today. Weather data improves climate risk models. IoT sensor data provides real-time building occupancy and condition details previously unattainable. Even social media and online reviews give insights into property usage unthinkable just years ago. This data explosion has massive implications for insurers.

The use of external digital data streams is advanced. FinTech Futures put the size of the global alternative data market at $17.4 billion by 2027, growing at 40% annually.

See also: 5 Ways Generative AI Will Transform Claims

Profound benefits are already emerging for insurance companies ahead of the curve. A study has identified:

• Hyper-personalization and enhanced customer experiences enabled by external data driving a 33% increase in identified lead improvement and placement.
• External data solutions like quote prefill and risk profiling delivering 12x higher likelihood of converting prospects.
• Book-of-business analysis identifying increased customer churn risk enabling a 59% improvement in retaining policyholders.

Insurers are already leveraging the trove of external data, alongside conventional analytics, to gain comprehensive insights with which to improve product competitiveness and workflow efficiency and experience.

• USAA's acquisition of Noblr enables usage-based insurance (UBI) using real-time driving behavior and mileage data to create personalized pricing, enhancing USAA's ability to offer competitive insurance products.
• The joint venture among AIG, Hamilton Insurance Group and Two Sigma resulted in the creation of Attune. Attune is a data-enabled platform that provides access to valuable external data from sources including public records, business operations data and financial data that can improve underwriting processes.

Satellite data: a revolution in property intelligence

One especially powerful external data source set to disrupt underwriting is satellite imagery.

Accessing accurate property data is still a huge problem for insurers. This data is often compiled from multiple sources (ranging from brokers and property managers to public records) and can be inconsistent or incomplete. As a result, customers often have claims rejected or only partially paid out, as the claimants in Southwest Florida have discovered. And insurers can be held liable for the difference in costs.

When combined with AI analysis, satellite data provides contemporary information that can be verified against visual evidence, rather than paper records. It can include property details like facade materials, construction types, occupancy details and roof geometry at mass scale. In fact, this data can provide detailed coverage for 99% of properties in developed countries.

For underwriters, satellite intelligence reduces in-person inspection costs by 50% on average and takes minutes rather than days to process. For claims teams, it enables real-time damage assessment and accelerated claims processing. And for brokers and their customers, it enables instant, automated quoting and more customized policies.

This data also mitigates premium leakage, enhances loss ratios, reduces under- and over-insurance and generally removes guesswork from the equation.

See also: AI and the Future of Independent Agents

The future belongs to data-driven insurers

Yet many insurers still depend on decades-old surveys and records for property data, potentially leading to underwriting and risk assessment mistakes. In the U.K. alone, 40% of commercial properties and 80% of households are underinsured due to poor property insights -- leading to denied or limited claims.

There is no longer any reason for these gaps. Through innovative data partnerships, insurers of all sizes can now access external data sources and AI capabilities that were previously only available to major carriers. These collaborations accelerate implementation and democratize access to advanced analytics, empowering insurers to leverage leading-edge data intelligence regardless of their scale.

External data and AI are no longer the sole province of tier one insurers -- strategic partnerships provide cutting-edge solutions to insurers across the market, fueling digital transformation through data. Data is the undisputed currency of modern insurance. Only insurers embracing partnerships and innovation will thrive. The time to unlock the black box of external data is now.