As we near the June 1 official start to the Atlantic hurricane season, we seem to be facing the worst of both worlds. 

We've been in an El Niño weather pattern for almost a year, which leads to warmer waters off the west coast of Africa, where hurricanes form, and in the Atlantic, Caribbean and Gulf waters where they gather strength. The waters have already reached temperatures that they usually doesn't hit until August and will only get hotter from here. 

The good side of El Niño is that it tends to disrupt the winds that coalesce into the tropical storms that can become hurricanes... but we're moving into a La Niña pattern, which lacks the storm-preventing tendencies of El Niño. 

So we're looking at all the heat energy provided by El Niño but none of its protection from hurricanes.

In advance of this week's official forecast from the National Oceanic and Atmospheric Administration (NOAA) and the June 11 update from Colorado State University (CSU), Phil Klotzbach, a senior research scientist at CSU, laid out how very bad the outlook is.

We've suspected for some time that this hurricane season would be bad. (Here is what I wrote back in February.) But now the predictions are moving well past suspicions. "We’re very confident this year we’re going to see well above normal hurricane activity," according to Klotzbach, a non-resident scholar at the Triple-I, a sister organization of ours at The Institutes. 

He predicts:

• 23 tropical cyclones in the Atlantic basin for the 2024 hurricane season, vs. an annual average of 14.
• 11 of those storms becoming hurricanes, vs. the average of seven.
• five becoming major hurricanes (categories 3, 4 or 5) vs. the average of three. 
• a 62% chance of a major hurricane making landfall in the continental U.S., vs. the historical average, from 1880 to 2020, of 43%.
• 34% chance for a major hurricane striking the U.S. East Coast, including the Florida Peninsula (vs. the 21% historical average).

[Editor's note: The last two bullet points have been updated since this post went live Tuesday morning, the 21st, because the original information, based on an article in Insurance Journal, was inaccurate and greatly overstated the danger to Florida. The summary for this article has likewise been updated. I regret the error.]

Meanwhile, the news of other climate-related catastrophes continues to hit my inbox daily.

Here is Global News, with the headline, "Canada's Extreme Weather Events Are Costing Billions, New Data Shows": 

"From 1983 to 2008, insurance companies in the country spent about $400 million on average annually on catastrophic claims, but since 2009 that number has rise to almost $2 billion. Recent hurricanes, floods and historical wildfires saw that number balloon to $3.4 billion in 2022 and $3.1 billion last year — 50% more than the yearly average."

Here is Grist, via Gizmodo, on "How 'Kitty Cats Are Wrecking the Home Insurance Industry':

"'Severe-convective storms' are large and powerful thunderstorms that form and disappear within a few hours or days, often spinning off hail storms and tornadoes as they shoot across the flat expanses of the central United States. The insurance industry refers to these storms as 'secondary perils'—the other term of art is 'kitty cats,' a reference to their being smaller than big natural catastrophes or 'nat cats.'

"But the damage from these secondary perils has begun to add up. Losses from severe convective storms increased by about 9 percent every year between 1989 and 2022, according to the insurance firm Aon. Last year these storms caused more than $50 billion in insured losses combined—about as much as 2022’s massive Hurricane Ian. No single storm event caused more than a few billion dollars of damage, but together they were more expensive than most big disasters."

One such storm hammered Houston last week, according to Bloomberg:

"Power was out for almost 700,000 customers in the Houston area after an intense storm swept through the area with winds in excess of 75mph (120km/h), downing trees, blowing out windows and leaving at least four dead. Economic losses and damages could be between $5 billion and $7 billion, according to an initial AccuWeather estimate.

"The trail of destruction is the result of what’s known as straight-line winds, fierce gusts that can rival their more familiar siblings, tornadoes. The atmosphere has been primed to unleash all types of violent weather this spring across the central and southern U.S.... 'It seems like we cannot go a day without there being some sort of severe weather,' said John Feerick, a meteorologist at AccuWeather. 'It has been active, and it looks like it will stay fairly active.'”

The Washington Post weighs in with a long article about how sea levels are rising in the American South: 

"At more than a dozen tide gauges spanning from Texas to North Carolina, sea levels are at least six inches higher than they were in 2010 — a change similar to what occurred over the previous five decades."

And Carrier Management cautions: "Catastrophe Bonds Use Models Underestimating Climate Risks, Investors Say." Swiss Re says the $15 billion in cat bonds issued last year played a big role in stabilizing the reinsurance market, so if models turn out to be too optimistic and investors flee the market there could be significant disruption.

About the only good news I've heard recently on climate threats came in a conversation I had with Gabriela Dominguez, president of Avante-Nea Insurance Group in Miami, about the chaos that is the South Florida P&C market. If you read the interview, you won't see much that feels like good news as she describes crazy-busy carriers using major premium increases to push clients to retrofit their homes and businesses to better withstand storms. Especially if you're an agent or broker, you'll feel her pain. But this exchange could signal the start of something important:

Me: "I’ve hoped that insurance premiums would send strong enough signals that policyholders would make their homes more resilient. It sounds like that may be happening."

Gaby Dominquez: "People are doing it. It's either that or lose your coverage, and if you have a mortgage, the force-placed insurance is three times more than the quote that I'm going to give you, which is already expensive."

She added that "the state is providing assistance through different programs that help people replace the roof, get a new AC, install impact windows and so on."

While I'd love to think that we'll get lucky with this hurricane season and that severe convective storms, wildfires and rising sea levels will fade as problems, I'm not counting on it. And the sort of approach, however painful, that Gaby describes--strong price signals from insurers, with some government assistance to ease the transition to greater resilience--feels like a reasonable way to begin what will be a long journey for all of us.

Cheers,

Paul  

Insurers often pontificate about being "customer first." They love nothing more than to create and then count touch points and one-off innovations that show they are delivering on their customer-centric ambition. 

Frankly, that's okay. Progress, while often slow and painful, is progress nonetheless. Even in moderate failures, such as adopting one-off digital experiences without fully baking them across channels, or allowing customers to make low-level, mid-term adjustments to policies, there's still critical learning.

However, insurers' efforts raise some critical questions about what customer-centricity truly means:

1. What does knowing your customer, personalizing your offering, and shifting the policy paradigm look like in an era of multi-banked and multi-insured fragmentation? 
2. How can you maintain viability while appreciating the significant shift required in enterprise design from policy-centrism to customer-centrism?
3. How do you dramatically reduce the time between gaining a customer insight and acting on it? 
4. How can you manage the ever-changing ecosystem to make sure you:
   • Keep up with fraudsters?
   • Deploy new technologies at low-risk?
   • Adapt to regulatory changes increasingly requiring insurers to keep pace with customers?
   • Treat them fairly and manage your own supply chains to deliver better and faster on your promises? 

Those questions are best wrapped up into one fundamental question: Who has the 360 view and relationship stance to become a true ecosystem business? 

The answer: those that act on customer insights fast and continuously.

After all, there aren't many examples of genuine ecosystem businesses in insurance. It's the Apples and Amazons that set the frame for competitive success and market dominance in the ecosystem paradigm, and without doubt drive the expectations of consumers.

You could argue that ecosystems have been tried in insurance, that even Amazon failed and had to close its U.K. Insurance Store. However, the Insurance Store wasn’t a failure. It was a relatively low-cost, high-learning opportunity. Amazon is still in insurance and expanding its presence rapidly.

Tesla is another good example: a business that exhibits many of the characteristics of ‌big ecosystem drivers but has struggled to manage data from its cars into its repair networks. However, it hasn’t given up. More likely, it’s learned and will now optimize its approach.

See also: Convergence and the Insurance Ecosystem

Then there are the insurers that are making ecosystems work. Despite sensible concerns over long-term profitability, Lemonade has managed to reach one million customers in just four years. In fact, it claims to be the first option for first-time buyers and renters‌, and second for people under 35. 

wefox is another. Since its founding in 2015, it's increased its revenue annually, achieving $800 million in 2023. It currently has nearly three million customers in its core markets of Germany, Austria, Italy, Poland, the Netherlands and Switzerland. Rapid growth, for sure. 

So, what sets these ecosystem businesses apart, and what can we learn from them and apply to insurers more broadly? They aren’t “incumbent” businesses with a lot to lose and an unwavering focus on sustaining their existing business models/source of premiums. 

This is important. If you can’t adapt quickly in today’s market, you risk decline, which is playing out in real time. 

The average tenure of old-economy companies on the S&P 500 is plummeting, and incumbency has never seemed to be worth less. Although not as disruptive as it’s been in other sectors, this looming threat to incumbents is present in insurance, and can only grow. 

But this threat is also a massive opportunity. The market forces acting on incumbent P&C insurers today have never been higher. Regulation is now starting to bite, and regulatory changes in the U.S. will follow the Consumer Duty in the U.K. These are requiring insurers to treat customers fairly, and long term they'll force insurers away from price-led and into new business models.

Equally, the road is running out for insurers, even with scale, to outpace the competition on price alone. It’s increasingly unviable even in medium-term views. Instead, understanding the value of a customer, focusing on ‌building mind and wallet share and increasing retention is a far better strategy. 

Which leads us barreling toward the framing in the title because ecosystem business models, and the enterprise design they sit within, hold many of the answers to success. 

Insurers continue to be overwhelmingly built around policy-centric systems and then try to build intelligent orchestration on top so they can create effective customer relationships. This creates a legacy effect, not only in technology terms but also in how insurers operate and how people interact within the organization, as well. This is what we call the legacy trap, and it has two primary impacts on insurers. 

First, change is complex and expensive. The policy-centric wiring often means that insurers don’t know if customers have one, two or 20 products with them.--not without abstracting that data, orchestrating it and acting on it. If you can’t get this basic work right, how can you expect to achieve meaningful changes in your customer relationships, mitigate risks, embed yourself in their lives and sell beyond insurance? 

Second, that wiring in an ever-growing ecosystem of partners is vastly more complex beyond the application programming interface (API). Integrating with legacy systems is usually straightforward. But orchestrating two-way data exchanges and incorporating a partner's value back into operational, employee or customer experiences can be extremely complex, somewhat akin to performing heart surgery.

Technology isn't the issue. The issue is mindset and organizational design. How can you be customer-centric if your business is designed to put the policy and not the customer at the center of it? You can't.

Organizational design drives technology. Get the design correct, and you get the technology right. You need to have a clear vision of the customer and business outcomes you want to create, and a detailed plan of how it'll be achieved. The technology follows.

There’s an obvious answer to this. It’s transformation done properly. Foundations of MACH-based core technology, built around the customer, data fluid and intelligent. These are the drive-trains in the engine of an insurance business that treats data as a perishable asset, constantly mining it for insight and acting on it. This engine provides adaptability in a way that'll drive the truly differentiated and hyper-competitive insurers that'll dominate over the next 10 years. 

From the customer’s perspective, there’s real value. Communication from the insurer through mobile apps, text, portals and dashboards can be used to mitigate risk, reward and influence behavior, lower maintenance and operating costs and reduce marketing noise. 

See also: The Great Unbundling

Performance metrics, comparisons, rewards and other gamification techniques will create even more customer engagement.

The challenge for many insurers will be the limitations of their back-end insurance core systems. Historically, these legacy systems have been purpose-built to support ‌the policy only, creating data and functional silos that impede innovation.

With the right customer-centric mindset, organizational design and technologies, it's possible for ambitious insurers to break free from the commoditization of insurance and offer excellent customer experiences, creating more positive, frequent and valuable customer interactions.

Faster horses are about to give way dramatically to the mechanization era and the P&C insurance ecosystem models emerging. I, for one, can't wait!

Egregious medical overbilling leaves payors and providers haggling over reimbursement for medical services while patients end up with large balance bills they cannot afford to pay. But a captive solution built on indemnification rather than insurance can shield health plan sponsors and members from any financial liability associated with high-cost claims and balance billing. 

Providing a legally defensible strategy to reprice individual medical bills and fully absorb that risk, a captive can transfer the risk exposure for excessive claims to a captive “cell” that separates its assets and liabilities from core corporate assets. The captive takes over the bill and is contractually obligated to pay those claims, relieving patients from the harassment of collection agencies.   

This novel approach is radically different from a traditional single or group captive program, which creates a big enough risk pool to aggregate large amounts of data and dilute overall risk while insuring risk on claims that haven’t yet occurred. The new approach actually takes steps to understand and manage risk on a bill-by-bill basis. Although it cannot prevent providers from continuing their practice of overbilling, experience shows that when providers learn there is a captive indemnification program in play, they typically back-off from claims collection.  

See also: Data Science Is Transforming Public Health

Learning From Failure

Traditional captives are not set up to indemnify health plan members from balance billing in the event that a large claim becomes problematic and there is no agreement on a fair payment to the provider. Healthcare payors have skirted this issue by hiring attorneys to challenge egregious billing in court, which is no guarantee that they – or their health plan members – will escape financial liability. 

Reference-based pricing (RBP) programs in tandem with a medical stop-loss captive also fail to shield payors and patients from balance billing. While RBPs may refer patients to an attorney for negotiating large bills, they cannot erase the responsibility of group health plan sponsors or their participants to pay those charges.  

There have been attempts at indemnification against egregious billing practices in the form of a Contractor Liability Insurance Program known as CLIP to help payors absorb risk, much like reinsurance. But there are inherent limitations to this approach. For example, Securities and Exchange Commission filings prevent a public company from taking on risk. CLIPs also charge huge administrative fees for their services. 

Much of the blame for continued balance billing falls on the inability of the commercial insurance marketplace to resolve this problem and achieve true healthcare price transparency. While government oversight has intensified, the slow pace of provider compliance with new laws and regulations to fix these issues, and lax federal enforcement over violations, have not resulted in any meaningful solutions. Even in the face of legislative and regulatory remedies, doctors and hospitals continue to send balance bills to collection agencies and harass patients for payment. The remedy must come from disruptive innovation, exemplified by captive indemnification. 

See also: Why to Customize Employee Healthcare Plans

Addressing Escalating Costs of Healthcare Benefits

While healthcare has become more expensive each year, it’s now also increasingly risky to provide these benefits. Plan sponsors face increasing pressure to fulfill their fiduciary responsibilities as stewards of group health plans amid growing government oversight and a litigious atmosphere. A recent employee lawsuit alleging Johnson & Johnson failed in its fiduciary duty to health plan participants may spark a new wave of class-action litigation against health and welfare benefit plan sponsors that mirrors decades of court battles waged against sponsors of defined contribution retirement plans. 

Without “true” insurance built on transparent pricing that is clear to consumers before services are rendered and devoid of hidden fees, patients will still receive balance bills. As a result, even many of those with employer-provided health insurance cannot afford important care or medicine, which they delay or forgo. More than 500,000 U.S. households each year file for personal bankruptcy, with unpaid medical bills now the leading cause. 

The only way to shield payors and patients from any financial liability from balance bills, and provide them with peace of mind, is through captive indemnification. Coupled with advanced payment integrity technology and medical expertise for reviewing and repricing bills, it fortifies protection against inflated prices. 

Using physicians and surgeons, rather than coders or administrative personnel, to manage a technically advanced bill review process bolsters claims payment accuracy, prevents overpayments and eliminates fraud, waste and abuse. The only way to ensure that a medical bill is properly reviewed is to fully understand the medicine behind it. When medical professionals are the ones who scrub bills at the line-item level, they can spot redundancies and items such as durable equipment that should never require separate billing or erroneous billing for unnecessary surgical procedures. 

As we have shown at WellRithms, payors now have a viable option to protect themselves and their members in an effort to curtail perverse billing practices.

During finals week in college, friends liked asking what I still had to do before the end of the term. I was such a procrastinator that I always had way more papers to write and tests to start studying for than they did, so they'd walk away feeling better about their situation.

My conversation with Gabriela Dominguez, president of Avante-Nea Insurance Group in Miami, for this month's interview brought finals weeks back to mind because of her vivid descriptions of the difficulties facing agencies in South Florida these days. Agents from just about any other part of the country will feel better about their plights after reading what Gaby is going through. 

For instance, she talked about a tattoo parlor she's writing at the moment, saying, "The carrier that writes that most effectively, efficiently and competitively, if you submit an account to them you've got to wait between 20 and 30 days to get a quote.... How can you wait 20 to 30 days to get a quote?" 

With Citizens, the homeowners insurance lender of last resort in Florida, she said they'll lock in an effective date for a policy but will take 20 to 25 days to look at the submission. "Then, she added, "they come back and say, 'Oh, by the way, you got everything in, but you're missing this. You've got five days to give it to me or you lose your spot and start all over again.'"

And even when a major carrier renews a client, the price soars—she's about to have to tell a restaurant that last year's $15,000 premium is now $29,000.

I draw two primary lessons from the interview. First, as much as carriers talk about making life easier for agents, they have a long way to go, at least in chaotic markets like Florida, and have a big opportunity if they get the coordination right. Second, there are benefits to consolidation to achieve scale, as Gaby describes at the outset of the interview, based on her recent experience with a merger. 

But even if you're not looking for lessons, I think you'll find her interview a compelling read—and it might even make you feel better about the chaos waiting on your own desk​.

Cheers,

Paul  

SOCIAL SELLING FOR INSURANCE AGENTS

Paul Carroll

A study just came out showing that mergers and acquisitions of agencies and brokerages, while down a bit in 2023, still registered one of the biggest years on record. You undertook a merger a couple of years ago. How does that trend look from where you sit?

Gaby Dominguez 

In our case, we were a small enough agency that we were getting constrained with appointments, restrictions, not meeting the quotas, not meeting the loss ratios. Joining with another agent and now having a much bigger book of business means I have more opportunities for appointments.

So, yes, a lot of agents at the size I was before are going to be constrained as to what they can and can't do if they don’t merge. In fact, you're going to probably even lose appointments because you're not able to meet the requirements that some of these carriers are putting on us.

Paul Carroll

For frame of reference, how big were you before and how big are you now?

Gaby Dominguez 

I was at $20 million in premium and $2 million in revenue. We're now at $7.5 million in revenue.

Paul Carroll

I assume dealing with carriers is especially difficult, as well as important, in Florida.

Gaby Dominguez 

In South Florida, our market is so, so difficult right now. Most of our book of business is written through excess and surplus instead of admitted carriers, so having those connections available is key. 

When I merged, I was able to acquire admitted carriers such as The Hartford and Chubb. I was not going to get those appointments on my own. Now that we’re a bigger agency, we have better contracts, better commission structures, better contingency contracts.

Paul Carroll

You were slammed last week because of some big renewals. Those have to be rough these days, especially in Florida.

Gaby Dominguez 

It's horrible.

Markets right now are non-renewing, removing the wind… and you’re getting a quote to present to the client maybe five days before the renewal day. Sometimes, it’s just two days before, especially on larger accounts.

It's just a mess. When you think about the number of accounts that we have to renew monthly, then multiply that by all the agencies in South Florida, it’s hard to get any time with carriers.

You're basically in a pipeline. If you call enough, if you're in front of them, if they like you, maybe they'll put you up in their stack so they can review the account. But you're basically bleeding. 

I've got an account that I'm writing right now, which is a tattoo parlor that also does cosmetic tattoos and medical tattoos, so it's a little bit more extensive. The carrier that writes that most effectively, efficiently and competitively, if you submit an account to them you've got to wait between 20 and 30 days to get a quote.

That's unheard of. How can you wait 20 to 30 days to get a quote? How far ahead do you have to present an account to a carrier to get a quote you can present to a client?

With Citizens [the property insurer of last resort in Florida], you upload all the information: the application, the appraisal, all the supporting documents, which is a huge amount, often including a 40-year recertification. Who was even talking about 40-year recertifications just four years ago? Now that is a must when you submit an application--room certifications, electrical certifications, wind mitigation…. Once you’ve uploaded all that information, you sit there and wait.

They secure your effective date. Let's say the coverage is effective next Monday. But they won’t review the application until they have time. And that can be 20 to 25 days. Then they come back and say, “Oh, by the way, you got everything in, but you're missing this. You've got five days to give it to me or you lose your spot and start all over again.”

There’s no communication with underwriting even with excess and surplus carriers, and nobody will answer a phone these days. I cannot put everything in an email sometimes, so it’s important to be able to pick up the phone and say, “Hey, Paul, can I just talk to you about this account? I get that you're seeing this and this, but look, there's this and this and this, and that other thing has gone away.” The reaction is: Put it in an email.

Paul Carroll

Are the insurance reforms in Florida having any noticeable effect yet?

Gaby Dominguez 

Losses are still being reported. We still have attorneys on the radio saying, “Don't report a claim to the insurance company. You come to me first.”

Carriers are saying the new legislation has made a difference. The number of claims has declined.

But it’s too soon to know. For sure, we have not seen a reduction in premiums. I’m working with a restaurant right now that last year paid $15,000 in premium, with wind. Normal restaurant, nothing big. A major carrier just renewed it: $29,000. Same sales, but nearly twice the premium, and I have to sit with this client and tell them that. 

The Department of Insurance says several carriers are very interested in writing and are preparing to come aboard. Maybe by the end of this year, we'll see three to five carriers coming into play. 

But I've been in this business long enough that I go back to Hurricane Andrew in 1992, which is when all this mess started. Carriers came in afterward and took business out of Citizens, but then another storm brewed, and those carriers went under, so the business went back to Citizens. It’s been a revolving door ever since. So I’m a bit skeptical. Are carriers coming in with the reserves they need? Do they have the management they need to be effective?

Paul Carroll

One of the things we've really focused on at The Institutes is the idea of Predict & Prevent—get away from this model where all you do is repair and replace after the storm hits, and help keep people from having losses in the first place. But is there much you can do to help clients prepare for what forecasts are saying will be a rough year for Atlantic hurricanes? I mean, the storms are going to hit your area, or they aren’t, right?

Gaby Dominguez 

The last 24 months, the number one conversation we’ve had with our clients is, “How old is your roof?” If your roof has a life expectancy of less than five years, you have to change it. Again, that’s not a conversation we were having five or six years ago. 

But people sometimes cannot afford a roof replacement. Here, a normal roof can easily cost between $30,000 and $40,000. It's not what it used to be. Ten years ago, the cost was maybe $12,000 or $15,000.

We also ask, “How old is your water heater? Have you had any electrical and plumbing updates?” If your water heater is more than 14 or 15 years old and you haven’t updated your plumbing and electrical—especially on older homes, and we have a lot of older homes here—then carriers are not going to quote you. So you have to go to the excess and surplus market.

Paul Carroll

I’ve hoped that insurance premiums would send strong enough signals that policyholders would make their homes more resilient. It sounds like that may be happening.

Gaby Dominquez

People are doing it. It's either that or lose your coverage, and if you have a mortgage, the force-placed insurance is three times more than the quote that I'm going to give you, which is already expensive. 

The state is providing assistance through different programs that help people replace the roof, get a new AC, install impact windows and so on.

Paul Carroll 

Are there enough plumbers, electricians and contractors to do all this work?

Gaby Dominguez 

It's a struggle. Every single day, I hear: “Do you know somebody who's reputable?” 

There's just so much work that needs to be done. And that's not only on residential. I do a lot of condominium associations. Right now, I'm battling on a condo whose 40-year recertification failed. The tab to replace the roof, change the electrical—because the electrical is no good—and do some plumbing work is over $500,000. So they have had to go to a bank and request a loan for half a million dollars. Now they’re on a timeline: This week we're doing this, the next two weeks we're doing that, this is where the progress on the roof is. And I have to report to the carrier every two weeks what the insured has or has not done. That is just draining.

Paul Carroll 

Holy smokes. 

Gaby Dominguez 

When an agent-friend of mine from California and I are at agent/broker meetings, we're the two who tell everybody else, “You guys have it fine.”

Paul Carroll

Thanks, Gaby. I really enjoyed the conversation. Here’s hoping conditions start getting at least a bit easier.

About Gaby Dominguez 

Gaby joined the second-generation family-owned business – Avante Insurance Agency – after obtaining her property and casualty license in 1986. She became president of Avante in 2010 and merged with NEA Insurance Group in 2022, where she also serves as leader of the highly successful personal lines team for over 20 employees, who are mostly women. Gaby has numerous professional achievements in her 38-year insurance career including – 1) Chartered Property & Casualty Underwriter CPCU designation showcasing all facets of the insurance business; 2) numerous positions in CPCU Society (local chapter president; regional governor-Southeast; diversity and nominating committees; and chair of the Agent Brokers Interest Group, a position she occupies currently); 3) past president and council president of the Latin American Association of Insurance Agencies; and 4) member of the depopulation and technical advisory committees of Citizens Property & Casualty Insurance, the largest insurer in Florida.

As much effort as carriers have put into digital transformation over the last decade, new research shows that there’s still considerable work to do. According to the J.D. Power 2024 U.S. Property Claims Satisfaction Study, today’s insurance consumers are dissatisfied with how long it takes carriers to process and resolve property and casualty (P&C) claims. And the longer a claim drags on, the deeper the dissatisfaction. Claims resolution times were longer in 2023 compared to 2022, mainly due to the myriad of catastrophic weather events from coast to coast. The study notes a significant drop-off in customer satisfaction levels if the claim takes over three weeks to resolve.

 Even carriers that offer digital interfaces for clients are seeing lower satisfaction rates. From the J.D. Power study:

“Customers who use digital tools for reporting their claim or submitting photos used in the estimation process experience faster claim cycle times but don’t always have higher levels of overall satisfaction. Claims taking longer than expected are partially to blame as satisfaction drops at a greater pace among digital users than non-digital users. For example, overall satisfaction among customers reporting their claim digitally is 903 when the claim is settled in less than three weeks. That score falls to just 727 after 31 days.”

What is driving insurance customers' dissatisfaction regarding digital channels? Carriers can face a few common challenges when building their digital channel engagement strategies. For example, some insurance carriers only offer a limited number of customer service channels. They may focus solely on traditional channels like phone and email, neglecting newer channels like live chat, social media, SMS, or messaging apps. This limits customer choice and may not align with the preferences of younger generations who prefer digital or self-service communication channels.

Addressing these gaps in the customer experience requires a comprehensive omnichannel strategy that prioritizes the seamless integration of all the channels, messaging consistency, agent responsiveness, personalization, and a focus on customer preferences across all channels.

Omnichannel Engagement Creates Happier Customers

A 2023 study commissioned by my company, in collaboration with independent data scientists, analyzed behavioral data from 250,000 P&C insureds. The study revealed that a consistent, diversified omnichannel experience creates higher levels of engagement and customer satisfaction. Policyholders who utilize multiple channels are 21% less likely to cancel their policies, and customers who repeatedly use them have a 25% higher retention rate.

An omnichannel strategy can significantly enhance insurance customer satisfaction in several ways:

1. Meeting Your Customers Wherever They Are: Carriers need to make it effortless for insureds to interact with them. Customers who can interact with the insurance company through various channels of their choice are more loyal. This requires carriers to enable a seamless transition between channels to ensure customers can access services without disruptions, leading to higher satisfaction. Depending on the situation, your customers may want to leverage digital channels for quick questions, or they may need to speak with a customer service professional for more complex needs.  
2. Getting More Personal: By leveraging data collected from multiple touchpoints, insurers can personalize customer interactions. That can include offering relevant new products, providing tailored recommendations, and addressing specific needs, ultimately making customers feel valued and understood.
3. Providing Convenient Self-Service: An omnichannel approach must include a self-service customer portal. The right portal enables customers to complete tasks and access information quickly and easily without the need to speak with an agent. Portals are also highly effective at reducing carriers' costs.
4. Maintaining Messaging Consistency: Consistency across channels is crucial for maintaining trust and satisfaction. With an omnichannel strategy, insurers can ensure that the information provided and the level of service offered remain consistent regardless of the channel used. This consistency builds confidence in the company and enhances the overall customer experience.
5. Achieving Operational Efficiency: During the claims process, customers want to feel that they’re a priority. Omnichannel strategies streamline processes and workflows, allowing insurers to resolve customer issues faster and more effectively. For instance, customer inquiries can automatically be routed to the appropriate department or agent, reducing wait times and improving resolution times. 
6. More Reliable, Real-Time Communication: Customers unhappy with claims resolution times may feel they’re not getting enough communication and updates from their carrier. Effective communication is critical to keeping insureds satisfied. That can mean different things to different customers. For example, some customers will appreciate a text message updating them on the status of a claim, while others prefer to receive an email with more detailed instructions on next steps. An omnichannel strategy enables carriers to communicate with customers more frequently, in real-time, providing updates, notifications, and reminders through their preferred channels. This proactive approach to communication keeps customers informed and engaged throughout their journey.

Carriers who take the time to build an integrated omnichannel engagement strategy can improve customer satisfaction by providing a seamless, personalized, and convenient experience. The main goal is to build loyalty with customers who appreciate the ease of use of each channel. That requires consistency across the full mix of digital and offline channels. Regardless of the engagement channel, carriers must move through the claims process promptly and efficiently, facilitating effective communication at each journey step. Doing so will demonstrate to your customer that their needs come first, even if a claim is complex and takes longer than expected to resolve. 

Sponsored by: ITL Partner: insured.io

In the realm of digital transactions, challenges often surface, stemming from a variety of sources ranging from user errors to glitches within the payment systems themselves. The State of Online Payments report sheds light on the prevalence of these hurdles, revealing that a staggering 60% of respondents regularly grapple with issues concerning their monthly digital payments. The data also reveals the respondent’s ideal way to resolve payment issues.

Among the myriad obstacles cited, frequent occurrences include the forgetfulness of usernames and/or passwords, the absence of timely payment reminders, and frustrating delays in the processing of payments. These findings underscore the pressing need for streamlined, user-friendly solutions to mitigate these challenges and enhance the overall efficiency of online payment experiences.

In our quest to better understand how customers navigate these inevitable obstacles, we sought insights into their preferred avenues for resolving billing and payment-related problems. Through our survey, respondents were posed with the question: “What’s your preferred way to connect with customer service teams for billing and payment-related issues?” The results unveiled clear trends, with the top responses indicating a preference for direct communication channels.

How Do Customer Prefer to Resolve Payment Issues?

Specifically, survey respondents favored contacting the biller’s office via phone call, engaging in live chat interactions with customer service representatives, or opting to address the matter in-person at the biller’s physical location. These preferences shed light on the significance of accessible and efficient customer service solutions to address the daily concerns of digital payment users.

Customers facing these problems want them fixed quickly, so they can finish their payment and move on with their day. Naturally, they seek assistance from customer support teams to address their concerns, but this can exacerbate call volumes and even lead to heightened lobby traffic for billing organizations. This surge in inquiries is not only time-consuming, but can divert staff’s attention away from critical projects and potentially lead to employee burnout.

In order to avoid this, we’re highlighting several strategies billing organizations can implement to streamline issue resolution.

1. Leveraging Technology for Self-Service Options

The most impactful way to drive results for billers is to increase the volume of customers that are willing to self-serve, which they can do by enrolling in services like automatic payments (AutoPay), paperless billing, and even by signing up for payment reminders. Increased self-service means fewer customer service calls, reduced walk-in and lobby traffic, decreased staff workloads, fewer account shutoffs or cancellations — in short, increased self-service enrollment means fewer headaches for you and your team.

Offering an enhanced interactive voice response solution (IVR) is a simple way to provide that convenient, contactless customer experience your payers expect while also diverting customer service calls, improving operational efficiencies, and increasing your revenue flow. IVRs are ideal for providing 24/7 access to bill payment over the phone.

Online portals for digital payments are another great form of self-service. Allowing customers to pay when and how they want and on the device of their choice can not only decrease call volumes but can significantly increase customer satisfaction. Also, offering omni-channel options is crucial. Providing more options can lead to higher adoption rates — however, regardless of how many options you offer, the user experience should remain the same across all channels. Customers should have the same effortless experience making via phone that they have on the web, too.

Chatbots in EBPP, when used properly and in line with the law, can also help people pay their bills faster and with less hassle. Many common billing problems have simple solutions that chatbots, powered by AI, can explain easily. With the right keywords, chatbots can understand a biller’s problem, even if the biller isn’t sure themselves. In these cases, AI-powered chatbots can solve mundane problems quickly, saving time and resources so staff can focus on higher-value work.

Overall, these technologies can address common customer queries in a way that saves time for customer service teams and simplifies the process enough to eliminate typical issues, such as difficulty finding where to pay.

2. Implementing Effective Communication Strategies

Merely establishing communication channels with customers is insufficient. Understanding their preferences and payment history is crucial. Clear and accurate billing statements are essential to prevent issues and confusion.

Payment notifications play a pivotal role, identified as the second most significant problem by our survey respondents. Intelligent communications capitalize on existing customer information to deliver targeted reminders and notifications. For example, sending a payment reminder to someone who has already settled their bill is redundant. Likewise, a single email about an upcoming bill might not suffice to counter the “I forgot” excuse for late payments, especially if it’s lacking a link to payment, the amount due, or other details.

Employing various communication channels, such as email and SMS, based on customer preferences, is essential. Proactive communication, including FAQs and user guides, is also vital to preempt common inquiries.

3. Training and Empowering Customer Service Staff

Finally, investing in the training and empowerment of customer service staff yields multifaceted benefits. Well-trained teams not only possess the skills to efficiently address customer inquiries but also play a pivotal role in minimizing call volume through their adept problem-solving abilities. Moreover, empowering employees by granting them the autonomy to make decisions fosters a sense of ownership and accountability, directly influencing customer satisfaction levels.

When frontline staff feel empowered to resolve issues promptly and effectively, customers are more likely to receive satisfactory resolutions on the first contact, leading to a significant reduction in unnecessary calls and ultimately enhancing overall service quality.

Ready to learn more? For more insights into customer payment habits and billing preferences, download the most recent State of Online Payments report here.

Sponsored by ITL Partner: InvoiceCloud

Originally Posted By InvoiceCloud

Apple's ability to excite customers about technological change is legendary... but the company erred badly with a recent ad for its new iPad Pro. And if Apple can totally misjudge how people will react to change, then so can you and I. 

I worry, in particular, about how the insurance industry will manage all the changes that are becoming possible with generative AI and that will need to be rolled out throughout companies over the next many years. While executives sing its praises and talk about how much drudgery it can remove from jobs, how much more efficient it can make people and so on, I'm not sure they're fully factoring in the fears that many employees harbor and the organizational changes that will need to occur.

I have thoughts.

So we're all on the same page, here is a link to the Apple ad. And here is a link to an article about Apple's quick apology.

You can see what Apple was trying to do. It wanted to show that a whole array of creative tools — books, musical instruments, a record player, paint and much more — had been combined into a single, sleek iPad. Apple was even being its usual cheeky self by invoking a popular meme, in which people put cans of paint or fruit or just about anything into a metal crusher and then film and share what they look like when they explode.

What Apple somehow missed is that many of the items being crushed are totemic. People love their books, their pianos, their record players. People don't want to see those crushed, even in the name of sleek technological progress. You can't just sell the notion that a technology is cool and assume everyone will climb onboard.

Many people like their jobs, too — even the less efficient parts. They've done the job the same way for a long time, and they're in no hurry to change. Change takes effort and is disruptive mentally. 

A rule of thumb among venture capitalists is that a new product needs to be 10 times better than what a startup is trying to replace, or don't bother. That number doesn't need to be as high with employees because, after all, the employer is paying their salaries. But there still needs to be a clear advantage, or the employee will resist the change, and the employee has to be wooed, not just ordered around.

I've always been a bit of a curmudgeon about change management programs — banners and leaflets and rah-rah meetings aren't my thing — but I thought two senior consultants at Heidrick & Struggles whom I helped with a book eight years ago were quite perceptive on the topic, so I'll share some highlights here. (If you want to investigate further, these points all come from Chapter 11 in "Accelerating Performance.")

Colin Price and Sharon Toye, who have both moved on from Heidrick & Struggles, opened the chapter by emphasizing the need for speed. "When transformations don't work," they write, "the biggest reason is that bold new ideas weren't institutionalized rapidly enough." They then get to the five steps they recommend for an organization trying to make the sorts of changes that generative AI will allow... and demand:

"First, leaders need to connect with their people through a common and compelling purpose. Next, leaders must align the operating model of the organization to reinforce the behavior change. Third, capabilities must be built. There is no point in asking people to do things differently if they don't have the skills to do so. Fourth, the changes must be role-modeled by leaders. We all know that following the parental mantra of do as I say not as I do will ruin any chance of colleagues doing what senior leaders asked of them, although it is surprising how many senior players still try to get away with this manner of leading. Fifth, but by no means last is the need to provide space for people to explore the change being asked of them and to choose whether to adopt it."

While that last point is the one that surprised me the most and has stuck with me — that you need to give people space to come to terms with the desired change and to decide to either go along or to leave the organization — let's go through the five points in order:

—Common and compelling purpose:  Price and Toye write that successful change programs "communicate the why first." And it seems to me that there are lots of powerful whys in insurance for innovation, in general, and generative AI, in particular. Those whys include serving customers faster, more effectively and more humanely in their hour of need; helping them reduce the risks they face with their lives, homes, autos and other assets; and making the insurer more efficient, allowing for lower premiums and a narrowing of the production gap. 

Whatever the why, it needs to be compelling to the employee and needs to be consistent, because the next step is to communicate it relentlessly. Price and Toye write that "change agents typically under communicate their vision by at least a factor of 10." Peter Drucker, the legendary management consultant and author, once told me in an interview that General Electric's longtime CEO Jack Welch would pick one goal for the company and communicate it at every opportunity for five years. Then he'd pick a new goal and pound on that for five years.

Price and Toye said managers also need to allow time for dialogue with employees about what's changing to encourage co-creation rather than just defining and imposing change from on high. "Lasting change occurs through insight, not instruction," they write.

—Operating model: There may be structural changes needed. Changes in processes will certainly have to occur. And there will need to be metrics and rewards. 

That's pretty standard stuff, but care will certainly need to be taken on all three of those points. I can imagine metrics being especially tricky because some of the improvements allowed by generative AI are pretty squishy. 

—Capabilities: What they say here is also pretty standard: Make sure you have all the capabilities you need, match them to the right opportunities and either find or train people to fill gaps as quickly as possible.

I think insurers already do a pretty good job of matching a submission with the right underwriter and a claim with the right representative, but I imagine training will have to be different with generative AI. Training can't be one-and-done because the capabilities of the technology are improving so fast. Training will have to be continual.

—Role modeling: The authors stress the need for clear articulation of what you want your employees to do differently — "You can't expect your people to be mind readers." Then, they say, leaders have to model the new behavior. If you want your people to be gung-ho about generative AI, then you'd better let them see you using it personally. 

—Space: As I said, this is the bit of advice I found most surprising. Every company whose change programs I ever wrote about were clearly thinking of them as top-down, but Price and Toye note, "People have the freedom to choose to not engage, and they exercise that freedom only too often" because of fear of the unknown and the potential for loss. 

Their recommendation: "Change management, like training, has traditionally been seen as a push model and needs to become a pull model, where employees draw what they need rather than having it imposed on them.... If you enable them to experiment with what the change could look like, feel like and be like, then their level of comfort with a new reality is more likely to rise. And if you allow them to choose to change, then they are more likely to adopt change with greater conviction and energy than if you don't." 

What if people choose not to change? Then they've chosen to part ways with you, Price and Toye write, and you need to be disciplined about moving them out as quickly as possible. That may feel odd at a time when the insurance industry is focused on its talent gap, but they argue that you lose more by having lots of people who aren't invested in the changes you need to implement.

Price and Toye certainly weren't writing about generative AI. It didn't exist eight years ago. But I think their ideas are still worth keeping in mind as we implement that technology, in particular, and continue to innovate, in general. 

If even Apple can't count on getting people to jump to a cool new technology, what chance do the rest of us have?

Cheers,

Paul

The differentiator for independent insurance agents has always been the quality of the customer service they provide to their clients. Unfortunately, in today's challenging market, that focus on clients can fall to the wayside.

The standard of customer service varies from agency to agency and, in some cases, from agent to agent. Those making strides to improve their customers’ experiences are more successful than those who simply say: “This is how we’ve done it for 50 years; this is how my father did it,; and this is how we're going to continue do it.”

So what does superior customer service from insurance agents look like today? What trends have forced changes upon agents in terms of customer service, and what best practices can they follow to set up their agencies for success? 

See also: Customer Segmentation Is Key

External Factors Affecting Customer Service Norms 

Digital transformation 

Technology has transformed how agents and clients communicate. Younger insurance buyers have different expectations than prior generations. They expect self-service, for example, paying bills and filing claims online. Older generations, however, might eschew some claims automation tools while believing they understand the products available and do not need assistance.

These generational differences can create huge opportunities for agents to play more of a consultant role when it comes to advising clients on their risks as well as introducing more tailored insurance products. For example, agents can position themselves as educators, introducing and explaining new products and services, such as usage-based insurance. Some clients in a usage-based insurance model will resist having their vehicle report driver data while others will appreciate the ability to lower their premiums. As a result, agents have an opportunity to map out the pros and cons of the usage-based model and position themselves as valued advisers rather than simply selling. 

Agents must also recognize that the differing needs and preferences of insureds extend beyond product offerings and can even include how they want to communicate. Some want to be emailed, while others prefer a phone call and still others are more comfortable with text messaging. Although these forms of communication may feel less personal, they can actually be more engaging and help insureds to understand, in many cases, what they do not know they don’t know.

Artificial intelligence (AI)

AI is one of the latest and most important tools for customer service. AI can also intimidate some agents. We need to understand that AI does not have to replace agents. Rather, it should support and enhance the customer experience process and the agent/insured relationship. Agents should not fight AI; they should embrace it. Take advantage of chatbots, virtual assistants, self-service portals and mobile apps as much as possible. Agents can also work with their carrier partners and investigate what technology they have available. Not only will doing so help their client relationships, adopting these tools will make agents more competitive.

The reputation of the insurance industry

Relationship building remains paramount, so understanding your client base is critical. Insurance is a product clients know they need but do not want to purchase. It is a product used mostly when the client has a loss and needs to make their business or personal financial circumstances whole. In fact, clients do not even know whether the policy will work as intended until they file a claim and speak with their insurer. 

In part, this is why the insurance industry has earned a negative reputation through the years. It may be that agents did not ask enough questions of their clients during the buying process to understand the client’s needs and insure the property and its contents to value. Agents likely did not spend the time necessary getting to know their clients. In a situation like this, a claim can lead to an unfortunate experience for the policyholder. And in today’s litigious environment, unhappy clients are more likely to file a lawsuit.

See also: Customer Success Is Key, but Where to Start?

The Keys to Better Customer Service

Agents can overcome the industry’s reputation as well as challenges introduced by digital transformation and AI to achieve superior customer services by using the digital tools available and by spending more time understanding their client’s situation. Specifically, agents should confirm how the customer wants to interact with the agent, managing customer service from the beginning by asking the following questions: 

• How often does the client want to communicate with the agent?
• What renewal increase with the client accept before the agent decides to market the account to other carriers? 
• When does the client not want to hear from the agent?
•  How comfortable are they with certain technologies? 

If agents are not truly spending the time to understand the coverage issues their clients face as well as how they like to communicate, then agents may not be able to give their clients the best advice and customer service. 

Despite the direct-to-consumer trends prevalent in the marketplace, clients still want an insurance agent they can call who will understand them and provide personalized guidance. Technology must be part of the formula for superior customer service, but it can’t be the only component. Customer service, built on relationships and in-person as well as virtual interactions, will be key to the future of the independent agent.