Six years ago, my friend Adrian Jones and I published our first deep analysis of the iconic full-stack insurtech carriers (Lemonade, Root and Metromile). Our "Five Dispatches from Insurtech Survival Island" found:

1. Underwriting results have been poor
2. It costs $15 million a year to run a start-up insurtech carrier
3. Customer acquisition costs and back-office expenses (so far) matter more than efficiencies from digitization and the absence of legacy systems
4. Reinsurers are supporting insurtech by losing money, too
5. In recent history, the startup insurers that have won were active in markets not targeted by incumbents
6. 

Personal note: I really miss that 2018 collaboration with Adrian to review the insurtech facts and figures. A week of back-and-forth, integrating the different perspectives and challenging each other, allowed us to extract the best from our accumulated knowledge. Moreover, his analytical rigor and exposure elegance made the first chapters the most precious gems of this six-year-long series. However, it is what it is. I'm continuing to report here my perspective on the insurtech facts and figures. It is an unpolished and instant snapshot of my perspective, written by carving out a few hours on an overnight intercontinental flight. I'm trying to write something interesting each month... but available time and inspiration allows me to do it just eight or nine times a year. I do my best, hope you like it.

In the past months, the current full-stack insurtech trio (Lemonade, Root and Hippo) published their 2023 results, and they were not so bad. The dispatch from Survivor Island says: We are alive, and we may survive! (Metromile, one of the original castaways, didn't and was acquired by Lemonade a couple of years ago.)

Sse also: Tech Secret to a Combined Ratio Below 100%

Let's look at some of the main pieces of evidence from this dispatch:

1. It costs $1 billion to $2 billion to build an insurtech carrier that barely enters the top 30 in personal auto or homeowners
2. Underwriting results have improved but are still poor
3. The carriers are still not efficient
4. 

• Root burned $1.7 billion to build an auto business of almost $800 million in premiums. (The U.S. auto market was $316 billion in 2023, with the 25th player writing $1.3 billion.) The company grew until 2021, shrank in 2022 and rebounded last year. A non-immaterial part of its business comes from embedded insurance.
• Hippo burned $1.2 billion to build an insurance business of $1.1 billion in premiums. An MGA back in the day, Hippo has acquired a carrier that gives underwriting capacity to MGAs (IAAS in the figure below) and is acting also as an agency selling third-party policies (services in the figure below). Without the agency premiums, the written premiums are $800 million. Hippo is an articulated business that has continued to grow over the years, but the original homeowner business sold and underwritten (HHIP) in the figure below) is pretty stagnant at about $300 million (U.S. homeowner multiperil was $152 billion in 2023, with the 25th player writing almost $1 billiion).
• 
• Lemonade burned about $1.1 billion to build an insurance business of slightly more than $700 million in premiums and has reached the milestone of 2 million clients. The main line of business is homeowner multiperil, as for Hippo (but with a predominant presence of renter insurance), with about a quarter of the premiums done by the pet insurance business (inland marine) and with a limited contribution of the auto and international business. Lemonade in renter and pet insurance is probably able to show the most relevant market shares among all the businesses of the trio. Unfortunately, the segments aren't big enought to allow us to talk about any sign of disruption in the market.

See also: The 'I Told You So'​ Moment

Underwriting results have improved but are still poor

All these players have hired seasoned insurance executives over the years and have focused on improving technical profitability. Since the time when they were used to pay out in claims the same or even more than they’ve collected in premiums, there has been (somehow) evidence of significant improvement:

• Root has brought the loss ratio down to 76%, while the personal auto insurance sector was on average almost at 78% 
• Hippo has brought the loss ratio down to 71%. However, the Hippo product (HHIP in the figure above) is still at 103% while the homeowner multiperil line '23 loss ratio was 72%. More than fixing the Hippo original homeowner product, they are writing a good business with Spinnaker as a fronting carrier for other MGAs, and this subsidizes Hippo's loss-making business. 
• Lemonade has brought the loss ratio down to 85%, but that is high for homeowners insurance and extremely high for a mostly renter portfolio. 

Note: All are gross loss ratios and include LAE;  the Root's figure below is about loss ratio without the LAE. 

Root's loss ratio is an outlier and doesn't deserve the headline "poor"; however, I've some doubts if it is more due to their underwriting performance or to the peculiar contingency of the U.S. auto insurance market. Their shareholder letter says, "We recorded an exceptional loss ratio as we benefited from our technology platform’s ability to drive pricing and underwriting improvements," and, "We are still in the early chapters of disrupting the auto insurance industry." 

In 2023, large carriers in many states struggled to obtain regulatory approval for rate changes and, consequently, tightened their underwriting guidelines. It isn't unlikely a small carrier with bloody past technical results has obtained quick approval for rate changes and had room for growth (without investing too much in advertising). 

Before dropping the magic world "disruption" loved by futurologists and black swan hunters, I suggest waiting a few quarters within a more stable auto insurance market landscape. 

See also: Lemonade's 'Synthetic Agent' Nonsense

Still not efficient insurance carriers

All three players have cut their marketing budgets compared with what they were used to; they aren't any longer the pure and brave online direct-to-consumer players you have met at insurtech conferences with colored T-shirts. All of them are also working with independent agents and embedding insurance policies in other incidental channels. Moreover, Hippo's only profitable business is the fronting business with the policies sold by other MGAs.

They have also controlled the cost base at a decent level, all but Lemonade:

• Root: spent in marketing and sales 6% of the premiums, and its administrative costs are 22% of the written premiums;
• Hippo: spent in marketing and sales $56 million (9% of the premiums of the Hippo product and the agency), showing that selling third-party policies at least offsets part of the marketing costs. The other costs represent 17% of the premiums written (thanks to the efficiency of the fronting business);
• Lemonade spent in marketing $102 million (14% of the written premiums), and the other costs added 38 percentage points to the combined ratio.

All these businesses burned a significant amount of cash even in 2023. The cash lost in operating activities was: Root, $34 million; Hippo, $92 million;, and Lemonade, $119 million. All amounts are lower than in the previous years. In the next few days, the Q1 '24 financials will be published, and we will have an update on the trajectory.

Considering the trend of improvement and that there are still significant buffers of cash in their balance sheet, our castaways may survive. 

But there is still no sign of any disruption from the island.

Inflation is a complex phenomenon, its roots intertwined in various economic, political and global factors. This presents unique challenges and opportunities for the investment strategies of insurance companies.

Insurers are still navigating from a terrain marked by prolonged low investment rates and squeezed margins to an unpredictable inflationary environment and balance sheets holding large unrealized losses. This article explores how insurers can adapt their investment strategies to hedge against uncertainties caused by inflation and extended periods of higher interest rates, exploring avenues such as real estate, equities and specialty products, while also incorporating strategic asset allocation and risk management best practices. Conning believes applying more dynamic investment strategies may also benefit insurers over the long term for most economic conditions.

The Impact of Inflation and the Outlook for Interest Rates

Our March 2022 Viewpoint studied the impact of inflation on insurance companies’ financial statements, observing deviations between actual results and projections due to deteriorations in assets and liabilities. We highlighted the extended influence of inflation and some companies’ constraints in implementing protective measures. We also discussed the limited flexibility that many investment portfolios have in dealing with these challenges amid regulatory and rating agency scrutiny. Ultimately, we determined that a thorough portfolio assessment and strategic planning can significantly mitigate these concerns.

The federal funds rate ended 2023 at 5.33%. Despite the U.S. Federal Reserve’s declaration to halt the cycle of increases, the outlook for the next two years remains uncertain (see Figure 1), but there is a strong inclination toward keeping rates higher for an extended period.

Figure 1 - The Fed’s Outlook: Higher Interest Rates for Longer but an Unclear Path

Although the exact timing and sequence of policy adjustments remains uncertain, the implications of maintaining higher interest rates for an extended period are multifaceted.

These are positives for insurance companies: Sustained higher rates present a unique opportunity to recalibrate pricing strategies, innovate by launching products and move their investment portfolios toward higher-yielding investments.

However, higher rates could also lead to elevated borrowing costs for the economy overall, prompting a pullback in business investment and expansion, potentially ushering in a phase of economic deceleration. (The real estate sector’s responses remain uncertain.) Moreover, the capacity of financial companies to manage unrealized losses hinges on their ability to maintain sufficient liquidity, and any disruption in the capital market or broader economy could lead to premature rate cuts, which may initially invigorate growth but also carry the risk of renewing inflationary pressures.

See also: The ABCs of Agency Planning for 2024

Mitigation Strategies for the Risks Ahead

During periods of uncertainties, correlations between asset classes typically shift, as we saw back in 2022 when both equities and bonds underperformed.

Figure 2 models how various sectors within the insurance industry investment universe might perform over a five-year period, both on average and in a tail scenario in which inflation ranges between 3.5% and 9.5%.

Figure 2 - Projected Five-Year Performance During Average and Tail Scenarios

To demonstrate further, we sampled two insurance company portfolios: a life company with a business mix of 50% individual life, 20% group life and 30% individual annuities, and a workers’ compensation insurer. Their investment strategies, both before and after they were modified to adjust to a higher-interest-rate environment, are in Figure 3.

Figure 3 - Sample Portfolios, Current and Altered Strategies

Figure 4 illustrates how total returns for both companies declined 0.4% and .2%, respectively, as a result of tail scenarios (in this case, an environment where inflation remains above target for an extended period) and how modifying the investment strategy can reduce the impact (the decline in returns improved from 0.4% to 0.2% for the life company and from 0.2% to 0.04% for the P&C company).

For both of our sample insurer portfolios, the key to navigating such environments lies in the flexibility and adaptability of their investment strategies. Such strategies might include investments in asset classes with a growth component or a natural inflation hedge or changing duration to better manage interest rate risk and mitigate some of the inflationary pressure.

Figure 4 - Sample Portfolio Projected Performance, Average and Tail Scenarios

We also point out how the modeling illustrates how the alternative strategies may improve portfolio performance in both the average and tail scenarios. While we are seeking to address the immediate concerns of a higher-for-long rate environment, we believe the dynamic nature of the alternative strategies offers significant benefits in other market conditions.

In scenarios in which the financial landscape undergoes meaningful changes, Conning also believes it is necessary to conduct a thorough assessment of a company’s investment portfolio to identify risks, level of diversification and areas for improvement.

The two charts in Figure 5 illustrate how we can adjust the investment portfolio of the workers’ compensation insurer with an optimal asset allocation, resulting in no change to downside risk (as measured by the 95% Value-at-Risk) but improving diversification benefits by 90 basis points.

Figure 5 - Projected Strategy Impact on P&C Portfolio’s Risk, Diversification

See also: 5 Key Mistakes in Long-Term Planning

Measuring Value at the Enterprise Level

When we examine the possible risks to both assets and liabilities, we can help insurers understand the adverse consequences to enterprise metrics such as net income, operating cashflow or surplus. It becomes essential to evaluate how a modified investment strategy can benefit the enterprise value of the company, not only investment yield or total return.

Using Conning’s proprietary modeling software, we’re able to measure the economic impact in each case and for each strategy. With a suitable strategic asset allocation (SAA) analysis, we’re able to assess such risks and adeptly adjust duration and introduce asset classes (such as specialty fixed income, collateralized loan obligations (CLOs), commercial mortgage loans (CMLs), equities, etc.) to help manage periods of uncertainty and market volatility. This helps position the company’s profile (assets and liabilities) to minimize risk exposure, enhance return and diversification and meet financial goals.

Figure 6 demonstrates how the alternative strategy for the workers’ compensation insurer outperforms the existing strategy in a normal steady state and the tail scenario (a period of above- target inflation).

Figure 6 - Projected Strategy Impact on P&C’s Enterprise Value

The negative impact on the company’s economic value was improved by more than $2 million in our example as a result of a timely optimal asset allocation. (Conning uses economic value as a measure of valuation, which reflects the market value of assets minus the discounted value of liabilities plus the value of future operations.)

Expanding to the full distribution of outcomes, Figure 7 illustrates the long-term economic value of the workers’ compensation company projections for both steady state and an environment in which inflation remains above target for some time. Although the alternative strategy introduces additional variations in results (comparing the two floating bar charts), the 99% Value-at-Risk (a measure of downside risk) remains stable (comparing the two strategies across the dotted red line), and economic value under the alternative strategy is higher.

Figure 7 - Projected Distribution of P&C Insurer’s Economic Value by Portfolio Strategy

Swift and Steady Can Win the Race

The ability to respond swiftly to the constantly changing economic environment can be a huge benefit to insurers. While our study focused on addressing higher-for-longer rate concerns, we think a dynamic approach to investment strategy offers rewards in most economic environments.

Whether addressing the intricacies of inflation risk, duration risk or the complexities of elevated correlation risk, strategic reallocation of investments must consider the intricate interplay among assets and liabilities (a nuanced and comprehensive approach) in the prevailing economic environment. Such meticulous assessments and strategic investment realignments are pivotal in mitigating the impacts, thereby optimizing the overall portfolio performance in the face of dynamic market conditions. 

Max Drucker, CEO of Carpe Data, said the quiet part out loud about insurtech last week. 

“Insurtech is never going to be exciting again,” he said. “Insurtech is never going to be a thing again like it was before. Companies like Carpe Data are going to be vendors to insurance carriers. Whether we’re providing data, whether we’re providing software, whether we’re providing services, we’re vendors.”

Some numbers back him up. Gallagher Re reported last week that global insurtech funding totaled just $912.3 million in the first quarter, which was down 17% from the fourth quarter and was the lowest total for a quarter in four years. The HSCM Public InsurTech Index has fizzled, down 55% from its peak in early 2021.

Many of the big storylines for insurtech have fizzled, too. Peer-to-peer models never amassed enough capital. Blockchain, while making progress, isn't going as fast as many hoped. The full-stack companies have been a major disappointment thus far. And Big Tech? Those expectations that Amazon, Google, Apple or some other giant would swoop in and redefine insurance as they have other industries? Nope.

So is Drucker right? Should we just fold up our tents, give up on profound innovation in insurance and go home?

That's a nope, too, in my opinion. But we do have to adjust our thinking some.  

I'll concede Drucker's point that lots of innovation, whether from startups or from incumbents, will go toward operational efficiency — what we used to call Better, Faster, Cheaper during the internet boom of the second half of the '90s. 

As he put it, according to an article in Insurance Innovation Reporter: “'We can do all these great, wonderful things for you' is not a sales pitch that carriers want to hear. It comes down to 'How do we cut costs,... how do we really get control of this business?’” Drucker added that incumbents are thinking: “‘The last thing I’m looking to do is really have to really engage in something big again because the last two years have been pretty rough, and so now we’re really just trying to stabilize.’”

In fact, I've said repeatedly that being an "arms supplier"--another term from the first internet boom --to carriers is the most reliable way for a startup to succeed, while trying to supplant them is a high-wire act. 

But it seems odd to give up on insurtechs right as generative AI is creating so many opportunities for innovation. Many of those, at least in the early days, will be of the Better, Faster, Cheaper variety, and many ideas won't pan out, just as happened with the big ideas from 2015-2020. But there sure is a lot of runway ahead for generative AI.

And not all the big ideas from the first wave of insurtech flamed out. The Internet of Things (IoT), in particular, is spreading sensors throughout homes and businesses in ways that enable a switch from the traditional repair-and-replace model for insurance to a Predict & Prevent approach. There's a lot of runway there, too.

Besides, the U.S. economy seems to have managed a soft landing, and recent softening in hiring means the Fed may finally start lowering interest rates in coming months. While rates were so low that money was almost free for years, rising rates in the past two years have greatly increased the cost of money, constraining new investment and leading to the sort of "profitability now!" environment that Drucker says startups are facing. Lower rates should start to loosen the purse strings, at least a bit.

If AI, IoT and falling interest rates aren't enough to convince you of the bright prospects for innovation in insurance, consider the sorts of opportunities Adrian Jones pointed out in a presentation at InsureTech Connect last November. Jones, who was co-head of a $200 million VC fund at the time and is now chief of staff, international and global markets at Acrisure, cited five insurance companies founded in the past 20 years that have built sustained, multibillion-dollar market capitalizations. (One happens to be Acrisure.)

The key was not breakthrough technology or the "move fast and break things" ethos of Silicon Valley. The key was finding a dislocated market and having an experienced management team that could exploit it — as opposed to the newcomers to insurance who ran many of the early insurtech startups, thinking their technology expertise would buy them time to learn about insurance on the fly. 

His presentation describes the five like this:

• Acrisure consolidated small retail distributors, which tended to be undercapitalized and often were looking for a succession plan. It was cofounded and is run by Greg Williams, who had 23 years of industry experience and had already founded two companies when he started Acrisure in 2005. It last raised capital, in 2022, at a $23 billion valuation.
• Ryan Specialty Group saw an opportunity when the Big 3 were forced to sell their wholesale distributors. It was founded in 2010 by Pat Ryan, who had 48 years of experience and had been CEO of Aon. It has a market cap of more than $6 billion.
• Athene spotted the opening in fixed annuities following the 2008 financial crisis. It was founded in 2009 by James Belardi, who had 23 years of experience and had been CEO of Sun America. It was acquired by a private equity firm in 2022 for $11 billion.
• Kinsale responded to strict regulation in admitted markets by moving into excess and surplus lines, especially for small risks. It was founded in 2009 by Michael Kehoe, who had 15 years of industry experience and had been CEO of James River. It has a market cap of more than $9 billion.
• Essent jumped into the market for mortgage insurance following the housing market collapse in 2008. It was founded by Mark Casale, who had 22 years of experience and had been an executive vice president. It carries a market value of $6 billion. 

"Insurance executives have been the biggest disruptors of insurance," Jones said.

All those companies were started years before the insurtech movement began, in 2015 or so, and they aren't based on technology, but they show the kind of highly profitable innovation that's possible in the industry. Carpe Data may see itself slotting into Better, Faster, Cheaper work at carriers — and loads needs to be done to make the industry more efficient — but other technologies and other types of innovation can still lead to profound improvement.  

Cheers,

Paul

Epidemiologists and virologists know that pathogens often mutate into new strains, forcing our immune systems – and vaccine development – to adapt. A recent cyber attack on a key entity in the healthcare supply chain has shown a disturbing evolution in cyber risk. As a result, healthcare organizations will have to adapt and expand their efforts to mitigate cyber threats.

On February 21, a division of UnitedHealthGroup, Change Healthcare, was struck by a ransomware attack. Change Healthcare is the largest healthcare payment platform in the U.S., acting as a clearinghouse for pharmacy and medical claims and payments. Recovering and reconnecting the platform has taken several weeks, and as of this writing, was continuing.

The attack on a linchpin of the healthcare industry’s payments infrastructure has disrupted patient care as well as provider operations. A large amount of data also was taken during the attack, but it remains unclear whether any records in the breach include protected health information, which is subject to data privacy laws, such as the Healthcare Information Portability and Accountability Act (HIPAA).

The attack is among the most serious in recent history, but it’s far from the only ransomware incident involving healthcare. Healthcare organizations of all sizes are targets for cyber criminals. A 2023 survey of more than 650 U.S. healthcare organizations by the Ponemon Institute found that 88% had experienced at least one cyber attack in the prior 12 months, with an average of 40 attacks per facility.

See also: Cyber's Evolving Threat Landscape

A good time to take action

Amid evolving cyber threats, growth in cybersecurity regulations and a changing insurance marketplace, healthcare organizations should take action now – to strengthen their cyber risk management programs and improve their protection.

Attacks like the one on Change Healthcare are likely to continue. Data breaches in lieu of, or in addition to, data encryption, also are likely. Perpetrators of other ransomware attacks have increased their extortion demands by threatening to release sensitive data on a victim organization’s customers or employees. A high-profile example is MOVEit, a 2023 ransomware attack on a widely used file transfer application. The MOVEit breach involved data breaches from at least 1,000 organizations around the world, including hospitals, universities, government agencies and global corporations.

The healthcare industry continues to attract cyber criminals, for multiple reasons. These include the industry’s dependence on technology systems, volume of sensitive data and the severe consequences of disruption to healthcare facilities. Indeed, healthcare experienced the most cyberattacks of any U.S. industry during the first half of 2023, according to a report on cybersecurity insurance by the National Association of Insurance Commissioners. The NAIC also noted the healthcare and public health sector had the costliest data breaches in 2021, averaging more than $9.2 million per incident. Notably, healthcare experienced the highest average data breach cost for 11 consecutive years, dating back to 2011.

Large data breaches are becoming more frequent for the healthcare industry, according to the federal agency that tracks them. The U.S. Department of Health and Human Services’ Office of Civil Rights found a 93% increase in the number of large breaches overall between 2018 and 2022, and a 278% surge in such breaches involving ransomware during that period. 

The frequency and severity of ransomware attacks in healthcare are concerning. Consider the financial and operational impact of just a few attacks, as noted in the 2023 Hospital Cyber Resilience Initiative Landscape Analysis, conducted by HHS, the Centers for Medicare & Medicaid Services and the Healthcare & Public Health Sector Coordinating Council:

• A California-based nonprofit healthcare company experienced a ransomware attack and data breach in May 2021 that resulted in an estimated $112 million expense from lost revenue, remediation and fines. The company separately paid $3.5 million to settle class-action litigation arising from the data breach, and several of its owned hospitals were forced to turn away patients.
• A university healthcare network in the Northeastern U.S. had a ransomware attack in 2020 that caused at least $21 million in damage. The healthcare network disclosed the impact of the event to warn peers: The ransomware attack shut down 1,300 servers, infected 5,000 endpoints and hundreds of applications and required working without email for 25 days (and without radiology systems for 40 days).

Understanding vulnerabilities

To be sure, hospitals and other healthcare organizations are aware of the risks that cyber events can pose to patient safety and their balance sheets. Yet, a vast number of healthcare entities remain vulnerable because they continue to run antiquated systems. In the Hospital Cyber Resilience Initiative report is a disturbing statistic: 96% of hospitals are using operating systems or software with known vulnerabilities, and that includes medical devices used in delivering patient care.

The report found hospitals have made significant progress in implementing email protection systems, but urgent improvement is needed in various areas, including: endpoint protection systems, identity and access management, network management, vulnerability management and security operation center and incident response. With incidents such as Change Healthcare occurring, hospitals should accelerate their efforts and fix vulnerabilities as soon as possible.

Four ways to enhance cyber protection

Healthcare organizations can take steps now to enhance their level of protection against cyber events. Here are four actions to consider:

1. Analyze your organization’s cyber risks. A cyber attack that encrypts the network and steals patient data, in addition to a ransom demand, can be devastating. Understanding the risks and quantifying vulnerabilities is a critical first step toward resilience, for healthcare and every other industry.
2. Assess risk in your supply chain. As both MOVEit and Change Healthcare demonstrate, the financial impact from a cyber attack on key suppliers and service providers can be severe. How reliant is your healthcare organization on third-party technology providers? What could happen to your organization if one of them was shut down for a week or more by a cyber incident? Answering questions such as these is important to building an effective business continuity plan and minimizing disruption to healthcare operations.
3. Explore options for cyber risk mitigation. Knowing about a vulnerability is only the first step. Next comes deciding on the best ways to mitigate or eliminate the risk. With cyber risk, various cyber security measures can reduce the possibility of loss. With key suppliers, contractual risk transfer and tighter vendor requirements regarding cyber risk management could be useful.
4. Revisit cyber insurance coverage. With the Change Healthcare attack, many healthcare organizations have put their cyber insurance carriers on notice for potential dependent business interruption claims, including net income loss and extra expenses. At the time of this writing, it remains to be seen if the associated data breach will increase these loss amounts. Now is the time to review cyber insurance policy terms to ensure that the limit, retention and breadth of coverage is appropriate.

See also: How to Build a Solid Cybersecurity Program

Cyber insurance market conditions continue to be competitive

Currently, the supply of cyber insurance coverage exceeds demand. As a result, healthcare organizations now have strong opportunities to negotiate more favorable terms and conditions for their cyber insurance policies.

Insurance prices have eased after multiple years of steep increases and tightened capacity due to record levels of ransomware claims in 2020 and 2021. Better underwriting practices and improved insured cyber security controls have attracted new insurance carriers to the market. The additional capacity helped stabilize prices in 2023. Competition has led to an easing of the tight terms and conditions that prevailed in prior years. Exploring the market can pay off in at least three distinct ways:

• Obtaining higher limits. Healthcare organizations may be able to purchase more cyber coverage than in the past given more carrier participation in the market.
• Reducing premiums and retentions. Competition and capacity available in the cyber marketplace mean healthcare organizations can potentially find lower-cost policies and shrink the size of their self-insured retentions, too.
• Removing sublimits, increasing overall coverage. More cyber insurers are willing to remove sublimits on certain coverages if healthcare organizations can demonstrate strong cyber security controls. This can lead to an increase in overall protection for cyber exposures.

Not taking the time to strengthen cyber risk management can lead to other risks for healthcare organizations, the most serious being degradation of patient care. The Ponemon Institute’s 2023 survey found different types of cyber threats directly affected healthcare organizations’ delivery of care. For example, 77% of respondents with supply chain cyber attacks reported the events disrupted patient care, up from 70% in 2022. Similarly, 69% of organizations with a business email compromise (BEC) or spoofing attack reported a care disruption, and 68% reported problems for patient care resulting from ransomware.

Taking advantage of opportunities in the insurance marketplace can strengthen healthcare organizations’ risk management programs, improve resilience and bring certainty in today’s volatile cyber risk environment.

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

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

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

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

See also: No-Code or Low-Code?

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

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

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

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

See also: How Life Insurers Can Leverage Generative AI

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

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

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

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

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

Controlling Rising Health Plan Costs for Large Companies 

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

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

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

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

See also: Insurers' Social Inflation Problem

Caring for a Diverse Workforce

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

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

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

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

ICHRAs Help Large Businesses Attract and Retain Top Talent

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

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

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

Methodology:

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

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

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

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

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

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

See also: How to Use Social Media Data in Underwriting

Adopt a 3-step daily routine. 

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

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

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

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

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

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

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

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

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

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

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

See also: Strategic Guide to Unlocking 'Gen Zalpha'

How to polish your social selling prowess.

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

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

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

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

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

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

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

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

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

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

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

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

Mid-sized Carriers, Large-Carrier Customer Experience

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

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

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

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

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

Beyond California

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

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

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

Sponsored by: ITL Partner: insured.io

Paul Carroll

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

Denise Garth

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

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

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

Paul Carroll

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

Denise Garth

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

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

Paul Carroll

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

Denise Garth

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

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

Paul Carroll

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

Denise Garth

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

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

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

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

Paul Carroll

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

Denise Garth

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

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

Paul Carroll

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

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

Denise Garth

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

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

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

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

Paul Carroll

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

Any final thoughts?

Denise Garth

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

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

Paul Carroll

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