To many, the threat of a chemical, biological, radiological or nuclear (CBRN) attack is informed by Hollywood movies and the occasional news report from Ukraine or Iran. Actual incidents, thankfully, remain few and far between, and in many cases are a result of direct state involvement. For example, the poisoning attempt in Salisbury or the successful assassination of Kim Jong-Un’s half-brother in Kuala Lumpur.

That said, our research shows broad terrorist intent to use CBRN material. And while such plots are infrequent, they do garner press interest because of the very mystery and intrigue they trigger within the general public. Much of the reporting can be unhelpful, with descriptors of a certain quantity of material commonly measured in “teaspoons” or “having the ability to kill X% of a population,” with little nuance on how that might be practically achieved.  

This type of reporting presents a challenge for the insurance industry. How to sensibly communicate CBRN risks and support clients in their risk management solutions?

Access to the facts from credible, well researched sources is the first step.

See also: Growing Number of Uninsurable Risks

CBRN incidents January to June 2023

As malicious risk advisers, the team at CHC Global undertake a six-monthly CBRN Risk Report. The latest edition, covering January to June 2023, identified two late-stage plots that were foiled in Europe and one high-profile death threat reported in the U.S. During this period, CBRN concerns driven by geopolitical maneuvering continued to feature in mainstream media, primarily due to Russian and North Korean activity. But the tangible use of CBRN appeared to be more likely at a sub-state, decentralized level.

This trend is aligned with the broader commentary around terrorism threats in the advanced economies, where risk of detection and interception by intelligence and security forces has very much reduced the possibility of larger groups organizing and initiating attacks. Key terror risks are now really confined to lone actors, many of them self-radicalized, seeking to conduct low-level attacks using whatever means are readily available to them.  

In the same period in Germany, police arrested an Iranian man in the city of Castrop-Rauxel for allegedly plotting an “Islamist-motivated” attack using cyanide and ricin. The man’s brother was also arrested in connection with the plot. It transpired that no poison was discovered at the man’s residence, and reports made no mention of any viable method for producing or acquiring cyanide or ricin. It is unclear how far the alleged plot had developed, but police did seize electronic devices while searching the suspect’s residence. Following this, authorities stated they believed action needed to be taken as soon as possible. Ricin is a highly potent toxin that can be lethal if injected into a person’s bloodstream, inhaled or ingested. According to the U.S. Centers for Disease Control and Prevention (CDC), testing indicates that a dose as small as three milligrams of inhaled ricin can kill an adult.  

Athens police, with assistance from Israeli national intelligence agency Mossad, arrested two Pakistani nationals, reportedly foiling a plot to conduct a mass-casualty attack on Israeli and Jewish targets in the city. Police stated that a planned attack was imminent, and an unnamed Greek official revealed that one target of the plot is believed to have been a chabad house (Jewish community center). Israeli National News reported that the individual who led the planning of the plot, based in Iran, had attempted to source “poison gas” that was intended to flood the target site with noxious fumes and harm as many people as possible.

Insurance considerations and CBRN Risk

Balanced reporting of the facts will support the insurance industry to sensibly communicate CBRN risks to their clients. But how to support clients in their risk management solutions?

The inclusion of CBRN cover in terrorism insurance policies can vary, depending on the insurer and the specific policy wording. In the U.K., terrorism insurance typically covers damage or losses resulting from acts of terrorism as defined in the Terrorism Act 2000. Given that the consequences of a large event could result in the loss of many billions, the majority of cover in the U.K. is reinsured through Pool Re, though CBRN policies are offered outside this state-backed scheme.

While the CBRN perils tend to be grouped for convenience, the specific nature of the materials, their damaging effects and the potential longer-term consequences on people, property and business operations vary significantly. A hazardous chemical gas, such as chlorine, can disperse in a few hours and is unlikely to require any active decontamination. Conversely, a dispersed radionuclide, such as caesium-137, can continue to pose a health hazard for decades, with costs accumulating rapidly – for decontamination, building demolition, hazardous waste removal and rebuilding.

A further complication in these highly technical risk management processes is the impact on both public perception and political leadership. While response to an event will be initially governed by operational scientific and medical advice, progress of the hazard and risk management processes will inevitably be influenced by how the wider public reacts to the reported news – and how political decision makers choose to resolve the situation.  

The consequence is that the ability of an insured party and their underwriters to influence the timings and nature of issue resolution and return to normality is somewhat out of their hands. In spite of a whole range of decontamination activities, one of the commercial properties affected by anthrax after the 2001 "Amerithrax" attack remain unoccupied for years. This was not because of any detected residual hazard but simply that no insurer would offer employee liability cover. And as we saw in the Salisbury Novichok event, some properties were cordoned off for over a year.  

See also: How to Plan for Armed Intruders

Low-probability, high-impact events

The insurance industry must put into context that the likelihood of a CBRN attack might be low, but the impact is high and potentially catastrophic for organizations and people. We only have to look to COVID-19 to see how quickly a biological attack could affect organizations and individuals worldwide. 

In this context, insurers should ensure they have access to credible information sources about the realistic threats a CBRN attack might present. And then highlight to their clients the potential threats and impact these types of attacks could have on operations, employees and claims – so organizations can take the necessary steps to manage their risk.

When I entered the insurance industry out of college, the recruiting toward millennials was on point. I was courted to feel like I could bring my whole self to work, all of my identities — my Blackness, my quirks, my ambition and my curiosity. But when I arrived in all of those ways, I realized that, in practice, the authenticity-at-work concept was still a work in progress.

An overwhelming amount of data shows that more people, especially millennials and Gen Z, want their labor to affect the world in meaningful ways. As idealistic as it seems, social responsibility is an important aspect of mental wellness. The COVID-19 pandemic showed us how important interpersonal connection is for our well-being.

The insurance and risk management industry has a reputation for being self-serving. Outsiders perceive insurance companies as striving to deny claims or at least pay as little as possible. Whether that’s true or not, there’s another side to insurance. 

As an industry, we need to educate prospective employees about the ways that insurance policies create a safety net for the infrastructure of the economy, real estate, schools, churches — every industry is secured by a compulsory insurance policy, where it’s a liability policy or workers’ compensation. Educating younger generations on both the tangible and abstract ways that insurance supports people, places and things can help connect the dots between the daily work and the broader missions of many insurance organizations (beyond shareholder profit).

Once we’ve convinced millennials and Gen Z that there are good things happening in this industry, retention is paramount. I learned the phrase “big ship, slow to turn” while working for larger insurance carriers. As I navigated career development, I intimately understood what that meant. Research from the financial services industry shows that Black professionals tend to plateau at middle management, as the executive ranks are peppered with disproportionately low numbers of Black leaders.

See also: Solving the Talent Crisis in Insurance

I’ve observed these phenomena in my own career. Looking around my office, I noticed a large proportion of my Black colleagues of various ages in lower-complexity claims positions, while the higher-complexity claims teams lacked the diversity that initially piqued my interest about the company. Scanning the org charts for people who look like me, I found few Blacks in positions with greater authority, responsibility and pay bands. Disheartened with this grim reality, and impatient with what felt like stagnation, I realized that, traditionally, it’s expected that you stay in your role for several years, possibly collecting small merit increases annually, and then look upward toward the next step.

I appreciate that there is value in remaining in the same position for a while, reaching a level of proficiency, then taking on additional responsibilities. Nonetheless, inflation outpaces merit increases, and employees’ desires to make more, faster, especially when excelling in their roles, isn’t unreasonable. 

To address the talent shortage, the insurance and risk management industry should consider looking within. As the talent ages, millennials are maturing, ready to develop into the next leaders of the industry.

The youngest millennials are now 30 years old, and we’ve got families and homes and live real adult lives. It’s time for industries to start appreciating the talent and maturity of a growing generation.

KEY TAKEAWAY:

--The primary value proposition for offshoring – more work at less cost – is declining with digitalization. And AI technologies, when implemented right, can make processes cheaper, better and faster than manual processing and deliver significantly improved customer experience. 

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Everyone is talking about artificial intelligence, especially generative AI, the breakthrough technology that brings the capability to learn from experience and to “think” in almost-human terms.

It is certainly true that using AI in the insurance world promises extraordinary benefits. To date, the AI-enabled innovation receiving the most attention is the increase in efficiency by automating mundane tasks.  Other benefits that are becoming part of the AI buzz include its potential for lowering risk, improving compliance, gaining business insights from predictive analytics and achieving higher profitability. 

One area that has not yet been addressed is the fate of process outsourcing, which has become standard practice for insurance firms over the last two decades. Can generative AI replace the advantages that insurers and brokers sought to achieve by offshoring? Will business process outsourcing disappear? Is there a place for it in the automated world of the future?

The State of Process Outsourcing  

Twenty years ago, labor arbitrage was big news. By taking advantage of low wages paid in other parts of the world, American companies discovered that they could save considerable operational costs. Soon, most firms had an office in Ukraine, India, the Philippines or other countries where labor costs were a fraction of those in the U.S. Expenses dropped.

However, over the last two decades, unforeseen developments have clouded this rosy picture.

The initial expense of hiring and training this international workforce was substantial. There was -- and is -- considerable competition for skilled individuals who are fluent in English and who could be rapidly trained to perform the required tasks, quickly and accurately. Over time, labor costs increased as salaries rose to be competitive. The costs of recruiting, training and providing facilities for this overseas workforce have also gone up. Consequently, savings from process outsourcing are less attractive today.

Unanticipated risks and complications associated with process outsourcing can be disruptive. For example, a volatile geopolitical climate can disrupt operations, as has happened in Ukraine, which is the location of many outsourced operations. 

As companies grow and acquire other firms, the process of training, adoption, integrating legacy systems and developing workflow processes must be repeated with the offshore organization. These significant efforts detract from the value the acquisition is supposed to bring to the parent organization and can be very frustrating to the staff involved. Similar adjustments must be made with the introduction of new technologies, and opportunities for insights from predictive analytics were not realized because data was siloed and some vendors declined to share data for analysis.  

Offshoring also had unanticipated downsides for the American workforce. Employees experienced considerable demoralization as people were laid off (including colleagues they had worked with for decades) and jobs disappeared across an ocean. Fear of losing one’s job eroded company loyalty, and workforce reductions thinned the ranks of skilled and experienced people here in the U.S. 

See also: AI: The Future of Group Insurance

In-Country Outsourcing

Not all outsourcing occurred offshore. Some functions were given over to outsourcing centers in the U.S. These arrangements avoid some of the risks of offshoring; however, manual processing still requires resources for staff, takes time and is not scalable. 

Regardless of the location of the outsourcing organization, one reality working against efficiency remained. 

While costs may have been lower, processing times were still an issue. Having tasks performed by humans still took time. Policy reviews and other tasks required people to review the documents, do the analysis, check their work and perform any necessary research to verify accuracy. Customers and U.S.-based staff could still experience significant time lags in getting documents analyzed and returned, no matter the location of the outsourced workforce. 

Comparing Options

A comparison of different options shows the advantages and disadvantages of three approaches: manual in-house processing, manual outsourced processing and processing by artificial intelligence. The task compared below is policy checking and verification.

Manual In-House Processing: Requires approximately 60 minutes of a customer service representative’s (CSR) time. This staff time, especially at the account executive level, could be better spent focused on customer needs. There is no standard output and no future reference on reviews. 

Manual Outsourcing Processing: Approximately 30 minutes of time from a CSR, in addition to the time taken by the offshore team to pick up the job and start processing it. The process is not scalable, there may be quality and data security concerns and there is no comparison of language in the forms by the outsourcing company. As seen during the pandemic, offshore teams were unavailable, thereby delaying E&O checks significantly.

AI Processing: Approximately 10 minutes of time from a CSR. Processing is instant, there is no lag time irrespective of volumes or peaks. AI also delivers instant confirmation of variances, there is a broader risk advisory, differences in language are highlighted and insights are offered in real-time.

See also: Overcoming the Challenges Posed by AI

The Value Proposition of AI

The primary value proposition for offshoring – more work at less cost – is declining with digitalization, which is defined as the process of using digitized data (encoding data by converting it into a digital format, like PDFs for insurance policy documents) to improve workflows by process automation. Intelligent automation has significant advantages over outsourcing to humans in any setting. AI technologies, when implemented right, can make processes cheaper, better and faster than manual processing and deliver significantly improved customer experience.  

Speed. With AI, complicated data can be analyzed and vetted within minutes and hours, not weeks and months. 

Accuracy. The service level standards achieved by AI exceed those offered by outsourcing services, consistently delivering accurate results faster and with fewer errors.

Instant business insight. With insights gleaned from the analytics performed by AI, executives have fast, accurate information to make better business decisions, increase profitability and even capture new sources of revenue. Implementing intelligent automation with AI allows the entire organization to be “flattened,” with few layers, immediate access to information and the ability to share and act on insights right away. 

Savings. The savings achieved from no longer funding outsourced centers or third-party vendors can be redirected to covering operational expenses.

Increased value of American jobs. With the AI revolution, unlike the offshoring migration of 20 years ago, the jobs of American employees are not at risk. In fact, their jobs will be enriched because workers are now armed with accurate data much more quickly than before. Employees have more time to spend on tasks that are client-facing and that deliver high value to customers instead of mundane repetitive task work. As these employees deliver greater value, their own value increases, as well, making them worth more. Automation has historically created specialized positions, which improves the workforce production, earnings and morale.

Will outsourcing disappear with AI? The answer must take into account the role that manual process intake plays with AI. An AI model is only as smart as the data fed into it. This data must be input to a level to educate the model and to continue to allow it to become “smarter” over time. So, manual input will continue to be with us, whether offshored or outsourced in the U.S., but on a much more limited basis once insurance companies adopt AI models. 

Undertaking this shift from offshoring to in-house automation is critical to the success of every company in the insurance sector. Fortunately, this transition does not have to be as disruptive and painful as the rush to offshoring was 20 years ago, if this shift is approached with an understanding of change management. It’s important to undertake this seismic task with an end-to-end plan, versus spot solutions, and to have partners with insurance sector expertise who can develop the customized solutions that an individual company will require. The first step is to understand the ramifications and benefits of this transformation, and that it is inevitable for companies that want to be the market leaders of the future.

Picture this: Your customer needs a high-risk surety bond with a large bond limit. You submit an application to your traditional surety carrier on your customer’s behalf and receive a response indicating that the bond will not be approved unless your customer provides financials. What ensues is an arduous series of back-and-forths between you, the underwriter and your customer in an attempt to provide the surety company with the required information. The underwriter then manually reviews your customer’s financial information, and, after what feels like an eternity, your customer’s bond is issued. 

This is how financial underwriting works in the surety industry. 

Now picture this: Your customer provides their financial information directly through the bond application, the surety provider’s software automatically reviews the information in seconds and the bond is immediately quoted and ready to be issued. Your customer is amazed at how easy it was to obtain a high-risk bond, which in turn makes you look extremely good. 

See also: How Automation Can Address Today's Growing Underwriting Challenge

What It Is 

Automated financial underwriting allows the surety provider to systematically review financial statements, verify assets and underwrite the risk without human intervention. With automated financial underwriting, the surety provider can instantly quote and issue bonds that previously took hours or even days due to the need to review financial statements. 

Without automated financial underwriting, human underwriters must carefully review each aspect of your customer’s financial statements. This can cause exasperating delays. 

Why It Matters 

President Theodore Roosevelt famously said, “Nothing in this world is worth having or worth doing unless it means effort, pain [and] difficulty…” I would counter that Teddy never tried to obtain a surety bond that was subject to financial underwriting. 

Automated financial underwriting presents a better path forward for agents than the status quo and eliminates one of the primary pain points associated with obtaining larger surety bonds.

Establishing long-term business objectives is a must for continual growth and success. Obstacles and new opportunities will constantly arise for entrepreneurs, and long-term company goals act as a guiding light leading the way toward a prosperous future.

The key lies in foresight and adaptability and in understanding the business landscape.

In my journey as the creator of the 9-Year Letter Method (a goal-setting system for the four pillars of life - relationships, financial, health, and fun), I have discovered many critical mistakes entrepreneurs typically make during their goal-planning.

Here are five to avoid, to strike a balance between ambition and practicality, ensuring sustainable success:

Ignoring Financial Feasibility

Having a vision ignites excitement, encourages innovation and drives teams forward. However, without in-depth, practical evaluation, this vision can easily turn into wishful thinking. One common mistake that many entrepreneurs make is setting targets (such as doubling monthly sales in a set timeframe) without fully grasping the financial implications and responsibilities associated with these goals.

Setting a goal requires a clear plan to achieve it. For example, if your goal is to grow twice as large in a 12-month period, several questions need to be addressed:

• Staffing Needs: Will scaling your operations require new hires? If so, how many? And how much will the added salary expenses be?
• Marketing Budget: Expansion typically requires amplified visibility and outreach. Have you calculated the projected marketing costs, including campaigns, promotions and possibly new channels or platforms to target?
• Affordability: Perhaps the most crucial question revolves around the company's current financial health. Is there sufficient cash flow to support this growth spurt? Can the company manage the necessary investments without jeopardizing its overall stability?

Basically, ambition determines where we want to go, but financial planning helps us get there. This delicate balance between our dreams and practicality is often maintained by having a crafted strategy.

Overlooking Current Successes

As business leaders venture into new territories and seek out growth opportunities, it's not uncommon for them to get caught up in all the possibilities and overlook the very foundations that led to their initial success. These core elements, whether a product, a unique service, an efficient process or a lucrative marketing strategy, have already proven their value. Why alter all of it just for the sake of change?

While pursuing innovation is important, it should never overshadow the significance of maintaining the quality that existing customers expect. Building on established strengths provides a base from which to explore new ventures. In many cases, the best strategy isn't to reinvent everything, but rather to refine and expand on what is already working. Pinpoint all the elements in your company that work well and brainstorm ways to improve them.

See also: Opportunity Now and in 2024

Neglecting Existing Challenges

When setting long-term business goals, many companies driven by a forward-thinking mindset tend to overlook existing inefficiencies and flaws. However, it is crucial to constantly acknowledge weaknesses and consider the challenges they may pose. Left unattended, these issues can become obstacles to growth. For example, if a hiccup in a business process is ignored while the company expands, this hiccup can turn into major systemic failure.

Therefore, before planning for expansion, it is crucial to review current operations. Identify any bottlenecks, strategies that are underperforming and areas where customers may be dissatisfied. You can then develop long-term strategies that not only propel your company forward but also address any underlying weaknesses. Essentially, real growth isn't about moving; it's about strengthening the foundation so unresolved issues from the past don't hold your business back as you reach new heights.

By prioritizing resolving issues, you can create a strong foundation for your company and pursue your long-term goals without being hindered by problems. It is essential to strike a balance between addressing challenges and nurturing aspirations.

Making Goal-Setting Exclusive

Every successful business relies not only on its management but also on the collective efforts of every employee, from newcomers to experienced leaders. So it would be shortsighted to limit goal-setting processes to boardrooms. Excluding the majority can result in disconnects, misalignments and missed chances for innovation. 

Enabling all staff members to grasp the company's direction and their own roles within that broader vision fosters a united workforce. Businesses can then truly leverage the strengths of their entire team and achieve sustainable progress.

Additionally, fostering such an atmosphere helps build an adaptable organizational culture. When challenges arise, the entire team is committed to overcoming them.

See also: Why Innovation Fails (and How You Can Succeed)

Being Overly Detailed

Today's fast-paced business environment is always changing. Technology keeps advancing, market trends shift and consumer preferences can be unpredictable. It is crucial to understand the complexities of this evolving landscape when setting goals, but trying to plan every detail for the future can sometimes be more constricting than helpful.

It's key to create a plan that aligns with your business timeline, whether that's a few months or a couple of years. This short-to-medium-term plan gives you direction while still being practical and relevant in the present. However, when it comes to long-term plans, being rigid and holding on to outdated strategies while the world around you changes can lead your company into trouble. While your company's mission and destination stay the same, the path you take to get there should be adaptable and responsive to the changing dynamics of the business world.

To Wrap It All Up

Carefully establishing long-term objectives will guide your business's path toward the future. This requires a balance between visionary thinking and strategic planning.

When setting long-term goals, avoid making critical mistakes such as overlooking current successes and challenges, ignoring financial feasibility, excluding employees when pinpointing objectives and being overly detailed. 

In today's dynamic business environment, the quest for innovation and growth is relentless and competition stiff. Liquidity is crucial for companies operating in these competitive and evolving environments, especially when pursuing growth and innovation.

Liquidity provides the financial flexibility necessary to seize opportunities, navigate uncertainties and fund strategic initiatives. In dynamic markets, having readily available cash, or assets that can be quickly converted into cash, ensures that businesses can invest in research and development, adapt to changing circumstances, make acquisitions and respond swiftly to emerging trends. Without liquidity, businesses risk missing out on opportunities, becoming vulnerable to financial setbacks and falling behind their more agile competitors.

One often-overlooked but potent tool to improve liquidity is captive insurance. In this article, we’ll first look at why liquidity issues impede innovation and growth, then address how a captive insurance company can be used to boost liquidity and secure innovation.

A Stifled Spark: How Cash Flow Challenges Hinder Innovation

Cash flow is the lifeblood of any business, and its importance cannot be overstated. Numerous businesses struggle to maintain consistent positive cash flow. The lack of essential funding can result in delayed payments, difficulties in meeting operational expenses and a limited ability to invest in vital areas such as research, development and innovative projects. Additionally, organizations confronting persistent liquidity challenges may be at risk for bankruptcy or closure; a significant number of startups and small businesses succumb within their first few years of operation. 

These financial constraints directly affect innovation, preventing companies from investing in research and development and potentially causing them to fall behind competitors with more substantial resources dedicated to innovation. Furthermore, reduced access to capital can hinder the ability of startups and small businesses to embark on strategic partnerships crucial for market expansion and growth. This lack of liquidity also impedes market expansion efforts, restricting businesses from venturing into new markets or diversifying their product and service offerings. 

See also: How to Stop Claims Leakage

Why Captive Insurance Emerges as a Solution to Liquidity and Thus Innovation

Captive insurance, a unique and versatile financial strategy, has emerged as a pivotal tool for businesses seeking to bolster their financial stability while simultaneously driving innovation and growth. Unlike traditional insurance models, captive insurance involves the creation of a subsidiary insurance company, typically owned by the parent organization, to provide coverage for specific risks. This innovative approach not only allows businesses to tailor insurance coverage to their precise needs but also offers a pathway to significantly improve liquidity—a crucial factor in today's competitive landscape in the following ways:

1. Risk Mitigation and Cost Savings: Captive insurance reduces reliance on external insurers, leading to cost savings that can be reinvested in innovation and growth.
2. Tailored Coverage: Businesses can customize insurance coverage to efficiently address unique risks associated with innovation projects.
3. Profit Generation: Captive insurance companies can generate profits that contribute to a business' liquidity and can be used for innovation.
4. Flexible Capital Deployment: Captive insurance offers flexibility in deploying capital, allowing businesses to channel funds into innovative initiatives instead of premium payments.
5. Strategic Moves: Captive insurance serves as a source of liquidity for strategic initiatives such as mergers, acquisitions or capital investments.
6. Long-Term Planning: Integrating captive insurance into long-term planning ensures financial stability, providing a foundation for innovation and growth.
7. Competitive Advantage: Effective risk management through captive insurance can give businesses a competitive edge, enabling them to seize opportunities for innovation and growth.

An Example of Captive Insurance in Action

Imagine a technology startup, CIC Services Tech, that has been growing rapidly but faces substantial cash flow challenges due to the volatile nature of its industry. CIC needs to invest in cutting-edge research and development (R&D) to stay competitive but is struggling to secure external funding at reasonable terms.

To address this, the company establishes its captive insurance company, CIC Services Insure. Instead of relying solely on traditional insurers, CIC Services Tech now insures certain operational risks through CIC Services Insure. This move allows CIC Services Tech to reduce its insurance premiums, conserving valuable cash.

With the cost savings from reduced premiums, the company can allocate more resources to its R&D initiatives, fueling innovation in product development and staying ahead of industry trends. Additionally, the improved cash flow lets the company seize strategic opportunities, such as acquiring a smaller competitor with innovative technology.

As a result of effective liquidity management through captive insurance, CIC Services Tech not only strengthens its financial position but also fosters a culture of innovation. This allows the company to maintain its competitive edge, consistently bring innovative products to market and achieving sustainable growth in a challenging industry.

See also: When You Have Too Many Good Innovation Ideas

Conclusion

Liquidity is the bedrock of success, enabling companies to innovate and grow. This article has underscored the crucial role of captive insurance in bolstering liquidity. By customizing coverage, reducing costs and generating profits, captive insurance frees resources for innovation and strategic ventures.

Proficient liquidity management not only strengthens financial foundations but also nurtures a culture of innovation, empowering companies to maintain a competitive edge and attain sustainable growth.

Small businesses are the backbone of our economy, driving innovation, job creation and economic growth. But growing a small business comes with uncertainties and the constant need for adaptation. These variables don't just affect a business' bottom line; they influence how businesses think about risk mitigation and the insurance policies they need to future-proof what they've worked so hard to build.

At Counterpart, we recently took the pulse of over 300 small business owners and CEOs across the U.S to get a snapshot of what is top of mind as they look toward 2024. The results indicate that the resilience and agility of small businesses continues to be tested by an increasingly volatile operating environment.

Small Businesses Remain Optimistic Despite Challenges

2023 has been marked by sustained high inflation, lingering supply chain snarls and a difficult hiring environment. Yet the determination of American entrepreneurs prevails; small businesses remain optimistic about the economic outlook and the future of their businesses. Roughly 45% of CEOs and business owners believe the economy has improved in the past year, and over 53% report they're optimistic about the future of their businesses.

Despite this optimism, many of the issues that have cast a shadow over the post-pandemic years continue to cause headaches. Inflation is top of the list, followed by supply chain disruption. While inflation may be largely out of the control of business leaders, steps can be taken to minimize its impact. These could include purchasing in bulk, exploring cheaper lines of credit or, if necessary, increasing prices.

See also: Building an Effective Risk Culture

Right-sizing the Workforce

Our survey also revealed that CEOs and business owners are increasingly looking to right-size their workforce. Human resource issues are among the top concerns for business leaders as they work to ensure they have the right workers with the right skills in every role. Recruiting and employee retention were the third and fourth most frequently cited challenges.

As business leaders restructure and rebuild their workforces, we can expect layoffs for the foreseeable future, with four in 10 owners and CEOs indicating they anticipate layoffs. This outlook will create a tricky landscape to navigate; it's important that company leaders understand their legal obligations when it comes to layoffs and terminations. Employee rights and termination laws vary by state, and new regulations are often introduced. Companies without dedicated HR teams should consult with a legal expert before conducting layoffs or terminating employees.

Understanding Exposures and Managing Risks

In the aftermath of the pandemic, and as the corporate and regulatory landscape continues to become more complex, small businesses are very conscious of their exposures. Almost all CEOs and business owners say they understand their exposures, and a quarter have significantly expanded their business insurance coverage over the last year.

Even with this high degree of confidence in understanding risks, it's important that small business leaders consult experts, to make sure their businesses have adequate insurance coverage. Insurance agents and insurance carriers are key stakeholders in helping small businesses better understand their weaknesses and potential exposures. They can offer important guidance and custom risk assessments; businesses can understand their unique operating risks and work with insurance experts to develop preventative strategies and practices.

See also: Biggest Business Trends for 2024

Increase in Insurance Costs and Coverage

Over 65% of CEOs and business owners say business challenges are continuing to increase, which will have a knock-on impact on insurance coverage. As insurance costs continue to rise, small business leaders can do their part to drive down their premiums by reducing risks. Companies should implement employee training programs for common risks like sexual harassment, workplace safety and cyber security. These actions will help small businesses reduce their risk of claims and can help lower overall insurance costs. Businesses can create safer operating environments with fewer exposures.

Small businesses navigate an ever-evolving landscape, with unexpected hurdles around every corner. Anticipating challenges, understanding risks and mitigating potential threats can help clear the path to allow leaders to grow their business with confidence.

KEY TAKEAWAY:

--Companies are losing out on so much when every product relies on a different tech stack -- a different billing system, different contracts, different vendors and so on. Consolidation can save money. It can smooth the experience for customers who buy more than one product. And it can help organizations get more out of their customer relationships. If a customer is purchasing more than one kind of life insurance, it is easier to track their data if all of your products are using the same tech stack.

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We are at an inflection point in the life insurance industry, and now is the time for carriers to transform their technology and make their products more accessible to everyone. It can be difficult for large organizations to make meaningful changes to their platforms, but the short- and long-term benefits can be substantial.

Life insurance carriers want answers to questions like, What more can we learn about our business? How have the market and field response to our product lines changed? But getting answers to these questions can be difficult on legacy or fragmented systems where the data is everywhere and often unusable. 

The importance of modern cloud-native technology

Most life insurance companies sell more than one product, and diversified revenue is great, but companies are losing out on so much when every product relies on a different tech stack.

Think of it like smartphone apps. There are easily eight apps you want on your phone. But you are not going to go out and buy a smartphone for each app. Yet, that is how many enterprises had been forced to set up in the initial days of legacy systems. If they have eight products, each one has a different billing system, different contracts, different vendors and so on.

Not to mention, carriers are requiring customers to interface with different platforms every time they want to consider a new product. It is also not unusual for customers to have to start from scratch when trying to buy a second or third product from a carrier, even though most of the questions are redundant. The fragmentation creates unnecessary work for everyone and a bad user experience for both customer and distributors.

There are many incentives for life insurance companies to standardize onto one technology platform. Not only can consolidation save money, it can help organizations get more out of their customer relationships. If a customer is purchasing more than one kind of life insurance, it is easier to track their data if all of your products are using the same tech stack. 

See also: How to Find (and Keep) Tech Talent

The power of cloud-native technology

Upgrading technology can be a huge undertaking, and high levels of thoughtfulness are warranted. After all, making such a big change can come with some risk. In 2023, you want your software to be cloud-native. There is a considerable difference between cloud-native software versus just hosting a legacy or monolithic system in the cloud.

Cloud-native means the code is written and orchestrated in smaller containers. While this does not necessarily mean cloud-native technology is immune to bugs, it does mean that finding and fixing bugs is often much faster and easier, and not to mention more easily restricted to less severe types. With old systems, it can take days to find and repair a glitch — and time is literal money, with companies easily losing millions when they struggle with outdated systems.

FOMU: Fear of messing up

If the business benefits of upgrading your technology are clear, what could be holding people back? Many times, FOMU: Fear Of Messing Up. Change can often be perceived as more risk than opportunity. There may be concerns around distributor and client adoption. There may be concerns about internal pushback or a lack of resources. 

When FOMU takes over, the easiest decision is always to do nothing, even if the way things currently “work” is not ideal in many ways. The effects of FOMU may sometimes even override potential improvements in topline revenue and bottom-line cost savings that would come from eliminating older systems and technical debt. 

This is when another powerful factor may come into play: competition.

Many life, health and annuity product lines operate in extremely competitive markets, and when early adopters break the norm to offer a substantially better experience than traditional peers, there often are material movements in market share and operational efficiency, which in turn become the catalyst for change.

Ultimately, the best experience in combination with a fair product setup almost always wins, both within and outside life insurance. It is an exciting time for many companies in the space contributing to this effort, making innovative options available across the industry.

Small businesses (SMBs) are a busy bunch. On any given day, they might be fulfilling orders, engaging with customers in-person, managing staff, doing their books — plus dozens of other tasks. Most would relish an opportunity to gain back an extra hour, or save some money.

Luckily, those goals (and others) are attainable thanks to artificial intelligence (AI) and marketing automation. These technologies can help small businesses, including many insurance agencies, work more efficiently, drive more sales and improve the ways they are marketing themselves – without creating more of a headache or a time suck.

We recently published a report at Constant Contact called, Small Business Now: An AI Awakening, that outlines how SMBs like insurance agencies are thinking about AI and automation, and some of the results that early adopters are seeing. With insights from nearly 500 small businesses across the U.S., the study reveals how these technologies can enhance marketing effectiveness and help SMBs save time and money. 

Here are the 10 stats:

1. Challenge Accepted: 60% of SMBs say their biggest challenge is attracting new customers, while 39% say it’s marketing to their target audience.
2. Piqued Interest: 74% are interested in using AI or automation in their business, and 55% reported that their interest in using these technologies grew in the first half of 2023.
3. Off to the Races: 26% are already using AI or automation, and the top use cases are social media (52%), generative content creation (44%) and email marketing (41%).
4. Proven Success: 91% of the small businesses polled say AI has helped make their businesses more successful.
5. Reaping the Benefits: 60% of small businesses that currently use AI or automation in their marketing say they have saved time and are working more efficiently.
6. First Step, Social Media: SMBs say the easiest places to start leveraging AI technology are social media, content creation and analytics.
7. Financial Gains: 28% of SMBs expect AI and automation to save them at least $5,000 in the next year.
8. Increasing Efficiency: 33% of small businesses estimate they have saved more than 40 minutes per week on marketing by using AI or automation.
9. Top Concern: 44% of small businesses noted data security as their top hesitation about using AI.
10. Value Recognition: The more SMBs use AI, the more they value it. 70% of SMBs would be willing to pay more to access AI and automation. 

See also: To LRO and Beyond: Using Generative AI to Get the Complete Picture for Businesses that Lease Space

So, what do all these stats mean? I’m glad you asked.

AI is here to stay. The small businesses that are currently using tools powered by AI overwhelmingly agree that it is making their businesses more successful. They are working more efficiently, saving money, improving customer experiences and growing quicker.

So, if you’re an SMB that is either starved for more time in your week, or you want to improve the way you engage with your customers without adding extra marketing work to your plate, don’t write off AI as a passing trend. Give it a try, and you might be surprised about the results you see.

Everyone involved in selling, buying and using insurance is experiencing a challenging market. Catastrophic weather, inflation and economic conditions have made it difficult for insurers to pay claims and maintain a profit. Some have pulled out of markets, others have announced they’re not taking on new business and many are raising rates. 

There are new risks everywhere, and Lessor’s Risk Only (LRO) insurance, which provides coverage to building owners from claims from tenants, is no different. It can be challenging – for both businesses and insurers – to understand various risks associated with rental office space. Is there a restaurant renting space on the ground floor of the building? Does the foot traffic from a medical office or store raise issues? Is there a manufacturing firm on the premises?

Insurers can’t write insurance for a business if they don’t have a complete view of the risks associated with a commercial space. In fact, for businesses looking to acquire LRO coverage, a policy could end up being more expensive than it needs to be if an insurer is working from limited information. 

Enter generative AI technology. The technology offers real-time information insurers need to fully understand businesses’ risk profiles. The data not only delivers information on occupant risk factors but can be used to streamline other underwriting processes and identify business opportunities. 

Here are four ways generative AI enables insurers to improve LRO underwriting to grow business: 

1. Better insights and increased accuracy: Many insurers say they don’t always have a good understanding of the businesses occupying a building. For instance, the underwriters might be working from historical data that isn’t always up to date. Or the client might only have limited knowledge of the renters in the building and provide the agent incomplete information. 

Using generative AI and large language model technologies, insurers can get real-time insights into tenant occupancy risks. These technologies use publicly available, structured and unstructured data so insurers are working from the most current information.

Generative AI also enables insurers to continue to get insights on a property during the entire policy term. Renting is fluid and can often have significant turnover. Businesses that occupied a space at the beginning of a policy might change over the course of the coverage period. Insurers can now monitor exposures and decide if the policy needs to be updated based on new risks. 

2. Faster decisions on risks: Spending time researching a business or property to understand its risk profile is not only slow but also wasted time if the entity ends up outside of the insurer’s risk appetite. Generative AI can enable insurance organizations to pre-qualify a prospect’s risk profile in a matter of seconds, with just a business name and address. The insurer can then quickly determine next steps.

See also: Supply Chain 4.0: The Digital Transformation

3. Prospecting opportunities: When insurers use LRO to underwrite a building, they are presented with a list of current occupants. This could identify other potential prospects within that location. For example, an insurer that targets takeout restaurants might be looking at the risk associated with a takeout pizza restaurant in a strip mall. They might learn from the list of occupants that the strip mall also contains a Chinese takeout restaurant and a Mexican takeout restaurant that they currently do not cover. They can pass this information over to their sales team as a new business lead. Additionally, understanding the business exposures of nearby businesses can help insurers identify potential risks and opportunities in their existing portfolio.

4. Beyond LRO: Insights from generative AI technology can be used across commercial lines business. Better understanding of the risks associated with surrounding businesses enables insurers to more accurately identify if they want to write a particular risk in another line of business. For example, an insurer was evaluating a property for LRO risk and determined that a business in the property was outside its appetite. However, the AI solution identified that the insurer was currently writing commercial policies for three other businesses located in that property. The insurer was able to make adjustments and remove those unwanted risks from their book of business, thereby optimizing their overall portfolio and reducing exposure to potential losses. This highlights the importance of not only identifying new business opportunities but also managing and mitigating risks associated with existing policies based on insights generated by AI technology.

With more current and accurate information, insurers are better able to assess the risks. This means they have more confidence in writing policies and businesses are paying premiums that match their actual risk exposure. With generative AI technologies, insurers can overcome hurdles when underwriting LRO coverage and further use the information to grow their entire commercial book of business.