The world is a hot mess – literally. We're facing unprecedented weather patterns fueled by climate change, uncertainty stemming from financial volatility and worsening business results.

All while carriers struggle to determine which AI solutions (among thousands) to choose. It’s enough to make you want to shut the doors and windows and turn on the TV.

Speaking of TV …

Ted Lasso represents the finest television ever created; fight me! And in its honor, I’ll share my top three insurance Lasso-isms for this year.

Be a Ricky Bobby

“Who wants to go fast?” In Talladega Nights, Ricky Bobby raises his hand, hops in that sweet Laughing Clown Malt Liquor car and finishes third overall in his first race.

Our constant – and sometimes ridiculous – encounters with AI feel like the plot of a silly yet epic movie. However, there’s truth in the fiction. There’s opportunity in the madness.

According to a global survey of 2,000 IT decision makers by Blackberry, 75% of organizations are considering or implementing bans on ChatGPT.

You can’t win the race if you’re not in the car.

By one McKinsey estimate, generative AI tools can add $50 billion to $70 billion in value for insurers globally. So be a Ricky Bobby and get in the race. Raise your hand and say, “I want to go fast!”

See also: The ABCs of Agency Planning for 2024

Be a sloth

In periods of ludicrous change, “Go slow to go fast.” Sloths can move fast – and be efficient – when it matters most. Like when they poop.

That’s right, nature’s butt-of-everything apathy joke is a polished example of efficiency that only goes to the bathroom once a week. It really does raise the question of how something so slow has survived for 64 million years (insert insurance joke here).

Critics often describe the insurance industry as inefficient, myopic and slow. That’s OK – there are advantages to careful consideration, especially when it comes to technological innovations.

In the Deloitte 2024 Global Insurance Outlook, adapting technology to create a more customer-centric focus also includes embracing culture to “close the trust gap that has often undermined the industry’s credibility.”

Insurers will only have a handful of opportunities to meaningfully adopt AI. Trust is everything in the insurance business, and a rushed maladaptation can make a mess pretty fast.

Own your notoriously frustrating sluggishness and go fast when it counts.

Be a snowflake

Every snowflake is different, and each risk is unique. Segmentation only goes so far in matching risk to price.

Actually, behavior will win the day in pricing (or rate making) – the global telematics market is projected to reach $12.7 billion by 2030. The Insurance Journal reported on a recent study that found more than 70% of commercial auto insurers offer usage-based insurance products (UBI). Yet adoption with agents and brokers falls between 10% and 15%.

We must close this gap.

The same publication cites a TransUnion report that shows a 33% increase in the number of consumers who are using telematics as a way to lower premiums and offset the impacts of inflation.

But telematics is just the tip of the iceberg. Technological innovation should be in pursuit of the “good life.” For insurance, it’s not just about lower rates; it’s about using technology to transform the industry’s value proposition from indemnification to prevention.

As AI evolves, data consumption increases and model training accelerates.  Behavioral analysis, in turn, can provide deep, individualized insights that translate to loss avoidance and reduction.

Here’s an entire podcast series on predicting and preventing losses from The Institutes.

Insurers and consumers no longer have to accept categorization in their insurance journey. We can demand more. Say no to segmentation and be unapologetically you!

See also: Biggest Business Trends for 2024

The big finish

People need insurers now more than ever. Swiss Re reports the global protection gap has now reached $1.8 trillion, an all-time high, and 43% of risks are uninsured.

The unfortunate reality is our most vulnerable populations are being pushed fast and first into this chasm.

Insurance is a noble profession. We exist to protect what matters most in the direst times. We can all agree something has to change, and it starts with us.

Where do we start?

My advice is let’s look ahead, think different and work together: Lasso-isms and all.

Cybercrime continues to evolve at a rapid pace, but not in the way you might think.

Companies are demonstrating an increased resistance to ransomware, yet 2023 was one of the most financially damaging years ever for digital extortion. Upon evaluation of cyber insurance claims data from our customers at Resilience – alongside data from ransomware incident response company Coveware, blockchain analytics firm Chainalysis, cloud security firm Zscaler and security provider Sophos – one thing is clear: We’re entering a new era of ransomware, and companies need to keep up.

Following a dip in 2022 that correlated with the escalation of the conflict in Ukraine, ransomware re-emerged with a vengeance in 2023. We found that ransomware incident notifications for our clients reached 100% of 2022 levels halfway through 2023. But while ransomware notices may be up, the second quarter of 2023 saw the overall success rate of extortion payments fall to a record low of only 15% for our clients, and to 40% across the industry. Through factors such as more investment in ransomware defense and pressure from law enforcement, we are seeing that companies are increasingly avoiding making extortion payments. 

But cybercrime is a business, and ransomware actors are once again adeptly reacting to a change in their market. Despite lower success rates overall, companies still handed out nearly $900 million in extortion payments in 2023 – one of the most expensive years for ransomware on record. This points to a return of “big game hunting” tactics for ransomware gangs. As extortion becomes less effective as a tactic, cyber crime groups are emphasizing quality over quantity and focusing their efforts on bigger targets that can afford larger payouts – with some even setting minimum ransom demands. The shift appears to be working: According to a recent report, the average cost of an extortion incident nearly doubled from 2022 to 2023, and victims paid out higher demands (>$1 million) at a rate nearly 4X that of 2022. 

See also: Cybersecurity Turns Attention to IoT

Bigger targets don’t always mean bigger companies, though. As part of the shift toward big game hunting tactics, threat actors are increasingly targeting third-party vendors. This strategy allows them to attack vendors with the same level of access to data as victims themselves, while circumventing many known ransomware controls. As evidenced by the widespread effectiveness of the MOVEit attacks in 2023, ransomware groups can leverage the trusted access of third-party vendors to scale their extortion attacks to hundreds – if not thousands – of companies in a single maneuver. While the majority of victims in a given attack will likely elect not to pay extortion, some will, and often in large sums. 

In tandem with ransom demands growing in size and hackers increasingly targeting upstream vendors, we’ve identified a notable transition to more nefarious extortion tactics. Encryption-less extortion attacks – which provoke payment by threatening the release of sensitive or regulated data – have increased dramatically over the past year. These attacks bypass counter ransomware strategies, like immutable data backups, and ultimately result in faster and larger profit margins for ransomware gangs. They are also far less resource-intensive compared with traditional encryption-based attacks, as well as much harder to detect. Combined with the expansive access to downstream victims afforded by third-party vendor breaches, this attack vector creates a perfect storm for cybercrime actors – with devastating consequences for organizations.

See also: The Latest Trends in Cybersecurity

With this new focus by cybercriminals on third-party vendors, executives can do several things to make their organizations more resilient:

1. Perform thorough cybersecurity due diligence when selecting third-party vendors.
2. Continuously monitor intelligence on vendors before, during and after an incident. 
3. Regularly practice your incident response plan (IRP) with executive and cybersecurity staff.
4. Prioritize security investments based on financial analysis of your organization’s cyber value-at-risk.
5. Work on connecting organizational silos across risk management, cybersecurity and financial leadership to align strategic objectives that focus on business goals. 

Many of the incidents Resilience tackles for customers could have been avoided or severely limited with organizational changes that improve cybersecurity governance. These are business process issues, not technical security challenges.

The data paints a clear picture: We’ve entered a new landscape for ransomware. As cybercriminals and their tactics continue to evolve, organizations must do the same. It’s no longer advisable – or even feasible – to attempt to effectively secure against all possible threats. Instead, organizations must shift their focus toward understanding the changes in cybercriminal business models and use that information to prioritize investments that are most likely to limit their financial loss. Only then will they be able to achieve true resiliency amid the constant evolution of the modern threat landscape.

KEY TAKEAWAY:

--A new report by Capgemini finds cloud migration has surged from 37% in August 2020 to 91% in August 2023. 85% of P&C companies are using the technology today, compared with just 29% of companies in 2020. Few, however, are leveraging cloud computing at a scale to reap its full benefits. More than half of the companies surveyed have moved just a fraction of their core applications to the cloud. 

----------

In the post-pandemic era, businesses face heightened pressure to continually innovate and meet customers' escalated expectations for a more connected and digitally advanced world. 

Across insurance, the expectation is no different. Today’s customers prefer to shop around. They want to evaluate and buy insurance digitally, seeking flexible policies that meet their various needs. 

However, many traditional insurance operations struggle with offering a fully digital experience. They require labor-intensive workflows for tasks such as new submissions, renewals, underwriting and claims.

See also: The Cloud: Connecting the Insurance Ecosystem

Digital core is pivotal for insurance carriers

The key to overcoming business challenges and unlocking growth lies in delivering superior customer experiences and achieving operational excellence. In 2022, the average Net Promoter Score (NPS) of the banking and insurance sectors ranged from 26 to 31. However, new-age players had a much higher (~2.5X) NPS score than established financial services companies. For example, Lemonade earned an average NPS score of 80, leading to significant customer growth. Why? Superior customer experience enabled by composable platforms that leverage cloud technology allows new-age players to respond quickly to customer demands and changing behaviors. 

While new-age players and digital subsidiaries offer superior customer experience (CX), incumbent banks and insurers seek to leverage their business scale advantage to boost customer experience and raise NPS scores. However, the inability of banks and insurers to deliver personalization and seamless multi-channel engagement, self-service access, consistent customer support and quick response time impedes the capabilities to provide customer satisfaction on the level of new-age players. In addition, this inability limits their readiness for the open finance era, where they have to be a part of a complex and intertwined ecosystem. 

A cloud-enabled CX strategy can help resolve these issues. Cloud technology is known to drive strong customer satisfaction, innovation, productivity and scalability. It's not solely about migrating to the cloud but also the enhanced customer experience and operational excellence it facilitates. In the financial services sector, a new report by Capgemini finds cloud migration has surged from 37% in August 2020 to an impressive 91% in August 2023. Looking across the P&C insurance sector, we see 85% of companies are using the technology today, compared with just 29% of companies in 2020.

In fact, a strong majority (91%) of carriers have started moving their core business applications to the cloud, though few are leveraging cloud computing at a scale to reap its full benefits. More than half of the companies surveyed have moved just a fraction of these core applications to the cloud. 

See also: Why Cloud Platforms Are Critical

Charting the path to success

The adoption of cloud technologies stands as a critical milestone for industry players seeking to stay ahead in the digital era. A company's cloud maturity model serves not just as a measure of readiness for cloud services but as a strategic guide for navigating the complexities of digital transformation. 

Cloud-enabled digital core ecosystems offer tremendous potential for insurance firms to optimize their combined ratios. These ecosystems can improve customer retention, satisfaction, premium growth, prospect conversion, among other benefits.

Legacy insurers typically are in one of the following stages in their cloud transformation journey:

At the initial stages lies the "aspiring" phase. Here, the exploration of cloud technologies is complemented by maintaining fundamental digital access to customer policies, claims and billing. However, challenges persist as operations remain siloed, hindering the creation of a holistic customer view. New facets such as rates, forms and coverage are treated as IT projects, and partnerships are constrained.

Insurers at this stage must craft a robust cloud strategy. Initiating the migration of core infrastructure and applications to the cloud, coupled with a carefully designed integration road map, becomes imperative. Aligning with industry best practices and anticipating future customer engagement and distribution opportunities are critical.

Advancing into the "mature" stage marks a strategic integration of cloud capabilities into the fabric of insurance operations. Mature insurance organizations find themselves digitally connected to customers through user interfaces, simultaneously serving as providers of embedded insurance products via third-party channels and ecosystems. Integrated data empowers them to glean business insights with unprecedented ease.

This stage signifies a shift from merely exploring cloud capabilities to strategically leveraging them for enhanced operational efficiency and customer engagement. The mature phase establishes a robust foundation for innovation and adaptability.

As an example, AXA Mansard Insurance, a part of the AXA Group, has used a cloud-based mobile platform called MyAXA Plus since May 2021. Customers can manage their insurance policies and file claims through one interface. This provides customers with a more personalized, seamless and satisfying experience.

In the "innovative" stage, insurers ascend to the pinnacle of digital prowess by embedding the digital ecosystem into every facet of their operations. The cloud becomes the catalyst for innovation and transformation, propelling the insurance company into a realm where the digital ecosystem shapes sales, products and customer service.

Insight-driven enhancements, agile market plays, rapid rule and rate changes and swift product launches become the norm.

As the insurance industry undertakes this transformative journey through cloud maturity, each stage represents not only technological evolution but a strategic shift toward staying relevant, competitive and resilient in the face of unprecedented change. 

As one executive recently told me, “Without cloud, there is no future for financial services firms.” Every organization needs the right cloud-enabled ecosystem to gain a competitive edge. When it comes to cloud, it’s not just the journey – it’s what the journey makes possible.

Over 60% of Americans under 65 have healthcare coverage through their job. But traditional employer plans have seen premiums climb faster than inflation and wages over the past decade. This points to a need for more flexible, affordable options to lower risks. One promising approach that's emerged is insurance connected to hourly wages.

The Evolution of Risk Mitigation Strategies

The standard employer health insurance model has used set yearly premiums. It is based on guessing how many employees will sign up and what coverage levels they'll need. But this approach has started to crack under growing pressure. In the last 10 years, the cost of job-based health plans has increased 54%, nearly double the 28% inflation over the same period.

Employing an hourly salary calculator, innovative models tailor insurance coverage based on an individual's specific income and working hours.

See also: "Intelligent Decision-Making" Is the Future

Analyzing the Mechanics of Hourly Wage-Driven Insurance

The hourly wage-driven insurance model introduces dynamic pricing of premiums based on actual hours worked instead of fixed costs. Premium amounts are calculated in real time and adjusted based on payroll data. Premiums go up or down whether employees work more or fewer hours in a pay period. 

In 2022, the yearly premium cost for employer's insurance averaged $7,739 for individual coverage and $22,463 for family plans -- a huge expense. With hourly wage insurance, this cost variability shifts from the employer to the insurance provider. The employer's percentage contribution can stay fixed, while the insurance partner handles adjusting premiums in real time.

For employees, there is flexibility to keep continuous coverage even if their hours change week to week. Deductibles and out-of-pocket costs also sync up to their income patterns rather than a static plan structure.

Case Studies: Success Stories and Challenges

Real-world implementation of hourly wage models highlights both opportunities and challenges.

A restaurant chain adopting this model saw a 5% drop in their overall health insurance costs. It allowed them to expand employee coverage despite business uncertainties from the pandemic. A retailer needed help to integrate their cumbersome legacy payroll system with the new insurance model. This resulted in payment delays and compliance issues, showcasing the need for automation.

A shift toward hourly wage alignment can be beneficial if the execution aligns with business infrastructure.

See also: Premium Leakage Due to Legacy Systems

Comparative Analysis With Traditional Insurance Models 

Hourly wage insurance provides the agility to link insurance costs to business performance, which improves cost savings and risk protection when business volumes swing up or down. For remote work and gig economy jobs, the model provides coverage that fits on-demand needs rather than one-size-fits-all packages.

Overall, the model has demonstrated greater cost-effectiveness, flexibility and risk protection capability compared with traditional insurance.

Integration With Modern Business Practices

Certain structural shifts in today's economy make hourly wage insurance models suitable, if not essential. The rise of remote, freelance and gig work has led to more fluidity in employer-employee relationships. Models based on static wages fail to provide effective coverage under these circumstances.

Payroll integration enables seamless tracking of insurance costs in real time. This allows for instant adjustments and forecasting, creating an integrated HR-insurance infrastructure.

Regulatory and Compliance Aspects 

As hourly wage models are new, regulations differ across states, which can create compliance challenges. Definitions of qualifying wages and hours become especially critical for proper policy pricing. Companies looking to adopt this model need rigorous assessment.

Future Prospects and Innovations

In the future, massive leaps in payroll automation and application programming interface (API) integration will likely expand adoption of hourly wage insurance. As more states enact accommodative policies, regulatory barriers will decline.

Nevertheless, cyber risks from payroll integration and privacy concerns will need to be addressed. Overall, the stage seems set for hourly wage insurance to disrupt the market in coming years.

See also: Building Resilience for Future Generations

Conclusion

Insurance tied to hourly wages gives a fresh option beyond traditional risk management strategies. As work and business get more dynamic and fluid, solutions that can flex along with them become critical. Even though it's early days, hourly insurance has huge potential to balance value for employers and workers.

Its focus on adaptability and integration make it a standout innovation for affordable risk mitigation. As this model gains traction, it could be a game changer for providing coverage that fits the modern workforce and economy.

While traditional employer plans still dominate, innovators are already pioneering alternatives that align with the future. As the landscape evolves, expect to see more out-of-the-box thinking that expands choices and accessibility.

FAQs

How does hourly wage insurance differ from traditional models?

Unlike fixed premiums, hourly wage insurance adjusts premiums up or down based on real-time payroll data. This links insurance costs dynamically to income flow.

What are the key benefits for businesses?

Hourly wage models provide enhanced cost control, reduced risks from income fluctuations and automated administrative management of premiums.

Which industries benefit the most from this model? 

Industries with irregular income flow like retail, transportation, healthcare and food service derive the most benefits from flexible and adaptable risk protection.

Cyber incidents such as ransomware attacks, data breaches and IT disruptions are the biggest worry for companies globally in 2024, according to the 13th annual Allianz Risk Barometer, an annual business risk ranking incorporating the views of 3,069 risk management experts in 92 countries and territories, including CEOs, risk managers, brokers and insurance experts. 

The closely linked peril of business interruption ranks second. Natural catastrophes (up from #6 to #3 year-on-year), fire, explosion (up from #9 to #6) and political risks and violence (up from #10 to #8) are the biggest risers.

Results for the U.S. mirror the global results, with cyber topping the risks, followed by business interruption and nat cats.

Large corporates and mid-sized and smaller businesses are united by the same risk concerns – they are all mostly worried about cyber, business interruption and natural catastrophes. However, the resilience gap between large and smaller companies is widening, as risk awareness among larger organizations has grown since the pandemic, with a notable drive to upgrade resilience. Conversely, smaller businesses often lack the time and resources to identify and effectively prepare for a wider range of risk scenarios and, as a result, take longer to get the business back up and running after an unexpected incident.

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

Trends driving cyber activity in 2024

Cyber incidents (36%) rank as the most important risk globally for the third year in a row – for the first time by a clear margin (give percentage points). It is the top peril in 17 countries, including Australia, France, Germany, India, Japan, the U.K. and the U.S. A data breach is seen as the most concerning cyber threat for Allianz Risk Barometer respondents (59%) followed by attacks on critical infrastructure and physical assets (53%). The recent increase in ransomware attacks – 2023 saw a worrying resurgence in activity, with insurance claims activity up by more than 50% compared with 2022 – ranks third (53%). 

According to Scott Sayce, global head of cyber at Allianz Commercial, “Cyber criminals are exploring ways to use new technologies such as generative artificial intelligence (AI) to automate and accelerate attacks, creating more effective malware and phishing. The growing number of incidents caused by poor cyber security, in mobile devices in particular, a shortage of millions of cyber security professionals and the threat facing smaller companies because of their reliance on IT outsourcing are also expected to drive cyber activity in 2024."

See also: Biggest Business Trends for 2024

Business interruption and natural catastrophes 

Despite an easing of post-pandemic supply chain disruption in 2023, business interruption (31%) retains its position as the second biggest threat in the 2024 survey. This result reflects the connectedness in an increasingly volatile global business environment, as well as a strong reliance on supply chains for critical products or services. Improving business continuity management, identifying supply chain bottlenecks and developing alternative suppliers continue to be key risk management priorities for companies in 2024.

Natural catastrophes (26%) is one of the biggest movers at #3, up three positions. 2023 was a record-breaking year on several fronts. It was the hottest year since records began, while insured losses exceeded $100 billion for the fourth consecutive year, driven by the highest-ever damage bill of $60 billion from severe thunderstorms. 

Regional differences and risk risers and fallers

Climate change (18%) may be a non-mover year-on-year at #7 but is among the top three business risks in countries such as Brazil, Greece, Italy, Turkey and Mexico. Physical damage to corporate assets from more frequent and severe extreme weather events is a key threat. The utility, energy and industrial sectors are among the most exposed. In addition, net-zero transition risks and liability risks are expected to increase as companies invest in new, largely untested low-carbon technologies to transform their business models. 

Unsurprisingly, given conflicts in the Middle East and Ukraine, and tensions between China and the U.S., political risks and violence (14%) is up to #8 from #10. 2024 is also a super-election year, where as much as 50% of the world’s population could go to the polls, including in India, Russia, the U.S. and the U.K. Dissatisfaction with the potential outcomes, coupled with general economic uncertainty, the high cost of living and growing disinformation fueled by social media, means societal polarization is expected to increase, triggering more social unrest in many countries. 

However, there is some hope among Allianz Risk Barometer respondents that 2024 could see the wild economic ups and down experienced since the COVID-19 shock settle down, resulting in macroeconomic developments (19%) falling to #5 from #3. Yet economic growth outlooks remain weak – well below 1% in the major economies in 2024, according to Allianz Research.

In a global context, the shortage of skilled workforce (12%) is seen as a lower risk than in 2023, dropping from #8 to #10. However, businesses in Central and Eastern Europe, the U.K. and Australia identify it as a top five business risk. Given there is still record low unemployment in many countries around the globe, companies are looking to fill more jobs than there are people available to fill them. IT or data experts are seen as the most challenging to find, making this issue a critical aspect in the fight against cyber-crime.

To view the 2024 Allianz Risk Barometer, please visit: Allianz Risk Barometer.

Gordon Bell, a computer industry pioneer who developed the legendary PDP and VAX lines of minicomputers back in the 1960s and 1970s, famously said that “the most reliable part of a computer is the one you leave out.”  

I’ve taken that to heart in all sorts of ways over the more than 35 years that I’ve had the pleasure of knowing and occasionally working with Gordon. In insurance terms, his famous line convinced me quickly, for instance, about the need for triage in claims – why send an adjuster if the likely change in a claim will be so small that it won’t cover the cost of the adjuster’s efforts? 

Agents and brokers rarely have the luxury of just deciding to stop doing something. But they can at least turn over a lot of required tasks to their computer systems and “leave out” work for themselves. 

To learn more about the efficiencies that are out there to be had, I spoke with Allister Yu, senior vice president, operations, at Rhoads, which focuses on software for compliance but which has a broad perspective on the possibilities of automation. 

He said, “In terms of things that are the most ripe for automation, I would say, credentialing, credential management and the communication between agencies and carriers and various stakeholders are all areas of opportunity…. We've seen case studies where organizations… that previously had teams of 70-plus individuals managing the compliance process were able to pare those teams down to 15 to 18 professionals through automation. The remaining staff can be refocused in other parts of the organization to leverage their expertise.” 

He added, “At the carrier level, organizations… were collecting PDFs but were subject to the legibility of those hand-completed documents. Now that they collect that data in an electronic process with electronic approvals, they are often able to shorten the contracting process from two weeks down to a matter of days.” 

Like just about everyone else these days – even those who once proclaimed that agents and brokers would be disintermediated – Yu said customers will always value the human touch. 

“I personally still like to pick up the phone and call somebody,” he said. “When we're looking at sales, when we're looking at the broker, when we're looking at the insurance agent, that's still going to be a highly human aspect.” 

But he argued that “there are a lot of tasks that, in terms of back-office processing, can be automated.” 

I’m sure Gordon Bell agrees. I certainly do. 

Cheers, 

Paul 

20 ISSUES TO WATCH IN 2024

Electoral politics, especially at the state level; the economic outlook; geopolitical risks; and evolving employee benefits top the list.

THE NEXT WAVE OF INSURTECHS

The first wave taught the valuable lesson that innovation builds on traditional fundamentals rather than replacing them outright.

BALANCING AI AND THE FUTURE OF INSURANCE

To be successful in our use of AI, we must remember one thing: A machine cannot replace the need for human touch in our industry.

TOP 5 INSURTECH TRENDS TO WATCH IN 2024

Embedded insurance, customer-facing digital tools, telematics and the IoT, rich data sets and AI and ML will mark a paradigm shift.

IN 2024, CHANGE BECOMES NON-NEGOTIABLE

Here are nine predictions for 2024, based on the certainty that few of yesterday’s approaches will be successful in tomorrow’s world.

MAYBE OEMS AREN'T SUCH A THREAT TO AUTO INSURERS

Tesla's problems developing an insurance business suggest the auto behemoths may not be as threatening as once thought. 

Paul Carroll

To start out, please tell us a bit about why it's so important for agents and brokers to be focusing on automation at this point.

Allister Yu

Absolutely, and thank you for the opportunity to speak about automation in the agents and brokers realm.

It's an exciting time in the insurance industry. We are looking at an insurance industry that last year wrote almost $1.5 trillion in premiums. We're looking at an industry with almost 2.25 million licensed insurance producers and in the neighborhood of 6,000 insurance carriers. It's a huge market.

And if we look at what I'll call the supply chain, things such as how quickly policies can be bound, how quickly premiums can be written, etc: Those things really drive the need for automation today. Just consider the number of hands that are involved, the number of back offices, the number of compliance teams that are needed to support a market that's almost $1.5 trillion.

Paul Carroll

Clearly, there is a huge opportunity. Have you seen some especially good examples of automation that you could point me to?

Allister Yu

When we look at the insurance industry, and we look at the supply chain, and how policies are bound, it really starts with the credential, with licensed insurance producers. It starts with having the proper license, applying for that license, managing that license, sending that credential information to the insurance carrier to ensure that policies are written and are bound appropriately.

There are a lot of manual steps in that process today, whether it's applying for the license, retrieving copies of the license, updating and maintaining those licenses, sending data through a PDF to the insurance carrier for contract. There are a lot of steps in that process that today are manual and need human intervention but could be automated.

We're seeing a lot of organizations today take advantage of that opportunity. We're looking at how insurance can move at the velocity that people are expecting today, and that means using technology to automate manual processes that are predictable and repeatable, to create efficiencies.

In terms of things that are the most ripe for automation, I would say, credentialing, credential management and the communication between agencies and carriers and various stakeholders are all areas of opportunity.

Paul Carroll

Are there specific technologies that you think are especially applicable?

Allister Yu

An organization like my own, Rhoads Online, is really focused on how we can create these efficiencies, whether it is creating automations in respect to the credential, or how to apply for licenses, how to update licenses, how to maintain licenses, how to retrieve license copies, how to create communications of status to stakeholders. Or the efficiencies could be created around what your license status is, what your continuing education statuses are, things of that nature.

We are also looking at carriers, which are implementing technologies to streamline the appointment process. They're identifying predictable processes that they can automate so they get to a contract and approval faster, to essentially enable producers to sell faster.

Paul Carroll

I've seen various metrics about how much more efficient an agency is if it digitizes. But I'm wondering if you have any particular metrics that you point to that quantify what the benefits are from automation?

Allister Yu

We've seen case studies where organizations using technology are able to affect their whole workforce. Organizations that previously had teams of 70-plus individuals managing the compliance process were able to pare those teams down to 15 to 18 professionals through automation. The remaining staff can be refocused in other parts of the organization to leverage their expertise.

At the carrier level, organizations that have been able to automate the contracting process have been able to save time. Previously, they were collecting PDFs but were subject to the legibility of those hand-completed documents. Now that they collect that data in an electronic process with electronic approvals, they are often able to shorten the contracting process from two weeks down to a matter of days.

So there are huge improvements in efficiency through automation.

Paul Carroll

As long as everybody is talking about ChatGPT and the other large language models, I wonder if you're starting to see much effect yet from generative AI.

Allister Yu

We're looking at a lot of chatbots, whether for answering questions or beginning the onboarding process, or even beginning the process for binding and selling policies to external constituents. We definitely see the market moving in that direction. We’re seeing organizations really invest in data harvesting, tracking data and analyzing data to power those AI engines.

Paul Carroll

That makes sense. Considering what you're already seeing with agency processes and technologies, would you look out one to five years and tell me what you think is possible?

Allister Yu

I think we first need to consider the workforce that's addressing the industry today. We're seeing a lot of people aging out. So organizations are really having to look at how they’re going to grow and map out

those plans one to five years into the future. I think in one to five years there'll be quite a bit more technology implemented to address mundane tasks, simple tasks, and a greater use of human resources to address the more advanced tasks that require analysis or that require human intervention, such as exception management.

Paul Carroll

It wasn’t that long ago that lots of people saw agents and brokers being increasingly cut out of the process. Not any more.

Allister Yu

Absolutely. Agents and brokers are important. People like the human touch. I personally still like to pick up the phone and call somebody. There are a lot of tasks that, in terms of back-office processing, can be automated, but when we're looking at sales, when we're looking at the broker, when we're looking at the insurance agent, that's still going to be a highly human aspect.

Paul Carroll

This is great. I really appreciate your taking the time.

Fun fact of the week: I learned from a new biography of Milton Friedman that he had intended to become an actuary but failed the licensing tests and decided to become an economist instead. That's just one more reason to respect all you actuaries out there who, unlike one of the two most important economists of the 20th century (along with John Maynard Keynes), prevailed in your rigorous training. Well done.

Now on to business:

A webinar I conducted recently with John Riggs, chief technology officer at Hartford Steam Boiler, and Matteo Carbone, the founder of the IoT Insurance Observatory, made me rethink my expectations for the Internet of Things. I've been a proponent of its potential ever since I first heard the term, more than a decade ago, but they convinced me that it's time to stop thinking about potential and to start thinking about mass deployment. 

The key exchange, for me, came when John described a 639% return on investment on their IoT work and Matteo, after coyly asking if it was okay for him to be controversial, said the ROI was TOO HIGH. He wasn't doubting the number. His concern was that the high ROI meant companies were ignoring lesser, but still highly promising opportunities, in the interests of demonstrating the potential of the IoT.

"Players have scaled only programs that are too good to be denied," Matteo said. "There are hundreds of other programs that will provide 80% return on investment, 60% return on investment, and all these opportunities should be deployed." He said he looked forward to the day when a major carrier would say, "We have 20% IoT penetration on our portfolio, not just on the niche we chose" for the initial test.

I encourage you to watch the whole, eye-opening webinar -- or, if you're pressed for time, at least the final 25 minutes -- but I'll give you a summary here.

Much of the discussion was about how connected sensors can detect problems so they can be corrected before they cause any damage. So I asked John to start off with a bit of the history of HSB, which began as an engineering company to inspect boilers and prevent explosions and only got into insuring the boilers and other equipment later.

He traced HSB's roots back to 1865, when a ship named the Sultana was bringing home Union soldiers who had been prisoners of war in the South, just days after the Civil War ended. A boiler exploded on the wildly overcrowded ship, and nearly 1,200 people died, making the disaster the deadliest in U.S. maritime history. One boiler was exploding every four days somewhere in the U.S., blowing away huge chunks of buildings, so a group in Hartford got together to see what they could do to diminish the carnage.

Fast forward to today, and John said HSB has been focused on the IoT for a decade. 

"We're very much focused on keeping things up and running at peak performance, not paying out against losses, because in that equation, no one wins," he said. "You might get reimbursed, but you still had major inconvenience. You still had a disruption to your business. We want to mitigate that and if along the way we also mitigate losses, so be it. That works well for everyone involved."

John said they've counted up hundreds of millions of dollars of savings for clients based on their IoT work.

Matteo said, "We have examples from commercial properties focused both on real time risk mitigation and on providing IoT tools to the loss control team. We have experiences with construction, where the risk mitigation demonstrated strong returns. In Europe, there is a player applying IoT to medical malpractice. They are equipping surgery rooms with cameras and retrofitting sensors already present in the surgery rooms. We have examples of people using IoT data for continuous underwriting. We have examples in commercial auto. Here, the set of use cases is really complete, from using using telematics data for claims management to the safety programs and even continuous underwriting."

Matteo closed with an interesting observation about how to think about the IoT. He said he initially made a mistake by thinking about it as a product for insurers. Instead, he said, he has realized that it's a capability that must be drawn on for a whole range of products and services, but isn't itself a product. 

As I said, I hope you'll take the time to watch the whole webinar. More broadly, I'd suggest you check out the Future of Risk series of which this webinar is a part. It includes some of the best thinking we've gathered at ITL over the past several months. While I love all my children, I'd especially encourage you to watch the "Predict & Prevent" webinar that kicked off the Future of Risk series. I'll also single out the Q&A with Nick Lamparelli on "The Biggest Opportunity for Innovation," which has become one of our most-read pieces in recent months, and an interview I did with Stefan Heck that asks the question, "Could Auto Accidents Be Reduced by More Than Half?" and explains why the answer is yes.

Stay tuned, too, because we're going to be doing a lot more with the Future of Risk in 2024.

Cheers,

Paul

The pandemic reimagined work, and organizations were swift to adapt digital technologies and embrace a remote work model. This not only enabled flexibility for employees but allowed employers to tap a borderless workforce. With the pandemic in the rearview mirror, as organizations navigate the shift from remote work to return-to-office (RTO) or a hybrid work model, the focus is on innovative approaches to providing incentives to the workforce.

This includes focusing on group benefits and how data and AI can play a pivotal role in providing value-based care.

Why employers need to focus on group benefits

Employees face myriad stressors such as isolated or remote work environments, rising inflation and social pressures. There is no finite line separating personal priorities from work responsibilities, and stress related to caregiving, finances, untenable workloads, etc. can accumulate. With increased focus on RTO, employers need to provide benefits that are personalized, to alleviate stress, and affordable, to attract and retain the talent.

See also: Survey Data Is Your Secret Weapon

How to personalize group benefits

Employers need to take a holistic view of wellness and demonstrate care while designing the plan for employees. Employers should use pulse surveys, benefits discussions, healthcare literacy townhalls, etc. to make sure benefits have a meaningful impact and broad utilization.

Factors such as high healthcare costs, diversified care needs, preferences and outcomes should drive organizations toward value-based care.

Role of data and AI in group benefits

Data and AI hold the key to delivering personalized, value-based care while reducing costs, accelerating diagnostics, providing recommendations for treatment plans, speeding recovery and improving wellbeing. Here are some approaches:

Virtual Benefits Adviser - This is a digital twin illustrating to employees the value of the benefits they select, how they work and how to maximize their use based on the employees' needs. The adviser can also serve as a guide to improve health through its well-being score and insights.

AI-Driven Employee Assistance Program (EAP) - Mental health is a focal point in employee wellbeing, and an effective program requires access to a tailored provider network. AI and machine learning can match patients with providers based on treatment sought, demographics, social determinants of health (SDOH), member preferences, etc.

AI-Driven Claims to Improve Provider Experience - Delay in payment to providers is one of the sticking points that can drive quality providers out of a network. Delays are primarily due to manual processing of treatment plans, procedures, bills, etc. and lack of adoption of unstructured or semi-structured data. Delays can be addressed by leveraging AI to process radiographs/X-rays, charting, etc. and improve adjudication of expenses.

Predictive Analytics - They can be used to monitor the treatment patterns of participating provider and identify instances to see if usage of procedures goes above the norm in a peer group.

Wearables for Workplace Safety - Workplace injuries such as overexertion, slips and trips and falls contribute significantly to lost time. Wearables can supplement workers' physical capabilities and speed an injured worker’s return to work. Also, data associated with the wearables can help to detect hazardous conditions, measure the posture and lifting techniques of the worker and thereby prevent future injuries. 

See also: 6 Words to Focus Your AI Innovation Strategy

Way forward

Data and AI can function as a personalized fitness coach and virtual care provider, while aiding in recovery/rehabilitation and improving overall wellbeing. 

KEY TAKEAWAY:

--Misconceptions can be created that the customer experience is positive, simply because certain touchpoints in the journey are scoring well in a survey or seem to have other positive measurables.

--To get started on a better approach, narrow your measurement focus to a few key journeys rather than trying to measure too much. 

----------

Insurance firms are increasingly investing resources to map and manage customer journeys to improve experiences and drive business results. Yet measurement of customer journeys is still being approached from a very siloed perspective. Data and metrics related to the various steps of the customer journey are trapped within the business units and are difficult to aggregate, let alone connect to the journey. 

The challenges are twofold. First, the effectiveness of journey improvement efforts is hard to determine, and it’s difficult to connect those efforts to business outcomes. Second, misconceptions are created that the customer experience is good, simply because certain touchpoints in the journey are scoring well in a survey or seem to have other positive measurables. Meanwhile from the customer’s perspective, the overall experience could be suffering. Customers measure their experience from the perspective of a lifecycle – the sum of all their interactions. Firms measure the experience from a single snapshot in time. 

A McKinsey study highlighted a story that illustrates this common issue. A company faced customer retention challenges despite high satisfaction scores at individual touchpoints. When the company decided to view the experience from the customer journey perspective, they found that the accumulation of negatives experiences was the issue, often involving multiple functions of the business. Despite satisfaction with individual touchpoints, the journey itself was driving customers away. Measuring touchpoints alone can often hide poor experiences. That’s why customer journey measurement is critical to unlocking the true potential of your experience.

See also: Tips for Improving Customer Experience

Why Customer Journey Measurement Matters

Customer journey measurement can be likened to using a fitness tracker for personal health. Your fitness tracker lets you view your health metrics on a dashboard to measure progress and personalize actions for better outcomes. Similarly, in a business context, customer journey health measurement quantifies the quality of experiences and their link to business key performance indicators. 

While it can be easy to understand why journey measurement is important in theory, putting it into practice is another story. A study by the Nielsen Norman Group found that around 80% of journey maps lack implemented measurement. Starting down the path of customer journey measurement can seem intimidating. But the good news is that it doesn’t have to be a hard process. Let’s look at a simplified approach to help you get started.

Getting Started With Customer Journey Measurement

Insurance firms likely have a handful of customer journeys they have prioritized for impact on their overall business strategy and the connections of these journeys to the firm’s mission and vision. Narrow your measurement focus to these key journeys rather than trying to measure too much. 

1. Start with one journey to measure:
   • Start small, focusing on a key journey crucial to your organization and customers. 
   • This approach allows quick wins, builds buy-in, enables agility and positions you to scale to the other key journeys once your practice is established.
2. Define and Align:
   • Identify the key journey steps or moments of truth and align metrics with the customer and business goals. You can think of business outcomes as traditional key performance indicators (KPIs). Metrics that measure outcomes aligned to customer goals are called CPIs, or customer performance indicators. 
   • Collect existing metrics and align on metrics that may need to be developed, identify data sources and define roles within the team.
3. Gather Data, Test, Learn and Adapt:
   • Start collecting data and metrics for the selected journey.
   • Test metrics alignment to business objectives and adapt based on insights.
   • Repeat phases as needed, acknowledging the continuing nature of this process.
4. Tell the Story:
   • Share CX insights through various channels, such as monthly reviews, dashboards or reports.
   • Celebrate wins, capture opportunities and agree on actions.

See also: How to Improve the Customer Experience

The Future of Journey Measurement

The landscape of data and analytics, powered by generative AI, is rapidly advancing. However, journey measurement is a practice, not just a tool. The practices shared here are timeless and can be applied with technology as an accelerant, but they are not technology-dependent.

Whether you are in a firm that has access to cutting-edge technology and has ready access to connected data or you are in a firm with fewer resources and disconnected or limited data, there is some element of journey measurement you can execute. The key is to start with what you have and mature as your capabilities, skills and data improve.

Journey measurement is itself a journey. As the industry evolves, adopting a robust journey measurement practice, founded on best practices, remains key. Technology should be viewed as an enabler, not a replacement for a solid foundation.

Investing in customer journey measurement is valuable for businesses, translating the intrinsic belief that helping customers win enables the business to win into actionable insights. As CX professionals, instilling this belief and quantifying what "winning" means can empower organizations to drive positive outcomes for both customers and the business.