KEY TAKEAWAYS:

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

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

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

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

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

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

See also: Revolutionizing Life Insurance Uptake in Younger Markets

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

See also: Genomics Revolution in Life Insurance

Wrap up

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

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

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

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

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

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

The potential of the data explosion in insurance

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

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

See also: 5 Ways Generative AI Will Transform Claims

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

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

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

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

Satellite data: a revolution in property intelligence

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

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

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

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

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

See also: AI and the Future of Independent Agents

The future belongs to data-driven insurers

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

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

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

Polo, the “game of kings,” is among the oldest, fastest, roughest and most dangerous team sports. Also known as hockey on horseback, the game is played with two teams of four players each. Polo combines physical skill, mental agility and quick strategic thinking. Players use a mallet to hit a small ball between the opposing team's goalposts, galloping on a horse at 30 mph. 

Polo and business both require leadership, teamwork and strategy. 

Leadership - No Two People Are the Same  

Each player has a specific role and responsibility on the field. There are two players: the horse and the rider. However, horses aren't machines. To be a great polo player, you must be an excellent horseman or horsewoman and develop a relationship with your steed.  

In my first polo season, I acquired my first pony, "JJ," an old racehorse, from a friend. Initially I "stick and ball" and fell off a lot. Then I played a couple of chukkas a game and got frustrated playing part-time, and soon more ponies followed. It kept my daughters and their friends busy exercising and grooming and was a great bonding experience.  

Looking after different horses taught us that each horse has a distinct personality and unique strengths and weaknesses -- like in business, where no two people are the same and can't be led the same way. Some employees need encouragement and confidence to take risks and chances, while you might need to let others run free or even rein them in occasionally.  

Employees and horses have unique motivators, skills and attributes that they bring to the table. Understanding who your people are and their skill sets will help to get the most out of the team, which is critical for strong business leadership and success. 

See also: Leadership Lessons From Sports

Try, Try Again, or Get Back on Your Horse and Try Again!

Polo can be a way of life for many players and enthusiasts. Polo fosters a sense of camaraderie, respect and fair play among the players and the spectators.

It is also an extreme sport. Whether galloping 30 mph with your opponent right beside you, getting a very hard ball shot into your back or being checked by your opponent on a 900-pound horse, danger exists everywhere. 

Fear can also be part of the game. Whether falling off your horse and suffering an injury, letting your teammates down or starting a new role at work, fear can shrink our confidence, make us hesitate and affect you and your team's performance.  

Every polo player will fall off their horse sometime. In fact, in 2015, 58% of polo players in the U.K. reported falls. What matters is how you respond, persevere and conquer your fears. You could give up and say this sport isn't for you. Alternatively, you could embrace a growth mindset and understand that great athletes and successful people get back on their horses and focus on progression and continuous improvement rather than perfection.  

After all, every expert was once a beginner. 

Teamwork - Play as a Team  

Only teams who play together and adhere to their positions can win in polo. For example, the number one player in polo is responsible for scoring goals. The number two player helps both in defense and offense. The number three player is often the captain and leads plays, and the number four is in charge of defending the goal. Without verbal and nonverbal communication, teams won't be able to coordinate plays effectively and ensure that everyone is playing their positions.  

In business, everyone on your team has a role and position that suits their specific skills and traits. For instance, while an insurance technology company might have talented software engineers, data scientists, etc., to develop products, they need advertisers, marketers and salespeople with different perspectives and niches to sell their technology and capture market share.  

Building a functional team requires leadership. Leaders must ensure that each team member, whether on the field or in the office, feels like they're a part of something meaningful and more substantial than themselves to be successful.

Play together and win together!

See also: 7 Things Sailing Taught Me on Leadership

Strategy and Time 

A polo game is divided into six periods called chukkas, each lasting seven and a half minutes. Your team can lose by being two seconds too slow off the mark, letting the opposition get ahead with the ball. The split-second decisions and small room for error have taught me never to second-guess myself or delay in chasing my goals. 

In business as well as polo, it is essential to keep communication open with all team members and, when you can, continue to evaluate and improve on; 

1. What is working 
2. What is not working 
3. What we can change 

Both polo and business leaders must have good communication, coordination and motivation skills to lead their teams effectively. 

My first polo game was on a farmer's field. Since then, the sport has taken me to places I likely wouldn’t have seen otherwise, including Argentina, the U.K. and all over North America.   

Business has also provided quite the journey. In 2000, I founded Global IQX, an employee benefits insurtech. During the COVID pandemic, our company saw remarkable growth, and recently we were acquired by Majesco, a global leader in cloud insurance software solutions.  

Whether you are playing a short or the long game, trust yourself and your team and continue to improve so you can knock that ball between the goalposts!

Traditionally, employer clients have looked to their insurance brokers and brokers have looked to general agents (GAs) or carrier sales representatives for information on the best rates and products. 

But client questions are increasingly shifting to technology matters.

Employers offering group benefits to their employees are now as curious about the features and capabilities of the technology used by carriers and ben-admin systems as they are about their rates. And according to a recent study by Ease, 50% of employers sourced their benefits technology from a broker. That new emphasis puts brokers -- and GAs -- in the unfamiliar position of tech advisers, intermediaries between clients and vendors.

That’s what we learned from a recent webinar with representatives from a leading brokerage and general agencies. Technology is transforming insurance, an industry that has traditionally lagged behind others in its adoption. It appears that this new prioritization is driven by clients demanding the same modern experiences, interoperability and ease of use from their insurance carriers that they have in other business functions and personal consumer experiences – also known as the “Amazon Effect.” 

For clients, easy data exchange is everything; in fact, 66% of employers prefer carriers that connect to their software over those offering the best-value insurance products.

At our recent convening event, which included experts from United Producers Group and Hub International, we posed question across three areas:

What’s going on with benefits technology today?

The role and versatility of technology is quickly advancing, due in part to the changes brought on by the pandemic and its new work models, as well as by clients and their employees’ expectations. Employees want to better understand their insurance benefits and have benefits experiences that help them use these valued assets in easier ways, which are essential pieces of their total compensation.

Employers are eager to provide modern, differentiated benefit experiences to retain and attract workers, and improved technology is necessary. According to a recent report by Guardian, 79% of employers expect to increase their spending on benefits technology in the next three years.

To get the desired result, clients need a digital benefits strategy, one that will not only please workers but help employers become more efficient and control costs by lessening administrative burdens, reducing manual transactions and addressing compliance. The optimal technology should reduce administrative costs by automating functions now done by people. 

The demand for this new technology isn’t only from large clients; small employers also want tech that will allow their various systems -- such as payroll, ben-admin, COBRA and cafeteria plans -- to interact seamlessly.

See also: Why Brokers Should Embrace AI

Where should benefits technology go next?

The panelists want the industry to emphasize investments in speed and accuracy, with a focus on getting insurance cards in new members’ hands as quickly as possible with no glitches or delays. That requires automating the process to minimize or eliminate the manual tasks that slow things down and introduce the possibility of errors.

In addition, brokers must be sure they’re up to speed on the latest industry technology, who offers what, and how different systems interact. If brokers don’t know how to deliver the tech experience their clients want, their clients will find other brokers.

Another point of emphasis was the importance of adopting technology that could help produce clean, accurate data right off the bat -- from the beginning of the process. Too often, insurance enrollment data is unavailable, incomplete or inaccurate. Incorrect data must be fixed at some point, which comes with a high cost in time, labor and strained relationships among sales teams, brokers, groups and more.   

See also: AI and the Future of Independent Agents

What do brokers want from ben-admins and carriers?

At the top of their wish list for carriers is application programming interface (API) integration for every policy to allow a single point of entry and an easy bi-directional flow of data so manual intervention is no longer required. There has been progress in this area, but fewer than 15% of carriers now offer it. The need is particularly great for medical insurers. 

From ben-admin platforms, the request is to add technology to make their systems flexible enough to accommodate and merge data from multiple sources and handle employers’ increasingly complex benefit structures.

The brokers also requested that carriers and ben-admins focus on speed-to-market for products, simplicity, improved communication and easy data flow among all parties. This, they noted, would allow brokers and GAs time to have the strategic conversations that bring the most value to their clients.   

As thought leaders and change agents in our industry, we regularly convene experts to get at the important nuggets in our industry. Talking with leaders like our panelists is a great way to assess where the industry stands and where it needs to be.

The recent cancellation of a major wind energy project off New Jersey's shore has cast a pall over efforts to limit climate change. But there are important signs of hope, too -- in particular, stunning declines in the cost of solar and wind power.

With the U.N.'s annual summit on climate set to start later this week, let's focus for a few minutes on the hope.

This chart from a recent article in the Wall Street Journal pretty much says it all:

You can see, in particular, how installations of solar power have consistently exceeded expectations -- by a lot. The 2002 projection the WSJ cites showed almost no adoption of solar by now in the grid because costs were expected to be higher than for alternative sources. Even in 2010, projections were for almost no use of solar in the grid by now. By 2020, the picture had totally changed -- but even that projection was far less optimistic than the current one. The 2023 prediction shows a full-on hockey stick of the sort that makes investors salivate. 

The reason? Technology has cut costs far faster than expected.

I have a personal point of reference here. I was part of a SWAT team at the Department of Energy in 2010 (led by Matt Rogers) that was investing $37.5 billion of Stimulus Act money to nurture innovation in a whole range of energy technologies, including solar, wind, batteries and electric vehicles. We took what seemed like a very aggressive view at the time about what technology could do and projected roughly a 60% decline in the cost of solar by 2020 -- while the WSJ article says costs fell fully 90% between 2009 and today. 

The cost of onshore wind power has declined by two-thirds over the same period, the article says, and there's every reason to think costs will continue to decline for both it and for solar. Not only will the technology keep improving, but costs steadily fall as manufacturing scales up. 

In fact, the New York Times ran a story yesterday about concerns that solar prices are falling TOO fast. The main concern addressed in the article is political: Falling prices might undercut profitability and lead to job cuts in Georgia, where production has boomed because of the clean energy push by President Biden  and where any disruption might cost him in the 2024 presidential election. However the politics play out, a plunge in prices will only accelerate adoption.

Solar and wind already have reached a tipping point: The WSJ article says four-fifths of global power capacity added last year uses renewables. 

There has been some concern recently about the adoption rate for electric vehicles. While Tesla has had to cut prices on its EVs to maintain momentum, Toyota, which has resisted the move to EVs, has been taking a victory lap because its sales of hybrids have soared this year. The CEO of Mazda, Masahiro Moro, told Fortune the other day that, “we have not put a goal on [the move to EVs]. We will move as fast as the customer. We never want to surprise them with new technology.” 

Still, the "disappointing" numbers for EV sales showed a 51% increase for the first three quarters of this year in the U.S. And the chart from the WSJ shows that expectations for growth remain stratospheric, as charging infrastructure will be built out and "range anxiety" will diminish.

The WSJ article says total cost of ownership for small and midsized EVs has dropped below that of cars with internal combustion engines in China and Europe and may cross that dividing line in the U.S. next year. (While EVs cost more up-front, they require far less maintenance, and electricity typically costs much less per mile than gasoline.)

As with solar and wind, costs for EVs will continue to drop as production scales up, and the technology will continue to improve. In fact, battery costs are projected to reach territory by 2025 that we would have considered the Holy Grail during my stint at the Department of Energy: Goldman Sachs predicts that the average cost for an EV battery will fall below $100 per kilowatt hour. That would be down more than 93% since 2008 and a 40% decline just since 2022. Goldman Sachs projects that prices will keep falling 11% a year through 2030. 

Of course, the context for all this improvement is a climate that is continuing to heat up. At this point, we're just trying to slow the rate of deterioration and minimize the increase in storms and wildfires that are devastating so many people and, in the process, generating massive insurance claims.

But we have to start somewhere.

Cheers,

Paul

P.S. As I said last week, I encourage you to attend the Town Hall being held on Thursday in Washington, DC, by my colleagues at the Insurance Information Institute. It will bring insurance executives and policy makers together to focus on how to attack the climate crisis. There are more details here, including a discount code. I hope to see you there.

In the ever-evolving landscape of employee benefits, self-funding of healthcare offers the potential for greater cost control, flexibility and customization and has become the choice for many employers. At the heart of a successful self-funded approach is a strong medical stop loss insurance (MSL). And employers must understand the pivotal role that different stakeholders hold in designing an optimized MSL strategy.

Collaboration for Success: The Crucial Stakeholders

An effective MSL strategy goes beyond a mere insurance purchase. It's a comprehensive approach that requires collaboration among various stakeholders, so employers need to have clear lines of communication with, and input from, those accountable to the execution of their strategy.  These range from captive insurers, reinsurers, clinical teams, underwriters and claims professionals to captive managers and participating companies – all essential for the thriving of the self-funded healthcare model.

Captive Insurer and Reinsurer: Building a Solid Foundation

The foundation of many strong MSL strategies lies in a well-structured captive insurance arrangement. The captive insurer, serving as the company's personal insurance segment, brings a degree of control and flexibility in managing risks. It facilitates a partnership with organizations to fine-tune insurance policies, ensuring they meet specific employee health demands and the participants' unique benefit needs. This customization can encompass coverage extents, terms, premium pricing and claim procedures.

Reinsurers, or excess risk protection through a fronting carrier, complement this structure by providing financial safeguarding, absorbing the shock of unusually high and unforeseen medical costs that could otherwise destabilize an organization’s financial health. These collaborative efforts between captive insurers and reinsurers provide a tailored, risk-mitigated coverage essential for the adaptability and durability of self-funded healthcare, addressing limitations often encountered in conventional insurance models.

See also: A Milestone in Healthcare

Clinical Team: Data-Driven Decision Making

The clinical team’s significance in formulating an effective MSL strategy is paramount. By scrutinizing data, evaluating risks and spotting health trends, these experts furnish employers with the necessary analytics to make informed decisions. Group programs like QBE North America's Agora stand out by embracing comprehensive health management, facilitated by a clinical risk management team analyzing claims utilization and costs to influence adoption of the most significant risk management strategies. 

Underwriting and Claims Professionals: Balancing Risk and Cost

The expertise of underwriters and claims professionals is central to maintaining stable operations of any captive strategy. Their expertise ensures that the MSL strategy strikes a balance between managing financial exposure and controlling costs. They navigate the complex realm of past claims data and the current and potentially continuing health conditions of the plan’s membership. This deep dive analysis provides critical insight into the particular health risks specific to each employer’s situation.

For example, QBE North America's underwriting team leverages data analytics to tailor solutions that not only meet employers' financial objectives but also provide a buffer against unexpected medical expenses. Customizing MSL plans ensures alignment with a company’s distinctive needs, taking into account the specific health demands and risk profile of its employees.

Captive Managers and Participating Companies: Seamless Administration

Captive managers play a crucial role in overseeing the day-to-day operations of the self-funded healthcare strategy, as well. They ensure compliance, handle administrative tasks and facilitate communication among all stakeholders. However, the insurer or reinsurer is often called on to provide specialized support in adjudication of MSL claims, as complications may disrupt the health plan, third party administrator and member’s medical provider. This streamlined approach through a partnership allows participating companies to focus on their core operations while reaping the benefits of self-funded healthcare.

Monthly Stakeholder Meetings: Continuing Innovation

A standout feature of successful MSL captives is consistent and diligent engagement of the stakeholders in the partnership. Regularly scheduled meetings or discussions reviewing historical and emerging claim trends and loss ratio performance meetings are engines of innovation, promoting transparent communication, collaborative learning and perpetual refinement of strategies. They allow for targeted discussions to draw wisdom from various experts, encouraging informed, forward-thinking decisions in managing healthcare costs.  

See also: How Digital Health, Insurtech Are Adapting

Transparency and Control: The Guiding Principles of MSL Captives

In an era where healthcare costs loom as a formidable challenge, MSL captives are guided by the principles of transparency and control. They represent the forefront of innovation in healthcare cost management, offering the industry a path toward sustainable solutions.

Conclusion

In the realm of self-funded healthcare, the significance of top-tier medical stop loss insurance partnerships cannot be overstated. A successful MSL strategy thrives on collaboration among diverse stakeholders, each playing a pivotal role in ensuring its effectiveness. Further, the importance of aligning with a fronting carrier with the financial class size and rating strength that demonstrates a track record and longevity cannot be overlooked.

As the landscape of employee benefits continues to evolve, the synergy among stakeholders will remain the cornerstone of a prosperous self-funded healthcare journey

If one topic has dominated industry discussion in 2023, it’s embedded insurance— the concept of bringing personalized insurance products to customers during relevant digital journeys. 

It’s not hard to see why. Allied Market Research reports that the global embedded finance market was valued at $66.8 billion in 2022 and is expected to reach nearly $623 billion by 2032. Within five years, more than 30% of all insurance transactions will likely occur within embedded channels, according to Ernst & Young. Nearly two in three Gen Zers and millennials and three in five Gen Xers are interested in accessing an average of 15 different embedded financial products from brand names they trust. And Deloitte predicts that, if as much as 20% of the U.S. personal auto market implements embedded insurance by 2030, $50 billion or more in premiums could be redirected away from the industry’s traditional distribution channels.

No doubt, embedded insurance is a hot topic. The problem is, because of all the noise and hype around it, this sought-after capability is often poorly understood. As the founder of Mylo—one of the first embedded insurance platforms—I think the term is overdue for reexamination. A better understanding of what “embedding” means can lead to smarter solutions for agencies, carriers and companies that want to connect their customers with the right insurance. 

A common misconception

The first mistake in my view is thinking of “embedding” as 100% digital insurance binding—just click a button, and you’ll have the right coverage. It’s true that embedded insurance has built serious momentum thanks to the successful adoption of simple add-on "insurance lite" products that can be easily bundled with other online transactions: Think travel, phone and pet coverage. But when it comes to more complicated (and essential) products like business, home, auto, group benefits and life, that model doesn’t stand up to reality. 

The truth of the matter is, no single carrier has the appetite for every type of product that an insurance shopper may want in a 100% digital transaction. When you add multiple carriers into the mix—which is important for finding every customer their best value—the challenge is even greater. Recommended products like business owners' policies (which combine property, general liability and sometimes cyber) or umbrellas (which provide extra protection when the limits of specific policies are reached) require the help of an expert adviser who can put all the pieces together. 

See also: A New Approach to Embedded Insurance

The right way to embed

That’s why I prefer a more nuanced definition. To me, “embedded insurance” means incorporating a simple, speedy and streamlined insurance shopping experience into a company’s digital experience—so customers have instant access to the guidance and options they need to make an informed decision when they need to make it. In other words, the entire process doesn’t have to happen online. For the foreseeable future, licensed agents will have an important role to play—to ensure every customer has the most personalized guidance.

So what exactly are companies “embedding”? Convenient access to everything a given insurance shopper needs—a wide range of insurance products, a suite of leading carriers, the guidance of expert advisers and a foundation of deep insurance expertise. We call this last piece “insurance intelligence,” and it’s one of the most important factors in a successful embedded platform.

Too many insurance websites use technology to rush their customers to complete the transaction. An online insurer or agency will typically present a list of coverages and ask the customer what they need—then use comparative rater software to show quotes with the lowest prices. Making the right choice is left to the customer, who may not know much more than they did when they started. 

What’s missing from the experience is insurance intelligence: the deep expertise that identifies what solutions are in the customer’s best interests based on the information they provided—then makes expert recommendations and finds the best available value from an insurance company that has appetite for that risk

Not just about price

Embedding isn’t just about finding customers the lowest rates. Our industry has long been driven by a “low price/big savings” mentality. But that’s not always the right value proposition. When a policyholder has a surprise loss and learns they’re not adequately covered, will they be glad they saved 15% in 15 minutes? Are they going to pat themselves on the back for choosing the lowest-cost carrier if they’re trying to be reimbursed for a valid claim and don’t receive high-quality service? 

The costs of not choosing a personalized policy from a top-rated carrier can be significant. In my view, technology should make customers aware of the right protections for their needs—instead of relying on shortcuts that can lower rates, such as reducing recommended coverage limits.

Make it easy

Most importantly, we need to make this experience as easy as possible. As I’ve said, I believe in putting a streamlined, guided experience directly in the path of shoppers who need insurance while they’re transacting other needs with companies they trust. This spares customers the need to research coverages and carriers on their own. 

For example, Verisk finds 43% of small businesses are uninsured, leaving them vulnerable to a variety of risks. By embedding access to insurance education and solutions into relevant journeys for small business owners – such as in the customer experience of a digital HR partner – agencies can benefit from closing policies while business owners can gain peace of mind in getting the protection they need, even if they didn’t know they needed it.

An embedded insurance platform should also interact with customers through all the channels they value – online, over the phone or through chat. Up to 70% of insurance customers make at least one channel jump, switching from digital to human assistance or vice versa, particularly toward closing, according to a recent Boston Consulting Group study. Starting a quote online, for example, should be paired with the immediate option to chat or speak with an agent. 

And customers should never have to answer the same question twice. Today’s sophisticated application programming interfaces (APIs) allow agencies and companies to pass data back and forth, which can enable a platform to automatically prepopulate customer information the partner was already given. This leads to a faster, stress-free shopping experience that can boost conversions. 

See also: Is Embedded Insurance the Wrong Idea?

The future is here

Bottom line, embedded insurance should be focused on making quality customized insurance recommendations easy. The goal should be doing what’s right for the customer: offering the right coverage at a fair value with the best experience possible, not always the lowest price. Your customers need to be able to trust the services and products you and your embedded insurance partner suggest. The good news is that, by using appropriate technology, recommending the right coverage and carrier and presenting the best value, you’re going to look attractive to insurance shoppers. Everyone wins.

Of course, effective technology and insurance intelligence engines aren’t built overnight. If you lack the necessary tech capabilities and insurance expertise internally, it’s important to collaborate with an external partner who can make your embedded insurance objectives a reality.

Embedded insurance is like a bullet train that’s preparing to leave the station. But before you jump on board, make sure you’re on the right track – one that will efficiently deliver you, your partners and your customers to the right destination of genuine insurance value.

In recent months, Paris has had a very unsavory problem. Videos circulating on social media have shown bed bugs crawling across seats on trains and buses. They have been spotted in restaurants, hotels and even at Charles-de-Gaulle Airport. However, such outbreaks are not just a problem for the French. Bed bugs have also hitched a ride to the U.K. -- pest control company Rentokil saw a 65% jump in cases during the second quarter of 2023, compared with a year earlier, sparking fears of international infestation.

Can bed bugs be prevented from invading a commercial place of business? In short: no. Bed bugs are opportunistic, non-discriminatory and – worst of all – stealthy.  They will find a way to get into unprotected buildings where necessary precautions have been neglected and where the right environment for infestation exists.

Because one cannot prevent bed bugs from infesting a place of business, the best course of action is early recognition and control. Implementing strict policies and procedures and best practices can prevent unnecessary customer complaints, eradication costs and business interruption. They can also protect the business’s brand and reputation.

See also: Top Causes of Business Insurance Loss

Control measures

In a new risk bulletin, Bed bugs: risk tips for avoiding infestations, Allianz Commercial outlines several dos and don’ts for helping to control and mitigate the impact of bed bug infestations, particularly in the hospitality sector. Important risk mitigation tips and control measures to consider include:

• Offer a refresher training for recognition and control to staff prior to peak bed bug season (summer)
• Implement focused inspections by housekeepers during room change-out periods to include baseboards, mattresses, pillows, etc.
• Encase mattresses and box springs with a cover
• Establish a referral/retention relationship with a local licensed, insured and reputable pest control company to respond to bed bug incidents. Include inspecting the adjacent rooms, as well as those above and below the infected unit
• Include K9 inspections (with dogs trained to sniff out bed bugs)
• Use garment steamers to treat luggage and clothing that may become contaminated with bed bugs
• Initiate procedures and protocol to have all the right tools on hand that can prevent guests from spreading bed bugs
• Use a trained response team who have high-resolution cameras and other tools, including clear tape to collect suspected bed bugs and physical signs (e.g. hatchlings and excrement) for validation
• Establish public relations protocols, referring all media inquiries to your corporate office. Unauthorized staff should never respond to media requests.

Bed bug basics – three things to know

1. They are small, parasitic insects that feed on the blood of people and animals. Found worldwide, they can withstand temperatures from around 32°F (0°C) to 122°F (50°C).
2. They typically hide in the seams of mattresses, bed frames, headboards and dressers and even behind wallpaper – in any small opening that is available. One of the first things you should do while traveling is to check your sleeping area thoroughly for bed bugs or signs that they are around (e.g., excrement).
3. Typically, they are nocturnal, coming out at night from their hiding places and traveling up to 20 feet, to where they can reach a human or animal for a blood meal.

For additional information, download the Allianz Commercial risk bulletin, Bed bugs: risk tips for avoiding infestations, which also includes a dos and don’ts checklist for responding to guest or customer complaints.

During the pandemic, agents and brokers found themselves in the unenviable position of needing to find ways to reduce the soaring costs being incurred by their construction clients. While certain inflationary factors, such as the cost of supplies, were out of agents’ and brokers’ control, they could explore new options for workers’ compensation insurance. 

Workers’ compensation claims are one of the most inefficient and costly aspects of a construction project. According to Insureon, construction carries the highest workers' compensation costs of any industry. While construction presents more risk for workers than most other industries, there are also issues with the traditional workers’ compensation claim process that drive costs without yielding better results.

The solution may lie in supplementing the traditional workers’ compensation model with programs that focus on pre-established, high-quality care that is agreed on by both unions and construction managers well in advance of any workplace injury. Alternative dispute resolution (ADR) programs offer a new route for injured workers to receive care from reputable doctors and caregivers in an efficient and cost-effective way. 

See also: Building an Effective Risk Culture

What is an ADR Program?

ADR programs require an additional agreement between construction managers and union labor, with a program administrator acting as an impartial intermediary. The program sets up pre-established processes for care for injured workers. Because these agreements are formed in partnership between labor representatives and the construction business, a reserve of agreed-upon doctors and caregivers can be established in advance, ensuring injured workers are driven to reputable caregivers with a history of focusing on healing injured workers.

Requiring workers to see reputable caregivers helps guarantee workers do not prolong care in the hopes of a larger settlement payout; it also removes layers of bureaucracy and wait times that are taken up by debate and litigation in a traditional workers’ compensation model. 

ADR programs do not replace traditional workers’ compensation coverage. Rather, they function in parallel with traditional workers’ compensation plans. As ADR programs are formed between construction projects and unions, any injured non-union labor would need to follow the traditional workers’ compensation process for filing a claim.

A Focus on Care

The traditional workers’ compensation process is often bogged down by debate and perspective about which caregivers are more credible. This often leads to long delays and negotiation between injured workers and construction businesses, slowing care and increasing the costs associated with the claim without providing better care.

Under an ADR program, this problem is resolved long before a claim is filed. Directing care allows for workers to get the help and care they need much faster, while simultaneously ensuring care providers are approved and accepted by all parties. This not only allows for faster care but allows representatives from construction companies and union labor to have a greater degree of confidence in the caregivers with whom they work. As a result, workers in an ADR program have a higher-than-average chance of returning to work, while also providing notable cost savings for the construction business.

Working Closely With Unions

While the traditional workers’ compensation model requires agreement and cooperation with unions, it often calls for conversation and negation at the worst possible time – after an injury occurs.

ADR seeks to solve for timeliness by both determining a plan of care in advance and ensuring the caregivers meet all the requirements of both the project and the unions. This allows for unions to use doctors with whom they have a history, while allowing the construction company to verify that caregivers have a history of good patient results and a focus on healing.

See also: Managing New Age of Construction Risks

Less Bureaucracy Through a Program Administrator 

While ADR programs provide a direct and clearly defined path of care for those enrolled in the program, there remains a need for some degree of administration to ensure all aspects of the agreement are met. There must also be a protocol to handle any disagreements or negotiations between the unions and the construction companies. This level of management requires far less time than it takes for an injured worker to receive care in a traditional workers’ compensation model. It also ensures all parties remain satisfied and compliant with the terms of the agreement. 

As the costs of building continue to increase, those who insure the workers on job sites are facing pressure to drive costs down while simultaneously increasing return-to-work rates. The traditional workers’ compensation model simply is not built to meet that demand. Only through new measures, such as ADR programs, will the industry be able to keep up and improve the return-to-work rates on job sites.

Businesses are undergoing unforeseen global shifts, and the commercial underwriting process is more intricate than ever. Understanding the complex commercial landscape requires both foresight into identifying the right risk variables and a modern technology stack to handle data efficiently.

Let’s start with the most influential risk factors in underwriting. 

The Prevailing Challenge in Commercial Underwriting: Fast, Accurate Classification Details

Supporting a profitable commercial insurance product starts with an underwriting process that captures accurate details of the business, including industry-specific information as well as the uniqueness of its operations. There are many factors that go into a business’s operations beyond when it started, what licenses it holds and the services it provides. The size of the business is not just about the revenue, but the number of employees, size of its physical occupancy and the types of products being offered. Smaller businesses might not have the resources to adapt to changes within the marketplace, which can cause them to become riskier by expecting employees to take on additional responsibilities or even broaden their offerings to attract and retain customers. This is why understanding what a business is doing matters more now than ever.

A business’s environment, quality of services and cleanliness also matter in underwriting. Review sites and social media channels can help form a complete picture of what the business is doing beyond how it is marketed by the owners, giving underwriters details that are authentic and current. This customer feedback can shed light on potential causes of loss that may not be evident through traditional channels. However, manually researching these clues for every business in your book is a time-consuming process, and when your underwriting team is already short-staffed, they need immediate insights, not additional homework.

As each industry has its unique types of risks, insurers need to adapt their risk assessment for different sectors. Some businesses offer a wide range of services or have unconventional models. For instance, a Mexican restaurant with a dance floor and a full bar faces different risks than one that does not offer alcoholic beverages. Similarly, a florist shop that has an expanded delivery radius introduces risks that must be considered. 

By leveraging advanced analytics and social listening tools, you can find valuable insights into such anomalies and complex businesses. This will help insurers identify businesses that may be expanding into new services or facing changes in their operations.

See also: The Defining Factor in Underwriting Success

Complex Businesses and Emerging Factors to Consider

In addition to traditional risk variables, there are emerging factors to consider. Businesses now pivot at a lightning pace due to economic conditions and technological advancements. Companies are implementing new technology that can change the dynamics of their operations and potentially open them up to cyber vulnerabilities. 

On top of this, diversification of services is becoming more common, as business owners seek to increase profits and grow their businesses. This introduces challenges of finding the changes when they happen. For example, a plumber who expands into roofing or other construction services presents another layer of complexity – especially if they lack proper training – and that information can be difficult to track down. Discovering these changes at scale requires automation, while using the data in new and renewal business workflows requires data integration to maximize the value of understanding these new operational risks.

Lastly, there has been a shift in risk priorities due to a heightened concern about catastrophes escalated by the impacts of climate change. Intense fires, floods, hurricanes and other natural disasters are a pressing issue at a macro-level that organizations have to navigate, and we’ve seen catastrophe risk take priority over risks such as social inflation. 

Such frequent pivoting profoundly affects underwriting, as traditional methods struggle to keep up. Furthermore, layoffs and staff changes at insurance companies are causing insurers to lose manpower and industry expertise, which can have significant consequences on the underwriting process.

See also: From Risk Transfer to Risk Prevention

Technology’s Role in Addressing Underwriting Factors

A lot of business activity can change during a policy term, leaving insurers without pertinent information for a comprehensive review of the businesses for renewals or new policy underwriting. In a post-COVID world where small businesses must adapt rapidly to survive, underwriters need tools that keep pace with modern businesses and provide the full picture, as the technology they've traditionally relied on no longer does the job. 

It's important to address the challenges in data consistency, as well. Each business, with its unique characteristics, may generate data of varying accuracy and consistency, so it’s imperative to adapt by using analytics tools to standardize, aggregate and cross-reference data from multiple sources. Another critical aspect is data integration. Comprehensive databases are paramount to successful underwriting, as they help insurers unearth hard-to-find information they might not have been aware of otherwise. Tapping into a variety of data sources enhances the understanding of businesses to make more informed decisions regarding coverage. 

With the use of predictive models and comparative analysis, insurers can easily translate this data into custom risk index scores. These scores play a crucial role in conducting a thorough evaluation of the risks associated with those businesses to help underwriters accurately forecast the likelihood of risks becoming issues. By converting complex data into actionable insights, insurers can make more informed decisions and better adapt to the dynamic nature of the business world. 

Streamlining the underwriting process is essential for adapting to a rapidly changing business environment, especially as shrinking underwriting workforces are burdened with the same workloads. With the right technology in place, insurers can garner a comprehensive view of a business by transforming complex data into actionable insights, streamlining the process and making informed decisions to best support the businesses they are underwriting for.