Every successful entrepreneur or CEO has dealt with failure at some point. It took Thomas Edison 10,000 attempts to perfect the light bulb, 36 publishers rejected Arianna Huffington and Milton Hershey had three candy-related ventures fail before he founded Hershey's.

Whether you're running a small startup or a Fortune 500 corporation, shifting your thinking to learn from failure is one of the hardest lessons for most business leaders but also one of the most essential for future success.

As Franklin D. Roosevelt once said, "A smooth sea never made a skilled sailor."

Learning from failure is a crucial skill that can lead to personal growth, resilience and improved decision-making. Here's some advice for someone who wants to learn from failure:

1. Shift Your Perspective: View failure as a learning opportunity rather than a defeat. If perfection is the standard, you're creating an unhealthy work environment where fear of failure will hamper you and your employees' ability to be creative and find innovative solutions. Instead, embrace a growth mindset, understanding that failures are stepping stones toward improvement and success.
2. Avoid Attributing Blame: When facing failure, avoid blaming yourself or others. Instead, objectively analyze the situation to understand what went wrong and why. Go beyond surface-level reasons for failure. Dig deep, conduct a postmortem to uncover the underlying factors contributing to the outcome and examine your assumptions, strategies, communication and execution. Look at failure as a chance to identify factors you can control and improve to mitigate the same mistakes from happening again.
3. Feedback: Although it might be challenging, embracing honest feedback about your and your company's failures can provide valuable sources of information and learning opportunities you might have yet to notice on your own. This can help you assess your progress, challenge your biases, improve your products and services and learn things. In fact, a global survey by the Economist Intelligence Unit found that what set top-performing companies apart was the use of feedback loops, stating that effective feedback brings speed to delivering strategy.
4. Document Lessons: Successful business leaders and businesses perform trials and embrace errors. You can only get better at something by practicing and learning from your mistakes. So, write down what you've learned from the failure. Create a document or journal where you record the details of the defeat, the analysis and the lessons you've gained. This helps solidify your insights and prevents repeating the same mistakes.
5. Adapt and Pivot: Accept that failures will happen in business and adapt your approach to the lessons learned from loss. Adjusting your approach when a failure occurs is critical to fostering long-term resiliency for your business. Apply the insights gained from failures to pivot and refine your strategies, adjust your goals and develop new approaches to make better decisions moving forward.
6. Celebrate: Acknowledge your progress, even if it's small. Every step toward improvement counts, and recognizing your efforts can boost your motivation to keep learning. Taking pride in your achievements allows you to pinpoint precisely what you've successfully done so that you can repeat it in the future. So, the next time you successfully handle a challenging situation or a task that you've struggled with, take the time to acknowledge and celebrate your accomplishments with your peers. It'll encourage them to do the same.
7. Set Realistic Expectations: When setting expectations, specificy your businesses and personal goals. Then, break down the most significant goals into more manageable expectations and understand that setbacks don't define your worth or abilities. For example, let's say you want your company's EBITA to increase by 10% by the end of the year. In that case, focus on a 2.5% EBITA increase per quarter and continuously reevaluate your expectations to ensure you have the staff, time and financial capabilities to realistically achieve your goals.
8. Practice Iteration: Approach your goals with an iterative mindset of continuous learning, progression, feedback and improvement. As you implement changes based on what you've learned from experiences, constantly monitor your progress, assess outcomes and refine your strategies as needed. For instance, if you're releasing an insurtech product, you'll need to continuously experiment with it, get feedback about its weaknesses and keep tabs on disruptive industry trends so you can make adjustments and deliver a game-changing product.
9. Stay Persistent: Failure is inevitable. In fact, 90% of startups fail. It's not a question of if you'll fail but rather when. Failure can be discouraging, but remember that success often involves persistence. Use your newfound knowledge to keep moving forward, even in the face of challenges.

See also: NFIP's Failure Fuels New Risks

Even Amazon CEO Jeff Bezos says that his company's growth and innovation are built on its failures: "If you're going to take bold bets, they're going to be experiments. And if they're experiments, you don't know ahead of time if they're going to work. Experiments are, by their very nature, prone to failure. But a few big successes compensate for dozens and dozens of things that didn't work."

Don't be afraid to share your failure stories with others. Sharing your experiences can help others learn from your mistakes and create a supportive community that values growth and learning. Be patient with yourself and focus on the journey of continuous improvement rather than perfection. Learning from failure doesn't mean dwelling on the negatives. It's about finding humor and growth in the most unexpected places.

So, go forth, fail fabulously, and remember the best view comes after the hardest climb!

Few people wake up in the morning excited to purchase an insurance product. At best, insurance is considered a "push" rather than a "pull" product. Often, it's a requirement based on legislation or contractual conditions. Rational buyers aim for the best possible deal (based on lowest price and perhaps coverage considerations) -- but what if we could influence the way that consumers perceived the value of risk mitigation and insurance in relation to a personalized asset?

Embedded insurance at the point-of-design may be a way to address this challenge and thereby support insurance sales and distribution.

Embedded insurance at the point-of-design involves creating assets that incorporate insurance products as natural complements with a shared value proposition. This process involves re-imagining the role of risk mitigation and insurance coverage as both a means of protecting the value of the asset and a source of resilience.

Embedded insurance at point-of-sale, by contrast, is an add-on product that is discrete from the asset and, as such, is an arbitrary complement.

Embedded Insurance at Point-of-Design as Part of a Distribution Strategy

What if the structure of point-of-design embedded insurance supported insurance distribution growth by wrapping a "push" product within a "pull" product? 

We can visualize this concept as a set of layers: 

1. The first layer is the asset. Perhaps the asset may be personalized by the consumer such that it can be modified to suit preferences or may engage with them in a way that's tailored to them. Over time, consumers see themselves reflected in the asset. 
2. The second layer is the cost of ownership. We may divide this into two categories -- pure expense and protection of value: 
   • Pure expenses may include maintenance, fuel, replacement parts and so on;
   • Costs associated with protecting the value of the asset may include risk mitigation (recommended activities that consumers may adopt to manage the risk associated with damage or loss to the personalized asset) and insurance (the cost of resilience or the capacity to return to a pre-loss state after a defined event). 

If the asset is sufficiently desirable and engaging -- "pulled" by the consumer -- and the risk mitigation and insurance components are considered to be part of the overall proposition and help to protect the value of the asset, then it follows that consumers may be prepared to purchase the overall bundle on the basis of the asset's desirability.

Further, the more that consumers consider the asset to have intrinsic value the more they may see these costs as an investment in mitigating loss of value -- and may be prepared to increase risk and insurance spending. An example may be if insurers provide guidance on how to increase a property's utility or overall valuation or boost the resale value of a vehicle. 

If we leverage personalized recommendations to help consumers enhance the perceived or actual value of the asset, we may increase both its attractiveness and consumer preparedness to pay for further insurance services.

See also: Time to Raise Your Embedded Insurance Game

Personal Lines Examples 

Prevention and protection become a dynamic part of home ownership. 

• Insurers could provide home buyers with a home-styling app that scanned the dwelling inside and out and provided personalized recommendations on how to redesign based on the owner's personal preferences -- perhaps recommending artworks, sound systems and acoustic materials or renovations such as skylights or natural heating and cooling options. 
• The app may also recommend ways to enhance the property value, such as landscape gardening, adding a patio or renovating a kitchen, calculating estimated benefits once complete. 
• The service could provide options for smart devices that mitigate risk of property damage or loss.
• Further, the insurer may provide access to trusted service providers who can fulfil these recommendations. 
• Complementing the property redesign, a flexible homeowners coverage could recognize the individual characteristics of the property and provide coverage accordingly, offering additional coverages and updates as changes are introduced. 

The insurance program becomes a risk and resilience service that helps to optimize resale value as well as supporting driver safety.

• Existing auto telematics programs for insurance typically focus on improving driving behavior through incentives such as reduced premiums. 
• Insurers may collaborate with original equipment manufacturers (OEMs) to incorporate pay-as-you-drive coverage, tailored for each line of vehicles and recognizing their individual risk factors and features, with an in-car customer experience that emphasized safe driving to protect the re-sale value of the asset. 
• The interface may provide personalized guidance on aesthetic or performance enhancements, such as addressing scratches and dints or detailing services, with recommended providers to support. 

Summary

Increasing perceived value does not necessitate that willingness to pay for insurance services will increase -- studies have demonstrated that the factors that influence willingness to pay are numerous and differ by customer segment -- yet it is reasonable to suggest that helping consumers enhance actual or perceived asset value, coupled with risk mitigation activity and protection, may lead to greater retention and potentially upselling opportunity. 

With embedded insurance, by tailoring it to the risk and the individual's choices we tie the value proposition of the asset and the insurance product together. By helping consumers increase the real and perceived value of the asset through personalized recommendations, and making it easy to protect, we can give consumers more reason to pay for risk mitigation and protection. Regular engagement and genuinely valuable guidance may create benefit for consumers and insurers alike.

KEY TAKEAWAY:

--For transformation to occur, key stakeholders must have the five C's in place: customer, capacity, competency, culture and communication.

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Sixty-one percent of people say resources (a category that includes both cost and people) are the biggest challenge to digital transformation, according to a poll during an Accelerate webinar hosted by Equisoft. But life insurance companies can overcome this challenge by dropping their technology-first mindset and adopting a people-centric attitude. 

For change to be successful at life insurance companies, key stakeholders must have the five C's in place: customer, capacity, competency, culture and communication. For life insurance companies looking to extract the anticipated value from their digital transformation, here are a few suggestions on how to improve each of the five.

Customer

Insurers cannot forget what drives these initiatives to begin with: the customer, both the agent and policy holder. Companies need to keep the customer at the center of decision making at all levels. This keeps both IT and business on the same page and working toward the same goals. Digital transformation cannot be a pure IT strategy; it needs to be a business transformation strategy. Organizations need to preserve products and processes that engage customers but also build new capabilities to support goals to scale and innovate to enhance engagement. 

See also: Going Beyond Incremental Transformation in Insurance

Capacity

While technology is still a key component of digital transformation, the journey can’t succeed if employees don’t have the capacity to oversee the implementation and maintain the existing legacy systems during the transition and avoid compromising their other projects.

When it comes down to it, the human capital will end up absorbing the change being pushed by leadership. It may not always be possible to have a dedicated team to oversee the transformation, especially in life insurance organizations that are limited in people resources and budget. So insurance companies should consider looking to outside technology companies for assistance with the transformation.

Not only will this offset some of the heavy lifting typically placed on internal employees, but it may also help organizations think outside of the here-and-now to gain a bigger picture of how digital transformation fits into overall organizational goals — both short-term and long-term. Collaborating with external partners can also help with establishing a stakeholder chart, including analyzing who will be the most affected by the transformation and what needs to be done to make the transition smooth. 

Competency

When you think about change in organizations, it’s not just about modifying workflows, it’s also about changing the skills that people need to leverage to get business done. An organization may be able to operate legacy systems, but it’s another matter to overhaul those and build updated or more modern solutions from scratch and educate others on how to use them. While organizations might have a set of people who are experienced in transformation, the organization as a whole is unlikely to share this expertise. Teams need to have the right digital skills and if those aren’t in place yet, an upskilling process must be set up before life insurers can even continue.

When faced with differing competency levels, a solution is to take the greenfield approach, either on your own or in collaboration with a trusted technology partner. With the greenfield approach, instead of modifying existing systems, the new platform is created from a clean slate without the need for new code to be written and with no restrictions or dependencies on legacy technology. This allows insurers to create an open environment for integration with innovative digital insurance technologies that streamline new business and underwriting processes. It also gives insurers time to roll out the change and adopt additional competencies required for success. 

While this can be a good solution, companies need to make sure they understand how their system-by-system greenfield approach aligns with the overall digital transformation plan, shifts to digital thinking, ensures the flexibility of the new system and obtains buy-in from all stakeholders. 

Culture

A more intangible key to a successful digital transformation is culture. When embarking on this kind of journey, organizations need to create a culture that embraces change, adaptability and resilience. Participants need to be okay with being uncomfortable and acknowledge shortcomings when they occur. If your stakeholders aren’t on board with technology change, then they’ll become roadblocks to your success instead of champions.

Implementing this type of change-oriented culture requires buy-in from organizational leaders, both at the C-suite level and the middle management level. Company leaders need to work toward creating and sustaining an environment in which people want to be part of change and pushing the business toward a more market-competitive position. 

But most importantly, companies should empower employees to make decisions about the project and foster ownership over the change management experience. This gives the employees a voice and encourages them to become far more involved in the process. They'll be more inclined to think through what obstacles may arise, what opportunities the new solution may create and how best to take advantage of the transformation. These are all great outcomes for the organization and not always seen in some of the “top-down” initiatives.

To create this culture of change, life insurers need to make sure all involved parties are aligned around a shared digital transformation vision. Additionally, key stakeholder group representatives should be looped in as early as possible, especially during the planning and scoping stages. If everyone has had a hand in building the vision, it’s easier to foster enthusiasm for the project and overcome obstacles, should they occur. 

See also: Insurtechs' Role in Transformation

Communication

Just as leaders need to foster a culture that’s accepting of change, they also need to openly communicate what the organizational goals are, how the company is working toward those goals and what additional asks are needed of employees. Transparency will ensure that employees understand their roles in this journey and how they can contribute. 

Part of being honest is being forthcoming when mistakes are made. It’s this truthfulness that will establish a sense of trust within the organization and give leaders an opportunity to demonstrate initiative based on how they’re rectifying the situation. 

Communication goes both ways. Leaders need to be open to receiving and incorporating feedback from employees to create a digital transformation pathway that works for everyone. Doug Lipp, the former head of Disney University, discussed the "walking the park" approach during his keynote address during last year’s Equisoft Elevate event. By frequently and consistently walking the park — or connecting with key stakeholders to gain a fresh perspective on where changes and improvements can be made — life insurers can learn about pain points in the value chain and identify ways that their digital transformation efforts can alleviate them. When you establish regular discourse as a default rather than the exception, you provide clear paths for employees and partners to share ideas and concerns. 

Change management is what drives success, but communication is what allows you to create opportunities for your team to be successful. 

Wrap-Up

Technology may be the impetus for digital transformation, but the people behind the initiative ultimately drive the change and determine the journey’s outcome. Change management, coupled with effective communication and a focus on people, creates opportunities for insurers to succeed. By placing your people at the heart of digital transformation, you can navigate the challenges of digitalization and harness its full potential.

KEY TAKEAWAYS:

--Managing closed blocks is a drain to insurers' capital and leads to a higher price per policy.

--Strategies led by data and AI can let life insurers reimagine closed blocks, improve operational efficiency and enhance the customer experience.

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Growth and cost optimization being the twin engines for sustainability, life insurers need to innovate products and services to cater to new realities such as longevity, retirement gaps and holistic wellness but at the same time focus on operational efficiency of legacy or closed blocks for better capital usage and reserve management. As a result, insurers must leverage technology advancements, data & AI strategy to manage closed blocks effectively. 

With insurers adopting various strategies such as reinsurance, outsourcing and consolidation to harness the proportionate locked-in capital, industry deals with complexities of asset liability management, regulatory demands, depreciating returns, administration of siloed products in legacy tech stack, process inefficiencies, etc., leading to higher costs and hurting customer experience.

Organizations can adopt two approaches to unwind the complexities and achieve operational efficiency: 

• Drive Simplification & Digitization
• Governance & Controls

Drive Simplification & Digitization

In dealing with the complexity of closed blocks, organizations can drive simplification in the following ways:

Cloud-based data lake – Consolidators that are in the business of acquiring closed blocks often face challenges such as long cycle time for integrating systems, data and the processes of acquired books. Cloud can be used to migrate the acquired book off its legacy platform, streamlining data extraction, data ingestion, processing, etc. Timelines for future acquisitions can be shortened and closed blocks managed effectively.

Low-code, no-code – Monolithic legacy systems often face challenges when it comes to administering closed books because of a lack of the needed skillsets, complexity in product administration, huge development costs for conversion, etc. Low-code, no-code platforms will significantly reduce the development life cycle and maintenance, enabling a transition to modern technology that eases integration with contact center operations and provides a seamless customer experience.

Digital twin – Process inefficiencies in customer servicing such as policy inquiry, FNOL, adjudication, payouts, etc. lead to increased price per policy. Application of process mining tools in conjunction with a digital twin -- a virtual representation of physical entities, data, its relationships and behavior -- will help identify bottlenecks and establish process and persona twins to streamline business process, aid in merging portfolios to achieve economies of scale and reduce cost of operations.

Generative AI – Productivity of IT operations and experience of in-force policy holders can be enhanced by query generation (i.e., converting natural language queries to SQL), data engineering, validation, aid in policy and claim servicing, bordereaux processing and customer service chatbots enabled with features such as claim summarization, document Q&A, etc.

See also: Moving Beyond Data Lakes

Governance & Controls

AI/ML for accelerated rate filing – As the risk profile of the customer changes, insurers managing in-force policies of legacy products need to be agile in filing in-force rate actions to state regulators. Traditional methods of data acquisition and processing of information (placed coverages, incurred claims) and projections for forecasting are time-consuming and often takes months. Automated data discovery, intelligent data extraction, ML-based DQM, centralized assumptions hub, etc. will enable lineage and traceability to regulators and accelerate rate filing and rate revision, thereby improving profitability.

Data governance and KPI model office for performance management - Establishing effective data controls and governance to measure the performance via key performance indicators (KPIs) is critical for enterprises to manage capital effectively. For instance, data quality issues in the customer data domain will affect the ability to merge the portfolios for optimization, establish a unified view of the customer for cross-sell and up-sell strategies, etc.

Way forward

Higher price-per-policy for managing closed blocks in the industry presents a significant opportunity for insurers to harness the combinatorial power of data and AI to improve their operations and governance, enhance customer service through digitized process and make capital management more effective.

KEY TAKEAWAY

--A third of MGAs are planning to add insurtech partners over the next three years, and 40% expect to expand/grow their current partners in the space, such as distribution platforms or digital agencies. Affinity relationships and partnerships with other MGAs/MGUs are also likely to develop significantly among more than half of MGAs.

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There is no arguing about the strength of the managing general agent (MGA) market in 2023. MGAs’ agility, innovation and focus on specialty and complex lines have positioned them for continuous growth. Conning reported the MGA market grew by 24% in 2022, with associated premium volumes estimated to be more than $85 billion.

Much of MGAs’ success can be attributed to how versatile they can be. Incumbent MGAs are leveraging advanced tech capabilities and new channel strategies to propel their growth in a market with increasing competition. The latter has become especially critical as MGAs have a broader role in the distribution landscape and seek to expand their reach in an increasingly hardening market.

A new ReSource Pro research report examines the channel distribution plans of MGAs in 2023, including their current partnerships, their expectations about how distribution will change in the next few years and their strategies to expand various channel partners. Considering the many challenges in the market today, such as rapid technological advancements, evolving customer expectations and a volatile economic environment, MGAs are exploring aggressive plans to grow certain distribution channels.

While MGAs continue to expand and add foundational channels, such as wholesalers and retail agents/brokers, there is an interesting shift in their approach to insurtech. A third of MGAs are planning to add insurtech partners over the next three years, and 40% expect to expand/grow their current partners in the space, such as distribution platforms or digital agencies. Affinity relationships and partnerships with other MGAs/MGUs are also likely to develop significantly among more than half of MGAs.

Regardless of the channel partner an MGA chooses, conducting thorough due diligence and ensuring strategic priorities align across parties is essential. Identifying partners that strengthen market position will be key to MGAs’ long-term success.

KEY TAKEAWAYS:

--A good starting point for thinking about customer care is the E3 model, which focuses on engaging them, empowering them and emotionally connecting with them.

--In implementing the E3 model, evaluating processes, emphasizing personalization and leveraging data are all crucial.

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Insurance technology spending in the U.S. is anticipated to grow by more than 25% between 2022 and 2026, highlighting that many companies are investing in digital transformation. Technological advancements enable insurers to streamline operations, offer innovative products and reach a broader customer base. However, insurance companies must be sure to maintain a relentless focus on customer care.

The implementation of new technologies is all about balance. While many customers will be happy to see businesses innovating with enhanced processes, others may feel they are being forced down a path they do not want to travel. Swiss Re highlights a way to achieve balance through the E3 model: engagement (enhancing digital services to improve customer interaction), empowerment (providing customers with the necessary information to enable them to make informed decisions) and emotional connection (integrating principles of behavioral economics into procedures to demonstrate an increased level of care and respect throughout the digital customer experience). 

To achieve balance, the insurance industry needs to provide omni-channel communication methods that not only offer the same level of support service across each platform but also the ability to maneuver seamlessly from one platform to another. This article will break down best practices for achieving balance while keeping a continued focus on customer care, through evaluation, personalization and leveraging data. 

Evaluate Processes to Enhance Communication Channels

In an increasingly digital world, communication channels play a pivotal role in customer care. Based on the E3 method, communication platforms should first allow for easy and convenient engagement for policyholders. Platforms should allow them to feel empowered by self-service capabilities in all facets: policy management, premium payments, policy enhancements, claims filing and claims participation. Finally, platforms must allow for emotional connection, which cannot occur through the use of technology alone. Personalization of messaging and content on platforms can help break the barrier of inherent distrust. This must combine digital and human approaches, because the human touch in customer care remains indispensable. 

Regularly seeking feedback from policyholders is essential for understanding pain points and identifying areas of improvement. To enhance communication channels, ask the following question: Based on our consumer demographic, how can we best meet our customers where they are? If the answer is unknown, the best way to find out is through customer evaluation and analysis. Insurance companies can conduct surveys and focus groups or use digital feedback platforms to gather insights into policyholder experiences. Analyzing this feedback and acting on the findings demonstrates a commitment to addressing customer needs and making the necessary enhancements. 

Emphasize Personalization to Increase Satisfaction and Loyalty

Each policyholder's needs are unique, and insurance companies must deliver tailored services to enhance the customer experience. Personalization ensures policyholders are heard throughout the claims process, from first notice of loss through to claim completion. Insurance companies have access to a myriad of data but often lack the ability to access it in a structured and meaningful way. Customer data must be accessed responsibly, enabling insurers to anticipate individual requirements, offer relevant coverage options and provide personalized assistance during claims processes. By demonstrating an understanding of policyholders distinct needs, insurers can increase customer satisfaction and loyalty.

Personalization is a powerful tool that can enhance the policyholder journey, helping insurance companies to distinguish themselves in an increasingly competitive market. Whether a solution is designed for a single customer or a broader audience, insurers must engage customers on their terms, delivering messages with empathy and consideration, especially in the aftermath of a disaster. A hybrid approach, blending digital innovation in the claims initiation phase with compassionate management throughout each claim, can not only boost customer satisfaction but also propel the evolution of the entire claims industry. By meeting customers where they are and showing genuine care, insurers can drive forward the progression of the claims process improvement and set new industry standards.

See also: Unlocking the Future of Long-Term Care

Leverage Data to Anticipate Customer Needs

The core goal with digitization and personalization is driving value and trust that align with a unique brand. By understanding what consumer data is available and what data is necessary, insurance companies can gain insights into customer needs and preferences. This can start with simply adding consumer preferences in the settings: Do policyholders want to receive updates via text or email? Then, this can be scaled to more important aspects. For instance, when analyzing findings from an underwriting inspection, several data points will be considered when determining policy details, including the home’s age, claim history and previous maintenance. 

Machine learning and artificial intelligence can be used to gain valuable insights into policyholder behavior, enabling insurers to anticipate their needs and offer relevant solutions. For example, AI-powered chatbots can handle routine inquiries, freeing human representatives to focus on more complex issues requiring empathy and problem-solving. While AI-powered chatbots can benefit companies greatly, though, they can also escalate issues, as their capabilities are solely driven by the data they have access to. Companies need to ensure that the knowledge base that feeds intelligent bots is well organized, clearly indexed and vast. Start by laying out the top 10 customer inquiries, in addition to all of the possible or necessary responses based on geographic location, policy type and other applicable factors. The ultimate goal is to combine the efficiency of technology with the warmth and understanding of human interaction.

While these insights will help insurance companies focus on policyholders, leaders must always analyze the impact on both employees and processes, as well as on the overall customer experience. Insurance professionals must adapt to new technologies and processes continually, so ensuring they have the proper tools and training can equip them with the necessary skills to navigate digital platforms and deliver exceptional customer care. 

Digitalization offers unprecedented opportunities for efficiency, but it must be balanced with personalized and empathetic interactions. Evaluating processes, emphasizing personalization and leveraging data are all crucial in sustaining excellence in customer care. By investing in customer-centric strategies, insurers can build lasting relationships, foster loyalty and position themselves for continued success in the digital era.

KEY TAKEAWAYS:

--The need for long-term care insurance is urgent, given the aging population, but purchases are declining.

--Technology now allows for streamlining the application process, as well as claims, and for spotting those who might be especially at risk and helping them avoid problems.

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There are nearly 56 million Americans aged 65 and over, up from just over 40 million in 2010. This explosive growth of aging Baby Boomers means the U.S. is set to witness a demographic shift that it is ill-prepared for. Less than 10% of this demographic currently has a plan in place for long-term care insurance (LTCI) despite the widespread, legitimate concern among aging adults about outliving their retirement savings. 

LTCI policies have experienced a steady decline in sales, with 2022 marking the lowest sales volume in over two decades. While perplexing on the surface – given the seriousness of the need – this trend is understandable when you consider heritage issues like inaccurate assumptions, which led to significant rate increases, lack of product innovation, agents and carriers dropping out of the market and overall consumer perception of the segment.

We can’t let this continue, though. To safeguard elderly individuals from financial insecurity during their retirement phase, the insurance sector needs to foster innovation that will ignite behavioral and buying changes in this category, as we have seen innovation drive growth in other verticals.

What Can Innovation Improve?

Let’s start at the beginning. Innovation can streamline the LTCI application process, which has traditionally involved physicals and lengthy procedures that frustrate consumers and result in high rejection rates. 

The ability to accomplish this is here, right now. With the availability of improved risk selection and application processing techniques, insurance products available now can provide decisions within an hour. This streamlined approach – which we know consumers are demanding in every category – has led to better risk selection and significantly improved consumer experiences.

Innovation is also transforming the way insurance companies handle claims, making the process more efficient and precise. Automated initial claims routing streamlines the process, so claims can be swiftly directed to the appropriate department or personnel for evaluation and next steps. We must replace legacy systems with automation that saves time and resources, leading to faster response times and reducing the risk of claims getting lost or mishandled.

Venture capital recognizes the need and size of the opportunity, which is why recent VC investments in insurtech companies are upward of $11 billion. Where money flows, innovation follows. Happily, much of this money will focus on resolving known issues and friction points in the insurance landscape, leveraging machine learning to improve risk selection during the application process, generating better insights into what is driving morbidity and mortality. 

If done properly, this innovative approach will lead to more accurate and stable pricing, making LTCI more affordable and accessible to middle-class consumers, a revolution that will help offset the years of negative news.

See also: Time for a 'Nudge' on Long-Term Care

Other opportunities exist in identifying potential policyholders who might require assistance and make a future claim for their health challenges. Those opportunities require insurers to analyze massive data sets mapped against population health metrics.

By using data analytics and predictive modeling, insurance carriers can reach out to these individuals, offering assistance, guidance and resources to address their needs before a crisis occurs. This don’t-wait-till-it’s-too-late approach can prevent or mitigate potential problems, helping policyholders maintain better health and quality of life.

For example, some insurance carriers are now incorporating innovative wellness programs into their pre-claim processes. These programs offer policyholders access to targeted, personalized health and wellness services like fitness programs, nutrition counseling, mental health support and preventive screenings. By encouraging and “gamifying” healthier lifestyles and early intervention, these insurers reduce the chances of claims arising from preventable health issues while also improving the customer experience overall, building stronger and deeper connections.

Messaging Matters, as in Any Other Industry.

As part of an innovative re-evaluation of the industry, insurance companies are seeking novel methods to engage and educate consumers about LTCI. They recognize that traditional approaches may not always effectively convey the significance of long-term care planning, given the complex nature of the subject matter. This includes applying the learnings from other categories delivering powerful content in the right way at that right time to the right audiences.

Educating consumers through various channels, such as interactive online platforms, mobile apps and personalized content, can address the LTIC gap. We can simplify complex insurance concepts, highlight the potential risks of not having long-term care coverage and demonstrate the value of investing in it early. Add to that a more sophisticated and accessible distribution strategy, and we have the ability to strengthen the LTCI market, making it more sustainable and responsive in the face of evolving healthcare needs.

Effective distribution channels are essential in creating awareness of the importance of LTIC and encouraging purchase. These channels are the bridge between insurance companies and potential policyholders, facilitating the dissemination of crucial information and guiding individuals through the purchasing process. 

What Can States Do?

States can also play a pivotal role in driving innovation in the insurance industry overall, particularly with LTCI. Growing recognition of the challenges posed by an aging population and the rising costs of long-term care have prompted several states — including Washington, California and Minnesota — to implement their own state-run LTCI plans. These state-driven initiatives offer an opportunity for experimentation and innovation, and they are to be commended.

Control over the plan's structure and governance enables states to tailor policies that strike a balance between affordability for consumers and financial sustainability for the program. This Goldilocks solution allows them to offer in-demand, innovative features such as comprehensive home-based care options, technology-enabled services and early intervention wellness programs. The growth of the hospital-at-home category will inevitably become part of this.

Another benefit of localization is that states can analyze their unique demographic trends, healthcare usage patterns and long-term care service availability to design more effective and targeted LTCI offerings. They can use advanced data analytics to identify high-risk populations and design interventions to mitigate long-term care needs. Moreover, by working closely with insurers and long-term care providers, states can foster partnerships that encourage innovation and collaboration in the long-term care space.

Large, innovative cities can also take up this challenge for their residents and also their former employees, because their pension benefit systems are under massive economic pressure.

See also: Long-Term Care Insurance Must Evolve

Final Thoughts – Addressing the Elephant in the Room

As with many massive issues, solving the long-term care financing question has been difficult to address head-on, in all its manifold complexities. It has challenged agents and consumers but must be addressed to protect against this significant cost that is literally around the corner.

We should be encouraged by what we are seeing, as insurtech companies are introducing innovative solutions that can revolutionize the insurance industry and fill this gap. These efforts are driven by our social obligation to serve the needs of the growing elderly population, as well as the business opportunities that await. We can’t predict where innovation will emerge next, but we can be certain it will shape the future of both the insurance sector and the thriving insurtech industry in new ways. And not a moment too soon.

A question that has been rattling around in my head for a while crystallized for me this morning when I read that a famous Nordstrom had closed in the heart of San Francisco. Then the Washington Post hammered the point home by leading the paper with this headline:

"How the ‘urban doom loop’ could pose the next economic threat."

My question has been about the long-term effects of the pandemic on work in offices. If enough people stay home to work, then businesses don't need as much office space. Restaurants, bars, coffee shops and other retail establishments see less traffic, and many close. As they close, downtowns become less attractive as places to live and work. Retail traffic declines further, fewer people come downtown, businesses need less office space. And down and down and down we could spiral,... meaning owners of commercial real estate could lose so many tenants that they default on loans.

That's where this could really become an issue for the insurance industry, because life insurers are the second-biggest holders of commercial real estate debt, behind only banks. Any long-term realignment of work and other activity in cities would also affect many other lines, notably workers' comp but also commercial property/casualty and others. 

No big change will happen soon. If cities are headed toward major problems, they will unfold over at least the next couple of years as a slow-motion track wreck. But it's always better to be prepared. 

So let's have a look. 

The Washington Post article opens with this grim picture:

"In Indianapolis, the technology giant Salesforce is paring back a quarter of its office space in the tallest building in Indiana, where it has been a key tenant for the past six years. In Atlanta, the private investment giant Starwood Capital defaulted on a $212 million mortgage on a 29-story office tower. And in Baltimore, a landmark building sold for $24 million last month, roughly $42 million less than it fetched in 2015."

If that isn't enough for you, The Commercial Observer wrote in June: "The shifting of the tide and subsequent distress has been plain to see: Brookfield defaulted on $784 million in loans tied to two Los Angeles skyscrapers in February; Blackstone sent a $270 million CMBS [commercial mortgage-backed security] loan on a Manhattan multifamily portfolio to special servicing in February; GFP Real Estate defaulted on a $130 million mortgage-backed securities loan for 515 Madison Avenue in December; and just last month RXR defaulted on a $260 million loan on 61 Broadway."

The Post says: "All across the country, downtowns, office spaces and shopping centers are at risk of becoming ground zero for a new economic hazard: the urban doom loop."

It adds that, while problems facing New York, San Francisco and some other major cities are getting most of the attention, "many economists are even more worried about midsize cities that have fewer ways to offset the blow when a major company slashes office space, the sale price of a building craters, or a downtown turns into a ghost town."

Some $1.5 trillion in commercial real estate debt is coming due by the end of 2025, and refinancing much of it could be tough. Banks' appetite for lending has diminished, especially for anything that feels risky, following the recent failures of three major banks. In addition, while inflation has declined significantly over the past year, markets seem to now be betting that the Fed will keep interest rates high for some time, to try to head off a resurgence -- and a building that can carry a loan at 3% may have a much harder time making ends meet with a loan at 7%.

In other words, less financing will be available, and what is available will cost a lot more. Those would be serious problems even if you could set aside the fact that building owners are facing what looks to be a fundamental decline in the need for office space -- and you can't set that issue aside.

In the quarterly podcast I do with Dr. Michel Leonard, the chief economist at the Insurance Information Institute, he said lenders have been cushioned thus far from the full effects of the shift to remote work because of "something fairly unusual. We're not seeing cuts in rents."

He adds, though, that "once there is less uncertainty around [the number of people returning to offices], the bankruptcy process will start." And he adds his voice to those saying that they don't expect big changes from here, that we've probably found our new normal.

"We did a survey of our members, and about 80% of them,... for three days a week, are not in the office," he said. "Almost all of them have at least one day out of the office. And that has stabilized. The insurance industry was willing to go virtual, but [people] really resisted coming back to the office."

The Post notes that the surprising strength in job creation has softened the blow to building owners and their lenders -- just imagine what a recession would have done to office occupancy rates -- and that many cities still have reserve funds from the unprecedented aid that states and the federal government offered during the pandemic.

So far, ratings agencies aren't raising any alarms about life insurance companies, despite their heavy exposure to commercial real estate debt. The reason: The companies generally have high-quality debt. They typically are at or near the front of the line to get repaid in the event of a default, and the buildings they've lent to are generally performing well. 

But I've learned to be cautious. Not only did ratings agencies grossly underestimate the dangers lurking in home mortgages in the leadup to the Great Recession of 2007-09, but I was running the Wall Street Journal bureau in Mexico City in 1994, when the country went from being a paragon of economic reform to being a basket case almost overnight. We had seen and reported on some warning signs as the country's foreign currency resources dwindled over the course of the year, but nobody was predicting a devaluation -- until it happened in December, and the bottom fell out of the country's whole economic program.

In any case, insurers will have to continue to adapt as cities do. For now, workers' comp carriers are prospering as fewer people are going into office settings and injuries are declining. In theory, the reduction in commuting should reduce vehicle accidents -- but theory isn't reality, and people seem to be slow to drop the bad habits, especially excessive speeding and distracted driving, that they developed while streets were empty during the pandemic. Commercial lines carriers will have to adapt as traffic at restaurants, bars, coffee shops, retailers, etc. morphs, and as establishments perhaps migrate to suburbs and exurbs, where the people are. And so on.

There will, of course, be wildcards, too, that will affect how cities develop. Dr. Leonard spoke of what he called "theme park-ification" -- the development of open spaces, including parks -- as a trend that is making cities more attractive. The spread of electric vehicles will reduce noise and pollution. In time, autonomous vehicles could allow for fundamental redesign because of all the space currently devoted to parking that will be freed for other uses. Cities could also benefit from the broad efforts to reduce climate change -- it's much more efficient to heat or cool an apartment building than it is to heat or cool 150 individual homes, because, instead of leaking to the outside, one person's heat or cool air helps those on either side and above and below heat or cool their apartments. On the flip side, crime tends to rise in cities if they empty out,

The wildcards are mostly long-term issues, though. What I'll really be watching is what happens over the next couple of years with commercial real estate, and to their lenders.

Cheers,

Paul

Well, that was fast.

Just a week after the California Public Utilities Commission gave GM's Cruise and Google's Waymo permission to operate fully autonomous robotaxi services for a fee at all hours in all parts of San Francisco, the state's Department of Motor Vehicles ordered Cruise to cut in half the number of automated vehicles (AVs) it's using.

Following two collisions involving Cruise cars, one of which injured a passenger, the DMV added that the restrictions will stay in place until Cruise “takes appropriate corrective actions to improve road safety.” 

For good measure, the robotaxis seem to have made a full-fledged enemy out of the San Francisco Fire Department. It had argued hard against licensing the robotaxis to begin with, saying they've been getting in the way at emergency scenes. The SFFD now has more ammunition: One of the collisions occurred when a Cruise vehicle pulled into an intersection and was hit by a fire engine on its way to an emergency.

So, how big a setback is this for AVs?

In the short term, the cut in service is certainly a public embarrassment.

While the Cruise car that was hit by the fire truck had pulled into an intersection on a green light and while Cruise executives say its sensors picked up the fire engine's sirens, the fact is that the vast majority of human drivers would have pretty much frozen in place while trying to figure out the source of the sirens, and the Cruise car kept going. That a passenger was hurt -- albeit with what Cruise called "non-service injuries" -- compounds the PR problem.

The other collision apparently wasn't Cruise's fault -- the company says its data show that its car moved into an intersection on a green light and was rammed by a car running a red light at high speed. But this collision will still get lumped in with the one Cruise caused, even if Cruise's description of the accident proves completely accurate.

For good measure, a Cruise car got confused by some road construction in San Francisco last week and drove onto a pad of wet cement. The car had to be pulled out by a tow truck. A week earlier, some 10 Cruise cars had just stopped in the middle of the street in the North Beach area because they lost their wireless connection to their home base when they neared a music festival where fans had overloaded mobile networks. 

Yes, all the recent problems have involved Cruise's vehicles, but Waymo's cars will face skepticism about safety, too. Advocates of AVs complain that scores of other car accidents happened in San Francisco last week without drawing any scrutiny in the media, but that's life in the fast lane. Any problem with an AV will be news for the foreseeable future and will taint all AVs. 

Robotaxis already faced heavy opposition in the hearings in front of the California PUC, which approved unlimited robotaxi use in San Francisco by a 3-1 vote two weeks ago, and the opposition now gets another shot because the DMV is asserting its jurisdiction. It remains to be seen just how skeptical the DMV will be about robotaxis and how much new opposition the SFFD and others can mount. 

What happens in the medium term really depends on the safety record of the robotaxis in the coming weeks and months. If Cruise or Waymo keeps having weeks like this last one, there will be real delays. If problems go away, then AVs will be back on the path of "radical incrementalism" that I described last week. But problems have to disappear, not just diminish, at least for weeks and probably for months. The attention caused by the accidents and the DMV action has raised the stakes.

In the long term, if the technology works as well as I think it will, not much about the rollout will change. Even San Francisco issued another vote of confidence last week, launching an autonomous bus service on Treasure Island, the site of a former Navy base in San Francisco Bay. 

And some of the recent press has been positive. Three New York Times reporters, for instance, took trips in Waymo robotaxis last week and found that, while two of the cars were a bit too slow and cautious for the riders' taste, "the ride was so smooth, the novelty began to wear off, turning a trip to the future into just another journey across town." 

We'll have to wait and see whether the public mood heads in that direction -- or not.

Cheers,

Paul

 

Listen Now:

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Paul Carroll

Hi, I'm Paul Carroll. I'm the Editor-In-Chief at Insurance Thought Leadership. I'm joined today by Dr. Michel Leonard, who is the chief economist, among other things, at the Insurance Information Institute, the Triple-I. We have these quarterly conversations that I look forward to so much, about the state of the economy and how it plays out in insurance. Today, we're going to eventually get into a conversation about cities and their future; and how the hybrid work model or non-hybrid work model and so forth affects things, how mobility redesign affects things and so forth. But I figure we can get started by talking about inflation and the economy and get your update. So, where do you think we are right now, and where are we going to be in the next quarter?

Dr. Michel Leonard

Paul, it's always a pleasure to speak with you. And I look very much forward to these, as well. I like the mixture of the hard data and so forth, and then trying to adjust the crystal ball, but also think about the demographic and social components of this. So, we do not expect that there will be a recession in 2023. Nor in 2024. On the contrary, all of the indicators indicate that we're heading to a recovery, both overall and in insurance, and we'll get to that, as well.

But the issue here that keeps me a bit awake at night is the fact that, a year ago, economists kind of said, all of our models are telling us that we're going to recession, and this is what should happen. Well, sometimes it doesn't happen according to the models. And that's exactly how it unfolded; we did not have a recession.

But because we expected it so much, companies, especially in corporate America, cut down significantly on capital investment and capital spending, and that really slowed down the overall economy. In insurance, it slowed down the underlying growth for commercial real estate, for commercial multi-peril and for commercial auto.

I'm hoping that, this time around, we end the year around 2% or 3% [GDP growth]. But the issue here is Q3 will probably be lower than Q2. We don't expect [growth] to have to go negative, though we could go negative, Hopefully, Q4 is much stronger, which has happened in the past. So, the issue is that we're going to have a weaker Q2/Q3, and how weak it is will [affect] the rest of the year. But [we’re still] going to have a positive year at the end….

But I'm concerned about what happened in Q1 last year. You know, sometimes just predicting things makes them happen because of the reflexivity there, like [investor George] Soros used to call it; you expect things, you act accordingly, and then you bring about those things.

Carroll

I've heard people talk about the Goldilocks economy or the Goldilocks recovery: You know, not too hot, not too cold, just right. As we were talking in advance of this, you used a term I had not heard before: the Godot economy. And I know how much you'd like that play, right? I'm just kidding; you told me you hated it. But it does seem like we are in sort of a Godot economy, where we've been waiting so long for the recession, and it's just not coming.

Leonard

You know, I'm an economist and a data scientist. And a lot of times, economics focuses on models that allow us to understand relationships…. Our forecasts are about understanding the way the different blocks come together. Data science is really focused on the forecasting. When we look at the data without a model, it does not, as I was pointing out, lead to a recession. But I want to talk a bit about employment, because when we think of the timing here, that's the big element.

Yes, employment has been resilient. But there's a whole narrative right now in the financial press, and we all kind of bought into it, that the American workers are doing great. We're doing well, but we're not doing great. And then if we scratch beneath the surface, we're not doing that well.

Yes, we've remained employed. So [regardless] of monetary policy tightening, regardless of capital expenditures being cut… we didn't see mass layoffs. But when we get to this argument that American workers have all this bargaining power, I'm not seeing it in the evidence. I'm not seeing it in wage increases. Yes, we had a good wage increase, 4% or something like that. But inflation was above that, so we all have less purchasing power.

Decades ago, three or four decades ago, 80% to 90% of corporate America provided cost-of-living increases. We didn't see that… as a pay raise. It was a cost-of-living increase. Today, there's only about 10% of companies that do that. And quite often it's sold as a pay increase.

So, yeah, the American worker is doing well; he or she is employed. But we have to think about that…. There’s some weakness, and I think it's really going to be directly impacting… the strength of the recovery.

Once more people start commuting again -- you and I have talked about how that is a big expense, especially if you've moved to the exurbs as opposed to the suburbs. From the city, you're going to have to pay for the subway, and the suburban trains, or you're going to have to drive more and spend more on that. So there's not going to be as much disposable income. One of the reasons this contraction has felt good is that we have had this disposable income. Inflation was really high, but it got kind of compensated, though not really from food. I was in New York a few weeks ago, and I was just shocked. An entree that would have been -- and I am using New York prices, so not that relevant everywhere -- but an entree that would have been $15 to $20 is now $30 to $40. Even in the best restaurants, I don't remember seeing the number four in front of the [price]. And that's the same with a TGI Fridays and the chains: What used to be $10 to $15 is now $25. For a family of four going out on a Friday, that's already $100 to $150. That money, if you add it up, directly correlates with the less spending on commuting. So, let's wait to see how that impacts disposable income and disposable spending, once we recover going into 2024.

Carroll

You started to talk about the recovery. How do you see it playing out? I mean, you've said Q3 is likely weaker than Q2, Q4 will likely be stronger, maybe a lot stronger, depending on how weak Q3 is. In terms of the numbers, but also in terms of the specific parts of the economy and sort of how they start firing on all cylinders again, how do you see the recovery developing?

Leonard

…There's so much uncertainty around what the numbers are. As economists, we normally go back and we [change] decimals; right now, we're moving digits, like the actual percent. Q3: Don't get alarmed if it's weaker. The weaker it is, the stronger Q4 will be. The closer [growth is in Q3] to where we are right now, the flatter it will be to the end of the year. We end the year around that 3% to 4%. I think that's a good range, basically on target for the Fed.

When does it start getting better? It starts getting better in Q1 for the wider economy. The Fed needs to go and start signaling that it’s easing. This is one of those cases where it is best if we "don't fight the Fed." There are some things in economic theory that work, and that's one that works. What does that mean? It means that the Fed will start signaling that it will ease, and it already has…. And then you're going to see, probably in Q4, companies starting to plan on investments, hiring and so forth, which means that, by the first half of next year, we're starting to see a real recovery…. And the stock market will probably recover….

What does all this mean for insurance policy? Insurance [growth] normally lags [the overall economy] by about two quarters. Right now, we're actually doing better. Our inflation is decreasing faster, our growth is picking up. Our numbers indicate that, going into next year, [inflation] in our replacement costs are going to be below 2%, while overall inflation will be around 2% to 2.3%…. We're going to be in a good place from an insurance standpoint…. Again, everything is about the Fed. Not the rate decisions, but the telegraphing….

So, again, by 2023 Q4, think economy recovering overall; for mid-year 2024, think insurance really picking up in terms of underlying growth by the end of 2024 Q4, and 2025 being the perfect alignment of economic indicators for peak insurance growth.

Carroll

That sounds sounds good to me. So let's talk about cities a little bit. You and I talked a bit about this before, and you mentioned the movement to the exurbs and so forth from the suburbs and how the mix changes. It seems to me that the return to work in offices is slow enough that that's going to cause a big change in cities. Boston is offering a pilot program that gives companies 75% off their taxes if they turn an office building into a residence. And I think there just are lots of things going on that are going to shift away from office buildings and have all sorts of ripple effects. And there's some other things going on, as well. What do you see happening in cities?

Leonard

That thing about Boston, I didn't know that. But I do know that there was kind of a similar conversation with WeWork, [maybe] moving WeWork into communal living or just outright apartments and lofts because they tend to be in downtown areas. Now, from an insurance standpoint, commercial property, commercial multi-peril, that's a big question for our industry. And so far, the fact that there's been fewer people at work… has been good for [workers’ comp] lines…. Rents haven't been cut, and therefore a lot of the value of the property hasn't adjusted, so it hasn't impacted our premium and premium growth as much as one would expect….

Now, booms and busts, that's the way the real estate market works. And it allows for great building, overbuilding. It allows for beautification and so forth. And at one point, supply and demand come back into play and create a bust; the bigger the boom, the bigger the bust. What's happening right now is that the bust process is being delayed, and it is being delayed for something fairly unusual. We're not seeing cuts in rents.

One of the reasons is, as you pointed out, a Waiting for Godot [or even] a Re-Waiting for Godot, and Godot is not going to show up. We don't think that the American worker will go back [to cities] in the same numbers…. We did a survey of our members, and about 80% of them, or something like that, for three days a week are not in the office. Almost all of them have at least one day out of the office. And that has stabilized. The insurance industry was willing to go virtual, but [people] really resisted coming back to the office….

Once there is less uncertainty around [the number of people returning to offices], the bankruptcy process will start. And at that point, there'll be that supply and demand pricing and rent changes that will allow for folks who want to go back. And that's an opportunity.

Carroll

That all makes sense. I'm thinking of a nephew of mine who's a commercial real estate broker in the Washington DC/Baltimore area. He's worried about a death spiral for cities. If people don't go back to work, then you don't have as many people going to the bars after work or going to the restaurants. And maybe the restaurants are jacking up prices because they know Michel is coming, or hope lots of Michels are coming, and they're going to milk them for as much as they can. If the restaurants aren't thriving, then the young people aren't going there. And then people start leaving the city and so forth.

I certainly don't think we're there yet. But I do think that that's a long-term trend to watch.

Another one I've mentioned is this idea of mobility. I've written a fair amount about driverless cars, in particular, and about transportation, in general. If you go back 100 years, cities really were designed for cars. And there's an awful lot of space in cities, just street parking, for instance, that is eaten up by cars. These days, it seems like some cities are rethinking their design. For instance, it costs you an awful lot of money these days just to bring a car into New York City, and that is changing the dynamics there. I think cities are going to redesign things more for people and less for cars. You'll wind up with this mix of driverless cars, taxis, regular cars, scooters, pedestrian walkways and so forth. If you look out, certainly 10 to 20 years, there are going to be very significant changes to cities.

Leonard

A few things there that I want to unpack. The transformation of cities is expensive. For almost 30 years, we beautified cities, but we didn't invest in highways and so forth, with some exceptions. But now we have all the money from Build Back Better coming in. And that money is starting to show in New York and other cities; highways are getting better, etc. So that's going to accelerate this shift….

I can see how this transformation will lead to a different kind of city. And I think what's important here, Paul, is to keep in mind that we've seen in the last 30 years what I call the theme park-ification of cities, also referred to as gentrification. We've made cities beautiful, but we also took away the reality of cities, with urban areas that support the industrial component having been outsourced to the exurbs. The cycle of cities, with immigrants coming in and having opportunities to open a small store, a lot of that has disappeared. I was reading recently that most of the immigrant-owned stores, the small businesses and the new businesses, are now in malls in suburbs, because price-wise it makes more sense.

Once you take away this revival, this transformation, this rejuvenation of a city, you'll also take away a lot of what makes a lot of folks willing to pay the rent, willing to spend as much. You get to a point where I'm not going to the city because, with inflation, restaurants are very expensive. I used to like music, but music is really not happening, partly because bars have been closed or they're too expensive…. Young people say, well, I can have a family or I can be in a city.

I'm concerned about how fast the change happens. I think there's an opportunity there to see a new kind of city…. And I mean transformation. There's an opportunity to see the emergence of a new approach, and mobility can be a part of that, along with more open spaces.

You know, I was doing a paper recently on the ability to have green spaces, the ability to have urban forests, the removing of cars in favor of being able to walk around; these are very attractive to corporate investment. There's a good value proposition there for companies. What made the corporate campus in the suburbs so attractive in the ‘60s and in the ‘70s, was ease of life, the fact that it was affordable. The exurbs are not that affordable anymore, nor are the suburbs. So this cycle will come about, and if we're willing to think differently, about more diversity, about cities that are less gentrified, [we can have] cities that are more alive.

Carroll

I agree totally. I'd suggest that, if people are interested in following this sort of thing, there are a couple of model city projects they could watch. One is in Saudi Arabia, where they're spending something like a trillion dollars to build a city of the future. It sounds a little crazy to me. But they're spending a lot of money on it, and there could be some interesting ideas coming out of that. There's also a much smaller effort by Toyota, which is doing something on the slopes of Mount Fuji. That will be quite interesting. It's really trying to reimagine how a city could be designed… for people rather than just for the transportation.

Leonard

Paris is the ultimate example of gentrification and of urban flight and all the layers to that, But the city has been reinventing itself. Paris has always had a lot of trees, but they've also opened up the Seine to swimmers. I have not been in Paris for a while, but Paris has become a big model that the World Economic Forum has been discussing. Urban forest, urban trees, it's better for health, it helps people live longer. Quality of life: Folks like to be next to that. That also becomes a driver of property prices…. Property next to green spaces in New York and in many other cities is some of the most expensive property. Many cities -- such as Paris, New York, cities on the West Coast, Mexico City -- are making a great effort in this area. Trying to bring urban forest is a way to make the cities more attractive. I think Vienna actually has a fantastic project from the ‘60s that featured some of those garden towers that we see.

Carroll

I spent a lot of time in Paris in the ‘80s, when I lived in Brussels. Paris is probably my favorite city in the world. I'll have to go back. I have not spent much time there in the last 10 years or so.

Leonard

It's the most beautiful city,

Carroll

I agree. It’s easier for you, though, because you speak French, whereas I speak pidgin French.

So this was great, as always. I really appreciate your taking the time. I would encourage people, as always, to follow you and the efforts of the Triple-I -- that is, iii.org. And then, of course, to check out InsuranceThoughtLeadership.com and sign up for the weekly newsletter, Six Things, in which I get into topics like this is often as I can.

Thanks, Michel.

Leonard

My last words, Paul, are going to be: Do not go see Godot. It's terrible.

Carroll

I've avoided it so far, and I will avoid it from now on.

Leonard

This was great. Thank you so much, Paul.