KEY TAKEAWAYS:

--When it comes to forecasting the liability risk factors of the obesity epidemic, our radars may need to shift away from obesity drivers and toward obesity solutions such as Ozempic and Wegovy.

--It may behoove risk management professionals to think carefully about other emerging risks, as well. For example, numerous products (such as cannabis and, more recently, psilocybin products) are being marketed to help address mental health, sometimes without merit or without clear understanding of what side effects can ensue.

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There are countless factors that go into emerging liability risk assessment. But at a high level, a systemic event typically has followed this track:

1. Company (or Industry) X is alleged to transgress in its operations.
2. Injuries ensue, and a large cohort of individuals coalesce into a class action.
3. The risk “emerges” with a payout of hundreds of millions or sometimes even billions of dollars.

Risk managers and insurance carriers must monitor emerging risks that can pose a threat to the balance sheet of their companies as a result of this type of event. One of these areas of concern has been the obesity epidemic, in part due to a staggering 42% of Americans now being considered obese, a stark increase from 15% in the late 1970s. 

The prerequisites are in place for this to mushroom into a significant liability event, but it hasn’t yet. Causality has been tricky. Is the cause sugar? Saturated fats? Geography? Genetics? There is also a human element: Regardless of actual accountability, it is difficult to vilify the entities whose logos are globally recognized, whose advertisements adorn our televisions and whose products people enjoy.

This isn’t to say the tide won’t eventually turn – it was once thought to be unfathomable that cigarette manufacturers were guilty of anything. But when it comes to forecasting the liability risk factors of the obesity epidemic, our radars may need to shift away from obesity drivers and toward obesity solutions. 

The Obesity Economy Is Rife With Risk

Ever hear of the Emerging Risk Economy? I haven’t either. That’s because it’s not a thing. But should it be?

A massive payout to settle a lawsuit doesn’t necessarily mean a risk is completely emerged. A huge payout could simply be the first chapter of the story. Problems typically lead to solutions -- but they may pose risks, themselves.

The Master Settlement Agreement (MSA) in 1998 led to Big Tobacco companies paying over $200 billion across the country, but there were still millions of people hooked on their products. Fast forward to the advent of the e-cigarette industry, promoted as a less dangerous alternative for addicted users. But some companies ultimately fell into the same perverse incentive structures to lure teenagers to use their products as the original Big Tobacco companies did. As a result, the e-cigarette companies, too, have been sued for hundreds of millions of dollars, an example of "solutions" begetting more risks.

See also: Wellness Vendors Keep Dreaming

While there has been no whiff of an MSA equivalent for any industries that could potentially be contributing to recent obesity trends, the wave of products (Ozempic, Wegovy, Rybelsus and Mounjaro, to name some) that have been developed to assist with weight loss could represent the pathway for the obesity epidemic to “emerge.”

Here are just a few areas of concern that could foster a pathway to litigation down the road:

• Widespread Use – In 2022 alone, 5 million prescriptions were written for the aforementioned weight loss products, up from 230,000 in 2019. This number may be poised to increase, with the successful marketing practices applied by targeted advertisements and social influencers, proliferation of telemedicine efforts by Congress to enable these drugs to be covered by Medicare and a recent recommendation from the American Pediatric Association that physicians should consider prescribing these drugs as part of a set of treatments for kids with obesity.
• Interplay of Competition and Incentives – The companies manufacturing these products represent some of the biggest pharmaceutical companies in the world and are likely keen on getting in on a market Barclays says could reach $200 billion in the next decade. As Charlie Munger once said, we should “never, ever, think about something else when [we] should be thinking about the power of incentives.” And the incentive to tap into this market quickly and beat out the competition for major global players with deep pockets is very strong.
• Serious Health Concerns – Alongside use of some of these products have come reports of renal failure, pancreatitis, intestinal obstruction, lessened bone density, decreased muscle mass, sarcopenia and “Ozempic Face.” The EU recently announced it will be investigating products in this class of drugs amid concern that use may contribute to suicidal thoughts. With use expected to pick up among children, there is scant information available on what long-term impacts can be. 

Keep an Eye on the Emerging Risk Economy

It may behoove risk management professionals to use this lens for other emerging risks, as well. For example, mental health, which has come under the microscope in recent years, has followed a similar arc as obesity. It has been difficult to pinpoint the key drivers to this issue, but numerous products (cannabis and, more recently, psilocybin products are just two examples) are being sold and marketed to help address mental health, sometimes without merit or without clear understanding of what side effects can ensue.

Sports have long captivated the human spirit, bringing people together in moments of exhilaration, triumph and heartbreak. Beyond the actual athletic competition, the world of sports holds valuable lessons for leadership.

By examining the dynamics of teamwork, strategy, perseverance and personal growth inherent in sports, we can unlock powerful metaphors that shed light on practical leadership principles.

Those who know me know I enjoy challenges. The outdoors and sports never fail to exhilarate and provide thrills. Whether it be a pond hockey game, skiing, summer sailing or hiking in the mountains (did I mention the five grizzly bears I ran into last week in the Kananaskis?) with my family and friends. I enjoy team sports and the camaraderie of competing and winning together.

In this article, we will explore leadership lessons from the world of sports, uncovering valuable insights that can be applied within various professional contexts.

Setting Goals and Creating a Vision

Just as sports teams set ambitious goals and work toward a shared vision, influential leaders must clearly articulate what their business is about: what it does, how it serves stakeholders and where it's headed and set challenging yet attainable goals for their teams. 

For instance, when sailing, the captain must know the final destination. Without a final landing spot and critical checkpoints along the way, the crew won't know where the ship is going, and you might get lost at sea.

By instilling a sense of purpose and direction, sports and business leaders can motivate their team members to strive for excellence, work toward a common goal and push beyond their limits.

A McKinsey study finds that 77% of employees who feel aligned with their company’s purpose or vision are engaged in their work, compared with only 20% of employees who are not aligned with the vision.

See also: Moving Forward

Building and Empowering Teams

In sports, successful teams are built on a foundation of trust, collaboration and complementary skills. It's up to leaders and coaches to foster an environment of trust and create opportunities for individuals to grow and contribute with their unique strengths.

Granting autonomy to employees and allowing them to think outside the box while not micromanaging is essential in creating such an environment. This might mean encouraging your soccer team to experiment with new plays or delegating your next marketing campaign to a young, ambitious associate. 

In the workplace, delegating tasks and trusting your team to deliver results are essential for building a dynamic team that can confidently work independently and solve problems without your direct input.

When employees and teammates feel valued and cherished for their skills, perspectives and personalities, they’re more likely to find fulfillment in their work and sport.

Resilience and Perseverance

Sports teach us the importance of resilience and perseverance in the face of adversity. Mark Stone, the captain of the Las Vegas Golden Knights, is a testament to perseverance and resilience. 

Stone underwent two major back surgeries in nine months, which put his participation in the NHL playoffs and even his career in doubt. However, despite playing with unimaginable back pain, Stone returned for the playoffs, and his resilience helped motivate his team to the first Stanley Cup in franchise history.

In business, we will inevitably have ups and downs. As leaders, we need to embrace and weather these setbacks and demonstrate strength in crises.

Most importantly, you must get your team on board by motivating and inspiring team members to bounce back from failures, learn from mistakes and keep pushing forward toward their goals -- no matter how much of an expert you are, nobody can do it alone.

Effective Communication

"You can have the greatest idea in the world, but if you can’t persuade anyone else to follow your vision, your influence, and impact will be greatly diminished." Carmine Gallo, Harvard Business Review. 

Communication is a vital aspect of both sports and leadership. Just as athletes need to communicate on the field to coordinate strategies and make split-second decisions, leaders must master the art of effective communication.

Transparent and open communication channels foster understanding, alignment and the ability to adapt to changing circumstances.

For example, in the sport of polo, each horse has a different personality and unique strengths and weaknesses. In business, 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 rein them in. 

Paying close attention to your team, taking their concerns seriously and allowing them to voice their thoughts without judgment is critical to understanding who your people are and what motivates them.

This kind of acknowledgment and communication in the workplace can ensure everyone feels valued, understood and aligned.

Strategic Decision-Making

Sports coaches and team captains make strategic decisions that affect the outcome of a game. Whether deciding when to make a pass, take a shot or sub a player in or out, coaches and captains must analyze a situation and make informed decisions in sports as in business.

Inefficient decision-making costs a typical Fortune 500 company 530,000 days of managers’ time each year, equivalent to about $250 million in annual wages.

Influential leaders can overcome emotional impulses and take a step back, assess a situation and decide the course of action. Conversely, leaders who can’t control their emotions often make rash decisions that can lead to catastrophic consequences.

As a sports coach or team captain, this could mean staying level-headed and focused when a call doesn't go your way rather than complaining. The key is to trust yourself, take a step back, focus on how your decision affects your company or team's vision and be ready to adjust if things do not go as planned.

Inspiring and Motivating

Sports fans are drawn to charismatic athletes who inspire and motivate with their exceptional skills and determination. I was inspired by Wayne Gretzky and Michael Jordan's drive and commitment to be the best in the world at their sports.

Effective leaders inspire and motivate their teams by leading by example and creating a sense of enthusiasm and dedication in their work. This might mean getting up early to work on your wrist shot, supporting a teammate or colleague in a difficult time or staying late to help your team close a sale.

In addition, recognizing employees or teammates who lead by example can go a long way in creating a positive and inspiring environment. This can be as easy as saying, "Nice play!" to your teammate or acknowledging employees who deliver on core company values at your next monthly team meeting.

Not only is recognition a simple modality, but its rewards are significant; 40% of Americans would put more energy into their work if they were recognized more often.

See also: The Power of Lifecycle Marketing

Adaptability and Change Management

The most successful sports teams are adaptable and responsive to evolving game situations and opponents' strategies. Similarly, leaders must navigate uncertainties and lead their teams through periods of change. The ability to adapt, embrace innovation and guide teams through transitions is a hallmark of effective leadership.

For example, when sailing, the weather can change instantly. You need to know how to use the sails to compensate, navigate under harsh conditions and capitalize on whatever is thrown at you. It’s not much different when you’re a business leader.

Like the weather, business is constantly moving and changing. Whether you’re steering your ship at sea or driving your business on land, it takes experience and, at times, raw courage to weather the storm.

So, see each storm as a chance to gain experience for the next one and know that sometimes you simply need to batten down the hatches – and wait it out.

Winning on the Field and in Business

To foster an innovative and creative culture, we use and encourage all of these leadership skills as a team at Majesco Global IQX, whether from senior leadership, team leads or junior-level associates, as we help employee benefits insurance companies streamline processes.

Sports provide a rich metaphor for leadership, offering valuable insights into the qualities and behaviors that define exceptional leaders. By embracing the lessons from the world of sports, aspiring leaders can unleash their own inner champions, inspiring and guiding their teams toward success!

KEY TAKEAWAYS:

--More than half of distributors across the P&C industry agree there will be an increase in agent/broker consolidation over the next five years.

--Only about 19% of executives in all P&C lines say insurtech will bring significant change to distribution within five years.

--In times of economic uncertainty, companies often pull back on innovative initiatives instead of investing in strategies with a history of success. Now is a prime opportunity to strengthen and expand existing partnerships while also identifying new partnership opportunities.

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We all know of the traditional carrier/agent relationship—it may, in fact, be the first thing that comes to mind when you think of insurance distribution partnerships. But rapid technological advancements, changing customer expectations and economic headwinds are reshaping how insurance products and services are distributed.

Today, many agency executives are forging new partnerships and expanding existing ones. While some choose to pare back their number of channel partners and focus on their most successful ones, others are selecting to partner with niche carriers that focus on specific industry verticals.

New research reports from ReSource Pro examine retail agencies’ current channel partnerships, their future channel plans and their expectations for changes to insurance distribution in both commercial and personal lines based on a survey of agency executives.

The number one change that more than half of distributors across the P&C industry agree will happen over the next five years is an increase in agent/broker consolidation. This is despite a decline in M&A transactions in 2022 amid widespread economic uncertainty. Although much of this uncertainty remains in 2023, deal volume may rebound this year due to decreased annual inflation rates and less aggressive interest rate increases.

In contrast, fewer executives expect major disruption from insurtech, with only about 19% of executives in all P&C lines saying insurtech will bring significant change to distribution within five years. This does not mean that insurtechs aren’t affecting insurance distribution. While prior concerns about the potential elimination of the agent role have mostly abated, agencies still recognize that insurtechs have an important role in distribution, particularly in the personal and small commercial segments.

When planning their channel expansion strategies for 2023, a small percentage of agencies—8% in personal lines and zero in commercial lines—are pursuing partnerships with insurtechs and digital agencies. This suggests that agencies are still finding their footing with more innovative partnerships and are currently prioritizing the carrier channel by expanding or adding carrier partners.

See also: Biggest Risks to an Economic Recovery

The message here is that agencies are mainly sticking with what they know works. In times of economic uncertainty, companies often pull back on innovative initiatives instead of investing in strategies with a history of success. Now is a prime opportunity for personal and commercial lines insurers to strengthen and expand their existing partnerships while also identifying new partnership opportunities.

For more information on agency channel strategies, see our recent research reports, “Channel Strategies and Plans for P&C Agencies: A View of the Commercial Lines Segment in 2023” and “Channel Strategies and Plans for P&C Agencies: A View of the Personal Lines Segments in 2023.” 

KEY TAKEAWAY:

--The main benefits of building your own software are that it helps with specific demands, can be fully tailored and gives a competitive advantage. The benefits of buying a solution mainly center on cost, ease and quick maintenance and support.

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Entrepreneurs and business owners often identify an area where technology or software could offer customers a better experience or simply provide better efficiency. The next step is to buy commercial "off-the-shelf" software or build a custom solution.

As with most things in life, there are positives and negatives to both depending on your exact needs and budget. However, going down the wrong path might well be a costly business mistake, so it's vital at the early exploration stage to weigh all your options and make an informed decision.

First, you need to know the problem you're trying to solve in detail. What are the unique challenges faced by your company or industry, as well as those common to most businesses? If you operate in a popular line of business, there are likely pre-made software programs available. However, building custom software may be necessary if you work in a specialized or emerging field.

Second, you need to work within your budget. Building in-house software can be very expensive. Consider the initial development costs, as well as annual maintenance and hosting expenses. In contrast, pre-made software solutions typically involve a one-time, annual or monthly fee that covers support, maintenance and hosting, which makes it more affordable but requires continuing investment.

Finally, the timeline and rollout plan is vital to get right. Assess how urgently you require the software. Developing a software program from scratch can take months or even years, depending on its complexity. If time is of the essence, purchasing a pre-made solution that can be up and running within minutes may be the more favorable choice.

Determining the value of building software in-house versus purchasing an external Software-as-a-Service (SaaS) platform can be daunting. While some consultants argue that building your own software is now easier than ever, it is crucial to acknowledge the potential issues that come with creating custom software, such as maintenance and system failure.

Digital transformation decisions often revolve around the trade-off between speed to market and cost savings. This delicate balance can significantly differ across industries. Businesses and brands should consider factors such as control, monetary costs, maintenance, opportunity cost and time to value to help evaluate which option is best for them.

See also: 6 Keys to Successful CRM Implementation

Control

Build:

Building your own software grants complete control over the SaaS platform. However, this also means you're responsible for every detail -- from design choices to technical specifications.

Buy:

Choosing a pre-made SaaS platform requires relinquishing some control but offers convenience and ease. You can use off-the-shelf products as a base but some providers also offer customizations, meaning if you need to solve a specific need the partner will build on top of the core product a new user interface or payment gateway that is required. But purchasing technology or existing products from a SaaS company means you will not have control over the product road map.

Cost

Build:

If you're looking for a fast and budget-friendly solution, building from scratch isn't the way to go. In-house software can rack up hefty expenses such as development costs, continuing maintenance, support, upgrades, hosting fees and system repairs. A whopping one-sixth of IT projects overrun their budgets by 200%. So, if you're set on building your own thing, be aware of the hidden costs you can pick up during the discovery, designing, testing and implementation of your platform.

Buy:

With a pre-made SaaS platform, you pay a subscription fee, which covers the costs of development and maintenance. As SaaS vendors serve a large customer base, they can offer their solutions at a fraction of the cost required to support a custom-built application.

Maintenance and Support

Build:

If you have a substantial budget, you can afford to maintain the software you build internally. However, consider the maintenance costs, such as bug fixes, user profile setup, user training, upgrades and compliance with industry standards. Increased user demand may require additional bandwidth and staff.

Buy:

If the prospect of maintenance seems daunting, purchasing a pre-made SaaS platform is the preferable option. Your subscription fee includes all maintenance services, and you benefit from a dedicated support team.

Opportunity Cost

Build:

Opportunity cost plays a significant role in budgetary considerations. Allocating funds to building a highly specialized app may limit resources available for other business opportunities that may arise.

Buy:

By choosing a SaaS solution, you can allocate more resources and time to other sectors of your business.

See also: The Cost of Still Using Spreadsheets

Time to Value

Build:

Consider your goals and how quickly you must achieve them through new software. Building a software program internally can take over a year. Assess whether you can afford to wait that long.

Buy:

Purchasing a SaaS platform provides immediate access to a complete program, allowing you to connect your goals to actions quickly.

Ultimately, decision-makers need to weigh both options, and the choice will differ across a variety of factors. There is no right or wrong answer.

The main benefits of building your own software are that it helps with specific demands, can be fully tailored and gives a competitive advantage. The benefits of buying a solution mainly center on cost, ease and quick maintenance and support.

KEY TAKEAWAY:

--When a storm approaches, it is important to be aware of how vulnerable you are to its impact. Don't just rely on weather predictions. Familiarize yourself with your area's evacuation orders and routes established by local authorities to ensure a safe and fast evacuation, if necessary.

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With the 2023 Atlantic hurricane season underway and running until November, early indications pointed to a slightly below-average season this year. However, with El Niño conditions present and their effect on storms still unfolding, uncertainties remain, with the potential for an active season.

A single storm, like Hurricane Ian in 2022, can cause catastrophic damage, and the National Hurricane Center in the U.S. advises that preparations should not be based on seasonal forecasts. Developing a well-defined preparedness plan is crucial to mitigate damage from hurricanes and other extreme weather events.

Understanding Storm Risks

Storms come in various forms, such as hurricanes, tornados, cyclones and harsh winter conditions, and the possible damage from intense storms includes flooding, falling trees and damage to rooftops, automobiles and powerlines. It is essential to recognize the specific storm risks in your area and take steps to mitigate them.

Knowing Your Zone

When a storm approaches, it is important to be aware of how vulnerable you are to its impact. In the U.S., the National Hurricane Center advises to "Know Your Zone," which means knowing your evacuation orders based on the potential threat, rather than relying on weather predictions. Familiarize yourself with your area's evacuation orders and routes established by local authorities to ensure a safe and fast evacuation, if necessary.

See also: Weather Science Supercharges Solutions

Creating an Emergency Plan

To minimize loss and ensure your safety, your plan should include actions to take during, before and after the storm. Consider implementing the following when developing your emergency plan:

• Training: Provide comprehensive training for your household or business on storm preparedness. This includes understanding evacuation procedures and protocols given by authorities, emergency communications and first aid instructions. You can also conduct emergency drills to ensure your employees are familiar with the protocols, including where to evacuate.
• Building inspections: Regularly inspect your premises to identify and address any vulnerabilities. Check the structure of the building, secure loose objects and reinforce doors and windows.
• Anchoring equipment: Anchor or relocate vulnerable equipment and other shelf items to safer areas or off-site storage spaces.
• Protecting windows: Install hurricane or storm shutters to act as a barrier against wind from a storm. Window security film can also be applied to the inside of windows to help keep them intact during a storm.
• Flood protection: If your building is in a flood-prone area, install flood barriers, move electrical objects to a higher area and ensure proper drainage systems are installed.
• Salvage and recovery: Develop a plan to salvage and recover vital assets and documents in the aftermath of a storm. This includes having procedures in place for drying equipment and for temporary storage.
• Damage assessment: Establish protocols for conducting thorough damage assessments after a storm. Immediately documenting and reporting any damages to insurance providers will help expedite the claims process.

A single storm can cause catastrophic damage, but by understanding the risks associated with storms, knowing evacuation orders and creating an emergency plan you can mitigate the many negative outcomes that come from severe storms. If you are in the U.S., visit National Hurricane Preparedness for more information about your risk and how to develop an evacuation plan.
 

In today's fast-paced and ever-evolving insurance markets, innovation is essential to reaching new buyers and thriving in the face of increasing competition. Larger carriers may have a resource advantage, but to reach innovation objectives and drive transformative change, partnerships have become the norm for carriers of all sizes. For small or medium-sized carriers, in particular, it can be the best way to enter a new space or gain an edge in an existing one.

Choosing the right partner is therefore crucial, as missteps can be costly to both the bottom line and an insurer’s reputation. To navigate this critical first step, the following 10 considerations for evaluating potential innovation partners provide a useful guide. They can be the key to minimizing risks and maximizing the potential for a successful, game-changing collaboration.

#1 Look for cultural fit.

This requires a strong sense of self-awareness, but every company has its own way of doing things. In your exploratory meetings with the potential partner, do the people you meet with feel like they would be comfortable working with your staff? Do they have the same focus on the customer? Do they treat each other and you with the same level of professionalism? Remember, successful partnerships can last a long time. No matter how brilliant their solution or capabilities, you want to avoid choosing partners your team will feel they have to battle every step of the way.

#2 Screen for strategic alignment.

Maybe even more than cultural fit, you also want someone whose strategic goals align with yours. This isn’t to say they need to have the same goals. For example, a technology company and an insurance carrier will likely have different business goals and express them differently. You need to assess whether both organizations respect each other’s goals, whether the goals are in conflict or synergistic and whether both sets of goals can be achieved through a successful partnership. 

Remember, you are not seeking to create a one-sided partnership. While you’re evaluating a potential business partner, that partner should be evaluating you. If goals are misaligned, it is best to part ways sooner to avoid long-term roadblocks. 

#3 Clarify the problem statement.

A vital first step in innovation is to ensure you are solving for a clear problem based on a validated client need. You must be able to clearly explain it to your executive management so they understand it and buy in to the project. You should expect no less from a potential partner.

If a prospective partner isn’t grasping the problem you’re looking to solve, it could be worth running your problem statement by other industry outsiders who don’t have a vested interest in agreeing with you. This will help you refine your explanation and messaging. If the prospective partner clearly understands the challenge but doesn’t see it the same way, this could be a sign of lack of commitment required for project success.

See also: Is My Organization Actually Innovative?

#4 Listen to how the solution is articulated. 

Sometimes a new technology solution is still in development when you are talking with a startup. The company may also be targeting more than one use case. This might lead to varied terminology being used to describe the innovation, so it becomes critically important that all parties are aligned and can clearly articulate what the solution is, the capabilities it delivers and its key attributes and benefits. Test yourselves by asking: What exactly does the solution do, and can everyone understand and restate that?

If something is not clear, ask questions. Don’t assume you know the answers, especially when it comes to the solution’s availability and capabilities. 

#5 Determine the amount of change required to fit the use case.

Significant change isn’t always a deal breaker but could signal challenges ahead. Few solutions will have everything you need, so in addition to looking at current capabilities, you’ll want to assess if the solution mostly fits your use case or if the potential partner has the ability to tailor the solution to meet your needs. If the solution and its capabilities are not fully shaped, the carrier can be essential to helping refine the solution and bring it to market.

Remember to consider the resources and technical know-how required to make necessary adjustments and the partner’s ability to meet the desired timeline for delivery. Above all, be honest about the capabilities of both the solution and the partner. Don’t force a partnership where one may not be suited.

#6 Gauge willingness to say “yes” to everything.

Closely related to #5: A partner who agrees to every request without considering the long-term implications may not be the best fit. Saying “yes” to every request is a sign that the partner may be unrealistic. Almost certainly, such lack of discipline will stretch limited resources on both sides and put a strain on your project that can lead to missed timelines and half-met critical measures. Look for a partner willing to provide constructive feedback and push back when necessary. Better yet, look for one that can help you identify potential risks and pitfalls ahead.

#7 Evaluate experience with corporate partnerships.

In partnering for innovation, you may run into companies with little experience creating and managing corporate partnerships. If so, you may need to lead the way. Be clear about processes and expectations. Assign dedicated resources to nurture and mentor the relationship.

#8 Assess susceptibility to distractions and industry “noise.”

This is a common problem for startups and established insurance industry players alike. Look for a partner who is also willing to dedicate resources to the project and doesn’t have too many “top priorities.”

In your exploratory discussions, your teams are likely to come up with a plethora of possibilities. While this is an exciting time, it’s important not to set your sights too high too quickly. You and your prospective partner should both be willing to set milestones thoughtfully and park good ideas on a “futures” list. 

#9 Determine appetite for committing to success metrics.

Establishing clear, achievable success metrics to measure performance is vital. A potential partner who is unwilling to commit to these metrics may not be fully invested in the collaboration. If partners have other metrics or set the bar too high, you run the risk they will walk away when the results don't meet their expectations.

This is not to say that a potential partner must always agree on your metrics immediately. The ideal partner is one who will help define success metrics suited to the problem you’re trying to solve and the milestones you both agree to.

See also: Tapping Into Life, Health Innovation

#10 Weigh the opportunity potential.

All parties need to be as realistic as possible when evaluating an opportunity’s potential outcomes and return on investment. Your core team already should have framed out a rough business case as they worked to clarify the problem statement. These estimates often need to be re-evaluated throughout the project’s lifecycle.

While ambition and optimism are essential for any new project, you and your potential partner need to clearly understand the opportunity and the risks involved. You’ll want to agree on what resources will be required to achieve success. If additional resources are required unexpectedly, you should discuss how long it might take to recruit or free up those resources. Finally, you will want to agree on a cadence for project assessment, including the reevaluation of the opportunity, the business case and the thresholds for a go/no-go decision.

Discipline Required

Building a successful business partnership demands discipline and commitment from both parties involved. Your team and your prospective partner's team must be willing to evolve and adapt quickly to unforeseen challenges. This process of evolution, while potentially challenging, can also be an exciting and rewarding experience, as it encourages both sides to learn and grow. 

When working with partners, you can’t always predict how the journey will unfold, but following the right steps will certainly help you enjoy the ride.

Financial metrics improved for most U.S. states during 2022, but the outlook for state credit quality is less favorable as economic conditions soften. As noted in Conning’s recently published 2023 State of the States Report, we have assigned a “declining” 2023 outlook on state credit quality, a change from the “stable” outlook we have had since our 2021 report.

Conning 2023 State of the States Overall Ranking

The previous two years were marked by relatively benign economic and credit conditions, with state credit quality riding the wave of the economy recovering from the impact of the Covid-19 pandemic and an unprecedented amount of federal aid. Moreover, state coffers benefitted from a strong labor market and nominal growth in consumer spending. With the economy in 2022 continuing its pandemic recovery and with people returning to work, income taxes performed very well. Sales tax collections also performed well, again due to federal stimulus-supported consumer spending and a reopening economy.

However, signs are mounting that the extraordinary tax-revenue growth of the past few years will soon moderate. If economic conditions soften, inflation could squeeze budgets, push down sales tax collections, keep expenses high and force states to tap reserve funds to balance budgets. Weakening labor and/or housing markets would impact state finances as well, as would lower corporate profits and depressed financial markets.  Some states are already feeling the effect of weaker stock and labor markets on income tax collections, and states that lowered taxes or expanded services could experience additional financial pressure. Furthermore, several states are facing significant infrastructure spending and pension obligations that may challenge their fiscal stability should an economic downturn come soon.  Nonetheless, states’ balance sheets are in their best shape since before the Great Financial Crisis with reserves at all-time highs and much-improved pension funding ratios. 

Which states will successfully navigate a recession? The impact will likely depend on how a recession plays out. For example, if unemployment jumps, states heavily reliant on income-tax revenue may suffer more. Or If consumers pull back on spending, states counting on sales-tax revenue may be vulnerable. How state leaders respond and leverage available resources in an economic downturn will be a critical test. 

See also: Transformation of Jobs in the AI Era

Conning’s Analysis: A Relative View of State Credit Quality

Conning analyzes 13 economic, socioeconomic and financial metrics that are indicative of state credit health in our State of the States Report. Our ranking is relative – comparing states to each other – rather than absolute – quantifying each state’s credit quality. For example, a state that improves its financial condition can still move down in our ranking should other states make even greater strides. 

Here are highlights of other findings in our 2023 report.

• Texas, fifth overall in 2022, moved up into first place. Florida, 2022’s #1 ranked state, fell to second. Both states benefitted from a strong economy, population growth and, in Florida’s case, an improved housing market while Texas outperformed in GDP per capita.
• The top-five overall ranked states had GDP growth, employment, revenue and population growth, which skewed to the South and West regions.
• Utah, which had held first place for three years prior to last year, fell to its lowest rank since 2015, in part due to how rising home prices affected affordability.
• New Hampshire, which had benefitted from the pandemic’s work-from-home dynamic, dropped from the top five to 21 as work conditions normalized.
• California was a notable laggard, dropping 14 spots to 42nd place, losing economic ground as reflected by lower tax collections. 
• New York’s population declined most, followed by Illinois and Louisiana.
• All 50 states recorded employment growth, with parts of the South and West offering the best jobs picture.  
• Nevada, Hawaii and Texas remained in the top five for employment growth, benefiting from an influx of residents.

Conning focuses on state credit quality, as states are large issuers of municipal debt, and their relatively high credit quality is important to many investors, such as insurance companies. Municipal securities offer opportunities for diversification by region and away from securities prevalent in many insurer portfolios, such as corporate and U.S. government debt. Additionally, these securities often offer higher yields than corporate debt of similar quality and duration and, particularly with taxable deals, will typically have a longer duration and a lower history of defaults than corporates. Our State of the States Report is not a definitive position on any state but rather a valuable starting point when evaluating a state’s debt issuance.

In this month's interview, with Sivan Iram, founder and CEO of insurtech Capitola, he offered up a striking image of how agents and brokers can use AI: as a little angel sitting on their shoulders, whispering wisdom. 

At a time when we're all being bombarded with predictions about the future of generative AI and being lectured about how to start using it, I like that simple image: an angel sitting on my shoulder.

Iram backed up that image with one of the more trenchant summaries that I've seen of the arc that AI has followed and that has brought us to this breakthrough moment. 

He said a key difference between generative AI and what preceded it is that the latest form doesn't just have a brain; it also has a mouth. You can talk to it, and it'll talk back. 

He also said the AI's brain has taken a leap forward. He said the first generation of AI could extract information from documents by recognizing characters, the second by recognizing words. Now, in the third generation, Iram says, the AI can search based on meaning -- it doesn't have to see the word "premium" in a document to infer that that's what's being discussed, for instance.

The generative AI can not only extract information from formal documents but can monitor and learn from the interactions between brokers and underwriters and between brokers and clients. The AI can also now easily supplement the information from internal sources by pulling in publicly available information, such as on a firm's revenue history. 

Meanwhile, the AI is assembling the wisdom that it will start whispering in your ear -- and will keep getting smarter as it pulls in more information. Iram focused on risk appetite as an area where the new version of AI can provide valuable advice. He says carriers currently communicate their risk appetite but do it in an analog, rather ad hoc way. He says AI can track all the current signals and augment them based on email traffic, then help a broker efficiently find a market to place the risk. 

He obviously hopes you develop your AI aspirations alongside Capitola, which provides a digital marketplace where brokers work with carriers to place risks in small commercial lines. But, whatever route you take, he provides some real insight. I hope you'll give the interview a read.

Cheers,
Paul

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ITL:

You wrote a nice piece for ITL recently on why agents and brokers should embrace AI. I wanted to follow up, given all the recent developments with generative AI, and talk about where you see the benefits of AI, both now and in the future.

Sivan Iram:

Absolutely. The mission is to bring technology to build better tools for insurance professionals. AI is just a means to an end. But it has immense potential to bring in capabilities that we’ve never seen before.

The place where GPT models, large language models, excel is with textual information. These models can take in large amounts of data, truly understand it and synthesize it and create new content out of it. That may mean summarizing it, enriching it with external information or composing new bodies of work.

I can be specific. At the core of Capitola, we're trying to bring efficiency to the middle market—larger companies’ insurance needs still require tailor-made products and solutions. Our AI lets us extract information from large documents and summarize them to get brokers and account managers familiar with the risk. We can automatically generate emails and mesh with whatever communication protocol the underwriter uses, so the underwriter can read through the responses and understand what they mean.

I'll give you a quick example. The other day, an underwriter wrote back to a broker about a real estate placement and said, “We don't insure anything built prior to 1946.” The AI read that response, understood that it was a declination and understood the reason. The AI will remember what happened and, the next time a broker is trying a placement on a building built before 1946, will tell the broker up front, This market doesn't accept anything prior to 1946.

We refer to the AI as a co-pilot because it sits set to the broker in the cockpit, helping every step of the way.

ITL:

I’m hearing the term “co-pilot” more and more. I've used different terms over the 35 years I’ve been following AI, but I think I like that one.

You said generative AI excels with text. Would you provide more context to help people understand why it’s so different than what’s come before?

Iram:

The most basic technology that can extract data from documents is OCR: optical character recognition. It's based on computer vision, which is a machine learning algorithm, but it’s very basic form of AI. It doesn't do a great job with scanned documents, and you can't really do handwriting. That was generation one.

The second generation extracted data based on syntax, not just characters. If you wanted to extract, let's say, the dollar value of the premium on a certain policy, the AI looked for the word “premium.”

The big leap with the third generation, with GPT technology, is that there’s a semantic understanding of the text. You can extract information via inference. The word “premium” doesn’t have to be there for the AI to understand that that’s what’s meant.

But that's only the first thing. Another thing we can do is enrich the information from publicly available data sources. If you want the last five or 10 years of revenue numbers for a company, you just ask the AI to go out and fetch the information.

The last thing we see is risk appetite matching. AI can help brokers know what markets to go to for every risk.

GPT has both a brain and a mouth, and people really get excited by the fact that it has a mouth, so you can talk to it, and it can respond. But even the brain in itself is a large language model that marks a huge improvement. The AI’s brain can look at huge datasets, understand what’s there, synthesize it and create insights and recommendations. Then there is the added benefit of the mouth, so you can also talk to it as if it were you.

ITL:

Drawing on the capabilities of the AI, you’ve also adopted a very modern design perspective, right?

Iram:

We start with deep, deep empathy with the broker: understanding their pain points, understanding their needs and putting them at the center of the process. Traditionally, most of the software that's been built for the industry required people to perform repetitive, manual tasks, such as entering data. We bring a new methodology, which is a very popular trend called “consumerization” of the enterprise. You think about the user first – the broker, in our case – and design everything for their benefit. You try to put them in a state of flow.

The new generation of brokers are folks who enjoy consumer tech, they watch Netflix and they use Instagram and other tools, then they go to work and they work with a system that feels like it was designed in the ‘90s.

ITL:

Helped me visualize this. If I'm a broker, and I'm using the Capitola system, what does my day look like versus what it would have looked like?

Iram:

Most likely, the brokerage that employs you has an agency management system with screens upon screens and all these different modules. You keep switching windows, working out of your Outlook, which is a tool designed for emails, as you work on 12, 13, 14 different placements. There's a constant stream of emails coming in, and you have to quarterback everything in your mind. You have to understand which email relates to which placement. You might be using Notes on the side, using Excel, sometimes using Word and PowerPoint to create customer proposals.

Capitola moves you to a project-based system. Every single placement is its own tiny project. If it's a basic, simple renewal, it takes you a couple of days to complete. Some are really complex. You might need to go really broad with a marketing exercise, or you might have a shared or layered program and have to really think about the structure. But, with Capitola, you see your entire book of business, organized by accounts, organized by renewals and placements, with all the documents there, and can deal with each project independently rather than all at once.

ITL:

And you have a sort of little AI on your shoulder whispering advice to you, such as not to try to place a building built before 1946 with a particular market?

Iram:

Today, carriers try to communicate risk appetite but in a very analog way. They do it at conferences, they do it at events, sometimes on the golf course, maybe through marketing emails. But really, at the moment of submission, every broker has their own algorithm running in their head.

To improve on that process, we're taking very explicit indications from the carriers themselves, which are giving us their underwriting guidelines. The promise we make is simple: Tell us what your risk appetite is, and you’ll get a highly curated deal flow from Capitola.

Number two is we're also working with the leadership of every brokerage we work with to understand what their preferred markets look like, all else being equal in terms of coverage and terms and price. Every brokerage has their natural partners.

And the third source is transactional data. We're reading the emails for indications of risk appetite and watching to see which placements are accepted and which are declined.

Combine all that, and we’re able to come up with a market recommendation engine that sits on the broker’s shoulder and whispers wisdom into the broker’s ears.

ITL:

That’s great. But what have you done for me lately? What's next?

Iram:

The company started in 2021, and for the first year and a half we were kind of under the radar in terms of public activity. But the two sides of the market, brokers on one side and carriers on the other, are getting more and more engaged, so we’ve started spreading the word. We finalized our Series A raise in April, and now we're on the mission to bring on board as many brokers as we can and as many carrier partners as we can. We plan to keep building capital and make an impact in the ecosystem.

ITL:

It sounds like you’ll do great. Best of luck.

About Sivan Iram

Sivan is the co-founder and CEO of Capitola, the world's smartest digital marketplace for commercial risk. He has raised $20 million to date from some of the world's best venture capital firms, including Lightspeed Ventures. Currently leading a team of 20, he is responsible for setting the company's vision and mission, making strategic decisions, and ensuring that the company's sales targets are being met. Sivan holds an MBA from Harvard Business School and has a background in Software Engineering.

KEY TAKEAWAY:

--Although storm surge is incredibly damaging, it’s omitted from most traditional home insurance policies. Policyholders need help understanding if their current policies cover damage it causes.

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June marked the start of the six-month-long hurricane season, a time of year that brings forth powerful storms capable of causing extensive damage and loss of life. The Eastern Seaboard, in particular, often finds itself in the crosshairs of severe winds, heavy rainfall and storm surge, which can lead to destruction for countless homeowners and communities.

What Hurricane Ian Taught Us About Financial Damage 

One need only look back at the aftermath of Hurricane Ian last year to see the lasting impact these storms can have. The devastation resulted in an estimated $112.9 billion in physical and economic damage, ranking it among the five costliest hurricanes in U.S. history. In Florida, Hurricane Ian is anticipated to set records as the largest hurricane-related loss event.

Only about 18% of homes in counties that were under evacuation orders for Hurricane Ian actually had a flood insurance policy. Ian left thousands of homeowners holding the bag to cover the costs caused by storm surge, and many workforces were completely disrupted.

Although storm surge is incredibly damaging, it’s omitted from most traditional home insurance policies. Policyholders need help understanding if their current policies cover damage it causes. If there’s a gap in coverage, then it’s valuable for them to get supplemental disaster insurance that specifically covers storm surge or flooding caused by hurricanes.

See also: Hurricane Season: More Trouble Ahead?

What Does This Hurricane Season Have in Store?

Although preseason predictions suggested a less active hurricane season, Mother Nature can be fickle. According to experts at the Colorado State University Tropical Meteorology Project, 13 named storms are expected for the 2023 season, including six hurricanes, with two of them potentially becoming major hurricanes (Category 3 or higher on the Saffir-Simpson scale). While this may seem like a relatively calm year, even in "normal" seasons like 2022, hurricanes such as Ian and Nicole each resulted in billions of dollars in damages in the U.S.

These lessons serve as a reminder that even if the forecasts indicate fewer hurricanes, the effects can still be incredibly costly. With the memories of Hurricane Ian fresh, policyholders along the eastern U.S. coastline must prepare themselves and their finances for the unpredictable nature of hurricanes. 

Here are six steps consumers can take to safeguard against the dangers and financial impacts of hurricanes:

1. Stay informed: Keep a close eye on news and weather forecasts to stay updated on any approaching hurricanes. Create a disaster plan and be prepared to evacuate if necessary.
2. Secure your home: Strengthen your home against hurricane forces by reinforcing the roof, windows and doors with hurricane shutters or other protective measures.
3. Elevate your home: While this is obviously a major step, FEMA says it's important to ensure that the lowest floor of your home is above the base flood elevation for your area.
4. Clear your yard: Remove any debris from your yard that could become hazardous when caught in high winds.
5. Stock up on supplies: Prepare an emergency supply kit with essentials such as water (at least one gallon per person per day for a minimum of three days), non-perishable food, first aid supplies, flashlights and a battery-powered radio to stay informed during power outages.
6. Invest in disaster insurance: Traditional home and renter insurance policies often lack comprehensive coverage, leading to significant out-of-pocket expenses for families. Waiting for claim processing can deplete emergency funds. Products like Recoop Disaster Insurance offer a solution by providing insured homeowners with quick access to flexible funds within days of filing a claim after a declared disaster.

See also: The Unprecedented Hurricane Season

While it’s impossible to predict the exact path and severity of hurricanes in any given year, you can encourage your clients to take these measures. They will significantly improve their preparedness in the face of a potential disaster and will appreciate having an insurer that cares about their overall financial well-being