For years, there’s been talk about how gamification, particularly focusing on financial literacy, can provide a significant lift to the productivity of life insurance agents. 

Two of the best examples to date are the financial literacy board games Praxis and Cyclic, deployed in South-East Asia in recent years. Agents who got prospects to attend in-person board game events were often able to close sales there and then -- reputedly with up to a third of the attending prospects!

While very valuable for those life agents fortunate enough to participate in such events, the games' logistics meant it was extremely difficult for them to be played at a sufficient scale to allow more than a small number of agents to benefit. 

The solution was always going to be a digital finance game. But were any game developers going to focus on this area? 

We’re now seeing this coming into focus, and a small number of digital financial games are coming on stream – albeit of varying degrees of sophistication.

FinQuest by JA Worldwide is at the simple end of the spectrum – with each game lasting just seven minutes. It states a series of actions (such as earning a scholarship to reduce school costs or helping a friend to pack his stuff to avoid paying a moving company). Players are then asked whether the actions are consistent with earning them money.

At the other extreme is Cyclic Town, developed by Cyclic Digital. This simulates financial life from age 25 to retirement at age 60. Players experience events such as marriage, parenthood, career progression, job loss, accidents and health issues. The game incorporates variations in market prices of stocks, gold and property, etc; and changes in economic factors such as interest rates and the level of unemployment. To navigate through all this, the player needs to visit financial institutions (bank, life insurer, general insurer, securities platform and more). There, they can choose to use various personal financial products and services – ranging from term deposits to high-risk stocks, and from mortgages to investment-linked life assurance products; each product operating as in real life. The game also includes a competition feature, which allows an insurance agent or financial adviser to set up a competition for his/her prospects. He/she can choose to get them together in person and play concurrently on their devices or have them play remotely. 

There are a few others, such as Stock Market Game by SIMFA, which focus on a narrow part of personal finance.

We can expect more digital finance games to come, and the early movers to improve their offerings progressively.

Free from the logistical challenges of board games, digital finance games can readily be deployed for thousands of agents and hundreds of thousands of prospects.

Efforts to slow climate change have for years focused on keeping global temperatures from rising more than 1.5°C above pre-industrial levels by 2050. But the World Meteorological Organization reported last week that there is a 66% chance we will exceed that 1.5°C limit in the next five years -- a quarter of a century before the date specified in the Paris Accords that went into effect just seven years ago.

The report shows that climate change isn't just a future problem. It's a now problem, posing major risks for insurers -- but also creating opportunities to better serve clients wrestling with a massive disruption. 

The WMO report doesn't predict that global temperatures will permanently exceed that 1.5°C mark just yet. It says the gradual increase in temperatures caused by greenhouse gases will be exacerbated by an El Niño event that is expected to warm waters in the Pacific Ocean starting this summer, following an unusually long La Niña that had cooled waters there but that ended in March. Temperatures should, thus, subside a bit whenever the El Niño ends and a La Niña begins again.

The report does say there is a 98% chance that at least one of the next five years will be the hottest on record and a 98% likelihood that the five-year period, as a whole, will be the hottest ever. The report adds that there is a 32% chance that the mean temperature for the next five years will surpass that 1.5°C threshold. 

We've already seen how climate change has increased the destructiveness of hurricanes in the Atlantic Ocean, such as last year's Hurricane Ian, which drew on especially warm waters in the Gulf of Mexico and intensified right before landfall. It caused more than $100 billion of losses ($60 billion insured) and was the third most destructive weather event on record. Warm waters in the Atlantic likewise fed a supercell that hit Fort Lauderdale last month. While a thunderstorm normally burns itself out after 20 minutes or so, the abundant energy from the water kept this one going for six to eight hours, dumping 25 inches of rain on the city.

An unusually active tornado season thus far this year in the U.S. also appears to be tied to the hotter temperatures, as are the wildfires that are bedeviling many Western states.

Just this week, Reuters reported that "farmers in Kansas, the biggest U.S. producer of wheat used to make bread, are abandoning their crops after a severe drought and damaging cold ravaged farms. They are intentionally spraying wheat fields with crop-killing chemicals and claiming insurance payouts more than normal, betting the grain is not worth harvesting." 

So, there are perils aplenty for insurers to watch out for.

But there are also plenty of opportunities to serve clients better through services that help them identify and reduce climate-related risks. ("A New Approach to Property Resilience," published last week, offers some thoughts on how to get started.

In addition, for insurers that develop expertise in underwriting clean energy projects, the number of new opportunities is massive. Based on the Biden administration climate bill passed last August, companies have already announced more than $150 billion of projects that take advantage of tax credits, and hundreds of billions of dollars of additional projects are expected. The climate bill (officially, the Inflation Reduction Act) also increased the lending power for the Department of Energy by a factor of 10. It now has $400 billion that it can allocate for clean energy projects. 

Many of those projects will fail, or at least won't live up to their grand promise. (I was at the Department of Energy, working on a project, when Solyndra began falling apart in 2010 after receiving a $535 million loan guarantee that became a huge political issue. The memories are still vivid.) But the track record of DOE loans and guarantees is quite good -- Solyndra, notwithstanding -- and suggests that many of the subsidized projects will become thriving businesses that will need insurance coverage for years to come. 

Here's hoping their efforts kick in in time to head off the worst effects of the truly scary trend that the WMO report identifies.

Cheers,

Paul

Listen Now:

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ITL:

Hi, I'm Paul Carroll. I'm the editor-in-chief at Insurance Thought Leadership. I'm joined again today for one of the quarterly chats I look forward to very much with Michel Leonard, who is the chief economist and data scientist at the triple-I, the Insurance Information Institute, which is basically the scorekeeper as far as I'm concerned for everything that happens in the insurance world.

Michel, we've been talking for, I don't know, probably a year or so now about inflation and economic growth and the P&C industry and its growth prospects and so forth, and it seems the narrative has changed. I think that that's partly because you've been right more than the Fed has been right on inflation. You've been predicting a faster subsiding in the short term. And, actually, even since your latest quarterly report came out, the news has bolstered your point of view. Inflation was only 5% -- only 5% -- in the last 12 months, and producer prices actually came down. With that sort of background, I wonder if you could talk about how the narrative changed about inflation and growth and everything else.

Michel Leonard:

Absolutely. Well, it's great talking with you as always. It's funny how you just mentioned inflation is only 5%. Who would have thought we would say “only” a few years ago?

One area where we have looked is the drivers of inflation. There are two views in the economic world. One has been that inflation was driven by demand, given the government spending and so forth that changed purchasing patterns during COVID. In this view, for example, buying more goods for homes drove prices up. Another view was that inflation was supply-driven -- that disruption in supply chains and disruption in labor availability pushed prices up.

It's funny you mentioned that I was right about inflation more than the Fed. I'll take that.

But what we are saying is what the Fed itself was saying originally, that inflation was transitory and that it was driven by factors like COVID that cannot be impacted by monetary policy. Then, there was a shift in the Fed's narrative. They were seeing that inflation was supply-side-driven and that interest rates could not do much about that, and they were resisting increasing interest rates. Then pressure came about, and they had to do something.

As they had to do something, the narrative changed, as well. The tightening, which we're still going through, has seen, in parallel, a decrease in inflation. But that doesn’t mean the decrease is because the Fed raised rates. We don't see it that way. I don't see it that way.

And the new equilibrium is precarious because the underlying supply chain factors are still there, in terms of food availability and so forth. We could go back very rapidly to 6%, 7% or 8% inflation.

Where does that leave us on inflation? It leaves us in a place where inflation is coming down but is still a multiple of what it’s been historically – more than twice, as of today. And we’re still very vulnerable, because inflation isn’t about interest rates. We're still very vulnerable to a sudden uptick in supply chain problems with cars or construction materials or food, whose prices have largely had to do with the war in Ukraine. There’s geopolitical risk, with the situation in China and Taiwan, and so forth.

I think the Fed framed the issue very well originally.

ITL:

Do you think the Fed will slow these interest rate increases, or do you think they're still committed to them?

Leonard:

Fed officials probably never really let go of that original narrative of transitory inflation, that this was a supply chain issue. Now, what does this mean in terms of whether they will be more or less willing to loosen up monetary policy?

Frankly, it can go both ways. On one hand, you might want to keep demand down through monetary policy, knowing that there's uncertainty on the supply and that the supply can drop again. The other issue is growth. The tightening of rates has cost a significant amount of growth. Unemployment has remained low, but we have an election year coming up, and stock market returns have been flat, and interest rates on fixed-income instruments have peaked.

ITL:

As a result, you're being fairly cautious about growth, right? And the P&C line of business is very much tied to growth in home purchases, car purchases and that sort of thing. So, am I right that you have a pretty cautious outlook about P&C growth for the next year or two?

Leonard: 

Absolutely.

Last year, the economy was doing well, but there was a shift at the end of Q1 2022 in the economic narrative from pundits on Wall Street, in the financial press and in monetary policy circles. The shift was basically, overnight, to: We're going to go into recession. Capital spending, especially corporate expenditures, dropped. The Amazons of the world and so forth that had been investing in the new COVID economy of shipping pulled back. Everything stopped. I don't recall a moment in which some of the metrics reacted so strongly, and it wasn't because of the underlying data. It was because of this emerging consensus about a severe recession.

The narrative was especially damaging to the insurance industry, because traditionally we lag a bit behind the rest of the economy. We do better going into a recession, but it takes us a bit longer to get out of it. We were heading toward peak conditions for growth, with people buying cars again, people buying homes, furnishings and so forth. That all disappeared. That growth bump never materialized. And now we're going to be waiting again.

We were also disproportionately impacted by inflation because of what we rebuild and repair.

ITL:

It's certainly a confusing time. Some big player the other day recommended knocking down a bunch of office buildings that aren't going to be used, which would certainly change the equation in commercial real estate. You talked about the COVID economy. I saw a study the other day from one of the big consulting firms that did a major survey of travel managers and other people responsible for corporate travel and found that they expect that people are going to return to the office, but that work from home will go only from 3.9 days during the pandemic to 2.2 after it's all over. Before the pandemic, that figure had been 0.7 day a week, so we’re still talking about a massive change.

Leonard:

That's so true. We go through cycles.

We had a lot of growth in downtown areas. We had a lot of growth in the suburbs. Now it's about the exurbs. And that has such significant implications, not just in terms of where the growth is for P&C but also in terms of replacement costs. Labor availability in the exurbs is not the same as in the suburbs.

How do we get a sense of the underlying replacement cost framework when the data we get from government agencies and so forth is really on the basis of cities and states and regions? The issue today isn’t about one city versus another or one state versus another, it’s about different areas within the periphery of the city.

ITL:

Replacement costs have consistently been one of the bright spots in our conversations over the last six months or so. Prices are rising less rapidly than they did before, and in a few instances they're actually decreasing. Would you explain a bit what your latest thinking is on replacement costs?

Leonard:

They were disproportionately impacted on the way up because of the supply chain impact on prices of used and new cars, construction material, homes, lumber and so forth. On the way down, as we reach this, again, precarious wartime equilibrium, we're also disproportionately benefiting.

Now, this is a temporary place. It's very unlikely that we're going to stay there. Housing, cars and so forth are elements that could once again increase faster than overall inflation. Then you have to add exogenous factors such as extreme weather events. So, when we're thinking of rate setting for next year, speaking with regulators right now and so forth, we're in this position where, yes, the situation has indeed gotten better, but we have to be cautious.

Again, something goes wrong in Taiwan, something goes wrong with COVID or another disease or something happens with any number of other possibilities, and then, of course, Ukraine: All of the improvements could come to a halt, and we could be back at 6%, 7%, 8% inflation.

ITL: 

You mentioned these crazy weather events. I was so struck the other day by this thunderstorm that basically got going in Fort Lauderdale and never stopped. Ordinarily, a thunderstorm will burn itself out in 20 minutes or so, but there was so much warm water there in the Gulf of Mexico that they basically had a cloudburst for six hours and got 26 inches of rain. The whole place was inundated, and it seems like these wild weather events are happening more and more frequently.

Leonard:

In just the past three or four years, we've had cumulative increases in replacement costs, on average for some of our homeowners and commercial property lines, of 40%. We know these sorts of storms are getting more frequent and worse; imagine the same storm costing 40% more before too long.

ITL:

In Northern California, where I live, we've had an incredibly wet winter, which is great because we need the water and because wildfires have become a problem. But it seems like after having a very long La Nina weather phenomenon, we're about to switch to El Nino in maybe the next month or so, and that historically has meant very high temperatures across the U.S. There could be more tornadoes, there could be more wildfires and so forth as a result.

The last thing I wanted to be sure we covered is rates, which you started to mention. It seems like property/casualty insurance has been sort of chasing premiums for a while because costs have been high and they've been trying to catch up.

Leonard:

I think we're heading toward a fundamental shift. The notion of affordability and availability really will have to be to be rethought. Homeowners and corporations will have to look at insurance as a significant driver when making a purchase.

In places such as Florida, the P&C industry hasn't made money on the homeowners side in several years  even though rates have been going up significantly. People will continue to live in Florida. People will continue to live in some of those other places. So, the issue becomes really expectations about pricing and insurance.

ITL:

Final thoughts?

Leonard:

We’ve covered a lot. I’d just point to two red flags:

Inflation: Let’s not get complacent. It could very rapidly go back up, with just a few events in Europe,

Growth: The economy is resilient, but growth won’t be secure until two quarters after the Fed telegraphs a shift in monetary policy. All eyes are on the Fed, and, as the saying goes, don’t fight the Fed.

ITL:

That’s a great way to end. Thanks, Michel, as always.

KEY TAKEAWAYS:

--A surge in property damage from natural catastrophes has made it nearly impossible to get adequate coverage at affordable prices, creating an opportunity for new approaches to risk transfer.

--Economic pressures have created a perfect storm: Businesses need to cut costs, including on insurance, but insurers must make sure their prices are realistic.

--Filling the gap in the market is a burst of investment of capital and expertise in parametric insurance, which will accelerate it from new entry to mass market in the years to come.

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Since launching FloodFlash in the U.S. earlier this year, I've been surprised to find that brokers and agents are familiar with parametric insurance. Many have even placed a parametric storm policy, based on hurricane or wind severity.

This is a stark contrast to our experience in the U.K. The majority of SME and mid-market agents there aren’t familiar with parametric insurance at all.

One thing they share with their colleagues in the U.S. is that flood parametrics is entirely new. When introducing FloodFlash, we most often hear one of two reactions. First, that it’s too good to be true. Second, why has nobody considered doing this before? 

The first reaction is simple to stave off with our A-rated insurance support, rapid payout claims and excellent service record in the U.K. The second is more difficult to answer. Parametric insurance has been around for 20-plus years in one form or another. By that token, it would make sense that parametric flood products would have come a long while ago. 

Right now, the insurance and wider markets have created the perfect conditions for parametric insurance to grow. Talking to our customers, agents, partners and investors, three trends emerged: a challenging insurance market; the cost-of-living crisis; and a surge in investment in parametric insurance.

A challenging insurance market

80% of the world’s flood damage goes uninsured every year. That’s $58 billion in unprotected losses. In the U.S., the picture is often even more stark. Aon estimates that last year was the fifth costliest on record from an environmental catastrophe perspective, and flooding dominated the uninsured losses. 

Those checking the receipts found out that only $1 billion of the $30 billion in flood losses in California were covered by insurance. When Hurricane Ian swept across the Gulf of Mexico, uninsured residential losses alone ranged between $10 billion and $17 billion. Guy Carpenter data suggests that up to 67% of hurricane losses in the U.S. were uninsured between 2012 and 2021.

The view for business isn’t much better – but it’s much blurrier. Most attempts to understand the impact of flooding focus on residential property, so insight on business flood risk is limited. When we carried out research with U.S. business leaders worried about flooding, 49% agreed they find it difficult to get affordable coverage for their property. The exodus of capacity providers and insurers from high-risk states stands to make things much worse throughout the year.

The statistics all point to the same conclusion: If you have a flood risk in the U.S. (and National Flood Insurance Program coverage isn’t sufficient), it can be impossible to get affordable coverage. This leads to big insurance gaps and massive losses. Drill into the statistics and you’ll find millions of lives and livelihoods that risk being destroyed when the water rises.

Sounds bad right? It’s not getting any better. Urbanization, increasingly extreme weather patterns and climate change are all making it harder to effectively underwrite flood policies. That means that alternative risk transfer solutions like parametric insurance must form part of the response. Without them, the flood insurance gap will continue to grow, and more and more livelihoods will be destroyed in the years to come.

The cost-of-living crisis

After several years of huge upheaval, many American businesses are feeling the financial strain like never before.

According to Aon data from October, 79% of business leaders think the country will face a recession in the next year. Only 35% claimed to be prepared.

Cash-strapped businesses find it harder to secure affordable coverage. Not only that, the rising price of recovery and claims inflation have put huge pressure on agents and their customers to make sure insured values are correct. This creates a perfect storm, where businesses can be paying higher premiums for coverage levels that don’t meet their recovery needs. When customers want to keep insured limits, our partner agents have reported rises of up to 300% in real term costs.

It’s not just brokers feeling the strain. Insurers are also under pressure to maintain a sustainable book. The threat of underinsurance can drive a wedge between insurer and customer, and when uncertainly looms, as it does for many flood risks, the answer is often a reduction in coverage and rising deductibles.

Parametric insurance offers an alternative from the trend of premium increases and limit issues. The premium benefits of parametric insurance are twofold. First, the increased simplicity and certainty in the underwriting (all claims values are known before a flood) means that capacity is more readily available in high-risk areas. Second, the flexibility that parametric policies afford mean that customers can select parametric triggers based on their risk and their budget.

See also: Property Underwriting for Extreme Weather

Investment in parametric coverage

The flood insurance market conditions are ripe, and customers are looking for greater flexibility. But can insurance providers deliver? The answer is an unequivocal yes. Investment in parametric solutions has seen massive growth in recent years. Equity raises by Descartes Underwriting, Parsyl and Arbol have set the stage for parametric market growth. The FloodFlash Series A raise announced last year only adds to the argument.

It isn’t just VC money that is capitalizing on the growth opportunity. Insurers and distributors are also getting in on the action. Reinsurance dollars dedicated to more exposed risks are shifting toward parametric providers. Similarly, brokers and agents across the country are hungry to learn about and distribute coverage that can help their clients most. According to Instech, nearly a third of the largest brokers globally mention parametric on their website, including half of the top 50 brokers. 

This investment of capital, expertise and platform will accelerate the growth in the years to come as parametric flood coverage goes from new entry to mass market. Experts recently interviewed by Wharton University Risk Management claim the flood insurance market “is so large and so underserved that there’s virtually limitless potential for growth.”

If you agree that parametric insurance holds the key to that growth, I’d love to hear from you.

Delivering digital CX is a driving motivator of life insurers' digital transformation initiatives, but many operational and technological challenges must be overcome.

Read the latest study from Equisoft and Forester Consulting to find out how insurers are currently optimizing CX and client engagement throughout the policy lifecycle. See what challenges carriers still face as they progress through digital transformation and what technologies are most critical.

Download Now

 

Sponsored by Equisoft 

 

KEY TAKEAWAYS:

--Problems are most common during claims. 73% of insurers reported significant customer friction in the claims process, and 59% reported decreased chances of customer policy renewals as a result.

--Improvements to the customer experience will require improvements to the employee experience, so 88% of insurers plan to invest more in CX technology over the next two years. 51% expect to invest more in self-service.

--Contact center agents often have to navigate through multiple systems. A single interface with integrations to core insurance systems can enable streamlined interaction. 

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A recent Talkdesk survey of customer experience (CX) professionals in insurance shows that 91% consider their contact centers meaningful contributors to their CX strategies, and 93% said delivering superior CX is a key driver of customer loyalty.

Consumers want a frictionless experience, whether they’re dealing with retailers, wireless providers, banks – or insurance companies. So, increasing customer loyalty requires simplifying the customer journey and removing friction points.

Nearly nine in 10 (88%) of survey respondents said CX is a growing strategic priority for their organizations, so insurers are seeking to provide contact center agents with the tools they need to do their jobs effectively.  

Disjointed and frustrating experiences erode loyalties

People are not eager to engage with their insurance companies. But when they do, customers expect a convenient and transparent experience that does not involve long wait times, getting shuffled to different departments or agents or providing the same information over and over. 

These types of problems are most common during claims. Nearly three in four (73%) of insurers reported significant customer friction in the claims process, and 78% said a single poor customer experience will diminish loyalty. 

Too frequently, poor customer experiences can be traced to the lack of training and tools of customer-facing employees such as contact center workers. Simply put, improvements to the customer experience will require improvements to the employee experience.

The contact center as the hub of CX

Customer-facing employees should be provided a single pane of glass that affords them a 360-degree view of the customer, including contextual information so they can respond, provide information, resolve inquiries and have the bandwidth and support to do all of this with empathy.

A modern, omnichannel cloud-based contact center should serve as an insurer’s hub for communicating with customers and creating a unified customer experience, whether through self-service and digital options or through personalized and convenient interactions.

It is no surprise, then, that 88% of insurers intend to invest more in CX technology over the next two years. And slightly more than half (51%) of surveyed insurers said they plan to increase their investments in self-service technologies over the same period.

Artificial intelligence (AI) will play a central role in these plans. Survey respondents called applying AI key to better understanding and predicting customer issues their top priority in resolving friction points across the customer journey. 

See also: Evolution of The Contact Center Experience

Empowering contact center workers

When consumers reach out to an insurer’s contact center, they often are in a state of anxiety – or worse – over a claim. This elevated emotional state makes it even more important that contact center workers can help customers resolve an issue or answer a question; after all, the more upset and disappointed customers are, the more likely they will seek a new insurer. According to the survey, 59% of insurers report decreased chances of customer policy renewals as a result of customer support frictions.

By deploying AI, machine learning, natural language processing and other smart technologies, insurers empower support workers to quickly resolve issues with next-best-action recommendations for each stage of a live call or digital chat. These tools also can conduct sentiment analysis to help contact center employees to respond in the most empathetic way. 

Additionally, integrating automation in the contact center platform and using automated workflows can simplify processes for employees, improve accuracy and increase efficiencies. 

Contact center agents often have to navigate through multiple systems, such as policy administration, claims management and CRM. Switching between screens and different systems can create a cumbersome and inefficient experience. A single interface with integrations to core insurance systems can provide complete customer context and enable a streamlined interaction. 

Conclusion

Insurers know that customer loyalty and retention are highly dependent on the customer experience. By using their contact centers as hubs for their CX strategies – and by equipping the centers with AI, automation and user-friendly tools – insurers can provide a better experience for customers and service reps while lowering costs through greater operational efficiencies.

KEY TAKEAWAYS:

--While building codes have long been set by local authorities, national standards are emerging for resilience in buildings.

--The commercial insurance community -- insurers, brokers and property owners alike -- must begin to develop and implement an organizational mindset for property resilience.

----------

The history of the standards we use for how we build structures -- homes, apartments and commercial and manufacturing buildings -- has largely to do with regional authorities determining what criteria they need to meet to keep the occupants of the building safe. Building codes traditionally reside under the authority of local governments, which determine a bare minimum requirements for their jurisdiction. But the realities of a warmer climate are changing this framework.

The Biden-Harris administration recently launched an initiative to modernize building codes, improve resilience in buildings and reduce energy consumption and costs. The National Initiative to Advance Building Codes provides incentives and support for state, tribal and territorial governments to enact and enforce building codes. Adopting stronger building codes increases the resilience of structures and can help in meeting the U.S. decarbonization targets.

As the federal government provides guidance on the next era of building codes, the commercial insurance community -- insurers, brokers and property owners alike -- must also begin to develop and implement an organizational mindset for property resilience.

What Is Property Resilience, and How Do You Get There?

Property resilience is the ability to withstand shocks or stressors and, with relative speed, return to normal business operations. If a hotel in South Florida experiences flooding as a result of a Category 1 hurricane, how quickly can the facility welcome back its guests? If a distribution warehouse facility in Tornado Alley is built to withstand 100 mph winds, how quickly can it be expected for the warehouse to resume normal operations? Questions like these form the basis for an organization's approach to resilience, going beyond the simple framework of disaster, claim and recovery.

Resilience sits firmly inside the realm of things we think about when it comes to commercial insurance. But operationalizing resilience happens beyond securing revised terms of coverage when your policy is up for renewal.

Calculating Your Risk — What does it mean to calculate risk? An equation that helps us think about risk would be Hazard x Exposure x Vulnerability = Risk. The vulnerability of a particular building is the degree of loss of a specific type of element (building attributes) at risk given the intensity of the hazard.

See also: Business Resilience Will Be Tested

Resilience as an Investment Framework — We are already experiencing extreme weather events as a result of a warmer global climate. With that said, choosing to acquire or to build new assets from the ground up must also consider what it would take to make the most resilient edifice possible. Gone are the days of meeting local building codes exclusively for safety. Those with large commercial portfolios have a responsibility to consider potential impacts -- extreme weather, supply chain disruptions or pandemic -- and work back to mitigation efforts from there.

Planned or Existing Properties — Understanding your portfolio as it stands today, its collective resiliency measures and how to build or acquire to reduce risk in the future is also a necessary component in crafting a framework for resilience. If you have an office building in Northern California that is located in an area prone to wildfire, but was built in 1986, how do you retrofit that building to survive a fire? Is it sensible to invest in retrofitting with fire protection measures? Might the cost of covering the building point to retaining the risk yourself? Outlining a methodology for making decisions like these will increasingly lead, not only in pursuing insurance but in how portfolio level decisions are made.

Building for Resilience — Despite the challenges we face as a result of a warming climate, capital will always seek deployment. If capital is deployed (in the form of new property assets), it makes sense that those assets be built with the latest types of mitigation technologies. Even if doing so raises the price of the structure as a whole, it stands to reason that the extra cost will be covered both in terms of lower insurance premiums and the ability to withstand outside stressors. Though it may be tempting to avoid the additional costs, the future necessitates an aggressive approach that can save time, money and capital when disaster strikes.

The road to the next generation of building standards in the era of climate change will certainly be long. But starting the practice of asking how resilience can be a part of the entire property lifecycle -- from acquisition, to operations, to liquidation -- will take your organization a great distance in protecting and maximizing assets, even in the midst of a warmer climate.

KEY TAKEAWAY:

--The types of automations that result in the biggest return on time, and thus profit, range from notifications (license expiration, date reminders, continuing education data notifications, workflow event creation) to license renewal submissions, license updates, license copy retrieval, etc.

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The use of automation—especially for manual, time-consuming tasks—could very well mean the difference between viability and extinction for many insurance carriers and producers in years to come. 

Why? Agencies, brokers and carriers are spending an inordinate amount of time and money on back-end processes that are taking them away from their core objectives. 

At the same time, many forward-looking organizations are taking advantage of incorporating intelligent automation across their entire lifecycle, reaping a myriad of benefits, including less expenditure on mundane processes, while allowing for more time on those tasks that will indeed affect their bottom line. 

Automation offers insurers a number of advantages, including:

• Centralizing the tracking of all insurance carrier/producer information
• Liberating compliance teams from tedious administrative work 
• Streamlining producer compliance by aggregating data from different sources 
• Driving a more unified regulatory workflow
• Leveraging compliance data to empower strategic decision making 

See also: A Low-Tech Approach to Work Automation

The types of automations that result in the biggest return on time, and thus profit, range from notifications (license expiration, date reminders, continuing education data notifications, workflow event creation) to license renewal submissions, license updates, license copy retrieval, etc.

For instance, the license renewal process includes the following manual and labor-intensive tasks for compliance teams:

1. Determining if there are any background check issues with the licensee
2. Submitting the renewal
3. Waiting for approval
4. Updating the new license data
5. Retrieving a license copy from the state website

It's a big advantage to automate this entire process. At Rhoads, for instance, our AI knows when expiration dates are coming up, and we automatically message the individual to update their background answers. We also store these answers and automatically submit the renewal. And, upon approval (by the state), we update the new license expiration date and retrieve a license copy for storage. 

Insurers are now able to do more with less. Automation and technology can address the routine tasks that compliance teams need to perform, freeing them to apply their expertise to exception management. 

Experts no longer need to spend their time on routine tasks and can use their acumen to focus on what drives the company forward. Automating compliance saves on operational as well as back-end costs, allowing organizations to do more with their current workforce.  

Make automation more than a buzzword for your organization and discover the value in terms of time and workforce savings and, of course, profits.

KEY TAKEAWAYS:

--Cyber insurance carriers should stop relying on security questionnaires and should perform active scans to determine the digital assets and overall security posture of each applicant.

--Insurers must then monitor the risk continuously. Cyber-attack trends and techniques evolve rapidly, meaning the risk and performance of a policy can differ drastically not only from year to year but also within a 12-month policy period.

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Cybersecurity risks continue to pose a significant threat to businesses, and the insurance industry is feeling the impact of these attacks. The percentage of insurance clients opting for cyber coverage has risen 47% over the last several years – while the costs associated with cyber events have steadily increased. 

The increasing frequency of large-scale cyber-attacks — WannaCry, NotPetya, Log4j, ProxyNotShell, to name a few — has highlighted the potential for catastrophic events and the resulting financial losses. This has put pressure on insurance companies to find new ways to mitigate risk and protect their policyholders.

Too often, insurers have reacted through traditional methods, such as enforcing limits on coverage and capacity, raising premiums and seeking coverage from reinsurers. But these approaches may not be sufficient in the long run.

Insurers must take a more comprehensive approach, including (1) practicing risk selection informed by the latest cyber security threat landscape, (2) maintaining constant awareness of the digital assets they insure, (3) scanning continuously for emerging risks, (4) identifying vulnerable companies quickly and accurately and (5) helping their insureds implement security patches as quickly as possible.

Issuing a cyber insurance policy without promptly assessing an organization's security stance is comparable to providing property insurance without comprehending the building materials used in its construction.

Unfortunately, many traditional cyber insurance policy processes and applications do not gather essential security details, such as the software and tools employed by the insured. This often leads to over-reliance on security questionnaires, whose answers are inherently biased and may not be completed by the correct technical staff.

Active scanning can offer a solution to this problem. Cyber insurance carriers can perform active scans to determine the digital assets and overall security posture of each applicant at the time of underwriting. This gives insurers real-time views of a company's digital assets and vulnerabilities – and enables much better risk selection and pricing decisions.

Such active scanning should be complemented with continuous risk monitoring. Cyber-attack trends and techniques evolve rapidly, meaning the risk and performance of a given cyber policy can differ drastically not only from year to year – but also within a 12-month policy period. Continuous cyber risk monitoring of an organization's digital infrastructure over the course of the policy periods allows insurers to keep pace with the changing threat landscape and the technological evolution of companies.

Amid an age of rapidly advancing cyber threats, insurance companies should start a program of active scanning and continuous cyber risk monitoring of insureds and their digital assets. By adopting such measures, insurers can improve their loss ratio and better protect their policyholders against cyber risks.

You can find a whitepaper on the topic here.

Sometimes, you get so caught up in what you’re doing that you miss the significance of what you’ve done. 

Recently, we were working with a client, driving efficiency in their claims operation, sweating over a lost and unaccounted-for minute, when Marcin, our customer success leader, said, “Do you remember when we got here and (the client) was trying to manage to the month?” We all laughed and got back to work. 

Only later did the significance of Marcin’s observation dawn on me. The first, fairly obvious reason is that we had helped our client actually manage to the minute. The second, less obvious reason is that the desire to find that lost minute came as much from workers as from management. The front-line people wanted to know where it went. 

Think about that both operationally and culturally.

Then consider that it’s one short step from granular performance metrics to performance-based pay. Why pay anyone by the hour any more?  

I could go on, but in the interest of your minutes I’ll end there.