You’ve just visited the grocery store, and it’s likely that you made a choice at the checkout. Did you scan and bag your items, or did you let a cashier scan and bag them for you? The choice may depend on just how many groceries you purchased or how you feel about your store’s tech level.  

Even now, though, it’s clear that there is a next step or two to be made in grocery store technology.

Where is the line where you simply feed your groceries onto a conveyor and they are automatically scanned and bagged? Where are the technologies that run and pick everything off of the shelves for you and deliver them to a waiting area or to your home without a delivery driver? Home deliveries are becoming more automated. Uber Eats and Postmates are already using robot deliveries in test locations with high population densities. 

Which raises the question: Just how far can technology take any industry? In many cases, technology makes its case so profoundly that we might call it a no-brainer — like making deliveries from a restaurant with no driver, no fuel, no insurance, no parking issues and no delivery tip. 

Underwriting technology for commercial insurance is also a no-brainer. When we look at all that today’s tech-enabled underwriting can accomplish and how it reallocates crucial resources to the brainy tasks, it makes its case. It is an “elegant” solution to so many commercial and specialty insurance challenges that it deserves an immediate look and quick implementation.

Drawing on joint research efforts between Majesco and Strategy Meets Action, let’s look at the benefits of today’s optimal underwriting technology to see how it produces real insights through collaboration.

The quest for insights, integration and intuitive workflow

Insurers seek to enable underwriters to focus on complex risk assessment, portfolio management and relationships with agents and brokers. Insurers need to improve the speed of underwriting, making it easier for brokers to do business with the company, and ultimately need to improve risk selection and profitability — not just for each policy and product but across the whole spectrum of business and geography. Insurers need to make complex concepts into simplified insights that leverage the underwriter expertise.

Digital thinking and platform vision

How can underwriting become a seamless hub of information, fed by the best data management and analytics practices available today? Which advancements make a real competitive difference — moving commercial and specialty insurers from capable to innovative? What does this environment look like?

A next-gen framework must support the workflow of relationship management, transaction processing, collaboration with brokers and portfolio management of the entire book.

It must also support processes to leverage new data, new models and new analytics to garner deeper insights, based on the three key attributes of digital thinking:

Intuition

In underwriting, the user experience should be tailored and personalized. No two underwriters are the same. The new underwriter has a completely different set of tasks compared with an underwriting veteran. As underwriters grow, their roles may change and shift. A digital underwriting platform will tailor its processes and workflow based on underwriter specifics to provide guided and balanced experiences. 

Today’s digital underwriting platform also must enable communication and collaboration among underwriters, brokers and others who may be involved in the process.

See also: Dramatic Shift in Underwriting Ahead

Integration

The first steps of automation were those made to integrate requirements data into the scoring process and to facilitate the underwriting workflow. Today, this integration is vastly expanded to contain connections with everything possible — data, collaborative communications and decisions. Application programming interfaces (APIs) need to connect with centralized data platforms to provide real-time synchronization with policy administration, rating engines, various tools and spreadsheets, analytic/predictive models, transformational technologies and new data sources (structured and unstructured).

Everything gains its power in the integration layers. Workflow becomes easier to automate. Data becomes easier to access and understand. With advanced digital communication tools, information sharing becomes more fluid and automatic, both within the company and outside its walls. There are so many valuable streams of data available today, but most are hindered by an inability to integrate the data into the current workflow.

Insights

Insights are made up of the “just-right” information presented in easily digestible views from multiple angles and layers. All relevant sources of data and analytics for the transaction, decisions and portfolio management are vital and accessible. Dashboards, alerts, business intelligence and advanced analytic tools are made available across any and all data points and through any lens: product, broker, underwriter, policyholder, market segment, region, etc.

Today’s digital underwriting provides the latest data and analytics for product/pricing/appetite and underwriting guidelines that are linked to intuitive and intelligent workflows and engines.  

Tech capabilities that advance underwriting for commercial and specialty insurance products

The technology to support new digital attributes goes beyond the basic underwriting found in policy solutions. It is more advanced and comprehensive than even the underwriting workbench of the past that was focused on workflow and process. What is required is a digital underwriting platform that not only enables today’s workflow and process but elevates the underwriting process and decision-making, as well.

This evolution of underwriting is powered by solutions that leverage:

• a digital no code/low code platform
• AI and advanced predictive analytics
• new communication and collaboration tools

This can be accomplished through a next-gen underwriting workbench that runs standalone and integrates seamlessly with other systems and data for rapid implementation and flexibility for future enhancements and upgrades.

Underwriting technology is a wise investment

Most commercial and specialty insurers are adept at understanding their customers and niches. Now is the time to pay close attention to the pains that their business customers are encountering.

When the economy is posing headaches for companies large and small, and many businesses are struggling to survive, areas of expense come under fire. It’s vitally important that insurers are seen as the protectors of business — with insurance as a high-value asset — as opposed to just a necessary expense that can be shopped around like any capital expenditure. Commercial and specialty insurers need to remain competitive by providing the accuracy, value and innovation that will keep company customers loyal. Commercial and specialty insurance underwriters need to transform underwriting into a center of support, engagement and insights, ready to contribute to cost savings for their own company and all those whom they serve.

If you think about it, this makes the decision to modernize commercial and specialty underwriting with digital and advanced data technologies a no-brainer. Every front-end improvement contributes to the insurer’s bottom line. Every step forward makes commercial and specialty products more competitive and makes insurer solutions more collaborative. For organizations that consider themselves business partners, digitally enhanced underwriting will build trust in the business relationship and protect both businesses and insurers from the unknown. Is your organization ready to take advantage of today’s next-gen underwriting platform?

To hear the latest from Majesco and SMA on Underwriting and analytics, be sure to watch Majesco’s webinar, The Art and Science of Underwriting Powered by Artificial Intelligence and Machine Learning. 

While many promises of disruption from insurtechs have fallen flat, now is the time to lean into digital transformation. On the cusp of a potential economic downturn, organizations must continue to adopt advanced solutions that foster quantifiable ROI and impact. And while there is a focus on how artificial intelligence (AI) and automation are critical when functioning with fewer resources on hand (and rightfully so), there isn’t enough focus on explainable AI. 

Explainable AI, or the ability to look inside the “black box” of decision-making of an algorithm and understand the reasons behind its predictions, is pivotal to better understanding customers, detecting fraud and staying ahead of potential legislation that has ability to disrupt the industry. Insurers are not alone in their struggle to obtain useful and unbiased data. Explainable AI paves the way for improving business outcomes and keeping companies accountable to new and emerging ethical standards. 

Mass customization through AI 

On the surface, using explainable AI to predict customer churn might seem less exciting than AI-driven telematics or using AI to configure risk models for states affected differently by natural disasters. But picture this: Your AI model alerts you that Customer X has a significant chance of taking their business to a competitor. Without explainable AI, which makes it easy to understand precisely why this is likely, your organization would have to accept defeat and watch the customer close their account once their contract was up. 

With explainable AI, it may be revealed that the customer is extremely price-sensitive, and because their rates went up due to an accident last year, they’re looking for solutions that are more within their price range. The AI arrives at this prediction from extensive first-party data, including past interactions with customer service representatives and subsequent surveys. In this instance, offering a lower rate could reduce the chance of Customer X leaving to 50%. One customer may not hold an organization afloat, but thousands of instances like this one can help keep consistent growth in economic fluctuations.

Aside from the obvious benefit to the insurer, targeted, customer-centric personalization of policies and customer service interactions contribute to a better customer experience and thus, a loyal customer base.

Detect fraud faster and improve your data

It wasn’t long ago that Geico unveiled its use of AI to speed collision estimation. Essentially, after an accident, customers submit photos of damage to their vehicles, which helps speed claims and repair processes. Without explainable AI to outline why certain damages or costs were identified, the software could cause considerable challenges if customers were unhappy with the decisions. It’s only fair for the insurer to provide details for why a claim was denied or only partially approved.

In the case of fraudulent claims, insurers need a way to quickly detect when something’s amiss. In verticals like retail, with lots of data constantly being added to systems, data can be updated instantaneously based on real-time interactions to improve AI-backed decision-making. However, this method requires a steady cadence of data to keep up with changing trends. Machine learning (ML) models predicting insurance claim fraud may be limited to adapting on a much less frequent basis, causing what is sometimes called model drift. 

This means that enterprise data, and therefore ML models, may be inaccurate for a period, until the feedback loop closes and the model is able to update. Implementing rules systems on top of ML can provide an automation stop-gap so that, until relevant data is fed into the system, rules can act as a guardrail and reduce risk for ML models when data drifts from its training distribution.

Further, the ability to analyze a model and its recommendations is crucial for identifying erroneous or biased data that should never have made it into training. Data science workflows that use explainable AI to drive upstream data improvements continuously boost the quality of their organization's data, while boosting confidence in output and results. 

See also: Modernizing Insurance for the Digital Era

Stay ahead of pending legislation 

In the last few months, regulators have upped the ante with a clear desire to create uniform, ethical standards for using AI and automation. For example, New York City is instituting a law that penalizes employers for bias in AI hiring tools starting in January 2023; as a result, companies are scrambling to audit their AI programs before the deadline. On the federal level, the Biden administration released a Blueprint for an AI Bill of Rights, which will likely inform more rigid legislation focused on transparency and accountability.

Compliance-minded insurers have no choice but to turn to explainable AI, using software to understand — and prove — the variables that came into consideration for sensitive decision-making. This is underscored by a December 2022 lawsuit alleging disparities between how a leading insurance carrier processes claims for minority policy holders. The suit cites the company’s relationship with a claims management platform provider – and its partnership with a Netherlands-based AI firm that delivers a fraud detection score to indicate the likelihood of fraud throughout the claims process. 

This lawsuit is a bellwether: as wider adoption of AI and automation software penetrate the insurance industry, the use-cases for ethical, transparent AI will skyrocket.

Insurance needs explainable AI

Insurers can’t stop the momentum of digital disruption. With rumblings of an economic downturn, insurers can't pump the brakes while competitors ramp up processes reliant on AI and automation. With the help of explainable AI, insurers are set up to succeed in attracting and retaining customers, detecting fraudulent activities and staying compliant with pending legislative efforts ensuring AI is accessible and fair.

 

“If you do not change direction,” Taoism founder Lao Tzu warned, “you might end up where you are heading.”

It’s a bit of ancient wisdom sure to resonate with modern enterprises as they seek to transfer their CX approach from the well-beaten path through a fast-fading single-channel world to one that leads to a new digital-first multichannel universe where tech-savvy Millennials and Gen Z—not to mention their expectations and business—reside.

Consider the following findings from a recent Salesforce survey:

• 56% of customers—and a full 68% of potential millennial/Gen Z customers—prefer digital channels over traditional ones.
• Further: “More than half (56%) of millennial and Gen Z prefer mobile apps and are more than twice as likely than silents/baby boomers to prefer voice assistants like Siri and Alexa.”
• Nearly forty percent of customers “won’t do business” with a company if they cannot use their preferred channels.

The challenge is particularly acute in the insurance industry where providers are working to pivot to that multichannel future while also operating as multi-line policy providers and attempting to stay ahead of the ever-evolving risk curve.

From an Insurance Nexus survey:

• In North America, 43% of consumers selected the broker channel as preferred. 57% chose the online channel and twenty-nine percent prefer an aggregator.
• Though nearly a quarter of millennials use an agent or a broker, only 16% identify brokers as a preferred insurance channel— “making it the fourth most popular choice after online, aggregator, and affiliate partner channels.”
• 61% of Gen X and Baby Boomers use an agent or a broker with half “selecting that channel as one of their most preferred.”

This means that insurance providers, to remain competitive, must do several different things well simultaneously.

As a Reuters white paper recently put it: “From digital native Gen Zs to silver-surfers, consumers are now accustomed to Amazon or Uber-style experiences, and they want affordable, transparent, and customized solutions.”

So, can the insurance industry accomplish this feat?

Can providers effectively manage all their foundational duties while simultaneously pivoting toward an omnichannel engagement strategy?

The answer is absolutely.

But it will require a multifaceted approach to distribution that is highly flexible and adaptive as well as responsive to the differing needs based on who the client is—i.e., individual or commercial buyer—and where they are on their own digital journey. A given customer may, for example, be comfortable submitting information for a digital quote but prefer to close the actual transaction with a broker or underwriter.

On a more macro-level is will also require some degree of “co-opetition”—an increasingly common phenomenon described by Harvard Business Review as “cooperating with a competitor to achieve a common goal or get ahead.”

“[Co-opetition] isn’t always easy, because people tend to think in either/or terms, as in either compete or cooperate, rather than compete and cooperate,” Adam Brandenburger and Barry Nalebuff write. “Doing both at once requires mental flexibility; it doesn’t come naturally. But if you develop that flexibility and give the risks and rewards careful consideration, you may well gain an edge over those stuck thinking only about competition.”

In other words, placing the customer first in a rapidly shifting business ecosystem could mean rethinking how the boundaries within those ecosystems are drawn in the first place.

And with consumers’ expectations being continually shaped by encounters with other brands in other sectors, for insurance providers, time is truly of the essence.

To get from here to there, providers will not only want to lean on outside technical and strategic expertise—the “consultant factor,” as I called it in a previous article—but also on laying the following two primary building blocks:

• A Technology-First Mindset. The mindset of insurance companies when a new or improved digital engagement tool is adopted by another industry should not be to lean into reliance on existing legacy systems and service models, but, instead, to immediately begin the process of ideating internal use cases and begin the integration process as soon as possible. In a multichannel world, providers must meet customers where they are at. That may mean, say, opening up lines of communication via instant message or an intelligent bot; a self-service web portal or mobile app; a conversational AI digital virtual agent; a human agent; or, most likely, a seamless, reactive hybrid of the three. Utilize experienced third-party insurtech firms whenever needed in whatever way possible—competitive advantage and both the short- and long-term prospects of the company will depend upon it. Customers are too inundated with options to settle in 2023. Remember, Customer acquisition in insurance is estimated to costs nine times more than customer retention.
• Freedom from Friction. Insurance should digitally pave its customer purchase journeys: Significantly, 96% of independent agents surveyed by Clearcover say their customers are seeking more digital tools now than they were pre-pandemic. Providers ignore this fact at their own peril. “Driven by insurtechs, insurance is moving towards efficiency driven by technology, data, and predictive analytics,” Mike Brown writes. “It’s getting away from the legacy operations defined by human underwriters, nine-to-five dealmaking, and cumbersome processes. A computer only needs a couple of minutes to underwrite an insurance policy. It’s an opportune time for tech companies to get a seat at the insurance table. They have robust data and technological infrastructure that could be leveraged to underwrite and sell insurance products.” If insurance companies want to protect their own turf, they’re going to have to be lithe, smart, and quick, technologically speaking.

Insurers are being challenged to rethink not just the experiences they provide customers but their entire approach to customer engagement and how they collaborate with their distribution partners, agents, brokers, and intermediaries. The quote-to-card value chain and traditional pillars of brand, price, product, and the claims “moment of truth” are being challenged and disrupted.

Many customers say that today superior service is often more important than price and a great claims experience is expected.

Considering all of this, multi-channel is the new front door to your business: Without the right technology, business culture, workforce, and processes, you face becoming obsolete.

If you’re ready for an extreme customer experience makeover, grab a sledgehammer. It’s time to build the modernized, digital-first omnichannel experience.

 

Sponsored by ITL Partner: OZ Digital Consulting

Lots of experts see cars’ increasing ability to automatically notify insurers and public authorities about crashes as a breakthrough. And it is. Authorities will quickly be able to dispatch help, if it’s needed, and insurers will be able to take hold of the claims process so early that they’ll be able to knock out lots of cost while speeding the repair process.

But what if customers don’t want to automatically notify insurers and public authorities about a crash?

Many will, of course, appreciate the peace of mind that comes with knowing that help will be sent even if they’re incapacitated in an accident. Many will feel coddled after they have even a minor accident and their insurance company calls or texts to ask if there’s anything the company can do to help. If customers get the sense that they’re being moved more quickly through the repair process, they’ll like that, too, and some PR and advertising could even sell customers on the idea that having costs taken out of the claims process allows for lower rates.

So, what’s not to like?

Well, we’ve already seen that crash detection can lead to many false  positives — Apple Watches, for instance, seem to think that many sudden stops by skiers are actually car crashes and dispatch help. Those annoyances will diminish as the technology improves, but they won’t go away.

And some people simply don’t want to report a crash. They don’t want it on their driving records, because it will raise their insurance rates and perhaps even imperil their license. 

Even if a driver welcomes having a crash reported, they may not want to do it right away. Maybe they’re late for a meeting. Maybe they’re discombobulated and want a chance to clear their heads. 

In rare cases, maybe the driver doesn’t want to use the tow service or repair shop that the insurer is steering them toward as part of cost-cutting efforts. 

Broadly speaking, I’m raising the issue of decision rights. We’ve seen lots of big plans for technology fail over the years because companies failed to account for the fact that consumers value those rights. I worry that the effort to enable automatic crash notification, while totally laudable, will at least be slowed unless insurers find ways to leave those decision rights with consumers. 

Remember “internet refrigerators”? The grand idea was that your refrigerator would know when you were out of, say, milk and would order it for you. But you don’t have an internet refrigerator, and I don’t, either. Why? Because I don’t want a refrigerator making that decision for me. I’d be delighted to have a refrigerator that knew whether I had dill and could tell me while I was at the store, while no one was at home to check, but I don’t want a refrigerator to automatically keep me stocked with it. Sometimes, we need dill. Sometimes, we don’t.

There is a straightforward way of addressing the decision rights issue: Ask the customer.

Do you want your insurer to be notified immediately if you have an accident? How about public authorities? Given that false positives are a possibility, how certain should our algorithms be that you’ve had an accident before reporting it? How serious an accident should we report — one at 5mph, 10mph, 25mph? For someone who’s had an accident, maybe start by asking if they want to report it now, then if they’re okay with using the official towing operator and repair shop. Etc.

Automatic reporting can be a game-changer, for all the reasons our friends Stephen Applebaum and Alan Demers lay out here. They estimate that the technology, now possible because of smartphones, could save an average of $1,000 per claim on the 15 million auto claims filed just in the U.S. each year, for a whopping $15 billion in savings.

I just think everything will go far more smoothly if we develop the technology with the customer, and not just the insurance process, in mind from the very beginning.

Cheers,

Paul

 

For many years, I have advocated for the insurance industry to coalesce in pursuit of a perception change. The industry clearly gets a bad rap. ProfitableVenture notes seven reasons why people think insurance companies are bad. I think at least a few are missing from this list. 

You hear people say insurance companies are not trustworthy, are uncaring during times of need and only focus on profits. From college-students considering careers, we often hear that insurance is boring and bad.

The only child who ever said they want to go into insurance when they grow up was someone with a relative in the business. Someone who guided them into the industry by helping to debunk the stereotypes and myths about the space. To all my friends in the industry, tell me that isn’t true…

The industry has two major perception strikes against it: It’s bad, and it’s boring. People coming out of school today can’t handle boring, and they certainly don’t want to work for a company seen as doing bad in the world.

But, those who know a little something about insurance know that both of these perceptions are simply not true.

The fact is, the insurance industry is one of the most caring and philanthropic around. People working in insurance are there to protect you and the property you own. Helping others is part of the insurance DNA, and the vast majority of insurance brokers and underwriters are committed to serving their clients in their best interests. 

McKinsey and the Insurance Industry Charitable Foundation, a nonprofit that unites the collective strengths of the insurance industry to help communities and enrich lives through grants, volunteer service and leadership, reported in 2020 that industry-wide charitable giving was more than $560 million between 2015 and 2019. 

Using information collected by IICF, the Insurance Information Institute estimated U.S. insurers and their charitable foundations donated $280 million in response to the COVID-19 crisis alone. 

I couldn’t find much data on volunteerism, but all the insurance brokers and underwriters I know support their hundreds of thousands of employees to volunteer in communities across the nation and around the world. The IICF alone has tracked more than 110,000 industry volunteers giving more than 320,000 hours of service through IICF volunteer projects. Volunteerism is widespread and important in the insurance industry.

The industry is doing many good things in the world. It gives back – in a big way.

As for being boring, the insurance industry is far from it. I tell anyone who will listen, “Don’t knock it till you try it.” I’ve seen over the years how people reluctantly agree to take on insurance-related clients to lead communications, awards, executive positioning, brand activation efforts and more, only to fall in love with the complex topics, financial metrics and real implications of the work. Managing risk is the foundation of decision-making, and in today’s world of volatility – from climate change to political uncertainty – weighing the risks and mitigating them is more critical than ever. It’s an incredibly interesting space to be in, and I highly encourage young people to give it a shot.

See also: Key Insurance Exposures for 2023

But, back to the task at hand. How do we change the long-held negative perceptions about the insurance industry? I believe that the insurance industry should come together to undertake a wide-scale and fully integrated campaign to improve the industry’s reputation. That campaign should include such actions as:

1. Reaching out to high school and college students – particularly kids interested in math – to show them the kinds of solutions provided by insurance and the possibilities for building careers in insurance.
2. More effectively measuring the total philanthropic impact being made by the industry in terms of giving and volunteerism and reporting the result to consumers, businesses and government officials.
3. Being more visible among business leaders on issues of climate change, health and wellness and other topics. Taking a seat at the table among the thinkers and actors working to make the world a better place. Insurance executives should lead conversations at the local level and at national and international platforms like local chambers of commerce, TED, Business Roundtable, World Economic Forum, Cop and so many more.
4. Calling out the bad players for what they are. Let’s not gloss over the fact that there have been some shady businesses in the industry in the past. Likely, some still exist. Let’s step up and call out those players. Let’s get rid of the bad actors.

We didn’t get to this place of overarching negative perceptions about the insurance industry overnight, and those perceptions won’t be shifted overnight, either. But, if the industry were to come together to more vocally explain its good work and great impact and more forcefully educate young people about the incredibly fulfilling careers to be had in insurance, there is no doubt in my mind that the industry’s reputation would improve. You can bet I’ll be telling my kids to consider a career in insurance

The cyber market has been in flux for about as long as it’s been around. New hackers use new techniques to exploit new vulnerabilities and use new methods of collecting ransoms. Meanwhile, victims and their insurers scramble to try to stay one step ahead of the bad guys, as rates rise – then rise some more. To sort through the latest trends, we sat down this month with Emma Werth Fekkas, RVP of underwriting at Cowbell Cyber. She offers any number of insights, including that those constant rate rises are likely a thing of the past.

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ITL:

Let me start by asking you what you think the two or three biggest issues are that are facing cyber market at the moment.

Emma Werth Fekkas:

One of them is around clarity of coverage, what it does, where it applies and how it fits into other policies and overall risk management. Cyber is such a new product and new coverage that I think we're all still trying to find our bearings and find where this is really the best fit.

ITL:

Are there particular areas of confusion?

Werth Fekkas:

There are a couple of hot buttons. One is around war. There are a lot of cyber terrorism carvebacks and a lot of debate around what was the intention of a cyber policy. Does it apply to cyber terror terrorism—and how do you define cyber terrorism? Should government come in and define it? There's been a lot of movement to define kinetic war differently from cyber terrorism. There's a lot of debate, and currently, different insurers are handling that differently.

ITL:

Quick aside. I think the term “kinetic war” is just a crazy euphemism. I mean, people are firing guns, artillery and missiles at each other, and we use a cute little word, “kinetic,” to describe that.

Werth Fekkas:

Right?

ITL:

I didn’t mean to sidetrack you.

Werth Fekkas:

The other piece is what we call infrastructure exclusions, or named perils, things like that. Prior to COVID, cyber started covering things like business interruption, and the wording kind of broadened to make coverage more appealing and meet the needs of our policyholders. But the wording sometimes can take on something it wasn't intended to and start to look more like a property or GL [general liability] coverage. So there is some pullback, defining when business interruption for a cyber policy would fit in and when it goes under more of your standard property and casualty coverage.

ITL:

Is there a big issue related to rates? Insurers have typically really wanted to push rates up because this is potentially really expensive stuff, but clients have often balked.

Werth Fekkas:

I think you're going to see rates coming down. It depends a bit on where you are in revenue. Rate declines will be slower for larger companies, I think, than for smaller companies. But I do think we're coming into a softer market now. And so we are going to see more competition and more price adjustments.

ITL:

That’s interesting. How quickly do you think that can happen? This year? Next year?

Werth Fekkas:

I would say throughout this year. You're probably going to see a significant difference between January and December, for sure, moving faster in the smaller and middle market space than in the larger space.

ITL:

A thesis I’ve had for a while is that insurance needs to move to what people are calling a “predict and prevent” model, away from “repair replace,” and cyber seems like a perfect spot for the transition. The more secure you are, the less you need to worry about insurance and the less the insurers need to worry about the risks. Are you seeing a shift?

Werth Fekkas:

I am. At Cowbell, we're able to continuously scan our policyholders and notify them of any vulnerabilities that are coming up. A little while ago, Log4J was a big one. We were able to get an idea of how many clients were potentially affected and notify our insureds and their brokers of how to mitigate the problem. We're going to have more and more of that.

There's going to be more and more partnership between cyber insurers and technology vendors to help companies see what they can do up-front to mitigate certain exposures.

ITL:

Is it a big deal, medium deal or small deal that law enforcement has managed to recover ransom payments made in cryptocurrencies, which were long thought to be untraceable?

Werth Fekkas:

It's a fairly big deal. It's certainly helpful for us to have some protection, to be able to mitigate what we're paying and to know we're getting to the root cause of some of these attacks. On the other hand, there have been frustrations among clients about having assets frozen and other measures taken, even though they know those measures protect them, in the end. To clients, it can look like investigators aren’t helping, that they’re part of the problem.

ITL:

How about trends in attacks?

Werth Fekkas:

Business email compromise is still the main way in. If it ends up in ransomware, of course, it's higher-severity. Overall, the main issue is higher frequency.

ITL:

What about countermeasures companies are taking?

Werth Fekkas:

We always stress training, but, of course, not all training is created equal. MFA [multi-factor authentication] is a big one. But if you just have MFA for email, it’s not as effective as if you have MFA across your entire system. Another one is EDR and MDR. EDR is endpoint detection and response. It checks each computer as an endpoint and notifies you when there's a threat there. MDR is more toward monitoring. We’ve learned in the past couple of years that a lot of threat actors are kind of dormant in your system. They’re monitoring your activity so they can make it look a lot more natural when they send you a phishing email. So, MDR seems very helpful, as well.

ITL:

You can monitor what might be monitoring you.

That really covers it from my end. Any thoughts you want to leave us with?

Werth Fekkas:

There’s definitely lively conversation in cyber right now, coming out of the hard market. Now is the time to do a post mortem, of what was working and what wasn’t? What can we now do as the market softens?

ITL:

Thanks, Emma.

 

There seems to be a common misconception that all workers’ compensation losses are flat to slightly improving. While that might be true for the frequency of smaller claims, it definitely is not the trend in the frequency and costs of large death and permanent total disability claims.

“Over the last three years, Safety National has seen frequency of severity like we have never seen before. This includes a 30% increase in claims with incurred over $10 million, along with a rise in claims with incurred of $5 million to $10 million,” said John Csik, president of Safety National. “Although these large claims are infrequent, when they do occur, the costs are high and continue to escalate. This is definitely a trend that should be on the radar of every broker and risk manager because, eventually, these costs impact premiums.”

Why Many Have Not Heard of This Trend

Bureaus such as NCCI and WCIRB focus their research on the first-dollar market, which is composed of a high percentage of small employers. These bureaus cap loss severity in their analysis and exclude claims that are open past 10 years. This approach does not accurately account for the long tail development and payout associated with catastrophic claims, which continue well past 10 years. In addition, self-insured employers that represent a significant percentage of the U.S. workforce, especially in segments such as public entities, hospitals, educational institutions and large employers, generally do not report loss information to the NCCI or state rate-making bureaus.

Cost Drivers Influencing This Trend

Significant advances and use of medical care and technology are increasing accident survivability and prolonging life expectancies for severely injured workers. These advances also considerably increase the quality of life and independence for injured workers.

Accident survivability for severely injured individuals has increased significantly due to better triage care on the scene, the use of air ambulances for rapid transportation to a hospital and the high-level care provided by level one trauma centers. People are surviving what used to be fatal injuries, but there are significant costs associated with this initial treatment.

Further, catastrophically injured individuals are living much longer. Medical science has advanced, preventing the complications that once led to reduced life expectancies in patients with severe burns or with quadriplegia. That means that a quadriplegic in their 20s could live 30 to 40 more years, requiring around-the-clock attendant care.

Another contributing factor is that the large cost drivers associated with catastrophic injury claims are often not covered by fee schedules. These drivers include extended ICU hospitalizations, extensive durable medical equipment, advanced state-of-the-art care and attendant care. The costs of these services are increasing at rates far greater than normal medical inflation. For example, attendant care rates have more than doubled over the past 10 years. How will these rates develop over the next 10 years?

Legislative expansion of benefits through various measures has also contributed to the increasing costs of severity on catastrophic claims, including cancer presumption laws in the public entity market. These laws establish a presumption that certain types of cancer contracted by first responders are the result of duty-related exposure. Varying by state, cancer benefits for first responders continue to expand, with changes ranging from the types of cancers that will be covered by workers’ compensation to the extension of filing periods. These claims often take time to develop and can have an extremely long tail. It is not uncommon to see a claim with an incurred well under the policy retention suddenly jump in value because of a recurrence of the cancer years after the original diagnosis. Because of the cancer presumptions, these losses are also showing up in workers’ compensation.

With all the advances in medical science in the last 10 years, it is very difficult to forecast what the standard of care will be for catastrophically injured workers in the future. However, it is likely that advances will continue and that costs associated with such claims will continue to rise.

See also: 20 Issues to Watch in 2023

Final Thoughts

The latest medical advances are improving the efficiency of claims management and the effectiveness of patient treatments in workers’ compensation. From enhanced neurological tests that assess brain trauma more rapidly to nanotechnology applications that target cancerous tumors more effectively, medical innovations are reshaping the future of claims management. Further, these incredible developments offer the ability to restore catastrophically injured workers in situations that would otherwise result in permanent disability or death, thus costing less in the long term.

As the industry faces rising costs, there are several measures that can contribute to cost reduction. Insurance carriers have incredible expertise and access to resources like predictive analytics and medical cost controls to assist with cost-cutting efforts. They can provide valuable insight into risk transfer, help improve safety practices and offer actionable reporting on claims trends. Excess carriers, in particular, routinely see the worst work injuries that result in larger and lengthier catastrophic claims and can serve as a considerable ally in the plan for the best claims outcomes.

Across the insurance landscape, commercial P&C firms are facing a host of challenges when it comes to underwriting talent. Rapid shifts in the makeup of the workforce, combined with technological innovation, global trends and industry-specific realities, have added considerable complexity to the process of attracting and retaining high-impact employees.

These difficulties manifest across the talent lifecycle, from recruiting and onboarding to advancement and retention – and the industry is feeling the pressure. According to a white paper from training firm Attensi, 55% of insurance executives surveyed said that talent acquisition and retention difficulties could prevent growth in the year ahead. And with a report from PwC finding that 71% of P&C insurers expect to increase staff in the next 12 months, the problem will only intensify.

One way to overcome the talent crisis is by leveraging technology to support talent. Technology provides a real opportunity for employers to differentiate themselves in the market and foster a happy, engaged and productive workforce. While many view it as having disrupted the status quo, when pointed in the right direction it can serve as a unifying force, enabling diverse underwriting teams to achieve transformative results while collaborating more closely than ever. Let’s explore how.

The Challenge: Demographic and Professional Evolution

Perhaps the biggest driver of the talent crisis in underwriting is that the hiring pool is changing rapidly. PwC found that the average age in the U.S. workforce is now 43 to 45, down from 55 just a few years ago – and that’s created pressure at both ends of the spectrum.

At the younger end, millennial and Gen Z prospective employees are digital natives – they have used modern technology throughout their lives, including in their educational and internship experiences, and expect their companies to arm them with the right tools and support. But many insurers have taken the opposite approach, making limited to no investment in modern digital workflow tools and cutting valuable training programs. To would-be underwriters, this lack of support is often striking, leading them to seek employment in other industries and further shrinking the pool of candidates.

At the other end, baby boomers and Gen X underwriters are finding that their roles are changing rapidly, with more quantitative workflows and fewer manual tasks that were once core to the profession. The risks they must account for are more numerous and ambiguous than ever before, such as climate and cyber. This has led to some senior underwriters feeling pushed out of their roles at the precise moment they are most needed.

Amid these rapid shifts in the workforce, it is imperative that different generations are brought together, not driven apart. Through close collaboration, senior underwriters can pass on a wealth of industry knowledge to those just starting out, while new hires can help their mentors learn the latest technologies. Together, they can combine their varied perspectives to shape and interpret quantitative findings far more effectively than any one person.

The pandemic has exacerbated the disconnect between employees and the breakdown in communication. Remote and hybrid work has made it even harder to onboard underwriters and give them the support they need, so they often feel a lack of engagement and empowerment. The pandemic has also led to a decrease in communication and organic training opportunities that happen when underwriting management and the underwriters collaborate in person and discuss risks. All of this can have an isolating effect, making employees less likely to feel a sense of meaning and community in their jobs – and less likely to stick around.

See also: Why the Decline in Underwriting Quality?

The Solution: Technology That Unites and Empowers People

While there are many elements that go into talent acquisition and retention, we believe that the right technology can facilitate real-time sharing of information, bringing together employees of all stripes and driving greater collaboration in the workplace. This kind of teamwork is something that many people are missing in the modern workplace, especially as we emerge from the pandemic. By driving greater collaboration, firms have an opportunity to differentiate themselves and more effectively fill underwriting roles – and keep them filled – even as the talent crisis ramps up.

Let’s examine some of the potential impacts across the talent lifecycle:

• Recruiting – Insurance firms should view modern technology as a recruiting tool, just as they do benefits and culture. The most talented candidates tend to gravitate toward roles that give them a chance to work with the latest systems – they make the role more engaging while providing an opportunity to practice related skills that could apply far into the future.
• Onboarding – Technology that drives communication and teamwork makes for a better employee onboarding process, especially in a post-pandemic world. When new and more junior employees can more easily navigate platforms, view how others interact with them, ask questions and get answers from veteran underwriters, they are more prepared to make an immediate impact, boosting their confidence. These cross-generation interactions can also help more senior employees learn the latest technologies, driving impact across the business.
• Development – Underwriting is a dynamic business function, with new risks and better processes always coming to the fore. With the right technology, underwriters can seamlessly adapt to these shifts and ensure they remain high performers even with this inherent uncertainty. It also enables them to maintain their edge over underwriters who do not have access to these capabilities, setting them up for career-long success.
• Retention – The right technology can drive retention at all levels. Junior underwriters feel more engaged and empowered, while veteran underwriters can evolve their workflows, remain in the industry for longer and apply their expertise to solving new challenges and training future generations.

There isn’t a single ideal approach to this evolution of underwriting technology – the right approach can vary widely based on the nature of your employees, clients, region, target audience and more – but the bottom line is that what you do can have a major impact on your talent pipeline. Stay tuned for specific examples of how the concepts outlined above can and have been applied to advance insurance businesses in ways never thought possible.

You can find this article originally published here on twosigmaiq.com.

With an abundance of options for insurance, consumers today demand – and expect – seamless experiences and personalization from every interaction with brands. To stay competitive in today's environment, carriers and insurtechs must revolutionize their customer experience to meet the wants and needs of the modern consumer.

But how?

In an industry that has historically relied on limited data points such as age, household income and driving history, the next generation of insurers must look beyond these attributes and embrace new forms of data and analytics, including contextual, behavioral and motivational data.

Thinking Outside the Box

By now, most innovative organizations and business leaders understand and are even leveraging the power of data to make decisions, drive targeted marketing campaigns and improve customer experience (CX). However, oftentimes the data being used is incomplete or off-base or does not provide insight into the modern consumer. Do we really need data points like "Yellow Pages Users" in 2023?

Data that goes beyond demographic information and other traditional attributes through advanced analytics and cutting-edge statistical techniques can provide robust information on the identity, behaviors, motivations and future actions of individuals and businesses. This type of data – often referred to as predictive data – enables insurers to make more informed decisions based on their customer preferences and needs, market trends and other key factors that affect their business outcomes.

For example, insight into shopper intent and likely future needs can drive your targeted offering strategy and even product development; insight into an individual’s professional life can uncover cross-sell opportunities; and more.

See also: Key Insurance Exposures for 2023

Customer Experience 2.0

Predictive data allows insurance companies to gain a valuable view into actionable, unique and often unknown factors outside of traditional insurance data points that can help improve the customer experience. Here are some powerful thought starters on how predictive data can help insurance companies enhance the CX:

1. Personalize your customer engagement by boosting what you know about prospects in real time.

It is obvious that the more you know about a person, the better you can anticipate and address their needs and even exceed their expectations when doing so. The same thing applies when it comes to the insurance customer experience. When dealing with a limited view of who people are – such as only their age, gender and marital status – you can only do so much.

When you are empowered to customize messaging based on characteristics like price sensitivity or quality concern, direct your targeting based on your prospect’s preferred marketing channel, provide digital experiences to those eager to adopt new technology and more, you are able to provide quality, personalized experiences for even more customers.

2. Identify cross-sell opportunities and grow customer value by examining all aspects of life – both personal and professional.

With many insurance carriers offering a variety of lines of protection, cross-sell opportunities are a no brainer. However, a data-driven approach should be taken for cross-sell efforts to be effective and actually helpful to your customers. Insight into all aspects of life – both personal and professional – gives insurance brands the ability to identify and prioritize their efforts toward customers most likely to need other products.

Perhaps there are a million current consumer auto customers who are also identified as independent business owners. These business owners may be ideal prospects for a specific business insurance product that independent agents are unable to sell but that corporate could cross-sell. Or let’s say another segment of 1 million auto customers are likely to be renters who may move in the next three months. These policy holders would be prime candidates for renters insurance offers or bundles.

3. Optimize your offering by understanding your best policy holders.

If you enrich your customer database with thousands of new personal and professional insights, you’re guaranteed to unlock insights into who your most profitable policy holders are. By analyzing many more data points beyond your first-party data, you can more easily understand which attributes are leading indicators of profitable customers. And when companies can better understand unique traits about their most profitable customers, they can improve their media, messaging and experience.

What if you found out that a certain product’s customers are heavy video gamers? Perhaps your brand would choose to run more mobile ads or even gamify the application process.

While the insurance space can enhance customer experiences with predictive data and analytics, incorporating such information into the insurance process is not a simple task. It's also important to note it's just one piece of the puzzle. Insurance brands must also invest in other areas, such as technology and customer support, to truly offer the best customer experience possible. As technology and data continue to transform the insurance industry, those that take advantage of predictive data to create exceptional customer experiences will be best positioned to thrive in the years to come.

Anger over growing social inequality and the cost of living, foundering faith in governments and institutions and increasingly polarized politics, together with a rise in activism and environmental concerns, are expected to fuel strikes, riots and civil commotion (SRCC) around the world, according to a new report from insurer Allianz Global Corporate & Specialty (AGCS). The heightened SRCC risk environment means businesses need to remain vigilant about the different threats. In addition to buildings or assets suffering costly material damage, operations can be severely disrupted, resulting in significant loss of income.

Strikes, riots and civil commotion have not only increased in recent years, they are also becoming more intense and catastrophic. These types of events are making our era one of uncertainty. We have seen multibillion-dollar loss events in the U.S., Chile and Colombia. The threat is changing, and although many of the reasons for it are universal – whether economic, political or environmental – it can play out differently in different regions, with various levels of violence and disruption. Operational and security management within organizations should view the current climate as a catalyst for evaluating best practices and policies around preparing locations and employees for potential civil unrest and building resilience.

Civil unrest risks rose in over 50% of countries between Q2 and Q3 2022 alone, according to the Verisk Maplecroft Civil Unrest Index -- out of 198 countries, 101 saw an increase in risk. Since 2017, more than 400 significant anti-government protests have erupted worldwide. It is unsurprising then that political risks and violence" ranks as a top 10 peril in the Allianz Risk Barometer in 2023. While the Ukraine war is a major factor, the results also show that the impact of SRCC activity ranks as a political violence risk of top concern with a combined score of almost 70%. 

Unrest is now spreading more quickly and widely, thanks in part to the galvanizing effect of social media. This means multiple locations can be affected, potentially resulting in multiple losses for companies. Such events are also lasting longer -- almost a quarter of the 400 significant anti-government protests since 2017 exceeded three months – helping to ensure financial costs are mounting. Reported damages from just six civil unrest events around the world between 2018 and 2023 resulted in at least $12 billion in economic/insured losses.

See also: The Cost of Uncivil Discourse

Five risk drivers of civil unrest

In the report, AGCS’ political violence team highlights the five main factors they expect to power further SRCC activity in 2023 and beyond:

The cost-of-living crisis: Although inflation is now thought to have peaked in many countries, the effects continue to take their toll. Just over half of protests globally in 2022 were triggered by economic issues, and public confidence in the financial future is shaky. Half the countries surveyed in the 2023 Edelman Trust Barometer showed a year-over-year, double-digit decline in the belief that their families will be better off in five years. Further protests are likely, and although mostly peaceful, they can turn violent.

Distrust of governments and institutions: Governments thought to be corrupt or perceived to have been in power for too long can bring people out onto the streets. Economic grievances about food, fuel, pay or pensions can expand from issues-led demonstrations to wider anti-government movements. In 2022 and early 2023, protests ignited over the rights of women and minorities in Iran, fuel prices in Kazakhstan, economic failures in Sri Lanka, abortion rights in the U.S. and COVID restrictions in China. Europe continues to be hit by multiple strikes over pay and working conditions. Political instability in Peru, Brazil and Argentina has also resulted in widespread and violent protest.

Increasing polarization: Political divisions are stoking tensions around the world, undermining social cohesion and escalating conflict. Polarized opinions can become particularly entrenched on social media, and in some countries such polarization is turning violent. Recent years have seen a big shift to the left and the right in many countries, with few liberal democracies maintaining a sense of balance where political parties compete for the center ground.

A rise in activism: In recent years, movements that have been significantly galvanized by social media include the global Occupy movement against economic inequality, the Black Lives Matter protests highlighting racial inequality, the #MeToo movement against sexual abuse and harassment and the Stop the Steal campaign, which falsely claimed electoral fraud in the election of U.S. President Joe Biden. 

Where politics are polarized, people can feel a greater sense that their personal values are under attack and will take to the streets to defend them. Riots can erupt as a result around a single flashpoint, such as a heavy-handed response by authorities that is deemed unjust. These can then escalate across a wider area, with larger numbers of people involved, to become civil commotion. If this spills over into violence and opportunism, businesses can be vulnerable to property damage and looting.

Climate and environmental concerns: Where governments are seen to row back on climate-change progress, such as fracking or reopening coalmines as a solution to reliance on Russian gas, there could be unrest. Businesses that are deemed to profit excessively from fossil fuels while many people struggle could also be targeted. 

See also: Cost-of-Living Crisis and Civil Unrest

Implement, test and update continuity plans

Civil unrest can be difficult to predict because it often starts with a specific trigger such as a change in government, a piece of new legislation or a sudden price rise. However, there are many things businesses can do to minimize disruption. Allianz Risk Consulting has developed a list of technical recommendations for companies, such as implementing, and then regularly testing and updating, a business continuity plan. Specialist insurance can help protect companies against damage resulting from political violence, as well as any interruption to the business. Policies can cover civil war, SRCC, terrorism and war.

To read the full report, please visit Outlook: Strikes, riots and civil commotion – a test of business resilience.