The phrase “existential crisis” has been admittedly overused in recent years, and sometimes for good reasons, but is still apt when applied to today’s P&C insurance industry.

Macro Influences 

After many long years of stability, the 125-year-old, $300 billion U.S. auto insurance industry is caught between runaway inflationary cost pressures on one side and consumer wallets, many of which are no longer able to afford the spiraling auto insurance premium increases, on the other.​

In the middle is the $42 billion U.S. collision repair industry (of which $39 billion is paid by insurance), which has been experiencing severe technician shortages, rising labor costs and pricing pressure from carriers as average repair costs have jumped 50% over the past few years. These increases can be primarily attributed to the cost of replacement parts, scanning and calibration for newer model vehicles, which are now bristling with electronic Advanced Driver Assistance System (ADAS) features and related sensors. The even higher costs of repairing the rising number of electronic vehicles (EVs) exacerbates the problem. In fact, some carriers are now writing off EVs with just moderate damage as total losses because of their much higher repair costs than like vehicles with internal combustion engines. Total losses, which are costly for insurers, now represent almost 25% of all insured auto claims.

Much of the underlying repair cost discussion has centered on the more visible and tangible issues: parts prices, supply chain inflation and delays. Longer rental car terms during the repair process, up from the pre-COVID figure of roughly 11.5 days to over 20 and now resting closer to 19 days, have been cited, as well.

A closer look reveals a double-digit-percentage jump in body shop labor rate increases, a significant change in the marketplace that is unlikely to recede. As independent body shops continue to decline in number, venture capital-backed MSO (multi-shop operator) models continue to expand, many of which are essential to insurance carrier DRP (direct repair program) networks, which were introduced to deliver long-term repair cost and other business benefits.

The advent of MSOs promised to advance repair consistency and provide volume cost benefits, so insurers openly embraced this new advantage in hopes of wrangling the fragmented repair space. Ironically, MSOs are now more able to flex their scale, raising rates as well as even limiting their participation in insurer DRPs, demonstrating greater influence in the marketplace.

Carriers with lower density of customers in select markets are becoming powerless and more challenged in containing repair costs because volume and relationships have a louder voice. Many on the insurer side have feared that the auto repair industry would someday become akin to the healthcare insurance model, in which services are rendered and then simply reimbursed by insurers, which have lost the ability to contain costs.

Although this article emphasizes auto repair cost increases that are likely permanent, there are additional long-lasting culprits afoot. Social inflation is proving to be a real factor as juror and public sentiment regarding justice is changing. Add in litigation funding and the growing capital behind this budding “cottage” industry.

Driver behavior and decreased law enforcement on drivers, as other crimes are prioritized, have been well studied and are offsetting gains from ADAS systems. Finally, medical costs show no signs of slowing, including the less obvious cost-shifting as the Medicare Secondary Payer rules established in 2018 push costs to P&C insurers. 

Telematics

Many of the influences that had been keeping these cost increases at bay are no longer able to contain them.

Telematics-supported usage based insurance (UBI) programs enabled a large group of safer drivers to take advantage of insurance discounts, but adoption has leveled out at under 20% of policies, as the market awaits the next generation of telematics programs that go beyond discounts to “always on” emergency response and accident management for all policyholders. As a reflection of this market’s maturation, global market leader Cambridge Mobile Telematics acquired rival True Motion, the second-largest mobile telematics provider, in 2021.

UBI programs continue to evolve, with emphasis on driver safety, saving lives and coaching components more common in personal lines rather than fleet (commercial vehicles) coverage. Westfield Insurance launched Mission Safe in May, which rewards drivers and provides feedback and incentives, thus differentiating it from others. Drive Safe from State Farm, Allstate’s DriveWise, SmartRide from Nationwide and Farmers’ Signal program work similarly as switch-to-save models by enticing drivers with 30% to 40% initial discounts, with the motivation to maintain discounts through good driving behaviors.  

Telematics pioneer Progressive Insurance recently announced their Accident Response initiative, focused on accident management and crash detection for all drivers, independent of a UBI program.

However, tangible changes in driver behavior and safety remain elusive, and distracted driving is on the rise.

See also: The End of Auto Insurance

Technology

Technology delivered real cost savings to both the auto insurance and collision repair industry for many years, peaking in 2022 as pandemic-related changes normalized.

Auto insurers discovered that policyholders were willing, indeed anxious, to take pictures of accident damage with their smartphones to avoid contact with adjusters. And taking the appetite for a “touchless” claim experience a step further, carriers began adopting digital claim payments to policyholders and collision repairers. 

Not missing the opportunity to reduce overhead, carriers pared their adjusting staffs and sold off less-occupied physical facilities. The gains from these major adjustments ended in 2022 as the pandemic eased, and the remaining staff resources are challenged to meet the higher claim volume as motorists returned to the roads, continuing the more dangerous driving habits they acquired on relatively empty streets and highways.  

Collision repairers, especially the better-funded MSOs, also embraced a host of cost-saving technologies spanning the intake and operational function of car repair, including repair planning, higher throughput painting and drying booths, scanning and calibration, automated parts procurement and customer communication technologies. Again, most of the economic gains from these advances are now baked in, while the tide is changing toward higher cost of repairs.

The Great Rebalancing

There is a Great Rebalancing underway as each of the major stakeholders scrambles to adjust to the new normal. The critical question is whether they can adapt quickly enough to forestall what could be a major consumer- and investor-led disruption.

A consumer groundswell of resistance to further auto insurance price increases could lead to broader market interference by state or federal regulators, who have the power to influence rates (much as is playing out now for auto in California and recently for property insurance in Florida).

It is not unreasonable to expect accelerated consolidation within the auto insurance market as investors, boards and financial activists push the worst-performing carriers to explore all strategic options.

And as the collision repair industry continues to consolidate as a result of additional investor involvement, the largest MSOs have gained and will likely exceed negotiating parity with auto insurers and extract better commercial terms to cover their rising costs, thus adding pressure on auto insurers’ results.    

Overlay on all of this the slow but sure conversion of the carparc from ICE to EV vehicles as the self-imposed 2035 switch-over deadline approaches, along with the higher price tags, operating and repair costs for these battery-operated “computers on wheels.” Consumers are going to have to absorb further material increases in their cost of transportation. 

You should not conclude that we are pessimistic about the outcome here. We are confident that American ingenuity, bolstered by new and exciting technologies, and our faith in the American appetite for affordable mobility, will prevail. What we can’t see quite as clearly is exactly how and where the various players will come out.

KEY TAKEAWAYS:

--The insurers of tomorrow won't be built on the technology of today. The uncomfortable truth is that the industry hasn't fundamentally changed the way it operates. Nor is the implemented technology flexible enough to support the transformation now needed.

--First, we must move beyond the legacy mindset of "how to do insurance the way it's done today, but better."

--Driving risk mitigation by providing new or additional services should be at the heart of every insurance business.

--Insurtech capability should be used to dramatically improve digitization and customer choice while expediting the most vital services an insurer provides. That means ending the emphasis on economies of scale in IT and focusing on speed, based on new, data-fluid and flexible foundations.

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Despite the eye-watering amounts of money insurance companies have spent on digital transformation, they continue to struggle under the weight of the pressures they face. If I were the CEO of a global insurer, I'd want to know why, after the millions I've spent on new tech, the business is incapable of adapting to the demands being placed on it.

While in many ways insurance is an adaptive industry, it has found itself out of step with customer expectations and possibilities. To make matters worse, it is now caught behind the huge changes occurring in our world.

In a cloud-driven, continuously changing and increasingly automated world, adaptability will be the defining characteristic by which insurers survive or thrive. The challenge is, right now, adaptability feels out of reach.

How did this happen?

The uncomfortable truth is while many insurance companies have put great effort into digitizing their businesses at great expense, the industry hasn't fundamentally changed the way it operates. Nor is the implemented technology flexible enough to support the transformation now needed.

Yes, modern legacy platforms can run a book of insurance business. Yes, they can automate some tasks using other technologies. And, yes, platforms can provide a front-end digital experience of a sort. But they can't respond to consumer demands for end-to-end digital experiences that put customers in control. Nor can they make insurance easy to choose and consume.

Worse, these patchwork platforms struggle to leverage the data held to provide meaningful, actionable insight or ingest new data sources to improve decision-making. Nor can they easily onboard the partners that are necessary to provide a comprehensive engine that speeds up customer resolutions, combats fraud and decreases the cost of doing business.

See also: Transformation Is Now an Imperative

The issues are two-fold. System architects have built new technologies on top of weak foundations, and business cases have only looked to save money through scale, not based on the idea of real change. The result is grinding gears, not well-oiled machines.

Conversely, the big market growth opportunities of risk mitigation, embedded 2.0, adaptive underwriting, response to catastrophic risk, the rapid adoption of emergent insurtech capability etc., are all about speed and relative cost reduction.

From the rise of electric vehicles (EVs) to climate change and extreme weather, it is becoming harder for insurers to keep pace with risk. The threat of Tesla's insurance takeover in the automotive space is undoubtedly overstated. But even as insurance companies talk more often about engaging the original equipment manufacturers (OEMs) and finding the partnership opportunity, the change is relatively slow compared with other industries.

Worst of all, we all know a lot of challenging transformation complexity is yet to surface.

How to Drive Real Change

Driving real change starts with the right mindset, from which the right foundations for transformation can flourish.

First, we must move beyond the legacy mindset of "how to do insurance the way it's done today, but better" and replace it with a new way of working that tackles the problems we face head-on and focuses on value creation.

Flood Re's capability on a home or property insurance offering is an excellent example. It ensures that, following a claim, you build back better or replace to mitigate some or all flood risks. By doing so, you create resiliency and reduce the likelihood of experiencing the same claim again.

Another example is using connected vehicles and building intelligent services around the vehicle ecosystem. So when the brakes are low, and the risk is high, the insurer intervenes, alerts the driver and directs them to get the best-value replacement. Or even the simple adoption of new mobile services that can help triage or even self-report the claim.

Driving risk mitigation by providing new or additional services should be at the heart of every insurance business. As should adopting insurtech capability that can dramatically improve digitization and customer choice while expediting the most vital services an insurer provides.

However, to embrace this new dawn, we must see insurers adopt new data-fluid and flexible foundations that enable them to build new value continuously while ensuring we are a more resilient and capable society.

Walking away from markets or any risk scenario because adaptation is too hard is walking away from the true purpose of insurance. This has always been a social experiment. A collection of people and organizations pooling together to share risk and allow us all to make progress.

To ensure we continue to drive progress, we must put aside the obsession with economies of scale in IT and move toward the economy of speed. Speed in adaptability gives us speed in response, speed to deliver insurance in new places and to support new endeavors.

The four key imperatives that will drive this change are:

1. Maximizing the value of a customer
2. Reducing total cost of ownership (TCO)/cost per policy (CPP)
3. Vastly improving decision-making and automation
4. Driving new value potential and selling beyond just insurance -- embedded, risk-mitigating, adaptive and vastly more meaningful.

The truth is where insurers can derive the greatest value for insureds and they, in turn, can derive the greatest value for themselves.

To do so, data acquisition-only strategies must move to data ecosystem-led approaches, where insurers can get much closer to the data in real time and start to build the picture of change and act on it far faster.

See also: How to Value AI, Analytics Initiatives

In many cases, this strategy presents the potential to make insurance more meaningful and a force for immense good.

New MACH-based technologies that create the right foundations are essential. Technology until now has largely let insurers down, but they must put that past behind them. The focus has to be on new ways of working, new business models and value creation-based business cases.

In a world currently caught up in tech fear or tech optimism and a general misunderstanding of new technologies such as generative AI, now more than ever, our best compass is morals, ethics and value creation.

In my experience, this is born of a deep understanding of the human condition we seek to transform. Otherwise, what's the point?

Successful insurance agents understand that in such a dynamic industry, knowledge is key. Embracing a mindset of lifelong learning helps agents remain at the forefront, empowered to adapt swiftly, identify opportunities and provide innovative solutions for their clients.

Despite the benefits, many in our industry resist the concept of lifelong learning because they find it irrelevant to their actual challenges. It's time we rethink this mindset.

Regulators mandate a certain amount of continuing education for agents to maintain licensing and stay in compliance with industry and state standards. Lifelong learning, by contrast, is self-directed and involves continually acquiring knowledge beyond formal education. 

The insurance industry has traditionally approached lifelong learning poorly, often mandating repetitive and unengaging training that fails to address actual business needs. There's also the negative impact of AI—no, not artificial intelligence but arrogance and ignorance. Arrogance comes from a false sense of knowing everything, and ignorance is not knowing what we don't know.

See also: From Agents First to Agents Last?

Rather than basing actions on assumptions, agents who pursue lifelong learning continually reevaluate their methods and approaches, promoting creativity within the agency.

Education can also serve as a confirmation tool, reassuring team members that they're operating correctly. This reinforcement boosts confidence. It also plays a pivotal role in team dynamics, fostering a sense of unity and direction and ensuring everyone is working toward the same goals.

Many people struggle with education because they attempt to tackle it alone. However, learning is often more effective and less frustrating when done collaboratively. Participating in courses, coaching sessions and discussions with peers can greatly enrich the learning experience. Lifelong learning isn't just about taking a class—it's about continual coaching and participating in conversations that enhance your knowledge and skills.

Lifelong learning doesn't necessarily mean spending large amounts of time on education each day. Instead, even dedicating 15 minutes a day can help. Use this time to focus on key concerns and pain points such as time management or business acumen. This small daily commitment can lead to significant improvements over time.

To maximize your learning and development, it's essential to adopt a strategic approach. Here are seven principles to keep in mind:

Commit to Daily Learning: Dedicate a 15-minute block every day to learning something. This routine can improve your skills and knowledge incrementally without taking much of your time. Avoid Mondays if they are generally busy for you.

Set a Theme for Your Learning: Each month, focus on a different aspect of your work. For instance, you could focus on communication skills in July, retention strategies in August, etc. This approach can ensure a well-rounded development over time.

Don't Journey Alone: Seek help from mentors, coaches or an alliance to gain insights and address your pain points effectively. Learning isn't a solo journey and can be more enriching with others' input and expertise.

Acknowledge the Need for Business Training: Many agents start their own agency without any formal business training. If this applies to you, acknowledge it and strive to improve your business acumen and operational skills as part of your learning.

Keep Track of Pain Points: Maintain a list of topics or situations where you lacked confidence or struggled to find answers. These pain points can guide your learning. Discuss these with a coach or seek advice from a training center to find effective solutions.

Understand Onboarding vs Orientation: Orientation is about acquainting yourself with the environment (like the location of the restroom), while onboarding is integrating new hires or learning procedures. This process can last anywhere from a few days to an entire year.

Distinguish Technical Skills From Soft Skills: Technical skills pertain to how you perform specific tasks like submitting a report or filling out a form. In contrast, soft skills such as time management, communication, questioning, sales skills and pipeline building are vital for overall success. Soft skills are often the hardest to master and must be continuously worked on.

While lifelong learning may seem overwhelming when looking at the big picture, breaking it down into smaller, manageable chunks makes it more approachable. 

See also: 4 Predictions for Independent Agents

Remember, acquiring knowledge is not an obligation—it's an opportunity. So, why wait? Turn lifelong learning into the cornerstone of your agency’s success story.

KEY TAKEAWAYS:

--The companies that most effectively cope with disruption will be ones that reinvent themselves by focusing intently on the customer.  

--Almost all carriers are pursuing "incremental change" and "pragmatic evolution" scenarios. But the aggressive "customer first" and "radical reinvention" scenarios are entirely possible based on already extant (albeit still maturing) technology. AI even offers the promise of moving insurance beyond restitution and risk mitigation to risk prevention. 

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The stability that insurers have long relied on for predictable risk pricing and consistent growth is disappearing. In the past three years alone, the world has experienced a pandemic, sometimes violent political unrest, severe supply chain disruptions, global conflict, high inflation and multiple historically extreme weather events. 

STEEP factors’ enduring impacts 

These short-term crises are part of longer-term trends that profoundly affect the insurance industry: social, technological, economic, environmental and political (STEEP). Their impact is only increasing. Social instability, technological disruption, demographic shifts and climate change are leading to a fractured world in which insurers have to cover a greater array and frequency of intensifying risks.  

Carriers are responding to these challenges in various ways, with different business and operating models. As we briefly describe below and in more detail in our new Insurance 2030 report, while determining the best ways to grow, attract customers and operate more economically and efficiently, most insurers will exhibit various traits across a spectrum of possibilities. However, the companies that most effectively cope with disruption will be ones that reinvent themselves by focusing intently on the customer.   

1. Incremental change. This is the current and historic baseline scenario for most carriers. They’re adapting, usually in pockets and reactively, even though STEEP developments challenge many of their attempts to keep up. This approach risks more than commoditizing the business. Companies operating in this scenario don’t stand out to potential customers and partners.
2. Pragmatic evolution. Most forward-looking companies are moving in this direction. Their progress varies depending on their priorities and investments, but they're earnestly trying to create a customer-centric business that orchestrates coverages, services and support for customers as their needs change over time. 
3. The customer first. A common — and still largely aspirational — goal of pragmatic evolution is restructuring business and operating models to put the customer at the forefront, facilitating genuinely personalized solutions. The ideal end game is to center product design on the customer, creating personalized, holistic insurance packages at the point of sale and removing friction by integrating service and support across offerings. In this case, the enterprise is tech-driven, and a direct result is a proliferation of effective touchpoints.
4. Radical reinvention. Building directly on the customer first, the boldest carriers are determining how to create unique business and operating models that redefine the very nature of insurance, helping stakeholders avoid risk in the process. This is a long-term goal for most of the industry, stretching through the end of the decade and likely beyond.

See also: Insurance 2030: Scenario Planning

Riding the wave of change instead of drowning in it

As we’ve seen so far this century, no one can clearly predict what may happen even in the short term, but our spectrum of business and operating models in a turbulent world isn’t theoretical or far-fetched. Our incremental change and pragmatic evolution scenarios describe current reality at almost all carriers. The customer-first and radical reinvention scenarios, which depend on already extant (albeit still maturing) technology, are entirely possible. Key factors for carriers trying to wind up on that end of the spectrum include: 

• True customer-centricity, which means moving beyond selling products created in-house for single transactions to orchestrating multiple coverages, services and support for customers as their needs change.  
• Partnerships, ecosystems and embedded options that immediately put carriers at the point of sale and broaden their market reach. 
• AI and other advanced data, which can significantly enhance risk assessment, product design, sales and marketing and improve the customer experience via answer engines, data collection, product customization and service. AI also offers the promise of moving insurance beyond restitution and risk mitigation to risk prevention. 
• Creating compelling career paths that fit your current and future skills needs and appeal to ambitious workers. 
• A flexible technological base and strategic IT function that will enable you to effectively implement all of the above. Cloud and related transformation aren’t an end to themselves. Instead, they facilitate internal and external integration, speed to market and IT that's a strategic driver, not just a maintenance function.  
• Last but certainly not least, fully investing in and supporting your strategy.

KEY TAKEAWAYS:

--With so many variables in the equation, brokers and agents must devise strategies that won’t upend the objectives of affluent clients.

--Policyholders must be encouraged to obtain quotes before making a major purchase. This tends to reduce or eliminate insurance sticker shock after a significant expense, such as the purchase of an additional home or luxury automobile.  

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The personal property & casualty insurance landscape functions much differently now than it did a decade ago. Unprecedented national and global events have changed the way high-net-worth individuals secure protection for their assets. These circumstances have also significantly increased the ancillary costs of home, car and other high-end purchases that require insurance coverage. 

In one instance, an existing policyholder bought an additional home in Florida. Their insurance portfolio included two other homeowner policies with extensive jewelry riders, a five-car auto policy and an umbrella policy. After the closing, the client contacted his broker to add coverage on the new home, assuming that, at most, the insurance would add another $15,000 to their premium costs annually. However, the premium for the additional home amounted to $60,000 — a figure that would have been a deal breaker for many buyers. 

The policyholder may not have considered that purchasing home insurance in hurricane-ravaged Florida has become an exercise in caution. But it has. Insurance costs have escalated in Florida and elsewhere due to the pandemic, catastrophic weather events like Hurricane Ian and the inflationary environment over the last few years. 

In 2023 alone, HUB International has witnessed mid-year average increases across the board. Here’s an approximate range:

• Auto insurance: Up 15% to 20% 
• Homeowners insurance: Up 20% to 30% 
• Umbrella policies: Up 5% to10% 

With so many variables in the equation, brokers and agents must devise strategies that won’t upend the objectives of affluent clients. The plan should include a need assessment, coverage limit discussions and an understanding of policy exclusions that could prove costly. 

See also: 'It’s the Customer Experience, Stupid'

Four strategies for protecting high-end assets in a whirlwind insurance market 

Coastal areas are not the only regions witnessing tumultuous insurance rates and availability. Claims resulting from wildfires, hailstorms, extreme heat and water damage all have contributed to the mix as well as an increase in replacement cost value of a home with “smart” equipment and contents. Here are four best practices insurance representatives can adopt to protect policyholders and solidify business relationships. 

1. Communicate early and often. Policyholders must be encouraged to obtain quotes before making a major purchase. This tends to reduce or eliminate insurance sticker shock after a significant expense, such as the purchase of an additional home or luxury automobile. By understanding all possible details about a vacation home or sports car, brokers can work with clients to formulate estimates on what sufficient insurance coverage will cost.

Homeowners need to reframe the way they look at insurance costs. Whereas premiums had been a small percentage of a purchase, securing adequate coverage can now unexpectedly blow up a budget in strained insurance markets. 

2. Present all the facts of the case. Putting together a comprehensive personal lines insurance portfolio is a two-way street. Insurance agents must obtain all the details from clients about a high-end home, for example, so the carrier can properly underwrite each case.

In an increasingly digital marketplace, insurers are using more innovative means to arrive at optimal issuance and coverage decisions to help protect their clients’ bottom lines. Data drives insurance risk assessment decisions at executive management levels. On a lesser scale, agents can use data modeling to help forecast risk for clients. This might include calculating the probability of incurring a total loss of a home due to a wildfire or hurricane. 

3. Promote a preventive mindset. Offer guidance on how preventive measures help homeowners maintain a solid insurance program over time. Claims prevention likewise helps improve carrier loss ratios. To reduce the odds of a claim, agents should advise homeowners to recognize common hazards.

• Water. In 2020, 20% of all homeowner claims involved water. Policyholders must know that properly maintained indoor fire sprinklers and automatic water shutoffs are two preventive measures that underwriters consider when assessing a risk. 
• Fire. Testing fire systems periodically helps ensure safety and loss control. Heat sensors triggered at certain temperatures can be wired to notify fire departments, improving response time and mitigating damage. 
• Power failure. Insurance advisers can communicate how generators and backup power systems should be tested regularly to prevent water and sewer backup due to inoperable sump pumps during a power loss. 
• Combustible matter. Gas leaks produce fumes that can be costly and deadly if ignited. Offering tips to policyholders on installing and properly maintaining gas leak sensors can help avoid potential catastrophes in earthquake-prone areas. 
• Regional risks. Be it floodwaters, hurricanes or wildfires, affluent policyholders should understand the risks specific to a home’s location. They can take preventive measures, such as structural reinforcements or fire-resistant construction materials. 
• Storms. With a new sale or at renewal, agents should make clients aware that roof damage and replacement can be another costly endeavor. As a rule of thumb, the newer a roof is, the more acceptable a homeowner’s risk is. Hailstorms are a common culprit, and heat maps can help identify risks in storm-prone regions.

4. Encourage safe driving practices. The post-COVID inflationary trend has boosted vehicle prices skyward and increased the amount of risk carriers must bear. Collision and property damage claims have increased in both average amount and frequency. Distracted driving and driving under the influence have added to the risk of severe injury or death.

Continue to emphasize that foregoing the use of phones while driving can reduce the odds of a serious car crash. For teen drivers, let parents know about apps like Life360 to ensure that youthful operators cannot text or talk while driving. 

It’s a different world

Understanding insurance market dynamics and navigating the changes are the first steps to a prudent loss control plan. To prevent and mitigate claims, brokers and policyholders must communicate freely and gather all relevant data on homes and automobiles, while encouraging their clients to adopt a preventive frame of mind. With the unique challenge of protecting highly successful individuals and their assets, holistic risk management conversations can help pull the entire plan together.

KEY TAKEAWAYS

--Because of COVID, millennials were forced to start thinking about life insurance planning sooner than generations past did.

--Digital transformation in the insurance industry makes life insurance more appealing and amenable to millennials.

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Millennials are no strangers to disrupting legacy financial institutions. After all, these status-quo challengers pioneered buy-now-pay-later technology like Klarna and Afterpay, as well as innovated fintech banking apps like Chime.

And now they’ve set their sights on another legacy institution… life insurance. But not life insurance in the traditional sense.

Instead, millennials are revolutionizing the life insurance industry from the inside out, imposing their reach and influence on every aspect.

And as previous generations continue to age out, creating a greater shift toward millennial-friendly life insurance companies, the industry will look far more lucrative and appealing. Instead of a job millennials avoid at all costs, they’re going to see their dream job. One where they’ll redefine the industry for future generations, as well as secure their own futures.

How the COVID Pandemic Affected Millennials’ Mortality Mentality

The chaos of the COVID-19 pandemic almost seems like a lifetime ago. It’s so easy to forget just how uncertain those times were. New variants seemingly popped up every week, each more deadly than its predecessor, and we didn’t have concrete evidence about how you could (or couldn’t) spread the virus.

This uncertainty not only reminded us of just how fragile life can be but forced every person in the world to confront their own mortality and made us way more aware of our health.

This put millennials in a precarious position.

The idea of death and how loved ones would be affected is something traditionally reserved for “older” generations -- in this case, Baby Boomers, with Gen-X following closely behind. But thanks to COVID, millennials were becoming hyper-aware of their own mortality much sooner and were forced to start thinking about their life insurance plans earlier than past generations.

See also: Breathing Life Into Life Insurance

The Appeal of a Digital Insurance Industry

The traditional image of a life insurance agent is very much analog. An older gentleman, maybe someone with a comb-over, thick glasses and leather patches on the elbows of his jacket sleeve who would drive through his city or town, going door to door, collecting insurance premiums weekly or monthly. He would then return to his office, where a stack of long paper applications waited for him.

Now, as with so many other aspects of the world at large, technology has begun to play a larger part in the insurance industry.

These days, a good percentage of life insurance is sold virtually, with Zoom calls and mobile devices replacing door-to-door house calls. An insurance agent’s reach is no longer dictated by how much gas is in their tank or how much paper they’ve stocked. Applications and signature verification can be done directly from their phone… they don’t have to be in front of the person.

And this is where millennials thrive.

Instead offering a full-time job full of red tape and antiquated processes, the insurance industry is using technology to be more amenable to millennials. And in this current economic crisis, with inflation on the rise and so many other contributing factors, a virtual and technology-driven industry makes for a convenient second income.

Yes, you read that right. Millennials aren’t just buying more policies – they are becoming agents.

Side Effects of the Millennial Disruption on the Insurance Industry

In the future, millennials will continue to be a huge influence on the insurance industry… that’s pretty obvious.

Because not only are millennial-friendly life insurance companies becoming the place they turn to to facilitate their dream careers, but it’s also filling them with the knowledge to help them avoid the serious financial risk that comes with not having life insurance. After all, nearly 30% of millennials admit to not having life insurance because it’s too expensive.

And something else unexpected is that it’s not just other millennials selling to each other. There’s plenty of research out there that talks about how older folks view millennials and how much they trust them.

So with a lot more younger people getting involved and selling insurance, the future of the industry looks very bright. I truly think you’re going to continue to see this trend continue, and the industry as a whole will continue to thrive because of it.

KEY TAKEAWAYS:

--A digital adoption platform (DAP) is a no-code software that integrates with applications to help users learn the application. A DAP provides just-in-time prompts, nudges and smart tips to users while they are in an app.

--Sentry offered guidance and support to internal associates for sales, underwriting, claims and operations, along with external agents and customer service reps, and more than 75,000 customers. As a result, user engagement on the Workday application reached 94%, with a 91% success rate for self-help searches.

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The insurance industry has long struggled with barriers to software application adoption by its internal agents and external policyholders. That is why leading firms are exploring a better approach, to enhance the quality of their software user experiences.

In a world relying on digitization, more organizations are finding digital adoption platforms to be crucial to their overall digital transformation journey. A digital adoption platform (DAP) is a no-code software that integrates with applications to help users learn the application. The goal is to help users take charge of their digital environments while working within their apps. Automated support can equip functional users such as underwriters, adjusters, agents and service representatives with in-the-moment resources to improve their software decisions and thus increase business profitability.

A DAP combines guided walkthroughs with task lists to assist users in the software training process. Property and casualty (P&C) and life insurance companies are able to deliver superior customer experiences to their policyholders by accelerating policy and claims processes using a DAP. Insurers can also improve the user onboarding experience by creating training content that supports the adoption of complex applications. 

A digital adoption platform minimizes human errors by posting just-in-time prompts, nudges and smart tips directly in the user’s app experience, serving as a kind of trusted adviser. This approach can help reduce claims leakage, improve processing time and boost customer satisfaction.

Efficiency for Insurance Employees and Benefits for Customers

For example, Sentry Insurance, one of the largest mutual insurance companies in the U.S., sought to provide on-demand learning and self-help options to train employees and customers to use its applications and portals more effectively. With more than 4,400 employees, Sentry believed self-service training options were essential to reduce the support team’s workload.

The internal-facing applications included core P&C apps such as a claims management system for claims associates, a policy administration system for underwriters and a portal for independent agents. A customer-facing application allowed for easy management of their personal accounts. The platform also provided digital guided learning for the Workday HR and payroll systems.   

Using Whatfix, Sentry created user-specific content with just-in-time support by using pop-ups, videos and other self-help materials specific to each person’s role and application. Those resources highlighted operating procedures on topics such as lienholders and vehicle payments, how to handle different types of claims or how to raise additional requests. Both customers and employees could immediately access the most relevant support and training materials in the flow of their work, without searching through a vast knowledge base or engaging with the support team for help.

This approach is known as "userization," which involves making technology more accessible through experience-first principles and empowering users to drive efficiency and productivity. Userization focuses on making technology user-centric, rather than making people technology proficient. With userization, organizations can tailor their technology ecosystems to suit individual users, show intelligent nudges and provide step-by-step guidance.

By implementing a digital adoption platform across multiple applications, Sentry created a real-time, in-app interactive guidance system for the full range of end users and reduced the average time needed for content creation by 40%. In the past, in-house content development could take Sentry up to 50 hours for a single project. With the new digital adoption platform, that timeline was reduced to 30 hours. Such time savings are significant because each application can involve 500 or more content resources.

See also: Digital Future of Insurance Emerges

Driving Agile Policy Administration, Claims and Sales Growth

Until recently, Sentry used simple tools to point sales, customer service and claims teams to their training resources. The organization recognized the need to provide a better experience that could improve the efficiency of all stakeholders. Sentry applied the DAP software to eight main applications, including employee and customer-facing platforms. The company offered guidance and support to internal associates for sales, underwriting, claims and operations, along with external agents and customer service reps, and more than 75,000 customers. As a result, user engagement on the Workday application reached 94%, with a 91% success rate for self-help searches. 

In addition, Sentry created automated walk-throughs to guide users through different parts of the platform. The company also used in-app surveys to collect feedback on the walk-throughs and other training content to improve future versions. In in-app surveys, Sentry saw an increase in user satisfaction – both from employees and customers.

Online resources were accessed through self-help menus more than 15,000 times during the platform’s first 12 months of operation, enabling contextual self-service and streamlining faster claims processing. Over that first year, time savings for Sentry content designers, developers, customers and support staff totaled $1 million in resources, salaries and increased productivity. Sentry reallocated those resources toward profit-generating activities rather than toward creating training content, which does not directly generate profits.

Today, Sentry’s internal-facing claims system application receives over 100 queries a day in its self-help portal. With the new digital adoption platform, Sentry’s support team has reported a significant decrease in simple support requests, such as which browser to use, freeing the team to focus on higher-priority issues. By adopting a modern digital adoption platform, Sentry has created more efficient training content that provides users with immediate access to the most relevant guidance and self-help materials for every application.

Auto insurers are raising rates as fast as they can to stem mounting losses. For instance, Allstate just announced 12% increases in auto insurance rates in 12 markets, on top of a general 7.5% rise earlier this year.

But it's not clear that insurers can move fast enough — or that regulators and consumers will accept the rate increases.

Allstate had an unprofitable 110.1 combined ratio in auto last year, and the American Property Casualty Insurance Association said the direct loss ratio for the whole industry soared. It was 80.2 in 2022, up a whopping 24.1 points from 2020. So there's a lot of catching up to do. 

But consumers are rebelling. J.D. Power reported that shopping for auto policies in the second quarter in the U.S. was the highest they've seen in the three years they've been tracking the behavior on a daily basis. Not only that, but J.D. Power said a TransUnion survey of insurance customers in the first quarter found that "nearly 15% of respondents said they owned or used a car without valid insurance or allowed their coverage to lapse at some point in the previous six months, with nearly 30% having cited inability to pay as the primary reason." 

What happens now?

Well, as it turns out, our friends Stephen Applebaum and Alan Demers sent me an article yesterday afternoon with almost the exact headline I had on my draft of Six Things — "Auto Insurance in an Existential Crisis," in their case — and they go into "What next?" in considerable detail. So, I'll summarize their thoughts here, add a couple of my own and then, as always, encourage you to read their full piece.

The short answer is that what comes next won't be pretty. The longer answer follows. 

Their article summarizes the forces we've all been reading about. Supply chains have been disrupted by the pandemic, sending prices for parts through the roof and inflating costs for cars, in general. Delays in getting parts have also raised costs by extending the length of time for which drivers need rentals. The war for talent has pushed labor costs higher. The transition to electric vehicles and the growing use of safety devices have made many repairs far more expensive or even led to vehicles' being declared a total loss. Meanwhile, the pressures from inflation and general uncertainty about the economy have weighed on consumers.

But Stephen and Alan also get into subtleties that seem to be getting overlooked. In particular, they talk about the reshaping of the collision repair industry and about how it may sustain pricing pressures for auto insurers. They note that private equity has been buying up small operations and linking them into what are known as multi-shop operators (MSOs). Insurers have, in some ways, even been driving the trend because they want collision repair shops to adopt more efficient technologies and link more tightly into insurers' claims operations. But a result has been that the MSOs now have more pricing leverage and will continue using it.

The article describes how the many attempts to reduce the frequency and severity of accidents seem to have run their course, at least for now. For instance, they say, "Telematics-supported, usage-based insurance programs enabled a large group of safer drivers to take advantage of insurance discounts, but adoption has leveled out at under 20% of policies... and distracted driving is on the rise."

Stephen and Alan predict what they call a Great Rebalancing that will likely lead to consolidation among auto insurers, as the collision repair industry flexes its muscles, as EVs and other technologies continue to drive up costs and as regulators and consumers resist increases in rates. 

I'm sure they're right. The sorts of pressures facing auto insurers would, in other industries, force many to go out of business, but auto insurance isn't just something consumers want; it's required by law. So the industry will at least muddle through the current crisis.

The question is whether one or more companies will be able to innovate a way out of the crisis, keeping price increases to a minimum for good drivers while returning the industry to financial health. Supply chains have mostly healed, and inflation is declining, so some macroeconomic factors should help. 

But the field for innovation is still wide open. And consumers will surely find whatever auto insurer produces the best solution.

Cheers,

Paul

Insurance brokers remain an attractive category for private equity investment and changing market conditions have necessitated a refresh in the playbooks for success. As we navigate a period of high inflation and rising interest rates, how can brokers thrive during the potential ‘hard landing’ in coming months? Getting the basics right has never been more important. Here, we share an exclusive look of our Oliver Wyman report, The Next Phase of Growth for Insurance Brokers. We dive into the macroeconomic environment and the impacts to the brokerage ecosystem. We share perspectives on how to win in the long-term — through integrated business models, greater standardization, and by driving cross-organizational effectiveness

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Sponsored by ITL Partner: Oliver Wyman

In Northern California, where I live, we had a mild start to the summer. I rarely even had my air conditioning on until this weekend. Following a winter with unrelenting rain and snow, the low temperatures seemed to augur a summer with few wildfires. 

No longer.

Soaring temperatures -- they hit 128 degrees Fahrenheit in Death Valley on Sunday -- are drying out the West. And there's even more feedstock than usual for fires because of the wet winter and spring. So Canada likely will soon not be alone in facing massive damage and smoke from wildfires.

Through mid-July, the U.S. is only at 26% of the historical average of acreage burned (while Canada is at 1,200% of its historical average) 

But AccuWeather says a heat dome forming across the Southwest and Southern California will cause wildfires that will likely peak in August or September but that could burn into the fall. In Southern California, the Rabbit Fire already exploded to more than 7,000 acres over the weekend. 

I'm actually on the Jersey shore this week, for a vacation with my many siblings and our families, so I'm still not using my air conditioning in California :), but I'll be back next week and experience the heat and, likely, fires first-hand. 

In the meantime, if you want to read more, here is a report from a sister organization, the Insurance Information Institute, and Capgemini on how to deal with wildfire threats, along with a raft of statistics on the threats they pose.

Stay safe.

Paul