Join us as we host a special webinar in honor of Hispanic Heritage Month featuring three Hispanic insurance industry leaders and experts. From September 15 to October 15, we celebrate National Hispanic Heritage Month, which was first observed as Hispanic Heritage Week in 1968 under President Lyndon Johnson. In 1988, President Ronald Reagan expanded it to a 30-day celebration. With nearly a quarter of the U.S. population identifying as Hispanic or Latina/Latino, Hispanic Heritage Month is an important time to recognize the achievements and reflect upon the many ways Hispanic and Latina/Latino American cultures have influenced and contributed to the insurance industry. During this panel discussion, the speakers will discuss the challenges that they have faced as well as the work that the industry can do to increase representation, belonging and accessibility of the industry to Hispanic and Latina/Latino communities.

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Join us as we host a special webinar in honor of Veterans Day featuring three military veteran insurance industry leaders and experts. Every year on November 11th, we celebrate Veterans Day; a time for us to pay our respects to those who have served. With nearly 19 million of the U.S. population identifying as a military veteran, Veterans Day is an important time to acknowledge the achievements and reflect upon the many ways military veterans have influenced and contributed to the insurance industry. We also recognize and honor the skills and diversity that veterans bring to the industry. Leadership, problem-solving skills, and integrity are just some of the skills that military veterans possess, and these skills are needed for a successful career in the insurance industry. With many insurance executives being veterans themselves, the industry is showing that they see the value that veterans bring. During this panel discussion, the speakers will discuss the successes and challenges that they have endured, as well as the work that the industry can do to increase representation, belonging and accessibility of the industry to the military veteran community.

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Small businesses and entrepreneurs have been longtime generational wealth builders. According to the Federal Reserve Bank of Cleveland, “In 2016, the average wealth of households with a head identifying as black was $140,000, while for white-headed households was $901,000, nearly 6.5 times greater.” Minority-owned businesses have the capacity to reduce this gap and its negative effects on their communities and supporting minority-owned businesses have proved to have a positive impact on communities of color. Minority business owners do face challenges. Roughly 18.7% of U.S. businesses are minority-owned and access to capital still is one of the biggest challenges today. The challenge is even greater for Black women-owned small businesses. In this webinar, minority-owned business owners will have an honest conversation about their personal journeys into entrepreneurship, challenges faced, identity, access, leadership, and how they have set themselves apart as minority business owners in risk management and insurance.

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Baseball season has arrived.  

"Moneyball," by Michael Lewis, it’s hard to believe, was published almost 20 years ago in 2004. For the unfamiliar, "Moneyball" tells the story of how Billy Beane, general manager of the Oakland A’s, used advanced analytics to identify high-value, low-budget players and win with payroll a fraction of major-market teams like the Yankees and Dodgers.    

Moneyball-type analytics, based on static player and team outputs, have since become table stakes. 

Last year’s World Series champion, the Houston Astros, won despite letting a billion dollars in free agents walk. Their opening day payroll of $180 million ranked eighth in the league. The Astros also won the World Series in 2017 with a payroll of $124 million, ranked 17th. Over the last six seasons, among legitimately contending teams, the Astros rank a clear first in payroll-cost-per-win. 

The Houston Astros were the first team in the league to go beyond Moneyball, investing in observational process intelligence, measuring player and team inputs, not just outputs. Installing computer vision devices and Doppler radar for bullpen and batting practice sessions as well as live games (this year a league-wide standard), the Astros created a class of kinetic data on players in motion to help them improve. An example of observational process intelligence from a different sport is Trackman in golf.   

Observational process intelligence has arrived in our favorite sport--insurance—helping leaders evaluate core marketing, distribution, underwriting, claims and customer service operations in motion. Our company, Skan.AI, combines computer vision with AI to observe humans and the tools they use as they’re using them, in real time, generating kinetic data for continuous improvement. 

See also: Automation 2.0: What's After RPA

Live analytics include: 

• Process maps and process variability: Dynamic process mapping with variation in how work really gets done
• Workforce utilization: quantified utilization at the operator, business unit and geography level
• Workforce productivity: quantified productivity metrics at the case and operator level
• Technology utilization: quantified application usage across operators and time, with available replays of actions as they occurred
• Activity-based costing: quantified unit costs at the case level filterable by any vector--customer, geography, product, etc. 
• Automation discovery: identification and ranking of automation opportunities quantified with estimated cost savings per opportunity 

Everything rolls up to an ops dashboard with hourly or daily reporting to address issues and opportunities as they arise, in or near real time.  

Observational process intelligence helps insurers find new ways to win, selling more policies, drawing new customers and minimizing cost-per-victory.

According to the latest report from the Bureau of Labor Statistics (BLS), there were 5,190 fatal occupational injuries recorded in the U.S. in 2021, an 8.9% increase from 2020. In 2019, the fatal work injury rate before the COVID-19 pandemic was 3.5 fatalities per 100,000 full-time equivalent workers. This number increased to 3.6 for 2021, which represents the highest annual rate since 2016.

“Even if your particular industry is not high on this list, the exposures that led to the workplace fatalities exist in almost every industry, and employers should certainly be able to find relatable events or exposures,” said Matt McDonough, assistant vice president of risk services at Safety National. “This report shows companies the types of events and exposures that led to workplace fatalities. If they do not have controls in place for some of these exposures, they should certainly start building those programs out now.”

Hardest Hit Industries

Four industries ranked highest for total number of fatalities:

1. Transportation and Material Moving: This industry reached a series high in 2021. BLS states that there was a 16% increase in deaths for driver/sales workers and truck drivers from 2020 to 2021.
2. Construction and Extraction: These types of occupations ranked second in number of fatal worker injuries despite experiencing a 2.6% decrease in fatalities from 2020.
3. Protective Service: Firefighters, law enforcement officers, transit police and others in this field saw a 32% increase in fatalities in 2021. More than 45% of these were due to homicides (116) and suicides (21).
4. Installation, Maintenance and Repair: This industry saw 475 fatalities in 2021, an increase of 21% from 2020.

The most hazardous working conditions are often related to labor-intensive occupations. The current labor shortage is only exacerbating on-the-job fatalities and injuries. More workers are being asked to take on more dangerous tasks, resulting in a higher risk of injury. There is also a lack of training and a shortage of experienced workers. Finally, employers are trying to manage their business with fewer resources, which can lead to a reduction in safety measures.

Surprises in the Report

Exposure to harmful substances was the third leading cause of fatalities throughout the U.S. in the workplace, just falling behind transportation incidents and falls, slips and trips. These were fatalities attributed to unintentional overdoses, which means nonmedical use of drugs and alcohol.

According to the BLS, exposure to harmful substances or environments led to 798 worker fatalities in 2021, the highest figure since the series began in 2011. This major event category experienced the largest increase in fatalities in 2021, increasing by 19% from 2020. Unintentional overdose from nonmedical use of drugs or alcohol accounted for 58% of these fatalities (464 deaths).

The transportation sector continues to be the most affected industry for workplace fatalities in the U.S. While this may not be considered a surprise, the sheer number of fatalities within this industry is shocking. The increased number of delivery drivers on the road, the increasing number of distracted drivers and insufficient safety protocols to protect workers all contribute to the large number in this industry, which continuously ranks number one in the BLS report.

See also: Unprecedented Severity of WC Claims

Tips on Managing Risks

In light of the information provided in this report, the following are some strategies that companies can implement to help reduce workplace fatalities:

1. Implement Safety Protocols: Employers should implement clear safety protocols and procedures, including important information on how to safely perform certain tasks and what to do in emergencies.
2. Develop Training Programs: Develop safety training programs to help workers stay aware of potential hazards and know how to safely perform their jobs.
3. Promote Safety: Promote a culture of safety in the workplace by emphasizing the importance of following safety protocols and the consequences of not doing so.
4. Upgrade Equipment: Regularly check and upgrade equipment and replace anything that is damaged or worn out.
5. Provide Personal Protective Equipment (PPE): Provide PPE to workers who may be exposed to hazardous environments or situations.
6. Conduct Safety Audits: Regularly conduct safety audits and take corrective action as needed.

Companies should also encourage workers to report any potential hazards they may notice, post signs to remind workers of safety protocols and to help them recognize potential hazards and hold regular safety meetings to ensure that workers understand all safety protocols.

McKinsey has been raising the alarm for some time about how insurers are in danger of losing relevance. The key indicator that we should be concerned is that global GDP is growing faster than insurance premiums, suggesting that insurers aren't keeping up with clients' needs. 

Three areas stand out as ones where insurers seem to be backing away from the risks: natural catastrophes, climate risk and cyber. With natural catastrophes, damages are increasing so fast that they are outstripping coverage. With climate change, the issue is more that attempts to address it rely on new technology, so there is little or no historical data to use for pricing. With cyber, attacks are proliferating so rapidly and changing shape so quickly that many insurers are being cautious.

Now, nobody is saying that insurers should just step in front of these massive risks so they can stay relevant. That would be a good way to get walloped. But McKinsey argues that there are ways to increasingly lean into all of these risks, through a combination of mitigation and pricing, that will grow the industry while preserving its traditional, protective role in society.

In its Global Insurance Report 2023, titled, "Expanding Commercial P&C's Market Relevance," McKinsey says: "While premiums for commercial lines have been growing over the past three years at approximately 7% per year, rate hardening has driven most of this growth. After adjusting for rate growth, global premiums lagged significantly behind real global GDP growth during this same period, indicating a decline in the relevance of commercial lines."

With natural catastrophes (NatCats), the basic problem is just that there have been so many. "Since 2017," the report says, "the U.S. has experienced an average of 15 NatCats per year with damages exceeding $1 billion—up from fewer than 10 per year in the previous decade and fewer than six in the decade prior to 2007." 

With climate risk, the report talks more about opportunities as the world tackles the problems. It says "the transition to a net-zero economy could account for more than $800 billion in annual global capital expenditures in renewable energies and decarbonization technologies by 2030. These new technologies will create new forms of risk requiring protection, and the resulting insurance value pool could be worth up to $15 billion, concentrated in property as well as energy and construction specialty lines." The report says insurers haven't found the renewable energy line of business to be especially profitable, so they have backed away, but says they can do better as they learn more and can develop risk-engineering services "to accompany clients on their way to net-zero emissions."

With cyber, the report talks about a massive problem... representing a massive opportunity:

"As widespread technological shifts have permeated nearly every aspect of work, especially with the rise of remote work environments, cyber risk has become ubiquitous.... Already, cyber economic losses in 2020 totaled $945 billion—more than one hundred times the total premium market ($9 billion in 2021)—indicating a massive protection gap. Even if only a fraction of these losses is insurable, it could translate to a more than $100 billion growth opportunity for the global commercial-insurance industry."

McKinsey says there are four ways to tackle the protection gaps in NatCats, climate risk and cyber: innovating on products and services, adjusting pricing to reflect the true cost of the risk, investing in risk prevention and mitigation services and educating stakeholders to raise awareness of the risks. 

But I've already gone on long enough, so I'll leave you to read about those four options here, in the full report, if you're interested.

While I don't see insurance ever becoming irrelevant, I do think McKinsey has a point: We shouldn't back away even from wildly complex problems like NatCats, climate risk and cyber. We obviously need to price the risk appropriately, but we should lean into our societal role and use all our data and expertise to help the world tackle those issues. We'll stay relevant, earn a lot of goodwill -- and generate a ton of business. 

Cheers,

Paul

P.S. Often, I see items that I think are worth noting, even though I won't go on at length about them, so I'm going to start appending some here. I hope you find these nuggets useful.

--CEOs still don't seem to be seeing that long-predicted recession. A Fortune survey that drew responses from 149 CEOs of major companies around the world found that 45% expect their firm’s growth to be strong (32%) or very strong (13%) over the coming 12 months. Another 44% said modest, while 12% said either weak (10%) or very weak (2%).

--A PwC survey found that 84% of executives thought consumers "highly trusted" their business. 27% of consumers agreed. Hmm. That result took me back to a survey Chunka Mui and I cited in our 2008 book, "Billion Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years." The survey found that 80% of executives thought their product was the best in the market -- and that only 8% of their customers agreed. We really have to stop kidding ourselves.

At least executives seemed to have a better handle on employees' thinking. PwC found that 79% of executives thought they were highly trusted by employees, and 65% of employees agreed. 

--The Insurance Information Institute, a sister organization of ours at The Institutes, released its latest economic outlook. The key takeaways are:

• Property/casualty (P/C) insurance saw its cyclical underlying growth rebound fail to materialize in 2022’s second half as interest rate tightening depressed housing starts, corporate spending, and vehicle expenditures.
• Increases in P/C replacement costs (e.g., vehicle parts, housing construction materials) slowed over 2022’s last two quarters but are up 40% since 2019.
• U.S. gross domestic product (GDP) growth is likely to remain depressed for at least the next two quarters after the Federal Reserve shifted away from its hawkish stand on interest rates; the Fed’s three-year consumer price index (CPI) expectations remain overly optimistic, Triple-I believes.

The devastating impact of natural disasters is felt by millions of people across the globe each year. Census Bureau data from the U.S. revealed that, in 2022, natural disasters caused long-term displacement of homeowners, with Louisiana and Florida being among the worst affected states. The aftermath of natural disasters creates a gap between the risks homeowners face and the coverage that insurers can provide. However, technology-driven climate insurance can play a significant role in addressing this gap, empowering insurers to pivot strategies, modernize legacy applications and deliver vital products that minimize coverage gaps with speed and efficiency.

Insurers often face the challenge of understanding and mitigating risks associated with climate change. By leveraging data and insights from disasters in previous years, insurers can adjust their strategies to better serve their customers. Technologies such as artificial intelligence (AI) and blockchain can enhance customer experiences and help insurers modernize their legacy applications.

One area where technology can play a critical role is in delivering superior products at a superior price. Data analysis of past disasters and the resulting damages can help insurers to better understand the accompanying risks to such events and design more efficient products. Data-driven insights can also help insurers to price their products more competitively to make them more accessible to homeowners in high-risk areas.

A recent report by Aon on catastrophe events in 2021 highlighted the significant losses incurred due to natural disasters. The report emphasized the need for insurance companies to prioritize climate change mitigation and adaptation measures to better serve their customers. Natural climate catastrophes contributed to $313 billion in global damages last year, only 42% of which ($132 billion) was covered by insurance programs, leaving a 58% coverage gap ($181 billion). The smart use of technology can not only help insurers to better understand the risks associated with climate change but also deliver innovative and cost-effective solutions to their customers that chip away at the global coverage gap. 

One example is the use of AI in risk assessment. AI algorithms can analyze vast amounts of data to identify potential risks and alert insurers to take preventive measures. For instance, AI can help insurers identify high-risk areas prone to natural disasters and alert homeowners in these areas to take necessary precautions. This can not only minimize damages but also save lives.

In addition to identifying potential risks and alerting insurers, AI can be used to automate underwriting processes. By using AI algorithms to analyze data from various sources, insurers can make more accurate underwriting decisions and minimize the time and costs associated with the process. AI can help insurers determine appropriate premiums, evaluate risk factors and provide customized coverage options for policyholders tailored to their particular needs. Additionally, AI-powered underwriting can help insurers identify market opportunities and develop innovative insurance products tailored to specific customer needs.

Blockchain is another technology that can invigorate the insurance industry. Blockchains can provide a transparent and secure platform for insurers to share data and verify claims, reducing the time and costs associated with claims processing. Moreover, insurers can use blockchain to minimize fraud and ensure that payouts reach legitimate policyholders.

See also: The Way to Address Climate Change

Parametric insurance can be especially beneficial in underserved markets, where traditional insurance coverage may be scarce. Due to the predetermined criteria for payouts, parametric insurance can reduce the time and costs associated with claims processing, enabling quicker  payouts to policyholders. This is particularly important in areas where natural disasters are frequent and the need for rapid recovery is paramount. By providing a more accessible and affordable insurance solution, parametric insurance can help close the coverage gaps in underserved markets and provide homeowners with the financial protection they need during times of crisis.

AI, blockchain, and machine learning are critical technologies that can support the implementation of parametric insurance. Insurers can better understand the risks associated with natural disasters by leveraging AI and machine learning algorithms to gauge potential damage and adjust parametric insurance products to ensure that payouts are triggered when necessary. The immutable nature of blockchains ensures that data is tamper-proof, and policyholders can trust that their claims will be processed accurately and efficiently. The combination of these technologies provides a robust framework for implementing parametric insurance, reducing coverage gaps and ensuring that homeowners in underserved markets have access to the financial protection they need.

In addition to leveraging technology to improve climate insurance, there is also an opportunity to explore non-traditional sources of risk capacity. As natural disasters become more frequent and severe, traditional insurance providers may face limitations in their capacity to absorb risk. However, there are alternative sources of risk capacity, such as capital markets and public-private partnerships, that can provide additional resources to ensure homeowners in affected states have access to climate insurance products. Through diversifying risk capacity sources, insurers can better serve their customers, minimize coverage gaps and mitigate the financial impact of natural disasters on homeowners.

As natural disasters continue to pose significant risks, it is essential for insurers to prioritize climate change mitigation and adaptation measures, and technology can play a crucial role in achieving this.

Over the last decade, we have seen an unprecedented shift in the makeup of the underwriting workforce in insurance. As of 2020, Millennials and Gen Z combined to make up 43% of the workforce – and that number is growing quickly. That means companies employ four generations of people with a wide range of life, professional and technological experience to account for.

Formative experiences for each generation tend to create some similarities in how individuals approach their work. Take writing a research paper in college. Baby Boomers went to college in the pre-internet era, where they had to do painstaking research on a microfiche machine – getting a reference from a book, finding the right microfilm and then hoping it was what they needed. Gen X could tap into the power of the early internet, with a single search term yielding dozens of research references available via a single click. The efficiencies have only accelerated since then, with Millennials able to download e-books instantly and Gen Z now able to leverage the power of ChatGPT to source the material and specific points needed to support their work.

The evolution of the tools available has been truly mind-blowing and set very different precedents for how each generation will approach their daily work life, as well as what their expectations are about their day-to-day work. How do we take advantage of this moment and capitalize on each generation’s strengths?

The stakes are high. Successfully bringing together these disparate generations will lead to the entire workforce being engaged in the challenges facing underwriting today, from cyber risk to climate change to enhancing client service. Failure to do so will result in continued difficulties around workforce shortages and changing risks, to the detriment of clients. To help the industry navigate this shift, we’d like to share a three-step plan to bring these generations, with all their inherent capabilities, together to increase capacity and capabilities in underwriting.

The first step is to create partnership among the generations. Just imagine what this partnership could look like: A Gen Z or Millennial early-career underwriter gets to enable technology for their very experienced partner, while the partner teaches them how to apply everything they know about evaluating risk. This kind of partnership would even reduce key-person risk as the junior builds knowledge and relationships alongside their mentor. The success of this approach hinges on having the right collaboration tools, allowing older workers to choose their mentees and making the partnership collectively responsible for work.

See also: Overcoming the Talent Crisis in Underwriting

The second step is to engage team members in determining what the new work world looks like. Today’s underwriters have the opportunity to create a new paradigm, and each generation has its own experiences to add. By facilitating workshops or building teams dedicated to defining how technology will be used or how emerging trends can be incorporated into products, organizations can create powerful ideas for meeting the challenges of this unfamiliar world, as well as activating the team to help along the way.

The final step is straightforward, but crucial: investing heavily in training and development programs. In a PWC survey, about 29% of Baby Boomers and 44% of Gen Z insurance professionals felt they weren’t getting enough training on technology and digitalization from their employers. You don’t need to create these programs from scratch – there are great resources available that offer off-the-shelf training, and many software and data vendors are more than willing to help train your underwriters. The key to this kind of professional development is making it more than just a one-and-done program. Continuously investing in your team will provide capability development to help meet the challenges ahead in underwriting.

These three steps are each useful on their own, but they are exponentially more powerful when used in concert. This moment is an incredible opportunity for all of us working in talent. We have the chance to use a multi-generational workforce to pave the way for the future of underwriting, which will help the insurance industry define new ways of working and create products that better protect clients from the new risks they are facing. Just as important, this approach will meet younger generations’ expectation of advanced technology and service to the community, attracting new talent to this workforce.

This piece was originally published by Insurance Quantified.

Join our panel of industry experts for a dynamic discussion of ways to enhance your advisory role, reduce risk in your portfolio and address inflationary economic conditions with a greater understanding of the commercial properties you insure.

Learn how aerial imagery, data analytics, and property estimation tools bring a new level of accuracy and transparency to the commercial property policy lifecycle. Integrating these third-party solutions into the modern core system, insurers experience better accuracy, real-time data-informed decision-making, up-to-date values, and much more.

Watch now and learn what it takes to expand your technology ecosystem with data analytics and predictive modeling tools for better decisions about the properties you cover.

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Meet the panelists:

John Dunn

Vice President – OneShield Software

John brings over 15 years of experience within the insurance technology industry, working with customers of all sizes from large insurers and MGAs to county mutuals. John is a NAMIC Merit Award recipient and has served on multiple industry association committees. Prior to the insurance industry, he worked in the nonprofit sector and continues to be active today serving on committees for the University of Nebraska at Omaha Foundation, Athletics and Alumni Association. John holds a bachelor’s degree in Communication from the University of Nebraska at Omaha.

Jeff Heine

Chief Revenue Officer – Betterview

Jeff leads the company’s Sales team and is responsible for the overall Revenue function. He has extensive experience in building B2B tech startup companies, including Guidewire Software, Adsensa (now Coupa Software), OutStart (now IBM), Endeca (now Oracle), CCC Information Services, and others. Before joining Betterview, Jeff led Sales, Customer Success, and Marketing at Groundspeed Analytics, helping establish rapid growth and helping raise a sizable round of funding. Jeff holds a BS from Bradley University and Business and Entrepreneurship Certification from Hecht and Associates.

Skip Coan

Vice President – e2Value

For over 35 years, Skip Coan has been involved with insurance-to-value and risk assessment as an insurance appraiser, field risk inspector, and company executive. Skip founded CIG Property Inspections in 1996, which was purchased by Reliable Reports in 2005. Skip was the executive vice president of Reliable Reports until 2018 when he joined e2Value as the senior vice president. Skip has presented at many carrier, agent, state, and NAMIC meetings during his career.

Stephanie Vasey

Product Manager, Commercial Lines & Inland Marine – AAIS

As a Product Manager for AAIS, Stephanie is responsible for the planning, design, and management of the commercial lines and inland marine products. Stephanie is committed to providing a modernized suite of insurance products to our members. Before joining AAIS in 2021, Stephanie had 15 years of experience working in commercial lines for insurance carriers.

Sponsored by ITL Partner: OneShield