KEY TAKEAWAYS:

--We saw that there were nonprofit and government agencies that were getting neurodistinct individuals ready for employment, but the big question was: Who's getting employers ready? We exist to be a connection between employers and this untapped neurodiverse talent pool.

--Business partners who sign up and commit to hiring and advancing neurodiversity and disability inclusion through NTW will receive neurodiversity inclusion training courses for managers and access to neurodiverse job candidates, 70% with bachelor’s degrees, who will be pre-screened and trained in workplace etiquette, as well as insurance principles, insurance management systems and insurance transaction basics.

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Every July, organizations commemorate the passage of the landmark Americans with Disabilities Act (ADA) in July 1990. Disability pride is defined “as accepting and honoring each person’s uniqueness and seeing it as a natural and beautiful part of human diversity,” according to the Disability Community Resource Center.

Disabilities are unique and can encompass a range of conditions, both apparent and not apparent, and with varying degrees of impact. Neurodiversity embraces a diversity of minds and encompasses non-apparent conditions such as autism, dyslexia and ADHD.   

Inclusion for neurodiversity celebrates the strengths of all minds and responds to challenges without shame, removing the stigma and misperceptions of capabilities that for far too long have been attached to having a disability. It also highlights a segment of the disability community that has often been overlooked because of its non-apparent nature.

Finding and screening job candidates was the No. 1 issue facing independent insurance agencies in 2022, according to the 2022 Agency Universe Study—retaining its position as the top challenge from 2020. However, despite representing a skilled, educated, untapped talent pool, neurodiverse candidates are largely underemployed and represent a solution to independent insurance agencies’ talent problem.

Neurodiverse minds have unique ways of interpreting the world around them, thinking, communicating and processing information. In many professions and day-to-day tasks, their distinctiveness offers certain advantages, such as memory, mathematics, concentration, data analysis and pattern recognition Neurodiverse individuals might need accommodations in the workplace due to various vulnerabilities because of their mind’s profile, including susceptibility to loud noises and stimuli or different needs for processing information and communicating. What many employers do not know is that these accommodations are low-cost and actually help an entire team perform work more effectively; they are rooted in what enables every mind to perform optimally.  

In an open letter published in 2021, Sir Richard Branson, founder of the Virgin Group, remarked, “The world needs a neurodiverse workforce to help try and solve some of the big problems of our time.”

Between 15% and 20% of the population is neurodiverse, according to the National Library of Medicine, which includes up to 10% of people who are diagnosed with dyslexia, 6% with dyspraxia, 5% with ADHD and 1% to 2% with autism.

According to recent estimates from the Centers for Disease Control and Prevention, 1 in 36 children is on the autism spectrum. 50,000 teenagers with autism leave school each year, and there are now approximately 2.5 million adults with autism living in the U.S., according to the advocacy organization Autism Speaks. Underemployment in the neurodiverse demographic is exemplified in the fact that only 22% of autistic adults are in any form of employment, according to the National Autistic Society. 

See also: Keys to Finding and Nurturing Talent

To address the 80% unemployment rate, my co-founders and I started NeuroTalent Works (NTW), a nonprofit dedicated to advancing neurodiversity inclusion and employment in the workplace, and in July 2023 launched a (Neuro)diversity in Insurance Job Training & Hiring Program in partnership with the California Department of Rehabilitation. This industry-specific program encourages and enables job opportunities in the insurance industry for individuals with disabilities and neurodistinctions. Through partnership with Insurance Community University, job candidates are provided training on fundamental principles of insurance.

Initially focused on autistic job candidates, we have branched out to all neurodiversity and have a two-pronged approach, connecting business readiness and talent readiness for neurodiversity inclusion and employment.

We saw that there were nonprofit and government agencies that were getting neurodistinct individuals ready for employment, but the big question was: Who's getting employers ready? We exist to be a connection between employers and this untapped neurodiverse talent pool.

Business partners who sign up and commit to hiring and advancing neurodiversity and disability inclusion through NTW will receive neurodiversity inclusion training courses for managers and access to neurodiverse job candidates, 70% with bachelor’s degrees, who will be pre-screened and trained in workplace etiquette, as well as insurance principles, insurance management systems and insurance transaction basics.

As we started working with business partners, we started to see that there's a difference between being ready for employment and being ready for a professional setting where there are many hidden rules of the workplace. We provide what we call "final-mile training" to debunk some of these unwritten rules of the workplace that some of us might pick up on but someone with autism might not pick up on as easily.

A key part of the employee readiness portion of NTW’s training is interviewing, which is the biggest barrier to employment for the neurodiverse community because the traditional interview relies on oral communication and persuasion skills. NTW attempts to overcome this barrier by using skills-based interviewing, including training on a mock agency management system (AMS), to prepare candidates and provide a medium for demonstration of skills and experience of their capabilities to employers. This provides a more equitable approach to hiring and enables all candidates to demonstrate and showcase their skills for a job.

The program also offers employers a grant for the first two weeks of employment of individuals hired through the initiative. In addition, NTW will provide six months of support and coaching over 25 sessions post-hire to facilitate talent onboarding and a smooth transition for both the new hire and hiring manager.

One of the companies that first signed up for our program—and gave NTW the impetus to delve deeper into the insurance industry—is Weaver Insurance & Associates in Acadia, California, which was recently announced as a monthly winner of Liberty Mutual and Safeco’s Make More Happen program. 

Make More Happen partners with independent agents by awarding grants to nonprofits that agencies support, as well as providing social media and public relations support to help agencies spread the word with awareness campaigns.

“We met [with NTW] to discuss their business plan, and, at the time, they had not landed on an industry to work with,” recalls Dana Dattola, agency principal of Weaver & Associates. “We suggested insurance due to its detail-oriented tasks that require skill and knowledge.”

After hiring her first employees, Dattola found that “training posed challenges as we lacked established processes and procedures. But this turned out to be beneficial for all employees, not just those who are neurodiverse, as it enhanced our training methods.”

Despite some challenges, as with any new hire, “the benefits are great,” Dattola says. “You have employees who are grateful for their job, try their hardest and don't tend to burn out or skip steps in processes.”

“There are so many smart individuals looking for good, long-term jobs,” she adds. “Staff turnover is the toughest thing with owning a business, and I feel that once you make the investment in the staff, you have more loyalty than from your average employee because they are grateful that someone gave them the opportunity and took the time with their training.”

The talent shortage, particularly for entry-level roles, has encouraged agencies to look offshore for assistance with repetitive and administrative tasks. However, those companies face similar turnover issues. 

See also: What Are Insurers’ Top Talent Objectives?

But the neurodiverse, and specifically autistic, community can thrive in routine and predictability and are detail-oriented, and many would want to continue such work for several years. Some companies that hired with us ended up letting go of a couple of their outsourced workforce companies so as to invest in the community, do something meaningful and give an opportunity to a community that's been so overlooked.

Among the other benefits of hiring neurodiverse candidates are cultural benefits to the agency, specifically in the eyes of younger employees, who more frequently demand that their employers are engaged with community-focused and charitable initiatives and demonstrate their commitment to diversity, equity and inclusion through action.

But most of all, managers who work with us tell us it’s the most meaningful thing they’ve ever done in their careers because it’s made them a better manager for all their people. When you understand an individual’s needs—both their challenges and strengths without shame—you’re going to be a better manager for everybody, not just an individual.

To learn more and hire from NeuroTalent Works’ (Neuro)diversity in Insurance program, visit: www.neurotalentworks.org/insurance.

KEY TAKEAWAYS:

--One of the core problems that makes it difficult for large carriers to innovate with their data and IT strategy is the scattered architecture that is the logical result of growth and acquisitions over a long time. To address the challenge, many insurance IT leaders and consultants propose a central data lake or enterprise data warehouse that gathers all the data into one place. But it’s extremely difficult to execute a data lake or data warehouse project, and it usually takes years and hundreds of millions of dollars to implement.

--There is an often-overlooked alternative that stems from the microservices architecture that many startups have adopted: a federated data architecture. Instead of moving all the data from the different sources into one central location, a query layer is built on top of existing data sources and only gathers data upon request. What makes this approach much easier to set up and maintain is that there is no need to configure the architecture for storing and maintaining a large amount of data. 

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With all the buzz around generative AI, P&C carriers are rushing to evaluate how and where to best apply this emerging technology. But is the insurance industry ready for this next wave of innovation, or are the same limitations that have limited real progress in the past a cause for concern? 

There are positive signs. Recent innovations in data querying, caching, pipelining and transformation should give insurers reason for optimism. In fact, I’d argue that these innovations in underlying data architecture are as exciting for our industry as the changes we’re seeing in AI – if not more so. This article looks at how federated data graph technology can help carriers overcome long-standing obstacles in harnessing their data to fully unlock insurance’s AI moment. 

Insurers Can No Longer Afford to Underuse Data

One of the core problems that makes it difficult for large carriers to innovate with their data and IT strategy is the scattered architecture that is the logical result of growth and acquisitions over a long time. Of the top 10 P&C carriers in the U.S., the newest kid on the block was founded in 1937. This creates a multitude of challenges: There is a huge barrier for data engineers and analysts to derive actionable insights across different systems, and every new initiative takes 10x the time because it involves multiple data migration projects.

To address the challenge of disparate data, many insurance IT leaders and consultants propose a central data lake or enterprise data warehouse that gathers all the data into one place. Although this approach can solve the problem, it’s extremely difficult to execute a data lake or data warehouse project, and it usually takes years and hundreds of millions of dollars to implement. 

Building the jobs that move all data from different sources into one place is not easy, and even though there are open source solutions available, maintaining and building them requires skilled staff and can be prohibitively expensive. What’s more, once the data has been moved, it often requires significant transformation in the context of any given business use case.

In the case of mainframe data, for example, making even a minor change to the data format is non-trivial and may require workarounds because the people who know how to work with mainframe data are now few and far between. One global P&C insurance carrier we work with built a data lake, only to realize, after the multi-year project was completed, that they needed a way to transform the information from the data lake back into the mainframe format to keep their current business running. All this means that the promise of building applications on top of your data lake always seems “just around that next corner.”

Data Volumes Outpace Architecture 

According to Stanford University’s AI Index 2022, it is now a proven fact that data grows faster than Moore’s Law. In other words, the amount of data we collect tends to grow more quickly than the growth of our computing power and processing efficiency. This means data lake spending will only increase, just to maintain the large amount of data an insurance carrier collects year after year.

This issue manifests itself across the enterprise and is often felt acutely by front-line underwriters and operations staff who struggle to turn mountains of data into insights they can actually use to guide risk selection and portfolio management decisions. Underwriters routinely tell us that they aren’t swimming in data, they’re drowning. As a whole new generation of innovators continues to build more sophisticated data-driven insurance products – telematics, anyone? – these problems become worse, and the back-end IT challenge of data organization grows exponentially.

Consider a Federated Data Layer Versus a Data Lake

If an insurer is willing to pay and has the patience, the data lake may make sense long-term. But many carriers are under increasing pressure to implement new underwriting applications right now to improve the workflow and boost underwriting productivity and performance. They’re also working to come to grips with emerging risks like climate-change-related natural catastrophes, cyber attacks and social and economic inflation. For insurers that do not have a decade to wait, there is an often overlooked alternative that stems from the microservices architecture that many recent technology startups have adopted: a federated data architecture. 

Instead of moving all the data from the different sources into one central location, a federated data layer is a query layer built on top of the insurer’s existing data sources that only gathers data upon request. What makes this approach much easier to set up and maintain is that there is no need to configure the architecture for storing and maintaining a large amount of data. 

Using open source solutions like GraphQL and Apollo, insurers can implement the query-able data layer in less time than it typically takes to establish a data lake. Once the query-able layer has been established, the bulk of the work that remains to set up an agile and configurable federated data architecture is mainly in building out specific connectors for every source of data.

On top of shortening time-to-value versus a data lake, the federated data graph gives the end user the ability to access data in real time, which is great for building modern applications (for example, dynamic dashboards or workflows) on top of existing databases.

In an interview with Carrier Management, Greg Puleo, vice president, digital transformation at QBE North America ,explained the power of a modern underwriting application that leverages an underlying federated data graph: “We now have the chassis that we can start to bolt other things to, and all those other data providers now just become an API [application programming interface] integration seamlessly in the workflow. The underwriters can make better decisions using that data without having to do extra steps.” 

Challenges like retainment of data, change control and disaster recovery remain at the individual data sources, which most likely were set up to solve these challenges in the first place. As the insurance industry goes from static analysis and historical data to more dynamic and AI-powered models like "predict and predict," the ability for end users to access relevant data and insights in real time is essential.  

A Few Caveats

A federated data layer is not a “solve it all” remedy for an insurer’s ills. There are real challenges in maintaining the schema as data changes, and building customer connectors is not always an easy task given the number of legacy databases still around.

Today’s most popular policy administration systems and other core insurance systems are already 20-plus years old and are not designed for easy data access and sharing outside the system – and as insurance technologists know all too well, there are still mainframes and AS/400 midrange servers lurking in dark corners of the data center. 

Insurers Don’t Have to Do It Alone

The right insurtech partner can be of enormous value in helping insurers build out a modern data architecture in lockstep with efforts to build new applications and workflows. Insurers should look for partners who share their vision of how better data can fundamentally transform insurance and who have demonstrated experience in employing advanced technologies and architectures to solve long-standing data issues. In addition to augmenting internal IT resources and expertise, an insurtech partner often serves as a forcing function, motivating internal IT teams to move projects to the finish line.

"From a business perspective, we weren’t looking for a vendor,” Thomas J. Fitzgerald, former president of commercial insurance at QBE North America told Carrier Management. “We were looking for a partner. We were looking for somebody who could ultimately come in and understand the myriad needs that we had, and had the flexibility and the agility to come along on a journey with us." 

As with any large-scale change, it’s essential to have a destination in mind and to focus on what you’re trying to improve for your end users and the business. In this way, you can avoid “data modernization for its own sake’ and ensure that modernizing your architecture happens in the context of meaningful innovations to core insurance processes and workflows – things that can actually affect your users and lead to better business outcomes.

A Real-World Insurance Use Case

Let’s look at a real example of why a federated data graph can be advantageous from a business and end user perspective. Underwriters have three main levers that they can manipulate when balancing their portfolio: rate, retention and new business. The business challenge is that these levers often seem to work counter to one another. If you increase the rate for an account, for example, it may hurt your ability to retain the client when the policy comes up for renewal. It’s a constant balancing act for front-line underwriters to navigate the inevitable tradeoffs among rate, retention and new business.

So, let’s say you want to calculate your retention. Sounds easy, right? But not so fast. If policy administration information is dumped into a data lake or enterprise data warehouse, it is often dumped partially or without full context. For example, total premium on a property schedule and premium by coverage might be available for analysis, but premium by building/location or in relation to total insurable value (TIV) may not. 

Down the line, when the business wants to build a simple retention dashboard but chooses to calculate retention on a "same exposure" basis (i.e., accounting for changes in buildings or the value of those buildings, not just new premium/old premium), they often cannot do it. Inevitably, the data about the exposure base is trapped in two worksheets, one from each year, and so yet another worksheet is created to take those exposure bases and the premium values and calculate a simple metric.

When an organization builds a business-centric application using a federated data graph with direct connection to data sources, they often get ahead of the transformations for simple core metrics like retention. A data graph forces the business to organize their data in a way that is aligned with how the business operates, saving an enormous amount of time and effort down the road. 

In other words, without investing an appropriate amount of time into getting data into the format the business can actually use to measure its effectiveness and progress toward organizational goals, a data lake is simply a lake/sink. This often renders future application builders helpless – the data lake contains hundreds of thousands of data points, but the relevant data they need remains inaccessible.  

From the business perspective of empowering end users, a hybrid approach that recognizes that sometimes a given application needs to be built in a federated way to be most effective makes more sense than an “all or nothing” approach that forces application builders to build their apps on top of a data lake. Ultimately, the business and IT need to think about the form factor in which data needs to exist to empower their users to achieve their goals.

Summing Up

As the insurance industry eyes a potential AI arms race, the carriers that will gain a real advantage from AI will be those that can harness their underused data investments to drive meaningful advances to core insurance processes. Federated microservice-based architectures and data graph technology provide insurers with a viable alternative to data lakes as a means of tackling legacy tech debt and bringing much-needed agility and data-driven innovation to insurance.

KEY TAKEAWAYS:

--We have inadvertently allowed the insurance story to become an amalgamation of carrier advertising, less-than-flattering attorney commercials and the media’s appetite for bad news. Insurance needs to talk about its noble purpose and reclaim its brand in the world.

--Flexibility is also key because the needs of both the organization and its employees evolve. Companies need to master the selection and transformation of existing employees into new roles that blend business expertise with analytical and technical acumen. Some of the expert talent that is quitting due to lack of a perceived career path, or retiring, could be the strongest candidates for these new positions.

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The insurance industry continues to find itself in a talent crisis. The workforce challenges we are facing are not entirely new. Some are the lasting impact of the pandemic, while others have come and gone over time as a result of a changing world.

There are some challenges that I believe are self-inflicted, albeit unintentional. The good news is that they are also within the industry’s power to change. It won’t happen overnight, but let’s get started. Because people are the industry’s most valuable asset and are at the heart of everything we do, doing nothing cannot be an option.

People do not want to join the insurance industry

Younger members of the workforce do not see a career in insurance. Only 4% of respondents to The Hartford’s 2015 Millennial Leadership Survey found insurance to be appealing. And ACORD’s 2020 survey found even less interest from the generation that will make up 75% of the global workforce by 2025. Keep in mind that only 25% of insurance employees are under the age of 35.  

People are leaving the insurance industry

The insurance industry will lose half its workforce between now and 2036 as almost 400,000 employees retire. Most P&C carriers expect to increase staff during the next 12 months but are finding most positions challenging to fill and are facing more than 10% voluntary turnover. The hiring pool is limited for both entry-level and experienced talent; 65% of people leaving an insurance job also exit the industry. The leading reason why employees quit is a need for more career development and advancement.

Our call to action

Insurance needs to reclaim its brand in the world. This is above and beyond the hard work that individual carriers, brokers and agencies do to articulate and reinforce their products, services and experience. I am referring to an industrywide effort for insurance to take back its voice to tell its own story. Borrowing a page from Simon Sinek’s “Start With Why,” we can state that insurance has a noble purpose and a critical reason to exist. But we have inadvertently allowed the insurance story to become an amalgamation of carrier advertising, less-than-flattering attorney commercials and the media’s appetite for bad news. 

Insurance has a compelling and unique talent story that, if told, can both drive employee engagement and strengthen recruiting. If you’ve not worked within an insurance organization, all you may understand comes from a few insurance interactions and advertising. You wouldn’t have had the exposure to realize there is work that matches any combination of creative, analytical and technical passions. You wouldn’t have the context to appreciate the motivation that comes with a larger sense of purpose.   

A multi-dimensional talent development strategy is critical to build an organization that operates both horizontally and vertically and can adapt to change. Companies need specialists and generalists for strategies and execution to have both a top-down and bottom-up perspective. Career journeys that are co-owned by the employee and employer replace a career path predefined by the company. Flexibility is vital to recognize that vertical and horizontal journeys are not mutually exclusive.

Flexibility is also key because the needs of both the organization and its employees evolve. Technology has been driving change within insurance for a long time, requiring the elimination of some roles and the creation of others. AI keeps accelerating the rate and pace of change, as seen most recently with generative AI. Companies need to master the selection and transformation of existing employees into new roles that blend business expertise with analytical and technical acumen. Some of the expert talent that is quitting due to lack of a perceived career path, or retiring, could be the strongest candidates for these new positions.

My advice to all employees is to have a goal for their next potential role but also keep their peripheral vision unblocked. Their best next move could be something in a completely different area or perhaps a role that doesn’t even exist yet. I offer that guidance from my own career journey.

The next time someone asks you what you do in the insurance industry, don’t forget to include your “why.” I confess that I paused for a moment the first time I was asked why I chose to become a claims adjuster as my first job after college. Then it all came back to me, along with a great sense of pride and gratitude.

We love to think about disruption as simply a modern-day term. Yet four historic industrial revolutions offer ample evidence that disruption occurs far more frequently than we might ever imagine.

Each of the three past industrial revolutions has ushered in seismic change: The original Industrial Revolution was powered by steam, the second was driven by electricity, assembly lines and mass production and a third industrial revolution introduced computers and the internet. Industry 4.0 —where we find ourselves today — is moving exponentially faster than its predecessors. Defined by digital transformation, connectivity and the rise of real-time data, Industry 4.0 has already evolved from on-premises to the cloud and from intricate programming languages to no-code. Now, it is embracing AI and quantum computing.

As Industry 4.0 shifts the world around us, it also creates tremendous opportunity to shape insurtech solutions and the insurance industry in incredible ways for those ready to embrace it. 

Insurance through each revolution

Insurance, of course, pre-dates all four industrial revolutions. Historic points that involved or created insurance opportunities include the advent of benevolent societies to aid ancient Greeks with burial costs, the Spanish maritime explorations that led to the discovery of America, the Great Fire of London, the discovery and proliferation of electricity, the introduction of the automobile, the rise of computer hackers and countless other pinnacle moments. At each point, societies have progressed, in part, either because insurance has been interwoven in these efforts or because insurance products developed because of those pivotal developments. 

The insurance industry has provided peace of mind the world over with each evolutionary step of humanity and technology. With steam engines and railroads, the telegraph and steel mills, electricity, nuclear energy and the advent of the internet — humanity made gigantic strides, and, in each instance, insurance adapted accordingly.

See also: Embedded Artificial Intelligence (AI) in Financial Services

Why Industry 4.0 is radically different

While insurance historically advanced with societal progress, the actual insurance product — the agreement that obligates an insurer to cover a policyholder’s risks — remained steadfast as a written, physical document.  

Arguably, the establishment of the Hartford Steam Boiler Inspection and Insurance Company (circa 1860s) was an astounding leap forward in industrial safety, as these insurers encouraged smart practices related to steam energy. Henry Ford’s assembly line led to a radical shift in how society moved. Computer technology took us to the moon. Again, at each step, that perennial paper insurance policy was a bedrock.

Industry 4.0 has changed that fundamental principle of insurance. As we move forward, the insurance policy itself, while remaining steadfast and reliable, is forever changed. That physical document is digitized, existing now as data, often in the form of a digital PDF and shareable with nearly anyone. This opens an incredible marketplace for insurers in an increasingly digital, connected global community leveraging technology as complex as satellites and as common as the ubiquitous smartphone. 

This radical shift in the constitution of insurance creates a challenge: How to increase the appetite for insurance to achieve greater market penetration? This is where insurtech will help to define the future of the industry.

What is possible for insurance

The rise of insurance as a digital product means our industry is inextricably tied to the acceleration of technological advances. Similar to the impact of the sewing machine or advanced robotics on our culture, the digitalization of insurance will drive the industry well beyond what was previously imagined. Solutions already exist that allow carriers, brokers and MGAs to design, rate, underwrite, quote and create products across multiple lines. As these tools grow in sophistication, they deliver higher levels of accuracy, allowing insurers to enter new markets more quickly and confidently.

Where our industry goes next will be defined by how technology transforms other areas of insurance. Consider the possibility for infusing new digital pathways into the claims settlement process. While there will always be a physical component — such as replacing windows shattered by wind or hail — tech giants like Amazon have already opened massive distribution channels for faster delivery of products needed to rebuild or repair as part of a claim. This gives insurers the potential to settle claims faster, so long as the supply chain can keep pace.

The most radical change to come is in another area of insurance that has remained static for nearly a century: the customer experience. As the relationship between technology and humans grows more symbiotic, there exists the potential for insurance to become increasingly entwined in people’s daily lives.

Consider a future state where people wear augmented reality-capable smart goggles or glasses— powered by AI — to receive information in real time. This gives insurers the capability to serve as a concierge, delivering in-the-moment risk management advice to keep customers safe. 

Imagine the transformative impact this could have on a family vacationing on Mt. Washington. First, they use their smart goggles to secure a rental car. Then, as they traverse the mountain in their vehicle, an AI-powered concierge notifies them if they are driving through high-risk areas and delivers real-time alerts as the road narrows and guardrails disappear. The family arrives safely at the top of Mt. Washington, they enjoy a one-of-a-kind experience and their safety is prioritized across every mile. Just as GPS changed how people travel, augmented reality and AI will reshape our relationships with all that surrounds us.

This future is closer than you might think. Industry 4.0 has created a paradigm shift in insurtech. The rigid legacy systems of the past have been replaced by more flexible, accessible and rapidly integrated solutions that have accelerated the delivery of new products. These best-in-class tools will give insurers the capabilities needed to combine the digital and physical worlds. From telematics to wearables, predictive modeling and virtual reality, insurance has the potential to continue its long history of being connected into the ways we live, the ways we do business, the ways we travel and transport goods, as well as the future we build.

See also: 'Law of Computability' Powers the Bionic Era

How will insurance careers evolve?

One of the unfortunate corollaries of the explosive growth in technology — and in AI specifically — has been the growing fear of massive job losses. Yet if there is one thing we have learned from past industrial revolutions, it is that, on a macroeconomic level, each job displaced by innovation gets replaced by one or more jobs in emerging industries. 

A great example can be found in both the times of the steam and combustion engines. Yes, wagoneers and barge captains fell out of favor as technology advanced. But the new technologies provided opportunities for retraining and creating entirely new industries. Long-haul trucking, much in the news of late, might never have come to be if society had looked on the combustion engine as a job killer for the horse and buggy business. In much the same way, we cannot be afraid to embrace these new and sophisticated technologies.

I am tremendously optimistic that as insurance grows more technologically sophisticated in the next few decades, the labor market will shift. While some roles may disappear, such as those in data entry, new and potentially better ones will emerge. What those roles might be is still largely speculative, but insurance professionals who commit themselves to upskilling will be rewarded for their ability to adapt and evolve.

Embrace a spirit of adventure

The golden thread through each industrial revolution has been the spirit of adventure. Johannes Gutenberg did not know exactly how his printing press would advance the speed of knowledge. Henry Ford had no guarantees his assembly line would revolutionize manufacturing. Yet they were unafraid to explore the unknown by employing the technology they believed would usher in a better future. 

Now, in Industry 4.0, it is time for insurers to embrace their own adventurous spirit. Those that answer the call and seize these digital opportunities will lead insurance to amazing new heights.

KEY TAKEAWAY:

--With access to precise geocoding data, claims departments can swiftly assess risks, verify policy coverage and estimate claim values. This streamlined approach minimizes manual intervention, reduces errors and enhances operational efficiency.

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Geocoding plays a crucial role in the insurance industry, particularly for underwriters, claims departments and adjusters, by delivering accurate structure location. Geocoding can increase profit margins, improve risk assessment, minimize losses on claims and empower claims and adjusting teams.

Geocodes are available with varying degrees of precision, such as ZIP9 geocodes, interpolated geocodes, parcel geocodes and rooftop geocodes—each offering a different level of accuracy. However, only true rooftop geocoding can maximize an insurer's investment and enhance risk assessment. 

The two most popular types of geocodes are parcel-centric geocodes and rooftop geocodes. Parcel-centric geocodes identify the center of a parcel or lot, while rooftop geocodes find the exact roof of a structure. Certain providers, including major search engines, may pass off parcel-centric geocodes as rooftop-accurate. 

Relying on parcel-centric geocodes when writing policies can lead to inaccurate risk assessments and underwriting compliance issues. Parcel-centric geocoding may increase the number of full-limit-losses paid, decrease revenue or even get your company in hot water with regulatory agencies. 

When vetting geocoding providers, it's worth verifying the absolute accuracy of the geocodes they return. 

Great Geocoding Requires Great Address Validation

Address validation cleanses and standardizes the geocoded addresses to reduce false positive matches. Using address validation, geocoding can also identify the address type, including non-postal address, residential or business, or determine if there is a multi-unit structure.

Pairing Geocoding and Data Enrichment Maximizes ROI

Whether you're writing a business owner's policy (BOP), vacant land policy, property policy or product liability policy, you must ask your clients questions about their home or business. However, peppering your clients with property attribute questions regarding their home or business can be tedious. Often, clients don't know the answer, and sometimes, they may even give incorrect information. Rooftop geocoding enriched with property attributes can improve the experience for you and your clients. 

Insurers using property attributes to augment the data they already have typically do so through a separate company's application programming interface (API). Through this API, insurers can obtain hundreds of supplementary data points and use them to paint a clearer picture of the risks involved with insuring the property in question. 

In addition to generating a positive ROI on the front-end, geocoding and data enrichment provide insights that enable insurers to enhance their risk management strategies. By identifying specific property characteristics and associated risks, insurers can develop loss-prevention initiatives and offer valuable risk mitigation advice to their clients. 

Geocoding Using Cloud-Based APIs Adds Flexibility and Speed

Historically, geocoding uses on-premise systems that tie up hardware resources and require time-consuming updates and processes. Geocoding using cloud-based APIs is more efficient because all data updates and hardware maintenance aren't needed. The flexibility of chaining together multiple cloud-based APIs is a huge plus.

Cloud-based geocoding can also be very fast. Some cloud-based providers can process geocodes much quicker than most on-premise systems for a fraction of the overall cost.

Persistent Unique Identifiers (PUIDs) Are Key 

Addresses can sometimes change due to street name modifications, address renumbering or subdivision developments. Getting the most out of geocoding means choosing a provider with persistent unique identifiers (PUIDs)—a type of digital fingerprint. PUIDs remain constant even when the underlying address data changes—allowing insurers to link historical data and maintain data integrity.

Considering how often addresses can change, it's not cost-effective for carriers, brokers and agents to manually correct them. PUIDS can help insurers automate this process, saving time and cost. 

And, by linking the property to previous claims, property updates, loss trends and other data, underwriters can more easily determine policy premiums and program eligibility. 

Geocoding Streamlines Straight-Through Processing

Rooftop geocoding has become a necessity for streamlining straight-through processing in claims departments. With access to precise geocoding data, claims departments can swiftly assess risks, verify policy coverage and estimate claim values. This streamlined approach minimizes manual intervention, reduces errors and enhances operational efficiency.

Rooftop geocoding also aids in efficiently deploying adjusters. Empowered with exact coordinates, insurers can assign adjusters who are geographically closest to the claim site, send them to the right place the first time and reduce travel expenses while providing timely and responsive claims handling. 

The future of geocoding holds exciting possibilities. With advancements in artificial intelligence, machine learning and data analytics, insurers can harness the power of geocoding to extract deeper insights from location data. This enhanced understanding of risks and exposures will enable insurers to develop more tailored policies, promote risk management and drive ROI

KEY TAKEAWAY:

--Smart homes offer a vast array of benefits in: risk mitigation and prevention, data collection and analysis, personalized premiums, faster claims processing, home monitoring services, liability coverage, premium discounts, the environment and health and wellness.

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Smart homes, equipped with various Internet of Things (IoT) devices and technologies, have the potential to change the insurance industry.

Insurers have a natural synergy with smart home technologies. With almost 69% of U.S. households owning at least one smart home device, it is clear that such technologies help consumers manage, protect and efficiently run their homes via mobile applications.

While smart home technology is not a new concept, many insurance companies and homeowners are adopting it like never before to optimize housing efficiency, streamline daily tasks, improve quality of life and well-being and reduce urban household risks.

What Are Smart Homes?

Smart home technology integrates various devices and appliances with internet connectivity, enabling remote monitoring and control through mobile applications. Implementing smart home devices, such as smart security cameras, door locks, thermostats and water leak detectors, significantly reduces the risk of potential hazards and damages, affecting insurance policies in many ways.

Here's how smart homes and insurance are connected

Risk Mitigation and Prevention

Smart homes are equipped with sensors, cameras and connected devices that can help prevent accidents and damages. For example, smart smoke detectors, water leak sensors and security cameras can detect potential hazards and alert homeowners in real time. Insurance companies can offer lower premiums or incentives to homeowners who invest in these technologies, as they reduce the risk of costly claims.

Data Collection and Analysis

Smart home devices generate a wealth of data related to occupancy patterns, usage of appliances and environmental conditions. Insurance companies can leverage this data to better understand customer behavior and assess risks accurately. For instance, if a homeowner's data shows responsible use of heating and cooling systems, they might be eligible for lower energy-related insurance premiums.

Personalized Premiums - Usage-Based Insurance (UBI)

By leveraging data from connected devices, insurance providers can tailor premiums based on homeowners' usage patterns and behaviors.

The data collected from smart homes can be used to create personalized insurance policies. Traditionally, insurance policies were based on statistical models and generalized risk assessments. However, with the advent of smart home technology, insurers can now offer UBI. This way, homeowners have more control over their premiums, and insurance companies can better assess individual risk profiles.

Faster Claims Processing

In the event of a claim, IoT devices can provide valuable data to insurance companies for faster and more accurate claim assessment. For instance, if a burglary occurs, security camera footage can help verify the claim and expedite the claims process.

Home Monitoring Services

Insurance companies might offer home monitoring services as part of their policies. These services could include continuous monitoring of security systems, smoke detectors and other safety devices. This not only enhances home security but also provides peace of mind for homeowners.

Devices, such as connected security cameras, smart locks and water leak sensors, offer real-time monitoring and early warning capabilities. These devices can detect potential threats, such as fires, gas leaks or water damage, in real time. In case of emergencies, the devices can automatically trigger alerts and notifications to homeowners and relevant authorities, helping mitigate risks and minimize the extent of damage and potential insurance claims.

For example, The Flo by Moen Smart Water Security System learns your home's water usage and can automatically shut off the water supply if there's a detected leak, reducing the likelihood of insurance claims.

Liability Coverage

Smart home devices can potentially assist in liability claims. For instance, if a guest is injured on the property, data from smart security cameras or access logs could provide evidence about the circumstances, helping to determine liability and claims settlement.

Premium Discounts

Some insurance companies already offer discounts for homeowners who implement certain smart home technologies, such as security systems or leak detectors. These discounts can encourage homeowners to invest in these technologies and enhance their overall safety and security.

The Environment

Smart homes often have sustainable and eco-friendly features to improve homeowners' carbon footprint. For instance, smart homes can be equipped with thermostats to automatically adjust a room's temperature to help people conserve energy and cut their utility bills. Insurance companies can encourage eco-friendly initiatives by offering incentives for homeowners who purchase such environmentally responsible devices.

The adoption of smart home technologies and their impact on insurance can vary by region and insurance company. As technology continues to evolve, the insurance industry will likely find new ways to leverage smart home data to provide more personalized and efficient services to their customers.

Health and Wellness

Many smart home devices help improve the health and well-being of homeowners. For example, smart fridges can be programmed to reorder healthy food, and smart bathroom mats can monitor your weight and posture. Insurers that create programs and incentives encouraging plan members to adopt smart home wellness technology can help them live healthier and longer lives. Lower mortality and morbidity can help employee benefits insurers increase profits while reducing strains on healthcare systems.

A Smart Future

While smart homes offer many benefits, there are also concerns related to data privacy and cybersecurity. Insurance companies must ensure that the data collected from smart devices is properly protected and used responsibly to maintain customer trust.

Smart home and smart city technologies radically change the insurance value and are integral to creating more resilient and sustainable urban environments.

KEY TAKEAWAY:

--AI can help with customer service through a careful use of chatbots, can speed underwriting in ways that will let agents be more responsive to clients and can automate aspects of the claims process that currently distract agents from more meaningful work.

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What would you say is the most prominent theme throughout human history? Many argue that conflict or culture defines humanity. Still, when we examine the entirety of human existence, I see one central point that outshines the rest: advancement. 

Each age of humanity has been defined by an innovation that changed the course of history. Whether it be the wheel, the invention of steel or the internet, humans seem determined never to settle for their current reality and are always rushing toward that next defining moment. 

We believe that the next defining moment is already here, and it has come in the form of artificial intelligence (AI). The floodgates are open, and in as little as five years AI will likely have significantly altered how we live and work.

What does this mean for insurance agents? Well, if history has taught us anything, it is that those who properly implement innovative technologies are rewarded while those who don’t either fade into obscurity or serve as a cautionary tale for why you shouldn’t blindly charge forward into uncharted territory. 

In this article, we explore how the emergence of AI could affect independent insurance agents and make the case for why agents should carefully implement this technology into their agencies’ operations. 

First Things First 

The burning question that professionals of all stripes are asking themselves is, “Can AI do my job better than I can, and will it make my role obsolete?"

Insurance agents are not immune to this line of thinking, but, thankfully, it is unreasonable to assume that machines will eliminate the need for human agents. Most consumers are not experts on the different types of coverages available and defer to the expertise of an insurance agent. While AI tools such as ChatGPT do a great job scouring the internet and organizing information to answer a question, purchasing insurance requires trust, and consumers trust that their agent can advise them on their potential risks and securing the right coverage for their needs.

That level of trust is not easily transferable to an artificial machine (do you prefer navigating an automated customer service menu or speaking with a live person?), especially considering the nuance required to properly advise and service a client. As such, it is highly unlikely that consumers would ever prefer their risk profile to be assessed and managed by a programmable machine instead of a real person. 

No one knows what the future holds, but we firmly believe that no matter how sophisticated AI becomes, it can never replicate the interpersonal value and expertise provided by agents. 

See also: AI in a Post-Pandemic Future

On the Bright Side

That being said, AI can potentially eliminate the need for agents to perform repetitive and mundane tasks and empower them to focus on where they provide the most value: advising and servicing their clients. How will it do this? Let’s take a look. 

Customer Service 

The use of AI chatbots to answer basic customer questions is an increasingly popular feature. These chatbots help companies stay connected to consumers and are especially useful outside normal business hours. For example, imagine a customer needing information about your agency’s renewal process after you’ve locked up shop for the day and your customer service team has gone home. Featuring an AI chatbot on your website that is capable of answering this customer’s questions will add value to your customer and in turn strengthen their loyalty to your agency.

Even today, using AI to enhance your level of customer service can reduce service costs by up to 30%, according to Entrepreneur. Imagine what that number will be in 10 years as AI continues to advance. Additionally, companies such as Synthesia allow users to create AI videos that could be used for employee training or continuing education purposes. 

AI chatbots are best used in tandem with your customer support team and should primarily be used when your team is unavailable (holidays, weekends, non-business hours, etc.) or as a fast reference for your team members when issues arise outside of their circle of competence. In our opinion, having a live person responding to customer inquiries is the preferred method (especially because being an insurance agent is a service role), but when a live person is not available an AI chatbot can provide an acceptable level of support in the interim and is certainly better than no support. Remember, AI should not replace your customer service staff but instead work in tandem with them to increase the service your agency can provide customers. 

Underwriting 

AI and machine learning (ML) technologies are already transforming the underwriting process by improving data collection and risk assessment methods. For example, instead of relying on potentially inaccurate data provided by customers on an application, insurance companies are beginning to use technology that can automatically gather data through many different sources and more accurately discern the level of risk present in each policy.

According to McKinsey, by 2030 underwriting processes will be almost entirely handled by machines, and most policies will be quoted instantaneously. This removes the need for underwriters to handle repetitive tasks such as data entry and allows them to focus their energy on handling complex submissions. These innovations will be groundbreaking for carriers and brokers. However, independent agents stand to benefit as their customers receive increasingly accurate and error-free assessments of their risk profiles and instant quotes on most policies, allowing agents to focus on other items, such as product education and customer retention. 

Claims 

Claims processing can be a tedious task that requires hours of investigative work and the examination of countless documents. McKinsey estimates that by 2030 AI and ML will play a significant role in the claims process, with nearly half of all claims being fully processed without human oversight or intervention. (Lemonade already handles half of their claims via AI.) 

What does this mean for agents? It means less time focusing on data collection and information sharing with carriers and more time providing support and counsel to their customers. AI will never be able to match the interpersonal touch of a live agent, but using AI and ML to eliminate tasks such as data collection and information sharing allows agents to focus their efforts on ensuring their customers have the guidance needed to properly file their claims. 

See also: Achieving a 'Logical Data Fabric'

A Pivotal Moment 

AI has already proven itself capable of enhancing customer support, underwriting and claims processes. The technology is here to stay and will only become more prevalent. The way we see it, insurance agents have three options: 

1. Reject its implementation and become the equivalent of an agency still using a typewriter in 2010 
2. Rush to implement the technology without cause or consideration and watch it blow up in your face 
3. Identify the areas where AI can increase efficiencies and cut costs and meticulously implement the technology over time 

The key to mastering the age of AI is to choose option three. If you don’t, you may be overtaken by competitors that are more efficient and better serve their customers.

Recently, we announced the winners of the 2023 Datos Insights Insurance Technology Impact Awards. I’m writing a blog series examining industry trends as seen through the lens of the 2023 Impact Awards’ 65 case studies, which catalogue real tech projects that real insurers delivered to create real success. Today, I’ll be diving into trends from data and analytics projects across the industry.

Unlike digital projects, data tends to be a smaller category, because it so often captures projects that are intensive, multi-year efforts: things such as training algorithms to automate underwriting decision making or migrating an on-premise data warehouse to a cloud data lake environment. “Easier” data projects might be setting up a self-service data mart where business users can independently use reporting tools like Tableau to get their own analytics and insights.

Data projects are large, complex and difficult, but also crucial and unavoidable.

What’s clear from this year’s Impact Awards data case studies—and from the digital and core case studies, for that matter—is that practically anything an insurer would like to do ultimately comes down to effective data and analytics capabilities. Accurate, available data is the secret key to all the other capabilities insurers want to implement.

Take midsize property/casualty winner Mosaic Insurance (now a back-to-back Impact Award winner!). Mosaic implemented an underwriting portal to improve customer experience for high-end specialty lines customers. Creating the speed the team wanted required Mosaic to embed AI-based decision making capabilities within the portal so the system could quote, bind and issue policies automatically. What seems like a digital initiative on its face (“let’s sell specialty insurance online”) is actually a data initiative, because the algorithm is such a crucial component of the overall function.

To that point, the data used to train an algorithm must also be high quality, and any third-party data invoked in the new business process must be reliable. Fellow winner CNA is an example of the latter. CNA wanted to provide faster quotes, and its path to doing so was to build an AI-enabled automation solution to improve data extraction from forms.

These needs also extend beyond new business. Life winner Lincoln Financial wanted to improve customer experience, but what the team built was a holistic customer data view, because the core of that customer experience is being able to serve accurate information about accounts, on demand, to the portal or channel where the customer wants to view it.

See also: Achieving a 'Logical Data Fabric'

It’s data all the way down.

Whether an insurer wants to sell more, manage risk better, serve customers more effectively or differentiate itself from the competition with superior user experiences—all of it ultimately comes down to data and analytics capabilities.

Want to provide a superior distribution experience by providing instant quotes? Underwriting components are typically core, but you definitely need good data and good analytics.

Want to improve customer experience by pre-filling fields for your digital FNOL user flow? You need to be able to pull that information from a data lake.

Want to save on claims costs by more effectively flagging potential fraud or more accurately predicting claim severity? Pure data and analytics, which will have a clear impact on profitability.

Insurers, like everyone else, are rightly paying a lot of attention to generative AI and large language models like ChatGPT. But at baseline insurers need data that’s accurate, reliable and available, as well as algorithms that are trained on quality data and that produce decisions that can be trusted. More and more, data is core, data is digital, data is everything.

To check out all 13 data and analytics case studies, read Insurance Technology Impact Awards Case Study Compendium 2023: Data Initiatives. Interested to see what’s happening in the world of digital, core and IT practices? Find information about all of this year’s Insurance Impact Awards winners here.

KEY TAKEAWAYS:

--Convergence means many parts of the industry are consolidating, and strategic partnerships are proliferating. Platforms and marketplaces are springing up and bringing many product offerings together. Home life and the workplace are converging, as are technologies such as those that enabled the smartphone.

--Today's insurance services will become increasingly obsolete. Drawing on technology, insurers are already shifting their value proposition from “repair and replace” to “predict and prevent.” This shift will change almost every aspect of insurance, including skills requirements, product design, distribution and pricing models.

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The violently disruptive and confusing shifts we are all experiencing are in large part a result of accelerating convergence. 

According to Marc Benioff, founder, chairman and CEO of Salesforce, “The world is being re-shaped by the convergence of social, mobile, cloud, big data, community and other powerful forces.”

Another perspective on the same phenomenon comes from Chunka Mui, author, futurist and innovation expert: “We have the good fortune and awesome responsibility of sitting at the inflection point of the Fourth Industrial Revolution. For better or worse, ever better and cheaper technological building blocks, including pervasive connectivity and computing, AI, robotics and genomics, are blurring the lines of the physical, digital and biological worlds. They are already reshaping industries and societal patterns, and the transformation is accelerating.”

This convergence is taking place across all industries, products, services and technologies. Its influence extends to the blurring of the previously clear separation of our work and personal lives, giving rise to the current focus on work/life balance.

Convergence and the Insurance Industry

Insurance is one of the larger industries to have significant exposure to these shifts, given the dependency on accurately predicting and managing risk and on the broad and diverse customer base, and we are already seeing the effects of this convergence.

In the financial services industry, convergence is bringing together banks, credit institutions, wealth management and insurers to develop products that combine the elements of each sector.

Consolidation of market share is another form of convergence, as the big get bigger. The $800 billion U.S. property & casualty insurance industry is highly consolidated, with 2% of carriers holding between 50% and 75% market share across most lines of business. This consolidation has caused many supply chain segments in the insurance ecosystem to themselves consolidate to meet the many new and different  needs and expectations of these large national carriers.     

In the estimated $500 billion U.S. auto insurance ecosystem, several highly fragmented segments, including collision repair, auto glass, insurance replacement car rental, salvage management, towing, third party claims administration and independent appraisal and adjusting, are seeing significant consolidation because of investors with access to large pools of capital. While thousands of these individual businesses controlling billions of dollars in revenues have already been consolidated, the process still has a long way to run in most segments.  

See also: The Power of Ecosystem Transformation

Strategic Alliances and Partnerships, Mergers and Acquisitions

Alliances and partnerships between participants in the insurance ecosystem are the result of, and precursors to, convergence. Historically, fewer alliances and partnerships existed because management believed that their company’s core competencies were competitive differentiators, and the “not invented here” prejudice was prevalent. The most progressive of companies may have collaborated with others, but nothing more formal than that.

As industry consolidation proceeded, new participants came to market leveraging new technologies, and competition in general heated up. Partnerships and alliances became recognized as valuable and eventually necessary. Similarly, mergers and acquisitions became attractive strategies to further formalize these benefits. One good example of this evolution is CoreLogic’s partnership with, minority investment in and ultimately acquisition of the property claims information software provider Symbility in 2018. The acquisition has helped CoreLogic compete with Verisk and its Xactware property estimating solution suite. 

Management began to recognize the value of these combinations in product development, speed to market, rationalization of duplicated overhead and acceleration of revenue. In some cases, partnerships with especially attractive companies were defensive, as suitors sought to keep these companies out of the hands of their competitors.  

Platforms and Marketplaces

Other more indirect forms of alliances and partnerships are emerging in the insurance industry in the form of so-called platforms and marketplaces. The most-recognized of these “hybrids” are the platforms created by insurance core system providers such as Guidewire, Duck Creek, Majesco and Sapiens. These companies are enabling third party information and service providers to integrate into their core systems and thereby become easily accessible to hundreds of common insurance clients, thus avoiding lengthy, resource-intense, one-to-one integrations. Some of these core system software providers have begun acquiring the more attractive and popular of these third party partners (e.g., Guidewire’s 2021 acquisition of HazardHub and Duck Creek’s 2023 acquisition of Imburse).

Other examples of platforms that focus more on claims, especially auto physical damage claims, include CCC Intelligent Solutions, Mitchell Enlyte and Solera/Audatex. All have numerous strategic partnerships with multiple third party providers, with many integrated into core claims solutions and linked to their common customers for ease of access and use. We expect to see many more of these strategic alliances, some of which may well result in acquisitions and further market consolidation by these claims information services and solutions providers.

OEMs and Insurance

Car makers, otherwise known as OEMs (original equipment manufacturers), auto insurers and software developers are converging. Most OEMs have partnerships with insurance companies around auto insurance distribution and repairs, even as some are simultaneously focused on developing their own bespoke auto insurance operations.

OEMs are developing certified repair networks in which collision repair shops that follow OEM repair guidelines are “certified” to perform repairs on those brands. This certification includes the use of OEM parts, as opposed to the less expensive alternative parts, which insurers frequently prefer. And today’s vehicles are essentially computers on wheels, as OEMs pursue subscription software models in which consumers pay for specific premium auto features “over the air” on a monthly basis. OEMs believe the market size for subscriptions will be in the tens of billions of dollars by 2030.

Telematics-enabled products are also converging as vehicle-installed software and programs and motion detection data resident on smartphones are aggregated. These hybrid solutions will enable greater functionality and reliability for solutions such as accident notification, emergency response and crash detection, which will be heavily monetized by auto insurers, OEMs and others.     

Workplace Convergence

For most of us, our workplaces and our homes converged during the pandemic, and for many of us that continues to be the case, either partially or completely. The implications of the shift to “work from home” are felt by the insurance industry in more ways than by most industries. Being so historically labor-intense, insurance companies own more physical facilities than most other industries, but that is changing rapidly. Most notably, Allstate insurance, one of largest personal insurers in the U.S., recently sold its entire 2 million-square-foot headquarters campus in the Chicago area. 

Technology Convergence

The smartphone is a prime example of technology convergence, in which several previously separate technologies (telephones, wrist watches, digital cameras, computers, web browsers and GPS navigators) were fused into a single easily portable device.

Data convergence has increased as AI software programs became capable of processing huge volumes of data into actionable information.  

According to a report published by Dell Technologies with the Institute for the Future, 85% of the jobs that will exist in 2030 hadn't even been invented when the analysis was done in 2018.

Likewise, the insurtech movement and the large amounts of capital invested in it over the past 10 years caused convergence between technology and insurance. While perhaps not the upending of the insurance industry that some had predicted, the movement has certainly accelerated adoption of digitization and automation in insurance processes and the leveraging of big data and analytics.

See also: Insurtech: Not Dead but Different

Future of Insurance

In such a changing world, today's insurance services will become increasingly obsolete. Drawing on technology, insurers are already shifting their products and value proposition from “repair and replace” to “predict and prevent.” This shift will fundamentally change almost every aspect of insurance, including skills requirements, product design, distribution and pricing models.

Embedded insurance represents both new insurance products and new distribution channels. Similarly, episodic insurance (e.g. travel interruption insurance) is a new insurance product enabled by technology and delivered digitally. 

Managing Convergence

Perhaps the most powerful convergence of all is the convergence of the future and the present. The speed of technology-enabled advancements continues to accelerate, and what was new only yesterday is replaced by even more important advancements today. This is as true in the insurance ecosystem as it is in every other industry. The basic question for insurers and others is – how do you manage your business in a world where planning based on historical experience and reasonable expectations is continually being proven unreliable?

To manage convergence, companies will need to be excellent at anticipating the future, innovating beyond their core and transforming their capabilities as rapidly as technology can enable it. This will require leadership to become expert change managers, encourage innovation in more powerful and practical ways with more than just lip service, ensure that the entire workforce is future-ready, develop more powerful intelligence-gathering capabilities to better anticipate and respond to competitive threats and communicate core strategies and changing priorities in a frequent and highly articulate manner. It will be necessary to have every employee understand that it will be a new and very different ballgame.

These skills will define the winners in a rapidly converging world.

Mark the date: Aug. 10, 2023, was the day when the starting pistol was fired for the rollout of autonomous vehicles. 

Everything to this point was testing. But the California Public Utilities Commission voted 3-1 last Thursday to allow two robotaxi services -- GM's Cruise and Google's Waymo -- to operate at all hours of the day in all parts of San Francisco and to charge riders.

What happens now?

A lot, and as quickly as Cruise and Waymo can manage -- but only step by step. Let's call the next phase radical incrementalism.

It has taken quite a while to get to this point in the rollout of AVs, certainly longer than General Motors expected when it bought Cruise in March 2016. I'll 'fess up to some excessive optimism myself, having written a book with Chunka Mui in 2013 called "Driverless Cars: Trillions Are Up for Grabs."  

Part of the issue is the sheer complexity of the technology. Glitches don't appear often -- but often enough to cause skepticism. In 2021, Waymo cars developed the odd habit of pulling into a particular cul-de-sac in San Francisco, then making a three-point turn and leaving. Residents complained that as many as 10 cars a minute were buzzing up and down their quiet street, waking many people up in the middle of the night. Just last week, as many as 10 Cruise driverless cars simply stopped in the middle of the street in San Francisco's North Beach area. The crowd at a concert was using so much cellphone capacity that the cars lost contact with their home bases when they neared the venue and shut down. More problematically, driverless cars can get confused in the presence of emergency vehicles -- a complaint that the San Francisco Fire Department made at the PUC hearing.

The glitches have happened often enough that resistance has developed among San Franciscans, even though the city may be the most technologically aggressive in the world. Some protesters learned that they can confuse an AV simply by putting an orange traffic cone on its hood, and they do, paralyzing cars with indecision.

The broader problem is that the technology has to fit into an existing system full of human drivers and pedestrians and adapt to all -- as in, every one -- of our odd little behaviors. That's double-parking, opening car doors into traffic, cycling the wrong way on a one-way street, darting out from behind a parked car... you name it. And driverless cars are trained to be cautious, so they're weak about left turns in traffic and no good at all on a crucial bit of human driving. You know the one I mean: You have to merge into a steady stream of traffic, so you make a quick move and hope drivers think you're just reckless enough to pull into their lane, even though you're just feinting. Then, when one of them blinks, you pull out in front of them.

Cruise and Waymo both say their cars haven’t caused any traffic fatalities. Waymo says its self-driving vehicles, in fully autonomous mode, haven't even caused a collision with another vehicle in their first million miles.

But now they have to prove it in full-on commercial operation. That means roughly 300 robotaxis for Cruise in San Francisco and 250 for Waymo. Waymo says it has a waiting list of 100,000 signed up for rides in its AVs, so the cars should get a workout.

Getting San Francisco right will be step one in the radical incrementalism of the AV rollout.

Step two will be expanding into other cities. Waymo has been gradually rolling out service in Phoenix and will continue to expand there -- the environment is far more favorable than in a city like San Francisco, which is why I count the California PUC's decision as the start of the real rollout. Waymo is also beginning service in parts of Los Angeles county and Austin, Texas. The company says it currently provides 10,000 fully driverless rides per week and will soon reach 10,000 a day. Cruise has announced plans for robotaxi service in Austin, Dallas, Houston, Phoenix, Miami and, most recently, Nashville.

Other companies will likely jump in, too. For instance, Amazon's Zoox has been testing self-driving technology in San Francisco and is developing a boxy vehicle specially designed for taxi services. (I'm not discussing Tesla because its approach to driverless technology is very different -- it mostly consists of Elon Musk claiming every year for the past decade that full self-driving is months way, only for it never to arrive. He may get there eventually, but, for the foreseeable future, "self-driving" in a Tesla requires a human driver with eyes on the road and hands on or right near the wheel.)

Step three will move self-driving beyond cities. At the moment, self-driving of the non-Tesla variety requires extremely detailed maps, so the car can triangulate and figure out exactly where it is even in rain or snow. But Cruise says it wants to get beyond its home base in San Francisco and serve all of California. If it can do that, then the handcuffs will truly be off. Cars will be able to drive even in areas that haven't been carefully mapped -- meaning AVs can go just about anywhere. 

Those are just the initial steps for robotaxi services, but car and tech companies won't stop there. They didn't spend tens of billions of dollars developing the technology, with tens of billions to go on the rollout, just to be a cheaper Uber. Step four -- a huge step -- will be an attempt to replace your car with an AV, whether you own it or just summon it from time to time. That means a whole set of other steps to watch for.

Fortunately, my friend Chunka laid out those steps for us in a series of LinkedIn posts here, here and here in 2018.

Let's look at the key issues he raises that are still in play and see how AVs are progressing.

--Mass production. Basically, the question is: Even when the AV technology is ready to go, will car companies be able to manufacture enough? I'd say this is a pretty clear yes, especially because the slower-than-expected rollout has given car companies time to prepare. GM has said the ability to turn technology into cars is a competitive advantage that it intends to exploit.

--Charging infrastructure. Again, the slow (in relative terms) rollout for AVs has given companies time to recognize the issue and prepare. We're a long way from having enough charging stations, but companies are building out the infrastructure quickly. A key is that companies are rallying around the Tesla plug as a standard -- it just doesn't work if you pull up to a charging station and find the plug doesn't fit your car.

--Fleet management and services. This will be one to watch as Cruise, Waymo and maybe others scale up. The issue with AVs isn't just whether the technology works -- as high a hurdle as that is. You also have to position the cars so they're as close as possible to those people who want to commute into a city in the morning and then back to the suburbs at night. You have to be able to recharge the cars and to clean them whenever a couple of kids covered in sand roll around in the back seat -- or adults engage in other forms of recreation. You need to ward off criminal behavior, such as having people use your cars to make drug deals. You have to have a backup when someone puts an orange cone on the hood or when the cars lose cellphone connection because of a nearby concert. You have to assume that major competitors such as Uber and Lyft will respond to your entrance into their market and be ready to react. There is a lot of potential for trouble here.

--Customer service and experience. Cruise and Waymo say customers settle into a driverless car and begin to trust it within minutes, but that first ride will still be disorienting, and many customers will always need care that they can no longer get from a driver.

--Security. Women may feel more comfortable traveling alone because they won't have to worry about a male driver, but it's possible to stop a driverless car just by standing in front of it -- you know it won't run you over -- and the cars are a huge target for cyber hackers, so plenty of security issues will surface. 

--Regulation. It's going to take regulators a long time to get their heads around all the issues with AVs -- how can it be otherwise? In the meantime, anyone dealing with driverless vehicles will have to be prepared for twists and turns.

--Public acceptance. This is what Cruise and Waymo are testing now, and we'll know soon enough. Based on my rides in AVs, starting a decade ago, I think Cruise and Waymo are right, and people will quickly become comfortable. But we'll have to wait and see. I learned long ago not to trust my personal impressions.

--Business viability. Early on, AV companies seemed to underestimate the complexity of operating robotaxis as a business. They didn't think in terms of the positioning of cars, the recharging, the cleaning, etc. They now seem to be more realistic and have even benefited from some changes in the economic environment -- the soaring cost for cars, including auto insurance, and the fact that Uber and Lyft are finally charging realistic prices, rather than heavily subsidizing fares as a way of capturing market share. Even if AV makers pass this first test of viability, the much bigger one will come when they try to move beyond today's robotaxi services and into the market for personal auto ownership in a few years.

--Stakeholder resistance. One person's cost saving is another person's revenue -- so all the benefits from AVs will face pushback. That could be from car dealers, insurers, personal injury lawyers, oil companies, truck drivers, transit unions and so on. Potential losers include some of the most influential policy shapers at federal, state and local levels.

--Congestion. When services become cheaper, people buy more of them, right? Well, if driverless cars become as cheap and simple as proponents believe they will, that could mean an awful lot more cars on the road. Various studies have found that Uber and Lyft have increased congestion in pursuit of convenience. We'll have to see what AVs do to the broad traffic picture.

If you put on your insurance hat and look at all the steps between last Thursday and a transformation of the world's transportation systems, you can rest easy for a while. It'll probably take a couple of years for robotaxis to be rolled out in metropolitan areas, even if all goes well. Then it'll take a few more years to get outside cities and on to the open road. Even if AVs become viable replacements for private cars, it takes a dozen years or more to replace all the cars on the road. So, personal auto insurance isn't going away any time soon. 

But I hope I've given you some sign posts. You can take your thinking today about how quickly AVs will roll out and either move up or postpone your estimations based on how well things go in San Francisco, how quickly the rollout to other cities occurs and so on down the line. 

Just remember: The starting pistol has been fired, and some massive corporations are now running as fast as they can.

Cheers,

Paul