A bright spot for small business insurers: Customer trust is on the rise.

Fifty percent of small business owners trust their carriers more than they did pre-pandemic. That number jumps to 80% when the business owner has filed a claim. One big driver: accelerated claims payments, which have helped business owners quickly recoup lost revenue in a stressed economy.

Speed is the new normal. To maintain insureds’ trust, carriers need tools that can create long-term efficiencies, from writing policies to handling claims.

One highly effective tool that many carriers aren’t using? App-free video software, which can remotely evaluate risk, assess damage, triage claims and prevent fraud.

Here, I’ll dive into three use cases to show how video tech can help speed the underwriting and claims processes.

1. Use App-Free Video Tech to Handle Property Inspections

Property inspections – key for brick-and-mortar businesses – are an important part of the underwriting process. But they’re also a major time suck.

Typically, inspectors have to spend time traveling from site to site to work through their daily queue. If an inspector gets stuck in traffic, that can affect the time they have to complete each job. Add up multiple delays, and inspections might be bumped to the following day.

For insureds, these delays aren’t just inconvenient – they can extend the time it takes to receive an accurate premium. Carriers need efficient inspections to start each customer relationship on the right foot.

With app-free video tech, inspectors can thoroughly inspect properties without losing time in traffic. Here’s what a remote inspection looks like:

1. The inspector video-calls the insured via an SMS link – no app download needed.
2. The insured uses their smartphone camera to show the inspector areas of interest, like their industrial kitchen or HVAC system.
3. The inspector guides the insured through the inspection checklist, using screen capture and augmented reality features to take photographs and circle problem areas.
4. The insured can ask questions throughout (e.g., “How should I correct this trip hazard,” or “Which security system would you recommend?”), and the inspector can look up answers in real time.

Remote property inspections allow carriers to quickly evaluate risk, adjust pricing and recommend upgrades. The result: a faster underwriting process that leaves insureds satisfied.

See also: 5 Keys to Transforming Underwriting

2. Use Remote Video Tools to Triage and Assess Claims

When business owners file a claim, it can take several days for an on-site adjuster to arrive – and even months if the loss is disaster-related. But many businesses can’t afford to wait. They might need an inspection to reopen, especially if operating from another location isn’t feasible. And the longer they wait, the more money they lose.

One reason for slow response time, of course, is the sheer volume of claims in each adjuster’s queue. With up to 100 new claims a month, adjusters need the right tools to reduce backlog.

Again, app-free video software can help.

For example, let’s say an adjuster has a few properties in today’s queue: a couple of storm-damaged storefronts and a fully burnt-out restaurant. With remote video tech, the adjuster can video-call each business owner to get a quick look at the damage.

If the storm damage seems relatively mild – say, a few loose shingles or cracked windows – then the adjuster can inspect each storefront on the spot. They can use the time they save to thoroughly inspect the burnt-out restaurant (a possible arson) in person.

When adjusters remotely assess damage, they can gauge inspection needs without unnecessary travel time. This way, fewer jobs pile up in the queue – and insureds get a faster claims resolution.

3. Use Reporting and Analytics Software to Prevent Fraud

Insurance fraud costs nonlife insurance carriers over $40 billion each year. That’s why most carriers invest a lot of time in fraud prevention.

The good news? With tech like automated red flags and predictive modeling, it’s easier than ever to prevent fraud. But there’s room to increase efficiency. Just 35% of carriers use photo analytics software – a valuable fraud prevention tool during the underwriting and claims process.

To more efficiently mitigate your fraud risk, I recommend using a remote inspection platform that enables photo reporting and analytics.

After conducting a virtual inspection, inspectors and adjusters should be able to download an editable report that includes:

• Photos of the insured property. These can verify the extent of property damage or identify features that confer premium discounts (e.g., a smart security system).
• Geotags. Standard location metadata is relatively easy to overwrite. Geotags can independently prove an insured property’s location via linked map coordinates.
• Software integrations. This makes it easier to run photos through image recognition software and upload inspection information to your policy management system.

With the right reporting and analytics tools, carriers can use video-based insights to cover their bases and avoid fraud.

See also: Why Underwriters Don’t Underwrite Much

Go Digital to Stay Competitive

These days, more carriers than ever are adopting digital tools to boost efficiencies and better serve insureds. That’s especially true for small business insurers. Tech has proven key to insuring customers and driving profit at scale.

But there’s a lot of work to do. Worldwide, fewer than 25% of carriers have fully digitized the value chain. And there’s a growing revenue gap between all-digital giants and industry laggards.

Video-first inspections can help close that gap. With another tool in their digital toolkit, small business insurers can boost customer retention and preserve their revenue generation. They can even reduce their carbon emissions, thanks to fewer in-person inspections. The overall impact: a step toward staying competitive in an increasingly digital space.

When you're in a tough spot - personally or professionally - and not sure of where to go or what to do, you need to look within at your fear.

And then you need to use it as fuel to realize your goals.

Most of us experience fear as being friction, getting in the way of making clear-headed decisions or even taking action. Let's face it: Big change can be intimidating, and there are no guarantees that it will be successful. But if you use that fear as fuel, using it to motivate you to check out every factor that could go wrong and mitigate that negative potential, your odds of succeeding skyrocket.

Every client we've ever gotten involved with was in a crisis because of fear -  fear of change, fear of failure, fear of spending too much. In those cases, fear was preventing them from finding their own solutions. Those solutions were there for the taking the whole time, but the fear was so overpowering for management that they were afraid to make a move. They were even afraid to try to identify a move.

Flee the deadly comfort zone

As we head into what many economists and business owners think will be a turbulent 2023, riding into it with high inflation and worried about a possible recession, fear will be palpable. But rather than let fear paralyze your decision-making, let it fuel that process. If you are a growth-oriented business leader, it starts with accepting fear as part of the territory. As I told a group in a speaking engagement, If you get up in the morning and you're not afraid of anything, you need to be doing something else. In that case you're not doing what you want to do in life. You're just coasting, staying in your comfort zone.

Comfort is worse than fear because it's insidious. The more comfortable you get, the harder it is to do the things you really want to do. I don't believe there's a steady state; you're either succeeding or failing. There is no middle. If you're not growing, you're falling behind. Transformation truly never ends. You should always be looking at how to continue to move your business forward and how to adapt to your customers' needs.

But after comfort, fear is the next biggest problem for many businesses. Fear stops companies from moving forward and can ultimately finish them.

The worst decision is no decision

When I say fear is fuel, the objective is to bring fear down to a level you can manage and use to your advantage.

Because fear is an emotion, many business leaders don't apply a logical process to understanding it. Some people are better at managing it and building systems that allow them to operate within that realm, without limiting their progress.

One of the first things to understand is you will never get rid of fear. But what you can do is build controls and actions that remediate the effect of the fear.

The idea behind fear as fuel is, as human beings, we're designed to survive, but we also have an optimism bias psychologically. So that combination of a biased optimism and a fear mechanism sometimes tells us, "You're a little too optimistic, and you need to step back." For example, if you bring fear to the physical world and pretend it's a wall, when most people see that wall, they turn and walk away from it because they assume that they should just walk away.

In my opinion, all the hesitation in decision-making over the years has been based on fear and not understanding and managing the fear. And that pattern creates a downward spiral. Once you get caught in that, you don't make the next decision, or the next one, or the next one. Eventually you're not making decisions anymore, and your business is failing.

At the end of the day, decisions have to keep coming. Leaders at a company need to ask themselves, "What decisions do we need to make over the next year or two to achieve certain goals?" You build a culture of forward-thinking and decision-making. Analyze that wall standing in your way. Understand why it's there and what elements are creating it.

See also: Data-Driven Transformation

Let fear liberate, not debilitate

The bigger that wall is, the more you care about the outcome that's on the other side. The more you care about something, the more your fear reflex will strengthen. And the higher up you are in an organization and the more responsibility you have, the stronger those fears are that will impede your progress.

But you can let fear liberate you and navigate around obstacles by reducing the effect of your fear response. Fear will tell you essentially that there's something you're not thinking of or paying attention to and that there's something you need to address. You should use your fear to indicate where you should be going and to give you input into your planning.

Don't look at fear as something you should ignore, or allow it to automatically shift your path. You should look at it as a beacon, an element of information essentially.

When you stop thinking about fear as something that is designed to prevent you from making progress, then you can start making decisions. Then you can start looking at planning in a more honest and intentional way. Let fear be your fuel to keep your company moving forward.

Personal lines insurance rarely sticks with the status quo for long – think of the wealth of changes that have occurred in the past two years. Societal forces, such as the pandemic and inflation, paired with continuing changes across the industry, are pressing insurers to reevaluate their business priorities, strategies and investments, including their channel expansion plans for 2023 and beyond. 

A new research report from SMA reveals that 85% of personal lines insurers are developing or deploying channel expansion strategies. Surveyed executives in the segment also shared their perspectives about channel partnerships, anticipated distribution changes and their distribution channel expansion plans, disclosing some key insights: 

• Consolidation is top of mind: Unsurprisingly, most executives see M&A activity in the agent and broker space as the most significant influence of distribution change over the next few years.   

• Insurtech partnerships remain vital: Insurers continue to team up with insurtechs for personal lines distribution, with more than 40% stating they have two to five insurtech partnerships in place today.  

• Direct business will increase: Personal lines insurers pioneered the direct-to-consumer business model many years ago. While the approach is widespread, nearly half of insurers indicate they have plans to increase direct via call centers, web or mobile.  

See also: What Future Will We Choose?

The research also makes it clear how vital independent agents and brokers are for personal lines distribution, especially when working with customers with complex or unique risks. Insurers must look at ways of strengthening and growing those partnerships, including providing the necessary capabilities for agents and brokers to succeed. 

Given how quickly the landscape is evolving, we will likely have a very different channel environment in five years than the one we have today. But by evaluating strategies and proactively pursuing right-fit channel partnerships, personal lines insurers can tap into new opportunities and fortify against future potential challenges.    

For more information on personal lines distribution expansion strategies, see our recent research report, "Channel Strategies for P&C Personal Lines: Plans for 2023 and Beyond." This report is part of SMA's research series based on surveys and interviews of insurers, agencies, brokers, MGAs and others in the distribution channel, including insights from ReSource Pro's large footprint of distribution clients. 

With a heavy focus on maximizing production and profits during the holiday season (after all, kids need the latest and greatest in toys!), health and safety considerations often become an afterthought.

Unfortunately, this time of year frequently sees an increase in the number of workplace injuries, likely a result of added responsibilities, stress, tighter deadlines and a decreased workforce.

Extended working hours have been associated with a 37% increased risk of injury, and The National Safety Council estimates that 13% of workplace injuries are attributed to fatigue.

Safe operations should be a top priority for all businesses, and a central part of an effective operations ecosystem. In the worst of cases, there can be severe workplace accidents -- most of which could be avoided with proper safety measures and training.

To make sure organizations are prepared for the busy season ahead and beyond, here are Evotix's top tips for creating a safe workplace.

Revise your safety training program

Training is an integral part of any business, and implementing safety training in the workplace is a key driver of business success. Safety training ensures that operations are continuously strengthened, staff are engaged and productivity remains high among employees.

While conducting training regularly throughout the year is important, providing extra training sessions before holidays is paramount to running a strong and smooth operation. During this time, many organizations augment existing workforces with contract workers or seasonal staff, so before the holiday season begins, refresh your training programs and make sure your staff is up to speed on the latest safety protocols.

A consideration should be toolbox talks, a short five- to 15-minute presentation to the workforce that focuses on a single aspect of health and safety. Often created by safety managers, these talks are delivered by managers on the shop floor. Another suggestion is to attach QR codes to machines where employees can scan the code and be sent to a short training video. While training has already taken place, this short video provides reminders about how to use the equipment, what PPE should be worn, considerations to make before starting the equipment, etc.

Prepare for staff shortages

Inevitably, the holiday season marks a time when people are traveling, spending time with family and friends and looking forward to a well-deserved break. One of the main components of maintaining a safe and smooth working environment is ensuring you are properly staffed.

Ahead of the holiday season, confirm schedules and determine what areas of your business will need the most focus. If you can, hire seasonal workers to ensure employees aren't overworked, fatigued and more susceptible to workplace accidents. If you are unable to hire extra staff, explore training current employees in areas of the business that may be busier during the holiday.

Use EHS tools to prevent injuries

If you aren't already, ensure your safety protocols are up to date by using EHS health and safety software to prevent workplace accidents. Having these solutions in place allows you and your employees to have a comprehensive view of health and safety across the entire organization, in near real time and on demand.

Using these software solutions can also allow businesses to draw insights from reporting and anticipate any problems before they arise, ahead of the busier season. Keeping track of any incidents helps organization leaders learn from the data and prevent recurrences and empower a safer workplace. And, these tools often provide great training resources.

Ultimately, safety should be the first priority for any company. The better the safety measures are in an organization, the smoother operations run and the more effective they will be in supplying customers and generating profits. In turn, a safer workplace also makes for happier employees, improved productivity and, most importantly, fewer workplace accidents.

See also: The Key to Cutting Workers' Comp Costs

Make health and safety your guiding principle

Acting on all of these top tips will greatly improve the safety of your company workplace, but it's still important to pose the question: Is safety engrained in the fabric of your business? Does it start at the top and make its way down to the floor level?

While businesses often include characteristics such as honesty, ambition and integrity in their core beliefs and guiding principles, health and safety aren't typically outlined values. But the reality is, health and safety should be key values, if not the guiding ones because they mean you are putting the well-being of your employees at the forefront of your business.

For organizations, this is the time to ask if your business is doing all it can to care for employees and make any operational improvements. After all, when properly executed, effective health and safety practices can bring significant business value.

Following many decades where globalization ruled, as corporations searched for the lowest labor costs and ever greater efficiency, the tide appears to have turned. I believe that corporations will be reversing their globalization efforts for at least the next decade and likely far longer. 

Shocks to the global supply chain from the pandemic and the Russian invasion of Ukraine, plus heightened threats that China will invade Taiwan, have made companies realize that, in their search for efficiencies, they have been picking up nickels in front of steamrollers -- just ask Germany about its decision years ago to build pipelines and rely on Russia for more than half its natural gas only to now have it cut off. Political trends emphasizing nationalism are also pushing companies to "re-shore" or at least "friendshore" their manufacturing.

The retrenchment will have profound, lasting effects on global businesses and, of course, on the companies that insure them.  

Now, we humans have short memories, and some of the worst effects of recent disruptions have dissipated. The supply chain problems have been sorted out well enough that the cost of shipping a container from China to the U.S. has dropped 90% from its peak and is back to where it was before the pandemic. Nobody is taking pictures any longer of container ships queued up for weeks while waiting to unload in Long Beach, CA. Likewise, gasoline prices in the U.S. are back to where they were before Russia invaded Ukraine. 

At the same time, there have been setbacks for the most extreme political movements toward nationalism around the world. So, there may be some tendency to return to the status quo before all the disruptions of recent years. 

But I don't think so.

As this very smart piece at The Real Economy Blog explains, there are just too many factors that will unravel globalization. It won't be a quick process, any more than globalization was quick. I still remember the aha moment I had about how global businesses had become when I read Robert Reich's landmark article in Harvard Business Review, "Who Is Us?", about how companies seen as, say, American might generate most of their revenue and profit outside the country. And that article ran in 1990. 

The implications for insurers will be profound -- though hard to detail just yet. In some ways, life will be simpler as companies move to "de-risk" their supply chains. Interest rates may also remain high as central banks try to tame inflation, and high interest rates help insurers' investment portfolios. At the same time, inflation increases claims costs -- as many property/casualty insurers, especially in auto, are seeing now.

And so on. A lot of forces will be unleashed by de-globalization, just as there were by globalization, and I don't pretend to be able to sort them all out. I'm basically just saying: Buckle in for the long haul.

Cheers,

Paul

The data that carriers and MGAs are missing might be the most valuable, and profitable, data of all. Yet the patchwork of legacy technology within the insurance industry, complicated by the expensive system conversions of the last two decades, has kept much of this data — and resulting bottom-line improvements — out of reach for many carriers and MGAs.

Older systems either fail to capture important data or lock it away due to a lack of compatibility with newer, more robust systems. Moreover, in recent years insurance leaders have faced bet-the-company scenarios as they tried to decide which technology platforms — many of them operating as closed ecosystems — might be the best way forward for their organizations and future growth.

This missing data, both nuanced and critical, has practical, financial applications for both carriers and MGAs. This data can also be immensely helpful in managing the insurers’ relationships with independent agents.

Customer insights, producer management and renewal optimization are just some areas for potential improvement through previously inaccessible or otherwise unavailable data; potentially improving a carrier or MGA’s topline growth by up to 30%.

What’s Missing?

Old systems didn’t readily capture various iterations of work done by agents, brokers and MGAs. Whether through system failure or lack of design foresight, older insurance tech failed to catalog and store some of the back and forth among insurers, agents and insureds that in more recent years has proved invaluable.

One example is detail surrounding insureds contacting their agents to make changes to a policy. Both the frequency and content of these interactions were not captured by legacy agency management systems. In fact, some older agency management systems acted as little more than old-school "contact us" screens found on websites of the 1990s, offering limited behavioral tracking to provide insights on the insured. For instance, detail on homeowner or property owner requests for policy endorsements, providing information on tenant improvement or betterments, adjustments to square footage, tweaking coverages or changing deductibles simply wasn’t captured. Seeing how consumers adjust coverage to get the right rate can be invaluable when it comes to determining the true nature of both the consumer and the risk.

This granular information, to some, is seen as background noise. To an increasingly large portion of the insurance sector, it provides deep insights into how consumers adjust coverage to get the right rate and may even provide early indications of adverse selection by producers.

For older systems that did capture this type of data, access and analysis were slow and expensive. However, with a cloud-based system like Amazon Web Services (AWS), it’s never been easier to deploy artificial intelligence and machine learning across a range of information and still derive significant insights. The accessibility and automated analysis of this data allow it to become sorted, informative and actionable with the push of a single button. Most importantly, these valuable behavioral insights allow carriers and MGAs to derive correlation risk.

Systems that can capture information progressively on how independent agents behave or how insureds are acting can offer insights into the customer lifecycle to indicate the churn of certain types of accounts and, in some cases, even detect potential fraud based on user behavior.

See also: Survey Data Is Your Secret Weapon

What the Data Tells Us

As the saying goes, the devil is in the details. For insurers, it’s usually in the data, and that data is only available if it is captured, made available and analyzed.

Agents can look at the insured’s behavior to determine if the policy will actually renew. Take a customer who calls customer service multiple times during the first year of a policy.  Perhaps they have questions or are requesting changes to reduce costs or otherwise adjust the policy. Depending on how often he or she calls, the agent may need to step in at renewal time to work directly with the insured to avoid non-renewal by the policyholder. 

Granular data can provide valuable insights into the risk for carriers and MGAs at the peril level, not just the policy level. If risk and exposure data is aggregated when commercial policies are bundled, carriers and MGAs may be unaware of what they’ve undertaken. For instance, if these bundled policies are largely focused on property, but some have a small percentage of risk focused on general liability, policy administration programs may not examine risks at the peril level because they were designed, primarily, for policy management rather than risk or exposure management. This can put carriers and MGAs at a disadvantage at renewal if the competition can reconstruct the policy from a peril perspective while those with less sophisticated insights lack the critical data to accurately assess and price the policy at the peril level.

What to Consider

As carriers, MGAs and independent agents continue to move away from legacy systems, the good news is most are turning to more robust, cloud-based systems. These tend to not only provide portability but also seamless system updates, ensuring users will continue to have modern agency or policy management systems for the foreseeable future.

However, there is no shortage of systems available, and each system claims to be ideal and built for the long term. What the insurance industry should aim to avoid is another round of bet-the-company investments that marries their organization to a specific, allegedly all-encompassing technology solution. After all, that’s the quintessential failure of most legacy insurance systems of the past — operating on a digital island with little or no communication with other systems used in and around the industry.

Therefore, the first question to ask any technology provider is whether their system is an open or closed ecosystem. While there can be advantages to both approaches, all indications point to an ever-faster and dizzying pace of technological advancement that will require the flexibility and interoperability that only an open ecosystem can provide. 

A second consideration is specialization. Insurance is built on specialization, and the systems used by insurance professionals should not be any different. Carriers, MGAs and independent agents should look for what fits best, both in terms of how their organizations work and in terms of their capabilities and priorities. Seeking out flexible partners that allow for other systems to easily bolt on to those of others will ensure the necessary customization or specialization needed will be available, and likely needed, for many years to come.

Third, the question of who owns the data once it becomes part of any system is critical. If that data becomes the property of the system provider or is otherwise not easily transferable, carriers, MGAs and independent agents should be skeptical. If you cannot take your data with you, I strongly suggest walking away from such a system provider. 

Why Data Sharing Saves

The question of access to this data has stymied the insurance industry for years. Carriers and MGAs have been cautious about who has access to their data. Neither party wants to give away too much to the other, and independent agents have similar concerns. Unfortunately, by restricting access to certain data, industry lessons aren’t easily shared, and efficiencies can be lost. 

However, this structural aversion to data sharing may not have much of a future in the world of delegated authority. More processes are being automated, and with automation comes measurement. A growing appetite for more nuanced data is dictating how insurers operate and increasingly becoming table stakes. And the granular detail now readily available along with the speed with which it can be accessed and analyzed is driving decision-making and the future of insurance.

In recent conversations, I’ve increasingly seen interest from carriers to provide MGAs a “carrot, rather than a stick” approach to encourage data sharing between the two. There is truly no free lunch, and capacity providers understand that there needs to be more incentive for MGAs to provide their data to overcome these historic aversions to transparency. While the specifics would vary between relationships, incentives like evergreen contracts to no aggregate limits, to mid-term commission hikes in desirable areas are being discussed in exchange for better and more real-time connectivity to MGA data. Steps like this could result in deeper relationships between MGAs and carriers, creating opportunities.   

As I noted at the start, industry data can be astoundingly profitable. We just need to have the will and the secure means to share it.

Electric cars are spreading across the nation. Interest in electric vehicles (EVs) has grown naturally among environmentally conscious drivers over the past two decades. As drivers consider the cost of EVs, some questions remain on their cost to insure, but government incentives could persuade drivers of the long-term benefits of EVs once and for all.

In light of a recent August 2022 California law that will entirely ban the sale of gasoline cars in the state by 2035 -- dubbed the Advanced Clean Cars II rule -- the auto industry is in for a shakeup. Washington, Massachusetts, New York, Oregon and Vermont are expected to follow California’s new law in the coming years.

As California sets high product safety standards and regulations, auto manufacturers have begun following  its laws as an all-inclusive way of abiding by industry standards nationally. Consumers are more likely than ever before to consider purchasing an electric vehicle (EV) but are still wondering about hidden costs. Those lingering financial questions have left uncertainties as to the long-term impact of EVs on the marketplace.

Consumer Demand for EVs

The first mass-produced hybrid hit the market with 1997’s Toyota Prius. Today, consumers can pick from a wide range of auto manufacturer EV options, from popular brands like Mercedes-Benz and Hyundai, to EV specialists like Tesla and Rivian. 

The early adopters of electric vehicles were environmental hobbyists with a strong motivation to ditch gasoline. Among the greatest challenges for those early customers, beyond the price, was how to find a charging station to accommodate the relatively short range of electric vehicles at the time. Development of charging infrastructure took off between 2009 and 2013, creating 8,000 public charging stations across the nation. 

Electric vehicles are now the fastest-growing segment of the auto market in the U.S. In the first nine months of 2021, sales for trucks and conventional gasoline cars fell by 15%, and electric vehicle sales rose 70% from the previous year.

Gasoline savings via electric vehicle use vary state by state, with high savings in areas of elevated gas prices. Consumer Reports estimates EV drivers save between $1,800 and $2,600 in operating and maintenance costs for every 15,000 miles driven.

Other incentives are available this year to encourage purchase of electric vehicles. In 2022, the U.S. began offering a tax credit for the purchase of an electric vehicle, crediting up to $7,500.

Insuring Electric Vehicles

While saving money at the gas pump is clear, insurance costs could be another story. Electric vehicles are more difficult and costly to repair or replace compared with gasoline vehicles – meaning the cost to insure is raised compared with conventional gas vehicles.

On one hand, electric vehicles have simpler mechanisms compared with gas vehicles. There are fewer components that could go wrong and an easier diagnostic process.

On the other hand, qualified facilities to repair electric vehicles are few and far between. It takes time to accumulate mechanics with the skills needed to repair electric vehicles across the nation, and the necessary amount of experts has not yet caught up to the market. For electric vehicle owners and insurers of electric vehicles, the cost to repair comes with a higher service charge, in addition to a higher cost, for replacement parts.

The cost to replace also carries a high burden on insurers. If an electric vehicle is totaled and an insurer is expected to replace the vehicle, the high cost of the vehicle is passed to the insurer.

Over time, these challenges are due to fade away. Between state regulations, federal tax credits and a growing interest in gasoline savings, insurance for electric vehicles is very likely to adjust to a new market in the near future.

See also: Why Are So Many Dying on U.S. Roads?

Reducing Costs to Insure

Insurers today offer a plethora of ways to reduce the cost to insure. 

One of the most popular ways insurers offer savings is through safe driving benefits. To qualify for safe driving benefits, the driver may download an app to record hard brakes, fast acceleration, phone usage, drive distance, drive time of day and drive location. These figures help the insurer compare the driver to a similar pool of drivers and rewards safe driving habits with lower rates. 

Many insurers highlight savings in gas, as well as tax rebates and credits, to help offset the cost of purchasing an electric vehicle.

Bottom Line

The cost to purchase an electric vehicle has dropped in recent years as more auto manufacturers are now producing a variety of different vehicle models. Interest in electric vehicles has risen through increasing motivations to be both environmentally conscious and a desire to cut fuel costs. As more electric vehicles are purchased, the skills to repair electric vehicles become more commonplace. 

The cost to insure an electric vehicle follows the market, offering coverage based on cost to repair or replace the vehicle. In light of California's Advanced Clean Air II rule and federal incentives to purchase an EV, insurance costs are due to adjust as the market for electric cars and trucks grows.

While it is always hard to say for sure what the coming year has in store for the insurance industry, a few trends do stand out, from the impact of the 2022 election to the continuing roles of inflation and COVID-19, and even green energy’s impact. 

Election impact

What happens in the voting booth often finds its way into insurance policies down the road. 

With the Republicans retaking the House of Representatives, the committee structures in the House are about to shuffle as the gavels change hands. The most consequential House committee for the insurance industry is the House Financial Services Committee. 

And even though the Senate stayed in Democratic hands, leadership on the Banking Committee, which has some oversight in the insurance industry, is going to shift because the ranking Republican member is retiring.

The key federal insurance questions likely to come up include the continued federal role in the COVID-19 pandemic response, as well as important questions surrounding flood insurance -- although, with the divided Congress, any new legislation would have to be navigated through a bipartisan majority. 

Although federal politics get the biggest spotlight every year, in the realm of insurance most of the policy is made at the state level, and the most consequential state right now is Florida. It is reeling from two major hurricane strikes on top of an already wobbly homeowners insurance market. The state redrew many of its congressional districts for this election, which means that when it comes time to convene its planned special session to tackle insurance issues, there will be a lot of new faces at the table. 

In South Dakota, the insurance story coming out of the election is the ballot-driven expansion of Medicaid to cover more low-income residents. And with the re-election of Kansas Democrat Gov. Laura Kelly, she pledged to also make Medicaid expansion a priority in her Republican-led sate. 

Arizona also pushed a potentially consequential ballot initiative governing how the state handles medical debt and the interest rates surrounding that. 

And abortion access continues to be a state-driven issue that was on many ballots and one that was generally protected in the states where it was up for a vote. 

See also: What the Mid-Term Elections Mean

Inflation

Inflation is being felt across so many areas of the economy, and insurance is no different. When it comes to insurance, the main inflationary pressures come from rising costs to repair and replace, whether for a home or an automobile. 

Rising mortgage rates have been pushing down home prices in many markets, but shortages in labor and increasing costs of materials mean that after a homeowner’s claim, the costs are still going to be higher, eventually leading to higher homeowners premiums. 

In the automobile realm, the same factors of costly labor and parts are in play, but unlike with homes, automobile prices are continuing their upward march, though there are glimmers that used vehicle prices are slowing. The most optimistic analysts are predicting a near-term end to the semiconductor shortages that have been haunting automakers for years now.  

Medical inflation continues to outpace general inflation, meaning the continued upward pressure on healthcare premiums is likely to continue for the foreseeable future.  

Life insurance 

In a bit of contrarian irony, inflation may be helping life insurance — at least, the tools used to fight inflation have the potential of helping life insurance. 

Life insurance companies invest premium payments when they aren’t needed for death benefits, and those investments tend to prefer safe havens. When the federal funds rate sat at essentially zero for years, that pushed life insurers into riskier asset classes to find return on those investments. 

Now that inflation fighting is pushing rates up on Treasury bills, life insurers are able to rebalance their portfolios, shifting back to government-backed, so-called risk-free investments, lowering their overall risk profile. 

Another trend is policies being targeted at younger consumers. While younger people don’t think as much about end-of-life expenses or retirement planning, many advisers are pushing them to strongly consider life insurance — especially if they are intertwining their financial lives with loved ones. 

One of those entanglements is in student loans. Even though federal student loans, and even Parent Plus loans, discharge if the student dies, the same isn’t always true of private student loans. If a parent takes on a private student loan on behalf of their child, and the child dies, the parent may be left holding the expense on their own. The same goes for co-signers of other loans, such as car loans, personal loans or mortgages. 

While the traditional sales pitch for a life insurance policy is that it provides income to support dependents who rely on their income, these policies for young people may be pitched as the opposite — a term life policy may be an inexpensive way to protect the people who they are relying on for support. 

Life insurance tends to be most affordable for young people because they tend to be healthier, and the policy has a longer time to compound in value, so the monthly premiums can be lower. 

See also: Cyber Trends That Will Change 2023

COVID-19

Even though COVID-19 continues to circulate in our communities, many of the emergency measures put in place to fight it have been coming to end. That means that the government is now shifting the costs for vaccines and testing onto the private insurers, which could mean higher costs and eventually higher premiums down the road. 

For people with insurance policies, this shift is going to be largely in the background because they will continue to get that care at no out-of-pocket cost. 

But the biggest impact of that shift is going to be felt in the uninsured communities. Before this shift, the federal funding meant that even uninsured people had access to many COVID-19 treatments and tests at no cost, but now many of those will be felt as out-of-pocket costs for those uninsured. 

Green Energy

On the heels of the COP27 summit on climate change, a lot of eyes have turned to green energy solutions. From an insurance perspective, those green energy solutions need to be approached with some consideration. 

When it comes to at-home rooftop solar, it is important for prospective buyers to first check with their insurance carrier. Even though rooftop solar is built to withstand much stronger storms and winds than the roofs on which they are built, some insurance companies write specific exclusions saying they won’t be covered by a standard homeowners policy. 

Absent a specific exclusion, rooftop solar would be covered as long as it is permanently attached to the home. The same goes for the inverters and other equipment, and even backup batteries that some of the most modern systems are coming with. 

That said, adding these features tends to raise the value of the home, which may mean that a homeowner is suddenly underinsured. 

On the auto end, while electric vehicles are covered by standard automobile policies, they can be more costly than their internal combustion brethren, and repairs can cost more, as well. That often translates to higher premiums for EVs. 

The higher insurance costs also come from the fact that EVs only represent a few percentage points of the vehicles on the road. Because they are relatively scarce still, there aren’t a lot of aftermarket parts available for their repair, and not every auto shop is certified to work on an electric vehicle, driving up costs at the shops that are certified. 

As more electric vehicles hit the road, market factors will mean that more spare parts will become available and more shops will specialize in EV repair, but in the short run, those higher costs translate to higher insurance premiums on many electric models. 

Given the general consensus that these green energy technologies are a net positive for society, though, there are many industry observers wondering if subsidies to offset these higher insurance costs for these lines should be on the horizon. 

It’s become an overused little joke that most people “fell into” insurance rather than choosing it, but when we consider the talent shortage in underwriting today it’s not so funny any more. The talent gap is only growing, exacerbated by the Great Resignation and the Great Retirement. We can no longer afford to be complacent about the fact that most people in our industry had no intention of being here, and that the new talent we need for future growth – including the best business minds, data scientists, analytics pros and people who understand artificial intelligence and "speak machine" – is choosing other industries over ours. 

Insurance provides an essential foundation in maintaining the stability, health and growth of our businesses, communities and individuals – including those that are the most vulnerable. The impact is more important now than ever. Insurance also is a people business, one that is built on trust and reliant on human interaction and judgment for deal analysis and strategy, pricing and negotiation, distribution partnerships and team building. 

Regardless of line of business or size of business, there still needs to be a human touch, and there is a requirement to think about the overall business strategy, the portfolio and broker/agent relationships. It is not right to assume that AI, machine learning, and other technologies will replace the underwriters we are losing. Instead, we must look to leverage new technologies to empower and enable the human side of underwriting and create a work environment that people want to join.  

None of This Is New

Industry leaders have been talking about the talent drain for nearly a decade, but the pandemic and other economic forces have certainly accelerated it. According to U.S. Bureau of Labor Statistics estimates, 50% of the current insurance workforce will retire in the next 15 years. A study by McKinsey found that 65% of those who resigned from a job in insurance between April 2020 and April 2022 left the industry entirely. That percentage is exceeded only by the 76% in consumer/retail, which has always had a problem retaining people, and the 72% in the government/social sector. If we’re honest, we have always had a problem attracting the best talent, and now we’re running out of people entirely. The time has come to do something about it.  

Given the turnover documented in existing insurance talent, it is even more crucial to attract and retain the next generation of talent. However, if we look to younger generations, we are failing there, as well. According to the Deloitte Global 2022 Gen Z and Millennial Survey, 46% of Gen Zs and 45% of millennials feel burned out due to the intensity/demands of their working environments, while 44% of Gen Zs and 43% of millennials say many people have recently left their organization due to workload pressure.

As an industry and within individual organizations, we need to focus on creating cultures that allow people to do their best work, make an impact, connect with each other and have time and space to live their best life. Said differently: Insurance must do better at keeping up with cultural and social expectations. A good culture can exponentially improve the underwriting experience, but it needs to start with the backbone of a productive and capable work environment. Technology, tooling and workflow all have a huge impact on the underwriter’s day-to-day work environment and how they feel about their job at the end of the day.  

If we assume that insurance will remain a human business (though the roles of those humans will inevitably evolve), our efforts to modernize and digitize underwriting need to be human-centric. We need to ask ourselves how the technologies being implemented today will improve the underwriting experience for current and future underwriters and staff.

Let’s talk about the current underwriting work environment – it isn’t pretty! The technology that has been available in most insurance environments is decades behind what we are accustomed to using in our personal lives – it's slow, static and highly manual, whereas the consumer tech and apps we’ve grown used to in most every other facet of our lives are seamless, beautiful, intuitive and fast – they anticipate and enable our needs. If you think about what is holding back the insurance industry’s ability to attract and retain talent, outdated technology and tooling are a big part of it.

McKinsey has identified providing employees with “a suitable physical and digital environment that gives them the flexibility to achieve a work–life balance” as a key factor in employee satisfaction and talent retention. The right digital tools “free people up to focus on the more creative and engaging aspects of their work.” 

When we consider the significant investments insurers have made in new technologies, data sources, predictive models and digital transformation initiatives, the results are frankly not good. I’ve seen countless companies use band-aids and bubble gum to hold together the systems where underwriters transact business. Fatigue from constant change that doesn’t align with the way underwriters actually work is all too common. So, how have we missed the mark when it comes to improving the underwriting experience? 

Oftentimes, technology capabilities or operational workflows are positioned as business problems, without much consideration for the day-to-day reality of the people in the organization. As a result, the solutions proposed tend to focus on automating away manual tasks. AI and machine learning, for example, are used to replace manual tasks on an ad hoc one-to-one basis. So, rather than having an operations person taking information from an Acord submission form or email and manually rekeying it into a policy admin system, we're going to automate that piece. And that’s great! It speeds things up, right? But piecemeal task automation is only the tip of the iceberg in terms of what these advanced technologies can do, and automation is only one step on the journey toward making a real impact on underwriting and operations.

See also: The Defining Factor in Underwriting Success

Seeing Underwriting Transformation Through a Different Lens

I’d argue that we need to look at the problem through the eyes of the underwriter. It's not enough to have executive leadership spending time and cycles considering the business problems of the day in terms of cost of systems, workflow challenges and expense-ratio issues without understanding the lives of underwriters, how they think, what they feel and why they do what they do. At Federato, we believe that businesses don’t have problems, people do. To improve underwriting productivity and performance, insurers need to take an "underwriter-first" approach to technology adoption. If you take the time to listen to your teams and ask questions, you can solve workflow problems by creating a beautiful underwriting experience that supports and empowers underwriters and staff. When you do that, the business problems disappear.  

The Next Frontier of Underwriting Transformation

The next frontier in underwriting transformation will be about using data and bleeding-edge technologies like AI and machine learning to augment the art of underwriting and operationalize the science of it. 

Up until now, insurers have essentially identified more information, more tools and more places for an underwriter to go to assess and price a risk. Insurers have layered on all of these new “versions of the truth” in a way that has left the underwriting community feeling like they are overwhelmed and drowning in data, instead of being empowered to make good decisions. To create workplaces where people want to stay, we need to make this information more accessible and digestible within the underwriter’s core workflow. Finding risk selection data, guidelines and rules shouldn’t be a scavenger hunt.

If we start from first principles, what are the core functionalities and data that underwriters need to be productive and make the right risk decisions, and how can technologies like AI and ML be applied exponentially to help underwriters in these areas? I see three key areas where intelligent, next-gen underwriting technologies can make a huge impact on underwriting productivity and performance: portfolio management, action-oriented workflow and single-pane-of-glass visibility into all relevant account information.

Portfolio Management

Number one is how your underwriters understand, manage and balance their portfolio. Today, there’s a good chance that they use static analysis and a bunch of fancy, macro-enabled spreadsheets – and there’s an even better chance that your organization’s portfolio targets are routinely missed. Insurers can use AI to let underwriters see into their portfolio at the most granular level, enabling them to see what’s happening in real time so they can dynamically course-correct, balance and shape the portfolio in the direction that they want. Imagine being able to view the state of your portfolio this morning versus looking at stale booked premium data that is 45 days out of date. Underwriters want to know how they’re tracking toward their goals and how their portfolio is doing relative to every other underwriter’s transactions across the entire organization. Having the ability to set goals and rules, dynamically track progress toward them, do what-if modeling and forecast with information in real time is truly transformative. 

Action-Oriented Underwriting Workflow

A lot of "first wave" technology is task-oriented and assumes that underwriting is a linear process. It isn’t. As an underwriter, you have to compile a lot of information at any given time. You have to price a deal, do a referral to give a quote, go back and forth with the broker on pricing and do another referral before you can quote again. If you have a list of 33 items and the technology forces you to get through items one through 30 before you can do 31, that's not very intuitive. We need to shift to an action-oriented approach to workflow, enabling underwriters to really quarterback an account. And we need to support them by digitally enabling risk-selection assistance and prompting, account triage to surface the best deals based on appetite and winnability and task management directly within the workflow. Underwriters are not unskilled labor who are content taking orders and following checklists. They are highly trained, strategic thinkers who really want to do the right thing for their organization. By treating them as such, and providing the right tooling for them to be effective, we can, in fact, attract the very sort of intelligent, creative and entrepreneurial people we want to the profession.  

See also: Why Underwriters Don’t Underwrite Much

Single Pane of Glass

As insurers adapt to new and emerging risks, there are always new data sources that should be considered for every decision, new places to go, new tools to use and new guidance to review. Underwriters shouldn’t have to remember which guidelines to look up, which websites to visit, which tools to use and which Excel Workbook to download. Having all of this information, both proprietary and third-party, all in one place is a tremendous advantage for underwriters looking to out-select the competition. AI and machine learning can do the work of a thousand people to comb the web for every piece of data that might apply to a given account, and do it almost instantly, to run the most complex analytical models to guide underwriters to the right decision. They can go out and gather and distill the right information and then serve it up to the underwriter who is making the decision at just the right point in the process. Rating data, pricing models, exposure information, loss information, third-party data, CAT modeling – having all of these disparate data elements compiled in a “one-stop-shop” is incredibly important, and it’s one of those things that machines can do better and faster. 

Summing Up

These are only a few of the ways that advanced technology can empower underwriters to focus on value-added, human-centric tasks. When you use AI and machine learning to create a digitally enabled workplace and match up risk selection and portfolio insights with operational execution at the account level, there’s no longer any separation between your business strategy and your underwriting execution. 

That's the power of what technology can do when it’s applied in a thoughtful, human-centric way. The endgame here is freeing up humans to focus on the tasks to which they are best suited – things like analyzing market dynamics, negotiation, relationship building, pipeline development and joint selling – rather than consuming their precious time on rote admin tasks and "data foraging." Technology does not eliminate the need for underwriters. It just enables them to use their skills, knowledge and judgment more productively.

Of course, all of this can have a huge impact on underwriting performance, but I see the primary benefit here as creating work environments that are going to help insurers attract new talent, retain the talent they already have and decrease the time it takes for new hires to achieve proficiency in their role. At the CPCU In2Risk 2022 conference, I asked the room how long it takes a new underwriter to go from zero to productive: The majority voted for 24 to 36 months. This is a ludicrous proposition. AI and machine learning can accelerate onboarding by engaging new underwriters with systematic knowledge, contextual prompting and recommendations on the "next best action" based on the insurers’ rules, guidelines and strategic goals. 

People who feel supported, informed, capable and good at what they’re doing tend to stick around – and if we can help them feel that way quicker, we can ward off burnout and churn. Insurers who show a commitment to advanced technologies like AI and ML – the really cool stuff – will be much more likely to attract the right talent. Empowering the next generation of underwriters is the way that we solve the people problems that have plagued insurance for too long and get new generations to seek out and choose our industry first above all others.