Gen Zers are the latest generation of insurance policyholders, and they’re changing the customer engagement game. But agents have a knowledge gap problem: Over 40% of Gen Zers don’t feel well-informed about insurance.

Without the right insurance knowledge, customers will likely make poor coverage choices – and might even avoid purchasing a policy they need. To close the knowledge gap, agents need ways to educate customers about insurance specifics.

One helpful solution: a mobile app that gamifies the learning process.

Digital games activate our brains’ reward pathways, which boosts our motivation to make in-app progress. Over time, customers will better understand insurance and make more confident, knowledge-based coverage decisions.

With a clear strategy, agents can help customers learn about insurance and make each lesson stick. Here, I’ll explain how.

Choose an Insurance-Optimized Learning App

General financial literacy apps are great for helping to educate people on many valuable topics, but for insurance agents, having an app that's customized for insurance education is the best way to go.  

The right app will enable customers to zero in on homeowners or auto insurance basics separately from, say, investing or savings tips. The app should also provide agents with a number of powerful tools to fuel lead generation and customer insights.

Which features matter most? Choose an app that includes:

• An agency-specific sign-up code. This builds credibility and positions the agency as an insurance education advocate.
• Comprehensive data collection. Sign-ups should prompt customers to include their phone number, email address and birthday for a fully personalized experience.
• Customizable learning modules. Customers should be able to choose what they learn about, from coverage types to underwriting and claims processes.
• Analytics tools. These help agents understand which modules customers are engaging with most, enabling more relevant consultations and cross-selling conversations.

Together, these features create a strong foundation for a successful gamified learning experience. The benefit: Customers gain knowledge, while the educational tool builds agency trust and powers long-term insights.

Offer Virtual and Real-World Rewards

With gamified learning apps, rewards typically come in the form of digital currency, which users can spend on in-app bonuses and customizations. But virtual rewards can only do so much – especially when gamifying dry insurance topics. Customers may log on a few times to earn virtual coins and bonuses. The best rewards, though, have a real-world impact.

To maximize app usage, look for an app that pairs in-app and real-world rewards. For instance, a customer might earn 500 coins after finishing a homeowners insurance module. Then, they can choose how to use their reward: spend it on a fun avatar outfit or save up for a $15 Amazon gift card.

As more customers use the learning app, agents can learn which rewards work best and tweak their offerings as needed.

See also: Let the Games Begin! Customers Love Them

Engage Customers at Every Opportunity

Even with a powerful reward system, it can be tough to encourage long-term app usage. But with insurance education, consistency is key. Customers need constant learning and reinforcement to enable informed coverage decisions.

Look for digital and physical ways to encourage learning. In many cases, you can likely take advantage of certain app features (e.g., push notifications and virtual currency) to supplement your efforts.

Not sure where to start? Consider:

• Encouraging customers to keep push notifications on. The app can nudge customers to log in consistently by sending a push notification at a certain time each day.
• Sending seasonally relevant reminders. For example, remind customers to complete a flood insurance module ahead of hurricane season.
• Mentioning the app via email or text. Weave app mentions into newsletters or text communications.
• Checking in during consultations. Ask customers about their app progress and experience.
• Offering rewards on special occasions. Consider giving customers virtual currency for logging in on their birthday or policy anniversary.

With frequent reminders, customers can maintain their learning momentum and strengthen their insurance knowledge. Ultimately, they’ll make better coverage choices and can avoid the pain of experiencing uncovered or under-covered losses.

Future-Proof Your Agency With Gamified Learning Tools

Gen Z is the most fully online generation yet. To reach its members, agents will need to provide an insurance experience that factors in Gen Z’s digital-first needs.

Gamified learning apps can be a key part of any agent’s Gen Z engagement strategy. With mobile education tools, agents can position themselves as agile industry professionals that are ready for the next generation of policyholders.

At the end of September, the Office of the Inspector General (OIG) for the Department of Health and Human Services (DHHS) released an initial report on the U.S. Food and Drug Administration's (FDA) accelerated medicine approval program, which allows for earlier approval of drugs that treat serious conditions. The gist of the findings in the FDA's continuing evaluation is that the Medicare and Medicaid programs spent $18 billion over three years on drugs for which no benefit had been confirmed. Once drugs were approved, manufacturers failed to complete the clinical trials necessary to establish their medications' efficacies. Apparently, there were no negative consequences for the drug makers, so the process became systemically diluted.

This is the tip of an iceberg. For context, consider that in 2021, U.S. drug spending totaled $577 billion. This figure includes all drugs purchased through commercial coverage and through federally funded programs like Medicare and Medicaid. Contrast that with the $6 billion per year wasted on unproven drugs in the OIG report, which is just a bit more than 1% of total U.S. drug spending, a literal drop in the bucket.

More to the point, prescribing drugs that deliver unproven results is not only nothing new, but rampant. In 2015, Kim and Prasad reported in JAMA Internal Medicine that, between 2008 and 2012, two-thirds of cancer drugs approved by the FDA "have unknown effects on overall survival or fail to show gains in survival." Really consider that for a moment; the consequences are staggering.

Worse, the complexities involved with the many variables that affect drug efficacy have resulted in wide-ranging prescribing patterns across all of medicine. This problem is perhaps most evident in the often strikingly poor "control" rates among chronic disease patients. With their downstream impacts, these conditions consume 85% or more of all healthcare expenditures. For instance, the CDC estimates that only about one in four (24%) of adult U.S. hypertension (HTN) patients' conditions are under control. For Heart Failure with Reduced Ejection Fraction (HFrEF), the CHAMP HF-Registry found that only 1.1% of patients were under control. The number of prescribing permutations for HTN exceeds 300 million. For HFrEF, it exceeds 850 million. In many cases, it is simply beyond reasonable comprehension, with so many competing priorities, to understand healthcare choices, to juggle and assess the number of variables at play to accurately identify the correct drugs and dosages for a given patient and condition.

The drug excesses - both in unit pricing and in utilization - that have become so common in U.S .healthcare have facilitated a crop of new medication management companies dedicated to enabling more value-driven perspectives. One company has developed an AI tool, the MedsEngine, that guides precise physician prescribing for major chronic diseases, based on a patient's individual characteristics. In pilots, chronic condition control rates have soared.

Companies like Vivio Health and Ascella Health track whether prescribed drugs, dosages, administration sites and other options are the best clinical and value-based choices. Others - like Illuminate Health - leverage pharmacists to more effectively manage patients on complex drug regimens, as pharmacists are more often embedded into care teams participating in a more integrated, team-based approach.

See also: Should Big Pharma Be Scared?

Another promising area of recent focus is the identification of gene-to-drug interactions, representing an entirely new information source that can profoundly refine prescribing accuracy. Blue Genes Lab provides pharmacogenetic profiling, as do many other labs, that can be accessed by patients and clinicians. They have additionally developed a mobile app that, based on the patient's genetic profile, delivers push notifications of problematic drug choices, lists drugs that are genetically compatible and screens for potential drug-drug interactions. The intention is to permit physicians to maximize effectiveness and employ precision medicine best practices. Drugs are avoided that cannot benefit a particular patient or result in costly adverse drug reactions.

These are major advances with the potential to improve health outcomes dramatically, while eliminating a hugely wasteful percentage of current drug spending. Many value-focused companies will warranty their results, which is understandable in a target-rich environment like medication management. They're signaling that there are meaningful solutions to the overtreatment and unnecessary drug costs that plague the drug industry and healthcare generally.  Further, this progress illustrates the power of embracing innovative techniques, rather than archaic and opaque methods associated with prescription medication and reimbursement.

In sum, the OIG's findings are hardly surprising, and they're a tiny symptom of a massively complex problem. As value-based capabilities and arrangements get more market traction, drug prescribing will be increasingly based on a more holistic view of a person and on the likelihood that a particular drug and dose can solve a specific condition(s). To get there, though, the agencies that oversee and regulate U.S. healthcare, and the firms that orchestrate and deliver the components of care, must be capable of rationalizing the current system's excesses. Most importantly, employers and other healthcare purchasers must, through their health plans, empower these new risk management vendors to hold the pharmaceutical and pharmacy benefit management industries to account or, alternatively, be fearless in navigating these decisions independently to seize direct contracting opportunities.

The modern world moves fast. Consumers expect convenience and the ability to get what they need from the smartphone in their pocket. Businesses and their investors are always looking for efficient ways to meet consumers’ expectations of instant fulfillment.  

In today’s insurance world, the apex of consumer convenience is straight-through processing. Now, consumers can input all essential information on an online form and submit everything needed for a quote online. Carriers then use a custom-built algorithm to evaluate the information and provide a quote in minutes, and in some cases—instantly! 

Unfortunately, when the form has inaccurate information, there can be significant delays caused by something as simple as a mistyped address. Automated processes are interrupted, and the correct address must be manually sought. The more automated operations are suspended, the longer it takes for the customer’s requests to be fulfilled, and the longer it takes to start seeing ROI for your efforts. 

Having an accurate address autocomplete option can help streamline your straight-through processing and minimize the need for manual intervention. Insurance companies that implement an address autocomplete utility can see improvements with better webform submission rates, improved accuracy on those submissions and a decrease in fraudulent claims. 

Increasing Webform Submission Rates

Webform address fields are an often-overlooked friction point for users that may lead to incomplete or abandoned forms. The longer prospects take to fill out their address on a web form, the higher the chance they’ll give up. The mix of numbers and upper- and lowercase letters in an address slows the typing and increases the likelihood of mistakes, especially on a mobile device. Using an autocomplete utility can greatly reduce the number of characters a user has to manually enter by suggesting verified addresses as they type. The utility can even be set up to give top priority to address suggestions that are close to the user’s geographic location and can even limit result to a state, city or ZIP code. In just a few keystrokes, your prospects and customers can select their address.

See also: Using Payments to Improve the CX

Improving Accuracy

Allowing users to submit their address information without standardization leaves room for mistakes, entering bad data into your database and creating delays in producing quotes. As much as people think they are excellent typists, we all make mistakes. It’s easy to push the letter "V" instead of "B" or add an extra digit to a house number without realizing it. 

Another challenge is when a potential customer inputs an address with a minor difference from the one in your system. While a person could tell that “210 jefferson center floor 2” is the same as “210 Jefferson Center, Floor 2,” an automated system may be unable to. Simple mistakes like incorrect street names or numbers can trigger a manual exception process and delay a policy’s creation. And once that data is part of your database, it takes manual intervention to correct or remove it.

Address autocompletion prevents these types of errors from being made. 

Rooftop geocoding and address verification can help with accuracy for creating insurance quotes, as well. Address verification standardizes and validates the address, while rooftop geocoding pinpoints the exact location of the structure for accurate quote creation. Carriers can then use that data to determine how close the structure is to a fault line, coast line wildfire zone or tropical storm area. When combined with the right risk analytics tools, geocoding and address verification can help you create a robust straight-through processing system. 

Avoiding Fraud

A 2021 survey from Finder.com found that 35.8 million American adults admitted to lying to their insurer. Nearly a third of those who admitted lying said they used an inaccurate address to obtain better rates. Address autocomplete can help prevent fraud because, instead of depending solely on user input, address autocomplete provides a precise, verified address for the insurer. 

Conclusion

Adding an address autocomplete utility to your straight-through processing arsenal helps save time and decreases the chance of errors. Automation reduces the workload of insurers, both in the present and down the road. Straight-through processing with an address autocomplete utility makes the quote process convenient enough to please consumers, accurate and efficient enough to please insurers and fast enough to fit into the lifestyle we have all come to expect.  

As of Nov. 14, the control of Congress was too close to call. There was not an official winner in several races, and some projected losers are contesting the results. The U.S. Senate will remain under Democratic control, even though the Georgia race will be determined by a runoff election on Dec. 6. Control of the House remains undecided, though trending toward the Republican party.

Regardless of this outcome, with Joe Biden remaining president, we expect Capitol Hill will remain gridlocked. Given that this was a mid-term election, most of the key elections occurred at the state level, with many of the national issues being fought locally. For insurers, this will result in multi-state efforts to understand and respond to regulatory challenges.

Uncertainty around election outcomes and control extended to the state level. Eighteen states remained in Democratic control, while Republicans retained control of 23 states. Eight states remained divided, with one party controlling the governorship and the other party controlling both houses of the state legislature.

The Post-Mid-Term Market Overview

If Republicans do gain control of the U.S. House of Representatives, investors will likely celebrate the end of one-party rule, as many of the most anti-growth measures being contemplated in Congress will fall by the wayside. Regardless, we believe 2023 could be a difficult year for markets, especially in the first half.

There are four major policy drivers of growth—monetary, fiscal, trade and regulatory.

• Monetary policy - The Federal Reserve’s Federal Open Market Committee (FOMC) is not likely to change course based on the election outcome. We expect the Fed to drive the economy into recession, one we hope will be mild and short, to bring inflation down into its target range.
• Fiscal policy - As spending bills must start in the House, per the U.S. Constitution, House party control is important. If Republicans gain control, as seems likely, it is unlikely that any new spending and, consequently, more inflation-spurring demand-side stimulus will be forthcoming. New taxes are less likely, as well. The lame-duck session will probably deal with funding the government (avoiding a shutdown threat, we hope) and the National Defense Authorization Act, as both will have some bipartisan support. If Democrats keep control, we would expect higher spending, such as a re-invigorated Build Back Better bill, and higher taxes.
• Trade policy - Trade and foreign relations are largely purviews of the Executive Branch, so we expect little impact from the mid-term results. Further, there is not that much difference between the parties when it comes to dealing with China and Russia, the two biggest concerns right now.
• Regulatory policy - We can expect continuing aggressive regulatory initiatives from the current administration. However, as Congress holds the purse strings, whichever party gains House control will determine how easily the Biden team can achieve the appropriations to fund them.

So, we expect earnings and equity markets to struggle, especially in the first couple of quarters of next year, until the FOMC ends the tightening cycle. We believe the U.S. dollar will ease a bit but continue to be strong against economies still under stress, especially in the U.K. and continental Europe. In this environment, high-grade USD bonds in the short to middle part of the yield curve should provide the best opportunity for income and stability. If we have a recession and it is short and mild, we will look for an earnings recovery in consumer sectors in the second half of next year, with opportunities in USD equities and longer-dated bonds.

Environmental, Social and Governance Progress or Pushback?

Regardless of what happens in Congress, with the election further locking in single-party control at a state level, insurers will continue to face a patchwork of ESG disclosure and investment regulations. Our opinion is that this is likely to lead to higher compliance costs for insurers as the differences in ESG disclosure among the states increase. We also think the ability to reallocate investments will be hampered as some states continue to prohibit divesting from fossil fuels. From a public relations perspective, these differences among the states may make it more difficult to provide a clear and consistent message about ESG from insurers to their stakeholders.

Evidence of the gap between state views on ESG has been on display during 2022, and the mid-term elections have widened that gap. Red and red-leaning states have begun to push back against efforts to increase ESG disclosure and investment. Blue and blue-leaning states are likely to increase their oversight of ESG corporate initiatives.

Insurers are stuck between a rock and a hard place. On the one hand, stakeholder pressure to divest from fossil fuel investments and withdraw underwriting support for fossil fuel products is strong and growing, particularly in Europe, where a string of insurers and reinsurers have adopted such measures in recent years. On the other hand, a number of Republican-controlled U.S. states – notably Louisiana, Florida and Texas – have pushed back on actions that they perceive as a violation of fiduciary duty and as damaging to local fossil fuel interests.

The state pushback against ESG has taken two forms: 1) No ESG investment and 2) Boycott. The states with “No ESG” laws do not allow state funds to be used for ESG or social investment. The boycott states bar local authorities from doing business with banks and investment management companies that have adopted ESG policies and divested from fossil fuel-based energy companies.

See also: Climate Change and Product Liability

Little Progress in Tort Reform

Tort reform typically has bipartisan support, and this mid-term election saw little progress. No state had tort-law reform on the ballot, but Arkansas, California and Missouri were considering initiatives.

Although ballot initiatives were absent, Republican success in achieving or tightening control of state legislatures and governorships creates a more favorable business environment for future tort reform. Our eyes will remain on Florida, as it convenes a special legislative session in December to address the challenges facing its home insurance market. Florida is by far the most expensive state in the nation for home insurance, with premiums in 2022 running at nearly three times the U.S. average, so pressure for reform will continue to be strong.

Industry Pushback on the PRO Act

When it comes to insurance distribution and advice, many state and federal regulators have focused on suitability. However, proposed changes to U.S. labor laws have been a growing concern among advisers and their firms. The Protecting the Right to Organize (PRO) Act, if passed, would affect U.S. labor law. The House passed the PRO Act in early 2021, and unions and other Democratic groups were pushing for the Senate to pass the PRO Act in 2022. The PRO Act has stalled in the Senate, as it would need at least 60 votes to avoid a filibuster, and obtaining those votes may continue to prove difficult given the continuation of the Senate’s near balance of Republican and Democrats.

The PRO Act offers broad reform, and multiple insurance and financial advisory trade groups have pushed back against the act because it would reclassify many independent agents and advisers as employees. To determine the independent contractor status of an employee, the PRO Act would use the “ABC” factor test employed in similar legislation in California, though the California rule included a carveout for financial advisers.

Medicaid Expansion Slowly Continues

Healthcare continues to be a focus within every election cycle. While the topic of the Affordable Care Act (ACA) was muted compared with prior election cycles, in some states Medicaid expansion was a hot topic. Based on mid-term results, that expansion slowly continues.

For insurers, an increase in Medicaid-eligible individuals provides the industry with an increase in membership and premium growth. Only 12 states have yet to adopt and implement the Medicaid expansion program per the ACA; of those 12, 10 had a gubernatorial election, and one had a ballot initiative focused on Medicaid expansion.

Ballot initiatives have been popular and effective in expanding Medicaid. However, in the 12 remaining states, only Florida, South Dakota and Wyoming allow voter-driven ballot initiatives. The remaining nine states would require voters to elect a governor and local state representatives who would support an initiative.

Voters in South Dakota passed a ballot initiative to amend the state’s constitution to expand Medicaid eligibility. Governor Kristi Noem (R), who won reelection, has stated that, while she does not support Medicaid expansion, she will implement the amendment if it is passed.

See also: Healthcare Inflation's Impact on Auto Insurers

Private Equity Annuity Insurers Remain Focused on the States

One subject where control of the Senate is particularly important is the involvement of private equity firms in the annuity industry. In March 2022, Sen. Sherrod Brown (D-OH), chair of the Senate Banking Committee, called on the NAIC and Federal Insurance Office to study private equity annuity insurers’ impact on the retirement security of individuals. He was especially interested in the impact on retirees who transferred their defined benefit pensions to such insurers. That request was followed by Banking Committee hearings in September in which Sen. Elizabeth Warren (D-MA) echoed Sen. Brown’s concerns.

We think, with the Senate remaining close, there is a low likelihood of federal regulation affecting the ability of private-equity-backed annuity insurers to continue engaging in pension risk transfers.

Data Protection and AI Regulation, the Question Is When, Not If

As technology firms expand their scope, the potential for hidden biases in the algorithms driving those systems is a concern among some regulators.

While there were no initiatives addressing data protection or AI on state ballots, control of governorships and state legislatures will determine the course of regulation. Both political parties have expressed interest in increasing data protection and privacy regulations.

According to the National Conference of State Legislatures, in 2022 at least 35 states and the District of Columbia enacted or considered consumer privacy bills. Insurers would like the freedom to use personal data for underwriting and pricing. Sensor-based technologies are rapidly developing uses in property insurance underwriting. Data-privacy legislation differs across jurisdictions but focuses on creating and regulating boundaries around the collection, use and disclosure of personal information by businesses.

Social media and genetic information are of interest to life and health insurers to help improve underwriting. All sectors are leveraging AI and machine learning to increase efficiency.

At the federal level, the bipartisan American Data Privacy and Protection Act (ADPPA) would create a comprehensive federal consumer privacy framework and generally preempt state laws. At this point, we believe it is unlikely that the bill will be considered in the full House or Senate before the conclusion of the 117th Congress on Jan. 3, but ADPPA could become a priority issue for the new Congress.

The NAIC’s work on developing new model laws on the use of AI is likely to continue, despite the election outcomes.

See also: The Risks of AI and Machine Learning

State Insurance Commissioners

Insurance is regulated at the state level, and a change in a state’s insurance commissioner can affect the regulatory priorities of those states’ insurance departments. In the 2022 mid-term elections, the states in which insurance commissioners were on the ballot -- California, Georgia, Kansas and Oklahoma -- all kept their incumbents in office.

California: Commissioner Ricardo Lara (D) won reelection.

Georgia: John King (R), the incumbent appointed by Gov. Brian Kemp (R) to replace the former commissioner who resigned, won election to a full term.

Kansas: Incumbent Commissioner Vicki Schmidt (R) won re-election. Schmidt has been a national leader at the NAIC across health and property/casualty work.

Oklahoma: Commissioner Glen Mulready (R) ran unopposed for his second term.

In addition, in several states, the governor appoints the insurance commissioner. A change in the state’s executive branch could bring about a change in the office of the insurance commissioner, but we will need to wait and see which of those elections will result in a change of commissioner.

It Ain’t Over ‘Til It’s Over

While this election has been bitterly fought and the outcome of many key races remains unknown, neither side can declare total victory in Washington. As a result, at the federal level, the likely election outcome is gridlock. This will lead to further rule by agency and executive regulations. However, the U.S. Supreme Court’s ruling in West Virginia v. Environmental Protection Agency may have opened an avenue for lawsuits blocking some agency and executive regulations. At the federal level, then, the 2016 presidential election remains dominant, as it enabled the GOP to obtain a 6-3 majority on the Supreme Court.

Where Republicans strengthened their control at the state level, we would not be surprised to see several outcomes favorable for insurers. There is likely to be less regulation, a more friendly tort environment and higher barriers to ESG or DEI (diversity, equity and inclusion) investment and reporting requirements. Health insurers may be relative losers due to more restrictions on Medicaid.

On the flip side, where Democrats enjoyed success at the state level, we think the outcome will be slightly negative for life-annuity insurers due to more regulation around underwriting. We also see a negative for property-casualty companies, leading to a less friendly tort and business environment with added pressure to divest from fossil fuels. Health insurers appear to have emerged as the relative winners, with no major adverse changes, at least for the near term.

One of Yogi Berra’s most famous quotes was, “It ain’t over ‘til it’s over.” With the U.S. elections, it’s never over. With that in mind, in 2023, as executives manage their way through higher inflation, possible recession and increased economic uncertainty, it can be tempting to put the 2022 midterms in the rear-view mirror. We think that management teams, however, should remain engaged at all political levels to shape a more favorable regulatory landscape. After all, the next election is less than 725 days away!

While it's tempting to see the world in blacks and whites, my experience with innovation is that it typically happens in grays, at least for years. Even when a company has a breakthrough idea and captures the imagination of investors -- Amazon with e-commerce, Tesla with electric cars, AirBnB with room and home rentals -- it takes time for reality to fill in behind the stock market valuations. 

Distribution in insurance has, I think, been living in a world of grays for some time now. It's been clear that technology can do a lot to improve interactions with customers and sharply increase the efficiency of agents and brokers, but there's been no aha moment. 

In fact, what many thought was a clear vision of the future -- that agents and brokers would be disintermediated as carriers set up direct relationships with customers -- has turned out to be false. If you look at valuations of agencies and brokerages, they've actually expanded their role and power in recent years. 

Instead of disintermediation, I think the future will be a hybrid of agents and brokers and technology. For now, the human element will dominate. Over time, the role of technology will increase, steadily taking on more and more of the mundane work and freeing (while also pushing) agents and brokers to focus more on providing high-value counsel.

To see how that future plays out, you could do a lot worse than follow the progress of VIU by HUB, which provides a digital platform for customers to see multiple quotes on auto, home and life insurance and to have an agent contribute as needed. VIU pretty much fits my vision of what the future will look like, which is why I was delighted to get the chance to conduct this month's interview with Bryan Davis, the EVP in charge of VIU.

Insurance distribution could still have what I think of as a Hemingway innovation moment. A character in his "The Sun Also Rises" said he went bankrupt two ways, "gradually, then suddenly." But I think innovation in distribution will stay in the "gradually" stage for the foreseeable future, with important innovation certainly happening, just on a curve with a steady upward slope, rather than one with a "suddenly" disruption in the graph.

Cheers,

Paul 

P.S. Here are the six articles I'd like to highlight this month for agents and brokers:

AUTOMAKERS BUILD NEW INSURANCE FUTURE

As data and technology pervade the car manufacturing industry, automakers have made fresh inroads into insurance.

THE DEATH OF 'THE ROBINSONS'?

"The Robinsons." who bundle home and car insurance, represent the crown jewel in customer lifetime value. But the segment is very much at risk.

3 WAYS DE&I CAN BOOST AGENCIES

Data has shown that, compared with individual decision makers, diverse teams make better decisions 87% of the time.

HOW RISK MANAGERS, BROKERS MUST COLLABORATE

Solutions can address brokers’ administrative risks from within, in a way that focuses on the customer/risk manager experience and leads to vastly improved alignment.

CYBER TRENDS THAT WILL CHANGE 2023

Here are six cybersecurity and incident response trends and priorities that can help organizations in 2023.

10 TIPS FOR LEADING TEAMS

What does it take to be a successful leader? How can you lead change effectively? Here are 10 tips that can help you lead change in the insurance industry.

HUB International debuted a digital platform in June called VIU by HUB that lets clients and prospective clients see detailed quotes from six to 10 carriers for home and auto insurance on a digital platform, then speak with an agent if they are interested in purchasing a policy. The platform is available now for auto, home and life insurance buyers, with additional carriers being added as available. VIU (pronounced "view") will gradually extend into other lines of business, such as renters and small commercial. VIU is also partnering with businesses in adjacent industries to embed its platform within the home- and car-buying journey so customers can shop for and purchase insurance at the point-of-sale.

ITL recently sat down with Bryan Davis, a HUB Executive Vice President and head of VIU, to talk about the hybrid, agent/digital platform and its broader implications, including through embedded insurance.

ITL:

I'm curious about the transition in terms of the business model, going to a hybrid model that includes digital. Could you tell me a bit about how that will work?

Bryan Davis:

The key thing is to take an outside-in perspective. We all can anchor on, Hey, we should be doing what's right for the customer. With COVID, the world went digital overnight, so customers got introduced to a new way of interacting with brokers. And cloud computing advanced, literally in months, because it had to improve to make the world's e-commerce happen at the speed that people demanded.

Historically, we've forced the customer to accept mediocrity. But I'm very excited about what the future is, because customers told us loud and clear, Instead of me having to adapt to your world, which is pretty clunky, I would much rather you adapt to my world, like Amazon and Apple have. And technology is allowing us to do that.

There is still a need for an intermediary for complex transactions. Think retirement plans. Think employee benefits. So, VIU is complementary for HUB, not contradictory.

ITL:

Some behaviors that took hold during the pandemic seem to be reversing, at least in part. For instance, some people are returning to the office. Do you think the customer behaviors you're seeing will last?

Davis:

I would say the percentage who didn't ever want to interact with a person has increased because of COVID from perhaps 15% of customers to 30%. The percentage of customers who were a hybrid has gone from 45% to perhaps 55%. Those are the people who say, I want digital, but I want the option to pick up the phone and talk to someone, and I may even want the option to go in and see somebody face to face. That still leaves a lot of customers who want to transact with an intermediary, but I would say they are open to new ways of interacting; it doesn't have to be all in-person at brick and mortar.

The key is being adaptable, to interact with the customer how the customer wants. I don't need to call you between the hours of eight and five to talk about a simple endorsement to my policy. But if I'm talking about my second home, with a premium of $50,000 a year, or about my Ferrari or fine art, I might need to talk to you in person.

ITL:

The model I've had in my head for a while about the future of work is a centaur, just with jobs becoming part-technology and part-person, rather than half-person and half-horse. First, do you agree with that thesis? Second, if you do, what kinds of things are being taken off the plates of agents and brokers so they can do the more important stuff?

Davis:

I think your thesis is spot on. If keying in information to get a quote was your value as an agent, I hate to inform you, but those days are gone. Data prefill sources can pull information—we know how old the roof is.

So, the value of the agent now is providing neutral advice. One carrier may be saying, Hey, I'm 30% less, but the broker will point out that the policy is only paying for actual cash value of your roof while another covers full replacement cost.

The agent finds, I'm freed up on data entry and getting all the forms in place, so I can really give my client advice and counsel about their risk needs and their gaps. Most of our producers are so tied up with back office that they don't have much time to give advice and to really go after new prospects. But transactional insurance will be more like 75% to 80% digital, and now with an advice component at checkout and after a new-business sale. That's what I see playing out over the next five to six years.

ITL:

What else do you plan for the next three to five years?

Davis:

Research shows that a massive amount of business will be coming through embedded insurance, so there is a strong value proposition for a broker to be able to offer choice and neutrality at the point of sale and beyond. That's a huge growth opportunity.

If you ask my daughters, who are 15 and 13, where they bought their insurance in the future, I think the decision will be based on where they bought whatever is being insured, whether that's a home, a car or something on Amazon. So, if a broker can combine neutrality with a digital channel, that’s a very interesting value proposition that will play out.

ITL:

How would that look? One of your daughters is now 25 years old, and she's buying a car. She goes into the dealership and they say, Well, you need some auto insurance. How does that get referred to a broker? What part of the commission goes to the car dealer as the finder's fee?

Davis:

Let's say she'll have the choice of 10 to 20 A-rated insurers. The decision will most likely come down to ease and price. Those advancements in cloud computing I talked about will mean the insurance transaction can happen right there in the car or right as the vehicle rolls off the Carvana truck. No more of this, you call a broker, and the broker has to call the carrier, and the broker has to get back to the customer, and so on. It’s all seamless.

As for the commission, everybody is different on partnerships. If the partner gets licensed, they can get commissions. If they don't, it's a referral marketing fee. Partnerships are not new. It used to be, Hey, I got a guy, go call him. Now, I don't have to make that call.

Imagine Ford says, here are all my cars. Now, here's my insurance marketplace, with all the carriers. You pick which one you want. That's the future.

ITL:

I assume the advice component will be some combination of AI, maybe provided via text, and of interaction with a person via chat or phone call, if needed?

Davis:

Exactly. The question is, who's in position to be neutral and to have your best interests at heart? It's not the carrier. It's the broker.

Of course the carrier will say, You should buy me because I'm the cheapest, when you might be the cheapest because you don’t pay claims or because you reduce the amount of coverage I have. Right now, customers are finding out about issues at a claim. That's not a good thing.

Digital brokers provide a fresh perspective. You don't have to sacrifice ease to get neutral advice from a broker. You can have both. And we think that's a strong value proposition.

ITL:

Thanks so much.

A recent article in Wired surprised me with its pessimistic outlook about nuclear war in Europe. It said that one group of "superforecasters" put the likelihood of a nuclear weapon being detonated somewhere in Europe by April 30 of next year at 9.1%. 

While a detonation is a truly scary prospect, the article also conducted an analysis based on "micromorts." It says that a young person has a risk level of roughly one micromort -- one chance in a million of dying each day -- just by being alive. And the prospect of a nuclear detonation adds only one micromort per day to the risk for someone living in London, which is the same additional risk that comes from traveling 230 miles by car or six miles on a motorcycle. Going on a scuba diving trip adds five micromorts. 

Now, insurers are in the business of quantifying risk all the time for all manner of activities, and I'm not sure that the concept of micromorts need change anything about underwriting, but it strikes me that micromorts could be a useful way to communicate to the public both about what is, and isn't, risky behavior.

The Wired article used a lot of its real estate to explore the implications of nuclear attacks and to explain the methodology of superforecasters, but I can imagine much more prosaic calculations.

Lots of people seem to worry about being hit by lightning. Might it help to tell them that, with only roughly 20 people killed by lightning each year in the U.S., the danger amounts to just .00000000002 micromort for each of us? Ride six miles on a motorcycle, and you've incurred 50 billion times as many micromorts. And the chance of being killed by a shark is roughly 1/1,000th the micromorts of the risk from lightning.

I certainly found the estimate about scuba diving interesting, given that I came reasonably close to being a statistic while just minding my own business. My wife and I had done a somewhat aggressive dive at the Blue Hole about 50 miles off the coast of Belize, getting to a depth of 140 feet, which is a bit beyond what's considered recreational diving because we had to do a long decompression stop on the ascent. All was fine -- until the captain of the dive boat capsized it three miles offshore. The boat sank so fast that I, napping down below, had to climb out through a porthole. Our equipment went down with the boat, and we only rescued a few life vests for the nine divers and four crew, one of whom couldn't swim. The boat sank at dusk, and nobody was going to miss us soon enough to find us before morning, so we faced the prospect of swimming toward shore or hoping to tread water all night. Fortunately, some Rastafarians were out for a sail and spotted us. They had a dinghy attached to their homemade boat and ferried us in batches to land. 

Having done about 50 dives, I have my own sense of risk and wouldn't let a few micromorts influence me, but I still could imagine using the stat in conversation with my daughters, who are certified but have done just a handful of dives. (Of course, my main advice is to avoid incompetent Belizean captains who claim to be experts on the reef system but clearly aren't.)

Increasingly, insurers are trying to use data from wearables (steps, heart rate, etc.) and from scales (not just weight but body mass index, bone density and more) to steer people away from behaviors that put their health at risk. Why not use measures of micromorts to make sure people understand the risks associated with their activities, too? 

The measurements of micromorts aren't perfect, any more than the data from wearables is, but the concept of micromorts sounds to me like a good place to start.

Cheers,

Paul

Compliance has a lot to offer for cyber security but also some significant limitations. Since the challenge of cyber was born, the need to meet compliance standards has been a significant factor in getting cyber security into boardroom discussions. Today's standards have benefited from those discussions and are broadly mature and well-thought-out.

But the double-edged sword of standards under legislation is that a company may assume by ticking the right boxes to meet those minimum requirements that they are considered secure and invest less time and resources into the continuing and evolving job of achieving cyber stability. Security leaders concerned with achieving true operational assurance know that the goal of compliance is not simply to be compliant.

For starters, compliance doesn't always get it right. Legislation is periodic, but cyber risk is ever-present and evolving. Cyber security has always been an arena of hyper change. Expecting legislation to keep pace with attacker innovation would be foolish; tomorrow's threats are unlikely to fit neatly into categories defined by current and past threats, and the prevention, detection and response to future threats require a more flexible mindset and security program.

There are countless examples of high-impact breaches affecting companies that are entirely cyber- compliant. Last year, it came to light that the telecoms giant Synaverse suffered a five-year-long breach despite being compliant with multiple standards such as GDPR, ISO 9001, and even supply chain-tailored standards like TL9000. In the past, compliance standards such as PCI DSS only necessitated quarterly vulnerability scans.

As a result, we've seen high-profile attacks exploit known vulnerabilities that already had patches available. The targeted companies were fully compliant at the time but still suffered preventable breaches. Standards are often updated in the aftermath to encompass a more risk-based approach, but this is still reactive. The reality remains that compliance rules will always lag behind the ever-evolving world of cyber risk.

Crucially, cyber risk, by its very nature, is bespoke. Compliance controls, on the other hand, ensure a common standard - but no two organizations are the same. Therefore, building a risk profile requires deep business context and an understanding of "self" before we look at understanding our enemy.

See also: 4 P&C Mega Risks in 2022

The challenge for CISOs is prioritizing those risks and continuously hardening defenses. Of course, 100% prevention is unrealistic - but that's okay. The goal is to make it so labor- and resource-intensive for attackers that it no longer makes sense for them to continue attacking the hardened target. Cyber crime is a business and being truly proactive makes it more difficult for attackers to achieve their ROI.

Adhering to compliance rules can significantly increase an organization's ability to manage risk - which, if it's not already clear, is the core goal of cyber security - but it can only go so far. Most CISOs today would agree that the further you move away from the time a compliance box was checked, the less confidence there is that the compliance rule is still effective and still managing risk at the expected level.

Compliance might be the start of the cyber conversation, but that conversation today has moved along. In the current era of cyber-threat, it's about marrying up teams with a proactive mindset and the right technologies to know the company inside-out. Only then can we hope to preempt and prevent the many ways that an attacker could do damage.

It seems inevitable that, in the near future, an innovative health care organization – let’s call it The Platform – is going to seize the market opportunity of broader value. It will cobble together the pieces and demonstrate to organizational purchasers that it consistently delivers better health outcomes at significantly lower cost than previously has been available.

To manage risk and drive performance, The Platform will embrace the best healthcare management lessons of the past decades: risk identification through data monitoring and analytics, driving the right care, quality management, care navigation and coordination, patient engagement, shared decision-making and other mission-critical health care management approaches. It will practice care that is grounded in data and science and is accountable on outcomes.

But The Platform will also appreciate that a few specialty vendors have developed deep expertise in dealing with clinical or financial risk in high-value niches – where healthcare’s money is – like management of musculoskeletal care, chronic disease, maternity, surgeries, high-performing providers or specialty drugs. It will understand that it often makes sense to partner with experts who can prove and guarantee high performance rather than trying to learn to achieve high performance within each niche. The Platform also will realize that simplicity is a virtue and that bundling specialized services under one organizational umbrella is easier for health plan sponsors to manage and for patients to negotiate than an array of individual arrangements.

The Platform and organizations like it will spark the interest of self-insured employers and unions, because they’re at risk and likely to be persuaded by a better deal (and particularly one with guarantees). But they’ll also find reception by other organizations that carry risk or are responsible for managing care and cost: e.g., stop-loss carriers, captives, fully insured health plans, Medicare Advantage plans, Managed Medicaid plans, third party administrators and advanced primary care organizations. If The Platform demonstrates better performance than its conventional competitors, it might scale rapidly, sweeping the market. Traditional healthcare vendors might find themselves in a more competitive marketplace than they’ve experienced in past decades.

The key here is that, in the U.S., patients and those who pay for health care deeply want a better way. Most healthcare organizations pay only modest attention to quality and are holding on to pricing that reflects what the market will bear and that is unrelated to cost, though excellent care can be delivered for far less. The difference between what is and what realistically could be is large enough that an opportunity exists for business to switch to upstarts representing stronger value. What’s needed is an integration platform that facilitates an easy-to-use comprehensive framework of high-performing, best-in-class specialty services.

In the healthcare value-focused community, many organizations have demonstrated that they reliably produce better results, particularly in high-value niches. Of course, most vendor organizations are eager to be publicly recognized as “high-performance” vendors. The trick is competently identifying those that consistently deliver.

It’s reasonable to believe that a robust ecosystem of risk-reduction mechanisms can result in far better health outcomes while conservatively reducing total health spending by 25% or more. That said, to my knowledge, no one has yet brought together all these approaches within a single health management organization. Most health plans make more if healthcare costs more, so they have not yet shown an interest in offering lower-cost healthcare (without compromising quality). But value-based arrangements are finally getting traction, and purchaser interest in value is accelerating. The fact that better results are occurring in the market means that high-performing approaches will continue to evolve and succeed.

See also: Mental Health in Post-COVID Era

High-value models are already being developed by advanced primary care firms like Marathon Health and CareATC and retailers like Amazon Care and Walmart Health. These and similar efforts could hugely disrupt the current U.S. health system by moderating the excessive services and costs that the legacy healthcare industry has come to depend on. Going the next step in healthcare management by assembling and scaling the powerful capabilities of high performers is an opportunity waiting to be exploited.

The fundamental tension within U.S .healthcare is whether our health system will strive to optimize quality, cost and value or strive to optimize revenues and margins. Responses to this question determine the approaches that characterize every aspect of healthcare, whether it’s the scientific evidence that guides a protocol or the interoperability of an electronic health record, or whether patients have access to information that can help them make better care choices.

For decades, the industry’s profiteering has dominated healthcare. The question now is whether purchasers will favor high value, turning the tide and remaking our health system in ways more consistent with the welfare of healthcare’s patients and purchasers.

This article first appeared at The Health Ccare Blog.

Earlier this year, the Intergovernmental Panel on Climate Change (IPCC) concluded in its Sixth Assessment Report that "global surface temperature will continue to increase until at least the mid-century under all emissions scenarios considered."

The more global warming we experience, the greater the changes to the climate system. These changes include increases in frequency and severity of heat waves, heavy rainfall, droughts, intense tropical cyclones and sea level rise. Many changes are now irreversible for centuries to millennia.

The effects of these changes are being felt across every region of the world and across all economic sectors, with the IPCC report revealing that approximately 3.3 billion to 3.6 billion people already live in “contexts that are highly vulnerable to climate change.” In the past two decades, the U.S. alone has endured over 250 weather and climate disasters, with cumulative costs of over $1.6 trillion. 

However, impacts of climate change are not uniformly distributed across society; they disproportionately affect the poor and marginalized groups. With at least 3.3 billion people living in situations that are highly vulnerable to climate change, according to the IPCC report, designing infrastructure to ensure that it remains resilient in the face of climate change is becoming increasingly urgent.

According to the Global Infrastructure Hub, there is also a projected $15 trillion shortfall in global infrastructure investment by 2040, while an estimated 75% of the infrastructure needed worldwide by 2050 is still to be built, much of it in emerging economies.

Preparing for a changing climate

Because infrastructure assets often have a long lifetime (50 years or more), high up-front costs and limited flexibility, understanding physical climate risks (PCRs) and embedding resilience from the outset is critical to ensuring assets meet their objectives in terms of serviceability, financial return and social outcomes. 

Until now, there has not been a uniform approach to appraising infrastructure assets against climate risk. This is mainly because most asset owners lack the right tools and are unsure how to accurately quantify risk, adapt assets to risk and prioritize investment in critical infrastructure that is more resilient.

The Coalition for Climate Resilient Investment (CCRI) aims to meet this challenge head-on with the launch of market-first methodology that pulls together best practices from asset management, engineering, finance and climate resilience sectors, providing infrastructure asset developers, investors and regulators with a robust, step-by-step process that quantifies the impact of PCRs on asset performance.

Recently launched by CCRI and led by CCRI member Mott MacDonald, the Physical Climate Risk Assessment Methodology (PCRAM) allows asset managers and owners to make informed decisions - from asset design and through the whole life cycle of the project - on how best to adapt new and existing infrastructure assets to reduce the material impacts of extreme weather events.  

See also: Time to Move Climate Risk Center-Stage

Vulnerability of climate-blind assets

Infrastructure projects have always faced serious challenges in design, delivery and operation, and climate change only exacerbates the risk. When it comes to PCRs, there has been lack of a structured, forward-looking approach to risk management across all stages of the value chain and the project lifecycle. Decisions made in regard to asset delivery and management, especially in the design and procurement phases, are rarely informed by climate projections and a robust understanding of future PCRs. 

Currently, insufficient attention is paid to the potential value destruction in the long term, as well as inefficient recognition or reward of associated improvements. This should not be the case, as integrating climate risk assessment to adapt infrastructure assets from the outset, including through adjustments to operations, can lead to both significant reductions in the costs of climate adaptation measures later on and improvement in the quality of revenue streams. 

Mott MacDonald tested the methodology on five real-world infrastructure assets, including a nearshore wind farm in East Asia and a hydropower plant in Africa, with each case delivering a "resilience dividend."

Until now, the private sector has not had the right tools to make decisions that optimize costs throughout an asset life while incorporating climate risk mitigation. The cost-benefit analysis of implementing resilience measures for these assets clearly demonstrates the significant medium- to long-term benefits from investing in resilience compared with the cost of not implementing such measures. Put simply, PCRAM presents a compelling business case for resilient investment, unlocking the finance needed to protect vulnerable communities from the impacts of climate change.