Like most industries, the insurance sector entered 2023 amid a high degree of uncertainty. With the Federal Reserve implementing successive interest rate hikes to slow inflation and most economists predicting a rocky year ahead, insurers have – perhaps predictably – reacted by downsizing their workforces. 

According to a recent study we conducted – Managing IT in Challenging Economic Times -- carriers’ decision to trim headcount has not affected all areas of the organization equally. When asked to identify the areas that have been most hurt by the economic slowdown, 57% of insurance decision makers pointed to HR, while 45% cited sales and marketing. By contrast, business operations (40%) and accounting/finance (36%) have been less severely affected.

Technology to the Rescue

One area where insurance carriers appear loath to cut back severely is information technology. In fact, 85% of insurers are trying to find ways to enable technology to perform jobs in areas as diverse as IT operations, customer service, sales and marketing, HR and business operations. This effort is well underway, as over half of insurers report a rising ratio of tech to non-tech employees, as well as policies making tech skills mandatory across departments, including non-technical positions.  

Accomplishing more with a leaner workforce has also required insurers to intensify their focus on core IT investments that offer the greatest ROI. Not only is more money being directed toward technology across the sector, but IT decisions are being made at a higher level, with CEOs, board members and top operational executives more involved in driving IT investment decisions than in the past. Cloud technology (80%), security (71%) and digital transformation (58%) have been among the biggest beneficiaries of these new investments. Moreover, a majority of insurance executives polled said their confidence in the return on investment from technology investment has increased. 

See also: BREAKTHROUGH TECHNOLOGIES FOR 2023

Persistent IT Labor Shortage 

While IT is being relied on more and more by insurers, like all companies they are operating against the backdrop of a chronic IT talent shortage. The unemployment rate for tech occupations is a minuscule 2.2%, according to CompTIA. In addition, retaining skilled IT employees has become more challenging than ever. A 2022 report by Gartner found that just 29% of IT workers had a high degree of interest in staying with their current employers.

The employee-oriented job market is putting a strain on insurance IT departments, because over half are having difficulty hiring and retaining tech staffers:

• 54% said they are currently struggling to fill vacancies in technology jobs having to do with cybersecurity (60%), machine learning (72%), data analytics (51%), network engineering (49%), cloud architecture (37%) and data engineering (35%). 
• 58% said they are struggling to retain IT staff in specific areas, such as cybersecurity (65%), cloud computing (59%), data analytics (52%) and systems and networks (43%). 

How are insurers reacting to these labor challenges? More than half are looking to retain IT staff by offering increased training, rewards and salary increases. But they will need to get even more creative if they want to reap the benefits of increased IT investment. Retraining staff for new and different roles, opening up the talent pipeline to new communities and leveraging external expertise from third parties all have important roles to play in ensuring that insurers get the greatest return on investment, even as they navigate choppier economic waters.

In today’s environment, companies need to act quickly with respect to operational and strategic initiatives. Gone are the days when, in many companies, projects could get done whenever someone became available to lead them and get access to necessary resources. Today, critical projects need to be staffed with experienced executives who can hit the ground running. Additionally, in many firms the process of hiring full-time people is fraught with complexity and layers of approval – not just with the hiring manager but getting buy-in from HR and accounting. Many companies have implemented hiring freezes, even in the current labor market, that reflect operating constraints.

In response, the latest hiring trends show that, instead of relying only on full-time employee (FTE) hires, are increasingly adopting contract employment – looking to interim executives and professionals to meet scaling workforce needs.

There are several benefits to an interim approach: People who choose interim or contract work are often highly skilled, mission-oriented and project-based individuals who assimilate quickly into new environments. They can bring unique skill sets and experiences needed for finite projects, during mergers and acquisitions, or to temporarily fill roles either during a leave of absence or while the company searches for a permanent employee.

Another benefit is the ability to quickly bring in outside perspectives for important initiatives. While promoting from within is often a laudable policy, in many cases those promoted have been with the company for many years and have not been exposed to operating realities at other companies. 

Also, a practical benefit of using interim executives and professionals is that in many companies expenditures to fund key projects quickly can be done through the department’s operating budget and without additional approvals beyond the operating executive’s own. This contrasts with requesting additional full-time headcount hires that would likely have to go through several layers of approvals or be subject to hiring freezes or other limits.

Here's a current example: A well-known carrier’s CEO looked at his company’s expenditures on printing and postage and mandated that the company cut the budget by $1 million, about 35% of its outlay in this area. The carrier reached out to a well-known search firm with a robust practice in interim executives and professionals. The firm worked closely with the carrier to define the specific objectives, desired outcomes and timeframes and was able to quickly develop an attractive proposal for the carrier that focused on the broader strategic issue of digital transformation in addition to tactical decisions on printing and postage. Once the carrier approved the proposal, within days the firm was able to identify several well-qualified professionals to lead the initiative and zeroed in on one executive who was perfect for the assignment. The carrier interviewed the professional the next day and was able to start on the project the following week. 

In this example, the carrier expects to realize the following benefits:

• Significant reduction of outlays
• Moving clients and agents to a digital experience in many facets of their interactions with the carrier
• Development of mobile apps to enhance sales and customer service 

See also: A Wake-Up Call for Insurers

In today’s environment, we see vast numbers of “gig workers,” often with 20 to 25 years of experience, who no longer want to work on a permanent basis with a company for a variety of reasons and prefer the challenge and variety of working with multiple companies on a project basis – of parachuting into a firm to address a specific need. These are not people who have difficulty finding permanent employment, but rather industry veterans and practitioners looking for a broad base of experiences at this stage in their careers.

In 2023, we will see an increase in people seeking interim opportunities who are willing to compromise a sense of security typically experienced with a permanent job. In turn, external talent acquisition professionals such as Korn Ferry will put more focus on nurturing relationships with candidates seeking contract employment and work with clients to determine the most effective scenarios for filling positions. In such a dynamic landscape, experts recommend companies maintain a 70/30 FTE-to-interim worker mix.

In the insurance space, there are many opportunities to use interim executives and professionals. These include:

• Filling critical voids in the organization, which buys time to find the right permanent candidates
• Digital transformation initiatives in sales activity, application entry and policy delivery processes
• Digitization projects in the underwriting process, and in producer communications, regulatory requirements and marketing
• Cost-saving mandates such as the one noted above
• Development of client and agent portals for policy changes, billing and payment processes
• Product research and development, particularly when the pipeline is filled due to resource constraints
• Solutions for modernizing legacy systems and integration with newer platforms
• Where M&A activity is involved, integrating systems, policies and underwriting workflow pre- and post-merger
• Many projects where an additional set of experienced hands is needed!

There are many opportunities to consider interim executives and professionals in the insurance space. I hope these ideas provide some food for thought in your strategic and operating discussions. Here’s to a great 2023!

The MIT Technology Review's always-interesting annual list of 10 breakthrough technologies to watch contains two this year that could revolutionize healthcare. 

One is a use of CRISPR to just edit away people's problems with high cholesterol by rewriting a sliver of their DNA. The other is work that could produce what the magazine calls "organs on demand" -- basically, a farm that would grow all the hearts, kidneys, livers and so on that we need, ending chronic shortages and making the lives of millions of people better. 

The CRISPR development is based on what's known as CRISPR 2.0. The first version, developed roughly a decade ago, could already do the nearly miraculous -- cutting out a small section of DNA to shut off a gene that was causing a health danger. The 2.0 version can actually substitute a base in a person's DNA for one that's already there, so 2.0 has far broader potential. 1.0 tends to be used in tests on rare genetic diseases, while 2.0 is being aimed at far more common problems, such as a genetic predisposition to high cholesterol.

While we know the technology works, it will still take many years before CRISPR 2.0 will go into wide deployment on medical issues, mostly because rewriting DNA creates so much potential for unintended consequences. We may think a genetic sequence we're editing has a single function, but who really knows? It'll take a long time and a lot of trials before we'll know conclusively enough for widespread use.

Still, as the Technology Review article explains, the potential is vast. And CRISPR 3.0 is on the way. It will allow us to add chunks of DNA to our genome that are thought to protect against high blood pressure or other diseases.

The possibility of "organs on demand" relates to a story you may have seen from last year: A man whose heart had failed and who wasn't eligible for a transplant was hooked up to a genetically modified pig heart and survived for two months. Some biotech companies, including the one that supplied that heart, are setting up farms where they plan to raise herds of pigs whose DNA has been altered so their organs are compatible with humans' and won't be rejected by our immune systems.

As you can imagine, plenty of obstacles lie ahead here, too. Even if the genetic modifications all work to make pig organs usable in humans, the herds still have to be raised in germ-free environments -- it was a virus from the pig whose heart was used, not a problem with the heart itself, that killed the transplant patient after two months. 

But, again, there is potential here to reinvent healthcare -- and, thus, the companies that provide health and life insurance. 

You'll likely find many of the other breakthroughs intriguing, too. Some are a bit far afield from insurance, such as the descriptions of the possibilities posed by the James Webb telescope, the development of mass market military drones and the decoding that's being done of ancient DNA. But a couple of others will bear heavily on insurance, too. What the Technology Review describes as "the inevitable electric vehicle" will turn the auto industry upside-down over the next decade-plus, and the advancements in battery recycling that the article describes will remove one of the final obstacles that are holding us back from a full-scale switch to EVs.

Cheers,

Paul

Since the onset of the COVID-19 pandemic, consumers have had higher demand for goods fulfilled largely through the trucking industry. This shift in the U.S. economy ran headlong into an industry already feeling a labor pinch before the pandemic as the previous generation of truck drivers started leaving the road. The resulting mismatch was part of the widespread story of supply chain bottlenecks and inflation that marked the economy throughout 2021 and 2022.

The transportation industry and the U.S. government have addressed this aspect of the supply chain, working on getting more drivers into commercial trucking. Due in part to these actions, including higher wages and benefits, the commercial driver labor market expanded, with more than 50,000 commercial driver’s licenses (CDLs) and learner’s permits issued each month in 2021, according to the White House’s Federal Trucking Action Plan. The 2021 numbers are 72% higher than the 2020 volume and 20% higher than the 2019 volume.  

Internal TransUnion data from a few representative states shows younger CDL drivers are increasing faster than older CDL drivers, with the most significant year-over-year increase among drivers less than 30 years old. This shift came before the enactment of the pilot program to lower the federal CDL age limit for interstate commerce, which became operational earlier this year and could further accelerate shifts by age group.

A strong labor market for commercial drivers has created additional growth opportunities for commercial auto insurers. Still, it comes with a tradeoff of the potential for deteriorating profitability as younger and less experienced drivers come with additional risk. 

Increasing Commercial Driver Risk  

In light of macroeconomic pressures on transportation companies, TransUnion studies show that new commercial drivers who entered the labor market post-COVID have displayed signs of higher driver risk. This sudden change in the risk profile of commercial drivers can make it challenging for underwriters to underwrite and price new and existing policies correctly.  

To quantify this change, internal TransUnion data for Ohio shows that, among new CDLs in the state, younger drivers have significantly higher moving violations and accident rates. Some key findings:

• Across all age cohorts, 23% of new CDLs had moving violations, and 16% of new CDLs had accidents.
• The results by age show both moving violations and accident rates correlate very closely with age. As the CDL driver's age decreases, violation and accident rates increase.
• For drivers under 30, the violation rate is almost double the rest of the new CDL population.

Younger commercial drivers — the fastest-growing age group — also represent the highest risk, and new CDLs are becoming riskier based on distributional shifts to younger ages. Additionally, across most ages, TransUnion internal data revealed that new CDL holders have higher-than-average moving violation rates for commercial drivers within their age group. Given the changing risk profile of new CDLs, insurers should review their processes for monitoring driving record history for new and existing commercial auto policies.

See also: 3 Practical Uses for AI in Risk Management

Greater Violation Insight Through Court Records

The state motor vehicle report (MVR) has traditionally been viewed as the gold standard for verifying driving record activity; however, it often comes with high costs and potential blind spots. Some commercial insurers may elect to mitigate MVR costs by underwriting fleet policies based on a random sampling of drivers, which introduces additional risk to the insurer. Traffic court record data offers a powerful alternative to the state MVR that's more affordable and captures further violation insight.  

Based on TransUnion's internal research using its DriverRisk court record database, 34% of CDL moving violations occurred outside the license state, or roughly two times higher than non-CDLs. These out-of-state and prior license state tickets found with court records are often not captured on the state MVR due to reciprocity rules and other DMV challenges with sharing violations across state lines.  

TransUnion took a deeper dive into moving violations identified within its court record database that do not appear on the state MVR. Internal TransUnion research found that more than 10% of CDL drivers had guilty moving violations identified within TransUnion’s court record database and a “clean” state MVR. As an example of additional activity identified by court records, 28% of all guilty DUIs found in TransUnion's court record database were for commercial drivers with a "clean" MVR. This is information that, if it had come to light, could’ve affected policy pricing and eligibility — and likely would have affected the driver’s CDL eligibility in the first place.  

A Safe Drive to Profitability

As the transportation industry works to hire and onboard the next generation of commercial drivers, commercial auto insurers need to deploy a comprehensive driving record strategy to fully evaluate driving risk exposures and more accurately rate and underwrite policies. Such actions will be critical for commercial insurers to achieve their profit and growth targets for 2023 and beyond.

It was 4 o’clock in the morning when a neighbor, a family with kids and dogs, experienced a home loss in a fire during the pandemic. The family lost nearly everything and needed help and a hug. Eventually, they would also need help getting back on their feet, but at that moment they simply needed reassurance that things would be okay and to have their questions answered. Witnessing this experience firsthand shaped how I view the value and importance of technology’s role in insurance. 

There has been no shortage of insurance challenges stemming from the pandemic. Earlier this year, insured losses were projected at $44 billion, and potentially rising. But these numbers do not consider the emotional toll felt by all. People are at the core of insurance — and insurance requires humanized experiences. Insurers remain resilient and are looking for ways to better serve customers. This includes digitally or with the help of automation, machine learning and telematics, for example. This is a critical evolution for our industry as we change how insurance is being built, deployed and serviced.

Humanized experiences. This guiding light is the only way insurance can successfully digitally transform to serve its purpose. Let’s look at our future through this lens.

Empathy, empathy, empathy!

Those of us in the insurance industry must ask ourselves the following fundamental question: How are we being empathetic? Think back to a time when you were stressed out, experienced a state of loss or generally looked for an answer to a pending problem. All routes are viable – phone, web, friends, peers, agencies and more. It can be a scramble to resolve a challenge in a timely manner. This is not an uncommon situation for those going through a loss, particularly when there is a continuing or unresolved insurance claim. And, according to a Duck Creek survey of 2,000 insurance consumers from around the world, 95% would like to hear more about the status of a claim.

From a carrier perspective, empathy means making programs and platforms simple to deploy and use. When carriers or agents are trying to engage with customers in times of need, technology must work, and we must build with this desire for familiar experiences in mind. Innovation almost needs to be silent, stealthy or – dare I say – invisible. Technology platforms need to look and feel right and give the person dealing with a customer the information they need to deliver the right human experience. From a customer perspective, they want to be reached via their preferred method wherever in the world they might be. Do you offer direct phone calls? Does the insured only want text updates? Do they log into their online portal for status notifications? These are the kinds of micro-decisions that lend themselves to empathetic experiences in a digital world. 

New customer experiences (for both workers and insureds)

In that same Duck Creek survey, 50% of all respondents mentioned that customer service was the determining factor in rating their insurance purchasing experience, over the price of insurance. For all that is said about competitive pricing in insurance (and, yes, it is a HUGE factor), we cannot forget the value of the right customer experience. This is an opportunity for both insurers and insureds to thrive. And it opens the door for new talent, new technologies and new ways of thinking in our industry.

We’re seeing this in real time with the growth of embedded insurance. Once a purchase is made, insurance options are bought to the table through a few clicks or taps. This eliminates friction and helps consumers at the point of purchase. Because these processes are embedded (or connected), policy management (and eventually claims processing) can be streamlined. In addition, coverage can be dynamic, getting customers and carriers closer together. From an employee perspective, new sales and service opportunities await to meet customer demand. Insurers also get a way to be there when customers may not know they need them (for example, travel insurance), enhancing a company’s reputation and protecting against potential loss. This is what it means to be human-centric.

See also: 2022 ITL Yearly Wrap Up

Evolving relationships with policyholders

Relationships between solutions providers and carriers, as well as carriers and insureds, are evolving. This is largely being seen with real-time or usage-based insurance (UBI) or through telematics applications where people get discounts or rewards for their actions. This is nothing new in insurance, but we’re playing in a new sandbox now. Insurance is truly connected, and the maturation of cloud ecosystems means that the right architecture is in place to make “evolved insurance” a reality. This will forever change relationships in insurance. Data has always been critical to insurance, but it’s about to take on a whole new importance.

Just as with any human experience, trust becomes the focal point. Why? Because the more data we share and the more visibility we provide into our lives, the more trust we are placing in others to use information to benefit us. Traditionally, UBI has been very surface-level. One or two data points are every so often used as an incentive or selling point. That is changing, fast — thanks to always-on connectivity in our smart tech-enabled lives. For perspective, one carrier predicted that approximately 70% of new business would come in the form of UBI by 2025. That’s why the more we know about a customer or policyholder, the better we can use technology to autofill critical information and provide real-time support. This means less time spent in the weeds and more time dedicated to the personalized interactions that matter. 

Final take

None of this will be easy to implement in 2023 and beyond. But the journey must begin, from the ideation of solutions to their deployment, to the products offered to insureds, to how people are serviced. Insurance is becoming one long value chain permeating more and more areas within our lives. There are so many areas to innovate for the better. Everyone is looking for the right support system.

Those providers and carriers who can overcome turbulent times with the help of technology, and use these tools to deliver humanized, empathetic insurance experiences will win the day. And, consumers will ultimately benefit from this evolution if the industry gets it right.

This guide identifies the cybersecurity risks associated with rapid innovation and the best practices insurers can adopt to continue to innovate securely. Whether developing your technology in-house or working with third-party vendors, this guide offers 14 steps to reach your potential while securing your innovations with the right disciplines, protocols, and partnerships.

A must-read for insurance professionals concerned with and responsible for the security of systems, data, personnel, innovation, and strategic initiatives.

Read More

Sponsored by ITL Partner: OneShield

2022 proved to be a very disappointing year for markets and insurance portfolios despite its promising start. It was the worst bond market ever and one of the worst in history for equities.

Two large surprises were key: the severe economic fallout from COVID lockdowns in China and the war in Ukraine. The non-surprises were U.S. fiscal and regulatory policies, particularly regarding stimulative spending and restrictive energy policy.

We had expected the U.S. economy to muddle through 2022 to a soft landing with modest inflation. However, the collective impact of all these negative factors proved too much, and we find ourselves with skittish markets -- and possibly peering into an economic downturn in 2023.

Growth Outlook Facing Inflation Challenge

International Monetary Fund (IMF) projections continue to show a stark weakening growth trend across all regions. Its projection for 2023 global growth is 2.7%, less than half of the 6% reported in 2021, reflecting barely 5% for Asia (dominated by China), a meager ½ of 1% for Europe and the U.K., and only 1% in the U.S.

Core inflation readings remain stubbornly high, and that is after adjusting for the impact of damaged food and energy supply chains as a result of the Russo-Ukrainian war. Negative real rates persist in markets around the globe, an unsustainable condition if we are to avoid contraction.

U.S. Federal Reserve (Fed) Chair Jerome Powell has said he will tighten monetary policy until it is "sufficiently restrictive" to tame inflation because the central bank's obligation to keep prices stable is "essential" in his view. The all-important terminal rate -- where tightening stops and recovery can begin -- is the level where the fed funds rate exceeds the inflation rate. Our current best guess is that these two rates cross sometime in the first half of 2023, somewhere above 5%.

There is currently a negative 70 basis-point yield difference between the 10-year Treasury note and three-month Treasury bill, the widest inversion in two decades (see Figure 1). While arguments persist as to whether this inversion is a cause or an effect of recession, its historically high correlation to recessions is undeniable.

The fed funds rate rose 425 basis points in 2022, with more increases expected in the next two years. This has provided continuing support for the U.S. dollar, which is good for U.S. consumers as it helps keep import prices low and eases the impact of inflation, but it's not good for U.S. exports and non-U.S. economies with dollar-based liabilities.

The dollar's strength has been a significant factor in the performance of U.S. assets relative to other global markets. Should the dollar cool, some of that support will likely fade.

See also: How to Plug Gaps in the Market

A Quality Bias as Earnings Slip

Spreads moved tighter across most sectors in the second half of November 2022, though we see them as still relatively attractive. We believe high-yield valuations do not currently reflect the risks associated with a global slowdown and still-elevated levels of inflation.

The opportunities where we see potential value for insurance portfolios are consistent with a laddered curve call; asset-backed securities (ABS), collateralized loan obligations (CLOs) and non-agency mortgage-backed securities (MBS) are shorter in duration, while agency MBS and corporate bonds provide good intermediate options, and taxable municipals as well as some corporate names may be able to round out the long end of the curve.

Conning believes we have moved into the latter stages of the credit cycle, which we refer to as the "reach" phase (see Figure 2). We have moved technology into the "decline" phase, an early indicator to be watchful for signs across the corporate universe. Banks are not yet seeing a rise in non-current loans, which suggests stability for the moment. We are seeing credit card delinquencies edging up a bit, and a few banks have modestly tightened standards.

In our view, this suggests investors may want to consider a bias toward quality because eventually we are likely to see more issuers move into the decline phase. The S&P 500 Index constituents are on track to post roughly 2% year-over-year profit growth for the third quarter. That would mark the slowest annual earnings growth since the third quarter of 2020, which was the height of the pandemic, a concerning signal for our 2023 outlook.

A review of consensus forecasts for 2023 suggests expectations of 5% annualized earnings growth. However, further downward revisions are likely as a recession looms and as increases in the fed funds rate, which always work with a lag, come home to roost.

With the average age of insurance agents being 45.9 years old and people retiring between the ages of 62.3 and 64.6, it is vital that insurance recruits Gen Z and Millennials. However, potential new entrants to the industry are less interested in life insurance careers than ever before. 

In part, this is because of a gap between potential employees’ expectations and the realities of how much work remains to be done on digital transformation in the life insurance industry. Younger generations are looking for jobs in which technology reduces frustrations, increases productivity and enables quick successes. For many life insurance companies, too many obstacles still exist: 

• Working on decades-old back-office platforms using out-of-date languages is not a particularly future-focused call to action for new graduates.
• When it takes five or even 30 days to return a decision on a policy application, how motivated would someone be to get into the business of trying to sell those policies?
• At the moment, many stakeholders are unable to share data and quickly pay agent commissions, which doesn’t inspire engagement in a demographic used to one-click financial transactions.
• While digital transformations are underway across the industry, some companies still rely on ad hoc processes that combine aging, siloed data portals, Word docs and homemade Excel macros. Not exactly what a digital-born entrepreneurial employee is looking for when considering whether to try to build their own advisory practice or whether they should embark on a career at a Tier 1 carrier. 

Technology is part of the solution

The reality is the industry is still mired in paper and too reliant on manual processes. There are still too many critical systems that don’t provide the automations, access to data or integrations among systems that enable employees to focus on more strategic tasks. 

The solution is for insurance companies to automate repetitive and laborious processes by updating their legacy technology‒increasing productivity and creating greater employee engagement.  

See also: Life Insurance Requires New Conversations

Accomplishing this means accelerating digital transformation and prioritizing technologies critical to increasing the opportunity employees have to work at the highest level of their potential. 

Consider initiatives such as:

• Modernize policy admin systems so product innovation can be moved into the hands of the business owners and accelerated. Enable underwriters to automate repetitive tasks (like client data collection).
• Develop a robust data strategy and migrate or convert data into accessible, usable formats so it can be shared easily among stakeholders to enhance decision making and improve analytics and BI.
• Provide advisers with integrated tech stacks purpose-built for their role. Provide them with adviser-specific CRMs that enable them to effectively manage their practice, find prospects and develop client relationships. Integrate those tools with financial and insurance planning solutions, quoting and illustration and e-applications to streamline the entire buying journey.

Resolving legacy technology issues will not only accelerate innovation, increase productivity and reduce costs‒it also sends the message to new generations that the life insurance industry is current, interesting and a place to build a future.

Focus on purpose

Great Place To Work found that Gen Z and Millennials want to work for employers that have purpose and special meaning. Life insurers fit the bill. It’s a mission-driven industry that aims to help families when they are going through some of the most difficult times of their life. By advertising life insurance’s mission and purpose, carriers can attract new talent who are looking to improve people’s lives and work at companies with a purpose beyond profit. 

Emphasizing life insurance’s mission can also help refocus agents who may feel like they’ve been left behind by the push to improve customer experience. If employees are happy and feel like they are working toward something beyond raising profits, it will affect how they interact with policyholders and drive organizational success. 

Be open to feedback

Agents have firsthand experience using insurance software and interacting with policyholders. They know what works and what doesn’t. They know what policyholders need and where the gaps in customer experience are. If insurers want to improve customer experience, they need to listen to their agents. 

Life insurance agents are a valuable resource as they can provide suggestions on how to improve organizational processes and can highlight pain points. If life insurance carriers better understand their agents and their needs, they can, in turn, help the policyholders by providing agents with all the tools and technology they need to succeed.

See also: What Is Happening to Life Insurance?

Conclusion

While it is important that life insurers improve the customer experience, they must not forget about their employees — their most essential asset. Carriers need to inject empathy back into the life insurance business by automating processes that don’t need a personal touch and empowering employees with systems that have human-centered design and allow agents to spend more time working one-on-one with clients instead of completing mundane tasks. 

If life insurers want to improve customer experience and inject empathy into the industry, they must improve employee experience first.

Embedded insurance is one of the most frequently explored topics in insurance today, yet its potential remains largely untapped. We are limited so long as we consider the concept purely with an insurance industry lens. Unlocking the potential of embedded insurance involves a mindset shift from "point-of-sale" to "point-of-design."

The embedded insurance model is not at all new. We define "embedded insurance" as any instance in which an insurance product is sold in conjunction with a non-insurance product. Examples include bancassurance, point-of-sale warranty products, life insurance sold prior to an airline trip and, increasingly, insurance products bundled with vehicles or higher-risk pastimes (such as insurance bundled with ski passes). The emergence of application programming interface (API) platforms has made it possible to bring insurance products closer to their non-insurance vehicles. In these cases, insurance is typically positioned as a "bolt-on" at a point-of-sale (either as an "opt in" or "opt out" choice).

When we approach embedded insurance design as adding a point-of-sale complement, we miss the opportunity to create even more meaningful customer experiences. The opportunity lies in exploring the affinity between the insurance solution and the non-insurance product and how we can build unity in a singular value proposition. Doing so requires introducing insurance at the point-of-design, rather than as a bolt-on at the point-of-sale.

See also: Embedded Insurance: The New Hot Topic

We can think about point-of-design-focused embedded insurance as similar to the example of the original screwdriver set that was included with Google Nest thermostats.

The utility set was designed both to add value to the thermostat (providing an easy-to-use kit to install and remove the device) and to reinforce the overall value proposition of a simple, elegant and functional connected home product. It would have been entirely possible to add an off-the-shelf screwdriver along with the thermostat device that would have served a similar purpose -- yet the development of a point-of-design complement reinforces and extends the core value proposition. Embedded insurance has potential to achieve the same outcome if approached as a design opportunity, rather than a bolt-on feature.

The founder of frog Design, Hartmut Esslinger, articulated customer buying behavior in a way that highlights the need for point-of-design thinking: "Customers don't buy a product; they buy value in the form of experience and emotion." We create a singular experience when we design bundles of products that share an intentional and clear affinity. Weaving the value of protection services into the design of non-insurance products has the potential to render insurance products more tangible. Examples may include, for instance:

• Connected home solutions with advanced safety and maintenance features built into the property that detect and automatically manage risk (turning off appliances or mains supplies and automatically contacting emergency services)
• Personal vehicles designed to support wellness-focused internal recreational spaces as an extension of a bundled life, health and vehicle insurance package
• Sports equipment (shoes and clothing) with sensors woven into them that monitor performance and health as an extension of a goal-directed training and wellness package that includes personalized life and health insurance risk mitigation and protection, and that connects to a branded community of similar users.

See also: Embedded Insurance and the Gig Economy

The challenges in creating point-of-design embedded insurance solutions are significant. The first question is where to start. Which industry and which products should we focus on? Secondly, who would be the right partners to engage? Overcoming the obstacle of different industry-focused mental models and practices and ensuring true co-design will not be easy. And thirdly, how can embedded insurance solutions help agents to effectively manage their book of business?

Underwriters spend up to 40% of their time on non-core and administrative activities like re-keying and manual data entry. 

As a result, many underwriters fail to service all the requests for coverage they receive. Time and energy that could be allocated toward more meaningful activities — like improving broker interactions, effectively pricing risks and winning new business — is wasted due to redundant, manual processes and inflexible systems. 

Brokers grow frustrated when they don't hear back from underwriters in a timely manner. Likewise, low-value activities often take time away from more thoughtful risk analysis — ultimately leading to poor risk selection and portfolio management. 

In a business environment where time is one of your organization’s most valuable assets, process efficiency is a top priority. But technology is maturing just in time to respond to common challenges in the underwriting world, allowing underwriters to refocus their time on what they do best. 

A day in the life of an underwriter 

As an underwriter, your first task of the day is to wade through your inbox and identify the risks worth opening — you’re looking for a profitable needle in a haystack of emails. An hour later, you’re 80 pages deep in the first risk you’re analyzing when you realize the broker failed to flag that coverage is needed for something your reinsurance doesn’t handle. 

So, you pass on that risk, meaning a wasted hour on your end. Although you’re frustrated, it’s still early in the day so you shake off the error. Things are looking better as you start reviewing the next risk in the queue, until you discover this broker also made a key oversight — they failed to include the engineering report on the request's most important asset. 

While waiting for a response on that information (which takes another hour), you pull up the rest of the applicant’s information and documents, which includes miscellaneous web forms and Excel spreadsheets. When you enter the applicant’s information into your workbench, you receive a clearance error because you mistyped the name of the cover and misplaced a decimal point when inputting the rebuild value. You contact another broker to resolve these issues and get an out-of-office email in response. 

Before you know it, your day is over — and you’ve failed to move forward even a single risk. Not only is your own work incomplete, but you haven’t had a chance to respond to brokers on other potential business opportunities. 

While this example is a worst-case scenario, it’s not far off from an average day for underwriters. Frankly, underwriters have struggled to service the volume of requests they’ve received over the past few years in a soft market. So how will underwriters cope in today’s hardening market — with submission volumes multiplying — where brokers are searching high and low to find capacity?

Scaling to meet these insurance challenges isn’t achievable via traditional methods like increased headcount and expense bases. You need technology intervention to close the gap. 

See also: 2022 ITL Yearly Wrap Up

Outdated technologies and inflexible systems undermine your underwriters’ success

Inefficiencies are all too common in underwriting. With loads of important information buried in disparate documents and forms — and processes that make it difficult to navigate business needs — underwriters are simply not set up for success. 

If your technologies and processes are weighing you down, consider whether the statements below apply to the underwriters at your organization. If so, it’s time for a tech upgrade. 

1. Disjointed data limits automation and efficiency. Your underwriters manage and extract data from siloed and often complex sources like medical reports, policy documents, applications and survey reports. The lack of standardization makes it difficult to automate data extraction, so you rely on time-consuming and costly manual data processing efforts. 

As a result, underwriters spend too much time sorting through, keying and compiling data. They lack time to respond to brokers in a timely manner, which damages the customer experience and causes underwriters to miss out on new business opportunities. The ability to respond swiftly to brokers is often the key to winning more of the business you actually want to write — and digitizing this process relies on clean and accurate data lifted straight from broker submissions. Support your underwriters with technology that facilitates accurate automation, regardless of inconsistent data formats. 

2. Underwriters can’t access the right data at the right time. Do your underwriters waste time waiting for answers and documents? How much time do they spend analyzing a risk before they identify a red flag or a treaty gap that prevents them from writing the risk? Without the right data at their fingertips, the insurance application drags on, wasting time and resources. 

At the same time, underwriters grow frustrated because they would rather spend time on initiatives that add value to the business instead of waiting for information and answers that may never come. Underwriters require technology that provides access to accurate data so they can maintain efficient processes and reallocate the time they would spend waiting around to more strategic initiatives. 

3. You lack confidence in your risk assessment and pricing. Human error is inevitable if your organization relies on manual processes. An underwriter or actuary can easily miss a key data point hiding in an Excel spreadsheet cell or enter duplicate data — especially when trying to quickly replicate loss runs that are baked into a PDF. With human error likely, it’s important to build additional steps into your process that help check (and then double check) inputs. 

See also: Why Underwriters Don’t Underwrite Much

To more accurately price risks and reduce losses, your underwriters require tools that provide easy access to each piece of relevant information — and that data must be captured accurately. Without a digital repository of information to draw insights from, underwriters are left to rely on experience and gut feelings, with no way to systemize insights, eliminate cognitive biases and pinpoint poorly priced risks in the market. And there's no point in investing in data augmentation if it’s being appended to an inaccurate or incomplete record.

If you aren’t sure where you stand with your current technologies, the most important step is to listen. Survey your underwriters, gather and analyze the results and determine how to proceed from there. To keep conversations aligned on your overarching business needs, center discussions on strategies to achieve scale and automation in an industry that’s filled with deep expertise and built on human relationships. 

You’ll find that the right technology won’t replace or automate the role of the underwriter — it should empower them to focus on bringing more value and revenue to your business.