Let’s get it out of the way early. Everyone will die. It is not an “if”; it is a when. And because it is a guarantee that no one likes to entertain, consumers shy away from even thinking about the topic of life insurance, let alone going through the process that puts them face-to-face with statistics and data surrounding their own mortality. 

Longstanding Hurdles

That resistance is actually deeply intertwined in who we are as people. In a study from Bar Ilan University in Israel, Yair Dor-Ziderman found that “the brain does not accept that death is related to us.” Humans have a primal mechanism that tells us the information is not reliable when it links oneself to death, so the brain doesn’t believe it to be real. Because the process of purchasing life insurance is linked to the realization that a consumer will in fact die for the policy to be enacted, it’s human nature to want to avoid it. 

Even if consumers can get over the mortality hurdle, they have traditionally been met with an intermediated, agent-assisted, purchase journey that can last up to two months. If they are using an agent, they are left to disclose personal health information to either someone they have known a long time and consider a family friend or a stranger; both instances can cause great discomfort. This leaves life insurers questioning where they can meet these customers. The answer lies where almost all other industries have ventured – online. 

See also: A New Boom for Life Insurance?

Digital Solutions

At Legal & General America (LGA), the team has taken an aggressive growth trajectory to bring the digital experience to the American term life insurance market. Since launching the digital experience, LGA has found significant success and customer adoption of the new process. With the new model, they found that 90% of those who start the application complete it; that figure was previously 40% when using a non-digital, paper application. The ability to complete some of the application, put it down and come back to it allows users the freedom to not feel pressured to carve out a block of time to sit with an agent or a handwritten application; they can get back to what matters most, the people they’re looking to protect when they’re gone. Twenty percent of applicants receive an instant decision, which means they have a life insurance policy as soon as they complete the application. More than half of applicants are approved without the need for a medical exam. An online experience shifts the agent into a support role, because anyone with access to the internet can use it.

Rather than sit across a table or on the phone with an agent and 25 pages of rigid questions, consumers can open the application where and when they want to fill it out. Not surprisingly, LGA has found that, with its digital application, most applicants are filling out their details later in the evening. And they can reply to only the questions that are relevant to their own medical history and experience. For example, a 50-year-old with pre-existing conditions may have 25 questions while that same 50-year-old with no pre-existing conditions may only have 20 because the dynamic digital application means there is no need to ask questions about medical conditions you don’t have! 

Keeping Consumers, and Agents, in Mind 

When designing the platform for consumers, it is vital to keep the user in mind. Again, thinking about death can be overwhelming, and that can be compounded by looking at a page or screen with five or 10 detailed health questions demanding a response. However, when the application is broken into one question per page, it makes life insurance even more accessible through technology. This platform also allows for increased transparency. The old model required the consumer to ask the agent for the status of their application. The agent then asked the insurer administrator, who had to check with underwriting and then relay all that information back through that same chain. By leaning on transparency, the agent can simply log in and see the status of where the application stands – a more financially leaning pizza delivery tracker of sorts.

All this technology does not remove the agent, either; it simply frees them from the arduous administrative tasks to let them get back to what they love doing – connecting with consumers and helping them find the best solutions for them and their families. Even if they’re the one driving the online application, they can reach more families in their day to increase their own goals. 

Shaving more than 20 days off the non-digital model, the self-guided consumer application can be completed in under 20 minutes, with a life insurance policy in-hand in 25 days on average (if an instant decision could not be made). Investing in technology to make insurance approachable and accessible provides the freedom for all users to find the journey that works best for them. The world continues to spin on a digital axis with the support and backbone of humanity and human connection. When we can harness the power of both, without having to give the heavy topic of death more brain real estate than it truly requires, everyone is granted the freedom to live a brighter life and leave behind the same opportunity for their loved ones

When I first came across the concept of "reverse innovation" a decade-plus ago, I was intrigued. Those of us living in fully developed economies tend to assume that innovation flows from our shores to countries in the developing world. But not always. When it comes to cost, in particular, many innovations happen in developing economies and, if the rest of us are paying attention, become available to the developed economies.

Vivek Wadhwa, a very smart fellow I've gotten to know over the years, and two co-authors have written a provocative piece in Fortune that argues that, while most of us have been distracted by the battle that cryptocurrency advocates have been waging against so-called fiat currencies (issued by governments) and the high cost of the traditional banking system, India may have come with an answer.

Vivek, not known for pulling his punches, and his co-authors write in Fortune that "Bitcoin long ago died as a digital currency, becoming nothing more than an empty speculative asset with its value most recently plunging from $60,000 to less than $20,000. Meanwhile, as [its] hypesters now promote a mystical Internet world called Web3, India is racing ahead and implementing what the crypto crowd had promised—with its United Payment Services (UPI)."

The Reserve Bank of India and the Indian Banks’ Association set up UPI six years ago and make payments free to build traffic. The system will eventually carry fees, but, according to the article, "only a tiny fraction of what merchants and consumers pay to move money on private payment systems such as those run by Mastercard and Visa."

UPI has grown to the point that 150 million users transact $100 billion of business through it each month. That's a tiny fraction of the trillions of dollars that pass through the international financial system daily but still shows that UPI can scale. A French company just announced that it will introduce UPI into the European Union, the article says, and "merchants in Singapore, Malaysia, Thailand, Philippines, Vietnam, Cambodia and Bhutan accept UPI payments.... The National Payments Corporation of India is now negotiating with Australia to integrate UPI with Australia’s own nascent fast payment rail, called New Payments Platform.... More than 300 banks and dozens of payment applications and startups—including subsidiaries of many major U.S. tech giants—[are] joining UPI."

It seems to me that UPI may have legs, because it is built from the ground up with the kind of security that is only now being grafted onto traditional payment systems and because it uses an open protocol, making it easy for companies to hook into and build services on top of. 

The article says: "By facilitating exactly what [cryptocurrency] was supposed to do—cutting out intermediaries and inducing greater competition—UPI could force a global acceleration of innovation in payment technology."

I'm not suggesting anyone rush out and convert all payments to UPI any time soon. Even if UPI becomes a wild success, it will be years before UPI becomes a must-have, at least outside India. But UPI is still worth a look for insurers. It shows that we don't need to wait for some sort of crypto revolution to happen (or not happen) to make great progress on electronic payments -- cutting costs and saving time for customers as well as insurers by taking so much paperwork out of the process. UPI also lays out a road map for how insurers can start to make progress.

As the article concludes: "Shiny new technologies such as [crypto] may be cool, but less flashy efforts driving open standards and interoperability are delivering a real revolution that flies under the radar of the tech gurus in England's Shoreditch and America's Silicon Valley."

Cheers,

Paul

What is Web3? What are the opportunities and risks for insurers? At Oliver Wyman, we've released a practical guide on Web3 to separate hype from reality, and help leaders navigate through this rapidly evolving space. Our latest research finds the Web3 economy is currently under-insured and has huge potential for future growth. We explore opportunities for insuring the Web3 economy, reaching new customers, and reinventing business models — that may radically change what an insurer can look like.

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Sponsored by ITL Partner: Oliver Wyman

Why travel somewhere when you can just pop on a virtual reality headset and be immersed in that world instead? That is the promise of the so-called “metaverse.”

Some companies may be overselling the technology and the role the metaverse promises to play in people’s day-to-day lives, but, even still, it is a good bet that at least some of our lives in the
future will be lived in that virtual space.

Some early adapters are already embracing it, and some businesses are hedging their bets by spending millions of real-world dollars to put in claims on what might eventually turn out to be valuable virtual real estate.

With those initial moves into the virtual world, the list of potentially insurable risks in the metaverse can be long. Hackers could take control of a user’s account, or lock a business owner out of their virtual storefront.

Businesses that can’t conduct transactions may come looking for protection from business interruption insurance policies, or potentially more.

Anyone keeping the private information of another person could have some exposure if that data gets breached.

And anything valuable is at risk of being stolen by someone trying to make a quick buck at their expense.

So, the short answer is that with money comes risk, and with risk comes insurance. While there aren’t any real metaverse insurance policies to refer to today, this might be the time to start exploring how the metaverse might find its way into insurance policies in the near future.

Business insurance in a virtual world

The first reality businesses are going to have to confront when they begin prospecting for metaverse-based property is that there isn’t just one metaverse. Many companies are looking to make their space the default virtual space. That means businesses need to buy into many metaverse platforms, some of which will inevitably go the ways of Friendster or Myspace.

Most business insurance policies don’t say a word about the virtual space, but a good argument could be made that “all risk” or “comprehensive” policies may need to start thinking about underwriting and claims coming from the meta space.

The first policy most companies buy is a business owner’s policy, or a BoP. These don’t tend to protect property the businesses’ property, though, and instead protect against liability.

So, if a company ends up inadvertently spreading a virus that takes down the cyber town, a BoP may be where they turn for coverage.

A BoP might also help if the company’s software caused physical damage to a user – say a company developed a game for the metaverse that started causing users to have seizures or migraines, or to trip over a coffee table, or fall out of a chair. The liability portion of the BoP may step in here. Policyholders probably would be hard-pressed to get their insurers to cover “mental only” losses, though, so, if someone says the software causes stress or anxiety, a successful claim may be harder to prove.

Business property insurance does promise to keep the owner’s stuff safe, but now the conversation quickly needs to turn on what is the definition of “property.”

From an insurer’s point of view, property damage tends to be considered to be physical damage to tangible things. Many policies exclude “electronic data” as tangible property, so some specific language or riders may need to be developed if a business owner wants to be protected from a hacker vandalizing a virtual storefront.

Typical polices do tend to include some language about cybercrimes, especially data breaches and ransomware attacks, but it is unclear if that is enough to protect the millions being spent in the virtual worlds.

See also: Beware the Metaverse

Personal risk

Individual users also need to be thinking about their insurance needs once they slip into the virtual world.

Much like with the business owner’s policy, the question of who would be on the hook if an individual’s private property is damaged in the metaverse would come down to what that person’s homeowner’s insurance policy says. Many homeowner’s policies specifically exclude digital assets, and others require specific riders to get coverage.

So, what would happen if a hacker gained access to an avatar and drained its inventory of all the NFTs the user so lovingly collected? Theft is usually covered by homeowner’s policies, but whether that protection follows the policyholder into the metaverse is unclear.

One place where homeowner’s policies would likely shine is in defamation. Because homeowner’s – and business owner’s polices, too, for that matter – don’t tend to specify where the defamation or advertising injury has to happen to be covered. So, if someone gets sued because they flamed another person in the metaverse and their comments crossed the line into libel, their real-world policies should still stand in to protect them.

Conclusion

Deciding who needs coverage in the metaverse in many ways comes down to who is at risk and who holds the liability.

Is it the businesses operating on the metaverse platform at risk, or does the platform itself hold the liability? Or is the whole metaverse going to be “user beware”?

What do the terms of service say? And are they enforceable in a court of law in every jurisdiction?

Borders also need to be thought of. In insurance terms, that is the coverage territory, which U.S.-based policies tend to specify as the U.S., Puerto Rico and Canada, but how would these policies handle a server housed in Seychelles, or Belize or China?

Many of these details are going to have to be hammered out by underwriters, legislators, in corporate board rooms, in courtrooms or in some combination.

Emerging technologies bring out the prognosticator in everyone. And one of the most certain things is that most people will get it wrong in the early days, but, if there is value, it will find a way to bubble to the top.

And if it is valuable, it is worth insuring.

The original version of this article ran at insurancequotes.com. 

I’ve spent my entire career trying to develop and improve catastrophe and weather-related models and analytics. So, from a personal perspective, if there’s one thought among many others that I would like to get across, it’s a sense of the opportunity to enhance decisions linked to climate risk mitigation and resilience if we use our ever-improving scientific understanding and modeling capabilities wisely.

And I think there’s one thing that holds an important key to unlock that opportunity – openness. When I talk about openness, I don’t mean a willingness from governments and others to set out and stick to commitments to reduce emissions – although that would be rather helpful, of course. I’m referring to two things, actually.

More open-access data

The first being more open-access data. Open-access and curated data can support and encourage improved climate-based risk assessment and decision-making. The public and private sectors should be working together to increase the world’s resilience to current and future climate risk.

It’s essential that those in the climate analytics community come together, wherever they are, to promote the win-win opportunity that comes from the development of publicly accessible, open and curated core data and risk models. The goal should be a global, consistent source of “real” assets data, such as locations of industrial plants and energy transmission facilities, or natural resources, which can be used for both public good and to enable organizations such as WTW to augment the data for commercial applications using proprietary data and intellectual property.

Examples of good work already being done in this area, which should pave the way for more of the same, include the Spatial Finance Initiative’s global asset GeoAsset Data Project, the Insurance Development Forum’s Global Risk Modeling Alliance and the Nasdaq-designed and now publicly curated Open Exposure Database.

As a further indicator of the benefits that this public/private approach can offer, WTW has been working in partnership with the National University of Singapore, flood modelers JBA and open-source public data of real assets to improve understanding of future flood risks in South East Asia.

See also: Time to Move Climate Risk Center-Stage

Common standards for common understanding

My second take on the need for openness, which is linked to the need for better and open models and data, relates to model and data standards and metrics. Right now, there are lots of companies and organizations producing climate hazard models. And as climate science is so fast-moving, they are all making lots of different choices and assumptions for those models. If a multinational business is trying to work out an international climate transition strategy, it almost certainly won’t be comparing the same things from region to region. But the last thing we want in attempting to unify action across the globe to reduce emissions is a VHS versus Betamax situation.

What’s needed is agreement on an open-standards framework for the capture of key climate-conditioned modeling parameters. These should support consistent representation and use of forward-looking models developed by independent modeling organizations to give confidence in the comparison and integration of models across various hazards and regions.

Similar things have been achieved before, but they need someone to take the lead. Nasdaq’s experts did it in relation to the catastrophe model exposure data, OED, which is now used as a common format for a wide range of models from different vendors. And that’s why we’re teaming up with Nasdaq and other organizations to propose a reference framework of standards for climate conditions catastrophe models. 

We’re all in this together

Openness is a subset of collaboration. And if I hear one word used more than any other to describe what’s needed to combat climate change, it’s collaboration.

Let’s make sure that it’s applied in practice to open source data assets and standards that can give us all better and more consistent knowledge about the impact of different future climate transition scenarios.

I'll be quick this week. I'm in Pittsburgh visiting my 92-year-old mother, who finally gave up tennis a few years ago but still takes no prisoners in her duplicate bridge games, and we have puzzles to do. 

But I wanted to pass along a meaty interview that McKinsey did recently with prominent venture capitalist Marc Andreessen. He offers a timely warning for insurers that might be tempted to see the tumbling of tech stocks, including those of insurtechs, as an excuse to slow innovation efforts.

Andreessen says: "The minute tech stocks get hit, a lot of big companies basically say, 'Oh, thank God, we don’t have to take this stuff as seriously.' This happened in a huge way after 2000. One of the reasons why Amazon took off is because all of the traditional retailers, after 2000, said, 'Oh, thank God, we don’t have to worry about this e-commerce thing anymore.' And they just left the field. Borders famously outsourced their online business to Amazon, which, in retrospect, was maybe not the best idea."

His advice: Double down while your competition is relaxing. 

In the interview with McKinsey, Andreessen also makes an intriguing argument for turning the normal innovation process upside-down. Rather than hiring technologists to assist with innovation, he argues, companies should put the technologists in charge of an opportunity and let them run with it.

He makes a more extreme form of that argument that no big insurance company will buy: that the best technologist should run the entire company. He cites Tesla as a success story in an industry where GM, Ford and others are run by traditional managers.

But I think companies should at least experiment with the more limited form of Andreessen's argument. I've written before that technology resources need to move out of the IT department and into the various business operations that they serve, and it makes sense to then see how much technology can drive strategy in those operations. Corporations have increasingly been deploying digital strategies for 25 years now, and it only makes sense that departments, operating sort as fractals of the parent, would be able to see how far they can push the envelope now that IT resources have matured to the point that they don't have to be so centralized. 

Andreessen also lays out three areas that he describes as the ABCs of innovation opportunities. I'm fully on board with the A, artificial intelligence, and the B, biotech -- we've published at length on all the opportunities being created by AI, and genomics is actually improving much faster even than Moore's law would suggest. Those gains will have massive impacts on healthcare and life expectancy and, thus, on insurers. I'm only partly on board with the C, crypto, because, while I see blockchain solving lots of real-world problems, I've never quite figured out what cryptocurrency is supposed to do for me. Yes, fees are still much too high on money that flows through the international financial system, but I don't see how crypto is going to solve that problem, especially when crypto mining already consumes more electricity than all of Argentina. 

Andreessen argues grandly that crypto and Web3 are "building out the other half of the internet" and notes the huge amount of engineering talent that is flowing into the field, but I'm with the McKinsey editor who responds: "A lot of really, really smart people were moving into web technologies around 1998 and 1999. And a lot of those technologies wound up going nowhere."

You can decide for yourself who's right; you've heard my side, and he goes on at length about his.

If nothing else, Andreessen is an original thinker, going back to his days developing the first commercial internet browser in the mid-1990s, extending through his famous essay a decade ago about how software is eating the world and continuing with his efforts to position his VC firm, Andreessen Horowitz, as the marketing engine for their portfolio, moving beyond the traditional role as just financial backer. (I identified Andreessen as clearly brilliant early on, when an interview with him in perhaps 1996 included a sidebar with his five favorite books of all time and listed my look at IBM's travails, "Big Blues," as one of them. I came quite close to convincing the executive team to let me do a fly-on-the-wall book on Netscape, the company built around Andreessen's browser, before the CEO decided he didn't have the time.)

And I'll acknowledge that our relative net worths, rounded to the nearest hundred million, are: Andreessen, $1.6 billion; me, $0.

Cheers,

Paul

P.S. Fun fact: Despite his massive net worth, Andreessen didn't amass the biggest fortune in his family. And the person would bested him did so in the most traditional of ways: through real estate development. That person was his father-in-law, John Arrillaga, who went to Stanford in the 1950s and saw the potential for all the farmland in the area. He bought as much as he could as fast as he could and became one of the biggest landlords in Silicon Valley. He had a fortune listed at $2.5 billion when he died early this year, even after having given away hundreds of millions of dollars, notably to his alma mater. 

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ITL FOCUS is a monthly initiative featuring topics related to innovation in risk management and insurance. This month, we're focusing on Talent Gap FROM THE EDITOR  When my younger daughter was a freshman at Yale, I was encouraged that her intro to economics class included a fairly long section on the economics of insurance -- essentially, an exercise in determining how much people valued the peace of mind they get from having a policy in place. Insurance certainly never came up in any of the economics classes I took way back when, and I took the material as a good sign: A top-tier college was making insurance intriguing for smart, young students.   Alas, I couldn't interest my daughter in the insurance industry. And there seems to be a lot of that indifference going around, based on the persistent concerns in the industry about the talent gap.    Jenn Knight, co-founder and chief technology officer at AgentSync, offers some intriguing thoughts on a way forward in this month's interview.    While I've heard lots of people describe insurance's noble purpose as a draw for talent, Jenn framed the issue as well as I've seen anyone do:   "If your house catches on fire, the first call is to the fire department, and the next call is to your insurance agent. Like the fire department, insurance is an emergency service that helps you get on with your life."   Jenn also explains at length what technology can do to at least remove the annoyances that keep talent from choosing insurance or that may make the industry lose them shortly after they sign on. In particular, she describes how technology can help agencies onboard agents faster and remove much of the load of minutiae that they now have to learn.   It's too late for my daughter. She went to law school and is now practicing in DC. But it's not too late for an awful lot of other talented kids. Let's go get them.   Cheers, Paul    Jenn Knight, co-founder and chief technology officer of AgentSync, lays out an approach that seems like it should be obvious but that somehow isn't. Her approach to attracting and retaining talent? Stop driving it away.  She explains how companies can use technology to onboard talent faster and more efficiently and remove much of the drudgery from their work that can make them seek greener pastures in other industries.  "In the insurance space, agents are going to be attracted to things that help them go out and have those personal relationships and really drive their business forward. How do we as an industry laser focus on improvement of administration work? Talented people demand that they are supported and enabled with effective and usable technology, and are not being dragged through all kinds of hoops."  -Jenn Knight Read the Full Interview READ MORE There Is No 'I' in 'TEAM' But there is an 'i' in 'WIN.' Let’s talk talent. Let’s talk football. Read More Acting on Diversity, Equity and Inclusion Employers who recognize the importance of these issues will capture talent and inspire the workforce. Those who ignore it are at risk. Read More What Are Insurers’ Top Talent Objectives? While talent challenges are nothing new to insurers, new research shows they are prioritizing talent strategies more than ever in the post-pandemic era. Read More Guide: Making Producer Management a Growth Opportunity Sponsored by AgentSync  Download the Guide to Making Insurance Producer Management a Growth Opportunity. It’s free and will give you tips to eliminate complexity, expense, and risk by modernizing processes and systems, delighting your people and partners, while powering your insurance company’s growth goals.  Read More The Future of Work As employees start to return to work after two years of mostly working remotely, smart employers are rethinking just about all aspects of how work is done to get the best of both the home and office worlds. Read More Outsourcing to the Sixth Century A story about monks and nuns doing electronic piecework suggests just how far the gig economy can stretch, if we think about the issues creatively enough.  Read More FEATURED THOUGHT LEADERS Tom Bobrowski Betsy Myatt Bryan Falchuk Ron Rock Mark Breading This Month Sponsored by: AgentSync  AgentSync powers rapid growth for insurance carriers, agencies, and MGAs by offering modern tools for producer management. With its customer-centric design, seamless APIs, and automation, AgentSync's products reduce friction, increase efficiency, and maintain compliance, ultimately helping to improve the broker onboarding, contracting, licensing, and compliance processes.  Founded in 2018 by Niranjan "Niji" Sabharwal and Jenn Knight, and headquartered in Denver, CO, AgentSync has been recognized as one of Denver’s Best Places to Work, as a Forbes Magazine Cloud 100 Rising Star, an Insurtech Insights Future 50 winner, and is ranked 88 in Forbes – America’s 500 Best Startup Employers 2022. View all ITL FOCUS topics

ITL:

In general terms, how would you frame the talent gap that the industry faces?

Jenn Knight:

We really need to be thinking about how we as an industry start to bring people in, in their early 20s, late 20s, early 30s. The way that a digital native operates is different than how I've operated through my life and how generations before us have operated. And figuring out how to be an attractive employer to a group of people that do not look like those currently working for you is a pretty significant challenge. How can you be compelling for them?

ITL:

As a relative latecomer to insurance, it amazes me to see all the people who say they just fell into insurance. I mean, it's a great industry offering great careers. How do you get people to see that?

Knight:

There’s a macro question here. How do you do that for any industry? Right? How is it that we've just decided that tech is cool? Where did that start?

Insurance is a really complicated, fascinating space that supports all of us as consumers in the hardest moments of our lives. If your house catches on fire, the first call is to the fire department, and the next call is to your insurance agent. Like the fire department, insurance is an emergency service that helps you get on with your life. If you frame the industry that way – which nobody did to me until I worked in insurance – it can become something you love and want to do for 10, 20, 30 years.

ITL:

Beyond the framing issue, what are some other challenges to filling the talent gap?

Knight:

There is a technology gap that has to be addressed. People are turned off if they feel they can’t drive enough impact because it's too difficult to go through the onboarding process or to engage with a certain set of carriers, or compliance with regulation is causing most of your day to be administrative.

Before I worked in insurance. I worked primarily in the back office of scaling tech companies and supported sales. The whole job is getting information you need from sales, supporting them with the information they need and getting out of their way so they can be on the phones.

In the insurance space, agents are going to be attracted to things that help them go out and have those personal relationships and really drive their business forward. How do we as an industry laser focus on improvement of administration work? Talented people demand that they are supported and enabled with effective and usable technology, and are not being dragged through all kinds of hoops.

ITL:

People who’ve written for us say that, in the old days, you got onboarded by sitting next to somebody who was 20 years older than you. You said to the person, over and over again, Okay, how do I do this? But talented people today aren’t willing to sit there for two years and learn. You also can’t wait two years for people to become productive. As you speed the onboarding process, are there problems you’re finding easier to solve than others?

Knight:

Everything in the insurance space is somewhat hard to solve. One thing we focused on early is “productizing” institutional knowledge. It's a continuing process because there are so many layers of complexity. But we started with some core aspects, such as, What are the rules you have to follow to get someone licensed? Well, those rules are different by state, by line and by license class, but the issue is something we can tackle.

We thought: Can we build a product that someone who's been doing a job for 20 years can use successfully and appreciate because it speeds them up? Can we take someone who’s new and let them quickly figure out if their five agents are compliant?

There are complex scenarios where you need to sit down and talk with someone or do some deep reading, but even that work can be supported with technology. We've started with situations, such as licenses for adjusters, that are more consistent and are working our way up to more complicated forms of knowledge transfer.

The change can actually be a bit disconcerting for people. They’re used to having to know all this stuff, down to the LOA code numbers, and we’re saying, but you don't have to do that.

ITL:

For a long time, lots of people thinking about innovation in insurance said the solution was to disintermediate the agents. Just get rid of them. Now, people seem to be realizing that the agents aren’t going anywhere.

Knight:

Yeah, we're big believers in the power of the agents. Insurance is super personal. Some of it is more mechanical – I don't get as worried maybe about my car insurance. But agents are here to stay, and that’s a great thing. The question is: How do we make sure they’re doing strategic relationship-building work and not operational, tactical, administrative work?

If you're not actively thinking about yourself as competing for the best talent, then you're probably doing it wrong. You can no longer just be this name and assume people are going to come to you.

It’s getting easier for your competitors to poach your people, too, because LinkedIn makes everyone and their talents so visible now. But the reaction shouldn’t just be fear. If you’re creating an environment where people want to be and you're celebrating their successes, and you're comfortable with them being out there as advocates for your company, they can help you attract that next wave of talent.

More openness, more celebration of people is better for everyone overall, and will help people maybe be more attracted to insurance as an opportunity.

ITL:

In Silicon Valley, there’s a maxim known as Joy’s law, after Bill Joy, one of the founders of Sun Microsystems. It says: “No matter who you are, most of the smart people work for somebody else.” You can fight Joy’s law or learn to live with it.

One last question: While lots of companies are focused on improving the customer experience – as they should be – it seems that the work-from-home experience during the pandemic has created a break point in how people think about the work environment and that smart companies can redesign the employee experience, too, in ways that can address the talent gap. Do you agree?

Knight:

I couldn’t agree more. At the end of the day, the person who is going to make or break your experience with insurance is the person you’re talking to. So, you need to focus on having engaged, happy, supported agents who are getting opportunities to learn more and be better partners who create better experiences for your consumers.

Agent experience empowers customer experience.

ITL:

Thanks so much for taking the time.

About Jenn Knight 

Jenn is the co-founder and CTO of AgentSync. With skill sets that encompass both left- and right-brained thinking, Jenn enjoys tackling the biggest challenges she can find.

Her passion for solving the unsolvable has put her at the forefront of solving the producer license compliance challenges of the insurance industry. After building the basic architecture of what would become AgentSync Manage in her free time on nights and weekends, Jenn's side project grew into a software enterprise that is poised to change the way the insurance industry tackles license compliance and reporting.

Jenn's background leading software development and architecture teams spans many well-known companies, among them Bluewolf, LinkedIn, Dropbox, and Stripe. She focuses on transforming business applications landscapes from disjointed single-point solutions to highly integrated, optimized, and best-in-class platforms. In those roles she learned the importance of building community while tackling difficult business challenges, as trust and humor are essential to navigating the ups and downs of delivery. She is grateful to those who helped her appreciate the journey is just as important as the outcome and works to pay that forward with her team.

Jenn earned a Bachelor of Arts degree in international relations with a minor in French and graduated magna cum laude from Boston University. She learned to code at her first job after college, and rediscovered her knack for logic and problem solving.

Growing up in Petaluma, California, Jenn spent her childhood biking through fields and tinkering with projects. With access to a computer at an early age, Jenn enjoyed deleting files to take apart the operating system before then going and rebuilding it.

As a leading woman in tech, one aspiration Jenn has for AgentSync is to challenge the industry to be better by example when it comes to hiring and maintaining a culture of diversity and inclusion.

When Jenn isn't solving big problems with intuitive solutions, she spends her time with her husband and co-founder, Niji, and their daughter, Inga.

With the stock prices of marquee insurtechs such as Lemonade, Hippo and Root down as much as 95% from their peaks, doubt has been growing for some time about the future of the insurtech movement. Concerns have accelerated as Policygenius laid off 25% of its staff, and as venture capitalists talk about how inflation and the threat of recession are putting pressure on startups across all industries. There is even talk of -- perish the thought -- down rounds (in which startups will have to raise money at lower valuations than they previously held).

So, what does the future hold for insurtechs?

I wrote at the end of January that I thought the future was still bright, especially for insurtechs that serve as what Silicon Valley calls "arms suppliers." Even though so much of the valuations of dot-com companies turned out to be air during the internet bubble of the late 1990s, companies that supplied the "arms" -- servers such as those from Sun and IBM -- still thrived. The same should be true for insurtechs, I reason: There will always be a market for technology that makes insurers smarter and more efficient.

Rob Moffat, a partner at Balderton Capital in London, now weighs in with a smart piece I wanted to share on the outlook for "full stack" insurers such as Lemonade. The headline: "Reports of insurtech's death are greatly exaggerated...."

He goes into some detail on the reasons for the plunges in stock price -- high loss ratios, poor unit economics and slowing growth, as the companies try to deal with those loss ratios and unit economics. (For more detail, check out the smart analysis Matteo Carbone has been publishing with us for years.)

Rob is nonetheless optimistic because:

"There are a number of private insurtech businesses reaching real scale: Zego, ManyPets, Next Insurance, Ethos Life, Alan, Atbay, Coalition, etc. Having seen some of their numbers, I can say that their loss ratios are good, their unit economics are sensible and they are growing strongly. They are achieving this through great execution, and some combination of the following:

• Addressing new markets that didn’t exist before, such as cybersecurity
• Using telematics and novel data to meaningfully reduce losses and fraud
• Targeting underserved segments such as SMEs and the self-employed
• Operating in ‘easier’ lines of business where there is less competition and loss ratios aren’t as tight as in home and motor, such as pet insurance."

He says others can prosper, too, based on the key lessons that we've learned about insurtech, which include:

• "Underwriting is crucial. As an insurtech, you start with the disadvantage of not having a base of loyal good customers. Where are you using tech to give you a real edge over incumbents? But also do you have enough actuarial talent and data to complement this?
• Telematics (real time data) works. Whether in motor or health insurance, telematics data has repeatedly demonstrated the ability to reduce loss ratios. As data collection becomes cheaper and universal, expect telematics to become widespread across many insurance lines....
• Your unit economics have to work. This starts with a good loss ratio, and requires you to have happy clients who stay with you. It also requires you to have a good customer acquisition cost, which in insurance is never easy.
• Automation will bring down expense ratios dramatically, but only at scale.
• Brokers are very hard to dislodge. Many startups have tried to bypass brokers without success. Some of the large private insurtechs above have ended up building a successful broker channel.....
• Disrupting a large sector takes time. Disruptors start off being worse than incumbents in all respects other than one really crucial one. Look at the early days of SaaS or Fintech for examples."

In terms of the Gartner Hype Cycle, insurtech is in the Trough of Disillusionment, having passed the Peak of Inflated Expectations, but we've all seen what happens next in these technology-driven cycles: Real progress happens for those who stay the course. 

Cheers,

Paul 

Telematics enables insurance to be done in a smarter way. Telematics data can be made available as a core component of the analytical rating engine, personalizing pricing. The same data can be used to make personalized appeals to customers as a retention tool, when it’s the right time to do so.

Insurance carriers will better understand their customer profiles and risks, improving sales and profitability, thus making the use of telematics data a concrete opportunity in all geographies.

The U.S. market has focused on using telematics data to enable continuous underwriting that personalizes pricing. We believe this approach will help usage-based insurance (UBI) move to the next level of adoption, convincing motor insurers that driving data is more than just longer something to experiment with because some of the competitors have it. Today, it’s truly an element that cannot be disregarded.

Some insurers worldwide have already successfully introduced a wide range of telematics-based applications. However, motor insurance telematics is still at the beginning of the development curve. Based on IoT Insurance Observatory research, there are fewer than 10 insurers globally with a portfolio bigger than one million telematics-based policies.

In Europe, usage of telematics data has not yet scaled to full potential, and still is rarely used to assess driver risks for modeling. UBI is either a small niche or telematics usage is limited to risk selection and claims management, where it has scaled. The two most advanced markets have been Italy and the U.K., with recent developments in Germany.

In the U.K., UBI is still considered a product for young drivers. In the Italian market, telematics was already present in 22% of the personal motor policies at the end of 2021. Italian personal auto insurance is still globally in a leading position regarding telematics portfolio size, value proposition toward its customers and demand for such services. Many insurers have mastered the use of telematics for self-selection of risks, for claim management and for delivering services to policyholders.

European markets can leverage the recent development in the U.S. market, where the transition to the less expensive, mobile phone-based approach has driven penetration and made the business cases more sustainable. 

The opportunity for telematics will only grow. Consumers love to interact with their smartphones, and digital tools and large tech companies are addressing consumers' needs based on the collected data with highly targeted offers, which consumers seem to like. Carriers' experience will mature, and the cost of technology will keep dropping, making it even more accessible. Data sources will increase, too, letting carriers create a powerful mix of elements and better assess driver risks.

We believe that telematics is becoming necessary for dealing with the future of insurance and that there is a concrete opportunity to use it to operationalize any motor book of business!