Imagine this email exchange with a claims executive:   

Pre-COVID: “We’re a people-driven firm, Tom, and our people don’t want Big Brother. What our people want, our people get, as we need to keep them, not drive them away. Humans are cheaper and easier to manage than bots. And bots don’t buy auto and home policies.”

Last week: “Hey, Tom, with remote work seemingly a permanent thing, skyrocketing wages and turnover, plummeting service levels and the Great Retirement looming on the horizon, I think we need 10 Big Brothers ASAP.” 

Our working world is fundamentally changed from three years ago. Skilled workforce is aging and retiring earlier, younger workers are opting out of mundane jobs in search of meaningful work, wages are indeed skyrocketing, machines are getting more proactive, customers are more digitally demanding (and impatient) and then there’s general inflation, an annualized 8.3% as I type this. 

And people like working remotely; they like it a lot. 

All of these trends, except inflation, we hope, seem long-term. Customer-native firms (e.g., State Farm and virtually all carriers of any size in the U.S.) start with customers and add technology; digital native firms (e.g., Lemonade and virtually all insurtechs) start with technology and (hope to) add customers. As a rule, customer-natives view post-COVID trends as a threat, operational or existential in scope, and digital natives see opportunity.

Most readers have been through a formal program of change management, typically led by a management consultancy, to implement growth strategies, embrace new IT systems or reorganize to reduce expenses. The program likely followed the industry-standard Kotter 8-Step approach: 

1. Establish a sense of urgency
2. Form a powerful guiding coalition 
3. Create the vision
4. Communicate the vision
5. Empower people to act on the vision
6. Plan for and create short-term wins
7. Consolidate improvements for more change
8. Institutionalize new approaches       

See also: Insurers Turn to Automation

Let’s focus on 1) urgency, because without it nothing much else happens. “At the very beginning of any effort to make changes of any magnitude,” writes John Kotter, the dean of organizational change management, “if a sense of urgency is not high enough and complacency is not low enough everything else becomes so much more difficult, difficulties that add up to, historically speaking, a 70% chance of failure.” 

Customer-natives tend toward complacency and digital natives tend toward urgency, as garnering customers is an existential challenge--there’s a cash burn rate and a clock ticking somewhere counting down to death and not a cushy retirement. Urgency is definitely a strategic cultural advantage post-COVID.  

Re-reading the two emails, there’s a tone of complacency in the first and a palpable urgency in the second. Urgency is a starting point; it’s fuel for change. The bad news is automation doesn’t happen ASAP. Like any meaningful change, automation is a process, not an event, with three steps: 

1. Discovery 
2. Instrumentation and Optimization
3. Implementation and Control 

In the follow-up meeting with the client, we didn’t talk about automation or the three steps. I asked two questions, finding answers to which consumed the hour:   

1.  Who owns the problem? In many customer-native firms, this question typically triggers a call from operations to the IT department to, in this case, buy robotic process automation (RPA) licenses and spin up some bots. Exporting the problem to IT may have worked in the past, but it won’t work with automation.   

Let’s assume a highly automated operation at some point in the future. With round-the-clock attention required and service-level agreements (SLAs) measured in minutes, would you want the humans managing the automations to roll up to you (operations) or IT (the CIO)? A desire to own the solution implies or demands a willingness to own the problem.  

IT can and should play a valuable role in the automation journey, but it’s a support role, like finance or HR plays.

2.  Who is going to lead the process? Generally speaking, management’s role is to optimize the existing system. Though automation, when properly done, is about process optimization, it also represents a cultural paradigm shift. 

One thing you can be sure of, automation will trigger urgency from workers who view it--rightly or wrongly--as a threat to their working existence. Line workers will have no problem summoning the urgency to reject it. Who is going to own leadership resolve? Who is going to stand as change agent number one, spreading the automation mission to agents two, three, four and beyond? 

Leading the automation effort isn’t a path to popularity, at least in the short term. Leadership requires energy, vision, resolve and a thick skin. While it’s true you’re about automating jobs humans decreasingly want, such logic tends to melt in the emotional heat. 

Assuming leadership, here again the IT department can play a valuable support role building demo bots sharable with other line leaders, the COO, CEO and board. Working bots draw an emotional rise from leaders familiar with them in concept alone. RPA is a truly fantastic tool for spreading urgency toward a larger automation initiative. And it’s cheap.    

The term “Big Brother” is indicative of a widespread perception of workplace automation. Though automation entails the mapping and tracking of human activities, the goal is not surveillance per se but operational excellence in resource-constrained environments serving customers growing more digital by the day. The leader’s impulse may be to strike the term “Big Brother” from the firm vernacular, but the real job is to change the mind that produces the term. 

Ultimately, there are three games in automation: human v. machine, complacency v. urgency and leadership v. management. Position yourself to play and win all three.

If you compare a 1922 Ford Model T with a 2022 Tesla Model S, it’s easy to focus on the differences.  However, since the inception of the automobile, there are some basic features that have endured—there are still four wheels, seats and a steering wheel, and the goal is still moving people safely from one destination to another. The innovations made over the last 100 years have made this core structure safer, faster and more efficient.

Insurance—at its core—is all about data processing. Methods for collection and analysis have become more sophisticated over the years, but data still drives everything in the industry. And now we have the ability to look at data differently, leveraging innovations to identify risk, extrapolate insights and see the bigger picture big data offers. Digital capabilities have moved risk research beyond paper forms and phone calls and allow complex real-time comparisons to power more informed and strategic decisions.

Insurance carriers have long been early adopters of new technologies to aid in data procurement and computation. Much like automobile production, the insurance industry is continually streamlining its collective production line, moving from punch card tabulators in the mid-20th century to be one of the first and most prolific adopters of computerization.

This pursuit gave rise to the insurtech industry, which specializes in innovations to better identify risks and opportunities for insurers and insureds. Artificial intelligence (AI) is the next logical step in the evolution of insurance data collection and analytics. In just the last few years, AI and machine learning algorithms have provided commercial insurance carriers a much faster, more thorough and more accurate depiction of business risk. AI helps expand, deepen and interpret the range of available data sources, making commercial risk more searchable, accessible, and rapidly actionable. 

In commercial insurance, it’s often the first quote returned that binds the business. The digital age has trained consumers to expect immediate responses to their inquiries. According to the Salesforce 2021 State of the Connected Customer Report, 88% of customers expect companies to accelerate their digital initiatives to keep pace.  

See also: How AI Can Solve Prior Authorization

A Tailored Fit for Bespoke Strategies

More and more leading insurance carriers are trying on AI for real-time data and advanced analytics to reimagine risk evaluation, enhance efficiency, optimize rate-setting, improve customer experience and customize offerings. 

AI and machine learning programs have shown to fit perfectly within the insurance business model. The proliferation of insurtech options offers a clear path forward to optimize all aspects of the insurance lifecycle with analytics and predictive data technology, benefitting insurers and insureds alike. As an example, with just a business name and address, the Planck platform provides real-time business data, customized insights, submission validation, submission prioritization, risk-scoring, risk management and automation options for straight-through processing.    

The ACORD 2022 Insurance Digital Maturity Study, based on an analysis of the 200 largest insurers in the world, indicates an unambiguous connection between digitization and insurer performance. In a recent interview, ACORD President and CEO Bill Pieroni said, “Digitization is the key enabler for the vast majority of strategic imperatives and allows insurers to address them in a timely manner.” And, according to Deloitte’s 2022 Insurance Industry Outlook, which includes 424 insurance respondents from around the globe, 74% expect to increase spending on AI. 

In 2015, I contributed to an article for the Harvard Business Review, “Know What Your Customers Want Before They Do,” where I warned that “the technologies and strategies for crafting next best offers are evolving, but businesses that wait to exploit them will see their customers defect to competitors that take the lead.” What AI truly offers commercial insurance carriers is a distinct competitive advantage to better understand and service businesses. It is possible to know the risks before your customers realize them—or before something happens.

Over the past few decades, our increasingly digital economy has dramatically expanded the amount of both available data and data sources. Billions of internet users around the world contribute daily to this expanding online library—including photos, blogs, customer reviews and social media posts. Anyone can access this data, but the future of commercial insurance is being guided by those equipped to read the insights.  

See also: Insurtech Success Stories: Still Waiting for Godot

Crowd-Sourced Data and The Parable of the Ox

I first discovered The Parable of the Ox in “The Wisdom of Crowds” by James Surowiecki. I’ve seen several industry-specific iterations and parodies since, but the main story beats are always the same. A contest challenges hundreds of people to guess the weight of an ox. While some guesses came in too high and others too low, the average of all the guesses submitted was almost exactly right. By connecting individual data points, a reliable response method emerged. This process was taken a step further by creating models of what the submitted guesses might be and using those data points to predict the correct response.  

AI and machine learning models create the same revelatory inroad, but on a much larger scale. The Planck platform, for instance, finds all relevant business data in real time and refines the information into valuable insights. Machine learning amplifies the process by modeling and creating additional risk insights and building a gold standard. 

Using big data to leverage crowd wisdom at this level would be impossible through manual research. Digital assistance creates these opportunities for bespoke solutions. Underwriters are still making the decisions, but with an enormous amount of help to support their process.

For example, one carrier employed a basic randomized formula to select organizations from their written policies for a post-bind audit. This audit would identify opportunities to cancel or propose changes to coverage, limits or rates. Because this was a manual process—taking about two hours per policy—they were only able to audit a small percentage of their book.

Using an AI-based scoring algorithm, Planck was able to look at the entire book of business to model and identify the businesses most likely to require underwriter follow-up. This exploration created significant process efficiencies, identified new revenue opportunities and generated value for the carrier and their insureds.  

Data superpowers can extend further into the customer experience by offering preemptive guidance to mitigate risk. According to a 2021 report from Beazley, insurance customers are looking for more from their insurance partners to meet their changing business needs. If a new restaurant wants to remain open until 2:00 AM, you could use AI to collect surrounding business data, police reports, police station proximity and other data points to offer insight into potential risk of assault or criminal activity. These insights could be applied to other areas of the policy lifecycle, as well, such as market research, prospecting and renewals.

As early adopters of digitization, the insurance industry clearly recognizes the value of capably mining and refining big data. However, that early adoption can often be a significant impediment in the form of legacy systems. The first step in the process is finding a vendor that aligns with your business and taking them for a test drive. See how the provided solution can be applied to your approach to customer acquisitions, submissions, underwriting and renewals.   

Quality insurtech solutions aren’t meant to replace existing systems—or underwriters, for that matter. Rather, they augment process and capability to handle modern data flow. The goal remains the same, but faster, more accurate and more efficient. And digital laggards are likely to be left in the dust by insurers with strategies driven by AI. 

Digitization and data. Data and digitization. No matter what sector you are in, you almost can't use one word without the other. Insurance is no different. Gone are the days when insurance was an offline financial product disconnected from the ecosystems and risks the “paper” was meant to cover. 

The ecosystem where all of this is coming together is the supply chain and transportation risk management space. Supply chains, as we all know, have been in turmoil for the better part of the past three years as crisis after crisis has rippled across suppliers, shippers, logistics service providers and transportation companies. The situation may seem dire, but there is reason for optimism. Why? Digitization and data. 

The supply chain and transportation ecosystem is rapidly digitizing. According to a 2021 McKinsey report titled “How COVID-19 is reshaping supply chains,” over 93% of companies state that they intend to make their supply chains far more flexible, agile and resilient. The same report makes the case that “success of an organization's performance is strongly linked to its use of modern digital tools, especially advanced analytics. Compared with organizations that reported problems, successful companies were 2.5 times more likely to report they have adopted advanced-analytics capabilities."

In summary, the disruptions we’ve experienced have accelerated the need to digitize and create more resilient supply chains and transportation networks. Transportation management systems, fleet management systems, warehouse management systems, routing solutions, real-time transportation visibility platforms, IoT devices and telematics are all being deployed at an increasingly rapid clip. Better yet, they are being stitched together into end-to-end solutions to create value across digital siloes.

See also: Tomorrow’s Insurance Is Connected

What does this have to do with insurance? A lot. As the supply chain and transportation ecosystem digitizes, the data captured and, most importantly the insight created, is bringing real-time operational risk management closer than ever to financial risk transfer.

Loss control teams at insurance brokers and carriers desperately need new ways to de-risk day-to-day operations of high-value shippers that have had troubling losses. Enter real-time digital risk management platforms (DRMP).

Savvy loss control professionals are finding out that these platforms can and do serve as an early-warning system, complete with a set of best practices that can be translated into intelligence used to spot non-compliance issues and known leading indicators of losses. What’s more, loss prevention staff can be more prepared than ever to intervene on behalf of insureds at a moment’s notice, especially when issues escalate to high-priority concerns.

Sounds simple, right? Ha. Maybe not that simple, but entirely doable. For the hundreds of billions of dollars of freight that are now being actively monitored, it’s not unusual to see loss frequencies in the low single digits and loss ratios in the mid-teens. 

The connection between real-time data and insight, loss control and underwriting is the next horizon for commercial property and casualty insurtech. In our world, that means cargo and commercial auto insurance will be programmatically fused to digital platforms that predict risk and prescribe interventions in real time. As an industry, we will connect the dots between theft and pilferage loss causes, product damage, asset conditions, operator health and safety and ever-changing operating conditions to dynamically price risk in real time and mitigate profitability killers for insurers and insureds alike.

Taken to their logical conclusion, these business models will beget innovative parametric insurance programs, “pay-how-you-orchestrate” offerings and enterprise risk transfer strategies more like digital advertising platforms and securities markets than anything resembling today’s insurance markets.

While the debate continues about police departments in the U.S. and sometimes devolves into a national shouting match, insurers are starting to have their say, and their voice will be an important one. 

I've often said that no plan goes forward until the risk is dealt with -- you can talk about innovation all you want, but even Silicon Valley won't try something bold without insurance. Policing is no different. And insurers are starting to address police misconduct by doing what they do: raising rates to reflect the risks.

The costs of those risks have been heightened by the attention policing has attracted over the past few years and the changing attitudes that have resulted among many, including those on juries in civil lawsuits. So, those rate increases have a real bite and are starting to change behavior. 

An article in the Washington Post looks at a small police department with a history of high-speed pursuits and shows how it has had to adjust in the face of soaring insurance premiums. The article also explains how the fear of rising rates is driving change at small to medium-sized police departments across the U.S. (Large cities often just absorb the costs.)

The article opens with a look at St. Ann, Missouri, a city of 12,700 whose police department had been involved in high-speed chases that left 11 people injured in 19 crashes over two years. One man was permanently disabled when a fleeing suspect crashed into his car. (Police were trying to pull the suspect over because his registration had expired three weeks earlier.)

The article says Police Chief Aaron Jimenez "doubled down on the department’s decades-old motto: 'St. Ann will chase you until the wheels fall off.'"

"Then," the article continues, "an otherwise silent stakeholder stepped in. The St. Louis Area Insurance Trust risk pool — which provided liability coverage to the city of St. Ann and the police department — threatened to cancel coverage if the department didn’t impose restrictions on its use of police chases. City officials shopped around for alternative coverage but soon learned that costs would nearly double.... [So,] the chief and his 48-member department agreed to ban high-speed pursuits for traffic infractions and minor, nonviolent crimes.

"'I didn’t really have a choice,' Jimenez said.... 'I was going to have to lose 10 officers to pay'" for the insurance.

The article says departments with a long history of civil rights settlements have seen rates soar by 3X to 5X in the past three years, and insurers "are telling departments that they must change the way they police."

They have effected change, too, in thousands of departments nationwide. The article says "entire states are having to adjust to insurers’ demands." In New Mexico, a risk pool that provides coverage for one-third of the state’s police officers "hired an instructor last year to travel the state and retrain officers in de-escalation skills after private insurance rates climbed by more than 60%.... 

"For some police departments, insurers are refusing even to provide initial coverage unless they change their policies on a variety of matters including body cameras and chokeholds, according to industry experts....

"In Springfield, Ore., complaints and settlements involving excessive force by police became so costly two years ago that the city’s insurance risk pool, Citycounty Insurance Services, was given oversight of overhauling the 82-member police department."

There is, of course, concern about what can happen to policing when insurers start dictating policies. The article quotes one officer who says that "some of the riskiest calls to which patrol officers respond — domestic violence, threats of suicide or disorderly conduct — might be curtailed or eliminated by insurers. 'Their goal is to have no injuries or accidents, but that isn’t realistic, and that isn’t policing.'”

While policing will remain a complex and hot button issue, I think what's happening here shows the real power that insurance has to send signals that carry a punch and that can change behavior on a whole range of important issues.

I'll never understand why more people don't see insurance for the fascinating, powerful industry it is.

Cheers,

Paul

P.S. I'll be at InsurTech Connect in Las Vegas this week. If you see me running around, please say, "Hi."

Anyone who says insurtech is an up-and-coming space hasn’t been paying close enough attention. The insurtech movement, which began around 2010, is long past its infancy and is both maturing and evolving. This is especially true in the P&C claims space, where companies are gaining traction and having a significant impact on their customers.

To gain greater insights into the claims space, SMA has been tracking over 175 P&C claims vendors in the North American market, comprising 75 insurtechs (startups initiated after 2010) and over 100 incumbents.

We are seeing several notable trends:

• Specialization is key: Three out of four companies among the 20 most successful insurtechs focus on one or two insurance segments (casualty/bodily injury, auto physical damage, workers’ comp and property).
   
• Companies are drilling down: While they may be focusing on one or two insurance segments, they are offering solutions in specific areas across the claims value chain.
   
• Partnerships are prioritized: The most successful insurtechs are partnering with key core system and data analytics providers. Securing these partnerships is often instrumental in boosting brand recognition and gaining market traction. 
   
• Artificial intelligence (AI) reigns supreme: AI and machine learning are driving much of today’s claims innovation and are being applied in a multitude of ways. Many of the most successful insurtechs have AI as a central element of their solutions.

Lastly, there is no one-size-fits-all approach to a claims insurtech’s success. Funding amounts vary, as do types of partnerships and even go-to-market strategies. However, claims insurtechs at all stages must keep the problem they are solving in sight and the experience of their customer front and center at all times.

As the bell rings on another school year, a host of insurance topics are showing up for class. 

From tuition insurance to life, health, auto or renter’s insurance, parents and their students should get ready for the potential risks and insurance opportunities a school year has in store. 

Tuition Insurance

After a school year begins, families only have a very short and very defined window in which they can pull their student and ask for a full refund on tuition. If an emergency happens outside of that window, families are going to be left owing at least some of that bill.  

That is where tuition insurance comes in. Tuition insurance protects families from emergencies that pop up that prevent the student from completing their semester. Typical tuition insurance policies protect students from a sudden serious injury or illness, a chronic illness, death of the student or tuition payer or a mental health emergency. 

Typically, these policies refund some or all of the tuition, room and board costs if the student is unable to complete their term. Some even help the student return home and return their vehicle home in the case of an emergency. 

It is important for families to know, however, that the triggers for payment have to be verifiable and outside their control. Simply losing steam and choosing to withdraw is typically not covered, though families may be able to find broader coverage with certain policies. 

These policies are available for universities but also for some private K-12 schools, as well. 

Life Insurance

College students may not be the typical audiences for a life insurance pitch, but two factors have changed that reality – parenthood and student loans. If the student has children of their own, then the typical life insurance conversation would be in play. What would happen to that child if the student dies? And when it comes to student loans, even a childless student may think about a term life insurance policy. 

Traditional federally issued student loans taken in the student’s name — subsidized, unsubsidized and even Parent PLUS – get discharged if they die, so those aren’t the ones in play here. Private loans get more complicated. 

When it comes to private loans, there are no universal standards for what happens if the student dies, so if that loan does not discharge on death, there is a great case to be made that an inexpensive term life policy makes sense for the student until that loan is paid off, especially if someone – such as a parent – is the one who is signing or cosigning for that loan. 

Health Insurance

Most colleges require students to show that they are covered by a health policy as a condition of enrollment. And most colleges also partner with a campus health insurance provider for students who don’t have suitable coverage and add those policies onto the tuition bill. 

While those campus-issued policies do make sense for many students, they shouldn’t be the automatic solution for everyone. If the student is covered by their parent’s private health policy, the first thing to do is look for coverage networks. If the policy has providers available near the school, then that might be all they need, and they should petition the school to drop that automatically issued coverage. 

Even if the typical preferred provider network doesn’t cover the area around the school, some private policies allow parents to buy out-of-network coverage option that might be worthwhile if it means not having to buy a separate plan. 

If the parents have a Marketplace Plan, then it is essential to double check the preferred provider network because, in most cases, they won’t cover out of state providers. In this case, it may make sense for the student to also apply for their own Marketplace Plan in their new state. 

The parents’ and the student’s incomes will both be counted toward both Marketplace policies for the purposes of calculating any subsidy, so there isn’t a rule of thumb for everyone on whether this option makes the most sense. 

The bottom line is to ensure that the student has access to the providers they need, and then look at what it is going to cost to ensure they are properly covered. 

In the case of K-12, if the parents are uninsured, they need to know the options available through the state Child Health Insurance Program, which may offer low- or no-cost insurance for their pupils. 

See also: How to Help Children Deal With Trauma

Auto Insurance

When it comes to auto insurance for a student, the most important question to ask is “where is the car?” according to the guidelines covered in insuranceQuotes.com’s 2022 Back to School & Insurance Report.

If the student brings the car to school, they should let the insurer know where it is going to be parked. The new community may require higher rates, and those may depend on whether the vehicle is in a secured parking garage or out on the street. 

If the student leaves the vehicle at home, the insurer also needs to know, because if the student is away at school more than 100 miles from home, they may qualify for a discount because the car is going to sit idle for much of the year. 

In some rare cases, such as if the parents lived in a high-insurance-cost community and the student moved away to a low-cost community, or if the parents have an exceptionally poor driving record, it may make sense for the student to take out a completely separate policy, though those cases are few and far between. It is almost always a better financial deal for the student and parents to be on the same policy. 

It is also important for the families to brag about junior’s grades. If the student is on the honor roll, they may qualify for a good student discount. 

If the family is tempted to drop coverage altogether, it is essential that they know that it would be strictly forbidden for the student to drive when they come home. 

Renters Insurance

Protecting the student’s belongings while they are away is the role of homeowner’s or renter’s insurance. 

If the student is living in the dorm, their parents’ homeowner’s insurance may be sufficient, though deductibles and policy limits may cut into the usefulness. Typically, each policy limits how much property is covered when it is not within the premises of the parents’ home, so the student may be limited to $10,000 in coverage when they are off to school. 

On top of that, if the parents have a $1,000 deductible, then, even if the student’s dropped mobile phone would otherwise be covered, there wouldn’t be much coverage left after the deductible is paid. 

If a student moves off campus, the homeowner’s question is a moot point. Nothing would be covered by a parents’ policy if the student was living in their own apartment (rather than a dorm.) 

This is where a renter’s policy would make sense. Because the policies don’t cover the structure, they tend to be very reasonably priced, and they can carry a much lower deductible, meaning that broken cell phone may be covered after all. 

But just like with homeowner’s policies, floods and earthquakes are excluded by typical policies.

The life settlement is a legal, regulated process for liquidating life insurance. Unfortunately, the regulations in place don't fully address the culture of mistrust in the industry. That culture is an outcome of the traditional process: Life settlement cases have historically been managed behind the scenes, with each stakeholder having access to only some of the case details. That veiled environment allows providers, agents, advisers, investors, brokers and policyholders to work at cross purposes.

Complicating matters more, the amount of funds available to buy policies has exploded in recent years. As more money circulates in the industry, dishonesty and deception remain key issues that ultimately work against all stakeholders. 

However, advancements in machine learning technology are changing the landscape of the life insurance industry, making life settlements more open and accessible to policyholders than ever before. 

Underlying mistrust and lack of transparency 

The traditional life settlement auction process has pockets of secrecy. Insureds, agents, advisers, life settlement brokers, life settlement providers and life settlement funds rarely have access to the same set of information. Brokers typically act as gatekeepers, with the freedom to share or withhold details as they see fit. That naturally creates a lack of transparency and fosters mistrust. 

Some of that mistrust is warranted. Unethical brokers will award cases based on relationship rather than bid size. That's a clear disservice to the insured, who assumes the broker is working to negotiate the highest selling price possible. In these cases, the broker must intentionally limit the auction information provided back to the insured. The insured certainly won't see the highest bid -- and also may not know how the winning offer was calculated or where it came from.  

Fortunately, these problems are solvable with technology. Life settlement auction platforms create transparency by giving all stakeholders access to the same information. With case details and bids accessible electronically, the auction becomes unbuyable. Whoever submits the highest bid wins the case, period. There is simply no room to make a backdoor deal, which ensures a fair process for everyone involved.

See also: Adding Transparency to Life Settlements

Poor communication

Poor communication, whether intentional or by accident, worsens the lack of transparency in the traditional life settlement process. Layers of hidden fees charged by providers or brokers cut into the insured's proceeds -- often, without the insured's knowledge. 

As an example, a broker might deliver a net offer to the insured, with no breakdown of the gross selling price and the broker's commission. As well, providers may put in offers net of their fee, essentially hiding those fees from funders.

Policy metrics can be another area of confusion. Actuarial firms, responsible for valuation, may be inconsistent on key metrics, such as life expectancy. That misalignment of data works against providers that are trying to put their best offer forward to win the deal. 

Again, technology can solve for missing or inconsistent data. Life settlement auction platforms state valuation metrics upfront so all parties are working from the same set of numbers. They also require families to sign off on commissions for every transaction -- ensuring full transparency into the fees paid out of sale proceeds. 

Reinventing the life settlement market 

Until now, it took months for financial professionals to understand and identify which life insurance policies have value and provide the proper guidance. A primary cause for this is cost of insurance (COI) data being fiercely protected by life insurance companies. COI incorporates several variables, such as when the insured purchased the policy, how old they were when they bought it, their health at the time and the policy type, which determines how much each policy is worth.

Thanks to machine learning technology, the future of the life settlement industry is bright. Financial professionals can now use a life settlement calculator to evaluate their entire book of clients in a matter of minutes and identify which would benefit from a life settlement. Technology makes the life settlement decision process easier than ever so advisers can understand their client's full financial picture and provide the right guidance, especially during times of economic distress. 

The life settlement industry is growing 34% per year on average and is expected to be worth $212 billion by 2028. Each and every American deserves to know the true value of their assets so they can make the best decisions for themselves and their families. With AI-powered technology, life settlement valuations are now a far more accessible, honest process for more policyholders nationwide. 

As the momentum for "embedded insurance" has built in recent years, I assumed it would mark yet another attempt to cut agents and brokers out of the sales process. So I was intrigued when, in this month's interview, the director of agency accounts at Clearcover suggested embedded insurance could actually mark an opportunity for agents and brokers.

Clearcover's Kaitlyn Taylor said that the insurtech is working to help agents and brokers remain part of the process even if someone who is, say, buying a car is prompted to purchase auto insurance while at a dealership. The buyer could be presented with a QR code, for instance, that would steer the insurance purchase through an agent, or some other link could be provided. 

Lots of details remain to be worked out, so the customer could both get the convenience of buying insurance while it is top of mind, without having to reenter all sorts of personal and financial information, and get the comfort of dealing with an agent on any questions, both during the sales process and during the relationship that follows. Commissions will, of course, have to be resolved, too, based on who gets credit for initiating the sale and who services the customer and policy from then on. 

So, Taylor cautioned that the work at Clearcover is in its very early stages. Still, I found the notion intriguing.

People keep trying to disintermediate agents and brokers... and keep failing.

Cheers,

Paul
 

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

You May Be Lighting Benjamins on Fire

You are passing up maybe $1,000 in commissions per client if you aren't cross-selling instant-issue term life insurance policies that don't require a medical checkup.

Why Brokers Have a Leg Up in Insurtech

While insurtechs are struggling, established brokerages have deep industry knowledge and solid businesses from which to build and evolve technology solutions. 

5 Keys to a Low-Stress Work Environment in 2022

Stressed employees are less engaged and have lower productivity - and some may even left their job. Here is how to promote a low-stress work environment.

Fried Chicken and Customer Loyalty

Customer loyalty, and thus retention and profitability, isn’t driven by cheap prices, AI bots, big data or nifty phone apps.

2 Areas of Focus for Distribution

Distribution partners are focused on two key areas – user experience and ease of doing business – and are looking to work with insurers.

Power of Partner Ecosystems

Insurers seem stuck in traditional channels rather than expanding channel choice and reach, meeting customers where and when they want.

ITL

There was a time, not so long ago, when the mantra of the insurance experts was disintermediation. Agents and brokers? Let's get rid of them. But agents and brokers not only survived; they're thriving, to the extent that a successful insurtech like Clearcover has someone—that would be you—focused on nurturing relations with them. Could you start us off with a bit of perspective on Clearcover's thinking?

Kaitlyn Taylor:

Yes, many thought that agents would be old news pretty soon, and the pandemic probably heightened that belief, but we don't think that's the case. That's why we launched the independent agent channel starting in 2019.

There are some  customers who have strong digital desires but who rely on agents for their insurance needs, and we need to make sure we're paying attention to those people. Agents have such a plethora of knowledge, not only about insurance, obviously, but also about customer expectations. We want to ensure that they can continue doing what they’re doing by embracing technology that we can bring them.

ITL

What does that technology look like?

Taylor:

D2C [direct-to-consumer] companies brag about how quickly you can quote and bind by yourself online, while talking about how you may wait on hold for an agent, or your producer is out of the office and you wind up in a long, drawn-out process. We feel like we have the responsibility to help speed up this process for agents so they're just as competitive as if their customers were going to D2C. And our AI makes decisions in a tenth of a second on whether a customer is a good fit for our products.

There's also the nitty gritty stuff in the agency. It's important that we're integrated with the agency’s CRM [customer relationship management], so information is being transferred from our database to theirs. We also, in general, need to help agencies speed up their processes so they can keep up with customers' expectations.

ITL

How far along do you think you are in the process? And what would be the next step or two that you could take to make the life of an agent easier?

Taylor:

More and more agents are hearing the term "embedded insurance," and we want to help agents make sure they can participate. We want to provide them with the APIs [application programming interfaces] or QR codes so they can tie into referral networks and make it easy for customers to click on a link and get a quote. We're hearing a lot about embedded insurance.

We also need to help agents adapt to new technology. At the end of 2021, we did a survey of agents—they weren't necessarily Clearcover agents—and found that 90% said they had to change their technology practices to keep up during the pandemic. Okay, that's not too surprising. But 67% said they still lacked confidence in their ability to keep up with technology. That was really surprising to me, because they had just gone a year and a half fully living in a techie, probably virtual environment.

When we have one-on-one conversations with agencies, we try to give them confidence, and we talk them through how things work in the background, to remove any concerns. For instance, we push hard to make sure customers download the mobile app, where you can digitally sign your documents. And I think some agents worry: What happens when a customer downloads the Clearcover app? Do I lose some control over the customer’s experience and their insurance journey? So, we assure agents that we’re only going to feed, positively, into the journey.

We also educate agents. My favorite example about the power of a mobile app is a personal one. I just had to update my banking information with another carrier I will not name. They sent me a secure PDF that I could use to provide the information, which they would then put into their system. That made me wildly uncomfortable. And we know from our own research that a big reason that customers want to download the mobile app is just to put in their own banking information.

With a mobile app, documents are sent to the customer’s email. That's one less thing for the agent to worry about. And now we have a permanent digital file of it. The mobile app also means they're already equipped with the ability to submit a claim and with the ability to update certain things about their policy on a Saturday morning when maybe the agency isn't able to.

ITL

Are there other technologies that you think are especially important that you're going to lean into?

Taylor:

We've been using AI since 2020 to help agents find quality long-term prospects by predicting if a customer is a good fit for them and us.

We've also focused a lot on speeding the claims process, so agents can instead direct their attention to generating more business in their agency. Like a lot of carriers, we have a lot of data on claims, so we determine if one is eligible for an expedited payment. We've paid a claim in as little as seven minutes from the time we received it.

ITL

How about digital payments?

Taylor:

Yes. And here's a cool thing: We now offer Uber credits to eligible customers if they don't need a rental car right away. I, myself, am currently in a rental car because of a claim that happened in April, and the parts just now came in. So, I would be a good case: You could give me the Uber credits in April, but I'm not going to use them until August.

ITL

Last question: What would you say most makes Clearcover stand out from your competition?

Taylor:

I think ease-of-use is where we have a leg up, especially if we have an agency that's particularly passionate about us.>

ITL

I'm a big fan of ease-of-use. Good luck, and thanks for taking the time.

Kaitlyn Taylor Kaitlyn Taylor is the director of agency accounts at Clearcover, the tech-driven car insurance company. She currently oversees the distribution of Clearcover's product through Clearcover's growing independent agency channel.

The insurance industry continues to aggressively pursue digital transformation and customer experience optimization but is still overlooking some of the fundamentals. This is exemplified by payments, which remain fragmented and needlessly complicated.

A key goal of digital transformation is to provide customers with streamlined, consistent user experiences. PYMNTS, a data, news and insights firm, reported that 67% of insurance carriers view digitizing payments as an important part of their digital upgrade plans. Yet large brokers and insurance carriers may have upwards of 40 payment providers with potentially hundreds of payment contracts—each with different reporting, pricing, capabilities and accounting interfaces. While this creates a challenging environment, improving this part of the business doesn’t require a significant investment. 

Whether you’re a carrier, broker, MGA or just about any entity in the insurance ecosystem that accepts and makes payments, it’s important to prioritize your payments strategy and create a unified experience to better meet the needs of customers and internal teams. 

Domain Expertise Is Key

Why have payments in insurance become so fragmented and inefficient? There are hundreds of payment providers, but very few have the insurance domain expertise and offer the services to adequately serve a complex, regulatory-heavy B2B2C industry like insurance. Oftentimes, they only provide an application programming interface (API), forcing carriers or brokers to build workflows or other capabilities on their own and take on the responsibility of maintaining highly customized integrations and interfaces. Further, some payment processors enlist third parties to underwrite transactions, which can lead to clunky customer experiences like having to re-enter credit card information and navigate multiple screens. Or, some brokers might rely on multiple payment processors, each offering different ways to accept premium payments.

For these reasons, it’s crucial to work with payment providers that have a deep understanding of insurance management systems and offer core technology and services such as payments underwriting, credit approvals, fraud prevention, administration and policyholder support.

On the operations side, insurance companies using multiple payment providers and workflows invite inconsistent pricing and reporting. For example, agency branches with different payment processors will pay varying fees for the same type of transaction. In other cases, outsourced billing firms have software on the front end but humans performing manual invoicing on the back end, which leads to higher transaction overhead. 

Consolidating payment processing helps standardize the workflow, the reporting and the costs. Of those surveyed in the PYMNTS report, 64% say those upgrade plans are motivated by their desire to be less dependent on paper checks, and 53% are looking to reduce their internal expenses. And the cost savings can be staggering. Bank of America has estimated that paper checks can cost approximately $4 to $20 per check based on the check price and postage, which doesn’t even take into account the labor costs of writing, mailing, collecting and reconciling the check, not to mention the increased exposure to fraud.

See also: Using Payments to Improve the CX

Customer Experience and the Bottom Line

In general, customer experience drives retention, new and expanded business and Net Promoter Scores, but when it comes to payments, the customer experience can also accelerate (or impede) cashflow. For an insurer, money that gets in the door faster will be invested faster. A complex digital payment experience can result in delay or abandonment of the process, as questions get answered or as the policyholder regresses back to sending a paper check. These are outcomes that not only delay the payment but add cost.

Digital insurance payments are a key part of the customer experience and yet often get overlooked. Nothing will change if payments are viewed as “checking off a box” rather than a critical component of the business that demands oversight and strategy. Many insurers and brokers are stuck in the first phase of digital payments, where the market had forced its adoption. Now it’s time to enter the next phase, where insurance organizations become more adept at managing their payments, and, as a result, reduce costs, streamline operations, improve cashflow and provide a seamless experience to customers.