Third-party administrators (TPAs) can offer a cost-effective means to assist in claims management, particularly for types that fall outside an insurer’s standard capabilities. That said, the relationship between an insurance carrier and a TPA can be complex and multifaceted, as both companies may have varying incentives and measure of success. As such, a foundation of trust is integral to a successful partnership. Open communication, transparency and regular reviews for validation are a must for effective collaboration.

At QBE, we are fortunate to work with some of the best TPAs in the business. Those relationships work well largely because we are consistently mindful of what’s working and what’s not, and we’re always looking for ways to collaborate more effectively in a spirit of continuous improvement.

Carriers and TPAs alike can benefit from increased visibility of the metrics that shed light on claims management performance. It’s never a hands-off relationship, of course, nor should it be. Effective oversight is essential, but accomplishing that efficiently and at scale can be a challenge. For both carriers and TPAs, oversight calls for new ways of systematically monitoring, evaluating and improving collaboration.

Technology offers a path toward achieving those ends, and there are now means to manage information and automate workflows at scale, but until recently, those capabilities could only be applied to highly structured information such as customer records, invoices and ledger entries.

Today, artificial intelligence (AI) and advanced analytics are making it possible to dig deep into narrative content, parse natural language, interpret its meaning and draw conclusions that can assist human actors in performing their jobs more effectively. AI is especially adept at discovering correlation and predicting outcomes based on multivariate data. This combination of natural language processing (NLP) and predictive analytics offers game-changing capabilities with respect to claims management.

When it comes to managing TPA relationships, in particular, AI provides some powerful advantages:

• Increasing the timeliness and accuracy of reserves. Case reserving is both art and science, relying on available information and a requisite amount of experience and expertise to predict an outcome. Historically, reserve accuracy has been a function of the individuals involved and their ability to truly understand what was driving case exposures. Naturally, the more complex the case, the more time is spent on the analysis and the more volatility in reserve vs. actual case outcome. It’s also more work for everyone involved, so carriers and TPAs alike would prefer to improve both reserve timeliness and accuracy without adding extra effort to the process. Using predictive analytics that incorporate a range of input variables, AI helps to identify potential mismatches in claims reserves using automation. Carriers can use this information to supplement human judgment, validating their TPAs’ reserve calculations and identifying any anomalies that may require further investigation.
• Uncovering hidden risks. Given the increase in litigation and the growth of mega-claims in recent years, insurers have been looking to sharpen their analytical capabilities and improve their capacity to identify high-risk cases. AI can discover and quantify correlations that could suggest expensive litigation, lifelong care or complications that may otherwise fly under the radar. For example, insurtech companies like CLARA Analytics are providing these kinds of insights for workers’ comp carriers, using very large data sets that span multiple geographies, providers, attorneys and categories of injury. Their AI algorithms can ingest an enormous array of information and zero in on the factors that indicate risk — even when those clues may not be apparent to the human eye. By calling attention to details that aren’t necessarily obvious, AI provides claims professionals with a powerful tool to identify hidden surprises and take action before they escalate. This informs the deployment of additional resources and aids in the ability to tailor case action plans to address the risks identified with AI assistance.
• Helping ensure optimal case assignment: “right claim, right adjuster.” Using a severity model approach, AI can assist with directing cases with higher potential exposures to where they need to go as early as possible, such as a senior level adjuster, and vice-versa. The ability to more accurately and consistently assign claims can have a significant impact on the cost of TPA services by ensuring a given program is staffed with the right mix of experience.

See also: How AI Can Help Insurers on Climate

These are a few instances of how working with TPAs, particularly through the use of AI, can be valuable to carriers. That said, it can’t be overstated how essential a strong working relationship centered on effective collaboration is to a successful partnership. At QBE, we’ve seen the benefits resulting from strategic, thoughtfully managed TPA relationships. Even if you’re not routinely working with third-party administrators, though, today’s technology offers all sorts of distinct advantages for companies that are willing to invest in the opportunity. When done right, better results can be achieved, ultimately delivering improved services to customers when they need it most.

As first published in PropertyCasualty360.

Innovation doesn’t need a pitch deck. Organizations have been talking about the need to be innovative since the end of WWII, where technological innovation was seen as the catalyst for economic growth.

Every executive has been told to be “more innovative” or to foster an “innovative environment.” We understand why, but do we know if our organization is being truly innovative?

Supreme Court Justice Potter Stewart is famous for uttering, “I know it when I see it,” when asked how he would know if something was pornographic. But executives cannot wait until they see innovation. They need tangible signs that innovation is actually happening under their roofs.

The best place to look for innovation is in the quality of decisions being made. Everything an organization does can be broken down into decisions, which are the building blocks of innovation, like Legos. 

Innovative decisions take into account factors besides growth, profit and costs. They reflect an organization that is willing to invest in a future that is unclear, planting seeds in a garden you will never see, as sung in the "Hamilton" musical.

Here are three areas within your organization where you can look for innovative decisions.

Where Are Your Ideas Coming From?

Some organizations haven’t been able to shake off their military-style leadership, where all decisions are made at the top and then trickle to the frontline workers. As you can imagine, the top-down approach doesn’t leave much room for innovation unless your CEO is Jack Welch or Steve Jobs. Even then, you would be leaving many good ideas on the table.

An innovative organization has a decision-making process that encourages ideas from anyone. Google is known for allowing employees to spend 20% of their time on side projects. Most don’t go anywhere, but a few become homeruns like Gmail.

The 3M Sticky Notes were a failure. The team was looking for strong adhesives and stumbled on an adhesive that somewhat worked. Someone recognized the value of it and made it into a product.

TV shows like "Undercover Boss" remind us that frontline workers may have some of the best ideas. After all, they are the ones who spend the majority of their time with customers. A doorman at a hotel has a better sense of what is working than an executive who might not even live nearby. 

Encouraging ideas from anywhere in the organization doesn’t mean that they have to be implemented. All ideas should be vetted through an objective framework. There are plenty of options, but I personally like the 3 O's, which stands for Outcomes, Options and Obstacles. 

An innovative organization (or even a team) can survey the company for ideas, which are then evaluated based on criteria such as strategic alignment, potential, risk and any other factors relevant to the specific decision.  

If all your ideas are coming from the same people, your decisions will always have the same outcomes. 

See also: A Look Ahead for Insurtechs in 2023

The Magic of Decision Speed

The speed at which decisions are made matters greatly. Markets are moving more rapidly today than in the past. We could debate the reasons—social media, connectivity and so forth—but what matters is that decisions need be made quicker.

Perfect decisions were never possible, but today, especially, we need "good enough" decisions. When the pandemic hit, travel restrictions hurt Disney Parks. Yet, in 2021, they had raised profit by 20% with 17% fewer visitors than in pre-pandemic years. Disney accomplished this feat by introducing an app (Genie+), by changing their ideal customer and by removing free perks -- working through all the decisions at an amazing pace..

Starbucks is another example. The “third place” concept imported by Howard Schultz from Milan is dead. Starbucks recognized the future of drive-throughs—and walk-throughs—and is retooling stores. 

Innovation often stems from a good idea implemented rapidly. Starbucks could have waited until all the research was done but likely would have lost market share to competitors. 

That’s why innovative organizations need a new metric, Decision Speed, to capture how long it takes to make critical decisions. When an organization starts tracking this metric, they are often surprised by how slow they are. Innovation cannot thrive if decisions are made slowly. By the time you decide, the market has moved on.

Forget About the HPO

The third area to look for innovative decisions is by focusing on the weight of the HPO. I’m not talking about the British brown sauce. HPO stands for Highest-Paid Opinion. 

I noticed a quirk in decision-making. The highest-paid person in a room commands attention. If they provide an opinion, it is often treated as fact. Decisions are then biased toward the HPO. HPOs often don’t realize their power, but the outcome is the same.

Innovation requires a certain meritocracy to avoid group think. Half of my work with organizations is simply providing fresh air to members' ideas. I then help them challenge their own thinking. Here are my three favorite techniques:

Technique 1: Blind Decision-Making

As you collect ideas, arguments and comments, do it blindly. You can set up an anonymous form where individuals can enter their ideas or find ways to strip their names from them. A team can then look at all the information without being biased by individuals' status within the organization.

This technique often adds a layer of administration, so I only recommend it for the most important decisions. 

Technique 2: Devil’s Advocate

The Catholic Church establishes a devil’s advocate when exploring the possible canonization of someone. The person argues against that person and can be quite effective at uncovering holes in reasoning.

You can assign individuals to take different positions in a decision to see if they can poke holes in it. Randomizing this role ensures that everyone gets a chance to voice their concerns. We are not talking about heated debates here. We simply want to hear any potential issues before making a decision.

See also: Cybersecurity & Innovation: Keeping pace in 2023

Technique 3: Thinking Partners

The best executives have informally found thinking partners to bounce ideas off. Making this a more formal process helps them have someone who can challenge them while understanding the biases they might fall into.

A good thinking partner is someone who knows your preferences and is able to challenge you respectfully. They are typically at the same level within the organization though usually in a different function.

Regardless of what technique you use, an innovative organization is debating decisions and working together to find the best solution. If none of this is happening, there’s a high chance you’re simply making the same decision over and over again.

Conclusion

One of my favorite quotes is from William Gibson: “The future is already here, it's just unevenly distributed.”

Innovation is often about trying to find the existing future. Your organization is full of innovative ideas, any of which could help the business grow. Your goal is to uncover those ideas and allow them to influence important decisions.

The future will arrive, one decision at a time. Are you making the right ones?

Customers need their insurer to provide stability, clear communication and financial support during a claim – and to do so in a timely manner. Unfortunately, claimants have had to wait days or weeks to receive funds from their insurance provider, and a check in the mail is often their only payment option. 

In today’s digital-first economy, insurers need to innovate their payout processes to offer their customers speed, convenience and flexibility. Imagine enabling payouts that provide customers with a personalized experience and doing so in near real time. With just a point and click following claim approval, customers can control when and how they are paid – reducing payout timelines to minutes or less while providing the payout options that cater to each policyholder’s preference for managing their money. 

By digitizing payouts, insurers can transform a critical customer interaction, turning a painstaking process into a truly positive experience.

Fostering loyalty via payout choice

One way to build customer loyalty is to provide claimants with multiple options for how they receive payouts. In today’s hectic world, customers want to manage finances on their terms, but those terms vary widely based on personal preferences. 

According to a recent Carat Insights study from Fiserv, which polled more than 2,200 adults in the U.S., two primary issues drive payout decisions for customers: security of the payment (40%) and speed of funds transfer (29%). This research finds that older customers prioritize security, while younger customers are more concerned with getting their money quickly. For example, receiving a payout to a bank account is the familiar and trusted experience for older generations. Meanwhile, millennials and Gen-Z are more accustomed to using digital wallets and increasingly prefer non-bank payouts. These non-bank payout types can include digital wallets that are popular among younger generations, or even payouts made to crypto wallets.

According to the same Carat Insights study, only 38% of insurance customers have ever received a payout digitally – with most consumers thinking that a payout via paper check is their only option. This gives insurers a tremendous opportunity to drive customer loyalty by enabling a differentiated experience, moving money to their customers via the payout method that best fits their personal preferences. 

Increased efficiency affects the bottom line

While developing and deploying digital payouts creates a better experience for the customer, it can also create operational efficiencies for the insurer by reducing administrative costs. According to our data, improving workflows, eliminating the administration of paper checks and digitizing the entire payout process leads to a 60% reduction in payout costs and a 25% reduction in call center volume.

At the same time, insurers that use digital payout technology provided by their merchant acquirer can secure additional efficiencies by routing consumer payments — the pay-in — for insurance premiums along the same payment rails as the payout. Similarly, these insurers can also maximize consumer choice by providing their customers an expansive list of payment options – accepting consumer payments for premiums from traditional sources like credit and debit cards, but also via ACH and popular digital wallets.

See also: Payment Processes Must Be Simplified

Paying out in a matter of minutes

Many insurers in the U.S. are beginning to focus on digitizing multiple touchpoints within their claims process. For example, we have been working closely with industry leaders to advance these initiatives via a customer-facing digital portal that gives claimants the ability to accept claims funds and the control to choose how they would like funds delivered. 

Once notified by their insurer that their claim has been approved, a claimant is prompted to access the digital portal via their personal device, at which point they can opt for a digital payout instead of a paper check. Claimants choosing to receive funds digitally then select from a list of payout options that include having a digital check delivered instantly via email, payouts sent to their bank account via a debit card or ACH transfer or even having funds delivered directly to their PayPal or Venmo account. 

Such digital payout initiatives have successfully paid out millions of insurance claims digitally across our client base – helping these insurers deliver an industry-leading experience for their customers. When paired with parallel efforts from the insurer to expedite how claims are reviewed and approved, some insurance claimants have been able to complete the entire claims process (from submission to payout) with their insurer in less than 20 minutes.

Digital transformation is changing how the insurance industry operates for the better. By digitizing payouts, insurers are creating better experiences, reducing costs and making it easier for customers of all ages to work with their insurer.

In the always escalating war between hackers and the rest of us on cybersecurity, the bad guys have a scary new tool: If they can get even a few sentences of recorded speech from someone, they can simulate that person's voice realistically and have it say anything they want.

At the moment, these voice fakes are primarily being used to fleece elderly people by generating anguished calls supposedly from children or grandchildren who are in a predicament and need several thousand dollars wired to them immediately. And it's easy to see the potential for broader abuse. 

Email scams that simulate messages from senior executives routinely con employees in finance departments into wiring hundreds of thousands or even millions of dollars to a "supplier" or "customer" that is actually a hacker bank account. That scam has happened often enough that many finance employees have learned to be careful, but now imagine if the hacker could follow up on that urgent email with a distressed voicemail message that sounds like the CFO demanding to know why the employee is being so slow.

An article in the Washington Post explains: 

"Powered by AI, a slew of cheap online tools can translate an audio file into a replica of a voice, allowing a swindler to make it 'speak' whatever they type. Experts say federal regulators, law enforcement and the courts are ill-equipped to rein in the burgeoning scam. Most victims have few leads to identify the perpetrator, and it’s difficult for the police to trace calls and funds from scammers operating across the world. And there’s little legal precedent for courts to hold the companies that make the tools accountable for their use.

“'It’s terrifying,' said Hany Farid, a professor of digital forensics at the University of California at Berkeley. 'It’s sort of the perfect storm … [with] all the ingredients you need to create chaos.'”

Even a year ago, the article says, a lot of audio was needed to clone a person's voice. Now, just recording a TikTok where you talk for 30 seconds is enough to let someone clone your voice using a tool that costs as little as $5 a month.

Based on so little audio, the tool can't replicate the mannerisms of a speaker or the language they would use, such as nicknames, if the person being impersonated was actually making the call. But the AI-generated voice sounds so much like the real person that people can be fooled, especially in a stressful situation where speed is demanded. 

Authorities say that, as usual, the best recourse for potential victims is caution: Be very suspicious of any urgent request, and always verify with the person supposedly making the request that it's really from them, whether in a personal or business setting. 

Eventually, tools will be developed that will help test whether a voice is being generated by AI, just as tools can now help test whether text or deep fake images come from AI... but the bad guys will probably be on to the next scam by then. 

Insurers have done an increasingly good job helping cyber insurance customers be more secure in the face of unrelenting attacks by hackers -- a topic we explore in detail in this month's ITL Focus, on cyber -- but they will obviously have to stay vigilant. There's no rest for the weary.

Cheers,

Paul

P.S. The latest scam comes in the context of continual improvement in what's known as generative AI. Last week, OpenAI released GPT-4, a new version of ChatGPT, just four months after it released ChatGPT and captured the world's imagination. The Atlantic does a good job of explaining what's new in this article, from March 14. 

The gist:

"Rumors and hype about this program have circulated for more than a year: Pundits have said that it would be unfathomably powerful, writing 60,000-word books from single prompts and producing videos out of whole cloth. Today’s announcement suggests that GPT-4’s abilities, while impressive, are more modest: It performs better than the previous model on standardized tests and other benchmarks, works across dozens of languages, and can take images as input—meaning that it’s able, for instance, to describe the contents of a photo or a chart....

"From what we know, relative to other programs, GPT-4 appears to have added 150 points to its SAT score, now a 1410 out of 1600, and jumped from the bottom to the top 10 percent of performers on a simulated bar exam."

 

 

 

  

 

We would all love to believe that everyone working in insurance is the paragon of honesty and ethical behavior and that it is the outsiders, the criminals, the general bad actors who are committing fraud against the industry. Unfortunately, this simply is not the truth. Although not the norm, insurance industry professionals have been known to participate in fraud schemes, and agent gaming is just one of the ways it happens.

Agent gaming occurs when insurance agents manipulate the details of insurance policies to alter the premium, to improve risk acceptability or to maximize their commissions and key performance metrics. It is a bad practice that can add risk to an insurer’s book of business while leaving a trail of upset policyholders. Despite the severity of the problem and the potential impact on insurers and insureds alike, agent gaming has been difficult to detect and mitigate. Fortunately, insurers have new technology that can help them.

What drives agent gaming

Insurance agents have incentives to sell a high volume of policies in the shortest time, but there are obstacles. While 65% of insurance customers still prefer to work with an agent, digital insurers create competition. This has led to financial pressure that may drive some agents to cut corners so they can write new accounts.

In addition, both home and auto insurance rates rose in 2022, which means it can be a lot harder to keep customers happy. If agents can’t provide competitive pricing, customer loyalty can erode, and policyholders may default to doing their own research and comparisons, leading to defection.

These challenges can act as a misaligned incentive for insurance agents. Because agents act as a conduit between policyholders and insurers, they have the opportunity to misrepresent policyholders when shopping for quotes. An insurance agent can increase the chances of a quick sale by manipulating a policyholder’s information or modifying essential facts to arrive at either a more affordable premium quote or to ensure the quote is considered acceptable by the insurer.

Agent gaming hurts insurers and policyholders

Premium leakage is one of the primary effects of agent gaming, and it’s part of an expensive problem for insurers. Industry insiders believe premium leakage in total may account for as much as 14% of an insurer’s direct written premiums. In other words, if an insurer has $500 million DWP, premium leakage will cost the organization $70 million per year in lost revenue.

Policyholders usually have no idea they’re part of an agent gaming scheme. Once the scheme is discovered, however, it can have bad consequences for the individual. For example, the insurer may decide to raise their rates, part ways with the policyholder or, in the event of a claim, deny or partially deny the loss. This can represent a surprising and unwelcome financial burden on the innocent policyholder.

Agent gaming can go the other way, as well. Instead of making premiums artificially lower, agents may inflate commissions by making policyholders’ premiums higher by signing them up for unnecessary coverage. Even if the scheme is detected, policyholders may never be able to recover these incremental premium expenditures.

Given the variety and scale of its impact, agent gaming can’t simply be regarded as a cost of doing business. This practice costs substantial amounts of revenue – and unwinding agent gaming schemes can cause a considerable amount of customer dissatisfaction. Therefore, insurers need ways to catch agent gaming earlier, before the scheme becomes entrenched.

See also: Characteristics of an Effective Change Agent

Manual investigation catches agent gaming after the damage is done

It can be difficult to detect agent gaming via manual review. A premium manipulation scheme, for example, will often reveal itself with a long list of policies that have abnormally low (or high) premiums. A clever, but dishonest, agent will avoid gaming every single one of their policies to evade detection. In fact, looking at their list of policyholders might reveal only a few customers with lower rates than normal. 

Even comparing a bad actor’s book of business with other agents' may not reveal them to be an obvious outlier. Manually comparing agents with one another takes time, and it’s difficult for investigators to review a large sample of agents, given other priorities. 

In many cases, agent gaming schemes aren’t revealed until a policyholder files a claim. At this point, the insurer has already lost significant revenue due to premium leakage.

Detecting agent gaming schemes sooner with AI solutions

AI solutions are capable of more nuanced analysis. They’re able to compare every agent in an insurer’s network against every other agent to find the biggest statistical outliers. This gives insurers a much better picture of the agent gaming that may already exist in their book of business.

Being an outlier doesn’t necessarily mean an insurance agent is gaming the system, however – it might just mean that an agent is a good salesperson. Therefore, AI solutions need to be capable of drilling down into individual policy details. 

Here’s an example: If an agent understates a home’s square footage or replacement cost to devalue the property and obtain a lower rate, the AI should be able to spot the problem using external data. For example, the AI solution could access county assessors to find the exact square footage of the home and then flag the discrepancy for investigation.

The crux of the matter is that AI doesn’t just perform this check for existing policies. AI solutions are also capable of flagging agent gaming in real time during the application process. In other words, insurers don’t need to wait until they start to lose revenue before they detect agent gaming schemes. Instead, they can keep their agents honest throughout the entire policy lifecycle.

The new kids on the block (#insurtech startups aiming to be disruptors) have not made a dent and for sure will not kill insurance incumbents. So, why should an insurer innovate? Because technology and data are incredible opportunities to lower the loss ratio and improve return on equity. (Do you remember my Insurtech 4Ps?)

Let's look at auto insurance. Root (the new kid on the block) once upon a time was a telematics-based unicorn, but it has never used telematics data well. Nowadays, they have given up on telematics (their latest storytelling is about embedded), and their market cap is about $50M (in March 2022, it was about $500M).

By contrast, Progressive (with a market cap of $81B) presented their 2022 results on Feb. 28 and dedicated all their earning call to telematics, providing tons of food for thought for anyone working on auto insurance in the U.S.

Below, I'll analyze nine key takeaways (with facts and figures) from this earnings call, exploring the future of auto insurance. (Spoiler: The future will be telematics-based! And you will get the reason for the headline of this newsletter edition.) 

Mobile-based telematics has made it feasible to apply this technology in any insurance market worldwide. Here, you have a recent example of the success at Cambridge Mobile Telematics in implementing telematics in Japan. There is no such thing as "a market not ready for auto insurance telematics," only telematics programs that are not good enough.

Are you working at an auto insurer that has not yet figured out how to use telematics capabilities to make more revenue, improve driver behaviors, price risks more accurately and retain more customers? You are leaving relevant opportunities on the table! You are leaving behind more than 10 percentage points on your combined ratio!

Source: Jan Myszkowski Oct '22

Let's take a quick look at Root's facts and figures.

• '22 gross written premiums $600M (vs $743M in '21)
• '22 loss ratio (including loss adj. expenses) 91% (vs 99% in '21)
• '22 combined ratio of about 120% (vs 157% in '21)
• '22 net losses $298M (vs $521M in '21)

Basically, Root has cut marketing expenses, reduced new business (more unprofitable than renewed and already pruned business) and reduced overall costs in line with the shrinking of the top line.

A year ago, I wrote: Root is not using telematics data well for pricing and risk selection. Moreover, they have even denied the usage of telematics data for claim management and for changing driver behaviors.

See also: It's Time to Get Back to Basics

They realized it and pivoted to the new buzzword: embedded insurance. Below are the mentions of "telematics" ("telematics" + "UBI") vs "embedded" in their quarterly shareholder letter:

Embedded insurance (with Carvana) represented 41% of new business in Q4 '22 (vs 3% in Q4 '21). That should represent about 9% penetration on cars sold by Carvana.

Wrapping up: They don't have their act together and haven't developed adequate telematics capabilities, and their market cap is an infinitesimal fraction of the money they raised. (Their IPO valued them at about $7B in '20.)

Does this mean telematics doesn't work? No! Absolutely not! Progressive's story, words, figures and acts demonstrate that it works well.

Progressives' earning call gave nine key takeaways for the future of auto insurance:

1. Auto insurance is your most relevant business line and is here to stay, and you have to innovate it

(Do you remember my "rumors about the death of personal auto insurance have been greatly exaggerated"?)

Progressive showed innovations (introduced over the years) and announced many further changes in their telematics-based approach. Progressive's CEO didn't talk about it on the stage of a conference; she dedicated the full Q4 earning call to this innovation journey.

They are not doing it because it is cool to be innovative. You can feel the C-level commitment to using technology and data to do the auto insurer's job better. They are innovating because it contributes to achieving their strategic goal "to grow as fast as possible while delivering a calendar year 96 combined ratio" and represents a concrete opportunity to increase their return on equity! We are talking about the second-largest U.S. auto insurer, with a personal auto loss ratio 10+ percentage points better than the market average in 2022 and a total shareholder return constantly in the top 10 insurers worldwide for the past two decades.

They took this insurtech approach (telematics) seriously and are obtaining terrific results on their most relevant business line. So why are you still ignoring/denying it?

2. The future of auto insurance is telematics-based

This 86-year-old carrier has been a pioneer in using telematics data since 1996, and has constantly invested in developing its telematics capabilities. Progressive has clearly talked about where they see economic value in using it:

• "Segmentation is a key facet of our competitive prices pillar, and nowhere is that more evident than in our investment and usage-based insurance products"
• "UBI is our most predictive rating variable, and it provides unparalleled rate accuracy"
• "It's about segmentation and matching rate to risk"
• "The program systematically helps us retain lower-risk drivers" 
• "Our claims representatives have seen that telematics data can help them settle claims more quickly and efficiently"
• "Offering a service to detect and respond to major accidents [...] customers have consistently told us that this kind of service is something that they really do value"

(Here is an old (gold) paper published with Swiss Re back in 2017: Unveiling the full potential of telematics )

Customers are ready in any market (a recent survey -- done by the IoT Insurance Observatory together with Swiss Re on 10,000 policyholders in nine different markets -- shows a high and consistent level of acceptance: Only a fifth dislike the telematics approach!) Regulation is not an absolute barrier in any market (only a constraint that would influence the execution of the program). And mobile-based telematics removed the old barrier: The telematics hardware was too expensive in some international markets where the annual insurance premium is below $200. The size of your company is not an excuse, either: You don't need to be a 20M policy carrier; there are international telematics success stories from players with less than half a million policyholders. In every market, you can find tech players and system integrators that allow smooth execution in your organization.

It is 2023, and there are no more excuses. What is your reason for still leaving on the table all these percentage points on your combined ratio?

3. Surcharge bad risks

Progressive explained well why it is necessary to surcharge bad risks to create value through more accurate pricing, and how it works:

• "Participation discount is larger now, at 15% instead of 10%"
• "We've increased the size of the maximum potential discount to 45%, and the maximum potential surcharge to 60%" 
• "75% of customers still receive a discount, and only about a fifth receive a surcharge"
• "Renewal rates for the safest drivers who are earning the biggest discounts are about 6% higher than average, while they're about 16% lower for the riskiest drivers who aren't receiving a discount"
• "We had deployed this new continuous model in 12 states, representing over a quarter of our net written premium, and plan rollouts to most of the rest of the country during 2023"
• "Early on, we weren't pricing to the full curve. So, we understood that a lot of people should be receiving surcharges and that some people should be receiving bigger discounts. [...] I think we are now very close to or almost completely pricing to that curve with the data we have today. [...] we continue to advance the size, continue to pull additional data elements [...] our segmentation game is never ending. We're always trying to continue to advance to find additional data to use that can keep us with a gap between us and the competition"

Telematics Innovation at Progressive (Feb '23)

How many times have you heard at conferences or read in articles that customers don't want to be monitored, don't accept the idea of being surcharged and would massively switch if you surcharge them? Progressive's "the share of our personal auto customers participating in Snapshot has moved steadily upward" seems a definitive answer to these doubts.

Putting together the information from this earning call with the previous ones, It seems that the telematics penetration on the new business is above 46% in the direct channel and about 13% through the agent channel.

4. All the policyholders must have a telematics app whatever the product chosen

This has been the most substantial and most surprising message in Progressive's earning call:

• "We know that despite how times have changed, there's a large segment of customers who don't want their insurance premium to be based on their driving data"
• "That means that if we limit this just to our Snapshot customers, we'd be leaving out a lot of others. So, in March we plan to start making accident response available to all of our auto customers, not just those who are in Snapshot"

(Do you remember the telematics predictions Harry Huberty and I dropped a couple of years ago?: "It will be the norm in the U.S. personal auto market for customers to download their insurer’s app on their phone to be insured. This app will continuously use the smartphone’s sensors to deliver a superior customer experience regardless of what product a customer chooses: pay-per-use, telematics-based renewal pricing or a policy with a traditional rating based only on traditional variables such as age, credit score, etc.") 

Progressive has started monitoring all policyholders to create value for both the customer and the insurer,

5. Wrap services around the insurance contract

Their talk about services: "We'll use data from the sensors on the phone to detect when a serious crash is likely to have happened. We'll reach out to the customer to confirm the accident and to see if they need help. If we don't hear from a customer at all, and it seems particularly serious, we'll request that the police conduct a well check to make sure our customer is OK. Since we know the customer's location from the telematics data, we know just where to send them. [...] This adds value to the customer's relationship with us and can become another reason to choose and to stay with Progressive. Additionally, while other insurers offer crash detection to their UBI customers, we'll be making it available to all of our personal lines auto customers, whether they're in Snapshot or not. Third, we're deliberate about dispatching EMS."

• Honestly, we have merely scratched the surface of the service opportunity ("continuous is a little bit more expensive [...] we're excited about and what Jim talked about, the excitement about it is the services that we're going to provide, especially in some of the claims examples") in the earning call
• However, Progressive has only just started with the continuous monitoring approach. ( "Our most recent addition is continuous monitoring, which began its rollout in the summer of 2022")
• I'm pretty confident they will fully understand the service opportunity in the coming years

6. The IoT paradigm gives tremendous value to claim handlers (and mobile-based telematics data is good enough)

• ”Having this telematics data available, we're able to get their claims started more quickly and able to handle it more efficiently”
• ”Within two minutes of the impact, we reached out to our customer […] That agent dispatched an ambulance and a tow truck […] it took only 10 minutes from the time of the accident to when we had a claim in our system”
• ”This customer had this accident just two days after buying their policy […] we can see from the telematics data that the crash happened where and, importantly, when our customer said it did […] very confident that this loss did occur after and not before the customer purchased the policy”

"Over the last couple of years, we've experimented with offering a service to detect and respond to major accidents," and "We'll use data from the sensors on the phone to detect.” Do you really think that Progressive would have released this feature to all their policyholders if they had not been super-confident with their mobile-based crash detection?  

I told you this in my first LinkedIn article back in 2014:

• “Emergency services with automatic claim detection or buttons for direct-dialing the assistance center”
• "Act more proactively […] make the whole process faster and more efficient, by anticipating: the actual verification of the claim (anticipating the first notice of loss); the direct contact with the client for claim description”

7. Telematics is a capability, not a product

My friend Pete Frey highlighted in an article we wrote together in 2021: "Telematics adoption should be seen “as not just launching a program but actually building a business capability within your organization. The biggest difference as you switch your perspective from program launch to capability building is that you look at building buy-in, understanding and expertise across the organization while launching the program." In an interview with Forbes in 2020, I shared: “building the capability to master the IoT insurance paradigm is an achievable target, and it doesn’t require tens of millions of dollars. However, governing this journey and transforming the way an insurance company does business will require a multi-year commitment and strong leadership.”

I had a couple of meetings in the last few months where two different insurers (both listed) gave me the clear feeling they didn't get it and will not obtain any result from telematics. At least, not with the current leadership teams.

In the meeting with one of the insurers, their main question was: "Can we hope someone will bring us a driving score already calculated? This way, we will have not to deal with app, devices and telematics data". The second insurer (bigger and with an international presence) opened the discussion by saying "for us, telematics is only about claim management. Can that app give us the same data as this device?".

See also: Embedded Insurance Is Everywhere

What have we heard in Progressive's earning call?

• "Getting into telematics is not easy. [...] It's not just as simple as adding a new rating variable. It takes broader and sustained effort, new capabilities and investments"
• "I'd like to tell you about how we've built on that long history in telematics that Tricia discussed"
• "Its efforts and investments over the past 20-some years has established a lot of these capabilities or learnings that we can leverage"
• "We're going to continue to evolve and continue to advance our competitive advantage when it comes to pricing and telematics"
•  "I'd like to share some exciting news that doesn't involve using telematics data to more accurately rate policies but instead builds upon our telematics heritage to provide a valuable service to our customers"
• "Invested in a process of continuous improvement in our UBI products"
• "In parallel to our efforts in personal lines, we were developing UBI for commercial auto products"

A competitor’s product can be replicated in a few months, but capabilities require time to be built and internalized in the organization. A capability gap is going to require years to be closed. The sooner you start your telematics journey, the better.

8. You don't need to wait for OEMs or beg for their data

When you talk to an insurer struggling with telematics, it is frequent to hear the belief/hope/illusion that connected cars will change everything, that OEM data are the inevitable end game, that OEM data will allow insurance telematics to take off and that this will happen soon.

What has Progressive said?

• "Working with data collected by automakers. [...] They've been working to show the value of these programs to their customers so that they'll sign up to share that data with them"
• "And we've been able to tap into that. When a customer comes to us to quote and their driving data is available, we'd ask the customer if they'd like us to use it to determine their price. They say yes, we bring that data in and apply the UBI discount or surcharge to their quote immediately, again, pushing that rate accuracy to where it matters most, the new business quote"
• "This isn't common yet, but we're excited about the opportunity it represents"
• "The framework we're talking about depends upon vehicles with cellular connection. [...] Some, you know, are still working on it. So, it's -- and it does take a while for the fleet to turn over. So, it's very focused on a few OEMs and the most recent model years. [...] So, we expect that this population will grow over time"

Basically, we are talking about customers asking for a quote from Progressive, and already have a driving score generated by their connected cars. This is a specific use case that doesn't happen too frequently yet (but will be more frequent in the future). Progressive is happy to use (and pay for) this additional information at the point of quotation.

Telematics Innovation at Progressive (Feb '23)

I'm pretty aligned with this vision. There are not a lot of data today (insurers insure all the cars in use today, not only the new sales), OEM data can be helpful for some specific use cases (that don't require a lot of data), and a few times you are even able to find sustainable business care considering the high cost of this data.

However, many of the telematics opportunities require continuous monitoring and can be addressed better with the insurer's mobile app.

Here a recent conference where I talked about OEMs and insurers VIDEO 

9. [MISSED] To change behaviors is an incredible opportunity for an insurer

Driver behaviors can be changed, and the most effective way is through frequent and tangible rewards. Over the years, a material part of the IoT Insurance Observatory's research has been dedicated to this use case (in the different insurance domains, not only personal auto). I've seen best practices obtaining up to three percentage points on their combined ratio changing driver behaviors. Last year, in the March edition of this newsletter, I interviewed Anton Ossip (Disovery Insure's CEO), who built a great telematics program focused on changing driver behaviors: Vitality Drive. A broader perspective on behavioral change can be found in the paper I published with the Geneva Association in 2021: From risk transfer to risk prevention

This issue is totally missing in Progressive's talk, and it is a pity because to apply it on all the portfolio (point 4 above) is a fantastic opportunity. I'm sure we will hear even this in Progressive's earning call within two or three years.

This earning call should be read again and again by everybody working on auto insurance. A lot of food for thought.

My advice in a nutshell: Be more like Progressive and less like Root.

The metaverse is coming — fast. In PwC’s 2022 US Metaverse Survey, 82% of business executives (including 87% of insurance executives) said they expect metaverse plans to be part of their business activities within three years. Insurers that move swiftly and wisely to use the metaverse can find success in two ways: 

1. Enhance operations and customer engagement by engaging employees, customers and policyholders in new ways.
2. Create new revenue streams through coverage of new, metaverse-specific risks.

Here is a brief rundown of some of the main opportunities in each area — and five guidelines to help seize them.

Engage and excite your stakeholders

The metaverse is on its way to becoming an immersive, global and decentralized digital world that blends seamlessly into the physical one. This new world can enable insurers to reach customers in new ways and deepen relationships with existing ones. It also can help insurance employees pick up new skills, collaborate more intensely and do their jobs more effectively — all while potentially cutting costs. It can, for example, help:

• Upskill the workforce in new ways. Metaverse tools available right now can train employees in hard skills (such as risk or damage assessments) and soft skills (such as leadership and resilience). Metaverse “campuses” can support remote work, collaboration, recruitment, onboarding, performance management and more. These tools can be both lower-cost and more effective than in-person equivalents.
• Transform underwriting and claims. Instead of (or in addition to) sending staff to inspect physical properties in person, your employees can inspect their digital twins in the metaverse. These detailed, interactive, continuously updated 3D models can help your people better assess risks and identify risk-mitigation measures. That can support more accurate, lower-cost underwriting. Digital twins can also enable claims assessors to virtually walk through an incident scene. They can then better determine damages, recreate and simulate incidents for training and service claims faster. 
• Captivate customers. Offices in the metaverse enable carriers and clients to share information and ideas (e.g., the results of the 3D model assessments we mention above) and assess coverage needs via a personalized and personable immersive experience while saving time and resources.

Close the protection gap — and increase revenue

Like any new set of technologies and experiences, the metaverse offers new risks. There sometimes are metaverse “accidents” (such as service outages at key moments), as well as criminal and malicious behavior including scams, financial fraud, intellectual property theft, data breaches and abusive behavior. 

Because few of these risks are covered today, insurers could create new lines of business through metaverse-specific products. Although it will likely take time to properly assess and price some of the newest risks, there are several potentially attractive entry points for insurers that understand the metaverse and its underlying technologies.

• Digital assets. Digital assets in the metaverse aren’t just cryptocurrencies. They also include NFTs, avatars and virtual real estate. Some are highly valuable. Most are blockchain-based and don’t run through traditional financial institutions, so there may be no recourse if they’re lost or stolen. Virtual real estate also carries new risks, ranging from “cybersquatting” and vandalism to missed mortgage payments, operational failures and new legal liabilities. Demand already exists for insurance against these and other digital asset risks. As the metaverse matures, this demand could grow exponentially. 
• Events and entertainment. More and more brands are hosting metaverse events, which include product launches, fashion shows, concerts and parties. Most risks related to these events are familiar, but “translated” into a digital world: surprise cancellations or delays, technical failures and threats (such as abusive behavior or cyber attacks) to attendees’ health and safety. All these could lead to financial losses or legal liabilities for companies — many of which find insurance appealing.
• Intellectual property. When companies put their IP and brands into an immersive digital world, they also may make them vulnerable to cybertheft. Deepfakes and other forms of digital fraud on the metaverse can also infringe on content, trademarks and copyrights, causing financial loss and reputational damage. Metaverse platform providers and marketplaces may also be liable for some of these IP violations. Savvy insurers may be able to build on traditional IP policy coverage to cover these and other related threats in the metaverse

See also: The Metaverse and Financial Services

Five steps to help start or accelerate metaverse initiatives

To take advantage of the metaverse’s opportunities, insurers will need to:

1. Set a strategy. Chart a course for sustainable success in the metaverse by assessing market opportunities and your own current and potential capabilities. Consider immediately available business outcomes as well as the potential for business transformation and all-new revenue streams. Your strategic assessment can include limited, low-risk tests of new technologies and products with select groups of employees and customers.
2. Choose the right tech. With your strategy in place, determine which technologies and related processes you’ll need. This requires not only choosing the right metaverse platform — based on business and customer preferences — but also buying or developing metaverse-specific technologies (such as specialized AI) and crafting appropriate procedures and controls. 
3. Build skills. For internal use cases, business growth and risk management, the metaverse requires new skills. Fortunately, you can teach basic skills through training in the metaverse itself. For more advanced ones, you may need to send your tech experts for focused training, make new hires, or work with third parties that can provide the key skills you lack.
4. Build in trust. Among the new metaverse-specific risks that every company must manage, insurers should pay special attention to (fast-evolving) regulatory developments and to security. It’s also important to go beyond the letter of the law and design trust upfront and throughout your metaverse operations — rather than having to make fixes later. No one wants to make headlines for suffering a metaverse scam, security breach, privacy violation or tax penalty, and insurers naturally prefer to avoid these risks.

Learn and grow. As you begin to launch metaverse products for business and enterprise use cases, have measures in place to keep managing your risk appetite and expand your offerings. For example, if you begin by adding metaverse-related line items to existing coverages, you may soon be able to offer whole new lines of business as you deepen your institutional understanding of the metaverse.

‘Change’ is a word we have long-been comfortable with in Ohio – in fact, many famous Buckeyes have driven it spectacularly.Steven Spielberg, a son of Cincinnati, altered a generation of filmmakers’ approach to cinema; inventor of the lightbulb and countless other technologies, Thomas Edison, shaped all our lives for the better; and, perhaps most famous, astronaut Neil Armstrong, who came from Wapakoneta, Ohio, fundamentally changed the way we view our world.

I’ve always been fascinated by the process of change. It can be challenging, sometimes painful but always interesting and as a senior director at JobsOhio, I’ve seen a lot of it in the financial sector in recent years. The insurance industry, in particular, has undergone something of a revolution here in Ohio.

What’s driving it? To start with, the availability of better data. Insurance companies, for example, can monitor lifestyle habits to inform life insurance provision. Every month, many of us receive an email telling us about our driving habits, which impacts our premiums. It’s almost something we take for granted now.So, data analytics have been transformative but the real sea-change has been a radical shift in the provider’s relationship with the customer.

Insurance has been flipped on its head; a few years ago, the customer was a passive consumer of what the insurance industry wanted or could provide. Today, and increasingly in the future, it’s about designing products and services around what individuals want and need. And in a post-COVID world, customers want, need and, indeed, expect a personalised, omnichannel experience.

As Adam Erlebacher, CEO and co-founder of Cincinnati’s Fabric by Gerber Life, a one-stop shop to help families ‘master their financial lives’, says: “If you’re a parent and looking to secure your family’s financial future, you don’t necessarily wake up in the morning thinking about life insurance. We need to meet parents wherever they are in their journey.” This customer-centric approach, getting to the places where consumers are, is increasingly achieved through embedded finance, which is a result of maturing partnerships in the supply chain that have seen many founders shift from B2C to B2B and B2B2C models.

Anthony Spiteri, CTO at Battleface, a full-stack global insurance company with modular tech and embedded travel products, based in Ohio, says that partnerships across tech, insurance, travel and finance, have been key to his organisation’s success. Battleface disrupted the travel insurance industry in 2018 by offering extreme customisation for travellers using innovative underwriting and has gone on to develop a global infrastructure to provide claims and emergency travel assistance support under white-label arrangements with partner brands. It recently launched Robin Assist, a single platform offering travel insurance as a service to carriers, brokers, managing general agents (MGAs) and self-insured enterprise partners. It’s designed, among other things, to dramatically cut claim times.

“Technology can really help when you’re filing a claim,” Sasha Gainullin, CEO of Battleface, explained at the launch. “It can find the policy you have. It can eliminate the need for a claim form. It can identify the expense that you’re filing against the policy.”Accessing customers via third parties is now a business imperative.“As an insurtech, we’ve continued to grow and evolve into areas where we see a lot of opportunity. A big part of what we now do is a realignment to go more toward partnerships instead of direct-to-consumer. So, we’ve adopted a B2B2C model,” Spiteri says.

“With travel insurance, the direct-to-consumer model is difficult when considering the circumstances of trying to sell to somebody travelling at the right time, who still hasn’t purchased travel insurance. So, partnering with key partners in the travel and fintech spaces has helped us rapidly grow, and we’ve shifted our focus towards that, versus going direct-to-consumer.”

Also close to ‘home’, Ohio’s Matic is a digital insurance agency built for partners, integrating insurance directly into the property-owning experience. It has grown to work with more than 100 home and auto carriers and distribution partners in industries ranging from mortgage origination, servicing, and banking to automotive organisations and real estate.

“To support our growth, we’ve prioritised increasing our network of insurance carriers,” says Matic CEO Ben Madick. “One of the reasons we picked Ohio as our headquarters is because it is a hub for insurance. There are so many insurance carriers nearby, which helps us build relationships. Today, we have over 45 insurance carriers on our platform, which, three years ago, was probably under 20.“Our partnerships allow us to meet customers where they want to be and choose how and where they want to shop.

“From buyer behaviour trends, we’ve been able to create insurance carrier insights reports and supply this information to carriers in a way that they haven’t seen before. We’ve been working really hard over the last couple of years to design these reports in a way that is meaningful to our insurance carrier partners. It will help them become better in what they do, whether it’s pricing, product availability, or consumer experience. Ultimately, that supports our customers as well and allows us to be the best partner to our insurance carriers that we can be.”

The big daddy in this space is the long-established, Columbus-based carrier Nationwide. It has experience of building a partnership ecosystem with 30 portfolio companies in which it’s directly invested and many more that it’s partnering with. It has also seen and responded to insurtechs’ move towards targeting intermediaries as opposed to an exclusive B2C strategy.

Angie Klett, Nationwide’s vice president of corporate development, leading ventures, mergers and acquisitions, strategic partnerships and brokerage solutions says: “When I started in my role a couple of years ago, it felt as if founders were just focussed on disrupting the sales component of the value chain and replacing the intermediary altogether.

“If you look at all the results in the market, you can see that there’s proof that founders have been able to grow quickly in our industry. The question is, can they grow profitably? Even in the distribution space, there’s been a lot of growth, but given the cost of acquisition to loan-to-value equation in a direct-to-consumer model, we’ve seen more of a shift toward partnering with intermediaries versus disrupting them or eliminating them from the equation. It’s important to us to enable their business models.”

In this vein, Nationwide recently announced a partnership with GloveBox, a client experience platform for insurance agents and carriers, which sees the Denver-based insurtech integrate with Nationwide’s post-bind service APIs to deliver a seamless, digital policyholder service experience.

“This partnership will help agents who find demands on their time immense and growing by digitising some of the aspects of servicing within the agency,” continues Klett. “You’ll see more and more of a shift to partnering with the intermediary in the founder space. Just as consumers and access to data become more costly, the concept of selling direct-to-consumer may not work out.”

The power of the Nationwide brand in this space cannot be underestimated. Some partners with a startup brand can bask in the reflective glory that comes from association with, and endorsement by this behemoth. Being able to say that they’re doing business with Nationwide is fantastic for building their own brands, but the secret sauce in the mix is the technology that allows partnerships to take root and flourish. Nationwide embarked on significant investment in core system modernisation, enabling it to move quickly in the market and to take advantage of its breadth. It also built a partner platform; a digital chassis that’s housed centrally and can be used over and over. Klett says Nationwide has 214 underlying publicly available application programming interfaces (APIs) ‘powering millions of pings each day’.

“Investment in the digitisation of our partners is one of the most important competitive advantages that we have in the market. We’re able to be in-market with partners very quickly. It allows us to be nimble and responsive, which are two words that you don’t typically hear associated with 100-year-old insurance companies,” she adds.

Battleface has also leveraged its own versatile platform and is talking to other companies about taking claims and assistance in-house on the back of their technology offering. “We realised there’s a large market for directly working in the B2B space within the insurance industry,” says Battleface’s Spiteri. “Right now, our focus is mostly travel insurance, but [with our platform] we also see the possibility of getting into other lines, working with MGAs, brokers and insurance companies in the future. I think that’s going to be a big part of our 2023 while we also continue to grow the partnerships that we have, as well as acquire new ones.”

Fabric’s Erlebacher, meanwhile, stresses the need for compatible technology as a pre-requisite for partnering with a third party as well as a ‘forward-thinking strategy when it comes to digital distribution’.

“If the partner doesn’t have that, the best technology in the world is not going to solve that problem. Second, we’re looking for partners with digital backends that we can integrate seamlessly. If you have to build too much technology to take on the carrier partner’s work, it becomes a bit of a mismatch when operating your business.” When Fabric chose to accept an acquisition offer from Western & Southern last year, both the technology and the mindset were key deciding factors.

“It’s still rare to find an insurance carrier with the history that Western & Southern has that is looking so far into the future and willing to make the investments in their backend system to push forward on a digital front. That was extremely important to us,” says Erlebacher. You can’t talk about partnerships, without discussing embedded finance.

Nationwide’s Klett says embedded is ‘a hot topic’ right now and one that her organisation has embraced.

“Many of us are talking about embedded, but I believe at Nationwide, we’re actually doing it,” she says. “That book is growing quickly. We have 150 per cent year-over-year growth and the quality of the risk coming through the book is really good. There have been some stops and some pivots along the way, and we’re leveraging those learnings right now to gain momentum. “The key to embedded is the placement in the digital journey. We have examples where we are B2B2C, as with Matic, and we have examples where we’re B2C, as with Ford or [electric vehicle manufacturer] Rivian. Each one of those provides us with a new set of lessons about how embedded can work in the marketplace. Each partner has a slightly different experience that allows us to learn and grow in embedded. We’re seeing meaningful results there.

“The other important aspect of embedded is growing those capabilities past distribution. There is so much focus on embedded distribution, but what about embedded experiences across the value chain? Things like insurance verification partnerships were born from that concept.” The integration of Nationwide’s insurance verification digital product with Assurant (a global provider of risk management products and services) is a great example of how customers benefit from that. They don’t have to leave their mortgage process to get their proof of insurance.

Rather, it’s an instantaneous process, that comes with a satisfying API ping. “That’s a really simple way of bringing a digital capability to life in the value chain outside of distribution. Keeping that digital mindset and the customer at the centre is pivotal to the overall concept in-market, “says Klett. Speaking to all of these players in Ohio, the recurring themes are obvious: the customer is king; partnerships – whether through embedded finance and/or rewriting the conventional B2C playbook – are key; and technology is the oil in the wheels that allows these partnerships to prosper.

The market has faced its challenges through a global pandemic and now the ongoing global financial uncertainty, but there is huge cause for optimism as insurance operators evolve how they operate and put the customer experience, through partnerships, at the heart of what they do.With that in mind, the final word goes to Nationwide’s Klett. “Our support for the insurtech and fintech world is unwavering, “ she says. “We’re open for business when it comes to investing in or partnering with companies that share our values and believe in our mission. We think that we can make the experience and futures for our customers and businesses better when we work together. “We’re going to continue to invest, look for ways to partner and keep the customer at the centre of our business strategy.”

 

• JobsOhio is a private nonprofit corporation, working outside of, but alongside state government. Speed putting a deal together, getting access to an ideal site, talent finding, having a working relationship with the administration and the legislature, and maintaining a network of economic development professionals, are all ways in which Ohio competes and JobsOhio creates an advantage.

 

Solving a headache for parents

A ONE-STOP SHOP FILLED WITH FINANCIAL TOOLS TO HELP FAMILIES PLAN THEIR FUTURES

 

Founded in 2015, Fabric was acquired by Western and Southern Financial Group in 2022 and rebranded to Fabric By Gerber Life. Co-founders Adam Erlebacher and Steven Surgnier (formerly COO and director of data respectively at digital bank Simple Finance) found, as new parents, there was no modern, convenient way for them to protect their families’ financial futures. The insurtech was born out of those frustrations.

Erlebacher recalls his experience: “The process of getting a will turned out to be very expensive and required meeting with a lawyer. It was so hard to find time that it literally took us three years to write a simple two-page document. And when I went to buy life insurance, it took ten weeks, a health exam, and three meetings with an agent who was pushing me to buy a more expensive product that would have earned him a bigger commission.“As dads, we realised that there was no modern way for parents to confidently check these otherwise daunting tasks off their lists, and that’s why we started Fabric.”

Its products and services include: life insurance policies, college savings and rainy-day savings funds that are tailored to younger families; free wills for parents – regardless of whether they are a policyholder or not, Fabric offers its Will Kit to make estate planning a simple matter; a modern iOS and Android compatible app with easy navigation that offers simple accessibility and extra tools for spouses to share; added security features that protects personal information with bank-level security that incorporates adaptive risk-assessment security, 256-bit encryption, two-factor authentication, automatic lockout, and biometrics; and support features such as a personalised checklist of financial tools to help families grow.

“What we did from the beginning was to focus on making life insurance a quick and easy digital experience. Something that used to take 10 weeks, we’ve distilled down to a 10-minute application where you get an instant offer. That was revolutionary,” says Erlebacher. “On top of that, we’ve taken a very different approach to the market, which is the one-stop shop. We began with building a full-stack digital will service that’s proprietary to Fabric and we’ve continued to invest in that. Beyond that, we’ve also rolled out tools to organise your family’s finances. Now we are building full-stack versions of some of these key products and are much more deeply integrating them into the experience across products.

“What gets us really excited in 2023 is that we want to offer families the power of compound interest in a tax-advantaged way. We want to make it very easy for parents to take whatever savings they’re able to invest and give them a simple way to do it. That’s a key product launch area that we’re focussing on in 2023. “Parents often chat at the playground about the challenges and struggles of being a parent. What’s really exciting to me and what drives us is that we want to be the go-to place for parents at the playground who ask each other ‘what do you do for life insurance or a will?’.

We would love the answer to be, ‘just get Fabric and you will have everything figured out. Get that app and you’ll be good.’ That’s really the North Star that we’re moving towards.”

 

This article was originally published in The Insurtech Magazine Issue 09, Page 14-16.

 

Sponsored by ITL Partner: JobsOhio

To get a different perspective on agents and brokers, ITL Editor-in-Chief Paul Carroll sat down with Jeffrey Lipsius, director of the Inner Game of Sales Leadership and author of “Selling to the Point: Because the Information Age Demands a New Way to Sell.” Drawing on his longtime collaboration with Inner Game guru Tim Gallwey, on his own experience running a major sales organization and on his decades training salespeople, Lipsius explains how the Inner Game can get agents and brokers beyond the Outer Game that almost all of us play at work.

At a very simple level, the Inner Game concept, which Gallwey first articulated in his book on tennis in the early 1970s, says we all have two selves. Self 2 operates at a subconscious level and is the part of the brain that is actually learning things, like how to swing a tennis racquet. Self 2 is playing the Inner Game. Self 1 plays the Outer Game. It kibitzes. It's what's telling you you have a bad backhand and generally making you feel inadequate.

While Gallwey began his work as a tennis instructor thinking he needed to TEACH his pupils, he soon decided that the goal was for the student to LEARN, which isn’t the same thing. He reconceived of himself as a coach, who offers no traditional instruction but who helps people distract Self 1 and steers Self 2 to focus on key variables. That way, Self 2, on its own, can learn as effectively as possible, without the normal pestering from Self 1.

That concept, which is explained in more detail in the introduction to this newsletter, may sound a bit strange for the moment, but it should provide a starting point for what follows, and Lipsius explains in depth.

ITL:

How did you connect with Tim?

Jeffrey Lipsius:

I connected with Tim back in 1974. I was an aspiring tennis pro, and we got to be friends. I didn't make it in the pros, and I had to get a real job, so I went into sales. Over the course of years, I became vice president of the company, so now I had over 100 salespeople under me. I got back with Tim, and I said, Hey, look, we can use my salesforce as a laboratory to practice applying Inner Game techniques. That's how the Inner Game of Selling incubated. Tim and I were going back and forth, looking to see what worked there and what didn't. Eventually, sales increased 10 times using Inner Game principles.

ITL:

To get us going, would you summarize a bit about how you think about the Inner Game, and then how you apply the concept to selling?

Lipsius:

I watched Tim give a tennis lesson to someone who said he had a bad backhand. Tim said, “We’ll worry about that later. For now, just watch the seams of the ball.” He’d have gotten nowhere if he had said, “Your problem is yourself. If you don’t think about your backhand so much, you’ll do much better.” Instead, he steered the person to focus on a key variable, tracking the flight of the ball carefully.

But what is the ball for a salesperson? It’s the customer. And what are the seams of the ball for the salesperson? The customer’s decision process.

The Inner Game of Selling is about coaching customers to make better decisions. The first thing I tell a class is that I’m not going to be their teacher. I’m going to be your coach. I’m going to help you learn how to learn from your customer. Your customer is your teacher.

ITL:

The thinking has long been that insurance is sold, not bought. What sorts of things would you coach a salesperson to observe about me so they can start coaching me to understand my needs better and have me wind up buying insurance?

Lipsius:

The salesperson has to be the learner, not the teacher, and find out what is your definition of value. What is your level of confidence about buying financial products? What are your beliefs and values? What are your priorities?

There's an assumption that you just find out the customer's needs. Well, not every customer knows their needs. Sometimes, the salesperson has to do a little coaching to help the customer get more internally clear about themselves.

ITL:

Are there specific things that you coach the sales folks to do or not do so that they don't get in the way of that discovery process?

Lipsius:

One big thing is helping the customer make the best decision no matter what that decision would be. If the salesperson is thinking that they need to get the sale, then, right away, they’re going to be thinking, “Well, is this going my way, or is this not going my way?” And they’re going to be distracted from what the customer could be teaching them.

All sorts of different sales training systems primarily focus on the conversation between the salesperson and the customer. They say they’ll help you have a better interaction with your customer. That's why a lot of sales conversations look more like an intervention than a sale. Those systems ignore the fact that there’s another conversation going on: the customer's internal decision process.

We get salespeople to realize that your commission check is the result of the customer's buying performance, not your selling performance. If you want to take credit for what you did, you’ll focus on the selling conversation. But if you’re trying to get the customer to buy, which conversation are you focused on? The one inside the customer’s head.

You find out what the customer's situation is and then, in a nonjudgmental way, help them make the best decision for their situation.

ITL:

What you’re saying cuts against some of the attitudes I see. I hear people in the industry talk about how consumers just don’t understand their need for insurance and have to be educated. How much pushback do you get?

Lipsius:

Well, insurance salespeople won’t try something unless they think it would increase their sales. But from an Inner Game perspective, a buying decision is a higher-quality decision, and it’s more sustainable, which is important for keeping policies in force. When the salesperson actually learns the customer’s beliefs and values and priorities and objectives and challenges and can integrate those with the internal environment of the customer, the customer takes a higher degree of ownership for the decision. That’s necessary if they’re going to pay for the policy for years and years, even after the salesperson leaves.

What I’m talking about is kind of the difference between advising and coaching.

ITL:

Insurance agents and brokers often say they want to be a client’s trusted adviser. You’re saying they should really aim to be the client’s coach.

Lipsius:

When the salesperson is trying to advise the customer, the gears are turning in the customer’s head as they advise themselves about whether to take the salesperson’s advice. Most people don’t see that part. They think, I gave the person advice, and they took it, so I must be their adviser. The situation is more complicated than that.

Part of the trouble for salespeople is that many trainers want to be able to take credit for what the salesperson did. After a sales call, the question is: “Did you tell them what I said?” A great salesperson is really good at thinking on their feet, but that’s not a teachable skill. Many trainers try to teach the skill anyway by anticipating all the objections. “This is how you handle this one. This is how you handle that one. This is what you say here. This is how you respond there.” But that can be counterproductive. If the salesperson’s mind is so cluttered with all that material, how can they be watching the seams of the ball?

ITL:

This is great insight. Any final thoughts?

Lipsius:

There is certainly value in much of the training that people get, and they’re selling a lot of insurance. But I hope people can ease into the Inner Game approach, maybe see it as a new tool in their arsenal. You don’t drop your traditional way of selling, but you try an Inner Game approach in certain situations. You’ll see it’s quite powerful.

ITL:

Thanks. I’ve been sold on the Inner Game concept for decades. I hope our readers give it a try.

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About Jeffrey Lipsius

Jeffrey Lipsius is the President and Founder of Selling To The Point®, LLC Sales Training and Consulting.  He developed the Selling To The Point® sales training method during his 30-years of sales training experience.  In the late 1970's Jeffrey pioneered inside selling for the Natural Foods Industry, and trained the first sales force of this type in that Industry.  As a result of the success, his selling model is being utilized by many Natural Foods Industry brands.

Jeffrey has trained over 100 salespeople, both inside and outside, as well as sales trainers throughout his career.  The salespeople trained by Jeffrey are some of the highest commission earners in their respective industries.  Salespeople trained by Jeffrey also cultivate great customer relationships and enjoy their careers as salespeople.

The salespeople Jeffrey trained have cumulatively sold over a Billion dollars worth of products.

 

When I played tennis in high school, my bible was "The Inner Game of Tennis," by Tim Gallwey—a book that I see Bill Gates recently listed as one of his five all-time favorites. Many years later, I had the distinct pleasure of working with Tim for several years when I was a partner at Diamond Management & Technology Consultants and he was a fellow. He had already extended his Inner Game thinking to golf and skiing and, drawing on his work with Diamond, published "The Inner Game of Work" in 2001. So, I was intrigued when I recently met a longtime associate of Tim's, Jeffrey Lipsius, who has been developing the Inner Game of Sales for many years and who has some insights for agents and brokers.

The Inner Game has lots of subtleties, but my simplified version goes like this:

We all have two brains (what Tim calls "selves"). Brain 2 operates at a subconscious level and is the brain that is actually learning stuff, like how to swing a tennis racquet, how to get the timing right, how to adjust for wind and so on. Brain 2 is playing the Inner Game. Brain 1 plays the Outer Game. It provides the conscious structure for, say, tennis lessons and processes information from books and videos. It also kibitzes. It's what's telling you that you'll never learn, that there sure is a lot riding on this service game, that you're looking silly, that you really need to get your hips turned on your backhand, that your dad really wants your match to end so he can get on with his day and so on and on and on. 

I happen to have a very well-developed Brain 2

So, I was fascinated to watch how Tim would help people learn by basically giving Brain 1 a job to do to distract it so it wouldn't get in the way of Brain 2 as it did the serious job of the actual improvement. For instance, he once addressed an all hands meeting at Diamond and began by gently tossing an apple to people in the front row as he took the stage, then having them throw it back. When a woman nervously bobbled the apple three or four times, before dropping it on the floor, Tim said, "You'll do," and invited her up on stage. 

She wasn't too excited about whatever was about to happen in front of 1,000 people, but she was a good sport, and Tim quickly began to calm her Brain 1 by telling her he wasn't going to try to teach her how to catch an apple or anything else. Instead, he was just going to ask her some questions. He tossed the apple to her, and she dropped it. He said, "Okay, this time, I just want you to tell me whether I'm tossing the ball higher or lower than I did the first time." She dropped the apple again but correctly told him he'd tossed it higher. Tim repeated the exercise 10 or 15 times, giving Brain 1 a conscious task while Brain 2 got a sense of how to measure speed based on whether the arc of the apple was higher or lower and started to track location. Without even seeming to realize it, she began catching the apple, and with increasing confidence. Tim switched to a new question: "Is the apple spinning more or less than the previous time?" Brain 1 stayed distracted while Brain 2 learned about another key variable. In less than two minutes, she had learned so much and gained so much confidence that Tim started tossing the apple harder, then switched to throwing it overhand, with increasing pace, and she caught it every time.

Tim didn't TEACH her anything about catching that apple -- but she LEARNED how to do it, in an environment he created. He says that's the key distinction, and it's the main one that his colleague Jeffrey Lipsius offers for agents and brokers. They often see themselves as TEACHING clients and prospects about insurance, while looking for openings to make a pitch, which is the Outer Game approach. He suggests that agents and brokers employ the Inner Game, focusing clients and prospects on key variables (as Tim did with the height and spin of the apple) and giving them the opportunity to LEARN, first, what their needs are, and then how insurance can address those needs.

But I've oversimplified and likely garbled the thinking a bit, so I'll let Jeffrey explain at length in this month's interview.

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

HAS INSURANCE BECOME TOO ON-DEMAND?

The "customer-centric" concept isn't wrong, but anything “centric” requires a balance. Has the pendulum swung past the point of effectiveness? 

YOUR AGENCY NEEDS A TECH LEADER

An effective tech leader has experience in insurance systems and processes but also understands organizations and the need to focus on efficiencies.

CHANGING THE RAP ABOUT INSURANCE

The industry should come together to conduct a wide-scale campaign to improve its reputation. The campaign would work. It has truth on its side. 

A LITTLE EMPATHY GOES A LONG WAY

In developing technology solutions, one of the most overlooked and critical elements of delivering value to end users is empathy -- truly understanding their pain points. 

CUSTOMER EXPERIENCE 2.0

The next generation of insurers must look beyond traditional attributes and embrace new forms of data and analytics, including contextual, behavioral and motivational data.

DIGITAL SELF-SERVICE IS TRANSFORMING INSURANCE

Self-service automation is the next step in the insurance industry. The right solution can be a win-win for insurers and customers, while the wrong solution can irritate customers and ruin a carrier’s reputation.