With massive shifts in the workforce, economic uncertainty and the majority of employees routinely feeling disengaged from their work, the need for strong leadership today is dire.

A lot has been said about leadership and change. Some people believe that leaders are born, not made. Others believe anyone can become a leader with the proper training and experience.

But what does it take to be a successful leader?

How can you lead change effectively in your organization?

Here are 10 tips that can help you lead change in the insurance industry.

1. Be visionary

“Chase the vision, not the money.” Tony Hsieh

Leaders need to have a clear vision for the future and be able to articulate it in a way that inspires others. For a leader to be visionary, they must be clear about the impact they want their organization to make in their community or industry. Without a vision, it’s difficult to set goals and create a roadmap for change.

77% of employees who feel they are aligned with the company’s purpose or vision are engaged, compared with only 20% of employees who are not aligned with the vision.

2. Be decisive

“The way to develop decisiveness is to start right where you are, with the very next question you face.” Napoleon Hill

Leaders need to be able to make tough decisions, even when there is no clear right or wrong answer. They also need to be able to make decisions quickly and efficiently, without dragging their feet.

Indecisive leadership can cost your organization as revenue opportunities can vanish if you don’t act quickly. Effective leaders can overcome emotional impulses and take a step back, assess a situation and decide the course of action. Conversely, leaders who can’t control their emotions often make rash decisions that can lead to catastrophic consequences.

Making the wrong decision is inevitable; it happens to everyone. The key is to trust yourself, focus on how your decision affects your company’s vision and be ready to adjust if things do not go as planned.

3. Be communicative

“The most important thing in communication is hearing what isn’t said.” Peter Drucker

Communication is critical for any leader. You need to be able to share your vision and goals with others and rally people to your cause. According to Vimeo, one out of eight business professionals say their companies never communicate strategy updates.

To do this, you must communicate confidently and frequently with your employees, sharing good and, if necessary, bad news. This will inspire trust. Use these opportunities to take ownership and share your insights with the team.

Leaders also need to be able to listen to feedback and take it on board. Try practicing active listening on all levels of the company. Give employees a space to share their ideas, perspectives and opinions on company matters.

See also: The Evolution of Leadership Intelligence

4. Be motivating

Leaders must create a positive and inspiring work environment to motivate others to achieve collective goals.

Granting autonomy to skilled employees helps motivate them to bring their best effort each day. When employees feel valued and cherished for their skills, perspectives and personalities, they’re more likely to find fulfillment in their work.

In addition, it’s imperative to provide recognition and rewards for people who excel within the organization. Rules and punishments don’t inspire.

5. Be adaptable

Leaders must be able to adjust tactics and strategies to the ever-changing landscape. Leaders also need to be able to embrace change themselves and be role models for others.

Having a diverse workforce and culture is a great place to start. Diverse workforces have many different ways of thinking, allowing leaders and organizations to stay open to different perspectives and change.

In addition, get in the habit of seeking out opportunities and trends. For example, look at how different industries are experimenting with new technology and listen to podcasts on topics you’re unfamiliar with. Continuously learning new trends and global perspectives can build an adaptable mindset and help you become more open to change.

6. Be authentic

People need to trust their leaders, and one of the best ways to build trust is by being authentic. Leaders must be true to themselves and display the same values through their actions and words that they expect from the rest of their team.

Authentic leaders must also be comfortable in their skin, have strong self-awareness and understand their weaknesses, strengths and values. By displaying your strengths and weaknesses to your team, you can show that you have nothing to hide. This way, you build trust among your team, and when an employee makes a mistake, they’ll feel more comfortable sharing their errors with you.

7. Be passionate

Passion is contagious, and leaders must be passionate about their vision for the future. This passion will inspire others and help them stay motivated through tough times.

Give your team some praise and congratulations to reignite their passion, and yours. Try taking your team out for lunch or organize a fun team activity like ziplining. When you celebrate achievements, you show that you’re getting closer to your vision.

8. Be coachable

No leader is perfect, and the best leaders are always learning and growing. They are open to feedback and willing to learn from their mistakes.

To be a coachable leader, you must be curious about your strengths and weaknesses, be hungry for feedback and have an open mind. You can’t focus on being right all the time, but rather focus on learning new things and listening to different perspectives.

Moreover, listen to the advice of your support group and advisers and apply that advice to your business just like an athlete would use it in their game. In business, just like sports, coaching and advising are meant to take you out of your comfort zone and push you toward greater success.

Leaders should also be willing to invest consistently in their own development and that of their team members. Whether this takes the form of courses and programs or a difficult conversation to encourage professional development, you must prioritize learning and growth for yourself and your team.

See also: 7 Things Sailing Taught Me on Leadership

9. Be collaborative

Leadership is not a one-person show. The best leaders know how to build and work with teams. They can delegate tasks and give others the credit they deserve. Leaders should also create an environment where different ideas can be shared and debated openly.

You must also give credit where it’s due and recognize the contributions of employees and teams. According to HubSpot, 69% of employees say they’d work harder if they were better appreciated. For example, if an employee comes up with an idea that brings in revenue opportunities, openly share credit with them.

10. Be humble

The best leaders do not have big egos. They know they cannot do everything independently and are not afraid to ask for help. They are humble and always looking to improve.

To be a humble leader, you must respect your employees’ time, ideas and feedback and treat your team how you want to be treated. Try to respond quickly to your team’s questions and requests, ask questions, show up on time for meetings and listen to their opinions. In addition, be accessible to your team and don’t let someone’s rank or pay grade affect how you act around them.

Leadership is not easy, but it is essential for anyone looking to effect change in their organization. By following these tips, you can develop the skills you need to be a successful leader.

Ransomware remains a top cyber risk for organizations globally while business email compromise incidents are on the rise and will increase further in the "deep fake" era. At the same time, the war in Ukraine and wider geopolitical tensions are a major concern as hostilities could spill over into cyber space and cause targeted attacks against companies, infrastructure or supply chains, according to a new report from Allianz Global Corporate & Specialty (AGCS). 

The cyber risk landscape doesn’t allow for any resting on laurels. Ransomware and phishing scams are as active as ever, and on top of that there is the prospect of a hybrid cyber war. Most companies will not be able to evade a cyber threat. However, organizations with good cyber maturity are better equipped to deal with incidents. Even when they are attacked, losses are typically less severe due to established identification and response mechanisms. 

Although we see good progress, our experience also shows that many companies still need to strengthen their cyber controls, particularly around IT security trainings, better network segmentation for critical environments and cyber incident response plans and security governance. As a cyber insurer, we are willing to go beyond pure risk transfer, helping clients to adapt to a changing risk landscape and raising their protection levels.

Around the world, the frequency of ransomware attacks remains high, as do related claims costs. There were a record 623 million attacks in 2021, double that of 2020.  Although frequency reduced by 23% globally during the first half of 2022, the year-to-date total still exceeds that of the full years of 2017, 2018 and 2019, and Europe saw attacks surge in the first half. Ransomware is forecast to cause $30 billion in damages to organizations globally by 2023. From an AGCS perspective, the value of ransomware claims the company was involved in, together with other insurers, accounted for well over 50% of all cyber claims costs during 2020 and 2021.

See also: Cyber Risk and Insurance in 2022

Double and triple extortion now the norm 

The cost of ransomware attacks has increased as criminals have targeted larger companies, critical infrastructure and supply chains. Criminals have honed their tactics to extort more money. Double and triple extortion attacks are now the norm – besides the encryption of systems, sensitive data is increasingly stolen and used as a leverage for extortion demands to business partners, suppliers or customers. Ransomware severity is likely to remain a key threat for businesses, fueled by the growing sophistication of gangs and rising inflation, which is reflected in the increased cost of IT and cyber security specialists.

Increasingly, smaller and mid-sized companies, which often lack controls and resources to invest in cyber security, are being targeted by gangs as larger businesses invest more heavily in security. Gangs are also using a wide range of harassment techniques, are tailoring their ransom demands to specific companies and are using expert negotiators to maximize returns.

Sophisticated scams

Business email compromise (BEC) attacks continue to rise, facilitated by growing digitalization and availability of data, the shift to remote working and, increasingly, "deep fake" technology and virtual conferencing. BEC scams totaled $43 billion globally from 2016 to 2021 according to the FBI, with a 65% surge in scams between July 2019 and December 2021 alone. Attacks are becoming more sophisticated and targeted, with criminals now using virtual meeting platforms to trick employees to transfer funds or share sensitive information. Increasingly, these attacks are enabled by artificial intelligence enabling "deep fake" audio or videos that mimic senior executives. Last year, a bank employee from the United Arab Emirates made a $35 million transfer after being misled by the cloned voice of a company director.

The threat of cyber war 

The war in Ukraine and wider geopolitical tensions are a major factor reshaping the cyber threat landscape as they increase the risk of espionage, sabotage and destructive cyber attacks against companies with ties to Russia and Ukraine, as well as allies and those in neighboring countries. State-sponsored cyber acts could target critical infrastructure, supply chains or corporations.

As yet the war between Russia and Ukraine has not led to a notable uptick in cyber insurance claims, but it does point to a potentially increased risk from nation-states. Although acts of war are typically excluded from traditional insurance products, the risk of a hybrid cyber war has accelerated efforts in the insurance market to address the issue of war and state-sponsored cyber attacks in wordings and provide clarity of cover for customers.

See also: 6 Cybersecurity Threats for Insurers

Improving Risk Controls

In response to a more complex risk environment and increasing cyber claims activity, the insurance industry is more diligently assessing companies’ cyber risk profiles in a bid to encourage companies to improve their security and risk management controls. 

The good news is that we are now seeing a very different conversation on the quality of cyber risk than a few years ago. We are gaining much better insights and appreciate clients going the extra mile to provide comprehensive data to us. This also helps us to provide more value and offer useful information and advice to customers, such as which controls are most effective or where to further improve risk management and response approaches.

The net result should be fewer – or less significant – cyber events for our customers and fewer claims for us. Such collaboration will also help in creating a long-term sustainable cyber insurance market that not only relies on traditional coverages but, increasingly, on integrating cyber risks into captive programs and other alternative risk transfer concepts.

Floridians whose properties were destroyed or damaged by Hurricane Ian are expected to file between $53 billion and $74 billion in insurance claims. The federal government will disburse billions more in disaster assistance through tax relief, subsidies and direct grants. While the vast majority of the claims are legitimate and will be settled, criminals always see opportunities in the misfortunes of others. 

According to the FBI, insurance fraud may have accounted for as much as $6 billion in losses to insurance companies and government agencies after Hurricane Katrina in 2005. Fraud now accounts for about $40 billion in losses per year to U.S. insurance companies, costing the average family $400 to $700 per year in increased premiums. 

But losses to fraudulent claims can be minimized by insurance companies. Identify verification (IDV) solutions have come a long way since Hurricane Katrina. Today’s most robust solutions use artificial intelligence and machine learning technology to verify identities anywhere in the world in a few seconds. 

Fraud flows through false information and identities

After a disaster, the most common frauds include false or exaggerated claims by policyholders, as well as bid-rigging by contractors who inflate the cost of repairs, and charity fraud scams designed to misappropriate disaster relief funds.

Money earned through an insurance fraud scheme rarely flows directly to the perpetrators. Instead, fraudsters tend to move the money through online accounts using individuals who have a legitimate U.S. bank account. This not only allows scammers to conceal their identities but also makes it difficult for regulatory authorities to detect fraud and recoup the funds. 

Additionally, digital wallets, mobile banking and other money transfer apps have opened the gateway to new avenues for moving illegal funds around. These channels allow users to access accounts without appearing in person. As a result, the scammers avoid cameras at ATMs, bypass manual security checks and conceal their true identities

To file for false unemployment insurance claims, criminals usually take over existing identities or fabricate identities using stolen details or forgeries. Identity theft is just the beginning. Once fraudsters have successfully created an account using the stolen personal information, other forms of fraud quickly follow. 

See also: How to Prepare for Catastrophe Claims

Mitigating insurance fraud with state-of-the-art IDV solutions 

Digital payment options make it easier for scammers to commit identity fraud - but government agencies and insurance companies can easily detect fraudulent players and suspicious identity details with the right technology. Using robust identity-proofing mechanisms during onboarding can prevent fraud.

Digital identity verification leverages state-of-the-art technology and artificial intelligence models to carry out multiple identity checks. Integrating identity-verification software can spot thieves - along with false insurance claims. 

Here’s how it works: The claimants provide personally identifiable information for identity verification. They are then asked to present themselves online to provide proof of identity, using valid ID documents. The AI-powered identity verification software verifies the documents and checks for any signs of tampering or forgery. The image on the ID document is also matched against the face of the claimant to ensure they are who they claim to be. If the verification process is successful, the insurers can proceed to process the claims within seconds.

During the initial identity verification process, the claimant is verified by authenticating not just official identity documents but also by collecting biometric data. Because biometric data is virtually impossible to replicate, it serves as a better defense mechanism. This way, even if a fraudster is filing for a fraudulent claim through an online channel, their identity can still be identified and reported to authorities.

The bottom line: Today’s most robust IDV solutions can authenticate claimants during the application stage, filter out fraudsters and minimize the threat of fraud. It’s a win-win for both the insurers and the policyholders who desperately need to file claims after a disaster.

For more than a century, carmakers and automobile insurers have largely kept to their own lanes. That was before data ruled. In 2022, data and technology have inspired the automobile industry to get more involved in the insurance side of the ledger, prompting an increase in the number of inter-industry partnerships and more.

For auto insurers, partnerships and other steps car manufacturers have taken to edge their way into the insurance industry offer a way to gain and maintain market share in the highly competitive personal auto space, AM Best Senior Director Richard Attanasio said. Offering products directly and at the point of a vehicle sale brings carriers an avenue of distribution with potentially lower expense levels and additional insight that can help set rates, he said.

Insurers working closely with manufacturers agree that they benefit from access to new data on driving behaviors, and seeing how they affect losses as automation advances and interest in electric vehicles surges. And carmakers that establish their own insurance operations can acquire a “natural feedback loop on driving patterns, effectiveness of safety features, etc., which allows them to further hone their product to meet customer expectations,” Attanasio said.

Points of entry vary by manufacturer and even by country. For instance, Tesla progressed from broker to fronting agency partner to insurance subsidiary. Swiss Re and BMW collaborated to craft a vehicle-specific insurance rating parameter for primary carriers globally to calculate premiums. Some carmakers, such as Toyota, are building out insurance brokerages. Others teamed up with carriers on embedded products.

Toyota overtook Ford as the leading car brand in the U.S. last year, based on 1.9 million vehicle sales, according to market and consumer data company Statista. Ford had 1.8 million, followed by Chevrolet's 1.5 million. Nationwide has partnered with the top two, as well as startup electric “adventure” vehicle Rivian.

Nationwide gains knowledge and strengthens trust by expanding original equipment manufacturer partnerships, said Senior Vice President of Corporate Development Angie Klett, creating “a relationship within their ecosystem that builds upon the customer having the say, the power and determining the path of an experience.” Carmakers and insurance partners today take a customer-first approach that varies from company to company, Klett said. Choose a manufacturing partner carefully, she advised, with an eye on aligning values and strategies.

Each side decides direction for the insurance product, such as if, how and when to embed insurance in the buying process. Klett said embedding is most strategic for manufacturers with a niche market, where customers think a company like Tesla or Rivian has a better handle on the needs of their vehicles' owners. “They're direct-to-consumer OEMs. The buying, the servicing is different. It's not the same as a Ford or Toyota,” Klett said.

Specialized manufacturers, such as Rivian, are notably invested in streamlining the entire car-owning experience, said Sarah Jacobs, Nationwide vice president of personal lines product development, and will lean into the process.

See also: 3 Tips for Improving Customer Loyalty

Toyota Financial Services is an owner of independent property/casualty insurance agency Toyota Insurance Management Solutions (TIMS), which distributes product from multiple carriers. Will Nicklas, president of Toyota Insurance, acknowledged manufacturers' earlier reluctance to enter the highly competitive auto insurance market in the U.S.

“But I think when we decided that cars were going to be connected, and there were going to be a lot more services that we could provide to customers, it made a lot of sense,” he said. “When you think about how insurance plays a role in car ownership, every six months, maybe every 12 months, a customer is renewing an insurance policy. We saw a gap in the ownership experience.”

Nicklas thinks of TIMS as “this new, connected tissue, or this glue that's bringing these two industries together” for a “really powerful collaboration.”

According to the TIMS website, working with Toyota companies and external partners allows the broker to harness data and technology to “improve safety and convenience and save customers time and money.”

The Counterpoint

Some insurance industry experts think the partnerships are helping carriers and manufacturers, but they doubt Tesla will inspire other carmakers to become underwriters. They cite the complexity of regulatory approvals, particularly in the U.S., and profit and loss swings in auto, even among large, legacy insurers.

Risk Information Inc. Editor Brian Sullivan put it bluntly: “There is no advantage at all to a traditional auto manufacturer owning a traditional insurance company.”

Jacobs said regulatory work can't be underestimated. Insurance is “very challenging to break into.”

Barriers are a little easier to clear in some global countries, particularly with a carrier partner. Volkswagen Autoversicherung AG was founded in 2013 as a joint venture between Allianz Versicherungs-AG and Volkswagen Financial Services AG. Volkswagen Autoversicherung AG offers auto insurance in Germany as a primary insurer. In about 30 other countries or markets, VW is an insurance broker, the company said.

“The technology of the cars, especially the car data, gain an increasing importance for the development of our motor insurance products,” a Volkswagen spokesperson said. “For example, in Germany, the safety features of the cars have a direct influence on the motor insurance pricing.” The company hopes to gain telematics experience and integrate insurance offers into VW on-board systems.

Brandy Mayfield, senior vice president and managing director, digital economy for Aon, said partnerships between manufacturers and insurers offer an attractive middle ground.

“As manufacturers build differentiated products, they want to make sure carriers have capacity to insure newer/different technology. Manufacturers also want to minimize friction in the insurance purchase journey and create continued revenue streams from their buyers,” she said.

On the other hand, she said, “shifting from acting as a broker to an insurer presents a significant leap in terms of regulatory complexity, capital intensity and moving the brand into a new category with mixed views from consumers.”

“For original equipment manufacturers to make that investment, there will have to be a clear opportunity to differentiate from traditional insurers or meet truly unmet needs in the marketplace,” she added. “Carmakers must determine what they're solving for by setting up their own insurance structure: more clients, a differentiated insurance product, etc. Many also want to capitalize on profits from the insurance space.”

Carriers can grow a book for certain auto types more rapidly than in the traditional market, she said. Customers may get improved access to parts and repair services, increasing satisfaction with insurers and carmakers. Doubly important for newer vehicles with limited production is “a network to quickly obtain parts and repair,” Mayfield said.

Tesla's push into insurance was reported to be motivated by reducing the cost of ownership. Repair costs ran higher because fewer technicians are familiar with the connected, electric vehicle. Tesla was known for supply chain challenges even before the pandemic, extending repair times.

“Other manufacturers could take a similar approach and offer insurance directly,” Attanasio said, although it would require a significant amount of industry knowledge and infrastructure, including a high level of product/pricing sophistication and policy administration and claims capabilities.

Entrepreneur Elon Musk drew distinctions between how automaker Tesla Motors' insurance operations cover auto risk compared with the traditional insurance industry, which he said suffers from too many players extracting part of the premium along the insurance value chain. “Insurance is quite significant,” Musk, Tesla's chief executive officer, said recently. “The car insurance thing is a bigger deal than it may seem. A lot of people are paying 30%, 40% as much as their lease payment for the car, in car insurance.” Tesla said its real-time insurance is based on measurable driving behavior.

Technology Roots

Twenty-one years ago, when OnStar was collecting vehicle usage data in 34 of General Motors' then-54 models, a spokesman said the onboard automobile information system was working on partnering with insurers. OnStar's inducement included cost savings because insurers wouldn't need to develop data-gathering equipment and then get it into vehicles.

That was three years before Progressive Corp.—which has since become the third-largest private passenger writer in the U.S., according to AM Best data—piloted a usage-based insurance program to research driving habits. In 2008, Progressive started offering customers the option of tying driving data to premiums.

Telematics adoption lagged through the years even as the ease improved from the early days, when consumers were required to install dongles to access UBI. Now that smartphones are common, telematics options from multiple carriers are just an app away. The amount of information an insurer can gather comes close to carmaker-installed monitoring systems, Sullivan said.

Mayfield, however, raised a prime consumer concern: data privacy. “Dealership agents should be prepared to answer a similar line of questioning from consumers: What information from their vehicles will manufacturers plan to share with insurance companies?”

That's a problem for carmakers because the distribution system encourages salespeople to sell vehicles as quickly and with as little friction as possible, Sullivan said. “All a salesperson wants is to get the car off the lot. Anything that might get in the way of closing the sale immediately will be ignored by sales and finance people in dealerships. Insurance is far more complicated than selling rust protection add-ons.”

See also; 5 Trends to Watch in Commercial Auto

Connected carmakers are already collecting enormous amounts of data on how vehicles are driven and maintained. That can give them an edge, albeit a minor one, as telematics becomes more widely accepted, according to Sullivan, even as many car buyers opt to retain a degree of privacy, or at least the right to decide when and who has access to their personal movements and habits.

Ford affiliate American Road Services Co. offers Ford Insure, underwritten by Nationwide Mutual Insurance Co. and its affiliates. Ford Insure customers employ FordPass App (compatible with smartphones) and FordPass Connect (an optional feature on some of the carmaker's models) on newer vehicles to transmit data on miles driven, hard braking and accelerating and stop-and-go and night driving.

Ford's insurance messaging mirrors that of partner Nationwide's for the general public. “While that discount is being calculated, you automatically get a 10% discount just for signing up,” Ford Insure notes on its website, promoting auto insurance discounts as high as 40% and potential additional savings by bundling other vehicles, home or pet insurance with the auto coverage.

Jacobs thinks 70% of new customers will opt in to UBI plans within five years, based on current trends.

Sullivan isn't surprised, seeing the day when drivers who decline to use telematics are presumed to be high-mileage or high-risk policyholders. Even if they're not, they will pay more for the privilege of privacy, he predicted.

This article initially appeared at AM Best. 

Inflation has been top-of-mind since early 2021, and for good reason. For most Americans, the impacts have been inescapable - from the grocery store to the gas pump to the car dealership. Inflation is the highest we’ve seen in 40 years. Auto insurers are struggling to maintain profitability given increases in labor, materials and vehicle replacement costs. And those challenges are only expected to deepen as medical bill inflation accelerates.

History Repeats Itself?

This isn’t the first time that medical care inflation has reacted during periods of high overall inflation. For historical perspective, we need to go all the way back to the recessionary periods of the mid-1970s and early 1980s. Though the specific economic conditions may have been different, we can still draw a few key insights: In general, overall CPI (Consumer Price Index) inflation spikes were followed by similar medical inflation spikes within one to two years (Figure 1), and (Figure 2) the medical increases also stayed elevated for longer periods than overall inflation, which dropped off steeply after peaks.

Figure 1: Consumer Price Index Trend for All Items and Medical Care in the U.S.

Now, let’s examine this trend in the context of the current landscape. Similar to the historical trend, medical care inflation has trailed overall CPI inflation, mainly because contracts between medical providers and major payers (i.e. Medicare/Medicaid, private health Insurers) are typically negotiated years in advance. This disconnect has placed major financial strains on medical providers locked into reimbursement contracts negotiated prior to the recent inflation increases. But, while medical care inflation reacts slowly compared with volatile items such as food and energy, make no mistake, it is catching up (Figure 2). As of August 2022, U.S. medical care inflation was 5.4% compared with 2021, with a steeply increasing trajectory.

See also: What to Do About Rising Inflation?

Figure 2: Consumer Price Index Trend for All Items and Medical Care Jan 2021 -— Present

These medical care price increases land heaviest on auto casualty billing because pricing and reimbursement are not tied to major payer contracts. Case in point: We have observed notable billing severity acceleration in Q3 2022 within both our first- and third-party medical bill review data, with first-party average bill severity up 4.2% and third-party average bill severity up 11% compared with Q3 2021 (Figures 3 and 4).

Figure 3: 1st Party Casualty Average Billed per Line

Figure 4: 3rd Party Casualty Average Considered (Billed less Duplicates) Per Line

Benchmarking to Level the Playing Field

Given the accelerating medical care inflation challenges, it is now more important than ever for auto insurers to leverage benchmarks when evaluating reasonableness of charges, as well as to have them readily accessible to the adjuster. This is easiest in states regulated via mandatory fee schedules, such as Pennsylvania or Oregon, but most states do not use a fee schedule. One option is the use of Fair Health, which maintains a large database of all charged amounts by procedure and geo ZIP code. While effective, a drawback of using methodology based on charge amount is that rapidly rising prices in a region will also drive up associated benchmark values.

Another excellent benchmarking option is the use of Medicare reimbursement schedules. As the single largest payer of medical bills in the U.S., Medicare is well-known to medical providers. It is extremely useful to reference the amount Medicare has agreed to pay for any given procedure by state venue. Because this benchmarking methodology is based on reimbursement versus charge, it is less affected by rapid charge increases.  

To better understand these differences in methodology, let’s use CCC billing data to examine the charge and recommendation values for some typical procedures that have already seen notable cost inflation (Figure 5). With a Fair Health benchmark configured at the 80th percentile for the procedure in the applicable ZIP code, the average reimbursement recommendation lands at 52% of the submitted amount. The Medicare benchmark value lands at just 6% of that same submitted amount. Even at 5x the Medicare reimbursement, the benchmark value lands at 32% of the submitted amount.

See also: Social Inflation: A Claims Perspective (Part 4)

Figure 5:  CCC Charge vs Benchmark Recommendations

These benchmark values are most useful for third-party liability negotiations when integrated into medical bill review applications and supported by robust configuration options. With CCC’s 3rd Party Bill Review Application Injury Evaluation Solutions (IES), insurers can cascade and display multiple benchmark methodologies while also setting rule configurations such as Medicare multipliers by venue or bill type. The adjusters can review all available benchmarks and adjust as a batch or all the way down to bill line level as needed based on the right fit for the claim (Figure 6)

Figure 6: Sample Bill Ingested via IES with Fair Health and Medicare Recommendation Values

Medical inflation is here, escalating quickly, and likely to persist for an extended period based on historical indicators. Insurers who have integrated a comprehensive, consistent, easy-to-use benchmarking strategy into their workflow will be best-equipped to indemnify their casualty claims.

With more than 33 million small businesses in the U.S., their insurance needs become more complex and competitive each year. Small-business owners require various insurance policies – from commercial auto and property to employee liability.

While the personal-lines insurance market started digital transformation years ago, commercial insurance was much slower to automate due to the complexity of the transactions and the reliance on independent-agent distribution models.

Overreliance on more manual processes can result in a poor customer experience, inefficient operations and a lack of usable data for underwriting and pricing. Moreover, TransUnion research shows that 82% of business insurance customers are open to obtaining a policy quote through online channels without agent assistance.

Cutting-edge technology and advanced data capabilities offer commercial insurers an unprecedented opportunity to boost profitability, elevate product sophistication, enhance customer experience and reduce costs.

Insurers that don't embrace digital transformation may risk losing market share to competitors using automation to gain an advantage in the small-business market and add to their bottom lines significantly. To realize higher profits and performance, small-business insurers must prioritize the many digital technology options available and have a clear strategy for automation.

Algorithm-Based Underwriting

When shopping for insurance policies, small businesses oftentimes seek providers offering them the most affordable policy quickly and efficiently. Any delay in receiving the quote will likely result in the customer going to a competitor instead. 

Automated underwriting relies on robotic process automation (RPA), artificial intelligence (AI) and machine learning to find new information sources, glean new insights from existing data, establish consistency in evaluating risks and achieve greater efficiency.

Using externally available data to prefill necessary information at quote facilitates algorithm-based underwriting processes, enabling customers to see a price quote within minutes instead of days. Additionally, data is captured and validated in online forms, significantly reducing the probability of human error and policy mispricing.

Historically, commercial insurance underwriters have reviewed and evaluated most risks because legacy data systems could not process complex small-business transactions and data sources were fragmented, causing significant delays in the quoting process. Additionally, due to the high policy volume, underwriting departments were large, which can drive up costs.

On the other hand, with the proliferation of available data and improved data accuracy, algorithms analyze risks quickly and effectively, enabling insurers to optimize underwriter workloads to focus on more complicated policies and use their time more efficiently. Also, automation can lead to greater worker satisfaction by enabling underwriters to focus on more challenging work.

See also: How to Use Social Media Data in Underwriting

Range of Discretionary Pricing Is Shrinking 

Because algorithms and data were not as readily available and accurate as today, underwriters have historically had more latitude to change prices. For example, they could lower the price from what the algorithm produced by 20-40 points in percentage terms or even raise it by a similar amount, if necessary. 

As the result of improvements in commercially available and scalable third-party data, small business insurance rate plans are increasingly capable of pricing the risk more accurately, and the need for discretionary adjustments to price is shrinking.

For example, previously, a rating algorithm might price a premium at $1,000, but an underwriter could raise or lower it by $500. However, with more precise data, algorithms are more capable of pricing risks, and there's more confidence in the ability to set the price. As a result, the underwriter might still need to change the price, but only plus or minus 10%, rather than 50%. In many cases, underwriter discretion may be eliminated entirely.

For certain less complex small-business risk segments, most insurance companies have a great deal of data. For example, residential plumbers present a common risk. In the past, underwriters may have reviewed these policies and made pricing adjustments, which is a disruptive and time-consuming process. But now, an algorithm can access the risk more precisely and in a much shorter time. As a result, what may have once taken several hours to evaluate can now be completed in a matter of minutes.

Online Transactions

With digital transformation, more small-business insurance policies are transacted online instead of through an agent, reducing costs and improving the cycle times considerably. For example, instead of waiting three days for a quote, customers can receive it in 10 minutes.

When small-business owners evaluate policies, they likely request quotes from several insurance providers. Assuming their policy needs are typical and not complex, the process takes less time because they enter the policy information online instead of visiting an agent's office, which generally takes a significant amount of time and can therefore lead to an unsatisfactory customer experience.

For example, a landscaper looking for insurance coverage has relatively standard risks. The customer is self-employed, so they may only need a policy for the vehicle and a general liability policy. Instead of spending all day in an agent's office, the landscaper can spend 20 minutes online and receive quotes from 10 different insurers of his or her choosing. 

If the customer has a large, complex or medium-sized business, an automated process might not be appropriate; but, for small businesses with standard risks operating in higher-volume business segments, transacting online streamlines the underwriting process and maximizes efficiencies.

See also: 3 Must-Haves for a Self-Service Portal

Transformation Is the Key to Profitability

Small business insurance profitability has been a challenge for providers due to a multitude of reasons including operational inefficiencies, high expenses and inaccurate pricing. 

However, with a substantial increase in data availability, small commercial insurers are realizing the benefits that automation brings to the underwriting and pricing processes, including algorithms, precision pricing and online transactions.

Today's customers expect to receive all types of information immediately and want insurance companies to follow suit. If small business insurers don't join the digital transformation across the industry, they risk being left behind or becoming obsolete.

Following this year’s InsureTech Conference in Las Vegas, it's clear we are operating in a new environment. Here are some thoughts that may be helpful in guiding stakeholders.

We have entered a hardening market amid rising interest rates, soaring inflation and continuing CAT challenges. That means we can expect price increases for insurance across the board. 

Venture capital investment is slowing, and insurtech valuations are moderating. Investors will no longer finance companies that spend a dollar to make 90 cents. Rather, they are looking for insurtech organizations that can achieve strategic efficiencies in both the types of products offered and the distribution methods for those products. The best companies will find investors,  but they may very well receive lower valuations compared with the past few years.

Besides funding constraints, insurtech startups will see a limited appetite for capacity, as major carriers deal with losses from major weather events and rising interest rates.

While several high-profile insurtechs have had a rough year in public market valuations, there are still many bright spots for startups in this marketplace.

See also: Insurtech Success Stories: Still Waiting for Godot

Investors are taking a closer look at startups and emerging growth insurtechs that can clearly demonstrate efficiencies in underwriting, products and distribution—and a realistic path to profitability. By specializing in a niche, MGAs have become more attractive investment vehicles, especially as they are more agile and can leverage advances in technology and data management that larger entities often struggle with. For example, my team and I have created an emerging growth MGA whose online product offering is transforming the experience of buying jewelry insurance throughout the U.S. I brought years of experience in the retail jewelry business, while my co-founder complemented that with in-depth expertise in insurance fundamentals -- the kind of combination that created considerable buzz at ITC this year.  

Our industry has learned key lessons from its past and is finding the best path forward. The market can’t rely on endless venture funding alone to grow. Insurance business doesn’t work that way. But, as seen at ITC, our industry is adapting and improving and is here to stay. 

We hear a lot of talk these days about the virtues of data-driven organizations. That’s certainly reasonable up to a point — but what does it really mean? When it comes to routine operational decisions, in particular, the current bias seems to favor increased automation over human judgment. The data doesn’t lie — or so the story goes — so we’re better off deferring to programmatic decision models.

That notion may be reasonable for some situations, but when you’re operating in a complex and nuanced domain like casualty insurance claims, that highly automated decision paradigm can begin to fall apart very quickly. Thousands of different variables come into play. Medical records and accident reports contain subtle details that provide vital clues about potential risks. To complicate matters, important minutiae are often buried deep inside the narrative content.

An experienced claims manager can pick up on that nuance, provided they have adequate time and attention to devote to reviewing the documentation. Can an algorithm accomplish the same thing?

The short answer is yes, but that comes with a vitally important caveat. In complex domains, advanced data analysis should not drive automated decisions; it should inform and empower human beings to make more effective decisions. The most effective artificial intelligence (AI) initiatives in place today are doing exactly that.

Data-Driven vs. Data-Informed

The distinction here is critically important. The data-driven paradigm is about automation. It’s about shifting decision-making responsibility away from human actors and trusting the algorithms to take their place.

A data-informed approach, in contrast, empowers and assists people to make better decisions by flagging potential risks, highlighting anomalies, and monitoring for changes that may indicate a need for attention. It’s a helper, not a replacement.

For claims managers, this approach has powerful implications. Imagine, for example, that an injured worker has missed three consecutive appointments for physical therapy. What does that mean? If the employee no longer feels a need for treatment, then it may be a sign that they’re ready to return to work, but it could also be an indication that the case has taken a turn for the worse. In either case, an adjuster should be made aware of the situation so they can make a proper assessment.

In a complex domain like claims management, this data-informed approach holds tremendous potential for transforming organizational culture and processes.

Consider how claims are handled today at most organizations; adjusters typically follow up with cases on an “as needed” basis. Depending on the individual adjuster, that might involve a diary notation, a running to-do list, or a collection of sticky notes. Inevitably, though, it means manually reviewing medical bills and records as they come in or when the adjuster’s schedule permits.

In a data-informed organization, claims adjusters focus on meaningful decisions. Because they no longer need to spend their time scanning records in search of salient information, they have sufficient bandwidth available in which to apply their professional judgment on high-priority cases. AI does that legwork for them.

Data-informed organizations can apply their valuable resources toward predictive severity-based workloads. They can focus on claims that need attention today — based on real-time data. Incoming documents are reviewed and scanned by AI, and claims adjusters are notified when a case requires their attention.

See also: The Data Journey Into the New Normal

The Business Opportunity for Insurers

The data-informed approach is already operational in a number of leading companies around the world. It’s transforming processes and driving cultural change — but not in the way that many AI skeptics have predicted. Data-informed organizations aren’t dehumanizing their processes. On the contrary, they’re empowering and elevating their claims professionals by enabling them to focus on meaningful work.

The data-informed paradigm is about focusing on the right claims at the right time. It’s about spotting correlations and anomalies, identifying potential risks and bringing those to the attention of an experienced claims manager.

The result? A data-informed organization has a shorter claim duration and lower-than-average total claim costs. Not surprisingly, workers at data-informed organizations also enjoy substantially higher job satisfaction. These companies are generating high ROI — not by reducing their workforces but by elevating them to higher-value activities.

The Build vs. Buy Debate

How does an organization achieve that kind of transformation? It starts with a predisposition toward innovation and a recognition that advanced data analytics has the potential to transform claims management from an operational perspective.

Conventional wisdom tells us that proprietary data is a differentiated asset. In other words, companies place a high value on their internal data because it’s theirs, and nobody else has it. In the world of AI and machine learning, though, more data is generally better. When ML models have access to higher volumes of information, from a relatively wide array of sources, they can “learn” faster and more effectively.

Building and maintaining those kinds of high-volume data sets can be extraordinarily costly and time-consuming. The implication for insurers is that, in the build-versus-buy debate, there is an increasingly powerful case for moving beyond proprietary data and embracing best-in-class platforms to drive the data-informed model.

This provides for a flexible co-innovation process, enabling insurers to leverage solutions and platforms that have already been proven in the real world, without reinventing the wheel. It’s the fast-track alternative for companies seeking to become data-informed organizations.

As first published in Claims Journal.

Giving the customer what they want — or need, depending on whom you're quoting — is a basic tenet of business. And perhaps the one thing all customers want — and need — is a good experience with the company they are working with.

It's a truth that the insurance industry needs to understand. One of the biggest complaints consumers have against their insurers is the often lengthy time it takes to settle claims. And dissatisfied customers often turn into former customers; studies show that over 60% of customers are likely to switch to a competitor after just one bad experience — while more than three-quarters would jump ship after just two such experiences.

If customers equate slow claims processing with poor service, insurers need to find a way to speed up claims — and fortunately, modern technology, in the form of advanced computer vision, can provide insurers with the means to do just that. These advanced computer vision systems use cameras and visual detection systems in vehicles, drones equipped with high-resolution cameras and images taken by devices such as phones and tablets. The images are then automatically uploaded to machine learning-based AI systems that analyze thousands of data points — type of damage, estimated repair costs, structural integrity (of buildings or vehicles) and much more.

These AI-based systems — relying on advanced data analysis and using machine learning — are able to develop a clear basis for claims far more quickly and accurately than with the traditional method, where human adjusters must visit the scene of the claim and human actuaries must determine the amount to be paid. Companies can thus cut down the investigation phase of a claim from weeks to minutes — rapidly approving settlements and ensuring high customer satisfaction and retention.

Investigations of structural damage from natural disasters, fires, hurricanes and similar events — where conditions make it difficult, if not impossible, to send out adjusters — become much more efficient with computer vision technologies. Drones can much more easily navigate these disaster scenes, flying into corners and crevices and recording images over, under or inside damaged structures. AI-based systems receive and examine the images, determining what damage was caused by the event and what damage may have already been in place. The analysis is based on damage models — patterns of damage based on specific events associated with disasters, such as how a roof would appear if it were blown off by a gust of wind measured at 75 mph — as well as with data on other similar incidents. With all the data taken into account, the system can quickly provide a full assessment of the damage and determine how much the insurer needs to pay to satisfy claims.

Computer vision can also streamline the claims process for incidents involving vehicles — often a sore point for customers, and the source of the largest number of complaints by policyholders. Here, too, the traditional process of claim evaluation — with adjusters sent out to evaluate the condition of a vehicle, the circumstances of an incident (traffic, weather, road conditions, etc.), along with statements by those involved in the incident, as well as police — becomes a time-consuming project that taxes the resources of insurers and leads to undue delays in claim settlement.

See also: Customer Segmentation Is Key

Images taken right away with a customer's mobile phone camera, along with data collected from sensors, road cameras and images recorded by in-vehicle cameras, are collected and analyzed by AI models, which provide an accurate picture of the circumstances of an incident, along with the liability of drivers and the amount of money the company needs to pay. Neural networks running on the customer's mobile device can provide real-time guidance to ensure suitable images are captured that can be used as evidence as part of the claim process.

Computer vision systems can also make sure that insurers get a clear picture of the condition of a vehicle before they even issue a policy — with previous damage noted and excluded from the policy, ensuring that they, too, are treated fairly in their relationship with their customers, eliminating potential fraud on the part of customers.

In addition to increased efficiency and speedier claim settlements, computer vision-based systems ensure that insurance processes are more likely to be perceived as fair by customers — increasing the level of customer satisfaction. Unlike human adjusters, computer vision systems are unlikely to miss small details that could end up being crucial to ensure an accurate evaluation. Customers will appreciate that insurers are doing everything possible to make sure that they get all the money they are entitled to as quickly as possible — and will reward their insurers with continued loyalty.

The technology to implement these systems is available right now, and as the technology proliferates, the price of systems continues to fall. That insurance companies have not yet widely adopted these systems yet is understandable  insurance is a very conservative business, and companies need to ensure that stockholders, stakeholders, and regulators are on board with major changes to the claims process. But implementing computer vision systems for damage assessment is worth the effort; companies will avoid wasting time and money, and ensure that they use their resources as efficiently as possible — while customers will get their money faster, increasing their satisfaction with their insurers and ensuring that they remain customers for many years to come.

Cyberattacks and breaches are happening more frequently and carry a hefty price tag, yet most organizations are still unprepared to deal. According to the IBM 2022 Cost of Data Breach report, the share of breaches caused by ransomware grew 41% in the last year and took 49 days longer than average to identify and contain. The report says a data breach in the U.S. costs over twice the global average, coming in at $9.4 million. Organizations recognize that risk continues to grow more dynamic and enduring.

2023 poses an opportunity for organizations to invest in cybersecurity; how they choose to invest will determine the strength of their cybersecurity posture. Incident response solutions drive resilience by improving action and analysis of threats, enabling security teams to increase efficiency and success rates.

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

Investments in cybersecurity are core to investments in the entire business. 

Organizations tend to limit themselves by focusing on just cyber trends, rather than cybersecurity as a whole. Yes, businesses should invest in strong security protection for computer systems and networks to help eliminate the chances of a cyberattack or breach. However, incident response is also an integral component of improving an organization’s cybersecurity posture, providing organizations with the foundation to leverage cyber data and apply it to their responses. Businesses should think about putting an extra emphasis on building and reinforcing their incident management response going into the new year.  

See also: Cyber Risk and Insurance in 2022

Preventative controls need to be balanced with resilience.

The threat landscape evolves faster than most organizations can anticipate, and most of the time there isn’t just one “cookie cutter” incident response that can cover every cyber incident. Having a solution in place that allows organizations to target their response to a specific incident improves their agility and reduces remediation time. 

Organizations need to defend against multiple attack vectors and address the complexity. 

Changes brought by digital transformation and remote work are increasing ecosystem complexity. As organizations invest in tools that monitor, detect and provide information on their IT environment, they should invest in the processes that leverage this information. Incident response solutions orchestrate and automate responses for all threat-types. Organizations accelerate processes, streamline collaboration and use system data and documents by responding through a "single pane of glass." 

Organizations will be evaluated against performance requirements related to risk. 

Cybersecurity is being recognized as more than an IT issue, as CEOs tie risk management to business value. Incident response tools serve this aim by aligning the activity, information and people involved in each leg of the response. With the entire response memorialized in one place, management conducts reporting and process improvement with greater insight. 

Cybersecurity is becoming the determinant factor in third-party transactions and engagements. 

Existing collaboration tools are not fit for secure collaboration between internal and external stakeholders. However, there are a few incident response solutions that can provide secure access to system data and documents, enabling organizations to pursue transactions and engagements with third parties. Challo by CafeX is one of these platforms. The main benefit of using a third-party-friendly solution is the speed in which you are able to share information and address the cyber incident instead of having barriers block communication or access to documents. 

Automation is the future of cybersecurity and incident response management. 

In any threat situation, organizations face common challenges, including locating incident response plans, communicating roles and tasks to response teams and monitoring actions during and after the threat. Often, information and actions are siloed, which can slow response times and hamper recovery. And in the case of ransomware, plans may be inaccessible and communication systems knocked offline, prohibiting an effective response. Organizations can rely on solutions that can automate an incident response protocol to help eliminate barriers.