While progress may seem to have stalled for driverless cars, don't be fooled. U.S. regulators essentially took the training wheels off autonomous vehicles last week, clearing the way for AVs to take a major step forward. 

The U.S. National Highway Transportation Safety Administration ruled that manufacturers can produce cars without controls designed for human drivers. No more need for a steering wheel, a brake pedal, a dashboard or anything else that we traditionally think of as part of the interior of a car. AVs can be optimized for carrying people, for making deliveries or for anything else.

The NHTSA said AVs still have to meet all the safety standards required for cars with human drivers but will no longer specify the sorts of equipment that must be in a vehicle to meet those standards. 

The change will allow for the sort of creative use of space that General Motors' Cruise subsidiary has demonstrated for its driverless vehicles, based on the idea that they will be used to ferry people to work and school in the mornings and take them home in the afternoon or evenings but will be available for grocery deliveries mid-day. Cruise has shown a cargo module with refrigerated lockers that can be put into a vehicle to quickly fit it for deliveries. (Cruise surely hopes that its integration with GM's manufacturing expertise will give it an edge over Waymo, which has led on AV technology but which, as a subsidiary of Google, doesn't have as tight a coupling with an OEM.)

Now, the NHTSA ruling won't change things overnight. AVs will have to continue to improve, especially in city environments, where pedestrians and cars can act unpredictably, and must demonstrate their safety following at least half a dozen fatalities over the past few years. At the moment, despite all the expectations for AVs, Waymo has been operating only a limited number of fully autonomous vehicles (in other words, with no safety driver behind the wheel) in the relatively simple environment of suburban Phoenix, and Cruise has just begun operating a few fully autonomous robo-taxis in San Francisco. 

So, auto insurers won't see their sales to individual drivers dry up any time soon. But no one should think that progress has stalled.

In fact, the move toward electric vehicles (EVs) in recent years -- which will accelerate if gas prices stay so high for an extended stretch because of geopolitical tensions, supply chain disruptions and other factors -- bolsters the move toward AVs. Driverless cars require so much electricity for sensors and computation that all are expected to be EVs. The switch from internal combustion engines to EVs requires a transformation of the entire automotive ecosystem, from suppliers of raw materials and parts up to the OEMs and then out to those who sell, finance, service and insure the vehicles, and the momentum for EVs will prepare the way for the transition to AVs. 

When that transition happens, just don't expect the vehicles to look much of anything like they do today. Cars were initially defined by what they lacked -- they were called horseless carriages. But cars came into their own soon enough in ways that bear little resemblances to the carriages of the late 1800s. AVs are now defined by what they lack -- they are driverless cars. But, following the NHTSA ruling, they can go pretty much anywhere from here.

Cheers,

Paul

 

Last year, insurtechs received $10 billion in investments worldwide. And, as direct-to-consumer (D2C) distribution becomes more and more popular, some analysts have even questioned whether insurtechs will replace the insurance agent altogether. 

But agents deliver value that tech can’t quite replicate. Independent agents, in particular, have the combination of human touch, industry knowledge and carrier access needed to build and retain customer relationships. Instead of sidelining them, D2C insurtechs should partner with agents to increase revenue and maximize customer satisfaction.

Here, we’ll take a deeper dive into three ways that insurtechs and independent agents can benefit from joining forces. 

#1: Independent Agents Build Customer Trust and Loyalty

In the insurance industry, consumer trust and loyalty aren’t just important – they’re essential. 

Customers insure property that’s valuable to them, and they rely on the insurance provider they’re working with to find the best coverage. As part of the process, customers have to disclose personal information. They’re trusting their insurance provider to handle it with care. Trust and loyalty go hand in hand – a breakdown in trust will push customers away. 

Here’s the problem: Consumers don’t exactly trust digital insurance services. When it comes to claims, for instance, Accenture research shows that…

• 49% highly trust human professionals.
• 12% find automated services to be similarly trustworthy.
• 7% trust chatbots at a similar level. 

For digital-first D2C insurtechs, these numbers should be alarming. Even with insurtechs’ explosive growth, low consumer trust spells a future of high customer turnover. 

To avoid this outcome, D2C insurtechs need a way to build personal connections that generate trust. The simplest route? Partnering with independent agents.

From the first consultation, agents and customers establish a rapport that strengthens over time. 

With each personal connection they make, agents also help D2C insurtechs build a more loyal customer base. 

As it stands, all-digital insurtechs give customers little reason to stick around. If pricing or product offerings change, customers won’t hesitate to switch providers. Agents, however, can create that crucial link between customers and insurtechs. When customers feel a connection, they’re more likely to stay loyal to the agent – and the company – they’re working with. 

#2: Independent Agents Deliver Custom Professional Guidance

Insurtechs excel at digital innovation, and the right tech can make for a smooth and convenient user experience. But when customers have questions about their coverage, digital tools can’t offer much beyond general guidance.

For example, think about an insurtech that relies on AI chatbots to answer customer questions. If a homeowner asks, “Do I need flood insurance?”, the chatbot’s ability to respond is limited. In this case, it might be able to provide a general answer. But what happens when the customer doesn’t know enough to ask a question in the first place? Here, the chatbot can’t address the customer’s needs. 

Agents can help D2C insurtechs overcome these shortcomings. 

For example, with flood insurance, the agent might look up whether the customer's home is in a floodplain – and when the floodplain map was last updated.

The best part about this interaction: It points the customer toward information they didn’t know they needed. This both makes for a better-informed customer and builds trust in the agent’s expertise. 

In this model, when pricing or product offerings change, the agent can educate the customer about their options – and the customer trusts the agent to guide them toward the one that makes sense.

See also: Agents Must Become ‘Discussion Partners’

#3: Agents Need the Digital Tools That Insurtechs Can Offer

As insurtechs have matured, the reigning industry narrative has been framed in terms of opposition – a battle between D2C insurtechs and independent agents.

The reality, though, is that these two parties don’t have to compete. Agents can help insurtechs build trust, and insurtechs can help agents streamline and digitize their operations.

Insurtechs can leverage their tech capabilities to address critical agent pain points. The right tech (including the following) can empower agents to deliver a seamless user experience that’s on par with what insurtechs themselves provide:

• Policy/carrier rating software. 
• A policy management system.
• Robust IT infrastructure.
• Omnichannel distribution tools.
• Data-driven digital marketing support.

Tech-enabled agents can help more customers find the best available policies. With each customer they serve, agents will build and deepen relationships that make everyone happy – agents, insurtechs and customers. 

High-Powered Partnerships Are the Future of Insurance 

In a rapidly changing industry, neither insurtechs nor independent agents can afford to operate in a silo. Without a more human touch, insurtechs will struggle to build the connections that create lifelong customers. Meanwhile, agents need digital tools to overcome their inefficiencies. 

For both parties, a future of growth will require tech-powered partnerships. Working together can create more efficient paths to stronger customer relationships that keep customers coming back.

The information contained in this page is provided for general informational purposes only and may not be applicable to all situations. PEAK6 makes no guarantees of results from the use of this information.

1. Leaders Take a Stand — “Not Another Life to Lose”

Leaders can take bold and visible positions declaring suicide prevention and mental health promotion critical community concerns. This statement can be written or oral and might include some of these talking points:

• Thank you/We are all in this together:
  • Authentically express gratitude for the community’s service and dedication during stressful times and how their efforts are contributing to the overarching important mission and vision of the community.
  • Offer specific examples of key people or groups demonstrating resilience, caring for one another or serving well to promote well-being.
• We see you, and we want to hear from you: 
  • Acknowledge that people are facing challenges right now (list examples specific to your community) and that many may be experiencing high levels of stress. 
  • Then say, "I get it. Me, too." 
  • Give a specific example of a challenge you faced – you can describe any specific hardship that you feel comfortable with, and you can go into as much detail as you are willing to share. The point is that you are human. too. If you have received support from others, describe how it was helpful.
  • Offer an open forum where community members can connect, check in and support one another.
• We care about you: 
  • Say. "While we had no choice but to rise to face the stressors we’ve been challenged with, we have choices about how we take care of each other. Your contribution to this community matters because you matter to us. Your families matter to us. We don’t want you to just survive the coming weeks and months, we want you to thrive because we need you. You are part of our community and part of our family. Today, I want to talk about how we are going to take care of you and each other.”
  • Offer a short list of resources and steps you are taking to help them cope (e.g., community resources, crisis resources, and the resource page you are developing on your website).
  • We have a plan – here is what to expect on how the community will work to prevent suicide and promote and mental health.
  • Offer reassurance: “If you get stuck, I want you to come to me. I’ve got your back. Together, we will find a way through.”

2. Bring Mental Health and Suicide Prevention Resources to Life

In addition to posting social media graphics and posters with the crisis resources numbers and lists of website links, take time to bring these resources to life for people. Effective mental health advocates do their homework. If you want to be a trusted referral source, you need to walk your talk. Get to know your local mental health providers. Visit your local psychiatric hospital or addiction recovery center. Attend a 12-step meeting. Invite local counselors to a “meet and greet” event. Call your local crisis line to get a better sense of how it works. Ask the questions you need to have answered so you can confidentially refer. Your referral will be so much stronger if you can say, “Oh, I know Dr. So-and-so, she’s really approachable and competent. I’ll take you there to meet her, if you’d like.”

• Conduct a mental health resource audit:
  • Kick the tires of your available resources -- ask them questions about how they work, what to expect, and what their credentials are.
  • Go further -- use the services to see how they work from your personal experience.
  • Create a “what to expect” document of the best resources for your community.
  • Develop a resource promotion plan.
• Share stories of how resources were helpful:
  • Build credibility by talking about what you and others have learned from your firsthand experiences.
  • Troubleshoot on ways to work through barriers to help.
• Meet and greet your resource representatives:
  • Bring a representative from a mental health or crisis service to your community to describe the resource and answer questions. Put a face and a name to the contact to help facilitate the future warm hand-offs.

See also: Why Invest in Suicide Prevention?

3. Launch a Well-Being Advisory Council

A true comprehensive and sustained public health approach to prevention will take more than an awareness week or one-time training. To create significant change, a more strategic approach is needed. Start by pulling together a small group of stakeholders – people whose roles in the community reflect some level of relevance to this issue and others who are passionate about suicide prevention because it has touched their lives personally. Their task? To identify culturally relevant areas of strength and vulnerability for suicide within the community and to develop a strategic approach to change. 

4. Implement an Engaging Communication Strategy

Look beyond the awareness week to figure out a broader and deeper, multi-pronged approach.

• Review best practices in building a suicide prevention messaging strategy:
  • https://suicidepreventionmessaging.org/ 
• Build an annual content calendar:
  • https://sacwellness.com/mental-health-awareness-calendar/ 
• Learn the preferred practices of public messaging about suicide:
  • https://reportingonsuicide.org/recommendations/#dodonts 
  • https://www.insurancethoughtleadership.com/language-and-mental-health-part-2/ 
  • https://www.sallyspencerthomas.com/dr-sally-speaks-blog/suicideintensity 
• Share images and examples that inspire action:
  • Customize these sample posts with your community’s actions and outcomes.
  • [Name of community ] makes #suicideprevention a health and safety priority by creating hope in action. #WSPD
  • [Name of community] We are doing our part to #preventsuicide during #NSPW. Everyone can play a role!
• Validate suffering without creating a self-fulfilling prophecy:

People who are experiencing suicidal intensity often feel great comfort in knowing they are not alone in their pain. By realizing that trauma, grief and injustice often lead to suicidal thinking, people living through this despair can start to shift their thinking. The trap that some advocates fall into is overemphasizing the prevalence of extreme behaviors as an “epidemic.” This type of messaging can make people feel hopeless about change. Worse, when it comes to suicide, this type of exaggeration might even create a cultural script that inadvertently influences people to engage in suicidal behavior, because it is the "norm" of what people do to cope with pain. Use suicide death data and suicide loss stories judiciously and make sure they are balanced with other data that represents healing and help-giving.

Tell people what you want them to remember:

Sometimes, in our attempt to get attention to our cause, we play up tragic outcomes and overlook important calls to action and messages of hope. We need to tell people what we want them to remember: Treatment works, prevention is possible, and people recover. Let people know what to do if they are struggling or if they are worried about a friend or loved one. Tell people exactly how to get involved in suicide prevention in their communities.

5. Cultivate Powerful Storytellers and Reduce Bias

A main goal of many mental health advocates is to “reduce the stigma of mental illness”; however, the more we talk about stigma, the more we actually reinforce it. Instead, we can fight bias and prejudice about people who live with mental health conditions or suicidal thoughts by sharing stories of hope and recovery. When we can demonstrate how others transform their wounds into sources of power, we create hope. When respected people come forward and say, “I fought through my suffering, I got support, and I got better,” others feel they can get better, too, and the issues become less marginalized. When you do programs that highlight how people have lived through their pain, be sure that they don’t end with despair; share the healing practices and positive outcomes, as well.

• Suicide Survivor Storytelling courses: https://unitesurvivors.org/online-education/ 

6. Honor the Life Lived of Those Who Died By Suicide and Celebrate the Lives of Those Who Have Survived.

Just like we do for people who fight cancer, we can honor the life that was lived with dignity and celebrate the resilience of people who fought to stay. 

7. Offer Screening Tools that Lead to Self-Empowerment

Screening is a great example of a low-cost, high-impact tool for mental health and suicide prevention advocates. Like with other health issues, screening for mental health conditions increases the likelihood that we can identify emerging symptoms and alter their course with early intervention. Screening offers people a way to anonymously self-assess, which is often an attractive first step for those who are ambivalent about seeking help. A screening that just gives participants a label, however, will fall short. Effective screening tools give participants a call to action and link them to additional local and on-line resources. Here are some examples:

• Help Yourself, Help Others: https://www.helpyourselfhelpothers.org/ 
• Mental Health America: https://screening.mhanational.org/screening-tools/ 
• Man Therapy: https://mantherapy.org/ 

8. Make Mental Health Promotion and Suicide Prevention Programs and Trainings Engaging

It’s human nature to turn away from things that are scary, confusing and depressing. The challenge for mental health/suicide prevention advocates is to make programs uplifting, engaging and cool without becoming so superficial they miss the point. 

• Develop a contest to encourage participation:
• Provide opportunities for deep learning.

Many mental health promotion efforts seek to promote awareness, but education alone will not move the needle. We call it the “State Trooper Effect.” We pay attention to educational or awareness-raising efforts when they are done well and right in front of us, but, once they are in our rear view mirror, we tend to go back to what we were doing before. Deep learning goes beyond passive input of knowledge. Deep learning engages people in a knowing-being-doing process. Yes, education is part of that equation – a necessary but not sufficient piece. We also need to get people “doing” – physically, emotionally and even spiritually involved in the work, and, to really make it stick, personal reflection on the experience is key.

• Offer a training to your community.

Consider offering a brief suicide prevention gatekeeper training

• Construction Working Minds/Working Minds (suicide prevention for the workplace): https://www.coloradodepressioncenter.org/workingminds/ 
• Question, Persuade, Refer (QPR) https://qprinstitute.com/ 
• safeTALK https://www.livingworks.net/safetalk 
• Talk Saves Lives https://afsp.org/talk-saves-lives 

See also: Blueprint for Suicide Prevention

9. Create a Symbol of Solidarity

We’ve seen the pink ribbons, the rainbow flags and the Black Lives Matter fists. Symbols of solidarity work, but they need to be unique. When these symbols work well, people can see at a glance the community that is being built. Symbols used to promote suicide prevention can let people find others who have lived through suicidal intensity or find people who might be safe to approach with questions. When the symbol of solidarity starts to spread to large groups of people, it is a powerful testament to a person secretly in despair. Some examples of symbols of solidarity in suicide prevention include:

• Project Semicolon: https://projectsemicolon.com/ 
• Honor beads often worn at the American Foundation for Suicide Prevention’s Out of Darkness Walk. Participants choose to wear different colors to symbolize their experience – one color represents “I have lost a loved one to suicide,” another color might mean “I have struggled myself,” while another might mean “I support the cause of suicide prevention.”
• Stickers worn on construction hard hats showing which workers had received suicide prevention training.

10. Donate to or Volunteer for Local or National Suicide Prevention Organizations

Engaging in community prevention efforts is a great way for people to give back and to get to know the local resources available. Investments in prevention programs and research will help us get ahead of the problem. Get involved!

• Walk for suicide prevention (community walks offered by the American Foundation for Suicide Prevention)
• Article: “Why Invest in Suicide Prevention?” from Insurance Thought Leadership contributor Sue Murray

Personal lines insurers are no stranger to widespread digital transformation and innovation, having been at the forefront of these changes for the past decade. When the pandemic hit in 2020, personal lines insurers responded in different ways. Some stayed the course with their existing digital strategies, whereas others began reshaping and even accelerating their plans to meet the shifting needs and expectations of policyholders, agents and employees. As the pandemic wore on into 2021, insurers split increasingly between maintaining or reshaping their current initiatives. Now, according to a new study from SMA, personal lines insurers will continue to advance their digital transformation strategies in 2022, albeit with a new lens and several shifts in priorities.

SMA's recent research report, "2022 Strategic Initiatives: P&C Personal Lines," features market insights from an annual survey of insurance executives about the state of their strategic plans. Despite the numerous and rapid changes resulting from the past two years, the personal lines segment remains committed to digital transformation. One hundred percent of surveyed executives report that digital transformation is a key strategic initiative in 2022. However, compared with 2021, there has been a two-fold increase in those developing strategies over implementing or broadly deploying new initiatives. This reflects a broader industry trend SMA is seeing of insurers opting to reexamine their go-forward strategies in light of lessons learned during the pandemic and to align their transformational and business priorities. What is now clear is that the next wave of transformation is on the horizon.  

Just as digital strategies are shifting, so are the key business drivers of personal lines insurers’ investments. While cost containment was a key driver in 2021, executives did not identify it as a top priority for 2022. Additionally, innovation, which has historically been a critical investment driver, returned to the top-five list in 2022 after declining in importance in 2021. As personal lines insurers become increasingly more confident about the state of the industry and workforce post-pandemic, SMA is seeing a corresponding shift in their business priorities.

See also: Insurtech: A Decade Gone, a Decade Ahead

Insurers entered 2022 with a new perspective and are taking the time to adapt their business roadmaps accordingly – both in terms of digital transformation and workforce strategies. Personal lines insurers have built a strong platform for innovation and digital advancement, having been a leader in these areas for years. By continuing to focus on their key business drivers and adapting to the changing needs and expectations of their key stakeholders, personal lines insurers are well-positioned for success in 2022 and beyond.

For more information on specific strategic initiatives of personal lines insurers, including both traditional and transformational initiatives, read SMA's recently published research report, "2022 Strategic Initiatives: P&C Personal Lines."

While technology-enabled disruption of the automotive ecosystem was already well underway prior to 2020, the global pandemic caused even greater disruption, and many of the changes will continue to affect every corner of society and industry well into the future. We have identified deceleration in some areas but acceleration in others. Our intent here is to put as much of this into context as is possible and to offer a view of the “new” future as we see it, following what we are calling “The Great Reset”     

Auto Safety

Early Traffic and Driver Safety

Traffic safety has been a concern since the first U.S. gasoline-powered car was introduced in 1896. In fact, the first seat belt patent was granted in 1858. Massachusetts introduced the nation’s first statewide traffic laws in 1901, limiting speeds to 12 mph in cities and 15 mph on country roads. New York introduced a drunk driving law in 1910. And in 1930 the nation’s first three-way traffic light was introduced.

Before there were lane departure warning systems, blind spot monitoring and rearview cameras, the automotive world saw one of the most important safety technologies to ever be invented—brake lights. The first brake lamps appeared as early as 1905, though the requirements for brake lamps took a bit longer to catch on. For many drivers, hand signals were enough of a warning to other drivers of their intent to stop or turn. This reliance on hand signals made it difficult for many drivers to enjoy their automobiles at night, though, making the brake light a necessity.

By 1928, 11 states in the U.S. had made brake lights a requirement on cars. But the most important brake light of all is the third brake light, introduced in 1974. The third brake light reduced rear-end collisions more than 60%. It quickly became a requirement on all automobiles.

Later in this article, we describe more recent driver safety technologies, introduced in 1950, and collectively referred to today as ADAS (Advanced Driving Assistance Systems).   

Rising Traffic Deaths

In spite of all of the many driver safety technologies and the many impaired and distracted driver laws, U.S. traffic deaths have continued to rise. One of the many unexpected consequences of COVID was the increase in driving speed on much-less-congested roadways, which resulted in higher accident severity, including more fatal crashes. The number of U.S. traffic deaths surged in the first nine months of 2021 to 31,720. The estimated number of people dying in motor vehicle crashes from January to September 2021 was 12% higher than in the same period in 2020. That represents the highest percentage increase over a nine-month period since the U.S. Department of Transportation (DOT) began recording fatal crash data in 1975.

This February, DOT announced an ambitious safety plan with the goal of zero roadway deaths. Calling the status quo “unacceptable,” Secretary of Transportation Pete Buttigieg unveiled a plan that will be implemented over the next three years. He noted that nearly 95% of U.S. transportation deaths occur on streets, roads and highways. Buttigieg cited National Highway Traffic Safety Administration (NHTSA) data that found an estimated 38,680 people died in motor vehicle crashes in 2020 and 20,160 died in the first half of 2021. That’s an 18% increase compared with the first six months of 2020 and is the largest number for January through June since 2006.

Collision Repair Industry Consolidation

For the last 15 years, we have seen the influence of financial institutions, investment banking and private equity targeting industry consolidation through multi-shop pperators (MSOs). Today, small to medium-size MSOs are now partnering with private equity companies to help accelerate their growth. These aggressive consolidators, known as multi-location operators (MLOs), such as Crash Champions, Classic and CollisionRight, are building regional and super-regional platforms to compete with the larger legacy consolidator MSOs like Caliber and Boyd/Gerber.

The collision repair space has long-term, proven economics and insurance-industry-driven demand dynamics that create relatively strong cash flow stability. A very high percentage of the repairable vehicles come from direct repair program (DRP) relationships with top 10 insurance carrier partners with ever-increasing market share. Repairers that provide consistent, high-quality repairs and service can depend on receiving a steady stream of vehicles. The quid pro quo revolves around managed performance metrics and agreed revenue/expense models between the repairer and insurer. The better the performance metrics, the more reliable volume the carrier will continue to influence to the MSO; carriers will rescind flow if performance and customer satisfaction deviates much from agreements.  

Insurers rely on the MSO repair organization to expand to new locations in insurer-targeted markets while the repairer looks to benefit from incremental cash flow through the working relationship and referrals from the insurance partner. This relationship allows the repair organization to leverage its insurer referrals without investing heavily in consumer direct marketing.

There is no evidence of a slowdown, especially for private equity investors, as they continue to see opportunity in consolidating the collision repair industry, even during a worldwide black swan event like the COVID-19 pandemic. Currently, there are 12 MSOs in the U. S. that have a total of 15 private equity or strategic investors or are publicly held.  

See also: Reflections on Insurtech, Pandemic

Caliber and Boyd/Gerber, by far the two largest consolidators, have continued to be consistent, prolific buyers of MLOs throughout the last two years. Service King continues its acquisition hiatus, which now spans almost four years. Two of the largest acquisitions in 2020 were of the U.S. Fix Auto network by Driven Brands and of Pacific Elite by Crash Champions. 

Because of these and many other transactions and despite COVID’s impact, 2020 and 2021 ranked as very active years for MLO transactions, with 676 MLO locations acquired, representing revenue of $1.8 billion. Since 2012, when we initiated coverage of MLO transactions, 2,271 MLO locations have been acquired, reflecting over $6.5 billion of revenue transfer while averaging $2.9 million per location.

The Advent and Future Impact of ADAS

Adoption and Impact on Collision Repairs

ADAS were being used as early as the 1950s with the adoption of the anti-lock braking system (ABS). Early ADAS include electronic stability control (ESC), anti-lock brakes, blind spot information systems, lane departure warning, adaptive cruise control and traction control.

The adoption of ADAS features on newer vehicles is having a growing impact on all aspects of collision repair and paint consumption, along with material changes and consequences within the auto physical damage landscape. Below, we have quantified through the current decade those changes most important to the number of collision repairable vehicles, PBE and paint company refinish revenue and expected changes across related distribution channels.

A new American Automobile Association study on the effectiveness of driver monitoring systems in vehicles equipped with ADAS found that direct systems with driver-facing cameras to detect driver distraction or disengagement are more effective than those that only monitor steering wheel use. On average, the percent of time drivers were engaged was approximately five times greater for direct systems compared with indirect systems.

The U.S. government’s annual safety ratings of cars may soon give them credit for having driver-assistance systems, the latest indication that the once-futuristic technology is becoming mainstream. DOT proposed on Thursday that lane-keeping support, automatic emergency braking, blind spot detection and blind spot intervention be incorporated into its Five-Star Safety Ratings program for new cars.

ADAS Features

While there is not industrywide agreement on the nomenclature and features composing ADAS, there is general agreement that ADAS today may include any or all of the following 16 safety features:

●   Reverse Camera

●   Rear Collision Warning

●   Rear Collision Mitigation

●   Adaptive Cruise Control

●   Automatic Emergency Braking (AEB) or Collision Avoidance

●   Brake Assistance (sensors determine when driver is making emergency stop and applies full    

braking force)

●   Blind Spot Warning

●   Blind Spot Mitigation

●   Lane Departure Warning/Lane Keeping Assistant (LKA)

●   Lane Departure Mitigation

●   Cross Traffic Warning (blind spot alert using long range radar)

●   Forward Collision Warning

●   Forward Collision Mitigation

●   Pedestrian Detection 

●   Adaptive Headlights

●   Driver Monitoring

ADAS Impact on Claims Frequency and Severity

While there is not yet enough data to forecast the long-term impact of ADAS on accident frequency, existing data and opinion indicate that overall accident frequency is likely to decrease as ADAS features proliferate, but the nature of accidents will shift until all vehicles are similarly equipped. (Currently, for instance, there is an increase in the percentage of front-rear collisions as Automatic Emergency Braking and Collision Avoidance technology reacts more quickly than do the drivers of unequipped vehicles). Offsetting this decrease in accident frequency is the sharply increasing severity of accidents due to the higher costs of ADAS technology replacement and the necessary associated repair procedures required.        

By 2030, 75%, or 211 million vehicles, of the 281 million cars registered in the U.S. are anticipated to have some number of ADAS features.

Compared with similar vehicles without any core ADAS features, vehicles with at least one core ADAS feature resulted in:

• 1% lower Bodily Injury claim severity
• 1% lower Property Damage claims severity
• 4% lower Property Damage claim severity

(Source: LexisNexis Risk Solutions, November 2021)

COVID and the Great Reset

COVID Cuts Into Collision Repair Production 

The lack of production based on technician shortage has been real since the beginning of COVID. This is due to not only COVID but is also based on changing cultural work norms and mores reflecting less interest in being a repair technician. Fewer available techs = less production = more time to repair = fewer cars being repaired = less collision repair revenue produced = lower paint sales for suppliers and distributors. 

A half-dozen collision repair companies in different regions of the country that were contacted last week all reported having staff out during the first half of January with COVID-19. A seven-location MSO in the Northeast reported having as many as 15 people home sick at the same time. A shop in the Midwest had 10 of its 16 employees on sick leave.

“This is the worst we’ve seen it since the pandemic began,” a West Coast shop owner said. “Customers and even most insurers have been pretty understanding about the delays, but customers are back to asking a lot more about how we’re cleaning their vehicle before they pick it up – more like they were doing the first few months of the pandemic. One lady paid us to deliver her car and park it in her garage with all the windows open, saying she’d look it over the next day.”

Post-Pandemic: What Stays, What Reverts?

The global pandemic had a broad range of impacts, many of which were expected, a few of which were totally unexpected and some of which continue and are likely to leave the world permanently changed.

Driving Behavior and Deaths 

Initially, pandemic lockdowns and work-from-home (WFH) models took the majority of private passenger vehicles off the roads, almost instantly cutting car accidents and repair volumes, and caused most auto insurers to reduce/refund auto premiums in one way or another. A noticeable uptick in usage-based insurance program adoption quickly followed, reflecting consumers’ interest in more closely matching auto premiums to the new realities of risk. It remains to be seen whether this adoption will continue once the pandemic recedes. 

Touchless Everything

Out of consumer concerns about infection, touchless everything became pervasive, and digital claims solutions, including auto photo accident claim self-service, absolutely spiked. As COVID fears began to recede in late 2021 and into 2022, miles driven returned to almost pre-pandemic levels, as did accident frequency, but the average severity of each accident and repair has increased due to higher speeds on more open roads, which drivers became used to, and the higher cost of onboard technologies. 

Crashes — and deaths — began surging in the summer of 2020, surprising traffic experts, who had hoped that relatively empty roads would cause accidents to decline. Instead, an increase in aggressive driving more than made up for the decline in driving. And crashes continued to increase when people returned to the roads.

Now, the U.S. is enduring its most severe increase in traffic deaths since the 1940s. Deaths from vehicle crashes have generally been falling since the late 1960s, thanks to vehicle improvements, lower speed limits and declines in drunken driving, among other factors. By 2019, the annual death rate from crashes was near its lowest level since cars became a mass item in the 1920s. But then came the COVID-19 pandemic.

And virtual claims inspection continues to gain traction as the preferred method of inspection (MOI) for insurance claims of many kinds, led by personal lines auto, with personal property close behind. There appears to be no going back to historical levels of staff or independent appraisal methods. 

Work From Home and the Great Resignation

Many of us initially assumed that working from home would be temporary and that a return to pre-pandemic working models was only a matter of time. We now know that to be wrong. A majority of the workforce, if given the choice, would now prefer some form of WFH, either hybrid or complete, to a full-time return to the workplace.

A lack of work-life balance and declining job satisfaction are among the greatest factors contributing to mass employee departures, referred to as the Great Resignation. Owing to the trend of working from home, the lines between work and leisure often get blurred, making professionals work beyond their dedicated hours. Working remotely for almost two years has gotten many employees used to the new trend. Some employees will inevitably quit their existing jobs and search for new opportunities if their employers leave them with no option but to work on-premise.

Recent research reveals that: 

• The recent rise of COVID-19 cases resulted in 71% of respondents’ companies delaying plans to return to the workplace or reverting to remote/hybrid work.
• 30% were back in the workplace and reverted to remote/hybrid work.
• 41% rescheduled or canceled plans to return.
• Nearly half (48%) have not determined a date to return to the physical workplace.

Auto Claims, Current State of Collision Repair and Projections Through 2030

Within the collision repair industry, 2019 was the pinnacle for opportunity and success. Repair facilities were flush with repairable vehicles, and the relevant total addressable market (TAM) reached its historical high of $38.3 billion.  

Then with very little warning, in March 2020, the scourge of the COVID-19 pandemic emerged and persisted through 2020, 2021 and, while the spread of the omicron variant seems to be slowing, through the beginning of 2022. 2020 will forever be seen as a year of significant disruption and structural change with far-reaching economic, social and political implications.

It clearly has not been a short-term experience. Following are some of the 2020-2021 collision repair industry’s confluences of trends and constructs affecting the entire auto physical damage ecosystem. 

• Consolidation remained well underway and was intensified by the numerous private equity investors and their MSO buyers. M&A activity remained extremely active in 2020 and throughout 2021, continuing within the collision repair segment and throughout the broader auto physical damage landscape, including the many segments within its orbit:  insurance, parts, technology, dealers, glass and paint, body and equipment, etc.
• We estimate that 2020 repairable claims were down around 22% nationally when compared with 2019. We have seen some recovery in 2021 and estimate the year to end up 10% to 13%, with repairable claims reaching 2019 levels by late 2022 to early 2023, barring some external events like COVID continuation.
• Technician labor and skill shortages continue to hurt revenue and production opportunities while increasing costs.
• Increasing parts costs, coupled with sourcing and delivery delays, are adding to the increase in total repair cycle time.  
• Digital transformation of the repair process, well underway in 2019, was aggressively stepped up in 2020 by the insurance industry and supported by technology and information services companies. The virtual repair process model was becoming ubiquitous through the use of self-service photo estimating, artificial intelligence, AI and human intervention as a way to co-manage estimating vehicle damage. This model morphed into an auto-generated image capture of vehicle damage supported by adjuster exception-based estimating. Video estimating supported by AI, machine learning and computer vision, is inevitable and has already surfaced within many areas of claims processing. 
• A gap continues to exist between insurers and OEMs regarding the OEM vehicle repair standard and its growing adoption and implementation and how to balance and resolve keeping the repairer out of the middle regarding repair procedures completed and payment for same. Despite the insurer/OEM repair standard gap, forward-thinking repairers took the opportunity to diversify their businesses by leaning into their relationships with OEMs through participating in OEM certification programs.
• As of November 2021, year-over-year inflation was at 6.1% and growing. Inflation jumped to 7.5% in January 2022. 
• According to Enterprise Holdings, the average length of rental is now just over 17 days, an increase of 3.9 days from the fourth quarter one year earlier. 
• Despite improvement in front-end claims repair process reduction, primarily due to a decrease in cycle time at first notice of loss (FNOL) assisted by telematics and AI, the middle to back-end of the repair process has been increasing due to many of the constructs mentioned above.
• We expect vehicle repair costs to rise moderately, but steadily, in the future due to several factors:
  • A shortage of qualified and dedicated technicians, which is fueling the need for increasingly competitive employee acquisition and retention compensation programs.
  • Increased vehicle repair complexity and embedded ADAS technology.
  • Expense of participating in OEM certification programs, including training, equipment and tools.  
  • Increased use of OEM parts and additional line-item repairs due to OEM certification program participation requirements and growing acceptance of OEM repair standards.
  • Growing long-term risk of existing and proposed country-of-origin tariffs raising the cost of automobiles manufactured outside the U.S.
  • Short to medium-term Inflation. 

Most repairers remained open during the pandemic. With business down 50% to 60% in the early days, repairers cut costs, accepted PPP money from the government and furloughed personnel. In some cases, repairers shuttered their businesses for a time, ultimately reopening with limited work. Many of these locations are single, mom-and-pop-style shops that will struggle to make the types of investments needed as cars become more sophisticated. This scenario means that more and more work will continue to shift to larger, more sophisticated operations with brand-specific training and certifications. 

The disruption caused by the pandemic will accelerate change in ways that make it difficult to find clarity around both near- and long-term effects. The expected and unintended consequences of the pandemic will accelerate what we have profiled previously as the dynamic and interactive confluence of prevailing trends and conditions throughout the broader auto physical damage ecosystem.

We expect to emerge from 2021 with stronger nascent and legacy businesses that were well-capitalized pre-COVID-19 and with emerging disrupters that happen to be at the right place and time with new solutions within the broader aftermarket.

The pandemic caused a dramatic decrease in vehicle repairs and total losses from the 2019 total of 15.7 million to 12.4 million in 2020. 2021 saw a partial return to pre-pandemic levels, with 13.9 million vehicles repaired. However, our projections (see figure below) indicate that the industry is unlikely to ever return to 2019 levels as ADAS features continue to penetrate the population of registered vehicles and significantly reduce collisions. There may be some short-term anomalies in repair volume in early 2022 as the industry works to clear its record backlog as labor and parts shortages ease.  

The average repair severity stood at $3,527 at June 30, 2021, up 6% compared with $3,327 for the prior 12-month period . 

As shown in the chart below, the number of insurance and consumer paid repairable and total loss vehicles dropped precipitously in 2020, partially recovered over 2021 and 2022, but are unlikely to ever return to 2019 levels. The forecasted decrease between the 15.7 million repairs in 2019 and the 14 million repairs in 2030 is 12%.  

Source: Romans Group and Insurance Solutions Group extensive market research informed by our understanding of the facts and trends related to ADAS adoption and its impact on repairable vehicles

See also: Insurance 2030: Implications for Today

Future View

There is no doubt that EVs (electric vehicles) and AVs (autonomous vehicles) will displace gas-powered cars – that transition has already begun. General Motors and Ford have vowed to phase out internal combustion engine (ICE) vehicles – GM by 2035 and Ford by 2030 — and some states will also ban gas-powered vehicles by 2035. Joint ventures between OEMs will also continue, such as those between BMW and Toyota on the Supra and Subaru and Toyota on an SUV. In fact, Ford just announced that it is splitting into two distinct business segments – Ford Blue managing legacy internal combustion engine (ICE) vehicles and Ford Model E for electric vehicles (EVs).

In addition, there is a related transformation emerging that will transform the future of the auto ecosystem – the new OEM strategy around the connected or software-defined vehicle (SDV), a term that describes a vehicle whose features and functions are primarily enabled through software, a result of the transformation of the automobile from a product that is mainly hardware-based to a software-centric electronic device on wheels. The implications are enormous and far-reaching. Current plans call for OEMs to earn subscription fee revenues in the tens of billions of dollars by 2030 for a wide range of travel, safety and entertainment products and services such as insurance, premium ADAS features and tailored brand and vehicle experiences that include family activities, off-roading adventures and performance-oriented outings.

The questions now are at what rate should we expect these changes and what will they mean to the many players, large and small, across the broad automotive ecosystem?

Let’s start here with five major short-term trends identified by CCC Intelligent Solutions:

1. The changing work landscape and its continued impact on auto sales, traffic volumes and accident severity
2. The growth of ADAS and connected-vehicle technologies
3. Climate change and its emergence as a significant factor in the future of insurance risk and regulations
4. New customer expectations in our on-demand, need-it-now world
5. A carry-over from 2021: Increasing complexity given all these factors continuing to disrupt the status quo

Technology and the Future of Collision Repair: EVs, AVs, SDVs and Computer Vision

One major industry that will continue to be heavily affected by the proliferation of EVs, AVs and SDVs is the collision and mechanical repair industry. The EV market share in the U.S. at Dec. 30, 2021, was only 3.5%, but EVs may account for up to 40% of new car sales by 2030. One industry expert predicts that dealer service volume will decline by 35% while tire replacement, glass and visibility services and length of ownership will all increase with EVs. Until autonomous vehicles are widely in use by consumers, there will be many AV fleets, robotaxis, delivery and commercial trucks and trains, especially in and near urban areas. 

OEMs are catering to Millennial and Gen Z consumers who expect online and app connectivity. And shops need to have an online presence to reach them because both generations look online for everything, including where to take their cars for repairs. OEM-certified repair networks will exert growing influence over repair procedures and referrals. 

Collision repairers will need to pivot from traditional body repair work to become more like computer technicians. New and different skills will be required, and the industry may begin to seem more appealing to young people as compensation rates increase. Specialized training programs will emerge to serve this new profession. Vehicle repair costs could double between now and 2030. One industry expert predicts that in five years the average repair order will be $6,000 to $7,000 due to the increase in parts and technician costs as repair complexity continues. The collision repair industry of the future will need EV charging stations and dedicated work areas or separate locations to repair EVs. 

OEMs and the Connected Vehicle Economy

Self-driving vehicle companies from Tesla to General Motors’ Cruise are racing to start making money with their technology, outrunning efforts by regulators and Congress to write rules of the road for robot-driven vehicles. This month, Cruise said that SoftBank Group will invest another $1.35 billion in anticipation of Cruise launching commercial robotaxi operations. Cruise is opening up its driverless robo taxi service to the public in San Francisco as it creeps toward commercialization.

OEMs will continue to push to certify collision repair shops, which means that the repair work must be done to each OEM’s recommended repair guidelines for shops to be part of these certified networks, receive repair referrals and maintain vehicle warranty provisions. This will likely increase the average cost of repair to auto insurers, putting upward pressure on auto premiums. It will also likely disrupt the multibillion-dollar aftermarket parts and distribution markets as more OEM parts are sold to certified repair shops. More auto insurer-OEM partnerships are likely to emerge out of economic pragmatism, especially as the capability to automatically generate real-time crash notifications and triage accident and repair management improes. Fifth-generation (5G) cellular network will enable this era of more reliable connectivity that facilitates faster data throughput rates and greater network capacities, while ultra-low latency ensures fast response times between senders and receivers.

Telematics will eventually connect everything to the vehicle, the urban infrastructure, homes and other property.

One regulatory movement that could impede or slow these developments is the “right to repair” legislation that is rapidly emerging at federal and state levels. These rights are positioned as giving consumers choice, the right to their vehicle’s data and safeguarding a free and fair repair market. Most notably among these proposals is the “Right to Equitable and Professional Auto Industry Repair Act” introduced by U.S. Rep. Bobby Rush (D-Ill.)      

Summary

If we’ve learned anything from COVID, it’s that the future is not easy to predict or certain to unfold based on existing trends. However, we are confident that barring another “black swan” event in the next decade, the automotive ecosystem of 2030-2035 will be virtually unrecognizable from today. Some legacy market leaders will lose ground and disappear. New market entrants possessing truly transformative technology and business models will rise. New and unprecedented inter-industry partnerships and alliances will emerge. And, above all, evolving consumer preferences and choices will dictate almost all of the change.

Despite its status as representing around one third of the insurance industry, with $1.6 trillion in annual premiums, the U.S. property and casualty sector still depends too much on manual intervention to keep up with constantly evolving customer requirements. This high reliance on manual intervention in the form of inspection agents taking charge of property assessments leads to increased personnel costs and high turnaround time. 

Property and casualty insurance companies can now benefit from risk models that analyze huge and diverse data sets. And new data source influencers are emerging in the insurance industry, to provide the most comprehensive and accurate assessment of a property and bring about the end of an era for traditional assessment methods.

Insurers will thrive by partnering with technology companies that have demonstrated expertise in the property attributes and are continuously evolving. Insurers will be better able to identify and add attributes that improve underwriting and claim handling. Insurers will also have access to data solutions that reduce manual tasks and streamline workflow for new business. 

The forward-thinking approach in the P&C market is to provide the required property data as a service (PDaaS) to carriers, removing the burden of gathering property images and extracting all the risk attributes from those images. The accuracy of attributes, determined based on multiple images and a 3D view of the property, is only one highlight of PDaaS’ unique proposition.

See also: Lemonade: No Sign of Disruption Yet

Knowledge is power

Progressive-thinking property insurers across the globe are competing to take advantage of upgrades in camera technology and the surge in imagery captured by drones and satellites. This advancement, combined with cutting-edge research in artificial intelligence algorithms, has opened avenues for property insurers to leverage image analytics to property underwriting and claim handling.

Where PDaaS corners the market

The growing list of customers using PDaaS appreciate that it can handle entire updated datasets every six months or a year. For example, any roof damage in the form of missing shingles or presence of tarp on the roof can be noticed via updates. As PDaaS platforms are continuously evolving, operators are adding attributes not available from other providers of property data.

PDaaS allows carries to integrate the data in mass volume workflows (such as pre-fill forms and fast online quotes). PDaaS provides extensive multi-sourced and AI-driven property data sets, allowing property insurance underwriters and claim handlers to undertake thorough, reliable risk assessments. What’s not to like?

Since the start of the pandemic two years ago, consumers' online insurance shopping has become increasingly active and sustained.

Here are a few highlights from Jornaya’s network of thousands of comparison shopping sites that attract millions of consumers every year:

• Auto insurance comparison shopping increased 49% from 2019 to 2020 and was up 16% from 2020 to 2021
• Home insurance comparison shopping increased 43% from 2019 to 2020 and shrunk 8% from 2020 to 2021
• Life insurance comparison shopping grew 45% from 2019 to 2020 and sat almost flat from 2020 to 2021 (-1%)
• Health insurance comparison shopping sustained consistently healthy growth throughout, with 16% and 11% increases in 2020 and 2021, respectively

However, in recent months, insurance providers have noticed a decrease in online shopping volume across auto, home and life insurance. The year-over-year comparisons, when focused on Q4 2021, paint a very different picture.

Auto insurance comparison shopping in Q4 2021 was up 5% year over year, a stark slowdown from the double-digit percentage growth in prior quarters. Year-over-year shopping growth was flat in January. Carriers' profitability surpluses are shrinking, as claims severity continues to be high, and claims frequency is on the rise as drivers return to the road. Premiums need to catch up to risk.

In late 2021, home insurance shopping levels fell 22% year over year. Home insurance shopping was down 23% in January 2022 from January 2021.

See also: Tips for the Hybrid Work World

Life insurance comparison shopping in Q4 2021 was off more than 31% from the high-water mark the market reached in Q4 2020. Shopping volumes in January were half of what they were a year ago (the most shopping Jornaya witnessed in years). While insurance providers accelerated their digital transformation efforts to meet heightened consumer interest in life insurance, demand may prove fickle over the long term as consumers become more desensitized to the risks posed by COVID-19. Call center shortages and broad staffing woes may have also hindered insurance providers’ ability to capitalize on remaining opportunities, shrinking the need for performance marketers to drive traffic to their life insurance websites.

Health insurance comparison shopping was down 4% from Q4 2020’s volume, though, with this year’s extensions to open enrollment, it may be due more to a spreading of volume over a longer time than an actual decrease. Shopping grew 3% YoY in January.

Across every line of business, the online shopping explosion of the past two years may finally be tapering, exacerbated by a drop in demand for new business leads while carriers increase rates to address profitability concerns and improve loss ratios.

Particularly in auto insurance, gaining new customers has become less profitable, especially with price-sensitive consumers more likely to leave before their first or second renewal period. Given these challenges, carriers must be thoughtful about the types of consumers they want to target. 

How do insurance marketers make the most of the current landscape?

In dynamic conditions like this, where insurers and agents need to pick their spots, strengthening existing relationships, elongating the customer lifecycle and focusing on the right prospects are all important. Here are four strategies to help marketers advance efforts: 

1. Invest in your existing database to learn about the customers you have and the customers you want 

Insurance companies already own or have access to vast amounts of data, but often it’s not well-structured and is siloed within groups or divisions with limited data sharing. 

Insurers can and must break down these barriers to better understand how customers enter, engage with and leave the business. This is critical to being able to identify opportunity and risk at scale.

Capturing, organizing, then deploying this data helps companies offer highly personalized customer interactions built on knowledge, whether through well-timed emails or phone calls to prospects or being alerted when existing customers are in-market. Marketers can anticipate customer needs, all while keeping privacy in mind and respecting consumer boundaries.

2. Implement a strategy that balances profitability and volume 

In the current market, it is vital to build a marketing strategy that considers the right mix of volume and profitability. Be cautious of a strategy that focuses purely on good profitable risks, as this won't generate enough volume to meet sales goals. 

Conversely, a strategy that focuses too much on active shoppers with a “come one, come all” approach will worsen existing profitability problems.

The ideal book of business is made up of both transactional business and good risk that can be written on a long-term basis.

3. Know which households to target; use data to understand customer needs

Data and technology have advanced to the point that insurance marketers no longer need to build customer “personas” or look-alike profiles of ideal customers. Today’s leading companies know, down to the household level, which consumers they want to write and their behavior. Data removes the guesswork. Take time to understand the households you want to write.

Once customer targeting is established, with the organization behind it, data can be used to dictate personalized outreach. In today’s highly competitive online insurance market, it's not enough to simply know who your customers are; marketers should also know what their customers’ needs are, when those needs are most acute and how to address them consistently. Today, marketers can leverage data to know who, what and when – applying their expertise to accomplish the how is where insurance providers can create unique advantages and differentiation from their competition. 

For example, is a new baby coming, has there been a career move, is a family member attending college? Data surrounding these events is widely available to advertisers. Organizing data at the household level then enables insurers to take the next step – knowing what needs are present and when to engage – personalized outreach delivered precisely when customers are in-market and most receptive to an offer. 

4. “Skate where the puck is going to be” — predict future needs 

The best marketers don't just know who they're targeting today — they know what the household may need in 90 days and why, even if the household doesn't know it yet. Robust household data paired with exhibited shopping behaviors can help predict future consumer needs. 

For instance, a consumer who is planning a home purchase may not be thinking about property insurance, but they absolutely will be on a property insurance buying journey soon. A recent Aite-Novarica Group survey found 87% of consumers are interested in receiving personalized recommendations about how to improve their insurance coverage. This type of data-driven head start can be precisely the edge an insurance provider needs to grow the business (or protect it).

While many factors affect the timeline of an insurance shopping journey (and sometimes lead consumers to other purchase journeys), knowing what customers need and being there at the right time to advise is a winning marketing strategy. 

See also: Getting to the Next Level in IT Systems

Bringing it all together

Use data to be choosy about which consumers you interact with, how you engage them and when. There is little benefit in acquiring customers who buy quickly and leave quickly. Conversely, there is risk in spending all of your time and resources on a historically profitable segment of consumer that is becoming increasingly comfortable with shopping and switching their insurance. Despite recent tapering in shopping frequency, comparison shopping is still above 2019 levels.

In today’s market, insurance providers must feel comfortable with the pace of shopping and strike a balance between hunting good risks and seizing the active shoppers to meet sales goals. 

Insurance carriers can capitalize on a changing profitability market by embracing technologies and digital tools that support our industry’s original mission – to help consumers make the best insurance decisions and provide peace of mind.

At Jornaya, a Verisk business, we work with insurance providers who leverage our view into daily comparison shopping behavior to acquire, retain and grow their customer base quickly, safely and confidently. 

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Red Alert for Cyber Attacks Paul Carroll, Editor-in-Chief of ITL With Vladimir Putin denied the quick victory he hoped to achieve with his invasion of Ukraine, the Russian military is reevaluating its strategy -- which may now include cyber attacks that could broaden far beyond those that the Russians have been waging against Ukraine for months. Obviously, no one knows for sure what Putin will do next. But Russia has a history of hacking, even against major powers. According to the Mueller report, Russian government hackers stole emails from the Democratic National Committee in 2016 as part of Putin's effort to help elect Donald Trump president. In 2021, a gang of Russian hackers launched a ransomware attack that shut down the Colonial Pipeline and cut off its supplies of gasoline in the U.S. East and Southeast. And Putin has said that even nuclear weapons are on the table if other countries intervene in his war on Ukraine, while listing 13 countries that have been "unfriendly" to Russia, so it's hard to imagine that cyber warfare isn't somewhere in the cards. Insurers would do well to prepare themselves and their clients for the possibility of cyber attacks, to the fullest extent possible. continue reading > New Majesco Research Check out Majesco's new research which underscores the need for insurers who seek relevance and growth in the SMB market to provide new risk products, value-added services, and customer experiences...digitally. Download Now SIX THINGS Ukraine: How Exposed Are Insurers? by Michel Leonard New political risk insurance losses in Ukraine due to Russia's invasion will likely be material but well within the ability of private carriers to perform on their obligations. Read More OCR Plus AI Opens New Vistas by Michael de Waal AI-powered optical character recognition lets insurers unlock vast troves of data and streamline all processes. Read More How IT Savings Can Fund Innovation Sponsored by Rimini Street While IT infrastructure is a business necessity, aging IT systems can inflate expenses and limit the ability to spend on initiatives that will really move the needle for a business. In this webinar, we discuss how insurers can optimize their data centers and generate savings that can fund innovation, while improving security. Read More A Low-Tech Approach to Work Automation by Tom Bobrowski Work automation is not about technology. It’s about process. A process that is best led by the line of business or function head and not corporate IT. Read More Balance of Information Between Insurers, Consumers by Frank Schmid Insurers are already familiar with adverse selection. Now, they are getting to grips with the new concept of inverse selection that arises with big data. Read More 4 P&C Mega Risks in 2022 by Mike Chapman These risks are moving the insurance market away from transactional coverage and more toward co-management of risk.  Read More Tips for the Hybrid Work World by Kevin Knopf The following are important ways to reduce corporate risk and support employees in both remote and on-site environments.  Read More Use Halo & AI For Claims Processing to Proactively Identify and Mitigate Emerging Fraud Sponsored by Daisy Intelligence  Daisy AI solutions recommend step-by-step implementation of Halo Effects into your fraud detection, claims management and underwriting processes, including useful examples that can be put into practice Read Now MORE FROM ITL March Focus: Life and Health For an industry that has long been considered sleepy, life insurance has a lot going on.  The efforts getting the most attention have probably been those related to improving the customer experience, largely by speeding underwriting by reducing or doing away with the need for medical exams and the providing of blood and urine samples.  But other big changes are afoot, too. . Read More The Impact of Rising Inflation and Interest Rates on Insurance Profitability  Sponsored by Insurance Information Institute  Paul Carroll, ITL's Editor-in-Chief, and Dr. Michel Leonard, vice president, senior economist and head of the Triple-I’s Economics and Analytics Department, continue their series of webinar discussions by looking at the Triple-I's latest projections for inflation and interest rates and talking about how the insurance industry can prepare. Read Now   Partner with ITL to create expert thought leadership content. Custom Content Promoted Content Display Advertising Custom Webinars Monthly Topic Sponsorships ITL Partner Packages and more Learn more and get the 2022 Media Kit

The impact of business and consumer trends is sometimes seen more clearly when we link them. For example, if you follow the progression below, you might come to some new conclusions about where and how P&C insurers should be targeting their development strategies.

• In 2019, personal savings in the U.S. were $1.2 trillion.
• In 2020, personal savings in the U.S. skyrocketed to $2.3 trillion.
• Gen Z and Millennials are investing outside of their retirement plans at higher rates than predecessors, but their investment tools of choice are up-and-coming platforms, such as Robinhood.
• Robinhood holds a 37% market share, over Fidelity (26%) and Acorns (23%).
• Personal wellness expenditures are on the rise, with individuals looking to improve their health

All of this points to a renewed desire for financial control, self-sufficiency and protection from catastrophic economic impact. At the same time, long-held insurance policies will come under scrutiny by financially conscious customers seeking price and value.

The message is clear. A volatile world has generated scrutiny by individuals and companies. They want to prepare for anything by shielding themselves against loss and doing what it takes to keep the keys to their future in their own hands. The customers want to drive. Are insurers prepared to thrive once we’ve handed them the keys?

Innovating with the customer at the center

Majesco and Capgemini have jointly released a thought-leadership paper, Embracing Innovation and Growth Opportunities in P&C Insurance. We used the paper as the springboard for a discussion on why P&C insurers need to reinvent themselves to fit new market needs. In this blog, we’ll look at how creating an engaging customer experience will invigorate an insurer’s strategy and allow the insurer to capitalize on platform technologies.

Responding to change. Changing to respond.

At a high level, insurers need to accomplish two related goals.

1. They need to respond to change by shifting from push to pull. They need to transform the insurance product into something that is bought, not sold.
2. They must improve their speed and agility. They need to transform their operations and technologies to become responsive to market changes and opportunities. The faster they can bring products and channels to market, the more effective they will become at capitalizing on trends.

Shifting from push to pull

In this new insurance era, nearly every process is rapidly becoming frictionless, including buying. If distribution channels are easy to use, with products that are easy to understand, insurers can grow through a friction-free, multi-channel distribution system. According to the World Insurance Report 2021 by Capgemini and Efma, more than 70% of customers expect a seamless multichannel experience for policy research and purchase. The benefit of adapting to these channel dynamics is that we move from needing to sell people on purchasing insurance to introducing insurance that is ready to be bought seamlessly at the point of need, creating a scalable, sustainable business model.

Technology is fueling customer expectations, altering and expanding markets and channels through which insurance is sold, including automotive, transportation businesses and Big Tech. To prompt customers to buy insurance products independently, in addition to identifying customers’ needs and expectations, insurers have to understand and adapt to their behaviors. Customers want to buy where, when, how and from the provider that offers the best fit.

Role rehearsal

Crucial to this is the expansion of partner ecosystems where insurers can assume multiple roles, from the owner of the unifying experience to the orchestrator of the products and services or provider of products and services. This will lead to a transition of the insurance value chain from a monolithic to a modular one, where the industry players will focus on their strengths within a specialized value chain. This can lead to two future scenarios as highlighted by the World InsurTech Report 2021 by Capgemini and Efma – Insurance embedded as a value add within third-party ecosystems or Insurance with added value at the core of the offerings.

What insurers achieve will depend on their ability to enter the market while it is still an uncrowded white space. As early insurers enter these markets, they will be experimenting, succeeding, failing and learning how to best fill their roles in the new insurance landscape. An insurer’s ability to enter now will provide greater long-term value. New revenue streams and access to broader markets will produce a multiplier effect. We are currently seeing this play out in the new affinity and program business models emerging in the market.

Insurers need to rehearse their role by adopting the “cultural persona” of flexibility. Firms with a cultural mindset that insurance must adapt to the customer will overtake competitors that believe policyholders must adapt to insurance.

What insurers will find is their choice of location in the ecosystem, the best pick of available roles and the first crack at innovative products that will change the face of insurance. The future depends on being in the right place at the point of opportunity.

Market moving through speed and agility

Of course, demand for insurance isn’t the only determinant for value. Innovation plays a role. Can insurers anticipate what’s coming and make forward-thinking, market-moving products and services? Can they use customer trends to predict customer needs and voluntarily give customers the keys to buying? It isn’t easy for any organization to gain the momentum it needs for change while the enterprise is in motion.

Industry trendsetters differentiate themselves by first giving up their need for legacy operational traditions that are built into their current business core systems. Instead, trendsetters shift their technological and administrative weight using a two-speed strategy for growth:

• Speed of operation is for the traditional business model with mature systems and processes needing operational improvements through modernization and optimization using cloud and modern solutions based on application programming interfaces (APIs) that deliver in months vs. years.
• Speed of innovation is for agile, fast and minimum viable product (MVP) models to explore, test and introduce products – many in 12 weeks or less. This strategy prepares the new business for the future using next-gen native cloud microservices and API-based solutions.

Visionary, inventive leaders see the market, customer segments and technological trends as a gateway to new revenue. Therefore, they are preparing to use new data sources, reach new market segments, offer innovative and appealing products, create exceptional customer experience and leverage new channels.

Leaders execute exceptionally well from Knowing to Planning and then Doing, aligning priorities to strategies and action. When these are not aligned, a Knowing-Doing gap emerges that defines insurers as a Leader, Follower, or Laggard, based on Majesco’s Strategic Priorities research.

Companies that procrastinate put their future at risk. The time for plans, preparation and execution is now – recognizing that the gap is widening and the timeframe to respond is closing. Leaders, as early adopters, are positioned to succeed.

Platforms fit customer-centric engagement and insurer needs for rapid flexibility

Leaders are using an outside-in view with the customers’ needs at the center. This is where platform technology makes a difference. Platforms are underpinning robust business models with network effects that disrupt traditional models, create tremendous customer loyalty and offer significant opportunities for growth. As a result, platforms are fundamentally changing businesses, and insurance is no exception.

The heart of the insurance platform is an orchestration of next-gen technologies, including cloud-native computing, microservices, APIs, new data sources, and artificial intelligence and machine learning, coupled with a vibrant ecosystem of partners that provide innovative or complementary products and services. This unified combination of components enables insurers to shift from owning complex core systems to owning greater technical agility and flexibility, digital fluency, innovation, and the speed to value required to meet today’s pace of change.

Leading firms are partnering to expand reach, adopt new capabilities, access new data and accelerate speed-to market.

• Collaborating with ecosystem partners and insurtechs enables insurers to cross-sell/upsell and launch innovative products.
• Carriers that deploy open APIs can reduce service cost, bundle services and strengthen the value proposition.
• Insurers that collaborate with ecosystem partners keep informed about future product needs.
• And, they can bolster their digital strategies, adopt new business models and add lucrative revenue streams

The most successful insurance leaders are increasingly adopting leading platform technologies and are innovating at a faster pace. They increasingly see themselves as technology companies providing protection services vs. insurance companies using technology to deliver insurance products.

For a deeper look at the report,  including the six key focus areas that insurance firms can leverage, be sure to download Embracing Innovation and Growth Opportunities in P&C Insurance. And, if you’re curious about all of the benefits you’ll receive through core transformation, you can receive an excellent primer and overview with Majesco’s latest webinar, An Intelligent Core to Transform Your Business.

Seth Rachlin, global insurance industry leader at Capgemini, and Denise Garth, chief strategy officer at Majesco, are co-authors of this article.

If insurers completely understand the implications of customer trends, competitive pressures and technology leap-frogging, they will be justifiably anxious about their future — unless they prepare.

Drones make an excellent short case for both the threat and the opportunity. If you fly helicopters in Hollywood for filming, or you cover traffic for the evening drive news, or you once flew a fighter in the Air Force, your occupation is in jeopardy due to drone technology. Cinematography isn’t going away. But the method for shooting the video is changing. Drone use for package delivery, powerline examination purposes and even insurance claims research will replace traditional methods with technology-enabled improvements. Those who haven’t adapted will feel threatened. Those who have adapted will feel liberated.

P&C insurers must reinvent themselves. Reinvention begins with an understanding of insurer mindsets. Most insurers still don’t consider themselves to be technology companies. They are risk management companies. But in a hundred different industries, we’re seeing the same shift. Companies that thought they had their niche locked up are finding themselves displaced because of the technology that is linked to their delivery. They need to become tech-flexible, tech-enabled and tech-creative. Technology is still a tool and not the end-game, but it is the thread that makes all insurance scenarios possible and exciting.

Once carriers have awakened to their need for change, most will quickly realize that their efforts are worth it. Every step out of the traditional business model is a step toward organization-enablement and greater profitability. Jump through the hoops, and suddenly the world opens up for rapid innovation and improved competitive positioning. Ask any executive if they would rather have their future dictated to them by technology constraints or if they might prefer instead to write their own success story with creativity as the theme. Innovation will always be “in.”

Recently, Majesco and Capgemini jointly released a thought-leadership paper, Embracing Innovation and Growth Opportunities in P&C Insurance. The paper illustrates the link between industry and market pressure and an insurer’s future ability to fill opportunity gaps. Can insurers capture the right perspective on the forces that are driving them toward change? In this blog, we’ll discuss a few of those pressures in detail, then we’ll touch on strategies that can bridge the distance between knowledge and implementation. 

Pressures, threats and changes — the starting line for insurance innovation and opportunities.

It seems a cliché to say that we are living within a perfect storm of insurance pressure, but the cliché fits. P&C insurance is like a hurricane. The core may look calm, but even it is heading for landfall. The storm is affecting everyone from insurers to reinsurers, brokers and MGAs. Rapidly evolving industry dynamics are offering opportunities for those who can capture the wind. The Majesco/Capgemini report points out five significant areas:

1. Emerging and evolving risk scenarios: Business clients are emerging with new or unknown risks. Existing businesses are moving to digital business models that require updated coverage, such as cyber. Enterprises that use IoT and artificial intelligence need new coverage. Disruptive environmental patterns are intensifying and expanding risks. The pandemic impact on nearly every industry and business is pressuring P&C insurers to rapidly and profitably adapt to new needs, demands and expectations.

2. Increasing competition: Significant growth in managing general agents (MGAs) and program business, and reinsurers that directly bring new products and businesses to market are creating rivalries. Non-traditional players such as automotive, retail and product manufacturers are entering the market. According to the World InsurTech Report 2021 by Capgemini and Efma, more than 50% of customers are willing to purchase coverage from non-traditional players.

3. Expanding customer expectations: Policyholders now seek complete protection, and they conduct independent research to learn what’s available and from which providers. More importantly, they want digital access to their risk products and value-added services on the go and at a faster pace, holistically and conveniently, 24/7. Customers seek peace of mind that their coverage is appropriate, and they are taking preventive measures to protect their assets and avoid claims. Changing customer expectations require P&C insurers to expand and reevaluate old paradigms.

4. New products and business models: Insurtech startups, greenfields launched by existing insurers, reinsurers, MGAs, brokers and other ecosystem players are collaborating and debuting new products and business models that address unmet risk needs, emerging risks such as climate change, new gig and sharing economy risks, new channels with embedded insurance and new product bundles to meet customer needs and expectations.

5. Accelerated technology adoption and landscape showing more opportunities: Explosive growth in new data sources, AI/ML capabilities, cloud platforms with APIs, microservices, ecosystem models and new digital platforms provide unmatched opportunities for insurers to enhance business operations, innovate and redefine their business for the future. While some may consider these challenges translating to the worst of the times, this is the best of times for innovative-minded P&C companies who are ready to embrace opportunities to become the new leaders in the future of insurance. NOW is the time to align business strategy with the new, shifting market needs to execute efficiently.

A strategy to harness the wind

Of course, these pressures are driving everyone. Each organization will make its own decisions on how and when to make the changes that need to be made to stay competitive. Insurers can fight the current, or they can let it push them to recreate themselves. Organizations that wish to lift their sails and let the current and winds carry them on to something new need to understand where this journey is taking them. Even if the organization is planning on using a two-speed approach to their business model, they need to envision how the new model might look. This model will be holistic, encompassing product, services, customer engagement and, of course, processes and technologies that will provide the data and analytics that will assist the insurer and make every moment a learning moment. 

New product strategy

Insurers need to rethink their product strategy and the value proposition by identifying new risk areas and new value-added services and thinking beyond premiums and claims payouts. Insurers should focus on providing comprehensive coverage, coming up with innovative products to cater to new customer segments, exploring new business models such as usage-based insurance and embedded insurance and simplifying their offerings.

For example, Nationwide has launched a comprehensive coverage for customers working from home - providing homeowners or renters insurance, usage-based auto insurance and identification of theft. They saw a need for new insurance package, and they created a hybrid product to fit.

Expanding offerings into value-added services

Insurers must go beyond just the risk product to focus on ensuring a speedier return to normalcy and intervening at the right time for risk prevention and mitigation. Insurers should provide risk advisory and encourage safe behavior, enhancing the customer experience. They can leverage technology to alert customers about loss incidents, thereby preventing losses or reducing their severity. By expanding their role to partner and preventer, insurers can achieve the golden mean between growth, customer-centricity and profitability.

Prevention services are certainly a logical entry point for P&C. International insurance specialist Hiscox partnered with the provider of LeakBot, a smart water leak alarm, to offer policyholders a mobile-app leak detection system. Insurers such as Chubb, Travelers and American Family have partnered with Wildfire Defense Systems for supplemental prevention services for homes and businesses in the case of regional wildfires.

Rethinking customer engagement

An effective customer experience strategy takes an outside-in approach, considering what and how the customer wants to engage – rather than an internal operational view. The customer experience strategy needs data to anticipate possible needs, and insurers must move from transactions to personalized experiences and use a 360° view for the customer whether for buying, servicing, submitting or paying claims and accessing value-added services – making insurance relevant when needed.

New strategies for innovation and new business models to meet the new world of insurance

Next-gen customer experiences that engage and excite customers must take a holistic experience view rather than a transactional view. Significantly changing customer risk management needs and engagement expectations are forcing the insurance industry to move from practices and technologies of the past to new platform-based technologies and business models that will carry them into the future. In our next blog, we’ll discuss that future from the perspective of innovation strategy. What approaches make the most sense in light of financial considerations and traditional businesses that can’t transform overnight?

For a preview of our conversation, be sure to download Embracing Innovation and Growth Opportunities in P&C Insurance and sign up for Majesco’s webinar, An Intelligent Core to Transform Your Business, a conversation focused on property & casualty insurers and their hurdles and needs when looking at new core platforms.

Seth Rachlin, global insurance industry leader at Capgemini, and Denise Garth, chief strategy officer at Majesco, are co-authors of this article.