Around 80% of workers feel stress on the job, and in just about every type of job or position. Employees are reporting neck pain, eye pain and lower productivity due to stress. In fact, around one in five people has quit a job due to stress.

Making some simple changes around the office (including remote offices!) can have a large impact on workplace stress and, thus, productivity. Let’s review five simple but effective ways to promote a low-stress work environment.

What’s new in 2022?

A 2021 survey found that 76% of respondents with 500 or more employees said that improving employee mental and emotional health was a top priority. Employees are also beginning to view protection of their mental health as a non-negotiable aspect of their job, and, as a result of the pandemic, many employees found themselves with newfound power as people left their jobs in droves. This “power shift” has led to increased demands for conscientious and flexible management.

See also: Insurance Tips for the Remote Workforce

5 Tips to Create a Relaxed Work Environment

1. Use communication tools

We’ve all heard it before: Communication is one of the best tools to reduce stress. But with so many workers moving to remote work, communication has also become much more difficult. Gone are the days of popping into someone’s office to check in on a project’s status (or a coworker’s wellbeing!). Instead, leaders need to leverage communication technology. 

How, you may ask? Communication software not only helps people stay on track and avoid wasting time emailing back and forth but can help set clear expectations and deadlines and avoid misunderstandings that cause stress. Using communication software can also help build virtual communities that would not otherwise be possible. Finally, communication software can help your team respond faster to potential issues, helping disrupt problems before they become even more stressful.

2. Take time for team building

A strong team is generally a more relaxed team. While team building has garnered a rather unfortunate reputation in recent years (how many more rounds of Two Truths and a Lie can most people take…?), team building actually is a crucial tool for reducing stress. Not only can team building help managers understand employees’ strengths and weaknesses better, but it can provide employees with an opportunity to blow off a little steam – in a healthy way.

Team building doesn’t have to feel like forced fun. Today, there are plenty of options for team building activities that are engaging and fun for everyone. For example, this escape room in Los Angeles advertises the benefits of playing an escape room for corporate team building, such as improved collaboration and the ability to think outside the box. More unusual team building activities that are both fun and effective include scavenger hunts or office trivia. 

No matter your activity of choice, even five minutes of team building can reduce a little stress -- especially if the activity doesn’t feel like a waste of time. Consider incorporating real-world office training into your team building exercise. For example, if your team visits an escape room, consider incorporating the escape room into a larger training on time management.

See also: Bridging Health and Productivity at Work

3. Set boundaries

A healthy work-life balance is absolutely crucial to a stress-free work environment. If employees are overworked and using their downtime to think about work, stress is likely to build up quite quickly. Successful employers encourage employees to set healthy boundaries between life and work so that everyone can take a much-needed mental break every once in a while. Not only will a healthy work-life balance reduce stress, but it can also free up mental space for breakthroughs in the future; without breaks, it’s easy to get stuck in the same thought patterns. 

Employers can lead by example and implement boundaries between home life and work in their own life. This will likely encourage their employees to follow suit!

4. Create healthy variety

Studies have shown that boredom is highly linked to stress; monotony at work can actually, counterintuitively, lead to high levels of stress. It’s important to create variety in your work day to avoid this!

The best way to avoid the boredom trap is to perform a variety of tasks throughout the day. Consider splitting your day into “focus chunks,” in which you pick one task to work on for a specific period. If you’re motivated to finish it, great. If not, and you’re starting to feel boredom creeping in, move to another task if you can. Not only is variety proven to reduce stress, but it’s also shown to increase satisfaction.

5. Allow autonomy

Finally, feeling control over your environment or situation is proven to reduce stress. After all, stress often occurs when things feel out of our control. As an employer, it’s important to allow your employees control over their workflow when possible. For example, consider assigning a goal or outcome and allowing your employees to figure out how best to achieve it. Autonomy may also extend to allowing employees to choose their hours and daily schedule or, as we’ve seen with the pandemic, their workspace.

Conclusion: Where Are We Headed?

As remote and in-person workers alike begin to demand working environments that are healthy and supportive, employers simply cannot afford to ignore stress in the workplace. And an increased employee focus on their own mental health is here to stay, bringing with it increased happiness and productivity. The businesses that work hard to promote a stress-free workplace will likely be the ones to succeed in the long run; after all, much of a company’s success depends on the security of its employees.

Wait! You Forgot Your Thousand Bucks!

You just wrapped up this year's renewal  on your client's auto and homeowners coverage. You got the green light to place the umbrella coverage, too. And you got a nice referral to the brother-in-law. Nice work, right? Of course it is. But you probably left about $1,000 in commissions on the table if you didn't log in and hand them a "While-You-Wait" instant-issue term life insurance policy. What's that you say? Read on.... SO much has changed.

It's All About the "E"

Sixty seconds. That is how long it takes to have a term life policy electronically underwritten in real time, approved, issued and spouting forth from your (or your client's) printer. The client puts their E-signature on the online E-application, and the policy is immediately E-delivered via PDF for qualified applicants. Is that enough "Ease" for you (bad pun intended :) ?

What if there was a simple, online system that provided:

• A step-by-stop questionnaire to fill out your client's E-application in 10 minutes
• Built-in E-signature
• Automated underwriting based on "AI" (artificial intelligence)
• No need for a medical exam
• Immediate approval for qualified applicants
• E-policy delivery of the life insurance policy PDF in about 60 seconds?

Cross-Selling Is King

We all want to generate additional revenue for our businesses. Existing clients and policyholders are the best source of new business. The "bridge of trust "already exists with them.

But, in working with huge numbers of property & casualty as well as health insurance agencies and agents over the years, we have heard countless times how they are not asking the client about their life insurance needs. Giant numbers of consumers tell us the reason they don't have life insurance is because "no one has approached me about it."

What need is the most unaddressed financial risk for American consumers? Life insurance.

See also: Selling Where Life Happens

The Old Reasoning for Not Cross-Selling Does Not Fly Anymore

Before high-speed, real-time processing of life insurance sales, the reason for not embracing cross-selling life insurance held water. Clients hated the lengthy forms, the confusion, the waiting and the mysterious nature of getting life insurance coverage. One life insurance industry veteran who comes to mind used to say, "Life Insurance is the only industry where one could swear that we're trying to actually PREVENT the customer from buying our product." Back then, he got that right. But today, the right digital tools are here, are super easy to use and are the key to almost unlimited amounts of additional revenue and profits to your organization.

Recent Advances in Agent-Friendly Technology Create the Golden Opportunity

Non-medically underwritten term life is the key. It satisfies most consumers' needs. This is the basic family-needs market we're talking about. $50,000 to $500,000 of coverage.

Better than old, worn-out "simplified" programs that are too small, are too expensive and are perceived as "flimsy" by consumers, Non-medically underwritten term life uses a thorough but still compact application online. Underwriting decisions are made electronically and, therefore, instantly for the majority of applications. 

This new frontier described here is opening up right in front of us. Now is the time to embrace the new capabilities, which are making the great promise and potential of digital technology a reality for life insurance sales. 

Tom Warden, the chief insurance and science officer at CLARA Analytics, is a big fan of artificial intelligence. But....

Therein lies a tale.

As Tom explains in the interview I did with him for this month's ITL Focus, AI is only as good as the data it works on, and most of the data being used for AI in insurance just isn't very good. The data for underwriting and claims comes largely from adjusters, who are evaluated and compensated primarily based on how quickly they resolve cases and may have more than 150 of them open at a time—not an environment conducive to producing highly accurate data or to making sure all the data fields required by an AI are filled in. Besides, AI needs three or four or five years of data to train itself on, and few insurers were addressing the data problem that long ago.

They aren't really addressing the problem now, either, because there are simply too many other pressing issues drawing the focus of adjusters and IT departments. So, while AI can be incredibly powerful, Tom says a lot of hard work has to be done before the industry sees the full benefits.

ITL:

A lot of talk about AI seems to treat it as fairy dust that you can sprinkle on things to get magic results, but you deal with this stuff day in and day out, so you see where the real benefits are—and where they aren't, at least just yet. What are the biggest benefits of AI thus far for insurance?

Tom Warden:

They’re still mostly in the underwriting space but claims is catching up fast. Companies are figuring out the fairy dust stuff isn't real, but they can make real progress if they carefully structure AI-based projects and implementations. They get the data right. They figure out the business problem that needs to be solved and make sure it's a real one, not some pie in the sky. They get all the necessary constituents in the room at the beginning—the data folks, the IT folks, obviously the data scientists, and people from the function that's going to be affected.

For the most part, you also need to keep the C-suite folks out of the room. You need their support, obviously, but don’t let them drive the train. They're the ones that are getting the most bombarded by the hype and all the marketing messages from vendors, so they can be unrealistic or impractical.

I mean, I once worked for a CEO who was very engaged and advocated for what I was doing, but his expectations about how fast we could go and how grand AI could be were inflated. He used to stop me and ask, "Tom, when are we going to be able to get rid of all the underwriters?" Or, "When can we get rid of all the adjusters?" He was partly kidding, but he really did talk a lot about increasing the productivity of adjusters and underwriters by factors of two or more. And that's just not feasible, at least in the near term. You can make great progress, but you must sort of nibble at it. I advocate for multiple problems being solved simultaneously, a portfolio approach, but each initiative needs its own resources.

His expectations were way out in front of what our capabilities were, especially because our database was a mess and our IT folks were having to do all sorts of other things—automate processes, build a new claims system, build a new underwriting system and so on.

You need to start, not by going top-down, but by going to the underwriters or the adjusters and asking how you can make their jobs easier and more productive. Thankfully, more and more companies are starting to figure that out.

ITL:

I want to follow up on your point about the messiness of data, because I think that's a key impediment to what AI can do. How do we solve that problem?

Warden:

I think it's the biggest issue, really.

Most of the claims data we ingest isn't from automated entry or from scanning documents. It's from adjusters. And these are people who all have 150 claims or more open at one time and who are pretty much compensated and evaluated based on how quickly they work. They're in a hurry. So, they don't always enter data accurately, or they don't fill in all the fields.

When you ask for three or four years of claims data so you can train the AI, you find you're dealing with all kinds of messy issues. Unfortunately, nobody with decision authority thought about the kind of data you’d need in the future for AI, or provided incentives to make sure that data was entered accurately. Cost minimization by IT departments is a big hindrance to collecting, cleaning and saving historic data.

ITL:

Are companies recognizing the problem and starting to make sure they produce the kind of clean data that AI needs?

Warden:

Not really, and it may be a while before they do. I had a fellow from a big insurer in the other day, and he just laughed when I asked if they were putting more rules in the claim system so adjusters couldn't skip over stuff or were forcing them to do data checks. He said that was a great idea, but it would take two years to update the legacy claim system, and there would be significant adjustments to workflows and incentives needed on top of that.

If a company is moving to a modern cloud system from Guidewire, Duck Creek or others, they have the opportunity to start fresh with new processes, and these systems can be changed more quickly. But even that is tricky. I know a chief claims officer who spent two and a half years implementing one of these systems, and he told me at the end, "Yeah, we had to leave a lot of stuff by the side of the road just to get it done." Some of that "stuff" was the checks on data accuracy and completeness.

I understand. You have to pay the claims and operate efficiently. But until people invest in data quality, they won't get the full value from the AI.

ITL:

Outside of what we've already discussed, where are you seeing real progress?

Warden:

The biggest improvements are probably on the customer service side, where you don't really need historical data to make the interaction with insurance companies easier. You can build chatbots or set up smarter paths through the call tree. Companies are also innovating in claims by having more and more decisions made automatically or by coaching adjusters without intervening.

ITL:

I was a big M*A*S*H fan growing up, which is probably where I learned the term "triage." I think of the term as relevant to AI in insurance. You divide problems into three sorts—ones that can be resolved immediately by AI, ones that should immediately be sent to a human expert and ones in the middle that can maybe involve some combination of people and AI. Initially, there may not be very many in the AI-only bucket, but you hope that, over time, you'll keep learning and keep moving more into that realm. Does that notion match what you're seeing?

Warden:

Yes, and you don't always even need a true AI-based solution. You can build an expert system by just interviewing adjusters and figuring how what rules to apply in certain circumstances and get 80% of the lift that you'd get from a more elaborate, AI system. Then, with enough time, we can add the AI on top of it to find the subtle things that are predictive and useful that maybe no one's thought of.

But people have it backward. They think, oh, AI is the answer. No, if you just mechanize your decision rules and have everyone follow them, that's where most of the lift is. AI can take you to higher levels, but it needs a decision-focused base to build from.

ITL:

Thanks, Tom.

The quarterly financial results of the listed insurtech carriers were published in August's first days. Their depressed valuations (which I have commented on in the last newsletter edition, Will insurtechs ever walk the talk?) improved somewhat before the announcements based on expectations. I posted about Lemonade's financial results, but otherwise let the dust settle until now.

We are still waiting for a clear sign that one of them can survive in the middle term. We are still waiting for Godot.

Let's look at some of the trends shown by the trio of the survival island saga.

Top Line

We have a positive sign from Hippo, which has underwritten more business than in the previous quarters. Root is shrinking its portfolio. (The number of their auto policies had been reduced by more than one-fifth in the last three quarters)

See also: Will Insurtech Disrupt Homeowner Market?

Loss Ratio

Hippo again stood out: It has provided some good news to its investors, while there has been nothing significantly positive about Lemonade or Root. However, Hippo's good news is a new version of the "seasoned policies" narrative. And, unfortunately for them, we are talking about an insurance portfolio, not a bottle of champagne. You can read in the comments of this post a deep discussion around this concept.

Net Losses

Each of them is still losing tens of million each quarter. This is still the major problem, even if they still have a pile of cash to burn.

Overall, it seems that Root is the player characterized by the worst trends. I highlighted in one of the previous editions of this newsletter that "Root is not using telematics data well for pricing and risk selection. Moreover, they have even denied the usage of telematics data for claim management and for changing driver behaviors."

A player such as Root -- which has focused all its equity story on telematics -- cannot miss nowadays having continuous monitoring and using the telematics data to improve the driving behaviors of its policyholders. It is well demonstrated how:

1. insurers can modify driving behaviors.
2. a structured behavioral modification program (including rewards) is necessary to obtain concrete results.

Here you can see a study on the field from the FHWA that I have discussed with the members of my IoT Insurance Observatory in the past few months:

Average height, average weight, non-smoker, occasional cannabis smoker and the kicker… 23 years old. The modern life insurance underwriter’s dream. The application flies through underwriting and is competitively priced. The consumer has a policy in hand at a record’s pace. But we do not live in a world of only 23-year-olds, and they aren’t thinking about life insurance on a consistent basis – but that’s a topic for another day.

Those who are more active in their life insurance search do not typically fit into that underwriter’s strength. So, what does one do with the 55-year-old diabetic, heart attack survivor with a high body mass index (BMI) who loves to scuba dive? Should you even try writing it or auto-decline? The key to writing a policy like this is in the data. With more data, more policies that may be immediately declined on direct-to-consumer platforms can go through, protecting more families and providing more peace of mind. 

Caution: Risk Ahead

For centuries, the life insurance industry has been cautious by nature. With the help of data and technology, the analysis of risk is shifting, which will enable prudent underwriting without volatility.

By leaning on digital capabilities and years of structured statistics and insights, carriers are now able to effectively write impaired risks and minimize the number of lab requests and attending physician statements (APS). As many advisers know, labs and APS add weeks and sometimes months to the application process, prolonging the buyer journey and putting unnecessary friction in the process. 

Companies like Legal & General America (LGA) are investing heavily in data and analytics to predictively ingest only the minimal amount of underwriting requirements for each specific case. LGA’s Lab Lift is an example of a new data source that can eliminates a lot of the redundancy of sourcing evidence. 

See also: Breathing Life Into Life Insurance

Understanding Your Map’s Legend

By harnessing decades of data and listening to where other industry leaders are finding patterns, life insurers can minimize the amount of evidence for a given risk appetite. Automating straightforward applications with instant decisions and automated underwriting programs take the pressure off the underwriters to do what they do best on the more complicated applications, and impaired risks. The trend toward instant decision life insurance journeys will help get coverage to historically underserved markets. 

Red Sky at Night

Brokers and advisers have always been meeting customers where they are on their journey, it is how the great ones do it week after week, year after year. By taking a few pages from their book, carriers can ease the burden on the advisers as well, giving them clearer options for smooth sailing no matter their client. 

Insurtechs and eye-popping valuations have generated recent headlines. However, the core element of life insurance is a promise – between the carrier and the insured. Underwriting is a check and balance to make sure that both parties can honor that promise. Processes to enhance the efficiency serve not only the quick wins but finding the best solution for more complicated cases because every human is different. And we now have the technology, historical data and human brain power to make more promises to new segments of the population.

What word would you pick to describe the future of underwriting? If "adaptable" came to mind, you would be joining the majority of insurer executives in the mid/large commercial lines segment who thought the same in a recent SMA survey. 

The past two years are clear evidence of how commercial lines, especially underwriting, adapted to a rapidly changing world. However, another phenomenon was also occurring as insurers pushed their underwriting initiatives forward: Many also realized that their digital capabilities were not as far along as previously thought. Now, insurers are accelerating their plans to move their underwriting departments into the next era. 

According to SMA’s new eBook, “Middle-Market and Large Commercial Lines Underwriting Transformation: The Next Era,” 87% of insurers expect big changes to occur in underwriting within the next five years. In 2020, only 69% said the same. Moreover, change is expected to touch every aspect of underwriting, from underwriters’ roles and responsibilities to the processes and resources used. Consider that 90% of leaders think their underwriting departments will significantly differ in five years, with many believing the role will evolve to blend the human touch with AI. In contrast, one in 10 executives thinks technology advancements will eventually eliminate the underwriter role. 

See also: Dramatic Shift in Underwriting Ahead

How insurers leverage their underwriting staff to drive change internally may also affect the path forward of the underwriter career. The more than half of insurers currently tapping underwriters to contribute to innovation initiatives may see their needs for tech-savvy talent increase. At the same time, several insurers are missing opportunities to capitalize on the expertise of underwriting teams to push their organizations into a new digital era.  

Learn more about the current state of underwriting transformation and the path forward for the mid/large commercial lines segment by reading SMA’s new eBook, “Middle-Market and Large Commercial Lines Transformation: The Next Era.” 

The term “liquid biopsy” has come into common usage, and the concept is receiving significant attention in the diagnosis and treatment of cancer. Liquid biopsies have been evaluated in other clinical areas, including prenatal diagnostics, organ transplant, autoimmune disease, trauma, myocardial infarction and sepsis. Liquid biopsy has been defined as “the collection of samples of non-solid biological tissues – i.e., body fluids – to test and analyze for relevant markers in specific diseases.”

Invading microbes either die naturally or are killed by antibiotics and the body’s immune response. Upon death, microbial genetic material and nucleic acids are released into the bloodstream or other bodily fluids. Sequencing methods are then used to identify fragmented microbial cell-free DNA (mcfDNA), extracellular DNA that can come from any cell in the body.

As this field’s technology is advancing rapidly, close attention must be paid to ensure that any test results are accurate and reliable, for use in both clinical and insurance settings. Potential uses of liquid biopsy in non-cancer settings include screening, identification of diseases and treatment selection and prognosis. Using liquid biopsy as an initial screening tool could reduce exposing individuals to unnecessary further tests and possible higher morbidity risk.

Infectious diseases such as bloodstream infections, tuberculosis, fungal and parasitic infections, endocarditis, pneumonia, urinary tract infections and infections following organ transplants can potentially be identified using mcfDNA as a marker of infection. The ability to identify pathogens quickly using non-invasive screening methods may provide significant benefit to patient outcomes.

Researchers have developed several mcfDNA PCR-based tests that use blood and urine specimens to diagnose infections. The mcfDNA plasma test can detect more than 1,000 organisms in the bloodstream that are responsible for causing infection. It has shown sensitivity of 93% and specificity of 63%. The test is also able to detect probable cause of sepsis in nearly half of patients (49%), compared with 18% using blood culture and 38% using microbiology tests. It also provided better results in detecting pathogens from individuals who had received antimicrobial therapy within two weeks preceding presentation compared with blood culture (48% versus 20%).

There are, however, issues with using liquid biopsy for clinical diagnosis of infectious diseases. Concentrations of cfDNA vary considerably from person to person, and there can be a lack of quantitative results differentiating infection from potential contaminants. Differences between practice and protocols with liquid biopsy methodology, and cost of sequencing further complicate its implimentation.

See also: Genomics Revolution in Life Insurance

Elevated biomarker levels may be indicative of other pathological conditions, including infection, sepsis and autoimmune diseases. Sensitivity has been shown to be between 70% and 93% and specificity to be between 63% and 88% for mcfDNA liquid biopsy tests. cfDNA sequencing tests lack the ability to detect RNA virus pathogens such as human immunodeficiency virus (HIV), Zika, hepatitis C, respiratory syncytial virus (RSV), enteroviruses and norovirus.

Noninvasive prenatal testing (NIPT), which analyzes fetal cfDNA in the maternal bloodstream, is being more frequently used since 2011. It is used to screen for fetal chromosomal abnormalities and to detect other fetal and pregnancy-associated conditions such as preeclampsia, fetal growth restriction, congenital heart diseases and gestational diabetes. Fetal DNA shed into the mother’s bloodstream can also be sequenced to test for common chromosomal abnormalities such as trisomy 21 (Down syndrome), trisomy 18 (Edwards syndrome), trisomy 13 (Patau syndrome) and monosomy X (Turner syndrome). 

Extracellular Vesicles (EVs) are rudimentary cells, mostly isolated from blood plasma and serum. These are considered a promising liquid biopsy tool for noninvasive diagnosis of disease, as they contain microribonucleic acids (miRNAs), messenger RNAs (mRNAs), DNA, proteins and lipids. EVs derived from blood samples have shown the potential to diagnosis conditions such as Alzheimer’s disease, amyotrophic lateral sclerosis, Parkinson’s disease and Huntington’s disease. Saliva liquid biopsy testing may help diagnose conditions such as oral lichen planus, periodontitis and Sjogren’s syndrome, as elevated protein levels in saliva EV are involved in wound repair.

Summary 

The rapid development of liquid biopsy technology, along with its potential for multiple clinical applications, including new cancer screening tests, has garnered significant attention in both medical and insurance literature. mcfDNA technology is already providing valuable diagnostic information, but further work will be needed to establish quantitative reference parameters to provide a clearer interpretation of results. Given their multiple potential uses, they will surely affect many aspects of insurance medicine and products. Thus, while currently presenting some challenges to the insurance industry, liquid biopsy technology also represents great opportunity. Insurers should seek ways to embrace and find opportunity with these promising developments in the emerging field of liquid biopsies.

I am baking in Northern California, where the temperature is to hit 114 degrees today, as part of a four-day stretch with highs above 110 and a 10-day stretch with highs projected to be above 105. So, I have zero reason to doubt the effects of climate change. But a question has been slowly forming in my head: Where are all the hurricanes?

Almost all the predictions this spring were for another worse-than-normal season, following a stretch of six years that saw five of the 11 most destructive hurricane seasons on record in the U.S. Yet not a single named tropical storm formed in August, the first time that has happened since satellites started monitoring the Atlantic in 1967.

In fact, no named tropical storm had formed since July 3. Two have formed thus far in September, one that has become a hurricane (Danielle) and one that is expected to do so shortly (Earl), but both are expected to head north and dissipate without making landfall. So, we are now past what is expected to be the peak of the hurricane season, and it's looking wonderfully quiet.

What is going on?

A generally cited reason is "the strong subtropical-tropical sea surface temperature gradient. This strong gradient increases the temperature differential between the subtropics and tropics, which can help increase frontal activity into the tropics, increasing shear and bringing in dry air too," said Dr. Phil Klotzbach, lead forecaster at Colorado State University.

For us non-meteorologists, that translates as: Water in the North Atlantic is at record warm temperatures, but water in the central Atlantic is closer to average or even a bit below. The greater-than-usual difference in temperature seems to be creating high winds that are breaking up tropical storms before they can form.

In even simpler terms: We're getting lucky. 

Forecasters acknowledge that they don't truly understand what's happening -- some also cite unusually dry air over the Atlantic or sand blowing off the Sahara as reasons major storms may not be forming. They also note that there is still plenty of time for hurricane activity to catch up to earlier expectations: September is typically the worst month of the season. And, of course, it only takes one massive hurricane making landfall to cause tens of billions of dollars of property damage and threaten lives.

But, for now, we can hope for the best. Maybe often-battered communities can get a break, and insurers can build reserves for future hurricane seasons.

I'll be following the issue closely -- from inside, with the air-conditioning on.

Cheers,

Paul 

Inflation, rising interest rates, seesawing stock markets, supply chain disruptions and geopolitical uncertainty might not have spurred some of the world’s largest insurers to invest in financial transformation. But they and others in the insurance business who have made the leap are much better positioned to deal with what appears to be a major reset of the financial order thanks to those investments.

While a term as broad as “financial transformation” means different things to different insurers, there are constants. One is harnessing the cloud – public, private or hybrid – to enable an aggressive pruning of redundant data sources and, in doing so, provide a single source of truth. 

A second is exploiting that single source of truth to the maximum possible extent. We’re seeing real-time or near-real-time reporting rather than having to wait for hours or days to combine and rationalize data from disparate sources and run batch reports. Also, having a single, reliable data source opens the doors for new machine learning and artificial intelligence tools developed in-house or by partners – PwC’s Cash Intelligence being one example.

A third involves a concerted effort to derive real business benefits from the major investments needed to meet the regulatory requirements of IFRS 17 and LDTI – not to mention prepositioning for compliance with future regulatory demands such as those that may emerge from the International Sustainability Standards Board. Often, doing so involves modernizing not only the financial function as narrowly defined, but also the actuary function. That combination lowers operational costs and brings immediate, much more comprehensive visibility into one’s own investments and fast-evolving risk profile, and it enhances agility in adjusting portfolios based on the shifting sands of a volatile market environment. 

A fourth element of successful financial transformation has to do with acting on the new insights into one’s own operations to experiment with new business models and exploit the opportunities that an unpredictable market environment can open up. 

See also: 4 Strategies as Customer Behavior Changes

These four elements are already being put into place – primarily by major insurers that, given their scale and the operational complexity, have been the leaders in financial transformation. Major insurers also have the biggest budgets, of course, and financial transformation is an investment. But we’re seeing that investment pay off, as demonstrated by these examples: 

• The U.S. subsidiary of a major European insurer launched its financial transformation effort to meet IFRS 17 requirements. That involved building a multi-ledger, parallel-ledger architecture, one that enabled IFRS testing to happen fast. But the company recognized that insurance was only part of the story. Its finance team could work faster and sharply cut month-end and quarter-end turnaround times while boosting throughput by roughly half. Advanced analytics accessing a common data platform could derive insights that, in the past, would have remained shrouded and unactionable. 
• Regulatory compliance also drove a major reinsurer’s financial transformation, and, as was the case with many others, compliance was only the start. A new multi-valuation subledger bridged the gap between operations and actuarial systems, and that and other improvements brought efficiencies of surprising power. One example: Time to financial close shrank from 55 days to just five days.
• A midsize European insurer reported better support for decision-making with real-time business insights and faster reporting through the ability to use general ledger reports in the settlement process. The simplified IT landscape enabled one source of truth and increased transparency, empowering employees to work more productively. Among the benefits include 70% faster financial report generation and efficiency gains of about 20% in both annual auditing and, more generally, the completion of finance-related tasks. 

Other cases show financial transformation to be paying off. A South American insurer reported better visibility and transparency of its data and processes as wells as improved sales and budget planning, with a 75% reduction in accounts-receivable closing time. A Central European insurer rationalized 20 finance systems running across its 119 companies into a single solution, using parallel ledgers and flexible data modeling to shrink the number of general ledger master records by 75%. Their quarterly close now happens four weeks faster.

In short, the idea that financial transformation can help insurers better serve their customers even as they position their businesses for rough seas is no longer theoretical. Success in an uncertain, highly competitive global insurance business is increasingly going to depend on it.

More than any other area of insurance operations, claims is best-positioned to benefit from a digitized, unified and continuous ecosystem to meet the needs and exceed the expectations of today’s consumer, support management’s key strategic objectives and bring compelling new value to policyholders. 

It is generally understood that, with a connected ecosystem, data and information flow easily and quickly among myriad stakeholders, speeding decisions and improving outcomes. This holds true for insurance, where digitally connecting all providers necessary to quickly resolve a claim can radically improve consumer experiences, customer loyalty and retention.

Though often perceived as a technology laggard, the insurance industry proved during the pandemic that virtual processes are not only possible but welcome and more efficient. This shift to a more digital-first process was made possible by a combination of connected technologies, many of which will also fuel the industry’s vision of straight-through processing. 

Creating a Connected Underpinning 

Connected ecosystems are enabled by cloud technology. Cloud is not new -- its roots tie back to 2006 -- but the insurance industry is now moving to the cloud in growing numbers. In fact, the recent Arizent/Digital Insurance 2022 Prediction Survey revealed that nearly 70% of responding insurers will be investing new or incremental resources in cloud in the next 18 months. Insurers are beginning to recognize the benefits as  some of the insurance industry’s information and technology providers have been supporting them using cloud technology for years, and the value it has brought to insurers has added additional validation and encouragement to those yet to migrate to cloud technology.

From an operational and technical perspective, these benefits include the ability to adapt to different work environments, facilitate experimentation, accelerate innovation and drive more efficiency into the business. From an end-customer perspective, cloud means better, faster service experiences and outcomes across touch points with the insurer.

Many insurers are already using the cloud in claims and other external transactions. For example, when an insurer uses a third-party information provider solution to manage external aspects of claims, such as requesting an estimate of repair cost and making a damage inspection assignment, chances are that the connections among carrier, customer, adjuster and the repairer are taking place in the cloud.

To validate this, we spoke with Marc Fredman, chief strategy officer at CCC Intelligent Solutions. He confirmed that the cloud is hard at work for its insurance clients, adding that the CCC cloud has facilitated more than 150 million interactions on behalf of its customers. 

See also: The Case for Cloud Computing

The Great Cloud Migration 

If you’re new to the concept, the cloud can be considered a collection of remote data centers. It avoids the need to store data on internal computer hard drives; access to information and applications takes place over the internet, which is available anytime, from anywhere. Clouds can be private or public and single or multi-tenant.

At its simplest, a private cloud is a service that is completely controlled by a single organization and not shared with others, while a public cloud is a subscription service that is also offered to customers who want similar services.

In a single-tenant cloud, only one customer is hosted on a server and granted access to it. Multi-tenant clouds can be compared to the structure of an apartment building. Each resident has access to their own apartment within the agreement of the entire building, and only authorized individuals can enter the specific units. However, the entire building shares resources and common areas. A multi-tenant cloud is what’s needed to power dynamic ecosystems at scale.

A cloud platform enables insurers to reimagine insurance as continuous customer engagement. It helps mitigate and manage risk and leverage data-driven capabilities and analytics at scale to accelerate business impact and drive retention through better customer experiences. Simplifying application programming interfaces (APIs) to third party providers, cloud connectivity enables a virtually unlimited number of opportunities to seamlessly connect external and internal resources in support of policyholders. And providing capabilities like process configuration and automation enable insurers to bring together innovative, compelling solutions for their customers.

For example, a P&C insurer writing personal or commercial auto and property in regions of the country susceptible to extreme weather can leverage a cloud platform, digital CRM systems and artificial intelligence algorithms to integrate with high-fidelity weather data providers and “push” warnings to policyholders, giving them time to move their property and themselves out of harm’s way. 

McKinsey, in its recent quarterly 2022 report “Cloudy with a Chance of Billions” identifies insurance as a top beneficiary of cloud adoption, predicting an industry increase of between 43% and70% in impact as a share of 2030 EBITDA. McKinsey goes on to state that “you might think that cloud merely optimizes IT, but 75% of cloud’s predicted value comes from boosting innovation.” 

Claims in the Cloud: The Ideal Use Case

Claims operations, which have been traditionally treated as outputs of a “reactive back office,” are striving to become a powerful differentiator. Through innovative, unrelenting customer service and multifaceted talent, claims is capable of driving strong results while reducing costs and enabling growth free of incremental expenses.

According to Deloitte, the insurance claims process is core to industry disruption. At the center of this insurance reset, the new growth engine is customer retention and loyalty, both of which are largely driven by customer interactions with their insurers, specifically the claims experience.

The key enablers for the likely future of claims are a combination of process transformation, adoption of new technologies, a connected partner ecosystem and a talent model that values technical claims handling and data science skills. Adoption of new technologies should reduce pressures of an aging workforce as no-touch insurance claims processing increases. At the same time, claims professionals will need greater technical fluency to take advantage of the increased volume and velocity of available information.

Carriers are focused on moving as quickly as possible toward digital, straight-through processing of claims. However, everyone acknowledges that this is not possible without a cloud infrastructure. Once in place, it provides the ability to efficiently extend digital processing beyond auto physical damage, where much of the innovation is happening today, to related claims functions such as casualty, property repair/restoration, payments and subrogation and among a multitude of supporting partners. 

CCC is at the center of enabling the highly complex end-to-end claims processes for our multitrillion-dollar industry. CCC’s Fredman shared that the company’s cloud technology connects more than 30,000 businesses across insurers, repairers, automakers, medical providers, lenders, parts suppliers and more. In a recent conversation, he noted a few examples of higher-frequency use cases for cloud-enabled transactions, including; 

• Computer vision of smartphone images to quickly identify total losses and provide repair estimates for decision-making by policyholders, adjusters and collision repairers
• Triaging claims with third parties including towing, car rental and total loss salvage services 
• Straight-through processing of auto physical damage claims, leveraging AI to enable minimal to no manual intervention to generate line-level estimates in seconds
• Automated applications in casualty claims, determination of fault and comparative negligence in the adjudication of medical bills 

Core system providers are also beginning to use cloud to offer client access to vendor marketplaces. In this use case, the sponsoring company has developed a core system for a specific segment of the industry on which sits a collection of third-party apps and content providers for use by the customers of that core system. The Guidewire Marketplace, Duck Creek Partner Ecosystem and the Majesco EcoExchange are prime examples of insurance marketplaces. 

We get asked all of the time about the difference between a marketplace and ecosystem platform like the one Fredman describes. While somewhat similar, a marketplace offers a gateway for customers to access third-party apps to augment their services. A network platform can do this along with its defining dimension of connecting ecosystem partners to enable the seamless exchange of information, assignments, reviews and approvals to deliver more efficient claims resolution.  

For insurance, ecosystem platforms free up staff time in claims organizations and help insurers differentiate themselves by focusing additional resources on the overall claims experience and increasingly on claim prevention vs. claim resolution. Preventing claims will change the relationship between insurers and customers—from a loss focus to a partnership with shared interest in loss prevention. Connected telematics programs combined with third-party data can alert customers to risks before losses occur. 

See also: Data Security to Be Found in the Cloud

Ecosystems and Network Effects

James Moore is credited with articulating the concept of business ecosystems, defining them as an economic community of interacting organizations and individuals – the organisms of the business world. In our context, ecosystems are connected groups of companies, all of whom are engaged in related but different aspects of a specific supply chain serving one or more common customer. The term “ecosystem” is extensively used today in place of the word "industry," though the terms aren’t interchangeable as an ecosystem implies connectedness and industry, while related, isn’t by definition connected through technology.

Successful insurance ecosystems will offer wins not just for end-users but for all participants. Their value grows as more people and institutions join, which is known as the network effect, the phenomenon by which the value or utility a user derives from a good or service depends on the number of users of compatible products. Network effects are typically positive, resulting in a given user deriving more value from a product as more users join the same network.

Challenges of Cloud Computing

In spite of all of the many compelling reasons and rewards for carriers to move to the cloud, challenges do exist, both real and perceived.

Migrating away from legacy systems can be difficult while prioritizing limited resources and the conflicting demands of system transformation of policy administration, claims and billing functions. Concerns over sensitive data security need to be addressed and satisfied. And cloud reliability including 24/7 information availability are critical. However, many forward-looking carriers have overcome these challenges.  

The Future of Insurance Cloud in Claims and Beyond

The future opportunities for claims transformation using cloud technology are truly exciting. They include the ability to extend and expand more intelligent straight-through-processing across auto physical damage and beyond, including the automation of casualty claims, property repair/restoration, payment and subrogation.  The uses of connected vehicle technologies, including telematics, are still only narrow and rudimentary, but future potential with cloud technology includes real-time first notice of ;oss, behavioral modification for safer driving and the integration of third-party weather data, surface conditions and road hazard warnings and rerouting.

Ultimately, when fully adopted, cloud-based platform technology will enable the auto insurance industry to make a critical and fundamental pivot away from purely reactive claims response and processing to claims minimization and avoidance, thereby delivering true, higher value protection to its customers and better operating economics to all of its stakeholders.