The personal lines segment is known for leading the charge with innovations and technologies – a reputation that only strengthened during the pandemic. From digital underwriting submissions and virtual inspections to digital first notice of loss (FNOL) and other capabilities, personal line insurers were poised to meet the new digital needs of customers and employees when other industries struggled to adapt to the virtual era. However, in enhancing processes and workflows to adjust to the pandemic's demands, insurers also uncovered gaps in their digital capabilities, forcing them to reexamine their existing projects and identify new opportunities.

A recent SMA study shows that 41% of personal lines insurers are revisiting their digital transformation strategies in 2022, a significant jump from 19% in 2021. This heightened activity indicates the acceleration of the digital projects identified in SMA's new research report, "Digital Transformation in Personal Lines: Project Priorities for 2022 and Beyond."

Unsurprisingly, personal lines insurers are most focused on expanding policyholders' self-service capabilities. With the pandemic creating the essential need for capabilities such as obtaining a policy, paying a bill or filing a claim online, customers now expect sophisticated systems that allow them to interact with their insurers when and how they want. Half of all insurers focused on personal lines are also implementing digital platforms. Because digital platforms leverage application programming interfaces (APIs) and low- and no-code technologies that allow for connectivity from various channels, SMA is seeing more and more insurers of all sizes shifting from portals to platform technology. Other projects aimed at leveraging emerging technologies are also rising on the priority lists of personal lines insurers as they complete their upgrades of more foundational technologies.

See also: Foundational Tech for Personal Lines

Although signs point to continued digital transformation acceleration across personal lines in the coming years, competition will only grow fiercer as progress gains momentum. Insurers that pause their digital projects for too long risk falling behind peers, losing distribution partners and being dismissed by current or potential customers. To stand out in the saturated personal lines market, insurers must commit to modernizing capabilities to serve agents, policyholders and employees and push forward in their digital transformation journeys.

Talent has been a front-and-center topic in boardrooms across the U.S. amid the pandemic, widespread resignations, a labor shortage and other trends challenging the recruitment and retention of employees. Yet, through the adversity, companies across the insurance ecosystem have adapted remarkably well, including the vendors that serve the industry.

Recently, SMA surveyed insurance professionals to understand how companies are approaching talent in 2022 and beyond. As a follow-up to SMA's research report focused on insurers' talent objectives, SMA has released a report that offers a fresh view of how technology/software vendors and services solution providers are shaping their talent strategies this year.

The technology sector has long attracted young professionals looking to jumpstart their careers. In fact, a study by Glassdoor found that most Gen Z job seekers are applying for tech-related positions. But when jobs are in high demand for both employers and prospective employees, it creates a hyper-competitive job market that requires a strategic approach. So, it is no surprise that insurance vendors consider attracting new talent as their No. 1 talent objective in 2022.

SMA's study shows that vendors have found new ways to recruit talent since the pandemic's start. Sixty percent of vendors reported recruiting from broader geographic areas as the primary change in their recruitment strategies in the past two years. This is a significant finding when considering that many technology/software vendors were ahead of the remote-worker trend when they employed personnel in various geographic regions pre-pandemic.

Another 40% of vendors stated they are using social media or are partnering with universities and associations to reach talent pools that may have previously gone untapped. But it is not enough to simply set new talent strategies – leaders at vendor companies must ensure their organizations are allocating resources, setting clearly defined goals and holding themselves accountable to be truly successful in their talent acquisition.

See also: In Competition for Top Talent, Innovation Matters

With the current competitive talent market expected to continue into 2023, it is critically important that vendors rethink their recruitment strategies in 2022 and the roles and skills needed to deliver products and services to the industry. There is now an opportunity to reevaluate traditional processes and redefine roles to provide a quicker onboarding experience and improve the organization's technology talent. The key will be achieving balance within teams as the industry is driven to expand its talent search well beyond the boundaries of insurance.

For more information on insurance vendors' talent strategies for 2022 and beyond, read SMA's recently published research report, "How P&C Insurance Vendors are Responding to the Battle for Talent.”  

As an accountant looking at the uncertain economy, I can’t help but say, “It’s an accrual world.” Joking aside, certified public accountants (CPAs) and insurers should do more to help clients in this economy, and, as a CPA, I know how insurance can help individuals and families. 

Whether following the loss of a loved one or a financial loss, life insurance is a lifesaver—truly. But if an insurance agent doesn’t have a chance to make this point, if he doesn’t know who needs help, a CPA can fill the gap. 

For example, if I tell a client he should buy life insurance to protect his family or lower his tax burden, I am not selling him anything. I am telling him what he should do, because it is right and because I don’t have a conflict of interest. CPAs who take a similar approach are why 86% of small business owners say their most trusted adviser is their accountant.

If I refer a client to an agent, it’s because of a specific policy an agent offers.

If I don’t know how a policy works, or don’t understand what an agent says about the workings of a policy, I will recommend a different policy or agent. The point is, I want to help my clients, and I know insurance can be a valuable form of help. But I must first communicate with my clients, which is why I read news and books to expand my knowledge.

In turn, insurance agents must communicate with CPAs, too.

Collaboration is everything. That is, if an agent emphasizes the tax benefits of a policy, he should encourage clients to consult with a CPA. If the benefits are clear, let a CPA say the same; if the terms are reasonable, let a CPA come to the same conclusion.

The more agents and CPAs collaborate, the better. 

See also: Ready for New Accounting Standard?

If collaboration improves communication, making it easier for everyone to explain or understand the importance of insurance, society will be better off.

Insurers must take the initiative, however.

As a whole, the insurance industry needs to contact and build relationships with CPAs.

The relationship is mutually beneficial, because it increases a CPA’s network of potential referrals. This network also allows CPAs to call on insurance agents. The result is a network of trust, for the good of clients and agents and CPAs alike.

Creating this network is not expensive, thanks to industry directories, social media, existing contacts and the internet in general.

The only thing necessary to create this network is action.

CPAs and insurers need to act, even if the act is nothing more than a phone call or letter (via email) of introduction. This act alone may be enough to establish a  conversation; and something—something positive—is better than nothing.

This network can help clients prepare for or protect themselves from the uncertainties of the economy.

Whether the economy worsens or inflation rises, no matter how bad things get, CPAs and insurers can plan for—and avoid—the worst.

Working together, both industries can be models of collaboration and communication.

The two can inspire more industries to follow their example, putting CPAs and insurers at the forefront of innovation.

2022 has been another roller coaster ride. Inflation hit a 40-year high in February, and, according to the World Bank, global growth in 2022 is expected to decelerate from 5.5% to 4.1%. We can blame continued COVID-19 disruptions, supply chain bottlenecks and anticipated higher food, gasoline and energy prices, combined with worker shortages and recent geopolitical issues related to the Russia/Ukraine conflict. 

But before we talk about what this means for auto insurers in the second half of the year, we need to go a bit deeper into the causes of the current inflation crisis.

First, supply shortages caused by the ripple effect of COVID shutdowns on manufacturing and distribution centers in multiple geographies have affected nearly every industry. For instance, I recently looked into buying furniture and learned that, not only would it take up to four months to arrive, but I’d also have to pay 20% more than I’d have had to pay last year. 

The auto industry is no different. Parts shortages are so severe that Ford had to shut down its Flat Rock assembly plant for more than a week because it could not secure enough chips. If manufacturers can’t get parts, the situation is going to be at least as severe for repair and body shops. For auto insurers, this means they should expect higher claims costs in the second half of the year and longer wait times for damaged vehicles to be repaired and returned to their owners. Prices for auto parts will definitely continue to rise, given manufacturing shortages and distribution delays. 

Auto repair costs 

What’s more, auto body and repair shops are facing the same labor shortages and increasing wage pressures that every other business is experiencing, further increasing costs for repair. In response to the labor shortage and other factors fueling inflation, the Federal Reserve voted to raise rates by half a point in May, the largest increase in more than two decades -- then three-quarter point in June. But the increases will take time to have an effect and are unlikely to temper auto claims costs much in the next six months.

Another factor to consider is how companies entice the last of the pandemic’s workforce dropouts to jump back into the job market. According to JP Morgan Chase, continued strong demand for labor should attract those workers, but demographic trends may still drive a long-term worker shortage. Moreover, even a return to pre-pandemic labor market participation rates and higher wages won’t reverse the aging of the American workforce or the slowing of immigration flows. As a result, businesses will need to invest in technologies that allow smaller teams to be more productive. 

Thankfully, used-car prices have begun to decline from the eye-popping heights they reached last year. Cox Automotive reports that used vehicle prices declined 1% in April over March, marking the third straight month of declines. But prices are still close to twice what they were over the previous decade. So while auto insurers may see a bit of relief in the second half of the year in the cost of replacing a totaled vehicle, costs will still remain historically high.

See also: What to Do About Rising Inflation?

Roadside assistance

But these are not the only costs that insurance carriers should expect to rise. Roadside assistance claims may not be a large share of total claims by amount, but they are by far the most common claims by volume. And inflation is having a large impact on the towing and roadside industry. 

After auto usage and road volume declined to unprecedented lows in 2020 due to the pandemic, motorists have significantly increased how often they drive and even changed their driving behavior now as public health measures have loosened. According to the U.S. Federal Highway Commission, traffic volume in November 2021 was up 11% year over year and is continuing to climb in 2022. 

A recent survey we conducted of tow providers found that 22% have more work than they can handle, which has led to dispatching delays and longer wait times for motorists stranded on the side of the road in some areas. Continued worker shortages, equipment shortages, higher fuel costs, higher maintenance costs, pandemic-related issues and inflation may affect high-performing towing and roadside program performance metrics, service-level agreements (SLAs) and pricing moving forward. As a result, towing and roadside rates in H2 2022 will continue to rise, with rates increasing across the US.

Additionally, conditions have prompted nearly three-quarters (73%) of tow providers to prioritize work. And while one might expect that their top priority would be to jump on the most lucrative jobs or contractual obligations, their No. 1 choice was to do the closest jobs first. In this way, tow providers can spend less on fuel, and each truck can complete more jobs per day, increasing both revenue and profit.

When service providers have more work than they can handle, that results in longer wait times for stranded motorists. Unfortunately, longer customer wait times lead to unhappiness, which has a domino effect by lowering net promoter scores (NPS). Since the return of pre-pandemic driving patterns, traditional motor clubs and other roadside providers have started to struggle to meet the demands of their clients, while those who rely on algorithmic systems that find the nearest provider have been able to protect their NPS ratings and, consequently, the customer satisfaction scores of their insurance partners.

The Outlook for H2 2022

The next six months will prove challenging for auto insurers when it comes to costs. The economy will have to overcome current downside risks, including simultaneous Omicron-driven economic disruptions, further supply bottlenecks, a de-anchoring of inflation expectations, financial stress, climate-related disasters, geopolitical conflicts and a weakening of long-term growth drivers. If this doesn’t happen, unfortunately, inflation will continue to drive up prices for all services.

A few positive signs are on the horizon. The measures taken by the Fed and the trending decline in used car prices point to some possible relief from inflation in 2023.

In the meantime, carriers will need to take measures to control costs and increase efficiencies.

The principal reserving challenge today is the opportunity cost of inefficiencies, primarily caused by the ineffectual use of human capital. This inefficiency makes it hard to redeploy more resources for continuous development and drains talent from reserving teams. The reporting process itself and supporting activities are far too onerous and consume too much human capital resource.

Given this strain on resources and the continuous compromises made due to deficiencies, why has there been so little innovation to date? And why do we think things are going to change?

Uniquely complex

The reporting process is uniquely challenging due to its very different objectives, constraints and timescales compared with typical modeling processes. The governance controls and audit requirements are much more onerous. This adds significantly to the difficulty of maintaining the process - let alone considering innovative techniques and new approaches.

For example, in some markets there is a requirement to print out information on the model parameters and the models used with enough detail for someone to independently recreate the results, which then becomes even more challenging when you start to add complexity to the models involved.

The reserving process itself is an optimization exercise. We recognize that there are a range of reasonable best estimates at any given valuation date; the challenge is in optimizing the selection of our best estimates to meet reserving objectives over time. This is a non-trivial process control problem, and real progress can only be made with a step change in how we think about and perform reserving.

There is, of course, more to reserving than the reporting process. But until we address the fundamental issues here, there is little opportunity for growth. There has been a common perception that reserving is a statutory requirement and nothing more, but reserving is a critical part of business intelligence.

What has changed

The difference now is that advancements in technology provide the tools and resources necessary for a step change in capabilities. For example, workflow management solutions enable the production of much more decision support material in a shorter time, while maintaining and improving governance and controls. And the leaders in this space reduce the need for ad hoc analysis, have more data-driven analysis to support decision making and free up time to embed further capabilities.

Tools provide a powerful solution for integrating software and systems in an end-to-end process, supporting a best-in-class approach to the architecture. This allows much more flexibility to use the best tool for a particular job in an end-to-end process.

The availability of cheap computing power is opening up possibilities to leverage data assets. For example: Robotic process automation is being used to produce more for less with increasing granularity; interpretation techniques are helping decision makers identify the pertinent information and prevent this being lost in large volumes of analytical output; and machine learning is being leveraged to unlock value from unstructured data.

The architecture possibilities enabled by the capability to integrate a diverse range of systems and applications into a coherent process has really expanded the possibilities, not just within reserving but across the organization. For this reason, real change in reserving practices appears feasible in the near future.

See also: How Machine Learning Halts Data Breaches

Impact of machine learning

The role of machine learning should be limited primarily as an enabler for targeted elements of the reserving solution, rather than as a one-stop remedy. Further, machine learning needs to be considered in the context of a wider road map to a future target operating model. Investing in the right development at the wrong time is probably the biggest pitfall when it comes to machine learning and reserving.

Besides operational efficiency and process control, the main benefit of machine learning for reserving is improved insights, and at its core it is designed to tackle the problem of optimization. We are effectively running an optimization to hit a moving target, with the objective of considering the cost of being wrong to provide meaningful outputs. This is very different from machine learning techniques where supervised learning methods are typically used with a well-defined response to simply minimize the error in fitting to historic data.

In pricing and risk modeling, for example, an insurer can assume that the risk differentials in their recent historic policy and claims data are representative of experience in the near future. This is a reasonable assumption in practice.

The difficulty in reserving is three-fold. First, the information necessary to inform the answer far in the future may not be in the historic data. So, building a predictive model of historic data is not going to provide the answer. Second, the estimates will change over time as the insurer generates more information on what the outcome will be. Finally, the reserving process and the way the insurer communicates results are going to be very different from today. This will require many more visualizations. Back testing diagnostics, for example, will be essential. This is why the road map is so important for placing developments in the right order to get where they need to be.

In terms of a single machine learning method that is going to magically solve all the problems in reserving, there is no silver bullet. Indeed, some developments will simply exacerbate existing problems if the right parts of the wider solution are not in place beforehand.

We are seeing a gradual move toward the use of machine learning in projection of ultimate losses. In considering the end goal for machine learning in reserving processes, there is a useful analogy in process control applications in robotics. Consider an exercise of programming a quadcopter to fly through a hoop that is thrown through the air at random. The quadcopter needs to monitor the data feed from sensors tracking the position of the quadcopter and the hoop to determine adjustments to the speed and direction the quadcopter should make.

How the hoop is thrown, how the wind blows during flight and numerous other variables mean that the quadcopter cannot know where that hoop will be when it eventually flies through it. The algorithms optimize a decision, given all information available at the time, to minimize the probability of missing the target at that point in time, and repeat this at regular intervals until the target is reached. In reserving, we cannot know what the ultimate loss for any given cohort will be, any more than the quadcopter can know where the hoop will be. But we can optimize the output from our reserving processes to acknowledge that we're on a journey and minimize the cost of being wrong at any given time.

See also: The Risks of AI and Machine Learning

Road map to unlock reserving capabilities

Insurers that have had the greatest success so far in improving their reserving capabilities are those that have made the most progress on the journey toward their defined future operating model. Strategic planning on developments and clear objectives for these exercises up front is a key differentiator for market leaders. There is a lot that can be done to realize the benefits of operational efficiency and process control before resorting to machine learning. It has its place, but it's not the complete solution.

Embedding a workflow management solution in the reserving processes, such as WTW’s Unify technology, is a critical enabler for the journey. The step change in automation capabilities will enable insurers to produce significantly more decision support material, while mitigating the problems of maintaining the governance, controls and audit, in addition to freeing resources for development activities. This tooling is essential to have in place to enable any real growth in data-driven analytics as well as supporting reserving without expenses spiraling out of control. Insurers will have the capabilities to readily integrate new tooling into the environment, with improvements in governance, control and audit. Robotic process automation will then complement these capabilities by producing increasingly sophisticated data-driven analysis and output in a timely manner for the same headcount.

While commercial insurance is still a very paper-based industry, the issuance and tracking of certificates of insurance (COI) is ripe for innovation. A COI is a document that provides proof of a business's insurance coverage and can be shared with clients and vendors.

COIs are often shared as paper documents or email attachments, which means they can quickly become outdated. They must be checked, re-checked and verified constantly to make sure the information is still valid. This is a time-consuming and inefficient process.

That's where smart COIs come into play. A smart COI is a living, breathing document that contains policies available for real-time monitoring. It uses dynamic data to ensure businesses always have continuous, compliant insurance coverage. Smart COIs are created by agents and remain current as a result of direct connections, via application programming interface (API), with agency management systems. This connection allows for seamless, real-time data sharing.

Thus, COIs move from being static, paper documents, providing a number of benefits for both businesses and insurance agents.

Businesses know their suppliers' current coverage at all times via continuous feeds from their agents' systems, thus reducing risk. This provides several crucial new benefits. For example, businesses can trigger action when suppliers are non-compliant by denying access to systems or buildings, stopping a payment or canceling an order. Businesses can receive notifications when suppliers' insurance coverage lapses, is canceled or is reduced below required limits.

Businesses using smart COIs to share coverage with clients makes them more attractive to do business with. Their clients know that the organization is up to date in its coverage and can check on any particulars in the policy at any time. There is also less manual, paper-based work for internal employees, which leads to greater operational efficiency.

For an insurance agent or broker, smart COIs make their lives much easier and allow them to work more efficiently. Agents know that, if any situation arises, they have the most accurate data available on the COI. They don't have to spend time digging through paperwork or checking and double checking policy information. They can quickly respond to requests and do so digitally, without any cumbersome paperwork. Smart COIs also provide agents with real-time alerts that let them know when their clients may need more insurance coverage and how much.

From a risk management perspective, the current COI process without a smart COI is flawed at the foundation. Time and money go into the review of static COIs, and they are only accurate for 24 hours at most. Is one day of compliance even worth all the headache? The process needs to be transformed, and smart COIs have proven to be the answer.

See also: COI Is a 4-Letter Word; Tech Is the Solution

We often compare smart COIs to smart home security systems. The traditional COI simply renders point-in-time information, like taking a photo of your front porch. It tells you if in that exact moment there was someone at your door. Within seconds, that photo is out of date. Smart COIs, like smart home security systems, can use monitoring to show you who was at the door and when they were there and can track their history and alert you or a third party.

McKinsey says, "For a long time, the traditional insurance business model has proved to be remarkably resilient. But it too is beginning to feel the digital effect. It is changing how products and services are delivered, and increasingly it will change the nature of those products and services and even the business model itself. We firmly believe that opportunities abound for incumbent insurance companies in this new world."

Insurance is not often thought of as an overly innovative industry. Every aspect of the insurance process can't be transformed overnight, but there are areas where digital innovation can immediately begin to provide value. Smart COIs are one such area. They eliminate risk, ensure compliance and reduce costs for every stakeholder in the COI process.

During the COVID pandemic, demonstrations against restrictions and mandates have taken place regularly across the world. While they may have been in response to a series of unprecedented events, the protests played out in a context of growing civil unrest globally. Political polarization increased in the years following the global financial crisis of 2008, and according to the Global Peace Index, demonstrations, strikes and riots surged by 244% between 2011 and 2019. 

The results are inevitably disruptive. Earlier this year, unrest in Paris and in Wellington, New Zealand, saw convoys of vehicles create disruption in protest at government coronavirus restrictions. The protests were inspired by events in Canada, where a "freedom convoy" had brought the capital, Ottawa, to a standstill.

Economic and insured losses from previous protests have been significant. In 2018, the "yellow vest" movement in France rallied to protest fuel prices and economic inequality, with French retailers losing $1.1 billion in revenue in just a few weeks. A year later in Chile, large-scale demonstrations were sparked by an increase in subway fares, leading to insured losses of $3 billion. In the U.S., the 2020 protests over the death of George Floyd in police custody are estimated to have resulted in over $2 billion insured losses, while the South African riots of July 2021 caused damage totaling $1.7 billion.

Protests set to increase around the world

According to the Verisk Civil Unrest Index Projections, 75 countries will likely see an increase in protests by late 2022. The unifying and galvanizing effect of social media on such protests is not a particularly recent phenomenon, but during the COVID crisis it combined with other potentially inflammatory factors to create a perfect storm of discontent.

The largely unregulated nature of social media allowed misinformation to spread unchecked, providing a platform for conspiracy theorists and an outlet for resentments. These grievances were centered on three main areas: anti-vaccination sentiment and civil liberties; mistrust in government and concern about government overreach; and economic hardship.

Although the political right were most likely to resent restrictions, the protests blurred traditional allegiances and united people across the economic and political spectrum behind specific topics. Geography was less of a barrier, too. Those with like-minded views were able to share views more easily and mobilize in greater numbers more quickly and effectively. In a world where trust in both government and media has fallen sharply, misinformation could take hold and partisan grievances be intensified and exploited.

See also: COVID-19 Trio Tops Global Business Risks

Platforms could be used with impunity

The 2022 Edelman Trust Barometer found concern over fake news being used as a weapon had risen to 76% among its global respondents. With confidence in traditional sources of information and leadership so undermined, social media gave a platform to powerful individuals who could use it with impunity and without legal consequences. When political leaders such as Donald Trump in the U.S. or Jair Bolsonaro of Brazil appeared to downplay the severity of the pandemic, social media warriors were emboldened. If they could attract the right audience, almost anyone with a social media account could become a politician, journalist or opinion leader. The pandemic disproportionately hit certain industries and ethnic groups harder than others, so where there already existed a sense of injustice, there also opened up the possibility for radicalization.

The COVID crisis shone a light on divided societies and increased the gulfs that already existed in some populations. A lack of social-media regulation in stable democracies led to misinformation that threatened to destabilize social norms and cohesion, while hostile states arguably used the lack of regulation in these democracies to gain ground with their own destabilizing messages.

Risk management and insurance

The circumstances surrounding the COVID crisis may have been unique, but social media’s influence is likely to play a role in fueling civil unrest for the foreseeable future. Unrest carries a risk of material damage to buildings and assets, business interruption, denial of access or loss of attraction. Targets or casualties could include government buildings, transport infrastructure, supply chains, retail premises, foreign-owned enterprises, petrol stations, distribution centers for critical goods and tourism or hospitality businesses.

Companies should review their insurance policies in the event of increasing local activity and update their business contingency plans if necessary, taking into account their supply chain vulnerabilities. Property policies may cover political claims in some cases, but insurers offer specialist coverage to mitigate the impact of strikes, riots and civil commotion (SRCC).

Civil unrest increasingly represents a more critical exposure for companies than terrorism. The nature of the threat is evolving, as some democracies become unstable and certain autocracies crack down on dissenters. Unrest can occur simultaneously in multiple locations, as social media now facilitates the rapid mobilization of protestors. This means large retail chains, for example, could suffer multiple losses in one event.

Where we currently stand, I do not expect incidences of social unrest to abate any time soon, given the after-shocks of COVID-19, the looming cost-of-living crisis and the ideological rifts that continue to divide societies around the world. At AGCS, we’re seeing rising interest from risk managers in specialist cover for political violence, as some traditional property and casualty insurers have stepped back from the exposures associated with SRCC insurance. The standalone market is also having a rethink on war-like perils, as well as the coverage extensions that were offered freely only a few months ago.

Let’s get it out of the way early. Everyone will die. It is not an “if”; it is a when. And because it is a guarantee that no one likes to entertain, consumers shy away from even thinking about the topic of life insurance, let alone going through the process that puts them face-to-face with statistics and data surrounding their own mortality. 

Longstanding Hurdles

That resistance is actually deeply intertwined in who we are as people. In a study from Bar Ilan University in Israel, Yair Dor-Ziderman found that “the brain does not accept that death is related to us.” Humans have a primal mechanism that tells us the information is not reliable when it links oneself to death, so the brain doesn’t believe it to be real. Because the process of purchasing life insurance is linked to the realization that a consumer will in fact die for the policy to be enacted, it’s human nature to want to avoid it. 

Even if consumers can get over the mortality hurdle, they have traditionally been met with an intermediated, agent-assisted, purchase journey that can last up to two months. If they are using an agent, they are left to disclose personal health information to either someone they have known a long time and consider a family friend or a stranger; both instances can cause great discomfort. This leaves life insurers questioning where they can meet these customers. The answer lies where almost all other industries have ventured – online. 

See also: A New Boom for Life Insurance?

Digital Solutions

At Legal & General America (LGA), the team has taken an aggressive growth trajectory to bring the digital experience to the American term life insurance market. Since launching the digital experience, LGA has found significant success and customer adoption of the new process. With the new model, they found that 90% of those who start the application complete it; that figure was previously 40% when using a non-digital, paper application. The ability to complete some of the application, put it down and come back to it allows users the freedom to not feel pressured to carve out a block of time to sit with an agent or a handwritten application; they can get back to what matters most, the people they’re looking to protect when they’re gone. Twenty percent of applicants receive an instant decision, which means they have a life insurance policy as soon as they complete the application. More than half of applicants are approved without the need for a medical exam. An online experience shifts the agent into a support role, because anyone with access to the internet can use it.

Rather than sit across a table or on the phone with an agent and 25 pages of rigid questions, consumers can open the application where and when they want to fill it out. Not surprisingly, LGA has found that, with its digital application, most applicants are filling out their details later in the evening. And they can reply to only the questions that are relevant to their own medical history and experience. For example, a 50-year-old with pre-existing conditions may have 25 questions while that same 50-year-old with no pre-existing conditions may only have 20 because the dynamic digital application means there is no need to ask questions about medical conditions you don’t have! 

Keeping Consumers, and Agents, in Mind 

When designing the platform for consumers, it is vital to keep the user in mind. Again, thinking about death can be overwhelming, and that can be compounded by looking at a page or screen with five or 10 detailed health questions demanding a response. However, when the application is broken into one question per page, it makes life insurance even more accessible through technology. This platform also allows for increased transparency. The old model required the consumer to ask the agent for the status of their application. The agent then asked the insurer administrator, who had to check with underwriting and then relay all that information back through that same chain. By leaning on transparency, the agent can simply log in and see the status of where the application stands – a more financially leaning pizza delivery tracker of sorts.

All this technology does not remove the agent, either; it simply frees them from the arduous administrative tasks to let them get back to what they love doing – connecting with consumers and helping them find the best solutions for them and their families. Even if they’re the one driving the online application, they can reach more families in their day to increase their own goals. 

Shaving more than 20 days off the non-digital model, the self-guided consumer application can be completed in under 20 minutes, with a life insurance policy in-hand in 25 days on average (if an instant decision could not be made). Investing in technology to make insurance approachable and accessible provides the freedom for all users to find the journey that works best for them. The world continues to spin on a digital axis with the support and backbone of humanity and human connection. When we can harness the power of both, without having to give the heavy topic of death more brain real estate than it truly requires, everyone is granted the freedom to live a brighter life and leave behind the same opportunity for their loved ones

When I first came across the concept of "reverse innovation" a decade-plus ago, I was intrigued. Those of us living in fully developed economies tend to assume that innovation flows from our shores to countries in the developing world. But not always. When it comes to cost, in particular, many innovations happen in developing economies and, if the rest of us are paying attention, become available to the developed economies.

Vivek Wadhwa, a very smart fellow I've gotten to know over the years, and two co-authors have written a provocative piece in Fortune that argues that, while most of us have been distracted by the battle that cryptocurrency advocates have been waging against so-called fiat currencies (issued by governments) and the high cost of the traditional banking system, India may have come with an answer.

Vivek, not known for pulling his punches, and his co-authors write in Fortune that "Bitcoin long ago died as a digital currency, becoming nothing more than an empty speculative asset with its value most recently plunging from $60,000 to less than $20,000. Meanwhile, as [its] hypesters now promote a mystical Internet world called Web3, India is racing ahead and implementing what the crypto crowd had promised—with its United Payment Services (UPI)."

The Reserve Bank of India and the Indian Banks’ Association set up UPI six years ago and make payments free to build traffic. The system will eventually carry fees, but, according to the article, "only a tiny fraction of what merchants and consumers pay to move money on private payment systems such as those run by Mastercard and Visa."

UPI has grown to the point that 150 million users transact $100 billion of business through it each month. That's a tiny fraction of the trillions of dollars that pass through the international financial system daily but still shows that UPI can scale. A French company just announced that it will introduce UPI into the European Union, the article says, and "merchants in Singapore, Malaysia, Thailand, Philippines, Vietnam, Cambodia and Bhutan accept UPI payments.... The National Payments Corporation of India is now negotiating with Australia to integrate UPI with Australia’s own nascent fast payment rail, called New Payments Platform.... More than 300 banks and dozens of payment applications and startups—including subsidiaries of many major U.S. tech giants—[are] joining UPI."

It seems to me that UPI may have legs, because it is built from the ground up with the kind of security that is only now being grafted onto traditional payment systems and because it uses an open protocol, making it easy for companies to hook into and build services on top of. 

The article says: "By facilitating exactly what [cryptocurrency] was supposed to do—cutting out intermediaries and inducing greater competition—UPI could force a global acceleration of innovation in payment technology."

I'm not suggesting anyone rush out and convert all payments to UPI any time soon. Even if UPI becomes a wild success, it will be years before UPI becomes a must-have, at least outside India. But UPI is still worth a look for insurers. It shows that we don't need to wait for some sort of crypto revolution to happen (or not happen) to make great progress on electronic payments -- cutting costs and saving time for customers as well as insurers by taking so much paperwork out of the process. UPI also lays out a road map for how insurers can start to make progress.

As the article concludes: "Shiny new technologies such as [crypto] may be cool, but less flashy efforts driving open standards and interoperability are delivering a real revolution that flies under the radar of the tech gurus in England's Shoreditch and America's Silicon Valley."

Cheers,

Paul

What is Web3? What are the opportunities and risks for insurers? At Oliver Wyman, we've released a practical guide on Web3 to separate hype from reality, and help leaders navigate through this rapidly evolving space. Our latest research finds the Web3 economy is currently under-insured and has huge potential for future growth. We explore opportunities for insuring the Web3 economy, reaching new customers, and reinventing business models — that may radically change what an insurer can look like.

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