Robin Merttens, a partner at InsTech London, posted a clever essay last week laying out a New Year's resolution for the insurtech community he serves. It is: "Please can we collectively resolve to rein in the use of superlatives and hyperbole in 2022 and get back to describing what we do in clear, simple and proportionate language?"

I'd like to broaden that resolution to the whole industry, as part of my occasional rant on how the insurance industry's language holds it back.

In his essay on LinkedIn, Robin goes off on the use of superlatives, such as "best" (especially "best of breed" and "best in class"), "unrivaled" and "leading."

He writes, "You are saying that you reign supreme and that there are none better at what you do worldwide/in your class/of your breed. This is wrong at so many levels, starting with the fact that in most cases it’s simply not true.... To make matters worse, the words are so overused as to have become meaningless. You can’t all be the best, although one of you is, and that doesn’t matter because no one believes you anyway!"

He also takes a shot at empty buzzwords, such as "next generation," "new era," "cutting edge," "revolutionary" and "state of the art."

He then offers a solution: "an application that sits on your browser and detects and deletes meaningless words and inappropriate superlatives in all marketing material. It’ll be like cyber protection, but instead of detecting inbound malware it will filter hyperbole."

Robin says he'll call the app Hogwash, use the domain name www.hogwash.bs and, using the lingo currently employed by insurtechs, describe the app like so:

“Hogwash is a unique, state-of-the-art drivel detector which combines best-of-breed technology and cutting-edge AI to provide an unrivaled way to eradicate technological trumpery. It is a world-beating solution that makes the very best use of next-generation technology to detect and filter hyperbole.”

The app would strip out all the fluff and tell you that “Hogwash is a bullsh*t detector.”

I'd sign up for that app. You?

I'd just add, having edited thousands of articles from established companies for ITL, that I can assure you the insurtechs aren't the only offenders. Incumbents aren't quite so likely to claim that they've discovered fire, but they still can't resist hyperbole that we'd all be better off without.

Some of my pet peeves, which I hope we'll all see less often in the New Year:

Companies rarely write about "crises" and "catastrophes" when they can write about "major crises" and "major catastrophes" -- there can be a minor crisis or minor catastrophe? It's bad enough that "transformation," "disruption" and "revolution" get tossed around so liberally when most change is incremental, but I'll often see references to "major transformation" and "major disruption," even though, again, such upheavals don't come in "minor" varieties.

"Proactive" is another one that generally sets my teeth on edge. People sprinkle that word throughout their writing to try to show they're really working hard, generally at serving customers. But step back for a second. Verbs are actions. Putting "actively" in front of a verb, which people do often, means you're saying you're actively taking an action. Now add "pro-," which connotes another level of aggressiveness, and you're saying that you're aggressively, actively taking an action. We get it.

I can see a use for "proactive" when it's used to distinguish from a reactive stance, but not otherwise.

One more: "New" is a great word, but it doesn't need to be used three or four times in a paragraph, let alone in a single sentence. Yes, you're introducing new products, creating new businesses and setting new records, but could you really be introducing old products, creating old businesses and setting old records? And don't even get me started on "new innovations" -- new new things -- which I actually see quite a bit. What you're doing comes across loud and clear without "new" sprinkled everywhere, and the writing will feel much stronger without it and the other superfluous words that Robin and I are harping on.

Those words aren't, by any means, the only problems that sap power from the writing I see in the insurance industry. (Looking at you, "decisioning" and "trialing.")

And the sorts of problems Robin and I describe are hardly the worst of the language problems facing the industry. I've written previously about what I think of as the bigger problems, which concern obtuse language that confuses customers and that can even make them believe we don't have their best interests at heart. I've written about those bigger problems here, here and here.

But, at the risk of scaling back my ambitions for the industry, I'll settle this coming year for less hyperbole. The industry has a great story to tell, and we'll tell it better if we strip out the over-the-top language. Doing so would represent a major, new, best-of-breed, unique, transformative step forward.

Happy New Year!

Paul

For most organizations, cloud migration is more than just a change in software. It’s a transformation that requires a culture change and buy-in from not only IT but also the business units whose processes are ultimately affected.

In today’s business environment, moving from legacy to the cloud most often means moving to a software-as-a-service (SaaS) solution that resides in the cloud. A recent report by Gartner forecasts that end-user spending on cloud services in 2022 will reach $482 billion. SaaS will remain the largest segment of cloud services, with spending expected to reach nearly $172 billion, Gartner indicates. 

For surety companies and insurance carriers in general, the legacy system may vary. In some cases, the migration might mean moving from an older, on-premises version of software, while in other instances it involves moving from a custom-built, in-house system.  

But the success of any cloud migration or modernization project is hinged on factors outside of the technology itself. Organizations tend to gloss over the culture change, but it is critical to the success of any modernization, migration, or digital transformation project. 

Deloitte explains: “Digital transformation calls for more than just updating technology or redesigning products. Failure to align the effort with employee values and behaviors can create additional risks to an organization’s culture if not managed properly, whereas a comprehensive and collaborative effort can help shift the culture to understand, embrace, and advance digital transformation.”

The culture shift may include rethinking the way projects are completed, and which teams and stakeholders are involved in the modernization process. The reshaped culture and the change management team will inform the various phases of the legacy-to-cloud migration process, and, to be successful, an advocate must guide it. 

Understanding the role of the change manager

That advocate is the change manager. In advocating for the implementation, this individual will drive the culture change. Organizations frequently discover that the biggest naysayer, or person who at first is opposed to change, can end up as the most vocal cheerleader once they understand the benefits of change. A good advocate helps to spread the buy-in to others in the organization. For this reason, the change manager can’t be an outsider. That person must be a key stakeholder who understands and wants the process improvement and its resulting benefits for the organization and who is trusted by others within the organization.

See also: 3 Powerful Data-Driven Strategies

One accountable and empowered business owner

Along with the change manager, it is also critical to designate one person as the business owner — a business decision maker with the authority to make key design decisions and say yay or nay to requested changes as they unfold, understanding clearly the impacts to the project. Decision making by committee can kill a project. 

Time commitment is a significant consideration when determining the right business owner. As this individual will set the tone for the direction of the project and is often the project’s greatest champion, the business owner must be visible, must understand key risks and issues and must be able to dedicate the amount of time required for the life of the project.

Rethinking the preparation stage

Planning and gathering requirements are crucial for any successful modernization or cloud migration project. This preparation stage includes a vital gap analysis, in which current processes are evaluated against a forecast of future needs. Once the gap analysis is complete, the results can be compared with the future SaaS solution’s capabilities.  

The business users who will be most affected by the cloud migration must be part of the requirement-gathering phase. Here’s why: The SaaS implementation will be smoother and more successful if they, rather than the IT department, specify the required capabilities of the new system. This departure from the traditional IT-directed approach requires a shift in thinking but will pay off. 

Be realistic about project scope and resources

When taking on a migration to cloud, or any type of digital transformation, organizations need to move away from “big bang” or “flip a switch” expectations, which are unrealistic for a successful modernization project. It’s critical for the organization to understand the scope of any digital transformation or cloud migration project, including how much and what level of work is involved, and what resources are necessary.

The availability of business and technical resources is a common challenge when implementing a SaaS solution. Internal resources involved with the implementation must be able to commit for the entire project, from the business owner and change manager to every other modernization team member. Organization leaders must recognize that the project will be impaired if resources or subject matter experts are not available. If a key person can dedicate only a minimal amount of their time to the implementation, the project will quickly lose ground. 

Rethinking IT projects as business solutions

Moving from a legacy system to a SaaS solution looks different from traditional IT projects and often means a new way of thinking about systems and IT, particularly in the insurance industry. Modernization projects must be reframed as business solutions, not merely IT changes, that transform the entire business model. 

McKinsey wrote in an article about the effect of IT modernization in the insurance industry: “Insurers too often treat systems transformations as IT projects rather than acknowledging them for what they are: overall business transformations.” 

Business users must play a more active role when implementing a SaaS solution. Because SaaS solutions are typically built using low-code models, organizations don’t always need IT resources involved from a traditional software development standpoint. Although IT team members will be involved in application programming interface (API) integrations, data migration and security, most of the testing can — and should — be done by the business users, not IT. 

See also: Data Security to Be Found in the Cloud

Keeping future evolution in mind

There are a variety of benefits and advantages to choosing a SaaS solution over proprietary systems for modernization. As McKinsey notes, “Standard systems are typically much more streamlined and include ready-made functionality for pricing, underwriting, customer self-service and automation and claims processing. As a result, they can improve efficiency across the enterprise.”

When implementing a SaaS solution, it’s recommended that organizations stick as close as possible to the base functionality of the software. If the base SaaS system is too modified or customized, every future deployment will require more work, from the SaaS solution provider’s development, deployment and testing to the client organization’s testing, that will strain resources and drive up costs. If the original solution is altered too drastically, future upgrades could be a problem, as well.

To avoid having to customize a SaaS solution, it’s better to make sure the solution fits your organization’s needs from the start. Finally, the culture change necessary for a successful and effective modernization project needs to start from the top. Bringing teams together is a must to set goals and expectations when moving to a cloud-based solution. But culture change is most effective when steered by the leadership team. They must make the transformation a clear priority for the organization, or the move forward will be unnecessarily challenging.

Thinking ahead was the mark of an effective insurer in 2021, as the COVID-19 pandemic required constant adaptability and intelligence. When insurance needs were changing day by day and week by week, responding quickly and flexibly with accurate quotes and appropriate product lines was essential. 2022 will be no different. 

We may move past a global pandemic, but new risks are constantly evolving, and insurers must be on their guard. With new coverage markets growing in the uncertain spaces of cyber and climate, companies must be faster and more agile than ever before.

Datasets originating from third-party providers could enrich the insights insurers desperately need to offer accurate and timely quotes to clients. In addition, exciting developments in modeling tools and analytics contribute to an elevated decision-making process for carriers, as underwriting grows easier.  

The more you know… 

Predicting and pricing risk requires insurers to be well-educated on each instance before underwriting, and gathering the necessary information could take valuable time and resources. But with the introduction of spectacular new datasets, insurers can speedily access up-to-date assessments of a risk anywhere in the world. 

These datasets are also more accessible now than ever before, with many data companies dedicated to specific data targeted toward different industries. Not only this, but companies also understand the value of a well-constructed interface, creating digital spaces where insurers can easily navigate gigantic data sources via clickable features and useful plug-ins. Going even further, the incorporation of AI capabilities into these knowledge bases can advance the underwriting process to a new level. Machine learning can even build a preventive element into insurance practices, adding important value beyond a simple quote.  

See also: P&C Commercial Lines in 2021

Capturing new niche markets 

Insurers must be quick off the blocks when building new product lines and securing influence in emerging markets, and the specialized insights datasets provide are invaluable for this. The end customer will only benefit if an insurer can offer more targeted services and stay ahead of the coverage curve, so it makes sense to collect all the information possible around a risk, at speed, to quote accurately. This kind of knowledge will massively improve service delivery, leading to seamless purchasing journeys for clients and simpler underwriting for carriers. Everybody wins. 

Those insurance lines created using the power of data, and constructed on agile, customizable platforms, will make for a radical change in the criteria for quality in the P&C space. Gone are the days of basic and homogenous contracts distributed slowly and without personalization: There are so many resources out there for insurers today that past standards no longer measure up. Insurers must make sure to make the most of the powerhouse of datasets and prioritize finding intelligent, innovative platforms upon which to build these new, richer product lines. 

In 2022, smart insurers will capitalize on every technological innovation available to them, leading the pack in digital transformation and combining data insights with smart product design to leapfrog competitors. If nothing else, the introduction of datasets prove that an insurance revolution is not just on the way: It is already here, and forward-thinking insurers will not be left behind.

For decades, executives at auto makers have complained about all the revenue and profit they create for others but don't get a taste of themselves. The manufacturer generates, say, $3,500 of gross profit on the sale of a $30,000 car while creating far larger opportunities for others -- the commission paid to the dealer, plus revenue from repairs, service, insurance and more.

Auto makers have repeatedly tried to capture more of the downstream revenue related to car sales and are now taking dead aim at insurance. There's reason to think they'll make inroads, too, because insurance is increasingly based on data on driver behavior -- and auto makers have easy access to all that data.

Toyota recently became the latest manufacturer to announce an insurance offering, joining Porsche, Ford, General Motors, Tesla and several others. While traditional insurers need to get drivers to install dongles to monitor their actions behind the wheel or, increasingly, build systems around drivers' smartphones, manufacturers have a raft of sensors already built into cars and just need permission to use them for insurance purposes.

The spread of 5G and increasing power of so-called edge computing make it much easier for manufacturers to monitor driving behavior. Edge computing lets behavior be monitored and evaluated by increasingly powerful processors in the car itself -- at the edge of the computing network, rather than having all the data be transported back to a central data-processing center -- and the rollout of high-bandwidth 5G mobile networks allows for robust, high-speed connections between manufacturers and their products.

Manufacturers can also save on commissions and advertising because they can embed an offer of insurance into the auto sales process, when the car buyer needs to get insurance somewhere and is demonstrating trust for the manufacturer.

Car makers also gain in ways that insurers can't. Tesla, in particular, has talked about taking what it learns about accidents and reflecting that knowledge in the design of future cars. All manufacturers could benefit by using insurance to strengthen a relationship with a customer, making it more likely that the person would use the dealer network for repairs and service.

It's even possible to imagine car makers expanding on the insurance model and helping drivers avoid accidents. While manufacturers already increasingly include safety features such as automated braking, they could use detailed knowledge of danger spots to warn drivers that they're approaching potential trouble. Insurers and other third parties could take this sort of prevention approach, too, but it's always easier to work with a system that's built into a car rather than having to retrofit it.

Traditional insurers still have plenty of advantages -- in particular, all the expertise on pricing and claims processing that they've developed over the decades. So, I'm not saying anybody needs to fold its tent and go home. But I do think auto makes pose a credible threat to traditional insurers and warrant careful monitoring.

Cheers,

Paul

In recognizing some of the latest emerging risks, it would be wise for risk managers to review their policy retention practices. The obvious consideration is how long policies should be kept. Other considerations include whether all policies should be kept the same amount of time, how accessible they should be and what is the best way to store them. Risk managers should consult with their legal and compliance colleagues as well as their brokers and professional associations to determine what is best for their situation. 

Imagine what it was like in the '70s and '80s when the courts were changing the intended meaning of “sudden and accidental pollution” in commercial general liability (CGL) policies. Companies were being sued and having to remediate years of environmental harm from pollutants that had been seeping from their industrial sites.

Risk managers needed to amass the company’s insurance policies dating back over many years so they could make claims to one or various insurers from whom they had coverage during those years. If they did not retain their policies or these were hard to find, they would turn to their broker. However, the brokers involved were not always able to find these old policies, either, due to having been involved in numerous mergers and acquisitions over the years or due to their own ineffective retention practices.

It was quite an uncomfortable, expensive, and time-consuming time for companies, brokers, and insurers. Ultimately, the industry adopted the absolute pollution exclusion in CGL policies, and insurers started offering stand-alone environmental covers. Asbestos claims created the same type of need to gather policies from years past. Out of this debacle, a relatively new type of service firm came into being: insurance archaeology.

There are two new risk phenomena that could create the same type of need to gather policies from years past. 

The first phenomenon is climate litigation. With the growing acceptance of "attribution science," it looks likely that companies of all sorts could be litigated against for having had a detrimental effect on the climate, resulting in floods, fires and other catastrophes. For those unfamiliar with attribution science, one explanation is, “Climate attribution science aims to establish the relationship between anthropogenic emissions and specific extreme weather events. Progress in this field is allowing claimants to better pinpoint and quantify the environmental impact of projects, policies and laws.” In other words, “Attribution science really is this idea that you can go in and examine the climate models and you can run different essentially alternate universes that ask, “What would have happened in our normal climate before global warming? How often would you see a Category 5 storm hit the Gulf Coast? Or how often would you get a million-acre wildfire in California?” Thus, a plaintiff will posit that if were not for CO² emissions from XYZ company’s operations, or other potentially climate-affecting actions, a loss event would not have happened. 

An S&P Global paper states, “We believe the volume of climate litigation may continue to grow, as may the impact of associated juridical decisions in the policies, commitments, finances -- and even business models -- of defendant organizations. Investors are likely aware of the growing body of climate litigation and how it could affect the value-at-risk in their portfolios."

The second risk phenomenon is forever chemicals, also known as PFAS. PFAS is short for perfluoroalky and polyfluoroalkyl substances and includes chemicals known as PFOS, PFOA and GenX, created as early as the 1940s. These chemicals do not easily break down and last for long periods in whatever they are treated with or ingested by. 

According to CNN, “A study from 2007 by the U.S. Centers for Disease Control and Prevention estimated that PFAS chemicals could be detected in the blood of 98% of the U.S. population.”

See also: Navigating the Future of Risk Management

They were used in some food packaging, pots and pans, paints, water repellents, cosmetics and other commonly used products. Today, they can be found in water, in soil and in us. Studies conducted in mice have indicated that such chemicals can cause a variety of health issues.

If or when there is a clear link between these chemicals and specific human health cases, not only the chemical manufacturers but also those that sold the products made with the chemicals could be sued, thus unleashing a tsunami of insurance claims by affected parties. 

The emerging risks will create a need to gather policies for the years leading up to the litigation to see what coverage may apply.  Hence, the need for making sure these documents will be available for review is real and present.

As data and technology become more accessible, insurance companies are finding new ways to use them to outperform the competition. While there are many options to put data to work for your organization, three main strategies have emerged in the insurance industry: 1) introducing new business models; 2) capturing new value; and 3) leveraging new cost structures. The results of these strategies are setting the bar for how a thoughtful approach to data and analytics can change the old and established insurance game.

New business models are here to stay

The direct-to-consumer (D2C) model is well-known and relied on heavily across many industries, such as auto insurance. A number of factors have prevented commercial insurance carriers from selecting the D2C model, though. In fact, direct response carriers write less than 1% of all commercial and workers’ compensation premiums, according to the most recent Market Share Report by the Independent Insurance Agents and Brokers of America (IIABA). According to the IIABA, 25% of personal auto insurance is sold through direct response carriers, a far greater proportion than commercial insurance.

One of the factors that puts personal auto insurance at an advantage over commercial insurance is the simplicity of the product ― hence, a shorter submission process and shorter submission form. That type of experience is what customers expect when buying a product online. Until now, this reality has stymied commercial insurers. However, new data sources are enabling commercial insurers to simplify insurance applications through submission form pre-filling or complete digital on-boarding.

Next Insurance, an MGA turned insurance company, is offering insurance online and drastically reducing the number of questions in a questionnaire by using new data sources and leveraging artificial intelligence and machine learning technology. In fact, most Next Insurance customers can buy a policy in five to 10 minutes. While there are a few other important factors that prevent commercial insurance companies from adopting a D2C model, data from third-party sources helps eliminate the potential for a poor customer experience because of a long questionnaire or unknown risks taken on by the carrier.

One of the ways insurance companies are using their internal data is to establish adjacent businesses, a concept known as data monetization. These new revenue opportunities do not rely on collecting new data; rather, they can repurpose the vast amount of data insurers already collect. An insurer can sell the data anonymously to other industries that find it profitable. This could be useful for predicting trends of a particular car company or even predicting the direction of an entire industry. Quandl, for example, gathers daily counts of how many new car insurance policies are sold by auto insurance providers and sells this information to investors. An adjacent business revenue stream like this is not tied up for liquidity or capital requirements, bringing even more value to insurance companies.

See also: How We Can Overcome Uninsurability With Data

Capturing new value

Lloyd’s Emerging Risk Report about drones highlights negligent or reckless pilots as one of the fundamental risks of drones.

Many insurers ask if photographers use drones, but they do not ask more details about that usage. This can be troubling for insurers, as different uses have different consequences if the pilot is negligent or has an accident. A wedding photographer who has an accident with a drone, for example, would face very different consequences than a landscape photographer would. Not knowing this information during customer acquisition or being too narrow with eligibility requirements can hurt an insurer.

With up-to-date data, carriers can develop new business streams in various directions. For example, as a business changes over time and expands to new areas by offering new services or getting exposed to additional risks, carriers are able to automatically offer additional insurance coverage ― or deny others, and adjust rates and limits in a surgical manner.

Furthermore, carriers can quote businesses based on their exact risk rather than that of other businesses in a similar category. Reducing, or potentially eliminating, information asymmetry can revolutionize insurance. 

Leveraging new cost structures

Data is enabling new and veteran commercial insurers to minimize costs and leverage new cost structures. For example, Lemonade insurance is maximizing automation to create a new expense ratio paradigm. According to a blog post by Lemonade, the company operates with an average of 2,500 policies per employee, compared with other “efficient legacy insurance carriers that have about 1,200 policies per employee.”

Lemonade’s digital platform takes in data through third parties and its own customers throughout a policy’s lifecycle and stores it for easy use across the whole insurance value chain. Thus, data automation at Lemonade can drastically reduce the need for employees to spend time in low-value processes, as the data already moves policies through the customer journey automatically. Lemonade can then deploy its valuable resources, e.g. underwriters and claim adjusters, to profitably generate more and better business. 

Lemonade also handles claims through data. Lemonade’s claims bot can review a claim within a few seconds. The chatbot cross-references the claim with the policy data and applies anti-fraud algorithms, reducing the need to have a person review every claim that comes in. Furthermore, Lemonade automatically collects all incoming data, increasing the accuracy and speed of the anti-fraud algorithms and ultimately reducing false claims.

Summary

Since the inception of insurance, insurers have relied on data and statistics to determine how to price risk. But for many years data was scarce. It is not anymore. The above examples are just the tip of the iceberg of how insurance companies are using data to evolve.

Data improves the customer experience through bots, simpler insurance applications and more tailored coverages and limits. Insurers also have the opportunity to use their own data to create businesses that can be separate from insurance entirely. With super granular data continuously becoming more accurate and available, it will be interesting to see which companies will take advantage of this opportunity to win the market ― and one thing is for sure, those that don’t will not be around to see the change.

In today’s world, a brand’s ability to personalize the customer experience is more critical than ever, perhaps nowhere so much as in the insurance industry. When buyers are busy or stressed and products seem complicated — that’s when personalization comes to the rescue. It makes next steps clear and adds a human touch to each interaction.

Video takes this a step further. It simplifies the message, it’s engaging and, quite frankly, it’s more fun than reading endless paragraphs of legalese.

Gen Z has already discovered this. If you want to reach this newest cohort of consumers, it’s “video or vanish,” as Forbes notes. Video is by far their favorite form of media (twice as important as gaming, Google and music). But it’s not just Gen Z that likes watching video. Already, the medium accounts for over 80% of consumer internet traffic, according to Cisco.

The rise of both video and personalization has only accelerated during COVID-19 as consumers turn to digital tools to replace or enhance in-person interactions. The good news is that personalizing digital communications — including through video — for your insurance customers is easier than ever before. 

For one, consumers are increasingly willing to share data. According to a recent global study by Accenture, 66% would share data on their habits to enable personalized services. Indeed, Accenture included personalization as one of its three pillars for the future of insurance.

Luckily, video has advanced in recent years and is no longer the one-size-fits-all medium of generations ago. It can be dynamic and data-driven, unique for every customer who watches it, even if you have millions of customers around the globe, speaking different languages and living vastly different lives.

The challenge, then, isn’t the technology or even getting the data. It’s how to personalize the customer journey in a way that supports loyalty and retention, and that means more than just adding a first name to an otherwise generic message. When do you reach out? What do you say? What gets results? Answers to all this and more below.

Upgrade Your Quote Follow-Ups

Typically, acquisition efforts are the most difficult to personalize. This is when you have the least data on your prospective customer.

But think about the quote request process. Here, you do have meaningful data about your future customer, so what do you do with it if they don’t convert? This is an important opportunity to remind them how you can help meet their needs and to do it in a way that’s memorable and personal. It’s good for the customer experience and your bottom line.

See also: Why Cyber Strategies Need Personalization

A quote follow-up video does exactly that. It greets people by name and explains their recommended coverage with easy-to-understand language and visuals. This kind of personalized video has increased policies sold by a whopping 40%. You can even add a clickable call-to-action directly in the video, making it easier for viewers to convert.

Tip: If you don’t have data on what potential customers are looking for, let them tell you. The latest video technology lets users input their requirements directly into the video to generate a personalized quote in real time.

Make a Good First Impression

Let’s talk about the onboarding process. Hello, paperwork.

Getting started with a new insurance carrier or plan can be confusing for many people. A personalized welcome starts the relationship off right and is a great way to introduce them to the details of their specific coverage. Here are some important things to include at this stage:

• A personal welcome
• An overview of coverage details
• Outlining benefits
• Steps to set up their online account

Here’s an example from SelectHealth that shows this in action.

And it works. We’ve seen lifts in customer satisfaction of 30% to 50% following personalized onboarding videos.

Take the Pressure Off Your Call Centers

In its road map to digital transformation, McKinsey identified customer service as one of the critical activities to tackle first. The right digital touch here can increase cost savings by 40% and lift ROI by five percentage points.

The key is letting customers self-serve in a way that’s seamless and boosts satisfaction. Enter personalized video. It can be a lifeline to a customer in crisis mode, especially when they’re going through the notoriously complicated claims process. (That’s the other area McKinsey labeled a top candidate for digital transformation).

A video personalized for the customer’s unique situation is human, relevant and cuts through complexity. By providing next steps in an accessible digital format, you’re letting customers get what they need right away, reducing calls to call centers by as much as 73%.

Tip: Try a personalized follow-up after someone contacts support. You can summarize the call and what the customer needs to do now in a personalized video that’s automatically generated and sent to the customer.

Remember — the secret to personalized customer care is being proactive.

See also: 6 Ways to Transform Customer Experience

Using Personalized Video to Wow Customers

Only 28% of insurance customers report being happy with their level of personalization. That’s a lot of room for improvement.

Fortunately, there are many more opportunities to connect personally — yet digitally — with your customers. Offer related insurance products you know will benefit them. Get in touch to remind them of the value you bring, increasing retention for the long term. You might even reach out with a personalized GIF on your customer’s anniversary to let them know you haven’t forgotten the special day. Ultimately, the greater care you put into treating your customer as a valued individual, the greater the impact. 

This strategy has certainly produced results for brands we’ve worked with, including over 20 of the world’s leading insurance companies. MetLife, for example, saw a 12-point NPS increase as a result of their policy renewal personalized video campaign. AXA reported an 8X increase in conversion rates and 20% churn reduction. 

Brands can launch their data-driven video campaigns in a matter of days, doing it themselves with Idomoo’s self-serve platform or letting us handle the details. To see how other companies are leveraging dynamic video, check out some of our favorite personalized insurance campaigns.

The global construction market is set for a sustained period of strong growth post-COVID-19, driven by government spending on infrastructure and the transition to a net-zero society. The switch to more sustainable buildings and infrastructure, the upscaling of clean energy facilities and the adoption of modern building methods will transform the risk landscape, with radical changes in design, materials and processes.

These challenges add to currently stressed supply chains, shortages in materials and labor and increased costs, which all come against the backdrop of years-long tight margins in the industry. A new report from Allianz Global Corporate & Specialty  (AGCS), Managing the new age of construction risk, explores both acute and long-term risk trends for the construction sector. 

The strong growth outlook for the sector is based on a number of factors, such as rising populations in emerging markets and significant investment in alternative forms of energy, such as wind, solar and hydrogen, as well as power storage and transmission systems. The shift to electric transport will require investment in new plants and battery manufacturing facilities and charging infrastructure. Buildings are not only expected to improve their carbon footprint, but will also require improved coastal and flood defenses and sewage and drainage systems in many catastrophe-exposed regions in response to more frequent extreme weather events. 

At the same time, governments in many countries are planning major public investments in large infrastructure projects to both stimulate economic activity after the pandemic crisis and to drive the low-carbon transition. In the U.S., a $1 trillion-plus infrastructure package touches everything from bridges and roads to the nation's broadband, water and energy systems. At the same time, the U.S. has announced plans to invest in a number of large infrastructure projects around the world in 2022 in response to China’s ambitious Belt and Road Initiative, which could stretch from East Asia to Europe. Four countries – China, India, the U.S. and Indonesia – are expected to account for almost 60% of global growth in construction over the next decade.

Downsides of the construction boom

The expected boom brings specific challenges in addition to benefits. In the medium term, sudden surges in demand could put supply chains under additional pressure and exacerbate existing shortages of materials and skilled labor, causing schedule and cost overruns. In addition, many in the industry may need to accelerate the implementation of efficiency and cost-control measures if profit margins have been affected in the COVID-19 economy, which can often impair quality and maintenance levels and increase susceptibility to errors. 

See also: Construction Workers’ Mental Well-Being

Analysis by AGCS shows that design defects and poor workmanship are one of the leading causes of construction and engineering losses, accounting for around 20% of the value of almost 30,000 industry claims examined between 2016 and the end of 2020. 

The enhanced sustainability and net-zero focus will strongly influence the traditional risk landscape in the construction sector. According to the UN Environment Program, buildings and the construction industry account for 38% of all energy-related carbon dioxide emissions. To cut carbon emissions, existing buildings will need to be refurbished and repurposed. Additionally, new materials and construction methods will need to be introduced across the market in relatively short periods. This will bring an increased risk of defects or may have unexpected safety, environmental or health consequences. For example, as a sustainable and cost-efficient material, timber's use in construction has increased in recent years. This has implications for fire and water damage risks. AGCS claims analysis shows that fire and explosion incidents already account for more than a quarter (26%) of the value of construction and engineering claims over the past five years – the most expensive cause of loss.

Upscaling clean energy – renewable risks

Expanding clean energy brings new risks, too. Offshore wind projects are growing and moving farther out to sea and into deeper waters, meaning the costs associated with any delays or repairs are increasing. Offshore wind farms, as well as onshore wind and solar projects, can also be exposed to serial losses. A design or manufacturing fault in a turbine, for example, can affect many projects. There have also been large claims from faulty foundations in solar parks and farms. Repairs to undersea cables, which weigh thousands of tons and require special ships to lay, can take more than a year. An offshore converter station alone can cost as much as $1.5 billion, comparable to an oil rig. A fire or explosion involving a converter, as seen recently in China, can result in a total loss. 

The two sides of modular construction

Ultimately, modern building and production methods have the potential to transform construction, transferring more risk offsite and incorporating greater use of technology. Modular construction, in particular, provides many benefits, such as controlled factory-based quality management, less construction waste, a construction timeline cut in half compared with traditional methods and reduced disruption to the surrounding environment. However, it also raises risk concerns about repetitive loss scenarios.

The shortage of skilled labor in the construction industry is likely to further the trend toward offsite manufacturing and automation. At the same time, digitalization of construction creates cyber exposures, which engineering and building companies need to strengthen their defenses against. Today, the numerous parties involved on a construction site are connected through various shared IT platforms, which increases their vulnerability. Cyber risks can range from malicious attempts to gain access to sensitive data, to disruption of project site control and associated theft, to supply chain disruption, to potential corruption of project design data, resulting in delays and ultimately reputational risk for parties involved.

See also: COVID-19: Next Steps in Construction

Better protection of building sites against natural hazards and water damage

The need to reduce greenhouse gas emissions will not only drive a more sustainable approach to residential and commercial buildings and infrastructure but may also hasten the trend as the industry looks to achieve efficiencies and minimize waste. Construction sites also need to give more consideration to mitigate the impact of climate-driven events, such as wildfires, flash flooding and landslides. AGCS claims analysis shows that natural hazards are already the second most expensive cause of construction losses, behind fire and explosion, accounting for 20% of the value of claims over the past five years. 

Meanwhile, water damage continues to be a major source of loss during construction. AGCS has seen a number of surprisingly large losses from leaks from pressurized water or fire systems that go undetected or occur out of business hours, on weekends or during periods when personnel are not on-site. Water leak detection and monitoring systems can help reduce the frequency and severity of water damage, mitigating expensive repairs and project delays.

The signs of a seismic shift in how insurance companies intend to compete for, and connect with, customers are difficult to miss. 

In China, Ping An Insurance Group is executing a tech-forward diversification strategy that includes development of integrated business ecosystems in five markets: financial services, health care, auto services, real estate services and smart city services. In North America, AXA XL, the property & casualty and specialty risk division of AXA, is winning awards for its construction ecosystem digital platform, which provides construction industry contractors access to a range of pre-vetted products and services, from curated technology offerings to tailored insurance products to knowledge-share resources. And in Europe, Movinx, a new joint venture between Swiss Re and Daimler Insurance Services, is developing fully digital automotive and mobility insurance products for vehicle manufacturers and mobility providers.

“Our joint long-term ambition,” said Pravina Ladva, Swiss Re’s digital transformation officer, “is to unlock an ecosystem interplay where insurance supports the introduction of new technologies such as advanced driving assistance systems and autonomous cars as well as new business models in the mobility area.” 

Notice a common thread here? Each of these ventures relies on an ecosystem, or extended business network. And these ecosystems are laying the groundwork for a new network-based economic order that promises to reshape our lives and our lifestyles as consumers. They are reinventing how many of the world’s largest industries, including insurance, engage with and deliver products and services to their customers. In industries from insurance to mobility to personal finance and beyond, we are witnessing a disintermediation where entire value chains are collapsing into single, integrated business networks. As this dynamic continues to play out, we are seeing competition shift from company vs. company to ecosystem vs. ecosystem. That’s happening in the mobility sector, for example, where Movinx faces a challenge from the likes of ERGO Mobility Solutions, an arm of European insurer Munich Re, and where companies such as Tesla and General Motors are moving into auto insurance.

Following this ecosystem thread leads to one place: the customer. New plays by Tesla, GM and insurtech Lemonade are pressuring insurance companies to reach across industries to build, or become part of, networks so they, too, can deliver the heightened experiences and rich, value-added services and seamless, end-to-end digital journeys that customers have come to expect. 

The consulting firm McKinsey was among the first to pick up the ecosystem thread. Noting that 71% of consumers say they’re ready for integrated ecosystems, it predicts that by 2030 the integrated network economy — and the 12 ecosystems it sees emerging across the globe — could account for revenue of $70 trillion. This represents 25% of the total economy, up from 1% to 2% today. What’s more, as McKinsey notes, there’s a golden opportunity for insurers to carve out an important role in multiple ecosystems. “The ecosystems most relevant to the insurance industry — and that thus represent the most salient entry points — include mobility, housing, health, wealth protection and B2B services,” McKinsey says.

See also: Power of Partner Ecosystems

An ecosystem-based approach makes sense for insurance companies for multiple reasons. First, it provides opportunities to counter disruptors by developing new revenue streams and business models, opening doors to customers and markets to which the insurers previously lacked access. It affords them access to huge volumes of customer data that they can use to develop, monetize, improve and refine their product and services. What’s more, as McKinsey points out, it “can help generate new leads, lower distribution costs, increase customer retention and improve prevention and assistance to reduce claims.” It also enables them to share risk with, and leverage the strengths of, their ecosystem partners, as AIG is doing in partnering with insurtech company Amodo to fortify the technology behind its usage-based insurance offerings. 

Why take on the huge expense and distraction to develop in-house technologies to support usage-based insurance when a potential ecosystem tech partner has already developed the technology you’re seeking? 

Insurers already are positioning themselves to thrive in a network-based economy by choosing the ecosystem partners with which they want to align, and the products and services to develop. Allianz is doing just that through its new Allianz X digital investment unit, for example. Its target ecosystems are mobility, connected property, connected health, wealth management and retirement, and data intelligence and cybersecurity.

Another critical step for insurers is to define the role they want to play within the ecosystem(s) in which they participate. Do they want to play a lead role and be an ecosystem orchestrator, as Ping An is doing, or are they better suited to supporting a risk-management/risk-mitigation role? While there are merits to both, the Amazons and Googles of the world have shown that being an orchestrator can pay big dividends. Because insurance touches so many industries, insurers should have plenty of potential roles from which to choose. 

And let’s not overlook the vital role data and digital technologies will play in the success of these ecosystems and the products and services they offer. Companies will need the ability to securely and seamlessly share, digest and act upon huge amounts of data (financial, operational, customer experience, etc.) in collaboration with their ecosystem partners. They’ll need machine learning and artificial intelligence tools to create the kinds of elevated experiences and outcomes their customers expect. They’ll need a robust, yet flexible, digital infrastructure to accommodate and integrate new business models, revenue streams and partners. And they will also need advanced analytics, modeling and business process tools to help them evaluate how those new business models are performing and how to innovate by developing new products and services on tighter launch cycles. 

See also: Insurance Ecosystems: Opportunity Knocks

Most important, perhaps, to their success in an ecosystem-driven economy is a willingness to evolve and embrace a new network-driven, collaborative and highly customer-centric competitive mindset. Customers inside and outside the insurance market have made it clear they expect convenient, quick and seamless digital journeys that ultimately lead to value-added services. If insurance companies and their partners can’t meet those expectations, customers will find someone that can. And that someone could be Amazon or Tesla or some other skilled ecosystem orchestrator.