During a 2017 first quarter earnings call, FedEx founder and CEO Fred Smith famously doubted that we would ever do most of our shopping online, saying of e-commerce’s share of retail sales, “It’s about 10% now. It’s certainly going to grow as a percentage. But will it be half? I doubt it.” It took fewer than two years for the U.S. Department of Commerce to issue a report proving him wrong. 

Smith was hardly the first to underestimate consumers’ voracious appetite for convenience, and he’s unlikely to be the last. But a growing body of empirical evidence across sectors paints a picture that shouldn’t come as much of a surprise: Many of us lead impossibly busy lives, and convenience is not just a “nice to have”; it supersedes brand loyalty -- and even cost -- as a deciding factor for a growing majority of modern consumers. 

This desire for convenience translates into a massive opportunity within the insurance sector, and not just for insurance companies. A study conducted by Bindable in 2021 showed that 65% of consumers would be willing to purchase insurance through a non-insurance brand, and, of those respondents, a large majority would actually prefer to do so if they already trusted the brand in question. Placing a complementary insurance product in front of prospective customers at precisely the time and place they need it, and while they’re interacting with a brand they already trust, is not only how insurers will stay relevant but also how brands can improve customer loyalty and retention in a competitive market.

Get Strategic About Selling

Potential insureds generally want to think about insurance as little as possible, which is one of the reasons why customer acquisition costs (CAC) are disproportionately high. This is also why insurers and their distribution partners must evolve and convert new customers where they already choose to spend their money, no matter where that is. To do so, they must strategically cultivate alternative distribution channels, optimize digital environments and provide superior technology and tools to agents, which is exactly where Insurance-as-a-Service (IaaS) offerings come into play. 

What Is IaaS? 

IaaS combines software, a digital marketplace and a full suite of support services to create flexible, market-ready solutions that connect insurance providers, trusted brands and consumers for the benefit of all. 

It’s a mechanism by which insurers can increase visibility and distribution (and potentially reduce CAC) by enabling partners to leverage an established network of insurance companies and introduce fully branded digital insurance propositions into their existing ecosystem -- all while staying in control of their brand story, expanding their value proposition and driving monetization with minimal to no friction, lead time, infrastructural investment or guesswork. IaaS enables carriers and brands to increase their digital delivery capabilities, streamline sales processes and optimize insurance offerings through sponsored channels.

See also: Why SaaS Is Key in Core Systems

Insurance Distribution, Redefined

With some earnings reports looking ominously grim, corporate budgets could potentially be tightening across the country in response to the anticipated downturn, and marketing budgets are often the first to be slashed. As mentioned, customer conversions within the insurance space are already notoriously expensive, but a product you can’t market, no matter how artfully designed, dies an ignoble death – so how can carriers stretch those dollars and minimize financial risk?

Simple: Partner with brands consumers already trust and embed the offer where they’re already shopping, at the moment of peak relevance. This could mean partnering with an employer, a financial institution, a consumer brand or even another insurance carrier; every industry is trying to improve customer acquisition and retention, so there is opportunity everywhere. 

For example, mortgage companies will find that many customers value homeowners insurance offers incorporated into the preexisting purchase flow, especially during what is likely to be a busy time for the homebuyer. Similarly, how many drivers would welcome the opportunity to drive off the lot by getting auto insurance coverage on the spot without having to start a separate process? Insurance might not be a brand’s main product, but, if it’s an adjacent offering, it’s never bad business to create added value for customers (as long as you keep their convenience in mind). 

What’s in It for Insurers?

As any insurance provider can tell you, one carrier does not want every risk, especially in a hardening market. By having a choice environment, even if the customer usually shops with one provider, when the provider doesn’t have an option for that consumer or doesn’t want to take on the risk they can offer an alternative solution through another provider; this is what we like to call “coopetition.” Such an arrangement also gives carriers the ability to present other relevant ancillary products that they might not currently offer. Instead of always trying to say “yes and…”, a provider can do what’s best for their business yet still provide an elevated experience for their customer by saying “no, but…” and still meet their needs through other options while owning the relationship with the customer. 

Leveraging an IaaS-powered marketplace or implementing an embedded insurance offer also enables a provider to control their customer experience. Contrary to using lead generation partnerships or aggregators (which can often be quite expensive), using an IaaS approach enables a brand to not only provide a better branded experience -- from the front end to agent service experience -- the brand can also gather data on their customers, understanding what they’re buying and when. If there is an opportunity to sell differentiated products, that provider can make an informed decision before committing to the heavy lift that entails.

Through IaaS, you can create a seamless online-to-offline experience that leverages your brand to sell insurance through digital channels (including embedded insurance offers) or via licensed agents over the phone, giving customers the choice of products they need, delivered in the manner they prefer, under a name they trust: yours. Enrich relationships with current customers and convert new ones, all while saving time and money and gathering invaluable data; there are no losers in this story. 

A Win-Win-Win

Today, we know one thing to be unequivocally true: Convenience is king. If providers want to stay relevant, they must adapt quickly and think innovatively, especially when it comes to distribution channels and technology, to meet consumers’ evolving needs. Working with brands that consumers already trust can build brand equity and minimize CAC, creating a mutually beneficial, omni-channel solution for insurers, distribution partners and potential insureds. Everyone wants a win – and, with IaaS, everyone gets one. 

My columns for Insurance Thought Leadership share best practices from outside insurance. For example, Amazon in digital customer experience, and AWS in large program management. Sticking with the A's, this piece on talent is from outside tech altogether: Alabama Crimson Tide football. 

For readers unaware, Nick Saban is arguably the most successful college football coach in the history of the sport. Mr. Saban owns a 269-67-1 career record, and his seven national championships--one at LSU and six at Alabama--are the most all-time. 

Winning, Saban would be the first to tell you, requires talent. Alabama has landed the top recruiting class in eight of the past 13 years and was top three in the other five. Success breeding success, today Alabama practically sells itself to top recruits, players interested in practicing against, and playing with, the best, toward winning championships and a lucrative career in the NFL.

But it wasn’t always that way. Saban inherited a Crimson Tide program that went 6-7 in 2006. “We’re going to build a winning culture here,” he said in his introductory press conference. “A culture that winners will want to be a part of.” Saban rightly put the horse before the cart: culture draws talent.

Here are three aspects of Alabama’s winning culture that can help you build and shape yours.

1. Think process, not outcomes.

“We don’t think or talk about winning the SEC Championship. We don’t think or talk about winning the National Championship. We don’t think or talk about the result, but what needs to be done to get the result,” Saban said in a recent speech. “What do you need to do in this workout? This drill? This play? In this moment? Let’s think about what we can do today. The task at hand.” 

Controllable inputs, in other words, over desired outputs. Right action; detachment from result. 

2. Alabama’s process in three steps:

1. What’s the vision?
2. What’s the plan to achieve #1
3. Do we have the discipline to follow #2?

This is where leadership comes in. It’s on you as a CxO, LOB head or Program Owner, to spell out the vision for your players. It’s on you to map the plan for getting there. And it’s on you to define roles and responsibilities and manage to them. Remember, winning culture is formed from high standards, firmly enforced. 

Saban’s vision of football excellence is a lot easier to articulate than yours. It’s for the most part implied. Everyone knows why they’re there. But finding the right “why narrative” is a must for attracting top talent, and in insurance the “why” is not implied. Here’s what we’re doing. Here’s why it matters. Here’s how we’re going to do it. And here’s where you fit in. You must define it, spell it out. 

See also: 3 Keys to Leading a Team in a Crisis

3. After process, people.

Alabama doesn’t recruit every five-star player who can run a 4.3 40-yard dash. Nor do they automatically pass on three-star players. Mac Jones, who led Alabama to a 13-0 record and National Championship in 2020 and is now starting quarterback for the New England Patriots, was a three-star recruit. 

The tangibles matter. In football, speed, height, athletic agility can’t be coached. Likewise, five-star business and especially digital talent just jumps off the page of the CV. Elite developers can do things mortal developers cannot; a ninja coder can often do the work of 10, and in half the time, creating a cleaner, more elegant solution. 

But the intangibles can’t be overlooked, either. On a team level, respect and trust are key--to the organization, the structure, the standard, each other. Beware chemistry wreckers. 

On a personal level, look for players with character, who work to get better and have a proven track record of working through adversity to get the job done. A favorite Sabanism: “It takes no ability to be mentally tough and finish.” Look for players who are mentally tough and finish. Mac Jones, while biding his time, waiting his turn to start, not only mastered the playbook but earned his degree in three years, masters in four, with a 4.0 GPA. 

In the three-step process that Saban drives at a program level, he looks for players to define for themselves on a personal level. What’s your vision for yourself? What’s your plan for getting there? Are you following that plan--or are you just talk? He develops players by holding them accountable to their own words. 

And he develops teams one player at a time. Alabama carries 85 scholarship athletes on their roster. That’s a lot of talent, a lot of egos, to manage. Whatever else is going on, Saban makes it a point to meet one-on-one with at least three players a day. “It’s about them--always. Not you,” he says. “People gotta know you care; that you’re a leader, not a manipulator. That you’re here to help them get what they want--which you know because you talk to them.

“There’s a misconception out there that the culture is somehow going to magically make players better. But that’s wrong. It’s the players and their daily behaviors that make the culture. There is no ‘i’ in 'team,' but there is an ‘i’ in 'win.'”

In 2007, Saban’s first season with Alabama, the Crimson Tide went 7-6. In 2008, they went 12-2. In 2009, they went 14-0, winning their first championship under Saban. Winning championships takes time. Building a championship culture, which attracts championship talent, starts today.

According to Google, 90% of owners of multiple devices switch between screens to complete tasks. So, the importance of being able to accurately identify consumers across devices and marketing channels – or identity resolution – cannot be overstated. This is especially true in industries like insurance, where shopping journeys typically involve extensive research and comparison shopping over time.  

There’s a high cost to unidentified consumers. Failing to invest in identity resolution leads to canned messaging, wasted marketing spending and lost opportunity to cross-sell and up-sell existing customers.

Today’s shoppers demand personalization. The logical next step to identity resolution, then, is using the additional data that comes with it to improve the customer experience in a process called identity management. 

Identity and Experience

Identity management involves reconciling what you know about an individual – static demographic information, such as income, as well as personal attributes like existing vehicle and homeownership – with real-time behavioral data, specifically actions that signal purchasing intent and tell marketers and agents it’s the right time to engage. 

This sort of data is useful for nurturing both prospective and existing customers. Consider an auto policyholder. Are they homeowners? Do they have children in the household who will be driving soon? Do they also own boats, motorcycles or second homes? Does their recent online shopping behavior indicate any of these attributes have recently changed?  

In essence, identity management centers on knowing who a consumer is as well as what they’re in search of and putting that knowledge to work. While this may seem obvious, for every $92 spent on acquiring customers, on average, only $1 is spent on converting them. Investing resources in lead nurturing and personalized messaging can be a significant differentiator. 

See also: 10 (Lame) Excuses for Not Marketing

Identity and Optimization 

Reliable data is the first requirement of effective personalization. Automated identity resolution solutions layer identity markers, or information like an email or IP address, with third-party data to fill in the holes, so to speak, on a given customer profile. Third-party data can include demographic details and personal attributes as well as real-time shopping behavior. In either case, third-party data extends a company’s view of a customer beyond the data it already has. 

Though most insurance providers have mountains of data at their fingertips, that data is often spread out among internal systems and tools, leaving providers without a singular 360-degree view of the contacts in their CRM systems. It can be time- and resource-intensive to disrupt these data silos, but getting your own first-party data in order is essential to making the most of identity resolution tools and leveraging additional data for identity management. 

In addition to lead nurturing, identity management also supports lead scoring. Take property and casualty. Our collective return to work (and thus return to commuting), recent supply chain challenges, even an uptick in catastrophic events due to climate change are all driving up the frequency of and severity associated with P&C claims. In return, P&C insurers are dialing back customer acquisition efforts until they’re able to increase rates to be commensurate with today’s risk. Concerns about risk only strengthen the case for identity management, as it allows marketing and sales teams to dedicate the limited resources they have to identifying and working the most profitable leads, while they pass on targets that do not meet the profile of ideal customers.

Identity and Privacy 

Any discussion on consumer data should also include a note on consumer privacy. Insurers must confirm each and every customer has given their consent to be contacted, to remain compliant with consumer privacy regulation like TCPA (the Telephone Consumer Protection Act). When purchasing lead data from a third party, marketers must verify that their lead partners have also complied on their behalf, as the courts have made it clear both parties are ultimately responsible. Marketers and agents should be prepared to demonstrate compliance in the event of a consumer complaint. 

All that said, compliance is the bare minimum. With great data comes great responsibility. Consumer data must be managed with great care. Not only because it’s good for business but because it’s the right thing to do. Retail giant Target offers us a cautionary tale – years ago, it detected a 16-year-old’s pregnancy based on her shopping behavior and mailed her maternity-related marketing materials before she shared the news with her parents, creating a PR nightmare for the company and an unfortunate breach in privacy for the young woman. 

To be effective, identity management strategies must balance what’s technically possible with what’s feasible and optimal from a business perspective. A thoughtful approach and reliable partners will empower insurers with more accurate, comprehensive customer data and the ability to communicate with the right customers at the right time and with the right message.

Recent events have highlighted the impact of violent, traumatic events on our daily lives. Trauma refers to an event, series of events or set of circumstances that are experienced by an individual as physically or emotionally harmful or life-threatening and that have lasting effects. Exposure to traumatic experiences creates emotional challenges for children of all ages. 

Parents and caregivers have the added worry of how to support their children in the aftermath of traumatic experiences. It is important for parents and caregivers to restore a sense of safety to their children even when the world does not feel safe. Adults can support the children in their lives by understanding the impact of traumatic events and knowing specific actions that can bring a sense of comfort and safety. 

Children respond to violence and trauma in a variety of ways; however, there are several typical responses. These responses vary, depending on numerous factors, including the following: 

• the child’s age
• whether the child knew the individuals involved
• whether the child directly witnessed or indirectly heard about the incident
• how “graphic” the violence was
• how extensively the media covered the event 
• if the child has previously experienced exposure to trauma. 

Representative Common Responses to Trauma Include: 

• Concerns about fearing that the affected person or people suffered
• Repeatedly visualizing the crime or incident in their minds 
• Constant attempts to tell and retell the story of the crime or incident 
• Need to reenact the crime or incident through play 
• Feelings of guilt for not having intervened or prevented the crime
• A desire to seek revenge [for those who knew the victim(s)] 

Signs of Grief in Children Parents Should Watch for After Traumatic Exposure

For parents and caregivers, it is important to observe children exposed to trauma for signals of grief after a violent crime or incident. For some children, particularly those who knew the victim(s), these grief signals may include:

• Fear of death 
• Fear of being left alone or sleeping alone 
• A need to be with people who have been through the same experience
• Difficulty concentrating 
• Drop in grades (during the school year) 
• Physical complaints, such as headaches or stomachaches
• Bedwetting 
• Fear of sleep 
• Nightmares 
• Clingy behavior and wanting to be with and around parents more often

How to Support Children When They’ve Experienced a Traumatic Event

Ask what they think happened: Let them tell you in their own words, and answer their questions. Do not assume you know what they are feeling or what their questions will be. The easiest way to have this conversation might be while they are engaged in an activity, such as drawing, sitting on a swing or driving with you in the car. Details that may be obvious to adults may not be apparent to children. Be truthful, but don’t tell them more information than they can handle for their age. 

Focus on their safety: Once you understand their perception of the traumatic event, be clear that you will keep them safe and let them know other adults (school, police, etc.) are working hard to make sure they will stay safe. 

Pay attention to your reactions: Your children will be watching you carefully and taking their cues from you. If you can manage your anxiety about the traumatic event, your children will be more easily reassured. 

Monitor your child’s access to media: It will help if young children do not watch news reports or see the front page of the newspaper. Young children who watch a traumatic event on the TV news may think the event is still going on or happening again. 

Watch for behavior changes: Your children may show you through their behavior that they are still struggling with what they have heard or seen. They may have physical complaints or regressive behaviors, often including nightmares, insomnia or bedwetting. They may feel guilty that they are responsible for the event and need to be reassured that they are not responsible. 

Maintain your routines: Sticking to your daily structure of activities -- mealtimes, bedtime rituals, etc.-- reduces anxiety and helps children feel more in control. 

Keep the door open: Encourage your children to come to you with any questions or concerns and do not assume the questions will stop after a few days or up to several weeks. Let them know their fears and questions are normal and you will always be available for them. Remind them that all questions are welcome. 

Consider this a teachable moment: For older children, this traumatic event may lead to a discussion about ways they can help others who have experienced a tragedy. You can also ask them if they know how to keep themselves safe when they are away from home. Traumatic events make us feel like we have lost control, so any constructive activities we engage in make us feel less vulnerable.

See also: Workplaces Coping With Suicide Trauma

Tips for Talking to Children Witnessing or Hearing About Traumatic Events

For children who have witnessed violence, either directly or through media exposure, talking with them in an informed, age-appropriate manner can help them process what they’ve seen. Below are representative pointers to consider for these conversations: 

• Allow your child to talk about what he/she experienced or heard about 
• Know that younger children may prefer to “draw” about their experiences 
• Ask them what they saw and heard and what they think about the experience 
• Help them to label feelings and normalize their reactions (“That must have been pretty scary. It wouldn’t surprise me if you keep thinking about it.”) 
• Keep routines as much the same as possible in the aftermath -- children count on routines and structure
• Spend extra time with your child: have dinner together, make sure to keep bedtime routines, share playtime or take walks together
• Remind your child of things he/she likes to do to help feel better when upset (playing, reading, drawing, singing, etc.) 

Steps for Employers to Help Employees Understand the Effects of Trauma on Children

The growing frequency of traumatic incidents has necessitated the expansion of crisis management and emergency response plans for organizations of all sizes. The importance of instituting Critical Incident Response protocols cannot be overstated, including stress debriefing and grief counseling. Often, community-wide services are coordinated in the aftermath of violent, traumatic events. Employers are encouraged to promote these services to their employees and ensure they feel supported to be able to attend these events. 

Employers increasingly are adopting trauma-informed approaches to wellbeing and understand the importance of addressing the harmful effects of trauma on affected stakeholders. Employers are encouraged to share information with workers about how to communicate with children in their lives about traumatic incidents. Parents and caregivers are encouraged to seek professional support from licensed practitioners when children do not respond to their intentional efforts to address the effects of trauma.

Demand for voluntary benefits is soaring, with 94% of employers expecting such benefits to hold greater importance in their organizations over the next three years. 

The days of voluntary benefits being sold in blocks where one product size fits all should be over. However, only 51% of employers believe their benefit programs address the individual needs of their workforce, and only 39% say their programs offer significant flexibility and choice.

Employee benefits carriers have an opportunity to increase their revenues by up-selling voluntary benefits that meet the evolving needs of today's workforce. Research from Agentero says insurance companies can increase their profitability by 60% to 70% through selling products to existing policyholders. 

Let's take a look at some in-demand voluntary benefits that carriers are offering to seize these new revenue opportunities, along with some analysis of why these offerings are now so popular.

Trend #1: Personalized Wellness Offerings 

Wellness benefits are in high demand as 90% of consumers opted for mental health support in 2022, increasing by 24% from 2020. However, 49% of employers have not yet formally articulated a wellbeing strategy for their employees despite the need. Carriers can help them fill the gap.

The core function of a wellness program is to motivate employees to adopt healthier habits to prevent illnesses and injuries typically covered by healthcare coverage. 

While traditional voluntary benefits like topped-up dental care, vision care and wellness-expense reimbursements will continue to be in demand, employee benefits carriers should acknowledge the shift toward personalized wellness packages that support all aspects of an employee's physical and mental health. 

Today, personalized voluntary wellness programs might offer a broader array of services and resources such as access to medical tests, work/life balance programs, smoking cessation, nutrition, stress-management classes and mental health resources at preferred group rates. 

Recent research finds that 38% of employees say they have at least one family member who suffers from severe stress, anxiety or depression. The same study finds that 45% of employees who suffer from mental health illnesses and extreme stress are not getting the help they need. Additionally, those same employees are 50% less likely to be highly engaged and often miss four more workdays a year than the average employee. 

According to Mayo Clinic, “Metabolic syndrome is a cluster of conditions that increase your risk of heart disease, stroke and type 2 diabetes. These conditions include increased blood pressure, high blood sugar, excess body fat around the waist and abnormal cholesterol or triglyceride levels.” Up to one-third of adults have it. Wellness programs promoting extensive lifestyle changes can prevent major health problems. 

Gartner's research indicates organizations can boost employee discretionary effort by 21% by providing holistic well-being support. That’s twice as much impact as companies that offer only traditional programs. 

As the wellness crisis continues, voluntary wellness benefits will be a cost-effective way for employers to assist employees in living healthier lives while improving employee retention.

Trend #2: Pet Insurance

Pet insurance is a popular voluntary benefit many employees are eager to obtain. In fact, in 2022, 56% of consumers opted for pet insurance as a voluntary benefit, an increase of 22% from 2020.

One survey found that 76% of millennials own a pet, with about 42% saying they think of their pets as they would their own children. Another recent survey shows nearly 50% of pet owners would not be able to cover a $5,000 pet expense out-of-pocket. Owners of sick pets have higher rates of depression and anxiety, potentially resulting in poor performance and disengagement from work.

There is an opportunity for employers and voluntary benefits providers to appeal to millions of people with pet insurance. 

Pet insurance may even be the difference between keeping and losing employees. 30% of respondents in a Nationwide survey said pet-related benefits would influence them to stay with their current employer or leave their company for one that offers pet insurance. 

See also: The New Mandate: 'Video or Vanish'

Trend #3: Identity Theft Protection

Identity theft is a growing problem responsible for serious financial headaches, including stolen funds, out-of-pocket costs, legal fees, record request fees, childcare costs, tax challenges, etc.

Allstate Identity Protection says a good identity theft protection benefit should cover all of the costs mentioned above to make an employee's financial recovery as complete and straightforward as possible. 

In a Gallup survey about what crimes Americans fear the most, 71% of respondents said they worry about their data being hacked, and 67% are worried about identity theft. 

The Federal Trade Commission (FTC) received 1.4 million identity theft complaints in 2020, an increase of 113% from 2019. In 2020, identity theft cost Americans about $56 billion, with about 49 million consumers falling victim. 

As a result, more employers are offering voluntary benefits that help protect their employees from identity theft. In fact, 60% of consumers opted for identity theft protection as a voluntary benefit this year, increasing by 18% from 2020. 

Trend #4: Hospital Indemnity Insurance

Unexpected lengthy hospital stays are a growing concern in the U.S., causing many Americans to fall into serious debt. There were nearly 33 million hospital admissions in the U.S. alone this past year. Sixty-one percent of Americans say they would not be able to cover an unexpected $1,000 out-of-pocket expense from their savings. 

As a result, hospital indemnity insurance has become an increasingly popular voluntary benefit, as 47% of employees opted for hospital indemnity coverage this year, increasing by 30% from 2020. 

A typical hospital indemnity insurance plan provides employees with additional financial support beyond usual health insurance. Every hospital indemnity plan is different. For example, some programs may offer fixed benefits for admission to a hospital, an overnight stay, treatment in an emergency room, outpatient procedures or overnight stays in an intensive care unit. 

Carriers should emphasize customizable hospital indemnity plans that can best meet their clients’ coverage needs.

Trend #5: Voluntary Childcare Benefits

A survey by Care.com finds that nearly half (47%) of families are more concerned about the cost of childcare than they were before the pandemic. 

Rising childcare costs put intense pressure on working parents. In 2020, 79% of working parents reported having symptoms of workplace stress and burnout, and over 55% say they are dealing with mental health issues. 

Nearly 44% of consumers opted for childcare benefits this year, increasing by 26% from 2020. However, while supporting working parents is a top priority for 74% of employers, only 39% feel their programs are effective. 

Childcare benefits provide working parents of young and school-aged children with resources, childcare services and financial support so they can afford to take care of their kids.

Such benefits can come in many different forms. For example, Willis Towers Watson finds that 30% of employers offer access to backup childcare services, 27% offer discounts for childcare centers and tutoring resources, 26% offer subsidies to employee dependent care spending accounts for childcare expenses and 97% offer parents flexible work hours. 

This presents employee benefits carriers and employers with an opportunity to help working parents alleviate financial stresses and anxieties with additional childcare offerings.

See also: What to Understand About Gen Z

Technology Makes Personalizing Voluntary Benefits Feasible

The number of companies offering voluntary benefits will continue to rise, as will the number of options in a benefits package. The Society of Human Resource Management says 92% of employees say that benefits are essential to their overall job satisfaction. 

Employee benefits carriers have an opportunity to increase their revenues by up-selling increasingly important voluntary benefits like pet insurance, identity theft protection, childcare benefits, hospital indemnity insurance and personalized wellness programs as well as traditional life, disability and critical illness coverage.

Fortunately, modern technology makes it much more feasible for carriers to craft personalized benefit programs for employers and their employees. Thanks to advances in AI and big data analytics, insurance carriers can recommend optimal voluntary benefits selections based on an individual employee’s unique customer profile with a digital sales and underwriting platform built specifically for the group insurance industry.

The global reinsurance market is a complex beast. In the past, the tail has often wagged the proverbial dog, with pressure from reinsurers forcing hard insurance markets via increased pricing. More recently, however, insurance markets have hardened due to other issues, such as increased flood losses, social changes, regulatory issues and major Covid-19 business interruption losses.

With higher pricing, many insurers, including Lloyd’s, have turned the corner and last year reported a return to profit. At the same time, reinsurers have struggled to increase rates to their desired level, in the face of increased cat losses, claim inflation and now pending Ukraine losses.

Reinsurers' views on rating adequacy varies, territorially and across business lines, which means that there are opportunities for smart reinsurance brokers and canny cedents to profit, especially those that use modern technology to swing results in their favor.

Recent renewals have been varied

Reinsurers have long voiced their frustrations about continued inadequate market conditions and the difficulty that they’ve had trying to recoup their losses following above-average natural catastrophe losses and significant casualty claims caused by COVID-19. Despite this, many reinsurers reported profits for 2021, after four years of successive rate increases.

Previous efforts by reinsurers to usher in a truly hard market have been thwarted by excess capacity that continued to flow into the market through insurance-linked securities (ILS), which kept rate changes at bay in most classes. However, a reduction in ILS capacity at 1/1 made the Retro renewal cycle especially difficult and saw firms that went into the market late forced to retain large swaths of risk on their balance sheet or accept sizeable rate increases. 

As Gallagher Re pointed out in their 1/1 renewal report, much of the reduction in ILS capacity could be attributed to this investment being redeployed to CatBond, ILWs and primary reinsurance. Still, as market conditions continue to be in flux, it isn’t clear whether investors could look to take their capacity elsewhere. We could see difficulty and rate increases in the Retro market trickle through to the primary reinsurance market throughout the remainder of the year.

The April renewal was deemed “balanced” by Gallagher Re but highlighted the concern of inflation across all lines of business. If inflation was a concern at Jan. 1 and April 1, it will certainly be a point of difficulty in the forthcoming July 1 renewals, as the U.S. market has experienced inflation of 8.5% in the last year – the largest jump in 40 years. 

The performance of summer renewals rises and falls with the performance of the Florida market, and the 1/1 Retro market has had a significant impact on expectations for the coming Florida renewals. So much so, in fact, that the renewals are even being called a “flashpoint.”

If expectations of a problematic renewal become a reality and ILS capacity continues to decrease – even slightly – it could signal a change toward more challenging market conditions for cedents and brokers. However, as we have seen this year, these rate changes won’t affect everyone evenly, and best-in-class cedents will continue to outperform their peers.

See also: Reinsurance: Dying... or in a Golden Age?

How to be a best-in-class cedent in an uncertain market?

There are certainly lessons to be learned from the most recent renewal cycles that can guide cedents looking to get the best result from their reinsurance placements:

1. Be faster, to get to market early: If there was one key takeaway from recent renewal seasons, it was that going to the market late hurt the ability of a firm to secure sufficient capacity for their placement. None more so than the recent Florida renewals, when, according to boutique investment bank/broking firm Stonybrook, most domestic insurers – which placed more than $40 billion of limit for the 2021 hurricane season – had placed less than 80% of their required external placements, including one carrier, which had no reinsurance in place as of May 27.

Bringing reinsurance placements to the market sooner can help ensure that an insurer is at the top of a reinsurance underwriter’s pile and that the capacity needed can be secured upfront. Of course, that’s much easier said than done. 

For most cedents, the process of gathering, cleansing, preparing and finalizing their data takes them (and their brokers) months to complete. Cedents using tools such as Supercede’s platform have a sizeable advantage as their data preparation process is reduced from months to only a couple of weeks

2. Present cleaner, clearer data: Data inconsistency and uncertainty continue to present a significant challenge. Reinsurers are often required to rerun all of the data and exhibits provided to them to ensure that they agree with the numbers presented. This painstaking process is made worse because each submission is organized and presented differently, making it difficult for underwriters to find the critical information they need. A lack of confidence in the data has always resulted in underwriters adding uncertainty loading to their price. As market conditions change, it will be more important than ever for cedents to provide their partners with clean, clear and consistent data to ensure that their portfolio is priced accurately and fairly. 

Again, cedents that use the latest tech have an advantage over their peers as they have the tools to instantly find and correct any anomalies in their data before sending it to market. This presents a clear and consistent view of their data year-over-year and makes it easier for their partners to review the high-level submission information as well as extract the raw underlying data used to prepare the exhibits. Reinsurers want to remove uncertainty loading from their pricing, but until the data is consistent and clear they are forced to keep the hedge. AXA XL’s chief underwriting officer, Jon Gale, commented: “We want to be in a position to reward cedents for providing us with good data in our pricing. Unfortunately, at the moment, we often have to include uncertainty loads for poor or incomplete data.”

3. Cede smarter: Most cedents have spent significant time assessing and evaluating their reinsurance purchasing strategy to determine what, and how much, they should purchase. However, because much of the valuable data that is shared with the market is siloed from their other treaty data, it is nearly impossible (or far too time-consuming) for ceded re teams to evaluate how the submission would look if different products, lines of business, etc. were combined into a single purchase or broken into different purchases. This is another challenge associated with the current way data is collected and prepared. Once again, tech can support cedents.

Necessity may be the mother of invention, but until recently the technology has just not been available to drive digital transformation in the reinsurance sector. And in current turbulent times that change is badly needed, particularly as we look to the future with rising nat cat losses, claims inflation and falling investment markets. 

Now is the time when market leaders will take the opportunity to use technology to win the reinsurance race, by being smart, cleaner and faster.

The hurricane season in the Atlantic basin officially started on June 1. The last six hurricane seasons have been characterized by above-average activity, and this trend is expected to continue in the 2022 Atlantic hurricane season. To minimize losses in the event of a hurricane, businesses need to develop and implement a comprehensive crisis plan, including actions to take before, during and after a storm. 

 According to the latest available forecasts, the 2022 hurricane season is expected to be above the 1991-2020 average, with 14 to 21 tropical storms and six to 10 hurricanes, including three to six major hurricanes (for comparison: an above-average season would be seven to nine storms reaching hurricane strength and two to four becoming major hurricanes, which is Category 3 or higher).

Looking back, the 2021 hurricane season was the third most active season on record, as well as the third costliest after 2017 and 2005. In late August, Hurricane Ida caused widespread damage in the Caribbean before devastating the coast of Louisiana, generating record rainfall in various locations, and flash flooding in the north-east U.S., resulting in insured losses of $36 billion.

The 2021 Atlantic hurricane season saw a total of 21 named storms, of which seven were hurricanes (four reached a major hurricane status). The number of named storms well exceeded the average of 14, and the total number of major hurricanes is also slightly above the average of three. 

Recent Atlantic hurricane seasons have seen the first tropical storms form before the official start date of June 1. As a result, the U.S. National Oceanic and Atmospheric Administration (NOAA) Hurricane Center has contemplated moving the start date to May 15.

The extension of hurricane activity could in some respects be attributed to the development of advanced observational technologies, which can identify weaker storms that never come close to any landmass, adding to tropical storm counts. 

Another contributory factor to the extension of seasonal storm activity is likely to be higher sea surface temperatures (SSTs). Tropical storms can only form and sustain themselves for longer periods where ocean temperatures exceed 27°C. Manmade global warming has increased atmospheric temperature by 1.1°C since 1880, with most of the net excess heat stored in the world’s oceans, including the North Atlantic. This has increased the duration of hurricane-supporting SSTs as well as the geographical spread of where they might occur. 

The role of climate change

While there is no clear scientific consensus on whether climate change will result in a net increase in the frequency of tropical storms, there is more certainty that high-intensity storms will become more frequent, indicating the potential for greater wind and storm surge damage. Scientists also believe that climate change will make hurricanes wetter, increasing the risk of flooding. In addition, the strength of a storm becomes harder to predict, as storms intensify in a short time. The wind speeds of Hurricane Ida increased by 55mph in the 24 hours before landfall in Louisiana. 

Businesses need to prepare themselves for the prospect of another above-average hurricane season this year. Obviously, windstorms cannot be prevented from occurring. However, loss can be greatly minimized by adequate preparation before a storm arrives. The development and implementation of a comprehensive windstorm emergency plan should be a No. 1 priority for those companies that don’t already have this in place.

Businesses in exposed areas are advised to regularly update their emergency plan, which should cover areas such as training, assembling emergency supplies, business continuity, buildings inspections, anchoring or relocating equipment and stock and protecting windows. 

Allianz Risk Consulting also publishes a series of risk bulletins and checklists to help you protect your people, property and business, including: Windstorm Checklist, Flood Checklist, Water Damage During Construction and Water Damage Prevention Solutions.

View the full Allianz hurricane season outlook here.

At the Insurance Europe conference in Prague last week, I closed the event with remarks on what will happen when insurance truly goes digital. Yes, I'm sure I'm partly just making certain you know that I spoke in a palace in Prague last week -- in the ballroom of the beautiful Zofin Palace on an island in the middle of the Vltava River, if you must know. But the talk seemed to go over quite well, so I thought I should share. 

I tell people I've been watching the same movie for more than 35 years, ever since I started covering IBM for the Wall Street Journal in 1986. In that movie, industries go digital -- and things blow apart, then reassemble.

As the center of the computer industry and arguably the most dominant country in the world in the mid-1980s, IBM was the focus the first time I witnessed the "what happens when an industry goes digital" movie. It was slow to adapt to the faster metabolism of the industry once personal computers came along and went through a tumultuous decade that saw the ouster of the CEO and massive layoffs. Then the rest of the computer industry followed IBM into digital disruption. When a commercial version of an internet browser became available in the mid-1990s, just about every industry could be affected -- retail sales, books, newspapers, music, you name it. 

In watching the "movie" over and over again, it has seemed to me that going digital looks a lot like the camera in your phone.

I'll explain.

The technology that allows photography developed for centuries, starting well before Leonardo da Vinci's camera obscura, and continuing through George Eastman's experimenting with film and chemicals that he baked in his poor mother's oven in the late 1800s. Once Eastman founded Kodak, the technology made great strides -- rolls of film instead of big sheets, smaller and smaller cameras, color, quicker and quicker exposures and eventually one-hour labs that churned out little yellow boxes of prints. But everything about the process was still analog. Photography still required a dedicated camera, film, lots of chemicals and paper. 

Then Philippe Kahn's wife had a baby.

Philippe is a fascinating guy, whom I've known since he founded and ran an early personal-computer software company, and it occurred to him as he paced the halls at a hospital in Santa Cruz, CA, in 1997 that the process of sharing photos with friends was what computer-types call a kludge. Digital cameras were starting to be available, and he had one, but he was going to have to go back home after the baby was born, take a card out of his camera, plug it into his computer, sort through the photos and, only then, email them to friends. Why couldn't he just connect his camera to his phone and send the photos right from the hospital?

So he did. And, in that moment, photography truly went digital. 

Philippe's phone camera got us soon enough to the point that few felt the need for a dedicated camera. The film, chemicals and paper disappeared, too. Photography had been stripped down to its simplest elements: capturing an image and sharing it.

Those who write about photography going digital tend to focus on Kodak, which actually invented the sensor that enabled digital photography but still bungled the transition to digital. It's an instructive story. I wrote it myself, in a book with Chunka Mui on lessons to be learned from failure that came out going on 15 years ago. But there are other lessons, too.

The stock market value that Kodak had didn't just disappear. It moved to other companies, many of which have achieved valuations that Kodak never dreamed of. Meta (with a market value north of half a trillion dollars even after all of Facebook's recent problems), Pinterest, TikTok and a host of other companies became possible because of the ability to capture and share images, free of the old, clumsy requirements of analog. Software and services have sprung up around the new world of photography, too -- we have to look good in those vacation photos, right, Photoshop?

The lesson I take from photography is this:

Going digital means eventually stripping an industry down to its barest essentials. And, once that happens, those bare essentials can be rearranged in all sorts of new ways -- hello, Facebook; goodbye, little yellow boxes. 

When I think about insurance, I see three bare essentials. There is a customer. There is a yes/no mechanism that decides whether a payment is triggered. There is capital. But that's it.

Sure, there are plenty of other things that have to happen: contracts, underwriting, claims processing, etc. But all those happen in support of one of those three essentials: the customer, the yes/no mechanism or the capital. 

We're still a good ways from being fully digital, and for at least one very good reason -- customers are making clear that they value advice that can't just come from a computer and that they value human contact. But you can start to see the three bare essentials taking new forms: embedded insurance that reaches customers in new ways, parametric insurance that can render a yes/no decision instantaneous, private equity bringing both its capital and its hard-edged expertise to insurance, etc. And I believe we're just beginning the digital disruption that the industry will see. I'm not sure we'll ever have that complete aha! moment that photography had when Philippe Kahn's wife had their baby, but we'll get there.

Cheers,

Paul

P.S. I also shared with the Insurance Europe audience a tool that Chunka and I have developed over the years that can help greatly in organizing your strategy for where digital will take you, but I'm going to set that aside for next week. I've already gone too long, and I'm actually on vacation. I'm catching up on Berlin, traveling with my younger daughter, who is chronicling the trip with her phone camera and, yes, giving me a little digital grooming via Photoshop, lovely child that she is.  

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A New Model for Agents and Brokers Not quite a decade ago, a colleague and I did some consulting on innovation for the CEO of one of the biggest personal lines insurers, and he expressed great frustration with his agent force. "Every time I try something new, even when it's going to benefit the agent channel, they turn around and kick me in the [crotch]," he said. In the years since, I've watched the power of agents and brokers only grow -- just look at how much valuations for agencies and brokerages have been climbing and at the much slower increases for carriers. And agents and brokers have mostly guarded the model that has let so many prosper for so long: They get paid commissions on product sales, rather than being paid for advice, and are rewarded for building and then maintaining a book of business rather than primarily for continually adding clients.  Certainly, the industry's push for digital innovation has led to more cooperation. In particular, insurers are trying to make themselves easier to work with, if only to try to become the carrier of choice for independent agents. But is that really the best we can do?  Bill Walrath thinks not.  Bill, now working as an independent adviser, has a long history of growing distribution networks across the U.S. He has also become a frequent author at ITL. (His recent articles can be found here.) So, I sat down with Bill recently to discuss whether there's a better way. His vision includes the need for insurers to become easier for agents to work with, in particular to seamlessly handle the busy work of issuing insurance cards, changing payment dates, etc. so agents can spend more time with clients and prospects. But the vision extends much further.  He notes that insurers spend loads of money buying data about customers even though most of it is of dubious accuracy. Agents have accurate information; why not pay them for it?  He also argues for moving toward a model where agents and brokers charge for advice. Everyone seems to agree that the advice is where the value is provided, so why not be explicit about the value and stop hiding pay inside product sales?  Change will surely be slow. Agents have control, and they're doing well in the current model. But opportunities are there for improvement -- even if they likely won't play out as my old client would wish.  Cheers, Paul P.S. The full interview is here Enjoy.      "There's a ton of information that agents can bring to the table based on what they know about customers. Companies spend loads of money buying data about customers that, in most cases, isn't that great. We're all trying to figure out who this customer is – and the agent likely knows it. So, is there a way that you could pay agents for good data?."  -William Walrath  Read the Full Interview READ MORE Agents and Brokers Commentary: May 2022 If an old-line family business in Mexico could build a game-changing dashboard more than  25 years ago,why not agents and brokers everywhere in today's digital world? Read More Specialization: Agents' Vast Growth Opportunity There is a huge range of opportunities that are still untapped, just waiting for creative, research-driven, passionate agents to capitalize on. Read More Getting Strategic About Distribution Putting the right product in the right place at the right time through embedded insurance has more potential than any other insurance innovation in recent memory. Read More Revolution? Not Yet. Evolution? You Bet. In our fervor to embrace new insurtech companies, we may have missed the opportunity to learn from those incumbents that have seen the ups and downs. Read More Underinsurance: A Call to Action for Agents We need to start a discussion about underinsurance, especially after natural disasters, to determine if changes need to be made to better estimate replacement costs. Read More 5 Flaws of a Commoditized Sales Approach I am convinced that  "we're free" are the two most damaging words in a broker's vocabulary, yet we see and hear them all the time. Read More FEATURED THOUGHT LEADERS Joel Zwicker Jocelyn Getson Bill Walrath John Putnam Kevin Trokey View all ITL FOCUS topics

ITL:

Despite all the talk about disintermediation, agents and brokers are as firmly embedded as ever in the sales process. But customers are also demanding changes in how they do business with insurers and their agents. In that context, what would be the first piece of advice you’d give to agents and brokers?

William Walrath:

There's definitely an aspect of digital self-service that’s required, almost letting go of the process and allowing people to have more freedom in terms of researching and asking questions and wanting to do things on their own. I think that poses a huge issue for agents, who are used to trying to create that perfect in-person relationship. Agents have to restructure and rethink how they go to market, the way that their offices are set up, just their general approach to the business.

I think agents, over time, are also going to have to diversify their businesses. Look at auto and home. Those are very competitive, so they're very price-driven. There's not a lot of differentiation. Agents who sell those lines need to begin learning how to move into products that are a little bit more complicated, where advice is needed – and where there’s more margin, too.

That might mean learning about small businesses. When you're dealing with a small business owner, there are a lot of things that can happen throughout the year. Payroll can go up, it can go down. The number of drivers of vehicles can go up, it can go down. Employees can come and go. All of those changes can affect the insurance policy. This is where an agent really stands out by giving advice and helping the client through all those changes, which are not simple, especially from the standpoint of a business owner who’s incredibly busy.

I’d also watch the insurtechs. As they continue to enter the market, I believe that at some point in their growth cycle they're going to want to look toward agents to help them grow.

ITL:

Some insurtechs are already starting to turn to agents.

Walrath:

Absolutely. The idea, at first, was to simplify the product with technology to the point that an agent wouldn't be needed. But, the deeper they get into insurance, the more insurtechs realize that that's not always the case. There's lots of things that happen in products, even within auto insurance, let alone in commercial insurance. Over time, insurtechs are realizing that relationships do matter and that they need to seriously consider using agents as a form of distribution.

ITL:

Beyond small business, what’s another area for agents to consider, where there might be more advice needed and thus more margin available?

Walrath:

Look at life insurance or umbrella disability. Health insurance is wildly confusing if you're not involved in an employer-based plan.

New products will take hold – parametric insurance, for example. Those new products will need to be explained. Agents can play a big part.

ITL:

If you look at financial advice, you see sort of a hybrid model. Many make money from commissions on selling products, but they also will charge for advice. Do you see us getting to the point with insurance agents where they would increasingly charge for advice?

Walrath:

Over time, we need to strongly consider the way in which we compensate for what an agency brings to the ecosystem.

In insurance, we have built a system based on a new business sale or renewal. That's how we pay, oddly enough. But, because of all the digitization of processes, customers don't always need somebody to fill out an application on their behalf like they did 30 years ago. We should strongly consider what types of activities and interactions with agents bring value to customers – and value might equal money at some point, because advice is something that can be compensated for.

The industry has done a lot of studies about the interactions between agents and customers, and most companies are very aware of what types of interactions create better retention, cross selling, etc. But companies don't necessarily drive those behaviors through a compensation system that would make it even more lucrative for agents to do those things.

The other thing is, there's a ton of information that agents can bring to the table based on what they know about customers. Companies spend loads of money buying data about customers that, in most cases, isn't that great. We're all trying to figure out who this customer is – and the agent likely knows it.  So, is there a way that you could pay agents for good data – is this family interested in having children, purchasing a home and so on? – and build up that client file so you can serve the customer correctly?

ITL:

Do you think the slow rate of change is because of lack of innovation on the part of the insurers or resistance on the part of the agent?

Walrath: 

A little bit of both.

I would say the execution of innovations by companies has been lackluster and has created a trust barrier. A company says, let’s be innovative and offer a new product. Let's offer travel insurance. What ends up happening is there isn’t an integrated process for the agent. Companies don’t ask themselves, how can agents work this new product into the conversations with clients, among all these other products you’re offering? And suddenly the agent is sending three different bills to the customer.

There's no doubt agents have to be open to change, but companies have to do a better job of innovating, as well. And not just with the idea, but the execution part of it.

ITL:

A sticking point seems to be that insurers don’t want to pay so much for renewals. I hear insurers say they want to encourage agents to generate new clients and not just build a book of business and coast on the renewals.

Walrath:

That goes back to my point about why agents should move toward products with more complexity. You don’t hear that drumbeat about commissions on these higher-complexity products like commercial insurance. You just hear the complaints on lower-complexity products like auto insurance, where the competition is only going to increase.

ITL:

Can you think of a company that is doing an especially good job of reorienting its relationship with agents?

Walrath:

I'll use examples from the independent agent side – I believe the independent agent side of the business has a healthier and more robust relationship with their agents. I’d cite Goosehead, Brightway and We Insure.

They have a new model. They pay a fair commission but also recognize that agents spend a significant amount of time servicing policies and built an infrastructure that seriously supports those agents. If a customer needs an insurance card or wants to change a billing date, that request seamlessly goes to a central call center. The agent can stay on the offensive, working with either new clients or existing clients in a meaningful way.

The companies came at this with the agent in mind first. The agents I've talked to who have worked in those groups are incredibly satisfied and are producing a lot of business.

ITL:

That sounds like a great place to end, with a call to action for insurers. Thanks so much.