General Electric's announcement last week that it is splitting into three parts not only marks the final stage in the unbundling of the world's most successful conglomerate but underscores a theme we've been sounding at ITL for years now: that the future belongs to ecosystems.

The GE announcement -- and one by Johnson & Johnson, also last week, that it is splitting into two pieces -- largely relates to stock market issues. GE felt that investors weren't fully understanding a three-headed business -- which manufactures equipment for healthcare, power generation and aviation -- and thought the aggregate valuation of the businesses would fare better if each had its own, clean story to tell. J&J made a similar calculation when it decided to split its volatile prescription drug business from the steady-as-she-goes consumer business that sells Band-Aids and Tylenol.

But the splits also reflect that the need for specialized expertise in a business, whether that's jet engines or over-the-counter medicines, increasingly overwhelms whatever benefits come from combining a variety of businesses in a single corporate structure -- and that digital connections make it ever-easier to gain any benefits via collaboration without being under the same corporate roof.

When I was a young pup of a reporter at the Wall Street Journal, an old hand told me, "If you have a good story, you should write it every once in a while." In that spirit, I'd like to resurface some of the many articles we've published on how the unbundling of businesses and capabilities can play out in insurance, benefiting businesses and customers alike.

In "Insurance Ecosystems: Opportunity Knocks," Marie Carr argues that, "rather than taking several years to fulfill digitization road maps, insurers will find that participating in a connected supply and demand service model offers something better, faster and cheaper.... Now that the building blocks are in place, industry leaders are increasingly engaging in ecosystems that serve broad consumer needs, often where insurance is only one offering among many. Strategic options are multiplying."

Carr then lays out four strategic considerations that can help insurers identify the right ecosystems to participate in and the right ways to participate.

In "The Intersection of IoT and Ecosystems," Matteo Carbone says, "Traditional, end-to-end business models are breaking down in every industry, including insurance. In the digital era, it is increasingly difficult for any single firm to deliver the seamless experience that customers expect. More insurers are leveraging digital ecosystems to reinvent their products and services, providing better risk management, reduced claim cost and new sources of revenue."

Carbone then describes how digital technology, especially through the Internet of Things, can be used to create a platform for coordination among numerous companies.

In "Power of Partner Ecosystems," Denise Garth focuses on distribution, where she says an "ecosystem can rapidly reach more markets, potential customers and current customers with more purchase and service options by tapping into a growing array of channels beyond the traditional agent/broker channel.... [including] direct-to-customer, other insurers (for products you want to offer your customers), marketplace exchange or platform and embedded."

Garth adds that "distribution ecosystems provide new access avenues, capabilities and services" and provides a formidable list of partnerships that involve insurers and that illustrate her point.

In "Big Opportunities in Insurance Ecosystems," Stephen Applebaum offers an example of an insurance ecosystem that dates back "to 1980, when information providers built platforms linking auto insurers to collision repair facilities to streamline the repair process. These ecosystems quickly expanded to include independent appraisers and adjusters, auto glass and car rental vendors, salvage pool and towing operators, parts providers and others. Today the ecosystems are beginning to include telematics service providers and auto manufacturers and dealers."

He adds that "new property claims ecosystems are emerging to include a full suite of contractors, inspection technology, digital payments and other service providers, enabling insurers to resolve claims in hours instead of days or weeks." 

In "The Word of the Year Is... 'Ecosystems,'" I took my own shot at the topic in early January of this year. Like some of the others I cited, I noted the potential for expanding the reach of sales efforts through partnerships. I also looked at "a second opportunity for ecosystems that is even more fundamental, because it allows for rethinking the whole organizing principle of major parts of a business and, eventually, the entire business.

"Historically, big insurers have been closed systems. They have their sales force, their underwriting teams, their actuaries, their claims organization, etc., all down the line, all operating within one set of walls. But what if an organization were more like a piece of software and could be organized as an open ecosystem, so the organization didn’t have to do everything itself and could incorporate a continual stream of innovations, whether from inside or outside the organization?"

Thinking of an organization as an ecosystem of businesses and capabilities would really lead to an unbundling of work.

Ronald Coase, who won the Nobel Prize in Economics for formulating the idea of transaction costs and whom I had the pleasure of interviewing once, came up with the notion because he was trying to figure out why businesses did certain things within their walls and contracted with others to do other things. He decided that the key was a measure of efficiency.

If a business wanted some legal work done, for instance, it could hire an outside attorney every time and avoid the fixed costs of having a legal staff. But then each bit of work would be a separate transaction and would carry costs -- and not just the costs of negotiating a deal. Transaction costs would include the time involved, the higher per-hour rate an outsider would charge, the uncertainty about the quality of the attorney if a business hadn't worked with the person before, etc. So, Coase theorized, businesses would hire staff attorneys and bring other work inside, to the point where those internal costs matched the cost of using external resources, including the transaction costs.

Although Coase was in his late 80s when I sat down with him (he lived to almost 103), he was as intrigued as anyone by the possibilities of the internet in the latter half of the 1990s. He thought it could drastically lower the transaction costs of doing business with other people and enterprises and thus shift work from inside corporate walls to outside them through the sorts of digital-based partnerships and ecosystems we're now, in fact, seeing.

He even put a number on how much he thought transaction costs could be cut. Figuring that about 20% of the U.S. economy was transaction costs, he speculated that the internet/digitization could take out some $4 trillion of cost per year.

But he also left me with a thought: One person's cost is another person's revenue. In other words, he warned, there would be plenty of rear guard actions to prevent costs from being eliminated.

So, I'm not saying that moving to ecosystems will be free and easy. Lots of people and companies have vested interests in the status quo. But if even the legendary GE has succumbed to the forces that have been undercutting the rationale for conglomerates, then I'm confident that resistance to ecosystems will steadily erode, too.

Cheers,

Paul

Even as insurers focus on innovation and the technology that will enable it, they still must maintain and operate the legacy systems that run the business. What if it’s possible to spend less time and money on those systems, freeing resources to focus on developing systems that will really move the needle for the business?

In this webinar, ITL Editor-in-Chief Paul Carroll interviews Anne Plese, Senior Director of Product Marketing at Rimini Street, and James Maudslay, global director of insurance at Equinix on how operational efficiency can create the room for innovation.

They cover:

--How outsourcing service can return massive amounts of dollars of working capital to insurers.

--How to address the skills gap as those who coded the core systems decades ago retire and are being replaced by people who aren’t even trained in the computer languages that were used.

--How to cost-effectively maintain the tens of millions of lines of custom code that aren’t covered under mainstream maintenance contracts with Oracle, SAP and the other big technology vendors.

Speakers

Anne Plese

Senior Director, Product Marketing, Rimini Street

Marketing leader and technology evangelist with 20 years of experience in product marketing and management. Powerful blend of business, leadership, technical, and communication skills. Experienced in Private Cloud, Hybrid Cloud, IoT, IaaS, PaaS, SaaS, Networking, Open Source, and Big Data. Deep background in defining customer requirements and influencing buying criteria of enterprise, mid-market, and service provider segments.

 

James Maudslay

Global Head, Insurance, Equinix

Joining Equinix in September 2012, James took on the subject matter expert role of the insurance vertical as part of the UK Financial Services team, enlarging that role globally in 2014.  James is responsible for developing Equinix's Interconnection and Colocation solutions in the Insurance Industry in all the primary worldwide insurance centers.  

James has worked in the London Insurance Market since 1989 at Centerwrite, The Euclidian Group, and Colt Communications. James holds a Master's Degree from City University, London, and has been a Fellow of the Chartered Insurance Institute (FCII) since 2000.
Joining Equinix in September 2012, James took on the subject matter expert role of the insurance vertical as part of the UK Financial Services team, enlarging that role globally in 2014.  James is responsible for developing Equinix's Interconnection and Colocation solutions in the Insurance Industry in all the primary worldwide insurance centers.  

James has worked in the London Insurance Market since 1989 at Centerwrite, The Euclidian Group, and Colt Communications. James holds a Master's Degree from City University, London, and has been a Fellow of the Chartered Insurance Institute (FCII) since 2000.

 

 

Paul Carroll

Editor-in-Chief, Insurance Thought Leadership

Paul is the co-author of “The New Killer Apps: How Large Companies Can Out-Innovate Start-Ups” and “Billion Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years” and the author of “Big Blues: The Unmaking of IBM”, a major best-seller published in 1993. Paul spent 17 years at the Wall Street Journal as an editor and reporter. The paper nominated him twice for Pulitzer Prizes. In 1996, he founded Context, a thought-leadership magazine on the strategic importance of information technology that was a finalist for the National Magazine Award for General Excellence. He is a co-founder of the Devil’s Advocate Group consulting firm.

 

The 2021 Global Insurance Forum brought together more than 40+ insurance executives from around the world to address the industry’s role in driving the economic recovery.

Join Paul Carroll, editor-in-chief of Insurance Thought Leadership, as he sits down with speakers from the event to take a closer look at critical topics. Over this six-part series, hear from industry leaders about bridging the protection gap through innovation, leveraging data for success, and more. 

Register now for individual sessions or the entire six-part series.

Release Schedule

Featuring:

Just a bit more than a year ago, a driver made a phone call to their insurance company -- and made history.

How? Well, the insurance claim that followed was the first-ever completely touchless claim -- in that it was entirely carried out by a trained artificial intelligence (AI). The AI received pictures of the claim from the driver, assessed the damage, created a line-by-line estimate of what it would cost to repair and sent the claim back.

Total time to process: 15 seconds. Humans involved (apart from the driver)? Zero.

If you've ever made a conventional insurance claim, this sounds unbelievable. The process can be long and unpleasant, with far too many hold-ups (as you wait for someone to look at your car) and data collection loops (as the repairer and insurer agree on what exactly should happen to it, and when).

So how is a process that normally takes weeks now happening in seconds? And how is this already having an impact on thousands of people, around the world -- and why don't more of them know about it?

One vision

How a computer can "see" what's in an image is known, naturally enough, as "computer vision." In 2014, this technology was at a tipping point. Advances in computing and processing power meant that we were finally able to train an AI to understand what's in an image, like a human would. That meant you could, in theory, accelerate any task that relied on visual assessments -- like facial recognition, or detecting cancer in medical images.

At my company, Tractable, we applied this technology in an unusual way -- to help people recover from accidents and disasters. We started with cars, mainly because cars are similar globally (making the training easier), because they get damaged all the time and because the first thing that happens when they get damaged is that a driver or a body shop takes lots of photos -- which is what we needed to train the AI.

By 2019, we'd worked with some of the world's leading insurers to prove that our technology could make them more efficient, applying our AI to enable them to check whether their repairs and claims had been carried out safely and correctly.

But we wanted to have a bigger impact. So, working with companies like global insurer Ageas, we sought to apply our technology at first notice of loss (FNOL) -- when a driver first calls to report a claim.

This was difficult, to say the least. It's one thing for an AI to analyze a perfectly taken photo of one dent to one panel, another for it to assess a collection of grainy pictures of a well-worn station wagon with multiple impacts, taken at night with low lighting. And for the technology to be useful, it had to provide a return almost immediately -- perhaps, even, on that initial phone call.

It was a huge technological challenge -- but, driven forward by some of the world's leading AI researchers, one we were able to meet. By 2019, our AI was providing line-by-line estimates of damage at FNOL. (You can see us talking about this here with Ageas, at the DIA conference in Amsterdam.)

See also: Getting to ‘Amazon-Like’ Auto Claims

Taking the human out of the loop

At this point, the AI was accelerating most of the process -- but, quite sensibly, the insurance carrier had a human involved to ensure quality control and provide support.

We wanted to know if we could take the obvious next step and make some of these claims touchless -- i.e., driven entirely by AI. That way, you free up your appraisers' and claims handlers' time, directing them to cases where they can make an impact and use their expertise effectively, instead of expending effort on claims that could be easily resolved with technology.

So, last October we convinced an insurer to take the plunge and let our technology finish a claim on its own -- and since then we haven't looked back. Our AI has now carried out tens of thousands of touchless claims worldwide. It is generating estimates for major insurers in the U.S., Japan, the U.K., Spain and Italy, to name a few. You can see Admiral talk about the impact on their Spanish unit and operations here. (Check out the killer quote at 12:54.)

It's no exaggeration to say AI has made an impact for millions of households worldwide and helped return vehicles to their drivers far quicker than previously possible.

Trust in the machine

So why isn't the impact of our technology more widely recognized?

Perhaps the answer is that people just don't realize what's happening behind the scenes. After all, if you're a policyholder, you have no idea that an AI has just assessed your damage -- you're only aware that your claim has been completed in record time, and you're now able to carry on with your life.

Since October 2020, Tractable's touchless claims have been live across the world, making the insurance process more efficient, helping body shops carry out more repairs and processing claims and returning vehicles to drivers far more quickly than was possible before.

The challenge for us? The introduction has been so seamless and smooth, they haven't noticed.

In 2012, CEO and co-founder of Beam Dental Alex Frommeyer began the search for the ideal place to move his Louisville, KY insurtech business, Beam Dental. The new headquarters would have to have access to talent, capital investment, and more to facilitate the next stage of growth for this startup. After selecting Columbus as the location for their new headquarters, Beam Dental experienced intense growth, causing this next-generation dental insurance provider to consider next steps, including where to expand. Ultimately, Beam Dental found that the talent, community, and insurtech ecosystem in the central Ohio region as the perfect place to further grow their business.

Find more from our partner on the JobsOhio Partner Page.

The pandemic and the economy are presenting various challenges for risk management teams across the nation, including difficulties within the insurance marketplace, emerging risks and the challenges associated with changing business operations. 

The recent virtual conference, Elevate, presented by Out Front Ideas with Kimberly and Mark, hosted a panel of risk management professionals discussing the array of issues they face. Guests were:

• Melora Copeland – director of insurance, Compass Group USA
• Kelly Oyler – senior director, insurance risk, Walgreens Boot Alliance
• Jane Sandler – vice president, global Risk management, McKesson
• Dawn Watkins – director, integrated disability management, LAUSD

Risk Transfer Programs and Renewals

The Los Angeles Unified School District is largely self-insured and represents the second-largest school district in the nation. LAUSD faced challenges before the pandemic began, with most of its students below the poverty line. For some students, the lunch they received during their school day might be their only meal of the day, creating a crisis when schools were shut down over the pandemic. LAUSD launched a feeding program, offering a meal to anyone in need, providing over 100 million meals in the process. Other parts of their program have provided school supplies, diapers and COVID-19 testing and vaccinations.

Mirroring most employers, LAUSD has been inundated with requests for reasonable accommodations for a disability, extended remote work opportunities and vaccine policies. However, the reduction of silos and encouragement of departmental integration helped address these requests, providing more timely resolutions. Their workers’ compensation program has also adapted quickly through telehealth, outreach to injured workers and increased efforts to resolve claims through settlements. 

Compass Group, a leading food and hospitality company, has felt the effects of the hard market on its insurance program while paying particular attention to cyber during this renewal season. Its strong relationships with technology partners and carriers have proved vital. Articulating to its brokers how it has specifically invested in technology has also been important during renewals.

Everyone is affected during a cyber event, and handling a breach correctly and communicating across your enterprise can make all the difference. You also want to get ahead of your renewal and make sure that you are not overbuying, as hard market trends will likely continue across 2022.

As a leading provider and distributor of products and services to the healthcare industry, McKesson has seen much of the same with a challenging market after 14 consecutive quarters of pricing increases. Successful management of various implications has come down to strengthening relationships and avoiding silos. It has partnered with brokers and carriers and invested in tools to manage the total cost of risks. Not expecting the return of a soft market anytime soon, it has focused on better positioning its risk management program, including:

1. Network use – Work with your risk managers, rely on your market relationships and have various options to maximize your coverage.
2. Analytics use – Using a risk finance optimization study can help visualize a risk profile and draw insight into the pricing for your particular risk. It can also help frame internal dialogue around limits, deductibles and self-insured layers. McKesson employs captives and has grown them through building out a portfolio of products that strengthen its ability to support the business, including funding high deductibles, quarter share layers with insurers and taking in its own layers where pricing was not right.
3. Loss-control, risk-mitigation investments – These should be included in the overall strategy; risk managers must understand in detail how they can support the company’s critical mission.

Walgreens credits its successful program in part to its relationships with underwriters within its carriers. While price is certainly important during renewal season, trust in partnerships can provide an incredible impact. Analytics also play an important role in driving conversations with senior executives to uncover their views on risk appetite and ensure strategies are aligned when developing a program. 

See also: The Woes of Absence Management

Impacts of Social Inflation

Non-economic factors affecting premiums, like increased litigation and higher jury verdicts, can be associated with anti-corporate sentiments and racial inequity movements. This phenomenon is often referred to as social inflation. While insurance premiums continue to rise, there are a few ways to offset some of the losses due to social inflation:

1. Safety and loss prevention – Technology can help determine the cause of accidents, thus handling claims accordingly and ultimately avoiding litigation. Training to prevent accidents can also help.
2. Claims handling – Some general liability claims can be resolved through early settlements. Typically, leaving these claims to a jury results in a worse outcome. 
3. Diversity, equity and inclusion initiatives – Embracing the community can help you understand the mindset of individuals, including clients and employees, and builds a better foundation. Hiring minority-owned law firms can also provide a different perspective that your organization may not have seen before.

Workers’ Compensation Programs

First and foremost, your workers’ compensation program should be worker-centric. It is a major tenet of managing risk within your program. Connect with injured workers early and often and advocate for your employees so they have a contact in the event of a claim. Successful programs also include a strong focus on medical management and holistic care for the individual and on ensuring individual business locations are not paying to bring an injured worker back to work. 

Using specialists, physical therapists and rehabilitation facilities can help get an injured worker back to work and potentially settle a claim. Settling those lifetime claims can prevent a high-dollar event from occurring. Presumptions are also changing what occupations have compensable claims, particularly involving COVID-19. The best way to manage claims cost, though, is to understand the data behind your program. Understand what departments are driving the losses and why.

View the archived recording of this session here.

The auto insurance industry is at a turning point. After navigating the unwelcome effects of a global pandemic, carriers and collision repairers are eagerly awaiting a return to “normal.” While last year’s shelter-in-place restrictions changed consumer preferences and accelerated virtual claims handling, they also affected miles driven, accident frequency and policyholder premiums. Now, after nearly two years, the economy is slowly rebounding, even in spite of the Delta variant. However, COVID-19’s influence on commute patterns, population redistribution and the current price of raw materials promises to have a long-lasting impact on automotive claims and proper, safe vehicle repair.

Rising VMT and Fuel Prices

A recent report from the U.S. Department of Transportation showed that vehicle miles traveled (VMT) rose 29% in May 2021 compared with May 2020, and decreased only 4.1% from May 2019 (Figure 1). 

This growth in VMT occurred despite the cost of oil, which has jumped 36% in less than a year and reached a level not seen since the summer of 2018, as reported by the U.S. Energy Information Administration (Figure 2). With the increase in VMT comes an increase in claims volume. In fact, we are already seeing a return to near pre-pandemic levels. For example, there was a 24% jump in the total number of repairable claims in June 2021 compared with June 2020 and only a 2.3% decline compared with June 2019, according to Mitchell data. With some business travel resuming and more companies preparing employees for an eventual return to office work, claims volumes will likely grow, potentially even exceeding pre-pandemic levels by the end of this year.

The Impact of Inflation

Claims cost more today than they did a year ago, with the average repairable severity rising by just over 3% for 2021 year to date compared with the same period in 2020, based on Mitchell’s estimating data. While some of the expense can be attributed to advancements in automotive technology and complexity, inflation may also be to blame—driving higher parts prices as a result of government spending, supply chain imbalances, an increase in the cost of raw materials and other factors. 

This is evident in the Consumer Price Index (CPI) data provided by the U.S. Bureau of Labor Statistics. In June 2021, there was a 0.9% increase compared with the previous month and a 5.4% increase compared with June 2020. 

See also: How to Engage Better on Auto Insurance

In addition, rising oil prices affect many components of the automotive repair process, especially solvent-based paints and materials as well as replacement parts. An analysis by S&P Global Platts shows a nearly 15% boost in the market price of toluene and isomer mixed xylene, which are primary ingredients in the manufacturing of automotive clear coat (Figure 3). Petroleum is also a critical component of manufacturing steel. The considerable rise in oil prices has resulted in an increase in steel costs—to the tune of 46% in July 2021 compared with July 2019. 

Not surprisingly, when the price of raw materials increases, so does the cost of goods made from those materials (though not immediately). Parts inflation is now affecting the automotive market, especially parts that are petroleum-reliant like those made of steel sheet metal and polyolefin plastic bumper covers. A review of the average OEM parts prices on Mitchell estimates demonstrates a consistent trend of rising prices for several of the most commonly replaced parts over the course of 2021. For example, the price of the 2014-2019 Toyota Corolla hood jumped by 6.9%, the 2015-2019 Dodge Challenger front bumper cover by 7% and the 2014-2019 Kia Soul left fender by 8.5% between July 2019 and July 2021 (Figure 4). Prior to 2021, the prices of all three parts were relatively stable, according to Mitchell data. If commodity prices continue to rise or even remain elevated, we may experience an additional increase in prices throughout the remainder of the year and into 2022.

Population Shifts and Their Effects

Finally, we are experiencing a redistribution of populations across the U.S. as remote work becomes more common. This “urban exodus” is pushing some people to relocate to suburban areas that can support a hybrid work model from an affordable ZIP code. According to recent U.S. census figures, previously high-demand states for employment like Illinois, California and New York saw population declines in the wake of the pandemic while less-crowded, tax-friendly states—including Texas, Florida and Tennessee—experienced unprecedented population growth. Overall, the West and South are witnessing the greatest influx of residents. At the same time, the Northeast and Midwest continue to shrink as a percentage of the overall population (Figure 5). 

See also: How to Thrive in Auto Insurance

This shift in population centers is significant as both insurers and repairers develop strategies to meet customer needs. Certain markets may now be much more attractive for opening a collision repair facility than they previously were. Additionally, more dispersed populations could require carriers to rely even more on virtual claims handling processes, especially if staff or shop coverage is sparse in various regions of the country. For years, the industry has focused on changing vehicle technology and complexity and the impact to auto insurers and collision repairers. While this topic remains a primary concern, today’s economic climate is perhaps equally as distressing. Abnormal levels of inflation, an expected return to normalcy in the transportation sector and a redistribution of the population mean that the industry of the (near) future will look very different from what many of us predicted previously.

Insurance agents and adjustors are often away from their desks attending to customer needs and inquiries in the field. Typically, property insurance adjustors are some of the first on the scene after a natural disaster or personal property emergency. Conditions on the ground are often less than ideal. Damaged structures, flood waters and violent weather can all threaten the safety of adjustors as they work to help customers file claims. 

While adjusting is a required function of business. it creates risks for employee safety. Insurance companies have provided training and planned for these situations by creating standard operating procedures and protocols to help keep employees safe. But the pandemic has caused an increase in employees working remotely, and, while at first this was viewed as a short-term necessity, in many cases it is now a permanent change.

When employees are not operating in an office or controlled environment, it is more difficult for businesses to manage the risks those workers invariably encounter. Further, it becomes increasingly more difficult to know when a worker needs emergency assistance. Organizations with employees who operate outside of traditional workplace settings need to develop safety protocols and invest in different technologies that secure the safety of mobile workers.

While proper training in safety procedures remains crucial, providing mobile workers with the right tools to request and receive help in an emergency is critical. According to the Pew Research Center, approximately 95 of Americans now own a cell phone of some type, and more than one-third own a smartphone. While these devices provide many conveniences, in emergency situations they remain highly limited, especially in environments that have poor reception or that limit a user’s ability to reach and operate the device.

For example, a cell phone is not able to detect if someone slipped and fell, was trapped by falling debris or experienced one of the thousands of other emergencies that can occur on the job. With a cell phone, the user is still required to be conscious and within range of the phone to be able to call for help. In the case of mobile workers and lone workers, cell phones are not the most reliable or function-rich options for tracking and monitoring employee safety and health. Additionally, when a lone worker is confronted by a hostile third party, the cell phone is the first item often taken to prevent a call for help. 

In emergencies, there is a better solution than traditional cell phones or smartphones. These situations are good candidates for easily worn devices (i.e., wearables) that automatically report changes that could indicate an emergency, or for a device that a worker could easily use to express the need for help without having to speak or make much of a movement.

Already, there are products like smart hard hats, smart safety vests, smart eyewear and even stick-on patches that can monitor everything from an employee’s location to body temperature and positioning. These devices eliminate the need for a worker to report an emergency, but, like cell phones, they have their limitations, as well. 

For example, while the devices can transmit certain information about a situation to a manager or human resources department, they do not create a direct line of communication between the worker and responder. If verbal communication is possible in the emergency, the worker would still need to place a call on a phone. 

A better option would be Mobile Personal Emergency Response System (mPERS) devices similar to those used by seniors for years -- essentially, a help button that can be pressed after a fall to alert emergency responders that assistance is needed. These types of technologies have become more beneficial because they no longer require a base station device to place calls, limiting their range of use. 

See also: Momentous Change and Mobile Devices

Like other wearables, mPERS devices are small and lightweight. They provide state-of-the-art location technologies and offer built-in fall advisory capabilities. Wearables with this type of functionality are able to detect horizontal and vertical movement. But they take safety a step further than simply reporting a fall on the job via a text message or red flag in a software system. mPERS devices can also eliminate the need for the worker to initiate a call for help. Instead, they can trigger one automatically. And cloud-based technologies make it possible for central stations to immediately respond to the call for help.  

Another benefit of mPERS devices over cell phones is long battery life. Unlike phones that sometimes have to be charged multiple times a day, mPERS devices have fewer functions and do not need to be fully functional at all times. They can be left off or essentially in a hibernation mode until the SOS button on the device is pressed. Once this action occurs, location information can be sent to a central reporting destination, and an emergency call can be placed. This enables mPERS devices to run on a single charge between two and 30 days depending on the configuration and use of the device.

Whatever wearable device makes the most sense for a particular company, the most important factor is that business owners and managers take advantage of these new technologies that could save lives and improve the safety and health of their lone-worker, mobile employees.

“Most businesses believe that machine learning models are opaque and non-intuitive and no information is provided regarding their decision-making and predictions,” — Swathi Young, host at Women in AI.

Explainable AI is evolving to give meaning to artificial intelligence and machine learning in insurance. The XAI (explainable AI) model has the key factors, which are explained in the passed and not passed cases. The features that are extracted from the insurance customer profile and the accident image are highlighted in the XAI model. The rules and logic for claim processing are presented in the output. In every case, passed cases are explained by showing the passed rules or coverage rules associated with the claim. Similarly, in the case of failed cases, the failed rules are displayed by the XAI model. 

In many enterprises in the insurance vertical, the underwriting engine or policy rules engine is a black box. The recommendations, quotes, insights, and claim rejections/passes are generated by the black box without any explanation. The decisions are trusted by not only IT team members but also by the business team members. Usage of AI/ML for claim processing or generating a policy quote is high in the insurance domain. AI/ML algorithms are based on different techniques, which might lead to issues related to bias, cost and mistakes. Explainable AI has come to the rescue by explaining the decisions and comparing/contrasting them with the other decisions. This helps in customer experience improvement, customer satisfaction, operational efficiency, financial performance and enterprise performance.

Most of the AI projects are a failure because enterprises in insurance always thought AI models are not trustworthy or are biased. AI models never had implicitly explained the output. XAI helps in closing the gap between the black box and trustworthy AI (responsible AI). XAI has been used in enterprise risk management, fraud prevention, customer loyalty improvements and market optimization. XAI has not just improved operational efficiency but also the fairness in the recommendations, insights and results. The explainable AI provides the software strengths, weaknesses, features, criteria for decisions, conclusion details and bias/error corrections.

Let us now look at the basic tenets of XAI (Explainable AI). Those tenets are transparency, fidelity, domain sense, consistency, generalizability, parsimony, reasoning and traceability. Many insurance enterprises are planning to adopt explainable AI in their decision-making. The decisions that affect customers, like quote generation, policy quote payment options and policy package options, are being modified with XAI showing the differencing based on the criteria and features.

“A recent survey found that 74% of consumers say they would be happy to get computer-generated insurance advice” — Forbes

Regulatory policies can be imposed and explained by XAI to the insurance enterprise. This helps them to abide by regulation laws. Claim processing can be improved, and analysis presented can be enhanced with the bias corrections and decisions that were not taken. Fraud can be prevented easily using AI/ML with XAI. Fraud rules can be verified, and the violations can be displayed to identify the area of the fraud. This helps in improving the revenue of the enterprise and cutting down the losses. The detection accuracy can be measured using true positives and false-positive analysis. This helps in cutting down the cost as the claim process is better streamlined.

See also: Stop Being Scared of Artificial Intelligence

Customer loyalty and retention can be improved by using AI/ML for customer behavior analysis. The prediction algorithms can be used for churn prediction and recommendation engines. Insurance pricing engines can use AI/ML for price prediction. The price predicted can be explained based on the customer profile, history and customer expectations. This helps in improving customer satisfaction and loyalty. XAI helps in making the AI model management more responsible. Business users like to know why the decision or the output is better. They can use the decisions easily and improvise.

What’s Next?

Responsible AI will be the next technology that ensures that decisions are taken wisely and trust is developed on the AI model. Casual AI can help in making the model more operational. The causes and effects can be described during the modeling, training, testing and execution. The complexity hidden will be simplified by inference engines and causality details. The next-level AI models and engines can help in adapting to new scenarios and make fair decisions with implicit causality.

Carriers look to their marketing organizations to be the voice of the customer. Most organizations focus their marketing messages on product functionality and features because they are organized by product or channel, but this can limit the findings and insights generated from market research. Some often lack a deep understanding of the drivers of a particular product’s appeal and the benefits the products provide. The pandemic has shifted customer needs, making it even more difficult to track and understand how customers are interacting with carriers. This has led to significant growth in customer experience (CX) technologies.

Technology leaders recognize the need for investing in CX technologies. They want their organizations to be more customer-centric so they can identify ways to enhance the overall customer experience. Forward-thinking leaders are also looking to remove barriers that hurt internal productivity and employee engagement. Too often, however, other business priorities and expense pressures make investing in emerging technologies difficult, particularly when the organization is dealing with the costs associated with maintaining legacy systems. 

The pandemic changed everything. It created a sense of urgency for digital transformation unlike anything else. To remain in business during lockdown, carriers had to dedicate resources to accelerate remote work. As employees worked from home, customers were conducting business digitally.  This reset the baseline for customer expectations in ways that few would have foreseen. Customers quickly adapted to conducting their business online and expect their carriers to deliver online, hassle-free experiences. Carriers are now paying more attention to the ways in which customers engage online.

Research by Deloitte found that 80% of consumers say the experience an insurance company provides is as important as its products. If carriers can find ways to really understand customer behaviors as they interact with the products and services across channels, carriers will begin to understand why it is important to invest now in technologies that are built to optimize the customer experience.

Fortunately, advances in technologies such as voice-of-the-customer (VoC) make it possible to gain insights on customer preferences and behavior patterns using more data than what traditionally comes from surveys, focus groups and other forms of feedback. VoCs combine traditionally siloed applications to integrate structured and unstructured data. This makes it possible to fundamentally change the way in which customer data is gathered, managed, analyzed and leveraged because every customer’s experience can be included. 

Many VoC solutions are enabled by AI and expanded speech analytics. This, coupled with natural language processing, makes it possible to analyze large amounts of unstructured, real-time data and produce graphically appealing, semantic data models to understand customer sentiments when interacting with carriers. When VoCs are deployed across all channels and customer touchpoints, these insights can be invaluable. Carriers can use these insights to identify customer pain points, underused solutions, and inconsistencies across products and channels. VoCs can also capture suggestions for improvements in existing products and services coming directly from customers by understanding patterns of behavior and sentiment in the words customers use. 

Digital experience monitoring (DEM) is another technology gaining industry traction. It enables optimization of operational experiences and behaviors of digital agents, humans or machines as they interact with enterprise applications and services. DEM solutions provide deeper visibility into user interaction across applications, channels and platforms. From data that already exists, they can uncover ways that consumers think about the decisions they make in the products and services they offer. 

Carriers have the challenge of identifying knowledge gaps for both internal users (their employees) and external users (their customers). Those gaps will be different because the different types of users are using different areas of the software. DEM can help identify what those training and support needs are to provide that additional support. For their internal users, this can be anything from a classroom style training or addition of tool tips. For the external users, this will likely be the addition of tool tips or some type of help text.

DEM solutions can identify bottlenecks that hurt employee productivity and engagement. Most carriers have support centers that require employees to submit requests for issue resolution. With DEMs, organizations can monitor where problems are occurring and the people who are having the problems and quickly respond as necessary. Not only does this help to attract and retain a high-performing workforce by providing a state-of-the-art technical environment, it has the potential of reducing the rising costs associated with providing remote support. 

As insurers accelerate their digital transformation initiatives, their strategic operations should incorporate solutions like VoC and DEM. Too often, users are unable to effectively explain what they like and don’t like about particular solutions. Nor are they able to describe what makes the platform hard to use. These technologies provide “behind the scenes,” real-time monitoring to deeply understand where pain points and bottlenecks exist. The sooner issues are identified, the sooner they can be fixed. 

See also: COVID: How Carriers Can Recover

One of the biggest challenges of implementing any type of new technology is a lack of buy-in from the leaders and others within the organization. Overcoming this requires the ability to align the solution’s benefits to the carriers’ overall strategy. It’s easy to say that VoC and DEM solutions support a carrier’s strategy for profitable growth, but to get the investment approved one should be prepared to answer questions that will clearly articulate how these technologies will lead to new sales, improved retention and reduced costs. One advantage that VoC and DEM technologies have over others is that they produce data that can be used to generate insights and inform decisions to help the company become more agile in responding to changing customers’ needs. 

Another challenge of these types of solutions is a lack of clarity on what will happen if the system produces results different than the opinions of the decision-makers. Most people, if given the same data and assumptions, are reasonable and will do what is in the best interest of the company if they believe the data. Understanding the critical success factors from the decision maker’s perspective is key. 

The shift to digital is not going away. Neither are solutions that enable carriers to engage customers online. Companies that continue to rely on siloed technology designed around products instead of the customers will find it increasingly difficult to be agile and responsive. Implementing solutions like VoC and DEM can help to identify areas that have the greatest impact on the total user experience. The opportunities for carriers to grow their bottom lines through the use of CX technologies will do nothing but increase. Although the pandemic isn’t over, it opened the door for change. Let's hope carriers will seize the opportunity to do more for the customers they serve.