How Important Is the Human Touch Really? Plus, consumers wary of AI-driven insurance; commercial insurers shift tech priorities; 3 key themes for check-ins with clients and more.
While ITL serves as a platform for the varied insights and opinions of others, they tend to coalesce around certain themes: on the need to innovate, on the importance of moving faster than the industry historically has, etc. It’s not often that I see articles with almost opposite points of view, let alone have them arrive on top of each other, but that’s what occurred with two of the six articles I highlight below.
One argues that the human touch is overrated these days, that what clients really want is much more ability to self-service. The other says, among many other things, that “two in three consumers are resistant to the idea of purchasing insurance or filing claims on a website or app without speaking to a human being.”
Who’s right, and who’s wrong? Well, I have my own opinion on that.
Join Denise Garth for an all new podcast featuring Vantage Risk's Gail McGiffin where they discuss what are the underlying drivers in commercial/specialty lines segment, how data is driving the volution of underwriting, and insights in how to change your mindset to achieve speed to market.
In this webinar, ITL Editor-in-Chief Paul Carroll sits down with Jim McKenney, chief strategy officer and products business head at Intellect SEEC, and Sandeep Tandon, CTO of Intellect SEEC.
With conversational AI, insurance companies can deliver easier and more convenient digital support to customers, improve agent experience and productivity, and reduce contact center traffic.
"Even before a commercial version of the internet browser was invented in the early 1990s, the rich, geeky types I dealt with in my travels at the Wall Street Journal were figuring out ways to wire their homes to ward off possible intruders."
Insurance Thought Leadership (ITL) delivers engaging, informative articles from our global network of thought leaders and decision makers. Their insights are transforming the insurance and risk management marketplace through knowledge sharing, big ideas on a wide variety of topics, and lessons learned through real-life applications of innovative technology.
We also connect our network of authors and readers in ways that help them uncover opportunities and that lead to innovation and strategic advantage.
An Aon survey found 70% of agents expect solid business growth this year, while nearly 20% expect that growth to be "off the charts."
Good news: It looks like 2022 could be a great year for many agents and brokers.
An Aon survey of more than 500 agents and brokers that was published late last year found that "about 70% of agents expect their business growth to be on track in the new year, while nearly 20% expect that growth to be 'off the charts.'"
The thinking seems to be that agents not only survived the pandemic but have used the time profitably, to fine tune their businesses in ways that will appeal to customers and increase business.
Product expansion will be a leading strategy for growth, with the top three specialty lines that might be added being: 1. catastrophe (commercial and personal/private coverage); 2. healthcare (beyond allied health); and 3. nonprofits.
With Zoom fatigue pushing agents to rely less on webinars and virtual events, 40% of agents expect social media to give them the biggest marketing boost in 2022. Email blasts were in second place, at 22%. 42% said they want to explore video marketing more this year.
I'll add an observation of my own: After years in which everyone talked about how insurers would disintermediate agents and brokers, carriers seem to be increasingly to be committed to working with agents and brokers rather than trying to go around them and get to customers directly.
Now, disintermediation hasn't gone away, and every part of the industry will remain under pressure to cut costs, but carriers are trying to find ways to work with agents and brokers to create a smoother experience for customers. Agents and brokers who lean into that new interest figure to prosper.
In February 2015, Anthem disclosed that criminal hackers had breached the company’s servers and potentially stolen 37.5 million records containing confidential personal information (CPI). This was a catalyst for insurance regulators that ultimately resulted in the creation of the Insurance Data Security Model Law that is now being adopted by states across the U.S.
Similarly, in the summer of 2020, the discussion by regulators regarding race and its role in the design and pricing of insurance became the catalyst to move forward on defining the regulatory expectations for using artificial intelligence (AI) in the insurance industry. As regulators and insurers work to understand the level of regulatory oversight that will be needed for AI innovation, we can find a path forward by looking to the work regulators accomplished regarding cybersecurity.
The Making of a Model Law
Although state insurance regulators were already discussing the protection of consumers’ CPI, the Anthem breach placed a laser focus on data security. Just two months later, in April 2015, the National Association of Insurance Commissioners (NAIC) issued and adopted the “Principles for Effective Cybersecurity: Insurance Regulatory Guidance.” These principles included ideals such as establishing a minimum set of risk-based cybersecurity standards, establishing appropriate regulatory oversight, requiring incident response by insurers, requiring insurer accountability for third parties and service providers, incorporating risks in insurers’ enterprise risk management processes and identifying material risks for the insurers’ boards of directors.
Over the next 18 months, the NAIC used these principles to draft a model law to establish standards for data security and standards for the investigation of and notification to the state insurance regulators of cybersecurity incidents. During this process, the drafters quickly recognized that insurers came in different shapes and sizes, used data differently and had different levels of systems and expertise.
Such was also true of regulators. As cybersecurity is not inherently an insurance-only issue, an expert in insurance regulation was not inherently an expert in cybersecurity. Additionally, departments of insurance were not uniformly staffed with cyber experts. The new law needed to strike a balance to ensure appropriate regulatory oversight while adapting to limitations on both the insurance and regulator sides of the equation.
In October 2017, the NAIC adopted the Insurance Data Security Model Law, which tackles a highly technical domain of a similar level of complexity as what we will soon face with AI. In the law, I see five actionable areas of regulation:
Proactive identification and mitigation of risks
Continual monitoring and reporting of potential risks
Accountability for third parties
Compliance certification to regulators
Transparency on significant events to regulators and opportunity to remediate
Additionally, the model law provides the insurance regulator the power to examine and investigate insurers while at the same time providing confidentiality protections for the information provided by insurers.
In adopting this model law, regulators successfully balanced maintaining significant regulatory oversight with placing the responsibility of compliance and notification of non-compliance on the insurers, which employ the necessary expertise in cybersecurity. The result was a model law that allows regulators and insurers to prioritize the protection of consumers’ CPI through an appropriate allocation of resources and expertise.
A Parallel Path for AI
Just five years later, regulators once again find themselves addressing a quickly growing, high-impact technology that is not inherently an insurance-only issue: the use of AI. This brings the familiar challenge of insurers that are at different levels of engagement in AI, including different levels of systems and expertise. It also once again highlights the challenges for regulators with strong expertise in insurance regulation but not necessarily in the nuances and risks of AI. As regulators look at creating model regulation, they will once again need to strike that balance of ensuring appropriate regulatory oversight while recognizing limitations on both sides of the equation.
As they did with cybersecurity, regulators have adopted high-level guiding principles regarding AI. The NAIC's Principles on Artificial Intelligence are intended to establish guidance for AI use and assist regulators in addressing regulatory oversight of insurance-specific AI applications. This time, though, the regulators also have the benefit of a potential road map to help navigate the development of a well-defined regulatory approach.
When overlaying the NAIC principles on the five regulatory areas I outlined above, a path forward quickly develops that emphasizes the importance of the key principles of accountability, compliance, transparency and safe, secure, fair and robust outputs.
1. Proactive identification and mitigation of risks
A company should have systems and resources in place to proactively comply with all applicable insurance laws and safeguard against AI outcomes that are either unfairly discriminatory or otherwise violate legal standards.
2. Continual monitoring and reporting of potential risks
A company must have a systematic and continuous risk management approach to AI. This includes a system to analyze AI outcomes, responses and other insurance-related inquiries. Risk management should include reporting to the board of directors any material risks and mitigation plans.
3. Accountability for third parties
A company must ensure that any third parties it engages to facilitate the business of insurance are also promoting, monitoring and upholding the principles.
4. Compliance certification to regulators
A company should annually certify to the applicable regulators the existence of proactive identification systems, mitigation, monitoring and reporting of risks, as well as compliance with legal requirements.
5. Transparency on significant events to regulators and opportunity to remediate
A company should have in place systems to record data supporting AI final outcomes and should be able to produce data to ensure a level of traceability. Any unintended consequence should be remediated when identified.
And, as was done in the data security model law, a similar AI model law can provide the insurance regulator the power to examine and investigate insurers while at the same time providing confidentiality protections for insurers’ proprietary algorithms.
While at times, regulating and managing risks of AI feels overwhelming and unknown, these are not completely uncharted waters. By adopting this model framework for AI, both regulators and insurers could embrace a comprehensive approach that would allow consumers to benefit from innovation in AI while establishing important consumer protections and trust.
Jillian Froment is a highly respected strategic adviser on insurance regulatory issues and an advisory board member for Monitaur, which provides AI governance and ML assurance software for regulated industries. As a former insurance commissioner, Froment has shaped national and international regulatory models and standards on issues such as cybersecurity, cyber insurance, big data, accelerated underwriting, artificial intelligence, rebating, pandemic impacts and annuity suitability.
She is a certified NAMIC mutual director and earned a juris doctorate from Capital University and a B.S. in engineering from Ohio State University.
For as long as weather and natural catastrophe risks have existed, insurers and reinsurers have been responsible for the commercial assessment of natural disasters, primarily through underwriting and reserves management. Today, amid increasingly devastating consequences and rapidly rising costs of climate-related perils, (re)insurers are expected to play a larger role in helping society mitigate the effects of climate change, build resilience to its effects and support the transition to a low-carbon economy.
(Re)insurers have an opportunity to lead on these issues and strengthen their position in the marketplace by taking an enterprise-wide approach to climate change, not only when it comes to underwriting but also on investment decisions. Climate change is going to affect different parts of the business, so it is important to take a holistic view of the business approach.
By understanding and managing climate risks on the assets and liabilities sides of the balance sheet and advancing climate-awareness in their own organizations, insurers can navigate climate change. With this in mind, Wellington Management and Willis Towers Watson recently collaborated to produce a pragmatic guide for insurers and reinsurers to help them steer their organizations through the challenges of defining, quantifying and managing climate risks on the journey to net zero.
Increased frequency of extreme weather
Climate change risk consists of three broad related categories of risk — physical, transition and liability risks. The risks are related — with acute physical risks (hurricanes and floods) and chronic ones (like droughts and rainfall) fueling transition and liability risks, such as carbon emissions regulations and legal actions brought about by those suffering damage from climate change.
While the impact of climate change will vary by peril and geography, analysis by Wellington and Willis Towers Watson shows that there is evidence that some events that used to be thought of as 1-in-100-year hurricanes 20 years ago now have a 40%-plus chance of occurring sometime between 2031 and 2050.
Assessing probability over time requires calculating the cumulative percentage risk of an event’s likelihood for a given period period. The longer the period, the more likely a “rare” event is to occur, and the greater the impact minor increases in probability have.
Wellington’s work with Woodwell Climate Research Center found that for parts of the U.S. Atlantic & Gulf Coasts, where climate is forecast to have the biggest impact, what was considered a 1% (1-in-100) event in 1990 is now estimated to be a 1.9% (1-in-53) event now and by 2040 could be a 3.2% (1-in-32-years) event. This means that over a period of 20 years the chance of being hit by a hurricane in one of these areas most affected by climate change could increase from 32% to 48%. This represents a 48% increase in probability compared with today.
The probability of an event does not necessarily align exactly to the probability of loss. Building resilience within portfolios and mitigation measures go a long way toward tempering the impact of frequency and severity changes.
The continued mischaracterization of rare climate events as one-time occurrences rather than part of a changing pattern may be a reason why climate risk often remains abstract, hampering preventative behavior, policy change and asset repricing. If insurers better understand climate probabilities, particularly the cumulative risk of occurrence over multi-year periods, they will better appreciate the severity and more accurately reprice these risks.
Until then, the increasing volatility of loss-causing climate-related events along with growing financial risks to assets in investment portfolios present a dual threat.
When defining transition risks as the effects on companies as economies decarbonize — effects such as policy regulation, litigation, adoption of alternative energy sources and shifting consumer preferences and behaviors — physical risks are manifestly the cause of these transition risks. Any approach that independently buckets physical risks as potential underwriting liabilities, and transition risks as investment risks that lower security values, requires a paradigm shift.
To better understand the multi-dimensional nature of climate risk and how it affects different parts of the business, the insurance industry needs to up its game and be more strategic. This means taking a whole balance sheet view of the risks and opportunities and requires insurers and reinsurers to develop scenarios of temperature change over a given time horizon, and considering optimistic and pessimistic assumptions about worldwide paths (orderly vs. disorderly) to reaching climate goals.
Each category of risk can affect both sides of the balance sheet — and should influence strategic business decisions about product development, capital management, investments, acquisitions and divestitures. A more strategic approach to climate risk and resilience means starting by understanding baseline enterprise risk and then developing climate scenarios that insurers and reinsurers can integrate into their risk models.
Gaining a clearer understanding of climate risks and building scenarios are just two of eight key challenges we have set out in our joint report that insurers need to address if they are to better appreciate the severity and more accurately reprice these risks, and ultimately play a larger role in helping society mitigate the effects of climate change. Other items on the to-do list outlined in the report include stress testing asset portfolios, developing climate-aware investment strategies and – importantly -- holistically integrating asset and liability strategies.
There is a lot to consider as insurers and reinsurers work to develop their own views of risk in line with their baseline underwriting and investment portfolios, and to translate climate risks under different scenarios into adjustment factors for models they use today. For example, there are also indirect climate risks to consider for insurers invested in industries like auto manufacturing, semiconductors, construction or other industries that rely heavily on water. Water scarcity could mean higher operating expense, lower output and ultimately a drag on GDP growth.
Another indirect risk relates to migration. Wellington’s climate research team believes that climate migrants will abandon vulnerable rural areas for urban ones, driving economic consequences. Some countries could see sovereign debt downgraded as a result of climate risks, and higher borrowing costs could ultimate lead to further impacts — unemployment, inflation, social unrest.
At the same time, as with any form of risk, climate uncertainty and the wide range of outcomes associated with climate change also present opportunities to develop a sustainable, progressive and commercially successful strategy for the business. For example, providing new risk mitigation strategies and transfer solutions through re/insurance products, as well as promoting risk awareness and resilience at source to tackle the aforementioned challenges. Within asset classes, sectors and regions, assets with material climate-risk exposure will likely struggle with higher costs of capital, while sustainable alternatives could capture a “green” market premium and accrue more value long-term. For example, by overweighting assets that contribute to the low-carbon transition (renewable energy, large-scale battery storage, water management, electric network utilities).
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"By having a simple yes/no metric, such as a temperature that rises above a certain level or drops below a specified level for an agreed-upon amount of time, parametric insurance removes the need to have an adjuster go into the field..."
When you strip insurance down to its essence, there are just three components related to indemnification. There is a client/contract. There is a yes/no mechanism for determining whether a payment is triggered to that client under that contract, as well as the amount. And there is capital, whether from an insurer, a reinsurer or the capital markets. That's it: a client, a judgment mechanism and money.
And when industries go digital, as insurance is, they get stripped down to their essentials, which can be recombined in new, even surprising, ways. Look at photography. For more than a century, since George Eastman patented the first roll of film and founded Eastman Kodak in the 1880s, photography was associated with its physical manifestations--the cameras, the film, the chemicals and the prints. In the digital age, photography is stripped down to its essence: an image. Cameras now are built into almost every conceivable type of device, especially smartphones, and images are shared without ever getting near a chemical or piece of paper. As a result, profits and market value have moved away from the physical manifestations, including Kodak, and to Facebook/Instagram, TikTok, etc.
This is where parametric insurance comes in. By having a simple yes/no metric, such as a temperature that rises above a certain level or drops below a specified level for an agreed-upon amount of time, parametric insurance removes the need to have an adjuster go into the field to inspect, say, crop damage and offers a path to accelerated digitization for insurance. The approach both cuts costs and greatly speeds payment--offering benefits both to insurers and customers.
As always, there's complexity to parametric insurance. Almost nothing about digitization is as simple as the theory suggests. Remember when ATMs replaced bank branches? When travel websites eliminated travel agents? Yeah, neither do I. But parametric insurance has great potential, which I hope you'll explore by reading this month's interview and by exploring the the links we've provided, including to the six articles below.
Cheers,
Paul Carroll, ITL’s Editor-in-Chief
INTERVIEW WITH HENRY GALE
As part of this month’s ITL Focus on parametric insurance, we spoke with Henry Gale, parametric insurance research lead at Instech London, on the prospects for this increasingly popular approach to insurance.
“We've just seen more and more products being announced, more and more startups emerging and getting investment, more partnerships and more adoption as bigger insurance companies get involved, as well. If you like, 2021 was a big year of announcements, and we’re looking to 2022 as maybe a year in which some of these products scale and we see success in parametric insurance”
Insurance Thought Leadership (ITL) delivers engaging, informative articles from our global network of thought leaders and decision makers. Their insights are transforming the insurance and risk management marketplace through knowledge sharing, big ideas on a wide variety of topics, and lessons learned through real-life applications of innovative technology.
We also connect our network of authors and readers in ways that help them uncover opportunities and that lead to innovation and strategic advantage.
As part of this month’s ITL Focus on parametric insurance, we spoke with Henry Gale, parametric insurance research lead at Instech London, on the prospects for this increasingly popular approach to insurance.
As part of this month’s ITL Focus on parametric insurance, we spoke with Henry Gale, parametric insurance research lead at InsTech London, on the prospects for this increasingly popular approach to insurance. In addition to the interview, you can check out these recent posts from InsTech London:
At InsTech London, you put a clear stake in the ground a year and a half or so ago and declared that parametric insurance was a real breakthrough. Do you still feel that way?
Gale:
We do. We've just seen more products being announced, more startups emerging and getting investment, more partnerships and adoption as insurance companies get involved, as well. If you like, 2021 was a big year of announcements, and we’re looking to 2022 as maybe a year in which some of these products scale and we see greater success in parametric insurance.
For specific examples, I'd steer you to a report we released last year that profiled over 50 companies in parametric insurance; we'll update that later this year.
ITL:
Is there a particular area, such as agriculture, where you expect to see the breakthroughs?
Gale:
Catastrophes have always been the biggest area of parametric insurance. There's still potential for growth in that area. So that will stay the dominant trend, both for agriculture and for other areas.
It's been interesting to see new distribution methods to get farmers in different parts of the world better-insured. In addition, there’s lots of potential in things like travel insurance, event insurance, or cyber business interruption.
ITL:
What are some of the new forms of distribution?
Gale:
When it started, parametric insurance was very much concerned with big corporate risks and reinsurance. The innovations in the last few years have been expanding that to smaller and medium businesses or even to individuals. And all of those need quite different approaches to distribution.
With corporates, they are becoming more and more aware of parametric insurance, especially for traditional catastrophes like hurricanes and earthquakes. The challenge will be maybe making them aware of the potential with other natural perils, and getting brokers more involved in selling parametric insurance. For smaller and medium businesses, there are less established distribution routes to parametric insurance. So people are looking at whether you can do embedded insurance or go through brokers.
In almost all cases, parametric insurance is still best combined with indemnity insurance. For instance, you could take a deductible buy-down approach. If you’re a big corporate, you might have a high deductible on your earthquake risk but achieve that deductible by taking out a parametric insurance policy against earthquakes. You get an instant payout and then the rest of your damage gets covered by the other policy.
One trend that I was looking at recently is combining parametric triggers into an indemnity-based insurance policy; products that are partly parametric based on some events but also indemnity in other realms.
ITL:
Do you have a favorite example?
Gale:
One recent example that we found very interesting is that Vave, an MGA that Canopius set up, is going to be including extreme-temperature insurance in its policies. Whether it's because of a cold snap or extreme heat, anyone who's insured on those commercial property policies will get an automatic payout, as well as being covered for everything else that they have in their commercial property insurance.
ITL:
Parametric has always been intriguing to me, partly because the payout can be so quick and partly because you just take the expense of the claims adjustment process out of it. Do you have a way of quantifying those gains?
Gale:
In terms of the speed of payout, it depends on the sort of product and the amount of money, but we’re seeing companies make payments in hours. And, if you’re insuring large corporate risks, it's a big improvement to be paying the claim in days or weeks rather than in months or longer.
Parsyl, which has collaborated with Lloyds, insures vaccines and seafood and other perishable goods. When the shipment reaches its destination, if the sensor in the cargo shows that the temperature has gone above a certain level, spoiling the batch, the person receiving the shipment scans the QR code. In July, Parsyl paid a claim in eight hours.
ITL:
Is there a particular part of the world where parametric insurance seems to be happening faster?
Gale:
There are regional patterns. In Africa, there's potential for ensuring smallholder farmers, and we’re seeing several parametric programs in action. There's also agricultural parametric insurance happening elsewhere in the world, like India. In terms of catastrophes, the U.S. is always going to be a big focus, as well as Latin America. There's quite a lot of initiatives to insure vulnerable people in the Caribbean or South America against the risks associated with earthquakes and hurricanes. Some of the other applications, for non-damage business interruption or flood risk, apply quite universally.
ITL:
You’ve mentioned a couple of companies. Are there others to watch?
Gale:
Descartes Underwriting has managed to scale up its underwriting for parametric insurance against climate and catastrophe risk for large corporates. Generali is the insurer behind them. Global Parametrics has been structuring a lot of solutions to help vulnerable communities across the world. New Paradigm Underwriters handle large risks against hurricanes and earthquakes in the U.S.
ITL:
What haven't I asked you about that you think is important for people to understand about parametric insurance?
Gale:
Insurers are looking at opportunities for parametric insurance in areas other than climate and catastrophe, such as business interruption and cyber. Finding a scalable product for small and medium businesses is a big opportunity for insurers to write new business.
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Our authors are what set Insurance Thought Leadership apart.
Insurance Thought Leadership (ITL) delivers engaging, informative articles from our global network of thought leaders and decision makers. Their insights are transforming the insurance and risk management marketplace through knowledge sharing, big ideas on a wide variety of topics, and lessons learned through real-life applications of innovative technology.
We also connect our network of authors and readers in ways that help them uncover opportunities and that lead to innovation and strategic advantage.
There's a division of opinion. Is the human touch overrated: Do customers want to serve themselves online? Or are they demanding human attention when they buy policies and file claims?
While ITL serves as a platform for the varied insights and opinions of others, they tend to coalesce around certain themes: on the need to innovate, on the importance of moving faster than the industry historically has, etc. It's not often that I see articles with almost opposite points of view, let alone have them arrive on top of each other, but that's what occurred with two of the six articles I highlight below.
One argues that the human touch is overrated these days, that what clients really want is much more ability to self-service. The other says, among many other things, that "two in three consumers are resistant to the idea of purchasing insurance or filing claims on a website or app without speaking to a human being."
Who's right, and who's wrong? Well, I have my own opinion on that.
Basically, I think that both articles make important points but that the right answer--as you've seen me say many times now about almost all things digital--needs to be a hybrid based on constant, small tests. Those tests will let you gradually find your way to the right approach, for now, and to let you keep adapting as your customers and competitive environment change.
Personally, I'm big on self-service. I have zero interest in talking to an agent of any company about anything if I don't have to. So, I resonate with the statistics in "Human Touch: How Crucial Is It Really?": that "90% of consumers expect a brand or an organization to offer a self-service consumer support portal"; that "today's customers manage 85% of the relationship with an enterprise without interacting with a human"; and that "73% of all consumers say that valuing their time is the most important thing companies can do to provide them with good customer service."
I have no reason to doubt any of those stats, and I suspect that many insurers, while moving in the self-service direction, still lag well behind their customers' desires.
At the same time, as "Customers Wary of AI-Driven Insurance" argues, based on an extensive survey by Policygenius, "despite faster claims turnaround times, the potential for lower rates and other AI-enabled transformations, customers still value a human touch." The survey found that "83% of consumers wouldn’t feel comfortable if their home, auto, or renters insurance claim was reviewed exclusively by artificial intelligence" and that, after a loss, only "around 43% of homeowners would agree to let a drone evaluate their property rather than a human." Policygenius also reports that "72% of consumers wouldn’t be comfortable purchasing insurance online without ever speaking to a real person, and 64% wouldn’t feel comfortable filing a claim on a website or app without human interaction."
If you pay attention to all the stats, you can find your way to a middle ground. You let customers handle as many of the routine matters on their own as possible--updating policies, determining when a payment is due, etc. But you make sure a human is always on call, at least during business hours, and you introduce a human into every process that might require advice or any sort of emotional support, whether that's as fraught as filing a claim might be or as straightforward as assuring someone they've made the right choices as they've done research and chosen insurance coverages online.
But that's just the broad outlines of a hybrid. There's a lot of play in the details. Preferences will vary based on the age of the client, the income, the education level, the location, the... who knows what else?
The best way to see what customers want is to offer them options and then watch and listen to how they react. Do agents need to be monitoring all changes that clients make to their policies online, including to coverages, or just some? Is there some way to give clients freedom online but then ping agents about where they might way to follow up? What is the best way to help people do their own research online while introducing agents at just the right time and in just the right way to turn a search into a sale?
I encourage you to click on and read the first two articles below so you can make up your own mind. But my mantra on innovation for 25 years has been, Think Big, Start Small, Learn Fast. So, while I think the statistics in the articles are very helpful--I wouldn't have published them otherwise--they're just the starting point. The only way to learn what the right answer is for you is to test and learn, then test and learn some more and some more and some more.
Cheers,
Paul
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Carroll spent 17 years at the Wall Street Journal as an editor and reporter; he was nominated twice for the Pulitzer Prize. He later was a finalist for a National Magazine Award.
The property and casualty insurance industry is turning to artificial intelligence (AI) to solve its most pressing issues. Record catastrophe losses created a demand for AI-driven climate models to better predict and manage risk. The pandemic accelerated investment in touchless consumer-facing technology like AI claims processing and remote inspections.
This past August, our team at Policygenius ran a survey to gauge consumer comfort around new tech being deployed by some insurance companies. The survey found that, despite faster claims turnaround times, the potential for lower rates and other AI-enabled transformations, customers still value a human touch.
A few other key findings from the survey include:
83% of consumers wouldn’t feel comfortable if their home, auto, or renters insurance claim was reviewed exclusively by artificial intelligence.
Around two in three consumers are resistant to the idea of purchasing insurance or filing claims on a website or app without speaking to a human being.
58% of drivers said they wouldn’t use an app that collects data about their driving behavior and location, even if this resulted in significant savings.
55% of homeowners said they wouldn’t install smart home devices that collect personal data, even if doing so earned them lower home insurance rates.
After a loss, around 43% of homeowners would agree to let a drone evaluate their property rather than a human.
Despite the increasing shift toward digitized insurance, customers in all age ranges still prefer the human element when it comes to purchasing coverage and filing claims.
The survey found that 72% of consumers wouldn’t be comfortable purchasing insurance online without ever speaking to a real person, and 64% wouldn’t feel comfortable filing a claim on a website or app without human interaction.
Claims reviews by artificial intelligence have skyrocketed in recent years as a means of cutting down on fraud and expediting the process. But just 17% of consumers said they’d feel comfortable if AI reviewed their claim from start to finish. Almost 60% said they were so uncomfortable with this scenario that they’d take the additional step of switching insurance companies to avoid start-to-finish AI claims.
Privacy concerns outweigh financial savings
Telematics and smart home tech can lead to lower premiums and risk reduction. But our survey found consumers haven’t fully embraced these products.
Around 43% of drivers said they’d use an app that tracks their driving behavior and location if they were offered a discount. But 74% of those drivers said they’d only use such an app if it lowered their rates by more than half.
These privacy concerns extend to homeowners and renters. Just 32% said they'd install a smart home device that collects personal data, even if doing so reduced their home or renters insurance rates by more than half. And 67% said that no home or renters insurance discount would be worth installing a smart doorbell camera that shares facial recognition data with third parties.
Consumers not ready for big tech to insure their home or car
Consumers are also wary of the possibility of a major tech company expanding into P&C insurance. Two in three consumers said they wouldn’t be comfortable with a company like Amazon insuring their home or car, with 40% saying it would make them very uncomfortable.
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Pat Howard is a managing editor and licensed home insurance agent at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.
Building a strong client base is the goal of every business, and providing good customer service is key to accomplishing it. The insurance industry has traditionally believed that good service means providing the human touch, with agents and office staff readily available to answer questions, make policy changes and process payments. But is this what your clients want and need?
As stated in Parature’s 2015 Global State of Multichannel Customer Service Report, 90% of consumers expect a brand or an organization to offer a self-service consumer support portal. In fact, according to Gartner Predicts, today’s customers manage 85% of the relationship with an enterprise without interacting with a human.How does this compare with your organization? If you aren’t providing your clients top-quality digital service, here’s why you need to do it now.
Saving Customers Time
Nearly three-quarters (73%) of all consumers say that valuing their time is the most important thing companies can do to provide them with good customer service, as reported by Forrester.Why? Because people are busy, and small business owners are no exception. That’s why they look for and expect the ability to manage their policy when it’s convenient for them. This means they always want easy access to their policy and billing documents and from any place. Business owners’ needs don’t stop at 5 p.m. when your office closes. Customers expect and want to be able to manage their policy, obtain proof of insurance, make payments and more, 24/7. With digital service, they can.
Promoting Customer Satisfaction
Clients who feelin control of theirpolicies tend to be more satisfied with their purchases, which can improve retention.
When you save your clients time and effort and give them the information and easy access to their accounts when they want and need it, you reinforce your value to them, as well as differentiate yourself from the competition. That’s good customer service!
But we all know that not all digital experiences are the same. At Insureon, for instance, we aim to partner with carriers with digital service centers to reinforce value and increase ROI.
When your clients use a digital app to manage their policies and make payments, you have more time to spend on activities that can help you build your business or work on more complex service needs. So, digital services are a win for you, too.
Changes in technology affect the way we live, and the buyers of insurance are no different than anyone else. As business owners, we need to meet our customers where they are and give them what they want.
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Policyholders faced innumerable challenges within the past two years, resulting in unprecedented changes to their consumer behavior. Personal lines insurers responded swiftly to meet insureds’ new and evolving needs. They went all-in on digital self-servicing capabilities for customers, agents and employees, but recent market activity suggests that insurers’ top technology priorities of the past year may be different in 2022.
New research from SMA shows that the plans and progress of some transformational technologies are accelerating as others have hit the brakes. The “Transformational Technologies in P&C Personal Lines: Insurer Progress, Plans and Predictions for 2022 and Beyond” report offers a glimpse into which technologies have the most activity in the industry, where insurers are investing and what insurance executives think about the potential of the technology to transform their businesses.
Of the 13 technologies deemed transformational in the report, including AI-related innovations and others that fall outside of the AI family, six are seen as having a short-term impact on personal lines, yielding significant changes to business operations and the customer experience. The report also examines technologies in the mid-term horizon that are expected to become more mainstream in the industry in the next two to three years and long-term horizon technologies.
Personal lines insurers are currently reprioritizing their plans with a blend of investment activity and maturity levels. Research shows insurers currently favor digital capabilities that replace face-to-face interactions – continuing a trend that emerged early in the pandemic. One example of a technology under rapid development is virtual payments. Nearly seven in 10 personal lines insurers report investing in digital payment technologies during the pandemic, including mainstream services like Venmo and Zelle and insurance-specific vendors. While the initial focus has been on inbound payment solutions, SMA observes that piloting and implementation of outbound claims payment solutions are already beginning to expand.
When looking at long-term transformational technologies, 5G/edge computing shows increased promise in personal lines, with more insurers reporting interest in the technology now than in previous studies. Many of the possibilities related to the Internet of Things, autonomous vehicles and new user interaction technologies, and others will depend highly on the widespread availability and adoption of 5G. As the technology becomes more widely adopted, it is likely to move to the mid-term horizon before becoming a short-term technology.
As the pandemic continues to play out and a post-COVID era emerges, personal lines insurers will continually need to review and revise their technology strategies and plans. The move toward broad-based digital capabilities will require insurers to understand how specific technologies contribute to digital transformation and how priorities and road maps are changing in the current environment.
Heather Turner is the lead research analyst at Strategy Meets Action.
Turner supports SMA's advisory and consulting engagements through rich written content, quantitative and qualitative primary research, market and technology trend analysis and the management of SMA IP materials.
Prior to SMA, Turner was managing editor of the NU Property & Casualty Group at ALM, which includes the insurance industry publications PropertyCasualty360.com and NU P&C and claims magazines. She started her career as a journalist reporting on the property and casualty insurance industry at Insurance Business America and its sister publications in Canada and the U.K.
