While the insurtech movement has taken hold and insurers are rushing to automate core processes, a labor-intensive cost center ripe for modernization is often overlooked: regulatory compliance.

Heavily regulated industries, such as finance and insurance, must grapple with a compliance landscape that is fast-changing and chaotic. Without automation and modernization, compliance change management swallows up resources at an alarming rate. Maintaining compliance in these industries requires many manual, repetitive and error-prone processes that must be handled by small armies of well-compensated experts.

To stay current, compliance officers must keep up with not only regulatory changes from multiple agencies but also the enforcement patterns that illuminate on-the-ground realities in a range of jurisdictions, from local municipalities all the way up to international regulatory bodies. Without automation, finding, reading and interpreting relevant regulatory changes and numerous enforcement actions is a cumbersome, manual, labor-intensive process that shifts the attention of skilled specialists away from higher-value projects. 

Regtech solutions automate many of those core compliance processes, so skilled experts are freed to apply their skills to initiatives that better leverage their expertise to benefit the bottom line. 

How regtech complements insurtech

For organizations already benefiting from insurtech, an obvious next step in their digital transformation journey is to investigate complementary solutions, such as regtech, which rely on similar innovations. 

Insurtech and regtech solutions  have evolved along parallel paths. In fact, some insurtech solutions include basic compliance features and vice versa. 

Regtech leverages many of the same core technologies (SaaS, ML, predictive analytics) as insurtech to deliver operational efficiencies, cost savings and better overall user experiences. As the name implies, regtech also plugs important gaps, such as automating regulatory change management, flagging relevant enforcement actions and delivering actionable insights to various stakeholders throughout the organization in near-real time. 

As with insurtech, regtech solutions are also expanding rapidly. According to ResearchAndMarkets, the global regtech market grew from $6.26 billion in 2020 to $7.9 billion in 2021, a compound annual growth rate (CAGR) of 26%. The market research firm predicts that the sector will continue to expand at a CAGR of 24% for the next few years, reaching $18.89 billion in 2025.

The steep cost of legacy anchors

However, insurtech and regtech are both still early in their adoption cycles. A major reason insurance firms are often slow to adopt new technologies is the need to support legacy software that was designed for a different era, one when cloud computing was not common and software was sold as a product, not a service. Many organizations believe that the change costs are too high to abandon these systems. 

Nothing could be further from the truth.  

Cloud/SaaS-based solutions have given businesses across the economy the opportunity to transform various cost centers in their businesses by optimizing processes, automating tasks that can be handled by new solutions, such as ML and AI, and adopting best-of-breed SaaS solutions that deliver fast ROI, turning capex into opex.

Legacy, pre-cloud systems, in contrast, are usually deployed on on-premises infrastructure that requires high up-front costs, steady maintenance overhead and steep management costs. These systems constantly burden IT teams with a range of labor-intensive, repetitive, error-prone tasks that are better and more affordably handled by technologies such as ML and AI. 

Most regtech solutions, just like insurtech, are built from the ground up as cloud-native, whether public, private or hybrid, and to be consumed as SaaS. With streamlined deployment cycles, intuitive user interfaces, automated workflows and application programming interfaces (APIs) that connect related solutions, regtech software eliminates errors, streamlines the compliance lifecycle and frees compliance officers from time-consuming, error-prone, manual processes.

Why 2022 is the right time to modernize compliance. . . before it’s too late

While regtech can help insurance organizations modernize, optimize and eventually automate many compliance processes and workflows, adopting regtech isn’t a simple bolt-on to insurtech platforms, and insurance companies will need to carefully manage the transition to automation-driven compliance.

A September 2021 study by McKinsey forecast the top 10 technology trends that are poised to disrupt the insurance industry in the near term. Of these, McKinsey zeroed in on five that will have the biggest impact on insurance: AI, distributed infrastructure, future of connectivity, next-level automation and trust architecture. 

All of these next-generation trends are converging with today’s best-of-breed regtech solutions, which are powered by AI and built on distributed cloud infrastructures. Regtech software also connects to related business solutions through open APIs, automates cumbersome tasks like tracking regulatory changes and should easily integrate into zero-trust architectures. 

In contrast, insurance organizations that continue to rely on ad-hoc workflows and outdated compliance software risk lagging behind competitors that are quicker to modernize. Lagging businesses also face higher risks of falling out of compliance and getting penalized for it. 

With regtech adoption on the rise and the regulatory landscape growing increasingly complex, 2022 is the year to get serious about modernizing compliance, so you can transform one of your organization’s cost centers into a competitive advantage. 

How to evaluate regtech providers: seven questions to ask

While insurtech and regtech have much in common, the two emerging technologies also differ in important ways. Here are seven questions to ask providers that will help you evaluate whether their solutions will meet your organization’s goals: 

1. How will your solution integrate with complementary solutions  we have already deployed, such as insurtech? 

Integrating insurtech with regtech will help you mitigate risks. For instance, many insurance companies are eager to leverage insurtech to deliver new products, but what happens if those products run afoul of existing (or pending) regulations? 

Ask regtech providers how data will be shared between the solutions and then throughout the organization, so business decisions do not undermine compliance.

2. Do you have reference customers in our sector of the insurance industry? 

Some regtech providers may offer solutions for your industry that are retrofits of solutions designed for other industries, such as healthcare or financial services. While some features may port easily to insurance, others may not. 

Ask vendors to provide references of customers from your market sector, so you understand any challenges that may be specific to your industry. 

3. What’s a realistic timetable for ROI?

Every SaaS provider promises low total cost of ownership and fast ROI, but don’t mistake this for table stakes. Those claims are often inflated. Ask providers to calculate your ROI. . . and then ask them to show their work. 

4. After the transition, where do our existing compliance experts fit in? 

Many fear that AI and automation could eliminate skilled positions that really shouldn’t disappear. Modernization shouldn’t destroy organizational strengths like institutional knowledge and the kind of nuanced subject matter expertise that AI cannot duplicate. 

Ask regtech vendors for a before-and-after picture. How will adopting regtech affect your existing compliance team, and how will the day-to-day work of compliance experts change?   

5. What happens if we decide to switch to a competing provider in the future? 

One of the biggest drawbacks of the cloud/SaaS era was supposed to be a major strength: data portability. In theory, data should be easy to move from one system to another and from one vendor to another if you decide to change, but proprietary software layers often prevent this. 

Ask providers about data ownership and find out how difficult it is to export your data. 

6. How do you protect data and control access? 

Automated compliance won’t deliver ROI if a data breach hits your organization. Be sure to have your security experts grill providers on their various access control and data protection features. 

7. Does your regtech solution satisfy regulators? 

Regulators will have their own priorities, and regtech solutions should have built-in features to address them. Be sure to ask providers about areas that regulators emphasize, such as transparency and the ability to repeat processes and audit data trails.

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FROM THE EDITOR Sometimes, innovation takes time.  Some 30 years ago, I wrote an article for the front page of the second section of the Wall Street Journal that declared a revolution in forms. We were far enough along in the personal computer revolution that software companies were coming out with products that would let users fill out forms on-screen, speeding the process and eliminating the errors that occurred as someone had to interpret people's handwriting. Even more magical, the spread of local area networks meant that information could flow straight from my screen into a corporate database, with no never to ever print the form and have someone re-enter the data.   Everything I wrote was correct, and forms did take a major step forward, but, here we are three decades later, still drowning in forms. And the insurance industry is Exhibit A. I realize that, in many ways, the need for clarity and standardization means insurance has to think in forms -- certainly, many regulators do. But there is so much inefficiency tied up in filling out forms, processing them and gathering them for use in underwriting and claims that I've been trying as hard as I can for years to drive people to consider the sort of automation that is the ITL Focus this month.  As you'll see from this month's interview with Nigel Walsh, a longtime consultant who is now managing director, insurance, at Google, he's pretty much moved beyond automation. His thinking is: Why automate a process when you can do away with it entirely?  He does acknowledge that automation can deliver loads of incremental gains, and the six articles I've highlighted this month lay out a number of possibilities for you to consider.  The whole experience with automation reminds of two lines I use often (apologies, if you've heard them before).  One is a Silicon Valley bromide: Never confuse a clear view with a short distance. That's something I did with forms and do all the time -- even though I know to never confuse a clear view with a short distance. The other is one I came up with on my own: Let's burn all the fax machines. They, to me, are such a symbol of antiquated technology and of the inefficiency in our industry. Let's automate all of them out of existence, then turn our attention to doing away with all the forms that we use fax machines to send back and forth. I may have been much too early about expecting forms to go away, but I'll eventually be right. Really, I will.   Cheers, Paul INTERVIEW WITH NIGEL WALSH As part of this month's ITL Focus on automation and RPA, we spoke with Nigel Walsh, managing director, insurance, at Google, about how far automation has progressed -- and about how to think about what comes next. Why automate a form or a process when you can simply eliminate it?  ""I think things have played out quite well. Bit by bit, area by area, division by division, process by process, things have improved. Adoption of automation throughout insurance businesses increased, without question, and there's no end of processes left to go, I would guess."" -Nigel Walsh Read the Full Interview READ MORE Stocking Caps and Insurance How Amazon’s approach to selling the former can help you move more of the latter. Read More Insurers Turn to Automation When automation is a core technology, transformation can occur at speed, meaning faster return on digital investment. Read More What’s Beyond Robotic Process Automation RPA is a primitive technology and represents only a small part of what’s needed to scale and allow for straight-through processing Read More Tipping Point for Claims Automation While virtual estimating for auto claims—using photos in place of a physical inspection—is not new, the pandemic has made it the preferred method. Read More How to Automate Your Automation It's crucial to take a top-down a pproach, to get a bird’s-eye view of all of processes, to be able to see which will benefit from RPA. Read More How Automation Adds to Need for Humans Automation does not mean industry professionals will be left out in the cold.In fact, the opposite may be true. Read More FEATURED THOUGHT LEADERS Tom Bobrowski Mark Breading Asheesh Mehra Sathyanarayanan Sethuraman Olivier Baudoux Harel Tayeb     View all ITL FOCUS topics Share Share Tweet

ITL:

When I was preparing for this month’s ITL Focus on robotic process automation (RPA) and the broader possibilities of automation, I went back and looked and saw that two of the five most popular articles we’ve ever published on the topic were ones you’d written. I thought, I haven’t talked to Nigel in a while, not since your move to Google, so I decided to give you a try and am delighted to get to chat a bit. 

Maybe we can start here: When you were writing these pieces a few years ago, it seemed that automation had great promise. Now that we’re some years on, how has that promise played out?

Nigel Walsh:

I think things have played out quite well. Division by division, process by process, things have steadily progressed. Adoption of automation within the insurance industry has increased, without question, and there are still plenty of processes left to automate.    

I always talk about evolutionary and revolutionary steps. I think RPA falls categorically into the evolutionary mode. We can make everything better than it was. In the cycling world, people will know this as marginal gains. Break it all down, improve it by 1% and rebuild it all.

ITL:

What would revolution look like? And is that possible?

Walsh:

Revolution would ask, Why are we doing this in the first place? Why do we need it? Can we remove it entirely?

If you're automating a process, you’re grabbing data to fill out a form that was always used. Maybe 20 years ago that was a form on paper for an agent or broker or customer. But why automate that old form? I would challenge us to ask, “Why can't we skip the form and automate the whole process, end to end?”      

Artificial intelligence has helped us understand our workflows. Think about your phone with all the shortcuts. Artificial intelligence (AI) says, actually, Paul, based on your location and the time of day and these three other factors, I know what you want to do, and I’ll get you right to it. Our ability to learn and predict quickly has improved exponentially. 

ITL:

So, you can go straight from whatever is going on to whatever the result ought to be.

Walsh:

The initial achievement of automation was to make the machine go faster and be more efficient. But what if there's a new and better way to do things? I’m not sure we pause enough and ask or challenge this. You can argue that automation is still horizon one thinking when we could be looking at horizon two or three.

ITL:

Do you know the name Mike Hammer? He was an MIT professor who pioneered reengineering in the 1980s and 1990s. He used to caution against paving the cow paths because he lived with the problems that were created in Boston when city officials did just that.  In the 1900s, city officials started just paving roads where cows had created paths over the centuries. He said we have to imagine the new – the superhighways or air travel or whatever – rather than just do a better job of what we’ve always done.

Walsh:

Exactly that. Otherwise, all we've done is make faster horses. As Henry Ford said, if we had asked people what they wanted, that’s what we’d have ended up with.

ITL:

Just the other day, the U.S. National Highway Transportation Safety Administration ruled that a car no longer had to have a steering wheel, gas pedal, brake pedal, etc. to meet safety criteria. So, now, we can have cars that don’t just look like they always did, without someone in the driver’s seat, but can reinvent the interior of cars entirely. 

Do you have an example or two of how the more revolutionary approach might work in insurance, of what could be entirely done away with rather than simply automated?

Walsh:

We’ve been talking for years about how you move from reactive to proactive. I think we are at that point now when we have the tools and the datasets available to make that shift. 

When you think about the whole process of insurance in the first place, it's the collection of data to assess risk, assign a price to it and return the assessment to the customer. But, even with all the information that is available, the orchestration is still being assigned to a human, even if it could be automated. A good example is parametric insurance. If we’re in a commodity world and there is an outage or breakage, you can automatically restore the customer to the pre-loss condition.

You can also change the business model of insurance. Look at folks like Laka, which sells insurance for cyclists. They set a cap on your premiums, but, if there are no claims or lower claims than expected, you pay less.  Why don't more companies do this?

ITL:

In terms of automation of the evolutionary variety, are there particular areas where you've seen successes or have seen failures?

Walsh:

I think you can apply automation to just about any area and see benefits. It’s not hard to take your 10-stage process and automate elements of it. But automation of just the arms and legs is unlikely to give you the benefits or outcomes you really need. 

ITL:

A few years ago now, I helped three senior partners at a big consulting firm write a book on how to innovate on strategy, and one of the major points they made was that operational efficiency can generate strategic advantage, even though it tends to be treated as separate from strategy discussions. They said they thought insurers should be able to take out 50% of their operating costs and rather quickly. Does that sound realistic? And, if so, how far along do you think insurance is on that trip?

Walsh:

Using Google Cloud, Ki Insurance built a Lloyd’s syndicate driven by algorithms. That’s a business traditionally grown by experienced executives, but Ki generated some $400 million in premium in its first year. A lot is possible when technology is an integral part of the business strategy.      

ITL:

Thanks, Nigel. Always great talking with you.

The constraints of insurers' legacy technology have become more obvious in the days of digital transformation. These systems can no longer support customers’ demands for speed of change and omnichannel experiences. 

Enter the era of ecosystem transformation. 

Legacy systems create siloed processes, multi-generational technology landscapes, limited point-to-point external integration and the lack of a comprehensive customer view across various solution offerings. But, within a broader partner ecosystem, technologies such as cloud, software-as-a-service (SaaS) and low-code allow carriers of all sizes to be more efficient, productive and modern and – ultimately – move closer to customers.

When technology and business operations are closely integrated across the entire insurance value chain, carriers can innovate in ways that matter most to their customers.

Connecting Emerging Technologies 

In an increasingly crowded space like insurance, and with the growing speed of digitization changing customer expectations, carriers need to constantly reassess customers’ needs and rethink the value they can bring. 

In the recent past, carriers have begun to diversify their lines of business and to leverage new technologies such as SaaS, artificial intelligence (AI) and machine learning (ML) to streamline the underwriting and claims processes. 

SaaS is reshaping how carriers deliver their services. From infrastructure, to solution offerings, to services and support, SaaS’ real-time nature allows IT teams to work more efficiently, building and testing rapidly and iterating faster than ever before, building a more nimble environment for insurance carriers. As a result, customers can get the latest capabilities and solution updates in a fraction of the time. 

In fact, in our Driving the New Standard of Insurance global benchmark survey conducted last year, over one-third of respondents told us high operating costs are the biggest obstacle to profitable growth for insurance businesses. 

Carriers that take this ecosystem approach will find themselves moving away from needing to upgrade constantly. This helps reduce technical debt and minimize both technology expense and burden. The configurability and malleability of SaaS brings speed, and it streamlines processes and workflows to benefit carriers in the long run. 

Speed, Speed, Speed! – Rewriting the Rules of Insurance Operations

Insurance has always been about data. We now have a lot more of it, placing a premium on analytical capabilities. This has strained technology systems – and, eventually, when the data dictates required changes to product, it can be a struggle to achieve desired product development outcomes with outdated systems. 

To address this challenge, carriers of all shapes and sizes are beginning to make substantial investments in SaaS-enabled ecosystems, enabling operational agility and efficiency in the product development and deployment cycles. 

How could this be done? An insurance ecosystem brings together a close integration of analytics, computing, data, mobile and security from different sources and partners, allowing even small and medium-sized carriers to benefit from the nimble infrastructure and emerging technologies. This gives them a leg up to compete in the fierce insurance marketplace, especially in the lines of personal auto, homeowners and small commercial.

When built into carriers’ core systems, this approach supports carriers’ business strategy with the ability to enter new markets, and deliver new products more effectively and efficiently. This allows insurance CIOs and IT professionals to focus on the overall business operations and concentrate the resources on product innovations to address customers’ evolving needs.

See also: Designing a Digital Insurance Ecosystem

2022 Keywords in Insurance – The Experience Economy and Personalization

Customer expectations have changed drastically in the past two years. An omnichannel experience is a key driver in customers making insurance purchase decisions. Fast-paced insurtechs and startups offer digital customer experiences and convenience that many carriers aspire to.

The delivery of experiences includes multiple layers – from data and technology to partners and ecosystem. Getting this right requires aligning these different layers to determine how they can be optimized for customers.  

When it comes to data and technology, insurance is at a unique position where customer data is readily available through claims history and the underwriting processes. How data is used is arguably the most critical factor in how well a carrier meets customer expectations and improves the overall process. Data management and analytics tools  can help carriers take advantage of new customer touchpoints and make sense of what customer data is telling them.

Partners and ecosystems, on the other hand, help fill the gaps of insurance offerings. By leveraging the innovative products and services from partners and external resources, insurance companies are able to improve claim accuracy and reduce processing time. This helps improve the customer experience.

However, the increased need for digital engagements doesn’t mean that the role of traditional agents is eliminated. Agents, carriers and partners work seamlessly together as a team with each being a critical element of the insurance ecosystem. 

Final Words

The ecosystem model is the way forward for the insurance industry. 

It empowers technology departments by getting them closer to the end customers, positioning them as supporters of business strategy as carriers enter new markets or reach new customers. The model also enables technology departments to play an integral role in the efficient and effective delivery of new products, allowing companies to move with incredible speed and agility in this crowded space.

On Feb, 24, Russian armed forces attacked Ukraine. The invasion is first and foremost a human tragedy, and Allianz has been clear in its opposition to this unprovoked attack. As a secondary topic after the humanitarian concerns, the invasion poses a complex threat to the operations of financial services companies and has some enormous consequences for the financial markets in the short term. 

Immediately after the invasion, there was a panicked reaction in the capital markets, particularly European banking stocks. Banks from Italy and France are most exposed to Russia, together accounting for more than 40% of the total exposure of foreign banks in Russia at $25.3 billion and $25.2 billion, respectively. However, these numbers only account for very low single-digit percentages of their total foreign claims. Banks with large Eastern European activities also saw stock prices declining materially. 

Stocks of Russian banks saw massive declines, and interest rates on (expected to default) Russian and Ukrainian sovereign debt, as well as the cost for credit default swaps, went through the roof. Europe’s Single Resolution Board took action on Russia’s Sberbank subsidiaries in Croatia and Slovenia to avoid failure.

The macroeconomic impact and increasingly higher inflation expectations are being fueled by elevated commodity prices. In Europe, the risk of stagflation has increased, and markets are closely watching the next steps central banks around the world are taking. Increasing inflation, together with low economic growth, may lead to lower profit generation for banks and hurt the results derived from retail operations.

When it comes to U.S.-based financial institutions, some asset managers and banks do have physical assets exposure to Russia and Ukraine. However, the evidence seems to suggest that such direct assets exposure (whether these are leased airplanes, real estate, equity investments, Russian and Ukrainian debt/bond investments denominated in USD/Russian rubles/Ukrainian hryvnia, etc.) and other related exposure is in low-single-digit percentages. 

Underwriters expect U.S.-based financial institutions to conduct full write-downs of their investments in Russia and Ukraine during fiscal 2022 and possibly later, as the ultimate outcome of the conflict remains uncertain. It is also likely that the U.S. assets in Russia will be nationalized in response to the U.S.-imposed sanctions, ruling out any possibilities of future recoveries.

A number of U.S. asset managers have highlighted that sanctioned Russian nationals are limited partners in their funds and that they are working to buy back their interests in these private funds to cease the affiliation with these limited partners. 

At the same time, certain U.S. hedge funds are buying up Russian and Ukrainian bonds at cents on the dollar, perhaps betting on an early resolution of the conflict. The Ukrainian bonds are currently trading at higher prices given the pledged financial support of Ukraine by the U.S. and the European Union. While doing so is somewhat of a common practice by hedge funds, aiming to profit from the current unprecedented situation in Eastern Europe may be viewed as an environmental, social and governance (ESG) issue by the investment community and the regulators.

See also: Ukraine: How Exposed Are Insurers?

Cyber and ESG issues

Alongside the human toll, the invasion of Ukraine provides a salient reminder of the omnipresent danger of state-sponsored cyber-attacks that aim to disrupt and disable IT systems. Banks and financial institutions are on alert for an escalation in hacking attempts and Russian reprisal cyber-attacks after the imposing of sanctions by Western nations, resulting in a number of the country’s lenders being kicked off the global payments messaging system SWIFT.  

This comes at a time when risk managers have never been more aware of the hazards posed by cyber criminals. Recent high-profile cyber-attacks have shown a worrying trend, where hackers target technology or software supply chains. AGCS analysis of more than 7,500 insurance claims involving financial services companies over the past five years (worth $1 billion-plus) show that cyber incidents are already the top cause of loss. IT outages, service disruptions or cyber-attacks can result in significant business interruption costs and greater operating expenses from a variety of causes, such as customer redress, consultancy costs, loss of income and regulatory fines. Brand reputation and, ultimately, a company’s stock price can also be harmed, while management can also be held responsible for lack of preparedness.

It is unsurprising then that cyber incidents was ranked as the top risk for the financial services sector by 51% of the 872 respondents who participated in the Allianz Risk Barometer 2022. For companies, and their senior management, this ultimately requires them to maintain an active role in steering the information and communications technology (ICT) risk management framework, including assigning clear roles and responsibilities for all functions and appropriate allocation of investments and training. Companies need to operationalize their response to regulation and privacy rights and not just look at cyber security.

At the same time, the broader ESG impact is being felt by asset managers assessing the impact these developments have on the sustainability of their investments post widespread sanctions, on a country that already scored relatively low in terms of governance and social matters. No doubt some asset managers will consider divesting Russian assets based on ESG considerations. Companies’ boards are re-evaluating presence and activities in the country due to concern over reputational damage.

What makes a true digital payment experience in insurance? Although the past few years have been characterized by rapid digital payment options, the game-changer has been the focus of market leaders to embrace the transformation of the actual payment experience – both for premium and claim payments.

In SMA’s new research report, "The Race Toward True Digital Payment Experiences: The Digital Transformation of Premium and Claim Payments in 2022 and Beyond," SMA explains the current state of premium (inbound) and claim (outbound) payments. Although there is a strong effort by insurers to provide true digital payment experiences, many continue to operate with outdated processes that don't meet the needs of today's consumers.

New preferences brought on by the pandemic and a more digital-connected world demand that insurers reimagine the payment experience. Within premium payments, this means offering policyholders the ability to manage how they interact with their insurers and control payment management and notifications. The goal should be to expand payment types and access options to give policyholders greater control of their experience.

On the claims side, while it is more challenging to establish a fundamental digital interaction, insurers have a tremendous opportunity to improve operational efficiencies and reduce costs. This includes establishing digital interactions that go beyond payout delivery for claimants, agents, claims adjusters, vendors and other third parties.

See also: Seeing Through Digital Glasses

For both premium and claim payments, speed and convenience are paramount. The acceptance and delivery of payments must be in real time, and capabilities must give customers the power to create tailored digital payment experiences that fit their needs best, from how they want to transact to how they want to communicate with their insurers.

Retail agencies and brokers are rethinking their channel partner strategies just as carriers and others across the distribution landscape do the same. Although carriers will always remain underwriting partners, more agencies are exploring new channel partners in the distribution ecosystem to ultimately reach customers and connect with carriers. New research from SMA finds that as options for channel relationships continue to expand, distributors across the personal and commercial lines segments are divided on the best approach for their businesses.

In 2022, agencies and brokers are not only turning to traditional partnerships, such as aggregators and banks or financial institutions, but are also exploring up-and-coming channels, such as insurtechs and digital agencies. The recent SMA research report, "Channel Strategies and Plans for P&C Agencies: A View of Commercial and Personal Lines Segments in 2022,” shows that very few agencies expect insurtechs to have a limited impact on their business. It follows that 52% of agents in the small commercial segment and 48% of agencies in personal lines fear the possibility of insurtechs encroaching on their business spaces. Thirty-two percent of agencies in mid/large commercial lines feel similarly. 

While many agencies partner with insurtechs as solution providers, very few are currently planning to use digital agencies as channel partners within the next three years. Rather, most see them as competitors. However, SMA advises that insurtech will increasingly become a force, especially in mid/large commercial lines, as technology advancements make these risks more viable targets while also improving the systems and processes within this segment. This year and beyond, agencies will fiercely focus on channel expansion and assess their current partnerships. At the same time, insurers should also take a step back to review their agency partners and prioritize key relationships by understanding their growth plans and vital industry segments. In today’s quickly changing distribution landscape, insurers must stay abreast of new agency channel partnership opportunities and the benefits they offer.

See also: 2-Speed Strategy: Optimize and Innovate

Medical debt totals at least $140 billion nationally and is the most common type of past-due bill for which consumers report being contacted by debt collections. The pandemic only increased the debt load for many Americans, despite insurer cost-sharing wavers. And, given that more than three in five adults struggle to pay medical bills even with insurance, it's clear that insurance alone does not provide adequate protection against medical debt.

New solutions and approaches are needed, and insurers have an important role to play. Existing strategies addressing medical debt - such as stopping lawsuits, negotiating repayment terms, removing it from credit reports and even charity buyouts of debt — are important but do little to actually prevent debt.

A new series of reports from the Financial Health Network, the nation's leading authority on financial health, and the Robert Wood Johnson Foundation finds that healthcare system actors, including hospitals, insurers and employers, can all intervene earlier to curb the risk of debilitating medical debt.

Medical Debt is a Social Determinant of Health

Medical debt forces tradeoffs in basic needs, such as choosing between food and paying off debt, disrupts physical and mental health and often leads to litigation, property seizure, wage garnishments, reduced credit scores and even bankruptcy. The financial implications are far-reaching, limiting consumers' ability to buy homes, pay for education, advance careers, build savings and pay off other debts, such as credit cards and student loans. Individuals with medical debt have triple the incidence of mental health conditions such as anxiety, stress and depression. And those with medical debt are more likely to forgo necessary care due to costs, potentially exacerbating health conditions and increasing healthcare costs down the line.

Worse, the burden of medical debt and its adverse implications disproportionately affect those with lower incomes, those who experience chronic illness and disabilities and Black, Latinx and indigenous households. For instance, 28% of Black and 21% of Hispanic households have medical debt, compared with 17% of white households. This creates a spiral wherein those least able to manage debt continue to incur more of it in their pursuit of medical treatment.

See also: Why Financial Wellness Is Elusive

Insurers as the First Line of Defense

Health insurers play an important role in stopping medical debt before it starts. This is especially true among the commercially insured, because the way in which members understand, use and experience their insurance can lead to unexpected medical debt.

Unfortunately, most members do not fully understand insurance terms, and lower health insurance literacy -- the ability to understand, select and use insurance -- is associated with higher medical debt. In fact, more than one in four Americans report forgoing care because they are unsure what is covered by their health plan.

Further, members can be caught in the middle or left with excessive medical bills when providers and insurers do not settle disputed claims quickly. Even worse, more than a quarter of adults in employer-sponsored plans are now considered underinsured.

Not only does acting to prevent medical debt fit under insurers' efforts to address the social drivers of health, but it can help to improve overall health and health equity. Our research found four key actions insurers can take to curb medical debt, improving the health of their members and the larger healthcare ecosystem:

1. Aid members in plan selection, and ensure members understand key health insurance terms. Insurers need to support members in selecting plans based on their particular health and financial circumstances with decision support tools, and ensure members understand health insurance terms.
2. Inform members of out-of-pocket expectations and how to navigate lower-cost options through effective price transparency resources. Insurers have a responsibility to support member decision-making by providing user-friendly, accessible and plain-language explanations of out-of-pocket expenses so members can plan for and navigate these costs. Knowing the cost of care in advance allows members to better budget for those payments.
3. Encourage primary and preventive care services by reducing or eliminating associated out-of-pocket expenses. This can prevent the need for unnecessary or costly care that puts members at risk for medical debt. This is particularly important for members with chronic conditions who tend to require more frequent and sometimes more customized care to manage their conditions. The same may be true for members experiencing long COVID symptoms.
4. Improve claims adjustment and prior authorization processes. Insurers should coordinate with providers to ensure disputed claims are settled quickly. Insurers should also streamline prior authorization, which can often be burdensome for members and providers and create delays in care.

These actions can lower members' risk of medical debt and should be part of insurers efforts to create more responsive, member-driven care. Doing so can improve member experiences, improve health and health equity, prevent members from catapulting into financial ruin, drive use of higher-value and lower-cost care and even help insurers build a competitive advantage.

You can read the full Insurance-focused report, as well as the other reports in this series on medical debt as a social determinant of health, here.

Insurance agencies across the globe are embracing software solutions that transform the filing and settling of claims into a quick and satisfying experience. In this blog, we will explore the typical lifecycle of a claim and how claims management software can streamline it. 

The Lifecycle of Insurance Claims

The insurance claims process usually involves five key stages, starting from first notice of loss (FNOL) to resolution. 

• Claims creation or FNOL
• Validation of the claim
• Review and evaluation
• Adjustment
• Cancellation or payment 

How Claims Software Can Streamline the Lifecycle 

Integrating automation into the claims process benefits all types and sizes of insurance agencies. It allows them to introduce efficiencies and shorten the lifecycle of the process, providing numerous benefits: 

1. Process Standardization

Manual workflows tend to get complicated, as several employees and partners may be involved. Each has a unique approach, which can lead to inconsistencies. Claims software offers a shortcut to process standardization, meaning more compliance and ensuring that no crucial steps are overlooked.

2. Efficient Collaboration

Nowadays, the most efficient insurance agencies are the ones that have digitized, streamlining their day-to-day processes and encouraging collaboration among previously siloed departments. Claims management software lets you send updates and notify the concerned departments, teams or individuals on coming tasks and activities. The software reduces the scope for miscommunication and enables claims handlers to coordinate better with customers. 

3. Higher Efficiency

The automation means users do not have to consistently check whether the process is advancing; the software keeps track for you. Likewise, the software, powered by machine learning and artificial intelligence, recognizes and address mistakes or bottlenecks.  

4. Regulatory Compliance

Regulations keep changing, making it challenging for agencies to ensure compliance as they strain to improve operations and meet the needs of customers. Failing to meet compliance norms can bring expensive, as well as inconvenient, consequences. 

But claims software helps with compliance. Automating the process means you are continually recording key information, producing a database that comes in handy during audit and compliance reviews. 

5. Data Security

Paper-based records are vulnerable to theft and can be destroyed in accidents and natural disasters, but digitizing processes and storing the data electronically keeps the information safe and easily accessible. Insurance claims software includes advanced security measures, such as multi-factor authentication. 

See also: How to Resist Sexy Analytics Software

6. Cost Optimization

Claims management software supports end-to-end processes, from registration to resolution, and accelerates the everyday work of claims handlers, producing efficiencies and saving on costs.

7. Increased Accuracy

Irrespective of how skilled or prepared the staff is, errors will undoubtedly occur occasionally, but automating the claims processes drastically lowers the probability of slip-ups or redundancies. 

8. Faster Resolution

Insurance processes can be tedious and lengthy, but customers want quick resolutions and frequent updates -- and automation can shorten the settlement process while helping spot fraud.

Final Words

Insurance claims software lets agencies reduce fraud, shorten the claims lifecycle, optimize costs, improve efficiency and a lot more.

A favorite line among technophiles is that “the future is here; it’s just not evenly distributed.” Every once in a while, we get a glimpse of the future in the here and now, in a way that can help us prepare for when that technology or way of life will become pervasive.

And I believe that the exceptionally quick, vivid and detailed coverage of the Russian invasion of Ukraine shows us what a truly connected world will look like – a world that all businesses, including insurers, are moving into, whether they like it or not.

We talk a lot about living in a connected world, with the IoT, telematics and so on, but we’re actually still in a pretty primitive state. I’d say the world of business is connected in much the way the world of communication was connected for the coverage of the Gulf War in 1991 – some crackly video, often days after it was shot; audio reports from correspondents while the TV showed a map; reports from military headquarters, etc. But the world of business is moving toward the world of unlimited communication and cameras and sensors everywhere that is giving us almost instant understanding of what’s happening on the front lines in Ukraine. The implications will be profound.

Think back to early this year, as Russia massed troops on the Ukrainian border -- and satellites let everyone see what was happening. While Saddam Hussein had managed to surprise the world with his invasion of Kuwait in 1990, even a cable-TV audience today could watch what Putin was doing. He insisted that he intended no harm, and some commentators bought the line, but then the satellites saw medical units being moved up to the border, including supplies of blood -- a pretty clear sign that he intended to attack.

He did, on Feb. 24, and all sorts of other cameras came into play. While few TV cameras were in Saudi Arabia in 1991, and transmission via satellite was spotty as the U.S. and allies geared up to retake Kuwait and then attacked, cameras are everywhere in Ukraine. Living on the U.S. West Coast, 10 hours behind Kyiv, I could turn my TV on at 9 every night, see the scenes from cities across the country and assure myself that Ukraine still stood.

That sort of coverage helped Ukraine President Volodymyr Zelenskyy rally support from the international community and turn some initial victories into a resounding defeat of the overwhelming Russian forces in the northern part of Ukraine. The availability of cameras and high-bandwidth connections has also let Zelenskyy boost morale by showing himself daily and even to address the U.S. Congress and the E.U. Parliament.

The ubiquitous cameras in people's phones have captured video of Russian atrocities, like a tank veering from its path to run over a car with an old man in it (miraculously, he survived) and like all the bombings of civilian targets, including a maternity hospital. The cameras also broadcast the remarkable courage of the Ukrainians, such as someone popping out from behind a tree to fire a Javelin missile and blow up a Russian tank at the head of the convoy, making the whole convoy a stationary target, or such as the intrepid farmers who hitched up tractors to tanks and hauled them away if they were briefly left behind because of a mechanical problem or because they ran out of gas.

In the Gulf War, you'd get some action footage, but not at this level of intimacy, not this quickly and not from the very front lines. (I have pictures of myself from 1991 standing in a Russian tank whose top had been blown off, but I assure you that no combatants were anywhere in the vicinity.) Russia has banned journalists from entering Mariupol, to hide the hardships that its siege is inflicting on residents, but satellite images let us count just how many desperate people are standing in line outside supermarkets. Today, satellites can see the front lines or even beyond, even when journalists can't get there. 

The adage says that the first casualty of war is truth, but satellites have even pushed back there. When the Russians pulled back from Kyiv over the weekend, they claimed that the hundreds of dead civilians left behind had actually been killed by Ukraine or that the scenes had been staged. But, as this New York Times article documents, satellite images showed that the bodies had been in the streets of Bucha for weeks, while the Russians controlled the area. 

Thomas Friedman of the New York Times refers to the invasion of Ukraine as World War Wired because of all the digital aspects to it. He writes: 

"Anyone with a smartphone and a credit card can aid strangers in Ukraine, through Airbnb, by just reserving a night at their home and not using it. Teenagers anywhere can create apps on Twitter to track Russian oligarchs and their yachts. 

"Meanwhile, Ukraine’s government has been able to tap a whole new source of funding — raising more than $70 million worth of cryptocurrencies from individuals around the world after appealing on social media for donations." 

What happens to insurance when the future becomes more evenly distributed and a Ukraine war-level of connection takes hold broadly? We can already see pieces of that future.

Telematics, while progressing slowly over the past two decades-plus, is nonetheless offering real-time observation of drivers. Cameras on the rearview mirror will increase that monitoring -- then autonomous cars will change the game entirely. 

The ever-present cameras in our phones are already being used to take pictures of car accidents and damage to homes, to speed the filing and processing of claims and to lower costs. Those cameras are also being used increasingly for do-it-yourself home inspections. Drones are being used to inspect rooftops, especially after major storms. All of those trends will continue.

And I think the satellites that are playing such a role in Ukraine will become increasingly important. If you can count people standing outside a supermarket in Mariupol, why can't you routinely check on the homes you insure to warn of risks -- perhaps a problem with a roof or the growing potential for flooding or a mudslide -- or make sure a home is properly insured after the owner installs a pool or a trampoline? At a macro level, satellites will make it increasingly possible to monitor the effects of climate change -- erosion, the effects of increased heat on water supplies, etc.

Cameras will also feed social media. Just as the images out of Ukraine are touching people's hearts, consumers will increasingly use images and videos to document and share their interactions with companies. In my experience, I'm sorry to say, consumers are much more likely to share complaints than to offer praise, so I'd say insurers should be prepared to deal with unhappy customers who tell compelling "stories" on social media using visuals designed to make a company look bad. 

Finally, while the issue doesn't relate to what's happening in Ukraine, I'd say insurers also need to be increasingly prepared for unhappy customers to start producing audio recordings of their interactions with agents and other representatives. Those smartphones don't just contain cameras; they're all recording devices, too. Disputes about guidance may no longer be, he-said, he-said; they may be, he-said-and-he-has-the-recording-to-prove-it.

War drives innovation to the extreme because so many lives are at stake, and it'll take insurance a while to catch up to the cutting-edge uses of technology happening in Ukraine. But we'll get there, and we can start preparing for the implications now.

Cheers,

Paul