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

Find more from our partner on the JobsOhio Partner Page.

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

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

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

Risk Transfer Programs and Renewals

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

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

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

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

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

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

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

See also: The Woes of Absence Management

Impacts of Social Inflation

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

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

Workers’ Compensation Programs

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

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

View the archived recording of this session here.

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

Rising VMT and Fuel Prices

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

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

The Impact of Inflation

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

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

See also: How to Engage Better on Auto Insurance

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

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

Population Shifts and Their Effects

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

See also: How to Thrive in Auto Insurance

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

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

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

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

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

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

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

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

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

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

See also: Momentous Change and Mobile Devices

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

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

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

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

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

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

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

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

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

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

See also: Stop Being Scared of Artificial Intelligence

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

What’s Next?

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

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

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

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

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

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

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

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

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

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

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

See also: COVID: How Carriers Can Recover

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

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

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

The insurance industry was caught flat-footed by the business impact of the COVID pandemic. Many agents were still relying on in-person contact with leads and customers to maintain their business, but world events and industry trends have aligned to push agents into the digital age. 

Along with world events uprooting business norms, increasing expenses and changing client expectations, independent agencies are facing another pressure -- a tsunami of new competition. Last year, Nationwide released all its captive agents in favor of the independent model. This industry shift, very likely to be a trend in the coming months, makes branding and marketing even more important. Finding ways to stand out and showcase one’s expertise is critical to finding and retaining clients.

And while some carriers are keen to release their captive agents to reduce internal costs, the carriers still want to keep those relationships as independent agents (IAs) build their own books of business. After moving to an IA model, Nationwide reports that its formerly captive agents increased new written premiums by 35%.

Insurance customers want more choices, IAs value the freedom to make their own business decisions and carriers reduce operating costs. From the client to agents to the carriers, the benefits of going to an independent model are clear.  

However, this transition isn’t as simple as just turning all agents loose. The steps that Nationwide took leading up to this change are what positioned the carrier and its agents for success. Nationwide continues to provide support for those agents selling their products. The company provides a vast library of resources on their website, many of them related to marketing. 

This is probably one of the biggest differences for new IAs. For the first time, they are going to have control over their brand and will need to market themselves to stand out. This can be a time-consuming task and an ideal place to leverage technology. Digital marketing solutions can take the load of client communications off IAs so they can focus on helping customers. 

Traditional methods of acquiring customers can still bear fruit but can be costly and inefficient. To grow one’s book of business, IAs must approach client acquisition, cultivation and retention tasks with a modern eye. Embracing digital customer communication technologies will allow IAs to demonstrate authenticity and expertise that scale. Identifying your niche and segmenting your clients so you can communicate with them with the right information when they want it is key to deepening those relationships.  

See also: A Commentary on Agents & Brokers

Because the entire insurance marketplace has moved online, this is where IAs need to be to meet new leads and engage with existing clients. A website, email communications, text messages, ebooks, webinars, videos and social media can all be supported by digital tools. 

New IAs can select from templates and customize them to fit their specific market segment -- taking the fear of staring at a blank page out of the equation. Messages can even be automated so new IAs can “set it and forget it” when it comes to consistent customer updates. Leveraging technology can ease the load put on a new IA agency, streamlining processes and showing a quick return on investment. 

Nationwide's successful transition is sure to be a model for other carriers. As the market swells with IAs and continues to advance toward online channels, the time to adopt digital solutions to remain competitive is now. Technology can provide additional flexibility, efficiency and personality into the mix for IAs as they work to grow their own book of business.

New Thinking on Driverless Vehicles Paul Carroll, Editor-in-Chief of ITL Driverless vehicles reached a milestone last week when General Motors’ Cruise subsidiary began offering fully autonomous rides (as in, without a safety driver) in San Francisco. While Google’s Waymo has been offering fully autonomous rides in the East Valley of Phoenix for more than a year, operating in San Francisco’s compressed, complex environment takes AV ride-hailing offerings to a new level. So, having reached this milestone, where do AVs now stand? Not where many of us expected two or three years ago. And they are heading in a different direction than many predicted. continue reading > Majesco Webinar Join us as we discuss Majesco’s P&C Core Suite and the newest, most innovative enhancements in Version 12 that deliver new, innovative capabilities across policy, billing and claims, including new AI/ML embedded models and integration with Digital Customer360 and Underwriter360 that are changing the insurance game. Register Now SIX THINGS How Automation Adds to Need for Humans by Mark Breading Automation does not mean industry professionals will be left out in the cold. In fact, the opposite may be true. Read More 5 Tips for Finding an RPA Solution by Jeff Hiegert Robotic process automation can manage workflows, improve accuracy, reduce operational costs and meet growing IT needs. Read More Tackling the Growing Problem of Insurance Fraud Sponsored by Daisy Intelligence This eBook explains trends in insurance fraud, the reinforcement learning approach, keys to successfully embracing AI and how to save millions in fraudulent claims payments. Read More Need for Scalable Response Teams by  Greg Hanover When disasters strike, insurers can become overwhelmed with calls and claims. They need to be able to scale their response teams quickly. Read More You Get the Results You Reward by Kevin Trokey Reward high performers the same way you reward average performers, and you will soon find yourself with a whole bunch of average. Read More Aduhelm: Case Study on Paying for Health by Paul Seegert As the controversial Alzheimer's drug shows, the only solution to our broken healthcare payment model is the free market. Read More AI and the Risk Management Pro by Shameek Kundu Managing risks from poor-quality AI is too important to leave purely to technical specialists. An organization-wide perspective is needed. Read More The Right Way to Engage Customers Sponsored by Statflo The right way to engage with customers is, of course, whatever they say it is – which likely means much more texting than you’re doing now. Watch Now MORE FROM ITL November Focus: Telematics In all my years covering all manner of technology, telematics may have caught me off-guard the most. When I first wrote about Progressive’s auto telematics program, Snapshot, in 1998, it seemed like a slam dunk. Of course, it made sense to monitor how people drove and to price their insurance accordingly. Or not. Read More Making the World More Resilient In this webinar, ITL Editor-in-Chief Paul Carroll sits down with Chris Wei, Chairman of the Executive Council of the International Insurance Society and a longtime senior executive at Aviva. In advance of the IIS annual forum on Sept. 27-29, they explore how the industry can help drive a sustainable global recovery.   Watch Now Partner with ITL to create expert thought leadership content. Custom Content Promoted Content Display Advertising Custom Webinars Monthly Topic Sponsorships ITL Partner Packages and more Learn more and get the 2021 Media Kit GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started SPREAD THE WORD Share Share Tweet Forward SUBSCRIBE TO SIX THINGS

 

Driverless vehicles reached a milestone last week when General Motors' Cruise subsidiary began offering fully autonomous rides (as in, without a safety driver) in San Francisco. While Google's Waymo has been offering fully autonomous rides in the East Valley of Phoenix for more than a year, operating in San Francisco's compressed, complex environment takes AV ride-hailing offerings to a new level.

So, having reached this milestone, where do AVs now stand?

Not where many of us expected two or three years ago. And they are heading in a different direction than many predicted.

In particular, it's now clear that Uber-like ride-sharing services using AVs aren't going to suddenly pop up everywhere, and, as a result, won't soon usher in personal ownership of AVs. Instead AVs will be used in environments that can be carefully circumscribed, such as for shuttles on college campuses on a fixed route. And the first fully driverless car you see on the road may be... a truck.

Yes, urban driving and ride-sharing services such as those operated by Waymo, Cruise and Aurora have made extraordinary technological strides, but the difficulties of fitting in with human drivers, cyclists and pedestrians have proved to be much trickier than expected. So, having AVs roaming everywhere, in all kinds of weather, at all hours of the day and night simply isn't yet practical and won't be soon, especially because the public doesn't just expect AVs to be safer than human drivers; the public expects AVs to be flawless, or at least awfully close.

As a result, AVs that focus on passengers will show up for now in "geo-fenced" parts of cities that are fully mapped and well-understood and on set routes on corporate and college campuses, where conditions can be controlled. You may also see small autonomous delivery vehicles like this one, which are being designed to operate at slow speed on sidewalks -- college kids need to get late night snacks and beer somehow, right?

In addition, Amazon is experimenting with AVs that could deliver its ever-growing array of goods -- though the AVs will have to negotiate a host of different environments full of human drivers, cyclists and pedestrians and will have to deal with the complexities of the final delivery. After all, somebody or something has to be there to take an item out of the AV.

Walmart is using AVs to shuttle online orders from a "dark store" to a retail outlet, where consumers can pick them up.

All those gains matter, and amassing experience with enough use cases will, over time, allow for the sort of broad rollout of AVs that many have been predicting.

In the meantime, though, many of the AV ventures are pivoting to trucking because the issues with pedestrians and cyclists go away and the traffic is far simpler to navigate. These ventures will avoid cities when possible and just focus on going hub to hub on the outskirts, according to my longtime colleague Chunka Mui, who has been my go-to on autonomous vehicles since he arranged a ride for us in a Google AV in the early 2010s and who is expert in the field.

He says the CEO of one well-funded company told him he could build an autonomous trucking business just within Texas because it's 800 miles from El Paso to Texarkana, and interstate all the way. Chunka also notes that Atlanta to Chicago is a 700-mile corridor with massive truck traffic "and only something like seven turns."

Imagine how much cargo could be transported from and to shipping centers on the outskirts of cities without the need for human drivers and without the limits of a 14-hour day that they must abide by for safety reasons. And imagine how much incentive there is for businesses to capture all that business.

The whole transportation sector would benefit because the reduction in the need for drivers on long-haul trucking routes -- even a modest number of them -- would do a massive amount to address the current shortage of truck drivers, which the American Trucking Association puts at 80,000 in the U.S. AVs would free the long-haul drivers for other tasks -- typically closer to home, where drivers would rather be, anyway.

At the other end of the spectrum, on the shortest of short hauls, autonomous trucks could help resolve one of the issues that currently has the supply chain snarled. Ports are so backed up that drivers may have to sit for hours to pick up a load -- and they don't get paid while they sit. What driver just wants to sit at a port, unpaid, especially while the clock is ticking on the 14-hour maximum they can spend in the cab in a day? Well, an autonomous truck would have no issue sitting at a port. It could inch through the port for however long it took, have a container hoisted onto the chassis by a crane and inch its way out of the port, where a human driver could pick it up. Just being autonomous while inside the port boundary would represent enormous progress.

Now, a fair amount of infrastructure would have to be developed to accommodate this hub-based approach to autonomous trucking. You'd need to build centers on the outskirts of cities. You'd need to adapt truck stops -- an autonomous truck isn't going to refuel itself, and you wouldn't need nearly as many showers or as much coffee and snacks. And the drivers, as well as the many systems that coordinate their activities, would have to fundamentally switch to a model where drivers shuttle trucks from those hubs outside the cities to and from their final destinations rather than going on the road for days or weeks at a time.

From an insurance standpoint, the trend away from ride-sharing and personal ownership relieves the pressure on auto insurers to rethink their whole model. Although it had seemed that personal ownership of cars might end in the foreseeable future -- meaning the end of the need for personal auto insurance and a shift to fleet-based insurance or to a product liability approach for the makers of the hardware and software and to the operators -- the old model now seems likely to persist for many years.

At the same time, the move toward autonomous trucking on a piecemeal basis will roil that market, creating threats for some and opportunities for many.

Cheers,

Paul

P.S. If you're interested in more on the trend toward autonomous trucking and on how AVs will likely play out in general, check out a book that Chunka and I published in September along with another longtime colleague, Tim Andrews. We lay out a timeline for the next 30 years for transportation, among other technologies, based on the notion that the best way to predict the future is to invent it. The book is "A Brief History of a Perfect Future: Inventing the World We Can Proudly Leave Our Kids by 2050."

P.P.S. I go all the way back to the late 1960s with driverless vehicles and, along the way, have seen how long developments can take and how unpredictable they can be -- but have also seen real progress.

The connection comes because, when I was a kid growing up in Pittsburgh, my father was the chief spokesman for Westinghouse, which built a prototype of what it hoped would be a driverless mass transit system. What was called Skybus operated on a two-mile stretch of raised roadway in a park near the suburb where we lived, and my dad used to take us kids out there from time to time to ride it. There wasn't much to it. You walked into what looked like a bus and rode it two miles to the end of the track. The bus stopped, then took you back. But there was no driver or other Skybus representative on board -- the Skybus was operated remotely -- and this was more than 50 years ago, so the experience was still pretty wild.

Skybus never had a chance as a mass transit system. It was much too expensive to build the dedicated roadway, and there just wasn't enough saving from not needing a driver in the vehicle. But Skybus did turn out to be a precursor to the sorts of driverless airport trams we've all ridden in Dallas and many other cities, including Pittsburgh.

My dad also got a Picturephone when AT&T debuted the service in Pittsburgh in the summer of 1970, so I'm thinking he was a much cooler guy than we kids realized at the time. But the history of phones is another story for another day.

 

Many agencies are at a complete loss as to why they aren’t getting the results they need. The frustration builds when they can’t get their team to change behaviors necessary to produce those results. Figuring out why they don’t change isn’t rocket science, my friends.

Like I always say, "Any organization that rewards its high performers the same way it rewards average performers will, very soon, find itself with a whole bunch of average."

So look no further than your compensation model(s). You must reward (financially) the behaviors that drive the results you need.

Align results and rewards

It is a misaligned reward system that causes most agencies to struggle with growth. You must reward the right behaviors at the right time in the right way to ensure you achieve your desired outcomes.

I appreciated a story I came across that illustrates this idea in practice. The story took place at a campground.

There was an older couple already set up at camp. As they were sitting around the campfire enjoying themselves, a young family rolled in in an SUV.

The father had barely stopped the car when three young children jumped out with an incredible sense of urgency. One child hurriedly unloaded coolers, backpacks and other camping equipment. With equally impressive speed, the other two children set up the tents.

Beyond impressed, the older couple later commented to the young parents, “Wow, you all sure well work well as a team!”

To which the mother responded, “Thanks! We learned a long time ago how important it is to have the right reward system in place. And, in our family, nobody gets to go to the bathroom until camp has been set up.” 😂

Talk about rewarding the right behaviors at the right time in the right way! Insurance agencies would find a more predictable path to growth if they followed this example.

See also: How Social Selling Can Boost Results

Compensation consistency

The job salespeople do is difficult. This is one of the reasons salespeople are paid so well.

There aren’t many who are bold enough to face so much rejection daily. Picking up the phone and calling a stranger is intimidating for most. Being skilled enough to show buyers a path to better results takes practice, knowledge and excellent communication skills.

It is a rare gift that salespeople possess.

Too often, salespeople leverage this ability until something "unfortunate" happens; they are successful and become comfortable and complacent. At this point, too many move into maintenance mode, making just enough new sales to maintain the size of their book of business and their income level.

Don't get comfortable

Many of you won't agree with me on my next point. This is inexcusable. In my opinion, salespeople should not be allowed to stop producing once they become comfortable. Salespeople are hired to sell, and they should be expected to always sell.

I feel so strongly about this because the issue isn’t only about them and their income. The entire organization depends on them doing their job. The owners and leaders of the agency can’t be confident in making new investments or hiring additional staff if there isn’t predictable growth.

Maybe worst of all, the rest of the non-production team members' opportunity to get raises and bonuses and have an evolving professional career depends on the salespeople doing their job of selling.

It’s the compensation formula, stupid

Again, it isn’t hard to figure out why this happens.

Agencies tend to pay producers the same commission percentage on accounts they don't lose (renewals) as they do for going out and adding a brand-new client. This is even though there is a whole support team in place to service that existing account.

How do you think the producer's behaviors would change if they were paid significantly more for a new account than for a retained account? They would be more focused on writing new business.

Those same agencies will pay the exact commission percentages to a producer who only stumbles on to one or two micro accounts a year as they do to a producer who consistently rings the bell with accounts that fit the agency's target profile.

How do you feel the producer’s behavior would change if they had a graduated commission schedule that increased with the size and frequency of new accounts added? The producer would be more consistent in writing new business and looking for larger opportunities.

And another thing

Speaking of servicing existing accounts...service team members are usually paid a flat salary regardless of the size of the books they service or the rate at which they retain the clients in that book.

Do you think you would have a more motivated service team if their compensation grew (at least partially) along with the book of business they service? I suspect you would.

I know many of you won’t agree with me, but I believe most agencies should:

• Pay higher producer commission for new business than they do currently
• Also, pay lower commission on renewals than they are now
• Provide significant, over-the-top, bonus opportunities when a producer has over-the-top new business production
• Tie a small percentage of the service team's compensation to the size of the book they handle

Create alignment

The behaviors you tolerate become the behaviors you promote, and the behaviors you reward become the habits of your team.

See also: Managing Your Personal Brand

No one compensation model is perfect for everyone. But you must build the compensation model that is right for you.

Don't make doing so more complicated than it needs to be:

1. Determine the results you need from each position.
2. Identify the behaviors that drive those results.
3. Build a compensation plan that rewards those behaviors.

I understand that changing existing compensation models isn't easy; I've done it before myself. However, what is even more difficult is allowing your current model to hold everyone back.

When you hire the right people for the right job and reward them in the right way – it’s magic for everyone.

You can find the article originally published here.