In 2020, catastrophic weather, including severe wildfires, seven major hurricanes and a destructive derecho drove the proportion of catastrophe losses up 40% from 2019. These weather events were the largest drivers of losses for the home insurance industry in 39% of claims – the highest percentage in the last six years, according to the new 2021 LexisNexis Home Trends Report. 

Overall loss cost for all perils increased by 6% year-over-year, with some states more severely affected than others. Louisiana, for example, had the highest loss cost in the nation in 2020 due to a devastating hurricane season and overtook Colorado as the state most affected on average by wind peril in the last six years.

In the western part of the U.S., Colorado continues to rank highest in hail claims over states like Texas and Wyoming, while California accounted for the most loss cost, severity and frequency of fire and lightning claims, with 37% of all catastrophe claims nationwide and 75% of all catastrophe losses in 2020.

In addition to these extreme weather events, the report also tracked and analyzed the impact of COVID-19 on the U.S. home insurance market in 2020. Fewer houses were left unattended, with more people working from home, leading to a 53% decrease in liability and a 25% drop in theft loss costs. 

As people go back to the office and school, it’s likely these perils will return to their respective longer-term trends, making it important for carriers to consider how to support homeowners in lowering their future risks. 

To help carriers do that, the LexisNexis Home Trends Report provides by-peril home insurance data and location-based insights to help carriers make more informed risk assessments and underwriting decisions. Some of the additional key findings from the report by peril include: 

Wind

• Wind frequency, loss cost and severity all increased significantly in 2020  –  frequency increased by 42% this year and loss cost by 63%. 
• 2020 marked the largest wind loss cost recorded in the last six years.

Hail

• Loss cost and severity of hail claims declined in 2020, while frequency remained steady.
• However, catastrophe claims made up 62% of all hail claims this year, and the frequency of hail catastrophe claims increased a significant 9.9% year-over-year.
• In 2020, catastrophe claims made up 62% of all hail claims  –  a marked increase compared with 2019, when just 56% of hail claims were catastrophe claims. 

Fire and Lightning

• The 2020 wildfire season, the most active on record, led to increases beyond 2017 and 2018 levels in both loss cost and severity for insurers. The proportion of catastrophe losses also increased. 
• Fire and lightning loss cost also increased year-over-year, having peaked in September following a dramatic uptick in frequency in August 2020.

Non-Weather-Related Water

• While the six-year trend for water claims not related to weather continued to climb, 2020 did see a decrease of 8.7% in loss cost compared with 2019 – likely a result of people spending more time at home and perhaps increased use of smart water leak detectors.
• Claim frequency decreased by 7.3% while severity remained steady. 

See also: A Price Tag on Climate Change

For carriers looking to make location-based decisions, there are some additional state-specific key findings: 

• Colorado and Nebraska ranked highest in loss cost over the six-year period from 2015 to 2020, while West Virginia and Maine ranked lowest. 
• Likely as a result of Hurricanes Isaias, Marco and Laura hitting Louisiana and Texas, wind loss cost, frequency and severity all increased significantly in 2020. Loss cost rose 63%, and frequency increased 42% compared with 2019. 
• Colorado ranked highest in loss cost over the six-year period from 2015-2020. 
• California had the greatest non-weather-related water loss in 2020 at 100% higher than the national average loss cost.

With catastrophe claims driving losses and reinsurance costs higher, it's imperative for insurers to have the most recent peril-related trend data. Basing underwriting and pricing decisions on accurate and up-to-date data can help insurers meet loss-ratio objectives and growth targets, as well as support a better customer experience for consumers by helping homeowners avoid escalating costs.

These insights for both peril-related and location-based trends can help insurers assess and price risks more accurately, better assess their book of business and improve their understanding of how by-peril trends are changing over time. To download the full 2021 LexisNexis Home Trends Report, click here.

In February 2021, Out Front Ideas with Kimberly and Mark, hosted its most attended webinar to date, featuring expert panelists and data around COVID-19 claims. This data provided valuable insight into current trends, claims development and the real impact the pandemic has had on workers’ compensation. 

At their September 2021 virtual conference, Elevate, Kimberly and Mark invited the expert panelists back, and they provided updates to the most comprehensive and current COVID-19 claims data available. Panelists were:

• Max Koonce – chief claims officer, Sedgwick
• Tim Stanger – vice president – claims, Safety National
• Alex Swedlow – president, California Workers’ Compensation Institute (CWCI)

CWCI Claims’ Data Trends

Currently, COVID-19 represents about 13% of all workers’ compensation claims. Since the last Out Front Ideas presentation of CWCI’s data in February, California’s claims count of infections has grown by 31% and fatalities by 51%. California represents about 13% of the U.S. population but makes up about 11% of infections and 10% of deaths. 

In the early days of the pandemic, California’s working-age population was used to estimate the overall effect and cost on the system. This group’s infections and fatalities have increased, representing three out of four infections and about one in every four deaths. However, death claims continue to be more prominent in the older age groups. The over-50 age group represents 54% of non-COVID-19 death claims and 72% of COVID-19 death claims. There is also a higher proportion of females represented in COVID-19 fatalities due to the gender mix in the hardest-hit industry, healthcare.

Healthcare and public safety workers still make up the majority of COVID-19 claims, including death claims. Since February 2021, healthcare’s COVID-19 claims have dropped from 31% of the total to 23%. In that same time frame, first responders’ COVID-19 claims increased from 17% to 23%, and transportation’s COVID-19 claims doubled from 6% to 12%.

CWCI has also seen a drop in claims reporting in the 14-to-30-day period on COVID-19 claims. This could be an early indicator of the emergence of long-hauler claims or a new trend in litigated claims for COVID-19.

Denial rates are also increasing due to the pandemic having a broad societal impact. Nineteen out of every 20 infected working-age Californians did not report an industrial cause. Other factors affecting compensability include essential employee status, presumption laws, outbreaks, shelter-in-place requirements, investigation and reporting requirements. 

In a sample of 20 insurance carriers and 13 public and private self-insureds, representing 65% of all fourth-quarter denials, three core denial reasons were cited: medical verification, non-industrial reasons and reporting errors. Medical verifications dealt with employees who had a negative COVID-19 test or did not take a required polymerase chain reaction (PCR) test. Non-industrial reasons involved claims where the employee was not exposed at work, withdrew the claim or failed to cooperate. Reporting errors were due to a submitted claim not representing an employee, or a positive test was not associated with industrial causation. Since medical verification and reporting errors are unique to COVID-19, if these two categories are removed from the fourth quarter figures, the adjusted denial rate, only including non-industrial reasons, drops from 37% to 12%. The non-COVID-19 denial rate is also 12%.

Safety National Claims’ Data Trends

As a leading provider of excess workers’ compensation for self-insured entities, around 40% of Safety National’s accounts fall into two largely self-insured industries: public entities and healthcare networks. Because self-insureds are not required to report data to bureaus, much of these two industries are likely not included in bureau data. These industries also represented the frontline workers more likely to be exposed to COVID-19, making up the majority of claims. 

Roughly 40% of Safety National claims came through as report only, and the other 60% make up the actual claim activity. Even with the Delta variant on the rise, Safety National’s COVID-19 claims are trending down as of August. This inconsistency with CWCI data could be due to municipalities and healthcare workers missing from the data, vaccine availability and safety protocols. 

See also: Mental Health in Post-COVID Era

Between January and August 2021, there hasn’t been a considerable change in the percentage of each age group’s makeup of the COVID-19 claims share. The 26-35 age group make up the largest portion at 29%. Consistent with CWCI data, the older age groups, age 56-65 and older, make up the largest portion of the death claims. Unlike CWCI’s data, male deaths continue to exceed female deaths in Safety National claims. 

The healthcare sector still makes up the largest portion of death claims but saw a 3% decrease in reported claims since February. From January through July, COVID-19 death claims increased from 0.36% to 0.60%.

99% of Safety National’s claims are under $100,000. Of those that exceed $100,000, 89% range from $100,000 to $1 million, and 11% are over $1 million. Safety National has seen a number of COVID claims with incurred over $1 million including death claims and extensive hospitalizations. There have also been a few claims with incurred over $3 million due to extensive complications that led to organ transplants, brain injury and even quadriplegia.  

Sedgwick Claims’ Data Trends

Most of Sedgwick’s COVID-19 claims occurred within their top three represented industries: retail, public sector and healthcare. Healthcare represents 46% of the total claims, remaining unchanged since the end of 2020. The public sector claims volume has increased, representing about 20% of the claims volume. Retail accounts for roughly 16% of the claims volume. These three industries are responsible for 80% of the total COVID-19 claims.

Sedgwick has received roughly 110,000 workers’ compensation COVID-19 claims since the beginning of the pandemic. That figure was closer to 75,000 at the end of 2020, with the majority of additional claims added in January and February 2021. The top five states reporting COVID-19 claims are California, Texas, Michigan, Florida and Illinois, with California representing roughly 28% of the total claims. 

7.4% of Sedgwick’s COVID-19 claims remain open, and 90% are closed, with an average paid cost of less than $2,500. The remaining 1.4% are litigated, which mostly involves denied claims. The average incurred cost is 75% lower than non-COVID-19 claims, and the duration is also 33% shorter than non-COVID-19 claims. 

Sedgwick’s COVID-19 claims are evenly distributed across all age groups with no definitive breakouts. However, the severity of cases was higher among the older age groups. 

96% of the claims have very nominal costs, involving little to no missed work. The high-dollar claims associated with complex cases and fatalities represented only 4% of the total claims but accounted for 81% of the costs.

See also: On COVID Vaccine: Do the Math

Of the claims involving workforce absences, 85% involved leave of absence, 14% involved short-term disability and 1% involved Americans with Disabilities (ADA) regulations. Roughly 20% of short-term disability absences were COVID-19-related. Still, the average cost on those was 29% lower than non-COVID-19 cases and had an average duration that was 65% lower than non-COVID-19 cases. California also had more than twice the number of COVID-19 leave of absence cases than any other state during the prior 19 months. 5.4% of COVID-19 leave of absence cases were denied. 46% of all COVID-19 leave of absence cases were from the retail industry. 

Telehealth has made incredible progress throughout the pandemic, with about 20% of initial evaluations or doctor visits performed virtually at its height. Prior to the pandemic, telehealth represented less than 10% of those visits. Its impact has resulted in a shorter duration of short-term disability in both surgical and non-surgical claims. It also resulted in less time away from work, and cases involving physical therapy telehealth saw a shorter duration versus in-person visits.

While vaccine reaction claims have occurred, they represent a tiny percentage of COVID-19 claims: only 0.2% of total claims. 91% were medical only, involved only a few days of missed work and were closed within 45-60 days. 31% of those cases have been denied, as this is a state-specific issue.

You can view the archived recording of this session here.

A while back, I took one of those personality assessments, and the results were no surprise. I’m a “fixer.” Even when having casual conversations with friends, I want to fix their problem. That’s actually a helpful trait when you work in an insurance agency or brokerage. There’s never a shortage of things that need fixing, or at least, improvement.

I’m a firm believer that one must always be looking for ways to make systems and processes easier and more efficient. It’s a key to survival in our industry, which arguably was one of the later arrivals to the digital age. Now, with all the tools at our disposal, we have no excuse but to improve. 

We’ve all found ourselves staring at a seemingly intractable problem and wishing we had help — even a sympathetic ear. That’s when a user group comes in handy. Imagine other people who use the same system as you and face the same frustrations every day. I know where to find those people: the Network of Vertafore Users, or NetVU. Our motto is “strength in members,” and it’s true that what benefits one, benefits all.

You know that feeling of accomplishment you get when you solve a problem? Multiply that feeling by a thousand when you solve a problem for everyone. The squeaky wheel gets the grease, not just for herself, but for others. Our industry is brimming with potential in the form of eager, motivated professionals who have a lot in common and are often working toward the same goal. When we put our heads together, we can accomplish so much more than any one of us can do in isolation.

My firm uses a Vertafore product called AIM for presenting a bound quote to a client, and it’s also our primary accounting system. Hundreds of other firms use AIM for pretty much the same thing, so you can bet that at any given moment dozens of us are looking at similar screens, performing the same tasks. 

They say the devil is in the details, and I think that saying was invented for insurance. There are many variables embedded in a single policy, and, when you’re talking about commercial E&S policies, it can get even more complex. More variables mean more opportunities for errors and omissions, which of course are the bane of every professional. 

That’s why the AIM product work group is so vital to our success. It’s where users come together to advocate not only for their own needs, but for the good of all users. In fact, “advocate” is one of the three pillars of the NetVU strategic vision. The others are “educate” and “community.” Much of my day is spent advocating for our clients, my coworkers and firms just like ours. Collectively, we make a difference when we put our heads together and chart a course toward simpler workflows, fewer clicks and a better customer experience.

The purpose of the AIM product work group is to regularly review all of the suggestions submitted by users and prioritize them to achieve the greatest impact. Individual users make suggestions, and community members vote for the suggestions they believe are the most important or urgent. The product work group meets monthly to review all the suggestions and vote totals and discuss with Vertafore product managers which ideas are possible. We share screens and run simulations, discussing the “what ifs” and available options. By the end of the meeting, we agree on the fixes and enhancements that will be put into action. Sometimes, we learn that an idea has already been contemplated and will be in the next upgrade or release. That’s the power of collaboration, because, if each of us operates in our own vacuum, we put ourselves and our agencies at a disadvantage, because we are unaware of new features that will not only make our lives easier but make things better for our clients.

The agenda runs the gamut, from things like finding a more efficient way to adjust installment payments when an endorsement is added to a policy to ensuring that two people working on the same record aren’t overwriting each other.

An underlying principle of the product work group is to let people know that their voice is being heard. To that end, we regularly revisit the older submissions that may have become more relevant over time. Maybe it was a feature that a lot of people hadn’t started using at the time, and it didn’t get many votes. But now the feature is rapidly gaining adoption, and more agencies are encountering the same problem. Our committee has the authority to escalate those issues and recommend immediate action.  

See also: Pressure to Innovate Shifts Priorities

I know I speak for other members of the product work group when I say that we get a great deal of satisfaction from these meetings. We are all “fixers.” We realize that we’re volunteering our time, our minds and our energy to the cause because it helps all users. It’s an unselfish act, really. And that seems counterintuitive in a competitive industry, right? On the surface, yes, but at the end of the day we do this because we have the best interests of the industry at heart.  

My husband and I have vowed to start every serious discussion with, “Do you want a solution, or do you just need me to listen?” We’re finding that’s also a great approach to problem-solving for agency management systems.

Being a leader is difficult, and even more challenging in a crisis. Given the great challenges presented by COVID-19, it can feel like we’re caught in a never-ending crisis, or at least one crisis after another.

As leaders, we have a responsibility to those we lead, and, though we may initially find ourselves thrown off balance by a crisis, the mark of a true leader is the ability to recover quickly and implement effective decisions. 

In my years leading both in business and the military, I have found that three key factors can help during crises: preemptive planning, building team trust and strengthening resilience.

Whether you are in the middle of a crisis, or waiting for the next shoe to drop, consider these tactics to ensure you are better-equipped to stay calm under pressure.

Don’t be caught off guard; plan preemptively 

Crises typically catch people off guard because they are unanticipated events. As leaders, we must expect the unexpected. The best way to thrive during a crisis is to have a solid plan in advance.

Meet with your team on a periodic basis for regular brainstorming sessions. Take time to consider all eventualities, especially those that seem improbable.

One of my favorite military exercises for preemptive planning is called “wargaming." Members of different staff sections and backgrounds attack proposed plans, assess vulnerabilities, identify risks and expose shortfalls. The plan with the greatest probability of success wins.

Take the strongest plans from these assessments to create a comprehensive plan of action, including backup plans and branch plans, so you can have protocol for what you and your team will do when the next crisis occurs.

See also: Insurance Leaders Use Digital for…

Build team trust through effective communication

To lead effectively during high stress and uncertainty, leaders must be able to trust their teams, and the team must trust the leaders.  

Trust begins with communication. Not only must a leader be able to make decisions and explain to their team the big picture of what must be done, they must also be able to listen to their team in real time and assess what people need to most effectively do their jobs.

A crisis makes communication much more difficult than usual, so it’s important to develop clear effective communication in advance. 

Make sure you are taking time to hear your team and provide channels by which they can report small problems before they become big ones. Also, provide opportunities for them to share what they know so everyone can grow.

When people trust that they are heard, they will more effectively communicate under pressure.

Strengthening resilience even in chaos

The truth is, nobody performs efficiently in chaos. But, by developing resilience, you can more quickly and efficiently come back to your center when thrown off by a crisis.

To develop resilience, there are two important considerations. 

The first is identifying limiting mindsets. During a crisis it can be very tempting to turn toward negative thoughts like “Everything is broken,” “This will never end,” or “This is all my fault.” Not only are these thoughts not true, they can inhibit your ability to rebound.

The second consideration is proper perspective. As a leader, you are setting the tone for proper response during a crisis. It’s important for you to manage your stress, mindfully communicate and magnify positivity. 

By developing resilience, you will be able to come out of the fog of chaos sooner, are able to take in information as it comes and can identify when there are opportunities to innovate and adapt to the changes at hand.

See also: How to Pursue Innovation in a Crisis

Crisis management going forward

Even though crises are unexpected, we can still do our best to prepare for when they inevitably arrive.

Through preemptive planning, you will know the first actions to take next time a crisis comes. If you didn’t plan for that crisis, then you’ll add it to your plan and be better prepared next time.

By developing trust with your team, you will forge stronger bonds that can withstand the strain of a crisis and more efficiently communicate to resolve problems as they arise.

With resilience, you will be able to effectively rebound from the initial shock and ensure proper perspective through the continuing challenges.

Though they are undeniably challenging, crises create many opportunities, even if it is only the opportunity for us to shine as leaders and set an example for our teams by staying calm and effective when everything around us seems to be falling apart. This isn’t always easy, but with practice we can all get better and take care of our most important asset, our team.

How much do most organizations spend to handle the average return-to-work case?

One 2015 U.S Department of Labor study found that the average human resources department serving at least 1,000 employees spends more than $4,800 just in labor costs per return-to-work case. And with the same study calculating an average of 31 return-to-work cases per year (and accounting for inflation), it is pretty safe to say that many are spending far more than they realize. 

These figures also do not take into account the lost productivity from handling paper-based forms, the manual generation of reports and missed details and deadlines that could put an organization at risk.

Fortunately, there are more options today to help teams not only take control of the return-to-work process but also to use that data to make decisions and changes to keep employees safe and the organization focused on its mission. 

One of the most powerful is the choice to digitize workflows with a flexible, no-code business process platform. So what would that entail, and how could an organization get started on the path toward digitizing the return-to-work process? 

How Digitized Processes Foster Employee Privacy and Efficient Workflows

When an employee gets sick or injured at work, several stakeholders get involved immediately, and many key decisions need to be made. There are likely also regulatory requirements and medical recommendations with their own timelines, restrictions and requirements. Needless to say, handling each of these facets manually requires a lot of effort.

In a typical return-to-work case, there are likely five different parties involved:

1. The employee-manager, who wants to ensure they properly follow all procedures and help their employee
2. The physician, who wants to ensure the employee is getting the medical care they need
3. The insurance adjuster, who wants to keep the overall cost of injury down  
4. The workers’ compensation (WC) team, who is there to investigate any workers’ compensation claims
5. The employee, who wants to get well and return to work

Combined, these parties work together to initiate and manage the return to work process, which could resemble a workflow like this:

Each of these stakeholders needs access to the right information at the right time to either meet their obligations or to support the employee during their treatment plan. The information also needs to be secure, accessible across a range of platforms and logically organized and intuitive to handle.

A return-to-work process facilitated with a no-code digitization platform not only gives the professionals that understand and manage the cases the power to design and maintain their own workflow, but it also introduces several other key benefits:

• Increased visibility, communication and accountability from across the return-to-work process allow for case-specific and trend analysis involving internal and external stakeholders.
• Integration and consolidation across the many systems and workflows — digital and manual — involved in managing the return-to-work case into one secure, modern solution bolsters resilience and ease of maintenance.
• Automated routing, rule-based decision points and built-in notifications help to ensure that the right people have the right information and processes to continue moving forward.
• Personalized web-enabled dashboards and employee self-service forms make accessing information easier.
• Automated integration of stakeholder input into centralized case repositories removes the need for separate document handling.

See also: Access to Care, Return to Work in a Pandemic

The Benefits of Digitization to Your Bottom Line

While the primary focus is always on how to support an employee as they get their treatment, return-to-work cases can also have a noticeable impact on an organization’s productivity and operating costs.

Nimble and Responsive Processes

If your current return-to-work process involves sorting through emails, texts and documents, the decision to digitize can immediately make a big difference for everyone involved. 

Instead of what seems like endless document management, duplicative tasks and manual entry, a digitized return-to-work process can:

• Standardize the initial claim form to help ensure all the necessary data is collected the first time.
• Enable triggerable actions, notifications and reminders to prevent bottlenecks and keep task owners accountable.
• Digitize and secure key records so all information stays confidential and compliant while saving on storage costs.
• Enable accessibility anytime, anywhere — online or offline —so all parties get what they need.

In other words, digitizing the return-to-work process can be a win for all those involved. Employees don’t have to manage mountains of paperwork or wonder about the status of their case. Internal staff members are empowered to design the processes that work for their business and make it easier to meet compliance standards. And all stakeholders can trust that their data and work are being kept safe and secure.

The Impact of Outsourcing

With just a cursory look, the idea of outsourcing return-to-work management may seem like the best financial and operational decision. However, digging deeper into the workflow and costs, this option can be less attractive than choosing to use a no-code process digitization platform in-house.

For example, though cost estimates can vary, outsourcing a return-to-work process can equate to hundreds of dollars per case. While some cases are complex and come with unique accommodations and planning, others are straightforward and involve limited case management and no accommodation actions. 

In either case, having a digitized, rules-driven platform can automatically route each claim based on its nature. In turn, an organization can not only help to ensure that the right parties get involved and the necessary tasks start but also that costly, less-personalized third-party services are replaced with a platform simple enough for process owners to design and manage on their own.

Bringing It All Together

Though every organization never wants to have to process a return-to-work case, they need to be ready to not only help their employees get the medical care, treatment and support they need but also to identify the means to do it as effectively, efficiently and productively as their condition allows. 

This is where a digitized return-to-work process flow delivers: giving process owners the tools, data and built-in document management and communications features they need to do their job while enabling the visibility that employees and other stakeholders require to play their part. The result is a means to replace a disjointed and inefficient process with one that puts the employee first while also making compliance, deterrence and overall management easier.

People don’t necessarily think about a career in insurance from the time they are five years old. So, how do we reach today’s job seekers? Many of them are less interested in job title and more interested in mission. They want to be sure that the organization they join shares their values, beliefs and passions in areas like diversity, equity and inclusion (DEI), the environment, social responsibility and governance (ESG), work-life balance and overall wellness.

The dramatic shifts in the workplace environment we’ve seen throughout the COVID-19 pandemic have brought the insurance industry to an inflection point. Employers who recognize the importance of these issues will capture new talent and inspire their current workforce. Those who ignore it risk losing talent and more.

At the Insurance Industry Charitable Foundation’s (IICF) 2021 Inclusion in Insurance Forum, we brought together more than 600 industry professionals, executives, DEI leaders and wellness experts from the U.S. and Europe. We focused our discussion on how we can turn our best ideas on DEI, mental health and wellness and the future of work into reality. Then we distilled the key findings from these conversations into a recently released white paper, “Diversity, Equity and Inclusion in Insurance: Advancing Ideas into Action.”

Here’s a high-level summary of what we learned:

DEI: All voices must be heard

The pandemic-inspired work-from-home revolution opened our eyes to inequalities across workforces, from limited Wi-Fi access and inadequate home workspaces to childcare and home-schooling dilemmas. Add in the civil unrest following the murder of George Floyd, and the importance of DEI became a moral imperative worldwide.

See also: The Broad Reality of Diversity

Yet promoting and developing DEI isn’t just the right thing to do. It also creates a stronger insurance organization. Companies with diverse management teams experience a 19% increase in revenue compared with less diverse companies. In addition, companies with greater diversity are 70% more likely to capture new markets.

Because of this, insurance organizations must go beyond simply offering programs. They must make DEI a part of their cultural fabric. Harriet Dominique, chief diversity officer, USAA, said it well: “DEI initiatives must be run as a business strategy just like every other strategy an association undertakes. It needs to be interwoven into everything the association does to realize the maximum benefits.”

To help insurance companies create a more inclusive future, IICF recently formed the IICF IDEA Council, which includes leaders in DEI and human resources from more than 40 organizations. Council members are tasked with working together to share ideas and best practices to find ways to collectively advance ideas into action – for the betterment of the entire industry. The IICF IDEA Council truly captures the heart of IICF’s mission by encouraging insurance companies to come together and put aside competition, with the understanding that what is good for the industry is good for every company in the industry. We’re focused on creating a diverse talent pipeline of future insurance professionals, creating safe and innovative workplaces and building on the valuable partnerships already established with nonprofits through IICF’s philanthropic efforts. 

We’ve already seen one idea start to take flight. IICF has partnered with Indeed to create an IICF Talent Hub where non-traditional job seekers can learn more about insurance industry opportunities, find job search resources, access testimonials from industry employees and view opportunities that might be a fit for them. 

There will be information for companies, as well. The IICF Talent Hub will soon host a webinar with a panel from AIG, Aon and Zurich focusing on the value of apprenticeship programs within the industry and the opportunities they can deliver. For many from underserved communities, finding a promising job can not only change their lives but also improve the lives of their families and potentially improve entire communities. The IICF Talent Hub will also serve as a resource for insurance companies looking to attract new talent into their organizations. Participating employers can post jobs along with detailed information on their company’s culture, ESG commitment and philanthropic work. Our hope is that the IICF Talent Hub will help inspire change and build a more inclusive workforce in our industry. 

Wellness: Employees want help achieving work-life balance

Work-life balance is one of the top areas where employees seek employer support. This balance and support are factors affected by DEI and contribute to helping employees achieve optimal wellness. In fact, 92% of respondents to the 2021 Willis Towers Watson Trends in Healthcare Survey said DEI is important to them when looking at an employer’s overall health and wellness strategy.

The shift to hybrid work environments has opened the eyes of senior management to the fact that flexible scheduling options can energize their employees’ health and happiness in the workplace and at home. It’s up to each organization to decide how they can best support their employees and provide flexibility. A smart way to start is by listening, which we’ve found to be a key factor in creating a culture of inclusiveness and alliance. The more leaders educate themselves and listen before they act, the better allies they become with members of their workforce.

The future of work: Ask your employees for their ideas

None of us know exactly what the future of work will hold. That’s why leaders should look to their employees for insight. As Fran O’Brien, division president, NA PRS, Chubb, puts it, “People will come up with fantastic solutions if you give them the opportunity.”

Today’s employees want to come to work as themselves and be accepted and welcomed. They also crave a deeper connection with their employers. Employees want their companies to be involved in philanthropic pursuits that matter to them personally. And they want to know how their organization’s corporate social responsibility strategy will create a better tomorrow for everyone. 

The deeper companies engage their employees in conversations around these critical issues, the more likely their employees are to point them toward a brighter future.

See also: Designing a Digital Insurance Ecosystem

Carrying our mission forward

These important conversations about DEI, wellness and the future of work didn’t stop at the IICF’s annual forum. We’re continuing the conversation in 2022 at our regional forums in Chicago, Dallas, Los Angeles, New York and London. The forums will help different regions identify inclusion strategies that will work best for their local areas and will provide opportunities for industry members in each region to not only be inspired by these important discussions but to connect and network with colleagues who share their passions. 

In a world where people want to work with mission-driven companies, our industry has a distinct advantage. We are here to serve people in their time of greatest need. By taking bold steps to build a more inclusive workforce, we will carry forward our industry’s noble mission while also building greater business success through more diverse voices and representation.

This article was written by Christian Mumenthaler, Group Chief Executive Officer, Swiss Re, for the International Insurance Society, a sister organization of Insurance Thought Leadership, under the umbrella of The Institutes. To see more IIS articles by Mr. Mumenthaler and other IIS experts, visit internationalinsurance.org.

The pandemic has accentuated the global insurance protection gap. Last year it reached a new high of USD 1.4 trillion, according to the Swiss Re Institute. This growing gap between economic losses and those that are insured exacerbates the lack of societal resilience, especially in emerging and developing countries.

As the protection gap in US flood insurance shows, even in developed markets there are risks considered uninsurable. Only one in six homes in the US has flood insurance. As a result, the cost of storm damage in an average year results in USD 19 billion in uninsured losses from flooding, compared to USD 5 billion in insured losses.

Digitalisation can be a great lever for re/insurance to reduce the protection gap. First, it opens a whole new spectrum for insurers to collectively cover risk – including those that are currently uninsurable. Second, digital technology can help to overcome the major obstacles for people and businesses to buy insurance: affordability, ease of access, attractiveness of the product and transaction costs.

More risks become insurable with deeper risk knowledge

Modelling of risk with more granular data and analytics provides exceptional risk information, allowing the insurer to rate a risk based on individual exposure and propose tailored solutions. In the case of flood risk in the US a generation ago, we had limited ability to determine the true flood risk for a location. Today, our fully probabilistic US flood model can identify differences between risks within the same flood zones. This means that insurers can offer flood coverage on a house-by-house basis even in areas which were previously deemed uninsurable.

Big data and Cloud computing enable new insurance models that were formerly not possible due to lack of real-time connectivity and access to vast amounts of data. One such new model is parametric insurance, where indicators for natural disasters and weather events are currently the main triggers. However, with the right curated data, other triggers can also be identified.  Instead of wind speeds or rainfall to protect farmers from crop failure, new parametric insurance is linked to indices that are not weather-related. For example, we have developed coverage for the loss of a tourist destination's attraction due to terrorism or travel disruption, using hotel occupancy or flight delays as triggers for payout. In this way, more of the currently uninsurable risks can also be covered.

Another new approach enabling more accurate risk assessment is real-time data on behaviour. Pricing based on risk behaviour can incentivise behavioural changes, mitigating moral hazard for risks that can be controlled by the insured.

For example,  our telematics app Coloride in the field of motor insurance can identify risky maneuvers, speeding habits and phone usage while driving, and offers post-drive coaching when the trip is over. Over time, Coloride assigns a risk score to each driver that an insurer can use to calculate a user-based premium. By offering a financial incentive to safe drivers and flagging risky behaviour, insurers encourage responsible driving, making roads safer for everyone. 

With more risk knowledge, insurers can offer more affordable coverage for behaviours that help mitigate risks. Accordingly, they can provide protection for risks they couldn't cover before.

Pave the way to ethical technology use

In essence, I see big data as the fertile ground to create new markets and to diversify risks that up to now were considered uninsurable. I think it's no surprise that data is sometimes referred to as the new gold. As the value of this intangible asset for re/insurers further increases, it is of utmost importance to ensure trust in the use of data, Artificial Intelligence and Data Analytics (AIDA) systems.

At Swiss Re we have implemented rigorous standards and frameworks on digital governance, data protection and privacy, transparency, conduct and analytical model validation. As a data-driven risk knowledge company, we are also actively addressing the ethical challenges of new technologies that regulators have only recently begun to tackle. 

Only responsible digitalisation can make a sustainable contribution to reducing uninsurability. That's why we also want to ensure fair treatment and inclusion beyond regulation. It is important to us, for example, to check that the underlying algorithms and models are transparently trained and calibrated, and lead to unbiased decisions. The digital responsibility principles we are developing include robust governance controls, such as continuous monitoring of automated decision-making processes to prevent individuals or specific group of individuals to be unfairly impacted.

Digitalisation reduces the barriers to access

To diminish the uninsurability of risks we must also tackle high transaction costs. The costs of distribution, administration and claims settlement swallow up a third of insurance premiums. The digitalisation of the value chain will eliminate many inefficiencies in the insurance market.

Faster and real-time assessment of policyholder's risks, taking out policies online and automated claims settlement drastically reduce the costs of insurance. Artificial intelligence and machine learning are bound to further accelerate processes. Affordability and effortless customer journeys pave the way to higher insurance penetration in the future.

Apart from changing the vertical processes of the industry, digitalisation is also ploughing up the horizontal distribution landscape. With partnerships, existing acquisition and distribution platforms can be leveraged by new channels and platforms – leading to a win-win situation in scalable ecosystems. The inhibition threshold to conclude an insurance policy embedded in a proven customer journey is significantly lower than when concluding an insurance policy alone.

Especially in developing countries, insurance distribution via mobile is a game changer for accessibility. Through mobile phones, farmers who do not have access to the internet can insure a crop, for example. When they suffer a loss, they receive a timely payout via mobile to get back on their feet. 

Some risks remain uninsurable

The ongoing technology-based shift of re/insurers from "detect and repair" to "predict and prevent" will bring great progress in dealing with risks before an event. The new approaches to prevention must not forget risks that are considered uninsurable. Of course, helping to mitigate an uninsurable risk is worth at least as much to the industry as covering it financially. Through smarter use of data, we see the risk landscape evolving rapidly, creating opportunities and new ways to help society benefit from risk knowledge. However, we must accept that digitalization cannot overcome all currently uninsurable risks, but with it we can take an important step towards societal resilience and reducing the protection gap.

The insurance industry’s sales and customer success teams are under pressure to deliver positive customer experiences faster than their competition. Customers expect an honest, positive experience in all end-to-end transactions like quoting, policymaking and policy activation. 

So, what makes a positive customer experience?

Nearly 80% of all American consumers point to speed, convenience, knowledgeable help and friendly service as the most critical elements of a positive customer experience, according to a recent report by PwC.  

Traditionally, an insurance company’s customer service team would answer every customer’s phone call and email and talk about how to do business with the insurer. That works, but the issue is scale.

Long wait times, language barriers and a high volume of client calls and emails have increased personnel costs and led to poor prioritization of cases and a weakened customer experience for many insurers. Today, rising costs and long wait times have led carriers and brokers to deploy insurance chatbots to meet increased demand.

Chatbots are changing the insurance industry’s customer service strategy:

• Close to 30% of life and property insurers have deployed chatbots in the last five years.
• Chatbots have become the leading application of AI in insurance for routine operations like customer service and lead management.
• By 2026, chatbots will fill 40% of all insurance industry customer service roles.

Whether rule-based or AI-enabled, chatbots lift resource constraints and drive customer service strategies across the insurance sector. As a result, chatbot deployment will remain a priority for insurers in the foreseeable future.

There are two main types of chatbots that insurers widely deploy: rule-based and AI-based. This article will consider rule-based bots.

Advantages of Rule-Based Chatbots

Rule-based chatbots follow a predesigned sequence of questions and commands that a given user will find helpful. To configure them, insurers must analyze data to anticipate what tasks users are most often trying to accomplish. 

Users will choose among various options (e.g., “Help me file a claim,” “Help me complete enrollment,” “How do I adjust my plan?”), and, depending on their selection, the chatbot will direct them to the right resource.

A recent survey by Drift discovered the most common frustrations for customers are websites being hard to navigate, simple questions not being answered and contact information for a business being too hard to find. Rule-based bots can improve the customer experience by directing a user to the correct information immediately after being asked.

When a customer asks an unprogrammed question to a rule-based bot, it can transfer the conversation to a human. This ensures the chatbot can resolve simple cases while freeing capacity to deliver better customer service for more complex issues.

See also: Integrating Chatbots, Policy-Handling Apps

Based on the responses given by the user and how the rules-based chatbot is programmed, the bot can either give a written reply back or trigger a task such as sending out an email, sending the user to a different page, scheduling a meeting or issuing an invoice.

Best Practices for Rule-based Chatbots 

High-quality, rules-based chatbots rely on rich data sets to respond to various user actions. For example, an insurer can plan different chatbot sequences depending on:

• Whether the user has visited the website before,
• What insurance product they’re looking at
• If the user has spent lots of time clicking through the website with little reading (“Are you having trouble finding something?”).

Rule-based chatbots are valuable for maintaining existing business. For example, let’s imagine a client’s policy renewal is coming up. Instead of going through a manual renewal process and answering tedious questions with the client, you could program the bot to recognize the logged-in user and ask the user if they want to purchase additional coverage or review their policy upon entering the website.

By effectively analyzing their user data, insurers can program a rules-based bot to appear with the right message, at the right time, to the right user, on the right device.

Rules-based chatbots are quick for insurance companies to implement but less flexible than their AI-enabled counterparts. This doesn’t mean rules-based chatbots are a poor choice. Every customer service team has three or four questions they get asked more than any other. Following the popular 80/20 rule, many insurers will be surprised to find how much time even a simple rules-based bot can save.  

See also: Will Chatbots Take Over Contact Centers?

By letting bots guide customers to answers for routine questions, companies can better deploy staff. Representatives can answer the more involved questions that require the human touch. Freed from the majority of queries that don’t, they can take the time they need to provide the wow factor in service.

My next article will cover AI chatbots.

 

The Supply Chain Fiasco Paul Carroll, Editor-in-Chief of ITL Now that ports have been identified as the major bottleneck in the supply chain dysfunction that is slowing the economic recovery and raising prices, a Twitter connection of mine offered a novel solution: “Assign all ships, trucks, yards, workers and rules to an app. Call it Port Simulator, and the world’s 15-year-olds will have [the supply chain problem] fixed in a week or two. It is literally [the premise of] every simulation game I’ve ever played.” If only the answer were that simple. In fact, it now seems the supply chain fiasco will run deep into next year, putting a crimp in the plans of almost every sort of business across the globe and requiring agility by those that insure them. continue reading > Majesco Webinar Register for this webinar to better understand the rapid shift and increased importance of data and analytics including contributory data, AI/ML models, and ecosystem partners that provide new insights across the entire value chain.  Register Now SIX THINGS Insurtech Is Much More Than Just Hype by Stephen Applebaum Despite Chubb CEO Evan Greenberg's claim that insurtech is just hype, the movement is real and important and exciting and valuable. Read More Boldly Insure Where No One Has Gone by Christopher McKeon, Ann Satovich, McKay Simmons, Christopher O’Connor and Brad Barger Commercialization of space is a once-in-a-generation opening.   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 Future of Digital Insurance Claims by Mark McNally We could be in danger of leaving the customer out of the equation in the rush to digitize and automate insurance processes. Read More Make Lemonade Out of Lemonade by Anthony Habayeb Lemonade's recent glitch sheds light on public fears about AI -- and about what must be done to keep AI innovation from slowing. Read More Long Live the Claims Adjuster! by Mark Breading There is tremendous momentum for leveraging technology in claims, but that does not mean the adjuster will become obsolete. Read More Innovation at the Point of the Customer by  Bobbie Shrivastav Innovation must focus on claimants, who deal with all sorts of requirements while going through perhaps the worst time of their lives. 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 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 OCTOBER FOCUS: Catastrophic Weather   In the face of catastrophic weather, insurers are doing what insurers do: helping identify, quantify and mitigate the risks, while making customers whole when disasters strike. They are also increasingly digging further into the roots of the problem. As you’ll see in the articles we’ve highlighted for this month, insurers are focusing more on how to raise the alarm about climate change and on how to make the world more resilient in the face of the challenges that we face today and that are surely coming. Keep Reading 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

Now that ports have been identified as the major bottleneck in the supply chain dysfunction that is slowing the economic recovery and raising prices, a Twitter connection of mine offered a novel solution:

"Assign all ships, trucks, yards, workers and rules to an app. Call it Port Simulator, and the world's 15-year-olds will have [the supply chain problem] fixed in a week or two. It is literally [the premise of] every simulation game I've ever played."

If only the answer were that simple. In fact, it now seems the supply chain fiasco will run deep into next year, putting a crimp in the plans of almost every sort of business across the globe and requiring agility by those that insure them.

In many ways, the supply chain trouble traces back decades, to companies' efforts to make production as efficient as possible, keeping the minimal amount of supplies on hand. That "just in time" approach is great -- until it isn't. And it wasn't, as of the early days of the pandemic.

As the New York Times explains the problem, "Factories in parts of the world where a lot of the globe’s manufacturing capacity sits — places like China, South Korea and Taiwan as well as Southeast Asian nations like Vietnam and European industrial giants like Germany — were hit hard by the spread of coronavirus cases. Many factories shut down or were forced to reduce production because workers were sick or in lockdown. In response, shipping companies cut their schedules in anticipation of a drop in demand for moving goods around the world.

"That proved to be a terrible mistake. Demand for some things — restaurant meals, trips to vacation destinations, spa services — indeed cratered. But Americans took the money they used to spend on such experiences and redirected it to goods for their homes, which were suddenly doubling as offices and classrooms. They put office chairs and new printers in their bedrooms, while adding gym equipment and video game consoles to their basements. They bought paint and lumber for projects that added space or made their existing confines more comfortable. They added mixers and blenders to their kitchens, as parents became short-order cooks for cooped-up children. The timing and quantity of consumer purchases swamped the system."

When factories tried to catch up with demand, the lack of shipping capacity meant that many products just piled up in warehouses, and the problems compounded from there. Truck drivers and dockworkers in the U.S. were stuck in quarantine, as dozens of ships were forced to anchor offshore Los Angeles, Oakland and other ports and wait days to unload and load again. The nearly week-long closing of the Suez Canal exacerbated the delays, as did COVID-related closings of major ports in China.

Many companies have responded to the supply chain delays by ordering extra products, adding another layer to the problem.

By now, we have a full-on mess, centered on a lack of available shipping containers. They are the building blocks of global shipping, and there just aren't enough of them in the right places.

Some hundreds of thousands of them, for instance, are currently sitting on 79 ships off Long Beach, Calif. (holding some $8 billion of merchandise). There are plenty of cranes available to offload the containers -- but nowhere to put them while waiting for trucks to transport them to their destinations. (Port tarmacs, usually at 60% to 80% capacity, are now at 90%, according to the Wall Street Journal.)

There aren't enough trucks to come get the containers, anyway. Because ports can't take any more containers, many trucks have nowhere to put their empties -- so containers sit idle on truck chassis, taking both the container and that chassis out of circulation.

Ryan Petersen, the CEO of Flexport, a logistics company, said he took a three-hour loop through the port of Long Beach on Thursday and, out of hundreds of cranes, counted only seven that were even operating.

"The terminals are simply overflowing with containers," he said, "which means they no longer have space to take in new containers either from ships or land. It’s a true traffic jam."

All levels of government have talked about trying to help alleviate the supply chain problems, but the efforts have mostly been talk to this point. Probably the biggest change thus far is that Long Beach will allow logistics yards to stack empty containers four or even five high, rather than the current two. Petersen says that change will "free up tens of thousands of chassis that right now are just storing containers on wheels. Those chassis can immediately be taken to the ports to haul away containers."

But tens of thousands won't solve the problem of hundreds of thousands sitting just offshore -- and with more on the way. It will likely take many months to smooth over the container issue.

In the meantime, new disruptions will arise until the pandemic finally subsides. 4.3 million Americans quit their jobs just in August, as people reevaluate career choices in what some are calling the Great Resignation. Their absence will cause pockets of issues with supply and transport. Meanwhile, more than 735,000 Americans have died from COVID, and it is still taking an average of more than 1,650 lives a day.

The supply chain issues will force major changes in how business is done. In the short term, all sorts of companies will have to adapt to shortages and come up with workarounds in transportation, factory scheduling, retailing and more. In the long run, because businesses are unlikely to go back to the super-lean approach to supplies and suppliers, at least not for the foreseeable future, they will have to rewire transportation, warehousing and logistics operations.

The changes will, of course, require adaptation both in the short run and in the long term by all those that insure these massive operations. The persistence of the supply chain issue will also create opportunities to provide risk-management expertise so that companies can be much more resilient in the face of the next global challenge than they were at the outset of this one.

In the meantime, we consumers will all just have to muddle along in the face of shortages. I don't have a 15-year-old to turn loose on the problem, but I do have a 25-year-old who is world class at Tetris. Maybe I'll get her thinking about Port Simulator and see what she comes up with.

Cheers,

Paul

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P.S. Here are the six articles I'd like to highlight from the past week:

Insurtech Is Much More Than Just Hype

Despite Chubb CEO Evan Greenberg's claim that insurtech is just hype, the movement is real and important and exciting and valuable.

Boldly Insure Where No One Has Gone

Commercialization of space is a once-in-a-generation opening.

Future of Digital Insurance Claims

We could be in danger of leaving the customer out of the equation in the rush to digitize and automate insurance processes.

Make Lemonade Out of Lemonade

Lemonade's recent glitch sheds light on public fears about AI -- and about what must be done to keep AI innovation from slowing.

Long Live the Claims Adjuster!

There is tremendous momentum for leveraging technology in claims, but that does not mean the adjuster will become obsolete.

Innovation at the Point of the Customer

Innovation must focus on claimants, who deal with all sorts of requirements while going through perhaps the worst time of their lives.