Participating in ITC2021 was a blast! It was great to see so many people in person for the first time in a couple of years. But aside from the joy everyone was experiencing in just being together, there was a serious undercurrent to the event. In fact, as I polled individuals on their impressions of the event, many discussed how the participants came with a mission... a purpose… intention… and were serious about fulfilling their individual missions by capitalizing on the convergence of so many innovative companies and thought leaders.

If nothing else, ITC2021 demonstrated that innovation is alive and well in insurance, and the transformation of the industry is accelerating.

In his keynote, Evan Greenberg from Chubb stressed that all the technology advances do not change the fundamental nature of the insurance business – it is still about “the art and science of taking risk.” I couldn’t agree more. In fact, I have made similar statements myself.

Looking at the P&C industry, one of the overarching trends is the move to more and more specialization. This translates into a deeper understanding of the risks faced by individual and business customers – not just in the large pool but at a micro-segmentation level, as well. The insights and experiences about those risks translate into new products and coverages; enhanced loss control engineering and safety advice; and specialist firms to distribute, underwrite and service the products. This is not to say that the multi-line, general purpose companies will falter. On the contrary, they are participating in this general trend in each of the segments they serve.

Wait – I was supposed to be talking about the cool technology solutions and the innovations that are changing the industry, right? How did I get off track? As I see it, the amazing advances in technology, the innovative applications of technology by insurtechs and others, and the emergence of startups are actually quite consistent with and supportive of the increasing focus on risk expertise (and the value of insurance professionals). We are not going to automate away the roles of agents, underwriters, adjusters and others.

See also: Tomorrow’s Insurance Is Connected

There is no question that I was very excited to learn about the evolution and success of many insurtechs, discover new entrants with interesting propositions and track the innovations that incumbent players are incorporating into their solutions. They are catalysts for industry transformation. And they do offer great potential to automate tasks and workflows, provide new insights to improve decision making and provide opportunities for insurers to create new value propositions for customers.

But in the end, this industry is all about the people. Technologies will augment human expertise to improve efficiencies, enable new products and design better ways to sell and service insurance. But the strengths of the industry have always been its people and its passion for helping individuals and businesses to address the risks inherent in their lives and business operations. That passion was evident in the many serious and purposeful discussions that took place over the three days in Las Vegas.

At Insuretech Connect last week in Las Vegas, I was struck by all the love being shown for independent agents. Weren't insurtechs supposed to disintermediate agents and put them out of business, not fall all over themselves to provide the best technology, the best service and the best anything else that agents could want?

How times have changed.

As Joe Schmidt, a fintech deal partner at venture capital firm Andreessen Horowitz, wrote in a recent note: "The growth and success of independent agent distribution — not direct marketing — has been the single most important trend in insurance over the past decade."

He says that, in the past, "the real money was made by the insurance company through profitable underwriting. But 'where the real money is made' has shifted dramatically over time, from underwriting to distribution, as evidenced by higher multiples on brokerages vs carriers and the percentage of premium paid to agents for acquiring customers."

He says the reason for the shift is that customers are demanding more choice, and they know that working with an independent agents provides more options than they'd have with a captive agent.

"As of 2019," Schmidt writes, "nearly 90% of commercial, 50%+ of life, 48% of homeowners, and 31% of auto policies were sold by independent agents — and the numbers continue to grow faster than not only the entire market, but also outpacing direct sales growth over the same period."

He notes that Nationwide converted its base of more than 2,000 captive agents to independent agents in 2020 and expects a wave of innovation to support independents, of the sort I saw last week in Las Vegas.

"Large businesses, like Vertafore ($5.4B), Applied Systems ($1.75B), iPipeline ($1.63B), have targeted this segment," Schmidt writes. "More recently, many next-generation carriers (notably Hippo, Swyfft, Coalition, Pie) have utilized independent agents to distribute their product, and others have launched strategies after starting direct to consumer (Ethos, Bestow, CoverWallet)."

But, he says, "this is still the early days of independent insurance agents." He expects companies to emerge that will "continue to improve and streamline workflows around aggregation, marketing, sales, payments, compliance, and more."

The latest quarterly insurtech report from Willis Towers Watson supports Schmidt's analysis about the growing importance of distribution. It says that "driving efficiency in insurance distribution continues to be a major priority for investors. This quarter, 55% of deals involved start-ups focused on distribution (i.e., digital brokers, MGAs and lead generation). In addition, 10 of the 15 insurtechs that raised mega-rounds this quarter focused on improving insurance distribution, with varying approaches."

While the report noted a wide variety of ways that insurers are trying to improve distribution, it singled out wefox, the Germany-based digital insurer, which "relies heavily on local agents for policy distribution but has built efficiency in other ways by automating nearly 80% of administrative processes."

Seth Rachlin, the global insurance leader at Capgemini, told me at Insurtech Connect that, like wefox, "Carriers all want to supply the tools to help agents. It's not like the old days where someone gave a territory and wished you luck."

So, independent agents have gone from being treated as relics of another era to having carriers and technology companies competing for their attention.

Not bad.

Cheers,

Paul

As part of this month’s ITL FOCUS on catastrophic weather, we spoke with Christopher McDaniel of the Catastrophe Resiliency Council on how the industry is banding together to establish data standards that will help tackle the problem.

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ITL:

Let’s start at the beginning. Please tell us a bit about how the Catastrophe Resiliency Council got started.

McDaniel:

There was a precursor project, it wasn't really an organization, that started in 2020 and lasted about a year. It was something that a whole host of industry players asked us at The Institutes to do. Once that was completed, we established the council in May.

When everybody sees the name CRC, they think resiliency is outwardly facing to the consumer, but we're really not doing anything consumer-facing. Everything we're doing is to prepare the industry. The key thing we're working on now is catastrophe modeling standards.

At the moment, there are three or four major vendors out there that provide catastrophe modeling tools, but each has its own language, The carrier has to exchange information with the broker, and a broker has to exchange information with the reinsurer. It's just like the Tower of Babel. We're all speaking different languages.

The result is a process where participants have to manually translate the data from one format to another format. Sometimes, there is more than one translation, which is kind of like making a photocopy of a photocopy. You wind up losing data over time.

So, we’re driving the adoption of a standard.

ITL:

Standards can be tough, in my experience in the high-tech world. Everybody wants a standard as long as they’re the one who gets to set it. How has the experience been for the CRC?

McDaniel:

The standard was created in Europe by a group called Oasis. They created an open standard – which we spent that first year validating, on behalf of the industry, to make sure it was a good standard. Now what we’re doing is promoting a universal translator, if you will. Every language can be translated to that open standard, so we don't lose the fidelity.

CRC didn't create the standard, and we didn't create the translation tool, but we're the ones driving the process of getting the standard adopted and getting carriers, brokers and reinsurers certified. We want everybody certified, so everybody in the industry knows that if they're talking to another organization then they’re all speaking the same language.

ITL:

Once you have everybody speaking the same language, how does that translate into practical effects?

McDaniel:

Ultimately, the idea is to have a common database that everybody's using. It will be protected, so everybody knows that their proprietary information won’t be shared. But we’ll do things like create a database for exposures. We’ll go into common standards for contract language, to give everybody a foundation. Once we get everybody on the same page, we’ll be able to do so many other things.

ITL:

I assume a lot of operational efficiency will result.

McDaniel:

Yeah, there are armies of people at the carriers, brokers and reinsurers doing nothing but translate back and forth manually – while that photocopy gets blurrier and blurrier all the time.

ITL:

And are all the various entities playing nice with each other thus far?

McDaniel:

Yeah, they actually are, because this is not something that we're pushing on them. This is something the industry is asking for from us. The challenge is getting the vendors that have the proprietary standards. And we have three of the major ones on board.

ITL:

Are you tackling hurricanes first, or what is the road map in terms of the kinds of disasters you’re modeling?

McDaniel:

The approach is more by type, and we’re starting with property – whether that means a hurricane, earthquake, fire or whatever.

Eventually, we’ll get to other types, including cyber.

ITL:

How can people track or even participate in what you’re doing at the CRC?

McDaniel:

As an educational thing, we have something called the Catastrophe Resiliency Network. There’s a podcast and a news magazine. We just finished a podcast that’s going to be released in the next week or two and have five or six more that we're going to be recording around catastrophe modeling and how catastrophe changes affect industries.

ITL:

Thanks for taking the time. Best of luck. And please keep us apprised of your progress.

Introduction

Does the word "surgery" make you cringe as you consider the negative thoughts associated with the realities of surgical procedures? Despite advances in modern medicine, being on the receiving end of surgery is not without significant risk. This is why the concept of informed consent is embedded in every medical consent form patients are required to sign as a means of acknowledging and accepting the known or potential risks of the procedure. 

Even when the surgical outcome appears to have been successful, there is a risk of experiencing complications. Unfortunately, the outcomes of surgical procedures vary for many different reasons. Traditional methods of surgery achieve only average results in total when compared with the universe of surgical procedures profiled in MDGuidelines from the Reed Group, which provides average healing times for most procedures. The healing times are expressed in the expected duration of days of disability following the procedure. 

Traditional approaches will never achieve better-than-average outcomes in this model. The rising complexity of medical research and medical technologies offer the promise of improving surgical outcomes. However, without changing preoperative education and care, this promise will not materialize, and costs of surgical procedures will likely outpace medical cost inflationary trends. There is a need for innovation and breakthrough solutions to achieve cost containment in the way in which patients, employers, health insurance and primary care physicians and surgeons approach surgery differently. 

How Surgeries Affect the Workplace 

Surgery affects 5% to 10% of the population in any given year. Virtually 100% of employers have one or more employees undergo a surgical procedure each year and, thus, experience the costs related to outdated surgical approaches. In one estimate, over 50% of healthcare expenditures were the result of surgical procedures. And that analysis did not include the cost of common surgical complications, including opioid painkiller addiction, which affects 9% of post-surgery patients.

Employers are not immune from the complications and risks when employers choose elective surgical procedures outside the sponsored health benefit plan. Employers have a vested interest in employees receiving the best care when surgery is required for musculoskeletal, women’s health, cancer or other health reasons. The incentives may vary somewhat depending on the setting of healthcare benefits. Yet, the end goal remains the same: helping employees to navigate a scary, expensive time and to get back to life as soon as possible. 

The Impact of Suboptimal Surgical Outcomes

Suboptimal surgical outcomes have consequences that are borne by both patients and their family members, as well as their employer organizations. The major adverse impacts from suboptimal surgical procedures include the following representative examples summarized below:  

What Are Enhanced Recovery After Surgery (ERAS) Protocols? 

In the field of surgery, over the last decade advanced, innovative providers have separated themselves from their peers by implementing minimally invasive surgery as part of broader Enhanced Recovery After Surgery (ERAS) protocols. Such protocols can take many forms and include interventions before, during and after surgery. ERAS represents the entire surgical experience re-imagined with patients and their recovery front and center.

See also: 2021: The Great Reset in Insurance

Enhanced Recovery emerged in Europe over a decade ago. Since then, over 4,000 journal articles have been published enumerating the benefits of this approach across nearly every procedure type. ERAS protocols often include:  

• tailored nutrition pre-surgery rather than lengthy fasting
• multiple, non-addictive pain medications to get -- and stay -- ahead of surgery pain
• techniques to prevent common surgical complications
• strategies to improve the patient’s ability to return to normal life function sooner

Patients experiencing ERAS-based care demonstrate:

• 30% shorter hospital stays
• 50% fewer complications
• 90% reduced opioid use
• Thousands of dollars in savings per surgery
• Faster return to normal life, including work

At a time when our society desperately needs solutions to the opioid crisis, ERAS provides one. In fact, it changes the picture entirely. What if you could change the underlying dynamic and prevent the first dose exposure to opioids? That’s exactly what ERAS does.

Surgeons, anesthesiologists and surgical teams have come together across disciplines to implement these care pathways in countries around the world, including the U.S. However, the adoption has been inconsistent. 

As the writer William Gibson once said, “The future is already here—it’s just not evenly distributed.”

Three primary systemic barriers explain the lagging levels of adoption for ERAS protocols:

1. The reluctance of patients to ask their doctors hard questions about alternative treatments, less invasive surgical procedures and non-opioid pain management strategies
2. Conventional wisdom and long-standing industry orthodoxy
3. Slow adoption of innovation in many organizations, especially smaller and rural healthcare centers

SIDEBAR:  Opioid First-Dose Prevention 

A major benefit of the ERAS procedures has been the measured reduction in the amount of opioid pain medication both prescribed by surgeons and consumed by patients. In fact, adherents to ERAS protocols have shown verified reductions of up to 90% when compared with surgeries performed using standard/traditional pre-operative procedures. These evidence-based clinical findings are significant in that ERAS provides a direct pathway to reducing exposure to prolonged use of opioid pain medications. In turn, ERAS can reduce the probability of patients developing an addiction. Moreover, the potential downstream ripple effect of opioids being consumed by other family members is likewise reduced. ERAS protocols are a proven strategy for effectively preventing the first dose of highly addictive opioid pain medications and all the resultant potential side-effects, complications, misuse and addiction. 

Consider the Benefits of Surgical Quality Analysis

Through a surgery quality analysis, Goldfinch Health processes medical (including pharmacy) claims for one to three years and produces a summary of areas to watch and opportunities for improvement in one of the highest-cost areas of healthcare and employee productivity: surgery. 

The picture that often emerges is one of not only opportunity but urgency. For example, Goldfinch recently reviewed a population that showed during COVID-19:

• 18% reduction in major musculoskeletal procedures (back, hips, knees, shoulders)
• And a 25% increase in steroid injections into joints

Of course, this means members in this population have put off surgery. But, in the end, most of those cases are inevitable. There will be a knee replacement or shoulder procedure needed. Due to the time, stress and treatments that have occurred in the meantime, those members will report for surgery with diminished physical and mental health. It truly is a powder keg waiting to blow. 

Another group believed strides had been made related to opioid use. A deeper look at the data revealed progress had been made—but not in post-surgery opioid use, where painkiller use remained three times higher than national guidelines recommend. 

Considering surgery often touches more than 60% of high-cost claimant cases, these insights provide the vision to act before healthcare and productivity costs overwhelm your budget. 

See also: Mental Health in Post-COVID Era

SIDEBAR: Representative Insights Derived from Surgical Quality Analysis 

This surgery quality assessment by Goldfinch Health includes assessment of:

• Outpatient vs. inpatient procedures (highlighting the potential for 40% (or greater) cost savings with outpatient procedures, and the formula for getting there)
• Large incision (“open”) surgery vs. minimally invasive surgery approaches
• Post-surgery opioid use  
• Surgical complications benchmarked against industry standards

Conclusion: Who Can Benefit from a Surgical Quality Analysis? 

Surgical quality analysis is a proven strategy for self-funded employee benefit plans for private and public employers as well as union-sponsored health plans. Employee benefits administrators and trustees will gain insights from engaging in a surgical quality analysis. A surgical quality analysis of self-funded claims data will offer key insights as to instituting modern medical case management strategies to optimize healing and achieve cost containment strategies. In short, self-funded organizations seeking to improve the outcomes of surgical procedures to reduce patient safety risks, promote faster healing, expedite return to work, decrease lost work time and associated lost productivity and achieve cost containment can expect to find value in a surgical quality analysis.

I was perusing LinkedIn and came across this post from Emily Glanz, a commercial insurance adviser at Cottingham & Butler in Iowa:

"A few weeks ago, we had a death in our family. My husband’s 98-year-old grandpa passed away. We were sad, but we celebrated his long and happy life. Grandpa was a creature of habit and ate at KFC every day for the last 10 years until he passed away.

"One day after he passed, KFC in Dubuque, IA reached out to express their sadness. Taking it one step further, they updated their sign facing the busy street to pay tribute to Grandpa. Our family was so touched."

I’ve worked in a client-facing role since the age of 16. I like to think I understand the power of strong customer service, client empathy and the resulting loyalty that comes with that… BUT this is a shining example of creating loyalty. This is powerful customer-service. Kudos to you, KFC. And thank you.

What a wonderful story and a lesson for the insurance industry, especially agents.

Growth comes from acquiring business; profitability comes from retaining existing business.

See also: Latest Insights on Customer Behavior

Customer loyalty, and thus retention and profitability, isn’t driven by cheap prices, AI bots, big data or nifty phone apps. Loyalty springs as much (or more) from the heart as the mind.

One of the first blog posts I ever wrote 4½ years ago was about customer loyalty. I explained why I had been with the same insurance agency since 1973. Here is my story:

How Do You Create Customer Loyalty? Why Do Consumers Stay With a Particular Agent or Carrier for Years?

Insurers must regain competitive ground in the digital race for the customer, and all roads that make sense … lead to cloud adoption.

Growing ransomware attacks should be the weight that tips the scales. T-Mobile was breached just recently. Half of its customers (105 million) now have their Social Security numbers, names and birthdates exposed. The information is already up for sale. Last year, insurers and healthcare systems were hacked in greater numbers. Ransomware victims across all industries paid out $370 million in cryptocurrency in 2020, 336% more than in 2019.

Vigilance in cybersecurity requires a different approach

Cybersecurity is not optional. It is table stakes. The issue is no longer all about keeping the data and systems safe. It is about looking out for and being able to nip potential vulnerabilities and hackers in the bud, before the hack actually happens. Vigilance is not reactive, it is proactive.

Pre-cloud security matched pre-cloud threats.

It used to be that the typical trajectory of a security exercise within a company would be periodic business continuity and disaster recovery checks. You might also have audits that are mandated by a public service organization or you might have specific customers that request to be in conformance with SOC audits, etc.

That type of security practice has spun 180 degrees. What changed?

Anyone can hack now.

The increasing consumerization and democratization of data and technology tools has made nearly every citizen in the world a potential hacker. Any interested party with a high IQ is potentially someone who can hack into your systems. The new urgency and vigilance is no longer about conforming to audits, conducting periodic checks or conforming to state or public-sector-driven regulations. It’s about continually being secure by examining your own insecurity. Cybersecurity is an enabler to doing business.

See also: Why Cloud Platforms Are Critical

The frequency of hack-possible events is making security far more complex.

Insurers and vendors all have security measures in place. But cyber hackers are twice as fast at breaking solutions as the solution providers are at updating their security tools. This makes cybersecurity a process rather than an event-driven initiative. Hackers have also improved in their ability to handle complexity. Where hacks come from and who can be a perpetrator is always expanding. Corporate security teams are doing their best, yet they are still sometimes scratching their heads, asking themselves, “Just which part of our data and systems do we protect?” And the answer, of course is, "all" and "everything." Nothing is truly safe. Cybersecurity is no longer a point-in-time exercise, and it has to cover every part of your data and platform framework. 

Answer = Cloud

Public cloud vendors answer these two related problems: expansion of the hacker community and the increasing complexity of protecting against hacking events. With public clouds, the large cloud vendor is doing the job of security for all of us — proactively taking responsibility for their customers.

Microsoft Azure is a great example. Microsoft invests more than $1 billion annually in cybersecurity research and development for Azure alone. This doesn’t include Microsoft Office or any of their own products. Microsoft Azure has more than 3,500 dedicated security experts. Their job, day in and day out, is to counsel their customers and close gaps. “Here is how well-designed your technology stack is against cybersecurity, and this is what Azure can do for you.”

With the cloud, security is job zero

If an insurer gets one takeaway from this blog, it should be this: Cybersecurity is job zero. It is not an add-on.

When we talk about securing a customer’s stack, there are six key things that we should do for them. These principles are universally adhered to:

1. We implement a strong security foundation. We must begin with role access. No matter who you are, your role is given only a certain sphere of access, and that is all you can access. As a cloud software vendor, we ensure that level of identity foundation.
2. Insuring traceability. A traditional issue in security was that, until three or four years ago, when hacks happened, it could take months for companies to figure out the root cause. What was hacked? What was the precise level of leakage, especially in insurance companies? The delay in understanding could lead to billions of dollars in loss. Insuring traceability, which includes monitoring alerts and audit action and changes to your environment, happens in the cloud in real time. You don’t need to wait two months for some IT guy to get into the old logs and figure out what has been lost or hacked. Your systems have real-time traceability.
3. Security must be applied on all layers. When you consider an organizational stack that resides in the cloud, that includes a client’s network, their servers, their websites, their applications and databases. Everything is now in the cloud. When we say that we manage their security, we apply security at all of these layers as well. We aren’t just securing their database or their front end.
4. Data must be protected both in transit and at rest. This is a modern, cloud-driven cybersecurity attribute. If you think of a traditional insurance organization, volumes of data are stored in their archival systems, such as their legacy administration and billing systems. This is data at rest. But an incredible amount of data is in constant transfer between the insurer and brokers or the insurer and customers. That is data in transit. What a cloud-native environment does is to protect data both in transit and at rest.
5. Least access as privilege. This is a logistics issue related to role-based access. Another traditional problem within internal IT shops has been that there is not always transparency if an employee leaves or is fired. HR may take 24 hours before notifying IT.  IT takes two hours to deactivate that person’s access from the respective systems. By this time, security has already been compromised. All cloud systems function on a different principle — the principle of least access privilege. A person only has access to the portion of the system that they are supposed to touch. There is no universal access. The CFO doesn’t automatically get access to everything. Cloud security functions on the basis of least access privilege. If a person needs greater access, they have to ask for it and gain permission before it is granted. This is paradigm shift in security that the cloud has brought about.
6. Security guidance through the well-architected playbook. Let’s say that your organization moves to the cloud to improve their digital presence and manage their data more effectively and to save additional expense. What you’re getting is so much more than that, though. Integrated security is the “value-add.” You’re receiving protective security and security expertise. This is life in the cloud. When you sign up, you get measured for how secure your full system is. The playbook has security design principles that will allow you to measure your system security. “Here’s how well-designed your systems are, based on key design principles. Here are some gaps that you need to fix.” The playbook also provides things like incidence response simulations. It has investigation policies and processes available as templates. It is a ready-to-use "security cookbook" supported by subject-matter experts. It is less prescriptive and more actionable. “Here’s where you are. Here is what needs to happen for you to get where you need to be.”

And if that’s not enough…there’s the financial picture

Cybersecurity costs money. If you are investing in internal security, you will likely spend more than if you are letting your environment be managed as a cloud-native environment where security is a part of the solution. The cloud hands you cost avoidance as a part of your business case or return on investment. The cloud provider is taking on this responsibility. This is intentional cost-avoidance on the part of the insurer.

In data-intensive organizations, such as financial, healthcare or insurance organizations, there is a significant amount of leakage every year due to security breaches. These aren’t necessarily data thefts; they are losses that are just eliminated by the cloud. The razor-sharp, stringent data security mechanisms that are in place for cybersecurity naturally fix other data leakage issues. This is an unintentional cost-avoidance, but it happens nonetheless.

Which brings us to our last point. The same real-time monitoring that can be used for security purposes will even help insurers to adopt better real-time monitoring for any issue. If you extend the concept, moving to the cloud forces the organization to whip its data and processes into shape enough to migrate, then the cloud takes over. The simple process of preparation is a beneficial exercise. Every aspect of cloud migration makes an excellent case for doing it now.

See also: A Novel Approach to Cybersecurity

For a broader look at many of the key benefits of cloud adoption, be sure to view the Majesco and Microsoft webinar, New Normal: The Catalyst for Cloud Adoption, or read Denise Garth’s interview/blog with Manish Shah, President and Chief Product Officer, Majesco, and Jonathan Silverman, Director of Insurance Industry Solutions, Microsoft, titled Majesco CloudInsurer Plus Microsoft Azure: A True Insurance SaaS Platform.

As consumers and the general public become more actively involved in environmental and social causes, organizations are responding by committing to written environmental, social and governance (ESG) policies or practices. Driven by investors and activists, ESG has served to measure an investment against a wide range of behaviors, such as a company’s carbon footprint, ethical sourcing standards or the handling of diversity and inclusion. 

Yet having an ESG stance is not enough. No company will be truly successful adopting ESG principles unless they understand that their responsibilities to their community encompasses far more than just making money for their stockholders. Taking any stance related to environmental or social concerns requires an organization-wide approach to think about nearly every aspect of the business. Not doing so will likely result in an ineffective program that opens the door to reputational damage that can affect everything from attracting customers and employees to the long-term sustainability of the business.

Where the Risks Are

Many companies believe that the function of an ESG stance is to garner shareholder and public favor. That may be true, but the opposite is also true – ESG principles, if not adhered to, could well land you in the spotlight for the wrong reasons. For example, a subsidiary of a well-known company settled numerous shareholder derivative lawsuits over its handling of sexual harassment claims. Another lawsuit brought by a nonprofit organization accused tech companies of sourcing cobalt from mines that employed child labor in the Democratic Republic of Congo. The era of companies being able to sweep bad behavior under the rug is soon to be over. 

As serious as these oversights are, so is the lack of cohesion with the organization’s business strategies. For too long, companies have been allowed to look profitable when the cost of using public assets – such as clean air and water — has not been property accounted for in determining profits. Any ESG approach should guide business decisions, not live apart from them. ESG should be giving organizations a strategy for setting objectives. When ESG is a statement and not a core operating principle, the opportunity to strengthen operations through an ESG approach is missed.

So, too, when the focus is too narrow. ESG should not be considered solely as a guideline for meeting compliance requirements. While conveying the company’s practices as they relate to compliance is beneficial in some respects, any organization using ESG appropriately will find it easier to build processes that surpass minimum compliance needs. 

Is the company just monitoring compliance so it can crow about it, or do they view ESG principles as an essential part of its success as a corporate citizen? Are policies aligning with the company’s commitment to environmental and social concerns? Is the company’s management ensuring that all activity and efforts are developed through their adopted philosophy? Is the corporate culture one that adheres to the ESG standards? Does leadership understand how ESG principles can drive success, or do they see them as a necessary evil to gain market share? It’s time for companies that want to appear as leaders in their fields to be held accountable for doing what is right by the environment and their employees. 

See also: The Year of a New Beginning – From ESG Commitments to Action

Why ESG Matters

Knowing those answers matters greatly. A sound, well-executed ESG effort can reduce overall operating costs. It is well established that customers are attracted to the notion of a more sustainable product or to an organization that does its utmost to reduce its carbon footprint. 

Even decreasing that footprint is evidence of how a strong ESG statement can benefit the organization. An ESG policy that’s acted on can give a company clearer incentive to embrace more transparent, socially responsible actions and create more transparency, both inside and outside the company. Within the company, the focus shifts to the business’s purpose, allowing for easier regulatory compliance and oversight. Outside the company, a more transparent business attracts consumers. The more transparent the company’s inner workings, the more confidence the public has in doing business with that company.

A well-crafted ESG plan supported by senior management enables companies to make strategic decisions in line with their principles and in advance of negative publicity. Those companies that wait for social activism to force their hand are showing they can be shamed, but they are not exhibiting leadership. Ask yourself: Why is leadership valued in every other area of management, except for stewardship of resources? 

Building an ESG Approach

It makes sense then to adopt an approach to ESG through which business can operate. Using ESG as the funnel through which every aspect of your operations flows helps bolster the decision-making process. 

Set ESG Goals

What is your organization looking to achieve with your ESG statement or principles? Think about how your grandchildren will view your decisions. Can you see yourself explaining to them that you blindly followed the Friedman doctrine of shareholder primacy at the expense of everything else, no matter what the impact on their future?  Because we serve nonprofits, we have held to the principle for more than 30 years that our investments should not fund companies contributing to the many societal and environmental problems nonprofits are working so ardently to cure. Eliminating all investment in fossil fuels was an obvious decision for us more than a decade ago. Today that decision is no longer restricted to just mission-driven companies like ours.

Use ESG as a Growth Strategy

Develop clear ESG guiding principles. A strong ESG approach gives your company the flexibility to grow the business through ESG-related activities. For example, construction or real estate development companies that demonstrate their commitment to sustainability could attract more clients looking for sustainable buildings or properties.

Plus, the activities your organization undertakes to align with your ESG stance can also help you get better aligned with the customers and communities you serve. When divesting of fossil fuels-related investments, for example, you are sending the message to your customers that their concerns are ones you share.

Create Incentives for the Team

Without the buy-in of everyone in the organization, your ESG approach will not pass the sniff test. To get everyone on board, build incentives into your operations that relate directly to meeting ESG goals. 

Add Accountability and Reporting

When you first start, tracking progress toward ESG principles will probably seem cumbersome, even elusive. Not everyone will agree on what should be measured or how. But part of the progress is having those conversations and agreeing to start somewhere.

As you build an ESG framework, remember to include regular updates for employees to reinforce your commitment to those guiding principles you set forth. As more employees opt to work for organizations that embrace social and environmental change, remaining accountable to your employees helps boost retention and employee satisfaction.

Educate

Not everyone will be on board with the adoption of an ESG-centric business approach. Our own organization had to educate board members and convince our employees on how ESG can benefit both our constituents and our organization. 

Many organizations find it hard to convince the board and investors that ESG will not hamper profitability. Even as a nonprofit, we need to produce a reliable net income year after year to maintain our solvency as insurers. We can’t go to the stock market to increase capital.  It must come from earnings.   

We know that many of our highly talented staff and leadership have joined us because of our ESG stance. We often overlook the fact that many resources, including human resources, determine the bottom line. Satisfied employees who are part of an organization demonstrating accountability to community are a terrific boost to efficiency. In fact, as more companies turn to more environmentally friendly and socially conscious decision-making, the companies left behind will be the ones who refuse to invest in ESG. 

We need to educate our leaders into understanding that long-term vision goes beyond the next quarter. Long-term planning, with an ESG framework in place, opens up opportunities that might otherwise have been missed. 

See also: ESG Means ‘Extremely Strong Gains’

Building ESG Over Time

Your ESG approach does not need to be a perfect, all-inclusive plan. Incremental changes – for example, divesting 20% of your investments in fossil fuels or reducing the carbon footprint by 10% this year, or even asking your cleaning crew to switch to biodegradable cleaning supplies – starts the conversation within your organization. 

Each year, your organization can build on that foundation. This year, our organization is adding a question to our RFPs: “What is your position on sustainability?” We are a relatively small company, but we can start the conversation with the scores of vendors, large and small, that we engage every year. Imagine if all the small and mid-sized companies started asking this question. Each of us is just one small voice, but together we can raise the profile of these important conversations. More than lip service, your ESG approach should be a commitment that runs through the entire organization.

What makes a consumer choose a particular insurance product? The scope of the policy will certainly be important; the price, the recognizability of the brand and its perceived reputation will be factors, too. How findable a policy is, how it compares with rivals, how easy it is to purchase. All of these issues will matter. Ultimately, the customer will want to feel reassured that they have bought the right cover and that they can trust the brands to deliver should things go wrong.

In a world where technology dominates our lives, a customer’s experience of researching, finding, purchasing and using a product or service become critical determining factors in how that person feels about the provider and whether they will return to the brand in the future or recommend it to others.

Of all the financial sectors, insurance has perhaps become more immersed in digital than others. As such, it has seen wave after wave of change, from the delivery of policies via online and mobile to the arrival of aggregators and comparison sites separating brands from consumers still further and the entry of insurtech players offering new forms of cover, data innovation and streamlined business models. 

If the insurance industry has become a focal point for experimentation and innovation, the consumers are, at least in part, the driving force of change. We are in many ways becoming an expectation-based economy where the ability to meet or exceed expectations determines success.

In parallel and to a degree underpinning these changes is the rapid evolution of the way we access, use or consume information and services. Smart and innovative technology is atomizing around our senses. From screens, we are expanding into virtual experiences, screen-free voice-based technology and cloud-based platforms that will surround us as we move through the day and from place to place. The interactive, multisensory brand experience will be our new normal.

Building emotional audio connections

Within this evolution, the need to build emotional connections that transcend the tech is widely recognized by user experience designers and marketers. For example, building sound and music into digital services and marketing is seen as a powerful way for brands to be recognizable, reassuring, trusted and appreciated as humans react faster and more deeply to audio stimulus than visual information.

The speed of change is illustrated by the tremendous growth of smart speakers. In the U.S., 33% of households own a smart speaker, a number that is expected to grow to 66% by 2022. 

Younger, tech-savvy consumers already rely on the online community to choose the brands they want to help them through life. More than 27% of millennials said they learn about an insurance provider through digital engagement. So, to reach the new wave of potential customers, brands must tune in to their emotions as well as practical needs.

The sound of a brand’s DNA

There are signs that some insurance brands are beginning to recognize that a more robust approach to sonic branding is vital to compete in a complex space. Strategic investment in sound to create a holistic, recognizable experience across customer touchpoints is a critical element.

The critical step is to create sonic intellectual property (IP) owned by the brand and designed based on a brand’s values in the same way that a visual identity is produced and used repeatedly in many different contexts. A sonic strategy that fits the purpose in today’s world is not the same as a jingle or simplistic sonic mnemonic – think Intel or McDonald's. In fact, we’ve found that, across all sectors, the use of simplistic sonic assets is declining.

See also: Underwriting in the Digital Age

Brands are increasingly using progressive sonic branding that works across the multichannel digital world. For example, a flexible Sonic DNA can be used in brand advertising, where advertisers can commission any desired amount of brand-owned music that can be endlessly edited to fit the context. The music is rooted in brand values while remaining instantly recognizable. 

This can be augmented by licensed music if the fit between brand and artist is clear. However, stock library music that is neither owned nor adds any tangible value is least attractive.

How do the world’s leading insurers sound?

To understand how insurance brands are currently using sound, amp assessed the top 26 insurance companies, including AXA, Aviva and Legal & General, and ranked them based on how well they are currently using sound in marketing.

The data and analysis were drawn from our yearly Best Audio Brands Index, which assesses the way the top 100 global brands (as judged by Interbrand) use sound and invest in music within their branding strategies.

We found that just nine out of the 26 insurance brands had what could be called a sonic logo or identity and that these brands are using that sonic identity in approximately 40% of their marketing output.

Six insurance brands have invested in owned brand music, and just three have a sonic identity that has been integrated with the music.

AXA and Aviva are notable in that they are developing their sonic brands to a place where they can now take ownership of the way they sound in many different contexts on a strategic level.

However, we found that more than 60% of the insurance brands we looked at are still using stock music in most of their marketing channel output, so clearly the sector has a huge opportunity to improve the way it sounds to consumers.

Brand recognition and trust are critical to consumer choices, so we expect the insurance sector to become a hotbed of sonic innovation.

Artificial intelligence (AI) is hot. Funding for AI startups has steadily increased over the past decade as a host of innovative tech entrepreneurs have stepped forward to solve a broad range of business problems. In many respects, AI is a natural fit for the insurance industry. This business is a numbers game; it’s about understanding correlation, predicting risk and identifying trends and anomalies, so the current rush to adopt AI doesn’t come as a surprise.

AI is indeed powerful — but it’s not magic. For years, tech visionaries and Hollywood screenwriters have offered us visions of a future in which machines exhibit human-like thought patterns combined with a virtually unlimited capacity to consume and digest new information. Digital assistants like Siri and Alexa have furthered those impressions, using natural language processing to understand human speech and respond to simple requests. They have reinforced the notion that artificial general intelligence (AGI) is already upon us.

Back in 2005, Gartner published and branded its now-famous “Hype Cycle.” A new category of technology emerges, a flood of VC money follows and, eventually, most early-stage companies fail or are acquired by bigger players. Ultimately, the majority of hyped technologies succeed in providing net positive value but not before they’ve been through the stage that Gartner calls “the trough of disillusionment.” That stage can be painful; it’s where a lot of startups fail. It’s also where a lot of once-promising internal projects are relegated to the trash heap.

There are, however, some extraordinarily good reasons for the current hype around AI. Insurers are achieving remarkable efficiencies and using it to transform claims management, improve risk assessment and detect fraud. The key, generally speaking, is to use AI to augment and enrich existing business processes rather than replacing them wholesale. The human touch still matters, but it can be rendered far more effective with the assistance of natural language processing, machine learning and predictive analytics.

To be successful with AI, executives should adopt the view that this technology serves as a key component within their overarching business strategy. As such, it requires careful analysis and forethought. With the right approach, insurers can achieve impressive returns on AI investments. That’s not a future promise; it’s already happening today.

Successful deployment of AI requires a careful balance between visionary optimism and cautious pragmatism. As insurance executives plan their AI investments, here are some best practices that will help to ensure successful business outcomes:

• Start with a list of your biggest challenges, then identify a path to solving them, one step at a time. Think beyond innovation and experimentation. Engage with stakeholders throughout your organization with the aim of identifying specific problems and operationalizing AI to achieve tangible benefits in the near term.
• Assess the opportunity for solving those challenges by reengineering (not necessarily replacing) existing business processes to incorporate AI. Map various AI technologies against those challenges. Aim at augmenting human intelligence — not replacing it.
• Assess your organization’s capacity to adopt and integrate AI, including fundamental competencies in AI technology, data access and data quality, change management and willingness among the target users to adopt proposed solutions.
• Get senior management involved … but at the right time. AI is strategic, and the C-suite needs to be informed and involved. They can bring vision, energy and support to your AI initiatives, provided that you engage them at the appropriate stage in the process. If senior management is involved too early, they could specify new initiatives that are ill-suited to AI. Early C-suite involvement can also frequently lead to inflated expectations. A better approach is to bring well-considered proposals that multidisciplinary teams at ground level have fleshed out.
• Make this a cross-functional exercise. Develop AI project teams that incorporate a range of perspectives and skill sets and don’t limit them to a single team. By creating multiple groups, each with its own dynamic and operational focus, your organization will benefit from a greater diversity of ideas.
• Start an AI-related education and skills program now. Even though you may not be sure yet of your specific needs for retraining and reskilling, begin to make education offerings available now that will help your workers adapt to future changes. Such programs will pay dividends down the road, giving your organization a head start in the change management process.

See also: 3 Steps to Demystify Artificial Intelligence

As you evaluate technology, plan your pilot rollout and eventually operationalize AI within your company, here are some additional factors that will contribute to your success:

• Before the pilot starts, set a timetable and criteria for deciding whether to go into production. This timetable will add rigor to the decision-making process and put pilot project advocates on notice that implementation is an important consideration from the very beginning.
• Adopt technologies that can scale and that can be used by your intended audience. If, for example, a chatbot is ill-suited to serve your customers as a primary channel, don’t adopt it with the vague hope that it will improve substantially soon.
• Get your data in order. AI relies on high-quality data, and it benefits from a holistic view of information enabled by integration. Assess your organization’s ability to unify and harmonize your data and to ensure its accuracy, consistency and completeness.
• Make sure AI can interface well with your existing systems. Select initiatives to prioritize needs to consider “the last mile” of implementation. Get your IT teams involved early so they have a hand in creating a feasible solution.

Finally, it’s important to be flexible and transparent and to manage expectations. Some pilots will prove to be impracticable fairly early. That’s to be expected, but stakeholders should understand that AI pilot projects are like a portfolio of investments; some will succeed while others will not. AI isn’t the answer to every problem, but insurers that neglect to get on board will be eclipsed by those that do. Be willing to learn from successes and failures and apply that knowledge to your future endeavors.

As first published in PropertyCasualty360.

Powering the Recovery Paul Carroll, Editor-in-Chief of ITL At last week’s Global Insurance Forum, Swiss Re Group CEO Christian Mumenthaler said the industry has been in a sort of hibernation for the past year and a half to two years, in terms of big deals and bold moves – but is about to wake up. “I think we’re in for a very interesting two or three years, with lots of change in the industry,” he said at the virtual event, “Powering Recovery,” held by the International Insurance Society. Roy Gori, CEO of Manulife, said insurance has “an opportunity to change the paradigm of how people think about our industry.” He described the opportunity as “once-in-a-lifetime.” continue reading > New Research Read the latest report from SMA to better understand the pain points and opportunities in underwriting and how Majesco’s Digital Underwriter360 for P&C revolutionizes the industry.  Read Now SIX THINGS Future of Work and Collaboration by Stephen Applebaum and Alan Demers Work will never resemble what it did in the past, and there will be no “all clear” signaling the end of the pandemic. Read More State of the Insurance Marketplace by Kimberly George and Mark Walls In the face of rapid change, what are the implications? And what risks should organizations be prepared for? 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 Underwriting in the Digital Age by Denise Garth Only 25% of an underwriter’s day is spent on selling and broker engagement. They are spending entirely too much time on non-sales work. Read More Blockchain: The Next Big Thing by Robin Westcott Blockchain technology has game-changing implications for data sharing and how we underwrite, determine loss-costs and more. Read More It’s Not Human Vs. Machine; It’s PLUS by Dave Ovenden What is right for your business, and where do you strike the balance between people-focused and automated processes? Read More Driving the New Standard in Insurance by  Jeff Wargin Over 90% of respondents felt the insurance industry could increase its relevance and grow faster than inflation and the general economy. Read More Minimize Fraud, Lower False Positive Rates and Increase Automation for Low Value High Volume Claims Using Halo Based AI Sponsored by Daisy Intelligence This whitepaper explains how using Halo-based AI minimizes insurance fraud, increases automation, lowers false-positive rates and delivers excellent financial results. Read More 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