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.”

Mumenthaler, Gori and many of the other speakers at the three-day event --videos of which you can see here -- said the industry had managed a stunning pivot to digital in the face of the pandemic, almost overnight. But they also pointed to numerous challenges and opportunities for the industry as the world gradually puts the pandemic behind us.

Gori, for instance, said the pandemic has underscored the role that insurance plays in creating personal financial stability, while also creating the opportunity for the "complete digitization of every aspect of our business … to eliminate the friction that makes insurance an unattractive proposition sometimes." He said Manulife has "done more in the past 18 months than in the prior 18 years" in digitizing and has seen the benefits -- e.g., straight-through processing now handling 81% of claims, up from 68%.

He sees a major role for insurance in the sorts of public-private partnerships that will be necessary to implement the infrastructure bill that, in some form, seems likely to pass in the U.S. Congress soon. Insurers can also help with what appears to be a new emphasis for global supply chains -- while companies have spent many years optimizing them for efficiency, the pandemic has made clear that companies need to build much more resiliency into them.

He cited two other key challenges/opportunities: "Cyber crime is up 600% in the pandemic," he said, "and 100 million people have been pushed back into poverty.... What can we do to close the income gaps that have been created?"

Mumenthaler said the Swiss Re Institute measures the protection gap -- the gap between the economic losses in the world and the insured losses, across all lines of business -- and saw a 6% increase during the pandemic, to $1.4 trillion. He said there "should be an obsession to close that protection gap."

He said he sees an opportunity to apply behavioral science to not only better understand customers but to work better with governments to address massive problems like future pandemics, major terrorist events and large-scale cyber attacks.

"The big events are entirely foreseeable," he said, citing a 2007 paper by 20 chief risk officers that not only said a pandemic was coming but that laid out almost all the repercussions we've experienced in the past year and a half. "Very few risks are totally off the screen," he said. But insurers can do a better job of helping governments to not only see the risks but to "pre-finance" responses, when actions are far less costly, rather than wait until disaster hits.

Dan Glaser, CEO of Marsh McLennan, agreed with Mumenthaler that supply chains need to focus far more on resiliency. "The world was in a hyper-efficiency mode," he said. "But the hyper-efficient companies shouldn’t be viewed as best in class. We have to see that risk-adjusted returns are more import than actual returns. Companies need to be asked: How prepared are you?"

The IIS' Global Priorities Report, released in conjunction with the forum, underscored the challenges facing the industry. The report, based on surveys sent to nearly 10,000 executives worldwide, found that "changing customer expectations during these crises can result in insurer frustration, as consumers may not fully understand how their insurance policy works and what it covers. One executive noted the challenge of correcting 'how insurance is viewed by the general public. It is not meant nor intended to cure all ills, yet it is often expected to.' This was especially true during the pandemic."

The report found that the biggest worry is about competition from outside the insurance sector: "Executives worry that digital engagement has taken over and that the industry faces disruption from new entrants with 'better-organized data and a stronger consumer orientation.'"

I could go on and on. There is an awful lot of meat both to the videos from the three days of the forum and to the Global Priorities Report -- which I encourage you to view and to read. But I'll just cite two more of the speakers, whose comments I thought were especially insightful, then let Marsh McLennan's Glaser bring us home.

As we've seen, ESG (environment, society and governance) has become a hot topic as companies are being pressed to be better corporate citizens, and that emphasis is likely to increase coming out of the world-shaking pandemic. Neeti Bhalla Johnson, president, Global Risk Solutions at Liberty Mutual Insurance, said insurance has a unique role to play in many aspects of ESG, notably climate change, because the industry has both "the asset and the liability side of the balance sheet." In other words, the industry carries the risk, while also have enough capital to help address it. She said ESG could also help address the industry's talent gap, because new types of people will want to join forces with insurers to tackle big ESG problems.

Meanwhile, Lorenzo Chan, president and CEO of Pioneer Inc., used the pandemic to make a bold step toward addressing the protection gap by, as he put it, going down the pyramid. He said that everyone typically goes for the best prospects, at the top of the pyramid, but he aimed at the "micromarket" in the Philippines. He says lots of people had negative associations about insurance -- slow to pay, tricky in the fine print, etc. -- so he looked for partners he could work with who were trusted by a broad market of the less wealthy. He wound up working with supermarkets, motorcycle distributors and, in particular, pawn shops.

"We unlearned everything we knew in traditional insurance," Chan said. But, in the process, Pioneer went from 180,000 customers in the micromarket to 18 million, and Chan thinks there is still considerable room to grow.

Talk about narrowing the protection gap.  

As Marsh McLennan's Glaser looks at the challenges ahead, he says: "In my 40-year career, it’s always been thus: There have always been things on the horizon that look dangerous. We’re one of society’s ways of sensing those dangers."

He adds: "Insurance is a noble business. It’s hard to think of a business that does more for society."

Cheers,

Paul

P.S. If you're at InsureTech Connect in Las Vegas this week, please stop by and say hello. I'll mostly be hanging out at The Institutes' booth, #1117 on the expo floor. I may be off doing some video interviews for a series we're pulling together, but I shouldn't be gone long. I hope to see you there.

The insurance marketplace has been changing rapidly, with the economy having a significant impact on both carriers and businesses, including employers, public entities and the middle market. So, what are the implications for the industry? And what risks should organizations be prepared for?

At the recent Out Front Ideas with Kimberly and Mark virtual conference, Elevate, an executive panel discussed the state of the commercial insurance marketplace across multiple lines of coverage and their outlook for the future. Panelists included:

• Cynthia Beveridge – president, AON Broking
• Patrick Gallagher – CEO, GGB-Americas, Gallagher
• John Glomb – CEO, Philadelphia Insurance
• Mark Wilhelm – chairman & CEO, Safety National

Economic Impact

The combined impact of an aging workforce and the pandemic in the insurance industry is causing significant challenges in recruiting and retaining talent. COVID-19 accelerated retirements with the inherent risks it created for baby boomers in a physical workplace. Beyond just retirements, all industries feel the effects of the Great Resignation due to employees questioning their career choices and priorities, seeking more money, flexibility and happiness. The shortage of trained talent has meant overhauling previously successful recruiting efforts. With talent requirements unrelenting, tactics like higher offers, new training and development and incentives to draft a much younger workforce have all been employed. 

Looming economic uncertainties have left employers realigning their discretionary spending on insurance purchasing due to higher premiums across the market. Employers are also facing their own issues with staff shortages across the U.S., leaving many to rethink their operational security, cash flow and real estate. Government and insurance regulations, model improvements and consolidations are all considerations in how these businesses will continue to stay profitable.

The pandemic has forced carriers to reconsider their customer-focused ease of use by encouraging smaller insureds to carry cash reserves, ensuring access to lines of credit and offering flexibility in billing plans. Displaying this empathy throughout uncertain times builds trust and may even lead to a longer-term relationship. 

See also: The Evolution of Marketplaces

Insurance Marketplace

Prior to the effects of COVID-19, the industry was looking at a standard hard market with a spike in premium increases, but the pandemic moderated the rates and premiums that carriers needed. Typically, corrective actions at the carrier level, including growth and repricing, would lead to a softer market. However, more accessible data has provided insight into inflation, interest rates and industry demographics, making carriers more selective, leading to a fluctuating market. Carriers with specialty niches can use this data to provide a truly customizable experience that clients expect.

With the exception of cyber and E&O, rate increases are decelerating, showing signs of equilibrium. Now that there is more demand for valuable return on investing, carriers are reviewing the profitability within their books of business and looking for opportunistic strategies. Clients are demanding more collaboration and solutions to their risks, not just an insurance product making alternative risk mechanisms, like captives or different deductibles, more popular. Contract wording and certainty will continue to be a necessity to clarify coverage for all stakeholders.

As the courts reopen, carriers are preparing for lawsuits to abound. The rise of litigation funding, social inflation and the effects of COVID-19 will continue to create major challenges for employers. Rising medical costs could increase workers’ compensation rates, creating uncertainty for underwriters and actuaries trying to set rates and predict profitability. The severity of claims and advances in medical technology could also drive rate increases. 

Emerging Issues

The challenges presented by cyber policies create an opportunity for new solutions, especially with ransomware on the rise. New solutions for supply chain clients, like aggregation and vendor management, are also in demand. Environment, social and governance (ESG) principles have become a key point of discussion within the industry and beyond as climate change risks continue. Additionally, addressing the underserved and the gaps in coverage through better access to capital have required the industry to rethink these solutions.

High-profile sexual abuse cases have resulted in states introducing reviver laws, allowing the opportunity for victims to reopen cases where the statute of limitations had been exhausted. These laws have created pressure on the pricing for abuse coverage, whether the industry is carrying appropriate reserves for those losses and if future reinsurance will be available. 

See also: The Perils of the Purchasing Process

COVID-19 continues to pose a great risk, with death claims still occurring and additional presumption laws being created. New legislation around vaccine mandates is also creating an increased responsibility for the industry as employees consider litigation. Additionally, public entities face risks from sexual abuse, police excess of force and cyber immunities under attack. Other lines of business, including business interruption, event cancellation, cyber, E&O and D&O, are contending with the risks of increased tort reform. 

To watch the recording of this Out Front Ideas virtual conference session, click here.

If you’ve been paying attention to the technology landscape, you’ve heard of blockchain. The inherent capabilities of this distributed ledger technology are vast, in its ability to efficiently, transparently and securely transmit information. As a neutral, not-for-profit advisory organization and statistical agent, AAIS needs access to key data with which to create loss costs and other insurance products and solutions for our member carriers. This is what led to the use of blockchain technology to develop our Open Insurance Data Link (openIDL) platform. 

The Data Access Problem

As an advisory agency, our goal to create innovative products and inform better public policy starts and finishes with the data we can access. The obstacle to leveraging data is that it is often “locked” in proprietary silos and legacy systems that carriers are powerless to access efficiently. Additionally, companies like AAIS need more granular data that companies were not willing to share, concerned they might jeopardize market position. We often found that regulators encountered similar obstacles when asking for data to inform public policy. 

The Birth of openIDL

During the exploration of a solution to data sharing in the insurance industry, it became clear to us that our industry needed an external data strategy that could remove existing barriers. Companies need to be able to assert control, support privacy of their data and allow enough transparency to others, including regulators and innovators, to improve the insurance data ecosystem. As with any ecosystem, change would need to be introduced with balanced and deliberate decisions around the use of data. It was apparent that blockchain/distributed ledger could be the conduit to support change.

With the help of stakeholders across the insurance community, AAIS set out to develop a technology platform that would fulfill data requirements for insurers while retaining the privacy of their data and providing regulators with the transparency and insights they need, when they need them. Together with IBM, AAIS built openIDL on Hyperledger fabric because of its commitment to open source as the best way to equitably bring change to industry. It was the first step toward ensuring that openIDL could not be owned by any one organization and used as a proprietary weapon within the industry. We sought freedom from that kind of control. openIDL would be an industry solution.

Understanding the need to apply governance principles to our open-source community led us to work with the Linux Foundation, one of the largest open-source consortiums in the world. AAIS came to realize that donating the openIDL technology to the open-source community at Linux would increase adoption of the platform across the industry and across the broader insurance ecosystem. So, on April 12, 2021, openIDL became a Linux Foundation project.

See also: Blockchain Smooths Subrogation

COVID-19 Data Call…The First Use Case

The first use case for openIDL focused on regulatory reporting because basic claims and policy data from statistical reporting and data call (Figure I) activities are core data elements needed throughout the insurance ecosystem. It was also important to include the regulatory community in this development because any real change would need to be fully understood and accepted by regulators to penetrate the entire ecosystem. 

An openIDL Pilot

By the time the pandemic hit in early 2020, the openIDL platform was ready for a test run in support of a COVID-19 business interruption (BI) data call, with nine state regulators and two large carriers agreeing to participate in a proof of concept (POC) using openIDL. The POC would replicate an earlier COVID-19 data call (Figure II) from the National Association of Insurance Commissioners (NAIC), using the capabilities of blockchain as applied to regulatory reporting.  

The Results: Success 

The openIDL POC yielded tangible successes. Not only was openIDL able to recreate the earlier COVID-19 BI data call, but new value was derived by introducing third-party data from the Federal Payroll Protection Loan database. Newfound insights were uncovered without the carriers’ private address level data ever leaving their control and possession. The utility of blockchain’s immutable ledger could be used to gain accountability and access to insights that we have never seen before, while dramatically improving the output and process of insurance regulatory reporting for both insurers and regulators. 

During the pilot, openIDL exhibited several advantages over traditional methods of regulatory compliance. Among them: 

• insurers could deliver far timelier data, more efficiently and potentially instantaneously once their dedicated openIDL “node” was populated 
• insurer data could be leveraged by regulators, while remaining private, secure and in full control of participating carriers
• insurer information could be correlated with data from other sources to reveal deeper, previously unattainable insights 

Ultimately, the ability to share insights while maintaining the privacy and security of data for all openIDL participants is a game-changer, ushering in a new era of quality underwriting capabilities, new product and service development and increased value to policyholders.

Next Steps

With openIDL now a Linux Foundation Project, AAIS and the Linux Foundation Regulatory Reporting Steering Committee will continue to work with regulators, insurers and other stakeholders to expand and evolve openIDL as the next-generation standard for statutory and periodic reporting, and perhaps the foundation for broader applications across the insurance ecosystem. Participation by stakeholders across the industry is welcomed! 

See also: Breakthrough for Blockchain?

If you would like to learn more or participate in future proofs of concept, please contact Robin Westcott at robinw@aaisonline.com or Lori Dreaver Munn at lorim@aaisonline.com.

Underwriters in the commercial market are, in some ways, facing a promising future: Valuate Reports recently estimated that the segment’s compound annual growth rate through 2028 would be 8.5% — a healthy clip by any standard. This is far above the overall average direct written premium (DWP) growth rate of 3% to 4% over the last decade or more.

Yet market research indicates that, while commercial carriers are adopting digital technologies and next-gen core systems at a rapid pace, age-old manual underwriting processes and lack of relevant data when they need it continue to cause bottlenecks and friction, leaving customers, underwriters and brokers frustrated.

Businesses insurance premiums are now at $350 billion annually, but the workflow generally remains paper-based. Only 25% of an underwriter’s day is spent on selling and broker engagement. Underwriters are spending entirely too much time on core processing and other non-sales work.

Imagine if underwriters could spend more time with their customers and focus on delivering a better customer experience instead of being bogged down by cumbersome, error-prone manual processes and information gathering. Imagine having intelligent, relevant information pushed to the underwriters’ fingertips at the exact moment they need it, empowering them to make better decisions.

As an industry, we are on the cusp of making this vision a reality. SMA research indicates a gap between what insurers do today and what is needed today and in the future. In fact, 80% of insurance executives expect underwriting roles to be significantly different in the next five years. They know they must evolve underwriting to make their companies competitive amid the rapid changes in customer needs and expectations, new digital technologies and data sources and increasing competition from both established players and new entrants.

This evolution will be powered by a next-generation underwriting workbench that leverages an easily customizable and scalable digital platform, robust data-ingestion capabilities, AI and machine learning and new communication and collaboration tools across commercial and specialty lines of business.

In addition to tedious, time-consuming tasks of manually gathering data, the most glaring pain points to be addressed are:

• A lack of an integrated and unified view for underwriters to access risks and make quick decisions
• The absence of holistic policy data at a single place to enable quick and accurate underwriting case management
• An overdependence on underwriters for making key decisions
• The lack of sufficient time for underwriters to develop relationships with distributors, given inadequate system capabilities
• Inefficient collaboration and communication channels between underwriter and distributors
• A need for constant follow-ups with line managers for updates, resulting in longer waits for closing out open cases, leading to poor experience

Progress depends on the creation of an end-to-end underwriter workflow and case-management capability. It requires a capability for intelligent data ingestion and extraction, coupled with standardized and automated processing.

A key in making underwriting work better, faster and in a cost-effective way is increased and predictable collaboration between the broker/agent and the underwriter. Ultimately, there is great value for the business by being highly responsive to customers through transparent collaboration among underwriters and brokers.

Next-generation underwriting capabilities are here. The challenge for the industry is in adopting a mind-set that permits digital transformation to take root and grow.

We believe performance excellence will flourish when insurers embrace change, leverage powerful new technologies and adopt new ways of working that are evolving at a rapid pace.

Mike Adler, principal, KPMG, and Denise Garth, chief strategy officer, Majesco, are co-authors of this article. Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities

As AirBnB and VRBO have opened up the vacation home rental market to millions of property owners, t The ease with which owners can use technology to list either their primary or secondary homes has transformed the way we take our holidays. 

The pandemic has, interestingly, fueled more growth in the secondary or vacation home markets as people choose to take their holidays closer to home or look for second spaces to continue remote working. According to the National Association of Realtors, vacation home sales rose 16% in 2020 over the previous year. That’s nearly triple the 5.6% growth in existing-home sales. The surge is continuing this year, with sales up 33% to April over last year.

Just as the vacation home rental market has embraced technology, so, too, has the insurance industry. Insurtech is reducing costs for owners and insurers as well as improving the customer experience. Providers are using advanced technologies such as AI and machine learning to develop insurance offerings that allow for more customizable coverage and pricing that can account for complex insurance requirements. 

This is an important step forward specifically when it comes to insuring vacation properties. With the help of platforms such as AirBnB, VRBO and others, owners are able to rent out their primary or secondary properties, or part thereof, for longer, shorter or intermittent periods. Which brings with it a much more complex insurance landscape for agents to navigate with their clients.

What should agents consider when looking to insure rental homes for their clients?

Different types of property owners need different types of coverage

Knowing what kind of property owner your customer is will make sure you start the discovery process in the right place. This can be as simple as knowing if they are a private owner or, for the purposes of the property in question, they are a commercial owner. A commercial owner can mean a company that owns numerous properties or an individual who is running a bed and breakfast. 

The ownership structure of the property can also affect the type of coverage required. If it is owned by an LLC or other type of legal entity and there are different users and owners of the home, it's important to be clear who the actual parties to the insurance contract are. It can be easy to get this wrong. For example, a party who is classified as an additional resident as opposed to an additional insured might affect the validity of the coverage.

Understand the type of coverage needed

A more commercial type of vacation property will likely be better-suited to commercial insurance as opposed to a more traditional homeowners policy. It will typically offer more in the way of liability insurance and be applicable across a portfolio of properties, making it more efficient than writing individual policies for each home.

However, a policy can be more nuanced for the smaller owner who is renting out their own vacation home or their primary residence from time to time. Traditional insurance policies can be vague when it comes to cover for use of the residence for rental purposes. The contract may allow for occasional short-term rentals, but it will be important to understand what the owner's intention is when it comes to how much of the year they want to rent out the property, to ensure they have the right kind of coverage.

In some cases, landlord’s insurance might be applicable if the property is to be rented out most of the time. In other cases, where the rental periods are briefer, a landlord's endorsement to their primary policy can be activated for those times the property is available to rent. 

Think about the different liabilities

Offering a property for rent will crystalize liabilities for the owner they would not otherwise be exposed to. This is particularly the case if the owner intends to offer bed and breakfast services beyond simple accommodation. Cooking for guests, serving alcohol or providing a shuttle service, for example, all come with their own inherent risks and liabilities. In these cases, liability coverage in traditional home owners contracts are unlikely to be sufficient. 

A homeowner’s existing injury liability may also not apply if the accident occurs when only a  part of a property is rented -- for example, when just a room or an apartment above the garage is rented but is part of a primary residence.

This is just the tip of the iceberg when it comes to understanding the kind of liability protection a homeowner may require when looking to rent out one of their properties to holidaymakers.

See also: Market Boundaries Are Blurring

Be diligent

In summary, agents need to make sure they thoroughly consider three things: how long the owners will rent out the property; if the owners ever intend to use it; and whether they want to offer services beyond accommodation. Every property owner can have different answers to each of these questions, but all will affect the blend of coverage and types of liability they will be exposed to. 

Insurtechs are able to offer updates and more customizations than traditional forms of homeowners insurance, so it's worth understanding the owner's intentions well and hunting around for specific policies that will cover their particular situation.

OCTOBER 2021 FOCUS OF THE MONTH

Catastrophic Weather

FROM THE EDITOR

Living in Northern California, I find myself pretty much in the wildfire capital of the world these days. Some days in late summer it was so grey outside that it felt like I was in Mordor. And many nearby areas have been hit far harder. Lake Tahoe, one of the most beautiful areas in the world, was covered in smoke so thick for much of August that breathing was downright dangerous.

Sadly, the lousy air and the wildfires that cause it represent just one of the many threats from catastrophic weather these days. In an unusually active season for Atlantic storms, Hurricane Ida not only hammered Louisiana (hit by five named storms in 2020, including two hurricanes) but followed through and caused massive flooding that killed dozens in the Northeast. A "heat dome" that descended on British Columbia in June raised temperatures as high as 121 degrees and killed more than 500 people -- one town just spontaneously incinerated. More than 650,000 farm animals also died. And that's just the beginning of the list of catastrophic weather events, even though the examples are only from North America.

In the face of all these problems, insurers are doing what insurers do: helping identify, quantify and mitigate the risks, while making customers whole when disasters strike. Insurers 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.

We have a very long way to go, and there's no easy solution -- nobody is going to throw a ring into Mount Doom and suddenly lift the pall that sometimes settles outside my window. But I hope the articles and this month's interview provoke you a bit and help raise the level of debate. 

Cheers,

Paul Carroll, ITL’s Editor-in-Chief

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WHAT TO WATCH

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6 QUESTIONS FOR CHRISTOPHER MCDANIEL

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.

Read the Full Interview

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WHAT TO READ

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Imagine you are an enterprise CEO in a business under increasing pressure to address the demands of continued growth, a meaningful ESG strategy, a fickle and more diverse customer base, a changing regulatory environment and fallout from the pandemic. Just for starters.

While the organization is full of talent who are expert at running the business, it’s clear that more is required to transform, adapt to unpredictable change and get much better at anticipating what’s next.

One day, the CEO opens a dialog with a startup whose technology is proven and relevant to their business. This CEO is captivated with the idea of engaging with the startup to help transform the enterprise. The CEO knows the enterprise must break habits that are inhibiting innovation and change. The company must learn new ways of operating.

The CEO imagines that a partnership will be a win/win. Success will mean the enterprise is becoming a stronger 21st century business. And the startup can realize its goal of scale.

Everyone’s investors and customers will be happy.

Right?

It's possible. Success begins with the enterprise and startup leaders anticipating how to:

• Bring together two radically different cultures, ways of working and talent profiles.
• Ensure the machinery of the enterprise does not stifle the startup’s agility.
• Transfer at scale new ways of working and new mindsets.
• Convince stakeholders to buy in that this is a smart strategy that will deliver results.

How does the vision of enterprise/startup partnership move beyond being more than a dream and achieve a happy ending?

Commit to these three steps to head in the right direction.

1. Set a shared North Star by coming to a common understanding of the partnership’s mission, vision, shared ambition and success metrics. The best North Star ambitions complete such statements as:

"As a result of the successful efforts of our partnership, we will have succeeded when customers say ..."

See also: Why Weak Signals of Disruption Are Key

2. Engage in shared governance. Even the most motivated and resourced team tasked with bringing to life an enterprise/startup partnership will fail if the right governance is not in place. This means:

• The CEOs hold both executive teams accountable for the success of the partnership, and
• A routine is in place and adhered to for communications, agenda-setting and decision making. 

3. Resource and implement disciplined, agile experiments. Big new growth stories do not emerge as overnight miracles. They come about through cycles of testing, failing, learning, iterating and improving. As the capability for agile experimentation is created, consider:

• How to operate outside the annual budgeting process.
• Whether the talent exists internally that can be dedicated to the testing efforts.
• Why it is critical for experiments to have established metrics from Day One.

As talented as the cross-business partnership team may be, they may benefit from external facilitation by a third party who has no stake in either entity’s pre-existing norms and who is only focused on helping the partnership succeed by bringing objectivity and operating knowledge. Their role is to keep the team focused on the North Star, through the many challenges, doubts and execution choices they will face, while pursuing proven practices to achieve their ambition.

You can read the complete article from which this post is adapted at Fast Company.

For insurance agents, deciding to implement a new tool is no easy feat. It requires research and demos. But the real work starts post-sign-up.

Digital solutions can help agents give customers a better experience and, most importantly, enable them to compete with industry disruptors. But agents drag their feet on implementing the solutions. Why?

For some, the reason has to do with workflow, education of the team, capabilities they wish the new solution had or issues with integration.

No matter the issues, they can all be overcome with time, a focus on the right solutions and the passion to drive innovation within the agency.

Here’s a list of four of the top hurdles and how agents have overcome them.

1. Lack of time

This may sound simple, but it is really a big deal for most agencies. Agents are busy, and most of the ones I know are usually in customer service or selling mode. Finding time to not only select a new solution but to set it up and understand its capabilities is just not on the radar. For those who do take the leap, it can often become a self-fulfilling prophecy when they don’t take the time to understand the solution’s full capabilities. Without that understanding, the solution can fail. 

There are some important tips I’ve found that can help. First, make a list of the problems your agency wants to solve with technology. This can eliminate many solutions that look cool but that you don’t really need. Once you have a pain point identified, do homework on the tools you’re considering. Find agent testimonials and reviews to see if a tool has helped others in the past. If so, it’s worth a trial at least. 

Then block off 20 minutes a day to test and explore new tools. Actually work with them. I’ve seen many agents get a significantly better understanding within just a week. With that newfound understanding, they make better decisions. 

2. Workflow disruption

Any disruption in a workflow, even to improve processes, is not always well-received. Change management is hard—for every company, including for most agencies, which are small businesses with limited personnel to devote to big changes. 

This is where communication helps. The new solution’s champion — who could be the agency principal -- must convince the team that, if adopting a tool can save time for one agent, it can save time for most. With this simple message, the champion can help establish the value of the tool and give the team the resources they need to understand the new process.

Make the change clear to all agents and provide training resources so they can successfully adapt. Also, encourage agents to use the tool's customer success team, who are likely focused on engaging with and providing training for customers. 

See also: How Technology Drives a ‘New Normal’

3. New tools that are not fully established

You’ve got that right — technology rarely does all the things you want. It may not integrate with existing systems, including agency management systems, and some (or most) carriers may not yet be on the platform. But these are not reasons to stop moving forward. In some cases, there are workarounds. In others, a solution may just be a matter of time and making your voice heard.

It’s important to get to know your agency management system and to understand  if the vendor has an open application programming interface (API). If they do, they can more easily integrate with other systems. You should also understand your carriers’ perspectives, to make the best-informed decision about new solutions. This is where a dialogue — especially with your top carriers — to understand their innovation plans can be very helpful.

4. Lack of understanding

A common issue is user error from not understanding how the solution functions. SaaS solutions are becoming more and more clever with integrations and functionality that add a degree of complexity. A lot of information is thrown at agents all at once, and it can be difficult to digest and prioritize the most important elements. 

It helps a lot to try before you buy. Agents are often afraid to jump into a new tool if they aren't confident in their understanding. Actually working with the tool is a big deal — not once or twice, but multiple times. Asking questions is also important. It’s one of the best ways to familiarize yourself with a tool. Lastly, getting the right materials from the supplier is key. Cheat sheets, one-pagers and post-demo materials can be very helpful. 

Despite the hurdles, implementing new technology is critical to advance every agency. It’s usually not as difficult as they think it will be. At Semsee, we’ve noticed a trend in agencies that sit through a demo, get onboarded and then immediately start using the platform to start quoting -- they often end up with few follow-up questions because they really understand the solution and how it can work within their agencies. For those that are most hesitant, it ends up taking more time. They have more questions and tend to want to go back over things we’ve covered. Their teams are less engaged. 

Technology works. It’s usually not perfect, it doesn’t have all the bells and whistles the agency might want on day one, and it definitely will require analysis, education and changes to workflow. But none of those are reasons not to innovate. Agencies need to invest their time in understanding tools to get the most out of them. In return, they’ll change hearts and minds and move their agencies forward.

Earlier this year, we commissioned an independent global benchmark survey exploring the new standard in insurance – what it should look like and how it is affecting business. Coupled with a digitally enabled architecture, the new standard enables insurers to bring new product to market with greater speed, scale and agility and drive profitable growth through reducing expenses, creating differentiation and improving customer engagement. 

As we head into 2022, we’re hearing from companies that digitization will continue to be on top of the priority list, allowing for the delivery of customized products to better serve customers with speed and agility. While undergoing digital transformation, carriers are asking how technologies such as artificial intelligence (AI) and machine learning (ML) can be leveraged to create better digital experiences, not just for customers but for workers, too.

Paving the Way for Parametric

Over 45% of respondents said new consumer preferences and behaviors are the leading trend affecting the global industry. Second was 31% selecting the viability of technologies like artificial intelligence (AI), the Internet of Things (IOT) and blockchain.

Over the past year, I’ve heard quite a lot about parametric insurance – the concept of a smart policy that knows how and when claims occur against it based on data. We are starting to see uptake of parametric and the ability to intelligently pay out claims. For example, if you are a commercial shipping line and you have a cargo ship en route from A to B, you can automatically monitor the weather to determine what conditions the ship will be encountering. Crop insurance is similar, with the ability to monitor rainfall, hail and other weather-related damages and gauge shortages of production. This ability can support a claim in being automatically adjudicated. 

We might see an uptick here in personal lines, as well, especially with people working from home and “daily” routines becoming increasingly individualized. For example, pay-as-you-go is here to stay. As data catalogues and algorithms become tested and more mature, pay-as-you-go is changing the way drivers are insured. With “miles driven” still so unpredictable, and hybrid work and the migration of employees in-and-out of cities continuing to be the norm, usage-based insurance will see an uptick. With all these changes, carriers are catering to the needs of emerging younger drivers who prefer digital products.

An Opportunity to Never Upgrade Again

Nearly 35% (over one-third) of respondents identified high operating costs as the biggest obstacle to insurance businesses achieving profitable growth. 

A return to profitability and a return to high top-line premium growth makes way for a lot of projects. This presents an opportunity for the industry to move away from the need to upgrade or overhaul systems – insurers can leverage evergreen systems to stay up to date and take advantage of the latest software and security features. 

Carriers are looking to minimize both IT expense and burden. In fact, one in three carriers is experiencing this challenge that affects their growth trajectory. This has to change. Startups are known for their nimbleness and ability to react quickly to market conditions – we’re seeing this mindset now being adopted by all sizes of carriers. If the technology is keeping up, carriers can take advantage of its benefits. 

Moving to an evergreen system allows carriers to run an efficient, nimble product factory. With this comes speed, and the ability to better allocate dollars and resources that directly affect a company’s bottom line. 

See also: Achieving Digital Balance in an Agency

Deliver at Scale

Nearly 70% of respondents felt that delivering big ideas at scale across a business is the biggest obstacle to creating value.

To me, this reads as follows: the importance of aligning all stakeholders on a cultural level to the process of running a product factory. I interpret a big idea to be launching an innovative product, bringing a new capability to the marketplace, creating a better business model or scaling at speed. I think the idea of being nimble rings true here as well.

Overcoming this obstacle begins with eliminating unnecessary IT burden and aligning resources with driving business, not bogging them down with upgrades or upkeep of software. 

There are carriers whose programs have blossomed running on evergreen systems with emerging technologies. This gives them the ability to innovate with speed and deliver at scale. Ten years ago, this agility was unheard of in insurance – it was uncommon to see carriers truly push the boundaries on maximizing technology capabilities. We are seeing dollars shift in real time, and the insurance industry continues to progress as a true innovator.

Competition Breeds Innovation

Over 90% of respondents felt there was scope for the insurance industry to increase its relevance and growth above and beyond inflation and general economic growth. 

This is the finding that has me most excited about working in insurance – and the bright future the industry has ahead of it. Competition always drives the biggest and brightest to achieve more. Historically, in insurance, larger players are known for selling products to the same customer base. So, competition was traditionally about better price and better coverage. 

Fast forward to today, and we’re at a level of maturity where we now focus on offering new capabilities, new ways to service customers and policies and more tailored coverage options. What this does is drive innovation, and the industry elevates itself from within. Yes, external pressures from industries that have forced the issue on what true customer service is have had a similar effect on insurance, but we’re now pushing each other to be more competitive. 

Looking back at the statistic, when I hear relevance I don’t necessarily think “more” product – I think that insurance will take a different place in the world and can reimagine its perception. Insurance companies have always been seen as recovery mechanisms. Technology is helping the industry delivery more for the economy and its people – it is taking control and helping people avoid problems from the outset. 

Preventative rather than recovery: Simple examples include detectors and sensors in homes or telematics in cars – examples that have shown promise early on but have never been truly delivered at scale, nor for a broader market. Preventive measures are now being monetized to avoid the pain and hassle with losses, particularly in lines like automotive, where dollars are going toward helping customers mitigate loss versus dealing with challenging recovery. 

See also: The ‘Race to Zero’ in Insurance SaaS

I believe we will see an explosion of growth in insurance as more companies take chances and accelerate what I believe will be a new standard in insurance -- freeing resources to solve more challenging problems, finding ways to mesh capabilities together to improve product offering and partnering with more innovative third parties to elevate services. 

This is an exciting time in insurance – creating a responsibility I know we don’t take lightly.

When it comes to thinking about how to secure data assets, deploy analytics and deliver intelligent automation, the question of "why are we doing this?" is well worth thinking through carefully. What is right for your business, and where do you strike the balance between people-focused and automated processes?

Those questions are the challenge underlying intelligent intervention. While the specifics of the answers will obviously vary by company, we believe they involve a common objective – to deploy the right resources to the situation at hand, whether that be full automation without underwriter or claims handler involvement, or a subject matter expert making the call based on insightful decision support.

The importance of data strategy

Any aspirations for achieving that objective will rely on granular data, and a culture that recognizes the power of data to both fully automate where it makes sense and provide critical decision support for underwriters and claims experts where it doesn’t.

Consequently, a data strategy will need to deliver a single, complete, consistent enterprise-wide source of facts relating to risk and non-risk activities. The strategy will also have to serve functional requirements for reporting, interactive dashboarding and data visualization to enable frictionless consumption of facts by key stakeholders/systems.

A suitable environment in terms of infrastructure, architecture, culture and tools will allow testing of new data sources and enable analytics and business teams to test hypotheses. Companies will also have to ensure that roles and responsibilities are clear and that there are internal control, governance and communication structures in place to leverage this data resource in pursuit of a single version of the truth.

Figure 1: A data strategy framework for breaking the cycle of poor data

As for the data itself, our view has long been that big data starts at home, so a lot of the gains can come from a company’s underlying data assets. There is undoubtedly a very large and growing source of invaluable third-party data available, but, without a core data asset to connect to, the value is diminished.

Insurers also have huge volumes of unstructured data, which is an area that will continue to offer significant potential competitive advantage. Improving loss cost analytics with claims reports, creating reusable insights from surveys and adapting claims strategies following court or medical reports are all possible. 

See also: COVID-19 and Need for Analytical Insurers

Automation and AI – a broad church

Moving on to how to apply that data, when companies think today of more automated approaches to underwriting, pricing and claims, either artificial intelligence (AI) or machine learning are often seen as the default solutions.  

To some extent, this stems from the overuse of the term AI or the broad use of the term. In fact, AI can encompass a huge breadth of technology, from very deep predictive models through to cognitive learning. Most of the industry spending to date has been at the predictive modeling end, and, while investment will expand through to the cognitive area as the technology matures, there are still very large gains to be made in claims and underwriting analytics using existing methods and approaches.

Deployment challenges

For companies needing motivation to act in this space, the huge range of challenges and uncertainty in the market - geopolitical and technological uncertainty, given the pace of change, as well as legal and regulation uncertainty – should be more than sufficient. The aim of pricing, underwriting and claims technology investment should be to create the capabilities to navigate this uncertainty.

Deployment challenges vary across insurers, but often manifest as lack of pace and agility. Insurers need an environment that enables technology and data to be used at pace to make great decisions at both product and portfolio level and link their technical and business communities. This will help ensure a rich seam of insight running backward and forward between internal communities.

Some companies were able to use technology and data to respond quickly to changes in the market. A recent example is the FSA announcements on new and renewal pricing. Leading insurers have been able to resolve their strategy and deploy adjusted rates inside a matter of days. Others have taken months. Equally, companies in the first group could be far more surgical in their approach and achieve better outcomes. 

COVID-19 only reinforces these challenges, but on a very large scale, presenting competitive opportunity for companies that are able to quickly adapt their underwriting rules or perhaps change their automated footprint.

Business-wide approach

An important point to recognize in intelligent intervention is that, important as it is, the technology itself is not the be all and end all. Intelligent use of automation and analytics is not a siloed activity and still, most certainly, involves people.

Some high-level challenges will need the time and attention of the business as a whole.

How will new technologies integrate with existing systems? Legacy systems are a fact of life for most (re)insurers and will often represent years of investment. Careful thought needs to be given to how to promote connectivity when implementing automation and decision support, including the benefits of capturing both structured and unstructured data, so that people within the business and customers who need information have it, when they want it.

Also, do we have the people and skills to make automation work for us? Not only will you probably need to tap in to a new and different talent stream, but you may be asking your existing people, such as underwriters and claims handlers, to work in new ways. Business culture, training, skills and career development, working practices and reward structures will all possibly need reviewing. 

Connected specialisms

The point is that automation in (re)insurance, or the use of automation for intelligent intervention at least, needs a connected, business-wide approach, albeit with a technological flavor. 

For example, some insurers already recognize that being highly effective at claims estimating opens up opportunities for their portfolio management, underwriting and actuarial teams. Reliable claims estimating provides these functions with a sound basis on which they can confidently make day-to-day business decisions, enabling them to be first movers in a market or agile in changing circumstances, both vital attributes in a highly competitive environment. The digitization of data assets delivers improved sophistication but also reduces frictional costs.  

See also: 7 ‘Laws of Zero’ Will Shape Future

Asking the right questions

Albert Einstein said, “The measure of intelligence is the ability to change.” It’s no coincidence that, in our experience, companies that do analytics and automation well and with a clear strategy linking pricing, underwriting and claims are best placed to use them to initiate intelligent interventions. The flexibility, agility, speed to market and cost savings that typically come with them naturally deliver benefits from both effectiveness and operational efficiency. 

That’s why, when it comes to analytics and automation technology, asking the right questions and addressing the right challenges and issues is critical. Pursuing loss ratio benefits, essentially a measure of effectiveness, will deliver efficiency savings, too.