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How Insurance Can Be Like a Smartphone Paul Carroll, Editor-in-Chief of ITL The theory goes that, in time, every industry becomes a technology industry. Well, what if we thought of insurance as akin to an electronic device and gave it an operating system, like what we’ve seen in recent decades with computers and smartphones? The power of operating systems is undeniable. IBM surged to the forefront of the computer industry in the 1960s when it developed an operating system that ran on all its mainframes, meaning that software written for one model could run on any other model in the family. Digital Equipment opened the market for minicomputers in the 1970s with the operating system that tied together its VAX line. The Microsoft operating system that ran on the original IBM PC and compatibles ushered in the personal computer revolution in the 1980s by creating a large enough, unified market that it attracted software developers in droves. The Apple and Google operating systems for smartphones have likewise provided a platform for vast arrays of apps and services, making the devices so valuable that we rarely leave them out of arm’s reach. Along the way, those operating systems created tens of trillions of dollars of value for shareholders, customers and the developers of apps and services. (Microsoft, Apple and Google, alone, have a combined market value of some $6.5 trillion, and the operating systems have played a key role.) What could an operating system look like in the insurance industry? continue reading > Your Future Awaits Find out how Majesco’s winning combination of next gen technologies and vibrant ecosystem of partners is helping insurers build a field of insurance dreams Learn More SIX THINGS Can You Automate Coffee and Donuts? by Alex Frommeyer Here’s a look at how the digital-first benefits shopping experience works – and why it works so well. Read More 3 Keys to Building a Safety Culture by Pat Stoik A strong safety culture can actually save your company money if it avoids incidents and delays. 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 How to Protect Those Who Need It Most by Bernhard Klein Wassink An EY survey of consumers reveals how the pandemic shifted financial well-being and prompted interest in new insurance protections. Read More Perspective on the Pandemic by Mark Webb Policymakers must identify how to integrate workers’ compensation programs into an overall commitment to worker security. Read More Survey Data Is Your Secret Weapon by Tara Kelly The pandemic is changing customer expectations, and carriers and agencies need data to map out a strategy to meet evolving needs. Read More Pressures on Insurer Asset Management by Christopher Dvorak Here are two principles that will help insurers take control of the whole office in their asset management operations. 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 SEPTEMBER FOCUS: Life Insurance   "...It seems to me that the lines will increasingly blur between life insurance and financial management, given that life insurance is an important financial asset; people often think about their finances, and life insurance can become a natural part of that focus. I could also see the trend toward embedded insurance expanding the life insurance market — why couldn’t a term life policy be, for instance, embedded in a mortgage when someone buys a building, to make sure the purchase is secure even if something happens to the buyer? Over the years, I’ve had people tell me life insurance is boring. I don’t see it that way at all." 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

Most people still think in terms of returning to work and life as we knew it once the pandemic is over. Meanwhile, return-to-office plans continue to be disrupted, impeding any real chance to test out hybrid models, which many have held out hope for as a longer-term solution. Return to work and life as we once knew it is increasingly improbable for two main reasons: Work in the future will never again resemble what it did in the past, and there will be no “all clear” sounded to signal the end of the pandemic. It will likely linger until herd immunity is reached, and the virus will continue to mutate until then. 

But there is good reason for optimism – great news, in fact – about these two new realities. Ever since man discovered fire and invented the wheel, when we need to evolve we leverage human ingenuity and technology to make work and life less stressful, more productive and safer than it ever has been. Although chaotic, most companies and organizations passed the test of shifting to and sustaining remote working. And much of this happened on an emergency basis with little planning or design. Imagine how much more effective could be more thoughtful and deliberate strategies for future-forward work environments.

Because we work in the broad insurance ecosystem, we will make references to how the future of work may affect these segments with a focus on inside work, but there will be no industry or business segment unaffected by these changes.

Short-Term Impact

Workers and their employers have learned that working from home is not only possible but preferable whether permanent, complete or partial. Corporations, including insurance companies that have relied on a “brick and mortar” infrastructure for over a century, are subletting and selling off headquarters and regional properties, cutting overhead and preparing for a work-from-home model for a majority of their workforce. Additionally, office space is shrinking, and work spaces are being redesigned in “hoteling” models in which full-time and hybrid employees reserve available fully equipped work areas for their time and meetings in office. Corner and window offices are becoming fewer; relics of the past. 

Several factors have conspired to drive unprecedented migration from cities to suburbs and beyond. This is a consequence of the combination of health-based fear of living in the close quarters of an urban lifestyle and reluctance to use public transportation, as well as fear of violent crime. People who have migrated to suburbs are not likely to return to the city or their workplaces anytime soon. 

Working from home, setting aside its many attractions to workers, also has its challenges.

See also: Tomorrow’s Insurance Is Connected

Screen fatigue has set in, not only from the endless series of video chat meetings but also from the lack of physical contact and camaraderie – the “watercooler” chats. Leaders are challenged with onboarding new employees remotely and are concerned with everything from gauging productivity to visibility, spontaneous innovation and sustaining organizational culture. In response, some companies are beginning to offer mental health and wellness support services to staff who appear to need it or want it. 

On top of these downsides, companies are experiencing worker shortages as some have moved to the unemployment sidelines and others are resigning in ever greater numbers as they find new careers from the freedom of their home office desks with companies that offer more appealing opportunities, including new digital approaches to workforce management and collaboration.

The New Workforce

Millennials are the largest generation in the workforce, and Gen Z is the only other generation whose representation in the workforce is growing. According to research from Aon, Gen Z makes up 20% of the U.S. population, while millennials account for 50%. Businesses need to understand these changes, tailor business models and focus their attention toward understanding the employment preferences of younger generations mixed in with an aging insurance workforce. 

In 10 years, Gen Z will make up 20% to 30% of the workforce – if our industry hopes to attract these future workers, digitization and transparent communication will be essential. Younger generations are less reluctant to voice their opinions or to be vocal agents for change, and working in a distributed model can make opinion and idea sharing even more difficult.

ACORD, the non-profit, insurance industry-owned organization, has done research showing that the insurance industry ranks below mining and manufacturing when it comes to attracting, developing and retaining young talent, even though insurance value systems align with those of millennials and Gen Z. 

“Gen Z is more comfortable in an online ecosystem than other generations, millennials included. Being digitally native is a unique characteristic of this group and something that is really going to mold the experiences companies will create for them,” said Dave Zeornes, sales leader at Aon Programs.

Recent graduates don’t want to work with obsolete technology or deal with paper anymore. “Gen Z is more open to change than any other generation,” Zeornes added. “They have the opportunity to build on what previous generations have done, revolutionize and change the world of insurance. It’s the responsibility of the current people in the industry to recruit new talent with fresh ideas -- the future of insurance lies on the shoulders of Gen Z.”

In addition, upskilling of the older segment of the workforce is becoming imperative as new technologies are performing lower-level, repetitive tasks, leaving employers to capitalize on the experience and judgment of displaced workers through retraining. The demand for, and value of, collaboration among work teams is paramount during these changing conditions.

Collaboration to the Rescue

Virtual collaboration tools and platforms are quickly emerging as one of the key solutions to these challenges.  

We first learned about the Balloon collaboration platform when a colleague sent us an article titled "Dartmouth Transforms Its Candidate Evaluation Process With Balloon." You can read the whole piece here. But what really grabbed our attention was this statement – “Balloon reduces meeting time by 70%.” Can you imagine the value of that savings multiplied across all meetings in all industries? 

This led to a discussion with Balloon’s founder Amanda Greenberg to learn more. Balloon is a platform that unlocks ideas, feedback and insights by eliminating groupthink from collaboration and amplifying unheard voices in the workplace. The platform is used by teams and companies of all sizes, including Amazon, MasterClass, VMware and Google. Balloon’s workflow helps facilitate frictionless cross-team collaboration, boosts productivity and makes synthesizing information and identifying top priorities easier — so they can make better decisions, faster, ultimately resulting in more revenue-generating actions. Increasing meeting efficiency alone is crucial to forward-looking work strategies.

See also: Big Opportunities in Insurance Ecosystems

The following recent quote nicely summarizes Balloon’s design concept. It is from Betty Liu, the noted author and journalist who also partners with Balloon as a template author: “Arguing your point starts a debate. Asking questions starts a dialogue.”     

As organizations embark on the largest social experiment in human history, our new normal — or normal of now — requires a focus on culture, purpose, trust and psychological safety. While the pandemic’s effects continue to accelerate our future of work and expedite our human transformation to digital creation, they impose even greater burdens on digital leaders to inspire, motivate and adapt human potential. Employers are implementing flexible organizational structures, virtual and asynchronous collaboration tools, and empathetic leadership to create effective hybrid workplaces.

We will continue to identify and share with our readers and clients new and emerging technologies such as Balloon that will enable companies of all sizes and types to transform, adapt to the new future of work and leverage the people they employ in very new and more effective ways.

The theory goes that, in time, every industry becomes a technology industry. Well, what if we thought of insurance as akin to an electronic device and gave it an operating system, like what we've seen in recent decades with computers and smartphones?

The power of operating systems is undeniable. IBM surged to the forefront of the computer industry in the 1960s when it developed an operating system that ran on all its mainframes, meaning that software written for one model could run on any other model in the family. Digital Equipment opened the market for minicomputers in the 1970s with the operating system that tied together its VAX line. The Microsoft operating system that ran on the original IBM PC and compatibles ushered in the personal computer revolution in the 1980s by creating a large enough, unified market that it attracted software developers in droves. The Apple and Google operating systems for smartphones have likewise provided a platform for vast arrays of apps and services, making the devices so valuable that we rarely leave them out of arm's reach.

Along the way, those operating systems created tens of trillions of dollars of value for shareholders, customers and the developers of apps and services. (Microsoft, Apple and Google, alone, have a combined market value of some $6.5 trillion, and the operating systems have played a key role.)

What could an operating system look like in the insurance industry?

When you look at, say, the historical development of Microsoft's operating system, you can see where an OS begins, how long it takes to develop and what the potential is.

Back in 1981, when the IBM PC was introduced, the OS was as rudimentary as could be. When you turned on the computer, you were greeted with a screen that, in its entirety, showed: "C:\_" -- you had to have the relevant commands memorized to actually do anything. Widgets that we have long taken for granted, such as a calculator or a clock, had to be installed as separate pieces of software. Connecting to another computer via modem was even more complicated.

But MS/DOS was enough to get the PC revolution going. Windows 3.0 added a graphical user interface in 1990, and the operating system has steadily increased in power since then -- not so much from its own merits as from the ecosystem it allowed. Graphics programs, communication software, etc. all plugged into Windows and enhanced it, eventually getting absorbed into it. The advent of the internet browser took the PC to a whole new level in the mid-1990s and attracted its own enhancements -- e.g., Wikipedia, which gave us all encyclopedic knowledge in moments.

Insurance is in the very early days. It's still digitizing many processes that have been analog for forever. Think of how many applications still happen on paper and how many checks are mailed. But the digitizing means that pieces of the insurance process can be pulled together without respect to physical location, in a trend called "open insurance" that is taking us toward that powerful goal of an industrywide operating system.

The result will be an industrywide ability to easily share information and cooperate across corporate and even industry boundaries, along the lines of the sharing of data and work across files and programs within a personal computer that mean even something as technologically complex as a Zoom call can be treated as a single task rather than as a long series of discrete steps.

While insurers have traditionally taken a go-it-alone approach that has meant relying on proprietary data and having all aspects of the insurance process take place within the insurers' four walls, those constraints will disappear in a world of open insurance. Insurers will be able to take in more data and price risk more accurately -- while offering new products and services. Insurers will augment distribution channels by incorporating nontraditional outlets, such as car dealers, which can offer insurance when someone buys a vehicle. And insurers will be able to cut costs, because efficient services from third parties will more easily be incorporated into their processes.

There is risk, as well as opportunity. When products, services and processes can plug into an operating system, they become interchangeable parts -- often creating a winner-takes-all competition. We didn't wind up with a whole bunch of spreadsheets on PCs; we pretty much all wound up with Excel. If you're fortunate enough to have the best claims processing system or distribution or underwriting, then you're in great shape, because you'll be able to sell them as services to others. But if you aren't the best, then you'll likely need to purchase the most efficient system from someone else and may eventually find your company hollowed out.

If you're interested in reading more on the issue -- and I think it's perhaps the most profound technological change the industry faces -- we've published any number of articles on parts of the phenomenon. Here is something I wrote at the beginning of the year on the importance of the ecosystems that will form once corporate barriers break down. Here is a link to a webinar I hosted at the Future of Risk conference in May on application programming interfaces (APIs), the technical standards that allow for collaboration. And here is a piece we published earlier this month on how embedded insurance -- those car insurance sales via the car dealer -- has reached a tipping point.

I'd point you to two other recent pieces, as well. Here is a smart piece via Medium that explores the implications of sharing data and capabilities. And here is a full-on report from Accenture, which explores what insurers can learn from the banking industry and details areas where open insurance can drastically improve what the industry offers.

In the end, the industry may not be able to go as far as the personal computer industry did. That's because there won't be one company that controls the operating system as completely as Microsoft did with PCs and as Apple did with the Mac. The industry will operate more as the looser amalgam of apps and services that mostly self-organize on Google's Android OS.

Still, the industry is clearly moving toward some sort of operating system that builds on all the individual corporate efforts at digitizing, and it's never too soon to start contemplating how to best take advantage.

Cheers,

Paul

On March 2, the California Future of Work Commission released its final report. It includes the key findings and its recommendation for a new social compact for work and workers in California by 2030. When the commission began its work in 2019, the focus was on technological disruption of traditional employment. But, as the report notes, “The pandemic has amplified and accelerated existing trends and challenges, bringing many aspects of the future of work forward.” 

The report is must reading for all in the workers’ compensation community — even if the words “workers’ compensation” do not appear in it.

In its broadest sense, the report calls for specific steps to create a comprehensive, secure environment for workers. This environment includes material and physical security both at work and in society in general. As such, in the report’s 15 recommendations there are familiar themes of wage adequacy and, acknowledging the intervening COVID-19 pandemic, the need for a safe workplace. For example:

“Essential and front-line workers face both economic vulnerabilities and health and safety risks, and are disproportionately female and workers of color.”

“Front-line workers and workers who must be physically present to work must have support to enable them to stay home when sick, have access to appropriate protective equipment, and be ensured safe and sanitary workplaces.”

These, and the other recommendations in the report, are a catalogue of issues that have been confronting policymakers in city halls, state capitals and Washington, D.C., for the past decade. California is at the forefront of this debate, from local jurisdictions adopting hazard pay ordinances and challenging the “gig” economy, to the OSHA Standards Board implementing their COVID-19 Prevention Emergency Temporary Standard, to the many new employment-related state laws, including Assembly Bill 5 adopting the “ABC Test” for worker classification disputes. Much of what the commission identifies as a new social contract would seem to be resting on an existing – and expanding – foundation made in California.

We remain in the midst of the pandemic. While states and the federal government have eased many  restrictions on activities due to vaccinations and corresponding decreasing infection rates, the laws, regulations and executive orders emerging from this crisis create public policy issues extending well beyond reopening. One of the many challenges facing America in general, and California in particular, is defining what “normal” is to become. 

The infusion of massive amounts of public funds into businesses and to individuals makes a return to the status quo ante COVID virtually impossible. State and federal budgets contain trillions of dollars of expenditures to support economic recovery. It is unrealistic to expect individuals in low-paying essential critical infrastructure jobs to continue to participate fully in a “recovered” economy after losing supplemental paid sick leave and, in some cases, higher wages associated with working in a hazardous vocation. 

For employers and employees, the exigent circumstances that caused the creation of supplemental paid sick leave and hazard pay for essential workers should not be looked at in isolation. This is part of a bigger picture that began years ago with efforts to make a $15-per-hour minimum wage the law in all states and for the federal government and implicates the still highly unsettled world of worker classification. Yes, the long reach of the Dynamex decision extends to the post-COVID future of work. So, too, does the equally unsettled world of co-employment. And not just in California.

Whether Congress will pass the Protecting the Right to Organize (PRO) Act is certainly in doubt, at least as long as the filibuster exists in the Senate. But the president has said he will sign it if it gets to his desk. Among its many provisions is bringing the “ABC Test” of Dynamex to the entire country. 

What does this have to do with assessing the workers’ compensation long-term public policy effects of COVID-19? Quite a lot, actually. 

Policymakers cannot meet the objectives of the commission’s report, or the PRO Act, or any of  hundreds of other laws, regulations and ordinances if they reduce the discussion of workers’ compensation to a debate over what is presumed to be a work-related injury. Policymakers must identify how to integrate workers’ compensation programs into an overall commitment to worker security implicit in the commission’s work and similar endeavors across the country. While currently focused on COVID, this effort must extend well beyond the pandemic.

See also: Pandemic Reshapes Personal Lines Plans

Consider this excerpt from the pre-pandemic directive of the Obama administration, the Presidential Policy Directive -- Critical Infrastructure Security and Resilience (PPD-21), released Feb. 12, 2013:

“Critical infrastructure must be secure and able to withstand and rapidly recover from all hazards. Achieving this will require integration with the national preparedness system across prevention, protection, mitigation, response and recovery.…The term ‘all hazards’ means a threat or an incident, natural or manmade, that warrants action to protect life, property, the environment and public health or safety, and to minimize disruptions of government, social or economic activities. It includes natural disasters, cyber incidents, industrial accidents, pandemics, acts of terrorism, sabotage and destructive criminal activity targeting critical infrastructure.”

For large businesses – including insurers – this process of prevention, protection, mitigation, response and recovery is the basis for enterprise risk management. For small businesses and entrepreneurs, developing a risk awareness and response program is more difficult. As COVID-19 has shown, when there is a threat to critical infrastructure, the risk to employees is not limited to the workplace. The commission report underscores that the scope of risk to workers during the pandemic is also more than to health, as employees in businesses, such as hospitality or restaurants, can attest given the high level of unemployment caused by stay-home orders and travel restrictions.

As we move forward, there needs to be a comprehensive effort to integrate the public and private institutional response to the next event placing critical infrastructure at risk. That effort involves all who will be expected to contribute to the resiliency and recovery of not only our essential critical infrastructure, but of the essential workers without whom no recovery can happen.

Insurance company demand for survey data has increased dramatically. It’s easy to understand why. Carriers and agencies know the pandemic and its social and economic fallout have changed customer habits and altered the marketplace. They want to understand how those changes will affect them, and they need data to map out a strategy to meet evolving customer expectations. That’s smart business. 

Insurers use surveys like net promoter scores (NPS) and customer satisfaction scores (CSAT) to gain insight into how customers view their company and the services they provide. But it’s important to keep in mind that it’s a continuing project because customer attitudes change in response to events and evolve over time, especially when market shifts are occurring as rapidly as they are now.   

NPS surveys ask customers to rate the likelihood of recommending your company or service to a friend, and, when you monitor NPS trends over time, you can get early warning if trouble is brewing or stay informed when customer perceptions remain steady or improve. This business intelligence can help you respond to trends quickly so you can keep customers on board.  

Carriers and agencies use CSAT surveys to gauge satisfaction on a range of products, services and processes. Customer satisfaction is always important, but more companies than ever are interested in collecting customer satisfaction data now because of what a recent McKinsey report calls a “loyalty shakeup” that has up to 30% to 40% of customers looking to switch brands.  

Gathering Survey Data Beyond the Basics 

Customer attitudes toward the carrier or agency are important, but it makes sense for insurance agencies to survey policyholder attitudes toward claims adjusters, too. Contact with an adjuster is the moment of truth for customers, who rely on their insurer for support under challenging circumstances. They expect to be contacted quickly and to receive information and compensation rapidly, too.   

Leading carriers are already conducting surveys on adjusters to stay in touch with what’s happening in the field. A customer survey following an interaction with a claims adjuster can also give agencies important insight into how customers perceive the relationship and the service they received. That can give agency leaders more data for making decisions on carriers and adjuster relationships.  

Gauging employee sentiment is also critical now because staff turnover is sky high. “The Great Resignation” cuts across industries — millions of workers are quitting their jobs and searching for work that gives them more purpose, time, flexibility or money. The current labor shortage makes it harder for insurers to replace departing employees, so it’s better to keep current talent onboard when possible. 

These are all excellent reasons to expand survey activities beyond gathering basic intelligence on customer attitudes toward the carrier or agency and products and services. With more insight on customer encounters with adjusters, agencies can improve service quality. With more information on employee satisfaction, carriers and agencies can ensure service quality  

See also: Collective Response to Data Resiliency

Getting the Right Data — And Following Up 

Surveys can improve insurer operations on a number of fronts, but, first, it’s critical to get the right data. That means creating surveys that elicit higher response rates by wording them in a way that encourages customer engagement. It also requires sending surveys across different channels to meet customers where they are, whether via automated calls, texts or emails.  

It’s also important to have the right processes and workflows in place and analytics and tools that can deliver actionable data in real time. To take decisive action, insurers need reports that are relevant to the industry and easy to interpret. These capabilities enable the insurer to collect feedback — and act on it quickly. 

At the end of the day, what the agency or carrier does with the insights the survey data reveals is what matters the most. Companies that survey customers and employees signal that they care, just by asking for feedback. Companies that follow up on the insights customers and employees provide with action and improvements earn loyalty. That’s how to stay competitive in an evolving economy.  

Before the pandemic, HR administrators often relied on personal relationships with brokers to find the right benefits packages. Coffee meetings, lunches and happy hours were typically how both groups shared information about pricing and plans.

Then came the shift to remote work, and many were introduced to the digital benefits marketplace for the first time. 

This nudge turned out to be a good thing for the benefits world: Brokers and employee benefits managers quickly realized how seamless the quoting and purchase process can be with insurance providers that leverage technology. By embracing digital tools, they now have better means to discover and compare packages than they would offline.

Here’s a look at how the digital-first benefits shopping experience works – and why it works so well.

Digital Platforms Enable Self-Service for Brokers and Employers

It’s a lot easier to make informed decisions about benefits packages when all the details you need are at your fingertips online. 

Benefits shopping used to revolve around presentations, normally involving a broker showing up with coffee and donuts to talk to HR teams or other decision makers about a benefits package for the coming plan year. It takes a while to communicate a complex benefits package, and the presentation may not cover all the criteria benefits managers and brokers need to evaluate the package. 

To compare multiple carriers and multiple benefits (like health, dental, vision, life and disability) simultaneously, brokers often put together a spreadsheet with the high-level view of each option, with a recommendation. Details and deeper comparison factors are not easy to surface, and real-time customization of plan design and price is nearly impossible.  

Instead, digital platforms from insurance providers via websites and apps give brokers and employee benefits managers a self-service option. They can get all the package information they need up-front, any time, anywhere. They can also refer back to the platform at any point in the decision-making process as they compare with other packages.

For HR folks and brokers who want more intimate customer service, many digital platforms still provide options to speak with someone over the phone or email for personalized support. But for those who just want to get in and out of a website to find what they need without talking to a salesperson, a digital platform is a much smoother experience.

Automated Underwriting Eliminates Back-and-Forth in Quoting

Getting a quote for a benefits package can be slow and frustrating. If an employer has custom product needs, it may take more time for an insurance representative to relay back and forth with the broker.

An automated underwriting process, on the other hand, streamlines the quoting process to provide self-service pricing information in real time. 

One example of simplified pricing online is our digital quoting tool. It enables brokers to input employer information, receive a quote and complete underwriting in seconds. Automation handles all the data analysis. The broker can iterate on the quote on their own with the tool, no need to contact a rep.

Automated underwriting also decreases the odds of human error in putting together a quote. Brokers can be confident that the quotes they receive promptly through digital platforms are accurate and dynamic enough to reflect the employer’s insurance needs and risk profile.

See also: Achieving Digital Balance in an Agency

Digital-First Insurance Providers Have Innovation Baked In

Another advantage of shopping for benefits online is that, when a provider prioritizes digital channels for sales, it’s usually a good indicator that the provider leverages technology to improve its product, especially if it’s an insurtech keen on disrupting the market.

Automated underwriting doesn’t just accelerate the sales cycle and create a better shopping experience for brokers and benefits managers – it can more accurately predict a company’s or individual’s risk profile to provide fair pricing.

And it can also be less biased. A number of insurance providers base underwriting on factors like race and gender that can lead to discrimination in package pricing. Underwriting with tools like artificial intelligence and machine learning can easily filter through the risk factors that matter most to identify the level of coverage needed.

Online Benefits Shopping Is Here to Stay

There’s no need to mourn the old-school method of benefits shopping for employee benefits managers and brokers.

Digital benefits platforms make the process easier for everyone. There may be no donuts involved, but they’ll give everyone in the benefit ecosystem so much time back that they can go buy some themselves.

The insurance asset management landscape has been evolving for some time now, particularly as long stretches of low interest rates have pushed many insurers beyond their fixed income comfort zones. 

At the same time, the industry-wide push for digital transformation has brought glaring attention to the need for new technology to replace legacy systems that many insurers have leaned on for decades, as well as the need to master data management. 

As insurers grapple with changing times and technology, piecemeal solutions will not do. Insurers need a holistic, integrated solution to take them into the next era of asset management.

Key pressures of the insurance asset management landscape

The challenges to insurance investment portfolios stem from three major themes:

• Evolving asset mix within a low-interest-rate environment — While insurers relied on fixed income investments for years to create returns and maintain their desired ratios, sustained periods of low interest rates forced many to adapt. Many have turned to equities and alternatives. According to a 2021 survey of insurers by Goldman Sachs Asset Management, 34% are ready to take on more portfolio risk. However, as insurers take on more complex private investments, they face the inherent challenge of gaining insight and transparency into how these investments are affecting their portfolios.
• Managing more data — With a broader investment mix, insurers will confront an expanding array of data that will need to be managed and shared across teams and stages of the investment lifecycle. Moving into riskier, multi-asset strategies means data is key, but if insurers can’t capture, consolidate and unlock insights from that data, they’ll encounter major blind spots as they seek to make informed decisions while managing their portfolios.
• Adopting new technology in the right manner — The legacy systems that insurers have leaned on for decades no longer serve them as insurance portfolios continue to shift from fixed income-heavy strategies to multi-asset strategies. It’s possible that existing platforms will not be able to support alternative investments like private equity, real estate and hedge funds, requiring insurers to spread their investment operations across multiple siloed tools, further complicating the data management challenge. 

Finding the right path forward into a new era

To effectively oversee the expanded asset mix in insurance portfolios and optimize alpha creation, insurers need to adopt an integrated approach to technology and data practices. At a high level, consider how components of the investment lifecycle – the front, middle and back office – fit together into a whole office rather than viewing them as segmented, individual pieces. From front office investment decisions to middle office trade execution to back office reporting and accounting, the data from each activity feeds into the others. Because they all must integrate, viewing each activity as a separate domain will leave insurers with siloed data and operations, reducing overall efficiency.

See also: Boosting Cyber Hygiene With Insurtech

In transforming insurance investment operating models for the current era, two principles can guide decisions on how to scale up: 

• Partnerships — Insurers have a history of building their own technology, customized to their particular needs. But that is changing along with the asset mix in investments. Consider the time and resource requirements if building investment and accounting tech in-house, versus the resources needed to develop and maintain client-facing applications. Many industry partners can offer existing technology to answer insurers’ needs alongside expert guidance and service.
• Integration — Impressive fintech solutions are being developed at a rapid pace, but they need to be properly integrated with the whole office to truly optimize the investment process. Managing just a few technology partnerships for investment operations can serve the investment team better than working across numerous different platforms and solutions. With this in mind, industry partners that can offer multiple capabilities and can integrate those capabilities offer a crucial benefit to insurers as they take on a challenging transformation of their investment management model. 

Insurers have reached an important investing crossroads. Low interest rates may last for some time, and even when they do climb an embrace of alternative assets has changed how insurers are able to drive alpha in their portfolios.

It’s hard to overstate the importance of technology and data in today’s world, and getting a firm handle on both is crucial to decision making. As insurers work through investment management pressures, finding the right partners will help to optimize the whole office of their investment lifecycle.

A 'Future History' of Insurance Paul Carroll, Editor-in-Chief of ITL In the consulting work my partner Chunka Mui and I have done with senior management at major companies over the past dozen years, the most useful strategic planning tool we’ve developed is what we call a “future history.” I’d like to try to apply that tool broadly, to the entire insurance industry. And I’d like your help. continue reading > New Podcast Alert Join Denise Garth, Chief Strategy Officer at Majesco, and Bryan Falchuk, Founder and Managing Partner for Insurance Evolution Partners, in discussing his latest book, “The Future of Insurance: From Disruption to Evolution, Volume II.” Listen Now SIX THINGS Getting to ‘Amazon-Like’ Auto Claims by Stephen Applebaum Digitization of thousands of steps and integration among participants is enabling an “Amazon standard" for customer experience. Read More Pivotal Moment for Innovation in Auto by Sameer Dewan As car traffic picks up again, insurers must innovate on claims processing, offer risk management advice -- and much more. 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 Latest Insights on Customer Behavior by Mary Parsons Increasingly, people no longer view insurance as a transaction – instead, they see insurance as a part of their overall financial wellbeing. Read More Power of Partner Ecosystems by Denise Garth Insurers seem stuck in traditional channels rather than expanding channel choice and reach, meeting customers where and when they want. Read More How Do You Sell if No One Answers a Phone? by Marybeth Degeorgis Here are five of the best practices that insurers can leverage to rebuild trust in voice communications. Read More Policy Admin Systems Are Evolving by Martin Higgins Modern solutions, including cloud-based options and lower-cost implementations, are redefining what constitutes a policy administration system. Read More MORE FROM ITL 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 SEPTEMBER FOCUS: Life Insurance   "...It seems to me that the lines will increasingly blur between life insurance and financial management, given that life insurance is an important financial asset; people often think about their finances, and life insurance can become a natural part of that focus. I could also see the trend toward embedded insurance expanding the life insurance market — why couldn’t a term life policy be, for instance, embedded in a mortgage when someone buys a building, to make sure the purchase is secure even if something happens to the buyer? Over the years, I’ve had people tell me life insurance is boring. I don’t see it that way at all." 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

Mitigating risk requires strategic planning. However, if you form a strategy, then print it on paper, toss that binder on a shelf and forget about it, that totally defeats the purpose.

With safety, in particular, we need more than just a neglected document. We need a culture that employees live and breathe. Whether that safety culture is driven by technology or policy, it should be woven into the very fabric of company operations. 

Let’s apply this to the supply chain. 

The basic intention is to move goods and services around the globe as smoothly as possible. In this industry, where so many variables are constantly changing and goods are exchanging hands, operating within a safety culture creates an environment that is less likely to have a disruption or delay. Oftentimes, when companies investigate incidents, they find that proper protocols may have been in place but were not followed. 

A proper safety culture is first and foremost about ensuring employees’ safety and well-being, but there are other benefits as well. A strong safety culture can actually save your company money if it avoids incidents and delays. Let’s dive into how exactly a company can foster a culture of safety.

Communication leads to efficiency 

A hold up at any point along the chain has a domino effect of disruptive consequences for all ensuing steps. Safety shortcuts that seem like a time saver in the moment can end up doing the exact opposite. It’s important to make efficiency a priority over speed and to support that goal through clear communication. 

Consider a manufacturing plant where a worker is required to shut off a machine, lock it and deploy the safety shield before leaving that station, even if the person is taking a break that’s shorter than the time it takes to ensure those safety measures. There's a risk if those three things don’t happen. 

The potential consequences are a serious injury, or worse, and representatives from Occupational Safety and Health Administration (OSHA) coming to investigate the operation. That creates a bottleneck early in the supply chain process and delays future steps. 

Adopting a safety culture starts at the top. Management needs to make priorities visible so employees adjust their frame of mind accordingly. If it is perceived that the priority is to push the limit of speed at the manufacturing plant, it’s no surprise that an employee wouldn’t shut off a machine, lock it and ensure the safety shield is deployed before taking a quick bathroom break. The potential consequences of speed would actually hinder efficiency in this case.

Having signs within the plant that clearly identify a safe working environment as the top priority can help assure employees that expediency is not tied to their paycheck. This clear communication allows them to be more diligent about their work, more productive and willing to go the extra mile because there is mutual loyalty. Using safety as an incentive, perhaps offering a reward for accomplishing milestones of incident-free work, can help drive home its importance. 

See also: 4 Keys to Online Safety Training

Technology can help realize insurance savings

An unsafe working environment can come with exorbitant insurance costs that will hurt profit margins. If that occurs, it’s usually followed by a downward spiral. Lower profit margins lead to cutting corners, which leads to more accidents and more insurance claims. Stopping that vicious cycle before it gets out of control is the best strategy. 

Because those costs can be so high, forward-thinking companies are willing to invest in risk-management tools that provide a more active approach. 

For example, a trucking company could install a system on each cab that tracks speed and braking habits, accounts for speed limits and weather conditions and provides data to the company. The company needs to follow through on the data, coaching any driver who isn’t safe on the road and offering tools to develop safer behavior.

Companies also might install devices within cargo shipments that monitor the goods being shipped and immediately alert local law enforcement if the truck or cargo is somehow stolen.

Gathering data, and then using it to change behaviors that foster a safer environment, is a powerful tool. Lowering the frequency of incidents generates data that provides leverage when negotiating insurance terms and conditions. Underwriters can see that the data is acted upon and that those actions yield safer results. Companies that can prove this have an advantage, which can result in lower insurance premiums.

Engaged employees keep business going

A safety culture won’t work unless employees buy in and see a benefit beyond the company’s bottom line. Through training efforts, management can make sure that employees see the value and are engaged with the safety culture. 

Any incident is a disruption to business, and some are more quantifiable than others, but employees can help mitigate most of them. Even if an incident results in an insurance payment, and therefore doesn’t have a huge financial impact, there could be other costly ramifications. Perhaps a vendor becomes aware of an incident and chooses to stop doing business with you based on how you operate. 

While it may not always get recognition, erring on the side of safety keeps business running smoothly. It’s difficult to quantify the benefit for a grocery store that ensures non-slip flooring and has well-trained employees that are quick to clean up a spill, limiting slip-and-fall accidents and potential insurance claims. Some societal benefits may go unnoticed, but they are important valuable. If employees didn’t notice the spill in aisle five, or were too slow to clean it up, and a customer were to slip, fall and sue, the cost of liability plus the reputational harm may be enough to threaten the store’s ability to remain open. 

See also: 5 Safety Keys for COVID-Era Building

Being hit in the financial pocket, whether from legal costs or a damaged reputation, always gets an owner’s attention and usually results in a greater emphasis on safety culture. Ensuring that employees are focusing on safety before an incident happens can avoid loss of revenue and reputational hits.

If you truly make safety a part of your culture, that will flow through the organization and throughout the supply chain. Partnering with companies that value a safety culture will help ensure the supply chain operates more efficiently and with less disruption.

In brief

• The EY 2021 Global Insurance Consumer Survey explored the financial anxiety caused by COVID-19, how consumers plan to respond and the protections they want now.
• The pandemic’s powerful financial and psychological effects were felt most intensely by younger consumers and in emerging markets.
• Given increased consumer interest, there is huge opportunity for insurers that develop accessible, purpose-led solutions and update distribution channels.

For consumers, the COVID-19 pandemic has been the equivalent of a massive life event. Its broad-based and multi-dimensional effects were felt psychologically, emotionally and economically. The profound financial impacts forced people around the world to reassess their priorities, goals and needs — indeed their entire lifestyles in some cases.

Widespread health concerns, pervasive economic uncertainties and strict lockdowns bound people around the world into a shared experience of unprecedented scale. But while anxiety and psychological effects were felt universally, it truly has been a tale of two pandemics, financially speaking.

Consumers in emerging markets were hit harder than those in mature economies, both in terms of their health and finances. They faced more severe consequences such as job loss, reduction in working schedules and the need to dip into savings. Younger generations were more heavily affected financially, while older citizens faced a greater mortality risk. Of course, many of these initial effects are still lingering as the virus persists.

Recent EY research confirms how the pandemic fundamentally changed consumer needs, how they plan to increase their financial security and what insurers can do to seize the opportunity. Between May and August 2021, EY surveyed 4,200 people in seven countries (Brazil, Canada, Japan, the Netherlands, the Philippines, South Africa and the U.S.) about the pandemic’s financial impacts, respondents’ plans going forward, their interest in different types of insurance products and their buying preferences (see full methodology). We also spoke to people in cities across the world to get their perspective.

The results of our research reveal consumers’ interest in new products, with strong value propositions and specific features, and an openness to interact and buy in new ways. Insurers will need to engage consumers with empathy, develop solutions that strengthen financial well-being, innovate their product sets and optimize digital distribution channels. Ultimately, insurers must live their purpose of providing protection to those who need it most, with an eye toward bridging the protection gap.

The four key findings from the EY 2021 Global Insurance Consumer Survey:

1. The pandemic caused almost universal anxiety, which has prompted consumers to take action and increased their interest in new protections.
2. Beyond the shared psychological impacts, emerging markets and younger generations took the biggest financial hit and show the greatest interest in new products.
3. Emerging market consumers are digitally savvy, open to sharing data and ready to buy new products in new ways.
4. Because corporate social responsibility matters to consumers, insurers need to stand behind great values as well as great products.

How consumers plan to respond to universal financial anxiety — Short-term protections are the priority.

The threats of the COVID-19 pandemic were felt quite close to home. Losing a loved one earlier than expected was the top concern for consumers worldwide, with 76% of overall respondents citing concern. Clearly, this was more than an economic crisis, though the financial stakes were high, too. Financial well-being was the second-highest concern, cited by 73% of all respondents. 

Consumers around the world also have much in common in terms of their reaction to the pandemic. Three out of four (75%) anticipate making financial preparations in response to the pandemic. Specifically:

• 50% plan to save more
• 30% expect to develop emergency plans
• 23% plan to speak with a financial adviser

The implication is clear: Nobody wants to be caught out like this again. Recovery and preparation for another crisis are the immediate priorities, rather than retirement or estate planning.

Significant percentages of respondents are interested in new types of insurance products. They expressed the greatest interest in policies that pay for hospitalization expenses (94% in emerging markets and 64% in developed markets are interested), followed by an add-on feature for life insurance that allows access to funds in case of emergencies (91% in emerging markets and 56% in developed markets are interested). They are also thinking about short-term income protection products, like insurance that funds college education plans or pays for credit card bills in the case of a job loss. 

Compared with a similar study EY conducted in mid-2020, these findings show a remarkable consistency. Despite the hopeful signs in the late spring and early summer of 2021, financial worries do not look likely to abate anytime soon. Consumers are keenly interested in avoiding what we call “long financial COVID-19,” a sustained state of financial anxiety due to overall uncertainty and a sense of not being prepared for another highly disruptive event. 

See also: 3 Tips for Improving Customer Loyalty

The intense impact on emerging markets and younger consumers — Financial distress drives new demand.

Our survey results quantify the varying financial impacts across markets. Consumers in emerging markets felt more severe impacts, but consumers in developed markets were not unscathed. In fact, significant proportions of the latter group dipped into savings or lost income. 

Interestingly, consumer responses to financial distress show the differences across markets: 93% of respondents in emerging markets plan to make at least some type of financial preparation, compared with 61% in developed markets. About one in four, or 23%, of consumers in emerging markets plan to purchase new forms of insurance, and nearly 42% plan to speak with their adviser about an emergency plan. The desire to prepare for future disruptions is surely prompting these actions.

It’s important to note how demographics correlate to these findings. Typically, emerging markets have younger populations, as reflected in our survey design. In emerging markets, 75% of the respondents were under the age of 45, compared with 35% in developed markets. Among our respondents, only 10% in emerging markets have more than $100,000 in investable assets, versus 37% for developed markets.

The varying levels of concern across different markets can also be attributed to the relative strength of healthcare systems, social safety nets and access to vaccinations. For instance, in emerging markets, where vaccination rates are considerably lower than in developed markets, concerns about losing a loved one and financial well-being were notably higher. That anxiety remains high more than a year after the onset of the pandemic speaks to the severity and extent of the psychological trauma. 

The word cloud below includes the most common comments from our survey respondents in emerging markets, demonstrating the diversity and intensity of their fears. Facing threats of economic instability, along with increased crime and delinquency, this population may require even more protection of their assets.

Our analysis of these findings confirms that there is a huge and largely underserved segment of the market that needs — and is ready to buy — new forms of protection. For example, 61% of respondents in emerging markets are interested in purchasing life insurance in response to the pandemic. Consumers in developed markets also want more life coverage, as evidenced by the significant uptick in sales and applications during the last year. Research and markets estimates global life insurance market growth at 16% from 2020 to 2021.

It’s no surprise that the greatest opportunity is with the consumers most affected by the pandemic, both in terms of health and finances. Historically, this has been a tough market to serve profitably. But insurers should view the scope of the growth potential in terms of greatly expanded and intensified consumer interest in their products. The opportunity to bridge the protection gap and build lifelong customer relationships has never been greater. 

See also: Digital Solution for Income Protection

A new wave of digitally savvy consumers emerges — Desire for new solutions in new ways

In considering how to take advantage of the demand spike, insurers will of course consider the most cost-effective ways to serve consumers in emerging markets. In this sense, our survey presents good news in that this digitally savvy demographic vastly prefers online channels: 80% are likely to purchase health insurance, and 73% are likely to purchase life insurance digitally. Nearly 60% prefer contacting their agents or brokers digitally. 

Further, they are ready to share more data, with more than half of emerging markets respondents willing to share personal information in exchange for meeting savings goals or individual health-related goals. They are also open to new buying options — 47% are comfortable purchasing an embedded insurance policy from a healthcare firm or hospital chain.

To connect with these consumers, insurers will need stronger digital capabilities, in addition to accessible and affordable products. Those are the necessary elements to satisfy these customers efficiently and prepare for potential competition from healthcare firms. Insurers will also need to communicate more effectively, demonstrating that they understand what consumers have been through and what they need now.  

Some forward-looking insurers are already taking steps in this direction. One Asian carrier developed a new policy with clearly defined benefits — coverage for up to three months of expenses in the case of a pandemic-related hospitalization. 

The offering was targeted at younger consumers, with whom the carrier had limited previous engagement. The business case was founded on a few strategic principles: that the firm’s network of advisers would gain access to new customers, that these relationships could be expanded and grown profitably and that the new offering aligned to the firm’s purpose of promoting financial security.

Our conversations with consumers highlight the demand for innovative products and distribution channels, along with strong customer relationships.

Why great values matter, along with great products — Social commitments count with consumers.

The pandemic, along with other events of the last year, advanced consumer interest in corporate social responsibility (CSR) and raised expectations about how companies contribute to society. A full 59% of consumers worldwide know their insurers’ CSR stance at least somewhat well, with consumers under the age of 45 more aware of social commitments. An average of 56% took at least some CSR-related action involving insurance or other financial products. Reputation is the most critical factor, with a quarter of respondents saying that they have chosen one insurance brand over another due to its CSR reputation.

Consumers in emerging markets are more actively engaged around CSR than their counterparts in advanced economies: 73% say they are aware of the social responsibility stance of companies they do business with, versus 48% in developed markets.

These numbers are consistent with our 2020 consumer survey findings, where we found the most financially affected consumers are both highly concerned about social justice causes and place a greater value on an insurer’s social efforts in their purchasing decisions.

Other EY research supports these conclusions. The latest edition of the EY Future Consumer Index suggests 43% of global consumers want to buy more from organizations that benefit society, even if their products or services cost more. Nearly two-thirds, or 64%, are prepared to behave differently if it benefits society.

More and more, consumers are choosing brands that share their values, especially regarding urgent societal issues, including climate change, diversity and inclusion and income inequality. By articulating a purpose beyond profits and amplifying their CSR efforts, insurers can gain traction with a socially active, energized audience. That their products can directly improve financial well-being and facilitate the transition to a greener economy demonstrates how insurers are uniquely positioned to show leadership and differentiate on CSR.

See also: How to Use AI in Customer Service

What’s next for insurers: implications and takeaways

The powerful effects of the pandemic will be felt for a long time, at both the level of the global economy and within individual human lives. The lockdowns and social isolation; the fear of contracting the virus and of losing a loved one; the disruption of jobs, careers and everyday activities; the yearning for a return to normalcy and greater financial security — these are the universal truths of the COVID-19 era. Insurers can respond and help people recover in meaningful ways.

1. Communicate with empathy to build trust: Our research, along with other studies, provides a detailed understanding of the new challenges that consumers face, their interests in specific products and how they intend to prepare for future shocks. The first thing insurance companies need to do is show that they understand all the impacts — from financial to physical and mental health.

Next, carriers should connect to their customers on a human level, with warmth and empathy, acknowledging the trauma of the last year. Language matters, especially in the digital channels younger consumers prefer. A human touch is the prerequisite to building trust and becoming a partner in strengthening financial well-being.

2. Innovate around customer value: The huge demand for new protections and financial well-being solutions cannot be ignored after a decade of sluggish industry growth. It must be seized vigorously and creatively, with new solutions and distribution options closely aligned to consumer needs and preferences. The key is to provide relevant guidance and scalable solutions now that will help consumers navigate the pandemic’s lingering financial impact and restore their financial well-being.

3. Strategically engage younger consumers: Personalized communications and new solutions are not only for mass-affluent and high-net-worth consumers. The pandemic opened a door to connect with younger and underserved consumers, a segment that insurers have long struggled to engage. It’s a moment of truth to introduce these individuals to the value of insurance as a means to prepare for future financial shocks and as the basis for long-term financial security. By providing relevant solutions now, insurers can lay the foundation for lifelong relationships.

4. Demonstrate purpose and commitment: Many carriers showed their purpose in the immediate aftermath of the pandemic, offering premium discounts and holidays and supporting local communities. Going forward, all operations — starting with products, communications and customer interactions —must be infused with such purposeful commitment and humanity. By linking their products to their core values and purpose, insurers can demonstrate they are good corporate citizens sincerely invested in delivering the protections that individuals, communities and society need now.