How far along are commercial lines carriers in delivering digital solutions to their agents and other distribution partners? Answering that question depends on whether you are a glass half-empty or glass half-full type of person. The pessimist might say: Despite huge investments in technology over the past few decades, there is still a great deal of manual processing; the time for the rate-quote-bind process is too long; and the goal of truly making it easy for the agent to do business with the carrier is still elusive. The optimist would cite enormous industry progress, as many companies have increased straight-through processing (STP) to a significant percentage of the business; digital self-service capabilities for both sale and service are widespread; and agent-carrier connectivity, in general, enables astounding volumes of electronic business flow.

SMA recently surveyed carriers focused on the small commercial market to assess the state of digital capabilities offered to distribution partners, the barriers to implementation and adoption and the plans for enhancing or delivering new digital capabilities. We discovered that rather. than taking a glass half empty or half full approach, the better analogy is a road trip, with the kid in the back seat regularly asking, “Are we there yet?” It turns out that the question is not easy to answer. Once you get by the lofty goals of STP and ease of doing business (EODB), there are a variety of specific functional capabilities that are important. By the way, STP and EODB are still the top two reasons that carriers invest in tech solutions for distribution, and they do provide a north star for plans in this space.

SMA’s research tracked 14 different digital sales-oriented capabilities and 17 servicing capabilities, starting with a carrier’s satisfaction with the state of the offerings to their distribution partners. Suffice it to say that, while some are satisfied with their offerings, many are not. For example, only about a third are satisfied with their quoting capabilities. Satisfaction levels on the servicing side are higher, but there are still many companies that are dissatisfied or do not offer the digital capability. In terms of plans and projects, there is lots of investment and activity in addressing the areas where companies believe they are weak. For example, data pre-fill is the top project area for sales capabilities as it is a critical starting point for achieving STP.

See also: Agencies Turn to Networks for Growth

There are both business and technology roadblocks to success in distribution technology. For example, few will be surprised to learn that limited IT resources are the #1 barrier on the technology side. In short, this is a very critical but complex area of the insurance business, and the industry as a whole is moving to enhance the digital capability provided to distribution partners. It is a journey, but, like that proverbial kid in the back seat, many executives will continue to ask, “Are we there yet?”

For more information on commercial lines distribution expansion strategies, see our recent research report, “Distribution Technologies for Small Commercial: Carrier Progress and Plans.” SMA is also introducing a research series with perspectives from the distributor viewpoint. A regular series of research reports will be published based on surveys and interviews of agencies, brokers, MGAs and others in the distribution channel, including insights from ReSource Pro’s large footprint of distribution clients. 

The life settlement is a legal, regulated process for liquidating life insurance. Unfortunately, the regulations in place don't fully address the culture of mistrust in the industry. That culture is an outcome of the traditional process: Life settlement cases have historically been managed behind the scenes, with each stakeholder having access to only some of the case details. That veiled environment allows providers, agents, advisers, investors, brokers and policyholders to work at cross purposes.

Complicating matters, the amount of funds available to buy policies has exploded in recent years. As more money circulates in the industry, dishonesty and deception remain key issues that ultimately work against all stakeholders. 

Harbor Life Brokerage set out to move the industry past those issues with technology -- specifically, a life settlement exchange that ensures transparency and ethical business practices.

Underlying mistrust and lack of transparency 

The traditional life settlement auction process has pockets of secrecy. Insureds, agents, advisers, life settlement brokers, life settlement providers and life settlement funds rarely have access to the same set of information. Brokers typically act as gatekeepers, with the freedom to share or withhold details as they see fit. They naturally create a lack of transparency and fosters mistrust. 

Some of that mistrust is warranted. Unethical brokers will award cases based on relationship rather than bid size. That's a clear disservice to the insured, who assumes the broker is working to negotiate the highest selling price possible. In these cases, the broker must intentionally limit the auction information provided back to the insured. The insured certainly won't see the highest bid -- and also may not know how the winning offer was calculated or where it came from.  

Fortunately, these problems are solvable with technology. The Harbor Life online auction platform creates transparency by giving all stakeholders access to the same information. With case details and bids accessible electronically, whoever submits the highest bid wins the case, period. There is simply no room to make a backdoor deal, which ensures a fair process for everyone involved.

Poor communication

Poor communication, whether intentional or by accident, worsens the lack of transparency in the traditional life settlement process. Layers of hidden fees charged by providers or brokers cut into the insured's proceeds -- often without the insured's knowledge. 

As an example, a broker might deliver a net offer to the insured, with no breakdown of the gross selling price and the broker's commission. As well, providers may put in offers net of their fee, essentially hiding those fees from funders.

Policy metrics can be another area of confusion. Actuarial firms, responsible for valuation, may be inconsistent on key metrics, such as life expectancy. That misalignment of data works against providers who are trying to put their best offer forward to win the deal. 

Again, technology can solve for missing or inconsistent data. The Harbor Life Exchange states valuation metrics up-front so all parties are working from the same set of numbers. The exchange also requires families to sign off on commissions for every transaction -- ensuring full transparency into the fees paid out of sale proceeds. 

The exchange also invites providers to specify their fees. That way, life settlement funds know what the provider is making on every deal.

See also: Making Life Insurance Personal

Lack of free market competition

Ultimately, the closed nature of the traditional life settlement process limits free market competition. And any factor limiting open competition will hold the entire industry back from growth. 

Transparency inspires confidence in life settlement transactions. And confidence creates growth. Confident buyers submit higher bids -- because they're more comfortable with policy details and valuation metrics. Confident agents and advisers refer more cases, creating more opportunities for buyers. And confident insureds have a positive, profitable experience they can share with friends and family.

The Harbor Life exchange promotes this confidence dynamic by encouraging as many providers as possible to compete openly on every case. 

Reinventing the life settlement market 

The Harbor Life Brokerage exchange streamlines life settlement transactions for agents and buyers. When agents submit cases, Harbor Life orders current records and compiles the case information. Agents can then list those cases on the exchange with a reserve price -- that is, the minimum bid the insured will consider. 

More than a dozen licensed providers are invited to view all listed policies on the exchange. Those providers can filter listings by policy type and insured demographics, including health status, state of residence, gender and life expectancy. Diving into each listing, providers will see a summary of key metrics for each case that's easy to analyze and compare.

See also: Beware the Grey Swan 

All stakeholders have a transparent view of bids, fees, case details and valuation metrics. It's a form of forced transparency to combat communication shortfalls that have historically plagued the industry. This transparency prevents relationship-based decisions and gives all stakeholders confidence that the buying process is fair. 

Life settlements are growing in popularity, but the industry needs innovation to move into the mainstream. Technology that fosters transparency and competition is a big step in the right direction.

The international shipping industry continued its long-term positive safety trend over the past year but has to master COVID challenges, apply the learnings from the Ever Given Suez Canal incident and prepare for cyber and climate change threats. The number of large vessels lost remained at record low levels in 2020, while reported incidents declined year-on-year, according to Allianz Global Corporate & Specialty SE’s  latest Safety & Shipping Review 2021. 

The annual AGCS study analyzes reported shipping losses and casualties (incidents) over 100 gross tons. During 2020, 49 total losses of vessels were reported globally, similar to a year earlier (48) and the second lowest total this century. This represents a 50% decline over 10 years (98 in 2011). The number of shipping incidents declined from 2,818 to 2,703 in 2020 (by 4%). There have been more than 870 shipping losses over the past decade. 

The South China, Indochina, Indonesia and Philippines maritime region remains the global loss hotspot, accounting for one in every three losses in 2020 (16) with incidents up year-on-year. Cargo ships (18) account for more than a third of vessels lost in the past year and 40% of total losses over the past decade. Foundered (sunk/submerged) was the main cause of total losses over the past year, accounting for one in two vessels. Machinery damage/failure was the top cause of shipping incidents globally, accounting for 40%.

COVID-19 factors

Despite the devastating economic impact of COVID-19, the effect on maritime trade has been less than first feared. Global seaborne trade volumes are on course to surpass 2019 levels this year after declining slightly in 2020. However, the recovery remains volatile. COVID-19-related delays at ports and shipping capacity management problems have led to congestion at peak times and a shortage of empty containers. In June 2021, it was estimated there was a record 300 freighters waiting to enter overcrowded ports. The time container ships are spending waiting for port berths has more than doubled since 2019.

The crew change situation on vessels is a humanitarian crisis that continues to affect the health and wellbeing of seafarers. In March 2021, it was estimated some 200,000 seafarers remained on board vessels unable to be repatriated due to COVID-19 restrictions. Extended periods at sea can lead to mental fatigue and poor decision-making, which ultimately affect safety. There have already been shipping incidents that have featured crews who have been on board for longer than they should have been. Seafarer training is suffering, while attracting new talent is problematic given working conditions. Future crew shortages could affect the surge in demand for shipping as international trade rebounds.

Larger vessels, larger exposures

The blocking of the Suez Canal by the Ever Given container ship in March 2021 is the latest in a growing list of incidents involving large vessels or mega-ships. Ships have become ever larger as shipping companies seek economies of scale and fuel efficiency. The largest container ships break the 20,000 teu mark, with vessels over 24,000 teu on order – capacity of container ships vessels alone has increased by 1,500% over 50 years and has more than doubled over the past 15 years.

If the Ever Given had not been freed, salvage would have required the lengthy process of unloading some 18,000 containers, using specialist cranes. The wreck removal of the large car carrier, Golden Ray, which capsized in U.S. waters in 2019 with more than 4,000 vehicles on it has taken over a year and a half and cost several hundred million dollars.

See also: A Price Tag on Climate Change

The number of fires on board large vessels has increased significantly in recent years. There was a record 40 cargo-related fires alone in 2019. Across all vessel types, the number of fires/explosions resulting in total losses increased again in 2020, hitting a four-year high of 10. Fires often start in containers, which can be the result of non-/mis-declaration of hazardous cargo, such as chemicals and batteries. When mis-declared, these might be improperly packed and stowed on board, which can result in ignition and complicate detection and firefighting. Major incidents have shown container fires can easily get out of control and result in the crew abandoning the vessel on safety grounds, thus increasing the size of loss.

Loss of containers at sea also spiked last year (over 3,000) and has continued at a high level in 2021, disrupting supply chains and posing a potential pollution and navigation risk. The number lost is the worst in seven years. Larger vessels, more extreme weather, a surge in freight rates and mis-declared cargo weights (leading to container stack collapse), as well as the surge in demand for consumer goods, may all be contributing to this increase. There are growing questions about how containers are secured on board ships.

Delay and supply chain issues

Maritime supply chain resilience is in the spotlight after a series of recent events. The Ever Given incident sent shockwaves through global supply chains dependent on seaborne transport. It compounded delays and disruption already caused by trade disputes, extreme weather, the pandemic and surges in demand for containerized goods and commodities. Such events expose the weak links in supply chains and have magnified them. Developing more robust and diversified supply chains will become increasingly important, as will understanding pinch points and supply chain nodes.

Piracy and cyber concerns

The world’s piracy hotspot, the Gulf of Guinea, accounted for over 95% of crew numbers kidnaped worldwide in 2020. Last year, 130 crew were kidnapped in 22 incidents in the region – the highest number ever – and the problem has continued. Vessels are being targeted farther away from the shore – over 200 nautical miles (nm) in some cases. The COVID-19 pandemic could exacerbate piracy as it is tied to underlying social, political and economic problems, which could deteriorate further. Former hotspots like Somalia could re-emerge.

The report also notes that all four of the world’s largest shipping companies have already been hit by cyberattacks, and, with geopolitical conflict increasingly played out in cyber space, concerns are growing about a potential strike on critical maritime infrastructure, such as a major port or shipping route. Increased awareness of – and regulation around – cyber risk is translating into an uptake of cyber insurance by shipping companies, although mostly for shore-based operations to date. 

The environmental picture

With momentum gathering behind international efforts to tackle climate change, the shipping industry is likely to come under increasing pressure to accelerate its efforts. A huge investment in research and development is required if the industry is to meet the challenging targets being set. Today’s existing fleet and technology will not get the shipping industry to the International Maritime Organization’s target of a 50% cut in emissions by 2050, let alone the more ambitious targets being discussed by national governments.

Last year, the cap on the sulfur content of ships’ fuel was cut. Known as IMO 2020, the cut is expected to reduce emissions of harmful sulfur oxide (SOx) from shipping by 77%. Insurers have seen a number of machinery damage claims related to scrubbers, which remove SOx from exhaust gases for vessels using heavy marine fuel. 

See also: COVID-19 Trio Tops Global Business Risks

Most frequent loss and incident locations 

According to the report, the South China, Indochina, Indonesia and Philippines maritime region is also the major loss location of the past decade (224 vessels), driven by high levels of local and international trade, congested ports and busy shipping lanes, older fleets and extreme weather exposure. Together, the South China, Indochina, Indonesia and Philippines, East Mediterranean and Black Sea and Japan, Korea and North China maritime regions account for half of the 876 shipping losses of the past 10 years (437).

The British Isles, North Sea, English Channel and Bay of Biscay region saw the highest number of reported incidents (579) in 2020, although this was down year-on-year. The most accident-prone vessels of the last year were a Greek Island ferry and a RoRo ferry in Canadian waters, both involved in six different incidents.

To learn more, please visit AGCS: Safety & Shipping Review 2021.

Tunnels, once the greatest innovation in transportation, are poised to be the greatest once again through innovation and rethinking of transportation. While Elon Musk has been looking to the sky with SpaceX, he’s also been going underground with the Boring Company, creating test tunnels in California and operational tunnels in Las Vegas. The key to Musk’s tunneling concept is the rapid technological advancement being made in boring machines. Prufrock, the current all-electric boring machine, can dig a 12’ diameter tunnel up to one mile per day. The Boring Company has a goal of producing a machine that would be able to bore up to seven miles per day, a stunningly fast pace that will change the landscape of transportation and create a system that connects people and places more than ever before.

The value of tunneling is also a new level of versatility and looks at the concept of mobility rather than individual types of transportation. It will improve pedestrian traffic, auto traffic and certainly some forms of subway traffic, but it will also facilitate new types of underground travel, such as autonomous vehicle traffic and hyperloop travel. Tunnels can be dug without disruption to the infrastructure, and they could be an excellent way to improve ground-level and atmospheric environments through non-emission subterranean commuting. Who would have thought that digging could lead to a more sustainable future? It is just one more example of how complex problems are often best solved by breaking outside of the boundaries of convention and incorporating new 360-degree thinking with an outside-in perspective.

Recently, we have been looking at Majesco’s latest thought-leadership report, Digital Insurance: The Inflection Point, in an effort to peek into the future of the insurance experience. Increasingly, customers choose insurers not just for the risk product but for the combination of risk product, customer experience and value-added services. Because of this, future insurance leaders will be those who provide smooth, pleasant experiences with the best views into products and value-added services. Can we learn anything by digging deeper?

An Outside-In Mindset

No one will argue that insurance opportunities exist for those who can innovate and adapt. Each insurer has its own mining to do. Not only do they need to think ahead about the impact of new technologies, like the Boring Company, on P&C insurance products, but they need to think about the impact of 360-degree digital views and services that create greater value for customers today and tomorrow. When it comes down to it, the customer is the one who is pushing insurers to innovate. They are looking especially hard at companies that can provide unconventional solutions to difficult insurance puzzles.

Insurers must lay the groundwork of a new digital business model. We are facing a constant flow of disruptive factors at the same time we are witnessing unprecedented opportunities.   

Consider the pressures, threats and opportunities, including:

• Non-Insurance Providers: Companies like Tesla and GM are offering/embedding insurance and have access to more real-time data to competitively price and underwrite the risk than most insurers will have, potentially cutting off traditional carriers from these opportunities. 
• Connected Everything: Connected devices, beyond telematics, are enabling underwriting and pricing based on mileage, location, weather and behavior for P&C and L&A products, which would tie premium to usage, risk or more – providing more personalized coverage. 
• On-Demand and Embedded Insurance: On-demand insurance, expected to increase 30% by 2026, will expand to nearly all lines of business. Furthermore, embedded insurance is poised to automatically include insurance in the purchase of something else -- like a vehicle, home or electronic device.
• Continuous Underwriting: Rather than pricing once, insurers are shifting to constantly updating the risk profile. This changes policy terms and pricing using the continuous flow of data from different sources like cyber, fitness devices, telematics and other IoT devices and encourages people to manage their risk, which can drive lower prices.

See also: 3 Ways to Improve Customer Experience

Today’s customers are extremely digitally adept, with higher expectations, different needs and a demand for better experiences that are not met with the “traditional” insurance approach, creating a fault line between customers’ expectations and insurers’ ability to deliver. In our customer research for individuals and businesses (Figures 1 and 2), the digital shift is well underway, reflected in the interest among both the older and younger generations for digital customer engagement and pricing. 

Figure 1: Interest in digital customer engagement and pricing — consumers

Insurers leveraging digital technologies, data and AI/ML are poised to leapfrog the competition by organizing talent, technology and ways of working around a digital-first vision for empowering customers.

In the recently released reports on innovation rating status, AM Best found that while the pandemic forced businesses to cram years’ worth of innovations into one year, most companies still have a long way to go. The report also found that there is a perceptible link between superior ratings and use of cutting-edge processes and technology-leveraged innovation initiatives.

If insurers are willing to dig deeper, they may find that data, analytics and digital technologies can help them create paths to income and value. The costs of cutting-edge technologies are continually going down as their impact rises. For example, the flexible, scalable, volume-based pricing of cloud-based processes that are necessary for digital service create a tremendous cost savings over on-site, server-based systems, but more importantly provide the flexibility to connect with ecosystems and adapt to market changes rapidly.

This is similar to tunnel boring. Prufrock’s boring cost per mile is going down just as the necessity for tunnels is on the rise. The result in both cases (tunnels and insurance) will be an ability to improve traffic flow, improve speed, improve experience and meet demand while reducing the overall use of previous technologies. That’s what makes digital insurance a more sustainable solution in the long run. It is solving multiple formulas at the same time.

The bottom line … a digital-first strategy will position that insurer as a future leader.  

Figure 2: Interest in digital customer engagement and pricing - SMBs

Can a Digital Strategy Meet the Digital Insurance Shift Quickly Enough?

Nothing satisfies an insurance customer more than having a positive personal interaction with any company --- even their insurer. All it takes is to meet their expectations of a personalized, smooth experience for a claim, a purchase or a routine contact such as billing and payments, creating the “Amazon experience” for insurance.

Of course, when interactions are disparate, frustrating, complex or redundant, the opposite is true. Customers become disillusioned and unsatisfied with the insurer.

COVID has tested insurers’ ability to pivot to a digital-first strategy, with an increased focus on customer experience. Years of adding disparate, siloed digital capabilities like functional portals were challenged. It became apparent that real digital transformation required a mindset shift to a new way of thinking, planning and doing. Leaders know this.

Unfortunately, insurance still embraces decades of legacy business assumptions and technologies that are roadblocks on the path to digital maturity. Many insurers were early adopters and innovators in technology but have built up a complex landscape of technical assets over decades, resulting in significant technical debt. The “modern” solutions of 10 years ago no longer meet the demands of a digital era or match the capabilities of insurtechs that are raising the bar.  

Creating compelling experiences for customers that provide transparency, intuitiveness and efficiency require next-generation core, data and digital platform solutions that use cloud, applicating programming interfaces (APIs), microservices, AI/ML and other technologies. This next-generation technology stack allows the exchange and ingestion of valuable data from diverse sources to produce highly personalized customer experiences in near real time. 

Insurers need to do some future-thinking around real-time risk assessment. They need to re-imagine customer journeys to move beyond a “tunnel-vision” portal to a new customer experience, to create new products offer new services and innovate their business models.

Frictionless payments are essential for e-commerce platforms to reduce the barriers between online shopping and completed checkouts. The buying process needs to be easier for both the customer and the seller, because an enjoyable user experience leads to higher conversion rates and fewer abandoned shopping carts.

When done right, frictionless payments improve the checkout process by eliminating waiting times. It’s all about reducing barriers and the steps toward a completed sale. Ultimately, frictionless payments should feel like a natural part of the experience.

Understanding how frictionless payments have developed and reviewing the history of buying processes will help us understand how businesses will be able to continue their growth in the digital age. So, let’s explore the evolution of frictionless payments and predict how businesses will drive conversion rates and create better customer experiences.

1950: Debit and credit cards

The credit card was developed in the mid-twentieth century, but it wasn’t until 1973 that the card payments system was computerized. This frictionless payment reduced transaction times to just one minute and gave rise to the era of electronic consumer payments. Computerized payments would eventually allow for future online transactions, where e-commerce businesses could contact banks to finalize payments with ease. In 1994, Stanford Federal Credit Union in California was the first financial institution to offer online internet banking, leading the way for online transactions to begin in 1995.

1999: 1-Click

Bookseller-turned-global-conglomerate Amazon patented an online transaction process called "1-Click" in 1999. This allowed customers to buy products with just a click of a button. Items could be purchased at the product level, without adding to a shopping cart, meaning that customers could buy a product in a flash. Voila: no shopping cart abandonment. With 1-Click, personal details and your bank account details are stored online, along with your usual delivery address.

The patent has expired, meaning a flurry of businesses can now use this frictionless checkout method. Given the global average rate for shopping cart abandonment is 70%, skipping over the shopping cart means that e-commerce businesses can maximize their conversion rates through this simple process.

2003: Chip, pin and tap

In 2003, the introduction of chip and PIN in the U.K. allowed cards to store data in a small chip on the face of a card. This data could then be accessed using a four-digit PIN, authorizing the payment. The American conversion to chip and PIN was announced in 2012 and completed in 2015.

Not only did this process increase efficiencies for both customers and businesses by automatically authorizing payments rather than making a customer sign a receipt, but it also curated a secure form of payment. Only those with access to the card and the secret PIN could access the account. The advance demonstrates how frictionless transactions can be made easier, and, importantly, more secure at the checkout.

Contactless payments were introduced in 2007, making the checkout process even easier. Today, one in five card payments is contactless.

2011: The mobile revolution

As mobile phones became smaller, they became as much an essential accessory as a wallet or purse. They’re with us all the time. So it’s not surprising that these handheld devices have become ingrained in the checkout culture. Leading mobile manufacturers Google, Apple, Android and Samsung all launched digital wallets between 2011 and 2015, allowing users to complete transactions with them rather than use their debit or credit cards.

These transactions had the added security benefit of authorizing payments through a fingerprint or facial scan. Furthermore, these digital wallets could be used in-store or online, storing personal data to automatically fill in those arduous forms with personal details, delivery addresses and billing addresses. The innovation helps further speed up online sales and transactions.

See also: The B2B Digital Payment Opportunity

Now and the future…

As online transactions become easier and quicker on the customer side, some obstacles for businesses to achieve a completely frictionless payment remain. Businesses must ensure that they balance the risks and rewards that come with streamlining checkout and ensuring protection from fraud and abuse.

As the popularity of omnichannel sales, digital wallets and one-click buying continues to develop, innovative ways to maximize sales without being affected by fraud and abuse have been developed. Commerce protection platforms, such as Signifyd, drive automated decisions on all transactions, approving more good orders and recovering lost revenue from chargebacks. This streamlines the customer experience, limiting the need for authentication forms and processes. Overall, commerce protection platforms feel like a natural part of the checkout process, going unnoticed by customers, and they can increase conversion rates by 4% to 6%.

Frictionless payments will continue to improve, creating better customer experiences and improving business performance. As more sales move online, and transaction speeds and efficiencies increase, it’s important to tackle attempts at fraud and abuse. At every stage of the evolution of frictionless payment, new processes are helping to make every transaction safer and more worthwhile for customers and businesses.

What Amazon’s Insurance Play Means Paul Carroll, Editor-in-Chief of ITL I’ve waited for years now to see how insurance might fit with Jeff Bezos’ quote that “your margin is my opportunity.” Amazon’s announcement last week that it will help sellers find product liability insurance through a network facilitated by Marsh may provide the answer. continue reading > Majesco Webinar Listen in as industry experts cover the evolving shift in underwriting, keys to the next-gen underwriting workbench, and why insurers need this to stay competitive in the commercial lines market.  Watch Now SIX THINGS The Recipe for Embedded Insurance by Denise Garth With embedded distribution, the insurer recognizes that insurance is just one task in the customer’s "job" and makes the buying process easy. Read More Dynamic Markets Need Dynamic Rates by Dror Pockard Insurers can use dynamic systems to create and deploy new rating structures attuned to market conditions and consumer needs. Read More Collective Response to Data Resiliency by Glen Shok Collective action will shield all organizations from infection and mitigate the damage of ransomware on the global economic landscape. Read More Tech Pulse Quickens for Commercial Lines by Mark Breading It was almost as if someone flipped a switch on Jan. 1, and commercial lines insurance companies began accelerating technology plans. Read More COI Is a 4-Letter Word; Tech Is the Solution by Wade Millward Certificates of insurance are broken. Processes must be transformed to provide the confidence clients deserve in the COIs they need to operate. Read More Why SaaS Is Key in Core Systems by Jonathan Boylan To fully leverage cloud technology, decision-makers must understand the nuances of cloud-agnostic software models and SaaS platforms. Read More Digital Revolution Reaches Underwriting by Intellect SEEC Underwriting is evolving toward a service that will help clients prevent losses, rather than merely indemnifying clients afterward. Read More MORE FROM ITL AUGUST FOCUS: Cognitive Technologies This month sponsored by Intellect SEEC Cognitive computing is a funny beast. Every time you hit your target, you find that another pops up off in the distance. When I first saw a demonstration of speech recognition, some 30 years ago, I was mightily impressed that the computer understood a few words. If I had seen what would be possible today, I’d have been stunned. But now? Oh, that’s just Siri or Alexa. And why didn’t auto-correct guess exactly what I wanted to say? 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

While the insurance industry has long played it safe, innovation is now accelerating as digitization is gaining ground in more business sectors and the pandemic has forced companies to rapidly adapt to new restrictions. “It’s highly likely that the insurance industry will change more in the next 15 years than it has in the previous 100,” says Mark Anquillare, chief operating officer at Verisk.

The industry would do well to rely more on what are known as OKRs -- objectives and key results, which were developed as a management tool by legendary Intel CEO Andy Grove, championed by Google and explained to a broad business audience in venture capitalist John Doerr's 2018 book, Measure What Matters.

In this article, I'm going to explore 10 ways that the insurance industry will lean on OKRs in the years to come. 

1. Digitization of insurance front-end processes: Digitization of customer-facing processes makes it easier for customers to access information, compare providers and accelerate the closing process. 

The slow progress of customer-centric innovation in the insurance industry is a huge problem. COVID-19 has accelerated the migration of customers to digital channels. In response, insurers will more than likely rely on OKRs to efficiently execute their digitization initiatives before they lose customers to providers that have already digitized their customer-facing processes. Innovative companies like Lemonade, which has prioritized the digital experience of customers, have taken a lead in this charge.

2. Process (specifically speed of process) is becoming critical: Customer onboarding, underwriting, policy administration and claims are key processes in insurance. As customers become accustomed to a digital experience in nearly every vertical – from retail to media and entertainment, and even education and healthcare – their expectations have only grown.

Slow manual processes are not going to cut it for the modern-day customer. A few insurance leaders have already anticipated this necessary change and adopted OKRs to plan for dramatic improvements.

See also: A Quarantine Dispatch on the Insurtech Trio

3. Customers want flexibility and an omnichannel experience: Today, insurers are multichannel — not omnichannel. However, channels must be integrated to provide customers with a single, seamless experience. 

Customers should have information consistency across channels to avoid confusion and grant them flexibility to access their important information in any way that is convenient for them. Customers should have the flexibility to navigate across channels easily. OKRs can be used to execute omnichannel projects and ensure that this important aspect of user experience is provided to customers.

4. Responsiveness will be a differentiator: The top requirements insurance customers have for their providers are to have safe and secure transactions, receive fast responses and claims resolutions and receive guidance on the right policies required to cover their risks.  

Because there are so many touchpoints for an insurance customer, it’s important for insurers to provide highly responsive service that feels personalized and sensitive. When people feel genuinely cared for during an ordeal or in their time of need, they are more likely to be satisfied, repeat customers. OKRs can be used to build and run responsive organizations.

5. Agent-customer interaction has moved digital: The pandemic has made digital engagement between insurance agents and their customers the default. This pandemic-induced shift has actually resulted in more frequent and efficient interactions. Customers still want empathetic personal service as well as accurate information about coverage types and policy options. 

Both potential and current clients need answers about policy restrictions and coverage availability and will seek personal guidance. Agents should be comfortable with digital communication and be able to answer these questions and help clients get the coverage that best meets their needs and budgets. OKRs should be employed to manage this shift to digital as well as the desired outcomes in agent-customer interactions.

6. Enterprise agility will be key: Agile organizations can quickly direct their people and priorities toward value-creating opportunities. With the disruption caused by digitization, changing customer preferences and pandemic-induced disruption, insurers with enterprise agility will be rewarded. OKRs can be a great framework to build enterprise agility and ensure that a company is keeping up with the developing needs and expectations of their customer base.

7. Role of ML/AI in claims: Claims processing can frustrate customers. Because claims involve forms and paperwork, the sense of urgency that customers feel might not be reflected in the process itself. However, insurers that use AI can now respond to customers quickly, ensuring that they get their money fast. Agents can use AI tools to assess coverage, communicate instantly via portal, create follow-up tasks and ultimately process claims in a vastly more efficient process. 

By reducing cycle times, insurers satisfy customers and can process more claims. OKRs are being used to manage this important work done by the team of data scientists and AI/ML developers. A machine learning application can be trained to analyze claims and place them into one of three buckets: pay, don't pay or refer. In ML projects, machine learning tools are given a batch of historic claims to analyze and decide on -- and then compare those results to those already delivered by the human underwriters. By making any changes needed, the algorithm should soon be comparable to the human decision-making process. 

8. COVID-19 will still play an important role: The insurance industry is generally well-prepared for major loss events. Still, a pandemic like COVID-19 can be quite demanding in various ways for insurers, payers, employers and investment managers. COVID-19 mandated insurance companies allow up to 90% of their employees to work from home. 

One of the biggest challenges for insurers during the pandemic has been the spike in customer contacts. Customers are flooding insurers with queries over what they may or may not be covered for, and to submit claims on travel insurance, critical illness, health coverage, business interruption or another issue. 

While service and call centers associated with life, health and retirement products are seeing significant increase in inquiries, other products such as auto have seen a significant drop in claims. This is a low-visibility environment for insurers. OKRs provide the agility for insurers to navigate the effects of COVID-19 in 2021 and beyond.

See also: P&C Insurance Is Losing Importance

9. Fraud detection will be important: COVID-19 has brought in a host of new types of frauds for insurers, including tele-medicine scams, dental provider frauds, disability claims and auto-related frauds. Insurers are using traditional fraud prevention and detection technologies. But they are also looking at advanced analytic techniques to better identify attributes and trends for new and emerging threats so they can develop controls to mitigate the risks. ML is being deployed to detect frauds. OKRs are being used by many insurers to execute these projects and monitor and mitigate fraud incidents.

10. Client referrals and retention rate will be key: Client referrals measure the number of new clients that were referred by existing clients in any given time. This will become a key metric to measure two important factors. First, how satisfied your existing clients are with your products and services. Second, how much of the company’s growth is organic as opposed to advertisement-driven. OKRs can help manage these outcomes by streamlining customer success and related processes.

Insurance is in the middle of a disruption being caused by an industry-wide move to digital processes. This shift has only been accelerated by the pandemic and rising customer expectations. Smart insurers are using OKRs to manage this disruption and emerge stronger with better operational efficiency through great execution and high-performance teams that are prepared to adapt to the changing industry.

To meet customers and prospects in the new virtual world over the past year, independent agencies scrambled to find ways to connect that felt personal and retained the “human touch.” Networks of agencies that care about their members understand how important it is to provide expert guidance and resources throughout this digital journey. 

Independent agencies come in all sizes and with different levels of resources, but they all require cost-effective strategies to ensure current clients are happy and attract new prospects. They join networks looking for collective strength and bargaining power and to get support with professional development and technology. Networks can level the playing field for independent agents by equipping them with the kind of advanced marketing tools those at the largest corporations have at their fingertips. 

Independent insurance agents are continually researching a multitude of options in service to their clients while managing every aspect of their business. Adding marketing on top of this load can be overwhelming. Access to resources, such as a marketing library with timely content that can be customized, simplifies communication with clients. 

A recent independent survey asked insurance professionals their perception of marketing. According to those surveyed, enhanced marketing strategies improved client retention, acquisition and revenue growth. Virtually all the respondents agreed that marketing is a competitive advantage (98%), and 96% reported that more effective marketing would grow their business. The survey also revealed that agents would switch networks to gain better technology platforms.

Networks that support their members’ client-retention initiatives can expect higher member retention and profitability for their own organizations. Because it can cost seven to nine times more for an agency to bring in a new customer than to retain a client, active engagement with the current client base is one of the strongest foundations for sales growth. 

Agents look to networks to fill the gaps in their marketing. The past year’s rush to a digital platform, while challenging, gave agents opportunities to strengthen their relationships with clients and prospects. The personal attention that smaller agencies provide is a powerful competitive advantage, in contrast with how clients can feel when dealing with a large, impersonal corporation.

A 2020 IBM survey that found only 56% of consumers are satisfied with their insurance provider’s personal attention. The same survey found that, in response, 84% of insurance organizations adding artificial intelligence (AI) tools are doing so to improve customer satisfaction. 

People need insurance policies for every stage of life, and they're an emotional as well as financial investment. Agents who understand this make sure their clients know they are always advocating for them. One way to do this is to take the time to build authentic relationships based on personal details -- providing useful information and offering help when clients need it, identifying pain points, alerting them to renewal deadlines and celebrating milestones like birthdays, graduations, anniversaries and more. But time is a valuable resource. This is where networks can step up and be a true partner in relationship-building by offering technological tools that simplify content development.

See also: NPS Scores Provide 3 Keys to Growth

A library with insurance-specific, relevant email and social media content, personalized greeting cards, as well as copy for virtual and in-person events makes engagement easy and efficient. AI technologies within a marketing suite can quickly sort and identify content that will resonate with clients by being precisely tailored to their interests, saving agents’ time. With these sophisticated tools added to their marketing arsenal, agents can increase cross- and up-sell opportunities. 

Automation in marketing helps agents manage a larger customer base while making the customer interactions more meaningful and relevant. Insurance agents are evolving to be consumer educators and partners in the lifelong journey of buying insurance for protection at every stage. Agents use multiple touchpoints to nurture, inspire and inform their clients, who respond to genuine interactions with trust and loyalty. 

Networks can serve as partners and facilitators for these agent-customer journeys, by serving as a resource that supports agents as they manage these relationships. As the industry continues to recover from the past year’s challenges, networks that are responsive to agency members’ technological and professional growth will remain strong for the inevitable changes to come.

I've waited for years now to see how insurance might fit with Jeff Bezos' quote that "your margin is my opportunity." Amazon's announcement last week that it will help sellers find product liability insurance through a network facilitated by Marsh may provide the answer.

Assuming the product liability offering is popular -- and Amazon is relentless when pursuing new opportunities -- it's easy to imagine the company expanding into other types of insurance for small businesses. For a lot of small businesses.

Amazon currently has 1.9 million active sellers on its site, so offering product liability insurance could quickly give Amazon a massive base of small businesses that could be interested in buying other types of insurance through the company. Not all of those sellers will buy via Amazon, of course. Many don't meet the minimum level of sales ($10,000 a month) at which Amazon requires that they carry product liability insurance. Others will buy their insurance through other channels or are already covered by general liability policies. But what Amazon is calling its Insurance Accelerator could easily become the starting point for hundreds of thousands of small businesses purchasing product liability insurance.

Those customers will find it easy to buy, because the insurance offering will be embedded in the services that Amazon already provides sellers digitally. Those buying the insurance through Amazon will also benefit from the sort of simple, intuitive interface that Amazon provides customers, as opposed to the more complex approach that most insurance companies and brokers employ.

So, why wouldn't those small businesses perk up if Amazon offered them workers' comp insurance for whatever warehousing and shipping operations they have? Perhaps some business interruption coverage, too? Once these small businesses start buying from Amazon, why not go all the way to a general liability policy, property insurance, key man insurance and everything else a small business might need?

Now, it's always possible that the Amazon Insurance Accelerator is just a fancy way of handing off leads to Marsh, in which case the arrangement could turn out to not be that significant. This would just be a way for Marsh to extend its already considerable reach and not the long-anticipated move by Amazon into insurance.

But using product liability as a launching point for a broad push into small business insurance fits the Amazon model of innovation going all the way to its beginnings. Bezos always hoped to build what he called an "everything store" but knew he needed to start small and thus began merely as a bookseller in the mid-1990s. Once he had a foothold in electronic commerce, he expanded as fast as he could in every direction.

Amazon's approach to insurance also lines up with the model it has scaled to enormous success. Amazon is providing an interface but otherwise serving as a platform, using Marsh to pull together outside resources (insurers Chubb, Harborway Insurance, Hiscox, Liberty Mutual Insurance, Markel and Travelers, as well as technology from Bold Penguin and Simply Business to help match insureds to the right coverages).

It's even possible to imagine Amazon moving well beyond small business if this initial push succeeds as broadly as it could. Amazon doesn't shy away from complexity, so it could keep climbing the ladder, developing expertise that would let it serve ever-larger companies. Amazon could also move into personal lines, especially because many owners of small businesses don't see a clear demarcation between their corporate and personal lives.

"Customers are going to have other insurance needs," says Karnina Szymanski, president of insurance at Bold Penguin, which was acquired earlier this year by American Family Insurance. "I'm not in the head of Amazon... but I think the possibilities are endless."

Cheers,

Paul

The problems associated with issuing certificates of insurance (COI) are so egregious, it could be argued most insurance professionals have either forgotten their existence or ignored them altogether. Nearly 30 years ago, a court characterized the certificate of insurance as “a worthless document.” Yet little has changed -- until now. With the aid of technology, promising solutions are being developed to solve the problems plaguing the outdated certificate of insurance.

There are an unlimited number of examples where the COI failed an interested party. Whether it is a lapse in coverage, incorrect limits or unknown exclusions, the COI would provide little comfort to anyone who knew the true limitations of these one-page documents. More significantly, it is often the business owner, franchisor or contractor, who have the most to lose, who are the least involved in obtaining and confirming coverage. 

It may not entirely be the fault of the industry for the COI’s apparent challenges. The alternative to COIs would require the comprehensive review of hundred-page policies and constant confirmation with carriers of their in-force status. -- a costly replacement that business would prefer to avoid.

Why COIs Are a Cause for Concern

The sheer number of challenges associated with certificates of insurance should make any agent or insured take pause. Deemed nothing more than an informational piece of paper, COIs are consistently issued to businesses that are only looking to tick a box off a checklist. On the other side, organizations that are looking to protect their interests by requesting COIs from their vendors often take minimal steps to ensure they are receiving the protection they desire. 

Consider that the COI does not:

List Exclusions — Certificates of insurance do not list the myriad of exclusions that could leave insureds without coverage. Particularly in the construction industry, insurers are keen to restrict coverage of the contractors they insure -- such as the roofing contractor whose liability policy excluded roofing work, or the painter doing work for a major home builder whose policy specifically excludes tract homes. 

Confer Any Rights — A COI is “issued as a matter of information only and confers no rights.” The documents are nothing more than a summary of coverage provided by an insurance agent as evidence the insured obtained coverage. Language exists within most COIs explicitly advising that policies must be endorsed to provide additional insured status and again warns rights are not conferred in lieu of such endorsement.  

Constitute a Contract — The COI is littered with disclaimers, including language insulating agents, brokers and insurers by specifically stating “this form does not constitute a contract.” Wording continues to remove any ambiguity by stating coverage is not affirmed by the certificate. The specificity of the language is intended to remove all responsibility from the agent and the insurance company represented. 

Guarantee Notice of Cancellation — Even if a certificate of insurance has been properly produced, accurately reflecting the terms afforded within the insurance policy it represents, certificate holders are still exposed to the potential the underlying policy gets canceled. Cancellations can occur for a variety of reasons, including failure to pay premiums, unresolved audit disputes or unattended loss control recommendations. 

The ubiquitous nature of the certificate of insurance has blinded certificate holders to the glaring and obvious deficiencies they carry. Perhaps there is some reliance by insureds on the insurance producer and their errors and omissions coverage. But, again, while individual circumstances may possibly implicate an agent for inaccuracies, there remain many more reasons a certificate could fail. 

See also: A New Phase for Insurtech

The Broken Process of Issuing Certificates 

While certificates of insurance themselves are unquestionably flawed, we must also look at the industry’s standard practice of how COIs are issued. In doing so, we can begin to grasp how something designed to be quick and efficient has become an exposure even for those being insured. 

Cutting costs in any industry commonly relies on reducing tasks to the lowest common denominator. Insurance is no exception. The issuance of certificates has become so procedure-based, their significance has been all but lost. 

Take franchisors. They request that franchisees procure insurance and forward proof of coverage in the form of a certificate of insurance. As the first step, franchisors provide very clear instructions regarding the type of coverage required. But from this point forward vulnerabilities in the process are exposed. 

Insurance Placement — The franchisee solicits quotations from local insurance agents to obtain the necessary coverage. While franchisees rely on producers to obtain the appropriate limits of coverage, the desire to place coverage at the most competitive premium could lead less experienced agents to place coverage that has unfavorable conditions or exclusions.   

CRM Input — Insureds' data, including coverage information, lives inside the insurance agency’s client relationship management program. Commercial lines have not been as fortunate as their personal lines counterparts in that nearly all coverage information must be input manually. When human hands are involved, there lies the possibility of inaccuracies. 

COI Issuance — Most of today’s CRM programs can automatically populate and print Acord forms, including the standard certificate of insurance. If the client service manager assumes the CRM information is correct, any errors entered previously will be transposed onto the certificate of insurance.

Receipt of the COI — This last step of the process is where our concern primarily lies. Often there is a clerk on staff with a franchisor (or other interested party) who receives the certificate of insurance and does nothing more than crosscheck the information against a checklist. Rarely are insureds requesting policy copies to identify any potential coverage gaps or exclusions. 

The certificate of insurance is a snapshot in time. Even if every step of the process has been followed to produce an accurate COI, the document can only be relied on in that moment. Any reliance on the COI as proof of coverage after its initial insurance can be undermined by midterm endorsements or an unforeseen cancellation. 

Who Will Transform the COI Process?

Without the hand of technology involved, the only sure-fire solution to ensure the policy provides coverage as intended remains a painstakingly manual process. It remains incumbent on insureds and other interested parties to review policies in their entirety to confirm coverage. Regrettably, today such reviews can only be tackled by the largest of companies with both the necessary personnel and deep enough pockets. 

However, as insurtech begins to penetrate deeper into the commercial lines space, technological developments for the less exciting aspects of insurance, such as the COI, will follow. Because the challenges associated with certificates of insurance are so pervasive, solutions will likely be developed by several different drivers. 

Carrier-Centric — Insurance carriers will continue to work on improving the customer experience either directly with the consumer or through agents and brokers. Carrier-centric solutions would offer an additional way to build brand loyalty and increase policy retention. Insureds who have experienced an uninsured claim after collecting a COI may be willing to part with the ability to shop their coverage in exchange for more certainty with their certificates. 

Industry-Driven — Industries relying most heavily on COIs to conduct their business may not wait for their insurers to present a solution. Instead, individual industries may take it upon themselves to force carriers to develop solutions under the threat of moving their business elsewhere. Industries or individual businesses with enough weight to broach the issue may also have the capacity to develop insurance pools tailored to their own needs, eliminating the need for COIs for those who participate. 

Third Party Insurtech — Technology solutions, independent of a single insurance company and with the ability to serve multiple industries, can offer the flexibility necessary to satisfy the various needs of agents, carriers and insureds. Acting as a bridge, third-party technology companies can bring many insurers together to serve those industries desperately seeking a way to confidently rely on the COI. 

There is plenty of room in the marketplace for one or more drivers to profoundly change the COI process. How solutions are designed and implemented will likely set the stage for how certificates are issued in the future, regardless of the innovator. 

See also: How Digital Health, Insurtech Are Adapting

How Technology Will Transform the COI 

Technology tends to improve existing processes or services only slightly. Irrespective of who will develop technologies to tackle the COI’s challenges, success will only come once all its related concerns have been addressed. In fact, perfunctory improvements could actually further overstate the already misleading sense of security certificates present.  

This problem necessitates a truly comprehensive solution for the COI -- an answer where certificates can be relied upon in real time, any time.

Developing such a complete solution requires the entire COI process be examined through the eyes of all interested parties, from insurer to insured. In between the two, we must also investigate whether brokers are required or should even be involved in facilitating certificates. 

Ultimately, we must look through the lens of our named and additional insureds who hold all the risk in this equation. Often naïve to the COI’s deficiencies, they deserve better from the insurance industry. Now is the time for technology initiatives to reimagine the certificate of insurance and the issuance process. The best solution will be so transformative it may be unrecognizable in comparison with today’s practices. The industry will question why COIs were ever handled any other way.