The past year saw the insurance industry respond to a pandemic, increased cyber risks and several natural disasters. As 2021 draws to a close, all eyes are on insurers to protect customers, so insurers must increase their flexibility and agility. But how?

With exciting developments in SaaS-based technologies now facilitating much easier underwriting, the next focus in insurance innovation needs to be the product itself. The traditional approach to product creation, using an almost universal contract base and only altering small sections or refiling certain aspects, will slowly fade into disuse. 

Because of all the technology and data now available, each separate market niche can contain products with unique contracts. SaaS-based systems allow companies to manage a plethora of distinct contracts, responding to changing needs in real-time and customizing combinations according to specific requirements. Companies that are unable to keep up, and continue to rely on ISOs and traditional product manufacturing methods, will become dinosaurs as new insurtechs leapfrog them in the market. The quicker that organizations embrace modern product management and design methods, the faster they can bring these new lines to market, another key to staying ahead of the curve. 

Time to market is essential, and the clock is ticking 

Now that the product manufacturing process is much easier to conduct, with capabilities to subdivide product lines, build niche products and customize products to different customer needs, the insurance world can move much faster. Of course, harnessing the power of technology will make for better products -- that is a no-brainer -- but the early birds in insurance in 2022 and onward will catch the worm.  

Insurers must move quickly: designing, testing and bringing to market products in a matter of weeks or months, not years, if they want to capitalize on new areas of coverage. This will convert more clients and generate new revenue streams at speed, but it will also respond effectively and intuitively to customer’s needs. Despite widespread advances in new technology, some insurers still see speed as a stumbling block if they are hampered by legacy policy administration systems and cumbersome internal processes. No insurer can afford to take a long time to innovate in today’s market, and when speed is the resting pulse of success, transformation is key to achieving it. 

See also: 2022 Will Challenge Health Insurers

The top priority must be the customer 

From making product creation more agile to moving more quickly and efficiently, a modern insurer must always refer back to one thing: the customer. There is still so much to be done to innovate the purchasing process for the customer’s benefit: from customization of product offerings to improving customer-facing communication. Intelligent insurers will invest in perfecting the human element of their entire service, thinking deeply about the customer journey and ensuring that the process is as seamless as possible. 

Consumers today have the digital world at their fingertips and, in most instances, can be highly demanding and selective when it comes to the quality of experiences. Consumers already receive immediate results in many industries – swift food delivery, instant book downloads and information within seconds. However, in insurance, consumers still must wait several days or weeks to receive a quote. Yet again, technology is the silver bullet to solve the troubling issues of traditional purchasing methods for insurance customers. With more agile, rapid systems, the back and front office of a company can work in harmony to design and deliver the products their clients require, without long lead times aggravating the customer in their time of need. 

When setting out priorities for 2022 and beyond, a quick-thinking insurer will look to innovate the products they create and how they are creating them, always with the customer at the forefront of their mind. It will be this speed and agility that sets companies apart, as coverages continue to evolve and needs continue to change. The insurance revolution is already underway, and innovation is no longer a choice: It is a necessity. 

When Agents Become Cyborgs

The Willis Towers Watson report on insurtechs for the second quarter found that fully 55% of all deal activity related to distribution. 

Many of those deals related to attempts to circumvent the traditional network. The report says, "The majority of companies focus on tech-enabled distribution in an attempt to minimize the dependence on agent channels, including embedded product warranty platform Extend, price comparison site the Zebra and commission-less life insurer Ethos Life."

But there was also significant investment in making the traditional agent channel more efficient and effective. The report cites wefox, which it says "has taken a different approach. wefox, the Germany-based digital insurer, relies heavily on local agents for policy distribution but has built efficiency in other ways by automating nearly 80% of administrative processes

Both observations mark important trends. Companies, whether incumbents or insurtechs, will continue to look for ways to move simple transactions online and to digitize pieces of more complex ones -- starting on the front end by presenting information that prospective customers are looking for online and continuing all the way through the back end, with the processing of what until now has been paperwork. Everyone -- whether incumbents, insurtechs, tech suppliers or, of course, the agents themselves -- will also invest heavily in making agents more efficient. Those investments will aim both to cut costs and to speed processes, improving the experience for customers

The result will be that the environment for agents will continue to change and that agents themselves will become a sort of cyborg -- part person and part machine. The personal touch will still be highly valued -- many customers still want to hear a human voice even in straightforward transactions that don't require human intervention. But agents will also be able to draw on all the computing power that the industry is increasingly making available. 

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P.S. Here are the six articles I’d like to highlight for agents and brokers:

Clearing 4 Hurdles to Better Agency Tech

While technology can provide huge benefits, agencies need to invest their time in understanding tools to get the most out of them.

3 Ways for Agencies to Improve Cybersecurity

By preparing agents to be the first line of defense against cybercrime, insurance agencies can change employees from risks to guardians.

Creating an Empathetic Customer Experience

Your brand’s empathy matters more than ever to customers who’ve undergone what can only be called an emotional roller coaster.

Digital Is the Assistant We Always Wanted

So why do many companies and advisers in our industry resist digital advances like customer self-service and apps?

Managing Your Personal Brand

Whether you like it or not, you have a personal brand. A powerful one differentiation you and creates an emotional connection with your audience.

Digital Is the Assistant We Always Wanted

So why do many companies and advisers in our industry resist digital advances like customer self-service and apps?

COVID-19 has fast-tracked the insurance industry’s shift from paper-based to digital claim processes. The fact that technology transformation is on every insurer’s radar is not lost on investors: Insurtech funding reached a whopping $7.5 billion in 2020. 

Now, insurers are grappling with the “how to” of implementing an optimal strategy to remain relevant in a rapidly evolving digital landscape. Notably, two forces are working in tandem to necessitate greater digital adoption: consumer demand and the need for streamlined operations. 

On the operational front, insurers are facing some of the tightest operational margins seen in 15 years. The devastating impact of the COVID-19 pandemic resulted in losses of around $55 billion — second only to Hurricane Katrina. 

Not surprisingly, 2020 ushered in a new day for digital demand from consumers. A Salesforce Research survey of 15,600 consumers found that 88% of customers expect companies to accelerate digital initiatives in the wake of the pandemic, and 69% of customers believe companies should offer new ways to get existing products and services via technology-enabled processes.

In terms of quick wins, digital payment is an obvious choice within the framework of claim processes. While a recent Guidehouse-sponsored study underscores that consumers increasingly expect and seek out digital payment options, the reality is that insurers can achieve near-instant return on investment by deploying digital payment infrastructures. 

Simply put, a well-thought-out, holistic digital payment strategy can change the dynamic on an operational area that was previously a cost center.

Digital Innovation: Why Payment Should Come First

For many insurers embarking on a digital transformation journey, one of the greatest challenges is striking the right balance between human and digital interaction. And for good reason — with many areas of the claim lifecycle, there is risk associated with lack of human interaction, especially when policyholders are in crisis. 

Generally speaking, this is not the case with payment. Policyholders overwhelmingly support digitization in this area, as demonstrated by a VPay and Engine Insights survey where more than 95% of respondents pointed to ease and convenience of claim payment, speed of payment and the ability to access funds quickly as criteria that affected satisfaction.

Working in tandem with low risk on the customer satisfaction front, digital payment delivers ROI on day one. The most obvious cost savings stem from the elimination of check print/mail costs equaling as much as $7 for every check issued, but the opportunities to create economies of scale go much further. For example, shortening the time to payment can also reduce ancillary costs — such as extra car rentals — related to lengthy claim cycles.

See also: The B2B Digital Payment Opportunity

First Steps to a Holistic Digital Payment Strategy

A holistic digital payment that positions an insurer well for the future goes well beyond implementation of automated clearinghouse (ACH) — the entry point for many. The best strategies start with incremental changes and capitalize on quick wins. In terms of optimal approaches, first steps should start with the following foundational elements:

1. The impact of various payment options

ACH may be one aspect of a well-rounded digital portfolio, but insurers should also consider other options such as push-to-debit and virtual cards. Push payments allow funds to flow instantly into a consumer’s bank account and can enable access to funds in near-real time, where ACH can take days. Virtual card options also speed B2B payment and operate as their own unique bank card and can be used like a credit card.

2. The power of personalization

The Salesforce Research survey underscores the growing importance of understanding individual preferences:

• 52% of customers expect offerings to always be personalized — up from 49% in 2019.
• 66% of customers expect companies to understand their unique needs and expectations, yet 66% say they are generally treated like numbers.

While digital processes are impersonal by nature, the right approach can help build greater trust through choice.

3. A framework for both B2C and B2B digital payments

Digital B2B payments are on the rise, according to a recent Association of Financial Professionals (AFP) survey. Financially, this approach makes sense: Just like B2C, electronic payment strategies targeting vendors and other third-party businesses save money. Electronic payment options such as virtual cards, which are delivered faster and come with electronic remittance data, align better with B2B. 

4. Security strategies

Digital processes and cybersecurity go hand-in-hand, and the best strategies recognize that the way a company manages and stores digital data is key to protection. It’s one reason new data security requirements were implemented by the National Automated Clearing House Automation (NACHA), and more are likely on the horizon.

See also: Digital Outbound Payments Heat Up

5. Third-party fintech provider partnerships

An April 2020 Celent survey found that two forces were working in tandem: Insurers are accelerating digital transformation while simultaneously outsourcing non-strategic activities, such as digital payment. Designing a holistic digital payment strategy is not for the faint of heart. That’s why the business case for partnering with a fintech provider is often an easy one to make. 

Digital engagement is a priority across the insurance industry. As executive teams consider quick wins with electronic claim processes, payment is a natural starting point. Holistic strategies that capitalize on operational efficiencies and address consumer expectations will define a competitive advantage and resiliency.

The words “insurance” and “innovation” are not typically used together. Today's leaders are working to change that.

As it relates to policy intake, claims management and servicing functions, we often hear the question, "How do we create a flexible, cost/time-efficient, customer-centric process that supports our vision when data is inconsistent and internal processes are so fragmented?" The labyrinth of disparate internal systems and the manual workflows that have been built over decades act as obstacles to growth. 

We saw the processes tested in real time as the COVID-19 pandemic sent the insurance world into hyper-drive to “virtualize” insurance sales and operations. A recent Deloitte Center for Financial Services survey found that "75% of insurance executives polled felt their carrier did not have a clear vision or action plan to maintain operational and financial resilience during the pandemic.” The gaps to transact and support business in a virtual world became obvious. Customers and associates need to transact business 24/7 from anywhere, and on any device, but current practices don't support this. 

The multitrillion-dollar protection gap presents a tremendous opportunity for new financial products to narrow the gap and disrupt the industry. The competition will be fierce. Internal and external digitization is imperative to support innovative growth. When claims management and servicing solutions are designed for growth with a customer-first mindset, policyholders and beneficiaries become hot prospects. The path forward doesn't need complex, multi-year, multimillion-dollar implementations, or extreme staffing changes. It just takes the right solution.

Why has internal claims transformation lagged?

Digitizing the external new business experience has helped carriers remain competitive and attract top agents. But what happens AFTER a policy is issued? Carrier-specific, manual workarounds and disparate databases tether together antiquated processes and lead to longer approval times, higher not-in-good-order (NIGO) rates and multiple customer touchpoints.

Digital claims management and servicing transformation can be costly, complicated and time-intensive. Small interventions can solve specific issues, but until recently a single platform solution wasn't available.

Traditionally, financial services lag other sectors in their adoption of technology. The 2021 Gartner Roadmap Survey reported that “a lot of value is placed on assisted service and the customer service representatives. While the rep remains a valuable focus of technology investment trends, customer service leaders are also signaling an increasing focus on the value of analytics and self-service technologies that help understand and serve the digital customer.”

Imperative for claims and service transformation

From my discussions and research, I’ve identified the following top four "pain points," driving carriers' accelerated need to find flexible solutions and offer self-service options for easy adoption by associates and customers.

1. Multiple Legacy Systems and Manual Workarounds 
2. Changing Claims Workforce
3. Changing Customer and Associate Expectations
4. Lack of Process for Retention of Beneficiary Assets

Pain points become opportunities

Pain Point #1: Multiple Legacy Systems and Manual Workarounds 

Solution: Multiple Systems and Workarounds Become a Single Orchestration Layer 

As I’ve said before, carriers can’t expect to offer an Amazon-like customer service experience if their internal systems function more like a 1970s K-Mart. When carriers develop their digital claims and servicing strategy, there are two considerations I recommend:

1. Current Optimization

How will digitization affect the current business model and optimize the near term? A carrier may need to take an implementation approach that addresses specific needs vs. implementing a straight-through enterprise transformation.

2. Long-Term Transformation

How will the digital strategy support the business transformation necessary to stay competitive in a changing industry landscape?

This requires an investment in developing a strong digital foundation. Consolidation and seamless rules-based configuration build the foundation that carriers can evolve from.

See also: New Operating Model for Insurers (Part 1)

Pain Point #2: Changing Customer and Associate Expectations

Solution: Flexible Cloud-Based Platform and Digital Solutions  

Transformational technologies enable claims and servicing associates to bring the most value to the service function. These could include employees having anytime, anywhere, any-device access to workforce and case management tools, consolidated internal collaboration tools and uniform communications methods to deliver the most value.

The technical transformation decisions need to meet the preferences of the digital customer. These include self-service channels such as online account portals and mobile applications. 

Analytics are critical. This includes the collection, analysis and reporting on customer data using digital analytics, sentiment analysis and machine learning to be able to make informed decisions. Interaction assistance tools and “voice of the customer” feedback will help enact an optimum solution for all.

As carriers build on their digital claims and servicing foundation, they need to enable the ability to support third-party providers in internal digital transformation efforts. Additionally, carriers will need a scalable technology solution that supports future growth.

Pain Point #3: Changing Claims Workforce

Solution: Support the Changing Claims Workforce While Supporting Legacy Requirements 

End-to-end virtual claims and servicing processes are essential as insurance carriers move to in-office and hybrid work models. Their popularity is accelerating carriers' need to implement straight-through and single-issue digital solutions. Gartner recently reported that “55% of employees say that whether or not they can work flexibly will impact if they stay with their current employer." 

Additionally, the Insurance Information Institute reports that "82% of insurance claims and policy processing clerks are women. With 1 in 4 considering downsizing their careers or leaving the workforce entirely post-pandemic, carriers need to focus on solutions to retain these valuable workers." 

Something often overlooked is that as technologies are evolving, support for legacy systems is still needed as boomers with skills like COBOL retire. COBOL still runs over 70% of the world's businesses, and IBM estimates there are over 200 times more transactions processed daily by COBOL business applications than there are Google and YouTube searches every day.

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

Pain Point #4: Lack of Retention Processes for Beneficiary Assets 

Solution: Create a “Customer First" Mindset to Turn Beneficiaries into Clients

Less than 4% of beneficiary assets are retained. A customer-centric, beneficiary claims process can turn beneficiaries into prospects, when done well.

Imagine a world where, through rules-based configuration, assets could be retained at the carrier instead of being disbursed to the beneficiary to be managed somewhere else. Or a rules-based suitability configuration that connects beneficiaries to an agent to discuss suitable financial products offered by the carrier. Such a configuration exists.

Moving forward: the impact of flexible claims and servicing solutions

Carriers that strive for digital strategy that creates a seamless orchestration layer among policyholders, claimants and associates will see near-term digital optimization efficiencies and be well-positioned for long-term transformation.

To learn more, download Benekiva’s white paper: “Carrier Empowerment Through Intuitive Claims & Servicing Solutions.”

Do You Need a ‘Digital Twin’? Paul Carroll, Editor-in-Chief of ITL It’s become fashionable to talk about how companies need to build a “digital twin” — essentially, an incredibly detailed digital model of the business so they can simulate a range of possible moves and see the results before deciding what to implement in the physical world. Should you go along with the fashion? The simple answer is: Yes. And no. continue reading > New Majesco Podcast Join Denise Garth for her latest discussion featuring NFP’s Head of Innovation Mark Rieder on challenging the traditional voluntary market operating models, new technology trends and the role of innovation.   Listen Now SIX THINGS Future of Insurance Is Preventive by Guy Attar Insurers could use artificial intelligence to identify risks and prevent losses from happening. Why don’t they? Read More 6 Ways to Transform Customer Experience by Amir Farid While agents have been leery, they are finding they can thrive in a new world where technology truly complements their offering. Read More Global Insurance Forum Experts Series Sponsored by International Insurance Society  Over this six-part series, hear from industry leaders about building an innovation culture, leveraging data for success, and more. Read More Navigating the Vaccine Mandate by Kimberly George and Mark Walls OSHA's vaccine mandate leaves employers facing a complex compliance challenge. Read More Virtual Captives: The Best of Both Worlds by Grant Maxwell If a captive is not an option, a virtual captive offers an innovative combination of a classic insurance product with those of risk financing. Read More Open Banking APIs: A New Growth Engine by Maarten Bakker The logical next step for bancassurance is to play a role within new digital ecosystems based on open APIs. Read More Digital Distribution With Personal Touch by Denise Garth In most “retail” industries, customer digital enablement is just a matter of “give them what they want.” But insurance requires more nuance. Read More After Finding Success in Ohio, Beam Dental is All Smiles Sponsored by JobsOhio Beam Dental, an innovative insurtech business, was growing. With the help of JobsOhio, Beam Dental moved to Ohio and found the perfect market for a growing startup. Watch Now MORE FROM ITL November Focus: Telematics In all my years covering all manner of technology, telematics may have caught me off-guard the most. When I first wrote about Progressive’s auto telematics program, Snapshot, in 1998, it seemed like a slam dunk. Of course, it made sense to monitor how people drove and to price their insurance accordingly. Or not. Read More Creating Room For Innovation  Sponsored by Rimini Street  Even as insurers focus on innovation and the technology that will enable it, they still must maintain and operate the legacy systems that run the business. What if it’s possible to spend less time and money on those systems, freeing resources to focus on developing systems that will really move the needle for the business? Watch Now 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

 

For as much coverage and discussion as telematics has received over the past two decades, its impact on the auto insurance economy, including transportation, is going to be even greater and further reaching than many may have thought – it will be transformative in the fullest sense of the word.

Broadly defined as the digital exchange of vehicle and driving performance and status data among vehicles, smartphones and sensors of many kinds, telematics will enable and permanently change auto insurance products, pricing, distribution, public safety, alternative transportation, new products and revenue streams for all participants, including auto accident management, claims and repair process for ever-changing customer experiences. Insurance companies not already participating in this transformation will be hugely disadvantaged as telematics adoption grows beyond the tipping point.

Telematics is one of the most discussed insurtech innovations for both personal and commercial auto insurance. Insurance carriers enthusiastically promote the concept of using apps, windshield and plug-in devices in some combination to track driver behavior in exchange for discounts or pay-per-mile benefits. Behaviors such as acceleration and hard braking are combined with other data and rating variables to score and ultimately price insurance premiums.

Even though telematics has been in market since 2008, when Progressive Insurance introduced its innovative but slowly embraced Snapshot wireless device, only around 10% of all U.S. consumers have auto insurance using some form of telematics: pay-as or how you drive or other variations on that general theme.

The majority of consumers – between 60% and 70% – don’t know much about telematics-based auto insurance or outright resist the idea of their insurer monitoring their driving behavior, not to mention having concerns over sharing a range of other private information. While most drivers believe they have good driving skills, there is obvious hesitance in allowing insurers to “watch” closely. But this hesitancy is gradually dissolving as more pragmatic and transactional attitudes toward privacy evolve and as technology improves and expands; thus, Telematics 2.0 is on the rise.

Telematics 2.0: What’s Driving It?

There are several trends to consider beyond some of the more obvious factors that are attracting insurers, car manufacturers and drivers to telematics programs. Some of the trends we are observing that will shape and accelerate Telematics 2.0. are:

• rising crime rate (carjacking and gun crime) and speeding are increasing focus on personal safety and security while people are traveling away from home
• growing demand for fairness and equity by consumers and regulators; backlash against use of credit scores in pricing, viewed as unfair and discriminatory in some circles
• the dramatic drop in miles driven as a result of COVID-19 and the work-from-home (WFH) transformation; new commuting and transportation patterns have emerged
• increased capabilities and lower cost of technologies, including smartphones; 5G enables greater speed and functionality of over-the-air solutions
• OEMs embedding vehicle telematics and onboard connectivity
• growing consumer acceptance (especially aging Gen Z and Millennials) of consciously trading personal information and privacy for rewards and benefits
• desire for higher levels of safety and security (especially for households with driving-age children)
• emergence of inter-industry ecosystems and platforms that depend on real-time connectivity of devices
• accident frequency and severity and poor commercial auto lines performance, which demand changes

See also: ITL FOCUS: Telematics

Tomorrow’s Telematics: Features and Benefits

Telematics 2.0 has promise beyond discounts, offering emergency response, first response and roadside assistance. The OnStar model is being advanced through telecom Verizon’s Hum crash response alert system and recently announced plans by Apple to launch crash detection, which may auto-dial 911. There are several other such offerings involving insurance carrier apps, as well. Most promising could be an eventual transformation to today’s first notice of loss (FNOL) process, creating a real-time, automated first notice of incident or accident. All of these concepts are currently available, but, due to low telematics adoption, there are even lower volumes of claims use cases affected at this time. However, as more players enter the mix, consumers will expect their vehicles, telematics service or apps to auto-activate and initiate a claim and provide other services.

Other benefits of telematics programs coincide with advances in advanced driver-assist systems (ADAS), where both car and driver behavior improve simultaneously. Gamification and rewards can encourage safety and are already showing promise, for example by reducing distracted driving as auto insurance coverage evolves to become hyper-personalized and dynamic.  

Commercial Auto Insurance in the New Economy

Shared mobility, which includes ride-sharing (e.g., Uber and Lyft) and car-sharing (e.g, Enterprise CarShare, Zipcar, Car2go, GIG, Turo and Getaround), relies heavily on telematics and is projected to continue to grow as vehicle ownership declines and socio-economic factors continue to change the mobility landscape.

The growth of small businesses began during and after the Great Recession of 2007-2009 and has continued to accelerate as corporate America adopted automation technologies and trimmed workforces to better compete. The pandemic fueled further growth in small business as WFH employment models fueled the Great Resignation and gig economy businesses emerged to meet new consumer demands for delivery and touchless services for everything. Telematics and connected devices are a key enabler of small business insurance products for fleet and delivery vehicle insurance, route optimization, asset management, driver safety and well-being and more.     

Telematics Playing Field Is Expanding

Initially, telematics device manufacturers and solution providers enabled and supported the majority of telematics programs. Leading adopters were initially larger personal lines auto insurers such as Progressive that used vehicle telematics as a marketing and underwriting tool to attract new policyholders with safer driving profiles. In a few global markets, but excluding the U.S., carriers also used telematics in claims and fraud applications.

As telematics programs, including UBI (usage-based insurance), PAYD (pay-as-you-drive) and PHYD (pay-how-you-drive) proliferated and became “table stakes” for auto insurers – in spite of anemic adoption rates averaging between 5% and 7% – new intermediaries emerged to enable and support carrier programs. These included TSPs (telematics service providers) such as Octo, IMS, True Motion, Cambridge Mobile, Vitality Drive and the Floow. In addition, TDEs (telematics data exchanges) were introduced by large insurance industry information providers such as Verisk, LexisNexis Risk Solutions, CCC Intelligent Solutions and Arity, an Allstate company that offers driver behavior insights for tens of millions of drivers. These exchanges are essentially permission-based platforms connecting cars, drivers and auto insurers that share embedded and mobile vehicle telematics data in normalized format for use by auto insurers to provide usage-based insurance (UBI) programs and telematics-enabled claims capabilities.

New telematics technologies also appeared, supplanting the costly and unwieldy OBD (on-board diagnostic ) plug-in devices. These initially included smartphone solutions connected to vehicle OBD port data, which have now evolved to smartphone apps with and without on-board installed “tags” that improve information capture and accuracy. The recent acquisitions of True Motion by Cambridge Mobile Telematics (CMT) marked the beginning of a consolidation phase in telematics insurance and was quickly followed by Lemonade’s entry into the connected car insurance space, with its acquisition of Metromile.

Future of Connected Vehicle and Smart Mobility Infrastructure Is Here

The many evolutionary developments described above would be enough to transform any industry, but there are even more powerful forces emerging just now and approaching that are sure to turbo charge the entire process. 

Consumer groups and state regulatory agencies in some jurisdictions are attacking the long-established auto insurer practice of using individual credit scores in pricing as unfair and discriminatory, and a call for an outright national ban could follow.  

Telematics-based UBI and other models that depend on mobile telematics, real-time data and AI such as Loop insurance continue to emerge almost daily. And many of these products are segment-specific, such as Buckle, available only to rideshare and delivery drivers and HDVI, which focuses on small and midsize trucking fleets.

See also: Building Telematics Can Mitigate Risk

Smart city projects are emerging that deploy different types of digital and voice-activation technologies and sensors to collect and transmit specific data and will depend on V2V (vehicle-to-vehicle) and vehicle-to-infrastructure connectivity. President Biden’s infrastructure bill, which was just passed, will greatly expand smart city projects in applications such as broadband connectivity and other urban technology projects and a rapid expansion in connectivity, electric vehicle adoption, transit improvements and more.

Finally, autonomous (self-driving) vehicles are an inevitable reality as they evolve from Level 1 (least autonomous) to Level 5 (completely autonomous) and will accomplish a few things: convenience for operators/owners of vehicles, cost reduction for commercial vehicle operators (no driver) and safer roads (fewer and less severe crashes). Even at Level 1, these vehicles depend on over-the-air software updates, which will require high-speed connectivity, the very foundation of telematics programs.

These technology and connectivity enhancements are certain to permanently transform the nature of transportation, automobiles and auto insurance – and are poised to accelerate.

It's become fashionable to talk about how companies need to build a "digital twin" -- essentially, an incredibly detailed digital model of the business so they can simulate a range of possible moves and see the results before deciding what to implement in the physical world.

Should you go along with the fashion?

The simple answer is: Yes. And no.

Accenture recently made the case for using digital twins in insurance. The blog notes that digital twins are being deployed effectively in many industries:

"Outside of the insurance realm, digital twins are being linked together to create living models of whole factories, product lifecycles, supply chains, ports and cities. Companies are using them to understand supply chain predictability, worker safety, maintenance and repair costs, and as a risk-free playground for innovation. For example, Unilever is working with Microsoft to develop intelligent twins of its factories so it can test potential operational changes and improve production efficiency and flexibility."

IBM makes a compelling argument about, for instance, outfitting a wind turbine with sensors producing data about key aspects of the physical object’s performance, such as energy output, temperature and weather conditions. The data can then be relayed to a processing system and applied to the digital copy. 

"Once informed with such data," IBM writes, "the virtual model can be used to run simulations, study performance issues and generate possible improvements, all with the goal of generating valuable insights — which can then be applied back to the original physical object."

Kevin Kelly, a co-founder of Wired, paints an even grander version, as usual. In early 2019, he laid out an almost poetic vision of what he calls a "mirrorworld," which is based on an exact, digital representation of everything in the real world.

"The mirrorworld doesn’t yet fully exist," he writes, "but it is coming. Someday soon, every place and thing in the real world—every street, lamppost, building and room—will have its full-size digital twin in the mirrorworld." 

All those possibilities sound great, right? So, what's the problem with digital twins?

The problem is that no model is a perfect representation of its physical counterpart. It's easy to think otherwise, especially once you've become accustomed to using a model for a time, and confusing a model with reality can be disastrous.

Look at Zillow, which developed a sort of digital twin of the housing market and which bought billions of dollars of houses, expecting to be able to flip them quickly -- only to find that its model didn't quite match reality. Zillow lost $380 million in its latest quarter and said it will take a writedown of half a billion dollars on its remaining inventory of homes. The Wall Street Journal says, "Zillow ran into some of the limits of technology in a business still informed by emotional attachments, personal tastes and other intangible factors."

Or, look at the models that led to the Great Recession in 2007-09. Financial services giants, including AIG, created derivatives based on incredibly precise models -- that ignored the possibility that housing prices could drop. Long-Term Capital Management likewise relied on incredibly elaborate models of financial markets -- and needed a $3.6 billion bailout in 1998.

A friend and colleague, Vince Barabba, taught me long ago: "Never say, 'The model says.'"

A model is simply not adequate justification for any decision that matters. You have to always be able to justify a claim or a decision based on actual evidence and logic, not just on a model that was likely developed long ago, based on assumptions that have become obscured.

Vince's track record gives him plenty of credibility on models. He held any number of senior corporate positions, including as SVP of strategy at General Motors, where he gave the world OnStar, and was twice the director of the Census Bureau. He has written numerous books on strategic decision-making.

I've also seen up close and personal, based on some consulting work we've done together, how he uses models but doesn't entirely trust them. A key tool is what he calls "decision records." Any time you are making an important decision, including those that go into elaborate models like digital twins, you record the assumptions you're making. You then revisit those assumptions from time to time to see how they've changed and to see if you need to adjust or even throw out your decision -- as Long-Term Capital Management, AIG, Zillow and many others should have done.

My recommendation on digital twins: Be like Vince.

Take advantage of the increased digitization of the world to build the best models you can and use them to simulate decisions as much as possible. But don't trust them too far and regularly revisit the assumptions that went into building them.

Cheers,

Paul

Insurers, which traditionally render services after catastrophes like earthquakes, hurricanes and wildfires, are busier than ever as climate risk becomes a genuine, dangerous possibility to many customers. But these disasters are now too unpredictable and frequent for traditional, retroactive action taken by companies. And with the advent of exciting new AI technology, insurers can do more.

What AI advances mean for risk-avoidance measures

The aerial imaging capabilities developed by exciting new companies in the P&C space mean that preventive measures are not just a pipe dream; they’re possible. Using up-to-date, 3D imaging of a property, insurers could notify customers of potential risks in advance of the risk occurring. This enables the customer to avoid the risk, or at least prepare for and mitigate the damage the risk could cause. 

The warnings could be generalized, referring to widely known or regional information concerning weather, for example. An insurer could contact a customer, warning them that, due to low temperatures occurring that evening, the customer should leave a faucet running to avoid burst pipes. Outside of weather warnings, generalized advice could be given around crime: If the area of the customer’s residence has recently suffered from a spate of burglaries, for example, an insurer could recommend installing or updating a burglar alarm system.

The guidance insurers provide could also be personalized to a customer’s property. If a customer has tall trees or branches overhanging their roof, the insurer can recommend trimming back or removing them to minimize the threat of damage in the event of a hurricane or windstorm. Even swimming pools, which AI imaging can identify and analyze, could be part of a protective offering provided by companies. Insurers have the capability to advise that customers cover their pool or add an enclosure, to avoid the risk of accidents.

The list is endless: AI imaging can detect if a roof needs replacing or if vegetation should be removed to reduce vulnerability to wildfire damage. Insurers could even warn customers to remove snow from a property’s roof, once the weight of the snow risks the roof collapsing. This is based on up-to-date weather measurements and specific, intelligent calculations of a property’s roof size, among other characteristics. 

Insurers can go one step further

These AI imaging capabilities provide the means insurers need to go that extra mile and help customers to remain safe. But insurers could go even further, offering mitigation services to protect against the imminent risks they identify on behalf of their customers.

By hiring third-party administrators and other suppliers, insurers could predict risks, warn customers and then carry out the preventive measures their clients need. These suppliers could include roofers, construction contractors, alarm or IoT system suppliers, or gardeners, to name a few. Although this extended service requires high investment by the insurer to avoid the damages, such investment pays out in the long term, as insurers eventually avoid paying out large amounts of money for losses when risks are realized.

Can preventive coverage be a customer engagement tool?

Taking a proactive approach to risk management not only benefits an insurer’s bottom line, it cultivates tighter relationships with customers. Leveraging AI predictions and the resulting preventive analysis as a customer engagement tool is a no-brainer. In the insurance industry today, customers rarely hear from or connect with their insurance carrier beyond the initial sale – unless receiving a renewal or filing a claim. But such distance and sporadic contact is ceasing to be effective in today’s increasingly customer-focused marketplace. When personalization, regular communication and intelligent customer experiences are the name of the game, establishing proactive relationships with customers can not only reduce claims but also improve retention rates. 

Many insurers are sitting up and taking notice of the need for better customer service, developing customer portals to push information out to customers. But what if you could take this one step further, building and maintaining positive customer relationships as you help them to avoid risks? 

See also: Future of Work and Collaboration

It’s time that insurance changed forever

At GeoX, we know there is a better way to conduct P&C operations that not only saves time and money but offers an elevated customer experience. We know this because we provide reliable, high-quality intelligence for residential and commercial properties across the U.S., interpreting aerial imagery using AI and 3D computer vision technology and producing accurate data and insights about a property. We enable insurers to identify a wide variety of risks within seconds, at scale and with no IT infrastructure requirements.

At GeoX, our purpose is to strengthen the business performance of each of our customers, to better protect the safety of their customers and employees, and to strengthen human connections throughout the policy life cycle.

OSHA’s Emergency Temporary Standard (ETS) regarding COVID-19 vaccine mandates leaves employers facing a complex compliance challenge involving both OSHA and laws on accommodation and leave of absence. What exceptions are allowed? How can employers track compliance? How will the courts respond?

The latest Out Front Ideas with Kimberly and Mark webinar included expert guests discussing these questions and more. Our guests were:

• Bryon Bass – senior vice president workforce absence, Sedgwick
• Travis W. Vance – partner, Fisher & Phillips

Court Decisions on Mandate Challenges

A lottery conducted by the Judicial Panel on Multidistrict Litigation determined on Nov. 16 that the Sixth Circuit will hear the consolidated legislation regarding OSHA’s ETS. This court has the power to modify or nullify the stay issued by the Fifth Circuit. To keep employers on track with the ETS’ Dec. 6 effective dates, it will be critical that the court decides by Thanksgiving. The Sixth Circuit’s active and senior status judges include eight Democratic appointees and 20 Republican appointees, which could prove favorable for vaccine mandate challengers. If the legislation is sent to the Supreme Court, it is unlikely that the circuit court’s decision will be overturned.

While OSHA’s ETS is currently suspended due to a stay ordered by the Fifth Circuit, if the stay is overturned, employers should be prepared to follow the provisions outlined in the ETS.

Key Points of OSHA’s ETS

Generally, an OSHA standard requires up to 10 years to go through the rule-making process, which involves a comment period, meeting with different industry groups and working through several rounds of drafts. An ETS provides an exception to that rule when there is a grave danger to the workplace, allowing OSHA to issue citations immediately. OSHA’s ETS regarding COVID-19 vaccination and testing will last six months, meaning on May 5, 2022, they can move this to permanent status. To cover all future pandemics, OSHA could potentially finalize the Infection Disease Standard (developed in 2009 after the H1N1 outbreak). 

The ETS applies to 29 states that use federal OSHA regulations. Following their own plans, the remaining states are required to decide whether to adopt the federal ETS, rely on existing regulation or make their changes. Some states on the state plan will be expected to fight the ETS, meaning the federal government may sue to ensure they adopt the regulation. 

Some of the crucial dates outlined in the ETS include:

• Nov. 5, 2021 – The deadline to start collecting documents from employees to detail their vaccination status.
• Dec. 6, 2021 – All provisions of the ETS go into effect except for testing status. This includes employee training, written policies and a vaccination roster. All unvaccinated employees will also need to begin wearing masks indoors if they are not already. The vaccination status of each employee will need to be known.
• Jan. 4, 2022 – Weekly testing begins for all unvaccinated employees.

Only employees who are entirely isolated or working by themselves full-time, like truck drivers, or employees working exclusively outdoors are exempt from the ETS. (Only 8% of outdoor construction workers fall into this group.) While testing won't be required, employers will still need to know the vaccination status of these employees.

See also: On COVID Vaccine: Do the Math

Federal Contractors and CMS Mandates

Apart from the ETS are two mandates that apply to federal contractors and the Centers for Medicare and Medicaid Services (CMS). Unlike the ETS, these require all employees to be vaccinated by Jan. 4 and do not provide a testing option. The federal contractor mandate applies to anyone involved with a project, even if they are only involved a portion of the time. The only exemptions to these mandates are medical or religious exemptions, where accommodations will need to be made.

Leave of Absence Requirements Related to the Vaccine

Under the ETS, paid leave is required for employees receiving a vaccine and those experiencing side effects from a dose. An employee may request up to four hours to have a vaccine administered and up to two days to recover from side effects. An employer can require an employee to use accrued sick leave but cannot ask them to take future sick leave. If they do not have any remaining sick leave, the employer must pay for the necessary time.

COVID-19 testing costs can be passed on to unvaccinated employees, per the ETS. This regulation runs counter to specific state laws that require employers to cover the time and costs of testing. It is recommended that testing be done during regular business hours to avoid overtime pay considerations. If any employee decides to get a vaccine or testing done outside of work hours, the employer is not responsible for covering the time or costs.

Disability and Medical Accommodations

If an employer already has a policy in place that mirrors the testing and mask requirements of the ETS, the employer does not necessarily need additional accommodations for unvaccinated employees. However, the mandates that require vaccination state that individuals with medical conditions covered under Americans with Disabilities Act (ADA) guidelines must be provided a reasonable accommodation. Regardless of the medical condition, employers should stay consistent in their practices, following previous standards.

For employees that fall outside of the reasonable accommodation group, like those who cannot wear a mask or get tested, further determination of an ADA-qualified disability may need investigation. Employers should not change their process with this group, and continue to engage with them and know their restrictions. Reasonable accommodations for this group may include remote work opportunities, separation capabilities, like offices with doors, or temporary work schedule modifications. Remember that accommodations do not need to last forever, and employers should use follow-up mechanisms to determine if it is still appropriate or causes a business hardship. Employers should be vigilant in their documentation and outline effective dates.

Religious Accommodations

Employees only need to demonstrate that they have a sincerely held religious belief, observance or practice that precludes them from getting vaccinated to request an accommodation. These accommodations have the same guidelines required by those that fall under the ADA, per Title VII. An employer would need hard evidence to prove an employee may be abusing this policy. As with medical accommodations, employers should be extremely consistent in their practices of religious exemptions.

How Employers Can Prepare

While many employers have already started tracking the vaccination status of their workforce, there is certainly more to the ETS orders. Employers should implement the following to stay on track:

1. Draft a written policy by Dec. 6.

2. Inform employees of the policy by Dec. 6.

3. Adopt procedures for determining employee vaccination status, including:

• Maintaining confidential records of employee vaccination status.
• Inquiring with employees about their vaccination status, which is lawful under the EEOC, but this should end the inquiry detail.
• Collecting proof of vaccination or creating a confidential list of vaccinated workers.
• Reviewing state laws regarding confidentiality and privacy of medical records.

4. Have an employee vaccination roster ready by Dec. 6.

5. Determine if you will mandate the vaccine or allow the unvaccinated employees to be tested weekly. The ETS allows employers to require vaccinations without providing the alternative for weekly testing. If an employer is planning on weekly testing, consider the logistics involved.

6. Have a plan for addressing non-compliance by employees. If an employee does not get tested or refuses vaccination, discipline will need to be outlined.

7. Develop a plan for handling accommodation requests. The policy should be robust and clear to address religious and disability issues. Communicate and administer the accommodation process thoughtfully, emphasizing individualized, confidential consideration of each request.

8. Prepare for OSHA complaints and inspections. The vaccination ETS will not displace current compliance duties related to COVID-19 prevention and mitigation. OSHA will also likely ask for your COVID-19 response plan and training, so it is critical to develop a policy and communicate its requirements to your employees. Train managers and supervisors on what to do and say if OSHA arrives for an inspection.

See also: Extreme Weather, COVID, Home Claims

The archive of our complete Navigating the COVID-19 Vaccine Mandate webinar and guests’ resources from this session, can be found here.

 

The Triple-I members-only Q4 Insurance Economic Outlook report, Soft Landing, Headwinds and Rebound, is now available! Paul Carroll Editor-in-Chief and Dr. Michel Leonard, CBE, head of the Triple-I’s Economics and Analytics Department, discuss the Triple-I’s latest Insurance Economics Outlook for Q4 2021 focusing on this year’s unusually wide range of growth and inflation forecasts and key performance indicators for the P&C industry in 2021.

They discuss:
--How insurers in the U.S. are growing much faster than might be expected, given the performance of the sectors of the economy where they do most of their business, but not as fast as GDP as a whole, as it snaps back from the effects of the pandemic.
--How insurers need to stay agile going into 2022, given the uncertainty about the speed of the recovery and given its sector-by-sector nature.