Insurers have spent the last 20 years exploring the potential of telematics with alternating curiosity, commitment and disillusionment. Last year, 8.2 million U.S. auto policyholders shared their driving data with an insurer, according to the IoT Insurance Observatory, a global think tank.

Insurer participation in the telematics space has been consistent for the past several years, according to annual surveys of insurer CIO members of the Novarica Research Council. Insurers that have deployed telematics generally indicate positive experiences; this includes a majority of larger insurers (more than $1 billion in annual written premium), 63% of which have measured positive ROI from their telematics programs. This is fairly rare for emerging technologies, where insurers are more likely to generally recognize value than formally measure it; the ROI places telematics alongside technologies like machine learning and robotic process automation in terms of the value created for insurers that have deployed it.

Given this activity, it’s useful to example the past, present and future of insurers’ use of telematics in personal auto lines, contextualizing current activity in light of insurers’ past approaches and speculating on future developments based on insurers’ present actions. As the article profiles the stages of telematics adoption, the focus will be on what is changing and why.

The Past (1998-2016)

Insurers in this phase were exploring telematics and the insights it could provide. Progressive’s Snapshot program has been the pioneer in OBD/dongle telematics-backed programs. The company's journey has motivated other tier-1 insurers to engage with usage-based insurance (UBI). Several other top-10 insurers had introduced similar programs by the end of 2012, at least in some states.

These programs went out of their way to avoid scaring off initial adopters. They offered discounts to opt in and monitored driving behavior only temporarily, and many even didn’t impose surcharges on poor drivers. The value for insurers largely came from self-selection: only good drivers were interested in enrolling. However, insurers that were better able to effectively manage the usage of telematics data for pricing not only obtained better economic results thanks to surcharging the worst risks but were also able to keep an average retention rate above 94%.

The number of policyholders sharing data with an insurer grew to 3 million in 2014 but then leveled off. Insurers’ commitment subsequently vanished, and market sentiment about UBI became pessimistic. After almost 20 years and relevant investments, only about 1.5% of U.S. drivers were sharing telematics data with their insurers.

Number of policies sending data to an insurer by year in the U.S.

The Present (2017-2021)

While many market analysts with a little literacy about telematics data were speculating whether UBI would die before its potential was realized, in 2016 forward-looking insurer Allstate created Arity, a company dedicated to telematics and focused on the usage of the smartphone as a sensor.

Mobile-based data collection has vastly increased the reach of telematics programs by simplifying sign-up. The market has grown at 30% per year in 2019 and 2020. The COVID-19 pandemic has further increased awareness of UBI among the media, agents and customers – especially about pay-per-mile mechanisms – and is likely to support even more robust growth in 2021, as presaged by new mileage-based programs like that from American Family Insurance (MilesMyWay).

At first, it wasn’t clear mobile was a suitable source for telematics data: A leading telematics conference in 2016 included a session titled “Royal Rumble: Dongle vs. Mobile vs. Embedded Data Collection.” But mobile-based solutions have been the growth engine for telematics over the last few years, and quality of OEM data hasn’t yet met expectations. All the new successful approaches rely instead on the sensors present in the phone – sometimes paired with a tag positioned in the vehicle – and monitor the policyholder for the full duration of the coverage, rather than using a dongle for a single initial monitoring period.

See also: From Risk Transfer to Risk Prevention

Continual monitoring has allowed many of the top insurers to expand the way they use telematics data. In recent years, U.S. insurers have:

• Introduced mechanisms for structured behavioral change– such as cash back earned on each trip – to promote less risky behavior;
• Leveraged telematics data in claim processes to improve customer experience and increase both efficiency and effectiveness of claims management;
• Introduced “try before you buy” apps for more accurate pricing at first quote, to attract better risks in each pricing cluster and reduce the premium leakage from bad risks.

Additional use cases like these allow insurers to build more robust UBI business cases, creating value on insurance profit and loss. This, in turn, allows insurers to create more attractive value propositions for customers: The more value created, the more there is to share with policyholders in the form of discounts, rewards and cash back. These incentives in turn attract new customers, driving further adoption.

Forward-looking insurers investing in these innovations today are progressively building the set of competencies necessary for mastering the usage of telematics data in the insurance business. This will not only create faster-growing and more profitable UBI portfolios but also address the transition to future mobility, as suggested by the story of Avail, the car-sharing service created by Allstate.

A large portion of the market hasn’t reached this level of maturity, however. Underwriting is still the most common area where insurers use telematics, although a few are beginning to explore other areas.

Many insurers are still watching the space, especially midsize insurers, which have engaged with telematics at roughly a third the rate of their larger counterparts. The percent of insurers deploying or piloting telematics has been roughly unchanged since 2018. (Insurers that are already participating, many of which have measured positive ROI, are continuing to innovate.)

Insurers whose internal technology environments are still mid-transformation may have a harder time supporting value-added telematics features; for these insurers, the value proposition for telematics as a whole is less clear. In particular, insurers need substantial data capabilities to manage UBI data at scale and innovation capabilities to transform the way business has been done for decades. As insurers continue to improve their data capabilities, and as more and more consumers adopt telematics, insurers that aren’t yet in the space may have more ability and more reasons to enter it.

The Future (2022-2030)

An insightful postcard from the future has been delivered by Tom Wilson, Allstate CEO, in a recent Bank of America Securities virtual conference: “If you're not leaning into telematics, you’re not going to be in business for very long, at least on a profitable basis.”

We believe that in 10 years it will be the norm in the U.S. personal auto market:

• For customers to download their insurer’s app on their phone to be insured. This app will continuously use the smartphone’s sensors to deliver a superior customer experience regardless of what product a customer chooses: pay-per-use, telematics-based renewal pricing or a policy with a traditional rating based only on traditional variables such as age, credit score, etc. This telematics app will have more than 40% daily active users, as some international insurers have already demonstrated. These interaction frequencies are not far from social media.
• Telematics will prevent risks, both by real-time warnings in risky situations and by driver improvement via rewards for safe driving. Some international insurers have already put these into practice and created a reduction of their expected losses. Insurers will create an overall benefit to society by making drivers safer.
• Claims touchpoints will be enhanced by the usage of telematics data and a virtuous collaboration between humans and AI. Policyholders will enjoy more accurate and efficient processes, from FNOL when accidents are detected, to claim triage, to adjudication and repair and payment. Customers are already demanding this, as shown by a 2019 customer survey conducted jointly by Cambridge Mobile Telematics and the IoT Insurance Observatory.
• Customers will use their insurers’ apps to select among personalized offers of telematics-based services and additional contextualized risk-transfer solutions.

See also: Personalized Policies, Offered via Telematics

Forward-looking insurers are already preparing for this kind of scenario. This will in turn require transforming processes to most effectively use telematics data. It may not be enough to simply have a UBI product: The technology itself has a cost, and value-sharing (e.g., through discounts), can start at 10%. Insurers will need to use telematics data effectively to generate a return on this investment.

Insurers will have to educate both externally and internally: Not only will they need to communicate the benefits of telematics to potential customers, they’ll need each internal functional area to have a basic literacy about telematics. We expect that the next 10 years will see a tremendous degree of innovation and adoption, so telematics and the value-sharing it enables will be necessary to compete at the leading edge. This in turn should create a sense of urgency: Although simple telematics products can be replicated quickly, effectively leveraging telematics data to generate profitability can take years of iteration and concerted effort across organizations, and capability gaps will require years to be closed. After 20 years of experimentation in the U.S. personal auto market, telematics is ready to take flight.

The sudden halt imposed on the aviation industry by the COVID-19 crisis hit the sector hard. In April 2020, two-thirds of the global commercial aviation fleet sat idle on the tarmac, while passenger traffic was down 90% year-on-year. Today, the aviation industry is slowly rebounding, led by domestic travel. As more aircraft return to the skies, a new report from aviation insurer Allianz Global Corporate & Specialty (AGCS) highlights some of the challenges airlines and airports face as they restart operations.

1. “Rusty” pilots and the return of sightseeing flights

Earlier this year, dozens of pilots reported making mistakes, such as taking multiple attempts to land, to NASA's Aviation Safety Reporting System, with many citing rustiness as a factor on returning to the skies. Airlines (and other operators) are well aware of the potential for pilot “rustiness” and continue to take steps to manage and mitigate these risks. 

Major airlines have developed different training programs for pilots re-entering service, depending on the length of absence. At a time of such unprecedented activity, it is comforting to know that the risk management processes that made airline travel safer than any form of travel prior to the pandemic will continue to drive an unparalleled travel safety environment in the post COVID-19 world. 

However, the return of sightseeing flights in tourism destinations could lead to an uptick in risk for smaller leisure aircraft, including helicopters, particularly if there is an influx of new pilots unfamiliar with the routes and terrain. There have already been a number of fatal accidents involving sightseeing flights in recent years.

2. “Air rage” incidents

Unruly behavior of airplane passengers is increasingly a concern, particularly in the U.S. In a typical year, there are around 150 reports of passenger disruption on aircraft. By June 2021, there had been 3,000 just this year, according to the Federal Aviation Administration – the majority involving passengers refusing to wear a mask. The report notes that unruly passengers may later claim they were discriminated against by the airline in these cases even when in the wrong – a trend insurers need to stay on top of.

3. Perils from parked fleets

Although a large proportion of the world’s airline fleet have been – and are still – parked during COVID-19, loss exposures do not disappear. They change. Parked fleets are exposed to weather events. There have been numerous incidents of grounded aircraft being damaged by hailstorms and hurricanes.

The risk of shunting or ground incidents also increases, which can bring costly claims. There were a number of collisions at the start of the pandemic as operators transferred aircraft to storage facilities. More are likely when aircraft are moved again ahead of reuse.

Aircraft in storage typically undergo regular maintenance to ensure they are ready to return. However, never has the industry seen so many aircraft temporarily put out of service, and the report notes that smaller airlines may face significant challenges when reactivating fleets, given that it will be an unprecedented process.

See also: How COVID Alters Claims Patterns

4. Pilot shortage

Odd as it may seem given the impact of COVID-19, but the global aviation industry faces a pilot shortage in the mid- to long term. The tremendous increase in air travel pre-pandemic – annual air passenger growth in China alone was 10%-plus a year from 2011 – meant pilot demand was already outstripping supply. More than a quarter of a million are required over the coming decade. 

Some airlines are building their own pilot pipelines by establishing flight schools. Given the nature of training, flying schools are prone to accidents, and claims are becoming more expensive with rising values of aircraft and increased activity. Landing accidents are most common, but insurers have also seen total losses. 

5. New generation aircraft

A number of airlines have shrunk their fleets or retired aircraft over the past year, as the pandemic hastens a generational shift to smaller aircraft, given the anticipated reduced number of passengers on aircraft in the short-term future. 

Newer-generation aircraft bring safety and efficiency benefits, but new materials such as composites, titanium and alloys are more expensive to repair, resulting in higher claims costs.

6. Robust performance by air cargo

Although passenger travel has been devastated by the pandemic, other aviation sectors have performed more robustly, such as cargo operators. In April 2021, Asia Pacific reported its best month for international air cargo since the pandemic began, thanks to rising business confidence, e-commerce and congestion at sea ports, while Latin America to North America freighter capacity grew by almost a third in May 2021 compared with the same two-week period in 2019. The report expects air cargo to continue to perform strongly. 

7. Business travel – boom or bust?

Pre-COVID-19 business travel traffic amounted to $1.5 trillion a year, or around 1.7% of global GDP. With many airlines dialing back expectations in the short term, the report asks whether those days are over. New ways of collaboration, such as video calls, proved to be effective, and more companies are aiming to reduce business travel to improve their carbon footprint. Therefore, while there will be initial surge once lockdowns end, many airlines are preparing for a long-term paradigm shift in traveling, with business travel expected to be slow to pick up.

However, what speaks for a possible uptick is that some areas of business aviation have proven resilient during the pandemic. Companies that had aircraft continued to use them, while many that had never purchased or chartered an aircraft before did so for the first time. Many charter companies thrived.

8. New routes in Europe and Asia Pacific

Over 1,400 new air routes are scheduled for 2021 – more than double those added in 2016 – driven by Europe (over 600) and Asia Pacific (over 500), with regional airports set to be the main beneficiaries. Growth in China’s domestic market alone has seen over 200 routes added – almost the same as the U.S.

9. Insect infestations

There have been a number of reports of unreliable airspeed and altitude readings during the first flight(s) after some aircraft have left storage. In many cases, the problem was traced back to undetected insect nests inside the aircraft’s pitot tubes, pressure-sensitive sensors that feed data to an avionics computer. Such incidents have led to rejected takeoffs and turn-back events. Contamination risk increases if storage procedures are not followed. 

See also: Pressure to Innovate Shifts Priorities

COVID-19 claims impact

The report also notes the aviation industry has seen relatively few claims directly related to the pandemic to date. In a small number of liability notifications, passengers have sued airlines for cancellations/disruptions.

AGCS analysis of more than 46,000 aviation insurance claims from 2016 to year-end 2020 worth more than EUR 14.5 billion (US$17.3 billion) shows collision/crash incidents account for over half the value of all claims. Other expensive causes of loss include faulty workmanship/maintenance and machinery breakdown.

More insurtech startups were launched in the last two years than in the previous 10. The brightest minds are developing new ideas and forging new paths in the insurance industry, but the reality is that significant change is a little further down the line. We need structural change long before the process of buying and selling insurance can adapt to the needs of modern consumers. This will take several years, maybe even a decade.

In my 30-plus years investing in fintech and insurtech and operating both digital and legacy insurance companies, I have seen first-hand the changes required to reduce costs and create better customer experiences in the industry. Many people approach innovation with the goal of improving existing products or procedures. That’s a good start, but, in the digital world we live in today, it’s not enough. Tweaking the product isn't a significant change, and the process will be repeated within a year or two.  

Innovation requires duality: You must innovate for the needs of the business while innovating for the needs of the consumer. It’s no longer solely about business processes and controlling the lion’s share of the distribution channels. It’s about figuring out how to be more consumer-centric. We must be motivated by creating a great experience that makes customers want to come back every day. 

Unfortunately, this is easier said than done. Take Lemonade. They launched a few years ago with a completely different user experience, which is amazing; but because the regulatory environment in which they operate is still not very bespoke to each individual consumer, they did not really change the product—but we’ll get to that later. 

We are witnessing a significant shift in consumer expectations and desires, but we must also manage the longstanding and tradition-holding customers we have today. While we wait for structural transformation in the insurance industry to come, there are a few smaller changes that will bridge the gap in the meantime. 

See also: The Evolution of Telematics Programs

Embrace Digitization

Insurance is, for the most part, digital in nature: and, given that tech is more available and accessible than ever before, it’s only natural that insurtech is becoming so prominent in the industry. Technology is less expensive, easier to use and more ubiquitous than it’s ever been, and many companies want to digitize their business. This, of course, would include the user experience.

Many are missing the mark here. Though technology has advanced significantly in the last few years and we have seen rapid increases in digitization across industries, it is still a real headache to change your insurance, even though it’s been digitized. Part of the problem is the archaic nature of insurance regulation, which requires constant approvals every time you want to amend the insurance provided. Insurance company’s rules and regulations make dynamic pricing virtually impossible in their historic form, especially when you compound that by 50 state regulators within the U.S. These processes must be made easier for us to see real growth and change in the industry. 

Understand the True Meaning of Disruption 

Many people believe that they have the chance to be a disruptor or play a role in disruptive innovation. But why does that matter? If you can be the disruptor, you win the prize and get the 10-digit valuation. But many are missing a more simplistic way of running their business because they have not embraced innovation and are making things more complicated for themselves. They also aren’t focused on the value proposition. Disruption won’t occur until 80 cents out of every dollar in premium is given back to the policy holder, instead of the 50 or 60 cents given back now. So how do we get there? We have to focus on making it the best possible experience for the customer, in every way possible. 

Tech is now more available and accessible than ever before. It’s only natural now that people have a go at it. Some of the companies that were started seven to 10 years ago, such as Oscar, Clover Health, Root Insurance, Next Insurance, Metromile, CoverHound and PolicyGenius, now have enough traction that they are becoming more widely used in the marketplace—you are hearing or reading about them even though they have been around for a while. Many companies know by now to invest in data and analytics and create more processes. But to truly disrupt things, companies will need to come up with entirely different business models than the ones that exist today. This won’t happen without embracing digitization combined with a new level of customer-centricity. 

See also: Digital Revolution Reaches Underwriting

It is time to go beyond embracing tech and innovation and into tailoring bespoke experiences to individual consumers, especially in an industry as personal as this one. The Lemonade example teaches us the importance of this; without this balance, we aren’t achieving true optimization. A lot of companies claim that they are innovative and are disrupting the industry but have yet to embrace the actions that will get them there. We need to focus on changing the narrative to where it’s more about serving the policy holder as opposed to the product nature of the industry historically. It is time for the insurance industry to change and grow to accommodate a new generation of consumers.

You may have heard of all the wondrous new possibilities afforded by embedded coverage, with hints of ominous implications for insurance agents. But before any agents start polishing up their resumes, hear me out: Embedded insurance is nothing new. It’s been around for a long while in the form of affinity groups. And embedded insurance will increase opportunity for intermediaries, not eliminate it -- so long as they know how to use it to their advantage. 

What exactly is an affinity group? Essentially, it is a group of people who share some trait that makes them a desirable market. An affinity relationship is symbiotic: The carrier provides discounts or other benefits to group members (conferring benefit onto the organization itself, as well, as it can boast this additional membership value). The group provides the insurer with a pool of potential customers and built-in marketing. Everybody wins. 

So, is embedded insurance actually the “new affinity?” Not exactly; there are some important distinctions. In both instances, you’re targeting a specific group with a coverage offer because they share some trait that makes them desirable. The distinction is that embedded insurance is more like a tool that agents and carriers can use to be more creative about the affinity groups they target. It allows them to target adjacencies that might not have been viable in the past: For instance, by partnering with a large property rental company, carriers can offer embedded renters insurance as an applicant is about to click “submit” on their lease paperwork -- at the precise moment the risk is top of mind and the offer is most relevant to the consumer. Not so long ago, that consumer would turn in their lease documents, think to themselves that they should look into renters insurance and then get busy with moving priorities and maybe eventually forget to secure a policy at all -- and the carrier’s distribution costs in attempting to market renters insurance to the right audience were often impractical. By increasing relevance and convenience through embedded marketing, carriers have the opportunity to create massive new revenue streams. Embedded insurance comprises the tools and technology that will allow affinity to scale, and the sky’s the limit. 

So what should carriers and intermediaries be doing right now to ensure that they are equipped to ride this wave, instead of being capsized by it? 

• Make sure you’re able to meet your customers wherever they want to interact with your brand. In recent years, statements like this have become synonymous with investment in sleeker digital capabilities, and that remains paramount -- customers absolutely expect an intuitive and functional website, an accessible customer portal, mobile applications, and chatbots, and all of those investments inarguably improve the customer journey. But just as importantly, customers expect a high level of responsiveness and accessibility when they want to speak to an actual human. In fact, in Bindable’s recent survey of 100 independent insurance agents, 91 said they had noticed an increase in customers wanting to speak to their agent when they had questions -- not the other way around. Policy specifications can seem complex to the consumer, and an explanation requires the human factor. This is what will continue to prove the value proposition of intermediaries even as neo-insurers and digital embedding provide consumers with increasingly direct access to product: the level of service. Move toward a bionic distribution model by investing in an interactive website, a mobile portal, chatbots, application programming interfaces (APIs), call and click tracking and hybrid phone support, and keep up with innovations to make the customer journey as seamless as possible. Make sure you’re prepared to interact with your customers on their terms -- or someone else will. 
• Work in the data whenever possible. Also abundant in insurance media are articles about the AI-enabled future of insurance, in which every category of insurance automatically adjusts policies and costs according to real-time risk. Unfortunately, this glorious future is caught up in a bit of red tape when it comes to who actually owns all this real-time data and can grant permission to access it. Many information privacy regulations were written for a pre-digital age and need to catch up to modern life, so admittedly there are obstacles standing in the way of the true potential of using real-time metrics to determine risk. But consumer expectations are shifting, and their patience with one-size-fits-all insurance solutions is rapidly dwindling, so make sure you stay abreast of current and coming capabilities. Using telematics and third-party data sources for now is a good option if it has relevance to your vertical. 
• Don’t be limited by traditional frameworks. I already said that embedded insurance will increase opportunity for intermediaries, but, in addition to that, it will create an entirely new class of intermediaries: Fintech apps, automotive dealers and manufacturers, retailers and any other entity that has a data-rich relationship with its users should be thinking about entering the embedded insurance market. The opportunity is significant, and there is room for entrepreneurs of all types in the space. 

See also: Building Your Digital Sales Arsenal

So next time you read about how embedded insurance is going to make you obsolete, remember that a tool can’t be used to clobber you if you’re the one wielding it. Embedded insurance will create boundless opportunities for a wide variety of businesses over the next decade, so seize them. There are a million ways to make this model work for you and not against you -- the only wrong move is to do nothing.

Raise your hand if you have a personal brand?

Of course, that’s a trick question. Everyone has a brand.

A brand is your professional reputation, and it has a lot in common with your personal reputation. Just as you don't get to choose whether you have a reputation, you also don't get to choose what that reputation is. Others determine your brand and reputation based on their interactions with you.

Sometimes, marketing and branding get confused. They are closely related but not the same.

Marketing is like asking for a date. Branding is the reason someone says “yes.”

Brand by default

While others ultimately determine your brand, you do have the power to influence the brand they assign to you. This is a power you must leverage to its full benefit.

Think of the brands associated with you as having three levels:

• The industry in which you compete has a brand.
• The company which you work for also has a brand.
• Then there is your personal brand.

Humans are strange creatures; we want to categorize and label everything. Because of that, you will have a pre-determined brand even in the minds of those who have never had a single interaction with you. We call that a stereotype.

If you call on a prospect and they don’t know you, but they know your organization, they will assume you mirror the image they have of your employer. If they don’t know the organization you work for, they will assume you fit the image they have of the industry. In the insurance industry, that usually isn't a positive stereotype.

We all want to be right

You may be the furthest from the industry stereotype there is and cringe at the idea of being labeled as such. You resent how often you hear business owners state that all insurance brokers are the same. But you convince yourself that, once you get in front of them, they'll see how you're different. That seems logical, but it doesn't work that way.

Most prospects are meeting you for the first time; they don’t know you personally and probably don’t even know your agency. All that leaves them with is an assumption that you fit the industry stereotype. It is the stereotypical insurance broker they are expecting to see when you show up.

It is human nature; we all want to prove ourselves right. Proving you fit the stereotypical mold is no different. When you show up, subconsciously, they will be looking for cues from you that you fit the image they expected. Even if only 20% of your conversation falls into the stereotypical bucket, that is what will stick as they form their impression of you because it is what they expected, proving their assumptions were correct.

You may be right; you may very well have broken the mold and spent a vast majority of your time with that prospect discussing non-stereotypical ideas. However, because they weren’t looking for something different, the ideas don't affect your brand the way you hoped.

Use this to your advantage

While you can’t determine the brand someone eventually assigns to you, you can influence that assignment. By managing your brand, you can plant a seed before they meet you that you are different. You can start to mold the list of expectations they have when they meet you.

If you consistently talk about different ideas or even different perspectives on familiar topics (on your blog, website, social media, etc.), they will now be looking for those cues when they meet you. This will influence the brand they assign to you in a very positive way.

See also: Personal Connections Via Social Media

But remember, you can't just manipulate your way into a desirable brand. It must be genuine to who you are and the experience you offer. A couple of blogs and an occasional post on LinkedIn isn’t enough. You must show up consistently and be conscious of your desired brand in everything you do. Every interaction someone has with you will reinforce, strengthen or dilute your brand.

Brand ROI

It does take work, but the results are worth the effort. A powerful brand creates trust, familiarity, differentiation and even an emotional connection with your audience. A strong brand makes your marketing and sales efforts more effective and attracts the “like-minded” to you.

You're going to have a brand no matter what. I would argue that nothing will affect your success more than effectively managing your brand.

The pinnacle of the real estate market, of any market, is hard to predict, just as the precipice of a collapse in prices is real but unpredictable. About the sea below, red with debt and white with foam, about the flotsam from those houses underwater and too deep to raise, a reminder: We must sail to port, for we cannot afford to drift or drop anchor; we must sail toward safety, in safety, with the safety insurance provides; we must sail with the tide, allowing it to lift us without having it crash against us, so we may convert a rise in valuations into a plan that delivers everlasting value.

By using life insurance to create an estate plan, and funding the plan with cash from a home equity conversion mortgage (HECM), qualified borrowers (ages 62 and older) can turn rising house prices into tax-free income. Because the appraised value of a house determines the size of a loan, and because prices have risen at the fastest rate in more than 30 years, borrowers have more money to invest. How they choose to invest this money, whether they choose to guarantee a legacy for their loved ones or better themselves without relying on their loved ones, is their choice. 

More important is the fact that borrowers are free to choose, that they have the freedom to secure paper wealth with paper as secure as property. Because of what the law says, that life insurance is a form of property, and because of what life insurance offers, liquidity, borrowers are free to make real the promises of HECM: bestowing upon themselves, or bequeathing to posterity, the blessings of financial freedom.

Take, for instance, a 62-year-old woman with an average life expectancy of 84. If the appraised value of this woman’s house is $500,000, or 25% higher than a year ago, she can transfer the money from a HECM loan into a life insurance policy, safeguarding the principal while earning tax-free income from a diversified portfolio of investments. Or the beneficiaries of her estate can receive a cash payout, minus the balance and interest of the HECM loan, thanks to a life insurance policy.

See also: Where Does Life Insurance Go Now?

Thanks to the fact that life insurance is a lifeline, this woman has the power to avoid the shallows and miseries of the sea. Whether her voyage is long or short, whether her vessel is a sloop or a schooner, the sea—mysterious, wild and unrestrained—endures. To weather its storms and withstand its moods, to be like a rock of strength and prudence, able to rise from awful stirrings and right the course, to stir the course with apparent wind, requires the assurance of a wise captain.

The captain deserves insurance, too, so she may sail in peace, despite the conditions of the sea. Mindful of the direction, and peaceful because of her directives, life insurance guides this captain home. Life insurance guides her travels.

Ever since a college statistics class in which I learned about the polling debacle in the 1936 U.S. presidential election, I've cast a wary eye at surveys. The respected Literary Digest got fully 2.4 million people to respond to a poll on their preferences that year and reported that Alf Landon would easily defeat incumbent Franklin D. Roosevelt. Or maybe not. While the poll found Landon leading 57% to 43%, in fact, FDR won 61% of the popular vote. He pitched a near shutout in the Electoral College, winning 523 to eight.

It's not that consumer surveys don't have value. They do, especially as long as we've all learned to avoid pitfalls such as the wild sampling bias that led Literary Digest so far astray. The surveys can be especially valuable when they track changes in attitudes over many years or even decades.

But customer surveys have always been rather crude. They're highly sensitive to how questions are phrased, and they've always operated at a remove from what we really care about: Surveys tell us what customers say they'll do, not necessarily what they'll actually do.

There's now a better way. And it's especially important at a time when so many insurers are trying to reinvent the customer experience -- they need to know what really matters and what doesn't, in fact, affect customer behavior.

This article from McKinsey provides a smart look at that better way: using the increased digitization of customers and of the industry to monitor in a detailed way how customers behavior in the wild.

The article points to three steps:

--Starting with a "data lake" that pulls together all the digital data possible both on aggregate behavior in a market and on individual customers. That massive amount of data provides the raw material for understanding what determines customer journeys.

--Bringing machine learning and other forms of analytics to bear, to sort through all that data and detect what specific events matter in customer journeys. That information will let companies assess investments in customer experience and tie CX initiatives to business outcomes.

--Sharing the insights with front-line employees so they know how to personalize customer experiences in ways that improve business outcomes. Timely insights can spur swift action.

As the article says, it's "possible for CX leaders to create an accurate and quantified view of the factors that are propelling customer experience and business performance, and [that view becomes] the foundation to link CX to value and to build clear business cases for CX improvement.... Leaders who have built such systems are creating substantial value through a wide array of applications across performance management, strategic planning and real-time customer engagement."

Again, traditional approaches have value. I recall vividly the insight that the team that developed the original Apple Macintosh got from a video of a focus group. One of the original developers once told me that that they had decided to take a hip approach and put the words "Do It" on what had to that point been an "Enter" key on a personal computer. But as they watched people in a focus group, they saw a woman going through all the steps in a process, and then, right before hitting the "Do It" button, she hesitated and then unwound all her work. When they turned up the volume, they heard the woman saying "Dolt? I'm no dolt." And that was the end of the "Do It" button.

But all our digital interactions with customers have created a better way, so it's time to deemphasize customer surveys, focus groups and other traditional means and start taking advantage of the extraordinary insights that customers are increasingly willing to provide us.

Cheers,

Paul

Let's say you've appointed a head of customer experience, who is part of your senior management team. You have a customer experience practice. This might be a small team of a few people, or it might be a larger division or department within your organization. And you've implemented practices and procedures driven by customer experience. You're doing research. You're creating and using personas and journey maps. Maybe you're even doing a service blueprint. And, of course, you have metrics and measurements. From thoseat, you get analytics and intelligence. You know what your customers need. You know how they feel; you know what they're saying. And you are acting based on what you learn. You're changing priorities, decisions and investments. So, you've established the discipline, and you're doing everything right.

But are you really? Don't get me wrong. Everything you're doing in that scenario is essential to your organization. But if your customer experience discipline is siloed, if it is simply aligned but not embedded and woven throughout your organization into everything you do, and if it is not a key driver for almost everything you do, the notion that you're truly driven by customer experience is more myth than reality.

Creating the reality of being driven by customer experience requires education, understanding and implementation of the discipline throughout your entire organization. It calls for the knowledge of how customer experience differentiates from customer service and the need to share, apply and nurture practices and assets, not simply develop and document them. This is not about creating personas and journey maps and then putting them on a shelf or implementing them within a siloed discipline. CX assets and practices need to be top of mind and referenced frequently by everyone – in thoughts, conversations, planning, practices and absolutely decision-making. And, just as your customers’ journeys continually evolve, so must your CX practices and assets. 

I cannot stress enough that the associated knowledge or practice of customer experience affects almost everyone in your organization and just about everything in your organization in the same way that everyone and everything in your organization affects your customers, whether you realize it or not. Customer experience should become an inextricable part of your culture. This is not accomplished top down, and it's not accomplished bottom up. It needs to be woven throughout all of your strategies, plans, projects, workflows, conversations, decisions and how you apply technology.

To achieve this organic customer experience culture, all of these components need to be designed and orchestrated to enable the desired customer experience. It is not just going to happen. Done right, this transformation is a journey much like innovation or digital transformation, and it's one that gets to the real heart of your organization and affects every aspect of what you do and why you do it. It's a big journey. But like all big journeys, it begins with small steps and is about gaining momentum. Over time, customer experience will no longer be a thing you do, but rather will become a natural part of how you think, how you behave, and what drives your conversations, priorities, investments, and decisions. To move from the myth to the reality and become truly driven by customer experience, it is key to educate and involve everybody. Do not align, but rather embed. And go beyond the customer's view and journey and look at your internal journey.

See also: 3 Ways to Improve Customer Experience

Is customer experience a discipline unto itself? I hope you would agree that customer experience is certainly a discipline, but that the last thing you want is to keep it unto itself.

For more than six decades, innovators have attempted to unlock the full potential of artificial intelligence (AI). It wasn’t until the past decade that the science finally caught up to expectations. Today, the AI market is on track to reach $500 billion by 2024. COVID-19 has fast-tracked AI adoption and acceptance.

McKinsey & Company says that "insurance will shift from its current state of ‘detect and repair’ to ‘predict and prevent,’ transforming every aspect of the industry in the process.”

See also: Key to Transformation for Auto Claims

AI-enabled solutions have opened up new possibilities for auto insurers and collision repairers. From detecting a car accident with IoT technology, to instantly processing a payment for completed repairs, the opportunities are endless. First on the list for most carriers, however, is using AI to automate the appraisal process and produce a “touchless” estimate. This can improve efficiency, shorten cycle time and meet policyholder expectations for a streamlined, digital claims experience. Now, thanks to these four trends, creating that experience is within reach.

1. Shifting Methods of Inspection

Prior to COVID-19, virtual estimating was reserved for low-severity claims. However, the need for social distancing during the pandemic and changing consumer demands spurred the adoption of virtual inspection methods. In April 2020, Mitchell data shows that the use of virtual, or photo-based, estimating more than doubled from earlier in the year. Just one year later, LexisNexis Risk Solutions reported that virtual claims handling has now “settled to a level of a little over 60%.”

This shift opened the door to the long-term aspiration of “touchless” claims and leveraging AI in the appraisal process. Over the last year, virtualization—considered the first level of automation—has resulted in estimate efficiency and consistency gains. From images, appraisers can complete approximately 15 to 20 estimates per day versus three to four out in the field. This has prompted more carriers—nearly 70%, according to LexisNexis Risk Solutions—to embark on the claims automation journey.

2. The Prevalence of Big Data

According to the Center for Insurance Policy and Research, “The successes of AI are also being facilitated by the massive amounts of data we have today. The wealth of data we now create is astonishing, and the speed at which data is generated has only made data management tools like AI even more important.”

The property and casualty industry has always thrived on capturing, analyzing and interpreting data. Whether it’s from mobile devices, automobile IoT sensors or other sources, this data gives decision makers the information necessary to personalize customer interactions and address issues. When it comes to touchless estimating, though, data alone isn’t enough. Access to a comprehensive library of vehicle, repair and historical claims information is needed—along with the ability to quickly interpret that information using AI. In the case of Mitchell Intelligent Estimating, claim details and images are collected. AI then analyzes the data, comparing it with Mitchell’s comprehensive library of vehicle and repair information that spans more than 30 years. From there, the machine-learning algorithms translate the output into component-level estimate lines for appraiser review and approval.

3. Human-Machine Collaboration

Just as humans continually learn and improve, so do machines. As highlighted in Insurance Thought Leadership, “good machine learning systems involve feedback loops…. By letting the machine know what happens on the ‘real world’ side of things, machines learn and improve”—no different from claims adjusters!

Support for a human-machine feedback loop is critical to automating the claims process and can lead to vast improvements in speed and accuracy. An appraiser’s feedback helps teach the machine to make better decisions. As AI-powered solutions remove repeatable tasks, employees have more time to focus on complex claims that may require extra scrutiny.

4. The Growth of Cloud Computing and Open Ecosystems

AI’s dependence on data increases the need for cloud-based systems that can access and aggregate vast amounts of information, making it available from anywhere. These systems help organizations reduce development and maintenance costs, enhance security and accessibility and improve speed, reliability and scalability.

Like cloud computing, open ecosystems are also vital to AI and touchless estimating. Open ecosystems allow AI to easily access data, analytics and software across platforms and providers, giving carriers the ability to create a cohesive, end-to-end claims experience. They also introduce flexibility and choice, PropertyCasualty360 reported.

See also: Designing a Digital Insurance Ecosystem

For instance, through Mitchell Intelligent Open Platform, carriers can select the AI that best meets their needs. That includes AI algorithms developed internally, provided by Mitchell or delivered through third parties such as Tractable or Claim Genius. The AI output is used to produce a partial or complete appraisal.

The Future of AI-Enabled Claims

By 2030, McKinsey & Company predicts that more than half of current claims activities will be replaced by AI-enabled automation. “Claims for personal lines and small-business insurance are largely automated, enabling carriers to achieve straight-through processing rates of more than 90% and dramatically reducing claims processing times from days to hours or minutes.”

With the science now ready to deliver on its decades-old promises, the auto insurance industry has reached a turning point. Carriers can either invest in AI or run the risk of being stranded by the side of the road. Ultimately, organizations that embrace this “new” technology to deliver a digitally driven claims experience will be best-positioned to gain market share and consumer loyalty.