Until the arrival of COVID-19, Americans had, for decades, been more concerned with outliving their savings than the prospect of premature death. With that in mind, it’s not surprising that life insurance policy sales dropped 45% during the 1980s and have remained flat ever since, according to LIMRA. Today, only half (52%) of Americans own life insurance, either bought individually or through employee benefit programs.

But COVID-19 may have reordered priorities. The pandemic has served as a reminder that life can be shortened unexpectedly. Eleven percent more life insurance policies were sold in the first quarter of 2021 as compared with early 2020, when employment was down and employee-based life policies lagged. This increase represents the biggest gain since 1983 and the first break after a long decline in life insurance sales. In addition, a greater percentage of policies were sold to households with more modest incomes.  

This heightened awareness has given life insurers a chance to prove their value for the first time in decades. But they will only succeed if they are able to meet the needs of the largest group of adults in the workforce: millennials, the oldest of whom are now approaching 40. Representing 25% of the population and numbering approximately 73 million, according to Pew Research, millennials are the generation life insurers will need to reach most urgently if they are to revive their fortunes.  

It won’t be easy.  

This is a generation that has a lot going on. It is the most educated generation of Americans, with 39% holding a B.A., but millennials are also preoccupied with competing financial priorities, including paying off student loans, managing healthcare costs, finding jobs that pay well, establishing home ownership, starting families and dealing with the cost of supporting aging parents. 

See also: Looking to Future of Insurance, Insurtech

JungleScout notes that millennials also constitute the majority (58%) of U.S. mobile shoppers. These are consumers who think nothing of ordering a latte or a pizza through a smartphone. Siegel & Gale found that 64% of all consumers are willing to pay for a simpler experience, but millennials are particularly used to quick and easy digital solutions. It’s no wonder a KPMG study notes that 46% of millennials cite confusion as the biggest barrier to purchasing life insurance. After all, life insurance has been a highly regulated industry loaded with jargon and legalese, and life insurers have lagged P&C counterparts such as Lemonade, which offer P&C insurance on a smartphone app powered by AI and machine learning that can onboard digital customers in less than a minute and pay claims in a matter of seconds.  

How Life Insurers Can Reach Millennials

Millennials already understand the need for car and home insurance. Now that the pandemic has gotten their attention, life insurers must speak to them in a language they understand, or risk being ignored. Here are a few factors life carriers should keep in mind as they seek deeper connections with this key demographic:

• Use Rewards to Drive Loyalty: According to a KPMG study, 81% of millennial consumers say being a member of a rewards program encourages them to spend more money with a brand. With this in mind, life insurers should consider rewarding policyholders with discounts and better rates as they commit to healthy lifestyle choices through partnerships with third-party wellness programs and insurtechs. From a technology perspective, this means life insurers will need to create platforms based on application programming interfaces (APIs) that can integrate data from a multitude of sources. 
• Make it Easy: According to an IBM study, almost half of all millennials say that buying life insurance is too confusing. Whether an interaction takes place through an app, web browser or face-to-face with an agent, millennial customers expect simplified explanations and options, price tiers and bulleted lists of specifics. Policy applications should include only the most relevant questions and, where possible, avoid medical exams. Insurers that do the best job of shielding shoppers from unnecessary complexity will win. 
• Prioritize Mobile Apps: Given millennials’ digital-first lifestyles, to stay relevant, incumbent life insurers must offer intuitive mobile apps that are both technologically sophisticated and intuitive, leveraging capabilities such as Face ID for quick login and providing smooth integrations with other financial products.
• Develop a Subscription Model: A massive 92% of millennials have active monthly subscription services, from razors to clothing to music to food. These services are automatized, tailored, simple and easy to manage. The subscription model could work well for life insurers, which, like other insurers, collect monthly premiums. What’s required is packing additional value into a more personalized monthly subscription.

See also: How Digital Health, Insurtech Are Adapting

It’s not too late for traditional life carriers to reach millennials. Although insurtechs and startups unencumbered by legacy infrastructure have gained some traction, their success has been modest. Larger life insurers still have the lion’s share of customers, highly recognizable brands and the resources to scale quickly. But they need to couple these advantages with a broader re-think of their core technologies if they are to regain a competitive advantage and create the kind of seamless user experiences that will engender millennial loyalty.

An Avalanche of M&A? Paul Carroll, Editor-in-Chief of ITL A financial adviser friend likes to say that “taxes are on sale” at the moment. He’s focusing on the possibility of higher income-tax rates for his well-to-do clients and for the corporations whose shares are in their portfolios, and trying to get clients to reduce or liquidate certain holdings before the increases hit. But this idea of taxes on sale should have effects that ripple far beyond my friend’s client base, possibly including a spate of consolidation in the insurance industry. continue reading > EVOLVING THE DIGITAL CUSTOMER EXPERIENCE Tune in as industry experts from Deloitte join Denise Garth, Chief Strategy Expert at Majesco to discuss new innovative products that are supporting changing demographics in a post-covid world.  Listen Now SIX THINGS Looking to Future of Insurance, Insurtech by Nicole Gunderson and Jason Gross Here are five priorities for insurance leaders to consider, drawing on insurtech-driven solutions. Read More Where Does Life Insurance Go Now? by Mark Tattersall Between the shift to a remote workforce, and the pandemic itself, life insurance had no choice but to evolve -- and there's no going back. Read More From Risk Transfer to Risk Prevention by Sathyanarayanan Sethuraman IoT provides the means for evolution from pure risk transfer to a "prescribe and prevent" scenario. Read More How to Increase Profits With Connected CX sponsored by Statflo Fostering connected experiences is vital to meeting customer expectations and succeeding in a technology-centric world. Read More Better Models for Next Pandemic by Simon Young It will take time to build an infectious disease risk model – re/insurers must be innovative in their pandemic coverage and exposure management. Read More Pandemic’s Lessons for Auto Insurers by Adam Pichon and Adam Hudson The pandemic will continue to affect virtually every market imaginable, potentially for years to come. Read More 3 Ways AI Can Boost Customer Retention by Simon Pickersgill Not only does AI improve the speed of crafting policies, the technology can speed underwriting, as well as the claims process. Read More MORE FROM ITL A Conversation on Workers' Compensation, with Kimberly George and Mark Walls As the world starts to emerge from the pandemic, ITL Editor-in-Chief Paul Carroll sat down to discuss the new normal for workers’ comp with two of ITL’s most widely read contributors: Mark Walls, VP of communications and strategic analysis at Safety National, and Kimberly George, global head of innovation and product development at Sedgwick. Watch Now JUNE FOCUS: Workers' Compensation The world of work turned upside-down and inside-out beginning 15 months ago, as the pandemic shut down offices and forced so very many of us to work from home. Now that we're beginning to reverse this process, insurers will have to sort through all sorts of new issues. Here's one: When is the place where a worker works a "workplace," and when is it not? Welcome to the new world of workers' comp. Keep Reading Partner with ITL to create expert thought leadership content. Custom Content Promoted Content Display Advertising Custom Webinars Monthly Topic Sponsorships ITL Partner Packages and more Learn more and get the 2021 Media Kit GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started SPREAD THE WORD Share Share Tweet Forward SUBSCRIBE TO SIX THINGS

Several long-established industries are considered “legacy” — having little motivation to change and slow to adopt new, critical technologies. Large, stable industries that provide essential or compulsory goods and services--like insurance--often fit squarely within this realm. But in 2020, the COVID-19 pandemic forced business leaders in legacy verticals to quickly adapt their technological infrastructure to support the long-term remote workforce. 

In the insurance industry, organizations already considering digital transformation sped up their plans. Some started nearly from scratch. , Leaders focused on innovations in areas like personalization, IoT, process digitization and even artificial intelligence. However, one essential area that is still frequently overlooked is the adoption of hybrid cloud models. 

The ability to undergo agile digital transformation while maintaining the same customer service levels and keeping up with shifting markets is possible--if the underlying infrastructure can adapt rapidly to changing needs. Cloud technologies, and specifically hybrid cloud models, enable smoother digital transitions for traditional industries because they can easily operate their existing on-premise infrastructure during the transition process.

What are the advantages of implementing a hybrid cloud model for insurance companies? Here’s a closer look.

What is the hybrid cloud model? 

A hybrid model in its most basic form is a computing environment that shares data with both a private and public cloud. Private clouds are dedicated specifically to an organization while a public cloud is delivered via the internet and shared across an organization. Less critical workloads can move to the public cloud without opening public access to data, while more sensitive information is kept in a more secure private cloud. Hybrid is an accommodating approach, especially for insurance businesses, which often store sensitive or protected customer information. 

Many industries cycle through short periods of increased demand. For example, insurance companies are busier when home and real estate sales are higher in the spring and summer and slower in January-February. Instead of investing millions of dollars to accommodate increased data and information during a small window of time, a hybrid cloud model scales seamlessly to accommodate evolving needs. Organizations may have the flexibility to only pay for services they use when needed. 

The hybrid cloud model affords many other advantages:

Improved data security and privacy

Data security and privacy is an ever-growing concern for IT and business leaders, especially in industries like insurance that house sensitive or legally protected customer information. For this reason, moving to the cloud can seem like a risky option. However, a hybrid cloud model can alleviate some of these concerns as doing so can reduce the risk of data loss or exposure. 

In a hybrid model, companies may opt to store their most sensitive data on-premise and shift functions like accounting or other operational processes to the cloud, all of which drives process optimization and cost savings.

See also: Tapping Cloud’s Ability to Drive Innovation

Enhanced flexibility over infrastructure 

Some business leaders in the industry have been hesitant about making the jump to the cloud due to concerns that they won’t achieve the same performance as that of on-premise infrastructure. However, the most important aspect of this transition is deciding which parts of the workflow must stay on-premise and which can be shifted over. This is a process that actually provides IT teams more flexibility and control within the overall system. 

The teams also can strategically use more of their budget through hybrid models because pay-as-you-go plans with no upfront costs are available. Cloud-only solutions can be costly upfront and disrupt workflows through complete lift and shift, but hybrid allows internal teams to define where multi-tenancy is needed. And, of course, any operations moved to the cloud will also benefit from automatic application fixes and updates--so they’ll always be using the latest technology.

Better disaster recovery measures 

Disruption, data breaches and physical infrastructure damage were prevalent in 2020 and early 2021. Insurance leaders must keep these concerns top of mind when making decisions about where and how to house varying types of data. 

A totally on-premise solution presents risks in disaster recovery. Contrarily, hybrid models can scale noncritical workloads while allowing IT teams to secure the most sensitive data and act quickly in the event of a disaster. 

Legacy industries don’t have to get stuck in the past or be forced to lift and shift all workloads into a full-scale cloud migration. Instead, organizations with critical infrastructure like insurance should implement a hybrid cloud model to reduce costs, improve security and enhance overall operations and productivity during peak seasons.

The insurance industry has steadily been digitizing in recent years. It is taking advantage of technological developments in automation, offering apps to clients and introducing things like electronic proof of auto insurance.

PwC’s Annual Global CEO Survey in 2020 identified customer experience (CX) and core tech transformation as the top two opportunities for companies to set themselves apart, with CX significantly ahead. When customers are communicating with their insurance company, they are usually dealing with an awful experience (a car accident, a medical issue, a home invasion, a roof leak or a full-on natural disaster). Hitting any snags when it comes to getting the service they need is a big factor in driving them to a competitor.

Artificial intelligence (AI) addresses both customer experience and tech transformation and has helped insurance companies improve their services and stay competitive in a tough industry. AI enables many services and processes to be automated, resulting in both cost and time savings. But AI deployment also benefits customer experience, in three specific areas.

Improvement of policies, products and processes

The retail sector has capitalized on custom products and experiences, and the concept that one or two sizes will fit everyone is fading quickly in other sectors, too. The insurance industry is now also latching onto customization, as AI enables companies to leverage data to personalize a core product for an individual customer. 

A company’s AI model can use a client’s historical data to calculate with a high degree of probability that a particular product or policy will be the best fit. In the eye of the customer, they get an attractive product without needing to spend a lot of time on consultations with the broker. For the insurance company, the efficiency gains are impressive, and agents don’t need to spend a lot of time finding the right product for the client.

See also: How AI Powers Customer Contacts

Not only does AI improve the speed of crafting policies for customers, the technology can also speed up underwriting, as well as the claims process -- two key touchpoints where turnaround time is essential for CX. If a health insurance customer is filing a claim for an expensive prescription, they will want a simple and quick resolution. Long waiting times may drive them to a competitor known for quicker reimbursements. But AI can bring a competitive edge to an insurance company if customers know they can expect trouble-free claims processing.

Enabling rapid online assistance

The days of customers playing phone tag with agents to get the information they want are long gone. Insurance companies can leverage AI on their platforms -- both web and mobile -- to allow customers to quickly find an answer to a question. The ability to more easily respond to inquiries from policyholders is especially important following a major event, such as a tornado or hurricane, when there is sure to be a high-volume of online interactions.

AI-powered chatbots have become the first touchpoint for customers in many sectors. When done right, they can give a major boost to an insurance company’s customer experience. Organizations can also save money by automating simple and routine online customer interactions, leading to another win-win situation where customers can quickly get to the information they need.

See also: Wake-Up Call on Ransomware

Using AI to test AI models

Once an insurance provider has an AI model in place to help with the crafting of policies and settling of claims -- and the organization begins using it as an integral part of its daily routine -- it is vital that the AI model suitably addresses four risk factors: accuracy, stability, flexibility and ethics. AI can be used to test these models against those factors.

Any AI model an insurance company employs should have a high accuracy score. Smart AI model testing will ensure that the results are reliable -- with an agreed tolerance for the model, to protect a company’s profitability while appropriately managing their risk. Because data changes over time, testing will ensure that an AI model remains stable when there’s a change in the data in the ecosystem, or in the way the insurance company handles business. Such testing will also ascertain that the model is flexible enough to react to those changes while remaining accurate. 

Above all, AI can be used to test whether the insurance company’s AI models are ethical -- meaning that they are not biased toward or against any specific groups of society. Even the largest dataset imaginable can be flawed or biased depending on the data that is included. Therefore, it is vital that these models be tested on a regular basis, to verify that the risk factors are being appropriately applied without bias, ensuring the company’s reputation and its brand.

Giving customers a reason to stay

As the saying goes, it’s cheaper to retain a current customer than to attract a new customer, so insurance companies need to look at technological innovations that can improve customer retention. By recognizing the value AI can bring to all aspects of the customer experience, insurance providers can deliver fast, accurate and fair service to policyholders. 

Whether a business provides health, car, home or other types of insurance, there will always be a line of competitors just waiting to snatch away disappointed and frustrated customers. What’s most important is for insurance companies to focus on giving customers reasons to stay.

A financial adviser friend likes to say that "taxes are on sale" at the moment. He's focusing on the possibility of higher income-tax rates for his well-to-do clients and for the corporations whose shares are in their portfolios, and trying to get clients to reduce or liquidate certain holdings before the increases hit. But this idea of taxes on sale should have effects that ripple far beyond my friend's client base, possibly including a spate of consolidation in the insurance industry.

That's the thesis that was advanced last week by Stephen Schwarzman, CEO of Blackstone Group, the private equity firm that as of March 31 had a staggering $650 billion of assets under management.

He says corporate leaders worry about a Biden administration proposal to tax capital gains as ordinary income for those earning more than $1 million a year, rather than let them apply the much lower rate that has long been used for profits on sales of stock, real estate and many other assets. The change would mean a tax rate of 39.6% on capital gains for those high earners, rather than 20%.

While any tax increases look to be at least months away, Schwarzman said high earners are starting to look now at selling assets and booking profits, to be safe.

Although he didn't single out insurance, I suspect his thinking applies, in particular, to many owners of insurance brokerages and agencies. We could see an acceleration of the consolidation that has been occurring in the distribution channel. Private equity has already been buying up brokerages and agencies, and having eager sellers should only increase the pace.

The continuing digitization of insurance sales, accelerated by the pandemic, may also encourage owners to continue selling. Digitizing takes capital that some don't have, so, knowing they face a steady loss of competitiveness, owners might explore selling now. Even if they have the capital, owners have to decide whether they want to manage a significant transition -- moving business online and incorporating digital technology into a host of internal processes while also figuring out how to reopen offices following the pandemic. Many may decide that they'd just as soon let some bigger entity handle the shift. For anyone contemplating an exit, now would seem to be a good time.

Beyond the effect on agencies and brokerages, the possibility of a higher tax rate on capital gains could encourage insurtechs and even some larger, established companies to consider putting themselves on the market now if they had already been considering an exit. The same for the possible increase in the corporate tax rate in the U.S. from 21% to 28% (or whatever the final proposal turns out to be): Potential sellers might hope to get a higher valuation based on the loftier net income that lower taxes allow.

It's not clear how great the effect of the possible tax changes would be for insurtechs and larger companies. Lots of other factors come into play, the larger a company is, and tax increases aren't anywhere near a done deal. But the prospect of higher taxes might tip the scales for some.

In theory, consolidation will address one of my bugaboos -- the wild inefficiency of so many insurance processes -- through economies of scale and greater investment in digitization.

I realize that the adage says: "In theory, there is no difference between theory and practice. In practice, there is."

And, in fact, a lot of the increase in scale among agents and brokers seems to have been used to press carriers for higher commissions, rather than to drive efficiency.

But I don't give up easily. I'm holding out for scale that drives digitization and that drives costs down while simplifying life for customers.

Cheers,

Paul

The COVID-19 pandemic has obviously accelerated the development of the healthtech and insurtech industries. Let’s look at these changes and certain corresponding innovations in more detail and see what we can expect in 2021.

Healthtech

In general, the existing healthcare system turned to various modern and necessary digital tools to perform the following crucial tasks:

• make predictions concerning the disease’s spread;
• collect and analyze vast amounts of data;
• diagnose and treat patients remotely.

And due to the spread of COVID-19 pandemic, the sector has developed rapidly in multiple directions. Among the most notable are:

• Remote monitoring;
• Telehealth;
• Artificial intelligence technologies.

It’s not surprising that providers advocate for integrating more data sources and new patient matching methods, from telehealth to big data analytics, to build effective coordination concerning COVID-19 tracing and valuable testing.

What trends await us in 2021 in healthtech?

1. Consumers will have dominant positions and will influence the sector in 2021. 

Healthcare will be restructured according to patient needs and expectations. More and more healthcare providers understand the necessity and even indispensability of digital and virtual healthcare in the post-COVID world. So, healthcare organizations will have to leverage technologies to help their patients in their day-to-day life – smart devices, omnichannel communication tools, intensive machine learning and many others.

Let’s look at a concrete example. In an article for Everyday Health, Vivian Lee, the president of platforms for Verily Life Sciences, describes cooperating with the federal government in the creation of Project Baseline, a tool to screen for coronavirus risks, while also working with universities and employers to create programs that provide detailed testing, competent symptoms’ tracking and data analytics. An app lets users to check any symptoms and schedule lab tests.

Such virtual systems extend beyond COVID-19 uses. For example, Verily's technology has been used by Onduo, a virtual diabetes clinic that tries to help patients lower their A1C levels and develop vital health habits.

2. Expansion of virtual care services is widely expected.

In the same article, Deneen Vojta, the executive vice president of research and development at UnitedHealth Group, said virtual health will direct patients to more self-care. This may lead them to rely on doctor services only in more essential cases. 

According to Sarahjane Sacchetti, Cleo CEO (in an article in Fierce Healthcare), in 2021 we will see increased use and efficacy of virtual services that had been seen as in-person only: postpartum, maternity, pediatric. Understanding the necessity of virtual health services, employers will offer flexible and convenient benefits to support employees (and drive productivity).

Indeed, many companies are looking to expand healthcare service.

3. The industry will continue to gain public and private investment.

Digital health has already received a surge of private and public investment during the pandemic. At the same time, modern digital health companies are going to become more comprehensive, which will attract even more. 

4. 2021 will become a pivotal year for the rapid development of artificial intelligence, including machine learning. 

The healthcare industry will pay attention to the benefits of machine learning in highly scalable solutions. AI has a vital ability to identify trends and sequences in data gathering and analytics that human beings can’t.

Hospitals are going to become smarter, says Kimberly Powell, vice president, general manager of NVIDIA Healthcare, in the same article in Fierce Healthcare. Smart cameras and speakers will help them to automate many activities. This, in turn, will help to increase operational efficiency and to improve virtual patient monitoring.

See also: New Picture of Total Digital Health

5. The shift to the cloud and APIs will increase.

Modern, cloud-based systems give providers the opportunity to access necessary patient’s data practically anywhere. They also enable telehealth and much better care coordination.

Application programming interfaces (APIs) will continue to play a significant role in healthcare data exchange, improving data analytics while allowing for important medical research and innovative ways to access electronic health records (EHRs).

However, on top of technological challenges there is always a challenge related to regulatory policies. Colin Anderson, lead developer at Tactuum, told our chief growth officer, Timothy Partasevitch, in an interview:

“The past year, as terrible as it has been, there are some good things that have come out of it. And that is the NHS [National Health Service] and U.K. government as a whole, realized what they are missing out on by not embracing the technology. We have got the ability to implement more streamlined healthcare through technology, and we’ve got the expertise to do it really quickly as well.”

Colin added that a new winner in healthtech could be “having patient records being available to actual patients themselves, so they can have a secure app with all their records on it that can be shared with their healthcare provider, whether that be their local [general practitioner] or a surgeon.”

6. Walmart (as well as Amazon and Alphabet) will redesign healthcare.

Andy Arends, vice president at NTT Data Services, says Walmart can establish great healthcare facilities within a reliable, low-cost and no-frills environment. As a result, Walmart could become not only a certain health plan but also the provider and create its own insurance distribution.

7. Social determinants efforts will change from aspirational to operational.

Megan Callahan, vice president of healthcare at Lyft, says there are predictable calls to action in the industry to form a more standardized approach to measuring and collecting data on social determinants of health.

Insurtech

Now let’s look at the predictions of different experts concerning how insurtech will grow and evolve in 2021.

Top trends for insurtech in 2021

1. Blockchain

Many experts are confident that blockchain technology will become a leading component of insurtech. Incorporating blockchain with encryption can better protect important medical records and other sensitive information against cybertheft.

Insurers will have to calculate all long-term environmental and economic costs. And, due to lack of regulation, an opportunity for fraud and scram could appear.

2. IoT (Internet of Things)

Internet of Things devices such as Apple’s smartwatch and Amazon’s Echo are going to reach an estimated $43 billion by 2023. Integration of IoT can help not only consumers but also insurers, by accelerating and simplifying the claims and underwriting process while reducing costs and expanding business. The technology can let insurers stay in touch with their customers, strengthening the relationship, and form partnerships with other companies to cross-sell services and products.

But smart technologies can be attacked by cybercriminals and hackers and require considerable investment.

3. Embedded insurance

In 2021, more insurance products will be embedded in the purchases and experiences customers are having online. Tesla, for instance, has announced its own insurance product, so all willing can purchase a car and insurance, specifically tailored to the vehicle, in one experience.

4. Discounting based on customer behavior

Many experts say that in 2021 we will see really creative programs, with smart technologies being used to offer customers special discounts according to their individual behaviors.

In an article for Benzinga, Brett Jurgens, co-founder and CEO of Notion, a Comcast company, says greater discounts could be offered for clients who use devices, such as modern smart sensors, in different water-prone locations or for better coverage across the home or whole property.

See also: 1 Million Digital Life Presentations

5. Virtual insurance

Insurers are ready to leverage augmented, virtual and extended reality solutions to meet their customers’ and employees’ needs.

6. API strategy and digital transformation 

With APIs, insurance companies can benefit from better internal systems and data integration, streamlining the claims management process and speeding the resolution of claims. APIs allow for flexible and powerful technology platforms, which can consume and share large volumes of data while linking insurers with a huge number of customers and partners. Insurers that fail to build valuable APIs into their platforms will not be competitive. 

Bryan Falchuk, founder and managing partner at Insurance Evolution Partners, said:

“I see the data in any system as having to be available to all other systems. This is table stakes today, and, as an industry, we are still lagging here. APIs are the preferred way to enable this if each function has a different system, but the industry is still struggling. There are new solutions coming out that can ride on top of legacy platforms or newer platforms that aren’t as API-friendly to solve the problems of standardizing data and making it available to other systems. They’re often built as low-code/no-code solutions, making hesitation in adopting them even harder to justify. Yet we do. This is where I try to help carriers I work with to see a) customers increasingly will not stand for re-entry of information or you not having a complete view of them when they come to you, and b) the means to solve for this exist today.

"For example, if you use a modern [customer relationship management system], based in the cloud, it can publish and consume data from many different sources through APIs. But what if those sources aren’t built to communicate that way? Or, what if they are, but the APIs aren’t very good (as I’ve often found to be more the case than a stark inability to use APIs)? We don’t need to stop there, and can instead see if there is another path to bring the data trapped in disparate systems together without having to go through a multi-year, multiple-tens-of-millions (or hundreds or millions) of dollars effort to replace a legacy system.

"Many carriers that were resistant have started to see on the back of pandemic-driven lockdowns and remote work that they simply must change. And the speed with which the industry virtualized its workforce was a good reminder that we can change much faster than we thought we could. Luckily, we also have the tools to get there now.”

So, obvious changes have occurred in healthtech and insurtech. And they will develop further in 2021. Modern healthcare and insurance companies must adapt.

In 2020, people flocked to purchase life insurance amid the looming fear and uncertainty brought by COVID-19. None of us had experienced a global health crisis like this, and, when mortality is at risk, the demand for security increases. 

While life insurance policy sales increased 2% overall in 2020, other indicators showed just how much life insurance was brought to the forefront once again, following a decline in policies sold over the decade prior. CNBC reported a 50% spike in Google search traffic for “life insurance” between March and May 2020, while leading carrier Northwestern Mutual saw a 15% increase in policies sold between April and September compared with the year prior. On the annuity side, sales were up $58.6 billion from 2019. 

You’d think these numbers would be a good thing for insurance companies and agents, but that wasn’t necessarily the case. The massive influx in applications caused insurance carriers to become increasingly bogged down; applications that once took one to two weeks to review and process were suddenly taking over one month. And thresholds for coverage became even more challenging to meet, with many premier carriers only insuring people if they met a $750,000 coverage threshold. This continues to be the case today for many major carriers. 

Luckily, simplified-issue insurance let people who are generally healthy just answer a handful of questions. And, with instant-decision life insurance, many people didn’t have to get a medical exam to enroll in a policy, and a decision was made in two minutes as to whether a carrier will cover that person. Insurance companies have also found easier ways to do underwriting or attending physician reports, which are essentially a doctor's official response regarding a patient's current state of health and health history. 

And yet, as the demand increased and both simplified-issue and instant-decision insurance became more prevalent, so did the need for efficient, user-friendly digital insurance quoting and sales platforms. But our industry just hasn’t kept up with the times. It has been using the same antiquated application process for decades. 

On the consumer side, the process of applying for life insurance required a 15-page application, doctor’s appointment and various other qualifying factors and steps (if the person doesn’t qualify for instant decision). And, the person would be on the receiving end of many broker marketing calls, and have to pick from 20 companies on the basis of pricing and insurability.

Now, as people’s health and desire for financial security have been in jeopardy, there’s been a needed shift in how we go about buying and selling life insurance. For instance, our platform, Quote & Apply, supports agents in making the transition to digital as seamless as possible. A person can go through our entire application in under five minutes and be quoted a policy (with several coverage options dependent on the person's unique history) right on the spot. There are just six questions (age, gender, height, weight, smoking history and a rating of general health). Insurance companies can directly contact the medical information bureau and a person's doctor through a health portal and make instant decisions while offering numerous policy options. 

See also: Why to Provide Life Insurance for Workers

The implications of COVID-19 spurred this heightened awareness of the importance of life insurance, and I believe that it’s every agent’s fiduciary duty to offer these policies to their clients. Life insurance gets people through the most challenging times of their lives.

We’re not going back to where we were as an industry, even post-pandemic. COVID-19 put a microscope on the issue of our mortality and how life insurance can provide an essential layer of security for people everywhere. COVID simply crystallized the demand for digital wholesale life insurance solutions.

Between the shift to a remote workforce, and the pandemic itself, we had no choice but to evolve; and we now have a chance to create widespread life insurance literacy through this experience.

Success in moving from the past to the future of insurance requires a two-speed strategy: Speed of Operations, which focuses on making improvements to the current, traditional business model with next-gen, mature systems and processes; and Speed of Innovation, which is all about creating agile, fast and new business models that explore, test and grow new business opportunities. 

We find that Leaders continue to distinguish themselves with a stronger focus on strategic initiatives that support both components of the two-speed strategy.

Speed One: Modernize and Optimize Today’s Business

Drilling into the specific elements of Modernize and Optimize reveals a large gap of 35% between Leaders and Laggards. The two key drivers of this gap are Developing a Digital Strategy (45%) and Scaling the business on a cloud platform (60%).

The gap around cloud platform is of particular concern. In our digital age, technology and the business are fundamentally inseparable. Cloud technology is now a given; application programming interfaces (APIs) enable technology to be easily broken into components; AI and machine learning (ML) help the business to make “smart” decisions; digital experience creates unique and personalized engagement; and no code/low code eliminates complexity and accelerates the digital transformation journey, as we outlined in our report, Insurance Platforms – The Digital and No Code/Low Code Platform.

SMA has tracked cloud adoption over the past eight years. In their P&C Core Systems Purchasing Trends report, they said that 2018 was a watershed year, with three in four new core systems deployed in the cloud.[i] And in 2019 they reported that adoption hit a new high-water mark, with 84% of new core systems deployed in the cloud. They say that cloud is now a fundamental requirement in the digital world, and it is growing as we move into the new era of computing where every new technology trend, from AI and big data to microservices and the connected world, is increasingly dependent on cloud.

Figure 3: Gaps between Leaders, Followers and Laggards in Modernize & Optimize priorities

The Modernize and Optimize gap between Leaders and Laggards grew from 9% to 35% over the past three years, continuing the theme we’re seeing of Laggards falling further and further behind. Leaders are constructing future-ready platforms. Followers are moving, but less quickly. Laggards are barely moving off the status quo.

See also: Tip the Sales Scale in Your Favor

Speed Two:  Create a Business for the Future

When we consider finding new benchmarks for our industry, it only makes sense that established insurers must respond to new, tech-savvy competitors by wielding innovative business launches. When it comes to business creation, Laggards fall drastically behind, with a massive gap of 84%! The gaps in the individual strategic initiatives range from a low of 50% for Innovation (which was an addition this year) and 152% for Accessing New Capital Markets. The access to new capital markets is a challenge for many of the mutual insurers, limiting what they can do, particularly in an era of significant capital that is being invested in insurtech and other digital, technology businesses.

Large gaps in Engagement/partnerships with insurtechs (94%) and Adding/offering new non-insurance value-added services to customers (80%) are also strong evidence of Laggards’ shocking weakness in speed of innovation. This gap reflects their focus on the past, rather than the future – a dangerous blind spot that suggests dim prospects for continued relevance or survival. A quick re-focus and a two-speed business strategy is the only strategy that can close this gap because we need today’s business to be successful so that it can also fund the new business

Figure 4: Gaps between Leaders, Followers and Laggards in Create a New Business priorities

The differences in planning priorities between Leaders, Followers and Laggards stand out in Majesco’s research. While many Followers may be keeping pace relative to Leaders with their modernizing and optimizing the existing business, often reflected in strong financials, this is deceiving when considering the future business needed – where Followers and Laggards are not planning effectively and are falling further behind.   

Leaders continue to distinguish themselves from the other two segments with their stronger focus on strategic initiatives that support the two-speed strategy. Other insurers must accelerate their planning and turn it into doing to remain relevant, let alone be viable for the future.

Is your organization pursuing a two-speed approach to modernization, optimization and innovation? Are you waking up to new benchmarks and realizing that something needs to change?

For more detail, download Strategic Priorities 2021: Despite Challenges, Leaders Widen the Gap. 

Carriers, regulators and solution providers in the insurance industry continue to seek innovative solutions to some of the most pressing issues facing the industry. Following are five priorities for insurance leaders to consider, in tandem with insurtech-driven solutions:

Priority 1 – Global risk: Even before the pandemic, volatility in global risks stemming from climate change, economic uncertainties, cyber attacks and more were at the forefront of long-term concerns for insurance providers. The pandemic has accelerated those debates, bringing both urgency and added complexity to forecasters and those evaluating the macro and micro impact of those risks.

Insurtech Response: Better understanding of weather volatility from storms, drought/wildfire, etc., has long been a focus in the insurtech sector, with firms such as Hazard Hub, Opterrix and Athenium Analytics, to name a few, giving insurers greater insights for underwriting and claims. Insurtech cyber solutions are really just starting to take root and grow. A great example of new cyber solutions is Global Insurance Accelerator (GIA) alum Cowbell Cyber, which is providing AI-driven, customized cyber coverages.

Priority 2 – Diversity, equity and inclusion: The increased focus and awareness around DE&I offers many challenges and opportunities for our industry. From very specific challenges such as the “red-lining” issue facing the mortgage industry and risks of biases in AI applications to macro questions about whom and how we serve, DE&I concerns are just beginning to be explored.

See also: How Insurtech Thrived in the Pandemic

Insurtech Response: While much has been discussed at the industry level about the long-term implications of AI bias, insurtech solutions are just starting to bring new tools to market to assist with not only gaining insights from our data but also helping understand and be on the lookout for unintended consequences based on how we are using that data.

In the nearer term, it is very exciting to see new insurtech solutions providing access and new products to support those who have been underserved by traditional means. For example, Caregiven, an Oregon-based startup and GIA alum, enables providers to offer real-time, curated guidance to individuals and families managing end-of-life care for an aging or ailing loved one.

Priority 3 – Managing expenses: The automation revolution coupled with digital-native upstarts is challenging every carrier to rethink their back-end platforms and processes, staffing and other overhead. Choosing from a long list of solutions to help reduce or mitigate expenses with lofty ROI promises is easier said than done for most carriers.

Insurtech Response: While some carriers are waiting for Internet of Things (IoT), robotic process automation (RPA) and AI to fully prove out their ROI, there is still a lot of activity that promises great returns. The top three approaches are:

1. The acceptance of chatbots for customer service and sales;
2. Automation solutions to eliminate some of the repetitive tasks associated with old processes; and
3. Cost-avoidance solutions to mitigate claims, fraud and legal/medical expenses.

Priority 4 – Growth: The industry as a whole is looking beyond traditional insurance products to add value and attract new customers. Some of these solutions are geared around a better understanding of what policy holders need and strive to make a more engaging customer experience. Others are looking to add coverage for risks historically not covered by traditional policies.

Insurtech Response: There has been a wave of new insurance-backed or insurance-related products that are helping consumers and businesses get the protection they require, often at the exact point in time they need it most. Carriers are starting to provide the paper to managing general agencies (MGAs) or developing their own products for risks such as instant-on travel or experience insurance, insurance-backed warranties for consumer products, home warranties and even specialty coverage for solar panels and other environmentally-friendly products.

See also: Why Open Insurance Is the Future

Priority 5 – Transformation: Just a few years ago, insurtech wasn’t taken seriously by most carriers. Today, more and more are realizing they could be facing “adapt or die” scenarios. The bottom line is carriers that are not becoming more agile and digital-first could soon be extinct.

Insurtech Response: One of the main reasons carriers are hesitant to engage with start-ups is the risk associated with the unknown. Statistically, only one in 10 makes it, and 70% fail within the first five years. Fortunately, more and more carriers are responding by not only investing and nurturing these companies to help them be successful, but also redesigning their own systems to be digital-native and enabled by application programming interfaces (APIs), allowing greater agility to plug-and-play new or different solutions as the market changes.

Not coincidentally, all five of these priorities will be explored during the 2021 Global Insurance Symposium, to be held on June 28-30, with the first two – global risk and DE&I – as key themes for keynotes and panel discussions. For a full line-up of speakers and conference information, visit www.globalinsurancesyposium.com.

Recent developments in technology and the corresponding availability of data can improve risk prevention. A key driver is the Internet of Things (IoT), the growing network of connected devices ranging from consumer wearables to industrial control systems.

According to a recent report by Kaspersky, 61% of enterprises already use IoT applications. So, nearly two-thirds of insurers’ corporate customers can potentially integrate IoT data into insurance services. And a recent study by Aviva revealed that the number of internet-enabled devices in the average U.K. home has increased by 26% in the last three years to over 10.

Insurers can use the newly available data from IoT applications to reduce risks for customers, whether directly – through real-time risk mitigation solutions – or indirectly, by promoting safe behaviors over a longer period.

Prevention services are not new in the insurance industry; for years, insurers have provided consumers with loss prevention advice, and risk-engineering teams advise businesses in commercial lines. Ways to prevent risk, however, are changing. IoT allows risks to be better managed. This can be seen as the very essence of the evolution from pure risk transfer to a "prescribe and prevent" scenario.

See also: The Human Risks in Insurer/Broker M&A

Real-time risk mitigation

Real-time risk mitigation results from the direct use of IoT technology and can either consist of:

• Automated actions by IoT actuators that affect the risky situation without any human intervention, like autonomous driving systems in cars, or
• A warning to trigger some kind of human intervention, such as a water leakage alert that activates an emergency repair service.

These risk mitigation actions can be triggered by the detection of three different situations:

1. Missed safety tasks, such as scheduled inspection or equipment that needs preventive maintenance, or a diabetic patient who has left insulin at home or missed a check of blood sugar level.
2. A risky situation, such as a frozen pipe; a cold storage door that has been left open; spilled liquids on a supermarket floor; workers without adequate equipment in the workplace; unsafe lifting by an employee; a distracted driver.
3. The consequences of an event that has already happened, such as a water leak; an unsafe worksite; an injury; or the failure of a patient to adhere to a treatment. A mitigation action is then initiated by the IoT system.

Real-time risk prevention is most mature in commercial lines, driven by the loss control culture present in commercial insurance. Field inspections by engineering teams are well-established, and enhancing this work with new technologies seems like a natural step.

A few personal auto insurers around the world have integrated real-time warnings in their telematics programs. This live feedback – from line departure warnings to alerts about coming risky intersections – influences driving behavior and allows insurers to reduce expected losses.

Water leakage sensors are one of the most cited preventive services in home insurance. However, as of today, insurers have struggled to introduce approaches that generate substantial demand and a sustainable business case. Finding a sustainable business case in the smart home insurance market is challenging, but innovations should make homeowners the ultimate winners.

Figure 1: Leveraging IoT data for multiple use cases

Bundling risk prevention with other customer services, such as security, has been the most successful approach to date. The sustainable business case is built on a bundle of different services – some sold after the purchase – and on the reduced churn rates built through customer engagement.

Life and health is the least mature field for real-time risk mitigation services. There have been many insurance pilots over the past few years around early detection, care optimization and medication adherence, but only a few examples have scaled to market level. Reasons for the slow adoption include: 

• Health costs in most countries are not fully covered by insurers but by a public health system. 
• Entering into the medical device space would mean entering into the medical regulatory field. 
• Medical advice comes with significant responsibility and requires deep and specialist knowledge.
• Execution at scale needs insurers to deal with many different medical service providers. 

Real-time risk prevention services and approaches to them are very heterogeneous. The only common denominator is that all successful services are based on a multi-year journey. 

Promoting less risky behavior

The second way to prevent risk is to encourage less risky behavior. Insurers have a role to play in creating a positive safety culture and raising awareness in society.

We can distill a three-pillar concept from the successful examples: 

• Pillar one: Create awareness of the current risk level
• Pillar two: Suggest a change in behavior
• Pillar three: Offer incentives for changes in behavior

The sustainable adoption of safer habits for the benefit of all stakeholders can only happen when all three pillars are successfully implemented. 

The first two pillars are closely linked and depend on feedback to customers. Awareness of the current level of risk leads to the question: What change will make the activity safer? Before changing our behavior, we need to be aware of our current behavior.

Raising awareness of risky behavior and identifying ways to change it are not enough. There is a need to encourage people to instigate real and sustainable changes in their behavior through rewards.

The customer’s perception of the value of the rewards, their cultural context and frequency and the intersection with behavioral economics are all integral. Changes in human behavior are also instinctive; A combination of behavioral economics and gamification to engage individuals is therefore needed to help to drive behavioral change.

The most mature business line is life and health. Fully individualized suggestions and challenges are provided to customers based on the number of steps registered by their mobile phone or physical activity data from wearables.

In personal auto telematics, customers often receive a detailed analysis of their driving style via a dashboard in a mobile app. Many insurers also automatically display tips for improving the driving score, or introduce contests on specific issues – so-called leaderboards. 

See also: Despite COVID, Tech Investment Continues

In commercial lines, IoT data is being used to enhance the activities of the loss control teams and to provide periodic safety insights to risk managers and supervisors of the insured companies.

The real-life case studies on promoting safer behavior afforded the following key findings:

• The reward system needs to be set up to reinforce positive behavior. The reachability of the reward is key. 
• There are cultural aspects to incentives. It is important to find compelling benefits and rewards that engage target customers. What works in one country does not necessarily work in another. The rewards must be explicit and tangible. For example, monthly cashback on fuel costs is effective, but a free weekly coffee also materially influences behavior.  
• Frequency is key. A yearly premium discount is not enough. Positive engagement must be nurtured on a short-term basis. This mechanism gives people a reason to come back to the platform. 

Enablers of prevention services

The integration of technology into prevention services greatly increases complexity. As a result, the enablers for success are the effective business transformation, cultural change and understanding of the corresponding financial management rather than the technology itself.

Figure 2: Complexity of the financial management of IoT-driven prevention services

We identified the following as the main success factors:

• C-level commitment
• Development of vision and strategy
• Development of culture and capabilities
• An effective value-sharing scheme with the customer
• Management of new and complex financials

Several new elements need to be considered in the financial management of this new paradigm, such as service fees, partner contributions, self-selection effects and net IoT costs, which are harder to integrate into the economics of traditional insurance products.

The full report from which this article is derived is available here.