The critical measures in underwriting are operational exposures, hazards affecting those exposures and controls that manage the risk. Those measures, combined with an historical view of prior losses, provide the insight that underwriters need. Unfortunately, a long-standing inefficiency in the underwriting process slows engagement with customers and increases the time it takes to make decisions about adding business to fragile underwriting portfolios. 

Underwriting needs a vision to advance in an ever-changing business environment, especially in commercial lines. That vision can be partitioned into five basic considerations and exercises to create a tactical road map for moving forward.

1. What is your desired trading model? How do you wish to engage your policyholders?  

While there are numerous web- or app-based solutions in the market, the degrees of data collection and integration vary. So, a key initial step in evaluating a platform is to make sure it satisfies data extraction requirements from multiple file types. That flexibility allows the design of a fluid, low-friction process for customer engagement. 

The more effort for customers on the first touch, the lower the probability of conversion from marketing to quote to bind.

2. What underwriting data can be foreseen and what proxies exist to capture that data without requiring customers to provide it? 

Enhancing customer engagement and limiting unnecessary, onerous data-gathering tasks are critical elements of this strategic assessment phase. New technologies exist today for integrating bundles of third-party data sources — to ease data integration into legacy systems without the need for building new foundations.

Technology is pervasive in the personal lines space, but commercial lines adoption has been slow, even though far more effort is often needed to gather and assess risk data in this segment. 

See also: The Future of Underwriting

3. How can you abbreviate the supply chain to build a more responsive initial indication/pre-quote?  

This question illustrates an acute pain point for brokers and agents.

The foundation of the portfolio and pricing is predicated on a pre-formulated target set of classes that can be both underwritten and adjusted (post-claim) with the appropriate subject-matter expertise, to bind new business at a profitable rate and an expected loss ratio. A qualified decision must be made as quickly as possible — to determine if the risk profile is worth pursuing, before incurring substantial time and expense in the underwriting process.

At this stage, there is a heavy dependence on data analytics and presentation in support of decision-making.

4. Have you implemented a process to match available coverage products with the operational exposures and hazards of commercial accounts?  

A matching process of all available products is a critical differentiator for creating a competitive advantage and achieving profitable growth.  Through a matching algorithm to assess enhancements for existing coverages, as well as complementary additional coverages or endorsements, underwriters can provide more comprehensive, custom coverage to brokers and their clients. 

Insurance continues to transform into a customer-centric rather than product-centric industry, all but eliminating unnecessary coverages, terms and conditions. By definition, the industry is moving toward “pay for what you need” models. While simple and pragmatic, this concept has eluded the insurance industry for a lifetime in the commercial segment. However, the concept has been adopted in personal lines.

5. Have you built a feedback mechanism to monitor performance of the policy to take immediate and decisive action to mitigate upside and downside risks?  

While there are significant decisions to be made prior to binding the policy, there are equally critical decisions post-bind, as the business moves from the “new” book to the “renewal” book. Underwriters should be enabled to monitor immediate changes to operational exposures, hazards and risks; and they should be able to exert suitable control on the potential erosion of profits. 

As an example, the Internet of Things (IoT) continues to provide great advances in the real-time monitoring of exposures, be they man-made or inanimate. Creative manuscript endorsements and stronger terms and conditions can use the IoT to manage the risk of losses.

Transformation in underwriting is key for any insurance organization. And transformation is more possible than ever before due to the increasing impacts of modern technology — which makes it possible to get strategic insights from data for better real-time decision-making and results.

Retronyms have always intrigued me: those new formulations for long-used terms that arise because of some advance, usually related to technology. My beautiful old wristwatches are now "analog watches" because so many of you sport digital watches. A war used to be a war, but then the Cold War came along; now, when people shoot at each other, we call that a "hot war." (A friend who consults with the military recently used the euphemism, "sending kinetic energy downrange," which I love but somehow doubt will replace "hot war.") A century ago, cars just had transmissions; now, those that require the driver to change gears are "manual transmissions." And so on.

I'm now starting to see a lot of uses of a sort of retronym that I never expected: "human."

The actual retronym is "human employee," which is increasingly being used to distinguish those of us with flesh and blood from the artificial intelligences that are being employed in business settings. But the term almost always gets shortened to "human," which makes the implication even starker: We're at an interesting spot in our deployment of AI, maybe even at a tipping point.

I'm hearing the distinction between human and AI "employees" primarily among friends and former colleagues at the big consulting firms, which tend to lead the way on language in business. They don't always get the shifts right -- I'm waging a battle against "decisioning" and "solutioning" at the moment -- but I suspect the increasing need to specify when someone is talking about a human employee suggests that we're at the beginning of a great acceleration in the use of non-human ones.

For years now, I've described the likely employee of the future as a "centaur," part human and part machine (as opposed to the half-human, half-horse of mythology). I suspect that the recent need to distinguish between human and computer employees suggests that we're getting there.

The shift should help address two big issues in insurance: operational efficiency and the talent gap. The efficiency gains are obvious and are already reflected in all the interest in robotic process automation, chatbots and other forms of AI.

The effect on the talent gap should be no less significant. While people have worried for years about all the talented people set to retire soon, and about who will replace them, AI will solve much of that problem -- not by flat-out replacing those retiring but by augmenting the skills of others and helping them cover for those leaving the industry. AI will also help with recruiting talent. Think about how different the pitch to a standout recent college graduate will sound: Instead of promising to make the person an expert in sorting through the fine print of an insurance contract or in using actuarial tables, you can hold out the prospect of making her an expert in using AI.

For now, the new way of thinking will likely stay incremental. We'll still have the traditional processes for underwriting, claims, etc. We'll just increasingly have AIs slotted into the process to do some of all of a traditional task, perhaps gathering and then exchanging information with all the relevant parties. The processes will become centaurs even before the individual jobs do.

In time, processes will be reinvented in ways that move past the traditional roles, so we won't think in terms of having an AI or a centaur slotted in where a human employee is doing the work today. There will still be a blend of human and AI input, but the flow of work will be very different.

Rest assured that the humans will still hold all the key decision-making (no, not decisioning) roles, so we won't have to bow to any robot overlords any time soon.

In the meantime, we can sort through the potential need that the pandemic has created for other retronyms. A meeting used to be a meeting, but now we have Zoom meetings. If you and I sit down a few feet from each other and have coffee after we're all vaccinated, does that become an "offline" meeting, an "in-person" meeting, a "face-to-face" meeting, or what -- noting that Zoom meetings could be described as "in-person" and even "face-to-face" if we have the video on?

I'd appreciate your help solving (no, not solutioning) such questions.

Stay safe.

Paul

What Future Will We Choose?

The industry needs to stop wishing others could see the critical role we can play in preparing for climate change and just start playing that role.

Are Solutions in Tune With Today’s Needs?

Developing products around new customer priorities, and reaching new demographics in need, are key to keeping the industry relevant.

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To Post or Not to Post? Choose Wisely

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Leaders Rise From a Year Like No Other

In the first six months of 2020, e-commerce in North America as a percentage of overall commerce increased more than in the entire previous decade.

Event Name: The Future of Risk

Event Dates: May 18-20, 2021

Event Location: Virtual

Event Link: futureofrisk.cventevents.com

Description:

The future brought to you no matter where you are. There’s no better time than now to spend a few hours learning and preparing for the future. Join industry leaders and innovators at The Institutes’ The Future of Risk™, to learn how disruption, innovation, and technology are changing the way we work and the risks we insure. This three-day event connects you directly with thought leaders and executives who are shaping the future of risk management and insurance.
 
Throughout the three days, we’ll feature industry experts addressing some of the hot topics facing our industry today and in the years to come.

Highlights include an opening panel with industry CEOs and a risk transfer solutions panel. Session topics include:

• Customer Experience: Leveraging Data for Success
• Blockchain 2021 -Evolution To A Standard
• Embrace the Future: The Open Playing Field of Platform Ecosystems
• COVID-19 Pandemic & Personal Lines Insurance Customers

Strong demand from Americans fleeing apartments or upgrading to more space pushed home prices from an average price of $247,000 in February 2020 to $271,000 a year later, according to Zillow. Massive shifts like this present insurers with a once-in-a-generation opportunity to sell their products, and using data is one of the best ways to focus on the right targets and the right time -- as they make their purchase decisions. 

However, the movement toward data is often accompanied by an unhealthy euphoria. The solution is not simply “more data,” despite what many providers seem to be pitching.   

In an economy with 260 million smartphone users together creating billions of new data points every day, the challenge for today’s insurers isn’t buying or gathering more data; it’s making sense of existing data.

Scores of companies credibly claim to have excellent predictive data. The question is: How do you find a partner that can connect insurers with the right data and then make sense of the information, turning it into actionable campaigns that drive business outcomes. In a world with too many choices, strategic counsel is the most valuable resource. 

Ask the right questions

Selecting the right data partner is mission-critical. Below are five questions to ask a data partner before engaging:

1. Do you source data from other providers?

Reputable data purveyors will be willing to source data from other providers so they can provide clients with the best possible leads. Even if a provider doesn’t have a relationship with the owner of a particular data set, the provider should be willing to engage on your behalf to ensure a consistent data selection process that’s not redundant. There is no reason a company has to manage multiple data provider relationships itself. This is especially important for the insurance industry, where there are multiple providers of excellent “life event” data – and no single provider can claim to have a monopoly.

2. Can you provide case studies and client references that speak to the data’s performance?

Case studies are not always available – especially for fresh data that’s never been used – but they can be a helpful predictor of a data set’s value. If a case study isn’t available, ask for a client reference. In general, the more a provider is willing to share about the data they’re selling, the more confident they are in its performance. This “transparency test” is an important barometer of any potential partner.  

See also: The Right Counsel for the Right Coverage

3. What data points are you able to flag? Do you have a first mover advantage? 

The key point here is to go as deep as possible into the data you’re buying so there are no surprises after the purchase is made. The most valuable data include information that competitors haven’t purchased already. Is the provider offering a new way to reach expectant parents, for example? Ask your provider whether they’re offering anything unique. Beyond that, it’s important to understand exactly what you’re buying. For example, a provider might be trying to sell you a data file that identifies new movers, new homeowners, pre-movers and newly engaged, but you may only need  a subset of those identifiers. When you know what somebody is trying to sell and what you already have, it gives you greater bargaining power and avoids duplication after the purchase is completed. 

4. Has your data been tested – and were under-performing sources removed?

How data should be tested depends on the individual needs of your organization and what attributes are most important. The data provider should be able to explain to you how they ensure continued accuracy of their data. They also should have steps in place to validate their data sets on an continuing basis and have the necessary monitoring in place. If they know a source isn’t quality, they shouldn’t be selling it to you. 

5. Will your provider provide a timestamp for the data?

Timing is everything when it comes to data, and providers should be transparent about when the information they’re selling was collected. This is especially important when buying data for time-sensitive moments, like marketing mortgage protection insurance to a new homeowner. On the other hand, it may be wise to wait a bit to offer life insurance to a new parent instead of targeting them as soon as they have a child. A few weeks can be the difference between a campaign’s success or failure. Can your provider certify that the information has the right timestamp identifying when the event occurred – or at least when the provider first became aware of the event? 

When you have a deep understanding of what you’re buying and how it connects with your existing needs, the odds of maximizing the value of the asset after the transaction go up exponentially. Insurers should seek out partners who can do the hard work of identifying the right data – and then come to the table ready to turn that information into successful campaigns that drive sales.

A new computer algorithm has just written the world’s funniest joke.... [Punchline at the bottom.]

During the last year, rapid advances in data, AI, and cloud solutions have accelerated, and a portfolio of AI assets is making everything more DIY than ever before.

More customers are more satisfied, while expenses go down and profits go up. Data gets more accurate and more precise when it is collected right the first time, by folks with direct involvement at the right place, at the right time and in the right process.

Sure, the potential for a diabolical AI to warp the insurance value chain and create illicit data trafficking is the salacious fodder of tabloids of the techno-Luddites. But, name-calling aside, letting people interact directly in a protected fashion with self-service channels in a personalized fashion has only seemed to widen hours of availability, lower operating expenses, increase transparency, improve communication, decrease cycle time, eliminate travel, enable social distancing, establish authentication and verification of identities and data, create faster payments and improve satisfaction.

It seems that the more tasks customers can do themselves, the less they must wait for expensive, slow, serial, synchronous, manual and human-error-prone, analog processes to do for them.

Same for agents, underwriters, employees, claims handlers, vendors and executives. How else could we all be functioning after a year of working at home?

We all still like a timely, helpful, empathetic and friendly voice when we want one (or even a live-video channel), but many find that an avatar or smart-bot can in many ways be e-better. No judging, no fatigue, no “bad days,” just the facts. There is implicit empathy in any process that respects our time.

As for ethics, it’s not even a required course in the MBA curriculum, but, because these robot processes establish a permanent digital record, it is easier than ever to audit them and not devolve to a “he/she/they said contest.” Even a gender-neutral machine can repeat the facts on record from the DIY process. Got a problem? E-litigate it (if you can’t settle with escalation). Facts/data can change, and adding them to the process should influence the outcome as appropriate. Misrepresent the facts, and that is on permanent record, too.

We have not yet seen “pick the robot voice and language you prefer,” but that technology to remove the potential for implicit bias of a gendered voice is on the horizon.

Facts can be recorded, with an ever more attractive set of options for responding, such as:

• “Would you please review the pre-filled data and say 'OK' to continue?"
• "Say 'yes' to opt in your data from your smart-car or smart-phone to complete your submission”
• “Use the hotlink just texted to your smartphone and take a picture
  • for a claim we will ask for a few pictures,
  • for your odometer-based billing, please also type in what you see on the picture as digital authorization for immediate processing,
  • for underwriting, please follow the prompts for your car, home and valuables."
• "Say, 'I have completed the task' as your voice signature, or simply push the green 'agree/OK' button."

A digital transcription of the session will be available on your app, in your portal and via e-mail, and your integrated communication will be available for agents, adjusters, repairers/vendors, underwriters, customer service, billing, etc.

See also: Despite COVID, Tech Investment Continues

When it works well, we are empowered.

When we need to exit to a human, we want the connection now, and we want the human to start where the machine left off. The machines don’t get frustrated, but customers do, and we hate repeating ourselves after creating a permanent record already. Our time is valuable. Simply notify us when you are ready to talk?

The only thing for sure – “easier, faster, more trustable, cheaper, convenient and more delightful” is a one-way street for customers.

They are voting with their feet for personalized risk rating and automated channels, especially during low-mileage driving and long hold times common during COVID.

People really are counting their mileage for usage-based pricing, but proven claim-free drivers may not need their every movement traced to just get miles verified -- we already can use third-party data and smart car data; why is that not already DIY, too? Get the picture, and you will get the joke.

The punchline “…but the algorithm's joke is only machine-readable.“ [Machine laughter: "Harharhar...."]

What happens when a key data source becomes less available, reducing carriers’ ability to evaluate risk? This has happened during the pandemic in workers’ compensation.

In workers’ compensation, OSHA is one of the top data sources that underwriters use. In particular, underwriters will look at OSHA inspections and violations to measure some aspects of the risk. 

Here at Convr, our focus has been to help carriers with the right insights at the right time for better decision-making, and we found, using a vast data pool, that planned inspections dropped 48% in 2020.

One reason is fewer claims; as operational capacity was reduced or suspended for many industries in 2020, workers’ compensation claims dropped by over 20%. As accidents declined, inspections that normally would have followed weren't needed. In addition, OSHA reduced the number of planned inspections for the safety of their inspectors.

The reduction in inspections has led to a lack of reliable information for workers’ compensation carriers to evaluate businesses -- but this is where technology comes in. With the help of artificial intelligence and advanced analytics, carriers can still determine the risk of a business by looking at past patterns.

These past patterns include types of structured and unstructured information that data scientists refer to as “features” in machine learning models. Often, significant features are high-dimensional nonlinear combinations of company and property characteristics, such as the size of the business, the year it was established and prior violations. Other features include social media information and product and services data.

See also: 9 Months on: COVID and Workers’ Comp

Applying AI to our data lake, which is informed by over 2,000 data sources, Convr has determined that, in place of the normal volume of OSHA inspections, carriers can use a workplace safety model to accurately quantify risk. A workplace safety model consists of a machine learning model that predicts how safe a workplace will be based on OSHA data and the different data sources mentioned above.

Companies labeled as the riskiest 10% by Convr’s proprietary workplace safety risk scoring model observed three times as many future violations as those labeled as the median risk.

COVID-19 has proven that circumstances can change unexpectedly, and carriers have to become adaptable and flexible enough to implement alternative solutions to minimize the impact. Advanced AI models, like the one Convr has created to quantify workplace safety, hold tremendous value for carriers, enabling them to better understand risks even when traditional sources of information are limited or unavailable.

When armed with technological advancements such as these, carriers are equipped with the right tools for better decision-making and optimal underwriting results.

When was the last time you sent a fax? For that matter, how many in-person meetings have you had this year? From the first cellphone call in 1973 to the first text message sent in 1992 to the rapid adoption of online meeting platforms in 2020, people are constantly exploring and adapting to new technology quickly, with many embracing the next digital update wholeheartedly. Unfortunately, the same cannot be said about the insurance industry, which is mired in antiquated business activities.

Insurance is an essential safety net for people, but often the industry relies on outdated business models and systems, some based off mortality tables that were developed in 1971 and 1984. At the same time, industry leaders have refused to embrace technology so much so that, in a Center for the Study of Financial Innovation survey about the risks facing insurers, insurance companies ranked outdated technology as the greatest threat to their business.  According to a McKinsey report, nine out of 10 insurance companies identified legacy software and infrastructure as barriers to digitization. 

Many corporations rely on the mentality of, “It’s worked for 100 years, so why fix it?” This became even more evident during the COVID-19 pandemic when many consumers, quarantined at home, turned to digital channels to find solutions to their insurance needs but found a lack of digital adoption. This doesn’t just prevent companies from gaining new clients but also alienates existing ones. According to a Bain & Co. brief, consumers who encounter problems in their digital interactions tend to give their insurance provider lower loyalty scores.

While there has been a plethora of data to help insurance companies create more responsive products and attract new consumers, most insurance companies analyze only dozens of different variables -- many based on that data from decades ago -- to arrive at their numbers.

By contrast, cloud-based artificial-intelligence (AI) assisted software can process 6 billion records composed of mortality, consumer demographic, health and social trends. The result is more precise, dynamic, insurance-oriented algorithms than can be leveraged throughout the insurance value chain.

In fact, cloud-based AI can compare thousands of variables simultaneously in a few hours. The resulting analytics and algorithms are easy to interpret and integrate into insurance processes that enhance pricing, risk assessments and customer acquisition, resulting in a data-driven competitive edge. 

A robust, full-stack, Insurance-as-a-Platform (IaaP) approach can quickly and robustly analyze and process all of this data to help insurance companies more precisely determine risk, create better, more appropriate products for their clients and improve customer experiences. This enhanced data can also help insurance companies price products more accurately, understand the demographics of who is ready to buy and when they are ready and get the right risk on their books — making them and their agents more profitable in the end. 

See also: 5 Things to Know When Integrating AI

Insurance companies that embrace technology will be the ones that succeed. Insurtech companies can help them succeed by providing data-based recommendations for competitive product pricing, to create products that consumers want and to improve the insurance-buying process, making it easier for both the client and the agent. 

In a digital world, data -- and the ability to fully analyze it -- is critical to insurers’ survival. The businesses that will succeed will be the ones that can quickly analyze and adapt to data to make better business decisions and serve their customers better and faster. 

Now, agents will never be left out of the equation. They are the ones who develop relationships and build personal networks — an agent serves as a place of trust. But the future of insurance is a hybrid where consumers can choose a digital experience or a traditional one and move between the two.

EY’s Global Insurance Consumer Survey reveals how insurers can support the needs of those affected by the COVID-19 pandemic.

In brief

• Insurers must evolve to meet changing consumer behaviors and priorities caused by the pandemic.
• The greatest opportunity for insurers lies with those most financially affected.
• Pervasive and contentious social issues call for insurers to engage, collaborate and lead the development of new solutions.

In late 2020, EY Insurance conducted a global survey of 2,700 consumers and 1,200 small business owners to understand how the pandemic has affected their lives. Our survey of consumers focused on their needs for personal lines and life and retirement insurance products.

To better understand the concerns and product preferences of respondents, we grouped these individuals into three segments: most financially affected, moderately affected and least affected. Across all segments, there are clear opportunities based on consumers’ shifting priorities:

1. Consumers are seeking to restore their financial well-being and security, with more than half of respondents saying they plan to save more as a result of COVID-19.
2. Those who experienced the greatest financial distress from the pandemic intend to minimize future financial risk and uncertainty.
3. The most affected consumers are socially active and place a high value on social responsibility in their insurance purchasing decisions.

Our survey confirms what we’ve heard from senior insurance executives across the industry: This is a moment of opportunity for the industry to increase its relevancy and live its purpose by playing a critical role in the recovery of consumers and the wider economy.

To play such a role, insurers will need to develop innovative products that align to consumers’ evolving needs and provide tangible value.

How the pandemic has affected insurance consumers

Our methodology allowed us to identify the extent to which the pandemic has affected the financial state of respondents in each country. As exemplified in the chart below that displays data from our life insurance findings, there is a sizable difference in impact between those most financially affected and those least affected. For instance, 54% of the most affected experienced a loss of a regular work schedule to a great degree, and 56% lost income to a great degree. Among the least affected respondents, those figures were 0%.

While the most affected consumers are typically younger (70% are under the age of 45) and less affluent than overall respondents, they are not exclusively from these sociodemographic groups. For example, in the U.S., 56% of the most affected respondents held at least one college degree, and 40% earned over $100,000 a year.

The survey also explored respondents’ concerns for the future and their appetite for insurance products. The most and least affected reported similar concerns and insurance needs, suggesting a widespread feeling of vulnerability and anxiety in a world already defined by geopolitical tensions, growing inequality and threats from climate change.

How the pandemic is shifting preferences on protection

Finding financial well-being through cost-effective alternatives

Looking at life insurance and retirement, the top concerns can be directly linked to the health and financial impacts of the pandemic: Fear of losing a loved one is by the far the greatest concern, followed by financial well-being. In seeking financial security, consumers are most interested in products that cover loss of income, credit card bills and other existing financial commitments.

Given the heightened financial anxiety and focus on financial well-being, consumers are seeking cost-effective insurance alternatives, such as policies with lower premiums. Consumers also express willingness to provide personal data or wear a fitness tracker in exchange for a discount or customized monthly rates.

See also: How COVID Alters Consumer Demands

More time at home creates new risks

From the perspective of personal lines, behavioral change brought about by the pandemic is reflected clearly in the results. For instance, cyber fraud as a result of increased time online was the respondents’ top concern, followed by paying for insurance for a car that’s being driven less. Consumers are also more interested in usage-based insurance and home-protection products.

Given that remote working is expected to continue for many employees, insurers should develop products suited to the “new normal,” such as home-protection and usage-based policies.

What to know about those most affected

Those who have experienced the greatest financial impact are inclined to plan for future financial uncertainty: They are more likely than respondents overall to develop an emergency plan, speak with a financial adviser, increase contributions to pension and retirement accounts and purchase new forms of insurance.

Despite this group’s heightened focus on financial planning, since the onset of the pandemic, the majority (60%) of this demographic said that they have not been contacted by their insurance provider. A majority (63%) also said they do not completely understand the extent of their life insurance coverage.

Insurers that contact this demographic, communicate the value of insurance and offer protection solutions at a time of need can help this segment recover while forming the foundation for long-term customer relationships.

Why social responsibility and justice matter

The most affected consumers are both highly concerned about social justice causes and place a greater value on an insurance firm’s social responsibility efforts in their purchasing decisions.

More than half of the most affected respondents reported that a firm’s commitment to social responsibility (racial injustice, environmentalism, income equality, police brutality and employee relations) is very important in their decision to purchase insurance. In addition, the most affected were twice as likely (61%) to donate money, time or supplies to a racial justice organization since March 2020 than respondents overall (31%).

Corporate activity around social purpose is becoming increasingly important to brand reputation and customer retention — and insurers need to think differently about what they are doing in this space.

Insurers have an opportunity to engage a socially active, energized audience by amplifying their corporate social responsibility efforts, including policies and investments to promote equality, diversity and inclusion. Within executive ranks, environmental, social and corporate governance (ESG) and sustainability-related initiatives and a focus on long-term value are important to demonstrating the vital purpose of the industry.

Strategic and operational implications for insurers

To meet consumers’ evolving concerns and needs, insurers must reimagine their offerings and overall value proposition for both existing and prospective customers. Satisfying this market demand starts with a product innovation strategy built around unique solutions that create differentiation in the market.

However, many executives express concern over the ability to achieve such a strategy. In our December 2020 poll of nearly 100 global C-suite insurance executives conducted during a virtual event, product development was predicted to face the greatest challenge in adapting to change.

Developing leading solutions requires an integrated approach that applies innovation discipline to highly regulated products. It also requires the ability to leverage external ecosystems and collaborate with others outside of the industry. Finally, insurers need an adequate technology architecture and supporting platforms.

But everything relies on first identifying the customer and an unmet need.

See also: 3 Tips for Increasing Customer Engagement

While COVID-19 vaccinations may help address our physical health concerns, the financial distress the pandemic has caused many consumers will be felt for years to come. As consumers’ concerns and needs change, insurers have a responsibility to live their purpose of providing protection to all.

Developing products around new customer behaviors and priorities, and reaching new demographics in need, will help the industry maintain its relevance and play the role it needs to in the recovery.

Fast forward 15 years. 

U.S. catastrophe losses have leveled off at sub-$350 billion for the past three years, with 2035 marking a seven-year low. The Insurance Institute for Business and Home Safety (IBHS) just certified its 1,000th Fortified Community, meaning 75% of Americans now live in a jurisdiction with a truly holistic, fully risk-aware, climate resilience plan. New housing stock in the red climate zones slid to a 10-year low. New Orleans’ recent Resilient Community Bond put that blended finance/community-based insurance market over the $5 trillion mark. In Washington, Congress has already reauthorized the barely tested Resilient USA Risk Pool, updated information-sharing rules governing the National Risk Modeling Facility and tripled the matching funding for the Mangrove Project, which over the past decade has used mangrove restoration to protect 2.5 billion people from flooding globally. 

The insurance industry, rightly credited with driving a generational resurgence in analytics-based resilient thinking, became the top recruiter of young engineers and coders in the country.  

All of this is clearly fiction. Or is it? Each alternative reality, if pursued relentlessly, is entirely feasible. 

If we’re going to “flatten the curve” of weather losses in 15 years, we need to initiate large-scale community resilience starting . . . now.  If we want to help mayors, county commissioners and governors take the brave steps needed to protect their constituents (i.e., our balance sheets) we need to find new ways to arm them with the knowledge and financing to get the job done. If we want a holistic policy framework that aligns incentives around priorities informed by risk, we in insurance need to influence debates we aren’t even part of today. And if we’re serious about winning, we need to understand that the resilience sprint we’re running is the ultimate team sport that will require a relay of impact-oriented partnerships.

In short, between now and then, the insurance industry needs to stop wishing others could see the critical role we can play in preparing the country for climate change and just start playing that role ourselves. Because never before has so much rested on the ability to understand and manage complex risks. 

The challenges with our playing that role on climate are real. To start, the primary means by which we send risk signals is no longer enough — or even possible — in some cases. A highly regulated, 12-month, risk-based contract in a hypercompetitive market isn’t going to be terribly effective signaling risks that will emerge five, 10, 15 or 20 years later. We must find novel ways beyond terms and conditions to deliver the stunning bundle of risk knowledge and foresight we package into a “simple quote,” like we did with IBHS, the Insurance Institute for Highway Safety (IIHS) or Underwriters Laboratory.

The deeper challenge we face is overcoming our instinctive reflex to view climate risk as a threat to profitability not an opportunity for impact. When under a multi-variant, long-term threat, the natural tendency is to be defensive, skeptical and insular, and these survival instincts are clearly evident in the initial response to climate we’ve seen from many of our institutional voices in the U.S.

If, instead, we recognized that the world is essentially begging the insurance industry to step into its broader societal role, we would see promising paths open up before us. Paths to reawakening the awesome power of nature to secure resilience. Paths to aligning economic interests for the betterment of social interests. And paths to harnessing a sense of pride that only comes from a workforce that knows its purpose is making a difference.

See also: What the Recent Deep Freeze Portends

Now humor me again with another look at March 2036. Cat losses are linear, exceeding $400 billion, with no end in sight. Communities are paralyzed by non-stop recovery efforts, unable to make system-level changes in their risk profiles due to politicized risk projections and limited funding options. Governments are still inconsistent – in some cases contradictory – in setting pre-event incentives. The National Flood Insurance Program (NFIP) has been extended to cover personal auto flood losses to prop up the fastest-growing entitlement on the federal balance sheet. Residual markets have become the top insurer in 20 states. And the average age of an insurance sector employee just passed 54.

This, too, is pure fiction. Or is it? The answer is literally up to us. Because we are the ones who know that absent a fundamental reset the next 15 years will bring hotter weather, wetter storms, more destructive winds, higher water marks and untold human and economic misery.

We are the ones who know how to signal risk, amass risk-based capital and restore people’s lives. And we are the ones – in our actions and our inactions – making generational decisions today. 

Which future are you choosing?

The Myth of ‘Sold, not Bought’ Paul Carroll, Editor-in-Chief of ITL A recent conversation crystallized a thought that has been rattling around in my brain for a while: that, despite the shibboleth, insurance is no longer “sold, not bought.” The reverse isn’t yet true, either. It isn’t correct to say that insurance is bought, not sold. Instead, we’re in a middle ground, where insurance is both sold and bought. People certainly still rely on advice about insurance, and a good agent can spot a need and fill it with a policy, but a huge percentage of people now begin their searches online. They also do more and more research on their own, out of reach of brochures and PowerPoint presentations. With COVID accelerating the move to digital, customers often won’t even sit down in person with an agent before buying a policy. Yes, “sold AND bought” is confusing — but the situation also creates opportunities for those who are first to adapt to the new reality... continue reading > THE FMLA AND PFL KNOWLEDGE GAP 2020   New Majesco research highlights that as leave regulations grow, so does managers' knowledge gap.  Read More SIX THINGS Does Pandemic Signal the End of Agents? by Mark Breading There will always be a need for intermediaries who deeply understand customer needs and can create that right combination of coverages. Read More Claims Development for COVID (Part 2) by Mark Walls and Kimberly George One study found that 50% of those infected were unable to work full-time six months after recovering. Read More What’s Wrong With Commercial Auto? by Gary Hagmueller If we can reduce, standardize or eliminate costs associated with litigation, the industry would be in a much better position. AI offers an answer. Read More The Insurer’s Customer Acquisition Playbook sponsored by Data Axle The right approach to data analytics can cut wasteful spending in customer-acquisition programs while attracting high-value clients. Read More The Key to Agency Management Systems by Paul Legutko and Emerson Davis Insurers must be flexible, to understand what kinds of integrations would be most valuable to agents. Read More False Dilemma Facing Life Insurers by Patrick Viau Selling life insurance to digital native consumers requires an omnichannel approach, regardless of what you consider your primary sales channel. Read More Arrogance and Nature’s Deadly Hand by Rich Sorkin Four years ago, almost no large companies were thinking about the impact of climate change on their businesses. Finally, many are. Read More MORE FROM ITL A Conversation on Corporate Strategy with Amy Radin In-depth with ITL's Thought Leaders Join ITL's editor-in-chief Paul Carroll as he sits down to discuss corporate strategy with director, advisor, author and thought leader Amy Radin. Watch Now March's Topic: Strategic Innovation Strategy is what you don’t do. That was the dictum of the late, great Mel Bergstein, who way back in 1994 founded the pioneering digital strategy firm Diamond Management & Technology Consultants. (It became part of PwC in 2010.) I heard Mel’s line a lot, as a partner with Diamond from 1996 through 2003, and I think his are words to live by in the insurance industry these days. Everyone seems to have gotten the memo about the need to digitize insurance and to explore innovative ideas, but the present typically creates a real drag that slows movement toward the future. Take Me There GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started Partner with Us We’d love to talk to you about how we can improve your marketing ROI. Learn More SPREAD THE WORD Share Share Tweet SUBSCRIBE TO SIX THINGS