As part of this month's ITL FOCUS on commercial insurance, we spoke with Stephen Applebaum, managing partner, Insurance Solutions Group, about the future impacts of technology in commercial lines.

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What is the biggest change you expect to see in commercial lines in the next 12 months?

COVID-19 related claims, notably first-party property business interruption and third-party liability, will proliferate and create new distractions in commercial insurance once the complete extent of losses is tallied in 2021 and beyond, attracting growing attention from media, regulators and other public watchdog groups, further complicating commercial policy renewals and new business and challenging actuaries, underwriters, agents and brokers. Adoption of policy process automation, including automated underwriting workstations, will accelerate as carriers struggle to regain operating efficiency while managing risk more accurately.

Connected auto, home and business insurance models will begin to see meaningful adoption. Telematics program adoption, featuring innovative partnerships will explode in commercial auto insurance for fleets, especially small business, offering more compelling value propositions focused on driver safety/behavior modification, rewards and fleet and asset management benefits. Commercial property will follow this trend.

In the next five years?

Distribution channels will change and multiply dramatically. Changing customer expectations and behavior will drive insurers to develop more robust multi-channel distribution. New and increasing competition will push insurers to develop new digital models and partnerships designed to make the insurance selection and purchase process fully seamless. While agency writers still hold a ~70% commercial P&C market share, the number of independent agencies will continue to decline as new direct distribution channels and channel consolidation grows, both fueled by expanding private equity and venture capital investment. Many exclusive and captive agencies will convert to independent agencies. Also, carriers and brokers will pursue more cross-border and geographic expansion through M&A and partnerships to drive scale.

An increasing percentage of work will be performed by artificial intelligence technologies, including machine learning and robotics process automation. Consequently, concern and public debate will ensue concerning the issues of bias and ethics in the design and use of AI, and governing standards will begin to emerge.

The demand for commercial cyber risk and liability insurance will continue to grow as digitization and mobility further penetrate communications. Insurers will adopt a variety of  growth strategies, including innovative partnerships, alliances and collaborations, new products and enhancements, as well as M&A to achieve growth and presence in the cyber insurance market. The global cyber insurance market size is projected by industry experts to grow by at least 20% annually from $8 billion in 2020 to well over $20 billion by 2025.

In the next decade?

Consolidation of the North American agent and broker channel, will continue unabated as private equity investors seek attractive returns through deployment of historically high levels of “dry powder” as investment fund sizes continue to break records.

Technology will continue to enable innovation and process transformation through 2030, including;

• completely digital quoting processes for retail agents and brokers
• deployment of e-signature solutions that will satisfy all compliance concerns and create a standardized process across all lines of business
• connected vehicle technologies that will alter the commercial auto insurance landscape and give auto makers an important role in insurance sales, distribution and claims
• connected home and business technologies that will similarly transform the commercial property landscape
• the commercial insurance claims process will evolve much as did personal lines claims; claims ecosystems and platforms will form that enable much shorter claims cycle times, better outcomes for carriers and customers and greater visibility into claims vendor performance. 

What are the three technologies you think will play the biggest role in driving change -- perhaps one for each of the three time periods?

Technologies driving change over the pre-defined time periods:

NEXT 12 MONTHS	Cross-enterprise digitization AI-enabled process automation Emergence of platforms and open ecosystems
NEXT 5 YEARS	Cross-enterprise digitization AI-enabled process automation Emergence of platforms and open ecosystems Connected sensors/devices in workplaces and buildings enabling risk management and ultimately risk avoidance
NEXT DECADE	AI-enabled process automation Emergence of platforms and open ecosystems Connected sensors/devices in workplaces and buildings enabling risk management and ultimately risk avoidance Virtualization of everything; workforce, external/internal communications, healthcare, claims reporting and claims management

Please pick a technology mentioned and describe in a bit of detail how that will play out.

Digitization will fuel virtualization much like the conversion of data from analog to digital form enabled all of the many information management solutions. As digitization continues to expand across each operating segment of the insurance enterprise, it will spawn innovation of virtual processes to improve upon and replace formerly manual, stubbornly long, costly, complex and inefficient ones. Ultimately, the commercial insurance industry will sell more profitable, lower-cost, innovative protection products and services such as hyper-personal, parametric and variable interval insurance through seamless, direct-to-customer distribution channels. 

Through these technologies, the industry’s primary selling proposition will pivot from insurance products, risk and claims management to protection services, risk and claims avoidance.

What is the one trend you see people talking about today that you think WON'T pan out, at least within a reasonable period?

Expectations for 100% automated and touchless processes without any human involvement will go unrealized well into the future. A subset of non-routine and catastrophic claims will continue to call for expert human, empathetic handling. However, numerous repetitive processes not requiring human support or judgment will be automated using AI technologies, eliminating a significant number of industry positions – but many of the individuals impacted will be offered retraining and upskilling by their employers –  thereby improving their job satisfaction and compensation levels.

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We would like to thank Stephen Applebaum for participating in our ITL FOCUS interview series. To learn more about Stephen and read more of his articles, click here.

This interview is a part of the January 2021 ITL FOCUS: Commercial Insurance article. View the full piece here.

I hesitate to make predictions about 2021. Those for 2020 didn't work out so well for any of us, right? And 2021 is already off to a rocky start, with the pandemic still killing thousands a day (just in the U.S.), with the ever-so-promising vaccines being rolled out ham-handedly and with political dysfunction in Washington, DC, reaching fever pitch.

But I'll still hazard a guess and say that one of the biggest, if not the biggest, themes of 2021 in insurance will be ecosystems. We may be well into the year before we see the effects. The pandemic -- and perhaps the nutty politics in the U.S. -- won't release its grip for a good while yet. But ecosystems should produce key changes in two areas: how we touch customers and how we organize internal processes.

A friend wrote a book years ago that included a line that has stuck with me: "Nobody is as smart as everybody." That ethic explains a lot of the power of ecosystems: Nobody individually is as powerful as everybody working together.

We've already published quite a bit on ecosystems, including the two articles at the top of the six I highlight below, and will publish much more, but I'll summarize here what I see as the two biggest opportunities.

The first relates to sales. Traditionally, insurers have sold products through expert sales forces. But that has typically meant that a customer has to walk into that Allstate office in a strip mall and speak to an agent or that that Allstate agent sponsors a local kids soccer team, becomes known in the community and gradually meets and grooms prospects. But digitization -- accelerated greatly because the pandemic has forced us all to deal with each other remotely -- allows for serving customers in a more natural way, by meeting them in their moment of need.

Digitization allows for bundling car insurance with the purchase of a car, or home insurance with the purchase of a home. A home buyer is already dealing with a mortgage broker or banker, who can digitally provide options for insurance at the moment when someone is actually motivated to buy it. You don't have to fill out any more forms -- the bank has already done a colonoscopy on your finances and can auto-fill whatever the insurer needs on you or on the home. You don't have to drive to an office, and the agent doesn't have to spend weekends schmoozing soccer moms and dads.

Life insurance, usually such a tough sell, can become a routine part of interactions with financial advisers, even being initiated by the growing assortment of robo-advisers. Shipping insurance can be bundled with shipping contracts. And so on.

Plenty of effort will be required for an insurer to bring banks, car dealers, financial advisers, etc. into their ecosystems. Lots of coordination will be required, too, to make sure that everyone's IT systems play nice with each other. Regulators will also have their say, to make sure no one is tilting the playing field unfairly, especially if customers are somehow being put at a disadvantage.

But it's inevitable that digitization will push the initial contact with customers well beyond the walls of individual insurers and their agents and will require building an ecosystem. Some years ago, when a colleague and I wrote a book based on a massive research project into what can be learned from corporate failures (called "Billion Dollar Lessons," if you must know), we decided that the only successful synergy strategy for sales was, "Do you want fries with that?" Well, I think there will soon be a whole lot of folks in non-insurance fields asking, "Do you want some insurance with that?"

The second opportunity for ecosystems is even more fundamental, because it allows for rethinking the whole organizing principle of major parts of a business and, eventually, the entire business.

Historically, big insurers have been closed systems. They have their sales force, their underwriting teams, their actuaries, their claims organization, etc., all down the line, all operating within one set of walls. But what if an organization were more like a piece of software and could be organized as an open ecosystem, so the organization didn't have to do everything itself and could incorporate a continual stream of innovations, whether from inside or outside the organization?

That ecosystem sort of approach is how apps work on your phone. There's some core piece that a team has written, but the team incorporates bits of software, called "objects," that handle the rest. Why write your own calculator when someone has already done one? Why write all that code that expresses your app on the phone's screen when someone has already written code you can rent?

The key is what's called the application programming interface (API) -- you and the others in the ecosystem have to specify exactly how your piece will accept data and will export data. (The coordination piece is so key that Plaid, a startup that lets apps connect to users' bank accounts, has an agreement to be acquired for $5.3 billion by Visa.) Once you've specified the API, you can do anything you want as long as you don't change it. You can improve your piece. You can decide, say, to swap out the calculator you were using and swap in a better one. Whatever.

Now imagine being able to apply that sort of model to an organization. What if your business were so modular that, finding out that your adjusters were best-in-class, you could sell their services to others, connecting easily and instantly through an API? What if the reverse were true, and you wanted to draw on some other company's adjuster module?

Something that fundamental is unlikely to happen soon, if only because companies see a skill like underwriting as a core competitive advantage and won't want to share. But I suspect we'll start to see more processes conceived as modular, to great effect.

Jamie Yoder, an old colleague of mine who is now president of Snapsheet, which provides claims automation services, offered an interesting way of thinking about ecosystems. He said the claim has to be "the captain of the process." In other words, rather than thinking about a traditional flow, in terms of how information comes in, how it gets passed from person to person, how approvals are done and how payment is made, you use artificial intelligence to give authority to the claim. It "knows" what needs to be done and can send out queries, whether to information systems or to humans (the client involved in a car accident, an adjuster, whomever), to move things along much faster and more efficiently than happens with today's games of phone tag and all those files sitting in in-boxes until a case reaches the top of a to-do list.

The key is the APIs: That claim needs the information in exactly the form it can handle. So there will need to be a lot of initial coordination, requiring considerable human intervention early on. But once all parties agree, for instance, on how the details on a crash and on insurance coverage will be presented and agree on how authorizations for payment will be exported, then the process becomes an ecosystem. Any piece can be swapped out if a better option comes along, with no disruption to the other pieces, creating the opportunity for what Jamie calls a "flywheel" of innovation. (If you want more, Jamie and his fellow panelists at the International Insurance Society's annual meeting said a lot of other smart things about modularity and innovation in a Six Things I wrote on Dec. 14.)

As I say, reconceiving even processes based on a modular, API sort of view of the world will take time. But I do think we'll see considerable progress this year, and I expect to hear a lot of the insurance version of, "Do you want fries with that?"

Here's hoping we get through these next several rough months and can make some real progress on ecosystems in 2021.

Happy New Year!

Stay safe.

Paul

P.S. Here are the six articles I'd like to highlight from over the holidays:

Big Opportunities in Insurance Ecosystems

Today, insurers succeed by offering products. In the future, insurers will win by providing access to risk prevention and assistance services.

Designing a Digital Insurance Ecosystem

Insurers should emulate Uber, which has an ecosystem of 2,200 microservices. Here are three ways ecosystems provide a competitive edge.

Who Will Buy Direct and Why?

The question for insurers is how they want to address a growing desire by small businesses to purchase online.

Telematics Consumers Are Ready to Roll

Telematics solutions let customers leverage their driving data’s potential to enable discounts and operational savings.

Banishing Busywork: Recruit the Robots

Bots help combat productivity drains that deplete resources and allow employees to focus their time on higher-priority tasks.

How to Leverage Behavioral Science

Coupled with tech advances that improve risk assessment, behavioral science could be the silver bullet in a period of strain from the pandemic.

We started using Tiktok as an experiment. A few months, 50 million views and almost 100,000 followers of our channel (see here) later, we think Tiktok may be the next big thing.

The organic reach of our channel and the demand of our community is so big that we started a never-planned fashion brand (our store here) to answer the magic question: Can you sell on Tiktok?

You can. We aren't selling insurance yet, but we think that could be possible.

Our new brand of “CEO of DIGGI" ("diggi" means “bro” in German) and “Team Diggi” merchandise include your go-to shirt, hoodie, cap, cups and a lot more. We have always believed in TikTok’s potential, but we were shocked what kind of opportunities it provides. If you would have asked me if I believe that an insurance nerd could sell branded hoodies on social media, I would have doubted that severely. But it worked.

We strongly believe that, with attention-hacking strategies, selling insurance on the same platform where the CEO of DIGGI started is also possible. And it’s starting right now. Several of our clients have begun.

The misconceptions

Just recently, I presented TikTok as the next possible big thing for the industry in a board meeting but got stern looks from the board members. One said, “That’s only for young people.” After a brief silence, I asked him how many people his company reached each month. "Maybe 10,000,” he said. I told him that my little brand reached 10 million to 16 million people each month. That is 20% of the population of my home country, Germany.

TikTok is not just for Gen Z's or millennials. A study done by Oberlo showed that its adult users grew 5.5 times in the U.S. in less than 18 months. To say that sales promotion in TikTok is a waste of effort is absolutely wrong. It has a very engaging algorithm based on a combination of factors, not including your number of followers. On TikTok, excellent and relevant content can go a long way.

How did it all start?

We started exploring TikTok as part of our effort to scout for the latest trends. The first videos that I made were about finance for young people, and some of these went viral.

Followers slowly became a community of different ages and backgrounds, all interested in watching and hearing my short video updates. They started calling me “CEO of Diggi” and eventually labeled themselves “Team Diggi.”

The amount of support we received each day exhilarated us. We became excited to manifest the interest of the community in our designs, so we did a dry run of our CEO of DIGGI shop. We haven’t formally announced the store yet on any other platform, but support is spreading quickly. The traffic was so immense that the drop-shipping company we use could not deliver certain products, and we stopped their sale temporarily. 

See also: Want to See Social Media Genius?

We did it! And you can, too!

Yes, you have read it all quite right! It is possible to gain considerable attention on TikTok, and it is fun and amusingly crazy.

Insurers could start by selling branded merchandise. Some have shops, such as Allianz and classical car insurer OCC, but not many insurers actively sell merchandise. 

Then, for our core business, offering protection from the risks of life, we could do the following: create a ton of content on TikTok about relevant topics and questions among the target group, including entertainment and fun, without directly promoting products. Users will start to ask specific questions about insurance. By answering them, we could and should mention our products that help those users to solve the problem they have and provide tailor-made landing pages and sales processes. This can be done by leading insurer and smaller agencies.

Our biggest mistake

Of course, not all went perfectly. By accident, we switched early from English to German content. We have a beautiful community, but we probably will never scale outside the 100 million German-speaking people in Europe. The choice of language is one of several key factors to consider when starting your TikTok channel.

Our presence on TikTok is, in the end, somewhat ironic. We started it as an experiment, became successful by being at the right time at the right place time, investing resources before most did. Now insurers around the world ask us to help them not only with strategy -- but with TikTok.

We are at a moment in history when businesses in all sectors are rapidly reworking how they interact with customers, to see how they can remain a valuable part of people's lives as so much is changing. The pandemic has accelerated these changes, of course. In its massive disruption of daily life, shaking people and societies out of familiar routines and forcing new ways of pursuing their professional and personal interests, COVID-19 has created a new space for changes in behavior.

The insurance industry -- long known for offering peace of mind, stability and trust -- is adapting. In fact, the insurance industry is expected to spend nearly $28 billion annually on customer experience solutions. But many people still lack trust in insurers. Fewer than half of those surveyed in EIS Group's Customer Compass Report say they trust insurers to respond to their basic needs. That is troubling and should be a wake-up call.

Now is the time for insurers to check their headings and set new courses to gain the trust and satisfaction of customers. To start, insurance companies must focus on adjusting two major components found throughout the customer journey -- customer experience and personalization.

Customer experience and personalization -- which have been predominant concerns in retail for some years -- are now only second and third to price when it comes to main reasons why people might switch insurers, according to the Customer Compass Report. A full 28% of policyholders stated that poor customer experience is a "main reason" for leaving a provider, and 20% cited lack of personalization. Getting experience and personalization right is no longer a "nice to have" for insurance providers; it is quickly becoming a crucial element of what insurers offer to customers.

As the world becomes increasingly digitized, opportunities abound. Fitness trackers, for instance, help their users with real-time insight into their health and activity -- but the same data can be fed into a health or life insurance product to provide personal rewards and discounts. A few insurers, including John Hancock with its Vitality program, have been successful with this model. Similar approaches are relevant for automotive insurance, rewarding users when they avoid risky activities or drive responsibly, while giving them options for more extensive insurance if that's what is appropriate for their lifestyle and behavior. 54% of consumers indicated they would consider car insurance they would pay for only when they drive. 60% would consider car insurance that costs less if they drive at low-risk times of the day.

See also: How Insurers Are Making Connections

Customers can be offered multiple ways of communicating, including email, self-serve interfaces and automated chatbots as well as phone and instant messaging. However, consumers have astonishingly low expectations of insurers -- only 23% expect insurers to integrate their experience across mobile, web and in-person channels.

For a truly satisfying customer experience, insurers need to ensure that customers can move seamlessly between those channels as they wish. As an example, a buyer might receive some initial information about an insurance offer via email, then use a messaging app to get further details in a conversation facilitated by a chatbot. A web form would then be pre-populated with the information from that chatbot conversation, and a quote sent. At the same time, a call center would be available where a representative can see an overview of progress, if the buyer has any final questions before completing the purchase. While this example may seem commonplace for many consumer buying cycles, it is not for insurance buyers.

One truth of the digital economy is that people are willing to research and assess which products are right for them. But they are also interested in simplicity and want a "one-stop shop" for products that meet their specific needs. With data and tech accelerating faster every day due to the pandemic, insurers must embrace the challenge and seek all the potential opportunities that can improve customers' lives.

Overview

In a competitive insurance space, an effective customer acquisition program is the key to success. Acquisition has become even more crucial as insurers grapple with changing customer needs and market disruptions. This playbook will help savvy insurers develop and implement a data-driven acquisition strategy through real-world examples from John Hancock, Lemonade, Northwestern Mutual, and more.

Robots, biometrics and smart devices. If you had told me 10 years ago I’d not only have access to these innovative technologies but would use them daily, I’m not sure I would have believed you. Yet here I am, using facial recognition to unlock my phone, log into apps and access my bank accounts. And at Hyland, I am working with insurance organizations to understand, strategize and implement disruptive technologies, including robotic process automation (RPA), which works hand in glove with a content services platform. Much like a smart phone provides a variety of tools and capabilities to streamline our day-to-day lives, a content services platform and RPA can help insurance organizations improve their operations, drive efficiencies and meet their digital transformation goals — all of which helps them thrive in an evolving business climate. 

The insurance industry has often been perceived as being slow adopters of technology, often relying on old processes and systems because they worked, even if inefficiently. What can we say…we’re risk-averse. Then, the insurtech era came along and presented us with different and more efficient ways of doing things. Keeping pace with all the new technologies can be stressful, but these technologies are impossible to ignore. As such, RPA has become a technology of interest because of the massive productivity and customer service benefits it offers.

In key business processes, getting all the necessary information and consolidating it often takes more time than deciding whether to issue the policy or pay the claim. RPA can do the gathering and consolidating without human intervention. 

A human might grow tired of doing the same task of collecting and consolidating data again and again…that’s when things can be missed, and mistakes can be made. A bot doesn’t get tired. And, while the RPA bots handle more tedious, manual tasks, your staff is freed to focus on more creative work that drives customer satisfaction. 

See also: Keys to ‘Intelligent Automation’

Setting an effective RPA strategy starts with structure

A successful RPA automation project relies on a vetted and structured format. To achieve this, organizations need to have control over the information feeding the RPA solution. Many insurers have implemented content services platforms as their information hubs, connecting all content within line-of-business systems and ensuring accurate, up-to-date content that RPA solutions rely on. Once fully connected, RPA and the content services platform provide a comprehensive suite to achieve intelligent automation.

To identify which internal processes, tasks and actions are the best candidates for automation via RPA, I recommend looking for those with the following qualities: 

• Standardization: Look for tasks that have a defined sequence and don’t have too much variance. Ideally, the work won’t change any time soon. 
• Structured data: The information and data that feeds the task should be relatively structured – or organized in a fairly predictable way so that it is easily classified. 
• Rule-based: The task or action should be built on a series of well-defined, objective rules. That means it would not require human interpretation to make a decision. 
• High-volume: The chosen tasks and actions should represent a substantial amount of staff time. Manually transferring data from one source to another is typically a good target. 
• Digital data: A task or action that already involves and relies on digital data is best suited for automation. If the task still relies on physical and handwritten documents, optical character recognition (OCR) and machine learning can be implemented to convert them to digital formats. 

Implementation: Finding the right solution…and provider

How can insurers select a solution, and provider, that best fits their unique requirements? Look for an RPA solution that is scalable and configurable to ensure it meets your needs today and into the future. Selecting a solution that complements an existing content services platform or a vendor that can provide both creates an end-to-end, RPA-enhanced automation strategy — one that is designed to empower your organization to automate, optimize and transform tasks, actions and processes. Look for an RPA solution that helps your organization: 

• Analyze: Look for platforms that quickly, accurately and intuitively analyze tasks and processes down to the click level and automatically document process steps. 
• Build: The RPA solution should leverage a low-code toolset to allow you to quickly and easily create automation opportunities. 
• Run: Efficiency is key here – the solution should efficiently run unattended or attended automations, ensuring maximum bot utilization and scalability.
• Manage: The best RPA applications manage and orchestrate bots with ease, using real-time dashboards for live monitoring and intuitive management. 

When investing in any new technology, it’s also important to have a clear understanding of the total cost of ownership (TCO), which includes both the direct and indirect costs associated with the purchase. Be sure to calculate any additional fees for integrations, consulting, maintenance, training and other costs. 

See also: The Future of Work: Collaborative Robots

Farewell wasted time

The current global health situation has led many insurers to accelerate their digital transformation strategies and new technology. RPA provides a great opportunity to enhance intelligent automation capabilities and further business process automation strategies. Insurers that leverage a digital workforce to complement their human employees provide employees with additional ways to excel at the work they do best, while delivering increased value for the organization.

In today’s data-driven world, bots help combat productivity drains that deplete resources and allow employees to focus their time on higher-priority tasks that build more meaningful connections with the customers they serve.

Insurance carriers that invest in open ecosystems and best-in-class components will experience improved customer satisfaction, lower costs and leapfrog the competition.

In 2020, the insurance industry experienced several years of digital transformation in a few months. The days of monolithic legacy systems, built and maintained in-house for decades, are coming to an end as the market rewards dynamic carriers that leverage application programming interfaces (APIs), microservices and web services to build ecosystems that offer the right experience, to the right people, on the right platform.

What is a digital ecosystem?

A digital ecosystem describes a loose network of connected applications and technologies that act cohesively to meet business objectives. Inspired by ecosystems found in nature, digital ecosystems are characterized by principles of openness, flexibility and self-organization. APIs, web services and microservices often work together to form the framework of a digital ecosystem.

Uber, for example, maintains an ecosystem of over 2,200 microservices. This architecture enables greater flexibility and autonomy, allowing teams to innovate rapidly and swap out specific services without compromising the entire system.

Unlike open ecosystems, closed systems (also known as “walled garden” systems) are typically built and maintained in-house. An example of a closed system is Apple’s iOS operating system, where apps can only be downloaded from Apple’s App Store.

The insurance industry’s next big frontier

According to research firm Novarica, the trend toward digital ecosystems in insurance is powerful, with more than 65% of insurers having deployed APIs/microservices as of Q4 2019. A couple of years ago, insurtech Lemonade made headlines by launching its public API, allowing anyone to offer Lemonade policies through different apps or websites. According to research from Accenture, 84% of insurance executives say ecosystems are important to their strategy. Ecosystems are the insurance industry’s next big frontier for disruption.

For insurers, a digital ecosystem can encompass the entire customer journey, from quote to claim. This frequently involves touchpoints with several applications such as CRMs, policy administration systems, broker portals and third-party data service providers. This barely scratches the surface. For insurers, however, there remains an understandable hesitancy toward adopting open ecosystems.

While carriers acknowledge the importance of adopting innovative new technologies, many find themselves tied to closed systems that struggle to “talk” to new applications. This may result in missed opportunities, declining market share and unhappy customers while rewarding competitors that offer greater flexibility. What monolithic legacy systems do provide, however, is control: governance, security, predictability and change management. These are important concerns in an industry known for its heavy regulation.

For many CIOs, managing a cornucopia of different technologies within a digital ecosystem can seem a tough pill to swallow given security and governance concerns. However, with rapidly evolving customer expectations and a drastic increase in the overall rate of change, greater flexibility is now a must.

A recent survey of European insurers conducted by DXC Technology found that 22% of insurers were already part of an ecosystem providing additional services to their customers, and a further 46% had plans of joining an ecosystem soon. The evidence is clear that the industry is shifting toward greater openness and agility, and insurers must be prepared to commit to the new paradigm.

See also: Big Opportunities in Insurance Ecosystems

Three ways insurance ecosystems drive competitive advantage

1. Optimize Customer Experience

Traditionally, customers had greater loyalty to particular brands, and there were relatively few touchpoints in advance of sales and renewals. Today, customer relationships are more fluid as pricing and plan comparisons have become more transparent, and the customer journey frequently involves several touchpoints across different channels both before and after a policy is sold.

Digital ecosystems enable insurers to optimize the customer experience by increasing the number of touchpoints with customers and by providing new services. Lemonade’s open API is one example, but there are many other opportunities that insurers are seizing to meet modern expectations and grab growth opportunities:

• Chatbots and conversational marketing technologies
• Life insurance applications for managing personal health
• Virtual healthcare delivery
• Partnerships with other businesses to earn digital loyalty points
• Connected smart home and vehicle-safety solutions
• Extensions to manufacturers’ warranties as part of an integrated e-commerce experience
• Advice and estimates provided to customers using voice technology

Insurers that are late to develop their ecosystems will likely lose market share to competitors and disruptors that deliver engaging new experiences.

2. "Componentization" of insurance ecosystems boosts agility and innovation

Open ecosystems that combine discrete components enable insurers to reduce costs and improve agility and system reliability while supporting innovation.

Flexibility is enabled by modularity: the ability to continuously swap out components based on evolving business needs. Similarly, if a single service goes down, it can be replaced without jeopardizing other components.

"Componentization" also forces IT planners to clearly define the roles of different components. This clarifies ownership and makes it easier to identify bottlenecks and efficiencies, improving the quality of services and reducing the overall IT spending.

At Global IQX, we built a componentized platform from the ground up. Our platform enables carriers in the group and voluntary benefits business to select specific components that fit within their digital strategies while integrating with their existing CRM, PAS and other applications. Whether insurers decide to build upon IQX or another platform, the principles of flexibility and componentization must reign supreme.

In the context of digital ecosystems, CIOs and CTOs are curators. Their role is to constantly evaluate and select best-in-class components for each function of the ecosystem within an established governance model. In the digital ecosystem economy, there is also a greater emphasis on maintaining and scaling partnerships with external vendors and data-service providers to remain at the forefront of innovation.

3. Securing Data Dominance

Big data analytics is changing the game in the insurance industry. More data is produced than ever before, providing ample opportunities for insurers. For example, auto insurers are now leveraging the four terabytes of data produced by connected cars each day to provide more personalized experiences to their customers. Similarly, life and health insurers are leveraging connected data from wearables that track thousands of data points such as an insured’s heart rate and sleep patterns.

To achieve data dominance, insurers must build and scale big data ecosystems. These can include analytics platforms, data visualization platforms, business intelligence platforms, artificial intelligence tools and Internet of Things (IoT) technology such as wearables and smart home devices. Global IQX, for example, includes the option for employees to connect their FitBits during enrolment to receive applicable discounts.

Most carriers already have vast amounts of data. New technologies can be leveraged to better visualize data sets and to suggest optimal benefits plan design based on past success factors. When data-protection and privacy laws pose challenges to personalization, artificial intelligence tools can be used to produce synthetic data that does not expose customer information.

Carriers that can most effectively leverage big data will be able to deliver more personalized customer experiences, increase customer retention, cut costs and produce more accurate quotes, faster.

Insurance ecosystems: Seize the opportunity for differentiation

Ecosystems might be the single greatest opportunity for insurers to differentiate themselves in a period of rapid digital transformation. Indeed, according to 2019 research from Accenture, only 5% of insurers can be considered “ecosystem masters.”

See also: Ecosystem-Based Business Models

While the benefits are clear, it is not always easy to develop and scale a digital ecosystem business model. There will be organizational, cultural and technical challenges along the way. Once you establish the foundational platform and define parameters you’ll have the opportunity to improve your service offerings, increase customer loyalty and drive growth in a competitive landscape.

JANUARY 2021 FOCUS OF THE MONTH
Commercial Insurance

 

FROM THE EDITOR

 

Much of the focus on innovation has related to personal lines. That makes some sense: Policies tend to be more cookie-cutter than in commercial lines, and individuals, spoiled by Amazon and other online resources, have demanded a better experience from insurers. But don't sleep on commercial lines. As businesses see what's changing in personal lines, they aren't going to be left behind. Businesses are demanding simpler interactions and more understandable policies, as well as better prices. Insurers are responding with smooth digital communications, augmented by AI; with autofill to diminish the drudgery of forms; with analytics that provide a better understanding of customers' businesses; and even with the Holy Grail for insurance: an ability to help customers foresee and prevent losses, rather than just indemnifying companies after the losses occur. Check out the hand-picked content below and stay up to date on the latest in commercial insurance.

 

- Paul Carroll, ITL's Editor-in-Chief

 

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6 QUESTIONS FOR STEPHEN APPLEBAUM

We asked Stephen Applebaum, Managing Partner, Insurance Solutions Group, 6 things.

What is the biggest change you expect to see in commercial lines in the next 12 months?

COVID-19 related claims, notably first-party property business interruption and third-party liability, will proliferate and create new distractions in commercial insurance once the complete extent of losses is tallied in 2021 and beyond, attracting growing attention from media, regulators and other public watchdog groups, further complicating commercial policy renewals and new business and challenging actuaries, underwriters, agents and brokers. Adoption of policy process automation, including automated underwriting workstations, will accelerate as carriers struggle to regain operating efficiency while managing risk more accurately.

Connected auto, home and business insurance models will begin to see meaningful adoption. Telematics program adoption, featuring innovative partnerships will explode in commercial auto insurance for fleets, especially small business, offering more compelling value propositions focused on driver safety/behavior modification, rewards and fleet and asset management benefits. Commercial property will follow this trend.

Read the Full Interview

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WHAT TO WATCH

The Future of Blockchain Series Episode 2: Usage in Commercial Lines Blockchain has incredible potential to streamline business functions and open up opportunities for a wide range of innovations Watch Now

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WHAT TO READ

	Property Claims: It’s Time for Innovation Those that solve for the dynamics of the many opportunities are likely to be the future industry leaders. Read More
	5 Liability Loss Mega Trends Fines and remediation standards are on the increase, so environmental management should be a boardroom priority. Read More
	How to Minimize Flood Losses Flood warnings have two weaknesses: lack of detailed information on the precise locations at risk of flood and too many false alarms. Read More
	COVID-19 Is No Black Swan There were clear warnings about COVID from credible institutions. The real issue is how we are going to deal with "grey rhinos." Read More
	How ‘Explainable AI’ Changes the Game AI often performs its magic with little insight into how it reached its recommendations. "Explainable AI" makes all the difference. Read More
	New Paradigm for Reinsurance Can the global reinsurance market morph into a new paradigm, allowing a more responsible and sustainable market to emerge? Read More

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WHO TO KNOW

Get to know this month's FOCUS article authors:

Stephen Applebaum	Ciara Brady	Matteo Carbone
Hélène Galy	Jonathan Jackson	Vincent Romans
James Vickers

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Blockchain has incredible potential to streamline business functions and open up opportunities for a wide range of innovations

Blockchain provides a single source of truth that is kept up to date in real time and is accessible (through permissions) by all stakeholders. Having that source creates unprecedented efficiencies by eliminating much of the phone tag and other wastes of time that come with the document-sharing that characterizes so many processes in the insurance industry. This webinar dives into the technology’s use in commercial lines, highlighting production-ready use cases in surety bonds, workers' comp and certificates of insurance. The possibilities are breath-taking.

Watch to learn:

• Where blockchain is about to make a big impact  
  
• The road map for the future of blockchain
  
• The status of active use cases and their testing schedule
  
• How you can prepare to reap the benefits

Don’t miss this free on demand panel discussion.

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Speakers:

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Did you miss the first in our blockchain series? View it here.

In Six Things at the beginning of this year, I joked that it should be dubbed "Hindsight," because hindsight is 20/20. (Yes, I'm aware that I'm hardly the only one to come up with that little chuckle.) Now that 2020 -- the longest, strangest year of my life -- is finally headed into the books, we have some actual hindsight, and I'm delighted to share these examples of cutting-edge thinking, from among the most-read pieces that we published this year.    I hope they continue to provide food for thought as we get set for a year in which we should be able to consolidate the hard-earned gains in innovation and efficiency that 2020 forced us to make -- and even accelerate them.   In the meantime, I wish you all a joyous (and safe) holiday season.   Cheers,  Paul   TOP OF 2020 4 Post-COVID-19 Trends for Insurers by Roger Peverelli and Reggy De Feniks It’s not all gloom and doom. A crisis usually functions as a great breeding ground for innovation. Read More The End of Auto Insurance by Denise Garth The greatest threat may be auto insurers’ continued 100-plus-year-old view of auto insurance as a policy transaction. Read More Blockchain in Insurance: 3 Use Cases by Ivan Kot Many blockchain insurance projects are lingering at the proof of concept stage, but three trailblazing applications are emerging. Read More 9 Months on: COVID and Workers’ Comp by Kimberly George and Mark Walls Does COVID open the door for future infectious disease coverage under workers’ comp? Likely, yes. Read More Should Insurers Use Amazon Model? by Barry Rabkin The short answer is: No. Insurance is very different from the business of Amazon (and Netflix) and must be approached differently. Read More Why Traditional Insurance Won’t Work by Tal Daskal With the sudden shift to remote-only interactions, insurers can no longer dictate the speed of their transformations. Read More 6 Megatrends Shaping Life Insurance by Ed Majkowski and Nicole Michaels The life insurance and retirement market is set for profound change in the next decade. Read More How Insurers Are Applying AI by Tiffany Wang and Jeff Goldberg Insurers should not invest in technology-driven projects; instead, look for use-case-driven projects. Read More Why Work-From-Home Threatens Innovation by Stephen Applebaum Non-insurance competitors such as Amazon, Google, Tesla, Comcast, General Motors and many others are not standing still, and neither should insurers. Read More The Next Wave of Insurtech by Paul Carroll Innovation will focus less on bells and whistles and more on improvements across entire processes and organizations. But incumbents must start preparing. Read More 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