I don't know about you, but if I never hear another client, or prospective client, say they “just want an apples-to-apples comparison,” it will be too soon! 

As insurance agents, we don’t just hate that expression, we also know it's a terrible idea for our clients. They ask for the comparison simply because insurance is complex, and they want to simplify information so they can make a decision and get on with their business. Unfortunately, many in the agent community have cooperated with this poor risk management strategy, which serves neither the client nor the agency, whether for personal or commercial lines. It reduces insurance and risk transfer to a commodity, which it is not and never will be, and results in inadequate or inappropriate coverage that rears its ugly head when a claim arises. 

In the future, agents who cooperate with apples-to-apples quoting will struggle. To understand why, we need only look at how technology is changing the rules of doing business.

Technology-Driven Winners

Technology, driven largely by artificial intelligence, will make it possible for customers to be better-educated, not only on their risks but on the various risk transfer mechanisms available to them. Smart systems will allow both consumer and commercial insurance purchasers to match their needs with available policy coverage in new and unprecedented ways. Also, relentless pressure for improved bottom lines fostered by competition in the marketplace will put an ever-increasing spotlight on the cost of insurance, forcing businesses to make more informed decisions. All of this means that agents must up their game from a technological perspective to prosper. Fortunately, technology will help in at least two ways. 

First, the improving technical tools available to agents will make it easier for them to select specific policy coverage and language for unique client needs. And improving integration between agency management systems and carrier technology will allow better product selection. Within a few years, this integration will increasingly be done automatically, freeing agents' time. Additionally, as insurance companies continue to learn how to analyze the massive data they are collecting, their pricing methodologies will change. It will become easier for them, and their agency partners, to propose bespoke coverage with tailored pricing for smaller and smaller risks.

Second, a technology that can make a profound difference in moving agents away from commoditized selling is virtual transportation systems. Think Zoom, Microsoft Teams and other widely adopted platforms. Dan Sullivan of the Strategic Coach points out that Zoom is really a transportation technology in that it allows you to transport yourself over endless distance, and enables face-to-face communication with virtually no time or expense. 

But Zoom and similar products are merely the Model T version. Within five years, there will be widespread adoption of augmented reality systems that allow full, 360-degree, three-dimensional, almost physical communication between people at any distance. Agents will be able to market much more broadly than ever before. Agents will be able to fine tune and narrow the niche or target markets in which they work. This will result in increased collaboration among agents, clients and insurance companies as all three seek to fine tune not only coverage, but pricing, as well. 

Agents who adopt these technologies and master them will win. They will write the most profitable business and experience the highest growth rates while leaving other agencies using old technology and outdated mindsets to increasingly fight over the less profitable scraps of business. While this future, which is coming rapidly, is exciting, it is also potentially frightening because busy agents often aren't sure what to do to prepare. 

See also: 2021: The Great Reset in Insurance

Preparing for Change

The first thing to do to be ready for this impending future is simple: Master your agency management system (AMS) so that data is uniform and complete. Most agencies, according to all major AMS companies, use only a fraction of the software capabilities already at their disposal. Worse, agency employees are not consistent in how they enter, preserve and manipulate data. This data is the raw material for the customized coverage and pricing model of the future. But if it is not accurate, complete and consistent, that future will be much harder to achieve. So, agents should start now by learning how to maximize the capability that is already present in their AMS and working on data collection and discipline. 

A second cultural objective to consider is implementing and enforcing consistent, careful annual coverage reviews with both prospects and clients. While this is standard practice in many agencies, it is often overlooked or involves only a cursory review of changes in business exposure or coverage needs. In the future, when clients know more about their own risks and coverage options, this won't be adequate. Agents should begin now to increase their thoroughness. 

Third, understand, use and maximize your current carrier’s technology tools. Hartford Insurance Senior Vice President Matthew Kirk said in a recent podcast that using the tools that carriers already provide is one of the biggest opportunities for both agents and companies to reduce costs, increase speed and deliver appropriate solutions. By having serious conversations with carriers about capabilities, agencies can find another way to prepare for a future in which technology increasingly dominates competitiveness.

Finally, agencies should consider adding tools now from those that already exist. For example, many agencies find that tools like Risk Match allow them to do a better and faster job of matching client risk to carrier appetite. And tools like ModMaster allow agents to help their clients understand what drives their workers’ compensation costs and allows for agent/client conversations to move past price — to collaboration on risk reduction and cost elimination. There are many other similar tools in the market now that may be of use to agencies and their specific situation. The key is to become aware of these tools and add them to your arsenal as soon as possible. 

Taking these steps, which appear deceptively simple, will prepare agencies for a future in which the client/agent conversation shifts from fruit comparisons to one that is more like the tailor and his clients while preparing a bespoke suit.

The third quarter of 2020 saw an unprecedented level of global funding into insurtech businesses, as $2.5 billion was raised by firms across 104 deals. Compared with the prior quarter, funding increased by 63% and deals by 41%.

With everyone working from home, never has the true value of technology been more real and manifest in our industry. Six mega-rounds of $100 million or more accounted for more than two-thirds of total funding, including Bright Health, Ki, Next Insurance, Waterdrop, Hippo and PolicyBazaar. Early-stage deal share grew to 57%, up 15 points to pre-COVID-19 levels, bolstered specifically by property & casualty startups. 

With the huge amount of capital being deployed, and the rate at which it is being deployed, one can quite easily see this quarter as clear validation of investors (industry and non-industry) being prepared to put their money where their mouths are as it relates to the pursuit of digital operations – both for pure investment returns and also for securing digital capabilities. 

What is particularly interesting is that a handful of well-established insurtechs have raised an enormous amount of capital (for example, Bright Health raised a seismic $500 million), and brand new entrants with very limited track records have also been successful in raising capital – 73% of those insurtechs that raised seed capital this quarter were raising any form of capital for the very first time.

There is no shortage of capital to support nascent businesses in the less expensive, earlier rounds and certainly no shortage of capital to support well-established insurtechs that are demonstrating their ability to deliver and that are in need of later-stage capital to support scale-up/growth mode. What we are also seeing, however, are the clearest examples of a (relative) drying up of Series B and C funding. Insurtechs struggled to secure funding in the $20 million to $50 million range, relative to the number of insurtechs looking to raise this amount of money. 

This is a very natural evolution of any burgeoning space that requires investment – the novelty and promise of a new firm meets the reality of commercial success criteria. With so many fantastic insurtechs in our midst, investors can be pickier and hold the knowledge that the winners will be relatively few. Similarly, with so much clear reliance on technology, "less risky" bets are been fiercely sought. 

This particular phenomenon is a version of the barbell strategy (a reluctance to support the intermediate growth of insurtechs with additional investment). While we try not to overinterpret any particular quarter and ascribe a theory as to why something might be happening in the short term, this particular issue is something we have been observing for a while – for want of a better description, we are seeing clear evidence of a widening funding gap.

As a result of these investment evolutions, relatively well-known but not particularly well-established insurtechs across the board could be about to face their toughest moment to date. With global markets preparing for one of the largest forecasted recessions in a generation, most insurers and reinsurers will look either to accelerate, conclude or temporarily slow down their ancillary technological endeavors to focus on ensuring that their core business functions are able to operate in this new digital and remote environment. 

Consequently, (re)insurers' appetite to support well-established insurtechs will be much greater than that of insurtechs that still have things to prove. Traditional investors, the principal drivers of the earliest stages of investment, are pushing extremely hard to make sure that they make the most of the digital revolution that our industry is undergoing at scale. This is creating an investment no man’s land in-between. 

The toughest challenge that less well-established insurtechs will face pertaining to this expected slowdown of investment (and most likely partnership) activity is its duration. While this gap is undoubtedly a natural feature of investing, it is also a symptom of the current COVID-19-induced recession. This impending recession could be with us for a good while. Incumbent technology strategies will be clear: surviving this brave new world. The impact of an economic slowdown, coupled with a surge in remote operations, presents less-established insurtechs with a cruel irony: Never has the true value of technology been more real and manifest in our industry, and yet the lifeblood of budding insurtechs that rely on Series B and Series C rounds to scale is, relatively speaking, drying up.

For very well-established insurtechs, the situation could be quite different. The current climate presents a great opportunity to continue to support the incumbent landscape. Those insurtechs that originate remote risks can arguably write more business as their traditional competitors catch up. We are seeing a big push toward digitalization, and well-known insurtechs can play a big role in this process.

See also: The Next Wave of Insurtech

We also expect to observe in-house technological initiatives ramping up as technology and technologists become increasingly pervasive and synonymous with our industry, as (re)insurers grapple with the challenges of remote environments. As such, we will most likely see a growth of organic projects – this could well squeeze certain insurtechs that have, until now, enjoyed a lack of competition in certain areas. We also anticipate that (re)insurers and end consumers will continue to be increasingly better-informed and better-experienced with regard to judging successful engagements with technology.

Arguably, we are on the brink of a very healthy milestone, and this next step should be celebrated by those insurtechs that have a clear digital strategy and those that have been successful in building solutions for our industry. If nothing else, there will be greater scrutiny on what is out there and how technology can be leveraged most effectively. For both incumbents and established insurtechs alike, we expect that the more successful initiatives will be those that can react quickly to the changing environment and those that show a true appreciation for the direction in which our industry is headed.

Policies for a pandemic should begin with a review of existing policies for small businesses. To ensure COVID-19 does not further weaken the economy, insurers should work to increase the flow of goods and services; to infuse businesses with the lifeblood necessary to recover from a plague; and to remove the pox on houses of civic trust and commercial value.

Insurers have a monetary reason to do these things, which is also moral and just, because insurers cannot write new policies or revise current policies if most policyholders go bankrupt. Who, after all, will buy something with nothing? What business will pay premiums when it cannot meet payroll? How will insurers sell policies to business owners if no one stays in business?

According to Sean Andrade of Andrade Gonzalez LLP:

“Insurers should help to keep businesses open, the country employed and goods and services flowing by honoring their policy obligations. If necessary, the federal government should backstop insurers with guarantees of bailouts for coverage of COVID-19-related losses.”

This suggestion is straightforward — and right — because it speaks to the urgency of the present danger. And, yes, if the federal government must intervene, let it do so for the health of the economy. 

“Even with communicable disease exclusions in policies, this should not be the end of the road for businesses that have faced direct losses as a result of the COVID-19 pandemic and the resultant state, county and local health and safety orders,” Andrade says. 

If advocacy of this sort advances a cause of national importance, if the cause is not only important but also indispensable to finding a cure, if the cure for small businesses is economic relief, then the actions of insurers and the government must be fast and certain.

This plan will save small businesses, yes, but it will rescue insurers, too. It will spare insurers from losses too large to endure and too impossible to ignore. It will make insurers beneficiaries in their own right, while delivering benefits to the industrious among a multitude of industries.

See also: AI and Discrimination in Insurance

By these standards alone, insurers have a plan worthy of adoption. Whether alone or with help from the government, insurers have a plan to weather this pandemic.

Without these standards, insurers face hard times while businesses face the worst hard time: a time of foreclosure by banks or forced closure by cities and towns; a time of despair among workers and depression among citizens without work; a time of fear and a fight for survival throughout the land.

Now is the time to prevent this economic end time, to change time by avoiding it altogether. 

Now is the time for insurers to change their policies — to update their policies — to guarantee the time does not come when there will be no time for rescue or recovery.

Now is the time for insurers to do what is necessary, intelligent and wise. Time will neither slow nor stop for insurers to delay a change in policy, but time will record — and history will note — that insurers did what was right.

While many businesses attempt some form of risk management, few have a flawless approach. And because of the dynamic nature of changing markets and other variables, risk management programs need to be regularly updated or they, themselves, become at risk. Risk calculations based on gravity and likelihood are relatively simple, but simplistic frameworks can’t prepare an organization for surprises down the road.

All organizations should undertake an ERM (enterprise risk management) strategy, projecting into their long-term future where risks might arise, but risk management is complicated, and many organizations are making mistakes. Here are five that can cost your business.

1) Reinventing the Wheel

Many organizations try to create their own risk management framework rather than drawing from the wealth of experience already out there. Yes, your business is uniquely positioned, but a strong risk management framework will take contextual variables into account. By attempting to implement your own risk management framework you’re rejecting experience and expertise developed by professionals, leaving yourself exposed to gaps in your framework that allow risk to creep in.

COSO (Committee of Sponsoring Organizations of the Treadway Commission) and AICPA (American Institute of Certified Public Accounts) have both published industry standard ERM frameworks from which your business can draw. Don’t reinvent the wheel when approaching risk management.

2) Ignoring IT Red Flags

Whilst IT departments are not best placed to lead ERM processes, the insight of your IT department is invaluable when building a risk management strategy, so IT professionals should be viewed as equal partners rather than subordinate teams. This configuration empowers your IT department to contribute valuably to the process of risk management.

“IT is uniquely placed to identify metrics and offer data and analysis that could easily be overlooked from other perspectives,” says Ethan McLaughlin, a risk management expert at State of Writing and Boomessays. “If your organization is conducting a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, IT departments are an important place to start examining where risks may be present.”

3) Considering Identified Risks “Managed”

While risks need to be identified before they can be managed and mitigated, too many organizations stop after the first step. By listing potential risks to your organization you have done nothing to reduce their likelihood, and if you aren’t putting robust procedures in place then your strategy is nothing more than a sop.

What’s more, a large proportion of ERM is identifying strategic advantages possessed by your organization. Leveraging these advantages is as important as mitigating risks, and by capitalizing strategically on your position you can place yourself ahead of competitors.

See also: How Risk Management Differs From Insurance

4) Letting Expectations Get Out of Control

ERM does not provide a crystal ball, and sometimes situations unfold in genuinely unpredictable ways. For example, in 2020, risk management frameworks are scrambling to adapt to a radically changed economy in the face of a global pandemic. Judging ERM based solely on its accuracy misses the point.

Don’t let expectations get out of hand, as otherwise faith can be lost in risk management as a whole when the unexpected does occur. This will leave your business vulnerable to any number of things in the future.

5) Keeping Risk Management in-House

We all know that blindspots can appear when we’re too close to an issue, but many organizations consider risk management something that can be handled by internal auditors. In fact, an objective approach is essential, and an external eye can identify risk in seemingly innocuous procedures, something that those with a high degree of familiarity might have overlooked.

“Of course, details are essential in risk management so the in-house team should work closely with external auditors,” says Martin Franklin, a writer at Liahelp and OXessays. "This provides checks and balances that reduce risk and protect your organization in the long run.”

Wrapping Up

Risk management is an essential process that protects organizations from foreseeable fluctuations in future events. Key to the success of risk management are an established ERM, and working closely across departments while introducing an external eye. Putting a positive spin on circumstances is human nature -- and provides a platform for success. Risk management enables this perspective to drive success, rather than leaving you open to catastrophic failure.

The Next Wave of Insurtech Paul Carroll, Editor-in-Chief of ITL At the recent International Insurance Society annual meeting, panelists laid out some provocative thoughts on insurtech, saying that the first wave is ending and describing the outlines of the second wave that has already begun to form. The key takeaways: 1) The industry is focusing too much on what panelists called “the shiny objects,” like artificial intelligence, and not enough on the issues that really matter to customers and to corporate bottom lines; and 2) incumbents will bear much of the responsibility for whatever success the second wave has, depending on how well they retool their mindsets and their processes to absorb the steady stream of innovations that smaller players will provide. The best image: the mullet. That’s how Jamie Yoder, president of Snapsheet, characterized innovation in insurance to date. “There has been so much attention paid to the front end [basically, sales],” he said, “but there’s a huge opportunity to clean up the back.”...  continue reading > SIX THINGS 2021: The Great Reset in Insurance by Stephen Applebaum A shift toward greater corporate and social responsibility and empathy in general is underway, and 2021 will bring a great global reset. Read More Innovating Our Way Out of a Crisis by Michael Byrne Any requirement, process, delay or regulatory cost that does not serve insurer solvency or consumer protection should be on the table for retirement. Read More Ecosystem-Based Business Models by Gaston Messineo More insurers now see ecosystems as an effective, flexible and capital-efficient way to grow the business and promote customer-centricity. Read More 3 Must-Haves for a Self-Service Portal by Yaroslav Kuflinski A hybrid approach to customer service appears to be the most appropriate strategy, smartly balancing self-service and human support. Read More Free Insurance Data You’ll Need by Matthew Grant I’ve been building and reviewing business plans for years and come across great free resources to help me along the way. Here they are. Read More Time to Move Climate Risk Center-Stage by Hélène Galy Insurers face a steep learning curve in embedding climate risk into their enterprise risk management programs, but the climb will be worth it. Read More The Future of Blockchain Series Episode 1: Usage in Personal Lines Blockchain has incredible potential to impact traditional business functions and inspire new innovative opportunities Learn 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

Employees value the insurance benefits their employers provide, but, now more than ever, people need answers and support. Vaccines are on the way, but the world is still facing a once-in-a-century public health crisis, and the economic fallout added a financial dimension to the anxiety, leaving people craving certainty and security. 

A recent Guardian Life report found that a large majority of employees say they’d be unable to afford benefits like health insurance without employer sponsorship. But many employees aren’t familiar enough with their coverage terms, and nearly 40% of employers admit they could do a better job of educating employees about their benefits. 

That’s where insurance providers can step up, form direct relationships with their insured customers and provide relief for overworked HR professionals who are struggling with multiple challenges at the same time. Insurance partners (whether brokers or carriers) can create a situation where everyone wins. Here are five ways to make it happen:

1. Don’t rely on HR for communications access to insured employees.

HR typically handles employee benefits education and gathers the associated paperwork. This sets the tone for the relationship going forward, with HR acting as an intermediary between employees and the broker or carrier on routine questions, unless an issue is escalated. You’ll need to break that pattern to form a direct relationship with customers, getting their attention earlier in the process. 

2. Get consent to carry on a conversation where customers are.

Building relationships with customers is as easy as collecting their express consent for insurance provider outreach, and you can make that part of the welcome message during enrollment. Get permission across all of the channels your organization supports, including phone outreach and digital channels like text, chat, email and social media. 

3. Offer to share the load with HR.

This has been a tough year for everyone, and, in the workplace, HR’s burden is heavier than ever. Companies are reorganizing or completely rethinking how they do business. HR staff who might have been territorial about benefits before don’t have as much time to answer questions about coverage for contact lenses, prescriptions and therapeutics now. They’ll be more receptive to a proposal to put employees in direct touch with insurance providers. 

4. Brokers should assess carriers’ digital support capabilities.

One key factor in developing a direct relationship with customers across channels is the carrier’s ability to support conversations with customers. Insurers have made great strides over the past several years, but some carriers are more active and technically proficient than others. Brokers need to understand which companies are up to speed and which are still building out modern customer communication capabilities. 

5. Carriers should evaluate their communication platforms.

A point related to the one above: Insurers that want to strengthen their individual relationships with customers should take a look at their customer communication platforms. Can they easily handle a variety of channels, delivering a consistent customer experience no matter how the insured contacts the company? If not, it’s time to upgrade those capabilities, taking advantage of application programming interfaces (APIs) and automation. 

See also: 2021: The Great Reset in Insurance

Insurance providers looking for a reset that strengthens customer relationships have a real opportunity here — a chance to improve not only the ways they serve customers and the overall experience customers have when they interact with their insurer, but also their partnerships with the HR professionals who are on the frontline of benefits administration. 

Employers and employees are experiencing significant anxiety and uncertainty right now, with the pandemic having a devastating effect on the health of millions and continuing to disrupt the economy. People crave certainty and connections, and, over the past several months, they’ve become more accustomed to reaching out online and via digital channels. 

Insurance providers that form more direct connections with their insured populations can serve those customers more effectively, identifying their needs in a personalized way and proposing solutions in addition to providing accurate coverage information. They can also help alleviate the burden on stressed HR teams. Everyone wins. So, keep these five things in mind heading into 2021 -- it can be a better year for all of us.

At the recent International Insurance Society annual meeting, panelists laid out some intriguing thoughts on insurtech, saying that the first wave is ending and describing the outlines of the second wave that has already begun to form.

The key takeaways: 1) The industry is focusing too much on what panelists called "the shiny objects," like artificial intelligence, and not enough on the issues that really matter to customers and to corporate bottom lines; and 2) incumbents will bear much of the responsibility for whatever success the second wave has, depending on how well they retool their mindsets and their processes to absorb the steady stream of innovations that smaller players will provide.

The best image: the mullet. That's how Jamie Yoder, president of Snapsheet, characterized innovation in insurance to date. "There has been so much attention paid to the front end [basically, sales]," he said, "but there's a huge opportunity to clean up the back."

In addition to Yoder, whose young company digitizes and automates the claims process in personal lines, the panel consisted of: 1) Chris Cheatham, who founded a startup, RiskGenius, that uses AI to facilitate review of policies and that was recently acquired by a bigger startup, Bold Penguin; and 2) Jeff Berezny, SVP and general manager of enterprise products at Trov, which provides a digital technology platform for incumbents. The panel was moderated by James Maudslay, global head of insurance at Equinix, which operates a huge network of data centers. (You can watch the entire session here.)

Yoder argued forcefully that much of the focus for innovation is on the wrong issues. He said that the sexy part of what Snapsheet does is the computer vision that can analyze photos of damage in a car crash and use artificial intelligence to provide an estimate of the cost of repairs. But he said computer vision saves only maybe 15 minutes on estimating -- in a claims process that can languish for days. He said he can get from a first notice of loss to a settlement in 30 minutes, but the computer vision only works in 1% of the cases. Why not, Yoder asked, focus on the big delays that happen as the insurers for those involved in a crash gather and exchange data, sort out responsibility and get money to clients so they can get their cars repaired?

He said the secret to innovation isn't to have AI do the estimate. "Al will do," Yoder said. [Lest his joke doesn't come across in print: He's saying that Al, as in someone perhaps named Albert, could do the work that everyone seems to want to assign to artificial intelligence and still allow for considerable innovation.]

"The real issue is all the handoffs," Yoder said. The solution is to "have the claim be the captain of the process. It's determining, what can I do myself? It's assigning tasks to vendors, updating the customer, getting an issue to a person when it needs a person." At the moment, he said, claims processes are managed "based on massive diaries and to-do lists, which don't really foster efficient throughput of work. And this is in a piece of the business that is 70% of the cost."

He said it's also crucial to focus on all parts of the process, because so many can yield improvement. "We'd do all this work with carriers to speed their claims, then find they were still cutting paper checks," Yoder said. "It's like you decide to drink a diet Coke but then order a Big Mac to go with it."

Berezny agreed that the beginning of the claims process "is just phone tag. Call me back, call me back, call me back...." So, having AI that manages the process, to reduce the administrative load on people, and that speeds the handoffs would matter much more than AI that prepares an estimate.

He said the second wave of insurtech that is taking shape now will be more about "selling picks and shovels" and not about the "gold rush" that is being capped off now with the huge valuations that Lemonade and Root achieved following their initial public offerings.

But he said the incumbents have a lot of work to do to prepare. While being cloud-based and digital are table stakes for being able to innovate these days, Berezny said, "Insurance just isn't there yet."

Yoder said incumbents need to develop modular processes, based on application programming interfaces (APIs), so companies can have "plug-and-play innovation." Are information systems designed so "you can just plug your innovation in, or are you stuck with a new wave of IT integration projects every time" you see an insurtech whose software could improve your business? "Innovation isn't about a point in time. This is a journey."

He said the need to be able integrate innovation quickly is all the more important because so much is becoming available. Yoder, who until two years ago ran the insurance practice at PwC, said clients used to need to invent a host of capabilities to be able to pursue a digital strategy. "Now," he said, "you can just pull together a list of insurtechs with those capabilities, and there you go. You should get there a lot faster and for a lot less money."

Berezny said he sees the new wave of insurtechs leading to "not just direct but embedded" insurance. As a result, he said Trov is working with mortgage groups to embed home insurance in their sales processes, with new digital banks to offer insurance as part of their portfolios and with affinity groups to include insurance in their dealings with members.

"Insurance needs to meet people where they are," Berezny said. "You can't just assume they'll come to your great, shiny website."

Yoder agreed that embedded insurance has great promise. "People sometimes look for innovations that are way beyond what anyone ever thought of," he said, "but sometimes the opportunities for innovation are staring you in the face."

Cheatham said that, with "the first wave of insurtech coming to an end," he hears a lot about how AI will supposedly eliminate human jobs. But he said the second wave will be about "augmenting humans, not replacing them." In commercial insurance, where RiskGenius and Bold Penguin focus, "There are too many nuances for us to think that we're going to get rid of humans in any part of the process."

He said that innovation in commercial lines moves more slowly than in personal lines, where Trov and Snapsheet live. But he said, "We've shrunk processes from weeks down to days, and we can go so much further. I see a big acceleration going forward.

"We'll catch up to you other guys soon enough."

Stay safe.

Paul

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

2021: The Great Reset in Insurance

A shift toward greater corporate and social responsibility and empathy in general is underway, and 2021 will bring a great global reset.

Innovating Our Way Out of a Crisis

Any requirement, process, delay or regulatory cost that does not serve insurer solvency or consumer protection should be on the table for retirement.

Ecosystem-Based Business Models

More insurers now see ecosystems as an effective, flexible and capital-efficient way to grow the business and promote customer-centricity.

3 Must-Haves for a Self-Service Portal

A hybrid approach to customer service appears to be the most appropriate strategy, smartly balancing self-service and human support.

Time to Move Climate Risk Center-Stage

Insurers face a steep learning curve in embedding climate risk into their enterprise risk management programs, but the climb will be worth it.

Free Insurance Data You’ll Need

I’ve been building and reviewing business plans for years and come across great free resources to help me along the way. Here they are.

ITL FOCUS puts a spotlight each month on a different topic that is driving innovation in risk management and insurance.

A collection of curated content from our vast library, each month's FOCUS includes webinars, featured authors and more to offer a comprehensive look at the topic of the month.

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Today, human support is steadily losing ground to self-service in the insurance industry. For one thing, clients have grown tech-savvy and self-reliant and are willing to solve issues on their own, without waiting to reach a live agent. What is more, as the pandemic interrupted the conventional face-to-face service and support delivery, even the most reluctant customers became favorable toward online channels. Against this backdrop, insurers are implementing out-of-the-box self-service portals or developing custom insurance software. 

Companies should prioritize the particular needs and expectations of their customer base rather than follow the examples of other self-service portals. Insurance customers, as shown by Accenture in its 2019 Global FS Consumer Study, do not feel comfortable resorting to self-service in every case. The majority would rely on digital channels for tasks like looking up information or submitting personal data. Yet, when it comes to complex financial decisions — purchasing a policy or changing the terms of a contract — over half of the respondents admitted they can’t do without human assistance. 

Given these customer behavior patterns, insurers need to invest in providing exhaustive information, features for handling non-critical issues and account management as self-service options, but refrain from trying to automate all customer interactions. Below, we explore the self-service features that suit the set tasks most.  

A knowledge base 

The idea of customer education meets skeptical attitudes from the majority of insurers. According to Deloitte, 33% of surveyed executives believe that clear product information is a decisive factor for new customers, yet only 16% see it helping retain customers. 

In fact, a detailed and consistent knowledge base is not only an essential self-service channel but also a powerful driver of customer satisfaction. Building a centralized repository of relevant insights, like policy comparisons, legal terms glossary, claims application guides and so on, you give customers an opportunity to find answers and solutions quickly and at any time. 

Through relevant and innovative content, a company can also reach a wider audience and build a reputation as a niche expert. What is more, by analyzing the knowledge base activity, insurers can discern customers’ common needs and challenges and come up with solutions.  

For such a knowledge base to prove authoritative and helpful, the content needs to be of high quality but clear and comprehensible to an average customer, free of complicated terms and industry jargon. What is more, the materials need to be reviewed and updated regularly to remain relevant in the face of your evolving service offer and changes in the insurance industry. Therefore, when choosing your knowledge base format, make certain you have sufficient resources to maintain it at a proper level. 

See also: Self-Service Portals Improve CX

AI chatbots

Conversational AI has taken the business world by storm, becoming a staple of customer relations strategy. What is more, customers have come to appreciate chatbots for their efficiency and increasingly prefer to seek their assistance first. These facts, coupled with the opportunity to cut customer service costs, make AI chatbots a self-servicing option worthy of adoption.  

Implemented in your insurance portal, chatbots can tirelessly handle numerous customer queries and come up with relevant advice in each case. Through simple message commands, users can ask the bot to describe or compare insurance plans, find policies matching certain criteria or help address any current insurance policy concern. Unlike human agents, the technology can provide answers and take actions in real time, driving customer satisfaction up. 

Beyond this, chatbots can be programmed to analyze a customer’s profile information and engagement history and supply personalized product and service recommendations or even craft bespoke insurance policies and quotes. 

Yet chatbots are not without limitations. They are not geared toward making independent decisions and can only perform actions defined by the algorithm. This means that complex issues and requests need to be escalated to human service representatives. Moreover, chatbots are still bad at gauging human emotions and expressing sentiment appropriate to the situation, which can unnerve an already distressed customer. 

Claims management

Traditionally, claims management is one of the most cumbersome and confusing journeys for the insured. The customer fills out forms, gathers a lot of paperwork and photo evidence and submits it all in person for the company to process and reach a conclusion. 

But the digital age has altered customers’ expectations in this regard. They want a simple, speedy and transparent process that can be handled remotely in real time. By integrating a claims management engine into your self-service portal, you can meet this demand. 

The solution should allow a customer to make the first notice of loss to the insurer and then fill out and submit the official claim together with all the necessary photo or video evidence. As the information is processed and checked for fraud, the damage is appraised and the settlement is offered, the policyholder has full visibility into the claim status without the need to contact company representatives.     

Inevitably, there can be complex claims that require the agent's on-site damage assessment or the personal presence of the insured. But for many other cases where fully digital handling is possible, self-servicing offers customers the freedom to manage their claims anywhere, anytime and allows them to control the process. The solution proves beneficial to insurance companies, as well, as it frees agents’ time spent on customer communication and paperwork in favor of other tasks, while minimizing human errors in the submitted claims.   

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Summing up: The balance is vital

Despite the extensive reliance on self-service, insurance customers are not yet ready to accept it as the only alternative. As long as there are people who appreciate human touch over convenience and speed, traditional customer support will remain in demand.

Therefore, a hybrid approach to customer service appears to be the most appropriate strategy for insurers. Smartly balancing self-service and human support features and ensuring intuitive access to them all, an insurance company can meet the shifting customer needs and offer an outstandingly rich and dynamic support experience.

This past summer, a group of African-American YouTubers filed a putative class action against YouTube and its parent, Alphabet. The suit alleges that YouTube’s AI algorithms have been applying “Restricted Mode” to videos posted by people of color, regardless of whether those videos actually featured elements YouTube restricts, such as profanity, drug use, violence, sexual assault or details about events resulting in death. The lawsuit alleges that this labeling has occurred through targeting video keywords like “Black Lives Matter,” “BLM,” “racial profiling,” “police shooting” or “KKK.” YouTube says its algorithms do not identify the race of the poster.

Whether the allegations are true or not, the case illustrates AI’s potential for inadvertent discrimination. It is easy to see how an algorithm could learn to use variables seemingly unrelated to race, sex, religion or another protected class to predict the outcomes it was designed to target. In the YouTube example, we could imagine the algorithm noting a link between the mentioned keywords and videos depicting violence, thus adding the keywords to factors it weighs when deciding whether Restricted Mode should be applied to a given video. The algorithm is simply programmed to restrict sequences containing violence, but in such a situation it could end up illegally restricting videos posted by African-American activists that depict neither.

In response to such potential pitfalls, the NAIC this past August issued a set of principles regarding AI. The set includes principles about transparency, accountability, compliance, fairness and ethics. The only way to ensure compliance, fairness and that ethical standards are maintained is for AI actors to be accountable for the AI they use and create — and the only way for these actors to properly monitor their AI tools is by ensuring transparency.

As Novarica’s most recent joint report with the law firm Locke Lord on insurance technology and regulatory compliance notes, all states follow some version of the NAIC’s Unfair Trade Practice Act (“Model Act”), “which prohibits, generally, the unfair discrimination of ‘individuals or risks of the same class and of essentially the same hazard’ with respect to both rates and insurability.” There are many possible insurance use cases that AI and data-based technology enable, like analytics-driven targeting, pre-underwriting, rules-based offer guidance and pre-fill data. Although these capabilities can be delivered without AI, the effort required to do so has historically been prohibitive, meaning that using AI will be essential in the coming years — as will ensuring that AI does not discriminate against protected classes.

A key area for insurers to monitor is the use of third-party data in underwriting processes that may not be directly related to the risk being insured. A good example of this is credit score, the use of which several states have restricted during the pandemic. NYDFS’s Circular No. 1 lists other external consumer data and information sources for underwriting that have “the strong potential to mask the forms of [prohibited] discrimination… Many of these external data sources use geographical data (including community-level mortality, addiction or smoking data), homeownership data, credit information, educational attainment, licensures, civil judgments and court records, which all have the potential to reflect disguised and illegal race-based underwriting.” Insurers must thus have transparency into what factors an algorithm is considering and how it arrives at decisions, and they must be able to adjust the included factors easily.

What will the regulatory future hold? Benjamin Sykes of Locke Lord foresees new model regulations requiring data to be subject to regular calls on underwriting criteria and risk-scoring methods, certification by insurers that the proper analysis to avoid any material disparate impact has been performed and a penalty regime focused on restitution above and beyond the difference in premium to those hurt by an algorithm’s decisions.

CIOs will need to consider how to handle the evolution of various regulations as they arise and their implications for how third-party data is used, how machine-learning algorithms are developed and applied and how AI models “learn” to optimize outcomes. Both the regulations and the technology are moving targets, so CIOs and the insurers they represent must keep moving, too.