Open enrollment is finishing up, and human resources departments are already in preparation mode for 2021. Traditionally, this is also a time when many organizations set out to find a new insurance broker or begin exploring options.

In fact, 53% of firms offering health benefits reported shopping for a new insurance carrier or health plan, according to the Kaiser Family Foundation's 2019 survey, similar to the previous year's percentage. Some 18% reported changing carriers in the previous year, and it stands to reason that the disruptive events of 2020 will drive that figure higher.

Why? Because COVID-19 has upended the way businesses operate and altered daily life for almost everyone. Employers are exploring how their coverage needs have been affected by the wholesale behavioral shifts occurring around them and by adjustments made to their own business models since the start of the pandemic. How should plan features adjust to serve a work-from-home employee base? How can benefits best answer demand for mental health services that have mushroomed under social distancing and the strains of confinement in isolated or overcrowded households?

The employer's own coverage demands extra attention, as well. How should its coverage change to reflect a smaller office footprint or risks and liability associated with virus outbreaks at the workplace? Do its policies address the elevated threats of cybercrime and damage to company equipment occurring in the homes of a newly remote workforce?

As HR teams confront a host of critical decisions, they want their insurance broker to serve as both an advocate and guide, helping to illuminate the shadowy corners in their risk profile and then walking them through scenarios and coverage options. The need to find the right broker, to align advisers and the organization in the pursuit of human resources objectives, is now mission-critical.

Perhaps more than at any other time in living memory, companies are motivated to comparison shop their markets in the hope of finding the best match to their needs. 

Searches in an Opaque Industry

Most communities host a variety of insurance offices from which to choose, operated by providers, independent brokerages or both, and often with multiple locations. 

The employer's challenge in finding the right broker is to make an informed selection from an abundance of options. As many HR managers can attest, however, there are surprisingly few reference points to help distinguish a brokerage's quality and advantages, or to make comparisons among the insurance businesses in a market. 

Standard internet search engines are a common starting point but often yield disappointing results. The initial list built through a web search will offer scant context, requiring earnest seekers to research each name for specializations and credentials or even to determine which brokerages are still in business. Traditionally, the search for a good insurance brokerage has been a form of research project, often requiring hours of online investigation, perhaps soliciting referrals from brokers and gathering recommendations from colleagues.

See also: Technology and the Agent of the Future

On the other side of the match-making equation, brokerages are typically motivated and eager for the opportunity to inform potential contacts about their successes, affiliations, special training, longstanding client relationships and other distinguishing characteristics. They may regularly purchase local advertising to that effect, in addition to the networking, community involvement and word-of-mouth promotions that insurance professionals have relied on for decades.

Yet these traditional approaches lack consistency and efficiency. Just as there are surprisingly few resources to help an employer search for the right brokerage, there are few forums where an insurance team can clearly showcase its expertise and capabilities for fair comparisons with competing firms.

AI-Powered Alternatives

Technology is poised to transform the brokerage marketplace, however. For instance, our firm, Mployer Advisor, recently launched a platform that promises to bring a new degree of transparency to the insurance brokerage space. Built to help employers search, evaluate and select business insurance brokers and employee benefits consultants, the system draws real-time data across multiple private and public sectors. Powered by algorithms and artificial intelligence, the platform enables users to conduct rapid searches of brokerage data and drill down into results by their size, industry, geographies and product offerings to narrow results.

The Mployer Advisor platform also introduces a brokerage rating system, M Score, which leverages public and private datasets to understand and quantify a brokerage's experience. Scores range 1-5; the higher the M Score, the broader the broker’s experience. While a brokerage cannot directly change its M Score, it can claim its profile and fill in any gaps in its listed expertise, which might trigger a recalculation. The platform also showcases reviews of each brokerage.

See also: 2021’s Key Technology Trends

Millions of Americans rely on employer-sponsored health coverage and benefits obtained through an industry that historically has lacked clarity. For too long, those companies have been forced to navigate the broker selection process with limited resources. Technology, powered by today's advanced algorithms and artificial intelligence, now provides the means for change. It is time to address this deficiency and give employers the transparency and tools they need to find the insurance broker best suited to their industry, company size and product needs.

Across the insurance industry, boards and senior executives are coming to terms with the need to become more digital, efficient and agile. The current environment is prompting insurers to find new revenue streams, boost customer engagement, achieve sustainable profitability and generate higher returns on equity. 

In reimagining their customer engagement models, many forward-thinking insurance executives view ecosystems as essential. Early adopters have already leveraged ecosystems and collaborations with insurtechs to get closer to customers. One carrier created on-demand access to insurance for ride-sharing drivers. Another offered free home monitoring services to its policyholders. A third developed a digital health platform to help customers achieve personal health and wellness goals. 

These programs and business models are helping drive growth mainly because they are centered on leveraging partnerships and shifting non-core capabilities outside of the enterprise. No wonder more insurers now see ecosystems as an effective, flexible and capital-efficient way to grow the business and promote customer-centricity. 

What ecosystems are and why they matter

Ecosystems are networks of companies that choose to collaborate and may produce a higher level of business value than any individual business can produce on its own. 

Typically, ecosystem-based models feature leadership or orchestration by a single company, which provides a platform of core capabilities and participants that offer complementary services and add-on features and functionalities. Consumers engage with this ecosystem, paying for various products and services and benefitting from the value created by the leaders and participants.

Within insurance specifically, ecosystem-based models typically enable interactions across the value chain by leveraging a differentiated infrastructure to allow for better service offerings, richer customer interactions and higher rates of automation. 

See also: New Actuarial Model for Unclosed Business

The journey to ecosystem success

While the benefits are often compelling, insurers may need to have a road map in place to create the most effective ecosystem strategies and business models. The following three core actions can help map out a fruitful journey.

1. Engage insurtechs for stronger customer engagement and increased agility

Insurtechs are integral to the development of successful ecosystems and can foster meaningful innovation across the industry. Insurers have a multitude of opportunities to invest in or collaborate with insurtechs – be it to launch products faster, engage customers in new ways or enhance back-office processes. Consider how Nationwide, a leading U.S. insurer, used an ecosystem model and extensive insurtech collaboration to launch an entirely new digital business focused on millennials within only seven months. 

Insurtechs can help insurers in multiple ways, starting with access to customer-centric technology and analytics and the ability to deliver rich and tailored customer experiences. Typically, companies can derive value from these collaborations by clearly defining strategic imperatives and adopting a test-and-learn mindset.  

Many insurers also benefit culturally from insurtechs’ relentless focus on innovation, agile working style and next-generation thinking. The most fertile opportunities for collaboration and new capabilities often involve the most advanced technologies, including the Internet of Things, artificial intelligence (AI), machine learning and robotics, with potential applications across the value chain. 

2. Scale faster by digitizing existing business models and embracing advanced technology

For years, many insurers have been constrained by inflexible legacy technology. Today’s advanced technology offers meaningful upside for insurers that modernize their core systems. Early adopters are using software-as-a-service (SaaS), AI, machine learning and robotics to enable straight-through processing, self-service and smarter cross-selling. Within the claims function, AI and robotics can deliver faster and more accurate payments, starting with frictionless first notification of loss, which may lead to higher customer satisfaction. 

Similarly, predictive analytics, another game changer for insurance, can allow insurers to make better use of internal and external data for pricing risk. 

By moving more processes and data to the cloud, insurers may effectively engage with ecosystem partners and streamline digitization of key processes. 

3. Enhance the operating platform to increase effectiveness and agility with innovative workforce and sourcing strategies

Strategically, ecosystems allow different participants to play to their strengths. In that sense, insurers can look to enhance their operating model, focusing on core, differentiated capabilities and adopting the right sourcing strategy for everything else. 

One large U.S. insurer determined that a new spin-off company would be able to compete more effectively in the personal life and annuities markets. The new company was designed to be lean, cloud-based and asset-light. Freed from the constraints and complexity of legacy technology architecture and able to engage with a range of partners for non-core capabilities, the company became poised for long-term growth.

Offshoring and outsourcing can drive efficiencies and cost savings across routine processes, freeing human and financial resources to focus on the highest-value activities. Policy administration and call center support are typically the first to be migrated to nearshore or offshore captives. Third-party administrators (TPAs) are often a viable option, while other insurers have turned to SaaS models as an alternative to expensive and risky system upgrades or replacements. 

Ushering in the new age of ecosystems

Given how ecosystems can be an effective go-to-market strategy across industries, thanks largely to success in driving growth and innovation and the creation of relevant products and personalized experiences, the collective and widespread adoption of these models within insurance may be imminent.

In fact, to some extent, ecosystems are already driving innovation at an outpaced scale and speed within the insurance industry. Additionally, such models are helping carriers overcome long-standing challenges related to outdated technology and weak customer engagement. 

See also: The Pandemic and a New Ecosystem

However, the first step for insurers to effectively integrate these models into their businesses may require a shift in management thinking – one that is willing to understand why the whole is bigger than the sum of the parts. With a clear vision for profitable growth, strategic foresight and operational and technology investments and an appetite for significant cultural change, insurers may be able to successfully embark on the ecosystem journey.

There are a few things we may never see again thanks to COVID-19. Free samples at the grocery store, infrequent cleaning of subway cars, cramped conference rooms, packed elevators, communal office pies and cakes, stigma around sick days and working from home, plastic ball pits for toddlers, buffet restaurants, paper menus, shaking (too many) hands and unpackaged dinner mints (okay, maybe those aren’t a thing any more), to name a few. These probably were not great ideas in the first place, at least not during flu season.

There would seem to be equivalents in insurance regulation – wet signatures, certain paper consumer notices, hard-copy regulatory filings, notarization and in-person continuing education, examinations and office requirements. Insurance regulators across the country have temporarily waived, on an emergency basis, certain of these requirements to varying degrees during the pandemic, to allow licensees and regulators to continue to serve consumers consistent with public health concerns. 

Various states have also waived certain legal and regulatory impediments to real-time insurance transactions. For example, states have permitted temporary termination and limited extensions of coverage and mid-term retroactive refunds and other premium adjustments that more accurately reflected underwriting risk during certain stages of the pandemic.

Recognizing some of these measures could be extended post-COVID without any material impact on state regulatory oversight, the NAIC Innovation and Technology (EX) Task Force and the Innovation and Technology State Contacts recently requested comments to support making permanent various “regulatory relief” and “regulatory accommodations” related to innovation and technology. Read comments from this author and other stakeholders. 

This request for comments is part of a larger effort by the NAIC and individual state insurance regulators to modernize various legal requirements and to encourage and facilitate innovation. Among other areas of focus, we’ve seen it in amendments to the NAIC Unfair Trade Practices Model Act concerning rebating and inducements. These changes, once adopted in the various states, will expressly permit licensees to provide certain loss prevention/mitigation and other value-added services to consumers at no charge or at a discount, without violating the anti-rebating and anti-inducement prohibitions. (California, Illinois and New York already permit these practices.) The NAIC’s commitment to facilitating innovation seems genuine and reliable, having completed this work over the past several months despite the pandemic. But the NAIC also needs continuing and consistent support from its individual state insurance commissioner members and their respective staff. And any meaningful and lasting innovation cannot be accomplished without cooperation and equal participation and commitment from the National Council of Insurance Legislators and its legislator members.

These waivers, accommodations and other relief measures are most welcome. By default, 2020 has served as a pilot program of sorts in which such additional regulatory flexibility was tested in many states. The country appears to have passed the test with flying colors—there has been no discernible negative effect on either of the two pillars of state insurance regulation – solvency regulation and consumer protection. 

See also: How to Outperform on Innovation

Can we build back better? In addition to removing unnecessary regulatory requirements and processes, state insurance regulators can facilitate innovation by expediting rate and form filings and expanding file and use and filing exemptions and access to the excess and surplus lines market. These extra steps will more adequately and efficiently address consumer demand for products tailored to their coverage needs in something closer to real time. Recognizing state insurance regulatory resources are already thin, and regulators are already overworked and underpaid, it should not be controversial to suggest industry would provide the financial support necessary for state insurance departments to obtain additional resources, including much-needed expertise around the use of technology and big data in rating and underwriting.

Any requirement, process, delay or extra regulatory cost that does not arguably serve either insurer solvency or consumer protection should be on the table for permanent retirement. It’s time. Before the next pandemic (or extension of this one) and the crisis after that.

Now, let’s share a pie [maybe some mints?] (and a handkerchief) in the elevator on our way to the [holiday?] buffet, and then hold hands and jump in the ball [mosh?] pit!! Who’s with me???

More than enough has been written about the global pandemic of 2020, and now the end is within sight during 2021. But what is not nearly as clear is how different the post-pandemic world will be as a result – in the insurance industry and beyond. These differences will not only be numerous and significant, but many will be permanent. This fundamental change will transform corporate, individual and societal thinking and behavior for the better. A subtle but powerful shift toward greater corporate and social responsibility and empathy in general is underway, and 2021 will be the year of a great global reset.

New Thinking — New Behavior  

Everyone is familiar with the voluntary rebates and discounts that auto insurers have issued to policyholders as personal automobile use dropped dramatically as a result of lockdowns and work-from-home edicts. It is widely anticipated that a significant portion of those employees will opt to continue working from home post-pandemic. Longer-term shifts such as noticeable migration from urban to suburban living will permanently alter transportation patterns, which will affect the insurance industry. The rise in new and different flavors of connected vehicle telematics programs also illustrates the change in consumer preference for dynamic and contextual auto insurance coverages and costs.

Crisis-Driven Innovation

The digitization of the insurance process was well underway before 2020, and adoption has been supercharged by the pandemic and the changed landscape. Health-conscious consumers have embraced contactless everything: virtual claims adjustment, digital payments, online car shopping and more. Life insurance applications hit an all-time record in March 2020 as the spread of the coronavirus acted as a catalyst, prompting people who have put off getting coverage to finally sign up. A percentage of these changes will be permanent as a result of their positive economic impact to carriers and policyholders.

But funding this accelerated digitization and innovation will require severe expense management to offset the new costs. In its new “2021 Insurance Outlook” report, Deloitte Insights’ research states that 61% of survey respondents expect to cut costs significantly – between 11% and 20% – over the next 12 to 18 months. 

Crises create a sense of urgency in business, a necessary focus on fewer priorities and more tolerance for experimentation. This allows organizations to foster and sustain a more innovative culture. To compete with digital players, traditional insurers will build their own new digital businesses. Even after the crisis passes, much of this transformation will have been institutionalized. and the benefits will be permanent. 

In a new report titled “Global Technology Governance Report 2021,” the World Economic Forum and Deloitte examine key applications of Fourth Industrial Revolution (4IR) technologies for thriving in a post-pandemic world and identify governance challenges that these technologies could help to address. These include five 4IR technologies: AI, mobility, blockchain, drones and IoT. 

A Global Community

We now more clearly understand that what happens in one part of the world can affect all 7.8 billion of the world’s inhabitants. That includes not just the global spread of the coronavirus in under 90 days but also man-made causes of climate change, including the use of fossil fuels, the deforestation of Brazil’s Amazon rainforest and many more such tragic examples. This realization will result in a greater sensitivity overall and changing decisions and behavior of individuals, governments, investors and corporations. 

See also: 2021’s Key Technology Trends

Social Responsibility

The financial services sector, including the insurance industry, are at the forefront of adopting new principles that were gradually emerging before 2020 but will move into the mainstream in 2021 and beyond.

• Impact investing refers to investments made into companies, organizations and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return. Impact investments provide capital to address social and environmental issues. 
  • In a July 2020 Milliman report titled “ESG considerations in the insurance industry,” Milliman reported that some insurers are setting standards for their investment managers with respect to how they take ESG factors into account, including Standard Life and AXA.
• Environmental, social and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments.
  • When announcing its Ambition 2025 plan, Munich Re announced an extensive decarbonization strategy, shifting away from coal, oil and natural gas and aims to reduce net greenhouse gas emissions in its investment portfolio by 25% to 29% between now and 2025, before achieving net-zero emissions by 2050. The firm has already ceased to invest in companies that generate more than 30% of their earnings from coal or by extracting oil from oil sands.
• Diversity, equality and inclusion (DEG) refers to the traits and characteristics that make people unique. Inclusion refers to the behaviors and social norms that ensure people feel welcome. Not only is inclusivity crucial for diversity efforts to succeed, but creating an inclusive culture will prove beneficial for employee engagement and productivity. Equality addresses injustices and discrimination and is manifested in gender pay gap, racial discrimination and discrimination based on sexual orientation.
  • Munich Re also shared its ambition that 40% of managers below the board of management are to be women by 2025.
  • Northwestern Mutual, through its foundation in partnership with its diversity and inclusion team, announced a 2020 commitment of $1.6 million to All-In Milwaukee to fund its new Talent of the Future program for Milwaukee-area high school students over the next four years.

Early signs are emerging that we are becoming more concerned and caring about the well-being of our fellow man, beyond just our immediate circle of family and friends. Have you noticed how many virtual business meetings typically open with questions about how the participants and their families are doing? It’s a welcome development and a small but important reflection of how our focus and values are changing, and it portends even greater change as the great global reset emerges.

The world is awash with data, but it's still surprisingly hard to find reliable statistics on what is happening in and around insurance. If you’re creating a business plan, sizing up a market opportunity, creating content or assessing an investment, finding the data to make your case can be hard. Or expensive.

I’ve been building and reviewing business plans for years and come across some great free resources to help me along the way. It was time to catalogue the sources, and having done that I thought I may as well share them with the wider world -- so here they are.

Some of the information is a few years old -- and, as companies increasingly become aware of the value of the data, some of these resources are disappearing behind paywalls. Use with care, but grab the data while you can. Imperfect facts are a better guide to decision making than foggy or fantasy forecasts. I hope some of this data will help you make better decisions -- and convince others to follow your advice.

Health warning: this is quite a long article -- over 2,500 words and lots of links -- if you have a low attention span I suggest skimming until you find something interesting rather than reading every word....

Premium Information

Insurance premium information is one of your data essentials. Understanding how much premium a company is writing, or is being generated by a class of business, is essential for market sizing. If you are building technology or selling data, looking for guidance on how to set prices or on how much your product is worth, then premium is often a good proxy for what you might be able to charge. Using a percentage of premium to figure out what your product may be worth to your buyer is a great sanity check. For example, in my prior life in catastrophe modelling, 1% of reinsurance premium was a good way of validating fees for an individual prospective client. At a country level, it's a good guide as to whether to invest in building models at all.

The most detailed premium information is provided by A.M. Best or S&P, but prices start at around $10,000. If you work for an established insurer or broker, your employer may already be licensing this data, so ask around. Both companies do provide summary and aggregate data to third-party publishers for free, so, if you can’t get the real deal, then the free versions may be enough. I cover these below.

For broad market sizing, try the Insurance Information Institute (III); it has useful headline data, showing for example that U.S. insurance industry net premiums totaled $1.32 trillion in 2019. You will also find the top 10 companies by different insurance sectors here. If you want to go deeper, try the searchable database of the top 100 U.S. insurers at reinsurancene.ws. It has the added benefit of links to recent news about the insurers themselves.

For who is who in global reinsurers, Atlas has a list of the top 50 reinsurers extracted from data published by A.M. Best. Interested in more obscure or specialist data, such as the top 30 insurance companies in Saudi Arabia? Atlas is also a good resource.

Statista is a subscription service but offers a taster dish of free data, such as its pie chart of global P&C premiums by region. A nice added touch is the ability to download the data as a spreadsheet. By the way, keep an eye on Statista's chart of leading insurance brokers, one chart that changes significantly every couple of years as consolidation continues. A Statista license isn’t expensive, but the data is limited compared with what you get from A.M. Best or S&P.

For a U.K. focus, Insurance Post has also just published a comprehensive table of the top 100 U.K. insurers for 2020. The data is behind a paywall, but Insurance Post offers a free trial, so maybe you can try before you buy -- or if libraries open again and you're in London, pop into the City Business Library and get December's print version. NSinsurance has some summary data on the top nine insurance companies in the U.K., which may be sufficient.

Unpicking the maze of the Lloyd’s market is a full-time job in its own right. Lloyd’s publishes some excellent detailed information on each of its 110 syndicates but charges £3,000 to non-members. At one time, this data was also available in business libraries. Atlas has a list of the top 20 syndicates from 2018, which covers those over $600 million annual premium, a good starting point if you are looking for potential clients or wondering who is driving the performance at Lloyd’s.

Comprehensive list by company type

Many of the insurance market associations have full lists of their members. They tend not to have financial metrics, so it's not possible to separate the big from the small, but the lists are useful nonetheless. The MGAA association in the U.K. links to members, as does the American Association of Managing General Agents. Insurance Post published a list of the top 50 brokers in the U.K. in 2016 – there’s quite a bit of consolidation going on in that market, but this is a good starting point. Head over to Insurance Age for the top 100 independent brokers from 2020 by revenue bands. A bit clunky in the way it is presented, but good enough for many purposes. For the U.S., Business Insurance offers you 2018 top U.S. broker firms in a table (no need to squint, click to read).

Insurance coverage

Most of the time, you will want to know what types of insurance different insurers offer. Getting consistent data, by line of business, by premium, by insurer, is hard or impossible without paying for it. In some industry sectors, particularly where there are only a small set of participants, such as marine or cyber, it can be easier to get information. Sometimes you need to come at this sideways, though. Lloyd’s list, for example, provides a list of the top 100 influential people in shipping, so it's possible to extract companies from that. There’s a lot of other free information on that site if you are interested in marine.

If you have good eyesight, the Bank of England’s List of U.K.-authorized insurers is available, as compiled at January 2019. This gives a split by different classes -- albeit at a high level.

Lloyd’s, of course, writes a wide variety of classes of business. You can find out which managing agent writes what business free from the Lloyd’s website. It’s ordered by managing agent, and with about 30 classes in each case requires a bit of data wrangling to figure who does what. If you are wondering who is going to license your cyber tool, for example, then this is not a bad place to start. It's possible to get deeper into the individual Lloyd's managing agents and their syndicates with the report and accounts from Alpha Insurance Analysts. The most current forecast performance of individual syndicates against their business plans is provided by Hampdens.

Insurance spending

To learn how we consumers are spending money, you can drill deeper into insurance spending in the U.K. by downloading the excellent free data from the ABI in Excel – this provides information on average insurance spending, with variation by region, age, coverage type. This is where you will find useful insights such as that the average insurance premium of structure and contents per family, with a head of household age 30 to 50 years old, is £382. Bear that in mind if you are hoping to sell insurers data to improve their underwriting -- or bundle in an IOT sensor. There is not much margin in these numbers to spend on risk selection, pricing or hardware. You'll also find out that in 2018 U.K. insurers wrote £2.7 billion of commercial premium compared with £4.6 billion of domestic insurance premium, and how much they paid out in claims. Fascinating stuff.

Company-by-company level

To really understand what is going on at some point you will want to go deep into the leading insurance companies. S&P or A.M. Best will provide that if you pay. Alternatively, you’ll need to unpick the annual report and accounts. The good news is that these, such as the Aviva annual report, are getting more comprehensive each year as companies are required to provide additional information on regulation and risks. The downside is that also means more work to extract the information you need, and every company report is slightly different so comparing like with like can be difficult.

Country-specific

Munich Re provides some excellent research, with good graphics showing trends and data for countries. This chart is a good example, showing projected premium growth by countries over the next 10 years (and notice that China is forecast to triple in size). Swiss Re through its Sigma research is probably the most comprehensive research into themes and markets with great data and more excellent graphics. Axco provides detailed data on each country, and is well-respected for its research and access in local markets around the world. It is currently offering a free trial of its Market Intelligence database.

Emerging markets and emerging risks

Opportunities for tapping into new markets can open up potential both for insurers looking for new lines and entrepreneurs looking to provide new analytics. The “insurance protection gap” totaled $84 billion in uninsured losses in 2019, according to Swiss Re, so there is a lot of untapped potential. The reason there is a gap, though, is because pricing is tough, aggregation potential is high and premium levels may not reflect the true risk. Five years ago, Allianz forecast cyber premiums of $25 billion by 2020 (from $5 billion at the time), but today they are still lower than $10 billion. In June of last year, A.M. Best published a summary of coverage types, market growth, claims and the top 20 cyber insurers along with information on losses and numbers of policies in force, reproduced here gratis. This article by SpringerLink goes into detail around cyber insurance and is so cheap as to be effectively free.

New industries such as cannabis could hold great potential. According to New Dawn Risk, the legal U.S. cannabis industry would pay about $1 billion in annual premiums if it were insured to levels normal for other businesses, but insurers are generally keeping clear. For a wide range of reports and reliable data on emerging markets, dig around the Geneva Association website.

Funding and acquisitions

We all know that venture funding alone is not the perfect indicator of the quality of a company, but, if you are like me, I’m sure the mega investments get your attention. Investment funding is a good guide as to whether a company can start to pay for your services if you are selling, pay you properly if you are looking for your next job or will be around for a few years if you are a buyer. The go-to source for most companies is Yahoo-owned Crunchbase – much of the information is still free, including funding rounds (where these are disclosed), investors, a handy summary of what the company does and more. Check out, for example, how are our friends at Friss are doing, in the Crunchbase news items, including a link to my recent podcast with CEO Jereon Morrenhof. Be warned, though, that some of the Crunchbase data is out of date or incomplete.

The two best sources I’ve found to track recent funding news, and acquisitions, are the quarterly reviews by FT Partners and the quarterly insurtech reports by Willis (led by Andrew Johnston, my guest on podcast 97). The Willis report is simpler to read but has less information about individual companies. Both are in PDF format. It's good to see a U.K. company leading the field for 2019 Q3 funding (Brit-owned Ki at $500 million) – my podcast with CEO Mark Allan and James Birch of Ki is episode 84 on the Instech London podcast and one of the most popular.

You'll come across various lists of top 100 insurtech companies. Some are of dubious quality (listing companies that have closed is a common indicator of sloppy journalism). Most are useful for identifying what companies do. Don't pay too much attention to the order of the listing; many great companies, particularly those that bootstrap and spend less time marketing, operate below the radar of these listicles.

Insurance rates, up and down

Each of the brokers, Aon, Marsh and Willis, provide its own assessment of the state of the market and how it's changing year to year. Aon Thought Leadership provides a comprehensive library here, and Guy Carpenter offers its Risk Benchmark report.

Other interesting sources

Catastrophe bond issuance is becoming a significant part of the global reinsurance market, with around $100 billion of bonds outstanding. Artemis deal directory provides an excellent directory of all the bonds that have been issued with details of the issuer, size and coverage. If you want a comprehensive view of parametric insurance, and the companies to watch, download our free InsTech London Parametric insurance report. Look out for more of these reports from us in other key areas in 2021, starting with Robin Merttens on e-placing platforms, followed by Mathew Grant (that's me) on location intelligence.

The Cambridge University Risk Centre creates an annual 100 cities risk index, assessing the impact of 24 different natural and man-made hazards. More comprehensive reports are provided on the site for individual areas, such as cyber. The university has strong links with insurance, risk managers in corporations and modelers, and the content is usually excellent. The 2019 report had pandemic as the fourth largest loss, with $49.9 billion GDP at risk.

Coverager used to provide a lot of great free data, but much of it is now available to subscribers only – fair enough, as Shefi and Avi need to get paid for all their great research. There is still some decent information on the website, though, and maybe some of the free content is still in there somewhere. London-based Oxbow Partners do a good job with their annual insurtech 25 companies and have useful data here, but beware of the sell-by date given how fast things change in this space.

By the way, if anyone from VentureScanner is reading this, can you please update your insurance technology map -- the reinsurance category, in particular, is about five years out of date and still lumps in multibillion-dollar global reinsurers with zombie startups. Not all free data is good data.

Going, going, gone…

I suspect we’ll have less choice in a year’s time, so grab this data while you can. This list is far from definitive, so please, if there are any other sources you know. let us all know by adding them in the comments.

Finally, at InsTech London we have over 160 sources of information, currently all still free at www.instech.london with podcasts, interviews, reports and insights. To keep track of what we are discovering each week -- including my weekly "Free Report Worth Reading" and "Other People's Podcasts" -- then sign up here for our hand-crafted newsletter delivered to wherever you are at 7.00am GMT every Wednesday.

A Breakthrough in AI Paul Carroll, Editor-in-Chief of ITL You may have seen articles last week about a breakthrough for artificial intelligence in medicine that managed to be arcane and exciting at the same time. Google’s DeepMind solved a 50-year-old problem related to protein folding — news only for geeks, right? Not so: The solution opens up all sorts of possibilities for understanding the inner workings of the human body and for rapid development of drugs. What I haven’t yet seen explained — amid all the speculation about just how many Nobel Prizes in Medicine will spring from the work — is that the type of AI that DeepMind developed to solve the protein-folding conundrum should also provide breakthroughs in insurance. This type of AI can take dead aim at some core issues in insurance, especially in underwriting and claims...  continue reading > 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 SIX THINGS Smart Contracts in Insurance by Ivan Kot Smart contracts will likely be used first for simpler insurance processes like underwriting and payouts, then scale as technology and the law allow. Read More Time to Try Being an Entrepreneur? by Kate Terry With businesses cutting back, many are asking that question. But there are huge misconceptions about how to think about the issue. Read More Surging Costs of Cyber Claims by Thomas Kang With home-working widespread because of COVID-19, security around access and authentication points is critical. Read More 4 Stages of Dominance in Performance by Kevin Trokey Chances are, you have natural gifts. However, many of the skills you need must be developed, nurtured and maintained intentionally. Read More Vintage Wine? Sure. But Vintage Tech? by Ian Jeffrey Legacy systems that have evolved over long periods can be bloated and far less efficient and cost-effective than more modern technologies. Read More Do Health Plans Have the Right Data? by Denise Olivares Health plans strive to deliver efficiency and great customer experiences and improve care outcomes. But what data are they missing? 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

Insurers are not big polluters in their own right. Nor do they typically have lots of physical assets at risk, except indirectly through investment portfolios either now or in the future when economic transition raises the possibility of stranded assets.

Yet the impacts of climate on insurance operations are only too evident. Losses from more frequent flood events and other climate-related events, such as the wildfires that have ravaged parts of the U.S. and Australia in recent months; changing attitudes toward insuring and investing in high carbon industries; burgeoning regulation and moves toward mandatory climate risk disclosure; and external ESG (environmental, social, governance) ratings that increasingly reflect assessments of climate risk management - are all changing insurers’ risk landscapes.

With the PRA letter to U.K. insurers also setting the expectation that “firms should have fully embedded their approaches to managing climate-related financial risks by the end of 2021,” it’s relatively unsurprising then that climate change has been rising rapidly up the rankings of the perceived most dangerous risks to an insurance enterprise. In the most recent Willis Towers Watson Dangerous Risks Survey, for example, climate change rose from 53rd position in 2019 to 9th in 2020.

On the other hand, the up-side should not be ignored: Climate risk also brings new insurable opportunities and insurance can often be an enabler of innovation, allowing new technologies to be developed as risks are shared. Insurers that are taking steps now to better understand the risks and opportunities and planning for changes in their mid- to long-term strategies will be better placed to deal with them. These insurers will have built up a body of data, tools, analytical capabilities, processes and frameworks, with experience of learning and refinement, to avoid having to play catch up with the rapidly evolving regulatory environment as our collective knowledge of climate impacts grows.

Climate risk is truly multi-dimensional

Much as loss events grab the headlines, climate risk for insurers is truly multi-dimensional (see Figure 1). Potential ramifications that may not be grabbing the headlines yet could have potentially devastating consequences in years to come, such as sea level rise or threats that destabilize fragile states. Equally, new pathways for mitigating climate risk and resilience that don’t exist now could offer respite from threats and open up business opportunities.

The need for a multi-dimensional risk approach simply reflects this expanding diversity of climate risk drivers.

Even if we confine those to the current day, from one angle there are market factors, such as regulation and investors’ lengthening ESG agendas. From another angle, there is the societal pressure to consume less and reduce environmental impact. Then there is the role of science and advances in climate understanding and adaptation, together with mitigation technologies and what these tell us about the need to adapt collective behavior. Notably, many of the world’s central banks and supervisors, through the Network for Greening the Financial System (NGFS), have already upgraded their view on the financial risks from climate change. The risks from climate change are now increasingly seen as having "distinct characteristics," which means these risks need to be "considered and managed differently."

The potential impacts on operations are similarly diverse, not the least whether factors such as public policy and regulation may affect insurability of certain segments. Add in underwriting issues (risk assessment, pricing sufficiency/competitiveness), regulatory compliance (including solvency impact), capital considerations (risk accumulation for example) and emerging risks (and opportunities) – and you have a veritable cocktail of risk dimensions to consider.

ERM implications

In many ways, however, these risks are not new per se; they map onto existing categories of financial and non-financial risk such as credit, market, business, operation and legal risks that insurers have been managing for many years. But taking into account the vagaries of climate, the risks do present new challenges.

Specifically for ERM programs, they raise issues and questions that require explicit consideration:

• Governance, including the board’s role in providing oversight of climate risk responses and defining management responsibility for climate risk and ESG integration.
• Risk identification, identifying the key channels through which climate risks can affect the company and how these are articulated and monitored on a continuing basis.
• Risk appetite, including forming a view as to whether climate risk should be considered as a separate element or part of aggregate risk and how this will be implemented in practice.
• Risk measurement and reporting, including how to incorporate climate risk into financial risk models and reports and deciding on relevant metrics for decision making, a key element of Taskforce for Climate-related Financial Disclosure (TCFD) requirements, for example.
• Investment – how does the investment approach meet ESG objectives and respond to investor pressure to reduce or eliminate funding of high-carbon industries, for example?
• Reputation risk, including identifying public communications needs and a strategy for communicating a firm’s climate and ESG response.

And because all in turn feed through to strategic business considerations such as earnings, product development, long-term direction and acquisitions and divestments, having a solid understanding within the business of the connections between physical, transition and liability risks is increasingly essential. This also means that the risk and governance frameworks need to be holistic and that each aspect cannot be treated in isolation.

See also: An Early Taste of Climate Change Disrupting Insurance

Devil is in the details

Conceptually, this all probably makes sense. Where it starts to get trickier is getting into the long weeds of risk impact and mitigation. For that, quantification is key.

This requires proven analytics tools and methods that are constantly being refreshed to reflect the latest science and predictive climate change scenario datasets and the expertise to provide the context of how business decisions can affect potential futures. Typically, quantification will also entail a collective, systematic and open data collection initiative to capture appropriate data to represent the key risk-related attributes of assets and, equally importantly, to include the valuations needed to feed through into balance sheet and other decision-making views.

Examples of the types of outputs needed will include hazard and climate risk scoring and mapping, determination of hazard- and climate-adjusted financial losses and advanced modeling of current and future climate risks. And beyond the numbers, transparency of models, scenarios and parameters is also key to the credibility and flexibility of the approach.

Our view is that there are some key analytical building blocks in helping build understanding of climate risk. Even if these may represent a kind of analytical nirvana at the moment, principally due to lack of data, there are options. Drawing parallels with emerging cyber risk, many insurers relied on scenario analysis and a sort of risk disclosure statement to not only quantify risks but also to set risk appetite metrics:

1. Identify hazards – review of the existing portfolio for exposure to climate and natural catastrophe perils to establish the hazard levels.
2. Quantify current climate risk for key perils – modeling of the current portfolio of risks, taking into account the vulnerability of assets and the level of hazard with reference to past events.
3. Quantify future climate risk for key perils – modeling of future portfolios of risks for key perils at different times (e.g. 2030, 2050) and climate development scenarios. This should also consider the connections between perils – compounding and cascading risks are difficult to model, but they are the real world.
4. Identify opportunities to mitigate climate risk – identification and assessment of loss drivers and mitigation opportunities to help reduce the financial loss potential of climate change.
5. Determine transition risk and opportunities – evaluation of potential transition routes in line with modeling and taking steps to embed them within the risk framework.
6. Quantify transition risks – through breakdown of the top transition risks by region/climate scenarios.

As they become armed with this sort of information, insurers should be able to identify the regions and perils that are driving climate risk now and how this distribution could change. Critically, this capability will help to quantify and reduce the cost of climate risk and enable insurers to feed the results into reviewing and updating the risk appetite and management frameworks on a regular basis.

Given the evolving investment focus on the "social contract" and sustainable returns, the capability will also be increasingly important for being able to inform potential investors of both the impact of climate change on an organization and steps being taken by the business to reduce its climate impact.

This need has been accelerated by recent regulatory moves focused around reporting and disclosure, including proposals and consultations in some countries to make TCFD reporting mandatory sooner rather than later. Add to this the idea that COVID-19 may accelerate the broader appetite for ESG as financial markets look to build resilience to systemic risks, and there is an even stronger case for enhancing understanding and response.

The upside is that the positive reputational impacts of disclosure, enforced or otherwise, are likely to be more far-reaching than just compliance – working through this process provides a holistic stress test of strategic decision making and company direction.

Eye to the future

So where might the gaps lie? To be truly strategic, thinking about climate risk needs to properly address current climate risks and project five, 10 and 20 years into the future, at least. That means developing the climate trajectory scenarios and metrics (the areas incidentally where insurers say they expect to need most help, according to our TCFD survey) that are increasingly being demanded by various stakeholders to assess a company’s climate transition plans and contribution.

See also: COVID-19 Is No Black Swan

Not all companies will be equally affected, but it’s apparent that, in relatively quick time, climate will have to be a central component of ERM and strategic direction. Those running ERM programs at insurers are uniquely placed to ensure their companies are prepared to meet those rising and multi-faceted expectations of investors, regulators, employees, customers and other stakeholders.

Embedding climate risk into existing frameworks and ensuring boards are taking a strategic approach to the changes that are already happening, and those to come, will put companies in a position to deal more effectively with the threats and embrace the opportunities of a future low-carbon economy .

The unexpected, unprecedented events of 2020 have turned the world upside down. Like every business sector, commercial lines insurance has had to adapt and adjust throughout the year. Many commercial lines insurers have experienced significant financial hits from the pandemic due to increased claims, lower business volumes and the decreasing payrolls of their customers. Large reserves have been set aside, but the continuing uncertainty means that there may be long-lasting negative impacts to financials far into 2021. How much has the economic environment affected insurers' strategies and plans for 2021?

SMA's recent research report, 2021 Strategic Initiatives: P&C Commercial Lines, provides insight into how strategies are shifting. All indications are that the transformation that began several years ago will continue in 2021. However, some significant changes are occurring in strategies as insurers consider the new realities of the business environment, the risk landscape and shifts in the workforce. Prior to 2020, insurers focused primarily on level one transformation, aimed at business optimization and innovation in the context of existing business models. As 2020 approached, leading insurers were moving to level two transformation, emphasizing true innovation via new business models, new products and bolder strategies. Then the pandemic hit.

As commercial lines insurers plan for 2021, there is a movement back to level one transformation. Our research shows that business optimization continues to be the top driver of strategies, as it has been for the last several years. Innovation had risen to become a major reason for tech investment, but it has fallen significantly, and fewer executives cite it as a strategic driver. In terms of major projects, core systems and business intelligence initiatives continue unabated. These foundational systems are too important and have too much momentum to slow down. In addition, all types of digital projects are moving forward, and some are accelerating. And the increased emphasis on improving the agent/customer experience remains critical.

One of the most important things to explore in analyzing 2021 commercial line strategies is how the priorities differ for companies focused on the small commercial market and the mid/large markets. For example, those focusing on both small and mid/large markets still seek growth through their existing products, channels and markets. But insurers focusing on small commercial are more apt to seek growth through new lines and markets than those in the mid/large sector. Another example lies in distribution strategies, where small commercial is further along in expansion plans, while insurers serving the mid/large segment are still in earlier strategy stages.

See also: AI Investment in Commercial Lines

While everyone hopes for a more predictable, stable year in 2021, the prospects look uncertain, at least for the first part of the year. The scaling back on some of the more ambitious plans and concentration on operationalizing strategies from existing projects will serve the industry well in any scenario. At the same time, it is evident that leading insurers still plan to pursue the level two transformation as they tackle bolder strategies in distribution, product, underwriting, claims and operations. There are also likely to be new partnerships and new business models launched into the marketplace in 2021. All in all, the next year will be interesting and require regular monitoring of the external forces and the ability to adapt strategies and plans for success during these turbulent times.

You may have seen articles last week about a breakthrough for artificial intelligence in medicine that managed to be both arcane and exciting at the same time. Google's DeepMind research arm solved a 50-year-old problem related to predicting how proteins fold themselves -- news only for geeks, right? Think again. Understanding how these chains of amino acids fold themselves into 3D shapes, providing the structural components for the tissues in our bodies, opens up all sorts of possibilities for exploring our inner workings and for rapid development of drugs.

What I haven't yet seen explained -- amid all the speculation about just how many Nobel Prizes in Medicine will spring from the work -- is that the type of AI that DeepMind developed to solve the protein-folding conundrum should also provide breakthroughs in insurance. This type of AI can take dead aim at some core issues in insurance, especially in underwriting and claims.

AI is funny. It tends to be talked about as a single thing, but it's really a whole bunch of things, pushing against limits in a wide range of directions. And some of the progress is flashy without being all that important.

For instance, when IBM's Watson defeated the greatest Jeopardy champions in 2011, IBM talked about sending Watson to medical school. After all, if it could beat Ken Jennings, what couldn't it do? But Watson's breakthrough was in natural language processing, a great advance if you want to be able to talk to a computer but little help if you're trying to cure cancer. Similarly, when DeepMind beat the world champion at Go in 2017, the event made for fun headlines but not much more. The AI is terrific for any setting where there are a small number of rules and where the computer can play games against itself ad infinitum to optimize its approach, but how many real-world situations fit that description?

By contrast, what DeepMind accomplished in solving the protein-folding problem is of deep significance because the approach the scientists used -- known as supervised deep learning -- can be applied to so many business situations, including in insurance.

Without getting too deep into the details (which you can find in this excellent piece in Fortune, if you want to geek out like I did), the scientists faced a problem far more complex than businesses face: trying to figure out how a protein folds itself, in the milliseconds after it is created, based on a host of forces. While we've been able to sequence the human genome for more than 15 years now, you also have to know how the string of amino acids folds, because the shape determines so much of how the protein behaves.

Although a famous conjecture in 1972 said it should be possible to predict a protein's shape just from the sequence of amino acids in it, the computation had proved to be too complex. Instead, the shape of a protein had to be determined through a complex chemical process and, often, through the use of a special type of X-ray produced by a synchrotron the size of a football stadium. The process could take a year and cost $120,000, for a single protein.

(I realize I may be giving you flashbacks to high school biology and chemistry and perhaps some unpleasant memories, but I'm just about done with the science and am getting to the implications for insurance.)

What the scientists had going in their favor were two things: a sort of answer key, because of some 170,000 proteins whose shape had already been determined experimentally, and some coaching tips that could help the AI focus on the key variables.

That starts to sound like a business situation, especially, in terms of insurance, in claims and underwriting. If you want to train an AI to take over tasks, you have underwriters and adjusters who can tell you what the right answer is and who can guide the AI's self-training by steering it toward certain variables. Over time, that AI can become as good or better than a human at, say, looking at photos of the damage in a car accident and estimating the damage.

At least, that's how it worked for DeepMind on a much harder problem. On a scale where 100 is perfect accuracy, the previous best AIs scored about 50, well below empirical methods, which scored about 90. But in a recent competition in which AIs predicted the shape of proteins whose forms had been determined experimentally but had yet to be published, DeepMind's median score was 92 -- a computer prediction outscored that year-long, expensive, physical process. Importantly, DeepMind's AI can tell scientists how confident it is about each prediction, so they know how heavily to rely on it.

The immediate application for the DeepMind AI will, of course, be in medicine. There are some 200 million proteins whose shapes haven't yet been determined, and the AI can quickly go to work on those. (The required computing power is only perhaps 200 of the graphics chips used in a PlayStation.) Understanding the shapes will help researchers see what drugs might interact with which proteins, potentially reducing drug development time by years and lowering costs by hundreds of millions of dollars.

However, how this AI moves into the mainstream remains to be determined. DeepMind functions as a research arm of Google, not as a business, and has promised to ensure that the software will “make the maximal positive societal impact,” but you could hardly blame Google if it tried to recoup the development costs through charges to Big Pharma. Only once this AI filters through medicine will it, I imagine, spread to other business problems, such as those that insurance faces.

For me, it's enough to know at the moment that this sort of AI is possible, because that means that a lot of smart people will accelerate their efforts to bring supervised deep learning to insurance. While the wins at Jeopardy and Go were startling, the AI that solved the protein-folding problem will prove to be far more consequential.

Stay safe.

Paul

P.S. Here are the six articles I'll highlight from the past week:

Smart Contracts in Insurance

Smart contracts will likely be used first for simpler insurance processes like underwriting and payouts, then scale as technology and the law allow.

Time to Try Being an Entrepreneur?

With businesses cutting back, many are asking that question. But there are huge misconceptions about how to think about the issue.

Surging Costs of Cyber Claims

With home-working widespread because of COVID-19, security around access and authentication points is critical.

4 Stages of Dominance in Performance

Chances are, you have natural gifts. However, many of the skills you need must be developed, nurtured and maintained intentionally.

Vintage Wine? Sure. But Vintage Tech?

Legacy systems that have evolved over long periods can be bloated and far less efficient and cost-effective than more modern technologies.

Do Health Plans Have the Right Data?

Health plans strive to deliver efficiency and great customer experiences and improve care outcomes. But what data are they missing?

The phrase "WWJD," or "What would Jesus do?", became popular in the late 1800s after the widely read book by Charles Sheldon titled, “In His Steps: What Would Jesus Do?” The phrase had a resurgence in the U.S. and elsewhere in the 1990s as a reminder to Christians of their belief in a moral imperative to act in a manner that would demonstrate the love of Jesus.

Today, as we continue to struggle with coronavirus, economic crisis and social and political dysfunction, I ask, WWYD – What will you do? 

This is the whole you – the individual, the family woman/man, the parent, the breadwinner or the bread eater, the independent or dependent person, the believer or the non-believer, the investor, boss, business owner, employee, consultant, etc. 

The lucky ones and risk takers have options – others must merely play the cards life deals them or commit to a life of dependency. The choice isn’t always ours, yet the consequences too often are our future!

Look at the work-from-home movement. For many, this now is a necessity, for some a luxury and for some a little of both. Most of us are creatures of habit – now that many have gotten into the habit of working from home, will we be willing and able to go back to the office?

Are you prepared for the future as it will be – with transformational change (read, chaos)? Or are you still assuming a neat and clean and comfortable life with incremental change? Tomorrow includes pandemic, social and economic chaos, generational and VALUES transitions, “a house divided,” cultural differences, shifting demographics, the have-nots and the haves with different world visions and personal expectations, etc. 

See also: 5 Transformations for a Post-Pandemic World

The story was told of three GIs under attack in a foxhole. Things looked bad. All three were non-believers. One said, “I think we should pray, but I’ve never done that before.” The others were equally spiritually challenged. Finally, one said, “I never went to church, but I lived next door to a Catholic Church, and on Wednesday nights I could hear them praying in their church hall. Let me try to remember what I heard. Here goes: Under the B number 7, under the G number 48, under the I number 25… BINGO!” 

SMILE!

Then decide: What will you do?