Many of you have been in insurance for quite some time, and it might sound amazing to even ask you to consider the possibility that core systems will take a backseat to digital projects.

Because of the pandemic, there was a real pause back in March to reassess what the priorities were. How would core systems need to interact? How would we keep pursuing core systems – as replacements, enhancements, in new roles, etc.? In this digital age, we feel tugs and pulls from the many different priorities that we have. Are we trying to cut some costs? Are we really focused on all of the digital engagement initiatives that we have underway? And where does core sit in all of this?

Well, I would suggest that the idea of the core taking a backseat is a myth: Core systems are not necessarily the drivers of digital projects, but they are the enablers. They are the core – the hub of many of the interactions with data from both internal resources and external resources. The facilitation of transactions connected via APIs is now the critical enabler for digital engagement.

When we look to our internal operations, how effective are our resources, our underwriters, our billing staff or our claims staff? Is the core system enabling them to move forward with their tasks in the most efficient and effective way? How open and interactive is your core system with bot technologies or robotic process automation (RPA)?

We must enable the balance between the digital workforce and the human workforce to be the most efficient that it can be.

There is a plethora of different technologies and initiatives out there focused on external digital projects. We now have digital platforms. We have new user interface (UI) initiatives. We have a whole new way of looking at our interactions with customers and agents.

How does your core system help enable the transactions? Is it open? Does it have access to the APIs? Is it efficient? Can it perform? Can it live in the new world?

We know empirically from our research this past year that core, because of the type of expense it is and because of its criticality to organizations, continues to push forward as a key initiative.

Whether you're sourcing a new system, in initial deployment or in rollout, remember that core initiatives do not take place in a short time. They are significant investments.

We are balancing a new world of digitally engaged platforms with the enterprise core system needs that we have today. There is a fit and purpose for every type of solution out there. Some are meant to expedite product innovation, and others are meant to handle the thrust and bulk of transactions and the volume of significant blocks of business. The important thing is to make sure your core system is working cohesively within your digital structure and enabling you to move forward with the digital projects that you have underway.

See also: Cloud Computing Wins in COVID-19 World

Call to Action:

To counteract the myth that core systems will take a backseat to digital projects, my call to action is to really make sure you’re using a core system that has and can expose their capabilities via APIs – because the core system is going to have to live within the new ecosystems in and of itself.

It is not the entire ecosystem, and it is not the only solution that you're going to have in play. This digital landscape requires much more from core systems from an interaction standpoint. Core systems must be able to interoperate with other technologies and enable interactions, and they must be as open as they possibly can be. We have to open up these systems to make them much more collaborative, available and accessible so we can capitalize on the gains made with cloud deployments, which will enable improved scalability and versatility.

Mass individualization. Is it an oxymoron? Or a new perspective when attracting customers? With a growing number of connected cars on the road and 74% of new vehicles featuring advanced driver assistance systems (ADAS), it's becoming easier to see the differences between policyholders. Increasingly, insurance carriers can understand how and when people drive, as well as the ways vehicles themselves interact with the road and their drivers. The growing variety of advanced safety features affect driving patterns, adding a layer of complexity as carriers navigate pricing, claim frequency and severity. So, how do insurers attract and retain customers when faced with so many new variables, while at the same time delivering a personalized experience to meet growing customer expectations? 

In a word -- telematics. Telematics can unlock an insurer's ability to:

1. Better identify and reach high-intent customers
2. Offer consumers new experiences that meet their expectations
3. Deliver superior customer service in a way that ensures prospective customers feel confident in making a decision

Leveraging Telematics Data to Reach the Right Customers

High-intent customers can arise from common scenarios, such as the purchase of a vehicle in a state where securing insurance is legally required. In fact, for 29% of customers, a new car is what prompts insurance policy research to begin.

To catch consumers’ attention during this critical point, carriers can gain valuable, personalized insights from connected cars, given that the latest vehicle models can chart and share data at every turn (not to mention each brake, acceleration and more). Equipped with this data, carriers can better determine which customers to target and what incentives to offer them up-front, helping customers increase confidence in their decisions and potentially improving carriers' bottom line. 

Going a step further, by having this information readily available at the time of quote, carriers can offer competitive pricing personalized to how an individual drives and to the vehicle the person is driving. This eliminates the need to first educate the prospective buyer about the plus side of usage-based insurance (UBI) and then make the buyer wait weeks or months to learn what discount he or she is being offered. Accessible connected car data can help carriers stand out from the competition, win a customer and simultaneously reduce marketing costs. Because about one-quarter of insurer marketing/customer engagement departments spend all of their marketing budget and time on customer acquisition, these cost savings are critical. 

Offering New Experiences to Attract New Drivers

Today, most consumers navigate a variety of services digitally without a second thought -- from filling prescriptions to buying groceries to banking -- and have come to expect a seamless interaction with almost every brand. The insurance industry is no exception. In fact, according to McKinsey, customers cite convenience as the second-most-common reason for switching brands. As a result, insurance providers may want to adapt to meet customer expectations. The good news is that more than half (51%) of auto insurance marketing professionals list "designing new customer experiences" as their top priority, behind acquiring customers and improving the claims experience.

While driving may be down over the past year, accidents are still occurring, and have actually gone up in severity, possibly because less traffic encourages faster driving. By using telematics, carriers are not only able to detect a crash and provide on-the-scene assistance, but can help resolve a claim faster. These are the types of services consumers are looking for. In fact, 47% of consumers said access to telematics-enabled claims submissions would make them more likely to purchase usage-based insurance. Intuitive, personalized experiences drive so many of our daily interactions; the same should be true for submitting a claim. 

See also: Telematics Consumers Are Ready to Roll

Going Beyond Digital to On-Demand

Just as it has in other industries, digital adoption has allowed insurers to speed and improve existing processes, enabling inspections, appraisals and repair estimates virtually. Beyond this, AI is creating dynamic experiences such as near-immediate total loss vs. repair decisions, repair vs. replace-parts decisions and injury prediction. AI also helps underwriters identify risk at the point of quote. The evolution of data analytics and AI guiding the estimating process will only accelerate efficiencies in operations and customer satisfaction, allowing policyholders to participate in the claims estimating process. Research shows that 36% of customers are dissatisfied with the initial claim filing process, highlighting the significant opportunity for improvement.

For example, by using telematics data that detects an accident, the carrier can reach out to the driver in the way the person prefers -- via text, in-app or through a phone call. The consumer can then decide when and how to respond. From there, the driver receives a link so her or she can take photos of the damage, upload the data, send it back to the carrier, receive a list of nearby repair shops and talk to a live person if there are questions. These improvements expedite the claims process and create a better customer experience: one that is on-demand and mimics interactions consumers have come to expect from other industries.  

Research already shows that 90% of current UBI customers are satisfied with their program, but carriers can take it a step further by using gamification to offer discounts while maximizing the convenience of app resources and more. This concept has shown success in a wide range of industries, helping companies achieve goals for creating awareness, increasing sales, simplifying complex processes and more. The interest, and opportunity, to expand to meet customer needs clearly exists, but to truly take advantage of UBI beyond pricing it is key that carriers differentiate to attract and retain customers. 

Carriers can begin to develop a strategy that allows them to innovate, reimagine the way customers see them and, most importantly, make offerings more personal and more appealing. The typical auto insurance customer requests three carrier quotes during the buying process. When the decision day comes and you’re among those three carrier options, these strategies can help your quotes stand out.

And, now that you’re more attuned to your customers' expectations and their specific needs, you’re putting yourself in a position not just to win on decision day but to increase the likelihood of retention, creating brand advocates who may remain loyal for a lifetime.

2020 was a year like no other, so it should come as no surprise that we aren’t just going to be able to pick up where we left off as the pandemic eases. That is even truer with regard to the high-risk, high-reward world of investing in insurtechs. To use a football metaphor, 2020 was a year full of “broken plays.” Now that conditions are beginning to settle, we need to look at 2021 as a “rebuilding” year; more of a reset than a resumption of what was.

Narrowing Focus; Fewer, Larger Checks

Crunchbase data shows that there were almost 60 insurtech funding rounds in the final quarter of 2020, lower than the 65 transactions in the same period in 2019 but much higher than the paltry 36 transactions in the second quarter of 2020. Equally revealing is that almost half of the rounds in the last quarter of 2020 were for $10 million or more, reinforcing a longer-term trend toward fewer startups receiving higher amounts in a confusing and uncertain business environment. 

In markets like these, investors will become even more pragmatic and disciplined, narrowing their focus to more mature insurtechs displaying measurable traction and to those whose products and services are higher on the insurance industry’s adoption curve. 

Favored Technologies 

According to S&P, the industry faces a combined ratio over 100 in 2001 – the first time in three years – because of the impact of the COVID-19 epidemic. In response, carriers will focus on insurtech that is relatively easy to deploy, that can reduce expenses and that boosts productivity and efficiency. Carriers will increasingly invest in, and acquire, these innovative companies to guarantee prioritization of attention to their needs while also keeping these valuable innovations out of the hands of competitors. Some insurers are reducing pilot program exploration in less certain technologies to maintain their focus on those with shorter-term potential payback.

Favored target technologies include: 

• big data aggregation, analytics and processing 
• no code/low code, which provides access to information management directly to line of business heads
• artificial intelligence, including robotics process automation, computer vision, machine learning and natural language processing
• AI-enabled chatbots
• technologies and platforms that accelerate carrier-broker information exchanges and expand distribution channels to drive business product sales. 
• end-to-end digital claim platforms and ecosystems
• digital claim payment solutions for policyholders, providers and vendors, which are seeing unprecedented uptake across all P&C lines as faster, lower-cost and contactless market demands continue to swell
• telematics programs, which are enjoying broader-based adoption in both personal and commercial lines as new and more compelling business models beyond just pricing discounts are enabling carriers to expand into new demographic segments and increase profitability by reducing customer acquisition, risk and claim costs.    

See also: 11 Insurtech Predictions for 2021

Less Favored Technologies

Insurtechs that are likely to find it more difficult to attract investment in 2021 will be those that require greater implementation effort, create more organizational disruption and carry longer payback periods. These include:

• AI voice
• augmented and virtual reality
• blockchain
• smart assistants
• wearables.

Creative Exit Strategies

Some of the more mature insurtechs may find their investors seeking exits, especially those funded by venture capital firms, which have traditionally had five- to seven-year investment horizons. We should expect to see more strategic acquisitions of these companies by insurance companies, some of which were also early investors through their corporate venture capital arms. 

Recent transactions of this nature include:

• American Family’s acquisition of Bold Penguin (which had recently itself acquired xagent and RiskGenius)
• Aon’s acquisition of small business commercial quoting platform CoverWallet
• Brown & Brown’s acquisition of CoverHound, a digital property/casualty insurance marketplace, and CyberPolicy, CoverHound’s small business subsidiary
• National General’s acquisition of Syndeste, an insurance technology company focused on the flood insurance market using comprehensive data and analytics, before being itself acquired by Allstate
• Prudential Financial acquisition of direct-to-consumer platform Assurance IQ
• and, in two “turnabout is fair play” transactions, insurtech Hippo acquired insurance carrier Spinnaker, and newly minted SPAC Porch acquired insurer Homeowners of America 

Other effective exit strategies for insurtechs will be IPOs (initial public offerings) so long as the stock market remains frothy and investors value future projections more than recent results. Beneficiaries of this channel in 2019 include Lemonade and Root. Hippo is rumored to be exploring the public market, as is Metromile, which is planning to do so through the newly popular SPAC (special purpose acquisition company) vehicle. A type of “blank check company," a SPAC is created specifically to pool funds to finance a merger or acquisition opportunity within a set timeframe. Many investors have been exhibiting extremely irrational exuberance for the SPAC phenomenon, which now includes some specializing in re/insurance and insurtech opportunities. 

See also: Has Pandemic Shifted Arc of Insurtech?

In fact, investment firm Cohen & Co. launched its first SPAC with a specific insurance, reinsurance and insurtech remit in early 2019. Its second re/insurance SPAC has entered into a planned combination with insurtech Metromile, which will effectively take that company public. As is evident, the insurtech species will continue to thrive in 2021 in spite of and because of the pandemic, just with several differences. As in nature, adaptation is essential to survival.

Australia is home to a well-developed workers’ compensation system. Each state determines the design of its scheme, with some being privately underwritten by insurers and others being state-run. Claims across territories vary by industry, injury and complexity. As such, insurers need systems that can enable quality, efficient handling of claims to facilitate the health of injured parties and can get them back to work as quickly as possible.

Approximately three years ago, QBE’s Australia Pacific division, like many other insurers, was running what we would describe as a “process-compliant business” when it came to workers’ comp claims. Leadership wanted to do more to eliminate manual processes and take advantage of claims adjusters’ expertise to get the best result for customers and their employees. They knew technology was the key.

Three Core Issues

QBE had long valued the principle of getting the right claim to the right adjuster based on areas of expertise. But to spot complexities early, claims teams engaged in what I refer to as our manual triage system. Expert adjusters did a cursory look at claims as soon as they were lodged, to identify potential risks based on very simple criteria — in particular, was the employee missing work? Simply put, we needed a better way to get claims routed and assessed from the earliest stages.

Our leadership team also wanted to figure out how to lighten adjuster caseload. As is common across the industry, adjusters may handle as many as 70 to 80 claims at a time. With this volume, it was incredibly difficult to spot the more complex or problematic claims, the ones that require the most attention. QBE was seeking a tool that could surface this information quickly and easily.

Additionally, the team was committed to identifying a better way to conduct quality reviews. Instead of manually selecting which claims to examine, which is very time-consuming, we wanted to add artificial intelligence to the mix.

AI Intrigue

As QBE prepared to set its strategic initiatives for the next few years, data analytics was prioritized. With more detailed information, adjusters and leadership could make better decisions about how to route claims, what required attention and how to ensure efficient, positive resolution.

We considered building a solution in-house but quickly realized that it would take a considerable amount of time and staff resources to construct a system that mapped to our priorities. We started engaging with many of the big data and analytics consultancies, hopeful that they would be able to help. They didn’t fit the bill, either.

See also: COVID-19’s Impact on Delivery of Care

In the summer of 2017, I ran across an article about how CLARA Analytics applied machine learning to workers’ comp claims. The approach, which leveraged artificial intelligence (AI) to identify claim issues and keep them from escalating while helping to close simple claims faster, made sense. As I examined how the models worked and how the software visualizes workload allocation, I recognized that it was the way we wanted to run our business and that CLARA had a sizeable lead over what QBE could build internally.

Clear Benefits

Once we started to get past people’s reluctance to use AI, they began to understand how an AI system could make their jobs easier -- the models not only saved countless hours of manual work but their accuracy made decision-making significantly easier.

The financial benefits associated with an adoption of such software have been significant. The initial reports estimate that product integration will easily deliver a 5:1 return on investment, and that could turn out to be conservative, given that the savings will extend across QBE’s entire workers’ comp portfolio.

QBE has been able to implement a more focused approach to quality assurance. Gone are the random selections of claims. Instead, we take the lead from this new system, which provides a much higher level of confidence that the review team is looking into the claims that need it most.

We believe that quality assurance shouldn’t be driven by art; it should be driven by analytics, which is exactly what we’ve been able to accomplish.

In addition to the new-found efficiencies and claim insights, we have enjoyed the competitive differentiation provided to our sales team. They love being able to showcase how QBE uses industry-leading technology to improve claims operations at multiple levels.

See also: An AI Road Map to the Future of Insurance

Continuing Collaboration

Our partnership has allowed us to enhance the software’s capabilities to create significant advancements for our industry. For example, several months ago, both QBE and CLARA started collecting perception data from each injured person’s claim, such as how they feel about their recovery. Today, we are able to collect and analyze that information at scale.

People have been talking about psychosocial flags for injury recovery for more than 20 years, and no one has solved the problem. But taking in extra data points and using them in a different way or thinking about a problem from another perspective has let us make better decisions about how to route claims, what required attention and how to ensure an efficient, positive resolution.

A ‘Touch and Go’ Moment for the Industry Paul Carroll, Editor-in-Chief of ITL Sean Kevelighan, CEO of the Insurance Information Institute, said there was a moment in 2020 that was “touch and go” for the industry, in the face of the pandemic. He and I were talking in advance of Thursday’s Joint Industry Forum, the III conference that is the first big event of the year and that sets an agenda for the industry (more on the forum in a bit), when he described how close the industry had come to being whacked with potentially hundreds of billions of dollars of business interruption claims. BI claims were obviously a potentially big deal, even though it was clear early on that few policies in the U.S. covered them, and I have seen that the issue faded, but I didn’t realize quite what a close call the industry had. “The industry collaborated more than I’ve ever seen us do,” Kevelighan said. “Everyone has shown that the industry can come together and lead in a very disruptive time.”... continue reading > New Agent Report January 21st | 1:00 PM CT New 2021 agent report shows why agents make mistakes Read Now SIX THINGS 20 Issues to Watch in 2021 by Kimberly George and Mark Walls Presumptions for COVID-19 show how the line between workers’ comp and group health continues to blur. Read More Crowdsourcing 6 Themes for 2021 by Matthew Grant Trust in insurance has been dealt a double blow in 2020 -- and resolving that must be a priority in 2021. Read More Despite COVID, Tech Investment Continues by Matthew Josefowicz and Harry Huberty Interest remains high in technologies like artificial intelligence and big data. Read More Did Biden Just Kill Wellness Programs? by Al Lewis Advisers need to be aware that many if not most clinical wellness programs now expose clients to employee EEOC actions. Read More What 2020 Taught Us on Selling Insurance by Tal Daskal Insurance policies that are sold online need to be packaged and priced differently than those that rely on face-to-face sales. Read More Home Insurance for Those Needing It Most by Rick Huckstep Sugar, a startup in South Africa, provides home insurance even for shacks costing a few hundred dollars, and without a street address. Read More MORE FROM ITL How AI Can Transform Insurance Correspondence Complimentary On Demand Webinar, sponsored by Messagepoint Join Kaspar Roos, CEO and founder of Aspire, and Patrick Kehoe, EVP Product Management at Messagepoint, to learn how organizations can overcome the challenge of transforming communications by combining best practices and AI-powered approaches. Watch Now January's Topic: Commercial Insurance Much of the focus on innovation has related to personal lines and that makes some sense: Policies tend to be more cookie-cutter than in commercial lines, and individuals, spoiled by online resources like Amazon, have demanded a better experience from insurers.  But don’t sleep on commercial lines. As businesses see what’s changing in personal lines, they aren’t going to be left behind. Businesses are demanding simpler interactions and more understandable policies, as well as better prices. Take Me There GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started Partner with Us We’d love to talk to you about how we can improve your marketing ROI. Learn More SPREAD THE WORD Share Share Tweet SUBSCRIBE TO SIX THINGS

To assess whether digital transformation is stalled because of the pandemic, we really need to think about transformation from past investments, the current state in the context of the pandemic and the strategies planned for 2021.   

Well, 2020 was quite a year! I want to make two key points that we've learned during the pandemic. One: The insurance industry is financially strong. It is weathering the pandemic, just like we've weathered other natural and manmade disasters over the years. And we should all realize how blessed we are to work in such an amazing industry! The second: The pandemic has brought real clarity to digital engagement and digital enablement across personal and business life. It has highlighted where insurers have made great investments in the past and where our gaps are. The gaps came into sharp focus the minute we went into lockdown and everyone started to work virtually. We saw all the paper: the paper checks, the correspondence and the forms still coming into the organization – along with a lot of paper and paper checks going out of the organization. We also saw a lot of manual workflows, mainframes requiring people in the data centers and our lack of providing digital experiences for our policyholders, agents, brokers, claimants and employees.  

And so, as we look forward into 2021 and consider the statement “digital transformation has stalled due to the pandemic,” we can see that it is a myth. The reality is that almost all insurers believe that digital transformation is essential. It is critical to all business strategies and plans. And this belief has only been reinforced by the pandemic. In fact, our experience in 2020 has actually accelerated plans and strategies for digital transformation. The difference is that the strategies and plans are being reshaped and reprioritized as a result of the revealed gaps. Most insurers now have a new list of projects: digital payments, improved self-service capabilities and updating the overall portals for starters. If anything, the list of projects has increased. Another thing that affects our digital strategies is the new clarity around operational efficiency and the customer experience. And so, as we look into 2021, digital transformation strategies are really going to be more about growth in operational excellence, optimizing operations and improving the customer experience, and less about innovation and transformation. So, it hasn’t stalled. We are going full steam ahead into 2021.  

See also: The Rules of Digital Transformation

Call to Action: 

The call to action for digital transformation is to ensure that your digital strategies are reshaped in response to your gaps and needs, and that they are all-encompassing in terms of optimizing operations and customer experience. Digital transformation needs to be part of your overall business strategy and should be integrated with culture change, customer experience and operational excellence. And priorities should be set using multi-pronged approaches, with both outside-in and inside-out perspectives. 

For more information, watch our 30-minute on-demand webinar, Myth or Reality: Strategies for Insurers in 2021. 

It seems there are more insurtech predictions than ever for P&C insurance in the new year. Some of my favorites include; rise of the ecosystems, embedded insurance (in just about every product and service) and big strides for AI and telematics.

Ever since the insurtech wave began, massive disruption has been anticipated. Several startups have done just that. Some have enabled efficiency gains through automation. Others have made the customer experience easier and faster, from shop to quote to bind and everything in-between. Usage-based insurance solutions are changing how insurance is consumed through pricing based on usage amounts or personalized degree of risk. All sorts of new companies are simplifying insurance policy language or organizing information in one place. Many intend to create insurance-as-a-service, or proactive insurance.

Despite all of these advances, the insurance model itself still remains reactive. The claims model is probably the most reactive part of insurance; services generally do not begin until after a claim is made. And there is a five-day average lag from time of loss until a customer initiates first notice of loss (FNOL). The promise of telematics crash detection is beginning to change this dynamic, allowing for immediate claim services. GM’s recent OnStar automatic crash response is one of numerous telematics concepts that detect and engage proactively. However, adoption rates and insurer activation are currently very low.

Should insurance prevent, detect and mitigate losses proactively?  

Smart home sensor technology offers a similar promise by detecting and preventing losses. Water shut-off and leak detection systems can both identify and prevent damages. Distracted driver prevention and driver coaching technologies can avoid accidents altogether.

So, should insurance go beyond traditional reactionary services and serve to prevent, detect and mitigate losses proactively? The short answer is usually a resounding, yes. After all, fewer losses are of mutual benefit to both customers and insurers alike, not to mention for society at large. There are some pockets where insurers are already helping mitigate losses, but there are several barriers to broader prevention and detection remaining.

Barriers to proactive insurance models

Loss control is a well-leveraged capability by insurers mainly in commercial lines. Safe work places for workers compensation claim avoidance, fire safety prevention and fleet driver programs are a few examples. In contrast, personal lines have been underserved because safety programs are costly to administer. Loss prevention for personal lines has been centered on risk selection and pricing, thus underwriting. Home and auto lines loss prevention efforts have paled in comparison, focused on issues such as FAQs or free replacement of washing machine supply hoses. Such efforts have not demonstrated meaningful benefit.

Insurance company discounts have not kept pace with customer expectations for smart home sensors. Costs to install are another barrier. Although usage-based insurance can generate significant savings, much of the marketing attention is devoted to switch-and-save or attracting new customers. This may be just one reason for low adoption rates, often around 5% of an insurer's portfolio. Tackling the issues of discounting, promoting or explaining technologies and addressing privacy concerns could go a long way to achieving higher adoption. And advancing technologies like telematics to coach and guide drivers to prevent accidents calls for much more customer engagement.

See also: How to Accelerate Innovation: Pairing

The road to claims-as-a-service has some deeper issues to resolve. Crash alerts can only bring value once false positive alerts are screened and customers are thoughtfully and carefully engaged following a detected incident to ensure that making a claim is warranted. Meanwhile, FNOL contact centers are designed and staffed for inbound phone calls, dispensing only generalized information while gathering information until a licensed adjuster is ultimately assigned – which can be a day after FNOL or longer. Even though loss intake can happen around the clock, getting access to decision makers is often sequenced to the dissatisfaction of customers. 

Insurance claims processes actually limit the degree of guidance and advice due to risk concerns. Yet, a proactive model calls for addressing urgent and emergency needs regardless of reporting an FNOL. So, there are a host of risk tolerance, structural, skill and mindset barriers for incumbent insurers to resolve.

What’s next?

The future of insurance as-a-service, especially for claims, requires an action-based model that leverages on-demand support vs. generalists, guidance vs. unbridled options, rapid response vs. assignment hand-offs and on-demand experts vs. sequenced specialists – all of which are inherent in today’s claim process. Discounts, technical support and expert care will go a long way to increase adoption, and some are beginning to materialize, which is good news.

Perhaps 2021 will be the year for insurance-as-a-service to take another step forward.

If you think insurers have issues with their mishmash of legacy technology platforms, take a look at the rat's nest of letters, emails and other documents that languish in an array of systems and formats.

As insurers deal with the fallout from COVID and dedicate themselves to improving the customer experience, many still shy away from refreshing their correspondence because they worry it takes too much time, effort and money. Artificial intelligence can now solve the problem by using "content intelligence" to quickly sort through even ad hoc correspondence. AI lets firms modernize their correspondence with messages and branding that are consistent and with the right reading comprehension level, no matter how the company touches a customer -- pleasing customers while lowering costs.

Join Kaspar Roos, CEO and founder of Aspire, and Patrick Kehoe, EVP Product Management at Messagepoint, to learn how organizations can overcome the challenge of transforming communications by combining best practices and AI-powered approaches.

Watch this webinar and learn how to:

• Automate key steps to reduce the time required to migrate and tag content by 99%
• Identify outdated, duplicate, and similar content for refresh and consolidation
• Optimize legacy communications for brand, reading levels, and sentiment

Don't miss this free on-demand webinar.

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After a decade of criticism from me (here on ITL, in particular) and a growing number of others, workplace wellness died last week. It had been on life support since Jan. 7. 

The bottom line: Brokers and advisers should now be aware both of the professional risks they are taking by pitching clinical wellness programs and of the career risk they are subjecting their clients to by encouraging use of the programs. Most clinical wellness programs now technically violate the Americans with Disabilities Act (ADA). 

You might be wondering why this is the first you are hearing of it. That’s because this is new news, as of last Thursday. Here is a timeline:

• Jan. 16, 2018: Federal court case “vacates” the expansive, corporate-friendly EEOC rules allowing large incentives and penalties used in clinical wellness programs and directs the EEOC to write new rules accordingly.
• July 16, 2019: AARP and unionized Yale employees sue Yale for imposing such penalties. 
• Jan. 7, 2021: The EEOC finally writes the new rules. As directed by the court, these rules no longer allow employers to subject employees to large forfeitures (penalties or foregone incentives) for refusing to submit to clinical wellness programs. The three Republican commissioners, at the request of the U.S. Chamber of Commerce and Business Roundtable, carve out a large loophole for increasingly unpopular and possibly harmful outcomes-based programs. (Those are the programs where you get heavily fined for not losing weight.)
• Jan. 8-20, 2021: The dog doesn’t bark in the nighttime: The Federal Register does not publish the proposed rules for public comment. The absence of this routine step suggests these rules are already generating blowback.
• Jan, 21, 2021: The Biden administration shakes up the EEOC, promoting the two Obama appointees, both of whom have strong pro-employee biases, and demoting the Republicans.
• Jan. 21, 2021: The Biden administration freezes all proposed rules from every agency from publication for comment in the Federal Register. This indicates a thorough realignment of priorities is in the works.

Here are three ways to know that this timeline means the end of programs that, like most, focus exclusively on risk assessments, screens and coaching.

First, the ADA requires that clinical inquiries and exams be “voluntary.” Absent rules defining “voluntary,” incentives can’t be imposed. Very few employees would voluntarily allow their employers to hire unlicensed wellness vendors to “play doctor,” especially with no law proscribing the vendors’ use of that data. (HIPAA does not apply to standalone wellness companies.)

Second, the new EEOC leadership alignment eliminates the chance that the EEOC will re-publish the existing rules. If indeed the EEOC publishes new rules once new rules are green-lighted for publication in general, the agency will specifically allow only minimal incentives. Penalties? No way.

See also: 3 Tips for Increasing Customer Engagement

Third, that 2019 Yale lawsuit has yet to be decided. The judge has been sitting on the summary judgment briefs for more than a year now, presumably waiting for the rules to be promulgated. With no rules, Yale is now in clear violation of the ADA, so the decision should come down within weeks -- in favor of the plaintiff employees. This decision will resonate with class action attorneys everywhere, as punitive programs will be “low-hanging fruit” for them. The decision will unleash a flood of claims by 2022.

Here’s how to keep your clinical program intact

The rules – and the EEOC’s jurisdiction in general – apply only to clinical programs. You can still offer activity-based programs and still tie up to 30% of insurance dollars to those programs. The reason? Activity-based programs are governed by the Affordable Care Act (ACA) only, not the ADA. They include physical and mental activities, as well as seminars, quizzes, volunteer work and more.

The difference between the two program types is best illustrated by an example: You can make employees wear FitBits to track their steps, but you can’t track their pulses. (It turns out tracking steps doesn’t accomplish anything anyway.)

There is a way to maintain your clinical programs. (Why anyone would want to is a different issue, covered at length here.) You can offer them side-by-side with your activity programs but allow employees to fully satisfy program requirements and earn the full incentive (or avoid the penalty) without submitting to any clinical test or inquiry. 

Suppose an employee needs 500 “wellness points,” and a risk assessment and a screen are worth 250 apiece. “Lunch ‘n’ learn” nutrition seminars are worth 50 points each, but employees are currently capped at 5 such seminars. That program would be noncompliant. Raising the cap to 10 or upping each seminar to 100 points solves the entire problem by allowing employees to earn the full incentive by sitting through all those sessions.

Employers concerned about the time commitment for something like that could offer health literacy quizzes instead. [Note: My company offers those.] This simple one-page flyer checks the ADA/EEOC compliance box by offering both quizzes and conventional screenings. It also encourages the highest-risk employees to choose screens, while a large majority of employees would learn more about health, healthcare and health benefits through quizzes.

As a belt-and-suspenders protection against EEOC exposure, Quizzify also provides indemnification to employers. With or without health literacy, your own wellness vendor should reconfigure its program to both comply with the ADA and to indemnify you and your client if it doesn't. 

Especially with indemnification, expanding the number of activity-based offerings to allow employees to hit their points target while avoiding clinical programs solves this new problem. The challenge will be to make those non-clinical activities useful.

If you want to explore this topic further, Insurance Thought Leadership is co-sponsoring a seminar on this very topic on Monday, Feb. 1 at 1pm EST. You can register here.

After the roller coaster of 2020, it’s a brave soul who’s willing to commit to what 2021 will look like. But running a global network of talented and successful people means that Robin Merttens and I have been able to dip into the collective wisdom of 20 of our friends and supporters from InsTech London.

In an hour-long Zoom call, we were able to crowdsource what is top of mind from 20 of the best people to predict the year ahead – those who are part of making it happen.

One investor, two reinsurers, three consultants, five Lloyd’s syndicates, six growing insurtechs and three others – all that was missing was the partridge and the pear tree.

You can now get the audio highlights (scrubbed and polished to perfection by the ever patient Peter Roach), and my match commentary, of the event on the InsTech London podcast episode 118. What follows are the dominant themes affecting risk and insurance that our panelists recommend you look out for -- and why. We agree with Robert Lumley of Insurtech Gateway, though – the skill of making good predictions is about following the direction of travel.

Here it comes - from some of the sharpest minds at PKF, Munich Re, Swiss Re, EY, PWC, Deloitte, Brit, Talbot, Convex, Wakam, Chaucer, Concirrus, CyberCube, Blink, Riskbook, Flock, Zego, Insurtech Gateway, Voice of Insurance, Miller and FintechOS

Insurers must regain trust -- consumers want more certainty

Charlie Burgess runs Munich Re international specialty business, and his responsibilities now include Munich Re Digital Partners. A major issue for Charlie is that trust in insurance has been dealt a double blow in 2020 -- and resolving that must be a priority in 2021. The rejection of COVID-related claims has accelerated the need for people wanting more certainty between their loss and receiving a payout. This, according to Charlie, will drive more interest in new types of insurance such as parametric. We agree, and wrote at length on this in our October report "Parametric Insurance - 2021 outlook and the companies watch."

The use of "price walking," the practice by which insurers charge their existing customers more than their new customers, has also undermined confidence in the market. Look out, Charlie says, for a “short-term rush to offer great deals by insurers to win new customers before the new regulations come into place.”

Ultimately, though, the impact will go deeper, he predicts, fueling the rise of trusted brands from outside insurance stepping in to replace traditional insurance brands, particularly in personal lines insurance. 

We shouldn’t be too despondent, though. Nigel Walsh, partner at Deloitte, reminded us that the insurance industry did pay out billions of dollars in COVID-related claims in 2020. Nigel predicts (or should that be hopes?) that 2021 will be the year everyone starts to love insurance – and that the industry will finally fix its complicated wordings.

By the way, Nigel got his homework in early and has already published his predictions for 2021 - and I learned what gets Nigel going when we spoke earlier in 2020.

See also: 2021, We Can’t Wait to Get Going!

Better integration of technology, better standards and Lloyd’s Blueprint gets underway

By far the most popular prediction across our panelists was the rise of the platforms – our experts expect to see meaningful developments in the use of platforms, integration between technology and, in London, the progress and implementation of Lloyd’s Blueprint Two. John Needham, partner at PKF, and our sponsor for the night, is still hearing concerns from insurers he talks to about the lack of ability to integrate with the new tools that are available, and "frustration that they are having to choose a mainstream platform to play it safe." Could this change in 2021?

Charlie Burgess welcomes the direction Lloyd’s is taking with its Blueprint but warned that implementation will take longer than planned. Charlie expects "a flurry of automation or digitalization among the Lloyd’s of London market players, both addressing the plumbing and digitalization in whole or some of the more complex risk products."

Chris Payne, partner at EY, sees the development of a “more pronounced two-speed architecture model” as established companies grapple with overcoming legacy. According to Chris, people are “waking up and realizing that they want something leaner, where they can stand up new ideas or quickly test them, and then decide how they want to launch, whether through a new platform or more easily through their main platform."

Christian Kitchen, head of technology and innovation at broker Miller, is also bullish about Lloyd’s: "It's going to crack it this year. Blueprint Two is going to be exactly what we've always wanted. The core data record and the digital spine is going to be the framework that all of us build our new solutions on."

Christian went on: “Now will be the chance for the agile organizations out there, including some of the brokers, to take what Lloyd’s is doing and build out the solutions and the end-to-end journeys that we've all been waiting for." Christian is also optimistic about the opportunities this creates for what he refers to as the "real insurtech companies," to start focusing on "groundbreaking solutions" as opposed to continuing to try to find work-arounds for legacy systems. 

Karl Lawless, sales director at FintechOS, adds: “Five months of lockdown was five years of digital transformation, and I only see that accelerating next year." Karl believes the age of the large transformation project is over. "Rather than insurers committing to the traditional big-box solutions that cost tens of millions of pounds and take three to five years to deploy, there's now an opportunity to deploy best-of-breed digital components, going down the Lego block approach." Karl reckons we will start seeing components glued together with automation, giving a cutting-edge platform to those that use this approach.

Having spoken to Gary Hoberman, CEO and founder ,of Unqork earlier this year, I am sure low-code and no-code will be a big part of this. And with Unqork having attracted $365 million of funding, according to Crunchbase, clearly I'm not the only one to believe this.

Your platform will be arriving shortly...

Glynn Austen-Brown, partner at PWC, brought a global perspective to the predictions, with a reminder that we all expect technology to make things more convenient and to give us our time back. Insurance will be the next frontier for simplicity. “Look at what people are doing in China. Look at WeChat or Grab. We are going to be moving much closer toward that platform economy that is so prevalent in the Far East,” Glynn believes.

Mark Geoghegan, formerly editor of Insurance Insider and now the “Voice of Insurance” podcast host, advises us to look and see what technology choices the recently capitalized specialty insurers such as Inigo, Vantage and others make. Unlike the previous wave of start-ups 15 years ago these companies, with large amounts of investment, can choose to go with the new solutions and not rely on legacy. (But will they, I wonder?) Meanwhile, Mark predicts that “most of the insurance market is still going to be your friend because they're not so nimble. They decided that they wanted to digitize three or four years ago, and they're finally starting to get around to doing it."

Ben Rose, co-founder of new reinsurance platform RiskBook, picks up on something Christian Kitchen mentioned and says the challenger brokers will rise to prominence in 2021. With the Aon and Willis merger coming up, and the acquisition of JLT by Guy Carpenter that we’ve already seen, Ben reckons that the new breed of brokers, which he observes has been recruiting many star players in 2020, “is really good for reinsurance innovation.”

Ben's list of challenger brokers to look out for includes TigerRisk, Beach, Capsicum, Gallagher, Hyperion, Lockton, McGill, BMS - all are small compared with the big two. As Ben points out, they can't replicate what the two giants are doing, so they've got to think digitally and about how they can use innovation. “They can't afford the traditional six-person account team to look after a single client, so they are going to have to explore automation to handle those bigger deals and perform all the analytics expected of them with a much smaller team.”

Ben and co-founder Jerad Leigh are watching closely as these brokers start to move faster and spin up partnerships with start-ups to bring a digital service that's been missing from the reinsurance ecosystem for quite a while. This is a topic I discussed at length with Rod Fox, CEO and Co-founder of TigerRisk, and with Barnaby Rugge-Price, CEO of Hyperion. And you can learn more about RiskBook from Ben when he joined us for the London leg of the ITC global tour.

Data-powered customers and risk reduction

Jenny Williams from Convex picked up on the theme of data, and she is thinking about it from a platform perspective, too. Jenny pointed to the recent news that S&P has acquired IHS Markit, a company that provides financial services and many insurers with data, for $44 billion: “We'll see more partnerships and acquisitions in the data ecosystem space.” She added that “lots of different companies offer different variations of data on different assets and their risk and perils." Companies (and InsTech corporate members) such as e2value and Hazard Hub are doing well in the U.S.

The challenge, according to Jenny, is that each specific data set requires expertise to collect and curate. Jenny is looking out for “more of a one-stop shop, targeted partnerships that may help reduce the offering overlap, while expanding the breadth of useful data that's available to us.” We go deeper into this topic in my interview with WhenFresh CEO Mark Cunningham.

Christen Smith, head of sales at Flock, a growing insurtech company, echoes a point made by many others, that "customers and brokers aren't going to be happy with the old solutions or with the old way of doing things. UBI (usage-based insurance) won’t be good enough any more." Christen added that “we're going to have to take the next steps into exposure-based insurance and really move the needle to impact consumer behavior.” Flock has recently expanded beyond offering commercial drone operator insurance into broader commercial insurance, no surprise then that for them “it's going to be a big year for stepping things up a notch in the space of connected insurance, and really delivering for consumers and brokers in a new and different way than has been done before.” Watch this space. we say.

Glynn Austen-Brown picked up on an emerging but powerful theme around customers who are “looking for more services that are aimed at risk prevention and other value-add services, for example boiler servicing, energy bill usage reduction and help with home repairs.” Glynn also sees this theme as driving more partnerships and more embedded insurance -- “things like Uber and Airbnb partnerships will become much more prevalent in regards to services and products that insurers offer. Customer stickiness will be everything.”

Data-powered automated syndicates

Andy Yeoman, CEO of Concirrus, expects to see meaningful progress from companies using data and algorithms, what he refers to as “technology-fueled market entrants.” We’ve seen Brit insurance launch the Ki syndicate and gain £500 million investment this year (my discussion with James Birch and CEO Mark Allan of Ki has been one of our most popular podcasts). 

Andy expects the newcomers are “going to use those algorithms to replace the work, whether it be submissions or some of the underwriting decisions,” and their role will change: “We're going to see their use move from follow syndicates, to lead syndicates. And in doing so, all those organizations are going to create investable asset classes because they'll ultimately have a predictable yield.” This will make insurance attractive for more external capital, with “trillions of dollars of pension funds monies” coming into the market, maybe not in 2021, but soon after. You can learn more about Andy Yeoman and Concirrus from our discussion last year)

See also: 11 Insurtech Predictions for 2021

But we need to deal with the data-ingestion problem

Of course, all these great opportunities for using data will fail if insurers can’t get the data they need. Jenny Williams is hoping that 2021 will “see some real progress in the very difficult area -- submission and ingestion of data in commercial and specialty lines.” The problem that Jenny refers to is caused by the volumes of valuable data that is locked up in email attachments in non-standard forms that are received by underwriters. While the data may now be getting to the underwriters, it's hard or expensive to extract. Jenny explained why. “It’s not just about ingesting standard forms such as ISO or ACORD; we're talking about the really funky messy Excel spreadsheets with merged cells, multiple tabs and complex risk details that require real expert interpretation to identify the statements of values, loss runs, engineering reports, etc.”

Jenny is encouraged by some proof points from companies such as Eigen Technologies, Groundspeed, EY, Expert AI, that are among those she sees leading the way. There is more need for collaboration between the technology and insurance experts, but for Jenny it “feels like we're at a tipping point, and this might be seriously commercially viable next year.”