The COVID-19 pandemic had a devastating impact on businesses and workers worldwide. Companies had to adopt online business models to survive, which forced an unprecedented workforce migration as employees left their offices to work from their homes.  As the world starts to emerge from the pandemic, we’re beginning to understand the many effects of this economic and social upheaval on workers. New research shows that gender inequality, long a problem in the American workplace, worsened during COVID-19, and the insurance industry is no exception.

In March, Accenture surveyed 176 U.S. women in insurance to understand how the pandemic and the sudden shift to remote work affected them. We looked at the professional and personal effects this had on work-life balance and caregiving roles. At the same time, we surveyed 134 C-level insurance executives in North America to discover what the future of work looks like for their organizations. The results were both surprising and concerning and confirmed that the pandemic has had a significant impact on the well-being and productivity of women.

Key observations

The survey reiterated the long-standing conflict between women as workers and women as caregivers, but the numbers were still striking. Most of our respondents are working mothers, with six in ten (59%) having school-aged children at home, and 68% saying they are the main caregiver for children or elders in their households. More than half (56%) say they face increased pressure as the primary caregiver as they juggle childcare responsibilities due to school closures, while working longer hours because of record business activities.

Our results revealed that almost one in three (32%) women working in insurance left their jobs temporarily or permanently during the pandemic – a sobering statistic. When asked why they left, 21% said childcare/eldercare priorities were the main reason. Meanwhile, 30% of women who remained at their jobs during the pandemic are considering leaving.

Additionally, 45% of women in insurance feel they have lost opportunities to grow their careers during the pandemic. Similarly, 44% say the pandemic has adversely affected their career progression while 39% feel disconnected from or forgotten by their companies.

Employees vs employers

We uncovered a stark disconnect between employer and employee attitudes on a number of issues. This includes the level of support women receive from their companies, the expectations for their return to the office, and the post-COVID changes they expect before returning to work. These disconnects must be addressed, because COVID added even more caretaking responsibilities to women, and they are not going away.

See also: State of Diversity, Inclusion in Insurance

Consider the disconnect between corporate leadership and female employees in the number of days they are expected to work from the office. Nearly half (47%) of women surveyed believe they would lose advancement opportunities if not present in the office five days a week post-COVID, but only a quarter (26%) want to work in the office that much. More than a third (34%) want to work remotely full time, with the rest preferring a hybrid approach. By contrast, almost all (91%) executives would prefer employees to spend four to five days in the office post-COVID, and more than half (54%) believe their employees share that desire.

When women were asked how their employers can help, more than a third (39%) cited flexible scheduling, followed by increased paid leave (24%). This appears to be an area of progress for insurance firms, with 43% of women surveyed saying their employer is trying to offer more flexible scheduling. 

A permanent culture shift

So, what does this information tell us, and what should insurers take note of, as many look to return their workforces to offices in the coming months?

First, remote working is here to stay, so companies must embrace this new model to support women and their needs, or risk losing them along with their years of experience, institutional knowledge, and dedication.

Next, in order to accommodate the remote or hybrid workforce of the future, companies will need to engage in a deliberate cultural change, one that ensures “remote” does not mean “less effective,” and that remote workers are not penalized for missing out on traditional in-person interactions, like the conversation over a cup of coffee or the face-to-face mentoring session. They will need to create return-to-office strategies that promote flexibility for women who need to juggle additional responsibilities outside of the workplace.

Finally, if firms incorporate flexibility in their return-to-office strategies, it may help prevent women from leaving the workforce in the future and persuade women who did leave to return.

What insurers and other financial institutions do next will have a major impact on the future of women in insurance, from entry-level workers all the way to the C-suite.

The FDA approved the first new drug to treat Alzheimer’s in nearly 20 years in recent weeks, and it is a prime example of why our spending on healthcare is so unnecessarily high and not slowing down anytime soon. The new drug is Aduhelm, an infusion therapy developed by Biogen.

A panel of 11 scientists reviewed the research and science for the FDA, and 10 voted against approval of the new treatment, while one was undecided. In fact, three of the scientists have resigned over the approval. The FDA moved to approve Aduhelm despite the lack of evidence that it either cures or slows the progression of the Alzheimer’s and has given the company nine years to conduct a confirmatory trial.

What is the actual cost of this treatment? The drug price is set at a whopping $56,000/year, and the overall costs will be much higher. According to the Kaiser Family Foundation, when related costs are included (the testing to monitor for brain bleeds and other possible side effects, outpatient facilities and staff, etc.) the real price tag will be more like $100,000/year. 

What is the cost to the individual? Copays will be as much as $11,500 – nearly 40% of the average income for a Medicare, enrollee according to the Kaiser Family Foundation.

How will this affect Medicare Part B premiums? As an infusion given in a provider’s office, administering Aduhelm will be covered by Medicare Part B. The current average premium for this coverage is just under $150/month. This will almost certainly have to be increased, so the impact will be widespread across Medicare enrollees.

See also: Are Your Healthcare Vendor’s Claims Valid?

What are the potential impacts to our overall healthcare spending? Biogen estimates that 1 million to 2 million Alzheimer’s patients match the patients studied in the clinical trials. Overall, we have approximately 6 million people who have Alzheimer’s in the U.S., and most are enrolled in Medicare. Interestingly, the FDA has approved the medication widely not just for those who are in the early stages of the disease with mild symptoms like those in the trial. If 1 million people are given this treatment, it could cost Medicare $56 billion annually. Medicare Part B spent $37 billion in total on drugs in 2019. Total outpatient Medicare drug spending with pharmacy prescriptions was $136 billion for 2019.

Biogen’s estimates of future sales are seemingly conservative. The company and other analysts are expecting $103 million in sales this year, about $1 billion in 2022 and $5 billion-plus in 2023. 

When you factor in the incentives paid to prescribing physicians by Medicare ($3,360 for each prescription in this case), it seems we have a real problem on our hands.  

The Centers for Medicare and Medicaid Services could decide not to cover Aduhelm, but if the past is any indicator this is not likely. Private insurers that provide Part B benefits could also place some limitations on the drug’s use. But, all things considered, It is clearly time for us to take a serious look at how we have allowed a fifth of our economy to get to this point.

While those pressing for innovation often focus on the unbelievable speed of technology change, perhaps the more important issue is the pace at which business models can change.

After all, increases in computing power have been running at the rate of Moore's law since Intel co-founder Gordon Moore formulated it in the 1960s -- processors have roughly doubled in power every 18 months at no increase in cost. But the pivotal moments came when that exponential improvement allowed for a new type of business model: e-commerce in the late 1990s; internet search and social media in the 2000s; data-heavy, asset-light platforms like Uber and Airbnb in the 2010s.

Last week, futurist Peter Diamandis shared his list of the seven business models he believes will dominate the next decade, and they sound roughly right to me, so I'm passing his writeup on to you.

His post lists the seven as:

--The Crowd Economy, which he describes as "crowdsourcing, crowdfunding, leveraged assets and staff-on-demand," a la Uber and Airbnb or Amazon's Mechanical Turk.

--The Free/Data Economy, which he describes as "essentially baiting the customer with free access to a cool service and then making money off the data gathered about that customer," a la Facebook, Google and Twitter.

--The Smartness Economy, which he describes based on an analogy to the late 1800s. At that point, businesses could just "take an existing tool, say a drill or a washboard, and add electricity to it—thus creating a power drill or a washing machine. In the 2020s, AI will be the electricity." Basically, add artificial intelligence to anything, and you could have a new, smarter, more efficient way model for doing business.

--Closed-Loop Economies, which take an environmentally conscious approach to products, for instance allowing people to pick up waste plastic, turn it in and be paid.

--Decentralized Autonomous Organizations (DAOs), such as a fleet of autonomous taxis, "with no employees, no bosses and nonstop production," built on top of blockchain.

--Multiple World Models, businesses that reach beyond our real-world personae to online personae. Diamandis notes that people pay to design digital clothes and houses in Second Life and other virtual worlds. (I thought it was clever that the Biden campaign put up campaign signs in Animal Crossing and gave supporters QR codes that would let them put up signs on their Nintendo Switch.) Diamandis adds: "Every time we add a new layer to the digital strata, we’re also adding an entire economy built upon that layer."

--Transformation Economy, which go beyond what's known as the Experience Economy -- such as Starbucks' creation of a "third place" that was neither home nor work -- and involve paying for a something that transforms your life.

I'd encourage you to read the whole post and dig more deeply into the models, then perhaps sign up for his newsletter, which can sometimes be over-the-top but which is routinely intriguing and informative.

From my standpoint, the most intriguing models for insurers are the Smartness Economy and the Transformation Economy. AI can be added to just about any part of the insurance process and conceivably even allow for new business models -- for instance, embedding insurance offers into the process of selling cars, shipping grain in developing countries, etc., without the need for human involvement. And insurance can transform even more lives than it does now, if it shifts its emphasis toward preventing losses and goes beyond the already crucial work of providing peace of mind and making people whole following losses.

But I think it's worth taking a look at all the potential business models, because business only happens if it can be insured, and new types of business create opportunities for new types of insurance. Just think how interesting it will be to price the risk on a digital house in a virtual world.

Cheers,

Paul

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

Why Weak Signals of Disruption Are Key

You must commit to a process that more closely resembles an anthropological journey than a traditional strategic analysis. Here are four steps.

How Life Insurers Can Reach Millennials

Millennials already understand the need for car and home insurance. The pandemic has given life insurers an opportunity.

Benefits of Deploying a Hybrid Cloud

Hybrid cloud models smooth digital transitions because they can easily operate their existing on-premise infrastructure during the shift.

How Digital Health, Insurtech Are Adapting

Due to the spread of the COVID-19 pandemic, the digital health and insurtech sectors have developed rapidly in multiple directions.

The Importance of Captive Insurance

Policies that insure a person in spite of the absence of bodily harm, that exist because of the threat of reputational harm—these policies are hard to find.

2-Speed Strategy: Optimize and Innovate

Success in moving from the past to the future of insurance requires a two-speed strategy: Speed of Operations and Speed of Innovation.

Life insurance policies abound, but policies that insure a person in spite of the absence of bodily harm, that exist because of the threat of reputational harm, that ease the degree of harm—these policies are hard to find. These policies are also expensive, regardless of whether a person is rich and famous, or more famous than rich, or famous but not rich. These policies are a necessity for people at the commanding heights of society, because no one has total command of what anyone can do to a person’s reputation. Captives of chance, we have the chance to benefit from captive insurance; we have recourse from the infliction of harm.

As an alternative to traditional commercial insurance, captives participate in the alternative risk transfer (ART) market. Because of this alternative, captives risk their own capital; they accept the risks of forming their own insurance companies, of having parent groups create these companies for them, so they may avoid volatile pricing and difficulties in purchasing the policies they want.

By developing bespoke policies, captives can reduce costs, increase cash flow, write policies, set premiums and return or reinvest unused funds. As a specific type of insurance, representing the thoughts of people in positions of leadership, as an example of insurance thought leadership, captive insurance makes sense. (Please note: These policies are rare, which is not to say these policies do not exist. Insofar as these policies are available, they tend to originate from offshore insurers. More common are deductible reimbursement policies, where companies increase deductibles with their respective carriers. Captives assume the risk of paying deductibles when they file a claim with traditional carriers.)

As history proves and as a footnote to history confirms, vandals would replace a life of service with headlines from a person’s time as a public servant. The death of Raymond J. Donovan, labor secretary in the Reagan administration, underscores this point: that vindication in a court of law is no shield from vilification via the court of public opinion, that an acquittal is no guarantee of absolution from the influencers of public opinion, that these facts beg the question; that Donovan asked the question himself, “Which office do I go to to get my reputation back?”

Donovan’s question was rhetorical then, but it need not be—it should not be—now. Not when anonymous forces can harm a person’s reputation in seconds. Not when the slings and arrows of outrageous lies can exhaust a person’s fortune. Not when it can be a person’s misfortune to see his life’s work collapse in real time.

See also: How Life Insurers Can Reach Millennials

Insurance from reputational harm may be the only way to ensure loss of livelihood does not lead to loss of life, that character assassination does not lead to self-harm, that a leader does not commit suicide. Unless a public figure has this insurance, or knows that captive insurance is a means of buying this insurance, reputational harm can be hurtful indeed; so hurtful as to be harmful to the survival of the body politic and the success of the nation.

If first-rate leaders choose not to put their country first, if the choice is not theirs to make in the first place, if they are not free to choose because of what they may lose, because of what the enemies of freedom want them to lose, their sacred honor, then America loses.

We must not lose.

Do you have time to observe and process what's happening beyond your "must do" list? How often do you stop to look twice at details that just don't seem "normal" -- that may even seem outlandish or inappropriate? Do you dismiss these as trivial, or as mistakes, or do you ever consider whether they foreshadow something bigger?

Of the many truths reinforced by events of the past 18 months, one is certainly that evolutionary change can unexpectedly become revolutionary.

That's why improving the capacity to spot, assess and sort the weak signals -- the earliest leading indicators of disruptive change -- is an imperative.

Weak signals are easy to miss, for good reason

Weak signals are all around us, all the time. The challenge in recognizing them is precisely that they are weak.

Weak signals:

• Are out of place versus norms.
• Show up as crude, implausible renditions.
• Get blocked by groupthink.

An example of a discounted weak signal

In the early 2000s, Citi Cards' digital transformation team exposed cardholders to the idea of "tap and go" RFID technology as a means of payment with a small device attached to a keyring that would replace physical plastic credit cards. The first use case: paying fares in urban transit systems.

The weak signal that stimulated this experiment was emotional and qualitative: Users' intense, enthusiastic reaction to how they would feel commuting without having to pull out their wallet and fumble with malfunctioning "swipe" cards in crowded subway stations.

Banking traditionalists were quick to dismiss the possibilities. They were attached to the primacy of the card as the form factor, and retailers resisted funding nominal technology upgrades.

See also: The Real Disruption of Insurance

The prevailing attitude was, "if it's not broken, don't fix it." After all, why change, when magnetic stripe-based cards performed virtually 100% of the time?

The result? Within a decade, contactless payments became ubiquitous, with the pandemic acting as an accelerant.

How to read weak signals of change

You don't need a crystal ball to see weak signals. But you do need to value and reward curiosity and commit to a process that more closely resembles an anthropological journey than a traditional strategic analysis.

Follow these four steps to get started:

1. Embrace the mindset. Cultivate curiosity as a habit. A simple step? Start by recognizing and accepting that we filter what we see based on what we know. Have an open mind, challenge preconceptions and stop to explore for more when you come upon the unusual.
2. Cast a wide and decentralized net to gather signals. Go far to the edge of your networks for observations, paying special attention to things that stand out as strange or curious.
3. Create a mechanism to interpret and understand the signals. Keep a database or a journal -- narrative, images and other stimuli -- of signals, including what is interesting and what each suggests.
4. Channel the signals for monitoring and further action. Begin to organize the signals -- perhaps a few key trends are emerging that suggest logical groupings, e.g., which should be set aside, monitored more intensively or moved toward brainstorming?

For more tips...

Spotting the weak signals depends on active sensing of the environment. For more on listening, take a look at my Fast Company article.

JULY 2021 FOCUS OF THE MONTH
Customer Experience

FROM THE EDITOR

For maybe the first 15 years of the personal computer revolution, business and even government leaders talked a lot about the need for computer literacy. We were told that the very competitiveness of our nations depended on educating the populace to prepare for the digital age. Then Steve Jobs came along.

It turned out the problem wasn't our lack of education. The problem was that computers were just too hard to use. Once Jobs and Apple brought the graphical user interface to computers, and once processors became powerful enough to handle the demands of GUIs, the talk of computer literacy faded. Then came the iPad and iPhone, making an intuitive experience available on almost any device. If you asked a teenager to define "computer literacy" today, he or she would likely say, "Hey, Siri...."

The insurance industry is trying hard to move into a "Hey, Siri" phase, as companies focus on drastically improving the customer experience. Companies are finding that they have to reinvent chunks of their businesses to really get the experience right. Yes, they have to focus on the ways that they touch customers, through agents and brokers, through call centers, through adjusters and through an increasingly broad array of electronic means. But a customer doesn't just experience a company through a direct communication. Customers also experience, for instance, how long and painful an underwriting process or a claim is.

And here's the thing: This emphasis on customer experience requires a revolution for companies but merely an evolution for customers. Insurers have to move heaven and earth to add computing power, to deal with new kinds of data, to come up with new analytical models, to design new processes and so on. Consumers just have to add an app or a phone number so they can text a company, have to e-sign documents rather than printing and mailing them, etc. -- and consumers have already been doing these sorts of things with other companies in other industries.

So, customers may understand at some level all the effort that has to go into changing how they experience an insurance company -- but they don't really care.

As you'll see from this month's interview, from the appended articles and from a host of articles throughout the website, lots of noble efforts are underway, and companies are making progress, but improving customer experience is a marathon, not a sprint. Every January, I publish articles about how this is the year that the industry will figure out the customer experience. Then I publish more of those articles the following January... and the January after that. Despite the undeniable progress, I don't expect to stop publishing those pieces any time soon.

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

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ITL FOCUS INTERVIEW

An Interview with Scott McArthur, CRO, Statflo We spoke with Scott McArthur, chief revenue officer, Statflo, about the impact of digitization on customer interactions. Read More

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WHAT TO WATCH

3 Tips for Increasing Customer Engagement Even before the pandemic, insurance customers were moving to digital channels and demanding the kind of smooth experience they get with Google and Amazon. With customers demanding new types of interactions and agencies and companies needing to increase leads in a world that’s gone from face-to-face to zoom, technology doesn’t have to be intimidating. Watch Now

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WHAT TO READ

	Key to Better CX: Think Like NTSB Airlines are rarely held up as exemplars of customer experience, but in one important respect the industry deserves such recognition. Read More
	Why CX Must Trump Efficiency Companies talk about improving customer experience but focus too much on saving money. Customer process automation does both. Read More
	Providing a Better Claims Experience It’s important to consider the communication preferences of five different generations when building a better claims process. Read More
	Self-Service Portals Improve CX 81% of companies expect customer experience to be a key battleground. Self-service portals are a great place to start. Read More		3 Ways to Optimize Customer Experience Even in a heated marketplace, a superior customer contact center can let life insurers grow. Read More		Millennials Demand Modern Experience To address the life insurance gap among millennials and create more financial security, the industry needs to move quickly. Read More		How to Increase Profits With Connected CX Fostering connected experiences is vital to meeting customer expectations and succeeding in a technology-centric world. Read More

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WHO TO KNOW

Get to know this month's FOCUS article authors:

Andi Dominguez	Tina Hammeke	Ian Jeffrey
Renaud Million	Jon Picoult	Thiru Sivasubramanian
Kseniya Yurevich

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Learn More about ITL Focus

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Interested in sponsoring ITL Focus or learning about other promotional opportunities? Contact us

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Until the arrival of COVID-19, Americans had, for decades, been more concerned with outliving their savings than the prospect of premature death. With that in mind, it’s not surprising that life insurance policy sales dropped 45% during the 1980s and have remained flat ever since, according to LIMRA. Today, only half (52%) of Americans own life insurance, either bought individually or through employee benefit programs.

But COVID-19 may have reordered priorities. The pandemic has served as a reminder that life can be shortened unexpectedly. Eleven percent more life insurance policies were sold in the first quarter of 2021 as compared with early 2020, when employment was down and employee-based life policies lagged. This increase represents the biggest gain since 1983 and the first break after a long decline in life insurance sales. In addition, a greater percentage of policies were sold to households with more modest incomes.  

This heightened awareness has given life insurers a chance to prove their value for the first time in decades. But they will only succeed if they are able to meet the needs of the largest group of adults in the workforce: millennials, the oldest of whom are now approaching 40. Representing 25% of the population and numbering approximately 73 million, according to Pew Research, millennials are the generation life insurers will need to reach most urgently if they are to revive their fortunes.  

It won’t be easy.  

This is a generation that has a lot going on. It is the most educated generation of Americans, with 39% holding a B.A., but millennials are also preoccupied with competing financial priorities, including paying off student loans, managing healthcare costs, finding jobs that pay well, establishing home ownership, starting families and dealing with the cost of supporting aging parents. 

See also: Looking to Future of Insurance, Insurtech

JungleScout notes that millennials also constitute the majority (58%) of U.S. mobile shoppers. These are consumers who think nothing of ordering a latte or a pizza through a smartphone. Siegel & Gale found that 64% of all consumers are willing to pay for a simpler experience, but millennials are particularly used to quick and easy digital solutions. It’s no wonder a KPMG study notes that 46% of millennials cite confusion as the biggest barrier to purchasing life insurance. After all, life insurance has been a highly regulated industry loaded with jargon and legalese, and life insurers have lagged P&C counterparts such as Lemonade, which offer P&C insurance on a smartphone app powered by AI and machine learning that can onboard digital customers in less than a minute and pay claims in a matter of seconds.  

How Life Insurers Can Reach Millennials

Millennials already understand the need for car and home insurance. Now that the pandemic has gotten their attention, life insurers must speak to them in a language they understand, or risk being ignored. Here are a few factors life carriers should keep in mind as they seek deeper connections with this key demographic:

• Use Rewards to Drive Loyalty: According to a KPMG study, 81% of millennial consumers say being a member of a rewards program encourages them to spend more money with a brand. With this in mind, life insurers should consider rewarding policyholders with discounts and better rates as they commit to healthy lifestyle choices through partnerships with third-party wellness programs and insurtechs. From a technology perspective, this means life insurers will need to create platforms based on application programming interfaces (APIs) that can integrate data from a multitude of sources. 
• Make it Easy: According to an IBM study, almost half of all millennials say that buying life insurance is too confusing. Whether an interaction takes place through an app, web browser or face-to-face with an agent, millennial customers expect simplified explanations and options, price tiers and bulleted lists of specifics. Policy applications should include only the most relevant questions and, where possible, avoid medical exams. Insurers that do the best job of shielding shoppers from unnecessary complexity will win. 
• Prioritize Mobile Apps: Given millennials’ digital-first lifestyles, to stay relevant, incumbent life insurers must offer intuitive mobile apps that are both technologically sophisticated and intuitive, leveraging capabilities such as Face ID for quick login and providing smooth integrations with other financial products.
• Develop a Subscription Model: A massive 92% of millennials have active monthly subscription services, from razors to clothing to music to food. These services are automatized, tailored, simple and easy to manage. The subscription model could work well for life insurers, which, like other insurers, collect monthly premiums. What’s required is packing additional value into a more personalized monthly subscription.

See also: How Digital Health, Insurtech Are Adapting

It’s not too late for traditional life carriers to reach millennials. Although insurtechs and startups unencumbered by legacy infrastructure have gained some traction, their success has been modest. Larger life insurers still have the lion’s share of customers, highly recognizable brands and the resources to scale quickly. But they need to couple these advantages with a broader re-think of their core technologies if they are to regain a competitive advantage and create the kind of seamless user experiences that will engender millennial loyalty.

An Avalanche of M&A? Paul Carroll, Editor-in-Chief of ITL A financial adviser friend likes to say that “taxes are on sale” at the moment. He’s focusing on the possibility of higher income-tax rates for his well-to-do clients and for the corporations whose shares are in their portfolios, and trying to get clients to reduce or liquidate certain holdings before the increases hit. But this idea of taxes on sale should have effects that ripple far beyond my friend’s client base, possibly including a spate of consolidation in the insurance industry. continue reading > EVOLVING THE DIGITAL CUSTOMER EXPERIENCE Tune in as industry experts from Deloitte join Denise Garth, Chief Strategy Expert at Majesco to discuss new innovative products that are supporting changing demographics in a post-covid world.  Listen Now SIX THINGS Looking to Future of Insurance, Insurtech by Nicole Gunderson and Jason Gross Here are five priorities for insurance leaders to consider, drawing on insurtech-driven solutions. Read More Where Does Life Insurance Go Now? by Mark Tattersall Between the shift to a remote workforce, and the pandemic itself, life insurance had no choice but to evolve -- and there's no going back. Read More From Risk Transfer to Risk Prevention by Sathyanarayanan Sethuraman IoT provides the means for evolution from pure risk transfer to a "prescribe and prevent" scenario. Read More How to Increase Profits With Connected CX sponsored by Statflo Fostering connected experiences is vital to meeting customer expectations and succeeding in a technology-centric world. Read More Better Models for Next Pandemic by Simon Young It will take time to build an infectious disease risk model – re/insurers must be innovative in their pandemic coverage and exposure management. Read More Pandemic’s Lessons for Auto Insurers by Adam Pichon and Adam Hudson The pandemic will continue to affect virtually every market imaginable, potentially for years to come. Read More 3 Ways AI Can Boost Customer Retention by Simon Pickersgill Not only does AI improve the speed of crafting policies, the technology can speed underwriting, as well as the claims process. Read More MORE FROM ITL A Conversation on Workers' Compensation, with Kimberly George and Mark Walls As the world starts to emerge from the pandemic, ITL Editor-in-Chief Paul Carroll sat down to discuss the new normal for workers’ comp with two of ITL’s most widely read contributors: Mark Walls, VP of communications and strategic analysis at Safety National, and Kimberly George, global head of innovation and product development at Sedgwick. Watch Now JUNE FOCUS: Workers' Compensation The world of work turned upside-down and inside-out beginning 15 months ago, as the pandemic shut down offices and forced so very many of us to work from home. Now that we're beginning to reverse this process, insurers will have to sort through all sorts of new issues. Here's one: When is the place where a worker works a "workplace," and when is it not? Welcome to the new world of workers' comp. Keep Reading Partner with ITL to create expert thought leadership content. Custom Content Promoted Content Display Advertising Custom Webinars Monthly Topic Sponsorships ITL Partner Packages and more Learn more and get the 2021 Media Kit GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started SPREAD THE WORD Share Share Tweet Forward SUBSCRIBE TO SIX THINGS

Several long-established industries are considered “legacy” — having little motivation to change and slow to adopt new, critical technologies. Large, stable industries that provide essential or compulsory goods and services--like insurance--often fit squarely within this realm. But in 2020, the COVID-19 pandemic forced business leaders in legacy verticals to quickly adapt their technological infrastructure to support the long-term remote workforce. 

In the insurance industry, organizations already considering digital transformation sped up their plans. Some started nearly from scratch. , Leaders focused on innovations in areas like personalization, IoT, process digitization and even artificial intelligence. However, one essential area that is still frequently overlooked is the adoption of hybrid cloud models. 

The ability to undergo agile digital transformation while maintaining the same customer service levels and keeping up with shifting markets is possible--if the underlying infrastructure can adapt rapidly to changing needs. Cloud technologies, and specifically hybrid cloud models, enable smoother digital transitions for traditional industries because they can easily operate their existing on-premise infrastructure during the transition process.

What are the advantages of implementing a hybrid cloud model for insurance companies? Here’s a closer look.

What is the hybrid cloud model? 

A hybrid model in its most basic form is a computing environment that shares data with both a private and public cloud. Private clouds are dedicated specifically to an organization while a public cloud is delivered via the internet and shared across an organization. Less critical workloads can move to the public cloud without opening public access to data, while more sensitive information is kept in a more secure private cloud. Hybrid is an accommodating approach, especially for insurance businesses, which often store sensitive or protected customer information. 

Many industries cycle through short periods of increased demand. For example, insurance companies are busier when home and real estate sales are higher in the spring and summer and slower in January-February. Instead of investing millions of dollars to accommodate increased data and information during a small window of time, a hybrid cloud model scales seamlessly to accommodate evolving needs. Organizations may have the flexibility to only pay for services they use when needed. 

The hybrid cloud model affords many other advantages:

Improved data security and privacy

Data security and privacy is an ever-growing concern for IT and business leaders, especially in industries like insurance that house sensitive or legally protected customer information. For this reason, moving to the cloud can seem like a risky option. However, a hybrid cloud model can alleviate some of these concerns as doing so can reduce the risk of data loss or exposure. 

In a hybrid model, companies may opt to store their most sensitive data on-premise and shift functions like accounting or other operational processes to the cloud, all of which drives process optimization and cost savings.

See also: Tapping Cloud’s Ability to Drive Innovation

Enhanced flexibility over infrastructure 

Some business leaders in the industry have been hesitant about making the jump to the cloud due to concerns that they won’t achieve the same performance as that of on-premise infrastructure. However, the most important aspect of this transition is deciding which parts of the workflow must stay on-premise and which can be shifted over. This is a process that actually provides IT teams more flexibility and control within the overall system. 

The teams also can strategically use more of their budget through hybrid models because pay-as-you-go plans with no upfront costs are available. Cloud-only solutions can be costly upfront and disrupt workflows through complete lift and shift, but hybrid allows internal teams to define where multi-tenancy is needed. And, of course, any operations moved to the cloud will also benefit from automatic application fixes and updates--so they’ll always be using the latest technology.

Better disaster recovery measures 

Disruption, data breaches and physical infrastructure damage were prevalent in 2020 and early 2021. Insurance leaders must keep these concerns top of mind when making decisions about where and how to house varying types of data. 

A totally on-premise solution presents risks in disaster recovery. Contrarily, hybrid models can scale noncritical workloads while allowing IT teams to secure the most sensitive data and act quickly in the event of a disaster. 

Legacy industries don’t have to get stuck in the past or be forced to lift and shift all workloads into a full-scale cloud migration. Instead, organizations with critical infrastructure like insurance should implement a hybrid cloud model to reduce costs, improve security and enhance overall operations and productivity during peak seasons.

The insurance industry has steadily been digitizing in recent years. It is taking advantage of technological developments in automation, offering apps to clients and introducing things like electronic proof of auto insurance.

PwC’s Annual Global CEO Survey in 2020 identified customer experience (CX) and core tech transformation as the top two opportunities for companies to set themselves apart, with CX significantly ahead. When customers are communicating with their insurance company, they are usually dealing with an awful experience (a car accident, a medical issue, a home invasion, a roof leak or a full-on natural disaster). Hitting any snags when it comes to getting the service they need is a big factor in driving them to a competitor.

Artificial intelligence (AI) addresses both customer experience and tech transformation and has helped insurance companies improve their services and stay competitive in a tough industry. AI enables many services and processes to be automated, resulting in both cost and time savings. But AI deployment also benefits customer experience, in three specific areas.

Improvement of policies, products and processes

The retail sector has capitalized on custom products and experiences, and the concept that one or two sizes will fit everyone is fading quickly in other sectors, too. The insurance industry is now also latching onto customization, as AI enables companies to leverage data to personalize a core product for an individual customer. 

A company’s AI model can use a client’s historical data to calculate with a high degree of probability that a particular product or policy will be the best fit. In the eye of the customer, they get an attractive product without needing to spend a lot of time on consultations with the broker. For the insurance company, the efficiency gains are impressive, and agents don’t need to spend a lot of time finding the right product for the client.

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Not only does AI improve the speed of crafting policies for customers, the technology can also speed up underwriting, as well as the claims process -- two key touchpoints where turnaround time is essential for CX. If a health insurance customer is filing a claim for an expensive prescription, they will want a simple and quick resolution. Long waiting times may drive them to a competitor known for quicker reimbursements. But AI can bring a competitive edge to an insurance company if customers know they can expect trouble-free claims processing.

Enabling rapid online assistance

The days of customers playing phone tag with agents to get the information they want are long gone. Insurance companies can leverage AI on their platforms -- both web and mobile -- to allow customers to quickly find an answer to a question. The ability to more easily respond to inquiries from policyholders is especially important following a major event, such as a tornado or hurricane, when there is sure to be a high-volume of online interactions.

AI-powered chatbots have become the first touchpoint for customers in many sectors. When done right, they can give a major boost to an insurance company’s customer experience. Organizations can also save money by automating simple and routine online customer interactions, leading to another win-win situation where customers can quickly get to the information they need.

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Using AI to test AI models

Once an insurance provider has an AI model in place to help with the crafting of policies and settling of claims -- and the organization begins using it as an integral part of its daily routine -- it is vital that the AI model suitably addresses four risk factors: accuracy, stability, flexibility and ethics. AI can be used to test these models against those factors.

Any AI model an insurance company employs should have a high accuracy score. Smart AI model testing will ensure that the results are reliable -- with an agreed tolerance for the model, to protect a company’s profitability while appropriately managing their risk. Because data changes over time, testing will ensure that an AI model remains stable when there’s a change in the data in the ecosystem, or in the way the insurance company handles business. Such testing will also ascertain that the model is flexible enough to react to those changes while remaining accurate. 

Above all, AI can be used to test whether the insurance company’s AI models are ethical -- meaning that they are not biased toward or against any specific groups of society. Even the largest dataset imaginable can be flawed or biased depending on the data that is included. Therefore, it is vital that these models be tested on a regular basis, to verify that the risk factors are being appropriately applied without bias, ensuring the company’s reputation and its brand.

Giving customers a reason to stay

As the saying goes, it’s cheaper to retain a current customer than to attract a new customer, so insurance companies need to look at technological innovations that can improve customer retention. By recognizing the value AI can bring to all aspects of the customer experience, insurance providers can deliver fast, accurate and fair service to policyholders. 

Whether a business provides health, car, home or other types of insurance, there will always be a line of competitors just waiting to snatch away disappointed and frustrated customers. What’s most important is for insurance companies to focus on giving customers reasons to stay.