This is part 3 in a series.

Wildfires, like tornadoes, can leave one property leveled and its neighbor unscathed — jumping houses, neighborhoods and boundaries with seemingly no rhyme or reason. The devastation seen with 2018’s Camp Fire— which consumed everything in its path and leveled the town of Paradise— wasn’t what happened in Malibu with the Woolsey fire, which hopped the Pacific Coast highway. Now, and admittedly not soon enough, innovations in data and analytics are helping carriers be more proactive with their mitigation and event response operations.  

Having lived in the San Francisco Bay Area, I’ve seen how utterly devastating wildfires can be to communities. California is running out of space, and people are being forced to live and work in wildland-urban interface (WUI) areas that weren’t originally planned for development. But while there is a logical reason for why wildfire risk is intensifying, seeing the devastation is sobering. I recall driving through areas hit by 2017’s Napa fire and witnessing total losses next to areas that were untouched. This gave me perspective about what it must have been like on the ground during the devastation. 

Too many of my coworkers have faced similar experiences — knowing the fear of evacuation and the hope that your house will still be standing. That’s why wildfire risk is a key focus for us here at Insurity.

Understanding the potential path of wildfires is crucial, as they can spread incredibly fast. In fact, 2017’s Northern California fires advanced at a rate of more than a football field every three seconds. Yet perimeter data has historically been generated slowly, especially with a lack of publicly available data over weekends. It’s no wonder insurers have always been a step behind with their wildfire event response efforts, and frequently left in the dark during an event, not knowing which insureds have been affected. 

Years of devastating losses have caught some insurers by surprise, and established players have suffered. The wildfire peril, traditionally viewed as a secondary risk, is now a primary risk worthy of focused attention and solutions. Now, technology is helping to shape solutions, like improved perimeter data and automated event alerts and analytics.   

See also: Wildfire Season: ‘The New Abnormal’? 

Up-to-date event perimeter data 

Advancements in NASA’s satellite imagery, for example, coupled with geospatial technology are providing insurers with up-to-date event perimeter data. Instead of guessing how a fire has grown and which insureds are affected, carriers can get regular fire boundary updates in the context of their portfolios. But, while data showing burn area and active burn spots is publicly available from sources like NASA and GeoMac, it’s not quick or easy for insurers to operationalize on their own to understand the impact.

By integrating GeoMac and NASA’s Visible Infrared Imaging Radiometer Suite (VIIRS) data with Insurity’s data enrichment and geospatial analytics platform, SpatialKey, insurers get faster perimeter updates while understanding the impact to their portfolios. With the ability to contextualize the data, insurance professionals can visualize exposure, apply buffers and filters, and understand TIV and policy exposed limits. 

Shown above is NASA fire perimeter data from the Woolsey fire in California. This data has built-in buffers set at one, two and three miles from the perimeter. Insurers can join portfolios to understand which insureds are inside the perimeter and apply buffers and filters to understand TIV and policy exposed limits. 

With the severity of wildfire events likely to continue and megafires emerging as a trend, it’s critical for insurers to be able to keep up with these events. Accurate and up-to-date wildfire perimeter data is one way insurers can implement a more timely approach. 

Automated event alerts and analysis

While up-to-date perimeter data is critical, it’s still a manual solution that requires insurers to know that an event is happening (or has happened), and then retrieve information to understand impact. But what if the information could be proactively delivered to you instead?

Automated event alerts and analysis will be a game-changer for wildfire event response by ensuring carriers stay in the know regarding events that have affected or may affect their portfolios. Analyses are executed automatically based on an insurer’s latest exposure data, as well as predetermined financial and peril-specific thresholds (meaning, anything hitting an insurer’s inbox has been prescreened and is worthy of immediate attention). 

See also: Parametric Solution for Wildfire Risk

Moving from “react and respond” to “prepare and serve” 

Using a combination of data and analytics solutions, insurers can monitor and mitigate wildfire risk — finally taking the guesswork out of what’s historically been a fast-moving and elusive risk. Insurance organizations are facing greater scrutiny as wildfire events become increasingly volatile.

How effectively you prepare for and respond to these events can either be an asset or a detriment, and you can take steps toward safeguarding your insureds while moving from "react and respond" to a "prepare and serve" approach.

Here's an analogy for you that may shed some light on how far we can still go -- and must go -- in smoothing our interactions with customers.

The analogy starts from the idea that, over time, every industry becomes a technology industry. That's sometimes expressed in different ways, notably in venture capitalist Marc Andreessen's famous line that "software is eating the world." But the basic idea is the same: Old practices in every industry give way to the faster/better/cheaper -- and sometimes very different -- ways of doing business enabled by technology, and whatever companies are most adept at the technology have a major advantage.

So, here's the analogy:

If the insurance industry were to map its user interactions onto those of the software world, I'd say we're right about where software was in 1990, maybe 1995. As you may remember, installing a big software application like Word in those days involved inserting a series of floppy disks into a drive in a certain order -- sometimes more than once -- and waiting while the drive whirred away, then finally getting a notification to proceed to the next floppy disk. Installation could easily take 20 minutes, and that assumes that everything worked right. If something went wrong, well, good luck to you. You went back to the beginning or wound up on an excruciating call with the developer's tech support.

Doesn't that sound like what a customer goes through when buying anything other than a routine policy or filing something beyond a plain-vanilla claim?

There's all sorts of paper involved, perhaps a fax machine or seven. Errors get introduced as the handwriting is misread or the data is rekeyed. Maybe something gets lost in the translation as the data moves from system to system. There are lots of phone calls and emails back and forth to sort out the problems. Then an underwriter or adjuster sends out a request for information or analysis, and the whole process stalls until responses trickle in.

The good news is that the world of technology has moved well beyond the early to mid-1990s. If you want to load even a sizable app, you just go to the app store and click. Your phone or laptop prompts you when a software update is recommended, and you can have it done while you're asleep. Not that it takes more than a couple of minutes, anyway, with no involvement for you -- and I can't remember the last time anything went wrong during an update. If you mention floppy disks to anyone under age 30, the response is likely to be, "Floppy what?"

So, my analogy suggests that there is lots of potential progress ahead of us. It also suggests that we've already come a long way.

The 1974 computer that inspired Bill Gates to drop out of Harvard and join childhood friend Paul Allen in founding Microsoft didn't even have a screen. It just had a face plate with toggle switches that you used to input data and 14 little LED lights that provided the output -- you, of course, had to be able to read binary code and know what the 1s and 0s represented by the lights actually meant. So, getting to 1990 or 1995 and floppy disks that could load massive programs and produce results on screens represented massive improvement, despite how buggy the process was.

How do we in insurance get from 1990-95 tech world to the sort of ease that technology companies provide today?

First, let's burn all the fax machines. Yes, I know about the "long tail" concept, meaning that some clients will want to use fax machines for years yet, but the pandemic has given digitization a huge boost. Let's at least pretend the machines don't exist and encourage clients and partners to interact directly with our data systems, without a bunch of paper and typists in the middle.

I wrote a story for the Wall Street Journal almost 30 years ago about the advent of online forms and waxed eloquent about how they'd save time and reduce errors. It's about time the insurance industry made an honest man out of me.

Clients will be happier, and companies will be happier, once clients can interact directly with insurers' information systems, at least on routine issues like entering data.

After burning the fax machines, the issues get more complex but are still pretty straightforward. Use public data or data from previous interactions with customers to do as much autofill as possible, both on the applicants and on the assets that are being insured. Use AI to pluck information electronically from all the various data bases, both your own and partners', to reduce the amount of manual querying and replying. Take a look at all your processes from the viewpoint of the customer, rather than based on your internal organization plans, and see what steps you can eliminate or at least accelerate. And so on.

No, you'll never get to the same smoothness that, say, Apple offers. Big Tech can enforce a one-size-fits-all standard, while in insurance, beyond the most routine transactions, one size fits one. But the industry has come a long way since the equivalent of toggle-switch inputs and readouts in binary code. If we burn the fax machines and keep pushing on other fronts, we can keep moving.

I'd bet a floppy disk on that.

Stay safe.

Paul

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

Bigger Disruptor: Lemonade or Tesla?

With its spectacular IPO, Lemonade has the attention of the insurance world, but Tesla may be the bigger disruptor in the long run.

COVID: Agents’ Chance to Rethink Insurance

The COVID-19 virus has given agents a wonderful opportunity to rethink insurance in general and their operations specifically.

AI in a Post-Pandemic Future

The post-COVID-19 world requires accelerated adoption of AI to deliver the efficiencies and augmentations of a highly digitized workplace.

Crisis Mitigation Beyond COVID-19

Whether at small companies or in massive industries, the ability to pivot to support new ways to work is key to sustaining operations.

Things Heating Up in Low-Code/No-Code

Low-code/no-code tackles three huge IT challenges: time to market for new capabilities, development capacity and managing cost.

Underwriting Wildfire Takes Extra Care

Insurers can’t rely on previous wildfire seasons or events, They need a more strategic approach that goes well beyond a single risk score.

I’ve never been a big fan of the term "disruption." I believe that a majority of insurance startups are partnering with incumbents to enable industry transformation and are catalysts for change, to be sure. But few are truly turning the industry on its head.

For instance, Lemonade is a startup that, since its inception, has positioned itself as a disruptor. The slogan is still, “Forget Everything You Know About Insurance.” The constant marketing drumbeat from the company has emphasized its different approach and has focused on appealing to millennials. And, with the recent spectacular IPO, Lemonade has the attention of the insurance world. I believe Lemonade has been very good for the industry (and it has certainly been good for the founders). But I think that Tesla has the potential to be even more of a disruptor in the long run.

This might seem an odd assertion, given that Tesla has heretofore only dipped its toe in the insurance waters, and Lemonade is four years old and on a roll. At this stage, Tesla is only a year into the California auto market as a broker backed by State National (a Markel company), with mixed results. But what has caught my attention is Elon Musk’s callout to insurance actuaries – inviting them to join Tesla to create a “revolutionary” insurance company. You don’t go on a hiring spree of actuaries if you plan to be just a distribution player. Now, on the surface, it might seem strange that insurance would be of interest to Elon Musk. To illustrate, let’s play the Sesame Street game, “Which one of these things is not like the other?”

Space exploration…Autonomous vehicles…Hyperloop travel…Battery Gigafactory…Insurance.

The answer is obvious – does insurance really have the potential to transform the world like these other ventures? Maybe not, but insurance is undoubtedly an enabler of these revolutionary advances and an essential foundation of the economy. And there is actually great potential to “revolutionize” insurance and make a lot of money in the process.

Back to the Lemonade/Tesla discussion. Starting an insurance carrier is a long play. Lemonade, with all its success, is only a small blip in the industry financial picture. Renters and pet insurance are nice businesses, but they will always be secondary lines. Lemonade has also entered homeowners, so there is much more potential there. But now they have to contend with the likes of Hippo, not just the State Farms and Allstates of the world. At SMA, we consider insurers with premiums of over $5 billion to be Tier 1. Lemonade may become a Tier 1 insurer someday, but likely not for years.

See also: COVID: How Carriers Can Recover

On the other hand, let’s consider Tesla’s prospects. Tesla is not the first auto insurance company to enter insurance and try bundling. Others have taken this approach, and, especially those in the autonomous vehicle game, have announced plans for insurance. Most still partner with an insurance company as underwriter. This has been Tesla’s initial approach, as well. Now, with stated plans to build an insurance company, the calculus changes.

Imagine yourself as a brilliant young actuary – wouldn’t it be cool to sign on with visionary Elon Musk and help rethink insurance? For that matter, it won’t stop at actuaries – other industry professionals are sure to be recruited for this venture. Underwriters (if Musk has them), adjusters, loss control engineers and others will probably join. Now, that is no guarantee of success … and the same long play dynamics will apply to Tesla as Lemonade. However, Tesla has some unique advantages. First, it has a well-respected, established brand. Secondly, it has the underlying assets that will be insured – the electric/autonomous vehicles. Third, it has the track record and energy of Musk and his enterprise.

Of course, this is all speculation – Tesla may not go full bore into insurance, and, if it does, it may not succeed for various reasons. But I, for one, would not bet against Elon Musk. 

Postscript: This blog sets up a discussion about two prominent players. There are certainly others that could be big disruptors for insurance. Three companies come to mind and have been the subject of prior SMA discussions: Root, Hippo and Munich Re. Root has shown the most impressive growth among the full-stack insurer entrants and has significant future potential as it moves into other lines and other states. Hippo has built an impressive ecosystem and a unique approach for homeowners insurance. And SMA is on record as saying that Munich Re may be the ultimate disruptor as it explores new business models, new products and broadly invests in insurtech. 

During the worst pandemic in a century, amid the most upheaval in a half-century, the insurance industry faces challenges larger than dollars and cents. Larger still is the need for insurers to have the common sense to communicate with the public, to communicate a plan of action and act with compassion. A tweet, therefore, does not count; a text does not matter; an email does not help. Not if the message is generic, the tone neutral, the spirit absent.

Insurers need to say more than the obligatory, if they even say that, because the best insurance policy for an industry—the best way to ensure the success of so many brands within a single industry—is to exceed people’s expectations. In other words, give people gifts they will cherish.

According to Benjamin Van Damme, founder of A Pearl of My Heart, gifts should be creative. The gifts that corporations give, including the gifts that insurers award workers and clients, should be personal, memorable and expressive. He says:

“Sustaining a sense of connection is essential in this time of uncertainty. A distinctive hand casting commemorates the bond between friends and family, reminding people they are not alone. We hope to strengthen the spirit of togetherness, so we may be stronger and more compassionate.”

I agree with Van Damme’s point about connection, because too many “gifts” are nothing of the sort. Too many corporate gifts in general, be they plaques or gold (plated) pens, look like what they are: soulless—and disposable—objects, which elicit little appreciation and no affection from recipients.

For insurers to weather the challenges of the present requires, well, presents; and presence. Insurers need to be attentive to what consumers want. Insurers need to be present, listening to what consumers say. Insurers need to have the presence of mind to address what consumers hope to receive.

What should be the principal concern of the insurance industry is consumer loyalty. Strengthening the loyalty that consumers have, or creating it where it does not exist, is an investment of time and effort. Through deeds of gratitude come words of praise, where insurers do good works and earn the respect of the public.

See also: COVID: Agents’ Chance to Rethink Insurance

Now is the time for insurers to lead with enthusiasm for the future. Now is the time for insurers to embrace originality, proving they have the will to succeed and the decency to lend a helping hand. Whether the hand is financial or in the form of a hand casting, or both, is critical to the reputation of the insurance industry.

As someone with more than his share of desk calendars and complimentary but worthless gifts from all manner of industries, I encourage insurers to choose creativity over the blatantly corporate. I encourage insurers to distinguish themselves from all other industries.

In creativity lies the gift of gifts: loyalty. In promoting loyalty, insurers will find consumers of great passion and influence. In rewarding consumers for their loyalty, insurers will find the power to influence the world for the betterment of all peoples.

Insurance companies long for a way to attract and interact with customers, rather than just hitting customers’ bank accounts every quarter for a premium payment or re-upping a contract at the end of the year. What if I told you that insurers could attract customers with smart home devices that generate interaction seven to 10 times A DAY -- and that customers would initiate those interactions? What if that level of involvement in customers’ lives led to a Net Promoter Score (NPS) above 50 for the insurers? 

Those numbers are in fact possible, both with homeowners and with small businesses, through an approach that incorporates IoT to help people avoid P&C risks while fitting easily into their home and work lives.

We know because we’ve seen these sorts of numbers at Notion, which we began with a Kickstarter campaign and grew through insurance partnerships with Hippo, Nationwide and others before being acquired by Comcast this year. 

While Notion partners with insurers to provide homeowners and owners of small businesses technology to monitor for water leaks, fire, theft and more, there are a variety of ways to win with smart IoT in the property/casualty world. 

In our experience, there are two keys to winning strategies: customer-centric technology and a comprehensive economic case for investment.

First, the technology should deliver benefits, such as “peace of mind,” that customers value highly even though the benefits would be hard to quantify. In our case, customers interact so frequently with the Notion app because they’re checking their system to see if the front door opened around the time their child was supposed to be getting back from school, that it is a comfortable temperature across their home, etc. Those benefits don’t show up in losses averted or claims reduced but can do an awful lot to increase installation rates, to bolster loyalty toward an insurer, to boost NPS and to create opportunities for cross-selling other services.

Every company that has led with a “prevent water damage” message has seen very little interest among consumers. Even if insurers provide water sensors for free, the installation rate can be low if that is the only use case. But technology and messages related to broader home coverage and security resonate with consumers.

Let’s walk through Notion as an example of the trajectory that the “smart home” (and “smart” small business) can take. Auto telematics long required a device to be professionally installed and focused just on discounted premiums for good drivers, and had a slow uptake, so we took a different approach: We’ve focused on a do-it-yourself (DIY) approach and on making that more-than-economic argument for insurers.

We built an affordable system where consumers can monitor their home or small business from anywhere and easily grow to fit their needs. The Notion sensors monitor for water leaks, temperature changes, opening doors and windows, and sounding smoke and carbon monoxide monitors. All the information is collected wirelessly and is made available to the user through an app on their smartphone.

Most homes and small businesses can have key areas covered with just five sensors -- total price for a five-sensor Notion Starter Kit is $199. 

Which leads us to the second key to winning strategies: a reasonable economic case for the IoT investment. Many technologies and programs aren’t there yet. For instance, a water shutoff valve that requires a professional installation may not pay for itself for 10 years -- the initial cost is a high barrier. 

So, we started from scratch and came up with a program design that produces full ROI in just under two years -- the kind of ROI that any business can appreciate. Just looking at water damage, there are about $10 million in claims each year per 50,000 homeowners policies. By investing in an $85 smart monitoring kit and program for customers, insurers can practically cut their water claims in half.

The ROI looks even better when you consider the other benefits to insurers outside water claim reduction: customer acquisition, customer loyalty, data insights and the potential for selling other services.

The large returns our insurer partners generate by preventing claims allows them to offer a kit at a discount plus offer discounts of roughly 3% to 15% on premiums to help drive adoption. Our partners say discounts could grow substantially as they gather data on losses prevented. (The high end of the discounts goes to those who fully outfit a house or small business, who have professional monitoring and whose setups can be verified by the insurer to make sure they’re actually being used.) 

While the discounts alone aren’t enough to generate full adoption even of free sensors, a curated flow of customer communication with a “what’s in it for me” message drives installation way up. (The same was true in telematics: Once messaging switched from discounts to security issues such as driving behavior, adoption finally picked up.)

While regulators were initially careful about what could be given away and what bundles should be allowed, they have become more comfortable with the IoT and understand that we’re all working together to benefit consumers. 

They have thus cleared a path for far greater adoption of the IoT, at a time when all trends were already pointing in that direction. According to Statista, the number of homes in the U.S. using smart security systems will nearly triple from 12.8 million in 2017 to 36.7 million by 2023 -- meaning that more than a quarter of U.S. homes will have them. Revenue from smart home devices is expected to grow 17% annually for the foreseeable future. 

The trend is very much toward DIY: 47% of security system owners report self-installing their system in 2019, an increase from 27% in 2014, according to Park Associates.

The pandemic seems to even be accelerating the trends, both toward the use of IoT (because people are spending more time in their homes) and toward DIY (because people have more time, without their daily commutes, because people want to keep strangers’ potential infections out of their homes and because videos and chat capabilities on smartphones make “telemaintenance” easier). 

A platform like Notion can become the hub for all kinds of services that can be bundled with hardware or sold separately to make the lives of homeowners easier -- for example, connecting a homeowner with a plumber when they have a water leak. With Notion, we have taken this one step further and created a direct integration in our app with HomeAdvisor. Once a leak has been detected, the homeowner can connect to HomeAdvisor’s network of certified professionals with one click. 

But that kind of service is just the beginning. In the same way that Tesla bundles insurance with its cars, I can imagine lots of maintenance-related services that could fit nicely into an IoT-based “protect my property” platform. When I say good night to my Google Home, it may remind me to do certain things around the house; why couldn’t insurers help inform homeowners and small business owners? 

Now there are winning structures for insurers to leverage IoT smart devices to connect and provide value to their customers -- a win for customers and for P&C insurers.

Sponsored by

When dealt a hand of cards, the goal is to play them as best you can. In other words, be constructive. The COVID-19 virus has given agents a wonderful opportunity to rethink insurance in general and their operations specifically. I'm going to start with a brief synopsis of what insurance is designed to protect.

Many writers have written that the pandemic is a Black Swan event (a few creative writers have stretched for more exotic animals, but a Black Swan is more applicable to insurance). Black Swan events were brought to the financial world's attention through Nassim Nicholas Taleb's book, "The Black Swan," which gained considerable popularity for its seemingly prescient prediction of the credit crisis. Taleb considers how luck, uncertainty, randomness and risk all coincide and how, as the subtitle suggests, The Impact of the Highly Improbable can be managed.

The pandemic was absolutely expected by the scientific community, if not by regular citizens and politicians. I think one might conclude that insurance carriers expected it, too, because of the exclusions they built into their policies. Insurance is designed for Black Swan events, but in many ways carriers, agents and the public have lost this perspective. Insurance is designed to restore the policyholder to the financial status (a balance sheet position) enjoyed immediately prior to the unexpected loss. Insurance would not be affordable if the losses were expected. Those are maintenance policies.

Moreover, insurance would not be affordable if the events were unexpected but occurred frequently. A really good example of how insurance companies have lost track of this point is in my home state of Colorado. For some reason, insurance company after insurance company has opened up in this state for property without realizing that hail happens all the time in all of the major population centers. Hail should be expected to affect a large number of properties on a fairly regular basis, if on an irregular schedule.

A good play to make with poor cards is to simply rethink and go back to the basics of what insurance is designed to do. Then, build your agency and value proposition to clients from there. Insurance is a fantastic tool for reinstating a person's wealth to its position immediately prior to a highly unexpected and relatively rare event. While auto crashes occur all the time, auto crashes per capita are relatively rare, and outside of fraud, always unexpected.

E&O claims often occur because agents fail to address unexpected and rare events. Business income coverage is a great example in this environment. Claims are virtually always unexpected and relatively one of the rarer insurance claims. Insureds are, therefore, less likely to recognize this exposure as an important insurance coverage. Agents are less likely to recognize it. too (ignoring for the moment most agents' lack of adequate understanding of this coverage). If both parties fail to recognize its importance, the odds of an insured having adequate coverage if an unexpected business income claim occurs is low.

I read a quote from a business owner who had a pandemic-related business income claim denied. He said something to the effect of, "But that is what I thought insurance was for! That is what I thought I'd bought." I don't know anything about that particular claim, but my guess is that he never read his policy and maybe even if he did read it he did not understand the need for pandemic business income coverage. There is no reason to expect he should have.

See also: 5 Transformations for a Post-Pandemic World

Humans have an incredibly difficult time understanding the unknown. Humans do not have a great ability to appreciate the importance of Black Swan events. (I encourage you to read Taleb's book "The Black Swan" and his book on fragility, "Antifragile: Things That Gain From Disorder.") Yet insurance is designed for Black Swan events. Arguably, insurance is designed for larger-probability events than Black Swan events but still at the tail end of the normal curve. This is why actuaries are employed. This is also why claim stories are so much fun and fascinating and often earn the sobriquet of, "You can't make this stuff up!" You can't make up the claims stories, because they are rare and unexpected.

This re-established insurance foundation provides the cornerstone for helping manage the agency, remotely or otherwise, helping clients and navigating insurance distribution going forward. There are two classes of insurance agents -- "order-takers" and "professionals." Agents who are order-takers work from the assumption or presumption that insureds know what rare and unexpected claims they want insurance to protect. The insured orders these coverages, and the agents obtain those coverages to the best of their ability. It's pretty simple, except that most insureds have a limited knowledge of what the unexpected events are for which they are likely to need coverage, and, in my experience, most order-taking agents are even less knowledgeable. The blind leading the blind is a great combination for eventual disputes, unhappy clients and E&O claims.

Going forward then, managing the agency should perhaps start with deciding whether your agency will be an order-taker or a professional agency. Once you make this decision, you can then best determine how to manage your agency and help your clients. Because, as an order-taker, you will not be making thorough coverage recommendations, if any recommendations at all, the key is going to be speed and low cost.

These are the benefits you will thrive upon because these are the benefits best appreciated by this class of customers. You will want to hire people focused on speed and efficiency. You will want to invest in technology that emphasizes speed and low cost. The entire agency must be focused on speed and low cost.

This may mean online quoting systems. It may also mean hiring employees who can process emails, calls, paper, etc. at a fast pace but are not skilled in insurance coverages. The technology used is different from the technology of professional agencies because coverage analysis, intimate meetings with clients -- "close" work, in other words -- is unnecessary in the order-taker environment. Employees who fit the order-taker environment will have a different personality than those who focus on coverages. Hiring specific to your model is vital.

From an E&O perspective, the historic middle ground is being eliminated due to the pandemic. The lines are being drawn more clearly than ever. Agents need to choose to operate as one type of agency or the other because the middle ground has become a dangerous trap. The best way to play this hand of cards is to fold on the strategy of following the middle ground.

The professional agent will focus on hiring people who have excellent communication skills, great insurance technical knowledge and critical thinking skills. These three skills are mandatory for "close" client work at the professional level. These people will educate clients on their exposures. Exposures are common and identified. The question is whether, once a client understands the exposures, the client wants to buy insurance for the unlikely event that an accident (unexpected) occurs relative to that exposure. The education required for this kind of service is challenging, and not everyone has the skills or patience to achieve it.

See also: Managing Risk in a Pandemic

The technology required for a professional agency is different from order-taking agencies because quality Zoom-like meetings will be far more important. The agencies will probably want to train their people on Zoom backgrounds, voice delays and other improvement protocols and will likely find ways to meet in person with clients when possible. These agencies will, more than ever, focus heavily on insurance technical training.

No universal answer exists to this paradigm change other than deciding which kind of agency you will be. Just like a hand of cards -- other than the fact that every hand needs to be played -- no universal answer exists. Be constructive and decide who you will be going forward. Decisions become much, much easier when you know your point of origination.

You can find this article originally published here.

A potentially devastating perfect storm is forming due a combination of COVID-19 fears and many parents now not getting their children wellness exams and routine vaccinations. The National Foundation of Infection Diseases has reported a 50% decline in well child office visits due to COVID-19 fears since the beginning of this pandemic. The World Health Organization just stated: “The avoidable suffering and death caused by children missing out on routine immunizations could be far greater than COVID-19 itself.”

As we approach the fall and the new school year, new flu season and a potential second surge of COVID-19 cases, there has been a dramatic decline in children receiving routine vaccinations in my home state of New Jersey. According to the NJ Department of Health Commissioner, there has been a 40% decline in the rate of vaccinations in children under two years of age and a 60% decline among children over two. 

Parents need to know that the need to protect their children from COVID-19 does not eliminate the need to protect their children from serious childhood disease like the measles, mumps, chicken pox and whooping cough. This alarming trend is just not happening in NJ; rather, pediatricians around the country and around the world are deeply concerned that proven vaccines will not be received by large numbers of children, resulting in serious unintended consequences in the spread of preventable illnesses.

The Lancet has reported a major disruption in childhood vaccination efforts in poor rural areas around the world.  During the recent COVID-19 lockdown in the province of Karachi in Pakistan, the rate of immunizations dropped over 50% compared with the previous six months. Once the lockdown was lifted, the situation improved, but there was still over a 25% decline in the rate of childhood immunizations. 

What makes matters worse in these impoverished countries are hot spots for not only preventable diseases like the measles but also polio. Pakistan and Afghanistan are the only two remaining countries where polio is still a major problem. In Pakistan, the number of reported polio cases went from 12 in 2018 to 147 in 2019.

The overwhelming challenge now faced by public health officials around the world is how to address not only the worldwide COVID-19 pandemic but the real danger of the resurgence of 100% preventable childhood diseases once thought eradicated. The World Health Organization declared in 2019 that the anti-vaccination movement was a major threat to public health. The anti-science, anti-vaccination and anti-mask movement is a dire threat to all of us.  

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

Long before the COVID-19 outbreak, 2019 was the worst year for the outbreak of the measles in 27 years in the U.S., where there were 1,300 cases in 31 states. The major outbreaks in Washington state, New York and New Jersey were all linked directly to unvaccinated people spreading the measles in airports, at ballgames, at weddings and in other public venues.

As a result, there was a major education effort, and several state legislatures voted to take on the anti-vaccination movement. In Washington state, two major outbreaks resulted in the state legislature banning personal and philosophical exemptions for the MMR vaccine. The city of Seattle provided free vaccines prior to banning unvaccinated children from attending school, which was said to be 2,000 students. 

In New Jersey, the state legislature in 2019 fell one vote short of removing personal, philosophical and religious reasons for parents not getting children vaccinated, much to the delight of the anti-vaccination protesters, who held loud protests in the state capital with slogans like “my body, my choice” and actually called members of the state legislature “murderers.” The 2019 measles outbreak in New York and New Jersey were all based in orthodox Jewish neighborhoods where people were declaring “religious freedom.” In a public education campaign, several rabbis went on TV declaring there is no religious prohibition on vaccines. None. There is no major religion in the world that has a religious exemption for vaccinations, except for the Taliban version of Islam.

The anti-science and anti-vaccination movement is beyond dangerous to all of us. As the world awaits a proven COVID-19 vaccine, the anti-science and anti-vaccination movement is already spreading conspiracy theories. 

Let’s get the facts and the truth straight. The entire anti-vaccination movement is based on a documented hoax linking the MMR vaccine to autism, which has been called “the most damaging medical hoax in the past 100 years.” (See, "To Be or Not to Be (Vaccinated)?" 4/28/15.)

These are the undisputed scientific facts about the MMR vaccine, which is considered one of the great public health success stories of all time, along with the polio vaccine and Louis Pasteur.

The MMR vaccine is 99% effective and provides a lifetime of immunity. There is a 90% chance of an unvaccinated person getting infected if exposed to the measles. There is only a 1 in 3,000 chance of a mild reaction to the MMR vaccine. The measles is, in fact, extremely dangerous and can result in hearing loss, pneumonia and even encephalitis, or swelling of the brain. 

It is completely understandable during this pandemic why parents have been afraid of going to the doctor to get their children what should be routine vaccinations. However, if parents do not believe the measles is still around and very dangerous, look at the results of the recent measles outbreak in Samoa. The outbreak there began in September 2019, and by January 2020 there were over 5,700 cases and 83 deaths. The cause was directly attributable to a drop in vaccination rates, from an already low 74% in 2017 to roughly 30% in 2018. Neighboring islands, with 99% vaccination rates, had no such outbreak. Parents need to call their child’s pediatrician office, which can schedule needed vaccinations at safe and effective times, when there are no known sick children present. 

A public education campaign to remind parents that routine vaccinations are critical should be included in the COVID-19 public health announcements from governors and state health officials in coordination with other state executive orders, such as mandating masks in public places and plans for re-opening schools in the fall. 

See also: Strategic Planning in the COVID-19 Era

Parents need to protect their own children, who then might infect other children. The Imperial College London found lockdowns in Europe saved over 3.1 million lives. The University of California, Berkeley Global Health Lab stated that without restrictions in place there would nearly 14 times as many COVID-19 cases in the U.S.  

Don’t be a knucklehead like the protesters last week outside the governor’s home in New Jersey who had a “burn the mask" protest. Wear a mask in public places, get your child the routine vaccinations before school starts and get the flu shot. You will help save lives and prevent major diseases, including your own.

In the last few weeks, another tech giant entered the low-/no-code space when Amazon announced a new platform called AWS Honeycode. While the product does not break new ground from a technology perspective and is still immature relative to the market, it has created an avalanche of media activity centered on low-/no-code technology. 

Low-/no-code is a complex space, but it’s worth the effort to navigate. It promises to address three of the biggest challenges in insurance IT: time to market for new capabilities, development capacity and managing cost. 

What Low-/No-Code Looks Like

Low-/no-code is both a development paradigm whose influence continues to broaden and a rich market segment with dozens of vendors completing for mindshare. 

As a development paradigm, low-/no-code is everywhere. It can be found embedded in CRM platforms such as Salesforce and MS Dynamics, in integration tools from vendors like Informatica and Dell, in robotic process automation (RPA) tools like Blue Prism, in digital experience platforms (DXPs) such as Liferay and Sitecore and even in some policy administrations systems.

The market segment is often referred to as Application-Platform-as-a-Service, or aPaaS, because most solutions are now deployed in the cloud using SaaS licenses. Vendors such as Mendix, OutSystems, Microsoft (PowerApps) and now Amazon market their products as general-purpose development platforms to compete with (and eventually displace) traditional development environments like Java and .NET. 

While some of these vendors include industry-specific functionality, most market to a range of industries and seek to compete on horizontal capabilities such as integration, workflow, native mobile support, user experience (UX) and the strength of their partner ecosystem/network. A recent Novarica report covers this segment.

Insurance-Specific Variations

The insurance industry also has its own industry-specific low-code platforms that Novarica refers to as insurance digital platforms (IDPs). Their DNA can be traced back to the agent portal. When core vendors began to offer portals as part of their administration suites, they found that adoption was lower than anticipated, especially among midsize and large insurers who chose to build instead. Packaged portals were seen as too restrictive in terms of customer experience (where insurers like to differentiate) and difficult to extend beyond the basic capabilities offered by the vendors’ back-end systems. 

Vendors answered this need with the IDP. Digital platforms include pre-built integration to a vendor’s back-end system but are typically stand-alone and licensed/deployed independently. Their focus is insurance digital experience (web and mobile) applications, but they can be general-purpose enough to tackle a wide range of front- and back-office problems across the enterprise. 

Like the horizontal players, IDPs often feature a rich partner ecosystem or network of plug-ins and canned integrations, but these tend to focus on insurance-specific capabilities needed for submissions, underwriting, rating, accessing third-party data and payment processing. Examples of IDPs include Majesco’s Digital1st and Sapiens' DigitalSuite.

See also: Agile, Organizational Realignment

Does Specificity Matter?

The question is whether any of these marketing distinctions really matter. The answer is, as usual, “it depends.” While low-code platforms do overlap in many of their core capabilities, differences become clear when considering the specific uses that an insurer needs to support. 

For insurers already running a vendor’s core systems, there can be compelling advantages to using the IDP from that vendor, especially when the primary use case is building agent or customer portals. If integration with multiple back-end systems is needed, insurers should also consider a broader range of options including the horizontal players. Some platforms are better suited to workflow/BPM, others are better for mobile development and still others excel in building customer-centric applications. 

For an insurer focused on building customer-facing websites that require personalization, content management, social media integration and some lightweight application development, a DXP with low-code technology may actually be the best fit.

Another consideration is the target developer. Some vendors tout the benefits of “citizen development,” where line-of-business resources trained to build their own apps. Other vendors aim to make the traditional developer more productive, and some focus on enabling a mix of both with powerful features for business/IT co-development. 

A final differentiator is licensing and pricing. While horizontal low-/no-code tools and DXPs compete with each other at scale, IDPs are often priced differently, and bundling with a core system purchase can be a pricing consideration.

A recent Novarica snap poll of insurers found that about 50% were using or had piloted a low-code platform. Novarica projects that by 2025, at least 80% of custom development projects in the industry will involve low-/no-code technology. All the big tech players now have a foothold in the space, and that makes it an area insurers should watch closely.

The COVID-19 pandemic put businesses under extreme pressure and has led to a massively accelerated digitalization of the workplace. The silver lining is the opportunity to develop more efficient, digital operating models by reinventing work and leveraging the power of artificial intelligence and automation.

Artificial intelligence and why it matters

Hype has for some time surrounded AI, but promises first made more than 60 years ago are now finally being delivered. What has been the game changer responsible for putting AI back on the map and on the verge of changing, well, just about everything? The answer is deep learning, an old idea that found an opportunity to mature in the late 1990s and early 2000s. 

Based on learning tasks using artificial neural networks inspired by the biological nervous system, deep learning technology is highly advanced and requires vast volumes of data and computing power only recently made possible. By 2030, AI is estimated to contribute as much as $15 trillion to the world economy, making it the biggest commercial opportunity in today’s fast-changing economy. Indeed, the new realities of the post-COVID-19 world require the accelerated adoption of AI to deliver the efficiencies and augmentations of a highly digitized workplace.

Figure 1: AI’s projected impact on global GDP

For more than 250 years, the fundamental drivers of economic growth have been technological innovations, the most important being general-purpose technologies such as electricity and the steam engine. Now it is AI that stands out as the transformational technology of our digital age, which, as with previous GPTs (general purpose technologies), is expected to trigger waves of complementary innovations and opportunities.

What tangible opportunities does AI offer businesses right now? We are currently witnessing the first wave, usually as a result of companies automating tasks and processes, reducing costs and creating more efficiencies. The work dividends from this first wave are mostly positive. Low-level, tedious, hazardous and boring tasks are taken over by machines, freeing time for the humans to do the higher-level, more productive tasks. 

Significant shifts in computing power and availability of large-scale data advance the development of AI applications that continue to rapidly grow in complexity and autonomy. AI’s autonomous nature and the way it is trained on data - essentially learning from the mistakes made in the past - make the technology both an opportunity and a risk.

See also: 4 Post-COVID-19 Trends for Insurers

AI at work

As organizations deploy technologies that automate work or introduce machine intelligence in the organization, the limiting factor in translating these innovations into real business benefits will be talent. Beyond the designers, developers and data scientists that everyone is battling for today, companies will need to explore what new roles are likely to emerge in digital disruptors.

As with many professions, underwriters have been doing a job one way for decades and now are expected to do things differently. The role is primed for transformation as AI is poised to reconfigure and augment insurance underwriting. Fueled by an explosion of data, low-cost data storage and open source technology, AI has the potential to help underwriters analyze an incredible amount of information, find red flags and help make more accurate decisions. 

While there is no expectation for human underwriters to be replaced, as their judgment will still be needed for complex cases, future underwriters will be expected to work alongside AI systems to ensure all risks are accurately measured and priced. As underwriters increasingly interact with automated AI systems, there will be a need for new skill sets to develop, with some old skills potentially becoming obsolete.

Meanwhile, demand for these new skills far outstrips supply at present, which indicates that the main roadblock to insurers capturing the full value of this new technology is not the science, but the human change management factor. It is a tall order, but starting by having the right people with the right skills in the right roles will far outweigh picking the right technology, algorithm or latest start-up to work with.

More digital, more human

One of the major transformations of the digital age is to see more companies adopting a flat working structure, where career paths are less clear and the turnaround of young talent greater. In this new environment, a next-generation operating model that supports the opportunity to learn skills, to have thought leaders provide mentoring and to involve new staff in meaningful projects will be critical to attract and retain the best digital talent. 

By moving beyond a one-size-fits-all approach to human resources and talent management, digital workforce platforms can help create the conditions in which employees feel energized by their work, valued by their organization and happy in their environment.

Google and Apple are examples of early adopters of digital workforce platforms that built ecosystems allowing them to innovate, take advantage of new technologies to cut costs, improve quality, build value and respond quickly to the fast-changing and rising digital expectations of consumers. How can this model be replicated across other industries?

The answer may depend on the ability of corporate leaders to restabilize the workforce — and to reconceive organizational structures — by using the very same digital technologies that have destabilized it in the first place. The incoming AI revolution should reinforce, not weaken, the uniquely human characteristics that define how we work, particularly in the way that we collaborate, communicate and develop relationships. To fully exploit emerging digital capabilities, most organizations will continue to depend on people, with human skills actually becoming more critical in the digital world, not less. 

See also: Stop Being Scared of Artificial Intelligence

As tasks are automated, they tend to become commoditized; a “cutting edge” technology such as smartphone submission of insurance claims quickly becomes almost ubiquitous. In many contexts, therefore, competitive advantage is likely to depend even more on human capacity, on providing thoughtful advice to an investor saving for retirement or calm guidance to an insurance customer after an accident.

AI is likely to be one of the biggest game changers in insurance history, offering a wide range of opportunities from faster and more efficient claims management to a greater variety of on-demand insurance services. As organizations transform to thrive in a digital environment, their success will be affected by how well they integrate their workforce into the transformation journey and manage the tension between the constant drive to innovate and improve and the new governance, compliance and regulatory risks created by new AI technologies. Digital transformation requires the overhaul of culture beyond technology updates or process redesign to reap the anticipated benefits.