"California is the lab for managing exposure to wildfire risk," according to Lynn McChristian, a professor of risk management at Florida State University. If carriers and reinsurers can make it there, they can make it anywhere.

The past several years have seen a steep increase in the severity of wildfires, with the 2017 and 2018 seasons causing $24 billion in insured losses in California alone. Rates are climbing there, and coverage is dropping—there is clearly insufficient wildfire coverage to meet market demand, especially in high-risk, wildland-urbane interface (WUI) communities. 

These historic losses, combined with insufficient solutions for managing wildfire risk, mean insurers are trying to get a handle on their wildfire portfolio accumulations and gather perspective on relative risk. Simply put, the old way of doing things has been proven not to work—and insurers are demanding better. 

The flaw with historical wildfire risk management: Fires don’t burn in a circle

The California wildfires illuminated that many companies do not have clear best practices around managing wildfire risk, primarily because it has often been considered part of wider policy terms.

One solution is to limit accumulations between highly correlated areas of wildfire risk. Historically, insurers have looked at their concentrations of wildfire risk at the county level, along with using ring accumulations as a tool to assess risk. But fires don’t burn in a circle, and they don’t know postal code boundaries. Now, RedZone, a wildfire modeling company, has used millions of wildfire simulations to identify burn patterns across the landscape to create areas called “correlated risk zones.”

See also: Parametric Solution for Wildfire Risk

These zones are essentially regions that look completely separate but, statistically, burn together. They provide a logical and credible alternative by which to manage portfolio risk accumulations, alongside traditional loss modeling techniques. A more consistent approach to managing capacity can also improve risk-based pricing.

Solving a portfolio-scale problem requires changing the way we think

“Models have focused on risk at specific locations, but this is a portfolio-scale problem,” RedZone CEO and founder Clark Woodward says. 

The above screenshots show RedZone’s models for use in portfolio-level analysis. On the left is RedZone’s burn probability layer. When combined with the image on the right, which is RedZone’s hazard control zones, you can develop a firmer understanding of portfolio composition when it comes to accumulations and likeliness to burn. 

Accumulation analysis involves defining zones of correlated risk—where properties are likely to be damaged by the same event in the same year—and estimating the probable maximum loss (PML) within each zone. By evaluating accumulated wildfire risk, insurers can assess where additional properties may be insured with minimal increase in exposure to extreme losses. 

Reinsurance broker Willis Re has also brought to market a new methodology for wildfire underwriting and customer-specific portfolios. By helping carriers understand not only individual risk selection but geographic areas that are driving up their PMLs, Willis Re can, in turn, help them diversify their portfolios and drive down reinsurance costs.

Practical innovation that can be deployed now  

It’s taken a beat—and a harsh reality check—but better wildfire risk management strategies are now coming to fruition. Providers like RedZone, Willis Re and Insurity are working collaboratively to create solutions, like the correlated areas of risk discussed here, that provide better, more logical ways of managing wildfire accumulations.

This technology can be quickly deployed and implemented alongside traditional risk management strategies. This allows insurers to avoid disruption while employing a consistent approach to managing capacity across both underwriting and portfolio management and, ultimately, better serve and protect insureds against wildfire risk.

In the mess that is flood insurance in the U.S., a bright spot emerged late last month when First Street Foundation released a major report on the issue, along with a model that will go a long way toward making assessment of flood risk more accurate and transparent.

The report serves first and foremost as a wake-up call. It says, for instance, that 70% more homes are within a “100-year” flood zone than are designated as such by the the Federal Emergency Management Agency (FEMA). That means 6 million households face flood risks they don't anticipate, yet aren't eligible for the National Flood Insurance Program. In Chicago, 13% of properties are at risk, according to First Street Foundation's report, while FEMA puts that figure at less than 1%. The report says Washington, D.C., and Utah have five times the risk that FEMA sees, while Wyoming, Montana and Idaho have four times the risk.

Those sorts of figures are quite the clarion call, but First Street Foundation goes even further by providing the beginnings of a solution: data. Its model evaluates the risk for 142 million properties in the continental U.S., based on an exhaustive array of different inputs that not only are as accurate as possible for today but that project how risks will develop because of climate change. The model lets you search any address for free.

The model from First Street Foundation, a nonprofit research and technology group, should provide short-term benefits while laying the groundwork for smarter long-term policy decisions.

In the short run, potential buyers will understand their odds better and can either pass on a higher-risk property or can mitigate the risks by buying insurance or retrofitting the building. Banks will see the risks more clearly when writing mortgages -- and some 30-year mortgages written today will still be in force in 2050, by which point the report projects at least 11% more properties will be at substantial risk of flooding. Insurers will price more accurately. Government -- the 800-pound gorilla on flood policy -- will have a better handle on what public works to undertake to protect vulnerable areas and what areas to steer clear of because the flood dangers are just too high.

(My entirely unrepresentative check on homes where I've lived over the decades struck me as spot on: All were ranked at the lowest level of risk, except for a condo I owned in Hoboken, N.J., that included the ground floor and that, in fact, flooded twice in the decade I owned it.)

In the long run, better information should allow flood risk to be allocated in a mostly rational manner, with homeowners and insurers mostly splitting the liability, but with government in the background to help with out-of-the-blue catastrophes.

We've all heard the stories about homes on the coast that get wiped out by storms, then rebuilt, only to be wiped out again, sometimes more than once. Having more accurate data should lead, in time, to underwriting decisions and government policy that reduce or even eliminate such craziness.

First Street Financial describes its report and model as a necessary but insufficient first step. That sounds right. The report is insufficient on its own because lots of other companies and groups will have to finetune the group's data and, in general, deepen our understanding of flood risk. At ITL, we've long appreciated the work done by reThought and Hazard Hub, among others, but many firms will have to step up. And regulators, not known for turning on a dime, will need to become comfortable with using data that exists for each individual property, rather than thinking in broad, imprecise terms like flood plains.

But the report is a necessary, and very welcome, first step.

Stay safe.

Paul

P.S. Here is an intriguing piece from a sister publication, Risk & Insurance, on how insurance could help address systemic problems in police departments. The idea would be to require that police officers carry professional liability insurance. Police departments would cover the average cost of the insurance, but each officer deemed a high risk by actuaries (based on number and type of civilian complaints against them, for instance) would have to cover the additional premium payments. The hope would be to price bad officers out of work before they could do something that would wind up on the news.

I'm not at all sure the idea would work. Institutional forces such as police unions would resist like crazy, and there is surely enough uncertainty about how to weight risk factors that they'd be able to piece together an argument. But I found the idea innovative, so I figured I'd share the article. Maybe there's a way to build on the idea.

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

4 Post-COVID-19 Trends for Insurers

It’s not all gloom and doom. A crisis usually functions as a great breeding ground for innovation.

The Case for Paying COVID BII Claims

Is it reasonable to assume coverage for a COVID-19-related BII claim in the absence of a virus exclusion? The answer has to be, yes.

How Risk Managers Must Adapt to COVID

To modernize at the scale and speed required, ​"low-code" application development tools should be incorporated within the enterprise.

COVID: How Carriers Can Recover

Does RFP stand for “Request for Proposal” or “Really Frustrating Process?” Carriers can and must do better.

Strategic Planning in the COVID-19 Era

As insurers develop plans for 2021, the question is, where to start? Traditional processes may need to be supplemented with scenario planning.

ERM Shows Its Worth in Pandemic

Companies with sound ERM practices were better-positioned to deal with the pandemic than those with less sound or no ERM.

Although some say COVID-19 is a black swan event, it really is not. Pandemics have occurred in the recent as well as the remote past. A clearly articulated description of pandemic risk can be found in the World Economic Forum’s, The Global Risks Report 2019. “The spread of infectious disease” was among the top 10 risks listed, based on impact. There are estimates of the cost of a pandemic in one of the special chapters in the report, though these may look small compared with what COVID-19 might actually cost.

In the The Global Risk Report for 2020, “infectious diseases” is again among the top 10 risks. That report describes the readiness of countries to deal with epidemic or pandemic and cites a Nuclear Threat Initiative study that concluded that “no country is fully prepared to handle an epidemic or pandemic.”

The World Economic Forum’s (WEF) annual meeting in Davos, Switzerland is attended by government, business, scientific and other leaders from a plethora of countries. The ideas and data developed by its staff and contributors are widely distributed and well communicated. 

The WEF is not the only organization or individual to warn about pandemics. Bill Gates gave an excellent TED talk about pandemics in 2015 that has now gone viral on the internet. Heath organizations, think tanks focused on health and other types of organizations have put out the warning, as well. 

In the face of these warnings, it is puzzling as to why has there been the lack of preparation witnessed in some sectors. On the other hand, many major corporations reacted speedily and effectively to the challenges presented by the pandemic, even if they had not had it among their list of top risks. The reason they were able to do so rests, in large measure, on these companies’ adoption and implementation of enterprise risk management (ERM). 

ERM’s Premise

ERM is a process that addresses both operational and strategic risk across all facets of an organization by identifying, prioritizing, mitigating and monitoring risk to ensure that the mission and strategy of the organization can be assured. Below are the numerous ways ERM has proven its worth in ameliorating the potential adverse effects of the pandemic, whether the risk was fully recognized or not.

See also: How Risk Managers Must Adapt to COVID

How ERM Has Mitigated Pandemic Risk Among Practicing Companies 

A robust ERM implementation includes having both a business continuity and a disaster recovery plan. These plans enable companies to 1) assemble key decision makers immediately to approve responsive actions, 2) communicate to employees quickly and 3) move to “work at home” conditions without too many glitches. Many companies have indeed moved to a “digital only” environment with employees working at home. When this was not possible, companies rapidly put guidelines in place to create social distancing and other modes of worker protection.

ERM places a heavy emphasis on information technology security. Thus, as companies migrated to more work at home, employees already had cyber training. IT staff have implemented strong controls on aspects such as accessing systems and cloud security. Further, cyber insurance products have been purchased. 

ERM also includes having a solid handle on supply chain risks, meaning that supply chains are well-documented and diversified and that supply alternatives lined up. A number of ERM practitioners moderate the parameters of their just-in-time production and ordering to allow for a certain amount of inventory to be available in the event of a catastrophe. However, even a company following ERM best practices can experience supply difficulties and losses when a pandemic is truly global and lingering, but less so than others.

In addition, ERM-managed companies tend to have very solid financial underpinnings in terms of capital levels, credit lines, investment portfolio diversification, etc. The "however" in this case is that many small businesses are unable to have as substantial a financial foundation as larger ones, and even large companies with solid financials cannot sustain a severe drop in revenues for consecutive months. Nevertheless, to the extent that practicing ERM resulted in stronger financials, companies were better-positioned to withstand the financial impact of the pandemic.

Further, ERM fosters keen focus on reputation risk. Companies with dynamic ERM practices understand the need to aggressively protect corporate reputation. As such, many of such companies widely communicated what they were doing to protect all stakeholders from the effects of the pandemic, modified their advertising to take a more sober and caring tone and introduced a new level of caution in all they did.

See also: COVID: How Carriers Can Recover

An Example for Others

Governments and healthcare institutions could have benefited from ERM or more robust ERM. The list of mitigations that could have been in place is legion. For example, stockpiles of personal protective equipment and respirators could have greater, the number of ICU beds could have been higher, protocol for where to treat patients who contract the virus could have been drafted in advance and treaties among co-operating countries that address warnings and the closing of borders in the event of an outbreak could have been drawn in advance. 

It is hard to argue that companies with sound ERM practices were better-positioned to deal with the pandemic than those with less sound or no ERM. The benefit in dollars and cents may not be able to be determined accurately, but the benefit is real.

No one will mistake 2020 for just another year. The turmoil caused by the pandemic, lockdowns and social unrest is unlike any other year. Businesses, individuals and governments have all been forced to make dramatic changes and adapt to new realities.

The P&C insurance industry has responded admirably amid the chaos and continues to adapt to the evolving environment. As insurers develop strategies and plans for 2021, the logical question is, where to start? The traditional planning processes may need to be supplemented with new approaches, given the great uncertainty brought about by the events of 2020. One approach to consider is scenario planning.

Scenario planning is most valuable when there are considerable uncertainties regarding the future. By definition, strategic planning always has to deal with an uncertain future. However, a new set of variables is now layered on to the traditional factors that influence strategic decisions. In a new research report, SMA has evaluated a wide range of variables and has developed four scenarios for the future for P&C insurers. P&C Insurance Post-COVID-19: 4 Scenarios for the Future, looks at the implications of different possibilities for economic recovery and the nature of digital transformation in the world at large. The four resulting scenarios that SMA has described are:

• Survival of the Fittest: In this grim scenario, insurers would be forced to adapt to decreased demand and growth by cutting back the workforce, expenses and investments in digital transformation and innovation.
• Digital Prevails: In this possible future, the pandemic would be embraced as a change event, and the lessons learned would be catalysts for finding creative ways to invest.
• Back to the Future: The world of P&C insurance would be similar to what it was like pre-COVID-19.
• Innovation Abounds: A robust economy and an acceleration of digital transformation in the world will require insurers to take innovation to the next level and accelerate their own transformation.

See also: How Risk Managers Must Adapt to COVID

What would each of these potential scenarios mean for the industry as a whole? For individual insurers? For different lines of business and business areas within an insurance company? That is the essence of scenario planning.

I wish I could travel to the future so that I could tell my clients what future they should plan for. But because time travel is not available yet, the next best thing is to engage in scenario planning to help think through the implications and strategic responses for various possible futures, then use that thinking as input into the traditional strategic process.

Because of COVID-19, carriers are reeling from the moves they have to make to mitigate loss and churn, accelerate digital transformation and automation efforts and improve safety.

The pandemic caused a dramatic reduction in consumer driving with fewer cars on the road, for instance, and many auto insurance carriers issued partial refunds to policyholders. In early April 2020, Allstate reported it would return 15% of monthly premiums, more than $600 million, to auto policyholders to compensate for reduced driving due to state-issued stay-at-home orders. Most carriers also began to extend payment grace periods.  

These swift moves were designed to minimize churn, as policyholders look to save money by reconsidering coverage limits or even reducing the number of vehicles they use. These changes are likely not just short-term. The impact of COVID-19 on the economy is expected to be long-lasting and will more than likely result in the reallocation of jobs, workers and capital across firms. The unemployment rate rose to 13.3% in May compared with 3.5% in February just before the pandemic hit, as reported by the U.S. Bureau of Labor Statistics.  

What else can insurance carriers do? 

To survive and thrive during this unprecedented time, carriers must empower economic recovery and innovate and reimagine business models and services, while serving policyholders’ rapidly changing needs. Retrenching through innovation is an important and necessary step. In my experience, one way to do this is by implementing a process known as "innovation groups" that spans the organization.

Properly structured, innovation groups increase the efficiency of work processes and empower employees. If innovation is too tightly concentrated in specialized departments such as strategic innovation teams, for example, or too tightly aligned with corporate venture interests, companies generally fail to leverage the deep knowledge and expertise of day-to-day operators. The best opportunities for innovation and new technology partnerships — those that truly drive a business forward — come from the active involvement of the people who are closest to the affected end-user and are most familiar with the incumbent process or technology and its deficiencies.

To succeed with a company-wide innovation process, companies must also consider culture and look for ways to make things work as opposed to reflexively saying “no” to challenging change. The most innovative companies have a similar formula for success:

1. They forgo hierarchical authority in exchange for collaborative teams that value data and divergent creative thinking;
2. They create a process and an environment where employees feel safe to bring (contextually focused) ideas without fear of judgment; and
3. They reward bold ideas that challenge the status quo, even if they fail.

Cultural shifts like these do not happen organically or overnight, so carriers must be committed.

We work closely with many of the top insurance carriers to create and implement technology-based solutions. So, I’ve provided a few suggestions based on our experience working with carriers for innovating through disruptions that can drive your business forward.

Leverage third parties to increase carriers’ technology capabilities

The insurance industry was already undergoing a significant technological shift before this pandemic. However, insurance has historically been slower than other industries to shift systems and applications to the cloud, which offers much greater bandwidth and capacity than traditional data centers. According to Forbes, many digital-first business models are the product of increased collaboration between traditional insurance companies, testing new business models, and revenue streams powered by new technologies. 

See also: Evolving Trends in a Post-Covid-19 World  

Insurance carriers are experiencing pressure to come up with solutions faster. Working with third parties accelerates innovation and allows carriers to focus on enhancing their traditional value proposition with expanded services to meet new customer expectations and the changing behaviors of a post-COVID world.

Most importantly, technology solutions can reduce operational costs by preventing fraud and automating services, freeing employees’ time for initiatives that provide more value and allowing insurance agents to acquire and maintain business more efficiently. 

Look for new ways to easily and quickly deploy AI across the business to increase accuracy and speed and to decrease costs.

Artificial intelligence (AI) has improved operations in multiple sectors of the insurance industry by lowering costs, driving efficiency across the business and enhancing the customer experience. If you’re not taking advantage of AI now, it is of utmost importance to start doing so immediately. 

According to Accenture, insurance executives believe that AI will transform their industry, with insurers investing in AI to empower agents, brokers and employees. They aim to enhance the customer experience with automated personalized services, faster claims handling and individual risk-based underwriting processes. 

Roadside assistance programs, for instance, are benefiting from AI, machine learning, automation and data transparency. For many insurers, roadside assistance is one of their highest-volume claims. So it’s vital to offer an omnichannel touchless claims process (voice, web, mobile with “hands off”) to AI-powered chatbots that provide customers with real-time information during a roadside service. New technologies for deep provider profiling and dispatching are also crucial. These digitalization efforts improve the overall roadside assistance experience and make it far more efficient. 

Leverage insurance carrier and partner data more effectively to make more informed decisions.

All companies can do a better job of leveraging data. Leveraging data helps insurers make better and more informed data-driven decisions with regard to pricing, risk selection, fraud, claims and identifying trends. 

Carriers can be more successful in this area by working closely with their third-party partners to design and implement data feeds or warehouses where relevant data is continuously updated and exchanged in a real-time environment. Introducing or evaluating new technology systems and partners is also an excellent way to rethink or update your data strategy. These efforts can unlock sources of data that were previously unattainable and, thus, not actionable. When vendors and clients work together to share data and operate transparently, they quickly become “partners,” with shared objectives and outcomes. They continuously hold each other accountable and are more likely, and more quickly able, to uncover insights.

Fraud is another area where insurance carriers can increasingly use data. Especially in difficult economic times, “bad actors” may look for ways to gain financially from fraudulent claims. Fraud is most effectively detected through artificial intelligence, which can increase efficiency and accuracy without adding headcount. 

Improve the RFP process, which is largely seen as broken and lengthy by startups and innovative companies, to speed your process. Focus efforts on testing/piloting as quickly as possible. 

Does RFP stand for “Request for Proposal” or “Really Frustrating Process?” That depends on whether you’re asking insurance carriers or startups.

Carriers, like many others, are used to using RFPs in their procurement processes. These RFPs have worked well over the years, comparing generally commoditized solutions in an apples-to-apples fashion. They shield operators from situations that might otherwise introduce bias (.i.e, the “procurement wall”), while also aiming to create a fair and equal environment for vendor competition. Sounds great, right?

Not if you’re a startup. By definition, startup companies are funded by investors that believe in a “moonshot vision” and want to see “disruptive innovation.” Investors don’t invest in startups with solutions that only marginally improve the status quo. Now, consider a startup with a highly differentiated solution. How is it supposed to explain that differentiation in a highly structured RFP document or web form in which the questions are often outdated or incorrect, answers are pre-canned or the startup has just 140 characters to explain its wildly different business model?

Analysts have documented that insurtech opportunities frequently fail to reach the test or pilot phase due to “internal difficulties.” And when the procurement process doesn’t actually evaluate a solution, it isn’t much of a procurement process, is it? Imagine trying to compare a potential switch from Yahoo search to Google search in the 1990s. What would that RFP look like? What questions would it have asked? “How many website categories do you support?” “How many human curators add links each day?” “Include screenshots of the search box.” Anyone that tried Google search would have spotted the difference in the quality and usefulness of search results immediately. Would the RFP have communicated this difference?

See also: Step 1 to Your After-COVID Future  

To ensure your RFPs aren’t inadvertently preventing your organization from evaluating truly transformative technologies, focus on relationships and culture fit and, most important, try the technology. Make decisions based on the results. Revisit processes and make sure they open doors for innovative startups. The carriers that focus not only on fixing these “old” processes, but also introducing “new” ones will out-innovate those that do not. Some of these new processes could include startup engagement, integration and staging environments, sandboxes loaded with sample data, APIs and standardized/modern security audit processes,

A catalyst for change

The transformation of the insurance value chain as we know it — from policies, pricing and distribution to underwriting and risk management through to claims servicing and payments —will be accelerated by this pandemic and the resulting economic downturn. Use this opportunity as a catalyst to change outdated processes and technology, implement thoughtful innovation processes, seek high-value partnerships in the rapidly expanding insurtech industry and evolve company culture to come out ahead where others may stay behind.

Risk managers who specialize in catastrophe planning and pricing are coming to grips with the idea that the financial cost of today’s pandemic will dwarf last decade’s​ ​historic​ losses from natural disasters and cyber hacking. According to researchers​, insurers kept pace last decade, saving lives and mitigating the economic hit, through increased use of data analytics and technology in risk modeling and claims processing. Today, the global scale of the pandemic’s economic fallout makes it more urgent for insurers to adopt and upgrade their digital enablement strategies quickly.

But, given the industry’s large base of cumbersome legacy systems, insurers notably​ ​lag behind other market sectors in adopting these much-needed innovations. To modernize core risk management systems and future-proof policy underwriting processes at the scale and speed required, ​experts​ say low-code application development tools should be incorporated within the enterprise.

“Low-code”— a visual development approach for building software using drag-and-drop components that is transforming the way applications are built — has been​ ​vetted​ by analysts as a powerful and effective means to reach a strategic end. For risk managers, that goal is to jumpstart the targeted use of next-generation capabilities, including cloud-based software deployment, artificial intelligence and augmented reality/virtual reality, all of which can be integrated into legacy systems with low-code tooling. Each has a specific way of empowering lean teams of specialists to handle the coming spike in claims, sort through market confusion, conduct complex tasks remotely and assess new sources of risk, while relying on core systems to maintain daily operations.

How Low-Code Bridges the Gap

First, a robust, low-code development platform enables a diverse talent pool of business experts to collaborate with IT teams and coding professionals. This approach captures the knowledge, expertise and iterative feedback of business-focused experts throughout the entire software development lifecycle, enabling quick deployment of customized, targeted software for web and mobile use.

Second, the underlying architecture of low-code platforms prioritizes integration, connectivity and openness. This enables enterprises to extend their digital capabilities with next-gen innovations while keeping their legacy systems’ core clean and secure.

Here are four aspects of technology enablement that empower risk managers to handle newly scaled-up demands and position the enterprise for success in the “new normal.”

The Cloud Enables Resilience

Compared with other business verticals, the insurance industry is late to adopt and fully leverage cloud-based software deployment. A 2019​ ​Deloitte survey​ on insurance trends found that nearly half of all respondents — 48% — were comfortable with a three-year time frame to adopt cloud technology.

But pandemics have a way of rewriting the rules. Today, risk managers are working remotely and require access to data and workflow processes often managed on mainframes. More than one insurance firm recently experienced operational delays when its data centers were hit with connection challenges. Ops teams were not allowed to go onsite to restart these systems until state officials modified their shelter-in-place orders.

In contrast, cloud-based operations are highly resilient. By design, the cloud enables business continuity from small and large interruptions, with a rolling system of global availability spread across geographically dispersed locations. Cloud-based operations today play a vital role in enterprise business continuity, including an insurer’s own disaster recovery strategies.

The low-code platform is cloud-native, offering the security of housing systems remotely and enabling seamless workforce access from anywhere. Regardless of what triggers a systemic shutdown, cloud-based systems will mitigate the impact.

See also: Where Were the Risk Managers for King’s Landing?  

Multi-Cloud Deployment Options Add Security

The majority of insurers have delayed cloud adoption due to data security and regulatory compliance concerns. To date, many firms still place their trust in on-premises data centers. However, cloud providers have evolved their product offerings to meet a wide range of enterprise cloud deployment strategies.

Companies requiring maximum security can adopt a fully private cloud model, or a hybrid model with the ability to “burst,” moving things to the public cloud when disaster hits or when demand spikes. Risk managers should also consider that the major cloud providers have the resources to hire the world’s best security engineers, a valuable and cost-efficient means of supplementing internal security capabilities.

AI Accelerates and Automates Contract Liability Assessments

As closures, cancellations and supply chain disruptions affect businesses, policyholders will file more and more claims. Risk managers also face uncertainty from mounting legal challenges, as underwriters are pressured by state governments and organizations to use business continuity policies to cover losses from government mandates to shelter in place, overriding existing contracts.

Business continuity policies are highly complex legal documents. Enterprise legal teams can quickly run out of bandwidth to evaluate contract liabilities triggered by the pandemic. While it is incumbent on brokers and underwriters to analyze existing contract language to map out covered risks and exclusions during these extraordinary circumstances, they need help to get it done accurately and in a timely fashion.

Applications built with low-code tools can integrate back-end systems with AI and natural language processing tools to review and flag contract language and risk mitigation strategies to ensure proper coverage. Here again, collaboration is key. Input from risk managers, executives, legal experts, process executors and IT professionals is needed to map out a firm’s current level of risk exposure, evaluate its preferred risk appetite and adjust strategic planning. Because it employs a visual “language” understandable by both technical and non-technical personnel, low-code is a powerful collaboration tool for conceiving, building and deploying digital solutions that address the massive disruption triggered by the pandemic.

Quality Assurance and Training Can Be Digitized

The limited number of risk management specialists is a challenge for the industry. Their ranks will never be large enough to thoroughly execute the tasks of onsite assessment and analysis, especially during and in the aftermath of a pandemic.

Risk managers should already be working with a checklist of qualitative items, including operational risks and associated controls, plus event and escalation triggers for risk identification and measurement. Too often, these essential processes are paper-based or stored in Excel documents. One solution to streamline these processes would be a customized mobile application combining a digitized checklist with a time-stamped photographic inventory of a plant or facility. Such an application would also improve training, documentation and knowledge transfer when new risk managers join the team.

See also: 3-Step Framework to Manage COVID Risk  

With current restrictions on business travel, the case for augmented reality tours through plant operations and factory floors makes economic sense. It may sound futuristic, but low-code developers have already integrated augmented reality into warehouse management tasks, insurance claim workflows and even cancer detection by radiologists. Similar capabilities could be leveraged by the risk management industry to confirm a range of safety standards and to analyze visual information that may require a specialist.

Collaborative Digital Initiatives to Power in the New Decade

With revenue taking a big hit, it’s key to remember that risk and recovery are two sides of the same coin. To speed the recovery process, risk professionals must help the enterprise understand the risk profile of every potential customer and reduce the overall risk profile of the organization.

Low-code application development in the cloud, along with AI, AR and other ascending technologies, can bring visibility to otherwise hidden relationships and liabilities, while ensuring that data is understood, available and actionable Risk managers and C-suite executives need to champion innovative technologies that can scale up an effective response and protect the bottom line, speeding the pace of digital adoption from ​later​ to ​now.

The property insurance industry has been steadfast in its position that COVID-19 does not constitute a “risk of direct physical loss,” the coverage trigger for business interruption (BII) coverage under the Insurance Services Office (ISO) “Special Causes of Loss” property form. 

However, this position raises the question: If a virus does not pose a “risk of direct physical loss,” why did the ISO (the same group that drafted this insuring agreement) feel a need to develop form CP 01 40 07 06 titled "Exclusion of Loss Due to Virus or Bacteria," which specifically excludes coverage for “loss or damage caused by or resulting from any virus”? 

This ISO coverage trigger provides broad coverage that, once triggered, is only modified by policy exclusions or limitations. That is, once there is a “risk of direct physical loss” to covered property, unless that cause of loss is excluded, it's covered. While there have been numerous court decisions discussing this language, each with twists and turns due to the specific fact patterns of each case, the consensus is that, if the interruption of business is caused by some physical problem with the covered property, coverage is triggered. Then, barring any exclusion or limitation removing or otherwise limiting coverage, the claim should be paid.

The insurance industry standard practice is to “read in” coverage wherever possible. That is, if there is a reasonable way to evaluate the policy language that triggers coverage, the insured is entitled to receive the benefit of the policy. Or, as stated in a well-respected industry text used to educate adjusters: “Therefore, the claim representative’s chief task is to seek and find coverage, not to seek and find coverage controversies or to deny or dispute claims.” “The insurance company should not place its interests above the insured’s.” “The claim professional handling claims should honor the company’s obligations under the implied covenant of good faith and fair dealings.”

While the industry argues that the drafters never intended to cover catastrophic economic loss caused by a pandemic, this argument falls flat and appears to be merely an attempt to prevent payment for otherwise covered claims. While most policies do in fact exclude “loss or damage caused by or resulting from any virus,” some do not. In fact, policies without a virus exclusion might have been purchased based solely on the lack of that or similar exclusionary endorsements. In short, not including a virus exclusion on these policies gave these insurers a competitive advantage by providing, or through a perception that they were providing, superior coverage.

The insurance industry seems to be grasping at straws by relying on court decisions that are not exactly on point. For example, one ruling used to argue against coverage is that dirt (which can be easily cleaned) does not constitute direct physical loss or damage. Of course, dirt is not inherently dangerous, usually does not result from a fortuitous event and does not usually cause harm. The same can’t be said of COVID-19. I have also seen an unpublished Sixth Circuit Court of Appeals opinion that addressed mold damage to a landlord’s property, distinct from the named insured “covered property,” argued as a case that somehow supports the position that a virus is not direct damage.

While there are indeed many commercial property insurance policies that do not provide coverage for COVID-19 BII claims due to virus or other similar exclusionary language, the courts will no doubt eventually find coverage under policies without such limitations or exclusions, or under policies with exclusionary language that is not on point, or that is poorly drafted.

Part of the problem is that the phrase "direct physical loss" is not defined in these policies, and even industry experts agree that “when the intent is for the policy to be triggered only by direct physical loss or damage, the language may need to be clearer. To say that a policy covers direct physical loss or damage to covered property from "risks of direct physical loss or damage" may be ambiguous.” And “whether the policy grants coverage for "all risk," "all risks" or "risks" of direct physical loss, this language is intended to mean that coverage is provided for direct physical loss or damage from all perils or causes of loss, unless the peril or cause of loss is specifically excluded or limited in the policy. However, when applied to property loss exposures, the phrase "risks of direct physical loss" could be interpreted to mean the chance or possibility of direct physical loss or damage, whether any property damage ever occurs or not.” 

Consider this International Risk Management Institute (IRMI) definition: 

Direct Damage — physical damage to property, as distinguished from time element loss, such as business interruption or extra expense, that results from the inability to use the damaged property. 

In other words, loss of use caused by some physical problem with the covered property constitutes direct physical loss or damage.

See also: How Startups Will Save Insurance  

Also consider the industry definition of property damage from the standard Commercial General Liability coverage form (in pertinent part):

1. "Property damage" means:
   1. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
   2. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.

So, the analysis, when evaluating this coverage trigger should be: Did COVID-19 cause some physical problem that interrupted the business? 

This can be an even easier analysis when evaluating coverage for Civil Authority or Ingress Egress, as many times these insuring agreements do not require “direct physical loss or damage,” only “damage.”

Clearly, mold constitutes physical loss, and courts have regularly held that “direct physical loss can exist without actual destruction of property or structural damage to property; it is sufficient to show that the property is injured in some way."

Some courts have ruled that the term "physical damage" includes "loss of access, loss of use and loss of functionality," and one court even ruled that government regulations rendering cereal unfit for sale was "an impairment of function and value," constituting "direct physical loss or damage” since even “without the actual destruction of property or structural damage to property it is sufficient to show that the property is injured in some way." 

In recent decisions arising from COVID-19, courts have already ruled that COVID-19 qualifies as a “natural disaster,” just like any “hurricane, tornado, … or other catastrophe which results in substantial damage to property, hardship, suffering or possible loss of life,” and since “the risk is, essentially, everywhere,” any “order to implement social distancing aimed at reducing this risk, policyholders have suffered a 'direct physical loss' of their property.”

The outcry from business owners is understandable because their livelihoods are at stake, but I fail to understand the insurance industry's solidarity and forceful rejection of these claims when some insurers made the conscious decision not to include virus exclusion on their policies, giving them a competitive advantage.

In an early sign of what I predict is coming, a French court recently found coverage for BII under AXA property policies for COVID-19. Reportedly, “Although AXA first signaled that it would appeal the ruling, it now has agreed to pay the claims involved in the lawsuit as well as other coronavirus claims involving similar policies, acknowledging that the insurance policy wording at issue is ambiguous. AXA’s admission that its policy is ambiguous is important as ambiguous policy language is generally construed in favor of coverage; AXA’s decision to pay is the correct one.” 

If one merely steps back and asks: Is it reasonable for a business to assume that it has coverage for its COVID-19-related BII claim when its property insurance policy does not contain a virus exclusion? The answer has to be, yes. While an insured has an obligation to read the policy, if after reading it and not finding a virus exclusion shouldn’t the insured be able to have an “objectively reasonable expectation” of coverage? “Although all-risk policies do generally extend to all fortuitous losses, this is true only to the extent that the policy does not expressly exclude the loss from coverage. . . .

For example, courts “have consistently held that the presence of a dangerous substance in a property constitutes ‘physical loss or damage,'” and at least one court found that an odor constitutes physical loss even without any "apparent" property damage. Interestingly, in that decision, the court ruled that while "the mere adherence of molecules to porous surfaces, without more, does not equate to physical loss or damage," coverage would be triggered “if the molecules on porous surfaces are accompanied by a pervasive, persistent, or noxious odor.” From a coverage evaluation standpoint, there is really little difference between an odor stemming from molecules on porous surfaces and a virus on surfaces causing loss of use due to its harmful nature. 

The bottom line is that if an insurance company truly intended to exclude coverage for virus-related BII, Civil Authority and Ingress/Egress claims, there were ISO forms or language readily available for use that could have been placed on the policy.

See also: ML for Commercial Property Insurers  

Where a policy has a valid and well-written virus exclusion, the insurer should feel free to deny coverage after conducting some minimal investigation to confirm that COVID-19 is the efficient proximate cause of loss, but insurers should think twice before denying coverage under policies without such exclusions and keep in mind that industry standards require that insurers never place their own interests ahead of the insureds’. 

Underwriting departments make informed business decisions when evaluating what endorsements to include or not to include on polices. Because a policy lacking a virus exclusion may be viewed by a risk manager as one of the factors leading to a determination that a particular policy provides superior coverage, insurers not using virus (or similarly effective) exclusions need to honor the terms of the insurance contract, and the insurance industry needs to recognize the important distinction between policies that include virus exclusions and those that do not.

The world is experiencing a unique situation. Over the past months, hundreds of millions of people from all over the globe have been forced to stay home, overnight. The economy came to a halt. The current pandemic determines what we talk about, what we can do and what our future looks like. Besides all the necessary short-term measures, insurers also need to think beyond the current crisis to a future that may be very different. We have identified four post-COVID trends that insurers should definitely tap into.

Waking up in a different world — and rapidly adapting to it

During the first couple of weeks, we found ourselves in a post-apocalyptic movie like "Mad Max." High streets turned into ghost towns. Mass panic buying began of all types of shelf-stable food, survival gear and water. In the U.S., according to Yelp, gun interest went up 360%, as if people were preparing for the end of time. But human adaptability turned out to be astonishing. Very quickly, everyone tried to make the best out of the changed situation. Where we cannot follow our old routines any more, like going to the supermarket to get groceries, people immediately find an alternative by meeting their needs online. And when we could not work at the office any more, we almost seamlessly continued at home, even while combining this with home-schooling for kids. The scale of change in consumer behavior, in such a short time, has been gigantic and unprecedented.

Trying out new things

For a lot of people, the current situation provides a reason to try new things. DIY stores and garden centers watch their revenues rise. Baking pies and playing board games have become popular activities. Alcohol consumption went up by 42% in the San Francisco Bay Area, and in China divorces significantly increased. This is an interesting time for behavioral scientists.

The world is about to open again, little by little

In many countries, the lockdown measures are alleviated little by little. Now that the world is becoming open to us again, we can start giving more attention to the post-pandemic future.

Some expect, or hope, that everything will get back to how it used to be. We believe that because of COVID-19 we entered a new era. Not only because of the economic crisis, but mostly because COVID-19 has the potential to create more permanent changes in customer perceptions and behavior. A number of COVID-19-related shifts in customer behavior are temporary, purely based on coping with the crisis, but other, more fundamental shifts are here to stay.

Although we know that the pandemic will eventually wane, a significant part of our new behavior will stick. Insurers that also want to be successful after the crisis have to understand this new behavior and turn this understanding into propositions and experiences that strike the right chord. They should start thinking ahead and reimagining the way they can stay relevant after the dust has settled.

4 Key Post-COVID-19 Trends Insurers Should Tap Into

We believe that, specifically for the insurance industry, the current crisis amplifies four consumer trends that determine the priorities of insurance customers and what they will value in a post-COVID-19 world. These four trends should serve as inspiration to reimagine the future of insurance beyond COVID-19. Let’s take a closer look at each of these trends.

Trend #1: Health First — More Than Ever

If one thing became clear during the last couple of months, it is that at the end of the day there is nothing of greater importance than your life and health. And almost everyone agrees to that. Individuals, governments and businesses around the world do everything to protect themselves, their families, their citizens and their employees. Virtually everyone is prepared to make huge sacrifices; to drastically change the way we live. Even to put our entire economy in jeopardy.

We notice people not just staying at home but also paying way more attention to health than before. What we learn about the virus contributes to that. Not only do pre-existing conditions such as cardiovascular diseases and diabetes increase the chances of complications and death but so do conditions such as being overweight and having excess belly fat. As a result, people are starting to exercise more and eat healthier.

More exercise

The millions stuck at home are keen to exercise, not only because they are bored but also because they want to improve their lifestyle. According to Yelp, interest in home fitness equipment has shot up 344%, and hiking is up by 116%. Yoga mats and kettle bells, but also bicycles, are selling like toilet paper. The online wellness industry is booming, as well. Meditation apps, digital fitness classes and online platforms such as Peloton, a home exercise-bike company, are growing fast. Subscriptions to workout video channels more than doubled. Videoconferencing platform Zoom, through which many workout, yoga and dance classes are broadcast, has become one of the most important "social wellness" platforms.

More healthy food

Food trends that were already on the radar are now becoming even more important. Data shows that, as social distancing persists, home cooking is on the rise. Online cooking courses are booming. People are becoming more health-conscious and spending more time in their own kitchens, which will further the growing demand for fresh, healthy and additive-free food. People are looking for products that suit their lifestyles and the life stage they are in, and that reduce health risks. Fruit and veggie shops are up by 102%, according to Yelp. LiveHelfi, a leading online functional food and supplement retailer, saw a sales increase of 75% in just three months. Personal nutrition schemes increase, as well.

More self-tracking

All sorts of health apps experience growing popularity. People value the sense of having control over things, now more than ever. So they monitor what they do, how they sleep, what they eat, how they feel, how much they exercise and so on -- self-knowledge through self-tracking with the use of technology. An increasing number of people wear self-tracking devices on their skin providing data that even goes under the skin. It doesn’t get more personal, more intimate.

More willingness to share data

With an identified contamination, you want to have a quick and complete understanding of who that person had contact with to control the spread of the virus. Several countries immediately made efforts to use data from smart phones:

• The government of Singapore came up with a community-driven contact tracing app called Trace Together. The app is able to identify people who have been within two meters of coronavirus patients for at least 30 minutes, using Bluetooth. Infected individuals can choose to allow the ministry of health to access the data in the app to identify those close contacts.
• YiTong Health, from China, launched a monitoring platform for employers to monitor the health of employees. The tool generates daily health reports of employees and an automatic evaluation of COVID-19 risks, and provides precaution courses for employees.
• LingBan provides a chatbot solution for communities to monitor the COVID-19 situation. It automatically makes daily phone calls to the community members with a high risk of infection to check the health status of the neighborhood and with COVID-19. AI helps to perform tracking, monitoring and reducing further risk.

All examples above are Asian. Although the importance attached to privacy differs per geography, we notice the adoption of similar solutions in other regions, as well. In just a few days, the Australian government’s COVIDsafe app had been downloaded millions of times. In Norway, more than 25% of the population has downloaded the coronavirus tracker smartphone app Smittestopp (Infection Stop) of the Norwegian Institute of Public Health in its first week. Apparently, many Australians and Norwegians are willing to play an active role themselves to prevent the spread of the virus and to share some of their personal data because it provides substantial benefits. It proves that reciprocity is the only way to solve the privacy issues that consumers have with sharing data.

More pressure on the health system

The lockdowns had much to do with the pressure experienced on every part of the health system. In hospitals, the occupancy rate of intensive care units has been way above 100% for months. Taking care of elderly relatives is massively impaired by the corona crisis. GPs quickly adopted online channels to avoid unnecessary movement and physical contact. They found that online appointments are more time-efficient, and most will continue to use online channels more than they used to. The sense of urgency for digital health solutions as well as the benefits are now clearer than ever.

Health First — Opportunities to Seize

1. Health insurance: Many expect the volumes in health and life insurance to grow in the next few years. The pandemic enhances the overall concern for personal health and wellbeing. It will make consumers more aware of the importance of adequate life and health insurance plans.
2. Pre-active and preventive services beyond traditional insurance: This has been widely discussed for some time now. The added value of an insurer is shifting from only covering risk when there is damage, to rendering preventive services as a substantial part of the offering. It will take a while before a vaccine is developed and everyone is vaccinated. Instead of simply waiting for that to happen, efforts can be made to prevent contamination and to promote a healthier lifestyle. By eating better and exercising more you become more resilient. Insurers should play an active role, or even take the lead, in promoting a healthier lifestyle with tangible services. This would also immediately increase the social impact of the insurance industry.
3. Data-drive health and wellness platforms: Platforms that combine self tracking, data and all sorts of incentives to help customers with healthier habits will become even more relevant than they already are. In the long term. personalized nutrition may even accelerate the cross-over between food, tracking and advanced analytics. Connected health devices combined with these platforms form the foundation for entirely new business models in the health insurance sector; shifting from a transactional to a relational, collaborative, participatory model, assisting customers to manage their health over time. Quite a few insurers are already exploring such platforms; either by developing these from scratch themselves or by teaming up with an existing platform and immediately leveraging the expertise of an experienced provider, such as dacadoo, PAI Health, Virgin Pulse, Vitality or Wellmo. Insurers need to move from exploration to adoption at scale.
4. Active participation by customers: Trackers and platforms provide actionable information and insights that users can act upon. In turn, this allows a much more active role for customers within insurance products and services. The "quantified self" movement and the adoption of COVID-19-tracking apps clearly show not only the consumers’ need for more control and empowerment, but also the desire and readiness to take a more active approach in assessing symptoms, connecting with healthcare providers and improving self-management of care. Active participation allows customers to take more responsibility, leading to more equality in the relationship with insurers. This is a fundamental shift in the relationship and a great new perspective on innovation.
5. Ecosystems with health providers: Current health systems are not sustainable due to the rapidly aging population and rising healthcare costs. Connected healthcare devices allow healthcare providers as well as health insurers to extend their reach and interactions with patients. Sharing data among all stakeholders, optimal use of this data and remote patient monitoring have the potential to change the way of working entirely, keeping healthcare efficient, affordable and accessible. The application of all sorts of connected devices, telemedicine solutions and advanced algorithms improve patient care, while decreasing total health care costs across the health ecosystem. These applications need to be taken to the next level, for instance by providing home-care solutions and flexible opportunities to engage with care providers for the elderly and the individuals that live independently.

See also: Step 1 to Your After-COVID Future

Examples of the wide variety of innovative tech providers that link insurers to health ecosystems:

• Telemedi.co (Poland): Decreasing medical costs for insurance companies using telemedicine and AI solutions.
• Mediktor (Spain): Supports health insurance clients from symptoms to the best action within five minutes.
• Medlanes (Germany): On-demand digital network, leveraging blockchain to access quality-assured medical providers while controlling costs for health and life insurers.
• Infermedica (Poland): AI-powered platform that makes it easier to pre-diagnose, triage and connect patients with the appropriate medical services.
• Breathomix (The Netherlands/Romania): Cloud-based breath analysis solution for rapid and efficient diagnoses of different types of diseases, empowering personalized medicine.
• reFit Systems (Mexico/Germany): Digital therapy system for individual rehabilitation, developing state-of-the-art digital solutions for healthcare and medical technology.
• Vayyar (Israel): Provides valuable insights into the health of elderly persons, reducing costs of emergency medical services and long-term hospitalization.
• HiNounou (China/Singapore): Wellness ecosystem and platform for seniors and their families.
• Neurotrack (U.S.): Cognitive health platform helping to assess risk for memory loss, and providing tools to prevent and manage cognitive decline.
• Somnox (The Netherlands): On a mission to improve people’s lives by sleeping with a robot.

Trend #2: Connected Living — Now For Real

Shift to digital on fast-forward

COVID-19 put the shift to digital on fast-forward. The whole planet just had a crash course in connected living. Working from home, days filled with virtual meetings on Zoom, Teams or Meet. Shopping for everything online, from groceries to fashion and electronics. Remote classes for children instead of going to school. Streaming movies. Online workouts and yoga classes. Ordering food, even from the finest restaurants. Having drinks with friends on Zoom. Worshipping from home. Even attending a funeral online in real time. It all became kind of normal in a short time.

After years of incremental change in small steps, digital routines were embraced within a few weeks. The longer we keep on following new routines, the bigger the chance that these changes will stay. Consequently, all kinds of aspects of connected living have become normal. What we currently experience is a fundamental shift in how people will live and work.

• Under quarantine, time spent online in China was up by 20%, according to research by Nomura.
• In some European countries, Vodafone’s internet usage has surged around 50%. The increase in data comes from a wide range of activities, from housebound school children logging on to Fortnite, from movies being watched on multiple devices, as well as from people using bandwidth because they work and videoconference from home.
• The demand for online porn has increased massively because of the corona crisis, so much that the government of France requested sex sites decrease the quality of their footage just to unburden the internet.
• In the U.S., according to streaming media intelligence provider Conviva, streaming during the pandemic has climbed 26%.
• Those stuck inside are desperate for social contact. Almost 45% of global consumers are devoting more time to social media, and over 10% are also creating and uploading videos themselves, Global Web Index says.

More remote working

Humans are creatures of habit. Every morning you got out only to await the daily traffic without ever thinking whether it could be done differently. Millions of people now have the chance to experience days without long commutes. The pandemic could permanently shift working patterns. Until recently, many companies were reluctant when it came to remote working. But even the functions that we thought could not be performed from home earlier this year seemed possible a couple of months later. Before the crisis, many companies assumed working from home would be unthinkable for call agents. Business owners and managers are discovering that solutions such as Zoom, Teams and Google Meet are adequate for a fair share of meetings and that much knowledge work can be carried out remotely. Many employees are starting to question why they had to go into the office in the first place. It looks increasingly as if the situation will not go back to how it was, at least not entirely.

In response to the crisis, Nationwide, a top 10 U.S. insurer, announced plans to permanently work from home in 16 of its 20 locations. When the company was forced to move quickly to a 98% work-from-home model, it turned out it could serve customers and partners without compromising the quality of service. “Our goal is to ensure that, when a recovery comes, we’re prepared to win business with competitively priced solutions while enhancing our resiliency and operational efficiency,” CEO Kirt Walker says.

Smart and safer homes

The fact that consumers in general will be integrating all sorts of new technologies into their daily routines will have its impact on their homes, as well. Homes around the world are going to become more connected and smarter in the coming years.

Remote working also leads to new risks. Most people are working in environments that are simply not set up for work. Take Zoom, which became extremely popular in a short time but is also under attack because of security issues. According to Bitdefender, the number of digital attacks in March was no less than 475% higher than in February. Hackers create false domains for Zoom sessions and send phishing mails containing "COVID-19 news" in the subject line. Safety and reliability are more important than ever.

More changes in mobility

The impact of COVID-19 on mobility is multifaceted and hard to predict. People are happy that they are allowed to leave the house again, but for the time being they will be careful. People will, at least when they can afford to, prefer not to use public transportation. Those who can, will use their own car to get to work, and prefer to commute alone. Among others, China, the Netherlands, Turkey and the U.K. already report an increase of sales of new and used cars. Obviously, this could lead to more traffic and consequently more accidents. On the other hand, as people and organizations get more used to remote working, they will be reconsidering commuting to work. Mobility patterns will definitely shift.

• German PHYD insurers that use SwissRe’s telematics solution have seen the weekly number of car trips plummet by 41% in March and April compared with February. Speeding has increased by 21%.
• Insurers using Amodo technology noticed a 56% decline in number of active drivers, 35% decline in number of recorded trips and 32% decline in the recorded distance through all users on the platform in April compared with March.
• The Floow saw a huge drop in journeys being recorded, such as a 90% overnight drop in South Africa, and a slower initial response from the U.K., which eventually led to a 30% drop in journeys on March 24, the day the lockdown was announced.

More demanding customers

Consumers now experience the convenience of mobile and online services even more. They expect comparable service levels from insurers. Customers will increasingly reach out to their current providers to meet their needs digitally. If that doesn’t work, customers will turn to another supplier that does a better job. A lot of insurers found out the hard way. When governments put a halt to face-to-face meetings, the sales of traditional insurers, brokers and agents collapsed.

Weaknesses of traditional models revealed

The gap between digital leaders and laggards has become wider. This development is not new. It just accelerated. The impact goes beyond daily operations. It is about the business model. While many incumbents have always viewed their face-to-face channels as an important differentiator, during this crisis those channels do not even appear to be a qualifier. Even worse, they made incumbents vulnerable. The traditional distribution model turned out not to be competitive and sustainable. On top of that, it was not agile enough to respond fast to changing conditions and a less physical world.

The digital models, on the other hand, have proven to be resilient and successful in these difficult times. It seems that digital models are better-protected against the crisis and more future-proof. Advanced technologies allowing for remote transactions lead over traditional models. Never before have these differences become so clear. That the insurance industry needs to become much more digital is nothing new. But the outbreak made clear how slow the digital transformation of insurance has been to date.

• Steven Mendel, co-founder and CEO of Bought by Many (U.K.): “Our sales rocketed up at the end of March and start of April as the lockdown set in — with sales doubling YOY.”
• Federico Malek, CEO at iúnigo (Argentina): “During the first weeks of the lockdown, we suffered just like the traditional companies. But in eight weeks, we’ve experienced a full recovery, with new business similar to the pre-lockdown period, while the traditional business is still on minus 40% vs pre-lockdown. This means we are gaining share.”
• Jamie Hale, co-founder and CEO of Ladder (USA): “Yes, we’re picking-up market share at an ever-greater rate than before. What is happening in e-commerce is happening in insurance, as well.”
• Martin Fleischer, board member of BavariaDirekt (Germany): “There was no decline during or after the shutdown. On the contrary. We saw an increase, especially in dog liability insurance.”
• Bill Song, CEO of ZhongAn Tech Global (China): “While COVID-19 hit the Chinese insurance industry quite heavily, and virtually every incumbent in the Chinese market saw a decline in sales, ZhongAn achieved 34% top line growth and 122% bottom line growth.”
• Fleur Dujardin, CEO of InShared (The Netherlands): “We are lucky to experience a strong growth and increase in sales and customer satisfaction. People increasingly look for fair online offerings with a good price. On top of that, customers really value our unique proposition. The money we don’t need this year to pay out claims will be returned to our customers.”
• Christian Wiens, co-founder and CEO of Getsafe (Germany): “At Getsafe, we are already seeing a shift from physical sales toward online sales: Since the COVID-19 outbreak, our sales numbers have grown by 20%, and we had the strongest months in our company’s history.”

Connected Living — Opportunities to Seize

1. Prerequisite: Insurers need to become more connected and agile. Being digital is paramount. More and more insurance executives are realizing this. The current crisis is a wake-up call to many. They see the strategic importance, and there is a clear sense of urgency. Simple digital products, online services and customer experiences, delivered at lower cost; becoming more connected and agile – they have become essential for continued growth. For many, they are essential for survival. It is not an option to press the snooze button once again. There will be quicker adoption of new technologies and a bigger role for insurtechs that enable the acceleration of digital transformation and innovation — because the time frames to achieve this have been compressed.
   • Among the 2,500 tech companies in the DIA Insurtech database, around 80% are enablers. They focus on assisting established carriers, to improve or renew specific parts of the value chain or help them to create new ones. Their focus ranges from offering platform solutions to allowing a specific part of customer inter-action to take place remotely. It is interesting to take a closer look at these solutions to spark new ideas. Innovative platform solution providers include Bambi Dynamic, DIG, Evari, iptiQ, Keylane, msg global, Tieto, UiPath, Vlocity and vlot. Companies that make remote digital interaction possible include BDEO, boost.ai, Quattroruote Professional, Scanbot, Surfly, TechSee, Tractable, Xtract and Zelros.
2. Usage-based car insurance: Especially when people use their car less, there will be an increase in the demand for simple solutions that reflect actual usage. Why pay a flat rate for a car that most of the week won’t leave your front porch? It could be that COVID-19 will push for usage-based car insurance to finally become mainstream.
   • Sample insurtechs that help established carriers to launch usage-based car insurance: Amodo, Cambridge Mobile Telematics, DriveQuant, The Floow, Kruzr, Octo Telematics, Sentiance and TrueMotion. Most providers look beyond mileage and more sophisticated pricing. They promote safer driving. CM Telematics, for instance, found that distraction by smart phones can be more dangerous than alcohol. By providing feedback on driving behavior that drivers can act upon, the company allows a much more active role for customers within car insurance products and lets customers take more responsibility.
3. New generation of home insurance with cyber and services: Thanks to connected devices, insurers will be able to offer personalized services meeting the lifestyle needs of customers. The more time we spend at home, the more important such services become as an extension of home insurance. More and more connectivity at home and all the new data streams that come with it open up all sorts of possibilities for services that help customers manage their house better and decrease the total cost of ownership. With people working more from home, also after the crisis, the importance of cyber security will increase. It is therefore likely that the scope of home insurance will broaden in the short term to include new propositions combining home insurance, IoT, cyber security and services.
   • Ideally, we would think of intelligent combinations of what companies such as mitipi, Shayp and ROC Connect have on offer in terms of combining smart home technology, property assistance services, insurance and improved customer engagement, with cyber solutions such as offered by CyberCube, CyberDirekt, CyberWrite and F-Secure. We call this Innovation Multiplied: combining innovations to come up with something that is even more innovative and that unlocks totally new economic value.
4. Reciprocity to solve privacy issues: The use of customer data means fresh grounds for concern over privacy. Obviously, insurers need to manage concerns that many consumers have. Reciprocity is the answer. Consumers' perceptions about the use of data by insurers will flip if they use the data to put customers in control and to offer something meaningful in return. It’s all about giving more than you take. The value insurers deliver based on consumer data should be perceived as bigger than the cost of handing over privacy in return. Insurers should combine things that customers can’t combine themselves or that customers would never think of.
5. Data protection: For centuries, insurers were engaged with offering protection to their customers. It would make a lot of sense to also assist customers in protecting their data, not just by offering cyber insurance but by offering new services. The so-called PODS (Personal Online Data Storage) introduced by Zurich are a great example. The customer owns the data and solely decides whatever part of the data to share with a third party. When you think about the enormous new data flows, there are numerous ideas for new value propositions.

Trend #3: Unprecedented Uncertainty — Lasting Long

The sense of control is far away

In recent decades, technology has given us more control over the way we live. Just think of something as mundane as navigation systems, so we never have to get lost again, or search engines that provide all information at our fingertips. The possibilities seemed endless. But 2020 will be known as the year of biblical disasters: the immense bushfires in Australia, the grasshopper plagues in Africa, Pakistan and India and, on top of that, COVID-19. In a few months’ time, it seems we have been thrown back to the Middle Ages, where plagues lurk around every corner. We’ve suddenly woken up to the reality that the world is much more fragile than we once believed. Nothing is as certain as it once seemed. The sense of control seems to be very far away.

Continuing concerns about health

People are obviously concerned about the virus and their own health. What exactly is COVID-19? Could I have it? If so, what can I do about it? How can I prevent my parents from getting infected with the virus? When will there be a vaccine? There is an enormous hunger for information. Thanks to the internet, the amount of information available is overwhelming, but unfortunately for us not always reliable....

More questionable information

Alongside the pandemic, an infodemic is also taking place. Disinformation and misinformation occur on an unprecedented scale. The arrival of the virus immediately resulted in panic buying of toilet paper, because, according to social media, this is produced in China and would therefore soon not be available any more. Looking back on this situation, most of us can have a laugh about it. However, we also see conspiracy theories on Facebook, the spread of well-meant but non-factual tips via WhatsApp and a world leader who suggests that disinfectant injections might help. According to the World Health Organization, the infodemic is as dangerous as the pandemic itself. When people do not know what to believe and who to trust any more, it becomes more difficult to have proven solutions and advice from scientific experts followed.

• MyHealthDiary (Indonesia) is specifically set up to tackle this problem of misinformation by offering trustworthy medical information only. People who download the app have access to free webinars about topics like why social distancing is important, how to identify symptoms, knowing if a rapid test kit is effective and weeding out hoaxes about COVID-19 in the media. By providing this information, MyHealthDiary educates Indonesia about COVID-19.
• Other tech companies that immediately created solutions to tackle the misinformation problem include Mediktor, Wellmo, SDA and Infermedica.

More vulnerable economies

In addition to uncertainty about the pandemic and individual health, COVID-19 has painfully exposed the Achilles’ heel of individual companies and the economy. Think of too much dependence on distant countries for production and supply, and operating models that did not turn out to be that robust after all. Even a giant like Apple only had stock for 10 days. Many brick and mortar companies did not have their e-commerce in order. Others turned out to be too dependent in their sales on customers in distant, suddenly unreachable countries.

In just a few months, the prospects of companies have changed drastically. The annual plans for 2020 have already been taken care of by the shredder. Companies are mainly working hard on saving what can be saved.

Gloomy economic prospects

When it comes to the supply side of the economy, it could be that we already experienced the worst. In more and more factories, people are starting to get back to work. The question is whether that is also the case for the demand side of the economy. The economic devastation of the pandemic is becoming painfully evident. In February, the unemployment rate in the U.S. was only at 3.5%. As a result of COVID-19, this percentage went up to 14.7% in April. In just two months, it went from an extreme low to the highest unemployment rate since the Depression.

Decline in propensity to spend

Deep economic shocks and unemployment are normally accompanied by financial uncertainty, less consumer confidence and a shift away from spending. Consumers prefer to save their cash amid uncertainty. According to research by personal finance company Bankrate, 52% of Americans had already cut their spending in response to the pandemic. 54% of consumers are no longer considering the purchase of big-ticket items such as homes, cars, holiday trips and luxury goods over the next three months.

The situation may be more positive in Europe, where many countries introduced schemes aimed at keeping people employed. This may also lead to higher confidence and propensity to spend.

Uncertain exit paths

The coming period will be critical. The various exit paths across countries from lockdowns will be precarious. Locking everything and then opening up again is not as easy as it seems and creates alignment challenges across virtually every supply chain. When will the economy get back on its feet again? Will consumers and businesses start spending more? Just as much as before the crisis? We do not know how uncertain consumers will deal with the new health protocols. Can we expect a new peak in infections in autumn? What will the consequences of the recession look like by then? Will it be even more severe than we already experience today?

More stress and reduced mental and physical health

A recession will further affect population health. Events that increase during economic downturns, such as becoming unemployed and losing financial and housing assets, result in more gloominess, more stress and reduced mental and physical health. This is amplified by people’s concerns about COVID-19, their own health and those of their loved ones. In the last week of March, meditation app Headspace saw a 19-fold jump in users completing a calming exercise and a 14-fold increase in those doing a "reframing anxiety" session. It’s a bad omen.

Unprecedented Uncertainty — Opportunities to Seize

1. Safety and reliability: Consumers will have a lower appetite for risks than they had before. Consequently, it is likely that they are more interested in protection than they were before. Insurers have the opportunity to explicitly confirm the feeling of protection and peace of mind to their customers.
2. Simple, transparent, affordable propositions: The economic downturn and resulting thriftiness increase the demand for insurance solutions and price propositions that are simple, transparent and cost-efficient. We already mentioned that PAYD, usage-based and on-demand car insurance may become mainstream – so that you only pay for what you actually use. We expect the same for embedded insurance concepts, in which coverage is part of the purchase of a product or service – so that you don’t have to worry any more. Bsurance, Moonshot-Internet, Qover, Servify and ZhongAn are examples of companies that already tap into this.
   • PSD2, the E.U. payment services directive, creates opportunities to all sorts of third parties to provide new opt-in services to banking customers. Although it is hardly on the radar of insurance carriers, we believe PSD2 has the potential to revamp the bancassurance model, moving from bank partnerships for just distribution and using bank data in marketing and underwriting processes to really being much closer to customers. The right PSD2 applications offer great opportunities to link insurance to a certain payment, making insurance much more individual and much more real-time.
3. Empowered customers: Most people want to make the right decisions in all areas of life. In uncertain times, this desire is even more crucial; especially when there is a growing number of unreliable information sources, it is important to be a trusted source of information and to provide guidance. Data enables insurers to help consumers enhance their lives by drawing actionable insights out of their data sphere and by giving feedback to customers, for example suggestions to adjust behavior that otherwise could lead to costs of damage, increased health risk or bad prospects. Insurers should aspire to give customers "superpowers" with all the available data. Think of speech-to-speech language translators that free you from having to learn foreign languages. Of GPS car navigators helping you find your way without knowing your way. In the coming period, we will see if insurers can give their customers similar kinds of superpowers.
4. Leverage risk management capabilities: Helping customers deal with uncertainty is the core business of any insurance firm. We believe there are ample opportunities to leverage these core capabilities to provide new value to customers, in commercial and retail, beyond offering insurance. The current challenging times offer insurers a great opportunity to sit down with customers and leverage their expertise to help customers also with risk management advice (not just insurance) on how to navigate through these difficult times.

See also: Evolving Trends in a Post-Covid-19 World

Trend #4: Empathy in Everything — Show You Care

Retreat from globalization

Globalization was never perceived as a blessing by everyone anyway. That makes sense; except for a tiny minority, most people find themselves in a very local community throughout the year. Due to the outbreak, everyone experienced the disadvantages of globalization. The pace at which the virus spread worldwide as well as how fast supply chains stopped are, in the perception of many, the consequences of globalization.

Each country its own strategy

Citizens look to their national governments to protect them from the pandemic, which most did firmly. We have rarely seen governments making such rigorous decisions in such a short time. Leaders from major countries had to radiate decisiveness while often using strong language; with a certain eagerness they compared the pandemic to war. To combat the virus, each country uses its own solutions, which makes sense looking at the large differences between countries. But soon the blame game started, every country primarily cared about themselves, and embarrassing fights about medical supplies such as respiratory equipment and masks took place. We haven’t seen much international coordination and later on of solidarity. The benefits of globalization have been carefully hidden during the past period.

More search for self-reliance

This retreat from globalization had already started; think of Brexit and the White House trade wars. During the coming period, countries and companies will keep looking for solutions to reduce economic vulnerabilities. "Self-reliance" is the most used word. Japan provides subsidies to companies to get supply chains back to the country again. The prime minister of India explicitly said that "a new era of economic self-reliance has begun." The reflex is control of one’s own fate and search for strategic autonomy. Citizens in different countries are encouraged to buy products from their own country, city and neighborhood to support local businesses and to rebuild the local economy. #supportyourlocal is trending.

Value of family is on the rise

The retreat from globalization is accompanied by turning inward and a shrinkage of our world. We also see this on an individual level. During the period we had to stay at home, people also rediscovered all kinds of long-neglected traditional life skills and pastimes. Baking bread, playing board games or simply spending a little more time with your loved ones. Self-isolation has forced us to rethink family time. The value of family is on the rise again. Family not only acts as a safety net, but, in hard times, the connections we have with the people around us keep us grounded, something we will need for quite some time.

It made us think of an Allstate commercial that was aired during the financial crisis in 2009, with actor Dennis Haysbert (who played the first African-American president of the U.S. in the hit series "24") telling the viewers: “After the fear subsides, a funny thing happens ... People begin enjoying the small things in life ... A home-cooked meal ... Time with loved ones ... Appreciating the things we do have ... The things we can count on ...”

More sense of connection and togetherness

The crisis also brought up something unexpectedly positive. Everyone is doing their best to help all of us get through this trying time. According to Yelp, interest in blood and plasma donation is up 204%. Clients are buying gift certificates from their favorite local restaurants to help keep them in business. Toy animals are placed in front of windows so that little kids can go "bear hunting." Professionals and volunteers in the health sector are applauded. Italians started singing from their balconies to enhance the feeling of community. Beer brewers recycled stock to produce hand sanitizer. And, of course, the absolute poster child: 99-year-old Tom Moore raised millions for NHS staff by walking laps in his garden. The number of heart-warming examples during the outbreak is unbelievable; also in insurance and insurtech. Just check our article on "how insurers and insurtechs are helping to fight the pandemic." An unprecedented sense of connection and togetherness is noticed. People really care about each other.

Empathy in Everything — Opportunities to Seize

1. Tough times are an opportunity to show you care: Challenging times see people craving for institutions that care. Consumers expect their financial service providers to support customers who are facing difficulties. Show you care when customers experience moments of truth. In March, Kees van Dijkhuizen, CEO of ABN AMRO, said: ‘’’During the previous crisis, banks were part of the problem. At this moment, we are emphatically part of the solution.’’ Standing at this crossroad, insurers must ask themselves a similar existential question: As an insurer, do you want to be a part of the solution, or do you want to be known for causing more problems?
   • In response to the shelter-in-place orders, motor insurers in the U.S. issued premium discounts to compensate policyholders for their reduced risk. State Farm, for example, announced a 25% discount for all policyholders through May 31, a discount that implied a reduction of about $2 billion in premium revenue.
   • U.K. insurer Beazley offered a 60-day premium pause for commercial clients “because we understand our commercial clients are under pressure to keep their businesses running at the same time as sharing the responsibility to reduce the spread of COVID-19 within communities."
   • Hundreds of U.K. firms thought they were covered when the government told them they had to close their doors because of coronavirus. Their business interruption insurance policy literally said that the insurer would pay out when a business was forced to shut owing to a notifiable disease. But when these business owners filed claims, the insurer said the policies did not provide cover for business interruption "because of the general measures taken by the government" in response to the pandemic. Some companies are likely to go bankrupt.
2. Empathy is a pillar for differentiation: The empathic, emotional part of the relationship will become more important for consumers. Demonstrate your company’s commitment to individual customers and emotionally engage with them. Reach out to clients. Act in the customer’s best interest. Treat customers the way you would like to be treated. Simple gestures can make a big difference. The objective is to enhance your usefulness for the customer. In turbulent times, showing that you care will find an extra-appreciative audience and certainly won’t be forgotten. Customers are also likely to return favors by being more loyal and more willing to spread the word about their experiences with you. Furthermore, employees and executives alike find that it is more engaging to work for a company with a caring mindset.
   • Examples of tech providers that help carriers to empower employees, brokers and agents by using artificial intelligence to support human intelligence include AdviceRobo, Force Manager, Glia and Helpshift. In all cases, such applications lead to better conversations, higher customer satisfaction and improved conversion rates.
3. Leverage the human skills of co-workers, brokers and agents: Now more than ever, to relate to their customers, insurers need to secure the feelings side. Humans inject emotion, empathy, passion and creativity and can deviate from the procedure, if needed. The thousands, sometimes even tens of thousands, of employees working at an insurance firm, as well as all the brokers and agents, are the most valuable asset to accomplish exactly that. The challenge is to use advanced technologies to empower them, making them even more effective and efficient and creating the best of both worlds.

Re-Imagining Post-COVID-19 Relevancy

The four trends set the stage

COVID-19 is having a significant impact on people’s lives, beyond social distancing. It seems the Maslow pyramid is turned upside-down; putting your health first is the top priority. The trends toward connected living shifted into a higher gear. The unprecedented uncertainty that people experience regarding the health situation, the recession and their job security is not likely to change soon. The current crisis also highlights the importance of empathy in everything and the human dimension. Consequently, consumers and businesses are looking for a new generation of products and services that fit these new circumstances.

Leaders of insurance companies therefore not only have the short-term challenge to keep their business afloat. At the same time, they also have to make sure the company remains relevant in the new market conditions once the dust is sort of settled. They need to fast-forward digital transformation and reconsider not only processes, products and services, but distribution and operating models, as well. Moreover, they should think of new business and revenue models, leverage the latest technologies and insurtech partnerships and seize new opportunities. The four trends set the stage.

Never waste a crisis

It’s not all gloom and doom. A crisis usually functions as a great breeding ground for innovation. Innovation is no longer optional but urgent and crucial. It is impossible to fight this crisis with the same instruments that you use when everything is going well. The new conditions and constraints force us to think in new ways. Moreover, we see across industries and companies that executives and employees are more open to radical solutions and are much more efficient in realizing these solutions. Think of how rigorously companies and colleagues have switched to remote working. If we abstract from the current situation, we can only conclude that we have exciting times ahead — if we know how to seize the opportunities.

You can download the full white paper here.

What to Learn From the Segway’s Failure Paul Carroll, Editor-in-Chief of ITL The original Segway, whose demise was announced last week to a chorus of chuckles about mall cops and I-told-you-sos about the nerd factor, may have been the most beautiful piece of design I’ve ever seen. Only the iPhone rivals the Segway, in my mind, in terms of how well the designs anticipated how people would use the devices and in terms of the wow factor when they debuted. Yet the Segway flopped. Is there then any hope for the rest of us, who lack the design skills that Dean Kamen brought to the Segway? Actually, there is, because he misunderstood or ignored an issue that is key to innovation success: the ecosystem. If you figure out how to plug into and help develop the right ecosystem, you can succeed where even the talented Dean Kamen and his magical Segway failed.... continue reading > Be Innovative Learn about Notion's easy-to-launch programs to get started.   Learn More SIX THINGS 5 Transformations for a Post-Pandemic World COVID-19 may be the much-needed impetus for change for insurance organizations operating based on decades-old procedures and tactics. Read More Insurers Can Lead on Addressing Inequality Apprenticeships can attract talent from among the underserved, and an industry initiative now makes the opportunity widely available. Read More Ready for Era of Real-Time Payments? Consumers and service providers increasingly expect the same frictionless payment experiences they have in other sectors of the market. Read More Ransomware Grows More Pernicious The emergence of the Maze variant creates a new threat, that stolen information will be released to the public on the internet. Read More 5 Trends Changing Auto Insurance Will insurers continue to provide traditional insurance in traditional ways until forced down a dead-end path, or will they embrace new trends? Read More Time to Streamline Group Benefits Quotes Current, AI-based technology can cut response time for group benefits quotes by as much as 92%. Read More GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started Partner with Us We’d love to talk to you about how we can improve your marketing ROI. Learn More SPREAD THE WORD Share Share Tweet SUBSCRIBE TO SIX THINGS

The original Segway, whose demise was announced last week to a chorus of chuckles about mall cops and I-told-you-so's about the nerd factor, may be the most beautiful piece of design I've ever seen. Only the iPhone rivals the Segway, in my mind, in terms of how well the designs anticipated how people would use the devices and in terms of the wow factor when they debuted.

Yet the Segway flopped. Is there then any hope for the rest of us, who lack the design skills that Dean Kamen brought to the Segway?

There is, because he misunderstood or ignored an issue that is key to innovation success: the ecosystem. If you figure out how to plug into and help develop the right ecosystem, you can succeed where even the talented Dean Kamen and his magical Segway failed.

I became acquainted with the Segway shortly after its debut in late 2001. The consulting firm where I was a partner at the time was putting on an innovation-related event and had gathered enough C-suite executives at major companies that Segway sent its president to do a presentation in early 2002. He was slick: He had us set up a ramp so he could bomb down the center aisle on a Segway and up onto the stage. He did the whole talk on the device, darting to some spot on the stage, drifting back to the center and generally showing how the Segway seemed to respond to his thoughts. Just to show off, he'd occasionally do a 360.

He brought a few of the devices with him so the 70 or so of us could take turns experimenting with them in the desert near the resort in Arizona where we were holding the conference. All I had to do was start to think about heading somewhere, and the Segway would do the rest because it sensed my balance shift. Whenever I'd worry about going too fast, the device would sense my hesitation, and I'd slow down. The Segway didn't have brakes, a throttle or a steering wheel, but it felt like an extension of my body.

I'll always remember Dan Bricklin, who invented the electronic spreadsheet and who was a fellow with the consulting firm, repeatedly asking people to try to run him over. They couldn't. They'd build up a head of steam, but then the user would worry as he or she got close to Dan, and the Segway would pull up.

Kamen had already developed a widely used insulin pump and other medical devices, plus a wheelchair that could climb stairs and raise the user to eye height; the Segway was to be his crowning achievement. Steve Jobs said the Segway could be bigger than the personal computer. Venture capitalist John Doerr, who put up funding, said the Segway could be bigger than the internet.

Nope.

The company hoped to sell 100,000 Segways in its first 13 months but sold only 140,000 over the nearly two-decade lifetime of the product. Shutting down production next month only means laying off 21 people.

The key problem was that Kamen and his supporters convinced themselves that cities would be redesigned to adapt to the Segway -- a colossally bold claim that, alas, turned out not to come true. In fact, as usual, the Segway needed to be doing the adapting, and it just wasn't very well set up to fit into the existing ecosystem.

I happen to think that cities need some redesigning -- they're far too car-centric -- and the pandemic has provided such a shock to the system that it could accelerate change, but so many trillions of dollars are invested in the current setup that rethinking will take many years, even decades. In the meantime, the Segway was going to have to either fit on the street or on the sidewalk, and it did neither well.

The sidewalk would work, in theory, but only in light traffic. In New York City, you don't gain much advantage from a device that goes 10 mph or 15 mph if you're dodging pedestrians who are walking at 3 mph to 4 mph (and who are telling you what you can do with your Segway, in that charming way that New Yorkers have). You also, of course, have to deal with the elements for much of the year, while you'd be protected from them if you're in a car or taking the subway. Even under the best of circumstances, Segway riders were told to wear helmets, knee guards and elbow guards -- fine if you're a kid but not so great for professionals who aren't willing to live with permanent hat hair.

Streets are a nonstarter. Someone on a Segway would be moving much slower than the rest of traffic and without the protection that tons of metal provide for those in vehicles. Even in a modified bike lane, the bikes and Segways could wind up going at very different speeds and getting tangled up.

There conceivably was a strategy to be had by working from the edges in. Perhaps if Kamen had seeded smaller cities, as Lime, Bird and other scooter companies are now doing (while facing their own troubles), and let popularity build in ways that would attract bigger markets. Perhaps if Segway had gone after discrete markets in controlled environments, such as warehouse workers, tourists in areas without cars and -- dare I say it? -- mall cops, then built from there rather than expecting cities to completely redo themselves from the get-go.

The good news is that insurers can learn from the Segway mistakes and, based on the thought leadership I see in the industry, are, in fact, beginning to pay serious attention to the demands of and opportunities in ecosystems.

There are three basic ways to do that: 1) join someone else's ecosystem; 2) invite others into yours; 3) or participate in and foster an ecosystem that has many parts but not a clear leader.

Joining someone else's would be, for instance, selling microinsurance through a shipping company that would offer the opportunity to bundle your coverage into the cost of carrying cargo. There would seem to be loads of such opportunities to bundle insurance distribution into car and home sales and all sorts of services supplied to businesses.

Having someone join your ecosystem would, likewise, be straightforward. You sell auto insurance, and you invite a roadside assistance provider to bundle its services into yours. You sell home insurance, and you offer security or maintenance providers the opportunity to plug into your relationship with the client.

Participating in or fostering an ecosystem without a clear leader (just yet) is less straightforward. At the moment, I'd say insurers are mostly consumers of information in these ecosystems -- pulling in publicly available data to save people time when filling out forms, gathering the full history of construction work on a building, etc. -- but, within the bounds of regulations, will become suppliers of information and relationships to others.

If the world of technology is any guide -- and it generally is, because all industries are becoming technology industries -- participating in ecosystems and forming them will become easier. That's because business processes will increasingly be connected via software, which means that every action and decision has to be super-well defined (via an API, for application programming interface). Once processes become like software modules, they snap together at least as easily as the apps on your smartphone.

So, competition will increasingly be based on ecosystems rather than on your native competitive advantage. Perhaps your underwriting, combined with someone else's distribution system (even from outside insurance) and a third-party claims system will compete against some other ecosystem.

The change to full-on ecosystem warfare is probably a ways off, but the change will be profound. Think back to MS-DOS, for any of you unfortunate enough to use it. It wasn't close to the best operating system, but it had assembled the best ecosystem based on the software that ran on it and on customer relationships, so it beat IBM's OS/2, all the flavors of Unix and even the Mac -- until Jobs assembled an even better ecosystem via the iPhone.

We'll never be as inventive as Dean Kamen, but that doesn't mean we can't be more successful than the Segway was, if we learn the right lessons about ecosystems.

Stay safe.

Paul

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

5 Transformations for a Post-Pandemic World

COVID-19 may be the much-needed impetus for change for insurance organizations operating based on decades-old procedures and tactics.

Insurers Can Lead on Addressing Inequality

Apprenticeships can attract talent from among the underserved, and an industry initiative now makes the opportunity widely available.

Ready for Era of Real-Time Payments?

Consumers and service providers increasingly expect the same frictionless payment experiences they have in other sectors of the market.

Ransomware Grows More Pernicious

The emergence of the Maze variant creates a new threat, that stolen information will be released to the public on the internet.

5 Trends Changing Auto Insurance

Will insurers continue to provide traditional insurance in traditional ways until forced down a dead-end path, or will they embrace new trends?

Time to Streamline Group Benefits Quotes

Current, AI-based technology can cut response time for group benefits quotes by as much as 92%.