Countless articles about the implications of COVID-19 on the insurance industry are circulating in the digital universe. Many aspects of the industry will be affected, but the ultimate impact depends on the length and magnitude of the virus crisis, something that is difficult to predict. However, one thing that is clear and will become more firmly entrenched as the reality of what is happening sinks in, and the weeks go by – digital capabilities are paramount for this day and age.

The work from home movement (#WFM), voluntary or mandatory quarantining, retail store closures and limits on public gatherings all serve to significantly increase our dependence on digital capabilities. More and more of the population are shifting their commerce online, using home delivery and expanding their usage of social media and digital tools for communication. The more that people and businesses get used to operating remotely via digital tools, the more it will be expected – even after the virus is contained. The genie is out of the bottle, and it will be hard to put it back.

What does this mean for insurance? Could COVID-19, in fact, create the tipping point for digital transformation?

For starters, it will bring into stark relief the level of digital capabilities that each insurer has. The demand for self-service digital interaction capabilities will increase significantly, both from a sales and service perspective. In addition, it is critical to assess insurers’ internal operations and the implications for employees. Another area of concern for insurers and customers is the potential for increased cyber risk. Finally, it is essential to look at existing transformation plans and IT projects and assess how these might change in the short and long term.

Let’s take a closer look at each of these areas:    

• Digital interaction capabilities: Self-service portals for agents and policyholders, websites that are easy to navigate and built using responsive design approaches, mobile apps for policy service and claims and world-class call center technologies will become more critical than ever. Volumes are likely to increase as fewer face-to-face interactions occur by necessity. Capabilities such as virtual inspections, do-it-yourself (DIY) claims reporting for first notice of loss (FNOL) and AI-based damage assessment will be much appreciated by all involved.  
• Internal operations and employees: The digital delivery of policy declaration sets, statements and correspondence is important for customers but also has a significant impact on employees. Documents that require production and mailing require employees to be physically present onsite to manage operations. In addition, the processing of inbound documents is a high-volume, people-intensive activity. The more that insurers can provide digital input options and automate and digitize inbound documents and correspondence, the better – for both customers and employees. Increased digital payment options can reduce the flood of checks that require physical handling. An environment in which more employees are working remotely makes the shift to more digital interactions vital. Also, modern technology enablement options for agents, adjusters and others who are in the field will enable them to do their jobs in a world where customers expect to interact and conduct business online.
• Cyber risk: The massive shift to WFH and increased reliance on digital interactions will increase the exposure for cyber risk. Both the insurance company’s internal data and the data of the personal or commercial lines customer will be more at risk. There will need to be greater adherence to security protocols and the stringent use of security technologies. From an insurance product standpoint, insurers will need to reevaluate an already rapidly growing product line to assess coverages and limits.
• Transformation plans and projects: The P&C insurance industry is in the midst of a wide-ranging digital transformation. Much has been done over the past decade to digitize documents and content and provide more ways for prospects, producers, policyholders, claimants and others to interact digitally with the insurer. However, most in the industry would agree that insurance is still in the earlier stages of comprehensive digital transformation across the enterprise. COVID-19 will not only create an immediate sense of urgency to provide digital capabilities during the crisis but will also reinforce the value of being digital.

When the spread of the virus is under control and the world begins to move back to a more normal state, insurers would be wise to rethink their plans for digital transformation. Many already sense that the pace of transformation is not fast enough. At SMA, we predict that COVID-19 will trigger a tipping point that results in more aggressive digital transformation plans across the industry.

See also: The Best Tools for Disaster Preparation  

Watch for a series of blogs, videos and webinars focused on “In the Moment of Truth” from the SMA team as we experience this new norm and together explore the possibilities and implications for the P&C insurance industry.

There is much discussion right now on the impact that COVID-19 (Coronavirus) will have on workers’ compensation. Most of this discussion has focused on the potential for claims activity arising from the virus. The determination of whether a communicable disease is “work-related” is a case-by-case evaluation. The large employers that I work with tend to retain risk on both their workers’ compensation and employee benefits programs. Thus, they are not concerned about which financial bucket the money comes from but are prioritizing caring for their workforce instead. Potential claims arising from COVID-19 are not the focus of this column. Instead, I’m looking at how the challenges arising from this virus will affect the workers’ compensation industry.

Individual Claims Costs

In the short term, expect the overall costs per workers’ compensation claim to rise due to the increased duration of claims caused by many factors: 

• There will likely be delays in treatment as the healthcare industry focuses on fighting COVID-19. That means physicians, hospitals and testing facilities are tied up and that elective surgeries are on hold until this crisis passes. This challenge is not unique to workers’ compensation, as the group health and Medicare setting will be experiencing similar delays. 
• Modified work will likely be unavailable for many employers, due to the significant downsizing of workforces in many industries, including retail, restaurant, hospitality and airlines.
• Return to work in any capacity may be a challenge for these same industries. In wage-loss states, indemnity benefits often cannot be stopped without a return to work. 
• Courts are mostly closed in many states, halting the workers’ compensation adjudication process. 
• Outside job placement efforts through vocational rehabilitation will be almost impossible, with so many employers idled and a significant percentage of the workforce looking for work. 

Total Claims Costs 

Due to the significant decline in people working in most industries, there will be fewer new claims over the near term. With so many businesses closed or functioning with reduced operations, there are simply fewer opportunities for workplace injuries to occur. 

On the flip side, it is too early to tell what the ultimate impact of compensable virus claims will have on the industry. No one can rule out that the costs from these claims will be as high, or even higher, than what we would experience typically. Specific industries, such as healthcare, some retailers and occupations such as first responders, could see an increase in claims and costs due to the combination of virus-related exposures and the significant overtime hours by their workforce.

Nationally, there is a significant increase in the number of people working from home in response to the outbreak. There is very little case law out there regarding what constitutes a compensable claim when working at home. It will be interesting to see what claims arise from these situations and how courts around the country interpret these situations.

See also: How Coronavirus Is Cutting Connections  

A decrease in total claims may mean less revenue for industry vendors with fee-for-service and per-claim business models such as medical management providers, including utilization review, bill review and case management. Third-party administrators are also often on per-claim contracts, and fewer claims could mean less revenue for them.

Later this year, there could be a spike in claims as things start to return to normal. There will be a massive influx of workers who are both deconditioned and may have forgotten procedures and loss-prevention policies. It will be challenging for employers to ensure their returning workforce is fit for duty and retrained appropriately.

Other Claim Considerations

As many restaurants shift to a delivery-only model, employees who are not usually commercial drivers find themselves adapting to this new role. Could that lead to a spike in work-related auto accidents in that industry? Possibly, but a more significant concern may be that many businesses may not have adequate commercial auto coverage because they did not have drivers until now.

Also, as non-essential businesses close, and many companies shift to a work-from-home model, there should be fewer auto accidents overall.

Industry Financial Implications

The dramatic drop in payroll for many employers may also mean a reduction in the corresponding workers’ compensation premiums they pay. It’s relatively simple; fewer workers equals lower premiums. Look for overall industry premiums to drop sharply for 2020 compared with prior years. Lower premiums also mean lower revenue for state regulatory agencies that are often funded by premium taxes and assessments.

The insurance industry, in general, and workers’ compensation carriers, in particular, depend on investment income as an element in their overall pricing model. With the Fed interest rate at zero and the massive drop in the stock market, those investments will be down across the board. Carriers may have to charge higher rates to make up for the significant decline in investment income.

Like all industries, the workers’ compensation industry is dealing with significant business disruption because of COVID-19. Many offices have closed, and, where possible, companies are implementing work-from-home models. Companies that focused on business continuity planning for such situations have an advantage over competitors that may not have been as diligent in these areas. It is imperative that insurance companies be included as “essential businesses” in any state or local shut-down orders because of the important financial backstop the industry provides to the economy and the workforce in general.

Finally, almost all in-person industry conferences are canceled right now until mid-May and possibly longer, including two of the largest industry events of the year, RIMS and the NCCI Annual Issues Symposium. The conference business is a challenging one because it requires you to invest up-front to secure facilities and resources with the hope you will be able to recoup that investment with sponsorships and attendee fees. Conferences have incurred costs preparing for now-canceled events, and they may not be able to recover those costs. Those unrecouped costs could put a significant financial strain on some event budgets, especially the smaller events that tend to operate with no surplus to tap into year-to-year.

See also: Coronavirus: What Should Insurers Do?  

On a positive note, most workers’ compensation carriers have strong balance sheets that will enable them to come through these challenges. The current crisis is an example of a time when the financial strength rating of your carriers matters most. Injured workers will continue to receive their benefits, and carriers are being very responsive to policyholders, including timely payment of claims. Many claims administrators use electronic banking where allowed, which means even injured workers under confinement receive their benefits in a timely matter.

COVID-19 will affect the workers’ compensation industry well beyond claims related to the virus. However, our industry is strong and resilient, and we will persevere and adapt to these challenges.

Within the commercial property and casualty sector, there has been a lot of attention on the underwriting process, which is inherently manual and time-consuming. Carriers and insurtechs are primarily trying to accomplish two things: make it easier for the end user to buy insurance and improve the accuracy and efficiency of underwriting.

These two goals complement each other. By tapping into third-party data sources, carriers can get more accurate information. Carriers also increase ease of doing business, for both underwriters and customers.

To date, carriers have leveraged in-house tools and partnered with technology providers to gain information for underwriting. Property sensors, public records, telematics and drones are just a few of the sources underwriters are using to access risk. But to stay competitive against other carriers and to continue to cut down on the number of questions that will need to be answered by the applicant, carriers need to continue to innovate.

See also: Winning in Small Commercial Lines  

An Accenture report centered on the rise of insurtech found that 86% of insurers believe innovation must happen faster. So, what can carriers do to boost their underwriting game?

1. Start with areas that are aligned with strategic objectives: Insurance carriers need to think more strategically about innovation. Areas of investment in innovation need to tie directly to where you want to grow or improve from a business perspective. It is easier to gain internal buy-in and traction on topics that everybody already agrees need the most attention.
2. Understand operational readiness for prioritized uses: Before any investment takes place, business leaders must understand what it would take to put an idea into production. In many cases, a clear path to test a new capability is identified--e.g.. limited proof of concept (POC)--but the actual requirements, timeline and costs (rough order of magnitude) in a production scenario are not analyzed or understood. Early focus on the desired end state can set the proper vision and avoid stalls and misdirection later on. 
3. Make it easy to collaborate. The thing that insurance carriers that have strong innovation programs have in common is that they are not afraid to collaborate with insurtech partners. Today’s insurtechs are building niche businesses that can be tapped to enhance specific parts of the insurance value chain, often far faster than a carrier’s internal capabilities could allow on their own. Leading-edge carriers are collaborative and oriented toward feedback. The approach by insurtechs creates a healthy ecosystem and promotes effective product development.  

Once a carrier implements new technologies in the underwriting process, the organization should ensure that it is measuring the improvements in accuracy and efficiency. One way is to look at the organization’s overall profitability. Another is to look at team productivity--if measures have been put in place to boost efficiency and accuracy, the same underwriting team should be able to quote more policies than before, and more quotes should be "bindable."

Agents will find it easier to do business with carriers that operate more efficiently and effectively.

While the insurance industry has fallen into the late adopter category, carriers and insurtechs have the opportunity to take advantage of a market that is ripe for change. 

See also: The New IoT Wave: Small Commercial  

DataCubes focuses on powering commercial underwriting using decision science. The organization was built on the idea that there is a more productive way to underwrite.

The insurance industry continues to be an enabler of innovation. Since its creation three centuries ago, it has become an essential part of the global economy — providing security and resilience to businesses and individuals alike. But the fundamentals of how it operates have barely changed.

As we enter a new decade, the industry must reflect the reality of the needs of today’s businesses and society. Large commercial insurers and reinsurers, in particular, have an increasingly urgent imperative to realign their organizations and modify their offerings to include stronger preventive services against new and evolving threats, including climate change and cyber risk.

There is a huge opportunity. Our latest NextWave Insurance report (released March 3, 2020) reveals that, should the industry act now, an unprecedented growth and profitability spike is within reach. By 2030, we project that large commercial insurers and reinsurers could experience:

• $600 billion in revenue growth
• 25% to 35% improvements in combined operating ratios

To realize these gains, the industry must become more dynamic and agile.

A range of forces — from technology advancements to a dynamic value exchange — will propel the creation of new business models and the evolution of existing ones.

We’ve identified seven business model trends already emerging across the industry that are pointing the way to what the future insurance ecosystem might look like:

1. Global composites

Market mainstays are evolving by leveraging strong balance sheets, strategic capital investments and new expertise to ignite growth across markets.

In the next decade, modernized technology will enable workers to re-skill while creating a culture that places the customer, process efficiency and operational agility at the center of insurers’ business models.

On top of this, organizations will become much more data-driven and increasingly reliant on productive partnerships and collaborations. These capabilities will be necessary to offset competition from smaller players.

2. Specialty insurers

Boutiques are starting to protect their market share by writing risks others won’t.

In a highly specialized commercial reinsurance marketplace that generally demands either specialization or scale, the most successful boutiques may navigate competitive threats by targeting specific niches where they can operate profitably and where few other firms are bold enough to tread. Boutiques' ability to survive will depend on the quality of their specialist expertise and a willingness to write risks others generally decline.

For these insurers, their strategic priorities for the next 10 years should revolve around expanding and enhancing business origination, loss prevention and other high-value services. These insurers must become smarter and leaner in risk transfers and forge better relationships with partners and suppliers.

3. Global reinsurers

Innovative traditionalists are remixing their talent base and upgrading their technology to provide compelling risk-transfer solutions and access to secondary markets.

Future global reinsurers will devise innovative risk-transfer solutions with smaller teams. By creating partnerships with alternative capital providers, these reinsurers will increase product innovation and boost their market penetration rate. Additionally, they will diversify their offerings to include primary insurance products and new loss-prevention and ancillary services.

See also: New Business Models Are Needed  

Advances in data mean they will employ more data scientists and fewer claims processors. Their ability to match different opportunities and new products for different risk appetites will help them provide access to secondary markets and engage with more stakeholders. 

To fully succeed, their strategies must prioritize growth opportunities and capital risk management capabilities. They must partner with alternative capital providers on product innovation, increase their access to big data and augment their analytical capabilities.

4. Underwriting agents

Future managing general agents (MGAs) are building momentum and capitalizing on market trends to create and capture profitable niches. 

Lean, agile and dynamic, tomorrow’s MGAs will build thriving niche businesses and grow profits faster and at a larger scale than the industry as a whole. Their sole purpose will be providing specialized underwriting services to portfolios and networks of investors and capital providers. Though specialization is key to success, “Mega MGAs” will emerge, reaching $1 billion in revenue through consolidation or by duplicating their success across multiple market segments.

By leveraging defined products and targeted expertise to exploit distinct and profitable market niches, this subsegment may grow to $150 billion in revenue, doubling the current revenue base. The largest may ultimately pivot to become insurers — a further threat to traditional business models.

The MGAs must engage with the most suitable partners, such as capital providers and supporting vendors. They must also strike the right balance between growth and scale as they seek to duplicate success across multiple segments.

5. Capital providers

Lean and agile portfolio managers are driving capital returns by aggregating strong delegated authority and managing general agents/managing general underwriters (MGAs/MGUs) to find profitable niches.

By 2030, some carriers will shift their focus to become experts in capital deployment and management of third parties. These firms will operate with relatively few employees and exceptionally lean in-house models. They will home in on well-defined market niches, customer segments and specific product types. These portfolio managers will excel in managing arrangements with multiple delegated authorities (DA) for underwriting, claims handling and other service providers, such as loss prevention specialists.

Strategic priorities will include identifying and engaging the top-performing DAs and improving operations by strategic sourcing. Should these managers deploy capital flexibly and efficiently, they will have a greater opportunity to develop niche products for target customer segments. 

6. Self-insurers

Customers are beginning to compete with traditional insurers as “super-sized captives” and are developing in-house capabilities to self-insure more of their risks.

Companies that formerly bought insurance are now more interested in selling risk, pushing traditional insurers into new roles and marginalizing some carriers. The absence of appropriate coverage for intangible and virtual assets will push large multinationals to deepen their commitment to self-insurance. Self-insurers may also contribute to the rise of industry associations as they build out capabilities that can be sold on the open market.  

These companies need to get comfortable taking on more risk, as they learn to generate superior insights and develop tools for stronger loss prevention. Deep and granular analysis of their considerable data resources, as well as knowledge of their own operations, will match coverage to risk appetite and eliminate the need to place business on the open market. Self-insurers will also develop the skills and knowledge to navigate increasingly complex regulatory and tax environments. 

Strategic priorities will need to include risk prevention, rather than risk protection only. Self-insurers will need to consider product innovation to map coverage to existing needs, as well as develop new skill sets.

7. Global intermediaries

Brokers are repositioning as underwriting and risk advisers, boosting revenue and strengthening customer relationships. 

Risk placement will always be important to commercial insurance brokers, but it will no longer be their sole focus. Their placement teams will be considerably smaller after extensive re-skilling, and the most successful firms will transform their models to expand and diversify their offerings to include underwriting and risk advisory services.

Of course, it will take considerable effort and significant investment to execute this transition. Brokers must overcome market skepticism about their ability to add value in a primarily digital world. They will also need new skill sets, higher-quality data and modernized technology. Those that transform successfully (and immediately) will be well-positioned to lead the creation of industry ecosystems that connect industry players following variants of all these business models — a traditional strength of brokers. 

See also: Future of Insurance Is Clear (but Hard)  

Their strategic priorities will consist of bringing in new skill sets to help develop new offerings. They will need to effectively use distribution networks to launch and refine services, along with using data comprehensively to identify opportunities to serve a broader range of customer needs.

An ever-evolving insurance ecosystem

Some of these changes are already underway. Yet others are only in the early stages. Some will be easier to turn from vision to reality, while many will involve significant disruption.

As our previous NextWave personal lines and small commercial report found, a business-as-usual operating approach is no longer an option. Changes are already affecting the industry now, and the early movers are seeking out competitive advantages that may become lasting as the insurance ecosystem is reshaped over the coming years.

We know what’s likely to come next — and picking the right business model to pursue will be key for insurers and reinsurers to reposition for what’s to come.

Click here to download the full NextWave Insurance report.

As insurance companies look to optimize performance, mitigate risk and meet rising consumer expectations, they still face a plethora of challenges when it comes to data and analytics. Companies continue to aggregate more and more data – but the manner in which they are doing so is not necessarily efficient. Some 40% to 50% of analysts spend their time wrangling the data, rather than finding meaningful insights.

To address these operational inefficiencies, TransUnion commissioned Aite Group to conduct a study of insurance and financial services professionals. The findings from this study outline how companies can stay competitive in the insurance industry while adapting to the evolving world of data and analytics.

Like most established financial institutions, insurance companies have multiple data repositories across the organization. Individual business units own their respective processes for capturing and managing data and, more often than not, manage at the product level rather than at the customer level. This often leads to inconsistencies, with no set definitions of key terms such as “customer.” As a result, information and insights are isolated to silos – by lines of business or by product – creating barriers toward seamless data integration.

To maintain a competitive edge, insurance companies recognize the need for new data sources. More than half of the study’s respondents plan to increase spending on most types of data sources, especially newer ones, such as mobile. However, as big data gets even bigger, it becomes increasingly difficult for analytics executives to find valuable insights. Addressing the challenges that arise from big data volumes requires an enterprise data management strategy as well as an investment in the proper analytics tools and platforms for processing and analyzing the data for meaningful insights.  

The majority of these institutions are currently grappling with fractured data and legacy systems, which prevents these companies from extracting value and making the data actionable. 70% of those surveyed indicated that a single analytics platform, one that coordinates and connects internal and third-party systems, is a major differentiator. However, only about two in 10 respondents indicated that their current solutions have these capabilities.

This highlights the need for a coherent enterprise data and analytics strategy and a common platform to hold and integrate existing and new data sources, as well as analytical tools. The platform needs to be flexible to support different skill sets, react to changing market conditions and have the ability to integrate alternative sources of data.

See also: Why to Refocus on Data and Analytics  

In addition to leveraging the right tools, sourcing the right talent remains a key challenge for executives. Nearly half (45%) of insurance professionals indicate that having the right talent greatly improves their ability to underwrite profitable policies. However, due to a lack of bandwidth, insurance companies often do not have the resources to allow their analytics teams to stretch their analytics creativity. 

These operational challenges can result in a significant amount of time being dedicated to cleansing and prepping the data – preventing analytical teams from performing more valuable activities such as model development. The operational challenges create an obstacle for retaining talent as these sought-after data scientists are instead assigned to trivial work. 42% of the insurance professionals surveyed indicated that it is also challenging to find qualified data scientists in the first place. 

As the use of descriptive, prescription and predictive analytics gains traction, it is imperative that executives recognize the challenges and explore solutions. By overcoming these barriers, the industry will be better prepared to embark on the next frontier of data and analytics.

For more information about the TransUnion/Aite Group study, please visit the “Drowning in Data: Thirsty for Insights” landing page.

Much has been written over the years about what sets great claims organizations apart from all others, but none of these analyses really apply anymore.

The new world in which insurance and claims now operate features totally different customer profiles, plus emerging, tech-enabled solutions that can solve challenges in the claims process that have existed for decades. Additionally, we have very different insurance products and coverage opportunities and a highly competitive business environment in which all participants are judged not just among their peers but against the most popular consumer brands across all industries globally.

Old marketing and advertising strategies are no longer relevant, as new forms of communication have emerged that influence consumer opinions and the way in which information is disseminated and consumed.

In short – the game and the rules have changed, materially and forever!

In today’s world, leadership, collaboration and partnerships have the greatest impact on the quality of the claims process and experience.

Leadership Impact

The greatest single influence over all of this is leadership, which can come from a variety of directions, but most effectively from the CEO or other C-suite leaders. This is where authority and power reside, and where company vision, mission and culture are created. It is the mission, not the perks, that attracts and motivates employees.

The most successful insurance companies are those with leaders who set and continuously articulate the corporate tone, support gender equality, diversity and inclusion, promote family culture, celebrate employee achievement and life milestones and aggressively encourage a healthy work-life balance.

See also: Future of Claims Intake for Insurance?  

And today’s most successful claims operations are those in insurance companies whose leadership understands the value of and promotes collaboration and partnerships. In the new world, nothing innovative or entrepreneurial really happens without mastering this collaboration.

Leadership Support

Obvious examples of support include financial investments, budget, staffing and upskilling initiatives. In larger insurance organizations, other assistance may include inter-departmental support from IT, finance and digital and innovation teams. Alignment with legal support is also essential, especially in light of regulatory and other potential exposures when making process and consumer changes.

Perhaps less obvious, but still critical, is the creation of an environment that encourages a culture of innovation that is future-focused, one that features tolerance for mistakes with safety nets in place. This is certainly challenging for leaders who are typically balancing risk and exposure and the demands of shareholders and directors with the recognized need to innovate at an unprecedented pace.

The most successful companies have developed teams and processes to identify, engage, evaluate and partner with the best insurtech startups, which promote “test and learn” and which are able to move rapidly from piloting to implementation. Also demonstrated by these leaders is a willingness to temporarily accept imperfection and iterate to accelerate progress, which is a departure from traditional methods of elongated pilots. Being a “fast follower” and waiting for peers to succeed or fail with pilots is only a recipe to fall further behind innovators. 

Positioning for Future Success

Perhaps most important of all for leaders is to provide resources to claims organizations to extensively assess the insurtech landscape for potential partners and to keep their knowledge current, because startups constantly improve their solutions. 

It is imperative that this effort be a team approach, where the broader organization is involved and such learning and information is socialized, as opposed to restricted to key individuals or select innovation teams. One such approach is to measure and monitor organizational return-on-learning. In other words, in much the same way as policy coverage expertise or damage evaluation are coveted skills for adjusters and claim leadership, organizations should assess the effectiveness of sharing knowledge around automation, technology and collaboration.

See also: Avoiding the Pitfalls in Catastrophe Claims  

These initiatives are neither easy nor inexpensive, and they undoubtedly require total leadership commitment, but they can turn average competitors into industry leaders and ensure longer-term success in what we all know is going to be a totally different marketplace and world.

At the Connected Claims USA conference (June 24-25, Chicago), insurance leaders and insurtech partners will be gathering to learn and form lasting partnerships that will change the game.

The coronavirus crisis presents us with a "natural experiment." I wish it didn't, but it does, and we ought to take advantage of the experimental possibility if we're to benefit at all from the weeks and months of danger and uncertainty that lie ahead of us. While the near-term focus clearly needs to be on battening down the hatches—taking care of our employees, our families and ourselves—if we can also establish a process for testing and learning, we can better position ourselves and our companies for the world that will exist on the other side.

A natural experiment is one that occurs in nature because it could never ethically be set up artificially. You don't, for instance, withhold a promising medicine from a control group because you want to see how much worse they do than those who are given the medicine. Probably the most famous natural experiment in recent years occurred in Oregon in 2008, when funds for Medicaid were expanded, but there wasn't enough for everyone. A lottery determined who qualified, so you had the state's poor randomly divided into have and have-nots, whose health was tracked over the following two years. Results were less than many had expected: There was no statistically significant difference on physical health measures. But there were significant gains by the haves on mental health and financial security vs. the have-nots. And at least there is real data. (You can read more here if you're interested.) 

In the case of the coronavirus, the natural experiment comes from the fact that we have to cut back on face-to-face interaction, sharply for a few weeks or more and at least moderately for months, perhaps many months. That will mean the cancellation of many conferences, a drastic reduction in meetings, a surge in remote work, far fewer in-office meetings with clients—and a major opportunity to see how well digital interactions can substitute for physical ones.

Because digital interactions are inherently less costly than physical ones—no more hopping on that plane, checking in to that hotel room, paying that conference fee, for instance—now is the time to test every digital interaction you've been considering. Even older clients, who might have assumed they needed a sit-down meeting, are now open to the idea of dealing with you remotely. The choices are, basically: interact via some digital technology or don't interact at all. 

You can take the next stretch to condition employees, corporate partners/customers and individual clients to the more efficient digital interactions, in ways that weren't possible previously.

But you won't want to continue doing everything digitally, because, despite all the futurists touting work from home for decades, there is value to face-to-face interaction. The key is to take an experimental mindset. 

You expected to generate X amount of business at the giant schmoozefest known as RIMS that was just canceled. Well, how much did business, in fact, drop because you couldn't go? How much do you think various new, digital interactions that you instituted managed to fill the gap? Now compare your lost business against what you would have spent and recalibrate what you'll do in the future—keeping in mind that benefits can be ephemeral; it's hard to put a clear value on that chance meeting that maybe leads to business years down the road. 

Calculate how many hours you and colleagues/employees spend in face-to-face meetings. Now, over the next weeks and months, see what you think you lose (if anything) in collaboration/camaraderie by doing those remotely or by not holding them. (When I stepped into an Intel conference room in 1996, during the Andy Grove era, I saw a sign saying that before holding a meeting you were to calculate the per-hour salaries of all those who would attend and cancel the meeting if you couldn't demonstrate that you'd increase earnings by more than the salary total consumed by the meeting. Smart man, that Andy Grove.) 

Establish metrics for your dealings with customers today, then see how they change once you switch to phone calls, texts, emails, videoconferences, etc. Calculate the difference in costs, too, so you can better decide what the right mix of channels should be once the world returns to normal. 

You can track your own activities, too, especially if you're now working from home rather than heading into an office. I, for instance, am finding I'm far more productive now that I can't have sports on in the background while I work. I assumed that, with the sound off, the broadcasts didn't distract. Well, yeah, not so. Those sports will stay off even when the various seasons resume. (I don't know if it's true, but I've seen people claim on Twitter that Shakespeare wrote King Lear and other classics while London was under a quarantine for black plague—and note that Julius Caesar wouldn't have been assassinated in the Roman Senate on the ides of March if he'd been able to work from home.)

My old friend and onetime neighbor Andy Kessler wrote a smart column in the Wall Street Journal on Monday about how stock market crashes can prefigure a major shift in the economy—in his case, following the 1987 crash, the smaller high-tech stocks he covered as a securities analyst for Morgan Stanley moved to the forefront, gradually eclipsing IBM and carrying the world into the Internet age. Sure enough, amid the stock market carnage on Monday, Amazon announced that it intended to hire 100,000 warehouse workers and delivery drivers.

The opportunity to lead in the next phase of the economy is open to all of us, at least to some extent, if we can take a test-and-learn approach even while dealing with all the other craziness. We're going to suffer through a pandemic and, it increasingly seems, a recession. We might as well get something out of it.

Stay healthy.

Paul Carroll
Editor-in-Chief

P.S. Here is a piece from the Daily Beast that, based on my experience in tracking economic crises, seemed informative. It lays out four scenarios for how the pandemic will play out and, eventually end. 

P.P.S. Here is a link to the first of a variety of educational quizzes at Quizzify.com, run by our friend Al Lewis. I found them informative and interesting. You might try your hand, perhaps even sharing with colleagues. We can all stand to be smarter about the challenge in front of us.

If the COVID-19 pandemic has taught the world anything, it’s that each event is different from the last. It’s not enough to have an abstract plan in place when disaster strikes. The most effective disaster recovery and business continuity (DR/BC) plans are those that organizations practice routinely. Insurers and companies across all industries should be prepared to stay online during a range of natural and man-made disasters, from earthquakes to pandemics and cyber-attacks. 

Modern consumers have come to expect 24/7 accessibility from their service providers. A weak infrastructure that can’t reroute traffic or a third-party partner’s lapsed platform causing an entire system to go down are not just inconveniences—they’re threats to customer relationships. DR/BC plans should take such liabilities into account and be tested end-to-end. 

Most insurers created DR/BC plans with hurricanes, winter storms or other natural disasters in mind—not terrorist attacks or pandemics. Organizations should consider these plans as living documents for precisely this reason. The impact of contagious illnesses (e.g., COVID-19) on company staff and leadership may not be present in existing plans. If so, organizations may need to put social distancing into effect, especially in key departments with high concentrations of knowledge or ability. 

Preparation Is the Best Prevention

Even the best-informed DR/BC plan is unlikely to cover every scenario. Preparing the entire organization for emergencies, however, drills in responses to create a form of muscle memory that makes employees ready to respond when new threats emerge. Pressure testing or refining a system is better done when an organization is running at full capacity rather than after a disaster has emerged. 

See also: Coronavirus: What Should Insurers Do?  

Plans may attempt to cover a broad range of known issues and look to incorporate reasonable fail-safe provisions to address contingencies if partner systems go down, but they should still follow two rules.

1. Documentation should be easily—and immediately—accessible. 

Even if plans establish clear lines of communication, explain how to access critical systems and lay out how to frame decision protocols, they do no good if employees can’t access them when the time comes.

Organizations should store DR/BC plans somewhere that is easy to locate, and there should be multiple instances of the plans. If an entire grid is down, for example, SharePoint is not a convenient place to house emergency instructions. Insurers should also encourage their employees to take information home with them. Corporate networks should not be the only storage space for emergency documentation—and demonstrating knowledge of DR/BC plan access points should be covered as part of employees’ test exercises. 

Employees are only able to act in a crisis if they have the hardware they need. Laptops or tablets should be available to take home; bringing these devices with employees should be part of regular training exercises. Equipment is not useful during a test or a “live fire” event if it stays at the office overnight. 

2. Plans should be created early and practiced often. 

The greatest key to a successful DR/BC plan is preparing long before precipitating events are on the horizon, when the organization can consider all scenarios. Employees will know what to expect and how to behave when disaster drills are routine (like fire drills), no matter if the employees are part of IT or serve as a member of a business unit. 

The events that teams practice for are seldom the ones that happen in real life, but preparing for a wide array of scenarios can help management and associates to stay calm and focus on understanding what is new or unusual about the emerging situation. When rational responses to crises become second nature, individuals and organizations can survive a wide array of incidents with lower stress and less negative impact on the people who depend on them most—their customers. 

If possible, employees should undergo regular online training in these emergency protocols with certification available. That way, newer employees or those less familiar with DR/BC plans and procedures can receive updated experience until the whole team is on the same page about where and how to access the information they need during an emergency. 

See also: How Coronavirus Is Cutting Connections  

No insurer can prepare for every possible emergency, especially when the future is uncertain, as it is with COVID-19. But maintaining a well-thought-out DR/BC plan that exists as a living document can help any organization keep a cool head when people need to make big decisions quickly. Creating a plan early and making sure employees know how to access it are foundational to keeping the lights on (and customers satisfied) when disasters and other unexpected events occur. My motto as a CIO in insurance and banking was, “Prepare for the worst; hope for the best,” while remembering that hope is not a plan on its own.

Software-as-a-service (SaaS) has become part of the tech lexicon since emerging as a delivery model, shifting how enterprises purchase and implement technology. A new “_” as a service model is aspiring to become just as widely adopted based on its potential to drive business outcomes with unmatched efficiency: artificial intelligence as a service (AIaaS).

The AIaaS Opportunity

According to recent research, AI-based software revenue is expected to climb from $9.5 billion in 2018 to $118.6 billion in 2025 as companies seek insights into their respective businesses that can give them a competitive edge. Organizations recognize that their systems hold virtual treasure troves of data but don’t know what to do with it or how to harness it. They do understand, however, that machines can complete a level of analysis in seconds that teams of dedicated researchers couldn’t attain even over weeks.

But there is tremendous complexity involved in developing AI and machine learning solutions that meet a business’ actual needs. Developing the right algorithms requires data scientists who know what they are looking for and why, to cull useful information and predictions that deliver on the promise of AI. However, it is not feasible or cost-effective for every organization to arm itself with enough domain knowledge and data scientists to build solutions in-house. 

AIaaS is gaining momentum precisely because AI-based solutions can be economically used as a service by many companies for many purposes. Those companies that deliver AI-based solutions targeting specific needs understand vertical industries and build sophisticated models to find actionable information with remarkable efficiency. Thanks to the cloud, providers can deliver AI solutions as a service that can be accessed, refined and expanded in ways that were unfathomable in the past.

One of the biggest signals of the AIaaS trend is the recent spike in funding for AI startups. Q2 fundraising numbers show that AI startups collected $7.4 billion — the single highest funding total ever seen in a quarter. The number of deals also grew to the second-highest quarter on record. Perhaps what is most impressive, however, is the percentage increase in funding for AI technologies — 592% growth in only four years. As these companies continue to grow and mature, expect to see AIaaS surge, particularly as vertical markets become more comfortable with the AI value proposition.

See also: Predictions for AI Adoption in 2020  

Vertical Adoption

Organizations that operate within vertical markets are often the last to adopt new technologies. AI, in particular, fosters a heightened degree of apprehension. Fears of machines overtaking workers’ jobs, a loss of control (i.e., how do we know if the findings are “right”?) and concerns over compliance with industry regulations can slow adoption. Another key factor is where organizations are in their digitization journey. For example, McKinsey found that 67% of the most digitized companies have embedded AI into standard business processes, compared with 43% at all other companies. These digitized companies are also the most likely to integrate machine learning, with 39% indicating it is embedded in their processes. Machine learning adoption is only at 16% elsewhere.

These numbers will likely balance out once verticals realize the areas in which AI and machine learning technologies can practically influence their business and day-to-day operations. Three key ways are:

Empowering Data

Data that can be most useful within organizations is often difficult to spot. There is simply too much for humans to handle. The data becomes overwhelming and thus incapacitating, leaving powerful insights lurking in plain sight. Most companies don’t have the tools in their arsenal to leverage data effectively, which is where AIaaS comes into play.

An AIaaS provider with knowledge of a specific vertical understands how to leverage the data to get to those meaningful insights, making data far more manageable for people like claims adjusters, case managers or financial advisers. A claims adjuster, for example, could use an AI-based solution to run a query to predict claim costs or perform text mining on the vast amount of claim notes.

Layering Insights for Better Outcomes

Machine learning technologies, when integrated into systems in ways that match an organization’s needs, can reveal progressively insightful information. A claims adjuster, for example, could use AIaaS for much more than predictive analysis. The adjuster might need to determine the right provider to send a claimant to based not only on traditional provider scores but also on categories that assess for things like fraudulent claims or network optimization that can affect the cost and duration of a claim. With AIaaS, that information is at the adjuster’s fingertips in seconds. 

In the case of text mining, an adjuster could leverage machine learning to constantly monitor unstructured data, using natural language processing to, for example, conduct sentiment analysis. Machine learning models would look for signals of a claimant’s dissatisfaction — an early indicator of potential attorney involvement. Once a claim is flagged, the adjuster could take immediate action, as guided by an AI system, to intervene and prevent the claim from heading off the rails. While these examples are specific to insurance claims, it’s not hard to see how AIaaS could be tailored to meet other verticals’ needs by applying specific information to solve for a defined need.

Assisting Humans at a Moment’s Notice

Data is power, but it takes a human a tremendous amount of manual processing to effectively use it. By efficiently delivering multilayer insights, AIaaS provides people the capability to obtain panoramic views in an instant. Particularly in insurance, adjusters, managers and executives get access to a panoramic view of one or more claims, the whole claim life cycle, the trend, etc. derived from many data resources, essentially by a click of a button.

See also: How to Use AI in Customer Service  

The Place for AIaaS

AIaaS models will be essential for AI adoption. By delivering analytical behavior persistently learned and refined by a machine, AIaaS significantly improves business processes. Knowledge gleaned from specifically designed algorithms helps companies operate in increasingly efficient ways based on deeply granular insights produced in real time. Thanks to the cloud, these insights are delivered, updated and expanded upon without resource drain.

AIaaS is how AI’s potential will be fulfilled and how industries transform for the better. What was once a pipe dream has arrived. It is time to embrace it.

As first published in The Next Web.

“That's only for young people,” the board member of a German insurer said when I presented Tiktok as a possible next big thing for the industry

"What do you think; how many people downloaded it?" I asked.

Brief silence.

"If you ask like that, a few million.”

Me: “Over 1.5 billion. It is the most downloaded app of the year - worldwide"

Again, silence.

"Okay, how would you use it with us?"

A lot of discussions inside and outside the industry go like this. A lot of insurers are happy to have seemingly caught up. We just created websites for individual agencies, putting some sales application processes online, or are outperforming each other at Google Adwords. But now, the next development seems to be passing us by--the new video platform from China: Tiktok.

Tiktok has -- like YouTube in 2005, Facebook in 2008, LinkedIn in 2009 or Instagram in 2010 -- a seductive specialty: free organic reach in the millions. As with the other networks, this will not last forever. But whoever invests one dollar here today will probably get it back multiple of times.

What is Tiktok?

At Tiktok, short videos of up to 60 seconds are uploaded. Most are between 10 and 15 seconds. An algorithm determines which videos appear on the user's home screen, the so-called for-you-page. When videos are finished, shared or viewed repeatedly, more and more users receive them. Due to the shortness of the videos and the rigid selection methods of the algorithm, the user is usually shown one appealing video after another.

This leads to very long average time spent in the app. In the U.S., it's over 52 minutes per day. Tiktok has replaced all other social networks in this key performance indicator (KPI). Over 41% of viewers are between 16 and 24 years old. However, the number of users in older groups is exploding, too. The number of adults has quintupled in the last 18 months.

There is a possibility that Tiktok will replace other networks such as Facebook and Instagram worldwide.

How do you become successful on Tiktok?

With our account, we achieved over 74,000 likes and over 1.8 million views with 2,400 followers within three months. We produced several viral videos that reached over 50,000 or even 70,000 views within a few days -- also over 250,000. Because many popular categories -- such as dancing, lip-sync and modeling -- fell out for us, we focused on business and relationship topics. Videos about business trips were particularly successful (examples here and here). We also tested insurance topics, such as "The 5 Biggest Insurance Losses" or the need for liability insurance, but with less success.

See also: Social Media: Your Top Referral Source  

Is this interesting for insurers and salespeople?

Tiktok is not for every insurer, broker or agency. Tiktok is only relevant for companies that want to grow above the market average and are willing to try new tactics. It is only relevant for decision-makers who want to deviate from pushy sales using sophisticated attention hacking strategies.

The idea is to create a situation in which the sales person doesn't reach out to the customer trying to convince him or her; customers approach the salesperson in the moment of need.

With Tiktok, currently, enormous reach can be generated with little effort. But we hardly see any companies, and international celebrities like Will Smith appear only slowly. This is often due to the fact that they are successful on other channels and would need to start at zero on Tiktok. A lot shy away from having to start all over again and possibly fail. Therefore, previously unknown content creators dominate and build an enormous follower base.

Insurers can use this new channel, especially for branding and recruiting but also for sales. How? By creating content that appeals to the corresponding target group.

I see a special opportunity for insurance and finance content that addresses problems of different target groups. A particularly good example is Tim Hendrik Walter, who attracted over 725,000 fans and over 14.6 million likes with legal topics (as the German “Mr. Attorney”). He does this by explaining legal questions to target groups, such as “When can I order from Amazon?” or "How to get dressed in court?"  

Insurers and salespeople could certainly do the same with their topics.The board member quoted at the beginning asked what the most important criterion was to start at Tiktok. The most important thing is to try out the app yourself as a decision-maker and to watch content (iTunes - Playstore).

Our biggest mistake in the beginning was simply using content from other channels for convenience. As soon as we started generating content specifically for Tiktok, the reach exploded.

Those who are particularly creative get a particularly high reach.

Even as an insurer.

Let's tackle this.