Concern about the spread of the coronavirus has triggered the largest “work-from-home” mobilization in history. Here are practical steps that organizations can take to remain cyber resilient amid the crisis.

The outbreak of COVID-19 has caused significant disruption to businesses and a degree of panic within the employee community. Companies across Asia have activated contingency and business continuity plans and have allowed or instructed employees to work from home to limit the spread of the virus. In a new reality where millions of people are working remotely, secure networks are now more critical than ever. To remain operational and secure, Aon recommends that companies take the following steps:

Defend Against the Phishing Wave

Malicious actors will leverage the intense focus placed on the virus and the fear and panic it creates. Security researchers have already observed phishing emails posing as alerts regarding COVID-19. These emails will typically contain attachments that purport to offer information about the outbreak or updates on how recipients may stay safe. In an environment where people are stressed and hungry for more information, there is a lack of commitment to security best practices.

This is the time for organizations to remind employees of the need for vigilance and the dangers of opening attachments and links from untrusted sources. Running a simulated spear phishing campaign can also demonstrate the level of resilience to these attacks. At a more technical level, up-to-date antivirus and monitoring tools can limit the effectiveness of successful spear phishing attacks.

Test System Preparedness

Organizations will be experiencing an unprecedent amount of traffic accessing the network remotely. Companies with an agile workforce have been preparing for this contingency for some time and will be well-equipped to maintain network integrity through the use of sophisticated virtual private networks (VPNs) and multi-factor authentication. Enterprise security teams are recommended to increase monitoring for attacker activities deriving from work-from-home users, as employees’ personal computers are a weak point that attackers will leverage to gain access to corporate resources.

For those less prepared, COVID-19 presents a challenge. There is a risk that the increased volume of network traffic will strain IT systems and personnel and that employees will be accessing sensitive data and systems via unsecure networks or devices. We recommend that these organizations migrate as quickly as possible to remote working and bring-your-own-device (BYOD) standards. Virtual private networks (VPNs) should be patched regularly (for example, a vulnerability in the Pulse Secure VPN was patched in April 2019, but companies that failed to update were falling victim to ransomware in December), and networks should be load-tested to ensure that the increased traffic can be handled.

See also: Coronavirus: What Should Insurers Do?  

Brace for Disruption

A remote workforce can make it more difficult for IT staff to monitor and contain threats to network security. In an office environment, when a threat is detected, IT can immediately quarantine the device, disconnecting the endpoint (i.e., the compromised computer) from the corporate network while conducting investigations. Where users are working remotely, organizations should ensure that, to the extent possible, IT and security colleagues are readily contactable and ideally able to physically address a compromise at its source. Sophisticated endpoint detection and response (EDR) software can also be used to quarantine workstations remotely, limiting the potential for malicious actors to move through the network.

As this risk moves beyond the technical, companies should adopt
an enterprise risk approach. This can include rehearsing business continuity plans (BCP) and senior management response through tabletop crisis simulations that focus on cyber scenarios as well as how pandemics and other similarly disruptive events are likely to affect automation, connectivity and cyber resilience.

Companies can also safeguard against the increased risk of disruption through a robust cyber insurance policy that, in the event of a digital disruption to systems, can provide cover for business interruption losses, as well as the costs of engaging forensic experts to investigate and remediate a breach.

COVID-19 presents a range of challenges to businesses across Asia, but developments in technology since the SARS outbreak mean companies can remain operational and nimble in the face of uncertainty. Keeping one eye on the pervasive cyber threat in the midst of this crisis is critical to ensuring continuing success.

Money has been pouring into insurtechs, reaching a record of almost $2 billion in Q4 2019. Since 2018, investors have put more than $1 billion per quarter into companies seeking to shake up the industry. Not a single market segment has been untouched.

In 2020, the focus will be on innovating with insurtechs that enable incumbents. One report found that 96% of insurers said that they wanted to collaborate with insurtech firms in some way. Those surveyed favored partnerships and the software as a service (SaaS) approach to developing new solutions. There’s a rapidly growing list of insurer and insurtech partnerships.

See also: An Insurtech Reality Check  

Insurtechs are developing to solve niche problems, and most aren’t aiming to tackle every vertical or every phase of the process. We all know the saying, jack of all trades, master of none. Insurtechs are focused on being the master at very specific parts of the value chain. Allianz has partnered with Flock, an insurtech startup offering pay-per-flight drone insurance; Aviva partnered with Digital Risks in the U.K. to develop insurance for startups and small and medium-sized enterprises (SMEs); and State Farm partnered with Cambridge Mobile Telematics to deliver usage-based insurance to drivers in the U.S.

One big driver of these partnerships is the inability of one company to do everything at once. Synergies can be realized when combining complementary skills. In Germany, Generali formed a partnership with Nest to offer homeowners insurance that leverages Nest’s smart home technology. Nest’s technology detects smoke and carbon monoxide and sends alerts to customer’s phones, reducing the risk for the insurer. Nationwide’s partnership with sure.com allows it to sell renters insurance through an app; Nationwide is still handing the underwriting and policy management separately. 

More and more, incumbents are working with several insurtechs that integrate to bring change to every aspect of the industry. 

Insurtechs bring the speed, agility and technological skills that incumbents need.

As Deloitte’s 2020 Insurance Outlook pointed out, “Despite some attempts to upgrade legacy marketing and distribution systems… carriers continue to struggle to drive more effective connections with consumers accustomed to online shopping and self-service.” Trying to bring legacy systems into the current age of digitization simply isn’t working, and, if incumbents try to build in-house, they face a longer time to market and higher costs.

Partnering with an insurtech company allows incumbents to quickly bridge the innovation gap, where technology changes faster than their ability to keep up. The estimated timeframe to develop solutions in-house is around 18 months, whereas you can be up and running in as little as three months if you partner with an insurtech. Moreover, incumbents that partner can respond more quickly to changing customer demands and lessen their risk of losing market share to a competitor. 

See also: How Tech Makes Sector Safer, Smarter  

For their part, insurtechs have realized that seeking to disrupt and replace incumbents can be too costly. To run a successful insurance company, you need significant capital, which is difficult for startups to raise. The insurance industry is also regulation-heavy, making it difficult for newcomers to find a place. Startups struggle to access the complex networks that support insurers. The industry presents too many barriers to independent disruption, but partnership benefits everyone involved.

Insurers are ready to innovate and have the data and distribution networks to support large-scale rollouts. Insurtechs have the technology and the agility to come into a large organization in the midst of change, work with its legacy systems, partner with insurtechs solving other problems in the supply chain and provide immediate value in moving them into the digital world. Both sides of the equation are ready and willing to realize the benefits of working together.

From one way of looking at it, the big carriers are caught in the middle, between the providers that aggressively raise their prices each year and the employers or individuals who are starting to realize that there’s no bottom to the pit into which they throw their premiums and deductibles each year.

On the other hand, no one in the U.S. healthcare system has been better-positioned to use their combined purchasing power to force delivery organizations to finally focus on the value of the services they provide than those same large carriers. Yet, over and over, they’ve been happy to pass those escalating prices on to the people paying their premiums – with just enough of a markup to ensure their own profits aren’t at risk.

Part of problem is semantics. As Vitalware CEO Kerry Martin recently said, there is an important difference between healthcare “costs”/“charges” and healthcare “prices,” but the lines between them are often blurred. People say, “healthcare costs are increasing” when it’s more accurate to say “healthcare prices are increasing.”

Think of it this way: Healthcare costs are what it costs hospitals to perform certain services. These haven’t really gone up over the years, evidenced by the fact that cash prices – what people who forgo insurance and choose to self-pay – have seen few fluctuations.

What has gone up are the prices that carriers negotiate off those costs/charges to turn a profit. Prices are increasing, with no added benefit to beneficiaries. Perhaps, health benefits should be renamed health detriments. 

It’s a broken system, ripe for disruption by upstarts that can attack the areas of biggest waste, while the incumbents focus on protecting their legacy service bundles.

A recent JAMA study pinpoints those areas with the greatest opportunity for change. The greatest source of wasteful healthcare spending, accounting for $265.6 billion of the estimated $760 billion to $935 billion industry total, came from administrative complexity, defined as “waste that comes when government, accreditation agencies, payers and others create misguided rules.” Complexity by design is the root cause. Thomas Sowell put it well, “People who pride themselves on their ‘complexity’ and deride others for being ‘simplistic’ should realize that the truth is often not very complicated. What gets complex is evading the truth.” 

The second-greatest source of waste, accounting for between $230.7 billion and $240.5 billion, the authors identify as pricing failure, or “waste that comes as prices migrate far from those expected in well-functioning markets, that is, the actual cost of production plus a fair profit.” Essentially, this is waste that comes from the cost versus price loophole carriers, and hospital executes have historically taken advantage with a devastating impact on the working and middle class. There is no bigger contributor to 20 years of wage stagnation and decline than hospital profiteering. 

See also: Pricing Right in Life Insurance  

This gap, historically too opaque for consumers to notice, is now quite salient, thanks to all the news coverage that surprise medical billing got in 2019. Many informed consumers are no longer afraid to give their medical bills a long and hard review, questioning not only why they would pay an arbitrary price, but also the quality of care they’re buying. They’re aware that, despite the high prices they may be paying, there’s often little return on their healthcare investment, and as a result are becoming pickier and picker about the providers they choose.

Some in high-deductible health plans are even going so far as to research what their providers’ cash prices are, and if they’re less than what they’d pay prior to hitting their deductible, are making the conscious decision to ignore insurance. That can be a smart approach.

If carriers don’t change, it’s likely government will soon change them. The Centers for Medicare and Medicaid Services’ (CMS) hospital price transparency final rule, which would require hospitals to “establish, update and make public a list of their standard charges for the items and services that they provide,” comes into effect this time next year. Carriers can continue to keep the prices they negotiate with hospitals secret for now, but not forever.

Being upfront and transparent about how and why they’ve come to agree on certain prices for certain services or procedures isn’t just the right thing to do, it’s the inevitable. And those that get a head start on that now will be the ones to have a leg up on their competitors in the not-too-distant future.

 

Life insurance is a dichotomy: decades-long customer relationships, but products in a continual state of change. As companies evolve, active sales of specific products are often discontinued due to underperformance or corporate shifts in strategy, although many of the policyholders are still very much alive.

As a result, insurers have to dedicate time and resources to servicing these discontinued products, also known as closed blocks. This robs focus—and funding—from strategic growth initiatives.

On average, these blocks run off anywhere between 4% and 10% a year, depending on the type of product. Yet, the costs to manage these discontinued products aren’t decreasing at the same rate.

In most cases, closed blocks run on legacy policy administration systems, which typically require more human intervention than newer, more agile platforms. The technology may be so old that it requires specialists to operate, which keeps the servicing costs per policy high.

In the past, the only way life insurance companies could mitigate the high cost of closed block administration was to sunset obsolete systems and migrate to a new solution. However, this approach presented problems of its own.

Data conversion was expensive and complex, at best, often taking years to produce the expected efficiencies. Even then, there was no guarantee of accuracy. Meanwhile, managing the change took time away from the company’s core business.

Today, the emergence of new approaches and disruptive technologies give insurers more options, and new opportunities to reimagine the administration of closed blocks.

Three main factors are driving the changes:

• Innovative business models can shape more advantageous deal structures with variable costs and reduced risk.
• Extreme transformation levers like robotics, automation, machine learning and artificial intelligence decrease operating costs and deliver efficiency gains in months, instead of years.
• The application of automation and big data conversion techniques speed data transfer without the inherent risks of more traditional conversion methods.

This paper explores the impact of these new enablers and how life insurance companies can maximize the benefits of these new closed block strategies.

See also: Selling the Urgency of Life Insurance  

Innovative Business Models Give Insurers More Options

In the past, life insurance companies had limited options for closed block management. Today, insurers have myriad approaches beyond traditional platform migration to consider.

Sell the Closed Blocks

One simple way to lessen the burden of managing closed blocks is to sell these policies to a reinsurer or to another carrier. While this approach does eliminate the challenge of servicing this run-off business, by divesting these policies companies also sever the associated client relationships. Cutting ties with clients who hold these discontinued policies eliminates the ability to cross sell or market new offerings to them (and their families) effectively. The sale could also be negatively received by the client as a disregard for long-term customer relationships, or as a sign of financial instability. Either of these perceptions could cast a negative light on the insurance company’s brand.

Outsource to Best-of-Breed BPO and ITO Provider

Companies that want to maintain client relationships but offload the day-to-day servicing of closed blocks could consider outsourcing policy administration and claims services.

While this option is feasible to mitigate some of the labor costs associated with closed blocks, it does nothing to alleviate the technology overhead or do anything to simplify the complex architecture that adds costly manual steps to the servicing process.

Outsource to Comprehensive Third-Party Administrator

Outsourcing both platform and personnel to a third-party administrator is a viable option for many life insurance companies. They can retire aging systems, redirect the specialized personnel often required to run these older platforms and turn a fixed cost into a variable cost structure. The idea is not only to offload operations as is, but add automation, robotics and other disruptive technologies for continual efficiency gains and cost savings throughout the duration of the contract. The challenge is that very few established third-party administrators with these capabilities and insurance industry experience currently exist. The other challenge is that established third-party administrators are less flexible in their approach, which often leads to nickel-and-diming the insurer or compromising the customer experience.

Develop a Structured Deal With Strategic Partners

Instead of going it alone, some insurance companies are entering into strategic alliances or creating structured or balance-sheet-based deals with trusted partners or other carriers to increase value, leverage economies of scale and manage risks. In this scenario, insurance companies share resources, knowledge, expertise and risk associated with closed block management. A few examples of such options are:

• Joint ventures, in which vendor and insurer share resources, revenue, expense and profits. These agreements can be very informal or complex. While they work for some insurers, they also have the potential to take focus away from the insurer’s core business.
• Equity strategic alliances, in which the provider takes over closed block administration, but both provider and insurer share in the block’s costs and profit.
• Industry consortium, in which two or more life insurance companies jointly invest with a provider to create an industry utility to manage their collective closed blocks.

Extreme Transformation Levers Drive New Levels of Efficiency and Customer Engagement

Technology is advancing at light speed, which is excellent news for life insurance companies. Extreme transformation levers are now in play, enabling companies to improve productivity by as much as 35% to 40%. 

Blending the use of disruptive technologies, like robotics, automation, descriptive analytics and machine learning, with system conversions can transform the economics of closed block management.

A transformed environment operates under a RAPID, SMART, LEARN, VIRTUAL model:

RAPID

Use automation to make processes run faster.

SMART

Use analytics to really look at how to process and who will process.

LEARN

Fully use machine learning in data extraction and document classifications to learn what information has to be taken from each form, each process and each individual.

VIRTUAL

Create a straight-through processing environment, where the transactions move seamlessly through the required steps without human intervention.

Robotic Process Automation

Robotic process automation (RPA) is the first phase of the evolution of automation. The “robots” are actually advanced computer software solutions that can interpret existing applications for processing transactions, manipulating data and communicating with other digital systems. The software is not only capable of streamlining repetitive, manual tasks previously handled by humans but, because it requires no coding, is fast and cost-effective to implement and is completely non-disruptive to the existing IT environment.

The number of tasks or hand-offs requiring human intervention is typically very high in legacy systems for closed blocks. The work might require countless hours and investment to fix the administration systems. It can alternatively be addressed through RPA, which can provide 20% to 30% efficiency gains within three to six months and with limited investment.

If life insurance companies work with a provider with skilled RPA technologists on staff, that provider can not only speed ROI by leveraging RPA for lower-complexity tasks but can minimize conversion efforts. Ultimately, this enables the provider to increase efficiency and throughput at lower costs.

Artificial Intelligence (AI) and Machine Learning-Based Utilities

There are multiple technologies within artificial intelligence, like natural language processing (NLP), machine learning and computer vision. There are already uses cases in the industry for leveraging AI to reimagine customer engagement, automate transactional processing or improve claims processing. The results show that employing AI- and machine learning-based utilities to extract structured, semi-structured and unstructured data from documents can improve efficiency by 30%, even if the company makes no other changes.

But this is not to say that machines eliminate human beings from every process.

The ideal model creates a fine balance between technology and human engagement—moving from a model in which people perform the work and machines manage the exception to the polar opposite. The goal is to employ machines to do the basic, passive work and to engage people to handle the less menial, more reason-driven exceptions.

Analytics

Like RPA, data analytics and advanced machine learning algorithms can greatly enhance the conversion process by reducing the amount of manual coding needed. But prescriptive and predictive analytics are equally effective in reducing operating costs.

For example, providers that apply first contact resolution (FCR) analytics to identify patterns and trends can increase contact center efficiency. By using predictive analytics to quickly segment customers and anticipate need, more callers get the information or resolution they need in one call. Over time, that reduces call center volume, lowers costs and increases customer satisfaction in the process.

Implementing analytics and machine learning techniques can also improve customer satisfaction and retention, as well as reduce the volume of service requests. These tools can be used to create insight by analyzing past customer queries to predict the next actions they may take or issues they may face.  Leveraging this information enables companies to reach out and solve customer issues before they escalate.

Analytics can also be used to identify lapse and retention patterns, which enable insurers to more effectively manage cost and risk.

Omni-Channel Customer Care Technologies

The biggest opportunity lies in reimagining the customer journeys. Different customers want to engage in different ways, and their expectation is to have a seamless experience. In the process, insurers have the opportunity to lower costs by using chat triggers on web sites and deploying analytics to segment customers, deflecting many calls to channels that lower costs while improving customer satisfaction.

Given the option, consumers prefer online communication to making an inbound call, as long as they get the answers they need. The financial impact could be significant, depending on current call volume and customer personas.

See also: Pricing Right in Life Insurance  

Methodologies to Mitigate Conversion Risk

Although modern technologies provide more options than traditional system migration, there will be some conversion involved. This is typically a very resource-intensive process using tools to extract and transform data from legacy systems to make it compatible with a new system.

The good news is the conversion process has significantly evolved in recent years with advanced technology and modernized approaches, bringing more efficiency and accuracy to the process.

The following techniques detail the options:

Conventional Conversion Process

In the past, there was one way to convert legacy data to a new or different system, and it involved a great deal of human intervention. 

The legacy data was mapped to the target system through a conglomerate of extract scripts, transformation scripts and loading scripts, all created by technicians, coders, subject matter experts or a combination.

Because the logic is embedded in the code throughout multiple scripts and systems, changes and defects were difficult to manage. To compound the challenge, data lineage and mapping documents were rarely kept up to date. The testing process involved human beings sorting through the supplied information, with little automation.

Contemporary (Semi-Evolved) Process

The introduction of extract, transform and load (ETL) tools to manage the schemas of legacy and target systems added efficiencies to the traditional conversion process. ETL tools are used by coders and technicians to manage mapping, isolating extract code from transformational code to target systems, as well as managing transformation logic.

Essentially, these tools enable companies to extract data from numerous databases, applications and systems, transform it so it works with the target system and load it into the target database. Although some ETL components can be automated, like scheduling and common management functions, logic mapping still requires manual analysis, design and subject matter expert involvement.

So, there’s an improvement, but, because so much manual intervention and specialized personnel are still involved, ETL tools do not significantly reduce the overhead costs associated with conversions.

Modern Approach to the Process

Today, components of big data architecture can be leveraged to eliminate the need for manual coding. New big data platforms can accommodate new schemas with read functionality of Hadoop architecture, which scales to accommodate large data files more easily.

Spark, Java and Python machine learning libraries can now be built to perform source-to-target mapping, or schema mapping, automatically. Other open source tools can perform testing and analysis, adding efficiency without the need or cost associated with building proprietary tools. Although many ETL functions are still manually coded, automation of these and myriad other functions are currently in development and primed for future deployment.

How Insurers Can Prepare for Change

One message is very clear: the same old ways will not lead to a better future. No question, the supplier maturity and the emergence of disruptive technologies and tools have brought new closed block management options to insurers. But effective closed block management is not a one-way street. To maximize the benefits of these new technologies when working with a strategic partner, life insurance companies should follow these five best practices:

1. Strategic partner — Today, with the emergence of disruptive technologies and innovative models, life insurance companies have the opportunity to reimagine the administration of closed blocks. With the right partner and approach, insurers can ease the administrative burden and costs associated with managing these closed books of business and focus resources on growing the company for the future.
2. Active C-suite engagement — A successful transformation requires alignment between the insurer’s COO, CIO and CFO functions, each of whom should be engaged in a closed block initiative.
3. A business case that is proof of value — It’s also critical to perform an assessment of the business case, product complexity and capabilities of the third-party administrator or a strategic partner before setting project milestones. The objective is to determine the “proof of value,” which is different from the traditional way of doing a proof of concept. This work upfront not only reduces surprises down the road but enables companies to set realistic timetables for the closed block initiative.
4. Dedicated teams — Both provider and insurer have to assign dedicated teams of personnel to the project. Skipping this step, or assigning personnel who can’t fully focus on the project at hand, are the most common reasons that conversions fail. It’s also critical to recognize that the ideal platform for efficient closed block management is much different than what’s needed to support business growth. Often, life insurance company leaders blend the agenda and end up investing in expensive, highly configurable technologies that may not be necessary.
5. A provider that’s a cultural fit and transforms the status quo — Insurers should seek out and work with a provider that understands their business, is aligned with the leadership’s vision and is willing to share risks and rewards. This is not just a technology problem; it’s a business problem and therefore needs to be evaluated as a business strategy. Those characteristics, in combination with a proven track record of success, are key to optimizing outcomes.

Embracing a growth mindset and understanding how new disruptive technologies could change our industry are among the best strategies to prepare for the opportunities and challenges of the Fourth Industrial Revolution. I highlighted some of the new disruptive technologies in Part 1 and Part 2 of this blog series.

At Gen Re, we advise clients to routinely update their companies’ boards on how artificial intelligence (AI) advancements and collaborative robots are changing their clients’ industries and whether technology is replacing or complementing workplace activities.

What are some critical actions for evaluating AI and developing technologies?

1. Separate the hype from reality. The amount of information can be overwhelming for any CEO or board, so consider getting assistance from trusted advisers in tracking developments.

2. Focus on the core practices, processes, products and people at your customer organizations. Your policyholders’ employees can help you analyze which industries in their portfolio are most vulnerable to automation within the next five years. If a critical assessment reveals that a significant part is susceptible to obsolescence, examine whether product development, market expansion or new partnerships can provide a buffer for anticipated premium or market share loss.

See also: Welcome to the Robot Revolution  

3. Don’t overlook your own underwriting and claim operations. Can you use AI to improve your own underwriting results or identify creeping catastrophic claims? Having a work culture that encourages a growth mindset and embraces new technology is essential.

4. Critically track and examine the legal and regulatory issues that can slow the adoption of AI, robotics and automation. While AI technology continues moving forward, many legal and ethical questions surrounding this technology remain unanswered. Driverless technology provides one pressing example for insurers. As Warren Buffett commented at the 2017 Berkshire Hathaway annual meeting, “If driverless cars became pervasive, it would only be because they were safer,” which would mean that “the overall economic cost of auto-related losses had gone down and that would drive down the premiums" for insurance companies. We do not know when driverless technology will be widely adopted, but we know that now is the time to prepare for its impact on auto, umbrella and workers’ comp portfolios.

5. Don’t wait. It is not too soon to start the journey toward understanding the impact and possibilities of AI, robotics and automation. Ignoring the trend can be costly regardless of what lines of insurance you write.

See also: Succeeding in the Digital Revolution  

As the insurance industry continues down the path toward digital transformation, it is being inundated with data being generated by many different connected devices and systems. Enterprise data is growing so rapidly that analysts at IDC predict the worldwide volume of data will increase ten-fold to 163 zettabytes by 2025. 

With the rise in volume and accessibility of data, comes an increased risk of data breaches. In the first half of 2019 alone, nearly 4,000 data breaches occurred, resulting in more than 4 billion records being compromised. On top of these challenges, insurers are also subject to an ever-changing list of complex regulatory requirements and industry standards meant to strengthen data security and consumer privacy. From the EU’s General Data Protection Regulation (GDPR) to the Payment Card Industry Data Security Standard (PCI DSS), the New York Department of Financial Services’ (NYDFS) Cybersecurity Regulation to the Insurance Data Security Model Law, insurers face a complex regulatory landscape. 

Strategically moving some core business functions to the cloud can provide insurers with many benefits that can address these challenges head-on, including increased data security, business flexibility and scalability, better ease of compliance and reduced infrastructure and capital expenditure costs.

The insurance industry has been hesitant about cloud adoption, due in part to the widespread use of legacy technologies, a desire for single-handed control of data and the nature of being a highly regulated industry. Yet, when done right, moving key systems and IT functions to the cloud can benefit insurance firms in spades. Innovations in the cloud can make it easier for organizations to not only comply with industry standards but also better safeguard customer data, all while providing a great customer experience.

How the Cloud Can Help

According to Gartner, expenditures toward cloud-based enterprise IT offerings are increasing at almost triple the rate of spending on more traditional, non-cloud solutions. The firm also found that more than $1.3 trillion in IT spending will be affected, directly or indirectly, by the shift to the cloud by 2022. This trend underscores the many benefits that organizations are reaping from the shift to the cloud.

To realize these benefits, insurance organizations must start joining the pack and look to migrate key parts of their business and IT infrastructure to the cloud. For example, providers can strengthen data security and ease compliance with PCI DSS by moving their payments systems to the cloud. Because insurers process and store tremendous amounts of sensitive consumer data and personally identifiable information (PII) – like Social Security numbers, bank account numbers, dates of birth and payment card numbers – insurers are prime targets for hackers. Traditionally, when a customer calls an insurer to make a payment, the customer speaks with a service representative and reads payment card details aloud over the phone. Likewise, if the customer uses the website to make a payment, sensitive payment card information is collected via a web form or e-commerce platform integrated into the insurance company’s computer network. In both scenarios, as soon as the sensitive data enters the organization’s network infrastructure, the insurer is responsible – both from a compliance perspective and in terms of customer expectations – for protecting that data. By making the shift to a secure, cloud-based payments processing solution, organizations can keep sensitive payment card data out of their infrastructure completely, thus reducing the risk of a data breach and minimizing the scope of compliance for numerous regulations. 

See also: The Cloud Concept That Many Miss  

How Cloud-Hosted Payments Solutions Can Strengthen Data Security

Let’s say a customer chooses to call an insurer to make a payment. Cloud-based, dual-tone multi-frequency (DTMF) masking solutions, for example, allow callers to give their payment card data securely over the phone. The customer simply enters the card number directly into the telephone keypad. The DTMF tones of the telephone keypad are replaced with flat tones, making them indecipherable to an agent on the line or to a nefarious eavesdropper. Alternatively, the agent could send an SMS text message with a secure payment hyperlink to the caller’s mobile phone. The caller simply clicks on the hyperlink and enters payment information. In either scenario, the agent is able to stay on the line in full voice communication with the customer for the duration of the transaction, helping to troubleshoot, if necessary, and providing a frictionless and secure customer experience. Because a cloud-based payments solution sits between the telephony carrier and the contact center’s network, the payment card data is encrypted and securely routed directly to the payment service provider (PSP) for processing – keeping the sensitive data out of the organization’s network infrastructure completely.

Likewise, if a customer uses the insurer’s website to make a payment, cloud-based digital payments solutions can make the transaction more secure and provide a better customer experience, all while streamlining regulatory compliance. Say a customer is interacting with a customer service representative via web chat. When the customer wants to make a payment, the agent can send a secure payment hyperlink to the customer right in the chat window. The customer clicks on the link and is presented with a secure web form, where the customer can enter payment card information. Again, the sensitive payment data is routed directly to the PSP and never enters the insurer’s network.

In all the scenarios described above, both the insurance provider and the payment channel (telephone, SMS, the webchat solution, etc.) are kept out of the scope of compliance for GDPR, PCI DSS and other regulations. At the same time, these cloud-based digital payments technologies can relay real-time progress updates that inform the agent when the link has been opened, when payment information has been collected and whether the payment was approved by the PSP, providing the business with powerful insights into the status and success of collected payments.

By handling payments in the cloud, insurance providers can dramatically reduce the amount and types of sensitive data they process or store – making themselves less of a target for hackers and reducing the scope of compliance for numerous industry standards and regulations. Moreover, by moving their payments to the cloud, organizations can reduce costs by eliminating the capital expenditure related to hardware, and enable greater productivity across their IT teams by offloading the task of maintenance and updates to third-party service providers.

Additional Benefits of Moving to the Cloud

Cloud-based technologies offer unmatched flexibility, scalability and nimbleness compared with traditional, on-premises IT solutions. Here are just a few benefits of adopting a cloud-based solutions:

• Greater Resiliency and Reliability – because many cloud solutions are able to accommodate thousands of customers at once, these platforms offer a greater level of reliability at a lower cost than insurers could typically afford independently.
• Geo-redundancy – cloud-based payments solution providers have geo-redundant data centers, resulting in an additional level of backup in the rare case that the main payments system fails – a necessity for companies to consistently and reliably ensure customer satisfaction.
• Scalability – cloud solutions enable organizations to quickly and easily scale up on-demand, without requiring additional investment in on-premises hardware.
• Cost Control – tightly tied to flexible scaling options, cloud payments solutions often result in better cost control and allow organizations to take advantage of economies of scale, compared with investing in on-premises infrastructure. This ability to save on up-front hardware costs is especially important for fast-growing businesses.
• Less Equipment – depending on the deployment option, firms can migrate their payments systems to the cloud and have little to no equipment to maintain, allowing their IT and infrastructure teams to focus on more strategic projects.
• Quick and Easy Implementation – cloud implementations are typically faster and less complex to get up and running than on-premises deployment models. 
• Easier Software Updates and Bug Fixes – because cloud payments solutions are most often managed by service providers, insurance companies can relieve themselves of the burden of having to manually update software and patch bugs.

Security Comes First – Cloud or No Cloud

While the insurance industry has traditionally been hesitant to migrate important functions such as IT or payments systems to the cloud due to security concerns, it is important to remember that the challenge is not in the security of the cloud itself. In most cases, data breaches are the result of a user – not the cloud provider – that has failed to follow or enforce appropriate security policies and controls. As long as the organization enacts proper security policies and trains its employees on the importance of following them, it should have no worries about cloud solutions adding security risks.

That said, security should always be a top priority for companies, whether they are using on-premises or cloud-based solutions. It’s important to carefully select a provider that adheres to the highest security and compliance standards. When choosing among cloud-based payments solution providers, make sure they have achieved industry-accepted certifications like ISO 27001, PA DSS and PCI DSS Level 1 certification. (Here is a helpful guide that explains the different PCI compliance levels).

See also: Why the Cloud Makes It All Happen  

As insurance organizations struggle to keep pace with an increasingly dynamic business landscape, a deluge of sensitive customer data and ever-more-complex regulatory requirements, they will find that migrating their critical systems and functions to the cloud will provide the nimbleness and flexibility they need to remain competitive. Cloud payments solutions can help optimize costs and provide scalability, while enabling stronger security, easier compliance and a superior customer experience.

There’s a quote attributed to Henry Ford: “If I had asked people what they wanted, they would have said faster horses.” While Ford was speaking about cars, there is still a lesson for the insurance industry. In an increasingly digital world, agencies and the insured don’t need to continue trying to improve outdated coverage processes just because they’ve been a cornerstone of the industry for the last century or more. Obsolete but convenient practices are costing both parties time and money.

The “horses” of the insurance industry are the paper and PDF forms still used to this day as the main means to complete the insurance application and renewal process. Confusing forms can take weeks or months to pass between agents and the insured before finally being completed correctly, wasting valuable time. In the worst-case scenario, incorrect forms are sent to market, resulting in incorrect coverage for the insured. 

Automation is the solution that the industry didn’t know it needed, but, for those who use it, there is no question of ever going back. With current technology, agents can provide their clients with digital forms that auto-populate duplicate answers, check in on the status of their client’s application and provide help, insight and advice in real time. Agents and the insured can become significantly more efficient.

Cost pressures will always be a factor for businesses across all industries, but long-term cost management is possible if insurance agencies reevaluate technological solutions in three simple areas:

1. Maintain Online Collaborative Systems

The current application and renewal process is unnecessarily complex and confusing. It includes dozens of forms and applications to manage, with many including repeat questions. Moving the renewal process into an easy-to-use online experience allows both agency staff and the insured to access information on their own, freeing up time to complete application and renewal forms at everyone’s convenience. 

An easy, central location cuts back on either party having to track down tangible papers or multiple PDF file forms across email and envelopes. A one-stop shop that works both ways can allow clients to complete forms, share documents, update information and more. Information flows seamlessly to agents, who can interact in real time. 

See also: How to Innovate With an Agency Partner  

Having both the agent and the insured work together within the same hub to complete the renewal process eliminates the inefficient back-and-forth across meetings, emails and phone calls.  

2. Use Digital Smart Forms

The current application and renewal process is plagued by mounds of paperwork that both the agent and insured must continually update and track. If one piece is missing, it’s time wasted for agency staff who must go back and forth with the client. This process leaves room for errors and omissions. Digital smart forms make all the hassle and lost time go away.

Smart forms and applications that live online include features such as automapping, which autopopulate common answers from one form to another. The need for insureds to constantly fill out the same data over and over again, from one year to the next, is eliminated. Smart online forms can also be customized by hiding certain questions that are not necessary for going to market, attaching comments within the forms to streamline communication and building in e-signatures to remove the need of printing, scanning, emailing and faxing.

Instead of a manual data swap susceptible to faulty procedures and a huge liability for mistakes, automation via smart forms provides a digital on-ramp that helps agencies achieve unparalleled workflow efficiencies and an exceptional customer experience.

3. Set Automated Reminders

Moving toward automation doesn’t necessarily mean applications and renewals are entirely hands-off. In fact, automation encourages opening communication channels between the agent and insured that would’ve been taken up by excessive administrative work. The insurer can provide notes, comments or tips within the application questions to help guide the insured through the process.

See also: Using Technology to Enhance Your Agency  

As application deadlines approach, it’s imperative to keep that communication open, especially by leveraging automated email reminders. Automated reminders can allow for a collaborative process while saving time. Such reminders can be sent at increasing intervals as the clock ticks down toward a deadline. Agents, instead of constantly drafting manual emails, have time to track follow-ups.

A digitally enhanced insurance agency takes a process dreaded by agents and clients and moves it into a modern landscape. If agency leaders take full advantage of automation technology, they can have a more effective agency.

We're all swimming in a soup of information and speculation about the coronavirus, and I'd love to be able to say I have some startling insight that will clear everything right up. I don't, of course. But I do have two bits of historical perspective that might help to frame a part or two of the many issues before us. 

First, from my days as a reporter, I learned the value of understanding precedent—the line at the Wall Street Journal was that "there are no new stories, just new reporters." The precedents here, as this Washington Post article ably describes, suggest that the coronavirus may be more like the H1N1 virus, which official statistics say killed 12,469 people in its first year in the U.S. in 2009-2010, and less like the 1918 Spanish flu, which killed 50 million worldwide. There's no guarantee, of course, but perhaps history can help us start to form expectations and to see what path we're headed down.

The second bit of perspective comes from a curious exposure to poker—both my brothers are former professional players, and I was hired by one of the top poker players in the world to help him write a book on how to apply poker thinking to everyday life. Although he eventually decided he didn't have enough insights to warrant a book, I've found some poker concepts to be quite useful over the years. So, I'll tell you what I think they say about the coronavirus. I'll then add some thoughts on applying poker principles to innovation; yes, the transition doesn't really work, but I figure I won't be returning to poker any time soon, and I've found the principles to be important. 

Poker players don't just bet if they think they have a better-than-even chance of winning a hand. They calibrate their betting based on a concept called "pot odds." They estimate their chances of winning a hand and multiply it by the size of the pot to help decide how much they should bet: A 50% chance of winning $1,000 warrants a $500 bet, while a 20% chance would justify a $200 wager.

Although there are a lot more variables involved with the coronavirus, governments can still apply the "pot odds" concept. They would start with the health, economic and other risks posed by a virus that Bill Gates says is behaving like a once-in-a-century pathogen. They would then multiply that rough figure by their best estimate of the odds that it will come to pass. My suspicion is that the potential catastrophe is so great that even a slim chance of the worst-case scenario would justify more mobilization of resources than we've seen to date.

Poker pros would also remind you that the outcome doesn't determine what the right course of action was. You aren't a genius if you draw to an inside straight on the river (the fifth face-up card) in Texas Hold'em and beat a set (three of a kind). You're just lucky. The right bet is the right bet, and poker pros are very disciplined about evaluating themselves based on the odds, not the outcomes. So, when the time comes to allot blame for the spread of the coronavirus or to hand out credit for containment (here's hoping), the actual toll from the virus should be set aside. It's possible to do all the right things and still have a massive problem, just as it's possible to do all the wrong things and hit that straight on the river. 

Now for the awkward transition to what poker says about innovation....

When I lived in Silicon Valley in the late '90s and early aughts, I was invited to play in the neighborhood game and didn't want to lose too much money to a bunch of smart, numbers types, so I called my younger brother right before leaving my house and said, "You have two minutes. Give me your best stuff." One pointer not only set me up for the game (I had one losing night through maybe a dozen evenings over two or three years) but showed me a mistake that I've seen companies make repeatedly. 

My brother told me that most of the money in Texas Hold'em is lost before anyone sees any of the five community cards that are dealt face-up. Each player is dealt the two face-down cards, and the temptation with mediocre cards is to think, well, maybe this will grow into something, and it won't cost me THAT much to see the flop (the first three cards that are dealt face-up, for anyone to use). If you're ruthless about whether you bet your first two cards, my brother said, you'll avoid the slow bleeding of chips that affects so many players.

That sort of mistake shows up in innovation efforts all the time. Once a venture gets set up, it's very hard to kill—among other reasons, people typically view the end of a project as a failure, rather than as education that can define future efforts, and fear their careers will suffer. So, companies bleed money through ventures that everyone knows aren't going anywhere. Think of Iridium, the Motorola satellite phone project that invested billions of dollars in the hope that the technology would prove out and a reasonable business model found, then couldn't find a way to gracefully back away from its big bet. (Of course, the technology never did work as advertised, and having to charge more than $3 a minute for calls didn't allow for much of a business model.) Motorola was on top of its game in the '80s and '90s, known for its innovation, but even those guys fell for the "betting on the come" trap.

My next lesson in poker came a decade-plus ago, with the book flirtation with the famous poker player. (I'm pretty sure I signed a non-disclosure agreement, and I've never seen him publicly say anything about the project, so I won't identify him.) Even though the book never went anywhere, he exposed me to numerous concepts, including pot odds, and I began to see how companies get confused about probability.

Many companies start with the goal and work backward to the odds: "We need to generate this sort of bump in the stock price, so we need profit to climb X% this year and revenue to increase Y%. What can we do that gives us the best chance of hitting X and Y?" The problem is that the best chance isn't necessarily a good chance. 

The backward approach can show up in any sort of strategy discussion but seems to be especially prevalent in decisions about innovation, particularly if the company is under some pressure. Having done a number of home remodels in my time, I used to think that the most expensive words in the English language were, "while we're at it...." But I've come to believe those are eclipsed by the CEO who says, "well, we have to do something." 

Look at Sears, which, as it began closing stores by the dozens years ago, decided that it had to try something to break the cycle. It made a heavy investment in digital operations, including a loyalty program, even though Sears didn't have the right technology, the right technology people, the right customer base...pretty much the right anything. The digital/loyalty program may have been the best chance, but that chance was still maybe 10,000-to-one.

Yes, every company needs to be exploring digital possibilities, because there are opportunities out there, as well as threats that you'll want to spot as early as possible. But you can play lots more hands if you're willing to fold your losing cards quickly. In the process, you'll increase the odds that you'll spot opportunities that aren't just your best chance but that are real, live, good chances to cash in. 

In the meantime, let's hope and pray that leaders around the world play their cards (our cards) perfectly as they deal with the coronavirus in the weeks and months to come. 

Cheers,

Paul Carroll
Editor-in-Chief

There seem to be infinite possibilities for insurance brokers to grow these days. Here are a few tried-and-true strategies that brokers can take full advantage of in 2020 to stay relevant and elevate themselves to strategic advisers.  

Expand your product and services portfolio

Brokers need to challenge the idea of being specialists, especially because monoline insurance selling is not as prominent as it once was. It will pay off to operate as a generalist with a vast knowledge of multiple available coverages and services rather than focusing on a singular, niche area. Indeed, expanding their portfolio can help brokers manage clients’ entire risk profile, reach new segments of potential clients and elevate them from simply a vendor to a strategic adviser. For example, a broker with clients in healthcare, an industry with acute cyber concerns, might expand his or her portfolio to offer cyber insurance. 

Get out of the Stone Age

In today’s digital world, clients are accustomed to having service at the touch of a button, and brokers must adapt. Implementing technology that boosts efficiency, enables customers to manage their own products and expedites all processes has become a must as clients no longer have patience to work with businesses unwilling to make such changes, regardless of coverage options.  

See also: Realistic Expectations for Insurance in 2020  

Evaluating where strategic investments can be made specific to their business, such as adopting a new agency management system, using data and analytics, white labeling or partnering on risk engineering services, can also fuel growth. For example, using a system like CoverWallet to rate, quote and bind smaller accounts, frees up agents’ time to focus on larger accounts with more revenue potential. Or agents can tap digital partners like IVANS to identify emerging markets faster, which leads to quicker growth. 

Be comfortable with a “blank piece of paper” mindset

Every successful broker has a growth mindset. Although it can be uncomfortable, a great way to grow can start from a “blank piece of paper” mindset. That is, moving away from the “business as usual” mentality and just saying “yes” can lead to unimaginable possibilities and new ideas regarding the evolving service, technology and customer experiences. For example, insurtech companies are super comfortable with a blank piece of paper – it allows them to think, design, build and test new ideas in a fast environment.

Straying away from the idea of perfectionism can lead to meeting new people, creating long-term goals and working on projects you hadn’t considered before. Being willing to start from scratch and think outside the box allows brokers to learn about the field in new ways. The ability to adapt to overcome challenges and a willingness to embrace the unknown are essential skills for successful brokers. A way to work on honing this skill is by looking for new strategies to adopt that allow you to stay up to date on current trends in the field, and maintaining an optimistic mindset. Long-term strategies can come from not being afraid to start at the end of something and working backward toward your goal instead of trying to fix what might be broken.

Have a referral strategy

Putting a referral strategy in place can help brokers capitalize on growth opportunities. Failing to take this step is essentially leaving money on the table.  It’s important to set goals before crafting and implementing a strategy. From there, brokers can make it a habit to think about who they can tap for a referral two or three times a week, and then bring the referral to life. These efforts will add up over time with persistence, gratitude and creativity. 

Referrals are a major business builder and money maker for brokers. When trusted clients, friends, family and colleagues recommend a broker’s services to others it can quickly translate into a new customer. However, brokers can’t rely solely on word-of-mouth referrals. To break free of the referral rut, brokers should leverage both social networking and traditional, in-person networking to organically grow their business, strengthen relationships and reach new audiences.

See also: What a Safer World Means for Brokers  

Invest in strategic partnerships 

Strategic partnerships can allow brokers to push their capabilities to the next level and expand into new areas of insurance. There are three main potential partnerships for brokers to explore: agent aggregators, merger or acquisitions and gaining access to an online marketplace. Agent aggregators offer immediate expansion and resources. Mergers or acquisition can prove successful when two firms specialize in the same niche area or have symbiotic offerings. Lastly, gaining access to an online marketplace is an increasingly common option with the evolution of insurtech.

It is impossible to discuss business models without considering moats. The word "moat" is used to describe a firm’s (actually, a firm’s business model's) competitive advantage. Both startups and incumbents need a defensible moat. 

It is terribly au courant to discuss moats, specifically for startups (and even more for insurance startups), as if the essence of a moat is the technology or technology applications a startup insurance firm uses to get and keep customers. 

But there are more attributes beyond technology or technology applications that can make up a moat. The 10 attributes, including technology applications. that I have listed below is only a partial set. (Please note that "Cost (Low or High)" means only one or the other for a specific product or business unit. I realize that the same firm can employ both low cost and high cost depending on the product, solution or market segment.) 

It is entirely possible – and, I believe, desirable – for a firm to create a moat that is built on two or more attributes.

Moat mortality

“Guests, like fish, begin to smell after three days.” Benjamin Franklin

Regardless of which attribute or combination of attributes a firm uses to create a moat, a key question arises: What is the quality of the moat? That is, how fleeting is the defensibility of the moat? What might cause the moat to dry up? Will a firm’s moat last more than three days?

Moats will dry up. The attributes of a moat will age, wither and die. The mortality of a moat depends on a host of factors, including:

• emerging technologies and their applications
• changing customer needs, expectations or demands
• staff reductions
• damage to the firm’s brand/reputation
• labor shortages
• changing economic policies (at local, state or federal levels)
• external shocks (natural, man-made) to supply chains
• ? (you can fill in the ? here).

Regarding the first mortality factor (emerging technologies and their applications), we had an Arthur D. Little Center for Research and Development focused on banks, capital markets and insurance when I worked there as an insurance management consultant in the financial services practice. The center’s objective was to provide clients with a temporary window of competitive advantage through the use of technology. 

We stressed to our clients that we were providing only a temporary competitive advantage because technology applications can be easily copied, newer applications based on the same technology can emerge and new applications from new technologies will arise quickly. To restate our position in the terms of this post: The mortality of a moat depending entirely or almost entirely on the applications of technology is extremely high. 

Simply put: Relying on technology (or a technology application) for a sustainable competitive advantage is a fool’s errand. 

Expanded insurance business model with selected key forces

At this point, I’ll turn "home" to the insurance industry, where I have spent my entire 40-plus-year career (with the exceptions of serving in the U.S. Army, going to graduate school and working as a "guest visitor" at Bell Labs on the Star Wars initiative). 

Below, I illustrate an expanded insurance business model including selected key forces acting on an insurance company and its business model. This expanded insurance business model applies to both incumbent and startup insurance firms.

One way to consider an insurance business model (or a business model for firms in other industries) is that it sits in the middle of a communications web sending out and receiving signals from one or more of the forces shown in the visual. These forces act not just on the expanded insurance business model but also on the insurance firm’s moat (whatever the depth of the moat is at any given time).

Insurance startups: a new species in the insurance ecosystem?

No.

Insurance startups are not a new species in the insurance ecosystem.

Insurance startups encompass new: insurance carriers, broking firms, managing general agencies (MGAs) and claim firms (to list only a few). These types of firms already exist in the insurance ecosystem.

The reality is that the essence of the value proposition must be the same for startups as it is for incumbent insurers: mitigate or manage risk (for a specific set of exposures) in a profitable manner that complies with insurance regulations. Insurance startups, to be successful, have to find a way to offer their value proposition in a manner that incumbent insurers cannot copy or don’t want to copy, at least in the near term.

(Relying on investor funds to paper over a startup’s losses is a myopic – and dangerous – approach to bringing an insurance firm to market. Eventually, financial reality will drop as sharply as a guillotine’s blade. And, if incumbent insurers don’t want to copy what one or more startups are doing, could it be that the incumbent insurers’ actuaries realize that the startups' offering will result in unacceptable levels of profitability or even losses?)

Giving credit where credit is due

To give credit where credit is due, I realize that insurance startups do use new(er) technology applications such as advanced analytics (i.e. forms of AI including algorithms/models, big data, cognitive computing or machine learning). This use of technology applications does give the insurance startups a degree of time to capture customers. But let’s get real: The insurance startups have not reached into a parallel universe and pulled out technology applications that incumbent insurers can’t copy and bring to market. There is no sustainable competitive advantage here. 

To repeat myself, using technology (or technology applications) for a sustainable competitive advantage is a fool’s errand (however much money investors have plowed into the startup or however much enthusiasm the startup’s owners/management shout out to the world.)

Insurance startups have entered the insurance ecosystem by brokering transportation network companies' (TNC) insurance coverage, or insurance for telematics/usage-based insurance or insurance for specific items in a person’s home for a specific period. 

Niches … all niches. I’ll agree that insurance startups creating their initial book of business on one or more niches is clever. But niches do not a robust moat make. I can see the moat vaporizing now.

Important questions incumbent insurers should ask concerning insurance startups

Incumbent insurers fully realize there are many hundreds of startup insurance firms in play or emerging around the world. There are quite a few "pump-and-dump" conferences that are filled with enthusiastic investors and entrepreneurs bringing the startup insurance firms to the insurance marketplace. A seemingly never-ending waterfall of digital ink promoting the startups and simultaneously scolding the incumbents (for not partnering or acquiring the startups) continues to fill all variety of insurance media.

See also: Why Analysts Need Business Awareness  

Nevertheless, incumbent insurers are partnering with (or acquiring) some of the startup insurance firms or wondering if they should. However, I recommend that, before actually completing a (partnership or acquisition) transaction with a startup insurance firm, there are several important questions that incumbent insurers should consider asking the startup:

• What is the startup insurance firm’s business model?
  • What best describes each part of the expanded business model?
  • What is the level of money invested in the startup (and from what sources and what from what rounds of investment)?
  • What is the number of customers that are on their books (not planned, not in the pipeline, not hoped for)?
  • What exactly is the startup firm’s profit formula?
  • What are the startup firm’s resources?
  • What are the startup firm’s processes, activities within each process, technology applications supporting each activity and technologies enabling each technology application?
• What parts of the insurance market, whether existing or niche or new (niche could equal new), is the startup striving to serve?
• What is the startup insurance firm’s moat?
  • What one attribute, if there is only one, does the startup firm’s moat most depend on?
• What is the mortality of the startup firm’s moat?
  • Which moat attributes will dry up quicker than the other attributes?
  • How, if at all, will that be a problem for the incumbent insurer?
• What parts of the incumbent’s business model will the startup’s business model:
  • strengthen (by bringing in new customers in the same markets the incumbent already is in, for example)
  • expand (by reaching new markets the incumbent is not in or does not plan to be in for some time?
  • offer new products/services the incumbent is currently not providing?
  • offer new technology applications, new skills/talent, new distribution channels that the incumbent is intrigued or interested in but has not yet decided to obtain itself for whatever reasons?
  • weaken, and for what reasons?
• Whether partnering with the startup or acquiring the startup, what are the issues with integrating procedures, technology applications, staff and culture between the incumbent and the startup?
• Is the investment (of money, people, skills, procedures, technology applications), whether in partnering with a startup or acquiring a startup, financially acceptable to the incumbent? If yes, at what time scale (immediately, short term or longer term, whatever these terms mean to the incumbent insurer) is the transaction acceptable to the incumbent?

Final comments

I’ve never shied away from my opinion that 99.99%-plus of the insurance startups are born to be devoured. Obviously, new insurance companies emerge in the insurance ecosystem, but it takes a great deal of time. Insurance is not a commodity, and that is a hurdle to succeeding in the marketplace. Another hurdle is that insurance regulations exist for a very strong reason: Insurance is all about helping people (and businesses) manage the risks to their lives, health, property, actions/behaviors and income streams. Insurance is not a "game" in which corners can be cut.

For me, the startup insurance firms’ business models and moats cry out for extinction.