In the healthcare industry, the strides from machine learning and artificial intelligence have been exciting. And because the nature of underwriting in healthcare relies so heavily on member information and huge volumes of data, the potential of leveraging AI and machine learning in determining underwriting risk cannot be ignored. What could make the equation for a better risk score even more compelling? The answer lies in clinical member data that has been enhanced with technology and expert clinical analysis, then made into actionable insights.

Group health plan underwriting can be conducted and risk-assessed with medical and pharmacy claims, especially if three years of data are readily available. However, the results begin to get murky when underwriting is applied to groups where claims history is not available. In this case, underwriters use demographics, actuarial tables, prescription transaction history and self-reported data for pricing health plans, understanding that these data sets may have their limitations. There is risk, if you will, of premium being mis-matched to risk – and this can affect profit greatly.

The Benefit of Incorporating Clinical Member Insights

Lab data in aggregate can be an impossibly cumbersome asset because in its raw state there is no standardization. In fact, there is no standard even within the same lab testing organization. It’s why Prognos saw an opportunity and took on the effort of bringing together clinical data sets from numerous lab testing organizations. We standardize large amounts of disparate, fragmented and inconsistent data, then apply AI, machine learning and deep domain expertise at scale to produce meaningful analytics solutions. The insights are tailored to use cases across healthcare and life sciences. In the case of underwriting risk, the opportunity to enhance member insights with their actual clinical history and likely health trajectory cannot be overstated. It’s a change well worth exploring to improve risk accuracy and better match risk to premium pricing.

How Clinical Lab Insights Are Predictive

The Society of Actuaries reported that, “as healthcare costs have continued to escalate over the past decades, tools that can be used to predict, explain or understand these costs have become correspondingly more important.”

This brings us back to the notion that AI-driven insights can greatly enhance and streamline analytics while also offering predictive capacity. Incorporating analytics-ready clinical member data can: 

• Eliminate the need for simplistic linear regressions and average-driven cost allocations 
• Account for non-obvious, non-linear intersections and insights (geographies, comorbidities, disease state progressions)
• Incorporate more recent, definitive facts about individuals’ health status as well as a thorough retrospective view to better predict state of health and trajectory

As we standardize and enrich clinical diagnostic data,  we’ve also identified the opportunity to support underwriting by predicting group risk. We’ve developed a secure and cloud-based Underwriting Risk Predictor solution being tested by some of the top five payers to more accurately price group health plans without prior claims history. After we receive a de-identified employer census, we match it to our clinical registry of more than 250 million lives. Predictive analytics can be applied again to produce a mid-year risk score prediction for each group and per-member-per-month cost. 

See also: Untapped Potential of Artificial Intelligence  

You focus on producing the most accurate risk assessment to deliver a profitable bottom line and to drive better outcomes for your members. AI can provide a predictive solution that may propel your efforts and deliver measurable ROI.

One of the happiest, most inspiring headlines I’ve seen in recent months read – “Nationwide announces five-year, $160M Future of Work investment.” Finally, an insurer was putting a stake in the ground, announcing a major commitment to address a looming and significant reality – the nature of work is changing. The article addressed the “how” of the initiative with phrases such as “reskill and upskill,” “future-ready skills” and “technology-enabled.”

A recent SMA research report, 2020 Strategic Initiatives: P&C Personal Lines, shows that personal lines insurers are strategizing and deploying around transformative technologies such as AI/ML, IoT and blockchain. Success is not going to happen without the supporting skills, so there is a clear need that must be addressed. Nationwide is stepping up, and that is very important.

But there’s another angle to this. It’s not just about technology skills training. It’s also about restructuring the workforce. If one believes that it’s all about the technology – technology for technology's sake – then going about skill training alone is just fine. But I have met very few people who believe that – including at Nationwide, as explained in press releases and articles. Given the enormity of the changes in motion related to customer and agent expectations and digital transformation, technology skills alone will not suffice. Personal lines organizations need to look at their business structures from an outside-in, consumer perspective, as well as traditional inside-out, operational perspective, and then reimagine business units and operational outcomes.

Make no mistake; this is very hard to do. SMA survey results show that 23% of personal lines insurers are not addressing the structure of their workforce at all. The percentage of insurers that are strategizing around this topic has stayed relatively the same for several years – again confirming that it is very difficult to move beyond tradition and culture and view the organization through a new lens. One of the things that makes this challenging is that the industry has historically reorganized itself around the goal of ROI, i.e., put in a new system and offset the cost through staff reductions. Unfortunately, this generally results in shuffling and redistributing work to remaining staff for quick pay-back versus actually realigning and reimagining processes.

See also: Emerging Technology in Personal Lines  

Many personal lines insurers are in the enviable position of having newly modernized core systems, and opportunities for operational efficiency abound in this environment. But modern core systems are also a launchpad for workforce modernization. Paper-based workflow walls can come down and claims organizations can reorganize around improving service. Underwriting and product development can unify around insight-driven new market opportunities with personalized coverages and services, and actually deliver in weeks versus months and years. Most importantly, reskilled and technology-empowered employees can focus on complex business needs and not waste valuable time on ticking workflow boxes. While it may seem like an over-worked topic, the retiring baby boomers are creating an urgency around workforce restructuring. There has been a long ramp-up to the tidal wave of retiring skill sets, but the moment is at hand. And there is no time to waste.

The new workers entering the workforce will not sit in the same seats as those who are leaving. Fortunately, that is not necessary if personal lines executives take the opportunity to align customer and digital strategies with transformational technology adoption in innovative new ways within organizations that are structured for the new reality of continuing change. Every insurer will have a different price tag to achieve this state, but it will be money well spent!   

If there’s one thing management gurus like to do early in a year, it’s make predictions – and customer experience (CX) experts are no different.

But business predictions are like weather forecasts. Everybody consumes them, but rarely does anybody look back to check their accuracy.

Back in 2014, for example, 89% of companies surveyed predicted that – within two years – they’d be competing mostly on the basis of customer experience (Gartner). Yet, here we are five years after that prediction, and there’s widespread stagnation in customer experience quality (Forrester Research). Overall U.S. customer satisfaction is at the same level it was a decade ago (American Customer Satisfaction Index).

In study after study, companies say they’re going to increase their focus on customer experience. At the same time, CX gurus issue rosy annual prognostications about how that enhanced focus will manifest itself – such as in these examples, culled from prediction lists over the past couple years:

• Companies will create more customer-centric cultures, using new recognition systems and training programs.
• Companies will use technology to digitally transform the customer experience.
• Companies will go the extra mile by empowering their employees to surprise and delight.
• Companies will use robotic process automation to speed customer transactions.
• Companies will leverage AI to automate customer interactions without making them feel mechanical.
• Companies will break down silos and align customer experience strategies across functional domains.
• Companies will use predictive analytics to create more personalized customer experience.
• Companies will overhaul their voice-of-the-customer programs, relying more on text analytics of unstructured content, such as survey comments, call center recordings, social media conversations and online chat sessions.

However, despite all the expert predictions, despite all the pledges to focus on CX, the needle has not moved much for many companies. The disparity can’t just be attributed to heightened customer expectations, as even objective measures of CX maturity indicate that the vast majority of organizations lag in this regard (so much for that increased focus).

The problem is that many companies pay lip service to customer experience, pursuing it to create good annual report copy, rather than to drive fundamental changes in how they do business. When push comes to shove, CX initiatives are often subordinated to other priorities and starved for funding, according to the Qualtrics “State of Customer Experience Management” report.

That’s an unfortunate outcome, given the compelling evidence available that illustrates the ROI of a great customer experience (as well as the penalties exacted for a poor one). 

See also: The Best Boost to Customer Experience  

This is the reality in today’s business world, though, which is why there’s one bold customer experience prediction that actually has a high probability of coming true this year. That prediction is simply this: Not much will change.

Most organizations will lumber along, spinning their wheels on customer experience, discussing it endlessly, executing on minor improvements that amount to corporate window dressing, just so someone can “check the box” on their next performance review.

Most organizations will continue their navel-gazing, focusing inward on structural changes, role shifts, political infighting and inter-silo strife.

Most organizations will lose whatever little momentum they may have gained around customer experience improvement, as top executives with “Organizational Attention Deficit Disorder” spot some shiny new object that becomes the next initiative du jour.

Granted, this is quite a pessimistic outlook. But the fact is, most organizations are unremarkable, and are destined to stay that way. That’s precisely why, when a company actually does break from the pack and deliver a differentiated customer experience, it turns heads.

So, rather than obsess over what everyone else will be doing (or what the CX gurus say everyone else will be doing), focus instead on what your company can do to avoid the fate of mediocrity.

See also: How Fine Print Ruins Customer Experience  

Think about how to send a clear, unmistakable signal to the marketplace — and your workplace — that something fundamental is changing. 

A signal that you’re no longer going to do it “like we’ve always done.” 

A signal that you’re disrupting the status quo in your industry. 

A signal that you’re liberating customers from long-simmering frustrations.

A signal that you’re dispensing with the typical CX platitudes, in favor of very tangible and compelling changes that will make a difference in the lives of your customers and the employees who serve them.

It’s disheartening to say that little will change in the state of most companies’ customer experiences next year. It’s not a fait accompli, though.  If you don’t want your company to be among those validating this bold prediction, well then…  go do something bold!

You can find this article originally published here on Forbes.

Many industry executives talk confidently about the opportunities the Internet of Things (Iot) presents, but is it really an exciting opportunity, or is it all hype?

To begin to think about opportunities and threats, a simple operational definition is probably going to help:

The Internet of Things is: Different “things” connected by a network that collect and transmit data; interpret it and then make use of the aggregated information. Those “things” could be everyday items in homes, in workplaces, in vehicles and in public. The technology allows automated responses, as well as remote access and control from around the world.

Some of the many examples of the application of IoT technology:

So, yes, the IoT is a hugely exciting development that creates significant efficiency opportunities for individuals and businesses. As with most new technologies, over the coming years we will see some IoT implementations fail (a few catastrophically). People will become disillusioned. But, over time, there will be more successes, the benefits will start to crystallize and it will be more widely understood.

The application of the technology in the insurance world will also be far-reaching. The IoT will help monitor, detect and control risks. It will allow early intervention in the event of a loss, potentially mitigating further losses, while providing valuable evidence of what has actually happened. However, the increased embeddedness of IoT also exposes new risks: A fault in the hardware, software or firmware of a device could lead to a catastrophic loss -- imagine heart rate monitors switching off, vehicles disabled midway through journeys, ovens turned on when premises are empty.

Insurers must adapt or may become irrelevant

Many insurance executives find the subject stimulating but a little abstract when it comes to changing the way we do business. The impact will most likely be significant (either positively or negatively) whether we embrace the possibilities or wait until we need to deal with the fallout.

There are plenty of estimates on the future number of IoT devices, some more speculative than others, but there appears to be consensus for somewhere in the region of 26 billion by 2020, and growing fast over the following few years. The insurance industry is, therefore, facing an involuntary paradigm shift as clients implement IoT ecosystems in their homes and businesses.

Client needs and the very nature of the risks they face will be changing. Insurers and reinsurers can either be part of the journey that their clients are taking or try to catch up with the new paradigm once the world has changed. With or without an insurer in the equation, these changes will fundamentally alter the insurance products that clients need. Insurers that are prepared for these shifts, working with their clients to design appropriate solutions, will be the winners.

Probably the best-known IoT deployment in insurance is telematics in auto insurance, but new examples are appearing all the time, such as the adoption rate of water sensors to detect leaks or the recent partnership between Lloyd’s of London and Parsyl that places IoT sensors alongside sensitive marine cargo (to monitor temperature-controlled foods, pharmaceuticals or high-tech products).

Even the most advanced businesses can get it wrong, though. It is worth considering how two of the largest technology companies have approached the integration of IoT. Apple and Amazon both sought to capitalize on IoT to capture the home assistant market. Probably the most important factor determining their relative success has been their ability to interact with the wider smart home ecosystem. One of the companies employed "compatibility strategy" that favored compatibility with its own IoT products, while the other was quick to ensure its product would work with just about every smart gadget in the home through its "distribution strategy"…. We will leave to you to judge which strategy was more effective!

The lesson: Those who stick to a closed ecosystem of products that don’t interact with others are going to lose out to those who provide integration with added-value services that go beyond their core offering.

See also: Global Trend Map No. 7: Internet of Things  

In insurance, data from IoT devices will unlock wonderful new approaches to underwriting and claims:

• Live underwriting: An enhanced view of risk through asset performance and usage data. Increased customer engagement, becoming a "risk partner," not just "risk finance." Alternative usage-based propositions. Live monitoring of compliance with warranties. Real-time coverage adjustments based on changing needs.
• Smart claims: Improved visibility of loss events and their proximate cause, but also some element of loss prevention as the IoT stops the loss from occurring in the first place. Quicker responses to events and better early loss estimation. Enhanced loss data and insight for risk advisory. New triggers for parametric products. Reduced need for (and cost of) loss adjusting.

But, we also need to think about this from the client perspective. With more data, clients become more sophisticated. They understand more about their risk than we do and can control much of it. Potentially, the IoT devices can independently prevent the loss from occurring at all. So, with less uncertainty, they need less insurance, and premiums could begin to fall. What they choose to buy could be very different. In short, insurers and reinsurers need to think about how products are designed to meet client needs.

Being left behind by more forward-thinking (and maybe new) competitors is a real risk. However, the good news is that it is not too late. Most insurer-led IoT propositions are still in the proof of concept stage. With limited evidence of a loss ratio reduction, it can be difficult to convince clients, or even our own executive teams, to disrupt business as usual for unproven technology pilots. The lessons learned by those insurers and reinsurers that are experimenting with IoT will help them win. Being late to this party is not really a viable option.

Grasping the opportunities of IoT and the Internet of Risk

While the opportunities may be great, and the threats from outside the industry may be very real, insurers still need to be careful to avoid leaving themselves open to unforeseen exposures. As an example, "traditional" cyber products have focused primarily on data breach, but now they must also take account of physical hazards. Security cameras, conference phones, vehicles and industrial machinery can provide a gateway for determined hackers. IoT terrorism is also a potential concern, whereby the manipulation of physical objects could lead to death and destruction. 

Insurers focused on “disconnected assets” need to evolve their thinking and propositions as the economy moves toward IoT. We will see fewer disconnected assets (each requiring less coverage), while there will be far more intangible and connected assets that require protection. 

Insurers will need to service clients holistically: Few clients operate uniquely disconnected, connected or intangible assets. They will look for insurance partners capable of servicing their needs across their balance sheet (or lifestyle). Limited products are currently available to cover IoT-related exposures; thus, it falls to brokers and insurers to innovate and raise awareness (before clients find alternative risk financing solutions). 

Insurers and brokers must look to identify how the IoT is changing their clients’ needs and help them holistically understand and manage the risks inherent in their business or personal life. Opportunities will be found in several places:

1. New clients — e.g. asset-less, sharing and gig economy firms/individuals, challenger banks, new physical-tech firms, blockchain service providers, cloud and data dependent services, etc. 

2. New risks — e.g. cyber coverage, drones, intangible assets, autonomous vehicles, crypto-assets being stolen, instant supply chains and connected cities etc. 

3. New propositions — e.g. new distribution models including players that have never operated in the insurance world but have access to IoT insights, e.g. Amazon, usage- based insurance, parametric covers, partnerships with different organizations etc. 

These will all continue to evolve, so taking a lead means being as advanced as possible in thinking how IoT will change the insurance world and how these new (and evolving) opportunities can be grasped. However, this cannot be a purely academic exercise. There must be a focus on actions that can drive short-term revenues, while creating a sustainable advantage for the longer term.

IoT complexity necessitates collaboration

A multidisciplinary approach is essential, factoring in many views from experts in several areas. When considering how IoT could change what Aon needs to do and how Aon serves its clients, we use expertise from various practice groups across our insurance and reinsurance operations, including the cyber, digital economy and technology practice groups, but also colleagues like Stroz Friedberg, a leader in cybersecurity in today’s digital, connected and regulated business world. 

But it isn’t only about getting insights from within your business: IoT is such a broad, societal mega-trend that anyone who only has a single-dimension perspective would be having a blinkered view (and almost certainly slightly rose-tinted). Aon Inpoint works with several global insurtech accelerators to find companies supporting innovation, while gaining experience in IoT and insurtech more broadly. An example includes an insurtech with which Aon is exploring approaches to quantify IoT-related cyber-physical exposure.  

Aon has also created Aon Digital Monitor, tracking or capturing proprietary insights from activity across the insurance ecosystem, to complement our extensive network of startups, vendors, investors and expert advisers tracking what people are investing in.  

The bottom line is that insurers and reinsurers shouldn’t try an "in house" solution. In an IoT-enabled future, partnering with organizations that have the necessary skills and knowledge is essential – either directly, or through an organization that is set up already with those partnerships.

See also: 12 Issues Inhibiting the Internet of Things  

The journey began with a possible purchase on eBay.

Robin Roberson thought to herself, "Wouldn't it be great if I could have someone go look at the item to make sure the seller is being straight with me?" Robin realized that others might want someone to go look, too, so she founded a company called WeGoLook in 2009 and recruited free-lance "lookers" around the country. She found her way into the insurance market soon enough—why would an insurer have an adjuster drive an hour to take photos of a car accident in a rural area if a "looker" was nearby?—and built her free-lance force up to more than 30,000. Crawford & Co. came calling and bought an 85% stake at the end of 2016 at a price that valued the whole firm at $42.5 million, making Robin one of the early stars of the insurtech movement.

For her next act, Robin has set her sights on, among other things, cybersecurity, and is championing a novel approach that she and a colleague will describe in detail at the Future of Risk, April 1-3, in Chicago. (You can register here. I'm going....) I've known Robin for years because some of my former partners at ITL helped steer her toward insurance and even initiated the connection with Crawford, so I caught up with her ahead of her talk to get a sense of where she thinks cybersecurity and cyber insurance need to head.

The issue boils down to "tokenization," which she and her colleague Alex Pezold, co-founder of TokenEx, have written about a bit for us here. Basically, tokenization replaces the data in a company's systems with tokens that, given the proper authorization, can be used to summon the actual data.

That may sound rather like encryption but goes beyond it in two ways. First, the tokens bear no mathematical connection to the data they summon, so a hacker can't simply figure out an encryption key and have access to all your data. Second, with tokenization, the data is taken off-site to a "vault" in the cloud. Hackers would have to break into it, too, and such a vault can be secured in ways that companies find nearly impossible to manage, given all the online connections they have—remember that the huge breach at Target happened because hackers snuck in via its HVAC systems. If hackers do make their way into your systems and grab your data in a tokenized system, all they get are a bunch of tokens that mean nothing to them or anyone else.

"A lot of cyber premium is being left on the table," says Robin, who has co-founded a boutique consulting firm, Goose & Gander, that works with startups such as TokenEx. "Carriers are concerned that the risks are too great. But if insurers price policies in tiers that encourage tokenization, they can be confident that they aren't taking on too much risk."

She adds that tokenization just requires an API (application programming interface) layer. "People don't understand how easy it is to implement this layer that sits between their systems and their data," she says.

Robin thinks small to medium-sized businesses could be big beneficiaries because they don't otherwise have the resources that big companies do when it comes to protecting their data.

Tokenization is already in widespread use with payments. "That's the cool thing," Robin says. "This is a solution that comes out of the finance industry." If you insert your credit card to buy gas, she says, the pump doesn't collect your card information. The card connects with the payment system, which simply sends a token to the pump saying you're authorized to pump gas.

The issue has been getting insurers, and their clients, to stretch the use of tokenization beyond payments and into protection of data.

"We're already seeing some traction," she says.

Robin says additional data protection will position insurers and their clients to deal more easily with the growing number of privacy laws, including the California Consumer Privacy Act (CCPA), which she's also covered for us here.

"It would behoove the industry to get ahead of the game and to start planning for all of the changes now," she said. "When you do, you can be compliant whether you're in California, or Oklahoma or any state."

She and Alex will tell us more at the Future of Risk on April 2. I hope to see you there.

Cheers,

Paul Carroll
Editor-in-Chief

The year is 1959. Neuroscientist and psychologist Bela Julesz tests the ability of the brain to perceive images in 3D. With circular dots and a double image, subjects could begin to see a circle floating above a printed background. Fast forward 20 years, and two of Julesz’s students use a computer to accomplish the same feat in just a single image. By 1991, Magic Eye pictures used repeat patterns to control the depth of perception. A complete 3D image could be hidden inside a 2D pattern. The only way someone could see the image was to relax the eye, blur the pattern and let the brain do the rest. What looked out of focus, blurry and flat, was transformed into an image of stark clarity that leapt off the paper.

Is this a magic formula for considering today’s insurance? A jumble of patterns exist. Focus is difficult to maintain. Thousands of details and past assumptions threaten to distort what insurance executives need to decipher. But…if we relax just a bit and allow the blurriness to exist for a few moments, a certain clarity arises. Not only does the picture become clear, it jumps off the page in 3D. As market boundaries blur and evaporate, new answers to insurance technology, processes and business models are coming to life.

Which boundaries are reshaping the industry?

Four years ago, Majesco published its first Future Trends report that examined the converging “tectonic plates” of people, technology and market boundary changes that are redefining the world, industries and businesses — including insurance. Recently, we released the latest report, Future Trends: Looking Back and Leaping Forward, where we once again discussed shifting market boundaries under six trending categories:

• Insurtech
• Channels
• Blurring Boundaries (between industries)
• New Competition
• New Products
• Competition for Talent

From the start, we recognized that insurers were going to begin competing in a new paradigm beyond their brand, product, price and distribution. This new paradigm required insurers to compete also on the customer experience and to move from vertical market boundaries to porous market boundaries, or ecosystems.

Ecosystems are fluid, porous and operate across and within verticals and multiple channels. The first platform companies like Amazon, Google, Apple, Netflix and Uber disrupted multiple industry verticals and demonstrated why market boundaries limit revenue generation, customer value and market valuations. By bursting the boundaries, they lost predictability, but they gained market reach.

The boundary lesson for insurers is that the industry isn’t simply being reshaped, it is being “unshaped.” 

It’s no wonder, then, that many insurers are finding themselves and their strategies adrift — no longer safely anchored to traditional assumptions. Insurers now have to wrap their heads around a new image that will allow them to escape 2D frameworks and find answers in new dimensions.

See also: Insurtech 2020: Trends That Offer Growth  

Can we find clarity among the blurriness of market boundaries? 

With traditional market and product assumptions (and constraints) evaporating before our eyes, clarity has to be found in a whole new definition of insurance products and services. From ecosystems to technologies, some picture has to emerge that will allow our brains to think “outside the page."

In words, this image might be, “Escape linear thinking. Embrace the idea of plug and play, partners, networks and ecosystems.”

What is affecting our boundaries and how can we use an ecosystem approach to take advantage of these boundary shifts? We can find out by considering four of the boundary-breaking areas — Insurtech, Channels, Blurring Boundaries and New Products.

Insurtech

If you have been keeping an eye on insurtech, then you’ll know how volatile and substantial investment has been. Based on Venture Scanner data, insurtech investment in 2015 was $1.78 billion as compared with $3.37 billion in 2018 (89% growth) and just over $5 billion through Q3 2019.

Even more interesting are the top funding areas. From the recent Venture Scanner report, Q3 2019 showed the largest influx of funding was in the Insurance Infrastructure/Backend category, with $1.12 billion.

This is a major flip given that channels/front-end were originally the top priority. This flip in focus recognizes the criticality of next-gen technology platforms for insurers that provide flexibility, agility, speed and scale. What does this mean for insurers that are looking for clarity?

First, insurers can take advantage of insurtech investments without making direct investments in insurtech. This is the one of the major takeaways. Insurtech capabilities are now ready as plug-and-play, ecosystem-based, cloud-available services such as Majesco’s Digital1st Insurance,

Channels

Today’s customers have introduced new time requirements and pressures into the insurance equation because they are looking for solutions that meet their needs on their terms (when and how they need it), and with speed. There is the time to quote, time to underwrite and time to purchase, which are all opportunities to lose or to gain the sale.

In this new era of insurance, nearly every insurance process is rapidly becoming frictionless, including buying. If distribution channels are easy to use with products that are easy to understand, then insurance has the opportunity to grow through a friction-free, multi-channel distribution system.

The industry is now exploding with new concepts in distribution, including new distribution channel options from marketplaces like Bold Penguin and digital MGAs like Slice Labs. We have also seen the shift from portals to digital experience platforms like Majesco Digital1st Insurance, which has allowed companies like Burns & Wilcox, a major wholesaler, to bring innovative specialty insurance solutions to brokers and agents. Ecosystems can rewrite channel strategy and open the windows to allow for unprecedented levels of channel partnership.

Blurring Boundaries (between industries)

Embedded insurance is an example of boundaries becoming invisible. There is a “hidden channel,” connecting insurance with another ecosystem, such as rental properties, auto manufacturers or even baby gift registries – and embedding the opportunity to purchase within the existing process.

To capture the opportunity, insurers must create an ecosystem of partnerships with a range of digital capabilities and channels to reach new and existing customers. How do insurers recognize the opportunities that exist within the flow of the current of buyer needs, events and lifestyles, to fit the product to the flow of life instead of trying to sell “upstream”?

Majesco Consumer and SMB research has found that customers are very interested in innovative channels like embedding insurance. The answer boils down to alignment. Clear strategies will align the right channels, technologies and partnerships, considering the synergies of partner organizations and the expectations of today’s and tomorrow’s customers. In many cases, insurers will need to quickly build relationships and cross industry verticals. In most cases, strategic clarity will be found through rapid test-and-learn cycles.

New Products

Over the last four years, we have seen a growing proliferation of new products and value-added services. These products use new data sources, offer new customer experiences, leverage new technologies and, most importantly, are focused on meeting a new set of risk needs and expectations, particularly for millennials and Gen Z.

The most important change, driven by startups and greenfields, is the unbundling of “one-size-fits-all” insurance into products based on specific needs at specific times. Unbundling, coupled with the growth in the sharing and gig economy has powered the development of micro-insurance or on-demand products across all insurance segments and lines of business.

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

Initially, unbundling was best accomplished by a range of small and agile insurance or MGA startups. As traditional insurers and reinsurers have begun to re-envision their responses to blurring industry and market boundaries, they have begun forming clear approaches to on-demand product development. Fast forward to today, and we are now seeing the emergence of on-demand voluntary benefits, life insurance, rideshare, cyber and so much more.

These four boundary-breaking trends are proving that insurers of all sizes can now find an alternate picture within a blurring universe — clear answers rising above the background of tradition and disruption.

Insurance fraud scams seem to make the news at least every month, as organized criminals seek to exploit the way insurers reimburse clinics, pharmacies and other providers for their services. What’s often shocking is how much money fraudsters can steal from insurers before they’re caught. Recently, in a single month, two separate alleged fraud rings based in California were busted for scams that investigators say netted $20 million or more. 

Clearly, there’s a need for fraud detection tools that can spot these frauds in their early stages. Based on my experience working for a company that uses machine learning and artificial intelligence to detect e-commerce fraud, I think these tools can also help stop organized insurance fraud. One technique called group analysis seems like an especially promising approach for catching fraud rings sooner rather than later. 

In this article, we’ll focus on organized health insurance fraud because it’s common, costly and hard to detect quickly using traditional screening methods. But the group analysis approach could apply to other kinds of organized insurance fraud, as well. 

The health insurance fraud landscape

It’s hard to find solid, consistent numbers on the cost of health insurance fraud, in part because it’s hard to detect at scale. The National Health Care Anti-Fraud Association (NHCAA) estimates that somewhere between 3% and 10% of U.S. healthcare dollars are spent on fraud every year, which translates into as much as $300 billion annually. 

While law enforcement does go after insurance fraud scams, the amount recovered doesn’t come close to the projected scale of losses. For example, in 2018, the U.S. Department of Justice recovered $2.5 billion in costs related to fraud and improper claims. That’s a lot of money, but it’s not $300 billion.

See also: Future of Insurance Is… Not Insurance  

How do fraudsters get away with stealing so much money from insurers and government programs? It’s mostly because they’re professionals, and they operate on a large scale. The NHCAA says most insurance fraud is committed by organized groups, which operate a variety of scams, including:

• Filing claims for procedures and services that never happened, using stolen patient data.
• Padding legitimate claims with procedures that never happened.
• Accepting kickbacks for patient referrals for unnecessary treatments.
• Setting up fake clinics to bilk patients’ insurers out of reimbursements for marked-up procedures and prescriptions. 

How AI and group analysis could help spot organized healthcare fraud

When insurers review claims individually for signs of fraud, they’re taking an approach like the one that e-commerce merchants have used for years: looking for fraud on a case-by-case basis. This is necessary, of course, because individuals do sometimes try to exploit the system. But individual claim review will miss the bigger picture.

That’s because sometimes patterns that indicate possible fraud are only visible when you look at the larger data set. That’s true no matter what type of fraud you’re trying to stop. For example, in e-commerce, a series of orders that look legitimate and raise no fraud flags can be part of a broader fraud scheme. 

How is that possible? 

Here’s an e-commerce example: Let’s say a merchant receives a dozen orders from different customers within an hour, all with valid payment and customer identity information. Each order passes fraud screening and gets approved. 

But the merchant’s fraud protection program also conducts group analysis—looking at all the traits of each order and analyzing the entire group to spot unusual patterns. After the 12^th order, the group analysis flags the entire batch of orders for further review, because every credit card used had the same bank identification number. When analysts look at the group analysis data and individual orders, it’s apparent that criminals compromised a batch of different cards issued by a single bank and used them to go shopping online. The orders are canceled, and the merchant avoids losses.

Insurance fraud investigators already look for big-picture patterns, of course. Federal, state and local law enforcement agencies deploy hundreds of people who spend thousands of hours checking out possible fraud rings based on intelligence and patterns of behavior, then collecting evidence to make arrests. But group analysis has the potential to help investigators identify suspicious patterns faster, to limit fraud losses. 

For example, a fraud ring in California is currently facing charges for an elaborate, two-year scheme that investigators say stole $19 million from TRICARE and $3 million from another insurer. According to the indictment, the ruse included two fake pain clinics set up by the fraudsters, kickbacks to a doctor for referring TRICARE and ILWU policyholders to the fake clinics and fraudulent prescriptions and refill requests for pain creams billed to those insurers at up to $15,000 per tube. 

The part of the story that stands out is that the ring’s operations were at their peak five years ago, but the alleged fraudsters are only now facing charges. It seems unlikely the insurers would be able to recover the stolen funds after so much time. 

See also: Empowering Health Through Blockchain  

How could group analysis make a difference in a complex case like this? It’s clear that each claim on its own passed the insurers’ fraud review. And it’s also clear that someone eventually spotted a pattern or received information about possible organized fraud. 

However, a machine learning system continuously analyzing claims for large-scale patterns might flag many claims based on referrals of patients with the same insurance by one doctor to two specific (and recently opened) clinics. Or the system might detect an unusually large number of prescriptions for very expensive creams coming from the pharmacy. As more data comes in, AI-driven systems get smarter about which patterns might be fraud and which might not. And, depending on the pace and timing of the claims, group analysis could spot fraudulent patterns in days, weeks or months, rather than years. 

Group analysis and AI could change the health fraud landscape

Giving health insurers and fraud investigators AI tools can do more than save money. These analytics tools could also reduce the number of patients who are subject to bogus treatments because fraudsters want to exploit their insurance coverage. And faster intervention could also discourage some fraudsters from making the effort. After all, why build fake clinics and find corrupt practitioners if the whole operation could be shut down before it’s profitable? 

Fighting fraud is a task that may never end. But by making it harder for criminals to succeed, AI-based group analysis could give investigators a powerful way to fight back faster against organized insurance fraud.

Data is the foundation of insurance, and two emerging technologies, the Internet of Things (IoT, and artificial intelligence (AI), are making that foundation more useful than ever.

IoT allows internet-connected devices to send and receive real-time data. Insurers are increasingly using IoT data to streamline operations, improve customer engagement, offer discounts for and encourage healthy behavior such as safe driving and regular exercise, calculate risks more accurately, boost competitive advantage and streamline compliance.

And that’s just the beginning. Connected devices will be increasingly valuable for other activities, including loss control, pricing, underwriting and marketing.

IoT produces a flood of big data that would be unmanageable without AI to organize it and extract what’s valuable. Using IoT and AI together can benefit not only insurers but brokers, employers, employees and consumers, too. Some IoT software vendors now offer built-in AI capabilities, such as machine-learning-based analytics. AI and analytics can find the needles of insight in the haystack of data and learn from them to identify patterns and trends that might otherwise be undetectable.

Technologies that monitor vehicle speed, brake function and driving habits are starting to transform auto insurance. Several insurers are offering savings to drivers whose data show that they’re safe.

About one in five Americans own a wearable fitness device. Wearables can provide extensive data, including an individual’s daily exercise level, heartbeat rate and even length and quality of sleep. 

Life and health insurers selling both individual and group policies would love to get their hands on this data and use it to motivate insureds to adopt healthy lifestyles, to offer appropriate discounts and to improve underwriting. John Hancock already plans to require new insureds to use activity trackers and share their fitness data in exchange for discounted premiums and other benefits.

In underwriting, wearables provide data that can either lessen or eliminate the need for medical tests. Some insurance software vendors have integrated wearable data analytics with cardio fitness scores for simplified underwriting.  The data also can also help guide product development.

Wearable devices that can detect heartbeat irregularities and high blood pressure can also alert insureds to the need for early treatment, potentially reducing costs for insurers. But there are downsides. The insurer has access to the most private type of information whenever it is connected to a customer wearing a device. (What could be more personal than one’s health?) So the insurer must take pains to ensure security and be able to credibly assure customers and employers (if it’s a group policy) that personal health information will be guarded like Fort Knox.

See also: Insurance and the Internet of Things  

Insurers, of course, have always dealt with sensitive information, but the sheer volume of IoT data presents more opportunities for hackers and other criminals. AI may also have a role here, in providing early-warning detection of possible hacking or fraud. 

IoT, combined with AI, is already beginning to transform the industry. Insurers looking to get the best return on investment for their data dollars would be wise to investigate making the combination a part of their technology strategy.

Have you ever been walking down Bourbon Street late one evening, only to see some street preacher carrying a sign warning you to repent because the end is near? My guess is you have, whether in New Orleans or some other city – you’ve seen him, you’ve smiled, laughed or ignored him and you went on about your business. Did you ever take time to ponder: WHAT IF HE IS RIGHT? If you had any inclination that he might be right, you probably would have left Bourbon Street by way of St. Louis Cathedral and then prayed for some way to explain your presence in the French Quarter. Don’t panic, I’m not going to use this column to call you out for your prior sins. See also: How to Extend Reach of Auto Insurance   I am, however, going to repeat the warning: “THE END IS NEAR." The END I am discussing is for insurance as it has been. To us (as agents), it is a profession, a good job offering exceptional compensation for those willing to work and the opportunity to build a book of business that offers recurring revenue. We can easily explain the importance of what we do. We can no longer easily explain the cost. My older, retired sister called me last week to ask about her auto insurance renewal on her Chevy, with her one accident. Her renewal quote was over $4,000. A column ("State’s sky-high car insurance rates going up!" by Dan Fagain) in Sunday’s Advocate said:

• Louisiana already has the second-highest rates in the country.
• Some recent auto insurance rates are increasing 22%.
• The average rate for a Louisiana resident was close to $2,000 a year.
• In 2012 and 2013, Louisiana had the highest rates in the nation.

By comparison: A check of Quick Facts for the U.S. Census Bureau indicates the 2016 median household income in Louisiana was $45,652, and the 2016 per capita income was $25,515. In April 1993, I wrote a report for a consumer advocacy group promoting “verbal threshold” no-fault auto insurance. This compared the auto insurance costs and issues driving these costs in the states of Texas, Louisiana, Arkansas, Alabama and Mississippi. There was no significant difference in the number of claims per capita, nor the intensity of the claim. The only difference of consequence was the frequency and severity of the bodily injury losses in Louisiana. The one element of the study that explained this difference best was attorney involvement. Louisiana had one attorney for every 280 people and one law student for every 1,145 citizens. The next closest to us was Texas, with one attorney for each 320 people and one law student for each 2,332 citizens. Our system has more people to feed with each premium dollar. What if we, as professionals, ignore the pain of our clients and don’t reinvent ourselves and our industry to work first for the consumers – those who use the system and those who pay for it? Can you afford to take that risk? Have we reached or are we reaching the price point where what we sell is no longer affordable to the people who buy our products? Are you willing and able to engage seriously with other professionals to make our system work for the consumers – the premium payers – first? This is not just an issue only of auto insurance and lawyers. This is about the cost and availability of liability insurance of various types that can protect individuals and business owners from their own negligence or alleged negligence. If we don’t fix this – the government will try. The marketplace will not be denied. The insurance industry was unwilling and unable to address the flood exposure – that brought us the National Flood Insurance Program (NFIP). Our health insurance model was too expensive and too cumbersome – now we have something worse, but only until it collapses under its own weight and it becomes a single payer system. Before you laugh at us poor folks in Louisiana – understand that the unsustainability of our traditional insurance offerings will eventually move into most states. It is not the geography of our state – it is the demographics, power of the trial bar, the culture and human greed. Technology exists today to streamline what we do and to reduce greatly the cost of what we sell -- to bring affordability back into the process and purchase. If we leverage it, it may save us. See also: The Sharing Economy and Auto Insurance   Peter Drucker, one of the great thinkers of the last 100 years, explained, “Customers do not see it as their job to ensure manufacturers a profit. The only sound way to price is to start out with what the market will pay – and thus, it must be assumed, what the competition will charge – and design to that price specification.” I may be an old rambling street preacher walking around with a sign warning “the end is near.” Laugh if you will, but ask yourself, “WHAT IF I’M RIGHT?!”

If insurers want to lower their legal costs, or at least make themselves less vulnerable to costly litigation, they need to increase their emphasis on safety. 

They need to revise their policies to align with public policy. They need to make it their policy to ensure safety before they insure clients—before they issue insurance to businesses—whose places of business are dangerous or potentially deadly. 

Absent a change, policies for all clients will become more expensive. The expense may be too much for some companies to bear, the expense may be too burdensome for most small businesses to endure, unless the seemingly inevitable becomes the easily avoidable.

That is to say, insurance can be more affordable, and insurers can afford to make more money, if safety is a national priority.

Achieving this goal is a matter not only of listening to what a lawyer says, but doing what he recommends.

According to Howard P. Lesnik, an injury law expert and member of the New Jersey Association of Justice, insurers should listen to what juries have said; insurers should listen to what juries continue to say, that accident victims deserve the damages they seek.

All juries may not say the same thing, but many say what all insurers should hear—the truth.

The truth is: When a place of business is injurious to the public, when the injuries are similar and the place where they happen is the same, when a business does nothing to prevent accidents that have a high likelihood of resulting in physical injuries, then it is no accident that that business is indifferent to the interests of the public.

Insurers must not be accomplices to such indifference. Not when a policy of do-nothingism is a prescription to lose everything. Not when the price of inaction is a possible class action lawsuit. Not when the ultimate price is bankruptcy, morally and monetarily.

See also: Visions of Safety and Pictures of Success  

A policy of conscience, on the other hand, is anything but indifferent.

It is a statement of principle, saying to the nation that insurers do acknowledge, that insurers do accept their role as leaders.

Such a statement would do a lot to define the insurance industry as a symbol of leadership.

To be true to that statement, insurers must listen to what an injury law expert has to say. 

In so doing, a dialogue may ensue. and new standards of excellence may emerge.

This dialogue is too important to ignore or dismiss, given the dangers that exist and the risks that threaten the lives of individuals and the livelihoods of individual workers throughout the insurance industry. 

Silence, in other words, is deadly.

Through an exchange of ideas and an attempt to achieve certain ideals, insurers can promote better business practices, superior workplace conditions and fewer accidents. They can also champion greater oversight and safety.

Let insurers strive to do these things, despite whatever challenges, criticisms or costs may arise.

Let insurers do what is right, despite whatever may happen, period.