Despite the headline, this blog is not about auto insurance or distracted driving. It’s about lessons learned in the COVID-19 pandemic. One is very likely to be that a fundamental change is needed in how we, as an industry, view product and services development.

Insurance product creation is based on historical data – the rearview mirror view. It always has been, and there is value in the approach. Past trends are likely to be repeated, and coverages and rating need to reflect that. Insurance departments require years of historical data to approve changes.

However, there is a fundamental change afoot that cannot be ignored. The once-in-100-years event is rapidly headed toward becoming a once-in-10-years event. As COVID-19 has shown, “we’ve never seen this before” is a veritable constant. As a society, and thus as insurers, never before have we experienced 9/11, the Fukishima nuclear disaster, Hurricane Sandy’s impact, the SARS and MERS global reach and on and on.

A stark reality is that the past is no longer the only predictor of future outcomes. But there are tools available to help.

Non-Traditional External Data. There is clear value in using internal and traditional external data in product development. However, as current and not-too-distant past events show, “we’ve never seen this before” is not reflected in that data. As an industry, we have new friends in the amount of scientific data that is now available and the technology providers that can make that data consumable.

A good example is the recent SMA Transformation in Action Award winner Sompo International, in partnership with Praedicat. Sompo was interested in emerging risk. It wanted to know what the next possible asbestos-like event might be so it could react now. Praedicat was able to bring machine learning, natural language processing, artificial intelligence and scientific data sources to this discovery process.

This is the windshield view! And what we, as an industry, need to include as a standard part of product development (and business decision-making) activities.

Clarity of Coverage. An early mentor told me that most people don’t care about their insurance coverage until they need it. One can debate the accuracy of that statement, but it does lead to the issue of clarity of coverage. People need to understand their coverage to care.

Unfortunately, there are already a number of lawsuits about what is and isn’t covered under certain policies related to COVID-19 outcomes. This happened after 9/11 and Hurricane Sandy, etc., too. This will never go away entirely, but it certainly can be mitigated. For example, for many insurers, due to mergers and acquisitions, it is not clear what is or is not covered within their total book of business. This is an area where technology can assist via AI to review and compare coverages between old and new products so that coverage issues can be addressed and clarified. Again, a little more windshield and less rearview mirror.

See also: Will COVID-19 Disrupt Insurtech?  

Creative New Services. Not too long ago, there were some insurance departments that would not approve services within insurance products. Fortunately, that problem has largely disappeared. Insurers are attaching mitigation services to cyber policies and IoT device implementations. Insurers can play an important part in extending services.

Product development initiatives should include services analysis as a routine part of activities. Services development can take advantage of the learnings coming out of external data analysis – are there gaps a service can address? Some insurtechs have homed in on this possibility.

For example, Jumpstart Recovery provides financial relief for whatever a person needs in the event of an earthquake outside of a traditional earthquake policy. The website identifies examples of pet care, camping supplies and document restoration. And Jumpstart Recovery is parametric-based, so there is creativity on several fronts. Maybe there’s a place for a similar attachment to a standard worker's comp or business interruption policy to cover gaps in the event of a pandemic. More windshield thinking!  

Right now, there is so much going on, it’s really hard to think about the creative and technology-based products and services that insurers can deliver to individuals and businesses. Things will settle down, and COVID-19 will get under control. However, on some fronts, there’s reason not to return to the same old way of doing things because the risks we insure are changing rapidly.

“We’ve never seen this before” isn’t going away. As insurers, we need to step up and be prepared, not just to preserve internal financial results, but because we can continue to improve society with the right tools, data and insights. Products and services need to be based on the forward-thinking, windshield view as much as it has been based on the historical, rearview mirror process of the past.

We are in a time when technology can be the facilitator. Out of adversity comes progress.

Life insurance sales are sluggish, and the struggle to capture the elusive mid-market and millennial demographic persists. Insurers are searching for a way to turn things around.

As tech start-ups have entered the insurance market, shaking up age-old policy servicing and sales models, insurers have been forced to rethink their offerings. Not adapting is not an option anymore.

Some innovative insurers are starting to gamify elements of the customer experience as well as the value chain, like we’ve seen in other industries, from airlines to credit cards, which already have well-received loyalty programs in place that rely largely on game mechanics. Innnovative insurance companies are rewarding users with points and gift cards for completing courses or taking quizzes related to financial wellness and mindfulness, for example. This is their way of incorporating fun, engaging elements into policies as a means of meeting the insured where they are.

But are these new types of policies and customer engagement models taking hold?

Research conducted recently by the Harris Poll on behalf of SE2 and Life.io investigates if factors like rewards and engagement make life insurance more appealing both to those who already have policies and those who don’t. The findings found that the vast majority of the 2,000 respondents would share real-time wellness data with insurance companies through wearable devices in exchange for financial benefits like a lower insurance premium or wellness rewards.

The data also found that U.S. adults want their policies to be more interactive. Roughly two-thirds (68%) say that, if a provider offered a policy that included elements of gamification to reward healthy lifestyle and wellness habits (think: badges for hitting certain milestones, a leaderboard, financial rewards), they would be likely to engage in those elements. Additionally, 43% of U.S. adults say they’d be “much” or “somewhat” more likely to purchase a life insurance policy if the insurer offered an interactive program with wellness benefits (such as coaching and education) rather than just policy payout.

See also: Customer Experience Gets a Major Facelift

In terms of generation, over half (53%) of millennials (ages 23-38) say they’d be “much” or “somewhat” more likely to purchase a life insurance policy if the insurer offered an interactive program with wellness benefits. This is noteworthy given that life insurance sales have historically lagged among this group, according to previous research from SE2. Even baby boomers want in. More than one-third (36%) of boomers (ages 55-73) say an interactive program with wellness benefits would make them “much more” or “somewhat more” likely to purchase a policy.

Will Sweat for Discounts

The survey also found that a majority of U.S. adults seem to like the idea of exchanging wellness and lifestyle data with life insurers for rewards and improved lifestyle. They would share wellness data, such as steps walked daily (79%), blood pressure daily (76%), heart rates daily (74%), calories burned daily (73%) and sleep patterns each night (71%) for financial or health rewards.

In fact, those rewards could lead to lasting lifestyle and health changes. Eighty-six percent of U.S. adults say they’d be “much” or “somewhat” more likely to live a healthier lifestyle if a life insurance company offered cash back as an incentive in exchange for their real-time wellness information. Almost all (94%) of millennials say this would be the case for them.

Other incentives that would urge the insured to improve their lifestyle habits? There are plenty:

• 86% of U.S. adults say cash back would encourage them to live a healthier lifestyle
• 85% say a lower life insurance premium would encourage them to live a healthier lifestyle 
• 82% say additional coverage or benefits would encourage them to live a healthier lifestyle
• 77% say wellness rewards would encourage them to live a healthier lifestyle 
• 70% say wellness education/coaching would encourage them to live a healthier lifestyle
• 66% say financial education/coaching would encourage them to live a healthier lifestyle

See also: 3 Ways to Improve Customer Experience  

More Frequent, Meaningful Touchpoints Matter

The importance of customer engagement cannot be overstated. The research found that policyholders want to hear from insurers more often, not just upon sign-up and for billing purposes. More frequent, personalized touchpoints are crucial for retaining and growing the insurer’s book of business. Higher-quality interactions can help build relationships, which leads to higher sales conversion, reduced lapse rates and referrals.

What to take from all of this?

Policyholders and prospective policyholders will no longer settle for the status quo. They want higher-touch customer service with more frequent touchpoints, policies that are more personalized and engaging and rewards that continue. These approaches can help turn around sluggish sales and lead to lifestyle and health improvements of the insured.

For insurers who aren’t willing to evolve their policies and engagement models to better meet consumers where they are, survey respondents stated that they would be willing to switch insurers. That’s not to be taken lightly.

Global financial markets are fluctuating, daily operations for businesses across industries have been disrupted and masses of the workforce are being grounded from travel and urged to work from home because of the coronavirus. This is an unprecedented situation, and the quick changes can overwhelm businesses.

Insurance agents likewise face challenges, including dealing with any staff and workplace issues and sharing guidance and advice with clients. The key to enduring the coronavirus or any other crisis is developing and activating a crisis management plan. Plans should focus on transparency; factual communication; aggressive planning; operations; and people management. 

Aggressively creating a plan

Failing to prepare can harm a business’s reputation and financial wellbeing. Crises, as evidenced by the coronavirus, unfold quickly. This is why being aggressive is key for businesses—always expect the unexpected. 

When creating crisis plans, business leaders need to imagine the worst possible scenarios and work backward. What’s the worst thing that could happen? How would we respond? What steps would be necessary to rebuild? Asking these questions leads to a well-rounded plan. 

Business leaders must know whom to contact, whether it’s their clients, partners or employees in the event of a crisis. All contact information should be up to date and on-hand for quick communication to avoid last-minute scrambling during a stressful time. 

Crisis plans can’t be created in a bubble. They become meaningless if people aren’t aware of them. All employees need to know how their company plans to respond and regularly perform drills to boost confidence that the plan can be executed without a hitch. Performing due diligence can lead to better results and consistency when the time comes.

See also: COVID-19: Moral Imperative for the Insurance Industry  

Considering impacts on business and people

When developing crisis plans, consider all scenarios—related to health, weather or personnel crises--and their potential impact on business operations. Running through scenarios, no matter how realistic, is a great exercise.

Communicating factual information

The World Health Organization has referred to the coronavirus as not only a pandemic but an “infodemic,” because of the rapid spread of misinformation and speculation online. It’s the responsibility of business leaders to maintain clear, factual communication with employees and clients during a crisis.

Before sharing information or guidance with clients or staff, leaders must ensure that it’s coming from an official, credible source like the Centers for Disease Control and Prevention or the World Health Organization. Business leaders should also:

• Know the best way to reach employees, clients or other interested parties in the event of an emergency. Think about the most common methods and channels of communication at your business and develop a mix of communication and content that will be most effective and efficient--internal or external email, social media, press releases, newsletters, etc.
• Not rush communications. Business leaders should maintain regular communication throughout a crisis, but it needs to be factual. Employees and clients alike shouldn’t be kept waiting, but rushing to get statements out can lead to unclear messaging, increased uncertainty and the spread of false information. Take enough time to make sure that all statements are clear, factual and approved by legal advisers before release. Leaders may be tempted to respond immediately, but quickly sharing false information can be dangerous.  

See also: Will COVID-19 Disrupt Insurtech?  

Ultimately, business leaders need to avoid feeding into fear, despite the uncertainty inherent in a crisis. Laying the groundwork for crisis responses can be incredibly beneficial for companies, their people and their clients in the long term.

When I saw this article in the Wall Street Journal this week, on how states are pressuring insurers to pay business interruption claims related to COVID-19 even though policies specifically exclude pandemics, I was reminded of my first encounter with the “deep pockets” theory that is driving the pressure.

A college friend who was a new associate at one of Chicago’s biggest law firms had managed to get me invited onto its softball team, and a bad hop on a wicked single had shattered the nose of our rightfielder. Once we bundled the poor fellow into a car, so someone could drive him to an emergency room, the young associates started talking about who was liable. Natch. But whom?

Someone suggested that the rightfielder bore liability because he played rarely and perhaps should have known better than to take the risk. But you don't sue your teammate. So, an eager associate joked that the batter bore the liability for blistering the ball. “What about the pitcher, who served up such a juicy ball?” another asked. Then came the definitive ruling, from still another: “Who has the deepest pockets? The municipality. We sue the municipality for not maintaining the field properly and allowing for that bad bounce.”

We all had a laugh, and nobody sued anybody, but I’ve seen over the past few decades just how appealing the “deep pockets” approach is, and now the insurance industry is a target of those looking to finance relief from the pandemic.

Do we have a responsibility to provide business interruption insurance even though it’s not covered in the contracts? More broadly, what is the industry’s responsibility to help with this crisis?

No, I don’t think the industry should have to cover business interruption due to the pandemic. I think small businesses and individuals, who did nothing wrong, should be bailed out by government as part of a collective effort by us taxpayers and citizens. But I don't see why the insurance industry bears any special responsibility. Two years ago, Marsh actually offered a policy that would cover pandemics, and no one bought it, so why should insurers have to cover them, essentially for free? A contract is a contract.

But….

But, but, but….

I think there is a moral imperative for the industry to do everything it can, even if means bending some rules and forgoing some revenue in the short term. There should even be long-term payoffs for generosity now—though that needs to be a secondary consideration.

When I was a kid, and one of my seven siblings or I (yes, Irish Catholic) would head out the door, my Dad would typically call one of two things after us, “Remember your name is Carroll,” or, “Do the right thing.” While the first admonition applied just to us Carroll kids, I’ve found the second to be a remarkably good guide to behavior, whether individual or corporate, ever since.

In the current moment, doing the right thing looks to me like finding ways to defer premium payments when possible. After all, the insurance industry is in strong financial position, while many clients, especially individuals and small businesses, are not. Why not let them rest on the broad shoulders of the insurance industry and borrow our balance sheet for a while? It’s not like the cost to insurers would be material, in a period when interest rates are nearly zero.

Is there some way to quickly diminish workers’ comp payments at small businesses where, after all, so many people aren’t working? Maybe recalculate slip-and-fall liability as long as there aren’t customers or workers who will slip and fall? Reduce premiums for commercial auto fleets if they've been idled? For buildings that aren't being used? Temporarily lower premiums for individuals whose cars are just sitting in their driveways or on the street?

I realize that regulators will need to weigh in on premium adjustments and that some bad debts will arise if people get into the habit of not paying their premiums, but I think my broad point stands. There are probably lots more ways to support clients in their time of need, too. Perhaps a blanket deferral of premiums for businesses with dire cash flow?

If a claim is the proverbial moment of truth, then this pandemic is the moment of truth among moments of truth. This is the moment to shine.

There are loads of people out there who are convinced that insurers are unfeeling and nothing more than greedy. Look at this article in the Daily Beast. The haters can control the narrative, or we can.

Look at the great publicity that Cigna and Humana have received for waiving copays on coronavirus treatment. Or, look at the coverage of the humanitarian gesture by Zion Williamson, a rookie with the New Orleans Pelicans, who said he'd cover 30 days of expenses for the team's stadium staff after the NBA put its season on hold. This is a 19-year-old kid (albeit, one earning some $20 million a year). Surely, with all the resources in the insurance industry, we can make many such grand gestures.

Whatever we do or don't do, it'll be remembered for months and years to come. So, let’s do the right thing. Let’s help in every way we can, even if it means going outside the normal rules and procedures. It shouldn’t cost much, if anything, in the short run and will return long-term dividends both for the industry and for grateful clients.  

Stay safe.

Paul Carroll

Editor-in-Chief

It’s safe to say that 2020 will be nothing like the year we were expecting. Our actuarial projections from last year, based on looking at historical data and adjusting it to fit future conditions, are woefully inadequate for the task of projecting what life will be like in an age of “social distancing,” pandemic-level illnesses and deaths, widespread closures and cancellations, stock market panic and massive unemployment.

Amid the hourly developments coming from the news, we are beginning to understand how we should adjust our actuarial assumptions to match this new reality. The magnitude of many of the outcomes discussed here depend on the evolving response to the crisis and, most significantly, how long it takes to get back to “normal.” The speed of change is dizzying, but here are some early thoughts:

Commercial Lines

Auto — In prior periods of economic downturn, commercial auto has experienced significant decreases in accident frequency. Historical data from the 2001 and 2008-2009 recessions show frequency dropping for both minor and severe accidents. The combination of people staying indoors (both as employees and consumers), disrupted supply chains, juggling “work from home” with caregiving responsibilities and increased “belt-tightening” from the stock market downturn should result in similar frequency reductions for most auto policies.

It is unclear how delivery vehicles will be affected. Will the increase in delivery services from “social distancing” outweigh consumers’ tightening budgets? The shift of many restaurants toward “delivery-only” could increase the hired and non-owned auto exposures for those risks. One concern is that new delivery drivers may be less experienced, which could give rise to increased accident potential.

In general, trucking activity will likely decrease, which would lower the number of claims. However, there may be factors offsetting this, such as drivers under more pressure to drive longer hours now that the U.S. has suspended the 11-hour-per-day limit on driving.

See also: COVID-19 and Need for Decision Intelligence  

Another consideration is that fewer personal autos will be on the roads, resulting in fewer car-on-car accidents. On the other hand, people are finding that walking and biking are good ways to get outside while keeping a safe distance from others, so there may be an increase in pedestrian strikes.

General Liability — Premises/operations claim counts are most likely going to plummet as the prospect of patrons visiting premises has all but evaporated in the era of “social distancing” and large-scale business closures. In contrast, we anticipate an increase in frequency from habitational risks as people spend more time in their rented homes. Small children cooped up inside could lead to more accidents and injuries resulting from dangerous conditions on the property.

Product claims may increase as companies shift their focus away from established products and move into new endeavors that are more relevant to the current epidemic. Examples of this are perfume manufacturers making hand sanitizer and restaurants shifting to delivery and take-out operations. In addition, consumers may start using products in ways that manufacturers never intended, such as making their own sanitizing products at home.

Pharmaceutical and healthcare companies will need to be careful about how they represent the efficacy of their products, lest they tread into “false advertising” territory.

Workers’ Comp — Businesses are temporarily closing, employees are working from home and the economy is grinding to a halt. All of this points to a big reduction in the frequency of WC claims in the aggregate, although certain classes may face pressures that cause an uptick in claims. There will likely be a large increase in the number of claims arising from healthcare workers as these brave men and women put in extra shifts to help others during this crisis. A similar situation might arise for workers under pressure to meet heightened shipping demands (e.g., truckers, distribution center workers, manufacturers and delivery services), as well as public safety officials, such as law enforcement and first responders.

There may also be fewer catastrophic injury claims as we expect a reduction in many occupations that are associated with high rates of fatalities (e.g., pilots, roofers, construction). One benefit of telecommuting is a reduction in employee concentration in one location, making a multi-person loss less likely.

Payroll, which is often used as the exposure base for premium, will probably decrease significantly, resulting in lower premiums collected.

Property — Many businesses will be closing or operating with reduced staff, making it less likely for a fire to occur there in the first place and lowering frequency. However, in these vacant and under-occupied buildings, it is more likely that a fire or water damage could go unnoticed and result in more severe building damage. And, as companies face financial pressures in a slumping economy, arson may become more prevalent.

Habitational exposures will likely see a greater frequency of fire losses, with people spending much more time at home cooking meals and using fireplaces. Some people are leaving their quarantined urban apartments to rent or property-share (e.g., AirBnB or VRBO) larger homes in less-infected nearby suburbs.

Repairs and maintenance may be slower than usual due to financial or safety reasons, and there may be less supervision of rental properties due to supervisors isolating themselves.

Directors & Officers — Some challenges facing corporate executives include enacting existing business continuity plans in a rapidly changing environment (without misrepresenting the efficacy of those plans), and the need to pay close attention to the impact that their decisions will have on their stock prices in this volatile market.

Employment Practices Liability — Employers need to navigate a diverse array of potential hurdles, including Family Medical Leave Act issues related to caring for loved ones, complications arising from unusual remote working arrangements and mass as well as individual worker layoffs under existing and new emergency employment laws. Unemployment rates are projected to rise from 3.5% up to double-digit levels, with the hardest-hit industries being retail, transportation, leisure and hospitality.

Cyber — We have already seen a marked increase in the number of phishing email scams targeting workers that are new to telecommuting, as well as fake CDC warnings that take advantage of the public’s fear.

Medical Malpractice — If the U.S. healthcare system becomes overwhelmed by a surge in patients, we might see different outcomes for patients resulting from the triaging of limited resources, for both coronavirus victims and all other types of patients. The danger posed to nursing home and long-term care patients is especially acute and will need to be monitored closely.

Surety/Credit — Surety frequency could increase if contractors are unable to continue work, raw materials supply chains are delayed or public officials stop inspecting worksites.

Public Entities — The widespread closure of public facilities could result in lower revenue for jurisdictions in the form of tuition refunds, refunds for canceled programs and a decreased tax base from reduced business and tourism. It is still unknown how effective online learning will be for students, especially those with special needs. A surge in emergency response spending will necessarily mean a decrease in less-essential maintenance and services going forward.

Personal Lines

Auto — As with commercial auto, with fewer people commuting to school or work, we expect a material decrease in miles driven (which translates into lower claim frequency) and a potential rise in pedestrian strike claims. Physical damage claims frequency will likely also decrease as a result of reduced miles driven.

Property — Families are “hunkering down” in their homes, increasing the amount of cooking, heating and other activities that could cause fires. Unoccupied second homes (rentals and additional dwellings) are more likely to go unchecked and thus face risks associated with vacant properties (water damage, unnoticed fires, vandalism). However, there may be some cases of homeowners leaving their primary dwellings in a quarantined city and spending more time at their secluded secondary dwelling.

All that social distancing should lead to a reduction in homeowner liability claims, as social visitors are less likely in this new environment.

See also: Impact of COVID-19 on Workers’ Comp  

Other Consideration – Insurer Operations

There are also common business issues that have a unique impact on insurance operations to consider. For example, claims departments might be beholden to slower-than-usual mail delivery, reduced staff, headaches associated with alternative work arrangements, lags in claim reporting, difficulties in adjusting claims and slower than normal claim payments.

On the top-line side, there could be a reduction in new insurance submissions in the short term. And, since insurance premiums are linked with GDP growth, employment levels, payrolls and revenues, we anticipate a decrease in future premium as these macroeconomic benchmarks deteriorate. Unfortunately, insurance companies have many fixed costs, so decreased premium combined with constant fixed costs could result in lower profitability margins. Longer-term projects and updates are likely to be put on hold until companies are back at full operational capacity and have the financial stability to re-invest in themselves.

Even insurance experts can’t foresee every eventuality. The speed and widespread prevalence of the coronavirus are upending almost every projection we made for 2020. And, given the pace at which the health situation is evolving and the world is reacting, much of our current thinking may soon be obsolete! As always, please reach out with any questions as we navigate through these challenging times together.

Republished with permission from Gen Re. You can find this article originally published here.

Lockdowns, mandatory work from home, social distancing – the coronavirus pandemic has upended lives across the US. With no definitive end in sight and officials closing restaurants, bars and non-essential businesses in cities and towns across the country, most small businesses are feeling the economic impact and wondering, does my insurance cover this?

It’s long been known that insurance agents demonstrate their value to customers during crises, whether that’s a personal crisis, such as a car accident, or a community crisis, such as a major storm. During these times, agents are advisers providing much needed guidance to worried clients. Now, with the unprecedented uncertainty surrounding the coronavirus, businesses are wondering if they have enough protection to help them weather this storm. Agents are advocates helping customers with the information they need, and are friends, providing comfort and support and a receptive ear to those who need a sounding board. 

Even if their physical locations close, agents need to be accessible to their clients. Agents have to have instant access to policy files. They need to maintain constant communication. And they need to implement solutions that handle routine matters, so they have more time to focus on their clients’ unique needs.

Here are three ways agents have adapted to continue to provide the service their clients require. 

1. Taking their agencies to the cloud. 

Most agency management systems are set up to work in the cloud – giving agents access to their customer files. Many agencies have been using these capabilities easily, with no disruption to their normal course of business. Agencies that are not set up should contact their vendor representatives to ensure they have all of the functions needed to continue business outside of the office.

Agencies are also using other cloud-based solutions that make it easier to process new business, claims and endorsements outside of the normal office setup. Automated quoting solutions that obtain multiple carrier quotes from a single-form submission eliminate the need to go to and resubmit the same information on multiple carriers’ websites. Online portals give customers instant access to their policies so they have the information at their fingertips and can file claims online. 

See also: Coronavirus: What Should Insurers Do?  

2. Extending communications beyond email and phone.

Every minute there seems to be a new coronavirus development. With things constantly in flux, customers will continue to have questions and want answers as quickly as possible. Agencies are making sure clients know how to reach them, especially since clients have gone mobile.  Some agents are using social platforms such as Twitter, LinkedIn and Facebook to share updates that are helpful for all customers. One good idea: If many of the questions are repetitive, consider adding a Frequently Asked Questions page to your agency website that can be promoted on social media. Other agencies are using text for simple questions that can be answered quickly. 

In a crisis, it’s also important to implement face-to-face communication tools to maintain relationships with clients. Social distancing doesn’t have to prevent you from meeting with customers. Take your conversations to the virtual world, using solutions like Skype or Zoom to maintain personal interactions.

3. Business doesn’t stop, and innovation can’t stop. 

With the world in chaos, the temptation may be to focus on stabilizing business, maintaining the status quo. But as agencies adapt and implement different processes to keep operations going, agencies should be using all tools at their disposal. Technological solutions, like automated quoting, that help with routine, time-consuming tasks can have a long-term effect in not only helping agencies through a crisis but better serving clients in the future. For example, some agencies are taking advantage of on-demand webinar platforms to host Q&A sessions where a variety of business owners can get advice on their most pressing queries. This can be a powerful tool in building long-term client relationships.

See also: How Coronavirus Is Cutting Connections 

It’s important for agencies to think about the changes they are making now as advancements that go beyond the crisis. Many of the improvements that agencies are currently making in real time can have significant benefits to efficiency and growth when things return to normal leading to an overall stronger agency dynamic.

These are uncertain times, and we don’t know how long the coronavirus pandemic will last. Taking the necessary steps now ensures that agencies continue providing their clients with critical customer service. When the pandemic subsides, many of these learnings and changes can be continued as the marketplace returns to normal.

We are in the midst of a bionic revolution in all industries and especially insurance. Organizations are competing with a new mix of people and machines doing both cognitive and physical work, and those companies that become bionic fastest are winning because of superior customer experience and economics. This has led to a new Digital Darwinism — the evolution of businesses and business models that not only occurs across generations as it does in the natural world, but rapidly and many times within the lifetime of a single organization.

The speed of evolution creates imbalances — and in the insurance industry we see a sophisticated sales/distribution experience with an old-style issuance, service and claims experience. Until very recently, insurtech has been a story of front-end evolution. It is only now that enterprise investments in insurtech have matched the front-end.

How do you increase the clock-speed of your evolution? Our lens at Snapsheet is to collectively reimagine the operating model, operational capabilities and customer experience with five bionic design principles in mind. A design principle is a practical concept that helps executives imbue the organization with the right way to think about critical tradeoffs and solutions. For example, Steve Jobs hated styluses, so the iPhone created a user interface that did not need any type of stylus. This simple concept drove many actions in Apple.

Bionic Design Principle 1: Change the way you work, and change the way the work is managed: Reapportion cognition among people and machines.

The fundamental activity of the industrial revolution has been to take thinking and labor tasks “out” of people and put them “into” machines. It’s a one-way street optimized around one process, one answer, one method. In contrast, in the bionic age, everything has the potential to be smart. Processes can be agile; claims can be alive and know their own path and what data they need to complete their task. Claims can even be patient, knowing how long information requests should take and when it’s time to “ask again” for missing information. A claim can even route itself to the optimal process and resources using its understanding of its complexity, service level status, skills needed and available, licensing requirements or other attributes; for example, a claim can know if it’s a total loss auto claim and therefore has a shorter, faster process path.

This dynamic allocation of cognitive responsibilities is the most important design principle because its application allows for the entire claims ecosystem (or any ecosystem) to be better without having to be in full control of every step. For example, to implement our smart claim approach in auto, we do not require customers to choose the way they engaged with us or others. Rather, we allow the customer to choose and change the interaction mechanisms, and the claim learns how the specific customer or repair shop interacts and how long responses take. The claim acts accordingly. The process is not industrial and stringent, but bionic and adaptive.

When cognition is reapportioned, no time is lost, and actions are optimized against capacity—and as the system gets smarter it can evolve the process and support higher and higher level tasks. The design itself does not have to be all-knowing right out of the gate. It masters a specific challenge and evolves over time because it’s a living system, not a mechanistic one.

See also: Darwinian Shift to Digital Insurance 2.0  

Advanced weapons systems in fighter aircraft have shared thinking responsibilities with pilots for many years. Sometimes the pilot is flying the plane, and the weapons system is protecting the plane; other times, the plane is flying itself, and the pilot is focusing on the weapons systems. This dynamic allocation of cognition means that the most capable thinker—person or machine—will be in charge based on context and competence, not rigid process. Think of claims as thinking for themselves: Each claim also knows when to “ask for help” and push the activity to a human when the claim lacks enough data, structure and rules to proceed. This adaptability enables productive integration of the complex, digitally enabled ecosystems that all insurers face. Put another way, it’s not just machine learning, it’s a learning machine.

Bionic Design Principle 2: Change the way you engage with the customer and change the way you work with others: Remove friction from the ecosystem—not just the customer.

Customers no longer tolerate friction. They want service anywhere, anytime, any way — and expect to have instantaneous status about every step of the process. In claims, the old way was to send out a person to look at the vehicle or visit the home. But if you’re creative, you can change the flow. We began Snapsheet by inverting the process—enabling customers to use their smartphones to send in photos of their accident so they could poll repair shops to deliver virtual estimates, instead of having a person visit the scene of the accident—thus removing a friction point and saving time. But as we implemented this innovation, we saw that we needed to do more. Some customers were not confident in their ability to take the right photos or did not want to use an “app”—so we had to enable omnichannel capture, allowing the customer to begin the process in any way the customer found faster or easier.

We’ve been chasing friction removal for seven years, and we expect to continue chasing it. It’s easy to say that “it’s not just about the technology,” but turning that observation into less friction for the customer takes a willingness to learn, adjust, reintegrate and sometimes reinvent major functions across the ecosystem.

Our ability to field smart claims that are aware of their context enables us to see how to close the gap between the desire and realization that happens in many places in the claims ecosystem. By looking at the whole ecosystem, not just the individual task, you can see entire areas of opportunity open up.

For example, we found that making payments—more than 75% of them still transacted by paper check—was an area we could redesign. Now we have the ability to provide payment and treasury functions instantaneously for all parties involved as soon as a step in the process—such as repair—is verified as complete. We asked participants in the ecosystem, “Do you want to get paid fast or slow?” No surprise, most customers say, “Fast!”

Another significant delay often comes from processing a total loss situation, which is often slowed by the complexity of issues having to do with identifying the lien holder of the asset and the title procurement process in a specific geography. This complexity requires a carrier to change the way it engages with other suppliers. In this case, working with other industry partners, Snapsheet is enabling faster exchange of information across multiple parties, initiating insurance and salvage workflows simultaneously and integrating new capabilities to remove that friction. In doing so, it’s possible to remove days, and even weeks from the process. This accelerates the time to sell the vehicle for the insurer and time to settlement for the customer.

Bionic Design Principle 3: Change the way you change: Innovate, don’t renovate—don’t start from scratch.

The most critical part of digital evolution is to change how you change. The idea of continuous improvement has been with us for many years—at least since the 1950s when Edward Deming led the quality movement. Most insurance companies have done an analysis of what it takes to redo the entire technology stack—and it is often an absurd number with millions and millions of dollars at risk for an uncertain payoff.

Fortunately, there are many new tools to help enable integration of legacy and emerging systems. The suites of robotic process automation tools help to provide what we call value-driven integration. When companies use these products or other integration/automation tools, they can often integrate multiple legacy systems with a secure container that can interface with multiple systems and then present the results on any device—providing new results, without the need for complete system overhauls or upgrades. This creates productive modules—of process, task and technology—together, which enables improvement with zero down time while delivering continuous enhancements.

With new API architectures, one can partition the work and make it more object-oriented, which enables more flexible task and process flow design within the organization and outside to suppliers. Properly used, this creates a much more agile and adaptable learning environment.

This can take time out of customer service, sales or other interactions by collapsing many dozens of steps and multiple screens over hours, to one screen and minutes, while kicking out a clean stream of audited data for machine learning to drive future improvement. This capture of cognitive capital drives near-term labor productivity and superior customer experience while providing a data asset for further improvement. Especially in the middle and back office, there are often greater opportunities to drive customer experience and superior economics.

See also: A Self-Destructive Cycle in Insurance  

Again, in the bionic age, the right way to think of it is as smart, evolving, alive systems. The most important design decisions are about the application program interfaces (APIs) and the modularity of the system. For example, Jeff Bezos declared that Amazon would use common APIs back in the early 2000s, which meant that the company could add or subtract functionality without interfering with the existing process and code base of the organization. This means the company can handle complexity at a much lower unit cost because complexity is contained within the modules. This is not true of many of his competitors, and you only need to go into Macy’s and try to find your order history with the store, to show the lack of APIs in that organization.

The innovate-not-renovate point of view relies on modular thinking. This may seem incremental to some, but some of the most important innovations in human history have been integration technologies that enable established ecosystems to interact productively. The international currency markets are such an innovation; so is the internet, whose very name states its “inter-networking” mission. In the bionic world the biggest bang for the buck is usually in innovating and integrating existing ecosystems, not starting from scratch.

Bionic Design Principle 4: Change the speed and efficacy of every decision: Use AI to pick up the trash and explore the stars

Evolution is often a process of simple and complex improvement. The fourth design principle is to use AI both for the low and the high end.

On the low end, AI helps to automate faster because it can gather new information and structure it faster. There are many mundane tasks that AI can help to improve. Proper analysis of photographs is a great example, and we have developed more and more capability to make sure we have the right angle and proper picture needed to move the claim forward in the process. Even simple uses of AI such as this can add up to vast improvements in speed and productivity.

On the high end, we are developing complex models that can continue to automate and refine estimates for more and more severe accidents. This other use of AI is like a telescope for the mind—allowing new insights into vast data sets and complex problems that would not be possible without it. We analyze millions and millions of accident pictures that feed a super-smart estimating engine and leverage our estimator talent eight to one compared with non-assisted, experienced estimators. We are also finding interesting patterns in repair shops, types of accidents, customer behavior etc. If we did not have the massive and growing scale of transactions, we would not have seen and been able to share these insights.

Bionic Design Principle 5: Change your economics: Take advantage of bionic economics— speed, scale & capital

Perhaps the most powerful force of Digital Darwinism is the speed of change in core economics. This is why our final key design principle is to use the business system with the best total economics, driven by speed, scale and new forms of capital. There is no question that this new mix of people and machines can make decisions faster. We’ve found that our staff are as much as five times as productive, but they are not super humans; they are simply people supported by great cognitive technology and training. The more data and transactions that any learning machine can ingest, the better its speed and accuracy.

Google Translate is so good because it was fed with billions of books and all the proceedings of the E.U., which publishes in about three dozen languages. This vast wealth of data made it learn faster. So, too, with claims. This speed not only decreases labor, it also allows us to provide answers faster and get through the entire process in less time. In claims, like many things in life, time only makes things worse— with impatient claimants creating additional service demands and the organization incurring added costs such as rental and storage.

In terms of scale, larger networks of computer power usually have superior economics. The cloud not only enables organizations to make their costs more variable, (e.g., if you need more capacity, simply contract for more without the need to buy new hardware and software) but also provides the ability to take advantage of the economics that support that network—such as the formidable buying power of the cloud provider, power efficiency, customized operating systems and software that creates other efficiencies. There are many end points on the network—another scale effect. Why do people usually go to Google? Because its network of links is larger and better than the competition. Why go to the second-best network? Likewise, cloud providers of critical business functions can create a world-scale network that is larger and better than all but the largest individual competitors.

Lastly, the bionic competitors gather and grow three types of capital: behavioral, cognitive and network.

Behavioral capital is the ability to track, analyze and model the behavior of any customer, device or service provider in the ecosystem. United Rental has over 70% of its assets—going to 100%—linked so the company can see the location, behavior and maintenance status of all assets. This is behavioral capital.

Cognitive capital is the store of AI, algorithms and other automated knowledge that can be used, improved and reused again and again. The better the store of cognitive capital, the more organizations can leverage existing labor and assets.

Network capital is how well a company is tied into the relevant networks for customer and supplier access. For example, no consumer products company can afford to not have a strategy for Amazon and Alibaba because they have some of the most extensive network capital in the world for consumer products. In bionic competition, organizations need to strategically use cloud providers that can bring these new forms of capital to bear to create superior economics.

There you have it. Five design principles that you can add to your strategy to move beyond siloed activities and on the way to deep transformation— speeding up your evolutionary process to meet the needs of a new Digital Darwinism and updating your customer’s experience along the way.

If there is one thing that we have all learned with the spread of COVID-19, it is that there is virtually no industry that is immune to its impact. The global pandemic is disrupting the daily lives of individuals, the operations of businesses, the activities of governments and even the approach of cherished institutions like museums, universities and religious organizations. The P&C insurance industry, like many others, is reeling from the implications of the virus. Amid the rapid changes, it is important to assess the impact of COVID-19 on the insurtech movement. After all, insurtech has always been touted as the ultimate disruptor of the insurance industry. But, might COVID-19 prove to be a disruptor to insurtech?  

First, it is essential to recognize that the ultimate impact will depend largely on the duration of the virus. If the U.S. and the world at large gain control of the virus in the next six to eight weeks, then there will be short-term pain for all (including insurtech). But there is likely to be a sharp rebound – the V-shaped recovery that economists are talking about. If the spread accelerates and the fight goes on for months or years, then it becomes a whole different scenario. Let’s look at several dimensions of insurtech and how they may be affected in the short term and long term, with the understanding that the implications for insurtech insurers, distributors and tech companies may be very different.

• Full-Stack Insurers: Companies like Root, Lemonade and Next should be well-positioned to thrive when the virus subsides. As digital-native companies, they can capitalize as the world accelerates transformation to online, digital and mobile engagement. In the short term, there may be fewer claims on the auto insurance side, as the roadways are empty. The offsetting factor is that fewer people will be buying new cars, moving into new apartments or buying/building homes – at least in the short term.  
• Digital Distribution Players: Like the full-stack insurers, the digital agents, MGAs, comparison platforms and others in the distribution space stand to succeed as more people gain experience with moving their personal lives online. Of course, individuals and businesses can still call their agents or brokers or use their web capabilities, but, generally speaking, the insurtech digital distribution players have more advanced capabilities. Like the full-stack insurers, they will be affected by fewer “changes” requiring insurance – fewer car and home purchases, less likelihood that business will be expanding fleets, etc. Then again, maybe there will be more shopping around to try to cut expenses.
• Tech Companies: Insurtechs that offer new capabilities for underwriting, claims or internal operations may face a more mixed future. Those that offer digital capabilities to interact with agents, prospects, customers and claimants will likely be okay, especially if the economy is starting to recover within 10 to 12 weeks. Self-service, DIY, mobile and virtual capabilities will all be elevated in importance – not just for the period when people are sheltering in place and businesses are closed or at limited capacity – but for the long run. Any insurer that has not already focused on the importance of digital transformation via these types of capabilities is sure to pick up the pace when the storm passes. Fortunately, most insurtechs provide the types of capabilities that enable a digital transformation. On the downside, the ability for insurtechs to be in the market meeting with insurers, increasing their brand visibility and building their pipeline will be reduced. Of course, marketing and sales can be done digitally. But in the case of insurtech, the physical presence is important. In addition, conducting pilots and proofs of concept (POCs) may be more difficult as they often require individuals to be onsite with the insurer. Finally, some insurers may be reluctant to sign new contracts in the short term.

One factor affecting all of this is that the funding picture is fuzzy. Up through the end of 2019, there was great momentum for insurtech around the world, and funding levels were continuing to increase. Now, capital is already starting to tighten up. And the longer the COVID-19 virus continues, the more reluctant investors will be to fund new ventures.

See also: Will COVID-19 Be Digital Tipping Point?  

Considering all these factors, will insurtech be disrupted? Over the next couple of months, the answer is most certainly yes. And there will most certainly be failures as some insurtechs run out of cash over the next few months. Another implication is that M&A might accelerate. insurtechs that have been reluctant to sell may be willing to cash out at lower amounts and acquirers are already out seeking bargains.

If the pandemic accelerates and lasts for a long time, all bets are off. If business starts to return to normal by summer, then most insurtech will be very well-positioned for success as insurers look to accelerate their digital transformation and inject even more innovation into their business.

The list of states in which marijuana is legal, either for medical or recreational purposes, is expected to continue to grow in 2020. Legislative efforts are expected to continue in New York and New Jersey, despite falling short the previous year, and in other states there are ballot-initiative campaigns aimed at legalizing recreational marijuana. However, at the federal level, efforts to revisit the status of marijuana under the Controlled Substances Act (CSA) have not made significant progress.

Currently, under the CSA, the cultivation, sale, distribution and possession of marijuana are illegal, irrespective of whether such activities are permitted under state law. This disparity in the legal status of marijuana at the state and federal levels, which has created uncertainty for businesses in the “legal” cannabis market, was dubbed the “marijuana policy gap” in a 2017 report by the Congressional Research Service.

The “marijuana policy gap” has caused some industries to hesitate to participate in legal marijuana markets, including the insurance industry.  As a result, insurance options for marijuana-related businesses (MRBs) are limited to mostly smaller, specialized insurers and the excess and surplus lines market. Conversely, larger, admitted carriers have resisted entering the insurance market for MRBs. In addition, financial institutions that accept deposits or extend credit to MRBs, or provide other financial services, risk violating federal law, such as anti-money laundering regulations. As a result, MRBs have limited access to capital to fund their growing businesses.

In 2019, a pair of bills were introduced in Congress aimed at expanding the ability of MRBs to obtain insurance as well as financial services. The CLAIM Act, as it was called, was intended to provide safe harbor from liability under federal law to insurers that underwrite policies for MRBs in states where medical or recreational use of marijuana is permitted. A second bill, the SAFE Banking Act, was intended to provide banks with a similar “safe harbor” from being penalized by regulators for providing banking services to MRBs operating in states where marijuana is legal. 

Although the CLAIM Act stalled in both the House and Senate, the SAFE Banking Act was passed by the House on Sept. 25. Prior to its passage, the SAFE Banking Act (H.R. 1595), was amended to include the protections for insurers that were originally introduced in the CLAIM Act. Under Section 4(c) of the act, an insurer that engages in “the business of insurance” with a “legitimate” MRB may not be held liable under federal law or regulations solely for engaging in such business. 

The SAFE Banking Act passed in the House with bipartisan support, on a vote of 321 to 103. The act now awaits action by the Senate, although its prospects for passage are uncertain. Sen. Mike Crapo (R-Idaho) is the chair of the Committee on Banking, Housing and Urban Affairs, which is considering the SAFE Banking Act, and has voiced “significant concerns” regarding the bill. Among other things, Sen. Crapo pointed to problems not addressed by the SAFE Banking Act, including “lack of research on marijuana’s effects, and the need to prevent bad actors and cartels from using the banks to disguise ill-gotten cash to launder money into the financial system.” Sen. Crapo’s apparent opposition to the bill may sound its death knell in the Senate. However, rather than outright dismiss any prospect of passing the bill, Sen. Crapo has requested public input on how to address his concerns. In addition, he has suggested that he may introduce his own legislation on this issue. 

See also: More Options for Cannabis Insurance?  

In the meantime, industry groups continue to support the act. On Feb. 7, 2020, the Credit Union National Association (CUNA) issued a response to the concerns outlined by Sen. Crapo, arguing that the SAFE Banking Act can be modified to address his concerns “consistent with the narrow objectives the bill was designed to achieve.” CUNA did not release a specific proposal but argued that, aside from a proposal to add public health and safety requirements to the enforcement responsibilities of the financial institutions, the SAFE Banking Act is already consistent with Sen. Crapo’s position on cannabis. 

Though its passage is far from certain, the SAFE Banking Act would have a significant impact on the legal cannabis insurance market and potentially encourage more insurers to underwrite policies for MRBs. Those working in the cannabis industry, or servicing those who do, should continue to track this legislation as well as monitor for future proposals.

Online payments are convenient, secure and easy. These days, they can also help keep you, your employees and your customers stay healthy and ensure your insurance business stays productive during the coronavirus pandemic.  

Amid the virus health concerns, employees across the country are being encouraged to work from home, while most Americans are being advised to stay inside.

That spells trouble for those consumers who prefer to pay their insurance bills in person or by the mail, many of whom are older. And it presents a tricky situation for insurance agents and companies that have shifted their work remotely for the time being. 

Not only should your clients avoid going out to pay their bills, but, even if they do, your business may not have anyone there to accept payments. 

That could be especially problematic in the insurance industry, where timely payments are paramount to maintaining coverage, something many Americans are undoubtedly nervous about as the virus spreads.

Even paying by mail could be problematic, as it requires having stamps on hand or going to the post office – again, your clients should be focusing on social distancing, not worrying about making a payment in person—and your office may not have anyone there anyway to open the mail.

The Federal Reserve Bank of Boston found in a 2017 study that the average American paid 8.4 bills in person, by mail or by phone, compared with 6.5 bills paid online and 6.4 bills paid through automatic withdrawal. That means a significant amount of people still aren’t paying online -- presenting an opportunity for you to increase the number of online payers, a true benefit, especially during the pandemic.

If your insurance agency or company doesn’t accept online payments, it’s not hard to add that capability to your website quickly, with a plug-and-play system. It’s even easier to get your customers set up. Under the current circumstances, they’ll be especially thankful. 

See also: Coronavirus Boosts Cyber Risk  

Online payments also allow your customers to know exactly when the payment is received, while mailed payments depend on the timing of the delivery. Your customers will be able to manage their cash flow better.

As the coronavirus continues to spread, now is a better time than ever to shift your payment processing online. Many more of your customers are open to the change, because they're trying to avoid personal contact. They'll thank you for the opportunity.