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How CCPA Will—and Won’t—Hit Insurance

The California Consumer Protection Act's penalties for data breaches will boost demand for cyber coverage.

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When the New Year arrives, so, too, will a new standard for privacy. The California Consumer Privacy Act—and its recent amendments and draft regulations—will soon govern how entities around the world are allowed to collect and process data. Although CCPA is limited to the data of California residents, the ultimate impact is much greater than it at first might seem. California represents the world’s fifth-largest economy and the nation’s first state to pass comprehensive privacy legislation. As a result, CCPA will likely influence privacy laws domestically and abroad, and could even begin the push toward federal regulation. Much of CCPA is based on the European Union’s General Data Protection Regulation, but the two landmark privacy laws differ on an important issue. While GDPR requires individuals to provide consent before their data can be collected, CCPA instead assumes consent and requires it to be revoked if an individual wishes to opt out. In other words, entities can collect the data of California residents as a default, whereas those same entities would need permission before gathering information about EU residents. This key philosophical difference benefits businesses by putting the onus on consumers to manage their privacy preferences—and that’s not the only way the California law is pro-business. The “financial institution” exemption Originally drafted as a ballot initiative by real-estate-developer-turned-privacy-activist Alastair Mactaggart, CCPA was designed to protect the privacy of consumers against the financial interests of large technology corporations. CCPA allows individuals to prevent the selling of their data, creates greater transparency in companies’ data-collection practices and increases penalties for improper data-security measures. However, for some industries—such as financial services and insurance—where the collection and processing of personal information is necessary for operation, the law carves out exemptions for specific data types used in those instances. See also: Vast Implications of the CCPA   An example is the exemption of data that is considered “personal information collected, processed, sold or disclosed pursuant to the federal Gramm-Leach-Bliley Act, and implementing regulations,” as referenced in Cal. Civ. Code § 1798.145(e). Referred to as personally identifiable financial information (PIFI), this data is addressed specifically by the Gramm-Leach-Bliley Act (GLBA) and subject to its regulation. CCPA finds the controls laid out in GLBA to be sufficient and therefore allows itself to be superseded by the federal law. PIFI is defined as any information:
  • Provided by a consumer to acquire a financial product or service
  • Used or referenced to perform a financial transaction
  • Gathered during the process of provisioning a financial product or service
As one might gather, data that might qualify as PIFI in one instance is not guaranteed to be considered PIFI in another context. For example, only data collected and directly related to the provision of a product or service constitutes PIFI. So, if that same data is collected solely for the purpose of marketing or business analytics, it would not be considered PIFI. Any non-PIFI data that “identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household” would be subject to CCPA, according to Cal. Civ. Code § 1798.140(o)(1). As one might imagine, this distinction can become cloudy in some applications and results in considerable gray area. To address this uncertainty, it is recommended that organizations work with their legal teams to review all of the data in their possession and re-evaluate their regulatory compliance obligations under both CCPA and GLBA. So, what is subject to CCPA? Within the insurance industry, any type of personal information that does not fall within the parameters of PIFI is subject to CCPA—if the entity collecting it meets the law’s established criteria. According to CCPA, any organization that has a gross annual revenue of over $25 million, processes at least 50,000 California residents’ records for commercial purposes or can attribute half of its revenue to the selling of personal information must follow the requirements of CCPA—or risk facing substantial fines and other penalties. This likely includes most decent-sized insurance companies. Although much of the information processed by providers is shielded against CCPA, the data possessed by policyholders is not. The total cost of cyber insurance premiums worldwide is projected to increase to $7.5 billion next year, and CCPA is a big reason. Because CCPA gives teeth to fines and other penalties for data breaches, many organizations will be looking to expand their cyber insurance coverage or purchase policies if they don’t have one already. See also: Where to Turn for Cyber Assistance? As the privacy landscape continues to shift with the development of new laws domestically and abroad, risk minimization must be prioritized by both insurance companies and their policyholders. Whether you’re concerned about CCPA compliance or preparing for the next wave of privacy regulations, we recommend deploying tokenization as a risk-reducing solution to protect sensitive data. When implemented properly, tokenization can significantly reduce the likelihood of a cyber event and, as a result, a claim. It’s an affordable investment that can better protect data and improve an insurer’s ability to provide reliable coverage.

Alex Pezold

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Alex Pezold

Alex Pezold is co-founder of TokenEx, whose mission is to provide organizations with the most secure, nonintrusive, flexible data-security solution on the market.

Robin Roberson

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Robin Roberson

Robin Roberson is the managing director of North America for Claim Central, a pioneer in claims fulfillment technology with an open two-sided ecosystem. As previous CEO and co-founder of WeGoLook, she grew the business to over 45,000 global independent contractors.

Americans Perplexed on Health Insurance

A survey finds that 62% of Americans favor a hybrid, public/private approach to health insurance--but many are confused.

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In the midst of a crowded Democratic primary field, one of the most complex and contentious issues at play is the candidates’ positions on the future of American healthcare, and a new study by insuranceQuotes shows that public sentiment is divided and slightly perplexed. According to this year’s annual State of Healthcare and Politics report, which was conducted via telephone in September, 62% of Americans “most strongly support” a U.S. healthcare system that includes both public and private insurance, while 25% favor a Medicare for All system that ends private insurance altogether, and just 9% favor a system that includes only private insurance. These figures come on the heels of the Oct. 15 Democratic primary debate, where Sens. Elizabeth Warren and Bernie Sanders continued to pitch and defend their plans for universal Medicare — and the eventual elimination of private health insurance — while other candidates made more nuanced appeals to the notion of combining public and private health insurance options for Americans. The insuranceQuotes study findings resemble those in other polls, where support for Medicare for All seems to be waning. For instance, a recent survey conducted by the Kaiser Family Foundation found that 51% of Americans back Warren's and Sanders’ Medicare for All proposals, which is down five percentage points since their last survey in April. The insuranceQuotes survey, which tracked responses from 1,009 people, generated these additional takeaways on Americans’ outlook on healthcare-related issues.
  • 58% believe that undocumented immigrants should have access to insurance, while 39% believe they should not.
  • 50% of Americans say that, since President Trump took office, the U.S. healthcare system has stayed about the same in quality, while 28% say worse and 18% say better.
  • 43% assert that Medicare is at risk of going bankrupt in the future, while 43% assert that it is not.
  • 34% are unaware that Obamacare is still in effect.
The future of U.S. healthcare will undoubtably feature prominently in the 2020 presidential election, so what do these figures tell us about the pulse of American sentiment regarding key health insurance matters? See also: Health Insurance for Self-Employed People   Public, private or healthcare combo? In the days following the October Democratic primary debate, a great deal of time and energy was spent parsing the potential viability — and messaging strength — of both Sanders’ and Warren’s plans to eliminate private health insurance in lieu of a Medicare for All nationwide insurance plan. And while the insuranceQuotes survey shows 25% of respondents support this approach, according to Dr. Tarek Hassanein, professor of medicine at University of California San Diego’s School of Medicine, the survey data supports the broader perspective Americans have about wanting a more incremental approach to health insurance reform. “We cannot go from private insurance to totally government-based insurance, knowing our attitudes toward government-run activities,” Hassanein says. “The idea that we will have both available makes a lot of sense, and it keeps public insurance competing with private.” What’s more, Hassanein believes that there are age demographic differences at play in assessing this particular point, and that voters understand the competitive value in allowing both private and public health insurance to coexist. “If you have young people voting, they will vote on public, not private. The older people who really need care will go with the private insurance — or a mixture,” Hassanein says. “They are really seeking the services. The combination lets them choose according to their needs and financial abilities. I think competition is the future — you need the public and the private at the same time so you can control the expense. The private will never increase their rates if the public is giving a good service with public rates.” But according to Harvard health economist and epidemiologist Eric Feigl-Ding, it’s difficult to extrapolate too much from polling data about this issue because Americans are generally underinformed when it comes to the complex nuances of something like Medicare. “If you talk to someone under the age of 60, I guarantee you they know almost nothing about Medicare. It’s incredibly complicated and comprehensive,” Feigl-Ding says. “And I don’t blame them. You have 12 [Democratic primary candidates] up on stage, and they don’t have time to go into detail. And they don’t want to lose people so they keep things as generic and vague as possible. But that doesn’t actually educate the public in a meaningful way.” As a result, Feigl-Ding says that polling Americans about their feelings toward Medicare for All is like asking, “Do you want to live on Mars?” “The average person doesn’t know anything about Mars and its air pressure, its average temperatures or the magnetic shielding that makes it impossible to grow crops on the surface,” Feigl-Ding says. “And Medicare is like Mars to anyone under the age of 60. People just don’t know about the complexities.” Nonetheless, Feigl-Ding says the insuranceQuotes study reveals two interesting things about public sentiment. First, that people want incremental change. Second, that they really don’t trust the private health insurance sector. “When you have 62% saying they favor a combination of private insurance and Medicare for All, that shows how people don’t want to move the needle too much. They want to move it a little but also stay with what’s familiar,” Feigl-Ding says. “The fact that only 9% said they’d favor a completely private system tells me that people have had really bad experiences with for-profit health insurance companies. They simply don’t trust them.” Health insurance for undocumented immigrants Feigl-Ding says the fact that 58% of Americans believe that undocumented immigrants should have access to health insurance reflects a growing understanding that a healthy American immigrant population is always going to be better for the country at large. “Putting aside the human rights issues here, this is all about productivity,” Feigl-Ding says. “People get sick regardless of their immigration status. And there are a lot of jobs being held by undocumented workers in this country. Do we really want them getting sick and going to the ER or not having the means to vaccinate themselves or their children? In this instance, I think an ounce of prevention is worth a pound of cure, and people should support health insurance for these immigrants. It’s better for the country on the whole.” For Hassanein, this issue hits close to home. Earlier this month he hosted a free health event in Chula Vista, a border town south of San Diego, allowing immigrants—documented or not—to receive free health scans and interact with insurance experts to understand the system. He says that “the system has to deal with their health issues, no matter what their status. “The bottom line is that they need to have [health insurance],” Hassanein says. “They need vaccinations so they don’t get infected and infect other people. Pregnant people need to get the care they need. There are consequences if you deny them. Everyone needs basic insurance.” Current state of Medicare and the Affordable Care Act The fact that 43% assert that Medicare is “at risk of going bankrupt” also comes down to faulty information, according to Feigl-Ding. “Healthcare costs are skyrocketing out of control, yes, but Medicare can’t go bankrupt,” Feigl-Ding says. “Medicare is a non-discretionary budget item, which means the U.S. government has to fund it, and it can issue as much debt as it needs to. Could the U.S. theoretically default on its debt? Sure, but it never has, and I don’t think there’s a risk of that happening any time soon.” See also: Social Determinants of Workforce Health When it comes to the state of healthcare more generally — and the Affordable Care Act more specifically — this is where experts are a little more concerned. Feigl-Ding says the fact that 34% are unaware that the Affordable Care Act (aka Obamacare) is still in effect is partly because "the Trump administration has done everything it can to kick as many legs out from under the Affordable Care Act as possible. For instance, they don’t advertise for open enrollment anymore. And they eliminated the tax penalty for not having health insurance, so while there’s still a law saying you need health insurance there’s no penalty for not having it. "As a result, you don’t have the risk pool of young, healthy people participating, which means premiums and deductibles are increasing while choices are decreasing. So I think this study reflects people’s frustration, but I’m not sure enough people actually know the source of why this is happening.” Similarly, Hassanein blames people’s confusion about the Affordable Care Act (ACA) on the divisive political rhetoric that’s been injected into this conversation over the past three years. “First, let’s not call it Obamacare. It’s called the Affordable Care Act. People think these two are different things, I’m sure of that,” Hassanein says. “The public thinks Obamacare was canceled. It’s just political rhetoric. There is very little truth being told. The ACA is still in place! But the government is saying we will not fund it anymore, so insurance companies are trying to save as much money as possible and thus are trying to pay for as little as possible. The rhetoric is helping the insurance companies. This affects the lives of all the people. And it’s a shame.” You can find the article originally published on insuranceQuotes.com.

Nick DiUlio

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Nick DiUlio

Nick DiUlio is an analyst and writer for insuranceQuotes.com, which publishes in-depth studies, data and analysis related to auto, home, health, life and business insurance.

When Innovation Efforts Go Wrong

It's worth stepping back from time to time and realizing that every project is a bet, and that not every bet pays off, no matter who you are. 

sixthings

While I generally emphasize the need to innovate, it's worth stepping back from time to time and realizing that every project is a bet, and that not every bet pays off, no matter who you are. 

The point about the inevitability of at least occasional failure has been driven home by the recent troubles for the Vision Fund at Softbank, run by the legendary tech investor Masayoshi Son. The fund was the biggest investor in WeWork, which had hoped for an IPO at a capitalization north of $47 billion, the last valuation at which money had been put into the company. WeWork positioned itself as a high-tech company building a new sort of community, a la Airbnb and Uber, rather than, ya know, an owner and renter of office space. But investors thought otherwise: They put a valuation more like $10 billion on the company, and WeWork pulled the IPO. The Vision Fund took a writedown of more than $9 billion on its roughly $10 billion investment in WeWork and invested a further $9 billion to make sure that WeWork could simply remain a going concern. 

Another huge investment by the Vision Fund, in Uber, has tumbled in value as the stock has crashed more than 40% this year. Other big investments by the fund are also raising eyebrows. Wag, an on-demand dog-walking service, hasn't separated from the competition despite a $300 million investment from the Vision Fund. Nor has Fair, a car lessor for which the fund led a $380 million round, or Plenty, a vertical-farming startup in which the fund invested $200 million. (The old headline writer in me imagines my erstwhile colleagues sharpening their proverbial pencils and preparing to go with lines like, "Fair Is Lousy," "Progress at Plenty Is Scarce" or "Problems Dog the Wag.")

The Vision Fund may face even deeper problems than some (really big) bad investments. Because Son was raising an audacious $100 billion for the fund and, seemingly, believed his own PR, he guaranteed investors (largely Saudi) a 7% annual return through bonds he issued them. So far, the fund has paid $1.6 billion to the investors on those bonds, but only $400 million has come from returns on the fund's investments. The rest has come from the capital in the fund—essentially, investor money is being used to pay the guaranteed return to the investors. 

The returns at the fund will have to improve greatly, or it will face a capital call totaling billions of dollars that could force Softbank to bail out its fund.  

The Vision Fund laughs off the idea of capital problems, pointing to unrealized gains at portfolio companies such as Slack, a popular messaging platform. And Son certainly has a track record, going back to his very early investments in Yahoo and, in particular, in Alibaba, the Chinese e-commerce giant where Softbank's stake is valued at some $150 billion. 

In any case, veterans in an old-line industry like insurance are far more likely to underinvest in innovation than overinvest, so I'm not trying to dampen the collective enthusiasm for the insurtech movement, in particular, or for innovation, in general. I've just seen a lot of silly bets over the years and want to make sure we all realize that even the greats, like Son, need to keep their eyes open and their wits about them. 

Cheers,

Paul Carroll
Editor-in-Chief 

Paul Carroll

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Paul Carroll

Paul Carroll is the editor-in-chief of Insurance Thought Leadership.

He is also co-author of A Brief History of a Perfect Future: Inventing the Future We Can Proudly Leave Our Kids by 2050 and Billion Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years and the author of a best-seller on IBM, published in 1993.

Carroll spent 17 years at the Wall Street Journal as an editor and reporter; he was nominated twice for the Pulitzer Prize. He later was a finalist for a National Magazine Award.

Top 10 Ways to Spook Customers

No right-minded business sets out to spook its customers. But that’s inevitable when companies lose sight of what’s important.

What were you afraid of this Halloween? That your customers might disappear like ghosts? That your competitors might pick them off like vultures? That it’s all going to drive you batty? In the spirit of All Hallows’ Eve, Watermark Consulting brings you… The Top 10 Ways to Spook Your Customers: 10.  Respond to customer requests like a zombie. Are your responses to customer inquiries heavily scripted like they came out of some low-budget horror movie? Might your customers feel like, no matter what they say, they get form letters and teleprompter-like messages in response? Remove active listening, critical thinking and personalized problem solving from your front-line and you miss a huge opportunity to impress your customer. If your front-line personnel perform like zombies, you can guarantee that customers will run from them. 9.  Communicate in gobbledygook (or, on Halloween, goblin-dygook). Having trouble reading a billing statement? Or your health insurer’s explanation of benefits? Or correspondence from your financial institution? You’re not alone. Businesspeople are steeped in the practices and language of their respective industries. As such, they often forget to translate their communications for easy public consumption. Instead, they convey their messages using jargon, terminology and acronyms that make their customers head for the hills. 8.  Cut expenses and operate with a skeleton staff. Particularly in times of economic distress, many companies’ first reaction is to slash investments in post-sale operations, because these areas are not viewed as revenue-driving and therefore become easy targets when profits need to be propped up. But while skeleton staffs might offer some immediate gratification in expense reduction, they also foster negative impressions that could snuff out your company’s true brand. Bare bones operations translate into long checkout lines, miserable 800-line hold times, overall inattentive service and visibly overworked and irritated employees – characteristics that are hardly the best ingredients for great customer experiences. 7.  Embark on monstrous transformation projects. Business transformation is overrated. It’s good to have high aspirations and stretch goals, but you’ve got to eat the elephant one bite at a time. Big, hairy, audacious projects have a tendency to be ill-defined and nearly impossible to manage. Plus, most companies suffer from “organizational A.D.D.” and have trouble staying focused on a three-month project, let alone a three-year one. Transformational projects make for good annual report copy, but they often fail to deliver valuable improvements to employees and customers. (Sometimes, all they deliver is disruption and dissatisfaction.) Yes, have a long-term vision – but never underestimate the power and efficiency of incremental advances toward that destination. 6.  Never do a post-mortem. In the whirlwind of daily business activities, people rarely take the time to dissect and diagnose customer annoyances. Customer complaints present a wonderful opportunity to not just recover gracefully (and perhaps win back a consumer’s loyalty), but to also dig up the root of a problem and fix it, once and for all. What’s even rarer than post-mortems on customer complaints? Post-mortems on customer compliments. There’s great value in pinpointing what employee or practice generated customer delight and then figuring out how to replicate that outcome more routinely. Post-mortems can yield silver bullet-like learnings that forever eradicate customer frustrations or permanently institutionalize loyalty-enhancing business practices. 5.  Create a workplace that sucks the lifeblood out of people. To create happy, satisfied and loyal customers, you need happy, satisfied and engaged employees. Create a work environment where employees don’t feel appreciated, respected or well-equipped to do their jobs – and you’re guaranteed to make their energy and passion go away faster than a vampire at dawn. And if you don’t think your customers will notice that difference in your staff, then you really are starting to hallucinate. 4.  Don’t tell your customers what’s lurking around the corner. Creating satisfied, loyal customers is a lot about managing expectations. People’s frustration (or delight) with a business is closely tied to the expectations they had of that interaction. Customers don’t like ambiguity or unpleasant surprises. If you don’t tell them what to expect – how long they’ll be on hold before speaking to a live person, how much paperwork they’ll need to fill out for a mortgage application, what information they’ll need to provide to get an insurance quote, etc. – then they’re more likely to be annoyed when the interaction isn’t as quick, simple or straightforward as they anticipated. 3.  Give your customers tricks and never treats. Do customers walk away from dealings with your business feeling good about the interaction? Do they get what they expected; do they feel like they got a good value? For lots of businesses, the answer is no. Customers will rarely tell you that, choosing instead to just vote with their feet (and wallet) and do business elsewhere. From products that don’t work exactly as expected, to special offers that exclude desirable merchandise, to fine print that can’t even be understood – these are examples of “tricks of the trade” that may draw consumers in momentarily but certainly won’t create a foundation on which to build loyal customer relationships. Contrast that with the indelible positive impressions left on customers who experience treats – pleasant surprises and personal touches that they never expected or anticipated. That’s what legendary, customer-centric brands are made of. 2.  Avoid ownership and accountability like the plague. A gruesome ailment has descended on the business community, eradicating all vestiges of ownership and accountability. Customer calls are not promptly (if ever) returned. Commitments are not kept. Obligations are forgotten. Here’s a little secret: Customers don’t care if your store is immaculate, if your employees have smiles, if you send them fancy newsletters or any of that fluff if your product doesn’t work as advertised and your people don’t follow through on their promises. Want to create a brand experience that outshines all others? Start by nailing these basics and making sure your customers feel cared for. And the No. 1 way to spook your customers… 1.  Put scary people on your front line. Who’s interacting with your customers on a daily basis? Is your front-line composed of superheroes who go the extra mile for your customers, or soulless automatons who frighten your customers with their discourtesy, uselessness and utter inability to deliver on promises? No matter how sophisticated your customer relationship management systems are, or how spectacular your retail store looks, or how advanced your customer segmentation strategy is – it means nothing if the people interacting with your customers are not professional, responsible and genuinely helpful. *** No right-minded business sets out to spook its customers. But that’s inevitably the outcome when companies lose sight of what’s important and valuable to the people they serve. Are you haunted by the prospect of your customers defecting to a competitor? Do something about it before your worst nightmares become a reality. Let these 10 tips serve as your guide, and, before you know it, you’ll be casting a spell on your customers that’ll have them coming back for more. This article first appeared here.

Jon Picoult

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Jon Picoult

Jon Picoult is the founder of Watermark Consulting, a customer experience advisory firm specializing in the financial services industry. Picoult has worked with thousands of executives, helping some of the world's foremost brands capitalize on the power of loyalty -- both in the marketplace and in the workplace.

10 Steps to Successful Insurance Program

Spinning up an insurance program is a lot like baking a cake. This post introduces the 10 steps to creating a successful program.

This is the first in a series of posts in which CJ Lotter, a 15-year industry veteran, shares lessons learned in the form of guidance to MGAs on the steps required to build a successful program. 

Creating a successful insurance program requires the execution of 10 essential steps that take advantage of market conditions, skills, partnerships and technologies. Spinning up an insurance program is a lot like baking a cake. A good cake requires the right ingredients, the right amount of time to bake and meticulous crafting to ensure it looks and tastes great. Creating an insurance program is similar. It takes a combination of ripe market conditions, the right amount of time to grow and the skills to execute. 

In this post, we introduce the 10 steps to creating a successful program. 

1. Size the Market Prior to starting any program, it’s important to size the entire market. How many companies make up the market? How much premium is floating around your target market segment? How many agencies serve this segment? Spare no expense to gather the most current and accurate data you can find. And tap underwriting experts to find adjacent markets you may be able to enter quickly. 

2. Analyze the Competitive Environment Scan the competitive landscape to determine how easily you can enter the market. How is the market segment being served today? What kind of programs are already in the space? What other MGAs serve this market? To continue making a viable case for your program, you need to ensure there’s enough space for your solution. Ideally, you want to compete against an old school company that can’t rapidly adjust. 

See also: Insurance Innovation’s Growth Challenge   

3. Profile the Industry’s Characteristics Establishing the industry’s characteristics is much like Step One but at a much more granular level. Analyze the perceived threats and challenges. Examine as many dimensions as you can. How will the economy affect this market? Is climate change a key a factor? Is technology a potential catalyst for disruption? You’re looking for clues that suggest an industry with unique needs. You don’t want to create an insurance program for a commodity that is easy to insure. This would only lead to competition on price rather than service. 

4. Spot and Attack 'Perceived Distress' Good, profitable programs are generally made up of difficult-to-insure business challenges. Ideally, you are looking for a distressed industry to serve, specifically a distressed class code. Perceived distress is the key here. Perceived distress essentially boils down to a gap in the insurance offerings available to your market that can be exploited by technology, underwriting advantage or better customer service. 

5. Assemble Relevant Expertise Identifying a strategic direction for your program establishes your road map. You hope you can bolster that through agency expertise. Your analysis of industry characteristics will give you the background you need to staff your program through internal or external hires. Assigning or hiring the right expertise can make or break a program. Ideally, you want underwriters with direct experience in the industry you are targeting. 

6. Select the Right Technology Of the many dimensions a company can compete on, technology may offer the biggest opportunity to differentiate in the Darwinian economy. Partnering with companies that do what you want to do and do it well is crucial. Competing on better technology can reduce your time to market so you can capitalize on perceived distress sooner than your competition – especially if the competition is a big, slow-moving, legacy insurance company. 

7. Establish the Distribution Network You’ve chosen your market, sized the competition, analyzed the industry and determined how to leverage expertise and tech. So, how do you sell this new thing? Start with the competition. How are they selling? Do they use agents? Do they have a dedicated team? Look for gaps in your competitors’ ability to deliver. Do they take three days to provide a quote? Use your superior technology and processes to deliver in one. 

8. Build the Product At this point, you have an idea of what the program offering will look like. But you still have a few critical questions to consider. Foremost is whether the product will be admitted or non-admitted. As a rule, you want to do as much admitted business as possible. If even one competitor provides an admitted option, you have no choice but to offer an admitted product. 

9. Set the Pricing Understanding the price elasticity in your market will help determine what it will take for your potential customers to leave their current provider. What can you offer or give them that is of more value? Can you underwrite more efficiently to lower the price? If you can maintain the customer experience while offering a price reduction from incumbent providers, you are in a sweet spot for program launch. 

See also: Is Buying Insurance Like Ordering Food?   

10. Choose a Carrier As an MGA, choosing the right carrier partner can make or break a program. Recent industry developments have made programs a strategic priority for carriers, and MGAs that underwrite and distribute profitably are in demand. If you can’t find a carrier partner, consider alternative capital sources such as pension funds and hedge funds, coupled with a fronting arrangement. This is a model that is growing in popularity as players along the value chain attempt to engage more directly with the policyholder. 

This has been a brief overview of the 10-step process to bake a new insurance program. We will revisit this topic in future posts, providing a deeper look at the steps. Creating profitable programs is a vital skill in the new insurance world, and those that do it well will never have trouble finding work. You may not be able to bake a cake, but, with the profits your successful program delivers, you can just go out and buy one. 

Excerpted with permission from Instec. A complete collection of Instec’s insurance industry insights can be found here.

CJ Lotter

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CJ Lotter

CJ Lotter is the director of engagement management at Instec. He spent nine years as chief research and business development officer at the U.S. programs division of Willis Towers Watson.

Health Benefits of Smart Appliances

An average family throws out $2,275 of food each year; smart appliances can reduce that waste while boosting healthy eating.

If our eyes give us the power to see misery and want, if our greatest power is the ability to change what we see—to improve the lives of the poor, hearing their sighs and lessening their sorrows—then insurers can do likewise. More to the point, insurers can help those of many means save one: the will to waste not. The will to be neither wasteful nor wanton in the purchase of food. The will to be neither bold nor brazen in feeding the ego while starving the soul. The will to be neither overly proud nor possessive about fields of gold, whose minerals are more valuable than any metal, whose minerals sustain livelihoods, whose minerals save lives. Insurers must see this situation for themselves, so they may understand the urgency of this issue. Insurers must see to it that people learn to care about this issue, so people may take better care of themselves. Put another way, insurers can help policyholders be morally solvent by being fiscally sound; reminding people to stock their respective food banks before filling their bank accounts with a surplus of stocks and bonds, because the average family throws out about $2,275 in food annually. That fact is unconscionable. That fact should shock the conscience of the insurance industry to act, to provide better health insurance coverage for families—and to subsidize coverage for those who do not have it. The good news is that technology allows us to see how we shop for food, so we may shop more intelligently, so we may have real-time intelligence to save money, so we may use our time more wisely. According to Vladislav Svetashkov, founder and CEO of Fridge Eye: “Smart appliances use intelligence to help people make more intelligent decisions about how to shop—and save money—when buying food. In turn, people change their lives for the better without having to change their routines. Insurers have reason to support or subsidize the use of these devices, because healthier policyholders are less expensive to insure. The savings are substantial, benefiting individuals, families, doctors, hospitals and insurers, among others.” Insurers should seize the chance to popularize smart appliances. See also: 10 Insurtechs for Dramatic Cost Savings   In so doing, insurers can lead the nation and the world in addressing the oldest challenges with the newest tools. These tools are portable, reliable and affordable. These tools are instruments of instruction, too, offering people an eye toward health and nutrition; giving people the insight to buy what they need; freeing people to shop more efficiently and economically. These tools are available for insurers to promote, not for reasons of profit alone, but for the opportunity to speak like prophets: to speak with one voice about a matter that concerns all people, hunger and nutrition. Technology allows insurers to amplify that voice, to inform the public about what every person should know and see for himself—that we must not waste food or money.

Q2 Progress at Root, Lemonade, Metromile

Current business models are not yet showing any clear competitive advantages for the three full-stack insurtechs.

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We have previously evaluated and discussed the financial performance and operating results of the insurtech trio Lemonade, Root and Metromile. Based on the analysis of the last available data, we think that:
  1. There is a pricing war
  2. The trio is missing an edge and story with respect to gaining a sustainable competitive advantage
At first glance, it appears that all three firms are focusing heavily on containing and improving their loss ratios. Metromile and Lemonade continue to have a relatively stable loss ratio, while Root has drastically improved compared with the prior quarter. At 91%, Root delivered a better result compared with the 105% in Q1-19 but still has some distance to go before getting closer to Lemonade or Metromile in terms of quality performance. Note: The expenses ratios are not significant because part of the expenses are paid by the parent companies and not reported on the Yellow Books. There is a pricing war We believe the insurtech trio is facing a pricing war. We find three data points in support of this view:
  • Viewed through the lens of growth rate, after a robust Q1-19 for all three players, Q2-19 presents a different story. We find the most interesting perspective by looking at the performance over the last year and half. Clearly, the premium evolution of Metromile is the less exciting story, as I previously wrote. The pay per mile doesn’t seem particularly effective in attracting customers. The “pay per mile” model introduces an element of uncertainty for segments of customers who want to save money and know what insurance coverage will cost them. The only comfortable customers are those who almost never use a car. (We will cover the customer experience and expectations for usage-based insurance in future articles.)
  • Lemonade has shown consistent growth in the last two quarters and appears to be on target to meet the $100 million annual revenue target. This revenue target is a far cry from the “massive disruption effect” that was expected during its debut. The revenue curve is not yet showing the vaunted hockey stick.
  • Root is the only of these three players with exponential growth in revenue. However, something happened in the second quarter, and growth slowed significantly as the loss ratio improved. As mentioned in our last article, insurtech D2C seems to be a “price game.”
Let’s go back to look at the top-line numbers. Root and Lemonade registered a net increase in direct premium written compared with Q1-19. Metromile, on the other hand, registered a marginally lower DPW than in Q1-19. Having looked at the top line, let’s switch our attention to the loss ratios. For an insurance carrier, the loss ratio is really the litmus test that assesses the strength and quality of the top-line numbers. Loss ratio is a fundamental insurance number, and the fact that all three players have improved this crucial metric is a sign of increased maturity for the “not so” fast-growing trio. All three improved compared with the prior quarter. This bodes well for the trio. Of the three, Root continues to have the highest loss ratio at 91%, suggesting that between new sales and renewal it is still under-pricing risks. See also: An Insurance Policy With Some ‘Magic’   The Q2-19 loss ratios are significantly better than what the three firms exhibited in Q2 of 2018, when Lemonade had a loss ratio of 120%, Metromile was at 95% and Root at 112%. The loss ratios are still far higher than the respective market segments. Missing an edge and story with respect to gaining a sustainable competitive advantage In our last article talking about insurtech direct-to-consumer (DTC) as a “price game,” we highlighted how the companies have not been able to make customers fall in love with anything other than “saving money.” We would like to share some thoughts on the business models of these three full-stack carriers, investigating where and how their approaches might both enable and impede them in terms of gaining a sustainable competitive advantage. What might be the proverbial sling that the “insurtech Davids” can use against the entrenched Goliaths of State Farm, Geico, Progressive, Allstate, et al? Let’s explore. If we consider the economics of an insurer, there are three areas where you can obtain a competitive advantage that can allow financing this kind of “pricing war”:
  • Investment income
  • The loss ratio
  • The administrative expenses
Investment income Investment income even in the current market conditions characterized by low interest rates represents the main source of profit for U.S. P&C insurers. A recent report by Credit Suisse has pointed out how, “over the last five years, approximately 90% of the industry’s profits have been generated from the investment income (float) component of the income statement.” In 2018, U.S. P&C insurers generated $53 billion net investment income, which accounts for 8.6% on the premium written. Well, all three insurtech carriers were far from this investment performance in the same period. Probably, hidden in the parent companies income statements, there is some additional investment income obtained investing the cash received by their investors. However - as of today - the return obtained investing the floating is clearly a competitive disadvantage for the insurtech players. Loss ratio As explained in a previous article, the loss ratio is the key measure of the technical profitability of an insurance business . The U.S. P&C market showed $366 billion net losses incurred, which means almost 61% loss ratio (net of loss adjustment expenses). Can any insurtech element allow Metromile, Root or Lemonade to have a competitive advantage on the loss ratio? Metromile and Root are telematics-based auto insurers. Matteo is a fan of the usage of telematics data on the auto business and an evangelist of these approaches through his IoT Insurance Observatory, an international think tank that has aggregated almost 60 Insurers, reinsurers and tech players between North America and Europe. Based on the Observatory research, four value creation levers have been the most relevant in telematics success stories:
  • The telematics approach has demonstrated around the world a consistent ability to self-select risks. Simply said, bad drivers don’t want to be monitored;
  • Some players such as UnipolSai and Groupama have achieved material results by improving claims management through telematics data;
  • Some other players have been able to change drivers’ behaviors, e.g., the South African Discovery and the American Allstate;
  • Many players have been able to charge fees to customers for telematics-based services, providing a revenue stream.
Metromile and Root are mainly using telematics for pricing purposes. Root is currently using a try-before-you-buy approach that allows potential customers to generate a driving score in a couple of weeks and obtain a tailored quotation. If consumers buy the policy proposed by Root, they will not be monitored anymore. This usage of a driving score at the underwriting stage could represent a way to price better the risk (if the price is settled at the right level), but the absence of further telematics data doesn’t allow Root to extract any value from the value creation levers above mentioned. By contrast, the Metromile pay-per-mile approach is constantly monitoring the driver for the duration of the policy, which is the necessary foundation for those telematics value creation levers. As of today, the only area where Metromile seems to exploit the value of telematics data is claims management. The biggest limit for Metromile seems to be the nature of the pay-per-mile business, which has found only a limited market fit (niche nature of the mileage-based approach). So, we think that both the players are still far from telematics best practices, currently represented by a few incumbents. However, the evolution of their telematics approaches can generate some competitive advantages against many incumbents that are less advanced. About the possible capability of Lemonade to generate a better loss ratio than other renter insurers, the game is around its famous focus on behavioral economics and the attempt to influence behaviors with the iconic giveback. Everyone (among insurance executives) remembers Lemonade for the fixed percentage of premium it charges — the iconic slice of pizza — while all the rest is used to ensure the company will always pay claims; whatever is left goes to charities. As of today, nothing in the loss ratio shows benefits from this approach. Would you avoid submitting a claim or resisting the urge to file an inflated claim (an unfortunate reality in our industry) because “whatever is left goes to charities.” We find it hard to believe that the fundamental economic incentives will move from individual gain to community gain. Ancient Latins were saying homo homini lupus. (Man is wolf to man.) Moreover, a recent comment by Lemonade CEO Dan Schrieber suggests that “AI may have played a role in higher loss ratios.” The increase of straight-through processing combined with a vast reduction or elimination of legacy checks and balances can increase the risk of fraud. Sri and his team at Camino Ventures, an AI/ML fintech, believe that this is a natural phenomenon with respect to AI/ML adoption. Ilich Martinez, co-founder and CEO at Camino Ventures, says, “Companies need to take a holistic view of AI/ML integration into business processes and business rules. Piecemeal or spotty inclusion of advanced AI/ML capabilities can be akin to installing a Tesla induction motor on a gas guzzler. It simply does not work.” Sri expects to see a spurt in fraudulent claims in certain domains where autonomous claims management is introduced or expanded. As bad actors try to game the system, it is imperative that insurance companies expand the fraud detection models and be willing to enter a phase of continuous and strenuous test-and-learns. Eventually, usage of AI/ML can be crucial to achieving better administrative cost positions, but the path to that destination will not likely be a straight line. See also: The Dazzling Journey for Insurance IoT   Administrative costs The U.S. P&C markets showed costs that represent 37% of the written premiums on 2018 (of which 10% was loss adjustment expenses). Unfortunately, we are not able to see any more the real costs of Root and Lemonade; part of the costs are on the income statement of their parent companies, and we can only enjoy the results of their goal-seek. Efficiency – if it will ever be achieved by these insurtech startups -- can be a way to compete and to sustain a pricing war, but the scale matters. We ask whether the AI-driven approach of a player such as Lemonade will become a key competitive advantage against the current established incumbents. Can an early, extensive and immersive adoption of AI/ML provide insurtechs a competitive edge? Will incumbent leaders be fast followers or late adopters in a domain as critical as AI/ML? We are already seeing the incumbents make early and deliberate moves to gain an AI/ML capability advantage. From domains like telematics to computer-vision-enabled image processing for claims, we see the Goliaths not waiting to be left behind. They are quickly moving from a “test and learn” approach to wide-scale adoption of numerous AI/ML capabilities and are finding early success. This adoption is accelerated by nimble, agile fintech and insurtech enablers like Camino Ventures that help industry leaders quickly move from opportunity to outcomes. Given these market conditions, we believe that advanced AI/ML capabilities would give insurtech an edge only against incumbents that are less focused, capable or invested in integrating insurtech solutions into their value chain. ***** We believe the current business models are not yet showing any clear competitive advantages that can make the pricing war sustainable for the three full-stack insurtech carriers. However, they have a lot of cash combined with highly talented teams that can experiment and find new ways to build moats and forts to gain competitive advantages.

Fixing the EMT Crisis in Rural America

What if ER physicians knew your full medical history before you even arrived at the emergency room?

What if you call 911 during an emergency medical situation and no trained emergency medical technician (EMT) and ambulance responds to the call? This scenario is a very real medical crisis facing rural America today.

What if you are unconscious or extremely disoriented during a medical emergency when EMTs arrive? Virtually every emergency room physician has to handle such a patient during every shift in a community hospital.

NBC national news recently ran a lead story about the EMT shortage that threatens rural communities across the country. Roughly 70% of EMTs in rural America are unpaid volunteers with full-time jobs and families to take care of. Their numbers are rapidly dwindling, causing a terrifying crisis where 57 million people face the risk of losing vital emergency medical services.

In many small towns, there is no local doctor, and the EMT/ambulance community serves as a front-line safety net. This crisis is exacerbated by the fact that EMT services are not funded in 39 states. As much as 60% of local EMT ambulance services are typically paid for through community fundraising, such as spaghetti dinners and fish fries, because states don't considered EMTs “an essential service” like police or fire. Try telling that to the person who just had a stroke or heart attack.

In the case of a stroke, which is the second leading cause of death worldwide, a person receiving treatment within three hours of the onset of symptoms has the best chance of not only survival but living a normal daily life. The longer a person must wait for medical care during an acute medical event, the less likely that the person will have a positive outcome.

What if you call 911 during a medical emergency such as cardiac arrest and nobody shows up? People who could have been saved will die.

It is estimated that one third of all emergency medical services in rural America are in danger of closing due to the lack of funding.

The system designed to save American lives needs a rescue now. It is time for the federal, state and local governments to respond to what medical experts describe as a dire situation.

See also: Musings on the Future of Driverless Vehicles  

My second scenario, in which a patient arrives unconscious but with no visible signs of trauma, is so common that emergency rooms physicians have a shorthand term for it: AMS, or “altered mental states.”

With AMS, the emergency room physician is essentially flying blind as to the root of the medical emergency. The patient could be facing any number of underlying medical problems. Has the patient suffered a stroke, heart attack, seizure, serious infection, allergic reaction, diabetic coma or overdose of prescription or illegal drugs?

All these potential medical issues are just the tip of the iceberg faced by the ER medical staff. The ER physician must do a rapid assessment of the ABCs: patient’s airways, breathing and circulation, including pulse and blood pressure. The first few minutes may be critical.

The rapid assessment is known as DON’T. Does the patient need Dextrose for diabetic shock? Does the patient need Oxygen to the brain? Does the patient need Narcan due to an opiate overdose? Does the patient need Thiamine due to alcoholism or encephalopathy?

DON'T covers immediately life-threatening conditions that can cause a patient to be in AMS, but that an ER physician cannot always find. Typically, ER physician’s end up ordering a lot more lab tests, EKGs, CT scans, etc. just to confirm a suspected diagnosis. The first few minutes are focused on the array of things that may cause AMS that can also kill you quickly.

The average time to complete comprehensive medical testing in the ER is six hours. But what if ER physicians and staff knew your medical history and who your primary care physician was, had access to your online medical records and knew what prescription drugs and dosage you were taking and what allergic reactions you may be dealing with before you even arrive at the emergency room? Many lives could be saved every day.

What if simultaneously your family, spouse, friends, worksite and babysitter were notified of the situation and what emergency room hospital you were being taking to by the EMTs? Without question, the patient would have a much greater chance of not only a better and less expensive patient experience, but the notifications could save lives and prevent lifelong disabilities.

The average time it takes an ER to contact a patient’s emergency contacts is four to six hours. That statistic includes patients who are fully conscious.

Tim Lally, president and CEO of My Notification Services (MNS), has been working on the development of such a program for what he describes as a “10-year pilot program.” MNS provides enrolled members from a sponsoring organization with a kit that includes a bright yellow emergency sticker, which is placed on the back of a driver's license or other form of identification such as a student ID or insurance card; a sticker for an auto, truck or RV is also provided, along with an option for an array of MNS medical alert bracelets that can be worn 24/7. The enrolled member receives a unique ID number through an online process that allows each member to provide potentially critical medical history and contact information.

Each member then has 24/7 access to update any medical or contact information and the ability to print out any additional personal MNS ID cards. EMTs are trained to look for emergency medical cards or other forms of medical alert information for patients who are unconscious or dealing with AMS. The EMT sees the MNS sticker and calls the 800 number, which is then answered by 1 of 22 call centers around the country and Puerto Rico. The call center operators fax or email all the pertinent medical history, primary physician contact information and insurance coverage to the hospital emergency room in this pre-planned process within five minutes of the initial call, prior to arrival at the hospital ER.

See also: Using High-Resolution Data for Flood Risk  

This program can save lives and provide peace of mind and can be sponsored by an endless list of organizations, associations and corporate and union health benefit plans, along with a vast array of insurance programs. I have the sticker in my wallet and my car windshield. You should, too.

Daniel Miller

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Daniel Miller

Dan Miller is president of Daniel R. Miller, MPH Consulting. He specializes in healthcare-cost containment, absence-management best practices (STD, LTD, FMLA and workers' comp), integrated disability management and workers’ compensation managed care.

New Guidelines for Preventing Suicides

Understanding suicide through a public health framework offers many new solutions.

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The American Association of Suicidology (AAS), American Foundation for Suicide Prevention (AFSP) and United Suicide Survivors International (United Survivors), announced their collaboration and release of the first National Guidelines for Workplace Suicide Prevention on World Mental Health Day (Oct. 10, 2019). The guidelines — built by listening to the expertise of diverse groups like HR, employment law, employee assistance professionals, labor and safety leaders and many people who had experienced a suicide crisis while they were employed — aim to jump start the ability for employers and workplaces to become involved in suicide prevention in the workplace. For employers and professional associations ready to take the pledge and become vocal, visible and visionary, please visit WorkplaceSuicidePrevention.com. Justification Over two-thirds of the American population participates in the workforce; we often spend more waking time working each week than we do with our families. When a workplace is working well, it is often a place of belonging and purpose — qualities of our well-being that can sustain us when life gets unmanageable. Many workplaces also provide access to needed mental health resources through employee assistance programs and peer support. If we are ever going to get in front of the tragedy of suicide, we need to widen our lens from seeing suicide only within a mental health framework to a broader public health one. In other words, when suicide and suicidal intensity are seen only as the consequence of a mental health condition, the only change agents are mental health professionals, and the call to action becomes a “personal issue” that people take care of with their providers — but not all problems will be solved by getting a bunch of employees to counselors. When we understand suicide through a public health framework, many additional solutions are available. Through this broader lens, workplaces now understand the importance of a culture that contributes to emotional resilience rather than to psychological toxicity, and they can take steps to create a caring community of well-being. Guidelines Development Process After the CDC’s 2018 report that ranked suicide rates by industry, some employers started to feel more of a sense of urgency and requested tools to protect their workers from this form of crisis and tragedy. The Workplace Committee of the American Association of Suicidology resolved to do something more important: to create a set of National Guidelines for Workplace Suicide Prevention. Over the next two years, the group enrolled over 200 partners into the effort and subsequently forged a core partnership to conduct an exploratory analysis (the full 100-page report of findings can be found at www.WorkplaceSuicidePrevention.com). The ultimate purpose of this needs and strengths assessment was to guide the development an interactive, accessible and effective on-line tool designed to help employers and others achieve a prevention mindset and implement best practices to reduce suicide intensity and suicide death. Some of these best practices are about supporting despairing or grieving employees, and others are about fixing psychosocial hazards at work that can drive people to suicidal despair. Goals and Target Audience The collaborative partners’ goal is to enroll workplaces and professional associations to join in the global suicide prevention effort by building and sustaining comprehensive strategies embedded within their health and safety priorities. Across the United States, workplaces are taking a closer look at mental health promotion and suicide prevention, shifting their role and perspective on suicide from "not our business," to a mindset that says "we can do better." We hope this ground-breaking effort helps provide the inspiration and the road map to move workplaces and the organizations that support them from inactive bystanders to bold leaders. See also: Blueprint for Suicide Prevention   Many different employer roles can benefit from these guidelines, including leadership, HR, community collaborators who will partner in the process, investors who can contribute resources for the development and sustainability of these guidelines, evaluators who can assess the effectiveness of workplace suicide prevention, peers (co-workers, family and friends) who want to help and many others. The newly developed guidelines, designed to be cross-cutting through private and public sectors, large and small employers, and all industries will:
  • Give employers and professional associations an opportunity to pledge to engage in the effort of suicide prevention. Sign the pledge here: WorkplaceSuicidePrevention.com.
  • Demonstrate an implementation structure for workplace best practices in a comprehensive, public health approach.
  • Provide data and resources to advance the cause of workplace suicide prevention.
  • Bring together diverse stakeholders in a collaborative public-private model.
  • Make recommendations for easily deployed tools, training and resources for short-term action inside of long-term change.
Nine Recommended Practices The exploratory analysis also uncovered a number of suggestions for nine areas of practice. They are:
  • Leadership: Cultivate a Caring Culture Focused on Community Well-Being
  • Assess and Address Job Strain and Toxic Work Contributors
  • Communication: Increase Awareness of Understanding Suicide and Reduce Fear of Suicidal People
  • Self-Care Orientation: Encourage Self-Screening and Stress/Crisis Inoculation Planning
  • Training: Build a Stratified Suicide Prevention Response Program
  • Peer Support and Well-Being Ambassadors: Set Informal and Formal Initiatives
  • Mental Health and Crisis Resources: Evaluate and Promote
  • Mitigating Risk: Reduce Access to Lethal Means and Address Legal Issues
  • Crisis Response: Prepare for Accommodation, Re-integration and Postvention
See also: Social Media and Suicide Prevention Conclusion This exploratory analysis is a starting point to develop guidelines and best practices to help employers and professional associations aspire to a "zero suicide mindset” and implement tactics to alleviate suffering and enhance a passion for living in the workplace. The process identified high-level motivations for (predominantly around worker safety and well-being) and barriers (lack of leadership buy- in and resources) that prevent the establishment of national guidelines for workplace suicide prevention. To learn more and take the pledge, please visit WorkplaceSuicidePrevention.com and follow along on Facebook, Twitter, Instagram and LinkedIn.

Sally Spencer-Thomas

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Sally Spencer-Thomas

Sally Spencer-Thomas is a clinical psychologist, inspirational international speaker and impact entrepreneur. Dr. Spencer-Thomas was moved to work in suicide prevention after her younger brother, a Denver entrepreneur, died of suicide after a battle with bipolar condition.

Jodi Jacobson Frey

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Jodi Jacobson Frey

Dr. Jodi Jacobson Frey is an associate professor at the University of Maryland, School of Social Work. Dr. Jacobson Frey chairs the employee assistance program (EAP) sub-specialization and the financial social work initiative.

Need for Context in Assessing Flood Risk

Comparing multiple data points and sources in one place is important with complex events like hurricanes, which involve wind, surge and flooding.

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Florida is the highest-risk state for storm surge, with an estimated 2.8 million single family homes at risk and a replacement value of $581 billion, according to the 2019 Private Flood Insurance Report. Yet, in Florida, there are only 1.7 million NFIP policies reported in force, suggesting a huge opportunity for private insurers. Even so, total direct written premium in Florida actually declined from $84 million in 2017 to $79 million in 2018, largely within the residential market. So what's holding insurers back from engaging in the obvious latent opportunities in markets like Florida? Answer: The inability to fully contextualize individual risks, as well as their subsequent impact on an existing portfolio. Why is the ability to contextualize risk so critical to evaluating flood risk? To ensure accurate and confident risk selection, underwriting and pricing decisions, insurers must be able to fully understand flood risk in terms of their own portfolio. However, this is only possible when using high-resolution, granular flood data, which provides details of flood type, severity and extent, such as JBA flood maps. Without the ability to assess the full granularity of the risk, other flood map providers, such as FEMA, fail to account for all the nuances required in setting premiums and providing coverage. See also: Using High-Resolution Data for Flood Risk   Using granular flood data alongside a geospatial analytics solution, like SpatialKey, further enables insurers to assess flood risk in line with their own decision-making. JBA flood assessments within SpatialKey provide a risk score and overall flood rating. The weighted score methodology provides a normalized measure by which insurers can consistently benchmark the risk and use it to inform their rating. Upon review in SpatialKey, and after consulting with JBA where necessary, an insurer can decide whether to write the risk and ensure that it is applying an appropriate deductible. Use case: Sherwood Park, Palm Shores, Florida Using a residential property in Palm Shores, FL, as an example, we can see the importance of contextualizing the flood risk in portfolio terms. Figure 1: JBA location report within SpatialKey for Palm Shores property across fluvial, pluvial, and coastal flood. The overall JBA flood rating for the property is medium, based on the likely depth of each flood type at different return periods or probabilities of occurrence. It’s weighted to reflect the fact that different sources of flooding will lead to different amounts of damage; coastal flooding is often more damaging due to the salinity of the water (and therefore has a higher score), whereas pluvial flooding is often cleaner and quick to recede. The location report in Figure 1 shows that the property under the orange pin has only a 1-in-500-year fluvial flood hazard. This indicates that riverine flooding is likely to be infrequent in the area. There is also minimal coastal (or storm surge) flood hazard. However, there is a pluvial hazard at the 1-in-20-year return period, indicating that flooding from heavy rainfall may be frequent here, to depths of up to nine inches. The flood rating is medium rather than high because pluvial flooding is typically less damaging than the other flood types. Understanding flood risk in the context of a wider portfolio To make an informed decision on a policy, the impact of an additional flood risk to an in-force portfolio must also be considered. Decisions cannot be made in isolation. And, while information on the individual hazard is extremely beneficial, accumulations at that location should also drive the decision-making process. Figure 2: SpatialKey helps inform underwriting decision-making with a view of nearby risks (3 black dots) within this half-mile radius. In Figure 2, three other risks (black dots) can be seen within a half-mile radius of the chosen location (grey pin). As insurers intelligently grow their flood business, an underwriting rule may dictate that, for example, residential flood should not exceed $1 million in a half-mile radius. Based on that underwriting rule, this particular property could prompt the agent to refer this policy to the home office for additional consideration and underwriting. See also: How Tech Improves Flood Modeling   It’s clear that granularity is an asset, especially when selecting and pricing flood risk in the U.S. market. Any data source can be misleading or incomplete when used in isolation. The ability to compare multiple data points and multiple data sources in one place is increasingly important with complex events like hurricanes, for example, which involve multiple perils (i.e. wind, surge, flood). By leveraging flood data within an advanced analytics platform, you can contextualize risk on a whole new level—helping you make more confident decisions, expand your foothold in the flood market and build a strong market reputation as a champion for superior flood coverage.