When American consumers go to pay their bills, they prefer going online to mailing a check because going online is simple. But for the businesses, it’s not quite as easy. Here's some advice. One reason online payments are so complicated is that eight players are involved. There’s the cardholder, the credit card company, the merchant, its bank, the payment gateway, yet another bank, the credit card network and, finally, the Federal Reserve. When you sit down with a payment provider, here are seven big questions you should ask: What are some reasons to accept payments online?  You never want to turn down a customer payment. Customers like to pay online, using either a credit card or a checking account number, because it’s quicker than hunting around for the checkbook and a stamp, and they can be certain when the payment has arrived, avoiding late fees or cancellations. In fact, the timing issue was the main reason people have been willing to pay fees for online payments. But business owners like them, too. They speed up your payables, allowing you to be more productive and avoid any difficult situations where a customer is having trouble paying promptly. What are some drawbacks to accepting online payments?  It’s tricky. Many vendors add processing fees, set-up fees, chargeback fees and other hidden fees that can eat directly into your already tight profit margins. Integrating payment into your website can also be costly, especially if you need custom coding. There are also security concerns that require an understanding of proper handling of customer data and banking information. And, in the insurance industry, there are additional state regulations to meet. See also: Important Perspective for Insurance Agents   Why is compliance important?  Running your operations with disregard for, or ignorance of, the law is never a good business model. Card rules violations may lead to card companies taking away your ability to accept payments or in some cases levying fines of up to $25,000 per violation. What can I do to ensure my payment system is secure?  Look for PCI Level I validation, the highest level of security, from any vendors you choose. Ask how long they have been in business. Read the contract to find out who is responsible for a breach: you or the vendor. Does every state have the same payment processing regulations?  States have varying regulations with payment processing that prohibit the agent from charging additional fees. For the insurance industry, states also have rules on how the premium fund must be handled, while credit card companies also have specific regulations. With multiple layers involved in being compliant, it is important that you choose a payment provider that ensures you are operating within the rules, at all times. Does my state allow people in the insurance business, such as agents, to charge additional fees?  While other businesses have the ability absorb processing costs as a standard part of their pricing models, typically this is not the case in the insurance industry, but it varies from state to state. Does my state have a “convenience fee” law? A convenience fee is an additional charge to your consumer on top of the payment due. It is referred to as a “convenience” fee because your business has provided the consumer with another avenue to make a payment outside of standard ways of paying. The rules on convenience fees are state laws, not guidelines, and violating these could come with significant consequences. To make things more complicated, the status of convenience fee laws may have current legal action pending in your state. Make sure your payment provider satisfies the requirements of these laws. See also: Find Your Voice as an Insurance Agent   By understanding the laws and regulations for your state, you can confidently run your agency knowing what you can and cannot do when it comes to payment processing. Not all payment processors are created equal, and a poor decision could cost your business in custom development work, unnecessary features, hidden fees and insecure data, and even land you in big legal trouble.

Progressing from a legacy application architecture constraining organizational strategy to a cutting-edge, digital-first application architecture driving organizational strategy is a goal for many insurers. To best achieve the transition, several steps are advisable. This article proposes a framework categorizing these steps into three distinct phases: fixing the core, organizing the data and extending the architecture. Fixing the core The first step requires addressing debt, both technical and operational, in an insurance application architecture, taking it to a baseline upon which the insurer can build. A number of elements should be considered. First, each application in the as-is architecture should be assessed to identify candidate applications for de-duplication, extension and replacement. De-duplication is justified where two or more applications perform overlapping functions. A common example is having claims applications that each cover a stage of the journey, even though each application could handle the entire claim. Another example is having multiple integration solutions, each covering a specific part of the architecture, such as policy, billing and claims. Extension is advisable where there is benefit in maintaining a legacy application, but where significant improvements are required to specific elements. An example is a core policy-handling mainframe application carrying benefits with regard to cost and stability of operations, but imposing significant constraints on usability. The application could be extended by implementing a modern front end for users. A key point to consider is that extending legacy applications may introduce architectural complexity, increasing maintenance costs. Where the underlying technology or functionality of a legacy application is significantly misaligned with the application strategy of the insurer, or where technical debt is so high that refactoring is no longer an option, then application replacement should be considered. Consult the insurer's application road map; If none are based on technologies akin to those of the application in question, then the application is likely not in line with the strategic direction. Technical debt, on the other hand, can be seen by analyzing the run cost of an application year on year; if the costs increase without a matching increase in supported functionality, then technical debt is accumulating. See also: Digital Insurance, Anyone?   Second, operational processes should be analyzed to determine whether there are effort-heavy activities being performed as workarounds for technology limitations. An example is handlers manually keying claims data into a policy-handling application, then having to key the same data into a claims application because the integration between policy and claims does not work correctly. Another example is underwriters having to access multiple applications to find the data required to validate a policy renewal, because there is no single application where the data can be found. Where it becomes apparent that an operational process is merely acting as a band-aid for a technology limitation, then the relevant applications should be modified, extended or replaced. Organizing the data The second step is to organize the data held within the application architecture so that its value can be maximized:

• The insurer should analyze whether it has a single view of its customers across all applications, or whether records exist separately in multiple applications. If the latter, then the risk is that updates made in one application only may cause misalignments between party records. One option is to implement a Master Data Management (MDM) solution holding the golden record of the customer, then having all other applications refer to the golden record.
• The insurer should look at where its books of business are residing, and whether data migrations are required to move policies, claims, billing and other records from the source applications they reside on, to the insurer's strategic applications. If so, the insurer should determine the approach by which the data migrations will be performed, with the key options being automated Extract Transform Load (ETL) solutions, robotics applications and manual re-keying. If the source and target applications are multiple and varied, or if complex data transformations are required, then the migration process may require significant effort and planning.
• The insurer should consider how it can enrich its data through integration with third-party services, such as those providing credit score reports, or those providing specialized data such as real-time flood risk for specific postcodes. The insurer should keep in mind that every integration with a third-party application carries a financial, complexity and performance cost; the value of the data obtained should be greater than the cost of obtaining it.

Extending the architecture Having built a solid platform, and having organized the data on it, the insurer can focus on extending the application architecture to achieve competitive differentiation. This can be done in innumerable ways; below are some ideas:

• The insurer could consider whether technology may support different operating models. For example, an insurer transacting through brokers alone may consider building a web front end allowing customers to perform quote and buy transactions. Similarly, an insurer lacking a customer-facing claims portal may consider building one.
• The insurer could consider whether its existing operating model could be extended through new channels. For example, a chatbot solution for claims First Notification of Loss (FNOL) could be built and integrated with a claims handling application. Similarly, an insurer could choose to integrate with a niche aggregator website to sell business that it previously only sold through brokers.
• The insurer could consider advanced analytics solutions. For example, the insurer may evaluate building an insights engine extracting data from key applications, normalizing and cleaning it to remove inconsistencies and duplication and presenting the data in management dashboards.
• The insurer could look at how to extend its application architecture to fit into its ambitions with regard to new technologies. For example, could anything be done to extend the architecture to accept data from IoT devices? Is artificial intelligence a real possibility on the current platform, or would structural changes be required? Robotics for operations is well established, but could robotics be applied to other use cases with the existing application landscape?

See also: Digital Insurance 2.0: Benefits   Analysis and Overview Although the three proposed stages are an approximation, and the individual steps within them far from comprehensive, the hypothesis is that an order in which activities should be undertaken on the road to insurer application architecture digitization does exist. Supporting this hypothesis are the numerous cases in which insurers have embarked on large-scale digitization programs leveraging cutting-edge, architecture-extending, solutions, only to find years down the line that, because their cores had not been fixed and their data not correctly organized, their digitization efforts were hampered, if not blocked. Key Points:

• The journey to insurer application architecture digitization is a multi-step process, and the steps can be categorized into three phases: fixing the core, organizing the data and extending the architecture.
• Fixing the core requires removing technical and operational debt associated with an insurance application architecture, taking the platform to a stable baseline.
• To organize the data, an insurer should evaluate whether it has a single view of its customers, whether data migrations are required and whether to integrate with data enrichment solutions.
• To extend its architecture, an insurer could consider enabling new operating models through technology adoption, implementing new technology-enabled channels, building advanced analytics capabilities and embedding into the architecture capabilities related to new technologies such as artificial intelligence and IoT.
• The hypothesis is that, although not rigid, an order of activities does exist, and insurers should consider fixing their cores and organizing their data before embarking on large-scale architecture extension.

The awarding of the Nobel Peace Prize last week to Ethiopia's prime minister brought back the memory of a time I interviewed Isaias Afwerki, one of the key factors in this year's prize. It was 1991, and Afwerki had just emerged from the bush in Eritrea. He led a guerrilla movement that, after 30 years, won the country's independence from Ethiopia. In the process, his guerrillas helped depose a brutal Communist government in Ethiopia. The tall, high-cheekboned freedom fighter cut quite the figure, driving by himself to his first press conference in a Jeep that looked like it had just rolled out of the mountains. He charmed the four or five of us reporters who happened to be in the area for the impromptu gathering—and, I'm sorry to report, has since become one of the world's most notorious dictators. Ethiopia's prime minister, Abiy Ahmed, won the Peace Prize largely because he may have figured out how to restore peace with his country's northern neighbor. Afwerki did not share in the prize; he is a big part of the problem, not the solution.

Eritrea comes to mind because of another problem, too: the power blackouts being staged by PG&E to prevent wildfires in California, where many of us on the ITL team live.

When I stayed in Asmara, Eritrea's capital, the electricity in my hotel cut out often. I had hot water an hour a day. Now, here I am in California, one of the world's most dynamic economies, the home of Silicon Valley, and the main utility in Northern California just turned off power to 2 million people because it can't figure out how to keep power lines from arcing and starting fires (or is just too lazy to effectively clear away the brush near the lines that provides fuel for fires).

Eritrea at least had an excuse for its outages in 1991. It is one of the world's poorest countries and had just survived a war that killed 100,000 to 300,000 people. The conflict was so wrenching that if you asked, say, a 50-year-old his age, he'd say he was 20, because the 30 years of civil war didn't count as living. 

But what's California's excuse?

It turns out that everybody has an excuse, or at least someone to blame. The feds blame the state for poor forest management. The state blames the utility, PG&E, for poor management and general indifference to the fire problem. PG&E blames the state, saying it should assume much of the liability for its forests and citizens. Republicans blame Democrats for being tree-huggers and trying to prevent the kinds of fires that would thin out forests and avoid the monster conflagrations that ravaged the state last year. Democrats blame climate change. And so on.

No matter how the blame eventually gets assigned, the one sure thing is that the citizen/consumer will eventually foot the bill. A tax is coming. It may be in traditional form, with the state collecting money to pay for forest management, to absorb liability from PG&E, etc. Or, the tax may be collected through higher electricity rates. But a tax is coming, and it will be heavy.

Maybe it's time for insurance to ride to the rescue.

We won't be able to do anything much this time around, but maybe can do more to prevent a next time. 

At the moment, insurers are fleeing from the wildfire issue. That's natural. The amount of uncertainty is enormous, and so are the potential damages. But, in a day and age when every company claims to be customer-centric, perhaps we can, in fact, look at the problem from the standpoint of the customer and find a series of ways—both big and small—to help.

Think about the blackout issue from the standpoint of, say, the venues in Napa where weddings were scheduled over the weekend. It's hard to have a reception without electricity. That band doesn't sound so great without an amp, and not many people will dance if they have to gather around the DJ's iPhone—for as long as the battery lasts. Maybe those venues lined up generators and ran up other expenses to make sure they could pull off the event. But maybe the venue had to cancel and refund the money to the devastated couple. 

Now imagine the wineries that lost temperature control in the vats recently filled with this year's grape harvest. Or the restaurants that had food go bad as it sat in warming refrigerators. Or all the facilities that lost tourism business because of uncertainty. Or the parents who had to skip work because their kids' schools were closed, then check into a hotel because the power was off at home. Or...or...or.... 

The only folks I know of who were happy were Cal kids who saw that lights were off on the Berkeley campus, meaning that the threatened blackout had hit and that they could stop studying for mid-terms. 

Some of those affected will be covered by some form of business interruption insurance, but policies weren't written with today's California in mind. What would qualify as an event triggering a policy? The fact that the utility deliberately turned off your power? Hmmm. Many policies require an interruption of a certain length, such as 48 hours, but the blackouts were often shorter—long enough to cause uncertainty and mess up a business but maybe not long enough to trigger a claim. 

The wildfire/blackout problem isn't going away, even if the state government and PG&E—the two big villains, in my book—get their acts together. So, people and businesses will need and welcome help adjusting to the risk of outages for years to come.

Some of that help will come in the form of insurance: policies adapted to a world of occasional blackouts. But some can be provided through means that will feel unusual for insurers.

Perhaps information services can alert people sooner about impending blackouts—PG&E's communications were lousy this time around. Maybe risk management services can help line up backup so that the fish doesn't rot in the refrigerator and the wine harvest doesn't spoil. Businesses could find ways to help parents whose kids' schools have closed—Bring Your Child to Work During a Blackout, anyone? The answer for many could even just be a battery.

Whatever the answer, the idea is to think through the blackout issue from the standpoint of all those millions of individuals who have been affected and who will be affected by future blackouts. Then we can see what, in the name of providing peace of mind, the insurance industry can do to help, even if that means stretching beyond traditional boundaries. 

There won't be a Nobel Peace Prize in it for you, but there will likely be plenty of profit streams, and there will certainly be lots of grateful clients.

Cheers,

Paul Carroll
Editor-in-Chief

A growing number of policymakers, advocates and experts predict that extreme weather may lead to higher costs for home and flood insurance. Some analysts are even predicting that the effects of climate change may make home insurance and flood insurance unaffordable for many Americans. Home insurance companies charge higher premiums to cover property associated with higher risks. Added insurance costs could lead to lower home prices. "As insurance rates rise commensurate with increasing risk related to weather hazards, and property taxes rise to cover the costs of climate mitigation and adaptation, real estate values for properties in vulnerable areas will fall," predicts Donna Childs, author of the book "Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses.” "The insurance premiums and property taxes for these properties become higher,” Childs said. Daren Blomquist, senior vice president at ATTOM Data Solutions, observes that natural disaster risks have affected home prices. Blomquist notes that home price appreciation in cities with the highest flood risk was half that for the U.S. housing market overall during the past decade. It’s been one-third that for cities with the highest hurricane surge risk. "The broader market has also outperformed appreciation in cities with the highest wildfire risk during the last decade, although the gap is much narrower,” Blomquist said. Climate change top insurer issue Many insurance experts consider climate change as one of the most pressing issues. That concern may lead to higher insurance costs for homeowners. The riskier the property, the more an insurer charges. The result — more climate change-related claims means:

• Higher insurance costs
• Insurers becoming stricter about who even gets coverage

"It could limit coverage availability in vulnerable areas that have not taken appropriate mitigation/adaptation measures," warns Childs, founder and CEO of Prisere, a software developer providing technical assistance and training for climate and disaster resilience. Todd Teta, chief product officer at ATTOM Data Solutions, was recently affected personally when an insurer rejected him for a homeowners policy in California. The reason: wildfire risk. Teta said the community suffered a small fire three years earlier, but no structures were destroyed. However, the insurer was still concerned about potential risk. "Insurance companies are outright rejecting entire ZIP codes because of wildfire risk, even in areas they previously wrote policies in,” Teta laments. See also: Role of Big Data in Fighting Climate Risk   Wildfires more common One likely byproduct of climate change is more forest fires. The Center for Climate and Energy Solutions said research shows that climate change, particularly earlier snow melt, leads to hot, dry conditions and more fires in the summer. The U.S. Department of Forest Service forecast that an average annual one-degree Celsius increase would increase the median burned area by as much as 600% in some forests. There were 58,083 wildfires in the U.S. in 2018 and 71,499 wildfires in 2017, according to the National Interagency Fire Center. Roughly 8.8 million acres burned in 2018, compared with 10 million in 2017. The Insurance Information Institute (III) estimates that insured losses from the 2018 Butte County “Camp Fire” will ultimately reach between $8.5 billion and $10.5 billion. Home insurance typically covers wildfire damage. However, if your area is prone to forest fires that spread to homes, your insurer may exclude covering that damage. Look through the exclusion section in your home insurance policy, so you know if wildfire damage is excluded from your coverage. Flooding claims About 90% of natural disasters in the U.S. are tied to flooding, according to the Federal Emergency Management Agency (FEMA). There is a lack of consensus on whether climate change is leading to more flooding. The Natural Resources Defense Council (NRDC) recently said that it’s tricky to connect the effects to flooding. However, the Intergovernmental Panel on Climate Change noted in its special report on extremes that it's becoming clearer that climate change "has detectably influenced several of the water-related variables that contribute to floods, such as rainfall and snow melt." Flooding complicates things when it comes to insurance. Home insurance doesn’t usually cover flood damage. Instead, you need a separate insurance policy for flooding that comes from outside your home. FEMA’s National Flood Insurance Program (NFIP) administers flood insurance. Federal flood insurance is available "where the local government has adopted adequate floodplain management regulations under the NFIP -- and many communities participate in the program." Avoiding coastal areas and flood zones won’t necessarily protect you from flooding. III indicates that 20% of flood claims come from areas with low to moderate flood risk. "Recovering from just one inch of water inside your building can cost about $27,000," Janet Ruiz of the III explains. Insurers are bracing themselves for more flooding claims in the coming years. More flooding claims will result in higher rates and can even affect home purchase prices. Those who own homes in higher-risk areas are seeing their values increase at a lower rate than the national average. Here's how flooding claims have increased in recent years. Despite the increase in claims and average flood claim amounts, flood insurance policies are purchased less frequently today than they were a decade ago. In 2009, insurance companies sold 5.7 million flood insurance policies. In 2017, the number dipped to slightly more than 5 million. Tornadoes, hurricanes and climate change The Center for Climate and Energy Solutions says some areas, such as the North Atlantic, have seen more hurricanes over the past three decades. Scientists predict Category 4 and 5 hurricanes will increase in the coming years, though the overall number of hurricanes may decrease. “Although scientists are uncertain whether climate change will lead to an increase in the number of hurricanes, warmer ocean temperatures and higher sea levels are expected to intensify their impacts,” according to the Center for Climate and Energy Solutions. States prone to hurricanes feature hurricane deductibles. If your home gets damaged in a hurricane, you’ll have to pay a hurricane deductible after filing a claim. These deductibles are different from regular home insurance deductibles. Depending on an area’s risk, hurricane deductibles are based on a percentage of a home’s insured value. It’s usually between 2% and 5%, but Florida allows insurers to charge up to 10%. Whether your home policy covers you for hurricane damage depends on the fine print. You may need to get a windstorm rider to cover hurricane damage, such as lost siding, shingles or shattered windows. Combating climate change and rate hikes Childs said taking preventive actions can lower risks. "For example, when I purchased my home, the land on the western side slopes downward at a 30-degree angle, and the basement windows are flush with the ground, with the result that water would come downhill, creating the risk of water intrusion into the basement,” Childs said. See also: Parametric Solution for Wildfire Risk   Childs trenched this area and inserted a serrated pipe that connects to the sewer system. She also made a significant energy retrofit that reduced her utility bills by 40% and protects against the risk of extreme heat. Childs said home buyers should factor in climate risks when purchasing a home, including figuring out whether to buy flood insurance, even if you’re not in a high-risk area. When buying a home:

• Shop around for insurance and know what you’re buying. If you need additional coverage, ask the insurer about riders and other coverage.
• Take precautions to protect your home. If you’re building a new home, talk to the builder about the materials being used. If you live along the coast, check on storm shutters. Explore fire-suppression systems. All of these additions could lead to lower rates and even home insurance discounts.

You can’t completely safeguard against climate change-related weather damage. But it’s wise to take precautions and know how you’re covered to minimize later problems. You can find the original article published here on Insure.com.

Personalization has taken a variety of industries by storm. Retailers base marketing campaigns on individual customer preferences; financial institutions are revamping their user experiences to cater to specific demographics; and healthcare organizations are offering services based on patient needs and family history. Without the ever-helpful “you may also like” features and individually customized dashboards, companies like Amazon and Netflix would be nearly unrecognizable, and certainly less appealing. There’s one critical aspect of business -- something that affects every industry -- that’s woefully behind on personalization, however: cyber protection. With media outlets constantly reporting on the latest large-scale data breach like this summer’s Quest Diagnostic attack or the First American Financial leak, it’s easy to get swept up in all the fear-mongering and reactively incorporate as many cybersecurity tools and services as possible, no matter their relevance. For small and medium-sized businesses (SMBs), in particular, it’s especially tempting to blindly emulate larger organizations’ defense strategies, as most SMBs are understandably short on knowledge and resources when it comes to cybersecurity and cyber insurance. Devising Cyber Protection Strategies Isn’t One-Size-Fits-All One could argue that any efforts toward cyber protection should be applauded. Data breaches have become an inevitable part of doing business today, so wouldn’t even a misguided attempt at making an organization more secure be beneficial? Unfortunately, no. Devising cyber protection strategies isn’t a generic, one-size-fits-all process. Rather, it’s akin to prescribing medicine. Just as physicians base their treatment plan on an individual’s specific symptoms, companies need to institute an approach to cybersecurity that incorporates their organization’s unique characteristics and needs. See also: Where to Turn for Cyber Assistance?   Consider the cyber protection needs of, say, a bakery. While a bakery may need to consider implementing defense mechanisms for its business email account(s), CRM solution and digital document storage, its cybersecurity requirements are fairly straightforward. A basic cyber insurance policy could prepare a bakery for any worst-case scenarios in which customer payment records are exposed, for instance, or sales temporarily dip due to a damaged brand reputation post-breach. Now look at an urgent care clinic, for which cyber protection can literally be a matter of life and death. Any internet-connected healthcare device, such as a heart monitor or IV, needs to be thoroughly secured to prevent patients from undergoing serious harm. Email, phone and text communications between physicians, nurses, specialists and patients should be encrypted. With healthcare organizations required to retain patients’ medical records for anywhere between two and 30 years (depending on the state), secure digital storage and back-up services must also be considered. In addition to all the tactical cybersecurity considerations that an urgent care clinic needs to take into account, it also has various regulations and audits it must comply with, such as HIPAA and HITECH. Steep fines and severe reputational damage await any healthcare organization that fails to comply. Evolving and Future Business Needs Must Also be Considered Not only do organizations need to personalize their cyber protection strategies by prioritizing their businesses' unique needs, they also need to consider how those needs may change. A new law office may not have much client data to secure in its first six months of business, for example, but, once it’s amassed a few years of cases, the firm’s data security and storage requirements will drastically change. The type of data that a growing law office collects could change, as well. After a decade in business, if the firm decides to branch out to handle personal injury cases, for instance, it will have to adjust its data security strategy to accommodate patient health information. See also: Cyber: No Protection Against Complacency   Prioritize Personalization to Secure Critical Assets Rather than getting distracted by what Target or Facebook is doing to protect their digital assets, take the time to assess your business. Conduct a comprehensive evaluation of your current cyber protection efforts to determine what’s working and what’s not. Look for any major vulnerabilities such as insecure websites or lax Bring Your Own Device or Shadow IT practices, and map out how your cybersecurity requirements stand to change over the next one to five years. Any organization -- no matter its size, industry or available resources -- can establish a custom cybersecurity and cyber insurance plan and leverage it to more effectively plan for and prevent devastating cyber attacks.

Why do people buy insurance, when they could spend their money on dozens of other excellent products and services? A classical answer would be, "to be safe against risks." Then, why do some people spend thousands of dollars on insurance products while others don’t spend a penny? Doesn’t everyone want to be safe against risks?

To find real answers, it is necessary to take a closer look at the motivations of people. Deciding whether to purchase insurance is not easy. Consumers usually don't get any financial benefit in return for the premium they pay. However, in addition to financial benefits, insurance products offer moral benefits such as peace of mind and a feeling of safety.

So the benefit of insurance from the customer’s view can be formulated as (risk expectation x coverage) + (moral benefit). Thus, the motivation of customers to buy insurance depends on two main indicators: risk expectation and risk sensitivity. Risk expectation determines the expected financial value of insurance. Risk sensitivity shows the concerns of customers, so it directly affects moral benefit.

Who Wants Pizza?

Being cautious is the main instinct behind insurance purchases. Of two consumers who face the same risks, the more cautious one is more likely to buy insurance. Exercising regularly to be safe against chronic illness resembles buying home insurance to be safe against fire, theft and earthquake. Preferring fast food instead of healthy food is like buying a great TV instead of auto insurance. Purchasing an insurance product is like dieting; costs arise immediately, but benefits are achieved later.

See also: Behavioral Economics Show Details Matter  

Generally, competition among insurance companies is thought to depend on prices, brand awareness and customer service. In fact, competition is much broader. Purchasing decisions cross product categories; people buy home insurance or... shoes. Insurance companies should develop strategies to convince more people to buy insurance, not those shoes.

Fans of Insurance

The key point is: People make risk assessments based on their personal experiences, not actuarial tables. Therefore, insurance companies need to focus on the feelings and emotions of consumers and not just working on statistics. People exaggerate the likelihood of risk occurrence under certain circumstances, which increases their sensitivity of risk. People will be more likely to buy insurance even if all other factors are the same. Some opportunities:

• High Loss Frequency: Consumer tend to demand insurance where loss frequency is high even if severity is not so great. A house fire is a disaster, but a car accident is more likely. This explains why automobile insurance is one of the biggest lines.
• Customers With Claim: Risk sensitivity increases cumulatively. If you faced a negative situation recently, you look at the world more pessimistically. It would be a good strategy to offer home insurance to customers who made auto insurance claims the previous month.
• Highlighted Risks: If a risk is highlighted in public, people exaggerate the possibility even if risk occurrence is not high. Theft news broadcast on TV for a week would increase people’s tendency to buy home insurance policy for a time.
• After Tragic Events: Right after tragic events like earthquake, flood and terror attacks, people think they will happen again soon. It makes no sense to buy insurance after an earthquake because, statistically, a new earthquake is not to be expected soon, but sales rise.
• Uncertainty and Fear: Important experiences like having a baby or suffering a heart attack make an impact on people’s view of life. There will be a significant increase in risk sensitivity. Therefore, it would be a good strategy to offer life insurance bundled with family health insurance to a customer who had a baby recently.

Homework for Insurers On the behavioral approach side, there are some basic steps to follow to grow the whole insurance market;

• Being Micro: Insurance products are not only complex but also are too focused on macro risks. In fact, the daily risks of our lives are more micro and ordinary. Why are major risks like fire or flood pointed out in home insurance products rather than damage to electronic devices or accidental risks?
• Being Visible: Insurance companies have a natural advantage because they pay thousand of claims every single day to people and touch their lives. Creating positive stories from negative events can bring life to insurance products.
• Being Informative: Insurers should undertake the mission of "warning against risks," in addition to providing financial coverage. The insurance company that interacts with customers regularly and improves their risk awareness would build brand trust.
• Being Protective: Getting share from competitors is becoming tougher every day. Insurance companies are not only competing with new-generation insurtechs but also with technology, entertainment and consumer goods companies. The most rational and cost-effective strategy could be retaining the existing customer portfolio.

See also: Machine Learning – Art or Science?  

New-generation economic theories based on behavioral science provide important insights about customers’ decision mechanisms. Many organizations, from e-commerce companies to government institutions, are profiting from the insights. For insurance companies, a good place to state would be understanding that customers are not robots who just want the most coverage at the cheapest price.

Thanks to Daniel Kahneman and Richard Thaler for inspiring this article with their behavioral economic theories.

In the past decade, a number of organizations have adopted cloud technology. As reported by Forbes in 2018, 83% of enterprise workloads will be in the cloud by 2020. The benefits of the cloud become especially valuable for SMEs (small-to-medium enterprises) without the infrastructure to support their own systems, let alone the staff to dedicate 24/7 to uptimes. Cloud computing allows insurance SMEs, including brokers and smaller carriers, to offer enterprise services without the overhead. Cloud opens the door to digital systems without constraints. Cutting-edge tech used to be reserved for large organizations with the funds and capacity to deploy, manage and maintain their systems. It’s is now open to organizations of all sizes through the cloud. Here are five ways cloud-based systems allow insurance SMEs to become more competitive: 1. You avoid costly up-front investments One of the most limiting factors for the growth of a small business is the up-front capital to invest in competitive technology. Traditionally, engaging on the same level as enterprise competitors meant investing many thousands of dollars in infrastructure to support the technology of the day. Cloud computing companies generally bill month-to-month for the use of their infrastructure, which is more manageable for growing organizations. You rent rather than own. If you ever become dissatisfied with your cloud provider, you can switch. See also: Cloud Takes a Starring Role   2. You get the benefits of a built-in support team Once you’re working on a cloud system, you get the benefits of an extended team. Not only does this reduce strain on yours, but it will also reduce your long-term IT costs. Depending on your contract, you won't have to worry about the time, costs or staff required to make system upgrades or fix any hiccups in the system. Almost all cloud providers guarantee upward of 99.95% service level uptimes, which means their systems are always available and your clients will always get the services they expect. This will reduce strain, allowing you to better serve your clients and do what you do best. 3. You can lean on reliable security Those same teams taking care of your system updates also work around-the-clock to ensure their cloud platform is secure. In addition to resources, cloud solutions bring to the table operational best practices and security standards, along with regular monitoring, patches and system fixes to ensure robust security you can depend on without added investments. 4. The system can scale to your business needs As your organization grows and your software needs evolve, you’ll have an external partner whose system can grow with you. You won’t have to reinvest in new infrastructure to accommodate the needs for more storage or capacity. Cloud applications offer virtually infinite growth to meet the demands of your business and clients - at any size. 5. The cloud will drive innovation and offer better experience for your customers Many benefits save money and time: two of the most critical factors in business. . The cloud makes it easy to streamline processes and can replace common tasks through automation and workflows. This frees employee time, allowing a better focus on innovation and customer service while you grow your business. See also: Security for Core Systems in the Cloud   Adopting cloud computing is a key way for smaller businesses to level the playing field with large enterprises and remain competitive in the insurance industry. Cloud can provide access to cutting-edge technologies and innovation without the burden of traditional IT costs.

Logistics lies at the heart of the modern global economy, with figures from Transparency Market Research revealing expected growth from $8.1 trillion in 2015 to $15.5 trillion by 2023. Logistics are fundamental to the success of the complex network of supply chains that all 21st-century organizations rely on. Yet insurance has for too long been costly to administer for such firms and more of a hindrance than a help for the merchants it’s meant to protect. Fortunately, things are changing. A new breed of insurtechs are offering logistics firms the ability to provide standardized policy benefits and claims handling experiences to shippers of all sizes at the time of booking, along with instant claims and pay-outs – driving confidence and profits. End-to-end insurance platforms offered by insurtechs are helping logistics players turn insurance from something traditionally viewed as a cost center into a legitimate revenue stream and providing a customer experience for their merchants that increases loyalty. Out of the Dark Ages Insurance has existed as a critical service underpinning the logistics industry for hundreds of years, ever since the first policy was created in 1350. While much time has passed, and things have surely evolved, modern insurance solutions have become complex and derivative of something that is no longer fit for contemporary use, while the customer experience has proven to be a frustrating process that often leaves merchants at risk. Real-time software is now reshaping the entire matrix of insurance policies and distribution networks available to logistics companies and their merchants. The rise of insurtech companies and the API economy has meant that the logistics industry is finally able to dust off rigid insurance processes and deliver the sophisticated coverage that merchants have always needed. With the modern business demands on trade and logistics, this kind of customer-centric innovation is the only way logistics companies can be viable heading into the future. See also: Insurance 2025: Smart Contracts   The Customer Is King In all industries, the customer is becoming the focal point for product development, technology and the overall service offering. Businesses of all types are racing to catch up to the digital behemoths that have filled their coffers by prioritizing the customer experience and adding value at every touchpoint. With the global insurance market for logistics set to be worth over $61 billion by 2025, the scene is set for global logistics companies to drive additional revenue by solving common customer concerns and providing a little peace of mind. Offering standardized end-to-end insurance solutions not only protects merchants against the inherent risks of shipping goods but also helps their businesses thrive. It generates confidence and a level of customer satisfaction that keeps merchants loyal. Protecting shipments has benefits above and beyond just the shipment itself and creates a safety net for the merchant's overall profit margins and provides continuing cost savings. When the cost of failed deliveries has skyrocketed to $2 billion, the logistics firms that can offer customer-centric insurance solutions with real utility are best placed to significantly increase their ancillary revenue streams and customer loyalty. Standardizing Solutions Across the Board Insurance is a key prerequisite for anyone shipping goods globally. Goods may travel over hundreds or thousands of miles to reach their destination. Breakages, delays and other challenges are only natural. Companies need coverage to drive confidence and prosperity and to manage risk. However, existing solutions are riddled with challenges. Traditional insurance policy benefits and claims handling processes tend to differ greatly across different carriers, leaving the merchant at an increased risk of being under-protected. Add to that a 30-day delay before a claim can be initiated, and the merchant is now under-protected and out of pocket should anything happen to shipments. Situations like this are not only creating unnecessary friction for the merchant but also stunting growth and expansion opportunities for logistics companies. The good news is that insurance has changed. Thanks to technology, new end-to-end insurance solutions are now available and are providing a standardized approach to policy benefits and claims handling for any carrier globally. This means merchants can now get the appropriate level of coverage, regardless of the carrier, and have the ability to make claims and receive payments instantly via an automated process for loss notification and declaration of value. A standardized approach gives the merchant confidence and peace of mind while providing a service that adds value to the day-to-day business and reduces financial risk. While solutions like this put the customer at the center of the insurance experience all the way from booking to claims, they can also fast-track growth for logistics companies looking to expand. The Insurtech Solution Insurtech’s impact on the logistics industry is a rare example of modern technology bringing processes previously deemed unworkable back from extinction. Whereas before, insurance was an impractical distraction to the main business function, it’s now a legitimate ancillary revenue stream that's providing real value to merchants. The data and technology-led approach used by insurtechs has evolved insurance beyond rigid blanket policies to give businesses insurance products that are fit-for-purpose, at the right time and at the right cost. They have also put customer needs first, removing operational costs, accelerating processes and breaking the insurance broker stranglehold on the industry. Insurtech and tech companies have created customer-centric protection with real utility and kick-started the revival of insurance in the logistics industry, making it viable and valuable again. It’s also becoming easier for merchants to claim without incurring losses and lengthy delays. Furthermore, whereas 20 years ago the complexities of the insurance process became detrimental to the core business, insurtech has facilitated the opportunity for insurance offerings to fill the modern need for ancillary income.

Ayan Sarkar, Global Head of Insurance for Salesforce, talks with Paul Winston, COO of ITL, about the launch of a series of insurance-focused solutions and services both within Salesforce’s Financial Services Cloud and in its Einstein Data and Analytics solution. The solutions, he says, are designed to help insurers and agents enhance the way they digitally engage with customers and deliver more personalized experiences, all from the ease of a cloud based solution.

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Kenneth Knoll, CEO and Co-Founder of Goose & Gander, speaks with Wayne Allen, ITL CEO, about its mission to help companies see where they can adopt and leverage new technologies, and shares the launch of a new company, Array, that offers a low-code, no-code tool that allows enterprise to take manual internal processes and make them more digital and interactive without having to first bring their IT department to the table.

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