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Text Your Way to Customer Loyalty

Here are three tips that insurers can use to build meaningful relationships with customers via text messaging.|

The average person sends 15 texts per day, and 90% report that they read incoming texts within three minutes. Text is the channel many people — especially younger consumers — use most often to communicate with friends and family. And text can be a great way for insurers to communicate with customers and build relationships. But, because the channel is so central to personal communication, it’s critically important for insurers to get customers’ permission and understand their communication preferences before reaching out via text. Managing consent has been a major focus for the past few years because it’s a privacy issue. Customers appreciate the chance to opt in and want to understand how you plan to use their number. Managing permission is critical, but it’s just the first step. The text platform has specific qualities and limitations that don’t apply to other channels like social media or email. Texting has enormous potential if you understand the context and expectations people have around the messages they receive. Here are three tips insurers can use to build meaningful relationships with customers via text: 1. Change up your messaging. If you look at recent text messages received from a friend, you’ll probably see questions, statements, tips, links, photos, etc., all in one thread and all in a single voice. A text communication strategy from an insurance brand should look like that, too: The content should vary. It shouldn’t be a series of cross-sell pitches (though pitches have their place). See also: 3 Ways to Build Digital Relationships   Customers don’t want to feel like a number when they’re dealing with any type of business, especially an insurer. You collect a lot of data on customers. Consider using it in a non-intrusive way to build relationships. If your customer has boat insurance, consider sending boat care tips. Above all, curate your text feed so that it’s interesting and valuable. 2. Limit the use of five-digit codes. If you receive texts from organizations, you probably don’t know who it is until you click because it arrives on your phone under a five-digit code instead of a name. Some businesses use multiple codes to send out different types of texts: one code for sales, another for customer service, a third for claims, a fourth for renewals, etc. Try to limit the use of five-digit codes to two or three at maximum, and, if you can, use only one five-digit code for all text communication. Your subscribers may add you to their contact list under your brand name; if you use multiple codes, you will dilute the impact of being in the contact list. Remember that customers expect to be able to reach you by responding to any of the codes you use to send texts. 3. Use centralized message control and analytics. This is a basic tip, but too many insurers who are savvy about marketing and sophisticated about communication on other platforms make the mistake of not analyzing incoming text messages to see what customers are saying, and some fail to respond appropriately when customers text back. Text analytics can be incredibly revelatory and serve as a valuable snapshot of customer sentiment. For example, if you send customers a notice about a new safe driver discount program and a customer responds with a question, you gain valuable insight about your message and an opportunity to respond quickly and consistently on the same channel — text. Insurance is about being there for customers when they need you the most. Text messaging is a great way to meet customers where they are, using the same channel they use to communicate with their friends and family. It’s important to get customers’ consent for text communication and understand their expectations. Once you have permission, the success of your text campaign is up to you. See also: How to Improve the Customer Journey   Insurers will continue to look for ways to strengthen their bond with customers and relate to them on an individual level. Texting can be an excellent channel for personalization. When you know what kinds of messages resonate on text and understand what customers expect in return, you’ll be texting your way to stronger customer relationships.

Tara Kelly

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Tara Kelly

Tara Kelly is founder, president and CEO of Splice Software. She has a passion for enabling clients to engage in a meaningful, data-driven dialog with their customers.

CES2020: Big Themes for P&C Insurance

While 8K TVs are intriguing, many other tech products and advancements at CES2020 have important implications for P&C insurance. |

The annual Consumer Electronics Show in Las Vegas (CES) is where the latest TVs, smartphones and a plethora of smart gadgets of every imaginable kind are introduced and on display. This year, the press is breathlessly reporting on the latest in tech that relates to every area of human endeavor, including areas like sports, transportation, beauty, sleep, baby care, learning, fitness and much more. There are top themes or top 10 CES innovations articles from every major press outlet – everyone has a perspective. The reason that I personally attend CES every year is to see the technology innovations and then think about them in the context of the insurance industry. While things like 8K TVs or digital appliances are of interest to all of us, there are many other tech products and advancements that have important implications for P&C insurance. Within that framework, let me present what I believe are the big themes of interest to insurance:
  1. Security and Privacy: This might just be the biggest overarching theme of the event. The advent of regulations like GDPR in Europe and the California Consumer Privacy Act (CCPA), coupled with the intense dialogue in society about these topics, has resulted in many companies coming forward with new or improved products. There were hundreds of new solutions, including those aimed at specific domains like smart homes or connected vehicles, payments and security for personal devices and personal digital data, and others focused on areas like the IoT infrastructure. Expect this area to continue to be a focus as both individuals and businesses grapple with cyber-risk and the issues of data ownership/sharing.
  2. The Expanding Mobility Ecosystem: The automotive ecosystem was already complex before the digital age, but now there are increasing numbers and types of companies offering new capabilities and services. As vehicles continue to become "computers on wheels,” the expectation is that occupants will be able to conduct, from their vehicles, every type of digital interaction that they can now do from their office or their living room couch.
  3. AI and Voice Everywhere: These technologies were prominent at CES2019, but the tech continues to advance and become embedded in more and more products. Voice is poised to become a dominant way that we interact with the smart, digital world around us. AI is becoming not only pervasive but, in many cases, invisible. The Consumer Technology Association describes it as the Consumerization of AI.
  4. Smart Tech for Commercial Vehicles: Just to reinforce what we at SMA have been saying for some time, it looks like connected, autonomous vehicles will have the most practical, real-world applications in commercial vehicles over the next few years. The options for autonomous public transportation vehicles continue to expand, and the use cases in controlled environments are many. Personal automobiles continue to add and enhance automated driver-assist systems (ADAS) features and advance up the autonomy levels. But the many challenges of autonomous personal vehicles on the open roads mean that, while the potential is tremendous, the reality is many years away.
See also: Road to Success for P&C Insurers   There are many other interesting products that insurers should follow, especially those in the health and wellness areas, drones and AR/VR. Each of these areas will influence customers, risks and operations over time, but the four themes identified in this blog are most likely to have the biggest near-term impact on the industry.

Mark Breading

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Mark Breading

Mark Breading is a partner at Strategy Meets Action, a Resource Pro company that helps insurers develop and validate their IT strategies and plans, better understand how their investments measure up in today's highly competitive environment and gain clarity on solution options and vendor selection.

Key Tech for Life, Annuity in 2020

The key is to view what may seem to be common buzzwords not only as trends, but also as technologies and concepts that will push the industry forward.|

Data governance, edge computing, artificial intelligence (AI), machine learning (ML) and blockchain have become much more than buzzwords in the life and annuity industry—they represent areas of innovation being implemented today and examined further for the future. I see four major trends in the life and annuity industry that will continue to be important for insurers as we enter 2020: Simplifying business and technology architecture We’ll see life and annuity organizations continue to modernize their technology platforms over the next 12 months. This is where life and annuities organizations will invest most heavily in 2020 from a technology standpoint. Addressing aging and limiting technology infrastructure will continue to be the highest priority for any large or mid-sized insurance company. Organizations that don’t already have a strategy in place to do so run the risk of disruption. The industry is still hurting because of the nature of the monolithic legacy platforms that are so difficult to change. Aging technology and the aging workforce pose a great risk to insurers, now more than ever before. If these organizations aren’t already focused on this issue, they’re going to be in for a rough road in the coming year. To mitigate the risk, they need to immediately develop a strategy and identify a partner to help them get to the finish line as soon as possible, or they won’t have the agility they need to compete in the future. Improving engagement models End-to-end engagement is becoming increasingly relevant today. Customers, the workforce and distribution partners are all demanding easier and more effective engagement with insurance organizations. To meet these demands, life and annuity insurers will have to work on all engagement models: customer engagement, distribution engagement and employee engagement. Insurers will improve how they work on an enterprise level, gaining efficiencies and boosting productivity. See also: Insurance Innovation’s Growth Challenge   Engagement is really about how both internal and external consumers see and interact with an insurance organization and use its capabilities. The industry now has to deal with meeting customer demands for a level of engagement and interactivity it never needed to provide before. Many companies focus on the design of that engagement, which is very important. However, if that design isn’t coupled with modern architecture that can enable it, insurers will fail because they are merely putting lipstick on a pig. Expanding the use of data In 2020, insurers will see greater value from the data generated by their enterprise. As an industry, we’re still having a hard time understanding and rationalizing our internal and external data. Identifying what our goals are and who truly owns the data is a struggle for many companies. For that reason, data governance becomes pivotal for insurers trying to leverage their data. In many cases, AI and machine learning are becoming more embedded and becoming part of the enterprise infrastructure and framework. In the next year, insurers will start to see more value from these efforts, whether for their advanced underwriting models, their implementation of advanced robotics or capabilities to create straight-through processing as well as self-service. We’ll also start to see some large and innovative insurance organizations develop use cases of blockchain implementation. In the past few years, many technology companies have been working on uses cases around agent on-boarding and claims, for instance. In 2020, we may see some of these use cases get implemented in the industry. Digitizing the enterprise As companies continue to work on new architectures, we’ll see them increasingly leverage “ecosystem” thinking. Many capabilities, such as plug-and-play innovations, will have to come into, and integrate with, the enterprise’s capabilities. That ecosystem thinking can only happen if insurers begin to enable a very modular architecture and an application programming interface (API) infrastructure. In this era of constant technological evolution and abundant innovation, it’s becoming difficult for legacy-minded insurance companies to have enough agility to implement and leverage these new capabilities. They’ll need to embrace innovations as they come and to create a unique, personalized context around the innovations that are relevant for their business models. They’ll have to learn fast, experiment fast and fail fast. All this requires a very open digital architecture enabled by API frameworks and infrastructure. New technologies, new trends Insurance organizations should be familiar with edge computing, which has been a heavy user of content management systems and image and workflow systems that require efficient content delivery and consumption. Edge computing will benefit our industry by efficiently leveraging and dispersing content where and when it’s needed. Insurance is a data- and content-rich industry. As new architectures continue to become mainstream, and with the advent of technologies like 5G and IoT, life and annuity insurers will use them to learn about our customers’ lifestyles, income patterns and more so we can provide more precise, personalized and real-time advice. I see insurers playing with that paradigm in 2020. See also: The Behavioral Science on Buying Insurance   Another paradigm that’s becoming buzzworthy in the industry is around no-code platforms. In reality, there’s no such thing as no-code—even no-code platform requires code. However, when you spend most of your time coding the framework and capabilities but not focusing on business functionality, the level of configurability you drive in these platforms limits the amount of actual physical code that’s required to implement business capabilities. This decreases the cost and time to market while enhancing the quality and reducing technology change-related disruption. This will be a trend that will influence the industry’s digital architecture implementations in the future. At a high level, the life and annuity industry will continue to make progress in 2020 thanks in large part to technological advances. The key is to view what may seem to be common buzzwords not only as trends, but also as technologies and concepts that will push the industry forward.

Vinod Kachroo

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Vinod Kachroo

Vinod Kachroo is the visionary responsible for leading innovation at SE2 to develop a technology platform that’s future-proofed.

Are You Ready to Fail in 2020?

Research identifies three factors that differentiate what some people do that allows them to harness failure for success while others simply fail.

As you begin the new year, my wish is that you will be ready to fail in pursuit of your innovation vision. That’s right: Be ready to fail. And then accept and learn from your failures. The last few weeks of 2019 were a time to reflect on the past year’s accomplishments, disappointments, and discoveries. With the clock striking midnight on Dec. 31, we instantly began to create 2020 – with all of its aspirations, goals, opportunities, market demands, risks and pressures. In the corporate world, the year barely gets started when leaders are identifying and documenting risks to their plans, then figuring out how to avoid, cover for or mitigate those risks. However useful the exercise, these and other corporate norms feed employee anxiety about being tagged with failures. They discourage the experimentation that brings about the failures that spawn discoveries. Startups are committed to the ethos of “fail fast, fail cheap,” but when they are not built with the culture, leadership, process and skill to turn failure into learning they will fail their way to complete failure. Most startups, after all, do. No matter where you sit in terms of company size, sector or life stage, there’s probably room to improve your approach to failure. That’s why, rather than adding to your inbox yet another year-end “top 10” list, I’ve decided to help jumpstart 2020 by encouraging you to get better at failing in a way that creates more success. I was motivated by reading "Failure Found to Be an 'Essential Prerequisite' for Success" in Scientific American. The article describes a recently completed study about failure. Based on research and analysis of three very large and very different data sets, the study presents quantified findings about failure. It isolates three factors that differentiate what some people do that allows them to harness failure for success while others simply fail. Interestingly, the research:
  • Overturns the commonly held view that persistence and luck are primary drivers of success. In fact, the study found no difference in work effort or persistence between those who succeeded versus those who failed.
  • Reinforces the connection between success and the ability to continue to learn from each prior failure so that the next attempt comes closer to success.
  • Reports fresh, empirical findings that the other key factor alongside applying the learning from the past failure is shortening the amount of time that elapses between each attempt.
Can you point to moments when you looked at the potential for failure and, instead of devoting energy to an avoidance strategy, anticipated how to learn from it? How do you feel and react in the face of failure? See also: Insurtech 2020: Trends That Offer Growth   Here are some recommendations on how to make failure fuel for success in 2020:
  • Accept, deep down, that failure is not only inevitable, it’s good for you. I know that It’s easy to espouse the value of failure but very hard to walk the talk. This year, take the walk. The points in my own career where I failed, or was even just viewed as having failed, led to the pivots that delivered the most joy, success and reward from the new opportunities that arose as a result.
  • Mine each failure for learning and insight to apply to your next revision, prototype, iteration, experiment, development sprint, pitch deck, decision or mentoring session.
  • Move quickly and with a sense of urgency to that next step to reflect what you have learned from your prior failures.
Keep in mind that, even if not by design, you are a role model for your team, partners, colleagues, board, investors or friends who will all pick up on the signals you give off about your latest failure. Besides what it will do for you, if you are able to overcome avoiding, burying, denying or rationalizing failure, you will help those around you, and improve their confidence in and willingness to support your vision. Find your successes this year by embracing the failures.

Amy Radin

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Amy Radin

Amy Radin is a transformation strategist, a scholar-practitioner at Columbia University and an executive adviser.

She partners with senior executives to navigate complex organizational transformations, bringing fresh perspectives shaped by decades of experience across regulated industries and emerging technology landscapes. As a strategic adviser, keynote speaker and workshop facilitator, she helps leaders translate ambitious visions into tangible results that align with evolving stakeholder expectations.

At Columbia University's School of Professional Studies, Radin serves as a scholar-practitioner, where she designed and teaches strategic advocacy in the MS Technology Management program. This role exemplifies her commitment to bridging academic insights with practical business applications, particularly crucial as organizations navigate the complexities of Industry 5.0.

Her approach challenges traditional change management paradigms, introducing frameworks that embrace the realities of today's business environment – from AI and advanced analytics to shifting workforce dynamics. Her methodology, refined through extensive corporate leadership experience, enables executives to build the capabilities needed to drive sustainable transformation in highly regulated environments.

As a member of the Fast Company Executive Board and author of the award-winning book, "The Change Maker's Playbook: How to Seek, Seed and Scale Innovation in Any Company," Radin regularly shares insights that help leaders reimagine their approach to organizational change. Her thought leadership draws from both her scholarly work and hands-on experience implementing transformative initiatives in complex business environments.

Previously, she held senior roles at American Express, served as chief digital officer and one of the corporate world’s first chief innovation officers at Citi and was chief marketing officer at AXA (now Equitable) in the U.S. 

Radin holds degrees from Wesleyan University and the Wharton School.

To explore collaboration opportunities or learn more about her work, visit her website or connect with her on LinkedIn.

 

'19 Hurricane Season: Dodging a Bullet

Dorian would have upended the industry if it had stalled over Palm Beach, not the Bahamas, with its 185 mph winds and 40 inches of rain.

The six-month 2019 North American hurricane season is officially in the books, and it was an active one in terms of named storm counts, with the majority of activity coming in the typical mid-August and mid-October periods. The season ended with 18 named storms, six of which became hurricanes, and three of those achieving major hurricane status (Category 3+ on the Saffir-Simpson scale). Having 18 named storms in a season is well above the 12.1 average (1981 – 2010), but the number of hurricanes and major hurricanes is right around what would be expected in an average year. In terms of ACE (Accumulated Cyclone Energy), the season ended up at 123% of the average, with two storms, Dorian and Lorenzo, contributing an impressive 61% to the tally. [caption id="attachment_37446" align="alignnone" width="570"] Preliminary Atlantic Tropical System Track Map Source: NHC.[/caption]
[caption id="attachment_37447" align="alignnone" width="586"] Key parameters that track the overall activity during a hurricane season. Source: NHC and Colorado State University[/caption] What is, perhaps, even more interesting is that, of the 18 named storms, eight of them lasted two days or less, and some didn’t even last 24 hours. Two storms (Olga and Imelda) ended up being named storms for only six hours. The number of named storm days totaled 68.5, which is 115% of the expected 59.5 average (1981 – 2010). This year clearly showed the bias to satellite observations, as several of the named storms this year likely would not have been named in the pre-satellite era. Even these short named storms can be destructive to the insurance industry, such as Imelda, which hit parts of eastern Texas with 43 inches of rainfall. This highlights that the category is not always indicative of how destructive a hurricane might be. In fact, the named tropical storms of Imelda, Nestor and Olga accounted for 42% of the total U.S. insurance industry loss this season, which should likely ultimately settle for under $2 billion. The named storm average annual loss for the U.S. is over $15 billion annually, so the U.S. insurance industry was lucky this year, especially considering Dorian. The season will clearly be remembered for major hurricane Dorian, which stalled over the northern Bahamas as a Category 5 hurricane for nearly two days and gave south Florida a good scare when the monster storm refused to leave the area. The insured loss impacts to the Bahamas are expected to surpass $3.5 billion. Even though the strongest winds remained off the coast of the U.S., impacts were still felt in Florida, Georgia, South Carolina and North Carolina (but not Alabama). This will be the largest insured loss event for the U.S. this season, at over $500 million. See also: Grasping the Perils of Extreme Weather   We also can’t forget about Dorian’s impact to eastern Canada, which is expected to hit around $2 billion (CAD) of loss and had a wide-ranging impact. This is a good reminder that strong named storms can easily affect New England during a hurricane season. With saturated ground and trees being in full leaf, many large trees were uprooted across eastern Canada, leading to long-term power outages, a major source of loss after strong wind events. Around 80% of the homes and businesses lost power in Nova Scotia at one point, a reminder that the insurance industry can easily suffer losses from long-term business interruption payments. How Lucky I’m not sure if the worldwide insurance industry truly understands the bullet that was dodged this hurricane season, as we saw the most intense hurricane to ever hit the Bahamas, which also tied the record with the 1935 Labor Day hurricane for the strongest landfall anywhere in the Atlantic. hurrThe losses could have easily reached $75 billion of insured loss and maybe more. The winds alone would have caused considerable damage to almost every single insured property in southeast Florida. The storm surge and flooding rains would have likely had a major impact on the National Flood Insurance Program and many of the new private markets now writing flood business in Florida. Even with 11 consecutive years (2006 – 2016) of no major hurricane catastrophes in Florida, there have been other loss issues across the state that have already strained parts of the market. Such a catastrophic event at this time would have been a big stress test for the Florida Hurricane Catastrophe Fund, considering such a Dorian-type event would be near the 100-year to 250-year event that many companies plan for on a yearly basis. The other noteworthy (positive) impacts on the insurance industry might be the huge void of hurricane activity in the Caribbean Sea and Gulf of Mexico. In fact, only hurricanes Dorian and Barry reached hurricane-strength in those areas, which again is welcome news for the insurance industry. It always amazes me when a named storm can hit the tiny insurance hub of Bermuda, which happened this year with Hurricane Humberto. A look ahead to 2020: It’s way too early to make predictions for the 2020 Atlantic hurricane season, but some of the climate forcers to think about for 2020 are listed below. See also: Risks, Opportunities in the Next Wave   *El Niño Southern Oscillation (ENSO) is currently in a neutral state and is forecasted to stay there for the beginning of the 2020 Atlantic Hurricane Season. If this is the case, neither La Niña nor El Niño will have a large influence on wind shear or storm tracks. [caption id="attachment_37448" align="alignnone" width="570"] IRI ENSO forecast model Based Probability showing Neutral ENSO Conditions next hurricane season July August September (JAS)[/caption]
*After spiking this summer, the Atlantic Multidecadal Oscillation (AMO) index dipped back to near average in November, according to the Klotzbach and Gray AMO index, as far north Atlantic sea surface temperatures are currently near their long-term average values. This could have explained the higher activity this season and could lead to lower counts next season if sea surface temperatures continue to drop. [caption id="attachment_37449" align="alignnone" width="570"] After spiking this summer, the Atlantic Multi-decadal Oscillation (AMO) index dipped back to near average in November.[/caption] *Madden-Julian Oscillation, which is associated with an upper-air wave that moves across the tropics every 30 to 60 days, will continue to drive periods of activity in 2020. It is important to watch these waves move from the western Pacific into the eastern Pacific, as they will ultimately help named storm formation in the Atlantic Ocean.

Andrew Siffert

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Andrew Siffert

Andrew Siffert is vice president and senior meteorologist within BMS Re U.S. catastrophe analytics team. He works closely with clients to help them manage their weather-related risks through catastrophe response, catastrophe modeling, product development and scientific research and education.

Grasping the Perils of Extreme Weather

In 2018, a staggering 56% of all catastrophe claims came from just four states: California, Colorado, Florida and North Carolina.

In 2018, extreme weather had a devastating impact on certain states – primarily driven by increasing severity, rather than frequency, of catastrophic events. LexisNexis Risk Solutions' recently released, fourth annual Home Trends Report highlights the impact that the 2018 extreme weather events had on insurance losses. A staggering 56% of all catastrophe claims come from just four states: California, Colorado, Florida and North Carolina. States hit by Hurricanes Florence and Michael, the California wildfires and severe hail saw the most catastrophic losses. Claims in these states are also up to 56% from the 36% of claims these states accounted for in 2017. The latest Home Trends Report underscores the growing need for insurers to understand and respond to by-peril loss trends and the potential for climate change and extreme weather to drive these losses. While fire losses have continued to increase since 2012, catastrophe claims accounted for nearly 40% of fire losses in 2018 – the highest in a decade and a significant jump from the previous high of 15%. As a result of hurricane devastation to North Carolina and Florida, 2018 was also the worst year on record for wind claim severity, up 15% from 2017. Hurricane devastation also led to a costlier September in North Carolina, with loss costs 17 times more than a typical September. While Colorado was unaffected by the hurricanes and wildfires, the state ranked the highest in loss cost overall for 2018, as well as the highest over the six-year period (2013-2018) that the study tracks. In terms of hail, Texas continued to top the nation for claims, representing 29% of total volume. See also: The Future of Home Maintenance   The report highlights some of the challenges that home insurance carriers face in managing by-peril risks, including increasing severity and unpredictability of weather-related patterns and their impact on catastrophic claims. The report also underscores how it is imperative that home insurance carriers collect, analyze and use aggregated by-peril data to help generate a deeper understanding of the risks associated with a particular location and of how to price future policies accordingly. For the long term, aggregated by-peril data can enable more accurate pricing, a healthier book of business. If you are interested in learning more about the impact of extreme weather events on insurance losses, click here for the LexisNexis Home Trends Report.

P&C Insurance Is Losing Importance

Careful carriers and unenthusiastic buyers mean that the part of the economy being insured just keeps getting safer. It's time for a rethink.

P&C insurance is becoming less important financially because the insured world is becoming safer. The safer the world, the less insurance people need to buy to protect them against losses. The less important any good or service is, the less valuable it becomes, and people will not pay as much for it. It is just simple economics. Before jumping to conclusions like most people do when I present these facts, it is important to understand the difference between the insured world becoming safer and the part of the economy that is not insured by private companies. In the U.S. (unlike some other developed economies), the government provides most flood insurance. A material portion of the population does not buy insurance, so they become part of the non-insured world. Many of the disasters you see on the news are not insured because people did not buy insurance for those catastrophes. Lots and lots of people may lose their homes to an earthquake or forest fires, but many of those people will not have insurance coverage for those types of events. In many cases, insurance coverage is not readily available so events become uninsured. The insurance companies have made the decision to only insure people and property they are confident they can insure for a profit. Many insureds have decided to forgo purchasing coverage for many kinds of risks because they are either too expensive to cover or, in consumers' minds, the risk is too small. What does get insured because of carriers' conservative approach and the insureds' cautious approach is the part of the economy that is becoming ever safer. If we're not careful as an industry, we will eventually have nothing left to insure. Here is the proof the insured world is becoming safer (all data is based on A.M. Best's latest Aggregates and Averages). The following two charts are for frequency, which is a better metric relative to whether more or fewer adverse insured events are occurring. For many reasons, severity may take a different path primarily because large losses tend to make up a larger portion of the remaining claims when frequency decreases. These charts exclude physical damage to autos because that one single line defies other trends. In other words, hail and flood auto claims are not becoming less frequent. The charts above do consider non-auto property hail claims, however, and, even with those claims, which include damage to hundreds of thousands of properties over the last few years (primarily in four states), the absolute number of claims is less. Considering that there are hundreds of thousands more businesses, people, homes and drivers, claims have decreased from around 54 million per year to, even in a cat year like 2017 (2018 numbers have not fully developed), only 50 million. The insured world is safer. See also: Road to Success for P&C Insurers   The chart below clearly shows that claims relative to GDP are in a steady decline. Even if auto physical damage claims are added to these charts, the overall trend does not change. The difference is that the steepness of the decline moderates. If it was not for severity increasing in pure dollar terms, which should be expected, the decrease would be even more pronounced. I do not have the definitive data, but my guess is the severity increase over the last three years is due to the hail storms and the horrible California fires. I can personally testify to hail claims totaling cars -- if you don't live in a severe hail state, it is difficult to appreciate the damage a hail stone the size of a golf ball, much less a tennis ball, can do. The increasing safety of the insured world is a threat to carriers' and agents' existence because the problem is likely to grow. The safety improvements in vehicles, blue collar work environments and, perhaps especially, water shut-off devices, along with technology that will reduce exposures, means insurance will become even less valuable soon. The above charts show obvious points. Improved regulations involving better zoning distances, airbags and even OSHA have all made our world safer. I am glad many of the tort reforms seem to have minimized or at least in some states reduced some of the ludicrous litigation that seems to benefit no one but a few plaintiff attorneys and the defense attorneys hired to defend against those nebulous suits. The fewer the losses, the less important insurance is. The less important insurance is, the less people will pay for it. Add record surplus, and talk of a true hard market becomes obvious wishful thinking unless some key carriers have managed to underestimate their reserves by large amounts. The increasing safety of the world is out of the industry's control. We must adjust. Two other factors affecting the results shown in these charts are within our control. The first is how carriers adjust claims and underwrite. Based on real world experience with agents every day and some interesting published articles, some of which are more direct in their accusations, it is thought that some carriers have taken approaches that make getting a payout for a legitimate claim so difficult that frequency and severity are depressed. Similarly, some of the public has become aware, and agents definitely are aware and often educate their customers, that filing small claims should be avoided. These claims should be avoided because the pricing penalties assessed for minor claims are far too high. This situation presents an opportunity in my mind for carriers that don't suppress claims or make processing claims inordinately difficult to let the world know they are easier to deal with in a claim situation. It is also an opportunity for agents to educate clients on the differences in claims-paying behaviors. Every agent knows different companies' tendencies with regard to claims, but many agents are reluctant to discuss those tendencies. Just as with any situation where full disclosure is limited, those with more dubious practices get the benefit, and those with the best practices fail to get full credit. Maybe use one of the publicly published claims satisfaction surveys or create your own. The second way in which the industry almost certainly needs to change to offset the safer insured world is to change its current focus on insuring 1950s America. 1950 was about manufacturing. 2020 is about services and data. It seems every insurance company is telling every agency that their target market is manufacturers, which is proof of 1950s thinking. The industry needs to insure today’s economy. Ever try to buy a full data policy for self-created data (which obviously is the most valuable data for a huge proportion of businesses)? Ever try to buy a policy providing coverage for intangible assets? How about intellectual property? Today’s economy is built on intangible assets, data and intellectual property. Most machines and buildings are almost unimportant because most are fairly easily replaced, or substitutes can often be easily identified (excluding highly specialized firms). Companies and governments run on data, not lathes. Few companies go out of business because they can't find a temporary building following a fire. Businesses do go out of business after cyber-attacks, reputational damage, theft of data and theft of intellectual property. In fact, think of it this way: What is the bigger danger even to a manufacturer -- the building burning down or someone in another country stealing the company's design and then undercutting the price by 50%? There is only one answer to that question. See also: Provocative View on Future of P&C Claims The Hartford did a study in 2015 showing reputational harm was the most severe small business claim (40% more than the average fire claim). I can only imagine that the spread has increased. In 2017, Deloitte published a study that reputation was more important than getting the strategy wrong for 87% of executives. A CNBC article from Oct. 13, 2019, reported on a study by Hiscox stating that 60% of small businesses go out of business within six months of a cyber-attack. Many other studies support the same statistics but carriers and agents continue to focus on $x liability limits, $x property and workers' comp. Some readers may be thinking that policies exist for cyber, reputational harm, etc. (notwithstanding the fact that many cyber policies are arguably worse than no policy at all because at least not having a policy is free). Those readers are missing the point. A BOP or package policy provides coverage if a machine or building burns or is stolen or is blown away. Where is the same property coverage for a destroyed reputation or the theft of self-created data? I know Lloyd's has some coverages available, but 99% of carriers are focused on what was important in 1950. Customers are concerned with what is important today. Carriers and agents that continue trying to insure the needs of 1950 will have a short life. Another reason today's exposures are not covered is that many agents do not understand business income coverage, so they either don't sell it or they don't sell it correctly. Next to cyber, business income is arguably the most difficult coverage to understand. Furthermore, the simplified solution that many agents choose to follow is offering the same business income solution to every client, as if all insureds were identical (and if you are thinking ALS is a universal solution, you are wrong). This is just bad thinking. Business income coverage in and of itself is far more important for many insureds, especially if one includes true contingent business income that goes beyond standard forms. Whether you are working for a carrier or an agency, you need to insure the economy of today and tomorrow. You have complete control over this aspect of the insurance industry's diminishing in economic importance. If you focus on what is important in today's economy, you become a hero with a much more secure future by using the tools that are already invented such as business income coverages, much less creating tools to insure data and intangible assets. Let’s finally let go of 1950s thinking. Find out more at www.burandeducation.com/3d-learn-more.

What to Expect in 2020

sixthings

Happy New Year!

I figure we should dub this year "Hindsight." After all, hindsight is 20/20, right? So, let's imagine it's Dec. 31, 2020, and we're looking back on the year. What will we see that the industry accomplished?

Having read a bazillion forecasts over the holidays, I think lots of prognosticators are on the right track. Yes, there will be loads more AI, more use of big data/insurtech in underwriting, more chatbots and other technology in customer relations. Yes, insurance will become more modular, as companies figure out how to plug in the industry's best, say, claims technology and process rather than using just home-grown systems. No, Big Tech doesn't look likely to do a cannonball into insurance and splash all the water out of the pool, though Big Tech will probably continue to do deals like Amazon's move into distributing pharmaceuticals and pull away certain buckets of profits. 

But I think 2020 will be most notable because the industry will start to get better in an even more important way than has been described in the forecasts I've read. I believe the industry will begin to get better at... getting better.

I trace this concept back to Doug Engelbart, a monumental figure in the history of computing. In 1968, he held what has become known as The Mother of All Demos, which laid the groundwork for graphical user interfaces, hyperlinks (as in, the World Wide Web) and networked computers. He even hand-carved a scrolling device out of wood, which came to be known as a mouse because the wire running out the back of the little brown block looked like a tail.

Engelbart also contributed seminal thinking on a variety of topics, including what he described as A, B and C processes in corporations. Every company has A processes; they're how the business is run. Good companies, he said, also have B processes—ways of making the A processes better. Great companies, he argued, also have C processes—ways of improving the B processes that improve the A processes. In other words, great companies keep getting better at getting better.

(Quick aside: About 20 years ago, when I lived in Silicon Valley, I attended a birthday party at a neighbor's house and struck up a conversation with an elderly gentleman who seemed a bit left out. We got talking about innovation—that's what you did in Atherton in those days—and I mentioned that I had just published an article on A, B and C processes in a magazine I edited. He said, "But that's my idea." I corrected him: "No, that idea came from Doug Engelbart." He said, "And I'm Doug Engelbart." He was, too. He lived next door to my friend.)

I believe that 2020 could mark the year when the insurance industry makes a breakthrough in getting better at getting better. 

We've been in heavy innovation mode for several years now, so we're learning about what works and what doesn't. 

If you're an incumbent engaging with an insurtech, no, you can't operate on your normal planning cycle. By the time you pull together your annual technology road map and tee the insurtech up for your quarterly budget review to see what funds are available, that insurtech has gone belly up. It needed to make payroll by Friday. Seven months ago.

We've also learned about the sorts of tools, such as the cloud and X-as-a-service, that can speed innovation. We've become more attuned to what technologies are available outside our companies and maybe picked up a bit of experience on how to incorporate them. We've seen the need for small, focused innovation teams and for quick, inexpensive prototypes that can let us test customer reaction in the wild.

In Engelbart terms, we began several years ago with those A processes. Then we engaged B processes and began to innovate on those A processes. Now, we know enough about those attempts at B processes, those attempts at innovation, to set up ways to systematically improve on them, too.  

That's my hope, at least, as we embark on 2020. 

May the year treat us all well.

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.

4 Keys to Online Safety Training

Employers face challenges implementing safety training across their organizations, and technology has answered the bell.

While the traditional methods of in-person or classroom training will always have their place, obstacles related to geographic disparity, the emergence of telecommuting and other factors have added to the challenges faced by employers attempting to implement safety training across their organizations. Technology, of course, has answered the bell with one concept in particular: the learning management system (LMS). At its core, an LMS is software used to deliver and track online training. Below are four key considerations to consider when diving into the world of online safety training. 1. Keep an Eye on Content Paired with a good content library, an LMS can serve as an efficient and engaging method to train employees on a plethora of safety-related topics. Often available in multiple languages, some of the more popular course topics include blood-borne pathogens, basic first aid, personal protective equipment as well as the ever-relevant topic of slips, trips and falls. Course content is often developed with specific regulatory requirements in mind. While there is loads of content out there on all sorts of health and safety topics, not all content libraries are created equal. Before deciding on an e-learning provider, it is important to preview content, which in some instances can be drastically outdated and practically irrelevant. If the coursework features imagery from the '80s, how does that affect the credibility of the content being presented? How often are courses updated? Does the content offer imagery related to my specific industry or occupation? These are all worthwhile questions to consider. 2. Ease of Use and Customer Support If you cannot figure out how to use it, will you use it? The administrative side of an LMS will be the place from which training is assigned, tracked and reported on. Hence, the system’s ease-of-use is paramount. Without an intuitive system, an administrator could spend countless hours struggling with how to best populate rosters, assign coursework, build reports and notify trainees of pending assignments. While many companies will provide onboarding support initially, eventually service can stagnate, if not altogether disappear. And, if the group of employees trained to administer the system leave the company or change roles, another group will have to learn the ins and outs of the system. If the system is not somewhat easy to learn, you will be left with a system that no one knows how to use. While most LMS companies provide user manuals and other supportive material, it is still important to verify that the prospective provider is committed to excellence in customer support. As with any significant purchase, look for testimonials or seek the candid thoughts of current system users. See also: 7 Safety Trends for Today’s Workplace   3. Some Common Pitfalls “We apologize for the technical difficulties....” Heard this before? Technical problems arise. It is no fun to establish and launch a training curriculum, only to discover that the system-generated email that was supposed to inform employees of a training due date was blocked by a spam filter. Or maybe the notification goes out, but, as employees log in to take the training, the login page is undergoing maintenance. These things happen, and you must be prepared. Additionally, for some organizations, not all employees have adequate internet bandwidth or the minimum technical requirements to support certain systems. Challenges related to browser capability can also surface. LMS providers typically design content to run optimally on one specific internet browser (e.g., Google Chrome, MS Edge, Safari, etc.); if an organization’s preferred browser is a different than that of the LMS’s, there can be a headache for all users. 4. The Future of e-Learning Micro-learning and blended learning are hot topics in the field of e-learning these days. Both are being refined to more effectively train employees across organizations and are worth exploring. In July 2019, OSHA reiterated that online and video-based training is not enough to satisfy OSHA training obligations, so, for now, some mixture of old-fashioned hands-on training still has its place in the business world. Nevertheless, while training styles evolve, the numerous benefits and uses of digital platforms will continue to provide organizations with a great way to deliver safety training, foster a strong culture of safety and produce more engaged, effective employees.

Matthew Hesemann

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Matthew Hesemann

Matt Hesemann is currently a senior client services representative at Safety National Casualty. He works with insureds to introduce and implement the company’s robust online risk control resource platform.

Third Step to a New, Successful Program

Analyzing freely available competitor data can uncover the easiest points of entry into a market for a new insurance program.

Editor’s Note: This is the fourth 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. The earlier articles are available here.  

By now, you’ve become familiar with our series of posts on program business. We’ve covered the processes for identifying a market to target and for validating the opportunity through research. Now comes one of the most important steps, analyzing competition. Much like the other steps, analyzing the competition can be boiled down to three things:

  • Gathering all available public data
  • Looking at the market on a macro level and determining which competitors own the space
  • Looking at individual players and their attributes and figuring out potential market entry points

Gathering Available Data 

After all your research, you should have a program plan narrowed down to a specific class code with a need gap. Now it’s time to do some research on the players already in the space. Insurance is one of the only industries in which your competitors must file their business plan, and anyone can pull the filings of anyone else. That’s exactly what we are going to do in this section. 

You have already selected an industry segment to target. Now, pull the filings of each competitor in that space, and all the product offerings. This will provide the raw information for your analysis in the next two sections. If, by chance, your competition is offering a non-admitted product, you will need to go elsewhere. 

Work with an industry focus group to ask about the type of insurance offerings available and gather information that way, or do market research on the product offerings available. Ideally, you will use the data you gather to answer several key questions. The most important ones will depend on your organizational goals, and we will cover those in the section on qualitative research. 

See also: 10 Steps to Successful Insurance Program   

Analyzing the Competition 

After gathering all the available competitive data, it’s time to develop the insights that will help us decide who our real competition will be. Figure out how much market share each major competitor possesses in your targeted industry. Consider these potential market share scenarios: 

 

Each scenario will require a different set of strategies. Which of these is more appealing? If you were to pursue “Scenario 1,” you would be attacking a single dominant player. In “Scenario 2,” you would enter a market with a variety of players offering a variety of solutions. 

What you decide depends on the attributes you are competing on. Traditionally, with programs, it is easier to enter a market with one established player. Ideally, this player is clunky, does business slowly and can’t react quickly enough. In this world, you can easily compete with better technology, better costs or better service, preferably all three. 

A word of advice if you choose to compete on cost: Unless the cost saving is 15% or more, it will be hard to get customers to switch from an incumbent. 

Profiling the Competitors 

With the market data pulled and analyzed, you can now move on to a qualitative analysis of the individual competitors and ultimately decide how and where to deploy your new program. Combining the data you’ve gathered, the “word on the street” from insureds in your target market and additional market research, you’ll build profiles of the major competitors. These are the attributes you should start with:

  • AM Best rating of the company
  • Size of the company in premium
  • Whether the company operates nationally or regionally
  • Types of products (from the filings, for admitted products)
  • The company’s market share in your targeted industry
  • Pricing for the product (from filings, focus groups or competitive research)
  • Distribution: Is the offering sold online or through agents?

The goal is to apply this data to understand which companies you will realistically compete with. Using the example we introduced in our prior post, the top provider of tow truck insurance may only serve the Midwest and Pacific Northwest, leaving open an opportunity in a Northeast market like New York. Or, perhaps there is a cost saving you can offer with a new product package. 

A four-quadrant (i.e. 2x2) matrix can be a good tool here, too. Pick two important variables, one for each axis, and place all the competitors onto the graph. For example, one axis could be company size, while the other represents geographic reach (from regional to national operators). 

Going as far as to do a full SWOT (strengths, weaknesses, opportunities and threats) analysis on each competitor may also be a good practice and will help illuminate the competitors you stack up against most favorably. A good resource for SWOT templates can be found here. 

See also: How to Improve the Customer Journey   

Final Thoughts 

Through diligent research, and a good measure of analysis, you should uncover a path for potential new business. Making the right decision on where to deploy, at what price point, with which distribution model and other vital issues can make or break a program launch. Some of these will be the topics of future blog posts. 

When planning a program, it is vitally important to have the conviction that you are bringing a product to the market that solves a problem better than the competition. Better pricing, better distribution or better product design are great examples of value that will improve your chance of success. 

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.