• Gain a more comprehensive view and reduce adverse selection by determining the overall crime rate for an area at the street level.
• Adequately or more accurately price for the associated risk — For example, setting a higher theft deductible if the crime data shows increased crime in the area, or lower premium if the property has security measures on-premise such as cameras, lobby security, etc.
• Determine which coverages to limit or even exclude based on the characteristics of a particular neighborhood/community (e.g. for an apartment complex, review the crime data to determine the level of property and violent crime in the area and limit/exclude coverages accordingly).
• Evaluate concentrations of exposure in particular for a schedule of risks, as crime codes can vary greatly within the boundaries of a single city.

• Yes, ordering chicken and insurance ARE the same. Chicken is chicken, and insurance is insurance. Both are commodities. Or,
• No, ordering chicken and insurance ARE NOT the same. While chicken may be chicken, all insurance is not created equal and is not a commodity.

• Don’ts – pave the historical cow path of ACORD/company forms, internal screens or database layouts.
• Do’s – reimagine the experience based on the user’s perspective alone. Make it easy to follow and use, be sensitive to screen real estate size or constraints.

• Don’ts – force users to gather and complete data entry based on what’s convenient for your system or organization.
• Do’s – allow users to start, suspend, restart and change the basic intent of the transaction, even allowing them to reorder the screen and field flows.

• Don’ts – assume that third-party data is valid, clean or up to date.
• Do’s – tell users what third-party data you are going to access before you retrieve it, show the data to them and ask for feedback.

• Don’ts – hide the AI process, results or how it hurt their eligibility or rate.
• Do’s – practice complete transparency about your use of AI, explain what it is, what data you are using, sharing both intermediate and final results.

• Don’ts – camouflage what are the favorable risk factors that you are looking for.
• Do’s – be transparent on both favorable and unfavorable risk factors and what the user can do to reduce their risk.

• Don’ts – use arcane, overly complex and statutory-sounding insurance jargon and terms.
• Do’s – as the March Hare said, “say what you mean” as simply and straightforwardly as possible for all text on screens, definitions and forms.

• First, when the economy is expanding or business is good, invest in the customer experience to further differentiate your company in the marketplace. This might sound obvious, but the fact is, when revenues are growing and the future looks bright, many organizations de-prioritize CX investments, under the premise that, if business is booming, customers must already be happy and loyal.
• Second, when the economy sours or business slows, be especially judicious when considering expense cuts that could materially affect customer experience. Such actions might yield short-term gains, but they also introduce serious long-term risks. Furthermore, don’t ignore opportunities to actually improve the customer experience while simultaneously lowering expenses (read more about that approach here).

• Develop highly price competitive primary care clinics across the country.
• Offer very low-cost telemedicine that can be a convenient pathway to primary care and other care, streamlining care processes.
• Implement a personal healthcare assistant that can simplify navigating the healthcare system and expedite a much enhanced patient experience.
• Connect to the highest-performing local physicians and regional COEs in each specialty, driving appropriate and disrupting inappropriate care and cost, in strong contrast to the inappropriate care and cost patterns that have come to dominate U.S. healthcare.
• Develop some tie to health plans that would allow the company to benefit from the health outcomes improvements and savings that its management approaches create.

• It is crucial to be prepared for the negotiation from the start. Know your file! The claimant attorney may have 10, 25, or 40-plus clients and may not be an expert with the nuances of the case like you can be. The attorney's negotiations may even dance around similar injuries of their other clients (neck and back being the most common). Read the medicals in detail. Ask for missing records if something does not add up. Check the doctor's release notes and enlist the assistance of a handwriting expert if needed (the best argument can often be what the claimant's own doctor documented hidden deep in the 200 pages of medicals that the attorney glanced over casually).
• Make a list of your strengths and weaknesses. Understand the direction the attorney will go to argue his key points, and be prepared for counterarguments. (Yes, I understand that your client had quite a bit of pain and suffering as you are stating, but on the release date your client reported a one on a one-to-10 pain scale so your argument the client is still in excruciating pain is difficult to fathom based on what you've provided).
• Don't get into a dollars-based negotiation. Often, attorneys may try to trick the adjuster into a back and forth of only numbers without regard to the details of the case. Let the facts lead in the negotiation, and the dollars will follow. (Make me understand better why your client deserves a $10,000 increase in the offer; what am I missing in my evaluation based on the medicals you provided me?) Concessions and deviations (when supported by facts) are perfectly acceptable.
• Sometimes just a call before negotiating can also let the adjuster assess the style and technique of the opponent. Your initial call on the attorney's demand may let you ask questions to see how the attorney came up with the number. You are not forced to make a counter right away. That initial call may let you know that you need additional preparation. You can also adjust your negotiating style. Remember to be an active listener.
• Always consider the intangibles. The injuries and treatment are one aspect, but is there aggravated liability, a potential credibility issue for witnesses on either side, permanency such as scarring (valued differently on everyone) or an impact on the claimant's daily lifestyle following the loss (unable to enjoy life's pleasures post-accident)?
• Can your medical evaluation benefit from a claim nurse reviewing the file or an additional doctor's review to understand the case notes?
• Patience is a huge factor in negotiations. They do not need to be finalized in one phone call!
• Remain professional even if your adversary is not. Lack of professionalism can be a barrier to settlement. Your opponent may not have a case he is confident about and can use a harsh tone to try to intimidate the adjuster.

The saying in journalism is that there are no new stories, just new reporters. It seems the same is true of mistakes in innovation programs: There are no new errors, just new companies making them.

I say that having spent years watching innovation programs at established companies fail for almost the same reasons, time after time. I thought I'd share the 10 most common mistakes, on the theory that it's a lot better to learn from others' costly errors than to make these yourself.

Here are the 10 most dangerous things I've seen companies believe about innovation:

1. Investment is innovation. It's not. If you're assigning importance to a technology or insurtech based on how much money it has raised, you're making a huge mistake. You are ceding your future to a crowd of financial analysts and technology treasure hunters. Money always looks backward. You need to look forward. The genius behind RiskGenius didn’t suddenly appear once the company raised a bunch of money. The genius was always there, and RiskGenius, whose natural language tools improve the quality and accuracy of policies, should have a game-changing effect. (We told you about RiskGenius almost three years ago because we know there's more to anticipating the success of an early-stage company than the capital raised.)
2. We're focused on customer engagement. Just stop. Your customers do not want to be engaged by their insurance company any more than I want to engage with the guy who did my colonoscopy. Your customers want to be served. Stop talking about customer-centricity, which is an excuse for spending a ton of time and money trying to figure out how to sell folks more of the products you developed based on what you thought they needed. Try customer empathy instead. Stand in the shoes of your customers (internalizing all their concerns, fears, hopes, dreams, etc.) and look around for solutions. The answer may not be any of your products. It might not be a product at all. But if you genuinely pay attention, your customers will tell you what they will pay for.
3. Victory will go to the slow and steady. No, victory will go to the deliberate and focused. That may not sound like a huge distinction, but it is. We have found through our work at our IE Advisory unit that the key is to define strategic areas of opportunity, then to adopt an innovation process based on clear boundaries. Don't think outside the box; think inside the box, once you've sharply defined the right box. John Wooden used to tell his basketball teams to be quick, but don't hurry. There's a difference.
4. It's not us, it's them. When an insurtech fails to deliver the expected impact, the tendency is to blame the startup for malfunctioning technology, a lack of industry knowledge or entrepreneurial hubris. But the industry has, in many respects, been its own worst enemy. The sloooowness of incumbent "innovation" processes can grind early-stage companies into non-existence—they can’t wait for your next quarterly innovation review; they’re trying to make payroll on Friday. Some incumbents major on pilots or proofs of concept, with no real objective—we call this death by POC. Others just use the try-out process to learn as much they can about an entrepreneur's ideas, about tech features and functionality and about possible applications, with no real intent to engage with the early-stage company. The problem is very likely you, not them.
5. We’ll see the ROI—one of these days. If your innovation team has been at work for a year or two and you have not generated measurable revenue, I mean of a magnitude that nears the cost of your innovation effort, you need to make a change. If your innovation consultants have not generated measurable revenue from the innovation process they helped you implement within a year of their engagement, you need a new adviser. I’m not saying there's a technological magic bullet, but there is an innovation process that can deliver measurable growth, and rather quickly.
6. We are the best at that already. Not likely. A famous Bain study from about 15 years ago found that 80% of executives thought their company had the best product in the market—and that 8% of customers agreed. Stop kidding yourself. Whatever it is, you are not the best at it—Silicon Valley, not known for its modesty, nonetheless subscribes to a saying from software pioneer Bill Joy: "No matter who you are, most of the smart people work for somebody else." You should adopt that attitude, too. If you don't, you create a barrier that prevents you from seeing opportunities. Look at Amali Solutions, which developed technology that draws amazing efficiencies out of the subrogation process. The payback on purchasing the technology is less than a year. Beat that. But carriers can't see past their existing subrogation processes. They don’t realize that all they have to do is bend over, because there are dollar bills on the ground all around them. There are lots of insurtechs out there that, like Amali, are built to pull hidden value out of an obsolete supply chain, so, if anyone in your organization tells you to ignore a technology or idea because you're already the best, you might start looking for the person's replacement.
7. We are sticking with what we do. You will at your peril. If you are in claims administration or the management or settlement business, we have a news flash for you: Technology is going to cannibalize your core business—not completely of course, but a lot. You had better figure out how to generate additional sources of revenue.
8. We are the oldest and biggest. You will be the oldest only as long as you are in business. You might be the biggest today, but by what measure and for how long? Oh, and Sears and Kodak say, “Hi.”
9. We have time. Maybe, maybe not. When A.M. Best announced earlier this year that it would include an innovation assessment in its financial rating methodology but said it would phase in the weighting of the assessment, a lot of carriers adopted a we'll-cross-that-bridge-when-we-come-to-it attitude. The phase-in sounds to me a lot like those parents who count to three and then wonder why their kids wait 'til "three" to actually move. We have been huge supporters (and in some ways participants) in A.M. Best’s effort because we believe, as they do, that failure of incumbents to innovate is a threat to their long-term financial resiliency. But we don't see any reason for A.M. Best or for any incumbent to count to three. Let's get moving.
10. The supply chain is what it is. Every supply chain is always vulnerable—ask HP how it did when Dell's hyper-efficient supply chain hit the PC world two decades ago. Don't ever assume that the way things are done today is they way they will always be done. The job to be done in insurance is to provide insurance policies for businesses and consumers, right? Wrong. The job is to provide financial security, to mitigate risks, to help clients head off losses, etc. If you believe we’re just in the business of manufacturing policies, then you’re dead; you just haven’t made it official.

Innovation is a never-ending journey, with defined ports of call along the way. Let’s not keep running aground on the same shoals. We'll still make mistakes, but let’s make new ones.

Cheers,

Wayne Allen
CEO

P.S. If you found this list useful, please pass it along to a colleague or 10 and encourage them to sign up for our weekly newsletter.

Editor’s Note: This is the second 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 first post is here. 

The trend in insurance today is toward large volumes of policies with very little human intervention. Although the cost benefits may be attractive, this movement is leading us toward a commoditization of the industry where the only differentiator is price. Any business-minded person will tell you this is not a good position to be in. 

Ideally, you want to sell unique solutions that are difficult to replicate, raising the barrier to entry. There is an alternative to commodity products. It’s called programs. 

The best program business is difficult to understand, labor-intensive and hard to automate. Unique underwriting expertise is required, and it should be hard to find and difficult to train. The role of technology in this market is to assist the process and provide the flexibility to adapt to unique risks, not to replace human ingenuity with mass automation. 

For an MGA seeking to launch a new program, there are three types of opportunity that provide the greatest potential: a distressed class, a perceived distressed class and an underserved class. 

A distressed class is one that most underwriters don’t understand or for which losses are difficult to predict. To underwrite this business, you need unique underwriting skills – an understanding of the nuances of the class and of the characteristics of the risk that could produce significant losses. Clever underwriting and careful selection of risks is key to remaining profitable in this niche. Heavy loss control may be required here, too. Your ability to make this riskier class safer is your competitive advantage. 

See also: 10 Steps to Successful Insurance Program   

Nuclear plants are one example of a distressed business class. The dynamics of radioactive materials and the consequences of their incorrect handling are complicated. Losses are catastrophic and will most likely include loss of life, millions of dollars of property losses and loss of business income. Underwriting this class calls for highly trained underwriters who know a good risk from a bad one. These are specialists who can assess, for example, whether safety manuals and procedures are sufficient to minimize the potential for losses. 

A perceived distressed class refers to business that potential competitors shy away from because their underwriters perceive it as too risky. By careful analysis, a clever underwriter can discover that what others thought were drivers of claims were indeed not so. Ski resorts are one example of perceived distress. Underwriters may avoid this class because of the downhill ski exposure, while the real claims drivers are slips and falls in the restaurant. This is an extreme example, but it illustrates the point. 

The underserved class is another spin on program opportunities. The less competition in a class, the better the chances for a successful program. There are many reasons markets avoid certain classes. It may be that the specific geographic territory is overly litigious or that the universe for this specific class is small. Whatever the reason, once you identify the issue and find a solution or compromise, you will have uncovered a program opportunity with little competition. 

The class may also be underserved because a traditional “old school” risk taker with archaic systems is the only alternative for this specific class of risk. By providing modern technology with automation that makes it easy to do business, you can outperform the competition and capture your fair share of the market. 

An example of this kind of risk may be trash truck operators in the boroughs of New York City. It’s a tough jurisdiction to write trash hauling insurance. A longtime traditional insurance company may have locked up the market. But at the same time, pricing may have crept up over the years, and customer service and loss control may be stale. There is no meaningful competition in this space, and it’s ripe for the introduction of an MGA program. 

Start with an updated product offering that includes new coverages like data destruction and privacy, and dynamic pricing tuned to the characteristics of each individual risk. Round off the offering with quick quote turnaround, killer personalized service and fast and fair claims handling, and you’ve got a program that will attract business from the incumbents. 

See also: Is There a Future for MGAs?   

So, there you have it – three scenarios that provide the first ingredients for building a new insurance program. Whichever you choose, when you create your program, ask the following question: “Will my program be so different that it will be difficult to duplicate, and so appreciated by buyers that price will not be the focus?” If your answer is “yes,” you have taken the first step to a successful program. 

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