Let’s take a brief trip down memory lane. In days past, whenever consumers wanted to make a major purchase—say, for a large appliance or the latest electronics—they had to leave the house and visit their local retailer. If they were concerned about the well-being of their new investment, they’d add a warranty plan once their transaction was complete. If something with their new fridge or stereo system went wrong, they’d need to pick up the phone to schedule a service visit. Things have changed. Let’s take a look at just how much technology is influencing purchasing habits and changing the warranty experience for consumers, retailers and providers. Click for Coverage Today, when consumers need to make purchases both big and small, they’re often opting to make them online. For big box retailers, incorporating additional warranty protection on their websites to accompany those purchases is no sweat; they’ve got the capability and budget to do so. But what about smaller retailers? According to a report by CBRE Group, about 30% of e-commerce retail is sold by small and midsize companies. While many of these companies might want to offer online consumers the benefits of product protection like their big box counterparts, integrating third-party warranty protection with a retail e-commerce platform can be cumbersome. But some providers have cracked the code and developed apps that allow smaller retailers to level the playing field and easily establish and manage valuable warranty programs. Another technology solution being explored is blockchain. For as long as anyone can remember, returns, warranties and service contracts have required proof of purchase. Blockchain capabilities can eliminate that need by decentralizing record-keeping, so all relevant parties can instantly access a digital proof of purchase, as needed. Innovative companies are already jumping on board and using blockchain to improve industry collaboration, increase customer satisfaction, boost efficiency and reduce prices. Make the Connection As the Internet of Things grows and consumers replace their obsolete, non-IoT devices, the true benefits of connectivity will continue to be revealed. For example, smart home technology will take the guesswork out of claims. Service providers and technicians will no longer be forced to rely on a customer’s diagnosis of the problem, because devices will accurately relay data about malfunctions or damage in real time. See also: How Tech Is Eating the Insurance World   Administrators will be able to better identify issues and potentially help the customer find a resolution via phone or chat, without a service visit. If a service visit is needed, the customer representative can approve repairs and estimate out-of-pocket costs in advance simply by using the data already available. But before the advantages of this new technology can be enjoyed to their fullest, there are some obstacles to overcome. The complexity of connected devices can be a lot to tackle for many consumers. Without the help of a professional, new device setup and network connections can be time-consuming. Recognizing the opportunity for increased customer satisfaction, streamlined processes and lower costs, service contract providers are stepping up their game to offer plans that not only cover repair and replacement but tech support, as well. This kind of 360-degree service plan can help simplify the consumer transition to the fully connected home experience. Go Custom Thanks to the intimate connection to products and data offered by IoT, the opportunity to customize service contracts and protection programs has never been greater. Driven by constant data collection, warranty analytics can be employed to create extended protection plans that categorize failures, identify customers who are most affected by these failures and key in on potential causes. These “intelligent” plans can help determine and customize proper coverage levels guided by each customer’s risk profile. The opportunity to apply the data extends beyond the connected home to products on the road. Now with the help of analytics, the failures, causes and costs that affect drivers most can be identified to help create intelligent protection programs for automobiles. Known as telematics, these systems facilitate the transmission of vehicle diagnostic data. Telematics can record a vehicle’s condition to provide quick, efficient analysis that can isolate an issue before it becomes a real problem. This technology can also simplify next steps by alerting the provider to the issue and directing the vehicle owner to the closest repair shop with relevant parts in inventory. This kind of efficiency can help consumers remedy potentially dangerous and costly situations early on, while also reducing expenses for service contract providers. See also: Common Error on Going Digital   While some may long for the old days, the benefits of new technology offer a chance to look on the bright side. For providers, retailers and customers, advancements have changed the warranty protection experience for the better and will continue to do so for years to come.

It’s no secret that the healthcare system is a mess. When was the last time you went to the doctor and knew how much you would pay for your treatment? Probably never. It isn’t just a mess for patients. Employers, hospitals and brokers are all suffering from the same dilemma. So should we just keep accepting it? Unfortunately, there isn’t just one problem to fix. Even just identifying the underlying issues can be challenging, and this allows the chaos to continue. The Falling Benefits and Rising Costs Challenge While HR departments everywhere try to tackle the problem, it continues to reign. Here are some stats:

• A 7% annual increase means costs double every 10 years.
• A 15% annual increase means costs quadruple every 10 years.

This isn’t sustainable for any business. Employers are already contributing a huge percentage of spending on healthcare, and most won’t be able to sustain themselves with rapidly increasing costs. See also: Insurance: On the Cusp of Disruption   Fortunately, this is where startups are stepping in to help fix healthcare. Here’s how they are doing it. Providing More Transparency This is a top priority among many startups. Imagine if you could walk into your next doctor’s appointment already knowing what the price is going to be. What? That’s crazy! Well, there is actually a startup that does allow you to walk into your appointment knowing what the cost will be. How does this affect you? Now patients are able to better budget for their healthcare expenses. You no longer will be wondering what kinds of bills will come in the mail six months from now. This startup would also affect hospitals. When patients are able to accurately budget for medical costs, hospitals will have fewer accounts receivable. When a larger percentage of patients can pay their medical bills, this can result in lower prices and better care because there is a larger percentage of the population paying for their treatments. Fewer Interactions Between Provider and Payer One of the reasons transparency is very difficult to attain is the numerous third-party interactions that provide little to no value. Health insurance isn’t a typical transaction. In most other service industries, the payer selects a product or service and then pays a price directly to the provider that has been agreed on by the two parties. In health insurance, a web of people lie between the patient and provider who each get a cut. This increases costs dramatically and is responsible for a number of transparency issues. What many health insurance startups are doing is creating a transaction closer to what we experience with any other product or service. While there are times when a third is party necessary, communicating directly with the payer and provider drastically decreases costs. More Efficient Processes Another massive problem with the standard health insurance process is slow and inefficient processes. Fortunately, most startups are investing in modern technologies, like cloud computing and data sharing, that allow easier access to documents and drastically shorter processing times. Processes that used to take weeks can now be done in hours. This also helps employers because the onboarding process with most health insurance startups is drastically (sometimes up to 75%!) shorter. This allows for companies to move faster and implement savings faster. See also: Who Will Win: Startups or Carriers?   The fewer hours that HR has to spend on implementation, the more hours they can win back so they can do more important work for the company. The Future of Healthcare While we still have a long way to go, startups are finally beginning to unravel the mess of health insurance complexity. We see a future of healthcare where the patients and providers are back in control and better communication and transparency are a norm.

The phrase “gradually, then suddenly” comes from Ernest Hemingway’s 1926 novel "The Sun Also Rises," when Mike Campbell is asked how he went bankrupt. “Two ways,” he answers. “Gradually, then suddenly.” These simple but profound words also apply to changes in the insurance claims IT industry over the last few decades, and to how today’s insurance industry leaders need to be thinking and acting to avoid the “suddenly” outcome. The insurance claims process has changed enormously since 1980s. Back then, it was stubbornly long and involved many phone calls and messages, dozens of hours of effort, numerous different insurance staff, field appraisers, desk adjusters and managers, hundreds of local claims offices, rooms full of mail, mountains of paper, cavernous file storage facilities and a great deal of time and frustration for everyone involved. Today, most auto claims are being resolved “touchlessly” in hours or days through near-real-time digital exchanges among policyholders, insurers, repairers and claims service providers. When one analyzes how we got from “there” to “here,” it’s clear that it did not happen suddenly but in fact very gradually. The first laptop was introduced in 1980. The internet and email started to appear within the insurance claims process around 1985, and shortly thereafter automated collision estimating software became available. The direct repair program (DRP) concept was introduced in the U.S. in 1990, the same year that the World Wide Web (today’s internet) became generally available, enabling communications and commercial relationships between auto insurers and repairers and allowing insurance claims staff and collision repair shops to communicate with one another electronically for vehicle repairs. See also: Untapped Potential of Artificial Intelligence   While DRPs grew to ultimately absorb well over 50% of all insurance repairs, not much else changed dramatically until 2007, when the first iPhone became available. It was not until the early 2010s that smartphone adoption exploded and insurers raced to adopt digital business platforms across the enterprise. In less than 10 years, the auto claims process moved to digital via smartphones and evolved into today’s nearly touchless process. Moore’s Law and ‘Suddenly’ Therefore, “suddenly” actually occurred over more than 35 years. The slowness of these changes could easily lull one into a fall sense of complacency about innovation and disruption. But that would be a big mistake, and here’s why: Moore’s law will quickly turn “gradually” into “suddenly.” Moore’s law, as many readers will know, observes that computing will dramatically increase in power and decrease in relative cost at an exponential pace. Today, this is known as exponential doubling, by which the pace of computing-based innovation driven by ever-cheaper technology will continue to double in ever-shorter periods. This pace will actually make “gradually, and then suddenly” redundant. In terms of the “gradually” signals to which insurers must pay very close attention, the slow and steady entry by OEMs into the auto insurance and accident management process through connected car technologies requires strategic planning and responses sooner than later. In fact, all of the connected technologies—home, wearables, production facilities, buildings and smart cities—represent threats to insurers that do not understand, leverage and manage them before others do. See also: Cognitive Computing: Taming Big Data   So, it’s not your imagination that the world around you, including the insurance industry in which we work, is changing at an ever-increasing pace. It is, and, to compete effectively and survive, we will have to adapt our thinking and actions to exponential doubling.

Every year, organizations pay millions of dollars in settlements for workers’ compensation claims for services they often shouldn’t. I’m not talking about insurance fraud but rather an unseen problem that routinely balloons out of control. It is vital to understand how medical cost projections are calculated in Medicare Set-Asides (MSAs) to pinpoint the root of this significant and often inflated area. Let’s explore. Today’s Process Projecting medical costs for MSAs is done by estimating the future treatment likely to be required over the claimant’s remaining lifetime for workers’ comp injuries as well as any illnesses or conditions accepted under or exacerbated by that injury. The projection entails figuring out what treatment is likely to be required — the number of office visits, diagnostic testing, surgeries, medications, braces, basically anything that could pertain to a specific injury — and is typically calculated by summarizing the past two years of medical records. Once the person charged with conducting the analysis — usually a nurse, an attorney, a claims person or someone with a managed care background — receives the records, she reviews them and generates a summary of two to three pages outlining the nature of the injury; history of medical treatment; and any recommendations for specific types of treatment, such as surgeries, hospitalizations or spinal cord stimulators. From there, a treatment table is developed, outlining everything the claimant will need for the rest of his or her life as per the expectations of the Centers for Medicare and Medicaid Services (CMS). In general, CMS expects the following for any symptomatic body part paid for under the workers’ comp claim: X-rays every three to five years, MRIs every five to seven years and 12 physical therapy sessions. This is just the basic care; any recommendations or provision for future surgeries for these body parts will increase the costs considerably. Based on this information, all future predicted care is priced out according to the current workers’ comp fee schedule within the jurisdiction of the claim. Although a time-consuming process, it seems simple enough. But there is always a catch. See also: Why Medical Records Are Easy to Hack   Data Hiding in Plain Sight Suppose an adjuster is reviewing a summary of a low back injury. The expectation would be to see treatment services related to the lumbar spine in the claimant’s medical records. Then, all of a sudden, the adjuster comes upon treatment being rendered for the knee. It may be a legitimate part of the treatment plan, and the knee may be accepted under the workers’ comp claim, but what if it’s not? It’s become more obvious over the past 10 years — particularly with the advent of increasing recovery efforts from the Commercial Repayment Center (CRC) and Benefits Coordination & Recovery Center (BCRC) — that treatment for body parts or conditions is being paid for under workers’ comp claims to which it doesn’t pertain. The treatment has not been accepted under the injury claim, and, justifiably, insurance carriers don’t want to pay for it. Yet additional, out-of-bounds care often slips through the cracks and is paid for and now documented in the claim. This is a problem because, from the MSA standpoint, once a single payment is made for a condition, the payer has effectively bought it and all future medical care that comes with it. That knee is now part of the low back injury claim for the duration of the claimant’s life expectancy and will have to have future medical services included in the MSA. How does this happen? It is actually very easy. Right now, adjusters often manage a desk of 150 claims at any given time. They spend most of their time talking to injured workers, to medical doctors who are working on their respective cases and to any managed care people involved in the claim. In addition, adjusters have a high volume of medical bills flooding in that need to be approved for payment. Adjusters can’t scrutinize all the information coming in on medical bills and think, “Is this injection actually connected to this claim?” In the best of all worlds, the medical bill review teams, whether internal or an external vendor, would catch what has been accepted under the claim versus what’s being billed by the provider, but, in reality, charges still routinely slip through the cracks. Fixing the Problem New technologies that leverage artificial intelligence (AI) to “read” medical records are on the horizon. These systems can analyze all of the body parts and conditions being treated and compare that against the medical bill payment data. As such, smart systems are becoming the new front line for establishing exactly what gets paid under the claim and alerting claims adjusters to anything that doesn’t seem quite right. The adjuster can then take a look and discuss with the physician’s office the reasons for inclusion of the treatment before the bill gets paid and the abnormality becomes part of a future MSA, generating costs associated with lifetime care for the body part or condition. For example, it won’t be long until applications can generate reports showing an additional alleged body part is now being treated under a claim. Alerts can be automatically generated to adjusters showing the scope “creep,” as what started as a low back claim has now expanded into the neck and shoulders. The injured worker is now also having problems with hips and knees, and three new medications have been added that the adjuster may not have been aware of. Applications can identify all of these vitally important nuggets hiding in the data and place them into context, allowing a wealth of information to be delivered to the adjuster’s fingertips in real time. See also: How to Manage Risk of Medical Malpractice   AI-based applications show tremendous potential for flagging issues that get missed. Machine learning fills in the blanks by understanding how things fit and how they don’t, even when it’s a little murky. The cost savings as well as the time saved in managing claims will be tremendous. Hidden data will finally be brought into the light so that people can make more informed decisions about what to pay and why. This is an exciting new frontier for MSAs, as medical payments are limited to only those body parts and conditions accepted under the claim, allowing the MSAs to be based on the most accurate, up-to-date information available, while holding down potential costs. As first published in Claims Journal.

Web users, especially business owners, already have plenty of good reasons to be careful with what they put online. Shifts in public perception, the increasing threat of data leaks and continual attempts to steal your identity might be enough. However, new state rules for New York’s insurance companies could highlight another worrying trend. What you post could affect your premiums. It’s already legal for insurance companies, including life insurance and business protection insurance providers, to use public data to decide what you pay. From credit scores to court records and now including your Twitter feed, they can effectively use nearly anything they want to set insurance prices. Now, however, New York is taking a bold step forward as the first step to codify the practice. Discrimination by race, sexual orientation, faith and other protected classes is still illegal, but the use of personal data to inform insurance decisions is a trend that many are worried other states will follow. See also: New Efficiencies in Life Insurance   Your data is just another way for insurance companies to measure your risk and make more efficient decisions. Regulations are designed to keep the needs of the companies and their customers both satisfied, but many are concerned that it’s just giving the providers license to be more invasive when deciding premium rates. Your rates aren’t only decided by what information you fill out; examinations are reaching further and deeper into our data than ever. The automation of the industry is making it easier to collect and collate data from many sources, but there’s always a human involved in the judgment, and many are concerned that business protection and life insurance providers expose too much. Social media use in setting insurance premiums isn’t commonplace, yet. Only one of 160 insurers in New York use it, but “big data” is spreading across industries, showing the power of using data from diverse sources. At the moment, social media is used to determine falsehoods in applications, but there’s no reason it can’t be used in ways that customers might consider more invasive. And while discrimination is prohibited, some fear there’s nothing to stop providers from doing deeper dives. In many cases, the deeper you look into anyone, the more likely you are to uncover something that could be used to raise their premiums. Algorithms may seem impartial, but they are designed by humans with all of their own biases. One textbook example is COMPAS, which predicted where crime would occur based on criminal justice data from the U.S. The tool vastly overestimated rates of recidivism for black defendants while underestimating the same risk for white defendants. This trend of using social media data might not be widespread just yet, but there are justified fears that social media surveillance and investigation will become more common as reliance on the technology spreads. As such, it may be even harder for customers to see what affects their premiums, as much of it could be determined by big data gathering information from dozens of sources and obscure algorithms used to highlight risk factors. This risk of surveillance, even if it has no application in reality, affects how we use the internet. A trend toward “deleting Facebook” arose shortly after its sizable data breach last year. Data-sharing from sites and businesses of all kinds has seen use of virtual private networks (VPNs) skyrocketing. This might seem prudent, at first, but if our social media use is being so closely monitored, then we’re less likely to use those platforms to talk and associate freely. The issue isn't just in the data we share, but also the data we consume. If a business protection insurance provider looks at who you follow on Instagram, what’s to stop it from deciding premiums based on whether you follow high-risk individuals, even if you are not a high-risk individual yourself? The same goes for health and life insurance companies, which could raise premiums because someone is seen as a higher risk because they are part of suicide prevention groups on Facebook. Business are already under great scrutiny for their social media, mostly by customers, which is justifiable. However, when it comes to business protection insurance and key man insurance, the premiums for protecting the people and assets most important to your business’s growth could be rising for reasons that are more obscure than most will be able to work out. We don’t know how far into your posting history insurance providers can go in their search for data, so it’s best to create a strong social media policy as soon as possible. The law is always slow to catch up on technology. While many fear that the wheels may not turn in time for smart, context-driven regulation, other solutions are being looked for. Some want broad restrictions on the ability of insurance providers to use public information, while others are fighting for great transparency. Some consider it of utmost important that insurance companies be clear with what data drives their premium setting, as well as when new algorithms and data sources are used to adjust them. See also: How to Resuscitate Life Insurance  However, insurance companies have a vested interest in protecting their algorithms and how, exactly, they find their premiums. Protection of trade secrets and other intellectual property is part of what keeps them competitive. Furthermore, if the widespread ignoring of terms and conditions on the internet shows anything, it’s that notices of new algorithms may not register with the majority of customers. Most people simply don’t understand the technology that could be used against them. More detailed regulations, such as a need for algorithmic impact assessment, are looked at as another potential solution. In answering questions that find out the data that insurance providers use, why they use it, what they test and whether they have tested the system for bias, discrimination could be halted in its tracks. The insurance industry and its customers rely on the ability to use the data available to set premiums based on risk level. However, the threat of discrimination is driving concerns.

On June 26 of this year, Connecticut Gov. Ted Lamont signed HB 7424, the state budget bill. Among the provisions in this over 200-page piece of legislation: “The bill repeals the state’s information security program law, replacing it with provisions substantially similar to the National Association of Insurance Commissioners (NAIC) insurance data security model law.” This is remarkable for two reasons. The first is Connecticut doing something no state west of the Mississippi has done – adopt the NAIC Model Law. The second is the Connecticut legislature actually repealed outdated laws before it adopted the new ones. Clearly, these people have never been to California. Which brings us to the California Consumer Privacy Act of 2018, or what is now affectionately known as the CCPA. Insurance companies are anxiously anticipating the outcome of several assembly bills amending the CCPA that are awaiting action by the Senate, now that the legislature has returned from summer recess. Regardless of the changes, it remains likely – even though unnecessary – that the CCPA will “go live” on Jan. 1, 2020. Given the number of cans kicked down the road by the legislature this year on important CCPA issues, it will be difficult for regulators to provide much needed clarity by the July 1, 2020 rule-making deadline. What regulations are adopted will likely be subject to quick change once the Jan. 1, 2021, iteration of the CCPA takes shape during next year’s legislative session. It will also be difficult for the attorney general to provide advice to businesses or third parties on how to comply with the CCPA, a requirement the attorney general feels, correctly, is a bit at odds with his obligation to enforce the CCPA. Maybe that, too, will be part of the 2020 agenda. In the meantime, insurance companies are faced with an increasing number of privacy and data security requirements not associated with the CCPA. For insurers doing business in New York or states that have adopted a form of the NAIC Insurance Data Security Model Law, compliant practices are being developed right now. In the case of New York and its Cybersecurity Requirements for Financial Institutions, 23 NYCRR 500, the “go-live” date was March 1 of this year. The New York regulation became effective one year after publication but also had a two-year transitional period before full compliance was required. That implementation process could have been emulated for the CCPA. Instead, there appears to be a hard effective date of Jan. 1, 2020 even as key amendments are still being negotiated. And remember, while the attorney general cannot bring an enforcement action until the earlier of July 1, 2020, or the adoption of regulations, lawsuits can happen right away. More accurately, lawsuits can commence after the 30-day notice and right-to-cure provisions are triggered. The CCPA has a series of “data exceptions” that are evolving. While entities such as insurance companies are not exempt from the new law, certain personal information (PI) of “consumers” is. Among those exemptions is PI collected that is also subject to the Gramm-Leach-Bliley Act (GLBA), 1999 legislation that ushered in privacy protections and rules for the safeguarding of PI by financial institutions when the merger of banks, investment firms and insurance companies became authorized. GLBA also required states to undertake certain actions in terms of privacy of PI; if they did not, the information practices of insurers (and others) would be subject to federal regulation. States could provide greater protections than the federal law but not diminish them. See also: First of Many Painful Privacy Laws   So, the NAIC and the California Department of Insurance sprang into action. California adopted portions of NAIC model regulations governing privacy of financial and health information, and additional regulations governing the safeguarding of that information. While the Department of Insurance was adopting portions of these models, it also provided additional privacy protections and conformed the new privacy regulations to already existing statutory protections in the Insurance Information and Privacy Protection Act (IIPPA). In addition, the legislature adopted the California Financial Information Privacy Act (CFIPA) as part of providing greater privacy protections for California residents and customers of financial institutions (including insurers) than required under GLBA. As part of the expansion of privacy protections beyond those contained in the federal law was the characterization of a workers’ compensation claimant as a “consumer” under certain circumstances. While this activity was going on, the Federal Trade Commission (FTC) adopted the Privacy Rule – relating to information practices and providing the ability for consumers to “opt out” of having their information shared. It also adopted the Safeguards Rule, requiring a financial institution to develop, implement and maintain a comprehensive information security program. After this great rush of legislative and regulatory activity in Sacramento and Washington, D.C., during 2000-2002, the pace of new regulation of privacy practices of insurers slowed. Newer iterations of the NAIC model regulations were not adopted in California, and neither was the later iteration of the IIPPA. The legislature continued to push out privacy-related bills at a dizzying pace, including the California Online Privacy Protection Act (COPPA), 2003 legislation requiring operators of websites and online services that collect PI about the users of their site to conspicuously post their privacy policies on the website and comply with them. The COPPA has been amended several times to keep up with technology. It is not in conflict with the existing requirements of entities that fall under GLBA. Indeed, analyses of Assembly Bill 68 (Simitian), 2003 legislation creating the COPPA, suggest that part of the intent of this legislation was to have other businesses operating on the internet adopt the same policies and practices as financial institutions under GLBA. The CCPA does not amend the COPPA, or even refer to it. Instead, the CCPA adds even more content on business’ websites so the new rights allowed under it can be exerted by consumers. Both the CCPA and COPPA want their notices to be “conspicuous” and on the business’ home page. It’s going to get crowded on home pages. In March of this year, the Federal Trade Commission (FTC) announced it was proposing to revisit both the Privacy Rule and the Safeguards Rule under GLBA. The changes as they relates to the Safeguards Rule will closely track the NAIC Insurance Data Security Model Law and the New York Cybersecurity Regulation. Once adopted, the changes may result in more action from the NAIC. None of this will occur in 2019, and maybe not even in 2020, but the landscape for privacy protection and data security for insurers and insurance organizations will be in a state of flux at least through 2021. The authors of the CCPA acknowledged that, within the patchwork of state and federal laws governing PI, some safeguards are adequate. The initiative measure upon which the CCPA is based provided data exceptions for PI covered by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). These data exceptions were expanded to include other laws, including GLBA and the CFIPA, during the legislative negotiations in 2018 that resulted in the initiative being withdrawn. In the rush to forestall an initiative and pass something to send to then-Gov.r Jerry Brown before the end of June last year, the California legislature did what it all too often does: add new laws without regard to existing ones addressing the same issues but in a different way. Because only certain PI is exempted from the requirements of the CCPA, businesses that collect and disclose exempt data must nevertheless maintain the architecture of the CCPA for non-exempt data. Consumers who seek to exercise their rights – assuming they will read properly crafted notices on business websites – will access a series of links only to be told that the PI they are seeking to control or delete really isn’t PI, even though it includes the consumer’s name, address, Social Security number, etc. It’s just not CCPA PI. Well, that’s certainly enlightened public policy, isn’t it? See also: In Race to AI, Who Guards Our Privacy?   It is difficult to claim the current and evolving laws and regulations governing consumer control over and data security of PI collected by insurers is inadequate. Yes, there have been security breaches among financial institutions covered by GLBA. That, however, is not the exclusive measure of effective security. The CCPA acknowledges that “reasonable” security efforts will protect a business from liability if unencrypted or unredacted PI is improperly accessed. Clearly, that also sends a message as to what the legislature thinks is a minimum standard for what is “reasonable.” Not good enough. The IIPPA, GLBA, the Privacy and Safeguards Rules of the FTC, the Department of Insurance Privacy Regulation and continuing initiatives by the FTC and the NAIC demonstrate a decades-long history of developing strong laws to protect the privacy of insurance consumers. Advocates for the CCPA would do well to remember that not every business is unregulated when it comes to information practices and give the IIPPA and subsequent laws a level of earned deference in today’s digital debate. Or, to quote Jacob McCandles (John Wayne) in the movie "Big Jake," “If you can’t respect your elders, I’ll just have to teach you to respect your betters.” The CCPA gathers headlines because it is intended to empower individuals and their efforts to control their own PI. When PI is shared, policymakers want to make certain it is shared transparently and securely regardless of where the PI goes. This is a response to the use of PI by very large international companies that occupy an outsized space in what is purported to be a competitive digital marketplace. They are also the companies most able to afford the increasingly complex data security environment throughout the world and who can pay very large penalties for non-compliance. Good for them. This new and complex environment is where policymakers in Sacramento should focus for the remainder of 2019 and next year, when CCPA 3.0 will roll out. Unfortunately, they won’t.

The joke about cyber insurance is that if you’ve read one policy, you’ve read… one policy. As an emerging, yet vital, form of insurance, cyber has not yet become standardized in terms of the coverage offered. This puts a heavy burden on businesses to rigorously analyze cyber policy options to pick the one that best fits their needs. Vetting countless different policies can be daunting, especially for small and midsize businesses (SMBs) that lack the resources of major corporations. And with the cost of cyber breaches expected to hit $6 trillion in the next few years, this task could not be more important. Insurance companies with stand-alone cyber offerings are working to make policies more accessible for SMBs, which are traditionally underinsured or uninsured for cyber, so that these businesses have a plan in place to survive a breach. While insurance agents play a critical role in the insurance market — businesses need an agent to talk them through how this form of insurance operates and answer any questions that they may have about coverage — we need additional methods to bring cyber coverage to more businesses. There is a fundamental distribution issue that needs to be solved, so that all SMBs have easy access to policies that apply to them. See also: Tips for SMBs Buying Cyber Insurance   Affinity partnerships, where a customer provides insurance products to its clients or membership, offer a clear and effective solution to this problem. By partnering with business services, professional organizations and brokers, insurance companies can begin to close the cyber insurance gap for SMBs. Insurance companies need to work with the groups that businesses trust most so that procuring a vetted cyber insurance policy is as easy as clicking “yes” on a form. Additionally, these organizations help businesses cut through the mass of policies to find the one that best fit their needs. Other classes of insurance excel with this model. As an example, shared work spaces that cater to young professionals entering the workforce have solved a common insurance conundrum by seamlessly integrating general liability and renters insurance into the lease. Cyber insurers can do the same with common business services, like cloud-based accounting or invoicing services. Insurers can partner with these larger organizations to embed their cyber policy right into the business contract. Lawyer or medical associations are another good example. They often review policies and services so that they can provide sound recommendations to their members. By working with an association to provide it with the policy that best fits its members or customers, insurers can help small and midsize businesses forgo the burden of reviewing many different policies. These organizations, as experts in the field, will help businesses opt into the cyber policy that fits their needs to ensure they have coverage. Affinity cyber programs can also offer businesses the comfort of a community. Organizations make things easier for member businesses by educating them on cyber risks and insurance terms that are specific to the coverage that “people like me” generally need. Working with brokers is an important aspect of an affinity strategy. There are around 29 million small businesses in the U.S., and most are drastically uninsured and underprotected. Brokers serve a wide number of clients, and, by partnering with brokers to design the coverage that best meets the needs of an affinity sponsor, insurers can reach many businesses through one partnership. A key challenge that insurance companies will face as they develop affinity strategies is education. With the average cyber attack of an SMB estimated to cost $160,000, many businesses that are the victim of an attack do not survive. But, just 33% of SMBs have cyber liability insurance. What few SMBs realize is that larger corporations often require cyber insurance to do business with smaller organizations, and it can be a surprisingly affordable and accessible line of insurance for SMBs. Insurance companies need to first work to educate professional services, professional organizations and brokers on the importance of cyber insurance to develop affinity partnerships. See also: The New Cyber Insurance Paradigm   Affinity organizations and SMBs will be looking for insurance partners that most effectively solve cyber risk. These groups will look at cyber insurers to see if they can provide broad coverage, quickly and accurately assess risk and offer prevention and monitoring tools, all at a competitive price. By working to educate groups on the importance of cyber insurance, and by forming affinity partnerships, insurance companies can help SMBs better manage their cyber exposure. Cyber attacks are not a matter of “if,” but of “when.” As the market for cyber policies increases and develops, insurers need to reach as many businesses as possible, and affinity partnerships can help close this gap and get SMBs covered.

Transforming the customer experience is a powerful way for an organization to shift and bring about quantum change, improving retention without huge IT investments that take years. A better customer experience will optimize operations, as well. In all my years of working in insurance and technology, I have never experienced anything with such power and potential as changing the perspective on customer experience. It all begins with shifting away from the traditional inside-out focus, driven by customer service, and flipping the lens toward an outside-in focus driven by empathy and the customer experience. And it does not matter who you call the customer: the policyholder or agents and other distribution partners, or even other stakeholders, as well. See also: Customer Experience Gets a Major Facelift   The new approach requires understanding the customers’ roles and motivations, goals and pain points to begin to have an empathy that drives a new and different operational response. That response must include a redesign for the ease and quality of customer interactions and deliver value in each and across all interactions. With empathy as an integral part of the lens, the conversation changes. With the common goal being the customer, silos are broken down, and organizations are changed. It’s quite powerful. SMA believes that eight customer-experience areas need attention and investment as your company launches into and matures in CX. Embracing customer experience throughout an organization requires transforming traditional strategies, workflows, processes and technologies in each of the areas so that they become an organic part of who you are, what you do and how you do it. The eight areas are: Advanced UX Designs, Customer Analytics, the Voice of the Customer Empowerment, Customer-Experience-Driven Metrics, Customer Journey Mapping, the Service Blueprint, the Customer Experience Playbook and the Culture Shift from Service to Experience.

SMA has recently released a report that assesses each area in terms of insurers’ investment levels, maturity levels, the business areas that will be most affected and current or emerging trends in each area for commercial lines insurers: 8 Critical Investments for Customer Experience Excellence: State of Commercial Lines Investments, Adoption and Maturity.

How to start? Education is the first step toward advancing and embracing customer experience across the enterprise. Understanding the customer is the only sure way to be able to provide customers with the experiences that they want – and the experiences that will cement the relationship of trust and loyalty between the insurer and the customer. See also: 3 Ways to Optimize Customer Experience   The importance of empathy cannot be understated. Every effort made by insurers to put themselves in the shoes of the customer will result in better customer experiences. And the goal to give customers excellence in service goes beyond supplying mere satisfaction. The key is to infuse empathy into the insurer-customer relationship. And that involves caring, understanding, personalization and commitment. The technologies, resources and initiatives deployed to this end will benefit the customers – as well as insurers as they position for success in the digital, connected world.

Life insurance might be the slowest vertical to adopt new technology, but it is not immune to changes that are affecting the industry. The market is changing, demanding insurance that’s easier to purchase, more personalized and tailored in a way it never has been before. A 2018 study by MarketWatch showed over 40% of Americans own no form of life insurance, making competition for this uninsured population fierce. The life insurers that find a way to evolve in meaningful ways will have an edge over the competition when it comes to customer acquisition and retention. Life insurers might consider adjusting how they engage the customer, such as through digital servicing and customer engagement that goes beyond a simple yearly bill. What’s clear to forward-thinking insurers is how pricing transformation presents a massive opportunity to stimulate growth in this regard. How the pricing process affects the sales process and customer experience Typically, pricing is only considered when a life insurer’s actuarial team is due to run a pricing exercise. The exercise generates a price that suits the insurer’s goals, it goes out to market and pricing is forgotten until the next exercise. However, the consequences to this approach can lead to carriers going to market with sub-optimal rates. See also: How to Resuscitate Life Insurance   Price's significance doesn’t diminish between pricing exercises. The market changes constantly, but the average life insurer’s pricing processes aren’t designed to keep up. How the pricing process exists today, and why it’s not working The problem with the life insurance pricing process boils down to how intensely manual it is. The standard pricing process used by most life insurers consists of an actuarial system and good old Excel. The actuarial system works as a projection system, modeling calculations and assumptions to deliver a price that incorporates strategic objectives. Excel works as a Swiss Army knife, incorporating policyholder and competitive data, as well as analyzing the results of the actuarial system. Life insurers’ actuarial teams run these two systems separately in a manual process, taking one set of goals/constraints set by the insurer and deriving the best price based on that specific setting. This is where the problem occurs. While this current system does work and has done so for a long time, it is sub-optimal, especially in a market as competitive as today’s. Remember that one set of goals/constraints that helps determine the sweet spot, the ideal price, for the market today? A life insurer can see exactly what price it needs at that specific moment, but no further. The system pinpoints one spot on a graph but can’t draw the trajectory it’s on. This trajectory has a name: the efficient frontier. Whenever an insurer creates a price with the traditional process, it's typically landing below the efficient frontier right off the bat, although the insurer might not necessarily realize this. The inability to see beyond the specific price this process creates also means an insurer’s ability to adjust based on strategic objectives may be limited. With the right pricing tool, a life insurer has the opportunity to see its entire range of possible prices based on the company’s financial goals, each slightly different depending on the constraints/goals. It’s the great "what if" scenario, except it’s every "what if" scenario all at once, clearly laid out for an insurer to analyze. The efficient frontier is the optimal pricing range depending on an insurer’s objectives; without it, it’s impossible to see the forest for the trees. How pricing transformation benefits a life insurer There isn’t a real downside. While some transformations or implementations can take years and millions to achieve, investing in the right pricing software, philosophy and process generates a significant ROI for insurers and quickly affects market position. See also: Selling Insurance in a Commoditized World   A flexible system that shows a variety of pricing strategies an insurer can take to maximize sales, margin or competitive position constantly enables experimentation to ensure pricing reflects the market, competitor pricing and consumer attitudes. Such a system even allows for the evaluation of an insurer’s strategic goals, and whether those are optimized for success in the market. All this can be achieved with minimal resources with the right pricing tool. Not only does it automate an intensely manual process, but it delivers more insights and flexibility and frees your actuarial team to focus on adding further value, with complex product pricing or long-term pricing strategy. The efficient frontier is the difference between having the perfect price 70% of the time and 100% of the time. Why not hit the bull's eye every time your product goes to market?

A tiger never changes its stripes. But is this true of life insurance companies? They’re good at selling through distribution, but there is a large pool of younger generations that must not be overlooked. This is where digital distribution comes in -- digitizing the whole process end-to-end, from improving the sales process through to identifying new target audiences. But how can this actually work in practice? And what are the barriers for life insurance firms? Digital distribution is often conceived of too narrowly – something akin to "we’ll market via social media," with little additional thought. In reality, the use of digital has multiple applications right through the whole sales process. First, there is the question of funneling new customers into the sales process - getting people aware, interested and to the door. The insurance industry has a real opportunity here to supplement its traditional reliance on agents and intermediaries with direct-to-customer marketing through all manner of online engagement. But rather a one-off initiative, long-term success depends on creating a virtuous cycle. Any company that moves into digital sales and marketing will find itself with an influx of new data. This needs to be stored, analyzed and used in a sophisticated way to inform future marketing, in terms of whom to target, how and when. It needs to be a continuing process. Second, there’s the sales process itself, which is still fairly archaic and often involves reams of paperwork with incomprehensible or irrelevant detail (from the customer’s point of view). Embracing digital distribution means giving new customers the ability to sign up to a policy in around five minutes maximum, via a simple, slick and intuitive mobile app that doesn’t overload the user with information. Third – and most often overlooked – is the role digital can play in engaging, retaining and upselling to existing customers, those who are already through the door. One example of this is what we call reciprocal intelligence, whereby, instead of the data flow being entirely one way (from customer to company), the insurer gives something back. For instance, if a consumer is using wearable apps to monitor fitness levels for a policy, the insurer should provide information back -- if the average resting heart rate has improved, or about the level of subsequent health risk that comes with certain lifestyles. See also: Digital Innovation in Life Insurance   The main misconception with digital distribution is that it’s all about replacing traditional marketing. In reality, it’s an opportunity to supplement the more traditional approaches and start to tap into an entirely new set of customers. The more traditional, agency-based model does still works well at engaging and selling to the type of customer it has always favored – asset-rich households. However, this pool of revenue is shrinking, and younger, less financially secure generations are far less inclined to purchase insurance through traditional channels. It is in tapping this relatively untapped pool of customers – and thus growing the overall pool of potential revenue – that digital distribution will come into its own. Another misconception is that digital distribution brings channel conflict. A few years ago, this was a dominating fear, and the main reason behind a lot of companies’ reluctance to adopt direct, digital models. But the fear was largely based on the misconception that both strategies would be targeting the same audience. This isn’t the case. On the contrary, embracing the digital side can make the traditional component more efficient and effective. The data and insights generated on the digital side can be used to inform and improve marketing and outreach on the traditional side in a way that was too expensive before. There’s more synergy than conflict. Of course, there are challenges for life insurance carriers looking to digitize. First is the question of technology and infrastructure, of making the investment required to ensure the company has the means to execute these quite unfamiliar, data-heavy digital strategies - whether that be through replacing or upgrading in-house systems, or through partnering with technology firms. There is also the question of talent and company culture. Fully embracing digital means processing large amounts of data, then knowing how to use it to maximum effect. This will require hiring people who are tech-savvy and know how to navigate, for instance, social media or data analytics. The skills and aptitudes involved are quite alien to many insurance firms and will involve hiring new types of employees at all levels. Any insurance firm that wants to do the work entirely in-house will have to, to some extent, become a tech firm – and that’s a big cultural leap. There’s also the inconvenient fact that insurance is not exactly the first sector that younger tech wizards think of when deciding on a career – firms will need to think about how to make themselves appealing to this kind of talent and bridge the gap. There is also the matter of digital distribution affecting the carriers’ risk profile. The main hazard from a risk perspective is the loss of human judgment when bringing customers onboard. The digital approach is about automation and volume – what comes through the door is a set of data points. There isn’t an agent talking to customers, getting to know them in a more rounded way. This is far from an insurmountable problem, but it does introduce the potential for new risks coming on board to not be screened as well as they would be via the traditional approach. It means learning new ways to screen for risks. The main things an insurer needs to understand about new customers are their financial status, their health and whether they truly need the product in question. This evaluation has to be done differently, rather than relying on the expert judgment of agents – any digital onboarding process needs to incorporate a way of both capturing and assessing information in a reliable fashion. This further underlines the point that digital and traditional should be seen as complementary rather than mutually exclusive – ultimately a human element will always be needed to address this type of risk. The key is finding a way to integrate the two, to ensure there’s an aspect of human intelligence built in. Life insurers are starting to embrace the shifting sands and are looking to digitize. Some firms want to build their own digital capabilities but recognize they don’t know where to start, and so they bring in a tech firm to advise. Other firms are partnering with tech firms to outsource the function. In these cases, the insurtech firm gets ‘bolted on’ to the insurance company, bringing its own talent and essentially acting as that company’s digital department. See also: A Game Changer for Digital Innovation The relationship between traditional insurers and smaller insurtech outfits has changed considerably over the last couple of years. Whereas many insurers initially thought they’d be competing directly against a new generation of disruptive fintech startups, a far more collaborative dynamic has now emerged. This makes a lot of sense – the two sectors bring very different yet complementary capabilities to the table, and have advantages with different markets and consumer audiences. Life insurers’ traditional revenue pool does have some life in it yet. But firms that are not just looking to survive but to thrive, at the very least, need to understand their customers better, and be more up to speed with modern consumer behavior. This doesn’t necessarily mean they have to go down the direct-to-customer route, but adaption is needed to unlock the efficiencies that digital can enable and to bring approaches in line with expectations consumers now have. Relying on traditional messages and systems limits the potential market, and will eventually be obsolete. Digital distribution is just one aspect of the modernization of the insurance industry that is, in the long run, inevitable. Those that don’t adapt will be left behind.