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10 Steps to Successful Insurance Program

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

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

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

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

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

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

See also: Insurance Innovation’s Growth Challenge   

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

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

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

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

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

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

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

See also: Is Buying Insurance Like Ordering Food?   

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

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

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

CJ Lotter

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CJ Lotter

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

Health Benefits of Smart Appliances

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

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

Q2 Progress at Root, Lemonade, Metromile

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

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

Fixing the EMT Crisis in Rural America

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

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

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

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

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

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

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

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

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

See also: Musings on the Future of Driverless Vehicles  

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

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

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

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

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

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

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

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

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

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

See also: Using High-Resolution Data for Flood Risk  

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

Daniel Miller

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Daniel Miller

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

New Guidelines for Preventing Suicides

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

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

Sally Spencer-Thomas

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Sally Spencer-Thomas

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

Jodi Jacobson Frey

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Jodi Jacobson Frey

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

Need for Context in Assessing Flood Risk

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

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

Race Is on for Bots in Workers' Comp

Administrative costs in workers' comp can be enormous, but bots can shorten many procedures to mere minutes or even seconds.

The thoroughbred horse Spring Racing Carnival is in full swing in the state of Victoria, Australia, culminating in the running of the Melbourne Cup, “the race that stops a nation.” Attendance at what is more akin to a “garden party” setting can well exceed 100,000 on Derby Day, Oaks Day and Melbourne Cup Day, and there are plenty of on-course bookmakers in the Betting Ring ready to offer odds to the eager punter. Bookmakers, like insurance underwriters, make their profit from risk by estimating the probability of an event occurring. This is reflected through the bookmaker’s odds and the rates charged by underwriters. The traditional method of managing a balanced book has been as much an art as a science combining deep research, risk parameters, instinct and psychological management, which is gradually changing by taking advantage of emerging technologies. While bookmakers are forging ahead with the opportunities provided through technology, the insurance industry has lagged, providing an opportunity for others, known as insurtech companies, to revive some dormant approaches to distributing insurance products. Two such companies are Lemonade in the U.S. and Huddle in Australia. Lemonade and Huddle are not insurance companies per se, but rather underwriting agencies that have taken advantage of emerging technologies, including the use of bots to deliver and service coverages on behalf of an insurance company, the underwriter of risks. For example, Huddle is an underwriting agency for Hollard Insurance, delivering and servicing three of Hollard’s insurance coverages in Australia: private motor vehicle, home and travel insurance. Lemonade Insurance Agency sells and services homeowners and renters insurance coverage insured by Lemonade Insurance Company in the U.S. See also: 7 Keys for Automated Event Response   Bots can be equally and effectively applied to tasks that are structurally repetitive such as in workers’ compensation, where, for example, in the vast majority of cases to determine whether an incident is AOE/COE (Arising Out of Employment/Course of Employment) a “yes” or “no” answer is required to nine questions on average. Using bots can reduce this effort to just seconds, and for the 75% of all claims that are either medical only or short-period lost-time claims, processing times can be reduced to mere minutes. Bots also provide the ideal opportunity for introducing machine learning and artificial intelligence into workers’ compensation claims. For example, bots can be applied to monitoring the progress of an injured worker’s recovery and, if necessary, suggest revised treatment plans. Adversarial behavior is not uncommon in this area, and bots can be used to alert and prevent a likely occurrence. Returning an injured worker to the workforce can be a challenging process. Bots can assist in developing a road map. Also, as fraud is an ever-increasing problem in workers’ compensation, a further benefit to introducing bots is that their visibility in monitoring the processes can act as one of the best deterrents. While some may say these tasks are better handled by claims personnel, administrative costs can be exorbitant, especially in California. ULAE (unallocated loss adjustment expenses) and ALAE (allocated loss adjustment expenses) can account for around 40% of claims costs, which can be dramatically reduced with bots. Whether current claims administrators adopt this approach remains to be seen, but insurtechs are embracing it and will challenge existing third party administrators for marketshare by providing a better service at a much lower cost. Insurtechs could equally challenge the need for an insurance company’s in-house claims department. Between now and 2023, it has been suggested, investors will be investing in insurtech startups like eager punters placing a bet on their favorite horse. However, as with betting on a horse race, there is a high probability that a number of insurtechs will be scratched from the race due to poor performance, and, for those remaining, the race conditions may be challenging. Only those insurtechs with agility and stamina will make it to the finish line. The race is on.

John Bobik

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John Bobik

John Bobik has actively participated in establishing disability insurance operations during an insurance career spanning 35 years, with emphasis on workers' compensation in the U.S., Argentina, Hong Kong, Australia and New Zealand.

The Necessary Tension Between Old and New Tech

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Last week's news that the U.S. military was retiring a 50-year-old system of 8-inch floppy disks that helped control the nuclear arsenal reminded me of my own brush with outdated technology that could have led to Armageddon. 

I was waiting to be interviewed by the History Channel for a special on the early days of the personal computer and was sitting on a couch at the front of a warehouse at Moffett Field that was the temporary home for items that now populate the Computer History Museum down the road in Mountain View, CA. In front of me was a coffee table that consisted of a round piece of clear plexiglass on top of a large, hollow cylinder full of wiring. 

Was there a story behind that cylinder? I asked the museum curator.

Oh, he said, that's the guidance system from the nosecone of a Minuteman missile from the 1960s. 

Yikes. That thing was supposed to accurately drop a nuclear warhead on a specific spot in the Soviet Union? It looked like one good kick or bit of turbulence would have dislodged enough wiring that the warhead would have landed on Tokyo, or Topeka, or would have just blown up in the missile silo.  

But that nosecone turns out to be a good metaphor for how to handle information systems that simply can't lead to an error—including many in insurance.

Now, I'm not conflating any insurance error with Armageddon—no matter how much General Electric's miscalculations on long-term care might feel like doomsday for a company that long was one of the world's most-admired. But the long tail of many insurance contracts creates unusual pressure to avoid mistakes, as do regulatory watchdogs and the desire to treat customers as well as possible in their moment of need, when they have a loss and file a claim.

So, let's look at that nosecone. 

The wiring was an aging technology even when implemented in the nosecone I saw and became positively antiquated as the years went along, given that guidance systems, driven by computer technology, have doubled in capability roughly ever year and a half since the '50s. But the wiring had been thoroughly tested, and it worked, once it was "ruggedized" enough to withstand the rigors of traveling through space. Sure, new guidance systems were demonstrably better, but would you bet the defense of the U.S. on their reliability? The fate of the world?

The same concern drove the technology decisions behind the moon landing in 1969. My microwave oven has far more computing power than Apollo 11, but the mostly hard-wired technology for the lunar mission had been tested in space, so advances in technology could wait for later programs. 

Silicon Valley, despite its ethos about being on the cutting edge, sometimes takes the same, conservative approach. When I covered Intel for the Wall Street Journal, an executive described for me a process the company calls Copy Exactly. The idea made no sense at first blush: The company would build a chip-manufacturing facility by exactly copying an existing fab, even though Intel had learned in that existing fab how to correct all sorts of inefficiencies by improving a myriad of processes. Why not build all those updates into the new fab from the get-go? Because all the processes interact, and making a bunch of changes at once led to new sorts of problems popping up. Better to copy exactly and introduce the improvements one at a time, in a controlled way.

How do the military, NASA and Intel approaches apply to insurance?

At a high level, they suggest leaving legacy systems alone as much as possible. Yes, better technology is out there, and I'm sure that the many companies selling new software can make a compelling case for updating, but legacy systems are always a mess.

In the biggest technology transition that I've covered—the move from the mainframe era to "client-server" in the 1980s and 1990s—the quick, big wins went to those that focused less on the server piece and more on the client piece, the front end. Technology advances, driven by all those hungry insurtechs out there, allow for all kinds of ways to make improvements, especially in any process that touches a customer, without having to wade through all the back-end complexity.

Focusing on front-end technologies won't let you save humanity, but you could avoid some thorny issues and produce better results faster.

Cheers,

Paul Carroll
Editor-in-Chief

Paul Carroll

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Paul Carroll

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

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

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

Insurance Innovation's Growth Challenge

Building an environment that offers low-cost, no-code functionality via API integration gives insurers real opportunity.

Pushed by internal and external process stakeholders, customers and board directives to drive innovation and growth in increasingly competitive and often shrinking markets, insurance company CEOs are not sleeping much these days. Topping the list of insurance CEO nightmares is a world where it is impossible to access new markets with new products that have plentiful, ready-to-buy customers. In a world where new ideas and revenue streams are difficult to find, at best, nightmares can quickly become reality. Technology is often held up as the single silver bullet for all of the insurance industry’s problems, but the best minds know that the greatest opportunities surface when insurtech startups partner with incumbent insurance organizations and ambitious managing general agencies (MGAs) to promote new business models, introduce products and provide solutions actually applicable to the world’s new ways of working. Industry veterans can easily identify the challenges involved in trying to build and launch insurance products, especially in a regulatory environment as complex as that in the U.S. Even when forward-thinking underwriters and marketers get time to ideate, it takes six months and a $500,000 investment (or more) to take a product to market, and that makes an iron-clad business case to scale the efforts hard to see. This means many promising opportunities will fall by the wayside. See also: Focusing Innovation on Real Impact   Traditionally, insurers often considered simplification and amalgamation of technology solutions onto a single platform or to a single provider as ideal. It seems reasonable to assume that it is easier to launch products and provide a better customer experience when there is only one system to consult and one single source of data for policy information, right? Unfortunately, this quite often proves to be an incorrect assumption, and, not only do insurers suffer when the selected single platform becomes a bottleneck, but the journey to get there is also high-risk and high-cost. In fact, rarely does everything else get switched off, and, even if that is achieved, inevitable weaknesses get amplified (because EVERY platform has weaknesses). No Single Silver Bullet Today, insurance buyers expect 24x7 access to information, instant delivery of products, outstanding customer experience and rapid claims resolution. It is not realistic to expect a single solution or platform to deliver every capability and to do it in a seamless, high-quality way. Often platforms focus on back-office functionality, and strength in this area is important; however, the real value for insurers sits at the actual customer interface. Insurance buyers, whether commercial, personal or intermediary, don’t care how well the back-end technology feeds accounting and underwriting systems. That part is, in effect, the insurers’ problem, and not the producer's or policyholder's problem. A solution that provides a single view of the customer and integration with back-office systems will ensure smoother operations, no doubt. But this shouldn’t be the only driver for what insurers use to take products to market. The truth is, no single platform, technology or solution can effectively handle both front-end and back-end functions – no matter what the technology people may say. As with most other things, the best solution to complex requirements is to create an ecosystem of solutions to deliver appropriately. And, while “appropriate” delivery may not be the most dynamic of terms, the concept is far more exciting. In very few other areas of business or life would the technology tool be allowed to determine what can be accomplished. The all-too-often-used “that’s not the way the system works” mentality and heavy lift of customizing monolithic legacy systems means that the entrepreneurial spirit erodes. Instead of innovation, diversification and growth, insurers are forced to settle for roughly on-time, hopefully on-budget and various not-ideal workarounds. Increasingly, however, insurers are waking up, and a number of dynamic businesses are combining legacy and insurtech for more agile, flexible solutions. These digital, API-enabled, front-end-focused platforms combined with sophisticated underwriting allow insurers to rapidly address the challenges by creating portals and functionality that sit outside the archaic change request process, where IT road maps are locked down months in advance, limiting any opportunistic ventures. See also: The Components of Innovation Capital Building an environment that offers low-cost, no-code functionality via API integration gives insurers real choice. Internal leaders and growth champions will have tangible ways to access new markets, rapidly develop products and streamline processes. Ultimately, the real barriers to innovation are not modern cloud native systems or a lack of ideas but legacy mindsets and an inability to understand or want to do things in a different way.

Blurring Boundaries Drive Innovation

To drive innovation, Aegon says to leverage the blurring boundaries -- and pack your bags and move to Asia.

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Relevant change and speed can only be achieved through investing and partnering with fintech and insurtech players. That’s why we asked Marco Keim, responsible for Aegon Continental Europe and member of the management board of Aegon, to share his thoughts. In our view, he is one of the boardroom executives who not only advocate change but really support and push innovation first-hand. According to Marco, to drive innovation we should leverage the blurring boundaries. And we should pack our bags and move to Asia. Aegon is a global financial services company and currently present in 20 countries. The U.S. unit is the largest; after that comes the Netherlands. The company serves over 29 million customers worldwide and generates over €800 billion of revenue-generating investment. Over 26,000 employees worldwide help Aegon achieve its purpose of "helping people achieve a lifetime of financial security." Let us start by talking a bit about Aegon. Aegon’s purpose is to help people achieve a lifetime of financial security. Can you tell a bit more about that? Marco: “We re-thought our purpose after the financial crisis, more than 10 years ago. We asked ourselves: ‘As an insurance industry, what would add value to customers?’ It’s not just about building better products than competitors or whatever. We realized that, even though we have a lot of financial knowledge to share, most customers are not interested in financial matters. 90% of customers in Western Europe, but probably also in Asia and other parts of the world, are not busy thinking about their financial situation. They spend more time buying a new pair of jeans than on thinking how to improve their financial situation with financial products.” What do you do to bridge that gap? Marco: “We decided to use our knowledge to help customers make better decisions themselves. In our view, that is our reason for being. As a result of retreating governments and corporations, more and more of our customers are responsible themselves for their retirement. Most of them don't even realize that. Here in the Netherlands, most Dutch believe they will get 70% of their final wage as a pension. Which is really not the case. This is the gap we need to address.” So, you see that the need for these services is bigger than ever. But we also notice that, in certain markets, sometimes even the same markets where the latent need is getting bigger, actual demand is declining. How do you get to the customer in the right way? Marco: “It’s about digital and data. This for us is the future, the Digital Insurance Agenda. With all due respect, if you're not digital in these days.… It’s as basic as plumbing. And data is where we can add much more value. To use our data, which we already have as an industry, and combine it with external data, we can be much more relevant for customers -- at the right moment with the right information, that is the nut that needs to be cracked. And a growing number of initiatives, like PSD2 in the banking area, enable us to have more access to data.” In Asia, you already see digital platforms joining with insurers to share data for better underwriting and better targeting. Marco: “Next to data and digital, you need an insurance product, but you need more than just that. Recently, I did a presentation for the insurance practice leaders of a global consulting firm. I told them that, if they would stick to insurance, they probably would face problems going forward. Because I believe you should not look at the opportunities strictly from an insurance point of view. Boundaries are blurring. Our business is much more than insurance. We are in financial services, but a customer doesn't mind whether the solution comes from an asset manager, a bank or an insurer. We need to broaden insurance to financial services.” Could you give an example? Marco: “Well, if you take our company in the Netherlands, our new business hardly comes from insurance. It is mortgages; we are a  third-party administrator for pension providers. So, what formerly was an insurer now is a completely different company. That’s also reflected in our balance sheet: €316 billion assets under management. You may think we are more of an asset manager than an insurer.” See also: A Game Changer for Digital Innovation   So, a key takeaway is that the future is about blurring boundaries. Then the obvious question would be, how do you manage this change? Marco: “At Aegon, we use what we’ve coined the ‘core - satellite - universe’ approach. About 10 years ago, when I started with innovation, we first started in-house. We had some ideas, we wanted to create a new digital in-house bank, but it didn’t work out as we hoped for. Because in-house innovation is very difficult, almost impossible." Most incumbents are not the best inventors in the world ... Marco: “Indeed! So, we decided to do this differently. We realized that within our own environment the existing organisation is less open to everything that is new. That’s why we decided to create companies separate from the existing organisation that were still 100%-owned. One of these companies was Knab, a digital bank, which was set up at a different location and in a fully remote fashion with no interference from existing business. It focuses on individuals and the self-employed, and it is quite successful. It is the only profitable digital bank in Europe, and it has the highest NPS [Net Promoter Score]. But we actually made a very interesting mistake.  We thought we wanted to disrupt the banks by offering more transparency, not hiding the hidden costs. So we decided to charge more than regular banks. Instead of €5 a month, we’d charge €15 a month but without hidden costs other banks charged, well in excess of the €15 a month. It turned out to be a disaster! The Dutch press opened with the line: 'Knab, the most expensive bank of the Netherlands.' We decided to pivot, go back to the €5, and now I dare to say it is quite a successful bank: Its rapidly growing customer base shows that it is a very attractive proposition for the self-employed, which is a growing market segment across the world.” Speaking of blurring boundaries, you have an interesting partnership with BCD Travel, with whom you launched GoBear in Asia. Can you tell a bit more about that? Marco: “A lot of corporates invite us to do something together. That’s what happened with BCD, which is a worldwide travel agency with a lot of experience in Asia. Initially, we discussed selling travel insurance. Long story short, that’s how GoBear got started. Conceptually, it was more or less a copy of Skyscanner, but it is pivoting more to a financial supermarket than to an aggregator. It is now operating in seven Asian countries. Data is the key here. We own 50%.” Based on your experience, should you always own 100% of a startup when you have the opportunity? Marco: “My answer is clearly no. Having a 50% private equity partner disciplined us.” At DIA, we see insurtechs operating in different business lines using the latest technologies. How do you, as an incumbent, make sure to have access to this cutting-edge knowledge? Marco: “We realized we could never have access to that ourselves. That’s why we started Transamerica Ventures as one of the first corporate insurtech VCs in the industry. Here, we are looking for these cutting-edge companies, series A startups, that have certain very specific, extraordinary and technology-driven knowledge. We always look for a link with an Aegon entity so that we combine knowledge from outside with that of our existing businesses. We want to learn and make use of what is happening outside in the world, because we don't have the skills to develop it ourselves.” What about the companies selected, are you looking for specific solutions? Can you share a few names of the companies in the portfolio of Transamerica Ventures?  Marco: “Transamerica Ventures itself wants to have a return on the investments, of course. So, our criteria are that, as Aegon, we should be able to make use of their solutions. Let me share some examples: Everplans developed a digital solution for estate planning. Our agents use this to increase interaction with customers and improve cross-sell and deep sell. By the way, here we own less than 5%, as we don’t strive for major influence or to have board seats. Nextcapital is a robo adviser that we use for expiring pension policies. In case you have a defined contribution scheme, it supports in where to invest the money. A very innovative solution that we integrated in our core systems. H2O.ai is an AI company. Almost seven units in Aegon are using their technology to advance AI. In all three cases, we invested in the company but also helped them to get access to the corporate, to create use cases and to benefit from all the knowledge and experience we have. And in return we get access to their technology.” More incumbents these days are setting up venture funds. What are your thoughts about that? Marco: “There are a few challenges to deal with. Take the cultural challenge. It is still very difficult to get our own people excited about ideas they didn't invent themselves. But yes, it is true that more and more companies are creating such funds. So, if I would be a startup, I would really look at how sincere the fund is, what proof points they can show you, for instance on how to leverage their customer base. These days, startups have a choice. It is Aegon’s ambition to be the best partner and the best investor in series A for startups. We show the proof points. But we also show the cases where for whatever reason it didn't work out." Recently, you set up the Aegon Growth Capital, a new fund investing in expansion and growth capital for fintech and insurtech companies. How did that come about? Marco: “Apart from blurring boundaries, the unbundling of the value chain is also very important. Revenue pools are created outside our industry by companies now rapidly scaling up. For us, it’s very clear what our role is, what we do and what we shouldn’t do. That’s why we created a separate fund. This fund is run by professionals, and they manage it like a fund, and we, as a shareholder, are at a distance. So, if companies are doing business commercially with Aegon, the people they deal with are different from those who invest in their expansion and own the shares. Also, by using the fund, we don’t finance these investments from a budget. This avoids short-term discussions because at some point the investment could be perceived as an expense. We separate the shareholders’ discussions from the incumbent businesses to avoid interference. Gijs Jeuken, CEO of Aegon Growth, headed a company financed by a private equity firm himself, which after a steep growth path was acquired by Aegon. He knows first-hand the benefits of having access to growth equity, and the other side of the story.” That’s an interesting lesson; if the incumbents start to interfere, in essence the whole system dies … Marco: “We asked ourselves: ‘What is the future'? Our strong belief is that our type of companies are not able to reinvent themselves. You can put a lot of money in innovation labs and hiring people, but innovation is already happening outside. So why not look and invest in those companies that potentially, not per se, might be the future of our company. We learned a lot in the process. For instance - and this may sound a bit cynical, but it is the truth - if we own 50% or more we run the risk to kill the company. We learned this the hard way. So, our Growth Fund rather has a stake of, let's say 20-40%, and has private equity in it as well for financial discipline. Then, hopefully, we reach a point in time to get a bigger stake if the company is already sufficiently strong, and at least have made a good investment decision by backing the right entrepreneurs.” See also: Focusing Innovation on Real Impact   So, you invest into companies you really believe in, and that will potentially be the future of Aegon. How does this work in practice? Marco: “We focus on four segments. We strongly believe that the value chain in the financial industry will be completely disrupted. Only if you're extremely strong in every part of the value chain will you survive. Most of us are not strong in every part of the value chain, so we have to outsource it. Don’t try to own everything. Then the question is: 'Which part of the value chain is the most interesting part?' We believe those that are closest to the customer potentially create the biggest value. That's why two of the focus areas of the Growth Fund are digital/omni-channel distribution and customer engagement, content marketing and platforms. Furthermore, we focus on business process optimization and automation to decide on the new way of getting to customers in an efficient way, making use of digital and data, and still have the right products for the customer. Then we have asset and wealth management because, in a world where governments are retreating, it's very clear that customers have to do more themselves.” One of the main overarching themes of the 2019 DIA conferences is "East Meets West," because we believe there is so much we can learn from one another. What is your view on the developments happening in Asia? Marco: “I have the privilege to travel to Asia about 10 times a year. Every time, it is a mind-boggling experience, and I’m flabbergasted when I come back. That’s where I get most of my energy from! The speed of change in Asia.... Here in Europe and America, we are somewhat behind the curve compared with what's happening over there! We must be careful not to become sitting ducks. Granted, Asian players can benefit from the big numbers, more (young) people, they don't have GDPR -- and I can find many more excuses. But the real differentiator is that they are much more entrepreneurial. They just try and do and act. They leapfrog, and that is what really resonated with me. Also when it comes to blurring boundaries, you see that all over the place in Asia. You see the big Asian tech firms expanding, really building huge ecosystems. A nice example is Go-Jek, the ‘motor Uber’ of Indonesia. But when you look at their offering ... they have everything, from insurance to banking, and you can even book a massage via their Go-Life app! We see more and more incumbents like ourselves teaming up with them. We are doing the same in India. Because this is the future. When you say that we learn a lot from Asia, I can only confirm.” Any closing words for the DIA Community? Marco: “Let me end with three takeaways: First, interact as much as possible with startups, and enjoy. The DIA conferences are the perfect place for this. Secondly, don't look at our challenges only from an insurance perspective, watch the blurring boundaries. We are in financial services. A customer doesn't know who has a license, they want a solution for their problem. Finally, pack your bags! Move to Asia and try to learn!”

Roger Peverelli

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Roger Peverelli

Roger Peverelli is an author, speaker and consultant in digital customer engagement strategies and innovation, and how to work with fintechs and insurtechs for that purpose. He is a partner at consultancy firm VODW.

Reggy De Feniks

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Reggy De Feniks

Reggy de Feniks is an expert on digital customer engagement strategies and renowned consultant, speaker and author. Feniks co-wrote the worldwide bestseller “Reinventing Financial Services: What Consumers Expect From Future Banks and Insurers.”