The number of states that have legalized marijuana use continues to grow, as 33 states have already approved medical use, with 10 of those states having approved recreational use, as well. According to New Frontier Data, a leading cannabis market research and data analysis firm, the legal cannabis market is expected to grow to $25 billion by 2025. The industry reached $10.4 billion by 2018, with $10 billion of investments in North America, more than twice the amount of the last three years combined.​ Despite the trend toward legalization at the state level, marijuana remains a Schedule I controlled substance under federal law, thus creating the “Marijuana Policy Gap” as characterized by a March 2017 report of the Congressional Research Service, The Marijuana Policy Gap and the Path Forward. Under the Federal Controlled Substances Act (CSA), the cultivation, sale, distribution and possession of marijuana is illegal, irrespective of individual state constitutional provisions, statutes and regulations that legalize and regulate marijuana. The Marijuana Policy Gap is creating uncertainty as businesses consider whether, and in what capacity, to enter the legal marijuana industry. As with any other industry, marijuana-related businesses (MRBs) require adequate insurance coverage to protect against a wide range of risks. However, the Marijuana Policy Gap is serving to limit insurance options available to MRBs to smaller specialized insurers and the excess and surplus lines market, as larger admitted carriers remain cautious with respect to the exposure associated with underwriting marijuana-related risk. This uncertainty is due, in large part, to conflicting judicial opinions on the enforceability of insurance policies purporting to cover marijuana-related risk and the shifting approaches of the Department of Justice (DOJ) in its enforcement of the CSA. While principles of contract law generally prohibit courts from enforcing agreements that are illegal or against public policy, the current dichotomy between state and federal law creates an interesting and often confusing dynamic. See also: Legal Marijuana: An Insurance Perspective   This article will highlight this evolving dichotomy being created as courts attempt to balance the federal regulations deeming marijuana an illegal substance against those states that have determined that marijuana use provides certain benefits to their citizens. Under the Supremacy Clause of the U.S. Constitution, federal law generally preempts conflicting state law. This principle was central to a decision by the U.S. District Court for the District of Hawaii in 2012 in Tracy v. USAA Cas. Ins. Co., 2012 WL 928186, Civil No. 11-00487 LEK-KSC, March 16, 2012. In Tracy, the court held that USAA was not obligated to provide coverage under a homeowner’s policy for theft of an insured’s marijuana plants. In doing so, the court agreed with USAA’s argument that, although the insured’s possession and cultivation of marijuana for medical use was legal under Hawaii law, it was illegal under federal law and that federal law controlled based upon the Supremacy Clause. Thus, the court concluded that it was against public policy to force USAA to provide coverage for the illegal plants. The following year, the U.S. District Court of New Mexico in Hemphill v. Liberty Mut. Ins. Co., No. CIV 10-861 LH/RHS, at 4 (D.N.M. October 23. 2012), expressly adopted the court’s reasoning in Tracy, concluding that an insurer was not obligated to provide coverage for the use of medical marijuana. The court stated that it could not force an insurance company to cover medical expenses pertaining to use of a product that was illegal under federal law. However, the evolving approach of the U.S. Department of Justice (DOJ) toward lenient enforcement of the CSA in states that have legalized marijuana appears to be generating a shift in judicial philosophy on the enforceability of marijuana-related contracts and the coverage provided through insurance policies. In August 2013, a memorandum issued by then deputy-Attorney General James M. Cole stated that, as a matter of prosecutorial discretion, the DOJ would not prosecute federal marijuana offenses in states where marijuana was legal and where “strong and effective regulatory and enforcement systems” were implemented to control the cultivation and sale of marijuana. The “Cole Memorandum” noted that effective state regulation would probably address federal concerns regarding the threats that marijuana posed to public safety, thus obviating the need for federal enforcement. Against this backdrop, the U.S. District Court for the Northern District of California in Mann v. Gullickson, 2016 U.S. Dist. LEXIS 152125 (N.D. Ca. 2016) held, in a 2016 decision, that a stock purchase agreement for two companies that provided equipment and consulting services to the marijuana industry was enforceable. The court upheld the agreement notwithstanding the argument of the purchaser that the stock purchase agreement was void because it involved the sale of businesses engaged in activities that were illegal under federal law. The court further noted that, since Tracy was decided, the federal government had shifted its priorities from enforcement of the CSA in states that permit the use and cultivation of marijuana. The court observed that there had been an “erosion” of a clear and consistent federal policy toward CSA enforcement. As the federal government abandoned federal enforcement of the CSA prohibition on marijuana cultivation and sale by deferring to state enforcement, it apparently subordinated its interests in this arena to those of the states that have legalized marijuana. In another 2016 case, the U.S. District Court for the District of Colorado revisited the issue of whether a policy of insurance covering marijuana-related risk was void as against public policy and federal law. The court in Green Earth Wellness Ctr., LLC v. Atain Specialty Ins. Co., 163 F. Supp. 3d 821, United States District Court, D. Colorado (February 17, 2016), rejecting that notion and finding that the policy of insurance was enforceable, noted that the federal government had taken a “nuanced (and perhaps even erratic)” approach to enforcement of the CSA in states where marijuana was legal and regulated. In distinguishing Tracy, the court, as in Mann, emphasized the “erosion of any clear and consistent federal public policy” in the area of CSA enforcement since that case was decided. Courts continuing to look to DOJ policies and enforcement for guidance in crafting their approach regarding enforceability of marijuana-related contracts and insurance policies may continue to encounter confusion. In 2018, former Attorney General Jeff Sessions rescinded the Cole Memorandum, ostensibly signaling that more stringent enforcement of the CSA prohibition on marijuana would follow. However, Sessions resigned shortly thereafter, before any significant shift in DOJ prosecutorial practices. During his confirmation hearing, Attorney General William Barr pledged not to prosecute marijuana companies that comply with state laws. Nevertheless, Barr is not bound by that position, and he, or his eventual successors, have the prosecutorial discretion to engage in stronger enforcement of the CSA. If that happens, it could have a significant impact on insurers and their insureds, and more specifically, how courts analyze the enforceability of policies covering marijuana-related risk. See also: In the Weeds on Marijuana and WC   Clearly, the marijuana industry presents an exciting area of opportunities for both MRBs and insurers. Nevertheless, insurers considering entry into this marketplace to underwrite MRB-related risk should continue to monitor DOJ policies and their potential impact on the enforceability and coverages provided under marijuana-related insurance policies. The Marijuana Policy Gap will remain a source of confusion for businesses and insurers operating in this space. By remaining informed and educated on DOJ policies and judicial decisions, at both the federal and state level, those enterprises seeking to capitalize on the legal marijuana trend can more fully assess the potential risks and rewards, and will be able to arrive at the soundest business decisions.

It’s not hard to see how drivers with histories of driving violations pose a higher risk to insurers. However, there may be another side to the story that isn’t immediately captured: A considerable portion of major driving offenses are dismissed or downgraded in the U.S. court system. Today, 80% of drivers have access to programs that dismiss or downgrade their violations, which can obscure their driving history and mask dangerous behaviors. This means it’s important for insurers to stay abreast of new ways to help mitigate this risk and ensure they are providing customers with accurate quotes that capture the full risk profile. Downgraded or dismissed? What does it mean? Downgrades and dismissals can happen when courts make certain programs available. These programs are intended to ease the burden of costly tickets and ultimately help drivers stay licensed, insured and on the road. They can also take pressure off courtrooms and judges that are often backed up with cases. Unfortunately, as a result, people’s real driving violation histories may be disguised. In fact, according to TransUnion’s DriverRisk analysis, 57% of original major offenses, such as DUIs, are actually unobservable by insurers due to dismissals or downgrades. In the states evaluated, 27% of traffic tickets are outright dismissed. See also: Smart Home = Smart Insurer!  For example, in New Jersey, drivers can pay $250 to $350 to downgrade certain types of moving violations. A few states have programs for drivers facing a first-time DUI charge to have their case dismissed. For the cases not dismissed, these programs may add delays to the charge appearing on a state-issued driving record. Additionally, there are driving school programs available to drivers to dismiss or downgrade traffic tickets, or to remove points. There are also deferral or probation programs that can eliminate a violation from the state driving record. So, while drivers benefit from fewer points on their license, insurers are potentially mispricing the policies for drivers whose original violations may have been obscured. When insurers aren’t presented with the full picture, this can compromise how well premiums align with actual risks. To make things even worse, the DriverRisk study found that the more serious the violation is, the more likely it is to be dismissed or downgraded. The findings show that 41% of DUIs are likely to be dismissed, and distracted driving violations are dismissed 10% of the time. Without visibility into each driver’s actual behavior, insurers tend to spread the premium needed to pay losses associated with these risks across all policies. This means the base rate for the average driver typically ends up being higher, effectively subsidizing the premium for the drivers with downgraded and dismissed violations. Drivers with dismissed or downgraded violations are more likely to have a loss and a higher loss cost than drivers found guilty of the violation they were ticketed for. Details of Driving Violations It is possible and very important for insurers to gain deeper insight into original violation information for prospective and current customers, in addition to the final disposition decisions. Insurers should seek information that includes court record data so they can provide more accurate quotes and improve adhering to their underwriting guidelines. Implementing court record violation data solutions can enable insurers to capture valuable insight into: convictions from a prior state (which may be associated with a previous driver’s license number), regardless of a change in name or address; convictions while driving outside of the resident state; tickets with dispositions other than guilty; and tickets and violations that are still active (not yet adjudicated). See also: 5 Steps to Understand Distracted Driving   Court record violation data is an essential tool for insurers to develop accurate pricing and underwriting strategies. By understanding a fuller picture of violation history, insurers will be able to more effectively assess the risk of each driver and implement programs to capture the appropriate amount of premium dollars for riskier drivers while providing more affordable premiums to cleaner drivers. For additional information about TransUnion’s study findings and DriverRisk, please click here.

The personal lines segment of the insurance industry is quite active today, with many initiatives and projects underway across the value chain. For many, the objective goes beyond incremental improvements to positioning the company for fundamental transformation. The many projects planned or in progress fall into three categories: Digital Enablement, Core Transformation and Data/Analytics. A newly published SMA research report, Foundational Technologies in Personal Lines Insurance, details the projects and initiatives underway in 2019 and beyond. One of the major challenges we observe in personal lines is the struggle to balance the need to establish a modern, competitive foundation with incorporating new technologies to position for the future. Most insurers have very long lists of projects for things like enhancing portals; replacing or upgrading policy, billing or claim systems; and modernizing business intelligence solutions. These are the types of projects that SMA terms “foundational,” precisely because modern solutions in these areas are table stakes for success today. Incorporating innovative solutions from insurtechs and incumbent tech providers that leverage machine learning, the IoT, wearables, virtual payment technologies and more are highly desirable but difficult to build into operational plans. These advanced types of solutions are what SMA calls “transformational technologies” and will be the subject of a SMA research study and report. See also: Emerging Technology in Personal Lines   All the excitement and visibility tend to center on the transformational technologies, and there’s no question that there is tremendous potential for innovation that can create competitive advantage. Yet the No. 1 task for insurers today regarding technology is to ensure that the foundational technologies are in place to provide the levels of efficiency and effectiveness needed to compete while establishing a flexible base to build on. This is not to imply that insurers should wait to engage in any activity related to transformational technologies. On the contrary, it is imperative that insurers monitor, learn and experiment with new technologies that are most relevant for their business. Thus, the challenges of finding the right balance! One other aspect of technology strategy and plans should be explored: the need to implement foundational technology solutions that already have some embedded transformational tech. Policy systems can leverage chatbots and AI. Billing solutions can begin to accommodate more advanced payment methods. Claim systems should already be leveraging solutions that use machine learning for fraud. Many other examples could be cited, as well. Over time, the various transformational technologies will become foundational as many in the industry begin to incorporate them into their organizations. One by one, the advanced technologies will become table stakes, only to be replaced by a new set of transformational technologies, or at least by new, more sophisticated levels of the existing technologies. See also: Insurtech and Personal Lines   There are a wide variety of strategic choices that senior leadership teams must make today. Allocating scarce resources and budget dollars is as difficult as it ever has been, if not more so. However, the successful personal lines insurers in the digital age will be those that find the right blend of technologies of all manner to create flexible, responsive organizations. For more information, see the SMA research report, Foundational Technologies in Personal Lines: Investment, Adoption, and Business Areas.

With August approaching, football training camps (American football) are opening, and I can't wait. I am reminded of a conversation I recently had with a sports agent about what makes some coaches consistently successful. 

My conversation with Bruce Tollner, a founder of Rep 1 Sports who works with college and professional coaches, focused on the fact that most teams rise and fall on the strength of their leadership, and that's just as true of companies in the insurance industry. It's especially true when it comes to innovation. A.M. Best has made leadership a key component of its proposed innovation assessment process for insurers.

Many coaches will tell you that better players make them better coaches, and talent is certainly a huge part of any organization's success. Acquiring and maintaining talent is a challenge for leaders, and it's important on and off the field to have the right people in the right roles.

But, just as a winning basketball coach might not also be a strong football coach, not just anyone can effectively lead insurance innovation efforts. Subject matter expertise is crucial, not only to understand the game but also to apply perspective. A problem we observe is that sometimes the entrepreneurs, VCs and people whom incumbents hire for their innovation efforts have little to no insurance industry knowledge. The lack of experience and insight to assess technologies and generally connect the dots can limit results.

There is a big difference between people who hold leadership positions and those who are leaders. Leadership flows from the impact that leaders have on the organization, from their passion and how they inspire their teams.

What else makes a good leader?

A mantra of mine is that respect must run downhill before trust will run uphill. The point is that leaders who care about and value input from their teams will engender trust, resulting in a better-run, more-successful organization. Most great leaders listen and develop strategy based on a variety of inputs.

Great leaders then communicate strategy effectively, provide the resources to get the job done and grant authority to individuals to do the job. That last part is important, because assistant coaches and innovation leader can't constantly be glancing over their shoulders to see if the head coach or CEO is going to second guess them, override their decision or fire them.

Another leadership quality is resiliency. Bruce said coaches rarely find themselves in optimal conditions. Elements are always lacking or could be better. The best coaches still find ways to position themselves to succeed, through a consistent and continual process.

My wife is a coach at the college athletics level, and she says that passion for the job, a sense of service to others, commitment to the team and support from the organization are all critical.

When people in positions of leadership don't demonstrate a commitment to innovation, when they simply do innovation to check a box or delegate it to someone else and aren't personally invested, the results are usually disappointing.

In its draft innovation assessment process, A.M. Best emphasized how important leadership is to success. The score for a company depends on setting and communicating strategy, supporting the troops, providing resources and creating a structure and process for success. Best stated that "an enterprise is unlikely to have a high culture assessment if it does not have strong leadership."

I love sports. I love the competition. I love that there's always another game or another season, another opportunity to prove yourself. I like the sports analogy between winning coaches and successful insurance leadership because innovation is a never-ending game. Companies need to position the right talent, have an effective process and show commitment by senior leaders to succeed over the long term, not just in a single instance. Success must be nurtured and maintained; there's no quitting after one unsuccessful play, game or season.

Here's to football season, and here's to the insurance industry's innovation efforts. Wishing your team all the success they earn.

Cheers,

Wayne Allen
CEO

The opioid epidemic is a moral hazard of existential proportions. A test of the moral health of the insurance industry in which the question is, Will insurers acknowledge the severity of this threat by subsidizing better ways to treat this threat? Will insurers accept what patients concede and even cynics confess, that specific treatments for opioid addiction outside the U.S. are more effective than the many but mostly unsuccessful treatment options in the U.S.? Will insurers admit that it is more expensive to cover what does not work than it is to underwrite what returns people—healthy and strong—to the workforce? To ask these questions is to know that it is smarter to insure domestic tranquility by experiencing it abroad, that it is easier to promote the general welfare by supporting programs that lessen dependency on welfare, not because these programs are wrong, but because it is wrong to abandon tens of millions of people—including mothers and military veterans—to short, nasty and brutish lives of addiction. The answers to these questions are available to all. See also: Alternatives to Opioids for Pain Management   The answers, thanks to my correspondence with staffers at Clear Sky Recovery, raise the ultimate question of whether we will exist half-slave or half-free, whether we will succumb to the ravages of opioid addiction or avoid this descent altogether, whether we will cause our health to worsen or rally to the cause of health and wellness. What I ask of insurers is no different than what insurers should ask of themselves: help. Let us be unafraid to seek help. Let us also be aware that help is achievable, that help is available, that help is accessible. Let us free ourselves from the false promises of what is a racket rather than a legitimate means of rehabilitation, what with the bombardment of ads and commercials, what with the inundation of junk mail and junk science—an audiovisual overdose of empty words and meaningless slogans. Let us wake up to the reality of this situation, that we face a do-or-die decision; a dire choice, indeed. Either we do what is necessary, either we do what is right, or we plead guilty to the fast death of minds and the slow loss of bodies: a sight too painful to witness but too profound to ignore, a sight too traumatic to forget but sometimes too awful to recall. Either we unite against opioid addiction, or we allow our divisions to destroy us. Either we encourage patients to get treatment abroad, or we stop demanding that insurers pay for treatment whose efficacy is questionable and whose rate of failure is so high as to be unquestionable. We must choose what is just, in lieu of what is popular or convenient. See also: Is There an Answer to Opioid Crisis?   That standard should determine not only treatment for opioid addiction but how insurers treat all matters of health and wellness. With truth as our guide, we can stop the advance of opioid addiction. With insurers on our side, we can win this war.

In today’s insurance marketplace, the benefits of technology cannot be overstated; however, the dark side of technology—namely ransomware attacks—is now infiltrating self-insured municipalities. Ransomware attacks occur when criminals find a way into the organization, encrypt as much data as possible and then extort money from you to get your own data back. If the ransom is not paid, the criminals may delete your data altogether. There have been more than 170 ransomware attacks on U.S. state and local governments since November 2013, notes the technology security company Recorded Future. The costs to remedy these attacks are growing, and the belief that “it won’t happen to us” needs to be discarded. In March 2018, the city of Atlanta had more than a third of its systems paralyzed by a ransomware attack. Recovery took more than a year, with costs estimated at $17 million. Baltimore, after refusing to pay an $80,000 ransom at the advice of law enforcement, recently approved $10 million in emergency funding to recover from a similar attack that immobilized some of the city’s systems, and services such as water billing are still offline, according to reports. Smaller cities, such as Lake City, FL, are also not immune: Recently, city administrators paid hackers a ransom of 42 bitcoins, or roughly $426,000. See also: The Growing Problem of Ransomware   Self-insured groups and public entities such as municipalities are among groups that particularly vulnerable, because they:

• Operate within a significant regulatory environment;
• Have data that others could steal and monetize (personally identifiable information such as Social Security numbers, HIPAA-related information and credit card numbers;
• Have data that is critical and necessary to conduct business.

For captive insurers, property and casualty and workers’ comp carriers, lapses in cybersecurity can even affect mergers and acquisitions. According to security firm Forescout Technologies Inc., 53% of more than 2,700 global businesses surveyed report a critical cybersecurity issue putting an M&A deal in jeopardy. “Unfortunately, it happens again and again to municipal systems that don’t have all the latest software, the latest protections or the highest-paid IT staffs,” Lee McKnight, an associate professor at Syracuse University’s School of Information Studies and an expert on cybersecurity, told USA Today. I believe McKnight’s comment minimizes the essence of how self-insured groups and public entities such as municipalities actually work, because it’s not all about the latest software or highest-paid IT staffers. And protecting your organization from a ransomware attack does not necessarily require expensive next-generation firewalls, intrusion prevention systems or “security as a service” systems. What it does require is common-sense due diligence, a clear line of responsibility for technology systems, a plan that holds all partners and vendors to the same security requirements, a secure cloud platform and, should the worst possible case occur, an incident response system. Even with those elements in place, it’s still important to assess your actual risk against a ransomware attack. Actual risk includes more than just data housed on a server; it includes reputational/brand risk and the impact of losing trust from partners/vendors and members/customers as a result of an attack. To assess your relative risk to a ransomware attack, consider your organization’s size, the number of cities and counties with which you do business and the cybersecurity measures your currently employ. Assess your own risk tolerance—the potential damage to your organization that hackers could inflict… and assess the cybersecurity countermeasures you currently have in place. When viewing your organization’s vulnerabilities in this way, it becomes clear that inaction is no longer an adequate response. See also: Ransomware Threat Growing for Phones   By creating a culture of alert self-monitoring, a plan that makes employee safety training and security safeguards a priority and a strategy that involves all stakeholders, including technology solution providers, you diminish your chances of being vulnerable to a ransomware attack.

We are all aware of numerous, infamous attempts to defraud galleries with forged paintings. We attend conferences and pay attention to this sort of a story because it is remarkable to think that anyone could trust, and breach trust, to that magnitude. Sadly, it happens every day. Every day, there is a crate of an artwork that is sold and not reviewed for condition first. Every day, there is reliance on condition of an artwork by review of the crate alone. Every day, there is a consignment that takes place without written confirmation and transparency. This is the nature of the beast. See also: The Globalization of Risk Management   If you have provided insurance services to the art community for a long enough time, you will receive what is loosely referred to as a “Friday phone call.” These are the time-pressured, high-valued, too-good-to-be-true risks that absolutely, positively have to be placed by the end of the week. This is a more practical example of something that an insurance broker should be aware of as something that can affect their day-to-day life. For example, who could forget the Caravaggio in the crate that could not move until it was insured? Or the ever popular Michelangelo that came with tons of gold star stickers on the non-USPAP-compliant appraisal. With every incoming risk, regardless of demanding time constraints, there is the need to review provided information and follow a process. It is important for brokers to take their time to examine the integrity of the information to uncover anything suspect in the submission. Some guidelines to consider when it comes to risk and art fraud related to fine art insurance submissions, include:

• Respond logically and practically in an unemotional manner to “pressure placements”
• Require proof that the artwork exists
• Require proof that the artwork is authentic
• Require proof of the value of the artwork from a credible source
• Follow required compliance rules related to disclosure of the named insured
• Review the credentials of the experts involved in the process as well as the credibility of the parties insured

See also: Natural Disasters and Risk Management   Do not be dazzled or blinded by the majesty of the incoming opportunity. Our role as professionals is to pre-qualify risks for the underwriting insurance company partners with which we work. Our role as brokers is to represent the interests of an insured, and the careful selection of those parties is integral to the success of your firm. This article is provided for general informational purposes only and is not intended to provide individualized business, risk management or legal advice

In January 1993, I began preaching the Gospel of Change – its management and architecture. One of my first presentations was to a very successful community bank’s senior management team. I said, “Today, General Motors, Sears and IBM are kings of their respective jungles. I believe in my lifetime (I was 46 at the time) one of these companies will go bankrupt!” The audience rolled their collective eyes! In 16 years, I was vindicated. GM filed for Chapter 11 reorganization in the Manhattan New York federal bankruptcy court on June 1, 2009. The filing reported $82.29 billion in assets and $172.81 billion in debt. Then, Sears filed for Chapter 11 bankruptcy protection on Oct. 15, 2018, with $6.9 billion of assets and $11.3 billion of debts, after a decade-plus as a train wreck in slow motion. See also: How to Earn Consumers’ Trust   Today, I’m not going to scare you into change – I’ll merely shine a spot light on the changes that are already occurring in the world and you decide if these innovations are friends or foes. Don’t ask what threats these changes mean for you. Ask instead what these changes mean to the marketplace – to each of us as consumers. The consumer is king, and now consumers shop in a global marketplace – when, where and how they want. Below are five transformational changes that are affecting the world for your clients and you--and a word of hope. Generational Change: Many of us grew up in a "Father Knows Best" world. Today, the universe is more similar to a “Modern Family.” Look at the demographics. The youngest members of the Greatest or Silent generation are nearing 75. The youngest members of the Baby Boomers are in their mid-50s. The youngest Gen Xers are in their mid-30s. And the youngest millennials are already 15. As Paul Harvey said often, “We’re not one world.” He was so right. In terms of marketing reality – One size does not fit all. Big Data and Artificial Intelligence: Yesterday, I opened an e-mail offering me a “deal” on a new Toyota. Within an hour, I had received similar e-mails from most other brands that I might be interested in. Big Brother (or Big Sister) is watching everything we do. Now, sophisticated sellers can anticipate your needs and be first to market with a solution for each need. Can you do this? Global Marketplace/Virtual Marketplace: As a consumer, you can buy anything you want, wherever you want. As a seller, your competitors are not down the street – they are everywhere. Language/Diversity: Robert Young as Jim Anderson in "Father Knows Best" was an insurance agent and also an OWGIC (Old White Guy in Charge). Today, ours is a much more diverse and multilingual world. Everyone can be in charge of their own world. Do you speak enough languages to serve this marketplace? Who is/will be your marketplace (Hispanic, Laotian, Muslim, etc.)? Remember that many "youn-'uns" communicate very differently. If you don’t believe me, call a teen and see she answers. Text, and she will. Innovation of Products/Services/Competitors: What, where and how you sell has no meaning. What, where and how people buy is all that matters. Remember social media, robotic surgery, driverless cars, Amazon, Expedia, Uber, Google, AirBnB: Innovations change options and in some cases bankrupt organizations and industries that are fat, dumb and happy. See also: Why More Don’t Go Direct-to-Consumer   Your Hope/Opportunity: John Naisbitt developed the concept of high tech, high touch in his 1982 bestseller "Megatrends." He theorized that, in a world of technology, people long for personal, human contact. He was so right. Become client-defined and client-driven. Develop client intimacy. Be engaged with the people and markets you serve. Don’t sell them; facilitate their buying. Be a concierge, a friend, a shoulder to cry on and voice of encouragement. Build intimacy - be a professional, expert, trusted resource.

This is the fourth article in a four-part series. You can find the first part of this series here, the second here and the third here.  I've worked in the insurance industry for more than 35 years, and I’ve never been more energized about the possibilities before us than right now. Working in both personal and commercial lines, including excess property, I’ve seen how technology has enabled the practices of exposure management, underwriting and claims to evolve from manual processes and “pins on a map” to complex, computer-driven workflows that enhance an insurer’s ability to provide superior products and services to their customers. At SpatialKey, we’ve been working diligently with several of our insurance clients to develop an automated event response solution that addresses key challenges:

1. Meeting growing customer demands in a highly competitive insurance landscape.
2. Driving cost-savings and increased profitability through more efficient event response and claims processes.
3. Anticipating and preparing for more frequent and extreme peril events, particularly in parts of the U.S. that are more susceptible to climate change.

Some of the event response challenges I’ve heard directly from insurers, brokers and MGAs include:

• “I need to know what happened when I was sleeping, traveling or working on something else—without having to jump through hoops to find out.”
• “We’re dealing with time-sensitive situations, but the manual nature of exposure data collection, event monitoring, as well as data research and procurement, delays our ability to respond to events expeditiously.”
• “I need a solution that not only focuses on events that I need to be concerned about but also allows me to filter out the noise from events that I don’t care about.”

These comments point to the pressing challenges insurers face during catastrophes—specifically around speed, efficiency, accuracy and how an automated solution can help to solve them. See also: Moving Toward Prevention, With IoT   Insurers are in a squeeze play to find places where they can drive operational efficiency and reduce expenses. Event response and claims automation is a great place to start. It doesn’t require large financial commitments or heavy investments in time and IT resources, and, better yet, the impact is immediate. I know first-hand that event response automation is on the “transformation radar” for many of the organizations I work with. They simply have to make it a priority to automate pieces of the event response process to meet growing business and customer demands. So, the question isn’t whether you should automate your event response operations. But rather...What are the key requirements of an automated solution? And, can a solution meet my specific business needs by delivering on criteria that will set my team up for success? 7 key questions an automated event response solution should answer for you, include:

1. What are my current exposures? You can’t have an accurate understanding of an event’s impact without the most recent exposure data. A data import API ensures your data is updated regularly, and that you’ll always have a current snapshot of exposures to work from.
2. What expert data is available? Streamlined and centralized access to trusted third-party hazard data as it becomes available is imperative. You shouldn’t have to procure and process expert data yourself. Likewise, you should be readily informed of new data sources as they become available.
3. What happened? You should be the first-to-know about an event and its impact to your portfolio—so, when management looks to you for answers, you can be confident in your preliminary assessment. To achieve this, you need an automated system pushing you results so you don’t have to pull reports and analytics yourself. By clicking a single link in an email, you should be informed of the geography and severity of an event. This means analyses are executed automatically based on your latest exposure, as well as your predetermined financial and peril-specific thresholds.
4. Do I need to care? Relevance is a critical asset because it prevents information overload during a time-sensitive process like event response. A custom approach to event notifications enables you to operationalize peril and exposure specific thresholds based on your company’s exposure knowledge and claims experience (e.g. $10 million in limit affected by hail that is two inches or greater). This filters out the noise by enabling you to define what’s important and then act expediently.
5. What’s my financial impact? Instead of scrambling to manually pull information together for stakeholders, a pre-packaged report should be automatically generated for you. The ability to quickly assess financial impact, provide input on capital expectations and manage stakeholder expectations are all critical to your company’s preparedness and requires a financial modeling engine that delivers results that matter most.
6. Where do I need to focus my outreach and service to affected insureds? To differentiate your business, customer outreach is imperative. By quickly pinpointing exact locations and accounts affected, you can serve your insureds—whether that means picking up the phone or putting boots on the ground. An event response solution should provide you with actionable information along with advanced analytics that enable you to further plan and communicate your strategic claims response.
7. How can I dive deeper into the event? Because automation has saved you so much time answering the last six questions, now you can dig even deeper into the event. This requires an advanced analytics solution like SpatialKey that enables you to ask more questions of your data, analyze the event progression, pull in claims history and rate/premium information and average annual losses, etc.

You can think of the seven questions I’ve answered here as requirements for success in the new competitive landscape of P&C. Insurance organizations are facing greater scrutiny as catastrophic events become increasingly volatile. As such, how effectively you prepare for and respond to these events can either be an asset to your business or a detriment. It’s time to move from “react and respond” to “prepare and serve” A company’s ability to follow through on its commitments and service is a competitive differentiator. If your event response processes run more smoothly—if they're built for performance—this translates to a more satisfactory customer experience. As one of my clients recently noted, “We’re not the cheapest coverage out there. So when it comes to shopping for insurance at renewal time, our service is what makes the decision to renew a no-brainer.” See also: Natural Disasters and Risk Management A solution like SpatialKey can modernize your event response operations without disruption or heavy investment, creating both operational efficiency and customer satisfaction. By moving from "react and respond" to "prepare and serve," you are modernizing your processes to meet the growing demands and expectations of your customers and shareholders. Technology will always be a moving target, and you may feel like you’ll never get ahead of the curve. But when you're pursuing transformation initiatives, it's important to consider your total investment. Automating your data and analytic operations shouldn't require major service disruptions or heavy hardware spending.