Despite the troubling persistence of cybercrime, many organizations are not doing everything they can to protect themselves from the serious threat of data breaches and other cyberattacks. A Spiceworks survey of 581 IT professionals showed that 62% of organizations did not have cyber insurance policies. This can be attributed to a slew of reasons, but perhaps the most perplexing one is a lack of reliable policy offerings. As demonstrated by the percentage of uninsured organizations, the market for cyber insurance is essentially untapped. According to the Insurance Journal, 71% of the market for cyber insurance belonged to just 10 writers in 2018, and the National Association of Insurance Commissioners reported that only 500 companies offered cyber insurance in 2016, compared with nearly 6,000 offering commercial insurance. Additionally, a Ponemon Institute study of more than 1,000 IT professionals showed 80% of those surveyed said they believed it was likely that a successful cyberattack on their organization would occur within 12 months. Clearly, the need for cyber insurance exists. It just isn’t being addressed. The reason for this is that cyber insurance is a relatively new policy area. In fact, it’s still so new that it lacks the standardized terms and pricing that are so essential for creating baselines for policies in other markets. And even when those policies are created, it can be difficult to determine what qualifies as cyber coverage. If a breach occurs due to a stolen password, for example, is that considered cyber, crime, theft or general liability? This confusion also can lead to insureds making cyber-loss claims under different policies, even if the insurer doesn’t offer cyber insurance—underlining the importance of creating well-defined cyber policies to protect policyholders and insurers alike. This lack of established policy structure leads to uncertainty about how policies should be written, making it difficult for companies to confidently guard themselves against losses. As a result, many companies don’t offer cyber insurance because they’re unsure how to properly quantify risk and, in turn, price policies. This apprehension is understandable. It’s difficult and risky to try to provide estimates without a sufficient amount of credible information from which to infer. See also: Quest for Reliable Cyber Security   Still, cyber insurance is quickly becoming one of the most profitable and fastest-growing lines of coverage. Premiums increased by 8% in 2018 to $2 billion, and the market is projected to reach $14 billion by 2022. So, how does an insurance company find a way to understand cyber risks, calculate their costs and reliably predict the frequency of losses? By significantly reducing the likelihood of an event resulting in a claim. As obvious as it might sound, it’s important to remember that insurance ultimately comes down to risk, and when that risk is significantly reduced—or virtually eliminated—it benefits both the provider and the policyholder. To accomplish this in the cybersecurity arena, companies should recommend insurers use risk-reducing technology, such as tokenization and encryption, to better guard the sensitive data they are trying to protect and to reduce the risk and likelihood of a data breach or other cyberattack. By leveraging these additional security processes, insurance companies can more accurately build policies, knowing the risk of damages from a data breach is effectively nonexistent. Tokenization, such as that offered by the TokenEx Cloud Security Platform, especially excels at reducing risk through its use of pseudonymization and secure data vaults. Pseudonymization, also known as deidentification, is the process of desensitizing data to render it untraceable to its original data subject. It does so by replacing identifying elements of the data with a nonsensitive equivalent, or token, and storing the original data in a cloud-based data vault. This does two things. First, it allows tokens to be stored in a business system for future use without interrupting crucial business-as-usual processes. Second, it virtually eliminates the risk of theft in the event of a data breach. Because there is no mathematical relationship between the token and its original data, tokens cannot be returned to their original form. Instead, when detokenization is required, the token is exchanged for the original data, which can be done only by the original tokenization system—there is no other way to obtain the original data from the token alone. So if a breach occurs, the exposed data is worthless to cybercriminals. The original, sensitive data sits undisturbed in a secure cloud data vault. In effect, no loss occurs. Additionally, tokenization can further reduce risk by addressing many international regulatory compliance obligations. Influential privacy regulations such as the European Union’s General Data Protection Regulation and the California Consumer Privacy Act refer to tokenization specifically as an appropriate technical mechanism for protecting sensitive data. It also reduces the scope of Payment Card Industry Data Security Standard compliance by removing payment card information from organizations’ cardholder data environments. Because tokenization satisfies controls concerning the processing of sensitive data, it can prevent losses stemming from fines and other penalties as a result of noncompliance. See also: Paradigm Shift on Cyber Security   So when determining how your company should write its cyber insurance policies, consider recommending tokenization as a risk-reducing step for policyholders. It’s a small upfront investment for them that can better protect their data, their policy and your ability to provide reliable coverage.

Customer acquisition costs are a familiar problem throughout the business world. On average, businesses spend five times more to acquire a new customer than to keep an existing customer, according to Khalid Saleh at Invesp. Companies focus more attention on acquisition than retention, too: About 44% dedicate themselves to acquisition, while only 18% focus on retention. For insurers, customer acquisition is even pricier. “The insurance industry has the highest customer acquisition costs of any industry. It costs seven to nine times more for an insurance agency to attract a new customer than to retain one,” says Lynn Thomas, president of 21st Century Management Consulting. While customer retention strongly affects insurers’ bottom lines, new customers are essential to maintain a steady pace of growth and build a competitive edge. Controlling costs while still attracting new customers presents a challenge for insurance companies. How Expensive Are New Insurance Customers? When you compare the high price of customer acquisition with the low net margin of property and casualty insurance — which hovers between 3% and 8%, according to Mary Hall at Investopedia — It’s easy to see why acquisition costs are a concern. Direct insurers have had an advantage in this area for quite some time. As early as 2014, William Blair & Co. analyst Adam Klauber determined that direct insurers like Progressive and Geico paid an average of $487 to acquire a customer. Meanwhile, captive insurers like State Farm and Allstate paid $792 on average. See also: Who Is Your Customer; How Is the Experience?   When independent agents were added to the mix, Klauber said, the average cost of customer acquisition rose to $900 per customer. One reason new customer costs are so high in insurance is that the industry has lagged in adopting digital technologies that meet the expectations of today’s insurance shoppers, say Tanguy Catlin and fellow researchers at McKinsey. Customers want simplicity, 24/7 availability and quick delivery. They also demand clarity about pricing, value and services designed for the digital age, no matter what they’re shopping for. “They have the same expectations whatever the service provider, insurers included,” according to Catlin et al. Improving technologies also helps transform customers’ perception of insurance as an outdated, unapproachable industry to one that is personalized and consistently present. When insurance is easier to access, customers are more likely to see it as a valuable and important facet of their lives. KPIs in Customer Acquisition It’s important to differentiate between customer acquisition cost (CAC) and cost per acquisition (CPA). While they sound similar at the outset, Proof’s Drew Housman outlines the difference: “CPA measures the cost of an action, CAC measures the cost of acquiring a customer.” For example, if you want to measure the effectiveness of clicks on a digital ad or buy button, use CPA. To factor in every click a customer makes on the way to completing the transaction, use CAC. Tracking both CPA and CAC is important, however, because not all methods of acquiring new customers yield results in the same period, says Gordon Donnelly at WordStream. For instance, combining SEO and content marketing with Google and Facebook advertising results may make insurers think their SEO is overperforming while their advertising is underperforming. This is because SEO and content marketing “typically take longer to yield results,” Donnelly says. While a good customer acquisition cost varies by the type of insurer, one way to track CAC effectively is to balance it against customer lifetime value (CLV), Jordan Ehrlich at DemandJump says. Customers who offer a higher lifetime value may be worth more to acquire at the outset. Ideally, the ratio between CLV and CAC will always show a higher number for the former metric: A customer’s overall value will always be higher than the cost to acquire the customer. “The less it costs you to acquire a single customer and the more overall value that customer represents, the more profit you stand to make,” Donnelly says. Treating customer acquisition, retention and value as three facets of the same goal can improve insurers’ ability to attract, retain and profit from customer relationships. “Since new policyholders immediately become current policyholders, your improved customer experience increases the likelihood that they will stay with your company, refer you to others and so on,” Patricia Moore at One Inc. says. How to Lower Costs Without Losing New Customers Cutting customer acquisition costs won’t help an insurance company if it also results in fewer new customers. Fortunately, there are several effective methods for reducing these costs while improving the quality of new customer relationships. 1. Use Incidental Channels Incidental channels are products or services that deliver value separately from insurance but that build a customer relationship and gather data that ultimately support an insurance relationship, says Kyle Nakatsuji, principal at American Family Ventures. These channels can help lower customer acquisition costs and improve engagement by demonstrating value to customers early in the process. Customers are more amenable to an eventual insurance purchase because they’ve already received value from the service and have perhaps considered how insurance could further improve that value. These services can also perform data-collecting functions, making it even simpler for new customers to choose and purchase coverage, Nakatsuji says. 2. Leverage Retention by Seeking Referrals An added benefit of incidental channels is that they make it easier for your current customers to recommend your insurance services to potential new customers, says Srikumar Rao, author of Happiness at Work. For example, imagine an app that helps homeowners identify and mitigate the most common causes of household fires. When a loyal customer uses the app, benefits from it and recommends it to others, that customer “is no longer a supplicant when she draws the attention of her contacts to you. She is the enthusiastic and proud bearer of a gift. She has bounty that she will bestow on the deserving,” Rao says. Not only have you made it easier for your loyal customers to refer their associates to your company, you’ve made it gratifying to them to do so. 3. Recognize Why Loyal Customers’ Referrals Matter Customer retention has a profound effect on the bottom line. When customer retention increases by only 5%, profits increase by 25% to 95%, according to research by Frederick Reichheld at Bain & Co. Nurturing relationships with existing customers builds trust, allowing companies to offer additional products and services with a lower chance of rejection, startup adviser Yoav Vilner says. It also increases the chance of attracting new customers through referrals — by far one of the least expensive methods of customer acquisition. Referrals, or word of mouth, account for 20% to 50% of all purchasing decisions, say Jacques Bughin, Jonathan Doogan and Ole Jørgen Vetvik at McKinsey. Experiential word of mouth, in which existing customers share their own firsthand experiences with a product or service, is perhaps the most powerful. It’s also the most common: 50% to 80% of word-of-mouth marketing is based on a consumer's personal experiences. Loyal customers are more likely to speak highly of their insurance company when services exceed their expectations, according to Bughin and fellow researchers. As a result, insurance companies that underpromise and overdeliver stand a better chance of generating praise and referrals from their existing customer base. When should insurance companies ask for referrals? Sooner is better, says Eric Wlison, national account director at Kaplan. Waiting until a customer’s transaction is finished increases the chances that something might go wrong, spoiling the customer’s inclination to speak positively of the insurance company to friends and family. “Remember that it is human nature to want to help others succeed. If you don’t ask for referrals you’ll likely get zero, and if you ask and get zero you are still at the same spot as if you hadn’t asked,” Wilson says. 4. Embrace Digital Tools That Promote Loyalty Here is where customer loyalty and technology intersect to drive down the costs of acquiring new customers. Nearly every consumer-facing industry has grappled with how to meet evolving customer expectations. Any fast food restaurant will offer bundled meals as well as a la carte menu items from which customers can choose. Even change-averse airlines and cable providers have learned to offer customizable levels of service because that’s what their customers have demanded. See also: The Missing Piece for Customer Experience   This is the point the team at McKinsey is making when they say insurance customers want simplicity and quick delivery. Today’s customers want to be able to choose from any and all available product lines, regardless of which carriers provide them. This is what the BOLT Platform facilitates. Our users are able to offer and sell their own products alongside bundled products from other carriers because, ultimately, customers only care about getting the coverage they need. The best way to meet this need is to become a one-stop-shop for your customers. Insurance companies that embrace this will earn increasing customer loyalty. And, as new potential customers come forward, it will require less time, less money and less effort to convince them to buy.

Health insurance is more a question of what, rather than how. As in: What programs and prescriptions should insurers cover? What services outside the U.S. should insurers support, if the science is strong and success substantial? What should the insurance industry do, in particular, about the rise of medicinal cannabis? The questions are of a piece. Which is to say the questions involve issues both the ethical and the economic, the political and the personal, the fiscal and physical. The questions raise a larger question: If insurers agree to cover cannabinoid medicines, because it is less expensive to travel outside the States than it is to transport these medicines across state lines, if what benefits patients is also beneficial to insurers, by what right should insurers deny coverage to an American seeking medical treatment in Australia? Location is central to this issue, based on Australian advances in the development and use of medicinal cannabis. Free of the conflicting state and federal laws that make medicinal cannabis legal in one city but criminal in another in the U.S., free of the battles between patients and insurers, Australia is true to its positive stereotype: a proto-America, with similar systems of language, culture, institutions, literature, history and tradition; a member of that English-speaking alliance of nations whose customs extend across the vale of years. Medicinal cannabis is also legal throughout Australia. See also: What Are Other Marketers Doing? According to Asaf Katz, chief operating officer of Cannvalate, Australia is central to innovation and investment involving medicinal cannabis. All the more reason, then, for insurers to champion that fact. The alternative is to deny coverage and alienate patients, which is not conducive to winning the insurance industry friends or improving its ability to influence people—people whose collective influence registers in polls and at polling places, where they use ballots to reject the way insurers do business. Avoiding that scenario is in the interests of all people. If coverage for medical care in Australia is the price insurers must pay, if covering medicinal cannabis is the burden they must bear, it is a hardship they can meet. In contrast, the cost of doing nothing is no small thing. The cost manifests itself in legal fees. The cost can be ruinous to an insurer’s reputation and its relationship with consumers. In turn, it can take years if not decades to undo a bad decision; so bad as to prove decisive to an insurer’s loss in revenues and drop in profits, resulting in protests from patients and investigations by politicians. Better to take a more holistic approach to subsidizing medicinal cannabis. Better to look abroad—to look to centers in Australia—than to look away, while people suffer from chronic pain or struggle with the side effects of inferior and toxic medication. Better to go down under than to go under, as the former lessens the probability that the latter will happen. See also: Best Practices for Predictive Models   Better for the insurance industry to have an international outlook to challenges within individual nations. Better to solve these challenges—and stay solvent—than do nothing.

Way back in 1975, geochemist Dr. Wallace Broecker of Columbia University published his article “Climatic Change: Are We on the Brink of a Pronounced Global Warming?” Today, almost 45 years later, the debate has intensified but still rages, even as some believe the clock is running out. The U.N. Intergovernmental Panel on Climate Change warns that we have only 11 years to limit the chances of a climate change catastrophe. I see very strong parallels between Dr. Broecker’s warnings and those related to our loss of personal data privacy. Society is facing the threat of climate change, which some experts say will reach a tipping point; we may be reaching a similar tipping point with privacy and cyber security. In their paper presented at the 1965 Fall Joint Computer Conference titled “Some Thoughts About the Social Implications of Accessible Computing,” E. E. David, Jr. of Bell Labs and R. M. Fano of MIT warned that “the same technology which has given us new dimensions in communication has been used to implement eavesdropping equipment.” They went on to say that “the very power of advanced computer systems makes them a serious threat to the privacy of the individual”. See also: Untapped Potential of Artificial Intelligence   Just as we continued to contribute to climate change, we continue to surrender personal privacy in exchange for the lure of instant gratification delivered through simple, easily accessible technologies. Insurance Industry Opportunity The insurance industry is uniquely positioned to take the lead in safeguarding data privacy; few other industries have the same depth and breadth of personal information or the same level of dependency on the trust and loyalty of their customers. Many insurers of property, life and health, along with numerous supply chain intermediaries, are employing a wide range of connected digital technologies to gather individual data and store, analyze and use it to train AI and use it to offer new, different and attractive products and services. And, as of now, there is no easy way for customers to reclaim their data. People may consciously understand the trade-offs of using digital services, but few understand how extensively their data is captured, used and shared. And that data exists in digital form and therefore virtually forever, most certainly long after we are gone. Without applicable data laws, we’re left with a decentralized patchwork system, devoid of human control. Privacy concerns are surfacing almost daily now, but successful, high-profile applications of analytics are drowning out the cautionary voices. Facial recognition, which is not unlike taking your fingerprints without your permission, is being used by China to keep track of all of their citizens and has been deployed by law enforcement agencies all over the world. Too Little, Too Late In a relatively small victory for opponents of this rapid adoption, San Francisco recently became the first U.S. city to ban the use of facial recognition by local agencies. And California’s tough new law, the California Consumer Privacy Act, which takes effect in January 2020, will significantly limit how companies handle, store and use consumer data. The law will require businesses to be more transparent, give consumers the ability to delete and download collected data and give them the chance to opt out of the sale of their information. Still, according to a new survey by TrustArc, most companies still aren’t ready to comply. See also: 3 Steps to Demystify Artificial Intelligence   Elsewhere, the European Union’s General Data Protection Regulation (GDPR), a set of new privacy laws, went into effect in May 2018. And Hawaii, Massachusetts and Washington are all considering their own state privacy laws, while Brazil passed its own regulations, which will take effect in 2020. Insurance Industry Call To Action What we really need, however, is a standardized, global set of rules and regulations on the permissible uses of personal data and a process governing and enforcing them. The global insurance industry would gain much by taking the lead in this effort – and sooner than later.

When the California legislature established a workers' compensation system in 1913, it was designed to mandate insurance to rapidly provide desperately needed medical treatment and wage loss mitigation to injured workers. In return, injured workers would not be able to sue in civil court and receive massive verdicts that could bankrupt businesses or receive punitive damages or "pain and suffering" beyond the scope of the medical findings. There were three prongs of the Safety Act of 1913, also known as the Boynton Act. First, it provided compensation to injured workers. Second, it required employers to purchase insurance and established a state insurance company, known as the State Compensation Insurance Fund, in case employers could not acquire other insurance coverage. Third, it gave the state power to make and enforce safety rules and regulations, to prescribe safety devices to be used by employees and to require accidents to be reported. In other words, the original workers' compensation program provided an "alternative dispute resolution" program to address the particular needs of workplace injuries. The Boynton Act included specific provisions for total temporary disability, medical benefits, permanent disability and death benefits. It was an exclusive remedy, with minimal exceptions for cases involving gross negligence and willful misconduct. The Boynton Act was also strongly supported by labor unions, which had become much more interested in workplace safety following massive industrial tragedies such as the deadly March 25, 1911, fire at the Triangle Shirtwaist Company in New York City, which claimed 146 factory workers’ lives. See also: States of Confusion: Workers Comp Extraterritorial Issues  Although the workers' compensation system had significant advantages over civil litigation, by the 1990s there were substantial bottlenecks in the system with the Workers' Compensation Appeals Board taking months to set matters on the calendar over a wide range of issues ranging from medical treatment to competing qualified medical evaluators. Any time there was a dispute, even on relatively simple matters, it could take months to get a hearing and ultimately a decision. To mitigate delays, several state legislatures, including California, developed legislation that would permit labor unions and management to jointly develop "carve out" agreements that resolve disputes outside the state workers' compensation system with no diminishment to benefits to injured workers. In California, the legislature passed Labor Code section 3201.5 covering construction trades and later 3201.7 covering more lines of work, allowed unions negotiating on behalf of employees and management to develop addenda to collective bargaining agreements that described rules and procedures of alternative dispute resolution programs tailored to the needs of their particular industries. While programs vary widely, most ADR programs are paid for by a joint labor-management trust and retain ombudsmen who can help resolve disputes informally between the parties, escalate the matter to mediation proceedings and set arbitrations for unresolved conflicts that require a ruling. A party that is not satisfied with the arbitrator's decision can then appeal the matter to the state Workers' Compensation Appeals Board. To make sure that the programs are workable and are fair, they must be approved by the California Department of Industrial Relations before going into effect. See also: Workers Comp Ensnares the Undocumented   Employer and labor unions developed programs in a way that sought to minimize conflicts over medical treatment or medical-legal evaluations through the joint development of medical provider networks (MPNs) and predetermined lists of agreed medical evaluators. They require tight timelines for scheduling mediations and arbitrations, and the fact that only one case is on the docket at a time prevents the distraction of traditional hearings where litigants may have several cases on the calendar at the same time. Predetermined and stipulated medical provider networks keep lien litigation to a minimum, and cases can be resolved and closed in a fraction of the time. With an emphasis on cooperation rather than pursuing a win-lose model, these provisions save insurance companies the costs of extended litigation and provide injured workers with prompt medical care and dispute resolution. It presents both parties with a win-win.

Insurance is a complicated product. Period. No debate used to exist relative to whether insurance was a complicated product. Complication was (is) obvious given the length of the policies, legal terminology, excessive use of prepositions and the aspects that get insurance nerds excited: inclusions within exclusions and exclusions within inclusions. Moreover, no one wants to buy insurance. 2+2=4. That is simple, and the simple part is that, when complexity is combined with massive reluctance and resentment to purchase, this equals consumer misery. One solution for mitigating consumer misery is to make insurance seem simple. "15 minutes will save 15%" makes insurance seem exceedingly simple. "The average consumer saves $X when switching to..." makes insurance seem simple. The "commoditization" of insurance that has received so much press is really a misnomer. Insurance is not a commodity. A complex good, because it is complex, generally cannot be a commodity. A true commodity is a product that is always identical. Red winter wheat from one farm is the same as red winter wheat on another farm. With GMO (genetically modified organism) seeds, the product is literally identical. Silver is silver once processed. Insurance policies and claim practices between companies are not nearly the same. This is why agents actually still need to read the policies they are selling to avoid E&O claims. This is why it matters if a policy is an ISO policy versus a non-ISO policy. Policies are not identical and, therefore, fail the test for commoditization. Is the goal the same? Yes, but the means and values are different. Therefore, the product is not a commodity, even in personal auto. Instead, insurance is more easily sold by a certain kind of company/agent if that company/agent can convince the public that all policies are the same, and, therefore, the only difference is price. In other words, these vendors need to convince the public that insurance is indeed a commodity, even though it is not. And they are pretty good at doing this. See also: Selling Life Insurance to Digital Consumers   Rather than commoditization, the result is really better described by the economist Carl Shapiro in his fantastic study, "Consumer Information, Product Quality and Seller Reputation" (Bell Journal of Economics 13, no. 1 (1982): 20-35). He describes how, when a product is complex from the consumer’s perspective, mediocre vendors will always take advantage of the consumer and vendors providing higher-quality services/products. The mediocre vendors do this by causing consumers to think they are getting the same product for a lower price. They may do this in a number of ways and, often in the financial world, will reduce a quality decision to one number. This number may be a rating, such as a rating company's rating of an insurance company. The vendors know that insurance agents and consumers and regulators look at one number/letter. Then they work backwards to figure out how to get to that number with a product/service that really does not deserve that rating but that will qualify because they manage to check all the boxes. This may have happened many times in the credit crisis and was arguably a leading cause of the credit crisis. I think this may be happening with some insurance companies today, but that is for another article. Relative to commoditization, the "one" number is a price. The silent message is that all insurance is the same, and the consumer should not spend any time considering the coverage differences or claims practices. Then the vendors go one step further and truly abuse the proper use of statistics because they only cite quotes that save money. For example, take the $300 saved when switching. The statistic may be correct, and statistics do not lie. The pictures people paint with statistics can mislead, though. If 100 people get quotes from this company, and 95 quotes result in premiums higher than they are already paying, but five do save money, then technically the tag line is correct because it includes the word "switch." If instead, all quotes were included, I am guessing the average savings would be less, and the average savings of all quotes is a rather important point. Another example is the focus on new business quotes vs. renewal pricing. This is a rather interesting point because so many companies jack renewal rates. Therefore, new business quotes vs. renewal pricing is really an apples-to-oranges comparison. Theoretically, with true actuarial based pricing, this difference should not exist. Consumers inherently get this, but the companies play to their advantage in two fascinating ways. The first is that by advertising that the consumer is saving $X on new business, vendors cause consumers to think that new and renewal pricing are the same. The difference creates an opportunity to gain new business on price. The second interesting play is that companies are not exclusively, and maybe not primarily, using actuarial-based pricing on either the new or the renewal. Instead, what they do at renewal is increase the price based on their price elasticity curve. A few insurance company people actually learned economics in college. They increase the renewal pricing knowing that they'll lose a percentage of clients (to other companies encouraging insureds to switch for $X savings on average switch). The damage, if the pricing is designed well, is negligible because the extra money made with those who stay more than makes up the difference for those that are lost. Then they create stickiness in the initial sale because the initial saving is so great that consumers are likely to think they are always saving more with this company and will not shop as often, resulting in paying more than if they shopped all the time. These companies that focus the consumer on one number and the concept that all coverages and claims practices are the same are smart. As Shapiro stated, companies that focus on causing consumers to think they are getting more quality than they really are is an inevitable outcome of a free economy. What are the rules for successfully selling a non-commodity financial product as a commodity?

1. The right kind of advertising is crucial. This means keeping it simple. Avoid all indication of complexity or differences between products.
2. Barely mention "insurance."
3. Use bad humor employed by cartoonish actors/animated characters.
4. Repeat, repeat, repeat, repeat, repeat, repeat, repeat, repeat, repeat. According to a report by Coverager, Oct. 16, 2018, Geico averaged 9.83 views per household of just one of their television commercials. To create enough sales and existing consumer brand knowledge, every household had to see that one advertisement almost 10 times.
5. Spend huge amounts of money on advertising. According to the same Coverager report, citing Alphonso & Statista (TV advertising data companies), Geico spent $232 million on television advertising alone (not including online advertising) in the last quarter of 2017. It is estimated in the article that Geico spends another 20% or so online. Call it $250 million plus per quarter, which extrapolates to $1 billion plus per year. According to A.M. Best, the Geico subgroup rating unit (002933) writes approximately $30 billion in DWP annually. Advertising expense then is only between 3% and 4%. Advertising for Geico then is incredibly affordable.

(Note: I am using Geico because I have access to these data points and because the company has a successful strategy. I am not picking on them, and I am not advocating for them. With the data available, I can more easily explain the market using their data vs. other carriers, although those carriers may be more aggressive, less aggressive, better/worse, more expensive/less expensive, use all the strategies described or none. I also do not know with certainty if Geico uses the strategies described, and I do not mean to imply they do by including their specific results.) See also: How to Resuscitate Life Insurance   Barring a few billion dollars available, and remember those billions have to be used on high-quality adverting and corporate leadership, competing directly is not a wise decision. How then does an agent/company win with true quality and care for the consumer? In Shapiro's analysis, the masses are lost in these situations involving complex products. Marketing is about the masses. So the solution involves selling. Selling is about the individual. Selling is about treating people as individuals. Selling is about taking the opportunity to tailor coverage for each individual. Selling is about identifying clients who care about the right coverages (the masses are lost) and converting those who would care if someone took the time to explain why they, the consumers, should care. Selling is about matching consumers' needs and budget with a policy that best fits their needs. Selling, in this environment at least, is about having the knowledge required to create a custom policy. The producer who does not know the coverages is like a tailor who cannot measure. The suit may not be off the rack and may technically be "custom," but it is mostly worthless. You can find this article originally published here.

This is the third in a series. The first two articles can be found here and here.  When catastrophes strike, you have no time. You’re under pressure to quickly understand the financial impact of an event and provide estimates to management. At the same time, you (and your team) are constantly tracking the event, processing hazard data, making sure exposure data is accurate, pulling reports and (let's hope) beginning outreach to insureds. The last item—customer outreach—may suffer, though, when the other to-dos consume your time and resources. Speed and quality of response following catastrophes can be an asset to your organization—and a key reason why your customers choose you over your competitors—but only if you can make your event response operations run like clockwork. This entails moving away from the status quo and integrating elements of automation into your event response processes. Let's take a look at some of the challenges you may face and how to implement a more proactive approach for minimal cost and disruption. Hurricanes, in particular, illustrate the problem of quickly deriving insight from data. For example, does the following scenario sound familiar? Imagine a hurricane strikes... ...and it’s affecting Texas, Florida or the Carolinas (probably not too hard to imagine, actually). Management is asking for the estimated financial impact of this event, and your stress levels are rising. It’s all hands on deck! 1) Get event data You go to the NOAA website, pull down wind datasets from the latest update and work to get them into a usable format. 2) Intersect with your portfolio Now, it’s time to intersect the footprint with your portfolio data, which may take another hour or so. 3) Update portfolio After you get everything set up, you realize your portfolio is six months old, which may over- or underestimate your actual exposure. Do you pull an updated snapshot of your exposures? Probably not, because there isn’t enough time! 4) Run financial model SQL scripts With a manual intersection process, you are likely unable to easily access the impact of policy terms and conditions, so you’ll need to run some financial model scripts to determine the actual exposure for this event. 5) Create and share reports You finally get some financial numbers ready and format them into a nice report for management. Then, you think about what you actually had on your to-do list for the day before the hurricane was in the picture...or, wait, maybe not...because just then you see that NOAA has published the next snapshot of the hurricane. Rinse and repeat. It’s going to be a long night. See also: How to Predict Atlantic Hurricanes   Let’s face it, if you can’t extract insight from data fast enough to mitigate damage or provide a timely course of action, your operational efficiency and downstream customer satisfaction go downhill fast. And just think, this was for a single data source. Realistically, you have to perform these same steps across multiple sources to gain a complete understanding of this event. (e.g. KatRisk, Impact Forecasting, JBA flood, NOAA probability surge). What makes the process so inefficient?

• You had to source the data yourself and operationalize it (i.e., get it into a usable format)
• You had to navigate the complexity of the data, which can be exceptionally time-consuming (depending on the source, resolution and other variables)
• You realized your portfolio data was out of date (this is a big problem because how can you determine actual financial impact against outdated information?)
• You had to manually run a financial model after determining the exposures that could be affected by the event
• And, of course, you had to manually pull the information together into a report for stakeholders

So what can you do? Application programming interface (API) integrations help to solve these challenges by ensuring you always have the latest hazard data and portfolio snapshot available. If you invest just a few hours to get your data configured with a data import API like SpatialKey offers, you’ll always have the latest view of your exposures ready to analyze—without ever lifting a finger. You’ll save countless hours by investing just a few up front. This also enables quicker and more accurate analyses downstream because you won’t be over- or understating your exposures (not to mention making errors by scrambling at the last minute to get a refreshed snapshot). Imagine another hurricane strikes...but this time you're set with automation Those couple hours that it took to get your portfolio data integrated and automation in place with a solution like SpatialKey are paying off (no deep breaths required). Within moments of NOAA publishing an update, you receive an email notifying you of the financial and insured impact. With the click of a button, you’re in a live dashboard, investigating the event, your affected exposures and more. You still have to get those numbers to management, but this time you can breathe easy knowing that your numbers are not only accurate, but that the whole process took a fraction of the time. Now when NOAA (or any other public or private data provider) pushes the next update, you’ll be set with a highly scalable infrastructure that enriches your data, calculates financial impact and produces a report within minutes. Why was this process much more efficient?

• Because you invested a couple hours up front to integrate API technology, your exposure data was up to date
• You had access to pre-processed, ready-to-use hazard footprints as they became available
• The event was monitored 24/7 so you didn’t have to constantly track it and pull reports to understand what changed
• Custom filters and thresholds ensured you were never inundated with notifications and only received metrics that you care about
• You saved a bundle of time because a financial report was auto-generated for you to pass along to upper management
• You were able to quickly share reports across teams so claims could get a head start on their customer outreach

Now, you’ll never be a bottleneck in the process of understanding and communicating the impact of an event to your stakeholders. And, with all the time you’ve saved, you can use advanced analytics solutions to contextualize the event and dive deeper into investigating it some more. Tick tock: It’s time to make your event response run like clockwork It’s clear there’s a better way to tackle the growing challenge of deriving insight from data and quickly understanding the impact of an event. If you lack the ability to operationalize and extract insight from time-critical data, you’re operating in status quo when your management team and customers expect to know more about an event, and sooner. Fortunately, automation doesn’t have to be a time-consuming or costly endeavor. There are simple ways to automate your manual processes, such as API integrations, that save time and steps along the way. “Automation” can carry with it preconceptions of disruption and heavy investment, but this is not true of a data enrichment and geospatial analytics solution like SpatialKey. Automating your event response operations can improve your customer retention and drive efficiencies now—not years from now.

Life insurance remains a foundation for transferring wealth to the next generation. But during recessions, life insurance companies could be under a threat of extinction as consumers may cut back on or downsize their plans and coverages, especially because life insurance might not be seen as a necessity to consumers. As 2019 shapes up to be a banner year for some insurance carriers, concerns are being raised about a potential economic slowdown, if not a full-fledged recession, in as early as 2020. In fact, Vanguard Group Chief Investment Officer Greg Davis recently warned in an interview that the probability for a recession by late 2020 is a 50-50 chance. Creating a consistent influx of commission-based transactions and keeping up with the market and competitors is crucial for life insurance carriers or an insurance agent. To survive the next recession, insurers are adopting new technologies and investing heavily in insurtech initiatives. According to a recent report by McKinsey, titled “Life insurance and annuities state of the industry 2018: The growth imperative,” insurtech drew $140 million of investments in 2011, surging to $3.5 billion in 2017. The average investment stemming from insurtech grew from $5 million in 2011 to $35 million in 2017. More than ever, carriers need to be prepared during a recession and maintain their growth momentum by adopting technology to streamline sales and distribution, adapt to the untapped millennial market and lower costs. See also: How to Resuscitate Life Insurance   Streamlining sales and distribution Deploying insurtech is enabling insurers to create and launch digital life and annuity products in months instead of years that leverage publicly available data such as electronic medical records and health claims data, enabling real-time decisions so carriers can automate the underwriting and policy application process. Additionally, instead of weeks, consumers’ applications only take minutes to complete, with instant approval notification, omni-channel payment options and policies issued directly from the electronic customer portal to the policyholder’s email inbox. Adapting to the millennial audience According to a report from LIMRA, there still are approximately 50 million households (about 40%) that recognize the need for life insurance. However, 37.5 million households remain uninsured. With the number of consumers who have attempted to purchase life insurance online tripling since 2011, combined with the preferences of the vastly untapped and underinsured millennial and mid-market consumers to purchase insurance online, the need for an efficient and profitable direct-to-consumer distribution channel has never been greater. Consumers are looking to purchase insurance faster as well as with the simplicity of a single click of the button, enhancing the insurance industry's need for an efficient and streamlined distribution channel. Along with changing the consumers’ views on the difficulty of obtaining life insurance, deploying a simplified technology solution can help insurance carriers reach an untapped, underinsured millennial market during low economic growth. Lowering operating costs In the report by McKinsey, the insurance industry has shown a disappointing track record of managing costs. A poll stated that senior executives from insurance firms estimated that the insurance industry needs to reduce its costs by 35% to sustain current expense levels. See also: Making Life Insurance Personal   Based on risks and opportunities, companies are encouraged to identify any cost savings. Companies are assessing revenue recognition and leasing accounting standards. Along with streamlining distribution method functions and adapting to the millennial audience, technologies like robotic process automation are being used to automate back office administrative tasks. Digitizing repetitive actions can allow insurers’ to focus on new business. In difficult economic times, it is important that insurance carriers not only bring in new business but maintain existing client relationships, as it is better to keep a client at a lower cost than lose the account (and income) entirely. Showing concern for a business’ clients during recessions goes a long way to keeping clients for life.

“Digital insurance” was an exciting concept for the insurers until a few years ago. It was believed that digital transformation would change the insurance industry forever. We can say that digital insurance was the "autonomous vehicle" of the insurance industry. Today, it seems that the digital insurance concept has lost most of its popularity. Insurers haven’t found what they expected from digitalization; now, they are dreaming of more disruptive technological transformations (like insurtech). So, why has digital insurance failed? The truth is insurance companies realized that digitalizing the traditional insurance process is not enough. At the beginning, they must have thought that, after transforming all offline processes to online, digitalization will be completed, and everyone will be happy with that. If you define digitalization as “transforming all offline processes to online,” insurance companies did their job completely, but ungrateful (!) consumers did not appreciate the change enough. Although most insurance companies have digitalized their sale process in the last five years, the share of online sales is still below 1%. However, if you define digitalization in the broader meaning as “being a part of the online ecosystem, to respond to changing and diversifying customer expectations,” insurance companies are going nowhere fast. This makes clear why digital insurance projects haven’t reached expectations. See also: Digital Insurance, Anyone?   There are reasons why the digital world is growing incredibly fast, regardless of industry. These are also motivators for stakeholders to be a part of the digital ecosystem:

• Low investment cost, easy entrance to the market and easy exit (means high competition)
• Low agency and services cost (low price)
• Easy-to-reach information (more comparison)
• Real user reviews (more trusted purchase)
• Product diversity (a tailor-made way to satisfy needs)
• Easy purchase and live support (better customer experience)

These six topics are the essentials of a well-built digital ecosystem. Let’s check how many of these features are available in the digital insurance ecosystem: Zero. So, we need to think about how we can bring the six fundamentals to insurance. Low Investment Cost, Easy Entrance and Exit The insurance business is strictly regulated in many respects, but, if we want to grow the digital insurance market, we have to make providing insurance easier. We need a new approach to insurance agency services, especially in digital platforms. Simple, fixed-price and easy-to-understand products should be sold by digital retailers or even individuals. Uber has transformed the individual transportation industry by providing a simple service. Low Agency and Services Cost Rule No. 1 about online shopping: Consumers want to have a significant price advantage while shopping online. Discount coupons, gift cards, limited time offers are necessary in online shopping. If you think that offering an off-season discount on health insurance is absurd, think again. Easy-to-Reach Information Insurance products are too complicated; we all know it. We also know they don’t have to be. We should simplify products and make them easier to understand. To sell a product online easily, you have to provide all key information in a few minutes. Why don't we replace boring policy documents with YouTube videos? Real User Reviews Creating a name in the digital world has never been easier--or harder. While a no-name startup can become a well-known brand with thousands of fans in a few months, giant brands can lose all of their prestige with a simple case. If you want to exist in the digital ecosystem, you must have a good reputation and always protect it. Blogs, forums, customer reviews have a huge impact on the consumer’s purchasing decision, even more than TV ads bought with millions of dollars. Product Diversity There is a word that doesn't exist in the digital ecosystem: "standard." Almost every product sold online has different color, size, function, power and quality options. For the consumers who are familiar with these opportunities, a one-size-fits-all approach will not be appreciated. Do you think that the couple who are going to the Maldives for their honeymoon and to Tanzania for a safari have typical needs and expectations for travel insurance? Easy Purchase and Live Support We are all busy. Digital consumers want to handle all their business as soon as possible, including insurance. If a consumer prefers buying insurance online instead of buying from a traditional agency, he would like to save time. Long phone calls, pages of application documents, lengthy procedures… have no chance in the digital world. People don’t even want to talk on the phone any more; do you have a Whatsapp number? See also: A Game Changer for Digital Innovation   Unfortunately, insurers emptied the concept of digitalization. There is a myth that everyone is doing something, but no one can make progress. We don’t have to wait for Amazon to change the rules of the game in digital insurance. The industry can catch the digital era with a well-defined and rational strategy, based on the requirements of a digital ecosystem. Even a collective transformation strategy that includes all stakeholders of the insurance ecosystem would be much more successful than what is happening now. Without a new strategy, digital insurance will be a cool idea to mention in an insurance company’s annual reports but nothing more.

On Dec. 4, 2018, the first insurtech IPO in the West happened. It wasn’t, however, in London, Berlin or New York. Instead, it took place in Frankfurt, Germany. Around the world, congratulations rolled in, wishing the company the best with its freshly raised money. Only 12 months earlier, hardly anyone in the international insurance or insurtech community would have been able to pick Deutsche Familienversicherung (DFV, or German Family Insurance) out of a lineup. It was not known outside the country. We changed that. How? A concise, well-planned, pre-IPO campaign pushed the company into the heart of the insurance community. To give back to the community, we are happy to share our lessons learned. Robin Kiera, founder of Digitalscouting: When I was contacted the first time by Lutz, to be honest, I was a little skeptical. A small insurer with quite a conservative name run by a 60-year-old insurance industry veteran was planning to conquer the world? Lutz Kiesewetter, head of corporate communications and investor relations at DFV: For a long time, I had followed Robin on social media. A first call confirmed that he shared a very similar digital vision of the insurance industry. Dr. Robin Kiera (left), founder of Digital Scouting, and Lutz Kiesewetter, head of IR and PR at DFV RK: Waiting for Lutz in the lobby, I saw heavy construction going on on the ground floor. There was free Wi-Fi everywhere, easy access for all. Actual investments were taking place, in contrast to so many other companies that talk a lot about modernization but lack any real action. Lutz was also a little younger than I expected, making it clear that young people had responsibility here, not only after serving 30 years. The conversation with the founder and CEO, Dr. Stefan Knoll, was also quite memorable. The fact that he was willing to share his crystal-clear analysis of the insurance industry was surprising. That he let me film and publish it was even more so. I was given the opportunity to look under the hood of the company, learning more about the impressive, homegrown, event-based IT system that allows end-to-end, real-time business processes. While the pure business numbers were way above industry average, I was even more impressed by the open minds and agile approach of the employees. Guided by a smart and dedicated CEO, this motivated team was thriving within their work culture, willing to go all in on new communication approaches to ultimately position the company for the IPO. See also: Insurtech Needs a Legislative Framework   Lesson #1: Go against all rules and go all in LK: The publicity for the first IPO of a European insurtech and fully digital insurer in the Western world could not be done with classic, conservative PR. Thankfully, being a little different is part of our DNA, It was, therefore, clear that attention hacking in social media via influencers would play an important role. This strategy led us to work with Robin and deploy his unusual “attention hacking,” which means using a flood of content on social media, vlogging and conference appearances to support our IPO mission. RK: For me, it was a go/no-go requirement that we would ignore most classic communication rules and go all in on social media, influencer marketing and content marketing. Lesson #2: Share your story RK: In a matter of weeks, we laid out our master plan and began to implement. We shot the first set of videos sharing the story of DFV, and we began to flood the internet with relevant, highly targeted content. I also made a lot of behind-the-scenes introductions to highly influential people within the international community. This was easy for me, because, first, I have known a lot of decision makers personally for years. Some are good friends. Second, the story of DFV was compelling: a seemingly conservative insurer with a long German name embracing modern technology, ripping apart its old IT system, creating innovative insurance products, investing heavily into team and technology and serving half a million clients already, making significant revenue and profit while a lot of other decision makers still were hesitant to invest in change and while a lot of startups presented vanity key performance indicators (KPIs) but not real sales numbers. The story was almost too good to be true. All around the world, insurance and insurtech experts were interested in hearing more. LK: The PR campaign kicked off with a DFV event series on April 26. DFV positioned itself as the only insurtech with a working insurance business model to the public, the insurance industry, journalists and the trade press. The live presentation covered features like the in-house event- and Java-based core system, the AI-based service that can settle a claim in 45 seconds, and the use of Alexa as a sales channel. The fact that DFV, with just 100 employees, not only covers the complete value chain of an insurance company but also works 100% digitally and is profitable, with hundreds of thousands of clients, while acting as a risk carrier for its products, was something that garnered attention. Lesson #3: Meet and serve the community RK: Sharing your story massively on social media is good. Meeting the decision makers of different ecosystems is even better. We decided to meet the movers and shakers in person by choosing to attend the most important conferences around the world. So, we went for example to Insuretech Connect in Las Vegas and DIA in Munich. We helped DFV share its fresh story backed by real KPIs on the most renowned stages in front of thousands of insurance professionals. Why? After speaking on stage, interested parties approach you; it’s not the other way around any more. Also, we produced social media content from the events that reached people around the world via the Digitalscouting channels. In addition to speaking at and breathing in the exciting atmosphere of these events, we met a lot of decision makers from my network. Many people welcomed DFV with open arms, keeping their fingers crossed for the IPO. Each time I saw this happen, it moved me personally, because it reminded me how many amazing people are working in this industry. LK: For the IPO and initial financial market communication, we implemented broad, multi-channel PR. The intention to go public was exclusively picked up by Wirtschaftswoche, one of the leading magazines in Germany. The story quickly spread throughout the world via Bloomberg and Reuters. Our 360-degree strategy included standard media and communication channels, as well as intensive attention hacking via social media and the visits to insurtech events such as DIA in Munich and ITC in Las Vegas. The first insurtech IPO in Europe received considerable attention within the community and also received from the financial and business media. See also: Insurtech Ingredients? We Just Want Cake   The last weeks, days and hours before the IPO were dramatic. The first IPO attempt needed to be called off because the order books were not full. For the second date, results looked a little better. But it was not clear until the morning of the day if the IPO would be successful. So, when the stock exchange employee announced the first stock price of 12.30 EUR, the relief for management was huge. With a ring of a bell, DFV raised 55 million USD. I, personally, was happy to be present and part of this insurtech success story. A small insurer from Frankfurt seized the moment, using tools and tactics that were against all traditional rules to prepare an IPO, helped across the finish line by a supportive community of international insurance and insurtech professionals. Now the company focuses on delivering on its promises.