The combination of artificial intelligence (AI), robotic processing automation and predictive data analytics is fundamentally redefining how businesses operate, how consumers engage with brands and, indeed, how we go about our daily lives. The field of insurance is no exception. Outlined here are three ways smart technology is affecting insurance, with a focus on identifying lessons learned and defining specific keys to success. Back Office Robotic Process Automation The impact of rules-based robotic process automation (RPA) on insurance operations has been well-documented. RPA tools are driving efficiency and productivity gains in generic back-office functions such as F&A and HR, and insurers are tackling processes related to claims administration and account management. One key challenge is scalability. In many cases, concept initiatives have failed to gain traction, resulting in isolated pockets of automation that yield limited benefit. In others, overly ambitious enterprise-wide projects struggle with boil-the-ocean syndrome. A well-defined center of excellence (CoE) model that develops and documents best practices and then propagates them across different business units has proven effective. Another critical lesson has been the importance of CIO involvement. This was lacking in many early RPA projects. For one thing, because RPA tools focus on process and business functions rather than programming skills, CIOs often weren’t interested. Business unit heads, moreover, feared that CIO involvement would lead to bureaucratic logjams and derail aggressive adoption schedules. Practice has shown, however, that CIO oversight is essential, to avoid both general shadow IT problems as well as specific interoperability, stability and security issues related to RPA functionality. See also: Using Technology to Enhance Your Agency   Leading early adopters have also continually pushed the envelope of automation levels. In a claims processing environment, 70% of claims may be simple and straightforward, and therefore ideally suited to an RPA application. At the other end of the spectrum, 5% to 10% of claims are complicated and unusual, and therefore require a human’s expertise and judgment to evaluate. While doable, automating these complex outlier claims isn’t cost-effective. The challenge then becomes to focus on the remaining 20% to 25% of claims. By analyzing the frequency of different types of claims, insurers can identify cases where the time and effort needed to configure a bot will yield a return. Applying Cognitive Capabilities to RPA RPA has delivered impressive benefits to insurance operations in terms of cost reduction, accuracy and auditability. That said, the tools are limited to the specific if/then rules they’re configured to follow. If a bot encounters a scenario that doesn’t align with what it’s been taught, it gets stuck. More advanced cognitive systems apply pattern recognition to analyze unstructured data to identify key words and phrases in context. This promises to take insurance automation to the next level. While an RPA bot can extract a specific piece of data such as a policy number from a specific form, it can’t interpret underwriting rules or aberrations from a form on which data is unstructured and organized differently. A cognitive application, meanwhile, can scan documents of various types and formats and apply machine logic and learning to identify relevant data in spite of discrepancies in how the data is structured or presented. This allows people to focus on policy/claim exceptions rather than formatting issues. More specifically, by injecting cognitive applications into operational workflows at key “intelligent gates,” insurers can more easily identify aberrations in unstructured data and highlight the policies and claims that require further human involvement. IoT, AI and Insurance Underwriting The combination of Internet of Things (IoT) and artificial intelligence will have perhaps the most transformational impact on insurance. By deploying networks of smart, connected IoT sensors, insurers can collect and analyze volumes of data at the point of critical business activity. Leveraging the pattern recognition and predictive analytics powers of AI, meanwhile, creates insights that insurers can use to refine actuarial tables and improve the rules of underwriting. Consider these examples:

• Sensors in vehicles ranging from commercial trucks to passenger cars monitor and document speed and driver behavior. Insurers can analyze data to calculate accident probabilities of safe vs. risky drivers over time. Based on those calculations, premiums could be adjusted. Smart sensors and cameras can also detect drowsy drivers or erratic behavior, triggering alarms.
• Smart home technology that monitors suspicious activity and automatically shuts off water pumps in the event of a burst pipe can lead to lower homeowner policy costs, particularly for premium coverage such as insuring valuable artwork from theft and damage.
• Pharmacies that store and transport medicines can deploy temperature and humidity monitors to ensure that supplies stay within required guidelines. Reducing the risk of tainted medicine reaching consumers could reduce liability risk.
• Smart video analytics can determine wear and tear of roofs, oil pipe damage from foliage and animal migration and levels of water and soil contamination. Such insights enable corrective action before catastrophes strike and reduce the level of unforeseen risk for underwriters.
• By monitoring pressure or fluid flow in an oil pipeline, sensors can trigger shut-off valves if limits are exceeded, thereby preventing costly environmental damage.

Innovative insurers are exploring how to deploy these capabilities into policy formulation. For instance, customers who adopt the technology could qualify for discounts. (Given the privacy issues surrounding driver monitoring, the voluntary aspect would seemingly be critical for auto insurance policies.) Another option: Insurers team up with technology partners to offer smart sensor services, thereby helping policyholders while creating revenue streams. See also: Smart Home = Smart Insurer!   The combination of sensor array and intelligent technology is refining underwriting and claims payment. Insurers can tune actuarial tables and pricing models to cover potential losses before they occur, as well as avoid incidents by advising policy owners to take corrective actions. In other circumstances, sensors can take action on their own. Ultimately, these capabilities will enable insurers to fundamentally redefine their operational and customer engagement models.

Self-learning machines and intelligent sensors will radically change the insurance industry of tomorrow. Insurance companies will only be able to tap into the full potential of digitization if they abandon their old processes and ways of thinking. Here are four theses on how the insurance of the future will differ from the insurance of today. Tomorrow's insurance is digital More and more people in Germany are online today; and this behavior is also reflected in customers' expectations of insurers. The days when printed insurance documents filled entire filing cabinets are over. Rather, today's customers expect to be able to access information and services anywhere, anytime and at the touch of a button. More and more insurers are relying on online sales channels, chatbots and digital language assistants to help customers 24 hours a day. Insurtechs are one step further: They already offer insurance products that are completely operated via smartphone. Claims can be easily reported via app and data, and insurance coverage can be changed and managed in real time. Standardized cases can already be processed automatically - with payments often on the insured person's account 24 hours later. This trend will continue. Simple claims will then be settled within minutes; For complicated claims, it will be possible to check the status online - just as customers can conveniently track parcel delivery via smartphone. In this way, customers will benefit from a vastly improved insurance experience. Tomorrow's insurance is data-driven Companies such as Amazon, Google and Netflix are proving that data is the currency of the future. Those who know the needs and behavior of their customers can offer better products and services. Insurance companies also have an important peculiarity: The product itself is based on probability calculations and empirical values, i.e. on data. Until now, tariffs have generally been calculated on the basis of a small amount of data, usually older data. However, the more data an insurer has on the life situation and behavior of its customers, the more it can refine risk profiles, reduce the fraud rate and adjust prices in a targeted manner. In short: If you have more data, you can change the core of the product. See also: How Robotics Will Transform Claims   This benefits not only insurers but also customers. Those who pay their bills on time and are classified as trustworthy on the basis of certain criteria could receive cheaper premiums and have their claims reimbursed quickly and easily. The conclusion of a contract itself is also massively simplified by data. Anyone taking out life or disability insurance usually has to answer a long list of questions. Providers are already experimenting with so-called Smart Underwriting. Applicants are asked a few basic questions and a few supplementary questions tailored to their individual needs. The result: Clients without health restrictions can complete the risk assessment in just a few minutes; the others receive in-depth questions based on their information. All in all, the entire risk assessment process is faster. The insurance of tomorrow is forward-looking The insurance of tomorrow will not only regulate damage but will not even allow it to occur. With improved data, it will not only be possible to calculate the probability and amount of loss more precisely. Possible damage can also be prevented by digital systems and sensors. In industry, this is referred to as predictive maintenance. The principle is simple: Technical systems are maintained and repaired in such a way that expensive production down times do not occur in the first place. Predictive maintenance is not new -- the wear and tear of components or machines could already be predicted well in the past. However, digital systems analyze machine functions and production processes in real time and immediately detect errors or deviations. This approach can also be used for private risks. Sensors on the washing machine report as soon as water escapes. Intelligent smoke detectors automatically alert the fire brigade. The evaluation of weather data could help to warn people of storms or natural disasters in time to protect travelers from dangers. In addition, the insurer could try to reward customer behavior that counteracts certain risks. Some health insurers, for example, reward a healthy lifestyle and subsidize preventive measures such as sports or vaccinations. Telematics tariffs in motor vehicle insurance are already moving in this direction by promoting a prudent driving style. See also: Pricing Right in Life Insurance   The insurance of tomorrow is holistic Thanks to digitalization, it is also possible to develop offers that are better-suited to customer needs - away from standardized and inflexible policies. If the insurer can better assess the customer's needs on the basis of the customer's history or behavior, it is in a position to put together tailor-made insurance packages. In the long term, insurance will therefore become increasingly holistic: While in Germany every resident over the age of 18 has an average of six insurance policies, in the future people will only have one risk partner covering all the risks in an individual policy. Just as people nowadays put together their breakfast individually in a restaurant, they will also choose their insurance cover from various modules. A father of a family who like to holiday on the North Sea and go mountain biking would then have a different service package than a father of a family who prefer to holiday in the Mediterranean and climb once a year in the Alps. Conclusion: From a guide folder to a smart insurance app Tomorrow's insurance will be a digital companion that understands customers and their needs. Digital use via smartphone and personalized insurance cover will become the norm. Intelligent digital systems will draw customers' attention to risks, point out suitable countermeasures and help prevent damage in the first place. And if the customer's life situation changes, the insurance cover will adapt automatically -- without the need for any human intervention.

Southern Californians found themselves earlier this summer dealing with some of the largest earthquakes and aftershocks to hit the area in 20 years. Although the earthquakes weren't devastating, they did serve as a reminder about earthquake insurance and whether its cost, high deductibles and exclusions make it the best route to go to protect your home or business. Following the quakes, which included nerve-shattering aftershocks, questions and confusion abound, particularly on the subject of insurance. Many believe inaccurately, state Insurance Commissioner Ricardo Lara would later emphasize, that a moratorium had been placed on all new earthquake policies. "While we have Californians' attention, insurers should not create barriers to homeowners or renters who want to protect their assets from earthquakes," Lara said, promising to send notices to insurers reiterating that the standard 15-day waiting period for coverage after a seismic event in no way means they should decline to write new policies. And there is plenty of interest. Glenn Pomeroy, CEO of the California Earthquake Authority, reported traffic to the not-for-profit’s website had increased tenfold since the earthquakes. See also: Preparing for the Next Big Earthquake   But the vast majority of California residents — 87% statewide, according to the California Department of Insurance — don't opt for earthquake coverage. The number with insurance rises to only 20% in Los Angeles and Orange counties. What gives? The answer most often lies in the deductibles, says Consumer Action, a San Francisco-based education and advocacy nonprofit founded in 1971. Simply put, combine modern building codes with the fact that you would have to suffer catastrophic home damage for a policy to kick in, and the odds are probably in your favor without insurance. "Even on the West Coast, earthquake insurance is not for everyone," Consumer Action spokeswoman Linda Sherry says. "It can be prohibitively expensive and come with large deductibles." High cost, large deductibles put coverage out of reach For example: If a $500,000 home with a replacement value of $300,000 was struck by a quake, you'd have to cough up $45,000 to meet a 15% deductible. That's a lot of earthquake damage before the policy would help. Throw in the fact that many California residents have little if any equity in their homes after the housing bust, and it would be tempting to walk away from a mortgage if such a calamity occurred. Ultimately, whether to opt for earthquake coverage is a case-by-case and individual budget decision, Sherry says. Rather than spend money on extra insurance, some homeowners invest it in a preventative approach — reinforcement bracing and securing homes to foundations. A "brace-and-bolt" program administered by the California Earthquake Authority has thus far distributed grants of up to $3,000 to retrofit more than 5,000 high-risk houses built before 1979. "After the Napa earthquake, I saw quite a few houses that slid off their foundation," California Earthquake Authority Chief Mitigation Officer Janiele Maffei says. "A brace-and-bolt retrofit beforehand could have made the difference." See also: A Troubling Gap in Earthquake Coverage   A retrofit typically costs $3,000 to $7,000, according to the CEA. Hazards to people come mostly from man-made structures, and the Federal Emergency Management Agency says many injuries can be prevented by securing tall or heavy items, such as appliances, with nylon straps or closed hooks, moving them away from beds and seating and making sure gas appliances have flexible connectors to prevent fires. This article was originally published on insurancequotes.com.

A few years ago, it was estimated that in a normal day another 127 devices are connected to the internet each second. This trend toward an Internet of Things is growing exponentially. Many global insurance companies are working on integrating IoT-based services into their insurance offers. Unfortunately, how to use this technology has been largely misunderstood. I’ve been lucky to work with some of the few players that have been successful in their usage of IoT. Through traditional distribution channels, these players are selling products that are bundles between insurance coverages and IoT-based services. Many have been able to get the service paid for by the policyholders, according to research by the IoT Insurance Observatory, an insurance think tank that has aggregated almost 60 insurers, reinsurers and tech players between North America and Europe. Those that have managed to develop a product with a portfolio of a significant size and considerable penetration have had a very specific approach. They first use interesting storytelling about successes that justifies additional fees. This is the case with car telematics in Italy and with the South African Discovery Drive, which represent global best practices in terms of telematics use in auto insurance: The customer pays an annual fee for telematics-based roadside assistance and a range of other services.

  Sharing Value With Clients All the insurance products that have succeeded with an IoT approach share economic value with customers. See also: 3-Step Approach to Big Data Analytics   In auto insurance telematics, for example, data is needed to provide assistance, to provide traffic information and to find a car. This data can also be used to manage claims better and avoid fraud, to influence the customer’s driving style or to establish more accurate pricing. On top of that, if you focus your storytelling on some tailor-made services, you can encourage lower risks to select your product. All these elements – I call them five value-creation levers (fees for services, loss control, change of behaviors, risk-based pricing and risk self-selection) - boost profits. All the successful products have shared the value with policyholders through discounts, rewards, cash back…. The same is going to happen with homeowners insurance.

  Dynamic Pricing on the Basis of Behavior In the life sector, the discourse is different. The IoT Insurance Observatory mapped more than 20 initiatives over the course of 2018, and there are more failures than successes. However, there is a best practice that has managed to integrate data from wearable devices, with contextual data on customer behavior that is collected in a variety of ways. This best practice is the South African Discovery. They have created life insurance products where the client's price increases year by year as a result of age, but could stay stable or even decrease if the customer's physical activity is sufficient. A U.S. company has implemented a process where a customer who requests a quote finds the option to share the data he has collected on his physical activity, to obtain a personalized offer. Commercial Lines Still at an Experimental Level Many successful IoT-based approaches in personal lines can be applied to commercial lines. However, applications are still experimental. I expect these experiments to end in complete IoT insurance products in the U.S. before Europe, but it will take a few years before significant portfolios are created. The most interesting experiments are in workers’ compensation and commercial property. In the world of SMEs, it will be necessary to specialize by sub-sector: It is one thing to talk about schools, another about residential skyscrapers and yet another about offices. Another area with potential is manufacturing, because of what is being called Industry 4.0. This megatrend is not yet mature, but some members of the IoT Insurance Observatory are scouting 4.0 technologies. The need for installation and tailoring of the technological and service components on the premises of a company will be a key. The World of Ecosystems The largest international insurance groups are closely monitoring ecosystems. As of today, IoT usage is sold as a closed option: The insurer chooses its own black box, the set of sensors, the app or the specific wearable items and obtains the data necessary to optimize its own use cases. To understand how an insurer could interact with emerging ecosystems is a key issue that will be addressed in the coming years by the IoT Insurance Observatory. I think that, rather than imagining which insurance product to offer, the first issue to address is how to sell customers products related to offers that come from the ecosystems. See also: The Dazzling Journey for Insurance IoT   Insurers cannot stop the IoT megatrend. They can only decide to leverage this data or to ignore it.

Celebration of International Women’s Day 2019 in March highlighted both how far we’ve come in the past year and how far we still have to go. CNN published an article quoting the World Economic Forum's 2018 Global Gender Gap Report as predicting that it will take 108 years to close the gender pay and opportunity gap, and pointing out that companies wanting to create a gender-diverse workforce need to make big changes. Last month, that number was updated to 204 years. The insurance industry might substitute any number of goals/initiatives in the paragraph above, as the slow pace of urgent and necessary change has become a hallmark of the behemoth industry. Innovators are jumping up and down, having convinced enterprise companies of the need for big changes, but not making progress quickly enough. Some even question whether industry giants will survive or die in the next phase of the marketplace, giving birth to a cottage industry of companies selling innovation services. Re-creating the workplace to optimize the value of men and women working together in leadership is itself innovation and will not succeed until it is treated like a business imperative rather than a social cause. Perhaps the single most relevant pillar of innovation is the understanding that one cannot generate new ideas from the old mindset. “Stuck in the weeds,” “in the quagmire,” you name the cliché, the concept applies. Innovation requires people to let go of entrenched beliefs and push through boundaries to reposition in a new perspective. Sometimes just a small shift can make a huge difference. From this new perspective, thought leaders emerge who can create a culture of innovation within an organization, even a really big organization. See also: 3 Keys for Building Women Leaders   Women face a number of particular barriers in the current mindset. Just to name a few, recent research shows:

• Women (in general) are afraid to speak up and afraid to take risks. The consequences of failure for women are much harsher than for men;
• Women are afraid to share their ideas, even when one might be a breakthrough, because their colleagues are not listening or will take the idea and make it their own;
• Women feel more isolated the further up the organization ladder they climb, both because there are few women at their level and because they feel cut off from women at other levels;
• Women and men don’t like it when women step out of gender stereotypes. Being liked is important to women, which amplifies the effect of attacks that result from breaking away from traditional gender roles. This is sometimes called “unconscious bias,” but is a powerful barrier for many women regardless of how it’s labeled.

All of these barriers have a chilling effect on innovation. When women step back, companies (and the world) lose 50% of their population of thinkers. When women step back, a much larger percentage of relevant expertise is lost for efforts to innovate. A mindset shift, a new perspective, is necessary for men and women; the results will be amazing. The recent explosion of effort to bring women together and to change the way women fit into the world is evidence enough of a strong desire to make change. The lack of progress is just as strong evidence that women don’t know how to make change happen. Stuck in the status quo, facing the same barriers day by day, women do not know how to change their circumstances and how to create the environment in which we are truly listened to and our ideas truly valued. What we need as a first step is a mindset shift, a way to free women from the ties that bind them to old ways of thinking. Anecdotally, successful women executives tend to agree on a few structural requirements before they would change their mindset:

• A safe environment. The last thing women who have “made it” want to do is highlight that they are women. Participating in an innovation project regarding gender diversity at work does not feel safe. A third party or outside forum is necessary;
• They need to be with other women to find common ground and shared experiences. Deciding to leave her comfort zone (the status quo) and jump the abyss without knowing what’s on the other side is HARD and is deeply personal for women. Being in the company of other women who can be trusted to keep shared stories confidential is critical;
• Women need a common language and a common mindset as a foundation for innovating and re-designing the workplace; Few women are in top leadership roles, so expanding the scope of who should come together itself requires a break from the status quo. Women from different companies, industries, job titles and ages must come together to learn a common language and share a common mindset.
• Like any innovation project, changing the workplace to better use the strengths of women in leadership requires an open mind and a willingness to abandon old beliefs and create without boundaries. Like any innovation project, the change requires dedication of resources, clear measures of success, sponsorship from top leaders and a safe environment for new ideas.

See also: How Diversity Can Stoke Innovation   Unless organizations commit themselves to addressing the creation of the workplace of the future as a pressing business imperative rather than a social cause, this, like other innovation projects, will stall. If you want to engage in conversation, if you want to explore how women can move forward, breaking through the tangles and making transformational changes for themselves and those around them, we would like to talk with you. Please reach out to us or check our website at www.hightidesgroup.com.

Participating in a panel last week in Orlando at the WCI360 event brought into focus two ideas about innovation in insurance that aren't understood fully enough yet. One is that workers comp will lead the way, because innovation can happen in so many more ways than is true for other parts of the insurance industry. The second is that many of the innovations won't occur in what we have come to know as insurtechs.

That second point may be the harder one to accept. We're in the insurance industry, so we view innovation through an insurance lens—but that doesn't mean our customers do. Kodak executives thought customers loved physical prints in yellow boxes as much as the executives did and now probably reminisce about the good old days by texting photos of themselves and their families to each other.

Just talk to the risk managers who were part of the panel that Chris Mandel of Sedgwick moderated at the 74th Annual Workers Compensation Educational Conference and the 31st Annual Safety and Health Conference, which brought together professionals from around the world at the largest workers comp conference. Soubhagya Parija, chief risk officer at New York Power Authority, and Brad Waldron, vice president, risk management for Caesars Entertainment, are innovating hard—but not through insurance. While many risk managers still see theirs as largely an insurance function, Parija and Waldron would rather eliminate the risks than tie up capital for them.

Waldron opened more than a few eyes when he said that, because of the sort of spectacular entertainment that Caesars does, "On any given week, I have to quantify the risk of some guy pancaking on a street in front of our marquee performing a 30-story BASE jump, then complete the same risk analysis for two motorcyclists jumping through a 40-foot ring of fire indoors." He'd much rather ensure the safety of the performers, even though, he said, "I realize most of the people in this room are from insurers."

Parija said NY Power is strategizing on how to provide vehicle owners incentives to dramatically increase the number of electric vehicles so that this utility giant can temporarily store power in the cars—not exactly an insurance-based approach to risk management. NY Power is also embracing new technologies that reduce injuries for line workers as well as those performing other high-risk tasks.

While insurers are innovating on traditional issues, such as getting an injured worker back on the job as quickly and empathetically as possible, risk managers such as Waldron and Parija are focused on getting rid of injuries/loss events entirely.

In thinking about innovation, workers comp insurers need to cast a far wider net than in other areas because of my other point: that innovation can come from anywhere. Consider robotic fish. Yes, robotic fish. Risk managers at Whole Foods, with a non-insurance focus, jumped in as early adopters of robotic fish from Aquaai Research to provide aqua farms with the option of keeping divers out of dangerous situations in North Atlantic salmon farms. Worker injuries dropped 85% for two consecutive years.  This example is particularly relevant as an open opportunity for an insurer. (Send me a note at the email below, and I'll provide details.)

Auto insurers know they need to track developments in driverless technology, but they don't need to worry about advances in genetics or exoskeletons. Workers comp insurers need to track all of the above—and a whole lot else besides.

Our Innovator's Edge data base tracks some 35,000 early-stage efforts, roughly 11% of which are insurtechs. These are the startups attacking problems that are recognizably about insurance and are the core of what most insurers need to track; for workers comp insurers, these companies focus on issues such as rating and recovery. But workers comp insurers may be affected by just about all of that remaining 89%, too. They have to think not just about insurtechs but also about what might be called risktechs, companies that are changing the nature of risk itself. Risktechs manage risk through prediction and prevention, cannibalizing the loss itself, or significantly extending the time before an inevitable loss.

Here is a table showing the number of early-stage companies in Innovator's Edge by categories aligned with the current model of insurer-based workers comp:   

CLAIMS MANAGEMENT	95
FUTURE OF WORK	47
HEALTH AND WELLNESS	396
SAFETY	953
TELEHEALTH	61
WELLNESS	835
WORKERS COMP	36

Source: Innovator's Edge

 

 

Risk managers who aren't looking through an insurance lens are asking, "What if we could…?", and they may just get their wishes through robotics, life sciences or any number of other innovations in the categories listed above. So, workers comp insurers had better be asking those same sorts of questions, based on the whole panoply of innovations that may come from the full list of 35,000 early-stage companies we are tracking, spanning 173 countries.

At the moment, most insurers are not. I've been inside eight major workers comp carriers making presentations to boards or corporate leadership teams. Only one is gearing up to prepare for a world where the nature of risk has changed.

After the panel, three attendees approached Waldron and me and posed a tough question: "How do you get existing companies to grow their appetite for risk and innovation?" Waldron responded: "I knew how our organization approached managing risk, and everyone knew we were struggling. I went to our corporate leadership and challenged them to eliminate as many rules of the road as they could. We needed a new rule book."

When customers are offered a choice between expedited recovery and eliminating the need to recover, they will have been provided a new rule book, insurers had better get one, too.

Guy Fraker
Chief Innovation Officer

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

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

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

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

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

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