One of the most fun and inspiring endeavors I’ve undertaken in my post-corporate life has been to advise select early-stage companies, portfolio managers and accelerators. Startups need lots of marketing advice, especially early on when there may not be a CMO on board. As a result, my work often involves defining audience targeting strategy and the value proposition (from the buyer’s perspective), building the messaging framework and then spending lots of time advising on how to navigate the corporate gauntlet. The problem is, even with a well-defined marketing, communications and sales strategy, a startup at the pre-seed, seed or even A-round stages may not have the endurance to make it through the corporate gauntlet.  The effort is just too complex and time-consuming given the demands and limitations on a young company’s talent and the sensitivity to monthly cash burn. You may say, well, the startup world is a bit Darwinian.  Only the fittest survive, and that is to be expected. My bet is that while most everyone at work in the corporate world acknowledges their own bureaucracies, too few act on the recognition that their people, policies, and processes can absolutely affect startups’ survival, which, in turn, hurts enterprise efforts to transform and innovate. Those in the corporate world pay a price for killing or weakening these innovators, who are a source of new capabilities that established companies are unlikely to create on their own. Corporate leaders can do something about it – if they can summon the leadership, courage and tenacity to do so. What exactly is happening? Here’s a sampling of what I see founders run into, once the introduction is made and there is an expression of interest to learn more. First, a couple of months pass to get a meeting on the calendar, and to take place with at least some of the right people in attendance. See also: How Startups Win Customers’​ Hearts     The conversation after the presentation and demo moves to: “We love this tech, and it would do a lot for our organization…” Yet, within a couple of follow-up meetings, phone-calls and other internal introductions, the conversation switches over to one of many variations on the big “but” …

• “But we have too many priorities.”
• “But we have to pick our battles with [fill in the blank – procurement, compliance, information security, et al.]
• “But we have so many open roles that there is no one here to lead the pilot.”
• “But we cannot get the support in 'the business'; they are just focused on this quarter’s sales.”
• “But it turns out we already do this or can do it ourselves.” [This is often untrue.]

These are real quotes from real conversations with well-paid, smart and accomplished corporate managers who get the reality of declining customer franchises, diminished brand commitment, new and unbounded competitors, legacy distribution, etc. Some of them are actually – yes – digital natives, and all are at least digitally enlightened. I wonder, are they simply beaten down? Are they afraid? Do they define their roles as being great at repeating how things have always been done, and not deviating too much? Or are they trapped inside a legacy mindset, an outmoded idea of the value of speed (no, you cannot expect the world to wait for your annual planning cycle), and higher internal hurdles for getting approval to do new stuff than to maintain the status quo? There are common characteristics inside large enterprises where the future is being advanced with meaningful adoption of some of the imaginative business models, offerings and technologies developed by startups:

• Leaders are allowing the processes, policies and procedures that are fit for the purpose of innovating to co-exist alongside those that are essential to sustaining earnings predictability.
• Leaders are willing to try new things and know that failure is a natural and expected part of experimentation.
• Leaders are speaking up and advocating for policy and process change and holding themselves and their people accountable for delivering the short term while also taking steps to the future.
• Leaders are developing their people, ensuring collaboration and diversity through action not just talk and having their people’s backs when they take risks.

See also: Who Will Win: Startups or Carriers?   Startups are discouraged by enterprise relationship opportunities where the pace and bureaucracy are simply too slow and complex to be practical when they have to demonstrate milestones every month to their investors. Is your company or another one you know of missing out as a result? Do you believe something can be done to change?

This article is based on a keynote speech, “Disruptive Leadership,” at the World Forum Disrupt, Strategy & Innovation Conference in New York City. The pace of change we are experiencing today is as slow as it is going to get for the rest of our lives. Everyone talks about disruption: digitalization, automation, virtual reality, artificial intelligence, big data. The corporate world is polarized at the moment. Companies today sometimes feel that they must choose between flexibility, on the one hand, and the stability, on the other. There is a lot of talk about agility as a way to bridge the gap between the startups and the industry incumbents. According to McKinsey, “Truly agile organizations learn to be both stable (resilient, reliable and efficient) and dynamic (fast, nimble and adaptive).” Disruptive leaders are the ones who can stand in the middle – the ones able to speak both the language of the legacy world and the language of the startup world. They stand in the sweet spot between rapid change and rigid stability. In fact, disruptive leadership is the single most important ingredient of agile organizations. Disruptive leadership is not reserved for tech and innovation departments only. It is about changing the organization's DNA, instead. Through my work over the past decade, I have been observing highly effective leaders, and, as a result, I came up with five main pillars of disruptive leadership. I will cover three here and follow up a second article that has the final two, plus a conclusion. 1. Past — Future Startup leaders ask: How could we do it tomorrow? Legacy leaders ask: How have we done it so far? Disruptive leaders ask: How might we do it today so that we bridge the gap between yesterday and tomorrow? Disruptive leaders are able to keep one eye on the present and the other on the future. They know that, to successfully lead a disruption, they need to keep the significant part of their existing operations stable. They also understand, however, that experimentation is crucial to be future-ready. Balancing these two conflicting goals is not easy. There are not a lot of leaders who can do this. It’s a missing skill in the market. See also: InsurTech Forces Industry to Rethink   Some traditional companies try to bridge the skills gap by hiring leaders from the startup world, which often fails. Why? Because they often don’t pay the necessary respect to the existing culture and the existing business model. They are great at innovation, but they are often not adequately skilled to balance stability with change. Reflect: How much time are you carving out in your day to think about where the future is headed? 2. Limited — Unlimited Limited vs. Unlimited thinking is closely related to the previous point. Our past and our present are mere indications of what is possible. Truly unlimited potential lies in the future. Disruptive leaders create an appealing vision by thinking in an unlimited manner and are then able to tie it back to reality and find ways to make it happen. Startup leaders focus on closing the so-called opportunity gap – the gap between the way things are and the way they could be. Legacy leaders focus on closing the performance gap – the gap between the way things are and the way they should be. Disruptive leaders focus on both. They aim to make improvements to the existing product or service (performance gap), while at the same time challenging whether that product or service is relevant any more (opportunity gap). Reflect: What can you do to move from limited thinking to unlimited thinking both in relation to your company and for your career in general? 3.  Internal — External Legacy leaders have an internal focus: How have we done it so far, and what is it that we are strong at, that we want to offer to our clients in the future? Startup leaders are extremely client-focused, on the other hand; they are great at listening and designing a business that meets their clients’ needs. As usual, a disruptive leader is the one who can do both – honor the legacy and the strengths of the company, while keeping another eye on the external world: clients, competitors, new entrants, emerging risks. See also: Industry Demands an Open Ecosystem   Disruptive leaders keep a close eye on all the players up and down the value chain because they understand that clients of today may be competitors of tomorrow, and vice versa. Value chain disruption is becoming more prominent, so keeping an eye out on the external developments is critical. Reflect: How much of your time are you carving out to observe the market and understand the developments up and down your value chain?

A report by The Insurance Insider last week that AXA won't contribute more funding to its insurtech venture fund underscores just how hard innovation can be for big corporations, even when you have the sort of all-star cast that a fund like XL Innovate can assemble.

Picking winners and losers among investments is plenty hard—the rule of thumb is that nine out of 10 startups fail. On top of that, corporate venture funds typically have conflicted agendas.

To get top talent, you have to pay handsomely for good returns—Silicon Valley titans like John Doerr and Vinod Khosla set the bar, having become billionaires as VCs. Chasing those returns, the VCs want to be able to invest in anything with great promise. Fair enough. But here's where it gets tricky.

The corporation typically isn't just looking for a return on investment. It wants to find a product, a line of business, a business model, a something that could produce a step change for the company or even reinvent the business. Basically, the corporation is looking to be Dayton Hudson, a stodgy family retailer that in 1962 let one of the brothers test an idea for a discount retailer—when I tell you that the name he chose was Target, you realize just how successful he was; his experiment subsumed the rest of the company. 

The XL Innovate early investment in Lemonade illustrates the tension. Lemonade is now a unicorn, valued at $1.5 billion to $2 billion, so the fund has generated a spectacular return. Yet Lemonade's renters and home insurance, even together with its slick interface, aren't likely to move the needle for AXA's life and health lines or its financial services.

And XL's Lemonade experience is for a company being sophisticated about how to innovate. Our chief innovation officer, Guy Fraker, tells of being at State Farm years ago, in the pre-insurtech days, and trying to get the company to invest in Relay Rides. Guy was sure that the peer-to-peer, car-sharing service would succeed, and the $500,000 investment finally happened, but only because a senior executive cut through the review process and expensed it. Guy later learned that State Farm sold its stake in the company (now called Turo) after a year and tripled its money, but it's not as though that extra $1 million moved the needle for the mammoth insurance company.

Historically, the best insurance companies have been run by financial geniuses, who have figured out super-smart ways to use all the capital they amass. Warren Buffett, for instance, has used Berkshire Hathaway's insurance assets to finance much of his wizardry. And there's a lot to be said for the insurance industry's financial sophistication. The industry financed the recovery from Katrina, Maria, 9/11, etc., and is rebuilding sections of California following the devastating wildfires, all without taking on debt. 

But the game is changing, and financial brilliance is no longer enough. The bad news is that the challenges will be tough, as the AXA report shows. The good news is that the industry seems to be coming to grips with the change. A.M. Best's decision to start rating companies on their innovation capabilities, in particular, will not only provide companies with incentive but will help steer them toward the right path.

Cheers,

Paul Carroll
Editor-in-Chief

Artificial intelligence (AI) seemingly has been discussed everywhere over the last few years, and now it’s made its way into the commercial insurance industry. Organizations are using AI and machine learning for everything from streamlining operations to offering more personalized care and better customer service. There is an increasing sense of urgency about getting started on the AI journey. The question is how. Do they develop a custom solution in-house or purchase a third-party solution already on the market? At first blush, the temptation to build can be strong — after all, you can design exactly what you want for your specific environment. In reality, it’s hard to accurately weigh the perceived benefits of a highly customized internal platform against the time and cost requirements compared with purchasing a tested, third-party solution. To help figure out the best course of action for your organization, I’d like to share some criteria that may guide you. Staffing Developing a quality AI-based platform that effectively addresses specific needs requires a dedicated team. To build this team in-house, your organization will need to hire more than just data scientists. Full deployment of a new solution requires product managers, software engineers, data engineers, data scientists, operational experts to develop process and operational workflows, staff to integrate data models into operations, people to manage onboarding and training of the employees who will ultimately use the solution and staff who can quantify value. It’s also important to have all these members operate as one unified team instead of spanning various organizational groups that are not 100% aligned. For some organizations, this may not be a big deal. For others, the process of recruiting, hiring, training, managing and scaling down staff is one of the worst, and often most prohibitive, parts of embarking on the AI journey. If it’s too daunting to put together a team with the necessary skills, opting for a third-party solution that already has this figured out could be the way to go. See also: How to Use AI in Commercial Lines   Data What types and how much data does your organization currently pull? If you can glean industry-leading insights and possess a treasure trove of information internally, you may want to keep it under lock and key, developing new ways to access and analyze it in-house. But this is usually the exception rather than the rule due to the complexities involved in the insurance industry. Even very large organizations with a high number of claims may lack a preponderance of data on a particular feature, injury or litigation scenario. An external vendor, however, could have data aggregated more broadly to cover all situations. External AI vendors draw on a wealth of anonymized and aggregated data from both public and private sources. This means data models can be trained more quickly and accurately. Customization This is an area where in-house development wins. Your organization can build something from the ground up completely specific to your needs at every turn. If you opt for a third-party solution, there are some constraints that you have to adhere to. However, it’s important to think of customization not just at a point in time but also across the entire life of the AI solution. While you might be able to build exactly what you want right now, if you don’t have continued focus, the solution will become obsolete rapidly. This brings us to the next point. Continued Focus Just because an AI-based solution is created and implemented doesn’t mean the work is done. It is, in fact, just the start of a journey that requires a dedicated team focused obsessively on the problem. These solutions need to evolve fast, or they will rapidly get irrelevant. Models need to refresh. And platforms and software need to be updated, maintained and optimized. When planning for this in-house, factor in both the staff and time involved to refresh models, fix bugs or add fields or features. If you go the third-party route, maintenance and improvements are typically included in the cost or subscription. If you feel uncomfortable dedicating an internal team to the project on a continuing basis, it might be better to go to a third party. Security When it comes to security, in-house platforms have an edge because data is not shared outside of the organization. While you still have to ensure that your networks, systems and endpoints are carefully managed, you are in control. While evaluating third-party vendors, it’s important to check their security credentials and processes to handle data. They need to be as good as your internal processes (if not better) with clear evidence of tight controls through certifications like SOC 2 Type II, HIPAA and HITRUST. Time to Capture Value There is a race going on to bring down cost structures dramatically. This is driven by the premium pressures in the market. The primary way to improve combined ratios is by pushing on operational efficiencies. Time matters. It’ll help to think hard about how you could capture value quickly. Ask yourself how much time it will take to:

• Assemble the team
• Receive data and set up a data pipeline
• Design the solution
• Build the solution and create a testing infrastructure
• Operationalize the solution
• Design and implement a way to track value
• Continuously iterate on the solution

Cost Your ultimate decision may come down to some basic math. Once you’ve narrowed the list of potential outside vendors and receive their quotes — which typically include a continuing fee that covers hosting, support, performance and additional improvements — you can compare them with what you estimate for the total of building a solution internally. In calculating this estimate, factor in staffing, training, infrastructure and hosting costs as well as maintenance and continuing improvements, as previously discussed. See also: Leveraging AI in Commercial Insurance   I hope these guidelines assist you in making the decision on how to best bring AI into your organization. There are pros and cons to both building and buying. The trick is to prioritize your needs and what is actually feasible and realistic for your company to ensure that the result more than justifies the means to get there.

I received this email last month: I attended another conference yesterday.... Lots of talk about tech and customer experience. No talk about coverage and language and why it matters. My response: Has there ever been an insurtech conference where someone speaks as a devil’s advocate to point out some of the problems or issues with trying to insure someone in 60 seconds or with dubious “big data”? I just wrote about an insurtech homeowners quote I got last year where my home’s square footage was understated by 1,200 sq. ft. resulting, in part, in the Coverage A limit quoted being at least $200,000 too low. I did another quote a week or two ago at the same site, and my square footage was OVERstated by 1,600 sq. ft., though the quoted Coverage A limit was still below what I know to be the correct replacement cost. I just wonder if the organizers or participants in these events simply don’t want any naysayers to rain on their parade. The thing is, the technology could be used to do a better job than many agents if the insurtech industry would just get away from the misguided premise that what consumers want and need is fast, easy and cheap. What consumers might want and what they actually need are two completely different things. When my son was a few years old, he would have happily subsisted on a diet of chicken nuggets and gummy bears. That was what he wanted, not what he needed, because he was ignorant of nutrition in general and the nutritional value of such "food" in particular. The same is true with regard to consumers and insurance. It’s a combination of ignorance and the perception, fueled by our own industry advertising, that insurance is a commodity differentiated only by price. See also: Insurtech’s Lowest Common Denominator   Instead of easy/cheap/fast, easy/cheap/better is quite possible. There’s a semi-insurtech that provides a commercial lines market. I looked at its application/exposure analysis system a few years ago, and it was VERY impressive. The questionnaire/checklist series of questions involved a lot of exposure analysis. It wasn’t fast by any means, but it appeared to be very thorough.

THIS is where insurtechs could take the industry if they had a clue what they were doing.

Instead, they cater to the base instincts of people because of ignorance or avarice. They’re looking for quantity, booking as many policies with as little effort as possible. Cash flow. The fact that they dishonestly or misguidedly lead people to believe they can really sell them insurance in 60-90 seconds makes me think there is more than just gross ignorance involved. If they actually understood the industry and what is at stake for the public, they would know the Amazon “one-click” approach isn’t suited for what we sell. Insurance policies have lots of endorsements for a reason--unless a lot of those coverage options are being built in, there are people with lots of coverage gaps that don’t have to be there. The insurance industry is founded on good faith, and good faith means a lot of things that don’t seem to be part of the business model of a lot of insurtechs. If we consider ourselves professionals, there are certain characteristics of being a professional that we have to meet. One of those is altruism. I don’t see any real altruism, for example, coming from a company like Lemonade other than the charity perception they like to give lip service to. When I got my online homeowners quotes, the companies never asked me about my boat dock. Assuming they’re using state-of-the-art data resources like satellite imagery, something in their system should have told them that I live on a lake and have a $40,000 covered boat dock. They should also have access to information that tells them the dock is on Army Corps of Engineers property, not MY “residence premises.” As a result, they would have issued me a homeowners policy with a $40,000 gap for that exposure alone. On our neighborhood NextDoor app, someone said they had a slip on their dock that was available for renting. That makes their dock used for business, necessitating another endorsement to cover that exposure. Does anyone at this insurtech know this? Does anyone at this insurtech really care that they may have a book of business full of people who have potentially bankrupting uninsured exposures? I doubt it. Too cool to care. Would a traditional agent ask these questions? Many would not, so I don’t blame this attitude just on insurtechs. There is plenty of room for improvement in traditional channels. That’s where I see the role of technology. Automate processing as best as possible and use RELIABLE information resources to streamline the processes. That should give knowledgeable, caring professionals, with the assistance of AI technology, the ability to devote most of their time to exposure analysis, risk management, advocacy and education. See also: Predicting the Future of Insurtech The industry needs disruption and can benefit greatly from technology, but not the kind being offered by most of the insurtechs I’ve looked at. Everyone knows the U.S. has a great need for rebuilding infrastructure. If we let the equivalent of insurtechs do it, they’d be rebuilding bridges with matchsticks. This message needs to be shared at insurtech conferences, but I’ve not seen any indications that it is.

Monumental changes in how and where work is performed create new risk and safety challenges. This session at the RIMS 2019 Annual Conference & Exhibition examined emerging workplace risks and effective safety strategies to address them. Speakers included:

• Larry Pearlman, senior vice Ppesident, workforce strategies practice, Marsh
• Timothy Martin, global health and safety manager, Steelcase

1. Wearables Ergonomics are a problem across many industries, especially with an aging workforce. Wearable devices measure body stress so that, with injuries, we can determine what happened, how it happened, when it happened and if it will happen again. Different technology like exoskeleton suits are available to help with strenuous activities, which can help retain your aging employees longer than otherwise expected. 2. Robotics Industries have evolved from using barrier robots (kept away from employees), to collaborative robots (good for repetitive tasks but extremely complicated to program) to now using autonomous robots. Autonomous robots are simple to program in an extremely short time, so virtually any employee can control them with little effort. See also: Top OSHA Trends Facing Employers   3. Workplace Violence Employers are still not being proactive enough on workplace violence, despite the increasing frequency. Training does not extend to drills, and mental health problems are going unaddressed. Employers need to shift from reactive policies to predictive and prescriptive policies. Technology has evolved to provide electronic robots that can patrol your workplace, supported by a control center that can interact with employees in real time. 4. Workplace Wellbeing Studies show that employees are stressed and in poor health. Employee wellbeing is a major problem, and employers need to implement support for total wellbeing – physical, emotional, financial, social. There is a certain way to inspire wellbeing that does not seem like you are telling employees what they should be doing, which is ineffective. There are more-effective programs available that will tailor programs to employee preferences. 5. Temporary Workers Temp workers often do not know proper safety basics and company policies related to safety. Employers can reduce the risks related to temporary workers through hiring practices, screening exercises, onboarding and continuous training. If you use a staffing agency, you can partner with it so that it aligns with your safety philosophy. Be transparent and try to match the type of work to the worker based on physical job requirements. 6. Changing Demographics Training methods must adapt to address the changing nature of the workplace. A blended learning approach is now necessary for different generations. Technology is addressing safety learning preferences for the younger, tech-savvy generations. Micro-learning is available to address bite-size info in real time. Geofencing can monitor and message employees at decision points to ensure rules, compliance and hazard awareness. Also, virtual reality is available to simulate situations to manage the rare, impossible, expensive and risky. See also: Connected Buildings and Workplace Safety   7. Marijuana Marijuana use continues to increase as legalization spreads across the U.S. There is no accurate impairment measurement available, so it is very difficult to create employment policies and testing. It may not make sense to test any more but, rather, enhance your fitness-for-duty policies. There is a new technology that will scan an employee’s eye and tell you if he or she is fit for duty. This is a measure that you can put at the time clock to help measure impairment before the employee begins his or her shift.

The transformation journey requires a new lens. This lens provides a clear future-state vision that anchors both the outside-in lens (prioritizing customers and their experience) and inside-out lens (prioritizing operational optimization), which together propel the journey forward. Acknowledging that the world and insurance are changing at an unprecedented pace, the first step to defining our future state is recognizing that the business of insurance may be very different 10 years from now. This more-open-to-the-future view lets us begin to explore possibilities and strategic watch points. It also alerts us to the fact that if we, as an industry, continue to seek only incremental change and do not change our approach to transformation, we will wake up in three to five years to discover that we have fallen behind, have lost our relevance and have missed out on a widening array of opportunities to advance. The second step is bringing the future-state vision and applying it across all initiatives. This means focusing not on the traditional approaches (in areas of standalone investment such as core systems modernization, new portals or business intelligence) but on the transformational “step beyond” tied to the future-state vision. Then inside-out and outside-in views need to be in sharp focus. But at the same time, they must complement each other. Each insurer’s individual transformation journey will draw on both in different orders and along different paths. In our latest strategic research brief, we illustrate SMA’s new approach to insurers’ transformation journeys with a series of use cases and proof points from the Chubb Small Business Marketplace initiative. With a clear future-state vision, Chubb took a multi-pronged approach to transformation from both the outside-in and inside-out perspectives – from creating new internal roles to launching new products and customer research, starting several strategic initiatives, introducing new portals and modernizing core systems … all linked together with the common future-state vision … to provide an amazing customer experience for agents writing small business. The clear but simple vision of Chubb’s future state has guided the company throughout its transformation journey and will continue to do so in future investments. See also: Beyond the Digital Transformation Hype   All transformation journeys require new perspectives and new approaches. Insurers, make sure you develop clarity on your future state, and make sure it is all encompassing. Have a clear vision of where you want your company to be before embarking on your journey toward that future. Think beyond the traditional approaches, beyond incremental change. Approaches that aim for incremental improvements are simply not going to be enough. And ensure that you are infusing every initiative with the future-state vision. The changes in our world and our industry are transformational. Maintain your transformational focus. This is your opportunity to advance your journey. Make sure your focus is always directed toward transformation.

The speaker walked to the podium holding a large jar filled with M&Ms. She asked: “Who likes M&Ms?” Hands went up. She then asked, “If I offered each of you $10 for each M&M you could eat, how many would eat some?” More hands went up. Finally, she said, “If I offered you $100 for each M&M you ate, who would get in line for a fistful of these chocolate treats?” All hands were raised, and a line to the podium started to form. Then she said, “But understand – one of these M&Ms is infected with a deadly poison, and, if that M&M touches your lips, you will die. Any takers?” All hands went down, and folks forming the line returned to their seats. She said, “This simple example provides insight into the underlying principles of risk management and insurance:

• Don’t risk a lot for a little.
• Don’t risk more than you can afford to lose.
• Don’t measure your chance of loss as a statistic; measure it in terms of the consequences if it happens to you.

As professionals in the insurance industry, our challenge is not just to sell insurance but also to help our clients manage their risks. Our purpose should be to facilitate our clients maximizing the good in their world, minimizing the bad and, when the bad does occur, mitigating the damage done. Risk management is the process. Insurance is the last step in that process. In 1972, as a G.I., I was blessed to visit the Notre Dame cathedral in Paris. It was a magnificent edifice. Today, it is smoldering ruins. The history remains; the vast majority of the structure does not. I have no idea of the insurance involved. My first question would be: Is it enough? My answer would be: “Probably not.” I’m assuming the liability carriers of the organizations responsible for the loss and the assets of these same organizations will provide the down payment on this disaster. The Catholic Church, billionaires, the French government and the people in the world will probably “re-insure the rest of the loss.” The facility will never be the same. My experience indicates that too many policyholders (risks) measure their losses in terms of losses they have experienced and are comfortable with. They are hard-pressed to venture into the unthinkable. Many residents/business owners in New Orleans were insured for wind and flood but not to the extent that a lady named Katrina delivered to their world. The people in Houston knew rains and floods but “misunderestimated” what 70 inches of rain can do. See also: In a Crisis, Will You Be Ready?   As agents and brokers, we and our clients guess, “How much is enough? We don’t know for sure until it’s too late to change our decision. I insured (circa 1975) a new hospital on the north shore of Lake Ponchartrain. I had been put on notice of a small fire loss that burned a fence and some grass. A dumpster had caught on fire. I was to report to the board soon, so I called the adjuster to be certain that all was well. The adjuster said, “Mike, I was getting ready to call you to advise you that I had reserved policy limits on this case.” (I almost threw up.) He further explained that the “little grass fire” had burned hundreds of acres adjoining the hospital. On the good news side, the landowner was an older man whose timberland had burned before, and this was the first time anyone had come forward to accept responsibility. He walked away from his claim. He appreciated our honesty and we appreciated his generosity. Bart was one of the best clients I ever had. In the mid-1980s, he had been carrying a $1 million umbrella. I suggested he raise the limits to $5 million. He said, “Mike, what could we ever do wrong that would result in that much damage?” I responded, “One of your trucks could run a busload of attorneys off the bridge and into the river.” He responded: “Oh my God, give me the higher limits.” (Two years later, we paid a multimillion-dollar auto loss.) In 1975, Louise (not her real name) was our agency bookkeeper. She had handled the books for decades. She was a blue-haired church lady who never caused trouble or had been a concern. The agency hired a newly minted accounting graduate to help the agency in the future but would let Louise work as long as she wanted out of respect for her decades of loyal service. In the first week, our new CPA discovered that Louise was more slick than innocent or loyal. We ended up discovering a loss of more than $33,000 (no one will ever know how much she stole). Fast forward about 12 years. I was insuring one of the fastest-growing and most profitable ENT practices in town. The practice was tubes in the ears into to gold via the operating room. The doctors realized the need for a more sophisticated accounting system for their practice. They hired a new CPA to be their office leader. He was the son of a prominent business leader. He had literally grown up next door to one of my agency's principals. He was a professional. We raised the employee bond limit to cover the new success of the practice. The carrier asked for additional details on this new employee. We forwarded the request. The information was not forthcoming. We made requests. The new employee used the excuse of “busy.” We believed him; the carrier did not. It sent a notice of cancellation. A few days later, the managing partner called and asked if the practice had a fidelity bond. I joked, “Don’t tell me he went south with the money.” Total silence. He was gone, as was a large sum of money. The good news for us: The prominent father of this “CPA” paid the claim to make other charges go away. It turned out that his son was not a CPA, and other legal issues were about to surface. As an agent/risk manager, I was not nearly as good as I thought. I was lucky. You may not be so lucky. Manage the risks as they are, not as you are or as you hope them to be. Today’s world is not as simple, innocent or honest as the world we left behind. Marcus Welby M.D. and Ozzie and Harriet are dead, and so is the world they lived in. With technology, your accounts can be cleaned out by a techie crook who can’t even spell CPA. Oftentimes, drugs today motivate dishonesty to support a habit. See also: With Innovation, Keep It Simple, Stupid   In the world of tort in Louisiana, there are more attorneys on billboards than there are underwriters trying to protect their carriers from them. Your Daddy’s Oldsmobile is a distant memory. The invincible AIG of my early years has been bankrupt, as have Arthur Andersen and other icons of yesterday. As a buyer and seller of insurance, as an agency owner and a business owner,  as a center of influence in your own world, BE PREPARED. Be prepared for the world as it is now, not as you would like it to be. Remember that technology has made crooks much more effective at mischief than it has made us efficient at self-preservation! How much is enough protection? I don’t know. Do you?

The World Health Organization has published a five-year strategic plan focused on 10 major threats to global health in 2019, among which there are noncommunicable diseases, such as diabetes, cancer and heart disease - collectively responsible for over 70% of all deaths worldwide. Through the plan, the WHO wants to try to ensure that 1 billion more people will benefit from access to universal health coverage, 1 billion more people are protected from health emergencies and 1 billion more people enjoy better health and well-being. It’s a very optimistic goal, and different types of solutions are required; all means available should be employed. Where do insurers come in? They are part of the healthcare system and could do more to contribute to global health. Though it may seem perhaps altruistic to associate insurers with such a noble scope, the reality is that they, insurers, would also benefit. Forward-looking companies have understood this opportunity, so there are examples of insurers that have started to use the “Insurer as Partner” approach, which implies an active role in prevention rather than just being reactive and paying claims when an undesirable event occurs. This new potential role of the insurer has been made possible, in great part, by what we now call “connected insurance,” which encompasses IoT (Internet of Things), wearables and other monitoring devices. The re-shaping of the insurance industry has already begun, and it will continue based on new technologies. Connected health insurance can become profitable for insurers as it allows measurement of the risk for a specific client and thus allows the presentation of an improved, better-priced value proposition that may also improve general health. The insurance company can’t possibly make it on its own and will have to seek partners from both the technological innovation sphere and medical providers, keeping in mind that its role in the health system is changing from “payer” to “pivot.” Discovery’s Vitality Program To better grasp the actual benefits for clients and not just for insurers that adopt such an innovative approach, let's look at the South African insurance player Discovery, which can be considered the benchmark when it comes to engaging members and improving their quality of life. Its Vitality program has created a system that not only raises the loyalty of customers but improves their lifestyle and overall health. Discovery’s Vitality uses an "early warning" mechanism that can anticipate serious health problems and more expensive claims. It does so by using connected devices like the smartwatch. According to Discovery, Vitality Gold status members with heart disease have 41% lower risk claims than members with no Vitality membership. Vitality Gold members living with diabetes have 50% lower risk claims. See also: Security of Medical Devices Needs Care   Another claim coming from a presentation by Discovery Vitality at DIA Amsterdam 2018 deserves our attention: There is an 18% reduction of hospital and chronic claim costs for the batch of Vitality members who use the Vitality Active Rewards (VAR) alongside the Apple Watch, compared with the group of insured who do not use an Apple Watch. VAR is a smartphone application based on fitness points, which is designed to encourage Vitality members to increase their activity by setting weekly personalized physical activity goals - and then rewarding users for achieving them. (Discovery specifies that its data is based on a cross-sectional view of the relative claims experience, and it is premature to show the improvement over time given the lower frequency of health claim events.) Discovery says that Apple Watch owners enrolled in the program are 35% more active than prior to getting the watch. Since the VAR system was launched, there has been a 24% increase in physical-activity days and a 9% increase in meeting higher exercise targets. The data is telling, and the implications for ensuring healthy lives and promoting wellbeing are significant. Seen from this point of view, the transition to a “prevention-centered” approach is a pragmatic decision for insurers because, in time, the portfolio tends to change its structure, passing from a majority of “sick” clients to a majority of relatively “in good health” clients. ICS Maugeri’s Mosaic case study Let’s look now at a more specific issue within the spectrum of uninsurable diseases, that is diabetes. Diabetes is a chronic disease that occurs either when the pancreas does not produce enough insulin or when the body cannot effectively use the insulin it produces. In 2014, 8,5% of adults aged 18 years and older had diabetes. In 2016, diabetes was the direct cause of 1,6 million deaths, and in 2012 high blood glucose was the cause of another 2,2 million deaths. It is estimated that the number of diabetic patients worldwide will be 629 million by 2045. Diabetic patients have a high risk to develop severe complications generated by the evolution of the pathology, such as peripheral neuropathy, retinopathy, nephropathy and cardiovascular diseases. It is well-known that insurers either do not cover diabetic patients or, if they do, require a high premium. This is due to the difficulty to measure the probability of the occurrence of risks associated with these clients. Therefore, the insurance sector is leaving uncovered a market that is becoming more and more relevant. ICS Maugeri, a major group of hospitals specializing in rehabilitation medicine, has developed, in partnership with the University of Pavia, an instrument called Mosaic aimed at improving the clinical management of patients affected by diabetes mellitus type 2 (T2DM) that can calculate the risk of developing complications in different time scenarios. Mosaic uses AI and machine learning that is based on algorithms able to learn patterns and decision rules from data. Based on the results expressed in one of their published research papers, the team has been able “to predict the onset of complications (retinopathy, neuropathy, nephropathy) at different time scenarios: at three, five and seven years from the first visit. The final models are thus able to provide up to 84% accuracy in predicting the probability for a diabetic to develop the three main complications and are easy to apply in clinical practice. In insurers’ terms, this shows that risk associated with diabetes can be estimated; furthermore, given that clinical evidences show that a proper management of the diabetic patient (intensive pharmacological treatment etc.) can lead to a significant reduction in the possibility of developing complications, the risk itself can be managed and reduced. The question is: How can insurers make sure that diabetic patients follow the required therapeutic path? It’s a difficult job. Diabetic patients are required to follow a rigorous clinical, diagnostic and therapeutic path to manage and control their pathology and try to limit or slow the consequences of this chronic disease. This path involves periodic medical checks and diagnostic tests as well as continuous and intensive drug therapies, requiring significant effort for patients and their caregivers. Most of the time, the scheduling of such periodic checks must be autonomously managed by the patient, resulting in a progressive reduction of adherence to the required clinical paths. Within the Mosaic project, the patient is monitored with the help of wearables and telemedicine; this allows the team to (i) personalize and update pharmacological treatments, (ii) identify and update the diagnostic path to be performed to monitor and reduce the risk of complications and (iii) identify on-time criticalities that may require timely investigations. Therefore, this approach allows a significant risk control and, potentially, risk reduction, allowing the insurer to update the premium yearly. See also: An Easy Way Forward on Health Costs   How do Discovery Vitality and Mosaic fit in together? Discovery Vitality uses gamification, reward systems and tracking devices to steer clients toward a healthier life style. Imagine if Vitality would be integrated with Mosaic’s technology for diabetes patients. This would mean that suddenly diabetics would become insurable, and the client base would increase. Vitality has already proven that a reward-based system can help improve behavior, so probably it would also work as an additional incentive for diabetics in keeping them effectively engaged with their prescribed treatment. Taking for granted that diabetics will follow a program step by step and change their behavior toward a desired goal is not something anyone should do. Even if the real stake for diabetics is their own life expectancy, which should be motivation enough, the reward element could be a good and fun extra incentive for reaching health goals. As estimated costs with lifestyle-related conditions (including diabetes) will be 47 trillion by 2030, insurers, the healthcare systems, clinical providers and patients could all benefit in some way from such a program. We would like to see this implemented in the short term at a larger scale than the test made by Mosaic, and it would also be interesting to look at how this approach could be extended to other chronic diseases. Article based on the chapter written by Andrea Silvello and Alessandro Procaccini, “Connected Insurance Reshaping the Health Insurance Industry,” Smart Healthcare, Intechopen, 2019, DOI: 10.5772/intechopen.85123.

According to a recent article by Policy Genius, “The cost of college has skyrocketed over the last decade, resulting in $1.4 trillion of outstanding student loan debt. The burden of educational debt weighs greatest on millennials --- those born between 1981 and 1996. Not surprisingly, college debt is influencing their behavior and spending habits. Research shows millennials are holding back on buying homes and making other big-ticket purchases because they are afraid of taking on more debt. Millennial families are also postponing other financial outlays, such as life insurance, because of debt concerns, according to a recent survey by SE2. Marriage and kids continue to be the life-changing events that trigger purchases of life insurance. As millennials buck the trend, insurers have to be versatile to adapt to their consumer tastes and lifestyles to capture this vastly untapped market segment. Start with technology Speed and convenience are increasingly critical to a good brand experience. Those raised as digital natives do not want to wait for several weeks for underwriting to size up an applicant’s risk. To be sure, a number of insurers have leveraged technology to accelerate the cycle time, but there is still far more we have to do. According to a recent report from Celent, cycle times for modest face amount carriers has dropped from 33 to 26 days, which is a solid improvement but still almost four weeks. See also: The Great Millennial Shift   Insurers rely on a mountain of public information --- from motor-vehicle records to credit information to property records --- to properly assess risk and price premiums. One late monthly payment on college debt can cause a credit score to drop, which could drive up premiums. What if price-sensitive millennials could offset the negative of a low credit score by sharing data from their Fitbit exercise app? New York’s top financial regulator is taking a step in this direction by allowing life insurers to use data from social media and other nontraditional sources when setting premium rates. Through leveraging data available through electronic medical records and health claims data, more and more carriers are able to provide a fluidless underwriting experience without an APS (Attending Physician's Statement). In the digital era, many of these digital natives are tracking everything from the food they eat to the number of steps they take every day. Our research shows that millennials might be more willing to buy insurance if their real-time health data could reduce premiums. Create an authentic experience Millennials are increasingly more discriminating about the firms they choose to do business with, showing a preference for companies that are authentic, ethical and committed to social good. This partiality stems in part from the 2008 financial crisis when a shortage of jobs affected the employment opportunities for older millennials. Younger millennials witnessed the pain of parents losing their jobs or their homes, or both. The scary economic news sowed a pessimism about the future and increased their desire for transparency. See also: Why Financial Wellness Is Elusive   Big companies have had to scramble to adjust to shifting attitudes. Mass marketing through TV advertising is proving less effective. Companies that target millennials with creative experiential campaigns are finding greater success. The engagement can be online, too, through gamification, loyalty programs and reporting on daily activities and life events. Some of the more innovative insurance carriers have seem immense success partnering with financial technology startup such as Life.io and Vitality to create customer engagement programs that has led to reduction in lapse rates and opened up new cross-sell and up-sell opportunities. Despite their financial concerns, we found that millennials value insurance and the peace of mind it provides. It falls upon the insurance industry to meet this generation where they are by creating tailored products, tools and processes that connect with how they live and consume today.