A bit of a backlash is developing about the insurtech movement – sort of, "We've been hearing about insurtech for a few years now, so why hasn't it meant the end of life as we know it? Why doesn't an app on my phone just know what I want and when I want it and provide that insurance for me?" We understand. We get impatient, too. But innovation in insurance is actually moving into an exciting and healthy new phase, where insurtechs and incumbents are finally working together rather than circling each other warily as potential enemies. We've always thought that cooperation was the way to go. That's why our team at gener8tor structured our OnRamp Insurance Conference to facilitate authentic, high-yield connections between participants at all levels. Over 1,100 insurtechs and incumbents come together for a one-day conference at a sports stadium. The program includes industry thought leadership, product demos, startup pitches, exhibitions and networking optimized to help attendees uncover opportunities to work with, not against, each other. We wanted to create an onramp, if you will, for consequential deals. As we draw closer to our fourth insurance conference (in Minneapolis-St. Paul on April 11 -- you can register here), the sort of deal that grew out of last year's event could serve as a model for how incumbents and insurtechs can collaborate. TCARE joined us last year as a startup with a grand total of two employees but with an unusual insight into long-term care: that caring for the caregivers can be key. "There are a lot of solutions out there helping the family members manage care better. We do not do that," said Ali Ahmadi, CEO and cofounder of TCARE. "We are all about the care of the family caregiver, not the patient. We take care of the family member better, which in turn has shown significant outcomes on the patient side." Science known as identity discrepancy theory shows that sons and daughters go through five stages as they shift from primarily a child-parent relationship to a caregiver-patient relationship, and TCARE monitors the transitions so it can support the children/caregivers during each phase. A two-year pilot with the state of Washington found that the TCARE approach delayed patients' move into long-term care by 21 months, while reducing costs by 20% by allowing so much more aging in place. See also: So, You Want to Work With Insurtechs?   At OnRamp last year, TCARE had a series of meetings with insurers that, over the following six months, developed into formal relationships, including investments. One is from RGA, the other from a faith-based institution that doesn't yet want to be identified. Ahmadi says the RGA relationship has provided considerable expertise in modeling that has improved TCARE's underwriting and has contributed demographic data on families that has greatly increased TCARE's accuracy. TCARE is now at 19 employees, on its way soon to 30-plus. It has signed a long-term contract with the state of Washington for its Medicare/Medicaid programs and has seen business pour in from other states and insurers looking to manage their long-term-care businesses. TCARE is now mandated legislatively in four states for use in their Medicare/Medicaid programs. Everybody wins, including the children and the parents they're caring for. At OnRamp this year, we expect a great deal of interest on the medical and healthcare side of the business, partly because there is so much data that can be used in insurance applications (while protecting everyone's privacy). As usual, we also believe that what we think of as horizontal technologies will play a major role, both at the OnRamp conference and within the industry – it isn't just insurtechs proper that will drive innovation; companies with cross-industry expertise in analytics, AI, etc. will be crucial, too. Elizabeth Carraro, director of digital strategy and partnerships at Securian, says, "We're looking at the innovation space broadly, not just looking at the latest and greatest in life insurance. How do you take the sorts of ideas you see with the connected home and apply that kind of thinking to improve life insurance? How do you bring a 140-year-old company into modern times?" Securian, which provides life insurance and other investment and retirement solutions, is looking in three main areas, she says. The first relates to changes in distribution, including through new aggregators and direct-to-consumer applications. "How do we change the conversation," she asks, "so we aren't just providing a piece of paper? Are there planning tools we can provide, as well?" The second covers the customer experience, a huge emphasis in the life insurance industry. "If you provide data to show that you're taking care of your health, how can we provide you with a better experience and maybe a better rate?" Carraro asks. The third relates to back-end operations: "If you started a company from scratch, what would your systems look like? You need to build for today's tech stack." Brittany Clements of Allianz Life Ventures says the corporate VC fund has a double mandate. As you'd expect, the fund needs to generate a significant return on its investments. But it also helps the startups in the portfolio thrive and assists the rest of Allianz in taking advantage of the innovative capabilities. "It's more about the strategic opportunities," Clements said. "We have one person devoted fully to business development for these investments. We work together to solve some of our business challenges, as well." She cites Covr Financial Technologies, which Allianz Life Ventures met at OnRamp and invested in last year. Covr has developed a platform that digitizes the whole life insurance process for advisers, which is a business in its own right but also can help Allianz's existing operations. See also: Is Insurtech Wave Hitting a Riptide?   Rick Zullo, who cofounded Equal Ventures and who has a history both with insurance investing and with OnRamp, focuses on establishing relationships at conferences, often well before he considers an investment. He met RiskMatch at our first OnRamp insurance conference and developed relationships that led, first, to an investment and a seat on the board and then to a successful exit when Vertafore bought the analytics company in 2017. "Our general philosophy has been less about disruption and more about appreciating what legacy insurers and brokers can do very well and appreciating what startups do well," Zullo says. "We try to match those capabilities." He adds: "Insurance is a world that is rooted in connections and complexity. The folks who win require both. You have to have an extremely nuanced understanding of how this industry operates, and of how relationships are extremely important to getting things done." We agree, which is why we think the partnership approach for insurtechs and innovation will prove to be so fruitful. We hope to see you at the Target Center in Minneapolis-St. Paul on April 11. Last year's crop of startups that applied for one-on-one meetings have raised more than $1.7 billion in financing, and we think this year's group is at least as intriguing. Please register here and join us.

Like the moon, mediation proceeds in phases. Here’s a primer on what happens when. Phase 1: Investigation The first phase of a mediation consists of fact-gathering and defining the issues. When the parties provide exhaustive briefs, time spent on fact-finding may be minimal. We can quickly pin down which facts and issues the parties agree or disagree on. Sometimes, people agree on the facts but not how to interpret those facts. Ferreting out those disagreements is part of defining the issues. Usually, case resolution will turn on fewer than five issues. As we drill down, disagreement about a fact may emerge, but a participant may be able to get the evidence to resolve the question during the mediation. Perhaps the information was not previously shared because it was not obvious that it was an issue, or someone may have been playing hide-the-ball. The employer’s side in a workers' compensation case should bring a copy of the indemnity and medical payment print-outs to the mediation. If no one can access the needed information during the mediation, we can usually put that issue aside and continue to mediate to resolution. But if that piece of the puzzle is critical, we might adjourn the mediation to allow time to gather those details, with a commitment to resume on a specified date. See also: Work Comp: Mediation or an ‘Informal’?   Mediation is not the time to declare you need additional discovery. For purposes of negotiation, let’s assume that each side’s discovery efforts would produce information favorable to that party. If the case settles, no one need undertake that expense. Phase 2: Working With the Numbers Now that we know what we’re dealing with, it’s time to talk about value. Sometimes, parties have exchanged offers and demands prior to mediation, but often they were waiting for this meeting. If everyone was together in joint session until this point, now may be the time to go into caucus, separate private meetings with the mediator. Once in caucus, parties can be candid about the strong and weak points of their case. Nothing said in caucus will be shared with the other side unless you authorize it to be shared. Moreover, per statute, no communication between any participants made exclusively within mediation can be used in any civil forum. Occasionally, a party has a secret reason for wanting to settle that has nothing to do with the case itself. For instance, an injured person told me of plans to move to another country, and a defendant company was undergoing a fiscal review in preparation for being acquired and wanted to get this potential liability off the books. In each case, the information went no further than me. While remaining neutral, the mediator gently helps each side form their offers of settlement and communicates them to the other party. Sometimes, this entails restating a party’s position to avoid unnecessary antagonism. As information and offers are exchanged, parties converge on resolution. If everyone is unwilling to go one step further, and it seems resolution is close, the mediator may suggest a “mediator’s proposal.” This allows parties to settle while saving face and can reduce dissatisfaction within the attorney-client relationship. Phase 3: Documenting the Agreement We have a deal, and now everyone gets back together. Parties are encouraged to bring a draft agreement to the mediation. If they must return to their offices to hammer out the final document, before leaving the mediation everyone should sign a memorandum of understanding that recites the agreed-upon terms. See also: ‘Slice’ Your Way to Mediation Success   Putting words to paper can call parties’ attention to missing details. Now is the time to consider the What If’s. Finally, review the timeline and commitments for wrapping up the loose ends. That typically includes court approval if required and paying the mediator.

Cybersecurity continues to remain top of mind with business owners as breaches continue and cyber criminals become more proficient in their techniques for hacking into sensitive information. Couple that with increasing regulations, like GDPR, which put the onus on companies to protect consumer information, and businesses of all sizes are paying closer attention. In 2018, 30% of commercial insurance shoppers added a cyber insurance policy compared with just 12% in 2017. According to a recent Cyber Trends report issued by CyberPolicy, contractual requirements from large corporations to third-party vendors and compliance requirements such as HIPAA, PCI and DCI are leading SMBs to shop for $1 million to $5 million coverage limits to satisfy these obligations. And for SMBs looking to do business with large corporations, many will find that vendor contracts now require cybersecurity planning and insurance, further protecting themselves in the event that partner data is compromised. See also: The New Cyber Insurance Paradigm   As SMBs are comparing different policies, here are a few tips:

• Commercial general liability (CGL) coverage is no longer enough, as it typically has insufficient cyber coverage.
• Business owners should look at the policy coverage with respect to data protection and privacy risks, both for third-party claims and first-party mitigation costs. Cyber insurance policies vary quite a bit, with no real standard in the industry. Policies usually include some combination of first-party and third-party coverages. A business owner who is unsure about which is more important should consult with a cyber insurance expert.
• Coverage needs to provide protection for cyber extortion threats and other breach-related liabilities, including regulatory penalties, GDPR and merchant services agreements.
• Renewing coverage during the contract period is critical, as most cyber coverage is written as “claims made” coverage and will only cover claims during the policy period.
• Proper preventative measures should be embedded in operations for every company, with cyber insurance as the backup. The measures should cover how sensitive data is handled, encryption, password management and controlling access to information. Some policies will have resources for the business owners to help manage this process, something to consider when speaking with a cyber insurance expert.
• Both parties should consider documenting specific preventative measures in a contract. This ensures that everyone is in alignment and understands the expectations for risk avoidance.
• Often, certificates of insurance are all that is required as documentation in the contract. Consider including a full copy of your cyber insurance policy with the contract to prevent misunderstandings should a breach occur.

The good news for SMBs is that cyber insurance policies have become more affordable. In April 2017, the average monthly premium cost for a $1 million cyber insurance policy was $270. By June 2018, the cost had dropped to $77. See also: New Approach to Cyber Insurance   As with most business operations, owners should always consult with their insurance representative when selecting cyber insurance. With any new policy, business owners should take the time to understand exactly what is covered under their insurance, how to manage their business operations to mitigate any security risks and what steps to take in the event of a breach.

As much promise as artificial intelligence is showing in insurance, many forms of it present a formidable challenge related to "back-traceability." In English, that means the AI is a black box.

If it makes a mistake, you can't trace the error back to its origin because the AI doesn't think like we do. It doesn't go from A to B to C and end up at Z, 23 steps later. It takes a massive amount of data, processes it in some mysterious way—from A to X to M-prime to...?—and spits out an answer. Take it or leave it.

Generally, we'll take the answer, because the AI is either more accurate than human analysis or can be trained to be more accurate by providing an influx or new data. Sometimes, though, it would be great to be able to follow the logic and fix a specific misperception, such as in some of the complex situations that are presenting themselves with driverless cars. But sorry. That's not how so-called deep learning and much of machine learning works. 

Insurers actually face a deeper problem than all but a few other industries: Even when an answer is right, it can be wrong. 

The reason: An AI could well make an accurate prediction of risk but could, without anyone intending or even knowing, be drawing on some inference about gender or race or some other attribute that, by law, can't be used in underwriting. Woe to that AI and the company using it.

As we think about how insurers use data, we split the process into four stages—collecting, organizing, analyzing and applying—and the first two stages should be safe from any unintended bias. AI can help collect lots of new information and can organize it in much more flexible ways; rather than have, say, all the information related to annuities be held in a silo just for that line of business, the information could be used to inform other businesses and combined with other data in ways that could allow for new insights into customers or products and services.

But there needs to be a double-check on uses for analysis and for application, to make sure that right answers aren't somehow wrong from a regulatory standpoint. The exact form of that double-checking will vary by jurisdiction but basically means some sort of statistical doublecheck to make sure bias isn't creeping into the decisions. 

In the black box age created by AI, it's not enough to be right. You also have to be right. 

Good luck.

Paul Carroll
Editor-in-Chief

To effectively acquire customers, offer personalized products and provide seamless service requires careful analysis of data from which insights can be drawn. Yet executives cite data quality (or lack thereof) as the chief challenge to their effective use of analytics. (Insurance Nexus’ Advanced Analytics and AI survey). This may, in part, be due to the evolving nature of data and our understanding of how its changing qualities affect how we use it -- as technology changes and different data sources emerge, the characteristics of data evolve. More data is all well and good, but more isn’t simply…more. As new and more contextual streams of data have become available to insurance organizations, more robust and potent analytical insights can be drawn, carrying with them huge implications for insurance as a whole. See also: Data, Analytics and the Next Generation of Underwriting   Insurance Nexus spoke to three insurance data experts, Aviad Pinkovezky (head of product, Hippo Insurance), Jerry Gupta (director of group strategy, Swiss Re Management (US)) and Eugene Wen (vice president, group advanced analytics, Manulife), for their perspectives on what each generation of data means for the insurance organization of today, and how subsequent generations will affect the industry tomorrow. See full whitepaper here. While there is disagreement regarding which generational bucket data should fall into, current categorizations appear to be largely aligned. Internal, proprietary data is generally agreed to form first-generation data, with the second-generation comprising telematics and tracking device data. There is some contention over the categorization of third-party data, but these are largely academic distinctions. Experts agree that we are witnessing the arrival of a new classification of data: third-generation. As Internet of Things (IoT) data becomes more commonplace, its incorporation with structured and unstructured data from social media, connected devices, web and mobile will constitute a potentially far more insightful kind of data. While this is certainly on the horizon, and has been successfully deployed with vehicular telematics, using "IoT, including wearables, in the personal lines space [and elsewhere], is still not widely adopted,” says Jerry Gupta, senior vice president, digital catalyst, Swiss Re. Yet, he is confident that third-generation data will "be the next wave of really big data that we will see. Wearables will have a particular relevance to life and health products as one could collect lot of health-related data." Download the full whitepaper to get more insights. Despite this promise, there are significant roadblocks to effectively leverage third-generation data. According to Aviad Pinkovezky, head of product at Hippo Insurance, the chief problem is one of vastly increased complexity: “This sort of data is created on demand and is based on the analysis of millions of different data points…algorithms aren’t just generating more data streams, they are taking new data, making decisions and applying them.” Clearly, this requires a change in how data is handled, stored and analyzed. Most significantly, third-generation data has the potential to change the nature of insurance. See also: 10 Trends on Big Data, Advanced Analytics   Given that data is no longer the limiting factor for insurance organizations, our research suggested five areas on which insurance carriers should focus to turn data into real-time, data-driven segmentation and personalization: cost, technical ability, compliance, legacy systems and strategic vision. A challenge, certainly, but the potential rewards to both insurance carrier and insureds are hugely promising, especially the change in relationship between carrier and insured. The potential to not only predict, but mitigate, risk has huge implications for insurance. Efficient, accurate and automated data gathering is a clear benefit for insurance carriers, and the potential to provide value-added services (by mitigating risk altogether) greatly enhances their role in the eyes of the customer. Measures that reduce risk to the insured increase trust and strengthen the bond between the carrier and the insured. Customers are less likely to view insurance as a service they hope to never use but, rather, a valuable partner in keeping themselves secure, both materially and financially. The whitepaper, "Building the Customer-Focused Carrier of the Future with Next-Generation Data," was created in association with Insurance Nexus’ sixth annual Insurance AI and Analytics USA Summit, taking place May 2-3, 2019, at the Renaissance Downtown Hotel in Chicago. Expecting more than 450 senior attendees from across analytics and business leadership teams, the event will explore how insurance carriers can harness AI and advanced analytics to meet increasing customer demands, optimize operations and improve profitability. For more information, please visit the website.

First, my heart is with small agencies and their owners. They have a tough time wearing so many hats. Delegation only works when other people are around to wear the hats. Agencies everywhere are pressured by carriers to write more business, but small agencies have limited resources when the owner is the key producer, the HR expert, the IT expert, the accounting expert and the chief bottle washer. I appreciate how personal small agencies are with clients. That is important to clients and often is a key reason the owners are even in the industry. This reason, among others, creates an interesting and often rewarding life for agency owners. I appreciate small agencies so much, I even made a promise to a mentor 25 years ago that, as I succeeded, I would not forget my roots by leaving behind small agencies as my practice grew. Sometimes small agencies are challenging entities with which to work. The situation is commonly this:

1. Like all small businesses and small accounts, they usually need more help but will not pay for it. They will not even ask for assistance, and often, if they are willing to ask and are willing to pay, they do not know for what to ask.
2. When these small agencies need help due to an E&O claim or another kind of legal situation or they need a valuation of their agency for a sale, merger or estate purposes, their data, their accounting methods and their contracts are so often missing or so disorganized that simply making sense of their situation is a huge challenge in and of itself. Quite often the situation borders on a fiasco trying to find a time to occur.

See also: Expanding Into Small Commercial   Here are some examples specific to accounting:

• Their accountant does not know anything about insurance agency accounting. Their ignorance has made a hash of the agency's records by trying to fit the square peg of agency accounting methods and systems into regular accounting methods.
• The accountant not knowing agency accounting has encouraged the agency owners to withdraw too much cash, causing a working capital shortage or worse, a trust account shortage.
• The agency has not maintained its accounting entries. When a valuation or audit is completed, or even when it is time to convert data from one system to another, and the accounting entries are poor to nonexistent, two outcomes are certain: 1) The owner is about to spend a lot of money to fix them; 2) The owner will look like a fool.
• When the data is a mess but the agency owner tells the appraiser, the attorney, the IRS or the judge: "Just trust me when I tell you what the numbers really are," the silence will be deafening. To many readers, this reads like a ludicrous statement, and it is, but this is verbatim what I have heard agency owners say numerous times. Another version is, "Don't pay attention to my financials. They are wrong. Here, I’ll tell you what the right numbers are." I cannot begin to write how many times I have heard agency owners speak some version of these lines. What is even more incredible is that they actually think, firmly believe, the other party is going to trust them! They actually get upset if the other party does not just take their word. They have no idea how bad they appear when they make these statements.
• The agency has been creative in how it pays people, including ex-owners. This appears when they buy the agency and want to deduct the price by paying the owner to do nothing. That is not exactly acceptable. The same usually goes for making producers independent contractors because your buddy advised it was a good way to save money.

Examples from the E&O world include:

1. • "If I license everyone, it will cost me more, and my staff will migrate to bigger agencies paying more." That does not go well in a deposition.
   • "If I do not have procedures, then the plaintiff cannot accuse me of not following procedures! I win." The agency does not really win because the result is the agency is painted as incompetent.
   • "We do not input data because it takes too much time." Really?
   • "We do not check policies because it takes too much time." Seriously?
   • Etc.

The Accounting Solution The solution is to do the work. The reality is that doing the accounting and operating procedures correctly actually saves time in the long run. My estimate, based on the improvements I've seen with my clients, is that approximately a 20% time savings is achieved. Hire an accountant who knows insurance agency accounting or hire someone to educate your accountant on insurance agency accounting. I have done this successfully many times, and, for constructive people, it is a blessing. Everyone sleeps better knowing they are doing the job right. Do not dig your grave deeper. When you learn that you or your accountant has been doing the agency's accounting ineptly or fraudulently and someone points this out, do not try to explain the problem away. Absolutely do not attack the messenger. Be constructive. Spend the time and money to purchase a better agency management system and then learn to use it. Some system’s trainers are not worth $2, and you may have to find third-party trainers. My most successful agencies, in this aspect, almost always use third-party trainers. The E&O Solution

1. Develop real procedures. The ROI using good procedures is awesome: 1) Productivity increases capacity with fewer people; 2) Sales increase
2. Complete a real audit. Fear seems epidemic with small agencies that an audit will put them out of business, not because of the cost but because of what the audit will discover. Personally, I think it makes for more sense for the auditor to discover the issues than for a plaintiff attorney to do so.

The Contract Solution Small agencies usually work with small attorneys, and many small attorneys are jacks of all trades and masters of none. They generally are not masters of insurance agency contract law. Agencies of all sizes need legal advice specific to them. If you cannot find a true specialist, let me know because here are some options:

1. I have trained many attorneys on insurance agency legal needs.
2. I can refer you to attorneys who specialize in agencies, but they likely will be in a different state, and you do have to pay.

It is so important to use true legal experts. I have seen generalist attorneys write contracts so the agency did not own its own book of business, the buy/sell agreement valued the agency about 2,000% higher than it should have, the agency violated its own by-laws, the owners had to sell their shares for half of their worth, obvious IRS compliance problems were created and this is the first paragraph in a 100-page book specific to attorney incompetence. Overall Solution Go to conferences with more sophisticated agencies. When you go to conventions, hang out with more sophisticated (not just larger, because larger does not always mean sophisticated) agencies rather than commiserating with other small agencies. Don't believe everything you hear, but dig for details from the best. Make a mark with insurance companies. Be professional in your submissions. Tell a story. Do not just submit junk or a pile and cause the company to wade through a mess. Some companies open doors for small but professional agencies. See also: 3 Ways to Boost Agency Productivity   Conclusion At the time of writing this article, my confession is that small agencies have worn me out. I am tired of fighting with agencies regarding what needs to be done with their accounting, their E&O, their carrier relations and so forth. Almost always, they do not know what they are doing, and many refuse to understand they are in a corner and do not have a choice. This is not fun. What is fun is working with agencies of any size that are constructive and proactive. Most bigger and better agencies got bigger and better by being more constructive, listening better and not refusing to act just because the action was difficult emotionally. They surpassed the emotion and their emotional barriers. Doing so greatly advanced their fortunes, both their monetary fortunes and the quality of their lives. I know that, for small agencies, time and money are always short. I do not know how to fix that in the short run, but I know how to fix it for the long run, and that is take the time to do your accounting, your data and your procedures correctly now. Bite the bullet. The ROI is high and, like in the old FRAM oil filter commercial, you can pay now or pay later, but you will pay, and, if you wait, the cost is likely triple or more what you'll pay now. Is it time to change that filter? You can find the article originally published here.

P&C insurers started a new momentum in 2018. Net incomes more than doubled in the first half compared to 2017, and P&C net premiums written rose 12.7 percent. With continuing economic traction, rising interest rates and higher investment income promised for 2019, this year could follow a similar trend, according to Deloitte. To continue the momentum, however, the industry will need to attend to some distinct challenges. How well insurers fit into an environment where customers are demanding greater personalization and more dynamic engagement, will depend upon insurers’ collective ability to incorporate new technologies and provide more customized coverage to meet the evolving needs of their consumer populations. Taking a Look Back at 2018 An improving economy and a bit of good luck provided wind for the sails of P&C insurers in 2018. Insurers witnessed growth in their insurable exposure base thanks to a drop in the unemployment rate and overall positive GDP gains, combined with elevated consumer spending. As proof of rising consumer confidence, Adobe Analytics reported a 23.6 percent jump in online Black Friday sales over 2017, with total sales ringing in five to nine percent higher than the previous year. A lower number of natural disasters in the first half also provided breathing room, dropping by one-third globally over the same time period the previous year and helping insurers to prepare for the onslaught of the 2018 hurricane season. As of early December 2018, insurable losses from Hurricane Michael had reached $4 billion and Hurricane Florence had netted $10 billion, according to Munich Re. Additionally, AIR Worldwide estimates that wildfire payouts are expected to exceed $9 billion before the 2018 tallies come to a close. Despite the large-scale cost of second-half natural disasters, total cat losses from 2018 are anticipated to be in line with a $50 billion industry average. It’s a vast improvement over the $78 billion Munich Re estimates for 2017, and should set the industry up for a healthier new year. Looking Toward the Year Ahead While the short-term outlook remains positive for 2019, insurers won’t realize the benefits in equal measure. The industry still faces many challenges in meeting consumer expectations at a time when their habits and preferences are evolving rapidly. EY reports that 80 percent of consumers are willing to utilize digital channels of engagement, including web, chat, email, mobile apps, video and phone, to interact with their insurers. Preferences like these make digital transformation a top 2019 priority, but many insurers won’t make the grade. For example, while 7 out of 10 insurers are now embracing cloud technology, taking advantage of lower-cost transformations and faster speed to market than on-premise system overhauls, the numbers also serve to highlight that some insurers are still behind the technological trends, fighting ailing legacy systems to meet consumer expectations in a digital age. New product development is another area where all insurers don’t and won’t fare equally. Startups continue to enter the industry, often supported by insurer-led incubators, offering fresh products that meet the needs of consumers. To maintain positive momentum, insurers will need to bring new products to market faster and find ways to create customized insurance solutions. See also: De-Siloing Data for P&C Insurers   Breaking Down Technology Barriers Technology remains an area that separates topperforming insurers from those who face extinction. According to J.D. Power, 45 percent of consumers use multiple channels when purchasing coverage, with a growing preference for online engagements. The J.D. Power 2018 Insurance Digital Experience StudySM revealed that insurers are falling short of consumer expectations. Attractive user interfaces have proven a poor substitute for core functionality, leaving consumers unable to complete simple tasks, such as quoting and purchasing a policy, completely through online channels. Information from CB Insights further confirms the industry’s poor showing on the digital front. According to their research, insurance continues to trail other industries when it comes to creating satisfying online experiences. While many insurers have mastered the web-presence portion of the digital equation, allowing customers to research coverage and maybe even request a quote, this experience falls short of customer expectations driven by an Amazon-buying culture. If insurers are unable to provide web quoting, binding and issuance, they have failed to deliver the functionality consumers expect and risk losing future business. Half of insurers responding to a Willis Towers Watson survey agree that the industry has been too slow to respond to digital trends and must now play catch up to evolve their capabilities to consumer standards. Eighty-five percent of CEOs are worried about the speed of technological change and their organization’s ability to develop the capabilities they need to compete. According to a new study conducted by North Carolina State University’s Poole College of Management’s Enterprise Risk Management (ERM) Initiative and global consulting firm Protiviti, “C-suite leaders are most concerned about their company’s ability to transform its operations and infrastructure to successfully compete with organizations that are born digital”. Who will win on the digital front in the end: InsurTechs or incumbent players? It seems the industry is split when it comes to making a prediction, with 45 percent of insurers saying that incumbents will be the future digital disruptors. An equal number gives a nod to the startups. Willis Towers Watson predicts that the reality will be far different as insurers instead partner with startups on digital pathways. According to PwC, nearly half of insurance executives responding to the 21st CEO survey are planning to enter strategic alliances in 2019 as the partnership ecosystem continues to expand. “We just think it is cheaper to buy technologies and external teams to help us get access to new capabilities,” said a director of strategy at a U.S. insurer when responding to the Willis Towers Watson Survey. “Developing our own systems is expensive and difficult." Analytics Lead the Future In addition to digital distribution, a growing trend toward analytics investments will be another technology-related area of focus for future-conscious insurers. While carriers are recognized for the quality of their data, managing this information for use by analytics is a challenge given the disparity between policy administration systems. Before insurers can invest in the next stage of analytics discovery and the application of artificial intelligence, they need to have their policy silos not only in order but communicating with each other. Digital distribution platforms have proven beneficial at uniting backend systems and delivering the single view of the customer necessary for insightful analytics applications. By using a digital distribution platform, insurers gain a single view of the customer and all applicable data. Analytics can then be applied to provide insights that fuel more personal communication between insurer and insured or more applicable products. Insurers are also able to offer online quoting, binding and issuance, in the streamlined environment customers expect. The cost is minimal when compared to internal systems overhauls and allows insurers to meet consumers’ digital demands without the lengthy timeframes associated with core systems upgrades. Reinventing the Insurance Product Line While insurers are partnering with InsurTech innovators to gain critical technological capabilities, particularly in the area of digital distribution, InsurTech innovation will provide a challenge to incumbents on the new product front. While much of early InsurTech funding focused on the healthcare space, CB Insights has witnessed the infusion of InsurTech dollars across the P&C sector, rising rapidly from 2015 and peaking in 2017. They estimate a $210 billion opportunity awaits across personal auto. The homeowners market represents an additional $74 billion for tech savvy startups bent on disruption. Currently, customer recognition of new entrants is low, but many are gaining ground. Bain’s 2018 Customer Behavior and Loyalty in Insurance Study reports that Lemonade is outperforming incumbents on the aspects of the buying experience that matter most to consumers. The study also revealed that 60 percent of the 174,000 respondents said they were open to purchasing insurance through new entrants. In 2019 and beyond, insurers will need to innovate and bring new products to market faster to keep pace with InsurTech innovation. The trend is driven by a number of consumer demands, including those for coverage that includes expanded risks as well as innovative ways of insuring assets. The sharing economy is one example where societal and technological changes are driving the need for insurance product innovation. One quarter of those participating in the sharing economy who believe they are at risk for doing so, want coverage they can turn on and off as needed. Deloitte predicts that insurers will need to increasingly “blur the lines” between personal and commercial coverage to meet these needs, providing hybrid policies that encompass malpractice, product, auto and cyber liability in one policy InsurTech Innovation Marches On

• Root, a usage-based auto insurance carrier raises $51 million in Series C funding. Root “insures only safe drivers” by using data acquired through Smartphone apps to determine consumer driving behavior. Premiums are priced accordingly.
• At-Bay, a “proactive cyber security monitoring service” offering related insurance coverage, raises $13 million in Series A funding, adding up to $19 million in total funds.
• Buddy offers on-demand, supplemental accident coverage for people who participate in active, higherrisk activities, such as skiing, hunting or hiking. Coverage is turned on and off via a smartphone app. The company was selected as one of only 10 companies admitted into the inaugural class of the MetLife Digital Accelerator.

While competition is entering the industry, CB Insights reveals that most insurers have focused on forming InsurTech partnerships with companies that complement their existing business over developing new products. Providing ancillary services, such as roadside assistance or organizational tools that help consumers compare the cost of car repairs, for example, has proven advantageous for insurers. According to Bain, 80 percent of consumers are interested in ecosystem services and willing to pay a higher premium to get them. While many insurers shy away from product innovation in favor of ancillary services, others are beginning to invest in InsurTech incubators or accelerator programs. In December of last year, The Hartford announced ten new startups that would participate in its second program launching in 2019. Accepted entrants are offering a wide range of products, including item insurance purchased through a mobile snapshot (Pineapple) and on-demand coverage for drones (Skywatch). See also: Keys to Loyalty for P&C Customers   See Your Box, specializes in collecting and analyzing data from IoT devices. According to Deloitte, sensor-based telematics policies are poised to become “a major force in product development” in 2019 despite emerging carrier disillusionment. Nearly one-third of insurance CIOs surveyed by Ovum stated that the cost and complexity of implementing IoT-based products was a deterrent to implementation. Nearly 25 percent find low appetite from customers for the coverage. Consumers and businesses are looking for customerfriendly products designed to protect them and their assets without breaking the bank. For instance, a recent survey conducted by Ovum revealed that 50 percent of U.S. firms have not purchased cyber security coverage despite the fact that 61 percent expect a breach in the next 12 months. Lack of value is considered to be one of the biggest deterrents. Only a quarter of firms feel that premiums are accurately aligned to their risk profiles, and 23 percent believe the industry is unclear about their approaches to policy pricing. Sixteen percent of respondents who have purchased policies say they aren’t covered for all risks. To consistently maintain and gain market share, insurers need to deliver on customer needs. That means protecting them against liability and their assets against loss, but in ways that deliver value and meet cost expectations. According to Bain’s analysis of their recent study, consumers “want to be able to choose from a good selection of policies at reasonable prices”. While some insurers will initiate incubators or accelerators to win InsurTech partnerships that enhance product lineups, others will go it alone, using vast stores of data to develop products that more closely fit the needs of customers today. Of course, not all insurers will have an appetite for expanded risks or the need to develop new product types when their primary customer base is covered by more traditional policies. All insurers, whether developing new products in house, supporting an incubator, or relying on their current product stack can benefit from a market network. Market networks will grow in 2019 as a way to enhance product selection and meet the need for more customized coverage. As insurers offer their products through the network, they are also able to utilize policies offered by other carriers to meet the needs of their customers when they don’t have an appetite for the risk or don’t have a product in house. Customizing coverage in this way allows insurers to meet the customers’ needs and price points while maintaining the renewal and the customer relationship. A market network operates as part of a distribution platform, providing insurers with digital distribution capabilities that unite product silos and enhance analytics applications. Insurers can provide a digital environment that allows consumers to select from a broad range of coverage to more accurately meet their insurance needs. You can download the report here.

“There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey.”  ― John Ruskin

Recently, I read a blurb that featured an “experiment” by SafeButler, an online premium comparison web site. The purpose of the experiment was to see how fast someone could get a renter’s insurance policy. They tested 10 online sources for coverage on a “luxury apartment.” We might recall that Dr. Frankenstein did an experiment once. It was ill-advised and didn’t turn out well. In this case, we have an experiment that, if relied on by consumers, might not turn out well, though the results of this experiment were presented as if they were a good thing. According to the report: “Assurant, Jetty and Lemonade have done a fantastic job of condensing the number of questions. With Jetty and Lemonade, we can almost finish the entire flow in about one minute.” Keep in mind that they were quoting a “luxury apartment.” That would imply to me that the renters are fairly affluent. As such, should they be asked a “condensed” number of questions in order to identify their insurable exposures? Do they have an umbrella policy? Do they need an umbrella policy? Would each of these sources provide them with the basic coverages they need, especially any underlying coverages required by an umbrella policy? Do these “luxury apartment” dwellers have significant amounts of jewelry or other property that has limited coverage in these policies? Do they perhaps belong to a private club or participate in volunteer activities with liability exposures? Do they have a need for personal injury coverage? Do they do any work from home? Do they own a watercraft housed at a local marina? Do they own any other properties? See also: 4 Hot Spots for Innovation in Insurance   What are the odds that these and possibly other relevant questions were asked at these web sites in “about one minute”? According to a chart they provide, the top two fastest quoters, Jetty and Lemonade, asked two and five questions, respectively. What’s more important, fast and convenient, or having a six-figure uninsured loss? And exactly what coverages are provided by the fastest/cheapest quoters? The report says they compared coverages “at the same level.” If they didn’t compare coverages at the policy language level, they didn’t compare coverages at the same level.

“There is more to life than increasing its speed.”  ― Mahatma Gandhi

I wrote an article last year about my son’s experience in renting his first apartment. The property management company required renters insurance and they had a relationship with a vendor that could provide it. You could read the policy online. No endorsements. Limited named perils. Minimal additional coverages. $50,000 liability limit. Overpriced junk. For an extra $80, I could get him a good HO-4 from a decent company. For an extra $120, I could get him a premium policy. He went with that AND a personal umbrella policy. I told him if he was ever short in paying for this superior coverage, I’d pay it, but he was going to protect his assets and income stream AND, even more important, he was going to protect innocent members of the public from his possible negligence. The report’s conclusion was: “People on a tight schedule want to feel safe and get covered fast. While all companies we tested provided great coverage, some were faster than others.” “Feeling” safe and actually being safe are two different things. How does the experiment warrant that ALL of these companies provided great coverage without examining their products and options in detail? And how do we know if each of these quoted policies properly and adequately cover the unique exposures of the applicants who reside in a “luxury apartment”? Do they cover all of these real-life exposures? See also: Insurance Coverage Porn   Does anyone really care as long as they can complete the unpleasant insurance purchasing task in one minute? Probably not…until they have a serious uncovered claim. Then fast, easy and cheap doesn’t seem that important. As my mentor, the late John Eubank, CPCU, ARM, would always say:

“The bitterness of no coverage is remembered long after the sweetness of low price has been forgotten.”

What if you ask someone if they are thinking about suicide, and they say, “yes”? What do you say? Here are four responses that can make a difference.

• Express gratitude

The first words out of your mouth: “Thank you.” “Thank you for trusting me.” “Thank you for your courage to be vulnerable with me.” “Thank you for valuing our relationship.” Often, when people express daunting thoughts about suicide, they expect to be judged. They anticipate that others will react in negative ways such as fear, anger, minimizing or shaming. When they hear a genuine expression of gratitude, often they are put at ease. This honoring response creates a safe space to move into next steps. Starting here is starting from a place of dignity and respect.

• Reassure with partnership

Second words to share: “I am here for you.” “I will stay with you as we figure this out together.” “I am on your team. You are not alone.” “I will persist with you until we have a viable plan to get you the support you deserve.” “I’ve got your back.” “It’s my honor to be here for you. I know you’d do the same for me.” “I don’t know exactly what you are going through, but maybe I have had some similar experiences. My heart is with you. Let’s figure this out together.” Because rejection and discrimination are real outcomes for people living with mental health conditions and suicidal thoughts, reassurance can be very grounding. Too often after disclosure, people who are suicidal experience the “hot potato effect.” Well-meaning people (and this includes many therapists) get scared, so they bounce people to someone else, who then does the same. Each time the person in despair is passed along to someone new to “help,” they must start over, telling their painful story, recounting symptoms and so on. All the time, no one is actually helping them solve problems and recover. The hot potato effect is demoralizing and often feeds into a narrative of “I am worthless and unlovable” or “no one can help me.” Bouncing people around worsens the suicidal crisis rather than helps resolve it. Working in partnership lets people know they have an advocate, someone who is in their corner. Another way to express this part is the idea of reciprocity. “I am helping you just as you would help me.” This statement lets the person know he or she is not a burden, but that this is just what friends and family do for one another out of love. Finally, this step emphasizes the importance of an empathic connection. You must reach inside your own memories of experiences and tap into something you have gone through that may give you insight into the other person's current emotional state. By doing this, you will be more likely to respond as you would want to be treated. See also: Suicide and the Perspective of Truth  

• Offer hope

Hope is the antidote to suicide. The most effective way to offer hope is through action. “If you were less miserable, you would probably be less suicidal, yes? I have some ideas to help you alleviate your suffering.” “I know some resources that might help.” “Let’s call the National Suicide Prevention Lifeline (or let’s text the Crisis Textline) together, so they can help us make a plan to keep you safe for now.” “This is important. Let’s talk through some ways to help you cope. I know of an app (My3App.org) that can guide us.” With compassion and collaboration, you can help the person consider options for developing a personal plan for healing. Offering hope is NOT about championing change (e.g., “You better see a doctor!”) or proposing reasons for living (e.g., “But you have so much to live for!”). Offering hope is about helping a person craft his or her own plan for safety and wellness by providing possibilities to help the person figure out what is best for him or her. Building in choice and empowerment is key in this step. Offer options at every turn (e.g., “We can take a walk and talk about this or go to the coffee shop.”). Have the person identify coping strategies and wellness tactics and write them out in his or her own handwriting. Say, “You are the expert in your own resilience. Let’s write down what has worked for you in the past.” Let the person know that you would like to be considered part of the safety net, and for you to be effective in that role, you would like help, too. Say, “If it’s okay with you, I’d like to go with you to your first appointment, so I can also get coaching on how best to support you.” Other resources to engage in this step might include your local mental health center, employee assistance programs or HelpPro.com’s suicide prevention therapist finder resource. Suggest that you call or meet with these resources together, at least as a first step. While you don’t want to inject your own ideas for the person's reasons for living, you may listen to and reflect back the reasons for living you hear the person say. For example, you can say something like, “On one hand, I hear you say you feel so overwhelmed, you don’t know if you can go on. On the other hand, I am hopeful when I hear you say things like you want to be a good role model for your kids. The way you say that it sounds like a part of you is fighting against this despair.” Another way to offer hope is to hold it for them. You can say something like, “What you are telling me is that you feel hopeless. I, however, see positive things in you and your future. I know you can’t feel this, but I can. I will hold on to your hope until you can feel it again.” See also: New Approach to Mental Health  

• Follow up

Before ending the conversation, make a plan to reconnect. “I will send you a note tomorrow to see if things are moving along.” “Let’s schedule a coffee for next week, so you can update me on whether or not the plan is working for you.” “I will call you by Friday to see how that therapy appointment worked out. Sometimes, things don’t seem like the best fit on the first pass, so, if that is the case, we can try again.” “You matter to me, so I’m going to let you know when I am thinking of you.” “I am feeling good about the steps you are taking to get back on track. I will reach out from time to time, and I’d love to hear about your success and any challenges you are experiencing.” It turns out following up is one of the most effective ways to prevent suicide. Sometimes these communications can be “checking in” to see if the person has hit a roadblock. Other times “non-demand caring contacts” are all that is needed. What are non-demand caring contacts? Just what they sound like. No asks. No telling what to do. Just “I’m thinking of you” messages. They could come in the form of pictures, “what I appreciate about you” thoughts or even funny cat videos. By following up, you are letting the person know he or she is not a hot potato, but that you are there standing shoulder to shoulder, walking with the person out of the darkness together. When someone discloses thoughts of suicide, treat it as a gift. The person has invited you in to a vulnerable part of their world, and you are a guest in this space. While it can be very scary to hear that your loved one is in such a desperately painful situation, your presence can make a huge difference in their recovery. So, when the person says “yes” to the suicide question, take a deep breath and follow these steps. You might just be the one to help the person save his or her life.

Ecosystems will play an important role in the future of insurance. But what factors will determine success? Tom van den Brulle, global head of innovation at Munich Re, says that at the end of the day insurance carriers need to be more courageous. Tom, what does your role at Munich Re involve, in particular with regard to ecosystems? Tom: “I am looking after the innovation portfolio of Munich Re. My role involves the development of our own platforms, such as Parachute and Realytix. But Munich Re is also investing and developing in long-term partnerships with key partners through our unit Digital Partners, for example. We’re a so-called cooperation partner on other platforms; think of Slice, which offers home-share insurance cover to Airbnb and other home rental platforms. We’re a member of various ecosystems; for instance B3i, Plug and Play and the Barclays Rise Program. And I also have the privilege to chair the Insurtech Hub Munich.” What are Parachute and Realytix about? Tom: “Parachute encompasses the complete value chain of insurance. Digital Porte is their new digital insurance agency, fully licensed to sell life and health insurance in Canada. Their business model allows both licensed and non-licensed partners the ability to sell eligible insurance products using DPI’s digital platform, Parachute. With Realytix, we are opening up opportunities in the development of non-life-commodity products. Time-to-market is the key term: In order to carry out back-end integration of a new product and bring it onto the market, primary insurers generally require up to two years. Realytix reduces this timeframe to just a few weeks.” Asian players such as Rakuten and Ping An seize all sorts of new business opportunities because they think beyond the boundaries of their original industry. Thinking ecosystems is at the core of their strategy. Tom: “In the last five to 10 years, with digitalization, we have learned that we can’t do all things on our own anymore. An ecosystem is bringing together all the players that can contribute to discussing and solving a particular issue. We need to organize ourselves differently, in order to learn from others and integrate processes. These can be corporates, but also governmental, academic institutions and others. The essence is that we need to find organizational solutions to bring all of them together. That’s the ecosystem.” See also: How to Build an Innovation Ecosystem   So it is critical to look beyond industry boundaries to solve the real issues that customers are facing; the problem that precedes the need for insurance. Tom: “I think customers are looking for value, for trust and for choice. Customers are looking for more and more aggregated offerings of services. So that’s what you need to put together. You can look at this challenge from different angles. The question is whether the insurance angle is the most relevant one. In some cases, it can be. But in other cases, a different angle may be more relevant. For instance, when a customer books a flight, he or she may want to purchase travel insurance on top, book hotel accommodation and rent a car. The challenge is to integrate insurance in this journey using technology but also through partnering with the right institutions, institutions that have access to customers and that also have their trust. I think that is key.” These trustworthy institutions being key, what kind of ecosystems do you envision in the future of insurance? Tom: “There are different ways to look at this. The insurance value chain seems to become increasingly fragmented. We don’t have one insurer that covers the entire value chain from the capital market to the customer front end. It’s rather, and this is also what we see in the insurtech space, a range of very different players that are contributing different concepts and processes of value to serve the customer. It would be exciting if a platform existed that brings all these different experts and excellence together. However, the most recent DIA line-up also included some interesting blockchain use cases that showed us that probably in a couple of years, if the technology works, insurers will play a totally different role and maybe have a modified business model. If you bring investors together with risk owners, you don’t necessarily need anyone in between, including solving the problem of discretionary legal terms. The second angle obviously begins with the question, 'Who has access to clients?' Who really has a direct interaction with clients? Who can build trust that gives clients such a good feeling that they will come back and ask for more of these services? Even if they’re probably slightly less competitive. So, one perspective is the fragmentation of the value chain and the other is the value of client interaction.” This obviously has an impact on the role insurance carriers should play in an ecosystem, in particular with regard to the inherent desire to be in control, to take the orchestration role. Tom: “Yes, the role may vary between being in control and just being one of the nodes. Many new products and services will be aligned with life events, such as getting married, buying a house, having a child. Consequently, the role of insurers could expand beyond traditional risk management and insurance coverage. Of course, insurers should determine what their distinctive added value is in an ecosystem. A mixed approach is the most suitable: centering on joint value creation for customers, providing risk-mitigation services to start with. Take Drover, one of the platforms Munich Re is involved with. It’s a marketplace that offers car leasing and leasing services to retail customers and rideshare drivers in the U.K. The insurance is bundled with the car lease offering. Saveup is a digital savings platform for end-customers that has been developed by Munich Re and is available as a white label solution for primary insurers.“ How important are insurtechs in developing platforms and ecosystems? Tom: “We believe insurtechs are inevitable partners to work with. They are doing many things better, with more depth and with more focus. A couple of years ago, we looked at insurtechs as digital front-ends for insurance. But, coming back to the concept of fragmentation of the value chain, there are now so many different technology partners available that are able to contribute to the solution to the customer. We’re acquiring some of them, we’re partnering with some of them, we’re looking at them via venture capital funds. We’re trying to do this in a fairly intelligent way, in order to understand how we can really enhance the service that we’re giving to clients. This has become amazingly more complex than it was a couple of years ago.” Why is that? Tom: “Because technology has been accelerating so much. And because we are now digitizing entire value chains, rather than just the piece that interacts with the customer. But it has also become amazingly more fun actually to look at this and to bring it together. We see it positively, but it is a challenge for us to stay on top of the discussion. You need to do much more and you need different people for that. We are now really in a war of talent, probably something that we didn’t perceive to be a couple of years ago.” Is that also one of the reasons why you are chairing the Insurtech Hub Munich? Tom: “The Insurtech Hub Munich is an initiative of the German government in order to make sure that digital topics are being advanced and taken ahead. Munich is an important insurance capital, and we are bringing together all these different contributors, academic institutions, corporate technology firms, startups in Munich, trying to make it easier for the industry to interact and to use these different technologies.” One of the elements that we like about Insurtech Hub Munich is that its active members include leading universities and business schools. This may also help to attract talent, entrepreneurial talent as well as insurance talent to come to the industry with a more open view than they do today. Many mention the war for talent being on top of the agenda when it comes to building those ecosystems. Tom: “I think a couple of years ago, we all started working with insurtechs for cultural reasons. Because it was cool, and because we didn’t understand all the startups and why they were wearing hoodies. But at some point it was also cumbersome - and we wanted our ties back. Today, it is really much more about how to get access to coders, how to get access to AI specialists, to the real people that are creating value there. Also this has become increasingly complex. That’s why we, the Insurtech Hub Munich, are partnering with Plug and Play, for example. Plug and Play is doing an accelerator program. And we are partnering with DIA to bring people together and make sure that we have access to them. It is less for the culture, and, although it’s all really cool, it is now very much business driven.” See also: How to Get Fit for Innovation   Ecosystems are not only about complementary capabilities to offer customers a more comprehensive solution. They are also about learning from each other in an open atmosphere. Tom: “Absolutely. At Munich Re Digital Partners, for instance, we are looking to create an insurtech ecosystem where our partners can learn from each other, where they can leverage from each other’s learning as well as the wider network that we are building. Think of subject matter meetings where insurtech CTOs, CEOs and others exchange their experience and learnings on specific key topics of interest. Think of Munich Re clients who, for instance, advise our partners on regulation and market entry; selected vendors that offer our partners all sorts of services, such as legal, consulting and HR; and tech providers that are able to build back-end systems, payments and other necessary integrations.” Being active in so many ecosystems, of so different nature, what would be the single most important learning from your vast experience that you would like to share when it comes to building and nurturing ecosystems? Tom: “Well, my learning would be that we need to be courageous enough to build up new business models. When we’re looking at IoT, for example, and what impact it’s going to have on claims frequency, risk prevention is where we can expand our role. We know what it’s about. We know about risks. We know where they come from, how they evolve and what to do about it. The cooperation with Bosch that we announced just recently is one step in this direction. Another example to illustrate what I mean by ‘being courageous enough’: Imagine sitting in front of a risk manager of an industrial company. They will probably burst in laughter when you tell them how few risks we are willing to take. With all the data that we are collecting, we need to be brave enough and really move into the field of risk prevention services and suggest to these companies solutions with a higher relevance for them and their industry reality.”