Blockchain has grown to be way more than just a tech underpinning cryptocurrencies. It is opening up transformative business opportunities, even in industries that are notorious for resisting change. And for good reason. Blockchain offers data security, reduced transaction costs, increased efficiency, trust, transparency, fraud prevention and data provenance. It’s no wonder that many businesses are already rising to the occasion with exciting use cases, even though full-scale adoption remains elusive. Here are some of the startups spearheading the adoption of blockchain in the insurance industry: Tradle Founded in 2015, Tradle leverages a blockchain-based framework to bridge the gap between consumers and companies. Its applications span multiple industries. In insurance, Tradle is focused on know-your-customer (KYC) procedures to build worldwide trust and enable faster allocation and access to customer data. After the KYC data is verified on the blockchain, it would be easily accessible by other authorized companies, eliminating cumbersome data entry and verification processes. See also: Blockchain’s Future in Insurance   RiskBazaar This is a platform that facilitates true peer-to-peer risk contracts to enable the affordable and efficient transfer of risks on a global scale. With the current insurance system, you have to purchase an insurance policy by sending your funds to the insurance company, which takes care of your money until you make a claim. With RiskBazaar, however, there is no single insurance policy or agency. You send your cryptocurrency to a digital lock-up box, whose key is then assigned to multiple (two or more) people. Upon agreement, the other parties can unlock the digital box with these keys, and, if you make a valid claim, you receive the compensation from the newly unlocked box. Essentially, anyone in the world can become an insurer, and the person can’t take off with the funds because no single person has full control over the box. Etherisk The German-based insurance company is applying the Ethereum blockchain to create insurance apps. In 2016, it demonstrated the concept with an experiment that allowed people to obtain flight delay insurance cover that pays out automatically. See also: The Problems With Blockchain, Big Data  SafeShare Global This is the first company in the world to launch a blockchain-based insurance solution that satisfies the needs of a shared economy. It allows private homeowners to rent out an extra room. Through blockchain technology, the system provides a time-stamped, immutable record of insurance in real time and at significantly reduced costs. The insurance industry is but one sector set to feel the effects of the rising blockchain technology. Take a look at the infographic below to learn about many other industries that are benefiting from its attributes. You can find the infographic here.

No or slow growth in revenues. Intense profit pressures. Constant flux from technology advancements and rising customer expectations. That’s what insurers have experienced in the recent past. Without bold action now, they risk seeing more of the same in 2019 and beyond. Yet a lot is possible for insurance — better ways of working, a clearer sense of purpose, more effective use of emerging technologies and ecosystems as well as our industry’s unique ability to promote financial wellness, provide protection and enable insurance customers to better manage risks. Here’s where insurance leaders should focus to take advantage of opportunities in 2019: The Life Market The Americas life insurance market has remained weak for years, though recent developments look promising. Improved financial markets, an uptick in growth, rising interest rates and aging populations are expected to drive demand for life insurance products. See also: ‘Organic Insurance’: Back to Basics   Life insurers should not simply wait for these fundamentals to work in their favor as they have in the past. To make the most of the growth opportunities, they must drive the agenda, develop the long-term resilience and “futurize” the organization. The focus must be on:

1. Developing comprehensive new value propositions for holistic financial wellness that are aligned to evolving customer expectations and the needs of aging populations across the region
2. Improving distribution through direct channels and empowered agents
3. Collaborating with insurtechs, new entrants and other incumbents on ecosystems
4. Optimizing value chain “basics” to promote sustainability

To achieve these ambitious goals, successful insurers will need to undertake digital transformation. In these transformation journeys, life insurers should seek to optimize the policyholder life cycle by catering to specific needs for specific types of customers, such as overall wellness for aging populations and rewarding experiences for millennials. By meeting these customers’ needs, insurers will enhance their own bottom lines by reducing costs, improving conversion rates and retaining more customers. Property Casualty Low, single-digit growth has been the rule in the non-life sector, thanks to a mix of favorable and adverse trends. Improved pricing in motor and health in North America has been largely offset by weak economic growth in Latin America. Of greater concern is falling profitability for the region’s P&C insurers. The causes include higher underwriting losses and weak pricing environment in commercial lines. To manage through this low-growth, low-profitability conundrum, non-life insurers have focused on innovation and disruption, demonstrating a strong interest in new technological developments including telematics, the Internet of Things (IoT) and blockchain. To demonstrate the value of these investments, insurers must move the needle on business outcomes. The focus must be on:

1. Driving cost efficiencies to fund continuing investment in digital transformation
2. Strengthening direct channels to gradually reduce dependency on agents and brokers, particularly in personal and small commercial lines
3. Preparing for the market entry of tech giants
4. Exploring insurtech partnerships and acquisitions to leverage relevant capabilities
5. Accelerating time-to-market to take advantage of new opportunities

With improved economic conditions in the U.S. buoying their growth prospects, P&C carriers must launch multiple change initiatives so that they establish long-term sustainable operating models. See also: How AI Is Redefining Insurance Industry   What’s Next The world’s largest insurance market, like most developed markets, has seen tepid growth in recent years. Life insurance lost favor with U.S. consumers due to low interest rates and heightened competition. P&C insurance has grown at low single-digit rates, fueled largely by auto lines. Health has continued to grow. The commercial sector struggles with a weak pricing environment and persistently low margins. Despite these challenges, insurers can reignite and sustain growth by strengthening the core value propositions and embracing new technology. See the full report for more.

Cyberattacks on brands and organizations have become an all-too-common occurrence in recent years—and 2019 will be no exception. Hardly any company is immune, regardless of the business sector, size of company or brand visibility. In fact, SMBs may be more vulnerable to computer attacks compared with their larger counterparts because smaller businesses tend not to invest in cybersecurity. Many SMBs also lull themselves into complacency when it comes to cybersecurity because they think their company couldn’t possibly possess enough online assets to attract malicious actors online. But hackers don’t discriminate. That was the major takeaway from a recent roundtable discussion focusing on how companies inoculate themselves against the growing threat of cyberattacks. The roundtable was hosted by Allianz Global Corporate & Specialty. I took part in the discussion, along with Steve Martino, Cisco senior VP and chief information security officer, and Gregory Falco, Stanford fellow, CISAC security researcher and MIT grad. The panelists agreed that computer hackers want to sow chaos just for the sake of doing so. What’s more, the problem is likely to get worse before it gets better. See also: Quest for Reliable Cyber Security   With that in mind, here are a few areas that companies need to think about this year (and beyond) to mitigate cyber threats. Brace yourselves. 1. Disruption from ex-employees rises. You know the drill. An employee is let go, and, before he can catch his breath, the head of HR tells him to turn in his ID badge, gather his belongings and vacate the building. However, does the employee have a duplicate ID badge at home? Did he download any corporate data to his smartphone? Ex-employees looking to wreak havoc on their former employer happens more often than you might think. Indeed, according to a recent poll of 472 cybersecurity professionals by CA Technologies, 90% of organizations feel vulnerable to insider attacks. The cyber threat posed by former employees is liable to get even more challenging in 2019, what with jobs created and old ones phased out due to the digital lurch. To bolster their company’s cybersecurity efforts, CIOs and IT departments must sharpen company protocols regarding how to make sure dismissed employees do not possess anything digitally that may cause the company harm. Another way to sharpen oversight is to clamp down on company intranets and reevaluate the kind of information or data that employees are able to access. 2. Ransomware threats grow more acute. Online crime travels fast, and hackers always seem to stay a step or two ahead of the efforts among companies and organizations to thwart them. But the ability to combat cyberattacks won’t get any easier in 2019, as ransomware becomes more difficult to contain. Ransomware is a type of malware that restricts access to the infected computer system in some way and demands that the user pay a ransom to malware operators to remove the restriction. Ransomware demands are typically made in Bitcoin, according to ZDNet, the cryptographic digital currency based on blockchain. As Bitcoin has spiked in recent years, so, too, has ransomware. A survey by Osterman Research found that ransomware attacks were the most common in 2017, leading to massive losses to businesses from the inflicted downtime, per Alverez Technology Group. Many businesses had to shut their systems for extended periods—up to 100 hours or longer, the survey said. To get their hands around the problem, companies should think about expanding their digital teams to include computer engineers who specialize in combating ransomware. 3. Digitization of manufacturing poses new problems. Large manufacturing plants that were formerly analog are fast being converted into digital systems—and posing new cybersecurity threats in the process. Many of these new systems are designed to assemble, vet and distribute products more efficiently, and not necessarily to detect cyber threats. A growing number of connected devices throughout manufacturing plants gives bad actors additional “pipes” to breach. For example, closed-circuit TVs and internal computer networks—both of which are fairly prevalent in manufacturing plants—are significant targets for hackers. As AI becomes a more integral aspect of manufacturing plants—with fewer and fewer people on-site—manufacturers will have to ramp up their cyber defenses even further. Is your company bringing any of the above cybersecurity strategies to bear? Is the board of directors tackling these questions head-on or sticking its collective head in the sand? Has the company sharpened both existing cyber defenses and training for rank-and-file employees on what to do if they spot something fishy in their email inbox? See also: Best Practices in Cyber Security   In 2019 (and beyond) these questions will be paramount for companies that want to protect their precious assets.

From mobile apps to machine learning, innovation in the insurance industry is moving faster than ever. Industry innovators are exploring the new frontier of insurance through smart investments, creative problem solving and new product and service development. To stay on top of the latest wisdom in the P&C insurance industry, put these 19 insurance innovators on your follow list in 2019. Marissa Buckley, Marketing and Brand Experience Vice President, Security First Featured on Digital Insurance’s 2018 Women in Insurance Leadership list, Marissa Buckley focuses on mobile innovation at Security First Insurance. One of her projects, a mobile app service that allowed customers to file notices of loss quickly, was used by 40% of Security First’s customers after Hurricane Irma. Buckley has also led the effort behind Security First’s JobSight network, which allows contractors to manage their work more efficiently. Buckley’s insight into digital and mobile technology as a tool to improve human lives, particularly in the face of oncoming catastrophe, makes her a must-follow insurance innovator in 2019. Chris Cheatham, CEO, RiskGenius As the CEO of RiskGenius, Chris Cheatham helps revolutionize risk management and underwriting. His company uses insurance algorithms that enhance the work P&C underwriters already do, making insurance work better for everyone involved. If you’re curious about how machine learning can be applied to insurance policies, Cheatham’s Twitter feed engages in many interesting conversations regarding this topic. Tom Elder, Senior Vice President, Breckenridge Insurance Services Though Tom Elder’s work focuses on risk management, he places a special emphasis on the rapid changes and future of P&C risk management. If you’re interested in understanding risk and innovation in commercial property and casualty insurance, real estate and flood insurance, following Elder in the coming year can offer an informed perspective on what’s coming next. Chris Gledhill, CEO and Co-Founder, Secco Aura If you need a fintech leader to follow in 2019, you can’t go wrong with Chris Gledhill, the CEO and co-founder of Secco Aura. Gledhill has given presentations on fintech, insurtech and business growth all over the world. If you can’t check out one of Gledhill’s presentations in person, his Medium account delves into many insights on fintech, banking and personal character. And, you can get a glimpse into what captures Gledhill’s attention by following his busy Twitter feed. You might also pick up one of his two books, titled “Consumerization: The Enterprise Guide to BYOD” and “The Fintech Group.” See also: Insurtech Innovator Videos 2018 Danielle Guzman, Social Media and Distributed Content Global Head, Mercer Danielle Guzman has served a number of professional marketing roles in the past, yet she credits her innovation not to these titles but to her personal qualities. “I’m a learner, a listener, a communicator, a social media enthusiast, and, above all, I am relentless,” she says. With a passion for innovation and success, combined with a focus on engaging people to build real value, Guzman earns her place on the list of insurance innovators to watch in 2019. Ryan Hanley, CMO, Bold Penguin Ryan Hanley is the chief marketing officer at Bold Penguin, a Columbus, Ohio-based insurtech company that focuses on applying technology to make the insurance buying process easier. Hanley helps P&C insurers put the human element back into insurance transactions, improving user experience for both customers and insurers. Hanley also travels the world as an international keynote speaker, providing insight on leadership and peak performance, customer experience, content strategy and marketing. Catch him at a conference or follow him on social media to share his insights. Seraina Macia, CEO, Blackboard Insurance Seraina Macia's professional experience reads like a who’s who of insurance companies, including XL Group, AIG and Hamilton Insurance Group. Since 2017, she’s been CEO of Blackboard Insurance, an AIG subsidiary that focuses on reimagining commercial insurance. For insurance companies interested in improving efficiency, reducing errors, breaking down silos and adopting new technologies, Macia’s insight will be essential in the coming year. Beth Maerz, Vice President of Customer Experience and Innovation, Travelers While many insurance companies are interested in using digital and mobile technologies to attract and retain customers, few have applied the technology practically like Beth Maerz. Maerz led the launch of Traverse, a renter’s insurance product that works entirely via mobile. Traverse seeks to meet today’s renters where they are and to make it easier for them to purchase coverage, prevent damage and file claims. The enormously popular app makes Maerz, the leader behind it, a top innovator to follow for anyone who wants to see technology applied to concrete, real-world improvements in insurance. Spiros Margaris, Margaris Ventures Spiros Margaris is one of the top minds considering innovations in fintech and insurtech today. In May 2018, Onalytica ranked Margaris in the top 10 fintech influencers within the insurtech community, along with naming him the No. 1 fintech, AI and blockchain global influencer. For insurers intrigued by artificial intelligence or blockchain and their ability to revolutionize the insurance industry, Margaris is a must-follow for 2019. In addition to maintaining an engaging Twitter feed, Margaris also gives talks around the world on fintech and insurtech topics. George Mathew, CEO and Chairman, Kespry Drones have become a big topic of conversation in P&C insurance due to their flexibility as a tool to improve claims adjustment and underwriting. Although Kespry has excelled in its approach to drones as a service, however, the company’s CEO George Mathew takes a view of innovation that encompasses the insurance industry as a whole. While promising big innovations from Kespry, Mathew also focuses on executive leadership, product management, development and market strategy experience across business intelligence, analytics and SaaS, according to his LinkedIn profile. He brings 20 years of experience to the table, making his insights key for insurers seeking to better understand innovation in 2019. Martha Notaras, Partner, XL Innovate Behind some of the biggest names in insurtech innovation today stand the venture capitalists who saw genius and supported it. Martha Notaras is one of those supporters. She focuses on investing in innovation within insurance, insurtech, data analytics and the Internet of Things, putting her work and insights at the heart of insurance innovation in 2019 and beyond. While not everyone recognizes Notaras’ name on sight, many in the insurance and insurtech world recognize projects Notaras has invested in and supported. Her list of successes includes Lemonade, Slice Labs, Notion and Cape Analytics. Her focus on opportunities in insurtech make her insights valuable for P&C insurers who wish to better understand disruption in the industry. Karl Ricanek, Co-Founder and Chief AI Scientist, Lapetus Solutions Karl Ricanek focuses on AI research and its application to a number of industries, including insurance. He also works as a computer science professor at the University of North Carolina at Wilmington, where he has served as the director of the I3S Institute and Face Aging Group since 2010. Ricanek’s work has helped to build the Chronos platform, which uses facial analytics to help life insurers determine BMI, gender and physiological age. With potential for use in the P&C industry, as well, tools like Chronos — and their creators — are worth following. Piyush Singh, CEO and Co-Founder, Terrene Labs Piyush Singh teamed up with three other insurance leaders to start Terrene Labs, which focuses on helping insurers underwrite policies by integrating with third-party data providers. What makes Terrene Labs different is its ability to facilitate underwriting with a very small number of data points, improving both underwriting efficiency and the overall customer experience. Singh also presents at conferences like Dig In, giving insurance professionals the opportunity to hear from him in person. You can also follow his Twitter feed or the Terrene Labs’ blog for insight throughout the year. Kate Stillwell, CEO and Founder, Jumpstart Insurance Kate Stillwell works to build human resilience to natural disasters. To do that, Stillwell applied her 20 years of experience as a structural engineer to P&C insurance, leveraging existing technologies to create an entirely new approach to insurance via Jumpstart. Jumpstart connects mobile devices, insurers and geologic data to automatically sense when a seismic event occurs and to trigger payments to customers immediately based on the severity of the event. Jumpstart began selling policies in 2018, making it one of the new kids on the block — and Stillwell a figure to watch in insurance innovation. Kathleen Tierney, President, Berkley One Kathleen Tierney earned a place on Digital Insurance’s Women in Insurance Leadership list in 2013, and she’s remained a notable innovator. Since March 2016, she’s served as the head of Berkley One, a new personal insurance provider within Berkley. Berkley One focuses on providing high-net-worth customers with insurance that combines the best digital tools with high-touch, agent-based services. This company aims to supply the insurance industry with the human connection that’s needed for good communication and a quality experience. This approach, which focuses on the role insurance plays in customers’ lives, put Tierney on the list of innovators worth following in 2019. See also: 10 Trends at Heart of Insurtech Revolution   Alex Timm, CEO and Founder, Root Insurance Alex Timm has been engaged in insurance since age 14, when he landed his first job assisting customers of his father’s insurance agency. A love of insurance and a passion for analytics led Timm to create Root, which seeks to change how auto insurance attracts and keeps customers by using customers’ actual driving habits to generate quotes. While Root looks simple, the concept behind it stands to change much about insurance in the future, making Timm a mind to watch in 2019. Abel Travis, Underwriting and Innovation Leader, AF Group Anyone whose official title is director of innovation could earn a place on a list of innovators to watch, but what makes Abel Travis a must-follow is his commitment to sharing what he learns in the insurance industry. His passion for learning and teaching landed him on a 40 Under 40 list of leaders to watch in Worcester, MA, home of Hanover. Catch Travis’s latest thoughts by tuning in to the “Insurance Innovators Unscripted” podcast, where Travis shares his own insights and talks to other leaders in the industry. Sabine VanderLinden, CEO, Startupbootcamp InsurTech Sabine VanderLinden heads Startupbootcamp InsurTech, which focuses on launching insurance-specific businesses and ideas. VanderLinden started the project in the U.K., and, when 80% of its participants received funding, she partnered with the Hartford to bring it to the U.S. In addition to helping insurtech innovators realize their dreams, VanderLinden has also co-edited the “InsurTECH Book,” released by Wiley in 2018. Insurers who want a connection to the newest ideas in insurance innovation can learn from following VanderLinden’s work in the coming year. Nigel Walsh, Partner, Deloitte How many insurance industry professionals put #Insurancefan in their Twitter bios? For Nigel Walsh, that label is placed proudly front and center, along with #InsurTech super fan. Walsh has easily earned both descriptors, spending significant time engaged in the insurtech conversation with a focus on digital and technological transformation. Walsh also co-hosts the “InsurTech Insider” podcast with David Brear of 11:FS. The podcast offers an easy-to-access source of insights while you’re commuting or unwinding after a day of hard work.

Organic products are quite popular in recent years. They are everywhere, in food, clothing, cosmetics and many other areas. It’s not hard to understand, because most inorganic things are harmful to human life. But what about organic insurance? The dictionary meaning of organic is “made in a natural way.” So, organic insurance can be defined as “insurance service that developed and is provided naturally.” Is today’s insurance service organic? Unfortunately, no. Basics of Insurance When we look back in the history of insurance, it becomes clearer.  Insurance was founded to guard against significant risks that affect society. Marine insurance was designed by sea traders. Fire insurance companies were founded by people who were exposed to the Great London Fire. The common point is the proximity of service and risk. And the service is offered by people who know the risk best, who can measure it in the most accurate way and take precaution when needed. Throughout history, insurance companies used to know the insured value from A to Z and managed the risk. For example, fire insurance companies had their own fire department and prepared detailed maps of the city where they operated. In this way, insurance companies made significant contributions to social development. Today, there is no organic connection between insurance companies and insured value. Insurance companies just have general statistics about the insured value. Statistics can be enough to manage the risk when the pool is large. But it doesn’t change the fact that insurance companies are far away from the society and the flow of life. Value of Insurance If you were living in Istanbul 150 years ago, the only way to protect your house from the fire was having a home insurance policy. Not for the compensation of your loss, because there was no central fire department; only insurance companies could protect your home from the fire (with their fire department). Today, home insurance policies don’t have such importance. In case of a fire, call the fire department; or home security companies meet your prevention needs. Insurance companies? They pay claims. Have you noticed how insurance service has become so uninspired over the years? It’s like hormone-growth tomato, bright red but tasteless. See also: Insurance and Fourth Industrial Revolution   Today’s insurance system is based on Henry Ford’s famous mass production system. The method we are familiar with, the factories, enables a product to be made in a short time and in large number. Workers do the same job continuously. They specialized in that line, but they have no ideas about the rest of the production. Similarly, insurance companies have kept a corner in the flow of life; they pay claims if bad things happen. It can be discussed how expert they actually are in this job, but It’s clear they have no idea about the other parts of the life. You can't provide insurance services like you produce cars. As a service provider you must be a part of people's lives. You must understand your customers and provide solutions to their various expectations. Henry Ford's famous quote summarizes the current situation of the insurance industry: “Any customer can have a car painted any color that he wants so long as it is black.” Development of Insurance Lots of things about family life have changed in the last 30 years, but home insurance coverages are almost the same. Cars are equipped with new driver assistance every year, but insurance companies still underwrite depending on car prices, license, driver’s age, etc. Brand new features of a car can be subjected to the insurance underwriting when they become an industry standard, but insurance companies follow all these developments a few steps behind. However, insurance companies had been pioneers of the social development throughout the history, such as fire departments, pension systems etc. The sales process of insurance is also inorganic. Most people buy extended warranty services with more peace of the mind when compared with car insurance. Why? Because people buy a warranty from car manufacturers, but they buy a policy from insurance companies. Paying hundreds of dollars to a third-party company can be annoying. Also, it raises lots of questions. Is insurance coverage enough? Is claim service high-quality? Whom to ask my question? You must trust a new brand for all these questions. But you buy extended warranty from the brand you already trust. Organic Insurance So, is organic insurance possible today? One way to make it possible could be to make insurance part of the insured product. Car insurance can be included in a car's safety package. Or home insurance may be a part of the home rental service. Although these kinds of partnerships are available, this business model promises much greater potential.

• The affinity partnership model is advantageous in several ways;
• The partner company knows the features of the product much more than the insurer. Insurance coverage may be defined much more clearly and accurately.
• To bundle insurance with the main product is the easiest way to sell insurance.
• Customers feel much safer about the insurance product. As customers have trusted a business partner, there is no need to build trust for an insurance company.
• Insured risk can be underwritten much better with the data provided from business partner. Likewise, insurers may share data with the business partner to upgrade the product. For example, car manufacturers and insurers may work together to develop accident-prevention systems.
• As sales and after-sale services will be provided from one channel, customer experience and satisfaction will be better.
• Insurance companies may be transformed to real service providers. Insurance companies may offer smart home services with their policy, or health insurance companies may provide regular health check-up and monitoring service.

See also: Connected Insurance Comes of Age in 2019   In fact, all these titles are new play areas for the insurers. Maybe insurers can stop being boring types who live in skyscrapers and deal with numbers all day.

Has the insurtech wave hit a riptide? At Strategy Meets Action, we think it has.

The riptide analogy generates a powerful image of a turbulent sea, where the strong finally reach the shore, but the weak succumb to the powerful currents and are pulled back out to the sea. The insurtech world is experiencing a similar struggle. We are seeing distinct winners in the insurtech market who are reaching the shore, but the rest – the vast majority – are not making it. Those few who have landed with firm footing, the winners, have captured the attention, and the investment dollars are going to them.

Headlines show that the hype around insurtechs is settling down. We see fewer startups in the U.S., and it is not for the lack of a strong economy. In fact, Strategy Meets Action estimates investment in new technology to be at high levels. So, what’s happening? Investment spending has become more focused. The interest is there, but insurers have collectively started to sort through the flood of information for the best possibilities and select the most promising solutions. From the start of the insurtech phenomenon, we have predicted that many startups will fail, and the industry is now experiencing that.

See also: Insurtech: Revolution, Evolution or Hype?  

Despite the smaller numbers of startups, we expect to see continued progress on the insurtech front in 2019. Among the frontrunners, progress is accelerating and will continue to take place. Those businesses and solutions with some level of insurance expertise and capabilities are gaining recognition as they demonstrate the ability to advance their technologies and come to insurers with connections.

At InsureTech Connect, we saw many amazing ideas and solutions, but not all have insurance implications. In these cases, insurance may be the wrong industry to champion them. For many of the technology startups trying to break into insurance, it will be easier to fine-tune their applications and solutions for car manufacturers, utility companies, appliance manufacturers or companies that sell direct to consumers. And the sad fact is that some ideas will never fly because they just don’t solve the right problems or have the broad applicability to attract funding.

The other reality for insurtechs is that, as time has gone on, innovation has become more common. It literally is everywhere, and novelty is harder to achieve. The thought of becoming the next “Uber” or the “Netflix” of insurance seems less and less probable.

Last year, Strategy Meets Action said the insurtech wave would continue … and we still believe that. However, it is a smaller number that will come ashore. The barriers to entry are causing the insurtechs that reach insurance to be more focused and purposeful – and this is the reality of an innovative world. Many new startups are losing the “wow” factor before they ever have a chance to get off the ground.

See also: 8 Key Insurtech Trends for 2019  

The great thing about innovation, though, is that we will see another wave of a different size and color in the future. As new computing trends, 5G, AI (among others) and even quantum computing gain traction and become more feasible and pervasive, a new wave will pick up speed. The key will be to stay ahead of it through monitoring the progress of these technologies, studying these insurtechs and exploring the opportunities that they will provide.

Insurers have a near-constant stream of unstructured data at their disposal that can be used to drive growth by improving policyholder retention and identifying cross-sell and upsell opportunities. One of the challenges for insurers is sorting through this mountain of unstructured data quickly to gain an accurate understanding of the sentiment of their customers in real time. The last few years have seen sentiment analytics become a critical component of customer feedback strategies for companies of all sizes. Sentiment analytics uses a combination of natural language processing (NLP), machine learning (ML) and deep text analytics to bring out the nuances hidden in the text. Sentiment is easier to translate and analyze than it is to express. Sentiment analytics, also referred to as opinion mining, is a technique to abstract the underlying sentiment from textual data. Usually, this customer feedback is unstructured data flowing in from multiple channels, such as:

• Voice messages
• Claims
• Adjuster notes
• Medical records
• DMV reports
• Surveys
• Underwriter notes
• Email
• Call center logs
• Social media posts

The idea is to understand not only the nature of the feedback but also to derive context out of it. However, sentiments are complicated. Analyzing sentiments, even more so. Domain-Specific Sentiment Analytics The complexity of spoken language makes it difficult if not impossible to derive sentiment accurately every time. Teaching a machine to understand such things as tonality, cultural lingo and slang, or the ability to discount grammatical errors, and comprehend rhetoric such as irony or sarcasm are all difficult at present. Existing sentiment analytics tools are not equipped to identify the true sentiment of these types of dialogues. Although sarcasm is a problematic form of language to detect, there are other complex statements that machines are learning to comprehend. Consider the following statement: “Rocketz Insurance Company has always offered me great pricing, but at times I have not been happy with their response time for questions about my policy.” This sentence has a negative as well as a positive connotation, and sentiment analytics come into play. The first part of the sentence can be identified as a positive feeling, and the other half is identified as negative. See also: 3-Step Approach to Big Data Analytics   Sentiment analytics specific to industry lines play a key role. The accuracy of identifying the sentiment of data can be increased by training the system (machine learning) on a specific domain, such as the insurance industry. For example, the terms “garaging” and “towing” have a greater meaning in the insurance industry as opposed to, for example, manufacturing. Therefore, if a client makes a comment about either, it would have more meaning for insurance than other industries. Driving Growth In the insurance industry, sentiment analytics can be used in a multitude of ways that directly affect business, such as:

1. Improving retention rates
2. Identifying cross-sell/upsell opportunities
3. Identifying trends

Improving Retention Rates Having the ability to quickly and easily identify the sentiment of policyholders whose auto policy will renew in 60 days or less is a good example. Let’s say we have 1,000 auto policies that are up for renewal by the end of 2019, and the priority for the renewal team is to contact policyholders who are “detractors.” The sentiment of their conversations and interactions, regardless of the channel, has a low score. The challenge for the renewal team is: Who do they contact first? Are all “detractors” equal in their dissatisfaction with their auto policy? And what may be the root cause or causes of their dissatisfaction? The renewal team can target these policyholders with a strategy to retain these policyholders with insight on why the policyholder may be unhappy before contacting them. Maybe it was a bad claim experience, or they are unhappy with their premium and started shopping elsewhere. It’s not enough to simply understand who a “detractor” is; you need to understand why. Identifying Cross-sell/Upsell Opportunities Using the example of our 1,000 auto policies that are up for renewal, what about the policyholders who are “promoters” and happy with their auto coverage? This is an ideal time for the renewal team to contact these policyholders and thank them for their business as a minimum. But is there a cross-sell or upsell opportunity here? For the renewal team focusing on this segment of policyholders, it would be helpful to have some idea why their sentiment is high before contacting them with a potential offer. Identifying Trends In addition to identifying immediate opportunities that can be acted on, sentiment analytics can help insurers understand trends such as:

1. The sudden demand for a product type
2. The like or dislike of a specific customer experience

Many homeowners are considering cyber insurance to protect themselves from identity theft and invasion of privacy. Sentiment analytics can provide insurers who currently do not offer cyber insurance a heads-up that maybe they should consider offering cyber insurance as a cross-sell/upsell opportunity. See also: Predictive Analytics: Now You See It….   Everyone wants to identify and correct bad customer experiences, especially a bad claims experience. What about good customer experiences? Going back to our auto policy example, something as simple as having the ability to easily obtain an auto insurance card online, or easily reach a customer service representative. can be a positive customer experience that sales and marketing may want to promote. Conclusion Sentiment analytics can help insurers sort through a continuous stream of unstructured data to identify opportunities for increasing revenue and identifying trends. Currently, sentiment analytics is not perfect, but focusing on a specific domain such as the insurance industry will increase accuracy. Sentiment analytics can be a powerful tool if leveraged starting at the earliest touch point, even if it begins with a small set of customers.

The 2008 animated Pixar movie "Wall-E" follows the refuse-based adventures of a sentient, autonomous trash compactor whose primary function was to clean an abandoned city on a now-deserted planet Earth, long ago having been abandoned by humanity. The movie highlights some of the issues that would likely occur from human beings’ over-reliance on an automated lifestyle – issues such as waste management, obesity and human environmental impact, to name a few. "Wall-E" is set hundreds of years in the future, but some of those issues ostensibly exist in the world we inhabit today. The transportation sector around the globe is a multitrillion-dollar industry. There’s money and mistakes to be made. While we are probably a ways off from sentient automobiles, the age of vehicle autonomy is well upon us. Every week, another company releases some update, patch or application that nudges autonomous tech in a new direction. There have been some setbacks – name me a sector that doesn’t have any – but cars that are less reliant on humans are here to stay. This is almost universally viewed as positive, with many examples given to support this position, such as:

• Fewer accidents.
• A move away from owned to rented vehicles, lessening the need for parking garages.
• A productivity increase during commuting time.
• A reduction in traffic congestion.

There are many more, but the age of connectivity comes with risks. One must exercise caution with any kind of new technology. What happens when things go wrong? Computers malfunction sometimes; we’re all familiar with Windows’ blue screen of death. See also: Autonomous Vehicles: ‘The Trolley Problem’   You are turning over your most precious commodity – your family – to a computer. And if that computer fails when you are trusting it not to – let’s say when it is in full autonomous mode – how will that fail affect things? In what manner will it fail? It will likely fail however the lowest-bidding subcontractor designed it to fail. Even if it does not fail, a computer still needs to be told what to do, at least initially. Computers can learn things and eventually make better iterative decisions based on this learning, but what do you tell a computer it should do when faced with a myriad of input data? Autonomous vehicles (ones that fly) have been around a long time. Most commercial airliners are autonomously piloted more than 90% of the time. Aircraft, along with the routes they take, are heavily regulated. They essentially all report in to the same system around the world. There is a reason all pilots around the world must communicate in English. There has to be one universal language to avoid miscommunication and errors. Autonomous automobiles have none of that. There is no central control, no clearing house and no standardization, to the extent that even the levels of autonomy differ by manufacturer. They can, though, roughly be classified in the following manner: Level 0 — Nothing The baseline since Gottlieb Daimler traded horse power for horsepower. Level zero applies to all vehicles that rely solely on humans to dictate driving actions. That is my car, and almost every car that has come before it. At best it has cruise control, but it is the "dumb" version that will crash you into a wall if you let it. Example: my 2009 Honda Ridgeline truck. Level 1 — Driver Assistance What does this level offer us? Some automation, but not much. For level one, you are looking at adaptive cruise control or lane departure tech to come as standard on your vehicle. While the human driver still supervises everything, the vehicle is capable of some decisions on its own. Example: your eco-friendly neighbor’s 2016 Toyota Prius. Level 2 — Partial Automation We get a step up from driver assistance in level two. This combines multiple automated functions such as lane assist, automatic braking and adaptive cruise control to ensure they work in a smooth, coordinated fashion. Anticipating traffic signal changes, lane changes and scanning for hazards are still the domain of the driver. Example: the Audi your boss drives that has Traffic Jam Assist as standard. Level 3 — Conditional Automation A car running level three automation can take full control of the vehicle during certain parts of a journey under certain conditions and within certain parameters. The vehicle will, however, turn control back over to the human driver when it encounters a situation it cannot handle or when it cannot interpret input data. The onus is, therefore, on the driver to stay alert because the vehicle may prompt the driver to intervene at any moment. The incident in Tempe, AZ, in March 2018, involving a pedestrian fatality involved a vehicle running level three autonomy. Example: Tesla’s Autopilot. Level 4 — High Automation An auto at level four automation does not require a human to ride along during certain journeys, subject to geographic and road-type limitations. These are currently being tested, and we should see them within the next 18 months. Think Amazon last mile and pizza delivery vehicles. Example: Johnny Cab, from the original "Total Recall." Level 5 — Full Automation At level five, absent inputting the destination, which will probably be done via your phone beforehand, there is no driver involvement. You will enter the vehicle, turn on your movie or laptop and that is it until you reach your destination. Example: KITT from "Knight Rider." Level 6 — Beyond Full Automation Well, there is no level six – at least yet. What would level six look like if it did exist? A teleporter? Something that transports you from your bedroom, via the bathroom and kitchen, straight to the office? A flying car? We have returned to Wall-E territory. Example: The Jetsons’ Aerocar. Technology in vehicles is designed to assist us and make us safer. For good reason, a few of the car and tech companies working on autonomous driving have said they do not want to release anything below level four. Either force people to drive, or let the machine do all of the work. Partial implementation runs the risk of scaring people away from the technology. The more reliant you are on tech, the tougher it is when you do not have it. When, in an instant, the computer turns full control back to you because its inputs are confusing, are you ready? See also: Autonomous Vehicles: Truly Imminent?   What does the future look like? We should expect a reduction in the frequency of accidents, but, given the complicated nature of what is now hidden under a fender, accidents will likely cost more (increased severity). Software updates can be problematic. They do not work well on airplanes, for example. You would not release beta software for an airliner. A recent over-the-air software update by Tesla reportedly disabled the autopilot system. Too much automation in the cockpit or car, and things can go bad when the computer gets an input it does not understand. Walt Disney promised us self-driving cars back in 1958. They are here – somewhat – but 60 years is a long time to wait in line. As a juxtaposition to that, with robotaxis already hitting our roads, the future has arrived more quickly than most people anticipated.

As we sort through the PG&E plans for bankruptcy because of its liability for the California wildfires, we need to think about the implications. PG&E may be the first climate change bankruptcy, but it won't be the last. So, what do we do?

When in doubt, I use the "All the President's Men" mantra: Follow the money. So, who is out money because of PG&E, and who will be out money in the future if we don't change how we manage risk?

Shareholders are an obvious victim. PG&E stock has plunged 85% since before the impact of the wildfires became clear in November, so shareholders have lost more than $20 billion. Insurers have also lost big-time, because every possible form of insurance has been triggered by the wildfires. Ratepayers will bear a huge load. They already pay the second-highest rates nationally for electricity, more than twice the national average, and PG&E is seeking increases of 12% to 24% annually over the next three years. The huge rate increases will likely go on for decades: PG&E ratepayers are still paying off bonds issued in the PG&E bankruptcy in 2001, following a botched attempt at deregulation of the electricity market by the state, and securities related to the fires will require decades to be paid off—at junk-bond interest rates. The bankruptcy process will surely mean that all creditors may suffer, too, as PG&E tries to walk away from what it estimates are $30 billion of liabilities from the fires—whether it's businesses or individuals who have been wiped out. All taxpayers also carry liability, nationally, because FEMA has committed to helping disaster victims in California.

Do we just keep doing what we've been doing? Or do those of us who bear the financial burden demand change? 

I suggest we demand change.

A review of our   Innovator's Edge platform  shows how little change PG&E has attempted. A variety of searches found a host of companies dedicated to better sensing of problems in the grid—none of them related to PG&E in any way. 

We know from all sorts of relationships that the technology is out there. There are ways to sense if a power line fails, if a gas pipeline ruptures and so on. We just have to decide whether we're going to sense the problems as they happen or react long after the fact.

I know how I vote.

Have a great week.

Paul Carroll
Editor-in-Chief

The spirit of “insurance,” as we know it today, developed in response to a need to mitigate risks related to international maritime trade: treacherous waters and storms, piracy, war, physical handling of goods at ports, etc. While many of these risks have become obsolete and while new, more modern versions have appeared (think cyber security), the function of insurance companies has remained as old as the idea itself: to compensate for the effect of financial loss after it has been caused. Insurers that wish to remain competitive in the 21st century, however, must supplement their offerings to mitigating the cause before the effect. Workplace injuries and property loss will continue to happen, but the future of insurance is, quite palpably, preventing these events from happening in the first place. To this end, companies have begun to leverage technology to aid in this process, and a whole new category of devices – dubbed the Internet of Things (IoT) - has emerged. These devices, and the sensors and algorithms they contain, hold the promise of enhancing our eyes and ears to perceive all things at all times. These new sources of data, and the analysis performed on them, hold the key to alerting customers of potential loss BEFORE it occurs. While the traditional insurance definition would say “this is not our responsibility,” the reality is that insurers can be uniquely equipped to use these new technological advancements to significantly reduce their losses and greatly improve the customer experience. See also: Insurance and the Internet of Things Let’s take a consumer use case – roughly one-third of all household claims relate to water leaks. Several companies such as Water Hero or Gems Sensors make a small connected device that attaches to a home’s main's pipes and can seamlessly monitor water flow, continuously. If any anomaly is detected, both the customers and insurer can be alerted to take action before a catastrophic event occurs. Some devices can even turn off the main's supply or make an automatic call to a plumber. While these devices won’t stop every incident, this low-cost technology can reduce the cost of claims to the insurer and provide a better experience for the home owner. This mutual benefit will make prevention a strategic advantage. In commercial lines, similar examples can be found. Wearable technology and the valuable data it offers about worker safety can lead to a reduction in workers' compensation claims while offering significant value to employees. For example, Kinetic has developed a wearable device for manual laborers to detect high-risk ergonomic movements and postures that can cause injury, gently alerting workers in real time. Data from the pager-sized device is fed into Kinetic’s software, which can identify ways of revising processes and workflows to reduce or prevent that risk in the first place. Deployments at manufacturing and logistics sites have shown reductions by up to 84% in the number of high-risk postures performed daily by workers. These postures are known leading indicators of musculoskeletal injuries, and customer sites have seen injury reductions of up to 60% for employees that have worn the device for over six months. Similar lessons can be drawn from telematics systems installed in vehicle fleets, which monitor driver activity through cameras and sensors. These systems provide feedback when certain activities or motions are detected, such as exceeding the speed limit or aggressive driving. As drivers start to modify and improve the way they drive, both accidents and the associated claims can often be reduced. See also: Global Trend Map No. 7: Internet of Things   While some effort is needed to navigate, deploy and maintain these IoT devices in a cost-efficient manner, these products can change the nature of the relationship between insurers and customers from merely transactional to partnerships, where both parties are invested in preventing costly incidents. In this booming, digital era, it seems now is the time for insurance to seize the opportunity and light the way into its own future.