Digitalization has become the new standard for business success and is fundamentally changing how insurers run their organizations. Just four years ago, less than 40% of insurers identified as a digital insurer; today, more than 90% see themselves as one, according to SMA research. While some are only in the nascent stages of digital transformation, others like Chubb are paving the way by functioning as a fully integrated digital enterprise. No line of business is exempt from digital transformation, but workers’ compensation has the largest initial impact, with concerted efforts from many carriers to improve their underwriting through predictive analytics and redefine the claims experiences for injured workers. Leading insurers are increasingly using digital tools, emerging technologies as well as external and internal data, to enhance sales and service experience for agencies and policyholders while minimizing losses and improving ease-of-use. Liberty Mutual, for example, has employed personalized, interactive videos to enhance communications and drive engagement with injured workers. Similarly, insurers such as QBE are leveraging AI and machine learning to improve patient care, reduce litigation potential and manage fraud. However, becoming truly digital is not just about overhauling agency portals or using technology to improve operations. It’s changing the entire mindset of an organization and can touch every aspect of the business including the people, processes and technology. Here are some of the guiding principles to establishing a successful digital mindset. A Comprehensive Digital Strategy An ideal digital strategy blends emerging and existing technologies to redefine a company’s value proposition to create and support all means of engagement and automation across the company. It’s about finding the right balance between effectiveness and efficiency. There are several stages of building a successful digital strategy. The first is a baseline capability of taking a paper asset and making it digitally available. The second is the ability to apply new methods to enhance digital experiences across the board, whether through automation of internal processes or through customer-facing portals. Finally, it involves smooth transition for handling fundamental changes in an insurers’ business model, which includes looping in all parties who will be affected by the change, deploying changes in phases and using the process of changes and upgrades as learning opportunities. See also: 5 Digital Predictions for Agents in 2019   Speed-to-Market Principles As insurers continue to integrate technology into their organizations, competition is escalating, and getting a product to market as quickly as possible is essential to the success or failure of a project. The value that digital tools and platforms provide to an insurers’ stakeholders is of prime importance, but it’s vital that these changes and updates are introduced in a timely manner. Given that, on an infrastructure level, most companies aren’t built to support digital businesses, the best approach is to integrate the new digital capabilities across the organization in increments. Insurers should begin by introducing a minimum viable product (MVP) to the marketplace and then adapt as needed. Using an iterative testing and learning approach will save time and help make the products better-suited to user needs. Simplified Customer Experience The way customers perceive their interactions with insurers defines the customer relationship. Today, people want insurance providers that offer simple, time-saving products and services and have many options beyond incumbent insurers, with new entrants vying for their business. Most insurers begin digital transformation by overhauling their internal processes to support automation, but true digital transformation should also extend to the customer touchpoint. Insurance buyers have a long list of “asks” in the modern economy. They expect broad coverage, state-of-the-art technology and apps to make the processes simpler. They also demand bespoke risk management solutions and faster claims management. What makes catering to this ever-growing demand a challenge is the number of players competing for the same piece of business. On one hand, we have insurtechs and traditional insurance companies looking to offer efficient digital platforms, and on the other, pay-as-you-go insurance models and producers looking to own buyer relationships with innovative customer solutions and product offerings. As a result, insurers should create ways for customers to reap significant rewards by improving time-to-quote, expedite policy binding and create more flexible billing options. An example of how to achieve these goals is to offer seamless customer services using application programming interfaces (APIs), email, telephone and customer portals. Currently, more than 40% of the applications are submitted via agent portals on average, which share policy documents and commission information. Insurers have a complex and deep sales funnel that can be streamlined if internal systems work together to reduce operational friction. Data and Customer Insights Drive Decision Making Insurance companies have access to a wealth of data, whether from customers or third-party data acquired from IoT, sensors and drones. Over the years, insurers have proven themselves adept at collecting data but struggle to analyze, process and organize the information in a way that helps with real-time decision making. The idea is to leverage data-driven insights to model products and solutions while making updates and enhancements to them. An example of a company successfully doing this is Pie Insurance, which uses predictive analytics to expedite and improve the direct-to-consumer quote experience. Routing data across an insurer’s systems is incredibly challenging, which is why more are moving away from disparate core systems and migrating to a unified platform that supports data flow across the entire organization. Evolve With the Market While Inspiring Change Adoption Across the Board Any cultural or organizational change requires educating the affected parties about the value that technology will bring to their day-to-day workflow. Employing new tools to better the business means nothing if it won’t be used appropriately by stakeholders that interact with the solution every day. This promotes actual mindset change and organizational alignment that prepares companies to continue to build on their digital foundation. For example, an insurer might have stringent underwriting guidelines for how a team should use a predictive model to make policy decisions, but, if the underwriters themselves do not understand the tool or how it benefits them, they risk breaking protocol or providing misguided feedback that makes the model less effective. See also: 3 Ways to an Easier Digital Transformation   True digital transformation not only requires an understanding of what’s needed to replace legacy systems, but also depends on a detailed strategy and plan to see the organization through transformation. Building on top of existing technology is just as important for the future and, without organizational alignment, insurers won’t receive critical feedback and suggestions that can help optimize the technology.

As we all start working toward our goals and targets for the year, what defines a good KPI? Guest blogger Hanne Sorteberg returns to share her experience and advice on how to get these priority metrics right. She also helpfully shares nine pitfalls to avoid. Whether you are an analytics leader setting KPIs for your team, or influencing other teams, this is for you. Over to Hanne… A new business year often brings new strategies and plans. KPIs, key performance indicators, are metrics that provide information on how a business is performing. KPIs ensure that a strategy is achieved, by giving direction to the employees who can realize it. Best case, KPIs are the compass that makes sure we are headed in the right direction. Worst case, they may drive behavior we do not want. Best case, they motivate for increased and improved effort; worst case, they discourage and demotivate. Oftentimes, they are a theoretical exercise put in a drawer without value. Avoiding worst-case KPIs How can we build KPIs that contribute to the growth and development of our business? KPIs should follow the checklist for SMART goals:

• S = Specific, it is evident and clear what the goal is
• M = Measurable, it is possible to measure the goal unambiguously
• A = Ambitious, it’s a stretch to achieve, and at the same time realistic
• R = Relevant, it contributes to the business’ strategy
• T= Timed, the timeframe for when the goal is to be achieved is clearly defined

There are many pitfalls to avoid to succeed with KPIs and goal management. Here are nine to consider: Pitfall #1: Too many KPIs The most common mistake is to be too ambitious and clever, vigorously defining KPIs for the entire business with fancy graphs and Excel macros. The work requires a lot of time to set up, and even more to maintain. Important deviations drown in information overload. A hospital went from one report of over 150 measurements, that no one paid attention to, to a lamp on the manager's desk. It had a green, yellow or red light depending on the waiting time in the emergency room. The lamp caused a significant improvement. A few, important KPIs can be enough to model the most important business processes. First ensure these are established, communicated and anchored in the organization. Then you can consider adding or adjusting the KPI process. See also: Insurtech Starts With ‘I’ but Needs ‘We’   Pitfall #2: Overly fancy KPIs Some KPIs can measure performance well but still be a bad choice. It can be too difficult to obtain the data. It can be difficult to explain what the KPI is, or there may be disagreement on how the KPI should be defined or calculated. Pitfall #3: KPIs that are impossible to measure Some KPIs that are important can be difficult to measure. In such cases, you either have to drop them or find an alternative way to measure them. For instance, customer satisfaction can be measured by an index based on surveys. It is important that the KPI is a numerical value, so that you can define thresholds and measure historical development. Make sure the KPI has the same meaning over time. Pitfall #4: Vanity KPIs Eric Ries, author of “The Lean Startup,“ uses the term “vanity metrics“ for measures that are celebrated as achievements but don’t contribute to the growth and development of the business. The number of page views, clicks, downloads and the like are examples of metrics you can boast about, but they don’t necessarily contribute to increased sales, customers or loyalty. Vanity metrics can take your attention away from the important stuff to follow up on. Pitfall #5: Not defining “good” What are satisfactory results? KPIs should drive the right behavior. It is important to define the thresholds of what is a good result, or green, making clear when there is a deviation that requires actions, to improve a yellow or red/critical situation. Pitfall #6: Not following up on KPIs Many businesses define KPIs as a part of their yearly strategy planning. The KPIs should be followed up so frequently that you have a chance to adjust course in time. Some KPIs may be measured daily or weekly, others more seldom. If something is measured less frequently than quarterly, it is probably not a good KPI. Pitfall #7: Not distinguishing between result and effort KPIs Most KPIs show results a business has achieved. Sales, the number of customers and contracts, waiting time, etc. You cannot influence these metrics directly; they result from what you do. An effort KPI measures the activities you do to affect the results. The number of sales calls, marketing campaigns, number of service calls and hours used for improvements are examples of such KPIs. It is useful to link result and effort KPIs. When a measurement hits yellow or red – which actions are taken? And how much effort does it take to correct? See also: The Dark Side of Product KPI   Pitfall #8: KPIs that drive unwanted behavior Some KPIs can have consequences you did not foresee, or even lead to behavior that is unwanted. If you, as a software vendor, introduce a KPI on the number of bugs, the development time may increase significantly. Measurements comparing when features are delivered to an estimate may lead to estimates that are way too high. A KPI to shorten the length of a telephone call at a service desk to decrease waiting time may cause fewer issues to be handled at the first call. But it may also actually increase the total waiting time. Some of these KPIs may be kept if they are balanced by an additional KPI. The number of bugs measured at the same time as development effort. The length of service calls in addition to the number of issues solved at the first call, in addition to customer satisfaction. It is critical to reflect on whether the KPI will introduce negative and unexpected consequences. If you can imagine any, set up monitoring to evaluate how effective the KPI is over time. Pitfall #9: KPIs aren’t communicated and anchored in the organization KPIs are meant to change the way you act. To measure without doing something different based on the results is wasted time. If you are to introduce a system of goals and measurements, it is important that the KPIs are communicated. This needs to be done in a clear way, and the organization needs to agree to them. Stakeholders should perceive that their effort can affect the KPIs. They need to believe that the goals are realistically achievable. Something should happen when a KPI turns yellow or red, either corrective action or an adjustment of the KPI to make it reflect reality. How are your KPIs? Thanks to Hanne for that practical post, which I’m sure is relevant to many managers at this time of year. What are you going to do differently as a result? Are you confident that you have the right KPIs for 2019? If not, how could they be improved? If you do make changes that work, after reading Hanne’s advice, I’d love to hear your story.

If insurers want to know the future, or to see the best approximation of it, they should review the events of 2018 so they can prepare themselves for the excitement of 2019. They should expand their emphasis on the theme of safety by rewarding companies and individuals for, respectively, teaching and learning basic life support (BLS) skills. Chief among these skills is CPR. It is a skill that saves lives by saving the world entire, by rescuing the entire economy, too, because the savings for insurers are substantial. These savings translate into more affordable and accessible insurance. They reduce the number of death benefits (an oxymoron, indeed) that insurers otherwise have to honor on behalf of a decedent's loved ones. They also allow insurers to better promote life-saving techniques like CPR, which is itself a reminder of how the simplest things sometimes yield the greatest returns, some of which are measurable while others are of incalculable worth. My advice to insurers is to partner with the best, for the best reasons, to achieve the best results. My advice is to seek, and to subsidize, the work of an organization such as National Health Care Provider Solutions (NHCPS), whose mission is to save lives, whose Save a Life Initiative empowers people to learn how to perform CPR, whose many initiatives enable men and women to become CPR-certified. See also: Digital Distribution in Life Insurance   If insurers take this advice, they will at least improve the odds that someone can save a life. They will go beyond the merely fiscal by accomplishing the metaphysical, placing in people’s hands a skill that expresses itself in the universal language of action. It lets people do for themselves what time does not permit others to do for someone in need of immediate medical attention. It enables members of a community to be the first ones to respond when there is no time to wait for first responders to arrive on the scene of a crisis or an emergency. To do these things is to strengthen the bond between insurers and individuals. To do these things is to do the right thing, period, because ethics trump economics. That is to say, if insurers put morals ahead of money, they will establish goodwill among the very people they want to reach. They will have a degree of credibility no amount of advertising can buy and no attempt of marketing can match. They will have authenticity, thanks to their commitment to BLS and CPR. That commitment should increase in 2019, as it can increase the number of lives people save. See also: New Health Metrics in Life Insurance   It can also save the insurance industry from wasting time and money on more costly, and far less effective, efforts. It can—and does—remind us to prioritize what matters most: life. Inspired by professionals, and imbued with the ability to act with the utmost professionalism, BLS and CPR offer insurers the opportunity of a lifetime. Now is the time for them to seize the moment.

It's that time of year: You unwind (in my case, get a cold!), reflect on the year that was and look to the year ahead. Last year, my "2018, a view through my looking glass" gave me a 60% score for my 2017 thoughts. I'm going to keep the format going and start with a quick look back to see how close I was on 2018, then jump into what I see in store for 2019. As always, I'd love your feedback. Here goes! 2018 - Marking my homework - how did I do?

1. Our first driverless journey — As reported in November, Oxbotica said it would complete tests that week. Oxbotica is on a great journey, from the partnership with AXA XL and newly formed partnership with Addison Lee. Marks 1
2. API s/Insurance as service — I'm torn on this one. The vision and ambition are still valid, I just didn't see as many folks get there as I thought would. That said, there have been some notable and clear moves including Slice, ICS, Coverwallet, Lemonade, GoCompare and many more across Europe. Marks 1
3. The deathly fear of Amazon and other GAFA/BAT companies.This one always draws debate and ensuing huge headlines and here. given their history in disrupting markets and attaining significant market share. Nothing launched directly in the U.K. from these organizations, despite much speculation, but they have filed for an Indian Insurance Licence. Marks 0
4. Re-bundling/Orchestration/Insurance. I thought we would see much more of this in 2018 than actually emerged. There was lots of talk, but we still seem to innovate in silos. I think 2019 will see this change; see below for my consolidation predictions. Marks 0.
5. Voice continues to be talked about. Lots more talk, more examples — still no scale. I maintain my position, now more than ever— it will have its place, but very rarely will it be quote-to-bind. Claims, updates and more - quite possibly. Marks 1
6. Regulation.With IFRS17 delayed a year, more time was handed for insurers to get ready — these continue to be long, complex and costly programs for many. How they will be leveraged, only time will tell. Marks 1
7. Insurtech investment - 100% bang on with my prediction here: "It will slow down." In our recent report — Insurtech entering the second wave — we identify that, while investment remains strong in the industry, this has moved from seed to more mature series B, C and later rounds with a lower number of organizations. Marks 1
8. New business models. I didn't know at the beginning of the year we would collaborate with Lloyds of London on this for our Squaring Risks in the Sharing Age report. The net summary of this was there is huge global need and opportunity for insurers here as we change the way we live, work and consume things. Some countries are way ahead of others (the U.K. lags, for example) with many new insurtech startups across the globe now established to fill the gap, including Tapoly, Zego, Dinghy and many more. Marks 1

2018 Score: 6/8 - 75% - an improvement on last year! See also: 5 Digital Predictions for Agents in 2019   2019 - so what does the year ahead look like! Like everyone else, I don't have a magic crystal ball - the below views are based on what I see and hear from the market, day in day out, and the pace at which I think they will surface in the market. In 2017, I talked about speed - I still feel this is something the insurance world needs but hasn't yet grasped fully, partly due to the nature of what we do and partly the speed at which our customers are prepared to make the change in what and how they buy.

1. Speed to market still seems to be the #1 question. How we do launch something new, or get something out there to test? There are so many ways to do this; we, for example, have partnered with Instanda to help launch products in weeks, not months and years, with some great success. Many other platforms are out there that can do this. See my new piece on "Are all insurtechs solving the core system challenge?", which I will post shortly.
2. Scale. Once you are in the market, and now that we are awash with experiments, the next question is: How do we get to scale? I was thinking of this in line with what"s going on with the fintech scene and how the likes of Monzo and Starling (new U.K. challenger banks) have 1.5 million and 400,000 customers respectively, or Bulb, a new challenger in the energy space, with 800,000 customers, grown by 600,000 in 2018. Why do people care about these things more than their insurance provider? I do not know a retail-based insurtech startup with the same volume of customers (outside China)? Anyone?
3. Artificial intelligence. Probably the most overused term of the year, AI will continue to be the most overused in 2019. We spent a good part of 2018 helping clients break this down into manageable parts, what it really means and where it can be applied and where it shouldn't be applied. I expect this to continue through 2019 as there are genuinely so many great opportunities. However, also sometimes - just no. It feels like "digital" of three to five years ago, that adding the word "digital" to anything was a surefire way to secure budget. Is AI this year's equivalent?
4. New business models. Last year, we saw an explosion of startups in the sharing and gig economy space, and in my view hugely valid. The way we buy and use services is changing and will continue to do so. Our work with Lloyds of London validated the opportunity, I expect more in this space. A good example is also what Cover Genius is up to -- listen to the interview with Mitch Doust here. From a business model perspective, I'm still a believer in what Tobi and the team at Laka have unlocked, as well as Dylan at SoSure. These both change the dynamics of what we know; both will have to find scale. SoSure is more straightforward; don't use it, get money back. What's not to love? Maybe a combination of this and the value-added services (see below).
5. Getting to grips with the SME sector in insurance. It's been talked about enough. Many have started already. Our work on Frank and Guru makes it feel like this sector is truly coming of age here and will find new attention as the markets on either side of this get harder. This includes a huge new push into the cyber space. Again, many have started. Watch out for our report on this later this year.
6. Consolidation!This is a big one for me, and I think will see a number of sub categories. Here how I see this breaking down (this is like four predictions in one):

• First — Product consolidation. We have already seen a few small moves here, the original multi-car policies, then multi-product (car and home), then most recently Aviva + was launched. Will we finally start to move away from the product silos? I expect so.
• Second — Value-added services. What we buy is about to change, in a move to make insurance more relevant and engaging. This feels like the long-overdue debate, and I see a gap emerging in an adjacent space of home bills/management, partly enabled by whats going on in open banking (PSD2), partly aggregator technology being applied to the next available area. Services such as Flipper, Snug, Bill Shark and Labrador, along with services such as OneDox, which can already connect to my insurance providers to consolidate everything into one place. These will threaten the "who owns our customer debate" (always the customer!), and I genuinely expect this area to explode. It saves time and money and makes life more convenient while often providing a better deal.
• Third — Insurtechs consolidate and are acquired by carriers. Many of the folks who have been hunting for distribution individually will come together to broaden their portfolio and frankly look for survival while others will be acquired by traditional carriers and baked into their digital offerings and efforts. It's not going to get any easier out there.
• Fourth - Carrier consolidation. I expect to see many more carriers come together as the market seeks benefits through scale or broadening portfolios. 2018 was a good year already for this, and many of those organizations will spend 2019 seeking out the benefits.

2018 was really great, with more Insurtech Insider podcasts (we were at episode 6 this time last year and closed out 2018 with our Boxing Day episode, #31; thanks, Sarah, Pet, Laura, David, Alex and all the team) through our partnership with 11:FS, as well as many other shows, including rebank (Insuring the Gig Economy with Harry Franks from Zego) and InsTech London, the Great Insurtech Debate, the Big Fat FinTech Quiz with Ali Paterson, our collaboration with Lloyds of London on the sharing economy and the global roadshow that followed. Most important was all the great work we did with our clients, launching products, driving new experiments, creating partnerships and delivering initiatives with them. See also: Insurtech: Revolution, Evolution or Hype?   If you had a chance to listen to our final podcast of the year, each of us also made a bunch of predictions for 2019, a quick summary of which is below. You will have to listen here to find out the full details. No surprise: Mine are in line with the above!

• Oliver Ralph, FT – Funding will get tough for insurtechs. May be a shake up in the market here as investors seek returns.
• David Brear, 11FS – Resurgence for the bancassurance model. New and bigger distribution model.
• Sarah Kocianski, 11FS – Value-added services – insurer and startups providing a packaged service.
• Me - Finally get to grips with SME – the untapped middle -- plus the emergence of platforms and consolidation, as I have talked about above,

As the year rolled on, InsureTech Connect in Vegas doubled again to attract over 6,000 people, thanks to the hard work from Jay and Caribou. Will it hit 10,000 this year? I don't think so, but it will be close, especially as the global market, understanding and appreciation continue to mature. I've not even touched on regulation, Brexit or so many other areas that we will continue to weather - these are not optional. Here's to a fantastic 2019, I expect an evolutionary year as opposed to a revolutionary year - but we are working on that, too! I can't wait to dive in together.

Agile methodology has a long history with deep roots. It evolved across decades from an array of research and writing by individuals with diverse backgrounds. One thing they all shared was the desire to quicken the pace of development – whether it be for a product, a manufacturing line or software. When you think about insurance, project methodologies may not be the first thing that come to mind. Yet, as business and IT professionals find themselves increasingly working together toward the shared goal of digital transformation, the topic has gained importance in the boardroom. And with good reason. Many projects have cost much more and taken much longer than expected. Scientists, product managers and engineers have been investigating what determines a successful project ever since Walter Shewart of Bell Labs began using Plan-Do-Study-Act (PDSA) cycles to improve products and processes in the 1930s. Shewart taught his young apprentice W. Edwards Deming the iterative development methodology that he used to create the famous Toyota Production System, the seed of today’s “lean” mentality. See also: Emerging Technology in Personal Lines   In 1986, Hirotaka Takeuchi and Ikujiro Nonaka published an article called “The New New Product Development Game” in Harvard Business Review. They examined manufacturers like Fuji-Xerox, Honda and Canon that were releasing innovative technologies faster and more successfully than their competitors. These companies were not using the traditional “relay race” or “waterfall” method of development where individuals or teams hand off products after completing each phase. Instead, the companies were using what Takeuchi and Nonaka coined a “rugby” approach, “where the entire team tries to go the whole way as one unit, passing the ball back and forth.” As personal computers and then the internet became mainstream in the late ‘80s and ‘90s, it was crucial that developers find a way to quickly implement their innovations, obtain feedback and launch their technologies to stay competitive. This was referred to as “the application development crisis” or “application delivery lag,” where the estimated time between a validated business need and solution could be as much as three years. In some cases, it was much longer, which meant that projects were often canceled or no longer met the original business need when finally completed. In 1993, agile co-founder Jeff Sutherland found himself with an incredible challenge working for Easel: develop a product to replace a legacy system in six months. Sutherland was well-versed in rapid application development, object-oriented design, PDSA and skunkworks methodologies. He set out to foster this kind of culture and began learning everything he could about optimizing productivity when he came across Takeuchi and Nonaka’s rugby approach. Sutherland embraced many of their ideas and established a novel way to develop software based on the rugby metaphor, calling his approach “scrum.” This method allowed him to complete seemingly impossible projects on time and with fewer bugs. He then joined forces with colleague Ken Schwaber to structure the approach, which they presented to the public in 1995. In 2001, a group of 17 developers, including Sutherland, met in Snowbird, Utah, to discuss their views. Sutherland was a proponent of scrum. There also were advocates for a number of approaches such as extreme programming (XP), adaptive software development (ASD), crystal, feature-driven development and the dynamic-systems-development method (DSDM). See also: How to Partner With Insurtechs   The group finally agreed on a new name for the movement – agile – suggested by a member who was reading the book “Agile Competitors and Virtual Organizations: Strategies for Enriching the Customer.” The “Manifesto for Agile Development” was born and hinged on 12 key principles that are being applied across industries worldwide, including insurance. Agile development has proven to be a major advance. In my next post, I’ll discuss the top challenges and key success factors for agile development in insurance.

We kick off 2019 by discussing 20 issues the workers’ compensation community should be monitoring. Our list includes both employee benefits and workers’ compensation issues, as these two areas inevitably overlap. Later in the year, several of these topics will be developed into individual “Out Front Ideas with Kimberly and Mark” webinars. Just because an issue is not on our list does not mean it’s not important. Our goal is to highlight issues that we feel need more attention. Thus, while opioids are an important issue, we do not discuss them here because they are already receiving tremendous national attention. Healthcare 2020 Two years into this administration, the Affordable Care Act remains the law, although lawmakers and the administration have reshaped parts of it through legislative, regulatory, budgetary and legal actions. Healthcare was a leading campaign conversation during the midterm elections in 2018, and expect it to top the list in the 2020 presidential election.. As of Jan. 4, all but 14 states have adopted Medicaid expansion. This is something we expect to continue into 2019. Addressing the cost of prescription drugs will be a priority in 2019. While we are a long way from bipartisan consensus on how to address the pricing challenges, big pharma is bracing for smaller, but significant, regulatory changes. Finally, physician-led accountable care organizations (ACOs), have continued to do well and are likely to increase in 2019. ACOs reward providers for desirable patient outcomes. Legislative Watch The 2018 elections may have a big impact on the workers’ compensation landscape in 2019. There were eight states where the party of the governor changed in the November 2018 elections. Many do not fully appreciate the impact this can have on workers’ compensation, however, these governors appoint the workers’ compensation regulators and administrative law judges. These positions have a very significant influence on the practice of workers’ compensation in their respective states. In 2018, there were over 100 national bills introduced to expand presumptions for first responders. Many of these bills pertained to post-traumatic stress disorder. We expect a similar trend this year. One newer area of emphasis that we expect to see is a push to continue death benefits for surviving spouses of first responders after remarriage. In terms of specific states, we are closely monitoring the following for potential workers’ compensation legislative activity in 2019. California Bills to erode costs savings provisions in the workers’ compensation statutes pass the California legislature every year. The question is: Will incoming Governor Newsom veto those bills like the past two governors did? Governor Newsom is also very focused on creating universal healthcare for California residents, which could have a significant impact on workers’ compensation. Illinois The Democratic Illinois legislature and Republican Gov. Rauner battled for his entire term over workers’ compensation. What will happen when Democratic Gov. Pritzker takes office? Alabama In May 2017, a circuit judge ruled that Alabama’s workers’ compensation statutes were unconstitutional because of the caps on weekly benefit and attorney fees. Since then, a bipartisan task force has been working to develop reforms to workers’ compensation statutes that would address the areas that the judge felt were unconstitutional while, at the same time, preventing significant cost increases for employers. It remains to be seen whether legislative action on the task force recommendations will happen in 2019. Federal With the solvency of Social Security being a significant concern for the federal government, we have been waiting for Social Security to start looking into potential shifting from state workers’ compensation programs to their program. This appears to be happening now. There are currently 15 states that have a “reverse offset” allowing workers’ compensation benefits to be reduced if the person is receiving both Social Security Disability (SSDI) and workers’ comp. In all other states, SSDI gets the offset. Legislation could quite possibly take away this reverse offset. See also: Why So Soft on Workers Comp Fraud? Psychology of Pain Treating pain is much more complicated than prescription medication and physical therapy. Pain has biological, psychological and emotional factors -- often approached through what we refer to as the biopsychosocial approach to pain or the biopsychosocial model. When patients focus on pain, pain worsens. Anxiety, fear and a sense of loss of control contribute to pain. Research shows treating anxiety and psychological support reduces pain and the use of pain medication. And while we know that the psyche has a tremendous role in pain, few patients receive treatment for the emotional and psychological aspects of pain. Worldwide, the need for more effective pain treatment has led the pain treatment community to promote comprehensive treatment of pain and multidisciplinary pain care. Unfortunately, access to skilled providers and comprehensive pain care is a challenge in many parts of America. In addition, receiving payer approval for care is equally challenging. Understanding a patient’s response to pain earlier in the claim offers an opportunity to create a meaningful, holistic treatment plan. If the initial pain assessment reveals the patient has a high level of subjective pain complaints with limited objective findings, there is a likelihood the patient will end up in chronic pain in the future. Here are a few suggestions to consider regarding the psychology of pain and workers’ compensation:

1. Create a pain philosophy as part of your claims program. Engage the entire cross-functional claims team in the development of the program, including claims, clinical, legal, employer, occupational and orthopedic providers. The pain philosophy and associated documents become part of the client service instructions.
2. Implement pain assessment tool(s); initial and continuing assessments are available
3. Outline care pathways for holistic pain treatment
4. Because patient-centered care is key to success, communicate clearly and often with the injured worker, Transparency and empathy are important.
5. Identify a pain psychologist or clinical pain expert to consult, as needed, on pain cases and help guide the more complex cases
6. Create a feedback loop or grand rounds approach to bring stakeholders together on a regular basis and assess the pain philosophy, outcomes and opportunities for improvement.

Politics of Permanent Impairment When the AMA 6th Edition Impairment Guidelines were issued, experts hailed them as a significant improvement in the evaluation of physical impairment. But they have also led to litigation around the country as plaintiff attorneys challenge the constitutionality of the guidelines because they can produce lower impairment ratings. This leads to the question that states need to be asking: What is the purpose of the impairment guidelines in their state? If the purpose is to provide a measurement of objective physical impairment, then the AMA 6th Edition is the best tool for this. But, if the purpose of the impairment rating is to provide a PPD award that considers more than just objective impairment, then the AMA Guidelines alone are not the proper tool. The AMA Guidelines measure physical impairment, not loss of access to the labor market, potential loss of earning capacity or other subjective elements that have nothing to do with recovery from the physical injury. Social Determinants of Health In patient care, addressing social determinants of health is as important as the quality of the care that a patient receives. Social determinants of health are the conditions in which people are born, live, work, play, worship and age that factor into overall health. Social determinants of health include socioeconomic status, education and literacy, access to healthy foods and health services and social and physical environments. Increasingly, payers and health care providers are interested in more holistic care, with the goal of improving health outcomes. Economy’s Impact on Workers’ Compensation We are at record low levels of unemployment, and wages are climbing. Higher employment and wages mean higher payroll. Higher payroll leads to higher workers’ compensation premiums. Higher employment rates also mean we have more workers in the workforce who are not adequately trained and may not be in good physical condition. Because of this, some carriers are starting to notice a slight uptick in accident frequency rates. It will be interesting to see the data presented at the 2019 NCCI Annual Issues Symposium to see if we are, indeed, starting to see an increase in frequency rates. Twenty states increased their minimum wage as of Jan. 1. Higher wages could lead to more payroll and associated premiums. In addition, in states with a wage loss benefit, a higher minimum wage means decreased wage loss awards. Employee Health Models Benefits continue to be a talent attraction and retention tool for employers. Chief human resources officers understand that the health of an employee is directly related to productivity. The health and wellbeing of the employee population lead to productivity and, in turn, directly correlate to top- and bottom-line performance of the organization. Employee health models are evolving with employer-purchased care. This is happening because health insurers are not negotiating and managing costs in a way that employers can manage models directly. Direct primary care (DPC) is a small, but fast-growing, movement of doctors who do not accept insurance and, instead, charge a monthly membership fee. Employers engaging direct primary care believe in the primary care health model from a treatment perspective and care coordination. Doctors have the incentive to prioritize prevention and provide high-quality, coordinated care. It is a cost-effective, value-based care model that avoids the fee-for-service traditional pricing model. The National Business Group on Health estimates that over 50% of employers report having some form of value-based care in their health insurance program. Although we are hearing more about value-based care in workers’ compensation, be mindful of the difference between bundled pricing and value-based programs. “Value-based” care should have a quality care component and cost factor. “Bundled pricing” is a cost savings model. Telemedicine is common in employee health benefits today. Over 95% of large employers offer telemedicine solutions. While adoption varies, consumers who use telemedicine typically report a high level of confidence and satisfaction in their care. Mega Claims and Rates Industry data reports that the number of claims over $5 million incurred is increasing, and the size of individual claims is also increasing. It was not that long ago that a $5 million claim was a rarity, and catastrophic injury claims tended to top off around $10 million to $15 million. However, a combination of factors are leading to the increase in these numbers, including accident survivability, an increase in auto accident frequency and advancement in medical treatment. Carriers are now seeing individual claims as high as $40 million, and these long-tail costs have a significant impact on premium rates. In terms of forecasting workers’ compensation premium rates for 2019, overall the outlook is that rates will remain fairly flat, with some states seeing slight rate decreases. However, both A.M. Best and Fitch have cautioned that increasing medical and litigation costs are eroding workers’ compensation carrier combined ratios and that 2019 will likely be closer to a break-even combined ratio than the last three years. If the data, ultimately, shows that accident frequency is increasing, that would be another factor that would affect the marketplace. Leave of Absence State and local laws, the talent war and employee expectations are leading more employers to implement leave-of-absence programs. Employers offering paid leave report that the benefit helps with employee retention and reduces costs related to turnover and employee training. Another contributing factor to leave policies is the federal Tax Cuts and Jobs Act of 2017, which contains a tax credit for employers that provide qualifying types of paid leave to full- and part-time employees. As more leave programs exist, the coordination of leave administration with job accommodations and workers’ compensation continues to be an issue to watch. Impaired Workforce As we enter 2019, legal marijuana is more available than ever. In October 2018, recreational marijuana became legal in Canada. After the November elections, there are now 10 states and the District of Columbia with legal recreational marijuana. In 2019, state legislatures in Connecticut, Illinois, Minnesota, New Hampshire, New Jersey, New Mexico, New York, and Rhode Island are all expected to consider legalizing recreational marijuana. What does all this mean for employers? Some percentage of your workforce is possibly impaired at work. The challenge for both employers and law enforcement right now is that the science of marijuana has not caught up to the social reality of legal marijuana. There are no widely accepted standards or standardized tests to determine if someone is impaired from marijuana. Talent Training and Development As an industry, we are experiencing an unprecedented amount of turnover due to the aging workforce. With turnover comes the need to train and prepare the next generation of claims handlers. It is important that we carefully examine training programs to ensure that they are adequately preparing people with the necessary skill sets to handle claims. Not only are statutes and rules important to learn, but soft skills are more important than ever. Rules and regulations are trained consistently, and system training is extensive, but soft skills training is lacking and, often, absent. Workplace Violence Workplace violence continues to get worse. We are not talking about mass shootings, which are rare. Instead, our focus is the day-to-day threat of violence faced by many workers. Physical assaults on the job are a growing problem in many industries – especially healthcare, K-12 schools and retailers. Most are not aware of how bad the problem is becoming because it is not widely reported. Some workers feel the violence is part of the job, so they don’t report the incidents. In addition, businesses and schools don’t want customers and the community to think they are unsafe, so they don’t talk about the problem. We cannot begin to fix the problem of workplace violence until we acknowledge the extent to which it is happening and talk about the societal causes of the behavior. This is a very complex problem for employers. Unconscious Bias In recent years, the discussion of diversity and inclusion has become mainstream. Conferences and conference sessions on the topic flood our inboxes, and many of our organizations have hired diversity officers. While the discussions are important and meaningful, we also must spend time digging into ways that we can train our staff to be more inclusive. One such way is to tackle the topic of unconscious bias. Unconscious biases are learned stereotypes that are automatic, unintentional and deeply engrained in each of us. Because many of these prejudices exist beyond the conscious level and are a result of being brought up in a culture that harbors biases, we must first acknowledge that they, in fact, exist. Simply learning about our hidden biases is not enough. We must train colleagues to identify these biases and build skills to overcome them. Employee Classification The determination of whether a worker is an employee or an independent contractor is a challenge that has been around since the start of workers’ compensation. This issue is getting more attention now because of the gig economy. States and the U.S. Department of Labor are very focused on this issue. This is a very complicated problem for employers. The rules regarding what constitutes an independent contractor not only vary by state, but “independent contractor” can also be defined differently under a state’s workers’ compensation than under wage and hour rules. In addition, IRS definitions of independent contractor are often different than the state regulations. The Sharing Economy When we speak of the sharing economy, organizations like Uber, Lyft and AirBnB come to mind. However, the biggest potential impact of the sharing economy in workers’ compensation comes in the form of data. Larger companies used to have a tremendous competitive advantage because they had access to so much more data, which enabled them to make more informed decisions. However, many insurtech companies are data aggregators, gathering information from multiple sources and compiling it into something useful that can be analyzed and acted on. The wide availability of data is a benefit to startup and smaller companies because it can help to level the information playing field. More data enables better analytics and better decision-making. Globalization of Risk Management We live in a global economy and, as a result, risk management is becoming more globalized. Employers with operations in multiple countries are well aware of the challenges associated with globalization, including complying with a growing number of laws and regulations. However, even businesses that do not have physical operations in other countries can be subject to international laws and regulations if they have an online presence or work cowith vendors in other countries. See also: How Should Workers’ Compensation Evolve?   The Consumer Experience Organizations placing a high priority on consumer experience and engagement are changing the way they create and design products, address customer service issues and measure experience and engagement across stakeholders. These organizations often discuss design thinking as a strategy for innovation. “Design thinking” involves internal and external stakeholders, satisfaction and engagement levels and efficacy and quality. How often do you find injured workers at a conference sharing their experience with the system and claims process? Do injured workers have a voice at the table regarding processes and communications in which they are involved? Would turnover and employee satisfaction improve for claims organizations if the claims adjuster had a central role in workflow and product design? As we consider the future of work, talent attraction and retention, evolving from process to an empathetic engaging industry, we believe emphasis on the consumer experience is paramount to success. Measuring Success The adage, “what gets measured gets done,” is also true in the workers’ compensation industry. But the question becomes, are we measuring the right things? We are excited to once again be moderating the opening panel at the WCI conference in Orlando in August. This session will be a discussion among employers, industry leaders and regulators on measuring success. What metrics are important, and what is obsolete? How can we drive the desired outcomes by adjusting the way we measure success? We hope you will join us in Orlando this August at the WCI conference for this session to hear what stakeholders think about this issue. Future of Work The future of work is an important conversation for all of us to consider in 2019. When you think of the future of work, what comes to mind? Machine learning, automation, technology, digital? How are our work cultures changing? Employees today want to feel connected – connected to each other, connected to their community and connected to passions. Employees also want to perform purposeful work and to feel valued. As workplaces evolve, our industry will also need to evolve to attract and maintain the workforce of the future. Natural Disasters Without question, we are experiencing more frequent and more catastrophic natural disasters than ever. Last year, we saw a record hurricane hit the Florida panhandle and wildfires in California destroy entire towns. Disaster planning and response are an essential part of a risk manager’s job. However, the significant and devastating nature of the natural disasters requires evaluation of current risk management programs. Risk managers need to build in contingencies for contingent plans and need to factor in what would happen if there was a significant and lengthy disruption in your supply chain. We need to be thinking of the unthinkable and preparing for it before it happens. To listen to the complete Out Front Ideas with Kimberly and Mark “Issues to Watch” webinar, which was broadcast on Jan. 8, please visit: http://www.outfrontideas.com/archives/

2018 was the year that insurance embraced open innovation. From medium-sized insurers to Fortune 50 incumbents, everyone seemed to be launching a challenge, accelerator or incubator -- to the point where we now have too much of a good thing. This has led to a certain ennui in the startup and VC ecosystem. Every insurtech startup, the good, the bad and the ugly, seems to have been part of one or more programs. It is hardly surprising that new programs are greeted with a collective shrug. In such a context, how can you create a compelling and differentiated program? Simply put, a compelling program creates immediate business value for both the program sponsor and the program participant. The keyword is "immediate" -- which means the program focus should be on core business processes and customer experience. In other words, ROI should mean return on investment, not reservoir of ideas! Programs to scout for new business models (like accelerators and incubators) have their place in an innovation portfolio but do not add immediate value -- certainly not to the sponsor (and rarely to the participant). In general, it is better to have a narrower focus on digitization and differentiation, before trying to tackle disruption. See also: Era of Insurance Innovation Is Upon Us   For the program to be more than PR spin, it should fulfill the following conditions:

1. The program should tackle well-defined, real business problems. As a rule of thumb, the problem should be costing the incumbent north of $1 million per year. This size of problem ensures that there is scope for a long-term relationship and a significant opportunity for the startup partner. The problem should also be well-defined -- the improvement metric should be clear. The Netflix prize, which required a 10% improvement to Netflix’s own recommendation engine, is a good example.
2. The pilot should be with real data and real customers. The end stage of the program has to be more than a demo day, with abstract promises of next steps. A differentiated program will guarantee a pilot that interfaces with the business and is implemented in a live environment. By definition, this will require certain maturity on the startup partner side, which is a good thing.
3. The pilot should have a real budget. No more "toy prizes" of $20,000 to $50,000. A pilot should have a budget of at least $100,000 to create meaningingful skin in the game, so that both sides are serious about making the pilot a success.

Finally, we need a new brand for programs that meet these conditions. I suggest "implementation challenges" to make clear that the program is about creating value in the here and now. See also: With Innovation, Keep It Simple, Stupid   A well-run implementation challenge can add significant value to both the sponsor and the participant: For the participant:

1. A "lighthouse" customer -- an actual implementation at a Fortune 500 company makes it easier for the startup to attract both investments and other customers.
2. Revenue leverage -- depending on the type of product, investors attach a multiple of 8X to 10X. Hence, a $100,000 contract can create a $1 million increase in valuation

For the sponsor:

1. Access to world-class talent and technology
2. Kickstarting the digital transformation process

I hope to see more implementation challenges in 2019.

On July 6, 1988, the Piper Alpha oil platform exploded. 167 people died. Much of the insurance was with what became known as the London Market Excess of Loss (LMX) Spiral, a tightly knit and badly managed web of insurance policies. Losses cascaded up and around the market. The same insurers were hit again and again. After 14 years, all claims had finally been settled. The cost exceeded $16 billion, more than 10 times the initial estimate. The late 1980s were a bad time to be in insurance. Piper Alpha added to losses hitting the market from asbestos, storms in Europe and an earthquake in San Francisco. During this time, over 34,000 underwriters and Lloyd’s names paid out between £100,000 and £5 million. Many were ruined. Never the same again In the last 30 years, regulation has tightened, and analytics have improved significantly. Since 1970, 19 of the largest 20 catastrophes were caused by natural hazards. Only one, the World Trade Center attack in 2001, was man-made. No insurance companies failed as a result of any of these events. Earnings may have been depressed and capital taken a hit, but reinsurance protections behaved as expected. But this recent ability to absorb the losses from physically destructive events doesn’t mean that catastrophes will never again be potentially fatal for insurers. New threats are emerging. The modeling tools of the last couple of decades are no longer sufficient. Lumpy losses Insurance losses are not evenly distributed across the market. Every year, one or more companies still suffer losses out of all proportion to their market share. They experience a “private catastrophe.” The company may survive, but the leaders of the business frequently experience unexpected and unwanted career changes. See also: Data Prefill: Now You See It, Now You Don’t   In the 1980s, companies suffered massive losses because the insurance market failed to appreciate the increasing connectivity of its own exposures and lacked the data and the tools to track this growing risk. Today, all companies have the ability to control their exposures to loss from the physical assets they insure. Managing the impact of losses to intangible assets is much harder. A new class of modelers The ability to analyze and manage natural catastrophe risk led to the emergence of a handful of successful natural catastrophe modeling companies over the last 20 years. A similar opportunity now exists for a new class of companies to emerge that can build the models to assess the new “man-made” risks. Risk exposure is increasingly moving toward the intangible values. According to CB Insights, only 20% of the value of the S&P 500 companies today is made up of physical assets. It was 80% 40 years ago. The non-physical assets are more ephemeral, such as reputation, supply networks, IP and cyber. Major improvements in safety procedures, risk assessment and the awareness of the destructive potential of insurance spirals makes a repeat of the type of loss seen after Piper Alpha extremely unlikely. The next major catastrophic losses for the insurance market are unlikely to be physical. They will occur because of a lack of understanding of the full reach, and contagion, of intangible losses. The most successful new analytic companies of the next two decades will include those that are key to helping insurers measure and manage their own exposures to these new classes of risk. The big data deception Vast amounts of data are becoming available to insurers. Both free open data and tightly held, transactional data. Smart use of data is expected to radically change how insurers operate and create opportunities for new entrants into the market. Thousands of companies have already emerged in the last few years offering products to help insurers make better decisions about risk selection, price more accurately, service clients better, settle claims faster and reduce fraud. But too much data, poorly managed, blurs critical signals. It increases the risk of loss. In less than 20 years, the industry has moved from being blinded by lack of data to being dazzled by the glare of too much. The introduction of data governance processes and compliance officers became widespread in banks after the 2008 credit crunch. Most major insurance companies have risk committees and all are required to maintain a risk register. Yet ensuring that data management processes are of the highest quality is not always a board-level priority. Looking at the new companies attracting attention and funding, very few appear to be offering solutions to help insurers solve this problem. Some, such as CyberCube, offer specific solutions to manage exposure to cyber risk across a portfolio. Others, such as Atticus DQPro, are quietly deploying tools across London and the U.S. to help insurers keep on top of their own evolving risks. Providing excellent data compliance and management solutions may not be as attention-grabbing as artificial intelligence or blockchain, but they offer a higher probability of being successful with innovations in an otherwise crowded space. Past performance is no guide to the future, but, as Mark Twain noted, even if history doesn’t repeat itself, it often rhymes. Piper Alpha wasn’t the only nasty surprise in the last 30 years. Many events had a disproportional impact on one or more companies. The signs of impending disaster may have been blurred, but not invisible. Some companies suffered more than others. Jobs were lost. Each event spawned new regulation. But these events also created opportunities to build companies and products to prevent a future repeat. Looking for a problem to solve? Read on. 1. Enron Collapse (2001) Enron, one of the most powerful and largest companies in the world, collapsed once shareholders realized the company's success had been dramatically (and fraudulently) overstated. Insurers lost $3.5 billion from collapsed securities and insurance claims. Chubb and Swiss Re each reported losses of over $700 million. Jeff Skilling, CEO, spent 14 years in prison. One of the reasons for poor internal controls was that bonuses for the risk management team were influenced by appraisals from the people they were meant to be policing. 2. Hurricane Katrina and the Floating Casinos (2005) At $83 billion, Hurricane Katrina is still the largest insured loss ever. No one anticipated the scale of the storm surge, the failure of the levies and the subsequent flooding. There were a lot of surprises. One of the large contributors to loss, from property damage and business interruption, were the floating casinos, ripped from their moorings and torn apart. Many underwriters had assumed the casinos were land-based, unaware that Mississippi's 1990 law legalizing casinos had required all gambling to take place offshore. 3. Thai Flood Losses (2011) After heavy rainfall lasting from June to October 2011, seven major industrial zones in Thailand were flooded to depths of up to 3 meters. The resulting insurance loss is the 13th-largest global insured loss ever ($16 billion in today’s value). Before 2011, many insurers didn’t record exposures in Thailand because the country was never considered a catastrophe-prone area. Data on the location and value of the large facilities of global manufacturers wasn’t offered or requested. The first time insurers realized that so many of their clients had facilities so close together was when the claims started coming in. French reinsurer CCR, set up primarily to reinsure French insurers, was hit with 10% of the total losses. Munich Re, along with Swiss Re, paid claims in excess of $500 million and called the floods a “wake-up call." See also: The Problems With Blockchain, Big Data   4. Tianjin Explosion (2015) With an insured loss of $3.5 billion, the explosions at the Tianjin port in China are the largest man-made insurance loss in Asia. The property, infrastructure, marine, motor vehicle and injury claims hit many insurers. Zurich alone suffered close to $300 million in losses, well in excess of its market share. The company admitted later that the accumulation was not detected because different information systems did not pick up exposures that crossed multiple lines of business. Martin Senn, the CEO, left shortly afterward. 5. Financial Conduct Authority Fines (2017 and onward) Insurers now also face the risk of being fined by regulators and not just from GDPR-related issues. FCA, the U.K. regulator, levied fines of £230 million in 2017. Liberty Mutual Insurance was charged £5 million (failure in claims handling by a third party) and broker Blue Fin £4 million (not reporting a conflict of interest). Deutsche Bank received the largest fine of £163 million for failing to impose adequate anti-money laundering processes in the U.K., topped up later by a further fine of $425 million from the New York Department of Financial Services. Looking ahead “We’re more fooled by noise than ever before,” Nicholas Taleb writes in his book Antifragile. We will see more data disasters and career-limiting catastrophes in the next 20 years. Figuring out how to keep insurers one step ahead looks like a great opportunity for anyone looking to stand out from the crowd in 2019.

While every carrier manages claims operations in a slightly different way, there are three consistent technology setups currently in practice: Green Screen, Home-Grown and Modern. The back-end operational workflows for each of these practices are generally the same: The adjuster manually enters notes, manually sends emails or makes calls and manually ties documents from the document management systems to the claim systems. The challenge here is that the adjuster is the centrally intelligent component. Relying on an adjuster to connect various systems mires the adjuster in overly manual steps, leaving claims processing vulnerable to reduced speed, mistakes and inefficiencies – all of which lessen customer satisfaction. Green Screen While more common overseas and in smaller markets, green screen systems are still found in many claims operations today. The green screen is a simple claim database that only accepts user inputs from a text-based screen with minimal capabilities to integrate into any other systems. Adjusters are forced to use a separate document management system to store files and photos and use a separate email system for outward communications. Carriers relying on green screen systems see inefficiency with data transfer. Adjusters have to hunt for documents that are not tied to a claim number, annotate the decisions they have made in the green screen system and communicate in a separate system to the customer. Most of the mindshare of the organization is spent on teaching the humans the rules of the claim and how to document their thoughts in the system. See also: Visual Technology Is Changing Claims   Home-Grown Some organizations have managed to build their own systems internally over the years. In these systems, various IT projects over the years have been spliced together with complicated business rules that aim to reduce the human error and ensure legal compliance. Carriers with a home-grown system face significant IT spending to maintain their complex infrastructure. Even with a large IT staff, it is nearly impossible to launch new technology initiatives because change affects rules buried deep in the system. The result is a system that is expensive, inflexible, complex and generally oblivious to the customer experience. Modern Recently, carriers have consolidated their legacy systems into one modern platform. These setups require a large engagement with a third-party system integrator and many years of thoughtful planning and data migration. However, the output is rarely a truly consolidated system. Carriers with modern systems are bound to long-term, third-party support contracts and face many of the issues that home-grown carriers face. Complicated business logic is embedded in the software to try to avoid human errors, but it leads to complexity and rigidity that ensure internal compliance while ignoring the customer experience. Carriers and Customers As customer needs are changing, carriers’ technology should be changing, too. Today’s customers expect a seamless tech experience with clear communication, automation and the ability to input via apps, photos, phones and inboxes. There are several new tech solutions that aim to ease a challenge of current carrier tech configurations. At Snapsheet, we have already built software that eases nearly all of these customer expectations. Here are the capabilities that are critical to advanced claims technology – all of which will help meet customer needs:

• Cloud-Based Architecture: This feature is important for a flexible design, which eases the implementation. There is no data migration, no system integration and no multi-year project plan. Claims software is launched stand-alone around existing systems or as a full-on replacement. It enables carriers to track, with real-time precision, all of the customer interactions, how the customer engages with the claims process and how the adjuster is engaging with the customer. Immediate insights are gained and can be operationalized.
• Intelligent Claims Files: Instead of relying on the adjuster to tie systems together and shepherd the customer through the claims process, the Snapsheet platform has advanced capabilities that understand the expectations of each step in the claims process and guide the customer through the appropriate actions. An intelligent engine coordinates the communications and documentation needs for each file and advises the adjuster when to take action. If all of the requested information is provided, the engine may choose to automatically move the work to the next stage.
• Real-time metrics and operational transparency: It enables the carriers to track, with real-time precision, all of the customer interactions, how the customer engages with the claims process, and how the adjuster is engaging with the customer. Immediate insights are gained and can be operationalized. The result is an enhanced customer claims experience, led by automation and real-time customer engagement to provide a tailored journey through any claim in any language in any country.
• Customized roll-out: Customization is key. Even with a single consistent platform, such as Snapsheet’s, it is important to customize implementation for whatever legacy IT configuration exists. This adds flexibility and ease-of-use to each project. Snapsheet’s recent strategic collaboration with Zurich is an example of taking a new software approach by putting the customer experience first. Various county entities in Zurich use each of the three software setups mentioned above. Snapsheet software can be leveraged across any configuration, activating software modules that smooth or plug efficiency gaps in the current process, or completely replace existing claims systems.

See also: How to Use AI in Claims Management   As we kick off 2019 and insurtech continues to expand, the industry will see even greater advancement in the technology space for carriers and claims processes. Automated systems are important to guide the customer through the correct claims journey and ultimately allow carriers more time to innovate.

The insurance industry has operated with great consistency and clear processes for many years. People may not always like or agree with how things work, but nearly everyone from the consumer to the provider essentially goes with it — no uprisings to drive change, no big shakeups. That is until recently.

Seemingly all of a sudden, artificial intelligence (AI) is infiltrating the insurance industry, which may be a bit scary to those devoted to long-established practices. In reality, we are witnessing relatively quick developments and sparks of innovation, considering the overall life cycle of the insurance industry. And what AI offers — now and promises to in the future — is anything but scary. It’s actually quite exciting as the industry enters a truly transformative period that will result in greater efficiency, significant cost savings, and far better service and care.

What Constitutes AI

AI has become one of the biggest buzzwords in the tech landscape, so I want to define what it really means, particularly as it pertains to the insurance industry. AI is a computerized system that exhibits behavior that is commonly thought of as requiring human intelligence. Taking this a step further, it essentially translates to machines acquiring a certain level of “human-ness” so that interactions with software become more like interactions with real people. It also mandates that a system has the ability to learn and improve on its own.

Advances in AI come because of a number of factors, but, undoubtedly, consumer-based technologies have led the charge. Voice, machine learning, computer vision and deep learning have been refined in consumer products, services and platforms, but they are now being combined to create really powerful automated solutions for some of the biggest issues organizations face.

See also: 4 Ways Machine Learning Can Help  

Specific to the insurance industry, novel AI-based applications can shift the workforce and advance what companies are able to assess and offer as well as how quickly they can do it. And this is just over the short term. McKinsey predicts that AI “has the potential to live up to its promise of mimicking the perception, reasoning, learning and problem solving of the human mind. In this evolution, insurance will shift from its current state of ‘detect and repair’ to ‘predict and prevent,’ transforming every aspect of the industry in the process.”

The Rise of Insurtech

This may sound a bit abstract and futuristic, but AI advances have already led to a whole new market segment: insurtech. A slew of new companies have popped up, showcasing strong growth by bringing AI and machine learning to market with the industry’s very specific and nuanced needs in mind.

For example, Cyence, which was acquired by Guidewire Software, developed a platform to ascertain the financial impact of cyber risk and management of risk portfolios; and Cape Analytics provides a service to property insurers that combines AI and geospatial imagery to analyze property and streamline the underwriting process — and these are just two examples. Other AI-based companies have emerged to reduce costs in claims operations, identify various insurance protection options, and transform mobile and social media marketing for insurance companies.

The insurtech segment is not defined by new players alone. Several incumbents have also dipped their toes into the AI waters to develop innovative applications. State Farm developed Distracted Driver Detection that uses dashboard camera images. Allstate has ABIE, a virtual assistant to help agents with information regarding Allstate’s commercial products, and Progressive now applies machine learning on top of data collected from client drivers through the “Snapshot” mobile app.

What Does It All Mean?

First and foremost, the rise of insurtech indicates that the insurance industry is changing profoundly as it modernizes. The ability to analyze countless data points in mere seconds opens ways to assess and predict that humans simply cannot hope to accomplish. This does not mean that humans are no longer needed in the industry. Quite the contrary. People still possess higher-level thinking skills that machines are not equipped to gain. The capacity to factor in intangibles, to make judgment calls, to see and interpret what lies beyond the screen — these are human skills that will always be in demand.

See also: Key Challenges on AI, Machine Learning 

In this light, AI and machine learning applications should be leveraged to streamline and better inform the decisions that humans must make. When this happens, workers are freed to focus on the facets of their jobs that matter the most. In addition to benefits to workers, organizations experience multiples of improvement in cost savings by increased efficiency, accuracy and better predictions generally. Simultaneously, customer service and patient care improve by providing answers and resources tailored to their specific case in a fraction of the time.

Perhaps the most exciting impact of insurtech, however, will be the new business models that arise. The notion of how we administer care will change, as will the way we construct policies for individuals and companies. Essentially, what has never been possible before is suddenly on the table. The options may appear overwhelming or even threatening to the existing way of life, but AI and insurtech have arrived. The advancements that will occur over the next decade will be extraordinary for all constituents. Pay attention and embrace the innovation long needed in the insurance industry.