Customer satisfaction requires sending relevant communications, but how do you sort through what's relevant when you have multiple relationships with so many customers? A customer may carry health and disability insurance, as well as long-term care and life insurance coverage with a single insurance company. When it comes to producing documents, issues arise as to how to coordinate multiple, separate applications, systems and processes. In our uber-connected world, every customer expects organizations to have a single, unified view of their relationship that includes all their interactions. Unfortunately, that’s not what typically happens. Although companies most likely have a plethora of information on each customer, they often face a challenge when it comes to accessing that information to deliver more consistent communications. Technology issues include: incompatible legacy systems, non-integrated lines of business, dispersed customer information and uncoordinated delivery channels. Understanding whether your technology can take information from disparate systems and work from a single, coordinated platform to create more customer-centric content is important. Being able to take full advantage of software that allows for easy integration with existing systems, data and content sources is critical. See also: How Technology Breaks Down Silos   A first step is to have a system that can support multiple platforms, packages and legacy systems. In many companies, by contrast, communications are silos built around specialized business groups, back-end systems and processes and output types. Remember that it is not only critical to communicate relevant messages to your customer, it is also just as critical (if not more) to listen to what they are saying back to you. Implementing two-way communication means being ready to use all available and emerging communication channels—email, web, social and mobile—and being ready to capture the feedback that your customers give you across these channels. Every customer has preferences, and having the ability to capture and respond to them is the real value of omni-channel communication. Preferences can mean many things, from where to send information, to how customers want to see their documents, to paying attention to concerns they may have expressed. Knowing these preferences, and responding to them, allows each document output cycle to be more and more targeted, making the customer feel like you are having a compelling conversation, and providing one more avenue to a deeper relationship. The right use of your system can provide the foundation for strengthening relationships with your customers across all contact points—print, electronic and interactive. With the ability to access a whole view of the customer, companies can use mission-critical documents—like statements, bills, enrollment kits and correspondence—to cross-sell and up-sell additional products and services, and lines of business (LOBs) can reinforce brand identity and representation of the organization. See also: Touching Customers in the Insurtech Era   Customer communication management (CCM) technologies can be complex. Reaping the rewards and earning ROI on your investment requires the ability to operate and manage CCM effectively. Companies that have implemented a successful strategy for breaking down silos and seeing the entire customer journey have reaped the benefits of reduced cost and customer churn, stronger brand identity and delivering customer communications to a customer more willing to buy.

True, a great deal has been written about the importance of inculcating a positive risk culture if an organization is serious about managing its enterprise risk. Yet, when it comes to discussions about organizational culture, many executives’ eyes glaze over because the topic is too nebulous or because they have no idea how to influence or develop a particular type of culture. Underwriters, considering an application from a commercial customer, generally do not look too deeply into the company’s risk culture. Given that risk is growing in magnitude and variety and with increasing speed of onset, it behooves leaders to take concrete actions to establish a sound risk culture or to maintain one if it already exists. And underwriters should also be interested in the risk culture of accounts they write for the same reasons. Often, I am inspired to write about something because of some news I hear or read about. In this case, something on the law360 website caught my attention: A woman slipped and fell near a collapsed "wet floor" sign at a casino. This person, Ms. Sadowski, suffered serious injuries and was awarded $3 million by an Ohio jury. “The sign lay flat on the floor that day in September 2016, and a Jack Cincinnati Casino employee even walked around it but did not pick it up," Sadowski’s attorney, Matt Nakajima, said, according to the Cincinnati Enquirer. He said that, moments later, Sadowski tripped over it and broke one of her knee caps. There were no safety measures in place for floor inspections or fall prevention, he said, and the employee who walked around the collapsed sign was not reprimanded. So, despite the use of "wet floor" signs, other aspects of risk management were purportedly absent. It seems the jury believed Nakajima’s description. If the description is accurate, the part about an employee walking around a collapsed "wet floor" sign is very troubling, as is the fact that there were no consequences for the employee. These kinds of actions point to a lack of a risk aware culture at various levels. See also: Building a Risk Culture Is Simple–Really   So, how do leaders build a risk culture and how do underwriters probe to see what kind of risk culture exists in their prospective insureds’ organizations. Three Basic Steps to Build Risk Culture

• Articulate the organization’s position on managing risk at key communication junctures and through different media with employees: 1) hiring interview, 2) orientation, 3) staff meetings, 4) webcasts, newsletters, bulletin boards.
• Include a risk culture criterion in all performance reviews; e.g., does the employee perform duties safely and address or report hazards/risks when they are identified? Evaluate positively or negatively, as warranted. Celebrate exemplary cases of risk awareness or risk mitigation.
• Ensure that policies, procedures and work instructions all describe what is expected in terms of safety, precaution and risk reporting

Three Basic Data Points for Underwriters to Ascertain

• Does the organization have any losses in the loss history that show an egregious lack of risk awareness?
• Does the organization practice ERM or, at least, have policies around required safety measures, risk/hazard reporting, training on avoiding cyber and other risks, etc.?
• Does the organization discuss or evaluate risk awareness as part of normal performance management?

At a time when every insurer is streamlining the information it requests from potential insureds, adding more requests for data seems antithetical. However, in light of the thousands of ways that employees can create, increase or decrease risk in an organization, the culture they embrace is very important. For example, an HR staffer who delays inputting an employee termination to the appropriate systems can create huge data and physical security risks. Likewise, a factory worker who leaves equipment running while going on break, when it should be turned off, can create safety and property risk. Or, consider a finance employee who thinks a spoofed email is actually from the CEO and sends a payroll check to the hacker’s account because there was no secondary control or it was not adhered to. The questions above will help underwriters to get a glimpse of the risk culture at the company they are evaluating. See also: Thinking Differently: Building a Risk Culture   A risk aware culture plays a role regardless of the category of risk: financial, operational, legal, cyber, human resource, strategic, etc. Everyone from the top to the bottom of the organization needs to have an automatic and quickfire gut check regarding their actions – am I creating a risk by taking this action; have I recognized the risks in the situation that is leading me to action; do I need to vet a recognized risk with others? When an organization reaches the point where this type of thinking is natural, and almost universal, then it can be said that a positive risk culture has been embedded. Her latest book, "Enterprise Risk Management: Straight Talk for Nonprofits," can be found here.

As we wait to see what exactly happens because of the executive order that the Trump administration promises to use to cut drug prices in the U.S. (while keeping our fingers firmly crossed), let's spend a minute understanding just how dysfunctional the system for pharmaceuticals is.

If you want full-on fury, read this article, which likens Big Pharma to organized crime. But, even if you don't want to go nearly that far, it's hard to argue that the system isn't broken. 

Pramod John, probably the smartest person I know on the subject of drug prices, contends that the U.S. Food and Drug Administration focuses on safety but not enough on the effectiveness of pharmaceuticals.

And, once approval is secured, Big Pharma is free to do pretty much whatever it wants in terms of pricing. By law, Medicare has to cover every drug approved by the FDA at whatever price the drug companies want to charge. As this editorial in the New York Times notes, Medicaid likewise has to cover every approved drug; "the program receives an across-the-board discount from drug makers, but, as critics note, that discount has not kept pace with the changing drug market." Private insurers and the Department of Veterans Affairs can negotiate, but separately, diminishing their power to bargain with Big Pharma.

By contrast, Britain and Germany, among others, tie price to value: The government will only pay for new drugs if they represent a clear improvement over old drugs.  

The situation in the United States is made worse by a trend toward speedy approval for drugs. A system set up to fast track drugs that could help desperate patients has been turned on its head: Now, as the Wall Street Journal reported last week, at least 60% of drugs approved in the past five years have been handled on an expedited basis.

Increasingly, drugs don't have to demonstrate actual improvement in patients; the drugs just have to show progress on some interim measure. So, a drug company doesn't have to show that a cancer drug increases patients' lifespans or improves their quality of life, merely that, say, the drug shrinks tumors.

Improvement on interim measures, no matter how logical, often doesn't translate into benefits for patients—yet, if no safety problems are found, a drug finds its way into the market, often at a startling price. 

In short, oversight of the pharmaceutical industry has become ineffective and medicine has become wildly expensive. 

Let's hope we—the patients, insurance clients and taxpayers—get some relief. But it won't be easy, even if the coming executive order is everything that can be hoped. It's taken us decades to create the pharmaceutical mess; it'll take time for us to get out of it.

Cheers,

Paul Carroll
Editor-in-Chief

The disruption of the P&C insurance industry, touted by insurtechs and others, may not have hit full force, but outside forces will drive a tsunami of change. Technologies such as AI/machine learning and the Internet of Things are already prominent in insurer strategies and projects. The demographics of the insurance workforce are shifting and will drive many changes over the next decade. New technologies in the digital, connected world promise to change the risk landscape – in some cases dramatically reducing risk and in others introducing new ones. There is much experimentation with products today, addressing the sharing economy and on-demand, episodic and parametric types of coverages. The changes raise questions in many senior executives’ minds about the nature of the insurance business in the future. Will change really be dramatic, or is it overly hyped? How will it affect the lines and segments of an individual company? Lacking a crystal ball, it is very useful to employ a scenario planning approach, developing and evaluating several possible futures in the context of a specific insurer’s business. While some may view this as an academic, blue-sky exercise, it typically yields surprising insights that serve to inform short-term and mid-term strategies. See also: Insurance 2030: Utopia or Dystopia?   Naturally, initiatives should not occur in a vacuum. A realistic assessment of the current state of the company is a good starting point: the products, people, processes, technology and other dimensions of the existing model. The intent is not to scrap existing strategies and plans but to layer in new strategies over time that position for the future. Ultimately, every insurer needs to build and execute along its transformation journey or fine-tune and enhance journey plans based on new insights. What will insurance look like in 2030? We humans have proven to be bad at prediction. So, in an era of rapid change, successful companies will be those that create a culture and an infrastructure that is adaptable, enabling them to seize new opportunities as the world changes. See also: An AI Road Map to the Future of Insurance   For more information on scenario planning and the development of digital transformation plans for insurance, read the recent SMA research report, Insurance 2030: How Technology is Transforming the P&C Landscape.

The macroeconomic news has been largely positive for several years running, especially in the U.S. Record-low unemployment. Recent wage growth. Nearly a decade of steady — if slow — growth. So why do so many people feel uncertain about their financial lives? Why financial stress matters: the link to physical and mental health Financial stress may be the most damaging type of stress. According to the American Psychological Association, more than 60% of Americans suffer from financial stress, which has been linked to migraine headaches, cardiovascular disease, insomnia and other health problems. A National Institutes of Health study showed that people with more debt face greater risk of depression and high blood pressure. That’s a potential vicious circle; health events can cause financial problems that can further deteriorate our sense of financial well-being (through huge healthcare expenses, for example). The path forward to financial well-being It’s clear that the financial services industry — and insurers, in particular — have a role to play. It’s just as clear that previous efforts haven’t paid off fully, which means a new approach is necessary. Financial education has been around for years but hasn’t fundamentally changed behaviors. As important as financial literacy is, it’s not enough by itself to increase the general sense of financial well-being or move large numbers of consumers closer to their goals. Insurers — as well as retirement firms and wealth managers — should focus on a more integrated and holistic approach that addresses the components of financial well-being and that has a chance at changing behaviors. In this context, it is interesting to observe where fintechs and insurtechs are placing their bets. Many are focused on delivering digital tools that educate customers and help them take charge of particular challenges, such as asset allocation or saving for an emergency fund. See also: Why Financial Wellness Is Elusive   The question is, how do traditional players that are capable of providing solutions for many elements of financial well-being through their savings, investments and protection products develop an approach that takes a comprehensive view and actually helps change consumer behavior? Recommended actions: What insurers should do now With broad product offerings and large amounts of high-value data, insurance companies are well-positioned to help consumers achieve financial well-being. The question is, what strategic and tactical steps can they take today to begin engaging consumers more directly and broadly in terms of financial well-being?

• Develop a proprietary, multi-factor analytical model that determines financial well-being from the customer point of view, especially to the moments that matter in their lives. It’s not enough for insurers to understand what customers want — they must also know when and how they want it.
• Understand customers’ financial stressors and review existing portfolios and the new product pipeline for those that can specifically address these issues. Offerings that deliver “quick wins” (both for consumers and insurers) can advance the dialogue on financial well-being.
• Adopt “evolutionary” and “revolutionary” in designing new products and experiences — that is, evolve existing products through simplification and basic enhancements and innovate boldly with new product types (e.g., portable group policies) and embrace digital transformation to offer entirely new experiences.
• Develop digital tools based on artificial intelligence and other advanced technologies but surround them with a human element, such as real-time access to financial advisers or customer service agents via phone or live chat. This way, firms can have the right conversations with consumers in the right way at the right time.
• Develop a platform strategy, recognizing that platforms designed to promote financial well-being may need to incorporate multiple external parties, including other financial services providers. Scalable platforms should reduce the cost to serve, support evolving technology sophistication and enhance customer experiences.
• Develop an integrated brand and marketing strategy to effectively communicate and drive demand. Consumers must come to understand that insurers want to help them live richer, less stressful lives, rather than simply selling policies to protect against losses and other unfortunate events.
• Design and build the necessary technology architecture, which likely requires digitizing legacy systems so next-generation tools and apps can be deployed. Most insurers today face serious legacy system constraints in at least some channels or lines of business. These constraints must be removed if insurers are to meet customer expectations for seamless and personalized experiences across channels.
• Orient all touch points around trust and transparency. It’s not enough to simply secure channels, assets and data to be compliant. To build trust, insurers must also share information transparently (like digital leaders in other sectors) and deliver high-quality, personalized experiences.

This article is adapted from a report that can be downloaded here.

I just read this article, which includes this: “According to an Accenture study, only 27% of consumers consider insurers to be trustworthy. And Deloitte found that only 11% of people have strong trust in insurance agents and brokers.” I’ve seen studies like this over the years. What is usually missing from these statistics is the Q&A related to the insurer or agent OF the consumer. If you ask consumers if THEIR insurance agent is trustworthy, the numbers are almost always WAY higher than those above. The same is often true of politicians…when the question just refers to “politicians,” polls imply that they are universally despised, But ask people what they think of a politician they voted for and the statistics are completely different. As has been said, “Torture numbers, and they’ll confess to anything.” The driving force behind insurance policy evolution is litigation and regulation where the difference in coverage, according to the courts, can be the tense of a verb or a punctuation mark. See also: Insurtech and the Law of Large Numbers   Berkshire just came out with a policy called “THREE” that combines property, business income, general liability, auto, professional liability, workers' compensation and cyber liability (I’m probably forgetting something) insurance…IN THREE PAGES. And it’s going to be clear to business owners what is or isn’t covered? Inarguably, the most important “customer experience” is the one that takes place at claim time. Insurance policies are complex, legal contracts whose terms and conditions have often been interpreted over decades. And the reality is that virtually no consumers read them…. Far too many insurance practitioners don’t even read them. I doubt that reducing dozens of pages to two to three pages will change that metric. When it comes to making contracts understandable, less is not necessarily more. By the way, there is no such thing as “fine print” in regulated insurance policies.

As the insurance industry has grappled with creating meaningful touch points with our customers, a few interesting  models have emerged, such as Amica Life with Cardiogram or John Hancock with Vitality. A few insurtechs, such as Life.io, have emerged as leaders focused on customer engagement. Life.io has reduced lapse rates as much as 35% through carriers deploying its engagement platform and using wearables to encourage healthy living through gamification and rewards. These examples show that, as much as the focus has been on an engaging experience for the customer, work has to be done on the back end, too, to address some age-old problems. The customer engagement in life insurance was long limited to paper and the call center. We printed policies. We printed statements. We printed bills. There was little to no engagement with customers after a policy was sold except for an occasional phone call if they had service issues or needs. The industry has been constricted by its adage that no one buys life insurance; it is sold, not bought. The life insurance industry has even been conflicted about who its real customer is. The carriers considered distributors to be their customers, and the distributor has usually owned the end customer relationship. See also: Self-Service Portals Improve CX   Shifting customer demands usher in an era of change Today, all those old truisms have to go away. Customers want self-service capabilities. They want to begin their research online, seek views through their social networks and get feedback from their peers. There's a shift happening from, "I spoke to my Dad, and he introduced me to his financial adviser," to, "I'm talking to my social network, and I intend to buy online.” So, people do buy term life products without a financial adviser. While current distribution channels won't go away soon, direct-to-consumer is an emerging channel, especially for products that are simpler and have modest face amount and that cater to the millennials and to mid-market consumers. Meanwhile, carriers seek to own the relationship with the end customer. Digital takes hold And insurance companies or even financial services companies are no longer viewed in isolation; the industry is benchmarked against other enterprises by the digital age consumer. Social media companies, the Googles and the Amazons of the world, or the latest app used by consumer have the opportunity to become the benchmark. Consumers are comparing insurance carriers against the best of breed out there and demanding, "Why are you not as good?” See also: A Game Changer for Digital Innovation   Ultimately, much of the struggle comes back to the antiquated back-end architectures. Customer experience is not just about the front-end presentation – we as an industry need to solve the problem of the back-end enabling architecture, as that becomes critical in enabling this digital experience. By having a modernized back-end that can plug in APIs and expose those capabilities into the presentation and experience layer, you can create an engagement model that makes consumers want to work with you and be loyal to your brand. Through breaking down the customer journey, prioritizing pain points and redesigning those journeys to focus on what matters most for the policyholders, carriers can differentiate themselves as a customer-centric business.

Spin the wheel to land on any insurance carrier’s website. Did you land on Allianz, USAA, MetLife, Radian, Traveler’s, State Farm, Protective Insurance or American Family? Do you notice anything familiar? Perhaps it’s images of smiling people, like you and me, living their lives, connecting with each other or being a family. In business today, leading organizations, from insurance, healthcare and finance to mobile and technology companies, find themselves centered on a common theme of enhancing customer experience (known as CX). It’s about relating to other people and finding commonalities in a world that is rapidly becoming disconnected. Human emotions and the desire to connect are driving business around the world to change their focus to consumers. According to Harvard Business Review, “On a lifetime value basis, emotionally connected customers are more than twice as valuable as highly satisfied customers.... Companies deploying emotional-connection-based strategies and metrics to design, prioritize and measure the customer experience find that increasing customers’ emotional connection drives significant improvements in financial outcomes.” People are attracted to other people – it’s human nature. Yet today, much of our connections and information are driven by technology, data, the internet and mobile phones. How do we bridge this dichotomy? We use technology to connect with other people. Insurance companies can serve as a prime example of an industry that’s being pushed to incorporate technology and data to make those human connections. Imagery can change people's perceptions of a service or product. Common sense? Definitely. But the next logical question is, how do companies deliver on these promises and demands of connecting. Consumers and businesses – and not just millennials – want products and services quickly, if not immediately. Behind the scenes, innovation departments, data scientists, IT departments and line of business leaders are exploring automation technology from robots (digital workers), business processes, workflow, customer support teams, engineering and other departments that can work smarter and faster. See also: 3 Ways to Optimize Customer Experience   Let’s look at some examples where insurance companies are improving and automating business processes. Claims processing is a department that deals with a high volume of documents, forms, packets and images. Leading insurance companies with fast response times are using intelligent technology that uses AI and machine learning. They have eradicated manual processes that slow them, namely a combination of physical paper and electronic documents, such as emails and PDFs that are not in a structured format. They use tools that automatically capture the data from claim files, can recognize different types of forms and files, categorize them and export that data into another intelligent system, such as an automated workflow or claims processing software. I work with insurance companies all over the world who are pressing forward with digital transformation projects and are incorporating these type of automation processes. The results that insurance customers report back to us demonstrate the ability to expedite millions of documents and claims per year, decrease document preparation efforts by 50% and indexing by 75%, reduce fraud and cut improper payments by about 2%, resulting in positive ROI within six months. The human touch is removed from these mundane, time-consuming processes, enabling insurance companies to respond to claimants or billing-related questions faster. This is improved CX, which customers don’t see, but where they reap the benefits and remain loyal. It’s the start of making the emotional connection that we all want. Now, insurance companies’ customers can relate to those happy, smiling faces they see on insurance websites. For insurance companies, the data around CX should be top of mind. Bain & Co. surveyed close to 30,000 P&C customers and found that highly loyal insurance clients: retain at 97%, buy 25% more insurance, consolidate almost 90% of their insurance with one provider and refer 250% more than neutral clients. Bain found that loyal clients deliver 300% more lifetime value than neutral clients and 700% more value than low-loyalty clients. See also: Bold Prediction on Customer Experience   These numbers alone should support the move to relate to your fellow humans. And, the funny thing is, it starts with uncovering and optimizing your data. Digital transformation and automation will lead you to CX and the first start of emotional intelligence.

Customer retention is a must for any successful business in our competitive, global economic climate. Estimations vary based on individual studies and industries, but, according to this article on the value of keeping the right costumers, it can cost from five to 25 times more to find a new customer than to retain an existing one. Wherever the true number sits, it stands to reason that it’s easier to build on existing relationships with people who already have brand loyalty than it is to recruit and retain new customers. Otherwise, you need to go through the marketing, reduced introductory rates and manpower to set up new accounts and forge new customer relationships. For businesses that are serious about their success, one way to boost customer retention is to invest in translation. The U.S. is a great example. Increasing numbers of people in the U.S. speak languages other than English, making it more important than ever that brands connect with them in the right way. Why Translation Matters: Languages Spoken in the U.S., by the Numbers The U.S. has become increasingly bilingual. Spanish had over 37 million speakers as of 2013 based on this census on Spanish speakers, ranking it as the most spoken non-English language, according to the Pew Research Center. That number is projected to go up to around 40 million Spanish speakers through 2020, up from 11 million in 1980. That’s 233% growth from 1980 to 2013. Clearly, the need for translation services won’t be fading anytime soon. The U.S. Census Bureau listed a breakdown of languages spoken in the U.S. between 2009 and 2013, with about 231 million people speaking English only at home, while about 60 million people over that period spoke a language other than English at home. Some of the top languages besides Spanish included Chinese, French, Vietnamese, Korean and Tagalog, all boasting over one million speakers in the U.S. This diversity of languages has major implications for business document translation and how that can affect customer retention. See also: The 3 Ways to Customer Retention   These numbers show that there are vast numbers of customers who would feel more comfortable if a business could speak to them in their language, rather than in English. In fact, having a business accommodate language translation needs can mean higher sales and greater customer retention. How Translation Can Help Keep Customers An international survey titled "Can’t Read, Won’t Buy: Why Language Matters on Global Websites," done by Donald A. DePalma, Benjamin B. Sargent and Renato S. Beninatto, shows the impact of language in a buyer’s decision: The more information is available in the buyer’s own language, the higher the probability that it would be a factor in their decision making. Although there is a percentage of consumers that will buy global brands without any information available in their language, smaller brands that are just making their name in the market are more affected by language. In the long run, localization and translation efforts go a long way to help your costumers understand the perks of your products and services. All of that makes sense. Why would you be willing to buy something if you can’t understand the product information very well? This is especially true in the insurance industry, where customers need to understand complex rate and coverage structures. Easy Ways to Implement Translation Translation need not be difficult. If you’d like to boost customer retention, you can start by simply translating a few forms and letters. For instance, you could have a professional translator convert background forms, health surveys, letters informing people that you are reviewing their information or outlines of benefits. A little investment like that could go a long way toward helping customers know that you are willing to meet them on their own terms. You might also consider having a website translation that offers information in multiple languages. Results from a 2011 Eurobarometer survey (conducted on behalf of the European Commission) show what you lose out on if you don't:

• 44% of European internet users feel they are missing interesting information because websites are not in a language they understand.
• Just 18% of people search for or buy products online in a foreign language frequently or all the time, with 38% reporting that they do so occasionally and 42% saying that they never do so.

It might be worth having a professional translation of your company’s website completed, so that the site can be read by the widest variety of customers possible. You might also consider having a translation done for marketing materials such as brochures and fliers and even social media messages. That way, you can market additional services to your existing customers who speak other languages in ways that they can easily understand and that will support their longer-term engagement with your brand. See also: ROI Study on Customer Experience   Whether you want to simply translate a few documents to show customers that you care or undergo a full informational product translation project, doing so can aid customer retention. The numbers show that people who feel that a company helps them understand a product or service in their own language are more likely to do business with that company.

Working on a book project, I’ve done some digging into the history of X Prizes and Grand Challenges and found raging successes. I think the world of insurance and risk management should consider offering some rewards to tackle seemingly intractable problems, and I have some thoughts on where to start.

Prizes for breakthroughs can be traced back at least to 1567, when King Philip II of Spain posted the first of many prizes that governments offered to anyone who could accurately determine longitude at sea. The prizes weren’t collected for some two centuries, and it wasn’t until the mid-1800s that the longitude problem was fully solved, but the prizes still focused the attention of many of the world’s leading scientists and drove steady progress for a long time.

Progress came much faster when a New York hotel owner offered $25,000 in 1919 to the first person who flew from New York to Paris or vice versa. One team alone committed $100,000 for a prize a quarter that size. Then Charles Lindbergh succeeded in May 1927 and helped usher in the era of long-distance flights.

The DARPA Grand Challenges for autonomous vehicles were even more successful; while the race among pilots was already on in the 1910s and ‘20s, the AV prizes came at a time when the prospects for driverless vehicles weren’t at all clear. The prizes not only led to technology breakthroughs but created a community that has fostered the work ever since.

The first competition, for a $1 million prize in March 2004, went almost literally nowhere. None of the 15 autonomous vehicles made it even eight miles into a 142-course. More than half the cars failed within sight of the starting line. A motorcycle (yes, someone entered a motorcycle) fell over after just a few feet. Many vehicles crashed or caught fire. But the seed had been planted.

DARPA (an arm of the Department of Defense known for driving innovation, including the founding of the internet) sponsored a second, $2 million Grand Challenge 18 months later. This time, a whopping 195 teams entered; five (including an updated version of the motorcycle) finished the 132-mile course. DARPA then posted a $2 million Urban Challenge in 2007, and six of 11 entrants completed the complicated course in a simulated city environment. AV technology was real, and it worked even in cities.

For a grand total of $4 million in prizes, DARPA unleashed a torrent of private investment and innovation. The Brookings Institution counted $80 billion—yes, “billion,” with a “b”—of investment in autonomous technology between 2014 and 2017. That’s just the investments announced publicly and of course doesn’t count the prior investments or the money that has flooded into the field since 2017. The private investment has us well down the road, if you will, to full autonomy and in the meantime has spun off all sorts of “driver assist” technologies that are making cars safer. (Now, if drivers would just get off their stinking phones.)

Many industries are sponsoring prizes that have led to breakthroughs related to health, more sustainable food supplies and access to fresh water. Last year, for example, the Skysource/Skywater Alliance won a $1.5 million prize for developing a generator that can pull more than 2,000 liters of water a day out of the air in any climate, using renewable energy and costing less than two cents per liter. How cool is that?

So, what sort of challenges would merit a prize in insurance and risk management?

For my money (though, no, this won’t be my money), the goals have to be fundamental, so important and audacious that they will intrigue great minds. The challenges also should be issues that aren’t already being solved by market forces and that won’t be soon, unless attention is focused on the problems.

Perhaps we can start by thinking about hurricanes, as long as we’re in the season. While there isn’t a lot to be done to protect property from the devastating winds and from the sort of long-term flooding that sometimes occurs, an awful lot of damage is done by water, quite quickly, through wind-driven rain and wind-driven surge. What if there were some way to quickly seal a property off from that wind-driven water, so owners could take action in the day or two before the hurricane hit and could provide protection long enough for the storm to pass? I’m thinking of something equivalent to fire retardant that could be sprayed around or on a house as a wildfire approached, and a hurricane generally comes with more warning. The market for such a sealing product or service is diffuse enough that I’m not sure the market is headed there any time soon, but wouldn’t it be worth some sort of a prize by insurers, knowing how much damage they could prevent?

I’m sure there are much better ideas for Grand Challenges out there – so please share them. If some alliance competing for a $1.5 million prize can pull hundreds of gallons of water a day out of thin air, just think of what progress prizes could produce for insurers and for risk management.

Cheers,

Paul Carroll
Editor-in-Chief