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

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

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

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

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

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

See also: Insurtech: Revolution, Evolution or Hype?  

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

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

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

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

See also: 8 Key Insurtech Trends for 2019  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

I suggest we demand change.

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

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

I know how I vote.

Have a great week.

Paul Carroll
Editor-in-Chief

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

The continued decline of standalone long-term care policies seems inevitable, and the life insurance gap among Americans continues to widen. Hybrid policies offer a joint solution that with the right approach can turn these two challenges into a new market. Recent months have seen a steady drip of bad news from life insurers, as firms have had to boost their reserves to the tune of billions in an expectation of soaring payouts for long-term care policies. October's update from Unum followed Prudential's in August, and by the time this is published more will likely have followed. While troubling, the news simply confirms something that has been fairly obvious for some time: The old long-term care market – once so popular as a means of funding assistied living, nursing home and home care services – is now more of a headache than an opportunity. Insurers are now having to significantly review assumptions made long ago when the first such policies were written, during a period when life expectancies were shorter and health expenses lower. To say the equation has shifted would be an understatement -- healthcare costs for assisted living have almost doubled over the last 15 years, while one in two Americans now suffers from chronic illness. The accompanying increased premiums have decimated the market. Many insurers have withdrawn from the line altogether, and those that remain are having to be increasingly restrictive with their policies. See also: Insurtech: Mo’ Premiums, Mo’ Losses   Axing an entire revenue stream, however -- especially one that was once so lucrative -- is risky in a situation where demand is clearly not the problem. The need for long-term care is going nowhere. And getting on the front foot with a new approach would be advantageous should a new solution cause an emptying marketplace to fill back up. Hybrid policies are designed to make long-term care insurance profitable again, and they do so by simultaneously offering a new solution to another difficult problem -- the decline in the life insurance market. The number of Americans holding life insurance has fallen steadily for years. The number of Americans holding life insurance has been falling steadily for decades and is now at a record low, with about half of U.S. households going without. Hybrid policies work by combining the two types of coverage – life insurance and long-term care – and allow for payouts based on accelerated or early payments of a death benefit. Importantly, the combination also allows insurers to stabilize the risk profile of the product and provide a sustainable means of growing both the top and bottom line. Despite some initial skepticism based on previous miscalculations that are now coming home to roost, insurers are starting to warm to the new approach, and upward of 260,000 hybrid policies were sold last year. As well as potentially re-opening the long-term care market, the policies could simultaneously help insurers reverse the downward trend in life insurance. Evidence suggests that one of the main barriers for uptake of life insurance among today’s customers is the lack of flexibility and control associated with traditional products. By addressing this, hybrid policies promise to turn two problems into a new and untapped market for insurers. See also: What’s Next for Life Insurance Industry?   However, the skepticism isn't without cause. As the headlines are reminding us, the consequences of incorrect assumptions and miscalculation can be drastic and long-lasting. If the long-term care market is to enjoy a hybrid revival and avoid the mistakes of history, carriers will need to ensure that the design is right. Given the nascent stage of the new product, this requires a specific set of underwriting skills, a granular understanding of the pricing and risk modeling involved, a deep expertise in mortality rates and new reinsurance structures to support risk transfer. For those that can get it right, though, the rewards will be significant.

“Fast and now” is what best describes the current insurance market. The internet has single-handedly changed how customers, distributors and even home office employees expect instant gratification in day-to-day insurance transactions. Couple that with increasing market pressures to maximize profit and lower cost, commoditization of products and the ever-increasing speed of business, it is only natural that distribution has emerged as a leading topic among executives at all carriers. Now is the time to modernize distribution. First, let us begin with understanding the structural drivers that have disrupted or can very quickly disrupt current distribution models: Customer Needs Changing customer demographics, expectations and needs have left insurers in a discombobulated state, with unclear strategies to optimize distribution channels, product mix and areas of investments. On one hand, customers today seek holistic financial and health wellbeing advice through a multitude of channels based on demographic and affluence levels. On the other, insurers are constraining distributors with standardized product offerings that make it hard for them to appease customer needs for flexibility and personalization. Customer journeys now start online for almost every purchase--including financial products--and, unlike in other industries, most end with an in-person interaction based on product complexity. This presents an opportunity to improve customer experience, intimacy, and fulfill the customer need using the distribution channel. However, slower product release cycles compound this problem and often leave distributors in a jarred state between cross-selling, up-selling or unfavorably switching carriers. Key events in a customer’s lifecycle--while slower in the P&C space--are much more frequent in the Life and Investments space, and customers are asking for short-term rewards against long term benefits. Carriers betting on closing technology gaps to increase customer intimacy are not moving fast enough, leaving the distributor with an “after-the-fact” and reactive (versus proactive and predictive) interaction. All these drivers continue to impact customer satisfaction and perceived experience, and widen the gap between the customers and distributors, overall slowing industry growth and profit realization. Distributor Dilemma A shrinking agent force is perhaps one of the biggest causes of concern for carriers who are heavily intermediated. Lack of succession planning, an older generation of producers coming close to retirement, reduced interest from newer generations to work as distributors, and changing customer behaviors have led to the consolidation of smaller distributors by bigger brokers and wholesalers. This has inadvertently reduced shelf space for carriers and increased pressure on competitive differentiation for product and price. The once-preferred captive channel is becoming cost-prohibitive to maintain as there is a stronger pull to invest in cross-distribution capabilities such as digital and direct. Technology constraints prevent carriers from expediting underwriting or even offering flexibility in product mix or incentive plan design: all necessary drivers to close the sale. See also: How to Use AI, Starting With Distribution On top of these impediments, the regulatory landscape is changing. While the recent fiduciary ruling from the DoL benefits customers with increased transparency, it increases pressure on fees, which impacts compensation plans and the need to introduce “advisement fees”. This also impacts the traditional advisory model and distributors must quickly adapt sales processes and carrier relationships to increase or maintain customer engagement as distribution moves from “best-suited” to “best-interest”. To combat these drivers, carriers have invested in shared service models and centers to allow producers to focus on tasks of higher value, implemented wrappers on legacy systems to provide agility in commissions processing and invested in process automation to increase operational efficiency. However, these disparate efforts do little, even as a whole, to increase the overall value for distributors or help solve for the holy grail of differentiated experience. Despite these factors, there is immense opportunity to improve distribution capabilities and, with the implementation of a new distribution management system, streamlining downstream systems and processes is not as daunting a task as it may otherwise seem. The Transformation Journey The pace of change in distribution prompts carriers to look at solving for issues and opportunities with technology, tooling, and platforms. However, it goes beyond just finding the right distribution platform that solves the table stakes business need of managing distributors effectively, processing compensation accurately, and providing a digital portal to improve the producer experience. There are four phases to this transformative journey, and it begins with defining the distribution and compensation management strategy to discover and understand the biggest roadblocks across people, process and technology. With the vision defined, it is time for a (b) mobilization or inception phase where business leads select a vendor platform, define the product features for their future state, all of which is supported by (c) the design of an operating model that can scale and flex to meet growing needs of the business with services and processes to deliver that elusive differentiated producer experience. Finally, the vision and future state is realized by (d) implementing the platform and the supporting operating model. While each carrier’s current and future state needs are unique, there are common opportunities (that often turn into roadblocks if not adequately planned for prior to implementation) to truly think outside of the box and deliver a transformed--not merely updated--distribution experience: Recruitment, Contracting and Onboarding: The producer’s first touchpoint with a carrier provides an opportunity to make a great first impression. The onboarding process itself must be streamlined and shortened with the highest degree of automation and self-service that lets producers drive the process on their own. There are also opportunities for carriers to provide “white-glove” services to larger distributors for mass-onboarding, or assisted onboarding for new first-time producers. Modern distribution platforms provide a digital, automated experience that can be configured to meet the carrier’s needs for a great first impression and, with a clear channel strategy, can greatly contribute to positive and sticky producer experiences. Producer Management: This area tests a carrier’s operational efficiency in managing high frequency events--ongoing hierarchy management, broker of record changes, licensing and appointment requests, to name a few--where any delay prevents producers from placing business or worse, increases a carrier’s risk of non-compliance. A clear definition of services associated with licensing and appointments as part of the operating model strategy, combined with the flexibility of modern rules-based appointment processing, alleviates significant bottlenecks and always keeps producers compliant and ready to sell with just-in-time appointing, automated backdating of appointments based on policy effectivity, or even self-delegated hierarchy management for larger distributors. Compensation Management: Perhaps the biggest area driving producer experience, trust, and satisfaction is compensation management. Producers work hard to earn the business and expect flexibility in plan design, accurate and timely commissions payouts, and incentives. Unfortunately, this area also drives the greatest amount of operational inefficiencies and producer requests or complaints due to legacy systems and processes. Modern platforms provide business-user friendly rules engines that allow for easy design of compensation plans on-the-fly, incentive options such as event or role-based advancing, bonuses, variable-interest loans, campaign management, vesting rules management, retroactive adjustments, splits between producers and producer debt management across channels, companies or even hierarchies. As part the transformation journey, compensation is where carriers must carefully assess, design, and deliver features to ensure minimal disruption to producers for business-as-usual activities while extracting the maximum business value from the transformation. See also: The Future of P&C Distribution   As insurance carriers migrate from legacy platforms to flexible, modern distribution management and compensation solutions, the art of the possible becomes infinite. No longer will rigid, crippling legacy systems and manual workarounds hinder a carrier’s ability to flexibly design new compensation plans, roll out new products, perform advanced analytical exercises on consolidated data, or digitize the field’s experience. What previously required heroic IT efforts will become business-as-usual, thus upping the ante for carriers who are beginning to consider implementing a modern distribution management and compensation solution. In sum, distribution and compensation have quickly moved from traditional back-office functions to prioritized elements of the value chain, primarily due to the impact producer experience can have on a carrier’s production. Such organic conditions provide the perfect ecosystem to undertake the distribution and compensation transformation journey with the aim of increasing distributor production, capturing savings from operational efficiency gains, and establishing an operating model that scales with business growth. Changing the perception that distribution and compensation functions are no longer menial back office functions, but instead, the carrier’s greatest opportunity to attract and retain distributors--and thus, customers--will help business leaders prioritize this initiative at an enterprise level. After all, it starts with carriers empowering their producers so customers can get products or services “Fast and Now.”

I love to celebrate the New Year. I’m energized by the opportunity to pause at the end of the year, reflect on my accomplishments over the past 365 days and think about what I hope to accomplish in the year ahead. My annual rumination centers on two questions: What have I done that is working for my clients and me? And what can I do differently to achieve better results personally and professionally? Turns out I’m not alone. I have found myself in many conversations with early-career insurance professionals who are pondering the same questions. I also have found that, for those new to our industry, coming up with useful answers to these questions is difficult. So, in keeping with the hopeful spirit of a new year, here are four tips for new insurance professionals (and even seasoned ones) to improve their client relations in 2019: 1. Understand your strengths and set goals for the skills you wish to improve. When I started out in my career, I was intimidated often by what the people across the table knew. Could I answer their questions? Did I understand their questions? Could I make a meaningful contribution? What helped me advance was to understand that, while I might not have the technical knowledge of more senior colleagues, I could still offer a number of strengths that could differentiate me from others. I was good at asking the right questions, at reading people’s body language and the overall tone of the room and at capturing meeting takeaways and following up on them quickly. See also: Restoring the Agent-Client Relationship   I soon realized that we all come to the table with strengths and with areas to improve. Even the most seasoned professionals can identify skills of theirs that they need to sharpen. For those new to the industry, begin building your professional brand based on the transferrable skills that set you apart. Set measurable goals for the personal and technical skills that you would like to enhance in 2019. 2. Evaluate current relationships. Over the past several weeks, my team and I spent many hours evaluating the client relationships that we have built, maintained and grown throughout 2018. Who are our closest clients? Who should we spend more time with this year? Who should I help my colleagues build better relationships with? Now that I understand the landscape of our current client relationships more clearly, I can reflect upon how purposeful the relationships are to me and if the clients will be long-term partners. If I believe a relationship has the potential to grow, the real challenge is dedicating the time and attention to carry the relationship to the next step, while identifying the relationships that may be stagnant or not worth pursuing. 3. Be mindful and deliberate with your time. Time is a limited commodity, and every client does not deserve an equal share of it. If you are spending a lot of time fostering a relationship with a person or organization that is not reciprocating the effort or that has not turned into an actionable business partnership, it may be worth re-evaluating whether you could use this time better elsewhere. See also: 5 Ways to Enhance Client Engagement   4. Repeat, repeat, repeat. Even if you have mastered the art of client relations and all your relationships are in good standing, your work is not necessarily finished. If anything, this success is an opportune moment to reflect – again – and evaluate the approach you used to build these strong relationships, and potentially apply it to other relationships that may need more work.

2018 was a breakout year for insurtech companies, as the insurance industry has been long overdue for innovation and disruption. The year attracted both talent and funding to the industry. FT Partners Research announced insurtech’s quarterly financing volume for Q3 2018 totaled $1.2 billion, which is up from $749 Million in Q2 2018. The excitement increasingly surrounding insurtech indicates that 2019 promises to be an even more meaningful and game-changing time for the insurtech space. Here are three insurtech trends you should keep an eye out for in 2019 and beyond: Sophisticated Analytics Any successful insurtech startup is not only passionate about transforming the current insurance model to be more cost-effective and automated but is invested in exploring the role that data analytics plays at the core of this process. Intelligent and productive data aggregation, integration and analysis are crucial in achieving this. When it comes to data analytics, the insurance industry’s antiquated business model has much room for improvement. Insurtech is modernizing insurance as we know it by implementing advanced big data analytics to optimize insurance products and services. And investors are taking notice. Significant investments are being made in data analytics and modeling techniques to improve nearly every part of the business. By embracing data analytics, your business can gain a competitive advantage by finding “new revenue opportunities, enhancing customer service, delivering more effective marketing and improving operational efficiency.” Over time, this rise in digital innovation is sure to bring significant opportunities for a more efficient, competitive and sustainable progress for insurtech as a whole. See also: 10 Insurtech Trends at the Crossroads   Transparency The vast and complex insurance industry has long awaited simplification. Insurers’ underwriting models have historically been a black box for consumers. Easy comparisons of complex data have been reserved for the experts. Transparency is critical to earning the trust of customers, especially in this digital age. People are now accustomed to online shopping, and they want procuring insurance plans to be less complicated -- similar to shopping for and purchasing other high-ticket items such as homes and financial products. Consumers desire that their pricing and product information not only be transparent but comparable as “apples to apples” so they can make smarter choices. Users can access online marketplaces to compare prices and benefits of different plans side-by-side. Partnerships between carriers and innovators There is a deepening need for laser-focused investments and partnerships between carriers and innovators as insurtech has now matured into an everyday business. Insurance executive and insurtech dealmaker Stephen Goldstein argues that “the team is what is ultimately going to make an insurtech initiative a success,” meaning that incumbents and insurance leaders executing partnerships with insurtech companies are part of the recipe that is going to provide a positive ROI and make insurtech as an industry thrive. While 2018 was a year of exploring and experimentation for insurtech, 2019 will be the year of engaging and deepening those relationships. At the start of 2018, insurance professionals predicted that the number of partnerships and collaborations between carriers and innovators would only gather momentum over the next year. And in June 2018, the Digital Insurer reported that partnerships remained a priority where insurtech was concerned. Insurtech companies are actively enabling new technologies that are used to provide increased efficiency and the ability to execute new tasks and analyses. These technologies are changing the industry on a fundamental level, all the while causing more incumbents to adopt these capabilities through investments or partnerships to compete effectively. The possibilities alone suggest that there will be expected growth in partnerships throughout the end of 2018 and well into 2019. See also: Insurtech: Revolution, Evolution or Hype?   Conclusion 2018 proved to be a massive year for insurtech, with a dramatic increase in funding from Q2 2018 to Q3 2018. There has been demand for skillfully acquired and implemented analytics, transparent experiences for consumers and mutually beneficial partnerships. All three trends are being successfully observed in 2018 and are believed to gather more momentum to lead us into 2019 and later.