Last time, we discussed some of the potential benefits of AI in commercial insurance. Now, let's talk making the business case. Many insurers are hesitant to invest in AI without proof that these theoretically smart systems will yield real-world returns. A mature AI vendor will have the foresight to develop a team within its organization that’s dedicated to value analytics. This team — made up of data scientists and actuarial experts — will use the company’s own AI solution to run a simulation that can quantify potential savings that the solution could provide. This capability is crucial, as insurers don’t want to wait three or four years to realize a return. The value analytics team will take an insurer’s historical data and run the simulation. It might conclude that if the insurer had implemented this AI solution two years ago, it could have saved a certain amount — such as 5% to 10% — on claims costs. This percentage of savings might be based on a specific action, such as moving injured workers from low-ranked providers to high-ranked providers — or doing the same for attorneys. Or, the savings might encompass claims that could have avoided certain scenarios, such as surgery or litigation. See also: 4 AI Payoffs in Commercial Insurance   Once the AI solution is deployed against live data, the models continue to run every month (or quarter) based on a pre-defined set of performance metrics. Every month (or quarter), the calculations become more accurate, moving from a rough estimate to a tighter range and eventually to a precise calculation of savings achieved. Traditional models were challenged by the fact that claims are long-term transactions that can take as much as 18 to 24 months to close, but AI — with its machine learning — is able to handle this complexity with a high degree of accuracy. A Holistic Approach, Not a Silver Bullet In folklore, it’s the silver bullet that kills the wolf. This bullet has come to signify a simple solution that magically resolves an insurmountable problem. However, an important part of making AI real is understanding that, while it is powerful, it’s no silver bullet. At the end of the day, AI is most effective when it’s part of a holistic approach. All the pieces of the puzzle must be put in place. At a high level, these pieces include the AI technology itself, operational tweaks and metrics to gauge results. Impact follows when all these components work in harmony. When these conditions are there, we’ll begin to see the needle move on costs and outcomes. For example, insurers can use AI insights to create more efficient workflows; they can facilitate more effective hiring and training practices that enable human resources to apply their expertise at precisely the right moment in the claims process. It’s iterative, with machine learning driving change in a continuous cycle. See also: New Era of Commercial Insurance  Although immediate savings can be achieved, an enduring competitive advantage can only be realized when the application of AI is seen as a journey. It requires continuing effort and investment. Strategic players understand it can take a few years of making improvements to truly redefine their cost structure, customer experience and position in the market. The organizations that start early on the AI path with an iterative mindset will be well-equipped. We’re looking forward to an exciting decade ahead. As first published in Digital Insurance.

In the complex, diverse insurance industry, it can be hard to reconcile theory and practice. Adapting to new processes, systems, and strategies is always challenging. However, with the arrival of new opportunities, cultural transformation will go more smoothly. Insurance companies that are considering how to plug into the insurtech landscape should understand the various models within the innovation ecosystem. Carriers have to weigh their options carefully before choosing between incubators and accelerators, or venture capital and partnerships, when creating their best internal and external teams. The key elements disrupting the insurance industry include the Internet of Things (IoT), wearables, big data, artificial intelligence and on-demand insurance. Although well-established business models, processes and organizations are being forced to adapt, insurtech can be more collaborative than disruptive. It is no secret that the insurance industry is responding to changing market dynamics such as new regulations, legislation and technology. With digital transformation, there are numerous ways technology can improve and streamline current insurance processes. See also: Rise of the Machines in Insurance   Cognitive Computing Cognitive computing, a subset of AI, mimics human intelligence. It can be deployed to radically streamline industry processes. According to the 2016 IBM Institute for Business Value survey, 90% of insurance executives believe that cognitive technologies will have an impact on their revenue models. The ability of cognitive technologies to handle both structured and unstructured data in new ways will foster advanced models of business operations and processes. Insurance carriers can use this technology for improved customer self-service, call-center assistance, underwriting, claims management and regulatory compliance. Big Data Unstructured data is rapidly growing every day. For instance, wearables can provide insurance companies with massive amounts of data that can yield insights about their markets. Social media also produces a flood of data. To harvest this data intelligently, insurers need to adopt the right analytical solutions to analyze, clean and verify data to customize their offerings according to their clients’ individual needs. Predictive analytics evaluates the trends found in big data to determine risk, set premiums, quote individual and group insurance policies and target key markets more accurately. Linking the Two Insurance organizations may have more data than they realize or know what to do with. Existing data is coming in from different core systems, and new data is being captured with IoT devices like wearables and sensors. Cognitive computing is the link to organizing and optimizing this data for use. See also: Strategies to Master Massively Big Data   Whether it is used to predict risk and determine premiums, flag fraudulent claims or identify what products a customer is likely to buy, cognitive computing is the way to ensure these goals are achieved. Sorting these trends among reams of data makes them more manageable and ensures that a business’s IT objectives link back to business strategies. Over the years, systems will evolve through learning processes to a level of intelligence that can adequately support more complex business functions. Schedule a meeting with your executive team to examine risks, opportunities and insurtech synergies that can take your organization beyond the competition.

It seems that with every advancement in technology a new threat vector is born. This theory holds true as we begin to embrace the world of cryptocurrency. Cryptocurrencies have emerged as an alternative means for financial transactions, while the value of a single Bitcoin cryptocurrency rose to $20,000 in late 2017. Hackers took notice and succeeded in stealing over $1 billion in cryptocurrency in 2018 alone. Unfortunately, the cyber threat goes beyond the theft of the currency itself. This new platform has given birth to a cyber crime known as cryptojacking. Cryptojacking Defined Cryptocurrency can be earned by a process called cryptomining. Cryptominers must first solve complex mathematical problems to validate transactions. To do this, they use software to create a very complex cryptographic puzzle that requires massive amounts of computing power. Rather than use their own resources, cyber criminals infiltrate the networks of unsuspecting victims to leverage the victim’s computers for their own mining activities. Hackers then send the results back to servers they control. This often results in slowing or crashing of computer systems, equipment replacement costs, increased energy costs and lost productivity. See also: Cyber: Black Hole or Huge Opportunity?   There are several attack methods, including:

• Phishing emails: The victim clicks on a malicious link or attachment. This runs a code that injects a cryptomining script on the target computer. The script will continuously run, often undetected.
• Drive-by mining: The hacker injects a cryptojacking script on targeted websites or pop-up ads. When a victim visits that website or receives a pop-up from the infected ad, the script will run and infiltrate the network.
• Rogue employees: Insiders with access to IT infrastructure can set up cryptojacking systems, including physical servers, within the workplace premises.

Preventing a Cryptojacking Attack There are several strategies that may help prevent a cryptojacking attack:

• Web filtering tools should be used to block websites that are known to spread cryptojacking scripts.
• A cryptojacking ad blocker can be installed to prevent infected ads from popping up.
• Endpoint detection technology can recognize known crypto miners as soon as they penetrate the network.
• Mobile device programs can manage vulnerable apps and malicious extensions that may be found on employee-owned devices.
• Employees must be educated to recognize phishing emails in security awareness training programs.

Transferring Cryptojacking Risk Many cyber security experts will agree that there is no silver bullet that will prevent all cyberattacks. As a result, the commercial cyber insurance market has evolved along with cyber threats to facilitate options for cyber risk transfer. These insurance policies can provide indemnification for both first-party direct costs and subsequent third-party liability costs in the aftermath of a cyberattack. See also: The New Cyber Insurance Paradigm   While policy wording can differ among insurance companies, there are common coverages that are found in many policies. These may be especially helpful in transferring financial losses specific to a cryptojacking attack, including:

• Business Interruption – The cumulative effect of the slowing of hundreds or thousands of computers in one organization can lead to significant cost over time. Components may fail prematurely due to overuse, and critical controls may be affected. The resulting downtime and restoration process may cause financial loss, which may be recovered under a cyber insurance policy.
• Network Security Liability – Companies may unknowingly transmit cryptomining code to other organizations, creating legal liability. Litigation costs and settlements may be covered under these policies.
• Crisis Management – Hackers may change tactics after the initial cryptojacking attack. Once they have access to networks, they may move laterally and access sensitive information that they can monetize, such as Social Security numbers and financial records. Costs to retain external vendors to investigate and respond to the attack, including IT forensics firms, privacy attorneys, credit monitoring fees, notification and call center costs, may be covered.
• Increased costs due to fraudulent use of a victim’s vendor services, such as a cloud provider or internet-based services, may also be a covered cost.

In light of the emerging threats posed by cryptojacking criminals, it is imperative that steps are taken to prevent, mitigate and transfer the risk. Technology-based controls, employee training and insurance risk transfer mechanisms should all be considered.

A recent social media dust-up between renters and homeowners insurance technology upstart Lemonade Insurance and old-line insurance industry stalwart State Farm motivated us to look at what their respective customers are saying about their experiences with the companies. A little context: State Farm recently aired a television commercial poking fun at technology-focused entrants to the marketplace. Specifically, the commercial made fun of the use of bots (artificial intelligence) used to process claims. Lemonade was quick to respond to the perceived slight, with early Lemonade investor Ashton Kutcher even weighing in on Twitter. Kutcher has since deleted his tweet, but Coverager captured it in a screenshot. To support its claim that Lemonade leverages technology to provide a customer experience superior to State Farm, Lemonade’s CEO Daniel Schreiber published, compared and contrasted its renters insurance customer rating and ranking to State Farm from Clearsurance's independent platform. You can see Clearsurance’s full renters insurance rankings here. Full disclosure: Lemonade is an engaged subscriber and affiliate marketing partner of Clearsurance. State Farm is not currently a subscriber. Being a subscriber does not enable any company to manipulate their customer ratings, which derive 100% from customer feedback. See also: New Entrants Flood Into Insurance   With that context, let’s see what renters insurance policyholders are saying about each company. Below is a table that includes renters insurance ratings of Lemonade and State Farm for six different categories. It’s important to note that, given that Lemonade was founded in 2015 and has a vastly smaller market share than State Farm, the startup insurer has far fewer renters insurance reviews (57) on Clearsurance than State Farm (1,349). Given that, the data should be taken with a grain of salt as Clearsurance user testing has revealed that the more reviews on a company, the more weight a consumer assigns to that company’s rating. *Lemonade's claim service rating based on just nine reviews Time will ultimately tell whether Lemonade can maintain these high customer ratings as it scales and receives more reviews from its policyholders. Still, we can at the very least get a sense for how consumers feel about Lemonade’s technology-based insurance. And the early returns portend a customer base that is highly satisfied with the experience. Despite not having agents like State Farm, which has more than 18,000, Lemonade has a 4.75 customer service rating out of 5. The part of the story that’s harder to tell with the data is how consumers’ experience has been at the time of a claim. Lemonade’s 4.33 claim service score is based on just nine reviews, which isn’t enough to draw any conclusions. By comparison, State Farm’s 4.26 claim service rating (based on 267 reviews that include a claim) and 4.41 customer service rating are both among the best for renters insurance companies. The largest discrepancy between the two companies is price. Lemonade has received a 4.80 rating from consumers for price, while State Farm’s 4.21 price rating is its lowest of any of the six categories we collect ratings on. Beyond just the ratings, though, consumer feedback within reviews has helped provide us with a look at what their policyholders value. Lemonade’s policyholders frequently discuss the ease of working with the company, things like getting a quote, buying a policy and setting up the coverage. In fact. 53% of Lemonade reviews discuss ease of the user experience while just 15% of State Farm reviews do so. The online services of Lemonade are also a main focus of reviews. More than a third of Lemonade reviews (35%) discuss the companies’ online and application-services while just 3% of State Farm reviews address the insurer’s online services. Instead, State Farm reviews are more apt to talk about agents (18%, compared with 0% for Lemonade, which has no agents). All this isn’t to say consumers have indicated one method — agent or bot — is better than the other. Quite the contrary, in fact. The consumer ratings data shows that both methods are pleasing the companies’ respective policyholders. State Farm and Lemonade appear to be geared toward different demographics and different service preferences. Some may prefer the personalized service an agent can provide. Others may prefer the ease and speed of a bot — like Lemonade’s Maya. That’s what this data indicates. And both companies appear to be enjoying success of their different business strategies. Lemonade has raised $180 million in funding and just last week was one of the companies Forbes named in a list of the next billion-dollar startups. State Farm, meanwhile, holds the largest P&C market share in the U.S. See also: Making Lemons From Lemonade   The misconception in all this — and why Lemonade may have taken offense to State Farm’s commercial — is that it insinuated agents are far superior to bots. The State Farm agent in the commercial says, “These bots don’t have the compassion of a real State Farm agent.” While more State Farm reviews use words describing the helpfulness of the company (15% to 7% for Lemonade), the customer service ratings in the table above indicate that isn’t the only part that matters. In today’s technological age, customer service in the eyes of the consumer may not just be about being compassionate. It factors in things like ease and speed, too. We would submit that saving a customer time from having to think about insurance is an act of compassion. What this means for Lemonade and State Farm in years to come remains to be seen. For now, a majority of the policyholders from these companies have indicated they’ve had a positive experience. If you’ve held a policy with Lemonade or State Farm, share your experience on Clearsurance to help better inform other insurance shoppers. This article originally appeared on the Clearsurance blog.

When IBM introduced its original PC in August 1981, threatening to wipe out the little companies that were already in the market, Steve Jobs had upstart Apple take out a full-page ad in the Wall Street Journal whose headline was: "Welcome, IBM. Seriously." The cheeky ad helped brand Apple, and we all know that the story had a happy ending for the company: Its market value now exceeds $1 trillion, while IBM, whose market cap amounted to three-quarters of the entire computer industry's in the early 1980s, now stands at less than an eighth of Apple's value. 

A modern-day ad fight has now started in the insurtech world, as State Farm tweaked Lemonade, and Lemonade responded. State Farm has begun running TV ads that mock Lemonade (by implication, though not by name) and its use of chatbots to interact with customers.  Here is the ad, suggesting that Lemonade's technology is no match for State Farm's 48,000 agents. Lemonade responded via a more modern medium (natch), tweeting:  "Wait,  @StateFarm , did you just fork out millions of your customers' premiums on an attack ad against  @Lemonade_Inc  and bots? As in, the country’s biggest insurance company is feeling the heat and getting A-listers to bash technology?" Lemonade has even paid to promote the video on YouTube and via other social channels, claiming the ad has backfired on State Farm.

We think the companies are on a crucial topic, so, rather than have them just retreat to their corners, a la Apple and IBM back in 1981, or simply amp up their ad budgets, we're inviting them to a public debate via webinar that we would moderate. We just reached out last night, so it may take a while to sort this out, but stay tuned for details. In the meantime, I'm going to start a discussion on the topic in the Inventing the Future of Risk and Insurance group that I moderate on our Innovator's Edge platform and that you can find here. (If you haven't already signed up for free access to IE, you can do so quickly here.) I'm going to invite to the discussion some heavy hitters among both incumbents and insurtechs.

I'm not so interested in who will win the marketing fight or whose business model is better—though the two companies could probably sell tickets to the fight, along with a lot of popcorn. I'm very intrigued by how quickly technology should be integrated into interactions with customers. 

I've had a long-held bias against things like chatbots because I first had people singing the praises of natural language processing to me in the mid-1980s, when I started covering the technology world for the Wall Street Journal, and NLP was so very not ready for prime time. Even with all the improvements since then, chatbots still lack empathy -- they'll immediately tell you how to fill out the forms to collect on a life insurance policy but not really grasp how to deal with someone who has just had a family member die. Chatbots learn, but...  a Microsoft bot set up on Twitter had to be quickly shut down  because it learned racism and cussing, not exactly what Microsoft had hoped. The potential for abuse is such that  California recently enacted a law  requiring that chatbots identify themselves as AIs if used in selling or in politics. 

Still, I much prefer dealing with companies via chat—no wait time, no getting passed around; I can keep doing whatever I'm doing on my computer and just interact as necessary. And the use of technologies such as chatbots fit the Clay Christensen model of disruption, which I think is mostly right. He says disruption happens when an innovator takes over a slice of the business that isn't very complicated and doesn't matter much to incumbents, then grabs another slice and another and.... In the case of chatbots, I think there are plenty of things that could be handled faster by technology and that the agents would be happy to hand off, such as questions about when a payment is due, whether it has been received and what the status of a claim is. Then the chatbots can grow from there. McKinsey has done lots of work showing that automation doesn't wipe out entire jobs; it automates pieces of jobs, in this case the more mundane aspects of agents' work and of call centers.

But State Farm and Lemonade could surely change my thinking. As I said, stay tuned. 

Paul Carroll
Editor-in-Chief

The duty of insurers is not to deny the need for new standards but to dedicate themselves to standardizing new—and superior—levels of safety. Why should they insist on doing otherwise, when the technology exists to heighten safety and lower costs; when the cost of doing business as usual looks safe but is far more dangerous than it appears to be; when cameras can reveal—and record—what workers cannot see for themselves? Why should insurers resist what trial lawyers will soon insist be the exclusive standard of safety, by way of multimillion-dollar settlements and verdicts? Why should insurers persist in their wait-and-see attitude, when they can see what lies ahead? The questions speak for themselves. If insurers do not like the answers, they should remind themselves that sometimes the refusal to answer a question is worse than acknowledging that an answer is true. Which is to say nothing is static; technology can make change easy to adopt or extremely hard to avoid. Take my column about workplace safety. Consider this piece, then, a continuation of my conversation with Chris Machut of Netarus, whose company develops innovative solutions for overhead cranes, tugboats and construction sites. See also: Let’s Open Our Eyes to Work Safety Issues   Machut is a visible—and vocal—advocate for using cameras to help workers see everything that matters. He says what matters most is what insurers can do now: champion the adoption of crane cameras so “policies can be more expansive without necessarily being more expensive; because safety translates into saving lives; because life-saving tools facilitate success; because success is more than the sum of even the largest sums of money.” I agree with Machut, not because I think or hope he is right, but because I know he is right. I know that knowledge of a danger—and the construction industry is, if nothing else, a study in danger—is often the key to liability. If real estate developers know how dangerous it is to add a chapter to the story of the history of a city, to measure that chapter not in pages but in stories, if they know the dangers of including another building to the skyline of their city; because they do know these things, insurers should seek to lessen the number of payouts by lowering the probability that they will have to pay out in general. If awareness is a given, how do we give workers the ability to see farther, thanks to an aide that neither weakens nor tires, that neither succumbs to the tedium of the task nor surrenders to the trials of exertion, that neither leaves the job site nor loses its sight? The answer is visual technology. In a word: cameras. Cameras represent a new standard in safety. See also: Awareness: The Best Insurance Policy   To debate that fact is to miss the point—and to possibly drop the beam or steel girder, injuring workers and pedestrians alike. To doubt the urgency of this point is be vulnerable to lawsuits and bankruptcy. To adopt this standard is for insurers to mitigate risk and to minimize danger. It is too dangerous for insurers to ignore this standard.

How do you increase the efficiency of your underwriting processes? In this post, I will showcase a solution for a fully automated underwriting process consisting of roughly five steps—solving major challenges in structuring, extracting and analyzing unstructured data.

In this series on how to boost your AIQ, I’m exploring innovative ways to apply artificial intelligence to the insurance value chain. In my first post, I spoke about the artificial intelligence quotient (AIQ), which consists of these key ingredients: technology, data and people and the ability of an enterprise to invest significantly in their in-house AI capabilities and collaborate externally. To achieve success, insurers need to develop these capabilities: both in-house and collaboratively. In my second post, I explained how insurers should start with carving out a clear AI strategy to be able to understand which use cases can be most relevant and conducive to achieving their strategic goals, and focused on the application of AI-related technologies to boost sales and distribution. In this post, I’ll explore how insurers can leverage AI in underwriting and service management. How can insurers use AI in underwriting and service management? Sixty-eight percent of insurance employees expect intelligent technologies to create opportunities for their work, and 63% of insurance executives believe AI will transform the industry. In underwriting and service management, we see several relevant use cases for which insurers could leverage AI-related technologies:

• Extraction of insights from multiple data sources (including unstructured)
• Automated demand analysis and generation of new product offerings
• Enhanced pricing and policy rating and personalization
• Natural language question answering for employees.

These offer the following benefits:

• Efficient and lean underwriting processes — robo-advisers streamline the process of customer interaction and data gathering, while data analytics helps insurers to make better-informed decisions.
• Improved hit and retention ratios — owing to better insight derived from data analytics and machine learning.
• Increased risk evaluation quality — smart technology increases not only the quantity of information that underwriters and risk managers need to make decisions, but also the quality of the decisions.

In the use case below, I’ll discuss a solution for a fully automated underwriting process consisting of roughly five steps—solving major challenges in structuring, extracting and analyzing unstructured data. Use case: End-to-end automation of business processes from unstructured data input From this diagram, we can see that everything in the journey from data input to output can be automated using a selected set of AI-related technologies. This doesn’t mean that there’s no place for humans in this journey; the workforce will likely need to pivot to become trainers, explainers and sustainers (for more about these roles see our Future Workforce Survey for Insurance ). As AI pervades the insurance industry, "raising" and training intelligent machines to function efficiently and responsibly will become a critical role and a significant creator of jobs at different skill levels. See also: Insurers: Start Boosting Your ‘AIQ’   “Next best action” guidance —how to leverage data insights for your clients’ needs So you’ve structured your unstructured data, and you have more information about your customers’ needs. Many insurers fail to capitalize fully on their data – how can you use it optimally to deliver personalized products and services along the appropriate channels? We have developed a 360-degree customer view for insurers to offer the right product via the right channel through "next best action" recommendation engines. The Accenture Next Best Action (NBA) app shows how insurers can deliver personalized offerings that cover the customer’s predicted growing insurance needs and wants. NBA empowers businesses with a real-time and customized decision-making service that provides relevant and timely offers to drive value. NBA is a data analytics-based marketing solution that provides inbound and outbound touch points with a customer recommendation engine to drive additional revenue. NBA has been shown to achieve a 30% to 45% increase in cross-sell and up-sell. How? The recommendation engine draws on available data to present insurers with a full overview of the best actions to be pursued, allowing them to respond to the needs of customers across a wide range of situations. What is NBA?

• A decision paradigm uses a combination of predefined business rules and advanced analytics to recommend a next best action.
• For each interaction, NBA identifies the best proposition to be presented to the customer with an acceptable degree of predictability about the behavior or response.
• Integration of all communication channels, inbound and outbound, ensures a consistent customer experience.

See also: How to Use AI, Starting With Distribution   What’s next –Insurance executives plan to make significant AI investments in the next three years as they start to “rotate to the new”—transform and grow their core business through the adoption of AI, while developing innovative sources of growth. Are you ready to transform how your business leverages AI-related technologies for the underwriting and service management activities in your value chain? To find out how you can do this, download the report on How to boost your AIQ. In my next post, I’ll look at how insurers can leverage AI-related technology to improve claims management.

Historically, technology adoption within commercial lines organizations has been met with a wall of push-back, largely related to commercial lines being wrapped in a cloak of “art versus science” thinking. Because of risk and product complexity, commercial lines organizations believed that only highly trained and seasoned humans could be involved with processes and decisions. Additionally, due to the predominance of large, enterprise-scale projects, characterized by protracted ROI exercises and IT resource allocation exercises, past technology choices generally brought out the “yeah buts.” (What are the “yeah buts”? This is the response to enterprise technology options, to which commercial lines product and underwriting heads promptly responded – “yeah, but that doesn’t work for us.”) In many cases, this was not an inappropriate response because of risk and product complexity. But, at long last, there is a change afoot, and it lies within emerging technologies. SMA has been conducting research and surveys around emerging technology since 2010 to gain insight and understanding of insurance industry adoption and spending. In the past, results have predominantly trended across the P&C industry. However, the recent 2018 results reveal clear differences between commercial lines and personal lines organizations.  Even more exciting, commercial lines product segment and transactional differences are emerging. As the phrase goes: Vive la difference! See also: Expanding Into Commercial Lines   So, what does all this mean? SMA’s recent report, Emerging Tech in Commercial Lines: Ramping Up Adoption, covers eight emerging technologies that hold great promise for commercial lines organizations: artificial intelligence (AI), new user interaction technologies, the Internet of Things (IoT), drones, blockchain, autonomous vehicles, new payment technologies and wearables. How are commercial lines organizations viewing these technologies? Here are some examples that show emerging technologies are being viewed uniquely by varying commercial lines segments and processes:

• AI – This technology garners the highest percentage of implementations of all the emerging technologies by almost twice the other categories, with 26% indicating so. Investment in AI exceeds the next closest emerging technology by more than 24 percentage points. The difference: It can drive straight-through processing for small business and simple specialty lines and support complex decisions for middle market, large national/global accounts and complex specialty lines. “Art versus science” well managed!
• New User Interaction Technologies – This is another technology that is affecting small commercial lines as this product segment goes digital. But 67% of all responders see the value in customer experience, regardless of product segment, and 50% are focused on policy servicing.
• Blockchain – While personal lines organizations are generally assessing the applicability of blockchain, commercial lines have found use cases and pilots. 42% of survey respondents believe that policy servicing and billing are the significant value areas. Global and complex lines of business are the first target areas.

See also: Top 5 Themes in Commercial Lines   Other emerging technology examples and spending projections can be found in SMA’s commercial lines report. But the big takeaway for me is that, happily, the “yeah buts” are disappearing across commercial lines of business and products as executives search for and find emerging technologies that can improve business outcomes. Because of the way emerging technologies are being delivered by incumbent and insurtech providers, discreet value choices can be made without having to launch enterprise-level projects. Vive la difference!!!

In a rapidly changing industry, some P&C insurers are pulling ahead of their competitors by focusing on customer satisfaction and retention. “The insurance industry as we know it is at the edge of a new business environment,” says  Michael Costonis , head of Accenture’s global insurance practice. “Breaking away from the pack and capturing new revenue opportunities requires a shift in business mindset – a shift from product-focused to customer-focused.” Customers want extra benefits, and one way to provide them is to offer value-added services. Travel companies and other insurance branches are already exploring the benefits of value-added services for retaining customers, as  Jamie Biesiada  at Travel Weekly points out. Because P&C insurers have been slower to adopt this strategy, however, many opportunities for capitalizing on this strategy remain. Here, we look at some of the most popular value-added services in P&C insurance, which of these services focus on building loyalty and how to create the right service offerings or packages to encourage your customers to stay with your company in the long term. Value-Added Services: The State of the Industry For many years, P&C insurers have struggled with the challenge of selling a product that is substantially similar to their competitors’ products. “Because customers don’t discern much difference between insurers, companies end up competing largely on price,” write Bain & Co. partners Henrik Naujoks, Harshveer Singh and Darci Darnell . A downward spiral occurs, in which costs and profits are cut and customers jump ship the moment they see the same coverage for a few dollars less. See also: How to Build Customer Loyalty in Insurance   When insurers compete on price, customers do what Brandon Carter at Access calls the services shuffle: quitting or threatening to quit their insurance providers to access the same price-lean deals that new customers receive. “My goal is to pay less in a system that actually punishes people for being loyal customers,” Carter explains. Focusing on cost decimates loyalty. Focusing on value can boost it. Yet insurance companies aren’t making value-added services their first choice when it comes to customer retention  Tom Super, director of the P&C insurance practice at J.D. Power, adds that many P&C insurers are turning to digital tools to court customers, particularly in the auto insurance business. But digital technology is only a tool. The insurers that will stay ahead of their competitors in the race for customer retention and loyalty are the ones that best leverage that tool to provide the value customers want, says Mikaela Parrick  at Brown & Joseph. Which Value-Added Services Boost Customer Loyalty? Value-added services provide an extra benefit that enhances the core product or service. This additional service may be offered at little or no cost for the customer, yet it may make both the customer’s and the insurer’s work easier. Connecting experience-based services to the product and brand can be a powerful way to encourage loyalty, adds Roman Martynenko , the founder and global executive vice president at Astound Commerce. While this approach is most commonly seen in retail, P&C insurers can adapt it to their needs. A top-of-the-line mobile app or a personalized starter kit featuring smart tools for each customer’s home can make customers feel like they’re part of a family. Unique, innovative or specially tailored value-added services can also help encourage loyalty and boost customer interest by becoming a cornerstone of an insurance company’s brand. Value-added services don’t have to be expensive or complex, suggests Mike McGee of Investment Insurance Consultants. For instance, a disaster preparation email sent at the start of tornado or hurricane season can help customers take loss-prevention steps, address safety and feel supported by their insurer, at very little cost to the insurance company. Partnering with other companies can boost loyalty for both organizations while providing value-added services that attract customers, digital transformation executive Fuad Butt says on the IBM insurance industry blog. For instance, working with telecommunications providers to offer reduced-rate packages can help both companies succeed. A highly specific partnership that uses existing technology to add value for both customers and companies is the recently announced alliance between Hyundai Motor America and data analytics firm Verisk. “Hyundai customers will have access to their portable Verisk driving score, which can lead to discount offers on UBI programs and support driver feedback that helps improve their driving,” says  Manish Mehrotra , director of digital business planning and connected operations for Hyundai Motor America. A similar arrangement through an auto insurer can help both insurers and drivers have access to more information to improve safety and make better choices. Choosing and Implementing Value-Added Services in P&C Insurance The changing landscape of insurance offers one significant advantage to companies seeking to improve their value-added services: access to data about why customers remain loyal. “The connections that enable excellent customer experiences aren’t always easy to make,” says Chris Hall of Pitney-Bowes. Siloing fragments customer information, leaving staff without a complete picture of each customer. This fragmentation makes it difficult to determine which value-added services will actually pique customers’ interest. If data access is an issue, start by de-siloing information to get a better sense of each customer. Then, find the services that best support your organization’s key differences from your competitors. Kirk Ford , compliance and T&C manager at RWA Business, suggests first considering how you’d like your clients and customers to perceive your brand in relation to competitors. Balance your differences against your similarities so that customers see they’ll receive all the services they need, but with the value-added extras that make their relationship with this particular insurance company meaningful. See also: The Future of P&C Distribution   However your insurance organization chooses to add value, resist the urge to announce it to customers merely as being higher-quality. “It doesn’t matter whether or not a company can pull off quality or exceptional service because quality and customer service rarely are differentiating strategies,” adds  Mac McIntire , president of the Innovative Management Group. Instead,  Ryan Hanley  formerly of Agency Nation, now at Bold Penguin, recommends finding ways your value-added services can improve customer lives. When customers feel a sense of shared values, they’re more likely to stick with their insurance company, rather than risk their luck with a company that may not share those values—even if the prices are lower. One way to connect with customer values is to change your company’s language surrounding insurance. “If you can sell insurance and not talk about insurance, it’s a win-win,” says  Rusty Sproat , founder of Figo Pet Insurance. He notes that many customers find insurance language obscure and frustrating. That’s why Sproat’s company focuses on providing quality information on pet care and health, switching the conversation to insurance only when necessary to complete a transaction. Finally, don’t shy away from technology—but use it as a tool rather than a cure-all. Smart home sensors, telemetrics for vehicles and other tech tools are increasingly common in U.S. households, plus they can greatly improve the customer experience, says  Ramaswamy Tanjore  at Mindtree. Consider the best ways to manage telemetric or other data, as well as how to position these tools to best showcase their value to loyal customers.

New entrants seem to be coming out of the woodwork in insurance. The insurtech movement, the advance of emerging technologies and the appetite of the global tech titans are all contributing to new entrants, new partnerships and new business models. A few recent examples illustrate the new interest in insurance from those both inside and outside of the insurance industry.

• WeWork partners with Lemonade. In what seems like a very natural partnership, WeWork plans to offer its WeLive members renters’ insurance through Lemonade. WeLive members rent fully furnished apartments from WeWork for short-term situations.
• Credit Karma enters insurance. This fintech intends to build on customer relationships to expand into auto insurance. While the initial focus will be education – helping Credit Karma customers understand how credit and adverse driving affects insurance rates – the longer-term goal is to provide yet another shopping/comparison site.
• BMW and Swiss Re partner for ADAS scores. BMW Group and Swiss Re will collect telematics data from vehicles related to the use of ADAS (Automated Driver Assistance Systems) and build scores that can be used by primary insurance companies.
• Lending Tree buys QuoteWizard for $370 million. Fintech Lending Tree, which has been on a buying spree, moves into insurance with the acquisition of insurance comparison shopping site QuoteWizard.
• Travelers partners with Amazon for the smart home. Travelers will set up a digital storefront on Amazon featuring smart home devices for a discount (especially security-related devices) as well as discounts on homeowners’ insurance.
• JetBlue invests in insurtech Slice. This appears to be a pure investment play, but it is still interesting that an airline would be following insurtech and seeking investment opportunities.

Something is going on here. It is not as if there have never been new entrants or that companies from other industries have ignored insurance. But the flurry of activity and innovative partnerships, investments and market approaches may represent a bigger trend. Insurance is transforming, and, despite some of the doom and gloom warnings, a case can be made that there is more opportunity than ever for the industry. Even in the examples provided above, the emphasis is more on new opportunities than displacing incumbent insurance players. Indeed, in the Swiss Re and Travelers cases, the incumbents are part of the new partnerships – and these are just two of many examples. See also: 5 Cs of Transformation in Insurance   One of the main themes of the examples highlighted above is the attention on distribution and customer relationships. While insurtechs are working with insurers on many opportunities to improve underwriting, claims, and other areas, so far the new entrants from outside the industry don’t appear to have the appetite to underwrite risk and handle claims. This may change, but it is likely that there will be even more interest from outside insurance in capitalizing on customer relationships. Above all, these new entrants and innovative partnerships serve to accelerate the transformation of insurance.