Arkansas recently contracted with an out-of-state vendor called Catapult Health to come in to the state’s schools and “play doctor” with the teachers, asking them personal questions, taking their blood and then telling them everything that’s wrong with them. This is a classic example of a “pry, poke and prod” program. This is followed by admonishments to take more steps and eat more broccoli. The program then refers teachers into lifestyle and disease management programs “at record rates.” Sounds terrible, but the good news is that this program isn’t going to cost taxpayers anything because, as Catapult Health’s website says: Phew! At least it’s free to taxpayers because Catapult’s expenses and profits are “already in your budget” and “fees are processed through your health plan.” Except that the state of Arkansas is its own health plan. There is no “Don’t worry. Insurance will pay for it” here. The state is self-insured, meaning it picks up the tab, not some nameless insurance company. But, hey, at least this program will save money, right? The return-on-investment for the state is allegedly 3.27-to-1, as shown by the so-called “Harvard Study,” conducted by Katherine Baicker. Except that the Harvard study has been proven wrong, not just by the nonprofit, nonpartisan highly respected RAND Corporation (and I myself chimed in, as well), but by an ace researcher named Damon Jones, part of the prestigious National Bureau for Economic Research. His work showed that wellness accomplishes virtually nothing other than the expenditure of money. (Don’t worry—insurance will pay for it.) See also: Wellness Vendors Keep Dreaming   But, hey, maybe Professor Jones is wrong. After all, why should he care what Professor Baicker thinks, right? Um, because he reports to her? Yep, he’s an associate professor at the exact same school of public health where she is now dean. Just guessing here, but it would seem a subordinate would have to be pretty darn sure of his findings (and they are rock solid, and completely in agreement with all the other recent research, summarized here) to publicly humiliate his own dean. Even Baicker doesn’t defend her findings any more. She says: “It’s too early to tell.” That means she is running away from her very widely cited signature study, upon which essentially the entire wellness industry’s economic justification is based. This would be like Arthur Laffer, whose Laffer curve created supply-side economics, which has been used to justify two tax cuts, saying, “Well, maybe it’s not right. I dunno. Let’s wait and see.” But, hey, at least forced wellness improves employee health, right? Apparently not. Forcing people to get annual wellness checkups doesn’t benefit them, according to the New York Times, the New England Journal of Medicine, the Journal of the American Medical Association and Consumer Reports. (Before dismissing the credibility of those sources due to possible political bias, keep in mind that Newsmax, the Federalist and Laura Ingraham hate “pry, poke and prod” programs, too.) Forced wellness also takes teachers away from the classrooms to be pried, poked and prodded, stresses them out and hurts morale. Further, sending “record rates” of employees into lifestyle and disease management is classic hyperdiagnosis – braggadocio-fueled misunderstandings of the arithmetic of lab results, resulting in large numbers of people getting told they need coaching and care they don’t want or, in general, need. Nothing makes a wellness vendor happier than to hyperdiagnose as many employees as possible. But, hey, maybe teachers are a special case. Maybe the impact of “pry, poke and prod” programs is different for them? It sure is. The single school district for which the data has been compiled is Boise, Idaho. According to the wellness vendor’s own data, the health of the teachers got somewhat worse as a result of this pry, poke and prod program. (The vendor, an outfit called Wellsteps, also admitted that it flouted clinical guidelines and fabricated its only positive outcome. The company also previously admitted that costs went way up as a result of its program. The company later suppressed that admission. Wellness vendors are not known for their integrity.) So the health of teachers may deteriorate, creating more medical expense. but don’t worry. Insurance will pay for it. But, hey, at least the teachers like it, right? According to Catapult, employees love the program. Ask the employees, and you might get a different impression. Indeed, I was tipped off to this program by an Arkansas teacher who hates it, like most of her colleagues do — and that’s before they learn that they are actually paying for it…keep reading. Obviously, if teachers wanted to submit to a “pry, poke and prod” program, the state wouldn’t have to threaten them with massive fines – almost $1,000/year, which appears to be close to a record for any "pry, poke and prod" program anywhere — for refusing to let a private, out-of-state corporation play doctor on them at state expense. But, hey, at least the state taxpayers save money by fining the teachers who don’t want to play doctor, right? Actually, wellness makes claims costs go up, probably by more than the fines. There are lots of unneeded lab tests and other tests. For instance, the state of Connecticut admitted that, in addition to throwing away all its money on the actual wellness program, the state spent more on health care. The state comptroller who administered the program said the increased spending was “a good thing.” I guess he wasn’t worried because insurance was paying for it. See also: Ethics of Workplace Wellness Industry   But, hey, at least the teachers don’t pay for it. Actually, they do. The state’s human resources department brilliantly figured out that it could launder its wellness spending by hiring this outfit. By paying extra to Catapult (a multiple of what an effective wellness program would cost), the state is able to pick up the tab for wellness using the extra paperwork of a medical claim, as opposed to an outsized administrative expense in a separate line item. The latter would clearly need to be picked up by the taxpayers…and the state would have an incentive to control this highly visible figure. By contrast, paying for “pry, poke and prod” as a medical claim will never be noticed, like Steve McQueen and David McCallum sprinkling the dirt from the tunnel around the stalag. On the other hand, the program will increase overall medical spending by 2% to 3% (the cost of the screening plus the added hyperdiagnosis expenses). Here comes the evil genius part: At the next contract negotiation, the state can limit wage increases (or reduce benefits) by pointing out how high the health spending is. So the teachers get pried, poked and prodded, hyperdiagnosed with hidden illnesses most of them don’t have – all against their will…and then they have to pay for the privilege in reduced wages. Wow…the teachers are getting screwed. But, hey, at least they can’t sue the state, right, so taxpayers won’t have to pick up that bill, as well? Starting in January, this program will be in blatant violation of two laws, the Americans with Disabilities Act and the Genetic Information Non-Discrimination Act. Those laws disallow forced wellness checkups but allow so-called “voluntary” ones. Until recently, “voluntary” meant “do wellness or pay a big fine” like this one. But thanks to a lawsuit by AARP, the rules are changing in January so that “voluntary” must mean voluntary, like a dictionary would define the word.  (This summary has the links to all you need to know about the case.) To get these fines back, teachers will be able to sue the state, possibly even as a class action, and possibly being awarded punitive damages. Exposure to lawsuits could cost the state millions more in addition to its current expenditure on Catapult Health. And that doesn’t even cover the costs of a possible teacher walkout, like the one in West Virginia that was spurred in part by – you guessed it – the wellness program. But, don’t worry. Insurance will pay for it.

How do you manage employees when they are all remote? I agree with an inspirational business leader, Marcus Lemonis. There are three things that make your company successful. They are:

1. People
2. Product
3. Processes

Let’s talk about people. I believe the most important of the three is people. Good people can fix processes. Good people can enhance products. Good people are what truly make your business successful.

• How many times have you worked at your home, a coffee shop or a co-working space and thought, “Wow, I got a ton of work done today”?
• How many times have you worked in your office and at the end of the day thought to yourself, “I didn’t get ANY work done”?

Let’s face it, if you are one of those organizations that feel that the employees (people) need to work in the office building from 8am until 5pm, you are going to have a very hard time finding true talent! Today’s employees can be highly productive anywhere. Sure, there might be a need to connect at the mothership once in a while for face-to-face meetings, client meetings, etc. But to think, “if they are not here, they are not working,” is absurd. Please refer back to the previous questions and think about it… See also: Engaging Employees: Key to Success   The organizations that believe that all people have to be in the office 100% of the time have a glaring issue that they need to address. The issue is TRUST. My thought is, if you don’t trust your people enough to give them the opportunity to test the remote model, then… 1. Why did you hire them in the first place? 2. Why would they want to perform above average for you or your company? Are there some individuals who need to be in the office? Sure. And I would argue that, if they are good people, they will be honest with themselves/your organization and tell you that! One person I spoke with said, “I think I need the structure of coming into the office at a certain time and leaving at a certain time.” GREAT! That is a person who is being honest with you and himself or herself. That is a good person! He/she is more than welcome to come in to the office at 8am and go home at the end of day. However, to have a policy or a culture that says all employees need to be in the office at all times is a disservice to the employee and the organization. At Benekiva, our entire executive team is remote. Sure, we have an office that we go to for certain functions. However, if you find good people who believe in the vision, mission and passion of the company and the problems you are solving, they are never “off work.” The issue you will have with these people is to make sure they manage the work/life balance. That’s for another discussion. Burnt-out employees are not a sustainable recipe for business success. See also: 4 Good Ways to Welcome Employees   Bottom line: Find and hire good people. Test and measure innovative methods. You might be amazed at how much work gets done even though the people are not at “work.”

In today’s constantly changing environment, positive customer experience has become more important than ever. As insurance becomes more commoditized, providing excellent customer service has emerged as a key way to achieve competitive differentiation. The stakes are higher today than ever before. Consumers have more insurer choices than ever before. Right now, insurers are facing competition not only from insurance companies but also non-traditional players in the field like insurtechs and banks that now offer insurance coverage. At the same time, customers demand more from their vendors, and they expect the interactions they have with retailers, financial institutions, insurers, health practitioners and service providers – every organization with which they do business – to be easy, seamless, pleasant and fruitful. It is sobering that customers are likely to switch providers of all kinds due to poor customer service. As reported by Forbes, NewVoiceMedia’s 2018 “Serial Switchers” reports that U.S. companies are losing $75 billion in business due to poor service. According to the research, the main reasons customers stop doing business with a company are: They don’t feel appreciated, they can’t speak to a person who can answer their questions, employees are rude and unhelpful, they are left on hold for too long and they need to speak to multiple people to get the help they need. Make the most of make-or-break moments There are several decisive moments in the life insurance journey when insurers have prime opportunities to delight new and existing policyholders with excellent customer service from the initial coverage inquiry calls and online visits to an insurer’s website to a final claim. Customers expect their policy-buying experiences to be fast and friction-free. They want their claims experiences to be uncomplicated and transparent, and they want their customer service experiences to be pleasant, efficient and productive. And if their insurance providers disappoint or fail to deliver, potential and existing policyholders can certainly take their business to the competition. Even worse, poor service can damage the brand. If an insurer consistently provides sub-par service, policyholders can voice their displeasure on social media, and the company can develop a bad reputation. Insurers absolutely must focus on optimizing customer experience across all channels and touchpoints. By using customer-facing and back-end technologies, these three solutions help life insurers enhance their customers’ experience: See also: How Insurtech Helps Build Trust   Offer an easy, intuitive and fast application process. Today’s online retailers have set the bar high for every customer-facing business. Because shoppers can place an online order and receive an item from companies like Amazon within two days – or even hours, in some cases – they have come to expect a similarly fast experience when they apply for life insurance coverage. However, applying for life insurance is far more complicated than placing an online grocery order. Life insurance shoppers typically must go through a rigorous application process before they can even get a quote. Not only do carriers need detailed health information to underwrite and properly price a policy, they also must gather other personal information like Social Security numbers, credit reports and other data that can help assess a potential insured. It’s no wonder so many people abandon the application process and wind up uninsured. Life insurers have recognized that streamlining the application process can not only improve the customer's experience, but has the potential to substantially boost sales. Historically, this meant life insurers had to increase their exposure and risk to offer a less onerous onboarding experience. Today, however, technology enables life insurers to optimize the application process, not only facilitating application completion but also ensuring appropriate risk assignment. With SE2 Digital Direct Life, for instance, carriers have a way to offer suitable products with a no-touch online application process that lets consumers nearly effortlessly apply for life insurance while better assigning risk and more accurately pricing policies. Digital Direct Life automates policy application by gathering key identifiers and an eSignature to authorize the carrier to access the personal data, which includes the applicant’s medical and credit histories and driving record. The system then uses the information to perform an automated underwriting process to accurately assess and price risk, while offering the insured tailored coverage and a speedy quote. Transform and integrate. In today’s omni channel environment, the contact center is a still a critical touch point where a carrier has the opportunity to significantly improve the relationship with customers. Insurers must provide a pleasant, high-quality interaction, the account service representative (ASR) must be able to resolve issues quickly and effectively and reps must inspire policyholder trust and confidence that all advice and information is accurate. If carriers provide anything less than superior service with every contact center interaction, they risk disappointing – and potentially losing – their policyholders. A decade or more ago, insureds would contact their agent or call their insurance company with all kinds of requests, ranging from the most complicated queries to requests for help with simpler tasks like changing a beneficiary or for basic information on premium amounts. The simplest calls might take no more than a few minutes because reps could simply pull up a single screen to answer quick questions. Today, however, an increasing number of policyholders are using online or phone self-service options for simple, routine queries, and many are now only calling into the contact center with the most complicated issues that require live help. To solve complex issues, contact center reps might have to pull up information on their screen from multiple sources on a single call. This can take considerable time, potentially frustrating policyholders and creating a customer experience that’s anything but pleasant. A comprehensive digital contact center transformation is essential for life insurers that want to optimize the call center. Digital not only enables self-service capabilities but gives agents the tools to perform their jobs better and more easily deliver fast and effective service to policyholders. A digital contact center strategy includes integration with a rich set of capabilities from a partner ecosystem to enable a seamless and engaging experience for both agents and customers. See also: How to Use AI in Customer Service   Use analytics to optimize the contact center. Speech analytics solutions give carriers insight on customer behavior by capturing the content of customer-agent interactions. A speech analytics application can attach different metadata to tag the call, including the caller’s number, the number of the contract the customer is calling about and call duration. Conversations are recorded and stored in the speech analytics software and then are typically turned into transcripts that can be used in several ways.

• Boost ASR performance and customer service. First, the analytics can help carriers significantly improve customer service by providing reps with valuable feedback to increase competence, leading to increasingly satisfying and successful interactions with policyholders. Typically, organizations provide feedback to their agents by evaluating a small, random sample of recorded calls. With speech analytics, 100% of calls can be evaluated. Ultimately, better-monitored, -evaluated and -trained ASRs can boost an insurer’s bottom line because customers may be more receptive to cross-sell and up-sell offers from a rep they trust, and policyholders are more likely to keep their business with an insurer that gets customer service right.
• Inform self-service strategies. Insurers can also gain insights from the metadata, revealing the reasons for the policyholder call that can help improve self-service solutions and processes.
• Improve FCR. In addition, speech analytics can also improve the first-call resolution (FCR) rate by giving insurers the ability to detect whether policyholders are calling multiple times for the same issue. Not only can speech analytics provide ASRs with feedback about their call-handling performance and guidance on how to improve service and issue resolution; the technology also captures insights that can drive solutions to improve FCR.
• Ensure regulatory compliance. And finally, speech analytics can help carriers head off potential legal and regulatory issues by flagging potential problems and handling them appropriately. Insurers can set up a speech analytics engine to detect key words like “legal action,” “fraud” and “DOL”. Any conversations that contain the flagged words are pulled for review, and a supervisor can swiftly follow up with policyholders and ASRs to deescalate a situation.

Even in a heated marketplace, insurers that can provide consistently superior customer service in the contact center can grow faster and become more profitable. With so much at stake, life insurance organizations absolutely must investigate how currently available contact center technologies can help them improve ASR competencies, develop their self-service capabilities and ensure a great customer experience.

Many of you have seen the Gartner Hype Cycle curve. When a hot technology appears, it gets hyped and hyped until one day enough people become impatient, and sentiment turns against the technology. It then heads into what Gartner calls the Trough of Disillusionment. Eventually, the technology finds its role – often a major one – in the market.

The idea has always struck me as rather obvious (I described the curve to reporter colleagues on the tech beat at the Wall Street Journal years before I ever saw the Gartner chart), but Gartner popularized the notion, which is why it’s known as the Gartner Hype Cycle rather than, say, the Carroll Hype Cycle. Gartner is to be commended, because technologies can be plotted on the curve, and, drawing on history, their futures can be predicted with some confidence.

On the Carroll…er, Gartner Hype Cycle, the idea of technology-driven innovation in insurance seems to be heading into the Trough of Disillusionment (great name) among incumbents. A Lemonade or Trov hasn’t taken over the world. Big Tech is coming to insurance but not really here yet for most insurers. Industry executives seem to have read everything they care to about AI, blockchain, etc., and are starting to describe plans for small-bore improvements rather than truly innovative ones. Not total disillusionment, but headed in that direction.

Which brings me to the warning signs for 2019. 

The slide into the Trough of Disillusionment creates real opportunities because prices of insurtechs will start to settle back toward reality. In any case, technologies keep maturing, no matter how we feel about them, so the day of reckoning in the market creeps closer all the time, and the slide toward disillusionment is the last opportunity for companies to position themselves before a host of technologies and startups will shake the insurance market.

If I’m right, 2019 may well be the last chance for insurance industry incumbents to start taking advantage of the opportunities presented by insurtech, or lose out to nimbler competitors. In that spirit, my colleagues and I at ITL pulled some thoughts together for incumbents on:

10 Signs You’re Headed for Trouble in 2019

• You set up an innovation fund and think that means you’re innovative.
• Your innovations focus on cutting expenses, to the exclusion of all else, and – worse – you reward executives based on those cuts.
• You say your legacy IT systems are what is preventing you from innovating.
• You say your defensive culture is preventing you from innovating.
• You practice “innovation tourism,” going to Silicon Valley and assuming magic dust will wear off on you. (Related warning sign: You have a ping pong table and coffee bar and think they signify creativity.)
• You have 6,000 ideas but can’t figure out how to turn one into a product.
• You can’t name 20 insurtechs that operate in your strategic domain or adjacent ones.
• You aren’t starting to move your operations into the cloud.
• You don’t have significant diversity in your management team and board, in terms of gender, race, age and nationality.
• You can’t quantify and measure how you’re doing on your innovation journey and hope you’re improving.

Bonus warning sign: You make television commercials criticizing innovative companies.

In "The Sun Also Rises," a character is asked how he went bankrupt. "Two ways," he says, "gradually, then suddenly." We’re still in the "gradually" part of innovation driven by insurtech, but "suddenly" is coming. I suggest insurance industry incumbents view 2019 and warning signs like these as a last warning to get moving and avoid innovation bankruptcy. 

Paul Carroll
Editor-in-Chief

The need for insurance agents will grow 10% faster than the overall job growth average between now and 2026, the U.S. Bureau of Labor Statistics  reports. Yet hiring in the insurance industry remains precarious, with only temporary periods of stabilization, The Jacobson Group  says. As digital natives form an ever-increasing percentage of the workforce, this tech-savvy demographic will become the backbone of our organizations. Ed Kooijman, head of operations at 12CU, adds that many traditional organizations will adopt digital natives as leaders as a key strategy for getting ahead. This gives rise to an important question: How are P&C insurance companies preparing to attract and retain a workforce consisting primarily of digital natives? The truth is that property and casualty insurers face multiple challenges when it comes to recruiting and retaining digital natives. To attract digital native workers and stay competitive, P&C insurers are changing their approach in several ways. Creating a Digital-Friendly Workspace The term digital native is used to describe workers who grew up in today’s high-speed, screen-focused digital environment. When used in a hiring context, this term helps explain what millennials and Gen Z expect from the workplace. As more digital natives occupy the workforce, adapting modern workspaces is a predictable response. In fact, workspaces have changed with every generation to leverage emerging technological assets and meet new demands, Nick Mason writes at OfficeSpace Software. Nevertheless, the changes occurring in modern workspaces differ from those experienced by previous generations. Today’s digital natives expect to be able to communicate and collaborate easily whether or not they occupy the same physical space, PwC technology leader Antonia Cusumano explains. They want to collaborate to produce results more than they want to clock a specific number of hours in the work day or week. Digital natives’ focus on collaboration and results has changed their view of the office. “The workplace is no longer a specific destination where employees gather,” CIO contributor Paul Chapman says. He explains that working is more about a mindset than a physical location. “83% of workers don’t think they need an office in order to be productive.” To this end, insurance companies seeking to enhance their internal culture with the digital native perspective need technologies that match or exceed the tools these workers already use daily. According to John Mancini at the Association for Intelligent Information (AIAA), organizations that fail to adopt new technologies will struggle to attract and retain the industry’s best digital native talent. See also: Winning With Digital Confidence   Using outdated, siloed systems is confusing and inefficient in the minds of digital natives, IO Integration contributor Mike Watson says. This is especially true because millennials are well-versed in technologies that empower smart, dynamic collaboration across remote and in-person teams. Making Information Easy to Access The internet provides the foundation of the digital native experience and helps define their approach to the world. Marie Puybaraud at Work Design Magazine explains that cloud-based data, along with multi-platform connections, provide digital native workers with instant, streamlined access to social and professional networks. This is why dark data, or siloed data that isn’t being used to make better decisions, can frustrate digital native workers. They’re accustomed to information being readily accessible, and they see this as a fundamental aspect of strong decision-making. Digital natives usually see technology as a tool rather than a solution, writer Jillian Richardson says. Consequently, insurance companies that invest in the latest technology simply to do so may be pushing these workers away, rather than attracting them. A clear goal for technological tools like software platforms, along with a careful consideration of how the new technology will be implemented, can help companies create a digital and physical environment optimized for these employees. It’s important to bear in mind, however, that while digital natives are comfortable with a wide range of technologies, they weren’t born with a complex understanding of cutting-edge tools like artificial intelligence or machine learning. Rather, digital natives have a lower learning curve for the technologies that are changing the insurance industry, says RapidValue marketing consultant Shuvro S. Sarkar. Similarly, multitasking isn’t a skill that digital natives have developed independently of previous generations. Although digital natives’ willingness to attempt multiple tasks at once is often higher than that of previous generations, their ability to succeed at those tasks is about the same, according to an October 2017 study published in Teaching and Teacher Education. Workspaces that allow digital natives some quiet time and space to focus on a single task remains essential. Speaking the Language of Digital Natives Insurance is also uniquely poised to speak the language of digital native generations. Digital natives may possess a confidence with technology that previous generations lacked, but they are keenly aware of the uncertainties in the broader world. Addressing this uncertainty within the context of insurance can make digital natives more interested in pursuing a career in the industry, says Michelle Tucker, global head of analyst training at AIG. “Insurance can provide some degree of certainty as a safety net supporting people’s lives and business pursuits,” Tucker says. “That idea really resonates with the individuals that we’re bringing into our organization.” The uncertainty that digital natives face in their overall lives is, in part, driven by the technology they are so comfortable using. Many are concerned, for instance, that the jobs they pursue at the start of their careers may be eliminated by technology, says Richard Partington, economics correspondent at the Guardian. This fear isn’t entirely unfounded in the insurance industry, says Peter Westerman, who works in product development at ALM. Highlighting the value of digital natives — and their ability to spot and implement insights that technology can’t replicate — is key to addressing these fears and hiring top-tier talent. See also: Workplace Wearables: New Use of Big Data In return, digital natives can help P&C insurers speak the language of their prospective and current client base. Younger generations are currently the most frequent users of new insurtech tools and systems, L’Atelier managing editor Sophia Qadiri says. Recruiting these natives can help established property and casualty insurers better adopt these customers’ viewpoints, making it easier to create the seamless digital experience this rising customer base demands. Like the rallying cry that early internet and software pioneers declared, the internet wants to be free. Today’s digital natives don’t always see information as free, but they do expect the information they need to be readily available when they’re pursuing a goal on the job. Attracting and retaining digital native staff can help property and casualty insurers better understand and address the changing world of insurance. To do so, these insurers will need to invest in technological tools that provide the information access and collaboration capabilities digital natives have come to expect from their technology.

Will driverless cars (AVs, for autonomous vehicles) live up to the revolutionary potential imagined by many, including me? In part one of this series, I asked whether AVs might develop like the Segway personal transporter and be relegated to narrow niche applications. To avoid going the way of the Segway, AV developers must overcome significant hurdles to scaling, trust, market viability and managing secondary effects.

In this article, I outline the challenges to scaling. Building and proving an AV is a big first step. Scaling AVs into industrial size and strength business operations delivering transportation as a service (TaaS) is an even bigger step. Here are seven giant hurdles related to scaling: 1. Mass production. Hand crafting or retrofitting a few thousand cars with AV technology is good enough for development and testing. Industrialization will require producing hundreds of thousands of cars at scale. But, as Tesla learned the hard way, building cars at scale is more complicated than it looks. 2. Electric charging infrastructure. Almost all AV efforts are being developed on top of electric vehicle (EV) platforms. Before EV fleets can operate at scale in any market, a whole new electric charging infrastructure must be built. This will take time and lots of money. 3. Mapping. The industrialization of the detailed, high-definition (HD) maps on which AVs depend limits where AVs can operate. Even though the cars are loaded with sensors, cameras and software, they need up-to-date maps to figure out where they are and what to do. See also: Driverless Cars and the ’90-90 Rule’   4. Fleet management and operations. Industrialization will require flawless maintenance and efficient operation of tens of thousands of AVs widely distributed across large metropolitan service areas. Doing so will entail much more than cleaning windows and vacuuming carpets. It will entail maintaining complex computers on wheels. It will require complex predictive analytics to recharge, dispatch and load balance in response to spiky customer demand. Both public safety and business viability depend on this. 5. Customer service and experience. AV TaaS services are like a hospitality business built on a fleet of mobile hotel rooms with no on-property staff. Even the shortest trip can become arbitrarily messy and unruly—especially because there will be no human supervision in the car. Acceptable service and experience will have to extend to non-customers, as well, because AVs must interact with pedestrians, cyclists, other drivers, emergency personnel, other companies’ AVs and a host of other actors outside the car. 6. Security. Computer security is a challenging issue, in general, and networked armadas of computers on wheels will be attractive hacking targets. There are physical security issues, too. Physical security involving disgruntled drivers and bystanders, pranksters, thugs and others could also create security issues for both passengers and the public at large. 7. Rapid localization. How much of what Waymo and others are learning on the well-marked, well-lit, well-laid-out and relatively polite streets of Phoenix is transferable to the not-so-polite paved cow paths and roundabouts of Boston or the congested, pedestrian-filled city centers of New York, Paris and Beijing? Much—but not all. That is why every developer tests in multiple regions, to understand the peculiarities of local infrastructure, weather, cultural norms, etc. How fast and how well such localization can be done is another hurdle to scaling. See also: How to Adapt to Driverless Cars   In part three of this series, I’ll explore the challenges to market acceptance. I will discuss eight industrialization hurdles that deal with trust, market viability and secondary effects.

“It is my view that this court could, and should, when such an ambiguous policy is before it, hold without equivocation that the provisions which are confusing and ambiguous as to the liability covered will be resolved in favor of the insured. If a few such forthright decisions were rendered by this court in this field it would not be long before insurance policies were more clearly and understandably written to express the true intent of the parties and there would be less litigation involving insurance policies.” — Geddes & Smith, Inc. v. St. Paul Mercury Indem. Co., 51 Cal. 2d 558, 47 Cal. Rptr. 564, 334 P.2d 881 (1959) [emphasis added] Needless to say, the findings of ambiguity in thousands of court cases since 1959 have not resulted in less litigation. This led me to write the following article for a recent edition of the CPCU CLEW newsletter that focused on issues related to successful litigation on the part of insurance consultants, expert witnesses and attorneys. However, unlike most of the other articles, mine focused on avoiding litigation altogether, a point I stress in my recently published book. See also: The ‘Moment of Truth’ for Claims   No one really wants to go to court to decide an insurance coverage issue. That is evidenced by the tiny fraction of insurance claims that are litigated to final judgment. Insureds don’t want to go to court because of the time, uncertainty and stress involved in what could take several years to resolve. Insurers don’t want to go to court because of the expense and, in the case of alleged ambiguities, the potential impact of adverse decisions on past and future claims. Policyholder attorneys may not be interested in low-value claims where the contingencies involved do not make good business sense. The best course of action for all involved is to equitably resolve claim disputes without litigation, at least beyond declaratory or summary judgment actions if absolutely necessary. In May 2018, I published a book titled, “When Words Collide: Resolving Insurance Coverage and Claims Disputes.” As illustrated throughout the book, the best way to avoid coverage and claims disputes is to prevent them. This involves assisting the customer in exposure analysis to identify the likely causes of loss, selecting the right package of insurance products (or risk management techniques) to minimize the likelihood of an uncovered loss and discussing questionable policy provisions with the insured and, if necessary, the insurer. For example, consider this agent inquiry: “I have a coverage question about boat docks that has been answered inconsistently by several insurers even though the language is identical in their ISO commercial property policies. Included under Property Not Covered are ‘Bulkheads, pilings, piers, wharves or docks.’ We believe this to mean permanent, non-removable docks. However, in Minnesota, we have many portable docks that are removed in the winter. Some insurers consider these to be personal property, not real property, while others don’t. According to some insurers, the exclusion applies to buildings and structures, not personal property, but others say it doesn’t matter. Who is correct?” This is a case where we could argue, following a claim, a legal principle called noscitur a sociis that is discussed extensively in the book or apply other logic to determine whether the exclusionary language applies. But there’s no need to do that nor, if an alternative exists, should we wait until claim time to resolve a coverage issue. An Insurance Services Office, Inc. endorsement exists called Additional Property Coverage (ISO form CP 14 10) which says: “The following is withdrawn from Property Not Covered and added to Covered Property….” In other words, you define the class of property before a claim occurs and insure it so there is no need to resolve anything at claim time other than perhaps value. See also: Transforming Claims for the Digital Era   Another example is whether an auto rented by an employee in his or her own name on a business trip creates a Symbol 8 or Symbol 9 commercial auto exposure. The importance of this issue is that only Symbol 8 is normally used to cover physical damage to nonowned autos. The answer to this question lies in the ISO CA 20 54 – Employee Hired Auto form. This endorsement effectively establishes that this is a Symbol 8 exposure (making physical damage coverage available) and that coverage provided by the CA 00 01 Business Auto Coverage Form is primary (a good thing because the employee’s own personal auto policy might otherwise become involved in the claim). In this case, we’re using readily available (and FREE) endorsements to resolve a potential claim dispute under two different policies. So, how can you dramatically improve your litigation success? Easy…don’t litigate. Resolve the coverage issue before a claim arises.

It’s no secret. The future is all about automation, and that future is now. Every industry from automotive and financing to customer service and food service is turning to automated solutions to improve productivity and better serve customers. The market for automation is so large, in fact, that the robotic process automation (RPA) market is expected to reach a whopping $5 billion by 2020. While widespread industry adoption is common in many verticals, the insurance sector has lagged slightly. The automation wave, however, is surging, and insurance providers that have already caught that wave have found incredibly positive results. If you as an insurance provider don’t want to be left behind, it’s time to adapt and adopt an automation solution. While automation sounds like an appealing idea, there are, understandably, some barriers to entry. Automation can seem scary and sound hard to implement. For many reasons, change is difficult, but it could make all the difference. Automation Isn’t Scary Turning to an automated insurance agency document management system can be nerve-wracking to say the least. Adopting a new machine, as opposed to human-run solution, can bring some anxiety. Will the system be able to sort and store files in the correct manner? Is it worth the investment? What about security and compliance? These are all valid concerns, and, if they aren’t addressed, automation can certainly seem like a scary prospect. But automation doesn’t have to be scary, especially if you find the right solution. Here are some reasons you may be scared to implement an automated insurance agency document management system, along with why you shouldn’t be scared. Why Automation Sounds Scary, and Why You Shouldn’t Be Scared

1. It’s new
2. Security and compliance can be difficult
3. It seems like a big investment

It’s New Implementing a new insurance agency document management system can come with a lot of unknowns. While you may be excited at the prospect of lessening the amount of paperwork and menial tasks that consume so much of your daily time, you may feel slightly apprehensive or hesitant to try something new when it comes to insurance document management. After all, maybe you have a way of filing that already works well. You are used to your paper and filing cabinet system, and you’ve been doing it that way for years. If it isn’t broken, why fix it? While the way you manage insurance documents may not be broken, it could certainly be improved. And that improvement could save you or your staff several hours per week. Some have found, in fact, that insurance document management software has saved them as much as $72,000 per year and 80 hours of paid labor per week. See also: Why Risk Management Is a Leadership Issue Security and Compliance Some of the biggest concerns to you as an insurance agent are security and compliance. That’s understandable, as it’s likely that the insurance industry is one of the largest targets of data breach, falling close behind healthcare as one of the most targeted industries. Compliance is also a large concern. Document retention and governance regulations mean you need to be wary of how and how long you store documents. While your current way of storing and sorting documents may feel secure, it’s likely that automated insurance document management software will enhance security. Yes, a filing cabinet that is meticulously managed and organized can feel concrete and comforting, but there is a better way. The security that comes from a password-protected, cloud-based solution with encryption capability keeps documents secure and accessible only to those who are authorized. It Seems Like a Big Investment Adopting a whole new document management solution can certainly seem like a big investment of not only money but also time. After all, you are busy enough as it is. The idea of adopting a new solution can seem daunting. At the outset, you may have no idea how much it will cost or how many man hours it will take to implement. Switching to a new solution rarely comes without growing pains, and it’s hard to rally yourself to take the plunge. The great news is that an automated insurance document management system may be a lot more affordable than you think. For only hundreds of dollars each year, you could very realistically save thousands. And if you are worried about the time taken to implement the new solution, don’t be. Many document management solutions provide personalized service from product experts who can help you custom-tailor the solution to fit your unique needs. With the help of a seasoned implementation specialist, you’ll save time and money and have your system up and running in no time. Automation Isn’t Hard So many document management solutions promise the world and don’t deliver. Maybe you’ve been burned in the past when you tried to turn to an automated solution. And while many document management solutions have a lot of functionality, learning how to use those capabilities can seem difficult. Here are some worries that may be causing some anxiety when it comes to selecting an automated document management solution for insurance documents. Why Automation Sounds Hard, and Why It’s Easier Than You Think

1. It will take a long time to implement
2. There’s a steep learning curve
3. Importing existing documents to a new system sounds cumbersome

It Will Take a Long Time to Implement Shifting over to a new system often means a lot of learning and likely a change in the way some processes are run. You are busy enough as it is, and taking time to implement a new system may seem like it will slow you down. Implementing a new solution may be a lot easier than you think. Getting your new system up and running may take some time, but it’s likely that the time investment will be very minimal compared with the benefits of a new document management system. There’s a Steep Learning Curve Learning how to use a new system takes some time. You may feel that the investment of time learning how to handle documents in a new way will eat into your time and slow you down. Many document management systems are incredibly intuitive and user-friendly. Some come with advanced functionality that is as simple to implement as it is sophisticated. Some use templates that enable files to essentially “file themselves.” See also: Using Technology to Enhance Your Agency   Importing Existing Documents to a New System Sounds Cumbersome What are you going to do with all of your current file cabinets full of documents? How long will it take to convert them into a digital format and file them correctly within a new system? With many solutions, it doesn’t take long at all. Some are trained to recognize specific document types and sort them into specific predetermined files using templates. And those templates are also completely customizable. Automation Is the Future Whether you accept it or not, the world is shifting toward automation. Don’t be late to the party. The great news is that, within the insurance industry, there’s still time to get on board. While there may be a certain level of comfort in holding out and continuing to file documents the way you always have, embracing change and automation will bring relief and clarity. If you’re not ready to implement an automated solution, it’s best that you take some time to consider the negative consequences of not going automated. While you are stuck fumbling over loose documents and renting out extra space to hold filing cabinets full of papers, other agents are going fully automated. It’s time to jump on the wagon, or you’ll be left behind. It won’t take long before the entire insurance world is fully automated when it comes to document processing and storage. If you haven’t implemented it as an insurance agent yet, you may find that customers will take their business elsewhere and find another simpler solution at an insurance company where they have more personal access to their agent because they aren’t drowning in paperwork.

Our three U.S. venture-backed nsurtech carriers have mo' money, mo premiums' and mo' losses. Around the time their losses became notorious, there were some signs of improvement, but not enough to prove viable business models. It’s still early. No 2Pacalypse is imminent, as the startups have tons of cash. But forget about East Coast/West Coast feuds: It’s still insurtechs against the world.

1. Premiums and losses grow at venture-backed startups
2. Industry-backed startups stay focused on underwriting
3. Gross or net – which matters?
4. Correcting rookie mistakes, experimenting and still underpricing?
5. Can anyone beat Progressive and Geico?

Context This is the fourth installment of our review of U.S. insurtech startup financials. Here are the 2017 edition, the first quarter 2018 edition, which generated many social media discussions, and the second quarter 2018 edition. For more information on where our data come from and important disclaimers and limitations, see the 2017 edition. As we have said since the start, we think all three companies have solid management teams who will figure out a solid business, but it will take time. 1. Premium and losses grow at venture-backed startups As we have said before, it’s early days. Growth is rapid. But all three startup carriers are a long way from profitability and need to continue to raise prices substantially (and thus potentially churn customers), tighten underwriting (which could also materially affect growth) or improve operational aspects that drive losses such as claims performance. In insurance, product-market fit is only demonstrated when selling a product that makes money. Here is the summary of the 3Q18 details of the three venture-backed U.S. insurers that we’ve been tracking. The fourth venture-backed insurer, Next Insurance, did not write premium in 3Q18. On expenses, it is important to note that Lemonade received permission from New York State to hide some expenses in an affiliated entity effective at the start of this year, so Lemonade’s expenses aren’t comparable to the others. (Lemonade’s CEO told us that the State of New York requested the change.) Root has followed suit and will now start to hide expenses in an affiliated agency, effective Oct. 1, 2018. Unfortunately, with less transparency, it is harder to verify whether the overall business model actually adds up. Lemonade, for example, makes a big deal about the power of an insurer built on a “digital substrate.” We’re inclined to agree, and we hope they’re right, but we won’t know from their statutory results whether a better expense ratio is really possible. *** The third quarter’s “most improved” award goes to Lemonade, which grew premium by 57% over the prior quarter to $15.5 milliion (perhaps helped by seasonal effects in the rental market) AND turned in a 96% gross & LAE loss ratio, its best ever. The company's reserves developed slightly adversely in the quarter, with YTD unfavorable development standing at $254,000, modestly worse from $245,000 the prior quarter. Lemonade has a ways to go -- its reinsurers continue to subsidize the loss ratio (but now paying "only" $2.44 of losses per dollar of premium), the average net loss & LAE ratio is still well above the 40% at which charities receive a giveback, and the company is far from profitability. But re-underwriting and higher rates -- which we discussed in our last post -- may be paying off. There are other explanations, too -- shifting to cat-exposed risk, for example, lowers the loss ratio but raises the cost of capital. See also: Insurtech: Revolution, Evolution or Hype?   The company has written $33 million in the first nine months of 2018, which is well behind some exponential expectations published last year. Management also says that they will take out 60 loss ratio points: "A similar progression in the year ahead will get us to where we need to be." Good luck. (Despite the good quarter.) Taking out loss ratio points gets harder for every point you get closer to the industry average. The breeziness of management's comments makes us wonder how much focus will be placed on the hard spadework of loss ratio improvement vs. embarking on a glamorous European Grand Tour. Respected industry analyst V.J. Dowling, whose IBNR Weekly publication (subscription only) was cited in a Lemonade transparency blog supposedly praising Lemonade, recently published a tear-down of Lemonade's strategy. IBNR called the giveback “a joke,” the company's marketing "overly simplistic, constantly changing and borderline dishonest" and “B.S. On Lemonade’s 'Transparency' & Model." We have long taken issue with Lemonade’s definition of “transparency,” which (as with many startups) is transparent only insofar as the company wishes to tell a story, which is just another form of marketing. (We are working on a longer article about ways startups bend numbers and welcome your ideas). We also agree with IBNR that a giveback at 1.6% of premium seems cynical. Middle-class insurance agents are some of the biggest charitable donors and sponsors in many towns, and it’s hard to see the social benefit in Lemonade’s spending the advertising budget enriching amoral tech bros at GAFA rather than sponsoring the town's Little League uniforms as an agent might do. Even insurance veterans don’t seem to realize that all of Lemonade’s entities are for-profit. Don't be fooled: B-Corps are still for-profit corporations. And railing against gun violence is easy, but social consciousness is messy in reality. Metromile grew at a steady and respectable 21% from the prior quarter to $24.5 million of gross premium but ran a 98% gross loss & LAE ratio (not improved from 2017). Among the three players, it has been the ant: slower growth and rather steady results. After seven years in business, the company is barely generating an underwriting profit and is showing little improvement. The company has been taking rate, but not as much as the actuaries say is needed. The company’s latest California indication, for example, is rates up 38%, but the company only took 15 points of rate, effective July 1, 2018, which will work through its book over the next couple of months. Matteo recently published a discussion of why its PAYD (the pay-as-you-drive) approach confirms its niche nature. If Metromile is an ant, Root is a grasshopper. Root again grew extremely rapidly through its TBYB (Try-Before-You-Buy) mobile approach, as one probably would expect of a company with a $1 billion valuation (as we discussed in our previous article). Root doubled the volumes underwritten by Lemonade. But Root continues to struggle with rookie mistakes that drove losses -- discussed more below. Root grew premium by 120% vs. the prior quarter to $33 million for the third quarter but turned in 128% gross loss & LAE ratio - its worst of the year and the worst of the three U.S. insurtech carriers. ** With the three carriers resuming rapid growth after a slow 2Q, the 2Q slowdown that we observed in our prior article may have been seasonal or a one-time coincidental slowdown. 2. Industry-backed startups stay focused on underwriting We first pointed out in the prior quarter’s analysis that companies run/led by well-known underwriters were growing slowly but were far more profitable than those with venture capital backing. That hasn’t changed. Here are the four subsidiaries of big companies that are selling direct or have a claim on being an insurtech. These companies often depend on parents for reinsurance and infrastructure, so we show mainly the gross figures. 3. Gross or net - which matters? One well-regarded venture capitalist challenged us on why gross premiums and loss ratio matter when net is what actually sticks to current investors. The difference between gross and net is reinsured premium and loss. The gross loss ratio is provides an unbiased view of the profitability of the book of business, while the net loss ratio may benefit from savvy reinsurance buying, as in the case of Lemonade. See also: How Insurtech Helps Build Trust   What matters most is for startups probably the higher of the two loss ratios. If reinsurance reduces the loss ratio, this is only sustainable over time if reinsurers make an adequate return. Reinsurers, like all businesses, tend to demand higher prices when customers lose them money, which in time makes the net loss ratio look more like the gross. In the case of the two auto startups, they are paying reinsurers to take away their biggest losses, so this “cost of reinsurance” needs to be reflected, and the net numbers matter more. 4. Correcting rookie mistakes, experimenting and still underpricing? At the Nov. 30 plenary session of the U.S. IoT Insurance Observatory, Denese Ross of DRC Consulting shared an in-depth 50-page review of Root’s filings, which total over 130,000 pages. Our opinions, based on her factual/non-opinion analysis, is that Root is experimenting aggressively, correcting some rookie mistakes and still underpricing some business.

The following is Matteo & Adrian's interpretation and analysis:

• Raising rates, but is it enough? Root has begun correcting its early underpricing by raising rates substantially in several states, but not as much as the actuaries indicate is needed. The company has filed rate increases in seven of its 20 states since late summer, ranging from +5.5% to +34%. The highest is in Texas, where the filing is pending, and where Root now writes 1/3 of its premium (whereas Ohio was the largest state last year). The indication in Texas was +200%. An indication is the change to the overall rate “indicated” by an actuarial analysis to achieve a specified pricing target based on analysis and adjustments to historic trends. For many reasons, the rate level chosen could be less than the indication, but a big gap between rate taken and indication suggests management may still be oriented toward growth even if it is at a loss. Indeed, Root recently put up a blog post claiming to be up to 52% cheaper. Further, Root also added or changed discounts, which are not part of the headline rate. In other states, per-policy rate caps limit the actual amount of rate taken on renewal business, possibly to avoid churning existing customers, since the acquisition cost of a renewal customer acquired via a direct channel is quite small. These rate-making decisions illustrate the fine line a company like Root has to walk when balancing growth, profitability, retention and acquisition cost. Similarly, investors should be wary of individual numbers presented in isolation -- it can be good to churn underpriced customers.
• Technology that isn’t as predictive as expected: Root collects telematic data via a smartphone and scores a driver once he or she has tracked 500 miles, using features such as hard braking, acceleration, turning, time of day, mileage, consistency and distractions. The company started with a third party's telematics model that apparently gave excessive discounts to drivers in better tiers – see the steep blue curve below, which is from a Root filing. Root then developed its own model and is giving more modest discounts to better drivers (gray line). Telematics contributes information and allows more granular clustering, but the law of large numbers and class rating variables (e.g. demographics) still matters more than perhaps anyone would like. Good drivers get hit by uninsured bad drivers. Bad drivers can drive well for 500 miles when they’re being watched. Good drivers’ cars get stuck in hail storms and hurricanes. Nonetheless, Root is the first insurer around the world to acquire large numbers of customers through a TBYB (Try-Before-You-Buy) app, something many incumbents have tried in the past few years.

• Me-too is harder than it looks. Root has filed several modifications to its rates to correct mistakes, such as correcting household structure data, moving from ISO vehicle symbols to factors assigned directly by VIN and correcting for “double-discounting” and “double-surcharging.”
• Claims difficulties. Most startups lack a high-quality claims infrastructure, which is one of the hardest aspects of an insurer to build, but it appears that Root is now taking more claims activity in-house instead of using a third party claims administrator (TPA). To date, Root's customer claims experience hasn't been as easy as the company says. The 15 Better Business Bureau complaints are mostly claims-related, and only 1/3 of Clearsurance users were satisfied with the claims experience. On the same website, Progressive and Geico are around 80%, and Metromile is at 70% claims satisfaction. As one Clearsurance review of Root reads: "I was in an accident back in July, and it's now November, and my simple simple claim has not been paid on or closed out. It was originally with an adjuster at Crawford & Co. but without my knowledge that changed hands to some other adjuster actually within Root. The original adjuster back in September said that she would get back to me within the week....Months later and I'm still here with an open claim."

It will take time for the corrections Root has made to show through in results. And particularly on pricing, they may be too little. Thus, the question remains: Is Root’s growth simply the result of selling something far too cheaply, or is it quietly experimenting its way to becoming the next Progressive? 5. Can a startup compete with Progressive and Geico? The most common refrain of startups is that insurance is broken, and their solution will fix it. Oui, c'est vrai. But two companies have their act together more than almost any other insurers: Geico and Progressive, the #2 and #3 auto insurers in the U.S. Geico is famous for its lean expenses, while Progressive runs a loss ratio about six points below the industry average of 69%. It wasn’t always this way. Back in 1996, Progressive was #7, and Geico was #9. There are few other examples in insurance of companies so steadily and regularly gaining market share across decades. In our first article, we showed how startups historically have only won where incumbents leave the door open. Progressive and Geico are not leaving the door open, at least in personal auto as a stand-alone line. Progressive, in particular, has been quite experimental throughout its life, pioneering telematics in the U.S. and experimenting with various ways of paying for auto insurance and using telematics, as some startups are now doing, but with none of Progressive’s advantages. So why do startups try to compete with such well-run companies? We think there are several beliefs (or hopes):

• A belief that the startup can duplicate public filings to set rates. As noted above, it's harder than it looks. Even professional comparison rating websites have trouble estimating a person's actual premium, and, in a thin-margin business, small differences matter. This is not a new story – eSurance's first me-too nearly 20 years ago didn't work particularly well. Progressive, having outperformed the market for decades, knows that its filings are scrutinized. Like a game of cat and mouse, the company has become expert at fooling competitors that try to replicate filings, which run thousands of pages and are deliberately obscured and complicated. And rate filings are only one aspect of underwriting. Credit models, underwriting rules and marketing plans for attracting the best customers may not be public and may be difficult to replicate. The result is that unwary and inexperienced competitors may grow by unknowingly writing the risks that their competitors didn’t want. There is no CAC at which an underpriced customer is a desirable customer

See also: Insurtech’s Act 2: About to Start  

• A belief that there are profitable untapped segments that incumbents won’t cannibalize. Progressive and Geico are very intelligent companies with a long history of innovation and extremely detailed customer segmentations. It defies all logic to suggest that there is a large segment of customers in a fragmented and highly competitive market that are being greatly overcharged simply because these companies refuse to offer them good rates to avoid cannibalization.
• A belief that the startups can easily acquire customers through direct channels. Direct distribution is not new in U.S. auto – Geico and Progressive both spend billions of dollars a year in advertising and have extremely sophisticated digital marketing. To this end, one of Root’s interesting innovations is its referral program, which we showed in our last article to be quite powerful. (And we probably underestimated its power, because we didn’t account for multi-car policies.)
• A belief that the startups can be “good enough” at claims. Scale matters in handling claims, whether it is hiring and managing high-quality defense counsel, detecting fraud patterns or negotiating with vendors such as garages and roadside assistance services. Further, incentives for third party administrators must be carefully set to avoid excessive claims cost and customer dissatisfaction. For example, when a TPA is paid per open claim, speed of settlement may suffer, which can lead to regulatory fines or bad faith judgments – not to mention customer annoyance. In an industry where 96% is considered a best-in-class combined ratio, even a little bit of claims leakage can be quite hurtful. Metromile is exploring the reinvention of the claims process through the usage of telematics data. Considering the international best practices of doing this, the size of the portfolio might not allow the company to have enough claims yet to train an algorithm for a reliable crash kinematic reconstruction.
• A belief that “we only need 1% of a $220 billion market to be huge.” So 1999…

This analysis isn’t to suggest that it’s impossible for a startup to win in auto insurance, but that the moat around Geico and Progressive in personal auto is wide and deep. Conclusion The annual figures that are published in March contain a wealth of additional information. To be notified when these numbers are available, please follow the authors on LinkedIn.

When we say marketing 3.0, industry 4.0 and technology 5.0, we all get used to cool names ending with zero. I think no one is surprised that insurers fell a little bit behind. We all talk about these cool zeros, but there is something really zero in insurance: customer service. I’m not talking about a claim service or a specific customer relations problem. I mean the view of insurers’ whole customer service. Most insurance companies think that they should only serve for the customer who has a claim. Their favorite customers are the policy owners who haven’t had any claims for years. But the insurance industry's approach doesn't match with the fundamental dynamics of the service sector. As a service company, if you are getting a fee from customers, you should be happy while serving them and should want to make your customers happy, too. See also: Next Generation of Insurance Services   Insurance companies need to remember that they are in the service business. Serving only the unfortunate winners (claim owners) does not make you a services provider, but makes you a lottery company, at best. Lottery companies do not have problems because the majority of ticket owners know that the chance of winning a lottery is very low and don’t expect any special service from the lottery company. But people buy insurance against bad events that they think are likely to happen, and, if these events do not happen, they feel they do not get their money’s worth. Therefore, it is necessary for all insurance companies to provide service to all of their customers during the policy period, even if they have not made any claims. Think about the gym that you paid hundreds of dollars for a year and you have not visited for nine months. Probably, you are angry with the gym. After a year without any claims, an average policy owner has similar thoughts about the insurer. How can you handle this problem? Let’s go back to the gym you have not visited for months. What if it provides you another kind of service that you can use remotely, like healthy nutrition consultancy or a one-year free Netflix subscription? The Netflix subscription could completely eliminate the possibility of your gym use, of course. :) But, joking aside, what would you think about the gym? Surely, you would find it more sympathetic and might think your money is not wasted. Six years ago, when I was working at Cigna Turkey, we had created a concept called “living insurance” to make life insurance more desirable. We bundled lifestyle services with insurance products by means of different concepts like family, education and healthy life. Normally, no one wants to think about the possible return on their life insurance policy; it's an unpleasant topic. However, with the service we provided to our customers -- from carpet cleaning to skin care, car check-up to pedagogical consultancy -- our product became something more than just the consolation of bad luck. In this way, products became more attractive, and customers did not think that their money was wasted. They could benefit from services any time during the policy, even if they had no claims. Of course, it was easier said than done. Some conservative executives strictly stood against the strategy. Some raised questions like, “What is the relation between these services and our policies?" Now, when I look back, I can easily say we have been successful. These products sold hundreds of thousands in a few years, and some of them are still the best sellers. In addition to creating a new product category in the market, we opened a way for these lifestyle services, which are now an industry standard; today, almost all life insurance companies in the market provide these kinds of additional benefits. See also: How to Use AI in Customer Service   Insurance companies are obligated to serve their customers throughout the whole duration of the policy, whether it is home, car or life insurance. By giving names to our customers as “insured” or “insurant,” we forget that they are actually customers with needs and expectations. To catch up with industry 4.0 or technology 5.0, insurance companies should focus on holistic customer service development before the big infrastructure transformation development projects. In this way, an insurance service 1.0 that represents a customer service concept that meets customers' expectations may be possible.