Digital transformation is at the top of most carriers’ agendas. But as life insurance sales move from the adviser to online channels, are we forgetting the science of persuasion? It is easy to sell candy. Candy tastes nice. It is full of sugar that our body craves, and we have to use our willpower to stop ourselves from overindulging. If you want to sell me more candy, you just need to make it easy to buy and hard to avoid. You can ensure the packaging is bright, bold and colorful so that it grabs my attention and makes it hard to ignore my cravings. You can place the candy by the supermarket checkout so that it tempts me while I'm waiting to be served. It is much harder to sell sprouts. Although they are good for you, sprouts just do not taste good to many people. We will not sell many more sprouts just by making it easier to buy sprouts. Wrapping them in beautifully colored packaging and placing them by the supermarket checkout is unlikely to lead to a dramatic increase in sales. Few people would find themselves unable to resist impulse-buying a pack of sprouts. It is both fortunate and unfortunate that selling life insurance is much more like selling sprouts than selling candy. Fortunately, like sprouts, life insurance is good for you. It protects families from losing their homes and livelihoods and enables people to leave a legacy to future generations. Unfortunately, for most people, life insurance does not taste good. We do not crave it, and we do not have to fight an impulse to stop buying more of it. So why, when we are creating digital distribution channels, do we assume that selling life insurance has suddenly become like selling candy? All the focus is on making it as easy as possible to buy life insurance by reducing friction. This is undoubtedly important, but it is not the whole picture. Carriers focused solely on reducing friction continue to see disappointing digital sales figures. Part of the reason is that we are looking to the wrong industries for inspiration. I have heard countless speakers at industry events talking about what we need to learn from businesses such as Amazon and Netflix. But Amazon and Netflix sell very different products than we do. I want to listen to music, read good books and watch great content – it tastes good. So just make it as easy as possible to do and as hard as possible to stop (Netflix’s auto start). See also: The 6 Principles of Persuasion   Persuasion is not reducing friction People who build digital systems are very good at reducing an activity to its core. They can identify waste and unnecessary steps to such an extent that experiences become so simple they are almost frictionless. But there is a danger to this approach: What digital designers see as friction may actually be persuasion. What might seem unnecessary may actually be core. A technologist might look at a server in a restaurant and think: “We don’t need a person to do that job; we can automate that.” It is only a few months later when sales, return visits and customer reviews are down that they realize the server does more than take your order and deliver your meal – the server welcomes you, makes you feel at home and signals the status of the establishment. In automating the insurance purchase journey, we have forgotten that financial advisers and life insurance salespeople do more than facilitate a purchase – they persuade the customer to make the purchase. We all know the oft-repeated adage that “life insurance is sold not bought.” But we seem to forget that when creating digital insurance platforms. So how do we sell more life insurance online? What does persuasion mean? What is clear is that while many people have a problem that life insurance can solve, most do not realize they have this problem. To sell life insurance online, we must awaken the need for it – just as advisers and salespeople do. Awakening the need for insurance Prompting awareness of a person’s mortality and morbidity can awaken a need. Traditionally, we have accomplished this by asking difficult and even disturbing questions:

• “Your family depends on you. Who would they depend on if you were no longer here?”
• “You work every hour of the day to provide for and look after your family. Who will do this if you're gone?”
• “If you had died this year, would your family have been able to afford to keep living in your house?”

These questions provoke an instinctive emotional response. For some, the answers will be comforting: “I have $1 million in the bank, so my family will be fine.” But for many the answers are worrying: “I don’t know how they’d cope.” The questions awaken a need people did not realize they had. They become anxious and determined to solve the problem they are now very much aware of. The challenge is to effectively replicate this approach online. Can a Facebook or Google ad grab someone’s attention and make a strong enough connection for these types of questions to work? Or will people react negatively to being asked such questions in this context? This still needs to be tested and proven either way. It may be that digital channels need a different approach, one that matches the context and the mood of people as they interact online. Carriers and startups are focusing on using more positive messages and storytelling techniques to engage customers. But too often these approaches lack real emotional punch – to awaken the need, we might need to shout rather than whisper. More fruitful could be approaches that work in a slower, less direct way but still use emotional intensity and tap into the inherent sociability of digital experiences. See also: How Customers Really Think About Insurance   For example, crowdfunding platforms that enable people to ask their friends and families to help pay their medical bills can help increase the demand for health insurance rather than reduce it as is often feared. Seeing a friend or family member suffer a serious illness prompts awareness of one’s own mortality and morbidity. Seeing them have to ask others to fund hugely expensive but potentially life-saving treatment makes people want to avoid ever finding themselves in the same situation. This awareness has awakened the need for life insurance and opened a potential sales channel. Mutual aid platforms using this approach are growing fast in some markets and appear to be increasing the size of the market rather than just winning market share. The potential for digital insurance sales is huge, but so are the potential pitfalls, which is why we at RGA have made this an area of focus. What is already clear is that we need to stop making assumptions that are simply not true and hoping people will suddenly crave life insurance in a way they never have before. We need to start creating products, platforms and communications based on how people really think and behave rather than how we think they should. If we continue to design our digital journeys for the ideal person, in effect we are designing them for no one.

In 2019, we will see many of the 2018 technology trends continue but with an added focus on business transformation and value. Innovation In 2019, we will see continued investments in insurtechs and fintechs, as more companies realize the value of technologies that enable the delivery of next-generation digital experience, especially in the area of customer engagement. Consumers’ demands are driving the need for better self-service capabilities, mobile capabilities and engagement tools. As with John Hancock’s use of Vitality and with SE2’s investment in Life.io, we’ve seen the creation of next-generation customer engagement platforms that leverage wearables and other social and industry data to get unique insights into prospects' and policyholders’ lives. That allows these companies to offer better needs-based, more personalized products. As insurers are able to access higher-quality data, there will be more experimenting with analytical models and algorithms to transform the underwriting, sales and marketing paradigms. Additionally, the ability to access consumer data in real time will continue to drive innovation in the insurance industry. Companies like Human API and Clareto are bridging the gap between heath information exchanges, healthcare providers and life insurance carriers, enabling them to fine-tune underwriting, claims and other business processes. Helping consumers live a better life and have a holistic approach to manage both their mortality and income risks is the way to go rather than sell point solutions with aggressive sales tactics. See also: 3 Insurtech Trends Accelerating in 2019   Artificial Intelligence/Machine Learning While there continues to be excitement and conversation around artificial intelligence and machine learning, the fact of the matter is that the insurance industry as a whole continues to struggle with adoption. Issues around data governance still need to be solved, data rationalization is not complete and data quality continues to remain a major challenge for insurers. Looking ahead in 2019, there will be more work in this area as insurers make progress in putting into place the foundational elements needed to create a strong data paradigm that will enable AI and ML adoption as well as generate real business value. There will be progress made in creating and enhancing data repositories, data lakes and other foundational infrastructure technologies. This year will see a refocus on AI and ML -- especially in conversational AI -- that will enable insurers to streamline and augment the work of their own employees and distribution network, ultimately providing a superior experience to policyholders. Digital Transformation Driven by customers’ market needs, digital transformation continues to remain a key priority in 2019. Many insurers remain constrained by the complexity of their back-end systems, resulting in very real concerns around agility, value and delivering the right consumer experience. Consumers are demanding more simplified products, as well as a growing preference for bundled products with the overlap of income and mortality risk. Without a nimble, flexible architecture in place, many insurers struggle with launching products fast enough to capture new customers with these preferences and gain market share. The year 2019 will see an increase in insurers looking to create effective and efficient direct-to-consumer distribution channels or other digital distribution channels to reach the vastly underserved middle market and millennial customer segments. Additionally, there will be increased pressure by the market for lower pricing, leading insurers to create cost efficiencies through digitization of back-end processes, increasing usage of RPA (robotic process automation), STP (straight-through processing) and digitized operations processes throughout the entire lifecycle of the policy. There is not only a price play but a consistency and a quality play that our industry struggles with, as well. At SE2, we call this moving from a “high touch” to “low touch with hugs” operating model. End-to-End Platform Modernization Driven by the need to reduce or eliminate outdated legacy technologies and address business and technology architecture complexity, an end-to-end platform modernization focus will be a very high priority for life and annuity insurers this year. Insurance carriers are realizing that the investments they’ve made in front-end digital capabilities are not giving them adequate return on investment without a fully digitized, modern and simplified back-end system. These delay the time it takes to launch products and hamper the ability to streamline business models. With a digital, open architecture platform, insurers can easily integrate systems and plug in APIs to extend their capabilities. See also: 8 Key Insurtech Trends for 2019   Overall, 2019 should be yet another interesting year for our industry and SE2, as we see billions of dollars of innovation spending led by tech giants like Google, Amazon and Microsoft, and the L&A industry finally beginning to reposition itself.

You sit down with a cup of coffee. You resist the urge to check new emails or Slack messages. You want to spend a few minutes to plan out, in your mind, how you will keep the momentum going for your transformation agenda or your innovative product. After a lot of resistance, all the pieces have finally started to move in the right direction. Just a few more months of hands-on progress, and you will have reached an inflection point, so things will not regress back to how they used to be. But the new year has come with new goals, new budgets and new distractions. Will everyone still be focused on your initiative? Will some stakeholders check out because they have something new to chase or they never truly believed in the mission anyway? You begin to worry about how to sustain your agenda. You start to wonder how you should drive it differently this year. Sounds familiar? Read on for a time-tested way to make sure your transformation and innovation agenda succeeds. What makes transformation stick? Transformation isn’t all about a wonderful brainwave or an iconic product. Most of the companies that are considered leaders in innovation (think Amazon, Google, even Tesla) and companies that are successfully transforming themselves (think Microsoft, New York Times even Walmart) are often not the first movers. They are often taking existing ideas and existing products and reassembling them in a more compelling, more meaningful way for the customer. Why do they succeed where other large and experienced companies fail? My belief is that the successful companies – or their specific divisions – embed transformation and agility in their DNA. Their cultures and internal processes are no longer designed solely to protect today’s franchise. Instead they are focused on moving steadily toward the franchise of tomorrow as well as moving away – quickly – from failed ideas and plateauing business models. What does the transformation DNA look like?  Three intertwining strands make up the transformation DNA in an organization. You need each of them in order to succeed.

1. Strategic clarity. You can’t transform or innovate without a strong hypothesis about the direction of change in the economy or the society and a strong belief about how you, specifically, will capitalize on or drive that change. While it is important to be agile and course-correct your strategy as needed, aiming for the wrong strategic quadrant or trying to conquer multiple quadrants at once is often a recipe for failure.
2. Precise, yet nimble, execution. Bold strategies, great ideas and soaring visions are worthless if they don’t survive in the day-to-day realities of your organization or industry. To that end, you need a well-thought-out plan to execute them. You also need a mechanism to sense when to fine-tune your plan based on changing realities.
3. Critical mass. Out of three strands of the transformation DNA, this is the most elusive one. Many organizations are great at strategy, many are great at execution, but most fail to truly build the discipline needed for scaling. You need to set meaningful milestones and only scale your investments if you meet those milestones. This discipline ensures that ideas or strategies that do not pan out in the marketplace don’t become a bottomless pit and starve other more potent ideas.

See also: Culture Side of Digital Transformation   How do we know we have sufficient strategic clarity? Get your core cross-functional team together and collectively answer the following questions in an open-minded manner. If you identify any areas of weakness, brainstorm as a team how you can define that aspect of your strategy better.

• Concise strategy: Can you articulate your strategy in a succinct way? With today’s fleeting attention spans, you will not win converts or allies for your endeavor if you can’t give them a quick but clear view of where you are going. This is not just a matter of playing with words and semantics. Is your strategy based on a strong hypothesis about the future and about your own strategic play?
• Clarity of outcomes: Are you clear about what success will look like? Will you gain market share, cross a revenue threshold, leave certain competitors behind, save a material portion of costs or measurably improve customer experience? The intended outcome of your strategy needs to be clear, both as a measuring instrument and a rallying cry.
• Clarity of approach: How will you realize your strategy? Will you build or buy or partner? Will you optimize what you have or invent something? Will you build a product or a platform? Often, there are many ways to reach a goal, and knowing which ones you will be following is crucial to ensure alignment and efficiency.
• Clarity of priorities: No matter how well-planned your quest is, there will be moments of truth when you will have to choose one path over another or provide resources to one effort over another. Do you have a clear prioritization framework that will help you make those decisions?

How do we assess and strengthen our ability to execute? Having a good strategy is a good start, but it’s just one of the ingredients. You also need to make sure your execution engine is in top gear. Look for these essential elements of nimble execution:

• Alignment between execution and strategy: Have you assembled a team that has the resources and skill sets your strategy will require? Do they understand and internalize your strategy? The next step is to engage them in building the high-level contours of your execution plan. Does this plan truly reflect the defined strategy, or is it just a “copy/paste” aggregation of siloed functional plans?
• Granular execution plans: As unsexy as it might be, defining granular execution plans based on the high-level blueprint is crucial. The biggest benefit of doing so is to identify dependencies that go across functional siloes. That is where a lot of transformational efforts fail, as two functions operate at different speeds or from different blueprints and fail to support each other at the right moment of dependency.
• Frequent recalibration: Do you have a way to measure your progress against the execution plans? How frequently does the team review the progress and recalibrate? This does not necessarily mean a lot of bureaucracy and a lot of “progress reports.” If your teams use one shared, digital tracker, the progress can be visible to everyone in real time. Yes, you do have to have a conversation with the right folks if a recalibration is needed.
• Decentralized decision rights: While I recommend shared or centralized tracking of progress, decision rights should be as decentralized as practically possible. This allows quick adjustments at the ground level and often preempts bigger problems. A similar approach can be found the Petraeus doctrine, which the army follows in modern, asymmetric wars. Go ahead and empower your teams to make decisions on their own – within guardrails, of course.

How does the concept of critical mass apply to our initiative? “Thing big. Start small. Scale fast.” You may have heard one of the many variations of this powerful adage. Sometimes people say “Learn fast” or even “Fail fast.” The core idea here is to divide your journey into distinct phases that get you to the proverbial “next level” but only launch the next phase if you perform well in the earlier one. If you don’t get to critical mass, if your metrics fall short, you should go back to the drawing board and reconsider or reorient the initiative. Follow these steps to embed this thinking in your operating model:

• Phases reflect step functions of value: Take a step back and think about the end game. What is the big prize? What is the value that you will deliver? Now, zoom in a little and think about the first “win” you can produce. Similarly, define one or two additional steps in value before you get to the big prize. Delivering these early wins will earn you street cred and buy-in. Without these, you are likely to fail or get sidetracked before you reach the big prize. Another common pitfall is that, in reality, phases are often lazily defined – just tied to quarters or based on something one function is already planning to do. To succeed, it is crucial to define the phases based on value increments.
• Phases reflect step functions of effort: Each of the phases defined above often requires a different level of resources and effort. For example, your first phase may be a prototype for which you borrow a few resources and stitch together a barely functional solution. But if that works, you may need to bring in many more resources and collaborate across functions to build something robust enough to be sold to or used by real users. Finally, as you get to the scaling phases, you may need to invest even more resources, for example in usability, in security and, of course, in marketing and sales. Ideally, your phases should reflect step-function changes in resources and investment, as opposed to just continuing the status quo.
• Structured review of phase results: Just defining the phases is not enough. Your team will need to define very clearly what success looks like for each phase. And as you come closer to the end of a phase, you should review with your board or steering committee, how the phase has performed vs. what you had expected. This review needs to be structured and methodical and should drive a clear go/no-go decision. Because each new phase represents a higher level of investment (and return), there should be an explicit decision before you plunge in. Without a doubt, this is the hardest part of the whole journey. Being able to step back from something you have invested in – financially and emotionally – is hard, but sometimes that is the right thing to do.
• Feedback loop into strategy: Last but not least, these phase reviews should feed into the continuing strategy definition. Perhaps the competitive landscape has changed. Perhaps a new technology has disrupted your previous assumptions. Perhaps you were too enthusiastic in terms of what your in-house team could accomplish in the given time. The latest, more nuanced understanding of the ground reality should inform your strategy as you move forward.

See also: Core Transformation Is Not Negotiable   Transformation and innovation initiatives can be very exciting and fulfilling. However, if they do not win in the marketplace, they can be shuttered after enjoying a year or two atop the hype wave. You can avoid that fate and ensure that your initiatives win by building the transformation DNA in your organization using the above approach. Good luck, and do share your experiences and thoughts.

The World Health Organization recently released its list of the Top Ten global health threats in 2019. Making that list is "vaccine hesitancy." This includes parents who don’t get their children vaccinated from 100%-preventable, highly contagious diseases for personal liberty or religious reasons. Others include people who are simply too confused, too busy or badly misinformed and thus won’t get the annual flu shot. Why is WHO so concerned? It’s simple—the anti-vaccination movement has done incredible harm to the field of public health. WHO research estimates that vaccines prevent between 2-3 million deaths worldwide each year and that another 1.5 million children could be saved from preventable deaths such as the measles and diphtheria. Louis Pasteur and Florence Nightingale are turning over in their graves. As a small child, I participated in one of the greatest public health success stories in American history. I got the polio vaccine. Polio had been around since the start of recorded history. In 1952, there was a nationwide polio epidemic, with 58,000 new cases. With the advent of the first polio vaccine in 1955, developed by American medical researcher Jonas Salk, the number of new cases dramatically decreased to fewer than 6,000 by 1957. Another medical researcher, Albert Sabin, developed an oral vaccine (a sugar cube with the vaccine) in the early 1960s. I got the oral vaccine in 1962 with all the other kids in my neighborhood. Polio has since been virtually eliminated in the U.S. WHO reported only 22 cases world-wide in 2017, mostly in remote places controlled by the Taliban. Today, the polio vaccination program would be met by widespread resistance. The anti-vaccination movement would insist that the polio vaccine gives you polio. There are anti-polio vaccine researchers today who believe that the vaccine does not work and that the declining numbers are due to underreporting, manipulation of data and simply better sanitation. Really…? See also: Bridging Health and Productivity at Work   The anti-vaccination madness began in earnest when British medical journal the Lancet published an article using purported research linking the MMR vaccine (measles, mumps and rubella) to autism in children. The supposed link between the MMR vaccine and autism was later declared by the publisher of the Lancet to be “the greatest public health hoax in the past 100 years.” ( See, "To Be or Not To Be (Vaccinated)" The major problem is that recent surveys have shown that 30% of American adults still believe the link to be true. The measles, which is a highly contagious and dangerous disease, was once an epidemic in America. I got my lifetime immunity the hard way—I had the measles. Due to the development of the MMR vaccine, the measles was officially eliminated in America by the Centers for Disease Control and Prevention (CDC). However, the world-wide scare due to the hoax linking MMR to autism, and the false belief that the measles is not dangerous, has reared its ugly head and led to the WHO reporting a 30% increase in measles cases worldwide. There have now been a handful of measles hot spots reported in the U.S. in the past couple of years. Just recently, it has been reported that a person infected with the measles at a Portland Trailblazers NBA game has left at least 36 people infected in neighboring Washington state. A measles outbreak occurred in New Jersey in December that spread to two counties and that has been 100% linked to anti-vaccination sentiments and beliefs. This "vaccine hesitancy" threat is directly linked to another Top 10 global health threat: the fear of a global influenza pandemic. Unlike with polio or the measles, many different strains of the flu circulate around the world each year that have the potential to mutate into strains never seen before. The anti-vaccination sentiment contributed significantly to last year’s flu epidemic in the U.S. that killed 80,000 Americans, including 185 children. CDC research shows that 85% of children who die from the flu each year were not vaccinated. A recent survey performed in November by NORC, a research organization at the University of Chicago, found that 40% of adults in America do not plan on getting the flu shot this flu season (2018-2019). The CDC also estimates that up to 100,000 children will not be vaccinated against the flu this season. The scientific facts include that adults are five times more likely to die from complications from the flu, such as pneumonia, if they don’t get the flu shot. In addition, the flu shot prevents deaths in 65% of otherwise healthy children. CDC studies in the 2016-2017 flu season found that the flu shot prevented 5.3 million illnesses, 2.4 million medical visits and 85,000 hospitalizations. The biggest myth continues to be that the flu shot can give you the flu. I’ve heard people swear to it. Yet it is a scientific impossibility. It takes up to two weeks for the flu shot to take effect. So, people who get the flu after getting the shot either got the shot too late or they caught an entirely different strain of flu. Some people do experience a mild reaction to the flu shot. This actually means it is working. Everyone over six months should get the flu shot. Public health researchers state that even people who are allergic to the flu shot should get vaccinated, but only in a medical office or hospital where they can be monitored for a reaction. Flu season typically peaks in February, so there is still time to get the flu shot to help prevent serious illness—especially among the elderly, and infants less than six months who are exposed to a contagious person. See also: Focus Areas for Insurers in 2019   The WHO 2019 report shows that public health officials are deeply concerned with the potential for new outbreaks of vaccine-preventable diseases like the measles, diphtheria and influenza. What else is there to be concerned about? You name it: Air pollution and climate change are considered the greatest environmental risks to health. The primary cause of both is the burning of fossil fuels. Non-communicable diseases such as diabetes (See, "Diabetes: Defining Moment of a Crisis"), cancer and heart disease will account for 70% of the deaths this year worldwide, or roughly 41 million people. Rounding out the WHO Top 10 Global Health Concerns for 2019 are: anti-bacterial resistance due to the overuse of antibiotics; HIV; dengue fever; Ebola; fragile and vulnerable geographic locations where a quarter of the world population lives; and the overall lack of primary healthcare around the world. Stay tuned. I would like to thank my medical research assistant Chandler Berke (B.S., public health, and 2019 medical school candidate).

Customer service is undoubtedly important to the modern, connected consumer. The chief differentiator between legacy carriers and the new breed of agile, digital-native insurtechs lies in the superior, efficient and omnichannel customer experience the latter are able to provide. The rapid rise of companies like Lemonade has shown the benefits that personalized offerings can produce. While 2018 saw many legacy carriers conduct a host of pilot initiatives aimed at improving the customer experience, there is an imperative on the rest to act now in delivering interactive and personalized products, communications and experiences. Based on a 2019 Insurance Nexus survey, insurance executives firmly believe that customer experience will see the biggest impact from the implementation of AI. While there are many barriers for carriers to effectively leverage AI (data organization, lack of technical expertise and ever-increasing regulation, to name but a few), its potential for winning and retaining customers in the future is now beyond doubt. The survey found, among other things, that: --85% of the executives expect to increase their investment in artificial intelligence this year. --30% see the biggest impact on customer service, while 26% expect the biggest changes in claims. --76% expect their personal roles to be transformed by AI. --52% see AI as integral to one of their company's top three strategies. Three carriers who are making great strides in the successful deployment of AI-driven personalized services will join Insurance Nexus for a webinar, “Create Customer Value with AI + Innovation: Personalize Insurance to Win Customers Hearts,” on Jan. 30. You can register here to attend live or to have the recording sent to you afterward. Moderator Stephen Applebaum, managing partner, Insurance Solutions Group, will be joined by: Thomas Sheffield, QBE senior vice president and head of specialty claims; Nicolette de Guia, Allstate head of consumer innovation and design, Allstate Digital Ventures; and Bilal Parviz, Arch Mortgage Insurance vice president of product development. They will explore the approaches carriers are successfully deploying to create valuable customer experiences driven by AI, including: how to move from low-touch to automated underwriting; how to let customers own their claims journey; and how to completely understand your customer.

Over the past couple of weeks, we have used this commentary to shine a light on and begin a discourse regarding what we believe are the avoidable consequences of certain catastrophic events. As our takeoff point, we've focused on PG&E's announcement that it plans to file for bankruptcy protection following massive liabilities from California's wildfires over the past couple of years. Some have shrugged and said there really isn't much we can do because the changing climate creates such vulnerabilities. Others have suggested that we can stop, even reverse, climate change. We think we have to deal with the world as it is, while waiting (without great hope) to see whether mankind has the political will and the technological skill to remove climate-related vulnerabilities, at what would likely be great cost. 

And we think we can deal with the world as it is, at least a lot better than we have been, mostly because of sensors that are becoming available. The California Public Utilities Commission has just 19 inspectors for the state's 250,000 miles of power lines and 4.2 million utility poles, but new types of sensors in the grid, augmented by a new generation of satellites and drones and managed aggressively through big data and AI, can at least help spot many potential problems and can let the state respond much faster to those that occur. 

The benefits of technology are even more apparent and immediate in preventing other sorts of disasters. What about the folks in Mexico who blew themselves and a bunch of other folks up trying to tap a gas pipeline? Is technology available that can detect an attempt to compromise the pipeline? There absolutely is. Is there technology that can assess the integrity of a bridge before it collapses? Yes, there is, and the technology is getting better.

Until now, we didn’t really have any choice but to wait for catastrophic events to occur, then respond as best we could. But technology exists or is being rapidly developed to enable a complete shift in our approach from response to prediction and prevention, and, at least with respect to infrastructure, we are not moving nearly fast as we should.

We refer to the current situation as a "Pinto moment." Our bet is that the costs to lean into technology that captures the data, analyzes it and creates alerts that can head off catastrophes pale compared with the cost of recovering from an event like California's Camp Fire (as if there is any recovery for the 89 people who lost their lives and for their families). 

We don’t know exactly who or what caused the Camp Fire, and we don't know just how it could have been prevented or what the cost would have been. We do know the wait-and-see cost of not doing anything.

One person responded to an earlier commentary by writing: "So I suppose you think the insurance industry is responsible" for these types of catastrophes. Well, depending on how you define "responsible," then, yes, we are saying that. Not from a legal liability perspective, but based on the notion that the insurance industry is uniquely qualified to take on the world's grand challenges. The industry should lead, and, in our view, has the responsibility to do so.

If running a business were just about management, then we wouldn't need leaders; we'd just need managers. But innovation doesn't happen without leadership. You can't manage your way to a new business model. We need leaders who will drive us from reaction to prevention.

If we don’t step up, who will? Government? Are insureds going take up the mantle? Prevention is in our wheelhouse. And the upside to taking the lead and shifting the whole approach from risk management to risk prevention, from turning the model on its side, is a lot of new revenue opportunities. 

Are we as an industry and a society willing to step up and be smart about getting out in front and using technology to revamp how we approach the risks we face everyday? 

Who will raise a hand?

Wayne Allen
Chief Executive Officer
Insurance Thought Leadership

Insurers have one asset that is first among equals, that is too rare to risk and too rich to easily replace, that is too abstract for actuaries to calculate and too valuable to actualize with numbers alone, as if an extra comma here and another zero there can create worth without effort—if insurers look beyond their respective balance sheets, they may see the result of centuries of history, laws and tradition. They should see that there is no substitute for integrity. Insurers should also know, and I am here to tell them for the first time or however many times it takes, that the wrong digital marketing campaign can ruin what they cannot recover: their livelihoods, their fortunes and their sacred honor. Dramatic words, but a truthful description just the same. Melodramatic words, too, but a nonetheless accurate account of the damage that the inexperienced can cause, that the incompetent can sow, that the inept can spread in seconds. That insurers can be so cavalier about digital marketing, when they are otherwise so conservative about how they do business, must no longer be standard operating procedure. See also: 5 Accelerating Trends in Digital Marketing   According to Erez Kanaan, founder and president of Kanaan & Co., digital marketing must never be the domain of the novice and a means to deter clients from asking questions. He says: “Digital marketing is a ‘science’ to the extent that we can measure the efficacy of keywords, ads and website traffic, among other things. Overall, however, digital marketing is more of an art than a science. It has the veneer of science, but it requires the soul of an artist to craft a message that resonates with a specific audience.” I agree with that comment, not because I think it is right, but because I know it is; because there is too much junk online; because there is too much noise in almost every medium; because there is a surplus of mediocrity and a scarcity of excellence, from the ads we see (and do not read) to the posts, tweets, texts and alerts we have to see before we can see what we want. Insurers need to accept these facts. More importantly, insurers have to act in accordance with these facts. They must not compromise what they can control, only to lose control over how they present themselves and how clients perceive them. Digital marketing, then, is a power that belongs to the few—that should be the property of the talented few whose work is as exceptional as the work ethic of each designer, writer, advertiser and SEO specialist, for whom it is a privilege to be a digital marketer. See also: 5 Digital Predictions for Agents in 2019   Call it a service by the few for the good of the many. Call it a service that exists, but one that must expand so we can render the unprofessional unacceptable and the unethical extinct. Call it a digital marketing policy for insurers and policyholders alike. Call it a new chapter in the union between insurers and digital marketers.

Blockchain has grown to be way more than just a tech underpinning cryptocurrencies. It is opening up transformative business opportunities, even in industries that are notorious for resisting change. And for good reason. Blockchain offers data security, reduced transaction costs, increased efficiency, trust, transparency, fraud prevention and data provenance. It’s no wonder that many businesses are already rising to the occasion with exciting use cases, even though full-scale adoption remains elusive. Here are some of the startups spearheading the adoption of blockchain in the insurance industry: Tradle Founded in 2015, Tradle leverages a blockchain-based framework to bridge the gap between consumers and companies. Its applications span multiple industries. In insurance, Tradle is focused on know-your-customer (KYC) procedures to build worldwide trust and enable faster allocation and access to customer data. After the KYC data is verified on the blockchain, it would be easily accessible by other authorized companies, eliminating cumbersome data entry and verification processes. See also: Blockchain’s Future in Insurance   RiskBazaar This is a platform that facilitates true peer-to-peer risk contracts to enable the affordable and efficient transfer of risks on a global scale. With the current insurance system, you have to purchase an insurance policy by sending your funds to the insurance company, which takes care of your money until you make a claim. With RiskBazaar, however, there is no single insurance policy or agency. You send your cryptocurrency to a digital lock-up box, whose key is then assigned to multiple (two or more) people. Upon agreement, the other parties can unlock the digital box with these keys, and, if you make a valid claim, you receive the compensation from the newly unlocked box. Essentially, anyone in the world can become an insurer, and the person can’t take off with the funds because no single person has full control over the box. Etherisk The German-based insurance company is applying the Ethereum blockchain to create insurance apps. In 2016, it demonstrated the concept with an experiment that allowed people to obtain flight delay insurance cover that pays out automatically. See also: The Problems With Blockchain, Big Data  SafeShare Global This is the first company in the world to launch a blockchain-based insurance solution that satisfies the needs of a shared economy. It allows private homeowners to rent out an extra room. Through blockchain technology, the system provides a time-stamped, immutable record of insurance in real time and at significantly reduced costs. The insurance industry is but one sector set to feel the effects of the rising blockchain technology. Take a look at the infographic below to learn about many other industries that are benefiting from its attributes. You can find the infographic here.

No or slow growth in revenues. Intense profit pressures. Constant flux from technology advancements and rising customer expectations. That’s what insurers have experienced in the recent past. Without bold action now, they risk seeing more of the same in 2019 and beyond. Yet a lot is possible for insurance — better ways of working, a clearer sense of purpose, more effective use of emerging technologies and ecosystems as well as our industry’s unique ability to promote financial wellness, provide protection and enable insurance customers to better manage risks. Here’s where insurance leaders should focus to take advantage of opportunities in 2019: The Life Market The Americas life insurance market has remained weak for years, though recent developments look promising. Improved financial markets, an uptick in growth, rising interest rates and aging populations are expected to drive demand for life insurance products. See also: ‘Organic Insurance’: Back to Basics   Life insurers should not simply wait for these fundamentals to work in their favor as they have in the past. To make the most of the growth opportunities, they must drive the agenda, develop the long-term resilience and “futurize” the organization. The focus must be on:

1. Developing comprehensive new value propositions for holistic financial wellness that are aligned to evolving customer expectations and the needs of aging populations across the region
2. Improving distribution through direct channels and empowered agents
3. Collaborating with insurtechs, new entrants and other incumbents on ecosystems
4. Optimizing value chain “basics” to promote sustainability

To achieve these ambitious goals, successful insurers will need to undertake digital transformation. In these transformation journeys, life insurers should seek to optimize the policyholder life cycle by catering to specific needs for specific types of customers, such as overall wellness for aging populations and rewarding experiences for millennials. By meeting these customers’ needs, insurers will enhance their own bottom lines by reducing costs, improving conversion rates and retaining more customers. Property Casualty Low, single-digit growth has been the rule in the non-life sector, thanks to a mix of favorable and adverse trends. Improved pricing in motor and health in North America has been largely offset by weak economic growth in Latin America. Of greater concern is falling profitability for the region’s P&C insurers. The causes include higher underwriting losses and weak pricing environment in commercial lines. To manage through this low-growth, low-profitability conundrum, non-life insurers have focused on innovation and disruption, demonstrating a strong interest in new technological developments including telematics, the Internet of Things (IoT) and blockchain. To demonstrate the value of these investments, insurers must move the needle on business outcomes. The focus must be on:

1. Driving cost efficiencies to fund continuing investment in digital transformation
2. Strengthening direct channels to gradually reduce dependency on agents and brokers, particularly in personal and small commercial lines
3. Preparing for the market entry of tech giants
4. Exploring insurtech partnerships and acquisitions to leverage relevant capabilities
5. Accelerating time-to-market to take advantage of new opportunities

With improved economic conditions in the U.S. buoying their growth prospects, P&C carriers must launch multiple change initiatives so that they establish long-term sustainable operating models. See also: How AI Is Redefining Insurance Industry   What’s Next The world’s largest insurance market, like most developed markets, has seen tepid growth in recent years. Life insurance lost favor with U.S. consumers due to low interest rates and heightened competition. P&C insurance has grown at low single-digit rates, fueled largely by auto lines. Health has continued to grow. The commercial sector struggles with a weak pricing environment and persistently low margins. Despite these challenges, insurers can reignite and sustain growth by strengthening the core value propositions and embracing new technology. See the full report for more.