Many people in the insurance industry fantasize about creating a customer experience that rivals those of other categories, like retail, or that of specific companies, like Zappos. But some may say the fantasy is just that. After all, insurance and shoes are not the same when it comes to demand, so we need to set our expectations lower. It’s a valid point of view. However, many things have been achieved in the world that, at one point, were thought of as just fantasy. Breaking the four-minute mile, achieved by Roger Bannister in the 1950s, is a favorite example. Bannister, who passed earlier this year, always will be remembered for what he taught the business world. At Maddock Douglas, we have a phrase that sums up this lesson: “Impossible is only an opinion.” Bannister took impossible out of the equation by mentally visualizing that a four-minute mile was possible. This led to a series of behaviors and training that ultimately got him there. Then, once he broke through, many others did, too. In sports, most would agree that attitude is the single most important key to success — it was the missing piece. So how does his breakthrough relate to the fantasy of a world-class customer experience within insurance? We need to first let go of the barrier of “impossible.” That will give us the open mind to look at what’s truly happening within the customer experience in another way. A helpful framework for looking at the customer experience is the Experience Cycle, developed by Dubberly & Evenson in 2008. In this framework, a customer’s interaction with a product or service is broken down into five phases: Connect & Attract, Orient, Transact, Extend & Retain and Advocate. See also: What Really Matters in Customer Experience   Let’s look again at the contrast between products like shoes and products like insurance. The biggest difference between the two is demand: For the former, it’s already there; for the latter, there’s a need, but demand must be cultivated. Further, you can’t pay for insurance with just money like you can with shoes. You must also pay for it with two other currencies: information and time. Information is needed to assess the risk, and, depending on what kind of insurance is being purchased, that can be quite extensive (e.g., personal financial data, credit data, health data). Then, if that information is not at the ready, it takes time to get it. That’s our missing piece. I am not suggesting eliminating the need for data, because we know what happens when we take that out of the equation. Prices go up. Many attempts have been made to offer higher-priced products that require little or no information, but uptake is generally not impressive. Rather, we need to help consumers understand why we need this information, help them get it efficiently and in a more pleasant way — and perhaps give them something more immediate in exchange for it (e.g., feeding it back in a helpful report about what it means to their insurance rates and how they can improve). The part of the cycle that this activity falls under is Orient. The Orient phase is most often skipped completely by insurance companies, expecting people to go right from the Connect & Attract phase to the Transact phase. Then, when consumers are hit with all these requirements, they get turned off and maybe even bail out. This can happen in an online environment, for sure, and it can also happen in a face-to-face sales environment if the agent hasn’t set expectations correctly. So in what ways might we fill in the missing piece? First, we must understand what questions must be answered in the consumer’s mind to get oriented and prepared for what happens next. These include:

• Do I really need insurance?
• If so, what kind?
• How much do I need?
• How are my costs determined? How much will it cost?
• What does the process look like?
• How much time and information do I really need to give?
• How will you use my data? Will it be used against me now or down the road?

Next, we can take pages out of the lesson books of other categories. A few of my favorite examples of successful orientation are:

1. Credit Karma: Here’s a service that not only aggregates your various credit reports but also breaks your score down into key behaviors that help people understand how to improve their score, and how it’s used by credit card companies and lenders.
2. Domino’s Pizza: The tension of not knowing what’s happening with your order or when it will arrive can be maddening when you’re hungry. So Domino’s created the “where’s my pizza” function, enabling someone to see exactly when it’s being made, in the oven and in the car on the way. For users, knowing that they will have visibility into the process is very comforting.
3. RealAge Test: This test, taken by millions of people, engages the user in a series of questions and instantly delivers back a “real age” based on health and risk factors. For example, your calendar age may be 40, but your “real age” could be 38. This is a socially engaging way to help orient people around the behaviors that lead to longevity and health, while also leading them to understand risk factors.

While the above are somewhat elaborate digital experiences, orientation can also happen with simple FAQs, videos, chat and many other easy mechanisms. This is an area to unleash your innovation team on for sure. See also: 4 Insurers’ Great Customer Experiences   The key is, we must fill in the missing piece. Orient is undernourished in the industry, and the uniqueness of the heavy data requirement means it needs even more love than if we were selling shoes. Proper orientation means the transaction has a much greater chance of happening.

Exploring the initial steps of any development includes the question: “Stay in or go out?” which translates to, do we build in-house or can we use off-the-shelf applications? Advantages of using applications already developed are self-evident: They save time and resources spent on recreating common code that similar platforms need. The frustrating downside, though, is the need to often modify the off-the-shelf technology so extensively for passable integration that time and resources are ultimately not saved and the results are sub-par. Incumbent carriers are struggling to deal with legacy-based policy management systems that have been in place since the 1980s. One of the difficulties with off-the-shelf solutions is that carriers can’t migrate all the data from their legacy platforms into a cloud-based platform. Even if they come up with a potentially relevant solution, there is still a significant risk of disrupting their customer portfolio. This was the dilemma facing us at Hippo Insurance as we discussed what a system that effortlessly supports home insurance agents and consumers would look like. The highly regulated, slow-moving and traditional home insurance industry seemed poised to benefit from widely applicable innovations and rapidly changing technology, motivating me and our team at Hippo to see about making such a system a reality. When our director of software architecture, Adrian Olariu, joined Hippo to help build out the company’s home insurance tech platform, we analyzed what was currently available and looked for an off-the-shelf service we could mold into something we would use for years to come. After trying to work within the legacy systems of the industry, we discovered outdated functionality and limited capabilities that not only made it difficult for insurance carriers to maintain cost-effective and compliant policies, but also made it difficult for us to provide a positive user experience for carriers and customers alike. So, we decided to build a policy management system in-house at Hippo, starting from the beginning. This undertaking, while risky, seemed to be the best option to create a streamlined offering we knew the system – and those using it – needed. Our goal was to launch an initial working version in three months and a fully functioning system in six months. See also: Trends in Policy Admin System Replacement   The complexity of the system we were building continued to reveal itself yet further reinforced our decision to build in-house. We successfully developed patent-pending technology that balances regulatory compliance with a user-friendly experience that saves time and money for agents, underwriters and support staff, ultimately passing along those savings to the customer. Our focus included:

• Single-system functionality. We created a single system that provides a seamless experience for the customer, agent and developer. It is one of Hippo’s most important features and means that all processes are handled within the one platform through the use of microservices. We included everything from document generation and storage to quotes and underwriting, billing and servicing to reporting and agent commissions. We designed it to streamline the management process, provide expansion capabilities and significantly reduce costs. Traditional policy management systems are built in fragments and pieced together. Because they operate independently from one another, they lack connection, causing additional cost, time, continued maintenance and potential for error.
• Automated. Within the single-system functionality, we also built functionality to automate potential change-in-policy notices, such as cancellations, non-renewals, non-payments and reinstatements. Communications are automatically triggered to send to the customer via e-mail as soon as they are processed (or mailed, when required by law). This allows customers more time to respond to any required actions and developers more time to focus on other projects. Legacy systems only generate hard copies of notices, meaning additional lag time that causes a delay in alerting customers to any actions necessary. Simultaneously, automation benefits agents who no longer need to pay attention to or manage repetitive and manual processes, freeing their time to attend to customers. This has already showcased strong value in our organization, helping us drive average NPS scores upwards of 78, and 85% five-star reviews.
• Cloud-based. The Hippo team also made the decision to make this a cloud-based system. We recognized that a cloud-based system allows for the kind of scalability we want through unlimited expansion and storage, enhanced data encryption (which protects consumer data), multiple redundancy backups and accessibility from any internet-connected device. Compare these benefits with the traditional server-based systems, which are prone to lost data, lack efficient expansion capabilities and limit remote user access.

We also built and implemented key pieces of technology such as:

• Out-of-sequence endorsement processing, which means the system allows endorsements to be automatically updated regardless of when they’re processed (no longer needing manual processing by dedicated engineers)
• Real-time document generation once a transaction is completed
• Automated future-update processing (versus agents and underwriters remembering to manually process the required change at a future date)
• Pre-programmed renewal periods to match the timeline set by the Department of Insurance, helping reduce compliance violations and regulatory fines.

See also: Innovation: ‘Where Do We Start?’  Hippo has been able to expand into eight states in eight months with multiple products, including homeowners and condominium insurance. Building our system in-house has also allowed us to partner with large insurance carriers that lack the capabilities this system provides, allowing them to benefit from one of the most advanced policy management systems in the industry.

Insolvencies and impairments are at such a low rate in P&C that most agents do not pay much attention to the possibility one of their companies may fail. (This is not necessarily true in health benefits and long-term care (LTC), an issue of societal importance that has been ignored because so many of the companies that have had issues were set up specifically under the Affordable Care Act). I now meet people in the insurance industry who have never, ever had to deal with rolling a book because the carrier went insolvent or even pulled out of the market overnight. Not long ago, who would have thought that possible? These numbers hide an interesting and important reality. About 10% to 15% of P&C companies, or on the five-year average between 2012-2016, inclusive, 176 companies, a year go away, according to A.M. Best (my calculations). Most of these companies, around 88% annually, are sold, consolidated or reorganized in some form or fashion. Most often, the effect on agents and consumers is nil--but not always. Sometimes these reorganizations result in new underwriting, new pricing, less service and other issues that make doing business with the new company quite painful. Worse, on average, about 22 companies annually are dissolved, liquidated, surrender their license, go into liquidation (different from being liquidated), go into runoff or no longer make their filings. Twenty-two out of around 900 companies is peanuts unless it involves you. See also: Innovation: ‘Where Do We Start?’ Another really interesting aspect is that one form of company is not inherently more stable than another. The rate of difficult situations on a percentage of companies with those formations is materially the same for stock companies versus mutual versus even risk retention groups. One point that is missed when analyzing frequency is the potential severity of an agent's E&O if particular forms of companies go insolvent. For example, when an agent has the option of placing an insured in a standard, admitted company but instead places the insured in an RRG or captive, a strong argument can be made that the agency must adhere to a far higher standard of care. [caption id="attachment_32495" align="alignnone" width="570"] Source: A.M. Best[/caption] [caption id="attachment_32497" align="alignnone" width="570"] Source: A.M. Best[/caption] [caption id="attachment_32496" align="alignnone" width="570"] Source: A.M. Best[/caption] These kinds of companies may not be covered under the state guaranty funds. One of the results of low insolvencies is that the agency community has lost some collective intelligence regarding what to do if a company goes insolvent. I find many agency people have no idea a guaranty fund even exists, much less the parameters involved. Agents largely have a duty to advise clients whether the entity with which they are placing that client's policy is covered under the state guaranty fund. This includes surplus lines. Risk retention groups and captives have quite different funding in many cases than traditional carriers. Often, insureds are potentially responsible for "assessments." Different companies and different types of these alternative carriers use different technical legal terms regarding whether these items are technically "assessments," but, to most people, when an insurance company tells an insured it needs to pay more money because the company is out of surplus, it feels like an assessment. For this purpose, I'm going to therefore use "assessment." I find that a large percentage of agency people selling these policies have completely and absolutely failed to read the key details in the policy language. Even when the policy requires that a power of attorney be signed, somehow the agents have not noticed that the vast majority of insurance policies do not require POAs be signed. A halfway curious agent might just wonder why a particular company wants the insured to sign a POA rather than just thinking it is just another piece of paper. When an agent tells an insured to sign a POA and something goes wrong with that carrier, especially involving an assessment, impairment or insolvency, the insured may have strong cause for coming back against the agent. Bluntly, I do not understand how agents, and I've interviewed dozens and dozens, do not notice these POAs. A word of advice to agents: If you have an insurance company that requires the insured to sign a POA, pay attention! Think about it! POWER OF ATTORNEY! Why would an insurance company want the insured to give it power of attorney over the insurance policy? Isn't this just a little different than normal? The pain of a wobbly company to the agent is not considered in these statistics either. When a company has to sell a division to raise capital, the company may be saved from impairment. The agent, though, may have to do a whole lot of extra work. Just an FYI, companies sell divisions primarily to raise capital or because they are incompetent in managing those divisions, which may indicate issues in and of themselves. Such sales can be dressed up, but be sure the reality is that someone has put lipstick on a pig. Another example is actually smart, if it was not nefarious. This is where a wobbly company raises rates far more than other carriers. The company say things like, the other carriers will follow, or that the company needs to make money in this line or that line or all lines. The company has to say things like this. In reality, the company is raising rates in hopes that agents will move the business because the company may not have the surplus to support its writings. The No. 1 goal is to get agents to move as much premium as possible. If the company makes some more profit with what sticks, then so much the better. That is gravy, though. The goal is to increase the surplus ratio or reduce premiums. See also: 3 Major Areas of Opportunity  While the frequency of impairments might not be different from one kind of insuring of facility to another and while impairment of frequency is not a major issue, don’t become complacent. Impairments are severity issues, and it pays to remain diligent and knowledgeable and protect yourself from E&O claims. You can find the article originally published here.

With climate change and severe weather events increasingly making headlines, lenders and institutional investors are becoming more interested in how these events are hitting the bottom lines of companies around the world. To answer this question, S&P Global Ratings collaborated with Bermuda-based climate risk management specialist Resilience Economics to determine the prevalence and materiality of climate risk for companies in the S&P 500 index. We examined public corporate research updates and earnings call transcripts from April 2017 to April 2018 (financial year 2017) to identify where a particular weather event had a material impact on earnings. This research complements our environmental and climate look-back analysis "How Environmental And Climate Risks And Opportunities Factor Into Global Corporate Ratings—An Update," published Nov. 9, 2017. Climate change will continue to increase the incidence and severity of both chronic and acute weather events, which could lead to a more material impact on companies' earnings. We excluded from our research the entire financial institutions sector, which includes insurance companies. Key Takeaways

• In financial 2017, 73 companies (15%) on the S&P 500 publicly disclosed an effect on earnings from weather events, but only 18 companies (4%) quantified the effect.
• The average materiality on earnings for the small number of companies that quantified it was a significant 6%.
• Climate risk is a surprisingly prevalent topic of discussion for the CEOs of publicly traded companies, and management teams are becoming increasingly accountable for understanding and mitigating the impact of climate risk. Evidence of the impact of climate risk is found across all sectors, geographies, and seasons.

See also: Reducing Losses From Extreme Events   The results of our analysis show that in financial year 2017, 73 companies (15%) in the S&P 500 publicly disclosed an effect on earnings from weather events, but only 18 companies (4%) quantified the effect (see table 1). However, the average materiality on earnings for the small number of companies that quantified it was a significant 6%. In S&P Global Ratings' view, the effect of climate risk and severe weather events on corporate earnings is meaningful. If left unmitigated, the financial impact could increase over time as climate change makes disruptive weather events more frequent and severe. Climate Risk and Weather Events Are Top Topics Among the CEOs of Publicly Traded Companies A review of the earnings call transcripts of S&P 500 companies in the past 10 years revealed that "climate" and "weather" combined were among the most frequently discussed topics among executives, even more common than "Trump," "the dollar," "oil" and "recession." Discussions of climate risk and its effect on companies' earnings are now reaching the CEO's office. Of the earnings calls in financial year 2017 where weather was mentioned as having a material effect on corporate earnings, more than half (53%) of these disclosures were made directly by the CEO. The CEO and CFO combined made 86% of all disclosures of climate-related impact on earnings. Moreover, CEOs and other top company executives often cite climate and weather as a risk factor beyond the control of management. You can find the full article here.

The traditional product development cycle in property and casualty insurance moves at a snail’s pace. Drafts, approvals, revisions, verifications of key details and other steps place months between the moment a product is envisioned and the day it becomes available to customers. As technology speeds the pace of daily life and business, the traditional product development cycle continues to represent a drag on P&C insurers’ efficiency and bottom line. Here, we discuss some of the biggest pain points in the product development cycle and ways to boost speed without sacrificing quality. Cycle Slowdown No. 1: Outdated Processes During the last few decades of the 20th century and into the 21st, speeding up the product development cycle wasn’t on most P&C insurers’ to-do lists, Debbie Marquette wrote in a 2008 issue of the Journal of Insurance Operations. Using the fax and physical mail options of the time kept pace with the as-needed approach to product development. Marquette noted that in previous decades, product development not only involved a team, but it often involved in-person meetings. “It was difficult to get all the appropriate parties together for a complete review of the product before the filing,” Marquette wrote, “and, therefore, input from a vital party was sometimes missed, resulting in costly mistakes, re-filing fees and delays in getting important products to market before the competition.” In the 1990s, the National Association of Insurance Commissioners (NAIC) realized that the rise of computing required a change in the way new insurance products were filed and tracked. The result was the System for Electronic Rate and Form Filing (SERFF). SERFF’s use rose steadily after its introduction in 1998, and use of the system doubled from 2003 to 2004 alone, according to a 2004 report by the Insurance Journal. By 2009, however, SERFF’s lack of full automation caused some commentators, including Eli Lehrer, to question whether the system needed an update, an overhaul or a total replacement. Property and casualty insurers adapted to SERFF and the rise of other tech tools such as personal computing, word processors and spreadsheets. Yet adaptation has been slow. Today, many P&C insurers are still stuck in the document-and-spreadsheet phase of product development, requiring members of a product development team to review drafts manually and relying on human attention to detail to spot minor but essential changes. The result? A product development process that looks remarkably similar to the process of the 1980s. The drafts and research have migrated from paper to screens, but teams must still meet physically or digitally, compare drafts by hand and make decisions — and the need to ensure no crucial detail is missed slows the product development process to a crawl. See also: P&C Core Systems: Beyond the First Wave   Cycle Solution No. 1: Better Systems The technology exists to reduce the time spent in the development process. To date, however, many P&C insurers have been slow to adopt it. Electronic product management systems streamline the process of product development. The “new-old” way of using email, spreadsheets and PDFs maintains the same walls and oversight difficulties as the “old-old” way of face to face meetings and snail mail. In a system designed for product development, however, information is kept in a single location, automated algorithms can be used to scan for minute differences and to track changes and tracking and alerts keep everyone on schedule. By eliminating barriers, these systems reduce the time required to create a P&C insurance product. They also help reduce errors and save mental bandwidth for team members, allowing them to focus on the salient details of the product rather than on keeping track of their own schedules and paperwork. Cycle Slowdown No. 2: Differentiation and Specificity Once upon a time, P&C insurers’ products competed primarily on price. As a result, there was little need to differentiate products from other products sold by the same insurer or from similar insurance products sold by competitors. During product development, insurers allowed differentiation to take a backseat to other issues. “Prior to the mid-1990s,” Cognizant in a recent white paper notes, “insurance distributors held most of the knowledge regarding insurance products, pricing and processes — requiring customers to have the assistance of an intermediary.” Today, however, customers know more than ever. They’re also more capable than ever of comparing P&C insurance products based on multiple factors, not only on price. That means insurance companies are now focusing on differentiation during product development — which adds time to the process required to bring an insurance product to market. Cycle Solution No. 2: Automation Automation tools can be employed during the product development cycle to provide better insight, track behavior to identify unfilled niches for products and lay the foundation for a strong product launch. As Frank Memmo Jr. and Ryan Knopp note in ThinkAdvisor, omnichannel software solutions provide a number of customer-facing benefits. A system that gathers, stores and tracks customer data — and that communicates with a product management system — provides profound insights to its insurance company, as well. When automation is used to gather and analyze data, it can significantly shorten the time required to develop insurance products that respond to customers’ ever-changing needs. “An enterprise-wide solution enables workflow-driven processes that ensure all participants in the process review and sign off where required,” Brian Abajah writes at Turnkey Africa. “Subsequently, there is reduction in product development costs and bottlenecks to result in improved speed-to-market and quality products as well as the ability to develop and modify products concurrently leading to increased revenue.” The Future of Development: Takeaways for P&C Insurers Insurtech has taken the lead in coordinating property and casualty insurers with the pace of modern digital life. It’s not surprising, for example, that Capgemini’s Top Ten Trends in Property & Casualty Insurance 2018 are all tech-related, from the use of analytics and advanced algorithms to track customer behavior to the ways that drones and automated vehicles change the way insurers think about and assess risk. It’s also not surprising, then, that companies using technology from 1998 find themselves stuck in a 20th-century pace of product development — and, increasingly, with 20th-century products. See also: How Not to Transform P&C Core Systems   As a McKinsey white paper notes, the digital revolution in insurance not only has the potential to change the way in which insurance products are developed, but also to change the products themselves. Digital insurance coverages are on the rise, and demand is expected to increase as the first generation of digital natives begins to reach adulthood. Alan Walker at Capgemini recently predicted that in the near future property and casualty insurance product development will become modular. “Modular design enables myriad new products to be developed quickly and easily,” Walker says. It also allows insurers to respond more nimbly to customers’ demands for personalized coverage. And while the boardroom and paperwork approach to development is ill-equipped to handle modular products, many product development and management systems can adapt easily to such an approach. “Insurance products embody each insurance company’s understanding of the future,” Donald Light, a director at Celent, wrote in 2006. “As an insurance company’s view of possible gains, losses, risks and opportunities change, its products must change.” Twelve years later, Light’s words remain true. Not only must insurance company products change, but so must the processes by which companies envision, develop and edit those products. Just as the fax machine and email changed insurance in previous decades, the rise of analytics and big data stand to revolutionize — and to speed up — the product development process.

The first time I logged in to the internet, I had a dial-up modem and a large desktop computer with tower, a separate keyboard and giant speakers. After the dial tone, there were  squeaks and honks as the computer took its time logging in. Then the words flashed across the screen: “You’ve Got Mail.” It was an iconic moment for me and one that millions of people around the world would experience in their own time. Then there were cellphones. You could literally talk to anyone anywhere, as long as there was a signal and you had saved some serious money. Later, smartphones were developed and once again changed the playing field. I found myself able to download apps that I didn’t know I needed, check my bank account or the status of my Amazon package and update my status from my phone – reaching all my friends no matter their or my location. Long gone were the days of dial-up and slow connection speeds. Now, I find myself refreshing when my phone doesn’t access the site I want after 15 seconds. All these developments in technology and society provided the finance and insurance industry with tremendous challenges. While other industries built new revenue streams on top of the internet and digital infrastructure, a lot of insurance companies are struggling with providing the most basic digital services to their customers. And it’s about to get worse. 5G – a new form of mobile internet – is going to accelerate things. A lot. 5G means high-speed mobile internet There are a lot of questions surrounding 5G services: What does 5G mean? How fast is it? When will it launch? Probably the biggest question surrounding 5G services is: How will we and our customers use it? One of the most important things to know about 5G services is that it will most likely bolster economies worldwide. The website Innovator cited a report by IHS Markit and Research Group that predicts “by 2035 5G will create 22 million jobs globally, generate $3.5 trillion in direct economic activity and fuel sustainable long-term growth to global real GDP.” 5G is a game changer, just like the internet, computers, motor vehicles, and the wheel. It will change the world as we know it. What does 5G mean? How fast is it? When will it launch? Techopedia says: “Fifth-generation wireless (5G) is a wireless networking architecture built on the 802.11ac IEEE wireless networking standard, which aims to increase data communication speeds by up to three times compared with its predecessor, 4G.” Reports vary as to how much faster 5G will be; some reports say 10x faster, and other reports indicate that it could be 20x faster or more. Much of the improvement will have to do with locations and service providers, but it’s going to be a large jump. We may have to wait a little, but this train has left the station – and it’s not coming back. While 5G operators are beginning to roll out their systems this year, most markets won’t be up and running until 2019, and more likely 2020. See also: What Will Operations Look Like in 2028?   For retail, that sounds far away. For the insurance industry, with long planning cycles and gigantic project portfolios, that means “tomorrow.” How will we use 5G? Many are questioning what the purpose is of faster service, especially those who are content with 4G services. 5G goes beyond the mobile phone user. While users may see a boost in service (especially in downloads and streaming), 5G technology is going to improve how the world operates. Users will have increased connectivity. Apps for which heavy computers are now necessary could transfer tremendous amounts of data quickly, probably providing digital services we can’t imagine today. With a smart 5G strategy, the insurance companies could expand One special case for the insurance industry: 5G technologies are going to streamline the Internet of Things (IoT), especially for consumer usage. So, after mobile internet, smart phones and 4G changed the way customers consumed, 5G is about to change everything again. Right now, our smartphones can talk to individual devices, but with 5G technology speeds we can further streamline these smart devices and achieve breakthroughs where they speak to each other instead. Imagine if your refrigerator could tell your oven when your steak had finished defrosting, and the oven automatically started pre-heating! Imagine that an oven could warn the customer that crucial parts are overheating, and a fire is likely. Imagine that an insurer informs the customer and that he can act on the information. Imagine how the customer would fall in love with his carrier or agent after he saves the customer's house? In addition to general consumer usage, 5G is going to make a huge impact in industry and commercial insurance. With 5G technology, we will be able to track shipments in real time, upload information from doctors' offices instantly and watch videos everywhere, without having to consider the bandwidth. Autonomous cars may become a broad reality, as they can generate real time data with which to operate. Drones will be able to provide better feedback and travel farther. Industry and manufacturing automation can improve with smart factories and the use of artificial intelligence. Currently, there are some factories using artificial intelligence to trouble shoot designs, and IoT technology to determine when machinery needs servicing. With 5G technology, these types of programs can be adopted by more companies and expanded to further suit the manufacturing needs. All of this has tremendous impact on calculating risk and preventing claims – the core of our industry. With smart vehicles being so much more efficient, and safe, we can expect to see insurance rates drop, according to an article on Innovator. We can also expect to see faster transactions and approvals. With a wealth of information at our fingertips, it may only be a matter of time before purchasing a home goes from a months-long ordeal, to something that takes place in a weekend (or faster) or even maybe without a bank at all. “5G will impact every industry – autos, healthcare, manufacturing and distribution, emergency services, just to name a few. And 5G is purposely designed so that these industries can take advantage of cellular connectivity in ways that wouldn’t have been possible before, and to scale upward as use of 5G expands" -- Don Rosenberg shared this thought as part of the World Economic Forum. Rosenberg also said 4G led to innovations like Uber and Spotify. How will 5G affect, say, Facebook's business model? What other changes have yet to be imagined? See also: How Digital Platform Smooths Operations   The world is constantly changing, though some “groundbreaking” innovations do little to change it. Then something like 5G services come along and completely change the foundation of how our world operates. 5G will change us, on a worldwide level. What to do? Don’t love your products – love your customer. Instead of fearing the next challenge after the landline-based and mobile internet, why should we not use this as an opportunity to expand our value chain? Why shouldn’t we put ourselves between the customer and product and service providers instead of leaving this interface to the customer to the old and emerging tech giants from California and China? Why shouldn’t we provide our customers digital products and services that relieve them of friction and pain in their daily lives? Why should not we use 5G as an opportunity to get ahead and become a trusted companion in the daily life of our customers? It’s still our choice.

GDPR (General Data Protection Regulation) took effect in Europe on May 25 --- and is expected to create a ripple effect that affects U.S.-based organizations, regardless of whether they have European operations. This is the most significant data privacy regulation ever – the EU views this as a human rights issue. The recent Facebook issues will accelerate GDPR acceptance here in the U.S., and it is up to insurance agents and carriers to be sure they are in compliance with all applicable laws and regulations in the U.S. and in Europe. GDPR was enacted to further protect the rights of individuals in controlling how their personal data is shared. Many expect further regulations to come to the U.S., along with stiffer financial penalties for those organizations that do not comply. But there are those in the insurance industry who see this as the “starting gun” not “the finish line.” The reality for most U.S. business, insurance companies and others is that GDPR will become the global standard for how businesses must handle consumer data, and it will set new benchmarks for consumer data privacy. GDPR will have a positive impact for both the business/marketer and the consumer. This can become an incredible opportunity for U.S. companies that choose to embrace GDPR. Instead of something scary and negative, it can become a great opportunity that they can use to challenge themselves to build tools and processes to maintain smarter marketing and more personalized and predictive communications with customers. As consumers begin to understand the advantages to them, they will likely prefer to work with and share their consumer data with compliant companies. Rather than waiting and wondering, companies need to take the steps necessary to comply. If it’s great for the customer, and if businesses lead the way, it will end up being great for the company. See also: How GDPR Will Affect Insurance  First, insurance companies will need to take steps to comply with the legislation so they will not be open to stringent financial penalties. They must begin by working with their legal team and GDPR experts to appoint a company representative who is established in an EU supervisory country. This person is the point of contact for all communications with the GDPR supervisory body. Not all organizations need one, but if it’s required, appoint a Data Protection Officer who has the expertise needed. This person can help redesign what consent and disclosure looks like for customers. Consumers will need to check a box (or its equivalent) for every single use case of their data. They need to be able to select those they agree with and decline those they don’t, and companies need to be able to comply and track their preferences in their systems. Insurance companies also need to consider third-party providers, as well. If a third party is not able to prove GDPR compliance, the EU work it does is illegal. Companies should audit their third-party providers and reevaluate service level agreements. Companies also need to work within the GDPR regulations and still be able to have a “good client experience” and grow and find and retain new customers with the new law that is a game changer for the way they do business now. Moving forward, companies will need to be much more aware of their audiences’ tolerance for marketing. Companies that have been careless by oversaturating their audiences with irrelevant marketing will lose the privilege to market to those customers. Consumers want information and marketing that is timely and relevant. Technology companies have tools available for clients that account for marketing saturation modeling and use dynamic marketing workflows. Their audiences should receive the “Goldilocks” amount of marketing – not oversaturated, but enough to maintain brand awareness and positive disposition when they are in the position of making a buying decision. The positive impact for insurance industry will be that GDPR compliance forces companies to implement data storage and processing and marketing “best practices.” Once a consumer asks to be forgotten, companies must remove all the person's data. Not just take people off an email list, or a call list, but delete all their preferences, history and contact information. Businesses that comply with GDPR will reap the benefits of better consumer confidence. Additionally, the practice of impeccable data security demands migrating customer data to the latest network technology. The long-term benefit of storing and running data using the best and most current technology reduces overall digital footprint. But how companies use technology to retain brand awareness and win and keep customers without becoming a nuisance at a permanent cost will be a challenge. Achieving and retaining brand awareness without irritation becomes a balance of just the right messaging, via the right channel at the right time. See also: How to Avoid Being Bit by GDPR (Part 1) We are proponents of human engagement and realize that all the AI in the world cannot replace human connections. We also realize that the human connection is invaluable and that marketing communications coming from a trusted adviser versus a faceless organization elevates the message. More than ever, companies need to rely on marketing acceleration models that induce a repeatable pattern of activity, garnered from AI and machine learning to create marketing workflows that enable individuals at a company to have personal connections, smarter marketing, more personalized and predictive customer experiences and better sales outcomes. Technology can help companies achieve one-on-one interactions and make them more confident that what they say and show is relevant and tailored to their client.

We're going to try something new this week. Our CTO, Joe Estes, has built some exceptional chat capabilities into our Innovator's Edge platform, and I'd like to see if we can't use them to jointly make progress on a crucial topic: How do we measure our progress toward innovation? How do we kill bad ideas as quickly (and inexpensively) as possible while making sure the good ideas get identified and nurtured and produce the biggest possible wins for the company? 

Our mantra at ITL is, "Nobody is as smart as everybody," so we'd like to get everybody involved in the discussion, which will be guided by a powerhouse group of experts on the topic and which will last for at least the next week. To join us, if you aren't already a registered user of IE, just click here and enroll. (It's quick and free.) Then click here to go directly to the group, called "KPIs: How to Use Analytics to Measure and Drive Innovation." Click join group and join the conversation.

Please let me know at paul@insurancethoughtleadership.com if you have any problems or questions.

We'll be joined by:

--Michael Schrage, a researcher at the MIT Media Lab and a prolific author on innovation.

--Amy Radin, who has a distinguished career at several financial services firms, including as CMO at AXA, and who is the author of the forthcoming "The Change Maker's Playbook: How to Seek, Seed and Scale Innovation in Any Company."

--Guy Fraker, ITL's chief innovation officer, whose decades in the insurance industry include some of the most successful innovation programs yet produced.

Much more detail on our guides, plus materials that are the basis for the discussion, are available inside IE.

I think this will be a great discussion. I hope you'll join us.

Paul Carroll
Editor-in-Chief

Geographic information systems (GIS) may conjure up images among insurers of an old technology that tends to be used by a few passionate specialists at their company. It is true that the technologies for mapping and visualization have been around for decades. (I first saw a demo of GIS for insurance in 1989, and the potential blew me away). It is also true that usage in insurance is often limited to a few high-value areas of the business. Although GIS can hardly be called an emerging technology – much like AI, which has also been around for many years – it could be considered a resurging technology. This is a new era for GIS. The core GIS technology platforms have been extended to enable solutions for what many now call location intelligence. There are some good reasons why insurers should be considering an enterprise location strategy as an important element of their overall business strategy.

• Ease of Use: This might seem counterintuitive because the use of GIS systems traditionally required individuals with deep skills in data, geography, demography and other sciences. But today, the user interfaces have been modernized, templates and apps abound and business users are able to leverage the technology without difficulty.
• Open Platforms: The sharing of maps, apps and data related to GIS solutions is extensive. Collaboration among government agencies, businesses and individuals is in high gear, especially because location intelligence-based solutions are often leveraged to address important societal issues. A prime example of this is the collaboration that occurs during natural disasters.
• New Data and Maps: The spread of connected sensors and devices across the planet has produced many new data sources, enabled the creation of new mapping layers and dramatically increased precision. A connected device might be indoors or outdoors, stationary or moving, urban or rural and able to collect highly accurate data about objects and what is happening to and around them.
• New Spatial Technologies: The technologies for indoor mapping, 3D, temporal analysis and many other aspects of spatial technology continue to advance rapidly. In addition, the scale and speed of real-time processing open up opportunities to capitalize on the technologies.

“When my mom passed away, I was aware she had a small life insurance policy. When I started the claims process, I had to keep resubmitting documents and kept getting asked to complete more documents. Finally, after four months of going back and forth, when the money was about to be reimbursed, I wanted the money transferred to my account as direct deposit, but my only option was a check. I’m lucky I didn’t need the money right away for expenses, or I wouldn’t know what would happen.” Will you consider purchasing life insurance policy from the insurer, I asked? “Hell no,” was the answer. I was giving a presentation a few nights ago on Benekiva and heard that story from someone in the audience. Throughout my journey with Benekiva, I have been intrigued by all the stories I've heard about the nightmares that beneficiaries have faced. As a new parent and owner of a life insurance policy, I know that ensuring the well-being of our family is critical. The thought of my daughter having to go through a hellish experience to get the money makes me furious and want to act now to fix the problems. After several years of researching and analyzing the life insurance claims processes, there are four main problems our Benekiva team has identified that have prevented life insurance companies from embracing digital transformation in their claims processes: Outdated Processes: The life insurance industry is a 258-year-old industry, and, though claims may make it in the top 10 list of issues for the CIO, the focus for the company as a whole tends to be on generating revenue. The claims staff works overtime to come up with various duct-tape systems filled with Excel spreadsheets, Access databases or various systems to balance the needs of regulators, old processes (this is how we have always done things) and beneficiaries. Beneficiaries wind up supplying the same information in multiple documents, sending the same documentation multiple times and chasing down faxes/mails for next steps. See also: How IOT Will Change Claims Process   Legacy Systems: On average, the claims staff touches four to 10 systems to process one claim. The claims module is most likely attached to policy administration systems in which modules don’t get updated often. To innovate claims processes gives CIOs headaches because they have to rip apart the monolithic and old systems that run the entire business. The mentality – “If it ain’t broke, don’t fix it” -- creeps in. Unclaimed Claims: There is more than $14 billion of unclaimed life insurance policies, and the number keeps growing $1 billion a year. Why is that? Ask yourself one simple question: How many times have you been asked to update your beneficiaries? Ask yourself another simple question: Have you informed your beneficiaries about policies you have for them? One of our co-founders could have been another drop in the bucket for unclaimed claims. He was at his father’s funeral, and one of his father’s co-workers came to give Jason his condolences. The co-worker said, “If you need help with paperwork, please let me know.” Jason said, “What paperwork?” He learned that his dad had a life insurance policy. Laws Changing: Each state and country has its own governing laws that need to be abided with when processing claims. One state may require a death certificate while another state may ask for additional documentation. How might claims departments innovate in the face of outdated processes, legacy systems, data that needs clean-up and changing regulation? There are three key recommendations: Keep Learning – Insurtech is HOT! Books are being written, conferences are popping up and fresh faces (like me) are appearing. Keep reading, attending and talking to learn what is happening in the space and how to navigate change. Keep Seeking – Insurtech is HOT! Which means, there are startups that are popping up to help solve complex problems. Benekiva is my startup with three other founders, and we are on a mission to help bridge the gap between life insurance companies and the intended beneficiaries, through beneficiary management and claims automation. What is cool about us – we can work with legacy systems, so you don’t have to pour millions into the work. There are other insurtech startups that are solving other pain points. What’s great about startups – they are small, nimble and hungry, which equates to: They will do whatever you need them to do…to a certain extent. Partnering with startups can leapfrog your innovation efforts and their startup mentality may rub-off on your staff. Keep Trying – You eat an elephant one bite at a time. I see claims processes as a big elephant, and the only way to improve is by “bitsizing.” What is one area of claims that can be improved? Identify that and try to find or partner up on a solution. Remember: Insurtech is HOT! I’ve seen organizations want to tackle the “elephant,” and unfortunately, those projects can take two years and longer and your strong talent is burned out at the end. What you get at the end is an “old” system – two years is a long time in tech. See also: Making Life Insurance Personal   To innovate in claims, the C-suite needs to make claims a priority and see it as a customer-experience issue. My five-year vision is to have the following experience when giving presentations about Benekiva: “Bobbie, I just submitted a claim, and I instantly received notification that money is available in the account. I also received a text message from an adviser whom my dad was using and who is going to help me plan for my future.”