While speaking this week at a PwC conference for members of the board of directors of financial services companies, I heard quite a bit of buzz about the likelihood of a wave of M&A for insurance companies and about an intriguing maneuver that could let insurers free up capital. Following the principle of Scott Van Pelt, who begins each broadcast on ESPN with "the best thing I saw today," I figured I should share.

The feeling about the need for consolidation was so strong that one person asked whether an insurer might hit the roughly 20% market share that Allianz has in Germany, getting so big that federal regulators would need to assert themselves and sideline the states.

The assumptions about consolidation began with the understanding that other industries tend to coalesce around a few giants, while there are thousands of players in the insurance industry, but the thinking went much further. There was a lot of talk about new FASB regulations that will tend to reward size.

In addition, if you believe, as I do, that every industry becomes a technology business over time, you have to assume that the insurance industry will show more of the winner-takes-all characteristics of the technology world, where there is one Google, one Apple, one Facebook and one Amazon. Once someone gets a digital platform right, it costs nothing to add more partners and customers, so competitors fall by the wayside, and many are more than happy to sell.

Even short of buying and selling companies, a PwC partner laid out an approach called Insurance Business Transfer (IBT) that is about to take effect in Oklahoma and that she thinks could spread across the country. The basic idea, which draws from a law in the U.K., is to transfer runoff business into a new entity and free up capital. Courts need to approve the transfer, but, crucially, approval from individual policy holders is not required. The law takes effect Nov. 1, and, if it withstands the inevitable legal challenges, could allow considerable restructuring even short of M&A. A much more limited form of the IBT approach exists in Connecticut, and a more modest form of the Connecticut law has been around in Pennsylvania since at least the 1990s. 

Thanks to PwC for including me. It's always nice to find an excuse to get back to New York. 

Have a great week. 

Paul Carroll
Editor-in-Chief 

How can insurers meet increased customer expectations at a lower cost? AI-powered care delivers on a future vision of customer service with an opportunity for savings of 30% by, for example, driving customers to digital experiences. In this post, I will explore how to apply AI using an intelligent customer engagement (ICE) framework.

How can your insurance company increase its artificial intelligence quotient (AIQ) with a balanced innovation strategy? In this blog series, I’m exploring the myriad ways in which AI adds value to financial services in general and the insurance value chain in particular. In my previous post, I defined the term AIQ and revealed and discussed three key ingredients to building a strong AIQ: technology, data and people. In this post, I’ll take a close look at one of the key areas in the insurance value chain—sales and distribution—and explain how AI-related technologies can add value to this function. But first, I want to reiterate the value of AI and why it’s important to transform your business into an AI business. Why a strong AIQ is vital for your business—and why you need a strategy first. Most of what’s written about AI relates to cost-cutting and job losses, but as we saw with the example given with regard to the health industry in the previous post, AI is a much more optimistic story. Its greatest benefits are not only efficiency and productivity but innovation, improved customer and employee experiences and the development of new sources of value and growth, especially when they augment human capabilities. However, to gain these benefits and to identify relevant use cases, it is necessary to develop a cross-enterprise AI strategy that clarifies the strategic goals: the whys, the hows and the whats of the business model leveraging our “AI strategic approach,” as outlined below. See also: 3 Steps to Demystify Artificial Intelligence   Once the strategic goals have been clarified, the potential use cases for AI can be identified and prioritized according to the impact and estimated implementation effort they have on supporting the achievement of these goals (such as enhanced operational efficiency or improved customer experience) along the insurance value chain: How can insurers use AI in sales and distribution? As mentioned in my previous post, there are numerous use cases of AI that can be applied along the insurance value chain. In this post, we focus on AI in marketing, sales and distribution, including:

• Enabling intelligent customer engagement
• Workload balancing/lead allocation for agents
• Machine learning insights to support customer segmentation
• Automated data extraction from PDF reports and comparison against various policy combinations
• Automated demand analysis and generation of new product offerings
• Intelligent reporting and visualization
• Customer personality and tone analysis
• Automated creation of targeted marketing materials and promotions
• Enablement of intelligent self-service product research for customers
• Automated product recommendations and natural language question answering

When it comes to deciding which AI to employ, insurers need to focus on the things that AI and humans do best together. When AI is combined with human ingenuity across the enterprise, it can help solve complex challenges, develop new products and break into and create new markets. Data analytics for better customer engagement In sales and distribution, insurers can use data analytics to improve customer engagement. Virtual assistance (VA) Accenture’s virtual adviser Cathy (Cognitive Agent to Help You) is a self-learning virtual agent that responds to customer queries by extracting information from a back-end database. Cathy is always learning more as it consumes human-agent interactions and stores knowledge on its database, enabling it to make automated product recommendations based on customer profiles. If a more complex customer request arises, Cathy seamlessly transfers the request to a human agent. Machine learning Insurers can boost their sales and distribution by using machine learning to analyze customer personality and tone. Machine learning makes selling (and buying) insurance easier than ever—virtual agent Amelia, for example, can give customers a motor insurance quote immediately, without the need to speak to a human being. What are the benefits of AI for sales and distribution in insurance? When humans and machines work together, they create the opportunity for growth and innovation. Within insurance sales and distribution, AI-related technologies can help to enable:

• Increased lead generation — data analytics helps insurers identify and reach potential customers. The insight derived from data analytics can drive and constantly improve the sales team’s effectiveness at generating leads.
• Efficient leverage for cross- and up-selling — AI such as data analytics and VA gives insurers invaluable knowledge about their customers, making it easier to convince them to buy a comparable higher-end product (up-selling) or a product that is related to the ones they already have (cross-selling).
• Increased service quality — self-learning virtual advisers like Cathy interact with customers and absorb information about their needs. This valuable feedback drives personalization of products and improves the quality of services.

Use case: intelligent customer engagement (ICE) With intelligent customer engagement, insurers can strategically deflect issues that need to be addressed from human agents to machine chatbots. They can predict why customers are calling and approach them effectively. Humans now take on the new role of knowledge engineer: They take over where the AI ends and curate the knowledge corpus over time. See also: Are Insurers Ready for Voice Search?   In our future vision for insurance, AI-powered care gives insurers the opportunity to save 30% of their customer service costs by:

• Driving customers to digital experiences;
• Providing conversational interactions that increase digital adoption and containment;
• Leveraging AI to automate and deliver consistency across channels.

Insurers are looking to better connect with their customers and to strengthen relationships with experiences that delight them—while reducing the cost to serve. Technology enables them to do this by, among others, shifting the mix of customer contacts: It’s time to put your AIQ to work When you combine human ingenuity with AI—such as data analytics, virtual assistance and machine learning—to improve the sales and distribution function, you will see results improving. AI presents the opportunity for business transformation by enabling intelligent processes in the value chain and intelligent products and services in the market. Success will depend on how well your organization can harness the combined power of technology, data and people. In my next post, I’ll look at how you can use AI to augment underwriting and service management. Get in touch to find out how you can boost your company’s sales and distribution function, as well as others within the insurance value chain, or download our report on How to boost your AIQ.

The commercial insurance industry is in an early and exciting stage of adopting artificial intelligence. With widespread acceptance, AI is set to provide a large source of value and a key driver of competitive advantage. However, there is confusion about what it means and how it will affect the bottom line. Certainly, futuristic perspectives of AI — with human-like robots — have been instigated by Hollywood films. However, to push the dialogue into meaningful territory and truly consider how AI can benefit insurance, we must first remove the shroud of mystery that exists around it. What Is AI? Simply put, AI is an intelligent computer program that strives to work much like a human does. As such, it’s usually defined by two main characteristics: 1. Ability to interact in a natural, human-like way. AI solutions (as opposed to traditional software solutions) strive to interact with users in ways similar to what humans do. One new and increasingly popular mode of interaction is through voice commands. A user might ask Alexa to turn on the lights in a room or instruct Siri to call “mom.” The same technology can be used to transcribe conversations with claimants and perceive the sentiment therein. Free text is another form of interaction, where users don’t need to provide precise data to get a system to react. For instance, claim notes entered by adjusters have been traditionally difficult to process, yet they are a gold mine of insights for AI-based systems. Images serve as another source of input. An AI system could use a picture of a car after a collision to assess the level of damage much faster and easier. 2. Aptitude to learn. Whereas traditional software has to be highly defined and programmed, an AI solution can be given a few parameters and learn on its own. AI is still quite far from being able to think as efficiently as human beings do, but these learning machines are improving by leaps and bounds every day. Increasingly sophisticated capabilities are important because data is ever-changing and noisy, particularly in commercial insurance data. With interactive and learning faculties, AI is evolving to exhibit the “smarts” we need to improve profitability in insurance. Executives should consider how and where to deploy AI to maximize the financial upside. It’s important for executives to realize that AI is fundamentally very different from the typical business intelligence (BI) approaches of the past. The BI infrastructure (i.e., data warehouses, reports) that most organizations have is a great foundation, but it does not have the agility and self-learning capabilities offered in the new wave of AI-based solutions. See also: Leveraging AI in Commercial Insurance   Why Does It Matter? The reason insurers are taking the time to consider AI investments is that these systems are increasingly showing the potential to dramatically improve their bottom line. There’s little doubt in a CEO’s mind that AI will redefine the competitive landscape in the years to come. Those with a strategic approach will thrive. Here are a few examples of how AI is being applied to enhance profitability: Identifying the best doctors to provide care to injured workers. In workers’ compensation, selecting the right doctor — particularly on a complex claim like a spinal injury — can have a dramatic impact on claims costs and outcomes. AI can analyze and rank providers into tiers based on a variety of performance measures, such as claims duration, medical expenses and return-to-work results, better than ever before. A low-ranked physician can potentially drive claims costs five to 10 times higher than a high-ranked doctor. The cost differential speaks to the quality of the provider and the treatment approach used. High-ranked doctors typically take a holistic approach to care. They consider all aspects of the injured worker’s health that affect recovery, including comorbidities such as high blood pressure or diabetes. These doctors are usually aggressive in getting injured workers the care they need to recover and return to work. Many have a long history in the occupational health setting, so they understand that being able to return an employee to work — even in a modified capacity — can play a key role in the healing process. Low-ranked doctors, on the other hand, often inexplicably drive up the number of office visits. They may unnecessarily prescribe opioids and other drugs. In essence, AI detects a trend of over-treatment rather than a focus on getting injured workers back on the job. The insurance industry previously relied on a traditional statistical approach to select physicians, but those models required a significant number of claims per doctor to yield a meaningful assessment. Today, AI can assess a doctor with just a few claims as it can delve deeper, using unstructured data such as notes and descriptions. AI is highly efficient in its analysis. Improving litigation trends. AI can also help to reduce litigation costs significantly. This is an expense that affects all lines of insurance, but in workers’ compensation litigation rates are particularly high, and in many cases they are unnecessary. So, attacking this trend can be a significant source of savings. AI can identify early on which claimants are likely to seek legal representation. By employing communication and management on these cases, insurers can avoid litigation. When attorneys must be involved, AI can help identify the best lawyer to represent the case, similar to its ability to determine the best physician. It makes attorney recommendations based on many factors, including type of case, jurisdiction and judge. AI can also indicate whether it’s best to settle and, if so, for what amount. See also: 3 Steps to Demystify Artificial Intelligence   Avoiding costly, unnecessary surgical procedures. AI can also help to identify claims that may be on a treatment track to surgery. By detecting this risk early, case managers can seek a better approach to care and possibly avoid the need for such an expensive, invasive procedure. This would yield savings, while also avoiding other potential medical complications that could be costly and, ultimately, affect quality of life for the injured worker. Aggressively managing auto claims with a potential to explode. Other lines of insurance also have a burning need for AI. For example, due to competitive pressures driving down premiums, auto insurers are experiencing tight profit margins, and AI can help hold down costs. One way is by identifying claims with a high likelihood of exploding in terms of expenses. This might be due to a number of factors, including the type of injury and vehicle damage. By having this early warning, examiners can pay closer attention to these cases and aggressively manage them in the hopes of having them stay on track. As first published in Digital Insurance.

We live on a seismically active planet, something most of us know all too well living here in California. Although seismic events can strike with little or no warning, major tremors are often separated by years or even decades. This infrequency and unpredictability can lull us into complacency, or even lead to a false sense that there is really nothing we can do to prepare ourselves for the movement of the earth beneath us. We certainly have no control over these immense forces or the time and place they are unleashed. What we can control is how well we minimize the hazards that cause most of the injuries in an earthquake and how effectively we prepare for the aftermath of a disaster. This year marks the 10th anniversary of The Great California ShakeOut, taking place on Oct.18, 2018 at 10:18am. On this date and time, millions of people in California and around the world will participate in earthquake drills and other events to both raise awareness and enhance our readiness. The safety of everyone in our schools, healthcare facilities, community resources, workplaces and homes depends on all of us doing our part to prepare for the next inevitable earthquake. Hazard Reduction For most of us, the first line of defense in earthquake preparedness lies in reducing the potential hazards present in the areas in which we live and work. Building codes and retrofitting have gone a long way toward making our structures less vulnerable to earthquake damage. But the greatest likelihood of injury comes from non-structural hazards, including furnishings and equipment, electrical and mechanical fixtures and architectural features such as suspended ceilings, partitions, cabinets and shelves. In general, non-structural components and building contents become hazards when they slide, break, fall or tip over during an earthquake. See also: A Troubling Gap in Earthquake Coverage   Securing non-structural components and building contents improves safety and security during an earthquake emergency by:

• Reducing the potential for fatalities and injuries.
• Helping to maintain safe and clear exit ways for evacuation and for emergency responders to access the building.
• Reducing the potential for chemical spills, fires and gas leaks.

Potential injuries can also be reduced significantly by completing these quick action items:

• Store heavy items on mid to lower shelves (below the height of adults and children).
• Do not store heavy items or full boxes on tall furniture.
• Secure hanging plants or hanging displays with closed hook hangers.
• Attach tall, heavy furniture to wall studs.
• Place tall file cabinets and shelving (over four feet) in low-occupancy areas (such as a closet).
• Secure desktop equipment and displays that could fall and injure occupants.

When the Shaking Stops When you are confident that the shaking has stopped, employ extreme caution in leaving buildings and structures. Keep in mind that there may be things that have been shaken nearly loose but still hanging on and could potentially fall on you. If you know where your utility shutoff locations are and are authorized to do so, turn off gas, electrical and water supplies to help prevent further risk of injury or damage. Be Ready for the Days After Following a major earthquake, utilities and communications can be interrupted, transportation may be blocked and emergency services could be potentially stretched to their limits. Some people could be completely on their own for several days afterward. Maintaining essential supplies in a “Go-Bag” to last for a minimum of three days, including water, food, flashlights and batteries, first aid supplies, clothing and means of shelter and warmth, will help you weather the immediate aftermath. A hand-cranked emergency radio provides an important source of official information for recovery, risks of secondary disasters such as fire, flood or gas leaks. Many of these radios also provide a way to charge a cell phone. You also need to be ready for aftershocks, which can be just as strong – sometimes stronger – than the initial earthquake. Stay clear of damaged structures, electrical lines or anything else that could fall in your vicinity. Don’t allow emergency supplies and equipment to become a danger if the shaking starts again. Because each aftershock may increase the possibility of gas leaks, fires should be avoided. Keep a supply of food that doesn’t require cooking and water that doesn’t need boiling. See also: 5 Tips for Avoiding Personal Injury Claims   Resilient communities and families learn the lessons from every prior earthquake – recent or distant – to have the best chance of surviving the next disaster uninjured and quickly on the way to recovery.

The insurance industry is facing seismic and unprecedented shifts on multiple dimensions. From increasing client expectations to new emerging risks, from the emergence of robo-underwriters to the ever-present question regarding the role of traditional channels, insurance carriers have multiple fronts on which to re-think, re-look and address innovation challenges and opportunities. The culture of the insurance sector is changing. The momentum to engage, identify new frontiers of competitive differentiation and execute outcomes has clearly started. As a case in point, Insuretech Connect, the largest insurtech conference had 1,200 participants in 2016, 3,800 in October 2017 and 6,000-plus this year. At events like this, you can feel the incredible energy of insurance professionals, regulators and startups. Insurance organizations are full of insurance professionals with incredible skills and commitment to always go the extra mile. Driven by an entrepreneurial spirit, they seek to reinvent the way things are done and have in many cases always been done. A few trailblazers have challenged their organization’s formal rules and forced habits and have pushed bottom-up innovations within their organizations. Yet other committed insurance folks have been involved in top-down programs that have been created by their companies to capture and execute the next frontier of innovation. We find that, unfortunately, large segments of the workforce do not engage with the innovation process of their employer. We often find that some of the best concepts, opportunities and solutions find the exit sign faster than they find traction within the boundaries of their firm. In some cases, people push for their innovations as side agendas, often driving them as secret agendas where their energies and attention are spent. In other cases, people simply decide that it’s better to pursue the art of the possible outside of the firm. We believe that this is a pity and a waste of positive energies for the existing incumbents. Carriers should embark on building a foundation that creates the conditions and enables mechanisms for promoting the culture of innovation and channeling this energy in a productive direction for the company. We have worked in and with large and international organizations and know well how these complex elephants live and how difficult it is to set formal processes able to promote virtuous circles and orchestrate innovation as a “living, breathing and relevant” process. This issue is big and complex, and there is no magic wand to solve it. We would like to start a discussion on how this issue can be addressed in the insurance sector. The problem as mentioned has many different angles. We decided to start by addressing one aspect of the current state—the silos. Traditional silos are one of the of the killers of insurance innovation. We recently came across situations that speak volumes to the need to consider foundational investment in integration capabilities. We present three myths that often prevent even forward-looking carriers from pursuing well-intentioned innovation strategies. Getting underwriters, risk engineers, marketers, product developers, actuaries, claim handlers and technology folks to break out of traditional silos will need to be a critical first step before any innovation investment or program is considered. See also: How to Get Fit for Innovation   The Myth of the Innovation Mirror A top performer in a line of business at a well-recognized carrier was promoted and placed in the company's innovation group. This leader was a recognized expert in his functional domain and was often sought out for insights on both legacy issues and emerging trends. During a recent meeting, we asked him for his opinions on the issues being faced by a key stakeholder and partner group within the same firm on a business line that, while different, was really close to his business line. Much to our surprise, this leader said, "I have never thought of their business line. I don’t know." We left the meeting with a surprising realization that there are probably many other top performers who excel in their chosen disciplines within well-defined boundaries, yet do not seek to expand the vistas of their exposure or to apply their knowledge to related domains. Their organizations have correctly encouraged their growth and specialization in one domain but have probably never facilitated exchanges between business lines or forced them to go out they comfort zone. We call this the "Myth of the Innovation Mirror," where the images we focus on are constrained by one's own areas of expertise. The Myth of the Signal Catcher A leading U.S. carrier saw the departure of one of its top line leaders. This individual had spent decades building a robust P&L, operating team and client relationships. He had been recognized for his thought leadership and for building teams that pushed the boundaries of what's feasible and valuable for their clients, but he was not directly involved in the innovation program of the company. This company boasted of a well-funded and successful enterprise-wide innovation program, championed by the CEO and supported by divisional leaders. The irony of this departure was that the executive left to pursue an independent entrepreneurial venture because he believed that his ideas and the innovative value proposition would not be implemented by the firm. Despite having a robust and well-managed innovation program, the firm failed to catch the signal that one of their very own was both willing and able and highly motivated to create a future-forward product today. There could be many reasons for this specific departure but we believe that it probably happened because this leader was not formally affiliated with the innovation program. There was no mechanism to watch, catch and act on the weak signals that this leader was sending out, weeks and months ahead of his departure. We believe that this myth of the signal catcher is a serious risk that carriers have to consider and address. Simply creating and operating an innovation program is not adequate and sufficient. Creating the ability and the mechanics to watch, interpret and catch the weak signals coming out of individual and or team efforts is as important if not more important than simply being a scouter of startups, or an inventor of ideas and concepts or an evangelist of the innovations. The Myth of Action Finally, we address the "Myth of Action." A global insurance carrier has innovation centers across key markets. A formalized program exists where leaders and staff resources spend dedicated time getting together and converting their individual ideas and interests to collective outcomes. Some of these centers represent centers of excellence in different domains. In this scenario, we found that an innovation team in one part of the world—while working on a new topic for them—was almost devoid of access to similar concepts and work that had already been pursued halfway around the world. As carriers with a global footprint address innovation outcomes, it will be critical to ensure that action is not mistaken for outcomes. Bridging the distance within and between different centers of innovation is crucial to ensure that the teams do not end up becoming innovation silos unto themselves. The "Myth of Action" arises when innovation champions or leaders assume that presence and permanence are sufficient. We are perfectly aware of the local specificities that make the possibility of simply copying-and-pasting an insurance solution coming from another country a utopian idea. But many ideas can inspire location-specific variations and be tailored to the local needs. While presence across regions and permanence from a mandate perspective are key, we believe that it is more critical to ensure that physically far-removed teams get structured and unstructured opportunities to be exposed to work that peer groups are driving at non-local locations. Researchers have found that proximity is a key driver of organizational effectiveness. Solving for this “distance bridging” will be critical. Simple tactics like designing intentional cross-location collaboration will ensure that exchange of ideas in large and complex organizations can transcend distances. So how can you attack these myths head on and build or mature your innovation practice? We recommend that innovation efforts identify three distinct but connected archetypes for roles/resources working with an innovation focus. We propose the trifecta of Observer, Interpreter and Storyteller. Think of these as hats or lenses, rather than roles or restrictions. Observers are designated to be non-judgmental observers of actions, outcomes and opportunities. With two leading questions of “What do I see?” and “Where do I see?”, Observers play a key role in taking a non-action view and in scouting even where you don’t expect to find anything. Interpreters are driven by two different questions. While the Observer has simply made her observations known, the Interpreter asks, “Why do I see what I see?” and “What does this mean?” These questions are designed to help the Observers dive deeper into the observations they are presented with, but also to rationalize the knowledge and ideas identified. While there might be a temptation to go broad and expand the scope of one's assessment, we believe that focusing on depth and asking increasingly fine-grained questions is more beneficial. Storytellers are the final actors in an innovation practice. We humans are wired for storytelling. From time immemorial, our ancestors have passed on down through generations many a story of heroes, victors and vanquished. We recommend that the Storytellers play their part in the modern version of "tell me a story," and spread the word about the insights that the Interpreters have distilled. The storytellers have to evangelize, inspire and motivate the organization in the adoption of innovation. See also: Key Trends in Innovation (Part 6)   Taken together, the Observer, Interpreter and Storyteller create the much needed and often missing enterprise-scale integration that helps make innovation efforts successful. These archetypes can be introduced and embedded into almost any current innovation program. Their integrated activities will contribute to channel the positive energy in a productive direction for your company. Think of these as calibrations you can do to any currently defined innovation operation, resource or delivery model. Done right and executed consistently, these three roles can help address the three myths, and the risk of innovation teams not living up to the promise of what they can truly deliver. In many ways, the IoT Insurance Observatory (spearheaded by one of the authors of this article) has applied this trifecta of lenses with an extremely narrow scope—the usage of sensors within the insurance sector—targeted at the open market (opposite to the internal focus of the discussion above). This think tank is, first of all, constantly observing and scouting the usage of sensors in different insurance business lines around the globe. Second, it is interpreting best practices and pitfalls for the members, so providing them the most globally relevant IoT insurance knowledge. Last but not least, it has as a core deliverable the storytelling of this knowledge through workshops dedicated one-to-one to each of the organizations that are members. In this way, the Observatory has aggregated almost 50 organizations between North America and Europe and is promoting IoT adoption in the insurance sector. **** We believe carriers can employ these three tactics/rules to mitigate the risks of the three myths. These tactics are part of the solution for the big and complex problem of how to promote virtuous circles and orchestrate innovation. Join our discussion to find additional solutions to catalyze all the positive innovation energy is emerging in the insurance sector. The article was written by Matteo Carbone and Sri Nagarajan.

Healthcare is being transformed by advances in artificial intelligence, virtual reality, machine learning, sensors and other innovative technologies. Practically everybody has a smartphone, making it easier than ever to gather data and consent to third-party access. Unique data insights mean providers can offer people products and services tailored to them individually. For insurers, digital technology offers new ways to manage risk that relies less on face-to-face and traditional clinical assessment; this is why there is so much interest in understanding how innovation might work. Selected comments from four key players in the digital health ecosystem make clear the appeal of putting two and two together. Thomas Lethenborg at Monsenso, a mobile platform for mental health, said, “Digital technology helps an individual move from reactive behavior to being more proactive - and this changes the paradigm in particular with engagement.” It’s a view shared by David Forster of Thrive, a digital interventions app for mental health: “Data drives our understanding of what works best for the individual.” According to Forster, the success of digital technology in clinical settings points to real opportunities in insurance: “It makes it possible to provide policyholders help with illness prevention, early detection and assistance on a personal level.” Ian Prangley, of exercise rehabilitation service TrackActive, continued the theme when he said, “For insurers, digital solutions can drive connectedness, engagement and customer satisfaction while enabling people to self-manage their health. Harnessing data insights and implementing artificial intelligence (AI) is key to achieving this.” See also: Why to Digitize Disability Claims   A comment by Danny Dressler of AIMO, an ecosystem integrating intelligent motion analysis into musculoskeletal care, added further confirmation: “As more and better data is gathered and processed safely, AI offers the most promise to take care of people's health, and fix issues in both healthcare and the life and health insurance sectors.” By using digital means, insurers can create scalable, automated, speedy ways of supporting people when they need help the most. Proponents argue it offers better health outcomes for policyholders that will reduce the costs associated with long disability claims - a win-win for both insurers and consumers. Dressler also said that “technology like ours lets insurers offer customers new solutions such as dynamic pricing and automated claims and even help to prevent claims from happening.” Lethenborg says it represents “an opportunity to ensure the data collected gives holistic insights and analytics that we can use to intervene more rapidly, when help is needed.” But it’s crucial the highest levels of privacy and data protection are guaranteed and operators are in full compliance with regulations. An imperfect balance of privacy with innovation is a deal-breaker for consumers. Forster is clear how delicate this balance is: “We recognize our responsibility to safeguard users’ data, but at the same time information technology empowers people to make choices and participate actively in managing their own health - it puts them in the driving seat for the first time.” For digital solutions to be convincing, research and scientific evidence are needed, but with newly made services, long-term experience is scarce, and a leap of faith is required. Dressler spoke for all in saying, “We maintain strong links to scientific institutions because the general technologies underpinning our solutions emerges from scientific thesis...[This means] we only implement new features or functions after a rigorous validation process, especially because we are asking people to trust us with their health and well-being.” Dealing with high volumes of data is not without risk, particularly when it’s shared with third parties. See also: Digital Innovation in Life Insurance   Prangley has pointed to recent concerns over how sensitive data is being used to highlight the challenges faced, “The key is to anonymize and protect data, and have customers consent to sharing it on the understanding it will be used solely to improve their health.” This insight is driven home by Lethenborg, who said, “Transparency about how the data will be used is essential to building trust.” Digitization has already brought new products and services that have had positive medical and scientific impact. As Prangley said, “Technology has connected people and changed how we relate to each other. There [are] arguments for and against this of course, but in the context of health and wellbeing we believe it’s a great thing.” With mental health and musculoskeletal problems as the leading causes of disability claims in every market, these companies can bring digital solutions and opportunities - and health insurers can also feel great about them.

Who do property and casualty insurance customers turn to when they need help? In the past, answers have included insurance agents, customer helplines and company websites. Today, however, customers are increasingly likely to consult Alexa, Siri or Cortana. As voice assistants gain popularity in homes, in cars and on smartphones, they’re also gaining traction as a marketing tool. Here, we look at the ways in which insurance companies are using voice assistants as part of their marketing and sales strategy, as well as what to expect in the near future. How Voice Assistants Are Changing Marketing Voice assistants commonly come in one of two forms: wireless speakers that can be placed in the home or office, or as built-in tools on smartphones. iPhones and various Android devices have had them for a few years now. In some ways, voice assistants work similarly to visual or text-based tools like smartphone apps and Google search bars. The user asks a question or enters a command, and the device responds to it. Voice assistants like Alexa even offer apps, or “skills,” that work similarly to smartphone apps — except they rely on audio rather than visuals to share information, TechCrunch’s Sarah Perez writes. The audio-based approach changes the ways in which both search results and apps work on voice assistant devices. A text-based Google search, for instance, returns a list of links from which the user can choose. A voice-based search, however, tends to return the single response the AI thinks best fits the user’s query. Some experts praise this option for its speed and flexibility. “Since voice flattens menus, it will make daily tasks far easier to complete,” Jelli CEO Mike Dougherty says. Yet it also puts additional pressure on marketing teams to ensure that their content gets chosen by the various search engines that inform each voice-based device, says Richard Yao, senior associate of strategy and content at IPG Media Lab. Voice assistants haven’t just changed how search results are presented. They have also changed how users launch searches in the first place, says More Visibility’s Jill Goldstein. While text-based searches tend to focus on two or three keywords, voice-based searches use full, natural-language sentences. These often start with question words like “what,” “how” or “when.” See also: Insurtech Starts With ‘I’ but Needs ‘We’   These questions give marketers insight into where shoppers are in their buying journey and how best to meet their needs — but only if marketing teams are collecting and using this information, says Tyler Riddell, vice president of marketing for eSUB Construction Software. Not only are marketing teams learning to adapt to the differences between audio and visual, but they’re also learning how to adapt to a search tool that adapts itself. Because voice assistants use artificial intelligence and machine learning, they can adapt to changes in search terms, says Gartner analyst Ranjit Atwal. The onboard AI is designed to learn over time, gaining a better sense of how users frame their queries and the sort of information they may be looking for. ‘Alexa, Find Me Auto Insurance’: The Rising Demand for Voice Search Based on recent sales trends, 55% of U.S. households are expected to have a smart home speaker, with voice assistance enabled, in their houses by the end of 2019, Dara Treseder at Adweek reports. Voice assistants are also a mainstay of many smartphones, from Apple’s Siri to Google’s voice search option triggered by saying, “OK, Google.” Insurance customers increasingly prefer to include digital channels in their search for property and casualty insurance. With voice assistants occupying millions of smartphones and a wide range of other devices, customers increasingly prefer to rely on these tools, as well. Nearly half (46%) of insurance customers already use voice search tools at least once per day, according to Shane Closser at Property Casualty 360. One in four want their voice assistants to be able to give them more information on insurance agents and products. One in three wanted to use voice assistants to book appointments with a particular insurance agent. Service-based companies that offer “highly complex and highly personal” services are uniquely suited to thrive in the voice search era, says Adweek’s Julia Stead. While Stead focuses on travel, finance and healthcare, her analysis applies to P&C insurers, as well, because these companies also offer services that have long been accessed via voice (phone), are tailored to the needs of each customer and often require access at odd locations or hours. And while the conversation about tech innovation often focuses on younger users, voice assistants are increasingly popular with older insurance customers. See also: Future of Insurance Looks Very Different   Lauryn Chamberlain at GeoMarketing.com says that 37% of consumers age 50 and older say they use a voice assistant, often because simply speaking to a smart speaker or phone is easier than tapping, swiping or reducing a question to its key search terms. In other words, older users can think of their voice assistants as a helpful background entity rather than as a device. In short, voice assistants are cutting across demographics. They’re entering more homes and workspaces. And insurance customers want to use them to secure coverage. How P&C Insurers Are Incorporating Voice Into Their Marketing Several insurance companies are already experimenting with voice assistant tools as part of their own marketing process, according to Danni Santana at Digital Insurance. For instance, Nationwide, Liberty Mutual (and subsidiary SafeCo) and Farmers have all launched Amazon Echo Skills. Progressive, meanwhile, joined Google Home in March 2017, the first insurance carrier to do so, according to Rachel Brown at Mobile Marketer. Other insurance companies have experimented with different approaches. Amica Mutual Insurance, for example, launched an Alexa skill that doesn’t connect users to their individual accounts. Rather, it offers information in more than a dozen categories to help users better understand billing, discounts, storm preparation and more. With the development of Alexa skills and similar tools, brands are thinking about how a voice assistant’s sound affects their brand development, says Jennifer Harvey, VP of branding and communications at Bynder. The choice of voice tone, pitch and speed can all send a powerful message about an insurer’s brand and culture, whether it’s reassuring, serious, cheerful or anything in between. One of the big opportunities for insurance companies and voice assistants is access. Currently, voice assistants can take on many simple tasks but can’t always handle a transaction as complex as ensuring a customer receives the right home or auto coverage for their needs. Yet developments in AI and voice recognition indicate this may change. “Alexa is already capable of placing a complicated pizza order,” says Inbal Lavi, CEO of Webpals Group, “underscoring that voice assistants will act as more than middlemen.” For now, however, even the digital middleman approach can benefit potential and current P&C insurance customers and the companies that serve them. “We want to enable easy access for our customers,” says Alexander Bernert, head of brand management at Zurich Insurance. “Consumers do not necessarily think of taking out disability insurance between 9 am and 5 pm, but maybe even shortly before midnight.” It can be tough to reach an insurance agent shortly before midnight. But a voice assistant can find one, provide information and even schedule an appointment — making it easier for potential customers to turn into actual purchasers. In a world where insurance customers already do research and contact insurers via multiple channels, voice assistants are a natural frontier for insurance marketing.

The American Cancer Society (ACS) recently decided that, because the rate of colon cancer has increased by an “alarming” 22% in the 45-to-49-year old cohort this century, colon screenings should start at age 45. This is a very instructive decision, though not because it is a good idea. Rather, it’s instructive because it’s a “teachable moment” about why Americans suffer from over-diagnosis and over-treatment so much more than people in other modern economies, with worse outcomes to show for it. One reason is the failure of our medical and public health community to understand the difference between relative risk and absolute risk. On one hand, a smoker might have a relative risk of heart attacks that is only a few times greater than the risk for nonsmokers. However, with Americans suffering 400,000 heart attacks a year, many of us do whatever we can to avoid small increases in relative risk of a heart attack because the absolute risk is so great. On the other hand, suppose the relative risk of an unsafe airline is 10 times the risk of a safe airline. But with about three crashes a year (in a very bad year) over the course of 30 million flights, even a whopping tenfold increase in relative risk would bring your absolute risk of crashing up to a trivial 1-in-a-million. Here at Quizzify, we’d still opt for the unsafe airline if it has more legroom and a better mileage program. See also: A Road Map for Health Insurance And that brings us to exactly what the American Cancer Society miscommunicated…with a disturbing twist, as you’ll see below. This “alarming” 22% increase in relative risk over the course of this century translates into an increase in the absolute rate of colon cancer in the <50 cohort from 0.006% to 0.007%. Yes, 0.001 percentage point more of the <50 population in this country will get colon cancer now than 18 years ago. Further, suppose half of that 0.007% had a family history (or some other major risk factor) and would be advised by their doctor to get screened regardless of guidelines for the average person. That leaves roughly 0.0035% of the 45- to 49-year-old population who could possibly benefit from a random screen. That’s not much different from your lifetime odds of getting struck by lightning. And a screen is far from a lifesaver, in general. Quite the contrary, statistically speaking it is likely to find the slow-growing tumors while missing the more aggressive, faster-growing tumors that begin between screens. Screening is not a surefire way to detect cancer, by any means. The Disturbing Twist: The Hazards of Screening That trivial benefit must be weighed against the nontrivial harms. The risk of a complication, such as a perforation, is estimated at between 1.6% and 1.8%. In all fairness to the ACS, it isn't insisting that the screen be done via a colonoscopy, though the non-invasive screens have such high positive/inconclusive test rates that they often lead to colonoscopies. That makes the rate of complications about 3,000 times the odds of having your life saved by early diagnosis of colon cancer. See also: How Telehealth Changes Senior Care Of course, the worst complication is death, and the mortality rate from colonoscopies (0.02%) appears to be, on its face, much higher than the rate of lives that would be saved. However, in all fairness, the mortality rate, like the complication rate, in general, increases with advancing age. Hence maybe the mortality rate in the 45- to 50-year-old cohort isn’t any higher than — and might even be slightly lower than — the rate at which early detection will save lives. So what’s an employer to do? We’d say, stay on the sidelines. Let employees work this one out for themselves, with their doctors. Or show them this post. But don’t encourage them to run out and get screened on the basis of a recommendation that is at best controversial and at worst harmful.

Whether the majority of your business is online or in-office, it is crucial for you to have the right tools to help you capitalize on the insurance market and get ahead of the competition in a changing landscape. It does not matter what type of insurance you are selling, whether it’s employee benefits, life insurance, group insurance, voluntary benefits or property and casualty. While your role may not be directly affected by things like legacy system transformation, robotics and big data, there will be ripple effects. Besides obtaining new clients, presenting renewals and marketing, changes in regulation and advances in technology are all things that agents will have to contend with. Here are three elements that savvy agents and brokers will want to consider. Multi-generational marketing Global populations are now categorized (albeit loosely) into four categories: Baby Boomers, Generation X, Millennials and Generation Z. Although Baby Boomers are still the largest population, the U.S. Census Bureau predicts Millennials will outnumber Boomers by 2019. These differentiated markets make targeting sales much more difficult. Fortunately, there are online tools that can support you. The trick here is diversifying your presence. Ensure that you have a presence on multiple channels so that you are able to meet your customers where they are. See also: 10 Essential Actions for Digital Success   Update your agency website with a live chat feature, and ensure it is easy to contact you online. Examine whether it makes sense to use Twitter, Facebook or Instagram. If you do, you’ll need a strong content strategy that provides real value to pull in visiting prospects. Don’t just surf the web, observe the web. Set up Google alerts and analytics and Hootsuite streams to follow partners and competitors. Watching for trends will keep you ahead of the game. Administration tools A strong agency management system can provide you with everything you need to support your customer lifecycle. When looking for the right one for you, think about CRM and marketing automation. Determine what will make it easier for you to track leads, nurture prospects, close deals and obtain commissions. Once you’ve sold a policy, a high-quality microphone and webcam will enhance consistent communication with customers remotely on Skype, WebEx, GooglePlus Hangouts or even Facebook. Get comfortable with automation As you get comfortable with a new and diversified way of connecting with your customers, you’ll want to consider that insurance carriers are doing the same thing. Accenture’s Technology Vision 2018 report revealed 82% of insurance carriers agreed that their organizations must innovate faster just to stay competitive. In a world where customers are shopping around for options and prices all the time, retention itself becomes a valuable commodity. Help carriers help you by learning what tools their new systems have to offer so you tap into all the resources available. Do your insurance companies offer broker portals? Do they offer online quoting capability for immediate results? Can you generate a proposal or immediately sell a policy? Can you offer that functionality on your own website? The carriers that invest in your success by improving sales, underwriting and admin functions for quicker turnarounds and smooth renewals are doing themselves a favor, too. See also: Agents Must Become ‘Discussion Partners’   Think strategy As you determine the best way to move forward, sit down with others on your team, start a Google doc and plan your strategy for the year ahead. As Yogi Berra wisely said, “If you don’t know where you’re going, you might not get there.” What free tools will you use? Which ones will you invest money in? How will you track progress to determine ROI? What tools are working for you? The best agents and brokers will be nimble enough to exploit the tools available to them and prepare for new ones as they arrive. The sooner you start, the more likely you’ll find yourself ahead of the digital curve.

In this blog series, we explore what benefits insurers would gain if they start boosting what we call the Artificial Intelligence Quotient (AIQ), and give an overview of why and how insurers should leverage technology, data and people to get started. Perhaps some of you remember when an IBM computer called “Deep Blue” defeated world chess champion Garry Kasparov, in 1997. Twenty years later, he said:

“Human plus machine isn’t the future, it’s the present; Don’t fear intelligent machines, work with them.”

Please note, he says “plus” not “versus” or “against.” I believe he is right – there is actually an optimistic story of unlocked potential. When AI was enlisted to detect breast cancer A team of Harvard pathologists recently showed how some commentators on the future of artificial intelligence – who either wax enthusiastic about the productivity gains or predict the elimination of jobs – are missing the most important point. The doctors created an AI-based technique to identify breast cancer cells. It did well, scoring 92% accuracy, but still fell short of human pathologists, who typically achieve precision rates of around 96%. The biggest surprise came when humans and AI combined forces. Together, they accurately identified 99.5% of cancerous biopsies. Much like Kasparov, I believe this is how AI will realize its fullest potential—when human ingenuity and intelligent machines combine synergistically to deliver more than either can on its own. How does this relate to Insurance? There are numerous use cases of AI that can be applied along the insurance value chain, such as enhanced pricing, customized products and services, efficient underwriting and claims administration processes. Sales & Distribution — Employing machine learning insights to support customer segmentation could lead to benefits such as customized products and services and increased sales. Underwriting & Risk Management — The extraction of insights from multiple data sources can lead to improved risk evaluation quality and, hence, better pricing. Servicing — using machine learning to handle external emails and requests can lead to an increased efficiency in administration processes. Claims — The pre-assessment of claims and automated damage evaluation leads to higher quality and accuracy in claims assessment, management and administration and, hence, to cost savings. Recruiting — Leveraging contextual analytics and skills-based ontology to score resumes against job descriptions leads to an optimized conversion rate. There are many benefits for insurers – more efficiency, better pricing, customized products and services. AI will deliver efficiencies, but its greatest benefit will be to drive growth. Especially when it’s used primarily to augment the capabilities of humans. Artificial intelligence is set to play a major role in insurance, not only by improving efficiencies but by significantly enhancing the customer experience, boosting innovation and opening up new sources of growth. Accenture conducted an econometric analysis that forecasts that insurers that invest in AI and human-machine collaboration at the same rate as top-performing businesses could not only profit from becoming a more efficient company but also boost their revenue by an average 17% by 2022. But the research revealed that, while executives expect AI to completely transform insurance, they believe only 25% of their employees are ready to work with intelligent technologies. See also: 3 Steps to Demystify Artificial Intelligence   Insurers acknowledge AI’s importance and its transformative potential. They admit their people are critical to the success of their AI initiatives, and the growing skills gap is the key factor influencing their workforce strategy, but only 4% plan to significantly increase their investment in reskilling programs over the next three years. So, there is a major disconnect in insurers’ approach to AI. Time to Boost Your AIQ To help insurers take the next steps toward investing in AI, we created two indexes to see what is working. We studied both the FORTUNE Global 100 and what we call the “Intelligent Global 100” – these are pioneers in the development of AI technologies and applications – for the period between 2010 and 2016. For those 200 companies, we looked at both their in-house focus (their AIQ for invention) and their outside focus (AIQ for collaboration). Both are essential. Organizations with a high AIQ invest significantly in their in-house AI capabilities and collaborate externally. Yet our analysis revealed that fewer than 20% score well on both indexes — those companies we call “collaborative inventors” (who balance in-house innovation with external collaboration) — while 56% were weak on both. Not surprisingly, financial services (as you can see in the lower left quadrant) currently has one of the weakest scores on this matrix. How do you build your AIQ? There are three key ingredients to building a high AIQ: Insurers need to own some of the technology (but define business goals before applying AI), some of the data (recognize the importance of data convergence) and some of the talent (create the future workforce; start reskilling your staff). And they will also need to be deeply involved in a broader ecosystem. You need to work at all three, both in-house and collaboratively, to achieve success. Business leaders need to evaluate how they invest in technology, data and people. To start, they need to ask themselves the following tough questions: Technology:

• Does your AI amplify the skills of your people?
• Are you integrating your AI with internal and external systems?
• Does owning your own AI differentiate you in the market?

Data:

• Have you partnered with companies that can monetize your data?
• Can you integrate data with your legacy systems?
• Do you practice responsible AI?

People:

• Can you reskill your workforce to stay ahead of automation?
• Do you offer continuous on-the-job training?
• Can your leaders manage diverse teams?

Finding honest answers to these questions and taking the next steps forward matters, as they are the basis for leveraging the full potential of AI. Before embarking on this transformational journey and to answer all these questions, it makes sense to first develop a cross-enterprise AI strategy to clarify strategic goals – the whys, the hows and the whats of the business model. As we have seen, the majority of insurance executives believe human-machine collaboration is important if they are to achieve their strategic objectives. Because the workforce is a critical enabler of any AI strategy, insurers need to develop a workforce that is equipped and willing to work at a higher level in collaboration with intelligent machines. Insurers, in my view, cannot afford to wait until the future is clear and predictable, but need to start now. There is a choice that insurers need to make. Which company do they want to be? The one that has strategically leveraged intelligent technology, data and upskilled its people – or the one that has not? Transforming the workforce to collaborate effectively with AI won’t be easy or quick, but it is essential if the potential of artificial intelligence is to be realized. The time to start is now. See also: Strategist’s Guide to Artificial Intelligence   As mentioned at the beginning, the use cases for the application of AI along the insurance value chain are numerous, and I will explore some in my next posts. This series is structured to answer a number of key questions:

• How can you boost your AIQ in sales and distribution?
• How can you boost your AIQ in underwriting and risk management?
• How can you boost your AIQ in claims management?
• How can you boost your AIQ in client services and policy administration?
• What steps should you take to create the insurance workforce of the future needed to become an AI-driven company?

To learn more about how to raise your organization’s AIQ, download the report: Boost your AIQ. You can find the article originally published at Accenture.