Out here in Northern California, the hot debate over the past few days has been a luxury: whether the NBA Finals MVP should have been the spectacular Kevin Durant or the spectacular Steph Curry. (I'm Team Steph but have no problem with Team KD—or even with those who say Golden State Warriors fans are hopelessly spoiled after three titles in four years and should just stop talking.) But there's a conversation to be had about a more consequential MVP, and Dan Bricklin is just the guy to introduce it.

In this case, MVP stands for Minimum Viable Product. The concept has been the rage in innovation circles for a few years now, helping companies see the need to push a product into the market quickly, even though not fully baked, to gauge how real customers react in real situations and to adapt quickly. Historically, many companies have finetuned products so much that they have been late to market, only to find that what they're offering doesn't really match what customers want.

Now that MVPs have been in vogue for a while, Dan pointed me to some thoughts from a colleague on how to improve on them. Dan is always right on such issues. He invented the electronic spreadsheet back in the '70s as a Harvard Business School student bored of having to constantly recalculate so many cells in a paper spreadsheet every time a variable changed, and I've seen him be smart on a whole range of subject over the 30-plus years I've known him. 

The finetuning, suggested by Dan's colleague Jensen Harris, consists of four points:

• For many products, you can't go "minimum" on the user interface. The customer experience is often key to success or failure, so make sure people get a feel for the soul of your product.
• Do ship bad code. You'll have plenty of time to fix it if you strike a chord with customers. Don't waste time making it pretty now.
• Be absolutely sure about what you want to learn by shipping your MVP quickly, and make sure you can measure what you're testing. Also be sure ahead of time that you can act on what you learn.
• Realize that MVPs aren't the only way to go. Sometimes, an innovative idea is so complex that you have to tackle the whole thing at once, not in parts where continual experimentation can occur.

If you want to see the full set of Jensen's thoughts, click here: https://twitter.com/jensenharris/status/1001662472305106944. 

Have a great week.

Paul B. Carroll
Editor-in-Chief

The combination of professional administration with a structured settlement (annuity) is often the best way to protect an injured party’s settlement dollars in the event of an unexpectedly very costly year due to higher-than-anticipated medical needs after settlement. The combination of these services in a costly scenario allows the injured party to access more coverage from Medicare and pay less out of their own pocket. What Is Professional Administration? Professional administration involves the use of a professional third party to help manage the injured party’s medical settlement funds or Medicare Set Aside (MSA) after settlement. “Professional administration achieves two important goals,” says Marques Torbert, CEO of Ametros. “It saves the injured party significant money on their medical expenses by providing them with access to discounted medical network prices, and it ensures that all their reporting to Medicare for a Medicare Set Aside account is done properly.” When an MSA account runs out of funds and reaches a zero-dollar account balance, as long as it is administered properly Medicare agrees to step in as the secondary payer covering the continuing and needed medical expenses. Medicare “highly recommends” the use of professional administration to make sure that funds are extended as long as possible through discounts, used appropriately for medical care and ultimately reported properly so that Medicare will know when to step in as the payer. See also: Big Misunderstanding on MSAs   What Is a Structured Settlement? A structured settlement is a stream of periodic payments paid to an injured party by the defendant primarily through the purchase of annuity (fixed and determinable) issued directly by highly rated life insurance companies. In the case of an MSA, the annuity will enable the issuance of annual payments that cover the entire MSA amount. As Eric Vaughn, executive director of the National Structured Settlements Trade Association, explains, “Structured settlements provide an injured party with a reliable, stable source of income which can be critical to cover their ongoing medical costs. A structured settlement removes the variability of the markets and guesswork out of funding their future expenses.” The Centers for Medicare and Medicaid Services (“CMS” or “Medicare”) is accustomed to the use of annuities with MSAs. Medicare has provided clear guidelines for how the MSA should be set up when annuities are involved, with two years of costs funded upfront and the rest of the cost broken out annually over the injured person’s lifetime. When an MSA is sent to Medicare for approval, Medicare will review and approve MSAs with structures. When assessing future medical costs in an MSA, it’s important to take a very conservative approach. Using a structured settlement and professional administration for the MSA can provide valuable protection to an injured party should they have a costly year. The combination of these services will allow the injured party to properly get coverage from Medicare in the event their MSA funds run out. That Medicare coverage can, in many cases, ensure that the injured person pays less out of their own pocket. As Vaughn points out, “Annuities are a natural fit with MSAs, given the annual medical expenses are already budgeted over the individual’s lifetime.” Torbert adds, “Attorneys and adjusters alike are recognizing the power of combining the annuity with administration not only to assist the injured party in saving money, but also to provide them with support for their medical care over the long run.” It’s important to keep in mind, not all professional administrators and annuities are the same. Choose an administrator that provides the best service and saves the injured party most on medical expenses. When choosing annuities, it’s important to work with a trusted broker and to select a reliable, highly rated life insurance company. Speak with experts in both administration and structures to make sure you and your client make the right selection to ensure you have the most financial protection. Case Study Let’s take a look at an example of how an injured party, Joe, can leverage these two important services to protect his settlement dollars in the MSA. Let’s assume that Joe accepted a settlement with an MSA and has a life expectancy of 10 years. In the first, good scenario, Joe is doing well and is using professional administration to receive discounts so he has relatively low spending of a few thousand dollars a year on MSA medical items. Both a lump sum and structured account would have the same amount spent at the end of Joe’s life expectancy. Let’s take a look at the unique protection that professional administration and a structured settlement together can offer Joe in the scenario where he undergoes a costly surgery or other adverse outcomes. Let’s assume that Joe is offered the exact same MSA settlement amount and starts out on the same pace. Unfortunately, three years after settlement, Joe needs to pay for a complex surgery. With a lump sum account, Joe ends up having to pay for the remaining cost of the surgery after using what funds he currently has in his MSA account. Unfortunately, with a lump sum settlement, he will never receive MSA funds again. If he is Medicare-eligible, Medicare will cover about 80% of the remaining balance, and Joe will have to pay 20% out of pocket for all future treatment costs for the rest of his life (such as Medicare premiums and his regular treatments). If Joe has a structured account managed by a professional administrator, his funds will take a large hit at the time of his surgery, but the administrator will have ensured the funds were spent appropriately, so Medicare will step in as the primary payor. Medicare will pay for 80%, and he will take care of 20% out of pocket for the remaining balance of the surgery only for that year. After that year, his account will continue to replenish annually, and he can use his MSA funds to pay for future treatment. In summary, the outcomes for Joe can be strikingly different. With the lump sum settlement, he is losing personal funds, and he never again has the chance to build value in his MSA account. With the structured settlement, Joe is better off over time. The way Joe settles his case has a very powerful impact on his finances, and the combination of a structured settlement and professional administration protects the injured party more effectively. To view the math behind why administration and structures are the best combination, click here. You can find the full whitepaper here.

OSHA is in something of a holding pattern while it awaits a new administrator. Nevertheless, now is not the time for employers to let their guards down. The agency has operated under the acting leadership of Loren Sweatt since July 2017. The president’s October nomination of Scott Mugno, vice president of safety at FedEx Ground, to be the next OSHA administrator continues to be delayed amid political wrangling. With many career agency personnel in place, enforcement looks similar to the Obama administration in many ways. Overall Trends "Confusion, compliance and anticipation" is the phrase that best sums up OSHA during the first year-and-a-half of the new administration. There have been delays in enforcement and effective dates for some regulations; however, OSHA has not retreated from inspections or enforcement activities. Expectations for a more business-friendly environment under the Trump administration have yet to materialize, although there have been signs that there will, ultimately, be moves toward deregulation and less aggressive enforcement. No long-standing regulations have yet been repealed, which is not surprising, given the lack of a permanent leader and the fact that OSHA regulations cannot be revoked solely for economic reasons. However, we have seen activity on regulations that were already in process. They are among the clear indications that the Trump administration plans to take a different tone than the Obama administration: 2-for-1 Requirement. The president’s signature on Executive Order 13771 requires agencies to eliminate two regulations for every one promulgated. Rule changes. The president employed the rarely used Congressional Review Act to repeal 14 regulations, including:

1. The Volks Act. The president effectively overturned the rule that made recordkeeping requirements a continuing obligation for employers. Essentially, OSHA had the ability to enforce recordkeeping requirements for five-and-a-half years, rather than six months.
2. Fair Pay and Safe Workplaces Rule. The president signed a resolution that blocked the Obama-era rule requiring federal contractors to disclose and correct serious safety and other labor law violations.

Rule movement. Several OSHA rules have been moved to "long-term actions" or completely eliminated from the administration’s first two regulatory agendas.

• 1. Removed from regulatory agendas:
  • Vehicle backing hazards
  • Updates to chemical permissible exposure limits (PELs)
  • Comprehensive combustible dust rule
  • Hearing protection in construction
• 2. Moved to long-term actions, essentially putting them on an indefinite delay:
  • Workplace violence
  • Emergency preparedness and response
  • Process safety management (PSM) rule reform
  • Infectious diseases in healthcare

Another signal of the Trump administration’s intentions toward deregulation is the changing of the name "Regulatory Agenda" to "Unified Agenda of Federal Regulatory and Deregulatory Actions." See also: Health Consumerism, Stress Management   Controversial Initiatives Employers need to be aware of several regulations in the pipeline to ensure they understand and comply with the requirements. Electronic Recordkeeping OSHA’s effort to improve tracking of workplace injuries and illnesses requires certain employers to electronically submit data they are already required to keep. But there has been significant confusion and consternation over the standard. One issue is the implementation schedule. There are clear indications that OSHA intends to amend this rule to ease some of the requirements on employers. As it appears now, the deadlines are: July 1, 2018: Employers with 250 or more workers, and those with 20 - 249 employees in "high-hazard industries," must electronically submit information from their 300A annual summaries of work-related injuries and illnesses. March 2, 2019: Every establishment must submit information from their 300A summaries. The rule has been fraught with controversy and questions, such as:

• Where will OSHA put the information? There are concerns that employers’ information may become publicly available. However, if the agency opts not to collect the 300 logs and 301 forms as expected, that concern would be eliminated.
• How will OSHA use the information? With data on fatalities, amputations, hospitalizations and other factors available on computers, OSHA compliance officers could determine inspection priorities based on that information. But there are indications that the Trump administration may back off from the forceful enforcement mentality.

OSHA’s about-face: The agency recently announced that employers in all states must electronically submit their data for calendar year 2017 by July 1. This caught many by surprise, as several states with OSHA-approved state plans had not yet updated their recordkeeping requirements and employers in those states were under no such requirements. Additionally, the announcement means that the states involved are now under a greater regulatory compliance burden. Silica OSHA established a new eight-hour weighted average PEL on silica for affected industries. The construction sector was first up in September, although the agency delayed enforcement for one month. The agency will begin enforcing the rule for general industry on June 23, including training requirements. While there is a chance the deadline will be delayed, employers should nevertheless be prepared to comply. Fall Protection The Walking/Working Surfaces Rule has caught many employers by surprise. The rule went into effect in January 2017, and OSHA is strongly enforcing it. To date, OSHA has cited and imposed hefty fines on at least 12 employers for violating the rule, despite having no associated injuries. For example:

• One employer was penalized $114,000 for failing to ensure each surface could support a maximum load.
• Another was fined $36,000 for failure to guard unprotected sides and edges at a height of at least four feet.

Despite some confusion surrounding this rule, we can expect OSHA to inspect and cite companies for violations. Employers should research how they are affected and what they need to do. Beryllium As of May 11, affected employers were required to abide by new PELs and short-term exposure limits. On a positive note, the agency recently clarified that the rule only applies to areas where there are significant amounts of beryllium, rather than just trace amounts. That will save on business compliance costs, and it eliminates some of the vagueness of the rule. Enforcement The public shaming via press releases under former OSHA Administrator David Michaels subsided in 2017, but there seems to be a renewed effort in 2018. One recent example was the announcement of a $40,000 fine imposed for trenching operation violations that OSHA officials discovered while doing a drive-by of a construction site. Additionally, there has been an unexpected slight uptick in inspections in 2017. Combined with the congressionally mandated increase in penalties in 2016, it means employers need to pay attention. Again, the increased number of inspections may be due to the fact that career OSHA personnel are operating with no official leader. Look-back period: This is an issue to watch closely, to see if the administration may decrease the look-back period for violations that OSHA can use for repeat violations. The previous three-year period was expanded to five years during the Obama administration. Also during the Obama administration, repeat violations were cited more frequently and with higher fines. A recent court ruling in New York said the look-back period is non-binding. That does not bode well for employers that have enhanced their programs and are doing the right thing, only to have the agency cite them for violations that occurred years ago. Another change under the previous administration was the consideration of workplaces as being under the same corporate umbrella. Previously, workplaces were deemed individual, stand-alone establishments, regardless of the parent company. We believe the administration will eventually roll the look-back period to three years and consider workplaces to be individual establishments again. However, this may not happen until late this year or beyond, as these changes likely will not be an immediate priority for the new OSHA administrator. Compliance Assistance We have seen a clear focus lately on helping employers comply with OSHA regulations, rather than the "enforcement, enforcement, enforcement" effort of previous administrations. There have already been announcements of new alliances between OSHA and various industries or organizations, including one with the Board of Certified Safety Professionals. We expect efforts to provide more assistance and guidance to continue, possibly through the use of "letters of interpretation" to change the tone to one of more compliance assistance. The Voluntary Protection Program (VPP) was not a favorite of the previous administration. It was viewed as too easy to get in, and difficult to expel companies. But the Trump administration already held a stakeholders meeting to discuss revitalizing the program. Topics included ways to:

• Encourage participation
• Ease entry
• Enhance the benefits
• Engage network members

One concern, however, is whether there will be enough funding to support these compliance assistance programs. Positions that were eliminated two years ago would need to be resurrected. State Plans Twenty-two states have their own OSHA-type programs, and there has definitely been an increase in activity — especially in some of the blue states. California, for example, has hired a number of enforcement officers. That state is also implementing a workplace violence standard for healthcare and an injury prevention rule for hotel and housekeeping. Additional proposals in California may be approved. Washington and Oregon are also taking steps that are stronger than the federal OSHA requirements. One concern for employers is the patchwork of compliance among states that are failing to meet OSHA-required deadlines. Maryland, Arizona, Hawaii, Utah and Wyoming, for example, have not adopted a silica rule, despite the requirement to do so by late 2016. Even if these states lack appropriate funding, they could easily adopt the federal rule — but have chosen not to. We may see the agency step in as it did with the electronic recordkeeping rule recently. See also: Healthcare: Need for Transparency   Dates to Remember Employers need to ensure compliance for the following: Beryllium — March 12: Employers had to comply with the majority of requirements. Silica — June 23: 

• General industry and maritime employers must be in compliance with all requirements except action-level triggers for medical surveillance; they must also offer medical exams to employees with exposure above PEL for 30 days or more in a year.
• Construction employers must comply with methods of sample analysis.

Electronic Recordkeeping — July 1: 

• Companies with 250-plus employees must electronically submit 300A data.
• Certain high-risk establishments with 20 - 249 employees must submit 300A forms.

Cranes and Derricks — Nov. 10: Crane operators must be certified Walking/Working Surfaces – Nov. 19:

• New fixed ladders greater than 24 feet must be installed with fall arrest or ladder safety systems.
• Existing ladders greater than 24 feet must be equipped with cage, well, personal fall arrest systems or ladder safety systems.
• Replacement ladders and ladder sections must be installed with fall arrest or ladder safety systems.

There’s no better time than the present to shed light on an integral, yet commonly overlooked, aspect of financial planning: property and casualty (P&C) insurance needs. New data from Chubb and Oliver Wyman finds that just 28% of financial advisers address their clients’ P&C insurance needs—leaving clients exposed to significant gaps in coverage and potential out-of-pocket costs. Yet, 77% of successful individuals want their advisers to provide this type of support. This mismatch in expectations versus advisory services offered presents an opportunity for agents and brokers to build connections with financial advisers in pursuit of holistic wealth management strategies. Here’s how they can begin making in-roads. Step 1: Articulate Why Holistic Wealth Management Matters Advisers innately understand the importance of updating client financial planning strategies to respond to significant life changes—be it a new baby or new home purchase. But they often don’t know that failing to advise their clients to take the same approach with their insurance coverage can cost them millions. Take Rick and Sue Smith. They recently moved into a new home and bought a backyard trampoline for their children but did not update their umbrella policy to reflect this purchase. One day, unexpected tragedy strikes—a friend of the Smiths' children is injured while playing on their trampoline. Following a lawsuit, the Smiths must pay $2 million in damages. Unfortunately, the Smiths' standard umbrella policy only covers $1.1 million in liability—not including legal fees—and they’re required to pay the rest out of pocket. That means tapping into college savings and their nest egg. If the Smiths had an adviser who counseled them on insurance needs, they could have saved a substantial amount of money. See also: The First Quarter in Insurtech Financials   The unexpected will continue to happen, and it’s crucial that financial advisers ensure their clients are adequately protected. Helping them understand the P&C risk exposures their clients may face—many of which are often complex and difficult to grasp—is the best foundation on which to build a relationship. Step 2: Explore the Roadblocks Once advisers understand the role that P&C insurance plays in wealth management, the next step in the relationship is to help them grasp the three largest roadblocks that stand in the way of achieving holistic wealth management strategies. First, many clients lack insurance products entirely or lack key coverages within the products they have. For instance, the Chubb and Oliver Wyman study found that, while most individuals have liability insurance, many don’t have high enough limits—similar to the Smiths. It was also shown that most Americans lack core insurance coverages, including for valuables like fine art (87%) or even flood insurance (76%). Second, individuals who do purchase insurance often buy policies with the wrong features, largely due to using a standard carrier to cover their unique risk profile. As a result, these individuals could have an inadequate amount of coverage, overpay for features they don’t need or leave money on the table by not taking advantage of available discounts. Third, and most importantly, clients are not receiving the right insurance advice from financial advisers. In fact, the same Chubb and Oliver Wyman research found that the driving forces behind sub-optimal client insurance protection is a lack of understanding of their risks and exposures, unpleasant prior experiences with insurers and little familiarity with insurance products. No one expects financial advisers to become insurance experts. But, by understanding the core insurance challenges that clients face, financial advisers and agents and brokers can work together to build a holistic wealth management strategy tailored to each shared client. Step 3: Explain the Business Benefits Creating harmony between financial advisers and insurance agents and brokers doesn’t just benefit clients—there is also a business development case to be made. As mentioned, more than three-quarters of Americans want their financial adviser to offer P&C support. If that isn’t convincing enough, 40% of successful Americans surveyed noted they’d consider switching to an adviser who does provide P&C support; 16% who would switch even if they had to pay extra fees. See also: Why Financial Wellness Is Elusive   There is clearly an opportunity for advisers to grow their business by working with agents and brokers (and for agents and brokers to increase their client base through referrals), while benefiting clients. The time for financial advisers and agents and brokers to act is now. Don’t wait.

When presenting at DIA last year, I commented on just how far the industry has come in recognizing the opportunities for insurtech and adopting smart digital techniques in such a short time. According to Celent’s most recent innovation outlook for insurance, 69% of the insurance innovation leaders surveyed have been pursuing an innovation agenda for somewhere between two and three years, with 11% having only just started. To me, this stat implies that we are no longer at the start of something. Instead, we’re slap bang in the middle of a movement. See also: Global Trend Map No. 6: Digital Innovation  And with that added maturity, I guess it should come as no surprise that the questions obsessed about by the industry are no longer focused on "how to engage with insurtech?" "what internal capabilities do I require?" or "will they eat my lunch?" and instead more directed toward understanding the source of value and execution. Simply speaking, conversations today are far more focused on “show me the money” than they were back in 2015. For example, the global head of innovation at a client recently shared with me that they’ve “fixed procurement,” “fixed internal development,” “reskilled the team” and “embedded their innovation capabilities back into the business (to sit more closely alongside strategy execution).” Consequently, this client has become far fussier about potential partners. If an insurtech does not have any jaw-dropping, protected IP, then they’re unlikely to even get enough air-time to press play on their Prezi or pencil drawing app (of which there are quite a few to choose from now) before the door is slammed in their face. Although this client’s story may not yet be representative of the industry as a whole, given that many are still struggling with aligning their organization behind new innovation capabilities, it highlights a shift in the general direction. Aligned with this shift, there also seems to be a more concerted effort to move innovation capabilities back within the business (as can be seen in this chart). Graph: Please indicate if you are utilizing any of the following innovation tools/techniques at your company (choose all that apply). Source: Celent – Insurance Innovation Outlook 2018: Practitioners Predictions, n=29 chief innovation officers, innovation leads, digital leads). Of course, central teams still play an important role. Often, they are the only places where more radical forms of innovation can be experimented with (helping to insulate them from the day-to-day pressures of running an existing business). However, when considered altogether, the gradual shifts away from what can sometimes feel like an opportunistic mode of engagement (characterized by serial “proof of concept” projects, often sponsored by central teams), toward something more locally aligned, deliberate and focused on real customer value feels like a step forward. See also: 3 Ways to Leverage Digital Innovation   Are we now at the point where innovation is truly back with the business and we’re ready to talk real traction in volume and customer value that goes beyond just a great concept? I can’t wait to see! This article was originally published here.

Eight years ago, I was giving a talk on cloud at a conference. The first thing I had to do was explain what the cloud is. It’s a new world, isn’t it? Cloud is no longer for the digital giants, the insurtechs and the early adopters. Today, it would be difficult to go through a whole day without using cloud computing. Insurers’ core systems (policy, billing, and claims) are no exception. Cloud-hosted core systems are no longer a niche item: 59% of the new P&C core systems that insurers purchased in 2017 will be deployed in the cloud. On-premise deployment is by no means obsolete, but more and more it will be only a fraction of insurers’ technical environments. Increased speed to market, fast implementations, seamless scalability, easy access to new technologies, robust safety standards and, in some cases, streamlined software upgrades have all attracted insurers to core in the cloud. What comes next, however, is where the real opportunity lies. The digital world is all about making connections – between people, technologies, services, data and data sources, etc. – and doing so at top speed. Whether your core systems are in the cloud, hosted by a solution provider or run from your own server room, you have to be able to call out to external services for data and transactions. New computing trends are pushing the abilities of core systems even further. Cutting-edge artificial intelligence services (think “rent-an-AI”) are only available through the cloud. For example, if you wanted to incorporate advanced natural language processing into your core systems, you would not simply install IBM Watson on your existing servers. Microservices, which are isolated processes that can be plugged into an existing technical architecture, fulfill their true potential by calling out to advanced, external services like blockchain and IoT data platforms. Then there are the possibilities offered by computing in the cloud. Serverless computing allows insurers to leave all server management and resource provisioning to the cloud provider for increased processing power, decreased latency and real-sized costs. It represents an evolution in the way that we consume and use cloud. For insurers looking at huge new sources of data, like wearable devices, serverless computing is a must. These are the real benefits of cloud computing. Core systems in the cloud can take advantage of some of these new computing trends more easily, but all have an opportunity to leverage the cloud to advance their technological capabilities. The insurance industry is poised to use cloud in a whole new way by streamlining processes and upgrades, connecting to advanced technology and consuming more data. The more benefits that insurers reap from cloud computing, the more cloud computing will become table stakes.

To learn more about the latest computing trends and how they will affect insurers’ core systems, please see our recent report, The New World of Core Systems: How New Computing Trends Will Transform the Core Systems Paradigm.

Direct-to-consumer (D2C) sales have shaken up multiple sectors, from retail consumables to insurance sales. While D2C sales of property and casualty insurance have the potential to improve customer satisfaction, increase upselling and boost retention, moving into the D2C space also poses challenges for insurers that have invested heavily in more traditional models. Here, we look at some of the biggest challenges D2C poses, the opportunities available and how P&C insurers can improve their direct appeal to consumers without losing their traditional strengths. The Challenge of D2C D2C models are threatening traditional participants in a number of industries with their ability to adapt, innovate and streamline — skills that are tough for established players to exercise quickly,Groceryshop cofounder Zia Daniell Wigder notes. “Ultimately, monopolistic players are stuck in a paradigm that is very profitable, but that leaves them with reduced ability to innovate and form direct, meaningful relationships with their customers,” Widger writes. While Wigder’s analysis focuses largely on retailers, many of the same challenges of D2C competition apply to P&C insurers. In particular, P&C insurers need strong connections with customers. These relationships boost customer retention and provide key insights into behavior and risk that play an essential role in the development, pricing and deployment of insurance products. And the D2C model makes customers want to build relationships with companies. As Ben Sun, general partner at Primary Venture Partners, tells Wigder, “New D2C brands emerging today understand these challenges and have built platforms that directly attack those vulnerabilities and provide consumers something of real value -- either a far superior shopping experience, higher-quality goods, cheaper products or greater convenience.” An outstanding shopping experience, better coverage, lower prices and increased convenience are high on the wish lists of those seeking P&C insurance — and, when D2C models can provide them, they become more attractive than their predecessors. See also: Why More Don’t Go Direct-to-Consumer   Even newcomers to the insurance market, however, face hurdles that sectors such as retail do not. Jay D’Aprile, executive vice president at Slayton Search Partners, says the complex web of legal regulations surrounding insurance creates additional hurdles for companies planning to either start on a D2C model or include a D2C option among their approaches. Fortunately, these challenges also present opportunities. D2C Opportunities for Insurers A 2016 Timetric report on D2C innovation in insurance found that the prevalence of internet technology in consumers’ lives — and the transparency that brings to every industry — has shifted the balance of power from insurers to consumers in our industry. Most insurance companies’ customers now demand fast, efficient, digital-centric access to insurance information and products. Often, a shift in the balance of power can feel like a cloud with no silver lining. Yet the power shift actually creates a number of opportunities. Expanded (and Tailored) Product Offerings Concerns over “choice paralysis” have long led P&C insurers to maintain a relatively small catalog of offerings. Insurance is complex, and a longstanding belief that too many options would cause customers to walk away has resulted in a reduced number of product offerings. While too many choices can be overwhelming, the existence of many choices, alone, isn’t typically the problem. “There is no upper limit to the number of options you can provide customers. With our private exchange, companies are offering 30 or even 300 choices to customers with a great experience,” Liazon cofounder Alan Cohen says. The trick, he adds, is to present options in a way that customers find intuitive to navigate. Personalization, packaging that clearly indicates differences in value and information access to support customer decisions allow D2C companies to lead customers easily through any number of choices. What does this mean for insurers? As technology helps insurance companies develop new products more quickly, P&C insurers are no longer limited from the customer side when it comes to tailored offerings. It becomes easier for insurers to provide precise, personalized coverage — and doing so simultaneously feeds customers’ desires for personalization and specificity, boosting their likelihood of returning to the insurer. Increase Employee and Customer Satisfaction at the Same Time In a 2016 report, Liazon found that companies using a D2C approach to both customer-facing products and employee-facing information tripled their employee satisfaction and doubled their customer satisfaction. How? In both cases, the D2C approach made the product in question — whether it was auto insurance for customers or health insurance for employees — easier to access. Questions could be answered more quickly, often with a quick browse on a website or mobile app. Selecting benefits or coverage was easier and more transparent and felt more personal. Companies that use these tools to collect customer or employee data have seen big boosts from their D2C approach, as well. “By leveraging analytics, we can deliver promotions and offers more efficiently to our consumers,” former High Ridge Brands CEO James Daniels explains, “and build our brands using owned media assets including our millions of Facebook Fans, email subscribers and website visitors vs. solely relying on paid media channels and at-shelf promotions.” How to Innovate D2C provides opportunities to increase agility, not only in the sale of P&C insurance products but in the way an insurance company understands customers, analyzes risk and does business. Technology provides the key. An agile insurance business in a D2C world “typically requires a multi-channel approach, including web, mobile, social, email and phone,” D’Aprile said. “Interaction on each of these plains must be tracked coherently to cater to the increasingly non-linear customer journey.” And, as Daniels noted, tracking customer interactions matters. Currently, insurers are limited by the systems they’ve build to track only certain types of customer data — and by legacy computer systems that can’t crunch available data efficiently. To get ahead of this problem, insursers will need to explore more expansive ways to capture and understand customer data. A strong D2C platform is only part of the equation. “If DTC is not a strategy that is deeply ingrained across the entire enterprise, customers will quickly see it for what it is: a smoke screen,” D’Aprile said. “Fancy technology cannot overcome operational siloes and uncoordinated business functions.” See also: Why Are Direct-Sales Carriers Winning? While D’Aprile mentions a multichannel approach as one solution to this problem, increasingly savvy customers who interact with insurers through multiple channels may come to read “multichannel” as a smokescreen, as well, because the experience in each channel is still different, BOLT’s CEO Eric Gewirtzman says. An omni-channel approach puts the customer experience, insurers’ access, agents’ information and data analytics under a single umbrella, maximizing the agility of the entire system while offering customers the personalization and speed of a D2C approach, according to CRM software provider Ameyo. Omni-channel allows for more agility in a D2C world — whether or not an insurer wishes to prioritize D2C insurance sales.

The millennial generation - which generally refers to individuals born between 1980-1996 - continues to fascinate businesses. Millennials are now the biggest cohort in the workforce and are opening the majority of small businesses. That means they hold a lot of power, both through the products and services they purchase and by way of social influence. Companies are motivated to understand millennials and win them over. That is not an easy task, considering that millennials show high levels of distrust in major institutions and most businesses. The health insurance industry, which struggles with public opinion more broadly, has a long way to go in terms of gaining millennials' business and trust. Below are three factors they should consider to convince millennial decision-makers that health insurance is an important purchase. Costs are a bigger concern than for other generations Millennials are more concerned with costs than other generations. Many young adults are saddled with student loan debts, while, at the same time, salaries have largely stagnated, and costs of living continue to increase. Millennial business owners understand these struggles because many of them have experienced them personally. Many millennials would rather go without health insurance than enroll in an unaffordable plan, especially because they are often relatively healthy and may not see an immediate need for healthcare services. To convince millennial business owners that health insurance makes sense for them, health insurers will have to prove their value. Insurers need to persuade millennial business owners of the short-term and long-term benefits. Insurers should create targeted, relatable ads that emphasize coverage of preventive services, which can reduce costly healthcare services down the road. Millennials treat health and wellness as a daily, active pursuit, so this message may resonate well with them. Small businesses should also view health benefits as an appealing incentive to attract and retain millennial talent. See also: How Millennials Are Misunderstood   Transparency is crucial for millennials While costs are important, millennials also place a high value on other brand characteristics like transparency. Considering the high levels of distrust among this generation, it makes sense that millennials want clear and honest information. In a dense and complicated industry like health insurance, companies can benefit from making information as simple as possible. It is especially important to be clear about pricing structure so potential customers can quickly understand what plan benefits include and don’t include. Insurance providers should also use social media and other channels to communicate with millennials and make it clear that they care about members. According to Ambassador, 71% of consumers are more likely to recommend a brand after having a positive experience with them on social media. They prefer digital experiences Millennials grew up with technology and are comfortable using the internet and their smartphones for all sorts of things, from banking to shopping. Taking care of their health is no exception - millennials are more likely to engage with insurers digitally and use telehealth services than older age groups. Millennials are coming to expect these capabilities, and some companies are doing better than others. For example, millennials’ retail expectations are based on the experiences they have with Amazon, Spotify, Airbnb and others. Insurers that focus on providing more streamlined digital services, like e-commerce marketplaces, online portals and subscriptions to mobile health solutions, will be in a better position to win over millennial consumers. See also: Taking Care of Small-Medium Business Conclusion To appeal to more millennials, health insurers will have to adapt their business strategies to prove their value, increase transparency and provide more digital offerings. Millennials are skeptical and cost-conscious, but they also care about their health a great deal. By meeting or exceeding millennials’ expectations, companies can gain loyal customers and increase the number of millennials who are insured.

Until insurtech, insurance companies were defining microinsurance policies as social responsibility projects. With the magic touch of technology, the picture is changing rapidly! Microinsurance is a type of micro financial activity, which protects low-income people and communities with low premiums and limited coverages against risks. The main objective is providing financial protection for all low-income members with pooling risks and financial resources. The target customer group is quite big, as well. More than 2 billion people are potential customers of micro insurance worldwide. Microinsurance enhances financial security and peace of mind, supports social security systems in poor or developing countries and provides a high-level risk management system. For long-term investors, microinsurance stabilizes and develops financial markets in developing and poor countries and provides considerable liquidity for critical times. See also: Microinsurance: A Huge Opportunity   Four features are crucial for penetration by microinsurance:

• Premiums should be affordable for low-income households
• Products should be very basic and easy to understand and cover limited risks
• Underwriting, claims and collection processes should be operated with high effectiveness
• Products should be distributed effectively and with minimum distribution cost

With insurtech, the picture is changing rapidly! Insurtech is converting microinsurance into a very profitable area. The first rule of insurance, the law of large numbers, is now valid for microinsurance business. The number of insureds is widening, and this makes claims more stable and predictable for insurance companies. The first impact of insurtech in micro insurance is on UW processes. Because of the low premiums, operational efficiency is the key of success in projects. Insurtech allows insurers to have their own automated UW decision-making processes for fast and low-cost policy production. The key to success, management of operational risk, is reduced significantly. The products are simple, do not require any financial literacy and are very user-friendly. Target customers purchase policies without location restrictions via digital distribution channels. Premium collections, claims notifications and all compensations activities are performed with digital tools that were developed and perfected by insurtech. See also: A ‘Nudge’ Toward Microinsurance   For now, microinsurance projects mainly focus on personal accident, health and agricultural activities, but new products are being developed promptly. With all its components, like artificial intelligence, machine learning, chatbots and the Internet of Things, insurtech is becoming the new leverage for microinsurance -- not just diversifying and absorbing risks for individuals, but also providing very strong preconditions for other productive activities for policy owners.

Mary Meeker laid out her annual report on the state of the internet and e-commerce last week, and I waded through the full 294 slides so you don't have to. (The full report is here—http://www.kpcb.com/internet-trends—for those who want all the detail.) The report by Meeker, a partner at venture capital firm Kleiner Perkins, has become the bible for internet followers and, as usual, contained some surprises.

To me, the most startling number was that sessions on mobile shopping apps surged 54% last year (use of mobile apps overall rose just 6%). The 54% covers all types of products, many of which are easier to buy on a mobile phone than insurance is, but, still: The time for a robust mobile strategy was yesterday (minus about a year and a half).

It was also striking to see that 6% of all online product purchases began with something that someone saw in a social media feed. The figure represents all product sales online, so the applicability to insurance needs to be sorted out, but the 6% is triple the percentage from just two years earlier, suggesting that there is upside for those promoted product placements. 

As always, the report showed a continued surge in online commerce—up 16% in 2017, even faster growth than the 14% increase in 2016. The online share of the value of total consumer purchases in the U.S. reached 28%, up from 20% in 2013. When people were asked how they conducted their 10 most recent transactions, 60% occurred digitally.

The social and mobile trends, on top of the general growth of online commerce, suggest to Meeker that companies will increasingly sell directly to consumers—but that companies must target their efforts well. She reports that many of the best mobile apps, for instance, used video and "gamification" and that successful offers were increasingly personalized.

Amazon may, though, soak up much of the increase in e-commerce: Already, 49% of product searches in the U.S. begin at Amazon, and most of the searchers never leave the site.

Although Meeker didn't specifically address insurance, some observations in the report suggest both opportunities and challenges for the industry.

On the plus side, she said the world is moving more toward subscription models, rather than sales of individual products—and subscriptions sound a lot like automatically renewable insurance policies. The number of gig workers available to help inexpensively with, say, parts of the claims process—a la those employed by our friends at WeGoLook—reached 5.4 million in the U.S. last year, up from 3.9 million in 2016. The cost of cloud computing fell 11% last year, on top of the 10% drop the year earlier. 

On the challenges side, profits are increasingly being competed away. The price for an offline good fell 1% since the start of 2016, and the cost of an identical good online declined 3% over the same period. In addition, some insurance costs were negative outliers in her general economic analysis. While prices have been falling for almost every category of household expenditure in the U.S. for decades, the percentage of household income devoted to pensions and insurance climbed from 7% in 1972 to 8% in 1990 and now to 10% in 2017. The percentage devoted to health insurance went from 5% in 1972 to 5% in 1990 and now to 7%. 

Either we take advantage of the opportunities presented by digitization and meet the challenges, or ... perhaps Amazon or some other tech giant will.

Have a great week. 

Paul Carroll
Editor-in-Chief

P.S. As advertised last week, we finalized the agreement between our Innovator's Edge information platform and SAP. Here is the announcement: http://insurancethoughtleadership.com/press_release/ie-sap-partner/