The insurance industry was built on mutual trust. Insurance companies trusted their insureds to give truthful accounts of losses and the events that caused them, and insureds in turn trusted their insurance company to pay what was owed under the terms of the insurance contract. The ability to gather and parse massive amounts of data, however, has changed the way insurance companies and their customers regard the trust relationship, Wilds Ross at KPMG says. Available data can now help insurance companies create personalized coverage for each customer, but it can also raise doubts in customers’ minds as to how that information is protected and used. Here, we explore some of the biggest trust hurdles to arise in recent years and how insurtech is poised to address the twin issues of privacy and transparency to rebuild trust. A Crisis of Trust? Customers are pretty evenly split as to their trust in insurance companies, according to data journalist Paul Hiebert. Forty-seven percent of Americans say they trust insurers, and 43% say they do not. There’s a clear generational trend, as well, with a greater lack of trust in customers younger than 55. Further, only 42% of people agree that insurance companies act in the best interests of their customers. As a result, many people are choosing to go without insurance rather than work with an insurance company they don’t trust. For instance, 83% of California homes lack earthquake insurance, financial columnist Liz Pulliam Weston writes, in part because customers don’t trust that available earthquake policies will come close to addressing their needs after a catastrophe. See also: Insurtech Starts With ‘I’ but Needs ‘We’   Insurtech startups are sensitive to the atmosphere of mistrust and are capitalizing on it, say Jagdev Kenth and Grace Watts at Willis Towers Watson. For instance, German startup Friendsurance uses the trust built in a peer group to take a sharing economy approach to insurance. Meanwhile, Lemonade publishes its flat fee of 20% of premiums and its donation of unused money to charity each year. “We have been giving insurance a free pass for way too long,” says Sophie Grønbæk, co-founder and CEO of insurtech startup Undo. “The products are confusing, which means that customers are completely dependent on the insurance company.” The power to change this relationship — and the atmosphere of suspicion it has created — lies with insurance companies, and insurtechs are taking an early lead. “The insurtechs can use their cost efficiencies to provide bespoke policies that create an intimacy with a customer and that, in turn, builds trust,” says Etherisc co-founder Stephan Karpischek. Yet the use of technology for its own sake creates additional uncertainties, particularly when it comes to privacy. The Links Between Privacy, Transparency and Consumer Trust “Consumer trust in insurance has been badly hit by distrust of financial services following the banking crisis,” Fairer Finance’s Melissa Collett says. This mistrust sprang from countless stories of people losing their homes and life savings — a catastrophe that, in turn, sprang from a lack of privacy and transparency in the financial industry. The mistrust spillover carries with it the same concerns in customers’ minds. Can insurance companies be trusted to keep their information safe, particularly in a world where identity theft and digital compromise is rampant? What are insurers doing with their information — and their hard-earned premium dollars — anyway? While state and federal regulations set the bar for privacy in many ways, insurance companies that rely solely on regulations for guidance often find themselves at a loss, entrepreneur Jason T. Andrew says. Because lawmaking tends to lag behind the rise of the social problems it addresses, concerns about data breaches and identity theft are already common — and customers want to see every business, including insurers, taking an aggressive approach. Even insurance companies with a strong commitment to privacy, however, may not be able to build trust on that commitment alone, particularly if it is not communicated or demonstrated clearly. Customers want to know how, where, why and with whom their information is shared. Thus, the shift to a customer-focused model has started to encourage transparency among insurance companies, consultant David Cabral says. Transparency sells, which means customers are hungry for it. Yet when it comes to implementing transparency, many insurance companies find themselves with little regulatory guidance. “Consumer protection in most domains of financial regulation centers on transparency,” University of Minnesota Law School Professor Daniel Schwarcz wrote in a 2014 article for the UCLA Law Review. Insurance companies, however, are an anomaly: State regulations of insurers typically don’t address transparency at all. Where transparency regulations exist, they’re often misguided or poorly written, which can make consumer trust issues worse. Building transparency and the trust that comes with it, then, lies in the hands of insurance companies rather than in the regulatory power of the state. And as Risk Cooperative founder and CEO Dante Disparte writes, insurtech ventures are demonstrating technology’s myriad opportunities to build that transparency. Building Trust Through Technology Technology alone won’t solve the trust problem. Far from being neutral or disinterested, algorithms have been found to replicate societal biases in everything from job recruiting to evaluating parole requests, FiveThirtyEight’s Laura Hudson reports. Meanwhile, interactive voice tools like Google Duplex have been criticized for misleading customers who believe they’re talking to a human, reporter James Ball points out. Instead, insurance companies seeking to build trust with customers — and to rely on their own ability to trust those customers in turn — will need to apply technological solutions thoughtfully to their current processes to produce results consistent with their own visions, missions and goals. “Gathering data is only beneficial to insurance companies insofar as it raises the profit/policy ratio or increases the overall policies sold rate,” Sureify CEO Dustin Yoder writes, arguing in favor of a well-thought-out approach to customer privacy and transparency. See also: How Insurtechs Can Win Consumers’ Trust   Cake & Arrow’s Christina Goldschmidt suggests that to improve customer trust relationships, insurers could learn from the application of e-commerce tools in the retail sector. By using tech tools like a SaaS platform to establish consistent workflows, enable customization, build a more interactive marketing approach and protect customer information within a de-siloed company, insurers can make it easier to provide trustworthy service and to gather trustworthy data. Building trust with customers is a multi-step process that technology can facilitate, says Alex Schmelkin, also at Cake & Arrow. For instance, tech tools can make it easier to allow customers to interact with the company via their preferred channels; help insurance company staff stay on track with the company’s goals; and incorporate new products, services and tools to provide a better customer experience. The single best step may be to talk more about customers and less about tech. By focusing on words like tech and digital, companies are focusing on the tools, not the customers, says Zaid Al-Qassab, chief brand and marketing officer of telecommunications group BT. “Write a brief that’s about your customer and business results you hope to achieve,” Al-Qassab says. “Let’s talk about target audience and how to sell to them” — and how to leverage technology to do so in a trustworthy fashion.

How to manage the increase in incoming unstructured information is a key challenge in the insurance industry—we explore how Accenture’s Machine Learning Text Analyzer can achieve this using historical data.

How do you approach customer service and policy administration within your organization? In this blog post, I’ll demonstrate how artificial intelligence (AI) and a raised AIQ can help you get the most out of your data. (For the other articles in this series, click here.) To do this, I’ll discuss how insurers can use machine learning to analyze texts. How can insurers use AI in customer service and policy administration? The customer service and policy administration workforce can make their lives easier by using AI to:

• Understand and act on external emails and requests.
• Automate call center and webchat services—helping companies get on with more intricate work.
• Enable self-service queries on policy issuance, endorsements, cancellations and renewals—using virtual assistants, for example.
• Process unstructured data, which means fewer mistakes and better customer service.

How does AI improve customer services and policy administration? AI enables more efficient administration processes. Insurance executives plan to invest in seven AI-related technologies in the next three years. They are: 

• Machine learning; 
• Deep learning; 
• Natural language processing; 
• Video analytics; 
• Embedded AI solutions; 
• Robotic process automation; 
• Computer vision. 

See also: Policy Administration: Ripe for Modernizing   In addition to increasing the efficiency of administration processes and enhancing analytical insights, AI technologies also benefit customer services through:

• Machine learning — using machine vision and natural language processing to improve customer interactions.
• Virtual advice — transforming the customer and sales force experiences with data-driven virtual advisers; for example, Munich Re’s Digital Doctor.
• Everyday coaching — helping customers manage and reduce their risk by providing frequent, personalized advice and incentives; for example, Generali’s in-car device that gives real-time coaching.
• Real-time protection — leveraging applications and the IoT to help customers manage their risks; for example, Homies, an IoT-based, peer-to-peer alarm platform developed by Achmea.

As I will show in the use case below, the customer service and policy administration workforce can use machine learning to process information faster and with greater accuracy. Use case: Machine Learning Text Analyzer (MALTA) Insurers today must figure out how to manage the exponential increase in incoming unstructured data. Eighty percent of data generated is unstructured, and the volume continues to grow exponentially. Forty percent of business executives complain that they have too much unstructured text data and don’t know how to interpret it. Insurers face three main challenges: 1. Too much unstructured information

• A large amount of information comes in through a variety of channels;
• Incoming data is structured as well as unstructured;
• Much of the workforce is occupied with processing unstructured information;
• A large amount of unstructured information exists within the organization.

2. Too many communication channels Customers use a large variety of channels to communicate with their insurance company, such as e-mail, contact forms, the service desk (e.g. ticketing), letters and applications. 3. The information is not linked to business processes

• Workers lose a lot of time when they have to identify received information and allocate requests to the right channels;
• They also lose time owing to inefficient processes caused by breaks in the system;
• This prolongs the response time to clients;
• Humans are prone to errors, which creep in at all points.

Solution: Machine Learning Text Analyzer (MALTA) Now, insurers can automate the analysis and classification of incoming text by applying machine learning and using historical data. How does MALTA work in customer service and policy administration? MALTA can analyze any incoming documents, for example when customers send their policy documents via email. These documents can be analyzed and classified using natural language processing methods and machine learning algorithms. MALTA is also trained with historical data, which enables it to classify, understand and extract information. In the next step, MALTA links your customer’s policy document to business processes, prompting different functions to take action. Depending on the business and architecture set-up, MALTA or the output of the API triggers a process chain, a robot or an agent so that the necessary processing steps can be executed. See also: In Age of Disruption, What Is Insurance?   Benefits of MALTA MALTA is flexible, customizable, independent, multilingual, state-of-the-art and end-to-end; using Accenture’s machine learning text analyzer, insurers can:

• Increase classification accuracy and efficiency, and reduce errors.
• Create individual learning models based on training data.
• Deploy the solution on-premise, not only in the cloud.
• Automate repetitive tasks, allowing employees to focus on more complex work.
• Categorize new requests immediately and send them to the relevant departments.
• Use state-of-the-art models and tools.
• Work on a platform-independent web service.
• Carry out classification outside regular business hours.
• Cleanse data and extract and evaluate features.
• Link robotics and process automation tools to classification.
• Set up and train employees with minimal effort.

In addition to customer services and policy administration, insurers can use MALTA across other parts of the enterprise, for example: Are you ready to power up your business with AI? Download the report on How to boost your AIQ for more insight.

I’d bet that most of you would be excited to learn that the factory of the future was being built in your hometown. Probably your enthusiasm would be driven by your knowledge of factories of the past. Unfortunately, the difference between the factory of the past and the factory of the future is change – TRANSFORMATIONAL CHANGE. Warren Bennis (a very smart man) offered the following observation in "New Work Habits for a Radically Changing World" in 1994: “The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.” From an insurance standpoint, my first questions on the new risks associated with the factory of the future would be:

1. What is the workers' comp rate on a dog feeder and a watchdog?
2. Can you afford to insure this type of new risk?
3. Is Bennis right about the factory of the future?
4. What are you doing to prepare to be a profitable agent insuring risks of the future?

Before you call me crazy, remember the travel agents, bookstores and video stores that are no more because they kept admiring their past success in the mirror of yesterday and did not consider the horizon of TRANSFORMATIONAL CHANGE THAT IS TECHNOLOGY. The bad news is that TRANSFORMATIONAL CHANGE is coming (and in some cases is already here). The good news is the buyers and sellers in our industry who leverage this TRANSFORMATION can be big winners if they TRANSFORM with it or allow themselves to be TRANSFORMED by it. Recently, I received an e-mail from a very creative industry leader, Ryan Collier, chief digital officer of Risk Placement Services, celebrating innovation/TRANSFORMATION: “Trying to live the ‘eThink Insurance’ mantra every day. A fun side note for you – the platform that we have developed started offering a ‘friction free’ cyber buying experience officially in 2015. It literally takes a company about one minute (four questions) to buy cyber insurance. Since we have launched it we have taken our proprietary/partner insurance carrier (BCS Insurance) from ZERO premium up to the sixth-largest cyber insurance carrier by premium and third by policy count in the U. S. – all by completely redesigning the process. For me, it is all about the process – and tailoring that process toward the buyer and not the carrier. This is a nascent product that needs to be bought – not sold. We now have 12 products that can be quoted/bound/issued in a moment, which has been a boatload of fun and an extreme amount of work as this old industry doesn’t like to change.” I call this intimacy being “client-defined and client-driven.” Ryan is a very innovative industry leader, a rare resource in a “me, too” world. We’re more copycats and fat cats than lean and mean innovators. Casual Friday is not innovation. Our industry will be TRANSFORMED from without – not from within. See also: 3 Ways to an Easier Digital Transformation   To reinforce this opinion, I offer the following from an insurance industry leader, Paul Carroll, who from his Innovator’s Edge platform asked: “Will Apple enter insurance? Google? Microsoft? Amazon?” He said, “Apple’s market value crested $1 trillion last week, and its big tech brethren Google, Microsoft and Amazon aren’t far behind; all are valued north of $800 billion.” I wasn’t shocked until he said, “All have extensive data about customers. And all have the size to tackle mind-bending problems that insurance faces – by contrast, you’d have to combine AIG, Prudential and Allstate just to surpass $100 billion in market value.” Now that I have your attention: Consider the comments that follow from Peter Drucker and Theodore Levitt, who were TRANSFORMATIONAL leaders in a world that did not voluntarily embrace change. Levitt – “We habitually celebrate him [Henry Ford] for the wrong reason, his production genius. His real genius was marketing. We think that he was able to cut price and therefore sell millions of $500 cars because his invention of the assembly line had reduced the costs. Actually, he invented the assembly line because he had concluded that at $500 he could sell millions of cars. Mass production was the result, not the cause, of his low prices." Peter Drucker, in a Wall Street Journal article titled "The Five Deadly Business Sins" (Oct. 21, 1993), explains the need for a new paradigm in all of our operations: “The third deadly sin is cost-driven pricing. The only thing that works is price-driven costing. Most Americans and practically all European companies arrive at their prices by adding up all costs and then putting a profit on top. And then, as soon as they have introduced the product, they have to start cutting the price, have to redesign the product at enormous expense, have to take losses – and often have to drop a perfectly good product because it is priced incorrectly. Their argument – ‘we have to recover our costs and make a profit.’ This is true but irrelevant: CUSTOMERS DO NOT SEE IT AS THEIR JOB TO ENSURE MANUFACTURERS A PROFIT.” Drucker further states, “Cost-driven pricing is the reason there is no American consumer electronics industry any more.” When I started in the agency business (1975), we were paid 25% commission on homeowners insurance. Agents boldly stated, “I won’t sell homeowners for less than that.” They were wrong. I believe, in my lifetime (and I’m old), insurance will be quoted net of commission or with full disclosure of commission. That will ensure TRANSFORMATIONAL CHANGE. See also: Core Transformation Is Not Negotiable   Want to be here tomorrow? Heed Drucker's advice: “There are only two functions in business, marketing and innovation.” Our world is transforming because the people and the global marketplace are changing. They now enjoy unlimited options. Consider the following simple outline of the marketing process:

1. Who is your customer (prospect) base? As a niche of one, customers can shop anywhere.
2. What are their wants and needs? Do not limit your research based on just what you sell.
3. What products/services and client intimacy must you offer to meet these wants and needs?
4. How will these be priced to sell?
5. How will you anticipate these needs and deliver a solution to customers at a profit?

Plan to innovate everything: people, process, products, pricing, performance (expectations), places, etc. Try “everything,” and, if something doesn’t work, go back to what did. Your marketplace will be the judge and arbiter of what is good and what is not so good! If this article starts making you sing "Crazy" – I like the Patsy Cline version best – consider how much online banking you do now and know that Capital Bank is now opening “branch cafes” in lieu of branch banks!

Quotes from only five data points, or even fewer? Name your number, and you can find an insurer looking to transform the sales experience to match. We have seen a great deal of this momentum in personal lines with increasing attention in small commercial lines. And the line of business delivering today is workers’ comp! Insurers writing workers’ comp – including insurtech startups – are innovating in many areas, including quoting, servicing, claims and the overall customer experience. There is high potential for emerging technologies, including AI and wearable devices, to enable these advancements and tremendous benefits to be gained from external data sources as well as the untapped data already within an insurer’s systems. Together, these circumstances have created fertile ground for innovation. Both established and greenfield insurers are taking advantage of the possibilities that advanced technologies bring to the workers’ comp sector. This year’s SMA Innovation in Action Awards gave us two excellent examples of how both types of companies are approaching these new opportunities – in the digital MGAs Cake Insure, which was incubated by Pinnacol Assurance, and Pie Insurance, a greenfield venture. They demonstrate two different approaches to the same goal: leveraging new technologies and external data to create a seamless digital experience for customers. See also: 3-Step Approach to Big Data Analytics   Pinnacol Assurance is a workers’ comp insurer that is more than 100 years old. They wanted to reinvent the purchasing experience for workers’ comp by emphasizing digital and leveraging new technologies such as AI to condense the entire process into five minutes or less. Cake Insure, a digital MGA, is the result. Cake’s online platform gives consumers a responsive, mobile-friendly experience that requires only a few data points to generate a quote. An AI-driven policy classification engine uses natural language processing and machine learning to enable straight-through processing for more than 90% of new policies. This technology enables Cake customers to simply enter a description of their business in their own words to get a quote, with no industry jargon or class codes required. Certificates of insurance can be generated and shared immediately via the Cake client portal or email. Cake’s success demonstrates how an established insurance company can embrace greenfield thinking and reinvent the customer experience. Greenfield insurers and MGAs are also pursuing the transformational possibilities of workers’ comp. Pie Insurance is a full-stack digital MGA for Sirius Group that set out to change the workers’ comp market for small businesses, an underserved and often overcharged business segment. Pie uses predictive analytics and high-quality data sets in real time to give small business owners a seamless, mobile-friendly way to find the coverage they need at the right price. According to Pie’s proprietary data, 80% of small businesses overpay for workers’ comp, often by as much as 30%. The company provides consumers with a detailed breakdown of the coverage and pricing that is appropriate to their risk and offers an online quoting experience that is as easy as getting an online quote for personal lines insurance. The savvy use of third-party data combined with predictive analytics gives Pie the ability to quote a new workers’ comp policy in minutes. See also: Predictive Analytics: Now You See It….   These companies are simply two examples of how the workers’ comp market is transforming. Both established and greenfield insurers and MGAs are making headway in this area. We can expect further changes to come as insurers find even more ways to bring new technologies to bear on the customer experience. So, stay tuned. For more information on the SMA Innovation in Action Awards program and this year’s winners, please click here.

At InsureTech Connect, there were a lot of innovative approaches and capabilities on display. But the term “bubble” could be heard on many attendees’ lips, especially those who’d watched the event double in size each year. In related news, Deloitte put out a report showing that although the flood of insurtech funding continues, funding for new companies is way down. What’s happening? Well, at the end of the day, "insurtech” means selling insurance to someone or selling something to an insurance company. Both of these things are really, really hard and take a really, really long time, no matter how cool your tech is. Over the past three years, there’s been a lot of news about big funding rounds, but not a lot of news about big exits. Most of the exits we have seen are driven by an incumbent insurer deciding that an acquisition is the best way to incorporate some new capability into its own offerings, or add a cool founder group to their team. Now it seems that most insurtech investors are using their capital to try to ensure their puppies stay healthy long enough to get taken home by a wide-eyed insurer or tech vendor. See also: How to Partner With Insurtechs   During the first fintech boom in the ‘90s, there was a lot of talk about nimble little mammals eating the dinosaurs who refuse to evolve. It was true that the dinosaurs needed to evolve. But they mostly did it by eating the mammals. For insurers, the insurtech bubble is a great thing. Venture capitalists are funding the R&D that insurers have refused to fund themselves. There’s a lot of great learning to be had for free, and insurers should pay close attention. When the bubble pops, there will be a handful of new participants in the insurance ecosystem, and a whole bunch of nutritious mammal carcasses lying around.

Brian Harrigan, Founder and CEO of InsurIQ, describes the company's ability to give consumers a more holistic view of all their insurance coverages in one easy to use platform, simplifying the process of researching, buying and managing a portfolio of insurance products as needs change and evolve.

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According to a recent Gallup study, more than one in three employees have changed jobs within the past three years. Among this group, common driving forces behind the change included gaining an improved work-life balance, having opportunities to do the work they want to do in the best environment possible and feeling valued as an employee over time. Feeling valued is arguably the most important among individuals and employers today, given the increased competition in the corporate world. Without a deep connection to a company, employees are likely to be on the prowl for a different opportunity elsewhere. One of the ways employees and their management can eliminate the urge for individuals to leave because they feel less than valued is through strategic collaboration revolving around career development. Team leads and employees have an opportunity to come together to develop well-defined, achievable career goals based on both individual needs and corporate goals. This is most effectively accomplished when a realistic plan of action is in place, including the mechanisms listed below. Meaningful Discussion About Career Progression It is nearly impossible to create strong career paths for employees in a collaborative environment without both individuals and management teams taking part in the process. This begins with in-depth discussions about what an employee wants and how that fits in with the company’s overarching vision. Sitting down with employees to talk through possible career paths, professional development opportunities and training requirements is a necessary step in collaborating. These conversations should cover what the employee wants over time, what the employer needs and how that can be accomplished based on current and future skills and competencies. See also: 4 Keys to Charting Your Career   Provide Training Opportunities Collaboration on career path progression also requires some form of corporate training and professional development opportunities for employees. Based on the career goals of employees and objectives of the organization, individuals and managers can come together to better understand what training initiatives are needed and wanted. Leaders should be willing to ask employees what professional development tools they required to move forward in their career, and how they are able to acquire new knowledge and skills. Similarly, employees need to feel confident that their wishes are heard and acted on in corporate training offerings. This collaboration leads to a more effective development program that helps improve the success of career pathing for leaders and employees. Using Integrated Technology Solutions In today’s business world, the use of technology has made collaboration a much easier process for companies and employees, regardless of location or size of the organization. Using a digital platform like career pathing software provides a streamlined way to define clear career paths for employees based on organizational needs. Through this technology tool, employees can select the skills and competencies necessary to achieve career progression while linking these to the necessary training and development courses. Employees can then easily see what they need to accomplish over time to move toward their selected career path. Once new skills are achieved, managers can offer recognition to employees and select those who are ready for a promotion or lateral move. Not only does this ease the process for both managers and employees, but it also offers more flexibility in and control over career movement over time. Connecting Individual and Corporate Goals Collaboration in career development among employees and managers also requires a connection between company goals and individual wants and needs. With the help of performance management tools, an organization has an opportunity to integrate career scenarios and employee accomplishments with the larger objectives of the company on an continuing, consistent basis. When these crucial aspects are clear and trackable for both management teams and employees, there is a greater opportunity to develop career paths that are beneficial to both parties. See also: Time to Formalize Insurance Career Path   Organizations that focus on a collaborative work environment in the realm of career development are known to thrive more than those that separate managers and employees in the process. Coming together to discuss career opportunities, designing professional development and training programs and using technology solutions to do so gives both employees and managers a voice in the process.

It’s 2028. The world’s population stands at more than 8 billion. In the past decade, we’ve added a billion people, and we’re living in a hyper-connected world. Our smart tools are diagnosing a growing number of conditions—taking your pulse and counting steps was just the beginning; the smart tools of 2028 detect all kinds of vitals to accurately diagnose a number of ailments and diseases. Even our roads have changed. Today’s glass-topped highways are beautiful stretches of solar roadways embedded with a multitude of sensors aligned with the self-driving cars traveling on them, preventing accidents. Insurers have figured out ways to underwrite and insure all that autonomy in all of its different modes. The same is true for transportation-as-a-service. And, we’re already discussing how to regulate and insure the next generation of vehicles – custom, 3D-printed, flying cars. The pace at which all of this has happened is amazing. But the big question is, how did we get here? In a word, telematics. Telematics – aka the Internet of Things – changed everything since it started interacting with all of our lives years ago. For insurance, it started with underwriting and data monetization. And, although there were a lot of interesting early results, there wasn’t a lot of uptake or market success. That all started to change in 2018. Data exchanges started to come out. Telematics data (from OEMs, mobile devices or OBDII devices) started to funnel into one place, normalized and ready for insurance companies to use to make attractive offers to subscribers. Insurers could also use the data to innovate. At the time, CCC was already working with its data exchange, CCC X. Our systems had already processed more than 50 billion driver miles. In retrospect, that time really was the turning point for telematics. As an industry, we saw the checkerboard get filled up—slowly at first—by forward-thinking companies that were making investments in telematics technology. 2018 was a turning point for the auto insurance industry. The real tipping point started to come when we looked at other use cases for telematics data. Those cases vastly increased the adoption of the technology and made it much more mainstream. On top of that, telematics was combined with other technologies and innovations of that time, and that was what really sent us on a rocket ride. When early use cases evolve, things get exciting In 2006, cell phones were mainly used by people making phone calls. Remember how fast it all changed when the first smartphone came out? What really made cellular technology take off was when the smartphone became your calendar, your music collection, your newspaper. It became how you bought products. It was everything, and everyone had to have one. And remember the companies that were slow to adopt? They had a tough time. In 2018, it was exactly the same with telematics. New use cases opened up the future and enabled innovation. See also: It’s Rush Hour in Telematics Market   In April of that year in Cypress, Texas, CCC began working with State Auto to ingest telematics that would enable connected claims. With a flip of a switch, a 100-year-old accident triage process was changed. Suddenly, State Auto knew about a crash seconds after it happened. And what did they do? They picked up the phone, called their customer and said, “We see you’ve been in a crash. How can we help?” One hundred years of process was flipped on its head overnight. Customers were amazed. That was the beginning of when people started to ask themselves about how things were done. The moment when change happens Up until this point, the three fundamentals of the insurance process were set in stone: I own my car, I drive my car, I call my insurance company when I get into an accident. After telematics, people started to think differently.

• I own my car. Do I? Remember, new modes for transportation as a service and driving subscriptions, among other innovations, started to become a more widespread conversation. People started to consider that maybe they didn’t need to own a car.
• I drive my car? Do I? 2018 was also right around the time when self-driving cars and taxis started hitting the streets of Singapore, Tokyo and Las Vegas. Maybe I don’t have to drive my car?
• I call my insurance company when I get into an accident. Should I? As mentioned, on April 26, 2018, we found that maybe that was no longer necessary or always true.

Another flashback. In 2018, we also introduced the capability to determine injuries from telematics-powered crash dynamics. We used the data to understand the principles of force and delta V and used that to detect what kinds of injuries the people in the car may have, the potential severity of those injuries and what the range of medical treatments would likely be. That came together to allow our customers to treat people with the same efficiency and process as we were able to repair the car. Finally, around this time telematics was applied to the repair. Cars were getting a lot more complicated, and there were a lot more sensors, more diagnostic trouble codes (DTCs), etc. Cars were capable of sending data right from their computers straight to the repair shop to make repair faster and more accurate, helping to ensure those increasingly complex cars were getting fully repaired and safely returned to the road. The change greatly expanded the use of telematics. But what really lit the match was when those telematics use cases started being combined with other innovations of that period. See also: Advanced Telematics and AI   Photo analytics in estimating? Check. Insurers were already using AI to instantly detect from one photograph the likelihood a car was repairable or a total loss. AI was used to build the estimates themselves, using photographs and the help of telematics data. From there, mobile and smart technologies enabled the detection of an accident all the way through to the disposition of the vehicle. The experience was self-guided and highly efficient. The person in the car accident was interacting with shops and insurance companies to get the job done in a streamlined way. All of these new possibilities were suddenly at our fingertips. That crash in Cypress, Texas, if it was serious enough, would have the tow truck quickly dispatched to pick the car up. Or, if the injuries were serious, an ambulance could get there more quickly, saving the customer’s life. Continued acceleration After 2018, the acceleration of technology innovation went through the roof. That’s how we got to the world we live in today. We were struck with this awareness of exactly how telematics and photo analytics are going to lead to a new world order. The future became clear. Those that got in early with those data exchanges and started using telematics for UBI purposes started to gain an understanding of data and chip away at the learning curve. They improved their book of business. They added use cases, detected crashes and delivered better injury disposition for customers and better repairs. Those experiences and that knowledge base got them to a point that, when the autonomous vehicles started coming in all different modes and configurations, they were ready to price the risk. When the transportation as a service option started coming up, they were ready to go. Innovation is always the same. It doesn’t matter if it’s 2018 or 2028 or 2058. The timeless advice about innovation is this: You need to adopt as early as possible. You need to give yourself permission to fail, the opportunity to learn and the time to get it right. When that match gets lit, you are ready to take the rocket ride to the future. Stay brave and power forward.

It seems we've struck out in trying to arrange a conversation between the CEOs of State Farm and Lemonade on what role technology should play in interactions with customers, in the wake of a State Farm ad that mocked chatbots and seemed to be aimed, at least in part, at Lemonade. We tried various dates, on both coasts. We made it clear that we weren't trying to embarrass anyone, that we weren't looking for any gotchas. But State Farm wasn't interested.

You can understand why, at least to a point. When a colleague of mine back at the Wall Street Journal wrote "Den of Thieves" about the Wall Street scandals involving Michael Milken, Ivan Boesky et al. back in the 1980s and early 1990s, Alan Dershowitz for some reason decided to take out a series of full-page ads in the New York Times denouncing the book—which promptly went to No. 1 on the Times best-seller list and stayed there for months. You can imagine that State Farm is being smarter, in deciding not to help raise the profile of a startup like Lemonade. 

Still, I'm disappointed. The role of technology in customer interactions needs to be figured out, and we in the insurance industry are smarter as a group than we are individually. Our motto at ITL is, "Nobody is as smart as everybody." 

Technology will play a major role in some ways, simply because it can be so much faster and more convenient than calling a company and waiting on hold or than mailing documents back and forth. But if history is any guide—and it almost always is—we're going to make some mistakes, moving either too fast or too slowly. It would help to share our experiences.

So, we at ITL will keep trying to seed the conversation on the role technology can and should play. For now, perhaps the best place to continue is at the "Inventing the Future of Risk and Insurance" group that I moderate on our Innovator's Edge platform and that includes some very smart and wise people. To join the group, click   here. If you haven't already joined Innovator's Edge, you need to click   here  first. (Registering take seconds and is free.) Maybe we can even get some State Farm folks to join in on the sly.

Have a great week. 

Paul Carroll
Editor-in-Chief

The next wave of innovation is sweeping the insurance industry as customers look for more personalization from their insurers. As policy needs and driving behaviors vary from customer to customer, there is no single perfect package. Customers demand personal treatment, and technology gives insurance providers the opportunity to follow suit. But, the more companies that move toward personalization, the more difficult it will be to stand out. Just weeks ago, Root Insurance – a startup that offers customers a personalized auto insurance experience – sped up this transition with its latest round of funding and a $1 billion valuation. This heavy investment in behavior-based insurance (BBI), or rating consumers on their driving performance rather than factors like zip code or credit score, certainly won’t be the last. Other small startup insurance companies offer their customers a more tailored and personalized plan, as well. But will these smaller companies lead the industry into broadly applied personalized insurance models? Or, will major insurance companies with large-scale credibility and longtime reputation come to the forefront? Smartphone telematics, big data, and AI-powered analytics enable legacy companies with an extensive outreach to truly disrupt the industry. These longtime players can offer the personalized experience as well as the credibility and resources to shift the entire insurance landscape in a new, digital direction. See also: How to Extend Reach of Auto Insurance   A personalized experience with a reputation customers trust As we’ve seen extensively in e-commerce and marketing industries, customers have come to expect brands to know their habits and to adapt purchasing and engagement experiences to fit their personal preferences. While it is a relatively new trend for the auto insurance industry, it will continue to grow over time. Customers do not want to be treated as a statistic any more, with their premiums based on credit score or geographic location alone. In fact, 73% of drivers surveyed said that they’d prefer insurance rates be based on their driving behaviors. Smartphone telematics solutions allow insurers to easily receive customer data that provides insight on an individual’s driving habits and performance, providing the necessary information to more accurately stratify risk and deliver more personalized, regular consumer touchpoints and – in some cases – behavior-based rates. Out of the 10 largest U.S. insurance providers, nine claim to be, at the very least, testing forms of smartphone-based telematics programs. The various use cases include building better risk and pricing models, offering behavior-based discounts and rewards and providing feedback and gamification to motivate customers to become better drivers. Not only do these use cases benefit the customer, but also the insurance provider. In the auto insurance industry where the top three providers make up 41% of the market, and the top 10 take 72%, there needs to be a clear differentiator for companies to win more business, retain top customers and establish themselves as leaders. Smartphone telematics is one way major insurers can differentiate themselves in consumers’ eyes. Better pricing and longer-term improvements in driver behavior will drive higher retention and new business while accident detection, faster claims and higher levels of positive customer engagement will enable them to take on a leadership role. See also: Will Technology Kill Auto Insurance?   Many new startups are basing their platforms on providing customers with a tailored experience, but the top insurance companies have the most power to affect change in a congested, commoditized environment. The future is promising with the growing popularity of smartphone telematics, enhancement of IoT solutions and our ability to glean insights on personal driving behaviors from large quantities of data. These technologies and capabilities have the power to further advance personalized insurance experiences and help insurers increase profitability. The insurer that embraces the end-to-end technological innovations available will be the ultimate standout, creating a customer experience that is seamless, efficient and human.