Historically, most independent insurance agencies have been slow to adopt new technologies, instead relying on their personal service to clients to differentiate themselves in the market. While it’s true that trusting an agent who has your security, protection and best interests at heart is a huge part of what makes the independent agent extremely valuable, customer expectations are shifting. Modern consumers embrace a digital-first environment. They expect high-end technology and automation to support their shopping, entertainment and banking needs, and insurance quickly joined that list. About five years ago, buoyed by strong capital investment and a surge in insurtech startups, direct-to-consumer personal lines disrupted the industry by bypassing the advisory and guidance upon which the independent agent model was built. Now, it’s the commercial industry’s turn, as we begin to see similar evolution in distribution models on that side. To remain relevant, independent agents must keep pace with the changing landscape of consumer behavior and the technological demand. Customer experience is more important than ever. When it comes to attracting and retaining clients, and delivering on expectations for speed, it's critical to be efficient and digital. API solution integration has become one of the most crucial components of digitization, enabling smoother workflows and increased efficiency and allowing agents to meet customer expectations for real-time, personalized service. By providing a framework for connectivity, application programming interface (API) protocols allow various pieces of software to interact, to share data, and to move data and tasks from one step of a process to the next. For independent agents and the entire value chain that supports them, APIs are game-changing. They give agents the combination of the digital-first approach customers expect, with personal attention and dependable service. Here’s why APIs are transforming the industry for agencies, customers and insurtech providers. APIs improve office workflow. As in every business, productivity and efficiency are critical in any agency. The ability to complete tasks faster, to save time and effort, not only means less work but also frees up more time for agents and customer service reps to spend collaborating with clients to better understand their needs. With something as simple as writing an auto policy, an agent may start and end the process in two pieces of software — first in the agency management system (AMS) and then in the underwriting system. This requires the agent to toggle back and forth, rekey data and perhaps even hand off the process to another individual. With API integration, the data is entered once, moves through the entire process with an electronic handoff from one system to the next, and can even be picked up by a second individual seamlessly. By cutting down on time and frustration, employees can spend their time on more productive, revenue-generating efforts. See also: AI Still Needs Business Expertise   APIs reduce data entry burden. The problem with lack of integration in most agencies is that it requires redundant data entry. And, each time customer data is entered increases the risk of error and inconsistency. For example, if a CSR enters client Amy Smith Jones’ name into the AMS with no hyphen, but the agent enters it into another system with a hyphen, there are two separate records for the same customer. Now, it’s impossible to see the client’s entire account, and there may be duplicate mailings and other communication breakdowns. With API integration, data is entered once — eliminating the time wasted in redundancy, reducing the risk of data entry errors and ensuring data consistency. APIs improve customer relations and retention. Insurance customers expect personalized service and attention. So, when they call the agency for help, they expect that their agent is familiar with their policies and situation. But, in many agencies, simply handling an incoming call is a lengthy process. An operator answers the phone and determines how to route the call, and then the agent must ask some questions to find out how he or she can be of service. With an API integration between the phone system and the AMS, the handoff happens seamlessly. When the customer dials in, the system uses reverse phone number lookup to identify the caller and pops up the customer’s policies on the operator’s computer screen and which agent handles them. Now, the operator can greet the client personally and transfer the call quickly. When the agent answers, they already have information about the client’s account and can immediately ask whether the call is regarding the homeowners or auto policy. This is just one example of how an API-enabled, streamlined system not only eliminates extra steps but also provides the personalized customer experience that clients expect from their agency. APIs demonstrate your digital prowess. As we’ve already established, consumers expect a certain level of modern, digital automation in practically every aspect of their lives. Using APIs to connect digital technologies gives your agency the forward-thinking image that attracts customers who value that quality. For example, even something as simple as mobile document signing technology that integrates directly with your agency management and underwriting solutions can streamline the process for clients. They can log in from wherever and whenever on their mobile device, sign as required and keep the process moving. Even with the personal service an independent agency strives to provide, there will still be clients who prefer less human interaction and a more digital approach, and APIs allow agencies to retain those clients while still addressing their automation expectations. APIs allow tech providers to remain relevant. There are many solutions in the insurtech industry that solve a niche problem — fillable forms for commercial line submissions, for example, or digital signature solutions. Even some of the larger AMS platforms don’t address every aspect of agency workflow, and many depend on complementary software to fill those gaps. API integrations allow the entire insurtech industry, especially point solutions, to thrive by continuing to provide value in the larger scheme. For the larger platform providers, this saves time and money in developing those features and allows the smaller niche players to remain relevant. See also: Growing Import of ‘Edge Computing’   API integrations clearly benefit the entire insurance value chain, from carriers, underwriters and agencies to insurtech providers and consumers. The alternative — continuing to operate with proprietary systems that don’t adhere to industry standards, perpetuating inefficiencies and detracting from the customer experience — will keep the industry stuck in the dark ages and ripe for disruption by new solutions that radically transform the process and the customer experience. Programs such as Vertafore’s Orange Partner Program are just one example of API programs creating a new model for the industry, enabling rich integrations that empower independent agencies to leverage a broad spectrum of solutions, not only within the platform’s ecosystem but also with a wide range of third-party providers. This type of open API approach ensures both technological consistency through integration standards and allows the entire industry to evolve and grow, while providing a more satisfactory experience for customers.

Providing your employees with insurance coverage is one of the best ways for small business owners to support them. Employees with health insurance are happier, far more productive in the office and more likely to stay at a company if they are satisfied with their current benefits. In this digital age, online benefits marketplaces render finding employee insurance for your employees as modern and straightforward as searching for and buying other high ticket items such as automobiles or homes. There are resources at your disposal should you have any questions throughout the insurance shopping and purchasing process. Below are three reasons online marketplaces help small business owners choose health insurance: Convenience As a small business owner, you are exceedingly busy, and your time is valuable. In a recent Vistaprint survey, small business owners reported spending their time on administrative duties, project management, marketing, product development, design and countless other tasks that are essential to growing their businesses. Your hectic schedule demands that you be able to browse and shop from your laptop or tablet, comparing employee health plan options digitally to save time that you would otherwise spend filling out lengthy paperwork, scheduling meetings or playing phone tag. Sophisticated technology modernizes employee benefits shopping as you know it by removing any confusion or unknowns. See also: 5 Health Insurance Tips for Small Business   Breadth of Options Most small business owners want to know they have considered a wide range of employee health insurance options before buying. You don’t want to sift through stacks of paper when considering your choices, but you do want to make sure you haven’t missed the best plan or plans for your employees. Research shows that 43% of individuals shop and purchase online. Look around the store the next time you are shopping and notice the number of people searching the price of a commodity prior to buying it. Employee benefits are no different. It is important to use the online resources available to you when providing your employees with benefits that suit both their needs and your budget. Broker Support The digital experiences offered by online insurance shopping marketplaces do not mean the death of the broker. People still benefit from having access to an expert in the field should they need any assistance. Even with the most streamlined of digital insurance shopping experiences, you may have questions and concerns along the way, especially because this is a high-cost decision that affects your employees directly. It is helpful to have a licensed broker to answer your questions, put you at ease and act as an ally who can assist you through the process. An online experience does not preclude you from having access to one of these valued resources. Licensed brokers are traditionally still made available to small business owners even online. See also: 4 Trends to Expect in Health Insurance Your employees and their health are important to you. Taking advantage of the ample resources provided by online health insurance marketplaces is the smartest and most cost-effective way to make sure your team is covered. You will save time overall and be presented with a variety of precise information faster, while still having access to support every step of the way.

There are so many great advances in the area of "smart homes" and buildings that it makes me wonder what the actual impact has been, or what I might have had to deal with, without all the smart features. The “smart” concept is to be able to secure a building with sensors that can provide safety features and collect information to reduce the risk of water damage, fire damage or other hazards.

I had a second home built and made it smart and connected in as many ways as possible. And my experience has been that I am generally more aware of all aspects of my home. I receive mobile alerts when there is motion on my front porch. I know the temperature in all areas of the house. Water sensor devices provide peace of mind in knowing that there have been no water leaks – if there is a leak, the sensors are connected to the auto shut-off valve in the basement. The SimpliSafe security system is connected to fire and police through the connected security system and fire alarm.

In essence, I know the health of my home at all times – which has been very handy to the owner of a second home.

See also: Smart Home = Smart Insurer! 

From the homeowner’s viewpoint, I can see the value for an insurance carrier. My insurer worked with me by providing a discount. The process was interesting. To obtain the discount, we correlated the capabilities of new devices we installed to the older discount program that was in already place.

A connected home can be considered an asset both in the sense that it has early detection and prevention capabilities and also that it is being actively managed. However, several barriers need to be overcome. The property owner needs education and access to the combination of devices that can assist with the management of the home or building.

To address these issues, many insurers have ventured into partnerships with companies such as Amazon (Travelers) and Roost (Aviva and Erie), to name a few. But there are big challenges involved here: How do you increase the knowledge of millions of policy holders or commercial property owners? And, how do you make available the key connected devices that can, at a minimum, detect water and fire to mitigate the risk of each?

See also: How Smart Is a ‘Smart’ Home, Really? 

In our most recent report, Smart Homes and Buildings: Ten Strategic Considerations for Insurers, we discuss the key considerations for insurers when developing the best value propositions, including the need to develop a deep understanding of specific customer segments, their needs and their adoption of smart devices.

For some, it may still be a few years away; for other insurers and customer segments, the time to engage in this area is now. For example, insurers that focus on segments such as second homes, vacant homes or specific types of commercial properties should be developing strategies now. But every insurer that writes property insurance must be engaged and following the developments in the smart home/property area. And they must maintain a conversation with agents and policyholders about their needs.

Squeezing efficiency out of decades-old legacy systems can seem like a losing battle for many insurance carriers, where long-term contracts are the nature of the business. Process engineers, both in-house and contracted, have driven efficiency within these operations to the point of diminishing returns. After all, there is only so much that Excel macros and keyboard shortcuts can do to streamline highly manual and repetitive processes. So it is no surprise that insurance companies, as well as other financial services institutions, took note when robotic process automation (RPA) entered the scene. By automating software application interactions, such as populating data, documenting audit trails and performing calculations, RPA promises to spare humans from performing these menial tasks while boosting accuracy, increasing efficiency and lowering the cost of operations by as much as 40%. Moreover, RPA requires minimal integration with legacy technology. By using RPA to streamline manually intensive operations, from underwriting new business to claims processing, process engineers can once again extend the life of these legacy systems. When properly applied, RPA has strong benefits. However, is RPA really living up to the hype? See also: The 5 Top Trends in AI and RPA   RPA Challenges While the application of AI and robotics will eventually drive opportunities for efficiency and improved customer experience, many insurance providers are currently struggling to find value. Most firms have struggled with deployment. Providers cannot assume RPA can be integrated into operations and deployed without intensive collaboration with the IT organization. Scaling an RPA program so a carrier can achieve real benefits requires IT process disciplines that are core to an IT organization, such as setting up infrastructure, managing security and executing testing. Without this rigor, an RPA implementation may fail to deliver the promised results, and an otherwise promising robotics program is likely to be scrapped. The second major failure is managing an RPA program without an end-to-end view of the process using experienced process engineers. Without this perspective, companies often spend months creating bots that deliver little real efficiency because they optimize only small portions of a process without reengineering the overall process with the automation in place. This is a critical step on the road to RPA success, otherwise, RPA may not be the silver bullet providers have been expecting. Making RPA Successful A strong RPA program includes a cross-functional team that combines process and technology experts to reengineer, develop and integrate with the people in the process. By so doing, the team will maximize the ability to identify the best places to apply robotics. Essentially, as the old saying goes, if you fail to plan, plan to fail. Additionally, ensuring that IT disciplines are applied will prevent unnecessary rework. Lastly – and most importantly – a cross-functional team will help implement the new processes with proper organizational change management, which will help ensure acceptance. Using these methods, a business process as a service (BPaaS) platform was recently automated to bring greater efficiencies and a better user experience. By leveraging RPA to automate task entry and acceptance, as well as data extraction, a global provider of employee benefit programs saw a 99% improvement in quality and 78% increase in efficiency. What’s Next? Interest in RPA is booming, but it is no silver bullet. RPA alone can’t solve network latency and choke points along the information chain. There is much to consider when implementing RPA, including involving cross functional teams who will bring process reengineering expertise, IT rigor and change management know-how to the program. Currently, process mining tools are finding new utility as they integrate closely with RPA software companies. These tools allow for a more automated approach to opportunity identification and reengineering. By using artificial intelligence to assist process engineers in assessing the processes being executed on the floor, it helps automate the creation of the requirements documents, saving hours of effort and expediting the building of necessary bots. See also: 3 Ways RPA Enables Growth   The next step is further development and use of artificial intelligence combined with robotics. This combination is already present for the intake processes at insurance companies. For example, using AI to improve optimal character recognition (OCR) and robotics to index and classify customer documents for proper routing within a workflow system is now becoming mature. Soon, new RPA and AI applications will rapidly emerge with the help of knowledgeable process engineers. For example, detecting anomalies in data using AI can help find fraudulent transactions. RPA can then ensure the relevant information is efficiently presented to the case manager for a thorough and efficient evaluation. RPA’s promise to enhance the customer and employee experience while improving the bottom line will continue to boost adoption and spur investment, but providers must be strategic to ensure they realize the potential benefits of RPA.

As I watch the insurtech space, I see a fair bit of hype around disruptive technology. Some of what I see reminds me of the dotcom boom of the late 1990s. Then, as now, lots of startups promise to deliver something ground-breaking, and all are competing in the same space, with many of the same ideas. To put this into perspective, let’s look at the global claims loss pyramid. This pyramid is a simplified model that segments claims into four main types. The base layers of the pyramid — representing technology-driven and networked services, and low-value, high-volume claims – are where technology-enabled offerings can be effective. Technology also is beginning to flow into the level above those, where higher-value and more complex claims reside. The top of the pyramid is large complex claims, which are the most technically challenging and require highly experienced loss adjusters. Aligned with these levels are the requirements for claims talent and experience; base-level claims only need basic skills, whereas the top of the pyramid requires the most advanced skills. At the moment, the insurance industry is aware that the claims experience is often the only contact a policyholder ever has with the insurer, so the claims journey must be completed correctly. Around the world, policyholders are demanding the same amount of transparency and oversight in the claims process that they get as consumers when they order something from Amazon or another online retailer. Many personal lines policyholders expect to be able to track and interact with their insurance carrier via an app or mobile portal. Similarly, if they have an app to see their policy details, renew coverage, etc., then consumers expect to be able to make a claim in that app and track or manage it to completion. It is apparent, though, that many prefer a mobile portal because they rarely make a claim and don’t want to install an app they may never use again. They don’t want to have to remember login details for the portal, so they need an encrypted link that will take them straight to their claim, just like a FedEx tracking number. They expect to be able to communicate with all parties via the portal using messaging, not email, but if they need to send in photos or documentation, they may transmit those through the portal without necessarily knowing or caring who is handling the claim. See also: Visual Technology Is Changing Claims   For large complex/technical claims, however, policyholders and other stakeholders have different expectations as to how their claims are handled, and how the communication works. Many insurtech startups don’t seem to differentiate in this claims segment – to many of them, “a claim is a claim.” In some cases, they clearly don’t understand the distinction between simple, low-value claims with repeatable steps, and larger, more complex claims where multiple, detailed narrative reports are needed to settle the claim. Either that or they have chosen to focus in the volume claims space for commercial reasons. Large complex claims are expertise-driven. Technology can support highly experienced adjusters, but technology for the foreseeable future will not replace the skill sets or expertise needed on such claims. A few of the new breed of software-as-a-service (SaaS) claims systems put the insured front and center in a collaborative claims process. The vendors say they can handle just about any type of claim, but they are only good for personal auto, volume and third-party administrator claims. Liability claims often entail complex sets of facts and negotiation, beyond the scope of most vendor offerings. The vendors also don’t offer client-driven SLA tracking, document management, co-insurers, multi-currency or billing capabilities. They assume that a claims manager overseeing a $10 million warehouse fire will trawl through an app on the phone to see status updates. Client-driven SLA tracking, such as through dashboards, is important for clients to make sure their claims are handled in the correct way. Vendors and their advisers need to understand their market better. Lots of insurtech startups are focused on the easy part of the equation – signing up policyholders via chatbots, submitting claims and using artificial intelligence to settle simple claims. Many startups are creating chatbot apps to sign up domestic policyholders and allow them to submit a claim. Every insurer will have this capability soon, as it is simple to build using third-party AI services, so I don’t see this as a market differentiator. We do not see a new breed of agile SaaS claims systems coming to market yet, probably because that is a more difficult system to understand and build. There is also resistance from some suppliers to handing their data and claims process over to a third-party SaaS provider. I haven’t yet seen one of these new-breed claims systems that is built around SLA-driven workflows that drive the claim to completion, though I am aware of some in development, none could support a traditional claim-adjusting business. What some vendors are currently offering is a claims-light system, focusing on collaborating with the various stakeholders via portals and apps instead of email. In the past, suppliers such as outsourced claims management organizations would each build their own systems to fill these gaps, often because insurers either didn’t see value in owning the claims system or couldn’t successfully bring their own solution to market. This multitude of external systems and processes doesn’t serve policyholders well, because it doesn’t always provide a consistent, positive experience when they make a claim. If I am a homeowner policyholder with ABC Insurance, then I should have an ABC Insurance app on my phone that I can use to manage my policy and any claims arising from it, including all communications with whoever is handling the claim. I should expect any outsourced provider or supplier to be plugged into that same system, either because they are directly using the same system or because their own systems are linked into it via an API. Traditional insurers need to re-evaluate how they outsource their claims to a third party because they continue to risk getting disintermediated from their relationship with the policyholder when so much of the claims process occurs outside their organization and systems. They should guarantee a great customer experience when a policyholder makes a claim, and to do that they need to control the collaboration space — the communication and data-sharing piece. Other financial services organizations have already solved this problem for the same reason: to reduce customer churn. Traditional insurers should be able to get this right, but many will need to become more agile in the way they deliver technology to do so. In the meantime, new entrants are launching with systems that already provide their policyholders with a better, more seamless claims experience. I’m not sure how well their systems integrate with external suppliers yet, but I suspect they will get there quickly because their organizations and systems were designed from the ground up to be agile and innovative. See also: Key Technology Trends for Insurers in 2019   Much of the above is already being discussed within the industry. I focus on the claims systems piece because I have been involved in many of these systems over the years, and it is interesting to see the same ideas come up again and again. We were talking about the “shared electronic claim file” in the early days of the internet. Now we are talking about a “collaborative claims workspace” decades later. I am confident that the technology available today will solve these long-standing problems quickly. I have been involved in discussions with low-code development platforms, and it is incredible what companies can now build and deploy for web, mobile and desktop in a couple of months. At this pace of innovation, advancements in claims technology will bring the industry to a crossroads. Will the industry embrace the opportunity to transform its service through the claims experience? Time will tell.

Wearables and fitness-tracking technology have witnessed rapid growth in recent times. International Data Corp. reports that one in every five people in the U.S owns a wearable fitness device. It also estimates that annual shipments will exceed 250 million devices by 2021. Given the ability of technology to provide critical data, the wearables revolution continues to spark interest in the insurance industry. Data collected from wearable devices can provide critical health and fitness information. This information is vital to the development of interactive life insurance policies that track fitness and health data through wearable devices and smartphones. The technology hence holds the key between insurance firms and technology-savvy clients who value a modern, updated experience and digital engagement. Industry giant John Hancock recently announced that it would begin selling interactive policies. They’ll require new life insurance policyholders to use activity trackers and share their fitness data. Insureds will, in turn, enjoy discounted premiums and other benefits. Benefits and Opportunities Wearable and fitness technology can be advantageous to both insurers and their customers. Wearables encourage insureds to become accountable for their health and fitness, and insurance companies stand to gain healthy clients with longer lifespans. Most life insurance policyholders pay their premiums for an average of 20 years. With the adoption and use of the trackers, they will be able to lead healthier and longer lives. Lower mortality means higher insurer profits. See also: Wearable Technology: Benefits for Insurers   Wearables also provide companies with a simplified way of collecting underwriting information. The data simplifies the risk-assessment process by offering metrics that would have taken longer to obtain through a full medical test. The data collected also acts as an additional source of information for product development. In addition to discounts on premiums, clients are also given the tools to boost their quality of life and well-being. Wearable devices can help detect conditions such as heart disease and high blood pressure and help insureds get treatment before things get worse.. The technology can also be used to detect a client’s unhealthy lifestyle habits, such as smoking and excessive drinking. With lifestyle conditions becoming prevalent, wearable devices will go a long way in promoting a healthy lifestyle. Risks and Challenges The rapid growth of wearables and fitness devices comes with the risk of infringing on privacy. The insurer has access to very private information whenever the customer is wearing a device. The ever- present risk of the information leaking to other parties is also high. See also: Workplace Wearables: New Use of Big Data   Another challenge is the reliability of the data collected, as the devices may not always report accurate information to the insurer. For example, devices may be tailored to indicate the motion patterns like walking or running and may not be able to record other activities such as cycling. The elderly may also be victimized by errors, as their exercise regimes may be less demanding. A Force to Be Reckoned With While there are various data safety and accuracy concerns with wearables, they can be overcome with proper protocol. Insurers have always dealt with sensitive information and will need to continue to handle such data with care. As for inaccurate heart-rate and other readings, studies show that fitness data is evened out over time. For example, a wearable device may not provide an accurate reading of the user’s heart rate during fast-paced or high-intensity exercises, but it can provide a comparable average over the period of the workout. The use of wearables and fitness devices as data collection tools in the insurance technology sector is increasingly gaining popularity. Their role in shaping industry trends can no longer be understated. As software and reliability keep improving, insurance companies will further embrace wearables as the future.

It’s no secret that the small business insurance industry is creeping online, representing the start of an insurtech revolution. More insurers are realizing that customers are getting comfortable buying directly from them -- and aren't shy about asking for specific products. There is a huge opportunity for insurers making the jump online, but I would argue that it’s not going to be the first online insurance brokerage that wins… It’s the one that won’t lose its humanity in the face of the digitalization. Here’s a deeper look at how online insurers can provide a more comfortable and human experience for their customers: Follow the Golden Rule It’s a timeless piece of advice, and for good reason: If you wouldn’t accept a certain level of treatment as a customer, you shouldn’t treat your own customers that way. Think about every part of your customers' journey and how your brand interacts with them at key touchpoints. For example, if they call with questions about their policy, are they able to speak with an adviser immediately, or are they on hold for several minutes? Is your site copy easy to understand, or would it take an insurance agent to decipher what you’re trying to say? See also: 5 Digital Predictions for Agents in 2019   Analyzing your customer journey with this empathetic lens can help you better understand opportunities for a more human touch. Don’t make it complicated It’s a huge understatement to say that the insurance industry can be complicated. That’s why, as insurers move to the online world, it’s important to make it easy for customers to get what they need. Don’t overcomplicate things for them or add information that they really don’t need to know. A large number of small business owners are probably shopping online for insurance before or after putting in a full day’s work; they just want what they need, and that’s it. Your digital experience is the face of the company, so make sure it provides a smooth process. Leave industry jargon at the door Be smart about what you’re presenting to the customer because, as I mentioned in my last point, our industry is overwhelming. Creating a more humanizing digital experience involves leaving behind the jargon and framing the conversation in a way that’s easier for the customer to understand. Deliver on your promises A lot of insurtech companies are jumping on chatbots as a platform for engaging with customers. But bots can quickly lead to a negative brand experience if you don’t have the logistics to support chats. Recently, I left a query on a brand’s chatbot and was told that I would get an answer about three hours later (already unacceptable). Seven hours later, I got a response -- but the answer didn’t even relate back to my question. Needless to say, the frustrating experience hurt my opinion of that brand. See also: Best of Both Worlds: Humans and Tech   If you’ve promised your customers something - like support or an easy claims experience - you need to deliver on your promise. It’s as simple as that.

The arguments surrounding the need for change in the insurance industry have largely been won. In recent years, dramatically increasing regulations, competition and customer expectations, along with dwindling resources and shortages of technical skills, have combined to produce an environment of uncertainty. All too often, insurance carriers have tended to push what they have been able to produce, rather than respond to what the customer demands. In a setting where that demand is changing radically, it is more important than ever that carriers step back and listen to customers. Enter "Connected Claims." As insurance’s "moment of truth," the claims process is where the service and delivery of an insurance-provider is judged, so it is natural that it should be a priority. But while the need is clear for a radical revision of the claims process, what isn’t clear is how organizations should undertake such profound and substantial transformational initiatives if they wish to deliver seamless, omnichannel and personalized, ‘Connected’ claims. Bringing about transformation in Connected Claims is not simply a case of refreshing or reorganizing a single department. It has the potential to disrupt – and revitalize – an insurance carrier’s business in its entirety. In our Connected Claims Report 2019, we find out how insurance executives view the challenge of creating a connected ecosystem within claims, where their challenges lie and what their expectations are in the near to mid-term. See also: The Connected World: How It Changes Claims   Our research discovered that no department is unaffected when a carrier undergoes claims transformation, but there are certainly some departments whose influence is pivotal. Between two-thirds and three quarters of respondents cited claims, IT and analytics as the "holy trinity" that drives transformation. To be successful, however, means more than just focusing on internal capability. Although the need for introducing Connected Claims is largely understood, customer service has recently become a key battleground, with the likes of Lemonade and Metromile disrupting the market with quick, personalized and mobile-friendly offerings. A focus on the customer is more than just good business practice. Understanding customers’ needs is the foundation for instigating cultural change. Our research reveals something of a paradox, where the majority of carriers believe their claims process is at least satisfactory but know the time is ripe for a change, and yet many feel unable to persuade their organization to release the necessary resources. Understanding customer motivations, as well as the technical landscape, may well be the evidence that executives need to secure that investment. While transformation may seem to be a radical process, executives are still focused on getting foundational processes in place before moving on to the more experimental technologies. Our research showed that four key areas will demand most of carriers’ attention in the near to mid-term: digital, data, claims technology and AI. It was interesting to discover that this last element is still being viewed with trepidation, particularly by North American executives. Delving deeper into the results, we find that many are already deploying AI-related capabilities, even if they don’t define them as such. The results of the survey show there is clearly a need for greater understanding of the range and capability of the new technologies at carriers’ fingertips. Connected Claims transformation is well underway. We can expect to see a greater shift toward automation and AI-based processes in the next five to 10 years as carriers become more confident that the foundational elements of data, IT and analytics are in place to support the change. But however advanced carriers’ technical capabilities become, focus on customer needs will always be the driving force behind any strategic change. See also: How Connected Cars Will Change Claims   Please download this full report here and get more insights on Connected Claims. This report was produced in conjunction with Insurance Nexus’ coming Third Annual Connected Claims USA Summit 2019, taking place June 5-6, at the Marriott Marquis in Chicago. Welcoming more than 750 senior attendees, Connected Claims USA is the world’s largest gathering for claims executives striving for efficient, customer-centric clams processing. More information can be found on the website at https://events.insurancenexus.com/connectedclaimsusa/.

It’s Sunday. That means there’s a lot of talk going on about #SurpriseBilling online and on TV. The conversation is picking up because it’s a new season for state legislators, we have a new Congress and the president is talking about the problem. And that’s just what the #HealthcareCartel wants. It wants us to address the problem of #SurpriseBilling in healthcare, because the more we focus on this symptom of a larger problem, the less we will focus on the problem itself. Ask yourself: Why don’t we experience surprise grocery bills when we go to a different grocery store than we usually do? Why not surprise gasoline bills for going “out of network” when we go to the Shell station instead of Conoco. Sure, we might get a few pennies off for staying in our gasoline network—that’s normal business, and it’s transparent.  We might not get the benefit of the loyalty program at the supermarket, sometimes paying more for “going out of network,” but they let us sign up on the spot, and the sign on the shelf says, “20% off for members.” These businesses have their incentive programs, but they don’t hide their prices from us. There are no surprises. We used to experience surprise cellular phone bills (going out of network meant roaming or making calls from overseas), but the marketplace rejected that over time as Sprint, T-Mobile, AT&T and Verizon designed better plans for competitive advantage. That's why the cost of cellular phone goes down over time—they keep competing. I believe everyone wants to see an end to surprise medical bills. The problem, unfortunately, is complex, and the solutions being proposed won’t work as expected. They amount to price controls, or call for providers to be forced to join networks, which in turns denies them their right to negotiate a fair deal—which we want, because that forms the basis of competition. We can't just stop prices from going up. We can't just legislate "fair" prices.  We need competition that actually drives prices down. That's the only way to reverse decades of dysfunction that have led to prices that are twice as high as they need to be. See also: The Science That Is Reinventing Healthcare  Laws and regulations layered on the back of a dysfunctional economic model always leads to unintended consequences. The reason is simple: Dysfunctional systems do not respond to change in predictable ways. That’s why policy makers have no business addressing the problem of #SurpriseBilling while ignoring the underlying economic dysfunction of healthcare. No matter how well-intentioned, they are going to get it wrong. They are going to make the system worse. The point is, surprise medical bills would not exist if we had an economically functional healthcare system based on truly transparent prices. That’s why the #HealthcareCartel is so pleased to see all of the political energy being absorbed by the problem of #SurpriseBilling. An entire political season is going to go by the wayside, with politicians taking victory laps while merely creating the illusion of progress. The #HealthcareCartel couldn’t have done it better if it tried. Highly complex machines evolve when we piece them together with one band-aid after another. The more complex the system gets, the harder it is to change. The status quo is solidified. This is just what the #HealthcareCartel wants. The more band-aids we put on the system, the deeper we entrench the highly profitable status quo. It’s time to start looking at real solutions to the underlying problem. Our healthcare system becomes less economically viable every day. One day, in the not-so-distant future, we will cross the point of no return and will have lost the opportunity to create the finest healthcare system on the planet by doing what we have always done—letting the free market work its magic.

In December, NASA’s spacecraft OSIRIS-Rex landed on the surface of Bennu 101955, a large asteroid. Scientists believe that it could one day strike the Earth, should gravitational interaction between the two bodies, during a close approach in 2060, cause it to change its trajectory. The energy released by the impact would be 80 times more powerful than Hiroshima. Is there a parallel, perhaps, to the independent London wholesale market (i.e. excluding business placed into London by the in-house placement teams of the large international brokers), hurtling inexorably to its doom, due to the pull of gravitational forces beyond its control? To answer that question, we perhaps first need to start with some definitions. Historically, the London wholesale insurance market has played a valuable role in matching brokers from (mostly) overseas looking to place large, complex or unusual risks into the London market capacity, in particular Lloyd’s. North America has long been by far the largest source of business into the London wholesale market. Reflecting the size of this market, brokers operating within North American typically access the London market either directly via a London market wholesaler, or indirectly via a U.S. wholesaler intermediary, who will themselves place the risk with a London market wholesaler. The process is, perhaps unsurprisingly for something that involves the words “London” and “insurance,” woefully inefficient, not to mention expensive. Imagine a U.S. corporate, approaching a local broker, who then goes to a U.S. wholesaler, who involves a London wholesaler, who then places the risk into a Lloyd’s syndicate (potentially via an MGA?), with each stage of the chain putting its snout in the fee trough. The process brings to mind the ancient symbol of the Ouroboros – a dragon, eating its own tail. Yet, the London wholesale market has been, and continues to be, very successful. The U.S. surplus lines market, for example, has been growing at 9% per annum, well above the growth rates seen in the normal insurance market in the developed economies. Within that, the Lloyd’s share has grown even more strongly, at around 12%. London is still the largest writer of excess and surplus lines and still the largest delegated authority business in the world. There are several reasons for this strong growth, but prime among them may be the London market’s proven ability to spot trends and emerging opportunities, innovate solutions and then mobilize quickly to write them first. When the market is at its best is when wholesalers are working in close partnership with their producing brokers to develop creative ways of managing not just existing risks but also new and emerging risks, attracting premium to the market that would otherwise have gone elsewhere or perhaps not have been spent at all. This is worth paying for, although that shouldn't disguise the fact that a lot of the sector's income is renewal business that requires little incremental effort. Wholesaling is typically a high-margin business, partly because it remains stubbornly commission-based but also because it benefits from high operational leverage, with a relatively small number of relationships with a relatively small number of placing brokers potentially giving access to a large flow of referred business. The market has also proved very stable, with business flows and retention rates not moving for years, underpinned by strong relationships that are difficult to dislodge once established. And the market - particularly at the larger end - has proved remarkably adept at boosting commission income affected by the soft market conditions, through the use of facilities, captive MGAs, facultative reinsurance and other non-placement services such as advisory or data services. So adept, in fact, that the FCA has launched a market study, concerned that the level of competition and innovation, the barriers to new entrants and the risk of conflicts may leave something to be desired . See also: Top Emerging Risks for Insurers   On the face of it, therefore, the overall health of the London wholesale insurance market would seem quite robust. As Mark Twain might have said, “rumors of its demise have been much exaggerated.” And yet I would argue that six long-term gravitational forces are likely to combine to tip the independent London wholesale insurance market into a different orbit. An orbit that while perhaps not threatening Bennu 101955's fiery end, will inevitably result in the market being much smaller and much changed from today. 1. Broker consolidation strangling supply The critical North American market continues to be consolidated aggressively by the large international brokers (in particular Marsh, Aon and Willis). This inevitably leads to risks that were previously wholesaled being placed directly into the London (and other – see below) markets by these large brokers’ in-house placement teams. With no end in sight to the North American consolidation trend, the amount of premium available to the "indepdendent" London wholesale market will inevitably come under increasing pressure. 2. U.S. wholesalers increasing their buying power  The U.S. wholesale market has essentially consolidated over the past few years into three main entities: AmWINS, Ryan Turner and CRC, each of them controlling around $6 billion to $7 billion of premiums. This has given them vastly improved buying power and the ability to demand better commercial terms. This has been facilitated (some might say accelerated) by moving to preferred supplier lists, to improve their operational efficiency by dealing with fewer counterparties. While ostensibly good news for those who come out on the right side of any supplier selection exercise, from an overall market perspective this inevitably raises the risk of premiums being funneled into the hands of a smaller number of independent London market wholesalers on worse terms than before, shrinking the available profit pool and leaving the “losers” high and dry. 3. U.S. wholesalers vertically integrating  Faced with long-term weak economic growth and soft market conditions, other parts of the insurance market have increasingly sought to vertically integrate to capture margin and drive efficiency. Examples abound but would include Berkshire Hathaway establishing a primary carrier, brokers setting up captive MGAs and insurers and re-insurers (e.g. Axa and Munich Re) investing heavily in insurtech in the hope of developing their direct channels and (presumably?!) circumnavigating brokers in some lines. How long, therefore, until U.S. wholesalers establish or buy a London market wholesaler and place their own business into the market through their own entity, to maximize efficiency and minimize leakage? Indeed, AmWINS has arguably already taken the first step, buying THB in 2012. While to be fair, AmWINS has so far resisted the urge to bring all the business in-house, logic and precedent suggest that at some stage there is a risk this will happen. Once the first move is made, will the rest of the market be able to resist following, potentially marooning the independent London market wholesalers who rely on this huge source of business? 4. Growing local market sophistication and depth The traditional insurance cycle has for years driven an ebb and flow of business between the domestic U.S. markets and London. Typically, the London wholesale market does particularly well in a hard market, when local brokers struggle to find sufficient capacity and risk appetite. However, the relentless pressure of the soft market conditions that the market has been laboring under for the last 15 years has shifted the dynamic. Local U.S. underwriters have been forced to adapt their risk appetite and invest in their own capabilities to write business that would previously have traveled to London, to keep their top and bottom lines moving in the right direction. While a future hard market could favor the London market once again, these type of skills and investment are not easily unlearned or undone. Further, the last few years have seen the establishment of an increasing number of local MGAs – essentially specialized capacity backed by Lloyd’s paper, as the Lloyd’s market has sought to drive its own growth by investing in developing its own on-the-ground distribution muscle. Why involve a London market wholesaler or broker, if you can access Lloyd’s directly in the form of an MGA? The hypothesis must therefore be that if the market hardens and the tide comes back in, it will not go anyway near as far up the beach as it would have previously. Further, I have argued previously that fundamental changes to long-term market trends mean that the traditional concept of a market cycle may well be obsolete and we may have now entered a new paradigm characterized by longer cycles and low volatility. On this basis, local markets will continue to eat away at premiums placed in the London wholesale market over the long term, with no hope of a respite. 5. Emerging centers of capital The emergence of new centers of capital in places such as Miami, Dubai and Singapore has significantly increased the number of markets able and willing to write risks that previously might have had no choice but to go to London. While no one could pretend that these new centers of capital have London’s depth of knowledge or range of skills today, they are a lot cheaper to operate in, as London remains challenged from a cost perspective. Over time these new centers will surely become far more viable alternatives and compete far more effectively for the North American (and other markets’) premium pool, putting further pressure on London’s share. 6. Improving data analytics and placement technology The London market remains resolutely analog. This in part reflects the relationship-based nature of the industry and the importance of face-to-face conversations in developing and maintaining client relationships and understanding and placing the risk. But it is also partly a defense mechanism – it is hard to disintermediate paper. The suspicion, however, must be that a significant proportion of the premium that currently comes through the London wholesale market could be placed electronically. Bronek Masojada, CEO of Hiscox, has been quoted in the FT as saying that 80% of what is done at Lloyd’s could be done entirely electronically -- there would seem little reason to think that the wholesale market was any different. And once the Pandora’s box of electronic placement is opened, how long before U.S. brokers or wholesalers look to place directly into Lloyd’s or other London based markets, circumventing the wholesale market entirely? Further, could analytical capability become decisive in winning and retaining accounts -- in other words, will the bonds of historic relationships become increasingly strained if these are not supported by leading edge analytics and insight, which many wholesale brokers do not have the resources or capabilities to build? None of this is to underestimate the London market’s ability to shoot itself in the foot when it comes to technology. But things are improving, the direction of travel is clear and the disruptive impact of enhanced analytics and placement technology could in time lead to significant parts of today’s wholesale market being placed direct, with Lloyd's brokers reduced to the status of electronic post-boxes. These gravitational forces suggest a number of important long-term implications for the London wholesale market: The market will shrink as changes in supply, market structure and competition reduce the amount of premium available to the market. While recently the market has been able (to its considerable credit) to more than counteract this through driving innovation to win market share, over time, the trends listed above will gain in momentum, and gravity will make itself felt. Arguably, JLT (by merging its Lloyd & Partners business with its specialty division) and Willis (by selling its wholesale business to Millers), to name but two, concluded several years ago that the best days of the London wholesale market were firmly behind them (although in JLT's case the decision was a perhaps unavoidable consequence of establishing itself as a U.S. retailer -- you can't wholesale where you retail, at least not without considerable difficulty.) In the short term, as players fight over a smaller pie, this will almost certainly put pressure on commission rates and margins that have historically rarely moved. The market will consolidate further and faster. Faced with the pressures outlined above, the market will consolidate to drive efficiencies and grow market share and mitigate the commission/margin pressure. Witness, for example, Besso coming together with Ed. This trend is further being accelerated by the growing cost of regulation and technology, which is squeezing the smaller end of the market and fueling M&A. Managing FX risk has also become increasingly important given Sterling’s recent volatility, something that is only typically affordable by larger brokers. It is also increasingly hard to grow by hiring talent, which for many years has been the preferred way of acquiring business and growing share – the market has wised up significantly in the last few years, and non-competes and other restrictive covenants are far more prevalent and effective than they used to be. Further, as the U.S. wholesale market has professionalized and moved to more of a preferred supplier model, so some of the larger U.S. relationships have become more institutionalized, and the opportunity of hiring one person in the hope that they will be able to shift an entire book of business, far riskier. For shareholders of smaller wholesale brokers, this should be good news as competition for assets and a race to the top drives multiples up. Anecdotally, I have heard of something of a demographic “cliff” in the market, in any case, with many wholesale brokers set up in the '80s and '90s and their owners now looking for an exit. In that sense, there may well be no losers from these changes – even those not equipped to compete effectively should be able to sell out at a good price, although inevitably the drive for deal synergies will mean that, unfortunately, not everyone will survive the cut. However, caveat emptor! -- scale is not growth, and the forces alluded to elsewhere in this article suggest that buyers may well end up saddled with all the cost and far less of the revenue than they thought they were buying over the longer term. The market will become more international. While there is significant pressure on premium flow from the North American market, the overwhelming bulk of global economic growth over the next 50 years will be in the emerging markets, in particular Asia. The depth and sophistication of underwriters in these markets is improving but remains far below that seen in more developed markets. This suggests a real opportunity for wholesalers able to establish more of a global footprint, partner with local brokers, reduce their historic reliance on North America, take a longer-term view and ride the emerging market growth wave, although, as in the U.S., they will find themselves competing against large international brokers who have invested in their local retail operations, channeling premiums back through their internal placement teams. Further, as outlined above, some of these local markets are themselves developing new centers of capital. The client proposition of a broker not just able to access London but also these emerging centers of capital to get a better outcome, should be significantly enhanced. Clearly, though, only the larger brokers will have the resources to pursue such a strategy, further bolstering the consolidation story. See also: ‘Organic Insurance’: Back to Basics   The placement chain will collapse. The cost and complexity of the current placement process is unsustainable, and it will collapse faster than most expect or understand, driven by rating and margin pressures. Even beyond the threat of the U.S. wholesale market going direct, how long before the global firms look to remove their own London offices from the placement process of their international business, accessing London insurers directly from source? Where is the logic in Lloyd’s underwriters writing U.S. or Australian MGA business through a Lloyd’s broker? Why would a client not wish to contract directly with the facultative reinsurance market that currently pays 15% commission to a broker that is in all likelihood owned by the same firm providing both retail and wholesale services (Marsh/Bowring Marsh/Guy Carpenter for example)? What has worked for the last however many years simply won't fly anymore. The market leaders will need to have clear specialization and edge. The pressures on the market mean that those that do emerge as market leaders, with sufficient scale and attractive growth momentum, will have succeeded by outcompeting and winning share, rather than from any growth tailwind. I am reminded of the joke about the two people who come across a tiger in a clearing. When one of them carefully reaches into his backpack for a pair of trainers and starts lacing them up, his friend asks him what he is doing, as there is no way he can possible outrun the snarling beast. “I don’t need to,” comes the reply. “I just need to outrun you!” The reality is that the market leaders will inevitably all be competing for the same talent, the same acquisition targets and the same supplier deals with the large U.S. wholesalers. At the risk of stating the obvious, therefore, the winners will be those who have deep pockets (probably PE backed), clear areas of specialization and a distinctive cultural edge, that they can articulate in a compelling way. Wholesale broking remains a people business. The best wholesale brokers, perhaps more than any other type of broker in the market, save perhaps for some reinsurance brokers, are often able to move millions of dollars’ worth of business through their personal relationships. Winning the PR game and positioning yourself as a winner will become even more important to win the war for talent and emerge as the destination of choice. I suspect there is room here for a new entrant, able to attract talent and backing and drive to scale quickly with a non-legacy platform. All of the above needs to be set against the potential findings of the FCA review into the sector, with the publication of its initial findings now expected during Q1 of 2019. The aim of the study is to “explore how competition is currently working and whether it could work better in the interests of clients.” Their work is covering how brokers compete, whether they use their bargaining power to get clients a good deal, what conflicts of interest there are and how these are managed and how they might affect competition and client outcomes. A specific concern is the growing use of facilities and captive MGAs by larger firms, in particular, placing smaller firms at something of a disadvantage and potentially raising conflict issues. It is hard to know what the findings will be and whether it is the wholesale activities of the large international brokers, as opposed to the independent wholesale players, that are particularly in the FCA's cross-hairs. Potentially the remedies could be seismic, turning much of what I have said above into something of a sectoral footnote. Certainly the tone of the FCA's communications so far would suggest that the sector will find itself caught between the "rock" of scale and consolidation on one side and the "hard place" of the regulatory concerns that such scale raises on the other. The good news in all of this is that NASA doesn’t think that Bennu 101955 will hit us, if at all, until 2175 and 2199 at the earliest. Who knows, by then we may well be living on Mars anyway! But for those working in and around the London wholesale market, the challenges, while far less dramatic, are much more immediate, and those convinced of the longevity of the London market wholesaler its current guise, are at best naive, at worst complacent. You would hope that the various players are alive to all these factors and have a plan. Although I can't help but be reminded of what Mike Tyson once said: "Everyone has a plan. Until they get punched in the mouth."