Do you think home and contents insurance is broken? Then join us for our Getting the House in Order series on what’s wrong and how to fix it. Part 1 takes stock of the U.K.’s protection gap and its effect on different demographics. I’m sure that at some point in life you’ve faced the too much stuff moment. For me, it was earlier in January, as I sought to escape the post-Christmas blues with a mini-break abroad. Except – the drawer that once contained my passport now appeared to be home to a multitude of still-wrapped DVDs, a large hardback book, some errant Christmas socks and a pack of comedy coasters. I located the passport in the end, several layers down. But I had to think: As a nation, we sure have a lot of household contents. I began trying to quantify the volume of stuff in people’s homes, starting with my own overloaded passport drawer. Then the drawers in the living room, drawers in the kitchen, drawers in my flatmates’ rooms (the mind boggles). Beyond that, the drawers in all the houses along my street. And that’s just drawers. What of the cupboards, floors and lofts? The garden sheds, shelves and trunks? In every city, town and village in the realm … To stave off insanity – at least temporarily – I decided to do a bit of research. It turns out there are 27.2 million households in the U.K., which means that, for starters, we’re looking at:

• at least 26,112,000 TVs
• 26,384,000 washing machines
• 12,512,000 dishwashers
• 4,297,600,000 books

And what about that class of possession wherein modern man delights the most: consumer electronics? The U.K. is apparently home to 41,000,000 smartphones, 37,600,000 laptops and 32,800,000 tablet. Now that’s a lot of expensive silicon knocking about! Today’s contents explosion has not been fueled exclusively by our couch-potato tendencies, let me add. We are a nation of 25 million bike owners, 1.5 million golfers and 825,000 tennis players (weekly), so we’ve got a fair bit of sporting equipment, too. These two recent trends – gadgetry and fitness – have helped to make our “contents footprint” larger than any previous generation’s. In fact, the Association of British Insurers (ABI), in its recent Britain Uncovered study, put the value of contents stashed in U.K. homes at £950,000,000,000 (that’s almost £1 trillion!). That’s £35,000 per home, on average, comfortably outstripping the average U.K. salary of £27,000. So, we’ve established that our small island conceals a scarcely imaginable volume of household contents, which brings us to our principal concern in today’s post: Where on Earth is all the contents insurance? See also: Can Insurtech Rescue Insurance?   The same Britain Uncovered study found that 28% of U.K. households had no contents insurance whatsoever. That leaves 16 million people and £266 billion of household possessions unprotected. — £266 billion of household possessions are at risk in the U.K. — This figure could be higher still. The ABI estimate was based on the number of uninsured households only, excluding those that are merely under-insured. Indeed, the Telegraph reckons that 6.8 million homes (25% of total households) may be under-insured, meaning that only a minority of U.K. homes have appropriate levels of cover. This contents protection gap has different causes – and solutions – for different people. At buzzvault, we’re pioneering an approach that matches contents cover to customers’ individual needs, whatever they own (sign up for buzzvault beta here, we’d love to know what you think). However: tech wizardry on its own never solved anyone’s problems. So it’s more important than ever that insurers truly understand their customers. To help with this, we’ve provisionally identified three demographics whose varying needs aren’t met by today’s providers. Let’s take a look. Contents Insurance: Renters As if only getting one shelf in the fridge weren’t bad enough already, “generation rent” miss out in more ways still. You see, that elusive house purchase isn’t just significant as a first step on the property ladder. A purchase is a major trigger for purchasing insurance, as well. Most home contents insurance is currently sold as a bundle with buildings insurance, which is generally mandated by mortgage providers. So, while homeowners are practically forced to take out contents insurance, little impels renters to even think about it. 81% of “generation rent” lack contents insurance, at least according to the Improving Access to Household Insurance report by the Financial Inclusion Commission (FIC). That means we’re looking at a staggering 10.5 million uninsured renters. That’s more than the entire population of Sweden! No assessment of the travails of renterdom would be complete without a cursory look at our nation’s students. Negative attitudes toward insurance are rife among this demographic. This explains why, despite the average student lugging more than £2000 of possessions along with them to start their studies, nearly half of them aren’t covered. And this, even though students are possibly God’s gift to burglars. Many renters could afford contents insurance, and would buy it, if only the thought crossed their mind for more than a second. So there is less a product failing for insurers than a failure to package and market their product in a relevant, customer-friendly way. Indeed, it’s that adage again: Insurance is never bought, it’s always sold. The Financial Conduct Authority (FCA) classifies two-thirds of renters as potentially vulnerable to harm due to low levels of financial capability and resilience, health issues or risk of life events creating difficulties. Contents insurance could provide a significant umbrella. Status: At Risk Contents Insurance: Poorest Households Only 40% of those earning £15,000 or less each year have contents cover, compared with more than 75% for the highest incomes (according to the FIC’s Improving Access to Household Insurance). And, in an unfortunate co-occurrence, it is precisely these individuals who are most exposed to household risks — be that house fires, floods or burglaries. Lower-income households live with 30 times the risk of arson as more affluent households. They’re also eight times more likely to be on tidal floodplains. To cap it all, socially rented housing is twice as likely to be burgled as owner-occupied properties. These are damning stats. They tell the story of unacceptable numbers of at-risk households having to bear the cost of personal disaster on their own. Covering total loss from savings is bad enough – worse still is the fact that many poorer households aren’t even in a position to do this. More than 7 million UK adults have less than £1000 in savings. And less than a quarter of those in social housing could replace a washing machine from savings and income alone (Citizens Advice Quids in survey). The financial inclusion debate has so far centered on banking, payments services and affordable credit – but accessible insurance has a part to play here, too. Tackling the protection gap won’t eliminate the savings gap, but it will de-risk it. To do this, insurers need to find ways to make lower-premium products economically viable. This will almost certainly require new distribution mechanisms to achieve scale, reduce cost and reach people regardless of their level of financial education. Tenants insurance schemes (sometimes called “Insurance with Rent”) are welcome in this regard but have had limited adoption so far. Status: Highest Concern See also: Why 5G Will Rock the Insurance World   Contents Insurance: Average Homeowners Some better news: More than 80% of those owning their home outright or with a mortgage have some form of contents cover in place (FIC: Improving the Financial Health of the Nation). However, these customers aren’t home and dry. More often than not, they have inadequate cover for the value of their contents. What we have here is endemic under-insurance, where coverage isn’t absent but is still patchy – leaving few people with optimal protection. When taking out insurance, people typically underestimate the value of their belongings by 40%. In the event of a total loss, this means they can recover max 60% of the value of their stuff. And many insurers operate an averages clause, whereby this percentage (representing the degree of under-insurance) is applied to all claims. To give you a flavor: Over the past three years, 6% of people have missed a typical pay-out of £1000 from their home insurance providers because they haven’t bought the right level of cover, according to a poll of 2,000 Britons by insurance broker Swinton Group. The main reason for under-insurance is the steady creep in home contents value. This, we estimate, grows by an average of 24% over a three-year period. While the rhythm for updating insurance policies is generally annual, we update our possessions daily, weekly and monthly. A one-size-fits-all approach to contents insurance doesn’t just lead to poorer households tending to pay over the odds. It can also lead to wealthier households paying too little – and then being hit with the consequences, without warning, when it’s time to claim. Topping up homeowners insurance isn’t as great a social good as providing a financial umbrella for the nation’s neediest households. However, much work for the insurance industry remains to be done here that could justifiably be called low-hanging fruit. These households are, after all, already receptive to insurance and tend to own the most stuff. Status: Vulnerable We will revisit all these themes in greater depth as this series progresses. Next, we’re looking at what can be done about the low adoption and engagement that insurance products have traditionally faced. It’s a certainly a challenge to sell a product no one covets or, in the main, understands. But rather than waiting for the public to start caring, the industry should explore ways to take insurance out to its customers: one approach being to embed it into other services customers do care about.

Active shooter events in the U.S., unfortunately, are becoming more frequent -- so much so that the Wall Street Journal reported this week that school districts are stepping up purchases of insurance against such events. The incidents raise many questions, and a persistent one in a legal context is, “Should anyone besides the shooter be held liable?” According to the Federal Bureau of Investigation, between 2000 and 2017 there were 250 active shooter incidents. They resulted in 799 victim deaths and 1,418 wounded. Often, victims and their families understandably seek to hold someone other than the shooter accountable for failing to prevent these acts of criminality or terrorism. Although this type of litigation is always emotionally charged, the legal concepts of foreseeability, duty and reasonable care are the key factors used to determine liability. In litigation, the concepts generally mean that allegations of liability must be supported by "expert" testimony. Such opinions are formed by using post-event knowledge to reverse engineer some preventative measure that would have allegedly prevented a particular incident. Of course, the entity alleged to be liable is being judged for its pre-event actions and "failing to act reasonably" in the context of a threat environment that includes countless potential risks. Unlike a government, private entities must assess these risks without access to the intelligence that only governments possess and without a government's resources and legal authority to implement an unlimited number of countermeasures. Governments are frequently held to be immune from similar lawsuits, so one can reasonably ask whether it is fair and just for private entities to be subject to a disparate legal standard. See also: Active Shooter Scenarios While there may be some cases where liability may properly attach, perhaps it's time to consider whether concepts of crime victim compensation funds and victim compensation funds similar to that enacted after the 9/11 attacks should be used to provide compensation to victims of mass shootings. Creating a similar fund for individual victims of active shooting incidents could address multiple challenges. Victims could gain compensation quickly and without the financial and emotional expense of litigation. Defendants who had no involvement in the shooting could be spared the costs of defending lawsuits. By authorizing a fund to accept claims over several years, individuals with latent physical injuries or illnesses that take time to develop also could be compensated. Risk cannot be eliminated Thinking about long-term solutions to address the issue of compensation for persons injured or killed by acts of mass violence is important. The real world is not like a post-event lawsuit that focuses only on whether a particular location could have been made "safer." In the real world, the question is really whether the world itself can be made safer. FBI data shows that the vast majority of active shootings 2000-2017 happened in locations that are open to public access:

• Commerce (businesses, shopping malls), 42% of active shooting events
• Schools (pre-K to 12, institutions of higher education), 21%
• Open space, 14%
• Government, 10%
• Residences, 4.8%
• Houses of worship, 4%
• Healthcare facilities, 4%

If active shooter litigation continues to propagate, more and more security measures are bound to be imposed by either governmental or private entities. The risk will never be completely eliminated, but the way we live and interact with each other necessarily will. And the cost for doing so will have additional ripple effects that may have profound effects on all our daily and heretofore routine activities. See also: The New Face of Preparedness   There are no perfect solutions for the societal problem of shootings, but we ought to fix what we can. Sparing victims the burden of litigation and providing fund-based compensation seems to be a logical approach to consider.

Sales is changing. That's a fact.

If your agency is still picking up the phone and hoping for the best, things probably aren't going to turn out the way you imagined.

The real future of insurance lies in leveraging the power of smart technology to streamline the sales process, increase conversions and have more productive agents and brokers.

Sounds like a dream for your business, right?

Every agent and broker wants to be able to sell more efficiently, hitting the right customers with the best products for their needs, and not waste time. Operating this way lets sales professionals shine and provides excellent customer service — something consumers expect today.

So how do you get there?

One way is through the right CRM system. These systems work in three main areas, which we're going to cover in this post:

1. Offering sales insights
2. Boosting productivity
3. Providing flexibility during the sales processes

Smarter Sales Via AI-Powered Sales Insights

Consumers today expect a lot more from brokers and agents than ever before. It's not enough to provide some information and call it a day.

Nope, consumers can get that part done on their own. Thanks to the internet, most consumers have already spent some time researching online and finding the basics. Now, what they are interested in is getting deeper insight and information from sales professionals.

Consumers want to know how a particular product is going to affect their business, where they will be able to see value in their investment and if customer service will continue after purchase.

See also: Strategist’s Guide to Artificial Intelligence  

The salespeople who are getting the best results are those who have seen this shift and have adjusted their approach to leads with this in mind. In fact, after analyzing almost 1 million sales calls, Gong Labs found the best performing "superstar" sales representatives talk about business and value 52% more than their peers.

That focus from merely highlighting features to deeply providing value on how a product or service can help their business can make all the difference when it comes to closing deals.

One area that is helping to drive this shift toward discussing the business and value is through sales insights. Tools today can use AI, predictive analytics and automated insights to offer agents and brokers data from lead scoring to opportunities for cross-selling and upselling customers.

Plus, integrated platforms allow for workflows to be managed across one system, removing back office backlogs and data silos that can get in the way of closing deals. Now, an agent can look at leads and use a data-driven approach to determine which are most likely to close, maximizing their potential.

Faster Sales Via Productivity-Boosting Features

When it comes to sales, downtime is not a good thing. After all, being as productive as possible accelerates the process of closing deals.

And yet, a study by Salesforce found only 36% of the average salesperson's week is spent selling.

As you can see from the chart, the majority of the time gets dedicated to administrative tasks, service tasks, meetings and traveling.

This is not a sustainable formula for the future of insurance agents and brokers (or sales in general).

The best agents and brokers are also the most productive. They keep track of their leads and customers and are quick to spot any potential issues, such as deals that are slowing down. They also know when to suggest action.

No, this isn't a unique gift; instead, top brokers and agents know how to analyze the data by utilizing the right tools. Here's where actionable intelligence can help streamline processes and boost productivity, providing sales professionals with the information they need to prioritize the most promising opportunities.

CRMs that utilize actionable intelligence and workflow automation can update and append activity records and call notes, automatically update the sales pipeline and even configure real-time prices and quotes for customers.

Timeliness matters. After all, in a survey from Demand Gen, 72% of respondents said the timeliness of a vendor's response to a quote was very important. When brokers and agents can come back with accurate quotes generated with a few clicks within minutes, it makes a big impression on leads and a huge difference in close rates.

More Flexible Sales Processes

It's rare to find two different insurance businesses that sell in the same way. Companies have their own processes, methods and even brand culture that differentiates one from another, especially when it comes to sales.

With that being said, flexibility in the sales process is essential. A management system that is too rigid can hinder the opportunities for some brokers and agents while having zero focus on the workflow and see a dramatic increase in employee turnover. Both need to be avoided at all costs.

Here's where introducing a new management system that offers data-driven insights can help provide the flexibility needed without the potential for critical data to slip through the cracks. Automated systems pull data from every corner of the platform consistently and in real time, giving brokers and agents access to lead scores, upsell and cross-sell potential, red flag issues and retention rates.

All of this information can be used in many ways.

The data can be used to populate customizable forms and reports, which can provide leads with policy details, for example. Plus, information is accessible by agents and brokers as well as the back office and management, removing bottlenecks in the system and allowing the necessary parties to get involved at a moment's notice to move a lead through the pipeline or save a sale.

See also: The Most Important (and Overlooked) Tech  

Flexibility also matters when it comes to customer service. Here is where smart CRM systems can make a massive impact. Studies have shown that companies embracing technology such as predictive analytics see much better results on everything from customer lifetime value to average profit margin per customer.

Numbers like these are essential when you consider that customer retention and upselling to existing customers are some of the best ways to increase revenue.

Having flexibility in the sales process, thanks to better systems and data, can not only convert new customers but keep existing customers happy and coming back for more.

The Bottom Line

The future of insurance is here, and it rests with automation, predictive analytics and AI-powered tools.

The sales professionals who are ready to go all in on it are those who are poised to fully take advantage of the potential and benefits not only offered to them but to their customers, as well.

Blockchain and smart contracts have enabled the development of new approaches in the insurance industry, as they begin to replace outdated business models (with excessive paperwork, communication problems, multiple data operating systems and duplication of processes and the inability of syndicates to mine their data). By digitizing payments and assets—thus eliminating tedious paperwork—and facilitating the management of contracts, blockchain and smart contracts can help cut operational costs and improve efficiency. Smart contracts also allow for automation of insurance claims and other processes as well as privacy, security and transparency. It is estimated that roughly one-third of blockchain use cases are in the insurance industry.

How Blockchain Is Used in Insurance

How will blockchain and smart contracts transform the insurance industry?

• Quick and efficient processing and verification of claims, automatic payments—all in a modular fashion, thus minimizing paperwork.
• Transparency, minimizing fraud, secure and decentralized transactions, reliable tracking of asset provenance and improving the quality of data used in underwriting. Besides improving efficiency, this also reduces counterparty risks, ensuring trust and safety both from the insurer's and customer’s perspective. By computing at a network, rather than individual, company level, the consumer is reassured that the process was completed appropriately and as agreed upon. From the perspective of the insurance company, this fosters trust, as well, and encourages consistency, as the blockchain provides transparent and permanent information about the transactions.

The insurance industry has traditionally been associated with tedious administration, paperwork and mistrust; the incorporation of blockchain, however, has the ability to transform this image by bringing operational efficiency, security, and transparency. The long-term strategic benefits of blockchain are thus clear.

Top insurance blockchain projects:

AIG (American International Group) – Smart contract insurance policies HQ: New York Description: AIG, in conjunction with IBM, has developed a “smart” insurance policy utilizing blockchain to manage complex international coverage. Blockchain network: Bitcoin Deployment: In June 2017, AIG and IBM announced the successful completion of their “smart contract” multinational policy pilot for Standard Chartered Bank. It is said to be the first such policy to employ the blockchain digital ledger technology.

Fidentiax - Marketplace for tradable insurance policies HQ: Singapore Description: As “the world’s first marketplace for tradable insurance policies,” Fidentiax hopes to establish a trading marketplace and repository of insurance policies for the masses through the use of blockchain technology. Blockchain network: Ethereum Deployment: Fidentiax succeeded in raising funds for the project through its Crowd Token Contribution (CTC, aka ICO) in December 2017.

See also: How Insurance and Blockchain Fit

Swiss Re – Smart contract management system HQ: Zurich, Switzerland Description: Swiss Re, a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer, has partnered with 15 of Europe’s largest insurers and reinsurers (Achmea, Aegon, Ageas, Allianz, Generali, Hannover Re, Liberty Mutual, Munich Re, RGA, SCOR, Sompo Japan Nipponkoa Insurance, Tokio Marine Holdings, XL Catlin and the Zurich Insurance Group) to incorporate and evaluate the use of blockchain technology in the insurance industry. The Blockchain Insurance Industry Initiative (B3i) hopes to educate insurers and reinsurers on the employment of the blockchain technology in the insurance market. It serves as a platform for blockchain knowledge exchange and offers access to research and information on use case experiments.

As of yet, there have only been individual company use cases in the industry. B3i is working to facilitate the widespread adoption of blockchain across the entire insurance value chain by evaluating its implementation as a viable tool for the industry in general and customers in particular. The initiative envisions efficient and modern management of insurance transactions with common standards and practices. To this end, it has developed a smart contract management system to explore the potential of distributed ledger technologies as a way to improve services to clients by making them faster, more convenient and secure.

B3i was launched in in October 2016. On Sept. 7, 2017, B3i presented a fully functional beta version of its blockchain-run joint distributed ledger for reinsurance transactions. On March 23, 2018, the B3i Initiative incorporated B3i Services company to continue to promote the B3i Initiative’s goal of transforming the insurance industry through blockchain technology.

Sofocle – Automating claim settlement HQ: Northern Ireland, U.K. Description: Through smart contracts, AI and mobile apps, Sofocle employs blockchain technology to automate insurance processes. All relevant documents can be uploaded by customers via mobile app, thus minimizing paperwork. Use of smart contracts allows for a far more efficient and faster settlement process. Claims agents can verify insurance claims, which are recorded on the blockchain in real time. The smart contracts allow for verification of a predetermined condition by an external data source (trigger), following which the customer automatically receives the claims payment. Blockchain network: Bitcoin

Dynamis – P2P Insurance HQ: U.K. Description: Dynamis’ Ethereum-based platform provides peer-to-peer (P2P) supplementary unemployment insurance, using the LinkedIn social network as a reputation system. When applying for a policy, the applicant’s identity and employment status is verified through LinkedIn. Claimants are also able to validate that they are seeking employment through their LinkedIn connections. Participants can acquire new policies or open new claims by exercising their social capital within their social network. Blockchain Network: Ethereum and Bitcoin Deployment: The goal of Dynamis is the creation of a decentralized autonomous organization (DAO) to restore trust and transparency in the insurance industry. Its community-based unemployment insurance employs smart contracts and runs on the Ethereum blockchain platform. Using social networking data and validation points, Dynamis verifies a claimant’s employment status among peers and colleagues. It also depends on Bitcoin-powered smart contracts to automate claims.

Conclusion

Recognizing the benefits of blockchain and smart contracts, the insurance industry has begun to explore their potential. With the traditional insurance model, validating an insurer’s claim is a lengthy, complicated process. Blockchain has the ability to combine various resources into smart contract validation. It also offers transparency, allowing the customer to play an active role in the process and to see what is being validated. This fosters trust between the insurer and the customer.

Despite the obvious benefits of blockchain for insurers, reinsurers and customers, the industry has yet to adopt blockchain on a large scale. The primary reason for this is that blockchain adoption has until now required in-depth knowledge and skills in blockchain-specific programming languages. The limited number and high cost of hiring blockchain experts have rendered the technology out of reach for many businesses in the industry. Without access to the technology, exposure to blockchain and the ability to reap its benefits will remain limited for insurance companies.

How can these obstacles be overcome? The key is accessibility to enable all parties within the insurance ecosystem to reap the benefits of blockchain and smart contracts. There is a dire need for a bridge between the blockchain technology and these industry players. This is the role that the iOlite platform fulfills. iOlite provides mainstream businesses with easy access to blockchain technology. iOlite is integrated via an IDE (integrated development environment) plugin, maintaining a familiar environment for programmers and providing untrained users simple tools to work with. The iOlite platform thus enables any business to integrate blockchain into its workflow to write smart contracts and design blockchain applications using natural language.

How it works? iOlite’s open-source platform translates any natural language into smart contract code available for execution on any blockchain. The solution uses CI (collective intelligence), in essence a crowdsourcing of coder expertise, which is aggregated into a knowledge database, i.e. iOlite Blockchain. This knowledge is then used by the iOlite NLP grammar engine (based on Stanford UC research), the Fast Adaptation Engine (FAE), to migrate input text into the target blockchain executable code.

See also: Blockchain – What Is It Good for? 

The future of blockchain in insurance With a clear direction of blockchain adoption for the future, insurance companies will be forced to adapt or be left behind. The adoption of blockchain by the insurance industry is no longer a question of if but how.

The General Data Protection Regulation (EU) 2016/679 (GDPR) revolutionizes the data protection regime and significantly affects how organizations worldwide collect, use, manage, protect and share personal data that comes into their possession. As personal data increasingly represents an important new class of economic asset for organizations, the regulatory environment across European member states is undoubtedly shifting, and regulators have greater powers of enforcement. Aon and DLA Piper’s guide "The price of data security," reviews the insurability of GDPR fines across Europe, which can reach up to €20 million or, if higher, up to 4% of a group's annual global revenue. The scale of these fines has understandably generated concern in boardrooms. GDPR replaces a regime under which fines for a data breach were limited and enforcement actions infrequent. Moreover, the consequences of GDPR noncompliance are not limited to monetary fines. There are also the costs associated with noncompliance. These costs, potentially resulting from a data breach, could include, legal fees and litigation, regulatory investigation, remediation, public relations and other costs associated with compensation and notification to affected data subjects. Furthermore, the potential damage to an organization’s reputation and market position can be significant. The guide also looks at insurability of costs associated with GDPR non-compliance, including litigation, investigation and compensation, as well as the insurability of non-GDPR regulatory fines. It highlights that there are currently only a few jurisdictions in Europe where civil fines can be covered by insurance, and, even then, there must be no deliberate wrongdoing or gross negligence on the part of the insured. Criminal penalties are almost never insurable. GDPR administrative fines are civil in nature, but the GDPR also allows European member states to impose their own penalties for personal data violations. See also: Data Security Critical as IoT Multiplies   Key findings include:

• GDPR fines were found to be insurable in only two of the countries reviewed – Finland and Norway;
• In 20 out of 30 reviewed jurisdictions, GDPR fines would generally not be regarded as insurable, including the U.K., France, Italy and Spain;
• In eight of the jurisdictions, it is unclear whether GDPR fines would be insurable. In these jurisdictions, specific details around individual cases, for example the conduct of the insured and whether the fine is classed as criminal, will need to be considered.

The role of insurance The magnitude of GDPR fines means organizations are keen to know whether these fines can be insured. Typical cyber insurance policies only insure fines when “insurable by law” and stipulate that the insurability of fines or penalties shall be determined by the “laws of any applicable jurisdiction that most favors coverage for such monetary fines or penalties.” Organizations also need to consider other costs and liabilities that could result from GDPR non-compliance. Given the size of the potential financial impact of GDPR non-compliance, it is important for organizations to understand how the insurability of fines, legal and other costs and liabilities following a data breach is approached in different jurisdictions. While the insurability of fines may be limited, insurance forms a key component of an organization’s GDPR risk management strategy to manage costs associated with GDPR noncompliance and resulting business disruption losses. In addition to insurance, there is significant business advantage to taking privacy and data protection seriously. Properly securing the data you hold is critical, but a robust data retention strategy is essential. The scope of GDPR is broader than most insurance policies, which are often triggered by privacy or security incidents, whereas GDPR violations can also be triggered by non-compliance separate from a privacy or security incident. To the degree an existing insurance policy is intended to cover wrongful collection or usage of private data and cyber-related regulatory fines, penalties and assessments, the same intent should apply with respect to GDPR. Similarly, to the extent an existing insurance policy excludes wrongful collection or use of private data and excludes cyber-related regulatory fines, penalties and assessments, the same should apply with respect to GDPR. Reviewing GDPR preparedness on an enterprise basis can increase an organization’s overall cyber resilience and help to reduce their total cost of risk – from insurance. See also: Global Trend Map No. 12: Cybersecurity Next steps There is no doubt that GDPR is a continuous challenge for organizations, but there are steps that you can take to help manage the potential impact through risk governance, insurance review and incident response. Risk governance

• Carry out a security audit to check personal data is secure against unauthorized access or processing
• Put in place a plan for ensuring continuous monitoring and follow up of data compliance efforts
• Ensure that contracts with all third-party processors contain at least the minimum terms stipulated by GDPR
• Adopt a privacy-by-design methodology when initiating projects or developing tools

Insurance review

• Ensure adequate cyber insurance coverage is in place
• Review your existing insurance coverage for GDPR noncompliance, especially fines, penalties and lawsuits, with assistance from qualified coverage counsel

Incident response

• Ensure you have an incident response plan in place, including data security breach notification procedures
• Review your existing enterprise-wide incident response plan to ensure that it incorporates escalation plans and nominated advisers covering all required stakeholders. This includes business operations, legal, PR and key third parties such as IT service providers.

Access the complete findings of the guide here.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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