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 Cycle Slowdown No. 1: Outdated Processes During the last few decades of the 20th century and into the 21st, speeding up the product development cycle wasn’t on most P&C insurers’ to-do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.

The first time I logged in to the internet, I had a dial-up modem and a large desktop computer with tower, a separate keyboard and giant speakers. After the dial tone, there were  squeaks and honks as the computer took its time logging in. Then the words flashed across the screen: “You’ve Got Mail.” It was an iconic moment for me and one that millions of people around the world would experience in their own time. Then there were cellphones. You could literally talk to anyone anywhere, as long as there was a signal and you had saved some serious money. Later, smartphones were developed and once again changed the playing field. I found myself able to download apps that I didn’t know I needed, check my bank account or the status of my Amazon package and update my status from my phone – reaching all my friends no matter their or my location. Long gone were the days of dial-up and slow connection speeds. Now, I find myself refreshing when my phone doesn’t access the site I want after 15 seconds. All these developments in technology and society provided the finance and insurance industry with tremendous challenges. While other industries built new revenue streams on top of the internet and digital infrastructure, a lot of insurance companies are struggling with providing the most basic digital services to their customers. And it’s about to get worse. 5G – a new form of mobile internet – is going to accelerate things. A lot. 5G means high-speed mobile internet There are a lot of questions surrounding 5G services: What does 5G mean? How fast is it? When will it launch? Probably the biggest question surrounding 5G services is: How will we and our customers use it? One of the most important things to know about 5G services is that it will most likely bolster economies worldwide. The website Innovator cited a report by IHS Markit and Research Group that predicts “by 2035 5G will create 22 million jobs globally, generate $3.5 trillion in direct economic activity and fuel sustainable long-term growth to global real GDP.” 5G is a game changer, just like the internet, computers, motor vehicles, and the wheel. It will change the world as we know it. What does 5G mean? How fast is it? When will it launch? Techopedia says: “Fifth-generation wireless (5G) is a wireless networking architecture built on the 802.11ac IEEE wireless networking standard, which aims to increase data communication speeds by up to three times compared with its predecessor, 4G.” Reports vary as to how much faster 5G will be; some reports say 10x faster, and other reports indicate that it could be 20x faster or more. Much of the improvement will have to do with locations and service providers, but it’s going to be a large jump. We may have to wait a little, but this train has left the station – and it’s not coming back. While 5G operators are beginning to roll out their systems this year, most markets won’t be up and running until 2019, and more likely 2020. See also: What Will Operations Look Like in 2028?   For retail, that sounds far away. For the insurance industry, with long planning cycles and gigantic project portfolios, that means “tomorrow.” How will we use 5G? Many are questioning what the purpose is of faster service, especially those who are content with 4G services. 5G goes beyond the mobile phone user. While users may see a boost in service (especially in downloads and streaming), 5G technology is going to improve how the world operates. Users will have increased connectivity. Apps for which heavy computers are now necessary could transfer tremendous amounts of data quickly, probably providing digital services we can’t imagine today. With a smart 5G strategy, the insurance companies could expand One special case for the insurance industry: 5G technologies are going to streamline the Internet of Things (IoT), especially for consumer usage. So, after mobile internet, smart phones and 4G changed the way customers consumed, 5G is about to change everything again. Right now, our smartphones can talk to individual devices, but with 5G technology speeds we can further streamline these smart devices and achieve breakthroughs where they speak to each other instead. Imagine if your refrigerator could tell your oven when your steak had finished defrosting, and the oven automatically started pre-heating! Imagine that an oven could warn the customer that crucial parts are overheating, and a fire is likely. Imagine that an insurer informs the customer and that he can act on the information. Imagine how the customer would fall in love with his carrier or agent after he saves the customer's house? In addition to general consumer usage, 5G is going to make a huge impact in industry and commercial insurance. With 5G technology, we will be able to track shipments in real time, upload information from doctors' offices instantly and watch videos everywhere, without having to consider the bandwidth. Autonomous cars may become a broad reality, as they can generate real time data with which to operate. Drones will be able to provide better feedback and travel farther. Industry and manufacturing automation can improve with smart factories and the use of artificial intelligence. Currently, there are some factories using artificial intelligence to trouble shoot designs, and IoT technology to determine when machinery needs servicing. With 5G technology, these types of programs can be adopted by more companies and expanded to further suit the manufacturing needs. All of this has tremendous impact on calculating risk and preventing claims – the core of our industry. With smart vehicles being so much more efficient, and safe, we can expect to see insurance rates drop, according to an article on Innovator. We can also expect to see faster transactions and approvals. With a wealth of information at our fingertips, it may only be a matter of time before purchasing a home goes from a months-long ordeal, to something that takes place in a weekend (or faster) or even maybe without a bank at all. “5G will impact every industry – autos, healthcare, manufacturing and distribution, emergency services, just to name a few. And 5G is purposely designed so that these industries can take advantage of cellular connectivity in ways that wouldn’t have been possible before, and to scale upward as use of 5G expands" -- Don Rosenberg shared this thought as part of the World Economic Forum. Rosenberg also said 4G led to innovations like Uber and Spotify. How will 5G affect, say, Facebook's business model? What other changes have yet to be imagined? See also: How Digital Platform Smooths Operations   The world is constantly changing, though some “groundbreaking” innovations do little to change it. Then something like 5G services come along and completely change the foundation of how our world operates. 5G will change us, on a worldwide level. What to do? Don’t love your products – love your customer. Instead of fearing the next challenge after the landline-based and mobile internet, why should we not use this as an opportunity to expand our value chain? Why shouldn’t we put ourselves between the customer and product and service providers instead of leaving this interface to the customer to the old and emerging tech giants from California and China? Why shouldn’t we provide our customers digital products and services that relieve them of friction and pain in their daily lives? Why should not we use 5G as an opportunity to get ahead and become a trusted companion in the daily life of our customers? It’s still our choice.

GDPR (General Data Protection Regulation) took effect in Europe on May 25 --- and is expected to create a ripple effect that affects U.S.-based organizations, regardless of whether they have European operations. This is the most significant data privacy regulation ever – the EU views this as a human rights issue. The recent Facebook issues will accelerate GDPR acceptance here in the U.S., and it is up to insurance agents and carriers to be sure they are in compliance with all applicable laws and regulations in the U.S. and in Europe. GDPR was enacted to further protect the rights of individuals in controlling how their personal data is shared. Many expect further regulations to come to the U.S., along with stiffer financial penalties for those organizations that do not comply. But there are those in the insurance industry who see this as the “starting gun” not “the finish line.” The reality for most U.S. business, insurance companies and others is that GDPR will become the global standard for how businesses must handle consumer data, and it will set new benchmarks for consumer data privacy. GDPR will have a positive impact for both the business/marketer and the consumer. This can become an incredible opportunity for U.S. companies that choose to embrace GDPR. Instead of something scary and negative, it can become a great opportunity that they can use to challenge themselves to build tools and processes to maintain smarter marketing and more personalized and predictive communications with customers. As consumers begin to understand the advantages to them, they will likely prefer to work with and share their consumer data with compliant companies. Rather than waiting and wondering, companies need to take the steps necessary to comply. If it’s great for the customer, and if businesses lead the way, it will end up being great for the company. See also: How GDPR Will Affect Insurance  First, insurance companies will need to take steps to comply with the legislation so they will not be open to stringent financial penalties. They must begin by working with their legal team and GDPR experts to appoint a company representative who is established in an EU supervisory country. This person is the point of contact for all communications with the GDPR supervisory body. Not all organizations need one, but if it’s required, appoint a Data Protection Officer who has the expertise needed. This person can help redesign what consent and disclosure looks like for customers. Consumers will need to check a box (or its equivalent) for every single use case of their data. They need to be able to select those they agree with and decline those they don’t, and companies need to be able to comply and track their preferences in their systems. Insurance companies also need to consider third-party providers, as well. If a third party is not able to prove GDPR compliance, the EU work it does is illegal. Companies should audit their third-party providers and reevaluate service level agreements. Companies also need to work within the GDPR regulations and still be able to have a “good client experience” and grow and find and retain new customers with the new law that is a game changer for the way they do business now. Moving forward, companies will need to be much more aware of their audiences’ tolerance for marketing. Companies that have been careless by oversaturating their audiences with irrelevant marketing will lose the privilege to market to those customers. Consumers want information and marketing that is timely and relevant. Technology companies have tools available for clients that account for marketing saturation modeling and use dynamic marketing workflows. Their audiences should receive the “Goldilocks” amount of marketing – not oversaturated, but enough to maintain brand awareness and positive disposition when they are in the position of making a buying decision. The positive impact for insurance industry will be that GDPR compliance forces companies to implement data storage and processing and marketing “best practices.” Once a consumer asks to be forgotten, companies must remove all the person's data. Not just take people off an email list, or a call list, but delete all their preferences, history and contact information. Businesses that comply with GDPR will reap the benefits of better consumer confidence. Additionally, the practice of impeccable data security demands migrating customer data to the latest network technology. The long-term benefit of storing and running data using the best and most current technology reduces overall digital footprint. But how companies use technology to retain brand awareness and win and keep customers without becoming a nuisance at a permanent cost will be a challenge. Achieving and retaining brand awareness without irritation becomes a balance of just the right messaging, via the right channel at the right time. See also: How to Avoid Being Bit by GDPR (Part 1) We are proponents of human engagement and realize that all the AI in the world cannot replace human connections. We also realize that the human connection is invaluable and that marketing communications coming from a trusted adviser versus a faceless organization elevates the message. More than ever, companies need to rely on marketing acceleration models that induce a repeatable pattern of activity, garnered from AI and machine learning to create marketing workflows that enable individuals at a company to have personal connections, smarter marketing, more personalized and predictive customer experiences and better sales outcomes. Technology can help companies achieve one-on-one interactions and make them more confident that what they say and show is relevant and tailored to their client.

We're going to try something new this week. Our CTO, Joe Estes, has built some exceptional chat capabilities into our Innovator's Edge platform, and I'd like to see if we can't use them to jointly make progress on a crucial topic: How do we measure our progress toward innovation? How do we kill bad ideas as quickly (and inexpensively) as possible while making sure the good ideas get identified and nurtured and produce the biggest possible wins for the company? 

Our mantra at ITL is, "Nobody is as smart as everybody," so we'd like to get everybody involved in the discussion, which will be guided by a powerhouse group of experts on the topic and which will last for at least the next week. To join us, if you aren't already a registered user of IE, just click here and enroll. (It's quick and free.) Then click here to go directly to the group, called "KPIs: How to Use Analytics to Measure and Drive Innovation." Click join group and join the conversation.

Please let me know at paul@insurancethoughtleadership.com if you have any problems or questions.

We'll be joined by:

--Michael Schrage, a researcher at the MIT Media Lab and a prolific author on innovation.

--Amy Radin, who has a distinguished career at several financial services firms, including as CMO at AXA, and who is the author of the forthcoming "The Change Maker's Playbook: How to Seek, Seed and Scale Innovation in Any Company."

--Guy Fraker, ITL's chief innovation officer, whose decades in the insurance industry include some of the most successful innovation programs yet produced.

Much more detail on our guides, plus materials that are the basis for the discussion, are available inside IE.

I think this will be a great discussion. I hope you'll join us.

Paul Carroll
Editor-in-Chief

Geographic information systems (GIS) may conjure up images among insurers of an old technology that tends to be used by a few passionate specialists at their company. It is true that the technologies for mapping and visualization have been around for decades. (I first saw a demo of GIS for insurance in 1989, and the potential blew me away). It is also true that usage in insurance is often limited to a few high-value areas of the business. Although GIS can hardly be called an emerging technology – much like AI, which has also been around for many years – it could be considered a resurging technology. This is a new era for GIS. The core GIS technology platforms have been extended to enable solutions for what many now call location intelligence. There are some good reasons why insurers should be considering an enterprise location strategy as an important element of their overall business strategy.

• Ease of Use: This might seem counterintuitive because the use of GIS systems traditionally required individuals with deep skills in data, geography, demography and other sciences. But today, the user interfaces have been modernized, templates and apps abound and business users are able to leverage the technology without difficulty.
• Open Platforms: The sharing of maps, apps and data related to GIS solutions is extensive. Collaboration among government agencies, businesses and individuals is in high gear, especially because location intelligence-based solutions are often leveraged to address important societal issues. A prime example of this is the collaboration that occurs during natural disasters.
• New Data and Maps: The spread of connected sensors and devices across the planet has produced many new data sources, enabled the creation of new mapping layers and dramatically increased precision. A connected device might be indoors or outdoors, stationary or moving, urban or rural and able to collect highly accurate data about objects and what is happening to and around them.
• New Spatial Technologies: The technologies for indoor mapping, 3D, temporal analysis and many other aspects of spatial technology continue to advance rapidly. In addition, the scale and speed of real-time processing open up opportunities to capitalize on the technologies.

“When my mom passed away, I was aware she had a small life insurance policy. When I started the claims process, I had to keep resubmitting documents and kept getting asked to complete more documents. Finally, after four months of going back and forth, when the money was about to be reimbursed, I wanted the money transferred to my account as direct deposit, but my only option was a check. I’m lucky I didn’t need the money right away for expenses, or I wouldn’t know what would happen.” Will you consider purchasing life insurance policy from the insurer, I asked? “Hell no,” was the answer. I was giving a presentation a few nights ago on Benekiva and heard that story from someone in the audience. Throughout my journey with Benekiva, I have been intrigued by all the stories I've heard about the nightmares that beneficiaries have faced. As a new parent and owner of a life insurance policy, I know that ensuring the well-being of our family is critical. The thought of my daughter having to go through a hellish experience to get the money makes me furious and want to act now to fix the problems. After several years of researching and analyzing the life insurance claims processes, there are four main problems our Benekiva team has identified that have prevented life insurance companies from embracing digital transformation in their claims processes: Outdated Processes: The life insurance industry is a 258-year-old industry, and, though claims may make it in the top 10 list of issues for the CIO, the focus for the company as a whole tends to be on generating revenue. The claims staff works overtime to come up with various duct-tape systems filled with Excel spreadsheets, Access databases or various systems to balance the needs of regulators, old processes (this is how we have always done things) and beneficiaries. Beneficiaries wind up supplying the same information in multiple documents, sending the same documentation multiple times and chasing down faxes/mails for next steps. See also: How IOT Will Change Claims Process   Legacy Systems: On average, the claims staff touches four to 10 systems to process one claim. The claims module is most likely attached to policy administration systems in which modules don’t get updated often. To innovate claims processes gives CIOs headaches because they have to rip apart the monolithic and old systems that run the entire business. The mentality – “If it ain’t broke, don’t fix it” -- creeps in. Unclaimed Claims: There is more than $14 billion of unclaimed life insurance policies, and the number keeps growing $1 billion a year. Why is that? Ask yourself one simple question: How many times have you been asked to update your beneficiaries? Ask yourself another simple question: Have you informed your beneficiaries about policies you have for them? One of our co-founders could have been another drop in the bucket for unclaimed claims. He was at his father’s funeral, and one of his father’s co-workers came to give Jason his condolences. The co-worker said, “If you need help with paperwork, please let me know.” Jason said, “What paperwork?” He learned that his dad had a life insurance policy. Laws Changing: Each state and country has its own governing laws that need to be abided with when processing claims. One state may require a death certificate while another state may ask for additional documentation. How might claims departments innovate in the face of outdated processes, legacy systems, data that needs clean-up and changing regulation? There are three key recommendations: Keep Learning – Insurtech is HOT! Books are being written, conferences are popping up and fresh faces (like me) are appearing. Keep reading, attending and talking to learn what is happening in the space and how to navigate change. Keep Seeking – Insurtech is HOT! Which means, there are startups that are popping up to help solve complex problems. Benekiva is my startup with three other founders, and we are on a mission to help bridge the gap between life insurance companies and the intended beneficiaries, through beneficiary management and claims automation. What is cool about us – we can work with legacy systems, so you don’t have to pour millions into the work. There are other insurtech startups that are solving other pain points. What’s great about startups – they are small, nimble and hungry, which equates to: They will do whatever you need them to do…to a certain extent. Partnering with startups can leapfrog your innovation efforts and their startup mentality may rub-off on your staff. Keep Trying – You eat an elephant one bite at a time. I see claims processes as a big elephant, and the only way to improve is by “bitsizing.” What is one area of claims that can be improved? Identify that and try to find or partner up on a solution. Remember: Insurtech is HOT! I’ve seen organizations want to tackle the “elephant,” and unfortunately, those projects can take two years and longer and your strong talent is burned out at the end. What you get at the end is an “old” system – two years is a long time in tech. See also: Making Life Insurance Personal   To innovate in claims, the C-suite needs to make claims a priority and see it as a customer-experience issue. My five-year vision is to have the following experience when giving presentations about Benekiva: “Bobbie, I just submitted a claim, and I instantly received notification that money is available in the account. I also received a text message from an adviser whom my dad was using and who is going to help me plan for my future.”

The notion of paying out an annual stream of income can be traced back to the Romans. It’s a simple notion and one of the earliest forms of wealth management. Today, the simplicity of that notion has been replaced by the complexity of the annuity product. Rooted in a time way before the iPhone, the conventional annuity looks tired in the digital world. It’s an old world approach long overdue for a refresh and reinvention. To explore this further, Rick Huckstep spoke with Matt Carey, CEO and co-founder of Blueprint Income. It’s a different world now  The baby boomers are retiring. When they made their plans for the future, the world was analog. Individual advice was based on human judgment, the personal touch and “trusted, expert” relationships. This was how the world of wealth management worked pre-internet. However, today, for many U.S. boomers, the prospect of actually giving up work is still some way off. This recent U.S. study by the Insured Retirement Institute reported that as many as two in five of American baby boomers have nothing saved for their retirement. Increased longevity and the massive decline in employer pensions in the 21^st century are major factors behind the prediction that as many as half of Americans will not be able to maintain their current lifestyle. The point is that the baby boomer generation, and Gen X for that matter, have shifted from creating retirement wealth through a lifetime of work to protecting what they have for now. Which means that the wealth management target client has changed. It’s no longer a baby boomer market, or a Gen X market for that matter. Now it’s the millennials who are the core client (target) base for wealth management. With 40% of the global adult population under the age of 35 years old, this is a generation who has only known a digital world in adult life. Rise of the affluent millennial But it is more than a digital divide that separates the generations. Millennials’ attitudes and behaviors to creating their own wealth are different, too. These differences are shaped by factors such as: debt-funded education, greater levels of social conscience and engagement, a broader world view and higher levels of self-employment. Which is a challenge for the wealth management industry as it adapts to a different customer profile. Building a wealth management proposition for the millennial generation has to reflect the different demographics compared with baby boomers and Gen X. See also: How Insurance Fits in Financial Management There’s tons of research out there that reports how attitudes and behaviors have changed over the generations, even back to the silent generation. In this 2015 survey of more than 9,000 millennials across 10 countries by LinkedIn and IPSOS, they found;

• millennials expect to be financially able to travel and see the world,
• 60% expected to be wealthy (even though they earn about 20% less than the baby boomers,
• they do not rely solely on wages for their income (trader by day, Uber by night),
• and are more likely to carry debt than Gen X (repaying student debt has replaced saving for retirement),
• nine out of 10 millennials use social networks for input on financial planning,
• as well as being more likely to take advice from family members,
• and are heavily influenced by their peers,
• millennials are half as likely to be married compared with baby boomers at the same age,
• they are seven times more likely to share their personal information with brands they trust.

The financial literacy problem There is another dynamic that is important to consider when looking at how the wealth management industry serves the millennial generation. Financial literacy, or the lack of it! The millennial generation may be more informed than their predecessors, but not necessarily in everything. They are more likely to know who Kim Kardashian is than to understand the impact of inflation on their savings over time. In itself, there’s nothing new in this, but the fact is that the level of financial literacy in the U.S. has been dropping for years. According to survey results by U.S. regulator FINRA, the level of personal finance literacy has fallen every three years since 2009. They found that 76% of millennials lack basic financial knowledge. Which is hardly surprising when only 14% of U.S. students are required to take a personal finance class in school. See also: Raising the Bar on User Experience   The FINRA survey also reported a massive gap between the level of financial understanding and the desire to have one. The survey found that 70% of adults aged between 18 and 39 years old “know they will need to be more financially secure, they just don’t know how to get there.” What is clear from the survey is that this lack of financial literacy is causing stress and anxiety among millennials (who, remember, now account for 40% of the adult population). For the rest of the article, click here.

On Sept. 29, 2017, the Insurance Authority of Hong Kong launched the new insurtech Sandbox, with the objective to test insurtech applications by authorized insurers in a controlled regulatory environment. The infographic summarizes the main features of the initiative and provides insight on the potential benefits as well as the anticipated challenges for the players interacting in the Sandbox.

The compliance and ethics functions within insurance organizations face continued regulatory pressure. But, nowadays, they must also deal with new threat vectors that are shaping a higher-stakes global compliance environment. More and more, investigative journalists are analyzing big data to spot fraud as well as compliance violations. Third-party agencies are increasingly using technology to identify incidents and monitor corporate behavior. Enforcement agency whistleblower programs are motivating employees to speak out about perceived violations. And, rapidly escalating grassroots campaigns, such as the #metoo movement, are making strong corporate culture and rapid-response capabilities even more critical. When these watchdogs form the genesis of a complaint, social media channels and the round-the-clock news cycle can rapidly increase awareness of the incident – in some cases even before the company itself is aware. Compliance functions need the agility to adjust to business changes and to the inevitable surprises inherent in a dynamic business climate. But, without a strong technological underpinning to help them operate efficiently in real time, it will be challenging, if not impossible, to get ahead of new threat sources and changing business dynamics. From dashboards for improved decision-making, to sophisticated tools for monitoring employee compliance, to training informed with data from compliance monitoring, technology-based capabilities are now cornerstones of effective compliance management. By using the best available tools and information to protect their organizations and to scan the horizon for new requirements, trends and risks, compliance functions can keep pace with their organizations’ changing compliance needs. But as a group, insurance sector compliance functions have some work to do on the technology front. According to the PwC 2018 State of Compliance study, only 41% of insurance organizations use policy management technology within the compliance department (compared with 44% across industries and 54% in banking, for example). Just 47% use technology to monitor employees’ compliance with ethics and compliance-related policies and procedures (compared with 50% across industries and 52% in banking). While progress is being made, it lags that of certain other industries. See also: How to Collaborate With Insurtechs   However, our study identified 17% of insurance survey respondents as “Leaders,” where executives were very satisfied with the effectiveness of their organization’s compliance program. This is on par with other industries in the study. The study’s overall Leader group shares a common denominator: Leaders take a more comprehensive and current approach to compliance risk management as enabled by technology. Leaders differ substantially from their peers in many of the operational aspects of compliance risk management, including executing differently in four key ways. Leaders invest in tech-enabled infrastructure to support a modern, data-driven compliance function. Technology helps organizations manage compliance in a dynamic and expansive risk universe. Leaders more often use data analytics tools, dashboards and continuous monitoring than their peers. More than half (54%) of Leaders in the study use data analysis tools, and nearly half have dashboards (49%) and engage in continuous compliance monitoring (48%). The effective use of cloud infrastructure, machine learning, advanced analytics and natural-language processors help organizations quickly analyze vast amounts of data and gain insights into business and customer behaviors, assess potential compliance issues and cost-effectively meet risk and regulatory challenges. Leaders increase compliance-monitoring effectiveness through the use of technology and analytics. Analytics, together with automation technologies, make the continuous monitoring of employee compliance across many areas of the business far more feasible. Two-thirds (66%) of Leaders use technology to monitor employees’ compliance with ethics- and compliance-related policies and procedures. And they more often use technology to monitor specific risk categories, such as fraud, gifts and entertainment, privacy, social media and trade compliance. Leaders are also gleaning more benefits from technology use in monitoring efforts - compared with their less effective peers, they are more responsive and even proactive in mitigating compliance issues. Leaders streamline policy management to increase responsiveness and boost policy and procedure effectiveness. Leaders take several steps to strengthen their policy management. They more often keep their codes of conduct, policies and procedures current and make them easily accessible across the organization. They also more often enable this streamlining through policy management technology, such as GRC tools, and measure the effectiveness of policies and procedures more comprehensively. Nearly two-thirds use technology to facilitate the policy management process. Leaders take advantage of information and technology to provide targeted, engaging and up-to-date compliance training. Leaders’ compliance training and communications are more comprehensive and current. They are often using multiple sources of information to inform and target their training and are thinking creatively about new ways to digitally engage employees in training activities. Leaders' approaches to training positively affect their organizations’ overall risk profile as they aim to minimize activities that potentially place the organization at higher risk. See also: Guide for Insurtech Work With Carriers   Effective compliance risk management must be grounded in strategy and business engagement. Establishing the right tone at the top, assessing compliance and ethics risks and building governance structures that provide high levels of confidence in regulatory matters are all critical to effective compliance leadership. But operational aspects of compliance are where the rubber meets the road. With multiple new, highly motivated watchdogs now providing their own forms of oversight, the case for strengthening compliance risk management through technology is strong. Technology is more critical than ever in building programs that boost compliance program value, better manage risks and drive cost-effective compliance.

Excerpted from MSA's Q1-2018 Outlook Report (June 2018) The insurance industry has been compared to the proverbial frog in the pot of ever hotter water. While things appear on the surface comparable to what they were like 10 years ago, perhaps with some nuanced variations, there appears to be little in the way of differences. Yes, mergers continue happening at the carrier level, and direct insurers are slowly gaining market share, but the band plays on. Industry associations continue holding conventions, insurers, reinsurers and brokers continue their traditions and year-end pilgrimages to London, Monte Carlo, Baden-Baden, NICC and the Aon Rendezvous, and the various other stations still welcome a familiar crowd. But signs that fundamental changes are afoot are becoming ever harder to ignore. In Ernest Hemingway’s 1926 novel, "The Sun Also Rises," there’s a snippet of dialogue that seems apropos: How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.” The primary driver of the change is technology. The less noticeable catalyst, but no less important, is changes in regulatory mindsets. Let’s tackle both. The two most influential market conduct regulators in Canada are readying themselves for technological disruption of the industries they oversee. Quebec’s regulator, the AMF, has publicly expressed that it is "open for business" in terms of insurtech/ fintech under CEO Louis Morisset and Superintendent of Solvency Patrick Déry. FSCO has recently moved to be more flexible within the tight bounds of its mandate, and its successor, FSRA, will be a modern independent agency purposely built for adaptability; it emerges from its cocoon under the guidance of a professional board and the stewardship of its CEO, Mark White, in April 2019. FSRA and the AMF are positioning themselves to allow experimentation via regulatory sandboxes, whereby players can test initiatives in the field. This sandbox methodology is modeled after the Ontario Security Commission’s LaunchPad initiative. See also: Global Trend Map No. 19: N. America (Part 1)   You may not have noticed it, but the regulatory ground in two of Canada’s largest provinces has shifted, and the stage is being set for ever-faster innovation in the Canadian insurtech space. In fact, in conversations with Guy Fraker, chief innovation officer at California-based Insurance Thought Leadership and emcee for the InsurTech North Conference in Gatineau in October, he advises that Canada is being looked at as a regulatory innovation hub by the global insurtech community. Even under the old FSCO regime, Canada’s largest insurer, Intact, pulled off what might be a master stroke in July 2016 when it issued a fleet policy to Uber, providing coverage to tens of thousands of Uber drivers when engaged in Uber activities. So, in one fell swoop, a single insurer swept up tens of thousands of drivers. Intact pulled another coup by partnering with Turo in Canada. Turo is a peer-to-peer car-sharing marketplace that is busy disrupting the sleepy and sloppy car rental industry. This again gives Intact access to thousands of drivers with the stroke of a pen. Further, Intact may be able to leverage the access it has to those drivers to provide full auto coverage and even residential coverages. When these risks are gone, they’re lost to the rest of the market. Striking deals with the likes of Uber and Turo changes the game. In the U.S., Turo partners with Liberty Mutual, and with Allianz in Germany. Uber partners with Allstate, Farmers, James River and Progressive in the U.S. Aviva has pulled off a similar deal in Canada with Uber’s nemesis, Lyft. Further afield, B3i, the industry blockchain initiative has been established with the support of 15 large insurers/reinsurers. It is just starting up, but its mission is to remove friction from insurer/reinsurer transactions and risk transfer. When friction goes, so will costs. It is starting out slowly, but things may change suddenly – reshaping whole segments of the market. In addition to the original 15, the initiative has been joined by 23 industry testers. In the U.S., The Institutes (the educational body behind the CPCU designation) launched a similar blockchain consortium called RiskBlock, which currently counts 18 members:

• American Agricultural Insurance
• American Family Insurance
• Chubb
• Erie Insurance
• Farmers Insurance
• The Hanover Insurance Group
• Horace Mann Educators
• Liberty Mutual Insurance
• Marsh
• Munich Reinsurance America
• Nationwide Insurance
• Ohio Mutual Insurance Group
• Penn National Insurance
• RCM&D
• RenaissanceRe
• State Automobile Mutual Insurance
• United Educators
• USAA

There is talk of establishing a Canadian insurance blockchain consortium, as well. You can hear from leaders of B3i, RiskBlock and parties involved in the Canadian initiative at the NICC in October. Even further afield, if one was to look for an industry that makes the insurance sector look futuristic, one need not look further than the global supply chain shipping industry, with antiquated bills of lading, layers of intermediation and massive administrative overheads. Well, that industry is getting a serious wakeup call thanks to determination and drive of the world’s largest shipping company, Maersk. The company is taking its industry by the scruff of the neck and pulling it into the future whether it likes it or not – long-standing tradition, relationships and methods notwithstanding. First, in March 2017, Maersk teamed up with IBM to utilize blockchain technology for cross-border supply chain management. Using blockchain to work with a network of shippers, freight forwarders, ocean carriers, ports and customs authorities, the intent is to digitize (read automate/disintermediate) global trade. More recently (May 28, 2018) and closer to home, Maersk announced that it has deployed the first blockchain platform for marine insurance called insurwave in a joint venture between Guardtime, a software security provider, and EY. The platform is being used by Willis Towers Watson, MS Amlin and XL Catlin (got your attention?). Microsoft Azure is providing the blockchain technology using ACORD standards. Inefficiencies, beware! Microsoft and Guardtime intend to extend insurwave to the global logistics, marine cargo, energy and aviation sectors. See also: How Insurance and Blockchain Fit   Insurers that find themselves locked out of these types of large-scale initiatives will be left out in the cold. We’re witnessing "SUDDENLY," and we’d better get used to it.