When losses occur during natural disasters, carriers in the $4.5 trillion insurance market understand that — in addition to safety — at the top of policyholders’ minds is how they are going to recover, and how fast. It is at these times that carriers must respond quickly and efficiently to make their policyholders whole again while keeping costs as low as possible. Operating in a cost-sensitive and hyper-responsive market that affects all service industries, even the most sophisticated and progressive carriers often find themselves struggling to effectively deal with the scalability, complexity and unpredictability of managing a local, regional or national adjuster workforce. This typically drives up service costs, hindering service performance and ultimately hurting policyholder satisfaction, particularly in crises. One way carriers can respond quickly and safely — and keep policyholders happy — when natural disasters strike is relying on an on-demand model to supply a scalable and affordable workforce. This article provides an overview of the strain that natural disasters place on carriers and discusses how the on-demand model can relieve pressure by revolutionizing how the insurance industry responds. The Insurance Industry Is Feeling the Strain Since Hurricane Andrew, the industry has shifted from a reactive to a proactive approach. This process is assisted by the development of much more sophisticated technology, fully formulated catastrophe response plans and the realization of the necessity for immediate response. Still, as natural disasters increase in frequency and strength, the insurance industry is feeling the strain. It takes far too long to assess claims and initiate payouts following catastrophes in the current insurance environment. “Waiting six weeks, 12 weeks or more for financial reparations is terribly stressful for policyholders,” says Ryan Kottenstette, CEO at Cape Analytics. “Carriers are striving to do better, and emerging tech companies can help them.” Indeed, the internet, mobile apps, on-demand models, automated estimations, drones and storm tracking technologies are but a few examples of how technology is improving the speed at which insurance companies settle claims. See also: Key Findings on the Insurance Industry   The main struggles for insurance professionals and insurance companies when dealing with large-scale natural disasters like the one-two punch of Hurricanes Harvey and Irma include extended response times and lack of resources. Extended Response Times “A stale claim is an expensive claim,” says John Rollins, an executive with Cabrillo Coastal General Insurance Agency LLC in Gainesville, FL. “The key… is getting to the policyholder and getting some money in their hands so they can begin the recovery process.” Certainly, one of the biggest pain points is time. Anything that slows payouts diminishes their value at the front end of a crisis. “There is a huge number of claims and a limited number of adjusters to handle them,” says Suzanne McCormack, director of business operations at Robert L. McCormack Public Adjusters. “As time goes on, the policyholders become more and more restless because their homes or businesses have been impacted, and they want to get back to their normal lives. People are understandably very emotional having been through the trauma of the disaster, then waiting and waiting to get back to normal.” In addition to the emotional toll that wait times place on policyholders, delays open the door for insurance fraud. “In the past five years here in Utah, catastrophic winds have provided the opportunity for rogue roofing contractors to knock on doors with minor roof damage, claiming that they can help provide a free roof replacement,” says Brent Thurman of Keystone Insurance. “In some cases, the contractor has even removed additional shingles before the claims representative arrives in an effort to have the entire roof replaced rather than a smaller repair. This can be difficult to track during a normal claim load, let alone a time when claims adjusters are overbooked by the sheer volume of claims submitted during a catastrophe.” Lack of Resources Carriers have traditionally understood the value of in-person asset inspections. However, maintaining an infrastructure capable of quickly completing these inspections in any location has become cost-prohibitive for most companies. As expected, during and after Hurricane Irma, many of Florida’s adjusters were still on the front lines in Texas, working on claims made after Hurricane Harvey hit. “I would have to say it’s difficult to find enough inspectors willing to work 12- to 14-hour days seven days a week,” says John Espenschied of Insurance Brokers Group. “Most large insurance carriers are facing thousands of claims daily that need to be inspected. However, there are only so many insurance adjusters around the country, and pulling hundreds away from their regular duties creates a shortage.” Then there is the underlying problem of managing logistics during a crisis. “From a logistics perspective, the biggest issue for the insurance industry will be the ability or inability to ramp up quickly and effectively to appropriately service the volume of claims that have and will continue to be submitted after disasters like Hurricanes Harvey and Irma,” says Dawn Sandomeno, national director of brand management, Procor Solutions + Consulting. “Whether it is the insurance companies having enough trained staff to triage claim intake or insurance adjusters managing a portfolio of claim appointments to visit loss sites — many of which are inaccessible — the capabilities of the industry will continue to be tested.” In fact, as insurers scrambled to get more of the nation’s 57,000 independent adjusters to Florida, it created a bidding war and the promise of a record payday for anyone available. It was reported that some Florida home insurers increased fees paid to adjusters by about 30%. In some cases, adjusters could earn $30,000 for evaluating a single complex property claim. Of course, these unprecedented increases in fees have the effect of increasing the cost of each claim. See also: Why Is Insurance Industry So Small?   The Power of the On-Demand Model We live in an era of immediate gratification where Uber provides rides on demand and Amazon delivers almost any product we desire on the same day we order it. Consequently, policyholders’ expectations for the types of services they want to receive continue to grow more demanding. To respond quickly and safely, carriers can leverage innovative approaches that align business processes from information-gathering to claims adjustment. By further aligning these essential business processes in a real-time, location-based context, carriers will be in a better position to understand and calculate risk while responding during catastrophes in hours, not days. Using workers contracted through an on-demand provider, carriers can get more done more quickly. They have access to a distributed workforce of vetted and trained information gatherers who are ready to be dispatched to the scene of a catastrophe at a moment’s notice. As on-demand options become more accessible, the insurance industry is beginning to realize that some of its traditional processes are less efficient than they need to be. The idea of sending a highly-paid, licensed adjuster to handle every claim scenario, regardless of its complexity, is being questioned. “ During a catastrophe, many claims require only a simple validation of damage. But traditional claims handling processes are over-engineered for such a situation. Why send a highly paid, licensed adjuster when an on-demand workforce can validate the damage immediately for a third (or less) of the cost? Why tie up valuable adjuster resources on simple claims when there aren’t even enough adjusters to handle the more complex situations that do require their level of expertise? This article is an excerpt from a white paper by WeGoLook, a provider of on-demand workforce solutions for the insurance industry and other industries around the world. You can find the full paper here.

Walmart’s acquisition of Flipkart demonstrates both Indian e-commerce’s coming of age and a repetition of history. U.S. giants will spend billions in India because they see huge opportunities, and this will produce a short-term boon for Indian consumers. When the dust settles, though, prices will rise and consumer choices will become more limited than they had been. Foreign companies will mine data and manipulate consumer preferences. They will have once again colonized India’s retail industry. Protectionism for physical goods and services is usually a bad thing, as it limits the incentive to innovate and evolve, stifling a country’s competitiveness and productivity. India’s protected domestic companies became lethargic, offered substandard products and services at high prices, and hobbled India’s economy. In a digital economy, though, things are very different. The value resides in the ideas, which spread instantaneously via the internet. Entrepreneurs in one country can easily learn of the innovations and business models of another country and duplicate them. As core technologies advance, they become faster, smaller and cheaper — and accessible to everyone, everywhere. Startups constantly emerge, putting established players out of business. So, speed and execution are key to business survival and competitiveness. Valuable competition and innovation can arise from within the domestic economy itself, without having to invite foreign companies to the table. Technology-based industries, such as retail, electronics and distribution, that require large capital investments handicap the small players, because money provides an unfair advantage to the larger ones. See also: Copy and Steal: the Silicon Valley Way   The latter can use capital to put emerging competitors out of business — or to acquire them. It is what U.S. technology giants do as a matter of course. Amazon, for example, has been losing money, or earning razor-thin margins, for more than two decades. But because it was gaining market share and killing off its brick-and-mortar competition, investors rewarded it with a high stock price. With this inflated capitalization, Amazon raised money at below-market interest rates and used it to increase its market share. It also acquired dozens of competitors — just as it tried to do with Flipkart. Having become the dominant player in the U.S. e-commerce industry, Amazon has its eye on India. A company that it left in the dust, Walmart, is desperate not to also lose the Indian market. Both are doing whatever they must to own Indian retail and then split the spoils between them. That is why controls are desperately needed on this kind of capital dumping. And such controls won’t reduce competition or throttle innovation. As they did in China, they will stimulate competition and, through that, innovation. Chinese technology companies are now among the most valuable and innovative in the world. In addition to having a valuation that rivals Facebook’s, Tencent’s WeChat e-commerce platform is far more advanced than any rival in the West. Baidu is building highly advanced artificial intelligence (AI) technologies as well as self-driving cars. And DJI (Dà-Jia ng Innovations) has become a global leader in drone technologies. Had China not imposed controls, these companies may not have survived at all. It is probably too late to save Indian e-commerce from modern-day East India Company-style colonization. But there are many other industries in which Indian startups can still lead the world. See also: Too Much Tech Is Ruining Lives With the exponentially accelerating advances occurring in technologies such as sensors, AI, robotics, medicine and 3D printing, practically every industry is about to be disrupted, and there are opportunities for Indian entrepreneurs to create solutions that benefit India and the rest of the world. India urgently needs to wake up and protect its entrepreneurs from foreign-capital dumping. And it needs to provide incentives for Indian — and foreign — companies to invest in its startups, just as China did for its own.

A recent headline read, “Insurers go all-out on mobile, but what comes next is elusive.” But what if the future doesn’t have to be elusive? The article shares some interesting statistics on Canadians’ use of mobile related to insurance purchases:

• 74% begin their insurance research journey online.
• 25% of those who begin their research online use a smartphone only.
• 61% of this segment will immediately abandon a broker’s website if it is not considered mobile-friendly.

And it’s not just Canadians. A January 2018 Pew Research Center study of U.S. consumers found that as mobile devices have become more widespread:

• 77% of Americans go online on a daily basis.
• 43% go online several times a day.
• 26% report they are online “almost constantly” (up from 21% in 2015).

As the article rightly points out, new findings on mobile behaviors like these require insurance and financial services companies to avoid assumptions and dig deeper into the various segments — considering demographics that include lifestyle, employment statistics, income and related buying preferences — in their marketing efforts. However, what’s next doesn’t have to be elusive. Highly effective targeting based on these characteristics can easily be achieved through social media advertising. As we shared in A Brief Guide to Mobile and Social Media Audience Targeting, social media platforms allow marketers to target ads based on consumers’ locations, demographics, interests and behaviors. See also: The Time to Adopt Mobile Was Yesterday   But that’s not all marketers can do through mobile and social media advertising. The Denim platform allows corporate marketers to achieve micro-targeted, hyper-localized ads at scale on behalf of any number of agents or advisers. Why? Because an ad presented from a local agent’s Facebook page consistently outperforms the same ad presented from a corporate brand’s Facebook page. Best of all, customers achieve better results at lower costs. This is apparent when you compare consumer engagement data on ads powered by Denim to Facebook advertising benchmarks for the insurance and financial services industry:

• The average click-through rate (CTR) of finance and insurance ads placed on Facebook is 0.56%, while the average CTR of micro-targeted, hyper-local ads powered by Denim is 1.95%.
• The average cost per click (CPC) on Facebook for finance and insurance is $3.77 — higher than any other industry. In comparison, the average CPC of ads powered by the Denim platform is $0.33.

See also: 4 Ways Social Media Can Win a Promotion   Perhaps a better headline would go something like, “Insurers go all-out on mobile; what comes next is micro-targeted, hyper-local mobile and social media advertising at scale.”

Life, group and voluntary benefits insurance is one of the most competitive verticals in the financial services industry. Strong relationships with customers are crucial to competitive advantage. Engaging customers is a proven way of enhancing relationships. Unfortunately, the insurance industry has one of the lowest rates of customer engagement. Too often, the only contact with the customer is the bill. How can insurers improve engagement? Use these five technologies to enhance digital customer engagement. Two-Way Communication Tools Email, social media, wearables and chatbots allow insurance companies to optimize every customer interaction. For instance, insurers can partner with wearables manufacturers so that these tools can be used as digital modes of communication between insurers and digitally savvy consumers. Wearables, for instance, can monitor a customer’s health and give insurers a chance to reward good behavior of their customers – creating opportunities for engagement. Platforms such as Facebook and Twitter can be used to engage consumers on various insurance issues and as a way of getting customers’ feedback. Big Data and Data Services Insurance companies can use big data to find opportunities to add value to customers’ lives. The human touch is still important, but a computer is much better at searching through huge amounts of data in real time. Incorporating data-based services to provide the company with constant data streams from connected devices such as IoT and wearables is crucial. This data can be turned into insights that help improve customers’ daily lives, boosting customer engagement. See also: Seriously? Artificial Intelligence?   Artificial Intelligence Worldwide data production runs around 44 trillion gigabytes a year. One gigabyte alone is equal to about a 30-foot shelf of books, and insurers (along with the rest of us) are suffering from data overload. Often, customers have to wait on the phone while insurance employees sort through data. AI can help solve this overload. It can assist insurance companies in cleansing large volumes of data and offer accurate predictions of customers’ expectations. It can provide customers with realistic ideas of what the future will hold, helping them make better decisions for themselves and their families. In addition to dealing with all the data, AI can handle customer service with chatbots, as well, automating and increasing customer engagement in entirely new ways. Analytics AI helps insurance companies comb through large amounts of data to predict exactly what customers want. But this is not the end of the story. Insurance companies need to find actionable insights from the information provided by AI. This is where analytics tools come into play. Robust analytics programs (based in data science) can be used to study customers’ past data, research potential trends and evaluate the effects that certain decisions might have on consumers. Many are looking at predictive analytics related to claims patterns, benefit design and profitability. Analytical tools such as Google analytics and Woopra (a real-time customer analytics service) can help insurers gain more knowledge about customers, which can then be used to inform strategies for customer engagement. Analytical tools can help insurers to create an all-inclusive road map that will help them improve and manage their customers’ entire lifecycles. Web-Based Self-Service More and more insurance consumers expect to be able to monitor the status of their claims and manage their policies themselves online. Studies show that 38% of insurance consumers prefer web-based self-services and strongly feel that these platforms have shifted from “nice-to-have” to “must-have” options. Web-based self-service improves engagement with customers. They give customers the freedom of choosing their preferred ways of making basic changes to their accounts, finding answers, refining service flexibility and improving customer experience. The future is now Customer engagement is becoming an increasingly important part of insurance. Enhancing rich, digital customer experiences through strategic engagement offers great opportunities, especially for insurers that are looking to cross-sell and up-sell their existing clients. Insurance customers are more and more willing to shift their loyalty to insurance providers that guarantee customers communication through digital channels and devices of their choosing. See also: How Technology Drives a ‘New Normal’   They are looking for insurers that are able to interact and offer informed conversation that relates to their individual needs, desires and relationships. It is therefore important that insurers cultivate proper digital ways to engage their customers. Without these customer-focused technological trends, any insurance company risks losing a big chunk of market share.

For decades, privately owned, privately insured cars have been so common that few people have questioned these models of transportation and the associated risk. Property and casualty insurers deal with thousands of individual vehicle owners and drivers as a result. Insurers deal with those drivers’ mistakes, too. A study by the National Highway Traffic Safety Administration (NHTSA) estimates that human error plays a role in 94% of all car accidents. The entire auto insurance industry is built on this humans-and-their-errors model. But autonomous vehicles stand to turn the entire model on its head — in more ways than one. Here are some of the biggest changes self-driving cars are poised to make to the auto insurance world and how P&C insurers can prepare for the shift. Vehicle Ownership Most conversations about self-driving cars and insurance focus on questions of fault, compensation and risk. In a 2017 article for the Harvard Business Review, however, Accenture’s John Cusano and Michael Costonis posited that an even bigger disruption to P&C insurance practices would be a change in patterns of vehicle ownership. “We believe that most fully autonomous vehicles will not be owned by individuals, but by auto manufacturers such as General Motors, by technology companies such as Google and Apple and by other service providers such as ride-sharing services,” Cusano and Costonis writes. Indeed, companies like GM and Volvo are already exploring partnership with services like Lyft and Uber, as keeping self-driving vehicles on the road as much as possible amortizes their costs more effectively. Paralleling the autonomous vehicle/ride-sharing partnership trend is a decrease in vehicle ownership. Young adults and teens are less interested in owning vehicles than their elders were, Norihiko Shirouzu reports for Reuters. Instead, they’re moving to more walkable areas or using ride-sharing services more often, already putting pressure on auto insurance premiums. See also: Time to Put Self-Driving Cars in Slow Lane?   U.S. roads are likely to be occupied by a combination of human-driven and self-driven vehicles for several decades, Cusano and Costonis estimate. As ownership trends change, however, P&C insurers’ focus on everything from evaluating risk to branding and outreach will change, as well. Connected closely to the question of ownership is a second question: Who is at fault in a crash? Fault Ownership NHTSA’s statistics on human error as a crash factor imply that reducing the number of human drivers behind the wheel would reduce accidents. A McKinsey & Co. report agrees, estimating that autonomous vehicles could reduce accidents by 90%. Taking human drivers’ mistakes out of the equation means taking human fault out of the equation, too. But questions of human fault stand to be replaced by even more complex questions regarding ownership, security and product liability. Several automakers have already begun experimenting with approaches that upend traditional questions of fault and liability. Concerned over the patchwork of federal and state regulations in the U.S., Volvo President and CEO Håkan Samuelsson announced in 2015 that the company would assume fault if one of its vehicles caused an accident in self-driving mode. The statement appears to apply to Volvo’s vehicles during the development and testing phases, according to Cadie Thompson at Tech Insider. It is too early to tell whether the company will extend its acceptance of fault to autonomous Volvo vehicles that function as full-fledged members of the transportation ecosystem. Nonetheless, the precedent of automakers accepting liability has been set — and, as automakers continue to explore partnerships or other models of fleet ownership, accepting liability or even providing their own insurance may become part of automakers’ arsenal, as well. Ultimately, Volvo seems unconcerned about major liability shifts. “If you look at product liability today, there is always a process determining who is liable and if there is shared liability," Volvo’s director of government affairs, Anders Eugensson, told Business Insider. "The self-driving cars will need to have data recorders which will give all the information needed to determine the circumstances around a crash. This will then be up to the courts to evaluate this and decide on the liabilities." Meanwhile, in Asia, Tesla is trying another method: including the cost of insurance coverage in the price of its self-driving vehicles, according to Danielle Muoio at Business Insider. "It takes into account not only the Autopilot safety features but also the maintenance cost of the car," says Jon McNeill, Tesla’s former president of sales and services (now COO of Lyft). "It's our vision in the future we could offer a single price for the car, maintenance and insurance." Doing so would allow Tesla to take into account the reduced accident risk of the autonomous system and to lower insurance premium prices accordingly. This might reduce the actual cost of the vehicle over its useful life. The NHTSA has already found that accident risk in Tesla vehicles equipped with Autopilot are 40% lower than in vehicles without, and the company believes insurance coverage should reflect that, according to Muoio. If P&C insurers don’t adjust their rates accordingly, Tesla is prepared to do so itself. Future Ownership Property and casualty insurers seem torn on how self-driving cars will affect their bottom line. On the one hand, “insurers like Cincinnati Financial and Mercury General have already noted in SEC filings that driverless cars have the potential to threaten their business models,” Muoio reports. On the other, 84% don’t see a “significant impact” happening until the next decade, according to Greg Gardner at the Detroit Free Press. Other analysts, however, believe the insurance industry is moving too slowly in response to autonomous vehicles. "The disruption of autonomous vehicles to the automotive ecosystem will be profound, and the change will happen faster than most in the insurance industry think," KPMG actuarial and insurance risk practice leader Jerry Albright tells Gardner. "To remain relevant in the future, insurers must evaluate their exposure and make necessary adjustments to their business models, corporate strategy and operations." KPMG CIO advisory group managing director Alex Bell agrees. "The share of the personal auto insurance sector will likely continue to shrink as the potential liability of the software developer and manufacturer increases," Bell tells Gardner. "At the same time, losses covered by product liability policies are likely to increase, given that the sophisticated technology that underpins autonomous vehicles will also need to be insured." See also: The Unsettling Issue for Self-Driving Cars   Major areas of concern in recent years will likely include product liability, infrastructure insurance and cybersecurity. Meanwhile, the number of privately owned vehicles — and individually insured drivers — on the road will likely continue to drop, placing further pressure on auto insurance premiums. What should P&C insurers to do prepare? Cusano and Costonis recommend the following steps:

• Understand and use big data and analytics. As Eugensson at Volvo notes, autonomous vehicles will generate astounding quantities of data — data that can be used to pinpoint fault. It can also be used to process claims more quickly and efficiently, if insurers are prepared to use it. Building robust data analysis systems now prepares P&C insurers to add value by analyzing this data.
• Develop actuarial frameworks and models for self-driving vehicles. As Tesla’s insurance experiment and NHTSA data indicates, questions of risk and cost for autonomous cars will differ in key ways. P&C insurers that invest the effort into developing and using more sophisticated actuarial tools are best-prepared to answer these questions effectively.
• Seek partnerships. The GM/Lyft and Volvo/Uber ventures demonstrate how partnerships will change the automotive landscape in the coming years. Insurers that identify and pursue partnership opportunities can improve their position in this changing landscape by doing so.
• Rethink auto insurance. Currently, P&C insurers’ auto work involves insuring large numbers of very small risks. As our relationship to vehicles changes, however, insurers will need to change their approach, as well — for instance, by moving to a commercial approach that trades many small risks for a few large ones.

Autonomous vehicles are poised to become one of the most profound technological changes in an era of constant change. Fortunately, the technology to manage this change is already available for insurers that are willing to embrace a digital future.

Across industries, many mature organizations have become acutely aware that their industrial-based business models, which strive for control, efficiency and scale, are not designed for speed, innovation or individualized customer experiences. Corporate leaders have no option but to consider using cloud-based platforms, but that introduces new vulnerabilities. Finding an appropriate balance between cybersecurity and privacy strategy while allowing for innovation is of fundamental importance. As all businesses will become “data companies” in the digital networked world, the cyber insurance industry needs to adapt to effectively underwrite and manage the most dynamic risk in the world. Everyone wants a piece of the action, as there are more than 70 U.S. carriers and 30 U.K. carriers that offer cyber insurance, and the supply will continue to grow rapidly. There is, however, one fundamental flaw – there is absolutely no standardization! We don’t capture the same data points, conforming to an industry data classification, so there is no gold standard for coverage. See also: New Approach to Cyber Insurance   How can the industry appropriately underwrite, analyze and manage the most connected risk in the world if carriers don't capture the same data points in their underwriting application and there is no common data classification to map toward? Each insurer is analyzing different data. Perhaps even a greater issue is that the data is captured at a point in time, typically via checkboxes on a paper application. The data quickly becomes outdated. Unless a vulnerability assessment is mandated for some of the larger enterprises to obtain coverage, there is no true validation of the prospects' security posture. Insurers are not capturing contextual data to validate their insureds' policies and controls that ultimately represent the risk. Is it enough to ask, “Do you educate or train users on information security and privacy?”, or would it help to know whether one insured does training once a year during lunch while another insured holds quarterly training meetings with randomly scheduled, unannounced phishing simulations throughout the year? Cyber insurance needs context and validity; the industry is deficient in both! In direct, online-to-bind insurance, some carriers only require four to six data points to underwrite the risk and present a quote in a matter of minutes. Is a company’s industry, revenue, address, number of records and a question on any previous claims I’ve had really enough to understand the risk? I understand that we need a seamless customer experience to ensure we don’t lose new business, but requiring so little data looks more like a reckless arms race to see who can capture the most SMB business more than anything else. There is no validation of the actual inputs from the insured (major issue!) and, in terms of customer experience, we should focus on strategically important issues such as integrating cyber risk mitigation with cyber insurance under the umbrella of an organization's cyber risk management. Customers need a holistic solution evaluating risk mitigation and risk transfer. Anyone who has gone through risk and compliance assessments at the enterprise level will agree that they need to be streamlined, with a centralized solution that collects and analyzes information about the cyber program and that quickly reacts to identified vulnerabilities and regulatory requirements. The traditional, siloed approach, where a company completes assessments in confusing, overly detailed Excel documents specific to a regulation (i.e. PCI, HIPPA, NIST, ISO, etc.), keeps resources tied down and focuses on completing each actual assessment rather than truly understanding broad exposure. The approach unfortunately shifts the focus to defense, in complying with regulations, instead of determining actionable insights that enhance cyber maturity. This manual, labor-intensive process does nothing to solve the snapshot problem, and a company’s cyber exposure or cyber maturity is not nearly the same on Jan. 15, 2018, as it will be on Jan. 15, 2019. Continuous, standardized insight into a company’s cyber risk is required to appropriately assess risk. Insurers are spending thousands on isolated solutions, such as SecurityScorecard and Bitsight, yet they are only viewing cyber risk through a small prism, as these solutions only provide a snapshot of risk from what's available on the internet and open-source databases. What most insurers don't realize is that successful cyber insurance underwriting comes at the intersection of insurtech and regtech. Insurers need to shift toward a digital platform that standardizes the data capture, has the data immediately available for analysis and is continuously analyzing an insured's risk throughout the policy period. Both insurers and clients need a standardized assessment that automates the manual processes of traditional risk assessments and allows companies to automate and streamline the IT and vendor audit process by mapping to several security standards, such as NIST, ISO, HIPPA, PCI and the NY DFS Regulation, through one assessment. In responding to market needs, companies like Cyberfense will prevail. In stealth mode for the last year, Cyberfense is now working with two of the largest cyber insurers to streamline the underwriting process while providing continuous insight into a company’s cyber maturity and mapping a company's cyber risk to most national and global security standards. Cyberfense helps insurers manage cyber risk by analyzing an insured's exposure and detailing recommended solutions so the client easily understands how to fill security and compliance gaps. See also: Promise, Pitfalls of Cyber Insurance   The eRisk hub that many insurers offer now does not provide any added value as it is simply a list of vendors that a client could Google itself. Insurers need to guide their clients with appropriate solutions as early as possible and in a manner that is not too invasive. With standardization and automation, you will then create a brokerage force that can finally understand cyber insurance and is more willing to sell the coverage and act as an adviser to their client. This is how we effectively underwrite and manage cyber risk.

Easily the most startling number I've seen in ages comes from this article in the May 14 Wall Street Journal. The article is behind a paywall, and, in fact, the startling number is buried, so I'll go directly to it:

According to forthcoming research from Oliver Wyman, only 16 cents of every dollar of auto insurance premium directly benefits claimants through repairs, physical therapy and so on.

16 cents! 

I certainly knew about all the other aspects of insurance that draw on that dollar of premium and understand all the expenses associated with distribution, underwriting and the complex mechanics of the claims process. But I've been operating based on the rule of thumb, as reflected in this article, that about 60 cents of every dollar goes to claimants.

Even that number struck me as far too low, and I've been arguing for years, such as in this article, that the percentage of premium returned to customers needs to increase greatly. We've explored at length how insurtech can raise that percentage both through helping customers reduce losses and by slashing expenses.

Now I find that, for auto insurance, I was wildly optimistic about where we stand now. It's a good thing for the industry that auto insurance is required. Otherwise, who would buy something with a negative 84% return?

I understand all about peace of mind and about everything the industry has to do that lies behind that, but...16 cents?

Have a great week.

Paul Carroll
Editor in Chief

Sometimes you’re the disruptor. Sometimes you’re the disrupted. In an 85-page missive, the California Supreme Court, in Dynamex Operations West vs. Superior Court (2018), S222732, unanimously left no doubt that for wage and hour purposes fewer individuals will be independent contractors. Commentators nationwide were quick to opine that this was a major blow to the gig economy. The new test for employment status, the “ABC” test, was set forth by the court in its April 30 decision. Basically, the test uses three criteria. Per the court: “Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.” The second criterion, “B,” that the worker performs work that is outside the usual course of the hiring entity’s business, will likely prove to be the most disruptive. While each case depends on the facts to a degree, establishing the hiring entity’s business is not a nuanced inquiry. The burden of proof is on the employer to prove independent contractor status and that each of the ABC standards are met. Failure to prove any element means the worker is an employee. See also: The State of Workers’ Compensation   The issue of employment status within the workers’ compensation system, however, was not before the court in Dynamex. Thus, the court’s prior holding in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 remains the applicable standard for resolving whether someone is an employee for workers’ compensation purposes. The court in Dynamex acknowledged that, “…because the Borello standard itself emphasizes the primacy of statutory purpose in resolving the employee or independent contractor question, when different statutory schemes have been enacted for different purposes, it is possible under Borello that a worker may properly be considered an employee with reference to one statute but not another.” Under Borello, the Supreme Court stated that the determination of employment status cannot be decided absent consideration of the remedial statutory purpose of the workers’ compensation laws. The court then acknowledged as factors the primary test of right of necessary control over the manner and means used, whether the task is part of the principal's regular business and discharge is terminable at will, whether the worker has a distinct business with equipment or employees that is subject to profit or loss, the skill and supervision required, mode of payment, bargaining position of the parties and their intent. [As summarized in Ware v. Workers' Comp. Appeals Bd., 92 Cal.Rptr.2d 744, 78 Cal.App.4th 508, 511 (Cal. App., 1999.)] The court in Borello also stated, citing previous authority, that “…the individual factors cannot be applied mechanically as separate tests; they are intertwined, and their weight depends often on particular combinations.” It is difficult, however, to articulate the basic public policy rationale supporting the idea that there is a significantly different “statutory purpose” between enforcement of payment of wages to employees and providing those employees the benefits necessary to recover from an injury arising out of and in the course of employment. Certainly, the statutes address different issues. That is not the same as saying that in one case (payment of wages) there should be a more expansive definition of “employee” than under the workers’ compensation laws. That is particularly the case when one considers that during the time an injured worker is recovering from the effects of his or her injury, temporary disability benefits are provided to make up for lost wages. In other words, isn’t the statutory purpose behind making certain employees receive the wages to which they are entitled just as pressing whether the issue is protecting someone from an unscrupulous hirer or whether it is to protect the employees from the loss of wages due to a workplace injury? Yet the court is making a distinction in Dynamex. It would seem that public policy dictates the standard should be the same – regardless of what that standard is. It will be left either to the courts to extend the ABC test to workers’ compensation in the appropriate case or require the legislature to intervene and harmonize these tests. The Dynamex decision will lead to considerable litigation. Although it may be anticipated that a new wave of wage and hour claims are in the process of being prepared, it is premature to immediately assume that independent contractors have en masse been transformed into employees. Any business using independent contractors, however, should already be assessing how its operations are affected by the ABC test and make the appropriate adjustments. One of the many unanswered questions for hirers is what happens when an individual is considered an “employee” of multiple employers? See also: 25 Axioms Of Medical Care In The Workers Compensation System   For workers’ compensation insurers, there is the added confusion that an employee for wage and hour purposes may not be an employee for workers’ compensation purposes, meaning that the “Dynamex” payroll will be larger than the “Borello” payroll. There is also the possibility that a worker will not be sufficiently attuned to these legal maxims and file a workers’ compensation claim. In such instances, the reconciliation of Dynamex and Borello will be, in the first instance, up to the Workers’ Compensation Appeals Board. Today, there are far more questions than answers in the wake of the Dynamex decision. The speed with which these questions get answered will depend more on the legislature than the courts. But, in today’s innovative economy the intructions are clear: Disrupt, adapt, repeat.

Background Mobile devices, like smartphones, can be used as "terminals" of IoT networks because they are equipped with numerous sensors that can record the environment. Smartphones nowadays are a commodity, almost always carried by their users, including when they are drivers or passengers of vehicles. Therefore, they can be used as automatic crash notification IoT devices, with the following important limitations:

1. The sensors in personal mobile devices are designed to address specific user needs, like gaming. They have very good specifications on their sensitivity and their resolution, but they have minimum range: The best accelerometer in a mobile phone can measure acceleration values of ±8g, when the forces involved in a car accident can create a negative acceleration of 100g. These sensors cannot record an accident. They can only POSSIBLY identify the beginning of an accident.
2. Any unusual sensor readings, a phenomenon common on cell phones, can be misinterpreted as the POSSIBILITY of an accident and initiate an ALARM dispatch procedure, when the phenomena most likely are FALSE ALARMS (also noted as false positives). The sheer amount of such FALSE ALARMS will create a distributed denial of service (DDoS) to the public safety answering point (PSAP).
3. In the case of a severe accident, where the passengers of the involved vehicle(s) will not be able to ask for help, it is almost certain that any phone in the vehicle(s) will be not operational.

For the above reasons it is obvious that smartphones lack the functionality and reliability required for a life-depending device because they can not monitor a severe traffic accident through its full timeline and cannot issue a VERIFIED alarm. On the other hand, a smartphone using its sensors can recognize the forthcoming of an accident from the unusual change of its kinetic state and pass this critical (but not definite) information to an external monitoring system before it is destroyed by the crash. A solution, called PODIS, is using this approach. A distress signal will leave the phone in time, before its possible destruction, and cancel the alarm transparently to the PSAP if the phone remained operational after the suspicious event. The system is issuing fail-safe crash notifications and is monitoring not only the driver of a vehicle but also the passengers of cars, professional vehicles, public transport and cyclists This is the simple operating principle of the PODIS system. PODiS (POst DIstress Signal) System description A cloud-based client-server system, where the client is an application installed in a mobile device (smartphone or tablet) and the server is a virtual private cloud (VPC) of processing and database servers, load balancers, security devices, etc. Monitoring stage The PODIS client is reading the mobile device sensors in a high frequency rate (minimum 50 Hz) and is calculating its kinetic state by fusing the readings of the sensors. It is then predicting the next kinetic state of the mobile device by using a specialized signal processing algorithm. The client is comparing the difference between the predicted and the current state against a predefined threshold in every single operating cycle. See also: 7 Imperatives for Moving Into the Cloud   Provisional alarm (Client side) If the difference between the predicted and the actual current kinetic state exceeds a threshold, a provisional flag is raised by the client and a provisional alarm (PA) is transmitted to the cloud server. The client is capable of transmitting a complete PA in milliseconds, well before the main vehicle parts and the client itself start to destruct. The latter typically takes in the range of 150 ms. Provisional alarm (Server side) When a PA is received by the cloud server, all received data (including user ID, location coordinates and timestamps) are recorded as a predicted event, and the server puts the specific client under supervision and starts monitoring for its next signal. False alarm (Client side) The client is checking in pre-defined intervals, for example every 5 seconds, if the PA flag is raised; if it is, the client transmits to the server a false alarm signal and sets off the flag. In case the PA flag is ON, the client is keeping pushing the kinetic and the location data to the server(s) for a short time for the server to check if the client survived from a severe accident (very unlikely). False alarm (Server side) When a PA signal is received, the server is waiting for a false alarm (FA) signal from the specific client for a predefined period, for instance 20 seconds, and if an FA is received then the event will be recorded internally as a false alarm with no further action. Real alarm (Server side only) If no false alarm is received from a client that raised a PA within a predefined period, then the server is raising a verified alarm ticket with all available data to the connected PSAP. Unverified accident (Server side) If the server receives data showing very little kinetic activity and short distance movement after a PA, then a non-verified alarm ticket is pushed to PSAP for further investigation. Threshold processing method Each smartphone, which for Android means 24,000 distinct devices from more than 1,000 different manufacturers, has its own characteristics and specifications. Thus, the same sensor from a certain manufacturer does not have the same characteristics in different smartphone models. Moreover, each individual driver has his/her own driving behavior. For example, a hard braking can be an emergency sign for one driver, while it can be an everyday driving practice for someone else. The server side is using a self-learning system that, at a very high level, is recording the PA values for each individual smartphone model and every single user when a PA is followed by a FA, and it adjusts accordingly the specific threshold. The new threshold value is pushed to the server for the record of the specific client. The system is effective: It will take just a few driving hours to eliminate the FA for a newly registered user if he/she is using a new smartphone model. See also: Profiles in the Customer Experience   Energy consumption and data traffic The client is running in the background as a service, only when it is in a moving vehicle with limited battery consumption. The maximum flow of mobile data is 2.6 MB per day for 24 hours driving use. NB: The above description is a simplified version of the principles behind the system. The system is already in use by insurers as a running service, while successful extended pilots have been performed around the world. The system and the method are patented: USPTO patent No. 9,758,120.

Political risk is a key concern for participants in the public-private partnership (P3) market in the U.S. and Canada. Large infrastructure projects generally, and P3s in particular, can serve as lightning rods in debates surrounding investment decisions using public funds. Due in part to the potentially higher up-front price of delivering an infrastructure asset through a P3 or the perceived loss of public control of an infrastructure asset, P3s can generate significant opposition – ultimately ending with the cancellation of a project for political reasons and no contract to award. Though the risk of project cancellation is considered a business risk and is not insurable, this does not mean it is something risk advisers should ignore. To help prospective bidders on these projects manage and assess risks, it is important to look at the readiness and friendliness of a company. Readiness is a measure of the legal and regulatory climate of a given state or province as it relates to P3 procurement, while friendliness is a measure of the public sector’s willingness and drive to successfully procure a P3. Within the readiness score are sub-factors, such as whether the state or province has legislation authorizing the use of P3s, whether P3s can be used for both civil and social infrastructure projects and whether the state or province has an office dedicated to assessing and procuring P3 projects. Within the friendliness score are sub-factors such as whether the state or province is in an election year, whether the state or province has experience procuring P3s and whether there is organized opposition to P3s. See also: Top 10 Claims Trends That Will Affect 2018 Aon’s latest Public-Private Partnership Pursuit Risk and Opportunity Index (P3-Pro), takes a deeper look at these two scores, and the results provided valuable key learnings. States and provinces that have relatively long track records of successful P3 procurements and institutions established to bring certainty to the procurement process topped the list. In the U.S., the top states for certainty as it relates to successful P3 procurement were Colorado and Virginia. Both these states have experience procuring P3s and each had two major projects successfully reach financial close in 2017. Both of these states also have offices dedicated to the assessment of whether the P3 model is in the public’s best interest. These offices lend a given procurement an increased sense of legitimacy and show that the public sector has thought about the project and is not simply looking at a P3 as a source of free money. P3 Trends Overall, last year saw a general decline in certainty across the U.S. Much of this was due to coming gubernatorial elections in 36 states. The potential change in executive can foster uncertainty for a project, particularly if the project becomes a campaign issue, as happened in the British Columbia elections in 2017. Additionally, last year saw the expiration of authorizing legislation in states that have had significant experience with P3s, particularly Texas. Texas has completed multiple highway P3s over the past decade, but due in part to public opposition to continued development of toll highways, the legislature allowed the legislation authorizing Regional Mobility Authorities to pursue P3s to lapse. When looking at which states currently have large projects in procurement, there are some continuing projects in states that scored in the middle of the pack on the index. For example, Alabama is in the process of procuring the $2 billion I-10 Mobile River Bridge and Bayway project but falls into the “less certain” category, in part due to its inexperience in procuring a P3 project. While Michigan is in the process of procuring the $650 million I-75 Modernization project, the state also falls into the “less certain” category due to its lack of explicit P3 authorizing legislation. See also: What if Amazon Entered Insurance?   Canada has historically been less dramatic than the U.S. when it comes to P3s. However, 2017 was a little different. A new government took power in the summer and subsequently canceled the George Massey Tunnel Replacement project. Aside from the turbulence in British Columbia, many provinces in Canada scored fairly high in the index. Ontario, which for the last three years of P3-Pro’s publication secured the top scoring jurisdiction in North America. In terms of certainty of reaching financial close once a project begins procurement, Ontario has been the P3 leader in North America for some time. The province has successfully reached financial close on dozens of projects and has a robust pipeline of more than 20 projects. The pursuit of a P3 can be a risky decision. Once the pursuit begins, there is no guarantee that the project will actually be awarded. Though there has been some progress in recent years to add certainty to the P3 process, with more states passing enabling legislation and getting experience in this delivery model, political considerations remain a key concern.