Numbers may numb the senses, but that does not mean insurers should forsake the chance to achieve something that, in contrast to their current approach to marketing, can be numinous, relatively speaking, because neither a lack of communication nor communication that lacks style can yield anything of substance. Insurers need not go back to the drawing board, when they should go to the photography studio instead: a place for photographers, artists, designers, writers, and directors—all of them working in a studio spacious enough for them to realize their vision, which itself is a study in the transformation of space. It is the conversion of space into living space—the way a studio lends itself to interpretation by way of a camera lens—that can allow insurers to further their message through the medium of video or photography. Achieving this goal starts with finding a studio in which a room has plenty of space for invention, and reinvention. To have such a studio is to have the solution to a challenge that is otherwise a logistical mess and a financial disaster. Enter FD Photo Studio, literally or virtually, because this is where insurers can begin to turn their message into effective marketing. I mention this disruption in how photographers do business, or how businesses can leverage a series of photography studios that have low hourly rates and a suite of equipment and services, because the biggest barrier to a shift in marketing is the refusal of most studios to change their prices—to change, period—in the face of changing needs and demands. See also: 10 Essential Actions for Digital Success  With the solution now available, insurers have no reason not to banish the banal, to erase the execrable, to delete the detestable. They do, however, have every reason to express themselves visually—to have a vision that verbalizes a specific set of values—so their marketing speaks for itself. They have to articulate what they believe. They have to believe what they say—they have to know what they believe—so what they say is not only believable but true, so what consumers see is a picture of what insurance is, so what appears on paper or develops on-screen is the summation of a collection of ideals like honor and integrity and hope and opportunity. That honesty is the best policy, for insurers, is both a matter of justice and a measure of goodness. To have a marketing campaign that blurs what should be clear, or to perpetuate a message that fails to clarify what is right, is neither good for business nor a good to possess. It is bad optics, as pundits are wont to say, because it is just plain bad. See also: Engaging Employees: Key to Success Let insurers, therefore, resolve to make excellence a priority and professionalism a promise to keep. Let them produce an actual snapshot of their industry, which says a lot without having to say a word; unless words are necessary; unless the words condense a thousand words into a memorable sentence; unless the sentence implies what consumers will likely infer: that insurers are great marketers.

I have been asked a number of times to provide my perspective on the insurance industry in the time of the Industrial Revolution 4.0. In this piece I'll do so, but first, how did we get to 4.0? What preceded and led to this brave new world of what's now called "IR4"? The first industrial revolution occurred in the late 1700s, with most agreeing that the seminal event was the development of the first mechanical loom in England in 1784. More broadly, the period was defined by mechanized production facilities, usually with the help of water and steam power. The second industrial revolution, in the late 1800s, was defined by the concept of division of labor and by mass production, with the help of electricity. Think of hog slaughtering or early automobile assembly lines. The third industrial revolution, starting in the late 1960s, was characterized by the introduction of the electronics and IT systems that accelerated the automation of production and business processes. Think of the room-sized computers of the '60s and '70s. The fourth industrial revolution is happening right now. The IR4 concept was pioneered by Professor Klaus Schwab, founder and chairman of the World Economic Forum. The idea is that we are now entering the fourth major industrial era since the initial industrial revolution of the 18th century. This new world is characterized by the fusion of many technologies and the blurring of lines between the physical, digital and biological spheres. This evolution to what we now call cyber-physical systems, or embedded systems, is leading very rapidly to a world dominated by systems that are controlled or monitored by computer-based algorithms, and integrated with the internet and its users. This kind of connected and communicating world has enabled the development of such things as a smart power grid, remote medical monitoring and autonomous vehicles. This is the "Internet of Things": technology becoming embedded into all facets of society, and even into our bodies. As dramatic as this may sound, the fourth industrial revolution is even more transformative than the previous three in other ways, as well. The speed of recent breakthroughs has no historical precedent; it is exponentially faster in adoption than previous industrial revolutions. Additionally, it is disrupting almost every industry in almost every country. This scope and pace is unprecedented. Like the revolutions that preceded it, the fourth industrial revolution has the potential to raise global income levels and improve the quality of life for populations around the world. At the same time, however, this revolution could yield greater inequality along the way. Access to technology varies widely, so developments like robotics have the potential to displace workers in precisely the parts of the world that need help advancing most. The reason is that there are three separate but connected kinds of disruption going on simultaneously. Technological disruption: artificial intelligence, blockchain, telematics, genomics, the Internet of Things. Economic disruption: imagine: AirBnB is now the #1 hotel company, Uber is the #1 taxi company, big stores and shopping malls are fighting for their lives. Sears, the Amazon of the 20th century, recently declared bankruptcy, and many traditional bricks-and-morter retailers are threatened. Social disruption: some parts of the world are aging rapidly, with attendant retirement savings and healthcare challenges, while other parts, mostly in the Southern Hemisphere, have more young people than jobs; people want to be able to use things without necessarily owning them; concepts of work are changing; income equality and gender equality are major issues. While the concept of a Fourth Industrial Revolution is now widely discussed, I would like to describe the Fourth Insurance Revolution as I see it. Like the eras of the four industrial revolutions, there have been three previous periods in insurance industry history that are somewhat similar to the evolution of the industrial world. The first era, which I call Insurance 1.0, began logically enough in the parts of the world that were the cradles of civilization, the Middle East and Asia. See also: Industry 4.0: What It Means for Insurance   As far back as the second and third millennia BC, traveling Chinese merchants practiced an early form of risk management by distributing their wares among numerous ships and different trade routes, to minimize losses along the way. In Babylonia, merchants receiving a loan to ship goods paid the lender an additional fee that would cancel the loan if the goods were somehow lost – credit insurance. This form of coverage is even memorialized in the Code of Hammurabi. The Greeks and Romans introduced the origins of life and health insurance when they created guilds called benevolent societies, to pay family members for funeral expenses of deceased members. These are our industry’s beginnings. Insurance 2.0 as I see it was the introduction of the first actual insurance contracts. These were developed in Genoa, Italy, in the 14th century and related to marine insurance for goods in transit. This was a formalization of the earlier concepts employed in the Insurance 1.0 period. Our industry matured greatly in the 17th century, into what I deem Insurance 3.0, a major leap forward. Much of the accelerated formalization of insurance was stimulated by the Great Fire of London in 1666. This enormous conflagration destroyed nearly 70,000 of the city’s 80,000 residences, and gave rise to urgent risk management and insurance planning. Property and fire insurance as we know it was launched by Nicholas Barbon in London in 1681. Around the same time, French mathematicians Blaise Pascal and Henri de Fermat conducted loss probability studies that resulted in the first actuarial tables. Insurance became an empirically based enterprise, and became widely understood to be a prudent expenditure for businesses and families. With that brief history of the evolution of our industry, let’s now move on to insurance in the 21st century: Insurance 4.0 In my view, most of the change in the industry since Insurance 3.0 up until the present has been incremental. Broader product lines, more distribution channels and, recently, the first elements of digitization. But what’s happening now is fundamentally different. The basic function and processes of insurance are being disrupted at an accelerating pace. So let me now present some of the issues and implications of change in the industry, what Insurance 4.0 looks like. I’ll start by making some comments on the insurance industry of today. Of course much of the rapid change taking place now and defining Insurance 4.0 is related to technology. The insurance industry’s raw material is data. Data not only to make underwriting and loss reserving judgments, but increasingly to manage virtually every business process in the insurance value chain. Data is valuable. But how can insurers successfully plan and manage data when, as Science Daily magazine tells us, 90% of all the data in the world has been generated in the last two years?! How do we use this avalanche of data to make sound business decisions? More data does not inevitably lead to better decisions. One promising set of tools: Artificial intelligence and machine learning, which represent a quantum leap from the predictive modeling insurers have been using over the past decade. Moving rapidly from applications in high-frequency, low-severity lines like auto and home insurance, AI capabilities are now employed in more complex commercial lines, and already show evidence of having real underwriting and loss reserving value. Skeptical about whether this can work in complex cases? Let me give you an AI example. A few years ago, a computer beat the world chess champion. Well, some said, that’s fine, but it will be a long time before a computer can beat a top Go player. As many of you know, Go is a complex Asian game played on a 19-by-19 grid, with more possible configurations than the number of atoms in the known universe. Google’s Deep Mind Lab computer input all the Go games ever recorded, over a 1,000-plus year span. After playing 4.9 million games against itself in a three-day period to learn, the computer immediately beat the world’s best Go player in a live game. What’s more thought-provoking, though, is what happened next. Putting aside the input of historical game results, Google just uploaded the basic rules of the game – no experience data. This new program, AlphaGoZero, became expert simply from learning first principles alone, without any human knowledge or experience input. Does anyone still think sophisticated underwriting or loss reserving is beyond the capability of modern computers? I don’t. Entrepreneurs have expanded the way technology can influence the insurance value chain to create an ecosystem we call insurtech. Leveraging off fintech’s huge impact on the banking and payments world, insurtech companies, which now number more than 100,000, are innovating in every insurance company department. Investments in them have grown by leaps and bounds. Insurtech attracted about $140 million in funding in 2011, $275 million in 2013, $2.7 billion by 2015 and more than $4 billion last year. Insurtech products and services address product development, marketing, pricing, claims and distribution, especially reducing policy acquisition costs, and have been much more focused on nonlife insurance (especially personal lines) than life and health insurance to date. Up until now, insurtech ventures have tended not to displace the incumbent insurers, but have been invested in or acquired by them to enhance their existing operations. Much of the industry’s current expanded use of technology, including insurtech, is focused on customer interface and the customer experience. It has always been said that an industry can’t disrupt itself; that disruption always comes from the outside. Not surprisingly, then, insurance policyholders and potential customers have had their expectations of customer experience elevated by their interaction with other product and service providers. No longer do they measure their satisfaction against other insurance companies. They want the kind of experience they get from Apple, Alibaba, Amazon, Starbucks and the like. They want mobile, 24/7, personalized service. Most insurers today are simply not capable of delivering this. They lack both the innovation mindsets and the IT budgets to deliver a 21st century insurance customer experience, and they will lose share of market to those companies that do. Another element of change in today’s insurance business is the emergence of public/private partnerships. More sovereign and sub-sovereign governments have come to realize that they are effectively the insurers of last resort when catastrophes strike. Efforts are accelerating to narrow the protection gap between total economic losses and the portion covered by insurance. Because the governments often end up paying directly or indirectly for disasters, and their citizens feel their brunt in terms of higher taxes or reduced services, governments now increasingly seek to partner with insurers. This is a positive development for the industry, one that presents both an enormous growth opportunity and a benefit to society. Recent years have seen the launch of the African Risk Capacity, the Caribbean Catastrophe Risk Insurance Fund and the Pacific Catastrophe Risk Insurance Company. All are regional public/private partnerships, and all are enabled by technology-driven parametric triggers. Others are in the works, facilities designed to address a range of perils including flood pools, terrorism pools and the like, best managed by governments and industry working together. The “lower interest rates for longer” world we live in presents major challenges for investing the assets that support our policy liabilities. Insurers can no longer simply commit the bulk of their portfolios to investment grade corporate and government debt. Such a strategy just isn’t sufficient to pay claims and provide an adequate return on capital now. Insurers and the asset managers who serve them have responded by changing their asset mix, to increase allocations to higher-return, not-much-higher-risk securities (let's hope). More equities. Structured products and bundles of loans. Private equity funds. And recently, infrastructure debt, in both developed and emerging markets. Portfolio yields are rising, but only time will tell whether these new investment allocations provide an appropriate margin of safety in more turbulent market conditions. It’s really too soon to tell if the industry’s investments have become riskier, or if insurers have simply better understood the true risks of 21st century investing. A more subtle but truly profound change in Insurance 4.0 is the industry’s focus on talent. I’ve been in the insurance business more than 47 years, and I can say with complete confidence that insurers have never remotely spent as much time, money and thought on developing their future leadership as today. There has always been talk about this, but the action has never before matched the rhetoric. With approximately 25% of the industry’s top management retiring in the next five years, as Baby Boomers retire in large numbers, the urgency of talent development has finally dawned on CEOs and even boards. Competing for top young talent isn’t easy. The lure of technology firms, entertainment, investment banking and other seemingly more exciting career paths is undeniable. But insurers have to try to attract at least some of the best, because our industry’s role in society is so critical, and the talent gap is large and growing. For the first time in my career, CEOs bring up their programs for attracting, developing and retaining talent without me asking them first. More and more describe carefully thought-out programs that are so strategically important that they have high visibility with their boards. Believe me, this is a real change. These are the companies that will thrive over the long term. All of these initiatives, in technology, in the customer experience, in public/private partnerships, in new investment approaches as well as in talent development, exemplify Insurance 4.0. Not just doing what we have always done, hoping to be somewhat better, but developing new tools to address new challenges, new opportunities and new competitors from within and without the industry. This is because insurers are the financial first responders in this risky world. We rebuild communities and homes after disasters, we provide financial stability when families lose loved ones and we invest to build economies around the world, and in Insurance 4.0 we do it faster and better. As numerous and daunting as the changes of today are for the insurance industry, there will be more and greater challenges in the industry of tomorrow. The accelerating pace of change in our world not only demands new products, but presents entirely new forms of risk, as well. I referred earlier to the three generic kinds of disruption we are witnessing. Each of them carries new risk exposure the likes of which our industry has not dealt with before. Technology disruption, for example, presents a host of new risks related to our connected world. Insurers are struggling to find their place as autonomous vehicles loom large in our future. What does this mean for the motor insurance business, the industry’s largest line of coverage? Will auto manufacturers simply bypass the insurance industry and go directly to the capital markets for their enormous coverage needs? Will commercial drones inspecting property damage claims improve workflow and reduce reliance on human error? How will blockchain reduce expenses? The InsureWave project developed by EY, Maersk, Willis and GuardTime promises to slash marine insurance expense ratios by approximately 10 points! Other blockchain applications are in the works, and industry consortia like The Institutes’ Risk Block Alliance are finding new processes to save and make money every day now. Finally, cyber risk represents the world’s first truly global peril, including a cascading potential due to our connectedness. Clearly, there is premium growth potential in cyber, but the early promoters of long-term-care insurance might remind us that revenue growth potential does not necessarily portend long-term profit. Current cyber combined ratios are running around 60%. True loss experience, though, will take years or decades to be fully understood. Economic disruption also presents new challenges and opportunities for insurers going forward. Who will be the insureds of the future? How does a company insure Uber or AirBnB, let alone the people who use them and the facilities they work with? How does the collapse of traditional industry customers like retailers, coal companies and other industries that dominated the 20th century affect insurers? And by the way, is the industry prepared to cut 25% to 50% of its non-customer-facing jobs over the next decade as a “benefit” of AI and robotics? Some of the internal workforce can become part of the “hybrid system,” the human overlords who write and work alongside the smart systems to make their ultimate decisions, but not many. Social disruption is also a source of new risks. For nonlife insurers, reputation risk and privacy risk have enormous potential exposures, and little existing loss data to make rates. It’s much too soon to tell if providing coverage for these exposures will be viable or not. What are the insurance implications of the sharing economy, where more people want the ability to use things without owning them? Usage based insurance is gaining popularity, but also has the potential to significantly reduce premium volume. What about the “gig economy,” where many people hold several part-time jobs and no full-time job (meaning no benefits)? And how will life and health insurers cope with a rapidly aging developed world? Retirement savings is a looming crisis. And even if we manage to avoid pandemics (consider: If the Spanish Flu of 1918 occurred today, it could kill 400 million people), what are the implications of a hotter and more polluted planet for healthcare? Will wearable devices driving the Internet of Things provide a cornucopia of information to enable better health outcomes? See also: Insurance Service Rates Zero Stars   And what of the big issue: climate change? Both the World Economic Forum and Lloyd’s of London define climate change as a top socio-economic risk to our society. Climate risk is now considered a core strategic issue by governments, businesses, even the military. Certainly for the insurance industry, adaptation and mitigation, the need to make future provisions for inevitable damage, and send pricing signals to insureds of the true cost of risk, is a defining issue of our time. In a broad way, Insurance 4.0 means the industry is becoming part of an ecosystem of connected and communicating sectors that are symbiotic, not as “B to B,” business to business, or “B to C,” business to consumer, but “E to E”: everything to everybody, where the information exchange benefits all participants, but is not equally understood by all parties. The information flow is asymmetrical. We can all agree that reducing risk in our world is a good thing for society, but, if risk is materially reduced, will the size and relevance of our industry then shrink? A few words are also in order about the political capital the insurance industry possesses. I have written herein mostly about the risk management side of our business, and indeed it is the very reason we are in business. But even in a time of increasing public/private partnerships seeking to mitigate and remediate natural disasters, politicians and policy makers primarily ascribe our industry’s power and influence to our investment portfolios. Globally, the industry has over $35 trillion of invested assets. Assets that are invested in companies’ domiciliary countries’ government bond markets and are critical to those countries. Assets invested in their stock and corporate bond markets, as well. And now, insurers’ role, along with pension funds, as the only true long-term investors, means they are vital to infrastructure funding. Growth projects for the emerging world, and reconstruction financing for the developed world. This is what gets the attention of policymakers. And so this attribute is what we must nurture and promote to enhance our stature. Our most promising avenue to high esteem with policymakers is by securing their understanding of the vital role our investment portfolios play in helping them achieve their goals. And so, the world of Insurance 4.0 is not just one of new products covering new risks, but a whole new conception of what insurance can be and do. Some say that in the future, all companies will be technology companies. If that is even close to being true, then insurance companies, which run on information, must surely be technology companies to succeed. But can they all be? No. Some don’t have the innovation mindset to adapt. I know of many insurers that employ only slightly modernized versions of the same processes that have been around for well over 100, and have yet survived. They will continue to try to muddle along until forced. Capital providers to stock insurers are getting impatient about returns, and so merger and acquisition activity is increasing. Few small insurers can afford to become state-of-the-art technology providers, and many will have to seek stronger partners. Most mutual companies, which do not have those demanding investors to answer to, will just carry on, but lose share of market to faster-moving competitors. I believe Insurance 4.0 will feature an accelerating consolidation of the global industry, driven by the technology leaders taking over technology laggards. I also believe that more and better utilization of data by insurers will lead to better pricing and better loss reserving, reducing the amplitude of underwriting cycles. This, in turn, will result in the industry becoming less of a frequency business and more of a severity provider, a tail-risk provider. The greatest value of the industry to its customers will become having the ability to better forecast and the capacity to provide for extreme weather events and other large losses. Examples would include cyber, environmental and terrorism/civil unrest. This is yet another argument for industry consolidation around fewer, bigger, tech-savvy insurers, and for an even greater role for funding from the capital markets. Another rapidly emerging concept of Insurance 4.0 is the industry’s role in loss mitigation. I’m shocked to find that many people still think our industry exists solely to pay money to people after bad things happen. In fact, the industry’s role in mitigating and even preventing losses before they occur is the key reason for the rapid rise of public/private partnerships and invitations by governments to help them anticipate and reduce, not just pay for, losses. As an example, I participated in this year’s G20 meetings in Argentina , where, for the first time ever, a dedicated insurance summit was held. Industry and governments explored opportunities to work together better to reduce losses any way possible. It is becoming widely understood that every dollar spent on loss mitigation and prevention by governments saves five dollars of post-event spending. This gets to a basic disconnect that the industry must come to grips with: Insurers basically want to sell protection for when losses occur, which they have done for centuries now. Customers, on the other hand, now want to buy loss prevention and mitigation, in the form of broader advisory services. If real customer-centricity is to be achieved, making this fundamental shift in the business model of how the industry meets customer needs would truly mean we have reached Insurance 4.0!

Over the last few years, many insurance companies across the globe have started to integrate workplace automation tools such as robotic process automation (RPA) into their day-to-day business activities and processes. At this point, if you’re the highly competitive insurance industry, this technology is one of your most trusted tools for creating a competitive advantage. But while RPA is an extremely useful software solution that helps large-scale insurance companies run more smoothly and efficiently, saving them money in the long run, it does have its costs, some more salient than others. For starters, many RPA packages are very expensive, and implementation can sometimes take months. Deciding which specific processes to automate is another issue entirely; it’s almost as if insurance companies need an automated process just to sort out which tasks they should automate. It's crucial to take a top-down approach, to get a bird’s-eye view of all of processes, to be able to see which will benefit from RPA. This sort of Process Discovery approach can drastically accelerate implementation; we've seen companies cut their automation deployment time by as much as 80%. Comparing Process Discovery and Process Mining To understand what Process Discovery does and why that matters, it’s helpful to compare it to another technology that some companies have started using in conjunction with RPA: process mining. Both process mining and Process Discovery can be used to identify a company’s processes automatically, reliably and objectively – and they can both offer key insights to help the company decide which processes to automate and in which order. But the two solution types were developed for different reasons, and they gather data very differently. See also: 3 Keys to Success for Automation   Whereas process mining tools were created to help organizations get a better understanding of their processes more broadly, Process Discovery was created specifically to help enterprises get more benefit out of RPA and to do so with optimal speed and efficiency,. While some businesses rely on process mining to decide how to use RPA, the field of process mining was not created specifically to be used with RPA. Additionally, process mining tools gather data on a company’s processes based on system event logs created after a user has performed an action – an approach that can sometimes limit the technology’s impact on successful automation. First of all, extracting processes from logs is a time-consuming project, typically taking between one and four months, and it requires specially trained and qualified personnel. Second, system event logs cannot always measure work processes performed on certain software, such as Citrix and legacy systems. Third, even after a process has been identified and a company has decided to automate it, the company’s employees must still create an automation workflow from scratch before robots can start performing the process – a project that can be slow and time-consuming. In contrast, Process Discovery can gather data primarily through computer vision, which enables it to monitor a user’s activities in real time based on the information displayed on that user’s computer screen. This approach allows for a single business user to manage a company’s entire process of using Process Discovery, taking only one to three weeks from start to finish. And, because it does not require system event logs, Process Discovery can easily detect processes performed on any application – empowering a company to identify all its processes, regardless of platform. Perhaps most importantly, each time Process Discovery identifies a process, it can automatically a fully functional automation workflow for it. Then, employees have the option of fine-tuning the workflow before assigning robots to start performing it. This capability is a key factor in Process Discovery’s tendency to slash the time required to identify and automate a work process. Use Cases For RPA in Insurance RPA is already being implemented in the insurance industry, with the benefits spanning from the reduction of tedious processes and general costs, to overall reduction in human error. A few specific examples include:

1. Claims Processing — which involves a heavy amount of data and is very document-intensive, requiring people to collect a vast amount of information from various sources. Doing claims processing manually can be lengthy, creating issues for both customer service and operations. Process Discovery can help insurers easily find ways to automate their claims processing, while using RPA to quickly gather data from various sources to be used in centralized documents, allowing them to be processed much faster.
2. Regulatory Compliance — insurance companies rely on various compliance standards that include HIPAA privacy rules, PCI standards and tax laws, which all continue to change over time. To protect business operations, these compliance standards need to be followed, but often they are hard to keep up with for employees and clients. Through the implementation of Process Discovery, insurance companies can find ways to automate areas of certain compliance processes, to better regulate them with RPA.
3. Scalability — as the insurance industry only continues to become more competitive, quick and efficient, scalability is important for the success of any insurance company. RPA can be implemented to ease the experience of scaling up, allowing insurance companies to focus more on the company itself rather than the tedious day-to-day activities that take up employee time. Additionally, Process Discovery can find the daily tasks that can be automated, so that new employees can be onboarded faster and more efficiently, without getting bogged down by having to figure out which of their own processes they should automate.

Looking Forward RPA is becoming a popular solution among major companies across the insurance industry, and it is only going to continue to grow. How much benefit a company gets out of it depends largely on which tasks the company automates. And the more quickly and efficiently that company can choose the best processes to automate, the better it is prepared to maximize its RPA ROI. See also: Next Big Thing: Robotic Process Automation   Against this backdrop, Process Discovery does more than “automate the automation.” It gives insurance companies a head start on their competition by providing them with the greatest luxury of all: time. Specifically, Process Discovery empowers these companies to reliably choose the best tasks to automate, deploy RPA up to five times faster and save significant time and money as the insurance industry continues to grow and become more competitive. At the same time, it stands out for its ability to identify all work processes, regardless of their computer platform – maximizing the scalability of RPA. For insurance companies around the world, this is an exciting and promising time for RPA. By empowering these businesses to jumpstart their use of automation, Process Discovery helps to explore this technological landscape aggressively.

In North Carolina, a storm is brewing that highlights the healthcare industry’s influence and stranglehold over public dollars. An experienced civic-minded reformer with clout has emerged. Dale Folwell is a certified public accountant who served four terms as a Republican in the NC House of Representatives and was elected speaker pro tempore. Now state treasurer, he has responsibility for the State Employees’ Health Plan and its 727,000 employees, dependents and retirees (including my wife, a sign language interpreter in the Charlotte-Mecklenburg  school system). The plan spends $3.3 billion annually, making it the largest healthcare purchaser in the state. “Right now, the state health plan and members spend more on healthcare to employees and retirees than is appropriated for the entire university system or for public safety,” Folwell says. He has made it his mission to bring reason and stability to that program. Beginning Jan. 1, 2020, Folwell proposes to switch the health plan’s reimbursement method to reference-based pricing. The approach, around a decade and now gaining momentum with employers around the country, would in this case pay 177% of (or nearly double) Medicare reimbursement. The health plan’s program, called the Provider Reimbursement Initiative, would allow providers a reasonable margin but would cut an estimated $300 million annually from the plan costs and another $60 million from enrollees’ costs in the program’s first year. The health plan’s board of trustees unanimously supported the proposal. See also: 5 Health Insurance Tips for Small Business   In promoting his plan, Folwell has described some of the issues he’s faced. The most important is that, under longstanding arrangements with the state’s providers and the plan’s administrator, Blue Cross of North Carolina, the health plan can’t access pricing information on the services it's purchasing. “I know what I’m being charged, but I don’t know what I’m paying,” Folwell explained. “For years, the plan has paid medical claims after the fact without knowing the contracted fee. It is unacceptable, unsustainable and indefensible. We aim to change that.” “I said [to Blue Cross], I know what you are charging, but what am I supposed to pay? There is no transparency,” Folwell said. “Blue Cross would not tell me, and there are laws on the books that say they need to tell us. The healthcare system has worked long and hard to develop this broken system, and they’ve been completely successful.” Not surprisingly, the state’s healthcare lobby is gearing up to protect its turf.  State Rep. Josh Dobson, a McDowell county Republican, is expected to file a bill that would block Folwell from instituting the plan. Steve Lawler, president of the North Carolina Healthcare Association, one of a half dozen health industry associations with powerful lobbies, has claimed that Folwell has resisted discussion. But Lawler does not appear to have publicly addressed the transparency or excessive cost issues that are central to Folwell’s complaint. While the battle is shaping up to be a high-stakes, all-out fight, the healthcare lobby may not simply get its way this time. Robert Broome, executive director of the formidable State Employees Association of North Carolina, favors Folwell’s plan and said, “The state health plan board made a very sound financial and public policy decision that will save money for taxpayers and will save money for plan members, while bringing some common sense to how we pay for healthcare. It boggles my mind that folks could actually line up and be opposed to this.” The beauty of Folwell’s strategy is that it is grounded in doing the right thing, and he has made it very visible to the Carolina rank-and-file. When challenged, politicians and business leaders will likely have to openly support the public interest over the healthcare industry’s interest, especially an industry that has become wealthy by taking advantage whenever possible for decades. Folwell’s bold initiative takes its cue from a groundbreaking reference-based pricing initiative by the  Montana State Employees Health Plan, with about 30,000 enrollees. That program’s success has since led the Montana Association of Counties to implement a similar program. Here’s an introductory video on how that program works, and another one here explaining how the payment is calculated. As healthcare costs have relentlessly risen, much of it due to opaquely excessive care and unjustifiable unit pricing, federal, state and local government workers around the country have seen their benefits slashed and their contributions drastically increase. The initiatives in North Carolina and Montana may be the leading edge of a drive by purchasers exercising their newfound market leverage. There’s every reason to believe they can be replicated throughout the country by governmental and non-governmental purchasers, fundamentally moving our broken healthcare system in the right direction. See also: Avoiding Data Breaches in Healthcare   It’s also important to remember that reference-based pricing is just one of several dozen powerful quality- and cost-management arrows in a larger healthcare performance management quiver. Smart employers and unions around the country are finally beginning to go around their health plans and deploy high-performance solutions in drug management, musculoskeletal care, cardiometabolic care, imaging, allergies, claims review and many other opportunity areas for quality improvement and cost containment. Folwell may well be the champion we need at the moment, and it’s possible he could achieve something meaningful. If governmental and business leaders follow his lead in North Carolina and around the country, it would be a key first step to drastically changing our health system for the better.

The diabetes industry is far more sophisticated than the wellness industry when it comes to dramatically overstating outcomes and savings. Excluding vendors by the Validation Institute like It Starts with Me and US Preventive Medicine, wellness industry claims can easily be shown to be fraudulent. It’s equally easy to back that assertion with a $3 million reward, knowing that no wellness vendor or consultant or “guru” will ever try to claim it, even though I’ve made it ridiculously easy, accepting the burden of proof and only allowing myself to pick one of the five judges. By contrast, unlike the more transparently dishonest wellness industry, the diabetes industry’s “outcomes” can only be challenged, rather than simply invalidated on their face. And no way I’m offering a reward. (I’ll make an even-money bet, though – same rules.) There could be actual savings from these programs, but these five examples of biostatistical sleight-of-hand suggest that those actual savings, if any, are far more modest than claimed savings. 1. Conflating verb tenses Here is a claim by a diabetes prevention vendor showing ROI on its program. One would be excused for thinking that these results had actually been achieved and validated, given the choice of verb tense in the graphic: Looking harder at the language, note that the phrase is “recoup their investment,” not “were validated by the Validation Institute as having recouped their investment.” Yet the verb “saved” is in the past tense. And the heading says: “How quickly employers recoup,” whereas the only article cited in the footnote analyzed Medicare patients, whose chronic disease are far more advanced. Further, digging into the actual article (financed by the vendor) yields the following sentence [emphasis mine]: We used a Markov-based microsimulation model in which a person’s characteristics are used to predict health outcomes in the upcoming year. Elsewhere the article says: We applied 26-week weight loss results to simulate potential health and economic outcomes  Therefore, this entire claim is based on a predictive simulation model that somehow morphs into a clear statement showing precisely $1,338 “saved." Speeding up time As can be seen from that graphic, this particular vendor is claiming a huge ROI in two years for employees with pre-diabetes. However, the Centers for Disease Control and Prevention says: One in 3 adults in the United States has pre-diabetes (fasting blood glucose, 100–125 mg/dL); 15% to 30% of those adults will develop type 2 diabetes mellitus within 5 years. See also: Diabetes: Defining Moment of a Crisis   So only a small minority of pre-diabetics will develop diabetes in five years. And then, of course, it would take years for avoidable complications to develop even if no one “manages” the newly diabetic employees to avoid them. How, then can $1,338 of expenses per participant be claimed to be avoided by keeping these employees from getting sick in a measly two years when most of these employees aren’t going to be sick five years from now even without an intervention? Comparing participants to non-participants Speaking of “participants”… Let’s be very clear: Whenever you see the word “participants” in a study report, the claimed outcome is vastly overstated.  Participants will always outperform non-participants, regardless of the intervention. The National Bureau of Economic Research proved this using a randomized control trial. Further, on three other occasions, biased researchers trying hard to prove the opposite accidentally showed that 100% of their apparent “savings” were attributable to participation bias, meaning 0% to the program. (The bias won’t always account for 100% of the claimed savings, of course.) The best example of this bias? A Koop Award-winning wellness program accidentally revealed that participants hugely outperformed non-participants even when there was not a program to participate in. In this slide, note the X-axis. The groups were separated in 2004. The program was implemented in 2006. During the two years between separation and implementation, the participants “saved” almost 20% vs. the non-participants by doing nothing. This isn’t a secret. Participation bias is well-known to insiders in the diabetes industry. Yet every single diabetes vendor ignores this bias (or “matches” participants to some medical charts), while most also fail to disclose the dropout rate – and the fact that most employees who drop out of programs do so because they aren’t getting results. Projecting participants’(!) short-term weight loss into the future Essentially all of them do this, too. Very large-scale studies have shown that only the smallest percentage of people who lose weight keep it off. There is no reason to think that somehow a few diabetes vendors have unlocked the key to long-term weight loss that has eluded the rest of the world and all academic researchers, especially when the vendors don’t follow employees for the long term or count dropouts. Rhetorical and arithmetical sleight-of-hand This single set of claims from a diabetes vendor looks quite impressive at first glance: Now look at it again, paying special attention to the underlined words: Once again, there is that word “participants.” That is just the tip of the invalidity iceberg. Six variables were tracked…and yet 27% of active, motivated participants weren’t able to reduce any. Randomly, three should decline. And many of the other 73% of participants could reduce only one…and this is considered successful? Further, these statistics look like averages on first glance –but they are not. They are examples (“improvements such as”) of reductions that maybe a few participants achieved. I can guarantee that, absent statins, virtually nobody reduces triglycerides by 29%. Regression to the mean Diabetes vendors often split the population into high and low utilizers and claim credit for reductions in high utilizers (whom they manage) while counting the utilization increase in low utilizers toward their “savings” — as though last year’s high utilizers also would have increased had it not been for the program. In this case, there are two giveaways that the 59% decrease in admissions is totally or mostly regression to the mean. The first giveaway is observing which diagnostic categories account for the bulk of an employer’s admissions. This is the top 10 list, in descending order. (“Del” means “delivery.”) To begin with, the majority of admissions on this Top Ten list – and about a third of all employer-paid admissions — are birth events, not affected by a diabetes program. You don’t see diabetes on this Top Ten list. That’s because diabetes itself  in the last year for which complete data is available accounted for less than 1 admission per 1,000 commercially insured people (126,710 admissions in about 150 million privately insured people). Diabetes admissions don’t even crack the top 25. Because total employer-paid admission rates are about 50-60 per 1,000, eliminating every single diabetes event would decrease admissions by – get ready — about 2%. See also: Putting Digital Health to Work   Reducing admissions by 59% would require wiping out not just every diabetes admission but also almost every admission not related to childbirth. The vendors might argue that temporary weight loss and eating better reduce other admissions, too. However, the only non-childbirth events in the top 10 are septicemia, joint replacements and pneumonia. Good luck crash-dieting your way out of those. The other giveaway that this seemingly impressive “decrease” is regression to the mean is that the non-program-members (the vast majority of the population here) regressed upward to the mean. There is no reason to think that admissions in the average employee population are going to increase 4%. Over time, inpatient admissions in the commercially insured population are falling. Using a selection methodology that is partly dependent on having high claims in the baseline assures both this apocryphal 55% “decrease”– and the equally apocryphal 4% increase in non-member admissions. For instance, about a third of all heart attacks occur in people who did not have a pre-existing CAD diagnosis. Therefore, if you “manage” patients with diagnosed CAD, you will show a one-third reduction in heart attacks in that population, simply because you didn’t tally the heart attacks in the cohort you didn’t manage. Then you’ll separately tally the employees without a pre-existing document CAD diagnosis, note the increase and say: “See how fast heart attacks increased in the population we didn’t manage.” The right answer, of course, is to add the heart attacks in both cohorts back together. Naturally, you’ll find no reduction at all. Coming soon: What is the Solution? The next installment will cover how you should measure outcomes to avoid being taken advantage of and to see what really does happen in your population when you implement a diabetes prevention program.

In a more virtual world, socially efficient ecosystems will generate more customer loyalty than do bricks and mortar, big advertising budgets or legacy insurance brands.

The relentless conversion of analog to digital communications and information over the past 15 years, bolstered by the voracious appetites of consumers and an impressive array of AI technologies, has already fueled real industry transformation, spawning the connected insurance ecosystem. This connected network partnership of complementary services will begin to deliver levels of insurance customer experience excellence approaching those provided by established ecosystems such as Amazon's.

McKinsey predicts 12 distinctive and massive ecosystems will emerge around fundamental human and organizational needs, which will account for $60 trillion in revenues by 2025, or roughly a stunning 30% of all global revenues. These insurance ecosystems, powered by AI technologies across the entire enterprise, are quickly transforming the industry across the value chain.

Chatbots are taking policy servicing inquiries and triaging them expertly. First notices of loss are being self-reported by policyholders using smartphone cameras and in real time from connected vehicles, homes and businesses, investigated and documented by drones, evaluated and settled in days instead of weeks and subrogated electronically in a frictionless process.

Almost every one of these functions is supported by seamlessly connected third-party technology, software and databases. Insurance applications are automatically pre-filled after requiring little more than a few items of personal information. Life insurance policies are being bound simply and digitally and without the need for a medical exam. New hyper-personalized insurance products are being developed and brought to market with lightning speed.

Next Inflection Point: Real Loss Prevention

But the next major insurance industry inflection point will be its most impressive and game-changing. The power of networks has already become apparent, but in 2019 it will come of age in insurance. Driven by the torrents of information that will be transmitted by billons of connected things and turned into actionable insights and decisions through the application of artificial intelligence, claims will actually be prevented, turning carriers into risk managers in the truest sense.

See also: It’s Time to Act on Connected Insurance 

Extending this trend, advanced driver assistance systems and autonomous and connected vehicle safety programs will continue to reduce accident and claims frequency and transform personal auto insurance into manufacturer and software liability insurance.

Wearables will monitor the health and wellness of life and health insurance policyholders, broadcastings warnings of diabetes, high blood pressure and other conditions, likely avoiding medical claims and even more serious risks.

Connected home sensors will notify home owners and first responders of potential risks such as fires, water or gas leaks, thereby minimizing and even completely avoiding costly claims.

Consequences of Connected Insurance Ecosystems

However, the impressive benefits emanating from this new connected insurance ecosystem will come at a price – namely the erosion of personal privacy, the growing threat of cyber theft and the need for ethical oversight of the uses and applications of artificial intelligence. Related consumer protection regulations and standards will emerge and impose new requirements and limitations on the various custodians of this personal information.

Another consequence of the adoption of AI technology will be its impact on the nature of work. Automation will free knowledge workers from repetitive tasks, enabling them to focus on higher-value functions and augment human intelligence, enabling faster and better-informed decision making.

Significant change management, re-training and continuing education of workers will be critical for workers to operate and thrive in the new world of human/machine partnerships.

Strategic Partnerships Become Mandatory

The insurance ecosystem and the relevant data being generated is rapidly expanding and becoming connected. No single company, regardless of its size, has all the expertise, resources, relationships and necessary understandings of every co-dependent industry. Cross-industry partnerships and alliances will speed time-to-market, expand market reach for each participant and add more value to the products and solutions consumed by their common customers.

Insurance Evolves from Product to Services

As a result of these changes, the insurance business model will also change to reflect this new and different role of insurers as service providers whose “products,” delivered through ecosystem partners, will be priced on the basis of the economic value of their risk-avoidance potential. The products known today as “insurance” will evolve into the services known as “protection” as loss avoidance becomes the most valuable benefit and the need for loss reimbursement diminishes.

Insurers can also help protect customers from the increasing threat of cyber attacks, which are enabled by the exploding number of connected devices in their lives through which their information is exposed.

See also: Insurance: On the Cusp of Disruption 

In this more virtual, less physical world, trust will be gained digitally and socially efficient ecosystems (think Amazon) will generate more customer loyalty than do bricks and mortar, big advertising budgets or legacy insurance brands.

You can find the article originally published here.

I wrote a column nearly 10 years ago about people and organizations and their reluctance to change. The title was: "Innovation – Incubator or Graveyard?" The first two paragraphs of the article follow: "Dale Dauten in his Sunday column got me thinking with the closing statements: 'If you have an idea you want to nurture, don’t plant it with the forest of the status quo; place it in a fresh field, away from the old growth. Give it a new group or try it in an experimental store, surrounded by people who want it there, who want it to thrive,' and 'Which brings us to an IBP (important business principle) with a lovely Zen weightless heft: It’s easier to change people than to change people.' "Dale is right on both counts. My question is: 'Can you, your team and your company innovate?' Before you say yes, remember, Casual Friday is not innovation! Does your organizational culture embrace the new, innovation, or is the status quo your lover? To quote Davis Balestracci (Quality Digest Magazine), 'Quite simply, culture is created by what is tolerated.'" See also: Wisdom From Some Very Smart People   As I’ve aged (many of y’all know me too well for me to claim I’ve matured) I realize that transformational changes (giant steps) are very challenging. For this reason, I’m going to offer a simple process that might be worth considering as you want to facilitate incremental change (baby steps moving in a different direction than your status quo). Consider this an idea that is not too threatening nor too high risk as to invite pushback from your team but still worth pursuing as you try to move forward into tomorrow’s world. The greatest benefit from such simple initiatives is the opportunity for you and your team members to succeed in an easy challenge so you build confidence in the processes of innovation and planning. Think of this as basic training for bigger challenges. A few days ago, I opened up a magazine I was reading a month ago. I found six bullet points I had scribbled onto one page of the journal. I upgraded this list with four more ideas that I believe are workable on some strategy or innovation you may be considering for the future. I offer this “to do” list for your consideration:

1. Acknowledge that, “None of us are as smart as all of us (Ken Blanchard).” Get input from all members of your team.
2. Facilitate communication. Know that communication is the negotiation of meaning. When everyone understands and engages, your chance of success is much greater.
3. Create a pond or pool of new perspectives and ideas. Don’t assume what you’ve done in the past is the best way to do something in the future. Discuss, debate, innovate, etc. until the ideas shared start to build a constituency of believers. Listen for, “Hey, this really might work!”
4. “Fish” this pond of ideas for what’s right for the challenge and your culture as it exists today. Test the first idea that you hook or hooks you. If that doesn’t work, throw it back in and grab another.
5. Reality-check your plan and process. Tweak as needed. Go back to the drawing board – if necessary.
6. Now take action – JUST DO IT!
7. If it works, CELEBRATE.
8. If it bombs, PICK YOURSELF UP, DUST YOURSELF OFF AND START ALL OVER AGAIN.
9. Know that there is wisdom in scar tissue -- grow from the lessons learned. Count heads and fingers and toes. If no lives were lost and no serious damage was caused – commit to continued efforts at innovation and experimentation. Your future depends on this.
10. Believe there is GENIUS in creative efforts – successful or unsuccessful. Find it! Remember, “Curiosity killed the cat, but satisfaction brought it back.”

See also: A Contrarian Looks ‘Back to the Future’   In tomorrow’s world “the greatest risk is not taking one” (AIG annual report). Commit to change initiatives. Build your future on innovation, not bureaucracy. Understand the process of success is defined by some as, “Fall down seven times, stand up eight!” In tomorrow’s world of incremental change you must THINK NEW! Happy NEW Year!

“To be, or not to be, that is the question: Whether 'tis nobler in the mind to suffer The slings and arrows of outrageous fortune, Or to take arms against a sea of troubles And by opposing end them. To die—to sleep, No more; and by a sleep to say we end The heartache and the thousand natural shocks That flesh is heir to: 'tis a consummation Devoutly to be wish'd. To die, to sleep….” ~Hamlet I’m not going to paste the entire Hamlet speech here, but you can see that he was going through a very tough decision-making process about a form of death he wanted to pursue. Technology decisions being made in organizations should also be deemed as do-or-die if you want to continue to exist. I know: very drastic. But let’s face it, competition is fierce, startups are popping up ready to grab your market share and the organizations that survive look at expenditures from a strategic viewpoint. From an application development lens, questions include: Should we build, whether in-house or outsource, or should we buy and integrate? See also: How Insurtech Helps Build Trust   The ugly truth: Developers LOVE to build. The maker inside of us wants to create. Integration projects aren’t deemed as fun. I worked with an organization where the IT department predominantly built software solutions. Need a scheduling tool? “I can build this.” Need a workflow solution? “I got this.” Developers would make any excuse known to mankind to devalue other products in the marketplace. Another ugly truth. Build projects are EXPENSIVE and take forever even if you outsource them. Why would you build a scheduling tool? There are thousands of such tools. The same is true with workflow. You may be thinking: Such problems could never happen! Why would someone sign off on the project if such problems were ahead? If you don’t have the right leadership -- your technology reports to a non-technologist or you don’t have the right project oversight -- your organization might very well make this kind of mistake. Technology dollars are precious, so why spend your time, resources and capital on projects that don’t propel your organization forward. Why spend the money building a scheduling tool or workflow solution? Why not take the opportunity to integrate with someone who has already built the solution? Here is the challenge I would offer you if you sit in project prioritization or new initiatives sessions, regardless of your department and role: Has due diligence occurred to look at software solutions that may solve the need? If the answer is no, figure out a way to start the process, or you will be in the do-or-die situation. If the answer is yes, vet various solutions. This can’t be left to IT only. The vetting must be done by a mixture of IT and the business, with equal decision-making power. Vet the various solution providers and find out how you can integrate while building the other pieces. Ask yourself: As an organization, what is your mission? Are you in the business of developing software or using software to serve the mission? Why would a life insurance company want to develop its own workflow tool, its own policy admin systems or its own claims systems? There are vendors whose sole purpose is to make your organization run better. See also: When It’s Better to Build In-House   Use your brightest IT talent in innovation, not in building solutions that exist in the marketplace. Figure out how to transform your organization using best-in-class technology. Integrate with solution providers and startups. Build what others cannot do, and innovate on solutions to beat the competition. “To be, or not to be, that is the question….”

The rapid technological evolution of the insurance industry will require independent agents to turbocharge their adoption of digital tools in 2019. Consumers have become accustomed to the convenience afforded by artificial intelligence (AI) when it comes to completing day-to-day transactions. Voice assistants allow people to ditch the keyboard and conduct searches by talking to devices. Chatbots enable customers to have personalized interactions tailored to fit their needs. This is the world in which agents are operating, and, to grow, they will have to leap forward and implement more of these technologies into their current offerings. Here are five predictions that will have a big impact on agencies’ abilities to compete and grow in 2019: 1. Voice search will become more common for insurance. The rapid adoption of smart devices powered by manufacturers like Google and Amazon are compelling consumers to speak to robots about their needs from their homes and offices and on the go. Insurance is no exception. Predictions indicate half of all searches will be conducted through voice-assisted technology in the near future. As more carriers index their local agents to work with voice services like Alexa and Siri, agencies must ensure that their websites and digital assets respond to advances in voice search. Content strategies will expand beyond conventional keyword campaigns and target phrases to sentences that mimic natural language used between two humans in conversation. See also: Insurtech: Revolution, Evolution or Hype?   2. Insurance agent bots will be humanized to create authentic interactions. Insurance agencies must adopt technology solutions that move their client-focused insurance buying experiences to the online environment. With deep knowledge and expertise in developing personal connections with their customers, agents have the advantage over insurtechs that are limited to simple mono-line customer interactions. Through customizable communication enablers, including chatbots and smart forms driven by automation and artificial intelligence, agents will elevate the emotional intelligence of their websites, social media and emails to speak to the consumer authentically. 3. Google mobile first represents an important frontier for insurance products. Google mobile-first indexing was formally launched in March 2018 and reinforced in September, which means websites will be indexed and ranked based on the mobile version of their content. Although desktops historically led the way for consumers to research and find products and services that met their needs, it is more critical than ever that agents have mobile responsive sites to not only grow but also maintain the highly coveted search engine real estate that they have worked for years to establish. 4. Texting will increasingly be used to connect with customers. The rise of mobile users will have an effect on how agents communicate. Texting is a critical line of communication with millennials and will be the preferred method of contact for the next generation of insurance customers. For better effectiveness, texting tools are expected to be integrated with existing email and CRM systems, and innovations in rich communication services (RCS) promise to deliver better app integration, secure transactions and branding for businesses to text. 5. New micro-experiences will become the building blocks for digital expansion. Agencies are differentiated by the niche markets they sell to and service better than their competitors. Investments in digital content campaigns and user interfaces that cater to specialized prospect and customer segments will rise in 2019. These micro-experiences will enable agencies to have access to a market with carriers, as well as the ability to quote, bind and service insurance online. Micro-experiences will typically focus on commercial lines and specialty insurance for niche markets, such as programs for craft breweries, energy contractors, concrete pumping or marijuana dispensaries, to name a few, and they will offer new opportunities for agencies to expand quickly with digital building blocks that can be easily integrated into existing business and workflows. See also: Digital Survival Tools for Agents   2019 will be the year where agents take significant technological leaps – from responsive mobile websites and texting with customers to humanized chatbots and the ability to search for products using voice commands. Agents will look for solutions that allow for the sharing of customer data, requiring platforms to become more open and work together to better them. The New Year will be the start of the next era of independent agents characterized by openness to new digital tools and rapid adoption of the latest technologies

In today’s online insurance shopping environment, many lead sellers and buyers work well together toward the same goal of delivering a great customer experience. But, it hasn’t always been this way. For example, in the mid 1990s, when InsWeb sold the first data lead produced from an online insurance quote form, our industry was a lot less focused on customer experience and a lot more focused on selling as many leads as many times as possible to anyone that would buy them. As you might imagine, the self-interest of lead generators, lack of industry standards being adopted and increasingly complex privacy regulations meant the industry would struggle to survive. Many learned the hard way (consider the demise of Bankrate Insurance, outlined further in this article), while others developed technology and standards to drive a better customer experience and are thriving today. The Beginning of the Lead Seller-Lead Buyer Relationship The relationship between online lead sellers and lead buyers began as a very simple one, over 20 years ago. The lead seller was also the lead generator and dealt directly with the lead buyers. At the time, aggregators did not exist. In the early 2000s, small and medium-sized publishers realized they could make money by generating leads. They would sell these leads to the larger lead generators who had direct relationships with the lead buyers (the insurance brands). This was the start of lead aggregation. And it appeared to be a logical business decision that was good for all parties involved: the generator, aggregator and buyer. The problems began to emerge when buyers and sellers started to exchange leads without any central record of the activity. Without third-party certification, and no industry standards, some lead generators and aggregators were driven more by the incremental monetization opportunity than by win-win-win relationships where lead generators, lead buyers and consumers all benefited. What’s more, the ping-post process evolved to allow an unlimited number of sellers and buyers to come together. On the surface, this should have created an efficient market with a variety of options for the consumer. In reality, without any standards or third-party verification, consumer information began to travel to dozens of lead buyers, creating an overbearing, intrusive consumer experience rife with fraudulent transactions. This is when the wheels came off the bus. See also: Insurtech Ecosystem: Who Will Eat Whom?   The End of the Beginning By 2010, relationships between sellers and buyers became very strained. Rules were in place to protect all parties: the lead generator, aggregator, lead buyer and the consumer. Some examples included:

• no selling of leads beyond a certain number of buyers
• no manipulation of the consumer’s data (many times, manipulating data would lead to higher monetization)
• no recycling/remarketing of leads at a later date
• no fake leads
• no leads based on incentives
• no unauthorized sales to stated end buyers (i.e., no selling of the lead to a captive agent that already bought the lead)

Unfortunately, these rules were not always followed, and there was no way to effectively know who was compliant, let alone how to enforce them. As a result, many carriers and agents experienced a noticeable decline in lead quality. While some of the aggregators and generators played by the rules, a few meaningfully sized “bad actors” wreaked havoc, making it difficult for the honest providers to survive. The industry went through a period of contraction, with several acquisitions resulting in less transparency, less trust and more gaming of the rules to benefit bad actor sellers over the customer or the lead buyer. Insurance carriers (the lead buyers) lost control, and the situation became dire. The industry tried to self-regulate. Some lead sellers discussed sharing data about the origin and history of a lead, as well as proof of compliance. In other words, each lead seller was expected to follow a set of standards loosely agreed upon by multiple parties and documented by parties like the LeadsCouncil. There were a lot of good folks trying to create valuable customer experiences, but the bad behaviors by some were making it difficult for everyone. For example, bad actors were selling leads to multiple insurance providers or holding leads to sell again and again—in other words, recycling leads. Other sellers were aggregating leads and misrepresenting this fact, while others would acknowledge they were aggregating but would misrepresent the actual origin. Simply put, by 2010 our industry lacked transparency and accountability. Consequently, the inability to identify and eliminate old, recycled, dupe, fake and no-intent leads led to the deterioration of lead quality. We were witnessing the beginning of a downward spiral where carriers and agents were directly affected by the decline in quality. Many carriers reallocated budget to hedge on the lead generation channel, and thousands of agents discontinued buying leads altogether. Pushing the Reset Button By 2011, the industry realized that self-regulation would not work. A new solution was needed. With advances in technology coupled with the widespread belief that a third party was required to certify leads, the problem certainly seemed solvable. It was at this time that a concept called LeadiD (the company that is now Jornaya) led the effort to leverage technology and data to promote confidence, clarity and trust in the lead generation space. The concept was simple: Lead generators placed a simple script on each page of their lead funnel. Each time a consumer arrived on the website, a unique LeadiD token was created for the lead event, and key data about the lead event was captured in a privacy-friendly manner by an independent, third party. No consumer data and no proprietary lead generator data was at risk while independent third-party validation was provided to rebuild both the trust and transparency of lead generation across the industry. The LeadiD token served like a Vehicle Identification Number (VIN) for the lead event. When a lead was presented to a prospective buyer, the LeadiD token was also included. The buyer could thus query Jornaya, an independent, third party. Similar to using a VIN with CarFax, buyers were able to validate in real time the key attributes about the origin, history and proof of TCPA compliance associated with each lead. The factual data provided by an independent observer, Jornaya, allowed the buyer to validate the lead’s value and minimize TCPA risk. The process effectively cleansed the waters made toxic by bad actors, unenforceable standards and lack of third-party certification. Lead buyers began to buy more volume programmatically, with the trust baked into the transaction. Lead aggregators used the same LeadiD technology to ensure transparency with their affiliate lead sources. The good actors, such as All Web Leads jumped on board immediately, and many followed. For others, it took some convincing. While many eventually began creating and passing LeadiD tokens, there were a few large holdouts. Which raised the question from carriers, why hold out? Implementing LeadiD was free, and sharing LeadiD tokens was also free. With firms like All Web Leads, ReviMedia (now PX), Quinstreet, Apollo Interactive and Hometown Quotes working together to require and share LeadiDs, there was a clear movement underway. An industry course correction was beginning to happen. A Lead Generator “Verified” Solution Fails Spectacularly Not long after LeadiD tokens started flowing throughout the ecosystem, Bankrate Insurance, one of the largest sellers at the time, created its own “verified” solution—providing data elements such as lead age and consumer consent (for TCPA compliance purposes). For its larger lead buyer customers, the company would also provide “exclusive” access to other attributes of the lead event to make buying decisions. I’ll never forget a meeting with senior management at a large insurance carrier alongside Bankrate executives. The carrier was listening to Bankrate discuss why the carrier did not need a third party solution, because Bankrate’s approach would solve all the problems. The vice president at the carrier asked, “Why would we trust you instead of an independent third party?” What’s more, the executive stated unequivocally: “Even if you are trustworthy, it’s very clear it’s not working for each lead provider to be self-regulating. We support a single, industry solution, with independent certification, and we’re wondering why you wouldn’t support the same.” This executive understood that while the Bankrate Insurance “verified” solution may have been technically viable, a lead seller taking necessary steps internally to clean up and verify its own traffic was actually a terrible idea fraught with problems. This solution never gained traction and did not last very long. Here are five reasons why an in-house “verified” solution provided by a publicly traded lead generator did not work:

1. Buyers had no way to independently verify the accuracy of the origin and history data contributed by the seller. “Because I said so,” simply wasn’t good enough.
2. In considering a lead, buyers could not confirm consumer consent to their approved TCPA compliant language (and font size/contrast requirements) across hundreds of websites owned and operated by the seller and accessed by millions of consumers across multiple device types.
3. For TCPA complaints and lawsuits, no independent, objective verification of a consumer’s consent to be contacted existed. Simply put, defense amounted to relying on attorneys or the courts to believe the lead generators, once again, “because they said so.” In contrast, independent certification has proven successful in mitigating TCPA risk time and again.
4. Because they didn’t receive the “exclusive” access to certain data, smaller lead buyers were not playing on a level playing field. Exclusive data sounds good until others realize it’s not actually exclusive and that it's not possible to identify or stop this behavior. Already rejected leads often ended up back with the buyers because the leads are aggregated and sold to them by a different lead seller, without the buyer being able to know this is occurring.
5. The temptation to falsify the data was enormous in the face of revenue and profit margin guidance and expectations, and many cases of false data were identified with a third-party solution, but were very difficult to identify with self-regulation.

It quickly became apparent to lead buyers that the primary purpose of those unwilling to pass LeadiD tokens was to handicap the transparency process and increase their own revenue and profit margins. Buyers equated the approach to “the fox guarding the hen house.” Consequently, lead quality of these sellers continued to decline. Some sellers exited the business altogether, while others were acquired by companies willing to create and pass LeadiD tokens. An efficient market was starting to grow built on trust, standards and transparency. Like a stock market, the lead generation marketplace can, and should, thrive when buyers and sellers offer transparency and both sides use independent, standard and trusted insights to make data-driven and consumer privacy-friendly decisions. As a result, everyone can win. Well, everyone willing to embrace true third-party transparency and industry standards. Here is a checklist to help understand in-house “verified” solutions versus an independent, industry-wide, third-party solution. Where We Are Now Today, Jornaya witnesses the vast majority of insurance lead events. We are in this privileged position because of the forward-thinking lead generators and aggregators who have embraced Jornaya as the third-party certification source for the industry. Thousands of lead buyers (aggregators, carriers and local agents) rely on the independent transparency of lead origin and history that a LeadiD token enables. With that transparency comes trust, better lead seller/buyer relationships, stronger performance, TCPA compliance and a smarter and safer consumer experience. See also: How to Build an Innovation Ecosystem   It’s been a fascinating journey, and we reinforce this story often with our customers. Many have experienced this journey alongside us and have witnessed the trials and tribulations of the evolution. Our partners and customers across insurance, mortgage, banking, real estate, home services, automotive and education appreciate that LeadiD tokens flow freely throughout the ecosystem and have programmed their lead bidding and buying technologies accordingly, expecting a LeadiD token just like any car evaluation system would expect a VIN. The collective voice of lead buyers and like-minded, collaborative lead sellers will assure we maintain an ecosystem with trust and transparency. I don’t say that just as GM of insurance at Jornaya, I say it as someone who has cared deeply about improving the insurance consumer experience and insurance provider productivity since we all started creating and exchanging leads over 20 years ago. Frans van Hulle, CEO and co-founder of PX (formerly ReviMedia), sums it up nicely in his recent article: “If you have something to hide, you’ll fear transparency. If you don’t, you won’t.” Most lead sellers have benefited by participating in this journey with us, and many insurance carriers have helped us get to this point. We all gain by being able to transact leads using a single, trusted currency (LeadiD tokens) that ultimately creates valuable consumer experiences. As such, we also enjoy playing the role of connecting like-minded lead sellers and buyers because we know how beneficial it is for all involved.