Industries all over the world have faced a digital renaissance. Companies like Amazon and Uber have grabbed the markets with amazing user interfaces (UI) and bespoke user experiences (UX), pushing them to the top of their game. Now imagine a world where insurance is effortless, something that tirelessly works in the background while you enjoy your everyday life. A world where insurance is easy, but, most importantly, a world where insurance is not intimidating. How do we ensure that? Insurance, say hello to Advanced User Experience! Is Now the Right Time? Until now, the actual user has not been given the required importance in digital strategy planning. But responsive design has flourished over the past few years, giving birth to a new era of device friendliness. The web, as a whole, has experienced a shift in consciousness. Online services have become easier to use, apps have become more intuitive to navigate and products have been even more delightful and engaging to interact with (because this isn’t an episode of "Black Mirror"). While a visually attractive user interface might be important, customers would rather get the right information delivered to them at the right time and through the right channel – whether they are researching, purchasing or servicing. Some work has been done by many insurers on customer journeys and persona mapping, but the true marriage of big data, deep learning technologies and behavioral analytics for a "here and now" experience has not been successfully achieved by most. The influence of the retail industry is on every user – customer, home office staff and the field force. Users expect a "data-driven," "contextual" and "simple" experience at the right time, at the right place and through the right medium. Insurers are realizing that true digital transformation not only takes into account the end customer experience but also requires an inclusive strategy for talent attraction and retention. See also: 4 Ways to Improve Agent Experience   In most of the current environments, the field force often struggles to find the right data in CRM and other systems of record, let alone use it quickly and effortlessly. Meanwhile, insurers are burdened with business silos, disparate technologies, form-driven user interfaces and limited analytics that keep their user experience in the dark ages. Keeping the lights on still takes priority, time and resources, hindering insurers’ ability to strategize and optimally implement transformative technologies to support business growth and sustain their competitive edge. Therefore, the need for digital transformation driven by design thinking is at an all-time high! Let the Transformation Begin! According to Gartner, artificial intelligence will be a mainstream customer experience investment in the next couple of years. 47% of organizations will use chatbots for customer care, and 40% will deploy virtual assistants. Basic chatbots are a thing of the past. Can they sense the user sentiment in real time? No. Are they smart enough to understand complex insurance and wealth management terms contextual to the user? No. Are they capable of interjecting a home office staff in the process when necessary, while keeping the customer engaged in conversation? No. Are they capable of understanding drop patterns and immediately engage retention strategies? No. Conversational platforms with natural language processing and deep learning algorithms are opening the doors to the next generation of virtual assistants. Domain-trained chatbots (type, click or voice), with intrinsic abilities to analyze customer sentiments in real time while funneling intelligence about the customer's holistic portfolio and suitability make way for the new age customer experience. This is current conversational technology at its best, because it’s intuitive and empathetic. In the next three to five years, interactive and immersive technologies (mixed reality) embedded into business operations will be a disruptive norm. Other forms of virtual assistants such as robotic process automation (RPA) have proven to reduce operating costs, enabling key resources to focus on complex scenarios and providing a way to scale without additional cost. When implemented with the right supporting technologies, RPA exceeds expectations by accurately deciphering structured and unstructured information contextually. Let advanced technologies do all the heavy lifting. The end result? We find ourselves with insurance that’s less intimidating, and more accessible – as we steer to a brighter future. A future where filing a claim doesn’t take longer than a voice request or a single click and agents have deep insights to better manage and grow their books of business. A future where user experience is all about the finer details, where exploring the virtual canvas is the norm and where simple day-to-day experiences inspire, engage and excite users in new and unexplored ways. See also: Why Customer Experience Is Key   What Next? It becomes important for us to stay ahead of this digital transformation wave, because staying put is no longer an option!

A quick Google search returns countless articles and resources on the topic of keeping employees engaged in corporate training initiatives. But what about keeping trainers engaged? For trainers, staying fresh on an insurance industry topic they’ve covered in dozens of past sessions is a regular struggle. It’s easy for them to fall into a rut and deliver the same information over and over again with less and less enthusiasm. In some cases, this perceived monotony can lead to trainers experiencing job burnout, a clinically defined psychological stress in which physical, emotional or mental exhaustion combines with doubts about their competence and the value of their work. Job burnout has three general causes: being overloaded with work, being bored on the job and feeling worn out. It’s the third cause—feeling worn out—that most often affects trainers who are struggling to stay motivated to lead engaging sessions on the same topics for the umpteenth time. A Bigger Problem in Learning and Development Learning and development (L&D) pros are actually more susceptible to burnout than individuals in other careers. More often than not, trainers choose their profession because they like working with people and are motivated to improve the lives of the people they train. According to research from Southern Illinois University, this “inherent need to derive a sense of existential significance from their work” makes burnout more likely for trainers who bump up against unsupportive organizations or apathetic training participants. What’s more, many trainers say their biggest source of stress is the organization’s failure to prioritize training within the structure of the company. It’s worth taking a step back and looking at your training processes on an organizational level. Are L&D pros constantly working to “sell” the value of training to decision makers? Is there a system in place to provide feedback for trainers on the value of the training and what participants have learned from the sessions? See also: Training Millennials: Just Add Toppings   Learning and development pros know that the challenges of keeping both trainers and trainees engaged are closely linked. Checked-out trainers aren't going to be very effective at motivating employees to take anything significant away from sessions, and they may actually help to spread the feeling of burnout throughout the organization. Unfortunately for trainers, there’s often not much that can be done about the material that has to be covered in sessions. New employees are always going to need training on fundamental insurance industry topics, from general risk management principles and basic sales techniques to function-specific training, such as underwriting fundamentals. But there are ways to put a fresh spin on the information, which can renew trainers’ interest in the subject and provide a better training experience for employees. Let’s take a closer look at three ways to rejuvenate training for trainers and trainees, even if it's the trainer's 20th time presenting the material. 1. Solve a Real-Life Problem It is one thing to tell employees how to write a policy or audit a claim, but quite another to have them actually do it. Trainers can breathe new life into sessions by creating a more real-life scenario that participants have to discuss and solve after they have a basic understanding of the principles at work. The session then becomes an interactive problem-solving exercise rather than a PowerPoint lecture that’s mundane for everyone involved. Developing the materials may be a bit more time-consuming, and employees may have to do some preparation on their own time, but there’s a better chance employees will remember and use the training on the job. This strategy, sometimes referred to as flipped classroom training, also makes better use of the trainer’s expertise as a subject matter expert rather than a talking head delivering content. 2. Tap a Guest Speaker’s Expertise Getting a fresh perspective is an effective way to rejuvenate the training process. If you’re leading a training session on adjusting claims, bring in a field adjuster to speak for a portion of the session. Collaborating with the guest speaker will invigorate the trainer, and the overall material will probably be more beneficial for employees. If guest speakers are not an option and trainers must be exclusively from the training department, consider swapping training assignments with another L&D pro. Assuming you both have the necessary knowledge to lead different sessions, it’s another opportunity to switch things up and get a fresh perspective on the various kinds of training your organization provides. 3. Conduct Follow-Up Training About 90% of new on-the-job skills are lost within a year, according to The Wall Street Journal. This means employees aren’t hanging on to crucial skills that could benefit their organizations. And this skill loss doesn’t help keep trainers motivated and engaged. Making time for follow-up training allows for that personal connection that trainers value so much. They can hear from training participants, “This is how I’m using what you taught me, and this is what I still need to learn.” See also: Security Training Gets Much-Needed Reboot   Follow-up training provides built-in feedback for trainers who are eager to improve their skills and more effectively educate employees. It’s a useful resource to help trainers hone their presentations and techniques, even after they’ve led a session on the same topic dozens of times.

One of the hottest topics is the legalization of marijuana for adult (recreational) use. As you are probably aware, medical marijuana use has been allowed in the state of California for quite some time. However, recreational marijuana use remained illegal until this year. On Nov. 8, 2016, voters passed an initiative that allows certain recreational marijuana use. That initiative went into effect on Jan. 1, 2018. It allows adults age 21 and over to legally purchase and consume marijuana in the state without the need for a medical referral card. Adults 18-20 still need a medical referral card to legally purchase in the state. The locations where marijuana use is prohibited include public places, places where smoking or vaping is prohibited and workplaces that maintain a drug- and alcohol-free environment. The bill says the state government will: “Allow public and private employers to enact and enforce workplace policies pertaining to marijuana.” Additionally, marijuana remains an illegal Schedule I substance under federal law, which employers must follow. This potentially means that employers can still drug test their employees, may refuse to hire those who use marijuana and may terminate employees who use marijuana (in the workplace or out) if it violates company policy. Therefore, based on the stated language in the bill, as well as federal law, employers with drug- and alcohol-free workplace policies may continue to maintain and enforce them in California. See also: Big Opioid Pharma = Big Tobacco?   One issue, in particular, that has many clients concerned is the effect legalization will have on workplace accidents. To be clear, this law does not make it legal to drive, operate machinery or otherwise take part in dangerous activities while under the influence of marijuana. However, California has not yet adopted a standard measure for marijuana impairment analogous to blood alcohol testing. Currently, the tests for marijuana detect THC (the chemical compound found in cannabis responsible for a euphoric high) in a person’s system from anywhere from three days to three months. Employers face a dilemma if an employee legally consumes marijuana outside of work, is no longer “impaired” and then is involved in a workplace accident. The potential exists that a post-accident test could detect marijuana (THC) in the employee’s system without proving any actual impairment at the time of the accident. According to the law as written, the employer could terminate that employee for violation of an existing drug-free policy. Given the nature of the debate and the publicity that the legalization is receiving, it is reasonable to anticipate pushback and litigation from employees terminated in that type of scenario. With these issues in mind, Heffernan Risk Management Division recommends that our clients regularly revisit and review their existing substance policy with a qualified labor and employment attorney to protect all their interests. If they do not have one, this is a great time to recommend that they enlist the services of an attorney to have them assist in drafting an adequate policy. Presumably, ancillary laws and standards will be developed by the state over the next few months that will direct employers how to deal with these new concerns a little more clearly. Until then, it is important for us to refer our clients to the experts most able to advise them during this time of uncertainty.

Lest you ever think the pace of innovation will slow, here is a story about an imminent, major improvement in the kind of battery used in mobile devices. If you thought that mobile devices were ubiquitous now and that consumers had developed an insatiable desire for interacting with, among others, insurers via mobile devices, just imagine what will happen when battery headaches disappear. 

The story is behind the Wall Street Journal pay wall, so I'll summarize: In today's commonly used batteries, the lithium ions that provide the electricity are typically stored in graphite. Silicon can store 25 times as many lithium ions as graphite—but only once; filling silicon with lithium ions crushes the structure. Various companies have now made a breakthrough, coming up with smart ways to preserve the structure of the silicon. This allows for 10% to 30% increases in the capacity of what are known as lithium-silicon batteries in the near term and has prompted at least one company to promise a two- to three-fold improvement in the longer term. Consumer devices with the new batteries are expected to hit the market within two years.

Battery chemistry is tricky. Remember when Samsung Note 7 phones spontaneously burst into flames in 2016, to the point that people weren't allowed to carry them on to planes? Or when planes themselves caught fire in 2013? (I'm referring to the Boeing 787, a few of whose early versions had their lithium-ion batteries catch fire while the planes were on the ground.)

But, lost amid all our complaints about how quickly our batteries die, technology has made a steady stream of incremental advances that already amount to huge improvements and suggest that the end game for battery technology is nowhere in sight.

For instance, in 2010, when I worked on a project on innovation at the Department of Energy, the most common measure of a car battery's performance, price per kilowatt-hour, was a hair under $500. Today, the cost is below $150, a drop of roughly two-thirds in just eight years.

Tesla most famously keeps driving costs down—manufacturing techniques are so important to battery performance that increasing volume drives cost down quickly, and Tesla's Gigafactory is leading the way on scale. But lots of companies are attacking on every possible front. A quick look into our Innovator's Edge database, for instance, finds: Dukosi, whose software manages the internal workings of batteries to improve performance; Powervault, which manages interactions with the electric grid; Bettergy, which is innovating in the membranes used inside batteries; and Mobile Enerlytics, whose software helps apps draw less power from batteries. 

Now, battery life is like cookie dough ice cream. You can never get enough. At least, I can't. So, I'm not saying we'll ever be satisfied. But imagine how different the world will look when electric vehicles travel two to three times as far on a charge as they do now, when massive amounts of battery power get integrated into the electric grid and when ever-smaller batteries drive ever-smaller consumer devices. 

We're not in that world yet, but we're on our way—with all the opportunity and confusion that will come with it.

Have a great week (and maybe some cookie dough ice cream).

Paul Carroll
Editor-in-Chief

The disruptive power of digital technologies has spread more slowly across the insurance industry than other financial services. This will not last much longer, and many insurance executives risk being caught by surprise by the drastic changes these advanced technologies will inspire. What kind of change is coming? In life insurance, a U.S. company says it can help companies accept or reject new policies by analyzing selfies to determine an applicant’s health. In other examples, advanced analytics can help fine-tune prices and segment customers more accurately; machine learning can present precise cross-selling opportunities; and digital interfaces can support single-event policies and purchases without any interaction with human agents. Indeed, the first waves of disruption have already hit automotive insurance, where claims are being processed using smartphone apps and where online aggregators are leading buyers to the lowest-priced offers from a range of companies. Similar changes will unfold across all corners of the industry. Our experience shows that many executives in all branches of insurance are underestimating the disruption these technologies can bring, putting their companies at risk. Early incursions into insurance Change enabled by digital technologies will come from outside and within the industry. Attackers will find ways to snatch profits along vulnerable edges of the industry, while longtime players will refine their models, products and customer service to become more competitive. Technology companies focused on financial services, known as fintechs, have grown rapidly in recent years. These fintechs moved first and aggressively into traditional banking services, giving many insurance managers a false sense of comfort. In 2016, the market intelligence group VB Profiles reported that 1,329 fintech companies globally had together raised more than $105 billion and had a combined market value of $870 billion. Of these, 356 specifically targeted banking and payments, 196 financing, 108 investments and just 82 insurance. The remainder focused on technology infrastructure, such as analytical and business tools, that could be applicable across sectors. VB Profiles also said that in 2015 insurtech companies that work directly on insurance innovations attracted investments totaling $2.2 billion, more than any other segment in its study. This is an ominous trend for traditional insurers, even though investment levels slid in subsequent years as companies focused more on product development than on raising funds. Already, digital applications are scooping up profits at the periphery of the industry. Price-comparison websites, for example, scan the internet for car insurance prices and provide the data to users. A separate study by S&P Global Ratings found that almost two-thirds of new car insurance policies in the U.K. are being sold through these sites. Another example from outside the core industry is single-trip cancellation insurance offered by online travel-booking companies such as Expedia, often underwritten by established insurers. Insurers are also using digital technologies to cut costs, improve customer service and create competitive advantages. In the U.S., for instance, property and casualty insurer Allstate lets customers file claims on car accidents by submitting photos through its smartphone app. In an example of using new technologies to augment current practices, a large U.K. insurer gathers its internal data to make pricing and service decisions that take better advantage of a customer’s life-cycle value. A customer with several products, for instance, could automatically have claims processed faster or be offered favorable pricing on additional insurance products. Three unstoppable forces Three extraordinary forces—a cascade of data, advanced analytics and heightened customer expectations—make the flood of technological innovations seen today very different from advancements witnessed in recent memory. Handheld tablets introduced to agents may have improved efficiencies, but they had little effect on underlying business models or how sector profits were divided. These three forces will be different. See also: 2 Paths to a New Take on Digital   Using auto insurance as an example, we’ve noted how price-comparison platforms have changed how customers shop. Soon, data automatically delivered from built-in sensors in cars and trucks will offer judgments on driving habits that could allow companies to raise or lower prices for individual clients with increased precision. The same sensors could also notify insurers of an accident, prompting the insurer to dispatch police, medical personnel or tow services; to send an automated drone to assess and film the situation; and even to arrange a rental car. All the while, the customer is updated on these actions over a smartphone app. Not only is customer service improved, but companies will also have immediate, concrete information on incidents, which could help prevent fraud, reduce costs and improve risk modeling. Increased data In 2015, Forbes magazine noted that more data had been created in the previous two years than in the prior entire existence of mankind and that only a tiny portion of that data — about 0.5% — is analyzed or mined for value. This data is generated constantly: tens of thousands of Google searches every second, tens of millions of Facebook messages every minute and, soon, 50 billion smart devices connected globally, composing the Internet of Things, among other sources. Insurances companies that harness this data can make better decisions, improve customer service and even prevent claims in the first place by, for instance, advising clients on healthier lifestyles or safer driving habits. Used properly, this cascade of data is the raw material needed for a more precise risk assessment on every single policy and for early warnings of any anomalies. If neglected, this trove of data is also a threat to established insurance companies. For example, a digital giant such as Google or Facebook could use its rich deposit of data to target the most attractive customer segments with tailored insurance offers that would be difficult to match in terms of personalization. Or, a major automaker could leverage data already arriving from sensors to strike an exclusive relationship with a single provider, closing a significant portion of the market off to others. Such a move is plausible as self-driving cars are perfected and as carmakers themselves seek ways to protect their own profits as the economic value in the auto industry moves from manufacturing to software. Advanced analytics While the data stream has swollen significantly recently, companies have been capturing data from their customers for years, often without extracting optimal value. Recent advances in analytics and predictive analysis, however, make it easier for companies with technological expertise to find value in these terabytes of data. Advanced analytics can provide better risk profiles of customers using data from a wide range of sources, from social media activity to public databases relevant to specific locations or occupations. The analytics also open the door for technology startups to target especially attractive customer segments or create targeted products, such as nascent “gadget insurance”—policies that cover just a laptop, tablet or smartphone rather than an entire household and its contents. Analytics can also help perfect pricing and customer-service policies. For instance, advanced analytics can be used to present promotions that would be attractive to a specific client based on how a large pool of other customers responded to the promotion. Analytics could also flag new opportunities, such as when a client’s children have reached a life stage when they might need their own policies. Customer expectations In the digital age, customers are becoming accustomed to highly personalized products and services. These customers, especially digital natives who grew up with the internet and represent the new generation of insurance buyers, expect Amazon, for instance, to suggest items based on their previous purchases and to be able to pick exact seats when buying concert tickets online. They expect immediate access to their banking information over their smartphones and have little patience for elaborate sales pitches. Such expectations cannot be satisfied by simply migrating traditional offers to a website or mobile platform. Customers want to have a choice between, say, purchasing a standard auto insurance policy or picking and choosing from among modules, such as roadside assistance and rental-car replacement, rather than an online brochure that touts traditional products. As an extension of closer customer relationships, some insurance companies are using new technologies to offer preventive programs, which deliver clear benefits to both policyholders and insurers. For example, insurer Discovery in South Africa runs the Vitality wellness program, which predates the digital era and has been updated with new technology. Vitality applications allow the company to encourage customers to frequent gyms, eat healthily and improve their driving habits. Hospitalization costs for program participants are as much as 30% lower than for nonparticipants, and participants live 13 to 21 years longer than other insured groups do. Similarly, IAG in Australia uses claims data to identify dangerous road segments, alerting customers as they approach these hazardous zones and working with governments to correct them. The company says a single improved highway ramp can save AU $600,000 (U.S. $470,000) a year in claims. Implications span crucial areas The exact implications of new digital technologies on insurance are difficult to foretell. Innovations in the financial services sector, in general, have been dynamic, and there is every reason to believe that these technologies will have a similar wide-ranging impact as they embed themselves into the insurance sector. Broadly, four areas can expect the greatest disruption. Customers A clear understanding of changing customer expectations is essential to take full advantage of new technologies. For many companies, this means adjusting product and service portfolios to cater to customer wishes, rather than presenting the same set of rigid offerings that have sold well in the past. Companies that use big data and advanced analytics to better understand their customers and agile product development to cater to these new needs rapidly will have a better chance of thriving in the digital environment. In one example, a growing number of private clients are participating in the sharing economy using platforms such as Airbnb for properties and BlaBlaCar for shared rides, and they need relevant policies to protect against damage and liabilities under these new circumstances. Unlike traditional policies, such products might cover only clearly limited periods or specific situations. Customer experience also has greater importance. While good experiences may not always outweigh price, especially as comparison websites reach more broadly into the industry, bad experiences, such as complicated site designs or claims processes, can easily send customers to rival offerings. In one example, a large U.K. insurer processes claims quickly, often within seconds, for customers whose data shows they are long-time clients who meet certain criteria, such as owning several products or having few past claims. Products and prices Companies will have to reexamine their product and service portfolios, taking into account evolving customer expectations, insights generated by advanced analytics and aggressive maneuvers from attackers. For example, insurers will have to find ways to deconstruct homeowners’ policies. Rather than insuring the entire contents of a home against theft or damage, specially designed policies could cover only selected items, such as computer equipment or musical gear. Products for individual events, such as travel or leisure activities, should also be expanded. Using new technologies, products can also be developed for customers who might be otherwise unattractive or too costly to serve. For example, in agricultural insurance, remote sensors could provide an insurer with pertinent information on soil conditions, temperatures, humidity and other factors for remote farms. Crop insurance claims from a drought or other natural calamity could be more quickly and efficiently processed using primarily this data, rather than waiting for an expensive visit by an adjuster. Insurance companies must also use technology to keep prices competitive while preserving profit margins. Looking at car insurance, S&P noted in 2016, “Insurers that do not find their quotes in the top five places on a [price-comparison website] may struggle to gain new business, no matter the quality of their product offering and service.” Among other measures, deploying new technologies to partially or fully automate processes such as application processing and claims payments can be especially effective in reducing back-office costs. The potential for increased transparency into client lifestyles and habits will also affect policy pricing and risk assessments. Although privacy concerns are still being addressed, sensors on smartphones and wearable fitness gadgets, for instance, could provide data that allows insurers to reduce premiums for clients who lead healthy and active lifestyles. In a similar vein, sensors inside vehicles can provide automotive insurers with valuable information on an individual’s driving habits. Increased use of this data, however, also leaves insurers open to the risk of customers hacking into these devices and sensors to present erroneous favorable data. IT systems For many established insurance companies, legacy computer systems are not up to the task of compiling and analyzing the massive amounts of data that feed these new technologies. These systems often lack the flexibility and speed needed to cater to today’s customer needs and to keep pace with industry attackers. To face this challenge effectively, many companies have developed a two-pronged IT approach. Processes that don’t require the strengths of new technologies, such as accounting and fraud management, remain the province of legacy systems, while social media, customer service, product development and process automation, among others, are handled by updated systems. For most companies, investments in new systems will be required to meet these needs. Among recent IT breakthroughs, blockchain technologies, which essentially provide a shared digital ledger that no individual controls, are being scrutinized for potential opportunities. Fifteen insurance companies, including Allianz, Munich Re and Swiss Re, have joined in a pilot program called the Blockchain Insurance Industry Initiative B3i to “explore the ability of distributed ledger technologies to increase efficiencies in the exchange of data between reinsurance and insurance companies,” according to an Allianz statement. Blockchain technology has particular potential in transaction validation and fraud prevention. Business models and risk As we’ve seen, advanced technologies deployed within the industry can support new business models, from gadget insurance to intricate pricing approaches. These technologies deployed in other industries could also disrupt business models. Consider the example of self-driving cars. Once they are in common use, the liability for any accident could shift from human drivers to manufacturers, bringing insurance into the suite of services offered by manufacturers in the overall ecosystem. Maintenance of software and mechanical systems could become more crucial to reducing risks, compelling insurers to collect data from service providers to help assess and manage these risks. Similarly, home insurers could gather data from utilities using smart meters and other sources to monitor the risk of fire or flood and dispatch warnings and instructions to mitigate risk to clients as necessary. In the U.K., home insurer Neos, founded in 2016, offers its customers a policy that includes a suite of smart-home sensors that alert the homeowner and the company if, say, a door is left open or the plumbing leaks. Neos also offers to arrange the necessary repairs. See also: Finding Value in Insurtech (Part 1)   While the availability of such data can help assess policy risks more accurately, it also creates internal risks that must be understood and managed. Perhaps the biggest issue revolves around privacy questions, especially as companies gather data from a variety of external sources to create customer profiles and inform pricing decisions. For example, one U.K. insurer is considering a program in which potential customers are given policy quotes with virtually no questions being asked. Instead of the usual long list of questions, the insurer would use the mobile number of the incoming call to identify the caller, find an address and compile various data related to the caller’s lifestyle and risk. The call-center agent would then offer an immediate quote for the desired policy. However, similar programs from other insurers that tapped into social media activities were met with protests over privacy concerns and had to be discontinued. Talent brings it all together To make the most of these advanced technologies and remain competitive, insurers will require new talent and new capabilities. The technology itself is readily available; assembling the talent needed to extract the greatest value from digital advances will be the crucial element that sets a company apart from its competitors. The talent insurers want — and where to find them Most insurers seek digital hires with capabilities in data analytics, digital apps, the Internet of Things, the habits of digital natives and other comparable areas. A natural first stop to find such talent would be the broader financial industry, especially banks, which have a head start on insurers in addressing these changes (and also have familiarity with operating in a highly regulated industry). Hires from banks and other financial services companies are likely to experience less culture shock than would those from outside the financial industry, but insurance companies must be ready to pay for this scarce talent. Recruiting from further afield will be more difficult, although necessary. Forward-looking insurers also prize meaningful international experience—a common gap in the resumes of otherwise high-flying, U.S.-based digital executives, who tend to have spent little time managing outside their home territory. Finders, keepers Of course, finding digital leaders is only half of the equation. The insurance companies most successful at transforming themselves will also prioritize employee retention. This is easier said than done, given the insurance industry’s reputation as a stodgy work atmosphere. Potential cultural clashes and generational gaps between young talent and older insurance executives must be recognized and addressed. Indeed, cultural clash may be the most difficult obstacle in recruiting and retaining the top talent needed to exploit new digital technologies. As banks have discovered, top hires with technology backgrounds expect a fast-paced, innovative environment, or they will take their in-demand talent elsewhere. One way that insurers seek to bridge the cultural divide is to set up separate innovation centers that mimic the digital “hothouse” environments found in technology or other fast-paced industries. Such models can work—and work well—but only when senior leaders are purposeful about attacking the perennial management challenge these approaches bring: transferring any insights generated in the incubator to the core business and integrating them into its day-to-day operations. Executives who expect this to simply happen of its own accord will be sorely disappointed. In the end, we find that the most powerful approach to keeping digital talent engaged is deceptively simple: make sure that company leaders—starting with the CEO—do their utmost to instill a sense of purpose in the work of the transformation itself. To be sure, perks and pay matter, but when digital leaders feel a genuine commitment to change, they are far more likely to stay the course, despite the inevitable culture clashes and other growing pains. Seeing a meaningful commitment to innovation and responsiveness from company leadership goes a long way to engaging and retaining digital talent. When in doubt, partner up In most circumstances, partnerships will also be needed to fill capability gaps. Insurance companies will have to collaborate with a range of technology companies, rather than relying on a small set of providers. In the process, the role of the chief information officer (CIO) will evolve to encompass a greater emphasis on managing a vast ecosystem of diverse vendors and partners as well as in-house innovations and proprietary systems. The shift will be complemented by other organizational changes, such as the creation or promotion of chief data officers or chief digital officers, to help maintain the right balance. For optimal impact, companies cannot pick and choose among these approaches to talent but rather must incorporate each model. Internal talent development, new hires and strategic partners must all be brought into the mix for the best results. Like all transformational efforts, success is largely reliant on top-level support and enthusiasm. CIOs and other senior executives must work toward an ideal balance of new capabilities and hard-won industry knowledge. Processes and structures must be adjusted. This will require a mix of new and old change-management skills, with communication a central component. One British insurer established a task force to disseminate the new digital culture and language throughout its global organization. As part of the transformation, an initial group of 30 “ambassadors” was responsible for explaining the changes broadly, and each recruited 10 new ambassadors to bring the message deeper within the organization. *** Outside innovators and leaders within the insurance industry are already looking carefully at the risks and opportunities posed by new technologies. Like those already witnessed in the banking industry, disruptions are likely to move quickly through the insurance sector, affecting everything from customer service and products to back-office processes. The key to capturing the value of these new technologies will be digital talent, which is already scarce. Companies that wake up and move now will have a much better chance for succeeding in this new environment.

Employers and health plans! Don't let the prospects of reform dupe you into failing to manage past and current Obamacare liability exposures. Contrary to popular perception, President Trump's health plan executive orders do not insulate employers or their health plans from all Obamacare compliance or enforcement exposures. Among other things, the Internal Revenue Service continues to enforce Internal Revenue Code rules that require employers to self-identify and report any violations of the 40 listed federal health plan mandates on Form 8928 and pay resulting excise taxes unless and until reform passes. Furthermore, even if reform eventually passes, reform is unlikely to insulate health plans, their fiduciaries or sponsors from costs and liabilities arising under plan terms and the laws in effect before a post-reform amendment. Employers and other health plan sponsors, their fiduciaries, insurers and reinsurers, administrative service providers and other vendors should review plans to continue in compliance, while promoting and shaping common sense reforms for the statutes and regulations affecting health plans. See also: 13 Steps to Take Now to Prepare for ACA   Employer and other health plan sponsors, fiduciaries, insurers and other vendors also should discuss processes for responding to changes and amending plans and associated contracts, to be able to respond as quickly as possible if reform happens.

SMA has tracked the changing course of business and technology projects in the insurance industry for nine years. Our recent research for the Strategic Initiatives in Insurance series and our work with insurers clearly support the fact that the P&C industry is changing, especially in the personal lines arena. And this change is having a profound impact on the insurers’ strategies, priorities and technology investments. We see significant spending and shifts in personal lines projects that are aimed at aligning insurers’ strategies to transformation and growth.

For personal lines, just sustaining the business is no longer an option. Ninety-five percent of personal lines insurers now consider themselves to be growing or transforming. Never before have these numbers been so high, or the number of insurers that are just sustaining so low. Priorities have shifted and refocused where spending and investments are concerned.

See also: Insurtech and Personal Lines  

Our study reveals that the key shifts and top priorities are centered on the customer, new technology platform investments and new world initiatives. Several top themes have emerged, and they reflect how the personal lines business is changing today as companies prepare for the future:

• It’s all about the customer, from the top business drivers of customer expectations to the top investments in self-service portals, mobile apps and CRM systems with new user experiences and enriched capabilities.
• New technology investments support mobile, website and call centers. Insurers are even exploring digital platforms and omni-channel investments.
• There is a renewed interest in telematics and usage-based insurance (UBI). This is clearly a required response to stay competitive in auto – for the time being.
• Shifts in emerging technology investments provide amazing new opportunities. More than half of the insurers are investing in virtual assistants, chatbots and AI.
• All aspects of data are hot, from master data management to predictive analytics and big data.
• Core system investments have shifted from modernizing to transforming and seek to implement new technology platforms and more modern architectures like microservices.
• Insurers are still balancing investments with agent/broker portals for both sales and service because managing agent expectations ranks as a top driver.

SMA encourages personal lines insurers to look carefully at what is happening around them, both inside and outside the insurance industry today, to keep an eye on the new trends and emerging technologies and to blend the best of their traditional strengths with the new world initiatives, ensuring that they are well-aligned to their own strategies.

Senior leaders should take into consideration all of the various project areas in the report – business, technology and tools and data and analytics – and prioritize in every area. These projects are baseline requirements for remaining competitive. Pay special attention to customer-centric investments, from self-service portals to CRM to mobile, making sure that the data and analytics investments align to customer intelligence.

See also: 3 Forces Disrupting Personal Lines  

Click here to learn more about this report and the other reports in our 2018 Strategic Initiatives Series.

The average U.S. consumer spends five hours a day on mobile devices. Two of those hours are spent consuming social media. Advertising on these channels is a highly effective yet often underused way for companies to engage consumers and grow their business. However, taking a “spray-and-pray” approach — blasting your message out to everyone and hoping it will reach someone likely to respond — no longer cuts it. Today’s digital consumers expect the companies they do business with to anticipate their needs and deliver highly relevant and personalized experiences. That’s where data comes in. Every time a consumer takes an action — a page visit, click, like, comment, share, post — he or she leaves a data trail. Following that trail tells a rich story about the consumer and his or her path to purchase. Below are three ways to activate that data trail to optimize your mobile and social media advertising. 1. Develop personas. Personas, or detailed representations of audience segments, are much more effective than broad demographic descriptors because they humanize target audiences. Fueled by data-driven research that maps out the who behind buying decisions, customer personas can help inform everything from marketing messages to product development efforts. For insurance and financial services companies, a great way to start developing personas is by analyzing data around life events. We know consumers make insurance purchases during major life events, such as buying a home or car, getting married or having a child. Beyond reaching the right consumer with the right message at the right time, life-event marketing puts it in the right context. Understanding the context of a consumer’s behavior is incredibly valuable and can help you adjust your marketing message to inspire action. See also: Data Opportunities in Underwriting   Social media provides marketers access to global conversations, bringing together droves of data to better understand consumer behavior, trends and opinions. And the more a brand advertises on mobile and social media, the more data it has access to and the more it can test and refine its personas to achieve even better results in the future. 2. Track the entire conversion journey. In today’s multi-channel world, data on cross-channel behaviors allows you to track a customer’s entire journey to conversion. As that journey increasingly involves multiple devices, browsers and mobile apps, it cannot be accurately measured using only cookies. While cookies may provide insight into the last touchpoint before the conversion, a cookies-only approach overlooks what happens earlier in the customer journey. A recent study by Facebook and Datalicious found marketers who only measure campaign success via cookies overlook nearly 40% of all digital touchpoints in the customer journey to conversion. And because people use multiple devices, each person has an average of three unique cookie identifiers. In other words, one individual is seen as three different people through the lens of cookie-only measurement. Because only one of those cookie identifiers will actually convert (and the other two appear to go cold), the data on engagement with your content becomes skewed. According to a Facebook IQ article, cookies force marketers to rely on guesswork to justify media investment, leading to wasted ad dollars: “So how do we tackle this complex reality? By understanding consumers as people rather than cookies…. To help drive results and sustainable business growth, more accurate methods based on people insights can give marketers the ability to measure campaigns on and off Facebook, on both desktop and mobile devices. When looking at attribution and reach, this approach offers a more holistic look at the ad performance — something not possible before.” Implementing Facebook Pixels to track conversions across devices is a great way to start building a cross-channel, people-based campaign measurement model. 3. Find the right partners. One way to greatly enhance the value of your own consumer engagement data is to combine it with complementary datasets. The easiest way to do that is to partner with organizations that have access to large amounts of data. Denim, for example, has aggregated more than 1 billion data points on consumer engagement with mobile and social media ads powered for insurance and financial services companies. We’re proud to have more data on consumer engagement with insurance- and financial services-related mobile and social media ads than anyone. See also: 4 Benefits From Data Centralization   At the same time, we recognize Denim’s dataset is not the only dataset the industry will ever need, nor is anyone else’s dataset the only dataset the industry will ever need. Denim’s database is a contributory database. In other words, it’s the contribution of Denim’s data along with a variety of other datasets that will ultimately paint a vivid picture of today’s consumer market and target it in a way that’s never been done before. Denim has partnered with a variety of organizations, including a global actuarial consulting firm, to perform extensive analyses of Denim’s data in contribution with other datasets. The results will be used to help our customers make even smarter mobile and social media marketing decisions in the future. Watch for exciting announcements to come!

These regional profiles are taken from our inaugural Insurance Nexus Global Trend Map, an in-depth quantitative-qualitative account of insurance and insurtech trends the world over. (You can access all seven of our regional profiles straight away by downloading the full Trend Map here.) Our Europe profile combines quantitative insights derived from our global survey, some of which we covered in our previous post introducing our regional profiles, and qualitative perspectives from our two in-region commentators:

• Switzerland-based venture capitalist Spiros Margaris (InsureScan.net, moneymeets and kapilendo)
• Charlotte Halkett, former general manager of communications at U.K.-based telematics provider Insure The Box (now MD of Buzzvault at Buzzmove)

First, a quick overview of the salient stats from our survey, as they manifested themselves in Europe.. Key Stats: a Quick Recap --- i) The External Challenges: Europe In Europe, the top three external challenges facing the insurance industry as a whole follow the global trend we outlined in our earlier post on industry challenges: technological advancement, changing customer expectations and digital channel capabilities. Looking further down the table, some points of note are the higher position attained by increased regulation and the lower positions of new emerging risks and catastrophe risk. Compared with some of the other regions we examine, like Africa and Asia-Pacific, Europe is relatively sheltered from natural catastrophes and the associated risks that they bring, which possibly explains the lower scores we find for new emerging risks and catastrophe risk. --- ii) The Internal Challenges: Europe Internally, the top challenges are close to the global trend we outlined in our earlier post on industry challenges: Lack of innovation capabilities and legacy systems take first and second place, with siloed operations edging out finding and hiring talent for third place. --- iii) Insurer Priorities: Europe Our discussion on Europe falls into five broad chapters, the first two of which we cover in today's post:

1. Growth opportunities in a relatively saturated market
2. The European consumer and Europe’s early adopter status
3. How European insurers can deliver on their customer promise with new tech
4. Dynamic, real-time insurance and IoT
5. Progress on developing connected insurance models across the continent

Chapters 3-5 of our Europe profile will be presented in our next post. See also: 10 Insurtechs for Dramatic Cost Savings   1. Old Problems — New Solutions While Europe, with a population of 750 million people, is a larger market than North America, it is still less than a fifth of the size of what we estimate for our Asia-Pacific region (4 billion). We therefore expect Europe to be relatively well-aligned with North America in terms of the range of market opportunities on offer. That said, Europe does comprise a broader spectrum than North America, including some of the world’s leading economies (U.K., Germany, France) alongside more emerging markets (like much of the former Soviet bloc), which are not as advanced per se but offer attractive growth opportunities. As is the case globally, low interest rates are hurting insurers’ investment outlook and forcing them to refocus on their core underwriting business. In Europe, this situation is compounded by a stringent regulatory environment (Solvency II), which makes running a profitable investments business harder still. "Solvency II regulation is good, but in the kind of environment where we have low interest rates, it makes it much harder for insurers to find opportunities to make money," comments Swiss-based VC Spiros Margaris. This is borne out in the survey stats we gathered on regulation, which we presented in our earlier post on regulation:

• Among our key regions, Europe leads on regulation as a priority area
• In our regulation section, a relatively high proportion of European respondents indicated that regulation was impeding progress at their organizations "a lot," with Solvency II and the Insurance Distribution Directive (IDD) being identified by European respondents as cause for concern
• Also, consistent with our other regions, a large majority of European respondents believed regulation was posing more of a challenge to their organizations currently than during the previous 12 months

"European carriers have a raft of incoming regulation to implement and prepare for… In addition to the implementation of Solvency II, we can also point to the IAIS’s Insurance Capital Standard (ICS) slated for 2020, the introduction of International Financial Reporting Standards (IFRS) and the transposition into national law of the Insurance Distribution Directive (IDD) in time for 2018." — James Vincent, general manager at Insurance Nexus

Interest rates and regulation make it imperative for insurers to seek growth and profit opportunities elsewhere. And while there does exist a low-end market opportunity in Europe, this is nowhere near on the scale we see in Asia-Pacific, Africa and LatAm. This means that, in the main, insurers must focus on established demographics and look either for entirely new risk categories or for ways to serve their clients’ existing risks better and more extensively. A key emerging risk area on the commercial side is cybersecurity. This isn’t entirely new as a risk category but looms larger and larger for any company operating with customer data (i.e. every company). Unfortunately, cyber risk is not an easy category of risk to insure, given the wide range of dependencies involved, spanning everything from reputational damage to share-price hits. It is partly for these reasons, Margaris says, that many insurers have been reluctant to jump on the cyber bandwagon, at least for now. Cybersecurity is also an issue that insurers are on the receiving end of, insofar as they steward vast quantities of customer data, all of which must be secured. Consistent with our other regions, a majority of European (re)insurers are very concerned about information security breaches, as we saw in our earlier post on cybersecurity; fortunately, a majority also have mitigation plans and have adjusted their security strategy to reflect the rise of new digital platforms. Beyond exploring completely new risk categories, like cybersecurity, insurers in Europe will find fresh profits by focusing on what they have always done – only better. Retention of existing business is therefore of primary importance, and we did indeed find a high focus on customer loyalty among European insurers in our post on marketing and customerCcentricity. Part of this also involves increasing the lifetime value of customers already on the books, with around half of European respondents indicating that they have a strategy to bundle and upsell products based on customer lifestyle analytics, consistent with our other regions, as we recounted in our section on product development.

"There is an abundance of capital available in the global economy, and right now money is cheap. There is minimal value in continually driving down price and adding further competition to a saturated market place. Putting digital at the core of distribution strategies will allow previously untapped markets to be exploited for a relatively low cost, allowing that capital to be deployed more effectively." — Gareth Eggle, head of insurance at Flint Hyde

Additionally, though, growth for European insurers will come from going after new customers in the established demographics, and this will require carriers to better adapt their existing products to the sorts of risks people want to insure against and to offer them at an appropriate price. While this new drive toward customer-centricity will, generally speaking, result in lower premiums (insurance is not a designer item, and less is always more from a price perspective), it also allows greater scale and, ultimately, lower operating costs. If we take the U.K. motor-insurance market as an example, we see that there is plenty of old business to be better served and new business to be won. Charlotte Halkett, speaking from her experience as general manager at telematics provider Insure The Box (Charlotte is now MD of home-line Insurtech Buzzmove), mentions that the cost of motoring in the U.K. is a particular challenge and draws attention to unlimited liability as well as to various government-influenced changes, such as the Odgen Rate, which disproportionately affects younger drivers less-well-placed to front the cost of auto insurance. It is this opportunity – not just to improve driver safety but to bring down the cost of motoring – that Insure The Box is taking full advantage of. By monitoring driver behavior through telematics, the company is able to encourage safer driving behaviors and ultimately guide motorists to lower premiums. We will explore their usage-based insurance (UBI) model in our next post. While Insure The Box forms part of an incumbent insurer’s technology stack through its parent company Aioi Nissay Dowa Insurance Europe, it is unlikely that the new play for personalized, customer-centric insurance will work out solely for the benefit of incumbents. Indeed, the opportunity is already attracting many new market entrants (like insurtechs), which represent a serious threat to legacy insurers’ hitherto cozy models. Margaris gives a high-level explanation as to why insurtechs are such a threat to traditional players: "Consumers will ask themselves why is it so much cheaper with an insurtech company and why does it cost so much at the insurer’s end? So there will increasingly be a margin pressure. The example I often present: If somebody gives the milk away for free, will you go to the deli and pay $1? You’ll say, I get it free there. I want to stay with you, but I’m not going to pay you a dollar for it. And that’s what fintech/insurtech does, it piles on margin pressure." Even if insurers can get the price of their products down, Margaris still believes insurtechs have an edge due to their stronger customer credentials. "If insurtech companies provide solutions that feel very personalized, customized to the user’s needs, people will feel like what their insurance company is offering is so old-fashioned," he says. "So there will be dissatisfaction with the incumbent services that they’re getting, and of course pressure not to pay up for that." Much of the difference between old-fashioned and newfangled comes down to the user interface. In this regard, Margaris compares the old and the new in insurance with the old and the new in software: "If we go back 15 years and look at the user experience with software then – nowadays, you’re left asking, how did people use it? But at that point we thought it was cutting-edge. Now, though, people don’t want to think about what they’ve got to do, everything has to be seamless." Price and personalization (the two Ps) are the two key areas that insurers have to work on as they square up to new market entrants. We will see later on in our Europe profile that insurers’ ability to lower premium prices in fact goes hand in hand with improving personalization – in the sense that more frequent customer touchpoints and interactions provide the very data insurers need to price accurately and to offer the incentive of lower prices still.

"Anyone who believes that business will stay as in the past, will face a so-called 'Kodak' moment and will not survive increasing competition. There is an urgent need to systematically deal with innovation and challenge the current offering or even business model." — Monika Schulze, global head of marketing at Zurich Insurance

2. Europe as Early Adopter The trends we have just outlined – falling investment returns and a renewed drive toward customer-centricity – all manifest themselves, in some way or another, in the other markets we examine. But how does Europe compare with other markets? Throughout this report, we have characterized the current disruption sweeping through the insurance industry as being customer-driven. We further identified its roots in the growth of digital outreach and distribution channels, not just in insurance but in the online economy more generally (a case in point being online retail), in the sense that these open up formerly captive markets to fleet-footed digital competitors.

"From IoT in the field to analytics and emerging AI solutions at the back end, European carriers are grasping with both hands everything the technology community has to offer in their bid to win the race for the customer. This promises to be a very exciting period for solution providers!" — Guy Kynaston, commercial director at Insurance Nexus

Europe is not just a heavily disrupted market but one in which insurers are showing themselves relatively well-equipped to deal with this, compared with our other key regions (this comes, of course, with the caveat that the European market varies substantially from country to country in ways we can only explore here at a relatively high level!). In our post on marketing and customer-centricity, we characterized Europe and Asia-Pacific as exhibiting a marginally more problematic insurer-customer relationship than North America. In Europe’s case, we pointed to the high priority score that it achieved for customer-centricity (56 compared with North America’s 51). Our thesis was that higher customer expectations in the region were driving customer-centricity to the very top of the European priority rankings. In line with our view that changes to distribution are intimately tied up with disruption in insurance, we expected to find a relatively shaken-up distribution landscape in Europe. A few thoughts on this:

• The digital direct-to-customer channel is well-established in Europe (as we saw in our post on distribution, if any region is a laggard, it is North America)
• Affiliate partnerships have a long tradition in Europe, for instance with Tesco insurance in the U.K., and a majority are increasing their distribution through these channels
• We know anecdotally that aggregator impact is high in Europe, likely a consequence of the volume of direct business and the plethora of digital channels

While distribution disruption is what fundamentally enables customer disruption, these two trends are ultimately bound together with consumers, once empowered, setting ever higher precedents for distribution. Halkett gives a brief overview, from a U.K. perspective, of this consumer/distribution complex: "The U.K. consumer is a very early adopter of things like online retail purchasing, and that means that new entrants can get to their market much more easily than in other markets." She continues: "The U.K. insurance market has been the most innovative for many years. They were the first to have direct insurance and the first to then start widescale adoption of aggregators, and now insurtech leads in the U.K., as well." Aggregators, in particular, allow new entrants to get in front of a vast number of consumers with minimal upfront cost. Halkett recalls how it was the aggregator route that first brought her former employer, startup Insure The Box, to prominence: "We started with almost no brand, no marketing spend, we got onto our first aggregator and that meant that lots of consumers could see our proposition very, very quickly. That’s how you find those early adopters, and that’s how the ball starts rolling. The U.K. consumers are very willing to try different financial products this way." Aggregators are particularly well-established in the motor-insurance sector, and Halkett estimates that the percentage of U.K. customers that use an aggregator before taking out a policy is in the 80% range and that this rises into the high nineties for young drivers. Based on the two lines of inquiry we have pursued in this chapter on "Europe as an early adopter" (high customer priority and a wide-open distribution landscape), we conclude that disruption has definitely arrived in Europe, and that the European market may be marginally ahead of the North American market. We feel similarly about Asia-Pacific, although it appears that the disruption wave is only just breaking over this market. On the other hand, it is our conviction that European (re)insurers have already gone some way toward establishing a new normal and are relatively well-equipped to deal with disruption. One key measure that speaks for this is the fact that it is Asia-Pacific, not Europe, that trails on cross-channel consistency. If Europe is marginally ahead here, this would suggest that European insurers’ omnichannel strategies – a reaction to disruption – have gone some way toward flattening out the fractured distribution landscape. Similarly, we can point to the lower prominence, compared with Asia-Pacific, of the chief customer officer role in Europe among recent or imminent appointments. The lower importance of the chief customer officer appears at first glance hard to square with the high priority that Europe currently accords to customer-centricity. However, rather than chief customer officer and other customer-related job roles being unimportant in Europe, we might conclude instead that they are simply not of recent creation. In Asia-Pacific, by comparison, which we have suggested is only now feeling the full force of customer-driven change, chief customer officer is the stand-out new job title. See also: Global Trend Map No. 9: Distribution   Intuitively, we expect job roles to get created when the perception of a market threat is at its highest, in some sense as a knee-jerk reaction. If we infer from our job-role stats that chief customer officer is currently all the rage in Asia-Pacific but was last year’s role in Europe, the implication is that the wave currently breaking over Asia-Pacific broke over Europe a short time ago and that Europe is marginally further along with its journey toward tomorrow’s new normal. The key stat to bear in mind here is the disruption score relating to lost market share that we introduced in our insurtech perspectives section: Only a small minority of carriers in Europe (23%) reported that they are currently losing market share to new entrants. We already emphasized the psychological component of this score in our insurtech perspectives post, so – at least in terms of how European (re)insurers perceive their own market – Europe is in less deep trouble than Asia-Pacific, where 47% of (re)insurers believed they were losing market share. "I think European insurers are not panicked yet that the insurtech companies will destroy their business," Margaris says. "We haven’t seen much business deterioration through insurtech companies yet, but it will happen, that’s certain." It would therefore appear that Europe is not so much the most disrupted of our key regions as the longest-disrupted. In line with this reasoning, it is Asia-Pacific that could be termed the most disrupted, in the sense that it is being hit by a storm that Europe has entered already, and North America the least disrupted, in the sense that the storm has not (quite!) broken yet. We explore the nature of disruption in the APAC and North American markets in greater detail in our coming dedicated profiles on these regions. None of this is to imply that the material level of disruption in Europe is declining or that the storm has been ridden – far from it – just that insurers have gone further to take it on board. Indeed, as Margaris has pointed out, more business deterioration is likely on its way. There is also no reason for markets to develop in a linear fashion, with innovations (and threats) arriving onto the market in a constant stream, so relative confidence among insurers today could turn into (or back into) panic pretty much overnight. For the time being, though, we believe we have discerned a slight innovation lead in Europe, which we explore further in our next post, in which we cover off the remaining chapters in our Europe profile:

• How European insurers can deliver on their customer promise with new tech
• Dynamic, real-time insurance and IoT
• Progress on developing connected insurance models across the continent

 

A playbook is better than a simple plan. A plan is a road map to a desired future based on current conditions and the steps needed to go from the current state to a future state. A playbook acknowledges that there are many possible futures and that businesses need to be built in a way that will adapt and thrive in any of them. In our past three blogs (here, here and here), we’ve discussed the concept of digital playbooks. Using a variety of digital “plays,” insurers can customize their playbooks in an effort to meet future demands and opportunities with flexibility. Using both the consumer market and the SMB market as examples, we created a pregame analysis. In this blog, as we look closely at small to medium businesses, we’ll consider how the scouting report can help us build Ideal Offerings, plays that are likely to help insurers bring digital capabilities to a ready market. New SMB Behaviors and Expectations Business is changing so rapidly that it is difficult for insurers to keep up. Aside from technology changes and generational expectations, the sheer numbers and types of businesses grow daily. The vast majority of new businesses are within the small-to-medium business space — and owners determine or greatly influence purchase decisions. For that reason, Majesco’s latest SMB research accounted not only for technology needs and trends within businesses, but it also accounted for generational differences in the ownership that controls insurance decisions. We found that when it comes to experience with new technologies and trends, there is a clear, strong interaction between business owner age (generation) and the size of the company (number of employees). See also: Digital Playbooks for Insurers (Part 1)   The results of this research can be viewed in our thought-leadership report, Insights for Growth Strategies: The New SMB Insurance Customer. A quick synopsis of the areas of digital impact include:

• Gig economy shift: Across all generational distinctions, there is growth in independent contractor/freelance services.
• Apps/Connected Devices: There is strong commercial use of apps and connected devices, with the highest use occurring in companies with 10-99 employees in the Gen Z/Millennial and GenX segments.
• Digital Payment: All segments have strong use of ApplePay and Samsung Pay, except for Pre-Retirement Boomers.
• On-Demand Insurance: Commercial use of On-Demand insurance is strong, in addition to online purchasing of insurance and the use of cloud-based subscription products.
• Drones and 3D Printers: These technologies are both on the rise, indicating new areas of risk that will require new products and services. 3D Printer use is highest among Gen X/Boomer segment companies with 100-499 employees.
• Risk Prevention: SMBs are willing to look at reduced costs and prevention of risks through value-added services and even social networking.

In creating digital offerings for all SMBs, insurers can begin their brainstorming with a list of digital capabilities and context drivers that are currently relevant to potential new business models and product and service offerings. Keeping this kind of list on-hand will allow companies to add/subtract/combine elements to form new Ideal Offerings. Though any business segment could certainly be a place for a new Ideal Offering, the three company and generational segments with the highest level of interest in new offerings were:

• Gen Z and Millennials, 10-99 employees
• Gen Z and Millennials, 100-499 employees
• Gen X and Pre-Retirement Boomers, 100-499 employees

These segments share traits across many areas, including:

• Doing things that reduce risk or provide free or discounted services and products and rewards.
• Using services that prevent or minimize risk, accidents or claims.
• Using insurance to cover an event of specific duration.
• Using mobile messaging apps for quoting, policy management, bill payment, claim filing and claim payment.
• Creating new affinity relationships to get preferred pricing among social groups.
• Using activity-based pricing for employees/vehicles/equipment.

SMB Playbooks So, what does this mean to the business insurer playbooks — the ones you may be creating right now? Well, first, it means that the time is ripe for creative business model, product and service development that shifts into the realms of Digital Insurance 2.0, by re-envisioning within the context of digital possibilities and desired engagement. An organization’s digital plays must include transformations that match generational SMB expectations and needs. These sought-after attributes are redefining the insurance value chain we have known for the last 30-plus years as Insurance 1.0, and they don’t just represent simple improvements. They represent a new world of Digital Insurance 2.0. Interestingly, pre-retirement boomers are open to digital services that will save claims and improve rates, signs that they are still engaged in making their businesses profitable and competitive. For example, business owners appreciate transparency in operations. Insurers that can provide an ecosystem of sensors, monitoring and risk reduction will find that businesses are highly ready for improved data and analytics regarding their own processes and risks. Every digital risk mitigation solution removes some of the weight and worry of the unknown. These services may go beyond business insurance products. Majesco fully expects that the insurer digital playbook will rapidly be filled with these non-insurance, value-added services that may also be foundational profit centers. Mobile and messenger-based apps may soon be considered table stakes with business insurers, but Digital Insurance 2.0 capabilities within these apps will continue to grow and improve. They exist at the intersection of business desirability and the need for portable windows into operations and service. See also: Darwinian Shift to Digital Insurance 2.0   Contextual and on-demand insurance need cloud platform solutions to work. An insurer that is using cloud and AI for real-time data management and decisions, for example, will find it much easier to track and insure (and even provide preferred routing for) freight carriers, delivery services and any business that needs to move people or materials. The gig part of the gig economy also needs episodic insurance. A benefit in this area may be grouping similar businesses for improved service. All of these possibilities fit within the positive opportunities identified by our research. Insurtech companies and existing insurers are taking advantage of a new generation of buyers with new needs and expectations, capturing the opportunity to be the next market leaders in the digital age, Digital Insurance 2.0. While Insurance 1.0 is still firmly in place with the smallest businesses and Gen X and Pre-Retirement Boomer business owners, insurance companies need to adapt and innovate to compete and prepare for business shifts that are rapidly unfolding. Where is your organization on the road to Digital Insurance 2.0? To gain more insights from our SMB research, be sure to read Insights for Growth Strategies: The New SMB Insurance Customer. For an in-depth look at how Cloud technologies can place insurers on the right road to digital transformation, check out Cloud Business Platform: The Path to Digital Insurance 2.0.