On the surface, it may seem redundant to think that underwriters are averse to loss. After all, our job is to make sure the policies we write for our respective companies earn more in premium than the claims and expense dollars that are paid. Yet, the cognitive bias of loss aversion is more nuanced, and recognizing the bias at work can help us avoid making ill-advised underwriting decisions. In the 1970s, researchers Daniel Kahneman and Amos Tversky began exploring how biases affected decision-making, and went on to formulate what is known as Prospect Theory. At a high level, Prospect Theory found that, when people faced a choice that resulted in either a loss or a gain of the same amount, the displeasure resulting from the loss was far greater than the benefit derived from the gain. Simply stated, losses loomed larger than gains. Picture the following coin-flip scenario:

• If the outcome is tails, you’d lose $100
• If the outcome is heads, you’d win $150

Would you take the bet? For most people, the fear of losing $100 outweighs the chance of winning $150, even though the expected value of the gamble is positive. To me, this example of the loss aversion bias feels like one of the more salient references to underwriting. Underwriting, in essence, is like a coin flip in the context that a bound policy either will or won’t have a loss. Quite often, we are faced with making judgment calls on challenging risks that do not come with a clean history. We are armed with supporting qualitative or quantitative information about the risk (i.e., affirming the “positive expected value” of the gamble), but it’s still possible that prior losses exert enough influence in the decision-making process that you must decline the submission. See also: How Underwriting Is Being Transformed   Additional caveats of Prospect Theory hold that decisions involving loss and gain are framed around a reference point, which is quite often neutral (or zero). Moreover, subjects in Kahneman's and Tversky’s studies experienced diminishing sensitivity to both gains and losses. Essentially, an increase in income from $100 to $200 has more of an emotional impact than an increase from $1,000 to $1,100. Consider the following choices:

• • A sure gain of $3,000, or an 80% chance to win $4,000

And separately,

• A sure loss of $3,000, or an 80% chance to lose $4,000

For the gambled portion of both choices, the expected value would be positive $3,200 in the first choice and negative $3,200 in the second. With this in mind, the wager in “a” and the guaranteed outcome in “b” would appear to be the logical pick. However, Kaheman's and Tversky’s research found the opposite: For choice “a,” the majority of subjects went with the sure gain, while for choice “b” most people chose the riskier option. Importantly, different behavior was observed on both sides of the reference point of zero. With this in mind, as well as knowing that losses are felt more than the same gains, their subjects’ behavior was described as risk-averse for gains, and risk-seeking for losses. What comes to mind is the racetrack bettor who is having a bad day and decides to wager big on the long shot during the last race in an effort to recoup his earnings. He has a shot to break even and feels that it is wise to take it, despite the slim chance the horse has to win. Does this happen in underwriting? Think of your production budget in the framework of situation “b” above. For added emphasis, imagine that the account you have on your desk will be the last one you’re working on before the quarter closes. Binding it would put you at plan, but not writing it would leave you short by 10%. What’s more, according to your metrics, this account is barely profitable, and you realize the price your broker is telling you to meet is deficient. Do you push to write it? Do you go all in on the long shot? In this hypothetical example, the “loss” isn’t in the context of whether the specific account would earn an underwriting profit. The reference point here pertains to the potential budget shortfall. The underwriter has to decide whether to display sound judgment and pass on the risk, only to fall short of plan (a sure loss), or attempt to write a below-average account that might enable him or her to meet plan (a chance at no loss). Kahneman's and Tversky’s findings might suggest that making the proper underwriting call in this case would be difficult, because we’re risk-seeking for losses. See also: Risk Management: Off the Rails?   Now flip this scenario on its head. What if you have already exceeded plan? Couldn’t this be construed as a sure gain? Recall that, due to diminishing sensitivity, additional gains lose their luster. So, are you motivated to pursue additional opportunities (a chance at a greater gain) knowing that you’ve already “won” for sure? Or does complacency set in, resulting in foregone revenue? Remember, we tend to be risk-averse for positive outcomes. Therefore, we need to be aware of the potential impact of our cognitive biases, such as loss aversion, and how they shape our behavior. This could not be more relevant for underwriters, given that we regularly need to decide – often quickly or under duress – on which risks to wager our companies’ bottom line. At the end of the day, getting a better grasp on the way we frame our underwriting decisions will keep us away from that long shot and closer to the safe bet. Originally published by the copyright holder, General Reinsurance, and reprinted with its permission.

Having worked in and around Asia for the past few years, I have seen microinsurance be a constant topic. I always found the concept of microinsurance (and microfinance) very interesting. However, I didn’t fully understand it. Fortunately, Peter Gross from MicroEnsure helped to give me more insights into this fascinating and extremely important concept. The following article is based on my conversation with Peter. Who Is Peter Gross? Peter is currently the director of strategy with MicroEnsure. Peter started with MicroEnsure in 2010 as the general manager in Ghana. Previously, Peter had a variety of management roles in McMaster-Carr. When I asked Peter about why he moved from a company like McMaster-Carr to MicroEnsure, his answer was simple: "I wanted to work in a social enterprise and use my business skills in a developing context." Peter’s wife is also in public health, working for the Centers for Disease Control and Prevention (CDC). Having an alignment of interests and values is important for any partnership, personal ones included. Hence, moving to Ghana to help with both the protection and providing of care was an easy decision for the couple. What Is Microinsurance? One of the comments that stuck with me most during my conversation with Peter is on the definition of microinsurance. He explained that he is trying to get away from that term and refer to it more as "insurance for emerging customers." The main reason is a desire to get away from the perception of "micro-price vs. micro-value." These types of products are specifically designed for an underserved population that typically can’t get access. That is the core of microinsurance. For people in these markets, Peter said, "Good-quality insurance is very important because they face more day-to-day risks than you and I.…. They get really excited about insurance and the role it plays to protect them." Microinsurance is primarily bought in some of the fastest-growing areas of the world, including these six countries from Africa and four from Asia: [caption id="attachment_30091" align="alignnone" width="570"] Source: https://www.theatlas.com/charts/BJOKD67VG[/caption] The blend of under-penetration plus fast growth shows a lot of opportunity for microinsurance in these areas, one which MicroEnsure is very aware of. See also: A ‘Nudge’ Toward Microinsurance   What Is MicroEnsure? MicroEnsure is a specialist provider of insurance for customers in emerging markets and has registered more than 55 million customers in 10 different countries in Asia and Africa. MicroEnsure designs, builds and operates their business by having products that are simple to understand and with distribution partners that can help to reach the masses. They don’t carry the risk themselves and partner with more than 70 different insurers. Their biggest shareholder is AXA, alongside Omidyar Network, IFC and South Africa’s Sanlam. Because the majority of the consumers in these markets do not have any insurance, Peter indicated to me that the marketing strategies that they deploy help them to introduce an insurance solution and meet an untapped need. An example of this was when Peter first moved to Ghana. The company partnered with Tigo Telecom to offer free life insurance. The process worked like this:

1. Customer dials *123 to sign up
2. The more the customer spends on telecom services, the more insurance the customer receives (up to a maximum of $500)

Simple, right? Peter told me that they started seeing customer behavior changing, especially when customers started seeing claims paid. This caused these consumers to not only want to spend more on airtime with the telecom to get more life insurance, but to get coverage for other risks. This helps to show what has made MicroEnsure so successful:

• Identify a need
• Introduce a solution
• Make that solution readily available and accessible
• Introduce more solutions
• Make those solutions readily available and accessible
• Repeat

What Else Does MicroEnsure Offer? As with any market, the range of products available to consumers can vary. Product development typically starts with life, personal accident and hospital. Policies to pay for funeral expenses and protection of property and crops are quite popular, too. Coverage for other risks, such as political violence, can also be marketed, depending on the country. As more consumers have mobile phones, mobile device cover is trending upward, too. If the product fulfills the need to the consumer and is simple to understand and easy to market/get access to, then it will be considered. At the same time, Peter made clear to me that MicroEnsure needs to be extra careful in building its products. Because the risks their consumers face are higher, the risk exposure for them and their insurance partners are also higher. The company needs to ensure that they build in features that are both easy to understand and tougher to game. This can be a tough balance to meet, but one that needs to happen to ensure that they can continue to provide this valuable solution for their consumers. What Role Does Technology Play? Good technology is part of the key to MicroEnsure’s success. Peter shared that this is both from a distribution and operational perspective. For distribution, products need to be able to be offered and distributed through the masses. Making an easy-to-purchase process over mobile or other e-platforms is critical. An application has to be not only simple to fill out but also easy to understand. From an operational perspective, Peter explained that MicroEnsure needs to assume a lot of mistakes on the data input from the consumer. As such, they need to build in certain tolerances on imperfect data to make it clean. This is crucial, especially for the payment of claims. Peter said MicroEnsure’s technology is fully API-enabled and can be easily plugged into their distribution partners, whether it be banks, telecoms or others. Their systems are modular, meaning partners can use various components, such as the policy administration system, claims system or messaging system, only as needed. See also: Big New Role for Microinsurance   Other Insurtechs to Watch in Microinsurance I asked Peter who some of the other insurtechs in the space are to take a look at. He gave me three:

1. BIMA, which just had an investment of $100 million from Allianz
2. Ayo
3. Acre Africa

Summary This was a fascinating conversation with Peter, and I learned a lot from it. I have a ton of admiration for the work Peter and MicroEnsure are doing. I’ve worked in mature markets as well as emerging ones (I would say Malaysia is right in the middle). There are complexities in both types of markets. What interested me the most from my conversation is the combination of being able to provide coverage for the un/underinsured, focusing on their specific needs and making them excited to be getting insurance. I feel that insurance is a very important product, for all people. In places like the U.S., insurance can often be looked at by consumers as boring and an unnecessary evil (until they need it, of course). Insurtech is helping to change that perception in the Western world and mature economies. For those in emerging markets, insurtech helps with access and a level of coverage that many have never experienced before in their lives. Now that is something exciting and meaningful. This article first appeared at Daily Fintech.

Marketers play a pivotal role in the success of insurance carriers, but that success is under threat. Profitability is at risk because the marketplace is highly competitive; many policyholders shop and switch to a new carrier long before the original carrier is able to recoup the cost of acquisition. To understand the dynamics of the marketplace, LexisNexis Risk Solutions surveyed marketers, underwriters and product managers at the top 50 auto, home and life insurance carriers and found that, to succeed, marketers and underwriters need to be on the same page. The study uncovered three key takeaways, which can help these teams overcome their challenges and improve their overall acquisition and retention success rate. 1. Understanding Insurance Team Responsibilities Improves Results It should come as no surprise that insurance marketers are distinctly different from their underwriting and product management counterparts. While profitability was the No. 1 metric for all groups in the survey, marketers identify cross- and up-selling to current customers, meeting sales quotas and retaining customers as their top three goals. Underwriters and product managers also identified these three objectives as top priorities for marketers. Conversely, underwriters and product managers identified their own top goals as enhancing existing products and creating new ones. Likewise, marketers agreed these were the most important goals for underwriters and product managers. See also: How Acquisitions Are Reshaping Landscape   While it is reassuring that both camps have a clear understanding of each other’s top priorities, an interesting disconnect that emerged from the study was that only 18% of marketers nominated "obtaining an optimal spread of loss exposures" as a core business goal for themselves, and 43% of project managers and underwriters nominated "obtaining an optimal spread of loss exposures" as a core business goal for their marketing counterparts. Does this suggest that underwriters and product managers want marketers to be more driven by obtaining an optimal spread of loss exposures? 2. Collaborating Is Essential While many marketers recognize the need for cross-functional collaboration, far fewer excel at actually doing it. As part of the research, the respondents were quizzed on their relationships with counterparts. The results were clear: 94% of respondents said that working more collaboratively was either “extremely important” or “important.” This suggests a willingness to embrace closer working relationships to achieve business goals. However, this resounding endorsement for working hand-in-hand seems to be contrary to reality. Only four of 10 teams reported that they build their strategies together. Given the challenging market dynamics, it seems counterintuitive for these teams to recognize the value of collaboration yet fail to embrace it within their organizational culture. So, what’s going on? 3. Teams Need to Be in Sync for Customer Acquisition and Retention Insurance marketers live in an imperfect and challenging world. Not every acquisition strategy will draw all the right customers. Nor will every retention program keep valuable policy holders. However, the survey's results were eye-opening: 43% of marketers said they were not completely satisfied with how underwriters and product managers executed acquisition and retention strategy, and 46% of underwriters said the same of marketers. See also: Underwriters Need Some Power Tools   While neither group disparages the other’s performance or efforts, the results clearly show that both camps are eager for improvement. Key Takeaways Through collaboration, marketers are better able to target policyholders with retention in mind. Acquiring longer-term policyholders delivers the promise of greater opportunity for profitable growth for carriers. Clearly, cross-functional collaboration is rapidly becoming a strategic imperative within the insurance industry. The good news is that teams are willing and eager to embrace it in pursuit of high-return opportunities and to achieve the greatest value from that collaboration. At the end of the day, it’s one team both on and off the field. And increased collaboration between marketing, underwriting and product management teams allow all teams to better align their strategies for more profitable growth. For more information, please refer to the white paper Collaborate Across Function to Acquire with Retention in Mind.

An industry cannot thrive without new ideas and talented people to lead it into the future. That’s why I believe there must be an educational program for individuals entering the insurance business. It has become increasingly evident over the past several years that we’re confronting the twin problems of an aging workforce and a dearth of new professionals. It’s crucial for industry veterans and leaders to elevate and accelerate this conversation. We must advocate for and help build academic programs, apprenticeships and on-the-job training opportunities that lay the foundation for success — as well as continue to teach insurance professionals throughout their careers. It’s up to us to shape a more vibrant future. It’s common for aspiring professionals to graduate from business school and then be left to fend for themselves when it comes to getting licensed and starting work. This limited training rarely teaches students the range of theories, skills and legal requirements necessary to understand such a technical industry. Institutions like the University of Pennsylvania and the University of Georgia offer an emphasis in risk management, but it only accounts for a handful of classes in a general MBA program. I’d like to see more colleges and universities create programs focused on risk management alone. Insurance experts can help academics design curricula explaining the richness and variety of the industry. The career can encompass many specializations, from sales agent to claims manager and underwriter to evaluation specialist. Students should be exposed to these exciting career possibilities. See also: 4 Keys to Charting Your Career   Academic institutions are beginning to shift in the right direction. In 2006, 58 risk management degree programs prepared 1,562 graduates to become insurance specialists. That number climbed to 112 programs with 1,870 graduates by 2010. Despite that rise, the programs still account for only a fraction of the more than 4,600 degree-granting post-secondary institutions in the U.S. that enroll more than 20 million students. We can do better. Our focus should be on building more academic programs to attract more students and better preparing them to join our ranks. To best equip students, it’s imperative that we augment classroom learning with apprenticeships and on-the-job training. Even after 44 years in the industry, I still learn something every day. Every time I reach a career milestone, I’m reminded of how wrong I was to think that at year five or year 10 — or even year 20 — I knew all there was to know about the industry. By offering apprenticeships, insurance companies can provide students and new graduates with an invaluable learning environment. This learning shouldn’t stop after the first couple of years on the job, either; we should design early- and mid-career training courses to keep our colleagues engaged and to reward the dedication of not only the students, but also the instructors. The average age of an insurance agent in the U.S. is 59, and a quarter of the industry’s workforce is expected to retire by the end of this year. It’s imperative that these industry mainstays pass their valuable institutional knowledge along to students and colleagues with less experience. Only 4 percent of millennials view the insurance industry as a potential career choice. Young professionals harbor the opinion that the insurance industry is inherently boring. If such a small fraction might consider insurance for a career, how is it possible to combat the stereotype that the industry is boring without established educational programs? Therein lies our challenge: It’s up to those of us in high-level positions to forge a more formal career path and teach the next generation how fulfilling the insurance industry can be. There are some instances in which the industry excels at recruiting and retaining young professionals. Agents under age 40, or with less than five years of experience, can join the Young Agents program — a section of the Independent Insurance Agents and Brokers of America. The program allows members to connect with various professionals, attend conferences and access helpful resources. Young Agents furthers early-career employees’ engagement and illustrates the many avenues for advancement and success in the industry. But we still need an unwavering commitment to comprehensive education. Insurance companies have to prioritize and invest in academic programs that maximize students’ knowledge — and employee retention. See also: 3 Reasons Millennials Should Join Industry   Our industry is about ensuring the health, happiness and dreams of individuals. When we join the insurance industry, we inherit the responsibility of protecting what people value most. No amount of time in the industry can allow us to take that responsibility lightly. We must look beyond the sense of duty we might feel toward our current clients and begin preparing the agents who will come after us. Only then will they be able to reliably and proficiently serve our future clients. It’s up to our industry to train, educate and provide experience and teachable moments to foster the growth of new graduates and transform them into well-trained agents. We must help our colleagues attain their hopes and dreams, too.

Tuesday’s announcement about Amazon, Berkshire Hathaway and JPMorgan (A/BH/JPM) was short on details. The three mega-firms will form an independent company that develops solutions, first, for their own companies’ health plans and then, almost certainly, for the larger health care marketplace. But the news reverberated throughout the healthcare industry as thoroughly as any in recent memory.

Healthcare organizations were shaken. Bloomberg Markets reported that:

Pharmacy-benefit manager Express Scripts Holding Co. fell as much as 11 percent, the most intraday since April, at the open of U.S. trading Tuesday, while rival CVS Health Corp. dropped as much as 6.4 percent. Health insurers also fell, with Anthem Inc. losing as much as 6.5 percent and Aetna, which is being bought by CVS, sliding as much as 4.3 percent.

As expected, these firms’ stock prices rebounded the next day. But you could interpret the drops as reflections of the perceived fragility of healthcare companies’ dominance and traders’ confidence in the potential power of Amazon’s newly announced entity. Legacy healthcare firms, with their well-earned reputations for relentlessly opaque arrangements and egregious pricing, are vulnerable, especially to proven disruptors who believe that taming healthcare’s excesses is achievable. Meanwhile, many Americans have come to believe in Amazon’s ability to deliver.

Those who buy healthcare for employers and unions probably quietly rejoiced at the announcement. For them, the prospect of a group that might actually transform healthcare would be a breath of fresh air. In my experience, at least, the CFOs and benefits managers at employers and unions are acutely aware that they’re being taken advantage of by every healthcare industry sector. They’re genuinely weary, and they’d welcome a solid alternative.

See also: The Dawn of Digital Reinsurance  

Their healthcare intentions notwithstanding, the A/BH/JPM group is formidable, representing immense strength and competence. Amazon is an unstoppably proven serial industry innovator, continuing to consolidate its position in the U.S. and in key markets globally. Berkshire Hathaway harbors significant financial strength and a stop-loss unit, U.S. Medical Stop Loss, fluent in underwriting healthcare risk, which should be handy. In addition to the fact that JPMorgan is the nation’s largest bank, with assets worth nearly $2.5 trillion in 2016, it has a massive list of prospective buyers in its commercial client base.

The coverage of the Amazon/Berkshire Hathaway/JPMorgan healthcare initiative has been universal, breathless and mostly superficial. Scoffers, “experts” are gleefully predicting this attempt to do something really different will fail miserably, a victim of ignorance and hubris. While there are no guarantees, these naysayers ignore:

• the three CEOS and their staff are brilliant, powerful, have almost unlimited resources and are very, very cognizant of the difficulties they face. These are as far from idealistic newbies as one could get.
• the “competition” is pretty lousy, hasn’t delivered and has incentives that are NOT aligned with employers’. If the big health plan companies could have figured this out on their own, you wouldn’t be reading this.  It’s not like A/B/J are taking on Apple, Salesforce or the old GE.
• the financial incentives are overwhelming; healthcare costs are more than $24,000 per family and heading inexorably higher. Unless A/B/J reduce and reverse this trend, they’ll have a lot less cash for future investments.

Many are also talking about “initiatives” that are little more than tweaks around the edges to address healthcare costs; things like:

• publishing prices and outcomes for specific providers, a.k.a. “transparency” (My view – research clearly demonstrates consumers don’t pay attention to this information, so there’s no point)
• using technology to monitor health conditions and prompt treatment/compliance (My view – lots of other companies are already doing this, and this is by no means transformational)
• use buying power to negotiate prices (My view – it’s about a lot more than price; it’s about value)

See also: Is Insurance Like Buying Paper Towels?   Here’s a few things A/B/J may end up doing:

1. Own their own healthcare delivery assets (My view – Insourcing primary care, tying it all together with technology and owning a centralized, best-of-breed, tertiary care delivery center would allow for vastly better care, lower patient hassle and cost control)
2. Buy healthcare on the basis of employee productivity (My view – Healthcare is perhaps the only purchase organizations make where there is no consideration of value – of what they get for their dollars. To the Bezoses, Dimons and Buffetts of the world, this is nonsensical at best. They will push for value-based care, defined as employee productivity)
3. Build their own generic drug manufacturer (My view – No-brainer)
4. Allow employees to go to any primary care provider they want but require them to go to Centers of Excellence for treatment of conditions that are high cost with high outcome variability (My view — No brainer)

I’d also expect many more large employers will join the coalition, for the simple reason that they have no other choice. What does this mean for you? Do not discount this effort.

U.S. pharmacy chain CVS recently announced that it would no longer use “materially altered” imagery to market beauty products in its stores. That means no more perfect, digitally modified wrinkle- and blemish-free photographs to sell everything from moisturizer to lipstick. Instead, consumers will see more realistic pictures of models, complete with crow’s feet and birthmarks. Why did CVS make this change? It all has to do with the company’s brand purpose, the “reason for being.” In a statement announcing the change, CVS noted the connection between the propagation of unrealistic body images and negative health effects, particularly for girls and young women. Given that the company’s stated corporate purpose is to “help people on their path to better health,” the use of airbrushed images in promotional materials seemed contradictory and ill-advised. This isn’t the first time CVS has made a bold move inspired by its brand purpose. A few years ago, the firm stopped selling cigarette and tobacco products, forgoing an estimated $2 billion in revenue. That decision, too, was triggered by the inconsistency between the company’s purpose and the well-documented health effects of those products. What CVS is giving us here is a master class in the difference between corporate purpose and corporate propaganda. Most firms practice the latter – articulating a business purpose that makes for good annual report copy but doesn’t translate into tangible action. It’s nothing more that corporate window dressing. See also: How to Apply ‘Lean’ to Insurance   Far less common, but much more notable, are firms like CVS that don’t just define a brand purpose but actually live by it (even when it requires really tough decisions, like walking away from a $2 billion business). Such actions help pave the way for a better and more distinctive customer experience because, in the eyes of consumers, it makes the company more appealing, more genuine and more authentic. Kudos to CVS for taking yet another bold stand that helps make their brand purpose more than just a piece of corporate propaganda. Those kinds of decisions can spruce up a company’s brand image far more effectively than even the best airbrush. This article was originally published on WaterRemarks.

In recent years, insurers have taken an active interest in a wide range of tools and technologies that fall under the “emerging” label. This label covers a spectrum: Tech approaching ubiquity, like mobile and predictive analytics, is on one end, and tech with low adoption rates, like blockchain and smart home, populates the other end. The five technologies that fall in the middle of the range are receiving a flurry of attention from insurers: artificial intelligence (AI), big data, sensors and telematics, drones and robotic process automation (RPA). Our study of more than 100 insurer CIO participants shows that while 15% to 25% of insurers have made deployments in this middle group of technologies, equal or greater numbers of carriers are actively planning pilot programs for 2018, and these technologies are poised for rapid growth. Most pilot activity is in digital and analytics areas as insurers look to these five emerging technologies to improve risk analysis, fraud detection, service and operating efficiency. See also: Insurtech: How to Keep Insurance Relevant   Under the umbrella of AI, machine learning is being used to improve the performance of rating or fraud-detection algorithms. Carriers are also embracing AI to mine unstructured data from images and raw text as they move forward in their journeys to improve data analytics. With the growth of AI and predictive analytics comes an increasing importance of big data. For about a quarter of insurers, the use of big data tools, such as Hadoop and NoSQL, is common. Less common is the use of big data sets such as weather data and raw internet consumer data. Regardless, insurers are planning explorations and pilot activity in both areas. Tools within the space of sensors (IoT) and telematics are maturing, moving beyond simple rating discounts. These tools are especially gaining traction and adoption in property/casualty; value messages are evolving to include value-added services, providing customers with greater risk management tools. The use of drones is enabling the capture of certain types of information for the first time. As a result, drones are quickly becoming a standard tool for both property inspections and claims. Most property/casualty insurers report a positive value, though most are working with service partner providers rather than building their own capabilities. RPA holds high interest for insurers and is an area of active pilot programs. While not a transformative technology, RPA is a valuable short-term fix for poorly designed systems and processes that helps avoid expensive reengineering. See also: Insurance Technology Trends in ’17, Beyond   The important thing to keep in mind is that technology changes faster than culture and practices at most insurance companies. To fully leverage the capabilities offered by emerging technology, carriers should look at their products and processes in light of new technical, market and customer realities. Harnessing the growth of emerging technologies should lead to improved risk analysis, streamlined processes and better business results for insurance companies in 2018 and beyond.

This post, which describes recent news coming from insurtech and digital insurance in China, was written for Daily Fintech by Zarc Gin from Insurview from within China. Happy New Year! It has been a great honor for me to share insurtech developments in China since last November. I hope my posts here help you understand what’s happening in China, so you can either learn from the experiences or even develop businesses opportunities in China. Today, I’m going to share the predictions we made about insurtech in China in 2018. They are a combination of opinions, ideas, trend analyses and hopes. 1. More funds, more IPOs We have seen huge amount of funds pouring into digital insurance in China, and top startups are well-funded. Because of the successful IPO of Zhong An, investors are looking for the next big name in digital insurance. Top startups are also aiming for IPOs to catch up with Zhong An. So the fever of digital insurance will enter the next level, with huge funds and IPOs in 2018. My forecast is that Ping An Good Doctor, a Ping An Group subsidiary, will be the first insurtech IPO this year. 2. More digital health insurance Premium income of health insurance has been growing quickly since 2011, with 404.25 billion RMB ($62.32 billion) income in 2016 and a 68% growth rate. Exalted Life was one of the most popular health policies from Zhong An in 2016. Ping An also launched E-home and E-life, which were well-received. The competition of digital health insurance got more intense in 2017 with the launch of Wesure. So, the competition will continue, and health insurance will be even more widely received in 2018. See also: How Is Insurtech Different in Asia?   3. Opportunities for B2B startups Over the past two years, B2C startups were in fashion. But the digitalization of the whole insurance industry is far from accomplished, and the infrastructure of insurance is still in its early stage. Therefore, the potential for B2B startups will be big in 2018. 4. Rise of a new type of broker CIRC has been trying to weaken bancassurance channels in China. This led insurers to seek the support from broker companies, and the insurance intermediary industry is expanding with this opportunity. Life brokers like Mingya and EverPro are growing quickly. Focusing on quality of individual brokers is their key difference from traditional broker companies. Digital broker companies like Tuniu are also growing rapidly with the help of e-commerce resources. We believe brokerage will have a new age in digital insurance, and both the life and property sectors will grow significantly in 2018. 5. New look on auto insurance With regulation on auto insurance tightening, the combined ratios for auto insurers are increasing. To reverse the situation, auto insurers need to grab the digital opportunity and develop policies from the perspective of customers. We believe digital auto insurer will explore the possibilities in the digital age and make a difference to the current auto insurance. 6. Opportunity in data and information Insurers are connected with their customers’ lives, so they will have access to all the data generated, such as health, habits and behaviors. Data can show insurers where the world is going, so there will be a huge opportunity in data collection and analysis. See also: Top 10 Insurtech Trends for 2018   7. Globalization The world is getting smaller thanks to the internet, both for China and for other countries. The interaction between China and the world is getting more and more frequent. Foreign insurtech companies such as Singapore-based CXA Group are exploring Chinese markets, and Chinese insurers like Fosun and CPIC are implementing their plans around the world. 8. Talent liquidity Tencent, Alibaba and Baidu all entered digital insurance in 2017. They will heat up the talent liquidity in this industry. We will see an increasing combination between tech talents and insurance talents in the future. This article first appeared at Daily Fintech.

As we approach Super Bowl LII in U.S. Bank Stadium in Minneapolis, in which all-time great quarterback Tom Brady leads the Patriots against the underdog Eagles, what risk management issues are affecting the game and fans? Here are five (from an Eagles fan): 1. Have a Backup Plan This is Risk Management 101 stuff — backup and redundancy. Just as an organization needs to back up its data and processing capacity to ensure smooth and continuous operation, so, too, must a football coach have capable and trained backups ready to take over on a moment’s notice. Eagles Coach Doug Pederson conducted a clinic on the value of backups this year when the Eagles lost their starters at kicker, special teams ace, running back, middle linebacker, left tackle and quarterback. I confess that I grimaced when the Eagles signed journeyman quarterback Nick Foles to an expensive contract to serve as a backup, but now he leads the Eagles into the Super Bowl. See also: The Current State of Risk Management   2. Know Your Environment Smart business travelers take the time to learn the basics of local customs and protocols, especially when traveling overseas. It’s not only good manners to understand the local culture, but it can prevent you from being misunderstood. Sadly, some Vikings fans who came to Philadelphia for the NFC Championship game did not know the rabid level of Eagles fans' devotion at Lincoln Financial Field, and they were subject to rude and abusive behavior simply for wearing purple Vikings jerseys to the game. The Super Bowl is in Minnesota, but Minnesotans are more likely to behave hospitably, even toward Eagles fans. While some members of the Eagles have reported trouble getting a restaurant reservation in Minneapolis, the larger risk to manage is the frigid Minnesota climate. For example, even though the Super Bowl will be played in a climate-controlled domed stadium, heightened security concerns may mean long lines at entry gates; fans should dress for the outdoor weather. 3. Manage Expectations and Larger Social Implications The 2017 season had plenty of controversy, with players kneeling, some team owners and politicians criticizing and everybody tweeting about it. Each team had to manage the risk of controversy and how it affected the players, the fans and society at large. While some owners took a combative stance, the Super Bowl-bound Eagles found ways to create some wins here. Eagles star safety Malcolm Jenkins joined other NFL stars to form the Players Coalition to find solutions to social problems by working with legislators. Eagles owner Jeffrey Lurie helped players publicize their goals in a positive light. While some locker rooms were divided by sensitive issues, Eagles players and owners came together and found common ground. 4. The Plural of “Anecdote” Is Not “Data" We’re in the age of big data. Our risk management and insurance business is poised for a digital transformation as the Internet of Things generates masses of new data, blockchain offers new ways to store it and data analytics gives us the power to use all this data. Many coaches still rely on intuition or an inherently conservative approach to the game (ahem, Andy Reid), but "Moneyball" showed how data can be leveraged to maximize the odds of winning in baseball, and there is no shortage of data available to NFL teams for both player evaluation and game day strategy. Coach Pederson and the Eagles have fully embraced an analytics approach to the game; he communicates with his analytics experts during the game. The Eagles seem daring when they run an offensive play instead of punting on fourth down, but the calls are simply managing risk for optimum outcome. The Eagles average 4.7 points on drives that include a converted fourth down. See also: 3 Challenges in Risk Management   5. Manage Exposures The biggest gripe of NFL fans? The officiating. Despite the billions of dollars at stake in the NFL, the league continues to use part-time referees who are accountants and analysts in their regular full-time jobs. These referees do a remarkable job under the circumstances, but the NFL should have — like the NBA and MLB — full-time officials who get rigorous year-round training. When is the last time you felt that your baseball team lost because of the umpires? The risk of making fans feel cheated is an easy one to manage. Take a tip from risk managers, NFL. Scan the environment, assess the exposures and put plans in place to mitigate those risks. The article was originally published in Insurance Journal.