This year’s CES is no less mind-boggling than in prior years. With 2.7 million square feet of exhibition space, about 4,000 exhibitors, hundreds of sessions and 180,000 people, it is virtually impossible to take it all in. However, there are a few big themes that always emerge, along with a variety of interesting new products – some are potential game-changers while others are head-scratchers. But, I’ll save a more in-depth analysis for another blog to concentrate on one overarching theme I’ve seen from CES2018 – the prominence of the user interface (UI).

This emphasis on the UI is especially interesting because CES has historically been considered a “hardware” show, with the latest and greatest statistics touted by tech companies. Metrics related to speeds, capacities, pixels, size (some devices keep getting bigger while others keep getting smaller) and other units of measure dominate the discussions and marketing materials. But one prevalent thread throughout much of CES2018 is the dramatic expansion and innovation regarding how we interact with computers and the world around us.

See also: Rise of the Machines in Insurance  

Start with the fact that voice assistants are increasingly embedded into new solutions – Alexa, Google Assistant, Cortana, Bixby and others from prominent tech brands are leveraged in home devices, vehicles, mobile devices and many other smart things. Next, consider that haptics and gestures are becoming more advanced and being used to control more devices. New car company BYTON unveiled a car that allows interactions via five simple hand gestures (and that vehicle also has a 49-inch touchscreen and has integrated Amazon’s Alexa). Also, interactions based on our movements continue to be enhanced in the VR world.

Another area in which interaction is rapidly advancing is the use of biometrics. Fingerprints are already broadly used to unlock devices and to gain access to other digital assets, but we increasingly see solutions based on iris scans, facial recognition, hand geometry and other unique aspects of human physiology. We can all hope that the days of the password are numbered (YAY!).

Chatbots are emerging in many places, and people are getting used to interacting with them for sales advice, customer service and tech problems. Many still need to be infused with more AI to perform at a higher level, but there is a distinct trending toward more chatbot use. It is also likely that we will see a resurgence of avatars to give more personality to chatbots. At CES2018, I had my face scanned, and a highly accurate 3D model of my head was created in less than a minute. While the early applications of these types of 3D digital capture and creation tools are designed for virtual reality, using the tools for customer interaction is a natural extension.

See also: Cyber Threats: Big One Is Out There  

Add to this mix the amazing advances in augmented and virtual reality, the appearance of all manner of screens (every size, shape and location possible), tech that adds the sensations of touch and smell to our virtual interactions with machines, and you get a formula that engages all our senses. The digital, connected world is in its infancy and is poised to transform our daily lives. One thing is clear, the way we interact with the world around us will be based on the types of UI advancements that are so front and center at CES2018.

One final wish: Imagine a world without passwords, where TV remotes are a thing of the past, using your fingers to type on a keyboard is rare, and mice only show up in the barn. Sounds like nirvana to me.

Small? According to Swiss Re, the global insurance industry generated $4.6 trillion in direct insurance premiums, or 6.3% of the global GDP in 2016. Without insurance, flights would not take off, ships would not set sail and you would not be allowed to drive your car. Insurance is a key enabler in the global economy, and, without it, the economy would quickly grind to a halt. How then can the global insurance industry be called small? Over the last few decades, the overall size of the insurance industry has not grown at the same rate as the other major financial markets, and it has struggled to increase its coverage, especially in new and emerging markets. It is a depressing statistic that ClimateWise (a global network of leading re/insurers, brokers and industry service providers) believes the gap of uninsured or under-insured assets had increased fourfold over the past 30 years. So why has the growth in the insurance industry been so sluggish, and what has constrained it? While there are differences between insurance and other financial markets, the growth of the foreign exchange (FX) market was undoubtedly fueled by the creation of an electronic marketplace. Up until the 1970s, the FX market was a very traditional, heavily intermediated, paper-based market. The high costs and length of time needed to complete a FX transaction limited the number of parties that were able to participate. See also: The World Is Flat; Insurance Is Round   Reuters, acting as an independent third-party provider, laid the groundwork for the first electronic FX marketplace in the 1970s by enabling parties to insert FX rates into their system, making them available on-screen to recipients. The electronic marketplace really took off in 1981 when Reuters enabled dealers to instantly communicate with each other to buy, sell or lend money through the same screen. The effect this had was that costs were greatly reduced, market liquidity grew, new participants were attracted to the market and it became possible to create a raft of innovative products. The FX market is now the world’s largest financial market, with more than $5 trillion changing hands daily. Although it may seem far-fetched to call the insurance industry small, it is fair to say that the insurance industry is nowhere near its potential size yet. As so many other industries have done, the creation of an electronic marketplace for the transfer of insurance risks would help drive growth, create efficiencies and stimulate innovation across the insurance market, benefiting the industry as a whole. AkinovA is building such an electronic marketplace for the transfer of re/insurance risks with the support and collaboration of some of the largest market participants. By taking an inclusive approach, AkinovA is bringing together all parts of the insurance value chain to enable the creation of a truly electronic marketplace.

Claims are a paradox for the insurance industry. Neither consumers nor insurers want claims to occur, but, when they do, they are critically important to both parties. Consumers want speedy resolutions, clear communications about status and, as a bonus, a personal touch. Insurers are looking for efficiency and accuracy and to eliminate the risk of fraud or litigation with claimants. When the claims process breaks down, consumer satisfaction falls and insurer costs go up – that is the penalty for a bad claims experience. In this sense, every claim is a “moment of truth.” In the low-touch relationship between consumers and their insurance companies, claims handling may represent the most important and meaningful interactions. That is why insurers are advised to look beyond mere cost savings and seek a richer, more data-driven and analytics-enabled customer experience that incorporates artificial intelligence (AI) and other advanced technologies. Insurers that get it right will transform claims from a necessary back-office function into a source of competitive advantage, market differentiation and increased customer loyalty. Achieving a seamless customer experience Insurers need to position themselves to win the future against an increasing range of competitive threats, such as insurtechs and other nontraditional players who may enter the market. With some insurtechs offering digital claims processing that can be initiated from mobile devices and completed within seconds, the pressure is on insurance companies to move beyond incremental improvements. To achieve the vision of a seamless and differentiating customer experience, insurers should:

• Determine which existing data sets can be used to enhance the claims process
• Identify external data and advanced technologies that can be applied to further reduce costs and remove friction
• Define and emulate the practices from experienced leaders and the particular insurance use cases that can be piloted and deployed to greatest effect
• Begin to build the required data and analytics capabilities

The age of experience: insurers vs. the leaders Historically, claims organizations have not been very effective or sophisticated in harnessing the wide variety of data available to them. Today, however, the opportunities are too compelling and potential threats to customer retention too severe to ignore. After all, today’s consumers have higher expectations than ever when it comes to efficiency, accuracy and personalization of service offerings – thanks to the very high standards by leading firms in e-commerce, consumer electronics and transportation. Seamless and intuitive self-service transactions are the rule in a wide range of industries, but an exception in insurance. Customer experience expectations Given that claims is often the most visible, customer-facing function in the insurance business, it is no wonder that it will be measured against other consumer-centric sectors and companies. Insurers may ask themselves if they offer:

• Personalization capabilities, such as 1:1 pricing, choice of repair facilities, usage-based products, car pickup and delivery services and tailored recommendations
• Real-time status updates, fast-track claims payouts and electronic submission of documents
• A single point of contact and hasslefree experience overall

See also: The Cloud’s Vital Role in Digital Revolution   Social media has also upped the ante for insurers relative to the customer experience. The risks and costs of a bad claims experience can be amplified if customers choose to share their dissatisfaction through social media or consumer review sites. Social channels also give customers access to more information about the companies they do business with – information the companies do not necessarily control. The proliferation of advertising by attorneys seeking claimants suggests there are many dissatisfied claimants. Data and analytics in the customer journey The most important difference between the experience offered by insurers and that delivered by digital bellwethers from other industries is the latter’s use of data and analytics to define every step of the customer journey, from promotional offers and upselling recommendations to product returns and complaint handling. The bellwethers deeply mine their own customer records and external data sets (including social media streams) to thoroughly understand customers’ needs, gauge customers’ value and take specific actions based on those insights. This is a proven strategy to achieve customer-centricity at scale, with clear applications to the claims process. What matters to claimants — and how to deliver it Our insurance consumer research confirms that speed, efficiency and transparency are among the most important characteristics of a quality claims experience. Better data can help streamline steps in the claims process, setting the foundation for an enhanced experience and, ultimately, no-touch claims resolution for many claims. Streamlining claims processes Consider the options for insurers seeking to streamline or fully automate “no-touch” or straight-through processing for many basic claims:

• Property and casualty (P&C) insurers can use historical repair data to dramatically decrease estimating times for different types of vehicles and homes. They can also better manage repair costs and quality based on deeper analysis of these data sets.
• Advanced telematics data (including video imagery) can be instantaneously captured during an automobile accident and downloaded from the cloud to automatically trigger a first notification of loss (FNOL) entry. Underwriters can “score” the data to determine the extent of loss relative to the automobile’s current value.
• Social media data can be analyzed to detect fraudulent claims.
• Drones and satellites can survey damage and collect information about property damage to initiate claims before a homeowner makes contact.
• Via intuitive apps or other interfaces, insureds can submit photos of damage to their homes or vehicles to initiate the claims process, provided there is no sign of fraudulent behavior (which analytics programs can evaluate).
• AI can be used to scan claims for the likelihood of fraudulent behavior, while robotic process automation (RPA) can automatically pay claims that fall within certain risk and financial parameters.

Customer engagement Now consider the options for more timely and personalized service:

• “Chatbots” issue notifications to the policyholder regarding claims status and payment amounts.
• Voice analytics assesses customer sentiment during phone calls, with appropriate classification and prioritization of resolution.
• Behavioral analytics are applied to model likely customer needs and identify high-value policyholders or those likely to dispute a claim.
• Analysis of customer records can identify claimants facing renewal and good candidates for purchasing additional products.

In some of these cases, a quality claims experience can pay immediate dividends. In all of them, insurers can engage at key points during the claims life cycle, with accurate and consistent information delivered on a timely and transparent basis. At the same time, claims teams can focus on high-value interactions, high-risk claims and other exceptions. Common use cases for data and analytics in claims

• Satellite and drone imagery: capture and analyze satellite data for more accurate damage assessments after storms or natural disasters
• Voice/biometrics: analyze recording of contact center conversations to identify customers at risk of a negative claims experience, and to match the right claims handlers to the right claimants
• Automation and no-touch processing: leverage RPA to process all low-risk claims under a certain threshold; then expand straight-through processing to a broader pool of losses, reviewing claims types and policyholder history to evaluate claims risk
• Vendor analytics: Combine internal data and geospatial modeling techniques to determine best-performing vendors

Claims transformation in action: addressing the claims process with telematics data First steps forward: where to start for a better claims experience As the previous examples show, there are many steps in the claims process that insurers can digitize and streamline for a better experience, no matter where they are on the maturity curve today. The path to full claims transformation is traversed in a series of well- thought-out steps that produce useful learnings and incremental value. Substantial improvements do not necessarily require new technology or huge teams of data scientists. Most insurers can and should start with the data they already have before looking to external data streams or adopting RPA, AI or other advanced technologies. They must also recognize that these once-futuristic-seeming technologies are ready for everyday use in claims. Data The priority should be to use data to create full views of individual claims from multiple perspectives. Internally, that means transactional data and historical customer data. Useful external data streams include:

• Weather data
• Consumer credit data
• Medical billing patterns
• General loss details information
• Social media

All of these inputs will help evaluate future risk and leakage risks and support potential process and experience improvements. See also: Go Digital… but Don’t Change Who You Are Technology More mature organizations will look to leverage new data storage and management technologies, such as data lakes, as the basis for advanced analytics and real-time visualization. The most forward-looking insurers may build out data science teams to probe large and diverse data sets stored in analytics ecosystems. Machine learning and visualization techniques can help predict claims risk with greater accuracy and certainty. They can also provide a consistent claims handling approach relative to unbiased reserving, litigation, subrogation and other claim processes. It is important to note that the benefits of more data and more effective analytics extend beyond the customer experience in claims. Organizational factors A better experience in claims is not simply a matter of better technology. Culture and a willingness to embrace change also matter. Test-and-learn approaches may be necessary for insurers with limited digital capabilities. For instance, they may begin by piloting automated processing for claims of relatively small amounts or trying bot-driven notification systems to improve communications. Many insurers must overcome risk-averse cultures to encourage experimentation and “fast failures” in the spirit of learning what works. Some early-adopting insurers have embraced analytics labs or customer experience centers of excellence, where relatively low-risk and low-cost experiments can be carried out in controlled environments. For instance, organizations can analyze the costs and benefits of no-touch processing for claims within certain parameters and creating special “SWAT teams” of experienced claims adjusters to focus on the claims that merit human review and intervention. The path forward to enhanced claims experience No matter where they are on the maturity curve, claims organizations can start to advance the experiences they offer. The bottom line: the experience is everywhere Customer experience was once largely the realm of marketing and service teams. Now, the proliferation of digital channels means the customer experience is everywhere customers interact with companies – from social media to brick-and-mortar spaces to billing and accounting. Further, the experience matters most where customers say it does. In insurance, that means the claims process. To seize this unique “moment of truth” opportunity to strengthen customer loyalty and boost retention, forward-looking insurers will leverage an expanded set of data and adopt more sophisticated analytical tools and techniques. Indeed, more effective use of data and analytics is one of the best ways for insurers to simultaneously improve financial performance, differentiate from competitors and deliver what customers want, which in claims is a fast, accurate, transparent and personalized experience.

Are the Amazon Echo and Google Home insurtech? They sure are! The two top-selling smart speakers have become so competitive that, in Canada during the past holiday season, each company undercut the other by offering the smaller versions, the Echo Dot and Google Home Mini, for as little as $39.99. For that price, why not buy one and try it out? A recent report from Canalys states that the smart speaker is now the fastest-growing consumer technology. It is growing faster than augmented reality (AR), virtual reality (VR) and wearables, with smart speaker shipments expected to top 56 million units in 2018. See also: Global Trend Map No. 5: Analytics and AI   Since the launch in Canada of the Google Home in July 2017 and subsequently the Amazon Echo in December 2017, the following insurance services have been made available:

• Aviva Canada — Aviva made a skill for the Amazon Echo to help consumers find answers to common insurance questions and to get an insurance quote. If a person is curious about accident benefits, for example, all they have to do is ask, “Alexa, what is accident benefits coverage?”
• Manulife — Manulife’s skills for the Amazon Echo advise customers on what is left on their health benefits. Need new glasses but not sure how much coverage you have? Simply ask, “Alexa, ask Manulife Benefits how much do I have left for glasses?”
• Kanetix.ca and InsuranceHotline.com — Both comparison websites made Google Assistant actions to support comparing car insurance quotes. Drivers just have to request a quote by saying, “Hey, Google, ask Kanetix.ca for a car insurance quote.”
• RateSupermarket.ca has a Google Assistant action that supports finding the best mortgage rate in any province. All one has to do is say, “Hey, Google, ask RateSupermarket.ca for the best mortgage rate in Ontario.”

Not only is the smart speaker convenient for finding information, it is also spurring the sales of smart devices and IoT (Internet of Things) technology for the home such as smart plugs, smart appliances and smart entertainment…basically, smart everything. The Amazon Echo and Google Home can be used to turn on the lights, turn on the TV, change the channel and even find the best science fiction on Netflix. Here is some recent data from ComScore and Statista showing the likelihood of IoT ownership for smart speaker households. See also: What I Learned at Google Google rarely has any presence at the Consumer Electronics Show, but this year Google is out in full force going head-on with Amazon Echo. Smart speaker adoption and integration to IoT devices is expected to be a megatrend at this year’s CES, which began yesterday in Las Vegas. The adoption, sales and marketing of both Amazon and Google smart speaker assistants is clearly making this device a must-have in the home. Insurance providers cannot ignore this opportunity to develop smarter, more convenient ways to service their customers. If the smart speaker can really fire up IoT adoption in the home, insurance providers can’t ignore the data it can collect to create better products that improve the management of risk and claims for the household.

In the last months of 2017, I wrote - together with my friend Andrea Silvello - “All the Insurance Players Will Be Insurtech,” and the book was published in the first days of 2018. See also: Is Insurance Really Ripe for Disruption?   I included all the foundations of my insurtech thoughts; the elaboration of many discussions I have had since I published my article “Will fintech newcomers disrupt health and home insurance?” in August 2015; and a review of my five insurtech predictions from a year ago. Here is that look back, followed by a prediction on the hottest discussion at the start of this year: whether Amazon will enter the insurance industry: Prediction: Exit Not everyone will prosper. Although many amazing insurtech companies are seeing great results and scaling up—and many will continue to enter the field—some will surely leave the game, as well. Result I was dreaming of an insurtech unicorn’s exit. Well, dreams become reality sometimes: Well Zong An – the Chinese full stack insurtech – made its IPO with a $10 billion evaluation in fall 2017. Also, Travelers acquired Symply Business for $400 million. On the other hand, Guevara left the game in the second half of the year. This winnowing down, a Darwinian “survival of the fittest,” should ultimately strengthen our industry. Prediction: Reconversion This is the other side of the moon. I saw many initiatives doing a great job putting together a fantastic team and a sexy equity story, and some raised relevant capital, but their business models look (to me) not sustainable from an insurance perspective. I don’t want to claim that no one of them could succeed, and history has already shown how skepticism can be wrong. But I’m expecting to see some players use their great skills and the funding raised to change radically their business models. Result In spring 2017, Trov did a round of financing of more than $40 million with a valuation higher than $300 million, but, from what we heard from the CEO at different conferences, the company is focusing its efforts on a back-end system that insurers can use on their customer base rather than on growing its customer base and portfolio of on-demand risks. Also, Zenefits went through a difficult 2017, stepped back from the brokerage business and started to license its technology as an SaaS (software as a service) player. Prediction: Connected Insurance My two cents are on any insurance solution that uses sensors for collecting data on the state of an insured risk and on telematics for remote transmission and management of data on the insurance value chain. A crazy prediction: Let’s consider the most mature use case, auto insurance telematics in Italy, which represents one of the best practices globally. In the country, I’m forecasting more than 7.5 million cars connected with an insurance provider by the end of 2017 (compared with 4.8 million cars connected at the end of 2015). Result In line with the expectations, Italy’s insurance telematics policies had reached 7 million by the end of third quarter 2017, according to the IoT Insurance Observatory. Prediction: Culture Shift Incumbents are becoming always more interested in debating innovation and concretely testing new approaches, including collaboration with startups. I expect to see this new breeze surround old-style insurance institutions, with a growing awareness on how all the players in the insurance arena will be insurtech players. Result A board member at one of the largest global reinsurers recently summarized the essence of insurance as assessing, dealing and accepting risks using the latest technologies. That’s one sign that the industry is coming around. We saw 3,800 more signs at InsureTech Connect, the world’s most prestigious insurtech conference. In 2016, the conference had 1,200 participants; in October 2017, it sold out with more than 3,800 attendees. Andrea and I were there on the stage and witnessed the incredible energy of those insurance professionals, regulators and startups. Prediction: Sustainability Many value propositions are bundling risk covers and services, thus allowing the insurer to influence behaviors and prevent risk, contributing to the sustainability of the sector. In the next months, I expect to see some insurers becoming more relevant in the life of their clients and act as partners and not only as claim players. Result The speeches of top insurance executives show the sector’s ambition to go in this direction. A slide projected on a wall is just that, however: in the field, we see very few examples of implementation. What will happen in coming years? Unfortunately, I damaged my laptop a few days ago so my crystal ball for the 2018 predictions is also not working...but I want to provide my middle-term view about the issue most-discussed at the end of 2017: Amazon activity in the insurance sector. I predict Amazon will not disrupt the insurance sector. I believe it will do something – especially around insurance coverages on the products it sells – but will not be able to touch the core of the insurance profit pool on either commercial lines or personal lines (auto, property, life, health). My view is based on two main beliefs:

• One of the key elements to be a successful insurer is underwriting discipline, as highlighted by Mario Greco recently or some famous Warren Buffett sentences in the past. Well, I believe that underwriting discipline conflicts with the culture of any tech giant. Amazon could buy an insurance company or hire talented people to close the gap on insurance knowledge, but the corporate culture doesn’t fit with the insurance business fundamentals.
• In insurance, each market has its particular characteristics. One size doesn't fit all -- the opposite of how things work in social media or in internet businesses. I'm speaking about what the customers want (need) to buy in the different markets and how they want to buy it. In life insurance - the usual push product, which needs to be sold – digital channel at global levels represent less than 1% of new sales. But even look at auto insurance. The U.K. auto insurance market is controlled by online distribution, and, 10 years ago, insurance executives assumed that all Western European markets would follow the U.K. path within a few years. But auto insurance distribution in Europe continues to be dominated by traditional channels. You can argue that local carriers executed poorly, but even branches of U.K. insurance groups, with their great expertise, couldn't duplicate the success that was had in the U.K.

I don't think things cannot be changed. In fact, I believe there are a lot of opportunities to do things in a different way. But "one size fits all" doesn't work, and I’m skeptical about the tech giants’ ability to deal with those local insurance characteristics. A tech giant based in Silicon Valley or with a European hub in Dublin will dirty its boots on insurance distribution (or other steps of the value chain). It is an interesting time to be in the insurance sector, but I’m pretty confident GAFA (Google, Amazon, Facebook, Apple) and BAT (Baidu, Alibaba, Tencent) will not disrupt this sector.

Virtually everyone agrees that many insurance markets have shifted from push to pull. Technology helps consumers to make better-informed and more rational decisions, and they are making use of this. Customers go through a significant part of the buying cycle before they contact a broker, agent or insurance firm. Although insurers are aware of the transition from push to pull, they have made hardly any adjustments to their customer engagement strategies and required capabilities. Insurance carriers have several ways to key in to the increasing importance of pull strategies. The one closest to home is "When you can't generate sufficient traffic yourself, you can, of course, always use the pull power of others." Consequently, many carriers rely on search engines and comparison sites. Double-edged swords Search engines, review and comparison sites play a key part in the online orientation and choice process in virtually every product category – insurance is no exception. Insurers view search engines and comparison sites with mixed emotions. Comparison sites are like double-edged swords. On the one hand, they create more transparency and convenience for customers and bring in a substantial part of the business. In general insurance, in mature markets, this can be 30% to 40% of the customers. On the other side, both rising costs and dependency on search engines and comparison sites are becoming a major pain point. Leaning too much on search engines and comparison sites may not be a sustainable strategy. If a financial institution is becoming too dependent, it is actually becoming a commodity and could end up being nothing more than a service provider or white label supplier. See also: What Is the Future of Comparison Sites?   Comparison concerns Several insurers we spoke to shared the following concerns:

• Many consumers start their path to purchase on the websites of brands that are top of mind for them. After that, consumers visit a comparison site to research possibly cheaper alternatives. Even if the insurer is still the best, the customer does not return to the site of the insurer but concludes the deal where he is at that point in the purchase process: at the comparison site. Consequently, the insurer has to pay a high commission to the comparison site, often even significantly higher than the average broker’s or agent’s commission, and all the while the customer had in fact already decided on that particular insurer.
• Customers coming in via comparison sites are not necessarily the best customers, or the best business. The insurer generates its revenues mainly in segments where it is one of the cheapest – and those are usually not the most profitable segments. Consumers in those segments are by nature more calculative and price-sensitive, and therefore less loyal. Price comparison sites can increase switching rates by more than 30% and have a less favorable claims profile, according to quite a few insurance executives that we have spoken to.
• The focus on price, rather than the cover and services, may lead insurers to strip their policies, instead of really guiding customers toward the best-fitting solution.

Shift power back Obviously, because of these concerns, many insurers are thinking about how they can shift power back from the comparison sites. We already see the following five strategies to fight price comparison:

1. U.S. insurer Progressive offers comparisons with competitors on its own website, within the quote that the prospect is getting -- even if Progressive is more expensive. Customers will find that information anyway, so it’s better to tell and explain it yourself. Because the comparison is made using the same covers, customers can be sure they are comparing apples with apples, and price is the sole differentiator.
2. U.K. insurer Admiral set up its own comparison sites. Dutch insurer Achmea acquired Independer.nl, the largest comparison site in the market. Comparison concept GoBear, an Aegon joint venture, is conquering Southeast Asia.
3. Different products can be highlighted on your own website with features and benefits that are not offered through comparison sites. Or companies can use a "Lego brick" type of product approach: simple, cheap products that perform well on comparison sites. Once customers are acquired, they can easily add more features and drive complexity.
4. Companies are creating more awareness through relevant and distinctive branding.
5. Some leverage the power of customer reviews. Increasing the number of reviews, of course, implies that service has to simultaneously become more important.

[caption id="attachment_29638" align="alignnone" width="570"] Visual: AEGON’s highly successful GoBear[/caption] Strategy 6. Pull platforms We believe that, apart from these five strategies, there is ample room to make more use of the possibilities that new technologies have to offer. The challenge is to close the gap between the financial institution and the customer. The contact frequency with customers is an essential part of the economic engine. Companies can move from transaction to interaction, from one-way communication to a dialogue and from interaction to intimacy, taking the dialogue from exchanging information to pro-active actions. Sooner rather than later, insurers need to define their own pull strategies and start working with other pull platforms rather than search engines and comparison sites only. GAFA carry pull in their genes In sessions we had the past few years in many boardrooms, one topic kept coming back: the fear of Google, Apple, Facebook and Amazon (GAFA). With regard to customer engagement, what is especially interesting is that all these companies don’t just apply a random number of pull instruments, but literally carry pull in their genes. Apple, for instance, has over time developed a number of successful pull platforms, like the iTunes store and the App Store. In both cases, supply and demand are brought together. Many people decide for the iPhone because of the brand and the design, but an important part of the success lies in the vast number of apps that Apple has created a platform for. Apple HealthKit, the health platform of Apple, gathers data from a wide variety of sources ranging from food and exercise-tracking apps and connected weighing scale to glucose and blood pressure measurement tools. There is also the comparable Apple HomeKit. Both can become just as successful pull platforms in their respective domains as the iTunes and App stores. [caption id="attachment_29639" align="alignnone" width="570"] Visual: HomeKit is Apple's platform for third-party smart home gadgets that talk to each other through iOS devices and are Siri-voice-controlled.[/caption] See also: Insurtechs: 10 Super Agents, Power Brokers Eight key characteristics of Pull Platforms We have analyzed the pull platforms of the companies mentioned above, from non-tech companies like Nike, Danone and Unilever but also from the first financial institutions, fintechs and insurtechs that have established successful pull initiatives. Our analysis revealed that these pull initiatives all have their own mix of eight key characteristics. In our next post we’ll dive into all eight. So stay tuned!

As we head into 2018, we’re all trying to figure out what the insurance industry can expect from innovation, and whether this will be the year the industry will embrace transformation. Several of the six articles linked to below will provoke some thoughts, and you’ll see plenty more outlook pieces over the next couple of weeks at the ITL website.

To get the juices flowing, here is a bold prediction from our own Guy Fraker, ITL’s Chief Innovation Officer, as well as a way for you to hear more from him.

First, the prediction. Guy wrote to me:

“Hardly a day goes by without someone publishing an article about why autonomous vehicles (AVs) won’t see deployment until 2025. In fact, 2018 will be the year that scaled deployment begins.

“One reason many people expect a slower rollout is because it takes some 15 years for the whole fleet of cars to turn over, but at least nine capable companies are racing to produce an aftermarket kit that can retrofit existing cars. AutonomouStuff has provided hardware, software and engineering assistance to more than 2,700 organizations that are already operating fleets of cars, trucks and semis that all began as stock vehicles but that are now running autonomously on public roadways. At ITL’s Innovator’s Edge, we are tracking 222 startups dedicated to autonomous vehicles that have received $6.2 billion in funding in just the past 24 months.

“So much for fleet turnover setting the pace. 

“Insurance is playing its part. Munich Re said way back in 2015 that AVs would be a primary growth market. Google’s AV program, Waymo, recently announced an alliance with Trov (after an introduction by ITL) to provide insurance for Waymo’s driverless fleet in Phoenix.

“I, personally, have worked with regulators on the AV issue, including spending two days with Google and 38 state insurance commissioners in 2017. Most states, led by Florida, are inclined to limit regulatory requirements.

“So they won’t stand in the way of innovation, either.”

Now, the way to hear more.

The first major conference of the year—one that features a wealth of insurance industry leadership onstage and in the audience—is the annual Joint Industry Forum, held at the Marriott Marquis in New York City on Jan. 16, and Guy will be speaking there. The event, organized by the Insurance Information Institute, features a panel on the digital technology revolution that includes Guy and two of our good friends: Pete Miller, President and CEO of The Institutes, and Donna Peeples, Chief Customer Officer of Pypestream. The conversation will be led by James Dodge, Practice Leader of Milliman Advanced Analytics. 

The panel will look at how technology can be integrated into supply chains and will tackle Guy’s two threshold questions for insurance executives: 

1. Are you accepting that transformative change is underway?
2. Do you have the will to embrace this period as opportunity more than threat? 

The JIF will feature several other panels, including the perennial CEO panel, which will be especially worth hearing for their views of the future. To learn more about the agenda, and register to attend while there is still time, go to JIF Registration. 

Cheers,

Paul Carroll,
Editor in Chief

In 1984, Wendy’s introduced an ad campaign with the tag line “Where’s the beef?” The campaign was so successful that the phrase “Where’s the beef” made it into the vernacular as a way to question whether there was any substance or any tangible result from an activity. The insurtech movement is enjoying enormous success in terms of new startups, venture capital, partnerships, and pilot projects. But it is fair at this stage to ask, Where’s the beef?

Let me be clear that this is not a putdown or dismissal of insurtech. In fact, I am somewhat of a cheerleader for the movement. There is a great deal of innovation generated by insurtech, in the form of new business models, new products, new distribution platforms, new ways to revolutionize the customer experience and many new options for leveraging emerging technologies. Insurers, venture capitalists and others are enthusiastic about the potential of insurtech to transform the insurance industry. And 2017 was a banner year for insurtech, with the number of startups around the world roughly doubling to more than 1,300 (by SMA’s count), with a raft of insurers setting up venture arms and allocating billions to invest and with new partnerships and projects being announced daily.

However, if insurtech is to truly transform insurance, it must ultimately affect the key financial metrics of the industry. Premium volumes and policy counts should rise. Expense and loss ratios should decrease. Life/annuity companies should finally gain traction in the middle market. Overall industry profitability should increase.

There are individual projects at specific insurers where insurtech partnerships have begun to move the needle. There are also some individual insurtech companies that have been quite successful, securing large investments, multiple insurance customers and positive results. But in the context of the roughly $5 trillion global insurance industry, insurtech has not perceptibly changed any metrics.

See also: 10 Insurtech Trends at the Crossroads  

So, what is likely to happen in 2018 (and beyond)? My prediction is that we will start to see “the beef.” This is not exactly a prediction that is going out on a limb. Investors and insurers have a sense that there is a lot of “beef” coming in the future. And not just as a junior hamburger but a double or triple cheeseburger. The hundreds of partnerships, POCS and pilot projects that were begun in 2017 and prior years are likely to begin paying off.

To be sure, there are many insurtechs that will probably fail. It will not be a surprise to see quite a few shut down in 2018. But with 1,300-plus and growing, there is a lot of room for market rationalization and for hundreds of winners to emerge. The proof in the pudding will be if many more use cases start to become visible and have quantitative results associated with their success (sorry for mixing the food metaphors).

But any way you slice it, 2018 is likely to be an eventful year for insurtech. The momentum should continue and begin to translate into solid business results.

Digitalization? – Let's do it!

• 91% of all insurers in our survey said they invested in digitalization initiatives over the last three years.
• 89% of companies hope digitalization will lead to a considerably more efficient sales process.
• 87% have developed their own digitalization road maps.
• The most important sales skills and activities in the future will be digital and mobile sales tools.

See also: The Industry’s New Dynamic Duo   Digitalization! – Are we doing it right?

• The digital customer journey and digital sales processes are some of the most important revenue drivers but were only mentioned by around half of the respondents. This means there's a lack of clear direction on which measures are really required and promising.
• Only one in four digitalization initiatives boosted revenue.
• Digital sales processes are ranked No. 1 for growth drivers currently receiving insufficient investment.

Focus on pricing and value? – Houston, we have a problem

• Price pressure and declining price levels constitute the greatest obstacles to revenue growth.
• More than third of those interviewed indicated they had realized less than 20% of their planned price increases.
• Digitalization further increases this trend, according to the participants.
• Reducing sales variance through well-thought-out sales processes and systematic value selling are regarded as useful countermeasures.

See also: 4 Ways That Digital Fuels Growth   Conclusion: Insurers see great potential in digitalization, especially in sales. Large sums are being invested, but not in a targeted manner. We need to better plan and implement digitalization initiatives to tap this potential. Furthermore, digitalization is raising the bar: Increasing price transparency must be met with a clear value argumentation to avoid price and revenue erosion. You can download the full report here.

Customer experience (CX) consulting firm Walker predicts that, by the year 2020, customer experience will overtake price and product as a key brand differentiator. To remain competitive in the consumer-driven era, EY advises insurers to provide an omni-channel environment where consumers can move seamlessly between channels. It’s a difficult feat for insurers to accomplish given the siloed nature of their legacy systems and lack of digital readiness, but, according to Rick Huckstep, there is a way to leverage these massive core systems while gaining digital capabilities, through partnerships with insurtech digital platform providers. Huckstep says that digital platforms allow insurers to capitalize on investments already made in technology by building the agility and responsiveness necessary for online distribution into the new digital front end. But what should insurers look for in a digital platform to ensure they can deliver the omni-channel environment consumers are demanding? Excel With Digital Platforms A global study of 1,000 insurance executives conducted by Insurance Nexus revealed that 59% of insurers are already relying on relationships with third-party resources to realize digital innovation goals. In PWC’s CEO survey, more than 80% of the executives responding plan to do so over the next three to five years. That’s because digital platforms can speed the transformation of insurers and put them on the fast track toward digitally enabled, direct-to-consumer distribution. Simply offering online channels of engagement won’t necessarily ensure carrier success. To meet consumer experience standards in today’s world, insurers should seek partnerships with digital platform providers who focus on providing the following key attributes: Consumer-Centric Online Storefront    Accenture surveyed more than 32,000 consumers globally and determined that as many as 50% are already purchasing online. As insurers improve the strength of their digitally enabled, direct-to-consumer channels, those numbers are sure to escalate. Executives surveyed predict that 90% of interactions will occur through digital channels within the next five years. As consumers move from the more personal experience of researching and purchasing coverage through an agent to digital channels, the insurer’s online storefront becomes representative of their brand. Whether consumers establish a relationship with the insurer and become a loyal customer or seek out other insurers that offer a more personalized online experience, will all depend on the strength of the online store. Big Commerce found that 78% of consumers feel more comfortable buying online when pictures that depict personal interactions are included as part of the online storefront. This highlights the need consumers have to feel connected to their insurers while still engaging in anytime, anywhere purchasing. Digital platform providers that focus on creating a customer-centered buying experience by improving the efficiency of the quote-to-issue lifecycle demonstrate a respect for the consumer’s time and instill good will. Automated prefill capabilities, for example, take much of the burden of completing an application off the customer and put it on the insurer, demonstrating that the customer comes first in the insurer’s operations. The ability to automatically quote multiple policy types from a single application is another way insurers can attract consumers to the online storefront and establish loyalty. A leading insurer that sells property lines through digital channels recently offered consumers the option to receive quotes on homeowners and auto by filling out one simplified application. The insurer now consistently provides 80,000 quotes a month to online insurance consumers. Uniting Operational Silos for Cross-Channel Consistency The largest group of insurance customers use both online and offline channels when interacting with insurers. This is particularly true in distribution, where J.D. Power found that 74% percent of shoppers purchasing coverage start transactions online, but only 22% actually close the purchase through a consumer-facing call center. The situation becomes complicated for insurers when you realize the fluidity required to meet consumer expectations for cross-channel engagements. Too often, the consumer is asked to restart the transaction when changing from one channel to another, damaging the customer experience. This happens because of the disparate and distributed nature of insurers’ back-end systems. With customer information locked up in operational silos, insurers have a difficult time creating a cross-channel experience that meets customer standards. According to Huckstep, digital platforms can solve for operational silos by using existing core systems as the system of record and building the agility and visibility necessary for omni-channel engagement into the digital front-end. It’s easy to envision the process by breaking it down. The web front-end is consumer facing, acting as the online storefront for consumers and agents alike. Information entered into the storefront is automatically updated across all core systems, courtesy of the digital distribution platform, creating a consistent source of data that is visible from a single vantage point. When consumers move from an online channel to the consumer-facing call center during the purchasing process, agents have complete visibility into information entered online, facilitating a seamless transition from one channel to another. Managing the Digital Transformation Accenture reports that as many as 51% of consumers are already purchasing online, but Aite Group has found that only 20% of auto insurers and 7% of homeowners carriers are currently selling products online. Those that aren't online are missing out on a chance at a lot of revenue. To grow their digital footprint, insurers will need to change the way they engage with consumers. For instance, Mintel’s study of shoppers who have property and casualty insurance revealed that a growing number (39%) feel that insurers should provide apps to make buying and managing policies easier. Progressive has recently introduced HomeQuote Explorer, an app that simplifies the purchasing of homeowners coverage by offering consumers a simplified application and four quotes on coverage. According to Tricia Griffith, Progressive CEO, “You fill in a couple fields, and you get a home quote from one of four companies. One of them is the Progressive home quote and then [quotes from] three other companies that we work with closely.” The service is free and allows consumers to comparison shop coverage from a group of carriers that Progressive trusts to provide quality customer service. Digital innovations like these have broad implications across the organization. Seasoned digital platform providers, which have undergone many successful transformations, understand the challenges. They’ve created transition plans and have the talent on hand to guide the organization and ensure results following implementation. Fast-Tracking Omni-Channel Distribution Accenture reveals that platform-based business models are the goal of 94%, creating ecosystems where insurers and outside digital resources join forces in synergistic relationships that promote asymmetric growth. As insurers embrace relationships with insurtech providers on digital distribution platforms that unite back-end systems and provide a single vantage point to the information contained therein, they are able to rapidly evolve into omni-channel insurance providers, seamlessly meeting consumer needs as they move across various mediums. For example, a top-five insurer partnered with a digital platform provider and built combined teams with shared strategies and goals to meet the insurer’s objectives and enable an initial rollout of digital capabilities within two months. Since that time, the insurer has doubled sales on a year-over-year basis. Because the platform is scalable, the insurer continues to experience growth by adding agents, products and markets with no down time or service interruptions. As consumer preferences evolve, the insurer is able to expand channels and products to ensure future profitability. Omni-channel engagement is the way of the future for the insurance industry. How is your organization meeting the demands for change?