It’s been an awfully eventful start to the New Year. In case you’ve missed the news, two major security flaws have been discovered in the processors that power nearly all of the world’s computers. The two techniques discovered to exploit these flaws, nicknamed Meltdown and Spectre, could allow hackers to steal data and secrets from any vulnerable computer, including mobile devices. Because the flaws are with the computer processor itself, any software platform running on top of an affected processor is potentially vulnerable. If by this point you’ve tired of hearing about technology vulnerabilities, this one is different (but also mostly the same, as I’ll get to a bit later). For one, this isn’t a software bug like you might find in your operating system or browser. Nor is it a physical defect in the processor itself. Meltdown and Spectre aren't really "bugs" at all. Instead, they represent methods to take advantage of the normal ways that many processors work for the purpose of extracting secrets and data. More important, though, is the magnitude of the impact. By comparison, the WannaCry and NoPetya ransomware attacks wreaked global havoc exploiting vulnerabilities that are believed to have affected ~400,000 computers versus the estimated 2 billion computers susceptible to Meltdown and Spectre. See also: New Approach to Cyber Insurance   The timing of these events could hardly come at a more interesting time for the cyber insurance industry. Only a few days prior, in an interview with the Financial Times, Christian Mumenthaler, CEO of Swiss Re, one of the world’s largest reinsurers, wisely questioned the very insurability of cyber risk due to the possibility for accumulation risk—the possibility that a cyber event could hit many insurance policyholders at the same time, by the same attack, resulting in huge potential claims payouts. Sound familiar? Cut the FUD As we’ve discussed before, we now live at a time where a cyber attack, technology failure or human error can cause everything from data theft to supply chain disruptions, hospital shutdowns, hotel room lockouts, blackouts and even nuclear centrifuge explosions—literally the entire spectrum of known risk. That these events could even theoretically occur on a massive scale, and all at once, is certainly cause for alarm—it would indeed pose a serious accumulation risk and eliminate one of the core pillars of insurability. However, it would be mistaken to assume that such a scenario, as in the case of Meltdown and Spectre, is anything more than FUD (fear, uncertainty and doubt). This is hardly to say that the discovery of these security flaws is much ado about nothing. On the contrary, they pose a very real threat and may well open the door to serious cyber attacks. However, as with the headline-grabbing ransomware attacks of 2017, there are many reasons to believe that subsequent losses will be relatively contained. [caption id="attachment_29663" align="alignnone" width="400"] Hierarchy of Cyber Security[/caption] To understand why, it’s helpful to understand the hierarchy of cyber security. At the base are vulnerabilities in all their forms (software, humans, even processor architectures). That the base is bounded is misleading because, in reality, there are an infinite number of vulnerabilities that can and will exist. However, vulnerabilities only matter if they pose a threat to an organization. This combination of threat and vulnerability is generally the risk an organization faces. Even then, threats don’t matter unless someone proceeds to attack you. And that someone at the top of the pyramid is, 10 out of 10 times, a human actor. Why does this matter? It matters because cyber attacks are really just forms of cybercrime, which itself is merely a form of crime—it is the people, not the form, that matter. There are costs for criminals to launch attacks, and not just the risk of being caught (which for the moment is abysmally low). Criminals require time, infrastructure and money to fund their enterprises, enumerate targets and move through the kill chain toward the realization of their desired outcomes. All the while they must also factor in the uncertainty of achieving the outcome. Exploits for security flaws can accomplish many things, but few produce cash. Every step in this chain takes effort. Although cyber criminals are becoming more numerous and sophisticated, they are still limited in how much damage they can cause and profit they can reap. As a result, even though an entire population may be vulnerable, the economically optimal strategy for an attacker is nonetheless to focus on a relatively small set of victims. Cyber insurance is dead. Long live cyber insurance! Although there is little doubt that certain accumulation scenarios exist, limiting the insurability of certain cyber risk exposures, this is not one of them. Absent an expertise in hacking and cybercrime—and the economics thereof—it is no surprise that many insurers offering cyber insurance struggle to understand, much less manage, accumulation risk. It’s high time they woke up. See also: Cyber Insurance Needs Automated Security   Insurers must come to realize the role that insurance plays in protecting companies from all forms of risk that accompany the digitization of everything. It also means thinking about cyber insurance as more than just coverage for data breach and response. The most recent devastating attacks have resulted in business and supply chain interruption, and even physical property damage. It is hardly a stretch to imagine exposure to nearly every other form of known risk, including bodily injury or even pollution. Of course, with new exposures come new challenges in underwriting and management of accumulation. Overcoming these challenges won’t be easy. It will mean using data in an entirely novel way to not only assess the risk of an individual policyholder, but an entire population of policyholders, and doing so on a continuous basis. It will also mean measuring diversity, and particularly technological diversity, to manage accumulation in novel ways. How many insurers today know which cloud service provider their clients use, much less which versions of software they are running? Or whether their clients’ passwords have been compromised in a third-party data breach? If you don’t know these answers, you’re in trouble. Gone are the days when accumulation will be managed by geography, industry and revenue size. Are we up to the challenge? Long live cyber insurance.

In the quest to spur growth from new sources, corporations will inevitably dedicate resources to innovation initiatives. Whether innovation takes the form of tiger teams, innovation labs, cross-functional project teams or consultant-led off-sites, efforts frequently fail to gain traction, particularly when attempting to integrate the innovative concepts back into the core business. Leadership, culture, strategy or process shortcomings are often blamed, and rightfully so, for the failure of such efforts. However, success isn't guaranteed even with empowering leaders, inspiring culture, visionary strategy or cutting-edge innovation processes. See also: What Does Success Look Like?   Successful innovation involves improving your odds of success at every turn, but corporations often leave some of the most stubborn inhibitors unchecked. Addressing the following Two Frequently Overlooked Innovation Success Factors can make the difference between an innovative concept taking off or falling flat in your organization: Technological Readiness Even in the most traditional industries, such as insurance, technological readiness is vitally important for successful innovation. Every corporate innovator, at some point, has been frustrated by the organization's inability to rapidly build and test new concepts. But, it's unreasonable to expect rapid product development efforts to take root in a business that has fully operationalized a controlled, stage-gate product development process. Too frequently, the resources that maintain and update legacy systems are the same resources called on to push innovations through these systems and into production. This produces conflicting priorities, which lead to long delays in implementation. To have a successful, sustainable innovation program, your company must spend at least as much time readying itself for innovation as it does innovating. For instance, adoption of agile principles and pace-layered architecture; development of virtual environments, two-way application programming interfaces (APIs) and sandboxes; and procurement of unstructured data mining capabilities can allow innovation to occur in tightly controlled systems that are designed for speed and errors. Buy (or Rent), Don't Build Mentality Particularly in industries with complex underlying systems, such as policy administration systems, there is a strong tendency to build new technology in-house so that it does not add unnecessary complexity to already unwieldy systems. In an age where what you're building probably already exists, the desire to control all data by developing all applications in-house will likely affect your speed to market, however. Businesses today must strive to understand to what extent their operational risk controls are affecting their ability to execute on their strategy, but many aren't having this conversation. External innovators are continuously developing new algorithms, programs and applications that can allow corporate innovators to skip multiple steps without compromising quality or security. When paired with a well-designed technology readiness plan, a buy-don't-build mentality can safely accelerate innovation efforts. See also: Finding Success in Core Systems   While these two factors may seem to point to an organizational design of innovation being "owned" by IT, that is not the intent. Instead, innovation should be a common thread woven into all of the strategic plans of an organization. The company's technology strategy must incorporate a technological readiness plan that is informed not solely by its core business growth strategy, but also by its desire to rapidly identify and integrate new sources of growth.

When it comes to thinking about 2018, you may have already set some company goals and feel that your plans are in place. Implementing plans, however, can be difficult, and every plan has a tendency to change over the days and months that it grows into a reality. New Year’s resolutions may not be the answer to all of your future issues, but they may help you to maintain focus on important end goals. If you want to see your organization adapt to new market drivers, remain competitive and relevant, and position for growth in the Digital Insurance 2.0 world, consider these six areas as New Year’s Digital Resolutions. We Will Focus Forward The most important high-level resolution an organization can make will be to focus on the future by rapidly moving from Insurance 1.0 to Digital Insurance 2.0. Your Insurance 1.0 business model will continue to be valuable for meeting the traditional needs of your current customers. But Digital Insurance 2.0 is rapidly emerging with new business models, products and processes that meet the needs and digital expectations of a new generation of insurance buyers. The digital future is exciting, compelling and important enough to begin aggressively preparing for a new future of insurance and cutting our mental ties to many of our sacred past assumptions and philosophies. See also: 4 Ways That Digital Fuels Growth   We Will Wake Up to Shifting Customer Behaviors What caused some insurers to be slower on the digital uptake in 2016 and 2017 was a general lack of understanding of the shift in customer expectations, among both consumers and business owners. Many insurers didn’t think that growing customer trends would dramatically alter their own products and services — or that customers were going to play such a large role in pushing technology adoption. They didn’t foresee that customers’ digital utilization would affect all industries, rewriting the idea of competition and removing any sense of loyalty and security. Now, that’s history. Technologies allow startups to compete using customer-centricity, as opposed to products, as their value offering.  And a new insurance paradigm is being crafted regardless of whether incumbent insurers choose, or are able, to play to compete in the era of Digital Insurance 2.0. For reference on just how deep these changes go, be sure to read Majesco’s research report, The New Insurance Customer – Digging Deeper: New Expectations, Innovations and Competition. Look for our research report on small-medium businesses later this month. Every day in 2018 and beyond, we should attempt to be sensitive to the power of consumer opinion and behavior that will affect insurance. Our newfound sensitivity will allow us to become more innovative as we match our new technologies to consumer desires. We Will Pursue Speed to Value The best New Year’s resolutions are those where constant application will provide clear impact. When insurers link business drivers to cloud business platform capabilities, they can begin to prioritize their efforts based on speed to value and a logical progression toward digital expertise. Realizing business value sooner with iterative rollouts is the essence of speed to value, a defining competitive element in the digital age. This includes speed to implementation, which provides the ability to get up and running in weeks or a few months versus years; speed to market, where you can rapidly develop and launch new products or enter new states with ready-to-use rules and tools; and speed to revenue, which rapidly enables business growth with minimal up-front cost. Speed to value is redefining a new generation of market leaders that leaves traditional, slow-to-respond business models increasingly at risk of irrelevance. We Will Build to Flex Homes and buildings in earthquake-prone communities are now built or retrofitted to withstand the unexpected tremors (and risk) that would crack traditional foundations. Insurance can take a lesson from earthquake-proofing. Our operations are similarly prone to other kinds of “earth-shaking trends” and risk that require the business to flex without breaking. Digital preparations must consider the unknown future. In everything insurers do, they should be removing rigidity and replacing it with agility and flexibility. Emerging technologies and connected devices will be adding value to insurers’ abilities to protect customers and compete with startups. But these technologies will only yield benefits to insurers that can quickly and efficiently plug them into a "find and bind" architecture on a cloud business platform to beat out competitors with new service offerings. The same digital preparations apply to channel development. An omnichannel presence is a digital one, providing seamless customer experiences. We Will Look for Greenfield Opportunities Market opportunities are all around, emerging rapidly in a fast-changing world. The intense industry disruption from changing customer expectations, advancing technology and shifting market boundaries creates risks and opportunities that many startups and greenfields are taking advantage of. Likewise, a growing number of existing insurers are incubating new ideas and products to spur innovation and gain market insights and advantages. These opportunities are within growing segments that are underserved or unserved for both P&C (personal and commercial) and L&A (individual and group/worksite) market segments. For a deeper view on these opportunities, read A New Age of Insurance: Growth Opportunities for Commercial and Specialty Insurance in a Time of Market Disruption and the coming A New Age of Insurance:  Growth Opportunity for Employee and Voluntary Benefits Insurance in a Time of Market Disruption reports. See also: What’s Your Game Plan for Insurtech?   Traditional insurers are finding that the best way to compete with startups is to be one — forming greenfield businesses that launch outside of current systems and processes for rapid product development and market testing. Life insurers, for example, are ripe for greenfield developments that include digital products that leverage fitness trackers and mobile communications. Mass Mutual’s startup, Haven Life, and John Hancock’s Vitality products are examples of insurers reaching new market segments via a new brand or new products. For an expanded view of greenfield developments in insurance, read Greenfields, Startups and InsurTech: Accelerating Digital Age Business Models. We Will Embrace the Platform Economy and the Shift to Digital Insurance 2.0 The next generation of core, digital and AI, cloud computing and partner ecosystems have opened a door for insurers in the platform economy, creating the art of the possible by enabling agility, innovation and speed in a time for rapid market changes. Cloud deployment of digital-ready systems can unify an insurer’s environment and prepare it for growth. Just look at the growth and value of other companies using a platform model, such as Apple, Uber and now Lemonade. The benefit of cloud platforms is in full swing, but from a utilization perspective the insurance industry is only scratching the surface. For insurers preparing “digital first” business models, new products such as pay-on-demand, pay-as-you-use or pay-as-you-need will require the shift to cloud business platforms. The hallmark of a cloud business platform as a new business model paradigm is collaboration via data and information sharing and subscribing (not owning). As a result, traditional boundaries between insurers, partners, third parties and even other industries are being replaced with market dynamics that open doors to improved operations and revenue outcomes. On behalf of everyone at Majesco, I sincerely wish you and your organization a Happy Digital New Year!

Insurtech, a hotbed of deal and growth activity over the last two years, is gaining traction and credibility. The leaders of top insurtech startups in the U.S. -- focused on renters insurance, auto insurance, life insurance, small business insurance, mortgage lender insurance and on-demand insurance -- share their thoughts about 2017 and predictions for 2018. Participants (alphabetical order by company)

• Fabric, cofounder and CEO Adam Erlebacher
• Jetty, cofounder and CEO Mike Rudoy, cofounder and President Luke Cohler
• Metromile, CEO Dan Preston
• Next Insurance, CEO Guy Goldstein
• Slice, CEO Tim Attia
• Spruce, cofounder and CEO Patrick Burns

Q. What will be different about insurtech in 2018, compared with 2017? Theme 2017: opportunity “The unveiling year,” Slice CEO Tim Attia “A grace period,” Next CEO Guy Goldstein “An explosion of investment into insurtech across existing and new insurance lines,” Metromile CEO Dan Preston “Lessons learned from being live in market,” Jetty cofounder and President Luke Cohler. Theme 2018: maturation Fabric cofounder and CEO Adam Erlebacher, “Where startups begin to gain traction and work toward meaningful scale” Jetty cofounder and CEO Mike Rudoy, “A year of maturation where consumers’ trust in insurtechs deepens, cementing marketplace standing” Next CEO Guy Goldstein, “Mistakes will have far bigger implications” Slice CEO Tim Attia, “2018 will be all about proving that we can scale and build real businesses” Metromile CEO Dan Preston, “Emerging winners will likely announce second or third rounds of capital” Q. What was your company’s greatest 2017 achievement, and what is your greatest 2018 goal? Fabric cofounder and CEO Adam Erlebacher, “Fabric launched in 43 states in one year” Jetty cofounder and President Luke Cohler, “In 2017, our greatest achievement was validating our thesis and finding product market fit with renters and property managers. Our largest goal for 2018 is simple: expansion” Metromile CEO Dan Preston, “Metromile's biggest achievement in 2017 was the launch of AVA, our entirely automated claims process that uses AI to validate and automate claims. In 2018, we are excited to expand AVA to nearly all claims we handle” Next CEO Guy Goldstein, “In 2017, we established our company foundation and core pillars, sold 10,000-plus policies and cracked the code on SMB insurance. Our goal for 2018 is to expand reach and accelerate our growth” Slice CEO Tim Attia, “Our 2017 achievements included a Series A funding and Progressive partnership, but the largest was our homeshare product launch in nearly all 50 states. In 2018, we’ll expand our existing product, launch other on-demand products, go global and release our cloud-based offering” Spruce cofounder and CEO Patrick Burns, “In one year, we went from serving homeowners and mortgage lenders in one state to 48 states. Our biggest goal for 2018 is to serve more customers, leveraging scale to drive down costs” See also: Insurtech in 2018: Beyond Blockchain   Q. What was your company’s greatest challenge in 2017; what do you anticipate as its greatest challenge in 2018? Theme: 2017 challenges, validation Slice CEO Tim Attia, “When re-imagining insurance, you truly have to re-imagine it. You have to forget everything you know and are used to and recreate the experience” Jetty cofounder and CEO Mike Rudoy, “In 2017, we had to validate and fine tune our model and customer experience” Metromile CEO Dan Preston, “Our big shift from MGA (agency) to full insurance company. It required the entire company (and more) to get it done.” Theme: 2018 challenges, scale Jetty cofounder and President Luke Cohler, “The challenges we face in 2018 will be associated with scale. New volumes of customers will require improving technical infrastructure, customer support functions and product experience” Metromile CEO Dan Preston, “The biggest challenge will be managing growth while launching in new markets (as every market is very different!)” Next CEO Guy Goldstein, “In 2018, our major challenge will be growing our offering from 20 classes of business to hundreds, while still maintaining excellent customer service” Slice CEO Tim Attia, “2018 will be about scaling the company and executing, in ways that fit with what customers want” Spruce cofounder & CEO Patrick Burns, “In 2018, we anticipate our biggest challenge will be hiring the highest-quality engineers and sales people as we continue to scale” Q. What was a surprise to you in 2017? Theme: Positive surprise at the intensity of consumer and partner buy-in to new insurtech options Jetty cofounder and CEO Mike Rudoy, “We were genuinely surprised at the rapidity and size of buy-in from all types of consumers eager for better solutions and experiences that fit their lifestyle. This isn’t unique to Jetty but across the insurtech landscape” Metromile CEO Dan Preston, “A big surprise came from the 2017 InsureTech Connect conference in Las Vegas, which had more than 4,000 people, orders of magnitude bigger than the entire world of people who knew what 'insurtech' was when we started Metromile in 2011” Next CEO Guy Goldstein, “We were very surprised to learn that companies were underwriting business insurance policies manually, based on individual underwriter experience. SMB insurance is a $100 billion industry, and not using data to evaluate risk was bewildering” Slice CEO Tim Attia, “We were surprised that our customers enjoy interacting with us regularly and being able to tie coverage directly to a successful and safe stay” Spruce cofounder and CEO Patrick Burns, “We’ve been pleasantly surprised with the receptiveness of mortgage lenders to working with a new company” Q. How will incumbents interact with insurtech companies in 2018? Theme: shift to action Metromile CEO Dan Preston, “I would expect the number of partnerships to grow significantly” Slice CEO Tim Attia, “I think incumbents have no choice but to embrace insurtech companies” Jetty CEO Mike Rudoy, “As insurtech players continue to capture market share, incumbents will be forced to identify response strategies” Next CEO Guy Goldstein, “The incumbents understand that change is coming and is required” Spruce cofounder and CEO Patrick Burns, “The industry is in the beginning stages of a multi-year shakeup as end-to-end digital sales and servicing become the norm” Theme: expectation of beneficial partnering Metromile CEO Dan Preston, “Competition fostering strong collaboration. Especially when expertise and assets are concentrated in different ways: incumbents with scale and capital, startups with new products, technical expertise and lack of legacy systems/thinking" Fabric cofounder and CEO Adam Erlebacher, “Many [incumbents] are engaging directly with startups. On a basic level, most carriers lack the digital infrastructure needed to execute a direct digital strategy” Next CEO Guy Goldstein, “Generally, [incumbents] seem very open and keen to work with new insurtech companies. Acquisition strategies are probably their best bet to integrate new technology” Slice CEO Tim Attia, “Insurtechs are faster and more nimble than the incumbents; [who] should be excited to engage and leverage new offerings” Q. What do you admire about other insurtechs? Jetty cofounder and CEO Mike Rudoy, “Munich Re is hardly a startup, but their willingness to partner and help quickly grow great insurtech companies is impressive” Slice CEO Tim Attia, “I admire how well insurtech companies complement one another. We have a similar goal: to enrich the customer experience and engagement” See also: 2018: A Look Back, Then Forward! Q. What’s the one book you read in 2017 that you can’t stop thinking about or recommending? Jetty cofounder and President, Luke Cohler: "Deep Work: Rules for Focused Success in a Distracted World" by Cal Newport. "A great guide that explains how we can regain our ability to focus without distraction on cognitively demanding tasks, despite the common distractions of our work environment” Metromile CEO Dan Preston: "The Wright Brothers" by David McCullough Next CEO Guy Goldstein: "Red Notice" by Bill Browder. “About a builder of an investment business in Russia. It left me feeling impressed and inspired by his drive to push through and find solutions to any challenges facing him” Slice CEO Tim Attia: "Misbehaving: The Making of Behavioral Economics" by Richard H. Thaler, who cowrote "Nudge" and won the Nobel Prize in Economics in 2017 Spruce cofounder and CEO Patrick Burns: "The True Believer" by Eric Hoffer. “It was written in the 1950s, but it’s immensely relevant today. Every startup CEO (and every politician) should read it”

At year end, in our personal lives, we reflect on and plan strategies relating to our health, wealth and family. In our business lives, we reflect on and plan strategies for our sales, costs and overall business direction. For writers, consultants and the like, we write predictions on the areas where we specialize. I’ve read a lot of these top 10 predictions in the past. I always think to myself: "Gosh, how do these people make such predictions? I hate doing crystal ball exercises where one is taking a shot in the dark…I’m not sure if I could ever do one." So much for that. Here are my predictions from last year. Most were on point: 2017 was the year that insurtech, at least the word, became everyday nomenclature that we all have grown to love. While the hype increased, so did the substance. We have seen an online-only insurer do an IPO (Zhong An), investment pour into insurtech startups like it’s running out of style and more insurtech conferences, blogs, podcasts and events than one can handle. Will the train keep rolling? Or will the hype subside? My 10 predictions this year are based on some self-selected categories that I think affect all areas of insurance and insurtech. I have also included links at the end of this article to other 2018 predictions that I think are great reads. Prediction #1 – Defining Customer Engagement There are many insurtech solutions that have helped to enhance the traditional touch points of the customer value chain: prospecting, quoting, purchasing policies, servicing policies, claims. Wearables, sensors and telematics have opened a host of ways to engage and personalize the customer experience. Most notably and importantly, this has helped with pricing and preventative care. These new solutions allow carriers and customers to have more real-time pricing, which can be beneficial for both sides. For preventative care, the opportunities are only now being explored. In addition, I’ve heard and read a lot that customers want more engagement from their carriers. Receiving notifications from your carrier on how to live better lives, in an effort to not have as many claims, could be great. But how much is too much? I think this question will be tested this year. Engagement will still be key. The most important customer engagement point for insurance is the point of claim. If this cannot be improved, then policyholders are going to tell carriers to cool it with the other engagement. Prediction #2 – Insurtech Buzzwords 2018 will be underpinned by these two buzzwords this year – "API" and "ecosystem." I think these two buzzwords/themes make so much practical sense for our industry. On the API (application programming interface) side, we have seen this trend from startups like Qover and Lemonade, both of which have an open API to enable traditionally non-insurance platforms to offer insurance. As I will mention below in Prediction #9, what has made Zhong An so successful is the power of its partnerships. From a distribution perspective, partnerships just make sense. How about from an operational perspective? One of the scariest word that can be uttered when it comes to an innovation implementation is "integration." See also: Top 10 Insurtech Trends for 2018   Why? Because integration of a solution with another solution takes time. The more that insurance carriers can have API-enabled policy admin systems and startups can build API-enabled value chain solutions, the easier it will be to do implementation with a carrier and start seeing benefits quickly. On the ecosystem side, we at Daily Fintech have recently covered some of the remarkable insurance ecosystems that have been built in China with Ping An. Insurance ecosystems excite me the most -- anything that can bring the insurer, insured and provider together, for treatment and transactions. Further enhancing the ecosystem proposition is the ability of preventative care through the use of wearables, telematics, smart sensors and IoT. Insurance ecosystems will be one of, if not the biggest, contributors to an improved customer experience. Prediction #3 – Specific Technology The two biggest technologies I see having an impact on the insurance industry, in 2018 and beyond, are blockchain and AI. Again, both just make sense. Blockchain has so many use cases for insurance. The most practical one for me is a smart contract. Looking at the ecosystem, if all parties can view the same information from a contract, in real time, the whole claims process will be simplified. This would be for almost all lines of insurance. AI is the same. Again, looking from a practicality standpoint, I see two forms – chatbots and data analytics. Chatbots will bring a better customer experience to both customers and distributors alike. I have been studying different use cases on chatbots since my article a few weeks ago on insurance agent enablement. I can see chatbots helping in:

• General customer service questions/help – this will free up time from call centers and agents/brokers to focus on more meaty issues
• General questions from agents/brokers – how many times do agents/brokers call you just to confirm how a certain product works? Chatbots can help with that
• Direct-to-consumer (D2C) sales
• Claims
• And more

I’m not the only one who is bullish on AI and chatbots. Just ask Softbank and Lemonade. For data analytics, someone needs to sift through all that data that an insurer has (including the new sets provided by wearables, sensors, telematics and other third-party sources). Someone will need to identify from that data when there is appropriate time for a) cross-sell, b) preventative care, c) wellness tips, d) positive reinforcement for good behavior, e) identify fraudulent claims, etc… That "someone" will be AI. Both blockchain and AI are prevalent in today’s market and are currently being explored more and more within insurance (some recent examples being Nationwide, AXA and E&Y). I see these two technologies as being the most commonly used by carriers in 2018 and beyond. Prediction #4 – Lines of Business/Risk Covers Three areas to look at in this prediction are:

1. Traditional lines of business/risk cover – i.e. life, health, home, auto, commercial, etc.
2. New lines of business/risk cover – i.e. cyber, gig economy, sharing economy, etc.
3. New business models

When it comes to D2C for the traditional lines of business, a lot of the new insurtech entrants/startups have been in the personal auto and home lines, with some in term life and health. I see more entrants in the life and health business, possibly in the annuity space, too. For new lines of business, I see an increasing focus on the ones I mentioned above (cyber, gig/sharing economy), as well as some new risk covers/business models coming out. I think there will also be an increased focus on more time and usage-based insurances, as well, with Slice leading the way by "removing the annual policy." Insurance for bitcoin may also be a thing. I also see the emergence of some new business models, like Laka, Insurepal and Getsafe. Laka just went live with bicycle insurance, which collects premiums in arrears and up to a cap. Insurpal is insurance using social proof, blockchain and cryptocurrency. Getsafe will be launching a multi-line single policy. It has just gone live, starting with liability Insurance. Prediction #5 – Areas of the Value Chain (B2B2C) A lot of the early insurtech innovation for carriers has been related to distribution, product, marketing/customer engagement and claims. I still see these areas being focused on (especially claims for life and health), with an added focus on cyber security and fraud-related initiatives. Prediction #6 – Geography The U.S., U.K. and Germany have been the main areas of insurtech over the last couple of years. China (driven by Zhong An and Ping An) has helped Asia become an insurtech leader. On the geographical front, I still see the U.S., U.K., Germany and China "doing their thing" when it comes to insurtech. I see Zhong An and Ping An expanding into other parts of Asia (the world?), as can be seen here for Zhong An and here for Ping An. Looks like this is a 2018 and beyond trend for some of the financial heavyweights in China. Ant Financial just signed a memorandum of understanding (MOU) with Standard Chartered, too. I also see an explosion of growth in some of the emerging markets, namely Africa, the Middle East and Latin America. The technologies that are being created will help to benefit the emerging markets by giving them low-cost access to insurance that they may not have had before. These are big populations with massive protection gaps. Insurtech innovation is ripe for the picking in these areas. As I was working on this article earlier this week, I came across this piece of news, in which Allianz invested $96.6 million in mobile insurance startup BIMA. Prediction #7 Investments According to the Q3 quarterly briefing from Willis Towers Watson/CB Insights, through Q3 2017, total investments in insurtech were about $1.5 billion. There has been a lot of activity in Q4, and I would expect the total for 2017 to be somewhere between $2 billion and $2.5 billion. I think investment will remain high but will come from some different sources. I see more startups trying to raise money via initial coin offering (ICO) (depending on regulation). I also see more insurers taking an active role in investing. Many insurers have set up their own investment arms over the past few years. Now that they’ve been able to do more homework and research in this space, I see them investing more heavily in and possibly acquiring startups. It may ultimately make more sense for the ones with bigger balance sheets to take on a startup within their business rather than having an annual recurring/per-user expense. Additionally, I think there is an interesting dynamic of an insurer working with a VC-backed startup. Typically, the payback periods for these VCs range from anywhere between three and five years. However, insurance carriers have an annual target to hit, which adds pressure to show a return on innovation quickly. I’m not sure if startups fully understand this dynamic or if it has started to play out yet. This is another reason I see insurers taking a more active role on investing; then they can ensure the startup is fully focused on them, not paying back their investors. Prediction #8 Regulation Regulators have been taking a more active role in understanding insurtech. 2018 will be the year that they start homing in. I see there being more regulation in general that relates to customer data protection. The increased use of wearables, sensors and telematics will call for it. By the same token, I see more regulators coming out with rules on how the increased data can be used for pricing purposes. Prediction #8.1 – Perhaps call this a wish list item: The U.S. will get its first regulatory sandbox. I’m not sure where it would be, but I would say that top candidates would be New York, Connecticut, Massachusetts, Iowa and California. Looks like this conversation is moving in the right direction. Prediction #9 – Big Tech This has been a hot topic lately within the insurance community, specifically with rumors as it relates to Amazon. In China, we already see big tech with Tencent and Ant Financial (Alibaba) being major shareholders in Zhong An and Tencent also setting up an insurance platform with WeSure. Looking at the West, specifically when it comes to GAFA (Google, Apple, Facebook and Amazon), I think Amazon (and perhaps Apple) makes the most sense. Why is Zhong An so successful? Aside from their tech capabilities, it is their partnerships that make them thrive. The company's insurance is plugged into any one of its partners (via API), making the process seamless and a no-brainer for customers. Trend 2 from the Digital Insurance Agenda’s 2018 predictions is "invisible insurance": "You purchase a product, and there is already an insurance embedded in that." I was speaking with a friend about this recently. He has a few blue chip U.S. insurance stocks that he said have not been performing as well as he’d like. I told him to look out east to Zhong An. He asked what makes them unique. My reply was, "For one, they embed insurance for just about everything that is bought through Alibaba’s platform." He stopped me there and said, "That’s a business model I understand; what’s the symbol?" Amazon is the only one of GAFA that already has a very established product purchase process with its customers. They know about their buying behaviors and can offer insurance for new risks based on the things they offer through their site. It would be easy for them to have an online store with stand-alone insurance products, as well. Apple would be the  runner up. It also has an established purchasing process via its app and iTunes store. With all of its investment in wearables and knowledge of how to embed its own line of Apple products in one’s life (i.e. ecosystem), Apple could be a threat in the insurance space. Google has information on its customers but had a bad insurance experience with Google Compare. Facebook has a lot of information on its users and knows a thing or two about ecosystems, too. However, I don’t see it offering insurance (though I do see Facebook Messenger and Facebook Marketplace as some potential enablers for the insurance value chain). Here are two good thought pieces on why Amazon and Apple, written by Dr. Robin Kiera and Dustin Yoder, respectively. See also: Insurtech: Breaking Down the Walls   Prediction #10 Macroeconomic When I look at the investments, focus and excitement in insurtech, part of me feels that it also goes along with the overall gains we have seen in the global economy. We often talk about the amounts of money that have gone into insurtech startups, but look at the spending on conferences, research, consultants, events and the like, too. There is a lot of money pouring into this subject. However, will that change if the markets take a turn for the worse? As Brexit hasn’t completed yet, neither have its global effects. In the U.S., effects of the recent repeal of net neutrality and the new tax plan are also unknown. Tensions could not be higher between North Korea and the U.S./world. Bitcoin/cryptocurrency are currently being used as a speculative asset versus a different payment method. Couple any major macroeconomic event with the recent surges in drastic weather around the world, and we could see a major change in plans/focus from insurers on their innovation initiatives as well as an outpouring of investment into new, unproven startups. Bonus Prediction – Global collaboration will continue to be the real driver of change. I can’t end the predictions list with a negative point on macroeconomics (though, if you couldn’t tell, my overall outlook on the macroeconomy is a bit more bearish). Regardless of what happens on the macro level, I think the real drivers of change are going to be all of us. By all of us, I mean people who are reading this, who work in this space and who work on innovation and insurance every day. I have seen so much cross-border collaboration personally and through my daily readings in the past year. The excitement of being able to innovate in an industry that has been around for hundreds of years and is worth trillions of dollars is exciting to people both new and old to the industry. People are flying and getting flown all over the world just to hear or speak about what is happening at the other end of the world. Regulators are signing MOUs on fintech/insurtech almost weekly, it seems! Startups are getting opportunities to present their solutions to carriers in different countries all the time. It is truly remarkable and will be exciting to be a part of. You can find the original article here. Other 2018 predictions from others – in no specific order Predicting innovation and transformation for insurance in 2018 – Insurance Thought Leadership InsurTech Year in Review 2017 – Eos Venture Partners 10 Insurtech trends at the insurance crossroads 2018 – Rick Huckstep Top 10 Insurtech Trends for 2018 that set the Digital Insurance Agenda – Roger Peverelli and Reggy de Feniks 2018 predictions: Insurtech hits its stride- KPMG 2018 Insurance Industry Outlook – Deloitte What Trends Will Shape ‘Fintech’ In 2018?- Seeking Alpha Insurance industry predictions 2018 – Clyde and Co. Security in InsurTech – Predictions for 2018 – Manta Labs Gartner’s 10 Technology Predictions for 2018: The Good, the Bad & the Obvious

Metromile was ahead of its time when it comes to digital engagement. This is the world of insurance protection where customers buy insurance cover because of the continuing value it provides, not just because of the price it is offered at. In recent times, the buying of insurance has become associated with searching for the cheapest price. Online buying guides advise customers to always shop around for the best price and never auto-renew. Even the regulators force statements on renewal notices to advise customers to shop around. This is commoditization in all its glory! Which is good for consumers, right? Maybe at the point of sale, but, when insurance is sold below premium, it means someone else is paying for it. Until renewal time, when premiums are increased significantly. All this does is irritate the customer, further diminish trust in insurance and cause the customer to start all over again looking for a new insurer! What a waste of time and effort for everyone! The case for digital engagement in insurance The big problem in any price-driven market is that cost of sales is a killer. Price points only ever go down, sales and marketing costs don’t (not at the same pace anyway), and this continually squeezes the whole supply chain. In the intermediated world of personal lines insurance, the addition of friction and inefficiency simply compound the cost (and margin) issue for insurers. No matter how hard the insurer tries to build and promote a trusted brand, the uncertainty of premium pricing always undermines it. The building of brand loyalty takes time, and insurers don’t hang on to customers long enough to do so. For traditional insurers, their only opportunity to show value is through the claims experience. However, all too often, the insurer fails to seize the day and ends up disappointing the customer. (Read “Democratizing insurance claims restores trust for customers” and the RightIndem solution) And yet customer feedback clearly shows they want more in the way of value. And are willing to pay for it! See also: How Sharing Economy Can Fuel Growth   Earlier this month, at the Digital Insurer conference in Singapore, James Eardley from SAP Hybris presented the findings of a current report from Ovum, “Driving Engagement through Value Creation.” The report found that customers would pay higher premiums for value engagement. Interestingly, when you look at the demographics, the Under-35s showed the highest willingness to pay more. Turning the Insurance Product Into a Lifestyle Product The advances in digital technology in the last decade have given insurers the means by which they can create “sticky” insurance products. Once they’ve “won” a customer, they can now hang on to that customer. They use enabling tech such as telematics, mobile apps, wearables and IoT devices to create ways of connecting and engaging with customers continuously. As a result, we’ve seen the introduction of digital engagement products based on new sources of data, personalized to the specific risk conditions of the customer. These new technologies enable insurers to radically shift from being the provider of an enforced product to a provider of a value-added service. The adoption of this enabling technology gives insurers the ability to dynamically improve risk ratings, to personalize premiums and adjust policy conditions on a continuing basis. The traditional approach of a single, point in time questionnaire can be replaced by a continuing assessment and review approach enabled by these new technologies. As Maria Ferrante-Schepis writes in Flirting With the Uninterested, “Insurance companies, when you really think about it, are not just in the protection business. They are in the ‘lifestyle continuity business.’” Digital engagement insurance in action Great examples in life and health are Vitality and Oscar along with insurtech platforms such as Fitsense and Sureify. Here, wearable devices combined with mobile apps enable digital engagement with the insurance brand to promote a healthy lifestyle. In so doing, the app becomes a lifestyle product, part of the customer’s daily routine. This makes it a lot harder to churn come renewal time. I covered this previously here about wearables and digital engagement in life and health. In home, the adoption of IoT devices has done more than (just) create a means for digital engagement. The IoT-enabled smart home moves the insurer into the loss-prevention space. Now, insurers can build insurance products that are focused on preventing the loss altogether. (Read about IoT and loss prevention in this article about digital engagement in home insurance.) The latest example to catch my eye comes from the innovation team at Halifax, the U.K.’s third largest general insurer with 3.2 million customers. Bringing together a number of insurtechs, the Halifax home insurance app is built on Surely’s insurance platform as a service. Surely provides the core insurance functions and integrates with third-party data sources to provide loss prevention and mitigation. These data services include Fing to connect all smart devices together, HomeServe Labs, which uses its Leakbot for water leak detection, and Fibaro for fire detection. The platform also connects to presence and entry-detection sensors, such as Samsung SmartThings, and all sensors are integrated into the app and provide the Halifax customer with up-to-date information about his house and home contents. The Halifax app even takes a weather feed to warn of extreme weather conditions that can affect the home. Prevention is always better than cure, right!? Metromile is the pioneer of digital engagement When it comes to auto, the combination of in-car telematics and mobile phone tech has seen the launch of pay-as-you-go and pay-how-you-drive insurance products. It’s a subject I’ve covered before, including articles like this featuring U.K. on-demand auto insurer Cuvva. The real expert on this subject at the Digital Insurer is Andrew Dart, who writes our Connected Insurer page. Which brings me to the main subject of this month’s article – Metromile. It represents everything that defines #InsurTech as we know it today, and yet it pre-dates the social media tag by half a decade! Metromile is a seven-year-old U.S. auto insurer I first wrote about back in 2015. The business model is based on a pay-per-mile insurance product, which is wrapped with other services to enhance the car ownership experience for customers. To enable continuous customer engagement, Metromile uses tech in the form of the Metromile Pulse (a device that plugs into the car’s on-board diagnostic port) and a smart driving app on the customer’s mobile. The company recently announced Series C and D investment rounds that took the total money raised to $205 million. It’s an impressive sum that puts the company in the insurtech fundraising upper quartile. You can watch the firm’s CEO Dan Preston explain the Metromile insurance product in this short YouTube video. The thing that struck me about Metromile is that it doesn't say anything about “insurance” when they describe what they do. Here’s what they say “About Us” on their website: At Metromile, our mission is to empower drivers by creating a more connected and informed car ownership experience. By taking our deep understanding of data and transforming it into information and services that make having a car less expensive, more convenient and smarter, we aim to make the urban car experience as simple as it can be. And for some, we hope to make car ownership a possibility where it wasn’t before. They’ve literally taken an insurance product and turned it into a lifestyle product! Leveling the playing field for low-mileage drivers When it comes to auto insurance, the main risk factor is how often drivers are on the road. If you’re not on the road, then factors such as claims history, driving behavior or condition of car are insignificant. In the case of auto, those who don’t drive very much subsidize the higher-mileage drivers. This is because traditional auto insurance products take a blunt-instrument approach to assessing driving time. See also: Cyber Insurance Needs Automated Security   Metromile says that customers can save on average $500/year on auto insurance (which is roughly 40% to 50% of the typical cost of insurance). You will see something similar in the U.K. from Cuvva. The company claims its pay-as-you-drive insurance can save drivers as much as 70% of traditional insurance premiums. Creating value that EVERY insurance customer gets In a recent call I had with CEO Dan Preston, I asked him about digital engagement and the Metromile model. He told me, “There are typically three interactions the insurer has with their customers. When they sell a policy, when they renew and when they receive a claim. There’s nothing in those interactions that adds value. Even the claims process is so full of friction that it becomes an unpleasant experience for the customer. It’s the place where NPS [Net Promoter Score] goes to die! “When we started Metromile we quickly learned that customers want more than just a good claims experience. They want value through digital engagement.” [caption id="attachment_29305" align="alignnone" width="570"] Metromile provides a frictionless claims experience with their new AI claims assistant, AVA. (PRNewsfoto/Metromile)[/caption] Here’s the thing that Metromile figured out early. By creating value over and above the insurance product, the company creates value that EVERY Metromile customer benefits from, not just those who might go through a successful claims experience. Dan explained, “We set out to build Metromile into more than just an insurance business. We wanted to help our customers manage the cost of running a car. This includes everything from maintenance and regular servicing, to parking and speeding tickets. “One of the early features on the app was a feature to help drivers avoid parking tickets by informing them of street sweeping schedules. We took publicly available data in the San Francisco area and laid that over our customers’ movements. Using the app, we were able to direct customers to parking areas that would not risk parking tickets. Some customers reported that the savings in parking fees more than paid for the cost of our insurance!” Dan explained, “Ultimately it became a data collection exercise for us to collect data unique to the car and the driver as we went into new areas. In many places, the data we needed was in PDF format. We found ways to extract the data and still provide the features in the app.” As Metromile moved into new jurisdictions, the company found that the data it wanted and needed to support the value-added services in the app were not always universally available. Metromile’s win-win through value and loyalty This is the real point of digital engagement – creating a win-win. The customer gets value from the digital engagement with a lifestyle product (and tangible benefits such as lower parking fines!). And insurers see less churn, better (risk) data about customers and a greater sense of loyalty/connection/trust. This is where behavioral economics kick in. It is this sense of trust and loyalty that directly links to lower levels of claims fraud and embellishment. (See Lemonade). None of this would be possible in a traditional auto insurance product. Metromile has exploited technology to enable this digital engagement. The key is the Metromile Pulse: a dongle that customers plug into their car to read the on-board telematics data and that connects to the mobile phone and the Metromile app. This allows Metromile to know when the car is being driven and when it is not. In turn, this allows Metromile to price on a per-mile basis for insurance, turning it off and on accordingly. Metromile’s AVA delivers an automated claims experience Metromile’s latest tech addition enables an automated claims experience. At the time of an incident, data captured by the app and the dongle is used by Metromile to settle a large number of claims. Many of them automatically and instantly. See also: Effective Strategies for Buying Auto Insurance   The company can do this because it is not waiting on a claims adjuster to collect information to support a claim. Instead, through the customer’s Pulse device, Metromile is able in many cases to verify and validate a claim without human intervention. In these scenarios, there is no reason to not pay a claim instantly. The turning point for Metromile came about a year ago when it became a fully licensed carrier. Dan told me, “We’ve been handling claims in-house for about year now. In that time we’ve launched AVA, our AI claims assistant and the most exciting product launch to date at Metromile! We wanted to create a different experience for customers, one that was different to the traditional experience, with much less friction for customers. “For the customer, all they want is to get back on the road. But for the traditional carrier, they won’t settle until they’ve got all the evidence that they need to justify the claim. In the traditional claims experience, often the problem is that the carrier only has the word of the customer to go on. Trust isn’t very strong in this relationship, and the result is that it takes time.  “With Metromile, the Pulse can verify what the customer is telling us. Our tech can verify facts such as speed and location and time. The customer doesn’t need to provide this data because we already have it. This leads to instant payout or for the Metromile app to organize the repair and servicing of the vehicle. “It’s another win-win because the instant and automated approach delivers a better customer experience by reducing cycle time and making it easy to claim. For Metromile, it lowers the cost of handling claims, which benefits customers in the long run by lowering premiums.” (See here for more on chatbots, AI and customer engagement) The lesson for insurers: Give more to Get back more So there you have it! Everyone’s a winner when the insurance product is built around a digital engagement model. Customers get value from the money they’ve paid for their insurance purchase (not just a safety net if they suffer a loss). Insurers get value from lower customer acquisition costs, less churn, lower operating costs and reduced fraud. They also get one step closer to one of the biggest innovations from insurtech – personalization (and that’s a story for another day!).

This is a follow-up to the announcement and “back story” of the Dec. 21 wellness decision in AARP vs. EEOC, a decision that could severely curtail incentives and penalties…and that could, to paraphrase the most memorable G-rated words ever spoken by Bill Clinton, end wellness as we know it. That’s the bad news. The good news is that this decision may actually be a windfall for employers with wellness programs that use heavy incentives. Q: What just happened? AARP just won a very favorable district court ruling against the Equal Employment Opportunity Commission (EEOC), the agency charged with enforcing the Americans with Disabilities Act (ADA) and the Genetic Information Non-Discrimination Act (GINA). The full decision is here. Q: How is this different from the previous ruling in AARP v. EEOC? The original ruling, though in favor of AARP, gave EEOC more than three years to amend its rules to redefine “voluntary” to match the dictionary definition. The new ruling gives one year both for the EEOC to write the rules and for employers to implement the rules, and makes clear what is expected of them. Here  is the key to why this decision should stick: The government can’t define “voluntary” to include fines of $2,000 or more for non-compliance if it also requires a “mandate” — the opposite of a voluntary option — that carries only a $695 penalty for non-compliance. A voluntary option can’t include remotely as high a penalty for non-compliance as a mandatory requirement, especially in the very same law. See also: A Wellness Program Everyone Can Love   Q: What will remain as of January 2019 that employers can require subject to forfeitures? It is still OK to offer medical screenings and HRAs (collectively, “medical exams”) OR dangle incentives or fines (collectively “forfeitures”), just as it is today. The difference is that the programs involving required forfeitures can’t also require medical exams, which both the ADA and GINA say can only be “voluntary.” The court ruled that you can’t force employees to undergo “voluntary” exams by dangling or threatening to withhold large sums of money. So you can still require employee forfeitures up to 30% (50% for smokers), and you can still offer medical exams. You just can’t combine the two. That’s because, in order for a wellness program to fall under ADA and GINA in the first place, medical exams must be involved. So, for example, requiring employees to either do screening or do Quizzify is still allowed. Q: Does this cover screenings only, or are programs that combine annual physicals and forfeitures also affected? A: If the results of the latter are not shared with the employer,  it appears that they may still be require-able. A better question is why an employer would want to require them. First, they lose money.  Second, they don’t appear to benefit employees, either. The New England Journal of Medicine, the Journal of the American Medical Association, Choosing Wisely and Consumer Reports (and also Slate) have all looked at the data and concluded that for most people annual physicals confer no net health benefit, meaning even if they were free they would be worthless. (People who have continuing health issues should, of course, see their doctor regularly. Those would not be considered checkups under this definition.) Logically and intuitively, this conclusion would appear to be especially true when employees submit to those physicals under duress. Quizzify — and this question, like most Quizzify questions, carries the Harvard Medical School (HMS) shield — recommends two checkups in one’s twenties, three in one’s thirties, four in one’s forties, five in one’s fifties and for most people annually after that. However, this is also Quizzify’s most edited-out Q&A, as some employers nonetheless want even healthy employees to get physicals every year, and Quizzify respects that choice (though a customized question advocating it could not carry the HMS shield). Q: These Q&As seem very Quizzify-centric. A: That’s not a question, but I’ll answer it anyway. There are two reasons for that:

1. We know of no other vendor that solves the problem and guarantees the solution, with EEOC indemnification. Quizzify was both conceived and designed in anticipation that this court decision would happen someday. (I just didn’t expect it to happen four days before Christmas, which meant a lot of my cousins got gift cards instead of ugly sweaters.) All my exposes on the wellness industry led me to conclude that conventional “wellness or else” (as Jon Robison calls it) could never survive a court challenge…and I designed a product specifically to allow employers to address that challenge immediately and completely.
2. Those of you familiar with my work know I have only three talents in life: wellness outcomes measurement, employee health literacy/consumerism education and self-promotion.

Your vendor, Quizzify or not, should offer something like this right on their website. If they do, you’re safe: Q: What other analyses should we be looking at? The best is The Incidental Economist. AARP hasn’t released a formal statement, but its informal back story can be found at the bottom of this posting. Q: So what should we do about it? Simply add the option of taking Quizzify quizzes to the option of HRAs/screenings. That one-step fix is guaranteed and indemnified to solve your legal issues. It will also save money both up front (a year of Quizzify costs much less than a single screening) and down the road, because wiser employees make healthier decisions…and healthier decisions save money. Employees also like playing trivia more than they like being browbeaten into promising to eat more broccoli. If your vendor refuses to add Quizzify via a “single sign on” and you don’t want to add it separately, you can fire the vendor (we can help you do that — if the vendor shows a positive ROI it means their outcomes are fabricated, which we can easily demonstrate) and replace them with one that will, of which there are more to choose from every week. Q: What happens next? A: The EEOC needs to rewrite the rules to comply with this decision by making new rules — and needs to do it in 2018 so that they can be adopted and implemented by employers by January 2019. The definition of “voluntary” will be a line-drawing exercise. Likely, gift cards and small incentives will be considered “voluntary.” If your incentive falls within whatever cap they decide upon already, you’re fine, with or without Quizzify. Q: Is this is last word? A: No.  First, the final rules have yet to be written. The rules then have to be approved by the district court. Along with that uncertainty are two others. The EEOC could appeal, because these days it tends to oppose employee rights, rather than support them. However, the DC Appellate Circuit, led by Merrick Garland, would likely not be favorably disposed toward arguments that require, for example, defining “involuntary” as “voluntary,”  especially when the court will know that even award-winning vendors harm employees, vendors flout guidelines and screen the stuffing out of employees and give incorrect advice, creating further harms, and that the industry itself is rife with corruption, starting at the top. (I published my last paper in a medical-legal journal rather than a clinical journal specifically in anticipation that it might be the basis for an amicus curiae brief specifically in a situation like this.) See also: Should Wellness Carry a Warning Label?   In an unregulated, employee emptor environment like this, voluntary fines collected by shareholders from employees wanting to protect themselves from the harms above should not exceed fines set as penalties for a mandate, and paid into a pool to create an insurance product. (That the mandate is going away is not relevant — it’s the fact the government has two words with opposite meanings that have inverse fines.) Alternatively, an Act of Congress could gut GINA. The American Benefits Council could try to convince the legislators their colleagues contribute heavily to, like Virginia Foxx (R-NC5), to push HR1313, for example. HR1313 is arguably the worst bill of any type ever to clear a congressional committee, in that nobody benefits from it (other than DNA collection vendors, for whom it would be a windfall), but the ABC has already demonstrated its disregard for the best interest of its own members by browbeating Rep. Foxx into proposing that bill in the first place. The ABC is down, but not out…and, as this video shows, being down but not out can cloud one’s judgment. However, because quite literally none of her constituents are helped by this bill and most of them in both parties detest it, Foxx may decide to disappoint her corporate overlords on this one, especially because it’s an election year. Q: How is HR1313 (or a bill like it) that ABC might propose on behalf of its members (large employers) not in “the best interest of its own members”? A: Many employers have finally figured out that even their own vendors know wellness loses money, and that incentives generally don’t change behavior because employees revert to their old behaviors once the incentive ends. (Incentives do work for Quizzify-type programs, because, as you’ll see for yourself if you take the quiz, once you pay an employee to know things, she can’t un-know them. Pay an employee to learn that CT scans are full of radiation once, and he will stop demanding unnecessary CT scans forever.) However, employers are stuck with these huge incentives now, which some employees expect annually. This rewrite of the “voluntary” rules, likely capping incentives in the low three figures, will allow employers to spend much less on incentives…and blame the government. (Obviously, we hope they maintain the incentives and instead just offer the Quizzify alternative. This will also save money due to Quizzify’s low price and a much-reduced number of employees having to follow up on false positives.) If ABC were to be successful in gutting GINA and allowing financially coercive wellness programs to continue unabated, employers would still have to fork over large incentives.

Feb. 14 will be the 45th anniversary of my first employment in the insurance industry. I’ve enjoyed the ride. Here are two memories from my first three years in the business that I think personify the best and worst of our industry and, more importantly, suggest a path for differentiation and prosperity for those willing to transform. “Different isn’t always better, but better is always different.” -- Dale Dauten On Feb. 14, 1973, I began employment as a claims adjuster at General Adjustment Bureau (GAB) in Baton Rouge, LA. Late that year, I handled a substantial burglary loss in the home of the manager of a major industrial complex. It was a legitimate loss, and in the adjustment process I never sensed any mischief or exaggeration by the claimant. After interviewing the policyholder, visiting his residence, obtaining pictures of the damages, studying the police report and obtaining an inventory of the loss, I prepared my report and valuation on the loss to the regional claims manager (Vernon) for Republic Vanguard. Vernon called to explain the “way we do things around here.” He said that, if the policyholder can’t produce a receipt on items lost, we’ll commence negotiations at 50% of actual cash value. See also: Top 10 Insurtech Trends for 2018   In my next report, I explained that the policyholder was a sophisticated businessman well-respected in the community and was making a legitimate claim. I explained that I believed that, if I acted as instructed, we’d be working through this claim with the insurance commissioner or a judge. The day Vernon received my letter, he called my boss and said, “This boy is trying to trap me.” I was not trying to trap him. I was trying to protect a policyholder and to “cover my a___ for when the s____ hit the fan.” This company was known for ruthless claims handling. The modus operandus was to lowball the settlement offer made by the adjuster and, when things got ugly, blame the adjuster. In the end, I was vindicated by a newspaper article on the front page of the Baton Rouge Morning Advocate that exposed the ruthless nature of this carrier. This case was, in my opinion, an example of the “worst of times/behaviors” in our industry. The “best of times” was demonstrated to me two years later. I was a wide-eyed rookie producer working for an agency in Baton Rouge. We were the Louisiana administrator for the Professional Protector Plan (PPP) endorsed by the American Dental Association and underwritten by Chubb through Poe & Associates (the national administrator) in Tampa, FL. This PPP was tailored to dentists, and the policy was written in the language of dentistry. The PPP included malpractice coverage and flood (physician and surgeon’s floater) coverage. It was a state-of-the-art product. When I attended the annual state administrator’s program in Tampa my rookie year, Harry Chadwick with Chubb introduced himself to me at the cocktail party on the opening night. He was the senior executive in charge of this program. He was a gentleman. He volunteered to me the philosophy of Mr. Chubb and his company. He said, “Mike, Mr. Chubb built this company on two principles:

1. You deny the claim in the underwriting process.
2. You interpret the policy based upon the 'intent and not the content.'"

I represented that program for about eight years – Chubb lived the two principles. The only complaint I heard was when one dentist said, “They pay too much on claims.” This was after a slight rate increase. In my opinion, if every carrier was as “client sensitive” and honorable as Chubb, our industry brand would be more positive than suspect. The 1970s were simpler times – the marketplace was local, comparative rating was still an experiment, batch processing was the norm, fax machines were still on the drawing board and agents were friendly competitors who divided up the markets among themselves. The vast majority of folks were sold a commodity (price-driven) or a product (price-sensitive, with a few added coverages). In today’s hyper-competitive and global markets, the '70s were the good old days. Here, in my opinion, is the lesson: Chubb provided an excellent buying experience. That included a quality product, fair pricing and superior customer and claim service. Chubb was then what only a few companies are now. With the wisdom of 45 years of hindsight and reasonably good foresight, I offer the following admonition: To survive and prosper, agencies must:

1. Be niche marketers – meet each group of people (even a niche of one) who, where and how they are.
2. Be defined by clients and driven by them.
3. Create, tailor and deliver the right client experience for the niche served.
4. Leverage technology to ensure profitability as commissions “skinny down.”
5. Use technology for admin and service – the staff will provide the intimacy with clients.

See also: 5 Predictions for Agents in 2018   I’m not suggesting anyone agree with me. I’m suggesting that you project the future as you believe it will be, build the model to meet the clients and their needs in that future and leverage technology to ensure profitability regardless of how much commissions are reduced or policies are being quoted net of commission. Then live with the result.

Every business today has legacy processes and systems and faces the dilemma on how to transform the business to adapt to the rapidly changing market dynamics that are driving the shift to the digital age. Is there a proper approach? Insurtech is embracing these dynamics and powering the shift through the significant capital flowing to new technology and startup companies from MGAs and insurers. There is much discussion and debate on how the shift will reshape the insurance market as we have known it for the last 50 years. But the industry should not forget that this same disruption has also affected other industries such as retail, media, travel, telecom and banking, where successful companies created new business models, technology solutions and more. The insurance industry has long had a degree of protection from new entrants, provided by the complexity of the regulatory environments. However, regulators are quickly realizing they need to understand the new digital technologies and work with the insurance industry to integrate them into the market. Today, we are seeing that new entrants are making strong moves into the market by working with regulators. At the same time, existing insurers are bringing new, innovative products to market within their current businesses. Irrespective of where one operates within the insurance market and across the insurance value chain, change is coming. The change is being driven by a combination of new customer needs and expectations, the rapid adoption of new technologies that offer significant opportunities to innovate and the changing market boundaries that expand market reach. The result is the rapid emergence of new entrants who see the selling, marketing and servicing of insurance in a very different light to the more traditional entities. See also: How to Enhance Customer Service   For existing insurers with legacy technology estates, tinkering around the edges or waiting to be a fast follower will not work, given the pace of change. As we have described in our research, Future Trends 2017: The Shift Gains Momentum, we are experiencing a tectonic shift that is creating a market dynamic that we call Digital Insurance 2.0. If you embrace the need for change, what should you do to help adapt and innovate for the new world? Which slices should be approached first? Here are some suggestions: Understand and Listen to the Customer. This is basic stuff, but the industry does not do it so well. In Majesco’s research, The Rise of the New Insurance Customer and The Rise of the Small-Medium Business Insurance Customer, insurance ranks at the bottom in its interactions with customers. In today’s digital age, the customer is in control. So, to transform a business, it is imperative to take the time and make a concerted effort to understand your customer needs and expectations … because your new competitors are. Evaluate alignment of your strategy to your current systems’ infrastructure and organization. You’ll most likely find that your legacy systems’ estates are inhibiting your ability to change, let alone shift to Digital Insurance 2.0. Digital Insurance 2.0 requires a modern, open architecture that is cloud-ready and has open API capabilities to integrate new data sources, new technologies and more. Trying to apply a closed technical infrastructure to address the needs of Digital Insurance 2.0 is the proverbial square peg in a very round hole. Prioritize. You can’t flip an established business on its head overnight. It’s just not going to happen. You need to grow the existing business while transforming and building the new business. This is crucial. Marketing and distribution should not pull back from traditional business in anticipation of the launch of new business models, new products or new channels. The current business is funding the future and needs to be kept running efficiently and effectively as the market shifts. At the same time, you need to optimize the existing business while building the new business. Ideally, one would seek to transform a “sliver” of the operation which goes from “front-end” right through to the “back-end” function. If an organization’s teams have been working toward placing digital front ends on the traditional business to engage customers, they shouldn’t stop in the middle of the bridge. Any process that can be optimized on the traditional side will help to maximize the existing business, reduce the cost of doing business and provide a bridge from the past to the future while beginning to enable realignment of resources and investment into the new business. These are very often the incremental changes that will also gently shift the customer base through new ways of doing business. Evolution vs. Revolution. Evolving a business is not going to be without its difficulties; but the greatest risk is allowing “old thinking” to solve “traditional issues.” This is not an ageist issue but a state of mind – “We cannot solve our problems with the same thinking we used when we created them.” – Albert Einstein. As you bring your thinking into what the new world looks like – most likely it won’t look like what is currently in place. From an organizational perspective, one should also be very open to creating “greenfield” entities — new structures built on a clean slate approach rather than replicating the traditional silo approach so frequently seen in large corporations. Increasingly, insurers are developing a new business model for a new generation of buyers. Some insurers have made the mistake of envisioning their digital front end as their big leap into the future, not realizing that they have only just touched the new landscape. They need a strategy for a new business model that supports simultaneous leaps forward that will create new customer engagement experiences underpinned by innovative products and services. This will create growth, competitive differentiation and success in a fast-changing market. Creating the requisite infrastructure to address the realities of the market shift shouldn’t be underestimated; it will not be a trivial investment. Many insurers are looking at justifying investment based on growth strategies as well as competitive survival. Strategically, more are moving to the buy vs. build approach. Forward-looking companies are seeking a cloud-ready platform with a modern architecture that can support all the insurance business functions, as well as increasingly sophisticated digital and data capabilities to support the customer and distribution channels. See also: Roadblocks to Good Customer Relations   These solutions seamlessly integrate core insurance processing with a growing ecosystem of other technology providers, third-party data sources and the growing number of external sales/service platforms or marketplaces. As systems and their underlying architectures become more open, products and services will be sold and serviced as part of “non-owned” processes. As a result, insurers will need to integrate their data collection and transactional requirements into portals and platforms that they don’t control directly. Clearly, we are seeing the shift to Digital Insurance 2.0, a key topic of discussion and strategic planning in the boardroom, though many may not fully appreciate the extent and ramifications of this shift. Truly transforming a business to Digital Insurance 2.0 will be a customer-centric, digital-first endeavor. The digital age shift is creating both a challenge and an opportunity for insurers. The time for plans, preparation and execution is now — recognizing that the gap is widening and the timeframe to respond is closing. This article was written by Mike Smart.

While tech innovation is quickly transforming how people buy insurance, most innovation is focused on direct-to-consumer (DTC). Yet the majority of P&C insurance sales still happen through an agent. Our own research indicates that while 80% of consumers do not trust insurance carriers, they do trust agents, and, for this reason, still prefer to buy insurance through an agent, rather than online. If these numbers are any indication, insurance agents are not going away yet.

Still, the process of buying insurance through an agent–for customers, carriers and agents alike–remains cumbersome, with long lapse times, large margins of error and a lot of paperwork. These problems are deciding factors in why agents and customers choose to bring their business elsewhere and can lead to millions of dollars of lost premiums for carriers and a general distrust among agents and customers.

Focusing on improving the agent-driven sales process is a win-win-win–for customers, agents and carriers. Below are a few simple ways that carriers can incorporate agents into their customer experience strategy.

1. Ensure accurate quotes Carriers must do everything they can to ensure that quotes are as accurate as possible and issued without rework. Quote inaccuracy leads to a breakdown of trust on all sides, causing both consumers and agents to lose trust in carriers, creating friction within the quoting process and extending and convoluting the sale. By exposing risk ratings, ordering reports early and ensuring that the level of accuracy is the same between comp-raters and proprietary systems, carriers can speed the sales process and, through transparency, create trust between agents and consumers.

See also: The New Agent-Customer Relationship  

2. Align technology with agent needs, your rules and ACORD standards Ensuring that, as a carrier, you understand the information, systems and tools agents need to service customers and that agents understand your rules can help eliminate unnecessary confusion on both sides of the sales process. Sales enablement tools and SaaS technology that are designed using contextual research on agents' real selling processes help greatly. Make sure your technology accurately represents your rules and that it is transparent to the agent. Moreover, ensuring that any technology you implement is aligned with ACORD standards will create consistency between your technology and other systems agents are used to, further eliminating barriers. Remember, you want to make it as easy as possible for them to use your systems so they can go about their jobs.

3. Make servicing and claims as transparent as possible When hailing an Uber with your phone, you know exactly where it is on the map, what it looks like, who the driver is and when it is arriving, to the minute. Agents and customers want similar transparency into what is going on with applications and with claims. Invest in the technology needed to service the customer efficiently and fairly and inform the agent of what’s happening with the customer. Agents appreciate knowing key actions like a late payment or claim so they can manage expectations with the customer.

4. Bring agents along the journey of global transformation initiatives Digital transformation in insurance is about more than just technology. It’s about creating a better experience for everyone and developing the processes and the technology needed to support it. Digitizing business as usual is not the solution. Rather, invest in deep user research and involving all the players involved in an experience to develop the best possible solution for the customer, the carrier and the agent. As you are developing new sales enablement technology, share plans and get feedback from agents on in-progress work. This will not only provide you with valuable feedback but can convert agents into your initiative’s most powerful marketing tool with their colleagues and customers.

See also: How to Enhance Customer Service  

According to a survey of 5,000 independent agents, 99.5% of insurance agents say that ease of doing business is critical in choosing which carrier gets their business. Being easy to do business with goes a long way to support agents in their relationship with customers. Agents know when your quotes are not accurate and are frustrated by manual corrections. They will do whatever they can to shield their customers from those frustrations, and sometimes that means choosing a different carrier for their customer’s business. As carriers plan their global transformation initiatives, considering independent agents as a critical kind of user–as critical as, say, a customer–can provide an important competitive edge over other carriers, making them a carrier of choice for independent agents and the first carrier they go to when writing new business.

This article first appeared on the Cake & Arrow website. For more on improving the agent customer experience, watch this on-demand webinar.