This is part one of four. You can find the full report here. In this new four-part series, we explore how your people can be your secret weapon in the next phase of tech-driven insurance transformation. With insights from Bullfrog Ventures' Hilario Itriago and Ana Rojas Matiz. Part I: What is the “people challenge,” and why is it important for today’s financial-services organizations? It can be tempting as a large company to try to buy your way to success, using your clout and deep pockets to cherry-pick successful innovations as they prove themselves, either from your own incubator program or from the wide-open sea of startups. This spares you plenty of awkward growing pains – because you’re not growing components organically but rather grafting them on from the outside. However, while corporate growing pains are well-documented, encompassing everything from duplicated work to failures to understand the customer, grafting pains – as we might call them – are less so …. What can go wrong, then, when little meets large, when startups or their tools are welcomed into their new home at large incumbents? What often happens – and there is plenty of anecdotal evidence to support this – is that the resultant outfit is worth less than the sum of its parts, and what looked like a good sum on paper does not end up paying for itself, and more. Somehow, marooned in the corporate lagoon, the wind goes out of a startup’s sails …. Or maybe a new tool, for all that it promised to revolutionize the business, simply slips unobserved into the rut vacated by its predecessor. However we choose to frame it, this process is far from mysterious and can be summed up in a single word: people. To find out more about insurtech’s people challenge, Insurance Nexus spoke to Hilario Itriago and Ana Rojas Matiz at Bullfrog Ventures, a leading international insurtech consulting firm driven by a strong focus on talent and leadership development as it brings both startups and its own capabilities to incumbents. See also: Strategies to Combat Barriers to Insurtech   "As insurtech becomes more and more embedded within the new insurance world, there are so many different things happening in so many different territories… and the one thing we haven’t said is: Are we preparing people to take advantage of all that?" says Hilario, Bullfrog’s CEO and co-founder. "And do we know who is the best person to do what as those things come our way? That’s the critical thing that needs to be addressed. Because even yesterday´s best day-to-day performers will need to be developed for today’s opportunities, and fast!"  In basic terms, there must be a solid bridge – solid communication – between old and new, a forceful individual who can drive the agenda of the new team/tool into the host company and vice versa. While this champion role is perhaps the keystone, there are many other moving parts that need to mesh, and the better-suited and -equipped the individuals and the team are at each point, the more successful the integration will be. Like any healthy graft, a smaller team or tool that is being connected to a larger organism needs to be connected artery-to-artery, vein-to-vein and nerve-to-nerve. None of this is to suggest that insurers should eschew the "external" route of innovating through acquisitions, accelerators and partnerships – indeed, it is this very people challenge that underlay the rise of external innovation channels in the first place. The people challenge represents one of the prime reasons for purely internal innovation programs rarely getting off the ground. And, with change coming thicker and faster than ever before amid today’s fintech and insurtech explosion, it is simply not feasible for incumbents to attempt everything themselves – so we will only see more work with incubators and third-party tools going forward. The winners in this race will not be those that shun outside innovation but those that make optimal use of it on the ground – by deploying the right people in the right places for the right causes. This raises an interesting point regarding where insurers over the coming years should locate their competitive advantage. There are obviously plenty of "hard" advantages that insurers can make good on, like having more data or better in-house actuarial modeling than competitors. However, in many areas, the trend is toward using best-of-breed third-party tools. Take the connected home, where many insurers are steering clear of the device-manufacture and white-labeling route to throw their weight behind an open ecosystem approach – with the key advantage that their solutions will have a greater present and future footprint, and the key disadvantage that nothing stops their competitors from getting this too. And this approach often extends up the stack to the software, as well, much of which is no more exclusively owned than the hardware. Insurance propositions in particular (and carrier businesses in general!) are therefore coming more and more to resemble Frankenstein’s monsters, superficially their own thing but in fact made up of dozens of other people’s widgets, layers and protocols. Technological wizardry represents competitive advantage to software houses and manufacturers; insurers, on the other hand, are really active in the field of proposition creation, competing against one another to stitch other people’s components together into the most powerful stack …. It’s not as if the world’s best chefs grow their own food; they operate with the same publicly available fodder as the rest of us, just with greater knowhow. The above is, of course, an oversimplification, but insurers are nevertheless justified in recognizing in their people and staff knowhow, which are so easily dismissed as commodities and overlooked, a major source of competitive advantage, especially with today’s insurtech, incubator and innovation-hub stew coming to the boil over the next five years. See also: Next for Insurtech: Product Diversity And, while advances in insurance technology continue to astound, much of this technology will – from a carrier perspective – be commodity soon enough. There is absolutely no shortage of amazing tools entering the market, nor is there a dearth of new graduates and experienced hires with the technical expertise to deal with them. But the more powerful these technologies become, the more that rides on the supporting infrastructure, on the facilitating roles and individuals within organizations. As Hilario says: "Innovation requires change, and change needs leadership. My full conviction is that if an organization is going to make people a critical component of the excitement of a project driven by a new technology, then it needs to have as much focus on assessing its individuals, its talent and its team members as it has on investing in the new technology." It is as if, with each technological advance, the handle of the axe grows longer, adding untold striking power but requiring progressively more sleight of hand from the lumberjack. The industry needs a new approach to talent and change management. But before we explore what this might look like, as well as the future evolution of the HR function, let us take a quick look at some of the key problems undermining current models. Stay tuned for our next post on the limitations of prevailing approaches to talent development and change management... Or, if you'd like to access the full report straightaway, simply download it for free here. Send me my complimentary report copy now!

The Ice Age! The Ice Age movie franchise that centered on a group of mammals surviving the Paleolithic ice age produced five films: "Ice Age," "Ice Age: The Meltdown," "Ice Age: Dawn of the Dinosaurs," "Ice Age: Continental Drift" and "Ice Age: Collision Course." These movies reflect what we are seeing today in insurance and what we described in the blog, An Ocean Apart: Pre-Digital and Post-Digital Insurance Models. In that blog, we described the breakup of Pangaea (meltdown), a supercontinent formation that reset and reorganized the world’s continents, oceans and seaways (dawn and continental drift) and the subsequent elimination and survival of species (collision course). The breakup disrupted the world while creating one that would ultimately shape the future. The Digital Age! We are experiencing disruption due to people, technology and market boundaries (meltdown), a new insurance paradigm of innovative products and business models (dawn and continental drift) and the potential irrelevance and survival (collision course) of insurers as a result. Regardless of whether incumbent insurers choose, or are able, to play in a new digital age, Digital Insurance 2.0 is here in full force! At the heart of the digital age is a shift from Insurance 1.0 in the past to Digital Insurance 2.0 for the future. Insurance 1.0 business models of the past 50-plus years have been based on the business assumptions, products, processes and channels for the Silent and Baby Boomer generations. Gen X was the first generation to begin the shift with the introduction of personal computers and the Internet as early indicators of the future digital age. Today, millennial and Gen Z influence is intensifying, shifting the fundamental business models of all businesses, including insurance, by demanding the use of digital technologies and new products and services that align to their demographics, needs and expectations … creating Digital Insurance 2.0. The Customer Is at the Center of the Digital Age Shift In our 2016 report, The Rise of the New Insurance Customer: Shifting Views and Expectations: Is Your Business Ready for Them?, Majesco published insights based on primary research we designed to capture the views and expecta­tions of consumers across generational groups. Our goal was to compare perceptions of insurance with other businesses and industries to understand how other businesses’ digital shifts may be influencing insurance expectations. The research took a deep dive into consumer perceptions of insurance across the spectrum of researching, buying and servicing. The results indicated that insurance is ranked consistently last or nearly last in “ease of doing business” compared with other businesses. See also: How to Move to the Post-Digital Age?   This year’s consumer research, The New Insurance Customer – Digging Deeper: New Expectations, Innovations and Competition, built on the 2016 insights by assessing year-on-year behavior changes and by diving deeper into the disruptive implications of expectations, innovations and competition for new insurance products and business models. These have emerged into the market via insurtech startups and traditional insurers. The research decomposed these products and models into their component parts and measured reactions to them across the generations, providing insight into the impact and potential of the innovations and competition on the industry. These insights point toward an insurance industry that will rapidly intensify and accelerate changes and disruptions that are already underway. Further insights from the new research reinforce the view that change is being forced on insurers, whether they like it or not. The traditional insurance products, services and processes of Insurance 1.0 do not conform to what the next generation of insurance buyers, millennials and Gen Z, and even the older generations expect from their interactions with insurers. While there has been a lot of focus and discussion on the millennial generation, even with some startups specifically targeting them, Gen Z is even more digitally oriented. New Expectations, Innovations and Competition Within the industry, there is much discussion and debate about whether these new products and business models are “real” and will succeed. Based on the survey, there is strong indication that many will succeed, which will, in turn, intensify the momentum of the shift toward Digital Insurance 2.0. Majesco’s new consumer research clearly identifies this growing gap. Some of the highlights include:

• There was year-on-year acceleration of behaviors and experience with technology and trends that is intensifying the generational gap between Insurance 1.0 and Digital Insurance 2.0, highlighting the split in experience levels between Gen Z + Millennials and Gen X + Pre-Retirement Boomers.
• During the same timeframe, we measured declines of 10 to 15 percentage points across all generations on not trying any of these new digital behaviors or expectations. This means that all generations are dipping into digital behaviors with increasing frequency.
• The behavior and expectation increases have driven significant interest in innovative products and channels for insurance, with millennials leading the way.
• There was strong interest in most of the 30 new Insurance 2.0-related attributes covered by the survey, particularly for the younger generations of Gen Z and millennials … the next generation of buyers.
• Gen Z “breaks out” in a number of areas, surpassing millennials and setting the stage for further acceleration in adoption.
• Embracement of new Digital Insurance 2.0 business models already operational in the market is strong among Gen Z and millennials, positioning these early market entrants to capture both market and mindshare.
• When we asked about new models such as P2P, on-demand, embedded insurance and others, a pattern emerged, with the Gen Z and millennials aligning more with the new business models and products, highlighting their propensity to switch insurers to match models that fit their expectations and lifestyles.
• We discovered variations in behaviors and expectations where sub-segments of each generation align more closely with either Insurance 1.0 or Digital Insurance 2.0, highlighting the need for options and personalization that can be achieved through behavioral targeting and niche products.

What Should Insurers Do? Insurers must aggressively begin to plan and act on these shifts, rather than being educated observers. Each day, we see products introduced, channels established, new services offered, business models launched and much more. These innovations and competition, based on this new research, will rapidly capture the market share of the millennial and Gen Z generations, while also bringing along some of the older generations. Unfortunately, too many insurers are taking a page from their old business transformation playbooks and expecting it to work in today’s digital age. Instead, insurers need to look outside their companies to a new cadre of digital leaders and imagine the art of the possible. They must rapidly position themselves in the digital era of Digital Insurance 2.0 to:

• Accelerate digital transformation to become digital era market leaders
• Accelerate innovation with new business models and products
• Accelerate ecosystem opportunities and value
• Avert disruption or extinction by new competition within and outside the industry

Time is of the essence. The days of being a fast follower will no longer work because of the rapid and disruptive shift. Traditional insurers whose businesses are built on the Insurance 1.0 model will struggle to remain relevant as the older generations decline, while businesses built on the Digital Insurance 2.0 model for the new generations increase. The ever-widening gap between competitors that are innovating and shifting to Digital Insurance 2.0 and those that are not will become insurmountable, putting traditional insurers’ futures at risk. See also: 3 Ways to Leverage Digital Innovation   Digital Age insurers will be competitively prepared to survive the drifts, collisions and rebirth of insurance markets, and they will reach a new level of optimism in the coming years. They will be the ones writing insurance history, playing starring roles in insurance market sequels and riding the waves of risk to new insurance adventures.

Last week's announcement of a healthcare venture by Amazon, Berkshire Hathaway and JPMorgan Chase may finally shift the debate in the U.S. in what I firmly believe is the right direction.

The debates on the Affordable Care Act and then on "repeal and replace" have largely focused on who pays for care. The real issue is the incredibly high cost of care in the U.S. If we can start to fix that problem, then the issue of who pays becomes easier. If we don't, the issue of who pays will keep getting hairier. And the venture could take a whack at healthcare costs, first for the three companies' employees, then for the whole market.

In theory, health insurers use their size and market power to keep prices down. In fact, health insurers have basically become a tax on the system. Whatever healthcare costs are, insurers get their 20%. Yes, insurers have incentives to push back on individual claims—many of us have learned the hard way—but the higher that costs are in the aggregate, the more the insurers earn. Netting 20% of $1 trillion a year is great, but why stop there if you can collect 20% of nearly $4 trillion? (Healthcare spending was $3.3 trillion in the U.S. in 2016, or 18% of GDP, and is still increasing rapidly. That percentage is roughly twice as high as in other major Western countries, even though Americans consume about as much medicine and services and have relatively low life expectancy.)

Pharmacy benefit managers (PBMs) were, likewise, supposed to protect us on prices, but they've been co-opted, too, by the immense profits to be had. Rather than just negotiate drug prices on behalf of employers and health plans, the PBMs now take payments from all comers, including drug makers—and the U.S. pays prices roughly twice those in other major countries.

Other ideas have been floated, notably "consumerization"—making consumers more accountable for their care by assigning them responsibility for some portion of every payment, while giving them far more information than they have now about prices and the quality of caregivers and value of medicines and procedures. That approach makes some sense, but it requires changing the whole system—and the system will fight back. Patients' cost are the system's revenue, and it has become so large and powerful that it will battle as hard as can be to protect that revenue. 

The best idea I've seen, the one that could actually be the point of the spear that pierces the healthcare system's armor, sounds rather like the Amazon/Berkshire Hathaway/JPMorgan Chase deal (which some are calling ABC, after Amazon, Berkshire and Chase).

The notion is that employers—initially, big employers—can lead the way on a form of consumerization because they have both the right incentives and the right scale. Individual consumers carry no particular weight, and we can hardly be expected to sort out the mind-boggling complexity that is healthcare. But big employers that self-insure can hire expertise to negotiate directly with providers and get better prices than if the employers rely on health insurers and pay the middlemen their 20%. Big employers can also draw on their data analytics expertise to measure outcomes and locate the best treatment for employees through programs such as Centers of Excellence. Prices may well be higher for these highest-quality providers, but the centers avoid unnecessary treatment (not something that a revenue-maximizing system is especially good at policing) while providing care that is more likely to be right the first time; that both avoids cost and reduces complications for patients. Employers can also cut through the fog that cloaks drug charges and insist on better prices either from PBMs or directly from makers.

Essentially, big employers kick insurers out of the picture and go toe to toe with healthcare providers and PBMs to both lower prices and improve care. That's the theory, anyway.

The details about ABC, while still sketchy, suggest it is the best example thus far of this approach. If ABC works, and other examples follow, they might just provide a market-based solution to a major drag on Americans. Individuals would initially be left out, but some way could eventually be found to let them benefit from the prices negotiated by corporations or Medicare.

There are, of course, plenty of reasons to be skeptical. If you'll allow me, ABC isn't as simple as A, B, C. Even if the deal works as advertised, what's to stop the combined companies from becoming just another power that jacks up healthcare prices for individuals while working for their own benefit? Amazon's Jeff Bezos, Berkshire Hathaway's Warren Buffett and Chase's Jamie Dimon aren't exactly known for turning down profits. 

Still, for now, let's call ABC progress and keep a close eye on where it goes. That's pretty much the initial take among our thoughts leaders, three of whose articles on the subject I've included below. (One, Brian Klepper, has organized an impressive array of thinkers on a listserv on healthcare costs that has done much to shape my thinking.)

I'll keep my fingers crossed. If this approach doesn't work....

Have a great week.

Paul Carroll
Editor-in-Chief

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

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

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

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

And separately,

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

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

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

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

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

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

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

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

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

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

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

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

Healthcare organizations were shaken. Bloomberg Markets reported that:

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

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

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

See also: The Dawn of Digital Reinsurance  

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

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

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

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

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

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

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

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

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