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

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

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

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

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

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

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

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

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

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

First, the prediction. Guy wrote to me:

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

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

“So much for fleet turnover setting the pace. 

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

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

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

Now, the way to hear more.

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

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

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

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

Cheers,

Paul Carroll,
Editor in Chief

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

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

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

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

See also: 10 Insurtech Trends at the Crossroads  

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

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

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

Digitalization? – Let's do it!

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

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

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

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

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

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

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

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”